<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 23, 1998.
REGISTRATION NO. 333-50681
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AURORA FOODS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 2045 TO BE APPLIED FOR
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
456 MONTGOMERY STREET, SUITE 2200
SAN FRANCISCO, CALIFORNIA 94104
(415) 982-3019
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
IAN R. WILSON
CHIEF EXECUTIVE OFFICER
AURORA FOODS INC.
456 MONTGOMERY STREET, SUITE 2200
SAN FRANCISCO, CALIFORNIA 94104
(415) 982-3019
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
NANCY YOUNG, ESQ. ROBERT E. BUCKHOLZ, JR., ESQ.
Richards & O'Neil, LLP Sullivan & Cromwell
885 Third Avenue 125 Broad Street
New York, New York 10022-4873 New York, New York 10004
(212) 207-1200 (212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE PER OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(1)(2) FEE(3)
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share.. 16,675,000 $23.00 $383,525,000 $113,140
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a) under the Securities Act of 1933.
(2) The shares of Common Stock are not being registered for the purpose of sales
outside the United States.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 23, 1998
14,500,000 SHARES
[LOGO]
AURORA FOODS INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------------------
Of the 14,500,000 shares of Common Stock offered, 12,325,000 shares are
being offered hereby in the United States and 2,175,000 shares are being offered
in the concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share of
Common Stock will be identical for both Equity Offerings. See "Underwriting".
Of the 14,500,000 shares of Common Stock offered, 12,946,363 shares of
Common Stock are being sold by the Company and 1,553,637 shares of Common Stock
are being sold by the Selling Stockholder. See "Principal Stockholders and
Selling Stockholder". The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Stockholder.
Prior to the Equity Offerings, there has not been any public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $20.00 and $23.00 per share. For factors to be
considered in determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 9 HEREIN FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
The Common Stock has been approved for listing, subject to notice of
issuance, on the New York Stock Exchange, and application has been made to list
the Common Stock on the Pacific Exchange, under the symbol "AOR".
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT (1) COMPANY (2) STOCKHOLDER
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Per Share........................... $ $ $ $
Total(3)............................ $ $ $ $
</TABLE>
- --------------------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting expenses estimated at $4,646,000, payable by the Company.
(3) The Selling Stockholder has granted to the U.S. Underwriters an option for
30 days to purchase up to an additional 1,848,750 shares at the initial
public offering price per share, less the underwriting discount, solely to
cover over-allotments, if any. Additionally, the Selling Stockholder has
granted the International Underwriters a similar option with respect to an
additional 326,250 shares of Common Stock as part of the concurrent
International Offering. If such options are exercised in full, the total
initial public offering price, underwriting discount and proceeds to the
Company and proceeds to the Selling Stockholder will be $ ,
$ , $ and $ , respectively. See "Underwriting".
--------------------------
The shares are offered severally by the U. S. Underwriters, as specified
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that certificates for the
shares will be ready for delivery in New York, New York on or about
, 1998, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CREDIT SUISSE FIRST BOSTON
SBC WARBURG DILLON READ INC.
CHASE SECURITIES INC.
--------------------------
The date of this Prospectus is , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE EQUITY OFFERINGS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE MARKET PRICE OF
THE COMMON STOCK INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE EQUITY OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
DUNCAN HINES-Registered Trademark-, LOG CABIN-Registered Trademark-, MRS.
BUTTERWORTH'S-Registered Trademark-, AUNT JEMIMA-Registered Trademark-, COUNTRY
KITCHEN-Registered Trademark-, WIGWAM-Registered Trademark-, VAN DE
KAMP'S-Registered Trademark-, MRS. PAUL'S-Registered Trademark-, and
CELESTE-Registered Trademark- are registered trademarks of the Company. The Aunt
Jemima trademark is licensed from The Quaker Oats Company ("Quaker Oats"). This
Prospectus also includes trademarks of companies other than the Company.
<PAGE>
A photograph appears on the front inside cover depicting the following
products of the Company: Mama Celeste Fresh-Baked Rising Crust Pizza; Celeste
Pizza-for-One; Van de Kamp's Garlic & Herb Crunchy Baked Fish Fillets; Mrs.
Paul's Grilled Salmon; Mrs. Paul's Batter Dipped Fish Fillets; Van de Kamp's
Value Pack 44 Breaded Fish Sticks; Mrs. Butterworth's Pancake and Waffle Mix;
Mrs. Butterworth's Original Syrup; Mrs. Butterworth's Reduced Calorie Syrup;
Aunt Jemima Homestyle Waffles; Log Cabin Sugar Free Syrup; Log Cabin Syrup;
Duncan Hines Chewy Fudge Brownie Mix; Duncan Hines Moist Deluxe Cake Mix; and
Duncan Hines Homestyle Frosting.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED IN THIS
PROSPECTUS, THE "COMPANY" REFERS TO AURORA FOODS INC., A DELAWARE CORPORATION
INCORPORATED PRIOR TO THE EQUITY OFFERINGS, AND ITS PREDECESSORS. EXCEPT AS
OTHERWISE INDICATED, ALL REFERENCES TO CATEGORY AND SEGMENT SALES AND SHARE
PERCENTAGES AND POSITIONS ARE BASED ON U.S. RETAIL SUPERMARKET SALES DOLLARS FOR
THE 52-WEEK PERIOD IN THE CASE OF SYRUPS, ENDED APRIL 18, 1998, AND IN THE CASE
OF BAKING MIXES, ENDED APRIL 11, 1998, AS GATHERED AND PUBLISHED BY A.C. NIELSEN
COMPANY ("NIELSEN") AND, IN THE CASE OF FROZEN CONVENIENCE FOODS, ENDED APRIL
19, 1998, AS GATHERED AND PUBLISHED BY INFORMATION RESOURCES INCORPORATED
("IRI").
THE COMPANY
The Company is a leading producer and marketer of premium branded food
products including DUNCAN HINES baking mixes, LOG CABIN and MRS. BUTTERWORTH'S
syrup, VAN DE KAMP'S and MRS. PAUL'S frozen seafood, AUNT JEMIMA frozen
breakfast products and CELESTE frozen pizza. The Company's brands are among the
most widely recognized food brands in the United States, have leading market
positions and participate in some of the fastest growing categories in the
supermarket. LOG CABIN and MRS. BUTTERWORTH'S have a leading 34.0% share of the
syrup category, VAN DE KAMP'S and MRS. PAUL'S have a leading 28.1% share of the
frozen seafood category, DUNCAN HINES is the #2 cake mix with a 36.3% share and
CELESTE is the #3 brand of frozen pizza in the Northeast. In 1997, dollar sales
of frozen pizza, frozen seafood and frozen waffles grew at annual rates of 8.5%,
9.5% and 7.8%, respectively. For the year ended December 31, 1997, the Company's
pro forma net sales were $874.2 million and the Company's pro forma Adjusted
EBITDA was $154.6 million (see Note 1 to the "Unaudited Pro Forma Statement of
Operations for the three months ended March 28, 1998").
The Company was formed by Dartford Partnership L.L.C. ("Dartford"), Fenway
Partners, Inc. and McCown De Leeuw & Co., Inc. ("MDC") to serve as a platform
upon which to build a leading branded grocery products company through both
strategic acquisitions and internal growth. The Company has been built through
six separate acquisitions over the last three years. The Company seeks to
acquire well-recognized brands which have become non-core businesses to their
corporate parents, but which retain strong brand equities and long-term growth
potential. The Company's objective is to revitalize the brands it acquires and
renew their growth by providing them with the strategic direction, dedicated
management and marketing focus they lacked under prior owners.
Under the direction of CEO Ian R. Wilson and Dartford, each of the brands
owned by the Company for more than one year has experienced significant growth.
The following table sets forth (i) the growth rates of the brands for the twelve
months prior to the date of acquisition, and (ii) the annual growth rate as
measured eighteen months after the date of acquisition, in each case based on
dollar sales data provided by IRI and Nielsen.
<TABLE>
<CAPTION>
DATE GROWTH PRIOR
OF TO GROWTH
BRAND PRIOR OWNER ACQUISITION ACQUISITION AFTER ACQUISITION
- --------------------- ----------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
VAN DE KAMP'S Pillsbury Sept. 1995 -2.5% +5.0%
MRS. PAUL'S Campbell Soup May 1996 -9.2 +7.1
AUNT JEMIMA Quaker Oats July 1996 -8.9 +10.5
CELESTE Quaker Oats July 1996 -16.8 +8.6
MRS. BUTTERWORTH'S Unilever Dec. 1996 0.0 +3.1
LOG CABIN Kraft July 1997 -6.0 n/a
DUNCAN HINES Procter & Gamble Jan. 1998 -5.0 n/a
</TABLE>
The Company has renewed the growth of its brands by providing them with
experienced management, refocusing marketing support, reformulating and
repackaging outdated products, developing and launching new products and
expanding distribution. The Company has also realized significant cost savings
by consolidating and improving the efficiency of its manufacturing operations,
outsourcing the production of certain products and eliminating redundant
administrative functions. The Company believes that the growth exhibited by the
brands it acquired in 1995 and 1996, combined with expected growth from its most
recent acquisitions and additional cost savings opportunities, have positioned
it to achieve superior long-term sales and earnings growth.
3
<PAGE>
BUSINESS STRATEGY
The Company's objective is to continue to generate sales and earnings growth
by (i) sustaining the growth of the brands it acquired in 1995 and 1996, (ii)
achieving similar results for its recently acquired brands, and (iii) continuing
to acquire brands with strong equities and long-term growth potential. The
Company's strategy is to revitalize its brands, reduce costs and continue to
make strategic acquisitions.
REVITALIZE BRANDS. To revitalize the brands it has acquired and stimulate
growth, the Company (i) provides experienced management, (ii) refocuses
marketing support, (iii) reformulates and repackages outdated products, (iv)
develops and launches new products, and (v) expands distribution of its
products.
PROVIDE EXPERIENCED MANAGEMENT. The Company has assembled a dedicated
sales, marketing and administrative infrastructure by recruiting experienced
managers from a wide variety of food and consumer products companies. The
Company believes that it significantly improves the performance of its
brands by taking them out of large organizations where they have not been a
priority and providing them with experienced, dedicated management.
REFOCUS MARKETING SUPPORT. The Company refocuses and broadens marketing
support for its brands by rationalizing product lines, refreshing
advertising campaigns and adjusting the mix of its marketing programs. The
Company increases media advertising and consumer promotional events
(coupons) and generally reduces price discounting.
REFORMULATE AND REPACKAGE PRODUCTS. To reinvigorate its brands, the Company
reformulates and repackages outdated products. For example, the Company has
reformulated MRS. BUTTERWORTH'S Lite syrup and certain AUNT JEMIMA frozen
breakfast products, resulting in significant increases in unit volumes for
both product lines.
DEVELOP AND LAUNCH NEW PRODUCTS. The Company has successfully developed and
launched more than 25 new products. New product successes include grilled
and premium fish fillets marketed under both the VAN DE KAMP'S and MRS.
PAUL'S brands and MAMA CELESTE Fresh Baked Rising Crust pizza.
EXPAND DISTRIBUTION. The Company expands distribution of its products by
(i) improving the selection of its products on the shelf, (ii) increasing
penetration in established markets, (iii) broadening the geographic
distribution of its products, and (iv) improving its presence in selected
channels of distribution including club stores and foodservice.
REDUCE COSTS. The Company has reduced costs of the acquired businesses by
approximately $49.9 million since their respective acquisitions. To achieve
these cost reductions, the Company has (i) consolidated the manufacture of MRS.
PAUL'S frozen seafood products into the Van de Kamp's facilities, (ii)
outsourced the production of syrup, (iii) reduced fixed costs and improved the
efficiency of its manufacturing facilities, and (iv) eliminated redundant
administrative functions of the acquired businesses. The Company believes that
there are further opportunities to reduce costs, which include outsourcing the
production of baking mixes and further consolidating its brokerage and
administrative functions. No assurances can be given, however, that these cost
reductions can be realized.
MAKE STRATEGIC ACQUISITIONS. The Company has a proven track record of
successfully acquiring and integrating food businesses. The Company's
acquisition strategy is to acquire established, well-recognized food brands that
can leverage off of the infrastructure it has developed. The Company will
continue to look for opportunities where strong but non-core brands would
benefit from the renewed focus and experienced management it brings to its
acquisitions. Management believes that these opportunities will continue to
arise as a result of large food companies continuing their recent trend of
divesting non-core businesses.
4
<PAGE>
OWNERSHIP
Upon completion of the Equity Offerings, Fenway Partners Capital Fund, L.P.
and certain of its affiliates (collectively, "Fenway") will beneficially own
24.8%, affiliates of MDC will beneficially own 24.4%, Dartford will beneficially
own 10.9%, and divisional management will beneficially own 5.1% of the
outstanding shares of Common Stock. See "Principal Stockholders and Selling
Stockholder".
CONFLICTS OF INTEREST. MDC, Fenway and their professional staffs are not
restricted from acquiring or managing other companies in the food business,
including companies that may be competitive with the Company. In addition,
certain directors of the Company affiliated with Fenway or MDC also serve as
officers or directors of other portfolio companies of Fenway or MDC.
MANAGEMENT INCENTIVE PLANS
Certain officers and other employees of the Company are participants in
incentive plans sponsored by MBW Investors LLC and VDK Foods LLC whereby they
were given an opportunity to participate in the appreciation in value of Aurora
Foods Holdings Inc. ("Aurora") or VDK Holdings, Inc. ("VDK"). Amounts due under
the Aurora Plan (as defined) and the VDK Plan (as defined) will become fully
vested as a result of the completion of the Equity Offerings and the final value
of all classes of Management Units (as defined) will be determined prior to the
closing of the Equity Offerings based on the initial public offering price of
the Common Stock. The sponsors of such plans will satisfy the amounts due by
distributing to the plans a fixed number of shares of Common Stock of the
Company, currently estimated at 7,806,345 shares in the aggregate. There are 87
employees that are participants in such plans. After giving effect to the
completion of the Equity Offerings and after aggregating the shares to be
distributed under such plans with those shares already owned by such employees,
employees of the Company will own 16.0% of the outstanding shares of Common
Stock of the Company. For the quarter ended March 1998, Aurora and VDK recorded
$60.0 million and $69.0 million, respectively, of non-cash incentive plan
expense relating to those plans based on estimated valuations of each company.
No additional incentive plan expense will be recorded under the plans after the
completion of the Equity Offerings. See "Management--Aurora Incentive Plan" and
"--VDK Incentive Plan".
After giving effect to pro forma adjustments based on the completion of the
Equity Offerings (at an assumed initial public offering price of $21.50 per
share (the midpoint of the range of initial offering prices set forth on the
cover of this Prospectus)) and the Refinancings, for the quarter ended March 28,
1998, pro forma as adjusted net loss per share of $1.48 included $1.58 net loss
per share related to the incentive plan expense.
All employees of the Company are eligible to participate in the Company's
1998 Incentive Plan (as defined). See "Management--Executive Compensation",
"--1998 Long-Term Incentive Plan" and
"--1998 Employee Stock Purchase Plan".
5
<PAGE>
THE EQUITY OFFERINGS
The offering of 12,325,000 shares of Common Stock initially being offered in
the United States (the "U.S. Equity Offering") and the concurrent offering of
2,175,000 shares of Common Stock initially being offered outside the United
States (the "International Equity Offering") are collectively referred to in
this Prospectus as the "Equity Offerings". The underwriters for the U.S. Equity
Offering (the "U.S. Underwriters") and the underwriters for the International
Equity Offering (the "International Underwriters") are collectively referred to
in this Prospectus as the "Underwriters". The closing of the U.S. Equity
Offering is conditioned upon the closing of the International Equity Offering
and vice versa.
<TABLE>
<S> <C>
Common Stock offered by the
Company:
U.S. Equity Offering.......... 11,004,409 shares
International Equity
Offering.................... 1,941,954 shares
Total....................... 12,946,363 shares
Common Stock offered by the
Selling Stockholder:
U.S. Equity Offering.......... 1,320,591 shares
International Equity
Offering.................... 233,046 shares
Total....................... 1,553,637 shares
Common Stock to be outstanding
after the Equity Offerings...... 67,000,000 shares (1)
Use of Proceeds by the
Company (2)..................... To redeem $35 million principal amount of the 12% Senior
Subordinated Notes due 2005 issued by VDK (the "VDK
Notes") and pay the associated $3.5 million redemption
premium, to repay approximately $218.5 million of
indebtedness under the VDK Senior Bank Facilities (as
defined) and Aurora Senior Bank Facilities (as defined),
and to pay the fees and expenses incurred in connection
with the Equity Offerings. The Company will not receive
any proceeds from the sale of shares by the Selling
Stockholder. See "Use of Proceeds".
New York Stock
Exchange ("NYSE") and Pacific
Exchange Symbol................. AOR
</TABLE>
- ------------------------------
(1) Does not include 2,000,000 shares of Common Stock issuable upon exercise of
stock options which have been granted, contingent upon closing of the Equity
Offerings, at the initial public offering price, to certain employees of the
Company. In addition, the Company has reserved 1,500,000 shares of Common
Stock for issuance in connection with options that may be granted under the
1998 Incentive Plan and 200,000 shares of Common Stock for issuance in
connection with options that may be granted under the 1998 Employee Stock
Purchase Plan. See "Management--1998 Long-Term Incentive Plan" and
"--1998 Employee Stock Purchase Plan."
(2) The net proceeds from the Refinancings (as defined) will be used to repay
the remaining $65.0 million principal amount of outstanding VDK Notes and
pay the associated $11.0 million redemption premium, to repay approximately
$416.3 million of indebtedness under the Aurora Senior Bank Facilities, and
to pay the fees and expenses incurred in connection with the Refinancings.
In the event that the Notes Offering (as defined) is not consummated, the
Company intends to increase the amount borrowed under the Senior Credit
Facilities. See "Refinancings".
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, matters set forth under the caption
"Risk Factors" before purchasing shares of the Common Stock offered by this
Prospectus.
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary historical and unaudited pro forma
financial data of the Company for the periods ended and as of the dates
indicated. Pro forma as adjusted net loss per share for the three months ended
March 31, 1998 of $1.48 per share included $1.58 net loss per share related to
the non-cash incentive plan expense. This expense relates to incentive plans
(the Aurora Plan and the VDK Plan) for which the final value will be determined
and all rights will vest as a result of the completion of the Equity Offerings.
Therefore, no additional incentive plan expense will be recorded under the plans
after the completion of the Equity Offerings.
The summary historical statement of operations data for the year ended
December 27, 1997 and the summary historical balance sheet data as of December
27, 1997 are derived from audited financial statements of the Company included
elsewhere in this Prospectus. The summary historical statement of operations
data for the three months ended March 28, 1998 and the summary historical
balance sheet data as of March 28, 1998 are derived from the unaudited financial
statements of the Company included elsewhere in this Prospectus which, in the
opinion of management, include all normal recurring adjustments. The summary
unaudited pro forma and pro forma as adjusted statement of operations data
reflect adjustments, where appropriate, to the historical financial data of the
Company to give effect to (i) the acquisition of the LOG CABIN business, the
DUNCAN HINES business and VDK, (ii) the Desserts Sale (as defined), (iii) the
Equity Offerings and (iv) the Refinancings, as if each occurred on January 1,
1997. The summary unaudited pro forma and pro forma as adjusted balance sheet
data reflect adjustments, where appropriate, to the historical financial data
for the Company to give effect to (i) the acquisition of VDK, (ii) the Desserts
Sale, (iii) the Equity Offerings and (iv) the Refinancings as if each had
occurred on March 28, 1998. This information should be read in conjunction with
the Company's unaudited pro forma and historical financial statements, and
related notes thereto, each appearing elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 27, 1997 March 28, 1998
------------------------------------- ------------------------------------
(in thousands, except per share Pro Forma Pro Forma
data) Actual Pro Forma As Adjusted Actual Pro Forma As Adjusted
--------- ------------ ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 143,020 $ 874,231 $ 874,231 $ 89,385 $ 240,337 $ 240,337
Cost of goods sold.................. 45,729 373,101 373,101 37,734 95,111 95,111
--------- ------------ ------------ --------- ----------- ------------
Gross profit...................... 97,291 501,130 501,130 51,651 145,226 145,226
--------- ------------ ------------ --------- ----------- ------------
Brokerage, distribution and
marketing expenses:
Brokerage and distribution........ 17,096 88,188 88,188 9,355 23,544 23,544
Trade promotions.................. 26,075 172,487 172,487 15,568 57,737 57,737
Consumer marketing................ 15,142 65,717 65,717 7,997 21,057 21,057
--------- ------------ ------------ --------- ----------- ------------
Total brokerage, distribution and
marketing expenses................ 58,313 326,392 326,392 32,920 102,338 102,338
Amortization of goodwill and other
intangibles....................... 5,938 33,424 33,424 4,597 8,356 8,356
Selling, general and administrative
expenses.......................... 5,229 34,427 34,427 2,346 7,084 7,084
Incentive plan expense.............. 2,300 2,300 2,300 60,000 129,000 125,257(1)
Transition expenses................. 2,113 3,405 3,405 1,926 1,926 1,926
--------- ------------ ------------ --------- ----------- ------------
Total operating expenses............ 73,893 399,948 399,948 101,789 248,704 244,961
--------- ------------ ------------ --------- ----------- ------------
Operating income (loss)........... 23,398 101,182 101,182 (50,138) (103,478) (99,735)
Interest income..................... (151) (515) (515) (223) (253) (253)
Interest expense.................... 18,393 84,502 58,025 12,837 21,126 14,506
Amortization of deferred financing
expense........................... 3,059 4,575 1,491 513 1,144 373
Other bank and financing expenses... 83 304 304 51 95 95
--------- ------------ ------------ --------- ----------- ------------
Income (loss) before income
taxes........................... 2,014 12,316 41,877 (63,316) (125,590) (114,456)
Income tax expense (benefit)........ 779 4,865 16,541 (360) (21,393) (15,382)
--------- ------------ ------------ --------- ----------- ------------
Net income (loss) before
extraordinary item.............. $ 1,235 $ 7,451 $ 25,336 $ (62,956) $(104,197) $ (99,074)
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Extraordinary loss on early
extinguishment of debt............ -- (1,876)
--------- ---------
Net income (loss)................... $ 1,235 $ (64,832)
--------- ---------
--------- ---------
</TABLE>
7
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<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 27, 1997 March 28, 1998
------------------------------------- ------------------------------------
(in thousands, except per share Pro Forma Pro Forma
data) Actual Pro Forma As Adjusted Actual Pro Forma As Adjusted
--------- ------------ ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Basic and diluted earnings (loss)
per share before extraordinary
item.............................. $ 0.04(7) $ (2.17 (7)
Extraordinary item per share........ -- (0.06 (7)
--------- ---------
Basic and diluted earnings (loss)
per share......................... $ 0.04(7) $ (2.23 (7)
--------- ---------
--------- ---------
Weighted average number of shares
outstanding....................... 29,055(7) 29,055(7)
--------- ---------
--------- ---------
Pro forma basic and diluted earnings
(loss) per share(2)............... $ 0.14(7) $ (1.93)(7)
------------ -----------
------------ -----------
Pro forma weighted average number of
shares outstanding(2)............. 54,054(7) 54,054(7)
------------ -----------
------------ -----------
Pro forma as adjusted basic and
diluted earnings per share(3)..... $ 0.38 $ (1.48)
------------ ------------
------------ ------------
Pro forma as adjusted weighted
average number of shares
outstanding(3).................... 67,000 67,000
------------ ------------
------------ ------------
OPERATING AND OTHER DATA:
Adjusted EBITDA(4)................ $ 34,877 $ 154,617 $ 154,617(5) $ 17,587 $ 39,080 $ 39,080(5)
Depreciation and amortization..... 10,057 52,094 49,010 6,140 12,618 11,847
Capital expenditures.............. 2,411 13,471 13,471 1,511 4,253 4,253
BALANCE SHEET DATA (END OF PERIOD):
Working capital (excluding current
portion of long-term debt)...... $ 6,524 $ 29,164 $ 54,548 $ 54,548
Total assets...................... 372,739 869,551 1,412,092 1,414,108
Long-term debt (including current
portion)........................ 279,919 652,377 937,136(6) 702,377
Stockholders' equity.............. 65,223 154,029 337,498 591,022
</TABLE>
(1) Pro forma as adjusted incentive plan expense represents the expense incurred
under the VDK Plan and the Aurora Plan, which are described elsewhere in the
Prospectus, based on an initial public offering price per share of $21.50
(the midpoint of the range of initial public offering prices set forth on
the cover page of this Prospectus). See "Management--VDK Incentive Plan" and
"Management--Aurora Incentive Plan".
(2) Pro forma basic and diluted earnings per share and the pro forma weighted
average number of shares outstanding gives effect to the acquisitions as
described in the notes to the Unaudited Pro Forma Financial Information.
(3) Pro forma as adjusted basic and diluted earnings per share and the pro forma
as adjusted weighted average number of shares outstanding gives effect to
the acquisitions and the Equity Offerings as described in the notes to the
Unaudited Pro Forma Financial Information.
(4) Adjusted EBITDA is defined as net income (loss) before interest expense,
taxes, depreciation, amortization, extraordinary items, incentive plan
expense (see (1) above) and transition expenses and is presented because it
is commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance and to determine a company's
ability to service and incur debt. Adjusted EBITDA should not be considered
in isolation from or as a substitute for net income, cash flows from
operating activities or other consolidated income or cash flow statement
data prepared in accordance with generally accepted accounting principles or
as a measure of profitability or liquidity.
(5) Adjusted EBITDA of $154.6 million and $39.1 million for the year ended
December 27, 1997 and for the three months ended March 28, 1998,
respectively, would increase to $172.8 million and $40.8 million if cost
savings of $18.2 million and $1.7 million, respectively, were included. Cost
savings primarily reflect savings pursuant to long term contract
manufacturing agreements the Company has entered into for its syrup and
baking mix products and the elimination of manufacturing and administrative
expenses allocated from prior owners. Cost savings represent an estimate and
there can be no assurance the cost savings will be realized. Actual results
could differ materially from those presented.
(6) Includes $15.0 million of revolving debt outstanding under the VDK Senior
Bank Facilities.
(7) Aurora Foods Inc., which was formed shortly before the Equity Offerings, is
the successor to Aurora. As such, Aurora Foods Inc. will assume the
historical financial statements of Aurora as its historical financial
statements. Therefore, the capital structure of Aurora Foods Inc. must be
applied to the historical capital structure and per share information of
Aurora. Upon formation and immediately prior to the Equity Offerings, Aurora
Foods Inc. is expected to have 54,053,637 shares of Common Stock
outstanding, assuming an initial public offering price of $21.50 (the
midpoint of the range of initial public offering prices set forth on the
cover page of this Prospectus). Based on these outstanding shares and prior
capital transactions of Aurora, outstanding shares as of previous dates have
been revised to be on an Aurora Foods Inc. capital structure basis. Earnings
per share data as of previous dates have been recomputed based on the
revised outstanding share amounts.
8
<PAGE>
RISK FACTORS
Investors should carefully consider the following risk factors, in addition
to the other information contained in this Prospectus, before purchasing the
Common Stock offered hereby.
IMPLEMENTATION OF BUSINESS STRATEGY; LIMITED OPERATING HISTORY; STRATEGIC
ACQUISITIONS
The Company intends to pursue a business strategy of increasing sales and
earnings through revitalizing its brands and achieving operational cost savings.
No assurance can be given that the Company will be successful in implementing
this strategy. See "Business--Competition" and "Business". Van de Kamp's, Inc.
was incorporated in July 1995 and Aurora Foods was incorporated in December
1996. Accordingly, investors have a limited operating history upon which to base
an evaluation of the Company's performance and an investment in the Company.
Moreover, certain of the financial statements included herein represent the
operations of the various Acquired Businesses by persons other than the
Company's management and may not be comparable with current operations or
indicative of future performance.
The Company also intends to pursue a business strategy of growth through
strategic acquisitions. The Company cannot predict whether it will be successful
in pursuing any acquisition opportunities or whether any acquisitions will be
successful. The Company continually evaluates potential strategic acquisitions;
however, the Company has no binding commitment to acquire any business or other
material assets. The Company's acquisition strategy involves numerous risks
including integration of the operations, systems, and management of acquired
businesses and the diversion of management's attention from other business
concerns. Depending on the nature, size, and timing of future acquisitions, the
Company may be required to raise additional financing. There can be no assurance
that the Credit Agreement, to be entered into by and between the Company and
Chase Manhattan Bank (the "Senior Credit Facilities"), the indenture (the "New
Indenture") related to the Company's proposed Series E Senior Subordinated Notes
due 2008 (the "New Notes"), the indenture (the "VDK Indenture") related to the
VDK Notes, and the indentures (the "Aurora Indentures" and together with the New
Notes Indenture and the VDK Indenture, the "Indentures") related to the 9 7/8%
Series B Senior Subordinated Notes due 2007 ("Aurora Series B Notes") and the
9 7/8% Series D Senior Subordinated Notes due 2007 ("Aurora Series D Notes") and
the VDK Notes, Aurora Series B Notes, Aurora Series D Notes, and the New Notes
(collectively, the "Senior Subordinated Notes") or any other loan agreement to
which the Company may become a party will permit such additional financing or
that any additional financing will be available on terms acceptable to the
Company.
RESTRICTIVE DEBT COVENANTS
The Senior Credit Facilities and each of the Indentures contain (or in the
case of the New Notes Indenture will contain) a number of significant negative
covenants. Under the Indentures, the negative covenants (i) limit the amount of
indebtedness the Company may incur; (ii) limit the Company's ability to make
certain payments; (iii) restrict distributions from the Company's subsidiaries;
(iv) place limitations on sales of assets by the Company and its subsidiaries;
(v) limit transactions with affiliates of the Company; (vi) limit the sale of
the capital stock of the Company's subsidiaries; (vii) limit the lines of
businesses the Company may engage in; and (viii) limit the Company's ability to
merge or consolidate or transfer all or substantially all of the assets of the
Company. The Senior Credit Facilities also contain other restrictive covenants
which require the Company to maintain specified financial ratios and satisfy
financial condition tests including a minimum interest coverage ratio, a maximum
leverage ratio, a minimum fixed charge ratio and a maximum level of capital
expenditures. In addition, under the terms of the Aurora Indentures and the VDK
Indenture, consummation of the Merger (which must occur prior to or concurrently
with the closing of the Equity Offerings) requires certain customary approvals.
Each of these negative covenants could affect the Company's ability to
implement its business strategy. The breach of any of these covenants or
restrictions could result in a default under the Senior Credit Facilities or the
Indentures, which would permit the senior lenders or the holders of the Senior
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<PAGE>
Subordinated Notes, as the case may be, to declare all amounts borrowed
thereunder to be due and payable, together with accrued and unpaid interest. If
the Company were unable to repay its indebtedness to its senior lenders, such
lenders could proceed against the collateral securing such indebtedness which
collateral represents substantially all of the assets of the Company. See
"Description of Indebtedness".
GENERAL RISKS OF FOOD INDUSTRY; COMPETITION
The Company is subject to the general risks of the food industry, and
particularly to the risk that a competitor gains a technological advantage such
as technology that flash freezes fish that is better tasting and has a higher
quality; evolving consumer preferences such as the current trend toward ethnic
foods; lack of attractiveness of a particular food product line after its
novelty has worn off; nutritional and health-related concerns; federal, state,
and local food processing controls; consumer product liability claims; the risk
of product tampering; mislabeling; and the availability and expense of
insurance. See "Business".
The food products business is highly competitive. Numerous brands and
products compete for shelf space and sales, with competition based primarily on
brand recognition and loyalty, price, quality, and convenience. The Company
competes with a significant number of companies of varying sizes, including
divisions or subsidiaries of larger companies. A number of these competitors
have broader product lines, substantially greater financial and other resources
available to them, lower fixed costs and/or longer operating histories than the
Company. There can be no assurance that the Company can compete successfully
with such other companies. Competitive pressures or other factors could cause
the Company's products to lose market share or result in significant price
erosion, which could have a material adverse effect on the Company. See
"Business".
PRODUCT LIABILITY; PRODUCT RECALLS
The Company may be subject to significant liability should the consumption
of any of its products cause injury, illness, or death and may be required to
recall certain of its products in the event of contamination, mislabeling or
damage to its products. There can be no assurance that product liability claims
will not be asserted against the Company or that the Company will not be
obligated to recall its products. A product liability judgment against the
Company or a product recall could have a material adverse effect on the
Company's business, financial condition, and results of operations.
GOVERNMENTAL REGULATION
The Company's operations are subject to extensive regulation by the United
States Food and Drug Administration ("FDA"), the United States Department of
Agriculture (the "USDA") and other state and local authorities regarding the
processing, packaging, storage, distribution, advertising, and labeling of the
Company's products, and environmental compliance. The material regulations to
which the Company is subject include regulations promulgated under the Federal
Food, Drug and Cosmetic Act, the Nutrition Labeling and Education Act, the
Federal Trade Commission Act and the Occupational Safety and Health Act, each as
amended. The Company seeks to comply with applicable regulations by a
combination of employing internal personnel to ensure quality assurance
compliance (for example, assuring that food packages contain only ingredients as
specified on the package labeling) and contracting with third-party laboratories
that conduct analyses of products for the nutritional labeling requirements (for
example, determining the percent or amount of specific ingredients and other
components of a food product). The Company's principal officers monitor
regulatory compliance within their functional areas and report to the president
of their division. The Company's manufacturing facilities and products are
subject to periodic inspection by federal, state, and local authorities. There
can be no assurance, however, that the Company is in compliance with such laws
and regulations or that it will be able to comply with any future laws and
regulations. Failure by the Company to comply with applicable laws and
regulations could subject the Company to civil remedies, including fines,
injunctions, recalls, or
10
<PAGE>
seizures, as well as potential criminal sanctions, which could have a material
adverse effect on the Company. See "Business--Certain Legal and Regulatory
Matters" and "--Environmental".
TRADEMARKS
The Company believes that its trademarks and other proprietary rights are
important to its success and its competitive position. There can be no assurance
that the actions taken by the Company to establish and protect its trademarks
and other proprietary rights will be adequate to prevent imitation of its
products by others or to prevent others from seeking to block sales of the
Company's products as violative of the trademarks and proprietary rights of
others. Moreover, no assurance can be given that others will not assert rights
in, or ownership of, trademarks and other proprietary rights of the Company or
that the Company will be able to successfully resolve such conflicts. See
"Business--Trademarks".
DEPENDENCE ON RAW MATERIALS
The Company's primary raw materials are fish (primarily pollock), flour,
sugar, corn syrup, liquid sucrose, maple sugar, flavorings, cheeses, meat, eggs,
milk, and vegetable oil. The Company purchases fish from various North Pacific
suppliers and its other raw materials from the U.S. commodity market. While all
such materials are currently available from numerous independent suppliers,
commodity raw materials are subject to increases in price attributable to, among
other things, changes in crop size and federal and state agricultural programs.
Such increases could have a material adverse effect on the performance of the
Company. For example, if the federal government increases import or excise taxes
on imported sugar, domestic sugar suppliers could raise their prices. Such
increased prices could materially adversely affect the Company's profitability
for its products that use sugar, such as DUNCAN HINES baking mixes. See
"Business--Raw Materials".
CONTROL BY PRINCIPAL STOCKHOLDERS; CONSENT RIGHTS; AND ALLOCATION OF CORPORATE
OPPORTUNITIES
Upon completion of the Equity Offerings, Fenway will indirectly or directly
beneficially own approximately 24.8%, affiliates of MDC will beneficially own
24.4%, and the parties to the Securityholders Agreement dated April 8, 1998 (the
"Securityholders Agreement") by and among New LLC, MBW Investors LLC, VDK Foods
LLC, Fenway, MDC, Dartford, the California Public Employees Retirement System
("CALPERS"), UBS Capital LLC ("UBS"), an affiliate of Tiger Oats Limited ("Tiger
Oats"), Sunapee Securities, Inc. and Squam Lake Investors II, L.P.,
(collectively, "Sunapee"), certain divisional management and other parties
thereto (the "Stockholders") will beneficially own, in the aggregate, 78.4% of
the outstanding shares of Common Stock. Pursuant to the Securityholders
Agreement, the Stockholders have agreed that until the occurrence of certain
events, the initial Board of Directors will consist of three directors
designated by Fenway, three directors designated by MDC, two directors
designated by Dartford, one director designated by UBS, and one director
designated by Tiger Oats. In addition, for a period not to exceed 30 months
after the closing of the Equity Offerings, the affirmative consent of Fenway and
MDC is required for certain actions which could otherwise be approved by a
majority of the directors including certain acquisitions or divestitures by the
Company and the removal or termination of Ian R. Wilson or the employment or
termination of his successor as Chief Executive Officer of the Company. In
addition, under the Company's By-Laws, the majority of the Board of Directors
that authorizes the creation of any committee of the Board must include at least
one director designated by Fenway and one director designated by MDC until, with
respect to either Fenway or MDC, such time as it shall not beneficially own a
number of shares of Common Stock equal to at least 50% of the shares of Common
Stock beneficially owned by MDC (excluding any shares held by proxy) at the
closing of the Equity Offerings. The interests of Fenway and/or MDC in respect
of such matters may be different from, or conflict with, those of the Company
and with other stockholders of the Company. By reason of these consent rights
and the fact that if Fenway and MDC vote together, they have the right to
designate a
11
<PAGE>
majority of the directors, Fenway and MDC will be able to practically determine
the outcome of significant matters affecting the management and business affairs
of the Company. See "Principal Stockholders and Selling
Stockholder--Securityholders Agreement" and "Certain Relationships and Related
Transactions".
In addition, certain directors of the Company affiliated with Fenway or MDC
also serve as officers or directors of other portfolio companies of Fenway or
MDC. Service as a director of the Company and as a director or officer of
another company (other than a subsidiary of the Company) could create or appear
to create conflicts of interest when the director is faced with decisions that
could have different implications for the Company and such other company. A
conflict of interest could also exist with respect to allocation of the time and
attention of persons who are officers of both the Company and one or more other
companies. MDC, Fenway and their professional staffs are not restricted from
acquiring or managing other companies in the food business, including companies
that may be competitive with the Company. For example, Fenway controls Delimex
Holdings, Inc., a leading manufacturer and distributor of Mexican and other
ethnic frozen food. Each of Dartford, and its partners (Messrs. Ian R. Wilson,
James B. Ardrey, and Ray Chung, and Ms. M. Laurie Cummings) are restricted from
acquiring or managing companies other than the Company and Windy Hill for
certain periods of time. If Dartford's management services agreement with Windy
Hill is terminated, Dartford may acquire or manage another company in place of
Windy Hill. On June 10, 1998 Windy Hill entered into an Agreement and Plan of
Merger with DPC Acquisition Corp., Doane Products Company and certain other
parties. The closing of this Merger Agreement is scheduled to occur in July,
1998 but is subject to a number of regulatory and other conditions. Dartford's
management services agreement with Windy Hill will be terminated if and when
this Merger Agreement closes. During the period that Messrs. Wilson, Ardrey, and
Chung and Ms. Cummings are subject to non-compete covenants in their employment
agreements, they are not permitted to manage or acquire any additional company
in the business of offering food products (other than beverages) for human
consumption. See "Management--Employment Agreements", "Principal Stockholders
and Selling Stockholder--Securityholders Agreement" and "Certain Relationships
and Related Transactions".
INTEREST RATE SWAP AGREEMENTS
The Company in the ordinary course of business enters into interest rate
swap agreements with major financial institutions in order to reduce the impact
of changes in interest rates on its floating rate long term debt. The Company's
principal risk under these agreements is that the financial institution
defaults. In such case, the Company would not receive a swap payment from the
financial institution that otherwise would have resulted in a reduction in net
interest expense. Management believes that any potential loss in future earnings
and cash flows attributable to its interest rate swap agreements would not be
material.
DILUTION
Persons purchasing shares of Common Stock in the Equity Offerings will incur
immediate and substantial dilution in the net tangible book value of
approximately $28.70 per share. See "Dilution".
NO DIVIDENDS
The Company has never paid dividends on the Common Stock and does not
anticipate paying such dividends in the foreseeable future. See "Dividend
Policy".
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Upon completion of the Equity Offerings, the Company will have outstanding
67,000,000 shares of Common Stock. Of these shares, the 14,500,000 shares of
Common Stock sold in the Equity Offerings (16,675,000 shares if the
Underwriters' over-allotment option are exercised in full) will be freely
transferable without restriction under the Securities Act of 1933 (the
"Securities Act"), unless purchased by an
12
<PAGE>
"affiliate" of the Company within the meaning of Rule 144 promulgated under the
Securities Act ("Rule 144"). The remaining 52,500,000 outstanding shares of
Common Stock are "restricted securities" under Rule 144. The number of shares of
Common Stock available for sale in the public market is limited by restrictions
under the Securities Act and lock-up agreements under which the holder of such
shares has agreed not to sell or otherwise dispose of any of their shares for a
period of 180 days after the closing of the Equity Offerings, without the prior
written consent of the representatives of the Underwriters. Of the 52,500,000
shares of "restricted securities", there are currently no shares of Common Stock
eligible for sale and beginning on April 8, 1999, all of such shares of Common
Stock will be eligible for sale based on current Securities and Exchange
Commission ("Commission") rules generally limiting the manner-of-sale, volume,
and timing of such sales. The direct and indirect members of New LLC will hold
approximately 52,500,000 shares of Common Stock immediately after the Equity
Offerings, have certain registration rights with respect to them, and have
agreed to certain restrictions on the sale of any shares of Common Stock. See
"Certain Relationships and Related Transactions", "Background", "Shares Eligible
for Future Sale", "Underwriting", and "Principal Stockholders and Selling
Stockholder--Securityholders Agreement".
The Company plans to register on Form S-8 3,500,000 shares of Common Stock
issuable to its employees pursuant to the 1998 Incentive Plan and 200,000 shares
of Common Stock issuable to its employees pursuant to the 1998 Employee Stock
Purchase Plan. See "Management--1998 Long-Term Incentive Plan" and "--1998
Employee Stock Purchase Plan".
Future sales of substantial amounts of Common Stock, or the perception that
such sales could occur, could adversely affect the market price of the Common
Stock prevailing from time to time and could impair the ability of the Company
to raise additional capital in the future through the sale of its equity
securities. See "Shares Eligible for Future Sale" and "Underwriting".
NO PRIOR PUBLIC MARKET
Prior to the Equity Offerings, there has been no public market for the
Common Stock and there can be no assurance that an active public market will
develop or be sustained after the Equity Offerings or that the initial public
offering price corresponds to the price at which the Common Stock will trade in
the public market subsequent to the Equity Offerings. The initial public
offering price for the Common Stock will be determined by negotiations among the
Company, the Selling Stockholder and the representatives of the Underwriters
based upon the consideration of certain factors set forth herein under
"Underwriting". Subsequent to the Equity Offerings, prices for the Common Stock
will be determined by the market and may be influenced by a number of factors
including the depth and liquidity of the market for the Common Stock, investor
perceptions of the Company and other food products companies and general
economic and other conditions.
PREFERRED STOCK
The Certificate of Incorporation allows the Company to issue preferred stock
without stockholder approval. Such issuances could make it more difficult for a
third party to acquire the Company. See "Description of Capital Stock".
REFINANCINGS
NOTES OFFERING
Concurrently with the Equity Offerings, the Company is offering $200 million
aggregate principal amount of its Series E Senior Subordinated Notes due 2008
(the "Notes Offering"). The closings of the Equity Offerings and the Notes
Offering are not contingent upon each other. The indenture for the New Notes
will contain certain covenants, including, but not limited to, covenants that
will limit (i) the incurrence of additional indebtedness by the Company and its
subsidiaries, (ii) the payment of dividends on, and reedemption of, capital
stock of the Company and the redemption of certain subordinated
13
<PAGE>
obligations of the Company, (iii) investments, (iv) sales of assets and
subsidiary stock, (v) transactions with affiliates, (vi) consolidations, mergers
and transfers of all or substantially all the assets of the Company and (vii)
distributions by subsidiaries.
In the event the Notes Offering is not consummated, the Company intends to
increase the amounts borrowed under the Senior Credit Facilities to $500
million.
REFINANCING OF SENIOR BANK FACILITIES
The outstanding indebtedness of approximately $184.8 million under the
Second Amended and Restated Credit and Guarantee Agreement, dated as of July 9,
1996, among VDK, Van de Kamp's, Inc., the banks and other financial institutions
parties thereto and the Chase Manhattan Bank, NA, as agent, as amended (the "VDK
Senior Bank Facilities") will be repaid in full with the proceeds of the Equity
Offerings. In addition, the outstanding indebtedness of approximately $416.3
million under the Aurora Senior Bank Facilities will be repaid in full with the
proceeds of the Refinancings and a portion of the proceeds of the Equity
Offerings. In the event the Notes Offering is not consummated, the Company
intends to increase the amounts borrowed under the Senior Credit Facilities to
$500 million.
Concurrently with the closing of the Equity Offerings, the Company will
enter into the Senior Credit Facilities. The repayment of the VDK Senior Bank
Facilities and the Aurora Senior Bank Facilities, the entering into of the
Senior Credit Facilities, and the Notes Offering are hereinafter referred to as
the "Refinancings". The Company plans to borrow under the Senior Credit
Facilities to redeem $65 million principal amount of the VDK Notes and to pay
the related redemption premium of $11.0 million after the closing of the Equity
Offerings.
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<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Equity Offerings
(after deducting the underwriting discounts and estimated offering expenses),
based on an assumed initial public offering price of $21.50 per share, the
midpoint of the estimated offering range set forth on the cover page of this
Prospectus, are estimated to be approximately $257.0 million. The net proceeds
will be used to redeem $35.0 million principal amount of the VDK Notes and pay
the associated redemption premium of $3.5 million pursuant to the VDK Indenture.
For a description of the VDK Notes, see "Description of Indebtedness--Senior
Subordinated Notes--The VDK Notes". Any portion of the net proceeds not so
utilized will be used to repay indebtedness of $33.7 million under the Second
Amended and Restated Credit Agreement, dated as of January 16, 1998, by and
among Aurora Foods, Aurora, the lenders listed therein, The Chase Manhattan
Bank, The National Westminister Bank PLC, and Swiss Bank Corporation (the
"Aurora Senior Bank Facilities") and $184.8 million under the VDK Senior Bank
Facilities. The indebtedness under the Aurora Senior Bank Facilities, which was
incurred in connection with the acquisitions of the MRS. BUTTERWORTH'S business,
the LOG CABIN business and the DUNCAN HINES business, bears interest at a
weighted average rate of 8.38% and has maturity dates ranging from December 31,
2004 through June 30, 2006. The indebtedness under the VDK Senior Bank
Facilities was incurred in connection with the acquisitions of the VAN DE KAMP'S
business, the MRS. PAUL'S business, the AUNT JEMIMA business, and the CELESTE
business, bears interest at a weighted average rate of 8.55% and has maturity
dates ranging from September 19, 2001 through September 30, 2003. The Company
will not receive any of the proceeds from the sale of shares of Common Stock by
the Selling Stockholder.
DIVIDEND POLICY
The Company intends to retain future earnings for use in the Company's
business and does not anticipate declaring or paying any cash or stock dividends
on shares of its Common Stock in the foreseeable future. Further, any
determination to declare and pay dividends will be made by the Board of
Directors of the Company in light of the Company's earnings, financial
condition, capital requirements, and contractual agreements, and other factors
deemed relevant by the Board of Directors at that time. In addition, the Senior
Credit Facilities and the Indentures contain certain restrictive covenants,
including covenants that directly or indirectly restrict or prohibit the
Company's ability to pay dividends and make other distributions. See "Risk
Factors--Restrictive Debt Covenants" and "Description of Indebtedness".
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words "believes", "anticipates",
"intends", "expects", "estimates" and words of similar import, constitute
"forward-looking statements" and involve known and unknown risk, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These statements appear under the captions
"Prospectus Summary", "Risk Factors", "Unaudited Pro Forma Financial Data",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and "Business" and elsewhere in this Prospectus. Such factors
include, among others, the following: the actions of the Company's competitors;
general economic and business conditions; industry trends; demographics; raw
material costs; the continued success of management's strategy; integration of
acquired businesses into the Company; terms and deployment of capital; changes
in, or the failure or inability to comply with, governmental rules and
regulations, including, without limitation, FDA and environmental rules and
regulations, and other factors referenced in the Prospectus. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements.
15
<PAGE>
BACKGROUND
Aurora Foods Inc. ("Aurora Foods"), a wholly-owned subsidiary of Aurora, was
incorporated in Delaware in December 1996 for the purpose of acquiring the MRS.
BUTTERWORTH'S syrup business from Conopco, Inc. (the "Predecessor"), a
subsidiary of Unilever United States, Inc. ("Unilever"). Aurora Foods then
acquired the LOG CABIN syrup business from Kraft Foods, Inc. ("Kraft") in July
1997 and the DUNCAN HINES baking mix business from The Procter & Gamble Company
("P&G") in January 1998.
Van de Kamp's, Inc., a wholly-owned subsidiary of VDK, was incorporated in
Delaware in July 1995 for the purpose of acquiring the VAN DE KAMP'S frozen
seafood business from the Pillsbury Company ("Pillsbury") in September 1995. Van
de Kamp's, Inc. then acquired the MRS. PAUL'S frozen seafood business from the
Campbell Soup Company ("Campbell Soup") in May 1996 and AUNT JEMIMA frozen
breakfast and CELESTE frozen pizza businesses from Quaker Oats in July 1996. The
acquisitions consummated by Aurora Foods and Van de Kamp's, Inc., are
collectively referred to as the "Acquired Businesses".
On April 8, 1998, MBW Investors LLC and VDK Foods LLC formed Aurora/VDK LLC
("New LLC"). MBW Investors LLC contributed all of the capital stock of Aurora
and VDK Foods LLC contributed all of the capital stock of VDK to New LLC (the
"Contribution Transaction"). In return for those contributions, MBW Investors
LLC was issued 55.5% of the interests in New LLC plus a right to receive a
special $8.5 million priority distribution from New LLC, and VDK Foods LLC was
issued 44.5% of the interests in New LLC plus a right to receive a special $42.4
million priority distribution from New LLC. Each of UBS and Tiger Oats have
agreed to receive their $9.7 million portion of their priority distribution in
shares of Common Stock of the Company. The Company was incorporated on June 19,
1998, and just prior to the Equity Offerings, New LLC will contribute all of the
issued and outstanding stock of Aurora and VDK to it.
New LLC is a majority-owned subsidiary of MBW Investors LLC. New LLC and the
Company will account for the contribution of the ownership of Aurora at MBW
Investors LLC's historical cost and the contribution of the ownership of VDK
will be accounted for as an acquisition using the purchase method of accounting
at New LLC's cost.
Unless the context otherwise requires, discussion of the business of the
Company gives effect to acquisitions made by Aurora or VDK and to the merger of
Aurora, Aurora Foods, VDK, and Van de Kamp's, Inc. with and into the Company,
concurrently with the closing of the Equity Offerings (the "Merger"). All
references to the Company's historical financial statements are to the
historical financial statements of Aurora, to which the Company will be the
successor upon formation and after the Merger. The consummation of the Merger is
a condition to, and will close concurrently with, the closing of the Equity
Offerings.
New LLC will sell 1,553,637 shares of Common Stock in the Equity Offerings
(assuming an initial public offering price of $21.50, the midpoint of the range
of initial public offering prices set forth on the cover page of this
Prospectus) and as soon as practicable after the closing of the Equity
Offerings, New LLC will be dissolved.
The Company's principal executive offices are located at 456 Montgomery
Street, Suite 2200, San Francisco, California 94104, and the telephone number is
415-982-3019.
16
<PAGE>
DILUTION
As of March 28, 1998, the Company had a pro forma deficit in net tangible
book value of $736.1 million or approximately $13.62(1) per share of Common
Stock after giving effect to the Company's acquisitions of VDK and the DUNCAN
HINES business, and the Desserts Sale. Pro forma net tangible book value per
share is determined by dividing the pro forma tangible net worth of the Company
(tangible assets less total liabilities) by the total number of shares of Common
Stock outstanding. After giving effect to the sale by the Company of the shares
of Common Stock offered hereby at an assumed initial public offering price of
$21.50 per share (the midpoint of the range of the initial public offering
prices set forth on the cover page of this Prospectus) and the deduction of the
estimated underwriting discounts and offering expenses payable by the Company in
connection therewith, but without taking into account any other changes in such
pro forma net tangible book value after March 28, 1998, the pro forma as
adjusted deficit in net tangible book value of the Company as of March 28, 1998,
as adjusted, would have been approximately $482.6 million or $7.20 per share.
This represents an immediate increase in net tangible book value per share to
the existing stockholder of $6.42 per share and an immediate dilution of $28.70
per share to new investors purchasing shares at the assumed initial public
offering price.
The following table illustrates the per share dilution in pro forma net
tangible book value to new investors.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $ 21.50
Pro forma deficit in net tangible book value per
share before giving effect to the Equity Offerings $ (13.62 (1)
Increase per share attributable to new investors..... 6.42
---------
Pro forma as adjusted deficit in net tangible book value
per share after giving effect to the Equity
Offerings.............................................. (7.20)
---------
Dilution per share to new investors...................... $ 28.70
---------
---------
</TABLE>
The following table summarizes as of March 28, 1998, after giving effect to
the sale of the shares of Common Stock offered hereby, the number of shares of
Common Stock purchased from the Company, the total consideration paid therefor
and the average price per share paid by the existing stockholder and by the new
investors purchasing shares of Common Stock in the Equity Offerings before
deduction of the estimated underwriting discounts and commissions and offering
expenses payable by the Company.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Existing stockholder... 54,053,637(1) 80.7% $ 401,660(2) 59.1% $ 7.43(1)
New investors.......... 12,946,363 19.3% 278,347(3) 40.9 21.50
---------- ----------- -------------- -----------
Total............ 67,000,000 100.0% $ 680,007 100.0% $ 10.15
---------- ----------- -------------- -----------
---------- ----------- -------------- -----------
</TABLE>
- ------------------------
(1) Aurora Foods Inc., which was formed shortly before the Equity Offerings, is
the successor to Aurora. As such, Aurora Foods Inc. will assume the
historical financial statements of Aurora as its historical financial
statements. Therefore, the capital structure of Aurora Foods Inc. must be
applied to the historical capital structure and per share information of
Aurora. Upon formation and immediately prior to the Equity Offerings, Aurora
Foods Inc. is expected to have 54,053,637 shares of Common Stock
outstanding, assuming an initial public offering price of $21.50 (the
midpoint of the range of initial public offering prices set forth on the
cover page of this Prospectus). Based on these outstanding shares and prior
capital transactions of Aurora, outstanding shares as of previous dates have
been revised to be on an Aurora Foods Inc. capital structure basis. Earnings
per share data as of previous dates have been recomputed based on the
revised outstanding share amounts.
(2) Reflects aggregate capital contributions received from MBW Investors LLC and
the value of the equivalent equity securities exchanged in the acquisition
of VDK.
(3) Assuming an initial public offering price of $21.50 per share of Common
Stock (the midpoint of the range of initial public offering prices set forth
on the cover page of this Prospectus).
17
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
as of March 28, 1998 ("Actual"), the unaudited pro forma capitalization of the
Company after giving effect to the VDK acquisition and the Desserts Sale (as
defined) ("Pro Forma"), and the unaudited pro forma as adjusted capitalization
of the Company, after giving further effect to the Equity Offerings and
Refinancings and the application of the net proceeds therefrom ("Pro Forma As
Adjusted"). This table should be read in conjunction with the historical
financial statements of the Company, the unaudited pro forma financial
statements, the financial statements of the Acquired Businesses and the
Predecessor, and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 28, 1998
---------------------------------------------------------
ACTUAL PRO FORMA PRO FORMA AS ADJUSTED
--------- ------------ --------------------------------
ONLY FOR
THE EQUITY FURTHER FOR
OFFERINGS THE REFINANCINGS
(IN MILLIONS)
<S> <C> <C> <C> <C>
Long-term debt (including current maturities):
Senior Credit Facilities............................. $ -- $ -- $ -- $ 300.0(1)
Aurora Senior Bank Facilities........................ 450.0 450.0 416.3(2) --(2)
VDK Senior Bank Facilities........................... -- 184.8 --(2) --(2)
12% Senior Subordinated Notes due 2005............... -- 100.0 65.0 (2)
9 7/8% Series B Senior Subordinated Notes due 2007... 100.0 100.0 100.0 100.0
9 7/8% Series D Senior Subordinated Notes due 2007... 102.4 102.4 102.4 102.4
New Notes(1)......................................... -- -- -- 200.0
--------- ------------ ------------- -----------------
Total long-term debt............................. 652.4 937.2 683.7 702.4
--------- ------------ ------------- -----------------
Stockholders' equity:
Preferred stock (no shares issued and outstanding)... -- -- -- --
Common stock......................................... 0.3(3) 0.5(3) 0.7(2) 0.7(2)
Paid-in capital...................................... 217.9 401.3 656.6(2) 656.6(2)
Promissory notes..................................... (0.6) (0.7) (0.7) (0.7)
Accumulated deficit.................................. (63.6) (63.6) (65.6)(2) (65.6)(2)
--------- ------------ ------------- -----------------
Total stockholders' equity......................... 154.0 337.5 591.0 591.0
--------- ------------ ------------- -----------------
Total capitalization............................. $ 806.4 $ 1,274.7 $ 1,274.7 $ 1,293.4
--------- ------------ ------------- -----------------
--------- ------------ ------------- -----------------
</TABLE>
- ------------------------
(1) The Senior Credit Facilities provides for borrowings of up to $400.0
million. See "Description of Indebtedness". In the event the Note Offering
is not consummated, the Company expects to increase the Senior Credit
Facilities to $500 million.
(2) Pro Forma As Adjusted gives effect to the net proceeds to the Company from
the Equity Offerings and the Refinancings and other pro forma adjustments
(see Notes to Unaudited Pro Forma Balance Sheet as of March 28, 1998).
(3) Aurora Foods Inc., which was formed shortly before the Equity Offerings, is
the successor to Aurora. As such, Aurora Foods Inc. will assume the
historical financial statements of Aurora as its historical financial
statements. Therefore, the capital structure of Aurora Foods Inc. must be
applied to the historical capital structure and per share information of
Aurora. Upon formation and immediately prior to the Equity Offerings, Aurora
Foods Inc. is expected to have 54,053,637 shares of Common Stock
outstanding, assuming an initial public offering price of $21.50 (the
midpoint of the initial public offering prices set forth on the cover page
of this Prospectus). Based on these outstanding shares and prior capital
transactions of Aurora, outstanding shares as of previous dates have been
revised to be on an Aurora Foods Inc. capital structure basis. Earnings per
share data as of previous dates have been recomputed based on the revised
outstanding share amounts.
18
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements of the Company are
based on the audited and unaudited historical financial statements of (i) the
Company, (ii) the LOG CABIN business, acquired by the Company on July 1, 1997,
(iii) the DUNCAN HINES business, acquired by the Company on January 16, 1998,
and (iv) VDK, acquired by the Company on April 8, 1998. These audited and
unaudited historical financial statements are included elsewhere in this
Prospectus, except for the DUNCAN HINES stub period January 1, 1998 through
January 15, 1998, and the VDK business for the three months ended March 28,
1998, which are not included herein.
The unaudited pro forma statements of operations has been prepared to give
effect to (i) the acquisition of the LOG CABIN business, (ii) the acquisition of
the DUNCAN HINES business, (iii) the acquisition of VDK, (iv) the Desserts Sale
(as defined), (v) the Equity Offerings, and (vi) the Refinancings as if each had
occurred on January 1, 1997. The unaudited pro forma balance sheet has been
prepared to give effect to (i) the acquisition of VDK, (ii) the Desserts Sale,
(iii) the Equity Offerings, and (iv) the Refinancings as though each had
occurred as of March 28, 1998.
The unaudited pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable. The unaudited pro
forma financial statements and accompanying notes should be read in conjunction
with the historical financial statements of (i) the Company, (ii) the DUNCAN
HINES business, (iii) the LOG CABIN business and (iv) VDK and other financial
information pertaining to the Company, including "The Company",
"Capitalization", and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein. The unaudited
pro forma financial statements are not indicative of either future results of
operations or the results that might have occurred if the foregoing transactions
had been consummated on the indicated dates.
19
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 27, 1997
<TABLE>
<CAPTION>
DUNCAN HINES
LOG CABIN TWELVE MONTHS
COMPANY SIX ENDED VDK
YEAR MONTHS DECEMBER 31, PRO PRO FORMA
ENDED ENDED 1997 FORMA ADJUSTMENTS
DECEMBER 27, JUNE 28, SEE SEE FOR COMPANY
(in thousands, except per share data) 1997 1997 TABLE 1 TABLE 2 ACQUISITIONS PRO FORMA
- ------------------------------------- -------------- ----------- -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................ $ 143,020 $ 51,222 $ 233,150 $ 413,523 $ 33,316(a) $ 874,231
Cost of goods sold................... 45,729 18,067 160,577 162,248 (13,520)(b) 373,101(h)
-------------- ----------- -------------- ---------- ------------ -----------
Gross profit....................... 97,291 33,155 72,573 251,275 46,836 501,130
-------------- ----------- -------------- ---------- ------------ -----------
Brokerage, distribution and marketing
expenses:
Brokerage and distribution......... 17,096 3,239 -- 39,110 28,743(c) 88,188
Trade promotions................... 26,075 9,457 -- 111,146 25,809(a) 172,487
Consumer marketing................. 15,142 597 16,450 30,544 2,984(a) 65,717
-------------- ----------- -------------- ---------- ------------ -----------
Total brokerage, distribution and
marketing expenses............... 58,313 13,293 16,450 180,800 57,536 326,392
Amortization of goodwill and other
intangibles........................ 5,938 675 -- 12,374 14,437(d) 33,424
Selling, general and administrative
expenses........................... 5,229 3,637 7,995 17,566 -- 34,427(e)(h)
Allocated selling expense............ -- -- 4,215 -- (4,215)(c) --
Incentive plan expense............... 2,300 -- -- -- -- 2,300
Transition expenses.................. 2,113 -- -- 1,292 -- 3,405
-------------- ----------- -------------- ---------- ------------ -----------
Total operating expenses........... 73,893 17,605 28,660 212,032 67,758 399,948
-------------- ----------- -------------- ---------- ------------ -----------
Operating income................... 23,398 15,550 43,913 39,243 (20,922) 101,182
Interest income...................... (151) -- -- (364) -- (515)
Interest expense..................... 18,393 -- -- 29,672 36,437(f) 84,502
Amortization of deferred financing
expense............................ 3,059 -- -- 1,900 (384)(f) 4,575
Other bank and financing expenses.... 83 -- -- 221 -- 304
-------------- ----------- -------------- ---------- ------------ -----------
Income before income taxes......... 2,014 15,550 43,913 7,814 (56,975) 12,316
Income tax expense................... 779 6,376 -- 3,087 (5,377)(g) 4,865
-------------- ----------- -------------- ---------- ------------ -----------
Net income......................... $ 1,235 $ 9,174 $ 43,913 $ 4,727 $ (51,598) $ 7,451
-------------- ----------- -------------- ---------- ------------ -----------
-------------- ----------- -------------- ---------- ------------ -----------
Adjusted EBITDA......................
Basic and diluted earnings per
share.............................. $ 0.04(2)
--------------
--------------
Weighted average number of shares
outstanding........................ 29,055(2)
--------------
--------------
Pro forma basic and diluted earnings
per share $ 0.14(2)
-----------
-----------
Pro forma weighted average number of
shares outstanding................. 54,054(2)
-----------
-----------
Pro forma as adjusted basic and
diluted earnings per share
Pro forma as adjusted weighted
average number of shares
outstanding
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR EQUITY COMPANY
OFFERINGS PRO FORMA
AND AS
(in thousands, except per share data) REFINANCINGS ADJUSTED
- ------------------------------------- ------------- -----------
<S> <C> <C>
Net sales............................ $ -- $ 874,231
Cost of goods sold................... -- 373,101
------------- -----------
Gross profit....................... -- 501,130
------------- -----------
Brokerage, distribution and marketing
expenses:
Brokerage and distribution......... -- 88,188
Trade promotions................... -- 172,487
Consumer marketing................. -- 65,717
------------- -----------
Total brokerage, distribution and
marketing expenses............... -- 326,392
Amortization of goodwill and other
intangibles........................ -- 33,424
Selling, general and administrative
expenses........................... -- 34,427
Allocated selling expense............ -- --
Incentive plan expense............... -- 2,300
Transition expenses.................. -- 3,405
------------- -----------
Total operating expenses........... -- 399,948
------------- -----------
Operating income................... -- 101,182
Interest income...................... -- (515)
Interest expense..................... (26,477)(i) 58,025
Amortization of deferred financing
expense............................ (3,084)(i) 1,491
Other bank and financing expenses.... -- 304
------------- -----------
Income before income taxes......... 29,561 41,877
Income tax expense................... 11,676(j) 16,541
------------- -----------
Net income......................... $ 17,885 $ 25,336
------------- -----------
------------- -----------
Adjusted EBITDA...................... $ 154,617(1)
-----------
-----------
Basic and diluted earnings per
share..............................
Weighted average number of shares
outstanding........................
Pro forma basic and diluted earnings
per share
Pro forma weighted average number of
shares outstanding.................
Pro forma as adjusted basic and
diluted earnings per share $ 0.38
-----------
-----------
Pro forma as adjusted weighted
average number of shares
outstanding 67,000
-----------
-----------
</TABLE>
See accompanying notes to the Unaudited Pro Forma Statement of Operations
- ------------------------------
(1) Adjusted EBITDA is defined as net income before interest expense, taxes,
depreciation, amortization, extraordinary items, incentive plan expense and
transition expenses and is presented because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance and to determine a company's ability to service and
incur debt. Adjusted EBITDA should not be considered in isolation from or as
a substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity. Adjusted EBITDA does not include any of the cost savings
disclosed in the Notes to the Unaudited Pro Forma Statement of Operations.
(2) Aurora Foods Inc., which will be formed shortly before the Equity Offerings,
is the successor to Aurora. As such, Aurora Foods Inc. will assume the
historical financial statements of Aurora as its historical financial
statements. Therefore, the capital structure of Aurora Foods Inc. must be
applied to the historical capital structure and per share information of
Aurora. Upon formation and immediately prior to the Equity Offerings, Aurora
Foods Inc. is expected to have 54,053,637 shares of Common Stock
outstanding, assuming an initial public offering price of $21.50 (the
midpoint of the range of initial public offering prices set forth on the
cover page of this Prospectus). Based on these outstanding shares and prior
capital transactions of Aurora, outstanding shares as of previous dates have
been revised to be on an Aurora Foods Inc. capital structure basis. Earnings
per share data as of previous dates have been recomputed based on the
revised outstanding share amounts.
20
<PAGE>
TABLE 1
The following table derives the statement of direct revenues, direct
expenses, and allocated selling expense of the DUNCAN HINES business for the
twelve months ended December 31, 1997, by deducting data for the six months
ended December 31, 1996, from the year ended June 30, 1997, and adding data for
the six months ended December 31, 1997. The DUNCAN HINES business was acquired
from P&G in January 1998. The historical statements of direct revenues and
direct expenses for the year ended June 30, 1997 and the six months ended
December 31, 1996 and 1997 are derived from the financial statements of the
DUNCAN HINES business included elsewhere in this Prospectus. The basis of
presentation of the statements of direct revenues and direct expenses is
disclosed in Note 1 to the DUNCAN HINES financial statements included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, TWELVE MONTHS
YEAR ENDED ------------------------ ENDED
(in thousands) JUNE 30, 1997 1996 1997 DECEMBER 31, 1997
- -------------------------------------------------------- -------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
Direct revenues:
Gross revenues.......................................... $ 253,548 $ 146,124 $ 154,519 $ 261,943
Less: trade spending.................................. (19,646) (9,659) (15,822) (25,809)
Less: coupon expense.................................. (2,900) (2,110) (2,194) (2,984)
-------------- ----------- ----------- ----------
Net direct revenues................................. 231,002 134,355 136,503 233,150
Cost of products sold:
Product costs......................................... 144,261 80,361 85,139 149,039
Delivery costs........................................ 11,787 6,647 6,398 11,538
-------------- ----------- ----------- ----------
Total costs of products sold........................ 156,048 87,008 91,537 160,577
-------------- ----------- ----------- ----------
Gross margin............................................ 74,954 47,347 44,966 72,573
Direct marketing:
Consumer promotional expense.......................... 3,376 1,226 1,184 3,334
Advertising expense................................... 9,957 5,576 6,549 10,930
Other marketing expenses.............................. 2,520 1,453 1,119 2,186
-------------- ----------- ----------- ----------
Total direct marketing expense...................... 15,853 8,255 8,852 16,450
Direct selling, administrative and other................ 10,041 6,177 4,131 7,995
Allocated selling expense............................... 4,750 3,297 2,762 4,215
-------------- ----------- ----------- ----------
Excess of direct revenues over direct expenses.......... $ 44,310 $ 29,618 $ 29,221 $ 43,913
-------------- ----------- ----------- ----------
-------------- ----------- ----------- ----------
</TABLE>
See accompanying notes to the Unaudited Pro Forma Statement of Operations
21
<PAGE>
TABLE 2
On May 1, 1998, the Company completed the sale of the frozen desserts
product line of VDK (the "Desserts Sale") to Mrs. Smith's Bakeries, Inc., a
subsidiary of Flowers, Inc. The Company received approximately $28.0 million
from the sale of certain assets of the frozen desserts product line. The Company
plans to close the Chambersburg, Pennsylvania facility where the frozen desserts
were manufactured and has taken steps to eliminate certain corporate management
and administrative positions related to the desserts business. Machinery and
equipment related to the production of certain frozen seafood and vegetable
products, which is currently relocated at the Chambersburg facility, will be
relocated to the Company's Erie, Pennsylvania, and Jackson, Tennessee
manufacturing facilities. The impact of the Desserts Sale on the Company's
annual results of operations is not expected to be material and management
believes the Desserts Sale will not materially impact future results. The net
proceeds from the Desserts Sale were used to repay $25.0 million in indebtedness
under the VDK Senior Bank Facilities. Because VDK was acquired by the Company
shortly before the Desserts Sale, the Company will not recognize any gain or
loss as a result of the sale.
The following table sets forth the statements of operations for VDK for the
periods ended as indicated. The audited statements of operations for the year
ended June 30, 1997 and the unaudited statement of operations for the six months
ended December 31, 1996 and 1997 are derived from the VDK financial statements
included elsewhere in this Prospectus. The pro forma statement of operations is
based on the audited and unaudited historical financial statements of VDK
adjusted to reflect the Desserts Sale as if it occurred on January 1, 1997. This
table derives the statement of operations for VDK for the twelve months ended
December 31, 1997, by deducting data for the six months ended December 31, 1996,
from the year ended June 30, 1997, and adding data for the six months ended
December 31, 1997.
<TABLE>
<CAPTION>
PRO FORMA
SIX MONTHS ENDED ADJUSTMENTS
DECEMBER 31, TWELVE FOR
YEAR ENDED ------------------------ MONTHS ENDED DESSERTS
(in thousands) JUNE 30, 1997 1996 1997 DECEMBER 31, 1997 SALE PRO FORMA
-------------- ----------- ----------- ------------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................. $ 435,476 $ 193,046 $ 199,329 $ 441,759 $ (28,236)(k) $ 413,523
Cost of goods sold......... 180,941 83,581 79,575 176,935 (14,687)(k) 162,248
-------------- ----------- ----------- ---------- ------------- -----------
Gross profit............. 254,535 109,465 119,754 264,824 (13,549)(k) 251,275
-------------- ----------- ----------- ---------- ------------- -----------
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution............. 45,352 22,824 19,764 42,292 (3,182)(k) 39,110
Trade promotions......... 108,925 47,045 58,340 120,220 (9,074)(k) 111,146
Consumer marketing....... 29,524 10,040 12,443 31,927 (1,383)(k) 30,544
-------------- ----------- ----------- ---------- ------------- -----------
Total brokerage,
distribution and
marketing expenses....... 183,801 79,909 90,547 194,439 (13,639) 180,800
Amortization of goodwill
and other intangibles.... 13,142 6,760 6,792 13,174 (800)(l) 12,374
Selling, general and
administrative
expenses................. 14,270 6,081 9,377 17,566 -- 17,566
Transition expenses........ 2,885 1,593 -- 1,292 -- 1,292
-------------- ----------- ----------- ---------- ------------- -----------
Total operating expenses... 214,098 94,343 106,716 226,471 (14,439) 212,032
-------------- ----------- ----------- ---------- ------------- -----------
Operating income......... 40,437 15,122 13,038 38,353 890 39,243
Interest income............ (965) (632) (31) (364) -- (364)
Interest expense........... 32,499 16,603 15,839 31,735 (2,063)(m) 29,672
Amortization of deferred
financing expense........ 2,108 1,047 1,080 2,141 (241)(n) 1,900
Other bank and financing
expenses................. 265 132 88 221 -- 221
-------------- ----------- ----------- ---------- ------------- -----------
Income (loss) before
income tax............. 6,530 (2,028) (3,938) 4,620 3,194 7,814
Income tax expense
benefit.................. 2,377 (811) (1,439) 1,749 1,338 3,087
-------------- ----------- ----------- ---------- ------------- -----------
Net income (loss)........ $ 4,153 $ (1,217) $ (2,499) $ 2,871 $ 1,856 $ 4,727
-------------- ----------- ----------- ---------- ------------- -----------
-------------- ----------- ----------- ---------- ------------- -----------
</TABLE>
See accompanying notes to the Unaudited Pro Forma Statement of Operations
22
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 28, 1998
<TABLE>
<CAPTION>
COMPANY
THREE DUNCAN HINES
MONTHS STUB PRO FORMA
ENDED PERIOD VDK PRO FORMA ADJUSTMENTS
(in thousands, except per MARCH 28, JANUARY PRO FORMA ADJUSTMENTS COMPANY FOR EQUITY OFFERINGS
share data) 1998 1-15, 1998 SEE TABLE 1 FOR ACQUISITIONS PRO FORMA AND REFINANCINGS
- ------------------------------ ----------- ------------- ---------------- ---------------- ----------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................... $ 89,385 $ 4,951 $ 145,267 $ 734(o) $ 240,337 $ --
Cost of goods sold............ 37,734 3,322 54,371 (316)(p) 95,111(u) --
----------- ------------- ---------------- ---------------- ----------- --------
Gross profit................ 51,651 1,629 90,896 1,050 145,226 --
----------- ------------- ---------------- ---------------- ----------- --------
Brokerage, distribution and
marketing expenses:
Brokerage and distribution.. 9,355 -- 13,542 647(q) 23,544 --
Trade promotions............ 15,568 -- 41,621 548(o) 57,737 --
Consumer marketing.......... 7,997 333 12,638 89(o) 21,057 --
----------- ------------- ---------------- ---------------- ----------- --------
Total brokerage, distribution
and marketing expenses...... 32,920 333 67,801 1,284 102,338 --
Amortization of goodwill and
other intangibles........... 4,597 -- 3,202 557(r) 8,356 --
Selling, general and
administrative expenses..... 2,346 144 4,594 -- (e) 7,084(u) --
Incentive plan expense........ 60,000 -- 69,000 -- 129,000 (3,743)(v,w)
Transition expenses........... 1,926 -- -- -- 1,926 --
----------- ------------- ---------------- ---------------- ----------- --------
Total operating expenses...... 101,789 477 144,597 1,841 248,704 (3,743)
----------- ------------- ---------------- ---------------- ----------- --------
Operating loss.............. (50,138) 1,152 (53,701) (791) (103,478) 3,743
Interest income............... (223) -- (30) (253) --
Interest expense.............. 12,837 -- 7,279 1,010(s) 21,126 (6,620) (x)
Amortization of deferred
financing expense........... 513 -- 472 159(s) 1,144 (771) (x)
Other bank and financing
expenses.................... 51 -- 44 -- 95 --
----------- ------------- ---------------- ---------------- ----------- --------
Loss before income tax...... (63,316) 1,152 (61,466) (1,960) (125,590) 11,134
Income tax (benefit).......... (360) -- (19,464) (1,569)(t) (21,393) 6,011(y)
----------- ------------- ---------------- ---------------- ----------- --------
Net (loss) income before
extraordinary item........ $ (62,956) $ 1,152 $ (42,002) $ (391) $(104,197) $ 5,123
----------- ------------- ---------------- ---------------- ----------- --------
----------- ------------- ---------------- ---------------- ----------- --------
Adjusted EBITDA
Basic and diluted loss per
share before extraordinary
item........................ $ (2.17)(2)
-----------
-----------
Weighted average number of
shares outstanding.......... 29,055(2)
-----------
-----------
Pro forma basic and diluted
loss per share.............. $ (1.93)(2)
-----------
-----------
Pro forma weighted average
number of shares
outstanding................. 54,054(2)
-----------
-----------
Pro forma as adjusted basic
and diluted loss per share..
Pro forma as adjusted weighted
average number of shares
outstanding.................
<CAPTION>
COMPANY
(in thousands, except per PRO FORMA
share data) AS ADJUSTED
- ------------------------------ -------------
<S> <C>
Net sales..................... $ 240,337
Cost of goods sold............ 95,111
-------------
Gross profit................ 145,226
-------------
Brokerage, distribution and
marketing expenses:
Brokerage and distribution.. 23,544
Trade promotions............ 57,737
Consumer marketing.......... 21,057
-------------
Total brokerage, distribution
and marketing expenses...... 102,338
Amortization of goodwill and
other intangibles........... 8,356
Selling, general and
administrative expenses..... 7,084
Incentive plan expense........ 125,257
Transition expenses........... 1,926
-------------
Total operating expenses...... 244,961
-------------
Operating loss.............. (99,735)
Interest income............... (253)
Interest expense.............. 14,506
Amortization of deferred
financing expense........... 373
Other bank and financing
expenses.................... 95
-------------
Loss before income tax...... (114,456)
Income tax (benefit).......... (15,382)
-------------
Net (loss) income before
extraordinary item........ $ (99,074)
-------------
-------------
Adjusted EBITDA $ 39,080(1)
-------------
-------------
Basic and diluted loss per
share before extraordinary
item........................
Weighted average number of
shares outstanding..........
Pro forma basic and diluted
loss per share..............
Pro forma weighted average
number of shares
outstanding.................
Pro forma as adjusted basic
and diluted loss per share.. $ (1.48)
-------------
-------------
Pro forma as adjusted weighted
average number of shares
outstanding................. 67,000
-------------
-------------
</TABLE>
See accompanying notes to the Unaudited Pro Forma Statement of Operations
- ------------------------------
(1) Adjusted EBITDA is defined as net income before interest expense, taxes,
depreciation, amortization, extraordinary items, incentive plan expense and
transition expenses and is presented because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance and to determine a company's ability to service and
incur debt. Adjusted EBITDA should not be considered in isolation from or as
a substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity. Adjusted EBITDA does not include any of the cost savings
disclosed in the Notes to the Unaudited Pro Forma Statement of Operations.
(2) Aurora Foods Inc., which will be formed shortly before the Equity Offerings,
is the successor to Aurora. As such, Aurora Foods Inc. will assume the
historical financial statements of Aurora as its historical financial
statements. Therefore, the capital structure of Aurora Foods Inc. must be
applied to the historical capital structure and per share information of
Aurora. Upon formation and immediately prior to the Equity Offerings, Aurora
Foods Inc. is expected to have 54,053,637 shares of Common Stock
outstanding, assuming an initial public offering price of $21.50 (the
midpoint of the range of initial public offering prices set forth on the
cover page of this Prospectus). Based on these outstanding shares and prior
capital transactions of Aurora, outstanding shares as of previous dates have
been revised to be on an Aurora Foods Inc. capital structure basis. Earnings
per share data as of previous dates have been recomputed based on the
revised outstanding share amounts.
23
<PAGE>
TABLE 1
The following table sets forth the unaudited statement of operations for the
three months ended March 31, 1998, derived from the VDK financial statements not
included herein. The unaudited statement of operations has been adjusted to
reflect the Desserts Sale as if it occurred as of January 1, 1998.
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS ADJUSTMENTS
ENDED FOR SALE OF
(in thousands) MARCH 31, 1998 DESSERTS PRO FORMA
- ----------------------------------------------------------- --------------- ------------ ---------------
<S> <C> <C> <C>
Net sales.................................................. $ 148,959 $ (3,692)(z) $ 145,267
Cost of goods sold......................................... 56,202 (1,831)(z) 54,371
--------------- ------------ ---------------
Gross profit............................................. 92,757 (1,861) 90,896
--------------- ------------ ---------------
--------------- ------------ ---------------
Brokerage, distribution and marketing expenses:
Brokerage and distribution................................. 14,001 (459)(z) 13,542
Trade promotions........................................... 43,194 (1,573)(z) 41,621
Consumer marketing......................................... 12,705 (67)(z) 12,638
--------------- ------------ ---------------
Total brokerage, distribution and marketing expenses....... 69,900 (2,099) 67,801
Amortization of goodwill and other intangibles............. 3,402 (200) aa) 3,202
Selling, general and administrative expenses............... 4,594 -- 4,594
Incentive plan expense..................................... 69,000 -- 69,000
--------------- ------------ ---------------
Total operating expenses................................... 146,896 (2,299) 144,597
--------------- ------------ ---------------
Operating income......................................... (54,139) 438 (53,701)
Interest income............................................ (30) -- (30)
Interest expense........................................... 7,795 (516) bb) 7,279
Amortization of deferred financing expense................. 532 (60) cc) 472
Other bank and financing expenses.......................... 44 -- 44
--------------- ------------ ---------------
Loss before income tax................................... (62,480) 1,014 (61,466)
Income tax benefit......................................... (19,865) 401 (19,464)
--------------- ------------ ---------------
Net loss................................................. $ (42,615) $ 613 $ (42,002)
--------------- ------------ ---------------
--------------- ------------ ---------------
</TABLE>
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Pro Forma Adjustments for the Acquisitions for the Year Ended December 27, 1997
(a) Adjustments to net sales reflect the following:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Reclassification of trade spending expense, netted against sales by P&G, to trade
promotions................................................................................. $ 25,809
Reclassification of cash discounts, netted against sales by P&G, to brokerage and
distribution............................................................................... 4,523
Reclassification of coupon expense, netted against sales by P&G, to consumer marketing....... 2,984
--------------
$ 33,316
--------------
--------------
</TABLE>
(b) Adjustments to cost of goods sold reflect the following:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Adjustments to convert LOG CABIN cost of goods sold from a Last-in, First-out Inventory basis
for the six month period ended June 30, 1997, prior to July 1, 1997 acquisition by the
Company, to the First-in, First-out basis to be consistent with the inventory accounting
policy of the Company...................................................................... $ 9
Reclassification of warehousing and shipping expense, included in cost of goods sold by P&G,
to brokerage and distribution.............................................................. (3,800)
Reclassification of delivery expense, included in cost of goods sold by P&G, to brokerage and
distribution............................................................................... (11,538)
Depreciation(1).............................................................................. 1,809
--------------
$ (13,520)
--------------
--------------
</TABLE>
- ------------------------
(1) Represents adjustment to reflect pro forma depreciation expense based
on acquired machinery and equipment at fair market value and estimated
remaining useful lives.
The Company entered into a co-pack agreement with the Red Wing Company,
Inc. ("Red Wing") on June 9, 1997, pursuant to which Red Wing contract
manufactures MRS. BUTTERWORTH'S syrup until November 19, 2002. In addition,
on November 19, 1997, the Company entered into a second co-pack agreement,
pursuant to which Red Wing also contract manufactures LOG CABIN syrup until
November 19, 2002. The Company commenced transferring production of LOG
CABIN syrup from Kraft to Red Wing in February 1998 and expects to complete
the transition by June 1998.
The Company has entered into a co-pack agreement with Gilster-Mary Lee
Corporation, dated as of June 4, 1998, and expects in the future to enter
into co-pack agreements whereby third parties will contract manufacture the
DUNCAN HINES cake mix, frosting, brownies and specialty products.
The Company anticipates lower conversion costs pursuant to such co-pack
agreements. As a result, the Company anticipates lower costs than those
incurred by the prior owners in the annual amount of $12.4 million. The
adjustment related to the anticipated cost savings from the co-pack
agreements is not reflected in the pro forma statement of operations as it
is not viewed as being directly related to the acquisitions.
(c) Adjustments reflects (i) reclassifications of selling expenses of $4.2
million recorded to allocated selling expense, by P&G, to brokerage and
distribution by Company, and (ii) selling expenses related to brokerage
expense based on the contractual rates which the Company will be charged
under its existing contracts with its broker network for the sale of DUNCAN
HINES products, incremental to the amount in (i) above plus (iii) brokerage
expense at the contractual rates which the Company will be charged under its
existing contracts with its broker network for the sale of LOG CABIN syrup
products, and (iv) the reclassification of cash discounts of $4.5 million,
warehousing and shipping expense of $3.8 million and delivery expense of
$11.5 million from (a) and (b) above. The Company anticipates a cost
reduction in the amount of $0.7 million due to the new contractual
25
<PAGE>
brokerage rates. In addition, the Company anticipates lower annual
warehousing and distribution costs of $3.8 million going forward. The
warehousing and distribution cost savings relate to allocations made by the
prior owner of the DUNCAN HINES business. However, as these anticipated cost
reductions are not viewed as being directly related to the acquisitions, the
pro forma cost savings are not included in the pro forma statement of
operations.
(d) Reflects goodwill and intangible amortization expense as a result of the
acquisitions. Goodwill will be amortized on a straight-line basis over a
forty year period and other intangibles will be amortized over periods
ranging from five to forty years.
(e) The Company has completed a thorough analysis of anticipated costs going
forward. Based on this analysis, the Company developed a detailed annual
operating budget which reflected approximately $33.1 million in factually
supportable selling, general and administrative costs, which is
approximately $1.3 million lower than the combined amounts previously
incurred to operate the business. A substantial portion of these savings is
attributable to a lower headcount relative to the headcount included in the
historical allocations from prior owners. These direct and indirect
allocations included multiple layers of management which the Company
believes it will not need to replicate. The table below reflects cost
reductions resulting from the new personnel infrastructure of the Company.
However, as these potential adjustments are not viewed as directly related
to the acquisitions, the pro forma cost savings are not included in the
unaudited pro forma statement of operations.
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Selling, general and administrative expenses:
1997 pro forma expenses...................................................................... $ 34,427
--------------
Company's anticipated expenses:
Executive and finance...................................................................... 16,021
Division management and marketing.......................................................... 9,641
Sales...................................................................................... 7,458
--------------
Total Company pro forma expense.............................................................. 33,120
--------------
Difference................................................................................... $ (1,307)
--------------
--------------
</TABLE>
(f) The adjustment to interest expense reflects the effect of the additional
financing incurred in connection with the acquisition of the DUNCAN HINES
business and the fair value adjustment to the VDK Notes. The adjustment to
the amortization of deferred financing costs reflects the effect of the
additional financing incurred in connection with the acquisition of the
DUNCAN HINES business, net of the write-off of Aurora's pre-DUNCAN HINES
indebtedness and the related costs thereof.
(g) Reflects an adjustment to the income tax provision to reflect an effective
rate of 39.5% based upon the Company's effective rate for the year ended
December 27, 1997.
(h) Pro forma depreciation expense for the Company included in cost of goods
sold for the year ended December 27, 1997 is $13.8 million. Pro forma
depreciation expense for the Company included in selling, general and
administrative is $0.3 million.
26
<PAGE>
Pro Forma Adjustments for the Equity Offerings and Refinancings for the Year
Ended December 27, 1997
(i) Pro forma as adjusted interest expense has been calculated based upon pro
forma debt levels and the applicable interest rates after giving effect to
the Equity Offerings and the Refinancings and the application of the net
proceeds to the Company therefrom. The table below presents pro forma as
adjusted interest expense, noted with the respective interest rates or fee,
and pro forma as adjusted debt amortization of deferred financing costs:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Interest expense:
Aurora Series B Notes ($100.0 million at 9.875%)............................................. $ 9,875
Aurora Series D Notes ($100.0 million at 9.875%)............................................. 9,875
New Notes ($200.0 million estimated at 8.625%)............................................... 17,250
Senior Credit Facilities ($300.0 million estimated at 6.950%)................................ 20,850
Commitment fee on unused senior revolving facility ($100.0 million at 0.375%)................ 375
--------------
Cash interest expense...................................................................... 58,225
Less: bond premium amortization.............................................................. (200)
--------------
Pro forma as adjusted interest expense................................................... $ 58,025
--------------
--------------
Pro forma amortization of deferred financing costs........................................... $ 1,491
--------------
--------------
</TABLE>
(j) Reflects an adjustment to the income tax provision at an effective rate of
39.5%, based upon the Company's effective rate for the year ended December
27, 1997.
Pro Forma Adjustments for the Desserts Sale for the Year Ended December 27, 1997
(k) Reflects the elimination of sales and operating expenses of the business
sold in the Desserts Sale.
(l) Reflects the impact on amortization expense of the write-off of goodwill
and intangibles related to the Desserts Sale.
(m) Reflects the reduction in interest expense related to the repayment of VDK
Senior Bank Facilities with the net proceeds from the Desserts Sale ($25.0
million at an interest rate of 8.25%).
(n) Reflects the elimination of a portion of amortization of deferred financing
costs related to the repayment of $25.0 million of VDK Senior Bank
Facilities term debt with the net proceeds from the Desserts Sale.
27
<PAGE>
Pro Forma Adjustments for the Acquisitions for the Three Months Ended March 28,
1998
(o) Adjustments to net sales reflect the following:
<TABLE>
<CAPTION>
For the period January 1- January 15, 1998 (in thousands)
- ----------------------------------------------------------------------------------------
<S> <C>
Reclassification of trade spending expense, netted against sales by P&G, to trade
promotions............................................................................. $ 548
Reclassification of cash discounts, netted against sales by P&G, to brokerage and
distribution........................................................................... 97
Reclassification of coupon expense, netted against sales by P&G, to consumer
marketing.............................................................................. 89
-----
$ 734
-----
-----
</TABLE>
(p) Adjustments to cost of goods sold reflect the following:
<TABLE>
<CAPTION>
For the period January 1- January 15, 1998 (in thousands)
- ----------------------------------------------------------------------------------------
<S> <C>
Reclassification of warehousing and shipping expense, included in cost of goods sold by
P&G, to brokerage and distribution..................................................... $ (158)
Reclassification of delivery expense, included in cost of goods sold by P&G, to
brokerage and distribution............................................................. (233)
Depreciation(1)......................................................................... 75
-------
$ (316)
-------
-------
</TABLE>
- ------------------------
(1) Represents adjustment to reflect pro forma depreciation expense based on
acquired machinery and equipment at fair market value and estimated
remaining useful lives.
The Company anticipates lower conversion costs pursuant to its co-pack
agreements of $1.7 million for the quarter. The adjustment related to the
anticipated cost savings from the co-pack agreements is not reflected in the
pro forma statement of operations as it is not viewed as being directly
related to the acquisitions.
(q) Adjustment reflects (i) brokerage expense for the January 1- January 15,
1998 period at the contractual rates which the Company will be charged under
its existing contracts with its broker network for the sale of DUNCAN HINES
products, and (ii) the reclassification of cash discounts of $0.1 million,
warehousing and shipping expense of $0.2 million and delivery expense of
$0.2 million from (o) and (p) above.
(r) Reflects goodwill and intangible amortization expense as a result of the
acquisitions. Goodwill will be amortized on a straight-line basis over a
forty year period and other intangibles will be amortized over periods
ranging from five to forty years.
(s) The adjustment to interest expense reflects the effect of the additional
financing incurred in connection with the acquisition of the DUNCAN HINES
business and the fair value adjustment to the VDK Notes. The adjustment to
the amortization of deferred financing costs reflects the effect of the
additional financing incurred in connection with the acquisition of the
DUNCAN HINES business for the period January 1- January 15, 1998, net of the
write-off of Aurora's pre-DUNCAN HINES indebtedness and the related costs
thereof.
(t) Reflects an adjustment to the income tax provision to reflect an effective
rate of 39.5%, after taking into consideration the non-deductible portion of
incentive plan expense of $69.1 million.
(u) Pro forma depreciation expense for the Company included in cost of goods
sold for the three months ended March 28, 1998 is $2.9 million. Pro forma
depreciation expense for the Company included in selling, general and
administrative is $0.2 million.
28
<PAGE>
Pro Forma Adjustments for the Equity Offerings and the Refinancings for the
Three Months Ended March 28, 1998
(v) Reflects an adjustment to incentive plan expense under the VDK Plan and the
Aurora Plan, which are described elsewhere in the Prospectus, based on the
value of the Company at the Equity Offerings. This expense assumes an
initial public offering price per share of $21.50 (the midpoint of the range
of initial public offering prices set forth on the cover page of this
Prospectus) and based on acceleration of vesting due to the Equity
Offerings. See "Management--VDK Incentive Plan" and "Management--Aurora
Incentive Plan." Note that all pro forma adjustments for incentive plan
expense have been recorded to the three month period ended March 28, 1998.
(w) Reflects an adjustment to incentive plan expense for tax gross-up payments
due under the VDK Plan (see (h) in Unaudited Pro Forma Balance Sheet). See
"Management--VDK Compensation Plan".
(x) Pro forma as adjusted interest expense for the quarter has been calculated
based upon pro forma as adjusted debt levels and the applicable interest
rates after giving effect to the Equity Offerings and the Refinancings and
the application of the net proceeds to the Company therefrom. The table
below presents pro forma as adjusted interest expense and pro forma as
adjusted debt amortization of deferred financing costs:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(IN THOUSANDS) MARCH 28, 1998
---------------------
<S> <C>
Interest expense:
Aurora Series B Notes................................................................. $ 2,469
Aurora Series D Notes................................................................. 2,469
New Notes............................................................................. 4,312
Senior Credit Facilities.............................................................. 5,213
Commitment fee on unused senior debt.................................................. 93
--------
Cash interest expense............................................................... 14,556
Less: bond premium amortization....................................................... (50)
--------
Pro forma as adjusted interest expense............................................ $ 14,506
--------
--------
Pro forma amortization of deferred financing costs.................................... $ 373
--------
--------
</TABLE>
(y) Reflects an adjustment to the income tax provision at an effective rate of
39.5%, after taking into consideration the $75.5 million non-deductible
portion of incentive plan expense.
Pro Forma Adjustments for the Desserts Sale for the Three Months Ended March 28,
1998
(z) Reflects the elimination of sales and operating expenses of the business
sold in the Desserts Sale.
(aa) Reflects the impact on amortization expense of the write-off of goodwill
and intangibles related to the Desserts Sale.
(bb) Reflects the reduction in interest expense related to the repayment of VDK
Senior Bank Facilities with the net proceeds from the Desserts Sale ($25.0
million at an interest rate of 8.25%).
(cc) Reflects the elimination of a portion of amortization of deferred financing
costs related to the repayment of $25.0 million of VDK Senior Bank
Facilities term debt with the net proceeds from the Desserts Sale.
29
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 28, 1998
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
VDK PRO FORMA FOR EQUITY
PRO FORMA ADJUSTMENTS OFFERINGS COMPANY
SEE FOR COMPANY AND PRO FORMA
(in thousands) COMPANY TABLE 1 ACQUISITIONS PRO FORMA REFINANCINGS AS ADJUSTED(1)
- ----------------------------------- ---------- ---------- ------------ ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents.......... $ 23,330 $ 53 $ -- $ 23,383 $ -- (f) $ 23,383
Accounts receivable, net........... 22,847 43,350 -- 66,197 -- 66,197
Inventories........................ 24,851 33,825 -- 58,676 -- 58,676
Prepaid expenses and other
assets........................... 4,973 1,459 -- 6,432 -- 6,432
Current deferred tax assets........ 8,537 12,397 (13,116)(d) 7,818 -- 7,818
---------- ---------- ------------ ---------------- ------------- -----------------
Total current assets........... 84,538 91,084 (13,116) 162,506 162,506
Property, plant and equipment,
net.............................. 45,031 86,359 -- 131,390(3) -- 131,390(2)
Goodwill and other intangible
assets, net...................... 717,956 306,548 49,103(a) 1,073,607 -- 1,073,607
Non-current deferred tax assets.... -- 7,171 18,269(d) 25,440 (894)(g) 24,546
Other assets....................... 22,026 15,415 (18,292)(c) 19,149 2,910(h) 22,059
---------- ---------- ------------ ---------------- ------------- -----------------
Total assets................... $ 869,551 $ 506,577 $ 35,964 $ 1,412,092 $ 2,016 $ 1,414,108
---------- ---------- ------------ ---------------- ------------- -----------------
---------- ---------- ------------ ---------------- ------------- -----------------
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current portion of long term debt.. $ 9,000 $ 16,978 $ -- $ 25,978 $ (15,978)(f) $ 10,000
Accounts payable and accrued
liabilities...................... 55,374 47,784 4,800(b) 107,958 -- 107,958
Senior secured revolving debt
facility......................... -- 15,000 -- 15,000 (15,000)(f) --
---------- ---------- ------------ ---------------- ------------- -----------------
Total current liabilities...... 64,374 79,762 4,800 148,936 (30,978) 117,958
Senior term facility............... 441,000 152,781 -- 593,781 (303,781)(f) 290,000
Senior subordinated notes.......... 202,377 100,000 -- 302,377 100,000(f) 402,377
Other liabilities.................. -- 15,000 14,500(c) 29,500 (16,749)(i) 12,751
Deferred tax liabilities........... 7,771 -- (7,771)(d) -- -- --
---------- ---------- ------------ ---------------- ------------- -----------------
Total liabilities.............. 715,522 347,543 11,529 1,074,594 (251,508) 823,086
---------- ---------- ------------ ---------------- ------------- -----------------
Total stockholders' equity:
Common stock....................... 291(3) -- 250 )(3 541(3) 129(j) 670
Paid-in capital.................... 217,900 198,635 (15,309)(e) 401,226 255,377(j) 656,603
Promissory notes................... (565) (107) -- (672) -- (672)
Retained earnings.................. (63,597) (39,494) 39,494(e) (63,597) (1,982)(k) (65,579)
---------- ---------- ------------ ---------------- ------------- -----------------
Stockholders' equity........... 154,029 159,034 24,435 337,498 253,524 591,022
---------- ---------- ------------ ---------------- ------------- -----------------
Total liabilities and
stockholders' equity......... $ 869,551 $ 506,577 $ 35,964 $ 1,412,092 $ 2,016 $ 1,414,108
---------- ---------- ------------ ---------------- ------------- -----------------
---------- ---------- ------------ ---------------- ------------- -----------------
</TABLE>
See accompanying notes to Unaudited Pro Forma Balance Sheet
- ------------------------------
(1) Assuming an initial public offering price of $21.50 per share of Common
Stock (the midpoint of the range of initial public offering prices set forth
on the cover page of this Prospectus).
(2) Pro forma and pro forma as adjusted capital expenditures for the three
months ended March 28, 1998 totaled $4,253,000.
(3) Aurora Foods Inc., which was formed shortly before the Equity Offerings, is
the successor to Aurora. As such, Aurora Foods Inc. will assume the
historical financial statements of Aurora as its historical financial
statements. Therefore, the capital structure of Aurora Foods Inc. must be
applied to the historical capital structure and per share information of
Aurora. Upon formation and immediately prior to the Equity Offerings, Aurora
Foods Inc. is expected to have 54,053,637 shares of Common Stock
outstanding, assuming an initial public offering price of $21.50 (the
midpoint of the range of initial public offering prices set forth on the
cover page of this Prospectus). Based on these outstanding shares and prior
capital transactions of Aurora, outstanding shares as of previous dates have
been revised to be on an Aurora Foods Inc. capital structure basis. Earnings
per share data as of previous dates have been recomputed based on the
revised outstanding share amounts.
30
<PAGE>
TABLE 1
The following table sets forth the unaudited balance sheet as of March 31,
1998, derived from the VDK financial statements included elsewhere in this
Prospectus. The unaudited pro forma balance sheet has been adjusted to reflect
the Desserts Sale as if it occurred as of March 31, 1998.
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C> <C>
PRO FORMA
ADJUSTMENTS VDK PRO FORMA
VDK AS OF FOR DESSERTS AS OF
MARCH 31, 1998 SALE MARCH 31, 1998
--------------- -------------- ---------------
ASSETS:
Cash and cash equivalents................. $ 53 $ -- $ 53
Accounts receivable, net.................. 43,350 -- 43,350
Inventories............................... 35,825 (2,000)(l) 33,825
Prepaid expenses.......................... 1,459 -- 1,459
Current deferred tax assets............... 11,989 408(m) 12,397
--------------- -------------- ---------------
Total current assets.................. 92,676 (1,592) 91,084
Property, plant and equipment, net........ 88,240 (1,881)(n) 86,359
Goodwill and other intangible
assets, net............................. 322,550 (16,002)(o) 306,548
Non-current deferred tax assets........... 7,171 -- 7,171
Other assets.............................. 16,434 (1,019)(m) 15,415
--------------- -------------- ---------------
Total assets.......................... $ 527,071 $ (20,494) $ 506,577
--------------- -------------- ---------------
--------------- -------------- ---------------
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current portion of long term debt......... $ 16,978 $ -- $ 16,978
Accounts payable and accrued
liabilities............................. 45,184 2,600(p) 47,784
Senior secured revolving debt facility.... 15,000 -- 15,000
--------------- -------------- ---------------
Total current liabilities............. 77,162 2,600 79,762
Senior term facility...................... 177,781 (25,000)(q) 152,781
Senior subordinated notes................. 100,000 -- 100,000
Other liabilities......................... 15,000 -- 15,000
--------------- -------------- ---------------
Total liabilities..................... 369,943 (22,400) 347,543
--------------- -------------- ---------------
Stockholder's equity:
Common stock.............................. -- -- --
Paid-in capital........................... 198,635 -- 198,635
Promissory notes.......................... (107) -- (107)
Retained earnings......................... (41,400) 1,906(m) (39,494)
--------------- -------------- ---------------
Total stockholder's equity............ 157,128 1,906 159,034
--------------- -------------- ---------------
Total liabilities and stockholder's
equity.............................. $ 527,071 $ (20,494) $ 506,577
--------------- -------------- ---------------
--------------- -------------- ---------------
</TABLE>
See accompanying notes to Unaudited Pro Forma Balance Sheet
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 28, 1998
Pro Forma Adjustments for the Acquisition of VDK.
(a) Reflects the excess of cost over the fair market value of the net assets
purchased in connection with the VDK acquisition. Goodwill will be amortized
on a straight-line basis over a forty year period and other intangibles will
be amortized over periods ranging from five to forty years. The Company will
evaluate the net realizable value of intangible assets on an ongoing basis
relying on a number of factors, including operating results and future
undiscounted cash flows.
(b) Reflects an accrual for acquisition costs related to the acquisition of VDK.
(c) Reflects the adjustment to record the VDK Notes and the VDK Senior Bank
Facilities at fair value.
(d) Reflects the reclassification of non-current deferred tax assets originating
from net operating loss carryforwards of $13.1 million, plus the tax benefit
from the adjustment to record the VDK Notes and the VDK Senior Bank
Facilities to fair value of $8.0 million and $4.9 million, respectively,
(see (c) above).
(e) Represents the equity adjustments associated with the acquisition of VDK.
Pro Forma Adjustments for the Equity Offerings and Refinancings
(f) Reflects the assumed proceeds to the Company from the Equity Offerings and
the Refinancings and the application of proceeds therefrom as follows:
<TABLE>
<CAPTION>
(in
millions)
------------
<S> <C>
Gross proceeds to the Company from the Equity Offerings................. $ 278.3
Uses:
Repayment of Aurora Senior Bank Facilities............................ 33.7
Repayment of VDK Senior Bank Facilities............................... 184.8
Repayment of principal on VDK Notes................................... 35.0
Redemption premium on VDK Notes....................................... 3.5
Underwriting discounts, fees and expenses............................. 21.3
------------
Remaining Cash........................................................ $ --
------------
Gross proceeds to the Company from the Refinancings..................... 500.0
Uses:
Repayment of principal on VDK Notes................................... 65.0
Redemption premium on VDK Notes....................................... 11.0
Repayment of Aurora Senior Bank Facilities............................ 416.3
Fees and expenses..................................................... 7.7
------------
Remaining cash........................................................ $ --
------------
------------
</TABLE>
(g) Reflects a $2.8 million adjustment reducing the tax benefit from the
deductible portion of incentive plan expense, partially offset by the tax
benefit of $1.9 million for the write-off of deferred financing costs
related to the repayment of Aurora Senior Bank Facilities.
(h) Reflects deferred financing costs related to the new Senior Credit
Facilities of $7.7 million partially offset by the write-off of deferred
financing costs of $4.8 million related to the repayment of Aurora Senior
Bank Facilities.
(i) Reflects (i) the payment of the $14.5 million of premiums on the VDK Notes
redemption and (ii) an adjustment of $2.2 million to the liability recorded
in connection with the incentive plan expense.
(j) Reflects the assumed gross proceeds of the Equity Offerings of $278.3
million, net of underwriting discounts, fees and expenses of $21.3 million,
partially offset by the adjustment to incentive plan expense of $1.5
million.
(k) Reflects the impact on retained earnings of the write-off of deferred
financing costs, net of tax, of $2.9 million related to the repayment of the
Aurora Senior Bank Facilities, partially offset by the adjustment to
incentive plan expense, net of tax, of $1.0 million.
32
<PAGE>
Pro Forma Adjustments for the Desserts Sale
(l) Reflects the finished goods inventory included in the Desserts Sale.
(m) Reflects excess of liabilities over VDK assets associated with the Desserts
Sale.
(n) Reflects the book value of the machinery and equipment included in the
Desserts Sale.
(o) Reflects the write-off of the allocated goodwill and intangibles from the
Desserts Sale.
(p) Reflects costs related to the Desserts Sale to be paid subsequent to the
closing date of such sale.
(q) Reflects repayment of VDK Senior Bank Facilities from the proceeds of the
Desserts Sale.
33
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
THE COMPANY
The following table sets forth selected historical financial and operating
information of the Predecessor and the Company for the periods ended and as of
the dates indicated. Statement of operations data for the years ended December
1994, 1995, and 1996 represents the operations of the MRS. BUTTERWORTH'S
business by the Predecessor while such data for the year ended December 27, 1997
includes the operations of the MRS. BUTTERWORTH'S business by the Company and
commencing July 1, 1997, the operations of the acquired LOG CABIN business, and
does not include the operations of VDK or the DUNCAN HINES business which were
acquired in 1998. Statement of operations data for the three months ended March
29, 1997 includes the operations of the MRS. BUTTERWORTH'S business by the
Company. Statement of Operations data for the three months ended March 28, 1998
includes the operations of the MRS. BUTTERWORTH'S and LOG CABIN businesses and
commencing January 16, 1998, the operations of the acquired DUNCAN HINES
business. The selected historical statements of operations data for the years
ended December 31, 1994, 1995, and 1996 are derived from the audited financial
statements of the Predecessor included elsewhere in this Prospectus for 1995 and
1996 and not included herein for 1994. The selected historical statement of
operations data and the historical balance sheet data for the year ended as of
December 27, 1997 are derived from the audited financial statements of the
Company included elsewhere in this Prospectus. The selected historical statement
of operations data for the three months ended March 29, 1997 and March 28, 1998
and the historical balance sheet data as of March 28, 1998 are derived from the
unaudited financial statements of the Company included elsewhere in this
Prospectus and which, in the opinion of management, include all normal recurring
adjustments. This table should be read in conjunction with the Predecessor's and
the Company's historical consolidated financial statements, the Company's
unaudited pro forma financial statements and related notes appearing elsewhere
in this Prospectus and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
(in thousands) 1994 1995 1996
--------- --------- -------------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales....................................................................... $ 96,729 $ 91,302 $ 89,541
Cost of goods sold.............................................................. 29,930 27,743 28,955
--------- --------- -------------
Gross profit.................................................................. 66,799 63,559 60,586
--------- --------- -------------
Brokerage, distribution and marketing expenses:
Brokerage and distribution.................................................... 8,662 7,583 8,140
Trade promotions.............................................................. 21,911 19,380 17,672
Consumer marketing............................................................ 15,297 13,291 10,835
--------- --------- -------------
Total brokerage, distribution and marketing expenses............................ 45,870 40,254 36,647
Amortization of goodwill and other intangibles.................................. -- -- --
Selling, general and administrative expenses.................................... 6,829 6,120 6,753
Incentive plan expense.......................................................... -- -- --
Transition expenses............................................................. -- -- --
--------- --------- -------------
Total operating expenses........................................................ 52,699 46,374 43,400
--------- --------- -------------
Operating income.............................................................. 14,100 17,185 17,186
Interest income................................................................. -- -- --
Interest expense................................................................ -- -- --
Amortization of deferred financing expense...................................... -- -- --
Other bank and financing expenses............................................... -- -- --
--------- --------- -------------
Income (loss) before income taxes and extraordinary item...................... 14,100 17,185 17,186
Income tax expense (benefit).................................................... 5,429 6,616 6,616
--------- --------- -------------
Income (loss) before extraordinary item....................................... 8,671 10,569 10,570
Extraordinary loss on early extinguishment of debt, net of tax of $1,184...... -- -- --
--------- --------- -------------
Net income (loss)............................................................. $ 8,671 $ 10,569 $ 10,570
--------- --------- -------------
--------- --------- -------------
Basic and diluted earnings (loss) per share before extraordinary item...........
Extraordinary item per share....................................................
Basic and diluted earnings (loss) per share.....................................
Weighted average number of shares outstanding...................................
OPERATING AND OTHER DATA:
Adjusted EBITDA(1).............................................................. $ 14,315 $ 17,496 $ 17,463
Adjusted EBITDA margin(2)....................................................... 14.8% 19.2% 19.5%
Depreciation and amortization................................................... $ 215 $ 311 $ 277
Capital expenditures............................................................
BALANCE SHEET DATA (END OF PERIOD):
Working capital (excluding current portion of long-term debt)...................
Total assets....................................................................
Long-term debt (including current portion)......................................
Stockholder's equity............................................................
<CAPTION>
COMPANY
---------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 27, ----------------
(in thousands) 1997 MARCH 29, 1997
--------------- ----------------
<S> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales....................................................................... $ 143,020 $ 21,253
Cost of goods sold.............................................................. 45,729 7,167
--------------- ----------------
Gross profit.................................................................. 97,291 14,086
--------------- ----------------
Brokerage, distribution and marketing expenses:
Brokerage and distribution.................................................... 17,096 2,279
Trade promotions.............................................................. 26,075 3,643
Consumer marketing............................................................ 15,142 1,331
--------------- ----------------
Total brokerage, distribution and marketing expenses............................ 58,313 7,253
Amortization of goodwill and other intangibles.................................. 5,938 828
Selling, general and administrative expenses.................................... 5,229 1,053
Incentive plan expense.......................................................... 2,300 --
Transition expenses............................................................. 2,113 126
--------------- ----------------
Total operating expenses........................................................ 73,893 9,260
--------------- ----------------
Operating income.............................................................. 23,398 4,826
Interest income................................................................. (151) (32)
Interest expense................................................................ 18,393 2,654
Amortization of deferred financing expense...................................... 3,059 2,313
Other bank and financing expenses............................................... 83 9
--------------- ----------------
Income (loss) before income taxes and extraordinary item...................... 2,014 (118)
Income tax expense (benefit).................................................... 779 (47)
--------------- ----------------
Income (loss) before extraordinary item....................................... 1,235 (71)
Extraordinary loss on early extinguishment of debt, net of tax of $1,184...... -- --
--------------- ----------------
Net income (loss)............................................................. $ 1,235 $ (71)
--------------- ----------------
--------------- ----------------
Basic and diluted earnings (loss) per share before extraordinary item........... $ 0.04(3) $ -- (3)
Extraordinary item per share.................................................... -- --
--------------- ----------------
Basic and diluted earnings (loss) per share..................................... 0.04(3) -- (3)
--------------- ----------------
--------------- ----------------
Weighted average number of shares outstanding................................... 29,055(3) 29,055(3)
--------------- ----------------
--------------- ----------------
OPERATING AND OTHER DATA:
Adjusted EBITDA(1).............................................................. $ 34,796 $ 5,936
Adjusted EBITDA margin(2)....................................................... 24.3% 27.9%
Depreciation and amortization................................................... $ 9,976 $ 3,274
Capital expenditures............................................................ 2,411 96
BALANCE SHEET DATA (END OF PERIOD):
Working capital (excluding current portion of long-term debt)................... $ 6,524 $ 10,709
Total assets.................................................................... 372,739 140,942
Long-term debt (including current portion)...................................... 279,919 100,000
Stockholder's equity............................................................ 65,223 33,089
<CAPTION>
(in thousands) MARCH 28, 1998
----------------
STATEMENTS OF OPERATIONS DATA:
Net sales....................................................................... $ 89,385
Cost of goods sold.............................................................. 37,734
----------------
Gross profit.................................................................. 51,651
----------------
Brokerage, distribution and marketing expenses:
Brokerage and distribution.................................................... 9,355
Trade promotions.............................................................. 15,568
Consumer marketing............................................................ 7,997
----------------
Total brokerage, distribution and marketing expenses............................ 32,920
Amortization of goodwill and other intangibles.................................. 4,597
Selling, general and administrative expenses.................................... 2,346
Incentive plan expense.......................................................... 60,000
Transition expenses............................................................. 1,926
----------------
Total operating expenses........................................................ 101,789
----------------
Operating income.............................................................. (50,138)
Interest income................................................................. (223)
Interest expense................................................................ 12,837
Amortization of deferred financing expense...................................... 513
Other bank and financing expenses............................................... 51
----------------
Income (loss) before income taxes and extraordinary item...................... (63,316)
Income tax expense (benefit).................................................... (360)
----------------
Income (loss) before extraordinary item....................................... (62,956)
Extraordinary loss on early extinguishment of debt, net of tax of $1,184...... 1,876
----------------
Net income (loss)............................................................. $ (64,832)
----------------
----------------
Basic and diluted earnings (loss) per share before extraordinary item........... $ (2.17)(3)
Extraordinary item per share.................................................... (0.06)(3)
----------------
Basic and diluted earnings (loss) per share..................................... (2.23)(3)
----------------
----------------
Weighted average number of shares outstanding................................... 29,055(3)
----------------
----------------
OPERATING AND OTHER DATA:
Adjusted EBITDA(1).............................................................. $ 17,587
Adjusted EBITDA margin(2)....................................................... 19.7%
Depreciation and amortization................................................... $ 6,140
Capital expenditures............................................................ 1,511
BALANCE SHEET DATA (END OF PERIOD):
Working capital (excluding current portion of long-term debt)................... $ 29,164
Total assets.................................................................... 869,551
Long-term debt (including current portion)...................................... 652,377
Stockholder's equity............................................................ 154,029
</TABLE>
- ------------------------
(1) Adjusted EBITDA is defined as net income before interest expense, taxes,
depreciation, amortization, extraordinary items, incentive plan expense and
transition expenses and is presented because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance and to determine a company's ability to service and
incur debt. Adjusted EBITDA should not be considered in isolation from or as
a substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
(2) Adjusted EBITDA margin is computed as Adjusted EBITDA as a percentage of net
sales.
(3) Aurora Foods Inc., which was formed shortly before the Equity Offerings, is
the successor to Aurora. As such, Aurora Foods Inc. will assume the
historical financial statements of Aurora as its historical financial
statements. Therefore, the capital structure of Aurora Foods Inc. must be
applied to the historical capital structure and per share information of
Aurora. Upon formation and immediately prior to the Equity Offerings, Aurora
Foods Inc. is expected to have 54,053,637 shares of Common Stock
outstanding, assuming an initial public offering price of $21.50 (the
midpoint of the range of the initial public offering prices set forth on the
cover page of this Prospectus). Based on these outstanding shares and prior
capital transactions of Aurora, outstanding shares as of previous dates have
been revised to be on an Aurora Foods Inc. capital structure basis. Earnings
per share data as of previous dates have been recomputed based on the
revised outstanding share amounts.
34
<PAGE>
VDK
The following table sets forth selected historical financial and operating
information of the Predecessor to VDK and VDK for the periods ended and as of
the dates indicated. VDK commenced operations in September 1995, concurrent with
the acquisition of the VAN DE KAMP's business from Pillsbury. Commencing May
1996, the VDK statement of operations data includes the operations of the MRS.
PAUL'S business and commencing July 1996, it includes the operations of the AUNT
JEMIMA and CELESTE businesses. The selected historical statements of operations
data for the years ended June 30, 1993, 1994 and 1995 and for the operating
period July 1, 1995 through September 18, 1995 are derived from the audited
financial statements of the Predecessor to VDK included elsewhere in this
Prospectus for 1995 and the operating period July 1, 1995 through September 18,
1995 and from audited financial statements not included herein for 1993 and
1994. The selected historical statements of operations data for the operating
period September 19, 1995 through June 29, 1996 and for the year ended June 30,
1997 and the historical balance sheet data at June 29, 1996 and June 30, 1997
are derived from the audited financial statements of VDK included elsewhere in
this Prospectus. The selected historical statements of operations data and the
historical balance sheet data for the nine months ended and as of March 31, 1997
and 1998 are derived from the unaudited financial statements of VDK included
elsewhere in this Prospectus and which, in the opinion of management, include
all normal, recurring adjustments. This table should be read in conjunction with
VDK's historical financial statements appearing elsewhere in this Prospectus and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
PREDECESSOR TO VDK
---------------------------------------------- VDK
-----------------------------
FOR THE YEARS ENDED JULY 1, 1995 OPERATING PERIOD YEAR ENDED
JUNE 30, THROUGH SEPTEMBER 19, JUNE 30,
------------------------------- SEPTEMBER 18, 1995 THROUGH -----------
(in thousands) 1993 1994 1995 1995 JUNE 29, 1996 1997
--------- --------- --------- ------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.................................. $ 159,004 $ 153,314 $ 149,359 $ 20,545 $ 143,296 $ 435,476
Cost of goods sold......................... 77,387 67,881 66,111 10,978 60,367 180,941
--------- --------- --------- ------------- ---------------- -----------
Gross profit............................. 81,617 85,433 83,248 9,567 82,929 254,535
--------- --------- --------- ------------- ---------------- -----------
Brokerage, distribution and marketing
expenses:
Brokerage and distribution............... 11,695 11,671 11,376 1,616 15,901 45,352
Trade promotions......................... 33,964 33,304 34,530 3,699 32,517 108,925
Consumer marketing....................... 6,586 9,852 8,260 1,919 11,336 29,524
--------- --------- --------- ------------- ---------------- -----------
Total brokerage, distribution and marketing
expenses................................. 52,245 54,827 54,166 7,234 59,754 183,801
Amortization of goodwill and other
intangibles.............................. 3,305 3,305 3,305 689 4,223 13,142
Selling, general and administrative
expenses................................. 9,518 8,682 9,789 1,370 5,267 14,270
Incentive plan expense..................... -- -- -- -- -- --
Transition expenses........................ -- -- -- -- 1,337 2,885
--------- --------- --------- ------------- ---------------- -----------
Total operating expenses................... 65,068 66,814 67,260 9,293 70,581 214,098
--------- --------- --------- ------------- ---------------- -----------
Operating income......................... 16,549 18,619 15,988 274 12,348 40,437
Interest income............................ -- -- -- -- (135) (965)
Interest expense........................... -- -- -- -- 12,469 32,499
Amortization of deferred financing
expense.................................. -- -- -- -- 607 2,108
Other bank and financing expenses.......... -- -- -- -- 79 265
--------- --------- --------- ------------- ---------------- -----------
Income (loss) before income taxes........ 16,549 18,619 15,988 274 (672) 6,530
Income tax expense (benefit)............... 7,841 8,769 7,716 396 (233) 2,377
--------- --------- --------- ------------- ---------------- -----------
Net income (loss) before cumulative
effect of accounting change............ 8,708 9,850 8,272 (122) (439) 4,153
Cumulative effect of accounting change, net
of income taxes.......................... 222 -- -- -- -- --
--------- --------- --------- ------------- ---------------- -----------
Net income (loss).......................... $ 8,486 $ 9,850 $ 8,272 $ (122) $ (439) $ 4,153
--------- --------- --------- ------------- ---------------- -----------
--------- --------- --------- ------------- ---------------- -----------
Basic and diluted earnings (loss) per
share.................................... $ (4) $ 42
---------------- -----------
---------------- -----------
Weighted average number of shares
outstanding.............................. 0.1 0.1
---------------- -----------
---------------- -----------
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------------
(in thousands) 1997 1998
----------------- ---------
(UNAUDITED)
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.................................. $ 344,113 $ 348,288
Cost of goods sold......................... 143,522 135,777
----------------- ---------
Gross profit............................. 200,591 212,511
----------------- ---------
Brokerage, distribution and marketing
expenses:
Brokerage and distribution............... 37,005 33,765
Trade promotions......................... 83,908 101,534
Consumer marketing....................... 23,897 25,151
----------------- ---------
Total brokerage, distribution and marketing
expenses................................. 144,810 160,450
Amortization of goodwill and other
intangibles.............................. 9,982 10,194
Selling, general and administrative
expenses................................. 9,825 13,968
Incentive plan expense..................... -- 69,000
Transition expenses........................ 2,073 --
----------------- ---------
Total operating expenses................... 166,690 253,612
----------------- ---------
Operating income......................... 33,901 (41,101)
Interest income............................ (939) (60)
Interest expense........................... 24,762 23,634
Amortization of deferred financing
expense.................................. 1,573 1,612
Other bank and financing expenses.......... 215 131
----------------- ---------
Income (loss) before income taxes........ 8,290 (66,418)
Income tax expense (benefit)............... 3,316 (21,304)
----------------- ---------
Net income (loss) before cumulative
effect of accounting change............ 4,974 (45,114)
Cumulative effect of accounting change, net
of income taxes.......................... -- --
----------------- ---------
Net income (loss).......................... $ 4,974 $ (45,114)
----------------- ---------
----------------- ---------
Basic and diluted earnings (loss) per
share.................................... $ 50 $ (451)
----------------- ---------
----------------- ---------
Weighted average number of shares
outstanding.............................. 0.1 0.1
----------------- ---------
----------------- ---------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR TO VDK
---------------------------------------------- VDK
-----------------------------
FOR THE YEARS ENDED JULY 1, 1995 OPERATING PERIOD YEAR ENDED
JUNE 30, THROUGH SEPTEMBER 19, JUNE 30,
------------------------------- SEPTEMBER 18, 1995 THROUGH -----------
(in thousands) 1993 1994 1995 1995 JUNE 29, 1996 1997
--------- --------- --------- ------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING AND OTHER DATA:
Adjusted EBITDA(1)......................... $ 22,620 $ 24,826 $ 22,309 $ 1,616 $ 20,588 $ 64,231
Adjusted EBITDA margin(2).................. 14.2% 16.2% 14.9% 7.9% 14.4% 14.8%
Depreciation and amortization.............. $ 6,071 $ 6,207 $ 6,321 $ 1,342 $ 7,454 $ 22,317
Capital expenditures....................... 1,403 2,075 1,884 -- 2,204 14,379
BALANCE SHEET DATA (END OF PERIOD):
Working capital (excluding current portion
of long-term debt)....................... $ 25,019 $ 37,921
Total assets............................... 305,499 509,591
Long term debt (including current
portion)................................. 188,750 312,856
Stockholder's equity....................... 83,676 147,921
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------------
(in thousands) 1997 1998
----------------- ---------
(UNAUDITED)
<S> <C> <C>
OPERATING AND OTHER DATA:
Adjusted EBITDA(1)......................... $ 51,897 $ 43,699
Adjusted EBITDA margin(2).................. 15.1% 12.6%
Depreciation and amortization.............. $ 16,772 $ 17,483
Capital expenditures....................... 12,717 7,524
BALANCE SHEET DATA (END OF PERIOD):
Working capital (excluding current portion
of long-term debt)....................... $ 37,958 $ 47,492
Total assets............................... 521,406 527,071
Long term debt (including current
portion)................................. 321,856 309,759
Stockholder's equity....................... 148,742 157,128
</TABLE>
- ------------------------
(1) Adjusted EBITDA is defined as net income (loss) before interest expense,
taxes, depreciation, amortization, extraordinary items, incentive plan
expense, and transition expenses and is presented because it is commonly
used by certain investors and analysts to analyze and compare companies on
the basis of operating performance and to determine a company's ability to
service and incur debt. Adjusted EBITDA should not be considered in
isolation from or as a substitute for net income, cash flows from operating
activities or other consolidated income or cash flow statement data prepared
in accordance with generally accepted accounting principles or as a measure
of profitability or liquidity.
(2) Adjusted EBITDA margin is computed as Adjusted EBITDA as a percentage of net
sales.
36
<PAGE>
DUNCAN HINES
The following table sets forth selected historical financial data of the
DUNCAN HINES business for the periods ended as indicated. The Company acquired
the DUNCAN HINES business in January 1998. All statement of direct revenues,
direct expenses, and allocated selling expense, operating and other data
presented below represent the DUNCAN HINES business while under the management
of P&G. The selected historical statements of direct revenues and direct
expenses for the years ended June 30, 1995, 1996 and 1997 are derived from the
audited financial statements of the DUNCAN HINES business included elsewhere in
this Prospectus. The selected historical statements of direct revenues, direct
expenses, and allocated selling expense for the six months ended December 31,
1996 and 1997 are derived from the unaudited financial statements of the DUNCAN
HINES business included elsewhere in this Prospectus and which, in the opinion
of management, include all normal, recurring adjustments. Certain amounts have
been reclassified to conform to the Company's presentation. This table should be
read in conjunction with the DUNCAN HINES business historical financial
statements and related notes thereto included elsewhere in this Prospectus and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------- --------------------
(in thousands) 1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENTS OF DIRECT REVENUES, DIRECT EXPENSES, AND ALLOCATED SELLING
EXPENSE:
Net sales(1).......................................................... $ 286,167 $ 282,525 $ 257,932 $ 148,652 $ 157,191
Cost of goods sold.................................................... 153,015 153,791 144,261 80,361 85,139
--------- --------- --------- --------- ---------
Gross profit........................................................ 133,152 128,734 113,671 68,291 72,052
--------- --------- --------- --------- ---------
Brokerage, distribution and marketing expenses:
Brokerage and distribution(1)....................................... 25,560 24,565 20,921 12,472 11,832
Trade promotions.................................................... 14,775 16,357 19,646 9,659 15,822
Consumer marketing.................................................. 25,407 26,411 18,753 10,365 11,046
--------- --------- --------- --------- ---------
Total brokerage, distribution and marketing expenses.............. 65,742 67,333 59,320 32,496 38,700
Selling, general and administrative expenses.......................... 9,962 10,791 10,041 6,177 4,131
--------- --------- --------- --------- ---------
Total expenses.................................................... 75,704 78,124 69,361 38,673 42,831
--------- --------- --------- --------- ---------
Excess of Direct Revenues over Direct Expenses and Allocated Selling
Expense........................................................... $ 57,448 $ 50,610 $ 44,310 $ 29,618 $ 29,221
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OPERATING AND OTHER DATA:
EBITDA(2)............................................................. $ 61,048 $ 54,310 $ 48,110 $ 31,518 $ 31,171
EBITDA margin(3)...................................................... 21.3% 19.2% 18.7% 21.2% 19.8%
Depreciation and amortization (unaudited)............................. $ 3,600 $ 3,700 $ 3,800 $ 1,900 $ 1,950
</TABLE>
- ------------------------
(1) Cash discounts of $4,864, $4,804, $4,384, $2,528, and $2,672 for the years
ended June 30, 1995, 1996, and 1997 and the six-month periods ended December
31, 1996 and 1997, respectively, have been reclassified from net sales to
brokerage and distribution expenses to provide consistency with the
Company's presentation and accounting policy. Allocated selling expense of
$6,429, $6,373, $4,750, $3,297 and $2,762 for the years ended June 30, 1995,
1996 and 1997 and the six-month periods ended December 31, 1997 and 1996
have been included in brokerage and distribution to be consistent with the
Company's presentation and accounting policy.
(2) EBITDA is defined as the excess of direct revenues over direct expenses
before interest expense, taxes, depreciation, amortization, and
extraordinary items and is presented because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
(3) EBITDA margin is computed as EBITDA as a percentage of net sales.
37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE COMPANY AND PREDECESSOR
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 of the Company and the Predecessor included in the
financial statements and notes to the financial statements. Unless otherwise
noted, fiscal years in this discussion refer to the Company's fiscal year ended
December 27 or December 31, as the case may be.
STATEMENTS 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. Certain
amounts from prior years have been reclassified to conform to the Company's
current year presentation. The Statements of Operations columns for the years
ended December 31, 1995 and 1996 are that of the Predecessor.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
PREDECESSOR
---------------------------------------------- COMPANY
-----------------------
YEARS ENDED DECEMBER 31,
---------------------------------------------- YEAR ENDED
DECEMBER 27, MARCH 29,
1995 1996 1997 1997
---------------------- ---------------------- ----------------------- ----------------------
% OF % OF % OF % OF
(in thousands) AMOUNT NET SALES AMOUNT NET SALES AMOUNT NET SALES NET SALES
--------- ----------- --------- ----------- ---------- ----------- -----------
AMOUNT
---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Net sales........................ $ 93,382(1) 100.0% $ 91,581(1) 100.0% $ 143,020 100.0% $ 21,253 100.0%
Cost of goods sold............... 27,743 29.7 28,955 31.6 45,729 32.0 7,167 33.7
--------- ----- --------- ----- ---------- ----- --------- -----
Gross profit................... 65,639 70.3 62,626 68.4 97,291 68.0 14,086 66.3
--------- ----- --------- ----- ---------- ----- --------- -----
Brokerage, distribution and
marketing expenses:
Brokerage and distribution..... 9,663(1) 10.3 10,180(1) 11.1 17,096 12.0 2,279 10.7
Trade promotions............... 19,380 20.8 17,672 19.3 26,075 18.2 3,643 17.1
Consumer marketing............. 13,291 14.2 10,835 11.8 15,142 10.6 1,331 6.3
--------- ----- --------- ----- ---------- ----- --------- -----
Total brokerage, distribution and
marketing expenses............. 42,334 45.3 38,687 42.2 58,313 40.8 7,253 34.1
Amortization of goodwill and
other intangibles.............. -- -- -- -- 5,938 4.1 828 3.9
Selling, general and
administrative expenses........ 6,120 6.6 6,753 7.4 5,229 3.6 1,053 5.0
Incentive plan expense........... -- -- -- -- 2,300 1.6 -- --
Transition expenses.............. -- -- -- -- 2,113 1.5 126 0.6
--------- ----- --------- ----- ---------- ----- --------- -----
Total operating expenses......... 48,454 51.9 45,440 49.6 73,893 51.6 9,260 43.6
--------- ----- --------- ----- ---------- ----- --------- -----
Operating income (loss)........ 17,185 18.4 17,186 18.8 23,398 16.4 4,826 22.7
Interest income.................. -- -- -- -- (151) (0.1) (32) (0.1)
Interest expense................. -- -- -- -- 18,393 12.9 2,654 12.5
Amortization of deferred
financing expense.............. -- -- -- -- 3,059 2.1 2,313 10.9
Other bank and financing
expenses....................... -- -- -- -- 83 0.1 9 --
--------- ----- --------- ----- ---------- ----- --------- -----
Income (loss) before income
taxes and extraordinary
item......................... 17,185 18.4 17,186 18.8 2,014 1.4 (118) (0.6)
Income tax expense (benefit)..... 6,616 7.1 6,616 7.2 779 0.5 (47) (0.2)
--------- ----- --------- ----- ---------- ----- --------- -----
Income (loss) before
extraordinary item............. 10,569 11.3 10,570 11.6 1,235 0.9 (71) (0.4)
Extraordinary loss on early
extinguishment of debt, net of
tax of $1,184.................. -- -- -- -- -- -- -- --
--------- ----- --------- ----- ---------- ----- --------- -----
Net income (loss)................ $ 10,569 11.3% $ 10,570 11.6% $ 1,235 0.9% $ (71) (0.4)%
--------- ----- --------- ----- ---------- ----- --------- -----
--------- ----- --------- ----- ---------- ----- --------- -----
<CAPTION>
MARCH 28,
1998
----------------------
% OF
(in thousands) AMOUNT NET SALES
--------- -----------
<S> <C> <C>
STATEMENTS OF OPERATIONS:
Net sales........................ $ 89,385 100.0%
Cost of goods sold............... 37,734 42.2
--------- -----
Gross profit................... 51,651 57.8
--------- -----
Brokerage, distribution and
marketing expenses:
Brokerage and distribution..... 9,355 10.5
Trade promotions............... 15,568 17.4
Consumer marketing............. 7,997 8.9
--------- -----
Total brokerage, distribution and
marketing expenses............. 32,920 36.8
Amortization of goodwill and
other intangibles.............. 4,597 5.2
Selling, general and
administrative expenses........ 2,346 2.6
Incentive plan expense........... 60,000 67.1
Transition expenses.............. 1,926 2.2
--------- -----
Total operating expenses......... 101,789 113.9
--------- -----
Operating income (loss)........ (50,138) (56.1)
Interest income.................. (223) (0.3)
Interest expense................. 12,837 14.4
Amortization of deferred
financing expense.............. 513 0.5
Other bank and financing
expenses....................... 51 0.1
--------- -----
Income (loss) before income
taxes and extraordinary
item......................... (63,316) (70.8)
Income tax expense (benefit)..... (360) (0.4)
--------- -----
Income (loss) before
extraordinary item............. (62,956) (70.4 )
Extraordinary loss on early
extinguishment of debt, net of
tax of $1,184.................. 1,876 2.1
--------- -----
Net income (loss)................ $ (64,832) (72.5)%
--------- -----
--------- -----
</TABLE>
- ------------------------
(1) Cash discounts of the Predecessor of $2,080 and $2,040 for the years ended
December 31, 1995 and 1996, respectively, have been reclassified from net
sales to brokerage and distribution expense to provide consistency with the
Company's presentation and accounting policy, and to facilitate comparison
between periods.
38
<PAGE>
THREE MONTHS ENDED MARCH 28, 1998 COMPARED TO THREE MONTHS ENDED MARCH 29, 1997
NET SALES. Net sales for the three months ended March 28, 1998 were $89.4
million, which was an increase of $68.1 million compared to sales in the prior
year's quarter of $21.3 million. The increase was the result of the acquisitions
of LOG CABIN and DUNCAN HINES, which provided $25.9 and $42.7 million in net
sales, respectively. Net dollar sales for MRS. BUTTERWORTH'S branded products
were down slightly for the three months ended March 28, 1998 at $20.8 million.
However, sales volume increased 4.5% for the three months ended March 28, 1998.
Syrup net sales of $44.8 million increased $26.2 million, of which $25.9
million was attributable to the LOG CABIN acquisition. Net sales for MRS.
BUTTERWORTH'S syrup products increased $0.3 million compared to the 1997 period
while MRS. BUTTERWORTH'S syrup case volume increased by 10.8% from 788,000
standard cases in the 1997 period to 874,000 standard cases in 1998. The growth
in MRS. BUTTERWORTH'S syrup volume was attributable to increased sales of lower
revenue per case products sold to the club store and foodservice markets.
MRS. BUTTERWORTH'S pancake mix sales were $1.9 million overall in the 1998
period compared to $2.7 million in the 1997 period. The decrease was due to a
decline in the overall pancake mix category and a retail inventory build up
during the first quarter of 1997 in anticipation of a consumer event that
occurred in the second quarter of 1997.
Net sales for the Company's DUNCAN HINES baking mix products were $42.7
million for the three months ended March 28, 1998 and included results of
operations from January 16, 1998, the date of acquisition. Including results for
the stub period (January 1 to January 15), sales would have been $47.8 million,
which was a decrease of 10.1% from the prior year period. Sales of DUNCAN HINES
products were negatively impacted in January and February by a case load into
retail channels initiated by P&G in the latter part of 1997 which resulted in
volume increases in December 1997 relative to December 1996 for cake mix and
ready-to-spread frosting of 118.3% and 129.5%, respectively. Monthly sales
volumes since February have returned to prior year levels.
GROSS PROFIT. Gross profit as a percentage of net sales was 57.8% for the
three months ended March 28, 1998 as compared to 66.3% for the corresponding
1997 period. The gross margin was affected by the inclusion of sales of DUNCAN
HINES baking mix products, which have lower gross margins than syrup and pancake
mix products. The syrup and pancake mix products had a gross margin of 67.2% in
the current quarter, a 0.9% increase compared to the 1997 period. The
improvement was attributable to lower manufacturing expense resulting from the
Company's long-term contract manufacturing agreements and lower corn syrup
costs.
BROKERAGE, DISTRIBUTION AND MARKETING EXPENSES. Brokerage, distribution and
marketing expenses for the three months ended March 28, 1998 were 36.8% as a
percentage of net sales compared to 34.1% in the 1997 period. The increase was
primarily the result of the implementation of new advertising programs for all
of the Company's brands where none existed during the prior year period.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles of $4.6 million was attributable to the acquisitions of
the MRS. BUTTERWORTH'S business on December 31, 1996, LOG CABIN on July 1, 1997
and DUNCAN HINES on January 16, 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses of $2.3 million were 2.6% as a percentage of net sales,
as compared to 5.0% for the same period in 1997. The favorable variance
represents the efficiencies realized from the increased size of the Company.
INCENTIVE PLAN EXPENSE. For the three months ended March 28, 1998, the
Company recorded non-cash incentive plan expense of $60.0 million based on the
estimated current valuation of the Company and in accordance with the Aurora
Plan contained in the Amended and Restated Limited Liability Company Agreement
of MBW Investors LLC. The previous estimated valuation of the Company
39
<PAGE>
for the year ended December 27, 1997 resulted in recording $2.3 million of
incentive plan expense. The current estimated valuation of the Company has
increased significantly and has resulted in significant incentive plan expense.
In addition, most rights under the Aurora Plan are fully vested. The expense has
been recorded as a liability of MBW Investors LLC as the sponsor of the Aurora
Plan. However, because the Aurora Plan is for the benefit of employees of the
Company, expense recognized under the Aurora Plan has been pushed down to the
Company, and has been recorded by the Company as incentive plan expense and as
additional paid-in capital from its parent. See "Management--Aurora Incentive
Plan."
TRANSITION EXPENSES. Transition expenses 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. The increase for the 1998 period of $1.8 million as
compared to 1997 was due to the LOG CABIN and DUNCAN HINES acquisitions. The
1997 period included transition expenses for the MRS. BUTTERWORTH'S business
only.
OPERATING (LOSS) INCOME. Operating loss for the three months ended March
28, 1998 was $50.1 million as compared to operating income of $4.8 million for
the prior year period. Excluding the effect of the recognition of non-cash
incentive plan expense of $60.0 million, operating profit was $9.9 million,
which was an increase of $5.0 million compared to the same period in 1997. The
operating income margin, excluding (i) incentive plan expense, (ii) higher
goodwill amortization (5.2% versus 3.9% as a percentage of net sales in 1997),
and (iii) higher transition related expenses (2.2% versus 0.6% as a percentage
of net sales) associated with the acquisitions of LOG CABIN and DUNCAN HINES,
would have been 18.5%, as compared to 22.7% in the prior year's quarter). The
margin decrease was due to lower gross margins and incremental marketing costs
for advertising associated with reestablishing media programs for the MRS.
BUTTERWORTH'S and LOG CABIN syrup brands and ongoing media support for the
DUNCAN HINES brand.
INTEREST EXPENSE AND AMORTIZATION OF DEFERRED FINANCING EXPENSE. The
aggregate of net interest expense and amortization of deferred financing expense
was $13.1 million in the three months ended March 28, 1998. The increased
expenses were related to the financing of the acquisitions of LOG CABIN and
DUNCAN HINES.
INCOME TAX BENEFIT. The effective tax rate was lower than the statutory
rate due to the effect of non-deductible incentive plan expense.
NET LOSS. Net loss was $64.8 million for the three months ended March 28,
1998. Excluding the effect of non-cash incentive plan expense, the net loss of
$4.8 million was greater than the net loss incurred in the same period in 1997
due to higher interest expense and amortization of deferred financing expense.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 28, 1998, and the year ended December 27,
1997 cash provided by operations was $14.4 million and $23.0 million,
respectively. Net income (loss) plus non-cash charges provided $2.8 million and
$14.3 million, respectively, of operating cash flow. A decrease in net working
capital generated an additional $11.5 million in cash from operations for the
three months ended March 28, 1998. The decrease in net working capital was
primarily the result of the timing of working capital commitments associated
with the Company's transition agreements with prior owners of the LOG CABIN and
DUNCAN HINES businesses. The transition agreements resulted in minimal working
capital commitments for the Company during the transition period due to a
monthly settlement procedure by which the Company remitted payments subsequent
to the receipt of finished goods. At March 28, 1998 current assets, excluding
cash and current deferred tax assets, increased $30.0 million as compared to
December 27, 1997 and current liabilities, excluding current maturities of
senior secured term debt, increased $31.5 million as compared to December 27,
1997. The increase in both current assets and current liabilities was the result
of three factors: (1) inclusion of all items of working capital
40
<PAGE>
related to the LOG CABIN business, which had previously been accounted for on
the prior owner's books through the transition period and recorded on the
Company's books as a monthly net cash settlement, (2) addition of inventory
balances of DUNCAN HINES products which were assumed in March 1998 as part of
the transition process from P&G, and (3) receivable balance due from P&G to
cover reimbursable costs incurred in connection with the relocation of
manufacturing equipment from P&G to the Company's contract manufacturers'
production facilities.
Net cash used in investing activities was $449.4 million and $229.2 million
for the three months ended March 28, 1998 and the year ended December 27, 1997,
respectively. In addition to the acquisition of DUNCAN HINES, the Company spent
$1.5 million on capital expenditures and $0.1 million on furniture and fixtures
during the three months ended March 28, 1998. In addition to the acquisition of
LOG CABIN, the Company spent $2.4 million on capital expenditures and $0.8
million on software to establish a management information computer system for
the Company during the year ended December 27, 1997. The capital expenditures
were incurred to relocate and install acquired manufacturing equipment at the
Company's contract manufacturers' production facilities. In addition, the
Company disposed of surplus production equipment and received proceeds of $0.3
million from the dispositions. The Company expects to spend approximately $10.7
million on capital expenditures in 1998 for the Aurora Division and anticipates
that these expenditures will be funded from internal cash flow. As of March 28,
1998, the Company had no commitments for any other material capital expenditures
for the current operations for the Aurora Division.
During the three months ended March 28, 1998, and the year ended December
27, 1998 financing activities provided cash of $453.6 million and $202.2
million, respectively. To finance the acquisition of DUNCAN HINES and related
expenses, the Company incurred an early extinguishment of its existing senior
secured term debt and senior secured revolving debt facility, which totaled
$76.5 million. The Company borrowed $450 million of senior secured bank debt
under the Aurora Senior Bank Facilities. During 1997, 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 a senior secured
revolving debt facilities under the Aurora Senior Bank Facilities. In addition,
the Company received a capital contribution from MBW Investors LLC 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 MRS. BUTTERWORTH'S on December
31, 1996, and to fund the $222.0 million acquisition of LOG CABIN on July 1,
1997. The Company's Senior Credit Facilities will have a final maturity date of
June 30, 2005, and will amortize in quarterly payments of $5.0 million,
beginning December 31, 1998, through June 30, 2000, increasing thereafter to
$7.5 million per quarter through June 30, 2002, increasing thereafter to $10.0
million per quarter through June 30, 2004 and increasing to $12.5 million per
quarter thereafter until the final maturity date. The Company's Aurora Series B
Notes and Aurora Series D Notes have maturity dates in 2007, and the New Notes
have a maturity date in 2008, with semi-annual interest payments totalling $37.0
million annually. If the Notes Offering is not consummated, the Company expects
to increase its Senior Credit Facilities to $500 million.
At March 28, 1998, the Company had $23.3 million of cash and cash
equivalents and an unused commitment of $75.0 million on its revolving debt
facility. The Company's primary sources of liquidity are cash flows from
operations and available borrowings under the $75.0 million revolving debt
facility. Management believes the available borrowing capacity under the
revolving debt facility combined with cash provided by operations will provide
the Company with sufficient cash to fund operations as well as to meet existing
obligations.
INFLATION
The Company does not believe that inflation has had a material impact on its
financial position or results of operations during the years ended December
1995, 1996, and 1997.
41
<PAGE>
YEAR 2000
The Company is aware of the risks associated with the Year 2000 issue
relative to computerized information systems of the Company and others. In
connection with the Company's recent formation and subsequent acquisitions, it
has modified and/or replaced all of its key computer information systems.
Accordingly, management believes that the Company's key computerized information
systems are Year 2000 compliant. Therefore, the Company, prospectively, does not
expect to incur any material remediation costs for Year 2000 solutions of its
existing information systems. The Company continues to assess the Year 2000
issue relative to its key vendors and other third parties having significant
relationships with the Company. Although no assurance can be given with respect
to vendors' and other third parties' computerized information systems being Year
2000 compliant, the Company believes other independent providers of similar
goods and services can be secured without any material adverse effect on the
future operating results and cash flows of the Company.
OTHER INFORMATION
On January 16, 1998, during the Company's quarter ended March 28, 1998, the
Company acquired all the assets of the DUNCAN HINES business from P&G for
approximately $445.0 million. The Company financed the acquisition of the DUNCAN
HINES business and related costs with a capital contribution by MBW Investors
LLC of $93.6 million and with additional senior secured bank borrowings totaling
approximately $373.5 million. The additional senior secured bank borrowings were
incurred under the Aurora Senior Bank Facility.
The Contribution Transaction occurred on April 8, 1998. On April 16, 1998,
Aurora Maryland was incorporated to facilitate the Equity Offerings. Just prior
to the Equity Offerings, the Company will be incorporated, New LLC will
contribute all of the issued and outstanding stock of Aurora and VDK to it, and
Aurora Maryland will be merged with and into the Company. New LLC is a majority
owned subsidiary of MBW Investors LLC. New LLC and the Company will account for
the contribution of the ownership of Aurora at MBW Investors LLC's historical
cost and the contribution of the ownership of VDK will be accounted for as an
acquisition using the purchase method of accounting at New LLC's cost. On June
19, 1998, the Company was incorporated and just prior to the Equity Offerings,
New LLC will contribute all of the issued and outstanding stock of Aurora and
VDK to it.
The Company expects to spend $23.0 million on capital expenditures in 1998
for both the Aurora Division and the VDK Division. As of June 22, 1998 the
Company has no commitments for any other material capital expenditures for its
current operations. Capital expenditures include the expansion of production
capacity for frozen breakfast products and routine maintenance and cost saving
projects. In addition, the Company anticipates one time expenditures of
approximately $5.0 million in excess of relocation costs for which it will be
reimbursed by P&G to relocate and install DUNCAN HINES machinery and equipment
into the Company's contract manufacturers, and expenditures of approximately
$5.0 million to relocate and install syrup machinery and equipment into Red Wing
manufacturing facilities.
In conjunction with the closing of the Equity Offerings, the Company will
refinance its Aurora Senior Bank Facilities and VDK Senior Bank Facilities. The
new Senior Credit Facilities will consist of $225.0 million of senior secured
term loans and $175.0 million under a senior secured revolving credit facility.
In addition, the Company has outstanding $200.0 million of Senior Subordinated
Notes under the Aurora Indentures and expects to issue $200.0 million of Senior
Subordinated Notes under the New Notes Indenture (see "Description of
Indebtedness"). The Senior Credit Facilities and each of the Indentures contain
a number of significant negative covenants. Under the Indentures, the negative
covenants (i) limit the amount of indebtedness the Company may incur; (ii) limit
the Company's ability to make certain payments; (iii) restrict distributions
from the Company's subsidiaries; (iv) place limitations on sales of assets by
the Company and its subsidiaries; (v) limit transactions with affiliates of the
Company; (vi) limit the sale of the capital stock of the Company's subsidiaries;
(vii) limit the lines of businesses the Company may engage in; and (viii) limit
the Company's ability to merge or consolidate or transfer all or
42
<PAGE>
substantially all of the assets of the Company. The Senior Credit Facilities
also contain other restrictive covenants which require the Company to maintain
specified financial ratios and satisfy financial condition tests including a
minimum interest coverage ratio, a maximum leverage ratio, a minimum fixed
charge ratio and a maximum level of capital expenditure amounts.
YEAR ENDED DECEMBER 27, 1997 FOR THE COMPANY COMPARED TO THE YEAR ENDED DECEMBER
31, 1996 FOR THE PREDECESSOR
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 LOG CABIN on July 1, 1997, which added $50.4 million in net sales. Net dollar
sales for all of MRS. BUTTERWORTH'S branded products increased 1.1% to $92.6
million for the year ended December 27, 1997 from $91.6 million for the 1996
period, while case volume increased 5.1% to 4.1 million 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 LOG CABIN acquisition,
which added $50.4 million in sales during 1997. MRS. BUTTERWORTH'S syrup dollar
sales increased $1.7 million, or 2.1%, to $82.8 million in 1997. MRS.
BUTTERWORTH'S syrup case volume increased 7.6% to 3.5 million cases in 1997 from
3.3 million cases in 1996. The percentage increase in MRS. BUTTERWORTH'S 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
price 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 brand and
foodservice and club store sales. The volume increase was partially offset by a
decrease in sales of MRS. BUTTERWORTH'S Country Best Recipe and MRS.
BUTTERWORTH'S Lite brands. MRS. BUTTERWORTH'S Lite has been reformulated and was
introduced in December 1997.
MRS. BUTTERWORTH'S 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%
to 0.6 million cases. The overall pancake mix category was down approximately 4%
in 1997 from the prior year.
The Company's pro forma 1997 net sales after giving effect to the
acquisition of LOG CABIN were $194.2 million, which was $1.8 million less than
the combined sales of MRS. BUTTERWORTH'S and LOG CABIN of $196.0 million for the
year ended December 31, 1996. The decline in sales was attributable to softness
in the LOG CABIN business.
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 by the Predecessor 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 as a percentage of net
sales in 1997 as a result of the value pricing strategy as well as a reduction
in high redemption value coupons compared to 1996.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles of $5.9 million in 1997 was attributable to amortization
of goodwill associated with the acquisitions of MRS. BUTTERWORTH'S on December
31, 1996 and LOG CABIN 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 MRS. BUTTERWORTH'S during the Predecessor's
ownership period.
43
<PAGE>
INCENTIVE PLAN EXPENSE. Incentive plan expense was recorded under the
Aurora Plan based on the estimated valuation of the Company. See Note 15 to the
Company's 1997 financial statements included elsewhere in this Prospectus.
TRANSITION EXPENSES. Transition expenses of $2.1 million in 1997 consist of
one-time costs incurred to establish the Company's operations and integrate the
acquired businesses of MRS. BUTTERWORTH'S and LOG CABIN, including relocation
expenses, recruiting fees, sales support and other unique transitional expenses.
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% of net sales), incentive compensation expense (1.6% of net
sales) and transition expenses (1.5% of net sales), 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 as a
percentage of net sales were lower than the prior year. 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 MRS. BUTTERWORTH'S.
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 and amortization of deferred financing expense incurred during
1997.
YEAR ENDED DECEMBER 31, 1996 FOR THE PREDECESSOR COMPARED TO YEAR ENDED DECEMBER
31, 1995 FOR THE PREDECESSOR
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 2.6% to 3.9 million cases in 1996 from 3.8 million
cases in 1995.
Syrup sales decreased $1.8 million to $81.1 million in 1996 from $82.9
million in 1995. Syrup volume increased 3.1% to 3.3 million cases in 1996 from
3.2 million cases in 1995. In May 1996, the Predecessor adopted a value pricing
strategy to position its MRS. BUTTERWORTH'S brand as the best value among the
three national syrup brands. This value pricing strategy benefited the brand
through higher volumes and savings on consumer marketing expenses, but resulted
in a net decrease in syrup dollar sales in 1996.
MRS. BUTTERWORTH'S pancake mix sales remained constant at $10.5 million in
1996, the same as in 1995. Pancake mix volume was flat at 0.6 million cases in
1996, which was the same volume achieved in 1995.
GROSS PROFIT. Gross profit was 68.4% in 1996, as compared to 70.3% in 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 attributable to the Predecessor's
value pricing strategy.
44
<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 MRS. BUTTERWORTH'S.
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.
45
<PAGE>
VDK
The following discussion and analysis of VDK's financial condition and
statements of operations should be read in conjunction with the historical
financial information included in the financial statements. Unless otherwise
noted, years (1997, 1996, etc.) in this discussion refer to VDK's fiscal years
ended June 30 or June 29, as applicable.
STATEMENTS 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. Certain
amounts from prior years have been reclassified to conform with VDK's current
year presentation. The Statement of Operations column for the period July 1,
1995 through June 29, 1996 combines VDK's operating period September 19, 1995
through June 29, 1996, including the operations of the acquired MRS. PAUL'S
business for the period May 6, 1996 through June 29, 1996, and the operations by
Pillsbury of VDK from July 1, 1995 through September 18, 1995.
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED MARCH 31,
----------------------------------------- -------------------------------------------
JUNE 29, 1996 JUNE 30, 1997 1997 1998
------------------- ------------------- ------------------- ---------------------
(UNAUDITED)
% OF % OF % OF % OF
STATEMENTS OF OPERATIONS: AMOUNT NET SALES AMOUNT NET SALES AMOUNT NET SALES AMOUNT NET SALES
-------- --------- -------- --------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... $163,841 100.0% $435,476 100.0% $344,113 100.0% $348,288 100.0%
Cost of goods sold...................... 71,345 43.5 180,941 41.6 143,522 41.7 135,777 39.0
-------- --------- -------- --------- -------- --------- -------- -----------
Gross profit............................ 92,496 56.5 254,535 58.4 200,591 58.3 212,511 61.0
-------- --------- -------- --------- -------- --------- -------- -----------
Brokerage, distribution and marketing
expenses:
Brokerage and distribution............ 17,517 10.7 45,352 10.4 37,005 10.8 33,765 9.7
Trade promotions...................... 36,216 22.1 108,925 25.0 83,908 24.4 101,534 29.2
Consumer marketing.................... 13,255 8.1 29,524 6.8 23,897 6.9 25,151 7.2
-------- --------- -------- --------- -------- --------- -------- -----------
Total brokerage, distribution and
marketing expenses.................... 66,988 40.9 183,801 42.2 144,810 42.1 160,450 46.1
Amortization of goodwill and other
intangibles........................... 4,912 3.0 13,142 3.0 9,982 2.9 10,194 2.9
General and administrative expenses..... 6,637 4.1 14,270 3.3 9,825 2.8 13,968 4.0
Incentive plan expense.................. -- -- -- -- -- -- 69,000 19.8
Transition expenses..................... 1,337 0.8 2,885 0.7 2,073 0.6 -- --
-------- --------- -------- --------- -------- --------- -------- -----------
Total operating expenses................ 79,874 48.8 214,098 49.2 166,690 48.4 253,612 72.8
-------- --------- -------- --------- -------- --------- -------- -----------
Operating income (loss)................. 12,622 7.7 40,437 9.3 33,901 9.9 (41,101) (11.8)
Interest income......................... (135) (0.1) (965) (0.2) (939) (0.3) (60) --
Interest expense........................ 12,469 7.6 32,499 7.5 24,762 7.2 23,634 6.8
Amortization of deferred financing
expense............................... 607 0.4 2,108 0.5 1,573 0.5 1,612 0.5
Other bank and financing expenses....... 79 -- 265 0.1 215 0.1 131 --
-------- --------- -------- --------- -------- --------- -------- -----------
Income (loss) before income tax expense
(benefit)............................. (398) (0.2) 6,530 1.5 8,290 2.4 (66,418) (19.1)
Income tax expense (benefit)............ 163 0.1 2,377 0.5 3,316 1.0 (21,304) (6.1)
-------- --------- -------- --------- -------- --------- -------- -----------
Net income (loss)....................... $ (561) (0.3)% $ 4,153 1.0% $ 4,974 1.4% $(45,114) (13.0)%
-------- --------- -------- --------- -------- --------- -------- -----------
-------- --------- -------- --------- -------- --------- -------- -----------
</TABLE>
46
<PAGE>
NINE MONTHS ENDED MARCH 31, 1998 COMPARED TO
NINE MONTHS ENDED MARCH 31, 1997
NET SALES. Net sales for the nine month period were $348.3 million, which
was 1.2% higher than net sales during the prior nine month period of $344.1
million. Excluding the impact in both years of (i) sales of the desserts product
line, which was divested on May 1, 1998, and (ii) sales of whipped topping
product lines, which was divested in February 1997, sales increased $11.7
million, or 3.7%. AUNT JEMIMA sales increased by $5.0 million, or 8.4%, as a
result of increased trade promotion spending and consumer marketing support.
CELESTE pizza sales increased by $5.9 million, or 10.6%, due to the introduction
of MAMA CELESTE Fresh Baked Rising Crust Pizza and increased sales of CELESTE
Pizza For One products. Frozen seafood sales decreased 0.8% versus the same
period last year primarily because the current period included two fewer weeks
of high volume Lenten season sales than the prior year period (Lent began on
February 25 in 1998 compared to February 12 in 1997), which affected the
Company's sales as well as overall seafood category volume. Foodservice sales
increased $2.2 million, or 9.1%, versus 1997 due to higher frozen breakfast
volumes and a price increase of approximately 3.0% taken in July 1997.
GROSS PROFIT. Gross profit increased from 58.3% as a percentage of net
sales to 61.0%. The increase reflected favorable packaging and raw material
costs, improved manufacturing and distribution efficiencies, and the impact of
the divestiture of the less profitable whipped topping product line in February
1997.
BROKERAGE, DISTRIBUTION AND MARKETING EXPENSES. Brokerage, distribution and
marketing expenses increased from 42.1% as a percentage of net sales in 1997 to
46.1% in the current period. Lower brokerage and distribution expenses were
offset by higher trade promotion and consumer marketing expenses.
Brokerage and distribution expenses declined as a percentage of net sales
compared to last year as a result of operational efficiencies within VDK's
distribution system and favorable freight rates. Trade promotion spending
increased to support the introduction of new products in the frozen seafood and
frozen pizza product lines and in response to competitive activity in the frozen
seafood and breakfast categories. Management believes that certain of the
Company's trade spending programs in the current period were not sufficiently
productive and has implemented programs to improve the efficiency of the
Company's trade spending. Increased coupon support and new media programs for
VDK's frozen pizza and frozen breakfast product lines resulted in higher
consumer marketing spending versus 1997.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and intangibles was unchanged as a percentage of net sales versus the same
period in the prior year.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $4.1 million to 4.0% as a percentage of net sales versus 2.8% in the
prior year. The increase reflected higher staffing levels required to support
the acquired business and the incremental cost of a foodservice sales
organization. In the prior year period, Quaker Oats managed the VDK foodservice
sales function for a fee of $1.3 million, which was classified as a selling and
distribution expense.
INCENTIVE PLAN EXPENSE. For the nine months ended March 31, 1998, VDK
recorded non-cash incentive plan expense of $69.0 million based on the estimated
current valuation of VDK and in accordance with the VDK Plan. In addition, most
rights under the VDK Plan are vested. Included in incentive plan expense was a
tax gross up amount of $15.0 million, which relates to certain distributions as
provided for in the VDK Plan. Valuations prior to the 1998 nine month period did
not result in incentive plan expense under the VDK Plan. The expense has been
recorded as a liability of VDK Foods LLC as the sponsor of the VDK Plan.
However, because the VDK Plan is for the benefit of key personnel of VDK,
expense recognized under the VDK Plan has been pushed down to VDK, and has been
recorded by VDK as incentive plan expense and as additional paid in capital from
its parent. See "Management--
47
<PAGE>
VDK Incentive Plan". In addition, the tax benefit related to the tax gross up
element of incentive plan expense had been recorded to income tax expense and as
a deferred tax asset. The Company will receive the tax benefit associated with
the tax gross up amount, and the Company expects that the tax benefit will
approximate the amount of the tax gross up payments. The tax gross up amount has
been recorded as incentive plan expense and as an other liability. See
"Management--VDK Incentive Plan."
OPERATING (LOSS) INCOME. Operating loss for the nine month period was $41.1
million as compared to operating income of $33.9 million for the prior nine
month period. Excluding the effect of the recognition of non-cash incentive plan
expense of $69.0 million, operating profit was $27.9 million, which was $6.0
million lower than the prior year period. VDK's operating income margin,
excluding the effect of incentive plan expense, was 8.0% as a percentage of net
sales in 1998 as compared to 9.9% during the same period in 1997. The decrease
in VDK's operating income, excluding the effect of incentive plan expense, was
primarily due to increased promotional spending in support of VDK's new product
offerings and in response to competitive activity and higher general and
administrative expenses.
INTEREST EXPENSE (INCOME). Interest expense decreased $1.2 million versus
the same period in the prior year due to scheduled repayments of VDK's Senior
Bank Facility. The decrease in interest expense was partially offset by
additional borrowings versus last year on the VDK Senior Bank Facility. Interest
income decreased $0.9 million in the current nine month period. In the prior
nine month period, VDK earned interest income on an escrow account which held a
$20.0 million senior secured convertible loan which was repaid in February 1997.
INCOME TAX (BENEFIT) EXPENSE. VDK's combined effective federal and state
tax rate for the current period was approximately 32.1%. The rate was lower than
the rate experienced in the same period last year because a portion of incentive
plan expense was not deductible, which generated a greater book loss than tax
loss and commensurate lower income tax benefit benefit for tax purposes.
NET INCOME (LOSS). VDK incurred a net loss of $45.1 million as compared to
net income of $5.0 million for the same period last year. Excluding the effect
of non-cash incentive plan expense, the net income of $1.3 million was lower
than the net income in the 1997 period due to lower operating income.
YEAR ENDED JUNE 30, 1997 COMPARED TO THE YEAR ENDED JUNE 29, 1996
NET SALES. Net sales for the year increased $271.6 million over the prior
year to $435.5 million. MRS. PAUL'S seafood, which was acquired from Campbell
Soup on May 6, 1996, generated $85.8 million in the first full year of
ownership. CELESTE/AUNT JEMIMA, which was acquired from Quaker Oats on July 9,
1996, added $184.1 million in sales following the acquisition. VAN DE KAMP'S
seafood sales increased $10.5 million, or 8.7% versus the prior year, largely
due to the successful introduction of flavored baked and grilled fillet
products. Desserts sales decreased $1.0 million versus 1996 due to lower whipped
topping sales volume resulting from the divestiture of the whipped topping
product line in February 1997. Excluding the impact of whipped topping sales in
both years, desserts sales grew $5.7 million, or 26.4%, due to increased
promotional efforts and new product introductions.
Compared to 1996 pro forma sales of $401.5 million, sales increased $34.0
million, or 8.5%. MRS. PAUL'S sales increased by $4.7 million, or 5.8%, due to
new product introductions which were supported by advertising and increased
promotional activity. CELESTE pizza sales increased by $4.1 million, or 6%,
behind focused promotional programs and more effective trade spending. AUNT
JEMIMA sales increased by $11.6 million, or 16.7%, due to increased consumer
marketing and trade promotion spending. Foodservice sales increased $4.1
million, or 15.8% versus the prior year, due to a focused selling effort on
frozen breakfast products.
GROSS PROFIT. Gross profit increased from 56.5% as a percentage of net
sales in 1996 to 58.4% in 1997. The improvement was caused primarily by lower
seafood manufacturing costs stemming from the integration of MRS. PAUL'S seafood
production in the Erie, Pennsylvania facility and the effect of the sale of the
lower margin private label whipped topping product line in February 1997.
48
<PAGE>
BROKERAGE, DISTRIBUTION AND MARKETING EXPENSES. Brokerage, distribution and
marketing expenses increased from 40.9% as a percentage of net sales in the
prior year to 42.2% in 1997. The increase was due to an increase in trade
promotion expense, which was partially offset by lower selling and distribution
expense and lower consumer marketing expense.
The increase in trade promotion spending was caused by (i) higher spending
levels to support new product introductions under the VAN DE KAMP'S and MRS.
PAUL'S brands, and (ii) the inclusion in 1997 of the CELESTE pizza business
which has a higher rate of trade spending than the seafood product lines.
Brokerage and distribution expenses declined from 10.7% as a percentage of net
sales in 1996 to 10.4% as a percentage of sales in 1997 due to the development
of a lower cost distribution network than the prior owner and distribution
efficiencies resulting from the MRS. PAUL'S and CELESTE/AUNT JEMIMA
acquisitions. Consumer marketing decreased as a percentage of net sales because
the spending rate was lower for the CELESTE pizza and AUNT JEMIMA breakfast
products than for VDK's other product lines. The lower CELESTE/AUNT JEMIMA
spending rate was partially offset by increased consumer spending to support the
introduction of new seafood and dessert products during 1997.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and intangibles increased $8.2 million from 1996 to 1997 due to the increase in
intangibles resulting from the acquisitions of VAN DE KAMP'S in the first
quarter of 1996, MRS. PAUL'S in the fourth quarter of 1996, and CELESTE/ AUNT
JEMIMA in the first quarter of 1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $7.6 million from 1996 to 1997 due to management of the businesses
acquired during calendar 1996. However, general and administrative expenses
decreased from 1996 to 1997 from 4.1% as a percentage of net sales to 3.3%
during this period due to delays in reaching full staffing levels following the
MRS. PAUL'S and CELESTE/AUNT JEMIMA acquisitions, and lower overhead spending
associated with VDK's organizational structure as compared to amounts allocated
to the business during the Pillsbury ownership period.
TRANSITION EXPENSES. Transition expenses of $2.9 million in 1997 and $1.3
million in 1996 consist of what management believes to be one-time costs
incurred to establish operations and integrate acquired businesses, including
relocation expenses, recruiting fees, sales training, broker conversions and
orientations, computer systems conversion, and other unique transitional
expenses. The increase in transition related costs was mainly attributable to
the CELESTE/AUNT JEMIMA acquisition and additional MRS. PAUL'S costs not
incurred in 1996.
INTEREST EXPENSE. Interest expense increased versus the prior year due to
additional debt incurred to complete the acquisition of CELESTE/AUNT JEMIMA and
the inclusion of a full year of interest and debt resulting from the
acquisitions of the VAN DE KAMP'S and MRS. PAUL'S businesses.
INCOME BEFORE INCOME TAXES. Income before income taxes increased $6.9
million due to the increased size, and therefore operating income of VDK, as
well as the operating improvements described previously.
PROVISION FOR INCOME TAXES. VDK's combined effective federal and state tax
rate for 1997 was 36.4%. This rate was lower than the rate experienced by
Pillsbury, primarily because VDK's amortization of goodwill is deductible for
income tax purposes.
NET INCOME. Net income of $4.2 million in 1997 was higher than the $0.6
million loss experienced in 1996. The increase in size of VDK resulting from the
acquisitions, combined with improvements in the gross profit margin, contributed
to the increase in net income.
49
<PAGE>
DUNCAN HINES
The following discussion and analysis of DUNCAN HINES financial condition
and results of operations should be read in conjunction with the historical
financial information included in the financial statements. The Company acquired
the DUNCAN HINES business from P&G in January 1998. Accordingly, all of the
information presented below represents the operations of the DUNCAN HINES
business by P&G. Unless otherwise noted, years (1997, 1996, etc.) in this
discussion refer to DUNCAN HINES fiscal years ended years June 30.
STATEMENTS OF DIRECT REVENUES, DIRECT EXPENSES, AND ALLOCATED SELLING EXPENSE
The following table sets forth for the periods indicated the percentage
which the items in the statements of direct revenues, direct expenses, and
allocated selling expense bear to net sales. Certain amounts from prior periods
have been reclassified to conform to the Company's presentation. The basis of
presentation of the statements of direct revenues, direct expenses, and
allocated selling expense is disclosed in Note 1 to the financial statements
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
---------------------------------------------------------------------- ----------------------
(IN THOUSANDS) 1995 1996 1997 1996
- -------------------------------- ---------------------- ---------------------- ---------------------- ----------------------
% OF % OF % OF % OF
NET NET NET NET
AMOUNT SALES AMOUNT SALES AMOUNT SALES AMOUNT SALES
--------- ----------- --------- ----------- --------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF DIRECT
REVENUES, DIRECT EXPENSES, AND
ALLOCATED SELLING EXPENSE:
Net sales(1).................... $ 286,167 100.0% $ 282,525 100.0% $ 257,932 100.0% $ 148,652 100.0%
Cost of
goods sold.................... 153,015 53.5 153,791 54.4 144,261 55.9 80,361 54.1
--------- ----- --------- ----- --------- ----- --------- -----
Gross profit.................. 133,152 46.5 128,734 45.6 113,671 44.1 68,291 45.9
--------- ----- --------- ----- --------- ----- --------- -----
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution(1)............. 25,560 8.9 24,565 8.7 20,921 8.1 12,472 8.4
Trade promotions.............. 14,775 5.1 16,357 5.8 19,646 7.6 9,659 6.5
Consumer marketing............ 25,407 8.9 26,411 9.4 18,753 7.3 10,365 7.0
--------- ----- --------- ----- --------- ----- --------- -----
Total brokerage, distribution
and marketing expenses........ 65,742 22.9 67,333 23.9 59,320 23.0 32,496 21.9
Selling, general and
administrative expenses....... 9,962 3.5 10,791 3.8 10,041 3.9 6,177 4.1
--------- ----- --------- ----- --------- ----- --------- -----
Total operating expenses.... 75,704 26.4 78,124 27.7 69,361 26.9 38,673 26.0
--------- ----- --------- ----- --------- ----- --------- -----
Excess of direct revenues,
over direct expenses and
allocated selling
expense................... $ 57,448 20.1% $ 50,610 17.9% $ 44,310 17.2% $ 29,618 19.9%
--------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- -----
<CAPTION>
(IN THOUSANDS) 1997
- -------------------------------- ----------------------
% OF
NET
AMOUNT SALES
--------- -----------
<S> <C> <C>
STATEMENTS OF DIRECT
REVENUES, DIRECT EXPENSES, AND
ALLOCATED SELLING EXPENSE:
Net sales(1).................... $ 157,191 100.0%
Cost of
goods sold.................... 85,139 54.2
--------- -----
Gross profit.................. 72,052 45.8
--------- -----
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution(1)............. 11,832 7.5
Trade promotions.............. 15,822 10.1
Consumer marketing............ 11,046 7.0
--------- -----
Total brokerage, distribution
and marketing expenses........ 38,700 24.6
Selling, general and
administrative expenses....... 4,131 2.6
--------- -----
Total operating expenses.... 42,831 27.2
--------- -----
Excess of direct revenues,
over direct expenses and
allocated selling
expense................... $ 29,221 18.6%
--------- -----
--------- -----
</TABLE>
- ------------------------
(1) Cash discounts of $4,864, $4,804, $4,384, $2,528, and $2,672 for the years
ended June 30, 1995, 1996, and 1997 and the six-month periods ended December
31, 1996 and 1997, respectively, have been reclassified from net sales to
brokerage and distribution expenses to provide consistency with the
Company's presentation and accounting policy.
50
<PAGE>
SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996
NET SALES. Net sales for the six months ended December 31, 1997 of $157.2
million were 5.7% higher than net sales of $148.7 million for the same six month
period in 1996. During 1997, P&G instituted in some markets a modified everyday
low pricing strategy ("EDLP"). In 1994, P&G converted its entire portfolio of
products to an EDLP strategy, including the DUNCAN HINES business. The EDLP
strategy had a detrimental effect on volumes as the baking mix category responds
well to promotion and merchandising activity in contrast to an EDLP strategy. As
trade activity was increased in certain markets during the six months ended
December 31, 1997, the brand responded as characteristic in the category, and
sales increased for the first time in over two years.
GROSS PROFIT. Gross profit as a percentage of net sales in 1997 of 45.8%
was flat as compared to the gross profit margin of 45.9% in 1996.
BROKERAGE, DISTRIBUTION AND MARKETING EXPENSE. Brokerage, distribution and
marketing expenses were $6.2 million higher during the six month period in 1997
versus the comparable period in 1996. As a percentage of net sales, brokerage,
distribution and marketing expenses were 24.6% in 1997, or 2.7% higher than
1996. The increase was attributable to higher trade promotions, which were $6.2
million above the prior year period. As a percentage of net sales, trade
promotions in 1997 increased to 10.1% from 6.5% in 1996. The increase in trade
promotion was attributable to the modified EDLP strategy undertaken in certain
markets. Brokerage and distribution expenses were 1.1% lower than the prior year
while consumer marketing expenses were flat as compared to 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $4.1 million in 1997 or $2.1 million lower than
expenses of $6.2 million in 1996.
EXCESS OF DIRECT REVENUES, DIRECT EXPENSES, AND ALLOCATED SELLING
EXPENSE. Excess of direct revenues, over direct expenses, and allocated selling
expense was $29.2 million for the six months ended December 31, 1997, as
compared to $29.6 million for the same six month period in 1996. The decrease of
$0.4 million was due to higher trade promotions and was partially mitigated by
lower selling, general and administrative expenses and increased gross profit.
YEAR ENDED JUNE 30, 1997 COMPARED TO YEAR ENDED JUNE 30, 1996
NET SALES. Net sales of $257.9 million in 1997 decreased 8.7% from net
sales of $282.5 million in 1996. The decrease in net sales was the result of
volume declines caused by the suspension of the variety strategy implemented by
P&G in 1994 and the reduction in corporate resources allocated to the DUNCAN
HINES business by P&G. The variety strategy was initiated to meet trade and
consumer demand for increased product variety. P&G introduced 50 new flavors,
which brought initial strong volume and a peak in sales in fiscal 1995. However,
the increase in sales proved unsustainable as a significant number of flavors
failed to generate repeat purchases and often cannibalized and crowded out the
brand's more popular product offerings. P&G suspended the variety strategy
during 1997.
The volume declines were also the result of a reduction in corporate
resources devoted to the business. P&G had shifted its sales efforts to other
more strategic and core brands. In addition, the EDLP strategy had a negative
effect on volumes as competitors within the baking mix category continued to
actively promote and merchandise while the DUNCAN HINES brand was left out of
the promotional cycle.
GROSS PROFIT. Gross profit as a percentage of net sales was 44.1%, which
was lower than the gross profit margin of 45.6% in 1996. The decrease of 1.5
percentage points was due to higher flour and sugar costs experienced in the
1997 period and lower absorption of fixed manufacturing costs resulting from the
lower sales levels.
51
<PAGE>
BROKERAGE, DISTRIBUTION AND MARKETING EXPENSES. Brokerage, distribution and
marketing expenses were $8.0 million lower in 1997 as compared to 1996. As a
percentage of net sales, brokerage, distribution and marketing expenses were
23.0% in 1997 or 0.9 percentage points lower than 1996. The decrease in expenses
was attributable to lower brokerage and distribution, and consumer marketing
expenses. Consumer marketing expenses decreased $7.7 million, or 29%, as
allocations of corporate marketing resources were reduced. Trade promotions
increased to 7.6% as a percentage of sales from 5.8% in 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $10.0 million in 1997 or $0.8 million lower than
expenses of $10.8 million in 1996.
EXCESS OF DIRECT REVENUES, OVER DIRECT EXPENSES, AND ALLOCATED SELLING
EXPENSE. Excess of direct revenues over direct expenses, and allocated selling
expense in 1997 of $44.3 million was $6.3 million lower than the prior year
amount of $50.6 million. The decrease was due to lower sales and a decline in
the gross profit margin.
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
NET SALES. Net sales in 1996 of $282.5 million were 1.3% below net sales of
$286.2 million in 1995. The sales decline in 1996 was the first indication that
the variety strategy, which generated record sales in 1995, was causing a
deterioration in sales volumes of core DUNCAN HINES products. The new flavors
were not generating repeat purchases and the unproductive flavors introduced in
1994 remained on the retailers' shelves and crowded out the brand's higher
turnover product offerings.
GROSS PROFIT. Gross profit as a percentage of net sales was 45.6% in 1996,
which was lower than the gross profit margin of 46.5% in 1995. The decrease of
0.9 percentage points was primarily due to higher flour and sugar costs.
BROKERAGE, DISTRIBUTION AND MARKETING EXPENSES. Brokerage, distribution and
marketing expenses were $67.3 million or 2.4% higher than the prior year. As a
percentage of net sales, brokerage, distribution and marketing expenses were
23.9% in 1996, or 1.0 percentage points higher than in 1995. Trade promotions
and consumer marketing expenses were 10.7% and 4.0%, respectively, higher than
such expenses in 1995. The increase in marketing expenses was due to the
requisite marketing support of the variety strategy and the introduction of the
multiple new flavor product offerings. The increase in marketing expenses was
somewhat offset by a 3.9% decrease in brokerage and distribution expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $10.8 million in 1996 or $0.8 million higher than
expenses of $10.0 million in 1995.
EXCESS OF DIRECT REVENUES, OVER DIRECT EXPENSES, AND ALLOCATED SELLING
EXPENSE. Excess of direct revenues over direct expenses in 1996 of $50.6
million was $6.8 million lower than the prior year amount of $57.5 million. The
decrease was due to lower sales and gross profit margin and higher marketing
expenses.
52
<PAGE>
BUSINESS
The Company is a leading producer and marketer of premium branded food
products including DUNCAN HINES baking mixes, LOG CABIN and MRS. BUTTERWORTH'S
syrup, VAN DE KAMP'S and MRS. PAUL'S frozen seafood, AUNT JEMIMA frozen
breakfast products and CELESTE frozen pizza. The Company's brands are among the
most widely recognized food brands in the United States, have leading market
positions and participate in some of the fastest growing categories in the
supermarket. LOG CABIN and MRS. BUTTERWORTH'S have a leading 34.0% share of the
syrup category, VAN DE KAMP'S and MRS. PAUL'S have a leading 28.2% share of the
frozen seafood category, DUNCAN HINES is the #2 cake mix with a 35.8% share and
CELESTE is the #3 brand of frozen pizza in the Northeast. In 1997, dollar sales
of frozen pizza, frozen seafood and frozen waffles grew at annual rates of 8.5%,
9.5% and 7.8%, respectively. For the year ended December 27, 1997, the Company's
pro forma net sales were $874.2 million and the Company's pro forma as adjusted
EBITDA was $154.6 million.
The Company was formed by Dartford, Fenway and MDC to serve as a platform
upon which to build a leading branded grocery products company through both
strategic acquisitions and internal growth. The Company has been built through
six separate acquisitions over the last three years. The Company seeks to
acquire well-recognized brands which have become non-core businesses to their
corporate parents, but which retain strong brand equities and long-term growth
potential. The Company's objective is to revitalize the brands it acquires and
renew their growth by providing them with the strategic direction, dedicated
management and marketing focus they lacked under prior owners.
Under the direction of CEO Ian R. Wilson and Dartford, each of the brands
owned by the Company for more than one year has experienced significant growth.
The following table sets forth (i) the growth rates of the brands for the twelve
months prior to the date of acquisition, and (ii) the annual growth rate as
measured eighteen months after the date of acquisition, in each case based on
dollar sales data provided by IRI and Nielsen.
<TABLE>
<CAPTION>
DATE
OF GROWTH PRIOR GROWTH
BRAND PRIOR OWNER ACQUISITION TO ACQUISITION AFTER ACQUISITION
- --------------------- ------------------ ------------- --------------- -----------------
<S> <C> <C> <C> <C>
VAN DE KAMP'S Pillsbury Sept. 1995 -2.5% +5.0%
MRS. PAUL'S Campbell Soup May 1996 -9.2 +7.1
AUNT JEMIMA Quaker Oats July 1996 -8.9 +10.5
CELESTE Quaker Oats July 1996 -16.8 +8.6
MRS. BUTTERWORTH'S Unilever Dec. 1996 0.0 +3.1
LOG CABIN Kraft July 1997 -6.0 n/a
DUNCAN HINES Procter & Gamble Jan. 1998 -5.0 n/a
</TABLE>
The Company has renewed the growth of its brands by providing them with
experienced management, refocusing marketing support, reformulating and
repackaging outdated products, developing and launching new products and
expanding distribution. The Company has also realized significant cost savings
by consolidating and improving the efficiency of its manufacturing operations,
outsourcing the production of certain products and eliminating redundant
administrative functions. The Company believes that the growth exhibited by the
brands it acquired in 1995 and 1996, combined with expected growth from its most
recent acquisitions and additional cost savings opportunities, has positioned it
to achieve superior long-term sales and earnings growth.
BUSINESS STRATEGY
The Company's objective is to continue to generate sales and earnings growth
by (i) sustaining the growth of the brands it acquired in 1995 and 1996, (ii)
achieving similar results for its recently acquired brands, and (iii) continuing
to acquire brands with strong equities and long-term growth potential. The
Company's strategy is to revitalize its brands, reduce costs and continue to
make strategic acquisitions.
53
<PAGE>
REVITALIZE BRANDS. To revitalize the brands it has acquired and stimulate
growth, the Company (i) provides experienced management, (ii) refocuses
marketing support, (iii) reformulates and repackages outdated products, (iv)
develops and launches new products, and (v) expands distribution of its
products.
PROVIDE EXPERIENCED MANAGEMENT. The Company has assembled a dedicated
sales, marketing and administrative infrastructure by recruiting experienced
managers from a wide variety of food and consumer products companies. The
Company believes that it significantly improves the performance of its
brands by taking them out of large organizations where they have not been a
priority and providing them with experienced, dedicated management.
REFOCUS MARKETING SUPPORT. The Company refocuses and broadens marketing
support for its brands by rationalizing product lines, refreshing
advertising campaigns and adjusting the mix of its marketing programs. The
Company increases media advertising and consumer promotional events
(coupons) and generally reduces price discounting. The Company has increased
media advertising in order to increase brand awareness and introduce new or
reformulated products. Focused consumer promotional support, including
point-of-sale and in-store coupons and cross promotions with other food
products, has also been increased to generate trial and repeat purchases of
the Company's products. In many circumstances, trade spending levels have
been reduced while the quality of the merchandising support for the
Company's brands has improved.
REFORMULATE AND REPACKAGE PRODUCTS. To reinvigorate its brands, the Company
reformulates and repackages outdated products. For example, the Company has
reformulated MRS. BUTTERWORTH'S Lite syrup and certain AUNT JEMIMA frozen
breakfast products, resulting in significant increases in unit volumes for
both product lines. The Company has recently launched reformulated DUNCAN
HINES brownie mixes and plans to introduce reformulated LOG CABIN Lite syrup
in the second half of 1998. The Company has also redesigned the packaging of
its AUNT JEMIMA and MRS. PAUL'S product lines and plans to introduce new
packaging for CELESTE Pizza for One and LOG CABIN syrup in the summer of
1998.
DEVELOP AND LAUNCH NEW PRODUCTS. The Company has successfully developed and
launched more than 25 new products. New product successes include grilled
and premium fish fillets marketed under both the VAN DE KAMP'S and MRS.
PAUL'S brands and MAMA CELESTE Fresh Baked Rising Crust pizza. The Company
has developed and is preparing to launch additional new products for its
frozen breakfast, frozen seafood and syrup product lines.
EXPAND DISTRIBUTION. The Company expands distribution of its products by
(i) improving the selection of its products on the shelf, (ii) increasing
penetration in established markets, (iii) broadening the geographic
distribution of its products, and (iv) improving its presence in selected
channels of distribution including club stores and foodservice.
REDUCE COSTS. The Company has reduced costs of the acquired businesses by
approximately $49.9 million since their respective acquisitions. To achieve
these cost reductions, the Company has (i) consolidated the manufacture of MRS.
PAUL'S frozen seafood products into the Van de Kamp's, Inc.'s facilities, (ii)
outsourced the production of syrup, (iii) reduced fixed costs and improved the
efficiency of its manufacturing facilities, and (iv) eliminated redundant
administrative functions of the acquired businesses. The Company believes that
there are further opportunities to reduce costs, which include outsourcing the
production of baking mixes and further consolidating its brokerage and
administrative functions. No assurances can be given, however, that these cost
reductions can be realized.
MAKE STRATEGIC ACQUISITIONS. The Company has a proven track record of
successfully acquiring and integrating food businesses. The Company's
acquisition strategy is to acquire established, well-recognized food brands that
can leverage off of the infrastructure it has developed. The Company will
54
<PAGE>
continue to look for opportunities where strong but non-core brands would
benefit from the renewed focus and experienced management it brings to its
acquisitions. Management believes that these opportunities will continue to
arise as a result of large food companies continuing their recent trend of
divesting non-core businesses.
INDUSTRY
The U.S. food industry is relatively stable with growth based on modest
price and population increases. Over the last ten years, there has been industry
consolidation and food companies have been divesting non-core business lines and
making strategic acquisitions.
The desire for nutrition and convenience strongly affects consumer demand
for food products. Increasingly, consumers want nutritious food that is
convenient to prepare and can be served as a meal occasion. The Company targets
consumers between the ages of 18 and 48 and particularly households with
children. There are approximately 39 million children between the ages of 5 and
14 which represent a growing target market for the Company.
The Company competes in the dry grocery and frozen convenience food
categories of the food industry. The Company is becoming increasingly
competitive in the foodservice markets which offer further opportunities.
PRODUCTS AND MARKETS
The Company manufactures and markets popular branded food products that are
leaders within their respective markets. The Company groups its brands into two
general categories: dry grocery products and frozen convenience food products.
The dry grocery category includes DUNCAN HINES brand baking mix products and
MRS. BUTTERWORTH'S and LOG CABIN brand syrup products. The frozen convenience
food category includes VAN DE KAMP'S and MRS. PAUL'S brand frozen seafood
products, AUNT JEMIMA brand frozen breakfast products, and CELESTE brand frozen
pizza products. The following table sets forth aggregate pro forma net sales and
related information for each of the brands within these two categories for the
periods indicated.(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 27,
1997
------------------------
<S> <C> <C>
AMOUNT % TOTAL
----------- -----------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
DRY GROCERY
DUNCAN HINES baking mixes............................ $ 266.5 30.5%
LOG CABIN and MRS. BUTTERWORTH'S syrups.............. 194.2 22.2
----------- -----
TOTAL DRY GROCERY.................................. 460.7 52.7
----------- -----
FROZEN CONVENIENCE
VAN DE KAMP'S and MRS. PAUL'S frozen seafood......... 218.0 25.0
AUNT JEMIMA frozen breakfast......................... 85.6 9.8
CELESTE frozen pizza................................. 78.0 8.9
Foodservice.......................................... 31.9 3.6
----------- -----
TOTAL FROZEN CONVENIENCE........................... 413.5 47.3
----------- -----
AGGREGATE PRO FORMA NET SALES............................ $ 874.2 100.0%
----------- -----
----------- -----
</TABLE>
- ------------------------
(1) Aggregate pro forma net sales include sales of the Company as well as sales
of the prior owners for each of the periods shown.
55
<PAGE>
DUNCAN HINES BAKING MIXES (30.5% of 1997 Aggregate Pro Forma Net Sales)
For over 40 years, the DUNCAN HINES brand has represented excellence in
baking mixes. The DUNCAN HINES product line consists of cake mix,
ready-to-spread ("RTS") frosting, brownie mix, muffin mix, and cookie and other
specialty mixes. The DUNCAN HINES trademark is among the most recognized in the
U.S. with 92% unaided brand awareness and 100% all commodity volume ("ACV")
distribution for DUNCAN HINES cake mix. DUNCAN HINES baking mixes enjoy consumer
satisfaction ratings which are superior to those of its principal competitors,
BETTY CROCKER and PILLSBURY. Consumer test results show the DUNCAN HINES brand
appeals to the consumer who wants to bake a "quality, good as homemade" product.
The Company's products compete in the $1.3 billion baking mix category,
which has grown at a compound annual rate of 3.7% over the last four years. Four
products (layer cake, frosting, brownies, and muffin mixes) account for
approximately 85% of the U.S. baking mix sales volume. The remaining 15% is
comprised of several smaller items including specialty cake, dessert bar, and
cookie mixes. Management believes there will be stable growth at historic rates
in the baking mix category as consumers continue to purchase baking mix products
which they perceive to be an easy, convenient, "quality" alternative to scratch
baking.
The following table indicates that the baking mix category is led by three
brands, DUNCAN HINES, BETTY CROCKER, and PILLSBURY, with the remainder in
regional brands and private label.
<TABLE>
<CAPTION>
Share
------------------------------------------------------------
$ Sales DUNCAN BETTY Regional/
Segment (mm) HINES CROCKER PILLSBURY Private Label
- -------------------------------- ----------- ------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Cake mix........................ $ 315.0 36.3% 36.4% 22.1% 5.2%
Frosting........................ 244.7 18.9 49.4 26.0 5.7
Brownie mix..................... 198.8 16.4 47.2 26.2 10.2
Muffin mix...................... 145.0 12.8 34.5 24.9 27.8
Cookie mix...................... 37.2 27.9 68.8 1.0 2.3
</TABLE>
The DUNCAN HINES brand has been built on the strength of its cake mix.
Introduced in 1956, DUNCAN HINES has the #1 and #2 selling stock keeping units
("SKU's") in the cake mix segment (yellow and devil's food cake mixes). Cake
mixes accounted for approximately 55% of DUNCAN HINES total sales for the year
ended December 27, 1997.
To complement its cake mixes, DUNCAN HINES offers RTS frostings. DUNCAN
HINES frostings have received consumer satisfaction scores that are among the
highest in its segment relative to its competitors. Popular DUNCAN HINES
frostings include homestyle vanilla and chocolate flavors.
DUNCAN HINES offers two tiers of brownie mixes, plain and premium. DUNCAN
HINES brownie mixes have received the highest overall consumer satisfaction
ratings relative to its competitors and ranked highest among consumers in key
product attributes such as "tastes as good as homemade," "rich and fudgey," and
"chewy." To capitalize on such key attributes, the Company has recently launched
a new, improved, "thicker, moister" reformulated brownie mix. DUNCAN HINES
brownies compete primarily in the premium tier of brownie mixes and include
product offerings such as Double Fudge and Milk Chocolate Chunk.
Other DUNCAN HINES products include muffin, cookie, and fruit bar mixes.
Similar to its other products, DUNCAN HINES muffin mixes enjoy superior consumer
satisfaction ratings.
Management believes that sales of DUNCAN HINES products have suffered over
the last several years as a result of two strategies pursued by its prior owner.
First, DUNCAN HINES products were sold on an every day low price basis that was
inconsistent with category dynamics. Industry studies show that over 50% of
consumers make their purchase decision regarding baking mixes on impulse in the
supermarket
56
<PAGE>
aisle. Every day low pricing placed DUNCAN HINES at a disadvantage because it
was unable to promote its products as frequently as its competitors. Second, a
variety strategy was launched in 1994 which involved the introduction of more
than 50 new flavors such as key lime cake mix and grape bubble gum frosting.
This initiative was not successful, as the new flavors failed to generate repeat
purchases and caused core SKU's to be crowded off the retail shelf. The variety
strategy was discontinued in 1997.
The Company plans to stimulate sales of DUNCAN HINES products by
reestablishing a high-low pricing and merchandising strategy, co-promoting the
brand's products and increasing consumer promotions to stimulate trial
purchases. Management has recently restored a high-low pricing strategy to its
baking mix products by increasing the list price on DUNCAN HINES cake mix and
frosting products, which will provide the Company with funds to more than double
the frequency of its quality merchandising events--the number of times its
products are featured or displayed by a retailer. While DUNCAN HINES cake mix is
the cornerstone of the trademark with a 36.3% share, other DUNCAN HINES products
have a weighted average share of approximately 15%. Management intends to
increase sales of DUNCAN HINES brownie mixes and RTS frosting by co-promoting
DUNCAN HINES RTS frosting with its cake mixes and highlighting the "new news" of
the reformulated brownie mix through couponing and television advertising.
Management intends to continue to build DUNCAN HINES brand equity by maintaining
the brand's media advertising expenditures.
LOG CABIN AND MRS. BUTTERWORTH'S SYRUPS (22.2% of 1997 Aggregate Pro Forma Net
Sales)
MRS. BUTTERWORTH'S and LOG CABIN syrup products together have a leading 34%
share of the syrup category. MRS BUTTERWORTH'S Original and LOG CABIN 24 ounce
bottles are the #1 and #2 selling SKU's, respectively, in the syrup category.
Different consumer perceptions of these two brands offer unique opportunities
for consumer targeting. MRS. BUTTERWORTH'S distinctive, grandmother-shaped
bottle represents a fun image to the family with children. The strong heritage
of LOG CABIN, which dates back to 1888, represents an authentic, rich maple
brand targeted more to traditional "warm, cozy" breakfast occasions. The Company
also sells LOG CABIN'S COUNTRY KITCHEN, a value priced syrup, to target the
economy segment. Introduced in 1954, COUNTRY KITCHEN has the highest share in
the economy segment. The Company's products are also sold to the club store
channel. The Company sells foodservice products under the LOG CABIN, LOG CABIN
Lite, and WIGWAM labels and under private label arrangements to the restaurant
and institutional channels. MRS. BUTTERWORTH'S, LOG CABIN, and COUNTRY KITCHEN
are offered in regular and lite versions. The Company also sells pancake mixes
under the MRS. BUTTERWORTH'S brand, which accounted for less than 1% of the
Company's 1997 aggregate pro forma net sales.
The U.S. retail syrup category is $469.3 million and has grown at a compound
annual rate of approximately 2% over the last three years. The category is
comprised of three segments: regular (approximately 60% of sales), lite
(approximately 27% of sales), and pure maple/diet/specialty (approximately 13%
of sales). Regular syrup is a full-calorie corn syrup based product. Lite syrup
is also a corn syrup based product, but has only half the calories of regular
syrup. Pure maple, diet, and other specialty syrups are all non-corn syrup based
products which occupy market niches that are not currently offered by any of the
major national syrup manufacturers. The Company competes in the regular and lite
segments and plans to launch a LOG CABIN sugar-free diet syrup to capitalize on
the strength of the LOG CABIN brand equity.
57
<PAGE>
The Company is the leader in both the regular and lite segments of the syrup
category as indicated in the table below:
<TABLE>
<CAPTION>
Share
-------------------------------------------------------------------------------------------------------
$ Regional/
Sales MRS. COUNTRY Total AUNT HUNGRY Private
Segment (mm) BUTTERWORTH'S LOG CABIN KITCHEN Company JEMIMA JACK Label
- ---------------- --------- ----------------- ----------- ------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Regular......... $ 279.5 17.0% 16.0% 4.6% 37.6% 13.8% 6.4% 42.2%
Lite............ 126.1 15.9 15.5 4.6 36.0 31.9 8.4 23.7
Specialty/ Pure
Maple......... 63.7 -- -- -- -- -- -- 100.0
---------
Total........... $ 469.3 15.0% 13.7% 5.3% 34.0% 18.1% 6.1% 41.8%
-- --
-- --
--------- --- --- --- --- -----
--------- --- --- --- --- -----
</TABLE>
As non-core brands to their prior owners, both the MRS. BUTTERWORTH'S and
LOG CABIN brands lacked sufficient marketing and brand management resources,
resulting in share erosion. To revitalize the LOG CABIN brand, management
recently introduced a new television advertising campaign featuring the slogan,
"In the heart of every home, there's a little Log Cabin". New packaging has been
developed which replicates a log cabin and will be introduced in the second half
of 1998. To compete against AUNT JEMIMA Lite, the Company introduced a new,
reformulated MRS. BUTTERWORTH'S Lite product in December 1997. The Company also
plans to reformulate its LOG CABIN Lite product.
VAN DE KAMP'S AND MRS. PAUL'S FROZEN SEAFOOD (25.0% of 1997 Aggregate Pro Forma
Net Sales)
Marketed under the VAN DE KAMP'S and MRS. PAUL'S brands, the Company
manufactures and markets a variety of frozen seafood products including breaded
and battered fish sticks and fish fillets, grilled and plain fish fillets,
"healthy" breaded fish, and specialty seafood items. The Company's dual brand
strategy emphasizes both the brands' respective regional strengths (VAN DE
KAMP'S is stronger in the West and Central U.S. while MRS. PAUL'S is stronger in
the Northeast and Southeast) and brand positioning (VAN DE KAMP'S targets
families with children while MRS. PAUL'S targets adults). The VAN DE KAMP'S
trademark dates back over 40 years and is recognized as a fun, "contemporary"
image that appeals to families with children. The MRS. PAUL'S franchise began in
the mid-1940's with the introduction of deviled crab cakes and has grown to
include a wide range of specialty seafood items which target the adult consumer.
The $869.0 million frozen seafood category has two segments: fin and
non-fin. Fin products are fish whereas non-fin products are other seafood such
as shrimp and clams. The frozen seafood category has experienced a compound
annual growth rate of 6.7% over the last three years due to the introduction of
new premium and healthy fillet products and increased advertising support by the
Company and GORTON'S. VAN DE KAMP'S introduced a 97% fat-free product under its
"Crisp and Healthy" label in 1992 and is the only major retail competitor to
offer a line of "healthy" breaded fish products. The Company has introduced over
the last two years 14 different premium and grilled products under the VAN DE
KAMP'S and MRS. PAUL'S brands including salmon with creamy dill sauce, teriyaki
tuna, and grilled lemon pepper and garlic herb fillets. The Company also offers
a variety of specialty seafood products including shrimp, fried clams, and
deviled crab cakes.
As the table below indicates, the Company has a leading 28.1% share of the
frozen seafood category. GORTON'S has the number two position with a 20.7%
share, and the remainder of the category is comprised of a multitude of other
regional brands and private label. According to IRI, the #1 and #2
58
<PAGE>
selling frozen seafood SKU's are VAN DE KAMP'S 44 Breaded Fish Sticks and VAN DE
KAMP'S Battered Fillets, respectively.
<TABLE>
<CAPTION>
Share
-------------------------------------------------------------------------
$
Sales VAN DE Total Other/
Segment (mm) KAMP'S MRS. PAUL'S Company GORTON'S Private Label
- ----------- --------- ----------- ----------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Fin........ $ 557.5 25.0% 15.2% 40.2% 30.5% 29.3%
Non-fin.... 311.5 2.4 4.0 6.4 3.1 90.5
---------
Total...... $ 869.0 16.9% 11.2% 28.1% 20.7% 51.2%
--------- --- --- --- --- ---
--------- --- --- --- --- ---
GRILLED
FIN(1)... $ 68.1 11.7% 29.4% 41.1% 42.8% 16.1%
</TABLE>
- ------------------------
(1) Included in fin segment.
The Company has revitalized both the VAN DE KAMP'S and MRS. PAUL'S brands by
introducing new products and increasing marketing support for the brands. For
example, annual sales of VAN DE KAMP'S frozen seafood have increased from $112.8
million at acquisition (year ended June 1995) to $132.8 million in year ended
1997. The Company continuously builds VAN DE KAMP'S and MRS. PAUL'S brand equity
through television and print advertising and consumer promotions.
Cross-promoting is used to focus on the target consumer. For example, VAN DE
KAMP'S products are cross-promoted with KRAFT macaroni and cheese to target
children. Another example of cross-promoting is including in-pack samples of
HEINZ cocktail sauce with VAN DE KAMP'S fish sticks.
As the category leader in frozen seafood, the Company has begun a program of
rationalizing SKU's between its two brands on a market-by-market basis. The
program involves eliminating redundant and slower-moving SKU's and replacing
them with new product offerings. Management believes that while this program
will slow the sales growth of the Company's frozen seafood business, it should
result in a more profitable mix of business for the Company and its retail
customers. See "Business--Marketing, Sales and Distribution".
AUNT JEMIMA FROZEN BREAKFAST PRODUCTS (9.8% of 1997 Aggregate Pro Forma Net
Sales)
AUNT JEMIMA was established as a brand over 100 years ago. AUNT JEMIMA
frozen breakfast products are offered in three segments: waffles, pancakes
(including frozen pancake batter), and french toast. AUNT JEMIMA is the only
national brand represented across all three segments of the frozen syrup carrier
segment. AUNT JEMIMA'S waffle and pancake products are offered in four
varieties, original, blueberry, buttermilk, and lowfat. The french toast product
is offered in two flavors, regular and cinnamon.
The Company's frozen breakfast products compete in the frozen syrup carrier
segment of the $1.3 billion frozen breakfast foods category. The frozen
breakfast foods category has three segments: frozen syrup carriers
(approximately 51% of total sales), breakfast entrees (approximately 28% of
total sales), and frozen bagels (approximately 21% of total sales). The frozen
syrup carrier segment consists of waffles (approximately 85% of total frozen
syrup carrier sales), pancakes (approximately 9% of total frozen syrup carrier
sales), and french toast (approximately 6% of total frozen syrup carrier sales).
The frozen syrup carrier segment has grown faster than any other frozen
breakfast product offering over the last ten years due to consumers' demand for
quick, convenient, and nutritious foods. Annual per capita consumption of frozen
syrup carriers has grown at a 7.5% compound average growth rate over the last
three years.
59
<PAGE>
As the table below indicates, AUNT JEMIMA is the number three brand in the
frozen syrup carrier category. AUNT JEMIMA is strongest in the Northeast and
holds the number one national share in french toast.
<TABLE>
<CAPTION>
Share
$ ------------------------------------------------------
Size AUNT HUNGRY Regional/
Segment (mm) JEMIMA EGGO JACK Private Label
- --------------------------------- --------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Waffles.......................... $ 577.1 9.2% 64.4% 16.4% 10.0%
Pancakes and Pancake Batter...... 68.4 21.6 8.9 50.1 19.4
French Toast..................... 42.8 51.8 -- -- 48.2
--------- --- --- --- ---
Total............................ $ 688.3 13.1% 54.9% 19.9% 12.1%
--------- --- --- --- ---
--------- --- --- --- ---
</TABLE>
The Company has increased sales of AUNT JEMIMA by expanding distribution and
introducing AUNT JEMIMA to children through a series of print and television ads
on the NICKELODEON television network. Annual sales of AUNT JEMIMA products have
increased from $70.6 million in 1996 to $85.6 million in 1997. Management plans
to increase further AUNT JEMIMA sales through a series of focused marketing
initiatives. At the start of 1998, management redesigned AUNT JEMIMA's
packaging, changing the color from white, which had a very low visual impact in
the freezer case, to red, which has a strong visual impact. Management plans to
or is in the process of (i) expanding distribution of current items, (ii)
launching a reformulated "more homemade taste" pancake product, (iii)
introducing new products in core markets that have proven successful in the
category such as mini pancakes and french toast sticks, and (iv) expanding its
foodservice and private label business.
CELESTE FROZEN PIZZA (8.9% of 1997 Aggregate Pro Forma Net Sales)
For over 36 years CELESTE frozen pizza has been a prominent regional brand
in the Northeast. CELESTE frozen pizzas are offered in small and large sizes and
a rising crust pizza is offered under the MAMA CELESTE label. CELESTE'S small
pizzas (marketed as CELESTE Pizza for One) and large pizzas are economy priced
while the MAMA CELESTE Fresh Baked Rising Crust pizza is premium priced.
Introduced in November 1997, MAMA CELESTE Fresh Baked Rising Crust pizza has
performed well in consumer testing and has achieved an 8.5% share in CELESTE
markets (as defined) for the 12 weeks ended April 19, 1998.
Frozen pizza is a $2.0 billion category which has grown at a compound annual
rate of 10.8% over the last two years. The category is comprised of three
segments: large (46.5% total sales), small (33.7% total sales), and a new
entrant, rising crust (19.8% of total sales). Rising crust pizzas have been a
very successful line extension and have been the primary driver of growth within
the frozen pizza category. Rising crust pizzas rise as they bake in the
consumers' oven and offer a pizza comparable in quality to a restaurant or home
delivered pizza.
CELESTE is the number one brand in unit sales in the markets in which it
competes. As indicated in the table below, CELESTE is the number three brand in
dollar sales in the markets in which it competes and the number eight brand
nationally. CELESTE products are primarily sold in the Northeast, Florida, and
California. In the markets in which it competes, CELESTE Pizza for One is the
leading brand of small pizzas. The frozen pizza category is highly fragmented
with numerous regional brands such as CELESTE.
<TABLE>
<CAPTION>
$ Share
Size ----------------------------------------------------------
(mm) CELESTE TOMBSTONE DI GIORNO All other
--------- ----------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
National.............. $ 2,078 3.9% 17.1% 11.6% 67.4%
CELESTE markets....... 671 10.6 15.4 11.6 62.9
</TABLE>
60
<PAGE>
Sales of CELESTE frozen pizza products have increased from $67.8 million in
1996 to $78.0 million in 1997. Management believes the CELESTE brand is in a
solid position to further grow sales in its core markets due to its strong brand
image. Management intends to expand distribution of its MAMA CELESTE Fresh Baked
Rising Crust pizza and its Pizza For One by offering more items in existing
accounts and increasing its geographic distribution. Management is also in the
process of redesigning its Pizza For One packaging to update and contemporize
its brand image.
FOODSERVICE (3.6% of 1997 Aggregate Pro Forma Net Sales)
The Company's foodservice product line consist primarily of AUNT JEMIMA
frozen breakfast products.
Sales of frozen syrup carrier products in the foodservice channel are
growing rapidly due to increased consumption of breakfasts away from home.
Customers in this area include schools, colleges, businesses, and fast food
chains. Management believes that significant opportunities exist for sales
growth of frozen syrup carrier products as well as other frozen product lines.
Management also believes the growth in the syrup carrier segment will drive
foodservice opportunities for MRS. BUTTERWORTH'S and LOG CABIN syrup products.
MARKETING, SALES, AND DISTRIBUTION
Management believes that a focused, consistent marketing strategy is
critical to the successful merchandising and growth of the Company's brands.
Television and print advertising is considered to be a key component to its
marketing strategy. The Company's television and print advertising acts both as
a builder of brand equity by emphasizing the heritage and characteristics of its
product offerings and as a promoter of "new news" for new products within the
brand segments. Consumer promotions include targeted couponing to generate trial
usage and increase purchase frequency. The Company's trade promotions focus on
obtaining retail display support, achieving key price points, and securing
retail shelf space.
The leading positions of the Company's brands has enabled it to practice
category management and enter into alliances and co-marketing arrangements with
leading manufacturers of complementary food products. As the category leader in
syrups and frozen seafood, the Company can practice category management, which
is a cooperative effort between the category leader and the retailer aimed at
increasing shelf space profitability for the retail store by rationalizing
product offerings in the category. The category leader generally benefits from
category management because its products are usually featured more prominently
and accorded more shelf space and it can maximize distribution efficiencies.
Successful examples of co-marketing are coupon events for the VAN DE KAMP'S
frozen seafood products with Kraft macaroni and cheese (the most frequently
purchased item in the grocery store) and in-pack samples of Heinz cocktail
sauce.
The Company sells its dry grocery and frozen food products through two
separate sales forces: broker networks and distribution systems. The dry grocery
division has a sales force of 13 people which manages approximately 63
independent food brokers and 40 foodservice brokers. Dry grocery products are
shipped either directly to the customer or to one of five independent,
regionally located warehouses, which provides national coverage. The frozen
convenience food division has a sales force of 16 people which manages
approximately 57 independent frozen food brokers and 49 independent food service
brokers. Frozen food products are shipped either directly to the customer or to
one of four independent, regionally located warehouses, which provides national
coverage. The Company's customers include most of the major supermarkets and
chains in the U.S. None of the Company's customers or group of customers account
for more than 10% of the Company's sales.
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RAW MATERIALS
The Company purchases its raw materials, all of which are widely available,
from numerous independent suppliers throughout the year. The principal raw
material of VAN DE KAMP'S and MRS. PAUL'S brand fish products is Alaskan
pollock.
The Company procures its annual Alaskan pollock fillet requirements from
various North Pacific suppliers. The key fishing season is in January through
April with a second season in September through October. In late May or early
June, the Company contracts to purchase pollock fillet requirements for the
following 10 to 12 months. This enables the Company to project reasonably
accurately its production costs for the fall and Lent seasonal peaks in frozen
seafood sales. The Company does not purchase the frozen fillets until delivery
to ports in the United States, which occurs in stages as needed, over the course
of 10 to 12 months. This arrangement minimizes the investment required in
inventory.
The Company's other primary raw materials are flour, sugar, corn syrup,
liquid sucrose, maple sugar, flavorings, cheeses, meat, eggs, milk, and
vegetable oil, which are generally sourced from the U.S. commodity market. The
Company also utilizes significant quantities of glass, plastic, and cardboard
for its packaging requirements. Supplies of raw materials and packaging
requirements are readily available from a number of sources. Purchases are based
on price and quality. Major purchases are made through a bidding process.
COMPETITION
The food products business is highly competitive. Numerous brands and
products compete for shelf space and sales, with competition based primarily on
brand recognition and loyalty, price, quality, and convenience. The Company
competes with a significant number of companies of varying sizes, including
divisions or subsidiaries of larger companies. A number of these competitors
have broader product lines, substantially greater financial and other resources
available to them, lower fixed costs and/or longer operating histories.
SEASONALITY
The Company does not experience any material effects of seasonality in its
business. There are no material backlogs.
RESEARCH AND DEVELOPMENT
The Company maintains its primary research and development departments for
its Aurora Division in Columbus, Ohio and for its VDK Division in St. Louis,
Missouri. The departments are responsible for nearly all of the food research
and product development for the Company. The Company uses food technology
consultants where appropriate. 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.
PRODUCTION AND FACILITIES
The Company owns and operates two manufacturing facilities for its frozen
food products described in the following table. The Company also owns a
manufacturing facility and the real estate underlying such facility located in
Chambersburg, Pennsylvania, comprising approximately 180,000 square feet, where
the Company manufactured certain frozen desserts products lines which it sold on
May 1, 1998. The Company plans to sell the Chambersburg, Pennsylvania
manufacturing facility and real estate. The Company's headquarters are leased by
Dartford pursuant to a lease that expires February 2002. See "Certain
Relationships and Related Transactions". The VDK Division's corporate
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offices lease will expire in September 2000, subject to one five-year renewal
option. The Aurora Division's corporate offices lease will expire in May 2002.
The Company's facilities, equipment and offices are subject to security
interests granted to its lenders:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRINCIPAL USE SQUARE FOOTAGE OWNED/LEASED
- ---------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C>
Jackson, TN................. Frozen Breakfast, Frozen 302,000 Owned
Pizza and Grilled Fish
Erie, PA.................... Frozen Seafood 116,000 Owned
St. Louis, MO............... VDK Division Corporate 12,000 Leased
Offices
Columbus, OH................ Aurora Division Corporate 10,500 Leased
Offices
San Francisco, CA........... Company Headquarters 7,000 Leased
</TABLE>
BAKING MIXES
DUNCAN HINES products are contract manufactured and distributed by P&G
pursuant to a co-pack agreement for the following periods: until July 16, 1998
for specialty mixes, until October 16, 1998 for frosting, and until April 16,
1999 for cake mixes. The Company entered into and expects to enter into
long-term co-pack agreements for its DUNCAN HINES cake mixes and frosting and
specialty mixes with contract manufacturers and will transition the DUNCAN HINES
manufacturing assets from P&G's Jackson, Tennessee plant to production
facilities owned or leased by such contract manufacturers. The terms of the
long-term co-pack agreements are five years with an automatic one-year renewal.
SYRUPS
The Company's syrup products are produced by contract manufacturers at four
manufacturing facilities pursuant to syrup co-pack agreements with terms of five
years and automatic renewal for one year unless cancelled by the other party.
All of the Company's syrup production equipment, including batching, filling,
and case-packing equipment, is or will be located at one of the contract
manufacturers.
FROZEN CONVENIENCE FOODS
The Company manufactures its VAN DE KAMP'S and MRS. PAUL'S frozen seafood
products at its Erie, Pennsylvania and Jackson, Tennessee facilities. The Erie
plant currently operates at 59% of capacity (based on 3 shifts, 5 days a week).
Annual capacity of the plant is approximately 9.2 million cases. Certain
specialty seafood items such as shrimp and clams are contract manufactured by
third parties. The Company produces AUNT JEMIMA and CELESTE products at its
Jackson facility. The plant currently operates at a weighted average of
approximately 70% of capacity (based on 3 shifts, 5 days a week).
TRADEMARKS
The Company's principal trademarks are DUNCAN HINES, LOG CABIN, MRS.
BUTTERWORTH'S, VAN DE KAMP'S, MRS. PAUL'S, CELESTE, and MAMA CELESTE. The
Company licenses the AUNT JEMIMA trademark pursuant to a perpetual,
royalty-free, license agreement which requires the Company to obtain the
approval of Quaker Oats for any material change to any labels, packaging,
advertising, and promotional materials bearing the AUNT JEMIMA trademark. Quaker
Oats can only withhold approval if such proposed use violates such license
agreement. The registrations for the Company's trademarks expire from time to
time and the Company renews them in the ordinary course of business prior to the
expiration dates. See "Risk Factors--Trademarks".
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EMPLOYEES
As of June 22, 1998, the Company had a total of approximately 1,017
employees, none of whom are represented by unions. Management of the Company
believes it has good relations with its employees.
CERTAIN LEGAL AND REGULATORY MATTERS
LITIGATION
The Company, in the ordinary course of business, is involved in various
legal proceedings. The Company does not believe the outcome of these proceedings
will have a material adverse effect on the Company's financial position or
results of operation.
PUBLIC HEALTH
The Company is subject to the Federal Food, Drug and Cosmetic Act and
regulations promulgated thereunder by the FDA. This comprehensive regulatory
program governs, among other things, the manufacturing, composition and
ingredients, labeling, packaging and safety of food. For example, the FDA
regulates manufacturing practices for foods through its current "good
manufacturing practices" regulations and specifies the "recipes", called
standards of identity, for certain foods. In addition, the Nutrition Labeling
and Education Act of 1990, as amended, prescribes the format and content of
certain information required to appear on the labels of food products. The
Company is subject to regulation by certain other governmental agencies,
including the USDA.
The operations and the products of the Company are also subject to state and
local regulation through such measures as licensing of plants, enforcement by
state health agencies of various state standards and inspection of the
facilities. Enforcement actions for violations of federal, state, and local
regulations may include seizure and condemnation of violative products, cease
and desist orders, injunctions and/or monetary penalties. Management believes
that the Company's facilities and practices are sufficient to maintain
compliance with applicable government regulations, although there can be no
assurances in this regard.
FEDERAL TRADE COMMISSION
The Company is subject to certain regulations by the Federal Trade
Commission ("FTC"). Advertising of the Company's products is subject to
regulation by the FTC pursuant to the Federal Trade Commission Act and the
regulations promulgated thereunder.
EMPLOYEE SAFETY REGULATIONS
The Company is subject to certain health and safety regulations including
regulations issued pursuant to the Occupational Safety and Health Act. These
regulations require the Company to comply with certain manufacturing, health,
and safety standards to protect its employees from accidents.
ENVIRONMENTAL
The past and present business operations of, and ownership and operation of
real property by, the Company are subject to extensive and changing federal,
state, local, and foreign environmental laws and regulations pertaining to the
discharge of materials into the environment and the handling and disposition of
wastes (including solid and hazardous wastes) or otherwise relating to
protection of the environment. Compliance with such laws and regulations is not
expected to have a material impact on the Company's capital expenditures,
earnings, or competitive position. No assurance can be given, however, that
additional environmental issues relating to presently known matters or
identified sites or to other matters or sites will not require additional,
currently unanticipated investigation, assessment, or expenditures.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information concerning the directors and
executive officers of the Company each of whom has served in the capacities
indicated below since its incorporation on June , 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------- --- -----------------------------------------
<S> <C> <C>
Ian R. Wilson............................ 68 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....................... 34 Chief Financial Officer and Secretary
Thomas O. Ellinwood...................... 44 President, VDK Division
Thomas J. Ferraro........................ 50 President, Aurora Division
Anthony A. Bevilacqua.................... 43 Executive Vice President--Sales and
Marketing, VDK Division
C. Gary Willett.......................... 42 Executive Vice President, Aurora 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>
Each director will hold office until the next annual meeting of stockholders
or until his or her successor has been elected and qualified. See "Principal
Stockholders and Selling Stockholder-- Securityholders Agreement" for a
discussion of the election of directors. Executive officers of the Company are
appointed by, and serve at the pleasure of, the Board of Directors. A brief
biography of each director and executive officer follows:
IAN R. WILSON--CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. Mr.
Wilson has served as Chairman of Aurora Foods Inc. since December 1996 and
Chairman of Van de Kamp's, Inc. since September 1995. Mr. Wilson is the Managing
Partner of Dartford Partnership L.L.C., a private partnership focused on the
food and beverage industries. From 1989 through 1995, Mr. Wilson was Chairman
and Chief Executive Officer of Windmill Holdings Corporation, 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., 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 membership on
the boards of Novell, Inc., Revlon, Inc., Crown Zellerbach Corporation, and
Castle & Cooke, Inc. Mr. Wilson currently serves as Chairman of Windy Hill Pet
Food Company, Inc.
JAMES B. ARDREY--VICE CHAIRMAN AND DIRECTOR. Mr. Ardrey has served as
Executive Vice President and Director of Aurora Foods Inc. since December 1996
and Executive Vice President and Director of Van de Kamp's, Inc. since September
1995. Mr. Ardrey is a partner of Dartford Partnership L.L.C. From
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1993 to 1995, Mr. Ardrey was a consultant to Windmill Holdings Corporation,
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. Mr. Ardrey currently serves as Executive Vice
President of Windy Hill Pet Food Company, Inc.
RAY CHUNG--EXECUTIVE VICE PRESIDENT. Mr. Chung has served as Executive Vice
President and Director of Aurora Foods Inc. since December 1996 and Executive
Vice President of Van de Kamp's, Inc. and Director of VDK Holdings, Inc. since
September 1995. Mr. Chung is a founding partner of Dartford Partnership L.L.C.
Mr. Chung has previously served as a Director, Executive Vice President and
Chief Financial Officer of Windmill Holdings Corporation from 1989 to 1995 and
as a Director, Executive Vice President and Chief Financial Officer of Wyndham
Foods, Inc. 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 currently serves as Executive Vice President and Director of
Windy Hill Pet Food Company, Inc.
M. LAURIE CUMMINGS--CHIEF FINANCIAL OFFICER AND SECRETARY. Ms. Cummings has
served as Vice President and Secretary of Aurora Foods Inc. since December 1996
and Vice President and Secretary of Van de Kamp's, Inc. since September 1995.
Ms. Cummings has been a partner in Dartford Partnership L.L.C. since 1994. Ms.
Cummings was Vice President, Controller and Treasurer of Windmill Holdings
Corporation from 1989 to 1995. Between 1987 and 1990, Ms. Cummings was the
Controller and Assistant Treasurer of Wyndham Foods, Inc. Ms. Cummings currently
serves as Vice President and Secretary of Windy Hill Pet Food Company, Inc.
THOMAS O. ELLINWOOD--PRESIDENT OF THE VDK DIVISION. Mr. Ellinwood has been
with Van de Kamp's, Inc. since 1995. Mr. Ellinwood has been responsible for the
management of VAN DE KAMP'S since Pet Incorporated acquired VAN DE KAMP'S 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 Incorporated from March 1992 until Van de Kamp's,
Inc. bought the VAN DE KAMP'S business in 1995. Between 1990 and 1992, Mr.
Ellinwood held the position of Vice President, Marketing. Prior to Pet's
acquisition of VAN DE KAMP'S, 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--PRESIDENT OF THE AURORA DIVISION. Prior to joining
Aurora Foods Inc. in 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, from 1991 to 1994, Vice President of
Sales for the Niche Grocery division of Borden, Inc. 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--EXECUTIVE VICE PRESIDENT, SALES AND MARKETING, VDK
DIVISION. Mr. Bevilacqua joined Van de Kamp's, Inc. in February 1998 and is
responsible for the development, direction and implementation of Van de Kamp's,
Inc. go-to-market strategy across all aspects of the Company's customer and
consumer value strategy. Prior to joining Van de Kamp's, Inc., 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 responsibilities 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.
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C. GARY WILLETT--EXECUTIVE VICE PRESIDENT, AURORA DIVISION. Mr. Willett
joined Aurora Foods Inc. 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--DIRECTOR. Mr. Apsey has served as a director of Van de
Kamp's, Inc. since September 1995. Mr. Apsey has been an Executive Director of
Tiger Oats Ltd. since 1987 and currently serves as Executive Chairman of the
International Division of Tiger Oats Ltd. Tiger Oats Ltd. is a major public food
company in Southern Africa. Mr. Apsey's past and present service as a director
includes membership on the boards of the following companies: Tiger Milling &
Feeds Ltd., Tiger Foods Ltd., Tiger Oats, Langeberg Foods, Ltd., Langeberg
Holdings Ltd., Beacon Sweets and Chocolates (Pty) Ltd. and Durban Confectionery
Works (Pty) Ltd.
CHARLES AYRES--DIRECTOR. Mr. Ayres has served as a director of Aurora Foods
Inc. since December 1996. Mr. Ayres is a managing director of McCown De Leeuw &
Co., Inc. 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. and The
Brown Schools, Inc.
DAVID E. DE LEEUW--DIRECTOR. Mr. De Leeuw has served as a director of
Aurora Foods Inc. since December 1996. Mr. De Leeuw is a managing director of
McCown De Leeuw & Co., Inc. 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.,
Nimbus CD International, Inc., AmeriComm Holdings, Inc., Outsourcing Solutions
Inc. and American Residential Investment Trust.
CHARLES J. DELANEY--DIRECTOR. Mr. Delaney has served as a director of Van
de Kamp's, Inc. since September 1995. Mr. Delaney has been President of UBS
Capital LLC since January 1993 and Managing Director in charge of the Leveraged
Finance Group of the Corporate Banking Division of Union Bank of Switzerland
since May 1989. Mr. Delaney is also a director of Cinnabon International, Inc.
and Peoples Telephone Company, Inc.
RICHARD C. DRESDALE--DIRECTOR. Mr. Dresdale has served as a director of
Aurora Foods Inc. since December 1996. Mr. Dresdale has been a Managing Director
of Fenway Partners, Inc. since the firm's founding in 1994. Fenway is a New
York-based private equity firm for institutional investors with a 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. and
Delimex Holdings, Inc. Mr. Dresdale is also a director of Remington Arms
Company, Inc., a designer, manufacturer and seller of sporting goods products
for the hunting, shooting sports and fishing markets.
ANDREA GEISSER--DIRECTOR. Mr. Geisser has served as a director of Van de
Kamp's, Inc. since September 1995. Mr. Geisser has been a Managing Director of
Fenway Partners, Inc. 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
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Investment Corporation, the largest Canadian leveraged buyout company, and prior
to that started the U.S. operations of IFINT, 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., Delimex Holdings, Inc., Iron Age Corporation and Valley
Recreation Products, Inc.
PETER LAMM--DIRECTOR. Mr. Lamm has served as a director of Van de Kamp's,
Inc. since September 1995 and as a director of Aurora Foods Inc. since December
1996. Mr. Lamm has been President of Fenway Partners, Inc. since the firm's
founding in 1994. 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., Iron Age
Corporation and National School Supply Company.
TYLER T. ZACHEM--DIRECTOR. Mr. Zachem has served as a director of Aurora
Foods Inc. since December 1996. Mr. Zachem is a managing director of McCown De
Leeuw & Co., Inc. 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.
There is no family relationship between any of the executive officers or
directors of the Company.
ELECTION AND COMMITTEES OF THE BOARD OF DIRECTORS
The election of directors is effectively governed by the terms of the
Securityholders Agreement. See "Principal Stockholders and Selling
Stockholder--Securityholders Agreement".
The Board of Directors of the Company has a compensation committee which
determines the compensation of executive officers, including bonuses, and
administers the Company's 1998 Incentive Plan and the 1998 Employee Stock
Purchase Plan. The compensation committee consists of Messrs. Lamm, Ayres, and
Dresdale. The Chairman of the Board is an EX-OFFICIO member of the compensation
committee. The Board of Directors of the Company intends to appoint an Audit
Committee within three months of the closing of the Equity Offerings comprised
solely of independent directors. The Audit Committee's functions will include
recommending to the Board of Directors the engagement of the Company's
independent public accountants and reviewing with such accountants the plans
for, and the result and scope of, their auditing engagement.
EXECUTIVE COMPENSATION
The Company paid Dartford a fee of $768,000 in 1997 for serving in the role
of the Company's executive office. Upon the closing of the Equity Offerings, Mr.
Ian R. Wilson will serve as Chief Executive Officer, Mr. James B. Ardrey will
serve as Vice Chairman, Mr. Ray Chung will serve as Executive Vice President,
and Ms. M. Laurie Cummings will serve as Chief Financial Officer and Secretary
of the Company pursuant to employment agreements. Messrs. Thomas J. Ferraro and
Thomas O. Ellinwood serve as President of the Aurora Division and VDK Division,
respectively, pursuant to employment agreements. In 1997, Mr. Ferraro earned
$175,000 in salary, $143,000 in bonus, and $6,000 in the form of Company
contributions on his behalf to profit sharing and savings plans and other
related benefits. In 1997, Mr. Ellinwood earned $225,000 in salary, $112,500 in
bonus, and $19,375 in contributions made by the VDK on his behalf to profit
sharing and savings plans. Messrs. Ferraro and Ellinwood were each recently
granted, contingent upon closing of the Equity Offerings, 175,000 options for
shares of Common Stock of the Company under the 1998 Incentive Plan at an
exercise price equal to the initial public
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offering price in the Equity Offerings. See "Management--Employment Agreements"
and "Certain Relationships and Related Transactions".
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 which
becomes effective upon the closing of the Equity Offerings. 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 the second anniversary of the closing of the
Equity Offerings or the first anniversary of employing a Chief Executive Officer
other than Mr. Ian R. 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 which becomes effective upon the closing of the Equity
Offerings. 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 the second anniversary of
the closing of the Equity Offerings or the first anniversary of employing a
Chief Executive Officer other than Mr. Ian R. 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 which becomes effective upon the closing of the
Equity Offerings. 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 the second
anniversary of the closing of the Equity Offerings or the first anniversary of
employing a Chief Executive Officer other than Mr. Ian R. 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 which becomes effective upon
the closing of the Equity Offerings. 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 the second anniversary of the closing of the Equity Offerings or the first
anniversary of employing a Chief Executive Officer other than Mr. Ian R. 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 Aurora Division
pursuant to an employment agreement, dated as of December 31, 1996, as amended
(the "Ferraro Employment Agreement"). He receives a base salary of $275,000 per
year 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
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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 VDK 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 $275,000 (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.
AURORA INCENTIVE PLAN
The Amended and Restated Limited Liability Company Agreement of MBW
Investors LLC contains an incentive plan (the "Aurora Plan") as a means by which
certain key employees and other specifically designated persons ("Aurora Covered
Employees") of Aurora and/or affiliated with Aurora, were given an opportunity
to benefit from appreciation in the value of Aurora. Under the Aurora Plan,
Aurora Covered Employees were issued a 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 Aurora. The Management
Units were subject to vesting requirements based on terms of employment or other
factors.
Prior to the closing of the Equity Offerings, the final value of all classes
of Management Units will be determined based on the valuation of the Common
Stock held indirectly by MBW Investors LLC, and upon the closing of the Equity
Offerings all unvested Management Units will become fully vested. The aggregate
value of all Management Units is expected to be $60.8 million (assuming an
initial public offering price of $21.50 per share). Through December 27, 1997,
Aurora 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 $58.5 million was recorded in the first and second quarters of 1998.
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The incentive plan expense has been recorded as a liability of MBW Investors 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. After the closing of the Equity Offerings, no
additional compensation expense will be recorded under the Aurora Plan.
MBW Investors LLC will satisfy its liability under the Aurora Plan by
distributing 4,192,932.2 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 Investors LLC. See "Certain
Relationships and Related Transactions".
Pursuant to the Aurora Plan, Dartford, Thomas J. Ferraro, and C. Gary
Willett are entitled to receive 2,725,406.0, 433,218.1, and 270,761.3 shares of
Common Stock, respectively, effective on the closing of the Equity Offerings in
respect of the Aurora Plan. In addition, 56 other employees are entitled to
receive an aggregate of 763,546.9 shares pursuant to the Aurora Plan.
VDK INCENTIVE PLAN
VDK Foods 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 will be determined based on the valuation of the shares
of the Company held indirectly by VDK Foods LLC, and upon the closing of the
Equity Offerings all unvested VDK Management Units will become fully vested. The
aggregate value of all VDK Management Units is expected to be $66.7 million
(assuming an initial public offering price of $21.50). 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
has been recorded as a liability of VDK Foods 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 has been pushed down to the Company as
incentive plan expense and as additional paid-in capital from its parent. After
the closing of the Equity Offerings, no additional incentive plan expense will
be recorded under the VDK Plan.
VDK Foods 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
Foods LLC, based on the valuation of the VDK Management Units at the initial
public offering price of the Company's Common Stock. See "Certain Relationships
and Related Transactions".
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 $12.8
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.
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"),
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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 the first
anniversary of the closing of the Equity Offerings 3,613,412.5 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 Foods LLC, as a contribution, a number of shares of
the Company's Common Stock owned by VDK Foods 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 Foods LLC. VDK
Foods 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 2,287,921.5, 244,847.6, and 92,048.0 shares
of Common Stock, respectively, under the VDK Plans no later than the first
anniversary of the closing of the Equity Offerings. In addition, 27 employees
are entitled to receive an aggregate of 988,595.4 shares pursuant to the VDK
Plans no later than the first anniversary of the closing of the Equity
Offerings.
1998 LONG TERM INCENTIVE PLAN
Prior to the Equity Offerings, the Board of Directors adopted the 1998
Incentive Plan and the sole stockholder approved such plan. The Company plans to
register with the Securities and Exchange Commission the shares issuable
pursuant to the 1998 Incentive Plan.
The following summary of the 1998 Incentive Plan is qualified in its
entirety by reference to the complete text of the 1998 Incentive Plan, which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. Capitalized terms not separately defined below have the meanings set forth
in the 1998 Incentive Plan.
The purpose of the 1998 Incentive Plan is to foster and promote the
long-term financial success and interests of the Company and materially increase
the value of equity interests in the Company by: (a) encouraging the long-term
commitment of selected key employees, (b) motivating superior performance of key
employees by means of long-term performance related incentives, (c) encouraging
and providing key employees with a formal program for obtaining an ownership
interest in the Company, (d) attracting and retaining outstanding key employees
by providing incentive compensation opportunities competitive with other major
companies, and (e) enabling participation by key employees in the long-term
growth and financial success of the Company. Under the 1998 Incentive Plan, the
Compensation Committee has the authority to grant to key employees and
consultants of the Company the following types of awards: (i) stock options in
the form of incentive stock options qualified under Section 422 of the Code
("Incentive Options"), or nonqualified stock options ("Nonqualified Options," or
collectively with the Incentive Options "Options"), or both; (ii) stock
appreciation rights ("SARs"); (iii) restricted stock (the "Restricted Stock");
(iv) performance-based awards; and (v) supplemental payments dedicated to
payment of any federal income taxes that may be payable in conjunction with the
1998 Incentive Plan (collectively referred to as "Incentive Awards"). All
employees of the Company are eligible to participate in the 1998 Incentive Plan.
3,500,000 shares of Common Stock have been reserved for grants of Incentive
Awards under the 1998 Incentive Plan.
The 1998 Incentive Plan is administered by the Company's Compensation
Committee which must consist of at least two members of the Board of Directors,
each of whom is a nonemployee director. The 1998 Incentive Plan provides that
the Compensation Committee may make adjustments to the number of shares and to
the exercise price of all or any Incentive Awards. The Compensation Committee's
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determinations and interpretations under the 1998 Incentive Plan are final,
binding and conclusive on all participants and need not be uniform and may be
made by the compensation committee selectively among persons who receive, or are
eligible to receive, grants and awards under the 1998 Incentive Plan.
The Compensation Committee may limit an optionee's right to exercise all or
any portion of an Option until one or more dates subsequent to the date of
grant. The Compensation Committee also has the right, exercisable in its sole
discretion, to accelerate the date on which all or any portion of an Option may
be exercised. The 1998 Incentive Plan also provides that, under certain
circumstances, if any employee is terminated within two years after a "Change of
Control", each Option or SAR then outstanding shall immediately become vested
and be immediately exercisable in full, all restrictions and conditions of all
Restricted Stock then outstanding shall be deemed satisfied and the restriction
period to have expired, and all Performance Shares (as defined below) and
Performance Units (as defined below) shall vest, and be deemed earned in full
and properly paid. In the event of a change in control, however, the
Compensation Committee may, after notice to the Grantee, require the Grantee to
"cash out" his rights by transferring them to the Company in exchange for their
equivalent "cash value".
If an employee's employment by the Company is terminated for any reason
whatsoever other than death, disability, retirement, involuntary termination or
termination for good reason, any Incentive Award outstanding at the time and all
rights thereunder shall wholly and completely terminate, and unless otherwise
established by the Compensation Committee, no further vesting shall occur and
the Grantee shall be entitled to exercise his rights (if any) with respect to
the portion of the Incentive Award vested as of the date of termination for a
period of 30 calendar days after such termination date; provided, however, that
if an employee is terminated for cause, such employee's right to exercise his
rights (if any) with respect to the vested portion of his or her Incentive Award
shall terminate as of the date of termination of employment. In the event of
termination for death, disability, retirement, or in connection with a change in
control, an Incentive Award may be only exercised as provided in an individual's
incentive agreement, or as determined by the Compensation Committee.
OPTIONS
No Incentive Option may be granted with an exercise price per share less
than the fair market value of the Common Stock at the date of grant.
Nonqualified Options may be granted at any exercise price. The exercise price of
an Option may be paid in cash, by an equivalent method acceptable to the
Compensation Committee, or, at the Compensation Committee's discretion, by
delivery of already owned shares of Common Stock having a fair market value
equal to the exercise price, or, at the Compensation Committee's discretion, by
delivery of a combination of cash and already owned shares of Common Stock.
However, if the optionee acquired the stock to be surrendered directly or
indirectly from the Company, he must have owned the stock to be surrendered for
at least six months prior to tendering such stock for the exercise of an Option.
An eligible employee (a "Grantee") may receive more than one Incentive
Option, but the maximum aggregate fair market value of the Common Stock
(determined when the Incentive Option is granted) with respect to which
Incentive Options are exercisable by such employee in any calendar year cannot
exceed $100,000. In addition, no Incentive Option may be granted to an employee
owning directly or indirectly stock possessing more than 10% of the total
combined voting power of all classes of capital stock of the Company (a
"Ten-Percent Stockholder"), unless the exercise price is not less than 110% of
the fair market value of the shares subject to such Incentive Option on the date
of grant. Awards of Nonqualified Options are not subject to these special
limitations.
Except as otherwise provided by the Compensation Committee, awards under the
1998 Incentive Plan are not transferable other than as designated by the Grantee
by will or by the laws of descent and distribution. The expiration date of an
Incentive Option is determined by the Compensation Committee at the time of the
grant, but in no event may an Incentive Option be exercisable after the
expiration of 10
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years from the date of grant of the Incentive Option (five years in the case of
an Incentive Option granted to a Ten-Percent Stockholder).
STOCK APPRECIATION RIGHTS
SARs may be granted under the 1998 Incentive Plan in conjunction with all or
part of an Option, or separately. The exercise price of the SAR generally will
not be less than the fair market value of the Common Stock on the date of the
grant. An SAR granted in conjunction with an option will be exercisable only
when the underlying Option is exercisable and once an SAR has been exercised,
the related portion of the Option underlying the SAR will terminate. Upon the
exercise of an SAR, the Company will pay to the Grantee in cash, Common Stock,
or a combination thereof (the method of payment to be at the discretion of the
Compensation Committee), an amount equal to the excess of the fair market value
of the Common Stock on the exercise date over the exercise price, multiplied by
the number of SARs being exercised.
The Compensation Committee, either at the time of grant or at the time of
exercise of any Nonqualified Option or SAR, may provide for a supplemental
payment (a "Supplemental Payment") by the Company to the Grantee with respect to
the exercise of any Nonqualified Option or SAR, in an amount specified by the
Compensation Committee, but which shall not exceed the amount necessary to pay
the federal income tax payable with respect to both the exercise of the
Nonqualified Option and/or SAR and the receipt of the Supplemental Payment,
based on the assumption that the stockholder is taxed at the maximum effective
federal income tax rate on such amounts. The Compensation Committee shall have
the discretion to grant Supplemental Payments that are payable in cash, Common
Stock, or a combination of both, as determined by the Compensation Committee at
the time of payment.
RESTRICTED STOCK
Restricted Stock awards may be granted under the 1998 Incentive Plan, and
the provisions attendant to a grant of Restricted Stock may vary among
participants. In making an award of Restricted Stock, the Compensation Committee
will determine the periods during which the Restricted Stock is subject to
forfeiture. During the restriction period, as set forth in the grant of the
Restricted Stock, the Grantee may not sell, transfer, pledge or assign the
Restricted Stock, but will be entitled to vote the Restricted Stock.
The Compensation Committee, at the time of vesting of Restricted Stock, may
provide for a Supplemental Payment by the Company to the Grantee in an amount
specified by the Compensation Committee that shall not exceed the amount
necessary to pay the federal income tax payable with respect to both the vesting
of the Restricted Stock and receipt of the Supplemental Payment, based on the
assumption that the employee is taxed at the maximum effective federal income
tax rate on such amount.
PERFORMANCE UNITS
The Compensation Committee may grant Incentive Awards representing a
contingent right to receive cash ("Performance Units") or shares of Common Stock
("Performance Shares") at the end of a performance period. The Compensation
Committee may grant Performance Units and Performance Shares in such a manner
that more than one performance period is in progress concurrently. For each
performance period, the Compensation Committee shall establish the number of
Performance Units or Performance Shares and the contingent value of any
Performance Units or Performance Shares, which may vary depending on the degree
to which performance objectives established by the Compensation Committee are
met. The Compensation Committee may modify the performance measures and
objectives as it deems appropriate.
The basis for payment of Performance Units or Performance Shares for a given
performance period shall be the achievement of those financial and nonfinancial
performance objectives determined by the
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Compensation Committee at the beginning of the performance period. If minimum
performance is not achieved for a performance period, no payment shall be made
and all contingent rights shall cease. If minimum performance is achieved or
exceeded, the value of a Performance Unit or Performance Share shall be based on
the degree to which actual performance exceeded the pre-established minimum
performance standards, as determined by the Compensation Committee. The amount
of payment shall be determined by multiplying the number of Performance Units or
Performance Shares granted at the beginning of the performance period by the
final Performance Unit or Performance Share value. Payments shall be made, in
the discretion of the Compensation Committee, solely in cash or Common Stock, or
a combination of cash and Common Stock, following the close of the applicable
performance period.
The Compensation Committee, at the date of payment with respect to such
Performance Units or Performance Shares, may provide for a Supplemental Payment
by the Company to the Grantee in an amount specified by the Compensation
Committee, which shall not exceed the amount necessary to pay the federal income
tax payable with respect to the amount of payment made with respect to such
Performance Units or Performance Shares and receipt of the Supplemental Payment,
based on the assumption that the Grantee is taxed at the maximum effective
federal income tax rate on such amount.
SECTION 162(M) LIMITATIONS
In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), compensation expense deductions of publicly-held
corporations may be limited to the extent total compensation (including base
salary, annual bonus, stock option exercises and non-qualified benefits paid)
for certain executive officers exceeds $1.0 million in any one year. However,
under Section 162(m), the deduction limit does not apply to certain
"performance-based compensation" established by an independent compensation
committee which is adequately disclosed to, and approved by, stockholders. Under
a Section 162(m) transition rule for compensation plans of corporations which
are privately held and which become publicly held in an initial public offering,
the individual compensation plan will not be subject to Section 162(m) until the
"Transition Date" which is defined as the earliest of (i) the expiration of the
compensation plan, (ii) the material modification of the compensation plan;
(iii) the issuance of all Common Stock and other compensation that has been
allocated under the compensation plan; or (iv) the first meeting of stockholders
at which directors are to be elected that occurs after December 31, 2001. After
the Transition Date, compensation paid under the compensation plan, will not
qualify as "performance-based compensation" for purposes of Section 162(m)
unless such compensation is based upon preestablished objective performance
goals, the material terms of which are disclosed to and approved by the
stockholders of the Company.
The Company has attempted to structure its executive compensation plan and
its 1998 Incentive Plan in such a manner that, after the Transition Date,
subject to obtaining stockholder approval of the compensation, the remuneration
attributable to such plans which meet the other requirements of Code Section
162(m) will not be subject to the $1.0 million limitation. The Company has not,
however, requested a ruling from the IRS or an opinion of counsel regarding this
issue.
1998 EMPLOYEE STOCK PURCHASE PLAN
Prior to the Equity Offerings, the Board of Directors adopted the 1998
Employee Stock Purchase Plan (the "Purchase Plan") and the sole stockholder
approved such plan covering an aggregate of 200,000 shares of Common Stock. The
Company plans to register with the Securities and Exchange Commission the shares
issuable pursuant to the Purchase Plan.
The following summary of the Purchase Plan is qualified in its entirety by
reference to the complete text of the Purchase Plan, which is filed as an
exhibit to the Registration Statement of which this
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Prospectus is a part. Capitalized terms not separately defined below have the
meanings set forth in the Purchase Plan.
The primary purpose of the Purchase Plan is to attract and retain key
employees by offering such persons a greater personal interest in the Company's
business through stock ownership. The Purchase Plan is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Code. All
employees of the Company or a Subsidiary, who are employed by the Company or a
Subsidiary at least 20 hours per week and five months per year are eligible to
participate in the Purchase Plan. Under the Purchase Plan, employees eligible to
participate in the Purchase Plan. Under the Purchase Plan, employees eligible to
participate in the Purchase Plan will have the right to purchase up to the
number of shares of Common Stock purchasable with 15% of such employee's
earnings withheld pursuant to the Purchase Plan and applied, on specified dates
determined by the Compensation Committee, to the purchase of shares of Common
Stock. The purchase price per share under the Purchase Plan shall be equal to
85% of the lower of the fair market value of the Common Stock on the
commencement date of each offering period and the relevant purchase date.
DIRECTOR COMPENSATION
Directors who are officers, employees, or otherwise affiliates of the
Company do not receive compensation for their services 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has appointed Messrs. Lamm, Ayres, and Dresdale as
members of its Compensation Committee. The Chairman of the Board is an EX
OFFICIO member of the Compensation Committee. Mr. Wilson is the Chairman of the
Board and Chief Executive Officer of the Company.
Mr. Wilson is also the Chairman of the Board of Directors and Chief
Executive Officer of Windy Hill Pet Food Company, Inc. ("Windy Hill") and
managing director of Dartford. Mr. Ardrey, Vice Chairman of the Company, is also
an Executive Vice President of Windy Hill and a partner of Dartford. Pursuant to
an agreement, dated September 19, 1995 and terminated on the effective date of
the Registration Statement of which this Prospectus forms a part, Dartford
provided management oversight on financial and operational matters to the
Company with respect to Van de Kamp's, Inc. Dartford received $631,000, and
$1,800,000 for 1996 and 1997, respectively, under such agreement. Further,
pursuant to an agreement with the Company, dated December 31, 1996 and
terminated on the effective date of the Registration Statement of which this
Prospectus forms a part, Dartford provided management oversight to the Company
with respect to Aurora Foods. Dartford received $768,000 for 1997 under such
agreement.
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
the MRS. BUTTERWORTH'S business, the LOG CABIN business, and the DUNCAN HINES
business. Also, from September 1995 through July 9, 1996, the Company paid
Dartford $1,950,000 in fees for services rendered in connection with
acquisitions by the Company and related financings of VDK's acquisitions.
Pursuant to an agreement with Windy Hill, dated as of September 5, 1995, the
Company paid $198,000 in 1996 and 1997 for computer support services. Dartford
and its partners own 14.2% of Windy Hill. Also, Dartford earned $1,500,000 in
fees in connection with the Contribution Transaction.
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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 the second
anniversary of the closing of the Equity Offerings and the date that Mr. Wilson
is no longer Chairman or Chief Executive Officer of the Company. See "Certain
Relationships and Related Transactions".
Mr. Ayres is a general partner of MDC. Pursuant to an agreement, dated
December 31, 1996 and terminated on the effective date of the Registration
Statement of which this Prospectus forms a part, MDC Management Company III,
L.P., 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 received $293,000 for 1997 under such agreement. From
December 31, 1996 through January 16, 1998 the Company paid MDC $5,700,000 in
fees for services rendered in connection with the acquisitions of the MRS.
BUTTERWORTH'S business, the LOG CABIN business, and the DUNCAN HINES business.
Also, MDC earned $1,500,000 in fees in connection with the Contribution
Transaction.
Messrs. Dresdale 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 the MRS. BUTTERWORTH'S
business, the LOG CABIN business, and the DUNCAN HINES business. Also, from
September 1995 through July 9, 1996, the Company paid Fenway $1,474,000 in fees
for services rendered in connection with acquisitions by the Company and related
financings of VDK's acquisitions. Fenway earned $1,500,000 in fees in connection
with the Contribution Transaction.
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PRINCIPAL STOCKHOLDERS AND SELLING STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock (i) immediately prior to the
consummation of the Equity Offerings and (ii) as adjusted to reflect the sale of
the shares of Common Stock pursuant to the Equity Offerings 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 after the Equity Offerings, (b) each director and
executive officer of the Company, (c) all directors and executive officers of
the Company as a group, and (d) the Selling Stockholder participating in the
Equity Offerings. 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 SHARES BENEFICIALLY
OWNED PRIOR TO EQUITY OWNED AFTER EQUITY
OFFERINGS(1) NUMBER OF OFFERINGS(1)(2)
NAME AND ------------------------- SHARES -------------------------
ADDRESS OF OWNER NUMBER PERCENT OFFERED(2) NUMBER PERCENT
- ---------------------------------- ------------ ----------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Aurora/VDK LLC(3)................. 54,053,636.8 100.0% (1,553,636.8) 52,500,000.0 78.4%
VDK Foods LLC(3).................. 23,865,896.9 44.2% 23,865,896.9 35.6%
Fenway Partners Capital Fund,
L.P.(4)......................... 16,602,504.2 30.7% 16,602,504.2 24.8%
McCown De Leeuw & Co.
entities(5)(6).................. 16,358,870.0 30.3% 16,358,870.0 24.4%
California Public Employees
Retirement System(6)............ 3,747,583.2 6.9% 3,747,583.2 5.6%
Dartford Partnership L.L.C.(7).... 7,334,050.5 13.6% 7,334,050.5 10.9%
Tiger Oats Limited(8)............. 4,221,177.1 7.8% 4,221,177.1 6.3%
UBS Capital LLC(9)................ 4,221,177.1 7.8% 4,221,177.1 6.3%
OFFICERS AND DIRECTORS:
Ian R. Wilson(7).................. 7,334,050.5 13.6% 7,334,050.5 10.9%
James B. Ardrey(7)................ 7,334,050.5 13.6% 7,334,050.5 10.9%
Ray Chung(7)...................... 7,334,050.5 13.6% 7,334,050.5 10.9%
M. Laurie Cummings(7)............. 7,334,050.5 13.6% 7,334,050.5 10.9%
Thomas J. Ferraro(10)............. 492,376.4 * 492,376.4 *
Thomas O. Ellinwood(11)........... 280,875.6 * 280,875.6 *
Clive A. Apsey(8)................. 4,221,177.1 7.8% 4,221,177.1 6.3%
Charles Ayres(5).................. 16,358,870.0 30.3% 16,358,870.0 24.4%
David E. De Leeuw(5).............. 16,358,870.0 30.3% 16,358,870.0 24.4%
Charles J. Delaney(9)............. 4,221,177.1 7.8% 4,221,177.1 6.3%
Richard C. Dresdale(4)............ 16,602,504.2 30.7% 16,602,504.2 24.8%
Andrea Geisser(4)................. 16,602,504.2 30.7% 16,602,504.2 24.8%
Peter Lamm(4)..................... 16,602,504.2 30.7% 16,602,504.2 24.8%
Tyler T. Zachem(5)................ 16,358,870.0 30.3% 16,358,870.0 24.4%
All directors and executive
officers of the Company as a
group (14 persons).............. 49,511,030.9 91.6% 49,511,030.9 73.9%
</TABLE>
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* 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 immediately prior to the Equity Offerings, Aurora/VDK LLC, MBW
Investors LLC, and VDK Foods LLC were dissolved and 52,500,000 shares of
Common Stock were distributed to the members of VDK Foods LLC and MBW
Investors LLC and were valued based upon the initial public offering price
of the Common Stock. It is currently expected that VDK Foods LLC will not
dissolve until some time after the Equity Offerings and not later than the
one year anniversary thereof.
(2) In accordance with the Amended and Restated Limited Liability Company
Agreement of Aurora/ VDK LLC, the Amended and Restated Limited Liability
Company Agreement of VDK Foods LLC, and the Amended and Restated Limited
Liability Company Agreement of MBW Investors LLC, proceeds from the sale of
these shares will be used to pay a priority distribution in the aggregate
amount of
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$31,399,037, as follows: (i) Fenway -- $22,164,807, (ii) the MDC entities --
$6,264,111, (iii) California Public Employee Retirement System --
$1,861,455, (iv) Dartford -- $438,642, and (v) other members of VDK Foods
LLC and MBW Investors LLC -- $670,022 in the aggregate. In the event the
Underwriters exercise the over-allotment option, Aurora/VDK LLC will own
50,325,000, or 75.1%, of the shares outstanding.
(3) Immediately prior to the closing of the Equity Offerings, Aurora/VDK LLC
will be the sole stockholder of the Company. As soon as practicable after
such closing, Aurora/VDK LLC will be dissolved and its shares of Common
Stock will be distributed to MBW Investors LLC and VDK Foods LLC, its sole
members. MBW Investors LLC will also be dissolved soon after the dissolution
of Aurora/VDK LLC and its shares of Common Stock will be distributed to its
members including McCown De Leeuw & Co., Fenway Partners Capital Fund, L.P.,
Dartford Partnership L.L.C., CALPERS, Sunapee, and certain divisional
management. Each of these beneficial owners is party to the Securityholders
Agreement. See "--Securityholders Agreement". The address of Aurora/VDK LLC
and VDK Foods LLC is c/o Dartford Partnership L.L.C., 456 Montgomery Street,
Suite 2200, San Francisco, CA 94104.
(4) Includes 16,296,750.2, 183,452.4 and 122,301.6 shares of Common Stock owned
directly or indirectly by Fenway Partners Capital Fund, L.P. (the "Fenway
Fund"), FPIP, LLC and FPIP Trust, LLC, respectively (assuming the
liquidation of Aurora/VDK LLC, MBW Investors LLC and VDK Foods LLC). Does
not include shares of Common Stock to be directly owned by VDK Foods LLC
upon the dissolution of Aurora/VDK LLC in respect of which Fenway does not
have an economic interest and as to which Fenway disclaims beneficial
ownership. In the event the Underwriters exercise the overallotment option,
Fenway will beneficially own, directly or indirectly, 15,737,829.6, or
23.5%, of the shares of Common Stock outstanding. The Fenway Fund holds a
majority of the voting interests of VDK Foods 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 Foods LLC. FPIP, LLC and FPIP Trust, LLC are entities formed
by the investment professionals of Fenway Partners, Inc. to make
co-investments alongside the Fenway Fund. The managing member of each of
FPIP, LLC, and FPIP Trust, LLC is Fenway Partners, Inc. 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
Partners, Inc., 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.
(5) Includes 6,029,927.6 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"), 428,081.1 shares of Common Stock owned by
McCown De Leeuw & Co. III (Europe), L.P., an investment partnership whose
general partner is MDC III, 100,322.9 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"), 130,435.3 shares
of Common Stock owned by Gamma Fund LLC, a California limited liability
company, 5,709,299.9 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"), 91,875.9 shares of Common Stock owned by Delta
Fund LLC, a California limited liability company and 121,344.1 shares of
Common Stock owned by McCown De Leeuw & Co. IV Associates, L.P. In addition,
includes shares of Common Stock held by California Public Employees
Retirement System 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 California Public Employees Retirement System. In the event the
Underwriters exercise the overallotment option, the MDC entities will
beneficially own 15,506,883.2, or 23.1% of the shares of Common Stock
outstanding, including shares held by California Public Employees Retirement
System. 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
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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.
(6) Under an irrevocable proxy, California Public Employees Retirement System
has granted McCown De Leeuw & Co. III, L.P. the right to vote all of the
shares of Common Stock it holds. Includes shares of Common Stock to be
distributed upon the dissolution of MBW Investors LLC. The address of
California Public Employees Retirement System is Lincoln Plaza, 400 P
Street, Sacramento, CA 95814. In the event the Underwriters exercise the
over-allotment option, California Public Employees Retirement System will
beneficially own 3,552,405.4, or 5.3%, of the shares of Common Stock
outstanding.
(7) Includes 3,947,122.4 shares of Common Stock owned by Dartford to be
distributed upon the dissolution of MBW Investors LLC, 1,099,004.6 shares of
Common Stock held directly by VDK Foods LLC, and 2,287,921.5 shares of
Common Stock to be distributed to Dartford under the VDK Plan no later than
the first anniversary of the closing of the Equity Offerings. Also includes
152,945.6 shares of Common Stock transferred to a trust for the benefit of
certain family members of Ian R. Wilson, an aggregate of 120,136.5 shares of
Common Stock transferred to trusts for the benefit of certain family members
of Ray Chung, and 39,009.1 shares of Common Stock transferred to 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. Each of Messrs. Wilson, Ardrey, and
Chung and Ms. Cummings has no direct ownership of any shares of the
Company's Common Stock and disclaim beneficial ownership of any such shares.
Does not include shares of Common Stock to be directly owned by VDK Foods
LLC upon the dissolution of Aurora/VDK LLC in respect of which Dartford does
not have an economic interest. Dartford is a member manager of VDK Foods
LLC, together with UBS, 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.
(8) Includes 453,510.8 shares of Common Stock which will be distributed to Tiger
Oats in connection with the Equity Offerings and 3,767,666.3 shares held
directly by VDK Foods LLC. In the event the Underwriters exercise the
over-allotment option, Tiger Oats will beneficially own 4,001,334.1, or 6.0%
of the shares of Common Stock outstanding. Tiger Oats's shares are held by
Gloriande (Luxembourg) SarL, a corporation organized under the laws of
Luxembourg ("Gloriande"), which is the record owner 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 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 to be directly owned
by VDK Foods LLC upon the dissolution of Aurora/VDK LLC in respect of which
Tiger Oats does not have an economic interest. Gloriande is a member manager
of VDK Foods 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 to be distributed just prior to the dissolution of Aurora/ VDK LLC to
VDK Foods 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.
(9) Includes 453,510.8 shares of Common Stock which will be distributed to UBS
in connection with the Equity Offerings and 3,767,666.3 shares held directly
by VDK Foods LLC. In the event the Underwriters exercise the over-allotment
option, UBS will beneficially own 4,001,334.1, or 6.0%, of the shares of
Common Stock outstanding. UBS is a member manager of VDK Foods 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 to be
distributed upon the dissolution of Aurora/VDK LLC to VDK Foods 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 to
be directly owned by VDK Foods LLC upon the dissolution of Aurora/VDK 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 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.
(10) Includes 129,965.4 shares of Common Stock to be distributed to Mr. Ferraro
under the Aurora Plan. Mr. Ferraro disclaims beneficial ownership as to
129,965.4 of such shares, which were transferred to a trust for the benefit
of certain of his family members.
(11) Includes 244,847.6 shares of Common Stock to be distributed to Mr.
Ellinwood under the VDK Plan no later than the first anniversary of the
closing of the Equity Offerings. Mr. Ellinwood disclaims beneficial
ownership as to any such shares.
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The following charts illustrate the organization and ownership of the
Company immediately preceding the Equity Offerings and immediately after
consummation of the Equity Offerings. See "Principal Stockholders and Selling
Stockholders".
IMMEDIATELY PRIOR TO EQUITY OFFERINGS
The first chart illustrates the ownership of the Company immediately prior
to the Equity Offerings as follows. The Company owns all of the issued and
outstanding shares of stock of Aurora Foods Holdings Inc. and VDK Holdings,
Inc., which in turn own all of the issued and outstanding shares of stock of
Aurora Foods Inc. and Van de Kamp's, Inc., respectively. The issuer is a
wholly-owned subsidiary of Aurora/VDK LLC, the voting interests of which are
55.5% owned by MBW Investors LLC and 44.5% owned by VDK Foods LLC. The following
investors own the interests of MBW Investors LLC: MDC, Fenway, CALPERS,
Dartford, Management, and Sunapee. The following investors own the interests of
VDK Foods LLC: Fenway, Tiger Oats Ltd., UBS, Dartford, and Management.
IMMEDIATELY AFTER EQUITY OFFERINGS
The second chart illustrates the ownership of the Company immediately after
the offerings. The Company has no subsidiaries. The following investors own all
of the issued and outstanding stock of the Company: the public (through the
acquisition of shares of Common Stock issued in the Equity Offerings), MDC,
Fenway, CALPERS, Dartford, Management, Sunapee, and VDK Foods LLC (the interests
of which are owned by Fenway, Tiger Oats Ltd., UBS, Dartford, and Management).
- ------------------------
* Certain management of Aurora Foods Inc. or the Aurora Division, as the case
may be.
** Certain management of Van de Kamp's, Inc. or the VDK Division, as the case
may be.
SECURITYHOLDERS AGREEMENT
In connection with the formation of New LLC and the Contribution, New LLC,
MBW Investors LLC, VDK Foods LLC and substantially all of the members (based on
percentage interests) of MBW Investors LLC and VDK Foods LLC entered into the
Securityholders Agreement, which sets forth certain rights and obligations of
the Stockholders and New LLC and its subsidiaries, including the Company. The
following discussion summarizes the terms of the Securityholders Agreement that
the Company believes are material to holders of Common Stock. This summary is
qualified in its entirety by reference to the full text of the Securityholders
Agreement, which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
The Securityholders Agreement provides that the Board of Directors of the
Company shall initially consist of ten members, of which Fenway will designate
three (each a "Fenway Designee" and collectively, the "Fenway Designees"), MDC
will designate three (each an "MDC Designee" and collectively, the "MDC
Designees"), Dartford will designate two (each a "Dartford Designee" and
collectively, the "Dartford Designees"), UBS will designate one (the "UBS
Designee") and Tiger Oats will designate one (the "Tiger Designee"). For so long
as Ian R. Wilson is Chairman and Chief Executive Officer of the Company, Mr.
Wilson will be one of the Dartford Designees. Upon the election of an
independent director to the Board who is mutually acceptable to two of the three
of Fenway, MDC, and Dartford, the number of directors on the Board will be
increased to 11. Upon the election of a second independent director to the Board
who is mutually acceptable to two of the three of Fenway, MDC, and Dartford, the
UBS Designee will resign from the Board and thereafter UBS will not be entitled
to have any designee elected to the Board. Upon the appointment of a new Chief
Executive Officer other than Ian R. Wilson to the Board, the Tiger Designee will
resign from the Board and thereafter Tiger Oats will not be entitled to have any
designee elected to the Board.
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<PAGE>
The number of Fenway Designees or MDC Designees will (i) decrease to two if
the number of shares of Common Stock beneficially owned by Fenway or MDC, as the
case may be, is less than 50% of the total number of shares of Common Stock
beneficially owned by MDC on the closing of the Equity Offerings (excluding any
shares held under a proxy), (ii) decrease to one if the number of shares of
Common Stock beneficially owned by Fenway or MDC, as the case may be, is less
than 5% of the total number of shares of Common Stock outstanding at the closing
of the Equity Offerings, and (iii) decrease to zero if the number of shares of
Common Stock beneficially owned by Fenway or MDC, as the case may be, is equal
to zero. The number of Dartford Designees will (i) decrease to one if the number
of shares of Common Stock beneficially owned by Dartford is less than 5% of the
total number of shares of Common Stock outstanding at the closing of the Equity
Offerings and (ii) decrease to zero if the number of shares of Common Stock
beneficially owned by Dartford is equal to zero.
Until the earlier of (i) the date that is 30 months after the closing of the
Equity Offerings or (ii) with respect to either Fenway or MDC, such time as it
shall not beneficially own a number of shares of Common Stock equal to at least
50% of the shares of Common Stock beneficially owned by MDC (excluding any
shares held under a proxy) at the closing of the Equity Offerings (the "Consent
Period"), the affirmative consent of Fenway and MDC is required for the
following actions: (a) issuance by the Company or any subsidiary of additional
equity, including by way of a public offering, or the approval or adoption of
any option or equity incentive plan or any material non-equity incentive plan;
(b) merger, consolidation, recapitalization, liquidation or other reorganization
with respect to the Company or any subsidiary, or any sale of any business
representing at least 50% of the pre-transaction consolidated revenues, assets,
or EBITDA of the Company for the most recently completed four fiscal quarters;
(c) acquisition of stock or assets by the Company or a subsidiary where the
revenues, assets or EBITDA of the business to be acquired represents more than
50% of the pre-transaction consolidated revenues, assets or EBITDA of the
Company for the most recently completed four fiscal quarters; and (d) removal or
termination of Ian R. Wilson as Chief Executive Officer or the hiring or
termination of any subsequent Chief Executive Officer.
The Securityholders Agreement prohibits the Stockholders from transferring
their shares of Common Stock prior to the second anniversary of the Equity
Offerings without the consent of MDC and Fenway except transfers (i) to
permitted transferees (including certain family members, affiliates and in the
case of a partnership or limited liability company, to their respective partners
in such partnership or members of such limited liability company), (ii) pursuant
to the demand and piggyback registration rights described below and (iii) by
UBS, CALPERS, Tiger Oats, and Sunapee pursuant to Rule 144 after the first
anniversary of the closing of the Equity Offerings. After the second anniversary
of the closing of the Equity Offerings, each Stockholder has the right to sell
its shares of Common Stock privately or under Rule 144 to the extent permitted
by applicable law but subject to certain lock-up periods relating to any
underwritten equity offerings by the Company.
The Securityholders Agreement provides for the following demand registration
rights ("Demand Rights"): (a) prior to the second anniversary of the closing of
the Equity Offerings, MDC and Fenway, acting together, will have demand
registration rights with respect to their Registrable Securities (as defined
below) in the Company; (b) from and after the second anniversary of the closing
of the Equity Offerings, MDC, Fenway and Dartford will each have four demand
registration rights with respect to their Registrable Securities in the Company;
(c) after the resignation or removal of the UBS Designee from the Board of the
Company and prior to the second anniversary of the closing of the Equity
Offerings, each of UBS and CALPERS will have one individual right to request a
demand registration with respect to its Registrable Securities in the Company;
(d) after the resignation or removal of the Tiger Designee from the Board of the
Company and prior to the second anniversary of the closing of the Equity
Offerings, Tiger Oats will have one individual right to request a demand
registration with respect to its Registrable Securities in the Company; and (e)
from and after the second anniversary of the closing of the Equity Offerings,
each of UBS and CALPERS will have individual rights to request a demand
registration (two for UBS and one for CALPERS) with respect to their Registrable
Securities in the Company. The
82
<PAGE>
Company shall not be required to effect more than two demand registrations on
behalf of Stockholders prior to the second anniversary of the closing of the
Equity Offerings without the approval of the Board. The Company's obligations to
effect a registration will include an obligation to use its best efforts to
cause such shares to be so registered, subject to the following: (i) no demand
registration may be required unless the gross proceeds of the offering to which
such registration statement applies are reasonably expected to exceed $25
million, (ii) no registration may be required within 180 days immediately
following the effective date of a registration statement for an underwritten
public offering of securities of the Company (other than a registration on Form
S-4 pursuant to Rule 145 or related solely to employee benefit plans), and (iii)
the Board can postpone a demand registration for not more than 120 days if, in
the good faith judgment of the Board, the registration would be detrimental to
the Company or its stockholders. There can only be one such postponement with
respect to any demanding Stockholder in any nine-month period. The Company's
obligations to effect demand registrations terminates on the date ten years
after the closing of the Equity Offerings.
Pursuant to the Securityholders Agreement, upon certain proposed
registrations of equity securities by the Company for sale to the public
(whether for the account of the Company or any Stockholder, and including
without limitation upon the exercise of a demand registration right), parties to
the Securityholders Agreement who hold Registrable Securities will have the
right to cause the Company to use its reasonable efforts to include in such
registration statement all Registrable Securities which they request the Company
to include ("Piggyback Rights"). No Stockholder will have Piggyback Rights on a
registration of equity securities by the Company relating to the acquisition or
merger by the Company or its Subsidiaries of or with any other business or
solely relating to employee benefit plans or in the Equity Offerings.
"Registrable Securities" that a Stockholder may elect to include in a
registration by exercise of Demand Rights or Piggyback Rights are any shares of
Common Stock in the Company that have been received as a result of holding an
interest in MBW Investors LLC or VDK Foods LLC (except that, with respect to
shares of Common Stock held by stockholders who are employees of the Company
other than Messrs. Wilson, Chung, and Ardrey and Ms. Cummings, Registrable
Securities are any shares of Common Stock received as a result of holding an
interest in MBW Investors LLC or VDK Foods LLC held by such stockholders so long
as they remain employees of the Company) and that are not then eligible to be
sold without restriction pursuant to Rule 144(k), provided that the limitation
regarding Rule 144(k) shall not be applicable to holdings of more than 2% of the
outstanding Common Stock of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 Van de Kamp's, Inc. Dartford received $631,000, and
$1,800,000 for 1996 and 1997, 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
Aurora Foods. Dartford received $768,000 for 1997 under such agreement.
Pursuant to an agreement, dated December 31, 1996 and terminated on the
closing of the Equity Offerings, MDC Management Company III, L.P., 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 received $293,000 for 1997, 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 business, the LOG CABIN
83
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business, and the DUNCAN HINES business: $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 of the Aurora
Division) and $75,000 to Mr. Willett (Executive Vice President of the Aurora
Division); $5,700,000 to MDC, whose general partners and principal include
Messrs. De Leeuw, Ayres and Zachem (all directors of the Company); and
$1,500,000 was paid to Fenway, whose partners include Messrs. Lamm, Dresdale,
and Geisser (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 MRS. BUTTERWORTH'S,
LOG CABIN and, DUNCAN HINES, 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 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, Inc., MRS. PAUL'S, and the Quaker Oats frozen business, respectively.
Pursuant to an agreement with Windy Hill, dated as of September 5, 1995, the
Company paid $198,000 in 1996 and 1997 for computer support services. Dartford
(of which Mr. Wilson is the managing partner) and its partners own 14.2% of
Windy Hill. Mr. Wilson is the Chairman of the Board and Chief Executive Officer
of the Company and Windy Hill.
Each of Fenway, MDC, 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 Transaction.
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 the second
anniversary of the closing of the Equity Offerings and the date that Mr. Wilson
is no longer Chief Executive Officer of the Company.
The Company and the Stockholders have entered into the Securityholders
Agreement which provides for certain rights, including registration rights of
the Stockholders. See "Principal Stockholders and Selling
Stockholder--Securityholders Agreement".
On September 19, 1995, Mr. Thomas O. Ellinwood, the President of the VDK
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 Foods LLC. The promissory note
matures September 30, 1998 with required annual payments. Interest is due and
payable quarterly at the rate of 8.5% per annum. The balance outstanding of his
promissory note as of fiscal year end June 30, 1996 was $125,000, $83,333 as of
June 30, 1997, and $41,666 as of March 31, 1998.
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On December 31, 1996 and January 16, 1998, Mr. Thomas J. Ferraro, the
President of the Aurora 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 Investors 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 balance
outstanding on his promissory note as of fiscal year end December 27, 1997 was
$40,000 and as of March 31, 1998 was $171,000.
Pursuant to the Aurora Plan, Dartford, Thomas J. Ferraro, and C. Gary
Willett are entitled to receive 2,725,406.0, 433,218.1, and 270,761.3 shares of
Common Stock effective on the closing of the Equity Offerings. See
"Management--Aurora Incentive Plan".
Pursuant to the VDK Plans, Dartford, Thomas O. Ellinwood, and Anthony A.
Bevilacqua are entitled to receive 2,287,921.5, 244,847.6, and 92,048.0 shares
of Common Stock, respectively, no later than the first anniversary of the
closing of the Equity Offerings. See "Management--VDK Incentive Plan".
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Certificate of Incorporation and By-Laws is a summary and is
qualified in its entirety by the provisions of the Certificate of Incorporation
and By-Laws, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
Upon completion of the Equity Offerings, the authorized capital stock of the
Company will consist of (i) 250,000,000 shares of Common Stock, par value $0.01
per share, of which 67,000,000 shares will be outstanding, and (ii) 25,000,000
shares of Preferred Stock, par value $0.01 per share, of which no shares will be
outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters to
be voted on by the stockholders of the Company and do not have cumulative voting
rights and the rights of holders of Common Stock are identical in all respects.
Pursuant to the Securityholders Agreement, the affirmative consent of Fenway and
MDC is required for certain actions by the Company which could otherwise be
approved by a majority of the directors including acquisitions of a certain size
by the Company and the removal or termination of Ian R. Wilson as Chief
Executive Officer of the Company or of his successor. In addition, Fenway, MDC,
Dartford, UBS, and Tiger Oats and the Company have agreed to elect a certain
number of directors designated by each of them, including the initial Board of
Directors, subject to certain conditions. See "Principal Stockholders and
Selling Stockholder--Securityholders Agreement" and "Certain Relationships and
Related Transactions".
Subject to preferences that may be applicable to any Preferred Stock
outstanding at the time, holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared, from time to time by the Board of
Directors out of funds legally available therefor. In the event of liquidation,
dissolution, or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of the Company's
liabilities and the liquidation preference, if any, of any outstanding Preferred
Stock. Holders of shares of Common Stock have no preemptive, subscription,
redemption, or conversion rights. There are no redemption or sinking fund
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are, and the shares offered by the Company and the Selling
Stockholder in the Equity Offerings will be, when issued and paid for as
provided herein, validly issued, fully paid and non-assessable. The rights,
preferences, and privileges of holders of Common Stock are subject to, and may
be adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
At present, there is no established trading market for the Common Stock. The
Common Stock has been approved for listing, subject to notice of issuance, on
the New York Stock Exchange, and application has been made to list the Common
Stock on the Pacific Exchange, under the symbol "AOR".
PREFERRED STOCK
The Board of Directors is authorized to issue from time to time shares of
Preferred Stock in one or more series, and to fix the rights, designations,
powers, preferences, qualifications, limitations and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series, all without stockholder approval. The ability
of the Board of Directors to issue Preferred Stock could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring or making a proposal to acquire, the Company or the
majority of the outstanding stock of the Company. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
holders of Preferred Stock that may be issued in the future. See "Risk Factors--
Preferred Stock".
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SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company has elected in the Certificate of Incorporation to not be
subject to the provisions of section 203 ("Section 203") of the Delaware General
Corporation Law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder. An "interested stockholder" is a person
who, together with affiliates and associates, owns (or, in certain cases, within
three years prior, did own) 15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
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DESCRIPTION OF INDEBTEDNESS
SENIOR CREDIT FACILITIES
The description set forth below is qualified in its entirety by reference to
certain agreements setting forth the principal terms and conditions of the
Company's Senior Credit Facilities, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. Capitalized terms
used herein and not otherwise defined have the meanings set forth in the Senior
Credit Facilities.
Just prior to the Equity Offerings, the Company entered into a Credit
Agreement with The Chase Manhattan Bank ("Chase") and various lenders providing
for senior secured credit facilities. In connection with such financing, Chase
acts as Administrative Agent, Chase Securities Inc. acted as Arranging Agent,
National Westminster Bank PLC acts as Syndication Agent and Swiss Bank
Corporation acts as Documentation Agent. The Senior Credit Facilities provide as
follows:
The Senior Credit Facilities consist of (i) a senior secured Term Facility
in a principal amount of $225.0 million and (ii) a senior secured Revolving
Facility providing for revolving loans to the Company and the issuance of
letters of credit for the account of the Company, in an aggregate principal and
stated amount at any time not to exceed $175.0 million.
Loans and letters of credit under the Revolving Facility will be available
at any time through the final maturity date on June 30, 2005. The Term Facility
will have a final maturity date of June 30, 2005, and will amortize in quarterly
payments of $5.0 million per quarter beginning December 31, 1998 through June
30, 2000, increasing thereafter to $7.5 million per quarter through June 30,
2002, increasing thereafter to $10.0 million per quarter through June 30, 2004,
increasing to $12.5 million per quarter thereafter until the final maturity
date.
The Company is required to make mandatory prepayments on the Senior Credit
Facilities under certain circumstances, including upon certain asset sales,
issuance of debt securities or issuance of equity securities to persons. The
Company will also be required under certain circumstances to make prepayments on
the Senior Credit Facilities and permanently reduce commitments under the
Revolving Facility in an amount equal to a specified percentage of the Company's
annual trailing Consolidated Excess Cash Flow commencing with the fiscal year
ending in December 31, 1998 and thereafter and upon receipt of cash proceeds
from property and casualty insurance or condemnation awards. At the Company's
option, subject to certain requirements, loans may be prepaid, and revolving
credit commitments or letters of credit may be permanently reduced, in whole or
in part at any time without premium or penalty.
At the Company's option the interest rate per annum applicable to loans
under the Senior Credit Facilities will be either the rate (grossed-up for
maximum statutory reserve requirements for eurocurrency liabilities) at which
eurodollar deposits for one, two, three or six months (as selected by the
Company) are offered to Chase in the interbank eurodollar market in the
approximate amount of Chase's share of the relevant Loan (the "Adjusted
Eurodollar Rate") plus a margin ranging from 2.25% to 0.875% (the "Applicable
Eurodollar Rate Margin") or the Base Rate plus a margin ranging from 1.25% to
0.00%. The margin is based upon the Company's ratio of consolidated total debt
to consolidated EBITDA. The Base Rate is the higher of (i) the rate of interest
publicly announced by Chase as its prime rate in effect at its principal office
in New York City, (ii) the federal funds effective rate plus 0.50% and (iii) the
secondary market rate for certificates of deposit (grossed up for maximum
statutory reserve requirements) plus 1.00%.
The Company pays a per annum fee ranging from 0.50% to 0.30% on the undrawn
portion of the commitments in respect of the Revolving Facility and a per annum
fee on the face amount of all outstanding letters of credit equal to the
Applicable Eurodollar Rate Margin then in effect with respect to loans under the
Revolving Facility bearing interest based upon the Eurodollar Rate. The per
annum fee is also based upon the Company's ratio of consolidated total debt to
consolidated EBITDA.
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The Senior Credit Facilities contain a number of significant covenants that,
among other things, restrict the ability of the Company to dispose of assets,
incur additional indebtedness, repay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, enter into leases,
guarantees, investments or acquisitions, engage in mergers or consolidations,
make capital expenditures, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. In addition, under
the Senior Credit Facilities, the Company is required to comply with specified
ratios and tests, including minimum interest coverage, minimum fixed charge
coverage and maximum leverage ratios and a limitation on capital expenditures.
An event of default under the Senior Credit Facilities will occur (i) if the
Company fails to make payments under the Senior Credit Facilities or, in certain
circumstances, under other outstanding indebtedness; (ii) if the Company
breaches the financial covenants contained in the Senior Credit Facilities;
(iii) if the Company breaches the warranties contained in the Senior Credit
Facilities; (iv) in the event of the bankruptcy, insolvency or reorganization of
the Company; (v) if any judgment or attachment involving, in an individual case
an amount in excess of $1,000,000 or, in the aggregate in excess of $2,000,000,
shall be entered against the Company and shall remain undischarged on unstayed
for a period of 60 days; (vi) if any judgment or decree of dissolution is
entered against the Company; (vii) if there occurs certain specified ERISA
events; (viii) if the Company undergoes a "change in control" as described
below; (ix) if the Company breaches certain transitional agreements; (x) if
there is a failure to comply with the subordination provisions contained in the
Senior Credit Facilities; or (xi) under certain other circumstances customary
for a transaction of this type. An Event of Default under the VDK Indenture and
the Aurora Indentures will occur if any of the above occur and an amount in
excess of $5.0 million is accelerated under the terms of the Senior Credit
Facilities and such default is not cured or rescinded within a 10 day period. An
Event of Default under the New Indenture will occur if any of the above occur
and an amount in excess of $10.0 million is accelerated under the terms of the
Senior Credit Facilities and such default is not rescinded within a 10 day
period. As noted above, an event of default under the Senior Credit Facilities
will occur if there is a change in control in the Company.
A change in control will be deemed to have occured if (a) MDC and certain of
its affiliates ("the MDC Entities"), Dartford and Fenway together shall own,
directly or indirectly, in the aggregate, a lesser percentage of the combined
voting power of the Company's voting securities than any other holder, including
a "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act") which includes such holder, of such
voting securities; (b) a majority of the members of the board of directors of
the Company shall not have been directors as of the Closing Date or nominated
for election or elected to the board of directors with the affirmative vote of
the MDC Entities and/or Dartford and/or Fenway; 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 the 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 35% of the combined voting power of the Company's voting securities.
The Senior Credit Facilities also contain provisions that prohibit any
modification of the Indentures in any manner adverse to the banks, financial
institutions and other entities under the Senior Credit Facilities and that
limit the Company's ability to refinance the New Notes or the Aurora Notes
without the consent of such Lenders.
SENIOR SUBORDINATED NOTES
The description set forth below does not purport to be complete and is
qualified in its entirety by reference to certain agreements setting forth the
principal terms and conditions of the New Notes, VDK Notes, Aurora Series B
Notes, and the Aurora Series D Notes.
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THE NEW NOTES
Concurrently with the closing of the Equity Offerings, the Company expects
to issue its Series E Senior Subordinated Notes due 2008 (the "New Notes") under
an Indenture (the "New Indenture") between the Company and Wilmington Trust
Company, as Trustee (the "Trustee"). The terms and conditions of the New Notes
include those to be stated in the New Indenture and those made part of the New
Indenture by reference to the Trust Indenture Act of 1939, as in effect on the
date of the New Indenture. The New Indenture is expected to contain a number of
significant negative covenants. Under the New Indenture, the negative covenants
will (i) limit the amount of indebtedness the Company may incur; (ii) limit the
Company's ability to make certain payments; (iii) restrict distributions from
the Company's subsidiaries; (iv) place limitations on sales of assets by the
Company and its subsidiaries; (v) limit transactions with affiliates of the
Company; (vi) limit the sale of the capital stock of the Company's subsidiaries;
(vii) limit the lines of businesses the Company may engage in; and (viii) limit
the Company's ability to merge or consolidate or transfer all or substantially
all of the assets of the Company.
The New Notes will be unsecured senior subordinated obligations of the
Company, limited to $200.0 million aggregate principal amount, and will mature
in 2008.
THE VDK NOTES
The VDK Notes were issued under an Indenture, dated as of September 15, 1995
(the "VDK Indenture"), between the Company and Harris Trust and Savings Bank, as
Trustee (the "VDK Trustee"). The terms and conditions of the VDK Notes include
those stated in the VDK Indenture and those made part of the VDK Indenture by
reference to the Trust Indenture Act of 1939. Capitalized terms used in this
"The VDK Notes" section and not otherwise defined have the meanings set forth in
the VDK Indenture.
The VDK Notes are unsecured senior subordinated obligations of the Company,
limited to $100.0 million aggregate principal amount, and will mature on
September 15, 2005. Each VDK Note bears interest at the rate of 12% per annum,
payable semiannually on March 15 and September 15 of each year which commenced
March 15, 1996 to holders of record at the close of business on the February 28
or August 31 immediately preceding the interest payment date.
OPTIONAL REDEMPTION. Except as set forth below, the VDK Notes are not
redeemable at the option of the Company prior to September 15, 2000. On and
after such date, the VDK Notes will be redeemable, at the Company's option, in
whole or in part, at any time upon not less than 30 nor more than 60 days prior
notice mailed by first-class mail to the registered address of each holder of
the VDK Notes to be redeemed, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
If redeemed during the 12 month period commencing on September 15 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ---------------------------------------- ---------------------
<S> <C>
2000.................................... 106%
2001.................................... 104%
2002.................................... 102%
2003 and thereafter..................... 100%
</TABLE>
In addition, at any time and from time to time prior to September 15, 1998,
the Company may redeem up to $35.0 million of the aggregate principal amount of
the VDK Notes with the proceeds of one or more Public Equity Offerings following
which there is a Public Market at the time of such redemption, at a redemption
price (expressed as a percentage of principal amount) of 110%, plus accrued and
unpaid interest, if any, to the redemption date (subject to the right of holders
of record on the relevant
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record date to receive interest due on the relevant interest payment date);
PROVIDED, HOWEVER, that at least $65.0 million of the aggregate principal amount
of the VDK Notes remain outstanding after each such redemption. The Equity
Offerings constitute a Public Equity Offering under the VDK Indenture and the
Company plans to redeem $35.0 million of principal of the VDK Notes pursuant to
the Optional Redemption provisions of the VDK Indenture.
At any time on or prior to September 15, 2000, the VDK Notes may also be
redeemed as a whole at the option of the Company upon the occurrence of a Change
of Control upon not less than 30 days or no more than 60 days prior notice (but
in no event more than 90 days after the occurence of such Change of Control)
mailed by first-class mail to each holder's registered address, at a redemption
price equal to 100% of the principal amount thereof plus the Applicable Premium
as of, and accrued and unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
RANKING. The payment of the principal of, premium (if any), and interest
on, the VDK Notes is subordinated in right of payment, as set forth in the VDK
Indenture, to the payment when due of all Senior Indebtedness of the Company. As
of March 31, 1998 on a pro forma adjusted basis, the outstanding senior
indebtedness of the Company would have been $300.0 million (exclusive of unused
commitment). Although the VDK Indenture contains limitations on the amount of
additional Indebtedness that the Company may Incur, under certain circumstances
the amount of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness.
Only Indebtedness of the Company that is Senior Indebtedness ranks senior to
the VDK Notes in accordance with the provisions of the VDK Indenture. The VDK
Notes in all respects rank PARI PASSU with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness that is subordinate or
junior in ranking in any respect to Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness.
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each holder
of the VDK Notes will have the right to require the Company to repurchase all or
any part of such holder's VDK Notes at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
CERTAIN COVENANTS. The VDK Indenture imposes certain affirmative covenants
and other requirements on the Company, including mandatory reporting of
financial and other information to the VDK Trustee.
The VDK Indenture also contains certain negative covenants that include,
among other things: (i) limitations on the amount of Indebtedness the Company
and its Subsidiaries may Incur, (ii) limitations on certain payments the Company
and its Subsidiaries may make, (iii) limitations on restrictions on
distributions from Subsidiaries, (iv) limitations on sales of assets by the
Company and its Subsidiaries, (v) limitations on Affiliate Transactions, (vi)
limitations on the sale of Subsidiary Capital Stock, (vii) limitations on the
lines of business the Company may engage in, and (vii) limitations on the
Company's ability to merge or consolidate or transfer all or substantially all
of the assets of the Company.
EVENT OF DEFAULTS. An event of default under the VDK Indenture includes
among other things, (i) a default in any payment of interest on any VDK Note
when due, continued for 30 days, (ii) a default in the payment of principal of
any VDK Note when due at its Stated Maturity, upon optional redemption, upon
required repurchase, upon declaration or otherwise, (iii) the failure by the
Company to comply with its obligations with respect to merger, consolidations,
and transfers of all or substantially all of the assets of the Company under
"--Certain Covenants" above, (iv) the failure by the Company to comply for 30
days after notice with any of its obligations under the change of control
provisions contained in the VDK Indenture or under covenants described under
"Certain Covenants" above (in each case, other than a
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failure to purchase VDK Notes which shall constitute an event of default under
clause (ii) above), (v) the failure by the Company to comply for 60 days after
notice with its other agreements contained in the VDK Indenture, (vi)
Indebtedness of the Company or any Subsidiary is not paid within any applicable
grace period after final maturity or is accelerated by the holders thereof
because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $5 million and such default shall not have been cured or
such acceleration rescinded within a 10-day period, (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or a subsidiary, (viii)
any judgment or decree for the payment of money in excess of $5 million (to the
extent not covered by insurance) is rendered against the Company or a Subsidiary
and such judgment or decree shall remain undischarged or unstayed for a period
of 60 days after such judgment becomes final and nonappealable, or (ix) the
failure of any Security Guarantee to be in full force and effect (except as
contemplated by the terms thereof) or the denial or disaffirmation by any
Security Guarantor of its obligations under the VDK Indenture or any Security
Guarantee if such default continues for 10 days. However, a default under
clauses (iv) and (v) will not constitute an Event of Default until the VDK
Trustee or the holders of at least 25% in principal amount of the outstanding
VDK Notes notify the Company of the default and the Company does not cure such
default within the time specified in clauses (iv) and (v) hereof after receipt
of such notice.
If an Event of Default occurs and is continuing, the VDK Trustee or the
holders of at least 25% in principal amount of the outstanding VDK Notes by
notice to the Company may declare the principal of and accrued and unpaid
interest on all the VDK Notes to be due and payable. Upon such a declaration,
such principal and accrued and unpaid interest shall be due and payable
immediately. If an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of the Company occurs and is continuing, the
principal of and accrued and unpaid interest on all the VDK Notes will become
and be immediately due and payable without any declaration or other act on the
part of the VDK Trustee or any holders. Under certain circumstances, the holders
of a majority in principal amount of the outstanding VDK Notes may rescind any
such acceleration with respect to the VDK Notes and its consequences.
THE AURORA NOTES
In addition to the VDK Notes the Company has outstanding: (i) the 9 7/8%
Series B Senior Subordinated Notes due 2007 (the "Aurora Series B Notes") issued
under an Indenture, dated as of February 10, 1997 (the "Series B Indenture")
between the Company and Wilmington Trust Company, as Trustee (the "Trustee"), in
connection with the MRS. BUTTERWORTH'S acquisition and (ii) the 9 7/8% Series D
Senior Subordinated Notes due 2007 (the "Aurora Series D Notes", together with
the Aurora Series B Notes, the "Aurora Notes") issued under an Indenture dated
as of July 1, 1997 (the "Series D Indenture", together with the Series B
Indenture, the "Aurora Indentures") between the Company and the Trustee in
connection with the LOG CABIN acquisition. The terms and conditions of the
Aurora Notes include those stated in each of the Aurora Indentures and those
made part of the Aurora Indentures by reference to the Trust Indenture Act of
1939 as in effect on the date of each of the Aurora Indentures. Capitalized
terms used in this "The Aurora Notes" section and not otherwise defined have the
meanings set forth in the Aurora Indentures.
The Aurora Notes are unsecured senior subordinated obligations of the
Company, limited to $200.0 million aggregate principal amount, and will mature
on February 15, 2007. Each Note bears interest at the rate of 9 7/8% per annum
from the date of issuance, or from the most recent date to which interest has
been paid or provided for, payable semi-annually on February 15 and August 15 of
each year which commenced February 15, 1998 to holders of record at the close of
business on the February 1 or August 1 immediately preceding the interest
payment date.
OPTIONAL REDEMPTION. Except as set forth below, the Aurora Notes are not
redeemable at the option of the Company prior to February 15, 2002. On and after
such date, the Aurora Notes will be redeemable, at the Company's option, in
whole or in part, at any time upon not less than 30 nor more than 60 days prior
notice mailed by first-class mail to the registered address of each holder of
Aurora Notes to be redeemed, at the following redemption prices (expressed in
percentages of principal
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amount), plus accrued and unpaid interest to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date):
If redeemed during the 12-month period commencing on February 15 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ---------------------------------------- ------------------
<S> <C>
2002.................................... 104.9375%
2003.................................... 103.2917%
2004.................................... 101.6458%
2005 and thereafter..................... 100.0000%
</TABLE>
In addition, at any time and from time to time prior to February 15, 2000,
the Company may redeem up to $35.0 million of the aggregate principal amount of
the Aurora Series B Notes and up to $35.0 million of the aggregate principal
amount of the Aurora Series D Notes with the cash proceeds of one or more Equity
Offerings received by, or invested in, the Company at a redemption price
(expressed as a percentage of principal amount) of 109.875%, plus accrued and
unpaid interest, if any, to the redemption date (subject to the right of holders
of record on the relevant record date to receive interest due on the relevant
interest payment date); PROVIDED, HOWEVER, that at least $65.0 million of the
aggregate principal amount of each of the Aurora Series B Notes and Aurora
Series D Notes remain outstanding after each such redemption.
At any time on or prior to February 15, 2002, each of the Aurora Series B
Notes and Aurora Series D Notes may also be redeemed as a whole at the option of
the Company upon the occurrence of a Change of Control upon not less than 30
days or no more than 60 days prior notice (but in no event more than 90 days
after the occurance of such Change of Control) mailed by first-class mail to
each holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the date of redemption (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date).
RANKING. The payment of Indebtedness evidenced by, and all other
obligations in respect of, the Aurora Notes is subordinated in right of payment,
as set forth in the Aurora Indentures, to the prior payment in full in cash or
Cash Equivalents when due of all Senior Indebtedness of the Company. The Aurora
Indentures provide that in the event of an Asset Disposition by the Company, the
proceeds of the Asset Disposition will be applied to repurchase the Aurora
Series B Notes prior to any repurchase of the Aurora Series D Notes. Although
the Aurora Indentures contain limitations on the amount of additional
Indebtedness that the Company may incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be Senior Indebtedness.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Aurora Notes in accordance with the provisions of the Aurora
Indentures. The Aurora Notes will in all respects rank PARI PASSU with all other
Senior Subordinated Indebtedness of the Company. The Company has agreed in the
Aurora Indentures that it will not Incur, directly or indirectly, any
indebtedness, that is subordinate or junior in ranking in any respect to Senior
Indebtedness, unless such Indebtedness is Senior Subordinated Indebtedness, or
is expressly subordinated in right of payment to Senior Subordinated
Indebtedness.
CHANGE OF CONTROL. Upon the occurrence of a Change of Control each holder
of the Aurora Notes will have the right to require the Company to repurchase all
or any part of such holder's Aurora Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if
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<PAGE>
any, to the date of purchase (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).
CERTAIN COVENANTS. The Aurora Indentures impose certain affirmative
covenants and other requirements on the Company, including the reporting of
financial and other information to the Trustee.
The Aurora Indentures also contain certain negative covenants that include,
among others things: (i) limitations on the amount of Indebtedness the Company
and its Subsidiaries may incur, (ii) limitations on certain payments the Company
and its Subsidiaries may make, (iii) limitations on restrictions on
distributions from Subsidiaries, (iv) limitations on sales of assets by the
Company and its Subsidiaries, (v) limitations on Affiliate Transactions, (vi)
limitations on the sale of Subsidiary Capital Stock, (vii) limitations on the
lines of business the Company and its Subsidiaries may engage in, and (viii)
limitations on the Company's ability to merge or consolidate or transfer all or
substantially all of the assets of the Company.
EVENTS OF DEFAULT. An Event of Default under the Aurora Indentures includes
among other things (i) a default in any payment of interest on any Note when
due, continued for 30 days, (ii) a default in the payment of principal of any
Note when due at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise, (iii) the failure by the Company to
comply with its obligations with respect to mergers, consolidations, and
transfers of all or substantially all of the assets of the Company under
"--Certain Covenants" above, (iv) the failure by the Company to comply for 30
days after notice with any of its obligations under the Change of Control
provisions contained in the Aurora Indentures or under covenants described under
"Certain Covenants" above (in each case, other than a failure to purchase Aurora
Notes which shall constitute an Event of Default under clause (ii) above), (v)
the failure by the Company to comply for 60 days after notice with its other
agreements contained in the Aurora Indentures, (vi) Indebtedness of the Company
or any Subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and the
total amount of such Indebtedness unpaid or accelerated exceeds $5 million and
such default shall not have been cured or such acceleration rescinded within a
10-day period, (vii) certain events of bankruptcy, insolvency or reorganization
of the Company or a Significant Subsidiary, (viii) any judgment or decree for
the payment of money in excess of $5 million (to the extent not covered by
insurance) is rendered against the Company or a Significant Subsidiary and such
judgment or decree shall remain undischarged or unstayed for a period of 60 days
after such judgment becomes final and non-appealable, or (ix) the failure of any
Security Guarantee to be in full force and effect (except as contemplated by the
terms thereof) or the denial or disaffirmation by any Security Guarantor of its
obligations under the Aurora Indentures or any Security Guarantee if such
default continues for 10 days. However, a default under clauses (iv) and (v)
will not constitute an Event of Default under the Series B Indenture or the
Series D Indenture until the Trustee or the holders of at least 25% in principal
amount of the outstanding Aurora Series B Notes or Aurora Series D Notes, as the
case may be, notify the Company of the default and the Company does not cure
such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Aurora Series B Notes or
Aurora Series D Notes, as the case may be, may declare by notice to the Company
the principal of and accrued and unpaid interest on all the Aurora Series B
Notes or Aurora Series D Notes, as the case may be, to be due and payable. Upon
such a declaration, such principal and accrued and unpaid interest shall be due
and payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and accrued and unpaid interest on all the Aurora
Notes will become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holders. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Aurora Series B Notes or Aurora Series D Notes, as the case may be, may rescind
any such acceleration with respect to the Aurora Notes and its consequences.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Equity Offerings, there has been no market for the Common
Stock. The sale, or availability for sale of substantial amounts of Common Stock
in the public market subsequent to the Equity Offering could adversely affect
the prevailing market price of the shares of Common stock and could impair the
Company's ability to raise additional capital through the sale of equity
securities.
Upon completion of the Equity Offerings, the Company will have 67,000,000
shares of Common Stock outstanding. Of these shares, the 14,500,000 shares sold
in the Equity Offerings will be freely tradable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" of the Company, as that term is defined under the Securities Act
("Affiliates"), may generally only be sold in compliance with the limitations of
Rule 144 described below.
The remaining 52,500,000 shares of Common Stock are deemed "restricted
securities" under Rule 144. The number of shares of Common Stock available for
sale in the public market is limited by restrictions under the Securities Act
and lock-up agreements under which the holder of such shares has agreed not to
sell or otherwise dispose of any of their shares for a period of 180 days after
the closing date of the Equity Offerings (the "Lock-up Period") without the
prior written consent of the representatives of the Underwriters. Because of
these restrictions, on the date of this Prospectus, no shares other than those
offered hereby will be eligible for sale. Upon expiration of the Lock-up Period,
all of the Restricted Shares will become available for sale in the public
market, subject to Rule 144 and Rule 701 of the Securities Act.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after the Equity Offerings, a person (or persons whose shares
are aggregated who has beneficially owned "restricted" shares for at least one
year, including a person who may be deemed an affiliate of the Company, is
entitled to sell within any three-month period a number of shares of Common
Stock that does not exceed the greater of 1% of the then-outstanding shares of
Common Stock (670,000 shares after giving effect to the Equity Offerings) or the
average weekly trading volume of the Common Stock as reported through the New
York Stock Exchange during the four calendar weeks preceding such sale. Sales
under Rule 144 of the Securities Act are subject to certain restrictions
relating to manner of sale, notice, and the availability of current public
information about the Company.
Rule 701 under the Securities Act provides that shares of Common Stock
acquired on the exercise of outstanding options may be resold by persons other
than affiliates beginning 90 days after the date of this Prospectus, subject
only to manner of sale provisions of Rule 144, and by affiliates, beginning 90
days after the date of this Prospectus, subject to all provisions of Rule 144
except its minimum holding period. The Company intends to register on a
registration statement on Form S-8 shortly after the date of this Prospectus, a
total of 3,500,000 shares of Common Stock reserved for issuance under the 1998
Incentive Plan and 200,000 shares of Common Stock reserved for issuance under
the 1998 Employee Stock Purchase Plan. See "Management--1998 Long-Term Incentive
Plan" and "--1998 Employee Stock Purchase Plan".
95
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
The material federal income tax consequences to Non-U.S. Holders expected to
result from the purchase, ownership and sale or other taxable disposition of the
Common Stock, under currently applicable law, are summarized below. A "Non-U.S.
Holder" is a person or entity purchasing Common Stock in the offering that, for
U.S. federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign estate or trust or a foreign partnership as such terms
are defined in the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based upon the current provisions of the Code, applicable
Treasury Regulations and judicial and administrative decisions and rulings.
There can be no assurance that the Internal Revenue Service (the "IRS") will not
take a contrary view, and no ruling from the IRS has been or will be sought.
Future legislative, judicial or administrative changes or interpretations could
alter or modify the statements set forth herein, and any such changes or
interpretations could be retroactive and could affect the tax consequences to
Non-U.S. Holders.
The following summary is for general information only and does not purport
to deal with all aspects of federal income taxation that may affect particular
Non-U.S. Holders in light of their individual circumstances and is not intended
for (a) stockholders other than Non-U.S. Holders, (b) Non-U.S. Holders who will
not hold the Common Stock as capital assets or (c) Non-U.S. Holders who are
otherwise subject to special treatment under the Code (including insurance
companies, tax-exempt entities, financial institutions, broker-dealers and
persons who would hold the Common Stock as part of a straddle, hedge or
conversion transaction). In addition, the summary does not consider the effect
of any applicable state, local or foreign tax laws on Non-U.S. Holders. EACH
PROSPECTIVE NON-U.S. HOLDER OF COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL AND FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
DIVIDENDS ON COMMON STOCK
Dividends paid to a Non-U.S. Holder of Common Stock that are not effectively
connected with the conduct by the Non-U.S. Holder of a trade or business within
the United States will generally be subject to withholding of United States
federal income tax at the rate of 30% of the gross amount of the dividends
unless the rate is reduced by an applicable income tax treaty. Except to the
extent that an applicable tax treaty otherwise provides, a Non-U.S. Holder will
be taxed in the same manner as United States citizens, resident aliens and
domestic corporations on dividends paid (or deemed paid) that are effectively
connected with the conduct of a trade or business in the United States by the
Non-U.S. Holder. If such Non-U.S. Holder is a foreign corporation, it may also
be subject to a United States branch profits tax on such effectively connected
income, with certain adjustments at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. However, a Non-U.S. Holder may
claim exemption from withholding under the effectively connected income
exception by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively connected with the Conduct of Business in the United States) or a
successor form with the Company or its paying agent.
Under the currently applicable Treasury Regulations, dividends paid to an
address in a country other than the United States are presumed to be paid to a
resident of such country for purposes of the withholding discussed above (unless
the payor has knowledge to the contrary) and, under the current interpretation
of Treasury Regulations, for purposes of determining the applicability of a
reduced rate of withholding under an income tax treaty. However, under certain
recently finalized Treasury Regulations (the "New Withholding Regulations") a
Non-U.S. Holder of Common Stock who wishes to claim the
96
<PAGE>
benefit of an applicable treaty rate would be required to satisfy certain
certification and other requirements. In addition, under the New Withholding
Regulations, in the case of Common Stock held by a foreign partnership, the
certification requirement would generally be applied to the partners of the
partnership and the partnership may be required to provide certain information,
including a United States taxpayer identification number. The New Withholding
Regulations also provide look-through rules for tiered partnerships. The New
Withholding Regulations are generally effective for payments made after December
31, 1999, subject to certain transition rules. Non-U.S. Holders are encouraged
to consult with their own tax advisors with respect to the application of the
New Withholding Regulations.
Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient and the amount, if any, of the tax
withheld. A similar report is sent to the holder. Pursuant to income tax
treaties or certain other agreements, the IRS may make its reports available to
tax authorities in the recipient's country of residence.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax or withholding on gain recognized upon the sale or other disposition
of Common Stock unless (i) the gain is effectively connected with the conduct of
a trade or business within the United States by the Non-U.S. Holder, or (ii) in
the case of a Non-U.S. Holder who is a non-resident alien individual and holds
the Common Stock as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year and certain other conditions are met,
or (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of the
United States federal income tax law applicable to certain United States
expatriates. If a Non-U.S. Holder falls under clause (i) above, the holder will
be taxed on the net gain derived from the sale at regular graduated United
States federal income tax rates (the branch profits tax also may apply if the
Non-U.S. Holder is a corporation). If a Non-U.S. Holder falls under clause (ii)
above, the holder generally will be subject to a 30% tax on the gain derived
from the sale, which gain may be offset by U.S. capital losses recognized within
the same taxable year of such sale. The foregoing discussion in this paragraph
is based on the Company's conclusion that it is not presently, and has not been
for the past five years, a United States real property holding corporation
("USRPHC") subject to the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Different consequences would apply to certain Non-U.S. Holders if
the Company were to become a USRPHC subject to FIRPTA.
FEDERAL ESTATE TAXES
An individual Non-U.S. Holder who owns, or is treated as owning, Common
Stock at the time of his or her death or has made certain lifetime transfers of
an interest in Common Stock will be required to include the value of such Common
Stock in his gross estate for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information reporting requirements and backup withholding tax will not apply
to any payment of the proceeds of the sale of Common Stock effected outside the
United States by a foreign office of a "broker" (as defined in applicable
Treasury Regulations), unless such broker is (i) a United States person, (ii) a
foreign person that derives 50% or more of its gross income for certain periods
from activities that are effectively connected with the conduct of a trade or
business in the United States, (iii) a controlled foreign corporation for United
States federal income tax purposes or (iv) effective for payments after December
31, 1999, a foreign partnership (a) more than 50% of the income or capital
interests of which are owned by U.S. persons or (b) that is engaged in a United
States trade or business. Payment of the proceeds of any such sale effected
outside the United States by a foreign office of any broker that is described in
(i), (ii), (iii) or (iv) of the preceding sentence will not be subject to backup
97
<PAGE>
withholding tax but will be subject to information reporting requirements unless
such broker has documentary evidence in its records that the beneficial owner is
a Non-U.S. Holder and certain other conditions are met, or the beneficial owner
otherwise establishes an exemption. Payment of the proceeds of any such sale to
or through the United States office of a broker is subject to information
reporting and backup withholding requirements, unless the beneficial owner of
the Common Stock either (a) provides a Form W-8 (or a suitable substitute form)
signed under penalties of perjury that includes its name and address and
certifies as to its Non-U.S. Holder status in compliance with applicable law and
regulations, or (b) otherwise establishes an exemption. Effective for payments
after December 31, 1999 (and subject to certain transition rules), the New
Withholding Regulations unify certain certification procedures and forms and the
reliance standards relating to information reporting and backup withholding.
If paid to an address outside the United States, dividends on Common Stock
held by a Non-U.S. Holder will generally not be subject to backup withholding,
provided that the payor does not have actual knowledge that the holder is a
United States person. However, under the New Withholding Regulations (which are
effective for dividends paid after December 31, 1999), dividend payments may be
subject to backup withholding imposed at a rate of 31% unless applicable
certification requirements are satisfied. See the discussion above with respect
to rules applicable to foreign partnerships under the New Withholding
Regulations.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PROSPECTIVE
NON-U.S. HOLDER OF COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT
TO THE TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON
STOCK.
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ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendments thereto) under the Securities Act with
respect to the securities offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement, or other document
referred to are not necessarily complete; with respect to each such contract,
agreement, or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
Upon completion of the Equity Offerings, the Company will be subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will file reports and other information with the Commission. The Registration
Statement, the exhibits and schedules forming a part thereof and the reports and
other information filed by the Company with the Commission in accordance with
the Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and will also be available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, the Commission maintains a World Wide Web site on the
Internet at http:// www.sec.gov that contains reports, proxy, and information
statements and other information regarding registrants that file electronically
with the Commission. Copies of such material will also be available for
inspection at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005. Where any document or part thereof is incorporated by
reference, the Company will provide without charge a copy of any and all of the
information that has been incorporated by reference herein (but not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that is
incorporated herein) by contacting the Secretary's Office of the Company located
at 456 Montgomery Street, Suite 2200, San Francisco, California 94104.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Richards & O'Neil, LLP, New York, New York and for the
Underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
The financial statements of the Company as of December 27, 1997 and December
31, 1996 and for the year ended December 27, 1997 included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of the MRS. BUTTERWORTH'S Business as of December
31, 1996 and for each of the two years in the period ended December 31, 1996
included in this Prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of VDK as of June 30, 1997 and June 29, 1996 and
for the period September 19, 1995 through June 29, 1996 and for the year ended
June 30, 1997 included in this Prospectus have been so included in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
99
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The statements of equipment and goodwill as of June 30, 1997 and 1996 and
the statements of direct revenues, direct expenses, and allocated selling
expenses of the DUNCAN HINES Business of The Procter & Gamble Company for each
of the three years in the period ended June 30, 1997, included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The statements of assets to be acquired of the LOG CABIN Business, a
component of Kraft Foods, Inc. as of December 28, 1996 and December 30, 1995 and
the statements of operations for the years ended December 31, 1996, December 31,
1995 and December 31, 1994, included in this Prospectus, have been so included
in reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The combined statements of income of Van de Kamp's and Frozen Dessert
Product Lines of Pet Incorporated for the operating period July 1, 1995 through
September 18, 1995 and the year ended June 30, 1995, included in this
Prospectus, have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of that firm as experts in
accounting and auditing.
100
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AURORA FOODS HOLDINGS INC.
Report of Independent Accountants...................................................................... F-3
Consolidated Balance Sheets as of December 31, 1996, December 27, 1997 and March 28, 1998
(unaudited)........................................................................................... F-4
Consolidated Statements of Operations for the year ended December 27, 1997 and for the three months
ended March 29, 1997 and March 28, 1998 (unaudited)................................................... F-5
Consolidated Statements of Changes in Stockholder's Equity for the year ended December 27, 1997 and for
the three months ended March 28, 1998 (unaudited)..................................................... F-6
Consolidated Statements of Cash Flows for the year ended December 27, 1997 and for the three months
ended March 29, 1997 and March 28, 1998 (unaudited)................................................... F-7
Notes to Consolidated Financial Statements............................................................. F-8
PREDECESSOR BUSINESS TO AURORA FOODS HOLDINGS INC.
MRS. BUTTERWORTH'S BUSINESS, A COMPONENT OF CONOPCO, INC.
Report of Independent Accountants...................................................................... F-23
Statement of Assets to be Acquired as of December 31, 1996............................................. F-24
Statements of Operations for the years ended December 31, 1995 and 1996................................ F-25
Notes of Financial Statements.......................................................................... F-26
ACQUIRED BUSINESSES
VDK HOLDINGS, INC.
Report of Independent Accountants...................................................................... F-30
Consolidated Balance Sheet as of June 29, 1996, June 30, 1997 and March 31, 1998 (unaudited)........... F-31
Consolidated Statements of Operations for the operating period September 19, 1995 through June 29,
1996, for the year ended June 30, 1997 and for the nine months ended March 31, 1997 and 1998
(unaudited)........................................................................................... F-32
Consolidated Statements of Changes in Stockholder's Equity for the period September 19,1995 through
June 29, 1996, for the year ended June 30, 1997 and for the nine months ended March 31, 1998
(unaudited)........................................................................................... F-33
Consolidated Statements of Cash Flows for the operating period September 19, 1995 through June 29,
1996, for the year ended June 30, 1997 and for the nine months ended March 31, 1997 and 1998
(unaudited)........................................................................................... F-34
Notes to Consolidated Financial Statements............................................................. F-35
DUNCAN HINES BUSINESS OF THE PROCTER & GAMBLE COMPANY
Independent Auditors' Report........................................................................... F-49
Statements of Equipment and Goodwill as of June 30, 1996 and 1997, and December 31, 1997 (unaudited)... F-50
Statements of Direct Revenues and Direct Expenses for the years ended June 30, 1997, 1996, and 1995 and
for the six months ended December 31, 1997 and 1996 (unaudited)....................................... F-51
Notes to Financial Statements.......................................................................... F-52
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
LOG CABIN SYRUP BUSINESS, A COMPONENT OF KRAFT FOODS, INC.
Report of Independent Accountants...................................................................... F-54
Statements of Assets to be Acquired as of December 28, 1996 and December 30, 1995...................... F-55
Statements of Operations for the years ended December 28, 1996, December 31, 1995 and December 31,
1994.................................................................................................. F-56
Notes to Financial Statements.......................................................................... F-57
Statement of Operations for the six months ended June 28, 1997 (unaudited) and June 29, 1996
(unaudited)........................................................................................... F-62
PREDECESSOR BUSINESS TO VDK HOLDINGS, INC.
VAN DE KAMP'S AND FROZEN DESSERT PRODUCT LINES OF PET INCORPORATED
Report of Independent Accountants...................................................................... F-63
Combined Statements of Income for the operating period July 1, 1995 through September 18, 1995 and for
the year ended June 30, 1995.......................................................................... F-64
Notes to Combined Statements of Income................................................................. F-65
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Aurora Foods Holdings Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statement of operations, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
Aurora Foods Holdings Inc. and its subsidiary (the Company) at December 27, 1997
and December 31, 1996 (commencement of operations), and the results of their
operations and their 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
F-3
<PAGE>
AURORA FOODS HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMENCEMENT
OF OPERATIONS
DECEMBER 27, DECEMBER 31,
1997 1996
MARCH 28, -------------- ----------------
1998
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 23,330 $ 4,717 $ 8,666
Accounts receivable (net of $234 and $140
allowance, respectively).................. 12,271 12,362 --
Accounts receivable--other (Note 4)......... 10,576 1,474 480
Inventories (Note 5)........................ 24,851 6,902 1,182
Prepaid expenses and other assets........... 4,973 1,955 9
Current deferred tax assets (Note 11)....... 8,537 2,966 --
----------- -------------- ----------------
Total current assets...................... 84,538 30,376 10,337
Property, plant and equipment, net (Note 6)... 45,031 14,075 5,206
Goodwill and other intangible assets, net
(Note 7).................................... 717,956 315,241 111,358
Other assets.................................. 22,026 13,047 3,995
----------- -------------- ----------------
Total assets.............................. $ 869,551 $ 372,739 $ 130,896
----------- -------------- ----------------
----------- -------------- ----------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long term debt (Note
9)........................................ $ 9,000 $ 4,375 $ --
Accounts payable............................ 26,267 6,443 --
Accrued liabilities (Note 8)................ 29,107 17,409 2,736
----------- -------------- ----------------
Total current liabilities................. 64,374 28,227 2,736
Non-current deferred tax liabilities (Note
11)......................................... 7,771 3,745 --
Senior secured revolving debt facility (Note
9).......................................... -- 37,500 30,000
Senior secured term debt (Note 9)............. 441,000 35,625 15,000
Senior subordinated notes (Note 9)............ 202,377 202,419 50,000
----------- -------------- ----------------
Total liabilities......................... 715,522 307,516 97,736
----------- -------------- ----------------
Stockholder's equity:
Common stock, $0.01 par value; 3,000 shares
authorized; 1,000 shares issued and
outstanding............................... -- -- --
Paid-in capital............................. 218,191 64,203 33,270
Promissory notes (Note 14).................. (565) (215) (110)
(Accumulated deficit) retained earnings..... (63,597) 1,235 --
----------- -------------- ----------------
Total stockholder's equity................ 154,029 65,223 33,160
----------- -------------- ----------------
Commitments and contingencies (Notes 12 and
16)
Total liabilities and stockholder's
equity.................................. $ 869,551 $ 372,739 $ 130,896
----------- -------------- ----------------
----------- -------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AURORA FOODS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------ YEAR ENDED
MARCH 28, MARCH 29, DECEMBER 27,
1998 1997 1997
----------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Net sales........................................... $ 89,385 $ 21,253 $ 143,020
Cost of goods sold.................................. 37,734 7,167 45,729
----------- ----------- --------------
Gross profit...................................... 51,651 14,086 97,291
----------- ----------- --------------
Brokerage, distribution and marketing expenses:
Brokerage and distribution........................ 9,355 2,279 17,096
Trade promotions.................................. 15,568 3,643 26,075
Consumer marketing................................ 7,997 1,331 15,142
----------- ----------- --------------
Total brokerage, distribution and marketing
expenses.......................................... 32,920 7,253 58,313
Amortization of goodwill and other intangibles...... 4,597 828 5,938
Selling, general and administrative expenses........ 2,346 1,053 5,229
Incentive plan expense (Note 15).................... 60,000 -- 2,300
Transition expenses (Note 10)....................... 1,926 126 2,113
----------- ----------- --------------
Total operating expenses............................ 101,789 9,260 73,893
----------- ----------- --------------
Operating (loss) income......................... (50,138) 4,826 23,398
Interest income..................................... (223) (32) (151)
Interest expense.................................... 12,837 2,654 18,393
Amortization of deferred financing expense.......... 513 2,313 3,059
Other bank and financing expenses................... 51 9 83
----------- ----------- --------------
(Loss) income before income taxes............... (63,316) (118) 2,014
Income tax (benefit) expense (Note 11).............. (360) (47) 779
----------- ----------- --------------
Net (loss) income before extraordinary item..... (62,956) (71) 1,235
Extraordinary loss on early extinguishment of debt,
net of tax of $1,184.............................. 1,876 -- --
----------- ----------- --------------
Net (loss) income................................... $ (64,832) $ (71) $ 1,235
----------- ----------- --------------
----------- ----------- --------------
Basic and diluted (loss) earnings per share before
extraordinary item................................ $ (63) $ -- $ 1
Extraordinary item per share........................ (2) -- --
----------- ----------- --------------
Basic and diluted (loss) earnings per share......... $ (65) $ -- $ 1
----------- ----------- --------------
----------- ----------- --------------
Weighted average number of shares outstanding....... 1 1 1
----------- ----------- --------------
----------- ----------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AURORA FOODS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
COMMON EARNINGS
STOCK PAID-IN PROMISSORY (ACCUMULATED
SHARES CAPITAL NOTES DEFICIT) 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 plan expense
(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
Capital contribution
(unaudited)................ -- 93,988 (366) -- 93,622
Payments on officer
promissory notes (Note 14)
(unaudited)................ -- -- 16 -- 16
Incentive plan expense
(unaudited)................ -- 60,000 -- -- 60,000
Net loss (unaudited)......... -- -- -- (64,832) (64,832)
----- ----------- ------------- -------------- ---------
Balance at March 28, 1998
(unaudited)................ 1,000 $ 218,191 $ (565) $ (63,597) $ 154,029
----- ----------- ------------- -------------- ---------
----- ----------- ------------- -------------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
AURORA FOODS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------ YEAR ENDED
MARCH 28, MARCH 29, DECEMBER 27,
1998 1997 1997
----------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income................................. $ (64,832) $ (71) $ 1,235
Early extinguishment of debt, net of tax.......... 1,876 -- --
Adjustments to reconcile net (loss) income to cash
provided by (used in) operating activities:
Depreciation and amortization................... 6,140 3,274 10,057
Deferred income taxes........................... (360) (177) 779
Incentive plan expense (Note 15)................ 60,000 -- 2,300
Change in assets and liabilities, net of effects
of businesses acquired:
Decrease (increase) in accounts receivable.... 91 (5,510) (12,362)
Decrease (increase) in accounts
receivable--other............................. 898 (3,183) (994)
(Increase) decrease in inventories............ (17,949) 18 2,975
Increase in prepaid expenses and other
assets........................................ (3,018) (9) (1,946)
Increase in accounts payable.................. 19,824 -- 6,443
Increase in accrued liabilities............... 11,698 5,117 14,624
----------- ----------- --------------
Net cash provided by (used in) operating
activities.......................................... 14,368 (541) 23,111
----------- ----------- --------------
Cash flows from investing activities:
Additions to property, plant and equipment........ (1,511) (96) (2,411)
Asset dispositions................................ 330 -- --
Additions to other non-current assets............. (90) (49) (925)
Payment for acquisition of businesses (Note 3).... (448,121) -- (225,930)
----------- ----------- --------------
Net cash used in investing activities............... (449,392) (145) (229,266)
----------- ----------- --------------
Cash flows from financing activities:
Proceeds from senior secured revolving and term
debt (Note 9)..................................... 450,000 -- 90,000
Proceeds from senior subordinated notes (Note
9)................................................ -- 100,000 202,500
Repayment of borrowings........................... (77,500) (95,000) (107,500)
Capital contributions, net of officer promissory
notes............................................. 93,638 -- 28,500
Debt issuance costs............................... (12,501) (4,951) (11,294)
----------- ----------- --------------
Net cash provided by financing activities........... 453,637 49 202,206
----------- ----------- --------------
Increase (decrease) in cash and cash equivalents.... 18,613 (637) (3,949)
Cash and cash equivalents, beginning of period...... 4,717 8,666 8,666
----------- ----------- --------------
Cash and cash equivalents, end of period............ $ 23,330 $ 8,029 $ 4,717
----------- ----------- --------------
----------- ----------- --------------
Supplemental Cash Flow Disclosure:
Cash paid for interest............................ $ 11,154 $ 1,211 $ 10,091
----------- ----------- --------------
----------- ----------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--THE COMPANY
ORGANIZATION
Aurora Foods Holdings Inc. ("Holdings" and together with its subsidiary the
"Company"), a Delaware corporation, is a privately held food company. Holdings
owns 100% of its direct subsidiary, Aurora Foods Inc. ("Foods"), also a Delaware
corporation. Holdings is wholly-owned by MBW Investors LLC ("MBW LLC"), a
Delaware limited liability 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). Foods holds all of the Company's operations and
debt. Holdings has no assets other than its investment in Foods. 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-Registered Trademark- and Log Cabin-Registered Trademark-.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Holdings and
its subsidiary. All significant intercompany transactions and balances have been
eliminated. 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.
F-8
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. The Company
F-9
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 as
incurred, or expensed ratably over the fiscal year in relation to revenues
depending on the nature of such costs. Advertising expense for the year ended
December 27, 1997 was $4.1 million.
UNAUDITED INTERIM INFORMATION
The interim financial data as of March 28, 1998, and for the three months
ended March 28, 1998 and March 29, 1997 is unaudited; however, in the opinion of
the Company, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
position and operating results for the interim periods.
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 MBW LLC
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.
F-10
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 3--BUSINESS ACQUISITIONS (CONTINUED)
The cost to acquire MBW has been allocated to tangible and intangible assets
acquired as follows:
<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 MBW LLC 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:
<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>
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.
F-11
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 4--ACCOUNTS RECEIVABLE--OTHER
Accounts receivable--other consist of the following:
<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 a purchase price settlement
adjustment owed to the Company.
NOTE 5--INVENTORIES
Inventories consist of the following:
<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>
NOTE 6--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<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>
F-12
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 7--GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following:
<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:
<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>
F-13
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 9--LONG TERM DEBT
Long term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 27, 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
month Eurodollar rate plus 3.00% payable quarterly or at
the termination of the Eurodollar contract interest
period.................................................... -- 15,000
</TABLE>
F-14
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 9--LONG TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 31,
1997 1996
-------------- ---------------
<S> <C> <C>
SENIOR SUBORDINATED NOTES
Senior subordinated notes issued February 10, 1997 at par
value of $100,000; coupon interest rate of 9.875% with
interest payable each August 15 and February 15; matures
on February 15, 2007...................................... 100,000 --
Senior subordinated notes issued July 1, 1997 at par value
of $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; matures on 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>
Annual principal payments for the next five years and thereafter consist of
the following:
<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 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 MBW LLC were used to acquire MBW from Conopco, pay fees and
expenses and fund working capital.
F-15
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 9--LONG TERM DEBT (CONTINUED)
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 MBW LLC, 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 $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 EXPENSES
Transition expenses 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 expenses for the year ended December 27, 1997 were approximately $2.1
million.
F-16
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 11--INCOME TAXES
The Company files a consolidated federal income tax return. State income tax
returns are filed by the Company and Foods on a separate company basis or on a
combined basis depending on the particular rules in each state.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 27,
1997
---------------
<S> <C>
The provision for income taxes is summarized as follows:
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:
Loss carryforwards.................................................. $ 1,230
Coupon reserves..................................................... 844
Inventory........................................................... 325
Accrued expenses.................................................... 320
Other............................................................... 247
-------
Total deferred tax assets--current.......................................... 2,966
-------
Deferred tax assets--non-current:
Incentive plan expense.............................................. 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)
-------
-------
Net deferred tax assets current............................................. $ 2,966
Net deferred tax liabilities--non-current................................... (3,745)
-------
Net deferred tax liabilities................................................ $ (779)
-------
-------
</TABLE>
F-17
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 11--INCOME TAXES (CONTINUED)
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 carryforwards 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:
<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:
<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.
F-18
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
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
in fiscal 1997. The annual management fee was $600 prior to the acquisition of
LC and $935 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 in fiscal 1997. The annual advisory fee was $250
prior to the acquisition of LC and $336 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 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 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
F-19
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 14--RELATED PARTY TRANSACTIONS (CONTINUED)
quarterly at the rate of 8.0% per annum and there are required annual principal
payments. The aggregate balances outstanding as of December 27, 1997 on the
promissory notes were $215. The outstanding balances are as follows:
<TABLE>
<S> <C>
Mr. Ferraro.......................................................................... $ 40
Mr. Willett.......................................................................... 50
Mr. Mintz............................................................................ 50
Mr. Grizzle.......................................................................... 75
---------
$ 215
---------
---------
</TABLE>
NOTE 15--INCENTIVE PLAN EXPENSE
The Amended and Restated Limited Liability Company Agreement (the "LLC
Agreement") of MBW LLC contains a management compensation arrangement (the
"Management 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 Management Plan, Key
Personnel are issued a specific class of limited liability company member units
("Management Units"), at a nominal value, as a means to participate in the
appreciation of the Company. The Management 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
stock, all Management Units will vest immediately, except for certain Management
Units issued after December 31, 1997 (see Note 17--Subsequent Events--Incentive
Plan Amendment), which will remain subject to normal vesting requirements under
the Management Plan. The holders of vested Management 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 Management 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 and in any event, will be funded by MBW LLC.
The total amount due under the Management Plan, if any, is subject to the
vesting factors discussed above. Based on management and the Board of Directors'
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 Management Plan could be significant (see Note 17--Subsequent
Events--Incentive Plan Expense). The fiscal 1997 compensation expense has been
recorded as a liability of MBW LLC as the sponsor of the Management Plan.
However, because the Management Plan is for the benefit of Key Personnel of the
Company, expense recognized under the Management 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.
F-20
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 16--COMMITMENTS AND CONTINGENCIES
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-REGISTERED TRADEMARK- 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 MBW LLC of $93.8 million. As a result
of the early extinguishment, the Company will record an extraordinary charge of
$1.8 million, net of 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:
<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>
F-21
<PAGE>
AURORA FOODS HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 17--SUBSEQUENT EVENTS (CONTINUED)
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.
INCENTIVE PLAN AMENDMENT
In May 1998, the Company's Board of Directors approved an amendment to the
Management Plan. This amendment accelerated the vesting of all Management Units
issued after December 31, 1997 in the event of an initial public offering of the
Company's Common Stock. As a result, all of the outstanding Management Units are
fully vested in the event of an initial public offering of the Company's Common
Stock.
INCENTIVE PLAN EXPENSE
In the quarter ended March 28, 1998, the Company recognized a pre-tax charge
of $60.0 million for incentive plan expense under the Management Plan.
F-22
<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
F-23
<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
F-24
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
<S> <C> <C>
1996 1995
------------- ---------------
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
------------- ---------------
Net sales less direct and allocated expenses before taxes..... 17,186 17,185
Provision for income taxes.................................. 6,616 6,616
------------- ---------------
Net sales less direct and allocated expenses.................. $ 10,570 $ 10,569
------------- ---------------
------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-25
<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.
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
F-26
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS (CONTINUED)
description of the allocation methodologies employed). CONOPCO maintains all
debt and notes payable on a consolidated basis to fund and manage all of its
operations. Debt and related interest expense were not allocated to the
Business.
All of the allocations and estimates in the Statements of Operations are
based on assumptions that Company management believes are reasonable under the
circumstances.However, these allocations and estimates are not necessarily
indicative of the costs and expenses that would have resulted if the Business
had been operated as a separate entity or future results of the Business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME RECOGNITION. Sales and related cost of products sold are included in
income and expense, respectively, when products are shipped to the customer.
INVENTORIES. Inventories are priced at the lower of cost or market with
cost determined by the last-in, first-out (LIFO) method.
MACHINERY AND EQUIPMENT ("M&E"). M&E is stated at historical cost.
Alterations and major overhauls which extend the lives 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.
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.
F-27
<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)
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.
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.
F-28
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
4. PROVISION FOR INCOME TAXES
Taxes computed at the U.S. statutory rates are summarized below:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
<S> <C> <C> <C> <C>
AMOUNT % AMOUNT %
----------- --- ----------- ---
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>
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.
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of VDK Holdings, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
VDK Holdings, Inc. and its subsidiary (the Company) at June 30, 1997, and June
29, 1996, and the results of their operations and their cash flows for the year
ended June 30, 1997 and the period September 19, 1995 through June 29, 1996 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
September 23, 1997
F-30
<PAGE>
VDK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, JUNE 29,
1998 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................ $ 53 $ 308 $ 4,040
Accounts receivable (net of $420, $416 and $190
allowance, respectively)............................... 43,350 33,011 16,250
Accounts receivable--other (Note 5)...................... -- 9 506
Inventories (Note 6)..................................... 35,825 33,535 30,202
Prepaid expenses......................................... 1,459 1,208 724
Current deferred tax assets (Note 12).................... 11,989 8,260 3,373
----------- --------- ---------
Total current assets................................... 92,676 76,331 55,095
Property, plant and equipment, net (Note 7)................ 88,240 86,394 35,943
Non-current deferred tax assets............................ 7,171 -- --
Goodwill and other intangible assets, net (Note 8)......... 322,550 331,013 203,736
Other assets............................................... 16,434 15,853 10,725
----------- --------- ---------
Total assets........................................... $ 527,071 $ 509,591 $ 305,499
----------- --------- ---------
----------- --------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long term debt (Note 10).............. $ 16,978 $ 13,097 $ 5,000
Senior secured revolving debt facility................... 15,000 5,000 --
Accounts payable......................................... 13,577 13,791 14,144
Accrued liabilities (Note 9)............................. 31,607 24,619 15,789
Current deferred tax liabilities (Note 12)............... -- -- 143
----------- --------- ---------
Total current liabilities.............................. 77,162 56,507 35,076
Non-current deferred tax liabilities (Note 12)............. -- 10,404 2,997
Other liabilities (Note 16)................................ 15,000 -- --
Senior secured term debt (Note 10)......................... 177,781 194,759 83,750
Senior subordinated notes (Note 10)........................ 100,000 100,000 100,000
----------- --------- ---------
Total liabilities...................................... 369,943 361,670 221,823
----------- --------- ---------
Stockholder's equity:
Common stock, $1.00 par value; 3,000 shares authorized;
100 shares issued and outstanding...................... -- -- --
Paid-in capital.......................................... 198,635 144,420 84,420
Promissory notes (Note 15)............................... (107) (213) (305)
(Accumulated deficit) retained earnings (Note 16)........ (41,400) 3,714 (439)
----------- --------- ---------
Total stockholder's equity............................. 157,128 147,921 83,676
----------- --------- ---------
Commitments and contingencies (Notes 6, 7, 13 and 17)
Total liabilities and stockholder's equity............. $ 527,071 $ 509,591 $ 305,499
----------- --------- ---------
----------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE>
VDK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED OPERATING PERIOD
MARCH 31, YEAR ENDED SEPTEMBER 19,
-------------------- JUNE 30, 1995 THROUGH
1998 1997 1997 JUNE 29, 1996
--------- --------- ----------- -----------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Net sales.............................. $ 348,288 $ 344,113 $ 435,476 $ 143,296
Cost of goods sold..................... 135,777 143,522 180,941 60,367
--------- --------- ----------- -----------------
Gross profit....................... 212,511 200,591 254,535 82,929
--------- --------- ----------- -----------------
Brokerage, distribution and marketing
expenses:
Brokerage and distribution......... 33,765 37,005 45,352 15,901
Trade promotions................... 101,534 83,908 108,925 32,517
Consumer marketing................. 25,151 23,897 29,524 11,336
--------- --------- ----------- -----------------
Total brokerage, distribution and
marketing expenses................... 160,450 144,810 183,801 59,754
Amortization of goodwill and other
intangibles.......................... 10,194 9,982 13,142 4,223
Selling, general and administrative
expenses............................. 13,968 9,825 14,270 5,267
Incentive plan expense (Note 16)....... 69,000 -- -- --
Transition expenses (Note 11).......... -- 2,073 2,885 1,337
--------- --------- ----------- -----------------
Total operating expenses............... 253,612 166,690 214,098 70,581
--------- --------- ----------- -----------------
Operating (loss) income............ (41,101) 33,901 40,437 12,348
Interest income........................ (60) (939) (965) (135)
Interest expense....................... 23,634 24,762 32,499 12,469
Amortization of deferred financing
expense.............................. 1,612 1,573 2,108 607
Other bank and financing expenses...... 131 215 265 79
--------- --------- ----------- -----------------
(Loss) income before income
taxes............................ (66,418) 8,290 6,530 (672)
Income tax (benefit) expense........... (21,304) 3,316 2,377 (233)
--------- --------- ----------- -----------------
Net (loss) income.................. $ (45,114) $ 4,974 $ 4,153 $ (439)
--------- --------- ----------- -----------------
--------- --------- ----------- -----------------
Basic and diluted (loss) earnings per
share................................ $ (451) $ 50 $ 42 $ (4)
--------- --------- ----------- -----------------
--------- --------- ----------- -----------------
Weighted average number of shares
outstanding.......................... 0.1 0.1 0.1 0.1
--------- --------- ----------- -----------------
--------- --------- ----------- -----------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE>
VDK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
COMMON EARNINGS
STOCK PAID-IN PROMISSORY (ACCUMULATED
SHARES CAPITAL NOTES DEFICIT) TOTAL
------------- ----------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at September 19,
1995........................ 100 $ 69,420 $ (500) $ -- $ 68,920
Capital contribution.......... -- 15,000 -- -- 15,000
Officer payments on promissory
notes (Note 15)............. -- -- 195 -- 195
Net loss...................... -- -- -- (439) (439)
--- ----------- ------------- -------------- ---------
Balance at June 29, 1996...... 100 84,420 (305) (439) 83,676
Capital contribution.......... -- 60,000 -- -- 60,000
Officer payments on promissory
notes (Note 15)............. -- -- 92 -- 92
Net income.................... -- -- -- 4,153 4,153
--- ----------- ------------- -------------- ---------
Balance at June 30, 1997...... 100 144,420 (213) 3,714 147,921
Capital contribution
(unaudited)................. -- 215 -- -- 215
Payments on officer promissory
notes (Note 15)
(unaudited)................. -- -- 106 -- 106
Incentive plan expense
(unaudited)................. -- 54,000 -- -- 54,000
Net loss (unaudited).......... -- -- -- (45,114) (45,114)
--- ----------- ------------- -------------- ---------
Balance at March 31, 1998
(unaudited)................. 100 $ 198,635 $ (107) $ (41,400) $ 157,128
--- ----------- ------------- -------------- ---------
--- ----------- ------------- -------------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE>
VDK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED OPERATING PERIOD
MARCH 31, YEAR ENDED SEPTEMBER 19, 1995
-------------------- JUNE 30, THROUGH JUNE 29,
1998 1997 1997 1996
--------- --------- ----------- --------------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net (loss) income............................ $ (45,114) $ 4,974 $ 4,153 $ (439)
Adjustments to reconcile net (loss) income to
cash provided by operating activities:
Depreciation and amortization.............. 17,483 16,772 22,317 7,454
Deferred income taxes...................... (21,304) 1,808 2,377 (233)
Incentive plan expense..................... 69,000 -- -- --
Change in assets and liabilities, net of
effects of businesses acquired:
Increase in accounts receivable.......... (10,330) (27,950) (16,264) (16,756)
(Increase) decrease in inventories....... (2,290) (2,748) 402 (4,980)
(Increase) in prepaid expenses........... (251) (256) (484) (139)
(Decrease) increase in accounts
payable................................ (214) 2,273 (353) 14,144
Increase in accrued liabilities.......... 6,988 10,895 6,396 13,366
Increase in income taxes payable......... -- 1,456 -- --
Increase in other assets................. (1,296) (484) (984) --
--------- --------- ----------- --------
Net cash provided by operating activities...... 12,672 6,740 17,560 12,417
--------- --------- ----------- --------
Cash flows from investing activities:
Additions to property, plant and equipment... (7,524) (12,717) (14,379) (2,204)
Additions to other non-current assets........ (2,627) (1,267) (1,453) (316)
Proceeds from sale of assets................. -- 6,192 6,192 --
Payment for acquisition of businesses (Note
3)......................................... -- (190,222) (190,226) (268,035)
--------- --------- ----------- --------
Net cash used in investing activities.......... (10,151) (198,014) (199,866) (270,555)
--------- --------- ----------- --------
Cash flows from financing activities:
Proceeds from senior secured revolving and
term debt.................................. 31,000 188,000 188,000 97,150
Proceeds from senior subordinated notes...... -- -- -- 100,000
Repayment of borrowings...................... (34,097) (54,894) (63,894) (8,400)
Capital contributions, net of officer
promissory notes (Note 17)................. 321 60,092 60,092 84,115
Debt issuance costs.......................... -- (5,631) (5,624) (10,687)
--------- --------- ----------- --------
Net cash (used in) provided by financing
activities................................... (2,776) 187,567 178,574 262,178
--------- --------- ----------- --------
(Decrease) increase in cash and cash
equivalents.................................. (255) (3,707) (3,732) 4,040
Cash and cash equivalents, beginning of
period....................................... 308 4,040 4,040 --
--------- --------- ----------- --------
Cash and cash equivalents, end of period....... $ 53 $ 333 $ 308 $ 4,040
--------- --------- ----------- --------
--------- --------- ----------- --------
Supplemental Cash Flow Disclosure:
Cash paid for interest....................... $ 11,096 $ 11,229 $ 32,805 $ 7,738
--------- --------- ----------- --------
--------- --------- ----------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--THE COMPANY
ORGANIZATION
VDK Holdings, Inc. ("Holdings" and together with its subsidiary the
"Company"), a Delaware corporation, is a privately held frozen food company.
Holdings owns 100% of its direct subsidiary, Van de Kamp's, Inc. ("VDK, Inc."),
also a Delaware corporation. Holdings is wholly owned by VDK Foods LLC ("VDK
LLC"), a Delaware limited liability company. The Company commenced operations on
September 19, 1995, when it acquired the frozen seafood and frozen dessert
businesses of The Pillsbury Company and PET Incorporated. On May 6, 1996, the
Company acquired substantially all the assets of the Mrs. Paul's frozen food
business from Campbell Soup Company ("CSC") (Note 3). On July 9, 1996,
substantially all of the assets of the frozen food division of The Quaker Oats
Company ("Quaker") were purchased by the Company (Note 3). VDK Inc. holds all of
the Company's operations and debt. Holdings has no assets other than its
investment in VDK Inc..
OPERATIONS
The Company produces and markets frozen seafood, frozen dessert products,
frozen vegetables, frozen pizza and frozen breakfast products which are sold
across the United States. The products are manufactured out of three
manufacturing facilities in Erie and Chambersburg, Pennsylvania and in Jackson,
Tennessee. The principal trademarks under which the products are sold are Van de
Kamp's-Registered Trademark-, Pet-Ritz-Registered Trademark-, Oronoque
Orchards-Registered Trademark-, Mrs. Paul's-Registered Trademark-,
Celeste-Registered Trademark-, and Aunt Jemima-Registered Trademark-.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Holdings and
its subsidiary. All significant intercompany transactions and balances have been
eliminated. 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 ended June 30, 1997. The Company's prior fiscal
year ended on the last Saturday of June. Accordingly, the results of operations
reflect activity for the year ended June 30, 1997 and the period from September
19, 1995 (commencement of operations) through June 29, 1996. The Company has
presented balance sheets as of June 30, 1997 and June 29, 1996. The Company's
cash flows reflect activity for the year ended June 30, 1997 and the period from
September 19, 1995 to June 29, 1996. Certain prior year amounts have been
reclassified to conform with the current year's presentation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid financial instruments with a
maturity of three months or less to be cash equivalents.
F-35
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in first-out (FIFO) method. Inventories include the
cost of raw materials, packaging, labor and manufacturing overhead.
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 five to thirty
years (primarily machinery and equipment with useful lives of 10-15 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. Amortization of goodwill and other
intangible assets charged against income during the year ended June 30, 1997 was
$12,301 and for the period ended June 29, 1996 was $4,152.
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 June 30, 1997.
OTHER ASSETS
Other assets consist of deferred loan acquisition costs, systems development
costs, and other miscellaneous assets. Deferred loan acquisition costs of the
senior subordinated notes are being amortized using the interest method over the
term of the respective notes. Deferred loan acquisition costs of the senior
secured debt are being amortized using the straight-line method over the terms
of the related debt tranches. Aggregate amortization of deferred loan
acquisition costs and other assets charged against income in the year ended June
30, 1997 was $2,949 and in the period ended June 29, 1996 was $678.
F-36
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
For purposes of financial reporting, the Company has determined that the
fair value of financial instruments approximates book value at June 30, 1997,
based on terms currently available to the Company in financial markets.
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. The Company maintains reserves for potential credit
losses and had no significant concentration of credit risk at June 30, 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 basis of assets and liabilities.
UNAUDITED INTERIM INFORMATION
The interim financial data as of December 31, 1997, and for the six months
ended December 31, 1997 and 1996 is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and operating results for the interim periods.
NOTE 3--BUSINESS ACQUISITIONS
VAN DE KAMP'S AND FROZEN DESSERT PRODUCT LINES
On September 19, 1995 (commencement of operations), the Company acquired the
assets of the frozen seafood business (which operated as Van de Kamp's) and the
frozen dessert product lines (together, the "Businesses") from The Pillsbury
Company and PET Incorporated (collectively, the "Sellers"). The Company
manufactures frozen seafood products out of its Erie, Pennsylvania production
facility and its frozen dessert product line is produced out of its
Chambersburg, Pennsylvania manufacturing facility.
The Company acquired the inventories, property, plant and equipment and
intangible assets of the Businesses for a purchase price of $190.0 million. The
Company paid The Pillsbury Company $2.0 million, a contractually agreed upon
amount, to retain all of the current liabilities of the Businesses. The purchase
agreement contains customary representations, warranties and covenants by each
of the Sellers and the Company. The acquisition was accounted for by using the
purchase method of accounting and the allocation of the purchase price has been
finalized.
The acquisition was financed by (i) an equity capital contribution from VDK
LLC of approximately $70.0 million, (ii) the proceeds from the issuance of
$100.0 million of senior subordinated notes (Note
F-37
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 3--BUSINESS ACQUISITIONS (CONTINUED)
10), and (iii) the borrowing by the Company of $30.0 million and $2.0 million of
senior secured tranche A debt and senior secured revolving debt, respectively,
under the senior secured bank facilities (Note 10).
The cost to acquire the Businesses has been allocated to tangible and
intangible assets acquired as follows:
<TABLE>
<S> <C>
Cash paid to acquire Businesses.................................................. $ 190,000
Cash paid for disposition of current liabilities................................. 2,000
Other acquisition costs.......................................................... 2,543
---------
194,543
Costs assigned to tangible assets................................................ (50,407)
---------
Cost attributable to intangible assets........................................... $ 144,136
---------
---------
</TABLE>
MRS. PAUL'S
On May 6, 1996, the Company acquired substantially all the assets of the
Mrs. Paul's frozen food business from CSC. Mrs. Paul's frozen food business
includes frozen seafood and frozen vegetable products which are manufactured at
both of the Company's Pennsylvania production facilities.
The Company acquired the inventories, certain manufacturing equipment and
intangible assets from CSC. The manufacturing equipment was removed from a CSC
facility with certain production lines installed in each of the Company's Erie
and Chambersburg production plants. The purchase price was $73.2 million which
included a contractually agreed upon payment related to inventories. The
purchase agreement contains customary representations, warranties and covenants
by each of CSC and the Company. The acquisition was accounted for by using the
purchase method of accounting and the allocation of the purchase price has been
finalized.
The acquisition was financed by (i) an equity capital contribution from VDK
LLC of $15.0 million, and (ii) the borrowing by the Company of $20.0 million and
$40.0 million of senior secured tranche A debt and senior secured tranche B
debt, respectively, under the senior secured bank facilities (Note 10).
The cost to acquire Mrs. Paul's has been allocated to tangible and
intangible assets acquired, as follows:
<TABLE>
<S> <C>
Cash paid to acquire Businesses................................... $ 73,203
Cash paid for disposition of current liabilities.................. 3,326
---------
Other acquisition costs........................................... 76,529
Costs assigned to tangible assets................................. (11,716)
---------
Cost attributable to intangible assets............................ $ 64,813
---------
---------
</TABLE>
QUAKER FROZEN FOOD BUSINESS
On July 9, 1996, substantially all of the assets of the frozen food division
of Quaker were purchased by the Company for $185.8 million. The Company
purchased the Celeste-Registered Trademark- trademark and was granted
F-38
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 3--BUSINESS ACQUISITIONS (CONTINUED)
an exclusive perpetual, transferable, royalty-free license of the Aunt
Jemima-Registered Trademark- trademark for use in the frozen breakfast products
business. Also included in the acquisition were inventories and the
manufacturing facility located in Jackson, Tennessee, where the Company produces
both product lines. The purchase agreement contains customary representations,
warranties and covenants by each of Quaker and the Company. The acquisition was
accounted for by using the purchase method of accounting and the allocation of
the purchase price has been finalized.
The acquisition was financed by (i) an equity capital contribution from VDK
LLC of $60.0 million, and (ii) the borrowing by the Company of $45.0 million,
$40.0 million and $50.0 million of senior secured tranche A debt, senior secured
tranche B debt and senior secured tranche C debt, respectively, under the senior
secured bank facilities (Note 10).
The cost to acquire the Quaker Frozen Food Business has been allocated to
tangible and intangible assets acquired as follows:
<TABLE>
<S> <C>
Cash paid to acquire assets...................................... $ 185,800
Other acquisition costs.......................................... 3,492
---------
189,292
Costs assigned to tangible assets................................ (49,356)
---------
Cost attributable to intangible assets........................... $ 139,936
---------
---------
</TABLE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma combined financial information reflects the
historical net sales and income before income taxes of the Company as if all
acquisitions had occurred on July 1, 1995. Had the acquisitions described in
this Note 3 taken place July 1, 1995, the unaudited pro forma net sales and
income before income taxes for the year ended June 30, 1997 would not have been
significantly different from those reflected in the Statement of Operations. For
the period ended June 29, 1996 the pro forma net sales were $401,522 and the
income before income taxes was $11,651.
NOTE 4--SALE OF ASSETS
On February 3, 1997, the Company sold substantially all of the assets of its
whipped topping product line, which was part of the frozen desserts business,
including inventory, certain manufacturing equipment, and intangible assets for
approximately $6.2 million in cash. The impact of the sale on current results
was not material, and the sale will not significantly impact future results. The
net proceeds from the sale, $5.5 million, were used to repay a portion of the
Company's senior secured term debt.
F-39
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 5--ACCOUNTS RECEIVABLE--OTHER
Accounts Receivable--Other consist of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 29,
1997 1996
----------- -----------
<S> <C> <C>
The Pillsbury Company.................................. $ -- $ 320
Miscellaneous.......................................... 9 186
----------- -----------
$ 9 $ 506
----------- -----------
----------- -----------
</TABLE>
The balance due from The Pillsbury Company was comprised of accounts
receivable collected by them on behalf of the Company.
NOTE 6--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 29,
1997 1996
----------- -----------
<S> <C> <C>
Raw materials.......................................... $ 12,556 $ 6,856
Packaging supplies..................................... 3,178 2,022
Finished goods......................................... 17,801 21,324
----------- -----------
$ 33,535 $ 30,202
----------- -----------
----------- -----------
</TABLE>
At June 30, 1997 and June 29, 1996, the Company had commitments to purchase
raw materials aggregating approximately $7.0 million and $3.2 million,
respectively.
NOTE 7--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 29,
1997 1996
----------- -----------
<S> <C> <C>
Land................................................... $ 2,342 $ 700
Machinery and equipment................................ 73,514 31,105
Buildings and improvements............................. 18,637 5,155
Construction-in-progress............................... 1,241 1,607
----------- -----------
95,734 38,567
Less accumulated depreciation........................ (9,340) (2,624)
----------- -----------
$ 86,394 $ 35,943
----------- -----------
----------- -----------
</TABLE>
At June 30, 1997 and June 29, 1996, the Company had commitments for facility
construction and related machinery and equipment purchases aggregating
approximately $2.3 million and $0.5 million, respectively.
F-40
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 8--GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 29,
1997 1996
--------- ---------
<S> <C> <C>
Goodwill.............................................. $ 163,599 $ 103,553
Trademarks............................................ 151,600 84,200
Other intangibles..................................... 32,105 20,135
--------- ---------
347,304 207,888
Less accumulated amortization....................... (16,291) (4,152)
--------- ---------
$ 331,013 $ 203,736
--------- ---------
--------- ---------
</TABLE>
NOTE 9--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 29,
1997 1996
--------- ---------
<S> <C> <C>
Interest.............................................. $ 4,425 $ 4,732
Trade promotion accruals.............................. 12,478 4,781
Other................................................. 7,716 6,276
--------- ---------
$ 24,619 $ 15,789
--------- ---------
--------- ---------
</TABLE>
F-41
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 10--LONG TERM DEBT
Long term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 29,
1997 1996
--------- ---------
<S> <C> <C>
SENIOR SECURED DEBT
Senior secured tranche A debt--interest rate of 8.3% at June 30, 1997;
principal due in semi-annual installments through September 19,
2001; floating interest rate at the prime rate plus 1.5%, or
alternatively, the one, three or six month Euro dollar rate plus
2.5% payable quarterly or at the termination of the Euro dollar
contract interest period............................................ $ 83,192 $ 48,750
Senior secured tranche B debt--interest rate of 8.8% at June 30, 1997;
principal due in semi-annual installments through April 30, 2003;
floating interest rate at the prime rate plus 2.0% or,
alternatively, the one, three or six month Euro dollar rate plus
3.0% payable quarterly or at the termination of the Euro dollar
contract interest period............................................ 76,640 40,000
Senior secured tranche C debt--interest rate of 9.0% at June 30, 1997;
principal due in semi-annual installments through September 30,
2003; floating interest rate at the prime rate plus 2.25% or,
alternatively, the one, three or six month Euro dollar rate plus
3.25% payable quarterly or at the termination of the Euro dollar
contract interest period............................................ 48,024 --
Revolving credit facility--interest rate of 10.0% at June 30, 1997;
principal due September 19, 2001; floating interest rate at the
prime rate plus 1.50% or, alternatively, the one, three, or six
month Euro dollar rate plus 2.50% payable quarterly or at the
termination of the Euro dollar contract period...................... 5,000 --
SENIOR SUBORDINATED NOTES
Senior subordinated notes issued September 15, 1995 at par value of
$100,000,000; coupon interest rate of 12.0% with interest payable
each March 15 and September 15; matures on September 15, 2005....... 100,000 100,000
--------- ---------
312,856 188,750
Less: current portion of long term debt (13,097) (5,000)
current portion of revolving credit facility........................ (5,000) --
--------- ---------
Long term debt........................................................ $ 294,759 $ 183,750
--------- ---------
--------- ---------
</TABLE>
Annual principal payments for the next five years and thereafter consist of
the following:
<TABLE>
<S> <C>
1998............................................. $ 18,097
1999............................................. 16,978
2000............................................. 22,071
2001............................................. 24,497
2002............................................. 33,227
Thereafter....................................... 197,986
---------
$ 312,856
---------
---------
</TABLE>
F-42
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 10--LONG TERM DEBT (CONTINUED)
SENIOR SECURED DEBT
On September 19, 1995, the Company entered into the VDK Holdings, Inc.
Credit and Guarantee Agreement (the "Agreement") with several banks for $30.0
million of senior secured term and revolving debt. The proceeds from the debt
were used to acquire the Businesses, pay fees and expenses and fund working
capital. The debt is guaranteed by the Company and its subsidiary. The Agreement
contains optional prepayment provisions with no premium. Substantially all
assets of the Company are pledged as collateral for the debt.
In conjunction with the Mrs. Paul's acquisition, the Company amended the
Agreement, dated as of May 6, 1996, to provide for additional borrowings of
$20.0 million under senior secured tranche A debt and $40.0 million of senior
secured tranche B debt. Proceeds from the additional borrowings were used to
acquire the Mrs. Paul's business, pay fees and expenses and to provide the
working capital requirements related to the Mrs. Paul's acquisition.
In conjunction with the acquisition of the Quaker Frozen Food Business, the
Company amended the Agreement, dated as of July 9, 1996 to provide for
additional borrowings of $45.0 million under senior secured tranche A debt, an
increase of $40.0 million to the senior secured tranche B debt and an increase
of $50.0 million to the senior secured tranche C debt. Proceeds from the
additional borrowings were used to acquire the business from Quaker, pay fees
and expenses and to provide the working capital requirements related to the
Celeste/Aunt Jemima acquisition.
The Agreement includes $25.0 million of available borrowing under a
revolving debt facility, subject to limitations based on letters of credit. At
June 30, 1997, the Company had unused borrowing availability of $19.6 million
after adjustment for previously issued letters of credit and an outstanding
balance of $5.0 million. The interest rate on the outstanding balance was 10.0%.
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 June 30, 1997.
SENIOR SUBORDINATED NOTES
On September 19, 1995, the Company issued $100.0 million of senior
subordinated notes (the "Notes") registered under the Securities Act of 1933.
The proceeds were used to fund the acquisition of the Businesses. The Notes may
be redeemed at any time prior to September 15, 2000. The prepayment redemption
price would be equal to 100% of the principal plus a premium equal to the
greater of (i) 1% of the principal amount or (ii) the excess of (a) present
value at time of redemption plus required interest payments due on the Notes
through September 15, 2000 over (b) principal amount of Notes. The indenture
includes restrictive covenants which limit additional borrowing, cash dividends,
the sale of assets, mergers and the sale of stock. The Company was in compliance
with these covenants at June 30, 1997.
F-43
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 10--LONG TERM DEBT (CONTINUED)
INTEREST RATE COLLAR AGREEMENTS
The Company uses interest rate collar agreements (the "Agreements") to
reduce the impact of changes in interest rates on its floating rate term debt.
Premiums paid for such Agreements are being amortized to interest expense over
the terms of the Agreements. Unamortized premiums are included in Other assets
in the balance sheet. Amounts to be paid or received, if any, under the
Agreements are recognized as an increase or decrease, respectively, in interest
expense. The counterparty to the Company's Agreements is a major financial
institution.
At June 30, 1997, the Company was party to two Agreements. On August 22,
1996, the Company entered into a three year interest rate collar agreement with
a notional principal amount of $70.0 million, a cap rate of 7.5% (plus the
applicable margin) and a floor rate of 5.5% (plus the applicable margin). On
November 26, 1996, the Company entered into a three year interest rate collar
agreement with a notional principal amount of $50.0 million, a cap of 6.5% (plus
the applicable margin) and a floor rate of 5.75% (plus the applicable margin).
The aggregate premiums paid for the two Agreements was $0.1 million.
Under the Agreements, the Company would receive payments from the
counterparty if the three-month LIBOR rate exceeds the cap rates and make
payments to the counterparties if the three-month LIBOR rate falls below the
floor rates. The payments would be calculated based upon the respective notional
principal amount. During fiscal 1997 the Company made payments aggregating $0.1
million under the Agreements. At June 30, 1997, the three-month LIBOR rate was
5.94%.
Risk associated with the Agreements include those associated with changes in
market value and interest rates. At June 30, 1997, the fair value of the
Company's interest rate collars was immaterial and management considers the
potential loss in future earnings and cash flows attributable to such collars to
be immaterial.
NOTE 11--TRANSITION EXPENSES
Transition related costs consist of what management believes are one-time
costs incurred to establish the Company's operations, including expenditures to
regain distribution of products that had been discontinued during the transition
of the acquired Businesses, relocation expenses, recruiting fees, sales
training, computer systems training and other one-time transitional expenses.
Transition related costs for the year ended June 30, 1997 and the period ended
June 29, 1996 were approximately $2.9 million and $1.3 million, respectively.
F-44
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 12--INCOME TAXES
The Company files a consolidated federal income tax return. State income tax
returns are filed by the Company and VDK Inc. on a separate company basis or on
a combined basis depending on the particular rules in each state.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 29,
1997 1996
----------- ---------------
<S> <C> <C>
The provision (benefit) for income taxes is summarized as
follows:
Current tax expense:
Federal...................................................... $ -- $ --
State........................................................ -- --
----------- -------
Total current provision........................................ -- --
----------- -------
Deferred tax expense:
Federal...................................................... 1,989 (196)
State........................................................ 388 (37)
----------- -------
Total deferred provision....................................... 2,377 (233)
----------- -------
Total provision (benefit) for income taxes..................... $ 2,377 $ (233)
----------- -------
----------- -------
Deferred tax assets (liabilities) consist of the following:
Deferred tax assets--current:
Loss carryforwards........................................... $ 5,679 $ 1,697
Promotion reserves........................................... 1,658 1,305
Other........................................................ 923 371
----------- -------
Total deferred tax assets--current......................... 8,260 3,373
----------- -------
Deferred tax liabilities--current:
Inventory reserves........................................... -- (130)
Deferred state taxes......................................... -- (13)
----------- -------
Total deferred tax liabilities--current.................... -- (143)
----------- -------
Deferred tax liabilities--non-current:
Goodwill..................................................... (7,043) (1,961)
Depreciation................................................. (3,361) (1,036)
----------- -------
Total deferred tax liabilities--non-current................ (10,404) (2,997)
----------- -------
Total deferred tax liabilities........................... (10,404) (3,140)
----------- -------
Net deferred tax asset (liability)....................... $ (2,144) $ 233
----------- -------
----------- -------
</TABLE>
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 June 30, 1997, the Company has federal net operating loss carryforwards
of approximately $14.2 million. These losses can be used to offset future
taxable income through the year 2011. The Company is
F-45
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 12--INCOME TAXES (CONTINUED)
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 carryforwards 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:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 29,
1997 1996
------------- ---------------
<S> <C> <C>
Provision for income taxes at U.S. statutory rate.............. $ 2,220 $ (229)
Increase (decrease) in tax resulting from:
Nondeductible expenses......................................... 36 20
State taxes, net of federal benefit............................ 121 (24)
------------- ------
$ 2,377 $ (233)
------------- ------
------------- ------
</TABLE>
NOTE 13--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:
<TABLE>
<CAPTION>
MINIMUM
LEASE
YEARS ENDING JUNE 30, PAYMENTS
- ----------------------------------------------- -------------
<S> <C>
1998........................................... $ 753
1999........................................... 758
2000........................................... 728
2001........................................... 574
2002........................................... 143
Thereafter..................................... --
-------------
$ 2,956
-------------
-------------
</TABLE>
Rent expense was $0.5 million for the year ended June 30, 1997 and $0.2
million for the period ended June 29, 1996.
NOTE 14--SAVINGS AND BENEFIT PLANS
The Company offers a retirement savings plan to its nonunion employees in
the form of 401(k) and profit sharing plans. Under the 401(k) plan, employee
contributions up to 3% of total compensation are matched 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 nonunion employees on an annual
basis. Profit sharing contributions also vest ratably over a five year period.
The Company's contributions to the
F-46
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 14--SAVINGS AND BENEFIT PLANS (CONTINUED)
401(k) plan for the year ended June 30, 1997 and the period ended June 29, 1996
were $0.6 million and $0.1 million, respectively. The Company's contributions to
the profit sharing plan for the year ended June 30, 1997 and the period ended
June 29, 1996 were $0.5 million and $0.1 million, respectively.
The Company also has a defined benefit retirement plan for unionized
employees in the Chambersburg plant. Benefits are based on years of credited
service and average compensation or stated amounts for each year of service. Net
pension expense for the defined benefit retirement plan totaled $0.1 million and
$0 for the year ended June 30, 1997 and the period ended June 29, 1996,
respectively. The funding policy is consistent with the requirements of federal
law and regulations.
NOTE 15--RELATED PARTY TRANSACTIONS
The Company has a Management Services Agreement with Dartford Partnership,
LLC ("Dartford") to provide consulting services and management oversight on
financial and operational matters. The Company paid fees totaling $1.8 million
to Dartford, a member of VDK LLC, during the year ended June 30, 1997 and $0.6
million during the period ended June 29, 1996. The annual management fee was
$0.7 million prior to the acquisition of Mrs. Paul's and $1.2 million prior to
the acquisition of the Quaker Frozen Food Business. The charge is included in
general and administrative expenses in the Statement of Operations.
The Company paid certain members of VDK LLC fees totaling $2.1 million
during the year ended June 30, 1997 and $2.0 million during the period ended
June 29, 1996. The fees were paid for services provided in identifying,
negotiating and consummating the Company's acquisitions. The fees were included
in the costs of the acquisitions.
On September 19, 1995, Mr. Thomas O. Ellinwood, the President of the
Company, and Mr. Thomas J. Youngerman, Mr. Olafur Gudmundsson and Ms. C. Renee
Sloan, Vice Presidents of the Company, executed promissory notes in favor of the
Company in exchange for monies borrowed to assist in the capitalization of their
limited liability company interests held with VDK LLC. The promissory notes
mature September 30, 1998 with required annual payments. Interest is due and
payable quarterly at the rate of 8.5% per annum. The aggregate balance
outstanding on the promissory notes was $213.3 and $305.0 at June 30, 1997 and
June 29, 1996, respectively. The net outstanding balance has been recorded as a
reduction to paid-in capital and is reflected as such on the Statement of
Changes in Stockholder's Equity.
NOTE 16--INCENTIVE PLAN EXPENSE
VDK LLC has implemented a Management Compensation Plan ("the Plan") as a
means by which Key Personnel (defined as employees and other specific designated
persons) of the Company, and/or affiliated with the Company, may be given an
opportunity to benefit from the appreciation in the value of the Company. The
Amended and Restated Limited Liability Company Agreement of VDK LLC, dated as of
September 19, 1995, was amended and restated as of May 22, 1997 to approve and
adopt the Plan. The effective date of the Plan is as of September 19, 1995.
Under the Plan, Key Personnel are issued various types of management
compensation units (the "Units") in the Plan as a means to participate in the
valuation of the Company, as determined based on certain formulae in the Plan
document. The Units are subject to forfeiture based on the failure to meet
F-47
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 16--INCENTIVE PLAN EXPENSE (CONTINUED)
vesting requirements, specified earnings targets, and/or rates of return targets
for certain investors in VDK LLC. Pursuant to the Plan document, the Units will
have special valuation and payment provisions upon a change of control or
initial public offering of the Company's stock (an "IPO").
Upon a change of control or IPO, the Units will be valued and amounts will
be paid to Unit holders according to various factors, such as the type of
triggering event and the amount of proceeds paid to the VDK LLC's investors. In
general, there will be no payment on the Units until the VDK LLC's investors
have received a designated return on their investments. The payment to Unit
holders may be cash and/or non-cash securities, depending on the triggering
event and the type of distribution received by VDK LLC's investors. In addition,
the Plan will gross-up payments to the Unit holders in certain events relating
to (i) any excise tax due under federal income tax rules, and (ii) any tax on
the Units in excess of capital gains tax rates.
The total amount due under the Plan, if any, is subject to the rates of
return and forfeiture factors discussed above. Based on management and the Board
of Director's assessment of the current valuation of the Company, there is no
basis to record an accrual for incentive expense at this time. Should the
Company appreciate further in value, incentive expense to be recognized in
future periods could be significant. To the extent any amounts are deemed
accruable under the Plan in the future, such amounts will be a liability of VDK
LLC as the sponsor of the Plan. However, because the Plan is for the benefit of
Key Personnel of the Company, any expense to be recognized under the Plan will
be pushed down to the Company, and will be recorded by the Company as expense
and as additional paid in capital from its parent over the applicable vesting
periods. See Note 18--Subsequent Events.
NOTE 17--COMMITMENTS AND CONTINGENCIES
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 position or
results of operations.
NOTE 18--SUBSEQUENT EVENTS--(UNAUDITED)
SALE OF COMPANY
On April 8, 1998, VDK LLC sold all of the outstanding common stock of the
Company to Aurora/VDK LLC, a newly formed limited liability company, in exchange
for an interest in Aurora/VDK LLC. Following the sale transaction, Aurora/VDK
LLC is owned 44.5% by VDK LLC and 55.5% by MBW Investors LLC.
INCENTIVE PLAN EXPENSE
In the quarter ended March 31, 1998, the Company recognized a pre-tax charge
of $69.0 million for incentive plan expense under the Plan.
F-48
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Management of
The Procter & Gamble Company:
We have audited the accompanying statements of equipment and goodwill as of
June 30, 1997 and 1996 and statements of direct revenues, direct expenses, and
allocated selling expense of the Duncan Hines Business of The Procter & Gamble
Company ("Procter & Gamble") for the years ended June 30, 1997, 1996, and 1995
(collectively, the "statements"). These statements are the responsibility of
Procter & Gamble'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 audit to obtain
reasonable assurance about whether the statements referred to above are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements referred to above. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the statements referred to above. We believe that our audits provide a
reasonable basis for our opinion.
The assets and operations covered by the statements referred to above are a
part of The Procter & Gamble Company and have no separate legal status. As
described in Notes 1 and 2 to the statements, the statements referred to above
have been prepared from Procter & Gamble's consolidated financial records and
allocations of certain costs and expenses have been made. These allocations are
not necessarily indicative of the costs and expenses that would have been
incurred by the Duncan Hines Business on a stand-alone basis.
In our opinion, the statements referred to above present fairly, in all
material respects, the equipment and goodwill as of June 30, 1997 and 1996 and
the direct revenues, direct expenses, and allocated selling expense of the
Duncan Hines Business of The Procter & Gamble Company for the years ended June
30, 1997, 1996, and 1995 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
June 9, 1998
Cincinnati, Ohio
F-49
<PAGE>
THE DUNCAN HINES BUSINESS OF
THE PROCTER & GAMBLE COMPANY
STATEMENTS OF EQUIPMENT AND GOODWILL
AS OF DECEMBER 31, 1997 AND JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
(IN THOUSANDS) 1997 1997 1996
-------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
EQUIPMENT--NET............................................................ $ 18,065 $ 19,349 $ 20,502
GOODWILL.................................................................. 3,914 3,914 3,914
-------------- --------- ---------
TOTAL..................................................................... $ 21,979 $ 23,263 $ 24,416
-------------- --------- ---------
-------------- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-50
<PAGE>
THE DUNCAN HINES BUSINESS OF
THE PROCTER & GAMBLE COMPANY
STATEMENTS OF DIRECT REVENUES, DIRECT EXPENSES, AND ALLOCATED
SELLING EXPENSE FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995, AND FOR
THE SIX-MONTH PERIODS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------------------ -------------------------------------
1997 1996 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS) (UNAUDITED)
DIRECT REVENUES:
Gross revenues................................ $ 154,519 $ 146,124 $ 253,548 $ 277,721 $ 281,303
Less:
Trade spending.............................. (15,822) (9,659) (19,646) (16,357) (14,775)
Coupon expense.............................. (2,194) (2,110) (2,900) (3,378) (5,388)
----------- ----------- ----------- ----------- -----------
Net direct revenues....................... 136,503 134,355 231,002 257,986 261,140
----------- ----------- ----------- ----------- -----------
COSTS OF PRODUCTS SOLD:
Product costs................................. 85,139 80,361 144,261 153,791 153,015
Delivery costs................................ 6,398 6,647 11,787 13,388 14,267
----------- ----------- ----------- ----------- -----------
Total costs of products sold.............. 91,537 87,008 156,048 167,179 167,282
----------- ----------- ----------- ----------- -----------
GROSS MARGIN.................................... 44,966 47,347 74,954 90,807 93,858
----------- ----------- ----------- ----------- -----------
DIRECT MARKETING:
Consumer promotional expense.................. 1,184 1,226 3,376 5,186 4,498
Advertising expense........................... 6,549 5,576 9,957 13,798 12,276
Other marketing expenses...................... 1,119 1,453 2,520 4,049 3,245
----------- ----------- ----------- ----------- -----------
Total direct marketing expenses........... 8,852 8,255 15,853 23,033 20,019
----------- ----------- ----------- ----------- -----------
DIRECT SELLING, ADMINISTRATIVE AND OTHER........ 4,131 6,177 10,041 10,791 9,962
ALLOCATED SELLING EXPENSE....................... 2,762 3,297 4,750 6,373 6,429
----------- ----------- ----------- ----------- -----------
EXCESS OF DIRECT REVENUES OVER DIRECT EXPENSES
AND ALLOCATED SELLING EXPENSE................. $ 29,221 $ 29,618 $ 44,310 $ 50,610 $ 57,448
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to the financial statements.
F-51
<PAGE>
THE DUNCAN HINES BUSINESS OF
THE PROCTER & GAMBLE COMPANY
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BASIS OF PRESENTATION
On January 16, 1998, The Procter & Gamble Company (Procter & Gamble) sold
certain assets and the related business of the Duncan Hines brand ("Duncan Hines
Business"). The Duncan Hines Business produces baking goods which are
manufactured at Procter & Gamble's Jackson, TN. plant, which also produces other
food products for Procter & Gamble that are unrelated to the Duncan Hines
Business. The accompanying statements present the equipment and goodwill that
Procter & Gamble sold as of December 31, 1997 and June 30, 1997 and 1996 and
direct revenues, costs of products sold, direct marketing expenses, direct
selling, administrative and other expenses, and allocated selling expense for
the years ended June 30, 1997, 1996, and 1995, the six-month periods ended
December 31, 1997 and 1996 for the Duncan Hines Business. Results of operations
for interim periods are not necessarily indicative of results to be expected for
an entire year.
Procter & Gamble did not account for the Duncan Hines Business as a separate
entity. Accordingly, the information included in the accompanying statements of
direct revenues, direct expenses, and allocated selling expense has been
obtained from Procter & Gamble's consolidated financial records. The statements
of direct revenues, direct expenses, and allocated selling expense include
allocations of certain Procter & Gamble selling, administrative, and other
expenses, as discussed in Note 2. Procter & Gamble management believes the
allocations are reasonable; however, these allocated expenses are not
necessarily indicative of expenses that would have been incurred by the Duncan
Hines Business on a stand-alone basis, since certain administrative and other
expenses are provided to the Duncan Hines Business that are not included in the
accompanying statements as discussed in Note 2.
In addition, the statements of direct revenues, direct expenses, and
allocated selling expense include allocations of certain Jackson Plant costs, as
discussed in Note 2. Procter & Gamble management believes these allocations are
reasonable; however, these allocated costs may not necessarily be indicative of
costs that would have been incurred by the Duncan Hines Business on a
stand-alone basis, since these allocated costs are based on the structure of the
Jackson Plant operations and related activities, as managed and operated by
Procter & Gamble.
Equipment and goodwill and direct revenues, direct expenses, and allocated
selling expense are presented in the accompanying statements in accordance with
generally accepted accounting principles. The unaudited information for the
six-month periods ended December 31, 1997 and 1996 contain all adjustments,
consisting only of normal recurring accruals, necessary for a consistent
presentation of the direct revenues and direct expenses for the six-month
periods.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION--Revenue from the sale of products is recognized at the
time the products are shipped.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying disclosures. Although these estimates are based on management's
best knowledge of current events and actions Procter & Gamble may undertake in
the future, actual results ultimately may differ from the estimates.
F-52
<PAGE>
THE DUNCAN HINES BUSINESS OF
THE PROCTER & GAMBLE COMPANY
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS) (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EQUIPMENT--Equipment cost and the related accumulated depreciation were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 JUNE 30, JUNE 30,
(UNAUDITED) 1997 1996
-------------- --------- ---------
<S> <C> <C> <C>
Equipment cost............................................................ $ 51,604 $ 51,793 $ 50,038
Accumulated depreciation.................................................. 33,539 32,444 29,536
-------------- --------- ---------
Net book value............................................................ $ 18,065 $ 19,349 $ 20,502
-------------- --------- ---------
-------------- --------- ---------
</TABLE>
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which primarily range from 4 to 19 years.
GOODWILL--Goodwill represents the cost of acquisition in excess of tangible
assets and identifiable intangible assets received. Since the goodwill was
acquired prior to November 1970 it is not being amortized.
COUPON EXPENSE--Coupon expense represents deductions from direct revenues
for coupons related to Duncan Hines products. The expense is based on expected
redemption rates of issued coupons based on historical data.
COSTS OF PRODUCTS SOLD--Inventories are valued at cost, which is not in
excess of current market. Cost is primarily determined by the average cost
method. The cost of products sold include allocations of costs to the Duncan
Hines Business activities, including warehousing, utilities, insurance, and
employee costs. These plant costs are allocated between the Duncan Hines
Business and other food products that are produced at the Jackson Plant based
primarily on number of employees, usage, and square footage.
DIRECT MARKETING--Direct marketing represents specifically identified
promotional, advertising, and other marketing expenses related to the Duncan
Hines Business.
DIRECT SELLING, ADMINISTRATIVE & OTHER--Certain selling, administrative and
other direct expenses are specifically identifiable and others are allocated to
the Duncan Hines Business based primarily on an estimate of actual time and
effort spent, number of employees, and square footage. Such allocated expenses
represent those charges that are attributable to the Duncan Hines Business and
include Procter & Gamble's Food and Beverage Sector and the Duncan Hines
Category related expenses such as human resources, public affairs, research and
development, finance and accounting, selling, and other general administrative
expenses. Certain administrative and other expenses are allocated to the Duncan
Hines Business by Procter & Gamble that are not directly attributable or
specifically identifiable to the Business and, therefore, are excluded from
direct selling, administrative, and other expenses in the accompanying
statements. Such expenses primarily include Procter & Gamble's Corporate and
North American Region related expenses such as human resources, executive
compensation, management systems, finance and accounting, research and
development, and general corporate expenses.
ALLOCATED SELLING EXPENSE--Selling expense is not specifically identifiable
to the Duncan Hines Business. Such expense is allocated to the Duncan Hines
Business based on the volume in relation to the total volume of the Duncan Hines
Business in relation to the total volume of the North American Region of Procter
& Gamble.
UNAUDITED INTERIM INFORMATION The interim financial data as of December 31,
1997, and for the six months ended December 31, 1997 and 1996 is unaudited;
however, in the opinion of the Company,
F-53
<PAGE>
THE DUNCAN HINES BUSINESS OF
THE PROCTER & GAMBLE COMPANY
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS) (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods.
3. SUPPLEMENTAL FINANCIAL INFORMATION
The following table presents supplemental financial information:
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------------------ -------------------------------
(IN THOUSANDS) 1997 1996 1997 1996 1995
----------- ----------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Depreciation and Amortization(1) $ 1,777 $ 1,863 $ 3,818 $ 3,689 $ 3,598
Cash Flows:
Capital Expenditures(1)..................................... 1,500 1,500 4,600 4,500 3,800
Changes in Inventory........................................ 1,313 (1,098) (3,162) 355 1,149
</TABLE>
- ------------------------------
(1) The amounts for Depreciation and Amortization and Capital Expenditures
include allocations of certain Jackson Plant costs, in addition to those
costs related to Equipment - Net presented in the accompanying statements of
equipment and goodwill. Amounts for Depreciation and Amortization are
included in Product costs in the accompanying statements of direct revenues,
direct expenses, and allocated selling expense. These amounts are not
necessarily indicative of the costs and expenses that would have been
incurred by the Duncan Hines Business on a stand-alone basis.
* * * * * *
F-54
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Kraft Foods, Inc.
We have audited the accompanying statements of assets to be acquired of the
Log Cabin Syrup Business (the "Business"), a component of Kraft Foods, Inc. as
of December 28, 1996 and December 30, 1995, and the statements of operations of
the Business for the years ended December 28, 1996, December 30, 1995 and
December 31, 1994. These financial statements are the responsibility of Kraft
Foods, Inc.'s management. Our responsibility is to express an opinion on these
financial 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 assets to be
acquired and the results of operations of the Business pursuant to the asset
purchase agreement between Kraft Foods, Inc. and MBW Foods, Inc. as described in
Note 1 and are not intended to be a complete presentation of the Business's
financial position and cash flows.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets to be acquired of the Business as of
December 28, 1996 and December 30, 1995 and the results of its operations for
the years ended December 28, 1996, December 30, 1995 and December 31, 1994, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Chicago, Illinois
August 20, 1997
F-55
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS)
STATEMENTS OF ASSETS TO BE ACQUIRED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
Inventories....................................................................... $ 6,717 $ 6,661
Machinery and equipment, net of accumulated depreciation of $2,415 and $2,099,
respectively.................................................................... 8,238 8,976
-------------- --------------
Total assets................................................................ $ 14,955 $ 15,637
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-56
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 28, 1996,
DECEMBER 30, 1995 AND
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales.................................................... $ 104,466 $ 106,330 $ 115,894
Costs and expenses:
Cost of products sold...................................... 36,237 35,804 35,254
Freight and distribution................................... 7,099 7,620 7,553
Trade promotions........................................... 21,355 23,239 20,898
Consumer marketing......................................... 3,994 5,478 7,940
Selling, general and administrative........................ 7,388 7,738 7,863
Amortization of goodwill................................... 1,350 1,350 1,350
--------------- --------------- ---------------
Total costs and expenses................................. 77,423 81,229 80,858
--------------- --------------- ---------------
Net sales less direct and allocated expenses before
taxes.................................................... 27,043 25,101 35,036
Provision for income taxes................................... 11,229 10,461 14,391
--------------- --------------- ---------------
Net sales less direct and allocated expenses................. $ 15,814 $ 14,640 $ 20,645
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-57
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
On May 7, 1997, Kraft Foods, Inc. ("Kraft" or the "Company"), entered into
an Asset Purchase Agreement (the "Agreement") with MBW Foods Inc. (the "Buyer").
The Agreement provides for the sale of certain assets of Kraft pertaining to its
Log Cabin Syrup Business (the "Business"). Under the terms of the Agreement,
Kraft Foods, Inc. sold to the Buyer certain assets (inventory and machinery and
equipment) used in the Business, as defined in the Agreement, and retained the
manufacturing plants, employees and certain liabilities, as defined in the
Agreement, of the Business. The sale was consummated on July 1, 1997.
The Business's products, which are distributed on an international basis,
consist of retail and foodservice syrup products. A significant portion of the
Business's net sales are with major retailers. The accompanying financial
statements represent the results of operations and assets to be acquired of the
Business in the United States and Canada, including export sales, but
specifically excluding the Business in Mexico and the manufacture and sale of
syrups under the Kraft brand name pursuant to a distribution agreement with
Alliant Foodservice, a former indirect wholly-owned subsidiary of Kraft.
Throughout the periods covered by the financial statements, the Business's
operations were conducted and accounted for as part of the Company. These
financial statements have been carved out from the Company's historical
accounting records.
The manufacturing and distribution operations of the Business are conducted
at sites where other Company manufacturing and distribution operations not
included in the Business are present. In addition, certain nonmanufacturing
operations of the Business share facilities and space with other Company
operations. At these shared sites, only the assets of the Business (inventories
and machinery and equipment) are included in the statements of assets to be
acquired.
Under the Company's centralized cash management system, cash requirements of
the Business were generally provided directly by the Company and cash generated
by the Business was generally remitted directly to the Company. Transaction
systems (e.g., payroll, employee benefits, accounts payable) used to record and
account for cash disbursements were provided by centralized Kraft organizations
outside the defined scope of the Business. Most of these corporate systems are
not designed to track assets/liabilities and receipts/payments on a business
specific basis. Given these constraints and since only certain assets of the
Business were sold, statements of financial position and cash flows could not be
prepared.
Net sales in the accompanying statements of operations represent net sales
directly attributable to the Business. Costs and expenses in the accompanying
statements of operations represent direct and allocated costs and expenses
related to the Business. Costs for certain functions and services performed by
centralized Company organizations outside the defined scope of the Business have
been allocated to the Business based on usage or sales of the Business, as
appropriate, compared to total usage or sales. The results of operations include
expense allocations for (1) selling costs for sales and customer service
functions and services performed on behalf of the Business by the centralized
sales group within the Company, (2) fixed manufacturing and distribution costs
of the facilities that produce and store the products of the Business, (3)
research and development expense, (4) administrative costs of the marketing
division responsible for the Business, including finance and accounting, and (5)
certain Kraft marketing and corporate expenses attributable to the Business,
including human resources,
F-58
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS) (CONTINUED)
1. DESCRIPTION OF BUSINESS (CONTINUED)
systems, legal, and risk management (see Notes 2 and 4 for a description of the
allocation methodologies employed). Kraft maintains all debt and notes payable
on a consolidated basis to fund and manage all of its operations. Debt and
related interest expense were not allocated to the Business.
The statements of operations of the Business exclude allocations of certain
expenses, primarily related to certain Kraft general corporate expenses.
Expenses not allocated include, but are not limited to, general overhead costs
related to corporate accounting, human resources, legal, systems, and risk
management.
Total cost of products sold includes $2,398, $2,401, and $2,091 in allocated
costs for the years ended December 28, 1996, December 30, 1995 and December 31,
1994, respectively. Freight and distribution expenses include $2,369, $2,597 and
$2,801 of allocated costs for the years ended December 28, 1996, December 30,
1995 and December 31, 1994, respectively. Selling, general and administrative
expenses include $7,388, $7,738 and $7,863 of allocated costs for the years
ended December 28, 1996, December 30, 1995 and December 31, 1994, respectively.
All of the allocations and estimates in the statements of operations are
based on assumptions that Company management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs and expenses that would have resulted if the Business
had been operated as a separate entity or the future operating results of the
Business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL PERIODS
The Business's fiscal year consists of 52 or 53 weeks, ending on the last
Saturday in December. The year ended December 31, 1994 consisted of 53 weeks.
Each of the years ended December 30, 1995 and December 28, 1996 consisted of 52
weeks.
INCOME RECOGNITION
Sales and related cost of products sold are included in income and expense,
respectively, when products are shipped to the customer.
INVENTORIES
Finished goods inventories are directly attributable to the Business. Raw
materials, packaging and supplies have been allocated to the Business on the
basis of usage during the preceding year. Inventories are priced at the lower of
cost or market with cost determined on a last-in, first-out (LIFO) basis.
Certain distribution and fixed costs have been included in inventory in
accordance with the Uniform Capitalization Rules under the Tax Reform Act of
1986 ("UNICAP") rules.
F-59
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS) (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MACHINERY AND EQUIPMENT
Machinery and equipment in the accompanying statements of assets to be
acquired (the "M&E") is stated at historical cost, net of accumulated
depreciation directly related to that machinery and equipment. Alterations and
major overhauls which extend the lives or increase the capacity of the M&E are
capitalized. The amounts for property disposals are removed from the M&E and
accumulated depreciation accounts and any resultant gain or loss is included in
earnings. Ordinary repairs and maintenance are charged to operating costs.
Depreciation is calculated using the straight-line method over the useful
lives of the M&E. Depreciation expense provided in costs and expenses in the
accompanying statements of operations for the M&E is directly attributable to
the Business. Depreciation expense provided in costs and expenses in the
accompanying statements of operations for the shared facilities is allocated to
the Business based on usage or occupancy of the Business compared to total usage
or occupancy.
COST OF PRODUCTS SOLD
Cost of products sold includes direct costs of materials, labor and overhead
and allocated costs for facilities, functions and services used by the Business
at shared sites. Overhead allocations are based on estimated time spent by
employees, relative use of facilities, estimated consumption of common supplies,
and sales of the Business compared to total Kraft sales.
FREIGHT AND DISTRIBUTION
Freight and distribution expenses consisting of direct outbound freight and
direct and allocated costs related to the warehousing of products of the
Business are included in cost of products sold.
TRADE PROMOTIONS
Trade promotions are directly attributable to the Business and represent
promotional incentives offered to retailers, including both performance and
non-performance trade deals.
CONSUMER MARKETING
Consumer marketing is directly attributable to the Business and consists
primarily of advertising and coupons. Advertising and promotional costs are
generally expensed as incurred. Production costs are expensed on the initial use
of the advertisement or the initial drop of the coupons. Advertising expense was
$361, $23 and $1,594 for the years ended December 28, 1996, December 30, 1995
and December 31, 1994, respectively.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative consists solely of allocated selling,
administrative and research and development expenses. The Business has allocated
these expenses based on various measures relevant to the expense being
allocated.
F-60
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS) (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION OF GOODWILL
Goodwill consists of an estimate of goodwill allocable to the Business
arising from Philip Morris's acquisition of General Foods, Inc. in 1985.
Goodwill is amortized over 40 years using the straight-line method.
INCOME TAXES
The taxable income of the Business was included in the tax returns of Philip
Morris. As such, separate income tax returns were not prepared or filed for the
Business. The provisions for income taxes included in the accompanying
statements of operations have been determined on a separate company basis. No
deferred income taxes have been attributed to the Business.
PENSIONS
The Company has noncontributory defined benefit plans covering substantially
all U.S. employees, including the employees of the Business. The benefits for
these plans are based primarily on employees' years of service and employees'
compensation during the last years of employment. It is the Company's policy to
fund at least the minimum amounts required by the Employee Retirement Income
Security Act of 1974. The Company maintains profit-sharing and savings plans for
full-time employees who meet certain eligibility requirements. The service and
interest costs allocated to the Business relative to the aforementioned plans
are based on pensionable earnings of employees directly attributable or
allocated to the Business.
OTHER POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits
(postretirement benefits) to substantially all eligible retired U.S. employees
and their dependents. These benefits are accounted for as they are earned by
active employees. The postretirement costs allocated to the Business are based
on headcount of employees directly attributable or allocated to the Business.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Also, as
discussed in Note 1, these financial statements include allocations and
estimates that are not necessarily indicative of the costs and expenses that
would have resulted if the Business had been operated as a separate entity or
the future results of the Business.
F-61
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS) (CONTINUED)
3. PROVISION FOR INCOME TAXES
The provisions for income taxes for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal........................................................................ $ 9,242 $ 8,610 $ 11,844
State.......................................................................... 1,987 1,851 2,547
--------- --------- ---------
Provision for income taxes..................................................... $ 11,229 $ 10,461 $ 14,391
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Business's effective income tax rate differed from the U.S. federal
statutory rate for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal........................................................................ 35.0% 35.0% 35.0%
State (net of federal tax benefit)............................................. 4.8 4.8 4.7
Goodwill amortization.......................................................... 1.7 1.9 1.4
--------- --------- ---------
Provision for income taxes..................................................... 41.5% 41.7% 41.1%
--------- --------- ---------
--------- --------- ---------
</TABLE>
4. INVENTORIES
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Raw materials, packaging and supplies......................................................... $ 2,846 $ 2,455
Finished products............................................................................. 4,186 5,223
--------- ---------
7,032 7,678
Adjustment to LIFO basis...................................................................... (315) 1,017
--------- ---------
$ 6,717 $ 6,661
--------- ---------
--------- ---------
</TABLE>
The Company's application of LIFO is not attributable to individual product
lines. Accordingly, the results of applying LIFO have been allocated to the
Business based on sales of the Business compared to total sales of Kraft.
Management believes such allocations are reasonable, but may not necessarily
reflect the costs that would have been incurred if LIFO had been applied on a
business specific basis.
5. COMMITMENTS AND CONTINGENCIES
The Business is currently subject to certain lawsuits and claims with
respect to matters such as product liability and other actions arising in the
normal course of business. Such lawsuits and claims, as defined in the
Agreement, are the responsibility of Kraft.
6. CASH FLOW INFORMATION
The Business had capital expenditures of $500, $1,200 and $800, for the
years ended December 28, 1996, December 30, 1995 and December 31, 1994.
F-62
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
<S> <C> <C>
JUNE 28, JUNE 29,
1997 1996
--------- ---------
Net Sales.................................................................................. $ 51,222 $ 51,509
Costs and Expenses
Cost of products sold.................................................................... 18,067 16,269
Brokerage and distribution............................................................... 3,239 3,589
Trade promotions......................................................................... 9,457 10,452
Consumer marketing....................................................................... 597 3,789
Selling, general and administrative...................................................... 3,637 3,802
Amortization of goodwill................................................................. 675 675
--------- ---------
Total costs and expenses................................................................... 35,672 38,576
--------- ---------
Net sales less direct and allocated expenses before taxes.................................. 15,550 12,933
Provision for income taxes................................................................. 6,376 5,303
--------- ---------
Net sales less direct and allocated expenses............................................... $ 9,174 $ 7,630
--------- ---------
--------- ---------
</TABLE>
F-63
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of
Pet Incorporated
In our opinion, the accompanying combined statements of income of Van de
Kamp's frozen seafoods business and frozen dessert product lines (the
Businesses), comprising businesses of Pet Incorporated (the Company), present
fairly, in all material respects, results of operations of the Businesses for
the period July 1, 1995 through September 18, 1995 and for the year ended June
30, 1995 in conformity with generally accepted accounting principles. These
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these 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 these 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 presentation of these statements. We believe that our
audits of these statements provide a reasonable basis for the opinion expressed
above.
As explained in Note 1, Van de Kamp's, Inc. acquired the assets of the
Businesses from The Pillsbury Company and Pet Incorporated on September 19,
1995.
Price Waterhouse LLP
San Francisco, California
July 22, 1996
F-64
<PAGE>
VAN DE KAMP'S AND FROZEN DESSERT
PRODUCT LINES OF PET INCORPORATED
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 1, 1995 FOR THE YEAR
THROUGH ENDED
SEPTEMBER 18, 1995 JUNE 30, 1995
-------------------- --------------
<S> <C> <C>
Net sales................................................................... $ 20,545 $ 149,359
Cost of goods sold.......................................................... 10,978 66,111
-------- --------------
Gross profit.............................................................. 9,567 83,248
-------- --------------
Selling distribution and marketing expenses:
Selling and distribution.................................................. 1,616 11,376
Trade promotions.......................................................... 3,699 34,530
Consumer marketing........................................................ 1,919 8,260
-------- --------------
Total selling, distribution and marketing expenses...................... 7,234 54,166
Amortization of goodwill.................................................... 689 3,305
General and administrative expenses......................................... 1,370 9,789
-------- --------------
Total operating expenses................................................ 9,293 67,260
-------- --------------
Income from operations before income taxes.............................. 274 15,988
Provision for income taxes.................................................. 396 7,716
-------- --------------
Net income (loss)....................................................... $ (122) $ 8,272
-------- --------------
-------- --------------
</TABLE>
F-65
<PAGE>
VAN DE KAMP'S AND FROZEN DESSERT
PRODUCT LINES OF PET INCORPORATED
NOTES TO THE COMBINED STATEMENTS OF INCOME
1. THE ENTITY
The Van de Kamp's frozen seafoods business (VDK) and certain frozen dessert
product lines (Desserts, together with VDK referred to as the "Businesses"),
were owned by Pet Incorporated (Pet) which had operated as a stand alone entity
from April 1, 1991 through February 8, 1995, upon which date Pet was acquired as
a wholly-owned subsidiary of The Pillsbury Company (Pillsbury), an indirect
wholly-owned subsidiary of Grand Metropolitan PLC, a company incorporated in
England. In accordance with the Asset Purchase Agreement dated as of July 7,
1995 (the Agreement), Pillsbury and Pet agreed to sell and transfer certain
assets of the Businesses to Van de Kamp's, Inc. VDK produces and markets branded
frozen seafood in the United States. The Desserts businesses represent frozen
dessert lines consisting of Pet-Ritz brand cream pies and cobblers, Oronoque
Orchards brand pie crusts and private label whipped toppings. Assets acquired by
Van de Kamp's, Inc. on September 19, 1995 were limited to inventories, property,
plant and equipment, and the intangible assets of the Businesses. No other
assets were acquired and no liabilities of the Businesses were assumed.
The historical net sales of the Businesses represented approximately 10% of
Pet's consolidated net sales in recent years. Of the Businesses' net sales for
the period July 1, 1995 through September 18,1995 and the year ended June 30,
1995 approximately 67.7% and 75.6%, respectively, relate to VDK, with the
remainder relating to Desserts.
2. BASIS OF PRESENTATION
The combined statements of income of the Businesses were derived from the
accounting records of Pillsbury and Pet and have been presented on a Pet
historical cost basis. Purchase accounting adjustments reflecting the Pillsbury
basis after February 8, 1995, in conjunction with the acquisition of Pet, were
not pushed down to the asset balances of the Businesses and are not reflected in
the related financial information presented herein.
The combined statements of income include revenue and expenses directly
attributable to the manufacture and sale of the Businesses' products as well as
the allocation of general and administrative expenses (see Note 3). However,
Pillsbury and Pet maintained all debt and notes payable on a consolidated basis
to fund and manage all product lines and businesses; debt and related interest
expense were not allocated to individual product lines. Accordingly, no interest
expense for these Businesses is included in the combined statements of income
presented herein.
Full financial statements, including complete historical balance sheets and
statements of cash flows, of the Businesses have not been presented. Neither
Pillsbury nor Pet operated these product lines as separate divisions or business
entities. Accordingly, it is not practicable to separate other components of
assets, liabilities or cash flows related specifically to these product lines.
The financial information in these statements is not necessarily indicative of
results that would have occurred if the Businesses had been a separate stand
alone entity during the periods presented or of future results of the
Businesses.
F-66
<PAGE>
VAN DE KAMP'S AND FROZEN DESSERT
PRODUCT LINES OF PET INCORPORATED
NOTES TO THE COMBINED STATEMENTS OF INCOME (CONTINUED)
3. SUMMARY OF ACCOUNTING POLICIES
Revenue recognition--Revenue from the sale of the Businesses' products is
recognized upon shipment to the customer. Costs and related expenses to
manufacture the Businesses' products are recorded as costs of goods sold when
the related revenue is recognized.
Allocation of general and administrative expenses--Prior to the acquisition
by Pillsbury, Pet provided various general and administrative services to the
Businesses including quality control, quality assurance, engineering, cost
accounting, labor relations, product development, computer processing systems,
treasury, legal, employee benefits, human resources, insurance and corporate
facilities and management. These expenses were allocated to all of Pet's product
lines, including the Businesses, based primarily on budgeted sales. Upon
conversion to Pillsbury's systems as of May 1, 1995, similar costs for the
months of May and June of 1995 and during the period ended September 18, 1995
were allocated from Pillsbury on a consistent basis.
Warehousing costs--Warehousing costs, including internal and external costs,
of $1,176 and $4,248 for the period July 1, 1995 through September 18, 1995 and
the year ended June 30, 1995, respectively, are reflected in cost of goods sold.
Selling, distribution and marketing expenses--Pet aggregates its selling,
distribution and marketing expenses into three categories. Selling and
distribution expenses include costs of the outside brokerage network and
outbound freight. Trade promotions represent promotional incentives offered to
retailers. Consumer marketing expense is comprised of costs for advertising and
coupon placements and related processing.
Property, plant and equipment--Property, plant and equipment are stated at
cost and depreciation is computed using the straight line method at annual rates
of 2% to 20%. Expenditures for improvements which substantially extend the
useful life or increase the capacity of assets, including interest during the
construction period, are capitalized. Capital expenditures for the Businesses
were $0 and $1,884 for the period July 1, 1995 to September 18, 1995 and the
year ended June 30, 1995, respectively. Ordinary repairs and maintenance are
expensed as incurred. When property, plant and equipment are sold or retired,
cost and accumulated depreciation are removed from the accounts and gains and
losses are recorded in income. Depreciation expense for the Businesses was $653
and $3,016 for the period July 1, 1995 through September 18, 1995 and the year
ended June 30, 1995, respectively.
Goodwill--Goodwill consists of the excess of cost over the fair market value
of net tangible assets acquired. Goodwill is being amortized on a straight-line
basis over 40 years.
4. PROVISION FOR INCOME TAXES
The Businesses have been included in the combined federal and certain state
tax returns of Pet through February 8, 1995 and included with those of Pillsbury
through September 18, 1995. The provision for income taxes included in these
statements has been calculated based upon statutory rates applied to pre-tax
income adjusted for goodwill amortization and may not necessarily be indicative
of the Businesses' tax expense on a stand alone basis.
F-67
<PAGE>
VAN DE KAMP'S AND FROZEN DESSERT
PRODUCT LINES OF PET INCORPORATED
NOTES TO THE COMBINED STATEMENTS OF INCOME (CONTINUED)
4. PROVISION FOR INCOME TAXES (CONTINUED)
The items which gave rise to differences between the income taxes provided
in the statement of income and income taxes computed at the U.S. statutory rate
are summarized below (in thousands):
<TABLE>
<CAPTION>
JULY 1, 1995
THROUGH
SEPTEMBER 18, 1995 1995
---------------------- --------------------
AMOUNT % AMOUNT %
<S> <C> <C> <C> <C>
Income tax expense computed at statutory rate..... $ 96 35.0 $ 5,595 35.0
State income taxes, net of federal income tax
benefit.......................................... 14 5.0 799 5.0
Goodwill amortization............................. 286 4.4 1,322 8.3
----- --- --------- ---
Provision for federal taxes..................... $ 396 44.4 $ 7,716 48.3
----- --- --------- ---
----- --- --------- ---
</TABLE>
F-68
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholder has agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom Goldman,
Sachs & Co., BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, Credit Suisse First Boston Corporation, SBC Warburg
Dillon Read Inc., and Chase Securities Inc. are acting as representatives, has
severally agreed to purchase from the Company and the Selling Stockholder the
respective number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- -------------------------------------------------------- ------------------
<S> <C>
Goldman, Sachs & Co.....................................
BT Alex. Brown Incorporated.............................
Donaldson, Lufkin & Jenrette Securities Corporation.....
Credit Suisse First Boston Corporation..................
SBC Warburg Dillon Read Inc.............................
Chase Securities Inc....................................
------------------
Total............................................. 12,325,000
------------------
------------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
to certain brokers and dealers. After the shares of Common Stock are released
for sale to the public, the offering price and other selling terms may from time
to time be varied by the representatives.
The Company and the Selling Stockholder have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters") providing for the
concurrent offer and sale of 2,175,000 shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two equity
offerings are identical. The closing of the offering made hereby is a condition
to the closing of the International Offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International, BT Alex. Brown International, Donaldson, Lufkin & Jenrette
International, Credit Suisse First Boston (Europe) Limited, Swiss Bank
Corporation acting through its division, SBC Warburg Dillon Read, and Chase
Manhattan International Limited.
U-1
<PAGE>
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two equity offerings, each
of the U.S. Underwriters named herein has agreed that, as part of the
distribution of the shares offered hereby and subject to certain exceptions, it
will offer, sell or deliver the shares of Common Stock, directly or indirectly,
only in the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction (the "United States") and to U.S. persons, which term shall mean,
for purposes of this paragraph: (a) any individual who is a resident of the
United States or (b) any corporation, partnership or other entity organized in
or under the laws of the United States or any political subdivision thereof and
whose office most directly involved with the purchase is located in the United
States. Each of the International Underwriters has agreed pursuant to the
Agreement Between that, as a part of the distribution of the shares offered as
part of the international offering, and subject to certain exceptions, it will
(i) not, directly or indirectly, offer, sell or deliver shares of Common Stock
(a) in the United States or to any U.S. persons or (b) to any person who it
believes intends to reoffer, resell or deliver the shares in the United States
or to any U.S. persons, and (ii) cause any dealer to whom it may sell such
shares at any concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
In connection with the Equity Offerings, the Underwriters may purchase and
sell the Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the Underwriters in connection with the Equity Offerings.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Common Stock; and
short positions created by the Underwriters involve the sale by the Underwriters
of a greater number of shares of Common Stock than they are required to purchase
from the Company and the Selling Stockholder in the Equity Offerings. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the Common Stock sold in the Equity Offerings
may be reclaimed by the Underwriters if such Common Stock is repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
The Selling Stockholder has granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 1,848,750 additional shares of Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 12,325,000 shares of Common Stock offered. The Selling
Stockholder has granted the International Underwriters a similar option
exercisable up to an aggregate of 326,250 additional shares of Common Stock.
The Company and the Selling Stockholder have agreed that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 days after the date of this Prospectus, they will not offer, sell,
contract to sell or file a registration statement (other than, in the case of
the Company, a registration statement on Form S-8 with respect to an employee
benefit plan) with respect to or otherwise dispose of, directly or indirectly,
any Common Stock, or any securities of the Company (other than pursuant to
employee stock option and incentive plans and agreements, upon conversion of
convertible securities or grants of options to directors outstanding as of the
date of the Underwriting Agreement) which are substantially similar to the
Common Stock or any other securities
U-2
<PAGE>
which are exercisable or exchangeable for, convertible into or whose exercise or
settlement price is derived from the price of Common Stock or any such
securities substantially similar to the Common Stock, without the prior written
consent of the representatives of the Underwriters.
Prior to the Equity Offerings, there has been no public market for the
shares of Common Stock. The initial public offering price has been negotiated
among the Company, the Selling Stockholder and the representatives of the U.S.
Underwriters and the International Underwriters. Among the factors considered in
determining the initial public offering price of the Common Stock, in addition
to prevailing market conditions, were the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to the market valuation of companies in related businesses.
The Common Stock has been approved for listing, subject to notice of
issuance, on the New York Stock Exchange, and application has been made to list
the Common Stock on the Pacific Exchange, under the symbol "AOR". In order to
meet one of the requirements for listing the Common Stock on the New York Stock
Exchange, the U.S. Underwriters have undertaken to sell lots of 100 or more
shares to a minimum of 2,000 beneficial holders.
In addition to acting as a U.S. Underwriter in connection with the Equity
Offerings, Chase Securities Inc. ("CSI") and its affiliates have certain other
relationships with the Company. Chase is agent bank and a lender under the
Aurora Senior Bank Facilities and the VDK Senior Bank Facilities and will
receive its proportionate share of any repayment by the Company of amounts
outstanding under such facilities from the proceeds of the Equity Offerings.
Chase has agreed to provide VDK with a $101 million senior subordinated credit
facility and Chase will be the Administrative Agent and CSI will be the
Arranging Agent under the Company's Senior Credit Facilities. See
"Indebtedness--Senior Credit Facilities" and "Senior Subordinated Facility
Commitment". Affiliates of CSI are limited partners of McCown De Leeuw & Co.
III, L.P., McCown DeLeeuw & Co. IV, L.P. and Fenway Partners Capital Fund, L.P.
As a result of the proposed bank debt repayments described above, this
offering is being conducted in accordance with Rule 2720 of the National
Association of Securities Dealers, Inc. (the "NASD"), which provides that, among
other things, when more than 10% of the proceeds of a public offering of
securities are to be paid to an NASD member participating in such offering or to
an affiliate of such member, the initial public offering price can be no higher
than that recommended by a "qualified independent underwriter" meeting certain
standards. In accordance with this requirement, Goldman, Sachs & Co. has served
in such role and has recommended a price in compliance with the requirements of
Rule 2720. Goldman, Sachs & Co. will receive compensation from the Company in
the amount of $10,000 for serving in such role. In connection with the offering,
Goldman, Sachs & Co. in its role as qualified independent underwriter has
performed due diligence investigations and reviewed and participated in the
preparation of this Prospectus and the Registration Statement of which this
Prospectus forms a part. In addition, the Underwriters may not confirm sales to
any discretionary account without the prior specific written approval of the
customer.
The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the shares of Common Stock, including shares initially sold
in the International Equity Offering, to persons located in the United States.
U-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 9
Refinancings.......................... 13
Use of Proceeds....................... 15
Dividend Policy....................... 15
Forward-Looking Statements............ 15
Background............................ 16
Dilution.............................. 17
Capitalization........................ 18
Unaudited Pro Forma Financial
Information......................... 19
Selected Historical Financial Data.... 34
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 38
Business.............................. 53
Management............................ 65
Principal Stockholders and Selling
Stockholder......................... 78
Certain Relationships and Related
Transactions........................ 83
Description of Capital Stock.......... 86
Description of Indebtedness........... 88
Shares Eligible for Future Sale....... 95
Certain United States Federal Tax
Consequences to Non-United States
Holders of Common Stock............. 96
Additional Information................ 99
Validity of Shares.................... 99
Experts............................... 99
Index to Financial Statements......... F-1
Underwriting.......................... U-1
</TABLE>
--------------------------
THROUGH AND INCLUDING ,1998 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
14,500,000 SHARES
AURORA FOODS INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------------------
[LOGO]
--------------------------
GOLDMAN, SACHS & CO.
BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CREDIT SUISSE FIRST BOSTON
SBC WARBURG DILLON READ INC.
CHASE SECURITIES INC.
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth those expenses to be incurred by the Company in
connection with the issuance and distribution of the Common Stock being
registered. All amounts shown except Securities and Exchange Commission filing
fee are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee........ $ 113,140
NASD filing fee...................................... 27,500
NYSE listing fee..................................... 121,350
Printing and engraving fees.......................... 500,000
Pacific Exchange listing fee......................... 10,000
Accountants' fees and expenses....................... 750,000
Legal fees and expenses.............................. 2,000,000
Road show............................................ 750,000
Blue sky expenses.................................... 10,000
Registrant's and transfer agent's fee................ 100,000
Miscellaneous expenses............................... 264,010
-----------
Total.............................................. $4,646,000
-----------
-----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") grants each corporation organized thereunder, such as the registrant,
the power to indemnify its directors and officers against liabilities for
certain of their acts. Section 102(b)(7) of the DGCL permits a provision in the
certificate of incorporation of each corporation organized thereunder, such as
the registrant, eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for certain breaches of
fiduciary duty as a director except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions)or (iv) for any transaction from which a director derived an
improper personal benefit. Article Eighth of the Company's Certificate of
Incorporation has eliminated the personal liability of directors to the fullest
extent permitted by Section 102(b)(7) of the DGCL.
Article VI of the Company's By-Laws provides, among other things that the
Company shall indemnify, in the manner and to the fullest extent permitted by
applicable law, officers and directors of the Company (or the estate of such
person) who was or is a party to, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the Company, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was or
has agreed to be a director, officer, employee, or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees and expenses),
judgments, fines, penalties and amounts paid in settlement actually and
reasonably incurred (and not otherwise recovered) by such person in connection
with the investigation, preparation to defend or defense of such action, suit,
claim or proceeding. To the extent and in the manner provided by applicable law,
any such expenses may be paid by the Company in advance of the final disposition
of such action, suit or proceeding even if such director or officer is alleged
to have not met the applicable standard of conduct required under Article VI or
is alleged to have committed conduct so that, if true, such director or officer
would not be entitled to indemnification under Article VI, upon receipt of an
undertaking, which need not be secured, by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Company as authorized in
II-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS (CONTINUED)
Article VI, PROVIDED, HOWEVER, that the foregoing shall not require the Company
to indemnify or advance expenses to any person in connection with any action,
suit, proceeding, claim or counterclaim initiated by or on behalf of such
person. Unless otherwise permitted by applicable law, the indemnification
provided for in Article VI shall be made only as authorized in the specific case
upon a determination, made in the manner provided by applicable law, that
indemnification of such director, officer, employee or agent is proper in the
circumstances. The By-Laws also allow the Company, to the fullest extent
permitted by applicable law, to purchase and maintain insurance for any such
person indemnified by Article VI.
The foregoing statements are subject to the detailed provisions of Section
102(b)(7) of the DGCL, Article Eighth of the Certificate of Incorporation of the
Company and Article VI of the By-Laws of the Company, as applicable.
The Company and each of its directors and Ms. Cummings have each entered
into an Indemnification Agreement which provides, among other things, for the
payment, in advance by the Company, of expenses incurred by any such person in
connection with an investigation, preparation to defend or defense of an action,
suit, claim or proceeding which arises by reason of the fact that such person
agreed to be a director or an officer of the Company, as the case may be.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Underwriting Agreement among Aurora Foods Inc., Aurora/VDK LLC, Goldman, Sachs & Co., BT Alex. Brown
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, Credit Suisse First Boston
Corporation, SBC Warburg Dillon Read Inc. and Chase Securities Inc.
2.1 Form of Merger Agreement between Aurora Foods Inc. and A Foods Inc.
2.2 Form of Merger Agreement among Aurora Foods Holdings Inc., AurFoods Operating Co. Inc., VDK Holdings,
Inc., Van de Kamp's, Inc. and A Foods Inc.
2.3 Asset Purchase Agreement, dated as of November 26, 1997, by and between Aurora Foods Inc. and The
Procter & Gamble Company. (Incorporated by reference to Exhibit 2.1 to Aurora Foods Inc.'s Form 8-K
filed on January 30, 1998).**
2.4 Asset Purchase Agreement, dated as of March 7, 1997 by and between Aurora Foods Inc. and Kraft Foods,
Inc. (Incorporated by reference to Exhibit 2.2 to Aurora Foods Inc.'s Form S-4 filed on August 21, 1997
(the "Aurora S-4").**
2.5 Amendment to Asset Purchase Agreement, dated as of February 13, 1997, between Van de Kamp's, Inc. and
Morningstar Foods, Inc. (Incorporated by reference to Exhibit 2.2 to Form 10-Q for the quarter ended
March 31, 1997).**
2.6 Asset Purchase Agreement, dated as of February 3, 1997, between Van de Kamp's, Inc. and Morningstar
Foods, Inc. (Incorporated by reference to Exhibit 2.1 to Form 10-Q for the quarter ended March 31,
1997).**
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
II-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.7 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 Aurora S-4).**
2.8 Supplement No. 1 to Asset Purchase and Sales Agreement, dated as of July 9, 1996, between Van de Kamp's,
Inc. and the Quaker Oats Company ("Quaker Oats"). (Incorporated by reference to Exhibit 2.2 to Van de
Kamp's, Inc.'s Form 8-K dated July 9, 1996).**
2.9 Asset Purchase and Sales Agreement, dated as of May 15, 1996 between Van de Kamp's, Inc. and Quaker
Oats. (Incorporated by reference to Exhibit 2.1 to Van de Kamp's, Inc.'s Form 8-K dated July 9, 1996).**
2.10 Asset Purchase and Sales Agreement, dated as of January 17, 1996, between Shellfish Acquisition Company,
LLC ("Shellfish") and Campbell Soup Company ("Campbell") (the text of which and Exhibits to which are
Incorporated by reference to Exhibit 2.1 to Van de Kamp's, Inc.'s Form 10-Q for the quarter ended March
30, 1996 and a list of the contents of the schedules of which is incorporated by reference to Exhibit
2.1 to Van de Kamp's, Inc.'s Form 8-K dated May 6, 1996).**
2.11 Asset Purchase Agreement, dated as of January 17, 1996, between Van de Kamp's, Inc. and Shellfish.
(Incorporated by reference to Exhibit 2.2 to Van de Kamp's, Inc.'s Form 10-Q for the quarter ended March
30, 1996).**
2.12 Agreement and Amendment No. 1, dated September 19, 1995, to the Asset Purchase Agreement among Van de
Kamp's, Inc., the Pillsbury Company and PET Incorporated. (Incorporated by reference to Exhibit 2.2 to
Van de Kamp's, Inc.'s Form S-4 filed on October 4, 1995 (the "Van de Kamp's S-4").**
2.13 Asset Purchase Agreement, dated as of July 7, 1995 among Van de Kamp's, Inc., the Pillsbury Company and
PET Incorporated. (Incorporated by reference to Exhibit 2.1 to the Van de Kamp's S-4).**
2.14 Form of Certificate of Merger of Aurora Foods Inc. with and into A Foods Inc.
3.1 Certificate of Incorporation of A Foods Inc., filed with the Secretary of State of the State of Delaware
on June 19, 1998.**
3.2 Amended and Restated By-Laws of Aurora Foods Inc.
4.1 Specimen Certificate of the Common Stock.
4.2 Securityholders Agreement, dated as of April 8, 1998, among the parties listed on Schedule A attached
thereto.**
4.3 Second Amended and Restated Limited Liability Company Agreement of VDK Foods LLC, as amended.
4.4 Second Amended and Restated Limited Liability Company Agreement of MBW Investors LLC, dated as of April
8, 1998.**
4.5 Indenture, dated as of February 10, 1997, by and between Aurora Foods Inc. and Wilmington Trust Company
(the "Series B Indenture"). (Incorporated by reference to Exhibit 4.1 to the Aurora S-4).**
4.6 Specimen Certificate of 9 7/8% Series B Senior Subordinated Note due 2007 (included in Exhibit 4.5
hereto). (Incorporated by reference to Exhibit 4.3 to the Aurora S-4).**
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
II-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.7 Form of Note Guarantee to be issued by future subsidiaries of Aurora Foods Inc. pursuant to the Series B
Indenture (included in Exhibit 4.1 hereto). (Incorporated by reference to Exhibit 4.4 to the Aurora
S-4).**
4.8 Indenture, dated as of July 1, 1997, by and between Aurora Foods Inc. and Wilmington Trust Company (the
"Series D Indenture"). (Incorporated by reference to Exhibit 4.6 to the Aurora S-4).**
4.9 Specimen Certificate of 9 7/8% Series D Senior Subordinated Note, due 2007 (included in Exhibit 4.5
hereto).**
4.10 Form of Note Guarantee to be issued by future subsidiaries of Aurora Foods Inc. pursuant to the Series D
Indenture (included in Exhibit 4.6 hereto). (Incorporated by reference to Exhibit 4.8 to the Aurora
S-4).**
4.11 Indenture, dated as of September 15, 1995, between Van de Kamp's, Inc. and Harris Trust and Savings Bank
(Incorporated by reference to Exhibit 4.1 to the Van de Kamp's S-4).**
4.12 Global Note, dated September 19, 1995, issued by Van de Kamp's, Inc. to the Depository Trust Company and
registered in the name of Cede & Co. in the principal amount of $100,000,000 (Incorporated by reference
to Exhibit 4.2 to the Van de Kamp's S-4).**
4.13 Form of Indenture, by and between Aurora Foods Inc. and Wilmington Trust Company (the "New Indenture").
4.14 Form of Specimen Certificate of the Series E Senior Subordinated Note Due 2008 (included in Exhibit 4.13
hereto).
4.15 Form of Registration Rights Agreement between Aurora Foods Inc. and Chase Securities Inc., Goldman,
Sachs & Co. and Natwest Capital Markets Limited (included in Exhibit 10.3 hereto).
5.1 Form of opinion of Richards & O'Neil, LLP regarding the validity of the Common Stock.
10.1 VDK Holdings, Inc. Incentive Compensation Plan.
10.2 1998 Incentive Plan.
10.3 Form of Purchase Agreement, between Aurora Foods Inc. and Chase Securities, Inc., Goldman, Sachs & Co.
and NatWest Capital Markets Limited.
10.4 Purchase Agreement, dated June 18, 1997, by and among Aurora Foods Inc., Chase Securities, Inc. and
Credit Suisse First Boston Corporation. (Incorporated by reference to Exhibit 1.2 to the Aurora S-4).**
10.5 Purchase Agreement, dated February 5, 1997 by and between Aurora Foods Inc. and Chase Securities Inc.
(Incorporated by reference to Exhibit 1.1 to the Aurora S-4).**
10.6 Purchase Agreement, dated September 14, 1995, between Van de Kamp's, Inc. and Chemical Securities Inc.
(Incorporated by reference to Exhibit 10.30 to the Van de Kamp's S-4).**
10.7 Employment Agreement between Ian R. Wilson and Aurora Foods Inc.
10.8 Employment Agreement between James B. Ardrey and Aurora Foods Inc.
10.9 Employment Agreement between Ray Chung and Aurora Foods Inc.
10.10 Employment Agreement between M. Laurie Cummings and Aurora Foods Inc.
10.11 Amendment No. 1 to Ferraro Employment Agreement, dated as of January 1, 1998, between Aurora Foods Inc.
and Thomas S. Ferraro.**
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
II-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.12 Employment Agreement, dated as of December 31, 1996, by and between Aurora Foods Inc. and Thomas J.
Ferraro (Incorporated by reference to Exhibit 10.5 to the Aurora S-4).**
10.13 Amendment No. 1 to Willett Employment Agreement, dated as of January 1, 1998, between C. Gary Willett
and Aurora Foods Inc.**
10.14 Employment Agreement, dated as of December 31, 1996, by and between Aurora Foods Inc. and C. Gary
Willett. (Incorporated by reference to Exhibit 10.6 to the Aurora S-4).**
10.15 Amendment No. 1 to Ellinwood Amended and Restated Employment Agreement, dated as of January 1, 1998,
between Thomas 0. Ellinwood and Van de Kamp's, Inc.**
10.16 Amended and Restated Employment Agreement, dated as of March 11, 1997, by and between Thomas 0.
Ellinwood and Van de Kamp's, Inc.**
10.17 Employment Agreement, dated as of February 16, 1998, by and between Van de Kamp's, Inc. and Anthony A.
Bevilacqua.**
10.18 Security Agreement, dated as of September 19, 1995, made by Van de Kamp's, Inc., in favor of Chemical
Bank (Incorporated by reference to Exhibit 10.20 to the Van de Kamp's S-4).**
10.19 Second Amended and Restated Credit Agreement, dated as of January 16, 1998, by and among Aurora Foods
Inc., as Borrower, Aurora Foods Holdings Inc., as Guarantor, the Lenders listed therein, The Chase
Manhattan Bank, as Administrative Agent, The National Westminster Bank PLC, as Syndication Agent and
Swiss Bank Corporation, as Documentation Agent (Incorporated by reference to Exhibit 10.4 to Form 10-K,
filed on March 27, 1998 (the "Aurora 10-K")).**
10.20 Form of Third Amended and Restated Credit Agreement by and among Aurora Foods Inc., as Borrower, the
Lenders listed therein, The Chase Manhattan Bank as Administrative Agent, Chase Securities Inc. as
Arranging Agent, National Westminster Bank PLC as Syndication Agent and Swiss Bank Corporation as
Documentation Agent.
10.21 Second Amendment to Guarantee and Collateral Agreement, dated July 9, 1996, between Van de Kamp's, Inc.
and VDK Holdings, Inc. in favor of The Chase Manhattan Bank, NA, as agent for the several banks and
other financial institutions (Incorporated by reference to Exhibit 10.23 of the Van de Kamp's, Inc. Form
10-K filed on September 27, 1996 (the "1996 Van de Kamp's 10-K").**
10.22 First Amendment to Guarantee and Collateral Agreement, dated May 6, 1996 between Van de Kamp's, Inc. and
VDK Holdings, Inc. in favor of Chemical Bank, as agent for the several banks and other financial
institutions from time to time parties to the Amended and Restated Credit and Guarantee Agreement.
(Incorporated by reference to Exhibit 10.20 to the 1996 Van de Kamp's 10-K.)**
10.23 Guarantee and Collateral Agreement, dated September 19, 1995, among VDK Holdings, Inc., Van de Kamp's,
Inc., the subsidiary grantors named therein and Chemical Bank as agent (Incorporated by reference to
Exhibit 10.19 to the 1996 Van de Kamp's S-4).**
10.24 Third Amendment to the Second Amended and Restated Credit and Guarantee Agreement, dated as of September
25, 1997, among VDK Holdings, Inc., Van de Kamp's, Inc., the banks, and other financial institutions
named as parties thereto and The Chase Manhattan Bank, NA, as agent (Incorporated by reference to
Exhibit 10.32 to Van de Kamp's Inc.'s Form 10-K filed on September 29, 1997 (the "1997 Van de Kamp's
10-K").**
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
II-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.25 Second Amendment to the Second Amended and Restated Credit and Guarantee Agreement, dated as of March
27, 1997, among VDK Holdings, Inc., Van de Kamp's, Inc., the banks, and other financial institutions
named as parties thereto and The Chase Manhattan Bank, NA, as agent (Incorporated by reference to
Exhibit 10.1 to Van de Kamp's, Inc.'s Form 10-Q for the quarter ended March 31, 1997).**
10.26 First Amendment, dated as of August 28, 1996, to the Second Amended and Restated Credit and Guarantee
Agreement among VDK Holdings, Inc., Van de Kamp's, Inc., the banks and other financial institutions
named as parties thereto and the Chase Manhattan Bank, NA, as agent (Incorporated by reference to
Exhibit 10.22 to the 1996 Van de Kamp's 10-K).**
10.27 Second Amended and Restated Credit and Guarantee Agreement, dated as of July 9, 1996, among VDK
Holdings, Inc., Van de Kamp's, Inc., the banks and other financial institutions named as parties thereto
and The Chase Manhattan Bank, NA, as agent (Incorporated by reference to Exhibit 10.21 to the 1996 Van
de Kamp's 10-K).**
10.28 Cash Collateral Agreement, dated July 9, 1996, between VDK Holdings, Inc. and The Chase Manhattan Bank,
NA, as agent (Incorporated by reference to Exhibit 10.29 to the 1996 Van de Kamp's 10-K).**
10.29 First Amended and Restated Red Wing Co-Pack Agreement, dated as of November 19, 1997, by and between
Aurora Foods Inc. and The Red Wing Company, Inc. (Confidential treatment for a portion of this document
has been requested by Aurora Foods Inc. Incorporated by reference to Exhibit 10.16 to the Aurora
10-K).**
10.30 Production Agreement, dated November 19, 1997, by and between Aurora Foods Inc. and The Red Wing
Company, Inc. (Confidential treatment for a portion of this document has been requested by Aurora Foods
Inc. Incorporated by reference to Exhibit 10.18 to the Aurora 10-K).**
10.31 Transitional Supply Agreement, dated November 26, 1997, by and between Aurora Foods Inc. and The Procter
& Gamble Distributing Company. (Confidential treatment for a portion of this document has been requested
by Aurora Foods Inc. Incorporated by reference to Exhibit 10.20 to the Aurora 10-K).**
10.32 Form of Expense Agreement between Aurora Foods Inc. and Dartford Partnership L.L.C.**
10.33 Form of Advisory Agreement among Aurora/VDK LLC, Van de Kamp's Inc., VDK Holdings, Inc., Aurora Foods
Inc. and Aurora Foods Holdings Inc. and Dartford Partnership L.L.C.**
10.34 Form of Advisory Agreement among Aurora/VDK LLC, Van de Kamp's, Inc., VDK Holdings, Inc., Aurora Foods
Inc. and Aurora Foods Holdings Inc. and MDC Management Company III, L.P.**
10.35 Form of Advisory Agreement between Fenway Partners, Inc. and Aurora/VDK LLC Van de Kamp's, Inc., VDK
Holdings, Inc., Aurora Foods Inc. and Aurora Foods Holdings Inc.**
10.36 Agreement, dated March 31, 1994, between Van de Kamp's, Seafood and Ore-Ida Foods, Inc. (Incorporated by
reference to Exhibit 10.29 to the Van de Kamp's S-4).**
10.37 Flavor Supply Agreement, dated as of December 31, 1996, by and between Quest International Flavors &
Food Ingredients Company and MBW Foods Inc. (Incorporated by reference to Exhibit 10.8 to the Aurora
S-4).**
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
II-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.38 License Agreement, dated as of February 21, 1979, between General Host Corporation and VDK Acquisition
Corporation (Incorporated by reference to Exhibit 10.27 to the Van de Kamp's S-4).**
10.39 License Agreement, dated as of October 14, 1978, between General Host Corporation and Van de Kamp's
Dutch Bakeries (Incorporated by reference to Exhibit 10.28 to the Van de Kamp's S-4).**
10.40 Trademark License Agreement, dated July 9, 1996 among Quaker Oats, The Quaker Oats Company of Canada
Limited and Van de Kamp's, Inc. (Incorporated by reference to Exhibit H to Exhibit 2.1 to Van de Kamp's
Inc.'s Form 8-K dated July 9, 1996 (the "Van de Kamp's 8-K")).**
10.41 Patent License Agreement, dated July 9, 1996, between Quaker Oats and Van de Kamp's, Inc. (Incorporated
by reference to Exhibit K to Exhibit 2.1 to the Van de Kamp's 8-K).**
10.42 Management Services Agreement, dated September 19, 1995 between Van de Kamp's, Inc. and Dartford
Partnership L.L.C. (Incorporated by reference to Exhibit 10.25 to the Van de Kamp's S-4).**
10.43 Management Services Agreement, dated December 31, 1996 between MBW Foods Inc. and Dartford Partnership
L.L.C. (Incorporated by reference to Exhibit 10.1 to Aurora Foods Inc.'s Form S-4 Filed on April 7,
1997).**
10.44 Management Services Agreement, dated December 31, 1996 between MBW Foods Inc. and McCown De Leeuw & Co.,
Inc. (Incorporated by reference to Exhibit 10.2 to Aurora Foods Inc.'s Form S-4 filed on April 7,
1997).**
10.45 Computer Services Agreement, dated September 5, 1995 between Windy Hill Pet Food Company, Inc. and the
Van de Kamp's, Inc. (Incorporated by reference to Exhibit 10.26 to the Van de Kamp's S-4).**
10.46 Form of Indemnity Agreement to be entered into by Aurora Foods Inc. and each of Messrs. Wilson, Ardrey,
Apsey, Ayres, De Leeuw, Delaney Dresdale, Geisser, Lamm, and Zachem, each of whom is a member of the
Board of Directors of Aurora Foods Inc., and Ms. Cummings.
10.47 1998 Employee Stock Purchase Plan.
10.48 Production Agreement, dated as of June 4, 1998, by and between Aurora Foods Inc. and Gilster-Mary Lee
Corporation.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Coopers & Lybrand LLP.
23.6 Consent of Price Waterhouse LLP.
23.7 Consent of Richards & O'Neil, LLP (included in Exhibit 5.1 hereto).
27.1 Financial Data Schedule.**
</TABLE>
- ------------------------
* To be filed by amendment.
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
II-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS (CONTINUED)
** Previously filed with the Commission.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-1 and has duly caused this Amendment No. 3 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, California, on June 23,
1998.
<TABLE>
<S> <C> <C>
AURORA FOODS INC.
BY: /S/ IAN R. WILSON
-----------------------------------------
Ian R. Wilson
Chairman of the Board and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
Chairman of the Board and
/s/ IAN R. WILSON Chief Executive Officer
- ------------------------------ (Principal Executive June 23, 1998
Ian R. Wilson Officer)
/s/ JAMES B. ARDREY Vice Chairman and Director
- ------------------------------ June 23, 1998
James B. Ardrey
Chief Financial Officer
/s/ M. LAURIE CUMMINGS and Secretary
- ------------------------------ (Principal Financial June 23, 1998
M. Laurie Cummings Officer and Principal
Accounting Officer)
/s/ CLIVE APSEY Director
- ------------------------------ June 23, 1998
Clive Apsey
/s/ CHARLES AYRES Director
- ------------------------------ June 23, 1998
Charles Ayres
/s/ DAVID E. DE LEEUW Director
- ------------------------------ June 23, 1998
David E. De Leeuw
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ CHARLES J. DELANEY Director
- ------------------------------ June 23, 1998
Charles J. Delaney
/s/ RICHARD C. DRESDALE Director
- ------------------------------ June 23, 1998
Richard C. Dresdale
/s/ ANDREA GEISSER Director
- ------------------------------ June 23, 1998
Andrea Geisser
/s/ PETER LAMM Director
- ------------------------------ June 23, 1998
Peter Lamm
/s/ TYLER T. ZACHEM Director
- ------------------------------ June 23, 1998
Tyler T. Zachem
</TABLE>
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
1.1 Underwriting Agreement among Aurora Foods Inc., Aurora/VDK LLC, Goldman, Sachs & Co., BT
Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, Credit Suisse
First Boston Corporation, SBC Warburg Dillon Read Inc. and Chase Securities Inc..............
2.1 Form of Merger Agreement between Aurora Foods Inc. and A Foods Inc...........................
2.2 Form of Merger Agreement among Aurora Foods Holdings Inc., Foods Operating Co. Inc., VDK
Holdings, Inc., Van de Kamp's, Inc. and A Foods Inc..........................................
2.3 Asset Purchase Agreement, dated as of November 26, 1997, by and between Aurora Foods Inc. and
The Procter & Gamble Company. (Incorporated by reference to Exhibit 2.1 to Aurora Foods
Inc.'s Form 8-K filed on January 30, 1998).**................................................
2.4 Asset Purchase Agreement, dated as of March 7, 1997 by and between Aurora Foods Inc. and
Kraft Foods, Inc. (Incorporated by reference to Exhibit 2.2 to Aurora Foods Inc.'s Form S-4
filed on August 21, 1997 (the "Aurora S-4").**...............................................
2.5 Amendment to Asset Purchase Agreement, dated as of February 13, 1997, between Van de Kamp's,
Inc. and Morningstar Foods, Inc. (Incorporated by reference to Exhibit 2.2 to Form 10-Q for
the quarter ended March 31, 1997).**.........................................................
2.6 Asset Purchase Agreement, dated as of February 3, 1997, between Van de Kamp's, Inc. and
Morningstar Foods, Inc. (Incorporated by reference to Exhibit 2.1 to Form 10-Q for the
quarter ended March 31, 1997).**.............................................................
2.7 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 Aurora S-4).**............................................
2.8 Supplement No. 1 to Asset Purchase and Sales Agreement, dated as of July 9, 1996, between Van
de Kamp's, Inc. and the Quaker Oats Company ("Quaker Oats"). (Incorporated by reference to
Exhibit 2.2 to Van de Kamp's, Inc.'s Form 8-K dated July 9, 1996).**.........................
2.9 Asset Purchase and Sales Agreement, dated as of May 15, 1996 between Van de Kamp's, Inc. and
Quaker Oats. (Incorporated by reference to Exhibit 2.1 to Van de Kamp's, Inc.'s Form 8-K
dated July 9, 1996).**.......................................................................
2.10 Asset Purchase and Sales Agreement, dated as of January 17, 1996, between Shellfish
Acquisition Company, LLC ("Shellfish") and Campbell Soup Company ("Campbell") (the text of
which and Exhibits to which are Incorporated by reference to Exhibit 2.1 to Van de Kamp's,
Inc.'s Form 10-Q for the quarter ended March 30, 1996 and a list of the contents of the
schedules of which is incorporated by reference to Exhibit 2.1 to Van de Kamp's, Inc.'s Form
8-K dated May 6, 1996).**....................................................................
2.11 Asset Purchase Agreement, dated as of January 17, 1996, between Van de Kamp's, Inc. and
Shellfish. (Incorporated by reference to Exhibit 2.2 to Van de Kamp's, Inc.'s Form 10-Q for
the quarter ended March 30, 1996).**.........................................................
2.12 Agreement and Amendment No. 1, dated September 19, 1995, to the Asset Purchase Agreement
among Van de Kamp's, Inc., the Pillsbury Company and PET Incorporated. (Incorporated by
reference to Exhibit 2.2 to Van de Kamp's, Inc.'s Form S-4 filed on October 4, 1995 (the "Van
de Kamp's S-4").**...........................................................................
2.13 Asset Purchase Agreement, dated as of July 7, 1995 among Van de Kamp's, Inc., the Pillsbury
Company and PET Incorporated. (Incorporated by reference to Exhibit 2.1 to the Van de Kamp's
S-4).**......................................................................................
2.14 Form of Certificate of Merger of Aurora Foods Inc. with and into A Foods Inc.................
3.1 Certificate of Incorporation of A Foods Inc., filed with the Secretary of State of the State
of Delaware on June 19, 1998.**..............................................................
3.2 Amended and Restated By-Laws of Aurora Foods Inc.............................................
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
4.1 Specimen Certificate of the Common Stock.....................................................
4.2 Securityholders Agreement, dated as of April 8, 1998, among the parties listed on Schedule A
attached thereto.**..........................................................................
4.3 Second Amended and Restated Limited Liability Company Agreement of VDK Foods LLC, as
amended......................................................................................
4.4 Second Amended and Restated Limited Liability Company Agreement of MBW Investors LLC, dated
as of April 8, 1998.**.......................................................................
4.5 Indenture, dated as of February 10, 1997, by and between Aurora Foods Inc. and Wilmington
Trust Company (the "Series B Indenture"). (Incorporated by reference to Exhibit 4.1 to the
Aurora S-4).**...............................................................................
4.6 Specimen Certificate of 9 7/8% Series B Senior Subordinated Note due 2007 (included in
Exhibit 4.5 hereto). (Incorporated by reference to Exhibit 4.3 to the Aurora S-4).**.........
4.7 Form of Note Guarantee to be issued by future subsidiaries of Aurora Foods Inc. pursuant to
the Series B Indenture (included in Exhibit 4.1 hereto). (Incorporated by reference to
Exhibit 4.4 to the Aurora S-4).**............................................................
4.8 Indenture, dated as of July 1, 1997, by and between Aurora Foods Inc. and Wilmington Trust
Company (the "Series D Indenture"). (Incorporated by reference to Exhibit 4.6 to the Aurora
S-4).**......................................................................................
4.9 Specimen Certificate of 9 7/8% Series D Senior Subordinated Note, due 2007 (included in
Exhibit 4.5 hereto).**.......................................................................
4.10 Form of Note Guarantee to be issued by future subsidiaries of Aurora Foods Inc. pursuant to
the Series D Indenture (included in Exhibit 4.6 hereto). (Incorporated by reference to
Exhibit 4.8 to the Aurora S-4).**............................................................
4.11 Indenture, dated as of September 15, 1995, between Van de Kamp's, Inc. and Harris Trust and
Savings Bank (Incorporated by reference to Exhibit 4.1 to the Van de Kamp's S-4).**..........
4.12 Global Note, dated September 19, 1995, issued by Van de Kamp's, Inc. to the Depository Trust
Company and registered in the name of Cede & Co. in the principal amount of $100,000,000
(Incorporated by reference to Exhibit 4.2 to the Van de Kamp's S-4).**.......................
4.13 Form of Indenture, by and between Aurora Foods Inc. and Wilmington Trust Company (the "New
Indenture")..................................................................................
4.14 Form of Specimen Certificate of the Series E Senior Subordinated Note Due 2008 (included in
Exhibit 4.13 hereto).........................................................................
4.15 Form of Registration Rights Agreement between Aurora Foods Inc. and Chase Securities Inc.,
Goldman, Sachs & Co. and Natwest Capital Markets Limited (included in Exhibit 10.3
hereto)......................................................................................
5.1 Form of Opinion of Richards & O'Neil, LLP regarding the validity of the Common Stock.........
10.1 VDK Holdings, Inc. Incentive Compensation Plan...............................................
10.2 1998 Incentive Plan..........................................................................
10.3 Form of Purchase Agreement, between Aurora Foods Inc. and Chase Securities, Inc., Goldman,
Sachs & Co. and NatWest Capital Markets Limited..............................................
10.4 Purchase Agreement, dated June 18, 1997, by and among Aurora Foods Inc., Chase Securities,
Inc. and Credit Suisse First Boston Corporation. (Incorporated by reference to Exhibit 1.2 to
the Aurora S-4).**...........................................................................
10.5 Purchase Agreement, dated February 5, 1997 by and between Aurora Foods Inc. and Chase
Securities Inc. (Incorporated by reference to Exhibit 1.1 to the Aurora S-4).**..............
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.6 Purchase Agreement, dated September 14, 1995, between Van de Kamp's, Inc. and Chemical
Securities Inc. (Incorporated by reference to Exhibit 10.30 to the Van de Kamp's S-4).**.....
10.7 Employment Agreement between Ian R. Wilson and Aurora Foods Inc..............................
10.8 Employment Agreement between James B. Ardrey and Aurora Foods Inc............................
10.9 Employment Agreement between Ray Chung and Aurora Foods Inc..................................
10.10 Employment Agreement between M. Laurie Cummings and Aurora Foods Inc.........................
10.11 Amendment No. 1 to Ferraro Employment Agreement, dated as of January 1, 1998, between Aurora
Foods Inc. and Thomas S. Ferraro.**..........................................................
10.12 Employment Agreement, dated as of December 31, 1996, by and between Aurora Foods Inc. and
Thomas J. Ferraro (Incorporated by reference to Exhibit 10.5 to the Aurora S-4).**...........
10.13 Amendment No. 1 to Willett Employment Agreement, dated as of January 1, 1998, between C. Gary
Willett and Aurora Foods Inc.**..............................................................
10.14 Employment Agreement, dated as of December 31, 1996, by and between Aurora Foods Inc. and C.
Gary Willett. (Incorporated by reference to Exhibit 10.6 to the Aurora S-4).**...............
10.15 Amendment No. 1 to Ellinwood Amended and Restated Employment Agreement, dated as of January
1, 1998, between Thomas 0. Ellinwood and Van de Kamp's, Inc.**...............................
10.16 Amended and Restated Employment Agreement, dated as of March 11, 1997, by and between Thomas
0. Ellinwood and Van de Kamp's, Inc.**.......................................................
10.17 Employment Agreement, dated as of February 16, 1998, by and between Van de Kamp's, Inc. and
Anthony A. Bevilacqua.**.....................................................................
10.18 Security Agreement, dated as of September 19, 1995, made by Van de Kamp's, Inc., in favor of
Chemical Bank (Incorporated by reference to Exhibit 10.20 to the Van de Kamp's S-4).**.......
10.19 Second Amended and Restated Credit Agreement, dated as of January 16, 1998, by and among
Aurora Foods Inc., as Borrower, Aurora Foods Holdings Inc., as Guarantor, the Lenders listed
therein, The Chase Manhattan Bank, as Administrative Agent, The National Westminster Bank
PLC, as Syndication Agent and Swiss Bank Corporation, as Documentation Agent (Incorporated by
reference to Exhibit 10.4 to Form 10-K, filed on March 27, 1998 (the "Aurora 10-K")).**......
10.20 Form of Third Amended and Restated Credit Agreement by and among Aurora Foods Inc., as
Borrower, the Lenders listed therein, The Chase Manhattan Bank as Administrative Agent, Chase
Securities Inc. as Arranging Agent, National Westminster Bank PLC as Syndication Agent and
Swiss Bank Corporation as Documentation Agent................................................
10.21 Second Amendment to Guarantee and Collateral Agreement, dated July 9, 1996, between Van de
Kamp's, Inc. and VDK Holdings, Inc. in favor of The Chase Manhattan Bank, NA, as agent for
the several banks and other financial institutions (Incorporated by reference to Exhibit
10.23 of the Van de Kamp's, Inc. Form 10-K filed on September 27, 1996 (the "1996 Van de
Kamp's 10-K").**.............................................................................
10.22 First Amendment to Guarantee and Collateral Agreement, dated May 6, 1996 between Van de
Kamp's, Inc. and VDK Holdings, Inc. in favor of Chemical Bank, as agent for the several banks
and other financial institutions from time to time parties to the Amended and Restated Credit
and Guarantee Agreement. (Incorporated by reference to Exhibit 10.20 to the 1996 Van de
Kamp's 10-K.)**..............................................................................
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.23 Guarantee and Collateral Agreement, dated September 19, 1995, among VDK Holdings, Inc., Van
de Kamp's, Inc., the subsidiary grantors named therein and Chemical Bank as agent
(Incorporated by reference to Exhibit 10.19 to the 1996 Van de Kamp's S-4).**................
10.24 Third Amendment to the Second Amended and Restated Credit and Guarantee Agreement, dated as
of September 25, 1997, among VDK Holdings, Inc., Van de Kamp's, Inc., the banks, and other
financial institutions named as parties thereto and The Chase Manhattan Bank, NA, as agent
(Incorporated by reference to Exhibit 10.32 to Van de Kamp's Inc.'s Form 10-K filed on
September 29, 1997 (the "1997 Van de Kamp's 10-K").**........................................
10.25 Second Amendment to the Second Amended and Restated Credit and Guarantee Agreement, dated as
of March 27, 1997, among VDK Holdings, Inc., Van de Kamp's, Inc., the banks, and other
financial institutions named as parties thereto and The Chase Manhattan Bank, NA, as agent
(Incorporated by reference to Exhibit 10.1 to Van de Kamp's, Inc.'s Form 10-Q for the quarter
ended March 31, 1997).**.....................................................................
10.26 First Amendment, dated as of August 28, 1996, to the Second Amended and Restated Credit and
Guarantee Agreement among VDK Holdings, Inc., Van de Kamp's, Inc., the banks and other
financial institutions named as parties thereto and the Chase Manhattan Bank, NA, as agent
(Incorporated by reference to Exhibit 10.22 to the 1996 Van de Kamp's 10-K).**...............
10.27 Second Amended and Restated Credit and Guarantee Agreement, dated as of July 9, 1996, among
VDK Holdings, Inc., Van de Kamp's, Inc., the banks and other financial institutions named as
parties thereto and The Chase Manhattan Bank, NA, as agent (Incorporated by reference to
Exhibit 10.21 to the 1996 Van de Kamp's 10-K).**.............................................
10.28 Cash Collateral Agreement, dated July 9, 1996, between VDK Holdings, Inc. and The Chase
Manhattan Bank, NA, as agent (Incorporated by reference to Exhibit 10.29 to the 1996 Van de
Kamp's 10-K).**..............................................................................
10.29 First Amended and Restated Red Wing Co-Pack Agreement, dated as of November 19, 1997, by and
between Aurora Foods Inc. and The Red Wing Company, Inc. (Confidential treatment for a
portion of this document has been requested by Aurora Foods Inc. Incorporated by reference to
Exhibit 10.16 to the Aurora 10-K).**.........................................................
10.30 Production Agreement, dated November 19, 1997, by and between Aurora Foods Inc. and The Red
Wing Company, Inc. (Confidential treatment for a portion of this document has been requested
by Aurora Foods Inc. Incorporated by reference to Exhibit 10.18 to the Aurora 10-K).**.......
10.31 Transitional Supply Agreement, dated November 26, 1997, by and between Aurora Foods Inc. and
The Procter & Gamble Distributing Company. (Confidential treatment for a portion of this
document has been requested by Aurora Foods Inc. Incorporated by reference to Exhibit 10.20
to the Aurora 10-K).**.......................................................................
10.32 Form of Expense Agreement between Aurora Foods Inc. and Dartford Partnership L.L.C.**........
10.33 Form of Advisory Agreement among Aurora/VDK LLC, Van de Kamp's Inc., VDK Holdings, Inc.,
Aurora Foods Inc. and Aurora Foods Holdings Inc. and Dartford Partnership L.L.C.**...........
10.34 Form of Advisory Agreement among Aurora/VDK LLC, Van de Kamp's, Inc., VDK Holdings, Inc.,
Aurora Foods Inc. and Aurora Foods Holdings Inc. and MDC Management Company III, L.P.**......
10.35 Form of Advisory Agreement between Fenway Partners, Inc. and Aurora/VDK LLC Van de Kamp's,
Inc., VDK Holdings, Inc., Aurora Foods Inc. and Aurora Foods Holdings Inc.**.................
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.36 Agreement, dated March 31, 1994, between Van de Kamp's, Seafood and Ore-Ida Foods, Inc.
(Incorporated by reference to Exhibit 10.29 to the Van de Kamp's S-4).**.....................
10.37 Flavor Supply Agreement, dated as of December 31, 1996, by and between Quest International
Flavors & Food Ingredients Company and MBW Foods Inc. (Incorporated by reference to Exhibit
10.8 to the Aurora S-4).**...................................................................
10.38 License Agreement, dated as of February 21, 1979, between General Host Corporation and VDK
Acquisition Corporation (Incorporated by reference to Exhibit 10.27 to the Van de Kamp's
S-4).**......................................................................................
10.39 License Agreement, dated as of October 14, 1978, between General Host Corporation and Van de
Kamp's Dutch Bakeries (Incorporated by reference to Exhibit 10.28 to the Van de Kamp's
S-4).**......................................................................................
10.40 Trademark License Agreement, dated July 9, 1996 among Quaker Oats, The Quaker Oats Company of
Canada Limited and Van de Kamp's, Inc. (Incorporated by reference to Exhibit H to Exhibit 2.1
to Van de Kamp's Inc.'s Form 8-K dated July 9, 1996 (the "Van de Kamp's 8-K")).**............
10.41 Patent License Agreement, dated July 9, 1996, between Quaker Oats and Van de Kamp's, Inc.
(Incorporated by reference to Exhibit K to Exhibit 2.1 to the Van de Kamp's 8-K).**..........
10.42 Management Services Agreement, dated September 19, 1995 between Van de Kamp's, Inc. and
Dartford Partnership L.L.C. (Incorporated by reference to Exhibit 10.25 to the Van de Kamp's
S-4).**......................................................................................
10.43 Management Services Agreement, dated December 31, 1996 between MBW Foods Inc. and Dartford
Partnership L.L.C. (Incorporated by reference to Exhibit 10.1 to Aurora Foods Inc.'s Form S-4
Filed on April 7, 1997).**...................................................................
10.44 Management Services Agreement, dated December 31, 1996 between MBW Foods Inc. and McCown De
Leeuw & Co., Inc. (Incorporated by reference to Exhibit 10.2 to Aurora Foods Inc.'s Form S-4
filed on April 7, 1997).**...................................................................
10.45 Computer Services Agreement, dated September 5, 1995 between Windy Hill Pet Food Company,
Inc. and the Van de Kamp's, Inc. (Incorporated by reference to Exhibit 10.26 to the Van de
Kamp's S-4).**...............................................................................
10.46 Form of Indemnity Agreement to be entered into by Aurora Foods Inc. and each of Messrs.
Wilson, Ardrey, Apsey, Ayres, De Leeuw, Delaney Dresdale, Geisser, Lamm, and Zachem, each of
whom is a member of the Board of Directors of Aurora Foods Inc., and Ms. Cummings............
10.47 1998 Employee Stock Purchase Plan............................................................
10.48 Production Agreement, dated as of June 4, 1998, by and between Aurora Foods Inc. and
Gilster-Mary Lee Corporation.................................................................
23.1 Consent of Price Waterhouse LLP..............................................................
23.2 Consent of Price Waterhouse LLP..............................................................
23.3 Consent of Price Waterhouse LLP..............................................................
23.4 Consent of Deloitte & Touche LLP.............................................................
23.5 Consent of Coopers & Lybrand LLP.............................................................
23.6 Consent of Price Waterhouse LLP..............................................................
23.7 Consent of Richards & O'Neil, LLP (included in Exhibit 5.1 hereto)...........................
27.1 Financial Data Schedule.**...................................................................
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with the Commission.
<PAGE>
Draft of June 20, 1998
AURORA FOODS INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
_____________
UNDERWRITING AGREEMENT
(U.S. VERSION)
--------------------------
. . . . . . . , 1998
Goldman, Sachs & Co.,
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Credit Suisse First Boston Corporation
SBC Warburg Dillon Read Inc.
Chase Securities Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Aurora Foods Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
11,004,409 shares of Common Stock, par value $.01 per share ("Stock"), of the
Company and Aurora/VDK LLC, a Delaware limited liability company, the sole
stockholder of the Company named in Schedule II hereto ("New LLC" or the "Sole
Stockholder") proposes, subject to the terms and conditions stated herein, to
sell to the Underwriters an aggregate of 1,320,591 shares and, at the election
of the Underwriters, up to 1,848,750 additional shares of Stock. The aggregate
of 12,325,000 shares to be sold by the Company and New LLC
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is herein called the "Firm Shares" and the aggregate of 1,848,750 additional
shares to be sold by New LLC is herein called the "Optional Shares." The Firm
Shares and the Optional Shares that the Underwriters elect to purchase pursuant
to Section 2 hereof are herein collectively called the "Shares".
Prior to the date hereof, (i) Aurora Foods Inc., a Maryland corporation
("Aurora Maryland"), was merged into and succeeded by the Company, (ii) MBW
Investors LLC, a Delaware limited liability company ("MBW LLC"), contributed all
of the issued and outstanding capital stock of Aurora Foods Holdings, Inc., a
Delaware corporation ("Aurora Holdings"), and VDK Foods LLC, a Delaware limited
liability company ("VDK LLC"), contributed all of the issued and outstanding
capital stock of VDK Holdings, Inc., a Delaware corporation ("VDK Holdings") to
New LLC, in exchange for membership interests in New LLC, and (iii) New LLC
contributed all of the issued and outstanding capital stock of Aurora Holdings
and VDK Holdings to the Company in exchange for Common Stock. The transactions
comprising the merger of Aurora Maryland into the Company, the capitalization of
New LLC with all of the issued and outstanding capital stock of VDK Holdings and
Aurora Holdings, the formation of the Company and the capitalization of the
Company with all of the issued and outstanding capital stock of VDK Holdings and
Aurora Holdings are collectively referred to as the "Reorganization".
Subsequent to the date hereof but prior to the Time of Delivery (as defined in
Section 5 hereof), Van de Kamp's, Inc. a Delaware corporation ("VDK"), A Foods
Inc., a Delaware corporation ("A Foods"), VDK Holdings and Aurora Holdings will
each be merged into and succeeded by the Company. The transactions comprising
the merger of each of VDK, VDK Holdings, A Foods and Aurora Holdings with and
into the Company are collectively referred to as the "Merger". Aurora Maryland,
Aurora Holdings, VDK Holdings, New LLC, VDK and A Foods are collectively
referred to herein as the "Predecessors" and individually as a "Predecessor".
Any references in this Agreement to "the Company and its subsidiaries", "the
Company or any of its subsidiaries", and "each Subsidiary of the Company" shall,
after the consummation of the Merger, be deemed to be references to the Company
only. Subsequent to the date hereof, New LLC will be liquidated and will
distribute to, among others, entities that are under the control of, under
common control with or that are otherwise affiliates of Fenway Partners Capital
Fund, L.P. ("Fenway"), McCown De Leeuw & Co. III, L.P. ("MDC III"), McCown De
Leeuw & Co. III (Europe), L.P. ("MDC IIIE"), McCown De Leeuw & Co. III (Asia),
L.P. ("MDC IIIA"), McCown De Leeuw & Co. IV, L.P. ("MDC IV"), McCown De Leeuw &
Co. IV Associates, L.P. ("MDC IV A"), Gamma Fund LLC ("Gamma"), Delta Fund LLC
("Delta" and together with MDC III, MDC IIIE, MDC IIIA, MDC IV, MDC IV A, and
Gamma, the "MDC Entities" and each individually, an "MDC Entity"), certain of
the net proceeds received by it from the sale of Shares by it hereunder and
under the International Underwriting Agreement. New LLC, Fenway and the MDC
Entities are hereinafter collectively referred to as the "Selling Stockholders".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and New LLC of up to a total of 2,501,250 shares of Stock (the "International
Shares"), including the overallotment option thereunder, through arrangements
with certain underwriters outside the United States (the "International
Underwriters"), for whom Goldman Sachs International, BT Alex. Brown
International, Donaldson, Lufkin & Jenrette International, Credit Suisse First
Boston (Europe) Limited, Swiss Bank Corporation acting through its division, SBC
Warburg Dillon Read, and Chase Manhattan International Limited are acting as
lead managers. Anything herein or therein to the contrary notwithstanding, the
respective closings under this Agreement and the International Underwriting
Agreement are hereby expressly made
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conditional on one another. The Underwriters hereunder and the International
Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates") which
provides, among other things, for the transfer of shares of Stock between the
two syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages. Although the Shares will be registered in the United States
under a registration statement, the international form of prospectus will not be
included in such filing. Except as used in Sections 2, 4, 5, 11 and 13 herein,
and except as the context may otherwise require, references hereinafter to the
Shares shall include all the shares of Stock which may be sold pursuant to
either this Agreement or the International Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
1. (a) The Company and New LLC, jointly and severally, represent and
warrant to, and agree with, each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-50681) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to
you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no other
document with respect to the Initial Registration Statement has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration Statement,
if any, including all exhibits thereto and including the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of the
Initial Registration Statement at the time it was declared effective or
such part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of the
Initial Registration Statement became effective, are hereinafter
collectively called the "Registration Statement"; and such final
prospectus, in the form first filed pursuant to Rule 424(b) under the Act,
is hereinafter called the "Prospectus";
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, except that the preliminary prospectuses,
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included in the Initial Registration Statement filed on April 22, 1998 and
May 15, 1998, did not include an estimated range of the maximum offering
price and share and per share data and did not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein or by a Selling Stockholder
expressly for use in the preparation of the answers therein to Items 7 and
11(m) of Form S-1;
(iii) As of the applicable effective date as to the Registration
Statement and any amendment thereto, and as of the applicable filing date
as to the Prospectus and any amendment or supplement thereto, the
Registration Statement conformed, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus
will conform, in all material respects to the requirements of the Act and
the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement
and any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or by a
Selling Stockholder expressly for use in the preparation of the answers
therein to Items 7 and 11(m) of Form S-1;
(iv) Neither any Predecessor nor the Company or any subsidiary of
the Company has sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, which loss or interference is material to the
business, financial condition, or results of operations of the Company and
its subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock or long-term debt of the
Company or any subsidiary of the Company or any material adverse change, or
any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated
in the Prospectus;
(v) The Company and its subsidiaries have, and after giving effect
to the consummation of the Merger will have, good and marketable title in
fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property to the Company
and its Subsidiaries, taken as a whole, and such as do not interfere with
the use
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made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(vi) The Company has been duly incorporated and is, and after
giving effect to consummation of the Merger will be, validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification
except where the failure to be so qualified would not, either individually
or in the aggregate with such other failures, have a material adverse
effect on the business, financial condition, or results of operations of
the Company and its subsidiaries, taken as a whole; as of the date hereof,
each subsidiary of the Company has been duly incorporated or organized, as
the case may be, and is validly existing as a corporation or limited
liability company, as the case may be, in good standing under the laws of
its jurisdiction of incorporation or organization, as the case may be; and
after giving effect to consummation of the Mergers, the Company does not
have any subsidiaries;
(vii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description of the Stock contained in
the Prospectus; as of the date hereof, all of the issued shares of capital
stock of each corporate subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and
(except for directors' qualifying shares) are, owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or
claims;
(viii) The unissued Shares to be issued and sold by the Company to
the Underwriters hereunder and under the International Underwriting
Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(ix) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation by the
Company and New LLC of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is subject except for
such conflicts, breaches, violations or defaults that individually or in
the aggregate would not have a material adverse effect on the business,
financial condition, or
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results of operations of the Company and its subsidiaries, taken as a
whole, nor will such action result in any violation of the provisions of
the Certificate of Incorporation or By-laws of the Company or any existing
United States federal or state statute (excluding for purposes of this
paragraph (ix) United States federal or state securities laws) or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters;
(x) Neither any Predecessor nor the Company or any subsidiary of
the Company has violated any existing foreign, federal, state or local law
or regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
provisions of the Foreign Corrupt Practices Act or the rules and
regulations promulgated thereunder, except for such violations which,
singly or in the aggregate, would not have a material adverse effect on the
business, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole;
(xi) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any Authorization, any related constraints on
operating activities and any potential liabilities to third parties) for
which the Company or any of its subsidiaries could reasonably be expected
to be responsible which would, singly or in the aggregate, have a material
adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole;
(xii) Each of the Company and its subsidiaries has, and after giving
effect to the Merger will have, such concessions, permits, licenses,
consents, exemptions, franchises, authorizations, orders, registrations,
qualifications and other approvals (each, an "Authorization") of, and has
made all filings with and notices to, all governments, governmental or
regulatory authorities and self-regulatory organizations and all courts and
other tribunals, including, without limitation, under any applicable
Environmental Laws and under any rules and regulations promulgated by the
U.S. Food and Drug Administration (the "FDA"), as are necessary to own,
lease, license and operate its properties and to conduct its business as
described in the Prospectus and to consummate the Reorganization and the
Merger, except where the failure to have any such Authorization or to make
any such filing or notice would not, singly or in the aggregate, (i) have a
material adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, or (ii)
adversely effect the validity, performance or consummation of the
Reorganization or the Merger or the transactions contemplated by this
Agreement and the International Underwriting Agreement. Each such
Authorization is valid
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and in full force and effect and each of the Company and its subsidiaries
is in compliance with all the terms and conditions thereof and with the
rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including,
without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both,
would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and other than as disclosed in the Prospectus, such
Authorizations contain no restrictions that are materially burdensome to
any of the Company or any of its subsidiaries; except in each case
described in this sentence where such failure to be valid and in full force
and effect or to be in compliance or the occurrence of any such event or
the presence of any such restriction would not, singly or in the aggregate
with all such failures, have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole;
(xiii) All agreements of any of the Predecessors or the Company that
are necessary to consummate the Reorganization or the Merger, as the case
may be, have been duly and validly authorized, executed and delivered by
the parties thereto and are valid and legally binding agreements of the
parties thereto, and enforceable in accordance with their terms, each
Predecessor and the Company have all corporate or limited liability company
power and authority necessary to consummate the Reorganization and the
Merger, and no circumstance exists which would allow or cause any party to
any agreements that are necessary to consummate the Merger to terminate or
fail to perform its obligations thereunder. All stockholder and limited
liability company member approvals necessary to consummate the
Reorganization and the Merger have been obtained and are in full force and
effect. The consummation of the Reorganization and the Merger will not
(i) conflict with or constitute a breach of any of the terms or provisions
of, or a default under, (A) the certificate of incorporation, by-laws or
other constituent documents of any of the Predecessors or the Company or
any of its subsidiaries, or (B) any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which any Predecessor or the
Company or any of its subsidiaries is a party or by which any of the
Predecessors or the Company or any of its subsidiaries or any of their
respective property is bound, (ii) violate or conflict with any applicable
law or any rule, regulation, judgment, order or decree of any governments
or court or any governmental body or agency having jurisdiction over any of
the Predecessors or the Company or any of its subsidiaries or any of their
respective property, or (iii) result in the suspension, termination or
revocation of, or result in the imposition of fines or penalties pursuant
to, or result in any other impairment of any Authorization, rights, assets
or properties of any of the Company or any of its subsidiaries; except in
the case of clauses (i)(B), (ii), or (iii) for such conflicts, breaches,
defaults, violations, suspensions, terminations, revocations, fines and
penalties as would not in the aggregate with such other conflicts,
breaches, defaults, violations, suspensions, terminations, revocations,
fines and penalties be expected to (x) have a material adverse effect on
the business, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, or (y) adversely effect the
validity, performance or consummation of the Reorganization, the Merger or
the transactions contemplated by this Agreement or the International
Underwriting Agreement;
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(xiv) The Company and its subsidiaries own or possess, or have
adequate rights to use, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and /or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively,
"Intellectual Property") currently used, or that after the Merger will be
used by them in connection with their business as described in the
Prospectus and as proposed to be operated by them (including the trademarks
"Duncan Hines", "Log Cabin", "Country Kitchen", "Mrs. Butterworth's", "Aunt
Jemima", "Wigwam", "Van de Kamp's", "Mrs. Paul's" and "Celeste"), and,
except as disclosed in the Prospectus, neither any of the Predecessors nor
the Company or any of its subsidiaries has received any notice of
infringement of or conflict with (or knows of any such infringement or
conflict with) asserted rights of others with respect to such Intellectual
Property except with respect to any alleged infringement or conflict which
would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the business, financial condition or results
of operations of the Company;
(xv) Neither the Company nor any subsidiary of the Company is in
violation of its Certificate of Incorporation, By-laws or other constituent
documents or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound;
(xvi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the captions "Risk
Factors--Mandatory Offer to Purchase VDK Notes Upon Change of Control",
"--Governmental Regulation "--Environmental Matters","Business--Certain
Legal and Regulatory Matters", "Principal Stockholders--Securityholders
Agreement", "Certain Relationships and Related Transactions", "Certain
United States Federal Tax Consequences to Non-United States Holders of
Common Stock" and "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, present in all
material respects a fair description of such provisions and documents;
(xvii) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which could reasonably be expected to be
determined adversely and, if so determined, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xviii) The Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
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(xix) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(xx) Price Waterhouse LLP, who have certified certain financial
statements of the Predecessors and of the Company, Deloitte and Touche LLP,
who have certified certain financial statements included in the
Registration Statement, and Coopers & Lybrand L.L.P., who have certified
certain financial statements included in the Registration Statement, are
each independent public accountants as required by the Act and the rules
and regulations of the Commission thereunder;
(xxi) The filing of the Initial Registration Statement has been duly
authorized by Aurora Maryland;
(xxii) The Reorganization has been duly consummated in accordance
with all applicable law and upon the filing of the Certificate of Merger
with and by the Secretary of State of the State of Delaware, the Merger
shall have been consummated in accordance with the Agreement of Merger and
the laws of the State of Delaware;
(xxiii) The Shares have been approved for listing on the New York
Stock Exchange, subject to official notice of issuance;
(xxiv) Except as described in the Prospectus, there are no contracts,
agreements, or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company;
(xxv) There are no contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the Prospectus
which are not filed or described as required;
(xxvi) The PRO FORMA balance sheets and PRO FORMA statements of
income and the related notes thereto set forth in the Registration
Statement and the Prospectus have been prepared in accordance with the
applicable requirements of Rule 11-02 of Regulation S-X promulgated by the
Commission, have been compiled on the pro forma basis described therein,
and in the opinion of the Company, the assumptions used in the preparation
thereof and the adjustments used therein are reasonable; and
(xxvii) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company.
(b) New LLC represents and warrants to, and agrees with, each of the
Underwriters and the Company that:
(i) All Authorizations necessary for the execution and delivery by
New LLC of this Agreement, and the International Underwriting Agreement,
and by New LLC of the Power of Attorney and the Custody Agreement
hereinafter referred to, and for the sale and delivery of the Shares to be
sold by New LLC hereunder and under the International
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Underwriting Agreement, have been obtained; New LLC has full right, power
and authority to enter into this Agreement and the International
Underwriting Agreement; and New LLC has full right, power and authority to
enter into the Power of Attorney and the Custody Agreement and to sell,
assign, transfer and deliver the Shares to be sold by it hereunder and
under the International Underwriting Agreement;
(ii) The sale of the Shares to be sold by New LLC hereunder and
under the International Underwriting Agreement and the compliance by New
LLC with all of the provisions of this Agreement and the International
Underwriting Agreement, and by New LLC with all of the provisions of the
Power of Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which New LLC or
any of its subsidiaries is a party or by which New LLC or any of its
subsidiaries is bound, or to which any of its property or assets is
subject, nor will such action result in any violation of the provisions of
the limited liability company agreement and certificate of limited
liability of New LLC, or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over New LLC
or its property;
(iii) New LLC has, and immediately prior to each Time of Delivery
(as defined in Section 4 hereof) will have, good and valid title to the
Shares to be sold by it hereunder and under the International Underwriting
Agreement, free and clear of all liens, encumbrances, equities or claims;
and, upon delivery of such Shares and payment therefor pursuant hereto and
thereto, good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims, will pass to the several Underwriters or
the International Underwriters, as the case may be;
(iv) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell, file a registration
statement with respect to (other than a registration statement on Form S-8
with respect to an employee benefit plan of the Company) or otherwise
dispose of, directly or indirectly, except as provided hereunder and under
the International Underwriting Agreement, any Stock or securities of the
Company that are substantially similar to the Stock, including but not
limited to any securities that are convertible into or exchangeable for, or
whose exercise or settlement price is derived from, or that represent the
right to receive, Stock or any such substantially similar securities (other
than pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior written
consent;
(v) New LLC has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement
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thereto are made in reliance upon and in conformity with information
furnished in writing or otherwise to the Company by or on behalf of New LLC
expressly for use therein or otherwise relate to New LLC, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and any
further amendments or supplements to the Registration Statement and the
Prospectus, when they become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act and the rules and regulations of the Commission thereunder and
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, New LLC will deliver to you prior to or at the First Time of
Delivery (as hereinafter defined) a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof);
(viii) Certificates in negotiable form representing all of the Shares
to be sold by New LLC hereunder and under the International Underwriting
Agreement have been placed in custody under a Custody Agreement, in the
form heretofore furnished to you (the "Custody Agreement"), duly executed
and delivered by New LLC to [NAME OF CUSTODIAN], as custodian (the
"Custodian"), and New LLC has duly executed and delivered a Power of
Attorney, in the form heretofore furnished to you (the "Power of
Attorney"), appointing the persons indicated in Schedule II hereto, and
each of them, as such New LLC's attorneys-in-fact (the "Attorneys-in-Fact")
with authority to execute and deliver this Agreement and the International
Underwriting Agreement on behalf of such Selling Stockholder, to determine
the purchase price to be paid by the Underwriters and the International
Underwriters to the Selling Stockholders as provided in Section 2 hereof,
to authorize the delivery of the Shares to be sold by New LLC hereunder and
otherwise to act on behalf of New LLC in connection with the transactions
contemplated by this Agreement, the International Underwriting Agreement
and the Custody Agreement;
(ix) The Shares represented by the certificates held in custody for
New LLC under the Custody Agreement are subject to the interests of the
Underwriters hereunder and the International Underwriters under the
International Underwriting Agreement; the arrangements made by New LLC for
such custody, and the appointment by New LLC of the Attorneys-in-Fact by
the Power of Attorney, are to that extent irrevocable; the obligations of
New LLC hereunder shall not be terminated by operation of law, whether by
the dissolution of New LLC or by the occurrence of any other event; if any
other such event should occur, before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on behalf of
New LLC in accordance with the terms and conditions of this Agreement, of
the International Underwriting Agreement and of the Custody Agreement; and
actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney
shall be as valid as if such termination, dissolution or other event had
not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
termination, dissolution or other event;
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(x) All agreements of New LLC that are necessary to consummate the
Reorganization or the Merger, as the case may be, have been duly and
validly authorized, executed and delivered by New LLC and are valid and
legally binding agreements of such New LLC, enforceable against such New
LLC in accordance with their terms. The execution, delivery and
performance of any of such agreements by such New LLC will not (i) conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, (A) its certificate of incorporation, by-laws or other
constituent documents, or (B) any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which it or any of its
subsidiaries is a party or by which it or any of its subsidiaries or any
of their respective property is bound, (ii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any
governments or court or any governmental body or agency having jurisdiction
over it or any of its subsidiaries or any of their respective property, or
(iii) result in the suspension, termination or revocation of, or result in
the imposition of fines or penalties pursuant to, or result in any other
impairment of any Authorization, rights, assets or properties of any of
the Company or any of its subsidiaries; except in the case of clauses
(i)(B), (ii), or (iii) for such conflicts, breaches, defaults, violations,
suspensions, terminations, revocations, fines and penalties as wold not in
the aggregate with such other conflicts, breaches, defaults, violations,
suspensions, terminations, revocations, fines and penalties be expected to
(x) have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries, taken as a
whole, or (y) adversely effect the validity, performance or consummation of
the Reorganization, the Merger or the transactions contemplated by this
Agreement or the International Underwriting Agreement;
(xi) New LLC has been duly organized and is validly existing as a
limited liability company in good standing under the laws of its
jurisdiction of organization, with power and authority to own its
properties and conduct its business as described in the Prospectus and to
perform all of the transactions contemplated by this Agreement and the
International Underwriting Agreement; and
(xii) The Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by New LLC.
(c) Fenway represents and warrants to, and agrees with, each of the
Underwriters and the Company that:
(i) All Authorizations necessary for the execution and delivery by
such Selling Stockholder of this Agreement, and the International Underwriting
Agreement, have been obtained; and such Selling Stockholder has full limited
partnership right, power and authority to enter into this Agreement and the
International Underwriting Agreement;
(ii) The compliance by such Selling Stockholder with its
obligations under this Agreement and the International Underwriting Agreement
will not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which such
Selling Stockholder or any of its subsidiaries is a party or by which such
Selling Stockholder or any of its subsidiaries is bound, or to which any of its
property or assets is subject, nor will such action result in any violation of
the provisions of the partnership agreement of such Selling Stockholder, or any
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statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(iii) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus,
not to offer, sell, contract to sell, file a registration statement with respect
to, or otherwise dispose of, directly or indirectly, except as provided
hereunder and under the International Underwriting Agreement, any Stock or
securities of the Company that are substantially similar to the Stock, including
but not limited to any securities that are convertible into or exchangeable for,
or whose exercise price is derived from, or that represent the right to receive,
Stock or any such substantially similar securities (other than pursuant to
employee stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(iv) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares;
(v) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity with
information furnished in writing to the Company by such Selling Stockholder
expressly for use under the caption "Principal Stockholders and Selling
Stockholder" therein, such Preliminary Prospectus and the Registration Statement
did, and the Prospectus and any further amendments or supplements to the
Registration Statement and the Prospectus, when they become effective or are
filed with the Commission, as the case may be, will conform in all material
respects to the requirements of Form S-1 and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(vi) Such Selling Stockholder has been duly organized and is
validly existing as a limited partnership in good standing under the laws of its
jurisdiction of organization with power and authority to perform its obligation
under this Agreement and the International Underwriting Agreement; and
(vii) The Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by such Selling Stockholder.
(d) Each MDC Entity severally, as to itself, represents and warrants to,
and agrees with, each of the Underwriters and the Company that:
(i) All Authorizations necessary for the execution and delivery by
such Selling Stockholder of this Agreement, and the International Underwriting
Agreement, have been obtained; and each such Selling Stockholder has the
requisite partnership or limited liability company right, power and authority to
enter into this Agreement and the International Underwriting Agreement;
(ii) The compliance by each such Selling Stockholder with its
obligations under this Agreement and the International Underwriting Agreement,
will not conflict with or result in a
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breach or violation of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which such Selling Stockholder or any of its
subsidiaries is a party or by which such Selling Stockholder or any of its
subsidiaries is bound, or to which any of its property or assets is subject, nor
will such action result in any violation of the provisions of the limited
partnership agreement if such Selling Stockholder is a limited partnership, or
the limited liability company agreement and certificate of limited liability if
such Selling Stockholder is a limited liability company, or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such Selling
Stockholder;
(iii) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus,
not to offer, sell, contract to sell, file a registration statement with respect
to, or otherwise dispose of, directly or indirectly, except as provided
hereunder and under the International Underwriting Agreement, any Stock or
securities of the Company that are substantially similar to the Stock, including
but not limited to any securities that are convertible into or exchangeable for,
or whose exercise price is derived from, or that represent the right to receive,
Stock or any such substantially similar securities (other than pursuant to
employee stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(iv) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares;
(v) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity with
information furnished in writing to the Company by such Selling Stockholder
expressly for use under the caption "Principal Stockholders and Selling
Stockholders", such Preliminary Prospectus and the Registration Statement did,
and the Prospectus and any further amendments or supplements to the Registration
Statement and the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of Form S-1 and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vi) If such Selling Stockholder is a limited partnership, it has
been duly organized and is validly existing as a limited partnership in good
standing under the laws of its jurisdiction of organization, with power and
authority to perform its obligations under this Agreement and the International
Underwriting Agreement;
(vii) If such Selling Stockholder is a limited liability company, it
has been duly organized and is validly existing as a limited liability company
in good standing under the laws of its jurisdiction of organization, with power
and authority to perform its obligations under this Agreement and the
International Underwriting Agreement; and
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(viii) The Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by such Selling Stockholder.
2. Subject to the terms and conditions herein set forth, (a) the Company
and New LLC agree, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company and New LLC, at a purchase price per share of
$............., the number of Firm Shares (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying the aggregate number of
Firm Shares to be sold by the Company and New LLC as set forth opposite their
respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from the Company and New LLC hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, New LLC agrees to sell to each of
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from New LLC at the purchase price per share set forth in
clause (a) of this Section 2, that portion of the number of Optional Shares as
to which such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction, the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
New LLC hereby grants to the Underwriters the right to purchase at their
election up to 1,848,750 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Attorneys-in-Fact, given
within a period of 30 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Shares to be purchased and the date on
which such Optional Shares are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as defined in Section 5 hereof)
or, unless you and the Attorneys-in-Fact otherwise agree in writing, earlier
than two or later than ten business days after the date of such notice.
3. The Company hereby confirms its engagement of Goldman, Sachs & Co. as,
and Goldman, Sachs & Co. hereby confirms its agreement with the Company to
render services as, a "qualified independent underwriter" within the meaning of
Section 2(o) of Rule 2720 of the National Association of Securities Dealers,
Inc. (the "NASD") with respect to the offering and sale of the Shares. Goldman,
Sachs & Co., in its capacity as qualified independent underwriter and not
otherwise, is referred to herein as the "QIU". As compensation for the services
of the QIU hereunder, the Company agrees to pay the QIU $10,000 at the First
Time of Delivery.
4. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
5. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and New LLC shall
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be delivered by or on behalf of the Company and New LLC to Goldman, Sachs & Co.,
through the facilities of The Depository Trust Company ("DTC"), for the account
of such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company and New LLC to Goldman, Sachs & Co. at least
forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on ............., 1998, or at
such other time and date as Goldman, Sachs & Co. and the Company may agree upon
in writing, and, with respect to the Optional Shares, 9:30 a.m., New York City
time, on the date specified by Goldman, Sachs & Co. in the written notice given
by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional
Shares, or such other time and date as Goldman, Sachs & Co. and the
Attorney-in-Fact may agree upon in writing. Such time and date for delivery of
the Firm Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Firm Optional Shares, if not the First Time of
Delivery, is herein called the "Second Time of Delivery", and each such time and
date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or
on behalf of the parties hereto pursuant to Section 8 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 8(l) hereof, will be delivered at the offices
of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at each Time of Delivery. A meeting will be held at the Closing Location at
2:30 p.m., New York City time, on the New York Business Day next preceding each
Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 5, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
6. The Company and New LLC, jointly and severally, agree with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later than
the Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you copies thereof; to advise you,
promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the
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issuance of any stop order or of any order preventing or suspending the use
of any Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, to furnish the Underwriters with copies of the Prospectus in New York
City in such quantities as you may reasonably request, and, if the delivery
of a prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any events shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon your
request to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Shares at any time nine months or
more after the time of issue of the Prospectus, upon your request but at
the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell, file a registration
statement with respect to (other than a registration statement with respect
to an employee benefit plan of the Company), or otherwise dispose of,
directly or indirectly, except as provided hereunder and under the
International Underwriting Agreement, any Stock or securities of the
Company that are substantially similar to the Shares, including but not
limited to any securities that are convertible into or exchangeable for, or
whose exercise or settlement price is derived from, or that represent the
right to
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receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of,
the date of this Agreement), without your prior written consent;
(f) For so long as there are stockholders of the Company other
than the persons listed in the Prospectus under the caption "Principal and
Selling Stockholders" (such persons that are not so listed, the "Public
Holders") or until such time as each Public Holder has directed the Company
in writing not to provide such Public Holder with an annual report, to
furnish to its stockholders as soon as practicable after the end of each
fiscal year an annual report (including a balance sheet and statements of
income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of
each fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), consolidated summary
financial information of the Company and its subsidiaries for such quarter
in reasonable detail;
(g) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use
of Proceeds";
(i) To use its best efforts to list, subject to notice of
issuance, the Shares on the New York Stock Exchange (the "Exchange");
(j) To file with the Commission such information on Form 10-Q or
Form 10-K as may be required by Rule 463 under the Act;
(k) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement, and the Company shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act; and
(l) To take, or cause to be taken, prior to the First Time of
Delivery, all actions necessary to cause the Merger to occur concurrently
with the First Time of Delivery and not to amend, modify or terminate, or
permit any of its subsidiaries to amend, modify or
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terminate, any provision of the Agreement of Merger prior to the First Time
of Delivery without the prior written consent of the Representatives.
7. The Company and New LLC, jointly and severally, covenant and agree
with one another and with the several Underwriters that (a) the Company and such
Selling Stockholder will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreements, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
6(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) all fees and expenses in connection with listing the
Shares on the New York Stock Exchange; and (v) the filing fees incident to, and
the fees and disbursements of counsel for the Underwriters in connection with,
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Shares; (b) the Company will pay or cause
to be paid (i) the cost of preparing stock certificates; (ii) the cost and
charges of any transfer agent or registrar; and (iii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section and (c) each Selling
Stockholder will pay or cause to be paid all costs and expenses incident to the
performance of such Selling Stockholder's obligations hereunder which are not
otherwise specifically provided for in this Section, including (i) any fees and
expenses of counsel for such Selling Stockholder, (ii) New LLC's fees and
expenses of the Attorneys-in-Fact and the Custodian and (iii) all expenses and
taxes incident to the sale and delivery of the Shares to be sold by New LLC to
the Underwriters hereunder. In connection with Clause (c) (iii) of the
preceding sentence, Goldman, Sachs & Co. agrees to pay New York State stock
transfer tax, and New LLC agrees to reimburse Goldman, Sachs & Co. for
associated carrying costs if such tax payment is not rebated on the day of
payment and for any portion of such tax payment not rebated. It is understood,
however, that the Company shall bear and the Selling Stockholders shall not be
required to pay or to reimburse the Company for, the cost of any other matters
not directly relating to the sale and purchase of the Shares pursuant to this
Agreement, and that, except as provided in this Section, and Sections 9 and 13
hereof, the Underwriters will pay all of their own costs and expenses, including
the fees of their counsel, stock transfer taxes on resale of any of the Shares
by them, and any advertising expenses connected with any offers they may make.
8. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and the Selling Stockholders herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
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(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 6(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become effective
by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no
stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions (a draft of each such
opinion is attached as Annex II(a) hereto), dated such Time of Delivery,
with respect to the incorporation of the Company, the validity of the
Shares being delivered at such Time of Delivery, the Registration Statement
and the Prospectus as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Richards & O'Neil, LLP, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II(b) hereto), dated such Time of Delivery, in form and substance
satisfactory to you.
(d) Richards & O'Neil, LLP, counsel for New LLC, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II(c) hereto), dated the First Time of Delivery, in form and
substance satisfactory to you;
(e) Ropes & Gray, counsel for Fenway, shall have furnished to you
their written opinion (a draft of such opinion is attached as Annex II(d)
hereto), dated the First Time of Delivery, in form and substance
satisfactory to you;
(f) Godward LLP, counsel for each of the MDC Entities, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II(e) hereto), dated the First Time of Delivery, in form and
substance satisfactory to you;
(g) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date
of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Price Waterhouse LLP, Deloitte & Touche LLP and Coopers & Lybrand L.L.P.,
shall each have furnished to you a letter or letters, dated the respective
dates of delivery thereof, in form and substance satisfactory to you, to
the effect set forth in Annex I hereto (the executed copy of the letter
delivered prior to the execution of this Agreement is attached as Annex
I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto);
(h) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not
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covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus, and since the respective dates as of which information is given
in the Prospectus there shall not have been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any change,
or any development involving a prospective change, in or affecting the
general affairs, management, financial condition, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise than
as set forth or contemplated in the Prospectus, the effect of which, in any
such case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(i) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities;
(j) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities declared by either Federal or
New York State authorities; or (iii) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this Clause (iii) in the judgment of the Representatives makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(k) The Shares to be sold by the Company and New LLC at such Time
of Delivery shall have been duly listed, subject to notice of issuance, on
the New York Stock Exchange;
(l) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from all parties to the Securityholders
Agreement (as defined in the Prospectus) to the effect set forth in Section
6(e) hereof in form and substance satisfactory to you;
(m) The Company shall have complied with the provisions of Section
6(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(n) The Company and the Selling Stockholders shall have furnished
or caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and the Selling Stockholders, satisfactory to you
as to the accuracy of the representations and warranties of the Company and
the Selling Stockholders, respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and the Selling Stockholders
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of all of their respective obligations hereunder to be performed at or
prior to such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a) and
(h) of this Section, and as to such other matters as you may reasonably
request; and
(o) The Merger shall have been consummated and evidence of the
filing of the executed Certificate of Merger with the Secretary of State of
the State of Delaware, satisfactory to the Representatives, shall have been
provided to the Representatives.
9. (a) The Company and New LLC, jointly and severally, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company and New LLC shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein.
(b) Fenway will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with information furnished in writing to the Company by such Selling
Stockholder expressly for use under the caption "Principal Stockholders and
Selling Stockholder" therein; and will reimburse each Underwriter for any legal
or other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that such Selling Stockholder shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through Goldman, Sachs & Co. expressly for use
therein; PROVIDED, FURTHER, that the liability of Fenway pursuant to this
subsection
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(b) shall not exceed the product of (i) the number of Shares deemed sold by such
Selling Stockholder (based on the allocation of proceeds to Fenway as set forth
in the Custody Agreement) consistent with the data set forth in the Prospectus
under the caption "Principal Stockholders and Selling Stockholder" including any
Optional Shares and (ii) the initial public offering price of the Shares as set
forth in the Prospectus.
(c) Each MDC Entity will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with information furnished in writing to the Company by such Selling
Stockholder expressly for use under the caption "Principal Stockholders and
Selling Stockholder" therein; and will reimburse each Underwriter for any legal
or other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that such Selling Stockholder shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through Goldman, Sachs & Co. expressly for use
therein; PROVIDED, FURTHER, that the liability of such MDC Entity pursuant to
this subsection (c) shall not exceed the product of (i) the number of Shares
deemed sold by such Selling Stockholder (based on the allocation of proceeds to
such Selling Stockholder as set forth in the Custody Agreement) consistent with
the data set forth in the Prospectus under the caption "Principal Stockholders
and Selling Stockholder" including any Optional Shares and (ii) the initial
public offering price of the Shares as set forth in the Prospectus.
(d) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company and each Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or such Selling
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Stockholder in connection with investigating or defending any such action or
claim as such expenses are incurred.
(e) Promptly after receipt by an indemnified party under subsection (a),
(b), (c) or (d) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(f) If the indemnification provided for in this Section 9 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b), (c) or (d) above in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (e) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged
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omission to state a material fact relates to information supplied by the Company
or the Selling Stockholders on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, each of the
Selling Stockholders and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (f) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (f). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (f) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (f), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (f) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(g) The obligations of the Company and the Selling Stockholders under this
Section 9 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 9 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act.
10. (a) The Company and New LLC, jointly and severally, will indemnify
and hold harmless Goldman, Sachs & Co., in its capacity as QIU, against any
losses, claims, damages or liabilities, joint or several, to which the QIU may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the QIU for any legal or other expenses reasonably incurred
by the QIU in connection with investigating or defending any such action or
claim as such expenses are incurred.
(b) Promptly after receipt by the QIU under subsection (a) above of notice
of the commencement of any action, the QIU shall, if a claim in respect thereof
is to be made against the Company under such subsection, notify the Company in
writing of the commencement thereof; but the omission so to notify the Company
shall not relieve it from any liability which it may have to the QIU otherwise
than under such subsection. In case any such action shall be brought against
the QIU and it shall notify the Company of the commencement thereof, the Company
shall be entitled
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to participate therein, and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to the QIU (who shall not, except with the consent of the
QIU, be counsel to the Company or New LLC), and, after notice from the
indemnifying party to the QIU of its election so to assume the defense thereof,
the indemnifying party shall not be liable to the QIU under such subsection for
any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by the QIU, in connection with the defense thereof other
than reasonable costs of investigation. Neither the Company nor New LLC shall,
without the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the QIU is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the QIU from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
the QIU.
(c) If the indemnification provided for in this Section 10 is unavailable
to or insufficient to hold harmless Goldman, Sachs & Co., in its capacity as
QIU, under subsection (a) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then the
Company and New LLC shall contribute to the amount paid or payable by the QIU as
a result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and New LLC on the one hand and the QIU on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the QIU
failed to give the notice required under subsection (b) above, then the Company
and New LLC shall contribute to such amount paid or payable by the QIU in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and New LLC on the one hand and the QIU on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and New LLC on the one hand and the QIU on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company, as set forth in the table
on the cover page of the Prospectus, bear to the fee payable to the QIU pursuant
to Section 3 hereof. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and New LLC on the one hand or the QIU on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, New
LLC and the QIU agree that it would not be just and equitable if contributions
pursuant to this subsection (c) were determined by PRO RATA allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (c). The amount paid or
payable by the QIU as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (c) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
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(d) The obligations of the Company and New LLC under this Section 10 shall
be in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
the QIU within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and New LLC shall be entitled to a further period
of thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company and New LLC notify
you that they have so arranged for the purchase of such Shares, you or the
Company and New LLC shall have the right to postpone such Time of Delivery for a
period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
New LLC as provided in subsection (a) above, the aggregate number of such Shares
which remains unpurchased does not exceed one-eleventh of the aggregate number
of all of the Shares to be purchased at such Time of Delivery, then the Company
and New LLC shall have the right to require each non-defaulting Underwriter to
purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
New LLC as provided in subsection (a) above, the aggregate number of such Shares
which remains unpurchased exceeds one-eleventh of the aggregate number of all of
the Shares to be purchased at such Time of Delivery, or if the Company and New
LLC shall not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or
Underwriters, then this Agreement or, with respect to the Second Time of
Delivery, the obligations of the Underwriters to purchase and of New LLC to sell
the Optional Shares shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or New LLC, except for the
expenses to be borne by the Company and New LLC and the Underwriters as provided
in Section 7 hereof and the indemnity and contribution agreements in Section 9
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth
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in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any of the Selling Stockholders, any officer or director or controlling
person of the Company, or any controlling person of any Selling Stockholder, and
shall survive delivery of and payment for the Shares.
13. If this Agreement shall be terminated pursuant to Section 11 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 7 and 9 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and New LLC as provided herein, the Company will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and New LLC shall then be under no
further liability to any Underwriter in respect of the Shares not so delivered
except as provided in Sections 7 and 9 hereof.
14. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives and in all dealings with New LLC as a Selling Stockholder
hereunder, you and the Company shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of such Selling Stockholder
made or given by any or all of the Attorneys-in-Fact for such Selling
Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to New LLC, to [ ] Attention:_________; if to
Fenway, to _______, Attention:________; if to an MDC Entity, to _________,
Attention:__________; and if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 9 (e) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Stockholders by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
15. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 9 and 12 hereof, the officers and directors of the
Company and New LLC and each person who controls the Company, any Selling
Stockholder or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
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17. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
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If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company, one for each Selling Stockholder and one for
each of the Representatives plus one for each counsel, and the Custodian, if
any, counterparts hereof, and upon the acceptance hereof by you, on behalf of
each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company and
each of the Selling Stockholders. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters (U.S. Version), the form of
which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Aurora Foods Inc.
By:
--------------------------------
Name:
Title:
Aurora/VDK LLC
By:
--------------------------------
Name:
Title:
Fenway Partners Capital Fund, L.P.
By: Fenway Partners, L.P.,
its General Partner
By: Fenway Partners Management, Inc.,
its General Partner
By:
--------------------------------
Name:
Title:
30
<PAGE>
McCown De Leeuw & Co. III, L.P.
By: MCD Management Company III, L.P.
its General Partner
By:
--------------------------------
Name:
Title:
McCown De Leeuw & Co. III (Europe), L.P.
By: MCD Management Company III, L.P.,
its General Partner
By:
--------------------------------
Name:
Title:
McCown De Leeuw & Co. III (Asia), L.P.
By: MCD Management Company IIIA, L.P.,
its General Partner
By:
--------------------------------
Name:
Title:
McCown De Leeuw & Co. IV, L.P.
By: MCD Management Company IV, LLC,
its General Partner
By:
--------------------------------
Name:
Title:
McCown De Leeuw & Co. IV Associates, L.P.
By: MCD Management Company IV, LLC
its General Partner
By:
--------------------------------
Name:
Title:
31
<PAGE>
Gamma Fund LLC
By:
--------------------------------
Name:
Title:
Delta Fund LLC
By:
--------------------------------
Name:
Title:
Accepted as of the date hereof ,
Goldman, Sachs & Co.
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Credit Suisse First Boston Corporation
SBC Warburg Dillon Read Inc.
Chase Securities Inc.
By:
----------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
32
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES TO MAXIMUM OPTION
UNDERWRITER BE PURCHASED EXERCISED
----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co. . . . . . . . . . .
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette Securities
Corporation . . . . . . . . . . . . . .
Credit Suisse First Boston Corporation. .
SBC Warburg Dillon Read Inc. . . . . . .
Chase Securities Inc. . . . . . . . . . .
[NAMES OF OTHER UNDERWRITERS] . . . . . .
---------- ---------
Total 12,325,000 1,848,750
========== =========
</TABLE>
33
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER PURCHASED IF
OF FIRM MAXIMUM OPTION
SHARES TO BE SOLD EXERCISED
----------------- ------------------
<S> <C> <C>
The Company. . . . . . . . . . . . . . 11,004,408
Aurora/VDK LLC (a) . . . . . . . . . . 1,320,592 1,848,750
---------- ---------
---------- ---------
Total 12,325,000 1,848,750
========== =========
</TABLE>
(a) Aurora/VDK LLC has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS
THAN TWO)], and each of them, as the Attorneys-in-Fact for Aurora/VDK LLC.
34
<PAGE>
ANNEX I
FORM OF COMFORT LETTER
Pursuant to Section 8(h) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have been
furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon; and on the basis of
specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus
agrees with the corresponding amounts (after restatements where applicable)
in the audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in the Company's Annual
Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures
35
<PAGE>
specified in such letter nothing came to their attention as a result of the
foregoing procedures that caused them to believe that this information does
not conform in all material respects with the disclosure requirements of
Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included in
the Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances
36
<PAGE>
of capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on the
date of the latest financial statements included in the Prospectus) or
any increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Representatives,
or any increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance sheet
included in the Prospectus, except in each case for changes, increases
or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
37
<PAGE>
ANNEX II(a)
Opinion of Sullivan & Cromwell
38
<PAGE>
ANNEX II(b)
Opinion of Richards & O'Neil LLP
(Pursuant to Section 8(c) of the Underwriting Agreement)
39
<PAGE>
ANNEX II(c)
Opinion of Richards & O'Neil, LLP
(Pursuant to Section 8(c) of the Underwriting Agreement)
40
<PAGE>
ANNEX II(d)
Opinion of Ropes & Gray
41
<PAGE>
ANNEX II(e)
Opinion of Cooley Godward LLP
42
<PAGE>
Exhibit 2.1
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER dated as of June ___, 1998 (the
"Agreement"), by and between Aurora Foods Inc., a Maryland corporation
("Aurora") and A Foods Inc., a Delaware corporation ("A Foods").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Aurora and A Foods
deem it advisable that Aurora merge with and into A Foods (the "Merger"), upon
the terms and conditions herein and in accordance with the laws of the States of
Delaware and Maryland.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERMS
1.1. At the Effective Time (as hereinafter defined) of the Merger,
Aurora shall be merged with and into A Foods, with A Foods as the surviving
corporation (hereinafter also referred to as the "Surviving Corporation").
1.2. The Surviving Corporation is A Foods Inc.
1.3. At the Effective Time, each share of Common Stock of Aurora
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger, be converted into and thereafter represent solely the
right to receive from the Surviving Corporation the sum of $1.00 and all such
issued and outstanding shares shall be cancelled and retired. No shares of
Common Stock of Aurora shall be issuable as a result of the Merger.
1.4. Upon and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises, and be subject
to all the restrictions, disabilities and duties, of the Constituent
Corporations (as hereinafter defined); and all rights, privileges, powers and
franchises of the Constituent Corporations shall be vested in and be the
property of the Surviving Corporation; and all debts, liabilities and duties of
the Constituent Corporations shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if said debts,
liabilities and duties have been incurred or contracted by it.
SECTION 2. EFFECTIVE TIME
2.1. Subsequent to the execution of this Agreement, Aurora and A
Foods (collectively, the "Constituent Corporations") shall each submit this
Agreement to their respective stockholders for their approval pursuant to the
applicable provisions of the General Corporation Law of the State of Delaware
and the General Corporation Law of the State of Maryland.
<PAGE>
2.2. Following approval of this Agreement in accordance with Section
2.1 above, and provided that:
(a) each of the Constituent Corporations shall have received the
approval of its stockholders as required under law; and
(b) this Agreement has not been terminated and abandoned pursuant to
Section 4.2 hereof; the Surviving Corporation will cause a Certificate of Merger
to be executed, acknowledged and filed with the Secretary of States of the
States of Delaware and Maryland, as provided by law.
2.3. The Merger shall become effective immediately upon the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware (the date and time of such filing being herein referred to as the
"Effective Time").
SECTION 3. CERTIFICATE OF INCORPORATION AND BY-LAWS; BOARD OF DIRECTORS
3.1. The Certificate of Incorporation of A Foods constituted at the
Effective Time shall be amended by changing its name in Article FIRST to "Aurora
Foods Inc." and as so amended shall thereafter be the Certificate of
Incorporation of the Surviving Corporation until such time as it shall be
further amended as provided by law.
3.2. The By-Laws of A Foods shall be the By-Laws of the Surviving
Corporation, subject to alteration, amendment or repeal from time to time by the
Board of Directors or the stockholders of the Surviving Corporation.
3.3. From and after the Effective Time, the members of the Board of
Directors of the Surviving Corporation shall consist of the members of the Board
of Directors of A Foods immediately prior to the Effective Time, to hold office
until the expiration of their then current terms and until their respective
successors shall be elected.
3.4. From and after the Effective Time, the officers of A Foods
shall consist of the officers of A Foods immediately prior to the Effective
Time, to hold office until the next annual meeting of the Stockholders of A
Foods and until their respective successors are elected and appointed.
SECTION 4. AMENDMENT AND TERMINATION
4.1. To the fullest extent permitted by applicable law, the
Constituent Corporations, by mutual consent of their respective Boards of
Directors, may amend, modify or supplement this Agreement in such a manner as
may be agreed upon by them in writing at any time prior to the Effective Time,
even though the Agreement shall have been approved by the stockholders of the
Constituent Corporations or of either thereof.
<PAGE>
4.2. This Agreement may be terminated and the Merger abandoned for
any reason by resolution adopted by either of the respective Boards of Directors
of the Constituent Corporations at any time prior to the Effective Time, even
though this Agreement shall have been approved by the stockholders of the
Constituent Corporations or of either thereof.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first
written above.
AURORA FOODS INC.,
a Maryland corporation
By:
--------------------------------------
Name:
Title:
A FOODS INC.,
a Delaware corporation
By:
--------------------------------------
Name:
Title:
<PAGE>
Exhibit 2.2
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER dated as of _____________ __, 1998 (the
"Agreement"), by and among Aurora Foods Holdings Inc., a Delaware corporation
("Aurora Holdings"), AurFoods Operating Co. Inc., a Delaware corporation (f/k/a
Aurora Foods Inc.) ("Old Aurora"), VDK Holdings, Inc., a Delaware corporation
("VDK Holdings"), Van de Kamp's, Inc., a Delaware corporation, ("Van de Kamp's")
and Aurora Foods Inc., a Delaware corporation ("New Aurora"). Aurora Holdings,
Old Aurora, VDK Holdings, and Van de Kamp's, collectively referred to herein as
the "Merging Entities".
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of New Aurora and each
of the Merging Entities deem it advisable that the Merging Entities merge with
and into New Aurora (the "Merger"), upon the terms and conditions herein and in
accordance with the laws of the State of Delaware.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERMS
1.1. At the Effective Time (as hereinafter defined) of the Merger,
the Merging Entities shall be merged with and into New Aurora with New Aurora as
the surviving corporation (hereinafter also referred to as the "Surviving
Corporation").
1.2. The Surviving Corporation is New Aurora.
1.3. At the Effective Time, each share of Common Stock of each of
the Merging Entities issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger, be cancelled and retired and no shares of
Common Stock or other securities of New Aurora shall be issuable as a result
of the Merger.
1.4. Upon and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises, and be subject
to all the restrictions, disabilities and duties, of the Constituent
Corporations (as hereinafter defined); and all rights, privileges, powers and
franchises of the Constituent Corporations shall be vested in and be the
property of the Surviving Corporation; and all debts, liabilities and duties of
the Constituent Corporations shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if said debts,
liabilities and duties have been incurred or contracted by it.
<PAGE>
SECTION 2. EFFECTIVE TIME
2.1. Subsequent to the execution of this Agreement, New Aurora and
each of the Merging Entities (collectively, the "Constituent Corporations")
shall each submit this Agreement to their respective stockholders for their
approval pursuant to the applicable provisions of the General Corporation Law
of the State of Delaware.
2.2. Following approval of this Agreement in accordance with Section
2.1 above, and provided that:
(a) each of the Constituent Corporations shall have received the
approval of its stockholders as required under law; and
(b) this Agreement has not been terminated and abandoned pursuant to
Section 4.2 hereof; the Surviving Corporation will cause a Certificate of Merger
to be executed, acknowledged and filed with the Secretary of State of the State
of Delaware as provided by law.
2.3. The Merger shall become effective immediately upon the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware (the date and time of such filing being herein referred to as the
"Effective Time").
SECTION 3. CERTIFICATE OF INCORPORATION AND BY-LAWS; BOARD OF DIRECTORS
3.1. The Certificate of Incorporation of New Aurora constituted
at the Effective Time shall be amended by changing its name in Article FIRST
to "Aurora Foods Inc." and as so amended shall thereafter be the Certificate of
Incorporation of the Surviving Corporation until such time as it shall be
further amended as provided by law.
3.2. The By-Laws of New Aurora shall be the By-Laws of the
Surviving Corporation, subject to alteration, amendment or repeal from time
to time by the Board of Directors or the stockholders of the Surviving
Corporation.
3.3. From and after the Effective Time the members of the Board of
Directors of the Surviving Corporation shall consist of the members of the Board
of Directors of New Aurora immediately prior to the Effective Time, to hold
office until the expiration of their then current terms and until their
respective successors shall be elected.
3.4. From and after the Effective Time, the officers of New Aurora
shall consist of the officers of New Aurora immediately prior to the Effective
Time, to hold office until the next annual meeting of the stockholders of
New Aurora and until their respective successors are elected and appointed.
<PAGE>
SECTION 4. AMENDMENT AND TERMINATION
4.1. To the fullest extent permitted by applicable law, the
Constituent Corporations, by mutual consent of their respective Boards of
Directors, may amend, modify or supplement this Agreement in such a manner as
may be agreed upon by them in writing at any time prior to the Effective Time,
even though the Agreement shall have been approved by the stockholders of one or
more of the Constituent Corporations.
4.2. This Agreement may be terminated and the Merger abandoned for
any reason by resolution adopted by any one of the respective Boards of
Directors of the Constituent Corporations at any time prior to the Effective
Time, even though this Agreement shall have been approved by the stockholders of
one or more of the Constituent Corporations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first
written above.
AURORA FOODS HOLDINGS INC.
By:
-------------------------------
Name:
Title:
AURORA FOODS INC.
By:
-------------------------------
Name:
Title:
VDK HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
VAN DE KAMP'S, INC.
By:
-------------------------------
Name:
Title:
AURORA FOODS INC.
By:
-------------------------------
Name:
Title:
<PAGE>
Ex 5.1
June ,1998
Aurora Foods Inc.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Re: Aurora Foods Inc.
Registration of 16,675,000 shares of
Common Stock, par value $.01 per share
---------------------------------------
Ladies and Gentlemen:
We furnish this opinion to be filed as Exhibit 5.1 to the Registration
Statement No. 333-50681 on Form S-1 (the "Registration Statement") of Aurora
Foods Inc. (the "Company") filed with the Securities and Exchange Commission
on , 1998. The Registration Statement relates to the proposed public
offering of up to an aggregate of 16,675,000 shares (the "Shares") of the
Company's Common Stock, $.01 par value.
We are familiar with the proceedings taken by the Company in connection
with the Registration Statement and the proposed public offering.
Upon the basis of the foregoing and such other investigations as we have
deemed necessary in connection with this opinion and, assuming that the
Registration Statement becomes and remains effective, we are of the opinion
that the Shares will, upon sale and delivery thereof in the manner specified
in the Registration Statement, be legally issued, fully paid, and
nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and the Reference to this firm under the caption
"Validity of Shares" in the Prospectus contained therein.
Very truly yours,
<PAGE>
Exhibit 2.14
CERTIFICATE OF MERGER
OF
AURORA FOODS INC.
WITH AND INTO
A FOODS INC.
* * * * * *
The undersigned corporations do hereby certify that:
FIRST: The constituent corporations to the merger (the "MERGER") are
Aurora Foods, Inc. a Maryland corporation and A Foods, Inc., a Delaware
corporation.
SECOND: An Agreement of Merger ("the "MERGER AGREEMENT") was approved,
adopted, certified, executed, and acknowledged by each of the constituent
corporations in accordance with Section 252(c) of the General Corporation Law
of the State of Delaware.
THIRD: The name of the surviving corporation is A Foods Inc., a Delaware
corporation.
FOURTH: The Certificate of Incorporation of A Foods Inc., as the
surviving corporation of the Merger, is amended to change the name of the
corporation to "Aurora Foods Inc." and, as so amended, the Certificate of
Incorporation of A Foods Inc. is the Certificate of Incorporation of the
Surviving Corporation.
FIFTH: The executed Merger Agreement will be furnished by the surviving
corporation at 456 Montgomery Street, Suite 2200, San Francisco, California
94104.
SIXTH: A copy of the Merger Agreement will be furnished by the surviving
corporation on request and without cost, to any stockholder of either of the
constituent corporations.
SEVENTH: The authorized capital stock of Aurora Foods Inc., a Maryland
corporation, consists of 100,000 shares, $1.00 par value per shares, all of
one class. The aggregate par value of all authorized shares having a par value
is $100,000.00
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
__ day of _________, 1998.
AURORA FOODS INC.
By______________________
Name:
Title:
A FOODS INC.
By______________________
Name:
Title:
<PAGE>
Exhibit 3.2
A FOODS INC.
-- A Delaware Corporation --
By-Laws
ARTICLE I
Meetings of Stockholders
Section 1.1. Annual Meetings. An annual meeting of the stockholders
for the election of directors and for the transaction of such other business as
may properly come before such meeting shall be held each year on such date and
at such time and place, within or without the State of Delaware, as may be
designated by the Board of Directors.
Section 1.2. Special Meetings. Special meetings of the stockholders
may be called by the Board of Directors, the Chairman, if any, the Vice
Chairman, if any, the President, any Executive Vice President or Vice President,
or the holders of a majority of the shares of the Corporation then issued and
outstanding and entitled to vote at such meeting. Any such meeting shall be held
on such date and at such time and place, within or without the State of
Delaware, as may be designated by the person or persons calling such meeting.
Section 1.3. Notice of Meetings; Waiver of Notice.
(a) Notice of Meetings. Whenever stockholders are required by law to
take any action at a meeting, a written notice of the meeting shall be given by
mail, facsimile, telegram, cable or personal delivery by or at the direction of
the Chairman, if any, the Vice Chairman, if any, the President, any Executive
Vice President or Vice President, the Secretary, any Assistant Secretary or
other persons calling the meeting, and shall state the place, date and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than 10 nor more than 60 days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be directed to each stockholder at his
address as it appears on the records of the Corporation.
(b) Waiver of Notice. Whenever notice is required to be given to the
stockholders under any provision of law, the Certificate of Incorporation of the
Corporation or these By-laws, a written waiver signed by a stockholder entitled
to notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a stockholder at a meeting shall constitute
a waiver of notice of such meeting, except when the stockholder attends such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the
<PAGE>
stockholders need be specified in any written waiver of notice unless so
required by the Certificate of Incorporation of the Corporation.
Section 1.4. Quorum. The presence at any meeting, in person or by
proxy, of the holders of record of a majority of the shares then issued and
outstanding and entitled to vote shall be necessary and sufficient to constitute
a quorum for the transaction of business, except as otherwise provided by law or
the Certificate of Incorporation of the Corporation. For purposes of the
foregoing, where a separate vote by class or classes is required for any matter,
the holders of a majority of the outstanding shares of such class or classes,
present in person or represented by proxy, shall constitute a quorum to take
action with respect to that vote on that matter. Two or more classes or series
of stock shall be considered a single class if the holders thereof are entitled
to vote together as a single class at the meeting.
Section 1.5. Adjournments. In the absence of a quorum, holders of a
majority of the shares of the Corporation then issued and outstanding and
entitled to vote, present in person or by proxy at a meeting, or, if no
stockholder entitled to vote is present in person or by proxy, any officer
entitled to act as chairman or secretary of such meeting, may adjourn the
meeting to another time or place.
When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 1.6. Organization. The Chairman, or, if there is no Chairman
or in his absence or disability, the Vice Chairman, if any, the CEO or the
President or any Executive Vice President or Vice President, or, in the absence
of all of them, a chairman appointed by the Board of Directors, shall act as
chairman of all meetings of stockholders. The Secretary or, in his absence or
disability, any Assistant Secretary, or, in the absence of both of them, a
Secretary appointed by the chairman of the meeting, shall act as secretary at
all meetings of stockholders.
Section 1.7. Voting. Unless otherwise provided in the Certificate of
Incorporation of the Corporation or required by law, each stockholder shall be
entitled to one vote for each share of capital stock held by such stockholder
which is registered in his name on the record date for the meeting and is
entitled to vote on the matter in question. Unless otherwise provided in the
Certificate of Incorporation, directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Except as otherwise provided by
law, the Certificate of Incorporation of the Corporation or these By-Laws, in
all other matters the affirmative vote of a majority of the shares present in
person or represented by proxy at the meeting and entitled
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to vote on the subject matter shall be the act of the stockholders. Voting,
including voting for the election of directors, need not be by written ballot.
Section 1.8. Proxies. Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate actions in writing
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power.
Section 1.9. Stockholder List. The Secretary shall prepare and make,
at least 10 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address and number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the entire time thereof, and may be inspected by any stockholder
who is present.
Section 1.10. Inspectors of Election. In advance of any
stockholders' meeting, the Board of Directors shall appoint one or more
inspectors to act at the meeting and make a written report thereof. The Board of
Directors may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
his ability.
Section 1.11. Fixing the Record Date. So that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix in advance a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted by the Board, and (i) in the case of a meeting, shall not be
more than 60 nor less than 10 days before the date of such meeting, or (ii) in
the case of a written consent, shall not exceed by more than 10 days the date
upon which the resolution fixing the record date is adopted by the Board, or
(iii) in the case of any other action, shall not be more than 50 days prior to
such action. Only those stockholders of record on the date so fixed shall be
entitled to any of the foregoing rights,
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notwithstanding the transfer of any stock on the books of the Corporation after
any such record date fixed by the Board of Directors.
ARTICLE II
Consent of Stockholders In Lieu of Meeting
Unless otherwise provided in the Certificate of Incorporation, any
action required by law or these By-Laws to be taken at any annual or special
meeting of stockholders of the Corporation may be taken without a meeting,
without prior notice and without a vote if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation as
required by law. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not so consented in writing, and who, if the action had
been taken at a meeting, would have been entitled to notice.
ARTICLE III
Board of Directors
Section 3.1. Number. The Board of Directors shall consist of not
less than one nor more than eleven directors. The initial Board of Directors
shall consist of ten directors. Thereafter, the Board of Directors shall fix the
size of the Board of Directors from time to time by resolution of either the
Board of Directors in accordance with applicable law (being subject to any
subsequent resolutions of them) and the Securityholders Agreement dated as of
April 8, 1998 (the "Securityholders Agreement") by and among VDK Foods LLC, MBW
Investors LLC and certain other parties signatories thereto.
Section 3.2. Election and Term of Office. Directors shall be elected
at the annual meeting of the stockholders, except as provided in Sections 3.3 or
3.11 of these By-Laws and subject to the Securityholders Agreement. Each
director (whether elected at an annual meeting or to fill a vacancy or
otherwise) shall hold office until his successor shall have been duly elected
and qualified or until his earlier death, resignation or removal in the manner
hereinafter provided.
Section 3.3. Vacancies and Additional Directorships. Unless
otherwise provided in the Certificate of Incorporation of the Corporation or the
Securityholders Agreement, vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a
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quorum, or by a sole remaining director. Unless otherwise provided in the
Certificate of Incorporation of the Corporation or the Securityholders
Agreement, when one or more directors shall resign from the Board, effective at
a future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to be effective upon the effectiveness of such resignation or
resignations. The directors shall have and may exercise all their powers
notwithstanding the existence of one or more vacancies in their number, subject
to any requirements of law or of the Certificate of Incorporation or of these
By-Laws as to the number of directors required for a quorum or for any vote or
other actions.
Section 3.4. Meetings.
(a) Regular Meetings. The Board of Directors may by resolution
provide for the holding of regular meetings for the organization of the
Corporation, for the election of officers and for the transaction of such other
business as may properly come before the meeting, and may fix the times and
places at which such meetings shall be held. Notice of regular meetings shall
not be required to be given, provided that whenever the time or place of regular
meetings shall be fixed or changed, notice of such action shall be given
promptly by mail, facsimile, telegram, radio, cable, telephone or personal
delivery to each director who shall not have been present at the meeting at
which such action was taken, communicated to him at his residence or usual place
of business.
(b) Special Meetings. Special meetings of the Board of Directors may
be called by or at the direction of the Chairman, if any, the Vice Chairman, if
any, the President, any Vice President or four of the directors then in office,
except that when the Board of Directors consists of one director, then such
director may call a special meeting. Except as otherwise required by law, notice
of each special meeting shall be mailed to each director, addressed to him at
his residence or usual place of business, at least seven days before the day on
which such meeting is to be held, or shall be sent to him at such place by
facsimile, telegram, radio or cable, or telephoned or delivered to him
personally, not later than seven days before the day on which such meeting is to
be held. Such notice shall state the time and place of such meeting, but need
not state the purpose thereof, unless otherwise required by law, the Certificate
of Incorporation of the Corporation or these By-Laws.
(c) Waiver of Notice. Whenever notice is required to be given to the
directors under any provision of law, the Certificate of Incorporation of the
Corporation or these ByLaws, a written waiver, signed by the director entitled
to notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except when a director attends a meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the directors need be specified in any
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written waiver of notice unless so required by the Certificate of Incorporation
of the Corporation.
(d) Participation by Conference Call. Members of the Board of
Directors may participate in any meeting of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other or by any other means permitted
by law, and such participation shall constitute presence in person at the
meeting.
Section 3.5. Quorum; Voting. Unless the Certificate of Incorporation
of the Corporation provides otherwise, and except as provided in the
Securityholders Agreement, at each meeting of the Board of Directors a majority
of the total number of members of the Board of Directors shall constitute a
quorum for the transaction of business, except that when the Board consists of
only one director, then one director shall constitute a quorum. Unless otherwise
required by law, the Certificate of Incorporation of the Corporation or these
By-Laws, and except as provided in the Securityholders Agreement, a vote of the
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board. So long as the Securityholders Agreement remains
in effect, except as otherwise required by law, all actions to be taken by the
Board of Directors shall require the presence and consent of at least six
directors and any action by written consent of the Board of Directors shall
require the consent of all of the members of the Board of Directors.
Section 3.6. Adjournments. A majority of the directors present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. Notice of any adjournment of a meeting of the Board of Directors to
another time or place shall be given to the directors who were not present at
the time of the adjournment and, unless such time and place are announced at
such meeting, to the directors who were present.
Section 3.7. Organization. The Chairman, or if there is no Chairman
or in his absence or disability, the Vice Chairman, if any, the President, or
any Vice President, or in the absence of all of them, a chairman appointed by
the directors present at such meeting, shall act as chairman at meetings of
directors. The Secretary, or in his absence or disability, any Assistant
Secretary, or in the absence of all of them, a secretary appointed by the
chairman of the meeting, shall act as secretary at all meetings of the Board of
Directors.
Section 3.8. Action of Board Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board consent thereto in writing and
such writing or writings are filed with the minutes of proceedings of the Board.
Such consent shall be treated for all purposes as the act of the Board of
Directors.
Section 3.9. Manner of Acting. A member of the Board of Directors
shall, in the performance of his duties, be fully protected in relying in good
faith upon the records of the
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Corporation and upon such information, opinions, reports or statements presented
to the Corporation by any of the Corporation's officers or employees, or
committees of the Board, or by any other person as to matters the director
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation.
Section 3.10. Resignation of Directors. Any director may resign at
any time upon giving written notice of such resignation to the Board of
Directors, the Chairman, if any, the Vice Chairman, if any, the President, any
Vice President or the Secretary. Unless otherwise specified in such notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
any such officer, and acceptance of such resignation shall not be necessary to
make it effective.
Section 3.11. Removal of Directors. Subject to the Securityholders
Agreement, at any meeting of the stockholders duly called as provided in these
By-Laws, (i) any director or directors may be removed from office, either with
or without cause, as provided by law, and (ii) a successor or successors may be
elected by a plurality of the votes cast, or if any such vacancy is not so
filled, it may be filled by the directors as provided in Section 3.3 of these
ByLaws. As provided in the Securityholders Agreement, any director who is a
designee of a designating party in accordance with the Securityholders Agreement
may be removed, with or without cause, by such designating party acting alone.
Section 3.12. Compensation of Directors. Directors may receive such
reasonable compensation for their services as directors, whether in the form of
salary or a fixed fee for attendance at meetings, with reasonable expenses, if
any, as the Board of Directors may from time to time determine. Nothing
contained herein shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
Committees of the Board
Section 4.1. Designation and Powers. The Board of Directors may, by
a resolution passed by a majority of the entire Board of Directors (which
majority shall include at least one Fenway Designee and one MDC Designee (as
such terms are defined in the Securityholders Agreement) so long as (A) the
Securityholders Agreement remains in effect and (B) (1) with respect to the
requirement that such majority include one Fenway Designee, Fenway shall
Beneficially Own (as such term is defined in the Securityholders Agreement) in
the aggregate at least 50% of the number of shares of capital stock of the
Corporation Beneficially Owned by MDC upon consummation of the initial public
offering of the Corporation (assuming the liquidation of Aurora/VDK LLC and MBW
Investors LLC contemporaneously therewith), and (2) with respect to the
requirement that such majority include one MDC Designee, MDC
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shall Beneficially Own in the aggregate at least 50% of the number of shares of
capital stock of the Corporation Beneficially Owned by MDC upon consummation of
the initial public offering of the Corporation (assuming the liquidation of
Aurora/VDK LLC and MBW Investors LLC contemporaneously therewith)), designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. Any such committee, to the extent provided in such
resolution and these By-Laws and permitted by law, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that no such committee shall have the power or authority to (i) amend the
Certificate of Incorporation of the Corporation, except as permitted by law,
(ii) adopt an agreement of merger or consolidation, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property or assets, (iv) recommend to the stockholders a
dissolution of the Corporation, or a revocation of a dissolution, or (v) amend
the By-Laws of the Corporation. Subject to Section 5.17, any such committee, to
the extent provided in such resolution, shall have the power and authority to
(i) declare a dividend, (ii) authorize the issuance of stock, or (iii) adopt a
certificate of ownership and merger as permitted by law.
Section 4.2. Term of Office. The term of office of the members of
each committee shall be as fixed from time to time by the Board of Directors,
subject to these ByLaws; provided, however, that any committee member who ceases
to be a member of the Board of Directors shall ipso facto cease to be a member
of any committee thereof.
Section 4.3. Alternate Members and Vacancies. Subject to Section
4.1, the Board of Directors may designate one or more directors as alternate
members of any committee who, in the order specified by the Board of Directors,
may replace any absent or disqualified member at any meeting of the committee.
If at a meeting of any committee one or more of the members thereof should be
absent or disqualified, and if either the Board of Directors has not so
designated any alternate member or members or the number of absent or
disqualified members exceeds the number of alternate members who are present at
such meeting, then the member or members of such committee (including
alternates) present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another director to
act at the meeting in the place of any such absent or disqualified member,
subject to the approval of the Board of Directors under Section 4.1. If any
vacancy shall occur in any committee by reason of death, resignation,
disqualification, removal or otherwise, the remaining member or members of such
committee, so long as a quorum is present, may continue to act until such
vacancy is filled by the Board of Directors.
Section 4.4. Meetings. Each committee shall fix its own rules of
procedure, and shall meet where and as and upon such notice as provided by such
rules or by resolution of the Board of Directors. Each committee shall keep
regular minutes of its proceedings and all actions by each committee shall be
reported to the Board of Directors at its next regular meeting succeeding any
such action. Members of any committee designated by the Board may participate
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in a meeting of the committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other or by any other means permitted by law, and such
participation shall constitute presence in person at the meeting.
Section 4.5. Quorum; Voting. At each meeting of any committee the
presence of a majority of the total number of its members then in office shall
constitute a quorum for the transaction of business; except that when a
committee consists of one member, then one member shall constitute a quorum. A
vote of the majority of committee members present at any meeting of a committee
at which a quorum is present shall be the act of such committee.
Section 4.6. Adjournments. A majority of the members of a committee
present, whether or not a quorum is present, may adjourn any meeting of such
committee to another place and time.
Section 4.7. Action of Committee Without Meeting. Any action
required or permitted to be taken at any meeting of any committee designated by
the Board of Directors may be taken without a meeting if all members of such
committee consent thereto in writing and such writing or writings are filed with
the minutes of the proceedings of such committee. Such consent shall be treated
for all purposes as the act of such committee.
Section 4.8. Manner of Acting. A member of any committee designated
by the Board of Directors shall, in the performance of his duties, be fully
protected in relying in good faith upon the records of the Corporation and upon
such information, opinions, reports or statements presented to the Corporation
by any of the Corporation's officers or employees, or other committees of the
Board of Directors, or by any other person as to matters the member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4.9. Resignation of Committee Members. Any member of a
committee may resign at any time by giving written notice of such resignation to
the Board of Directors, the Chairman, if any, the Vice Chairman, if any, the
President, any Vice President or the Secretary. Unless otherwise specified in
such notice, such resignation shall take effect upon receipt thereof by the
Board of Directors or any such officer, and acceptance of such resignation shall
not be necessary to make it effective.
Section 4.10. Removal of Committee Members. Any member of any
committee may be removed with or without cause at any time by the Board of
Directors, subject to the approval required by Section 4.1 for establishment of
a committee.
Section 4.11. Compensation of Committee Members. Committee members
may receive such reasonable compensation for their services as committee
members, whether in the form of salary or a fixed fee for attendance at
meetings, with reasonable expenses, if any, as the
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Board of Directors may from time to time determine. Nothing contained herein
shall be construed to preclude any committee member from serving the Corporation
in any other capacity and receiving compensation therefor.
ARTICLE V
Officers
Section 5.1. Officers. The officers of the Corporation shall be a
Chairman (if elected by the Board of Directors), a Vice Chairman (if elected by
the Board of Directors), a Chief Executive Officer (if elected by the Board of
Directors), a President (if elected by the Board of Directors), one or more
Executive Vice Presidents or Vice Presidents (if elected by the Board of
Directors), a Secretary (if elected by the Board of Directors), a Treasurer (if
elected by the Board of Directors), and such other officers as may be appointed
in accordance with the provisions of Section 5.3 of these By-Laws and the
Securityholders Agreement.
Section 5.2. Election, Term of Office and Qualifications. Each
officer (except such officers as may be appointed in accordance with the
provisions of Section 5.3 of these ByLaws and subject to the Securityholders
Agreement) shall be elected or appointed by a majority of the Board of Directors
present at any meeting at which such election is held. Unless otherwise provided
in the resolution of election and subject to the Securityholders Agreement, the
Chairman and each officer (whether elected at the first meeting of the Board of
Directors after the annual meeting of stockholders or to fill a vacancy or
otherwise) shall hold his office until the first meeting of the Board of
Directors after the next annual meeting of stockholders and until his successor
shall have been elected and qualified, or until his earlier death, resignation
or removal.
Section 5.3. Subordinate Officers and Agents. The Board of Directors
may from time to time appoint other officers or agents (including, without
limitation, one or more Assistant Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers), to hold office for such
periods, have such authority and perform such duties as are provided in these
By-Laws or as may be provided in the resolutions appointing them. The Board of
Directors may delegate to any officer or agent the power to appoint any such
subordinate officers or agents and to prescribe their respective terms of
office, authority and duties.
Section 5.4. The Chairman. The Chairman, if there is one, shall be
elected by the Board of Directors. Subject to the direction of the Board of
Directors and the Securityholders Agreement, the Chairman shall preside at all
meetings of the Board of Directors and stockholders and see that all orders and
resolutions of the Board of Directors are carried into effect. From time to time
the Chairman shall report to the Board of Directors all matters within his
knowledge which the interests of the Corporation may require to be brought to
the attention
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of the directors. The Chairman shall also have such other powers and perform
such other duties as may from time to time be prescribed by the Board of
Directors or these By-Laws.
Section 5.5. The Vice Chairman. At the request of the Chairman, if
there is one, or in his absence or disability, the Vice Chairman, if there is
one, shall perform all the duties of the Chairman and, when so acting, shall
have all the powers of and be subject to all the restrictions on the Chairman.
The Vice Chairman may sign (which signature may be a facsimile signature), with
any other officer thereunto duly authorized, certificates representing stock of
the Corporation, the issuance of which shall have been duly authorized, and may
sign (which signature may be a facsimile signature) and execute, in the name and
on behalf of the Corporation, deeds, mortgages, bonds, contracts, agreements and
other instruments and documents duly authorized by the Board of Directors,
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to another officer or agent. The Vice Chairman shall also
have such other powers and perform such other duties as may from time to time be
prescribed by the Board of Directors, the Chairman or these By-Laws.
Section 5.6. Chief Executive Officer. The Chief Executive Officer
(the "CEO") of the Corporation shall report to the Chairman or, if there is no
Chairman, then to the Vice Chairman. Subject to the direction of the Chairman,
the Vice Chairman, if any, and the Board of Directors, the CEO shall have
general charge of the business, affairs and property of the Corporation and
general supervision over its officers and agents. He may sign (which signature
may be a facsimile signature), with any other officer thereunto duly authorized,
certificates representing stock of the Corporation, the issuance of which shall
have been duly authorized, and may sign (which signature may be a facsimile
signature) and execute, in the name and on behalf of the Corporation, deeds,
mortgages, bonds, contracts, agreements and other instruments and documents duly
authorized by the Board of Directors, except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to another
officer or agent.
Section 5.7. The President. If there is no Chairman or Vice Chairman
or CEO, the President shall act as the chief executive officer of the
Corporation. Subject to the authority and direction of the Chairman, the Vice
Chairman or CEO, if any, and the Board of Directors, the President shall have
all the powers of and be subject to all the restrictions on the Chairman, and
shall have charge of the day to day supervision of the business, affairs and
property of the Corporation. The President may sign (which signature may be a
facsimile signature), with any other officer thereunto duly authorized,
certificates representing stock of the Corporation, the issuance of which shall
have been duly authorized, and may sign (which signature may be a facsimile
signature) and execute, in the name and on behalf of the Corporation, deeds,
mortgages, bonds, contracts, agreements and other instruments and documents duly
authorized by the Board of Directors, except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to another
officer or agent. The President shall also have such other powers and perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman, the Vice Chairman, CEO or these By-Laws.
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Section 5.8. Executive Vice President and Vice Presidents. At the
request of the President, or in his absence or disability, any Executive Vice
President or Vice President designated by the Board of Directors shall perform
all the duties of the President and, when so acting, shall have all the powers
of and be subject to all the restrictions on the President. Any Executive Vice
President or Vice President may also sign (which signature may be a facsimile
signature), with any other officer thereunto duly authorized, certificates
representing stock of the Corporation, the issuance of which shall have been
duly authorized, and may sign (which signature may be a facsimile signature) and
execute, in the name and on behalf of the Corporation, deeds, mortgages, bonds,
contracts, agreements and other instruments and documents duly authorized by the
Board of Directors, except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to another officer or agent. Each
Executive Vice President or Vice President shall have such other powers and
perform such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman, the Vice Chairman, the CEO, the President or these
By-Laws.
Section 5.9. The Secretary. The Secretary shall
(a) record all the proceedings of meetings of the
stockholders, the Board of Directors, and any committees thereof in
a book or books to be kept for that purpose;
(b) cause all notices to be duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) whenever any committee shall be appointed pursuant to a
resolution of the Board of Directors, furnish the chairman of such
committee with a copy of such resolution;
(d) be custodian of the records and the seal of the
Corporation, and cause such seal to be affixed to (or a facsimile to
be reproduced on) all certificates representing stock of the
Corporation prior to the issuance thereof and all instruments the
execution of which in the name and on behalf of the Corporation and
under its seal shall have been duly authorized;
(e) see that the lists, books, reports, statements,
certificates and other documents and records required by law are
properly kept and filed;
(f) have charge of the stock and transfer books of the
Corporation, and exhibit such books at all reasonable times to such
persons as are entitled by law to have access thereto;
(g) sign (which signature may be a facsimile signature), with
any other officer thereunto duly authorized, certificates
representing stock of the
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Corporation, the issuance of which shall have been duly authorized,
and sign (which signature may be a facsimile signature) and execute,
in the name and on behalf of the Corporation, instruments and
documents duly authorized by the Board of Directors, except where
the signing and execution thereof shall be expressly delegated by
the Board of Directors to another officer or agent; and
(h) in general, perform all duties incident to the office of
Secretary and have such other powers and perform such other duties
as may from time to time be prescribed by the Board of Directors,
the Chairman, the Vice Chairman, the CEO, the President or these
By-Laws.
Section 5.10. Assistant Secretaries. At the request of the
Secretary, or in his absence or disability, the Assistant Secretary designated
by the Secretary, the Board of Directors, the Chairman, the Vice Chairman, the
CEO or the President, shall perform all the duties of the Secretary, and, when
so acting, shall have all the powers of and be subject to all the restrictions
on the Secretary. Each Assistant Secretary shall have such other powers and
perform such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman, the Vice Chairman, the CEO, the President, the
Secretary or these By-Laws.
Section 5.11. The Treasurer. The Treasurer shall
(a) have charge of and supervision over and be responsible for
the funds, securities, receipts and disbursements of the
Corporation;
(b) cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies, or with such bankers
or other depositaries, as shall be selected in accordance with
Section 7.3 of these By-Laws, or to be otherwise dealt with in such
manner as the Board of Directors may direct from time to time;
(c) cause the funds of the Corporation to be disbursed by
checks or drafts upon the authorized depositaries of the
Corporation, and cause to be taken and preserved proper vouchers for
all moneys disbursed;
(d) render to the Board of Directors, the Chairman, if any,
the Vice Chairman, if any, and/or the CEO or President, whenever
requested, a statement of the financial condition of the Corporation
and of all of his transactions as Treasurer;
(e) cause to be kept at the Corporation's principal office
correct books of account of all of the Corporation's business and
transactions and such duplicate books of account as he shall
determine and, upon application, cause such books or duplicates
thereof to be exhibited to any director;
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(f) be empowered, from time to time, to require from the
officers or agents of the Corporation reports or statements giving
such information as he may desire or deem appropriate with respect
to any or all financial transactions of the Corporation;
(g) sign (which signature may be a facsimile signature), with
any other officer thereunto duly authorized, certificates
representing stock of the Corporation, the issuance of which shall
have been duly authorized, and sign (which signature may be a
facsimile signature) and execute, in the name and on behalf of the
Corporation, instruments and documents duly authorized by the Board
of Directors, except where the signing and execution thereof shall
be expressly delegated by the Board of Directors to another officer
or agent; and
(h) in general, perform all duties incident to the office of
Treasurer and have such other powers and perform such other duties
as may from time to time be prescribed by the Board of Directors,
the Chairman, the Vice Chairman, the CEO or President or these
By-Laws.
Section 5.12. Assistant Treasurer. At the request of the Treasurer,
or in his absence or disability, the Assistant Treasurer designated by the
Treasurer, the Board of Directors, the Chairman, if any, the Vice Chairman, if
any, the CEO or the President shall perform all the duties of the Treasurer,
and, when so acting, shall have all the powers of and be subject to all the
restrictions on the Treasurer. Each Assistant Treasurer shall have such other
powers and perform such other duties as may from time to time be prescribed by
the Board of Directors, the Chairman, the Vice Chairman, the CEO, the President,
the Treasurer or these By-Laws.
Section 5.13. Resignations. Any officer may resign at any time by
giving written notice of such resignation to the Board of Directors, the
Chairman, the Vice Chairman, the CEO, the President, any Executive Vice
President or Vice President, or the Secretary. Unless otherwise specified in
such written notice, such resignation shall take effect upon receipt thereof by
the Board of Directors or any such officer, and the acceptance of such
resignation shall not be necessary for it to be effective.
Section 5.14. Removal. Any officer specifically designated in
Section 5.1 of these By-Laws may be removed with or without cause at any meeting
of the Board of Directors by the affirmative vote of a majority of the directors
then in office, subject to the Securityholders Agreement. Any officer or agent
appointed pursuant to the provisions of Section 5.3 of these By-Laws may be
removed with or without cause at any meeting of the Board of Directors by the
affirmative vote of a majority of the directors present at such meeting or at
any time by any superior officer or agent upon whom such power of removal shall
have been conferred by the Board of Directors, subject to the Securityholders
Agreement.
-- 14 --
<PAGE>
Section 5.15. Vacancies. Any vacancy in any office (whether by
reason of death, resignation, removal, disqualification or otherwise) shall be
filled for the unexpired portion of the term in the manner prescribed by these
By-Laws for regular elections or appointments to such office, subject to the
Securityholders Agreement.
Section 5.16. Compensation. The salaries of the officers of the
Corporation shall be fixed from time to time by the Board of Directors, except
that the Board of Directors may delegate to any person the power to fix the
salaries or other compensation of any officers or agents appointed pursuant to
the provisions of Section 5.3 of these By-Laws. No officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the Corporation.
Section 5.17. Bonding The Corporation may secure the fidelity of any
or all of its officers or agents by bond or otherwise.
Section 5.18. Interested Directors and Officers.
(a) No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of the Corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his vote is counted for such purpose, if:
(i) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in
good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors may be less than a quorum; or
(ii) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(iii) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified,
by the Board of Directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
-- 15 --
<PAGE>
Section 5.19. Limitation on Actions. Notwithstanding anything set
forth in these By-Laws to the contrary, the Chairman and the officers of the
Corporation shall not be authorized to take or cause the occurrence of, and are
hereby expressly prohibited from taking or causing the occurrence of, any of the
"Restricted Actions" (as defined below) listed in Section 5.1 of the
Securityholders Agreement, unless any required approval of "MDC" and "Fenway"
(as such terms are defined in the Securityholders Agreement) as set forth in
such Section 5.1 has been obtained. The term "Restricted Actions" shall have the
meaning given such term in the Securityholders Agreement.
ARTICLE VI
Indemnification
The Corporation shall indemnify, in the manner and to the fullest
extent permitted by applicable law, any person (or the estate of any person) who
was or is a party to, or is threatened to be made a party to, any threatened,
pending or completed action, suit or proceeding, whether or not by or in the
right of the Corporation, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was or
has agreed to be a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees and expenses), judgments, fines, penalties
and amounts paid in settlement actually and reasonably incurred (and not
otherwise recovered) by such person in connection with the investigation,
preparation to defend or defense of such action, suit, claim or proceeding. To
the extent and in the manner provided by applicable law, any such expenses may
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding even if such director or officer is alleged to have not met
the applicable standard of conduct required under this Section or is alleged to
have committed conduct so that, if true, such director or officer would not be
entitled to indemnification under this Section, upon receipt of an undertaking,
which need not be secured, by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Section, provided, however,
that the foregoing shall not require the Corporation to indemnify or advance
expenses to any person in connection with any action, suit, proceeding, claim or
counterclaim initiated by or on behalf of such person. Unless otherwise
permitted by applicable law, the indemnification provided for herein shall be
made only as authorized in the specific case upon a determination, made in the
manner provided by applicable law, that indemnification of such director or
officer has met the standards required by law. The Corporation may, to the
fullest extent permitted by applicable law, purchase and maintain insurance on
behalf of any person who is or was or has agreed to be a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise against any liability which may be asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability
-- 16 --
<PAGE>
under applicable law. The indemnification and advancement of expenses provided
for herein shall not be deemed to limit the right of the Corporation to
indemnify or make advances to any other such person for any expenses (including
attorneys' fees and expenses), judgments, fines or other amounts to the fullest
extent permitted by applicable law, nor shall they be deemed exclusive of any
other rights to which any such person seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall inure
to the benefit of the heirs and legal representatives of such person. Any repeal
or modification of this Section or any repeal or modification of relevant
provisions of the Delaware General Corporation Law or any other applicable laws
shall not in any way diminish any rights to indemnification of such director or
officer with respect to any acts or omissions by such person occurring prior to
such repeal or modification, or the obligations of the Corporation arising
hereunder. If this Section or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless (i) indemnify each director or officer of the Corporation as to
costs, charges and expenses (including attorneys' fees and expenses), judgments,
fines and amounts paid in settlement with respect to any proceeding and (ii)
advance expenses (including attorneys' fees and expenses), in each case to the
fullest extent permitted by any applicable portion of this Section that shall
not have been invalidated and to the full extent permitted by applicable law.
ARTICLE VII
Execution of Instruments and
Deposit of Corporate Funds
Section 7.1. Execution of Instruments Generally. Subject to the
approval of the Board of Directors, each of the Chairman, the Vice Chairman,
CEO, the President, any Executive Vice President or Vice President, the
Secretary or the Treasurer into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. The Board of Directors
may authorize any officer or officers or agent or agents to enter into any
contract or execute and deliver any instrument in the name and on behalf of the
Corporation, and such authorization may be general or confined to specific
instances.
Section 7.2. Borrowing. No loans or advances shall be obtained or
contracted for by or on behalf of the Corporation, and no negotiable paper shall
be issued in the name of the Corporation, unless and except as authorized by the
Board of Directors. Such authorization may be general or confined to specific
instances. Any officer or agent of the Corporation thereunto so authorized may
obtain loans and advances for the Corporation, and in connection with such loans
and advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the Corporation. Any officer or agent of the
Corporation so authorized may pledge, hypothecate or transfer as security for
the payment of any and all loans,
-- 17 --
<PAGE>
advances, indebtedness and liabilities of the Corporation any and all stocks,
bonds, other securities and other property at any time held by the Corporation,
and to that end may endorse, assign and deliver the same and do every act and
thing necessary or proper in connection therewith.
Section 7.3. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to its credit in such banks or
trust companies or with such bankers or other depositaries as the Board of
Directors may select, or as may be selected by any officer or officers or agent
or agents authorized to do so by the Board of Directors. Endorsements for
deposit to the credit of the Corporation in any of its duly authorized
depositaries shall be made in such manner as the Board of Directors may from
time to time determine.
Section 7.4. Checks, Drafts, Etc. All checks, drafts or other orders
for the payment of money, and all notes or other evidences of indebtedness
issued in the name of the Corporation, shall be signed by such officer or
officers or agent or agents of the Corporation, and in such manner, as from time
to time shall be determined by the Board of Directors.
Section 7.5. Proxies. Proxies to vote with respect to shares of
stock of other corporations owned by or standing in the name of the Corporation
may be executed and delivered from time to time on behalf of the Corporation by
the Chairman or Vice Chairman, the CEO, the President, or any Executive Vice
President or Vice President, or by any other person or persons thereunto
authorized by the Board of Directors.
ARTICLE VIII
Stock
Section 8.1. Form and Execution of Certificates. The shares of
capital stock of the Corporation shall be represented by certificates in the
form approved by the Board of Directors from time to time. The certificates
shall be signed by, or in the name of the Corporation by, the Chairman, the Vice
Chairman, the President or any Executive Vice President or Vice President, and
by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer. Any or all of the signatures on the certificates may be facsimile
signatures. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon such certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
Section 8.2. Regulations. The Board of Directors may make such rules
and regulations consistent with any governing statute as it may deem expedient
concerning the issue, transfer and registration of certificates of stock and
concerning certificates of stock issued,
-- 18 --
<PAGE>
transferred or registered in lieu or replacement of any lost, stolen, destroyed
or mutilated certificates of stock.
Section 8.3. Transfer Agent and Registrar. The Board of Directors
may appoint a transfer agent or transfer agents and a registrar or registrars of
transfers for any or all classes of the capital stock of the Corporation, and
may require stock certificates of any or all classes to bear the signature of
either or both.
ARTICLE IX
Corporate Seal
Subject to alteration by the Board of Directors, the corporate seal
shall be circular in form, shall bear the name of the Corporation and words and
figures denoting its organization under the laws of the State of Delaware and
the year thereof, and otherwise shall be in such form as shall be approved from
time to time by the Board of Directors.
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall begin on the first day of
January in each year or such other day as the Board of Directors may determine
by resolution.
ARTICLE XI
Amendments
In addition to the provisions, if any, in the Certificate of
Incorporation of the Corporation relating to the amendment of the
Corporation's By-Laws by the Board of Directors, the By-Laws of the
Corporation may be amended or repealed, and new By-Laws may be made and
adopted, by vote of a majority of the shares of stock of the Corporation then
issued and outstanding and entitled to vote thereon at any annual or special
Stockholders' meeting; provided, that Sections 3.1, 3.2, 3.3, 3.5, 3.11, 4.1
and 5.17 of these By-Laws and this proviso of this Article XI shall not be
amended or repealed unless such amendment or repeal is approved by each party
under the Securityholders Agreement whose approval is then required to
authorize any Restricted Action and no provision of these By-laws may be
amended or repealed in a manner inconsistent with the provisions of the
Securityholders Agreement.
-- 19 --
<PAGE>
Exhibit 4.1
Temporary Certificate--Exchangeable for Definitive
Engraved Certificate When Ready for Delivery
- --------------------------------------------------------------------------------
COMMON STOCK COMMON STOCK
---------------------- ----------------------
AOR
---------------------- ----------------------
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR CERTAIN
IN THE CITIES OF NEW YORK, NY OR DEFINITIONS
JERSEY CITY, NJ CUSIP 05164B 10 6
AURORA (TM)
FOODS INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
SPECIMEN
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, PAR
VALUE OF $0.01 PER SHARE, OF
AURORA FOODS INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
SPECIMEN SPECIMEN
CHIEF FINANCIAL OFFICER AND CHIEF EXECUTIVE OFFICER
SECRETARY AND CHAIRMAN OF THE BOARD
[AURORA FOODS INC. SEAL]
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(Jersey City, NJ)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
AMERICAN BANK NOTE COMPANY.
<PAGE>
AURORA FOODS INC.
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of designation, and the
number of shares constituting each class and series and the designations
thereof, may be obtained by the holder hereof upon request and without charge
from the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ___________________________
(State)
UNIF TRF MIN ACT -- ____ Custodian (until age _____)
(Cust)
_______ under Uniform Transfers
(Minor)
to Minors Act _________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated __________________________
Signature(s) Guaranteed
________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
By ____________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 4.3
EXECUTION VERSION
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
VDK FOODS LLC
This Second Amended and Restated Limited Liability Company
Agreement of VDK Foods LLC (the "Company") is amended and restated as of
April 8, 1998, among the Persons whose names are set forth as Members on
Schedule A hereto.
WHEREAS, Dartford Partnership L.L.C. and Ray Chung have
heretofore formed a limited liability company pursuant to the Delaware
Limited Liability Company Act, 6 Del. C. Sections 18-101, et seq., as amended
from time to time (the "Delaware Act"), by filing a Certificate of Formation
of the Company with the office of the Secretary of State of the State of
Delaware on August 16, 1995, and entering into a Limited Liability Company
Agreement of the Company, dated as of August 15, 1995, which was amended and
restated as of September 19, 1995 and further amended and restated as of May
22, 1997 (the "Original Limited Liability Company Agreement").
NOW THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Members,
intending to be legally bound hereby, amend and restate the Original Limited
Liability Company Agreement in its entirety and agree as follows:
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions. Unless the context otherwise
requires the terms defined in this Article I shall, for the purposes of this
Agreement, have the meanings herein specified.
"Additional Members" has the meaning set forth in Section
12.1 hereof.
"Additional Units" has the meaning set forth in Section
12.1 hereof.
"Admission Event" means any of the following actions:
(a) execution of this Agreement or any other writing
evidencing intent to become a Member; or
(b) the making of a Capital Contribution.
<PAGE>
"Affiliate" means with respect to a specified Person, any
Person that directly or indirectly controls, is controlled by, or is under
common control with the specified Person. As used in this definition, the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"Agreement" means this Second Amended and Restated Limited
Liability Company Agreement, as amended, modified, supplemented or restated
from time to time.
"Assignee" means any Person who is an assignee of a
Member's interest in the Company, or part thereof, and who does not become a
Member pursuant to Section 13.6 hereof.
"Aurora Foods" means Aurora Foods Inc., a Delaware
corporation, and any successor thereto.
"Aurora Holdings" means Aurora Foods Holdings Inc., a
Delaware corporation, and any successor thereto.
"Authorized Number of Class E Units" is 720.
"Available Cash" means all cash (including the net proceeds
from capital transactions and sale of assets not in the ordinary course of
business) held and owned by the Company less any reserve for the working
capital and other foreseeable future needs of the Company, as determined by
the Board in its sole discretion.
"Board" means the Board of Member Managers of the Company,
with such powers and duties as described in Article VI.
"Capital Account" means, for each Member, the sum of
Capital Contributions made by such Member pursuant to Section 4.1 hereof and
such adjustments made pursuant to Section 4.3 hereof.
"Capital Contribution" means, with respect to any Member,
the aggregate amount of money and the value of any property (other than
money) contributed to the Company pursuant to Section 4.1 hereof with respect
to the Units held by such Member. In the case of a Member who acquires an
interest in the Company by virtue of an assignment in accordance with the
terms of this Agreement, "Capital Contribution" has the meaning set forth in
Section 4.3(b) hereof.
"Cause" means (i) the failure or inability to cure or
remedy, within 20 days after written notice from the Board, any willful
misconduct in the course of rendering services for or
2
<PAGE>
on behalf of the Company; (ii) the commission of any fraudulent act in the
course of rendering services for or on behalf of the Company; or (iii) the
conviction of a felony by any court having competent jurisdiction.
"Certificate" means the Certificate of Formation and any
and all amendments thereto and restatements thereof filed on behalf of the
Company with the office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act.
"Class A Holder" means any Person listed on Schedule A
hereto as a holder of Class A Units.
"Class A Units" means the outstanding Class A Units, each
of which shall have the rights, powers and preferences set forth in Section
4.6 hereof.
"Class B Holder" means any Person listed on Schedule A
hereto as a holder of Class B Units.
"Class B Units" means the outstanding Class B Units, each
of which shall have the rights, powers and preferences set forth in Section
4.6 hereof.
"Class C Holder" means any Person listed on Schedule A
hereto as a holder of Class C Units.
"Class C Units" means the outstanding Class C Units, each
of which shall have the rights, powers and preferences set forth in Section
4.6 hereof.
"Class D Holder" means any Person listed on Schedule A
hereto as a holder of Class D Units.
"Class D Units" means the outstanding Class D Units, each
of which shall have the rights, powers and preferences set forth in Section
4.6 hereof.
"Class E Catch-Up Percentage" means (x) the number of
Vested Class E Units then outstanding divided by (y) the Authorized Number of
Class E Units, then multiplying that quotient by .0399996. For example, if
the number of Vested Class E Units then outstanding is 648 and the Authorized
Number of Class E Units is 720, the Class E Catch-Up Percentage is 648 / 720
= .9, multiplied by .0399996 = .0359996 or 3.59996%.
"Class E Holder" means any Person listed on the books and
records of the Company as a holder of Class E Units.
3
<PAGE>
"Class E Units" means the outstanding Class E Units issued
by the Company, each of which shall have the rights, powers and preferences
set forth in Section 4.6 hereof and which, after the issuance thereof, shall
be subject to vesting in accordance with Schedule B hereto.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any corresponding federal tax statute enacted after the
date of this Agreement. A reference to a specific section (Sections) of the
Code refers not only to such specific section but also to any corresponding
provision of any federal tax statute enacted after the date of this
Agreement, as such specific section or corresponding provision is in effect
on the date of application of the provisions of this Agreement containing
such reference.
"Company" means VDK Foods LLC, the limited liability
company heretofore formed and continued under and pursuant to the Delaware
Act and this Agreement.
"Contribution" means the contribution to New LLC as of the
date of this Agreement (i) by the Company of all of the outstanding shares of
capital stock of VDK Holdings, and (ii) by MBW Investors LLC of all of the
outstanding shares of capital stock of Aurora Holdings, in each case pursuant
to the Contribution Documents.
"Contribution Documents" means the Contribution Agreement,
dated as of April 8, 1998, between the Company and MBW Investors LLC, and any
and all documents, agreements, certificates or other instruments required to
be executed and delivered by or on behalf of the Company in connection with
the Contribution.
"Covered Person" means a Member, a Member Manager, an
Officer, any Affiliate of a Member, Member Manager or Officer, any officers,
directors, shareholders, members, partners, employees, representatives or
agents of a Member, a Member Manager, an Officer or their respective
Affiliates, or any employee or agent of the Company or its Affiliates.
"Dartford" means Dartford Partnership L.L.C., a Delaware
limited liability company.
"Delaware Act" means the Delaware Limited Liability Company
Act, 6 Del.C. Sections 18-101, et seq., as amended from time to time.
"Depreciation" means, for each Tax Year or other period, an
amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such Tax Year or other
period; provided, however, that if the Gross Asset Value of an asset differs
from its adjusted basis for federal income tax purposes at the beginning of
such Tax Year or other period, Depreciation shall be an amount that bears the
same ratio to such beginning
4
<PAGE>
Gross Asset Value as the federal income tax depreciation, amortization or
other cost recovery deduction with respect to such asset for such Tax Year or
other period bears to such beginning adjusted tax basis; and provided
further, that if the federal income tax depreciation, amortization or other
cost recovery deduction for such Tax Year or other period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Member Manager.
"Exceptional Performance Units" has the meaning set forth
in Schedule D hereto.
"Fair Asset Value" means the amount for which any asset
could be sold in an arm's length transaction by one who desires to sell, but
is not under any urgent requirement to sell, to a buyer who desires to buy,
but is under no urgent necessity to buy, when both have a reasonable
knowledge of the facts, all as determined by the Board. In determining such
Fair Asset Value, furniture, fixtures and equipment shall be valued at cost
less depreciation and the reasonably foreseeable prospects (including all tax
liabilities and, in particular, tax liabilities upon the sale or other
disposition of Company assets) of the business of the Company shall be taken
into account. Securities which are traded on a national securities exchange
or quotation system shall be valued at the average closing sales price for
the actual number of Trading Days during the 60-day period immediately
preceding the date of such valuation, as such prices are reported in The Wall
Street Journal.
"Fenway" means Fenway Partners Capital Fund, L.P., a
Delaware limited partnership.
"Final Date" has the meaning set forth in Schedule D hereto.
"Fiscal Year" means (i) the calendar year, or (ii) any
portion of the period described in clause (i) of this sentence for which the
Company is required to allocate Profits, Losses and other items of Company
income, gain, loss or deduction pursuant to Article VIII hereof.
"Gloriande" means Gloriande (Luxembourg) SarL, an Affiliate
of Tiger Oats Limited.
"Gross Asset Value" means, with respect to any asset, such
asset's adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed
by a Member to the Company shall be the gross fair market value of such
asset, as agreed to by the contributing Member and the Board;
5
<PAGE>
(b) the Gross Asset Value of all Company assets shall be
adjusted to equal their respective Fair Asset Values, as of the following
times: (i) the acquisition of an additional interest in the Company by any
new or existing Member in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Company to a Member of more than a
de minimis amount of Company assets as consideration for an interest in the
Company; and (iii) the liquidation of the Company within the meaning of
Treasury Regulation Sections 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to Clause (i) and Clause (ii) of this sentence shall be
made only if the Board reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic interests of the
Members in the Company; and
(c) the Gross Asset Value of any Company asset distributed
to any Member shall be the Fair Asset Value of such asset on the date of
distribution, as determined by the distributee Member and the Board.
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to Paragraph (a) or Paragraph (b) above, such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Profits and Losses.
"Incentive Plan" means the VDK Incentive Compensation Plan
in the form of Schedule D hereto.
"Liquidating Trustee" has the meaning set forth in Section
15.3 hereof.
"Majority Vote" means the written approval of, or the
affirmative vote by, Members holding a majority of the Voting Units held by
Members.
"Management Services Agreement" means the Amended and
Restated Management Services Agreement, dated as of July 9, 1996, as amended
from time to time, between Dartford and Van de Kamp's.
"MBW Investors LLC" means MBW Investors LLC, a Delaware
limited liability company and any successor thereto.
"Member" means any Person named as a member of the Company
on Schedule A hereto (or, in the case of Class E Units, identified as a
member on the books and records of the Company) and includes any Person
admitted as an Additional Member or a Substitute Member pursuant to the
provisions of this Agreement, and "Members" means two or more of such Persons
when acting in their capacities as members of the Company. Except as
otherwise provided herein, the Members shall constitute one class or group of
members.
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"Member Managers" means the Members designated in Section
6.1 hereof as the member managers of the Company and shall include successors
appointed pursuant to the provisions of this Agreement. A Member Manager
shall not be deemed to be a "manager" within the meaning of the Delaware Act.
"New LLC" means Aurora/VDK LLC, a Delaware limited
liability company into which the Company has agreed to contribute pursuant to
the Contribution Documents all of the outstanding capital stock of VDK
Holdings in exchange for certain interests in Aurora/VDK LLC, and any
surviving entity of a reorganization (including an incorporation of
Aurora/VDK LLC), merger or consolidation of Aurora/VDK LLC or any successor
thereto.
"New LLC Entities" means, collectively, New LLC and any
direct or indirect Subsidiary of New LLC and any successor thereto. As of the
effective date of the Contribution, the New LLC Entities will be New LLC, VDK
Holdings, Van de Kamp's, Aurora Holdings, and Aurora Foods.
"Non-Public Shareholders" of the Public Company means the
stockholders of the Public Company other than any stockholders who acquired
their equity securities of the Public Company pursuant to a registration
statement filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and the rules and regulations thereunder.
"Officers" means officers of the Company appointed by the
Board pursuant to Article VI hereof.
"Other Subsidiary" means any Subsidiary of the Company,
other than any New LLC Entity that would qualify as a Subsidiary of the
Company.
"Performance Units" has the meaning set forth in Schedule D
hereto.
"Permitted Transferees" means the Persons to whom Transfers
are permitted to be made under Section 13.5.
"Person" includes any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company, or other legal entity or organization.
"Plan Catch-Up Percentage" means (x) the number of Vested
Performance Units plus the number of Vested Exceptional Performance Units
divided by (y) 4,000, then multiplying that quotient by .1111. For example,
if the number of Vested Performance Units is 1,334 and
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the number of Vested Exceptional Performance Units is 1,200, the Plan
Catch-Up Percentage is 2,534 / 4,000 = .6335, multiplied by .1111 = .070382
or 7.0382%.
"Preferred Capital Contribution" means, with respect to any
Member, the aggregate amount of money and the value of any property (other
than money) contributed to the Company pursuant to Section 4.1 hereof with
respect to the Class A Units held by such Member.
"Profits" and "Losses" means, for each Tax Year, an amount
equal to the Company's taxable income or loss for such Tax Year, determined
in accordance with Sections 703(a) of the Code (but including in taxable
income or loss, for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Sections 703(a)(1) of
the Code), with the following adjustments:
(a) any income of the Company exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
(b) any expenditures of the Company described in Sections
705(a)(2)(B) of the Code (or treated as expenditures described in Sections
705(a)(2)(B) of the Code pursuant to Treasury Regulation Sections
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing
Profits or Losses pursuant to this definition shall be subtracted from such
taxable income or loss;
(c) in the event the Gross Asset Value of any Company asset
is adjusted in accordance with Paragraph (b) or Paragraph (c) of the
definition of "Gross Asset Value" above, the amount of such adjustment shall
be taken into account as gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;
(d) gain or loss resulting from any disposition of any
asset of the Company with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax basis
of such asset differs from its Gross Asset Value; and
(e) in lieu of the depreciation, amortization and other
cost recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Tax Year or
other period, computed in accordance with the definition of "Depreciation"
above.
"Proportionate Percentage" means, (i) with respect to each
Member that elects to exercise its rights under Section 12.2, 13.1(b) or
Section 13.2(b) hereof, a percentage (expressed as a decimal fraction rounded
to the nearest one-hundredth) obtained by dividing
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(x) the number of all Voting Units owned by such electing Member by (y) the
aggregate number of Voting Units owned by all Members electing to exercise
their rights under such provision and (ii) with respect to the Selling Member
and each Member that elects to exercise its rights under Section 14.1 hereof,
a percentage expressed as a decimal fraction rounded to the nearest
one-hundredth) obtained by dividing (x) the number of all Class B Units owned
by such Selling Member or electing Member by (y) the aggregate number of
Class B Units owned by the Selling Member and all Members electing to
exercise their rights under such provision.
"Public Company" means the Company, any New LLC Entity, or
any Other Subsidiary, or any successor thereto, in each case which intends to
effect a Public Offering.
"Public Offering" means (i) the sale to the public by the
Public Company for its own account of equity securities issued by such Public
Company, and/or (ii) the sale to the public by the Non-Public Shareholders
pursuant to a Secondary Sale of equity securities issued by the Public
Company and held by the Non-Public Shareholders, in either case pursuant to a
registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
"Redemption Price" shall mean the amount required to be
paid on account of the redemption of any Class A Unit as provided by the
first sentence of Section 4.6(c).
"Sale Notice" means a written notice, delivered by a
Selling Member pursuant to Section 13.2 hereof, stating the number of each
class of Units that are proposed to be Transferred and describing the terms
and conditions of the intended Transfer, including the name of the proposed
transferee and the Transfer price therefor.
"Secondary Sale" means any sale by one or more Non-Public
Shareholders of equity securities issued by the Public Company and held by
such Non-Public Shareholders (but not originally issued by the Public Company
pursuant to a Public Offering), whether such sale is pursuant to a registered
public offering under the Securities Act of 1933, as amended, an exemption
from the registration requirements thereof, or otherwise.
"Securityholders Agreement" means the Securityholders
Agreement dated as of the date hereof by and among New LLC, the Company,
certain Members of the Company, MBW Investors LLC, and certain members of MBW
Investors LLC.
"Selling Member" means any Member that intends to Transfer
any Units owned by it when such proposed Transfer would be subject to the
provisions of Section 13.2 or Section 14.1 hereof.
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"Subsidiary" with respect to any company means any
corporation more than 50% of whose stock or other equity securities (measured
by virtue of voting rights) in the aggregate is owned by such company, by one
or more Subsidiaries of such company, or by such company and one or more
Subsidiaries of such company.
"Substitute Member" means a Person who is admitted to the
Company as a Member pursuant to Section 13.5 hereof, and who is named as a
Member on Schedule A to this Agreement.
"Super-Majority Vote" means the written approval of, or the
affirmative vote by, Members holding at least the following percentage of the
Voting Units held by all Members: (i) for purposes of Sections 16.1(a)(i),
(ii), (iii), (iv), (vii) and (xii): 70%; and (ii) for all other purposes: 75%.
"Tax Liability Distributions" shall have the meaning given
such term in Section 8.2 hereof.
"Tax Matters Member" has the meaning set forth in Section
10.1 hereof.
"Tax Year" means the 12 month period ending on the last
Saturday in December.
"Total Performance Unit Value" and "Total Exceptional
Performance Unit Value" shall have the meanings given such terms in Schedule
D hereto.
"Transfer" means (i) as a noun, any transaction (or the
consummation of a transaction) which has resulted in a change in the
ownership of any Unit, including without limitation, any voluntary or
involuntary sale, assignment, transfer, pledge, hypothecation, encumbrance,
disposal, loan, gift, attachment or levy of, by or with respect to the Member
which owns such Unit which has resulted in a transfer of the voting rights or
the rights to distribution with respect to such Unit, and (ii) as a verb, to
make any transaction described in (i).
"Treasury Regulations" means the income tax regulations,
including temporary regulations, promulgated under the Code, as such
regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"UBS Capital" means UBS Capital LLC, a New York limited
liability company.
"UBS Permitted Transferee" means (A) any Affiliate of UBS
Capital, including co-investment entities established and controlled by UBS
Capital (collectively, "UBS Affiliates") (B) any managing director, director,
officer or employee of UBS Capital or any UBS Affiliate
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or the heirs, executors, administrators, testamentary trustee, descendants of
any of the foregoing persons referred to in this clause (B) (collectively,
"UBS Associates"); and (C) a trust, the beneficiaries of which, or a
corporation, limited liability company or partnership, the stockholders,
members or general or limited partners of which, include only UBS Capital,
UBS Affiliates or UBS Associates.
"Unit" means any one of the Class A Units, Class B Units,
Class C Units, Class D Units or Class E Units. Each Unit represents a limited
liability company interest in the Company, with the respective rights, powers
and preferences as provided in this Agreement. All issued Units are held by
the Members as set forth on the Schedule A hereto. If Additional Units are
issued as provided in Article XII, the total number of Units outstanding
shall be automatically increased by the number of Additional Units issued.
Upon their issuance, all Units shall be owned by the Members holding such
Units; provided, that Class E Units that have been issued but have not become
Vested Class E Units shall have no rights or powers under this Agreement
except as expressly provided on Schedule B hereto and in Section 7.1(iv)
hereof.
"Unrecouped Capital Contribution" means as to any Member or
Assignee the amount of such Member's or Assignee's Capital Contribution with
respect to Class B Units held by such Member or Assignee minus the aggregate
of all distributions previously made to such Member or Assignee pursuant to
Section 8.3(iii) hereof.
"Unrecouped Preferred Capital Contribution" means as to any
Member or Assignee the amount of such Member's or Assignee's Preferred
Capital Contribution, if any, minus the aggregate of all distributions
previously made to such Member or Assignee pursuant to Section 8.3(i) hereof.
"Van de Kamp's" means Van de Kamp's, Inc., a Delaware
corporation, and any successor thereto.
"VDK Holdings" means VDK Holdings, Inc., a Delaware
corporation, and any successor thereto.
"Vested Class E Percentage" means a percentage obtained by
dividing (x) the number of Vested Class E Units then outstanding by (y) the
Authorized Number of Class E Units, then multiplying that quotient by 0.36.
For example, if the number of Vested Class E Units then outstanding is 648
and the Authorized Number of Class E Units is 720, the Vested Class E
Percentage is 648 / 720 = .9, multiplied by .036 = .0324, or 3.24%.
"Vested Class E Units" means those Class E Units that have
vested in accordance with Schedule B hereto.
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"Vested Plan Percentage" means a percentage obtained by
dividing (x) the number of Vested Plan Units then outstanding by (y) 4,000,
then multiplying that quotient by .1. For example, if the number of Vested
Plan Units is 2,534, the Vested Plan Percentage is 2,534 / 4,000 = .6335,
multiplied by .1 = .06335, or 6.335%.
"Vested Plan Units" means the sum of those Performance
Units and those Exceptional Performance Units that have vested in accordance
with Schedule D hereto.
"Voting Units" means, collectively, the Class B Units and
the Class C Units which shall vote together as a single class.
Section 1.2 Headings. The headings and subheadings in this
Agreement are included for convenience and identification only and are in no
way intended to describe, interpret, define or limit the scope, extent or
intent of this Agreement or any provision hereof.
ARTICLE II
CONTINUATION AND TERM
Section 2.1 Continuation.
(a) The Members hereby agree to continue the Company as a
limited liability company under and pursuant to the provisions of the
Delaware Act and agree that the rights, duties and liabilities of the Members
and the Member Managers shall be as provided in the Delaware Act, except as
otherwise provided herein.
(b) Any Person listed on Schedule A hereto that performs an
Admission Event, or any Person listed on Schedule A hereto whose authorized
representative performs an Admission Event, shall be deemed to have evidenced
its intent to become a Member, to have complied with the conditions for
becoming a Member as set forth in this Agreement, and to have requested that
the records of the Company reflect such admission as a Member, and when the
records of the Company are amended to reflect the admission of such Person as
a Member, such Person shall be admitted to the Company as a Member.
(c) The name and mailing address of each Member shall be
listed on the Schedules hereto. The Member Managers shall update any Schedule
from time to time as necessary to accurately reflect the information therein.
Any amendment or revision to a Schedule made in accordance with this
Agreement shall not be deemed an amendment to this Agreement. Any reference
in this Agreement to a Schedule shall be deemed to be a reference to such
Schedule as amended and in effect from time to time.
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Section 2.2 Name. The name of the Company heretofore formed
and continued hereby is VDK Foods LLC. The business of the Company may also
be conducted under any other name or names designated by the Board from time
to time.
Section 2.3 Term. The term of the Company commenced on the
date the Certificate was filed in the office of the Secretary of State of the
State of Delaware and shall continue until December 31, 2020, unless
dissolved before such date in accordance with the provisions of this
Agreement. The existence of the Company as a separate legal entity shall
continue until the cancellation of the Certificate.
Section 2.4 Registered Agent and Office. The Company's
registered agent and office in the State of Delaware shall be The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801. At any time, the Board may designate another
registered agent and/or registered office.
Section 2.5 Principal Place of Business. The principal
place of business of the Company shall be at 456 Montgomery Street, Suite
2200, San Francisco, California 94104. Upon 10 days' notice to the Members,
the Board may change the location of the Company's principal place of
business.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purpose. The purpose of the Company is to
acquire, hold for investment, sell and dispose of the stock and other
securities, directly or indirectly, of any Subsidiary, and to engage in all
activities necessary, advisable or incidental thereto, including without
limitation engaging in (or causing or permitting any of its Subsidiaries to
engage in) any of the transactions identified in Section 16.1 hereof.
Section 3.2 Powers of the Company.
(a) Subject to the provisions of Section 3.3, the Company
shall have the power and authority to take any and all actions necessary,
appropriate, proper, advisable, incidental or convenient to or for the
furtherance of the purpose set forth in Section 3.1, including, but not
limited to, the power:
(i) to conduct its business, carry on its
operations and have and exercise the powers granted to a
limited liability company by the Delaware Act in any state,
territory, district or possession of the United States, or in
any
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foreign country that may be necessary, convenient or
incidental to the accomplishment of the purpose of the
Company;
(ii) to acquire by purchase, lease, contribution of
property or otherwise, own, hold, operate, maintain, finance,
improve, lease, sell, convey, mortgage, transfer or dispose of
any real or personal property that may be necessary,
convenient or incidental to the accomplishment of the purpose
of the Company;
(iii) to enter into, perform and carry out contracts
of any kind convenient to or incidental to the accomplishment
of the purpose of the Company;
(iv) to lend money for its proper purpose, to invest
and reinvest its funds, to take and hold real and personal
property for the payment of funds so loaned or invested;
(v) to appoint employees and agents of the Company,
and define their duties and fix their compensation;
(vi) to indemnify any Person in accordance with the
Delaware Act;
(vii) to cease its activities and cancel its
Certificate;
(viii) to negotiate, enter into, renegotiate, extend,
renew, terminate, modify, amend, waive, execute, acknowledge
or take any other action with respect to any lease, contract
or security agreement in respect of any assets of the Company;
(ix) to borrow money and issue evidences of
indebtedness; and
(x) to guaranty the obligations of any Person and
to secure any of the same by a mortgage, pledge or other lien
on the assets of the Company.
(b) The Member Managers and Officers, or any of them, are
hereby expressly authorized to enter into and perform on behalf of the
Company the Contribution Documents and the Securityholders Agreement, but
such authorization shall not be deemed a restriction on the power of the
Member Managers to authorize the Officers to enter into other documents not
inconsistent with such Contribution Documents or Securityholders Agreement on
behalf of the Company to the extent permitted by this Agreement. The Company,
Member Managers and the Officers on behalf of the Company, are expressly
authorized to enter into and perform the Contribution Documents and
Securityholders Agreement and are authorized and directed to take
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any and all actions contemplated thereby, and to the extent the Company,
Member Managers and the Officers have previously entered into and performed
such agreements not inconsistent with such Contribution Documents or
Securityholders Agreement, such actions are ratified, without any further
act, vote or approval of any Member notwithstanding any other provision of
this Agreement, the Delaware Act or other applicable law.
Section 3.3. Limitations on Actions. Anything in this
Agreement to the contrary notwithstanding, the Company shall not hold any
investment, incur any indebtedness or otherwise take any action that would
cause any Member of the Company to realize "unrelated business taxable
income" as such term is defined in Section 512 of the Code.
ARTICLE IV
CAPITAL CONTRIBUTIONS, UNITS,
CAPITAL ACCOUNTS AND ADVANCES
Section 4.1 Capital Contributions.
(a) Each Member has contributed to the capital of the
Company the amount of cash set forth opposite the Member's name on Schedule A
hereto, and the Company has issued to each Member the number of Units set
forth opposite the Member's name on Schedule A hereto; provided, that the
number of Class E Units issued to the Class E Holders and the respective
capital contributions relating thereto shall be maintained on the books and
records of the Company and not set forth on Schedule A hereto.
(b) No Member shall be required to make any additional
capital contribution to the Company.
Section 4.2 Status of Capital Contributions.
(a) Except as otherwise provided in this Agreement, the
amount of a Member's Capital Contributions may be returned to it, in whole or
in part, at any time, but only with the consent of all Members.
(b) No Member shall receive any interest, salary or drawing
with respect to its Capital Contributions or its Capital Account or for
services rendered on behalf of the Company or otherwise in its capacity as a
Member, except as otherwise specifically provided in this Agreement.
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(c) Except as otherwise provided herein and by applicable
state law, the Members shall be liable only to make their Capital
Contributions pursuant to Section 4.1 hereof, and no Member or Assignee shall
be required to lend any funds to the Company or, after a Member's Capital
Contributions has been fully paid pursuant to Section 4.1 hereof, to make any
additional capital contributions to the Company. No Member shall have any
personal liability for the repayment of any Capital Contribution of any other
Member or Assignee.
Section 4.3 Capital Accounts.
(a) An individual Capital Account shall be established and
maintained for each Member. The Capital Account of each Member shall be
maintained in accordance with the rules of Section 704(b) of the Code and the
Treasury Regulations (including Section 1.704-1(b)(2)(iv) thereof)
thereunder. Adjustments shall be made to the Capital Accounts for all
distributions and allocations as required by the rules of Section 704(b) of
the Code and the Treasury Regulations thereunder. In general, a Member's
Capital Account shall be increased by (i) the amount of money and the Gross
Asset Value of property (net of liabilities secured by such contributed
property that the Company is considered to assume to take subject to under
Section 752 of the Code) contributed to the Company by the Member and (ii)
allocations to the Member of Profits and decreased by (i) the amount of money
distributed to the Member by the Company, (ii) the Gross Asset Value of
property distributed to the Member by the Company (net of liabilities secured
by such distributed property that such Member is considered to assume or take
subject to under Section 752 of the Code), and (iii) allocations to the
Member of Losses. In the event the Gross Asset Value of Company assets is
adjusted under Article I of this Agreement, the Capital Accounts of the
Members shall be adjusted to reflect the aggregate net adjustment as if the
Company recognized Profits or Losses equal to the amount of such aggregate
net adjustment and such Profits or Losses were allocated to the Members
pursuant to Sections 8.7 and 8.8 of this Agreement. The foregoing provisions
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Sections 1.704-1(b) and 1.704-2 and shall be applied in a manner
consistent with such Regulations.
(b) The original Capital Account established for any Member
or Assignee who acquires an interest in the Company by virtue of a Transfer
or an assignment that does not cause a termination of the Company within the
meaning of Code Section 708(b)(1)(B) and that is in accordance with the terms
of this Agreement shall be in the same amount as, and shall replace, the
Capital Account of the transferor or assignor of such interest, and, for
purposes of this Agreement, such Member or Assignee shall be deemed to have
made the Capital Contributions made by the transferor or assignor of such
interest (or made by such transferor's or assignor's predecessor in interest)
and have received the distributions and been allocated the allocations
receive by or allocated to the transferor or assignor of such interest (or
received by or allocated to such transferor's or assignor's predecessor in
interest). If the Company has a Code Section 754 election in effect, the
Capital Account will not be adjusted to reflect any adjustment
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under Code Section 743. To the extent such Member or Assignee acquires less
than the entire interest in the Company of the transferor or assignor of the
interest so acquired by such Member or Assignee, the original Capital Account
of such Member or Assignee and its Capital Contributions shall be in
proportion to the interest it acquires, and the Capital Account of the
transferor or assignor who retains a partial interest in the Company, and the
amount of its Capital Contributions, shall be reduced in proportion to the
interest it retains. If a Transfer or assignment of an interest in the
Company causes a termination of the Company within the meaning of Code
Section 708(b)(1)(B), the income tax consequences shall be governed by the
relevant provisions of Subchapter K of Chapter 1 of the Code and the
Regulations promulgated thereunder, and the initial Capital Accounts of the
Members and the Assignee in the new limited liability company shall be
determined in accordance with the rules of Treasury Regulations Section
1.704-1(b)(2)(iv)(d), (e), (f), (g) and (h) under Code Section 704 and
thereafter in accordance with this Section 4.3.
Section 4.4. Negative Capital Accounts. At no time during
the term of the Company or upon dissolution and liquidation thereof shall a
Member with a negative balance in his Capital Account have any obligation to
the Company or the other Members to restore such negative balance.
Section 4.5 Advances. If any Member shall advance any funds
to the Company in excess of its Capital Contributions, the amount of such
advance shall neither increase its Capital Account nor entitle it to any
increase in its share of the distributions of the Company. The amount of any
such advance shall be a debt obligation of the Company to such Member and
shall be repaid to it by the Company with interest at a rate equal to the
lesser of (i) such rate as the Board agrees and (ii) the maximum rate
permitted by applicable law, and upon such other terms and conditions as
shall be mutually determined by such Member and the Board. Any such advance
shall be payable and collectible only out of Company assets, and the other
Members shall not be personally obligated to repay any part thereof. No
Person who makes any nonrecourse loan to the Company shall have or acquire,
as a result of making such loan, any direct or indirect interest in the
profits, capital or property of the Company, other than as a creditor.
Section 4.6 Units.
(a) Distributions. Distributions on Units shall be made in
accordance with Article VIII hereof.
(b) Voting. Except as otherwise provided in this Agreement,
(i) the Members shall not be entitled to vote their Class A Units on any
matter brought before the Members for a vote; (ii) the Members who are Class
B Holders shall be entitled to vote on each matter on which the Members shall
be entitled to vote at the rate of one vote for each Class B Unit held
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by such Member; (iii) the Members who are Class C Holders shall be entitled
to vote on each matter on which the Members shall be entitled to vote at the
rate of one vote for each Class C Unit held by such Member; (iv) the Members
shall not be entitled to vote their Class D Units on any matter brought
before the Members for a vote; and (v) the Members shall not be entitled to
vote their Class E Units on any matter brought before the Members for a vote.
(c) Redemption of Class A Units. The Company may at its
option by the approval of the Board, at any time and from time to time, upon
notice in writing to the Class A Holders not less than 10 days prior to the
date fixed for redemption, redeem the Class A Units, in whole or in part, on
a pro rata basis among the Class A Units outstanding on the date fixed for
redemption, at a redemption price per Class A Unit, payable in cash, equal to
$42,400,000 (if such redemption is prior to January 1, 1999), or equal to the
aggregate amount then distributable under Section 8.3(i), (ii) and/or (v)
hereof with respect to the Class A Units to be redeemed (if such redemption
is on or after January 1, 1999).
(d) Class E Units. The Class E Units shall vest in
accordance with the provisions set forth on Schedule B hereto.
ARTICLE V
MEMBERS
Section 5.1 Powers of Members. The Members shall have the
power to exercise any and all rights or powers granted to the Members
pursuant to the express terms of this Agreement but subject to the terms and
provisions of the Securityholders Agreement. The Members shall agree to take
all actions required by, or approved in accordance with, the Securityholders
Agreement. Except as expressly provided in this Agreement, Members who are
not Member Managers shall have no power as Members to bind the Company.
Members who are Member Managers shall have the power to bind the Company as
provided in Article VI.
Section 5.2 Reimbursements. The Company shall reimburse the
Members for all ordinary and necessary out-of-pocket expenses incurred by the
Members on behalf of the Company. The Board's sole determination of which
expenses may be reimbursed to a Member and the amount of such expenses shall
be conclusive. Such reimbursement shall be treated as an expense of the
Company that shall be deducted in computing the Profits and shall not be
deemed to constitute a distributive share of Profits or a distribution or
return of capital to any Member.
Section 5.3 Partition. Each Member waives any and all
rights that it may have to maintain an action for partition of the Company's
property.
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Section 5.4 Resignations. Other than any resignation by a
Member approved by a Super-Majority Vote of the Members and any resignation
described in Section 13.5, a Member may not resign from the Company.
ARTICLE VI
BOARD OF MEMBER MANAGERS AND OFFICERS OF THE COMPANY
Section 6.1 Designation of Board of Member Managers. The
management of the Company's business shall be vested, to the extent provided
in this Article VI, in a Board of Member Managers of the Company (the
"Board"), consisting of four Member Managers who in the aggregate hold at
least 20% of the total interests in the Company. Each Member Manager must be
a Member. The Members hereby designate Fenway, Gloriande, Dartford and UBS
Capital to serve as the initial Member Managers on the Board, and such Member
Managers hereby accept and agree to be bound by the terms and conditions of
this Agreement. A Member Manager that is not an individual shall act through
one or more authorized representatives. Such Member Manager may designate any
number of authorized representatives to act on behalf of such Member Manager,
by written notice to the Company and all other Member Managers. Each Member
Manager and its designees agrees to act in accordance with the
Securityholders Agreement.
Section 6.2 Election; Resignation; Removal.
(a) Each Member Manager shall serve from the effective date
of its designation until the effective date of its resignation or removal. In
the event any Member Manager ceases to be a Member Manager of the Company
whether by resignation or removal as provided in this Agreement or otherwise,
a successor Member Manager shall be elected by a Super-Majority Vote. Such
successor Member Manager shall execute an instrument reasonably satisfactory
to the Members accepting and agreeing to the terms and conditions of this
Agreement. Notwithstanding anything in this Section 6.2 to the contrary:
(i) in the event that Fenway sells more than 50% of
the then outstanding Voting Units to a single purchaser that
Fenway designates as a Substitute Member in accordance with
Section 13.5 hereof (the "Fenway Transferee"), then, upon its
substitution as a Member in accordance with Section 13.5
hereof, the Fenway Transferee shall be the successor Member
Manager to Fenway without any further action by the Members or
the Board, and Fenway shall no longer be a Member Manager;
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(ii) in the event that Gloriande sells 80% or more of
the Class A Units and Class B Units held by it on the date of
this Agreement to a single purchaser that Gloriande designates
as a Substitute Member in accordance with Section 13.5 hereof
(the "Tiger Transferee"), then, upon its substitution as a
Member in accordance with Section 13.5 hereof, the Tiger
Transferee shall be the successor Member Manager to Gloriande
without any further action by the Members or the Board, and
Gloriande shall no longer be a Member Manager; and
(iii) in the event that Dartford sells 80% or more of
the Class C Units held by it on the date of this Agreement to
a single purchaser that Dartford designates as a Substitute
Member in accordance with Section 13.5 hereof (the "Dartford
Transferee"), then, upon its substitution as a Member in
accordance with Section 13.5 hereof, the Dartford Transferee
shall be the successor Member Manager to Dartford without any
further action by the Members or the Board, and Dartford shall
no longer be a Member Manager; and
(iv) in the event that UBS Capital sells 80% or more
of the Class A Units and Class B Units held by it on the date
of this Agreement to a single purchaser that UBS Capital
designates as a Substitute Member in accordance with Section
13.5 hereof (the "UBS Transferee"), then, upon its
substitution as a Member in accordance with Section 13.5
hereof, the UBS Transferee shall be the successor Member
Manager to UBS Capital without any further action by the
Members or the Board, and UBS Capital shall no longer be a
Member Manager.
(b) A Member Manager may resign from its position as a
Member Manager at any time upon not less than 10 days' prior written notice
to all of the Members.
(c) No initial Member Manager specified in Section 6.1
hereof or any successor Member Manager pursuant to clauses (i)-(iv) of the
last sentence of Section 6.2(a) hereof shall be removed unless such initial
Member Manager or successor Member Manager consents to such removal. Any
other Member Manager may be removed for Cause by a SuperMajority Vote. Any
removal of a Member Manager shall become effective on such date as may be
specified by the Members voting in favor thereof. Should a Member Manager
that is removed continue to be a Member, such Member shall continue to
participate in the Company as a Member and shall share in the Profits, Losses
and Available Cash in the same ratios, as provided in Article VIII hereof.
Section 6.3 Officers. The Board may appoint agents and
employees of the Company who are designated as officers of the Company. The
officers of the Company shall include a Chairman, one or more Executive Vice
Presidents, a Secretary and such other officers with such titles as may be
approved by the Board. Ian R. Wilson shall be Chairman until his
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resignation or removal. Ray Chung and James B. Ardrey shall each be an Executive
Vice President until his resignation or removal. M. Laurie Cummings shall be a
Vice President and the Secretary until her resignation or removal. Craigh
Leonard and Jonathan M. Peterson shall each be an Assistant Secretary until his
resignation or removal. Subject to Article XVI hereof, the Board may remove any
officer so appointed at any time, with or without Cause, in its absolute
discretion. The Chairman and other officers shall be agents of the Company,
authorized to execute and deliver documents and take other actions on behalf of
the Company, subject to the direction of the Board, and to have such other
duties as may be approved by the Board; provided, that the delegation of any
such power and authority to the Chairman and other officers shall not limit in
any respect the power and authority of the Member Managers to take such actions
(or any other action) on behalf of the Company as provided in this Agreement.
The Secretary shall record the actions of the Board, certify this Agreement and
any related document or instrument, certify resolutions of the Board, incumbency
and other matters of the Company, and have such other ministerial duties as may
be specified by the Board from time to time.
Section 6.4 Board Action. Unless otherwise specified in this
Agreement or the Securityholders Agreement, the Board shall act by majority vote
with each Member Manager on the Board having the following number of votes:
Fenway: two, Gloriande: two, Dartford: two, and UBS: one; provided, that (i) so
long as Fenway holds more than 50% of the then outstanding Voting Units, Fenway
shall have the right, by taking such action as would be required under the
Delaware General Corporation Law for a majority shareholder to act without a
meeting, to increase its number of votes to the number of votes that would
constitute a majority of the total votes on the Board, and (ii) upon written
notice to all Member Managers, UBS Capital shall have the right to increase its
number of votes from one to two. Any authorized representative of any Member
Manager on the Board shall be permitted to cast all of the votes of such Member
Manager. The Board shall act in accordance with the terms and provisions of the
Securityholders Agreement.
Section 6.5 Meetings. The Board may hold regular meetings
without call or notice at such places and at such times as the Board may from
time to time determine, provided reasonable notice of the first regular meeting
following any such determination is given to Member Managers absent at the
meeting fixing regular meetings. When called by the Chairman or by Member
Managers holding a majority of votes of the Board, the Board may hold special
meetings at such places and times as are designated in the call of the meeting,
upon at least seven days' notice given by the Secretary or an Assistant
Secretary, or by the officer or Member Manager calling the meeting.
Section 6.6 Quorum. At any meeting of the Board, the presence
of three Member Managers by at least one of their authorized representatives
shall constitute a quorum. Any meeting may be adjourned from time to time by a
majority of votes, whether or not a quorum is present, and the meeting may be
held as adjourned upon reasonable notice.
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Section 6.7 Action By Consent. Any action of the Board may be
taken without a meeting if (i) the Member Managers holding not less than the
minimum number of votes that would be required to approve and adopt such action
at a meeting consent to the action in writing, signed by an authorized
representative of each such Member Manager, (ii) written notice (delivered in
person or by facsimile) of the actions to be approved by such Member Managers is
given to all Member Managers simultaneously, and (iii) the written consents are
filed with the records of the meetings of the Board. Such actions by consent
shall be treated for all purposes as actions taken at a meeting.
Section 6.8 Telephonic Meetings. Member Managers, through
their respective authorized representatives, may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment
provided all Member Managers participating in the meeting can hear each other at
the same time, and participation by such means shall constitute presence in
person at a meeting.
Section 6.9 Member Managers as Agents. The Member Managers, to
the extent of the powers set forth herein, are agents of the Company for the
purpose of the Company's business, and the actions of the Member Managers taken
in accordance with such powers shall bind the Company.
Section 6.10 Powers of the Board; Powers of Officers.
(a) The Board's powers on behalf and in respect of the
Company, subject to the provisions of this Agreement requiring the approval of
the Members, shall be all powers and privileges permitted to be exercised by
members that manage the Company under the Delaware Act, including, without
limitation, Section 18-402 of the Delaware Act; provided, nothing herein shall
supersede, limit or otherwise invalidate any action, authorization or resolution
of the Members set forth in this Agreement including, but not limited to those
referred to in Section 3.2(b).
(b) The Board may delegate any of its powers to the Officers
of the Company, or any one of them, except to the extent that this Agreement
requires the Board to take an action by voting.
(c) The Board hereby delegates to the Officers of the Company
the respective powers delegated to officers of a corporation under the Delaware
General Corporation Law, subject to the powers of a board of directors of a
corporation under such Delaware law; provided, that the Board reserves the right
to rescind the delegation of any such powers at any time in the sole discretion
of the Board. Notwithstanding the foregoing, all decisions as to the hiring and
terminating the employment of and the compensation of any officer who reports
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directly to the Chairman or Chief Executive Officer of the Company shall be
subject to the approval of the Board.
Section 6.11 Reimbursement. The Company shall reimburse each
Member Manager for expenses incurred by such Member Manager on behalf of the
Company according to such terms as shall be approved by the Board. Such
reimbursement shall be treated as an expense of the Company that shall be
deducted in computing Profits and shall not be deemed to constitute a
distributive share of Profits or a distribution or return of capital to the
Member Manager.
Section 6.12 Required Approvals by the Board. Any action or
transaction by any of the New LLC Entities that requires a consent or approval
pursuant to the Securityholders Agreement shall be deemed to have been approved
by the Board if the required approval or consent pursuant to the Securityholders
Agreement has been obtained and shall not require any further approval by the
Board. The Board shall cause any vote, approval or consent by the Company
required by the Securityholders Agreement to be effected. The Board shall not
take any action or enter into any transaction inconsistent with the
Securityholders Agreement. The following actions shall not be taken by the
Company without the approval of the Board:
(i) the incurrence of indebtedness for borrowed
money;
(ii) capital expenditures in excess of $150,000 for
any Fiscal Year;
(iii) distributions of Available Cash and Tax
Liability Distributions (other than any amount distributable pursuant to the
last paragraph of Section 8.3 hereof which distribution is hereby approved);
(iv) the approval of the annual budget for the
Company; and
(v) the selection of the firm of independent public
accountants that will audit the financial statements of the Company and its
Other Subsidiaries.
Section 6.13 Board of Directors of Subsidiaries of the
Company.
(a) As of the date of this Agreement, the New LLC Entities do
not qualify as Subsidiaries of the Company. In the event that any New LLC Entity
hereafter qualifies as a Subsidiary of the Corporation, the Board of Directors
of such New LLC Entity shall be determined in accordance with the terms and
conditions of the Securityholders Agreement, and the Board will take such
actions as are necessary to cause the election of such Board of Directors in
accordance with the Securityholders Agreement.
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(b) Each Member Manager agrees to take such action as a Member
Manager as may be necessary to cause any stockholder of any Other Subsidiary to
elect the following persons as members of the Board of Directors of the Other
Subsidiary: (A) two persons designated by Fenway, (B) two persons designated by
Dartford, (C) two persons designated by Gloriande, (D) one person designated by
UBS Capital, and (E) two persons designated by the Board of the Company;
provided, that
(i) so long as Fenway holds more than 50% of the then
outstanding Voting Units, Fenway shall have the right, by
taking such action as would be required under the Delaware
General Corporation Law (including without limitation Section
228 of the Delaware General Corporation Law) for a majority
shareholder to act without a meeting, to designate a number of
additional persons for election as members of the Board of
Directors of the Other Subsidiary which, when added to the two
persons previously designated by Fenway, would constitute a
majority of members of the Board of Directors of the Other
Subsidiary,
(ii) UBS Capital shall have the right, by written
notice to all Member Managers and all members of the Board of
Directors of the Other Subsidiary, to increase the number of
persons it may designate for election to such Board of
Directors from one to two, and
(iii) unless otherwise directed by a Super-Majority
Vote of Members, the number of directors on the Board of
Directors of any Other Subsidiary shall not be less than nine.
(c) In the event either Fenway or UBS exercises its rights
under this Section 6.13, the Member Managers agree to take such actions as may
be necessary to cause the election of the additional persons designated by
Fenway or UBS Capital as directors of such Other Subsidiary of the Company and
to amend the By-Laws of such entity in connection therewith.
ARTICLE VII
AMENDMENTS AND MEETINGS
Section 7.1 Amendments. Except as expressly provided in this
Agreement, any amendment to this Agreement (including the Schedules hereto,
unless otherwise the power to amend any such Schedule is provided for therein)
shall be adopted and be effective as an
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amendment hereto if it is approved by the affirmative vote of Members holding
95% of the outstanding Voting Units. In addition to the foregoing requirement:
(i) no amendment of this Section 7.1 or of Article
VIII hereof shall be effective without the written approval of
Members holding a majority of any class of Units that would be
adversely affected by such proposed amendment;
(ii) no amendment of Section 4.6(c) hereof shall be
effective without the written approval of Class A Holders
holding a majority of the Class A Units;
(iii) no amendment of Section 4.6(b) hereof shall be
effective without the written approval of Members holding a
majority of the Class B Units and Class C Units, respectively;
(iv) no amendment of Section 4.6(d) hereof or
Schedule B hereto shall be effective without the written
approval of Members holding a majority of the Class E Units;
(v) no amendment of Section 6.1 or 6.2 regarding the
initial Member Managers (or any successor Member Manager
pursuant to Section 6.2(a)(i)-(iii) hereof) shall be made
without the unanimous written consent of such initial Member
Managers and successor Member Managers; and
(vi) no amendment of Schedule D hereto shall be
effective without the approvals required by Section 10 of
Schedule D.
Notwithstanding the foregoing, the officers of the Company may amend Schedule A
hereto to reflect new Members or Substitute Members duly admitted in accordance
with this Agreement, with such amendment to be effective upon the filing of such
amendment with the books and records of the Company.
Section 7.2 Meetings of the Members.
(a) Meetings of the Members may be called by the Board and
shall be called by the Board upon the written request of Members holding 10% of
the Voting Units. The call shall state the location of the meeting and the
nature of the business to be transacted. Notice of any such meeting shall be
given to all Members not less than 14 days nor more than 50 days prior to the
date of such meeting. Members may vote in person or by proxy at such meeting.
Whenever a vote, consent or approval of Members is permitted or required under
this Agreement, such vote, consent or approval may be given at a meeting of
Members or may be given in accordance with the procedure prescribed in Section
7.2(e) hereof. Except as otherwise
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expressly provided in this Agreement, a vote by Members holding a majority of
the Voting Units shall be required to constitute the act of the Members.
(b) For the purpose of determining the Members entitled to
vote on, or to vote at, any meeting of the Members or any adjournment thereof,
the Board or the Members requesting such meeting may fix, in advance, a date as
the record date for any such determination. Such date shall be not more than 50
days nor less than 14 days before any such meeting.
(c) Each Member may authorize any Person to act for it by
proxy on all matters in which a Member is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Member or its attorney-in-fact. No proxy shall be
valid after the expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
Member executing it.
(d) Each meeting of Members shall be conducted by the Board or
Members requesting such meeting or by such other Person that the Board or
Members requesting such meeting may designate.
(e) Except as otherwise provided in this Agreement, any action
of the Members may be taken without a meeting if
(i) the Members holding not less than the minimum
number of Voting Units that would be required to approve and
adopt such action at a meeting consent to the action in
writing,
(ii) written notice (delivered in person or by
facsimile) of the actions to be approved by such Members is
given to all Members simultaneously, and
(iii) the written consents are filed with the records
of the meeting of the Members. Such actions by consent shall
be treated for all purposes as actions taken at a meeting.
ARTICLE VIII
DISTRIBUTIONS AND ALLOCATIONS
Section 8.1 General Distribution Rules. Except as provided in
Section 8.2 hereof, the Company shall distribute Available Cash pursuant to the
terms hereunder to the
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Members at such times 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.
Section 8.3 Other Distributions. Subject to the remaining
paragraphs of this Section 8.3, distributions other than Tax Liability
Distributions, including without limitation distributions of Available Cash and
distributions upon liquidation pursuant to Section 8.4 hereof, shall be made to
the Members as follows:
(i) First, an amount up to the aggregate Unrecouped
Preferred Capital Contributions of all Class A Holders at the
time such distribution is made shall be distributed to the
Class A Holders. Such distribution shall be allocated among
the Class A Holders in proportion to their Unrecouped
Preferred Capital Contributions.
(ii) In the event a Public Offering has occurred,
next, an amount shall be distributed to each Class A Holder
which amount shall produce a compounded annual return of 16%
per annum on the Unrecouped Preferred Capital Contribution of
such Class A Holder as may have been outstanding from time to
time, taking into account the amount and timing of any prior
distributions with respect to Class A Units under Sections
8.2, 8.3(i) and this Section 8.3(ii). All amounts distributed
to Class A Holders pursuant to this Section 8.3(ii) shall be
allocated among such Class A Holders pro rata based on their
respective Class A Units. In the event a Public Offering has
not occurred, no distribution shall be made under this Section
8.3(ii) and the provisions of Section 8.3(v) shall apply, with
the distribution under Section 8.3(v) to be made after all
distributions under Section 8.3(iv).
(iii) Next, an amount up to the aggregate Unrecouped
Capital Contributions of all Class B Holders at the time such
distribution is made shall be distributed to the Class B
Holders. Such distribution shall be allocated among
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the Class B Holders in proportion to their respective
Unrecouped Capital Contributions.
(iv) Next, an amount shall be distributed to each
Class C Holder, which amount, when added to all prior
distributions made to such Member with respect to the Class C
Units under Section 8.2 and this Section 8.3(iv) shall be
equal to $4,750,000. Such distribution shall be allocated
among the Class C Holders in accordance with their respective
Class C Units.
(v) In the event a Public Offering has not
occurred, next, the amount to be distributed to each Class A
Holder as described in Section 8.3(ii) above shall be made.
(vi) Next, an amount shall be distributed to each
Class B Holder and each Class C Holder, which amount, when
added to all prior distributions made to such Member under
Section 8.2 with respect to Class B Units or Class C Units
(only to the extent such amounts have not reduced the amounts
distributed pursuant to Section 8.3 (iii) or (iv),
respectively), respectively, and this Section 8.3(vi) shall
produce an annual return of 10% per annum on (i) in the case
of the Class B Holders, the amount of Unrecouped Capital
Contributions outstanding from time to time from September 19,
1995, and (ii) in the case of the Class C Holders, the portion
of the amount payable pursuant to Section 8.3(iv) which
remains undistributed from time to time with the amount
payable pursuant to Section 8.3(iv) being $3,000,000 for the
period from September 19, 1995 to May 6, 1996, $3,500,000 for
the period from May 6, 1996 to July 9, 1996 and $4,750,000
from and after July 9, 1996. Distributions to the Class B
Holders shall be allocated in proportion to their respective
Class B Units. Distributions to the Class C Holders shall be
allocated in accordance with their respective Class C Units.
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 B Holder and Class C Holder by this Section 8.3(vi), the
amount of such distribution shall be allocated between the
Class B Holders as a group and the Class C Holders as a group
based on the respective amounts which each group would have
received had the total distribution been made.
(vii) Next, an amount shall be distributed to the
Class D Holders and the Class E Holders that hold Vested Class
E Units as follows: (A) the Class D Holders shall receive an
amount, which amount, when added to all prior distributions
made to the Class D Holders with respect to Class D Units
under Section 8.2 and this Section 8.3(vii), shall be equal to
7.11104% of all prior
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distributions made pursuant to Section 8.3(vi); and (B) the
Class E Holders that hold Vested Class E Units shall be
entitled to receive an amount, which amount, when added to all
prior distributions made to Class E Holders with respect to
Vested Class E Units under Section 8.2 and this Section
8.3(vii), shall be equal to the Class E Catch-Up Percentage of
all prior distributions made pursuant to Section 8.3(vi)
above. Distributions to Class D Holders shall be allocated
among the Class D Holders in accordance with their respective
Class D Units. Distributions to Class E Holders that hold
Vested Class E Units shall be allocated among such Class E
Holders in accordance with their respective Vested Class E
Units. To the extent the amount of any proposed distribution
under this Section 8.3(vii) is not sufficient to provide a
full distribution of the amount required to be distributed to
each Class D Holder and each Class E Holder that holds Vested
Class E Units by this Section 8.3(vii), the amount of such
distribution shall be allocated between the Class D Holders as
a group and the Class E Holders that hold Vested Class E Units
as a group based on the respective amounts which each group
would have received had the total distribution been made.
(viii) Next, an amount shall be distributed to the
Persons that hold Vested Plan Units as follows: the Persons
that hold Vested Plan Units shall be entitled to receive an
amount, when added to all prior distributions made with
respect to Vested Plan Units under Section 8.2 and this
Section 8.3(viii), shall be equal to the Plan Catch-Up
Percentage of all prior distributions made pursuant to
Sections 8.3(vi) and 8.3(vii) above. Distributions to Persons
that hold Vested Plan Units shall be allocated among such
Persons in accordance with their respective Vested Plan Units.
To the extent the amount of any proposed distribution under
this Section 8.3(viii) is not sufficient to provide a full
distribution of the amount required to be distributed to each
Person that holds Vested Plan Units by this Section 8.3(viii),
the amount of such distribution shall be allocated among such
Persons in accordance with their respective Vested Plan Units.
(ix) Next, any balance shall be distributed to the
Class B Holders, the Class C Holders, the Class D Holders, the
Class E Holders that hold Vested Class E Units and the Persons
that hold Vested Plan Units as follows: (A) the Persons that
hold Vested Plan Units shall receive the Vested Plan
Percentage of such balance; (B) the Class D Holders shall
receive 6.4% of such balance; (C) the Class E Holders that
hold Vested Class E Units shall receive the Vested Class E
Percentage of such balance; and (D) the Class B Holders and
the Class C Holders shall receive the remaining amount of such
balance to be distributed after accounting for any payments
under clauses (A), (B) and (C) of this Section 8.3(ix).
Distributions to the Class B Holders and Class C Holders shall
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be allocated in accordance with their respective Class B Units
and Class C Units taken as a whole. Distributions to the Class
D Holders shall be allocated among the Class D Holders in
accordance with their respective Class D Units. Distributions
to the Class E Holders that hold Vested Class E Units shall be
allocated among such Class E Holders in accordance with their
respective Vested Class E Units. Distributions to the Persons
that hold Vested Plan Units shall be allocated among such
Persons in accordance with their respective Vested Plan Units.
Appropriate adjustments shall be made to the amounts distributed under clauses
(vii) and (ix) of this Section 8.3 with respect to Class E Units that become
Vested Class E Units after the time of any distribution under clause (vii) or
(ix) (such Class E Units are referred to herein as "Post-Distribution Vested
Class E Units"). Such adjustments shall result in each such Class E Holder
holding Post-Distribution Vested Class E Units being distributed an amount with
respect to such Post-Distribution Vested Class E Units before any further
distributions are made under subclause (B) of clause (vii) or under clauses
(viii) or (ix), with such amount to be equal to the amount such Class E Holder
would have received with respect to such Units if such Units had been Vested
Class E Units at the time of the prior distribution under clause (vii) or (ix).
Appropriate adjustments shall also be made to the amounts
distributed under clauses (viii) and (ix) of this Section 8.3 with respect to
Performance Units and Exceptional Performance Units that become Vested Plan
Units after the time of any distribution under clause (viii) or (ix) (such
Performance Units and Exceptional Performance Units are referred to herein as
"Post-Distribution Plan Units"). Such adjustments shall result in each such
Person holding Post-Distribution Vested Plan Units being distributed an amount
with respect to such Post-Distribution Vested Plan Units before any further
distributions are made under clause (viii) or under clause (ix), with such
amount to be equal to the amount such Person would have received with respect to
such Performance Units and Exceptional Performance Units if such Performance
Units and Exceptional Performance Units had been Vested Plan Units at the time
of the prior distribution under clauses (viii) or (ix).
Notwithstanding the foregoing, the amounts distributable under
clauses (iii) through (ix) of this Section 8.3 and the time and manner of such
distributions are subject to adjustment as set forth in Schedule B and Schedule
D hereto in certain events following a Public Offering.
Any amounts (including in the form of shares of the Public
Company) so distributed in accordance with such adjustments shall be treated as
distributions made under clauses (iii) through (ix) of this Section 8.3 so as to
reduce the obligation to make distributions under said clauses (iii) through
(ix) in the order in which said distribution obligations are set forth in said
clauses (iii) through (ix).
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Holders of Performance Units and Exceptional Performance Units
under the Incentive Plan are not, by reason of the provisions of this Section
8.3 or any other provision of this Agreement, intended to be third party
beneficiaries of any provision of this Agreement and are not Members as a result
of any right to payment.
Notwithstanding any other provision of this Agreement to the
contrary (including without limitation Sections 8.3(i), (ii) and (v) hereof), in
the event that the Public Company consummates a Public Offering on or before
January 1, 1999, (i) the first amount distributable under Section 8.3 hereof
shall be the amount of $42,400,000 less all prior year distributions made
pursuant to Section 8.2 hereof relating to an allocation of income to the
holders of the Class A Units in respect of the $42,400,000 distribution, which
shall be distributed to the holders of Class A Units, with such distribution to
be allocated among the Class A Holders as set forth on Schedule A-1 hereto and
(ii) no amounts shall be distributable under Sections 8.3(i), (ii) and (v)
hereof, including in connection with any liquidation of the Company.
Section 8.4 Distribution of Proceeds Upon Liquidation. Subject
to the terms and conditions in Article XV hereof, upon liquidation of the
Company, any distributions shall be made in accordance with the principles and
rules of Section 8.3 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 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 Members in accordance with and
in an amount equal to the cumulative Losses allocated among
the Members pursuant to
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Section 8.8(ii) 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 and not previously taken into account under this
clause.
(iii) Next, among the Class A Holders in proportion
to, and in an amount equal to the excess, if any, of (A) the
cumulative cash distributions pursuant to the last paragraph
of Section 8.3 or, if the Public Company does not consummate a
Public Offering on or before January 1, 1999, pursuant to
Sections 8.3(ii) or (v) and that have previously been made to
the Class A Holders and that each Member would have received
pursuant to such Section for the current Tax Year of the
Company had an amount of cash at least equal to such Profits
been available for distribution under such Section over (B)
the cumulative allocations previously made to the Class A
Holders pursuant to this Section 8.7(iii) plus for each Class
A Holder its Preferred Capital Contribution.
(iv) Next, among the Class C Holders in proportion
to, and in an amount equal to the excess, if any, of (A) the
cumulative cash distributions under Section 8.3(iv) that have
previously been made to the Class C Holders and that each
Class C 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 C Holders pursuant to
this Section 8.7(iv).
(v) Next, among the Class B Holders and the Class C
Holders in proportion to and in an amount equal to the excess,
if any, of (A) the cumulative cash distributions under Section
8.3(vi) hereof that have previously been made to the Class B
Holders and Class C Holders and that each Class B Holder and
Class C Holder would have received under Section 8.3(vi)
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 (B) the cumulative
allocations previously made to the Class B Holders and Class C
Holders pursuant to this Section 8.7(v).
(vi) Next, among the Class D Holders and the Class E
Holders holding Vested Class E Units in proportion to, and in
an amount equal to the excess, if any, of (A) the cumulative
cash distributions under Section 8.3(vii) that have
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previously been made to the Class D Holders and such Class E
Holders and that each Class D Holder and each such Class E
Holder would have received under Section 8.3(vii) hereof for
the current Tax Year of the Company had an amount of cash at
least equal to such Profits been available for distribution
under such Section over (B) the cumulative allocations
previously made to the Class D Holders and such Class E
Holders pursuant to this Section 8.7(vi).
(vii) Next, among the Members in proportion to and in
an amount equal to the excess, if any, of (A) the cumulative
cash distributions under Section 8.3(ix) hereof that have
previously been made to such Members and that such Member
would have received under Section 8.3(ix) 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 (B) the cumulative allocations previously made to
the Members pursuant to this Section 8.7(vii).
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. Cash distributions to
Persons holding Vested Plan Units shall be treated as an expense of the Company.
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 B
Holders to the extent of their Capital Contributions, (b) to
the Class A Holders to the extent of their Preferred Capital
Contributions, and (c) to the Class A Holders, the Class B
Holders and the Class C Holders in accordance with their
respective pro rata portion of Class A Units, Class B Units
and Class C Units taken together for this purpose as a single
class of 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 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury
Regulations, items of Company income and gain (including gross
income) shall
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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 allocation 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 VIII have been made as if Section 8.9(i) and
(ii) were not in this Agreement.
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 Sections 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 Sections 706 of 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. Notwithstanding the
foregoing, items of income and gain that would be taxed to any Member at
ordinary income tax rates shall be allocated under Section 8.7 prior to items of
income and gain that would be taxed at capital gains rates.
Section 8.11 Tax Allocations of Section 704(c) of the Code.
(a) In accordance with Sections 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
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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 Sections
704(c) of the Code and the Treasury Regulations thereunder.
(c) Any elections or other decisions relating to
allocations for tax purposes under this Article VIII, including the selection
of any allocation method permitted under proposed Treasury Regulation
Sections 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 account in computing, any
Member's Capital Account or share of Profits, Losses, other items or
distributions pursuant to any provision of this Agreement.
(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.
Notwithstanding any other provision of this Agreement, for
federal income tax purposes, taxable gain recognized by the Company on a sale of
stock described in clause (ii) of the final paragraph of Section 14.2 of the
Limited Liability Company Agreement of Aurora/VDK LLC shall be allocated to the
Members in proportion to the amounts set forth on Schedule A-1 hereto.
ARTICLE IX
BOOKS AND RECORDS
Section 9.1 Books, Records and Financial Statements.
(a) At all times during the continuance of the Company, the
Company shall maintain, at its principal place of business, separate books of
account for the Company that shall show a true and accurate record of all costs
and expenses incurred, all charges made, all credits made and received and all
income derived in connection with the operation of the Company business in
accordance with generally accepted accounting principles consistently applied,
and, to the extent inconsistent therewith, in accordance with this Agreement.
Such books of account,
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together with a copy of this Agreement and of the Certificate, shall at all
times be maintained at the principal place of business of the Company and shall
be open to inspection and examination at reasonable times by each Member and its
duly authorized representative for any purpose reasonably related to such
Member's interest in the Company. The books of account and the records of the
Company shall be examined by and reported upon as of the end of each Fiscal Year
by a firm of independent certified public accountants selected by the Board. Any
Member shall have the right to have a private audit of the Company books and
records conducted at reasonable times and after reasonable advance notice to the
Company for any purpose reasonably related to such Member's interest in the
Company, but any such private audit shall be at the expense of the Member
desiring it, and it shall not be paid for out of Company funds.
(b) The Board shall prepare and maintain, or cause to be
prepared and maintained, the books of account of the Company and the following
documents shall be transmitted by the Board to each Member holding 10% or more
of the outstanding Voting Units at the times hereinafter set forth:
(i) as soon as available and in any event within
120 days after the end of each Fiscal Year of the Company, a
balance sheet of the Company as of the end of such Fiscal Year
and the related statements of income and cash flows of the
Company for such Fiscal Year, all reported on by such
independent public accountants of nationally recognized
standing as the Board shall select;
(ii) as soon as available and in any event within 60
days after the end of each of the first three quarters of each
Fiscal Year of the Company, a balance sheet of the Company as
of the end of such quarter and the related statements of
income and cash flows of the Company for such quarter; and
(iii) such other financial reports of the Company or
any Subsidiary that the Company or any Subsidiary is required
to deliver to its senior lender, within 5 days after such
financial reports are required to be delivered to such senior
lender.
(c) All information contained in any statement or other
document distributed to any Member pursuant to Section 9.1(b) hereof shall be
deemed accurate, binding and conclusive with respect to such Member unless
written objection is made thereto by such Member to the Company within 20
business days after the receipt of such statement or other document by such
Member.
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Section 9.2 Accounting Method. The books and records of the
Company shall be kept on the accrual method of accounting applied in a
consistent manner and shall reflect all Company transactions and be appropriate
and adequate for the Company's business.
Section 9.3 Annual Audit. As soon as practical after the end
of each Fiscal Year, but not later than 120 days after such end, the financial
statements of the Company shall be audited by the independent certified public
accountants referred to in Section 9.1(a) hereof, and such financial statements
shall be accompanied by a report of such accountants containing their opinion.
The cost of such audits will be an expense of the Company. A copy of the audited
financial statements and the accountants' report will be furnished to each
Member within 10 business days after their receipt by the Member Manager.
ARTICLE X
TAX
Section 10.1 Tax Matters Member.
(a) Dartford is hereby designated as the initial "Tax
Matters Member" of the Company and as the "Tax Matters Partner" for purposes
of Sections 6231(a)(7) of the Code and shall have the power to manage and
control, on behalf of the Company, any administrative proceeding at the
Company level with the Internal Revenue Service relating to the determination
of any item of Company income, gain, loss, deduction or credit for federal
income tax purposes.
(b) The Tax Matters Member shall, within 10 days of the
receipt of any notice from the Internal Revenue Service in any administrative
proceeding at the Company level relating to the determination of any Company
item of income, gain, loss, deduction or credit, mail a copy of such notice to
each Member.
(c) The Members may at any time hereafter designate a new Tax
Matters Member; provided, however, that only a Member may be designated as the
Tax Matters Member of the Company.
Section 10.2 Right to Make Section 754 Election. The Board
may, in its sole discretion, make or revoke, on behalf of the Company, an
election in accordance with Sections 754 of the Code, so as to adjust the tax
basis of Company property in the case of a distribution of property within
the meaning of Sections 734 of the Code, and in the case of a transfer of a
Company interest within the meaning of Sections 743 of the Code. Each of the
Members shall, upon request of the Board, supply the information necessary to
give effect to such an election.
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ARTICLE XI
LIABILITY, EXCULPATION AND INDEMNIFICATION
Section 11.1 Liability. Except as otherwise provided by the
Delaware Act, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Covered Person shall be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a Covered Person.
Section 11.2 Exculpation.
(a) No Covered Person shall be liable to the Company or any
other Covered Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Covered Person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of
authority conferred on such Covered Person by this Agreement and the
Securityholders Agreement, except that a Covered Person shall be liable for any
such loss, damage or claim incurred by reason of such Covered Person's gross
negligence or willful misconduct.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Company, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, Profits, Losses or any other
facts pertinent to the existence and amount of assets from which distributions
to Members might properly be paid.
Section 11.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Company or to any other Covered Person, a Covered Person acting under this
Agreement and the Securityholders Agreement shall not be liable to the Company
or to any other Covered Person for its good faith reliance on the provisions of
this Agreement and the Securityholders Agreement. The provisions of this
Agreement and the Securityholders Agreement, to the extent that they restrict
the duties and liabilities of a Covered Person otherwise existing at law or in
equity, are agreed by the parties hereto to replace such other duties and
liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein,
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(i) whenever a conflict of interest exists or arises
between Covered Persons, or
(ii) whenever this Agreement, the Securityholders
Agreement or any other agreement contemplated herein or
therein provides that a Covered Person shall act in a manner
that is, or provides terms that are, fair and reasonable to
the Company or any Member, the Covered Person shall resolve
such conflict of interest, taking such action or providing
such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and
burdens relating to such interests, any customary or accepted
industry practices, and any applicable generally accepted
accounting practices or principles; provided that the Board
shall vote on the adequacy of any such resolution of conflict
of interest by the Covered Person, making such adjustments to
such resolution as the Board in its sole discretion sees fit;
and provided further that if such Covered Person is a Member
Manager, such Covered Person shall not vote with the Board on
the adequacy of such resolution. In the absence of bad faith
by the Covered Person, the resolution, action or term so made,
taken or provided by the Covered Person shall not constitute a
breach of this Agreement, the Securityholders Agreement or any
other agreement contemplated herein or of any duty or
obligation of the Covered Person at law or in equity or
otherwise.
(c) Whenever in this Agreement or in the Securityholders
Agreement a Covered Person is permitted or required to make a decision
(i) in its "discretion" or under a grant of similar
authority or latitude, the Covered Person shall be entitled to
consider such interests and factors as it desires, including
its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting
the Company or any other Person, or
(ii) in its "good faith" or under another express
standard, the Covered Person shall act under such express
standard and shall not be subject to any other or different
standard imposed by this Agreement, the Securityholders
Agreement or other applicable law.
Section 11.4 Indemnification. To the fullest extent permitted
by applicable law, a Covered Person shall be entitled to indemnification from
the Company for any loss, damage or claim incurred by such Covered Person by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Covered Person by
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this Agreement and the Securityholders Agreement, except that no Covered Person
shall be entitled to be indemnified in respect of any loss, damage or claim
incurred by such Covered Person by reason of gross negligence or willful
misconduct with respect to such acts or omissions; provided, however, that any
indemnity under this Section 11.4 shall be provided out of and to the extent of
Company assets only, and no Covered Person shall have any personal liability on
account thereof.
Section 11.5 Expenses. To the fullest extent permitted by
applicable law, expenses (including legal fees) incurred by a Covered Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding including any claim, demand, action, suit or
proceeding with respect to which such Covered Person is alleged to have not met
the applicable standard of conduct or is alleged to have committed conduct so
that, if true, such Covered Person would not be entitled to indemnification
under this Agreement or the Securityholders Agreement, upon receipt by the
Company of an undertaking by or on behalf of the Covered Person to repay such
amount if it shall be determined that the Covered Person is not entitled to be
indemnified as authorized in Section 11.4 hereof.
Section 11.6 Outside Businesses. Except as may be provided in
any other agreement entered into by such Person and the Company or its
Subsidiaries, any Member, Member Manager, Officer or Affiliate thereof may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company or any of its Subsidiaries, and the Company, the Members, the
Member Managers and the Officers shall have no rights by virtue of this
Agreement in and to such independent ventures or the income or Profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Company, shall not be deemed wrongful or improper. Except as may
be provided in any other agreement entered into by such Person and the Company
or its Subsidiaries, no Member, Member Manager, Officer or Affiliate thereof
shall be obligated to present any particular investment opportunity to the
Company even if such opportunity is of a character that, if presented to the
Company, could be taken by the Company, and any Member, Member Manager, Officer
or Affiliate thereof shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment opportunity.
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ARTICLE XII
ADDITIONAL MEMBERS AND UNITS
Section 12.1 Additional Units.
(a) If approved by a Super-Majority Vote, the Company is
authorized to raise additional capital by offering and selling, or causing to be
offered and sold, additional limited liability company interests in the Company
("Additional Units") to any Person in such amounts and on such terms as the
Board may determine; provided, that any issuance of Class E Units, or reissuance
of Class E Units that are forfeited in accordance with Schedule B hereto, shall
be to such Persons and in such amounts as the Chairman of the Company shall
recommend to the Board and the Board shall approve, and the approval of a
Super-Majority Vote of Members shall not be required with respect thereto; and
provided, further, that the Company is not authorized to issue any additional
Class D Units unless all of the Class D Holders consent to such issuance in
advance thereof. Each Person who subscribes for any of the Additional Units
shall be admitted as an additional member of the Company (each, an "Additional
Member" and collectively, the "Additional Members") at the time such Person (i)
executes this Agreement and the Securityholders Agreement or a counterpart of
this Agreement and the Securityholders Agreement and (ii) is named as a Member
on the Schedules hereto. The legal fees and expenses associated with such
admission shall be borne by the Company.
(b) If Additional Units are issued pursuant to this Article
XII such Additional Units will be treated for all purposes of this Agreement as
Units as of the date of issuance.
Section 12.2 Preemptive Rights. In the event that the Company
at any time shall propose to issue additional Class A Units, Class B Units or
Class C Units or units of any other class of limited liability company interests
(other than Class D Units or Class E Units), or any securities convertible into,
or exchangeable for, or any rights, warrants or options to purchase, any limited
liability company interests in the Company, each Class B Holder and Class C
Holder shall have the right to purchase up to such Holder's Proportionate
Percentage of such Additional Units or such securities being issued. Each such
Holder who elects to purchase a full Proportionate Percentage of such Additional
Units or securities shall also be entitled to elect to purchase additional
amounts of such Additional Units or securities up to the amount of such Holder's
recalculated Proportionate Percentage of the number of Additional Units which
the Holders purchasing less than their full Proportionate Percentages did not
purchase.
Section 12.3 Allocations. Additional Units shall not be
entitled to any retroactive allocation of the Company's income, gains,
losses, deductions, credits or other items; provided that, subject to the
restrictions of Sections 706(d) of the Code, Additional Units shall be
entitled to their respective share of the Company's income, gains, losses,
deductions, credits and other items
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arising under contracts entered into before the effective date of the
issuance of any Additional Units to the extent that such income, gains,
losses, deductions, credits and other items arise after such effective date.
To the extent consistent with Sections 706(d) of the Code and Treasury
Regulations promulgated thereunder, the Company's books may be closed at the
time Additional Units are issued (as though the Company's Tax Year had ended)
or the Company may credit to the Additional Units pro rata allocations of the
Company' income, gains, losses, deductions, credits and items for that
portion of the Company's Tax Year after the effective date of the issuance of
the Additional Units.
ARTICLE XIII
ASSIGNABILITY AND SUBSTITUTE MEMBERS
Section 13.1 Restrictions on Transfer.
(a) No Member shall sell or otherwise Transfer any of its
Units (whether now held or hereafter acquired), except in accordance with the
terms of this Agreement and the Securityholders Agreement. Any attempted
Transfer of any of a Member's Units in violation of the terms of this Agreement
will be null, void and of no effect and the proposed transferee shall not be
recognized by the Company as the owner or holder of the Units attempted to be
Transferred or any rights pertaining thereto (including, without limitation,
voting rights and rights to allocations and distributions).
(b) Except as otherwise provided in this Agreement, no
Transfer of (i) a Class C Unit by a Class C Holder, (ii) a Class D Unit by a
Class D Holder, or (iii) a Class E Unit by a Class E Holder may be made without
the consent of the Board, which may be withheld in its sole discretion, and in
no event shall a Class C Holder be permitted to Transfer any Class C Units
unless it is part of a transaction in which outstanding Class A Units and Class
B Units of all Class A Holders and Class B Holders are entitled to be
Transferred on a pro rata basis and the Class C Holders Transfer not more than
their Proportionate Percentage of Units.
(c) As a condition precedent to the effectiveness of any
Transfer of Units to any Person (other than the Company or a Person that is
already a Member and has executed this Agreement), the transferee shall execute
a counterpart of this Agreement and deliver it to the Company. As a condition
precedent to the effectiveness of any Transfer of Units by a Member or Person
who is a signatory to the Securityholders Agreement (other than to the Company
or a Person who is already a signatory to the Securityholders Agreement), the
transferee shall execute a counterpart of the Securityholders Agreement and
deliver it to the Company and New LLC.
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Section 13.2 Rights of First Refusal.
(a) Except as provided in Section 13.4 hereof and subject to
Section 13.1(b) and (c) hereof, whenever a Selling Member intends to voluntarily
Transfer any Units at any time owned by it, other than pursuant to a public
offering, such Selling Member shall deliver to the Company and the Members
holding Class B Units or Class C Units a Sale Notice. The Company shall have the
exclusive right and option during the 30 day period from and after the Company's
receipt of the Sale Notice (the "Option Period") to elect to purchase all (but
not less than all) of the Units described in the Sale Notice that are proposed
to be Transferred (the "Offered Units") for the Transfer price and upon such
other terms and conditions as stated in the Sale Notice. In the event the
Company elects to exercise its option under this Section 13.2(a), it shall
consummate the purchase and pay the Transfer price for such Offered Units on or
before the 90th day after the Company's receipt of the Sale Notice.
(b) In the event the Company does not elect to repurchase the
Offered Units pursuant to Section 13.2(a) hereof within the Option Period, the
Company shall furnish written notice thereof to all Members at the end of the
Option Period. The Members shall have the exclusive right and option during the
45-day period from and after the expiration of the Option Period (the "Member
Option Period") to elect to purchase up to such Member's Proportionate
Percentage of the Offered Units. Each Member that elects to purchase its full
Proportionate Percentage of such Offered Units shall also be entitled to elect
to purchase additional amounts of such Offered Units up to the amount of such
Member's recalculated Proportionate Percentage of the number of Offered Units
which the electing Members purchasing less than their full Proportionate
Percentages did not purchase. Each Member that elects to purchase Offered Units
under this Section 13.2(b) shall consummate the purchase and pay the Transfer
price therefor on or before the 15th day following the expiration of the Member
Option Period.
(c) If (i) upon the expiration of a Member Option Period
arising under Section 13.2(b) hereof neither the Company nor the Members shall
have exercised their options to elect to purchase Offered Units pursuant to this
Section 13.2, (ii) the Members exercising their right to elect to purchase
Offered Units do not elect to purchase in the aggregate all of the Offered
Units, or (iii) the Company or the Members fail to consummate a purchase within
the requisite time period, then, subject to Section 14.1 hereof, the Selling
Member shall have the right to Transfer such Offered Units during the 120-day
period from and after the expiration of the Member Option Period (the "Free
Transfer Period") on terms and conditions no more favorable to a purchaser of
such Offered Units than those set forth in the Sale Notice; provided, that the
Selling Member shall have the right to Transfer such Offered Units for a
Transfer price equal to or greater than 97.5% of the Transfer price set forth in
the Sale Notice. Any Offered Units not so Transferred before the expiration of
the Free Transfer Period shall again become subject to the restrictions set
forth in this Agreement.
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Section 13.3 Closing of Purchase by the Company. Upon the
determination of the purchase price of and the identification of the parties to
any Transfer of Units by any Member to the Company upon exercise of any rights
pursuant to Section 13.2(a) hereof, at the closing of such purchase (i) any
Member selling its Units shall deliver to the Company any documentation
necessary to transfer such Member's Units and (ii) the Company shall deliver in
immediately available funds to the Member selling its Units the purchase price
for the Units being purchased by the Company.
Section 13.4. Permitted Transfers. The rights and obligations
under Section 13.2 of this Agreement will not apply to a Transfer:
(a) to a Member's ancestors or descendants or spouse or to a
trust, partnership, custodianship or other fiduciary account for his or for
their benefit;
(b) if the Member is a partnership or limited liability
company, to the respective partners in such partnership or Affiliates of such
partners or members of such limited liability company;
(c) to an Affiliate of the Member, provided, that such
Affiliate is not being used as a device to avoid the restrictions on Transfer
provided in this Agreement;
(d) by UBS Capital to a UBS Permitted Transferee or by a UBS
Permitted Transferee to another UBS Permitted Transferee, provided that such UBS
Permitted Transferee is not being used as a device to avoid the restrictions on
Transfer provided in this Agreement;
(e) by Dartford of any of its Class A Units and Class B Units
to any officer, director or employee of the Company or any Subsidiary of the
Company; or
(f) by any Class A Holder of any of its Class A Units.
Section 13.5 Substitute Members. Except for a Transfer by UBS
Capital or a UBS Permitted Transferee pursuant to Section 13.4(d) hereof, any
Transfer of Units pursuant to this Article XIII or XIV including, but not
limited to a Transfer permitted by Section 13.2 hereof or a Transfer made
pursuant to Section 14.1 hereof, shall, nevertheless, not entitle the transferee
to become a Substitute Member or to be entitled to exercise or receive any of
the rights, powers or benefits of a Member other than the right to share in such
profits and losses, to receive distribution or distributions and to receive such
allocation of income, gain, loss, deduction or credit or similar item to which
the transferor Member would otherwise be entitled, to the extent assigned,
unless the transferor Member designates, in a written instrument delivered to
the other Members, its transferee to become a Substitute Member and the
non-transferring Members holding a majority of the capital and Profits interests
of the Company in their sole and
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absolute discretion, consent to the admission of such transferee as a Member;
and provided further, that such transferee shall not become a Substitute Member
without having first executed an instrument reasonably satisfactory to the other
Members accepting and agreeing to the terms and conditions of this Agreement and
the Securityholders Agreement, including a counterpart signature page to this
Agreement and the Securityholders Agreement, and without having paid to the
Company a fee sufficient to cover all reasonable expenses of the Company in
connection with such transferee's admission as a Substitute Member. A UBS
Permitted Transferee of Units from UBS Capital or a UBS Permitted Transferee
pursuant to Section 13.4(d) hereof shall become a Substitute Member upon
designation by UBS Capital or such UBS Permitted Transferee and upon execution
by such Transferee of the instrument referred to in the last proviso of the
preceding sentence. If a Member Transfers all of its interest in the Company and
the transferee of such interest is entitled to become a Substitute Member
pursuant to this Section 13.5, such transferee shall be admitted to the Company
effective immediately prior to the effective date of the Transfer, and,
immediately following such admission, the transferor Member shall automatically
resign as a Member of the Company. In such event, the Company shall not dissolve
if the business of the Company is continued without dissolution in accordance
with Section 15.2(d) hereof.
Section 13.6 Recognition of Assignment by Company. No Transfer
or assignment, or any part thereof, that is in violation of this Article XIII
shall be valid or effective, and neither the Company nor the Members shall
recognize the same for the purpose of making distributions pursuant to Article
VIII hereof with respect to such assigned interest or part thereof. Neither the
Company nor the nonassigning Members shall incur any liability as a result of
refusing to make any such distributions to the assignee of any such invalid
assignment.
Section 13.7 Effective Date of Transfer. Any valid Transfer
of a Member's interest in the Company, or part thereof, pursuant to the
provisions of this Article XIII shall be effective as of the close of
business on the last day of the calendar month in which such Transfer occurs.
The Company shall, from the effective date of such assignment, thereafter pay
all further distributions on account of the Company interest (or part
thereof) so assigned, to the transferee of such interest, or part thereof. As
between any Member and its transferee, Profits and Losses for the Fiscal Year
of the Company in which such Transfer occurs shall be apportioned for federal
income tax purposes in accordance with any convention permitted under
Sections 706(d) of the Code and selected by the Member Manager.
Section 13.8 Indemnification. In the case of Transfer or
assignment or attempted Transfer or assignment of an interest in the Company
that has not received the consents required by this Article XIII, the parties
engaging or attempting to engage in such Transfer or assignment shall be liable
to indemnify and hold harmless the Company and the other Members from all costs,
liabilities and damages that any of such indemnified Persons may incur
(including, without
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<PAGE>
limitation, incremental tax liability and lawyers' fees and expenses) as a
result of such Transfer or assignment or attempted Transfer or assignment and
efforts to enforce the indemnity granted hereby.
ARTICLE XIV
TAG-ALONG OPTION AND COME-ALONG OBLIGATION
Section 14.1. Tag-Along Option. To the extent certain
Transfers of Units are subject to the tag-along provisions in the
Securityholders Agreement, this Section 14.1 shall have no force and effect. To
the extent certain Transfers of Units are not subject to the tag-along
provisions in the Securityholders Agreement, and subject to Section 13.1(c)
hereof, in the event that any Selling Member intends to voluntarily Transfer to
another Person (other than to a Permitted Transferee or pursuant to a Public
Offering) (such Person being the "Purchaser") a number of Class B Units which,
together with all other Transfers made by such Selling Member to any other
person (other than a Permitted Transferee) in the immediately preceding 12
months, represents 10% or more of the outstanding Class B Units held by such
Member on the date of this Agreement, the Selling Member shall deliver to the
Company and each other Member a written notice (a "Compliance Notice") stating
that it has complied with the provisions of Section 13.2 hereof and that such
Units are no longer subject to such Section 13.2. During the 30-day period (the
"Tag-Along Period") from and after the delivery of such Compliance Notice to the
Company and such other Members, each Member shall have the right to elect to
sell to the Purchaser, and the Purchaser shall have the obligation to purchase
from such Member, such Member's Proportionate Percentage of the Class B Units
being proposed to be sold pursuant to the Compliance Notice. Each Member that
elects to sell its full Proportionate Percentage of such Class B Units shall
also be entitled to elect to sell additional amounts of such Member's Class B
Units up to the amount of such Member's recalculated Proportionate Percentage of
the number of Class B Units which the electing Members selling less than their
full Proportionate Percentages did not sell. Each Member that elects to sell
Class B Units under this Section 14.1 shall consummate the sale pursuant to the
Sale Notice delivered under Section 13.2(a) hereof. The Selling Member may not
consummate such a transaction unless the Purchaser complies with this Section
14.1.
Section 14.2. Come-Along Obligation. So long as the
Securityholders Agreement is in effect, certain Transfers of Units shall be
subject to the drag-along provisions thereof and this Section 14.2 shall have no
force and effect. In the event the Securityholders Agreement is no longer in
effect, and if any Person or group of Persons makes an offer to purchase all
outstanding Units of the Company from all Members (a "Tender Offer"), then the
Members (other than any Members who are Affiliates of the Person making the
Tender Offer) who hold 70% or more of the total number of Voting Units held by
Members who are not Affiliates of
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the Persons making the Tender Offer (the "Approving Members") may require all
other Members ("Minority Members") to sell their Units pursuant to the Tender
Offer. To exercise this right, the Approving Members must deliver a written
notice to the Minority Members describing the terms and conditions of the Tender
Offer. If such an exercise has been made by the Approving Members, then each
Minority Member shall be obligated to sell all of its Units pursuant to the
Tender Offer. Notwithstanding the foregoing, no Member shall be obligated to
sell any Units pursuant to the Tender Offer unless the portion of the purchase
price therefor payable at the closing of such sale shall be paid in cash or
readily marketable securities. Any amounts to be received by Members or
Assignees in connection with a Transfer of Units under this Section 14.2 shall
be allocated in accordance with Section 15.5 hereof.
ARTICLE XV
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 15.1 No Dissolution. The Company shall not be
dissolved by the admission of Additional Members or Substitute Members in
accordance with the terms of this Agreement.
Section 15.2 Events Causing Dissolution. The Company shall be
dissolved and its affairs shall be wound up upon the occurrence of any of the
following events:
(a) the expiration of the term of the Company, as provided in
Section 2.3 hereof;
(b) the written consent of all Members;
(c) the sale of all or substantially all of the assets of the
Company (other than pursuant to the Contribution) and the expiration of any
indemnity period or escrow or the payment of any deferred payment relating to
such sale;
(d) the death, insanity, bankruptcy, retirement, resignation,
expulsion or dissolution of any Member or the occurrence of any other event
under the Delaware Act that terminates the continued membership of a Member in
the Company (other than a resignation described in Sections 5.4 or 13.6 hereof,
which resignation shall not cause the Company to be dissolved and the business
of the Company shall continue without dissolution) unless, within 90 days after
the occurrence of such an event, the remaining Members holding a majority of
capital and Profits interests of the Company agree in writing to continue the
business of the Company and to the appointment, if necessary or desired,
effective as of the date of such event, of one or more Additional Members;
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(e) the entry of a decree of judicial dissolution under
Section 18-802 of the Delaware Act; or
(f) on the first anniversary of the initial Public Offering,
whereupon the Company will immediately liquidate and all securities then held by
the Company will be immediately distributed to the Members in accordance with
Section 15.4.
Except as provided in Section 15.2(d), the death, insanity,
bankruptcy, retirement, resignation, expulsion or dissolution of a Member shall
not cause the Company to be dissolved and upon the occurrence of such an event
the Company shall be continued without dissolution.
Section 15.3 Notice of Dissolution. Upon the dissolution of
the Company, the Person or Persons approved by a Majority Vote to carry out the
winding up of the Company (the "Liquidating Trustee") shall promptly notify the
Members of such dissolution.
Section 15.4 Liquidation. Upon dissolution of the Company, the
Liquidating Trustee shall immediately commence to wind up the Company's affairs;
provided, however, that a reasonable time shall be allowed for the orderly
liquidation of the assets of the Company (subject to the provisions of Section
15.8 hereof) and the satisfaction of liabilities to creditors so as to enable
the Members to minimize the normal losses attendant upon a liquidation. The
Members shall continue to share Profits and Losses during liquidation in the
same proportions, as specified in Article VIII hereof, as before liquidation.
Each Member shall be furnished with a statement prepared by the Company's
certified public accountants that shall set forth the assets and liabilities of
the Company as of the date of dissolution.
(a) Subject to Section 15.8 hereof, the proceeds of any
liquidation (or of any transaction that is deemed to be a liquidation under
Section 15.5 hereof) shall be distributed, as realized, in the following order
and priority:
(i) to creditors of the Company, including Members
who are creditors, to the extent otherwise permitted by law,
in satisfaction of the liabilities of the Company (whether by
payment or the making of reasonable provision for payment
thereof), other than liabilities for distributions to Members;
and
(ii) to the Members the remaining proceeds of
liquidation in accordance with Section 8.4 hereof, after
giving effect to all contributions, distributions and
allocations for all periods.
(b) Subject to Section 15.8 hereof, if the Liquidating Trustee
shall determine that it is not feasible to liquidate all of the assets of the
Company, then the Liquidating Trustee shall cause the Fair Asset Value of the
assets not so liquidated to be determined. Any unrealized
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<PAGE>
appreciation or depreciation with respect to such assets shall be allocated
among the Members in accordance with Article VIII as though the property were
sold for its Fair Asset Value and distribution of any such assets in kind to a
Member shall be considered a distribution of an amount equal to the assets' Fair
Asset Value. Such assets, as so appraised, shall be retained or distributed by
the Liquidating Trustee as follows:
(i) The Liquidating Trustee shall retain assets
having a Fair Asset Value equal to the amount by which the net
proceeds of liquidated assets are sufficient to satisfy the
requirements of paragraph (a)(i) of this Section 15.4. The
foregoing notwithstanding, the Liquidating Trustee shall, to
the fullest extent permitted by law, have the right to
distribute property subject to liens at the value of the
Company's equity therein.
(ii) The remaining assets (including mortgages and
other receivables) shall be distributed to the Members in such
proportions as shall be equal to the respective amounts to
which each Member is entitled pursuant to Article VIII hereof
giving full effect in the calculation thereof to any previous
distributions made pursuant to this Section 15.4. If, in the
sole and absolute judgment of the Liquidating Trustee, it
shall not be feasible to distribute to each Member an aliquot
share of each asset, the Liquidating Trustee may allocate and
distribute specific assets to one or more Members as
tenants-in-common as the Liquidating Trustee shall determine
to be fair and equitable.
(c) Except as set forth in Section 15.8 hereof, no Member
shall have the right to demand or receive property other than cash upon
dissolution and termination of the Company.
Section 15.5 Sale Transactions. Any sale of all or
substantially all of the Voting Units in a transaction or series of related
transactions, including without limitation pursuant to a Tender Offer, shall be
deemed to be a liquidation of the Company, and any amounts to be received by
Members of Assignees upon the consummation of any such transaction shall be
distributed, as realized, in accordance with Section 15.4(a) hereof.
Section 15.6 Termination. The Company and this Agreement shall
terminate when all of the assets of the Company, after payment of or due
provision for all debts, liabilities and obligations of the Company, shall have
been distributed to the Members in the manner provided for in this Article XV
(including without limitation after the sale of Units pursuant to a Tender Offer
in accordance with Section 14.2 hereof), and the Certificate shall have been
canceled in the manner required by the Delaware Act.
Section 15.7 Claims of the Members. The Members and Assignees
shall look solely to the Company's assets for the return of their Capital
Contributions, and if the assets of
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<PAGE>
the Company remaining after payment of or due provision for all debts,
liabilities and obligations of the Company are insufficient to return such
Capital Contributions, the Members and Assignees shall have no recourse against
the Company or any other Member or the Member Managers or Officers.
Section 15.8 Dissolution Upon a Public Offering. In connection
with any dissolution of the Company following a Public Offering, the Company
shall cause the equity securities of the Public Company held by the Company or
any Subsidiary of the Company to be distributed in accordance with the order and
priority rules set forth in Section 15.4. In the event the Public Company is New
LLC or a successor thereto or is a New LLC Entity, the Members shall have such
registration rights as are set forth in the Securityholders Agreement. In the
event the Public Company is not a New LLC or a successor thereto or a New LLC
Entity or if the Securityholders Agreement is no longer in full force and
effect, then simultaneously with such distributions of equity securities, the
Company shall cause the Public Company to grant the following registration
rights with respect to such equity securities:
(a) The Public Company shall grant to Fenway, Gloriande and
UBS Capital demand registration rights that are substantially the same as the
demand registration rights set forth on Schedule C hereto assuming with respect
to such demand registration rights as set forth on Schedule C that (i) the
Public Company will be "the Company", (ii) Fenway, Gloriande and UBS Capital
will each be a "Demand Holder," and (iii) the equity securities of the Public
Company so distributed to such Members will be the "Registrable Securities", in
each case as such terms are used in Schedule C hereto.
(b) The Public Company shall grant to each other Member or
Assignee piggyback registration rights that are substantially the same as the
piggyback registration rights set forth on Schedule C hereto assuming with
respect to such piggyback registration rights as set forth on Schedule C that
(i) the Public Company will be "the Company", (ii) each such other Member or
Assignee will be a "Holder", and (iii) the equity securities of the Public
Company so distributed to such Members and Assignees will be "Registrable
Securities", in each case as such terms are used in Schedule C hereto.
(c) The Public Company will grant to the holders of
Performance Units and Exceptional Performance Units the piggyback registration
rights described in Section 5(g) of Schedule D hereto. In the event that holders
of Performance Units and Exceptional Performance Units are not permitted to
"tack" the holding period of the Company with respect to the equity securities
of the Public Company distributed to such holders for purposes of Rule 144 under
the Securities Act of 1933, as amended, and such securities are not otherwise
registered under said Act, the Public Company will grant to such holders demand
registration rights reasonably acceptable to the Board and Dartford.
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<PAGE>
ARTICLE XVI
Members' Rights of Approval
Section 16.1 Approval Requirement. Without the approval of a
Super-Majority Vote of the Members, the Company shall not (and no Member shall
cause the Company to):
(a) Except for transactions between or among the Company and
one or more of its Subsidiaries or between or among the Company's Subsidiaries
themselves, engage in or permit to occur any of the following events (each event
hereinafter described being hereafter referred to as a "Transaction"):
(i) the sale, Transfer, assignment or other
disposition by the Company of any interest in any Other
Subsidiary of the Company, or by any Other Subsidiary of the
Company of any interest in another Other Subsidiary of the
Company, except pursuant to the provisions of the Contribution
Documents;
(ii) the consolidation or merger of the Company with
or into any other Delaware limited liability company or other
business entity (as defined in Section 18-209(a) of the
Delaware Act), or any liquidation, dissolution or winding-up
of the Company other than as provided for herein;
(iii) (A) any consolidation or merger of any Other
Subsidiary of the Company with or into any business entity (as
defined in Section 18-209(a) of the Delaware Act), (B) any
sale by any Other Subsidiary of the Company of all or
substantially all of its assets, or (C) any liquidation,
dissolution or winding-up of any Other Subsidiary of the
Company other than as provided herein;
(iv) the issuance of any equity securities of any
Other Subsidiary of the Company, or any securities convertible
into shares of preferred stock or common stock of any Other
Subsidiary of the Company, other than pursuant to Schedule D
hereto, or as contemplated in Section 15.8 hereof;
(v) the acquisition by the Company or any Other
Subsidiary of the Company of any stock or assets of another
entity or of capital assets, in a single transaction or a
series of related transactions in any 12 month period, for an
aggregate purchase price in excess of $5,000,000;
(vi) the incurrence by the Company or any Other
Subsidiary of the Company of funded debt with a principal
amount in excess of $5,000,000;
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<PAGE>
(vii) the removal of Ian R. Wilson as the Chairman of
the Company or any Other Subsidiary of the Company and the
hiring or removal of any successor Chairman or any Chief
Executive Officer of the Company or any Other Subsidiary;
(viii) the amendment to (A) any provision of the
charter of any Other Subsidiary of the Company or (B) any
provision of the By-Laws of any Other Subsidiary of the
Company if such provision by its terms may be amended only
with the approval of a Super-Majority Vote of the Members;
(ix) the declaration of distributions by the Company
(other than Tax Liability Distributions and any distribution
pursuant to the last paragraph of Section 8.3 hereof) or
dividends by any Other Subsidiary of the Company;
(x) the adoption of the Incentive Plan or of any
stock option or incentive compensation plan by the Company or
any Other Subsidiary of the Company or any amendment thereto;
and
(xi) the making of capital expenditures by the
Company and its Other Subsidiaries in an aggregate amount for
any fiscal year in excess of $2,500,000.
(b) Anything in this Section 16.1 to the contrary
notwithstanding and so long as such action is not in contravention of the
Securityholders Agreement, the Company shall not be prevented from engaging in
any Transaction, or from taking any actions, including, but not limited to,
obtaining approval of its Board for, engaging investment bankers, accountants
and attorneys, and entering into letters of intent or binding agreements
relating to any Transaction, so long as
(i) the Company is not contractually obligated or
permitted to proceed with such Transaction until the approval
required under Section 16.1 has been obtained and
(ii) if the approval required under Section 16.1 is
not obtained, the Company shall not be required to pay nor
shall incur or become subject to any commitment or standby
fee, damages, penalty or other break-up or similar fee in
order to terminate any binding obligation which it may have
entered into relating to the matters described in Section 16.1
or otherwise as a result of such approval not having been
obtained.
16.2 Affiliate Transactions. At any time after the date of
this Agreement, neither the Company nor any Other Subsidiary of the Company
shall enter into or engage in any
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<PAGE>
single transaction or series of transactions with any Member (or any Affiliate
of any Member) (other than "Approved Affiliate Transactions" as defined below)
involving the payment of more than $500,000 in the aggregate during any 12-month
period by the Company or any of its Other Subsidiaries to such Member or its
Affiliate, without the approval of Members holding the number of Voting Units
that represents a majority of the total Voting Units held by all Members who are
not (and whose Affiliates are not) a party to such transaction. "Approved
Affiliate Transactions" shall include all transactions between the Company or
any of its Subsidiaries with any Affiliate that are described in or effected
pursuant to the Contribution Documents.
ARTICLE XVII
REGISTRATION RIGHTS
Section 17.1 Registration Rights. In the event the Company or
any surviving entity of a reorganization of the Company (including by the
incorporation thereof) or any successor entity into which the Company merges or
consolidates intends to issue equity securities by way of a public offering, the
Members shall have such registration rights set forth on Schedule C hereto. In
the event that New LLC or any surviving entity of a reorganization of New LLC
(including by the incorporation thereof) or any successor entity into which New
LLC merges or consolidates, or any other New LLC Entity intends to issue equity
securities by way of a public offering, the Members who are signatory to the
Securityholders Agreement shall have such registration rights as are set forth
in the Securityholders Agreement, and the registration rights provided herein
shall have no further force and effect.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 Notices. All notices provided for in this
Agreement shall be in writing, duly signed by the party giving such notice, and
shall be delivered in person or by an acknowledged overnight delivery service,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Company, in care of the President at the
Company's mailing address set forth in Section 2.5 hereof with a copy to the
Chairman and the Chief Executive Officer at such address as each such officer
shall designate to the Company;
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<PAGE>
(b) if given to the Member Managers, at their mailing
addresses set forth on Schedule A attached hereto; or
(c) if given to any Member at the address set forth opposite
its name on Schedule A attached hereto, or at such other address as such Member
may hereafter designate by written notice to the Company.
All such notices shall be deemed to have been given when
received.
Section 18.2 Failure to Pursue Remedies. The failure of any
party to seek redress for violation of, or to insist upon the strict performance
of, any provision of this Agreement shall not prevent a subsequent act, which
would have originally constituted a violation, from having the effect of an
original violation.
Section 18.3 Cumulative Remedies. The rights and remedies
provided by this Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive its right to use any or all other
remedies. Said rights and remedies are given in addition to any other rights the
parties may have by law, statute, ordinance or otherwise.
Section 18.4 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of all of the parties and, to the extent permitted
by this Agreement, their successors, legal representatives and assigns.
Section 18.5 Interpretation. Throughout this Agreement, nouns,
pronouns and verbs shall be construed as masculine, feminine, neuter, singular
or plural, whichever shall be applicable. All references herein to "Articles,"
"Sections" and paragraphs shall refer to corresponding provisions of this
Agreement unless otherwise indicated.
Section 18.6 Severability. The invalidity or unenforceability
of any particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision were omitted.
Section 18.7 Counterparts. This Agreement may be executed in
any number of counterparts with the same effect as if all parties hereto had
signed the same document. All counterparts shall be construed together and shall
constitute one instrument.
Section 18.8 Integration. This Agreement, together with
Schedules A, B, C and D hereto and the Securityholders Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings pertaining
thereto.
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Section 18.9 Governing Law. This Agreement, together with
Schedules A, B, C and D hereto and the rights of the parties hereunder shall be
interpreted in accordance with the laws of the State of Delaware, and all rights
and remedies shall be governed by such laws without regard to principles of
conflict of laws.
Section 18.10 Inconsistency. In the event of an inconsistency
between the provisions contained in this Agreement, on the one hand, and in the
Securityholders Agreement, on the other hand, the provisions contained in the
Securityholders Agreement will govern.
[the remainder of this page is intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above stated.
MEMBERS:
DARTFORD PARTNERSHIP L.L.C.
By: /s/ James B. Ardrey
-------------------------
Name: James B. Ardrey
Title: Member
FENWAY PARTNERS CAPITAL FUND, L.P.
by: Fenway Partners, L.P.,
its general partner
by: Fenway Partners Management,
Inc., its general partner
By: /s/ Richard C. Dresdale
-------------------------
Name: Richard C. Dresdale
Title:
GLORIANDE (LUXEMBOURG) SARL
By:
-------------------------
Name:
Title:
UBS CAPITAL LLC
By: /s/ Charles J. Delaney
-------------------------
Name: Charles J. Delaney
Title: President
By: /s/ Michael Greene
---------------------
Name: Michael Greene
Title:
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<PAGE>
MEMBERS:
THOMAS O. ELLINWOOD
THOMAS J. YOUNGERMAN
C. RENEE SLOAN
OLAFUR GUDMUNDSSON
TIMOTHY B. ANDERSEN
RICH BERRY
VICKI FITZGERALD
LARRY MOURDOCK
JAMES BRUFFY
JIM FREY
HAZEL MORRIS
HOWARD TEUFEL
MARY STAHLHUT
JERRY L. SALLER
GERALD W. HAYES, JR.
NATHAN ERNEST PASKOFF
JOHN P. CROWDER
GREGORY L. SMITH
PAUL GILLSTROM
LAURA MARTINEZ
JOE McSHERRY
LISSA MULLINS
LINDA MEULLER
RICK MAGER
MARK RIKAL
STEVE FUCOLORO
LAMONT RUMBERS
By: /s/ James B. Ardrey
--------------------------------------
James B. Ardrey, Attorney-in-Fact for
each of the Members listed above
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<PAGE>
SCHEDULE A-1
To the Limited Liability Company Agreement of
VDK Foods LLC
<TABLE>
<CAPTION>
AMOUNT DISTRIBUTABLE
NAME AND MAILING ADDRESS UNDER SECTION 8.3(i)
------------------------ --------------------
<S> <C>
A. Class A Units
1. Fenway Partners Capital Fund, L.P.(1) $22,164,807
152 West 57th Street
New York, New York 10019
Facsimile: (212) 757-0609
2. Gloriande (Luxembourg) S.a.r.L. $9,750,482
c/o Moore Stephens Services SAM
L'Estoril
Avenue Princess Grace
MONACO
3. UBS Capital LLC $9,750,482
299 Park Avenue, 34th floor
New York, New York 10171
Facsimile: (212) 821-6333
4. Dartford Partnership, L.L.C. $270,341
456 Montgomery Street, Ste. 2200
San Francisco, California 94104
Facsimile: (415) 982-3023
5. The Ian and Susan Wilson 1998 $168,301
Irrevocable Trust
6. Thomas O. Ellinwood $52,595
12451 Montsouris Drive
St. Louis, Missouri 63141
</TABLE>
- ---------------
(1) FPIP, LLC, as Assignee is entitled to $170,583 of the
aggregate amount distributable to Fenway pursuant to
Section 8.3(i) hereof. FPIP Trust, LLC, as Assignee is
entitled to $94,724 of the aggregate amount distributable
to Fenway pursuant to Section 8.3(i) hereof.
A-1
<PAGE>
<TABLE>
<CAPTION>
AMOUNT DISTRIBUTABLE
NAME AND MAILING ADDRESS UNDER SECTION 8.3(i)
------------------------ --------------------
<S> <C>
7. Thomas J. Youngerman $17,883
232 N. Kingshighway, Apt. 412
St. Louis, Missouri 63108
8. C. Renee Sloan $17,883
1159 Olive Lake Drive, Apt. C
St. Louis, Missouri 63132
9. Olafur Gudmundsson $17,883
95 Aberdeen Place
St. Louis, Missouri 63105
10. Timothy B. Andersen $17,725
20 Georgian Acres
St. Louis, Missouri 63131
11. Rich Berry $40,915
705 St. Louis Street
Edwardsville, IL 62025
12. Vicki Fitzgerald $14,727
11317 Terwillingers Knoll Court
Cincinnati, Ohio 45249
13. Larry Mourdock $8,415
2960 Mountain Trace
Rosewell, Georgia 30007-4097
14. James Bruffy $7,148
2986 Franklin Oaks Drive
Herndon, Virginia 22071
15. Jim Frey $8,990
1247 Cherry Tree Lane
Scotland, Pennsylvania 17254
16. Hazel Morris $9,946
5877 Nina Place
St. Louis, Missouri 63112
17. Howard Teufel $9,946
612 Wedgewood Drive
Erie, Pennsylvania 16505
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT DISTRIBUTABLE
NAME AND MAILING ADDRESS UNDER SECTION 8.3(i)
------------------------ --------------------
<S> <C>
18. Mary Stahlhut $5,597
302 Deep Cove Drive
Edwardsville, Illinois 62025
19. Jerry L. Saller $1,913
1307 Boardwalk Street
Arlington, Texas 76011
20. Gerald W. Hayes, Jr. $8,537
12127 Crestline Avenue
Dallas, Texas 75244
21. Nathan Ernest Paskoff $10,473
4631 Mountain Creek Drive
Roswell, Georgia 30075-4036
22. John P. Crowder $4,780
104 Echo Ridge
Collinsville, Illinois 62234
23. Gregory L. Smith $9,330
388 Wellington Cove
Jackson, TN 38305
24. Paul Gillstrom $4,664
1000 St. Louis Union Station
Suite 200
St. Louis, MO 63103
25. Laura Martinez $2,799
21291 Windstream Circle
Trabuco Canyon, CA 92679
26. Joe McSherry $7,576
27. Lissa Mullins $6,053
28. Linda Mueller $3,018
29. Rick Mager $2,260
30. Mark Rikal $1,507
31. Steve Fucoloro $1,507
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT DISTRIBUTABLE
NAME AND MAILING ADDRESS UNDER SECTION 8.3(i)
------------------------ --------------------
<S> <C>
32. Lamont Rumbers $1,518
</TABLE>
A-4
<PAGE>
SCHEDULE A
To the Limited Liability Company Agreement of
VDK Foods LLC
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
A. Class A Units
1. Fenway Partners Capital Fund, L.P. $20,015,596.00 20,015.6(2)
152 West 57th Street
New York, New York 10019
Facsimile: (212) 757-0609
2. Gloriande (Luxembourg) S.a.r.L. $7,184,333.00 7,184.3
c/o Moore Stephens Services SAM
L'Estoril
Avenue Princess Grace
MONACO
3. UBS Capital LLC $7,184,333.00 7,184.3
299 Park Avenue, 34th floor
New York, New York 10171
Facsimile: (212) 821-6333
4. Dartford Partnership, L.L.C. $183,571.00 183.6
456 Montgomery Street, Ste. 2200
San Francisco, California 94104
Facsimile: (415) 982-3023
5. The Ian and Susan Wilson 1998 $114,286.00 114.3
Irrevocable Trust
6. Thomas O. Ellinwood $35,714.00 35.72
12451 Montsouris Drive
St. Louis, Missouri 63141
7. Thomas J. Youngerman $12,143.00 12.1
232 N. Kingshighway, Apt. 412
St. Louis, Missouri 63108
</TABLE>
- ---------------
(2) FPIP, LLC is the Assignee of 153.87855076 of these Class A
Units. FPIP Trust, LLC is the Assignee of 85.44835613 of these
Class A Units.
A-1
<PAGE>
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
8. C. Renee Sloan $12,143.00 12.1
1159 Olive Lake Drive, Apt. C
St. Louis, Missouri 63132
9. Olafur Gudmundsson $12,143.00 12.1
95 Aberdeen Place
St. Louis, Missouri 63105
10. Timothy B. Andersen $12,143.00 12.1
20 Georgian Acres
St. Louis, Missouri 63131
11. Rich Berry $29,429.00 29.4
705 St. Louis Street
Edwardsville, IL 62025
12. Vicki Fitzgerald $10,000.00 10.0
11317 Terwillingers Knoll Court
Cincinnati, Ohio 45249
13. Larry Mourdock $5,714.00 5.7
2960 Mountain Trace
Rosewell, Georgia 30007-4097
14. James Bruffy $4,999.00 5.0
2986 Franklin Oaks Drive
Herndon, Virginia 22071
15. Jim Frey $6,428.00 6.4
1247 Cherry Tree Lane
Scotland, Pennsylvania 17254
16. Hazel Morris $7,142.00 7.1
5877 Nina Place
St. Louis, Missouri 63112
17. Howard Teufel $7,142.00 7.1
612 Wedgewood Drive
Erie, Pennsylvania 16505
18. Mary Stahlhut $4,001.00 4.0
302 Deep Cove Drive
Edwardsville, Illinois 62025
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
19. Jerry L. Saller $1,429.00 1.4
1307 Boardwalk Street
Arlington, Texas 76011
20. Gerald W. Hayes, Jr. $6,429.00 6.4
12127 Crestline Avenue
Dallas, Texas 75244
21. Nathan Ernest Paskoff $7,858.00 7.9
4631 Mountain Creek Drive
Roswell, Georgia 30075-4036
22. John P. Crowder $3,571.00 3.6
104 Echo Ridge
Collinsville, Illinois 62234
23. Gregory L. Smith $7,143.00 7.1
388 Wellington Cove
Jackson, TN 38305
24. Paul Gillstrom $3,571.00 3.6
1000 St. Louis Union Station
Suite 200
St. Louis, MO 63103
25. Laura Martinez $2,143.00 2.1
21291 Windstream Circle
Trabuco Canyon, CA 92679
26. Joe McSherry $7,143.00 7.1
27. Lissa Mullins $5,714.00 5.7
28. Linda Mueller $2,857.00 2.9
29. Rick Mager $2,143.00 2.1
30. Mark Rikal $1,429.00 1.4
31. Steve Fucoloro $1,429.00 1.4
32. Lamont Rumbers $1,429.00 1.4
B. Class B Units
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
1. Fenway Partners Capital Fund, L.P. $62,430,404.00 62,430.4(3)
152 West 57th Street
New York, New York 10019
Facsimile: (212) 757-0609
2. Gloriande Industries, Inc. $22,410,667.00 22,410.7
7760 France Avenue South, Ste. 850
Minneapolis, Minnesota 55435
Facsimile: (612) 830-0600
3. UBS Capital LLC $22,410,667.00 22,410.7
299 Park Avenue, 34th floor
New York, New York 10171
Facsimile: (212) 821-6333
4. Dartford Partnership, L.L.C. $591,390.00 591.3856
456 Montgomery Street, Ste. 2200
San Francisco, California 94104
Facsimile: (415) 982-3023
5. The Ian and Susan Wilson 1998 $685,753.00 685.7144
Irrevocable Trust
6. Ray and Eileen Chung Children's Trust $200,000.00 200.0
f/b/o Melissa Ann Chung
7. Ray and Eileen Chung Children's Trust $200,000.00 200.0
f/b/o Jessica Michelle Chung
8. Scott W. Seaton, Trustee f/b/o Caitlin E. $15,000.00 15.0
Ardrey
9. Scott W. Seaton, Trustee f/b/o Ian B. $15,000.00 15.0
Ardrey
10. R. Holt Ardrey, Trustee f/b/o Blake $20,000.00 20.0
Ardrey
11. R. Holt Ardrey, Trustee f/b/o Scott $20,000.00 20.0
Ardrey
</TABLE>
- ---------------
(3) FPIP, LLC is the Assignee of 479.96060449 of these Class B
Units. FPIP Trust, LLC is the Assignee of 266.52086635 of
these Class B Units.
A-4
<PAGE>
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
12. Wendy R. Ardrey, Trustee f/b/o Ann $20,000.00 20.0
Richardson
13. Elizabeth D. Ardrey $20,000.00 20.0
14. Thomas O. Ellinwood $214,285.00 214.3
12451 Montsouris Drive
St. Louis, Missouri 63141
15. Thomas J. Youngerman $72,857.00 72.9
232 N. Kingshighway, Apt. 412
St. Louis, Missouri 63108
16. C. Renee Sloan $72,857.00 72.9
1159 Olive Lake Drive, Apt. C
St. Louis, Missouri 63132
17. Olafur Gudmundsson $72,857.00 72.9
95 Aberdeen Place
St. Louis, Missouri 63105
18. Timothy B. Andersen $72,857.00 72.9
20 Georgian Acres
St. Louis, Missouri 63131
19. Rich Berry $176,571.00 176.6
705 St. Louis Street
Edwardsville, IL 62025
20. Vicki Fitzgerald $60,000.00 60.0
11317 Terwillingers Knoll Court
Cincinnati, Ohio 45249
21. Larry Mourdock $34,286.00 34.3
2960 Mountain Trace
Rosewell, Georgia 30007-4097
22. James Bruffy $30,001.00 30.0
2986 Franklin Oaks Drive
Hemdon, Virginia 22071
23. Jim Frey $38,572.00 38.6
1247 Cherry Tree Lane
Scotland, Pennsylvania 17254
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
24. Hazel Morris $42,858.00 42.9
5877 Nina Place
St. Louis, Missouri 63112
25. Howard Teufel $42,858.00 42.9
612 Wedgewood Drive
Erie, Pennsylvania 16505
26. Mary Stahlhut $23,999.00 24.0
302 Deep Cove Drive
Edwardsville, Illinois 62025
27. Jerry L. Saller $8,571.00 8.6
1307 Boardwalk Street
Arlington, Texas 76011
28. Gerald W. Hayes, Jr. $38,571.00 38.6
12127 Crestline Avenue
Dallas, Texas 75244
29. Nathan Ernest Paskoff $47,142.00 47.1
4631 Mountain Creek Drive
Roswell, Georgia 30075-4036
30. John P. Crowder $21,429.00 21.4
104 Echo Ridge
Collinsville, Illinois 62234
31. Gregory L. Smith $42,857.00 42.9
388 Wellington Cove
Jackson, TN 38305
32. Paul Gillstrom $21,429.00 21.4
1000 St. Louis Union Station
Suite 200
St. Louis, MO 63103
33. Laura Martinez $12,857.00 12.9
21291 Windstream Circle
Trabuco Canyon, CA 92679
34. Joe McSherry $42,857.00 42.9
35. Lissa Mullins $34,286.00 34.3
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
36. Linda Mueller $17,143.00 17.1
37. Rick Mager $12,857.00 12.9
38. Mark Rikal $8,571.00 8.6
39. Steve Fucoloro $8,571.00 8.6
40. Lamont Rumbers $8,571.00 8.6
C. Class C Units
Dartford Partnership, L.L.C. $1,500.00 4,750.0
456 Montgomery Street, Ste. 2200
San Francisco, California 94104
Facsimile: (415) 982-3022
D. Class D Units
Dartford Partnership, L.L.C. $500.00 1,300.0
456 Montgomery Street, Ste. 2200
San Francisco, California 94104
Facsimile: (415) 982-3022
E. Class E Units (the Capital Contribution of and Number of Class E Units
held by each of the Class E Holders are on file with the
records of the Company)
1. Thomas O. Ellinwood
12451 Montsouris Drive
St. Louis, Missouri 63141
2. Thomas J. Youngerman
232 N. Kingshighway, Apt. 412
St. Louis, Missouri 63108
3. C. Renee Sloan
1159 Olive Lake Drive, Apt. C
St. Louis, Missouri 63132
4. Olafur Gudmundsson
95 Aberdeen Place
St. Louis, Missouri 63105
</TABLE>
A-7
<PAGE>
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
5. Timothy B. Andersen
20 Georgian Acres
St. Louis, Missouri 63131
6. Rich Berry
705 St. Louis Street
Edwardsville, IL 62025
7. Vicki Fitzgerald
11317 Terwillingers Knoll Court
Cincinnati, Ohio 45249
8. Larry Mourdock
2960 Mountain Trace
Rosewell, Georgia 30007-4097
9. James Bruffy
2986 Franklin Oaks Drive
Herndon, Virginia 22071
10. Jim Frey
1247 Cherry Tree Lane
Scotland, Pennsylvania 17254
11. Howard Teufel
612 Wedgewood Drive
Erie, Pennsylvania 16505
12. John P. Crowder
104 Echo Ridge
Collinsville, Illinois 62234
13. Gregory L. Smith
388 Wellington Cove
Jackson, TN 38305
14. Paul Gillstrom
1000 St. Louis Union Station
Suite 200
St. Louis, MO 63103
15. Laura Martinez
21291 Windstream Circle
Trabuco Canyon, CA 92679
</TABLE>
A-8
<PAGE>
<TABLE>
<CAPTION>
CAPITAL NUMBER
NAME AND MAILING ADDRESS CONTRIBUTION OF UNITS
------------------------ ------------ --------
<S> <C> <C>
16. Nathan Ernest Paskoff
4631 Mountain Creek Drive
Roswell, Georgia 30075-4036
17. Joe McSherry
18. Mary Stahlhut
302 Deep Cove Drive
Edwardsville, Illinois 62025
19. Terry Davis
20. Steve Fucoloro
21. Linda Mueller
22. Rick Mager
23. Hazel Morris
24. Lamont Rumbers
25. Lissa Mullins
26. Mark Rikal
</TABLE>
All Persons identified on this Schedule A as holders of Class A Units, Class B
Units, Class C Units and Class D Units are Members of the Company. All Persons
identified as holders of Class E Units shall become Members when and to the
extent their Class E Units become Vested Class E Units in accordance with
Schedule B.
A-9
<PAGE>
SCHEDULE B
To the Second Amended and Restated
Limited Liability Company Agreement
of VDK Foods LLC
(the "LLC Agreement")
1. [intentionally omitted]
2. Forfeiture. In the event a Public Offering occurs and the provisions
of Section 3 below apply, the Class E Units held by a Class E Holder shall no
longer be subject to forfeiture other than upon the termination of the
employment of the Class E Holder with Cause.
(i) Termination With Cause. In the event that a Class E Holder's
employment by the Company and/or a New LLC Entity terminates because of
discharge or termination of the Class E Holder by the Company or such New LLC
Entity with Cause (as defined below), then all Class E Units held by such Class
E Holder shall be forfeited to the Company without the payment of any
consideration to the Class E Holder by the Company therefor.
(ii) Cause. For purposes of this Schedule B, the Company and the New
LLC Entities shall have "Cause" to discharge or terminate a Class E Holder upon
(i) the indictment of the Class E Holder for any crime which constitutes a
felony, (ii) if the Class E Holder is party to a written employment agreement
with the Company or any New LLC Entity, the failure or inability of the Class E
Holder to cure or remedy, within 30 days after written notice of such failure
from the Company or such New LLC Entity, either (A) the Class E Holder's failure
to satisfactorily discharge all of his or her duties and obligations under such
employment agreement or (B) any gross negligence or willful misconduct on the
party of the Class E Holder in the course of rendering services thereunder, or
(iii) if the Class E Holder is not a party to a written employment agreement
with the Company or any New LLC Entity, the failure or inability of the Class E
Holder to cure or remedy, within 30 days after written notice of such failure
from the Company or such New LLC Entity, either (A) the Class E Holder's
substantial and continuing failure to satisfactorily discharge all of his or her
material duties and obligations owed to the Company or such New LLC Entity or
(B) any gross negligence or willful misconduct on the part of the Class E Holder
in the course of rendering services to the Company or such New LLC Entity.
(iii) Forfeited Class E Units. In the event any Class E Units are
forfeited in accordance with this Schedule B or otherwise, the Board may, but
shall not be required to,
B-1
<PAGE>
reissue such Class E Units. Any such issuance shall be made in accordance with
Section 12.1 of the LLC Agreement.
3. Public Offering On or Before September 30, 1998. For purposes of
Section 3 and Section 4 of this Schedule B, capitalized terms used herein but
not otherwise defined shall have the meaning given such terms in Schedule D to
this Agreement.
(i) Conditions. In the event any New LLC Entity including without
limitation any surviving entity of a reorganization (including an
incorporation), merger or consolidation of one or more such entities (such
issuer being the "Public Company") intends to effect a Public Offering and such
Public Offering closes on or before September 30, 1998, the provisions of this
Section 3 shall govern the valuation of Class E Units, the vesting of Class E
Units and the time and manner of payments with respect thereto in lieu of the
other provisions of this Schedule B. The provisions of this Section 3 shall be
effective immediately prior to the consummation of the initial Public Offering
(the "E Unit Effective Time").
(ii) Vesting. At the E Unit Effective Time, any then outstanding but
unvested Class E Units held by such Class E Holder shall become Vested Class E
Units. In addition, Class E Units held by a Class E Holder shall be subject to
forfeiture only upon the termination of the employment of the Class E Holder
with Cause pursuant to Section 2 above.
(iii) Valuation and Distribution of Shares. Upon the closing date of
the initial Public Offering, each Vested Class E Unit shall be valued as
hereinafter set forth and the holders of such Units shall become entitled to be
distributed, at the times and in the manner set forth below in this Section 3,
shares of common stock of the Public Company based on such valuation.
(iv) Valuation of Class E Units. The value of Vested Class E Units
and the number of shares of common stock of the Public Company distributable on
account of Vested Class E Units is set forth in this paragraph (d). Upon the
closing date of the initial Public Offering, a computation of Total Profits,
Total Distributions and Total Vested Class E Unit Value shall be made on a basis
as if all of the Company's direct or indirect equity interests in the Public
Company (but excluding any such equity interests either sold in the initial
Public Offering by Aurora/VDK LLC or distributed by Aurora/VDK LLC in connection
with the initial Public Offering in respect of a special distribution by
Aurora/VDK LLC of $50,900,000 in the aggregate to the Company and MBW Investors
LLC) had been valued at a per share price equal to the Gross IPO Price and as if
such value had been distributed by the Company in accordance with Section 8.3 of
this Agreement.
The holder of each Vested Class E Unit shall thereupon be entitled to
receive with respect to such Unit a number of shares of common stock of the
Public Company (of the same class as sold in the Public Offering) equal to the
sum of (x) the quotient of (A) the Vested Class E Unit Value under this
paragraph (d) divided by (B) the Gross IPO Price plus (y) the Per Unit
Additional Share Increment.
B-2
<PAGE>
"Additional Share Increment" means the number of shares equal to the
quotient of (x) the Additional Increment divided by (y) 125% of the Gross IPO
Price.
"Additional Increment" means the excess, if any, of (x) Total Vested Class
E Unit Value calculated as if all of the Company's direct or indirect equity
interests in the Public Company (excluding any interests sold in the Public
Offering directly or indirectly for the Company's account) had been valued at a
per share price equal to 125% of the Gross IPO Price and as if such value had
been distributed by the Company in accordance with Section 8.3 of the LLC
Agreement over (y) Total Vested Class E Unit Value calculated as the product of
(1) as if all of the Company's direct or indirect equity interests in the Public
Company (but excluding any such equity interests either sold in the initial
Public Offering by Aurora/VDK LLC or distributed to VDK LLC in respect of a
special distribution by Aurora/VDK LLC of $50,900,000 in the aggregate to the
Company and MBW Investors LLC) had been valued at a per share price equal to the
Gross IPO Price and as if such value had been distributed by the Company in
accordance with Section 8.3 of the LLC Agreement and (2) 125%.
"Per Unit Additional Share Increment" means the Additional Share Increment
divided by the aggregate number of Vested Class E Units outstanding.
Any shares of common stock of the Public Company distributable to
Class E Holders pursuant to this Section 3 are hereinafter referred to as
"Distributable Shares".
For the purpose hereof, the term "Gross IPO Price" shall mean the
price to the public per share at which securities of the Public Company were
sold in the Public Offering without reduction for underwriter's commissions and
other expenses relating to the Public Offering.
"Total Vested Class E Unit Value" means the value of all Vested Class E
Units, which shall equal the product of P multiplied by Total Profits, where P
is a percentage that equals 3.6% multiplied by the fraction in which the
numerator is the number of Vested Class E Units and the denominator is 720.
"Vested Class E Unit Value" means the value of a single Vested Class E
Unit, which shall equal the percentage of Total Vested Class E Unit Value
obtained by dividing one by the aggregate number of Vested Class E Units
outstanding.
(v) Time of Payment. Following a Public Offering, distributions of
Distributable Shares payable on account of Total Class E Unit Value shall be
made as of the following dates and at the following times:
1) as of the effective date of each Secondary Sale prior to the
Final Date, in an amount equal to the total number of Distributable
Shares which all holders of Vested Class E Units and would be
entitled to include in such Secondary Sale pursuant to the piggyback
registration rights provisions under the Securityholders Agreement,
assuming for such purpose that the Company had distributed all shares
of the Public Company
B-3
<PAGE>
held by it pursuant to this Agreement and the VDK Holdings Plan;
provided, however, in lieu of distributing such shares to the holders
of such Units, all or any portion of such shares will instead be sold
by the Company (or, if applicable, by the Public Company) in such
Secondary Sale and the net proceeds of such sale shall be distributed
to the holders of such Class E Units pro rata in accordance with
their respective interests in the shares that otherwise would have
been distributed.
2) upon the Final Date, with the payments of Distributable
Shares with respect to the Final Date to be made at the same time as
any Distributions to Investors under this Agreement arising from the
Final Date.
(vi) Manner of Payment. Any payment to Class E Holders with respect
to Units that is made pursuant to paragraphs (c) or (d) of this Section 3 shall
be made in Distributable Shares distributed by the Company to Class E Holders.
4. [intentionally omitted]
B-4
<PAGE>
SCHEDULE C
To The Amended and Restated Limited Liability
Company Agreement of VDK Foods LLC
REGISTRATION RIGHTS
1.1. General. This Schedule C describes the duties and the obligations of
the Company (which for purposes of this Schedule C shall include any successor
entity of VDK Foods LLC by way of merger or consolidation) and the Members with
respect to the registration of certain securities of the Company.
1.2. Certain Definitions. As used in this Schedule C, the following
capitalized terms shall have the following meanings:
(a) "Commission" means the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
(b) "Demand Holder" means any of Fenway, National Sun or UBS Capital.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(d) "Holder" means any Member or Assignee or other holder of
outstanding Registrable Securities that have not been sold to the public.
(e) "Prospectus" means the prospectus which is part of a Registration
Statement.
(f) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
(g) "Registrable Securities" means any Unit (other than Class E Units
that are not Vested Class E Units), or any limited liability company interest or
other equity security of the Company issued to Members upon the merger or
consolidation of the Company or upon any Unit or stock split, Unit or stock
dividend, recapitalization, reorganization or similar event.
(h) "Registration Expenses" means all expenses incurred by the
Company in compliance with Section 1.3 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in
C-1
<PAGE>
any event by the Company) and the expenses associated with the Company's
obligations under Section 1.5 hereof.
(i) "Registration Statement" means a registration statement filed
with the Commission under the Securities Act.
(j) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
(k) "Selling Expenses" means all underwriting discounts and selling
commissions, brokerage fees and transfer taxes applicable to the sale of
Registrable Securities in a registered offering and all fees and disbursements
of any counsel, accountants or other representatives retained by any Holder.
(l) "Selling Holder" means a Holder whose Registrable Securities are
included in a Registration Statement hereunder.
1.3. Piggyback Registration Rights.
(a) Request for Registration. If at any time the Company shall elect
to register any Registerable Securities for the account of any Holder or any
equity securities for its own account, the Company will:
(i) promptly give to each Holder written notice thereof (which notice
shall advise such Holder of his or its rights to have any or all Registrable
Securities then held by such Holder included among the securities to be covered
by such registration statement and shall offer such Holder, for a period of 15
days beginning on the date of delivery of such notice, the opportunity to notify
the Company of such Holder's wish to have its or his Registrable Securities
included in such registration statement and a list of the jurisdictions in which
the Company shall qualify such securities under the applicable blue sky or other
state securities laws);
(ii) include in such registration (and any related qualification
under state blue sky laws and other compliance filings, and in any underwriting
involved therein) on the same terms and conditions as the other securities
included therein, all the Registrable Securities specified in a written request
or requests given by any Holder within 15 days after such written notice from
the Company described in clause (i) above is delivered; and
(iii) file and keep effective such registration statement for a
period of not less than 90 days, or such shorter period which will terminate
when all Registrable Securities covered by such registration statement have been
sold or withdrawn (but not prior to the period referred to in Section 4(3) of
the Securities Act and Rule 174 thereunder, if applicable).
C-2
<PAGE>
(b) Certain Restrictions.
(i) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
1.3(a)(i) above. In such event, the right of any Holder to registration pursuant
to this Section 1.3 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting on the same terms and conditions as such offering. All Holders
proposing to distribute their Registrable Securities through such underwriting
shall (together with the Company and any other persons distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriters selected or approved
for underwriting by the Company.
(ii) If a representative of the underwriters advises the Company in
writing that in its opinion, or, in the case of a registration not being
underwritten, the Company shall reasonably determine after consultation with an
independent investment banker that, the number of securities proposed to be sold
exceeds the number which can be effectively sold in, or would have a material
adverse effect on, such offering, then the Company will include in such
registration the number of securities which, in the opinion of such
representative or the Company, as the case may be, can be sold, as follows: (A)
first, any securities the Company proposes to sell, (B) second, the Registrable
Securities requested by Holders to be included in such registration selected pro
rata among such Holders and (C) third, other securities requested to be included
in such registration. If any Holder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written notice to
the Company and the representative of the underwriters. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
1.4. Demand Registration Rights.
(a) Right to Demand. Subject to Sections 1.4(b) and (c) below, at any
time after the 90th day after the first registration of the Company's equity
securities under the Securities Act (other than a registration on Forms S-4 or
S-8 or a similar form), Demand Holders may make a written request for
registration under and in accordance with the provisions of the Securities Act
of all or part of their Registrable Securities (a "Demand Registration"). After
receipt of such request, the Company will promptly give to each holder written
notice (the "Notice") of such registration request to all Holders and the
Company will include in such registration all Registrable Securities of Holders
with respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt by the applicable Holder of the Notice.
All requests made pursuant to this paragraph (a) will specify the aggregate
number of the Registrable Securities to be registered and will also specify the
intended methods of disposition thereof.
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(b) Restrictions on Demand Rights.
(i) The Company shall not be obligated to effect any Demand
Registration if (A) such Demand Registration covers Registrable Securities
having an aggregate proposed sales price of less than $5,000,000, (B) the need
for any special audit or restatement of the Company's audited financial
statements in connection with such Demand Registration could, in the reasonable
judgment of the Company, be avoided by a one-time deferral of such Demand
Registration for a period of not more than 120 days, or (C) less than six months
has elapsed from the effectiveness of a Registration Statement filed pursuant to
Section 1.4(a).
(ii) If a representative of the underwriters of a Demand
Registration advises the Company in writing that in its opinion, or, in the case
of a Demand Registration not being underwritten, the Company shall reasonably
determine after consultation with an independent investment banker that, the
number of securities proposed to be sold in such Demand Registration exceeds the
number which can be effectively sold in, or would have a material adverse effect
on, such offering, then the Company will include in such registration only the
number of securities which, in the opinion of such representative or the
Company, as the case may be, can be sold, selected pro rata among Holders which
have requested to be included in such Demand Registration based on the number of
securities of each Holder included in the offering; provided that if any Holder
has requested inclusion in such Demand Registration and 66 2/3% or less of the
securities so requested to be included have been included, such Holder shall be
entitled to an additional Demand Registration hereunder on the same terms and
conditions as would have applied to such Holder had such earlier Demand
Registration not been made.
(c) Number of Demand Registrations. The Demand Holders shall be
entitled to the following number of Demand Registrations: Fenway -- two; UBS
Capital -- one; and National Sun -- one, the expenses of which shall be borne by
the Company. A Demand Registration shall not be counted as a Demand Registration
hereunder until such Demand Registration has been declared effective and
maintained continuously effective for a period of at least 90 days or such
shorter period ending when all Registrable Securities included therein have been
sold in accordance with any such Demand Registration; provided, however, if any
Demand Registration shall be withdrawn prior to effectiveness thereof at the
request of the Selling Holders holding a majority of the Registrable Securities
included therein due to reasons other than material adverse changes in the
condition, financial or otherwise, of the Company, such Demand Registration
shall be counted hereunder unless such Selling Holders shall agree to pay the
expenses incurred by the Company in connection therewith.
1.5. Expenses of Registration. Except as set forth in Section 1.4(a)
above, all Registration Expenses incurred pursuant to this Section 1 shall be
borne by the Company. All Selling Expenses shall be borne by the Holders of the
securities so registered.
1.6. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 1, the Company will advise each Holder in
writing as to the initiation
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of such registration and as to the completion thereof. The Company will, as
expeditiously as practicable:
(a) prepare and file with the Commission a Registration Statement
which includes the Registrable Securities and use its best efforts to cause such
Registration Statement to become and remain effective as provided herein;
provided that before filing any amendments or supplements to a Registration
Statement or Prospectus, including documents incorporated by reference after the
initial filing of the Registration Statement, the Company will furnish to the
Selling Holders and the underwriters, if any, copies of all such documents
proposed to be filed at least two business days prior thereto, which documents
will be subject to the reasonable review of such Selling Holders and
underwriters, and the Company will not file an amendment to a Registration
Statement or Prospectus or any supplement thereto (including such documents
incorporated by reference) to which Selling Holders holding a majority of the
Registrable Securities covered by such Registration Statement or the
underwriters, if any, shall reasonably object;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for a period of not less than 90 days,
or such shorter period which will terminate when all Registrable Securities
covered by such Registration Statement have been sold or withdrawn (but not
prior to the expiration of the 90-day period referred to in Section 4(3) of the
Securities Act and Rule 174 thereunder, if applicable); cause the Prospectus to
be supplemented by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement or supplement to the Prospectus; the
Company shall be deemed to have used its best efforts to keep a Registration
Statement effective during the applicable period if it complies with all rules
and regulations under the Securities Act relating to it and the noncompliance
with which would result in Selling Holders not being able to sell their
Registrable Securities covered by such Registration Statement during that
period;
(c) furnish to any Seller Holder and the underwriter or underwriters,
if any, without charge, at least one signed copy of the Registration Statement
and any post-effective amendment thereto, upon request, and such number of
conformed copies thereof and such number of copies of the Prospectus (including
each preliminary Prospectus) and any amendments or supplements thereto, and any
documents incorporated by reference therein, as such Selling Holder or
underwriter may reasonably request in order to facilitate the disposition of the
Registrable Securities being sold by such Selling Holder (it being understood
that the Company consents to the use of the Prospectus and any amendment or
supplement thereto by each Selling Holder and the underwriter or underwriters,
if any, in connection with the offering and sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto);
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(d) notify each Selling Holder at any time when a Prospectus relating
to Registrable Securities of any Selling Holder included in a Registration
Statement is required to be delivered under the Act, when the Company becomes
aware of the happening of any event as a result of which the Prospectus included
in such Registration Statement (as then in effect) contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements therein (in the case of the Prospectus or any preliminary Prospectus,
in light of the circumstances under which they were made) not misleading and, as
promptly as practicable thereafter, prepare and file with the Commission and
furnish to Selling Holders a supplement or amendment to such Prospectus so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(e) enter into customary agreements (including, if applicable, an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities;
(f) make reasonably available for inspection by any Selling Holder,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Seller Holder or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such Inspector in connection with such Registration Statement. Records
and other information which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (i) the disclosure of such Records in the
opinion of counsel reasonably acceptable to the Company is necessary to avoid or
correct a misstatement or omission in the Registration Statement or (ii) the
release of such records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction. The Selling Holder agrees that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(g) use its best efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary from and covering such
matters of the type customarily covered by "cold comfort" letters as the Selling
Holders holding a majority of the Registrable Securities being sold or the
managing underwriter reasonably requests;
(h) use its best efforts to obtain an opinion or opinions from
counsel for the Company in customary form;
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(i) use its best efforts to cause all Registrable Securities included
in such Registration Statement to be listed, by the date of the first sale of
Registrable Securities pursuant to such Registration Statement, on each
securities exchange on which the Company's securities of the same class are then
listed or proposed to be listed, if any;
(j) make generally available to its securityholders an earnings
statement, which need not be audited, satisfying the provisions of Section 11(a)
of the Securities Act no later than 45 days after the end of the 12-month period
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which statements shall
cover said 12-month period;
(k) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(l) if requested by the managing underwriter or underwriters or any
Selling Holder promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters or such
Selling Holder requests to be included therein, including, without limitation,
information with respect to the number of Registrable Securities being sold by
such Selling Holder to such underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and information with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as possible after
being notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment;
(m) as promptly as practicable after filing with the Commission of
any document which is incorporated by reference into a Registration Statement,
deliver a copy of such document to each Selling Holder;
(n) on or prior to the date on which the Registration Statement is
declared effective, use its best efforts to register or qualify, and cooperate
with the Selling Holders, the underwriter or underwriters, if any, and their
counsel, in connection with the registration or qualification of, the
Registrable Securities covered by the Registration Statement for offer and sale
under the securities or blue sky laws of each state and other jurisdiction of
the United States as any Selling Holder or underwriter reasonably requests in
writing, to use its best efforts to keep each such registration or qualification
effective, including through new filings, or amendments or renewals, during the
period such Registration Statement is required to be kept effective and to do
any and all other acts or things necessary or advisable to enable the
disposition in all such jurisdictions of the Registrable Securities covered by
the Registration Statement; provided that the Company will not be required to
(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (c)(14), (ii) consent to
general service of process in any such jurisdiction or (iii) subject itself to
general taxation in any such jurisdiction;
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(o) cooperate with the Selling Holders and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities to be
sold under the Registration Statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or such Selling Holders may request; and
(p) use its best efforts to cause the Registrable Securities covered
by the Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States as may be
necessary to enable the Selling Holders or the underwriter or underwriters, if
any, to consummate the disposition of such securities.
1.7. Indemnification.
(a) Whenever pursuant to Section 1.3 or 1.4 hereof a registration
statement relating to Registrable Securities is filed under the Securities Act,
the Company will indemnify and hold harmless each Holder selling Registrable
Securities covered thereby, each person, if any, who controls any such Holder,
each underwriter of any such Registrable Securities and each person, if any, who
controls any such underwriter, against any losses, claims, damages or
liabilities, joint or several, to which such Holder, any such underwriter or any
such controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement, or alleged
untrue statement, of any material fact contained in such registration statement,
or preliminary prospectus or final or summary prospectus that may be a part
thereof, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Holders selling Registrable Securities, each such
underwriter and each such controlling person for all legal or other expenses
reasonably incurred by it in connection with investigating or defending against
such loss, claim, damage, liability or action; provided that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in said registration
statement, said preliminary, final or summary prospectus, or said amendment or
supplement, in reliance upon and in conformity with information furnished to the
Company by any Holder in writing selling Registrable Securities, such
underwriter or such controlling person for use in preparation thereof.
(b) Whenever pursuant to Section 1.3 or 1.4 hereof a registration
statement relating to Registrable Securities is filed under the Securities Act,
each Holder selling Registrable Securities will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed such
registration statement, each other Holder and each other person, if any, who
controls the Company or such other Holder against all losses, claims, damages or
liabilities, joint or several, to which the Company or other Holder, or any such
director, officer or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based
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upon any untrue statement, or alleged untrue statement, of any material fact
contained in such registration statement, or preliminary prospectus or final or
summary prospectus contained therein, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only if, and to the extent that, such
statement or omission was in reliance upon and in conformity with information
furnished to the Company by such Holder in writing selling Registrable
Securities specifically for use in the preparation thereof, and will reimburse
the Company, each such other Holder and such directors, officers or controlling
persons for all legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest may exist between such indemnified
and indemnifying parties with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably satisfactory
to the indemnified party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld). No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
(d) If for any reason the indemnification provided for in Sections
1.6(a) and 1.6(b) above is unavailable to an indemnified party as contemplated
by such Sections, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
1.8. Information from Holder. Each Holder shall furnish to the Company
such information regarding such Holder and the distribution proposed by such
Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Schedule C.
1.9. Rule 144. The Company agrees that at all times after it has filed a
registration statement pursuant to the requirements of the Securities Act
relating to any securities of the
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Company, it will use its best efforts to file in a timely manner all reports
required to be filed by it pursuant to the Exchange Act and, at any time and
upon request of a Holder, will furnish such Holder and others with such
information as may be necessary to enable the Holder to effect sales of
Registrable Securities without registration pursuant to Rule 144 under the
Securities Act. Notwithstanding the foregoing, the Company may deregister any
class of its securities under Section 12 of the Exchange Act or suspend its duty
to file reports with respect to any class of its securities pursuant to Section
15(d) of the Exchange Act if it is then permitted to do so pursuant to the
Exchange Act and the rules and regulations thereunder.
1.10. "Market Stand-Off" Agreement. Each Holder agrees, if requested by
the Company and the underwriter for any underwritten offering of the Company's
securities, not to sell (including sales under Rule 144) or otherwise Transfer
any Registerable Securities of the Company held by it during the 15 days prior
to, and during the 120-day period following, the effective date of any
registration statement of the Company filed under the Securities Act with
respect to an underwritten public offering of securities by the Company (except
as part of such registered offering). Such agreement shall be in writing in a
form satisfactory to the Company and the underwriter. The Company may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restrictions until the end of such 120-day period.
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SCHEDULE D to the
Second Amended and Restated Limited
Liability Company
Agreement of VDK Foods LLC
AMENDED AND RESTATED VDK
INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this Amended and Restated VDK Incentive
Compensation Plan (this "Plan") is to provide a means by which certain employees
of, consultants to and other persons having key business relations with VDK
Foods LLC (the "Company") and certain New LLC Entities (such employees,
consultants and other persons being hereinafter referred to individually as a
"Key Person" and collectively as "Key Personnel"), may be given an opportunity
to benefit from the appreciation in the value of the Company through the
issuance of (i) incentive compensation units ("Performance Units") whose value,
as described below, is based on the achievement of certain earnings targets and
(ii) incentive compensation units ("Exceptional Performance Units") whose value,
as described below, is based on the rate of return achieved by certain investors
in the Company. Performance Units and Exceptional Performance Units are
hereinafter referred to as "Units." This Plan is intended to advance the
interests of the Company by encouraging long-term employment with and diligent
service to the Company and certain New LLC Entities on the part of the Key
Personnel, by enabling the Company and certain New LLC Entities to retain their
services and by providing such Key Personnel with an incentive to advance the
success of the Company and certain New LLC Entities.
2. General Terms and Conditions of Rights; Definitions.
(a) General Terms. The Board of Member Managers of the Company (the
"Board") has granted and may grant Units to one or more Key Persons from time to
time pursuant to this Plan; provided that each time a Key Person is granted
Units, the number of Performance Units in such grant shall equal the number of
Exceptional Performance Units in such grant. The maximum number of Performance
Units that may be granted under this Plan is 2,000. The maximum number of
Exceptional Performance Units that may be granted under this Plan is 2,000.
(b) Units Agreements. Units that have been granted shall be evidenced
by written agreements (each a "Units Agreement") and, except as specifically
approved by the Board or any Committee designated thereby, shall not be
inconsistent with this Plan.
(c) No Effect on Employment. Nothing in this Plan or a Unit or Units
Agreement issued hereunder shall govern the rights and duties relating to
employment or other services
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between the holder of any Units and the Company or any New LLC Entity. Neither
this Plan, nor any grant of Units pursuant thereto, shall constitute an
employment or other form of service or supply agreement among such parties or
establish a right of continued employment or a continued relationship with the
Company or any New LLC Entity and the holder of any Unit.
(d) Definitions. Capitalized terms used in this Plan shall have the
respective meanings set forth in Section 11.
(e) Relationship of this Plan to the VDK Holdings, Inc. Incentive
Compensation. The Company has amended and restated this Plan pursuant to the New
Compensation Agreement. Under the New Compensation Agreement, the Company agreed
to amend and restate this Plan so that it would have the same terms and
provisions of the VDK Holdings Plan and grant to each holder of Performance
Units and Exceptional Performance Units under this Plan a number of PUs and EPUs
under the VDK Holdings Plan that is identical to the number of Performance Units
and Exceptional Performance Units held by such person under this Plan as of
April 8, 1998. VDK Holdings will make payments to Unit Holders under the VDK
Holdings Plan, and any payments made under the VDK Holdings Plan will replace
any payments due under the this Plan.
(f) Obligation of VDK Foods LLC to Fund Payments. Any cash,
securities or other property payable by VDK Holdings to Unit Holders under the
VDK Holdings Plan with respect to the obligations of VDK Holdings (other than
the Gross-Up Obligation) under the VDK Holdings Plan shall be contributed by the
Company to VDK Holdings. To the extent the Company does not contribute such
cash, securities or other property to VDK Holdings, the Company shall be
required to make the payment due to Unit Holders under this Plan and VDK
Holdings shall have no obligation to make the payment due to Unit Holders under
the VDK Holdings Plan.
3. [intentionally omitted]
4. [intentionally omitted]
5. Payment and Valuation with respect to a Public Offering. In the event
either VDK Holdings or any other New LLC Entity (including without limitation
any surviving entity of a reorganization (including an incorporation), merger or
consolidation of one or more of such entities) (such issuer being the "Public
Company") intends to effect a Public Offering, the provisions of this Section 5
shall govern the valuation of Units, the vesting of Units, and the time and
manner of payments with respect thereto, except as provided in this Section 5
and Annex 1 hereto. In the event the closing date of the initial Public Offering
occurs on or prior to September 30, 1998, the valuation of Units, the vesting of
Units and the time or manner of payments with respect thereto shall be governed
by Annex 1 hereto. This Section 5 and Annex 1 hereto shall be effective
immediately prior to the closing date of the initial Public Offering (the "IC
Plan Effective Time.")
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6. Forfeiture. In the event a Public Offering occurs and the provisions of
Annex 1 hereto apply, the Units held by a Unit Holder shall be subject to
forfeiture only upon the termination of the employment or engagement of the Unit
Holder with Cause (as defined below); provided, that in the event the employment
of a member of Dartford who is an employee of the Company is terminated for
Cause, such employee's allocable share of Dartford's Units as determined in
accordance with the governing documents of Dartford then in effect shall be
subject to forfeiture under this Section 6.
(a) Termination With Cause. In the event that a Unit Holder's
employment by the Company and/or any New LLC Entity terminates prior to the date
on which Total Performance Unit Value or Total Exceptional Performance Unit
Value, as applicable, are determinable in accordance with this Plan because of
discharge or termination of the Unit Holder by the Company or any New LLC Entity
with Cause (as defined below), then all Units held by such Unit Holder shall be
forfeited to the Company without the payment of any consideration to the Unit
Holder by the Company therefor.
(b) Cause. For purposes of this Plan, the Company or a New LLC Entity
shall have "Cause" to discharge or terminate a Unit Holder upon (i) the
indictment of the Unit Holder for any crime which constitutes a felony, (ii) if
the Unit Holder is party to a written employment, consulting or similar
agreement with the Company or a New LLC Entity, the failure or inability of the
Unit Holder to cure or remedy, within 30 days after written notice of such
failure from the Company or such New LLC Entity either (A) the Unit Holder's
failure to satisfactorily discharge all of his, her or its duties and
obligations under such agreement or (B) any gross negligence or willful
misconduct on the part of the Unit Holder in the course of rendering services
thereunder, or (iii) if the Unit Holder is not a party to a written employment,
consulting or similar agreement with the Company or any New LLC Entity, the
failure or inability of the Unit Holder to cure or remedy, within 30 days after
written notice of such failure from the Company or such New LLC Entity either
(A) the Unit Holder's substantial and continuing failure to satisfactorily
discharge all of his, her or its material duties and obligations owed to the
Company or such New LLC Entity or (B) any gross negligence or willful misconduct
on the part of the Unit Holder in the course of rendering services to the
Company or such New LLC Entity.
(c) Forfeited Units. Forfeited Units shall not be taken into account
for purposes of the computations under Sections 5 or 7. In the event any Units
are forfeited in accordance with this Section 6 or otherwise, the Board may, but
shall not be required to, grant such Units to Key Personnel of the Company
pursuant to this Plan.
7. Special Provisions. The following special provisions shall apply to the
valuation of the Units provided for in this Plan.
(a) Golden Parachute Gross-Up. Anything herein to the contrary
notwithstanding, in the event that the excise tax provided by IRC Sections
4999, or any amended or successor provision, applies to any payment to a Unit
Holder hereunder, at Dartford's election
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exercisable by written notice to the Board, the amount of such payment shall be
increased sufficiently, but not in excess of 15% thereof, so that the amount
distributed to such Unit Holder net of such excise tax is approximately equal to
the amount that would have been distributed had no such excise tax been imposed.
All calculations made under this Plan shall be made after taking into account
any such gross-up payments such that Total Distributions and IRR of the Business
are based on the actual amounts received by Investors.
(b) Capital Gains Gross-Up. Anything herein to the contrary
notwithstanding, in the event that the U.S. federal income tax rate on capital
gains is less than the U.S. federal income tax rate on ordinary income and the
payments to Unit Holders are subject to tax at such ordinary income rates, at
Dartford's election exercisable by written notice to the Board, the amount of
any payment to any Unit Holder shall be increased sufficiently so that such
amount, net of any such U.S. federal income tax at ordinary rates, equals the
payment that would otherwise have been made to such Unit Holder net of U.S.
federal income tax at capital gains rates; provided, that in the event of a
Public Offering occurs and the provisions of Annex 1 apply, Dartford shall be
deemed to have automatically made such election and no notice to the Board shall
be required. The aggregate amount of such increased amounts payable to Unit
Holders are hereinafter referred to as the "Gross-Up Obligation". The Gross-Up
Obligation shall be paid by VDK Holdings to Unit Holders in cash at the same
time as the corresponding payment to Unit Holders giving rise to such Gross-Up
Obligation is payable. The obligation of VDK Holdings to pay the Gross-Up
Obligation shall be subject to VDK Holdings (or its successor) having the right
to accrue a deduction for tax purposes for such payment but shall not be subject
to such deduction reducing the amount of taxes otherwise payable by VDK Holdings
(or its successor) in the year in which such deduction accrues. The payment of
such Gross-Up Obligation is a direct obligation of VDK Holdings, and the Company
has no obligation to fund the payment of the Gross-Up Obligation; provided, that
to the extent VDK Holdings fails to pay the Gross-Up Obligation then due
(whether or not the reason for such failure is the inability of VDK Holdings to
accrue the deduction for tax purposes described above), the Company shall be
required to pay to Unit Holders an amount in cash equal to the amount of the
unpaid Gross-Up Obligation.
8. Administration. This Plan shall be administered by the Board subject to
the express terms and conditions of this Plan. From and after the effective date
of this Plan, the Board shall have full power to grant Units under this Plan. No
member of the Board or VDK Board shall be liable for any action or determination
made in good faith with respect to this Plan or to any Unit.
9. Effective Date; Termination; Successors.
(a) The original effective date of this Plan was as of September 19,
1995. The effective date of this Plan as hereby amended and restated is as of
April 8, 1998.
(b) This Plan shall terminate upon all Units being retired as a
result of payments or forfeiture.
D-4
<PAGE>
(c) This Plan shall be binding on and inure to the benefit of the
Company and its successors and assigns, including without limitation any
successor or assign of the Company by reason of the merger, consolidation or
reorganization of the Company with such successor or assign to be the "Company"
for purposes of this Plan.
10. Amendments. From time to time, this Plan may be altered, amended,
suspended or discontinued, even if such action alters an outstanding Units
Agreement to the detriment of the Unit Holder without his consent, upon the
mutual agreement of the Board, the VDK Board and Dartford; provided, that at any
time when the next succeeding proviso is not applicable, any such action applies
to each Unit Holder in a consistent manner; provided, further, that in the event
that neither Dartford nor its members are providing management services to the
Company (whether in a member's capacity as a senior executive officer of the
Company or otherwise), then any such alteration, amendment, suspension or
discontinuance shall be effective upon the mutual agreement of the Board, the
VDK Board and (A) insofar as any Units held by Dartford are affected by such
amendment, Dartford, and (B) insofar as any Units held by Persons other than
Dartford are affected by such amendment, such other Persons holding a majority
of such Units.
11. Definitions. As used in this Plan, the following terms shall have the
meanings set forth below.
"Affiliate" means any parent or subsidiary corporation of the Company as
defined in Section 424(e) and (f) respectively of the Internal Revenue Code of
1986, but only for so long as such relationship is maintained.
"Aurora/VDK LLC" means Aurora/VDK LLC, a Delaware limited liability
company and the holder of all of the issued and outstanding capital stock of the
Company on the effective date of this Plan.
"Board" has the meaning set forth in Section 2.
"Cause" has the meaning set forth in Section 6.
"Class B LLC Units" means the "Class B" Units of limited liability company
interest of the Company.
"Class D LLC Units" means the "Class D" Units of limited liability company
interest of the Company.
"Company" has the meaning set forth in Section 1.
"Dartford" means Dartford Partnership L.L.C.
D-5
<PAGE>
"Distributions" means amounts paid, payable or deemed paid or payable to
any holder of Voting LLC Units, Non-Voting LLC Units, Units under this Plan, or
PUs or EPUs under the VDK Holdings Plan, whether such amounts are in cash,
equity securities (not including equity securities issuable as pursuant to
splits or recapitalizations) or other property either as (i) distributions of
profits, (ii) distributions in redemption, liquidation or otherwise, or (iii) in
accordance with Section 5 hereof.
"EPUs" means the Exceptional Performance Units (as such term is defined
therein) granted under the VDK Holdings Plan.
"Exceptional Performance Units" has the meaning set forth in Section 1.
"Final Date" means the first anniversary of the closing date of the
initial Public Offering or, if earlier, the date of the dissolution of the
Company.
"Gross-Up Obligation" has the meaning set forth in Section 7(b).
"Investor" means any holder of Class B LLC Units on the effective date of
this Plan.
"Key Person" and "Key Personnel" have the meaning set forth in Section 1.
"LLC Agreement" means the Second Amended and Restated Limited Liability
Company Agreement of VDK Foods LLC, dated as of April 8, 1998, as amended.
"New Compensation Agreement" means the New Compensation Agreement, dated
as of April 8, 1998, by and among the Company, Aurora/VDK LLC, MBW Investors
LLC, VDK Holdings and certain other parties signatory thereto.
"New LLC Entities" has the meaning set forth in the LLC Agreement.
"Non-Public Shareholders" has the meaning set forth in the LLC Agreement.
"Non-Voting LLC Units" means, collectively, the "Class D" and "Class E"
Units of limited liability company interest of the Company.
"Performance Units" has the meaning set forth in Section 1.
"Person" means any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"Public Company" has the meaning set forth in Section 5.
"Public Offering" has the meaning set forth in the LLC Agreement.
D-6
<PAGE>
"PUs" means the Performance Units (as such term is defined therein)
granted under the VDK Holdings Plan.
"Secondary Sale" means any sale by one or more Non-Public Shareholders, on
or after the effective date of a Public Offering, of equity securities issued by
the Public Company and held by such Non-Public Shareholder (but not originally
issued by the Public Company pursuant to a Public Offering), whether such sale
is pursuant to a registered public offering under the Securities Act of 1933, as
amended, an exemption from the registration requirements thereof, or otherwise.
"Total Distributions" means the aggregate amount of Distributions to
holders of Voting LLC Units and holders of Non-Voting LLC Units and to the Unit
Holders pursuant to this Plan or the VDK Holdings Plan.
"Total Exceptional Performance Unit Value" has the meaning set forth in
Section 4(b)(iii).
"Total Performance Unit Value" has the meaning set forth in Section
4(a)(iii).
"Total Profits" means the sum of all amounts distributed or distributable
under Sections 8.3(vi), 8.3(vii), 8.3(viii) and 8.3(ix) of the LLC Agreement
(which includes all amounts distributed or distributable to Unit Holders under
this Plan or the VDK Holdings Plan).
"Unit Holder" means any holder of Performance Units or Exceptional
Performance Units.
"Units" has the meaning set forth in Section 1.
"Units Agreement" has the meaning set forth in Section 2(b).
"Van de Kamp's" means Van de Kamp's, Inc., a Delaware corporation and
wholly-owned subsidiary of VDK Holdings as of the effective date of this Plan.
"VDK Board" means the Board of Directors of VDK Holdings or of its
successor (including the Public Company).
"VDK Holdings" means VDK Holdings Inc., a Delaware corporation and
wholly-owned subsidiary of Aurora/VDK LLC as of the effective date of this Plan.
"VDK Holdings Plan" means the VDK Holdings, Inc. Incentive Compensation
Plan.
"Vested Class E Units" has the meaning given such term in the LLC
Agreement.
D-7
<PAGE>
"Vested Exceptional Performance Units" means those Exceptional Performance
Units that have vested pursuant to Section 5 or 7 hereof.
"Vested Performance Units" means those Performance Units that have vested
pursuant to Section 5 or 7 hereof.
"Voting LLC Units" means, collectively, the Class B LLC Units and the
"Class C" Units of limited liability company interest of the Company.
D-8
<PAGE>
ANNEX 1 TO THE AMENDED AND RESTATED
VDK INCENTIVE COMPENSATION PLAN
(a) Public Offering On or Before September 30, 1998. In the event the
Public Company effects a Public Offering and the closing date of the Public
Offering occurs on or prior to September 30, 1998, the provisions of this Annex
1 shall govern the valuation of Units, the vesting of Units, and the time and
manner of payments with respect thereto.
(b) Vesting. At the IC Plan Effective Time, each Unit Holder shall:
(i) have any outstanding but unvested Performance Units held by
such Unit Holder become Vested Performance Units; and
(ii) have any outstanding but unvested Exceptional Performance
Units held by such Unit Holder become Vested Exceptional Performance
Units.
In addition, Units held by a Unit Holder shall no longer be subject to
forfeiture other than upon the termination of the employment or engagement of
the Unit Holder with Cause pursuant to Section 6(a) of this Plan.
(c) Valuation and Distribution of Shares. Upon the closing date of
the Public Offering, each Vested Performance Unit and each Vested Exceptional
Performance Unit shall be valued as hereinafter set forth and the holders of
such Units shall become entitled to be distributed, at the times and in the
manner set forth below, shares of common stock of the Public Company (of the
same class sold in the initial Public Offering) based on such valuation.
(d) Valuation of Performance Units. The value of Vested Performance
Units and the number of shares of common stock of the Public Company
distributable on account of Vested Performance Units is set forth in this
paragraph (d). Upon the closing date of the initial Public Offering, a
computation of Total Profits, Total Distributions and Total Performance Unit
Value shall be made on a basis as if all of the Company's direct or indirect
equity interests in the Public Company (but excluding any such equity interests
either sold in the initial Public Offering by Aurora/VDK LLC or distributed by
Aurora/VDK LLC in connection with the initial Public Offering in respect of a
special distribution by Aurora/VDK LLC of $50,900,000 in the aggregate to the
Company and MBW Investors LLC) had been valued at a per share price equal to the
Gross IPO Price and as if such value had been distributed by the Company in
accordance with Section 8.3 of the Company Agreement. For the purpose hereof,
the term "Gross IPO Price" shall mean the price to the public per share at which
securities of the Public Company were sold in the initial Public Offering
without
1
<PAGE>
reduction for underwriter's commissions and other expenses relating to the
initial Public Offering.
The holder of each Vested Performance Unit shall thereupon be
entitled to receive with respect to such Unit a number of shares of common stock
of the Public Company (of the same class as sold in the Public Offering) equal
to the quotient of (A) the value of a single Vested Performance Unit computed as
set forth in the following paragraph with respect to the Total Performance Unit
Value determined under this paragraph (d) divided by (B) the Gross IPO Price.
The value of a single Vested Performance Unit shall equal the
percentage of Total Performance Unit Value (as determined under the following
sentence) obtained by dividing one by the aggregate number of Vested Performance
Units outstanding. The value of all Vested Performance Units ("Total Performance
Unit Value") shall equal the product of P multiplied by Total Profits, where P
is a percentage that equals 5% multiplied by the fraction in which the numerator
is the number of Vested Performance Units and the denominator is 2,000.
(e) Valuation of Exceptional Performance Units. The value of Vested
Exceptional Performance Units and the number of shares of common stock the
Public Company distributable on account of Vested Exceptional Performance Units
is set forth in this paragraph (e). Upon the closing date of the initial Public
Offering, a computation of Total Profits, Total Distributions and Total Vested
Exceptional Performance Unit Value shall be made on a basis as if all of the
Company's direct or indirect equity interests in the Public Company (but
excluding any such equity interests either sold in the initial Public Offering
by Aurora/VDK LLC or distributed by Aurora/VDK LLC in connection with the
initial Public Offering in respect of a special distribution by Aurora/VDK LLC
of $50,900,000 in the aggregate to the Company and MBW Investors LLC) had been
valued at a per share price equal to the Gross IPO Price and as if such value
had been distributed by the Company in accordance with Section 8.3 of the LLC
Agreement.
The holder of each Vested Exceptional Performance Unit shall
thereupon be entitled to receive with respect to such Unit a number of shares of
common stock of the Public Company (of the same class as sold in the Public
Offering) equal to the sum of (x) the quotient of (A) the Exceptional
Performance Unit Value computed with respect to Total Exceptional Performance
Unit Value determined under this paragraph (e) divided by (B) the Gross IPO
Price plus (y) the Per Unit Additional Share Increment.
"Additional Share Increment" means the number of shares equal to the
quotient of (x) the Additional Increment divided by (y) 125% of the Gross IPO
Price.
"Additional Increment" means the excess, if any, of (x) Total Exceptional
Performance Unit Value calculated as if all of the Company's direct or indirect
equity interests in the Public Company (excluding any interests either sold in
the initial Public
2
<PAGE>
Offering by Aurora/VDK LLC or distributed to the Company in respect of a special
distribution by Aurora/VDK LLC of $50,900,000 in the aggregate to the Company
and MBW Investors LLC) had been valued at a per share price equal to 125% of the
Gross IPO Price and as if such value had been distributed by the Company in
accordance with Section 8.3 of the LLC Agreement over (y) Total Exceptional
Performance Unit Value calculated for this purpose as the product of (1) as if
all of the Company's direct or indirect equity interests in the Public Company
(but excluding any such equity interests either sold in the initial Public
Offering by Aurora/VDK LLC or distributed to the Company in respect of a special
distribution by Aurora/VDK LLC of $50,900,000 in the aggregate to the Company
and MBW Investors LLC) had been valued at a per share price equal to the Gross
IPO Price and as if such value had been distributed by the Company in accordance
with Section 8.3 of the LLC Agreement and (2) 125%.
"Exceptional Performance Unit Value" means the value of a single Vested
Exceptional Performance Unit, which shall equal the percentage of Total
Exceptional Performance Unit Value obtained by dividing one by the aggregate
number of Vested Exceptional Performance Units outstanding.
"Per Unit Additional Share Increment" means the Additional Share Increment
divided by the aggregate number of Vested Exceptional Performance Units
outstanding.
"Total Exceptional Performance Unit Value" means the value of all Vested
Exceptional Performance Units, which shall equal the product of P multiplied by
the Total Profits, where P is the percentage that equals 5% multiplied by the
fraction in which the numerator is the number of Vested Exceptional Performance
Units and the denominator is 2,000.
Any shares of common stock of the Public Company distributable to
Unit Holders pursuant to this Annex 1 are hereinafter referred to as
"Distributable Shares".
(f) Time of Payment. Following the initial Public Offering,
distributions of Distributable Shares payable on account of Total Performance
Unit Value and Total Exceptional Performance Unit Value shall be made as of the
following dates and at the following times:
(i) as of the effective date of each Secondary Sale prior to the
Final Date, in an amount equal to the total number of Distributable
Shares which all holders of Vested Performance Units and Vested
Exceptional Performance Units would be entitled to include in such
Secondary Sale pursuant to the piggyback registration rights
provisions under the Securityholders Agreement, assuming for such
purpose that the Company had distributed all shares of the Public
Company held by it pursuant to this Agreement and the VDK Holdings
Plan; provided, however, in lieu of distributing such shares to the
holders of such Units, all or any portion of such shares will instead
be sold by the Company (or, if applicable, by Aurora/VDK LLC
3
<PAGE>
or the Public Company) in such Secondary Sale and the net proceeds of
such sale shall be distributed to the holders of such Units pro rata
in accordance with their respective interests in the shares that
otherwise would have been distributed.
(ii) upon the Final Date; and
(g) Manner of Payment. Any payment to Unit Holders under the VDK
Holdings Plan with respect to PUs and EPUs that is due pursuant to paragraphs
(d) or (e) of Annex 1 to the VDK Holdings Plan shall be made in Distributable
Shares contributed by the Company to VDK Holdings. To the extent the Company
does not contribute Distributable Shares to VDK Holdings, VDK Holdings shall
have no obligation to distribute securities of the Public Company, cash or any
other property to Unit Holders pursuant to the VDK Holdings Plan with respect to
the payment then due and the Company shall then be obligated to make such
payment pursuant to this Plan. When the aggregate number of Distributable Shares
required to be paid under this Plan or the VDK Holdings Plan has been paid in
full, then all distributions required to be made on account of Units under this
Plan or on account of Vested Plan Units under the LLC Agreement shall be deemed
to have been made.
4
<PAGE>
FIRST AMENDMENT TO THE SECOND
AMENDED AND RESTATED LIMITED LIABILITY
COMPANY AGREEMENT OF VDK FOODS LLC
This First Amendment is made by and among the Member of VDK Foods LLC
signatory hereto. Capitalized terms used but not defined herein shall have the
respective meanings given such terms in the Second Amended and Restated Limited
Liability Company Agreement of VDK Foods LLC, dated as of April 8, 1998 (the
"LLC Agreement").
The undersigned Members hereby agree to amend the LLC Agreement as
follows:
1. Definitions.
(a) The defined term "Management Services Agreement" is deleted in
its entirety.
(b) The following additional defined term is inserted:
"VDK Holdings Plan" means the VDK Holdings, Inc. Incentive Compensation
Plan adopted by VDK Holdings, Inc., a Delaware corporation which has merged with
and into the Public Company, and which was effective as of immediately prior to
the initial Public Offering.
2. Section 4.6(c). Section 4.6(c) is hereby amended by deleting the words
"payable in cash", inserting after the end of the first parenthetical the words
"with such amount to be payable with the consideration contemplated in the last
paragraph of Section 8.3", and inserting at the end of such section the words
"with such amount payable in cash".
3. Section 8.3.
(c) The last paragraph of Section 8.3 is amended by inserting the
following at the end thereof:
Distributions under this paragraph of the amounts allocated on
Schedule A-1 hereto shall be distributed as follows: (A) UBS and
Gloriande shall be distributed shares of common stock of the Public
Company (of the same class sold in the initial Public Offering) with
a per share value equal to the Gross IPO Price (as defined below),
and (B) all other members shall be distributed cash. For the purpose
hereof, the term "Gross IPO Price" shall mean the price to the public
per share at which securities of the Public Company were sold in the
initial Public Offering without reduction for underwriter's
commissions and other expenses relating to the Public Offering.
1
<PAGE>
4. Section 15.4.
(d) Section 15.4 is hereby amended by inserting the following
paragraph (d) at the end thereof:
(d) Notwithstanding any other provision of this Agreement to the
contrary, upon the liquidation of the Company following a Public
Offering, holders of Class E Units shall be distributed in the
aggregate the number of shares of common stock of the Public Company
(of the same class sold in the Public Offering) determined in
accordance with Schedule B hereto, with the number of such shares
distributable to the Class E Holders to be allocated among the Class
E Holders in accordance with their respective Class E Units.
5. Section 15.9. The following paragraph shall be inserted as a new
Section 15.9 of the LLC Agreement:
Section 15.9. Agreement with Respect to Performance Units and
Exceptional Performance Units. Notwithstanding any other provision of
this Agreement to the contrary, the Company agrees to contribute to
the Public Company (as successor to VDK Holdings, Inc.) or to the VDK
Holdings Plan in the aggregate the number of shares ("Plan Shares")
of common stock of the Public Company (of the same class sold in the
Public Offering) necessary to satisfy the Company's obligation to
fund the payment obligations of the Public Company under the VDK
Holdings Plan. The Company shall make such contribution on or
immediately prior to the Final Date; provided, that at the election
of Dartford, the Company shall make such contribution at an earlier
date selected by Dartford so long as distributions to holders of
units under the VDK Holdings Plan shall be made at the times and in
accordance with the terms thereof. To the extent the Company fails to
contribute all or part of the Plan Shares to the Public Company, the
Company shall be obligated to either (i) distribute to the holders of
units under the VDK Holdings Plan, on a pro rata basis, the number of
Plan Shares not contributed by the Company to the Public Company, or
(ii) make such distributions as are required under Schedule D to this
Agreement.
6. Schedule A-1. Schedule A-1 to the LLC Agreement is amended and restated
in its entirety as attached hereto.
7. Schedule B. Schedule B to the LLC Agreement is amended and restated to
read in its entirety as attached hereto.
8. Schedule D. Schedule D to the LLC Agreement is hereby amended and
restated to read in its entirety as attached hereto.
2
<PAGE>
This First Amendment shall be effective upon the execution by Members
holding at least 95% of the outstanding Voting Units. In the event an initial
Public Offering does not occur on or before September 30, 1998, this First
Amendment shall automatically be void ab initio and of no force and effect.
This First Amendment may be executed in one or more original facsimile
counterparts.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this First
Amendment as of this ____ day of June 1998.
DARTFORD PARTNERSHIP L.L.C.
By:
------------------------------------------
Name:
Title:
FENWAY PARTNERS CAPITAL FUND, L.P.
by: Fenway Partners, L.P.,
its general partner
by: Fenway Partners Management,
Inc., its general partner
By:
------------------------------------------
Name:
Title:
GLORIANDE (LUXEMBOURG) SARL
By:
------------------------------------------
Name:
Title:
UBS CAPITAL LLC
By:
------------------------------------------
Name:
Title:
By:
------------------------------------------
Name:
Title:
4
<PAGE>
SCHEDULE A-1
To the Limited Liability Company Agreement of
VDK Foods LLC
<TABLE>
<CAPTION>
AMOUNT DISTRIBUTABLE
NAME AND MAILING ADDRESS UNDER SECTION 8.3(i)
------------------------ --------------------
<S> <C> <C>
A. Class A Units
1. Fenway Partners Capital Fund, L.P.4 $22,164,807
152 West 57th Street
New York, New York 10019
Facsimile: (212) 757-0609
2. Gloriande (Luxembourg) S.a.r.L. $9,750,482
c/o Moore Stephens Services SAM
L'Estoril
Avenue Princess Grace
MONACO
3. UBS Capital LLC $9,750,482
299 Park Avenue, 34th floor
New York, New York 10171
Facsimile: (212) 821-6333
4. Dartford Partnership, L.L.C. $270,341
456 Montgomery Street, Ste. 2200
San Francisco, California 94104
Facsimile: (415) 982-3023
5. The Ian and Susan Wilson 1998 $168,301
Irrevocable Trust
6. Thomas O. Ellinwood $52,595
12451 Montsouris Drive
St. Louis, Missouri 63141
</TABLE>
- -----------------
4 FPIP, LLC, as Assignee is entitled to $170,583 of the
aggregate amount distributable to Fenway pursuant to
Section 8.3(i) hereof. FPIP Trust, LLC, as Assignee is
entitled to $94,724 of the aggregate amount distributable
to Fenway pursuant to Section 8.3(i) hereof.
A-1
<PAGE>
<TABLE>
<S> <C> <C>
7. Thomas J. Youngerman $17,883
232 N. Kingshighway, Apt. 412
St. Louis, Missouri 63108
8. C. Renee Sloan $17,883
1159 Olive Lake Drive, Apt. C
St. Louis, Missouri 63132
9. Olafur Gudmundsson $17,883
95 Aberdeen Place
St. Louis, Missouri 63105
10. Timothy B. Andersen $17,725
20 Georgian Acres
St. Louis, Missouri 63131
11. Rich Berry $40,915
705 St. Louis Street
Edwardsville, IL 62025
12. Vicki Fitzgerald $14,727
11317 Terwillingers Knoll Court
Cincinnati, Ohio 45249
13. Larry Mourdock $8,415
2960 Mountain Trace
Rosewell, Georgia 30007-4097
14. James Bruffy $7,148
2986 Franklin Oaks Drive
Herndon, Virginia 22071
15. Jim Frey $8,990
1247 Cherry Tree Lane
Scotland, Pennsylvania 17254
16. Hazel Morris $9,946
5877 Nina Place
St. Louis, Missouri 63112
17. Howard Teufel $9,946
612 Wedgewood Drive
Erie, Pennsylvania 16505
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C> <C>
18. Mary Stahlhut $5,597
302 Deep Cove Drive
Edwardsville, Illinois 62025
19. Jerry L. Saller $1,913
1307 Boardwalk Street
Arlington, Texas 76011
20. Gerald W. Hayes, Jr. $8,537
12127 Crestline Avenue
Dallas, Texas 75244
21. Nathan Ernest Paskoff 10,473
4631 Mountain Creek Drive
Roswell, Georgia 30075-4036
22. John P. Crowder $4,780
104 Echo Ridge
Collinsville, Illinois 62234
23. Gregory L. Smith $9,330
388 Wellington Cove
Jackson, TN 38305
24. Paul Gillstrom $4,664
1000 St. Louis Union Station
Suite 200
St. Louis, MO 63103
25. Laura Martinez $2,799
21291 Windstream Circle
Trabuco Canyon, CA 92679
26. Joe McSherry $7,576
27. Lissa Mullins $6,053
28. Linda Mueller $3,018
29. Rick Mager $2,260
30. Mark Rikal $1,507
31. Steve Fucoloro $1,507
</TABLE>
A-3
<PAGE>
<TABLE>
<S> <C> <C>
32. Lamont Rumbers $1,518
</TABLE>
A-4
<PAGE>
SCHEDULE B
To the Second Amended and Restated
Limited Liability Company Agreement
of VDK Foods LLC
(the "LLC Agreement")
1. [intentionally omitted]
2. Forfeiture. In the event a Public Offering occurs and the provisions of
Section 3 below apply, the Class E Units held by a Class E Holder shall no
longer be subject to forfeiture other than upon the termination of the
employment of the Class E Holder with Cause.
(i) Termination With Cause. In the event that a Class E Holder's
employment by the Company and/or a New LLC Entity terminates because of
discharge or termination of the Class E Holder by the Company or such New LLC
Entity with Cause (as defined below), then all Class E Units held by such Class
E Holder shall be forfeited to the Company without the payment of any
consideration to the Class E Holder by the Company therefor.
(ii) Cause. For purposes of this Schedule B, the Company and the New LLC
Entities shall have "Cause" to discharge or terminate a Class E Holder upon (i)
the indictment of the Class E Holder for any crime which constitutes a felony,
(ii) if the Class E Holder is party to a written employment agreement with the
Company or any New LLC Entity, the failure or inability of the Class E Holder to
cure or remedy, within 30 days after written notice of such failure from the
Company or such New LLC Entity, either (A) the Class E Holder's failure to
satisfactorily discharge all of his or her duties and obligations under such
employment agreement or (B) any gross negligence or willful misconduct on the
party of the Class E Holder in the course of rendering services thereunder, or
(iii) if the Class E Holder is not a party to a written employment agreement
with the Company or any New LLC Entity, the failure or inability of the Class E
Holder to cure or remedy, within 30 days after written notice of such failure
from the Company or such New LLC Entity, either (A) the Class E Holder's
substantial and continuing failure to satisfactorily discharge all of his or her
material duties and obligations owed to the Company or such New LLC Entity or
(B) any gross negligence or willful misconduct on the part of the Class E Holder
in the course of rendering services to the Company or such New LLC Entity.
(iii) Forfeited Class E Units. In the event any Class E Units are
forfeited in accordance with this Schedule B or otherwise, the Board may, but
shall not be required to,
B-1
<PAGE>
reissue such Class E Units. Any such issuance shall be made in accordance with
Section 12.1 of the LLC Agreement.
3. Public Offering On or Before September 30, 1998. For purposes of Section 3
and Section 4 of this Schedule B, capitalized terms used herein but not
otherwise defined shall have the meaning given such terms in Schedule D to this
Agreement.
(i) Conditions. In the event any New LLC Entity including without
limitation any surviving entity of a reorganization (including an
incorporation), merger or consolidation of one or more such entities (such
issuer being the "Public Company") intends to effect a Public Offering and such
Public Offering closes on or before September 30, 1998, the provisions of this
Section 3 shall govern the valuation of Class E Units, the vesting of Class E
Units and the time and manner of payments with respect thereto in lieu of the
other provisions of this Schedule B. The provisions of this Section 3 shall be
effective immediately prior to the consummation of the initial Public Offering
(the "E Unit Effective Time").
(ii) Vesting. At the E Unit Effective Time, any then outstanding but
unvested Class E Units held by such Class E Holder shall become Vested Class E
Units. In addition, Class E Units held by a Class E Holder shall be subject to
forfeiture only upon the termination of the employment of the Class E Holder
with Cause pursuant to Section 2 above.
(iii) Valuation and Distribution of Shares. Upon the closing date of the
initial Public Offering, each Vested Class E Unit shall be valued as hereinafter
set forth and the holders of such Units shall become entitled to be distributed,
at the times and in the manner set forth below in this Section 3, shares of
common stock of the Public Company based on such valuation.
(iv) Valuation of Class E Units. The value of Vested Class E Units and the
number of shares of common stock of the Public Company distributable on account
of Vested Class E Units is set forth in this paragraph (d). Upon the closing
date of the initial Public Offering, a computation of Total Profits, Total
Distributions and Total Vested Class E Unit Value shall be made on a basis as if
all of the Company's direct or indirect equity interests in the Public Company
(but excluding any such equity interests either sold in the initial Public
Offering by Aurora/VDK LLC or distributed by Aurora/VDK LLC in connection with
the initial Public Offering in respect of a special distribution by Aurora/VDK
LLC of $50,900,000 in the aggregate to the Company and MBW Investors LLC) had
been valued at a per share price equal to the Gross IPO Price and as if such
value had been distributed by the Company in accordance with Section 8.3 of this
Agreement.
The holder of each Vested Class E Unit shall thereupon be entitled to
receive with respect to such Unit a number of shares of common stock of the
Public Company (of the same class as sold in the Public Offering) equal to the
sum of (x) the quotient of (A) the
B-2
<PAGE>
Vested Class E Unit Value under this paragraph (d) divided by (B) the Gross IPO
Price plus (y) the Per Unit Additional Share Increment.
"Additional Share Increment" means the number of shares equal to the quotient
of (x) the Additional Increment divided by (y) 125% of the Gross IPO Price.
"Additional Increment" means the excess, if any, of (x) Total Vested Class E
Unit Value calculated as if all of the Company's direct or indirect equity
interests in the Public Company (excluding any interests sold in the Public
Offering directly or indirectly for the Company's account) had been valued at a
per share price equal to 125% of the Gross IPO Price and as if such value had
been distributed by the Company in accordance with Section 8.3 of the LLC
Agreement over (y) Total Vested Class E Unit Value calculated as the product of
(1) as if all of the Company's direct or indirect equity interests in the Public
Company (but excluding any such equity interests either sold in the initial
Public Offering by Aurora/VDK LLC or distributed to VDK LLC in respect of a
special distribution by Aurora/VDK LLC of $50,900,000 in the aggregate to the
Company and MBW Investors LLC) had been valued at a per share price equal to the
Gross IPO Price and as if such value had been distributed by the Company in
accordance with Section 8.3 of the LLC Agreement and (2) 125%.
"Per Unit Additional Share Increment" means the Additional Share Increment
divided by the aggregate number of Vested Class E Units outstanding.
Any shares of common stock of the Public Company distributable to Class E
Holders pursuant to this Section 3 are hereinafter referred to as "Distributable
Shares".
For the purpose hereof, the term "Gross IPO Price" shall mean the price to
the public per share at which securities of the Public Company were sold in the
Public Offering without reduction for underwriter's commissions and other
expenses relating to the Public Offering.
"Total Vested Class E Unit Value" means the value of all Vested Class E Units,
which shall equal the product of P multiplied by Total Profits, where P is a
percentage that equals 3.6% multiplied by the fraction in which the numerator is
the number of Vested Class E Units and the denominator is 720.
"Vested Class E Unit Value" means the value of a single Vested Class E Unit,
which shall equal the percentage of Total Vested Class E Unit Value obtained by
dividing one by the aggregate number of Vested Class E Units outstanding.
(v) Time of Payment. Following a Public Offering, distributions of
Distributable Shares payable on account of Total Class E Unit Value shall be
made as of the following dates and at the following times:
B-3
<PAGE>
1) as of the effective date of each Secondary Sale prior to the
Final Date, in an amount equal to the total number of Distributable Shares
which all holders of Vested Class E Units and would be entitled to include
in such Secondary Sale pursuant to the piggyback registration rights
provisions under the Securityholders Agreement, assuming for such purpose
that the Company had distributed all shares of the Public Company held by
it pursuant to this Agreement and the VDK Holdings Plan; provided,
however, in lieu of distributing such shares to the holders of such Units,
all or any portion of such shares will instead be sold by the Company (or,
if applicable, by the Public Company) in such Secondary Sale and the net
proceeds of such sale shall be distributed to the holders of such Class E
Units pro rata in accordance with their respective interests in the shares
that otherwise would have been distributed.
2) upon the Final Date, with the payments of Distributable Shares
with respect to the Final Date to be made at the same time as any
Distributions to Investors under this Agreement arising from the Final
Date.
(vi) Manner of Payment. Any payment to Class E Holders with respect to
Units that is made pursuant to paragraphs (c) or (d) of this Section 3 shall be
made in Distributable Shares distributed by the Company to Class E Holders.
4. [intentionally omitted]
B-4
<PAGE>
SCHEDULE D to the
Second Amended and Restated Limited
Liability Company
Agreement of VDK Foods LLC
AMENDED AND RESTATED VDK
INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this Amended and Restated VDK Incentive
Compensation Plan (this "Plan") is to provide a means by which certain employees
of, consultants to and other persons having key business relations with VDK
Foods LLC (the "Company") and certain New LLC Entities (such employees,
consultants and other persons being hereinafter referred to individually as a
"Key Person" and collectively as "Key Personnel"), may be given an opportunity
to benefit from the appreciation in the value of the Company through the
issuance of (i) incentive compensation units ("Performance Units") whose value,
as described below, is based on the achievement of certain earnings targets and
(ii) incentive compensation units ("Exceptional Performance Units") whose value,
as described below, is based on the rate of return achieved by certain investors
in the Company. Performance Units and Exceptional Performance Units are
hereinafter referred to as "Units." This Plan is intended to advance the
interests of the Company by encouraging long-term employment with and diligent
service to the Company and certain New LLC Entities on the part of the Key
Personnel, by enabling the Company and certain New LLC Entities to retain their
services and by providing such Key Personnel with an incentive to advance the
success of the Company and certain New LLC Entities.
2. General Terms and Conditions of Rights; Definitions.
(i) General Terms. The Board of Member Managers of the Company (the
"Board") has granted and may grant Units to one or more Key Persons from time to
time pursuant to this Plan; provided that each time a Key Person is granted
Units, the number of Performance Units in such grant shall equal the number of
Exceptional Performance Units in such grant. The maximum number of Performance
Units that may be granted under this Plan is 2,000. The maximum number of
Exceptional Performance Units that may be granted under this Plan is 2,000.
(ii) Units Agreements. Units that have been granted shall be evidenced by
written agreements (each a "Units Agreement") and, except as specifically
approved by the Board or any Committee designated thereby, shall not be
inconsistent with this Plan.
(iii) No Effect on Employment. Nothing in this Plan or a Unit or Units
Agreement issued hereunder shall govern the rights and duties relating to
employment or
D-1
<PAGE>
other services between the holder of any Units and the Company or any New LLC
Entity. Neither this Plan, nor any grant of Units pursuant thereto, shall
constitute an employment or other form of service or supply agreement among such
parties or establish a right of continued employment or a continued relationship
with the Company or any New LLC Entity and the holder of any Unit.
(iv) Definitions. Capitalized terms used in this Plan shall have the
respective meanings set forth in Section 11.
(v) Relationship of this Plan to the VDK Holdings, Inc. Incentive
Compensation. The Company has amended and restated this Plan pursuant to the New
Compensation Agreement. Under the New Compensation Agreement, the Company agreed
to amend and restate this Plan so that it would have the same terms and
provisions of the VDK Holdings Plan and grant to each holder of Performance
Units and Exceptional Performance Units under this Plan a number of PUs and EPUs
under the VDK Holdings Plan that is identical to the number of Performance Units
and Exceptional Performance Units held by such person under this Plan as of
April 8, 1998. VDK Holdings will make payments to Unit Holders under the VDK
Holdings Plan, and any payments made under the VDK Holdings Plan will replace
any payments due under the this Plan.
(vi) Obligation of VDK Foods LLC to Fund Payments. Any cash, securities or
other property payable by VDK Holdings to Unit Holders under the VDK Holdings
Plan with respect to the obligations of VDK Holdings (other than the Gross-Up
Obligation) under the VDK Holdings Plan shall be contributed by the Company to
VDK Holdings. To the extent the Company does not contribute such cash,
securities or other property to VDK Holdings, the Company shall be required to
make the payment due to Unit Holders under this Plan and VDK Holdings shall have
no obligation to make the payment due to Unit Holders under the VDK Holdings
Plan.
3. [intentionally omitted]
4. [intentionally omitted]
5. Payment and Valuation with respect to a Public Offering. In the event
either VDK Holdings or any other New LLC Entity (including without limitation
any surviving entity of a reorganization (including an incorporation), merger or
consolidation of one or more of such entities) (such issuer being the "Public
Company") intends to effect a Public Offering, the provisions of this Section 5
shall govern the valuation of Units, the vesting of Units, and the time and
manner of payments with respect thereto, except as provided in this Section 5
and Annex 1 hereto. In the event the closing date of the initial Public Offering
occurs on or prior to September 30, 1998, the valuation of Units, the vesting of
Units and the time or manner of payments with respect thereto shall be governed
by Annex 1 hereto. This Section 5 and Annex 1 hereto shall be effective
immediately prior to the closing date of the initial Public Offering (the "IC
Plan Effective Time.")
D-2
<PAGE>
6. Forfeiture. In the event a Public Offering occurs and the provisions of
Annex 1 hereto apply, the Units held by a Unit Holder shall be subject to
forfeiture only upon the termination of the employment or engagement of the Unit
Holder with Cause (as defined below); provided, that in the event the employment
of a member of Dartford who is an employee of the Company is terminated for
Cause, such employee's allocable share of Dartford's Units as determined in
accordance with the governing documents of Dartford then in effect shall be
subject to forfeiture under this Section 6.
(i) Termination With Cause. In the event that a Unit Holder's employment
by the Company and/or any New LLC Entity terminates prior to the date on which
Total Performance Unit Value or Total Exceptional Performance Unit Value, as
applicable, are determinable in accordance with this Plan because of discharge
or termination of the Unit Holder by the Company or any New LLC Entity with
Cause (as defined below), then all Units held by such Unit Holder shall be
forfeited to the Company without the payment of any consideration to the Unit
Holder by the Company therefor.
(ii) Cause. For purposes of this Plan, the Company or a New LLC Entity
shall have "Cause" to discharge or terminate a Unit Holder upon (i) the
indictment of the Unit Holder for any crime which constitutes a felony, (ii) if
the Unit Holder is party to a written employment, consulting or similar
agreement with the Company or a New LLC Entity, the failure or inability of the
Unit Holder to cure or remedy, within 30 days after written notice of such
failure from the Company or such New LLC Entity either (A) the Unit Holder's
failure to satisfactorily discharge all of his, her or its duties and
obligations under such agreement or (B) any gross negligence or willful
misconduct on the part of the Unit Holder in the course of rendering services
thereunder, or (iii) if the Unit Holder is not a party to a written employment,
consulting or similar agreement with the Company or any New LLC Entity, the
failure or inability of the Unit Holder to cure or remedy, within 30 days after
written notice of such failure from the Company or such New LLC Entity either
(A) the Unit Holder's substantial and continuing failure to satisfactorily
discharge all of his, her or its material duties and obligations owed to the
Company or such New LLC Entity or (B) any gross negligence or willful misconduct
on the part of the Unit Holder in the course of rendering services to the
Company or such New LLC Entity.
(iii) Forfeited Units. Forfeited Units shall not be taken into account for
purposes of the computations under Sections 5 or 7. In the event any Units are
forfeited in accordance with this Section 6 or otherwise, the Board may, but
shall not be required to, grant such Units to Key Personnel of the Company
pursuant to this Plan.
7. Special Provisions. The following special provisions shall apply to the
valuation of the Units provided for in this Plan.
(i) Golden Parachute Gross-Up. Anything herein to the contrary
notwithstanding, in the event that the excise tax provided by IRC Sections
4999, or any amended or successor provision, applies to any payment to a Unit
Holder hereunder, at Dartford's
D-3
<PAGE>
election exercisable by written notice to the Board, the amount of such payment
shall be increased sufficiently, but not in excess of 15% thereof, so that the
amount distributed to such Unit Holder net of such excise tax is approximately
equal to the amount that would have been distributed had no such excise tax been
imposed. All calculations made under this Plan shall be made after taking into
account any such gross-up payments such that Total Distributions and IRR of the
Business are based on the actual amounts received by Investors.
(ii) Capital Gains Gross-Up. Anything herein to the contrary
notwithstanding, in the event that the U.S. federal income tax rate on capital
gains is less than the U.S. federal income tax rate on ordinary income and the
payments to Unit Holders are subject to tax at such ordinary income rates, at
Dartford's election exercisable by written notice to the Board, the amount of
any payment to any Unit Holder shall be increased sufficiently so that such
amount, net of any such U.S. federal income tax at ordinary rates, equals the
payment that would otherwise have been made to such Unit Holder net of U.S.
federal income tax at capital gains rates; provided, that in the event of a
Public Offering occurs and the provisions of Annex 1 apply, Dartford shall be
deemed to have automatically made such election and no notice to the Board shall
be required. The aggregate amount of such increased amounts payable to Unit
Holders are hereinafter referred to as the "Gross-Up Obligation". The Gross-Up
Obligation shall be paid by VDK Holdings to Unit Holders in cash at the same
time as the corresponding payment to Unit Holders giving rise to such Gross-Up
Obligation is payable. The obligation of VDK Holdings to pay the Gross-Up
Obligation shall be subject to VDK Holdings (or its successor) having the right
to accrue a deduction for tax purposes for such payment but shall not be subject
to such deduction reducing the amount of taxes otherwise payable by VDK Holdings
(or its successor) in the year in which such deduction accrues. The payment of
such Gross-Up Obligation is a direct obligation of VDK Holdings, and the Company
has no obligation to fund the payment of the Gross-Up Obligation; provided, that
to the extent VDK Holdings fails to pay the Gross-Up Obligation then due
(whether or not the reason for such failure is the inability of VDK Holdings to
accrue the deduction for tax purposes described above), the Company shall be
required to pay to Unit Holders an amount in cash equal to the amount of the
unpaid Gross-Up Obligation.
8. Administration. This Plan shall be administered by the Board subject to the
express terms and conditions of this Plan. From and after the effective date of
this Plan, the Board shall have full power to grant Units under this Plan. No
member of the Board or VDK Board shall be liable for any action or determination
made in good faith with respect to this Plan or to any Unit.
9. Effective Date; Termination; Successors.
(i) The original effective date of this Plan was as of September 19, 1995.
The effective date of this Plan as hereby amended and restated is as of April 8,
1998.
(ii) This Plan shall terminate upon all Units being retired as a result of
payments or forfeiture.
D-4
<PAGE>
(iii) This Plan shall be binding on and inure to the benefit of the
Company and its successors and assigns, including without limitation any
successor or assign of the Company by reason of the merger, consolidation or
reorganization of the Company with such successor or assign to be the "Company"
for purposes of this Plan.
10. Amendments. From time to time, this Plan may be altered, amended, suspended
or discontinued, even if such action alters an outstanding Units Agreement to
the detriment of the Unit Holder without his consent, upon the mutual agreement
of the Board, the VDK Board and Dartford; provided, that at any time when the
next succeeding proviso is not applicable, any such action applies to each Unit
Holder in a consistent manner; provided, further, that in the event that neither
Dartford nor its members are providing management services to the Company
(whether in a member's capacity as a senior executive officer of the Company or
otherwise), then any such alteration, amendment, suspension or discontinuance
shall be effective upon the mutual agreement of the Board, the VDK Board and (A)
insofar as any Units held by Dartford are affected by such amendment, Dartford,
and (B) insofar as any Units held by Persons other than Dartford are affected by
such amendment, such other Persons holding a majority of such Units.
11. Definitions. As used in this Plan, the following terms shall have the
meanings set forth below.
"Affiliate" means any parent or subsidiary corporation of the Company as
defined in Section 424(e) and (f) respectively of the Internal Revenue Code of
1986, but only for so long as such relationship is maintained.
"Aurora/VDK LLC" means Aurora/VDK LLC, a Delaware limited liability company and
the holder of all of the issued and outstanding capital stock of the Company on
the effective date of this Plan.
"Board" has the meaning set forth in Section 2.
"Cause" has the meaning set forth in Section 6.
"Class B LLC Units" means the "Class B" Units of limited liability company
interest of the Company.
"Class D LLC Units" means the "Class D" Units of limited liability company
interest of the Company.
"Company" has the meaning set forth in Section 1.
"Dartford" means Dartford Partnership L.L.C.
D-5
<PAGE>
"Distributions" means amounts paid, payable or deemed paid or payable to any
holder of Voting LLC Units, Non-Voting LLC Units, Units under this Plan, or PUs
or EPUs under the VDK Holdings Plan, whether such amounts are in cash, equity
securities (not including equity securities issuable as pursuant to splits or
recapitalizations) or other property either as (i) distributions of profits,
(ii) distributions in redemption, liquidation or otherwise, or (iii) in
accordance with Section 5 hereof.
"EPUs" means the Exceptional Performance Units (as such term is defined
therein) granted under the VDK Holdings Plan.
"Exceptional Performance Units" has the meaning set forth in Section 1.
"Final Date" means the first anniversary of the closing date of the initial
Public Offering or, if earlier, the date of the dissolution of the Company.
"Gross-Up Obligation" has the meaning set forth in Section 7(b).
"Investor" means any holder of Class B LLC Units on the effective date of this
Plan.
"Key Person" and "Key Personnel" have the meaning set forth in Section 1.
"LLC Agreement" means the Second Amended and Restated Limited Liability Company
Agreement of VDK Foods LLC, dated as of April 8, 1998, as amended.
"New Compensation Agreement" means the New Compensation Agreement, dated as of
April 8, 1998, by and among the Company, Aurora/VDK LLC, MBW Investors LLC, VDK
Holdings and certain other parties signatory thereto.
"New LLC Entities" has the meaning set forth in the LLC Agreement.
"Non-Public Shareholders" has the meaning set forth in the LLC Agreement.
"Non-Voting LLC Units" means, collectively, the "Class D" and "Class E" Units
of limited liability company interest of the Company.
"Performance Units" has the meaning set forth in Section 1.
"Person" means any individual, corporation, association, partnership (general
or limited), joint venture, trust, estate, limited liability company, or other
legal entity or organization.
"Public Company" has the meaning set forth in Section 5.
"Public Offering" has the meaning set forth in the LLC Agreement.
D-6
<PAGE>
"PUs" means the Performance Units (as such term is defined therein) granted
under the VDK Holdings Plan.
"Secondary Sale" means any sale by one or more Non-Public Shareholders, on or
after the effective date of a Public Offering, of equity securities issued by
the Public Company and held by such Non-Public Shareholder (but not originally
issued by the Public Company pursuant to a Public Offering), whether such sale
is pursuant to a registered public offering under the Securities Act of 1933, as
amended, an exemption from the registration requirements thereof, or otherwise.
"Total Distributions" means the aggregate amount of Distributions to holders of
Voting LLC Units and holders of Non-Voting LLC Units and to the Unit Holders
pursuant to this Plan or the VDK Holdings Plan.
"Total Exceptional Performance Unit Value" has the meaning set forth in
Section 4(b)(iii).
"Total Performance Unit Value" has the meaning set forth in Section 4(a)(iii).
"Total Profits" means the sum of all amounts distributed or distributable under
Sections 8.3(vi), 8.3(vii), 8.3(viii) and 8.3(ix) of the LLC Agreement (which
includes all amounts distributed or distributable to Unit Holders under this
Plan or the VDK Holdings Plan).
"Unit Holder" means any holder of Performance Units or Exceptional Performance
Units.
"Units" has the meaning set forth in Section 1.
"Units Agreement" has the meaning set forth in Section 2(b).
"Van de Kamp's" means Van de Kamp's, Inc., a Delaware corporation and
wholly-owned subsidiary of VDK Holdings as of the effective date of this Plan.
"VDK Board" means the Board of Directors of VDK Holdings or of its successor
(including the Public Company).
"VDK Holdings" means VDK Holdings Inc., a Delaware corporation and wholly-owned
subsidiary of Aurora/VDK LLC as of the effective date of this Plan.
"VDK Holdings Plan" means the VDK Holdings, Inc. Incentive Compensation Plan.
"Vested Class E Units" has the meaning given such term in the LLC Agreement.
D-7
<PAGE>
"Vested Exceptional Performance Units" means those Exceptional Performance
Units that have vested pursuant to Section 5 or 7 hereof.
"Vested Performance Units" means those Performance Units that have vested
pursuant to Section 5 or 7 hereof.
"Voting LLC Units" means, collectively, the Class B LLC Units and the "Class C"
Units of limited liability company interest of the Company.
D-8
<PAGE>
ANNEX 1 TO THE AMENDED AND RESTATED
VDK INCENTIVE COMPENSATION PLAN
(i) Public Offering On or Before September 30, 1998. In the event the Public
Company effects a Public Offering and the closing date of the Public Offering
occurs on or prior to September 30, 1998, the provisions of this Annex 1 shall
govern the valuation of Units, the vesting of Units, and the time and manner of
payments with respect thereto.
(ii) Vesting. At the IC Plan Effective Time, each Unit Holder shall:
1) have any outstanding but unvested Performance Units held by such
Unit Holder become Vested Performance Units; and
2) have any outstanding but unvested Exceptional Performance Units
held by such Unit Holder become Vested Exceptional Performance Units.
In addition, Units held by a Unit Holder shall no longer be subject to
forfeiture other than upon the termination of the employment or engagement of
the Unit Holder with Cause pursuant to Section 6(a) of this Plan.
(iii) Valuation and Distribution of Shares. Upon the closing date of the
Public Offering, each Vested Performance Unit and each Vested Exceptional
Performance Unit shall be valued as hereinafter set forth and the holders of
such Units shall become entitled to be distributed, at the times and in the
manner set forth below, shares of common stock of the Public Company (of the
same class sold in the initial Public Offering) based on such valuation.
(iv) Valuation of Performance Units. The value of Vested Performance Units
and the number of shares of common stock of the Public Company distributable on
account of Vested Performance Units is set forth in this paragraph (d). Upon the
closing date of the initial Public Offering, a computation of Total Profits,
Total Distributions and Total Performance Unit Value shall be made on a basis as
if all of the Company's direct or indirect equity interests in the Public
Company (but excluding any such equity interests either sold in the initial
Public Offering by Aurora/VDK LLC or distributed by Aurora/VDK LLC in connection
with the initial Public Offering in respect of a special distribution by
Aurora/VDK LLC of $50,900,000 in the aggregate to the Company and MBW Investors
LLC) had been valued at a per share price equal to the Gross IPO Price and as if
such value had been distributed by the Company in accordance with Section 8.3 of
the Company Agreement. For the purpose hereof, the term "Gross IPO Price" shall
mean the price to the public per share at which securities of the Public Company
were sold in the initial Public Offering without
1
<PAGE>
reduction for underwriter's commissions and other expenses relating to the
initial Public Offering.
The holder of each Vested Performance Unit shall thereupon be entitled to
receive with respect to such Unit a number of shares of common stock of the
Public Company (of the same class as sold in the Public Offering) equal to the
quotient of (A) the value of a single Vested Performance Unit computed as set
forth in the following paragraph with respect to the Total Performance Unit
Value determined under this paragraph (d) divided by (B) the Gross IPO Price.
The value of a single Vested Performance Unit shall equal the percentage
of Total Performance Unit Value (as determined under the following sentence)
obtained by dividing one by the aggregate number of Vested Performance Units
outstanding. The value of all Vested Performance Units ("Total Performance Unit
Value") shall equal the product of P multiplied by Total Profits, where P is a
percentage that equals 5% multiplied by the fraction in which the numerator is
the number of Vested Performance Units and the denominator is 2,000.
(v) Valuation of Exceptional Performance Units. The value of Vested
Exceptional Performance Units and the number of shares of common stock the
Public Company distributable on account of Vested Exceptional Performance Units
is set forth in this paragraph (e). Upon the closing date of the initial Public
Offering, a computation of Total Profits, Total Distributions and Total Vested
Exceptional Performance Unit Value shall be made on a basis as if all of the
Company's direct or indirect equity interests in the Public Company (but
excluding any such equity interests either sold in the initial Public Offering
by Aurora/VDK LLC or distributed by Aurora/VDK LLC in connection with the
initial Public Offering in respect of a special distribution by Aurora/VDK LLC
of $50,900,000 in the aggregate to the Company and MBW Investors LLC) had been
valued at a per share price equal to the Gross IPO Price and as if such value
had been distributed by the Company in accordance with Section 8.3 of the LLC
Agreement.
The holder of each Vested Exceptional Performance Unit shall thereupon be
entitled to receive with respect to such Unit a number of shares of common stock
of the Public Company (of the same class as sold in the Public Offering) equal
to the sum of (x) the quotient of (A) the Exceptional Performance Unit Value
computed with respect to Total Exceptional Performance Unit Value determined
under this paragraph (e) divided by (B) the Gross IPO Price plus (y) the Per
Unit Additional Share Increment.
"Additional Share Increment" means the number of shares equal to the quotient
of (x) the Additional Increment divided by (y) 125% of the Gross IPO Price.
"Additional Increment" means the excess, if any, of (x) Total Exceptional
Performance Unit Value calculated as if all of the Company's direct or indirect
equity interests in the Public Company (excluding any interests either sold in
the initial Public
2
<PAGE>
Offering by Aurora/VDK LLC or distributed to the Company in respect of a special
distribution by Aurora/VDK LLC of $50,900,000 in the aggregate to the Company
and MBW Investors LLC) had been valued at a per share price equal to 125% of the
Gross IPO Price and as if such value had been distributed by the Company in
accordance with Section 8.3 of the LLC Agreement over (y) Total Exceptional
Performance Unit Value calculated for this purpose as the product of (1) as if
all of the Company's direct or indirect equity interests in the Public Company
(but excluding any such equity interests either sold in the initial Public
Offering by Aurora/VDK LLC or distributed to the Company in respect of a special
distribution by Aurora/VDK LLC of $50,900,000 in the aggregate to the Company
and MBW Investors LLC) had been valued at a per share price equal to the Gross
IPO Price and as if such value had been distributed by the Company in accordance
with Section 8.3 of the LLC Agreement and (2) 125%.
"Exceptional Performance Unit Value" means the value of a single Vested
Exceptional Performance Unit, which shall equal the percentage of Total
Exceptional Performance Unit Value obtained by dividing one by the aggregate
number of Vested Exceptional Performance Units outstanding.
"Per Unit Additional Share Increment" means the Additional Share Increment
divided by the aggregate number of Vested Exceptional Performance Units
outstanding.
"Total Exceptional Performance Unit Value" means the value of all Vested
Exceptional Performance Units, which shall equal the product of P multiplied by
the Total Profits, where P is the percentage that equals 5% multiplied by the
fraction in which the numerator is the number of Vested Exceptional Performance
Units and the denominator is 2,000.
Any shares of common stock of the Public Company distributable to Unit
Holders pursuant to this Annex 1 are hereinafter referred to as "Distributable
Shares".
(vi) Time of Payment. Following the initial Public Offering, distributions
of Distributable Shares payable on account of Total Performance Unit Value and
Total Exceptional Performance Unit Value shall be made as of the following dates
and at the following times:
1) as of the effective date of each Secondary Sale prior to the
Final Date, in an amount equal to the total number of Distributable Shares
which all holders of Vested Performance Units and Vested Exceptional
Performance Units would be entitled to include in such Secondary Sale
pursuant to the piggyback registration rights provisions under the
Securityholders Agreement, assuming for such purpose that the Company had
distributed all shares of the Public Company held by it pursuant to this
Agreement and the VDK Holdings Plan; provided, however, in lieu of
distributing such shares to the holders of such Units, all or any portion
of such shares will instead be sold by the Company (or, if applicable, by
3
<PAGE>
Aurora/VDK LLC or the Public Company) in such Secondary Sale and the net
proceeds of such sale shall be distributed to the holders of such Units
pro rata in accordance with their respective interests in the shares that
otherwise would have been distributed.
2) upon the Final Date; and
(vii) Manner of Payment. Any payment to Unit Holders under the VDK
Holdings Plan with respect to PUs and EPUs that is due pursuant to paragraphs
(d) or (e) of Annex 1 to the VDK Holdings Plan shall be made in Distributable
Shares contributed by the Company to VDK Holdings. To the extent the Company
does not contribute Distributable Shares to VDK Holdings, VDK Holdings shall
have no obligation to distribute securities of the Public Company, cash or any
other property to Unit Holders pursuant to the VDK Holdings Plan with respect to
the payment then due and the Company shall then be obligated to make such
payment pursuant to this Plan. When the aggregate number of Distributable Shares
required to be paid under this Plan or the VDK Holdings Plan has been paid in
full, then all distributions required to be made on account of Units under this
Plan or on account of Vested Plan Units under the LLC Agreement shall be deemed
to have been made.
4
<PAGE>
EXECUTION COPY
Exhibit 4.13
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AURORA FOODS INC.
__% Series E Senior Subordinated Notes due 2008
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----------
INDENTURE
Dated as of ____ _, 1998
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WILMINGTON TRUST COMPANY
Trustee
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<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1)...........................................................7.10
(a)(2)...........................................................7.10
(a)(3)...........................................................N.A.
(a)(4)...........................................................N.A.
(b)..............................................................7.8; 7.10
(c)..............................................................N.A.
311(a)..............................................................7.11
(b)..............................................................7.11
(c)..............................................................N.A.
312(a)..............................................................2.5
(b)..............................................................11.3
(c)..............................................................11.3
313(a)..............................................................7.6
(b)(1)...........................................................N.A.
(b)(2)...........................................................7.6
(c)..............................................................7.6
(d)..............................................................7.6
314(a)..............................................................4.2
...................................................................4.11; 12.2
(b)..............................................................N.A.
(c)(1)...........................................................12.4
(c)(2)...........................................................12.4
(c)(3)...........................................................N.A.
(d)..............................................................N.A.
(e)..............................................................12.5
(f)..............................................................4.10
315(a)..............................................................7.1
(b).............................................................7.5; 12.2
(c)..............................................................7.1
(d)..............................................................7.1
(e)..............................................................6.11
316(a)(last sentence)...............................................12.6
(a)(1)(A)........................................................6.5
(a)(1)(B)........................................................6.4
(a)(2)...........................................................N.A.
(b)..............................................................6.7
317(a)(1)...........................................................6.8
(a)(2)...........................................................6.9
(b)..............................................................2.4
318(a)..............................................................12.1
</TABLE>
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
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ARTICLE I
Definitions and Incorporation by Reference............... 1
SECTION 1.1. Definitions.......................................... 1
SECTION 1.2. Other Definitions.................................... 16
SECTION 1.3. Incorporation by Reference of Trust Indenture Act.... 17
SECTION 1.4. Rules of Construction................................ 18
ARTICLE II
The Securities............................. 19
SECTION 2.1. Form, Dating and Terms............................... 19
SECTION 2.2. Execution and Authentication......................... 24
SECTION 2.3. Registrar and Paying Agent........................... 26
SECTION 2.4. Paying Agent To Hold Money in Trust.................. 26
SECTION 2.5. Securityholder Lists................................. 27
SECTION 2.6. Transfer and Exchange................................ 27
SECTION 2.7. Mutilated, Destroyed, Lost or Stolen Securities...... 31
SECTION 2.8. Outstanding Securities............................... 31
SECTION 2.9. Temporary Securities................................. 32
SECTION 2.10. Cancellation......................................... 32
SECTION 2.11. Payment of Interest; Defaulted Interest.............. 32
SECTION 2.12. CUSIP Numbers........................................ 33
SECTION 2.13. Form of Certificate to be Delivered in Connection with
Transfers to Institutional Accredited Investors...... 34
SECTION 2.14. Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S................... 36
SECTION 2.15. Computation of Interest.............................. 37
ARTICLE III
Redemption............................... 37
SECTION 3.1. Notices to Trustee................................... 37
SECTION 3.2. Selection of Securities To Be Redeemed............... 37
SECTION 3.3. Notice of Redemption................................. 38
SECTION 3.4. Effect of Notice of Redemption....................... 38
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SECTION 3.5. Deposit of Redemption Price.......................... 38
SECTION 3.6. Securities Redeemed in Part.......................... 39
ARTICLE IV
Covenants............................... 39
SECTION 4.1. Payment of Securities................................ 39
SECTION 4.2. SEC Reports.......................................... 39
SECTION 4.3. Limitation on Indebtedness........................... 39
SECTION 4.4. Limitation on Restricted Payments.................... 40
SECTION 4.5. Limitation on Restrictions on Distributions from
Subsidiaries ........................................ 42
SECTION 4.6. Limitation on Sales of Assets........................ 43
SECTION 4.7. Limitation on Affiliate Transactions................. 46
SECTION 4.8. Change of Control.................................... 46
SECTION 4.9. Limitation on Sale of Subsidiary Capital Stock....... 47
SECTION 4.10. Future Security Guarantors........................... 47
SECTION 4.11. Limitation on Lines of Business...................... 48
SECTION 4.12. Maintenance of Office or Agency for Registration of
Transfer, Exchange and Payment of Securities......... 48
SECTION 4.13. Appointment to Fill a Vacancy in the Office of
Trustee ............................................. 48
SECTION 4.14. Provision as to Paying Agent......................... 48
SECTION 4.15. Maintenance of Corporate Existence................... 49
SECTION 4.16. Compliance Certificate............................... 50
SECTION 4.17. Further Instruments and Acts......................... 50
ARTICLE V
Successor Company........................... 50
SECTION 5.1. When Company May Merge or Transfer Assets............ 50
ARTICLE VI
Defaults and Remedies......................... 51
SECTION 6.1. Events of Default.................................... 51
SECTION 6.2. Acceleration......................................... 53
SECTION 6.3. Other Remedies....................................... 53
SECTION 6.4. Waiver of Past Defaults.............................. 54
SECTION 6.5. Control by Majority.................................. 54
SECTION 6.6. Limitation on Suits.................................. 54
SECTION 6.7. Rights of Holders to Receive Payment................. 55
SECTION 6.8. Collection Suit by Trustee........................... 55
SECTION 6.9. Trustee May File Proofs of Claim..................... 55
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SECTION 6.10. Priorities........................................... 55
SECTION 6.11. Undertaking for Costs................................ 56
ARTICLE VII
Trustee................................ 56
SECTION 7.1. Duties of Trustee.................................... 56
SECTION 7.2. Rights of Trustee.................................... 57
SECTION 7.3. Individual Rights of Trustee......................... 58
SECTION 7.4. Trustee's Disclaimer................................. 58
SECTION 7.5. Notice of Defaults................................... 58
SECTION 7.6. Reports by Trustee to Holders........................ 59
SECTION 7.7. Compensation and Indemnity........................... 59
SECTION 7.8. Replacement of Trustee............................... 60
SECTION 7.9. Successor Trustee by Merger.......................... 60
SECTION 7.10. Eligibility; Disqualification........................ 61
SECTION 7.11. Preferential Collection of Claims Against Company.... 61
ARTICLE VIII
Discharge of Indenture; Defeasance................... 61
SECTION 8.1. Discharge of Liability on Securities; Defeasance..... 61
SECTION 8.2. Conditions to Defeasance............................. 62
SECTION 8.3. Application of Trust Money........................... 63
SECTION 8.4. Repayment to Company................................. 64
SECTION 8.5. Indemnity for U.S. Government Obligations............ 64
SECTION 8.6. Reinstatement........................................ 64
ARTICLE IX
Amendments............................... 64
SECTION 9.1. Without Consent of Holders........................... 64
SECTION 9.2. With Consent of Holders.............................. 65
SECTION 9.3. Compliance with Trust Indenture Act.................. 66
SECTION 9.4. Revocation and Effect of Consents and Waivers........ 66
SECTION 9.5. Notation on or Exchange of Securities................ 67
SECTION 9.6. Trustee To Sign Amendments........................... 67
ARTICLE X
Subordination............................. 67
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SECTION 10.1. Agreement To Subordinate............................. 67
SECTION 10.2. Liquidation, Dissolution, Bankruptcy................. 67
SECTION 10.3. Default on Senior Indebtedness or Guarantor Senior
Indebtedness......................................... 68
SECTION 10.4. Acceleration of Payment of Securities................ 69
SECTION 10.5. When Distribution Must Be Paid Over.................. 70
SECTION 10.6. Subrogation.......................................... 70
SECTION 10.7. Relative Rights...................................... 70
SECTION 10.8. Subordination May Not Be Impaired by Company or the
Subsidiary Guarantors................................ 70
SECTION 10.9. Rights of Trustee and Paying Agent................... 70
SECTION 10.10. Distribution or Notice to Representative............. 71
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
Right To Accelerate.................................. 71
SECTION 10.12. Trust Moneys Not Subordinated........................ 71
SECTION 10.13. Trustee Entitled To Rely............................. 72
SECTION 10.14. Trustee To Effectuate Subordination.................. 72
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness or Guarantor Senior Indebtedness........ 72
SECTION 10.16. Changes in Senior Indebtedness....................... 72
SECTION 10.17. Reliance by Holders of Senior Indebtedness and
Guarantor Senior Indebtedness on Subordination
Provisions........................................... 73
SECTION 10.18. Legend............................................... 73
ARTICLE XI
Subsidiary Guarantee.......................... 74
SECTION 11.1. Subsidiary Guarantee................................. 74
SECTION 11.2. Limitation on Liability.............................. 75
SECTION 11.3. Successors and Assigns............................... 76
SECTION 11.4. No Waiver............................................ 76
SECTION 11.5. Right of Contribution................................ 76
SECTION 11.6. No Subrogation....................................... 76
SECTION 11.7. Modification......................................... 77
ARTICLE XII
Miscellaneous............................. 77
SECTION 12.1. Trust Indenture Act Controls......................... 77
SECTION 12.2. Notices.............................................. 77
SECTION 12.3. Communication by Holders with other Holders.......... 78
SECTION 12.4. Certificate and Opinion as to Conditions Precedent... 78
SECTION 12.5. Statements Required in Certificate or Opinion........ 78
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SECTION 12.6. When Securities Disregarded.......................... 79
SECTION 12.7. Rules by Trustee, Paying Agent and Registrar......... 79
SECTION 12.8. Legal Holidays....................................... 79
SECTION 12.9. Governing Law........................................ 79
SECTION 12.10. No Recourse Against Others........................... 79
SECTION 12.11. Successors........................................... 79
SECTION 12.12. Multiple Originals................................... 79
SECTION 12.13. Variable Provisions.................................. 79
SECTION 12.14. Qualification of Indenture........................... 79
SECTION 12.15. Table of Contents; Headings.......................... 80
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EXHIBIT A Form of Initial Note
EXHIBIT B Form of Exchange Note
- v -
<PAGE>
INDENTURE dated as of ______, 1998, between AURORA FOODS INC., a Delaware
corporation (the "Company") and WILMINGTON TRUST COMPANY, a Delaware banking
corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Company's __% Series
E Senior Subordinated Notes due 2008 (the "Initial Notes") and, if and when
issued in exchange for Initial Notes as provided in the Registration Rights
Agreement (as hereinafter defined), the Company's __% Series F Senior
Subordinated Notes due 2008 (the "Exchange Notes" and, together with the Initial
Notes, the "Securities"):
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Subsidiary in a
Related Business; (ii) the Capital Stock of a Person that becomes a Subsidiary
as a result of the acquisition of such Capital Stock by the Company or another
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Subsidiary of the Company; provided, however,
that, in the case of clauses (ii) and (iii) of this definition, such Subsidiary
is primarily engaged in a Related Business.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any Person who is a director
or officer (A) of such Person, (B) of any Subsidiary of such Person or (C) of
any Person described in clause (i) above. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described in Sections 4.4, 4.6 and 4.7 only,
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of the Voting Stock (on a fully diluted basis) of
the Company or of rights or warrants to purchase such Voting Stock (whether or
not currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Applicable Premium" means, with respect to a Security at any
redemption date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such time of (1) the
redemption price of such Security at ________ __, 2003 (such redemption price
being described in the Security) plus (2) all required interest payments due on
such Security through ________ __, 2003, computed using a discount rate equal to
the
<PAGE>
2
Treasury Rate plus 50 basis points based on 360-day year of twelve 30-day
months, over (B) the principal amount of such Security.
"Asset Disposition" means any sale, lease, transfer, issuance or
other disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Subsidiary (other than directors' qualifying shares), property or other assets
(each referred to for the purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a disposition by a
Subsidiary to the Company or a Wholly-Owned Subsidiary or by the Company or a
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory or
Temporary Cash Investments in the ordinary course of business, (iii) a
disposition of obsolete equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Subsidiaries and that is disposed
of in each case in the ordinary course of business, (iv) the sale of other
assets so long as the fair market value of the assets disposed of pursuant to
this clause (iv) does not exceed $2.5 million in the aggregate in any fiscal
year, (v) for the purposes of the covenant described in Section 4.6 only, a
disposition subject to the covenant described in Section 4.4 and (vi) the
disposition of all or substantially all of the assets of the Company in the
manner permitted pursuant to Section 5.1 or any disposition that constitutes a
Change of Control pursuant to this Indenture.
"Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Securities, compounded annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Senior Credit Documents and any Indebtedness that is incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) Indebtedness under such Senior Credit
Documents including Indebtedness that refinances such Indebtedness, as amended
from time to time, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for post filing
interest is allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees and all other amounts payable thereunder or in respect
thereof (including, without limitation, cash collateralization of letters of
credit).
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board of
Directors.
<PAGE>
3
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP, and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date such lease may be terminated without penalty.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition; (ii) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (iii) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof issued
by any domestic commercial bank the long-term debt of which is rated at the time
of acquisition thereof at least "A" or the equivalent thereof by Standard &
Poor's Ratings Group, or "A" or the equivalent thereof by Moody's Investors
Service, Inc., and having capital and surplus in excess of $500.0 million; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i), (ii) and (iii) entered into
with any bank meeting the qualifications specified in clause (iii) above; (v)
commercial paper rated at the time of acquisition thereof at least "A-2" or the
equivalent thereof by Standard & Poor's Ratings Group or "P-2" or the equivalent
thereof by Moody's Investors Service, Inc., or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in either case maturing within 270
days after the date of acquisition thereof; and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses (i)
through (v) above.
"Change of Control" means the occurrence of any of the following
events: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting power of the Voting
Stock of the Company; provided that the Permitted Holders beneficially own (as
defined above), directly or indirectly, in the aggregate a lesser
<PAGE>
4
percentage of the total voting power of the Voting Stock of the Company than
such other person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of the Company (for purposes of this clause (i), such other person
shall be deemed to beneficially own any Voting Stock of a Person (the "specified
corporation") held by any other Person (the "parent corporation") if such other
person "beneficially owns" (as defined in this clause (i)), directly or
indirectly, more than 35% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders "beneficially own" (as defined in this
clause (i)), directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the board of directors of such parent corporation);
or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Company was approved by a vote of a
majority of the directors of the Company then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Aurora Foods Inc., a Delaware corporation.
"Consolidated Cash Flow" for any period means the Consolidated Net
Income for such period, plus the following to the extent deducted in calculating
such Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense (iii) depreciation expense, (iv) amortization expense, in each case for
such period, (v) other non-cash charges reducing Consolidated Net Income
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period) and (vi) for the period ending on
the first anniversary of the Issue Date only, non-recurring relocation and
start-up expenses not in excess of $16.5 million, in each case for such period,
and minus, to the extent not already deducted in calculating Consolidated Net
Income, (i) the aggregate amount of "earnout" payments paid in cash during such
period in connection with acquisitions previously made by the Company and (ii)
non-cash items increasing Consolidated Net Income for such period.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of Consolidated Cash Flow for the period
of the most recent four consecutive fiscal quarters ending prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (A) if the Company or any of its Subsidiaries
has Incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to
<PAGE>
5
such Indebtedness as if such Indebtedness had been Incurred on the first day of
such period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, (B) if since the
beginning of such period the Company or any of its Subsidiaries shall have made
any Asset Disposition, Consolidated Cash Flow for such period shall be reduced
by an amount equal to the Consolidated Cash Flow (if positive) attributable to
the assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
attributable to any Indebtedness of the Company or any of its Subsidiaries
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Subsidiary of the
Company is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Subsidiary to the extent the Company
and its continuing Subsidiaries are no longer liable for such Indebtedness after
such sale), (C) if since the beginning of such period the Company or any of its
Subsidiaries (by merger or otherwise) shall have made an Investment in any
Subsidiary of the Company (or any Person which becomes a Subsidiary of the
Company) or an acquisition of assets, including any Investment in a Subsidiary
of the Company or any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the Incurrence of any Indebtedness and
including the pro forma expenses and cost reductions) as if such Investment or
acquisition occurred on the first day of such period and (D) if since the
beginning of such period any Person (that subsequently became a Subsidiary of
the Company or was merged with or into the Company or any Subsidiary of the
Company since the beginning of such period) shall have made any Asset
Disposition or any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (B) or (C) above if made by the Company or a
Subsidiary of the Company during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Subsidiaries, plus, to the extent not
included in such interest expense, (i) interest expense attributable to
Capitalized Lease Obligations and imputed interest with respect to Attributable
Indebtedness, (ii) amortization of debt discount and debt issuance cost (other
than those debt discounts and debt issuance costs incurred on the Issue Date),
(iii) capitalized interest,
<PAGE>
6
(iv) non-cash interest expense, (v) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Subsidiary
under any Guarantee of Indebtedness or other obligation of any other Person,
(vii) net costs associated with Currency Agreements and Interest Rate Agreements
(including amortization of fees), (viii) the product of (A) all Preferred Stock
dividends in respect of all Preferred Stock of Subsidiaries of the Company and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly-Owned Subsidiary multiplied by (B) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined Federal,
state and local statutory tax rate of the Company, expressed as a decimal, in
each case, determined on a consolidated basis in accordance with GAAP and (ix)
the cash contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income
(loss) of the Company and its consolidated Subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income: (i) any net income
(loss) of any Person if such Person is not a Subsidiary, except that (A) subject
to the limitations contained in clause (iv) below, the Company's equity in the
net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other distribution
to a Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income; (ii) any net income (loss)
of any person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income (loss) of any Subsidiary if such Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Subsidiary, directly or indirectly, to the Company, except
that (A) subject to the limitations contained in (iv) below, the Company's
equity in the net income of any such Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Subsidiary during such period to the Company
or another Subsidiary as a dividend (subject, in the case of a dividend that
could have been made to another Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Subsidiary for
such period shall be included in determining such Consolidated Net Income; (iv)
any gain (but not loss) realized upon the sale or other disposition of any
assets of the Company or its consolidated Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which are not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person; (v) any extraordinary gain
or loss; and (vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made as (i)
<PAGE>
7
the par or stated value of all outstanding Capital Stock of the Company plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and
(ii) any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $5.0
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable) or upon the happening
of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to 123 days after the Stated
Maturity of the Securities.
"Equity Investors" means Fenway Partners Capital Fund, L.P., McCown
De Leeuw & Co. III, L.P., McCown De Leeuw & Co. III (Europe), L.P., McCown De
Leeuw & Co. III (Asia), L.P., Gamma Fund LLC, McCown De Leeuw & Co. IV, L.P.,
McCown De Leeuw & Co. IV Associates, L.P., Delta Fund LLC, California Public
Employees Retirement System, Dartford Partnership L.L.C., Tiger Oats Limited and
UBS Capital LLC..
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" means, if and when issued in exchange for the
Initial Securities as provided in the Registration Rights Agreement, the
Company's __% Series F Senior Subordianted Notes due 2008.
"Existing Indentures" means the Indenture dated as of September 15,
1995 between the Company and Harris Trust and Savings Bank, as trustee, the
Indenture dated as of February 10, 1997 between the Company and Wilmington Trust
Company, as trustee, and the Indenture dated as of July 1, 1997 between the
Company and Wilmington Trust Company, as
<PAGE>
8
trustee, in each case as the same may have been and may from time to time be
amended, modified or supplemented.
"Existing Notes" means the Company's 12% Senior Subordinated Notes
due 2005, 9 7/8% Series B Senior Subordinated Notes due 2007 and 9 7/8% Series D
Senior Subordinated Notes due 2007.
"GAAP" means generally accepted principles in the United States of
America as in effect from time to time, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as are approved by a significant segment of the accounting
profession. All ratios and computations based on GAAP contained in this
Indenture shall be computed in conformity with GAAP as in effect on the Issue
Date.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of any other Person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means, with respect to a Subsidiary
Guarantor, whether outstanding on the Issue Date or thereafter issued, any
Guarantee of the Bank Indebtedness by such Subsidiary Guarantor, all other
Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the Company
and all Indebtedness of such Subsidiary Guarantor, including interest and fees
thereon, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that the obligations of such
Subsidiary Guarantor in respect of such Indebtedness are not superior in right
of payment to the obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee; provided, however, that Guarantor Senior Indebtedness shall not
include (i) any obligations of such Subsidiary Guarantor to the Company or any
other Subsidiary of the Company, (ii) any liability for Federal, state, local or
other taxes owed or owing by such Subsidiary Guarantor, (iii) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including Guarantees thereof or instruments evidencing such
liabilities), (iv) any Indebtedness, Guarantee or obligation of such Subsidiary
Guarantor that is expressly subordinate or junior in right of payment to any
other Indebtedness,
<PAGE>
9
Guarantee or obligation of such Subsidiary Guarantor, including any Guarantor
Senior Subordinated Indebtedness and Guarantor Subordinated Obligations of such
Subsidiary Guarantor or (v) any Capital Stock.
"Guarantor Senior Subordinated Indebtedness" means, with respect to
a Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee and any other Indebtedness of such Subsidiary Guarantor
that specifically provides that such Indebtedness is to rank pari passu in right
of payment with the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee and is not subordinated by its terms in right of payment to
any Indebtedness or other obligation of such Subsidiary Guarantor which is not
Guarantor Senior Indebtedness of such Subsidiary Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a
Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the obligations of such Subsidiary Guarantor under
the Subsidiary Guarantee pursuant to a written agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (other than contingent or "earn-out" payment obligations
and Trade Payables and accrued expenses incurred in the ordinary course of
business), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, provided, however, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of such other
Persons, (vii) all Indebtedness of other Persons
<PAGE>
10
to the extent Guaranteed by such Person, (viii) the amount of all obligations of
such Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of the Company, any
Preferred Stock (but excluding, in each case, any accrued dividends) and (ix) to
the extent not otherwise included in this definition, obligations of such Person
under Currency Agreements and Interest Rate Agreements. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above as such amount would be
reflected on a balance sheet in accordance with GAAP and the maximum liability,
upon the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Initial Securities" means the Company's __% Series E Senior
Subordinated Notes due 2008 issued under this Indenture.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of such Person) or
other extension of credit (including by way of Guarantee or similar arrangement,
but excluding any debt or extension of credit represented by a bank deposit
other than a time deposit) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person.
"Issue Date" means the date on which the Notes are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such
<PAGE>
11
Asset Disposition, (ii) all payments made on any Indebtedness which is secured
by any assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon such assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) all distributions and other
payments required to be made to any Person owning a beneficial interest in
assets subject to sale or minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition, (iv) the deduction of
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the assets disposed of in
such Asset Disposition and retained by the Company or any Subsidiary of the
Company after such Asset Disposition and (v) any portion of the purchase price
from an Asset Disposition placed in escrow (whether as a reserve for adjustment
of the purchase price, for satisfaction of indemnities in respect of such Asset
Disposition or otherwise in connection with such Asset Disposition) provided,
however, that upon the termination of such escrow, Net Available Cash shall be
increased by any portion of funds therein released to the Company or any
Subsidiary.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock or Indebtedness, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"Officer" means the Chairman of the Board, Chief Executive Officer,
the President, the Vice Chairman, any Vice President, the Treasurer, the Chief
Financial Officer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by an Officer (in
the case of the annual Officers' Certificate delivered pursuant to Section 4.16,
the principal executive officer, principal financial officer or principal
accounting officer of the Company) and that complies with Sections 12.4 and 12.5
of this Indenture and is delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee and that complies with Sections 12.4 and 12.5 of
this Indenture and delivered to the Trustee. The counsel may be an employee of
or counsel to the Company or the Trustee.
"Permitted Holders" means the Equity Investors and their respective
Affiliates.
"Permitted Investment" means (i) any Investment in a Subsidiary of
the Company or a Person which will, upon making such Investment, become a
Subsidiary; provided, however, that the primary business of such Subsidiary is a
Related Business; (ii) any Investment in another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Subsidiary of the Company; provided, however, that such Person's primary
business is a Related Business; (iii) any Investment in Temporary Cash
Investments; (iv) receivables owing to the Company or any of its Subsidiaries,
if created or acquired in the ordinary course of business and payable or
dischargeable
<PAGE>
12
in accordance with customary trade terms; (v) payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business of the Company or such Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Subsidiaries
or in satisfaction of judgments or claims; (viii) Investments the payment for
which consists exclusively of equity securities (exclusive of Disqualified
Stock) of the Company; (ix) loans or advances to employees and directors to
purchase equity securities of the Company; provided that the aggregate amount of
such loans and advances shall not exceed $5.0 million at any time outstanding;
(x) any Investment in another Person to the extent such Investment is received
by the Company or any Subsidiary as consideration for Asset Disposition effected
in compliance with Section 4.6; (xi) prepayment and other credits to suppliers
made in the ordinary course of business consistent with the past practices of
the Company and its Subsidiaries; (xii) Investments in connection with pledges,
deposits, payments or performance bonds made or given in the ordinary course of
business in connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations; and (xiii) any Investment in another Person not to exceed in the
aggregate $5.0 million at any one time outstanding (measured as of the date made
and without giving effect to subsequent changes in value).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus
the premium, if any, payable on the security which is due or overdue or is to
become due at the relevant time.
"Private Exchange Securities" shall have the meaning set forth in
the Registration Rights Agreement.
"QIB" means any "qualified institutional buyer" (as defined under
the Securities Act).
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and "refinanced"
shall have a correlative meaning) any Indebtedness existing on the date of the
Indenture or Incurred in compliance with the Indenture (including Indebtedness
of the Company that refinances Indebtedness of any Subsidiary and Indebtedness
of any Subsidiary that refinances Indebtedness of another Subsidiary) including
<PAGE>
13
Indebtedness that refinances Refinancing Indebtedness, provided, however, that
(i) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced and (iii) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced (plus the
amount of any premium required to be paid in connection therewith and plus
reasonable fees and expenses in connection therewith); provided further that
Refinancing Indebtedness shall not include Indebtedness of a Subsidiary which
refinances Indebtedness of the Company.
"Registered Exchange Offer" shall have the meaning set forth in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated as of July 1, 1997, between the Company and Chase
Securities Inc.
"Related Business" means the food business and such other business
activities which are incidental or related thereto.
"Representative" means any trustee, agent or representative (if any)
of an issue of Senior Indebtedness.
"Restricted Period" means the 40 consecutive days beginning on and
including the later of (A) the day on which the Initial Securities are offered
to persons other than distributors (as defined in Regulation S under the
Securities Act) and (B) the Issue Date.
"Restricted Securities Legend" means the Private Placement Legend
set forth in clause (A) of Section 2.1(c) or the Regulation S Legend set forth
in clause (B) of Section 2.1(c), as applicable.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" means the Securities issued under this Indenture.
<PAGE>
14
"Security Guarantee" means any guarantee pursuant to a supplemental
Indenture which may from time to time be executed and delivered by a Subsidiary
of the company pursuant to Section 4.10.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to the
Global Security (as appointed by the Depositary), or any successor Person
thereto and shall initially be the Trustee.
"Senior Credit Agreement" means the Credit Agreement dated as of
_______ __, 1998, among the Company, Holdings, the lenders parties thereto, The
Chase Manhattan Bank, as administrative agent, Chase Securities Inc., as
arranging agent, National Westminster Bank PLC, as syndication agent, and Swiss
Bank Corporation, as documentation agent.
"Senior Credit Documents" means the collective reference to the
Senior Credit Agreement, the notes issued pursuant thereto and the Subsidiary
Guaranty, the Security Agreement, the Pledge Agreement, the Collateral Account
Agreement and the Patent and Trademark Security Agreement (each as defined in
the Senior Credit Agreement) and each of the mortgages and other security
agreements, guarantees and other instruments and documents executed and
delivered pursuant to any of the foregoing or the Senior Credit Agreement, in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amounts of
available borrowing thereunder provided that such increase in borrowing is
permitted by Section 4.3 or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement whether by the same or
any other agent, lender or group of lenders.
"Senior Indebtedness" means the principal of, premium (if any), and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization of the Company regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, the Bank Indebtedness and all other Indebtedness of
the Company, whether outstanding on the Issue Date or thereafter issued, unless,
in the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is provided that the obligations in respect of such
Indebtedness are not superior in right of payment to the Securities; provided,
however, that Senior Indebtedness will not include (i) any obligation of the
Company to any Subsidiary, (ii) any liability for Federal, state, foreign, local
or other taxes owed or owing by the Company, (iii) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (iv)
any Indebtedness, Guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including any Senior Subordinated Indebtedness and
any Subordinated Obligations or (v) any Capital Stock.
<PAGE>
15
"Senior Subordinated Indebtedness" means the Securities and any
other Indebtedness of the Company that ranks pari passu with the Securities in
right of payment and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of the Company which is not Senior
Indebtedness.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
June 12, 1998.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
"Subsequent Equity Offering" means any public or private sales of
equity securities (excluding Disqualified Stock) of the Company after the Issue
Date.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person. Unless otherwise specified herein, each reference
to a Subsidiary shall refer to a Subsidiary of the Company.
"Subsidiary Guarantor" means any Subsidiary which is required to
guarantee the Securities pursuant to Section 4.10.
"Temporary Cash Investments" means any of the following: (i) any
Investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (ii) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $250.0 million (or the foreign currency
equivalent thereof) and whose long-term debt, or whose parent holding company's
long-term debt, is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act), (iii) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with a bank meeting the qualifications described
in clause (ii) above, (iv) Investments in commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other than
an
<PAGE>
16
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Treasury Rate" means, at the time of computation, the yield to
maturity of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the redemption date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the redemption date to ________ __, 2003; provided, however, that if
the period from the redemption date to ________ __, 2003 is less than one year,
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock of
such Person then outstanding and normally entitled to vote in the election of
directors or managers.
"Wholly-Owned Subsidiary" means a Subsidiary of the Company, all of
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or another Wholly-Owned Subsidiary.
<PAGE>
17
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction".................................. 4.7
"Agent Member"........................................... 2.1(d)
"Authenticating Agent"................................... 2.2
"Bankruptcy Law"......................................... 6.1
"Blockage Notice"........................................ 10.3
"Company Order".......................................... 2.2
"covenant defeasance option"............................. 8.1(b)
"Custodian".............................................. 6.1
"Defaulted Interest"..................................... 2.11
"Definitive Securities".................................. 2.1
"Event of Default"....................................... 6.1
"Exchange Global Note"................................... 2.1
"Global Securities"...................................... 2.1
"Institutional Accredited Investor Global Note".......... 2.1
"Institutional Accredited Investor Note"................. 2.1
"legal defeasance option"................................ 8.1(b)
"Legal Holiday".......................................... 12.8
"Note Amount"............................................ 4.6
"Obligations"............................................ 11.1
"Offer" ................................................. 4.6(b)
"Offer Amount"........................................... 4.6(c)(ii)
"Offer Period"........................................... 4.6(c)(ii)
"pay the Securities"..................................... 10.3
"Paying Agent"........................................... 2.3
"Payment Blockage Period"................................ 10.3
"Pari Passu Notes"....................................... 4.6
"Pari Passu Offer"....................................... 4.6
"Private Placement Legend"............................... 2.1
"Purchase Date".......................................... 4.6(c)(i)
"Registrar".............................................. 2.3
"Regulation S"........................................... 2.1
"Regulation S Certificate"............................... 2.1
"Regulation S Global Note"............................... 2.1
"Regulation S Note"...................................... 2.1
"Regulation S Legend".................................... 2.1
"Release Date"........................................... 2.1
"Resale Restriction Termination Date".................... 2.3
"Restricted Payment"..................................... 4.4(a)
"Rule 144A".............................................. 2.1
</TABLE>
<PAGE>
18
<TABLE>
<S> <C>
"Rule 144A Global Note".................................. 2.1
"Rule 144A Note"......................................... 2.1
"Special Interest Payment Date".......................... 2.11
"Special Record Date".................................... 2.11
"Subsequent Series Securities"........................... 2.2
"Successor Company"...................................... 5.1
</TABLE>
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA by reference to another statute or defined by an SEC
rule have the meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular;
(vi) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
<PAGE>
19
(vii) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; and
(viii) the principal amount of any Preferred Stock shall be
(A) the maximum liquidation value of such Preferred Stock or (B) the
maximum mandatory redemption or mandatory repurchase price with respect to
such Preferred Stock, whichever is greater.
<PAGE>
20
ARTICLE II
The Securities
SECTION 2.1. Form, Dating and Terms. (a) The Initial Securities are
being offered and sold by the Company pursuant to a Purchase Agreement, dated
June __, 1998, among the Company, Chase Securities Inc., Goldman, Sachs & Co.
and NatWest Capital Markets Limited.
Initial Securities offered and sold to the qualified institutional
buyers (as defined in Rule 144A under the Securities Act ("Rule 144A")) in the
United States of America (the "Rule 144A Note") will be issued on the Issue Date
in the form of a permanent global Security substantially in the form of Exhibit
A, which is hereby incorporated by reference and made a part of this Indenture,
together with appropriate legends as set forth in Section 2.1(c) (the "Rule 144A
Global Note"), deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The Rule 144A Global Note may be represented by more than one
certificate, if so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate. The aggregate
principal amount of the Rule 144A Global Note may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Initial Securities offered and sold outside the United States of
America ("Regulation S Note") in reliance on Regulation S will be issued on the
Issue Date in the form of a permanent global Security, without interest coupons,
substantially in the form set forth in Exhibit A, which is hereby incorporated
by reference and made a part of this Indenture, together with appropriate
legends as set forth in Section 2.1(c) (the "Regulation S Global Note")
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
Regulation S Global Note may be represented by more than one certificate, if so
required by the Depositary's rules regarding the maximum principal amount to be
represented by a single certificate. The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary
or its nominee, as hereinafter provided.
Initial Securities resold to institutional "accredited investors"
(as defined in Rules 501(a)(1), (2), (3) and (7) under the Securities Act) in
the United States of America (the "Institutional Accredited Investor Note") will
be issued in the form of a permanent global Security substantially in the form
of Exhibit A, which is hereby incorporated by reference and made a part of this
Indenture, together with appropriate legends as set forth in Section 2.1(c) (the
"Institutional Accredited Investor Global Note") deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The Institutional Accredited Investor
Global Note may be represented by more than one certificate, if so required by
the Depositary's rules regarding the maximum principal amount to be
<PAGE>
21
represented by a single certificate. The aggregate principal amount of the
Institutional Accredited Investor Global Note may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Exchange Securities exchanged for interests in the Rule 144A Note,
the Regulation S Note and the Institutional Accredited Investor Note will be
issued in the form of a permanent global Security substantially in the form of
Exhibit B, which is hereby incorporated by reference and made a part of this
Indenture, deposited with the Trustee as hereinafter provided, with the
appropriate legend set forth in Section 2.1(c) (the "Exchange Global Note"). The
Exchange Global Note may be represented by more than one certificate, if so
required by the Depositary's rules regarding the maximum principal amount to be
represented by a single certificate.
The Rule 144A Global Note, the Regulation S Global Note, the
Exchange Global Note and the Institutional Accredited Investor Global Note are
sometimes collectively herein referred to as the "Global Securities."
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose pursuant to Section 2.3;
provided, however, that, at the option of the Company, each installment of
interest may be paid by (i) check mailed to addresses of the Persons entitled
thereto as such addresses shall appear on the Note Register or (ii) wire
transfer to an account located in the United States maintained by the payee.
The Private Exchange Securities shall be in the form of Exhibit A.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule or usage, in addition to those set forth on Exhibits A and B
and in Section 2.1(c). The Company and the Trustee shall approve the forms of
the Securities and any notation, endorsement or legend on them. Each Security
shall be dated the date of its authentication. The terms of the Securities set
forth in Exhibit A and Exhibit B are part of the terms of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to be bound by such terms.
(b) Denominations. The Securities shall be issuable only in fully
registered form, without coupons, and only in denominations of $1,000 and any
integral multiple thereof.
(c) Restrictive Legends. Unless and until (i) an Initial Security is
sold under an effective registration statement or (ii) an Initial Security is
exchanged for an Exchange Security in connection with an effective registration
statement, in each case pursuant to the Registration Rights Agreement, (A) such
Rule 144A Global Note and the Institutional Accredited Investor Global Note
shall bear the following legend (the "Private Placement Legend") on the face
thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR
<PAGE>
22
THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS OWN
BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED
SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR,
IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PRINCIPAL AMOUNT OF
$250,000 OF SECURITIES, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT
TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE."; and
(B) the Regulation S Global Note shall bear the following legend
(the "Regulation S Legend") on the face thereof:
<PAGE>
23
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S.
PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2) BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE")
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM AND IN THE CASE OF THE FOREGOING
CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER
SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE
DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH THE
SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS
<PAGE>
24
(AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE
ORIGINAL OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION",
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT."
The Global Securities, whether or not an Initial Security, shall
bear the following legend on the face thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."
(d) Book-Entry Provisions. (i) This Section 2.1(d) shall apply only
to Global Securities deposited with the Trustee, as custodian for the
Depositary.
(ii) Each Global Security initially shall (x) be registered in the
name of the Depositary for such Global Security or the nominee of the
Depositary, (y) be delivered to the Trustee as custodian for the Depositary and
(z) bear legends as set forth in Section 2.1(c).
(iii) Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Security, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its
<PAGE>
25
Agent Members, the operation of customary practices of the Depositary governing
the exercise of the rights of a holder of a beneficial interest in any Global
Security.
(iv) In connection with any transfer of a portion of the beneficial
interest in a Global Security pursuant to subsection (e) of this Section to
beneficial owners who are required to hold Definitive Securities, the Security
Trustee shall reflect on its books and records the date and a decrease in the
principal amount of such Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Definitive Securities of like tenor and amount.
(v) In connection with the transfer of an entire Global Security to
beneficial owners pursuant to subsection (e) of this Section, such Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in such Global Security, an equal aggregate principal amount
of Definitive Securities of authorized denominations.
(e) Definitive Securities. Except as provided below, owners of
beneficial interests in Global Securities will not be entitled to receive
certificated Securities ("Definitive Securities"). If required to do so pursuant
to any applicable law or regulation, beneficial owners may obtain Definitive
Securities in exchange for their beneficial interests in a Global Security upon
written request in accordance with the Depositary's and the Registrar's
procedures. In addition, Definitive Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global
Security if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as depositary for such Global Security or the Depositary
ceases to be a clearing agency registered under the Exchange Act, at a time when
the Depositary is required to be so registered in order to act as depositary,
and in each case a successor depositary is not appointed by the Company within
90 days of such notice or, (ii) the Company executes and delivers to the Trustee
and Registrar an Officers' Certificate stating that such Global Security shall
be so exchangeable or (iii) an Event of Default has occurred and is continuing
and the Registrar has received a request from the Depositary.
(f) Any Definitive Security delivered in exchange for an interest in
a Global Security pursuant to Section 2.1(d)(iv) or (v) shall, except as
otherwise provided by Section 2.6(c), bear the applicable legend regarding
transfer restrictions applicable to the Definitive Security set forth in Section
2.1(c).
(g) The registered holder of a Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.2. Execution and Authentication. One Officer shall sign
the Securities for the Company by manual or facsimile signature. If an Officer
whose signature is on
<PAGE>
26
a Security no longer holds that office at the time the Trustee authenticates the
Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually authenticates the Security. The signature of the Trustee on a
Security shall be conclusive evidence that such Security has been duly and
validly authenticated and issued under this Indenture.
At any time and from time to time after the execution and delivery
of this Indenture, the Trustee shall authenticate and make available for
delivery: (1) Initial Securities for original issue on the Issue Date in an
aggregate principal amount of $200.0 million and (2) Exchange Securities for
issue only in a Registered Exchange Offer pursuant to the Registration Rights
Agreement, and only in exchange for Initial Securities of an equal principal
amount, and (3) additional series of notes which may be offered subsequent to
the Issue Date (the "Subsequent Series Securities") in an aggregate principal
amount not to exceed $200,000,000, in each case upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall specify the
amount of the Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated and whether the Securities are to be
Initial Securities or Exchange Securities. The aggregate principal amount of
notes which may be authenticated and delivered under this Indenture is limited
to $400.0 million outstanding except as provided in Section 2.9. No Subsequent
Series Securities may be authenticated and delivered in an aggregate principal
amount of less than $25,000,000. All Securities issued on the Issue Date and all
Subsequent Series Securities shall be identical in all respects other than issue
dates, the date from which interest accrues and any changes relating thereto.
Notwithstanding anything to the contrary contained in this Indenture, all notes
issued under this Indenture shall vote and consent together on all matters as
one class and no series of notes will have the right to vote or consent as a
separate class on any matter.
The Trustee may appoint an agent (the "Authenticating Agent")
reasonably acceptable to the Company to authenticate the Securities. Unless
limited by the terms of such appointment, any such Authenticating Agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by the
Authenticating Agent.
SECTION 2.3. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent.
<PAGE>
27
The Company shall notify the Trustee of the name and address of each such agent.
If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such and shall be entitled to appropriate compensation therefor pursuant
to Section 7.7. The Company or any of its domestically incorporated Wholly-Owned
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Paying Agent or the Registrar may resign as such upon 30 days' prior written
notice to the Company and the Trustee; upon resignation of any Paying Agent or
Registrar, the Company shall appoint a successor Paying Agent or Registrar, as
the case may be, no later than 30 days thereafter and shall provide notice to
the Trustee of such successor Paying Agent or Registrar.
The Company initially appoints the Trustee as Registrar and Paying
Agent for the Securities.
SECTION 2.4. Paying Agent To Hold Money in Trust. By at least 10:00
a.m. (New York City time) on the date on which any principal of or interest on
any Security is due and payable, the Company shall deposit with the Paying Agent
a sum sufficient to pay such principal or interest when due. The Company shall
require each Paying Agent (other than the Trustee) to agree in writing that such
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
money held by such Paying Agent for the payment of principal of or interest on
the Securities and shall notify the Trustee of any default by the Company in
making any such payment. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate the money held by it as Paying Agent and hold it as a separate
trust fund. The Company at any time may require a Paying Agent (other than the
Trustee) to pay all money held by it to the Trustee and to account for any funds
disbursed by such Paying Agent. Upon complying with this Section 2.4, the Paying
Agent (if other than the Company or a Subsidiary) shall have no further
liability for the money delivered to the Trustee. Upon any bankruptcy,
reorganization or similar proceeding with respect to the Company, the Trustee
shall serve as Paying Agent for the Securities.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee, in writing at least seven Business Days
before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders.
SECTION 2.6. Transfer and Exchange.
(a) The following provisions shall apply with respect to any
proposed transfer of a Rule 144A Note or an Institutional Accredited Investor
Note prior to the date which is two years after the later of the date of
original issue and the last date on which the Company or any affiliate of the
Company was the owner of such Securities (or any predecessor thereto) (the
"Resale Restriction Termination Date"):
(i) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to a QIB shall
be made upon the representation of the
<PAGE>
28
transferee that it is purchasing the Security for its own account or an
account with respect to which it exercises sole investment discretion and
that it and any such account is a "qualified institutional buyer" within
the meaning of Rule 144A, and is aware that the sale to it is being made
in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A;
(ii) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to an
institutional accredited investor shall be made upon receipt by the
Trustee or its agent of a certificate substantially in the form set forth
in Section 2.13 from the proposed transferee and, if requested by the
Company or the Trustee, the delivery of an opinion of counsel,
certification and/or other information satisfactory to each of them; and
(iii) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to a Non-U.S.
Person shall be made upon receipt by the Trustee or its agent of a
certificate substantially in the form set forth in Section 2.14 from the
proposed transferee and, if requested by the Company or the Trustee, the
delivery of an opinion of counsel, certification and/or other information
satisfactory to each of them.
(b) The following provisions shall apply with respect to any
proposed transfer of a Regulation S Note prior to the expiration of the
Restricted Period:
(i) a transfer of a Regulation S Note or a beneficial interest
therein to a QIB shall be made upon the representation of the transferee,
in the form of assignment on the reverse of the certificate, that it is
purchasing the Security for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a "qualified institutional buyer" within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A;
(ii) a transfer of a Regulation S Note or a beneficial
interest therein to an institutional accredited investor shall be made
upon receipt by the Trustee or its agent of a certificate substantially in
the form set forth in Section 2.13 from the proposed transferee and, if
requested by the Company or the Trustee, the delivery of an opinion of
counsel, certification and/or other information satisfactory to each of
them; and
(iii) a transfer of a Regulation S Note or a beneficial
interest therein to a Non-U.S. Person shall be made upon receipt by the
Trustee or its agent of a certificate substantially in the form set forth
in Section 2.14 from the proposed transferee and, if
<PAGE>
29
requested by the Company or the Trustee, receipt by the Trustee or its
agent of an opinion of counsel, certification and/or other information
satisfactory to each of them.
After the expiration of the Restricted Period, interests in the
Regulation S Note may be transferred without requiring certification set forth
in Section 2.14 or any additional certification.
(c) Restricted Securities Legend. Upon the transfer, exchange or
replacement of Securities not bearing a Restricted Securities Legend, the
Registrar shall deliver Securities that do not bear a Restricted Securities
Legend. Upon the transfer, exchange or replacement of Securities bearing a
Restricted Securities Legend, the Registrar shall deliver only Securities that
bear a Restricted Securities Legend unless there is delivered to the Registrar
an Opinion of Counsel to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(d) The Company shall deliver to the Trustee an Officer's
Certificate setting forth the Resale Restriction Termination Date and the
Restricted Period.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.1 or this Section 2.6. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
(e) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall, subject to the other terms and conditions of this Article
II, execute and the Trustee shall authenticate Definitive Securities and
Global Securities at the Registrar's or co-registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments or similar governmental charges payable upon
exchange or transfer pursuant to Sections 4.6, 4.8 or 9.5 or pursuant to
paragraph 5 of the Securities).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (A) any Definitive Security
selected for redemption in whole or in part pursuant to Article III,
except the unredeemed portion of any Definitive Security being redeemed in
part or (B) any Security for a period beginning (1) 15 Business Days
before the mailing of a notice of an offer to repurchase or redeem
Securities and ending at the close of business on the day of such mailing
or (2) 15 Business Days before an interest payment date and ending on such
interest payment date.
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(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose name
a Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest on such Security
and for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar shall be affected by notice to the contrary.
(v) Any Definitive Security delivered in exchange for an
interest in a Global Security pursuant to Section 2.1(d) shall, except as
otherwise provided by Section 2.6(c), bear the applicable legend regarding
transfer restrictions applicable to the Definitive Security set forth in
Section 2.1(c).
(vi) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt and
shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(f) No Obligation of the Trustee. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in, the Depositary or other Person with respect to
the accuracy of the records of the Depositary or its nominee or of any
participant or member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depositary) of any notice
(including any notice of redemption) or the payment of any amount or delivery of
any Securities (or other security or property) under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders in respect of the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only through the
Depositary subject to the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon information
furnished by the Depositary with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among the
Depositary participants, members or beneficial owners in any Global Security);
provided that the Trustee shall have the right to require such certifications,
Opinions of Counsel or other documentation in respect of exchanges of beneficial
ownership interests in Global Securities for Definitive Securities as it may
reasonably request.
SECTION 2.7. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the Company
provides the Trustee with an Officer's Certificate stating that the requirements
of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
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31
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security. Every replacement Security is
an additional obligation of the Company.
SECTION 2.8. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section 2.8 as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.9. Temporary Securities. Until Definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Definitive Securities. After
the preparation of definitive Securities, the temporary Securities shall be
exchangeable for Definitive Securities upon surrender of the temporary
Securities at any office or agency maintained by the Company for that purpose
and such exchange shall be without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute,
and the Trustee shall authenticate and deliver in exchange therefor, one or more
Definitive Securities representing an equal principal amount of Securities.
Until so exchanged, the Holder of temporary Securities shall in all respects be
entitled to the same benefits under this Indenture as a holder of Definitive
Securities.
SECTION 2.10. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue
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32
new Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed (or upon the Company's failure to do so the Trustee shall fix
pursuant to a written instruction of Holders of at least a majority in principal
amount of the Securities) any such special record date and payment date to the
reasonable satisfaction of the Trustee which specified record date shall not be
less than 10 days prior to the payment date for such defaulted interest and
shall promptly mail or cause to be mailed to each Securityholder a notice that
states the special record date, the payment date and the amount of defaulted
interest to be paid. The Company shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such defaulted interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when so deposited to be held in trust for the benefit of the Person
entitled to such defaulted interest as provided in this Section 2.11.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such CUSIP
numbers.
In the event that the Company shall issue and the Trustee shall
authenticate any Subsequent Series Securities pursuant to Section 2.2, the
Company shall use its best efforts to obtain the same CUSIP number for such
Subsequent Series Securities as is printed on the Securities outstanding at such
time; provided, however, that if any series of Subsequent Series Securities is
determined, pursuant to an Opinion of Counsel, to be a different class of
security than the Securities outstanding at such time for federal income tax
purposes, the Company may obtain a CUSIP number for such series of Subsequent
Series Securities that is different from the CUSIP number printed on the
Securities then outstanding.
SECTION 2.13. Form of Certificate to be Delivered in Connection with
Transfers to Institutional Accredited Investors.
[Date]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
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33
Attention: Corporate Trust Services Division
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the ____% Series E Senior Subordinated Notes due 2008 (the
"Securities") of Aurora Foods Inc. (the "Company").
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Securities
and we invest in or purchase securities similar to the Securities in the normal
course of our business. We and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two years after
the later of the date of original issue and the last date on which the Company
or any affiliate of the Company was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales that occur outside the United States within the meaning of
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in a minimum principal
amount of Securities of $250,000 or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or accounts be at all
times within our or their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Company and the
Trustee, which shall provide, among other things, that the
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34
transferee is an institutional "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and that it is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Termination Date of the Securities pursuant to clauses (d), (e) or (f) above to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
TRANSFEREE:_____________________
BY______________________________
SECTION 2.14. Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S.
[Date]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Services Division
Re: Aurora Foods Inc.
_____% Series E Senior Subordinated Notes due 2008 (the
"Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
1. the offer of the Securities was not made to a person in the
United States;
2. either (i) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (ii) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
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35
3. no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________________
_________________________________________
Authorized Signature Medallion Guaranteed
SECTION 2.15. Computation of Interest. Interest on the Securities
shall be computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for in
this Section 3.1 at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and, if the Trustee so requests, an Opinion of Counsel to the effect
that such redemption will comply with the conditions herein. If fewer than all
the Securities are to be redeemed, the record date relating to such redemption
shall be
<PAGE>
36
selected by the Company and set forth in the related notice given to the
Trustee, which record date shall be not less than 15 days after the date of such
notice.
SECTION 3.2. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee shall
make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(i) the redemption date;
(ii) the redemption price;
(iii) the name and address of the Paying Agent;
(iv) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(v) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(vi) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making
such payment pursuant to the terms of this Indenture, interest on
Securities (or portion thereof) called for redemption ceases to
accrue on and after the redemption date;
(vii) the CUSIP number, if any, printed on the Securities
being redeemed; and
(viii) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or
printed on the Securities.
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37
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section 3.3.
SECTION 3.4. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date;
provided that if the redemption date is after a regular record date and on or
prior to the interest payment date, the accrued interest shall be payable to the
Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. By at least 10:00 a.m.
(New York City time) on the date on which any principal of or interest on any
Security is due and payable, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption which are owned by the Company or a
Subsidiary and have been delivered by the Company or such Subsidiary to the
Trustee for cancellation.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in a principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
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38
Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.2. SEC Reports. Notwithstanding that the Company may not
be required to be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Company shall file with the Commission, and within 15
days after such reports are filed, provide the Trustee and the Holders (at their
addresses as set forth in the register of Securities) with the annual reports
and the information, documents and other reports which are otherwise required
pursuant to Section 13 and 15(d) of the Exchange Act, for so long as the Notes
are outstanding the Company shall furnish to the Trustee and the holders,
promptly upon their becoming available, copies of the Company's annual report to
stockholders and any other information provided by the Company to its public
stockholders generally.
SECTION 4.3. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any of its Subsidiaries to, Incur any Indebtedness;
provided, however, that the Company and any of its Subsidiaries may Incur
Indebtedness if on the date thereof the Consolidated Coverage Ratio would be
greater than 2.00:1.00.
(b) Notwithstanding Section 4.3(a), the Company and its Subsidiaries
may Incur the following Indebtedness: (i) Bank Indebtedness provided that the
aggregate principal amount of Indebtedness Incurred pursuant to this clause (i)
does not exceed an amount outstanding at any time equal to $400 million less the
aggregate amount of permanent reductions of commitments to extend credit
thereunder and repayments of principal thereof (without duplication of
repayments required as a result of such reductions of commitments); (ii)
Indebtedness (A) of the Company to any Wholly-Owned Subsidiary and (B) of any
Subsidiary to the Company or any Wholly-Owned Subsidiary; (iii) Indebtedness
represented by the Securities, any Indebtedness (other than the Indebtedness
described in clauses (i)-(ii) above) outstanding on the date hereof (including,
without limitation, the Existing Notes) and any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (iii) or this
paragraph (b); (iv) Indebtedness represented by the Security Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause (i) above; (v)
Indebtedness under Currency Agreements and Interest Rate Agreements which are
entered into for bona fide hedging purposes of the Company or its Subsidiaries
(as determined in good faith by the Board of Directors or senior management of
the Company) and correspond in terms of notional amount, duration, currencies
and interest rates, as applicable, to Indebtedness of the Company or its
Subsidiaries Incurred without violation of the Indenture or to business
transactions of the Company or its Subsidiaries on customary terms entered into
in the ordinary course of business; (vi) Indebtedness of the Company
attributable to Capitalized Lease Obligations, or Incurred to finance the
acquisition, construction or improvement of fixed or capital assets, or
constituting Attributable Indebtedness in respect of Sale/Leaseback
Transactions, in an aggregate principal amount at any one time outstanding not
in excess of $10.0 million; and (vii) Indebtedness of the Company or any of its
Subsidiaries (which may comprise Bank Indebtedness) in an aggregate principal
amount at any time outstanding not in excess of $15.0 million.
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39
(c) Notwithstanding any other provision of this Section 4.3, the
Company shall not Incur any Indebtedness (i) pursuant to Section 4.3(b) if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Obligations or (ii) pursuant to Section 4.3(a) or 4.3(b) if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness
or is expressly subordinated in right of payment to Senior Subordinated
Indebtedness.
(d) The Company shall not Incur any Secured Indebtedness which is
not Senior Indebtedness unless contemporaneously therewith effective provision
is made to secure the Securities equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
SECTION 4.4. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Subsidiary, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company) except (A) dividends or distributions
payable in its Capital Stock (other than Disqualified Stock) and (B) dividends
or distributions payable to the Company or another Subsidiary (and, if such
Subsidiary is not a Wholly-Owned Subsidiary, to its other stockholders on a pro
rata basis), (ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company or any Subsidiary held by Persons other than the
Company or another Subsidiary, (iii) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Obligations (other
than the purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being herein referred to
as a "Restricted Payment"), if at the time the Company or such Subsidiary makes
such Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); or (2) the Company could not Incur at least an
additional $1.00 of Indebtedness pursuant to Section 4.3(a); or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a resolution of the Board of Directors) or made subsequent to
the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting period) from the Issue Date
to the end of the most recent fiscal quarter ending prior to the date of such
Restricted Payment as to which financial results are available (but in no event
more than 135 days prior to the date of such Restricted Payment) (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the issue or
sale of its Capital Stock (other than Disqualified Stock) or other cash
contributions to its capital subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company or an employee stock ownership
plan or other trust established by the Company or any of its Subsidiaries); (C)
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aggregate Net Cash Proceeds from issue or sale of its Capital Stock to an
employee stock ownership plan or similar trust, provided, however, that if such
plan or trust Incurs any Indebtedness to or Guaranteed by the Company to finance
the acquisition of such Capital Stock, such aggregate amount shall be limited to
any increase in the Consolidated Net Worth of the Company resulting from
principal repayments made by such plan or trust with respect to Indebtedness
Incurred by it to finance the purchase of such Capital Stock; and (D) the amount
by which Indebtedness of the Company or its Subsidiaries is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or
its Subsidiaries convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash, or other
property, distributed by the Company or any Subsidiary upon such conversion or
exchange).
(b) The provisions of Section 4.4(a) shall not prohibit: (i) any
purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries); provided, however, that (A) such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from clause Section 4.4(a)(3)(B);
(ii) any purchase or redemption of Subordinated Obligations of the Company made
by exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company; provided, however, that such purchase
or redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under Section 4.6; provided, however,
that such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments; (iv) dividends paid within 60 days after the date
of declaration if at such date of declaration such dividend would have complied
with this provision; provided, however, that such dividend shall be included in
the calculation of the amount of Restricted Payments; (v) amounts expended by
the Company to repurchase Capital Stock of the Company owned by employees
(including former employees) of the Company or its Subsidiaries or their
assigns, estates and heirs; provided that the aggregate amount paid, loaned or
advanced purchase to this clause (v) shall not, in the aggregate, exceed the sum
of $5.0 million plus any amounts received by the Company as a result of resales
of such repurchased shares of Capital Stock; or (vi) any repurchase of equity
interest deemed to occur upon exercise of stock options if such equity interests
represent a portion of the exercise price of such options.
SECTION 4.5. Limitation on Restrictions on Distributions from
Subsidiaries. The Company shall not, and shall not permit any of its
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any such Subsidiary to (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company; except: (A) any encumbrance or restriction pursuant to an agreement in
effect on the Issue Date, including those arising under the Senior Credit
Documents; (B) any encumbrance or restriction with respect to a Subsidiary
pursuant to an
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41
agreement relating to any Indebtedness Incurred by a Subsidiary prior to the
date on which such Subsidiary was acquired by the Company (other than
Indebtedness Incurred as consideration in, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary was acquired by the
Company); (C) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement effecting a refinancing of Indebtedness Incurred
pursuant to an agreement referred to in clauses (A) or (B) or this clause (C) or
contained in any amendment, supplement or modification (including an amendment
and restatement) to an agreement referred to in clauses (A) or (B) or this
clause (C); provided, however, that the encumbrances and restrictions contained
in any such refinancing agreement or amendment taken as a whole are no less
favorable to the holders of the Securities in any material respect than
encumbrances and restrictions contained in such agreements; (D) in the case of
clause (iii), any encumbrance or restriction (1) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is
subject to a lease, license, or similar contract, (2) by virtue of any transfer
of, agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Subsidiary not otherwise prohibited by
this Indenture, or (3) contained in security agreements securing Indebtedness of
a Subsidiary to the extent such encumbrance or restrictions restrict the
transfer of the property subject to such security agreements; (E) any such
restriction imposed by applicable law; (F) any restriction with respect to a
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of such
Subsidiary pending the closing of such sale or disposition; and (G) purchase
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired.
SECTION 4.6. Limitation on Sales of Assets. (a) The Company shall
not, and shall not permit any Subsidiary to, make any Asset Disposition unless
(i) the Company or such Subsidiary receives consideration (including by way of
relief from, or by any other Person assuming sole responsibility for, any
liabilities, contingent or otherwise) at the time of such Asset Disposition at
least equal to the fair market value of the shares and assets subject to such
Asset Disposition, (ii) at least 85% of the consideration thereof received by
the Company or such Subsidiary is in the form of cash and (iii) an amount equal
to 100% of the Net Available Cash from such Asset Disposition is applied by the
Company (or such Subsidiary, as the case may be) (A) first, to the extent the
Company elects (or is required by the terms of any Senior Indebtedness or
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary), to
prepay, repay or purchase Senior Indebtedness or such Indebtedness (other than
Preferred Stock) of a Wholly-Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within one year
after the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the extent the Company or
such Subsidiary elects, to reinvest in Additional Assets (including by means of
an Investment in Additional Assets by a Subsidiary with Net Available Cash
received by the Company or another Subsidiary) within one year after the later
of the date of such Asset Disposition or the receipt of such Net Available Cash;
(C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to purchase
the Existing Notes pursuant and subject to the conditions of the Existing
Indentures to the Holders at a purchase price of 100% of the
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42
principal amount thereof plus accrued and unpaid interest to the purchase date,
and (D) fourth, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to make an offer to
purchase the Notes and other Senior Subordinated Indebtedness (other than the
Existing Notes) at the time outstanding with similar provisions requiring the
Company to make an offer to purchase such Indebtedness with the proceeds from
any Asset Disposition ("Pari Passu Notes") at 100% of the principal amount
thereof (or 100% of the accreted value of such Pari Passu Notes if such Pari
Passu Notes were issued at a discount) plus accrued and unpaid interest, if any,
to the date of purchase; and (E) fifth, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A), (B), (C) and
(D), to (x) acquire Additional Assets (other than Indebtedness and Capital
Stock) or (y) prepay, repay or purchase Indebtedness of the Company (other than
Indebtedness owed to an Affiliate of the Company and other than Disqualified
Stock of the Company) or Indebtedness of any Subsidiary (other than Indebtedness
owed to the Company or an Affiliate of the Company), in each case described in
this clause (E) within one year from the receipt of such Net Available Cash or,
if the Company has made an Offer pursuant to clause (D), six months from the
date such Offer is consummated; provided, however, that, in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (A), (C),
(D) or (E) above, the Company or such Subsidiary shall retire such Indebtedness
and shall cause the related loan commitment (if any) to be permanently reduced
in an amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions, the Company and its Subsidiaries shall
not be required to apply any Net Available Cash in accordance herewith except to
the extent that the aggregate Net Available Cash from all Asset Dispositions
which are not applied in accordance with this Section 4.6 at any time exceed
$5.0 million. The Company shall not be required to make an offer for Securities
pursuant to this covenant if the Net Available Cash available therefor (after
application of the proceeds as provided in clauses (A), (B) and (C)) is less
than $10.0 million for any particular Asset Disposition (which lesser amounts
shall be carried forward for purposes of determining whether an offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
For the purposes of this Section 4.6, the following will be deemed
to be cash: (x) the assumption of Indebtedness (other than Disqualified Stock)
of the Company or any Subsidiary and the release of the Company or such
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Subsidiary of the
Company from the transferee that are promptly converted by the Company or such
Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of Notes and Pari Passu Notes pursuant to Section 4.6(a)(iii)(D), the Company
will be required to apply the Net Available Cash available therefor to the
purchase of the Notes and any Pari Passu Notes as follows: (A) the Company will
make an offer to purchase (an "Offer") from all holders of the Notes in
accordance with the procedures set forth in the Indenture in the maximum
principal amount (expressed as a multiple of $1,000) of Notes that may be
purchased out of an amount (the "Note Amount") equal to the product of such Net
Available Cash multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Notes and the denominator of which is the
sum of the outstanding principal amount of the Notes and the outstanding
principal
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43
amount (or accreted value, as the case may be) of the Pari Passu Notes at a
purchase price of 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase and (B) the Company will make an offer
to purchase any Pari Passu Notes (a "Pari Passu Offer") in an amount equal to
the excess of such Net Available Cash over the Note Amount at a purchase price
of 100% of the principal amount (or accreted value, as the case may be) thereof
plus accrued and unpaid interest, if any, to the date of purchase in accordance
with the procedures (including prorating in the event of oversubscription) set
forth in the documentation governing such Pari Passu Notes with respect to the
Pari Passu Offer. If the aggregate purchase price of the Notes and Pari Passu
Notes tendered pursuant to the Offer and the Pari Passu Offer is less than such
Net Available Cash, the Company will apply the remaining Net Available Cash in
accordance with Section 4.6(a)(iii)(E) above.
(c) (i) Promptly, and in any event within 10 days after the Company
is required to make an Offer, the Company shall deliver to the Trustee and send,
by first-class mail to each Holder, a written notice stating that the Holder may
elect to have his or her Securities purchased by the Company either in whole or
in part (subject to prorating as hereinafter described in the event the Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "Purchase
Date").
(ii) Not later than the date upon which such written notice of
an Offer is delivered to the Trustee and the Holders, the Company shall deliver
to the Trustee an Officers' Certificate setting forth (A) the amount of the
Offer (the "Offer Amount"), (B) the allocation of the Net Available Cash from
the Asset Dispositions as a result of which such Offer is being made and (C) the
compliance of such allocation with the provisions of Section 4.6(a). Upon the
expiration of the period (the "Offer Period") for which the Offer remains open,
the Company shall deliver to the Trustee for cancellation the Securities or
portions thereof which have been properly tendered to and are to be accepted by
the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to
each tendering Holder in the amount of the purchase price of the Securities
tendered by such Holder to the extent such funds are available to the Trustee.
(iii) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice prior to the expiration of
the Offer Period. Each Holder will be entitled to withdraw its election if the
Trustee or the Company receives, not later than one Business Day prior to the
expiration of the Offer Period, a telegram, telex, facsimile transmission or
letter from such Holder setting forth the name of such Holder, the principal
amount of the Security or Securities which were delivered for purchase by such
Holder and a statement that such Holder is withdrawing its election to have such
Security or Securities purchased. If at the expiration of the Offer Period the
aggregate principal amount of Securities surrendered by Holders exceeds the
Offer Amount, the Company shall select the Securities to be purchased on a pro
rata basis (with such adjustments as may be deemed appropriate by the Company so
that only Securities in denominations of $1,000, or integral multiples thereof,
shall be purchased). Holders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.
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44
(d) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.6. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.6, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.7. Limitation on Affiliate Transactions. (a) The Company
will not, and will not permit any Subsidiary to, directly or indirectly, enter
into or conduct any transaction (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate of the
Company (an "Affiliate Transaction") unless: (i) the terms of such Affiliate
Transaction are no less favorable to the Company or such Subsidiary, as the case
may be, than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate; (ii) in the
event such Affiliate Transaction involves an aggregate amount in excess of $2.5
million, the terms of such transaction have been approved by a majority of the
members of the Board of Directors of the Company and by a majority of the
disinterested members of such Board, if any (and such majority or majorities, as
the case may be, determines that such Affiliate Transaction satisfies the
criteria in (i) above); and (iii) in the event such Affiliate Transaction
involves an aggregate amount in excess of $10.0 million, the Company has
received a written opinion from an independent investment banking firm of
nationally recognized standing that such Affiliate Transaction is fair to the
Company or such Subsidiary, as the case may be, from a financial point of view.
(b) The provisions of Section 4.7(a) will not prohibit (i) any
Restricted Payment permitted to be made pursuant to Section 4.4 (and in the case
of Permitted Investments, only those described in clauses (v), (vi) and (ix) of
the definition of Permitted Investments), (ii) the performance of the Company's
or Subsidiary's obligations under any employment contract, collective bargaining
agreement, employee benefit plan, related trust agreement or any other similar
arrangement heretofore or hereafter entered into in the ordinary course of
business, (iii) payment of compensation to, and indemnity provided on behalf of,
employees, officers, directors or consultants in the ordinary course of
business, (iv) maintenance in the ordinary course of business of benefit
programs or arrangements for employees, officers or directors, including
vacation plans, health and life insurance plans, deferred compensation plans,
and retirement or savings plans and similar plans, (v) any transaction between
the Company and a Wholly-Owned Subsidiary or between Wholly-Owned Subsidiaries,
(vi) the payment of fees under the Agreements dated as of April 8, 1998 between
the Company and Dartford Partnership L.L.C., Fenway Partners, Inc. and an
affiliate of McCown De Leeuw & Co., respectively, as in effect on the Issue Date
and (vii) payments of up to $800,000 per year to Dartford Partnership L.L.C. as
reimbursement of corporate headquarters expenses and rent for space leased by
Dartford Partnership L.L.C. and used by the Company as corporate headquarters.
SECTION 4.8. Change of Control. (a) Upon the occurrence of a Change
of Control, each Holder shall have the right to require the Company to
repurchase all or any part of such Holder's Securities at a purchase price in
cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of Holders of
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45
record on the relevant record date to receive interest due on the relevant
interest payment date), such repurchase to be made in accordance with Section
4.8(b).
(b) Within 30 days following any Change of Control, unless the
Company has mailed a redemption notice with respect to all the outstanding
Securities in connection with such Change of Control, the Company shall mail a
notice to each Holder of record with a copy to the Trustee stating: (i) that a
Change of Control has occurred and that such Holder has the right to require the
Company to purchase such Holder's Securities at a purchase price in cash equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of Holders of record on a
record date to receive interest on the relevant interest payment date); (ii) the
circumstances and relevant facts and financial information concerning such
Change of Control; (iii) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and (iv) the
procedures determined by the Company, consistent with this Indenture, that a
Holder must follow in order to have its Securities purchased.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Each Holder will be entitled to withdraw its
election if the Company receives, not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter from such
Holder setting forth the name of such Holder, the principal amount of the
Security or Securities which were delivered for purchase by such Holder and a
statement that such Holder is withdrawing his election to have such Security or
Securities purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section 4.8 shall be delivered to the Trustee for cancellation, and
the Company shall pay the purchase price plus accrued and unpaid interest, if
any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.8. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.8, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.9. Limitation on Sale of Subsidiary Capital Stock. The
Company (i) will not, and will not permit any Subsidiary to, transfer, convey,
sell, lease or otherwise dispose of any Capital Stock of any Subsidiary to any
Person (other than to the Company or a Wholly-Owned Subsidiary) and (ii) will
not permit any Subsidiary to issue any of its Capital Stock (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly-Owned Subsidiary;
provided, however, that this Section 4.9 shall not prohibit such conveyance,
sale, lease or other disposition of all the Capital Stock of a Subsidiary if the
net cash proceeds from such transfer, conveyance, sale, lease, other disposition
or issuance are applied in accordance with Section 4.6.
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46
SECTION 4.10. Future Security Guarantors. The Company will cause
each Subsidiary which Incurs Indebtedness or which is a guarantor of
Indebtedness Incurred pursuant to Section 4.3(b)(i) to execute and deliver to
the Trustee a Security Guarantee pursuant to which such Subsidiary will
Guarantee, jointly and severally, to the Holders and the Trustee, subject to
subordination provisions in Article X, the full and prompt payment of the
Securities in the Indenture. Each Security Guarantee will be limited in amount
to an amount not to exceed the maximum amount that can be Guaranteed by that
Subsidiary without rendering the Security Guarantee, as it relates to such
Subsidiary, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
SECTION 4.11. Limitation on Lines of Business. The Company will not,
and will not permit any Subsidiary to, engage in any business, other than the
food business and such other business activities which are incidental or related
thereto.
SECTION 4.12. Maintenance of Office or Agency for Registration of
Transfer, Exchange and Payment of Securities. So long as any of the Securities
shall remain outstanding, the Company will maintain an office or agency in the
Borough of Manhattan, the City of New York, State of New York, where the
Securities may be surrendered for exchange or registration of transfer as in
this Indenture provided, and where notices and demands to or upon the Company in
respect to the Securities may be served, and where the Securities may be
presented or surrendered for payment. The Company may also from time to time
designate one or more other offices or agencies where Securities may be
presented or surrendered for any and all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, the City of New York, State of
New York for such purposes. The Company will give to the Trustee prompt written
notice of the location of any such office or agency and of any change of
location thereof. The Company initially appoints the Trustee c/o Harris Trust
Company of New York, 77 Water Street, New York, New York 10005 for each of said
purposes. In case the Company shall fail to maintain any such office or agency
or shall fail to give such notice of the location or of any change in the
location thereof, such surrenders, presentations and demands may be made and
notices may be served at the principal office of the Trustee in the City of
Wilmington, State of Delaware, and the Company hereby appoints the Trustee its
agent to receive at the aforesaid office all such surrenders, presentations,
notices and demands. The Trustee will give the Company prompt notice of any
change in location of the Trustee's principal office.
SECTION 4.13. Appointment to Fill a Vacancy in the Office of
Trustee. The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 7.8, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 4.14. Provision as to Paying Agent. (a) If the Company shall
appoint a paying agent other than the Trustee, it will cause such Paying Agent
to execute and deliver to the Trustee an instrument in which such agent shall
undertake, subject to the provisions of this Section 4.14,
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47
(i) that it will hold all sums held by it as such agent for
the payment of the principal of, premium, if any, or interest on the
Securities whether such sums have been paid to it by the Company (or by
any other obligor on the Securities) in trust for the benefit of the
holders of the Securities and will notify the Trustee of the receipt of
sums to be so held,
(ii) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Securities) to make any
payment of the principal of, premium, if any, or interest on the
Securities when the same shall be due and payable,
(iii) that it will at any time during the continuance of any
Event of Default specified in Section 6.1(i) or 6.1(ii), upon the written
request of the Trustee, deliver to the Trustee all sums so held in trust
by it, and
(iv) acknowledge, accept and agree to comply in all aspects
with the provisions of this Indenture relating to the duties, rights and
liabilities of such Paying Agent, including, without limitation, the
provision of Article X hereof.
(b) If the Company shall not act as its own Paying Agent, it will,
by 10:00 a.m. on the Business Day prior to each due date of the principal of or
premium, if any, or interest on any Securities, deposit with such Paying Agent a
sum in same day funds sufficient to pay the principal of, premium, if any, or
interest so becoming due, such sum to be held in trust for the benefit of the
holders of Securities entitled to such principal of or premium, if any, or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its failure so to act.
(c) If the Company shall act as its own Paying Agent, it will, on or
before each due date of the principal of or premium, if any, or interest on the
Securities, set aside, segregate and hold in trust for the benefit of the
persons entitled thereto, a sum sufficient to pay such principal or premium or
interest so becoming due and will notify the Trustee of any failure to take such
action.
(d) Anything in this Section 4.14 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any Paying Agent hereunder, as
required by this Section 4.14, such sums to be held by the Trustee upon the
trusts herein contained.
(e) Anything in this Section 4.14 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 4.14 is subject
to the provisions of Sections 8.4 and 8.6.
SECTION 4.15. Maintenance of Corporate Existence. So long as any of
the Securities shall remain outstanding, the Company will at all times (except
as otherwise provided or permitted in this Section 4.15 or elsewhere in this
Indenture) do or cause to be done all things
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48
necessary to preserve and keep in full force and effect its corporate existence
and franchises and the corporate existence and franchises of each Subsidiary;
provided that nothing herein shall require the Company to continue the corporate
existence or franchises of any Subsidiary if in the judgment of the Company it
shall be necessary, advisable or in the interest of the Company to discontinue
the same.
SECTION 4.16. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default or Event of Default and whether or not the signers know
of any Default or Event of Default that occurred during such period. If they do,
the certificate shall describe the Default or Event of Default, its status and
what action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with TIA ss. 314(a)(4).
SECTION 4.17. Further Instruments and Acts. The Company will execute
and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture or as may be reasonably requested by the Trustee.
ARTICLE V
Successor Company
SECTION 5.1. When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") is a corporation organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) expressly assumes
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary of the Successor Company as a result of such
transaction as having been Incurred by the Successor Company or such
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur at least an additional $1.00 of
Indebtedness pursuant to Section 4.3(a);
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(iv) immediately after giving effect to such transaction, the
Successor Company will have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but the
predecessor, the Company, in the case of a lease of all or substantially all its
assets shall not be released from the obligation to pay the principal of and
interest on the Securities.
Notwithstanding Section 5.1(ii), (iii) and (iv), (i) any Subsidiary
of the Company may consolidate with, merge into or transfer all or part of its
properties and assets to the Company or another wholly-owned Subsidiary of the
Company; and (ii) the Company may merge with an Affiliate incorporated solely
for the purpose of reincorporating the Company in another jurisdiction to
realize tax or other benefits.
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of Default" occurs if:
(i) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article X, and such default continues for a
period of 30 days;
(ii) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon required repurchase, upon declaration or
otherwise, whether or not such payment shall be prohibited by Article X;
(iii) the Company fails to comply with Section 5.1;
(iv) the Company fails to comply with Section 4.2, 4.3, 4.4,
4.5, 4.6, 4.7, 4.8, 4.9, 4.10 or 4.11 (in each case other than a failure
to repurchase Securities when required pursuant to Section 4.6 or 4.8
which failure shall constitute an Event of Default under Section 6.1(ii))
and such failure continues for 30 days after the notice specified below;
(v) the Company fails to comply with any of its agreements in
the Securities or this Indenture (other than those referred to in (i),
(ii), (iii) or (iv) above) and such failure continues for 60 days after
the notice specified below;
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(vi) Indebtedness of the Company or any Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
unpaid or accelerated Indebtedness exceeds $10.0 million or its foreign
currency equivalent at the time and such default shall not have been cured
or such acceleration rescinded within a 10-day period;
(vii) the Company or a Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against
it in an involuntary case;
(C) consents to the appointment of a Custodian of it or
for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the Company
or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order,
decree or relief remains unstayed and in effect for 60 days;
(ix) any judgment or decree for the payment of money in excess
of $10.0 million or its foreign currency equivalent at the time (to the
extent not covered by insurance) is entered against the Company or any
Significant Subsidiary which is final and non-appealable and is not
discharged and either (A) an enforcement proceeding has been commenced by
any creditor upon such judgment or decree and is not promptly stayed or
(B) there is a period of 60 days following the entry of such judgment or
decree during which such judgment or decree is not discharged or the
execution thereof stayed; or
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(x) the failure of any Security Guarantee to be in full force
and effect (except as contemplated by the terms thereof) or the denial or
disaffirmation by any Security Guarantor of its obligations hereunder or
any Security Guarantee if such default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
Notwithstanding the foregoing, a Default under Section 6.1(iv) or
Section 6.1(v) will not constitute an Event of Default until the Trustee or the
Holders of at least 25% in principal amount of the outstanding Securities notify
the Company of the Default and the Company does not cure such Default within the
time specified in said clause (iv) or (v) after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
The Company shall deliver to the Trustee: (i) within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (vi) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (iv),
(v) or (ix), its status and what action the Company is taking or proposes to
take with respect thereto; and (ii) within 120 days after the end of each fiscal
year, written notice in the form of an Officer's Certificate indicating whether
the Officers signing such Officer's Certificate knew or were aware of any
Default that occurred during such previous fiscal year.
SECTION 6.2. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.1(vii) or (viii) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in outstanding principal amount of the Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
and unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.1(vii) or (viii) with respect to
the Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holders. The Holders of a majority in principal amount of the Securities by
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of acceleration. No such rescission
shall affect any subsequent Default or Event of Default or impair any right
consequent thereto.
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SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
outstanding principal amount of the Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except (i) a
Default or Event of Default in the payment of the principal of or interest on a
Security or (ii) a Default or Event of Default in respect of a provision that
under Section 9.2 cannot be amended without the consent of each Holder affected.
When a Default or Event of Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any consequent right.
SECTION 6.5. Control by Majority. The Holders of a majority in
outstanding principal amount of the Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.1, that the Trustee determines is unduly prejudicial to the
rights of other Holders (it being understood that, subject to Section 7.1, the
Trustee shall have no duty to ascertain whether or not such actions or
forebearances are unduly prejudicial to such Holders) or would involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.6. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium, (if any) or interests when due, a Holder
may not pursue any remedy with respect to this Indenture or the Securities
unless:
(i) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(ii) the Holders of at least 25% in outstanding principal
amount of the Securities make a written request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
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53
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or indemnity;
and
(v) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction that, in the opinion of the
Trustee are inconsistent with the request during such 60-day period.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(i) or (ii) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Holders allowed in
any judicial proceedings relative to the Company, its Subsidiaries or their
respective creditors or properties and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel, and any other amounts due the Trustee under
Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: Costs and expenses of collection, including all sums paid or
advanced by the Trustee hereunder and the compensation, expenses and
disbursements of the Trustee, its agents, and counsel and all other
amounts due to the Trustee under Section 7.7;
SECOND: to holders of Senior Indebtedness to the extent required by
Article X;
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54
THIRD: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment
to Holders pursuant to this Section 6.10. At least 15 days before such record
date, the Company shall mail to each Holder and the Trustee a notice that states
the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more
than 10% in outstanding principal amount of the Securities.
ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and (ii) in the absence
of bad faith on its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that: (i) this paragraph does not limit the effect of Section 7.1(b);
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Trust Officer unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.5.
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(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to Sections 7.1(a), 7.1(b) and 7.1(c).
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.1 and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed in
good faith.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) Prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, Officer's Certificate, or other certificated statement, instrument,
opinion, report, notice, request, consent, order, approval, appraisal, bond,
debenture, note, coupon, security, or other paper or document unless requested
<PAGE>
56
in writing so to do by the Holders of not less than a majority in aggregate
principal amount of the Securities then outstanding; provided that, if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to
proceeding; the reasonable expenses of every such examination shall be paid by
the Company or, if advanced by the Trustee, shall be repaid by the Company upon
demand.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its power and duties hereunder.
(h) The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions, or agreements on the
part of the Company, except as otherwise set forth herein, but the Trustee may
require of the Company full information and advice as to the performance of the
covenants, conditions and agreements contained herein and shall be entitled in
connection herewith to examine the books, records and premises of the Company.
(i) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its negligence or willful default.
(j) Except for (i) a default under Sections 6.1(i) or (ii) hereof,
or (ii) any other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not be
deemed to have notice of any default or event unless specifically notified in
writing of such event by the Company or the Holders of not less than 25% in
aggregate principal amount of the Securities Outstanding; as used herein, the
term "actual knowledge" means the actual fact or statement of knowing, without
any duty to make any investigation with regard thereto.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, it shall not be responsible for the use
or application of any money received by any Paying Agent (other than itself as
Paying Agent), and it shall not be responsible for any statement of the Company
in this Indenture or in any document issued in connection with the sale of the
Securities or in the Securities other than the Trustee's certificate of
authentication.
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SECTION 7.5. Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if a Trust Officer has actual knowledge thereof,
the Trustee shall mail to each Holder notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment of principal of, or interest on, any Security (including
payments pursuant to the optional redemption or required repurchase provisions
of such Security, if any), the Trustee may withhold the notice if and so long as
its board of directors, the Executive Committee of its board of directors or a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Holder a brief report dated as of such May 15 that complies
with TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b). The
Trustee shall also transmit by mail all reports required by TIA ss. 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed by the Company with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time, and the Trustee shall be entitled to,
compensation for its services as set forth in a separate fee agreement between
the Trustee and the Company. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, costs of preparing and
reviewing reports, certificates and other documents, costs of preparation and
mailing of notices to Holders and reasonable costs of counsel retained by the
Trustee in connection with the delivery of an Opinion of Counsel or otherwise,
in addition to the compensation for its services. Such expenses shall include
the reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Company shall indemnify
and hold harmless the Trustee against any and all loss, liability or expense
(including reasonable attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder,
including the costs and expenses of enforcing this Indenture (including this
Section 7.7) and of defending itself against any claims (whether asserted by any
Holder, the Company or otherwise). The Trustee shall notify the Company promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder.
The Company shall defend the claim and the Trustee may have separate counsel and
the Company shall pay the fees and expenses of such counsel. The Company need
not reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct or
negligence.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. The
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Trustee's right to receive payment of any amounts due under this Section 7.7
shall not be subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section 7.7 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.1(vii) or (viii) with respect
to the Company, the expenses are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in outstanding
principal amount of the Securities may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if: (i) the Trustee fails to comply with Section 7.10; (ii) the Trustee
is adjudged bankrupt or insolvent; (iii) a receiver or other public officer
takes charge of the Trustee or its property; or (iv) the Trustee otherwise
becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the
Holders of a majority in outstanding principal amount of the Securities and such
Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy
exists in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in outstanding principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
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If at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and if at that time any of the Securities shall not have been
authenticated, any successor to the Trustee may authenticate such Securities
either in the name of any predecessor hereunder or in the name of the successor
to the Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities or in this Indenture provided that
the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $400 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.7) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III hereof
and the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities (other than Securities
replaced pursuant to Section 2.7), including interest thereon to maturity or
such redemption date, and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to Section
8.1(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
(accompanied by an Officers' Certificate and an Opinion of Counsel stating that
all conditions precedent specified herein relating to the satisfaction and
discharge of this Indenture have been complied with) and at the cost and expense
of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture and
all obligations of the Subsidiary Guarantors under the Subsidiary Guarantee and
this Indenture ("legal defeasance option") or (ii)
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its obligations under Sections 4.2 through 4.15, 5.1(iii) and 5.1(iv) and the
operation of Sections 6.1(iv), 6.1(v), 6.1(vi), 6.1(vii) (but only with respect
to a Subsidiary), 6.1(viii) (but only with respect to a Subsidiary) and 6.1(ix)
("covenant defeasance option"); provided, however, no deposit under this Article
VIII shall be effective to terminate the obligations of the Company under the
Securities or this Indenture prior to 123 days following any such deposit. The
Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Sections 6.1(iv),
6.1(vi), 6.1(vii) (but only with respect to a Subsidiary), 6.1(viii) (but only
with respect to a Subsidiary), 6.1(ix) and 6.1(x) or because of the failure of
the Company to comply with Section 5.1(iii) and Section 5.1(iv).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding the provisions of Sections 8.1(a) and (b), the
Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5
and 8.6 shall survive until the Securities have been paid in full. Thereafter,
the Company's obligations in Sections 7.7, 8.4 and 8.5 shall survive.
SECTION 8.2. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(i) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of and
interest on the Securities to maturity or redemption, as the case may be;
(ii) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment of the deposited U.S. Government Obligations plus any
deposited money without reinvestment will provide cash at such times and
in such amounts as will be sufficient to pay principal and interest when
due on all the Securities to maturity or redemption, as the case may be;
(iii) (A) no Event of Default (excluding a Default or Event of
Default arising from breach of Section 4.3 as a result of the borrowing of
funds to be applied to such deposit) shall have occurred or be continuing
on the date of such deposit and (B) 123 days pass after the deposit is
made and during the 123-day period no Default specified in Section
6.1(vii) or 6.1(viii) with respect to the Company occurs which is
continuing at the end of such period;
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(iv) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article X;
(v) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940;
(vi) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (A)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (B) since the date hereof there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance had not
occurred;
(vii) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred;
(viii) The Holders shall have a perfected security interest
under applicable law in the cash or U.S. Government Obligations deposited
pursuant to Section 8.2(i) above;
(ix) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably satisfactory to the
Trustee, to the effect that, after the passage of 123 days following the
deposit, the trust funds will not be subject to any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights
generally;
(x) such defeasance shall not cause the Trustee to have a
conflicting interest with respect to any securities of the Company; and
(xi) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities and this
Indenture as contemplated by this Article VIII have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
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SECTION 8.3. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article X.
SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them upon payment of all the obligations under this
Indenture.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal of or interest on the Securities that remains
unclaimed for two years, and, thereafter, Holders entitled to the money must
look to the Company for payment as general creditors.
SECTION 8.5. Indemnity for U.S. Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the obligations of the Company and the
Subsidiary Guarantors under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article VIII
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Article VIII;
provided, however, that, if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Holder:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article V;
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(iii) to provide for uncertificated Securities in addition to
or in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(iv) to make any change in Article X that would limit or
terminate the benefits available to any holder of Senior Indebtedness (or
Representatives therefor) under Article X;
(v) to add Guarantees with respect to the Securities or to
secure the Securities;
(vi) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon the
Company;
(vii) to comply with any requirement of the SEC in connection
with qualifying this Indenture under the TIA;
(viii) to make any change that does not adversely affect the
rights of any Holder; or
(ix) to provide for the issuance of the Exchange Notes, which
will have terms substantially identical in all material respects to the
Initial Notes (except that the transfer restrictions contained in the
Initial Notes will be modified or eliminated, as appropriate), and which
will be treated, together with any outstanding Initial Notes, as a single
issue of securities.
An amendment under this Section 9.1 may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness or Guarantor Senior Indebtedness then outstanding unless the
holders of such Senior Indebtedness or Guarantor Senior Indebtedness (or any
group or representative thereof authorized to give a consent) consent to such
change.
After an amendment under this Section 9.1 becomes effective, the
Company shall mail to each Holder a notice briefly describing such amendment.
The failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.1.
SECTION 9.2. With Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Holder but with
the written consent of the Holders of at least a majority in principal amount of
the Securities. However, without the consent of each Holder affected, an
amendment may not:
(i) reduce the amount of Securities whose Holders must consent
to an amendment;
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(ii) reduce the rate of or extend the time for payment of
interest on any Security;
(iii) reduce the principal of or extend the Stated Maturity of
any Security;
(iv) reduce the premium payable upon the redemption or
repurchase of any Security or change the time at which any Security may or
shall be redeemed or repurchased in accordance with this Indenture;
(v) make any Security payable in money other than that stated
in the Security;
(vi) modify or affect in any manner adverse to the Holders the
terms and conditions of the obligation of the Company for the due and
punctual payment of the principal of or interest on Securities; or
(vii) make any change in Section 6.4 or 6.7 or the second
sentence of this Section 9.2.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section 9.2 may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section 9.2 becomes effective, the
Company shall mail to Holders a notice briefly describing such amendment. The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.2.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Holder.
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The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall become valid or effective more than 120
days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
ARTICLE X
Subordination
SECTION 10.1. Agreement To Subordinate. The Company and each
Subsidiary Guarantor agrees, and each Holder by accepting a Security and the
related Subsidiary Guarantee agrees, that the Indebtedness evidenced by the
Securities and the related Subsidiary Guarantee is subordinated in right of
payment, to the extent and in the manner provided in this Article X, to the
prior payment in full in cash or Cash Equivalents when due of (i) all Senior
Indebtedness in the case of the Securities and (ii) all Guarantor Senior
Indebtedness of such Subsidiary Guarantor in the case of its obligations under
the Subsidiary Guarantee and that the subordination is for the benefit of and
enforceable by the holders of Senior Indebtedness and such Guarantor Senior
Indebtedness. The Securities shall in all respects rank pari passu with all
other Senior Subordinated Indebtedness of the Company, the related Subsidiary
Guarantee of each Subsidiary Guarantor shall in all respects rank pari passu
with all Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor
and only Indebtedness of the Company which is Senior Indebtedness will rank
senior to the Securities and only Indebtedness of such Subsidiary Guarantor
which is Guarantor Senior Indebtedness of such Subsidiary Guarantor shall rank
senior to the obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee in accordance
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with the provisions set forth herein. For purposes of these subordination
provisions, the Indebtedness evidenced by the Securities is deemed to include
the liquidated damages payable pursuant to the provisions set forth in the
Securities. All provisions of this Article X shall be subject to Section 10.12.
SECTION 10.2. Liquidation, Dissolution, Bankruptcy. Upon any payment
or distribution of the assets of the Company or any Subsidiary Guarantor to
creditors upon a total or partial liquidation or a total or partial dissolution
of the Company or such Subsidiary Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or such
Subsidiary Guarantor or their respective properties:
(i) holders of Senior Indebtedness in the case of the Company
or holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor
in the case of such Subsidiary Guarantor shall be entitled to receive
payment in full in cash or Cash Equivalents of all Senior Indebtedness in
the case of the Company or all such Guarantor Senior Indebtedness in the
case of such Subsidiary Guarantor before the Holders shall be entitled to
receive any payment of principal of or interest on or other amounts with
respect to the Securities from the Company or such Subsidiary Guarantor,
whether directly by the Company or pursuant to the Subsidiary Guarantee;
and
(ii) until the Senior Indebtedness in the case of the Company
or such Guarantor Senior Indebtedness in the case of such Subsidiary
Guarantor is paid in full in cash or Cash Equivalents, any payment or
distribution to which Securityholders would be entitled but for this
Article X shall be made to holders of Senior Indebtedness in the case of
payments or distributions made by the Company or the holders of such
Guarantor Senior Indebtedness in the case of payments or distributions
made by such Subsidiary Guarantor, in each case as their respective
interests may appear.
SECTION 10.3. Default on Senior Indebtedness or Guarantor Senior
Indebtedness. Neither the Company nor any Subsidiary Guarantor may pay the
principal of, premium (if any) or interest on or other amounts with respect to
the Securities or make any deposit pursuant to Section 8.1 or repurchase, redeem
or otherwise retire any Securities, whether directly by the Company or by such
Subsidiary Guarantor under the Subsidiary Guarantee (collectively, "pay the
Securities") if (i) any Senior Indebtedness in the case of the Company or any
Guarantor Senior Indebtedness of such Subsidiary Guarantor in the case of such
Subsidiary Guarantor is not paid when due or (ii) any other default on Senior
Indebtedness in the case of the Company or such Guarantor Senior Indebtedness in
the case of such Subsidiary Guarantee occurs and the maturity of such Senior
Indebtedness in the case of the Company or such Guarantor Senior Indebtedness in
the case of such Subsidiary Guarantor is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived and any
such acceleration has been rescinded in writing or (y) such Senior Indebtedness
in the case of the Company or such Guarantor Senior Indebtedness in the case of
such Subsidiary Guarantor has been paid in full in cash or Cash Equivalents;
provided, however, that the Company or such Subsidiary Guarantor may pay the
Securities, whether directly or pursuant to the Subsidiary Guarantee, without
regard to the foregoing if the Company or such Subsidiary Guarantor and the
Trustee receive written
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notice approving such payment from the Representative of the Designated Senior
Indebtedness in the case of the Company or such Guarantor Senior Indebtedness in
the case of such Subsidiary Guarantor with respect to which either of the events
set forth in clause (i) or (ii) of the immediately preceding sentence has
occurred and is continuing. During the continuance of any default (other than a
default described in clause (i) or (ii) of the preceding sentence) with respect
to any Designated Senior Indebtedness pursuant to which the maturity thereof may
be accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, neither the Company (in the case of Designated Senior Indebtedness of
the Company) nor any Subsidiary Guarantor (in the case of Designated Senior
Indebtedness of such Subsidiary Guarantor) may pay the Securities, either
directly or pursuant to the Subsidiary Guarantee, for a period (a "Payment
Blockage Period") commencing upon the receipt by the Company and the Trustee
(with a copy to such Subsidiary Guarantor) of written notice (a "Blockage
Notice") of such default from the Representative of the holders of such
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Trustee and the
Company or such Subsidiary Guarantor from the Person or Persons who gave such
Blockage Notice, (ii) because the default giving rise to such Blockage Notice is
no longer continuing or (iii) by repayment in full in cash or Cash Equivalents
of such Designated Senior Indebtedness). Notwithstanding the provisions of the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 10.3), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have accelerated
the maturity of such Designated Senior Indebtedness, the Company or such
Subsidiary Guarantor may resume payments on the Securities, either directly or
pursuant to the Subsidiary Guarantee, after such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period; provided, however, that if any Blockage Notice
within such 360-day period is given by or on behalf of any holders of Designated
Senior Indebtedness (other than the Bank Indebtedness), the Representative of
the Bank Indebtedness may give another Blockage Notice within such period;
provided further, however, that in no event may the total number of days during
which any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360 consecutive day period (unless the Designated Senior
Indebtedness in respect of which such default exists has been declared due and
payable in its entirety, in which case no payment may be made on the Securities
until such acceleration has been rescinded or annulled.
SECTION 10.4. Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company, the
Subsidiary Guarantors or the Trustee shall promptly notify the holders of the
Designated Senior Indebtedness and their Representatives of the acceleration. If
any Designated Senior Indebtedness is outstanding, neither the Company (in the
case of any Designated Senior Indebtedness of the Company) nor any Subsidiary
Guarantor (in the case of any Designated Senior Indebtedness of such Subsidiary
Guarantor) may pay the Securities, either directly or pursuant to the Subsidiary
Guarantee, until five Business days after the Representative of such Designated
Senior Indebtedness receives notice of such acceleration and, thereafter, the
Company (in the case of any Designated
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Senior Indebtedness of the Company) or such Subsidiary Guarantor (in the case of
any Designated Senior Indebtedness of such Subsidiary Guarantor) may pay the
Securities, either directly or pursuant to the Subsidiary Guarantee, only if
this Article X otherwise permits payments at that time.
SECTION 10.5. When Distribution Must Be Paid Over. If a distribution
is made to the Trustee or the Securityholders that because of this Article X
should not have been made to them or which the Trustee or the Securityholders
are otherwise not entitled to retain under the provisions of this Article X, the
Trustee or the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness and Guarantor Senior Indebtedness and
promptly pay it over to them as their respective interests may appear.
SECTION 10.6. Subrogation. After all Senior Indebtedness and
Guarantor Senior Indebtedness is paid in full in cash or Cash Equivalents and
all commitments in respect of the Senior Indebtedness have expired or terminated
and until the Securities are paid in full, Securityholders shall be subrogated
(without any duty on the part of the holders of Senior Indebtedness to warrant,
create, effectuate, preserve or protect such subrogation) to the rights of
holders of Senior Indebtedness and Guarantor Senior Indebtedness to receive
distributions applicable to Senior Indebtedness and Guarantor Senior
Indebtedness. A distribution made under this Article X to holders of Senior
Indebtedness or Guarantor Senior Indebtedness which otherwise would have been
made to Securityholders is not, as between the Company and Securityholders, a
payment by the Company of Senior Indebtedness or, as between a Subsidiary
Guarantor and Securityholders, a payment by such Subsidiary Guarantor of
Guarantor Senior Indebtedness.
SECTION 10.7. Relative Rights. This Article X defines the relative
rights of Securityholders and holders of Senior Indebtedness and Guarantor
Senior Indebtedness. Nothing in this Indenture shall:
(i) impair, as between the Company or the Subsidiary
Guarantors, as the case may be, and Securityholders, the obligation of the
Company or the Subsidiary Guarantors, as the case may be, which is
absolute and unconditional, to pay principal of and interest on the
Securities in accordance with their terms; or
(ii) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness and Guarantor Senior Indebtedness to receive
distributions otherwise payable to Securityholders.
SECTION 10.8. Subordination May Not Be Impaired by Company or the
Subsidiary Guarantors. No right of any holder of Senior Indebtedness or
Guarantor Senior Indebtedness to enforce the subordination of the Indebtedness
evidenced by the Securities or the related Subsidiary Guarantee shall be
impaired by any act or failure to act by the Company or any Subsidiary Guarantor
or by failure of any of them to comply with this Indenture or by any act or
failure to act on the part of any such holder or any other holder of Senior
Indebtedness, regardless
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of any knowledge thereof which any such holder or any other holder of Senior
Indebtedness may have or otherwise be charged with.
SECTION 10.9. Rights of Trustee and Paying Agent. The Company shall
give prompt written notice to the Trustee of any fact known to the Company that
would prohibit the making of any payment to or by the Trustee in respect of the
Securities, but failure to give such notice shall not affect the subordination
of the Securities to the Senior Indebtedness provided in this Article X and
shall not result in any default or event of default under this Indenture or the
Securities. Notwithstanding Section 10.3, the Trustee or Paying Agent may
continue to pay the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of any such payment, a Trust
Officer of the Trustee receives written notice satisfactory to it that payments
may not be made under this Article X. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness or Guarantor Senior Indebtedness may give the notice; provided,
however, that, if an issue of Senior Indebtedness or Guarantor Senior
Indebtedness has a Representative, only the Representative may give the notice.
Nothing in this Section 10.9 is intended to or shall relieve any Securityholder
from the obligations imposed under this Article X with respect to monies or
other distributions received in violation of the provisions hereof. The Trustee
shall be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Senior Indebtedness (or a
Representative of such holder) to establish that such notice has been given by a
holder of such Senior Indebtedness or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness or Guarantor Senior Indebtedness with the same rights it would have
if it were not Trustee. The Registrar and co-registrar and the Paying Agent may
do the same with like rights. The Trustee shall be entitled to all the rights
set forth in this Article X with respect to any Senior Indebtedness or Guarantor
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness or Guarantor Senior Indebtedness; and
nothing in Article VII shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article X shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
or Guarantor Senior Indebtedness, the distribution may be made and the notice
given to their Representative (if any).
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment in respect of the Securities,
whether directly or pursuant to the Subsidiary Guarantee, by reason of any
provision in this Article X shall not be construed as preventing the occurrence
of a Default or Event of Default. Nothing in this Article X shall have any
effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities, subject, however, to the rights under this Article X
of the holders of Senior Indebtedness to receive payments or other distributions
otherwise payable to or received by the Securityholders or the Trustee upon the
exercise of any remedy in connection with such acceleration.
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SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or Guarantor Senior
Indebtedness or subject to the restrictions set forth in this Article X, and
none of the Securityholders shall be obligated to pay over any such amount to
the Company, any Subsidiary Guarantor, any holder of Senior Indebtedness of the
Company, any holder of Guarantor Senior Indebtedness or any other creditor of
the Company or any Subsidiary Guarantor.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness or Guarantor Senior Indebtedness for the purpose of ascertaining
the Persons entitled to participate in such payment or distribution, the holders
of Senior Indebtedness, Guarantor Senior Indebtedness and other Indebtedness of
the Company or the Subsidiary Guarantors, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article X. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness or Guarantor Senior Indebtedness to participate in
any payment or distribution pursuant to this Article X, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness or Guarantor Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article X, and, if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment. The provisions of Sections 7.1 and 7.2
shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness and Guarantor Senior Indebtedness as provided in this
Article X and appoints the Trustee as attorney-in-fact for any and all such
purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness or Guarantor Senior Indebtedness. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Senior Indebtedness or Guarantor
Senior Indebtedness and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Securityholders or the Company, the
Subsidiary Guarantors or any other Person, money or assets to which any holders
of Senior Indebtedness or Guarantor Senior Indebtedness shall be entitled by
virtue of this Article X or otherwise.
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SECTION 10.16. Changes in Senior Indebtedness. Any holder of Senior
Indebtedness may at any time and from time to time without the consent of or
notice to any Securityholder or the Trustee: (i) extend, renew, modify, waive or
amend the terms of the Senior Indebtedness; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any guarantor or any other person (except the
Company) liable in any manner for the Senior Indebtedness or amend or waive the
terms of any guaranty of the Senior Indebtedness; (iv) exercise or refrain from
exercising any rights against the Company or any other person; (v) apply any
sums by whomever paid or however realized to Senior Indebtedness; and (vi) take
any other action which otherwise might be deemed to impair the rights of the
holders of the Senior Indebtedness. Any and all of such actions may be taken by
the holders of Senior Indebtedness without incurring responsibility to any
Securityholder or the Agent and, subject to the provisions of the definition of
Senior Indebtedness, without impairing or releasing the obligations of any
Securityholder or the Trustee under this Article X.
SECTION 10.17. Reliance by Holders of Senior Indebtedness and
Guarantor Senior Indebtedness on Subordination Provisions. Each Securityholder
by accepting a Security acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a consideration to
each holder of any Senior Indebtedness or Guarantor Senior Indebtedness, whether
such Senior Indebtedness or Guarantor Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness or Guarantor Senior
Indebtedness and such holder of Senior Indebtedness or Guarantor Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness or Guarantor Senior Indebtedness.
SECTION 10.18. Legend. The Notes shall be conspicuously legended
indicating that their payment is subordinated to Senior Indebtedness in
accordance with this Article X.
<PAGE>
72
ARTICLE XI
Subsidiary Guarantee
SECTION 11.1. Subsidiary Guarantee. Subject to the subordination
provisions contained in Article X, each Subsidiary Guarantor which becomes a
party hereto by executing and delivering a supplement to this Indenture pursuant
to Section 4.10 hereby, jointly and severally, unconditionally and irrevocably,
Guarantees to each Holder and to the Trustee and its successors and assigns (i)
the full and punctual payment of principal of, premium (if any) and interest on
the Securities when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations owing of the Company under this
Indenture (including obligations owing to the Trustee) and the Securities and
(ii) the full and punctual performance within applicable grace periods of all
other obligations of the Company under this Indenture and the Securities (all
the foregoing being hereinafter collectively called the "Obligations"). The
Subsidiary Guarantors further agree that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from the
Subsidiary Guarantors, and that the Subsidiary Guarantors will remain bound
under this Article XI notwithstanding any extension or renewal of any
Obligation.
The Subsidiary Guarantors waive presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waive notice
of protest for nonpayment. The Subsidiary Guarantors waive notice of any default
under the Securities or the Obligations. The obligations of the Subsidiary
Guarantors hereunder shall not be affected by (i) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Securities or
any other agreement or otherwise; (ii) any extension or renewal of any
Obligation; (iii) any rescission, waiver, amendment, modification or supplement
of any of the terms or provisions of this Indenture (other than this Article
XI), the Securities or any other agreement; (iv) the release of any security
held by any Holder or the Trustee for the Obligations or any of them; (v) the
failure of any Holder or the Trustee to exercise any right or remedy against any
other guarantor of the Obligations; or (vi) any change in the ownership of the
Company.
The Subsidiary Guarantors further agree that their Guarantees herein
constitute a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waive any right to require that any resort be had
by any Holder or the Trustee to any security held for payment of the
Obligations.
The Guarantee of each Subsidiary Guarantor is, to the extent and in
the manner set forth in Article X, subordinated and subject in right of payment
to the prior payment in full of the principal of and premium, if any, and
interest on all Guarantor Senior Indebtedness of such Subsidiary Guarantor and
this Guarantee is made subject to such provisions of this Indenture.
The obligations of the Subsidiary Guarantors hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver,
<PAGE>
73
release, surrender, alteration or compromise, and shall not be subject to any
defense, setoff, counterclaim, recoupment or termination whatsoever or by reason
of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
the Subsidiary Guarantors herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Securities or
any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
the Subsidiary Guarantors or would otherwise operate as a discharge of the
Subsidiary Guarantors as a matter of law or equity.
The Subsidiary Guarantors further agree that their Guarantees herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
Subsidiary Guarantors by virtue hereof, upon the failure of the Company to pay
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Obligation, the Subsidiary Guarantors hereby promise to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
principal amount of such Obligations, (ii) accrued and unpaid interest on such
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary Obligations of the Company to the Holders and the Trustee.
The Subsidiary Guarantors agree that, as between the Subsidiary
Guarantors, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article VI for the purposes of the Guarantee herein, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such Obligations as provided in Article VI, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Subsidiary Guarantors for the purposes of this Section 11.1.
The Subsidiary Guarantors also agree to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section 11.1.
SECTION 11.2. Limitation on Liability. Any term or provision of this
Indenture to the contrary notwithstanding, the maximum, aggregate liability of
each Subsidiary Guarantor hereunder shall not exceed the maximum amount that can
be guaranteed by such Subsidiary Guarantor under applicable federal and state
laws relating to insolvency of debtors.
<PAGE>
74
SECTION 11.3. Successors and Assigns. (a) This Article XI shall be
binding upon the Subsidiary Guarantors and their successors and assigns and
shall enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
(b) Notwithstanding the foregoing, all obligations of a Subsidiary
Guarantor under this Article XI shall be automatically and unconditionally
released and discharged, without any further action required on the part of the
Trustee or any Holder, upon (i) the unconditional release of such Subsidiary
from its liability in respect of the Indebtedness in connection with which it
became a Subsidiary Guarantor hereunder pursuant to Section 4.10; or (ii) any
sale or other disposition (by merger or otherwise) to any Person which is not a
Subsidiary of the Company, of all of the Capital Stock in, or all or
substantially all of the assets of, such Subsidiary Guarantor; provided that (i)
such sale or disposition of such Capital Stock or assets is otherwise in
compliance with this Indenture and (ii) such Subsidiary Guarantor has been
unconditionally released from its liability in respect of the Indebtedness in
connection with which it became a Subsidiary Guarantor hereunder pursuant to
Section 4.10.
SECTION 11.4. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article XI shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article XI at law,
in equity, by statute or otherwise.
SECTION 11.5. Right of Contribution. Each Subsidiary Guarantor
hereby agrees that to the extent that a Subsidiary Guarantor shall have paid
more than its proportionate share of any payment made hereunder, such Subsidiary
Guarantor shall be entitled to seek and receive contribution from and against
any other Subsidiary Guarantor hereunder who has not paid its proportionate
share of such payment. Each Subsidiary Guarantor's right of contribution shall
be subject to the terms and conditions of Section 11.6. The provisions of this
Section 11.5 shall in no respect limit the obligations and liabilities of any
Subsidiary Guarantor to the Trustee and the Holders and each Subsidiary
Guarantor shall remain liable to the Trustee and the Holders for the full amount
guaranteed by such Subsidiary Guarantor hereunder.
SECTION 11.6. No Subrogation. Notwithstanding any payment or
payments made by any of the Subsidiary Guarantors hereunder, no Subsidiary
Guarantor shall be entitled to be subrogated to any of the rights of the Trustee
or any Holder against the Company or any other Subsidiary Guarantor or any
collateral security or guarantee or right of offset held by the Trustee or any
Holder for the payment of the Obligations, nor shall any Subsidiary Guarantor
seek or be entitled to seek any contribution or reimbursement from the Company
or any other Subsidiary Guarantor in respect of payments made by such Subsidiary
Guarantor hereunder, until all amounts owing to the Trustee and the Holders by
the Company on account of the Obligations are paid in
<PAGE>
75
full. If any amount shall be paid to any Subsidiary Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by such Subsidiary Guarantor in trust
for the Trustee and the Holders, segregated from other funds of such Subsidiary
Guarantor, and shall, forthwith upon receipt by such Subsidiary Guarantor, be
turned over to the Trustee in the exact form received by such Subsidiary
Guarantor (duly indorsed by such Subsidiary Guarantor to the Trustee, if
required), to be applied against the Obligations.
SECTION 11.7. Modification. No modification, amendment or waiver of
any provision of this Article XI, nor the consent to any departure by the
Subsidiary Guarantors therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on the Subsidiary Guarantors in any case shall
entitle the Subsidiary Guarantors to any other or further notice or demand in
the same, similar or other circumstances.
ARTICLE XII
Miscellaneous
SECTION 12.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control.
SECTION 12.2. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Aurora Foods Inc.
Community Corporate Center
445 Hutchinson Avenue
Columbus, OH 43235
Attention: Thomas J. Ferraro
if to the Subsidiary Guarantors:
c/o Aurora Foods Inc.
Community Corporate Center
445 Hutchinson Avenue
Columbus, OH 43235
Attention: Thomas J. Ferraro
<PAGE>
76
if to the Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration.
The Company, any of the Subsidiary Guarantors, or the Trustee by
notice to the others may designate additional or different addresses for
subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to
the Holder at the Holder's address as it appears on the registration books of
the Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 12.3. Communication by Holders with other Holders. Holders
may communicate pursuant to TIA ss. 312(b) with other Holders with respect to
their rights under this Indenture or the Securities. The Company, the Trustee,
the Registrar and anyone else shall have the protection of TIA ss. 312(c).
SECTION 12.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall, if requested,
furnish to the Trustee: (i) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and (ii) an Opinion of
Counsel in form and substance reasonably satisfactory to the Trustee stating
that, in the opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 12.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include: (i) a statement that the
individual making such certificate or opinion has read such covenant or
condition; (ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; (iii) a statement that, in the opinion of such
individual, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (iv) a statement as to whether or not, in
the opinion of such individual, such covenant or condition has been complied
with.
<PAGE>
77
SECTION 12.6. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 12.7. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Holders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 12.8. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York or in the State of Delaware. If a payment date is a Legal
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.
SECTION 12.9. Governing Law. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 12.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Holder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Securities.
SECTION 12.11. Successors. All agreements of the Company and the
Subsidiary Guarantors in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 12.13. Variable Provisions. The Company initially appoints
the Trustee as Paying Agent and Registrar and custodian with respect to any
Global Securities.
SECTION 12.14. Qualification of Indenture. The Company shall qualify
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees for the
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78
Company, the Trustee and the Holders) incurred in connection therewith,
including, but not limited to, costs and expenses of qualification of the
Indenture and the Securities and printing this Indenture and the Securities. The
Trustee shall be entitled to receive from the Company any such Officers'
Certificates, Opinions of Counsel or other documentation as it may reasonably
request in connection with any such qualification of this Indenture under the
TIA.
SECTION 12.15. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
AURORA FOODS INC.
By: ______________________________
Name:
Title:
WILMINGTON TRUST COMPANY, as Trustee
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT A to
Indenture
[FORM OF FACE OF INITIAL NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Private Placement Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS OWN
BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED
SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES
<PAGE>
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE
MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A
MINIMUM PRINCIPAL AMOUNT OF $250,000 OF SECURITIES, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
[Regulation S Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT
PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT
("REGULATION S"), (2) BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED
<PAGE>
3
STATES WITHIN THE MEANING OF REGULATION S, (E) TO AN INSTITUTIONAL ACCREDITED
INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
TRANSACTION INVOLVING A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM AND IN THE CASE OF THE FOREGOING CLAUSE (E), A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY
IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE.
THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING
THE LATER OF (A) THE DAY ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER
THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING
OF THE ORIGINAL OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION",
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
<PAGE>
No. 1 Principal Amount $200,000,000
CUSIP NO. _______________
___% Series E Senior Subordinated Note due 2008
Aurora Foods Inc., a Delaware corporation, promises to pay to CEDE &
CO., or registered assigns, the principal sum of Two Hundred Million Dollars on
__________, 2008.
Interest Payment Dates: __________ and __________ commencing
__________, 1998.
Record Dates: __________ and __________.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: AURORA FOODS INC.
by ________________________
___________________________
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
WILMINGTON TRUST COMPANY
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL NOTE]
___% Series E Senior Subordinated Note due 2008
1. Interest
Aurora Foods Inc., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above.
The Company will pay interest semiannually on __________ and
__________ of each year commencing __________, 1998. Interest on the Securities
will accrue from the most recent date to which interest has been paid on the
Securities or, if no interest has been paid, from __________, 1998. The Company
shall pay interest on overdue principal or premium, if any, at the rate borne by
the Securities to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment
By at least 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Security is due and payable, the Company shall
transfer by wire to the accounts specified by the Trustee or the Paying Agent
money sufficient to pay such principal, premium, if any, and/or interest. The
Company will pay interest (except defaulted interest) to the Persons who are
registered Holders of Securities at the close of business on the __________ or
__________ next preceding the interest payment date even if Securities are
cancelled, repurchased or redeemed after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal and interest by
check payable in such money. It may mail an interest check to a Holder's
registered address.
3. Paying Agent and Registrar
Initially, Wilmington Trust Company, a Delaware banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company or any of its domestically incorporated Wholly-Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
<PAGE>
2
4. Indenture
The Company issued the Securities under an Indenture dated as of
__________, 1998 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured senior subordinated obligations
of the Company limited to $200 million aggregate principal amount (subject to
Section 2.7 of the Indenture). The aggregate principal amount of notes which may
be authenticated and delivered under the Indenture, including the Securities, is
limited to $400.0 million (subject to Section 2.7 of the Indenture). This
Security is one of the Initial Notes referred to in the Indenture. The
Securities include the Initial Notes and any Exchange Notes issued in exchange
for the Initial Notes pursuant to the Indenture and the Registration Rights
Agreement. The Initial Notes and the Exchange Notes are treated as a single
class of securities under the Indenture. The Indenture imposes certain
limitations on the Incurrence of Indebtedness by the Company and its
Subsidiaries, the payment of dividends and other distributions on the Capital
Stock of the Company and its Subsidiaries, the purchase or redemption of Capital
Stock of the Company and Capital Stock of such Subsidiaries, certain purchases
or redemptions of Subordinated Obligations, the sale or transfer of assets and
Capital Stock of Subsidiaries, the issuance or sale of Capital Stock of
Subsidiaries, the business activities and investments of the Company and its
Subsidiaries and transactions with Affiliates. In addition, the Indenture limits
the ability of the Company and its Subsidiaries to restrict distributions and
dividends from Subsidiaries.
In addition, the Indenture requires Subsidiaries of the Company (in
the circumstances specified in Section 4.10 of the Indenture and on the terms
and conditions specified in Article XI of the Indenture), to enter into a
supplement to the Indenture providing for a guarantee by such Subsidiaries (on a
senior subordinated basis) of the due and punctual payment of the principal of,
premium (if any) and interest on the Securities and all other amounts payable by
the Company under the Indenture and the Securities when and as the same shall be
due and payable,
<PAGE>
3
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture.
5. Optional Redemption
Except as set forth in this paragraph 5, the Securities will not be
redeemable at the option of the Company prior to __________, 2003. On and after
such date, the Securities will be redeemable, at the Company's option, in whole
or in part, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount) plus accrued
and unpaid interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
If redeemed during the 12-month period commencing on __________ of the years set
forth below:
Year Redemption Price
---- ----------------
2003......................................... %
2004......................................... %
2005......................................... %
2006 and thereafter.......................... 100.0000%
Notwithstanding the foregoing, at any time or from time to time
prior to __________, 2001 the Company may redeem up to $70 million of the
aggregate original principal amount of the Securities with the cash proceeds of
one or more Equity Offerings received by or invested in, the Company at a
redemption price (expressed as a percentage of principal amount) of __________%
plus accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however, that after giving
effect to such redemption, at least $130 million of the aggregate principal
amount of the Securities remain outstanding after each such redemption.
At any time on or prior to __________, 2003, the Securities may also
be redeemed in whole, but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal
<PAGE>
4
amount thereof plus the Applicable Premium as of, and accrued and unpaid
interest, if any, to, the date of redemption (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date).
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
principal amount larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, unless the Company shall have exercised
its right to redeem the Securities pursuant to paragraph 5 of the Securities in
connection with such Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount thereof
plus accrued interest to the date of repurchase as provided in, and subject to
the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture, and the obligations of each Subsidiary Guarantor under the
Subsidiary Guarantee contained in Article XI of the Indenture are subordinated
to Guarantor Senior Indebtedness, as defined in the Indenture, of such
Subsidiary Guarantor. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid, and Guarantor
Senior Indebtedness of a Subsidiary Guarantor must be paid before such
Subsidiary Guarantor may make payments under the Subsidiary Guarantee. The
Company agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give them effect and appoints the Trustee as attorney-in-fact for such
purpose.
<PAGE>
5
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
for a period beginning 15 days before a selection of Securities to be redeemed
and ending on the date of selection or (ii) any Securities for a period
beginning 15 days before an interest payment date and ending on such interest
payment date.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in outstanding principal amount of the Securities
and (ii) any default or noncompliance with any provision may be waived with
<PAGE>
6
the written consent of the Holders of a majority in outstanding principal amount
of the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company, the Subsidiary
Guarantors and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants for the
benefit of the Holders or surrender rights and powers conferred on the Company,
or to comply with any request of the SEC in connection with qualifying the
Indenture under the Act, or to make any change that does not adversely affect
the rights of any Securityholder, or to provide for the issuance of Exchange
Notes.
14. Defaults and Remedies
Under the Indenture, Events of Default include: (i) default for 30
days in payment of interest on the Securities when the same becomes due and
payable; (ii) default in payment of principal on the Securities when the same
becomes due and payable at maturity, upon redemption pursuant to paragraph 5 of
the Securities, upon required repurchase, upon declaration or otherwise; (iii)
failure by the Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Indebtedness of the Company or its Subsidiaries if the amount
accelerated (or so unpaid) exceeds $10 million and such acceleration or failure
to pay is not rescinded or cured within a 10-day period; (v) certain events of
bankruptcy or insolvency with respect to the Company or any Significant
Subsidiary; (vi) certain final, non-appealable judgments or decrees for the
payment of money in excess of $10 million; and (vii) the failure of any
Subsidiary Guarantee to be in full force and effect or the denial or
disaffirmation by any Subsidiary Guarantor of its obligations under the
Indenture or the Securities in certain cases. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain
<PAGE>
7
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Securityholders notice of any continuing Default or Event of
Default (except a Default or Event of Default in payment of principal or
interest) if it determines that withholding notice is in their interest.
15. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Securities or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
<PAGE>
8
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. Governing Law
This Security shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
The Company will furnish to any Securityholder upon
written request and without charge to the Securityholder a copy of
the Indenture which has in it the text of this Security in larger
type. Requests may be made to: Aurora Foods Inc., 445 Hutchinson
Avenue, Columbus, Ohio 43235, Attention: President.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ____________________ Your Signature: ___________________
Signature Guarantee: ______________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
1 |_| acquired for the undersigned's own account, without transfer; or
2 |_| transferred to the Company; or
3 |_| transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
4 |_| transferred pursuant to an effective registration statement
under the Securities Act; or
5 |_| transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
6 |_| transferred to an "accredited investor" (within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933) that is an institutional investor and that has furnished
to
<PAGE>
2
the Trustee a signed letter containing certain representations
and agreements (the form of which letter appears in Section 2.13
of the Indenture); or
7 |_| transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (5), (6) or
(7) is checked, the Trustee or the Company may require, prior to registering any
such transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
This certificate and the statements contained herein are made for the benefit of
the Company, the Guarantors, Wilmington Trust Company, as Trustee, and Chase
Securities Inc., the Initial Purchaser of such Notes being transferred and each
of you are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any
administrative or legal proceeding with respect to the materials covered hereby.
------------------------------
Signature
Signature Guarantee:
- ------------------------- ------------------------------
Signature
(Signature must be guaranteed)
________________________________________________________________________________
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.
<PAGE>
3
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
<PAGE>
4
[SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
TO BE ATTACHED TO GLOBAL SECURITIES]
The following increases or decreases in this Global Security have
been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal Amount of Signature of
in Principal Amount in Principal Amount this Global Security authorized officer
Date of of this Global of this Global following such of Trustee or
Exchange Security Security decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the other side of the
Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
EXHIBIT B to
Indenture
[FORM OF FACE OF EXCHANGE NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY IS SUBORDINATED TO SENIOR INDEBTEDNESS, AS DEFINED IN
THE INDENTURE (AS DEFINED HEREIN), AND THE OBLIGATIONS OF EACH SUBSIDIARY
GUARANTOR UNDER THE SUBSIDIARY GUARANTEE CONTAINED IN THE INDENTURE ARE
SUBORDINATED TO GUARANTOR SENIOR INDEBTEDNESS, AS DEFINED IN THE INDENTURE, OF
SUCH SUBSIDIARY GUARANTOR.
<PAGE>
2
No. _____ Principal Amount $200,000,000
CUSIP NO.
___% Senior Subordinated Note due 2008
Aurora Foods Inc., a Delaware corporation, promises to pay to CEDE &
CO., or registered assigns, the principal sum of Two Hundred Million Dollars on
__________, 2008.
Interest Payment Dates: __________ and __________ commencing
__________, 1998.
Record Dates: __________ and __________.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: AURORA FOODS INC.
by
-------------------------------
by
-------------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
WILMINGTON TRUST COMPANY
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE NOTE]
___% Senior Subordinated Note due 2008
1. Interest
Aurora Foods Inc., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above.
The Company will pay interest semiannually on __________ and
__________ of each year. Interest on the Securities will accrue from the most
recent date to which interest has been paid on the Securities or, if no interest
has been paid, from __________, 1998. The Company shall pay interest on overdue
principal or premium, if any, at the rate borne by the Securities to the extent
lawful. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
2. Method of Payment
By at least 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Security is due and payable, the Company shall
transfer by wire to the accounts specified by the Trustee or the Paying Agent
money sufficient to pay such principal, premium, if any, and/or interest. The
Company will pay interest (except defaulted interest) to the Persons who are
registered Holders of Securities at the close of business on the __________ or
__________ next preceding the interest payment date even if Securities are
cancelled, repurchased or redeemed after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal and interest by
check payable in such money. It may mail an interest check to a Holder's
registered address.
3. Paying Agent and Registrar
Initially, Wilmington Trust Company, a Delaware banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company or any of its domestically incorporated Wholly-Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
<PAGE>
2
The Company issued the Securities under an Indenture dated as of
__________, 1998 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured senior subordinated obligations
of the Company limited to $200 million aggregate principal amount (subject to
Section 2.7 of the Indenture). The aggregate principal amount of notes which may
be authenticated and delivered under the Indenture, including the Securities, is
limited to $400.0 million (subject to Section 2.7 of the Indenture). This
Security is one of the Exchange Notes referred to in the Indenture. The
Securities include the Initial Notes and any Exchange Notes issued in exchange
for the Initial Notes pursuant to the Indenture and the Registration Rights
Agreement. The Initial Notes and the Exchange Notes are treated as a single
class of securities under the Indenture. The Indenture imposes certain
limitations on the Incurrence of Indebtedness by the Company and its
Subsidiaries, the payment of dividends and other distributions on the Capital
Stock of the Company and its Subsidiaries, the purchase or redemption of Capital
Stock of the Company and Capital Stock of such Subsidiaries, certain purchases
or redemptions of Subordinated Obligations, the sale or transfer of assets and
Capital Stock of Subsidiaries, the issuance or sale of Capital Stock of
Subsidiaries, the business activities and investments of the Company and its
Subsidiaries and transactions with Affiliates. In addition, the Indenture limits
the ability of the Company and its Subsidiaries to restrict distributions and
dividends from Subsidiaries.
In addition, the Indenture requires Subsidiaries of the Company (in
the circumstances specified in Section 4.10 of the Indenture and on the terms
and conditions specified in Article XI of the Indenture), to enter into a
supplement to the Indenture providing for a guarantee by such Subsidiaries (on a
senior subordinated basis) of the due and punctual payment of the principal of,
premium (if any) and interest on the Securities and all other amounts payable by
the Company under the Indenture and the Securities when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according to
the terms of the Securities and the Indenture.
<PAGE>
3
5. Optional Redemption
Except as set forth in this paragraph 5, the Securities will not be
redeemable at the option of the Company prior to __________, 2003. On and after
such date, the Securities will be redeemable, at the Company's option, in whole
or in part, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount) plus accrued
and unpaid interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
If redeemed during the 12-month period commencing on __________ of the years set
forth below:
Year Redemption Price
---- ----------------
2003................................................... %
2004................................................... %
2005................................................... %
2006 and thereafter.................................... 100.0000 %
Notwithstanding the foregoing, at any time or from time to time
prior to __________, 2001, the Company may redeem up to $70 million of the
aggregate original principal amount of the Securities with the cash proceeds of
one or more Equity Offerings received by or invested in, the Company at a
redemption price (expressed as a percentage of principal amount) of __________%
plus accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that after giving effect to
such redemption, at least $130 million of the aggregate principal amount of
Securities remain outstanding after such redemption.
At any time on or prior to __________, 2003, the Securities may also
be redeemed in whole, but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest, if any, to,
the date of redemption (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).
6. Notice of Redemption
<PAGE>
4
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
principal amount larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, unless the Company shall have exercised
its right to redeem the Notes pursuant to paragraph 5 of the Securities in
connection with such Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount thereof
plus accrued interest to the date of repurchase as provided in, and subject to
the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture, and the obligations of each Subsidiary Guarantor under the
Subsidiary Guarantee contained in Article XI of the Indenture are subordinated
to Guarantor Senior Indebtedness, as defined in the Indenture, of such
Subsidiary Guarantor. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid, and Guarantor
Senior Indebtedness of a Subsidiary Guarantor must be paid before such
Subsidiary Guarantor may make payments under the Subsidiary Guarantee. The
Company agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give them effect and appoints the Trustee as attorney-in-fact for such
purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) any Securities
<PAGE>
5
selected for redemption (except, in the case of a Security to be redeemed in
part, the portion of the Security not to be redeemed) for a period beginning 15
days before a selection of Securities to be redeemed and ending on the date of
selection or (ii) any Securities for a period beginning 15 days before an
interest payment date and ending on such interest payment date.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in outstanding principal amount of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in outstanding principal amount of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company, the Subsidiary
Guarantors and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants for the
benefit of the Holders or surrender rights and powers conferred on the Company
or to comply with any request of the SEC in connection with qualifying the
Indenture under the Act, or to make any
<PAGE>
6
change that does not adversely affect the rights of any Securityholder, or to
provide for the issuance of Exchange Notes.
14. Defaults and Remedies
Under the Indenture, Events of Default include: (i) default for 30
days in payment of interest on the Securities when the same becomes due and
payable; (ii) default in payment of principal on the Securities when the same
becomes due and payable at maturity, upon redemption pursuant to paragraph 5 of
the Securities, upon required repurchase, upon declaration or otherwise; (iii)
failure by the Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Indebtedness of the Company or its Subsidiaries if the amount
accelerated (or so unpaid) exceeds $10.0 million and such acceleration or
failure to pay is not rescinded or cured within a 10-day period; (v) certain
events of bankruptcy or insolvency with respect to the Company or any
Significant Subsidiary; (vi) certain final, non-appealable judgments or decrees
for the payment of money in excess of $10.0 million; and (vii) the failure of
any Subsidiary Guarantee to be in full force and effect or the denial or
disaffirmation by any Subsidiary Guarantor of its obligations under the
Indenture or the Securities in certain cases. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of principal
or interest) if it determines that withholding notice is in their interest.
15. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the
<PAGE>
7
Company or its affiliates with the same rights it would have if it were not
Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Securities or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. Governing Law
This Security shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
<PAGE>
8
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the
Indenture which has in it the text of this Security in larger type.
Requests may be made to: Aurora Foods Inc., 445 Hutchinson Avenue,
Columbus, Ohio 43235, Attention: President.
________________________________________________________________________________
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: _______________ Your Signature ____________________
Signature Guarantee: ____________________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: _______________
Signature: _________________________
(Sign exactly as your name appears on the other side of the Security)
Signature
Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
Exhibit 10.1
VDK HOLDINGS, INC.
INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this VDK Holdings, Inc. Incentive
Compensation Plan (this "Plan") is to provide a means by which certain employees
of, consultants to and other persons having key business relations with VDK
Holdings, Inc. or any successor thereto by reason of merger or otherwise (the
"Company") and its Affiliates, as hereinafter defined (such employees,
consultants and other persons being hereinafter referred to individually as a
"Key Person" and collectively as "Key Personnel"), may be given an opportunity
to benefit from the appreciation in the value of the Company through the
issuance of (i) incentive compensation units ("Performance Units") whose value,
as described below, is based on the achievement of certain earnings targets and
(ii) incentive compensation units ("Exceptional Performance Units") whose value,
as described below, is based on the rate of return achieved by certain investors
in the Company. Performance Units and Exceptional Performance Units are
hereinafter referred to as "Units." This Plan is intended to advance the
interests of the Company by encouraging long-term employment with and diligent
service to the Company and its Affiliates on the part of the Key Personnel, by
enabling the Company and its Affiliates to retain their services and by
providing such Key Personnel with an incentive to advance the success of the
Company and its Affiliates.
2. General Terms and Conditions of Rights; Definitions.
(a) General Terms. The Board of Directors of the
Company (the "Board") may grant Units to one or more Key Persons from time to
time pursuant to this Plan; provided that each time a Key Person is granted
Units, the number of Performance Units in such grant shall equal the number of
Exceptional Performance Units in such grant. The maximum number of Performance
Units that may be granted under this Plan is 2,000. The maximum number of
Exceptional Performance Units that may be granted under this Plan is 2,000.
(b) Units Agreements. Units that have been granted
shall be evidenced by written agreements (each a "Units Agreement") and, except
as specifically approved by the Board or any Committee designated thereby, shall
not be inconsistent with this Plan.
(c) No Effect on Employment. Nothing in this Plan or
a Unit or Units Agreement issued hereunder shall govern the rights and duties
relating to employment or other services between the holder of any Units and the
Company or its Affiliates. Neither this Plan, nor any grant of Units pursuant
thereto, shall constitute an employment or other form of service or supply
agreement among such parties or establish a right of continued employment or a
continued relationship with the Company and the holder of any Unit.
<PAGE>
(d) Definitions. Capitalized terms used in this Plan
shall have the respective meanings set forth in Section 11.
(e) Relationship of this Plan to the Plan of VDK
Foods LLC. The Company has adopted this Plan pursuant to the Drop Down
Agreement. Under the Drop Down Agreement, the Company agreed to adopt an
incentive plan having the same terms and provisions of the Amended LLC Plan and
grant to each holder of PUs and EPUs under the Amended LLC Plan a number of
Performance Units and Exceptional Performance Units under this Plan that is
identical to the number of PUs and EPUs held by such person under the Amended
LLC Plan as of April 8, 1998. The Company will make payments to Unit Holders
under this Plan, and any payments made under this Plan will replace any payments
due under the Amended LLC Plan.
(f) Obligation of VDK Foods LLC to Fund Payments. Any
cash, securities or other property payable by the Company to Unit Holders under
this Plan with respect to the Company's obligations (other than the Gross-Up
Obligation) under this Plan shall be contributed by VDK LLC to the Company. To
the extent VDK LLC does not contribute such cash, securities or other property
to the Company, VDK LLC shall be required to make the payment due to Unit
Holders under the Amended LLC Plan and the Company shall have no obligation to
make the payment due to Unit Holders under this Plan.
3. [Intentionally Omitted.]
4. [Intentionally Omitted.]
5. Payment and Valuation with respect to a Public Offering. In
the event either the Company or any other New LLC Entity (including without
limitation any surviving entity of a reorganization (including an
incorporation), merger or consolidation of one or more of such entities) (such
issuer being the "Public Company") intends to effect a Public Offering, the
provisions of this Section 5 shall govern the valuation of Units, the vesting of
Units, and the time and manner of payments with respect thereto, except as
provided in this Section 5 and Annex 1 hereto. In the event the closing date of
the initial Public Offering occurs on or prior to September 30, 1998, the
valuation of Units, the vesting of Units and the time or manner of payments with
respect thereto shall be governed by Annex 1 hereto. This Section 5 and Annex 1
hereto shall be effective immediately prior to the closing date of the initial
Public Offering (the "IC Plan Effective Time").
6. Forfeiture. In the event a Public Offering occurs and the
provisions of Annex 1 hereto apply, the Units held by a Unit Holder shall be
subject to forfeiture only upon the termination of the employment of the Unit
Holder with Cause (as defined below); provided, that in the event the employment
of a member of Dartford who is an employee of the Company is terminated for
Cause, such employee's allocable share of Dartford's Units as
2
<PAGE>
determined in accordance with the governing documents of Dartford then in effect
shall be subject to forfeiture under this Section 6.
(a) Termination With Cause. In the event that a Unit
Holder's employment by the Company terminates prior to the date on which Total
Performance Unit Value or Total Exceptional Performance Unit Value, as
applicable, are determinable in accordance with this Plan because of discharge
or termination of the Unit Holder by the Company with Cause (as defined below),
then all Units held by such Unit Holder shall be forfeited to the Company
without the payment of any consideration to the Unit Holder by the Company
therefor.
(b) Cause. For purposes of this Plan, the Company or
its Affiliate shall have "Cause" to discharge or terminate a Unit Holder upon
(i) the indictment of the Unit Holder for any crime which constitutes a felony,
(ii) if the Unit Holder is party to a written employment, consulting or similar
agreement with the Company or any Affiliate thereof, the failure or inability of
the Unit Holder to cure or remedy, within 30 days after written notice of such
failure from the Company or such Affiliate, either (A) the Unit Holder's failure
to satisfactorily discharge all of his, her or its duties and obligations under
such agreement or (B) any gross negligence or willful misconduct on the party of
the Unit Holder in the course of rendering services thereunder, or (iii) if the
Unit Holder is not a party to a written employment, consulting or similar
agreement with the Company or any Affiliate thereof, the failure or inability of
the Unit Holder to cure or remedy, within 30 days after written notice of such
failure from the Company or such Affiliate, either (A) the Unit Holder's
substantial and continuing failure to satisfactorily discharge all of his, her
or its material duties and obligations owed to the Company or such Affiliate or
(B) any gross negligence or willful misconduct on the part of the Unit Holder in
the course of rendering services to the Company or such Affiliate.
(c) Forfeited Units. Forfeited Units shall not be
taken into account for purposes of the computations under Sections 5 or 7. In
the event any Units are forfeited in accordance with this Section 6 or
otherwise, the Board may, but shall not be required to, grant such Units to Key
Personnel of the Company pursuant to this Plan.
7. Special Provisions. The following special provisions shall
apply to the valuation of the Units provided for in this Plan.
(a) Golden Parachute Gross-Up. Anything herein to the
contrary notwithstanding, in the event that the excise tax provided by IRC ss.
4999, or any amended or successor provision, applies to any payment to a Unit
Holder hereunder, at Dartford's election exercisable by written notice to the
Board, the amount of such payment shall be increased sufficiently, but not in
excess of 15% thereof, so that the amount distributed to such Unit Holder net of
such excise tax is approximately equal to the amount that would
3
<PAGE>
have been distributed had no such excise tax been imposed. All calculations made
under this Plan shall be made after taking into account any such gross-up
payments such that Total Distributions and IRR of the Business are based on the
actual amounts received by Investors.
(b) Capital Gains Gross-Up. Anything herein to the
contrary notwithstanding, in the event that the U.S. federal income tax rate on
capital gains is less than the U.S. federal income tax rate on ordinary income
and the payments to Unit Holders are subject to tax at such ordinary income
rates, the amount of any payment to any Unit Holder shall be increased
sufficiently so that such amount, net of any such U.S. federal income tax at
ordinary rates, equals the payment that would otherwise have been made to such
Unit Holder net of U.S. federal income tax at capital gains rates; provided,
that in the event of a Public Offering occurs and the provisions of Annex 1
apply, Dartford shall be deemed to have automatically made such election and no
notice to the Board shall be required. The aggregate amount of such increased
amounts payable to Unit Holders are hereinafter referred to as the "Gross-Up
Obligation". The Gross-Up Obligation shall be paid by the Company to Unit
Holders in cash at the same time as the corresponding distribution to Unit
Holders giving rise to such Gross-Up Obligation is payable. The obligation of
the Company to pay the Gross-Up Obligation shall be subject to the Company or a
subsidiary having the right to accrue a deduction for tax purposes for such
payment but shall not be subject to such deduction reducing the amount of taxes
otherwise payable by the Company in the year in which such deduction accrues.
The payment of such Gross-Up Obligation is a direct obligation of the Company,
and VDK LLC has no obligation to fund the payment of the Gross-Up Obligation;
provided, that to the extent the Company fails to pay the Gross-Up Obligation
then due, VDK LLC shall be required to pay to Unit Holders an amount in cash
equal to the amount of the unpaid Gross-Up Obligation, as required under the
Amended LLC Plan.
8. Administration. This Plan shall be administered by the
Board subject to the express terms and conditions of this Plan. The Board shall
have full power to grant Units under this Plan; provided, that no Units may be
issued from and after the closing date of the initial Public Offering. No member
of the Board shall be liable for any action or determination made in good faith
with respect to this Plan or to any Unit.
9. Effective Date; Termination; Successors.
(a) This Plan shall be effective as of April 8, 1998.
(b) This Plan shall terminate upon all Units being
retired as a result of payments or forfeiture.
(c) This Plan shall be binding on and inure to the
benefit of the Company and its successors and assigns, including without
limitation any successor or assign
4
<PAGE>
of the Company by reason of the merger, consolidation or reorganization of the
Company with or into the Public Company or any other entity with such successor
or assign to be the "Company" for purposes of this Plan.
10. Amendments. From time to time, this Plan may be altered,
amended, suspended or discontinued, even if such action alters an outstanding
Units Agreement to the detriment of the Unit Holder without his consent, upon
the mutual agreement of the Board and Dartford; provided, that at any time when
the next succeeding proviso is not applicable, any such action applies to each
Unit Holder in a consistent manner; provided, further, that in the event that
neither Dartford nor its members are providing management services to the
Company (whether in a member's capacity as a senior executive officer of the
Company or otherwise), then any such alteration, amendment, suspension or
discontinuance shall be effective upon the mutual agreement of the Board and (A)
insofar as any Units held by Dartford are affected by such amendment, Dartford,
and (B) insofar as any Units held by Persons other than Dartford are affected by
such amendment, such other Persons holding a majority of such Units.
11. Definitions. As used in this Plan, the following terms
shall have the meanings set forth below.
"Affiliate" means any parent or subsidiary corporation of the
Company as defined in Section 424(e) and (f) respectively of the Internal
Revenue Code of 1986, but only for so long as such relationship is maintained.
"Amended LLC Plan" means Schedule D to the VDK LLC Agreement.
"Aurora/VDK LLC" means Aurora/VDK LLC, a Delaware limited
liability company and the holder of all of the issued and outstanding capital
stock of the Company on the effective date of this Plan.
"Board" has the meaning set forth in Section 1.
"Cause" has the meaning set forth in Section 6.
"Class B LLC Units" means the "Class B" Units of limited
liability company interest of VDK LLC.
"Class D LLC Units" means the "Class D" Units of limited
liability company interest of VDK LLC.
"Company" has the meaning set forth in Section 1.
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<PAGE>
"Dartford" means Dartford Partnership L.L.C.
"Distributions" means amounts paid, payable or deemed paid or
payable to any holder of Voting LLC Units, Non-Voting LLC Units, Units under
this Plan, or PUs or EPUs under the Amended LLC Plan, whether such amounts are
in cash, equity securities (not including equity securities issuable as pursuant
to splits or recapitalizations) or other property either as (i) distributions of
profits, (ii) distributions in redemption, liquidation or otherwise, or in
accordance with Section 5 hereof.
"Drop Down Agreement" means the IC Plan Agreement between VDK
Foods LLC and VDK Holdings, Inc., dated April 8, 1998, between VDK LLC and the
Company.
"EPUs" means the Exceptional Performance Units (as such term
is defined therein) granted under the Amended LLC Plan.
"Exceptional Performance Units" has the meaning set forth in
Section 1.
"Final Date" means the first anniversary of the closing date
of the initial Public Offering or, if earlier, the date of the dissolution of
VDK LLC.
"Gross-Up Obligation" has the meaning set forth in Section
7(b).
"Investor" means any holder of Class B LLC Units on the
effective date of this Plan.
"Key Person" and "Key Personnel" have the meaning set forth in
Section 1.
"New LLC Entities" has the meaning set forth in the VDK LLC
Agreement.
"Non-Public Shareholders" has the meaning set forth in the VDK
LLC Agreement.
"Non-Voting LLC Units" means, collectively, the "Class D" and
"Class E" Units of limited liability company interest of VDK LLC.
"Performance Units" has the meaning set forth in Section 1.
"Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company, or other legal entity or organization.
"Public Company" has the meaning set forth in Section 5.
6
<PAGE>
"Public Offering" has the meaning set forth in the VDK LLC
Agreement.
"PUs" means the Performance Units (as such term is defined
therein) granted under the Amended LLC Plan.
"Secondary Sale" means any sale by one or more Non-Public
Shareholders, on or after the effective date of a Public Offering, of equity
securities issued by the Public Company and held by such Non-Public Shareholder
(but not originally issued by the Public Company pursuant to a Public Offering),
whether such sale is pursuant to a registered public offering under the
Securities Act of 1933, as amended, an exemption from the registration
requirements thereof, or otherwise.
"Total Distributions" means the aggregate amount of
Distributions to holders of Voting LLC Units and holders of Non-Voting LLC Units
and to the Unit Holders pursuant to this Plan or the Amended LLC Plan.
"Total Exceptional Performance Unit Value" has the meaning set
forth in Section 4(b)(iii).
"Total Performance Unit Value" has the meaning set forth in
Section 4(a)(iii).
"Total Profits" means the sum of all amounts distributed or
distributable under Sections 8.3(vi), 8.3(vii), 8.3(viii) and 8.3(ix) of the VDK
LLC Agreement (which includes all amounts distributed or distributable to Unit
Holders under this Plan or the Amended LLC Plan).
"Unit Holder" means any holder of Performance Units or
Exceptional Performance Units.
"Units" has the meaning set forth in Section 1.
"Units Agreement" has the meaning set forth in Section 2(b).
"Van de Kamp's" means Van de Kamp's, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company as of the effective date
of this Plan.
"VDK LLC" means VDK Foods LLC, a Delaware limited liability
company.
"VDK LLC Agreement" means the Second Amended and Restated
Limited Liability Company Agreement of VDK Foods LLC, dated as of April 8, 1998,
as amended.
7
<PAGE>
"Vested Class E Units" has the meaning given such term in the
VDK LLC Agreement.
"Vested Exceptional Performance Units" means those Exceptional
Performance Units that have vested pursuant to Section 5 hereof.
"Vested Performance Units" means those Performance Units that
have vested pursuant to Section 5 hereof.
"Voting LLC Units" means, collectively, the Class B LLC Units
and the "Class C" Units of limited liability company interest of VDK LLC.
8
<PAGE>
ANNEX 1 TO THE VDK HOLDINGS, INC.
INCENTIVE COMPENSATION PLAN
(a) Public Offering On or Before September 30, 1998. In the
event the Public Company effects a Public Offering and the closing date of the
Public Offering occurs on or prior to September 30, 1998, the provisions of this
Annex 1 shall govern the valuation of Units, the vesting of Units, and the time
and manner of payments with respect thereto.
(b) Vesting. At the IC Plan Effective Time, each Unit Holder
shall:
(i) have any outstanding but unvested
Performance Units held by such Unit Holder become
Vested Performance Units; and
(ii) have any outstanding but unvested
Exceptional Performance Units held by such Unit
Holder become Vested Exceptional Performance Units.
In addition, Units held by a Unit Holder shall no longer be subject to
forfeiture other than upon the termination of the employment or engagement of
the Unit Holder with Cause pursuant to Section 6(a) of this Plan.
(c) Valuation and Distribution of Shares. Upon the
closing date of the Public Offering, each Vested Performance Unit and each
Vested Exceptional Performance Unit shall be valued as hereinafter set forth and
the holders of such Units shall become entitled to be distributed, at the times
and in the manner set forth below, shares of common stock of the Public Company
(of the same class sold in the initial Public Offering) based on such valuation.
(d) Valuation of Performance Units. The value of
Vested Performance Units and the number of shares of common stock the Public
Company distributable on account of Vested Performance Units is set forth in
this paragraph (d). Upon the closing date of the initial Public Offering, a
computation of Total Profits, Total Distributions and Total Performance Unit
Value shall be made on a basis as if all of VDK LLC's direct or indirect equity
interests in the Public Company (but excluding any such equity interests either
sold in the initial Public Offering by Aurora/VDK LLC or distributed by
Aurora/VDK LLC in connection with the initial Public Offering in respect of a
special distribution by Aurora/VDK LLC of $50,900,000 in the aggregate to VDK
LLC and MBW Investors LLC) had been valued at a per share price equal to the
Gross IPO Price and such value had been distributed by VDK LLC in accordance
with Section 8.3 of the VDK LLC Agreement. For the purpose hereof, the term
"Gross IPO Price" shall mean the price to the public per share at which
securities of the Public Company were sold in the initial Public
1
<PAGE>
Offering without reduction for underwriter's commissions and other expenses
relating to the Public Offering.
The holder of each Vested Performance Unit shall
thereupon be entitled to receive with respect to such Unit a number of shares of
common stock of the Public Company (of the same class as sold in the Public
Offering) equal to the quotient of (A) the value of a single Vested Performance
Unit computed as set forth in the following paragraph with respect to the Total
Performance Unit Value determined under this paragraph (d) divided by (B) the
Gross IPO Price.
The value of a single Vested Performance Unit shall
equal the percentage of Total Performance Unit Value (as determined under the
following sentence) obtained by dividing one by the aggregate number of Vested
Performance Units outstanding. The value of all Vested Performance Units ("Total
Performance Unit Value") shall equal the product of P multiplied by Total
Profits, where P is a percentage that equals 5% multiplied by the fraction in
which the numerator is the number of Vested Performance Units and the
denominator is 2,000.
(e) Valuation of Exceptional Performance Units. The
value of Vested Exceptional Performance Units and the number of shares of common
stock the Public Company distributable on account of Vested Exceptional
Performance Units is set forth in this paragraph (e). Upon the closing date of
the initial Public Offering, a computation of Total Profits, Total Distributions
and Total Vested Exceptional Performance Units Value shall be made on a basis as
if all of VDK LLC's direct or indirect equity interests in the Public Company
(but excluding any such equity interests either sold in the initial Public
Offering by Aurora/VDK LLC or distributed by Aurora/VDK LLC in connection with
the initial Public Offering in respect of a special distribution by Aurora/VDK
LLC of $50,900,000 in the aggregate to VDK LLC and MBW Investors LLC) had valued
at a per share price equal to the Gross IPO Price and as if such value had been
distributed by VDK LLC in accordance with Section 8.3 of the VDK LLC Agreement.
The holder of each Vested Exceptional Performance
Unit shall thereupon be entitled to receive with respect to such Unit a number
of shares of common stock of the Public Company (of the same class as sold in
the Public Offering) equal to the sum of (x) the quotient of (A) the Exceptional
Performance Unit Value computed with respect to Total Exceptional Performance
Unit Value determined under this paragraph (e) divided by (B) the Gross IPO
Price plus (y) the Per Unit Additional Share Increment.
"Additional Share Increment" means the number of shares equal
to the quotient of (x) the Additional Increment divided by (y) 125% of the Gross
IPO Price.
"Additional Increment" means the excess, if any, of (x) Total
Exceptional Performance Unit Value calculated as if all of VDK LLC's direct or
indirect equity interests in the Public Company (excluding any interests sold in
the initial Public Offering by
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Aurora/VDK LLC or distributed to VDK LLC in respect of a special distribution by
Aurora/VDK LLC of $50,900,000 in the aggregate to VDK LLC and MBW Investors LLC)
had been valued at a per share price equal to 125% of the Gross IPO Price and as
if such value had been distributed by VDK LLC in accordance with Section 8.3 of
the VDK LLC Agreement over (y) Total Exceptional Performance Unit Value
calculated for this purpose as the product of (1) as if all of VDK LLC's direct
or indirect equity interests in the Public Company (but excluding any such
equity interests either sold in the initial Public Offering by Aurora/VDK LLC or
distributed to VDK LLC in respect of a special distribution by Aurora/VDK LLC of
$50,900,000 in the aggregate to VDK LLC and MBW Investors LLC) had been valued
at a per share price equal to the Gross IPO Price and as if such value had been
distributed by VDK LLC in accordance with Section 8.3 of the VDK LLC Agreement
and (2) 125%.
"Exceptional Performance Unit Value" means the value of a
single Vested Exceptional Performance Unit, which shall equal the percentage of
Total Exceptional Performance Unit Value obtained by dividing one by the
aggregate number of Vested Exceptional Performance Units outstanding.
"Per Unit Additional Share Increment" means the Additional
Share Increment divided by the aggregate number of Vested Exceptional
Performance Units outstanding.
"Total Exceptional Performance Unit Value" means the value of
all Vested Exceptional Performance Units, which shall equal the product of P
multiplied by the Total Profits, where P is the percentage that equals 5%
multiplied by the fraction in which the numerator is the number of Vested
Exceptional Performance Units and the denominator is 2,000.
Any shares of common stock of the Public Company
distributable to Unit Holders pursuant to this Annex 1 are hereinafter referred
to as "Distributable Shares".
(f) Time of Payment. Following the initial Public
Offering, distributions of Distributable Shares payable on account of Total
Performance Unit Value and Total Exceptional Performance Unit Value shall be
made as of the following dates and at the following times:
(i) as of the effective date of each
Secondary Sale prior to the Final Date, in an amount
equal to the total number of Distributable Shares
which all holders of Vested Performance Units and
Vested Exceptional Performance Units would be
entitled to include in such Secondary Sale pursuant
to the piggyback registration rights provisions under
the Securityholders Agreement, assuming for such
purpose that VDK LLC had distributed all shares of
the Public Company held by it pursuant to the VDK LLC
Agreement and this Plan; provided,
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however, in lieu of distributing such shares to the
holders of such Units, all or any portion of such
shares will instead be sold by VDK LLC (or, if
applicable, by the Company) in such Secondary Sale
and the net proceeds of such sale shall be
distributed to the holders of such Units pro rata in
accordance with their respective interests in the
shares that otherwise would have been distributed.
(ii) upon the Final Date.
(g) Manner of Payment. Any payment to Unit Holders
with respect to Units that is made pursuant to paragraphs (d) or (e) of this
Annex 1 shall be made in Distributable Shares distributed by the Company to Unit
Holders. The number of Distributable Shares with respect to any such payment
under this Plan shall be contributed by VDK LLC to the Company. To the extent
VDK LLC does not contribute Distributable Shares to the Company, the Company
shall have no obligation to distribute securities of the Public Company, cash or
any other property to Unit Holders pursuant to this Annex 1 or this Plan with
respect to the payment then due. When the aggregate number of Distributable
Shares required to be paid under paragraphs (d) and (e) of this Annex 1 has been
paid in full, then all distributions required to be made on account of Units
under this Plan or on account of Vested Plan Units under the VDK LLC Agreement
shall be deemed to have been made.
(h) Liquidity for Tax Liabilities. In order for Unit
Holders to have a means to pay tax liabilities arising from the receipt of
Distributable Shares under this Plan and this Annex 1 to the extent such tax
liabilities exceed the amount received by the Unit Holders pursuant to Section
7(a) or 7(b) hereof, and to the extent cash is needed by Unit Holders to pay
such tax liabilities, the Public Company shall take one of the following
actions, with the specific action taken to be at the right and option of the
Public Company:
(i) grant Unit Holders piggyback registration rights
with respect to Distributable Shares or other shares
of common stock of the Public Company (of the same
class as sold in the initial Public Offering) held by
Unit Holders ("Other Shares") subject to the
Securityholders Agreement that would entitle the Unit
Holder or VDK LLC (or if applicable, the Company) as
the holder of Distributable Shares to sell such
shares in the first Secondary Sale following the
closing date of the initial Public Offering, with the
number of Distributable Shares and/or Other Shares to
be in addition to the number of Distributable Shares
and Other Shares such Unit Holder would otherwise be
entitled to sell in such Secondary Sale pursuant to
this Plan and the Securityholders Agreement;
(ii) notwithstanding any restrictions to the contrary
set forth in the Securityholders Agreement, permit
Unit Holders to effect resales of
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Distributable Shares or Other Shares pursuant to Rule
144 under the Securities Act of 1933, as amended; or
(iii) make or arrange to be made loans to each Unit
Holder that provide recourse only to the
Distributable Shares, Other Shares and any other
shares of the Public Company held by such Unit
Holder, with such loans to be on terms and conditions
reasonably acceptable to the Board and Dartford.
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Table of Contents
SECTION 1. GENERAL PROVISIONS RELATING TO PLAN
GOVERNANCE, COVERAGE AND BENEFITS................................. 1
1.1. PURPOSE..................................................... 1
1.2. DEFINITIONS................................................. 1
1.3. ADMINISTRATION.............................................. 4
1.4. SHARES OF COMMON STOCK SUBJECT TO THE
PLAN........................................................ 5
1.5. PARTICIPATION............................................... 6
1.6. INCENTIVE AWARDS............................................ 6
1.7. MAXIMUM INDIVIDUAL RIGHTS................................... 7
SECTION 2. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS....................... 7
2.1. GRANT OF OPTIONS............................................ 7
2.2. OPTION TERMS................................................ 7
2.3. OPTION EXERCISES............................................ 8
2.4. STOCK APPRECIATION RIGHTS................................... 9
2.5. SUPPLEMENTAL PAYMENT ON EXERCISE OF
NON-QUALIFIED STOCK OPTIONS OR STOCK
APPRECIATION RIGHTS......................................... 10
SECTION 3. RESTRICTED STOCK.................................................. 10
3.1. AWARD OF RESTRICTED STOCK................................... 10
3.2. RESTRICTIONS................................................ 11
3.3. RESTRICTION PERIOD.......................................... 11
3.4. DELIVERY OF SHARES OF COMMON STOCK.......................... 11
3.5. SUPPLEMENTAL PAYMENT ON VESTING OF
RESTRICTED STOCK............................................ 12
3.6 PROVISIONS APPLICABLE TO SECTION 162(m)
PARTICIPANTS................................................ 12
SECTION 4. PERFORMANCE UNITS AND PERFORMANCE SHARES.......................... 13
4.1. PERFORMANCE BASED AWARDS.................................... 13
4.2. SUPPLEMENTAL PAYMENT ON VESTING OF
PERFORMANCE UNITS OR PERFORMANCE
SHARES...................................................... 14
4.3. PROVISIONS APPLICABLE TO SECTION 162(m)
PARTICIPANTS................................................ 14
SECTION 5. PROVISIONS RELATING TO PLAN PARTICIPATION......................... 15
5.1. PLAN CONDITIONS............................................. 15
5.2. TRANSFERABILITY............................................. 16
5.3. RIGHTS AS A STOCKHOLDER..................................... 16
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5.4. LISTING AND REGISTRATION OF SHARES
OF COMMON STOCK............................................. 16
5.5. CHANGE IN STOCK AND ADJUSTMENTS............................. 17
5.6. TERMINATION OF EMPLOYMENT, DEATH,
DISABILITY AND RETIREMENT................................... 18
5.7. CHANGES OF CONTROL.......................................... 19
5.8. AMENDMENTS TO INCENTIVE AWARDS.............................. 21
5.9. EXCHANGE OF INCENTIVE AWARDS................................ 21
5.10. FINANCING................................................... 21
SECTION 6. MISCELLANEOUS..................................................... 21
6.1. EFFECTIVE DATE AND GRANT PERIOD............................. 21
6.2. FUNDING..................................................... 21
6.3. WITHHOLDING TAXES........................................... 22
6.4. CONFLICTS WITH PLAN......................................... 22
6.5. NO GUARANTEE OF TAX CONSEQUENCES............................ 22
6.6. SEVERABILITY................................................ 22
6.7. GENDER, TENSE AND HEADINGS.................................. 22
6.8. AMENDMENT AND TERMINATION................................... 23
6.9. SECTION 280G PAYMENTS....................................... 23
6.10. GOVERNING LAW............................................... 23
6.11 LIMITATIONS APPLICABLE TO SECTION 16
PERSONS AND PERFORMANCE-BASED
COMPENSATION................................................ 24
(ii)
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AURORA FOODS INC. 1998 LONG TERM INCENTIVE PLAN
SECTION 1. GENERAL PROVISIONS RELATING
TO PLAN GOVERNANCE, COVERAGE AND BENEFITS
1.1. PURPOSE
The purpose of the Aurora Foods Inc. 1998 Long Term Incentive Plan
(the "Plan") is to foster and promote the long-term financial success of Aurora
Foods Inc. (the "Company") and materially increase the value of the equity
interests in the Company by: (a) encouraging the long-term commitment of
selected key employees (defined in Section 1.2(i) below), (b) motivating
superior performance of key employees by means of long-term performance related
incentives, (c) encouraging and providing key employees with a formal program
for obtaining an ownership interest in the Company, (d) attracting and retaining
outstanding key employees by providing incentive compensation opportunities
competitive with other major companies and (e) enabling participation by key
employees in the long-term growth and financial success of the Company. The Plan
provides for payment of various forms of incentive compensation and,
accordingly, is not intended to be a plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended, and shall be administered
accordingly.
1.2. DEFINITIONS
The following terms shall have the meanings set forth below:
(a) APPRECIATION. The difference between the exercise price per
share of the Common Stock subject to a Stock Appreciation Right (SAR) and the
Fair Market Value of a share of Common Stock on the date of exercise of the SAR.
(b) BOARD. The Board of Directors (or equivalent governing
authority) of the Company.
(c) CHANGE OF CONTROL. Any of the events described in and subject to
SECTION 5.7.
(d) CODE. The Internal Revenue Code of 1986, as amended.
(e) COMPENSATION COMMITTEE OR COMMITTEE. The Committee, which shall
be comprised of two or more members of the Board, each of whom is both a
"non-employee director" as defined by Rule 16b-3 of the Exchange Act and an
"outside director" for purposes of Section 162(m) of the Code, who shall be
appointed by the Board to administer the Plan, which Board shall have the power
to fill vacancies on the Committee arising by resignation,
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death, removal or otherwise. In the absence of a Committee, reference thereto
shall be to the Board.
(f) COMMON STOCK. Company Common Stock, par value $.01 per share,
which the Company is authorized to issue or may in the future be authorized to
issue.
(g) COMPANY. Aurora Foods Inc. and any successor corporation.
(h) DISABILITY. Any complete and permanent disability as defined in
Section 22(e)(3) of the Code and determined in accordance with the procedures
set forth in the regulations, thereunder.
(i) EMPLOYEE. Any common-law employee of the Company, Parent or
Subsidiary, who, in the opinion of the Committee, is one of a select group of
executive officers, other officers or other key management personnel of the
Company, Parent or Subsidiary who is in a position to contribute materially to
the continued growth and development and to the continued financial success of
the Company, Parent or Subsidiary, including executive officers and officers who
are members of the Board and including consultants and advisors.
(j) EXCHANGE ACT. The Securities and Exchange Act of 1934, as
amended.
(k) FAIR MARKET VALUE. The closing sales price of Common Stock as
reported or listed on a national securities exchange on any relevant date for
valuation, or, if there is no such sale on such date, the applicable prices as
so reported on the nearest preceding date upon which such sale took place. In
the event the shares of Common Stock are not listed on a national securities
exchange, the Fair Market Value of such shares shall be determined by the
Committee in its sole discretion.
(l) GRANTEE. Any Employee who in the opinion of the Committee
performs significant services for the benefit of the Company and who is granted
an Incentive Award under the Plan.
(m) INCENTIVE AWARD. Any incentive award, individually or
collectively, as the case may be, including any Stock Option, Stock Appreciation
Right, Restricted Stock Award, Performance Unit, or Performance Share, as well
as any Supplemental Payment, granted under the Plan.
(n) INCENTIVE AWARD AGREEMENT. The written agreement entered into
between the Company and the Grantee pursuant to which an Incentive Award shall
be made under the Plan.
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(o) INCENTIVE STOCK OPTION. A stock option which is intended to
qualify as an Incentive Stock Option under Section 422 of the Code and which
shall be granted by the Committee to a Grantee under the Plan.
(p) INVOLUNTARY TERMINATION. The termination of a Grantee's
employment by the Company other than for death, Disability, Retirement,
Terminated for Cause, Termination for Good Reason, or in the event of a Change
of Control (as defined in SECTION 5.7(a) below).
(q) NON-QUALIFIED STOCK OPTION. A stock option granted by the
Committee to a Grantee under the Plan, which shall not qualify as an Incentive
Stock Option.
(r) OPTION. A Non-Qualified Stock Option or Incentive Stock Option
granted by the Committee to a Grantee under the Plan.
(s) PARENT. Any corporation (whether now or hereafter existing)
which constitutes a "parent" of the Company, as defined in Section 424(e) of the
Code.
(t) PERFORMANCE PERIOD. A period of time determined by the Committee
over which performance is measured for the purpose of determining a Grantee's
right to and the payment value of any Performance Units or Performance Shares.
(u) PERFORMANCE SHARE OR PERFORMANCE UNIT. An Incentive Award
representing a contingent right to receive cash or shares of Common Stock (which
may be Restricted Stock) at the end of a Performance Period and which, in the
case of Performance Shares, is denominated in Common Stock, and, in the case of
Performance Units, is denominated in cash values.
(v) PLAN. The Aurora Foods Inc. 1998 Long Term Incentive Plan, as
hereinafter amended from time to time.
(w) RESTRICTED STOCK. Shares of Common Stock issued or transferred
to a Grantee subject to the Restrictions set forth in SECTION 3.2 hereof.
(x) RESTRICTED STOCK AWARD. An authorization by the Committee to
issue or transfer Restricted Stock to a Grantee.
(y) RESTRICTION PERIOD. The period of time determined by the
Committee during which Restricted Stock is subject to the restrictions under the
Plan.
(z) RETIREMENT. The termination of employment by the Company, Parent
or Subsidiary constituting retirement as determined by the Committee.
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(aa) SECTION 162(m) PARTICIPANT. Any Employee designated by the
Committee as an Employee whose compensation for the fiscal year in which the
Employee is so designated or a future fiscal year may be subject to the limit on
deductible compensation imposed by Section 162(m) of the Code.
(ab) STOCK APPRECIATION RIGHT or SAR. A Stock Appreciation Right
described in SECTION 2.4 hereof.
(ac) SUBSIDIARY. Any corporation (whether now or hereafter existing)
which constitutes a "subsidiary" of the Company, as defined in Section 424(f) of
the Code.
(ad) SUPPLEMENTAL PAYMENT. Any amounts described in SECTIONS 2.5,
3.5 and/or 4.2 dedicated to payment of any federal income taxes that are payable
on an Incentive Award as determined by the Committee.
(ae) TERMINATED FOR CAUSE. An Employee shall be deemed Terminated
for Cause if he or she is terminated as a result of a breach of his or her
written employment agreement (or consulting or advisory contract), in the event
one exists, or if the Committee determines that such Employee is being
terminated as a result of misconduct, dishonesty, disloyalty, disobedience or
action that might reasonably injure the Company, Parent or Subsidiary or their
business interests or reputation.
(af) TERMINATION FOR GOOD REASON. The resignation of an Employee
shall be deemed to be a Termination for Good Reason if Employee's resignation is
within two years of a Change of Control as defined in SECTION 5.7, caused by and
within ninety (90) days of the following: (i) without the express written
consent of Employee, any duties that are assigned that are materially
inconsistent with Employee's position, duties and status with the Company at the
time of the Change of Control; (ii) any action by the Company that results in a
material diminution in the position, duties or status of Employee with the
Company at the time of the Change of Control or any transfer or proposed
transfer of Employee for any extended period to a location outside his principal
place of employment at the time of the Change of Control without his consent,
except for a transfer or proposed transfer for strategic reallocations of the
personnel reporting to Employee; (iii) the base annual salary of Employee, as
the same may hereafter be increased from time to time, is reduced; or (iv)
without limiting the generality or effect of the foregoing, the Company fails to
comply with any of its material obligations hereunder.
1.3. ADMINISTRATION
(a) COMMITTEE POWERS. The Plan shall be administered by the
Committee, which shall have full power and authority to: (i) designate Grantees;
(ii) determine the Incentive Awards to be granted to a Grantee and whether such
Incentive Awards are to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code;
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(iii) subject to SECTION 1.4 of the Plan, determine the Common Stock (or
securities convertible into Common Stock) to be covered by Incentive Awards and
in connection therewith, to reserve shares of Common Stock as needed in order to
cover grants of Incentive Awards; (iv) determine the terms and conditions of any
Incentive Award; provided however, that the terms and conditions of Incentive
Awards intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not limited to, such terms
and conditions as may be necessary to meet the applicable provisions of Section
162(m)(4)(C) of the Code; (v) determine whether, to what extent, and under what
circumstances Incentive Awards may be settled or exercised in cash, Common
Stock, other securities, or other property, or cancelled, substituted, forfeited
or suspended, and the method or methods by which Incentive Awards may be
settled, exercised, cancelled, substituted, forfeited or suspended; (vi)
interpret and administer the Plan and any instrument or agreement relating to,
or Incentive Award made under, the Plan; (vii) establish, amend, suspend or
waive such rules and guidelines as the Committee shall deem necessary or
appropriate for administration of the Plan; (viii) appoint such agents as it
shall deem appropriate for the administration of the Plan; provided however,
that the Committee shall not delegate any of the power or authority set forth in
(i) through (vii) above; and (ix) make any other determination and take any
other action that it deems necessary or desirable for such administration. No
member of the Committee shall vote or act upon any matter relating solely to
himself. All designations, determinations, interpretations and other decisions
with respect to the Plan or any Incentive Award shall be within the sole
discretion of the Committee and shall be final, conclusive and binding upon all
persons, including the Company, Parent or Subsidiary, any Grantee, any holder or
beneficiary of any Incentive Award, any owner of an equity interest in the
Company and any Employee.
(b) NO LIABILITY. No member of the Committee shall be liable for any
action or determination made in good faith by the Committee with respect to this
Plan or any Incentive Award under this Plan, and, to the fullest extent
permitted by the Company's Articles of Incorporation and Bylaws, the Company
shall indemnify each member of the Committee.
(c) MEETINGS. The Committee shall designate a chairman from among
its members, who shall preside at all of its meetings, and shall designate a
secretary, without regard to whether that person is a member of the Committee,
who shall keep the minutes of the proceedings and all records, documents, and
data pertaining to its administration of the Plan. Meetings shall be held at
such times and places as shall be determined by the Committee. The Committee may
take any action otherwise proper under the Plan by the affirmative vote, taken
with or without a meeting, of a majority of its members.
1.4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
(a) COMMON STOCK AUTHORIZED. Subject to adjustment under SECTION
5.5, the aggregate number of shares of Common Stock available for granting
Incentive Awards under the Plan shall be equal to 3,500,000 shares of Common
Stock. If any Incentive Award shall expire or terminate for any reason, without
being exercised or paid, shares of
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Common Stock subject to such Incentive Award shall again be available for grant
in connection with grants of subsequent Incentive Awards, subject to the
limitations of SECTION 1.7.
(b) COMMON STOCK AVAILABLE. The Common Stock available for issuance
or transfer under the Plan shall be made available from such shares reserved
under the Plan, from such shares now or hereafter held by the Company or from
such shares to be purchased or acquired by the Company. The Common Stock
available for issuance or transfer under the Plan, if applicable, shall be made
available from shares now or hereafter held by the Company or from such shares
to be purchased or acquired by the Company. No fractional shares shall be issued
under the Plan; payment for fractional shares shall be made in cash.
(c) INCENTIVE AWARD ADJUSTMENTS. Subject to the limitations set
forth in SECTIONS 1.7, 5.6 and 6.8, the Committee may make any adjustment in the
exercise price or the number of shares subject to any Incentive Award, or any
other terms of any Incentive Award. Such adjustment shall be made by amending,
substituting or canceling and re-granting such Incentive Award with the
inclusion of terms and conditions that may differ from the terms and conditions
of the original Incentive Award. If such action is effected by amendment, the
effective date of such amendment shall be the date of the original grant.
1.5. PARTICIPATION
(a) ELIGIBILITY. The Committee shall from time to time designate
those Employees, if any, to be granted Incentive Awards under the Plan, the type
of awards granted, the number of shares, options, rights or units, as the case
may be, which shall be granted to each such Employee and any other terms or
conditions relating to the awards as it may deem appropriate, consistent with
the provisions of the Plan. An Employee who has been granted an Incentive Award
may, if otherwise eligible, be granted additional Incentive Awards at any time.
(b) NO NON-EMPLOYEE BOARD PARTICIPATION. In no event may any member
of the Board who is not an Employee be granted an Incentive Award under the
Plan.
1.6. INCENTIVE AWARDS
The forms of Incentive Awards under this Plan are Stock Options,
Stock Appreciation Rights and Supplemental Payments as described in SECTION 2,
Restricted Stock and Supplemental Payments as described in SECTION 3, and
Performance Units or Performance Shares and Supplemental Payments as described
in SECTION 4.
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1.7. MAXIMUM INDIVIDUAL RIGHTS
No grantee may receive during any fiscal year of the Company
Incentive Awards covering an aggregate of more than two hundred thousand
(200,000) shares of Common Stock. To the extent required by Section 162(m) of
the Code, shares subject to Options which are canceled continue to be counted
against the maximum number of shares an individual may receive and if, after
grant of an Option, the price of shares subject to such Option is reduced, the
transaction will be treated as a cancellation of the Option and a grant of a new
Option and both the Option deemed to be canceled and the Option deemed to be
granted will be counted against the maximum number of shares an individual may
receive. Furthermore, to the extent required by Section 162(m) of the Code, if,
after the grant of an SAR, the base amount which Appreciation is calculated is
reduced to reflect a reduction in the Fair Market Value of the Company's Common
Stock, the transaction will be treated as a cancellation of the SAR and a grant
of a new SAR and both the SAR deemed to be cancelled and the SAR deemed to be
granted will be counted against the maximum number of shares an individual may
receive.
SECTION 2. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1. GRANT OF OPTIONS
The Committee is authorized to grant Options to Grantees in
accordance with the terms and conditions required pursuant to this Plan and with
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine.
2.2. OPTION TERMS
(a) EXERCISE PRICE. The exercise price per share of Common Stock
under each Option shall be determined by the Committee; provided however, that,
in the case of an Option intended to qualify as an Incentive Stock Option or as
performance-based compensation as described in Section 162(m)(4)(C) of the Code,
such exercise price shall not be less than 100% of the Fair Market Value per
share of such stock on the date the Option is granted, as determined by the
Committee (110% in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder). For purposes of this SECTION 2.2, Ten-Percent
Stockholder shall mean an individual owning more than 10% of the total combined
voting power of all classes of stock of the Company, Parent or Subsidiary.
(b) TERM. The Committee shall fix the term of each Option which, in
the case of an Incentive Stock Option, shall be not more than ten years from the
date of grant. In the event no term is fixed, such term shall be ten years from
the date of grant. The term shall be five years in the case of an Incentive
Stock Option granted to a Ten-Percent Stockholder.
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(c) EXERCISE. The Committee shall determine the time or times at
which an Option may be exercised in whole or in part. The Committee may
accelerate the exercisability of any Option or a portion thereof at any time.
Notwithstanding the foregoing, the Committee may, in its sole discretion,
provide that all or part of the Options received by a Grantee upon the exercise
of a Non-Qualified Stock Option shall be Restricted Stock subject to any or all
of the restrictions or conditions set forth in SECTION 3.2.
2.3. OPTION EXERCISES
(a) METHOD OF EXERCISE. To purchase shares under any Option granted
under the Plan, Grantees must give notice in writing to the Company of their
intention to purchase and specify the number of shares of Common Stock as to
which they intend to exercise their Option. Upon the date or dates specified for
the completion of the purchase of the shares, the purchase price will be payable
in full. The purchase price may be paid in cash or an equivalent acceptable to
the Committee. At the discretion of the Committee, the exercise price per share
of Common Stock may be paid by the assignment and delivery to the Company of
shares of Common Stock owned by the Grantee or a combination of cash and such
shares equal in value to the exercise price. However, if the Grantee acquired
the stock to be surrendered directly or indirectly from the Company, he must
have owned the stock to be surrendered for at least six months prior to
tendering such stock for the exercise of an Option. Any shares so assigned and
delivered to the Company in payment or partial payment of the purchase price
shall be valued at the Fair Market Value on the exercise date. In addition, at
the request of the Grantee and to the extent permitted by applicable law, the
Company in its discretion may selectively approve a "cashless exercise"
arrangement with a brokerage firm under which such brokerage firm, on behalf of
the Grantee, shall pay to the Company the exercise price of the Options being
exercised, and the Company, pursuant to an irrevocable notice from the Grantee,
shall promptly deliver the shares being purchased to such firm.
(b) In the case of Incentive Stock Options, the terms and conditions
of such grants shall be subject to and comply with Section 422 of the Code and
any rules or regulations promulgated thereunder, including the requirement that
the aggregate Fair Market Value (determined as of date the date of grant) of the
Common Stock with respect to which Incentive Stock Options granted under this
Plan and all other option plans of the Company, the Parent and Subsidiary become
exercisable by a Grantee during any calendar year shall not exceed $100,000. To
the extent that the limitation set forth in the preceding sentence is exceeded
for any reason (including the acceleration of the time for exercise of an
Option), the Options with respect to such excess amount shall be treated as
Non-Qualified Stock Options.
(c) PROCEEDS. The proceeds received by the Company from the sale of
shares of Common Stock pursuant to Options exercised under the Plan will be used
for general purposes of the Company.
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2.4. STOCK APPRECIATION RIGHTS
(a) GENERAL PROVISIONS. The Committee may grant SARs in connection
with the grant of an Option ("Tandem SARs") or independent of an Option
("Independent SARs" or collectively with the Tandem SARs "SARs"). The Committee,
in its discretion, may determine whether an SAR is to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
and Incentive Agreements evidencing SARs intended to so qualify shall contain
such terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code.
(b) TANDEM SARS. A Tandem SAR shall be issued in connection with the
granting of an Option. A Tandem SAR shall be exercisable only when and to the
extent the related Option is exercisable, and shall be subject to the conditions
applicable to such Option. When a Tandem SAR is exercised, the Option to which
it relates shall terminate to the extent of the number of shares with respect to
which the Tandem SAR is exercised. Similarly, when an Option is exercised, the
Tandem SAR relating to such Option shall terminate. Any Tandem SAR that is
outstanding on the last day of the term of the related Option shall be
automatically exercised on such date for cash without any action by the Grantee.
The exercise price per share of Common Stock subject to a Tandem SAR shall be
fixed in the Incentive Award Agreement and shall not be less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the date
of the grant of the Option to which the Tandem SAR relates. Upon exercise of a
Tandem SAR, the holder shall receive, for each share with respect to which the
Tandem SAR is exercised, an amount equal to the Appreciation. The Appreciation
shall be payable in cash, Common Stock, or a combination of both, at the option
of the Committee, and shall be paid within 30 calendar days of the exercise of
the Tandem SAR.
(c) INDEPENDENT SARS. An Independent SAR shall be unrelated to any
Option and shall have a term set by the Committee. An Independent SAR shall be
exercisable in such installments as the Committee may determine. An Independent
SAR shall cover such number of shares of Common Stock as the Committee may
determine. The exercise price per share of Common Stock subject to each
Independent SAR shall be set by the Committee, provided however, that the
exercise price per share of Common Stock subject to each Independent SAR, that
is intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, shall not be less than one hundred percent (100%) of
the Fair Market Value of a share of Common Stock on the date of grant of the
Independent SAR, unless Incentive Agreements evidencing Independent SARs
intended to so qualify shall contain such other terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code. Upon
exercise of an Independent SAR, the holder shall receive, for each share with
respect to which the Independent SAR is exercised, an amount equal to the
Appreciation. The Appreciation shall be payable in cash, Common Stock, or a
combination of both, at the option of the Committee, and shall be paid within 30
calendar days of the exercise of the Independent SAR.
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2.5. SUPPLEMENTAL PAYMENT ON EXERCISE OF NON- QUALIFIED STOCK
OPTIONS OR STOCK APPRECIATION RIGHTS
The Committee, either at the time of grant or at the time of
exercise of any Non-Qualified Stock Option or SAR, may provide for a
supplemental payment (the "Supplemental Payment") by the Company to the Grantee
with respect to the exercise of any Non-Qualified Stock Option or SAR. The
Supplemental Payment shall be in the amount specified by the Committee, which
shall not exceed the amount necessary to pay the federal income tax payable with
respect to both the exercise of the Non-Qualified Stock Option and/or SAR and
the receipt of the Supplemental Payment, assuming the holder is taxed at the
maximum effective federal income tax rate applicable thereto. The Committee
shall have the discretion to grant Supplemental Payments that are payable solely
in cash or Supplemental Payments that are payable in cash, Common Stock, or a
combination of both, as determined by the Committee at the time of payment. The
Supplemental Payment shall be paid within 30 calendar days of the date of
exercise of a Non-Qualified Stock Option or SAR (or, if later, within 30
calendar days of the date on which income is recognized for federal income tax
purposes with respect to such exercise).
SECTION 3. RESTRICTED STOCK
3.1. AWARD OF RESTRICTED STOCK
(a) GRANT. In consideration of the performance of services by the
Grantee, shares of Restricted Stock may be awarded under this Plan by the
Committee on such terms and conditions and with such restrictions as the
Committee may from time to time approve, all of which may differ with respect to
each Grantee. Such Restricted Stock shall be awarded for no additional
consideration or such additional consideration as the Committee shall determine.
(b) IMMEDIATE TRANSFER WITHOUT IMMEDIATE DELIVERY OF RESTRICTED
STOCK. Each Restricted Stock Award will constitute an immediate transfer of the
record and beneficial ownership of the shares of Restricted Stock to the Grantee
in consideration of the performance of services, entitling such Grantee to all
voting and other ownership rights, but subject to the restrictions hereinafter
referred to. Each Restricted Stock Award may limit the Grantee's dividend rights
during the Restriction Period in which the shares of Restricted Stock are
subject to a substantial risk of forfeiture and restrictions on transfer. Shares
of Common Stock awarded pursuant to a grant of Restricted Stock will be held by
the Company, or in trust or in escrow pursuant to an agreement satisfactory to
the Committee, as determined by the Committee, until such time as the
restrictions on transfer have expired. Any such trust or escrow shall not be
insulated from the claims of the general creditors of the Company in the event
of bankruptcy or insolvency of the Company.
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3.2. RESTRICTIONS
(a) RESTRICTIVE CONDITIONS. Restricted Stock awarded to a Grantee
shall be subject to the following restrictions until the expiration of the
Restriction Period: (i) the shares of Common Stock of the Company included in
the Restricted Stock Award shall be subject to one or more restrictions,
including without limitation, a restriction that constitutes a "substantial risk
of forfeiture" within the meaning of Section 83 of the Code and regulations
promulgated thereunder, and to the restrictions on transferability set forth in
SECTION 5.2; (ii) unless otherwise approved by the Committee, the shares of
Common Stock included in the Restricted Stock Award that are subject to
restrictions that are not satisfied at such time the Grantee ceases to be
employed by the Company shall be forfeited and all rights of the Grantee to such
shares shall terminate without further obligation on the part of the Company
when an Employee leaves the employ of the Company; and (iii) any other
restrictions that the Committee may determine in advance are necessary or
appropriate.
(b) FORFEITURE OF RESTRICTED STOCK. If for any reason, the
restrictions imposed by the Committee upon Restricted Stock are not satisfied at
the end of the Restriction Period, any Restricted Stock remaining subject to
such restrictions shall thereupon be forfeited by the Grantee and re-acquired by
the Company.
(c) REMOVAL OF RESTRICTIONS. The Committee shall have the authority
to remove any or all of the restrictions on the Restricted Stock, including the
restrictions under the Restriction Period, whenever it may determine that, by
reason of changes in applicable laws or other changes in circumstances arising
after the date of the Restricted Stock Award, such action is appropriate.
3.3. RESTRICTION PERIOD
The Restriction Period of Restricted Stock shall commence on the
date of grant and shall be established by the Committee in the Incentive Award
Agreement setting forth the terms of the award of Restricted Stock.
3.4. DELIVERY OF SHARES OF COMMON STOCK
Subject to SECTION 6.3, at the expiration of the Restriction Period,
a stock certificate evidencing the Restricted Stock (to the nearest full share)
with respect to which the Restriction Period has expired with all restrictions
thereon having been satisfied shall be delivered without charge to the Grantee,
or his personal representative, free of all restrictions under the Plan.
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3.5. SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK
The Committee, either at the time of grant or at the time of vesting
of Restricted Stock, may provide for a Supplemental Payment by the Company to
the holder in an amount specified by the Committee, which shall not exceed the
amount necessary to pay the federal income tax payable with respect to both the
vesting of the Restricted Stock and receipt of the Supplemental Payment,
assuming the Grantee is taxed at the maximum effective federal income tax rate
applicable thereto. The Supplemental Payment shall be paid within 30 calendar
days of each date that Restricted Stock vests. The Committee shall have the
discretion to grant Supplemental Payments that are payable solely in cash or
Supplemental Payments that are payable in cash, Common Stock, or a combination
of both, as determined by the Committee at the time of payment.
3.6. PROVISIONS APPLICABLE TO SECTION 162(m) PARTICIPANTS
(a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant Restricted Stock to a Section 162(m) Participant the
restrictions with respect to which lapse upon the attainment of performance
goals for the Company which are related to one or more of the following business
criteria: (i) pre-tax income, (ii) operating income, (iii) cash flow, (iv)
earnings per share, (v) return on equity, (vi) return on invested capital or
assets, (vii) cost reductions or savings, (viii) funds from operations, (ix)
appreciation in the fair market value of Common Stock and (x) earnings before
any one or more of the following items: interest, taxes, depreciation or
amortization.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
Restricted Stock which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period or period of
service (or such other time as may be required or permitted by Section 162(m) of
the Code), the Committee shall, in writing, (i) designate one or more Section
162(m) Participants, (ii) select the performance goal or goals applicable to the
fiscal year or other designated fiscal period of service, (iii) establish the
various targets and amounts of Restricted Stock which may be earned for such
fiscal year or other designated fiscal period or period of service and (iv)
specify the relationship between performance goals and targets and the amounts
of Restricted Stock to be earned by each Section 162(m) Participant for such
fiscal year or other designated fiscal period or period of service. Following
the completion of each fiscal year or other designated fiscal period or period
of service, the Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other designated
fiscal period of service. In determining the amount earned by a Section 162(m)
Participant, the Committee shall have the right to reduce (but not to increase)
the amount payable at a given level of performance to take into account
additional factors that the Committee may deem relevant to
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the assessment of individual or corporate performance for the fiscal year or
other designated fiscal period or period of service.
SECTION 4. PERFORMANCE UNITS AND PERFORMANCE SHARES
4.1. PERFORMANCE BASED AWARDS
(a) GRANT. The Committee is authorized to grant Performance Units
and Performance Shares to Grantees. The Committee may make grants of Performance
Units or Performance Shares in such manner that more than one Performance Period
is in progress concurrently. For each Performance Period, the Committee shall
establish the number of Performance Units or Performance Shares and the
contingent value of any Performance Units or Performance Shares, which may vary
depending on the degree to which performance objectives established by the
Committee are met.
(b) PERFORMANCE CRITERIA. At the beginning of each Performance
Period, the Committee shall (i) establish for such Performance Period specific
financial or nonfinancial performance objectives as the Committee believes are
relevant to the Company's overall business objectives; (ii) determine the value
of a Performance Unit or the number of shares under a Performance Share grant
relative to performance objectives; (iii) notify each Grantee in writing of the
established performance objectives and minimum, target, and maximum Performance
Unit or Share value for such Performance Period.
(c) MODIFICATION. If the Committee determines in its sole discretion
that the established performance measures or objectives are no longer suitable
to Company objectives because of a change in the Company's business operations,
corporate structure, capital structure, or other conditions the Committee deems
to be appropriate, the Committee may modify the performance measures and
objectives as considered appropriate.
(d) PAYMENT. The basis for payment of Performance Units or
Performance Shares for a given Performance Period shall be the achievement of
those financial and nonfinancial performance objectives determined by the
Committee at the beginning of the Performance Period. If minimum performance is
not achieved for a Performance Period, no payment shall be made and all
contingent rights shall cease. If minimum performance is achieved or exceeded,
the value of a Performance Unit or Performance Share shall be based on the
degree to which actual performance exceeded the pre-established minimum
performance standards, as determined by the Committee. The amount of payment
shall be determined by multiplying the number of Performance Units or
Performance Shares granted at the beginning of the Performance Period times the
final Performance Unit or Performance Share value. Payments shall be made, in
the discretion of the Committee, solely in cash or Common Stock, or a
combination of cash and Common Stock, following the close of the applicable
Performance Period.
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4.2. SUPPLEMENTAL PAYMENT ON VESTING OF PERFORMANCE UNITS OR
PERFORMANCE SHARES
The Committee, either at the time of grant or at the time of vesting
of Performance Units or Performance Shares (other than Restricted Stock), may
provide for a Supplemental Payment by the Company to the holder in an amount
specified by the Committee which shall not exceed the amount necessary to pay
the federal income tax payable with respect to both the vesting of such
Performance Units or Performance Shares and receipt of the Supplemental Payment,
assuming the Grantee is taxed at the maximum effective federal income tax rate
applicable thereto. The Supplemental Payment shall be paid within 30 days of
each date that such Performance Units or Performance Shares vest. The Committee
shall have the discretion to grant Supplemental Payments that are payable in
cash, Common Stock, or a combination of both, as determined by the Committee at
the time of payment.
4.3. PROVISIONS APPLICABLE TO SECTION 162(m) PARTICIPANTS
(a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Performance Units or Performance Shares described in
this Section 4 to a Section 162(m) Participant that vest or become exercisable
or payable upon the attainment of performance goals for the Company which are
related to one or more of the following business criteria: (i) pre-tax income,
(ii) operating income, (iii) cash flow, (iv) earnings per share, (v) return on
equity, (vi) return on invested capital or assets, (vii) cost reductions or
savings, (viii) funds from operations, (ix) appreciation in the fair market
value of Common Stock and (x) earnings before any one or more of the following
items: interest, taxes, depreciation or amortization.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
Performance Units or Performance Shares described in this Section 4 which may be
granted to one or more Section 162(m) Participants, no later than ninety (90)
days following the commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in
writing,(i) designate one or more Section 162(m) Participants, (ii) select the
performance goal or goals applicable to the fiscal year or other designated
fiscal period or period of service, (iii) establish the various targets and
bonus amounts which may be earned for such fiscal year or other designated
fiscal period or period of service and (iv) specify the relationship between
performance goals and targets and the amounts to be earned by each Section
162(m) Participant for such fiscal year or other designated fiscal period or
period of service. Following the completion of each fiscal year or other
designated fiscal period or period of service, the Committee shall certify in
writing whether the applicable performance targets have been achieved for such
fiscal year or other designated fiscal period or period of service. In
determining the amount earned by a Section 162(m) Participant, the Committee
shall have the right to reduce (but not to increase) the amount payable at a
given level of performance to take into account
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additional factors that the Committee may deem relevant to the assessment of
individual or corporate performance for the fiscal year or other designated
fiscal period or period of service.
SECTION 5. PROVISIONS RELATING TO PLAN PARTICIPATION
5.1. PLAN CONDITIONS
(a) INCENTIVE AWARD AGREEMENT. Each Grantee to whom an Incentive
Award is granted under the Plan shall be required to enter into an Incentive
Award Agreement with the Company in a form provided by the Committee, which
shall contain certain specific terms, as determined by the Committee, with
respect to the Incentive Award and shall include provisions that the Grantee (i)
shall not disclose any trade or secret data or any other confidential
information of the Company acquired during employment by the Company or a
Subsidiary, or after the termination of employment or Retirement, (ii) shall
abide by all the terms and conditions of the Plan and such other terms and
conditions as may be imposed by the Committee, and (iii) shall not interfere
with the employment of any other Company employee. An Incentive Award may
include a noncompetition agreement with respect to the Grantee and/or such other
terms and conditions, including, without limitation, rights of repurchase or
first refusal, not inconsistent with the Plan, as shall be determined from time
to time by the Committee. Incentive Award Agreements evidencing Incentive Awards
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code.
(b) NO RIGHT TO EMPLOYMENT. Nothing in the Plan, Incentive Award
Agreement or any instrument executed pursuant to the Plan shall create any
employment rights (including without limitation, rights to continued employment)
in any Grantee or affect the right of the Company to terminate the employment of
any Grantee at any time for any reason whether before the exercise date of any
Option or during the Restriction Period of any Restricted Stock or during the
Performance Period of any Performance Unit or Performance Share.
(c) SECURITIES REQUIREMENTS. No shares of Common Stock will be
issued or transferred pursuant to an Incentive Award unless and until all
then-applicable requirements imposed by federal and state securities and other
laws, rules and regulations and by any regulatory agencies having jurisdiction
and by any stock market or exchange upon which the Common Stock may be listed,
have been fully met. As a condition precedent to the issuance of shares pursuant
to the grant or exercise of an Incentive Award, the Company may require the
Grantee to take any reasonable action to meet such requirements. The Company
shall not be obligated to take any affirmative action in order to cause the
issuance or transfer of shares pursuant to an Incentive Award to comply with any
law or regulation described in the second preceding sentence.
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5.2. TRANSFERABILITY
(a) NON-TRANSFERABLE AWARD. Unless otherwise provided in an
Incentive Award Agreement, no Incentive Award and no right under the Plan,
contingent or otherwise, other than Restricted Stock as to which restrictions
have lapsed, shall be (i) assignable, saleable, or otherwise transferable by a
Grantee except by will or by the laws of descent and distribution or pursuant to
a qualified domestic relations order, or (ii) subject to any encumbrance, pledge
or charge of any nature. No transfer by will or by the laws of descent and
distribution shall be effective to bind the Company unless the Committee shall
have been furnished with a copy of the deceased Grantee's will or such other
evidence as the Committee may deem necessary to establish the validity of the
transfer. Any attempted transfer in violation of this SECTION 5.2 shall be void
and ineffective for all purposes.
(b) ABILITY TO EXERCISE RIGHTS. Only the Grantee or his guardian (if
the Grantee becomes Disabled), or in the event of his death, his legal
representative or beneficiary, may exercise Options, receive cash payments and
deliveries of shares, or otherwise exercise rights under the Plan. The executor
or administrator of the Grantee's estate, or the person or persons to whom the
Grantee's rights under any Incentive Award will pass by will or the laws of
descent or distribution, shall be deemed to be the Grantee's beneficiary or
beneficiaries of the rights of the Grantee hereunder and shall be entitled to
exercise such rights as are provided hereunder.
5.3. RIGHTS AS A STOCKHOLDER
Except as otherwise provided in any Incentive Award Agreement, a
Grantee of an Incentive Award or a transferee of such Grantee shall have no
rights as a stockholder with respect to any shares of Common Stock until such
person becomes a holder of record of such Common Stock. Except as otherwise
provided in SECTION 5.5, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities, or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued.
5.4. LISTING AND REGISTRATION OF SHARES OF COMMON STOCK
Prior to issuance and/or delivery of shares of Common Stock, the
Company shall consult with representatives of the Company, as appropriate,
regarding compliance with laws, rules and regulations that apply to such shares.
If necessary, the Company shall postpone the issuance and/or delivery of the
affected shares of Common Stock upon any exercise of an Incentive Award until
completion of such stock exchange listing, registration, or other qualification
of such shares under any state and/or federal law, rule or regulation as the
Company may consider appropriate, and may require any Grantee to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in compliance with
applicable laws, rules and regulations. The Company shall not be obligated to
take any affirmative action in order to cause the issuance or transfer of shares
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pursuant to an Incentive Award to comply with any law, rule or regulation
described in the immediately preceding sentence.
5.5. CHANGE IN STOCK AND ADJUSTMENTS
(a) CHANGES IN CAPITALIZATION. In the event the outstanding shares
of the Common Stock, as constituted from time to time, shall be changed as a
result of a change in capitalization of the Company or a combination, merger, or
reorganization of the Company into or with any other corporation or any other
transaction with similar effects, then, for all purposes, references herein to
Common Stock or Restricted Stock shall mean and include all securities or other
property (other than cash) that holders of Common Stock are entitled to receive
in respect of Common Stock by reason of each successive aforementioned event,
which securities or other property (other than cash) shall be treated in the
same manner and shall be subject to the same restrictions as the underlying
Common Stock or Restricted Stock.
(b) CHANGES IN LAW OR CIRCUMSTANCE. In the event of any change in
applicable laws or any change in circumstances which results in or would result
in any dilution of the rights granted under the Plan, or which otherwise
warrants equitable adjustment because it interferes with the intended operation
of the Plan, then if the Committee shall, in its sole discretion, determine that
such change equitably requires an adjustment in the number or kind of shares of
stock or other securities or property theretofore subject, or which may become
subject, to issuance or transfer under the Plan or in the terms and conditions
of outstanding Incentive Awards, such adjustment shall be made in accordance
with such determination. Such adjustments may include without limitation changes
with respect to (i) the aggregate number of shares that may be issued under the
Plan, (ii) the number of shares subject to Incentive Awards and (iii) the price
per share for outstanding Incentive Awards. The Committee shall give notice to
each Grantee, and upon notice such adjustment shall be effective and binding for
all purposes of the Plan.
(c) PROVISIONS APPLICABLE TO SECTION 162(m) PARTICIPANTS. With
respect to any Incentive Award granted to any Section 162(m) Participant that is
intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 5.5 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Incentive Award to fail to so qualify
under Section 162(m)(4)(C) or any successor provision thereto. Furthermore, no
such adjustment or action shall be authorized to the extent such adjustment or
action would result in short-swing profits liability under Section 16 or violate
the exemptive conditions of Rule 16b-3 unless the Committee determines that the
Option or other award is not to comply with such exemptive conditions.
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5.6. TERMINATION OF EMPLOYMENT, DEATH, DISABILITY AND RETIREMENT
(a) TERMINATION OF EMPLOYMENT. Subject to SECTION 3.2, if an
Employee's employment with the Company, Parent or Subsidiary is terminated for
any reason whatsoever other than death, Disability, Retirement, Involuntary
Termination or Termination for Good Reason, any Incentive Award granted pursuant
to the Plan outstanding at the time and all rights thereunder shall wholly and
completely terminate, and unless otherwise established by the Committee, no
further vesting shall occur and the Employee shall be entitled to exercise his
or her rights with respect to the portion of the Incentive Award vested as of
the date of termination for a period of thirty (30) calendar days after such
termination date; provided however, that if an Employee is Terminated for Cause,
such Employee's right to exercise the vested portion of his or her Incentive
Award shall terminate as of the date of termination of employment. In the event
of termination for death, Disability, Retirement, or Change of Control, an
Incentive Award may only be exercised as determined by the Committee and
provided in the Incentive Award Agreement. However, the following shall be used
as a general guideline.
(b) RETIREMENT. Subject to SECTION 3.2, unless otherwise approved by
the Committee, upon Retirement of an Employee:
(i) any nonvested portion of any outstanding Incentive Award
shall continue to vest after Retirement; and
(ii) any vested Incentive Award shall expire on the earlier of
(A) the expiration date set forth in the Incentive Award Agreement with respect
to such Incentive Awards; or (B) the expiration of six (6) months after the date
of Retirement.
(c) DISABILITY OR DEATH. Subject to SECTION 3.2, unless otherwise
approved by the Committee, upon termination of employment from the Company,
Parent or Subsidiary as a result of Disability or death:
(i) any nonvested portion of any outstanding Incentive Award
shall continue to vest after Disability or death; and
(ii) any vested Incentive Award shall expire upon the earlier
of (A) the expiration date set forth in the Incentive Award Agreement with
respect to such Incentive Awards; or (B) the first anniversary of such
termination of such employment as a result of Disability or death.
(d) INVOLUNTARY TERMINATION. Subject to SECTION 3.2, unless
otherwise approved by the Committee, upon termination of employment from the
Company, Parent or Subsidiary as a result of Involuntary Termination (not Change
of Control):
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(i) any nonvested portion or any outstanding Incentive Award
shall vest on a pro-rated basis based upon the number of months the terminated
Employee has been employed within the applicable Performance Period or Term; and
(ii) any vested Incentive Award shall expire upon the earlier
of (A) the expiration date set forth in the Incentive Award Agreement with
respect to such Incentive Awards or (B) the expiration of thirty (30) days after
the date of Termination.
(e) CONTINUATION. Subject to the express provisions of the Plan and
the terms of any applicable Incentive Award Agreement, the Committee, in its
discretion, may provide for the continuation of any Incentive Award for such
period and upon such terms and conditions as are determined by the Committee in
the event that a Grantee ceases to be an employee.
5.7. CHANGES OF CONTROL
(a) CHANGES OF CONTROL. In the event of Involuntary Termination or
Termination for Good Reason within two years after a Change of Control:
(i) all Options and Stock Appreciation Rights then outstanding
shall become vested and immediately exercisable, notwithstanding any provision
therein for the exercise in installments;
(ii) all restrictions and conditions of all Restricted Stock
then outstanding shall be deemed satisfied, and the Restriction Period with
respect thereto shall be deemed to have expired, as of the date of the Change of
Control; and
(iii) to the extent determined by the Committee, all
Performance Shares and Performance Units shall become vested, deemed earned in
full and promptly paid to the Grantees without regard to payment schedules and
notwithstanding that the applicable performance cycle or retention cycle shall
not have been completed.
For the purposes of this SECTION 5.7, a "Change of Control" shall
mean a change of control of a nature that would be required to be reported in
response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act as such Schedule, Regulation and Act were in effect on the date of
adoption of this Plan by the Board, assuming that such Schedule, Regulation and
Act applied to the Company, provided that such change of control shall be deemed
to have occurred at such time as:
(i) any "person" (as that term is used in SECTION 13(d) and
14(d)(2) of the Exchange Act) (other than the Company or an affiliate of the
Company) becomes, directly or indirectly, the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of
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securities representing 30% or more of the combined voting power for election of
members of the Board of the then outstanding voting securities of the Company or
any successor of the Company;
(ii) during any period of two (2) consecutive years or less,
individuals who at the beginning of such period constituted the Board of the
Company cease, for any reason, to constitute at least a majority of the Board,
unless the election or nomination for election of each new member of the Board
was approved by a vote of at least two-thirds of the members of the Board then
still in office who were members of the Board at the beginning of the period;
(iii) the equity holders of the Company approve any merger or
consolidation to which the Company is a party as a result of which the persons
who were equity holders of the Company immediately prior to the effective date
of the merger or consolidation (and excluding, however, any shares held by any
party to such merger or consolidation and their affiliates) shall have
beneficial ownership of less than 50% of the combined voting power for election
of members of the Board (or equivalent) of the surviving entity following the
effective date of such merger or consolidation; or
(iv) the equity holders of the Company approve any merger or
consolidation as a result of which the equity interests in the Company shall be
changed, converted or exchanged (other than a merger with a wholly owned
subsidiary of the Company) or any liquidation of the Company or any sale or
other disposition of 50% or more of the assets or earnings power of the Company;
provided however, that no Change of Control shall be deemed to have occurred if,
prior to such time as a Change of Control would otherwise be deemed to have
occurred, the Board determines otherwise.
Notwithstanding the foregoing (A) the merger or consolidation of
Aurora Foods Holdings, Inc., Aurora Foods, Inc., a wholly owned subsidiary of
Aurora Foods Holdings, Inc., VDK Holdings, Inc., and Van de Kamp's, Inc., a
wholly owned subsidiary of VDK Holdings, Inc., with and into the Company, (B)
the Public Offering of the Common Stock of the Company, and (C) the liquidation
or dissolution of Aurora/VDK LLC, MBW Investors LLC or VDK LLC shall not
constitute a Change of Control for purposes of this Plan.
(b) RIGHT OF CASH-OUT. If approved by the Board prior to or within
thirty (30) days after such time as a Change of Control shall be deemed to have
occurred, the Board shall have the right for a forty-five (45) day period
immediately following the date that the Change of Control is deemed to have
occurred to require all, but not less than all, Grantees to transfer and deliver
to the Company all Incentive Awards previously granted to Grantees in exchange
for an amount equal to the "cash value" (defined below) of the Incentive Awards.
Such right shall be exercised by written notice to all Grantees. For purposes of
this SECTION 5.7(b), the cash value of an Incentive Award shall equal the sum of
(i) all cash to which the Grantee would be entitled upon settlement or exercise
of such Incentive Award and (ii) the excess of the "market value" (defined
below) per share over the option price, if any, multiplied by the number of
shares subject to such Incentive Award. For purposes of the preceding sentence,
"market
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<PAGE>
value" per share shall mean the higher of (i) the average of the Fair Market
Value per share on each of the five trading days immediately following the date
a Change of Control is deemed to have occurred or (ii) the highest price, if
any, offered in connection with a Change of Control. The amount payable to each
Grantee by the Company pursuant to this SECTION 5.7(b) shall be in cash or by
certified check and shall be reduced by any taxes required to be withheld.
5.8. AMENDMENTS TO INCENTIVE AWARDS
The Committee may waive any conditions or rights with respect to, or
amend, alter, suspend, discontinue, or terminate, any unexercised Incentive
Award theretofore granted, prospectively or retroactively, with the consent of
any relevant Grantee, subject to the limitations of SECTION 1.7.
5.9. EXCHANGE OF INCENTIVE AWARDS
The Committee may, in its discretion, permit Grantees under the Plan
to surrender outstanding Incentive Awards in order to exercise or realize the
rights under other Incentive Awards, or in exchange for the grant of new
Incentive Awards or require holders of Incentive Awards to surrender outstanding
Incentive Awards as a condition precedent to the grant of new Incentive Awards.
5.10. FINANCING
The Company may extend and maintain, or arrange for the extension
and maintenance of, financing to any Grantee (including a Grantee who is a
Director of the Company) to purchase shares pursuant to exercise of an Incentive
Award on such terms as may be approved by the Committee in its sole discretion.
In considering the terms for extension or maintenance of credit by the Company,
the Committee shall, among other factors, consider the cost to the Company of
any financing extended by the Company.
SECTION 6. MISCELLANEOUS
6.1. EFFECTIVE DATE AND GRANT PERIOD
This Plan shall become effective as of the date of Board approval
(the "Effective Date"). Unless sooner terminated by the Board, the Plan shall
terminate on ___________, 2008, unless extended. After the termination of the
Plan, no Incentive Awards may be granted under the Plan, but previously granted
awards shall remain outstanding in accordance with their applicable terms and
conditions.
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<PAGE>
6.2. FUNDING
Except as provided under SECTION 3, no provision of the Plan shall
require the Company, for the purpose of satisfying any obligations under the
Plan, to purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets in a manner that
would provide any Grantee any rights that are greater than those of a general
creditor of the Company, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund if such action would provide any Grantee with
any rights that are greater than those of a general creditor of the Company.
Grantees shall have no rights under the Plan other than as unsecured general
creditors of the Company except that insofar as they may have become entitled to
payment of additional compensation by performance of services, they shall have
the same rights as other employees under applicable law. However, the Company
may establish a "Rabbi Trust" for purposes of securing the payment pursuant to a
Change of Control.
6.3. WITHHOLDING TAXES
The Company shall have the right to (i) make deductions from any
settlement of an Incentive Award made under the Plan, including the delivery of
shares, or require shares or cash or both be withheld from any Incentive Award,
in each case in an amount sufficient to satisfy withholding of any federal,
state or local taxes required by law, or (ii) take such other action as may be
necessary or appropriate to satisfy any such withholding obligations. The
Committee may determine the manner in which such tax withholding may be
satisfied, and may permit shares of Common Stock (rounded up to the next whole
number) to be used to satisfy required tax withholding based on the Fair Market
Value of any such shares of Common Stock, as of the delivery of shares or
payment of cash in satisfaction of the applicable Incentive Award.
6.4. CONFLICTS WITH PLAN
In the event of any inconsistency or conflict between the terms of
the Plan and an Incentive Award Agreement, the terms of the Plan shall govern.
6.5. NO GUARANTEE OF TAX CONSEQUENCES
Neither the Company nor the Committee makes any commitment or
guarantee that any federal, state or local tax treatment will apply or be
available to any person participating or eligible to participate hereunder.
6.6. SEVERABILITY
In the event that any provision of this Plan shall be held illegal,
invalid or unenforceable for any reason, such provision shall be fully
severable, but shall not affect the
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<PAGE>
remaining provision of the Plan, and the Plan shall be construed and enforced as
if the illegal, invalid, or unenforceable provision had never been included
herein.
6.7. GENDER, TENSE AND HEADINGS
Whenever the context requires such, words of the masculine gender
used herein shall include the feminine and neuter, and words used in the
singular shall include the plural. Section headings as used herein are inserted
solely for convenience and reference and constitute no part of the Plan.
6.8. AMENDMENT AND TERMINATION
The Plan may be amended or terminated at any time by the Board by
the affirmative vote of a majority of the members in office. The Plan, however,
shall not be amended, without prior written consent of each affected Grantee if
such amendment or termination of the Plan would adversely affect any material
vested benefits or rights of such person.
6.9. SECTION 280G PAYMENTS
In the event that the aggregate present value of the payments to a
Grantee under the Plan, and any other plan, program, or arrangement maintained
by the Company constitutes an "excess parachute payment" (within the meaning of
Code Section 280G(b)(1)) and the excise tax on such payment would cause the net
parachute payments (after taking into account federal, state and local income
and excise taxes) to which the Grantee otherwise would be entitled to be less
than what the Grantee would have netted (after taking into account federal,
state and local income taxes) had the present value of his total parachute
payments equaled $1.00 less than three times his "base amount" (within the
meaning of Code Section 280G(b)(3)(A)), the Grantee's total "parachute payments"
(within the meaning of Code Section 280G(b)(2)(A) shall be reduced (by the
minimum possible amount) so that their aggregate present value equals $1.00 less
than three times such base amount. For purposes of this calculation, it shall be
assumed that the Grantee's tax rate will be the maximum marginal federal, state
and local income tax rate on earned income, with such maximum federal rate to be
computed with regard to Code Section 1(g), if applicable. In the event that the
Grantee and the Company are unable to agree as to the amount of the reduction
described above, if any, the Grantee shall select a law firm or accounting firm
from among those regularly consulted (during the twelve-month period immediately
prior to the change of control that resulted in the characterization of the
payments as parachute payments) by the Company regarding federal income tax or
employee benefit matters and such law firm or accounting firm shall determine
the amount of such reduction and such determination shall be final and binding
upon the Grantee and the Company.
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<PAGE>
6.10. GOVERNING LAW
The Plan shall be construed in accordance with the laws of the State
of New York, except as superseded by federal law, and in accordance with
applicable provisions of the Code and regulations or other authority issued
thereunder by the appropriate governmental authority.
6.11. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION
Notwithstanding any other provision of this Plan, this Plan, and any
Incentive Award granted to any individual who is then subject to Section 16 of
the Exchange Act, shall be subject to any additional limitations set forth in
any applicable exemptive rule under Section 16 of the Exchange Act (including
any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan, and Incentive Awards granted hereunder shall be deemed amended to the
extent necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option, Stock Appreciation
Right or Performance Unit or Performance Share described in Section 4 which is
granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
IN WITNESS WHEREOF, this Plan has been executed this __th day of
______, 1998, to be effective as of _______ 1, 1998.
AURORA Foods Inc.
By:
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<PAGE>
Exhibit 10.3
EXECUTION COPY
================================================================================
AURORA FOODS INC.
____% Series E Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
------------------
dated June __, 1998
among
AURORA FOODS INC.
and
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
NATWEST CAPITAL MARKETS LIMITED
================================================================================
<PAGE>
AURORA FOODS INC.
$200,000,000
____% Series E Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
June __, 1998
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
NATWEST CAPITAL MARKETS LIMITED
c/o Chase Securities Inc.
270 Park Avenue, 4th Floor
New York, New York 10017
Dear Ladies and Gentlemen:
A FOODS INC., a Delaware corporation (as more fully defined below,
the "Company"), proposes to issue and sell to CHASE SECURITIES INC. ("CSI"),
GOLDMAN, SACHS & CO. and NATWEST CAPITAL MARKETS LIMITED (the "Initial
Purchasers") $200,000,000 aggregate principal amount of its ___% Series E Senior
Subordinated Notes due 2008 (the "Notes"). The Notes will be issued pursuant to
an Indenture to be dated as of __________, 1998 (the "Indenture"), among the
Company and Wilmington Trust Company, as trustee (the "Trustee"). This is to
confirm the agreement concerning the purchase of the Notes from the Company by
the Initial Purchasers.
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on an exemption therefrom. The Company has prepared a
preliminary offering memorandum, dated June 12, 1998 (the "preliminary offering
memorandum"), and will prepare an offering memorandum dated the date hereof
(such offering memorandum, in the form furnished to the Initial Purchasers for
use in connection with the offering of the Notes, the "Offering Memorandum"),
setting forth information concerning the Company and the Notes. Copies of the
preliminary offering memorandum have been, and copies of the Offering Memorandum
will be, delivered by the Company to the Initial Purchasers pursuant to the
terms of this Agreement. Any references herein to the preliminary offering
memorandum and the Offering Memorandum shall be deemed to include all amendments
and supplements thereto and all documents incorporated therein by reference. The
Company hereby confirms that it has authorized the use of the preliminary
offering memorandum and
<PAGE>
2
the Offering Memorandum in connection with the offering and resale of the Notes
by the Initial Purchasers in accordance with Section 3 hereof.
The Initial Purchasers and their direct and indirect transferees
will be entitled to the benefits of the Exchange and Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company will agree to
file with the Securities and Exchange Commission (the "Commission") (i) a
registration statement under the Securities Act (the "Exchange Offer
Registration Statement") registering an issue of senior subordinated notes of
the Company (the "Exchange Securities") which are identical in all material
respects to the Notes (except that the Exchange Securities will not contain
terms with respect to transfer restrictions) and (ii) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement").
Prior to the date hereof, (i) Aurora Foods, Inc., a Maryland
corporation ("Aurora Maryland"), was merged into and succeeded by the Company,
(ii) MBW Investors LLC, a Delaware limited liability company ("MBW LLC"),
contributed all of the issued and outstanding capital stock of Aurora Foods
Holdings, Inc., a Delaware corporation ("Aurora Holdings"), and VDK Foods LLC, a
Delaware limited liability company ("VDK LLC"), contributed all of the issued
and outstanding capital stock of VDK Holdings, Inc., a Delaware corporation
("VDK Holdings") to Aurora/VDK LLC, a Delaware limited liability company ("New
LLC"), in exchange for membership interests in New LLC, and (iii) New LLC
contributed all of the issued and outstanding capital stock of Aurora Holdings
and VDK Holdings to the Company in exchange for Common Stock. The transactions
comprising the merger of Aurora Maryland into the Company, the capitalization of
New LLC with all of the issued and outstanding capital stock of VDK Holdings and
Aurora Holdings, the formation of the Company and the capitalization of the
Company with all of the issued and outstanding capital stock of VDK Holdings and
Aurora Holdings are collectively referred to as the "Reorganization". Subsequent
to the date hereof but prior to the Closing Date (as defined in Section 4
hereof), (i) Van de Kamp's, Inc., a Delaware corporation ("VDK"), Aurora Foods
Inc., a Delaware corporation ("Aurora"), VDK Holdings and Aurora Holdings will
each be merged into and succeeded by the Company, and (ii) the Company will be
renamed Aurora Foods Inc. The transactions comprising the merger of each of VDK,
VDK Holdings, Aurora and Aurora Holdings with and into the Company, and the
renaming of the Company are collectively referred to as the "Merger". Aurora
Maryland, Aurora Holdings, VDK Holdings, New LLC, VDK and Aurora are
collectively referred to herein as the "Predecessors" and individually as a
"Predecessor". Any references in this Agreement to "the Company and its
subsidiaries", "the Company or any of its subsidiaries", and "each Subsidiary of
the Company" shall, after the consummation of the Merger, be deemed to be
references to the Company only. Subsequent to the date hereof, New LLC will be
liquidated.
<PAGE>
3
Concurrently with the Offering, the Company and certain of the
Company's shareholders are offering (the "Equity Offerings") 14,500,000 shares
of the Company's common stock, par value $.01 per share. The closing of the
offering of the Notes is contingent upon the closing of the Equity Offerings.
The Company intends to use the proceeds of the Offering to repay a
portion of the outstanding indebtedness under its Aurora Senior Bank Facilities
(as defined in the Offering Memorandum) and to pay related fees and expenses.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents and warrants to and agrees with the Initial Purchasers that:
(a) Each of the preliminary offering memorandum and the Offering
Memorandum, as of its respective date, contains all the information that, if
requested by a prospective purchaser, would be required to be provided pursuant
to Rule 144A(d)(4) under the Securities Act. Each of the preliminary offering
memorandum and the Offering Memorandum, as of its date did not, and the Offering
Memorandum as of the Closing Date, will not, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading; provided, however, that the Company makes no
representation or warranty as to information contained in or omitted from the
preliminary offering memorandum or the Offering Memorandum, as amended or
supplemented, in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Initial Purchasers specifically
for use therein (collectively, the "Initial Purchasers' Information"). The
parties acknowledge and agree that the Initial Purchasers' Information consists
solely of the statements relating to the Initial Purchasers in the first
sentence of the third paragraph, the second sentence of the ninth paragraph and
the thirteenth paragraph in its entirety under the heading "Plan of
Distribution" in the Offering Memorandum.
(b) It is not required by applicable law or regulation in connection
with the issuance and sale of the Notes to the Initial Purchasers and the offer,
resale and delivery of the Notes in the manner contemplated by this Agreement
and the Offering Memorandum, to register the Notes under the Securities Act or
to qualify the Indenture in respect of the Notes under the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act").
(c) The Company has been duly incorporated and is, and after giving
effect to consummation of the Merger will be, validly existing as a corporation
in good standing under the laws of the State of Delaware, with corporate power
and authority to own its properties and conduct its business as described in the
Offering Memorandum, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification except where the failure to be so qualified
would not,
<PAGE>
4
either individually or in the aggregate with such other failures, have a
material adverse effect on the business, financial condition, or results of
operations of the Company and its subsidiaries, taken as a whole (a "Material
Adverse Effect"); as of the date hereof, each subsidiary of the Company has been
duly incorporated or organized, as the case may be, and is validly existing as a
corporation or limited liability company, as the case may be, in good standing
under the laws of its jurisdiction of incorporation or organization, as the case
may be; and after giving effect to consummation of the Mergers, the Company does
not have any subsidiaries.
(d) The Company has an authorized capitalization as set forth in the
Offering Memorandum, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description of the stock contained in the
Offering Memorandum; as of the date hereof, all of the issued shares of capital
stock of each corporate subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and (except for
directors' qualifying shares) are, owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims.
(e) The unissued shares of common stock to be issued and sold by the
Company pursuant to the Equity Offerings have been duly and validly authorized
and, when issued and delivered against payment therefor, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description thereof contained in the Offering Memorandum.
(f) The Company has the corporate right, power and authority to
execute and deliver this Agreement, the Indenture, the Registration Rights
Agreement and the Notes (collectively, the "Transaction Documents") and to
perform its obligations hereunder and thereunder; and all corporate action
required to be taken for the due and proper authorization, execution and
delivery of the Transaction Documents and the consummation of the transactions
contemplated thereby have been duly and validly taken.
(g) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and legally binding agreement of the
Company.
(h) The Registration Rights Agreement has been duly authorized by
the Company, and when duly executed and delivered by the Company on the Closing
Date, will constitute a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) or an implied covenant of good faith and fair dealing.
<PAGE>
5
(i) The Indenture has been duly authorized by the Company, and when
duly executed and delivered by the Company and the Trustee on the Closing Date,
will constitute a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law) or
an implied covenant of good faith and fair dealing. At the Closing Date, the
Indenture will conform in all material respects to the requirements of the Trust
Indenture Act and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
(j) The Notes have been duly authorized by the Company, and, when
duly executed, authenticated, issued and delivered as provided in the Indenture
and paid for as provided herein, will be duly and validly issued and
outstanding, and will constitute valid and legally binding obligations of the
Company enforceable against the Company in accordance with their terms and
entitled to the benefits of the Indenture, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) or an
implied covenant of good faith and fair dealing.
(k) The Transaction Documents conform in all material respects to
the description thereof contained in the Offering Memorandum.
(l) The execution, delivery and performance of the Transaction
Documents by the Company, the issuance, authentication, sale and delivery of the
Notes, and compliance with the terms thereof will not conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of the property or assets of the Company is subject, nor will such
actions result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or, assuming the accuracy of the
representations and warranties of the Initial Purchasers contained herein, any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties or assets;
and except for such consents, approvals, authorizations, registrations or
qualifications as may be required under the applicable state securities laws in
connection with the purchase and resale of the Notes by the Initial Purchasers,
no consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the execution,
delivery and performance of the Transaction Documents by the Company, the
issuance,
<PAGE>
6
authentication, sale and delivery of the Notes, and compliance with the terms
thereof, and the consummation by the Company of the transactions contemplated
thereby.
(m) Price Waterhouse LLP, who have certified certain financial
statements of the Predecessors and of the Company, Deloitte and Touche LLP, who
have certified certain financial statements included in the Offering Memorandum,
and Coopers & Lybrand L.L.P., who have certified certain financial statements
included in the Offering Memorandum, are each independent public accountants as
required by the Securities Act and the rules and regulations of the Commission
thereunder.
(n) The Reorganization has been duly consummated in accordance with
all applicable law and upon the filing of the Certificate of Merger with and by
the Secretary of State of the State of Delaware, the Merger shall have been
consummated in accordance with the Agreement of Merger and the laws of the State
of Delaware.
(o) There are no pending actions or suits or judicial, arbitral,
rule-making or other administrative or other proceedings to which the Company is
a party or of which any property or assets of the Company is the subject which,
singularly or in the aggregate could reasonably be expected to have a Material
Adverse Effect; and to the best of the Company's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others.
(p) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency or body
which prevents the issuance of the Notes or suspends the sale of the Notes in
any jurisdiction; no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued with respect to
the Company which would prevent or suspend the issuance or sale of the Notes, or
the use of the preliminary offering memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the best
of the Company's knowledge, threatened against or affecting the Company, before
any court or arbitrator or any governmental body, agency or official, domestic
or foreign, which could reasonably be expected to interfere with or adversely
affect the issuance of the Notes or in any manner draw into question the
validity thereof or in any manner draw into question the validity of the
Transaction Documents or any action taken or to be taken pursuant thereto.
(q) Neither the Company nor any subsidiary of the Company is in
violation of its Certificate of Incorporation, By-Laws or other constituent
documents or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound.
<PAGE>
7
(r) The Company is not and, after giving effect to the Equity
Offering, will not be an "investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act").
(s) The Company and its subsidiaries own or possess, or have
adequate rights to use, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks, and trade names (collectively, "Intellectual
Property") currently used, or that after the Merger will be used by them in
connection with their business as described in the Offering Memorandum and as
proposed to be operated by them (including the trademarks "Duncan Hines", "Log
Cabin", "Country Kitchen", "Mrs. Butterworth's", "Aunt Jemima", Wigwam", "Van de
Kamp's", "Mrs. Paul's and "Celeste"), and, except as disclosed in the Offering
Memorandum, neither any of the Predecessors nor the Company or any of its
subsidiaries has received any notice of infringement of or conflict with (or
knows of any such infringement or conflict with) asserted rights of others with
respect to such Intellectual Property except with respect to any alleged
infringement or conflict which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(t) The Company and its subsidiaries have, and after giving effect
to the consummation of the Merger will have, good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Offering Memorandum or such as
do not materially affect the value of such property to the Company and its
subsidiaries, taken as a whole, and such as do not interfere with the use made
and proposed to be made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(u) No labor disturbance by the employees of the Company exists or,
to the best knowledge of the Company, is imminent which might be expected to
have a Material Adverse Effect.
(v) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as amended from time to time (the "Code"))
or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any
of the events set forth in Section 4043(b) of ERISA (other than events with
respect to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has
<PAGE>
8
occurred with respect to any employee benefit plan of the Company which could
have a Material Adverse Effect; each such employee benefit plan is in compliance
in all material respects with applicable law, including ERISA and the Code; the
Company has not incurred and does not expect to incur liability under Title IV
of ERISA with respect to the termination of, or withdrawal from, any "pension
plan"; and each "pension plan" (as defined in ERISA) for which the Company would
have any liability that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which could cause the loss of such
qualification.
(w) Neither any Predecessor nor the Company or any subsidiary of the
Company has violated any existing foreign, federal, state or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws") or any provisions of ERISA, except for such
violations which, singly or in the aggregate, would not have a Material Adverse
Effect.
(x) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints on operating activities and
any potential liabilities to third parties) for which the Company or any of its
subsidiaries could reasonably be expected to be responsible which would, singly
or in the aggregate, have a Material Adverse Effect.
(y) Each of the Company and its subsidiaries has, and after giving
effect to the Merger will have, such concessions, permits, licenses, consents,
exemptions, franchises, authorizations, orders, registrations, qualifications
and other approvals (each an "Authorization") of, and has made all filings with
and notices to, all governments, governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals, including,
without limitation, under any applicable Environmental Laws and under any rules
and regulations promulgated by the U.S. Food and Drug Administration (the
"FDA"), as are necessary to own, lease, license and operate its properties and
to conduct its business as described in the Offering Memorandum and to
consummate the Reorganization and the Merger, except where the failure to have
any such Authorization or to make any such filing or notice would not, singly or
in the aggregate, (i) have a Material Adverse Effect or (ii) adversely effect
the validity, performance or consummation of the Reorganization or the Merger or
the transactions contemplated by this Agreement. Each such Authorization is
valid and in full force and effect and each of the Company and its subsidiaries
is in compliance with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
after notice or lapse of time or both, would allow, revocation,
<PAGE>
9
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and other than as disclosed in the
Offering Memorandum, such Authorizations contain no restrictions that are
materially burdensome to any of the Company or any of its subsidiaries; except
in each case described in this sentence where such failure to be valid and in
full force and effect or to be in compliance or the occurrence of any such event
or the presence of any such restriction would not, singly or in the aggregate
with all such failures, have a Material Adverse Effect.
(z) All agreements of any of the Predecessors or the Company that
are necessary to consummate the Reorganization or the Merger, as the case may
be, have been duly and validly authorized, executed and delivered by the parties
thereto and are valid and legally binding agreements of the parties thereto, and
enforceable in accordance with their terms, each Predecessor and the Company
have all corporate or limited liability company power and authority necessary to
consummate the Reorganization and the Merger, and no circumstance exists which
would allow or cause any party to any agreements that are necessary to
consummate the Merger to terminate or fail to perform its obligations
thereunder. All stockholder and limited liability company member approvals
necessary to consummate the Reorganization and the Merger have been obtained and
are in full force and effect. The consummation of the Reorganization and the
Merger will not (i) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, (A) the certificate of incorporation, by-laws
or other constituent documents of any of the Predecessors of the Company or any
of its subsidiaries, or (B) any indenture, loan agreement, mortgage, lease or
other agreement or instrument to which any Predecessor of the Company or any of
its subsidiaries is a party or by which any of the Predecessors or the Company
or any of its subsidiaries or any of their respective property is bound, (ii)
violate or conflict with any applicable law or any rule, regulation, judgment,
order or decree of any governmental body or agency having jurisdiction over any
of the Predecessors or the Company or any of its subsidiaries or any of their
respective property, or (iii) result in the suspension, termination or
revocation of, or result in the imposition of fines or penalties pursuant to, or
result in any other impairment of any Authorization, rights, assets or
properties of any of the Company or any of its subsidiaries; except in the case
of clauses (i)(B), (ii), or (iii) for such conflicts, breaches, defaults,
violations, suspensions, terminations, revocations, fines and penalties as would
not in the aggregate with such other conflicts, breaches, default, violations,
suspensions, terminations, revocations, fines and penalties be expected to (x)
have a Material Adverse Effect or (y) adversely affect the validity, performance
or consummation of the Reorganization, the Merger or the transactions
contemplated by this Agreement.
(aa) Since March 31, 1998 there has not been any change in the
capital stock or long-term debt of the Company (other than scheduled redemptions
or payments) or any material adverse change, or any development involving a
<PAGE>
10
prospective material adverse change, in or affecting the management, financial
position, stockholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Offering Memorandum.
(bb) The Company has filed all federal, state, local and foreign
income and franchise tax returns required to be filed through the date hereof
and has paid all material taxes due thereon, and no tax deficiency has been
determined adversely to the Company which has had (nor does the Company have any
knowledge of any tax deficiency which, if determined adversely to the Company,
might reasonably be expected to have) a Material Adverse Effect.
(cc) Except as set forth in or contemplated by the Offering
Memorandum, since March 31, 1998, the Company has not (i) issued or granted any
securities (other than under plans, agreements and arrangements disclosed in,
and in effect on the date of, the Offering Memorandum), (ii) incurred any
liability or obligation, direct or contingent, other than liabilities and
obligations which were incurred in the ordinary course of business, (iii)
entered into any transaction not in the ordinary course of business or (iv)
declared or paid any dividend on its capital stock.
(dd) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")) of the Company
has directly, or through any agent (provided that no representation is made as
to the Initial Purchasers or any person acting on their behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be integrated
with the offering and sale of the Notes in a manner that would require the
registration of the Notes under the Securities Act or (ii) engaged in any form
of general solicitation or general advertising (within the meaning of Regulation
D) in connection with the offering of the Notes.
(ee) Neither the Company nor its affiliates has taken, and the
Company will not take, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Notes.
(ff) None of the proceeds of the sale of the Notes will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Notes to be considered a "purpose credit"
within the meanings of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
(gg) On the Closing Date, the Company (after giving effect to the
issuance of the Notes) will be Solvent. As used in this paragraph (hh), the term
<PAGE>
11
"Solvent" means, with respect to a particular date, that on such date (i) the
aggregate fair value (or present fair salable value) of the assets of the
Company is not less than its total existing debts and liabilities (including
contingent liabilities) as they become absolute and matured in the normal course
of business and (ii) the Company does not have an unreasonably small amount of
capital with which to conduct its business. In computing the amount of such
contingent liabilities at any time, it is intended that such liabilities will be
computed at the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
(hh) Neither the Company nor to the best of the Company's knowledge,
any director, officer, agent, employee or other person associated with or acting
on behalf of the Company, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.
(ii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(jj) The Company has and will maintain insurance covering its
properties, operations, personnel and businesses, which insurance is in amounts
and insures against such losses and risks, in each case as is adequate in its
reasonable business judgment to protect the Company and its businesses. The
Company has not received notice from any insurer or agent of such insurer that
capital improvements or other expenditures will have to be made in order to
continue such insurance.
(kk) Except as described in "Certain Relationships and Related
Transactions" in the Offering Memorandum, the Company is not a party to any
contract, agreement or understanding with any person that would give rise to a
valid claim against the Company or the Initial Purchasers for a brokerage
commission, finder's fee or like payment.
(ll) The Notes satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
<PAGE>
12
(mm) None of the Company, any of its affiliates or any person acting
on its or their behalf has engaged or will engage in any directed selling
efforts (as such term is defined in Regulation S under the Securities Act
("Regulation S")), and all such persons have complied and will comply with the
offering restrictions requirement of Regulation S to the extent applicable.
(nn) None of the Company or any of its affiliates or any other
person acting on its or their behalf has engaged, in connection with the
offering of the Notes, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act.
(oo) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act in
connection with the offering of the Notes.
(pp) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
preliminary offering memorandum or the Offering Memorandum has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good
faith.
(qq) Neither the Company nor any of it affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes.
(rr) Except as described in the Offering Memorandum, there are no
contracts, agreements, or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company.
(ss) The pro forma balance sheets and pro forma statements of income
and the related notes thereto set forth in the Offering Memorandum have been
prepared in accordance with the applicable requirements of Rule 11-02 of
Regulation S-X promulgated by the Commission, have been compiled on the pro
forma basis described therein, and in the opinion of the Company, the
assumptions used in the preparation thereof and the adjustments used therein are
reasonable.
2. PURCHASE OF THE NOTES BY THE INITIAL PURCHASERS. On the basis of
the representations, warranties and agreements contained herein, and subject to
the terms and conditions set forth herein, the Company agrees to issue and sell
to each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Company, the principal amount of Notes set forth opposite the name of such
Initial Purchaser on Schedule 1 hereto at a purchase price equal to _____% of
the principal amount thereof. The Company shall not be obligated to deliver any
of the Notes except upon payment for all of the Notes to be purchased as
provided herein.
<PAGE>
13
3. SALE AND RESALE OF THE NOTES BY THE INITIAL PURCHASERS. (a) The
Initial Purchasers have advised the Company that they propose to offer the Notes
for resale upon the terms and subject to the conditions set forth herein and in
the Offering Memorandum. Each Initial Purchaser, severally and not jointly,
represents and warrants to, and agrees with, the Company that (i) it is
purchasing the Notes pursuant to a private sale exempt from registration under
the Securities Act, (ii) it has not solicited offers for, or offered or sold,
and will not solicit offers for, or offer or sell, the Notes by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act and (iii) it has solicited and
will solicit offers for the Notes only from, and has offered or sold and will
offer, sell or deliver the Notes, as part of its initial offering, only to (A)
persons whom it reasonably believes to be qualified institutional buyers
("Qualified Institutional Buyers") as defined in Rule 144A under the Securities
Act ("Rule 144A"), or if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when such
person has represented to it that each such account is a Qualified Institutional
Buyer to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A and in each case, in transactions in accordance with Rule
144A and (B) outside the United States to persons other than U.S. persons in
reliance on Regulation S.
(b) In connection with the offer and sale of Securities in reliance
on Regulation S, each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:
(i) the Securities have not been registered under the Securities Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except pursuant to an exemption from,
or in transactions not subject to, the registration requirements of the
Securities Act.
(ii) such Initial Purchaser has offered and sold the Securities, and
will offer and sell the Securities, (A) as part of their distribution at
any time and (B) otherwise until 40 days after the later of the
commencement of the offering of the Securities and the Closing Date, only
in accordance with Regulation S or Rule 144A or any other available
exemption from registration under the Securities Act.
(iii) none of such Initial Purchaser or any of its affiliates or any
other person acting on its or their behalf has engaged or will engage in
any directed selling efforts with respect to the Securities, and all such
persons have complied and will comply with the offering restrictions
requirement of Regulation S.
(iv) at or prior to the confirmation of sale of any Securities sold
in reliance on Regulation S, it will have sent to each distributor, dealer
or other
<PAGE>
14
person receiving a selling concession, fee or other remuneration that
purchases Securities from it during the restricted period a confirmation
or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering of the Securities and the
date of original issuance of the Securities, except in accordance
with Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act. Terms used above have the
meanings given to them by Regulation S."
(v) it has not and will not enter into any contractual arrangement
with any distributor with respect to the distribution of the Securities,
except with its affiliates or with the prior written consent of the
Company.
Terms used in this Section 3(b) have the meanings given to them by Regulation S.
(c) Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that (i) it has not offered or sold and prior to the date
six months after the Closing Date will not offer or sell any Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 and the Public Offers
of Securities Regulations 1995 with respect to anything done by it in relation
to the Securities in, from or otherwise involving the United Kingdom; and (iii)
it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom such document may otherwise lawfully be issued or passed
on.
(d) Each Initial Purchaser, severally and not jointly, agrees that,
prior to or simultaneously with the confirmation of sale by such Initial
Purchaser to any purchaser of any of the Securities purchased by such Initial
Purchaser from the Company pursuant hereto, such Initial Purchaser shall furnish
to that purchaser a copy of the Offering Memorandum (and any amendment or
supplement thereto that the Company shall have furnished to such Initial
Purchaser prior to the date of such confirmation of sale). In addition to the
foregoing, each Initial Purchaser acknowledges and agrees that the Company and,
for purposes of the opinions to be
<PAGE>
15
delivered to the Initial Purchasers pursuant to Sections 6(c) and (d), counsel
for the Company and for the Initial Purchasers, respectively, may rely upon the
accuracy of the representations and warranties of the Initial Purchasers and
their compliance with their agreements contained in this Section 3, and each
Initial Purchaser hereby consents to such reliance.
(e) The Company acknowledges and agrees that the Initial Purchasers
may sell Notes to any affiliate of an Initial Purchaser and that any such
affiliate may sell Notes purchased by it to an Initial Purchaser.
4. DELIVERY OF AND PAYMENT FOR THE NOTES. (a) Delivery of and
payment for the Notes shall be made at the offices of Simpson Thacher &
Bartlett, New York, New York, or at such other place as shall be agreed upon by
the Initial Purchasers and the Company, at 10:00 A.M., New York City time, on
__________, 1998, or at such other time or date, not later than seven full
business days thereafter, as shall be agreed upon by the Initial Purchasers and
the Company (such date and time of payment and delivery being referred to herein
as the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the Notes
shall be made to the Company by wire or book-entry transfer of same-day funds to
such account or accounts as the Company shall specify prior to the Closing Date
or by such other means as the parties hereto shall agree prior to the Closing
Date against delivery to the Initial Purchasers of the certificates evidencing
the Notes. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligations
of the Initial Purchasers hereunder. Upon delivery, the Notes shall be in global
form, contain the legends required by the Indenture and be registered in such
names and in such denominations as CSI on behalf of the Initial Purchasers shall
have requested in writing not less than two full business days prior to the
Closing Date. The Company agrees to make one or more global certificates
evidencing the Notes available for inspection by CSI on behalf of the Initial
Purchasers in New York, New York at least 24 hours prior to the Closing Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
Initial Purchasers:
(a) To furnish to the Initial Purchasers, without charge, as many
copies of the Offering Memorandum and any supplements and amendments thereto as
they may reasonably request.
(b) To advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes any
statement of a material fact made in the Offering Memorandum untrue or which
requires the making of any additions to or changes in the Offering Memorandum
(as amended or supplemented from time to time) in order to make the statements
<PAGE>
16
therein, in light of the circumstances under which they were made, not
misleading and not to effect such amendment or supplementation without the
consent of the Initial Purchasers; to advise the Initial Purchasers promptly of
any order preventing or suspending the use of the preliminary offering
memorandum or the Offering Memorandum, or the suspension of the qualification of
the Notes for offering or sale in any jurisdiction and of the initiation or
threatening of any proceeding for any such purpose; and to use reasonable best
efforts to prevent the issuance of any such order preventing or suspending the
use of the preliminary offering memorandum or the Offering Memorandum or
suspending any such qualification and, if any such suspension is issued, to
obtain the lifting thereof at the earliest possible time.
(c) Prior to making any amendment or supplement to the Offering
Memorandum, the Company shall furnish a copy thereof to the Initial Purchasers
and counsel to the Initial Purchasers and will not effect any such amendment or
supplement to which the Initial Purchasers shall reasonably object by notice to
the Company after a reasonable period to review, which shall not in any case be
longer than five business days after receipt of such copy.
(d) If, at any time prior to completion of the distribution of the
Notes by the Initial Purchasers to other purchasers, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of counsel
for the Initial Purchasers or counsel for the Company, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in light of the
circumstances existing at the time it is delivered to a purchaser, or if it is
necessary to amend or supplement the Offering Memorandum to comply with
applicable law, to promptly prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission or so that the Offering
Memorandum, as so amended or supplemented, will comply with applicable law and
to furnish to the Initial Purchasers such number of copies thereof as it may
reasonably request.
(e) So long as the Notes are outstanding and are "Restricted
Securities" within the meaning of Rule 144(a)(3) under the Securities Act, to
furnish to holders of the Notes and prospective purchasers of Notes designated
by such holders, upon request of such holders or such prospective purchasers,
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, unless the Company is then subject to and in compliance with
Section 13 or 15(d) of the Exchange Act.
(f) For a period of five years following the Closing Date, to
furnish to the Initial Purchasers copies of any annual reports, quarterly
reports and current reports filed with the Commission on Forms 10-K, 10-Q and
8-K, or such other similar forms as may be designated by the Commission, and
such other documents, reports and information as shall be furnished by the
Company to the Trustee or to
<PAGE>
17
the holders of the Notes pursuant to the Indenture or the Exchange Act or any
rule or regulation of the Commission thereunder.
(g) To use its reasonable best efforts to qualify the Notes for sale
under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may reasonably designate and to continue such qualifications in
effect so long as required for the distribution of the Notes. The Company will
also arrange for the determination of the eligibility for investment of the
Notes under the laws of such jurisdictions as the Initial Purchasers may
reasonably request. Notwithstanding the foregoing, the Company shall not be
obligated to qualify as a foreign corporation in any jurisdiction in which they
are not so qualified or to file a general consent to service of process in any
jurisdiction.
(h) To assist the Initial Purchasers in arranging for the Notes to
be designated Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. ("NASD")
relating to trading in the PORTAL Market and for the Notes to be eligible for
clearance and settlement through The Depository Trust Company ("DTC").
(i) Not to, and will cause its affiliates (as such term is defined
in Rule 501(B) under the Securities Act) not to, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect (except as contemplated in the
Offering Memorandum or hereby) of any security (as defined in the Securities
Act) which could be integrated with the sale of the Notes in a manner which
would require the registration of the Notes under the Securities Act.
(j) Except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
not to, and to cause its affiliates not to, and not to authorize or knowingly
permit any person acting on their behalf to, solicit any offer to buy or offer
to sell the Notes by means of any form of general solicitation or general
advertising within the meaning of Regulation D or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act; and
not to offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale, contract
or disposition would cause the exemption afforded by Section 4(2) of the
Securities Act to cease to be applicable to the offering and sale of the Notes
as contemplated by this Agreement and the Offering Memorandum.
(k) To apply the net proceeds from the sale of the Notes as set
forth in the Offering Memorandum.
(l) For a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose
of, directly or indirectly, or file a registration statement for, or announce
any offer, sale, contract for sale of or
<PAGE>
18
other disposition of any debt securities issued or guaranteed by the Company or
any of its subsidiaries (other than the Notes and the Existing Notes) without
the prior written consent of the Initial
Purchasers.
(m) In connection with the offering of the Notes, until CSI on
behalf of the Initial Purchasers shall have notified the Company of the
completion of the resale of the Notes, not to, and to cause its affiliated
purchasers (as defined in Regulation M under the Exchange Act) not to, either
alone or with one or more other persons, bid for or purchase, for any account in
which it or any of its affiliated purchasers has a beneficial interest, any
Notes, or attempt to induce any person to purchase any Notes; and not to, and to
cause its affiliated purchasers not to, make bids or purchase for the purpose of
creating actual, or apparent, active trading in or of raising the price of the
Notes.
6. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of
the Initial Purchasers hereunder are subject to the accuracy, on the date hereof
and on the Closing Date, of the representations and warranties of the Company
contained herein, to the accuracy of the statements of the Company made in any
certificates delivered pursuant to provisions hereof, to the performance by the
Company of its obligations hereunder, and to each of the following additional
terms and conditions:
(a) The Initial Purchasers shall not have discovered and disclosed
to the Company on or prior to the Closing Date that the Offering Memorandum or
any amendment or supplement thereto contains an untrue statement of a fact
which, in the opinion of Simpson Thacher & Bartlett, counsel for the Initial
Purchasers, is material or omits to state a fact which, in the opinion of such
counsel is material and is required to be stated therein or is necessary to make
the statements therein not misleading; and no stop order suspending the sale of
the Notes in any jurisdiction shall have been issued and no proceeding for that
purpose shall have been commenced or shall be pending or threatened.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of each of the Transaction Documents, the
Notes and the Offering Memorandum, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby shall be
reasonably satisfactory in all material respects to counsel for the Initial
Purchasers, and the Company shall have furnished to such counsel all documents
and information that they may reasonably request to enable them to pass upon
such matters.
(c) White & Case shall have furnished to the Initial Purchasers
their written opinion, as counsel to the Company, addressed to the Initial
Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, substantially to the effect set forth in
Exhibit B hereto.
<PAGE>
19
(d) The Initial Purchasers shall have received from Simpson Thacher
& Bartlett, counsel for the Initial Purchasers, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Initial Purchasers may
reasonably require, and the Company shall have furnished to such counsel such
documents and information as they reasonably request for the purpose of enabling
them to pass upon such matters.
(e) With respect to the letters of Price Waterhouse LLP, Deloitte &
Touche LLP and Coopers & Lybrand L.L.P. delivered to the Initial Purchasers
concurrently with the execution of this Agreement (the "Initial Letters"), the
Company shall have furnished to the Initial Purchasers letters (the "Bring-Down
Letters") addressed to the Initial Purchasers and dated the Closing Date (i)
confirming that they are independent public accountants within the meaning of
Rule 101 of the American Institute of Certified Public Accountants' Code of
Professional Conduct and its rulings and interpretations; (ii) stating, as of
the date of the Bring-Down Letter (or, with respect to matters involving changes
or developments since the respective dates as of which specified financial
information is given in the Offering Memorandum, as of a date not more than five
days prior to the date of such Bring-Down Letters), that the conclusions and
findings of the firm with respect to the financial information and other matters
covered by the initial letter are accurate and (iii) confirming in all material
respects the conclusions and findings set forth in their initial letters.
(f) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, of its President or any Vice President and
its chief financial officer stating that (A) such officers have carefully
examined the Offering Memorandum, (B) in their opinion, as of the date hereof
the Offering Memorandum did not include any untrue statement of a material fact
and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and since the date
hereof, no event has occurred which should have been set forth in a supplement
or amendment to the Offering Memorandum and (C) to the best of their knowledge
after reasonable investigation, as of the Closing Date, the representations and
warranties of the Company in this Agreement are true and correct, the Company
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and subsequent
to the date of the most recent financial statements in the Offering Memorandum,
there has been no material adverse change in the financial position or results
of operations of the Company, or any change, or any development including a
prospective change, in or affecting the condition (financial or otherwise),
results of operations, business or prospects of the Company, except as set forth
in the Offering Memorandum.
(g) The Initial Purchasers shall have received on the date hereof
the Registration Rights Agreement executed and delivered by duly authorized
officers of the Company.
<PAGE>
20
(h) The Notes shall have been approved by the NASD for trading in
the PORTAL Market.
(i) The Indenture shall have been duly executed and delivered by the
Company and the Trustee and the Notes shall have been duly executed and
delivered by the Company and duly authenticated by the Trustee.
(j) If any event shall have occurred that requires the Company under
Section 5(c) hereof to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the Initial
Purchasers shall have been given a reasonable opportunity to comment thereon,
and copies thereof shall have been delivered to the Initial Purchasers
reasonably in advance of the Closing Date.
(k) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed withdrawal
of any rule or regulation under the Securities Act or the Exchange Act by the
Commission or any amendment or proposed amendment thereof by the Commission
which in the reasonable judgment of the Initial Purchasers would materially
impair the ability of the Initial Purchasers to purchase, hold or effect resales
of the Notes as contemplated hereby.
(l) At the Closing Date, there shall exist no default or event of
default under the Indenture or the Senior Credit Facilities (as defined in
the Offering Memorandum).
(m) Since March 31, 1998, except for the transactions contemplated
by the Offering Memorandum, there shall not have been any change in the capital
stock or long-term debt of the Company or any change, or any development
involving a prospective change, in or affecting the condition (financial or
otherwise), results of operations, business or prospects of the Company, the
effect of which, in any such case described above, is, in the reasonable
judgment of the Initial Purchasers, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the Notes
on the terms and in the manner contemplated in the Offering Memorandum
(exclusive of any supplement).
(n) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Notes by any
"nationally recognized statistical rating organization," as that term is defined
by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of
the Commission under the Securities Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review (other than an
announcement with positive implications of a positive upgrading) its rating of
the Notes.
<PAGE>
21
(o) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or limited, or minimum prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction, or trading in any securities of the Company on
any exchange or in the over-the-counter market shall have been suspended or,
(ii) a general moratorium on commercial banking activities shall have been
declared by Federal or New York State authorities, or (iii) an outbreak or
escalation of hostilities or a declaration by the United States of a national
emergency or war, or (iv) a material adverse change in general economic,
political or financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such) the effect of which,
in the case of this clause (iv), is, in the reasonable judgment of the Initial
Purchasers, so material and adverse as to make it impracticable or inadvisable
to proceed with the sale or delivery of the Notes on the terms and in the manner
contemplated by this Agreement and the Offering Memorandum (exclusive of any
supplement).
(p) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance or sale of the Notes;
and no injunction, restraining order or order of any other nature by a federal
or state court of competent jurisdiction shall have been issued as of the
Closing Date which would prevent the issuance or sale of the Notes.
(q) The closing of the Equity Offerings shall have occurred
concurrently with the closing hereunder.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
7. TERMINATION. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Notes if, prior to that time, any of the events described in Sections 6(k),
(m), (n), (o) or (p) shall have occurred and be continuing.
8. DEFAULTING INITIAL PURCHASERS. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for the
purchase of the Securities which such defaulting Initial Purchaser agreed but
failed to purchase by other persons satisfactory to the Company and the
non-defaulting Initial Purchasers,
<PAGE>
22
but if no such arrangements are made within 36 hours after such default, this
Agreement shall terminate without liability on the part of the non-defaulting
Initial Purchasers or the Company, except that the Company will continue to be
liable for the payment of expenses to the extent set forth in Sections 9 and 13
and except that the provisions of Sections 10 and 11 shall not terminate and
shall remain in effect. As used in this Agreement, the term "Initial Purchasers"
includes, for all purposes of this Agreement unless the context otherwise
requires, any party not listed in Schedule 1 hereto that, pursuant to this
Section 8, purchases Securities which a defaulting Initial Purchaser agreed but
failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Company or any non-defaulting
Initial Purchaser for damages caused by its default. If other persons are
obligated or agree to purchase the Securities of a defaulting Initial Purchaser,
either the non-defaulting Initial Purchasers or the Company may postpone the
Closing Date for up to seven full business days in order to effect any changes
that in the opinion of counsel for the Company or counsel for the Initial
Purchasers may be necessary in the Offering Memorandum or in any other document
or arrangement, and the Company agrees to promptly prepare any amendment or
supplement to the Offering Memorandum that effects any such changes.
9. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If (a) this
Agreement shall have been terminated pursuant to Section 7 or 8, (b) the Company
shall fail to tender the Notes for delivery to the Initial Purchasers for any
reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Notes for any reason permitted under this Agreement, the
Company shall reimburse the Initial Purchasers for the reasonable fees and
expenses of their counsel and for such other reasonable out-of-pocket expenses
as shall have been reasonably incurred by the Initial Purchasers in connection
with this Agreement and the proposed purchase of the Notes. If this Agreement is
terminated pursuant to Section 8 by reason of the default of one or more of the
Initial Purchasers, the Company shall not be obligated to reimburse any
defaulting Initial Purchaser on account of such expenses.
10. INDEMNIFICATION. (a) The Company shall indemnify and hold
harmless each Initial Purchaser, its affiliates, and its officers, directors,
employees, representatives and agents, and each person, if any, who controls
each Initial Purchaser within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 10 and Section 11 as
the Initial Purchasers) from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not limited
to, any loss, claim, damage, liability or action relating to purchases and sales
of Notes), to which that Initial Purchaser may become subject, under the
Securities Act, the Exchange Act or any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue
<PAGE>
23
statement or alleged untrue statement of a material fact contained in any
preliminary offering memorandum or the Offering Memorandum or in any amendment
or supplement thereto or any information provided by the Company pursuant to
Section 5(e) hereof or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse the Initial Purchasers promptly upon
demand for any legal or other expenses reasonably incurred by the Initial
Purchasers in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with any Initial Purchasers' Information; and provided further that with respect
to any such untrue statement or omission made in the preliminary offering
memorandum, the indemnity agreement contained in this Section 10(a) shall not
inure to the benefit of the Initial Purchasers, to the extent that the sale to
the person asserting any such loss, claim, damage, liability or action was an
initial resale by the Initial Purchasers and any such loss, claim, damage,
liability or action is a result of the fact that both (i) to the extent required
by applicable law, a copy of the Offering Memorandum was not sent or given to
such person at or prior to the written confirmation of the sale of such Notes to
such person, and (ii) the untrue statement or omission in the preliminary
offering memorandum was corrected in the Offering Memorandum unless, in either
case, such failure to deliver the Offering Memorandum was a result of
non-compliance by the Company with Section 5(c).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Company, its affiliates, and its officers,
directors, employees, representatives and agents, and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 10 and Section 11 as
the Company), from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company may become
subject, under the Securities Act, the Exchange Act or any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary offering memorandum or the Offering Memorandum or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with such Initial Purchaser's
Information, and shall reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
or preparing to defend
<PAGE>
24
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 10 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent that such
indemnifying party has been materially prejudiced by such failure and, provided
further, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have to an indemnified party otherwise than
under this Section 10. If any such claim or action shall be brought against an
indemnified party, it shall notify the indemnifying party thereof, and the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 10 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that each indemnified party shall
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (4) the indemnifying party has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm of attorneys (in addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 10(a) and 10(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be
<PAGE>
25
unreasonably withheld), but if settled with its written consent or if there be a
final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
The obligations of the Company and the Initial Purchasers in this
Section 10 and in Section 11 are in addition to any other liability which the
Company or the Initial Purchasers, as the case may be, may otherwise have.
11. CONTRIBUTION. If the indemnification provided for in Section 10
is unavailable or insufficient to hold harmless an indemnified party under
Section 10(a) or 10(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchasers on the other from the offering of the Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Initial Purchasers on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Notes purchased under this Agreement (before deducting expenses) received
by the Company, on the one hand, and the total discounts and commissions
received by the Initial Purchasers with respect to the Notes purchased under
this Agreement, on the other hand, bear to the total gross proceeds from the
offering of the Notes under this Agreement, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Initial Purchasers' Information on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 11 were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 11 shall be deemed to include, for
purposes of this Section 11, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 11, Initial
Purchasers shall not be required to contribute any amount in
<PAGE>
26
excess of the amount by which the total price at which the Notes sold and
distributed by it was offered to purchasers exceeds the amount of any damages
which the Initial Purchasers have otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Company
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except as provided in
Sections 10 and 11 with respect to affiliates, officers, directors, employees,
representatives, agents and controlling persons of the Company and the Initial
Purchasers and in Section 5(f) with respect to holders and prospective
purchasers of the Notes. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section
12, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
13. EXPENSES. The Company agrees with the Initial Purchasers to pay
(a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Notes and any taxes payable in that connection, (b) the costs
incident to the preparation and printing of the preliminary offering memorandum
and the Offering Memorandum and any amendments or supplements thereto, (c) the
costs of distributing the preliminary offering memorandum and the Offering
Memorandum and any amendments or supplements thereto, (d) the costs of printing,
reproducing and distributing the Transaction Documents, (e) the costs incident
to the preparation, printing and delivery of the certificates representing the
Notes, including stamp duties and stock transfer taxes, if any, payable upon
issuance of any of the Notes, (f) the fees and disbursements of the Company's
counsel and accountants, (g) the fees and disbursements of accountants for the
Company and the LC Business (as defined in the Offering Memorandum), (h) any
fees charged by rating agencies for rating the Notes, (i) the fees and expenses
of qualifying the Notes under securities laws of the several jurisdictions as
provided in Section 5(g) and of preparing, printing and distributing a Blue Sky
memorandum (including related reasonable fees and expenses of Simpson Thacher &
Bartlett, counsel to the Initial Purchasers), (j) the fees and expenses of the
Trustee and any paying agent, (including related fees and expenses of any
counsel for such parties), (k) all expenses and listing fees incurred in
connection with the application for quotation of the Notes on the PORTAL Market
and the approval of the Notes for book-entry transfer by The Depository Trust
Company, and (l) all other reasonable costs and expenses incident to the
performance of the Company's obligations hereunder which are not otherwise
specifically provided for in this Section; provided, however, that except as
provided in this Section 13 and Section 9, the Initial Purchasers shall pay
their own costs and expenses, including the costs and expenses of its counsel.
<PAGE>
27
14. SURVIVAL. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Initial
Purchasers contained in this Agreement or made by or on behalf on them,
respectively, pursuant to this Agreement, shall survive the delivery of and
payment for the Notes and shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of any of them or any person controlling any of them.
15. NOTICES. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent
by mail or facsimile transmission to Chase Securities Inc., 270 Park
Avenue, New York, New York 10017, Attention: James C. Neary (Fax:
212-270- 0994), to Goldman, Sachs & Co., 85 Broad Street, New York,
New York 10004, Attention: Registration Department (Fax:
212-___-____) and to NatWest Capital Markets Limited, 660 Madison
Avenue, New York, New York 10021, Attention: ______________ (Fax:
212-___-____); or
(b) if to the Company, shall be delivered or sent by mail or
facsimile transmission to the address of the Company: 445 Hutchinson
Avenue, Columbus, Ohio 43235, Attn: Thomas Ferraro, with a copy to
Frank Schiff, Esq., White & Case, 1155 Avenue of the Americas, New
York, New York 10036.
provided, however, that any notice to the Initial Purchasers pursuant to Section
10(c) shall be delivered or sent by mail to the Initial Purchasers at One Chase
Manhattan Plaza, 25th Floor, New York, New York 10081, Attention: Legal
Department. Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof.
16. DEFINITION OF TERMS. For purposes of this Agreement, "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading.
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York but without giving effect
to applicable principles of conflicts of law to the extent that the application
of the laws of another jurisdiction would be required thereby.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
<PAGE>
28
19. AMENDMENTS. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
20. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument will become a binding agreement among the Company and the
Initial Purchasers in accordance with its terms.
Very truly yours,
AURORA FOODS INC.
By: _________________________________
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By: _________________________________
Authorized Signatory
GOLDMAN, SACHS & CO.
By: _________________________________
Authorized Signatory
NATWEST CAPITAL MARKETS LIMITED
By: _________________________________
Authorized Signatory
<PAGE>
SCHEDULE 1
Aggregate Principal
Initial Purchasers Amount of Notes
------------------ -------------------
Chase Securities Inc. $
Goldman, Sachs & Co. $
NatWest Capital Markets Limited $
Total
============
$200,000,000
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
AURORA FOODS INC.
$200,000,000
_____% Series E Senior Subordinated Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
_______ __, 1998
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
NATWEST CAPITAL MARKETS LIMITED
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Aurora Foods, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to Chase Securities Inc. ("CSI"), Goldman, Sachs & Co. and
NatWest Capital Markets Limited (together with CSI, the "Initial Purchasers"),
upon the terms and subject to the conditions set forth in a purchase agreement
dated June __, 1998 (the "Purchase Agreement"), $200,000,000 aggregate principal
amount of its ___% Series E Senior Subordinated Notes due 2008 (the
"Securities"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Company agrees with the Initial Purchasers,
for the benefit of the holders (including the Initial Purchasers) of the
Securities, the Exchange Securities (as defined herein) and the Private Exchange
Securities (as defined herein) (collectively, the "Holders"), as follows:
<PAGE>
2
1. Registered Exchange Offer. The Company shall (i) prepare and, not
later than 45 days following the date of original issuance of the Securities
(the "Issue Date"), file with the Commission a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders of the Securities
(the "Registered Exchange Offer") to issue and deliver to such Holders, in
exchange for the Securities, a like aggregate principal amount of debt
securities of the Company (the "Exchange Securities") that are identical in all
material respects to the Securities, except for the transfer restrictions
relating to the Securities, (ii) use its reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act no later than 135 days after the Issue Date and the Registered Exchange
Offer to be consummated no later than 165 days after the Issue Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 30
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "Exchange Offer Registration Period"). The Exchange Securities will
be issued under the Indenture or an indenture (the "Exchange Securities
Indenture") between the Company and the Trustee or such other bank or trust
company that is reasonably satisfactory to the Initial Purchasers, as trustee
(the "Exchange Securities Trustee"), such indenture to be identical in all
material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) acquires the Exchange
Securities in the ordinary course of such Holder's business and (c) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Initial Purchasers and
each Exchanging Dealer acknowledge that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing substantially the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or
<PAGE>
3
any Holder is not entitled to participate in the Registered Exchange Offer, the
Company shall, upon the request of any such Holder, simultaneously with the
delivery of the Exchange Securities in the Registered Exchange Offer, issue and
deliver to any such Holder, in exchange for the Securities held by such Holder
(the "Private Exchange"), a like aggregate principal amount of debt securities
of the Company (the "Private Exchange Securities") that are identical in all
material respects to the Exchange Securities, except for the transfer
restrictions relating to such Private Exchange Securities. The Private Exchange
Securities will be issued under the same indenture as the Exchange Securities,
and the Company shall use its reasonable best efforts to cause the Private
Exchange Securities to bear the same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the Exchange
Offer Registration Statement, together with an appropriate letter of transmittal
and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days (or
longer, if required by applicable law) after the date on which notice of the
Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior to the
close of business, New York City time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable to the
Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the
case may be, promptly to authenticate and deliver to each Holder, Exchange
Securities or Private Exchange Securities, as the case may be, equal in
principal amount to the Securities of such Holder so accepted for
exchange.
<PAGE>
4
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company or,
if it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
<PAGE>
5
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) for any other reason the Registered Exchange Offer is not
consummated within 165 days after the Issue Date, or (iii) any Initial Purchaser
so requests with respect to Securities or Private Exchange Securities not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following the consummation of the Registered Exchange
Offer, or (iv) any applicable law or interpretations do not permit any Holder to
participate in the Registered Exchange Offer, or (v) any Holder that
participates in the Registered Exchange Offer does not receive freely
transferable Exchange Securities in exchange for tendered Securities, or (vi)
the Company so elects, then the following provisions shall apply:
(a) The Company shall use its reasonable best efforts to file as
promptly as practicable with the Commission, and thereafter shall use its
reasonable best efforts to cause to be declared effective, a shelf registration
statement on an appropriate form under the Securities Act relating to the offer
and sale of the Transfer Restricted Securities by the Holders thereof from time
to time in accordance with the methods of distribution set forth in such
registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement"); provided, however, that no Holder of Securities or Exchange
Securities (other than the Initial Purchasers) shall be entitled to have
Securities or Exchange Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer Restricted
Securities for a period of two years from the Issue Date or such shorter period
that will terminate when all the Transfer Restricted Securities covered by the
Shelf Registration Statement have been sold pursuant thereto (in any such case,
such period being called the "Shelf Registration Period"). The Company shall be
deemed not to have used its reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Transfer Restricted Securities
covered thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action is required by applicable law;
provided, however, that the foregoing shall not apply to actions taken by the
Company in good faith and for valid business reasons (not including avoidance of
its obligations hereunder), including, without limitation, the acquisition or
divestiture of assets, so long as the Company within 120 days thereafter
complies with the requirements of Section 4(i) hereof. Any such period during
which the Company fails to keep the registration statement effective and usable
for offers and sales of Securities and Exchange Securities is referred to as a
"Suspension Period." A Suspension Period shall commence on and include the date
that the Company gives notice that the Shelf Registration Statement is no longer
effective or the prospectus included therein is no longer usable for offers and
sales of Securities and Exchange Securities and shall end on the date when each
Holder of
<PAGE>
6
Securities and Exchange Securities covered by such registration statement either
receives the copies of the supplemented or amended prospectus contemplated by
Section 4(i) hereof or is advised in writing by the Company that use of the
prospectus may be resumed. If one or more Suspension Periods occur, the
three-year time period referenced above shall be extended by the number of days
included in each such Suspension Period.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included therein
in reliance upon or in conformity with written information furnished to the
Company by or on behalf of any Holder specifically for use therein (the
"Holders' Information")) does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect to
Holders' Information), does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Transfer Restricted Securities will suffer damages if the Company fails to
fulfill its obligations under Section 1 or Section 2, as applicable, and that it
would not be feasible to ascertain the extent of such damages. Accordingly, if
(i) the applicable Registration Statement is not filed with the Commission on or
prior to 45 days after the Issue Date, (ii) the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, is not
declared effective within 135 days after the Issue Date (or in the case of a
Shelf Registration Statement required to be filed in response to a change in law
or the applicable interpretations of Commission's staff, if later, within 45
days after publication of the change in law or interpretation), (iii) the
Registered Exchange Offer is not consummated on or prior to 165 days after the
Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 135 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's staff, if later, within 45 days
after publication of the change in law or interpretation) but shall thereafter
cease to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 45 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will be
obligated to pay liquidated damages to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $ 0.192 per week per $1,000 principal amount of Transfer
Restricted Securities held by such Holder until (i) the applicable Registration
Statement is filed, (ii) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared
<PAGE>
7
effective or (iv) the Shelf Registration Statement again becomes effective, as
the case may be; provided, however, no liquidated damages shall be payable for a
Registration Default under clause (iii) above if a Shelf Registration Statement
covering the securities for which the Exchange Offer was intended shall have
been declared effective. Following the cure of all Registration Defaults, the
accrual of liquidated damages will cease. As used herein, the term "Transfer
Restricted Securities" means (i) each Security until the date on which such
Security has been exchanged for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) each Security or Private Exchange Security until
the date on which it has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii)
each Security or Private Exchange Security until the date on which it is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding
anything to the contrary in this Section 3(a), the Company shall not be required
to pay liquidated damages to a Holder of Transfer Restricted Securities if such
Holder failed to comply with its obligations to make the representations set
forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time, on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on each
interest payment date specified by the Indenture and the Securities to the
record holder entitled to receive the interest payment to be made on such date.
Each obligation to pay liquidated damages shall be deemed to accrue from and
including the date of the applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior
to the filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and shall use its reasonable best efforts to reflect in each
such document, when so
<PAGE>
8
filed with the Commission, such comments as any Initial Purchaser may reasonably
propose; (ii) include the information set forth in Annex A hereto on the cover,
in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer Registration
Statement, and include the information set forth in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if
requested by any Initial Purchaser, include the information required by Items
507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of
the Exchange Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
when any Registration Statement and any amendment thereto has been
filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
of any request by the Commission for amendments or supplements to
any Registration Statement or the prospectus included therein or for additional
information;
of the issuance by the Commission of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any proceedings
for that purpose;
of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Securities, the Exchange Securities
or the Private Exchange Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included therein in
order that the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one conformed copy of such Shelf Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules and,
<PAGE>
9
if any such Holder so requests in writing, all exhibits thereto (including
those, if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of such prospectus
or any amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale of the
Transfer Restricted Securities covered by such prospectus or any amendment or
supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge, at
least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement or the Shelf Registration Statement and any
amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or
other persons may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by any such Initial
Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein and their respective counsel in connection
with the registration or qualification of, such Securities, Exchange Securities
or Private Exchange Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any such Holder reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities, Exchange Securities or
Private Exchange Securities covered by such Registration Statement; provided
that the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(i) The Company will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private
<PAGE>
10
Exchange Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such names
as the Holders thereof may request in writing prior to sales of Securities,
Exchange Securities or Private Exchange Securities pursuant to such Registration
Statement.
(j) If (i) any event contemplated by Section 4(b)(ii) through (v)
occurs during the period for which the Company is required to maintain an
effective Registration Statement or (ii) any Suspension Period remains in effect
more than 120 days after the occurrence thereof, the Company will promptly
prepare and file with the Commission a post-effective amendment to the
Registration Statement or a supplement to the related prospectus or file any
other required document so that, as thereafter delivered to purchasers of the
Securities, Exchange Securities or Private Exchange Securities from a Holder,
the prospectus will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may be, and
provide the applicable trustee with printed certificates for the Securities, the
Exchange Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Company will use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and will make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earning statement satisfying
the provisions of Section 11(a) of the Securities Act; provided that in no event
shall such earning statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of the applicable Registration Statement, which statement shall cover such
12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Company may from time
to time reasonably require for inclusion in such Shelf Registration Statement,
and the Company may exclude from such registration the Transfer Restricted
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
<PAGE>
11
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder
will discontinue disposition of such Transfer Restricted Securities until such
Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(j) or until advised in writing (the "Advice") by the
Company that the use of the applicable prospectus may be resumed. If the Company
shall give any notice under Section 4(b)(ii) through (v) during the period that
the Company is required to maintain an effective Registration Statement (the
"Effectiveness Period"), such Effectiveness Period shall be extended by the
number of days during such period from and including the date of the giving of
such notice to and including the date when each seller of Transfer Restricted
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemental or amended prospectus contemplated by Section 4(j)
(if an amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold or the managing
underwriters (if any) shall reasonably request in order to facilitate any
disposition of Securities, Exchange Securities or Private Exchange Securities
pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Securities, Exchange Securities and Private Exchange
Securities being sold and any underwriter participating in any disposition of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Shelf Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries
and (ii) use its reasonable best efforts to have its officers, directors,
employees, accountants and counsel supply all relevant information reasonably
requested by such representative, Special Counsel or any such underwriter (an
"Inspector") in connection with such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal amount of
the Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection with
such Shelf Registration Statement, use its reasonable best efforts to cause (i)
its counsel to deliver an opinion relating to the Shelf Registration Statement
and the Securities, Exchange Securities or Private Exchange Securities, as
applicable, in customary form, (ii) its officers to execute and deliver all
customary documents and certificates requested by Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and Private
Exchange Securities being sold, their Special Counsel or the managing
<PAGE>
12
underwriters (if any) and (iii) its independent public accountants to provide a
comfort letter in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
5. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders
for the reasonable fees and disbursements of one firm of attorneys (in addition
to any local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Securities, the Exchange Securities and the Private Exchange
Securities to be sold pursuant to each Registration Statement (the "Special
Counsel") acting for the Initial Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Securities, Exchange
Securities or Private Exchange Securities), to which that Holder may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and shall
reimburse each Holder promptly upon demand for any legal or other expenses
reasonably incurred by that Holder in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Holders' Information; and provided,
further, that with respect to any such untrue statement in or omission from any
related preliminary prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of any Holder from whom the person
asserting any such loss, claim, damage, liability or action received Securities,
Exchange Securities or Private Exchange Securities to the extent that such loss,
claim, damage, liability or action of or with respect to such Holder results
from the fact that both (A) a copy of the final prospectus was not sent
<PAGE>
13
or given to such person at or prior to the written confirmation of the sale of
such Securities, Exchange Securities or Private Exchange Securities to such
person and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder
shall indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably
<PAGE>
14
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than the
reasonable costs of investigation; provided, however, that an indemnified party
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based upon advice of counsel
to the indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based upon advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Securities,
on the one hand, and a Holder with respect to the sale by such Holder of
Securities, Exchange Securities or Private
<PAGE>
15
Exchange Securities, on the other, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and such Holder
on the other with respect to the statements or omissions that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations.. The relative benefits received by the
Company on the one hand and a Holder on the other with respect to such offering
and such sale shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses)
received by or on behalf of the Company as set forth in the table on the cover
of the Offering Memorandum, on the one hand, bear to the total proceeds received
by such Holder with respect to its sale of Securities, Exchange Securities or
Private Exchange Securities, on the other. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to the Company or information supplied by the Company on
the one hand or to any Holders' Information supplied by such Holder on the
other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 7 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 7 shall be deemed
to include, for purposes of this Section 7, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 7, an indemnifying party that is a Holder of
Securities, Exchange Securities or Private Exchange Securities shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Securities, Exchange Securities or Private Exchange
Securities sold by such indemnifying party to any purchaser exceeds the amount
of any damages which such indemnifying party has otherwise paid or become liable
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any Holder
of Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. The Company covenants that it will take such further action as any
Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules
<PAGE>
16
144 and 144A (including, without limitation, the requirements of Rule
144A(d)(4)). Upon the written request of any Holder of Transfer Restricted
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 8 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to Chase Securities Inc., Goldman, Sachs & Co. and NatWest
Capital Markets Limited;
<PAGE>
17
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Company or by any
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of its obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3
hereof), will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
<PAGE>
18
(i) No Inconsistent Agreements. The Company represents, warrants and
agrees that (i) it has not entered into, shall not, on or after the date of this
Agreement, enter into any agreement that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the provisions
hereof, (ii) it has not previously entered into any agreement which remains in
effect granting any registration rights with respect to any of its debt
securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Securities, it
shall not grant to any person the right to request the Company to register any
debt securities of the Company under the Securities Act unless the rights so
granted are not in conflict or inconsistent with the provisions of this
Agreement.
(j) No Piggyback on Registrations. Neither the Company nor any of
its security holders (other than the Holders of Transfer Restricted Securities
in such capacity) shall have the right to include any securities of the Company
in any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE>
19
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
AURORA FOODS INC.
By: _____________________________
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By: ____________________________
Authorized Signatory
GOLDMAN, SACHS & CO.
By: ____________________________
Authorized Signatory
NATWEST CAPITAL MARKETS LIMITED
By: ____________________________
Authorized Signatory
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
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<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
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<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus./ The Company will not receive any proceeds
from any sale of Exchange Securities by broker-dealers. Exchange Securities
received by broker-dealers for their own account pursuant to the Registered
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 90 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders
- ----------
// In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Registered Exchange Offer
prospectus.
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<PAGE>
of the Securities) other than commissions or concessions of any broker-dealers
and will indemnify the Holders of the Securities (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
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<PAGE>
ANNEX D
o CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:_____________________________________________
Address:__________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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<PAGE>
EXHIBIT B
FORM OF OPINION OF
WHITE & CASE
White & Case shall furnish to the Initial Purchasers their written
opinion, as counsel to the Company, addressed to the Initial Purchasers
and dated the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchasers, to the effect that:
1. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, and has the corporate power and authority
necessary to own or hold its properties and to conduct the
businesses in which it is engaged as described in the Offering
Memorandum. The Company has no subsidiaries.
2. The Company's authorized capitalization is __________
shares of common stock, of which __________ are issued and
outstanding, and all of the issued shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and nonassessable.
3. The statements in the Offering Memorandum under the
caption "Certain United States Federal Tax Considerations", insofar
as they purport to constitute summaries of matters of United States
federal tax law and regulations or legal conclusions with respect
thereto, constitute accurate summaries of the matters described
therein in all material respects.
4. The Company has the corporate right, power and
authority to execute and deliver the Transaction Documents and to
perform its obligations thereunder; and all corporate action
required to be taken for the due and proper authorization, execution
and delivery of the Transaction Documents and the consummation of
the transactions contemplated thereby have been duly and validly
taken.
5. Each of the Purchase Agreement and the Registration
Rights Agreement has been duly authorized, executed and delivered by
the Company, and each constitutes a valid and legally binding
agreement, enforceable in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency, or other similar laws affecting
creditors' rights generally or by general principles of equity
(regardless of whether enforcement is sought in a proceeding in
equity or at law).
6. The Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution
and delivery thereof by the Trustee, constitutes a valid and legally
binding agreement of the Company enforceable in accordance with its
terms, except as the enforcement thereof may be limited by
applicable bankruptcy, reorganization, insolvency, or
<PAGE>
2
other similar laws affecting creditors' rights generally or by
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
7. The Notes have been duly authorized, executed and
issued by the Company and, assuming due authentication thereof by
the Trustee and upon payment and delivery in accordance with the
Purchase Agreement, will constitute valid and legally binding
obligations of the Company enforceable in accordance with their
respective terms, except as the enforcement thereof may be limited
by applicable bankruptcy, reorganization, insolvency, or other
similar laws affecting creditors' rights generally or by general
principles of equity (regardless of whether enforcement is sought in
a proceeding in equity or at law). The statements made in the
Offering Memorandum under the caption "Description of Notes" and
"Exchange and Registration Rights Agreement," insofar as they
purport to constitute summaries of certain terms of the Indenture,
the Notes and the Registration Rights Agreement, constitute accurate
summaries of the terms of such documents in all material respects.
8. The execution, delivery and performance by the Company
of each of the Transaction Documents and the agreements of any of
the Predecessors of the Company that are necessary to consummate the
Reorganization or the Merger, as the case may be, the issuance,
authentication, sale and delivery of the Securities and compliance
by the Company with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, any material
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument known to us to which the Company is a party
or by which the Company is bound or to which any of the property or
assets of the Company is subject, nor will such actions result in
any violation of the provisions of the charter or by-laws of the
Company or any statute or any judgment, order, decree, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties or assets
except for such conflicts, breaches, violations, defaults, liens,
charges or encumbrances as would not have a Material Adverse Effect;
and to our knowledge no consent, approval, authorization or order
of, or filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment, order,
decree, rule or regulation is required for the execution, delivery
and performance by the Company of each of the Transaction Documents,
the issuance, authentication, sale and delivery of the Securities
and compliance by the Company with the terms thereof, the
consummation of the Reorganization and the Merger and the
consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations,
filings, registrations or qualifications (i) which have been
obtained or made prior to the Closing Date and (ii) as may be
required to be obtained or made
<PAGE>
3
under the Securities Act and applicable state securities laws as
provided in the Registration Rights Agreement.
9. Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Notes will violate Regulation G, T, U or X of the
Federal Reserve Board.
10. To the knowledge of such counsel, there are no pending
actions or suits or judicial, arbitral, rule-making, administrative
or other proceedings to which the Company is a party or of which any
property or assets of the Company is the subject which questions the
validity or enforceability of any of the Transaction Documents or
any action taken or to be taken pursuant thereto; and to the
knowledge of such counsel, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
11. The Company is not an "investment company" or a
company "controlled" by an investment company within the meaning of
the Investment Company Act.
12. Assuming (i) the accuracy of the representations,
warranties and agreements of the Company and of the Initial
Purchasers contained in the Purchase Agreement and (ii) that the
persons who buy the Notes in the initial resale thereof are
Qualified Institutional Buyers or non U.S. persons under
Regulations, the issuance and sale of the Notes and the offer,
resale and delivery of the Notes in the manner contemplated in the
Offering Memorandum and the Purchase Agreement, are exempt from the
registration requirements of the Securities Act and it is not
necessary to qualify the Indenture under the Trust Indenture Act.
13. The Reorganization and Merger have been consummated in
accordance with the laws of the State of Delaware.
Such counsel shall state that they have participated in conferences
with representatives of the Company and with representatives of its
independent accountants, at which conferences the contents of the Offering
Memorandum, any amendment thereof and supplement thereto and related
matters were discussed, and, although such counsel assume no
responsibility for the factual accuracy or completeness of the Offering
Memorandum, any amendment thereof or supplement thereto (except as
expressly provided above), such counsel believes that the Offering
Memorandum or any amendment thereof or supplement thereto (other than the
financial statements and other financial and statistical information
contained therein, as to which such counsel need express no belief)
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and public officials which are
furnished to the Initial Purchasers.
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June ___, 1998, by and between
AURORA FOODS INC. (the "Company"), a Delaware corporation, and Ian R. Wilson
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and the
Executive desires to be employed by the Company on the terms set forth herein.
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 Executive and the Executive hereby
accepts employment with the Company in the capacities hereinafter set forth.
2. Term of Employment. Except as provided in Section 6, the term of
employment of the Executive (the "Term") pursuant to this Agreement shall
commence on the date hereof (the "Effective Date") and shall terminate on the
date (the "Termination Date") that is the earlier of (x) the second anniversary
of the Effective Date or (y) the date the Executive's employment hereunder is
terminated pursuant to Section 6 hereof.
3. Duties; Extent of Services.
(a) Duties. During the Term, the Executive shall serve as
Chairman and Chief Executive Officer of the Company, and shall, in accordance
with and, subject to the provisions of the Bylaws (as amended from time to time)
of the Company and the right of Executive to provide management and other
services to certain other business ventures as provided in Section 8 hereof,
devote all or substantially all of his business time and attention to the
affairs of the Company and perform the duties, undertake the responsibilities
and exercise the authority customarily performed, undertaken and exercised by a
person in such position in the business in which the Company is engaged. The
Executive shall report to and carry out the lawful directions of the board of
directors of the Company (the "Board"). The Executive shall be based in an
office located in the San Francisco, California metropolitan area.
<PAGE>
(b) Extent of Services. Except for illness and permitted
vacation periods, during the Term the Executive shall (i) devote his best
efforts and ability to the business and affairs of the Company and its
subsidiaries; and (ii) discharge such executive and administrative and other
duties not inconsistent with his position as may be assigned to him by the
Board. For so long as the Executive remains employed as Chairman and Chief
Executive Officer of the Company, he shall serve, without additional
compensation, on the Board, on the board of directors of any subsidiary of the
Company and as Chairman and Chief Executive Officer of any subsidiary of the
Company.
4. Compensation.
(a) Base Salary. Subject to the terms and conditions herein, in
consideration of the services rendered by the Executive hereunder and provided
that the Executive has performed in all material respects all of his obligations
provided for herein, the Company will pay to the Executive a base salary (the
"Base Salary") at a minimum of One Million Dollars ($1,000,000) per year during
the Term. The Base Salary shall be paid in accordance with the Company's normal
payroll practice.
(b) Bonus. The Company shall pay the Executive a bonus (the
"Bonus") in an amount expressed as a percentage of the Base Salary with respect
to each fiscal year or portion thereof during the Term in accordance with the
following provisions:
(i) For (A) the fiscal years ended December 31, 1998 and
December 31, 1999, during the Term the Bonus shall be payable
with respect to the EBITDA Target (as defined below) for such
fiscal years then ended and (B) the period commencing January
1, 2000 and ending June 30, 2000 during the Term, the Bonus
shall be payable with respect to the EBITDA Target for the six
months then ended (in each case, the "Applicable Period").
(ii) If the Financial Results (as defined below) of the
Company for the Applicable Period during the Term are at least
90% but less than 95% of the EBITDA Target (as defined below)
for the Applicable Period, the Executive shall be paid an
amount equal to 30% of so much of his Base Salary as was paid
with respect to the Applicable Period.
(iii) If the Financial Results of the Company for the
Applicable Period during the Term are at least 95% but less
than 100% of the EBITDA Target for the Applicable Period, the
Executive shall
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<PAGE>
be paid an amount equal to 45% of so much of his Base Salary
as was paid with respect to the Applicable Period.
(iv) If the Financial Results of the Company for the
Applicable Period during the Term are at least 100% but less
than 105% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 60% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(v) If the Financial Results of the Company for the
Applicable Period during the Term are at least 105% but less
than 110% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 65% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(vi) If the Financial Results of the Company for the
Applicable Period during the Term are at least 110% but less
than 115% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 70% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(vii) If the Financial Results of the Company for the
Applicable Period during the Term are at least 115% but less
than 120% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 75% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(viii) If the Financial Results of the Company for the
Applicable Period during the Term equal or exceed 120% of the
EBITDA Target for the Applicable Period, the Executive shall
be paid an amount equal to 80% of so much of his Base Salary
as was paid with respect to the Applicable Period.
(c) For the purpose of this Agreement (i) the term "EBITDA
Target" shall mean the Company's projected earnings before interest, taxes,
one-time transition expenses, non-cash compensation expense charges,
depreciation and amortization, as contained in the Company's budget for the
Applicable Period and which is approved by 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 budget), and (ii) the term "Financial Results" shall mean the Company's
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<PAGE>
EBITDA calculated by reference to the Company's financial statements for the
Applicable Period as filed with the Securities and Exchange Commission (the
"SEC").
(d) The Bonus due under Section 4(b) shall be paid to the
Executive within thirty (30) days of the filing of the Company's annual audited
financial statements for the relevant year with the SEC.
5. Other Executive Benefits. (a) During the Term, the Executive
shall be entitled to (i) vacation time in accordance with the Company's approved
policy from time to time then in effect; (ii) 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 Executive is eligible; (iii) participate in a pension
plan with terms similar to those applicable to executives of the Company; and
(iv) participate in the Company's equity compensation plan to the extent
determined by the Board from time to time.
(b) The Company shall promptly reimburse the Executive for all
reasonable documented business expenses incurred in furtherance of the business
and affairs of the Company in accordance with approved company policies.
6. Termination Provisions.
(a) Termination for Cause. The Board may terminate the
Executive's employment hereunder for Cause, as hereinafter defined, immediately
upon written notice to the Executive. For purposes of this Agreement, "Cause"
shall mean (A) proven dishonesty of the Executive detrimental to the best
interests of the Company or any of its subsidiaries or conviction of the
Executive of a crime which constitutes a felony, (B) any material act or
omission by the Executive during the Term involving willful malfeasance or gross
negligence in the performance of his duties hereunder, (C) repeated failure of
the Executive to follow the reasonable instructions of the Board (other than
inattention or neglect resulting from illness or disability of the Executive)
which inattention and neglect does not cease within fifteen days after written
notice thereof specifying the details of such conduct is given by the Board to
the Executive or (D) material breach by the Executive of any material provision
of this Agreement (provided, however, that if such breach is curable and is
remedied to the reasonable satisfaction of the Board within fifteen days after
written notice thereof specifying the details of such breach is given by the
Board to the Executive, such breach shall not fall within the definition of
"Cause" for purposes of this Subsection (D)). During the Term, the Executive
shall be entitled to only one such notice and right to cure for any single act
or event. If the Executive's employment is
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terminated for Cause, the Executive shall be entitled to receive only the unpaid
portion of the Base Salary then in effect which has accrued to the date of
termination.
(b) Termination By Reason of Permanent Disability. If at any
time during the Term an independent licensed physician selected by the Board
determines that the Executive has been or will be 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 Executive's employment
hereunder may be terminated by the Board upon thirty days' written notice to the
Executive. If the Executive's employment is terminated by reason of Permanent
Disability, the Executive shall be entitled to receive only the sum of (x) the
unpaid portion of the Base Salary then in effect which has accrued to the date
of termination plus (y) an amount equal to six months of the Executive's Base
Salary plus (z) an amount equal to a pro rata portion of the Bonus payable
pursuant to Section 4(b) hereof assuming that the Financial Results of the
Company for the then current Applicable Period equal exactly 100% of the EBITDA
Target for such Applicable Period, with such pro rata portion based on the
actual number of days during such Applicable Period that Executive was employed
by the Company. Such amounts due shall be paid within thirty (30) days after any
termination due to a Permanent Disability and shall be in lieu of any other
payment to which the Executive may be otherwise entitled.
(c) Termination By Reason of Death. The Executive's employment
hereunder shall automatically terminate on the date of his death. If the
Executive's employment is so terminated by his death, the Company shall pay to
the Executive's estate in addition to the unpaid portion of the Base Salary then
in effect through date of Executive's death the sum of (y) an amount equal to
six months of the Executive's Base Salary plus (z) an amount equal to a pro rata
portion of the Bonus payable pursuant to Section 4(b) hereof assuming that the
Financial Results of the Company for the then current Applicable Period equal
exactly 100% of the EBITDA target for such Applicable Period, with such pro rata
portion based on the actual number of days during such Applicable Period that
Executive was employed by the Company. Any amounts due shall be paid within
thirty (30) days after the date of his death if a personal representative has
been appointed by the end of such thirty (30) day period or, if a personal
representative has not been appointed by the end of such thirty (30) day period,
promptly after a personal representative has been appointed. All such amounts
payable pursuant to this Section 6(c) shall be in lieu of any other payment to
which the Executive may otherwise be entitled.
(d) Termination Without Cause. The Board may terminate the
Executive's employment hereunder at any time for any reason without Cause in
which case the Executive shall be entitled to receive an amount (the "Severance
Amount") equal to the sum of (x) the Base Salary then in effect for the balance
of the Non-Compete Period (as
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defined below in Section 7(a)) plus (y) an amount equal to the Bonus payable
pursuant to Section 4(b) hereof based upon the actual Financial Results of the
Company for the remainder of the Non-Compete Period. For purposes of determining
the Bonus payable during the remainder of the Non-Compete Period, it shall first
be measured in respect of the Applicable Period first ended during the remainder
of the Non-Compete Period and thereafter in respect of each succeeding
Applicable Period that commences during the Non-Compete Period. The Severance
Amount shall be in lieu of any other severance payment to which Executive may be
otherwise entitled under any other severance plan maintained by the Company. The
Base Salary portion of the Severance Amount shall be paid in accordance with the
Company's normal payroll practice over the balance of the Non-Compete Period.
For each Applicable Period within the Non-Compete Period, the Bonus portion of
the Severance Amount shall be paid within thirty days of the filing with the SEC
of the Company's financial statements covering such Applicable Period.
(e) Change of Control. This Agreement may be assigned in
connection with a Change of Control (as defined below) as provided in Section
10(a) hereof. In the event of a Change of Control:
(i) the Executive shall have no obligation to move to a
new work location that is more than 50 miles from the
Executive's principal work location immediately prior to such
Change of Control;
(ii) the amount of Base Salary set forth in Section 4(a)
hereof and the Bonus opportunities set forth in Section 4(b)
hereof shall not be subject to reduction;
(iii) the Executive's title, duties and responsibilities
as set forth in Section 3(a) hereof shall not be subject to
reduction; and
(iv) the Executive's reasonable, documented business
expenses shall continue to be reimbursed in a manner
consistent with the Company's reimbursement practice prior to
such Change of Control.
Following a Change of Control, the failure by the Company (or its successor or
assign) to comply with any of subparagraphs (i)-(iv) shall permit the Executive
to terminate this Agreement for "Good Reason", on written notice to the Company
(or its successor or assign). In the event the Executive terminates this
Agreement for Good Reason, the Executive shall be entitled to receive the
Severance Amount. The Severance Amount shall be in lieu of any other severance
payment to which the Executive may otherwise be entitled
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under any other severance plan maintained by the Company (or its successor or
assign). The Severance Amount shall be paid in accordance with Section 6(d)
hereof.
For purposes of this Agreement, a "Change of Control" shall mean (i)
the sale, exchange or other disposition of the issued and outstanding shares of
Common Stock of the Company or the merger, consolidation or other business
combination of the Company and/or its subsidiaries in a single transaction or a
series of related transactions after which the shareholders of the Company on
the date immediately prior to the single transaction or first transaction of the
series own less than 50% of the outstanding shares of voting common stock of the
Company or any surviving corporation in any such single transaction or series of
related transactions, or (ii) the sale or transfer of all or substantially all
of the assets of the Company and its subsidiaries taken as a whole, to a person
or entity other than the Company or its wholly-owned subsidiaries; provided,
that any merger, consolidation, dissolution, sale of substantially all the
assets or other similar transaction consummated in connection with the initial
public offering of the Company's common stock shall not constitute a "Change of
Control" hereunder.
7. Covenants of the Executive.
(a) Non-Competition. During the Non-Compete Period (as defined
below), the Executive shall not, directly or indirectly, be associated with any
entity, whether as a director, officer, employee, agent, consultant, partner,
owner, shareholder, member, independent contractor or otherwise, that is then
engaged in a Restricted Business (as defined below), including any "Platform",
as defined in Section 8 hereof, other than the Company and its subsidiaries. A
"Restricted Business" means any business or venture engaged in the manufacture,
marketing, distribution or sale of food products (but excluding beverages) for
human consumption. The "Non-Compete Period" shall commence as of the Effective
Date and remain in effect through the Term and thereafter until the earlier of
(x) the second anniversary of the Effective Date or (y) the first anniversary of
the date of hire of a Chief Executive Officer of the Company other than the
Executive.
(b) Non-Solicitation of Employees of the Employer. Until the
end of the Non-Compete Period, the Executive shall not, and shall cause each
business or entity with which he is or shall become associated in any capacity
not to, solicit for employment or employ any person who is then employed in a
professional or managerial position by the Company, its subsidiaries or
affiliates.
(c) Confidentiality. The Executive agrees and acknowledges
that the Confidential Information (as defined below) of the Company and its
subsidiaries 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
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Information by keeping it confidential for the use and benefit of the Company
and its subsidiaries. Based on the foregoing, the Executive agrees to undertake
the following obligations with respect to such Confidential Information:
(i) the Executive agrees to keep any and all
Confidential Information in trust for the exclusive use and
benefit of the Company and its subsidiaries;
(ii) the Executive 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;
(iii) the Executive agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure
that all Confidential Information is kept confidential for the
exclusive use and benefit of the Company and its subsidiaries;
and
(iv) the Executive agrees that, upon termination of his
employment hereunder or at any other time that 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 Executive 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 this Section 7(c), "Confidential Information" means
any and all information developed by or for the Company or any of its
subsidiaries of which the Executive gains or has acquired knowledge during or
prior to the Term by reason of his affiliation with the Company, its
subsidiaries or any predecessor that is (A) not generally known in any industry
in which the Company or any of its subsidiaries is or may become engaged or (B)
not publicly available. Confidential Information includes, but is not limited
to, any and all information developed by or for the Company or any of its
subsidiaries 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, together with all written, graphic
and other materials relating to all or any part of the same.
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8. Unrelated Business Ventures. In addition to and not in limitation
of his obligations under Section 7 hereof:
(a) The Company acknowledges that the Executive is a member of
Dartford Partnership L.L.C. ("Dartford") and that Dartford and its members
provide management and other services to business ventures or groups of
affiliated business ventures (each, a "Platform"). On the date hereof, Dartford
and its members provide such services to (i) the Company and its subsidiaries
and (ii) the Windy Hill Pet Food Company group. The Company acknowledges and
agrees that the performance by the Executive or Dartford of such services for or
on behalf of a Platform other than the Company and its subsidiaries shall not
constitute a breach of this Agreement so long as the Executive complies with the
provisions of Section 7 and the remaining provisions of this Section 8.
(b) The Company and the Executive agree that the Executive
will limit his business ventures to two Platforms for the period (the
"Restricted Period") commencing on the date hereof and ending on the later of
(x) the first anniversary of the date hereof and (y) the date the Company
initiates a search to hire a person (other than the Executive) who is expected
to join the Company either as its Chief Executive Officer or in another capacity
with the expectation that such person will become Chief Executive Officer. In
the event that during the Restricted Period any management services agreement
between Dartford and a member company of one of its then existing Platforms
terminates, the Executive shall have the right to engage in business activities
with a new Platform; provided, that the aggregate number of Platforms for which
the Executive provides services at any one time during the Restricted Period
shall not exceed two; and, provided, further, that any such new platform shall
not be in a business engaged in the manufacture, marketing, distribution or sale
of food products (but excluding beverages) for human consumption.
(c) The restrictions set forth in this Section 8 shall
terminate and be of no further force and effect on the expiration of the
Restricted Period or, if earlier, on the Termination Date so long as such
Termination Date does not arise from the termination of the Executive's
employment hereunder by reason of his resignation without the consent of the
Board or from Termination for Cause; provided, that the Executive's liability
for breaches under this Section 8 shall survive any termination of this
Agreement or Executive's employment hereunder insofar as such liability relates
to actions taken by the Executive prior to such termination; and, provided,
further, that nothing in this Section 8 modifies or reduces the obligations of
the Executive under Section 7 hereof.
9. Certain Adjustments. In the event the Company hires a Chief
Executive Officer to replace the Executive in such capacity, the Company and the
Executive agree to review and renegotiate the terms of this Agreement (including
without limitation the Base Salary and Bonus provisions hereof) to reflect such
hiring, with any adjusted terms of
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this Agreement to be mutually acceptable to the Board, on the one hand, and the
Executive, on the other hand.
10. Successors; Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Executive, in
connection with a Change of Control. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns.
(b) The Executive. Neither this Agreement nor any right or
interest hereunder may be assigned by the Executive, his beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 10 shall preclude (i) the Executive from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives of
the Executive or his estate from assigning any rights hereunder to distributees,
legatees, beneficiaries, testamentary trustees or other legal heirs of the
Executive.
11. Indemnification. The Company shall indemnify, in the manner and
to the fullest extent permitted by applicable law and the by-laws of the
Company, the Executive (or the estate of the Executive) in the event the
Executive (or the Executive's estate) was or is a party to, or is threatened to
be made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of the Company, and whether civil,
criminal, administrative, investigative or otherwise, by reason of the fact that
the Executive is or was a director, officer, employee, or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) ("Expenses"),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding (including
without limitation in connection with the defense or settlement of such action,
suit or proceeding). To the extent and in the manner provided by applicable law,
any such Expenses shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding, even if the Executive is alleged
to have not met the applicable standard of conduct required under this Section
or is alleged to have committed conduct so that, if true, the Executive (or the
Executive's estate) would not be entitled to indemnification under this Section,
upon receipt of an undertaking, which need not be secured, by or on behalf of
such person to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Company as authorized in this Section.
Unless otherwise permitted by applicable law, the indemnification provided for
herein shall be made only as authorized in the specific case upon a
determination, made in the manner provided by applicable law, that
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indemnification of the Executive (or the Executive's estate) is proper in the
circumstances. The Company's obligations under this Section 11 shall survive any
termination of this Agreement or any termination of Executive's employment by
the Company.
12. 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.
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
(ii) If to the Executive:
945 Green Street
San Francisco, CA 94133
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.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
14. Entire Agreement; Other Agreements. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and understandings,
written or oral, with respect thereto; provided, however, that nothing in this
Agreement shall effect the determination of the persons who will serve as
members of the Board and any subsidiary board which shall be determined in
accordance with the Securityholders Agreement dated as of April 8, 1998 among
the Company and the parties thereto and the Dartford Agreement dated as of April
8, 1998 among the Company, Dartford and the parties thereto, it being
acknowledged that the Executive will constitute a "Dartford Designee" as defined
in and for purposes of such Securityholders Agreement in the event he serves as
a member of the Board and any subsidiary board.
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15. 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.
16. Remedies.
(a) Injunctive Relief. The Executive acknowledges and agrees
that the covenants and obligations of the Executive contained in Section 7 and
Section 8 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 that a breach of any of the terms of such covenants and
obligations will cause the Company irreparable injury for which adequate
remedies at law are not available. Therefore the Executive agrees that the
Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Executive from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies under
this Section 16 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
17. 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.
18. Survival. The obligations of the Company to pay any amounts due
to Executive after termination of this Agreement, and the obligations of
Executive under Sections 7 and 8 hereof, shall survive any termination of this
Agreement to the extent such obligations do not terminate upon such termination
in accordance with the terms thereof.
19. 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 and with Board approval. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
AURORA FOODS INC.
By:
-----------------------------------
Name:
Title:
--------------------------------------
Ian R. Wilson
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Exhibit 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June ___, 1998, by and between
AURORA FOODS INC. (the "Company"), a Delaware corporation, and James B. Ardrey
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and the
Executive desires to be employed by the Company on the terms set forth herein.
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 Executive and the Executive hereby
accepts employment with the Company in the capacities hereinafter set forth.
2. Term of Employment. Except as provided in Section 6, the term of
employment of the Executive (the "Term") pursuant to this Agreement shall
commence on the date hereof (the "Effective Date") and shall terminate on the
date (the "Termination Date") that is the earlier of (x) the second anniversary
of the Effective Date or (y) the date the Executive's employment hereunder is
terminated pursuant to Section 6 hereof; provided, that in the event that (i)
Ian R. Wilson is terminated without "cause" pursuant to the employment agreement
of even date herewith between Ian R. Wilson and the Company, the Term hereunder
shall automatically terminate as of the effective date of such termination of
Ian R. Wilson and the Executive shall be deemed to have been terminated without
cause pursuant to Section 6(d) of this Agreement, and (ii) Ian R. Wilson resigns
as Chief Executive Officer of the Company without the consent of the board of
directors of the Company, the Executive shall automatically be deemed to have
resigned as Vice Chairman of the Company and the Term hereunder shall terminate
as of the effective date of such resignation by Ian R. Wilson.
3. Duties; Extent of Services.
(a) Duties. During the Term, the Executive shall serve as Vice
Chairman of the Company, and shall, in accordance with and, subject to the
provisions of the Bylaws (as amended from time to time) of the Company and the
right of Executive to
<PAGE>
provide management and other services to certain other business ventures as
provided in Section 8 hereof, devote all or substantially all of his business
time and attention to the affairs of the Company and perform the duties,
undertake the responsibilities and exercise the authority customarily performed,
undertaken and exercised by a person in such position in the business in which
the Company is engaged. The Executive shall report to and carry out the lawful
directions of the board of directors of the Company (the "Board"). The Executive
shall be based in an office located in the New York, New York metropolitan area.
(b) Extent of Services. Except for illness and permitted
vacation periods, during the Term the Executive shall (i) devote his best
efforts and ability to the business and affairs of the Company and its
subsidiaries; and (ii) discharge such executive and administrative and other
duties not inconsistent with his position as may be assigned to him by the
Board. For so long as the Executive remains employed as Vice Chairman of the
Company, he shall serve, without additional compensation, on the Board, on the
board of directors of any subsidiary of the Company and as Vice Chairman of any
subsidiary of the Company.
4. Compensation.
(a) Base Salary. Subject to the terms and conditions herein, in
consideration of the services rendered by the Executive hereunder and provided
that the Executive has performed in all material respects all of his obligations
provided for herein, the Company will pay to the Executive a base salary (the
"Base Salary") at a minimum of Six Hundred Thousand Dollars ($600,000) per year
during the Term. The Base Salary shall be paid in accordance with the Company's
normal payroll practice.
(b) Bonus. The Company shall pay the Executive a bonus (the
"Bonus") in an amount expressed as a percentage of the Base Salary with respect
to each fiscal year or portion thereof during the Term in accordance with the
following provisions:
(i) For (A) the fiscal years ended December 31, 1998 and
December 31, 1999, during the Term the Bonus shall be payable
with respect to the EBITDA Target (as defined below) for such
fiscal years then ended and (B) the period commencing January
1, 2000 and ending June 30, 2000 during the Term, the Bonus
shall be payable with respect to the EBITDA Target for the six
months then ended (in each case, the "Applicable Period").
(ii) If the Financial Results (as defined below) of the
Company for the Applicable Period during the Term are at least
90% but less than 95% of the EBITDA Target (as defined below)
for the
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Applicable Period, the Executive shall be paid an amount equal
to 30% of so much of his Base Salary as was paid with respect
to the Applicable Period.
(iii) If the Financial Results of the Company for the
Applicable Period during the Term are at least 95% but less
than 100% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 45% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(iv) If the Financial Results of the Company for the
Applicable Period during the Term are at least 100% but less
than 105% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 60% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(v) If the Financial Results of the Company for the
Applicable Period during the Term are at least 105% but less
than 110% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 65% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(vi) If the Financial Results of the Company for the
Applicable Period during the Term are at least 110% but less
than 115% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 70% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(vii) If the Financial Results of the Company for the
Applicable Period during the Term are at least 115% but less
than 120% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 75% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(viii) If the Financial Results of the Company for the
Applicable Period during the Term equal or exceed 120% of the
EBITDA Target for the Applicable Period, the Executive shall
be paid an amount equal to 80% of so much of his Base Salary
as was paid with respect to the Applicable Period.
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(c) For the purpose of this Agreement (i) the term "EBITDA
Target" shall mean the Company's projected earnings before interest, taxes,
one-time transition expenses, non-cash compensation expense charges,
depreciation and amortization, as contained in the Company's budget for the
Applicable Period and which is approved by 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 budget), and (ii) the term "Financial Results" shall mean the Company's
EBITDA calculated by reference to the Company's financial statements for the
Applicable Period as filed with the Securities and Exchange Commission (the
"SEC").
(d) The Bonus due under Section 4(b) shall be paid to the
Executive within thirty (30) days of the filing of the Company's annual audited
financial statements for the relevant year with the SEC.
5. Other Executive Benefits. (a) During the Term, the Executive
shall be entitled to (i) vacation time in accordance with the Company's approved
policy from time to time then in effect; (ii) 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 Executive is eligible; (iii) participate in a pension
plan with terms similar to those applicable to executives of the Company; and
(iv) participate in the Company's equity compensation plan to the extent
determined by the Board from time to time.
(b) The Company shall promptly reimburse the Executive for all
reasonable documented business expenses incurred in furtherance of the business
and affairs of the Company in accordance with approved company policies.
6. Termination Provisions.
(a) Termination for Cause. The Board may terminate the
Executive's employment hereunder for Cause, as hereinafter defined, immediately
upon written notice to the Executive. For purposes of this Agreement, "Cause"
shall mean (A) proven dishonesty of the Executive detrimental to the best
interests of the Company or any of its subsidiaries or conviction of the
Executive of a crime which constitutes a felony, (B) any material act or
omission by the Executive during the Term involving willful malfeasance or gross
negligence in the performance of his duties hereunder, (C) repeated failure of
the Executive to follow the reasonable instructions of the Board (other than
inattention or neglect resulting from illness or disability of the Executive)
which inattention and neglect does not cease within fifteen days after written
notice thereof specifying the details of such conduct is given by the Board to
the Executive or (D) material breach by the
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Executive of any material provision of this Agreement (provided, however, that
if such breach is curable and is remedied to the reasonable satisfaction of the
Board within fifteen days after written notice thereof specifying the details of
such breach is given by the Board to the Executive, such breach shall not fall
within the definition of "Cause" for purposes of this Subsection (D)). During
the Term, the Executive shall be entitled to only one such notice and right to
cure for any single act or event. If the Executive's employment is terminated
for Cause, the Executive shall be entitled to receive only the unpaid portion of
the Base Salary then in effect which has accrued to the date of termination.
(b) Termination By Reason of Permanent Disability. If at any
time during the Term an independent licensed physician selected by the Board
determines that the Executive has been or will be 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 Executive's employment
hereunder may be terminated by the Board upon thirty days' written notice to the
Executive. If the Executive's employment is terminated by reason of Permanent
Disability, the Executive shall be entitled to receive only the sum of (x) the
unpaid portion of the Base Salary then in effect which has accrued to the date
of termination plus (y) an amount equal to six months of the Executive's Base
Salary plus (z) an amount equal to a pro rata portion of the Bonus payable
pursuant to Section 4(b) hereof assuming that the Financial Results of the
Company for the then current Applicable Period equal exactly 100% of the EBITDA
Target for such Applicable Period, with such pro rata portion based on the
actual number of days during such Applicable Period that Executive was employed
by the Company. Such amounts due shall be paid within thirty (30) days after any
termination due to a Permanent Disability and shall be in lieu of any other
payment to which the Executive may be otherwise entitled.
(c) Termination By Reason of Death. The Executive's employment
hereunder shall automatically terminate on the date of his death. If the
Executive's employment is so terminated by his death, the Company shall pay to
the Executive's estate in addition to the unpaid portion of the Base Salary then
in effect through date of Executive's death the sum of (y) an amount equal to
six months of the Executive's Base Salary plus (z) an amount equal to a pro rata
portion of the Bonus payable pursuant to Section 4(b) hereof assuming that the
Financial Results of the Company for the then current Applicable Period equal
exactly 100% of the EBITDA target for such Applicable Period, with such pro rata
portion based on the actual number of days during such Applicable Period that
Executive was employed by the Company. Any amounts due shall be paid within
thirty (30) days after the date of his death if a personal representative has
been appointed by the end of such thirty (30) day period or, if a personal
representative has not been appointed by the end of such thirty (30) day period,
promptly after a personal representative has been appointed. All such
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amounts payable pursuant to this Section 6(c) shall be in lieu of any other
payment to which the Executive may otherwise be entitled.
(d) Termination Without Cause. The Board may terminate the
Executive's employment hereunder at any time for any reason without Cause in
which case the Executive shall be entitled to receive an amount (the "Severance
Amount") equal to the sum of (x) the Base Salary then in effect for the balance
of the Non-Compete Period (as defined below in Section 7(a)) plus (y) an amount
equal to the Bonus payable pursuant to Section 4(b) hereof based upon the actual
Financial Results of the Company for the remainder of the Non-Compete Period.
For purposes of determining the Bonus payable during the remainder of the
Non-Compete Period, it shall first be measured in respect of the Applicable
Period first ended during the remainder of the Non-Compete Period and thereafter
in respect of each succeeding Applicable Period that commences during the
Non-Compete Period. The Severance Amount shall be in lieu of any other severance
payment to which Executive may be otherwise entitled under any other severance
plan maintained by the Company. The Base Salary portion of the Severance Amount
shall be paid in accordance with the Company's normal payroll practice over the
balance of the Non-Compete Period. For each Applicable Period within the
Non-Compete Period, the Bonus portion of the Severance Amount shall be paid
within thirty days of the filing with the SEC of the Company's financial
statements covering such Applicable Period.
(e) Change of Control. This Agreement may be assigned in
connection with a Change of Control (as defined below) as provided in Section
10(a) hereof. In the event of a Change of Control:
(i) the Executive shall have no obligation to move to a
new work location that is more than 50 miles from the
Executive's principal work location immediately prior to such
Change of Control;
(ii) the amount of Base Salary set forth in Section 4(a)
hereof and the Bonus opportunities set forth in Section 4(b)
hereof shall not be subject to reduction;
(iii) the Executive's title, duties and responsibilities
as set forth in Section 3(a) hereof shall not be subject to
reduction; and
(iv) the Executive's reasonable, documented business
expenses shall continue to be reimbursed in a manner
consistent with the Company's reimbursement practice prior to
such Change of Control.
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Following a Change of Control, the failure by the Company (or its successor or
assign) to comply with any of subparagraphs (i)-(iv) shall permit the Executive
to terminate this Agreement for "Good Reason", on written notice to the Company
(or its successor or assign). In the event the Executive terminates this
Agreement for Good Reason, the Executive shall be entitled to receive the
Severance Amount. The Severance Amount shall be in lieu of any other severance
payment to which the Executive may otherwise be entitled under any other
severance plan maintained by the Company (or its successor or assign). The
Severance Amount shall be paid in accordance with Section 6(d) hereof.
For purposes of this Agreement, a "Change of Control" shall mean (i)
the sale, exchange or other disposition of the issued and outstanding shares of
Common Stock of the Company or the merger, consolidation or other business
combination of the Company and/or its subsidiaries in a single transaction or a
series of related transactions after which the shareholders of the Company on
the date immediately prior to the single transaction or first transaction of the
series own less than 50% of the outstanding shares of voting common stock of the
Company or any surviving corporation in any such single transaction or series of
related transactions, or (ii) the sale or transfer of all or substantially all
of the assets of the Company and its subsidiaries taken as a whole, to a person
or entity other than the Company or its wholly-owned subsidiaries; provided,
that any merger, consolidation, dissolution, sale of substantially all the
assets or other similar transaction consummated in connection with the initial
public offering of the Company's common stock shall not constitute a "Change of
Control" hereunder.
7. Covenants of the Executive.
(a) Non-Competition. During the Non-Compete Period (as defined
below), the Executive shall not, directly or indirectly, be associated with any
entity, whether as a director, officer, employee, agent, consultant, partner,
owner, shareholder, member, independent contractor or otherwise, that is then
engaged in a Restricted Business (as defined below), including any "Platform",
as defined in Section 8 hereof, other than the Company and its subsidiaries. A
"Restricted Business" means any business or venture engaged in the manufacture,
marketing, distribution or sale of food products (but excluding beverages) for
human consumption. The "Non-Compete Period" shall commence as of the Effective
Date and remain in effect through the Term and thereafter until the earlier of
(x) the second anniversary of the Effective Date or (y) the first anniversary of
the date of hire of a Chief Executive Officer of the Company other than Ian R.
Wilson.
(b) Non-Solicitation of Employees of the Employer. Until the
end of the Non-Compete Period, the Executive shall not, and shall cause each
business or entity with which he is or shall become associated in any capacity
not to, solicit for employment or
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employ any person who is then employed in a professional or managerial position
by the Company, its subsidiaries or affiliates.
(c) Confidentiality. The Executive agrees and acknowledges
that the Confidential Information (as defined below) of the Company and its
subsidiaries 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. Based on the foregoing, the
Executive agrees to undertake the following obligations with respect to such
Confidential Information:
(i) the Executive agrees to keep any and all
Confidential Information in trust for the exclusive use and
benefit of the Company and its subsidiaries;
(ii) the Executive 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;
(iii) the Executive agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure
that all Confidential Information is kept confidential for the
exclusive use and benefit of the Company and its subsidiaries;
and
(iv) the Executive agrees that, upon termination of his
employment hereunder or at any other time that 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 Executive 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 this Section 7(c), "Confidential Information" means
any and all information developed by or for the Company or any of its
subsidiaries of which the Executive gains or has acquired knowledge during or
prior to the Term by reason of his affiliation with the Company, its
subsidiaries or any predecessor that is (A) not generally known in any industry
in which the Company or any of its subsidiaries is or may become engaged or (B)
not publicly available. Confidential Information includes, but is not limited
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to, any and all information developed by or for the Company or any of its
subsidiaries 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, together with all written, graphic
and other materials relating to all or any part of the same.
8. Unrelated Business Ventures. In addition to and not in limitation
of his obligations under Section 7 hereof:
(a) The Company acknowledges that the Executive is a member of
Dartford Partnership L.L.C. ("Dartford") and that Dartford and its members
provide management and other services to business ventures or groups of
affiliated business ventures (each, a "Platform"). On the date hereof, Dartford
and its members provide such services to (i) the Company and its subsidiaries
and (ii) the Windy Hill Pet Food Company group. The Company acknowledges and
agrees that the performance by the Executive or Dartford of such services for or
on behalf of a Platform other than the Company and its subsidiaries shall not
constitute a breach of this Agreement so long as the Executive complies with the
provisions of Section 7 and the remaining provisions of this Section 8.
(b) The Company and the Executive agree that the Executive
will limit his business ventures to two Platforms for the period (the
"Restricted Period") commencing on the date hereof and ending on the later of
(x) the first anniversary of the date hereof and (y) the date the Company
initiates a search to hire a person (other than Ian R. Wilson) who is expected
to join the Company either as its Chief Executive Officer or in another capacity
with the expectation that such person will become Chief Executive Officer. In
the event that during the Restricted Period any management services agreement
between Dartford and a member company of one of its then existing Platforms
terminates, the Executive shall have the right to engage in business activities
with a new Platform; provided, that the aggregate number of Platforms for which
the Executive provides services at any one time during the Restricted Period
shall not exceed two; and, provided, further, that any such new platform shall
not be in a business engaged in the manufacture, marketing, distribution or sale
of food products (but excluding beverages) for human consumption.
(c) The restrictions set forth in this Section 8 shall
terminate and be of no further force and effect on the expiration of the
Restricted Period or, if earlier, on the Termination Date so long as such
Termination Date does not arise from the termination of the Executive's
employment hereunder by reason of his resignation (or deemed resignation)
without the consent of the Board or from Termination for Cause; provided, that
the Executive's liability for breaches under this Section 8 shall survive any
termination of this Agreement or Executive's employment hereunder insofar as
such liability relates to actions
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taken by the Executive prior to such termination; and, provided, further, that
nothing in this Section 8 modifies or reduces the obligations of the Executive
under Section 7 hereof.
9. Certain Adjustments. In the event the Company hires a Chief
Executive Officer to replace Ian R. Wilson in such capacity, the Company and the
Executive agree to review and renegotiate the terms of this Agreement to reflect
the impact of such hiring (including without limitation the Base Salary and
Bonus provisions hereof), with any adjusted terms of this Agreement to be
mutually acceptable to the Board, on the one hand, and the Executive, on the
other hand.
10. Successors; Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Executive, in
connection with a Change of Control. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns.
(b) The Executive. Neither this Agreement nor any right or
interest hereunder may be assigned by the Executive, his beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 10 shall preclude (i) the Executive from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives of
the Executive or his estate from assigning any rights hereunder to distributees,
legatees, beneficiaries, testamentary trustees or other legal heirs of the
Executive.
11. Indemnification. The Company shall indemnify, in the manner and
to the fullest extent permitted by applicable law and the by-laws of the
Company, the Executive (or the estate of the Executive) in the event the
Executive (or the Executive's estate) was or is a party to, or is threatened to
be made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of the Company, and whether civil,
criminal, administrative, investigative or otherwise, by reason of the fact that
the Executive is or was a director, officer, employee, or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) ("Expenses"),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding (including
without limitation in connection with the defense or settlement of such action,
suit or proceeding). To the extent and in the manner provided by applicable law,
any such Expenses shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding, even if the Executive is alleged
to have not met the applicable standard of
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conduct required under this Section or is alleged to have committed conduct so
that, if true, the Executive (or the Executive's estate) would not be entitled
to indemnification under this Section, upon receipt of an undertaking, which
need not be secured, by or on behalf of such person to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in this Section. Unless otherwise permitted by applicable
law, the indemnification provided for herein shall be made only as authorized in
the specific case upon a determination, made in the manner provided by
applicable law, that indemnification of the Executive (or the Executive's
estate) is proper in the circumstances. The Company's obligations under this
Section 11 shall survive any termination of this Agreement or any termination of
Executive's employment by the Company.
12. 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.
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
(ii) If to the Executive:
48 Pheasant Lane
Greenwich, CT 06830
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.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
14. Entire Agreement; Other Agreement. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and understandings,
written or oral, with respect thereto; provided, however, that, nothing in this
Agreement shall effect the determination of the persons who will serve as
members of the Board and any subsidiary board which shall be
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determined in accordance with the Securityholders Agreement dated as of April 8,
1998 among the Company and the parties thereto and the Dartford Agreement dated
as of April 8, 1998 among the Company, Dartford and the parties thereto, it
being acknowledged that the Executive will constitute a "Dartford Designee" as
defined in and for purposes of such Securityholders Agreement in the event he
serves as a member of the Board and any subsidiary board.
15. 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.
16. Remedies.
(a) Injunctive Relief. The Executive acknowledges and agrees
that the covenants and obligations of the Executive contained in Section 7 and
Section 8 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 that a breach of any of the terms of such covenants and
obligations will cause the Company irreparable injury for which adequate
remedies at law are not available. Therefore the Executive agrees that the
Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Executive from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies
under this Section 16 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
17. 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.
18. Survival. The obligations of the Company to pay any amounts due
to Executive after termination of this Agreement, and the obligations of
Executive under Sections 7 and 8 hereof, shall survive any termination of this
Agreement to the extent such obligations do not terminate upon such termination
in accordance with the terms thereof.
19. Amendments, Miscellaneous, etc. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by an
instrument in
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writing signed by the party against which such change, waiver, discharge or
termination is sought to be enforced and with Board approval. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
AURORA FOODS INC.
By:
-----------------------------
Name:
Title:
--------------------------------
James B. Ardrey
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Exhibit 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June ___, 1998, by and between
AURORA FOODS INC. (the "Company"), a Delaware corporation, and Ray Chung (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and the
Executive desires to be employed by the Company on the terms set forth herein.
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 Executive and the Executive hereby
accepts employment with the Company in the capacities hereinafter set forth.
2. Term of Employment. Except as provided in Section 6, the term of
employment of the Executive (the "Term") pursuant to this Agreement shall
commence on the date hereof (the "Effective Date") and shall terminate on the
date (the "Termination Date") that is the earlier of (x) the second anniversary
of the Effective Date or (y) the date the Executive's employment hereunder is
terminated pursuant to Section 6 hereof; provided, that in the event that (i)
Ian R. Wilson is terminated without "cause" pursuant to the employment agreement
of even date herewith between Ian R. Wilson and the Company, the Term hereunder
shall automatically terminate as of the effective date of such termination of
Ian R. Wilson and the Executive shall be deemed to have been terminated without
cause pursuant to Section 6(d) of this Agreement, and (ii) Ian R. Wilson resigns
as Chief Executive Officer of the Company without the consent of the board of
directors of the Company, the Executive shall automatically be deemed to have
resigned as Executive Vice President of the Company and the term hereunder shall
terminate as of the effective date of such resignation by Ian R. Wilson.
3. Duties; Extent of Services.
(a) Duties. During the Term, the Executive shall serve as
Executive Vice President of the Company, and shall, in accordance with and,
subject to the provisions of the Bylaws (as amended from time to time) of the
Company and the right of
<PAGE>
Executive to provide management and other services to certain other business
ventures as provided in Section 8 hereof, devote all or substantially all of his
business time and attention to the affairs of the Company and perform the
duties, undertake the responsibilities and exercise the authority customarily
performed, undertaken and exercised by a person in such position in the business
in which the Company is engaged. The Executive shall report to and carry out the
lawful directions of the board of directors of the Company (the "Board"). The
Executive shall be based in an office located in the San Francisco, California
metropolitan area.
(b) Extent of Services. Except for illness and permitted
vacation periods, during the Term the Executive shall (i) devote his best
efforts and ability to the business and affairs of the Company and its
subsidiaries; and (ii) discharge such executive and administrative and other
duties not inconsistent with his position as may be assigned to him by the
Board. For so long as the Executive remains employed as Executive Vice President
of the Company, he shall serve, without additional compensation, on the Board,
on the board of directors of any subsidiary of the Company and as Executive Vice
President of any subsidiary of the Company.
4. Compensation.
(a) Base Salary. Subject to the terms and conditions herein, in
consideration of the services rendered by the Executive hereunder and provided
that the Executive has performed in all material respects all of his obligations
provided for herein, the Company will pay to the Executive a base salary (the
"Base Salary") at a minimum of Three Hundred Fifty Thousand Dollars ($350,000)
per year during the Term. The Base Salary shall be paid in accordance with the
Company's normal payroll practice.
(b) Bonus. The Company shall pay the Executive a bonus (the
"Bonus") in an amount expressed as a percentage of the Base Salary with respect
to each fiscal year or portion thereof during the Term in accordance with the
following provisions:
(i) For (A) the fiscal years ended December 31, 1998 and
December 31, 1999, during the Term the Bonus shall be payable
with respect to the EBITDA Target (as defined below) for such
fiscal years then ended and (B) the period commencing January
1, 2000 and ending June 30, 2000 during the Term, the Bonus
shall be payable with respect to the EBITDA Target for the six
months then ended (in each case, the "Applicable Period").
(ii) If the Financial Results (as defined below) of the
Company for the Applicable Period during the Term are at least
90%
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but less than 95% of the EBITDA Target (as defined below) for
the Applicable Period, the Executive shall be paid an amount
equal to 30% of so much of his Base Salary as was paid with
respect to the Applicable Period.
(iii) If the Financial Results of the Company for the
Applicable Period during the Term are at least 95% but less
than 100% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 45% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(iv) If the Financial Results of the Company for the
Applicable Period during the Term are at least 100% but less
than 105% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 60% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(v) If the Financial Results of the Company for the
Applicable Period during the Term are at least 105% but less
than 110% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 65% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(vi) If the Financial Results of the Company for the
Applicable Period during the Term are at least 110% but less
than 115% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 70% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(vii) If the Financial Results of the Company for the
Applicable Period during the Term are at least 115% but less
than 120% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 75% of so much of
his Base Salary as was paid with respect to the Applicable
Period.
(viii) If the Financial Results of the Company for the
Applicable Period during the Term equal or exceed 120% of the
EBITDA Target for the Applicable Period, the Executive shall
be paid an amount equal to 80% of so much of his Base Salary
as was paid with respect to the Applicable Period.
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(c) For the purpose of this Agreement (i) the term "EBITDA
Target" shall mean the Company's projected earnings before interest, taxes,
one-time transition expenses, non-cash compensation expense charges,
depreciation and amortization, as contained in the Company's budget for the
Applicable Period and which is approved by 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 budget), and (ii) the term "Financial Results" shall mean the Company's
EBITDA calculated by reference to the Company's financial statements for the
Applicable Period as filed with the Securities and Exchange Commission (the
"SEC").
(d) The Bonus due under Section 4(b) shall be paid to the
Executive within thirty (30) days of the filing of the Company's annual audited
financial statements for the relevant year with the SEC.
5. Other Executive Benefits. (a) During the Term, the Executive
shall be entitled to (i) vacation time in accordance with the Company's approved
policy from time to time then in effect; (ii) 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 Executive is eligible; (iii) participate in a pension
plan with terms similar to those applicable to executives of the Company; and
(iv) participate in the Company's equity compensation plan to the extent
determined by the Board from time to time.
(b) The Company shall promptly reimburse the Executive for all
reasonable documented business expenses incurred in furtherance of the business
and affairs of the Company in accordance with approved company policies.
6. Termination Provisions.
(a) Termination for Cause. The Board may terminate the
Executive's employment hereunder for Cause, as hereinafter defined, immediately
upon written notice to the Executive. For purposes of this Agreement, "Cause"
shall mean (A) proven dishonesty of the Executive detrimental to the best
interests of the Company or any of its subsidiaries or conviction of the
Executive of a crime which constitutes a felony, (B) any material act or
omission by the Executive during the Term involving willful malfeasance or gross
negligence in the performance of his duties hereunder, (C) repeated failure of
the Executive to follow the reasonable instructions of the Board (other than
inattention or neglect resulting from illness or disability of the Executive)
which inattention and neglect does not cease within fifteen days after written
notice thereof specifying the details of such conduct is given by the Board to
the Executive or (D) material breach by the
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Executive of any material provision of this Agreement (provided, however, that
if such breach is curable and is remedied to the reasonable satisfaction of the
Board within fifteen days after written notice thereof specifying the details of
such breach is given by the Board to the Executive, such breach shall not fall
within the definition of "Cause" for purposes of this Subsection (D)). During
the Term, the Executive shall be entitled to only one such notice and right to
cure for any single act or event. If the Executive's employment is terminated
for Cause, the Executive shall be entitled to receive only the unpaid portion of
the Base Salary then in effect which has accrued to the date of termination.
(b) Termination By Reason of Permanent Disability. If at any
time during the Term an independent licensed physician selected by the Board
determines that the Executive has been or will be 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 Executive's employment
hereunder may be terminated by the Board upon thirty days' written notice to the
Executive. If the Executive's employment is terminated by reason of Permanent
Disability, the Executive shall be entitled to receive only the sum of (x) the
unpaid portion of the Base Salary then in effect which has accrued to the date
of termination plus (y) an amount equal to six months of the Executive's Base
Salary plus (z) an amount equal to a pro rata portion of the Bonus payable
pursuant to Section 4(b) hereof assuming that the Financial Results of the
Company for the then current Applicable Period equal exactly 100% of the EBITDA
Target for such Applicable Period, with such pro rata portion based on the
actual number of days during such Applicable Period that Executive was employed
by the Company. Such amounts due shall be paid within thirty (30) days after any
termination due to a Permanent Disability and shall be in lieu of any other
payment to which the Executive may be otherwise entitled.
(c) Termination By Reason of Death. The Executive's employment
hereunder shall automatically terminate on the date of his death. If the
Executive's employment is so terminated by his death, the Company shall pay to
the Executive's estate in addition to the unpaid portion of the Base Salary then
in effect through date of Executive's death the sum of (y) an amount equal to
six months of the Executive's Base Salary plus (z) an amount equal to a pro rata
portion of the Bonus payable pursuant to Section 4(b) hereof assuming that the
Financial Results of the Company for the then current Applicable Period equal
exactly 100% of the EBITDA target for such Applicable Period, with such pro rata
portion based on the actual number of days during such Applicable Period that
Executive was employed by the Company. Any amounts due shall be paid within
thirty (30) days after the date of his death if a personal representative has
been appointed by the end of such thirty (30) day period or, if a personal
representative has not been appointed by the end of such thirty (30) day period,
promptly after a personal representative has been appointed. All such
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amounts payable pursuant to this Section 6(c) shall be in lieu of any other
payment to which the Executive may otherwise be entitled.
(d) Termination Without Cause. The Board may terminate the
Executive's employment hereunder at any time for any reason without Cause in
which case the Executive shall be entitled to receive an amount (the "Severance
Amount") equal to the sum of (x) the Base Salary then in effect for the balance
of the Non-Compete Period (as defined below in Section 7(a)) plus (y) an amount
equal to the Bonus payable pursuant to Section 4(b) hereof based upon the actual
Financial Results of the Company for the remainder of the Non-Compete Period.
For purposes of determining the Bonus payable during the remainder of the
Non-Compete Period, it shall first be measured in respect of the Applicable
Period first ended during the remainder of the Non-Compete Period and thereafter
in respect of each succeeding Applicable Period that commences during the
Non-Compete Period. The Severance Amount shall be in lieu of any other severance
payment to which Executive may be otherwise entitled under any other severance
plan maintained by the Company. The Base Salary portion of the Severance Amount
shall be paid in accordance with the Company's normal payroll practice over the
balance of the Non-Compete Period. For each Applicable Period within the
Non-Compete Period, the Bonus portion of the Severance Amount shall be paid
within thirty days of the filing with the SEC of the Company's financial
statements covering such Applicable Period.
(e) Change of Control. This Agreement may be assigned in
connection with a Change of Control (as defined below) as provided in Section
10(a) hereof. In the event of a Change of Control:
(i) the Executive shall have no obligation to move to a
new work location that is more than 50 miles from the
Executive's principal work location immediately prior to such
Change of Control;
(ii) the amount of Base Salary set forth in Section 4(a)
hereof and the Bonus opportunities set forth in Section 4(b)
hereof shall not be subject to reduction;
(iii) the Executive's title, duties and responsibilities
as set forth in Section 3(a) hereof shall not be subject to
reduction; and
(iv) the Executive's reasonable, documented business
expenses shall continue to be reimbursed in a manner
consistent with the Company's reimbursement practice prior to
such Change of Control.
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Following a Change of Control, the failure by the Company (or its successor or
assign) to comply with any of subparagraphs (i)-(iv) shall permit the Executive
to terminate this Agreement for "Good Reason", on written notice to the Company
(or its successor or assign). In the event the Executive terminates this
Agreement for Good Reason, the Executive shall be entitled to receive the
Severance Amount. The Severance Amount shall be in lieu of any other severance
payment to which the Executive may otherwise be entitled under any other
severance plan maintained by the Company (or its successor or assign). The
Severance Amount shall be paid in accordance with Section 6(d) hereof.
For purposes of this Agreement, a "Change of Control" shall mean (i)
the sale, exchange or other disposition of the issued and outstanding shares of
Common Stock of the Company or the merger, consolidation or other business
combination of the Company and/or its subsidiaries in a single transaction or a
series of related transactions after which the shareholders of the Company on
the date immediately prior to the single transaction or first transaction of the
series own less than 50% of the outstanding shares of voting common stock of the
Company or any surviving corporation in any such single transaction or series of
related transactions, or (ii) the sale or transfer of all or substantially all
of the assets of the Company and its subsidiaries taken as a whole, to a person
or entity other than the Company or its wholly-owned subsidiaries; provided,
that any merger, consolidation, dissolution, sale of substantially all the
assets or other similar transaction consummated in connection with the initial
public offering of the Company's common stock shall not constitute a "Change of
Control" hereunder.
7. Covenants of the Executive.
(a) Non-Competition. During the Non-Compete Period (as defined
below), the Executive shall not, directly or indirectly, be associated with any
entity, whether as a director, officer, employee, agent, consultant, partner,
owner, shareholder, member, independent contractor or otherwise, that is then
engaged in a Restricted Business (as defined below), including any "Platform",
as defined in Section 8 hereof, other than the Company and its subsidiaries. A
"Restricted Business" means any business or venture engaged in the manufacture,
marketing, distribution or sale of food products (but excluding beverages) for
human consumption. The "Non-Compete Period" shall commence as of the Effective
Date and remain in effect through the Term and thereafter until the earlier of
(x) the second anniversary of the Effective Date or (y) the first anniversary of
the date of hire of a Chief Executive Officer of the Company other than the Ian
R. Wilson.
(b) Non-Solicitation of Employees of the Employer. Until the
end of the Non-Compete Period, the Executive shall not, and shall cause each
business or entity with which he is or shall become associated in any capacity
not to, solicit for employment or
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employ any person who is then employed in a professional or managerial position
by the Company, its subsidiaries or affiliates.
(c) Confidentiality. The Executive agrees and acknowledges
that the Confidential Information (as defined below) of the Company and its
subsidiaries 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. Based on the foregoing, the
Executive agrees to undertake the following obligations with respect to such
Confidential Information:
(i) the Executive agrees to keep any and all
Confidential Information in trust for the exclusive use and
benefit of the Company and its subsidiaries;
(ii) the Executive 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;
(iii) the Executive agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure
that all Confidential Information is kept confidential for the
exclusive use and benefit of the Company and its subsidiaries;
and
(iv) the Executive agrees that, upon termination of his
employment hereunder or at any other time that 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 Executive 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 this Section 7(c), "Confidential Information" means
any and all information developed by or for the Company or any of its
subsidiaries of which the Executive gains or has acquired knowledge during or
prior to the Term by reason of his affiliation with the Company, its
subsidiaries or any predecessor that is (A) not generally known in any industry
in which the Company or any of its subsidiaries is or may become engaged or (B)
not publicly available. Confidential Information includes, but is not limited
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to, any and all information developed by or for the Company or any of its
subsidiaries 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, together with all written, graphic
and other materials relating to all or any part of the same.
8. Unrelated Business Ventures. In addition to and not in limitation
of his obligations under Section 7 hereof:
(a) The Company acknowledges that the Executive is a member of
Dartford Partnership L.L.C. ("Dartford") and that Dartford and its members
provide management and other services to business ventures or groups of
affiliated business ventures (each, a "Platform"). On the date hereof, Dartford
and its members provide such services to (i) the Company and its subsidiaries
and (ii) the Windy Hill Pet Food Company group. The Company acknowledges and
agrees that the performance by the Executive or Dartford of such services for or
on behalf of a Platform other than the Company and its subsidiaries shall not
constitute a breach of this Agreement so long as the Executive complies with the
provisions of Section 7 and the remaining provisions of this Section 8.
(b) The Company and the Executive agree that the Executive
will limit his business ventures to two Platforms for the period (the
"Restricted Period") commencing on the date hereof and ending on the later of
(x) the first anniversary of the date hereof and (y) the date the Company
initiates a search to hire a person (other than Ian R. Wilson) who is expected
to join the Company either as its Chief Executive Officer or in another capacity
with the expectation that such person will become Chief Executive Officer. In
the event that during the Restricted Period any management services agreement
between Dartford and a member company of one of its then existing Platforms
terminates, the Executive shall have the right to engage in business activities
with a new Platform; provided, that the aggregate number of Platforms for which
the Executive provides services at any one time during the Restricted Period
shall not exceed two; and, provided, further, that any such new platform shall
not be in a business engaged in the manufacture, marketing, distribution or sale
of food products (but excluding beverages) for human consumption.
(c) The restrictions set forth in this Section 8 shall
terminate and be of no further force and effect on the expiration of the
Restricted Period or, if earlier, on the Termination Date so long as such
Termination Date does not arise from the termination of the Executive's
employment hereunder by reason of his resignation (or deemed resignation)
without the consent of the Board or from Termination for Cause; provided, that
the Executive's liability for breaches under this Section 8 shall survive any
termination of this Agreement or Executive's employment hereunder insofar as
such liability relates to actions
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taken by the Executive prior to such termination; and, provided, further, that
nothing in this Section 8 modifies or reduces the obligations of the Executive
under Section 7 hereof.
9. Certain Adjustments. In the event the Company hires a Chief
Executive Officer to replace Ian R. Wilson in such capacity, the Company and the
Executive agree to review and renegotiate the terms of this Agreement (including
without limitation the Base Salary and Bonus provisions hereof), with any
adjusted terms of this Agreement to be mutually acceptable to the Board, on the
one hand, and the Executive, on the other hand.
10. Successors; Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Executive, in
connection with a Change of Control. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns.
(b) The Executive. Neither this Agreement nor any right or
interest hereunder may be assigned by the Executive, his beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 10 shall preclude (i) the Executive from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives of
the Executive or his estate from assigning any rights hereunder to distributees,
legatees, beneficiaries, testamentary trustees or other legal heirs of the
Executive.
11. Indemnification. The Company shall indemnify, in the manner and
to the fullest extent permitted by applicable law and the by-laws of the
Company, the Executive (or the estate of the Executive) in the event the
Executive (or the Executive's estate) was or is a party to, or is threatened to
be made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of the Company, and whether civil,
criminal, administrative, investigative or otherwise, by reason of the fact that
the Executive is or was a director, officer, employee, or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) ("Expenses"),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding (including
without limitation in connection with the defense or settlement of such action,
suit or proceeding). To the extent and in the manner provided by applicable law,
any such Expenses shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding, even if the Executive is alleged
to have not met the applicable standard of conduct required under this Section
or is alleged to have committed conduct so that, if true,
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<PAGE>
the Executive (or the Executive's estate) would not be entitled to
indemnification under this Section, upon receipt of an undertaking, which need
not be secured, by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in this Section. Unless otherwise permitted by applicable
law, the indemnification provided for herein shall be made only as authorized in
the specific case upon a determination, made in the manner provided by
applicable law, that indemnification of the Executive (or the Executive's
estate) is proper in the circumstances. The Company's obligations under this
Section 11 shall survive any termination of this Agreement or any termination of
Executive's employment by the Company.
12. 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.
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
(ii) If to the Executive:
11 Smithdale Estates
Houston, TX 77024
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.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
14. Entire Agreement. This Agreement contains the entire agreement
of the parties relating to the subject matter hereof and supersedes all prior
agreements, representations, warranties and understandings, written or oral,
with respect thereto.
15. 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
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<PAGE>
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.
16. Remedies.
(a) Injunctive Relief. The Executive acknowledges and agrees
that the covenants and obligations of the Executive contained in Section 7 and
Section 8 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 that a breach of any of the terms of such covenants and
obligations will cause the Company irreparable injury for which adequate
remedies at law are not available. Therefore the Executive agrees that the
Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Executive from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies
under this Section 16 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
17. 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.
18. Survival. The obligations of the Company to pay any amounts due
to Executive after termination of this Agreement, and the obligations of
Executive under Sections 7 and 8 hereof, shall survive any termination of this
Agreement to the extent such obligations do not terminate upon such termination
in accordance with the terms thereof.
19. 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 and with Board approval. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
AURORA FOODS INC.
By:
------------------------------
Name:
Title:
---------------------------------
Ray Chung
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Exhibit 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June ___, 1998, by and between
AURORA FOODS INC. (the "Company"), a Delaware corporation, and M. Laurie
Cummings (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and the
Executive desires to be employed by the Company on the terms set forth herein.
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 Executive and the Executive hereby
accepts employment with the Company in the capacities hereinafter set forth.
2. Term of Employment. Except as provided in Section 6, the term of
employment of the Executive (the "Term") pursuant to this Agreement shall
commence on the date hereof (the "Effective Date") and shall terminate on the
date (the "Termination Date") that is the earlier of (x) the second anniversary
of the Effective Date or (y) the date the Executive's employment hereunder is
terminated pursuant to Section 6 hereof; provided, that in the event that (i)
Ian R. Wilson is terminated without "cause" pursuant to the employment agreement
of even date herewith between Ian R. Wilson and the Company, the Term hereunder
shall automatically terminate as of the effective date of such termination of
Ian R. Wilson and the Executive shall be deemed to have been terminated without
cause pursuant to Section 6(d) of this Agreement, and (ii) Ian R. Wilson resigns
as Chief Executive Officer of the Company without the consent of the board of
directors of the Company, the Executive shall automatically be deemed to have
resigned as Chief Financial Officer of the Company and the Term hereunder shall
terminate as of the effective date of such resignation by Ian R. Wilson.
3. Duties; Extent of Services.
(a) Duties. During the Term, the Executive shall serve as
Chief Financial Officer of the Company, and shall, in accordance with and,
subject to the provisions of the Bylaws (as amended from time to time) of the
Company and the right of
<PAGE>
Executive to provide management and other services to certain other business
ventures as provided in Section 8 hereof, devote all or substantially all of her
business time and attention to the affairs of the Company and perform the
duties, undertake the responsibilities and exercise the authority customarily
performed, undertaken and exercised by a person in such position in the business
in which the Company is engaged. The Executive shall report to and carry out the
lawful directions of the board of directors of the Company (the "Board"). The
Executive shall be based in an office located in the San Francisco, California
metropolitan area.
(b) Extent of Services. Except for illness and permitted
vacation periods, during the Term the Executive shall (i) devote her best
efforts and ability to the business and affairs of the Company and its
subsidiaries; and (ii) discharge such executive and administrative and other
duties not inconsistent with her position as may be assigned to her by the
Board. For so long as the Executive remains employed as Chief Financial Officer
of the Company, she shall serve, without additional compensation, on the Board,
on the board of directors of any subsidiary of the Company and as Chief
Financial Officer of any subsidiary of the Company.
4. Compensation.
(a) Base Salary. Subject to the terms and conditions herein, in
consideration of the services rendered by the Executive hereunder and provided
that the Executive has performed in all material respects all of her obligations
provided for herein, the Company will pay to the Executive a base salary (the
"Base Salary") at a minimum of Two Hundred Fifty Thousand Dollars ($250,000) per
year during the Term. The Base Salary shall be paid in accordance with the
Company's normal payroll practice.
(b) Bonus. The Company shall pay the Executive a bonus (the
"Bonus") in an amount expressed as a percentage of the Base Salary with respect
to each fiscal year or portion thereof during the Term in accordance with the
following provisions:
(i) For (A) the fiscal years ended December 31, 1998 and
December 31, 1999, during the Term the Bonus shall be payable
with respect to the EBITDA Target (as defined below) for such
fiscal years then ended and (B) the period commencing January
1, 2000 and ending June 30, 2000 during the Term, the Bonus
shall be payable with respect to the EBITDA Target for the six
months then ended (in each case, the "Applicable Period").
(ii) If the Financial Results (as defined below) of the
Company for the Applicable Period during the Term are at least
90%
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but less than 95% of the EBITDA Target (as defined below) for
the Applicable Period, the Executive shall be paid an amount
equal to 30% of so much of her Base Salary as was paid with
respect to the Applicable Period.
(iii) If the Financial Results of the Company for the
Applicable Period during the Term are at least 95% but less
than 100% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 45% of so much of
her Base Salary as was paid with respect to the Applicable
Period.
(iv) If the Financial Results of the Company for the
Applicable Period during the Term are at least 100% but less
than 105% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 60% of so much of
her Base Salary as was paid with respect to the Applicable
Period.
(v) If the Financial Results of the Company for the
Applicable Period during the Term are at least 105% but less
than 110% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 65% of so much of
her Base Salary as was paid with respect to the Applicable
Period.
(vi) If the Financial Results of the Company for the
Applicable Period during the Term are at least 110% but less
than 115% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 70% of so much of
her Base Salary as was paid with respect to the Applicable
Period.
(vii) If the Financial Results of the Company for the
Applicable Period during the Term are at least 115% but less
than 120% of the EBITDA Target for the Applicable Period, the
Executive shall be paid an amount equal to 75% of so much of
her Base Salary as was paid with respect to the Applicable
Period.
(viii) If the Financial Results of the Company for the
Applicable Period during the Term equal or exceed 120% of the
EBITDA Target for the Applicable Period, the Executive shall
be paid an amount equal to 80% of so much of her Base Salary
as was paid with respect to the Applicable Period.
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(c) For the purpose of this Agreement (i) the term "EBITDA
Target" shall mean the Company's projected earnings before interest, taxes,
one-time transition expenses, non-cash compensation expense charges,
depreciation and amortization, as contained in the Company's budget for the
Applicable Period and which is approved by 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 budget), and (ii) the term "Financial Results" shall mean the Company's
EBITDA calculated by reference to the Company's financial statements for the
Applicable Period as filed with the Securities and Exchange Commission (the
"SEC").
(d) The Bonus due under Section 4(b) shall be paid to the
Executive within thirty (30) days of the filing of the Company's annual audited
financial statements for the relevant year with the SEC.
5. Other Executive Benefits. (a) During the Term, the Executive
shall be entitled to (i) vacation time in accordance with the Company's approved
policy from time to time then in effect; (ii) 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 Executive is eligible; (iii) participate in a pension
plan with terms similar to those applicable to executives of the Company; and
(iv) participate in the Company's equity compensation plan to the extent
determined by the Board from time to time.
(b) The Company shall promptly reimburse the Executive for all
reasonable documented business expenses incurred in furtherance of the business
and affairs of the Company in accordance with approved company policies.
6. Termination Provisions.
(a) Termination for Cause. The Board may terminate the
Executive's employment hereunder for Cause, as hereinafter defined, immediately
upon written notice to the Executive. For purposes of this Agreement, "Cause"
shall mean (A) proven dishonesty of the Executive detrimental to the best
interests of the Company or any of its subsidiaries or conviction of the
Executive of a crime which constitutes a felony, (B) any material act or
omission by the Executive during the Term involving willful malfeasance or gross
negligence in the performance of her duties hereunder, (C) repeated failure of
the Executive to follow the reasonable instructions of the Board (other than
inattention or neglect resulting from illness or disability of the Executive)
which inattention and neglect does not cease within fifteen days after written
notice thereof specifying the details of such conduct is given by the Board to
the Executive or (D) material breach by the
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Executive of any material provision of this Agreement (provided, however, that
if such breach is curable and is remedied to the reasonable satisfaction of the
Board within fifteen days after written notice thereof specifying the details of
such breach is given by the Board to the Executive, such breach shall not fall
within the definition of "Cause" for purposes of this Subsection (D)). During
the Term, the Executive shall be entitled to only one such notice and right to
cure for any single act or event. If the Executive's employment is terminated
for Cause, the Executive shall be entitled to receive only the unpaid portion of
the Base Salary then in effect which has accrued to the date of termination.
(b) Termination By Reason of Permanent Disability. If at any
time during the Term an independent licensed physician selected by the Board
determines that the Executive has been or will be unable, as a result of
physical or mental illness or incapacity, to perform her 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 Executive's employment
hereunder may be terminated by the Board upon thirty days' written notice to the
Executive. If the Executive's employment is terminated by reason of Permanent
Disability, the Executive shall be entitled to receive only the sum of (x) the
unpaid portion of the Base Salary then in effect which has accrued to the date
of termination plus (y) an amount equal to six months of the Executive's Base
Salary plus (z) an amount equal to a pro rata portion of the Bonus payable
pursuant to Section 4(b) hereof assuming that the Financial Results of the
Company for the then current Applicable Period equal exactly 100% of the EBITDA
Target for such Applicable Period, with such pro rata portion based on the
actual number of days during such Applicable Period that Executive was employed
by the Company. Such amounts due shall be paid within thirty (30) days after any
termination due to a Permanent Disability and shall be in lieu of any other
payment to which the Executive may be otherwise entitled.
(c) Termination By Reason of Death. The Executive's employment
hereunder shall automatically terminate on the date of her death. If the
Executive's employment is so terminated by her death, the Company shall pay to
the Executive's estate in addition to the unpaid portion of the Base Salary then
in effect through date of Executive's death the sum of (y) an amount equal to
six months of the Executive's Base Salary plus (z) an amount equal to a pro rata
portion of the Bonus payable pursuant to Section 4(b) hereof assuming that the
Financial Results of the Company for the then current Applicable Period equal
exactly 100% of the EBITDA target for such Applicable Period, with such pro rata
portion based on the actual number of days during such Applicable Period that
Executive was employed by the Company. Any amounts due shall be paid within
thirty (30) days after the date of her death if a personal representative has
been appointed by the end of such thirty (30) day period or, if a personal
representative has not been appointed by the end of such thirty (30) day period,
promptly after a personal representative has been appointed. All such
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amounts payable pursuant to this Section 6(c) shall be in lieu of any other
payment to which the Executive may otherwise be entitled.
(d) Termination Without Cause. The Board may terminate the
Executive's employment hereunder at any time for any reason without Cause in
which case the Executive shall be entitled to receive an amount (the "Severance
Amount") equal to the sum of (x) the Base Salary then in effect for the balance
of the Non-Compete Period (as defined below in Section 7(a)) plus (y) an amount
equal to the Bonus payable pursuant to Section 4(b) hereof based upon the actual
Financial Results of the Company for the remainder of the Non-Compete Period.
For purposes of determining the Bonus payable during the remainder of the
Non-Compete Period, it shall first be measured in respect of the Applicable
Period first ended during the remainder of the Non-Compete Period and thereafter
in respect of each succeeding Applicable Period that commences during the
Non-Compete Period. The Severance Amount shall be in lieu of any other severance
payment to which Executive may be otherwise entitled under any other severance
plan maintained by the Company. The Base Salary portion of the Severance Amount
shall be paid in accordance with the Company's normal payroll practice over the
balance of the Non-Compete Period. For each Applicable Period within the
Non-Compete Period, the Bonus portion of the Severance Amount shall be paid
within thirty days of the filing with the SEC of the Company's financial
statements covering such Applicable Period.
(e) Change of Control. This Agreement may be assigned in
connection with a Change of Control (as defined below) as provided in Section
10(a) hereof. In the event of a Change of Control:
(i) the Executive shall have no obligation to move to a
new work location that is more than 50 miles from the
Executive's principal work location immediately prior to such
Change of Control;
(ii) the amount of Base Salary set forth in Section 4(a)
hereof and the Bonus opportunities set forth in Section 4(b)
hereof shall not be subject to reduction;
(iii) the Executive's title, duties and responsibilities
as set forth in Section 3(a) hereof shall not be subject to
reduction; and
(iv) the Executive's reasonable, documented business
expenses shall continue to be reimbursed in a manner
consistent with the Company's reimbursement practice prior to
such Change of Control.
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<PAGE>
Following a Change of Control, the failure by the Company (or its successor or
assign) to comply with any of subparagraphs (i)-(iv) shall permit the Executive
to terminate this Agreement for "Good Reason", on written notice to the Company
(or its successor or assign). In the event the Executive terminates this
Agreement for Good Reason, the Executive shall be entitled to receive the
Severance Amount. The Severance Amount shall be in lieu of any other severance
payment to which the Executive may otherwise be entitled under any other
severance plan maintained by the Company (or its successor or assign). The
Severance Amount shall be paid in accordance with Section 6(d) hereof.
For purposes of this Agreement, a "Change of Control" shall mean (i)
the sale, exchange or other disposition of the issued and outstanding shares of
Common Stock of the Company or the merger, consolidation or other business
combination of the Company and/or its subsidiaries in a single transaction or a
series of related transactions after which the shareholders of the Company on
the date immediately prior to the single transaction or first transaction of the
series own less than 50% of the outstanding shares of voting common stock of the
Company or any surviving corporation in any such single transaction or series of
related transactions, or (ii) the sale or transfer of all or substantially all
of the assets of the Company and its subsidiaries taken as a whole, to a person
or entity other than the Company or its wholly-owned subsidiaries; provided,
that any merger, consolidation, dissolution, sale of substantially all the
assets or other similar transaction consummated in connection with the initial
public offering of the Company's common stock shall not constitute a "Change of
Control" hereunder.
7. Covenants of the Executive.
(a) Non-Competition. During the Non-Compete Period (as defined
below), the Executive shall not, directly or indirectly, be associated with any
entity, whether as a director, officer, employee, agent, consultant, partner,
owner, shareholder, member, independent contractor or otherwise, that is then
engaged in a Restricted Business (as defined below), including any "Platform",
as defined in Section 8 hereof, other than the Company and its subsidiaries. A
"Restricted Business" means any business or venture engaged in the manufacture,
marketing, distribution or sale of food products (but excluding beverages) for
human consumption. The "Non-Compete Period" shall commence as of the Effective
Date and remain in effect through the Term and thereafter until the earlier of
(x) the second anniversary of the Effective Date or (y) the first anniversary of
the date of hire of a Chief Executive Officer of the Company other than the Ian
R. Wilson.
(b) Non-Solicitation of Employees of the Employer. Until the
end of the Non-Compete Period, the Executive shall not, and shall cause each
business or entity with which she is or shall become associated in any capacity
not to, solicit for employment
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<PAGE>
or employ any person who is then employed in a professional or managerial
position by the Company, its subsidiaries or affiliates.
(c) Confidentiality. The Executive agrees and acknowledges
that the Confidential Information (as defined below) of the Company and its
subsidiaries 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. Based on the foregoing, the
Executive agrees to undertake the following obligations with respect to such
Confidential Information:
(i) the Executive agrees to keep any and all
Confidential Information in trust for the exclusive use and
benefit of the Company and its subsidiaries;
(ii) the Executive agrees that, except as required by
applicable law or as authorized in writing by the Board, she
will not at any time during or after the termination of her
employment hereunder, disclose, directly or indirectly, any
Confidential Information of the Company or any of its
subsidiaries;
(iii) the Executive agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure
that all Confidential Information is kept confidential for the
exclusive use and benefit of the Company and its subsidiaries;
and
(iv) the Executive agrees that, upon termination of her
employment hereunder or at any other time that the Company may
in writing so request, she will promptly deliver to the
Company all materials constituting Confidential Information
(including all copies thereof) that are in her possession or
under her control. The Executive further agrees, that if
requested by the Company, to return any Confidential
Information pursuant to this subparagraph (iv), she will not
make or retain any copy or extract from such materials.
For purposes of this Section 7(c), "Confidential Information" means
any and all information developed by or for the Company or any of its
subsidiaries of which the Executive gains or has acquired knowledge during or
prior to the Term by reason of her affiliation with the Company, its
subsidiaries or any predecessor that is (A) not generally known in any industry
in which the Company or any of its subsidiaries is or may become engaged or (B)
not publicly available. Confidential Information includes, but is not limited
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<PAGE>
to, any and all information developed by or for the Company or any of its
subsidiaries 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, together with all written, graphic
and other materials relating to all or any part of the same.
8. Unrelated Business Ventures. In addition to and not in limitation
of her obligations under Section 7 hereof:
(a) The Company acknowledges that the Executive is a member of
Dartford Partnership L.L.C. ("Dartford") and that Dartford and its members
provide management and other services to business ventures or groups of
affiliated business ventures (each, a "Platform"). On the date hereof, Dartford
and its members provide such services to (i) the Company and its subsidiaries
and (ii) the Windy Hill Pet Food Company group. The Company acknowledges and
agrees that the performance by the Executive or Dartford of such services for or
on behalf of a Platform other than the Company and its subsidiaries shall not
constitute a breach of this Agreement so long as the Executive complies with the
provisions of Section 7 and the remaining provisions of this Section 8.
(b) The Company and the Executive agree that the Executive
will limit her business ventures to two Platforms for the period (the
"Restricted Period") commencing on the date hereof and ending on the later of
(x) the first anniversary of the date hereof and (y) the date the Company
initiates a search to hire a person (other than Ian R. Wilson) who is expected
to join the Company either as its Chief Executive Officer or in another capacity
with the expectation that such person will become Chief Executive Officer. In
the event that during the Restricted Period any management services agreement
between Dartford and a member company of one of its then existing Platforms
terminates, the Executive shall have the right to engage in business activities
with a new Platform; provided, that the aggregate number of Platforms for which
the Executive provides services at any one time during the Restricted Period
shall not exceed two; and, provided, further, that any such new platform shall
not be in a business engaged in the manufacture, marketing, distribution or sale
of food products (but excluding beverages) for human consumption.
(c) The restrictions set forth in this Section 8 shall
terminate and be of no further force and effect on the expiration of the
Restricted Period or, if earlier, on the Termination Date so long as such
Termination Date does not arise from the termination of the Executive's
employment hereunder by reason of her resignation (or deemed resignation)
without the consent of the Board or from Termination for Cause; provided, that
the Executive's liability for breaches under this Section 8 shall survive any
termination of this Agreement or Executive's employment hereunder insofar as
such liability relates to actions
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<PAGE>
taken by the Executive prior to such termination; and, provided, further, that
nothing in this Section 8 modifies or reduces the obligations of the Executive
under Section 7 hereof.
9. Certain Adjustments. In the event the Company hires a Chief
Executive Officer to replace Ian R. Wilson in such capacity, the Company and the
Executive agree to review and renegotiate the terms of this Agreement (including
without limitation the Base Salary and Bonus provisions hereof), with any
adjusted terms of this Agreement to be mutually acceptable to the Board, on the
one hand, and the Executive, on the other hand.
10. Successors; Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Executive, in
connection with a Change of Control. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns.
(b) The Executive. Neither this Agreement nor any right or
interest hereunder may be assigned by the Executive, her beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 10 shall preclude (i) the Executive from
designating a beneficiary to receive any benefit payable hereunder upon her
death, or (ii) the executors, administrators, or other legal representatives of
the Executive or her estate from assigning any rights hereunder to distributees,
legatees, beneficiaries, testamentary trustees or other legal heirs of the
Executive.
11. Indemnification. The Company shall indemnify, in the manner and
to the fullest extent permitted by applicable law and the by-laws of the
Company, the Executive (or the estate of the Executive) in the event the
Executive (or the Executive's estate) was or is a party to, or is threatened to
be made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of the Company, and whether civil,
criminal, administrative, investigative or otherwise, by reason of the fact that
the Executive is or was a director, officer, employee, or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) ("Expenses"),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding (including
without limitation in connection with the defense or settlement of such action,
suit or proceeding). To the extent and in the manner provided by applicable law,
any such Expenses shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding, even if the Executive is alleged
to have not met the applicable standard of conduct required under this Section
or is alleged to have committed conduct so that, if true,
- 10 -
<PAGE>
the Executive (or the Executive's estate) would not be entitled to
indemnification under this Section, upon receipt of an undertaking, which need
not be secured, by or on behalf of such person to repay such amount if it shall
ultimately be determined that she is not entitled to be indemnified by the
Company as authorized in this Section. Unless otherwise permitted by applicable
law, the indemnification provided for herein shall be made only as authorized in
the specific case upon a determination, made in the manner provided by
applicable law, that indemnification of the Executive (or the Executive's
estate) is proper in the circumstances. The Company's obligations under this
Section 11 shall survive any termination of this Agreement or any termination of
Executive's employment by the Company.
12. 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.
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
(ii) If to the Executive:
1765 Broadway, Apt. 5
San Francisco, CA 94109
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.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
14. Entire Agreement. This Agreement contains the entire agreement
of the parties relating to the subject matter hereof and supersedes all prior
agreements, representations, warranties and understandings, written or oral,
with respect thereto.
15. 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
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<PAGE>
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.
16. Remedies.
(a) Injunctive Relief. The Executive acknowledges and agrees
that the covenants and obligations of the Executive contained in Section 7 and
Section 8 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 that a breach of any of the terms of such covenants and
obligations will cause the Company irreparable injury for which adequate
remedies at law are not available. Therefore the Executive agrees that the
Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Executive from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies
under this Section 16 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
17. 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.
18. Survival. The obligations of the Company to pay any amounts due
to Executive after termination of this Agreement, and the obligations of
Executive under Sections 7 and 8 hereof, shall survive any termination of this
Agreement to the extent such obligations do not terminate upon such termination
in accordance with the terms thereof.
19. 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 and with Board approval. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
- 12 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
AURORA FOODS INC.
By:
--------------------------------
Name:
Title:
-----------------------------------
M. Laurie Cummings
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<PAGE>
Exhibit 10.20
ST&B DRAFT
6/18/98
================================================================================
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JUNE __, 1998
AMONG
AURORA FOODS INC.,
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT,
NATIONAL WESTMINSTER BANK PLC,
AS SYNDICATION AGENT
AND
SWISS BANK CORPORATION,
AS DOCUMENTATION AGENT
================================================================================
<PAGE>
AURORA FOODS INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
----
SECTION 1.
DEFINITIONS.............................. 2
1.1 Certain Defined Terms................................................ 2
1.2 Accounting Terms Utilization of GAAP for Purposes of
Calculations Under Agreement................................. 38
1.3 Other Definitional Provisions................................ 39
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS................................. 39
2.1 Commitments; Loans........................................... 39
2.2 Interest on the Loans........................................ 46
2.3 Fees......................................................... 50
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments;
Application of Proceeds of Collateral and Payments
under Guaranties............................................. 50
2.5 Use of Proceeds.............................................. 58
2.6 Special Provisions Governing Eurodollar Rate Loans........... 59
2.7 Increased Costs; Taxes; Capital Adequacy..................... 61
2.8 Obligation of Lenders and Issuing Lenders to Mitigate........ 66
SECTION 3.
LETTERS OF CREDIT.......................................................... 66
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein....................................... 66
3.2 Letter of Credit Fees........................................ 69
3.3 Drawings and Payments and Reimbursement of Amounts Paid Under
Letters of Credit............................................ 70
3.4 Obligations Absolute......................................... 72
3.5 Indemnification; Nature of Issuing Lender's Duties........... 73
3.6 Increased Costs and Taxes Relating to Letters of Credit...... 74
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT.................................. 75
4.1 Conditions to Term Loans and Revolving Loans................. 75
4.2 Conditions to All Loans...................................... 80
4.3 Conditions to Letters of Credit.............................. 81
<PAGE>
Page
----
SECTION 5.
REPRESENTATIONS AND WARRANTIES............................................. 81
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries.................................... 81
5.2 Authorization of Borrowing, etc.............................. 82
5.3 Financial Condition.......................................... 84
5.4 No Material Adverse Change; No Restricted Junior Payments.... 85
5.5 Title to Properties; Liens; Intellectual Property............ 85
5.6 Litigation: Adverse Facts................................... 86
5.7 Payment of Taxes............................................. 87
5.8 Performance of Agreements; Materially Adverse
Agreements; Material Contracts............................... 87
5.9 Governmental Regulation...................................... 87
5.10 Securities Activities........................................ 88
5.11 Employee Benefit Plans....................................... 88
5.12 Certain Fees................................................. 88
5.13 Environmental Protection..................................... 88
5.14 Employee Matters............................................. 90
5.15 Solvency..................................................... 90
5.17 Related Agreements........................................... 91
5.18 Disclosure................................................... 91
5.19 Subordination of Seller Notes................................ 92
5.20 Year 2000 Matters............................................ 92
SECTION 6.
AFFIRMATIVE COVENANTS...................................................... 92
6.1 Financial Statements and Other Reports....................... 92
6.2 Corporate Existence, etc..................................... 97
6.3 Payment of Taxes and Claims; Tax Consolidation............... 98
6.4 Maintenance of Properties; Insurance......................... 98
6.5 Inspection; Lender Meeting................................... 98
6.6 Compliance with Laws, etc.................................... 99
6.7 Environmental Disclosure and Inspection...................... 99
6.8 Company's Remedial Action Regarding Hazardous Materials......100
6.9 Execution of Subsidiary Guaranty and Subsidiary Security
Agreements by Subsidiaries and Future Subsidiaries...........101
6.10 Conforming Leasehold Interests; Matters Relating to
Additional Real Property Collateral......... ................101
6.11 Interest Rate Protection.....................................104
6.12 Further Assurances...........................................104
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<PAGE>
Page
----
SECTION 7.
NEGATIVE COVENANTS.........................................................104
7.1 Indebtedness.................................................105
7.2 Liens and Related Matters....................................106
7.3 Investments; Joint Ventures..................................107
7.4 Contingent Obligations.......................................108
7.5 Restricted Junior Payments...................................109
7.6 Financial Covenants..........................................110
7.7 Restriction on Fundamental Changes; Asset Sales..............114
7.8 Sales and Lease-Backs........................................115
7.9 Transactions with Shareholders and Affiliates................116
7.10 Disposal of Subsidiary Stock.................................116
7.11 Conduct of Business..........................................116
7.12 Amendments or Waivers of Certain Related Agreements;
Amendments of Documents Relating to Subordinated
Indebtedness; Designation of "Designated Senior
Indebtedness"; Preferred Stock...............................117
7.13 Fiscal Year..................................................118
SECTION 8.
EVENTS OF DEFAULT..........................................................118
8.1 Failure to Make Payments When Due............................118
8.2 Default in Other Agreements..................................118
8.3 Breach of Certain Covenants..................................118
8.4 Breach of Warranty...........................................119
8.5 Other Defaults Under Loan Documents..........................119
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.........119
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc...........119
8.8 Judgments and Attachments....................................120
8.9 Dissolution..................................................120
8.10 Employee Benefit Plans.......................................120
8.11 Change in Control............................................120
8.12 Invalidity of Guaranties.....................................121
8.13 Failure of Security..........................................121
8.14 Termination or Breach of Certain Transition Agreements,
Log Cabin Transition Agreements and Duncan Hines
Transaction Agreements.......................................121
8.15 Conduct of Business By Company...............................121
8.16 Default Under Subordination Provisions.......................122
SECTION 9.
AGENTS.....................................................................123
9.1 Appointment..................................................123
9.2 Powers; General Immunity.....................................124
9.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness................................126
9.4 Right to Indemnity...........................................126
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<PAGE>
Page
----
9.5 Successor Agents and Swing Line Lender.......................126
9.6 Collateral Documents.........................................127
SECTION 10.
MISCELLANEOUS..............................................................127
10.1 Assignments and Participations in Loans, Letters of Credit...127
10.2 Expenses.....................................................131
10.3 Indemnity....................................................131
10.4 Set-Off; Security Interest in Deposit Accounts...............132
10.5 Ratable Sharing..............................................132
10.6 Amendments and Waivers.......................................133
10.7 Independence of Covenants....................................135
10.8 Notices......................................................135
10.9 Survival of Representations, Warranties and Agreements.......135
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative........136
10.11 Marshalling; Payments Set Aside..............................136
10.12 Severability.................................................136
10.13 Obligations Several; Independent Nature of Lenders' Rights...136
10.14 Headings.....................................................136
10.15 Applicable Law...............................................137
10.16 Successors and Assigns.......................................137
10.17 Consent to Jurisdiction and Service of Process...............137
10.18 Waiver of Jury Trial.........................................138
10.19 Confidentiality..............................................138
10.20 Counterparts; Effectiveness..................................139
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<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 REVOLVING NOTE
VI FORM OF SWING LINE NOTE
VII FORM OF SUBSIDIARY GUARANTY
VIII FORM OF PLEDGE AGREEMENT
IX FORM OF SECURITY AGREEMENT
X FORM OF VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
XI FORM OF COMPLIANCE CERTIFICATE
XII FORM OF OPINION OF COUNSEL TO LOAN PARTIES
XIII FORM OF OPINION OF SIMPSON THACHER & BARTLETT
XIV FORM OF OPINION OF LOCAL COUNSEL
XV FORM OF ASSIGNMENT AGREEMENT
XVI FORM OF PERMITTED SELLER NOTE
XVII FORM OF CERTIFICATE RE NON-BANK STATUS
XVIII FORM OF COLLATERAL ACCOUNT AGREEMENT
XIX FORM OF COLLATERAL ACCESS AGREEMENT
XX FORM OF MORTGAGE
-v-
<PAGE>
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES; LENDING OFFICES
4.1C CORPORATE AND CAPITAL STRUCTURE; MANAGEMENT
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)
5.5E OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL
CONTRACTS (VAN DE KAMP'S)
5.8 MATERIAL CONTRACTS
7.6E STIPULATED CONSOLIDATED EBITDA AND CONSOLIDATED CAPITAL
EXPENDITURES
-vi-
<PAGE>
AURORA FOODS INC.
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED CREDIT AGREEMENT is dated as of June
__, 1998 and entered into by and among AURORA FOODS INC., a Delaware corporation
("Company"), 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"), NATIONAL WESTMINSTER BANK PLC, as
syndication agent (in such capacity, "Syndication Agent") and SWISS BANK
CORPORATION, as documentation agent (in such capacity, "Documentation Agent").
R E C I T A L S
WHEREAS, Company (capitalized terms used in these recitals without
definition shall have the respective meanings assigned in subsection 1.1
hereof), Aurora Foods Holdings Inc. ("Holdings") and certain financial
institutions (the "Existing Lenders") are parties to the Second Amended and
Restated Credit Agreement, dated as of January 16, 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 Duncan Hines
Acquisition Agreement;
WHEREAS, Company proposes to (i) issue equity of Company in an
initial public offering (the "Initial Public Offering"), (ii) issue in an rule
144A private placement or a public offering at least $200,000,000 principal
amount of New Subordinated Notes and (iii) refinance certain of its existing
Indebtedness (collectively, the "Transaction").
WHEREAS, as at the date of the Initial Public Offering, Company will
be the survivor of mergers involving A Foods, Holdings, Company, VDK Holdings,
and Van de Kamp's (collectively, the "Merged Companies").
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 $225,000,000 (the "Term Loan Facilities")
and a revolving credit facility in an aggregate principal amount of $175,000,000
(the "Revolving Credit Facility") which, together with Equity Proceeds from the
Initial Public Offering and the proceeds from the issuance of the New
Subordinated Notes, will be used (i) to refinance existing Indebtedness under
the Existing Credit Agreement and under the VDK Credit Agreement, (ii) to reduce
the VDK Subordinated Notes, (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>
2
WHEREAS, 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, 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, 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:
"A Foods" means A Foods Inc., a [Delaware] corporation.
"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>
3
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 Third Amended and Restated Credit Agreement
dated as of June __, 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 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 under the heading "Ratio of Consolidated Total Debt to
Consolidated EBITDA"; provided 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 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
<PAGE>
4
are Eurodollar Rate Loans and with respect to the Commitment Fee shall be
0.50%, and provided further that for the period until September 30, 1998,
the Applicable Margin shall be no less than the Applicable Margin
corresponding to Level 4, as set forth on Annex A.
"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 XV 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.
"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.
<PAGE>
5
"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, fundings, 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 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 XVII annexed hereto delivered by a Lender to
Administrative Agent pursuant to subsection 2.7B(ii).
<PAGE>
6
"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 acknowledgement 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 XIX
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 XVIII 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 Van de Kamp's Patent and Trademark
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.
"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.
<PAGE>
7
"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
$0.01 per share.
"Compliance Certificate" means a certificate substantially in the
form of Exhibit XI 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 Company 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 Company 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 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.
<PAGE>
8
"Consolidated Current Assets" means, as at any date of
determination, the total assets of Company 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 Company 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, (B) 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 foregoing
as determined on a consolidated basis for Company 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
<PAGE>
9
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 Company 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 Company 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
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 Company or any of its Subsidiaries.
"Consolidated Interest Expense" means, for any period, the net
interest expense of Company and its Subsidiaries for such period (net of
any interest income of Company and its Subsidiaries during such period) as
determined on a consolidated basis in conformity with GAAP.
<PAGE>
10
"Consolidated Net Income" means, for any period, the net income (or
loss) of Company 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 Company 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 Company 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 Company 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 Company 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 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
<PAGE>
11
(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 subclauses (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.
"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.
<PAGE>
12
"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 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.
"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.
<PAGE>
13
"Effective Date" means the date (on or before [June 30], 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.
"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,
<PAGE>
14
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. ss. 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.,), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the
Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. ss.136 et seq.), the Occupational Safety and
Health Act (29 U.S.C. ss. 651 et seq.), and the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. ss. 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 Company 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 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
<PAGE>
15
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 (l) 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 401(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.
"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 Indentures, 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.
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16
"Existing Subordinated Note Indentures" means the indentures
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
indentures 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 (a) the 9-7/8% Series B Senior
Subordinated Notes of Company due 2007 issued on February 10, 1997 and (b)
the 9- 7/8% Series D Senior Subordinated Notes of the Company due 2007
issued on July 1, 1997 pursuant to the Existing Subordinated Note
Indentures 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
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.
<PAGE>
17
"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 Company 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).
"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.
<PAGE>
18
"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 Subsidiary Guaranty and
any other guaranty of the Obligations, and "Guaranties" means the
Subsidiary Guaranty and each other guaranty of the Obligations,
collectively.
"Guarantors" means 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 Recitals to
this Agreement.
"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
<PAGE>
19
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.
"Initial Public Offering" has the meaning assigned to that term in
the Recitals to this Agreement.
"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, the Duncan Hines
Intellectual Property and the Van de Kamp's Intellectual Property, each as
defined in subsections 5.5B, 5.5C, 5.5D and 5.5E, 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 December 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 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.
<PAGE>
20
"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 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,
the Duncan Hines Patent and Trademark Security Agreement and the Van de
Kamp's 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.
<PAGE>
21
"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 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(iii) 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 3.1C, 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.
<PAGE>
22
"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 Company 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), 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 Company and any Subsidiary
Guarantors, and "Loan Parties" means 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.
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23
"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 in effect on the Effective Date, 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.
"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.
<PAGE>
24
"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 Company 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.]
"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
substantially in the form of Exhibit XX annexed hereto, and "Mortgages"
means all such instruments collectively .
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25
"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 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 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 _____% Series E Senior
Subordinated Notes of Company due 2008 issued pursuant to the New
Subordinated Note Indenture in the form delivered to Agents and Lenders on
or prior to the Effective Date with
<PAGE>
26
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, 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 2.1B 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.
"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 3.1B(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.
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27
"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" means The Procter & Gamble Company, an Ohio corporation.
"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).
"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
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28
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);
(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 XV 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
<PAGE>
29
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 Third Amended and Restated
Pledge Agreement by and among Company, the Subsidiary Guarantors and
Administrative Agent dated as of the Effective Date and substantially in
the form of Exhibit VIII 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.
"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 and Tranche A 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.
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30
"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 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(iii).
"Register" has the meaning assigned to that term in subsection 2.1D.
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31
"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, 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 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 Company
now or hereafter outstanding, and (iv) any payment or prepayment of
principal of, premium, if any, or
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32
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(ii) and "Revolving
Loan Commitments" means such commitments of all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means June 30, 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 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 2.1A(ii).
"Revolving 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 Revolving Loan
Commitment and Revolving Loans of any Lender, 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.
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33
"S&P" means Standard & Poor's Ratings Service, or any successor
thereto.
"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 Third Amended and Restated Security
Agreement entered into by and among Company, the Subsidiary Guarantors and
Administrative Agent dated as of the Effective Date and substantially in
the form of Exhibit IX 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.
"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 Company 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
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34
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, the VDK Subordinated Note Documents and the
New Subordinated Note Documents.
"Subordinated Note Indentures" means collectively the Existing
Subordinated Note Indentures, the VDK Subordinated Note Documents and the
New Subordinated Note Indenture.
"Subordinated Notes" means collectively the Existing Subordinated
Notes the VDK 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 7.1(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
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35
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 VII 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 9.1B.
"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(iii).
"Swing Line Loans" means the Loans made by Swing Line Lender
pursuant to subsection 2.1A(iii).
"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
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36
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 to Company pursuant to subsections 2.1A(i),
2.1A(ii) and 2.1A(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 made by Lenders to
Company pursuant to subsections 2.1A(i), 2.1A(ii) and 2.1A(iii),
respectively.
"Term Notes" means one or more of the Tranche A Term Notes.
"Title Company" means one or more title insurance companies
reasonably satisfactory to Administrative Agent.
"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 2.1A(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
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37
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.
"Transaction" has the meaning assigned to that term in the Recitals
to this Agreement.
"Transaction Costs" means the fees, costs and expenses payable by
Company and its Subsidiaries [on or before the Effective Date] in
connection with the Transaction.
"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.
"Van de Kamp's" means Van de Kamp's, Inc., a Delaware corporation.
"Van de Kamp's Patent and Trademark Security Agreement" means the
Van de Kamp's 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 X
annexed hereto, as such Van de
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38
Kamp's Patent and Trademark Security Agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time.
"VDK Credit Agreement" means the Second Amended and Restated Credit
and Guarantee Agreement, dated as of July 9, 1996, among VDK Holdings, Van
de Kamp's, the banks and other financial institutions from time to time
parties thereto, and Chase, as agent, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"VDK Holdings" means VDK Holdings, Inc., a Delaware corporation.
"VDK Subordinated Note Documents" means the VDK Subordinated Note
Indenture, the VDK Subordinated Notes and each other document executed in
connection with the VDK 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.
"VDK Subordinated Note Indenture" means the indenture pursuant to
which the VDK 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.
"VDK Subordinated Notes" means the 12% Series __ Senior Subordinated
Notes of Van de Kamp's due 2005 issued on September 15, 1995 pursuant to
the VDK Subordinated Note Indenture in the form delivered to the 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.
"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
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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.
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)
and 2.1A(ii) and Swing Line Lender hereby agrees to make the Swing Line Loans as
described in subsection 2.1A(iii).
(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 $225,000,000; 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 2.1A(i) and subsequently repaid or prepaid may
not be reborrowed.
(ii) 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
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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 $175,000,000; 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. Company may
borrow no more than $5,000,000 under the Revolving Loan Commitments on the
Effective Date. Amounts borrowed under this subsection 2.1A(ii) 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.
(iii) 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 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
$10,000,000; 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(iii) 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;
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(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 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(iii) 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
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42
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
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(iii) 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)
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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.
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
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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(iii) 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 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.
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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 an 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 10.1B(ii). 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.
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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 and (b) a
Revolving Note substantially in the form of Exhibit V 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 VI
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 guarantied 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 2.1B. The basis for 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.
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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 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 June 30, 2005 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;
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(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).
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)
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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 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.
<PAGE>
50
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 September 30, 1998, and on the Revolving Loan Commitment
Termination Date.
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 Term Loans. Company shall make principal
payments on the Term Loans in installments on the dates and in the amounts set
forth below:
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51
- -------------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TERM LOANS
- -------------------------------------------------------------------
December 31, 1998 $5,000,000
- -------------------------------------------------------------------
March 31, 1999 $5,000,000
June 30, 1999 $5,000,000
September 30, 1999 $5,000,000
December 31, 1999 $5,000,000
- -------------------------------------------------------------------
March 31, 2000 $5,000,000
June 30, 2000 $5,000,000
September 30, 2000 $7,500,000
December 31, 2000 $7,500,000
- -------------------------------------------------------------------
March 31, 2001 $7,500,000
June 30, 2001 $7,500,000
September 30, 2001 $7,500,000
December 31, 2001 $7,500,000
- -------------------------------------------------------------------
March 31, 2002 $7,500,000
June 30, 2002 $7,500,000
September 30, 2002 $10,000,000
December 31, 2002 $10,000,000
- -------------------------------------------------------------------
March 31, 2003 $10,000,000
June 30, 2003 $10,000,000
September 30, 2003 $10,000,000
December 31, 2003 $10,000,000
- -------------------------------------------------------------------
March 31, 2004 $10,000,000
June 30, 2004 $10,000,000
September 30, 2004 $12,500,000
December 31, 2004 $12,500,000
- -------------------------------------------------------------------
March 31, 2005 $12,500,000
June 30, 2005 $12,500,000
===================================================================
provided that the scheduled installments of principal of the Term Loans set
forth above shall be reduced in connection with any voluntary or mandatory
prepayments of the Term Loans in accordance with subsection 2.4C; and provided
further, that the final installment payable by Company in respect of the 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 Term Loans.
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52
(ii) 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:
------------------------------------------------------------
SCHEDULED REDUCTION
DATE OF REVOLVING LOAN
COMMITMENTS
------------------------------------------------------------
June 30, 2005 $175,000,000
------------------------------------------------------------
; 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>
53
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 (such Net Cash Proceeds that are reinvested or to
be reinvested not to exceed $45,000,000 in aggregate amount in any Fiscal
Year)), 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
<PAGE>
54
therewith deliver to Administrative Agent an Officer's Certificate
demonstrating the derivation of the additional Net Cash Proceeds resulting
in such deficit.
(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 rights or remedies of
Agents or Lenders.
(c) Prepayments and Reductions Due to Issuance of Equity Securities.
At any time the Leverage Ratio is greater than 3.25:1.00, on or prior to
the first Business Day after receipt by 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 50% of 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 Company 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.
(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 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
<PAGE>
55
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 Term Loans pro rata and shall be applied to the remaining
installments thereof on a pro rata basis to the full extent thereof.
(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 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
<PAGE>
56
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.
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 Term Loans pursuant to
subsection 2.4B(i) or 2.4B(iii) shall be applied to prepay the Term Loans on a
pro rata basis in accordance with the outstanding principal amounts thereof. Any
mandatory prepayments applied to the 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 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.
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
<PAGE>
57
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
(c) thereafter, to the extent of any excess of such payments, to the
payment 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).
<PAGE>
58
(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 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, the Equity Proceeds
from the Initial Public Offering described in subsection 4.1C and the proceeds
from the New Subordinated Notes, shall be applied to (i) refinance indebtedness
under the Existing Credit Agreement and the VDK Credit Agreement and (ii) 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 (i) 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
<PAGE>
59
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 and (ii) to the payment of premiums and related costs and expenses to
repay the VDK Subordinated Notes.
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 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
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60
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 Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or convert
such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's
obligation to maintain its outstanding Eurodollar Rate Loans, as the case may be
(the "Affected Loans"), shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company pursuant
to a Notice of 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)
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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.
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
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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 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.
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(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;
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
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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 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,
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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, 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.
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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 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(ii), and that Swing Line Lender
make Swing Line Loans pursuant to subsection 2.1A(iii), 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
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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;
(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
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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 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.
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(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:
(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 (y) 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 December 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.
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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 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 rights 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.
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(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
right 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 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
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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.
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
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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).
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").
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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.
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
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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.
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:
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A. Company Documents.
On or before the Effective Date, 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 the Transaction, this Agreement and the
other Loan Documents 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 [December 31, 1997], no
Material Adverse Effect (in the opinions of Administrative Agent or Lenders)
shall have occurred.
C. Corporate and Capital Structure; Capitalization of Company;
Equity Contribution.
(i) Corporate Structure. The corporate organizational structure, capital
structure and ownership of Company and its Subsidiaries shall be as set forth on
Schedule 4.1C annexed hereto.
(ii) Capital Structure and Ownership: Capitalization of Company. The
capital structure and ownership of Company, both before and after giving effect
to the Transaction, shall be as set forth on Schedule 4.1C annexed hereto.
(iii) Equity Contribution. On or before the Effective Date, Company shall
have received no less than $250,000,000 in Equity Proceeds from the Initial
Public Offering.
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D. Issuance of New Subordinated Notes. On or before the Effective
Date, Company shall have issued and sold the New Subordinated Notes in an
aggregate amount of not less than $200,000,000 and Company shall have delivered
to Administrative Agent completed, correct and conformed copies of the New
Subordinated Notes, the Subordinated Note Indenture and the other principal New
Subordinated Note Documents, all in form and substance reasonably satisfactory
to the Administrative Agent. Company shall have provided evidence satisfactory
to Agents that the proceeds of the New Subordinated Notes have been irrevocably
committed, prior to the application of the proceeds of the Term Loans and the
Revolving Loans, to the refinancing of Indebtedness under the Existing Credit
Agreement and the VDK Credit Agreement.
E. Existing Liens; No Other Indebtedness Outstanding. All security
interests attaching to any of the assets of Van de Kamp's created to secure
obligations under any Indebtedness 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 4.1E, Loan Parties shall have
no Indebtedness outstanding other than Indebtedness permitted under the Loan
Documents.
F. Necessary Consents. Company shall have obtained all consents
necessary or advisable in connection with the Transaction, the Loan Documents
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
Transaction, 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.
G. Collateral Access Agreements. Administrative Agent shall have
received from Company Collateral Access Agreements in form and substance
satisfactory to Administrative Agent with respect to any facility which
equipment of Company is located on the Effective Date. Company shall not own
interest in any real property on the Effective Date other than the Mortgage
Property in Pennsylvania and Tennessee and its Leasehold Property interest in
its offices in Columbus, Ohio.
H. Perfection of Security Interests in Personal Property and Mixed
Collateral. 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
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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.
I. 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).
J. 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 XII 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.
K. Opinions of Agents' Counsel. Lenders shall have received (i)
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 XIII annexed hereto and as to such other
matters as Agents acting on behalf of Lenders may reasonably request and (ii)
originally executed copies of one or more favorable written opinions of
[__________________], local counsel to the Agents, dated as of the Effective
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Date, substantially in the form of Exhibit XIV annexed hereto and as to such
other matters as Agents acting on behalf of Lenders may request.
L. 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.
M. 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 Merged Companies for the years ending December 31 of
1996 and 1997, consisting of statements of direct revenues and expenses for such
years, (ii) unaudited financial statements of the Merged Companies as at March
31, 1998, 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 March 31, 1998, in reasonable detail,
and (iv) a pro forma consolidated balance sheet of Company and its Subsidiaries
as at June 30, 1998 prepared in accordance with GAAP and reflecting the
consummation of the Transaction, the related financings and the other
transactions contemplated by the Loan Documents and the New Subordinated Notes,
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 Company and Company as
at June 30, 1998, as adjusted as described in this clause (iv), assuming that
such events had occurred at such date.
N. 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 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.
O. 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.
P. 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
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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 2.1B, 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;
(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 Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing and that
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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
subsection 3.1B(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, 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.
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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 Company as
of the Effective Date after giving effect to the Transaction 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 Company 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 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.
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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 Company 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, 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 Company Common Stock and Subordinated Notes.
(i) Company Common Stock. The Company 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 Company 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
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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
Merged Companies for the years ended December 31, 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 Merged Companies as at March 31, 1998 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.
Company does not have (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 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 Company and its Subsidiaries taken as a whole.
(ii) The balance sheets of Company as at December 31, 1997 and March
31, 1998 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, 1997 through March 31, 1998, 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, 1997 through March 31, 1998
(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, 1997 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
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been no purchase or other acquisition of any business or property 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 December 31, 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. Company 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.
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 rights, 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 rights 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 5.5B 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,
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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 rights 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. Company has acquired 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 as "Van de Kamp's Intellectual
Property) under the VDK Credit Agreement, except as set forth on Schedule 5.5E
annexed hereto.
F. 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 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 Company 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 Company or any of its Subsidiaries or any
property of Company 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 Company 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
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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 Company 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 Company 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 Company or any of its Subsidiaries other than
those which are being actively contested by Company 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 Company 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 Company 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 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 Company 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
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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 Company 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. Company 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 Company 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 Company 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 Company 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.
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 Company 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;
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(ii) Company 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 Company and each of its Subsidiaries are in compliance with all
material terms and conditions of such Governmental Authorizations;
(iii) Neither Company 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. ss. 9604) or comparable
state laws, and, to the best knowledge of Company, none of the operations of
Company 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 Company 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 Company 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 Company nor any of its Subsidiaries has any material
contingent liability in connection with any Release of any Hazardous Materials
by Company or any of its Subsidiaries;
(vii) Neither Company nor any of its Subsidiaries nor, to the knowledge of
Company, any predecessor of Company 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 Company's 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 Company
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 Company nor any of its Subsidiaries nor, to the knowledge of
Company, any of their respective predecessors has disposed of any Hazardous
Materials in a
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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 Company 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 4.1, 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 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
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subsection 5.16A 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.
Company has delivered to Administrative Agent complete and correct
copies of each Related Agreement and of all exhibits and schedules thereto.
5.18 Disclosure.
The representations of Company 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 Company 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 Company or the
applicable Subsidiary, in the case of any document not furnished by Company 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
materials 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.
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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.
5.20 Year 2000 Matters.
Any reprogramming required to permit the proper functioning (but
only to the extent that such proper functioning would otherwise be impaired by
the occurrence of the year 2000) in and following the year 2000 of computer
systems and other equipment containing embedded microchips, in either case owned
or operated by Company or any of its Subsidiaries or used or relied upon in the
conduct of their business (including any such systems and other equipment
supplied by others or with which the computer systems of Company or any of its
Subsidiaries interface), and the testing of all such systems and other equipment
as so reprogrammed, will be completed by January 1, 1999. The costs to Company
and its Subsidiaries that have not been incurred as of the date hereof for such
reprogramming and testing and for the other reasonably foreseeable consequences
to them of any improper functioning of other computer systems and equipment
containing embedded microchips due to the occurrence of the year 2000 could not
reasonably be expected to result in a Default or Event of Default or to have a
Material Adverse Effect. Except for any reprogramming referred to above, the
computer systems of Company and its Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient for the conduct of their business as currently conducted.
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):
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(i) Monthly Financials: (a) as soon as available after fiscal
month-end June 1998 and July 1998, (b) as soon as available and in any
event within 45 days after fiscal month-end August 1998 and September 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(xiii),
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 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
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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 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
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95
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 Company or any of its Subsidiaries 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 Company or any of its
Subsidiaries to the public concerning material developments in the
business of Company 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
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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 Company or any of its Subsidiaries or any property of Company 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, Company or
any of its Subsidiaries equal to or greater than $500,000 and
promptly after request by Administrative Agent such 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
Company 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 Company 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;
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(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
Company and its Subsidiaries and all material insurance coverage planned
to be maintained by Company 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;
(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 Company 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 Company and its Subsidiaries (on a consolidated basis).
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98
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.
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 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
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.
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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 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
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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.
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.
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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, the Duncan Hines Patent and Trademark Security Agreement and
the Van de Kamp's 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 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.
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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 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;
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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) Copies 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 acknowledgement of receipt of written
notification from Administrative Agent (1) that such Mortgaged Property is
a Flood Hazard 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.
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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, 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 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 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
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 7.
<PAGE>
105
7.1 Indebtedness.
Company shall not, and shall not permit any of its 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) Company 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 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
<PAGE>
106
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) 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. Company shall not, and shall not permit any
of its 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 Company 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 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;
<PAGE>
107
(iv) Liens on any asset securing Indebtedness permitted by
Section 7.1(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.
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.
Company shall not, and shall not permit any of its respective
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
<PAGE>
108
(i) Company and its Subsidiaries may make and own Investments
in Cash Equivalents;
(ii) Company and its Subsidiaries may make intercompany loans
to the extent permitted under subsection 7.1(iv);
(iii) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted by subsection 7.6D;
(iv) Company and its Subsidiaries may make and own Investments
in connection with a Permitted Acquisition;
(v) 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.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) 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 7.1(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 (a)
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 and
(b) as required under subsection 6.11 herein;
(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
<PAGE>
109
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, the Duncan Hines Business and Van de Kamp's 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.
7.5 Restricted Junior Payments.
Company shall not, and shall not permit any of its 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 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); (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 as
contemplated by the Transaction to redeem or defease the Indebtedness under the
VDK Subordinated Note Documents; (vi) Company 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 (other than the VDK
Subordinated Note Documents), provided that (a) no Event of Default or Potential
Event of Default shall have occurred and be continuing or shall be caused
thereby, (b) Company shall be in compliance, on a pro forma
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110
basis giving effect thereto, with the covenants set forth in subsection 7.6
hereof, (c) the Senior Leverage Ratio (calculated on a pro forma basis giving
effect thereto) shall be less than 3.75:1.00 if such redemption or defeasance
shall occur in 1998 or 1999, less than 3.50:1.00 if such redemption or
defeasance shall occur in 2000 or 2001, and less than 3.25: 1.00 if such
redemption or defeasance shall occur thereafter, (d) after giving effect to any
such redemption or defeasance, the sum of (x) the amount of cash on hand of
Company plus (y) the amount by which the Revolving Credit Commitments exceed the
Total Utilization of the Revolving Loan Commitments, shall equal or exceed
$40,000,000 (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 (b), (c) and (d)) and (e) and the aggregate amount of such
redemption or defeasance, together with any other such redemption or defeasance
since the Effective Date, shall not exceed $100,000,000; and (vi) Company may
make dividends or other distributions, direct or indirect, on account of any
shares of any class of capital stock of Company; provided that (a) the Senior
Leverage Ratio (calculated on a pro forma basis giving effect thereto) shall be
less than 2.00:1.00 or (b) either of the publicly announced ratings S&P or
Moody's of the current senior unsecured, non-credit enhanced long term
Indebtedness of Company that has been publicly issued are BBB-or better or Baa3
or better, respectively, and the amount of such dividend shall not exceed 50% of
Company's cumulative positive net income.
7.6 Financial Covenants.
A. Minimum Consolidated Cash Interest Coverage Ratio. 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
TEST PERIOD CASH INTEREST COVERAGE
RATIO
- -------------------------------------------------------------------
6/30/98 - 12/31/98 2.00:1.00
- -------------------------------------------------------------------
1/01/99 - 12/31/99 2.00:1.00
- -------------------------------------------------------------------
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 - 6/30/05 2.50:1.00
===================================================================
<PAGE>
111
B. Maximum Leverage Ratio. 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 5.50:1.00
- -------------------------------------------------------------------
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 3.50:1.00
- -------------------------------------------------------------------
1/01/04 - 6/30/04 3.50:1.00
- -------------------------------------------------------------------
7/01/04 - 6/30/05 3.00:1.00
===================================================================
C. Minimum Fixed Charge Coverage Ratio. 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>
112
- -------------------------------------------------------------------
MINIMUM FIXED CHARGE
TEST PERIOD COVERAGE RATIO
- -------------------------------------------------------------------
6/30/98 - 12/31/98 1.15:1.00
- -------------------------------------------------------------------
1/01/99 - 12/31/99 1.15:1.00
- -------------------------------------------------------------------
1/01/00 - 12/31/00 1.15:1.00
- -------------------------------------------------------------------
1/01/01 - 12/31/01 1.20:1.00
- -------------------------------------------------------------------
1/01/02 - 12/31/02 1.20:1.00
- -------------------------------------------------------------------
1/01/03 - 12/31/03 1.25:1.00
- -------------------------------------------------------------------
1/01/04 - 12/31/04 1.25:1.00
- -------------------------------------------------------------------
1/01/05 - 6/30/05 1.25:1.00
===================================================================
D. Maximum Consolidated Capital Expenditures. Company shall not, and
shall not permit any of its 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 $25,000,000
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, (ii) expenditures not
exceeding $15,000,000 in the aggregate incurred on or prior to June 30, 1999 to
relocate Company's assets related to the Duncan Hines Business and transition
related expenses in connection therewith and (iii) expenditures not exceeding
$5,000,000 in the aggregate incurred on or prior to December 31, 1998 related to
additional capital expenditure projects previously identified at Van de Kamp's.
<PAGE>
113
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 Transaction 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)(1) 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
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114
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.
Company shall not, and shall not permit any of its Subsidiaries to,
alter the corporate, capital or legal structure of Company 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) 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;
(ii) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted under subsection 7.6D;
(iii) Company and its Subsidiaries may acquire inventory,
equipment and other assets in the ordinary course of business;
(iv) 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);
(v) 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 (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)
<PAGE>
115
the proceeds of such Asset Sales shall be applied as required by
subsection 2.4B(iii)(a); and
(vi) 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 $40,000,000;
(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) 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 (3) 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.
Company shall not, and shall not permit any of its 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
<PAGE>
116
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
Company and its Subsidiaries, (iii) [fees, expenses and other amounts payable to
the MDC Entities, Fenway and Dartford on the Effective Date], (iv) the
Management Fees, (v) any employment agreement entered into by Company or any of
its Subsidiaries in the ordinary course of business, and (vi) any issuance of
capital stock of Company in connection with employment arrangements, stock
options and stock ownership plans of Company 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 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 and those food businesses which are
reasonably related to such businesses, and
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(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
Company 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 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, Company shall not 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 the filing or amendment of any certificate of designation with
respect thereto.
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7.13 Fiscal Year.
Company shall not change its 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:
8.1 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 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 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
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8.4 Breach of Warranty.
Any material representation, warranty, certification or other
statement made by Company or any of its Subsidiaries in any Loan Document or in
any statement or certificate at any time given by Company 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 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 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 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 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 the
property of 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) 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
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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 Company or any
of its Subsidiaries (other than Immaterial Subsidiaries) shall make any
assignment for the benefit of creditors; or (ii) 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 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
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 Company or
any of its Subsidiaries decreeing the dissolution or split up of 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 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.
(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,
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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 35% 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 full 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
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 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
8.15 Conduct of Business By Company.
(i) Company 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
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permitted thereunder or (b) own any assets other than (1) the capital stock of
Company and (2); or
8.16 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
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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
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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
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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.
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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.
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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 VI 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 10.1B, 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,
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without the consent of Company, require Company to file a 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
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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 10.9B)
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 or Exhibit VI 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 10.1B(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 XV 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 10.1B(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
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(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.
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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
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of any of the Letters of Credit) (collectively 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
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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 holder 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 holder.
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, 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 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 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
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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
limitation 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 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 2.1A(iii) 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 Section 3
relating to the rights or obligations of any 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 (vii) 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
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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 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 party, such
other address as shall be designated by such party 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.
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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, right 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 Marshalling; 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 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.
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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 Company's
rights nor obligations hereunder nor any interest therein may be assigned or
delegated by Company without the prior written consent of all Lenders.
10.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST 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, 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 COMPANY 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 COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND
<PAGE>
138
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 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 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
<PAGE>
139
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.
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: AURORA FOODS 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
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>
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) 906-7858
Facsimile: (212) 906-7116
<PAGE>
ANNEX A
TO CREDIT AGREEMENT
PRICING GRID
RATIO OF CONSOLIDATED TOTAL DEBT TO CONSOLIDATED EBITDA
<TABLE>
<CAPTION>
Less than Less than
5.25 but Less than Less than Less than 3.75:1
Greater 5:00 but 4.75:1 but 4.25:1 but but Greater
Greater than than or Greater than Greater than Greater than than or Equal
or Equal to Equal or Equal to or Equal to or Equal to to Less Than
5:25:1 to 5:00:1 4:75:1 4.25:1 3.75:1 3.25:1 3.25:1
------ --------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revolving Credit Loans and
Tranche A Term Loans:
ABR Loans 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% 0.00%
Eurodollar Loans 2.25% 2.00% 1.75% 1.50% 1.25% 1.00% 0.875%
Commitment Fee: 0.50% 0.50% 0.375% 0.375% 0.375% 0.30% 0.30%
- ---------------
</TABLE>
<PAGE>
STB DRAFT
6/18/98
EXHIBIT I
[FORM OF NOTICE OF BORROWING]
NOTICE OF BORROWING
Pursuant to that certain Third Amended and Restated Credit Agreement
dated as of June __, 1998, as amended, restated, supplemented or otherwise
modified to the date hereof (said Third Amended and Restated Credit Agreement,
as so amended, restated, supplemented or otherwise modified, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among Aurora Foods Inc., a Delaware
corporation ("Company"), the financial institutions listed therein as Lenders,
The Chase Manhattan Bank, as administrative agent (in such capacity,
"Administrative Agent"), National Westminster Bank PLC, as Syndication Agent,
and Swiss Bank Corporation, as Documentation Agent, this represents Company's
request to borrow as follows:
1. Date of borrowing: ______________, [199_] [200_]
2. Amount of borrowing: $_____________________
3. Lender(s): |_| a. Lenders, in
accordance with
their applicable Pro
Rata Shares
|_| b. Swing Line Lender
4. Type of Loans: |_| a. Tranche A Term Loans
|_| b. Revolving Loans
|_| c. Swing Line Loan
5. Interest rate option:(1) |_| a. Base Rate Loan(s)
|_| b. Eurodollar Rate
Loans with an
initial Interest
Period of __________
month(s)
The proceeds of such Loans are to be deposited in Company's account at
Administrative Agent.
The undersigned officer, to the best of his or her knowledge, and Company
certify that:
- --------
(1) Term Loans and Revolving Loans may be Base Rate Loans or Eurodollar Rate
Loans. Swing Line Loans shall be Base Rate Loans.
I-1
<PAGE>
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof to the same extent as
though made on and as of the date hereof, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case such representations and warranties were true and correct in
all material respects on and as of such earlier date;
(ii) No event has occurred and is continuing or would result from
the consummation of the borrowing contemplated hereby that would
constitute an Event of Default or a Potential Event of Default; [and]
(iii) Company has performed in all material respects all agreements
and satisfied all conditions which the Credit Agreement provides shall be
performed or satisfied by it on or before the date hereof [; and] [.]
[(iv) FOR REVOLVING LOANS: The amount of the proposed borrowing will
not cause the Total Utilization of Revolving Loan Commitments to exceed
the Revolving Loan Commitments.]
DATED:___________________ AURORA FOODS INC.
By:___________________________
Name:
Title:
I-2
<PAGE>
EXHIBIT II
[FORM OF NOTICE OF CONVERSION/CONTINUATION]
NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Third Amended and Restated Credit Agreement
dated as of June __, 1998, as amended, restated, supplemented or otherwise
modified to the date hereof (said Third Amended and Restated Credit Agreement,
as so amended, restated, supplemented or otherwise modified, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among Aurora Foods Inc., a Delaware
corporation ("Company"), the financial institutions listed therein as Lenders,
The Chase Manhattan Bank, as Administrative Agent, National Westminster Bank
PLC, as Syndication Agent, and Swiss Bank Corporation, as Documentation Agent,
this represents Company's request to convert or continue Loans as follows:
1. Date of conversion/continuation: __________________, [199_] [200_]
2. Amount of Loans being converted/continued: $__________________
3. Type of Loans being converted/continued:
|_| a. Tranche A Term Loans
|_| b. Revolving Loans
4. Nature of conversion/continuation:
|_| a. Conversion of Base Rate Loans to Eurodollar Rate Loans
|_| b. Conversion of Eurodollar Rate Loans to Base Rate Loans
|_| c. Continuation of Eurodollar Rate Loans as such
5. If Loans are being continued as or converted to Eurodollar Rate
Loans, the duration of the new Interest Period that commences on the
conversion/continuation date: ________________ month(s)
II-1
<PAGE>
In the case of a conversion to or continuation of Eurodollar Rate
Loans, the undersigned officer, to the best of his or her knowledge, and Company
certify that no Event of Default or Potential Event of Default has occurred and
is continuing under the Credit Agreement.
DATED: _________________ AURORA FOODS INC.
By:__________________________
Name:
Title:
II-2
<PAGE>
EXHIBIT III
[FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT]
NOTICE OF ISSUANCE OF LETTER OF CREDIT
Pursuant to that certain Third Amended and Restated Credit Agreement
dated as of June __, 1998, as amended, restated, supplemented or otherwise
modified to the date hereof (said Third Amended and Restated Credit Agreement,
as so amended, restated, supplemented or otherwise modified, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among Aurora Foods Inc., a Delaware
corporation ("Company"), the financial institutions listed therein as Lenders,
The Chase Manhattan Bank as Administrative Agent, National Westminster Bank PLC,
as Syndication Agent, and Swiss Bank Corporation, as Documentation Agent, this
represents Company's request for the issuance of a Letter of Credit by
Administrative Agent as follows:
1. Date of issuance of Letter of Credit: _______________, [199_]
[200_]
2. Type of Letter of Credit:
|_| a. Commercial Letter of Credit
|_| b. Standby Letter of Credit
3. Face amount of Letter of Credit: $________________
4. Expiration date of Letter of Credit: ______________, [199_]
[200_]
5. Name and address of beneficiary:
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
6. Attached hereto is:
|_| a. the verbatim text of such proposed Letter of
Credit
|_| b. a description of the proposed terms and conditions
of such Letter of Credit, including a precise
description of any documents to be presented by
the beneficiary which, if presented by the
beneficiary prior to the expiration date of such
Letter of Credit, would require the Issuing Lender
to make payment under such Letter of Credit.
III-1
<PAGE>
The undersigned officer, to the best of his or her knowledge, and Company
certify that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof to the same extent as
though made on and as of the date hereof, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case such representations and warranties were true and correct in
all material respects on and as of such earlier date;
(ii) No event has occurred and is continuing or would result from
the issuance of the Letter of Credit contemplated hereby that would
constitute an Event of Default or a Potential Event of Default;
(iii) Company has performed in all material respects all agreements
and satisfied all conditions which the Credit Agreement provides shall be
performed or satisfied by it on or before the date hereof; and
(iv) The issuance of the proposed Letter of Credit will not cause
(a) the Letter of Credit Usage to exceed $7,500,000 or (b) the Total
Utilization of Revolving Loan Commitments to exceed the Revolving Loan
Commitments.
DATED: _________________ AURORA FOODS INC.
By:_____________________________
Name:
Title:
III-2
<PAGE>
EXHIBIT IV
[FORM OF TRANCHE A TERM NOTE]
AURORA FOODS INC.
PROMISSORY NOTE DUE JUNE 30, 2005
$[1] New York, New York
June __, 1998
FOR VALUE RECEIVED, AURORA FOODS INC., a Delaware corporation
("Company"), promises to pay to [2] ("Payee") or its registered assigns the
principal amount of [3] ($[1]) in the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Third Amended and Restated Credit Agreement dated as of June __, 1998, by and
among Company, the financial institutions listed therein as Lenders, The Chase
Manhattan Bank, as administrative agent (in such capacity, "Administrative
Agent"), National Westminster Bank PLC, as Syndication Agent, and Swiss Bank
Corporation, as Documentation Agent (said Third Amended and Restated Credit
Agreement, as it may be amended, restated, supplemented or otherwise modified
from time to time, being the "Credit Agreement", the terms defined therein and
not otherwise defined herein being used herein as therein defined).
Company shall make principal payments on this Note in consecutive
quarterly installments as set forth in the Credit Agreement, commencing on
December 31, 1998 and ending on June 30, 2005. Each such installment shall be
due on the date specified in the Credit Agreement and in an amount determined in
accordance with the provisions thereof; provided that the last such installment
shall be in an amount sufficient to repay the entire unpaid principal balance of
this Note, together with all accrued and unpaid interest thereon.
- ----------
[1] Insert amount of Lender's Tranche A Term Loan in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Tranche A Term Loan in words.
IV-1
<PAGE>
This Note is one of Company's "Tranche A Term Notes" in the
aggregate principal amount of $225,000,000 and is issued pursuant to and
entitled to the benefits of the Credit Agreement, to which reference is hereby
made for a more complete statement of the terms and conditions under which the
Tranche A Term Loan evidenced hereby was made and is to be repaid.
All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register as provided in subsection 10.1B(ii) of the Credit Agreement, Company
and Administrative Agent shall be entitled to deem and treat Payee as the owner
and holder of this Note and the Loan evidenced hereby. Payee hereby agrees, by
its acceptance hereof, that before disposing of this Note or any part hereof it
will make a notation hereon of all principal payments previously made hereunder
and of the date to which interest hereon has been paid; provided, however, that
the failure to make a notation of any payment made on this Note shall not limit
or otherwise affect the obligations of Company hereunder with respect to
payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which 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 on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option of
Company as provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE
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.
Upon the occurrence of an Event of Default, the unpaid balance of
the principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Guaranties and is
secured pursuant to the Collateral Documents.
IV-2
<PAGE>
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
AURORA FOODS INC.
By:___________________________
Name:
Title:
IV-3
<PAGE>
EXHIBIT V
[FORM OF REVOLVING NOTE]
AURORA FOODS INC.
PROMISSORY NOTE DUE JUNE 30, 2005
$[1] New York, New York
June __, 1998
FOR VALUE RECEIVED, AURORA FOODS INC., a Delaware corporation
("Company"), promises to pay to the order of [2] ("Payee") or its registered
assigns, on or before June 30, 2005, the lesser of (x) [3] ($[1]) and (y) the
unpaid principal amount of all advances made by Payee to Company as Revolving
Loans under the Credit Agreement referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Third Amended and Restated Credit Agreement dated as of June __, 1998 by and
among Company, the financial institutions listed therein as Lenders, The Chase
Manhattan Bank, as administrative agent (in such capacity, "Administrative
Agent"), National Westminster Bank PLC, as Syndication Agent, and Swiss Bank
Corporation, as Documentation Agent (said Third Amended and Restated Credit
Agreement, as it may be amended, restated, supplemented or otherwise modified
from time to time, being the "Credit Agreement", the terms defined therein and
not otherwise defined herein being used herein as therein defined).
This Note is one of Company's "Revolving Notes" in the aggregate
principal amount of $175,000,000 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Revolving Loans
evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the
- ----------
[1] Insert amount of Lender's Revolving Loan Commitment in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Revolving Loan Commitment in words.
V-1
<PAGE>
assignment or transfer of this Note shall have been accepted by Administrative
Agent and recorded in the Register as provided in subsection 10.1B(ii) of the
Credit Agreement, Company and Administrative Agent shall be entitled to deem and
treat Payee as the owner and holder of this Note and the Loans evidenced hereby.
Payee hereby agrees, by its acceptance hereof, that before disposing of this
Note or any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; provided, however, that the failure to make a notation of any payment made
on this Note shall not limit or otherwise affect the obligations of Company
hereunder with respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which 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 on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option of
Company as provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE
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.
Upon the occurrence of an Event of Default, the unpaid balance of
the principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Guaranties and is
secured pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
V-2
<PAGE>
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
AURORA FOODS INC.
By:_________________________
Name:
Title:
V-3
<PAGE>
TRANSACTIONS
ON
REVOLVING NOTE
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---- --------- --------- --------- --------- -------
V-4
<PAGE>
EXHIBIT VI
[FORM OF SWING LINE NOTE]
AURORA FOODS INC.
PROMISSORY NOTE DUE JUNE 30, 2005
$10,000,000 New York, New York
June __, 1998
FOR VALUE RECEIVED, AURORA FOODS INC., a Delaware corporation
("Company"), promises to pay to [NAME OF SWING LINE LENDER] ("Payee") or its
registered assigns, on or before June 30, 2005, the lesser of (x) TEN MILLION
AND NO DOLLARS ($10,000,000.00) and (y) the unpaid principal amount of all
advances made by Payee to Company as Swing Line Loans under the Credit Agreement
referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Third Amended and Restated Credit Agreement dated as of June __, 1998, by and
among Company, the financial institutions listed therein as Lenders, The Chase
Manhattan Bank as administrative agent (in such capacity, "Administrative
Agent") National Westminster Bank PLC, as Syndication Agent, and Swiss Bank
Corporation, as Documentation Agent (said Third Amended and Restated Credit
Agreement, as it may be amended, restated, supplemented or otherwise modified
from time to time, being the "Credit Agreement", the terms defined therein and
not otherwise defined herein being used herein as therein defined).
This Note is Company's "Swing Line Note" and is issued pursuant to
and entitled to the benefits of the Credit Agreement, to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Swing Line Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Whenever any payment on this Note shall be stated to be due on a day
which 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 on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to
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prepayment at the option of Company as provided in subsection 2.4B(i) of the
Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE
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.
Upon the occurrence of an Event of Default, the unpaid balance of
the principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Guaranties and is
secured pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
AURORA FOODS INC.
By:_________________________
Name:
Title:
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<PAGE>
TRANSACTIONS
ON
SWING LINE NOTE
Outstanding
Amount of Amount of Principal
Loan Made Principal Paid Balance Notation
Date This Date This Date This Date Made By
---- --------- --------- --------- -------
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EXHIBIT VII
[FORM OF SUBSIDIARY GUARANTY]
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of ______________,
[199_][200_] by THE UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES of Aurora Foods
Inc., a Delaware corporation ("Company") (each such undersigned Subsidiary a
"Guarantor" and collectively, "Guarantors"; provided that after the date hereof,
Guarantors shall be deemed to include any Additional Guarantors (as hereinafter
defined)), in favor of and for the benefit of THE CHASE MANHATTAN BANK, as
administrative agent for and representative of (in such capacity herein called
"Guarantied Party") the financial institutions ("Lenders") party to the Credit
Agreement referred to below and any Interest Rate Exchangers (as hereinafter
defined).
RECITALS
A. Company has entered into that certain Third Amended and Restated
Credit Agreement dated as of June __, 1998 (said Third Amended and Restated
Credit Agreement, as amended, restated, supplemented or otherwise modified from
time to time, being the "Credit Agreement"; capitalized terms defined therein
and not otherwise defined herein being used herein as therein defined) with
Lenders, The Chase Manhattan Bank, as Administrative Agent, National Westminster
Bank PLC, as Syndication Agent, and Swiss Bank Corporation, as Documentation
Agent.
B. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"Lender Interest Rate Agreements") with or one or more Lenders or their
Affiliates (in such capacity, collectively, "Interest Rate Exchangers") in
accordance with the terms of the Credit Agreement, and it is desired that the
obligations of Company under the Lender Interest Rate Agreements, including
without limitation the obligation of Company to make payments thereunder in the
event of early termination thereof (all such obligations being the "Interest
Rate Obligations"), together with all obligations of Company under the Credit
Agreement and the other Loan Documents, be guarantied hereunder.
C. A portion of the proceeds of the Loans may be advanced to
Guarantors and thus the Guarantied Obligations (as hereinafter defined) are
being incurred for and will inure to the benefit of Guarantors (which benefits
are hereby acknowledged).
D. It is a condition precedent to the making of the initial Loans
under the Credit Agreement that Company's obligations thereunder be guarantied
by Guarantors.
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E. Guarantors are willing irrevocably and unconditionally to
guaranty such obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder and to
induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, Guarantors hereby agree as follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
As used in this Guaranty, the following terms shall have the
following meanings unless the context otherwise requires:
"Beneficiaries" means Guarantied Party, Lenders and any Interest
Rate Exchangers.
"Guarantied Obligations" has the meaning assigned to that term in
subsection 2.1.
"Guaranty" means this Subsidiary Guaranty dated as of __________,
[199_][200_], as it may be amended, restated, supplemented or otherwise
modified from time to time.
"payment in full", "paid in full" or any similar term means payment
in full of the Guarantied Obligations, including without limitation all
principal, interest, costs, fees and expenses (including without
limitation legal fees and expenses) of Beneficiaries as required under the
Loan Documents and the Lender Interest Rate Agreements.
1.2 Interpretation.
(a) References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Guaranty unless otherwise specifically
provided.
(b) In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Credit Agreement, the terms, conditions and provisions of this
Guaranty shall prevail.
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<PAGE>
SECTION 2.
THE GUARANTY
2.1 Guaranty of the Guarantied Obligations.
Subject to the provisions of subsection 2.2(a), Guarantors jointly
and severally hereby irrevocably and unconditionally guaranty the due and
punctual payment in full of all Guarantied Obligations when the same shall
become due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. ss. 362(a)). The term "Guarantied Obligations" is used herein in
its most comprehensive sense and includes:
(a) any and all Obligations of Company and any and all Interest Rate
Obligations, in each case now or hereafter made, incurred or created,
whether absolute or contingent, liquidated or unliquidated, whether due or
not due, and however arising under or in connection with the Credit
Agreement and the other Loan Documents and the Lender Interest Rate
Agreements, including those arising under successive borrowing
transactions under the Credit Agreement which shall either continue the
Obligations of Company or from time to time renew them after they have
been satisfied and including interest which, but for the filing of a
petition in bankruptcy with respect to Company, would have accrued on any
Guarantied Obligations, whether or not a claim is allowed against Company
for such interest in the related bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.8 hereof.
2.2 Limitation on Amount Guarantied; Contribution by Guarantors.
(a) Anything contained in this Guaranty to the contrary
notwithstanding, if any Fraudulent Transfer Law (as hereinafter defined) is
determined by a court of competent jurisdiction to be applicable to the
obligations of any Guarantor under this Guaranty, the obligations of such
Guarantor hereunder shall be limited to a maximum aggregate amount equal to the
largest amount that would not render its obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11
of the United States Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving effect
to all other liabilities of such Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Guarantor (i) in respect of intercompany indebtedness to
Company or other affiliates of Company to the extent that such indebtedness
would be discharged in an amount equal to the amount paid by such Guarantor
hereunder and (ii) under any guaranty of
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Subordinated Indebtedness which guaranty contains a limitation as to maximum
amount similar to that set forth in this subsection 2.2(a), pursuant to which
the liability of such Guarantor hereunder is included in the liabilities taken
into account in determining such maximum amount) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of such Guarantor pursuant to applicable law or
pursuant to the terms of any agreement (including without limitation any such
right of contribution under subsection 2.2(b)).
(b) Guarantors under this Guaranty together desire to allocate among
themselves (collectively, the "Contributing Guarantors"), in a fair and
equitable manner, their obligations arising under this Guaranty. Accordingly, in
the event any payment or distribution is made on any date by any Guarantor under
this Guaranty (a "Funding Guarantor") that exceeds its Fair Share (as defined
below) as of such date, that Funding Guarantor shall be entitled to a
contribution from each of the other Contributing Guarantors in the amount of
such other Contributing Guarantor's Fair Share Shortfall (as defined below) as
of such date, with the result that all such contributions will cause each
Contributing Guarantor's Aggregate Payments (as defined below) to equal its Fair
Share as of such date. "Fair Share" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(x) the Fair Share Contribution Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Fair Share Contribution
Amounts with respect to all Contributing Guarantors multiplied by (ii) the
aggregate amount paid or distributed on or before such date by all Funding
Guarantors under this Guaranty in respect of the obligations guarantied. "Fair
Share Shortfall" means, with respect to a Contributing Guarantor as of any date
of determination, the excess, if any, of the Fair Share of such Contributing
Guarantor over the Aggregate Payments of such Contributing Guarantor. "Fair
Share Contribution Amount" means, with respect to a Contributing Guarantor as of
any date of determination, the maximum aggregate amount of the obligations of
such Contributing Guarantor under this Guaranty determined as of such date, in
the case of any Guarantor, in accordance with subsection 2.2(a); provided that,
solely for purposes of calculating the "Fair Share Contribution Amount" with
respect to any Contributing Guarantor for purposes of this subsection 2.2(b),
any assets or liabilities of such Contributing Guarantor arising by virtue of
any rights to subrogation, reimbursement or indemnification or any rights to or
obligations of contribution hereunder shall not be considered as assets or
liabilities of such Contributing Guarantor. "Aggregate Payments" means, with
respect to a Contributing Guarantor as of any date of determination, an amount
equal to (i) the aggregate amount of all payments and distributions made on or
before such date by such Contributing Guarantor in respect of this Guaranty
(including in respect of this subsection 2.2(b)) minus (ii) the aggregate amount
of all payments received on or before such date by such
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<PAGE>
Contributing Guarantor from the other Contributing Guarantors as contributions
under this subsection 2.2(b). The amounts payable as contributions hereunder
shall be determined as of the date on which the related payment or distribution
is made by the applicable Funding Guarantor. The allocation among Contributing
Guarantors of their obligations as set forth in this subsection 2.2(b) shall not
be construed in any way to limit the liability of any Contributing Guarantor
hereunder.
2.3 Payment by Guarantors: Application of Payments.
Subject to the provisions of subsection 2.2(a), Guarantors hereby
jointly and severally agree, in furtherance of the foregoing and not in
limitation of any other right which any Beneficiary may have at law or in equity
against any Guarantor by virtue hereof, that upon the failure of Company to pay
any of the Guarantied Obligations when and as the same shall become due, whether
at stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.
362(a)), Guarantors will upon demand pay, or cause to be paid, in cash, to
Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to
the sum of the unpaid principal amount of all Guarantied Obligations then due as
aforesaid, accrued and unpaid interest on such Guarantied Obligations (including
without limitation interest which, but for the filing of a petition in
bankruptcy with respect to Company, would have accrued on such Guarantied
Obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding) and all other Guarantied Obligations then
owed to Beneficiaries as aforesaid. All such payments shall be applied promptly
from time to time by Guarantied Party as provided in subsection 2.4D of the
Credit Agreement.
2.4 Liability of Guarantors Absolute.
Each Guarantor agrees that its obligations hereunder are
irrevocable, absolute, independent and unconditional and shall not be affected
by any circumstance which constitutes a legal or equitable discharge of a
guarantor or surety other than payment in full of the Guarantied Obligations. In
furtherance of the foregoing and without limiting the generality thereof, each
Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the occurrence
of an Event of Default under the Credit Agreement or the occurrence of an
Early Termination Date (as defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in
the form prepared by the International Swap and Derivatives Association
Inc. or a similar event under any
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similar swap agreement) under any Lender Interest Rate Agreement (either
such occurrence being an "Event of Default" for purposes of this Guaranty)
notwithstanding the existence of any dispute between Company and any
Beneficiary with respect to the existence of such Event of Default.
(c) The obligations of each Guarantor hereunder are independent of
the obligations of Company under the Loan Documents or the Lender Interest
Rate Agreements and the obligations of any other guarantor (including any
other Guarantor) of the obligations of Company under the Loan Documents or
the Lender Interest Rate Agreements, and a separate action or actions may
be brought and prosecuted against such Guarantor whether or not any action
is brought against Company or any of such other guarantors and whether or
not Company is joined in any such action or actions.
(d) Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge
any Guarantor's liability for any portion of the Guarantied Obligations
which has not been paid. Without limiting the generality of the foregoing,
if Guarantied Party is awarded a judgment in any suit brought to enforce
any Guarantor's covenant to pay a portion of the Guarantied Obligations,
such judgment shall not be deemed to release such Guarantor from its
covenant to pay the portion of the Guarantied Obligations that is not the
subject of such suit, and such judgment shall not, except to the extent
satisfied by such Guarantor, limit, affect, modify or abridge any other
Guarantor's liability hereunder in respect of the Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or
enforceability of this Guaranty or giving rise to any reduction,
limitation, impairment, discharge or termination of any Guarantor's
liability hereunder, from time to time may (i) renew, extend, accelerate,
increase the rate of interest on, or otherwise change the time, place,
manner or terms of payment of the Guarantied Obligations, (ii) settle,
compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Guarantied
Obligations or any agreement relating thereto and/or subordinate the
payment of the same to the payment of any other obligations; (iii) request
and accept other guaranties of the Guarantied Obligations and take and
hold security for the payment of this Guaranty or the Guarantied
Obligations; (iv) release, surrender, exchange, substitute, compromise,
settle, rescind, waive, alter, subordinate or modify, with or without
consideration, any security for payment of the Guarantied Obligations, any
other guaranties of the Guarantied Obligations, or any other obligation of
any Person (including any other Guarantor) with respect to the Guarantied
Obligations; (v) enforce and apply any security
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<PAGE>
now or hereafter held by or for the benefit of such Beneficiary in respect
of this Guaranty or the Guarantied Obligations and direct the order or
manner of sale thereof, or exercise any other right or remedy that such
Beneficiary may have against any such security, in each case as such
Beneficiary in its discretion may determine consistent with the Credit
Agreement or the applicable Lender Interest Rate Agreement and any
applicable security agreement, including foreclosure on any such security
pursuant to one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable, and even though
such action operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of any Guarantor against Company or
any security for the Guarantied Obligations; and (vi) exercise any other
rights available to it under the Loan Documents or the Lender Interest
Rate Agreements.
(f) This Guaranty and the obligations of Guarantors hereunder shall
be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other
than payment in full of the Guarantied Obligations), including without
limitation the occurrence of any of the following, whether or not any
Guarantor shall have had notice or knowledge of any of them: (i) any
failure or omission to assert or enforce or agreement or election not to
assert or enforce, or the stay or enjoining, by order of court, by
operation of law or otherwise, of the exercise or enforcement of, any
claim or demand or any right, power or remedy (whether arising under the
Loan Documents the Lender Interest Rate Agreements, at law, in equity or
otherwise) with respect to the Guarantied Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for
the payment of the Guarantied Obligations; (ii) any rescission, waiver,
amendment or modification of, or any consent to departure from, any of the
terms or provisions (including without limitation provisions relating to
events of default) of the Credit Agreement, any of the other Loan
Documents, any of the Lender Interest Rate Agreements or any agreement or
instrument executed pursuant thereto, or of any other guaranty or security
for the Guarantied Obligations, in each case whether or not in accordance
with the terms of the Credit Agreement or such Loan Document, such Lender
Interest Rate Agreement or any agreement relating to such other guaranty
or security; (iii) the Guarantied Obligations, or any agreement relating
thereto, at any time being found to be illegal, invalid or unenforceable
in any respect; (iv) the application of payments received from any source
(other than payments received pursuant to the other Loan Documents or any
of the Lender Interest Rate Agreements or from the proceeds of any
security for the Guarantied Obligations, except to the extent such
security also serves as collateral for indebtedness other than the
Guarantied Obligations) to the payment of indebtedness other than the
Guarantied
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Obligations, even though any Beneficiary might have elected to apply such
payment to any part or all of the Guarantied Obligations; (v) any
Beneficiary's consent to the change, reorganization or termination of the
corporate structure or existence of Company or any of its Subsidiaries and
to any corresponding restructuring of the Guarantied Obligations; (vi) any
failure to perfect or continue perfection of a security interest in any
collateral which secures any of the Guarantied Obligations; (vii) any
defenses, set-offs or counterclaims which Company may allege or assert
against any Beneficiary in respect of the Guarantied Obligations,
including, but not limited to, failure of consideration, breach of
warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction and usury; and (viii) any other act or thing or omission, or
delay to do any other act or thing, which may or might in any manner or to
any extent vary the risk of any Guarantor as an obliger in respect of the
Guarantied Obligations.
2.5 Waivers by Guarantors.
Each Guarantor hereby waives, for the benefit of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment
or performance by such Guarantor, to (i) proceed against Company, any
other guarantor (including any other Guarantor) of the Guarantied
Obligations or any other Person, (ii) proceed against or exhaust any
security held from Company, any such other guarantor or any other Person
(iii) proceed against or have resort to any balance of any deposit account
or credit on the books of any Beneficiary in favor of Company or any other
Person, or (iv) pursue any other remedy in the power of any Beneficiary
whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company including without
limitation any defense based on or arising out of the lack of validity or
the unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto or by reason of the cessation of the liability
of Company from any cause other than payment in full of the Guarantied
Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which
amounts to bad faith;
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(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of such Guarantor's obligations hereunder,
(ii) the benefit of any statute of limitations affecting such Guarantor's
liability hereunder or the enforcement hereof, (iii) any rights to
set-offs, recoupments and counterclaims, and (iv) promptness, diligence
and any requirement that any Beneficiary protect, secure, perfect or
insure any security interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Credit
Agreement, the Lender Interest Rate Agreements or any agreement or
instrument related thereto, notices of any renewal, extension or
modification of the Guarantied Obligations or any agreement related
thereto, notices of any extension of credit to Company and notices of any
of the matters referred to in subsection 2.4 and any right to consent to
any thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this Guaranty.
2.6 Guarantors' Rights of Subrogation, Contribution, Etc.
Until the Guarantied Obligations have been paid in full and the
Commitments terminated, each Guarantor hereby waives any claim, right or remedy,
direct or indirect, that such Guarantor now has or may hereafter have against
Company or any of its assets in connection with this Guaranty or the performance
by such Guarantor of its obligations hereunder, in each case whether such claim,
right or remedy arises in equity, under contract, by statute, under common law
or otherwise and including, without limitation, (a) any right of subrogation,
reimbursement or indemnification that such Guarantor now has or may hereafter
have against Company, (b) any right to enforce, or to participate in, any claim,
right or remedy that any Beneficiary now has or may hereafter have against
Company, and (c) any benefit of, and any right to participate in, any collateral
or security now or hereafter held by any Beneficiary. In addition, until the
Guarantied Obligations shall have been paid in full and the Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled,
each Guarantor shall withhold exercise of any right of contribution such
Guarantor may have against any other guarantor (including any other Guarantor)
of the Guarantied Obligations (including without limitation any such right of
contribution under subsection 2.2(b)). Each Guarantor further agrees that, to
the extent the waiver or agreement to withhold the exercise of its rights of
subrogation, reimbursement, indemnification and contribution as set forth herein
is found by a court of competent jurisdiction to be void
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or voidable for any reason, any rights of subrogation, reimbursement or
indemnification such Guarantor may have against Company or against any
collateral or security, and any rights of contribution such Guarantor may have
against any such other guarantor, shall be junior and subordinate to any rights
any Beneficiary may have against Company, to all right, title and interest any
Beneficiary may have in any such collateral or security, and to any right any
Beneficiary may have against such other guarantor. If any amount shall be paid
to any Guarantor on account of any such subrogation, reimbursement,
indemnification or contribution rights at any tine when all Guarantied
Obligations shall not have been paid in full, such amount shall be held in trust
for Guarantied Party on behalf of Beneficiaries and shall forthwith be paid over
to Guarantied Party for the benefit of Beneficiaries to be credited and applied
against the Guarantied Obligations, whether matured or unmatured, in accordance
with the terms hereof.
2.7 Subordination of Other Obligations.
Any indebtedness of Company or any Guarantor now or hereafter held
by any Guarantor (the "Obligee Guarantor") is hereby subordinated in right of
payment to the Guarantied Obligations, and any such indebtedness collected or
received by the Obligee Guarantor after an Event of Default has occurred and is
continuing shall be held in trust for Guarantied Party on behalf of
Beneficiaries and shall forthwith be paid over to Guarantied Party for the
benefit of Beneficiaries to be credited and applied against the Guarantied
Obligations but without affecting, impairing or limiting in any manner the
liability of the Obligee Guarantor under any other provision of this Guaranty.
2.8 Expenses.
Guarantors jointly and severally agree to pay, or cause to be paid,
on demand, and to save Beneficiaries harmless against liability for, any and all
costs and expenses (including fees and disbursements of counsel and allocated
costs of internal counsel) incurred or expended by any Beneficiary in connection
with the enforcement of or preservation of any rights under this Guaranty.
2.9 Continuing Guaranty.
This Guaranty is a continuing guaranty and shall remain in effect
until all of the Guarantied Obligations shall have been paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled. Each Guarantor hereby irrevocably waives any right to revoke
this Guaranty as to future transactions giving rise to any Guarantied
Obligations.
2.10 Authority of Guarantors or Company.
It is not necessary for any Beneficiary to inquire into the capacity
or powers of any Guarantor or Company or the
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officers, directors or any agents acting or purporting to act on behalf of any
of them.
2.11 Financial Condition of Company.
Any Loans may be granted to Company or continued from time to time,
and any Lender Interest Rate Agreement may be entered into from time to time, in
each case without notice to or authorization from any Guarantor regardless of
the financial or other condition of Company at the time of any such grant or
continuation or at the time such Lender Interest Rate Agreement is entered into,
as the case may be. No Beneficiary shall have any obligation to disclose or
discuss with any Guarantor its assessment, or any Guarantor's assessment, of the
financial condition of Company. Each Guarantor has adequate means to obtain
information from Company on a continuing basis concerning the financial
condition of Company and its ability to perform its obligations under the Loan
Documents and the Lender Interest Rate Agreements, and each Guarantor assumes
the responsibility for being and keeping informed of the financial condition of
Company and of all circumstances bearing upon the risk of nonpayment of the
Guarantied Obligations. Each Guarantor hereby waives and relinquishes any duty
on the part of any Beneficiary to disclose any matter, fact or thing relating to
the business, operations or conditions of Company now known or hereafter known
by any Beneficiary.
2.12 Rights Cumulative.
The rights,powers and remedies given to Beneficiaries by this
Guaranty are cumulative and shall be in addition to and independent of all
rights, powers and remedies given to Beneficiaries by virtue of any statute or
rule of law or in any of the other Loan Documents, any of the Lender Interest
Rate Agreements or any agreement between any Guarantor and any Beneficiary or
Beneficiaries or between Company and any Beneficiary or Beneficiaries. Any
forbearance or failure to exercise, and any delay by any Beneficiary in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.
2.13 Bankruptcy; Post-Petition Interest; Reinstatement of Guaranty.
(a) So long as any Guarantied Obligations remain outstanding, no
Guarantor shall, without the prior written consent of Guarantied Party acting
pursuant to the instructions of Requisite Obligees (as defined in subsection
3.14), commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency proceedings of or against Company. The obligations
of Guarantors under this Guaranty shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any proceeding, voluntary or
involuntary, involving
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the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Company or by any defense which Company may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guarantied Obligations ceases to accrue by operation of law by reason of
the commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantors and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantors pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantors will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied
Obligations are paid by Company, the obligations of Guarantors hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) are rescinded or
recovered directly or indirectly from any Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Guaranty.
2.14 Notice of Events.
As soon as any Guarantor obtains knowledge thereof, such Guarantor
shall give Guarantied Party written notice of any condition or event which has
resulted in a breach of or noncompliance with any other condition or covenant
contained herein.
2.15 Set Off.
In addition to any other rights any Beneficiary may have under law
or in equity, if any amount shall at any time be due and owing by any Guarantor
to any Beneficiary under this Guaranty, such Beneficiary is authorized at any
time or from time to time upon the occurrence and during the continuation of any
Event of Default, without notice (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) and any other
indebtedness of such
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Beneficiary owing to such Guarantor and any other property of such Guarantor
held by any Beneficiary to or for the credit or the account of such Guarantor
against and on account of the Guarantied Obligations and liabilities of such
Guarantor to any Beneficiary under this Guaranty.
2.16 Discharge of Guaranty Upon Sale of Guarantor.
If all of the stock of any Guarantor or any of its successors in
interest under this Guaranty shall be sold or otherwise disposed of (including
by merger or consolidation) in an Asset Sale not prohibited by subsection 7.7 of
the Credit Agreement or otherwise consented to by Requisite Lenders, the
Guaranty of such Guarantor or such successor in interest, as the case may be,
hereunder shall automatically be discharged and released without any further
action by any Beneficiary or any other Person effective as of the time of such
Asset Sale; provided that, as a condition precedent to such discharge and
release, Guarantied Party shall have received evidence satisfactory to it that
arrangements satisfactory to it have been made for delivery to Guarantied Party
of the applicable Net Cash Proceeds.
SECTION 3.
MISCELLANEOUS
3.1 Survival of Warranties.
All agreements, representations and warranties made herein shall
survive the execution and delivery of this Guaranty and the other Loan Documents
and the Lender Interest Rate Agreements and any increase in the Commitments
under the Credit Agreement.
3.2 Notices.
Any notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier and shall be deemed to have been
given when delivered in person or by courier service, or upon receipt of
telefacsimile or telex (with received answerback) or three Business Days after
depositing it in the United States mail with postage pre-paid and properly
addressed; provided, notices to Guarantied Party shall not be effective until
received. For purposes hereof, the address of each party hereto shall be as set
forth under such party's name on the signature pages hereof or, as to any party,
such other address as shall be designated by such party in a written notice
delivered to the other parties hereto.
3.3 Severability.
In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the
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remaining provisions or obligations, or of such provision or obligation in any
other jurisdiction, shall not in any way be affected or impaired thereby.
3.4 Amendments and Waivers.
No amendment, modification, termination or waiver of any provision
of this Guaranty, and no consent to any departure by any Guarantor therefrom,
shall in any event be effective without the written concurrence of Guarantied
Party and, in the case of any such amendment or modification, each Guarantor
against whom enforcement of such amendment or modification is sought. Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
3.5 Headings.
Section and subsection headings in this Guaranty are included herein
for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose or be given any substantive effect.
3.6 Applicable Law; Rules of Construction.
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTORS AND
BENEFICIARIES 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. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Guaranty mutatis mutandis.
3.7 Successors and Assigns.
This Guaranty is a continuing guaranty and shall be binding upon
each Guarantor and its respective successors and assigns. This Guaranty shall
inure to the benefit of Beneficiaries and their respective successors and
assigns. No Guarantor shall assign this Guaranty or any of the rights or
obligations of such Guarantor hereunder without the prior written consent of all
Lenders. Any Beneficiary may, without notice or consent, assign its interest in
this Guaranty in whole or in part. The terms and provisions of this Guaranty
shall inure to the benefit of any transferee or assignee of any Loan, and in the
event of such transfer or assignment the rights and privileges herein conferred
upon such Beneficiary shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof.
3.8 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT
OF OR RELATING TO THIS GUARANTY, OR ANY OBLIGATIONS
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<PAGE>
HEREUNDER, 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 GUARANTY, EACH GUARANTOR, 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 SUCH GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 3.2; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT; (V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST SUCH GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES
THAT THE PROVISIONS OF THIS SUBSECTION 3.8 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.
3.9 Waiver of Trial by Jury.
EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, EACH
BENEFICIARY 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 GUARANTY. 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 Guarantor
and, by its acceptance of the benefits hereof, each Beneficiary (i) acknowledges
that this waiver is a material inducement for such Guarantor and Beneficiaries
to enter into a business relationship, that such Guarantor and Beneficiaries
have already relied on this waiver in entering into this Guaranty or accepting
the benefits thereof, as the case may be, and that each will continue to rely on
this waiver in their related future dealings and (ii) further warrants and
represents that each has reviewed this waiver with its legal counsel, and that
each 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 3.9 AND EXECUTED BY GUARANTIED
PARTY AND EACH GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. In the
event of litigation, this Guaranty may be filed as a written consent to a trial
by the court.
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<PAGE>
3.10 No Other Writing.
This writing is intended by Guarantors and Beneficiaries as the
final expression of this Guaranty and is also intended as a complete and
exclusive statement of the terms of their agreement with respect to the matters
covered hereby. No course of dealing, course of performance or trade usage, and
no parol evidence of any nature, shall be used to supplement or modify any terms
of this Guaranty. There are no conditions to the full effectiveness of this
Guaranty.
3.11 Further Assurances.
At any time or from time to time, upon the request of Guarantied
Party, Guarantors shall execute and deliver such further documents and do such
other acts and things as Guarantied Party may reasonably request in order to
effect fully the purposes of this Guaranty.
3.12 Additional Guarantors.
The initial Guarantors hereunder shall be such of the Subsidiaries
of Company as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto, as additional Guarantors (each an "Additional Guarantor") by
executing a counterpart of this Guaranty. Upon delivery of any such counterpart
to Administrative Agent, notice of which is hereby waived by Guarantors, each
such Additional Guarantor shall be a Guarantor and shall be as fully a party
hereto as if such Additional Guarantor were an original signatory hereof. Each
Guarantor expressly agrees that its obligations arising hereunder shall not be
affected or diminished by the addition or release of any other Guarantor
hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Guarantor hereunder. This Guaranty
shall be fully effective as to any Guarantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Guarantor hereunder.
3.13 Counterparts; Effectiveness.
This Guaranty may be executed in any number of counterparts and by
the different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original for all purposes; but
all such counterparts together shall constitute but one and the same instrument.
This Guaranty shall become effective as to each Guarantor upon the execution of
a counterpart hereof by such Guarantor (whether or not a counterpart hereof
shall have been executed by any other Guarantor) and receipt by Guarantied Party
of written or telephonic notification of such execution and authorization of
delivery thereof.
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<PAGE>
3.14 Guarantied Party as Administrative Agent.
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Guarantied Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action solely in
accordance with this Guaranty and the Credit Agreement; provided that Guarantied
Party shall exercise, or refrain from exercising, any remedies hereunder in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the holders of a majority of the aggregate notional amount (or, with
respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "Requisite Obligees"). In furtherance of the foregoing provisions of
this subsection 3.14, each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to enforce this
Guaranty, it being understood and agreed by such Interest Rate Exchanger that
all rights and remedies hereunder may be exercised solely by Guarantied Party
for the benefit of Beneficiaries in accordance with the terms of this subsection
3.14.
(b) Guarantied Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Guarantied Party under this Guaranty;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Guarantied Party under this Guaranty;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor
Guarantied Party under this Guaranty. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Guarantied Party under this Guaranty, and the
retiring or removed Guarantied Party under this Guaranty shall promptly (i)
transfer to such successor Guarantied Party all sums held hereunder, together
with all records and other documents necessary or appropriate in connection with
the performance of the duties of the successor Guarantied Party under this
Guaranty, and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Guarantied Party of the rights
created hereunder, whereupon such retiring or removed Guarantied Party shall be
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<PAGE>
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied Party hereunder.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned Guarantors has
caused this Guaranty to be duly executed and delivered by its officer
thereunto duly authorized as of the date first written above.
[GUARANTOR]
By:_____________________________
Name:
Title:
Notice Address for the foregoing
Guarantors:
_________________________________
_________________________________
_________________________________
Attention:_______________________
Facsimile:_______________________
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
(212) 355-6945
and a copy to:
Dartford Partnership L.L.C.
801 Montgomery Street, Suite 400
San Francisco, California 94133
Attention: James B. Ardrey
Facsimile: (415) 982-3023
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
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<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ____________, [199_][200_].
[NAME OF ADDITIONAL GUARANTOR]
By:______________________________
Name:
Title:
Notice Address:
_________________________________
_________________________________
_________________________________
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<PAGE>
EXHIBIT VIII
[FORM OF PLEDGE AGREEMENT]
THIRD AMENDED AND RESTATED PLEDGE AGREEMENT
This THIRD AMENDED AND RESTATED PLEDGE AGREEMENT (this "Agreement")
is dated as of June __, 1998 and entered into by and among AURORA FOODS INC., a
Delaware corporation ("Company" or "Pledgor"); provided that after the Effective
Date, "Pledgors" shall mean and include Company and any Additional Pledgors (as
hereinafter defined)), and THE CHASE MANHATTAN BANK, as administrative agent for
and representative of (in such capacity herein called "Secured Party") the
financial institutions ("Lenders") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of (i) the shares of
stock (the "Pledged Shares") described in Part A of Schedule I annexed hereto
and issued by the corporations named therein and (ii) the indebtedness (the
"Pledged Debt") described in Part B of said Schedule I and issued by the
obligors named therein.
B. Pursuant to that certain Third Amended and Restated Credit
Agreement dated as of June __, 1998 (said Third Amended and Restated Credit
Agreement, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined),
by and among Company, Lenders, Secured Party, as Administrative Agent, National
Westminster Bank PLC, as Syndication Agent, and Swiss Bank Corporation, as
Documentation Agent, Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
C. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"Lender Interest Rate Agreements") with one or more Lenders or their Affiliates
(in such capacity, collectively, "Interest Rate Exchangers") in accordance with
the terms of the Credit Agreement, and it is desired that the obligations of
Company under the Lender Interest Rate Agreements, including without limitation
the obligation of Company to make payments thereunder in the event of early
termination thereof (all such obligations being the "Interest Rate
Obligations"), together with all obligations of Company under the Credit
Agreement and the other Loan Documents, be secured hereunder.
D. Additional Pledgors shall execute and deliver counterparts to
that certain Subsidiary Guaranty (said Subsidiary
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Guaranty, as it may be amended, restated, supplemented or otherwise modified
from time to time, being the "Subsidiary Guaranty") in favor of Secured Party
for the benefit of Lenders and any Interest Rate Exchangers, pursuant to which
each Additional Pledgor shall guaranty the prompt payment and performance when
due of all obligations of Company under the Credit Agreement and an obligations
of Company under the Lender Interest Rate Agreements, including without
limitation the obligation of Company to make payments thereunder in the event of
early termination thereof.
E. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that each Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into Lender Interest
Rate Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Pledgor hereby agrees with
Secured Party as follows:
SECTION 1. Pledge of Security.
Each Pledgor hereby pledges and assigns to Secured Party, and hereby
grants to Secured Party a security interest in, all of Pledgor's right, title
and interest in and to the following (the "Pledged Collateral"):
(a) the Pledged Shares owned by such Pledgor and the certificates
representing such Pledged Shares and any interest of such Pledgor in the
entries on the books of any financial intermediary pertaining to such
Pledged Shares, and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Pledged Shares; provided, however, that to the extent the issuer of any of
the Pledged Shares is a controlled foreign corporation (used hereinafter
as such term is defined in Section 957(a) or a successor provision of the
Internal Revenue Code of 1986, as amended from time to time), such Pledgor
shall only be required to pledge Pledged Shares of, certificates
representing Pledged Shares of, and such interests pertaining to Pledged
Shares of such issuer possessing up to but not exceeding 65% of the voting
power of all classes of capital stock entitled to vote of such issuer, and
all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Pledged Shares;
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(b) the Pledged Debt owned by such Pledgor and the instruments
evidencing such Pledged Debt, and all interest, cash, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Pledged Debt;
(c) all additional shares of, and all securities convertible into
and warrants, options and other rights to purchase or otherwise acquire,
stock of any issuer of any Pledged Shares from time to time acquired by
such Pledgor in any manner (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such
additional shares, securities, warrants, options or other rights and any
interest of such Pledgor in the entries on the books of any financial
intermediary pertaining to such additional shares (all such shares,
securities, warrants, options, rights, certificates, instruments and
interests collectively being "Additional Pledged Shares"), and all
dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Additional Pledged
Shares; provided, however, that to the extent that the issuer of any
Additional Pledged Shares is a controlled foreign corporation, such
Pledgor shall only be required to pledge Additional Pledged Shares of such
issuer possessing up to but not exceeding 65% of the voting power of all
classes of capital stock entitled to vote of such issuer, and all
dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Additional Pledged
Shares;
(d) all additional indebtedness from time to time owed to such
Pledgor by any obligor on any Pledged Debt and the instruments evidencing
such indebtedness, and all interest, cash, instruments and other property
or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
indebtedness;
(e) all shares of, and all securities convertible into and warrants,
option and other rights to purchase or otherwise acquire, stock of any
Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of such Pledgor (which shares shall be
deemed to be part of the Pledged Shares), the certificates or other
instruments representing such shares, securities, warrants, options or
other rights and any interest of such Pledgor in the entries on the books
of any financial intermediary pertaining to such shares (all such shares,
securities, warrants, options, rights, certificates, instruments and
interests collectively being "New Pledged Shares"), and all dividends,
cash, warrants, rights,
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<PAGE>
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any
or all of such shares, securities, warrants, options or other rights;
provided, however, that in the event that any such direct Subsidiary is a
controlled foreign corporation, such Pledgor shall only be required to
pledge New Pledged Shares of such Subsidiary possessing up to but not
exceeding 65% of the voting power of all classes of capital stock entitled
to vote of such Subsidiary, and all dividends, cash, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any
or all of such New Pledged Shares;
(f) all indebtedness from time to time owed to such Pledgor by any
Person that, after the date of this Agreement, becomes, as a result of
such any occurrence, a direct or indirect Subsidiary of such Pledgor, and
all interest, cash, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes
of this Agreement, the term "proceeds" includes whatever is receivable or
received when Pledged Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary
or involuntary, and includes, without limitation, proceeds of any
indemnity or guaranty payable to such Pledgor or Secured Party from time
to time with respect to any of the Pledged Collateral.
SECTION 2. Security for Obligations.
This Agreement secures, and the Pledged Collateral pledged and
assigned by each Pledgor is collateral security for, the prompt payment or
performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including without
limitation the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.
362(a)), of all Secured Obligations with respect to such Pledgor. "Secured
Obligations" means
(a) with respect to Company, all obligations and liabilities of
every nature of Company now or hereafter existing under or arising out of
or in connection with the Credit Agreement and the other Loan Documents
and any Lender Interest Rate Agreements, and
(b) with respect to each Additional Pledgor, all obligations and
liabilities of every nature of Additional
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Pledgors now or hereafter existing under or arising out of or in
connection with the Subsidiary Guaranty,
in each case together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Pledgors now or hereafter existing under this Agreement.
SECTION 3. Delivery of Pledged Collateral.
All certificates or instruments representing or evidencing the
Pledged Collateral shall be delivered to and held by or on behalf of Secured
Party pursuant hereto and shall be in suitable form for transfer by delivery or,
as applicable, shall be accompanied by the appropriate Pledgor's endorsement,
where necessary, or duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to Secured Party. Upon the
occurrence and during the continuation of an Event of Default (as defined in the
Credit Agreement) or the occurrence of an Early Termination Date (as defined in
a Master Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International Swap and
Derivatives Association Inc. or a similar event under any similar swap
agreement) under any Lender Interest Rate Agreement (either such occurrence
being an "Event of Default" for purposes of this Agreement), Secured Party shall
have the right, without notice to any Pledgor, to transfer to or to register in
the name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties.
Each Pledgor represents and warrants as of the date it becomes a
party hereto as follows:
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(a) Due Authorization, etc. of Pledged Collateral. All of the
Pledged Shares owned by such Pledgor have been duly authorized and validly
issued and are fully paid and non-assessable. All of the Pledged Debt
owned by such Pledgor has been duly authorized, authenticated or issued,
and delivered and is the legal, valid and binding obligation of the
issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares owned by
such Pledgor constitute the percentage of the issued and outstanding
shares of stock of each issuer thereof set forth on Schedule I annexed
hereto, and there are no outstanding warrants, options or other rights to
purchase, or other agreements outstanding with respect to, or property
that is now or hereafter convertible into, or that requires the issuance
or sale of, any Pledged Shares. The Pledged Debt owned by such Pledgor
constitutes all of the issued and outstanding intercompany indebtedness
evidenced by a promissory note of the respective issuers thereof owing to
such Pledgor.
(c) Ownership of Pledged Collateral. Such Pledgor is the legal,
record and beneficial owner of the Pledged Collateral owned by such
Pledgor free and clear of any Lien except for the security interest
created by this Agreement.
(d) Perfection. The pledge of the Pledged Collateral pursuant to
this Agreement creates a valid and perfected first priority security
interest in the Pledged Collateral, securing the payment of the Secured
Obligations.
SECTION 5. Transfers and Other Liens; Additional Pledged Collateral; etc.
Each Pledgor shall:
(a) not, except as expressly permitted by the Credit Agreement, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of,
or grant any option with respect to, any of the Pledged Collateral, (ii)
create or suffer to exist any Lien upon or with respect to any of the
Pledged Collateral, except for the security interest under this Agreement,
or (iii) permit any issuer of Pledged Shares to merge or consolidate
unless all the outstanding capital stock of the surviving or resulting
corporation is, upon such merger or consolidation, pledged hereunder and
no cash, securities or other property is distributed in respect of the
outstanding shares of any other constituent corporation; provided that if
the surviving or resulting corporation upon any such merger or
consolidation involving an issuer of Pledged Shares which is a controlled
foreign corporation is a controlled foreign corporation, then such Pledgor
shall only be required to pledge outstanding capital stock of such
surviving or resulting corporation possessing up to but not exceeding 65%
of the voting power of all classes of capital
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stock of such issuer entitled to vote; provided further that in the event
any Pledgor makes an Asset Sale permitted by the Credit Agreement and the
assets subject to such Asset Sale are Pledged Shares, Secured Party shall
release the Pledged Shares that are the subject of such Asset Sale to such
Pledgor free and clear of the lien and security interest under this
Agreement concurrently with the consummation of such Asset Sale; and
provided further, that as a condition precedent to such release, Secured
Party shall have received evidence satisfactory to it that arrangements
satisfactory to it have been made for delivery to Secured Party of the Net
Cash Proceeds of such Asset Sale in the event and to the extent that all
or any portion of such Net Cash Proceeds are required to be applied to
prepay the Loans under the Credit Agreement.
(b) (i) cause each issuer of Pledged Shares not to issue any stock
or other securities in addition to or in substitution for the Pledged
Shares issued by such issuer, except to a Pledgor, (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and
all additional shares of stock or other securities of each issuer of
Pledged Shares, and (iii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all shares of stock
of any Person that, after the date of this Agreement, becomes, as a result
of any occurrence, a direct Subsidiary of any Pledgor; provided, that
notwithstanding anything contained in this clause (b) to the contrary,
such Pledgor shall only be required to pledge the outstanding capital
stock of a controlled foreign corporation possessing up to but not
exceeding 65% of the voting power of all classes of capital stock of such
controlled foreign corporation entitled to vote;
(c) (i) pledge hereunder, immediately upon their issuance, any and
all instruments or other evidences of additional indebtedness from time to
time owed to such Pledgor by any obligor on the Pledged Debt, and (ii)
pledge hereunder, immediately upon their issuance, any and all instruments
or other evidences of indebtedness from time to time owed to such Pledgor
by any Person that after the date of this Agreement becomes, as a result
of any occurrence, a direct or indirect Subsidiary of any Pledgor;
(d) promptly deliver to Secured Party all written notices received
by it with respect to the Pledged Collateral; and
(e) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged
Collateral, except to the extent the validity thereof is being contested
in good faith; provided that such Pledgor shall in any event pay such
taxes, assessments, charges, levies or claims not later than five
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days prior to the date of any proposed sale under any judgement, writ or
warrant of attachment entered or filed against Pledgor or any of the
Pledged Collateral as a result of the failure to make such payment.
SECTION 6. Further Assurances; Pledge Amendments.
(a) Each Pledgor agrees that from time to time, at the expense of
Pledgors, such Pledgor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, such
Pledgor will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby and (ii) at
Secured Party's request, appear in and defend any action or proceeding that may
affect such Pledgor's title to or Secured Party's security interest in all or
any part of the Pledged Collateral.
(b) Each Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in Section 5(b) or (c), promptly (and in any event within five
Business Days) deliver to Secured Party a Pledge Amendment, duly executed by
such Pledgor, in substantially the form of Schedule II annexed hereto (a "Pledge
Amendment"), in respect of the additional Pledged Shares or Pledged Debt to be
pledged pursuant to this Agreement. Each Pledgor hereby authorizes Secured Party
to attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any such Pledge Amendment delivered to Secured
Party shall for all purposes hereunder be considered Pledged Collateral;
provided that the failure of a Pledgor to execute a Pledge Amendment with
respect to any additional Pledged Shares or Pledged Debt pledged pursuant to
this Agreement shall not impair the security interest of Secured Party therein
or otherwise adversely affect the rights and remedies of Secured Party hereunder
with respect thereto.
SECTION 7. Voting Rights; Dividends; Etc.
(a) Pledgors' Rights. So long as no Event of Default shall have
occurred and be continuing:
(i) Pledgors shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Credit Agreement;
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(ii) Pledgors shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement, any and all
dividends and interest paid in respect of the Pledged Collateral;
provided, however, that any and all
(1) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral,
(2) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus, and
(3) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as, Pledged
Collateral and shall, if received by a Pledgor, be received in trust for the
benefit of Secured Party, be segregated from the other property or funds of such
Pledgor and be forthwith delivered to Secured Party as Pledged Collateral in the
same form as so received (with all necessary endorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgors all such proxies, dividend payment
orders and other instruments as Pledgors may from time to time reasonably
request for the purpose of enabling Pledgors to exercise the voting and
other consensual rights which they are entitled to exercise pursuant to
paragraph (i) above and to receive the dividends, principal or interest
payments which they are authorized to receive and retain pursuant to
paragraph (ii) above.
(b) Secured Party's Rights. Upon acceleration of the maturity of the
Loans in accordance with Section 8 of the Credit Agreement and upon the
occurrence and during the continuation of an Event of Default:
(i) upon written notice from Secured Party to a Pledgor, all rights
of such Pledgor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section 7(a)(i)
shall cease, and all such rights shall thereupon become vested in Secured
Party who shall thereupon have the sole right to exercise such voting and
other consensual rights;
(ii) all rights of Pledgors to receive the dividends and interest
payments which they would otherwise be
VIII-9
<PAGE>
authorized to receive and retain pursuant to Section 7(a)(ii) shall cease,
and all such rights shall thereupon become vested in Secured Party who
shall thereupon have the sole right to receive and hold as Pledged
Collateral such dividends and interest payments; and
(iii) all dividends, principal and interest payments which are
received by a Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of such Pledgor and shall forthwith
be paid over to Secured Party as Pledged Collateral in the same form as so
received (with any necessary endorsements).
(c) Irrevocable Proxy. In order to permit Secured Party to exercise
the voting and other consensual rights which it may be entitled to exercise
pursuant to Section 7(b)(i) and to receive all dividends and other distributions
which it may be entitled to receive under Section 7(a)(ii) or Section 7(b)(ii),
(i) each Pledgor shall promptly execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies, dividend payment orders and other
instruments as Secured Party may from time to time reasonably request and (ii)
without limiting the effect of the immediately preceding clause (i), each
Pledgor hereby grants to Secured Party an IRREVOCABLE PROXY to vote the Pledged
Shares owned by such Pledgor and to exercise all other rights, powers,
privileges and remedies to which a holder of the Pledged Shares would be
entitled (including without limitation giving or withholding written consents of
shareholders, calling special meetings of shareholders and voting at such
meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Shares on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Shares or any officer or agent thereof), upon the occurrence of an
Event of Default and which proxy shall only terminate upon the payment in full
of the Secured Obligations.
SECTION 8. Secured Party Appointed Attorney-in-Fact.
Each Pledgor hereby irrevocably appoints Secured Party as such
Pledgor's attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor, Secured Party or otherwise, from time
to time in Secured Party's discretion to take any action and to execute any
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including without limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of such Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for
VIII-10
<PAGE>
moneys due and to become due under or in respect of any of the Pledged
Collateral;
(c) to receive, endorse and collect any instruments made payable to
such Pledgor representing any dividend, principal or interest payment or
other distribution in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same; and
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the
rights of Secured Party with respect to any of the Pledged Collateral.
SECTION 9. Secured Party May Perform.
If any Pledgor fails to perform any agreement contained herein,
Secured Party may itself perform, or cause performance of, such agreement, and
the expenses of Secured Party incurred in connection therewith shall be payable
by Pledgors under Section 13(b).
SECTION 10. Standard of Care.
The powers conferred on Secured Party hereunder are solely to
protect its interest in the Pledged Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the exercise of reasonable care
in the custody of any Pledged Collateral in its possession and the accounting
for moneys actually received by it hereunder, Secured Party shall have no duty
as to any Pledged Collateral, it being understood that Secured Party shall have
no responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Secured Party has or is deemed to have
knowledge of such matters, (b) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Pledged Collateral) to preserve rights against any parties
with respect to any Pledged Collateral, (c) taking any necessary steps to
collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property consisting of negotiable securities.
SECTION 11. Remedies.
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged
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Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "Code") (whether or not the Code applies to the affected
Pledged Collateral), and Secured Party may also in its sole discretion, without
notice except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange or
broker's board or at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral. Secured Party or any Lender or Interest Rate Exchanger may be the
purchaser of any or all of the Pledged Collateral at any such sale and Secured
Party, as agent for and representative of Lenders and Interest Rate Exchangers
(but not any Lender or Lenders or Interest Rate Exchanger or Interest Rate
Exchangers in its or their respective individual capacities unless Requisite
Obligees (as defined in Section 15(a)) shall otherwise agree in writing), shall
be entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at any such
public sale, to use and apply any of the Secured Obligations as a credit on
account of the purchase price for any Pledged Collateral payable by Secured
Party at such sale. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of any Pledgor, and each
Pledgor hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Each Pledgor agrees that, to the extent notice of sale shall be required by law,
at least ten days' notice to such Pledgor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Pledged Collateral regardless of notice of sale having been given. Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Each Pledgor hereby
waives any claims against Secured Party arising by reason of the fact that the
price at which any Pledged Collateral may have been sold at such a private sale
was less than the price which might have been obtained at a public sale, even if
Secured Party accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral are insufficient to pay all the Secured
Obligations, Pledgors shall be jointly and severally liable for the deficiency
and the fees of any attorneys employed by Secured Party to collect such
deficiency.
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<PAGE>
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Each Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable than those obtainable
through a public sale without such restrictions and, notwithstanding such
circumstances, such Pledgor agrees that any such private sale shall be deemed to
have been made in a commercially reasonable manner and that Secured Party shall
have no obligation to engage in public sales and no obligation to delay the sale
of any Pledged Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if such
issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, each Pledgor shall and
shall cause each issuer of any Pledged Shares owned by such Pledgor to be sold
hereunder from time to time to furnish to Secured Party all such information as
Secured Party may request in order to determine the number of shares and other
instruments included in the Pledged Collateral which may be sold by Secured
Party in exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as the same
are from time to time in effect.
SECTION 12. Application of Proceeds.
All proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral shall be applied as provided in subsection 2.4D of the Credit
Agreement.
SECTION 13. Indemnity and Expenses.
(a) Pledgors jointly and severally agree to indemnify Secured Party,
each Lender and each Interest Rate Exchanger from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including without limitation enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's or
such Lender's or Interest Rate Exchanger's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
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<PAGE>
(b) Pledgors jointly and severally agree to pay to Secured Party
upon demand the amount of any and all costs and expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, that
Secured Party may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by any Pledgor to perform or observe any of the provisions hereof.
(c) The obligations of Pledgors in this Section 13 shall survive the
termination of this Agreement and the discharge of Pledgors' other obligations
under this Agreement, the Lender Interest Rate Agreements, the Credit Agreement
and the other Loan Documents.
SECTION 14. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (a) remain in full force and effect until the
payment in full of all Secured Obligations, the cancellation or termination of
the Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Pledgors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to the applicable Pledgors. Upon any such termination Secured Party
will, at Pledgors' expense, execute and deliver to Pledgors such documents as
Pledgors shall reasonably request to evidence such termination and Pledgors
shall be entitled to the return, upon their request and at their expense,
against receipt and without recourse to Secured Party, of such of the Pledged
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.
SECTION 15. Secured Party as Administrative Agent.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action
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(including without limitation the release or substitution of Pledged
Collateral), solely in accordance with this Agreement and the Credit Agreement;
provided that Secured Party shall exercise, or refrain from exercising, any
remedies provided for in Section 11 in accordance with the instructions of (i)
Requisite Lenders or (ii) after payment in full of all Obligations under the
Credit Agreement and the other Loan Documents, the holders of a majority of the
aggregate notional amount (or, with respect to any Lender Interest Rate
Agreement that has been terminated in accordance with its terms, the amount then
due and payable (exclusive of expenses and similar payments but including any
early termination payments then due) under such Lender Interest Rate Agreement)
under all Lender Interest Rate Agreements (Requisite Lenders or, if applicable,
such holders being referred to herein as "Requisite Obligees"). In furtherance
of the foregoing provisions of this Section 15(a), each Interest Rate Exchanger,
by its acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Pledged Collateral hereunder, it being
understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Secured Party for the benefit of
Lenders and Interest Rate Exchangers in accordance with the terms of this
Section 15(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the provisions of this Agreement shall inure to
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its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION 16. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Pledgor therefrom, shall in
any event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by Pledgors;
provided that any Pledge Amendment in the form of Schedule II annexed hereto or
any amendment hereto pursuant to Section 19 shall be effective upon execution by
any Pledgor and Pledgors hereby waive any requirement of notice of or consent to
any such Pledge Amendment or amendment. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
SECTION 17. Notices.
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
provided in subsection 10.8 of the Credit Agreement or as set forth under such
party's name on the signature pages hereof or such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
SECTION 18. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of
any power, right or privilege hereunder shall impair such power, right 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 any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 19. Additional Pledgors.
From time to time subsequent to the date hereof, Subsidiaries of
Company may become parties hereto, as additional Pledgors (each an "Additional
Pledgor"), by executing an acknowledgement to this Agreement substantially in
the form of Schedule III annexed hereto. Upon delivery of any such
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counterpart to Administrative Agent and Secured Party, notice of which is hereby
waived by Pledgors, each such Additional Pledgor shall be a Pledgor and shall be
as fully a party hereto as if such Additional Pledgor were an original signatory
hereto. Each Pledgor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Pledgor hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Pledgor hereunder. This Agreement
shall be fully effective as to any Pledgor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Pledgor hereunder.
SECTION 20. Severability.
In case any provision in or obligation under this Agreement 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.
SECTION 21. 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.
SECTION 22. Governing Law; Terms; Rules of Construction.
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, EXCEPT TO THE EXTENT THAT
THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED
BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein or in the Credit Agreement, terms used in Articles 8 and 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined. The rules of construction set forth in subsection 1.3 of the Credit
Agreement shall be applicable to this Agreement mutatis mutandis.
SECTION 23. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, 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 PLEDGOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
VIII-17
<PAGE>
(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 SUCH
PLEDGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 17; (IV) AGREES THAT
SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL
JURISDICTION OVER SUCH PLEDGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES
THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MATTER
PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH PLEDGOR IN THE COURTS OF
ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 23
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.
SECTION 24. Waiver of Jury Trial.
PLEDGORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. 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 Pledgor and Secured Party acknowledge that this waiver is
a material inducement for Pledgors and Secured Party to enter into a business
relationship, that Pledgors and Secured Party have 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 Pledgor and Secured Party further
warrant and represent that each has reviewed this waiver with its legal counsel,
and that each 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 SECTION 24 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 25. Counterparts.
This Agreement may be executed in one or more 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.
VIII-18
<PAGE>
[Remainder of page intentionally left blank]
VIII-19
<PAGE>
IN WITNESS WHEREOF, Pledgors and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
AURORA FOODS INC.
By:___________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Secured Party
By:___________________________
Name:
Title:
VIII-20
<PAGE>
SCHEDULE I
TO PLEDGE AGREEMENT
Attached to and forming a part of the Third Amended and Restated
Pledge Agreement dated as of June __, 1998, by and among the Pledgors referred
to therein and The Chase Manhattan Bank, as Secured Party.
Part A
================================================================================
Percentage
of
Stock Number Outstanding
Stock Class of Certificate Par of Shares
Pledgor Issuer Stock Nos. Value Shares Pledged
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Part B
=========================================================================
Pledgor Debt Issuer Amount of Indebtedness
=========================================================================
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
=========================================================================
VIII-21
<PAGE>
SCHEDULE II
TO PLEDGE AGREEMENT
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated ____________, [199_] [200_] is
delivered pursuant to Section 6(b) of the Pledge Agreement referred to below.
The undersigned hereby agrees that this Pledge Amendment may be attached to the
Third Amended and Restated Pledge Agreement dated as of June __, 1998, by and
among the Pledgors referred to therein and The Chase Manhattan Bank, as Secured
Party (the "Pledge Agreement", capitalized terms defined therein being used
herein as therein defined), and that the [Pledged Shares] [Pledged Debt] listed
on this Pledge Amendment shall be deemed to be part of the [Pledged Shares]
[Pledged Debt] and shall become part of the Pledged Collateral and shall secure
all Secured Obligations.
[NAME OF PLEDGOR]
By:___________________________
Name:
Title:
================================================================================
Percentage of
Stock Number Outstanding
Class of Certificate of Shares
Stock Issuer Stock Nos. Par Value Shares Pledged
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
========================================================
Debt Issuer Amount of
Indebtedness
========================================================
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
========================================================
VIII-22
<PAGE>
SCHEDULE III
TO PLEDGE AGREEMENT
[FORM OF PLEDGE ACKNOWLEDGEMENT]
This Pledge Acknowledgement, dated ____________, [199_] [200_], is
delivered pursuant to Section 19 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Acknowledgement may be attached to
the Third Amended and Restated Pledge Agreement dated June __, 1998, by and
among the Pledgors referred to therein and The Chase Manhattan Bank, as Secured
Party (the "Pledge Agreement", capitalized terms defined therein being used
herein as therein defined), that the undersigned by executing and delivering
this Acknowledgement hereby becomes a Pledgor under the Pledge Agreement in
accordance with Section 19 thereof and agrees to be bound by all of the terms
thereof, and that the [Pledged Shares] [Pledged Debt] listed on this Pledge
Acknowledgement shall be deemed to be part of the [Pledged Shares] [Pledged
Debt] and shall become part of the Pledged Collateral and shall secure all
Secured Obligations.
[NAME OF ADDITIONAL PLEDGOR]
By:_________________________
Name:
Title:
Notice Address:
____________________________
____________________________
____________________________
VIII-23
<PAGE>
================================================================================
Percentage of
Stock Number Outstanding
Class of Certificate of Shares
Stock Issuer Stock Nos. Par Value Shares Pledged
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
========================================================
Debt Issuer Amount of
Indebtedness
========================================================
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
========================================================
VIII-24
<PAGE>
EXHIBIT IX
[FORM OF SECURITY AGREEMENT]
THIRD AMENDED AND RESTATED SECURITY AGREEMENT
This THIRD AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement") is
dated as of June __, 1998 and entered into by and among AURORA FOODS INC., a
Delaware corporation ("Company" or "Grantor"); provided that after the Effective
Date, "Grantors" shall mean and include Company and any Additional Grantors (as
hereinafter defined)) and THE CHASE MANHATTAN BANK, as administrative agent for
and representative of (in such capacity herein called "Secured Party") the
financial institutions ("Lenders") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pursuant to that certain Third Amended and Restated Credit
Agreement dated as of June __, 1998 (said Third Amended and Restated Credit
Agreement, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined)
by and among Company, Lenders, Secured Party, as Administrative Agent, National
Westminster Bank PLC, as Syndication Agent, and Swiss Bank Corporation, as
Documentation Agent, Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
B. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"Lender Interest Rate Agreements") with one or more Lenders or their Affiliates
(in such capacity, collectively, "Interest Rate Exchangers") in accordance with
the terms of the Credit Agreement, and it is desired that the obligations of
Company under the Lender Interest Rate Agreements, including without limitation
the obligation of Company to make payments thereunder in the event of early
termination thereof (all such obligations being the "Interest Rate
Obligations"), together with all obligations of Company under the Credit
Agreement and the other Loan Documents, be secured hereunder.
C. Additional Grantors shall execute and deliver counterparts to
that certain Subsidiary Guaranty (said Subsidiary Guaranty, as it may be
amended, restated, supplemented or otherwise modified from time to time, being
the "Subsidiary Guaranty") in favor of Secured Party for the benefit of Lenders
and any Interest Rate Exchangers, pursuant to which each Additional Grantor
shall guaranty the prompt payment and performance when due of all obligations of
Company under the Credit Agreement and the other Loan Documents and all
obligations
IX-1
<PAGE>
of Company under the Lender Interest Rate Agreements, including without
limitation the obligation of Company to make payments thereunder in the event of
early termination thereof.
D. It is a condition precedent to the extensions of credit by
Lenders under the Credit Agreement that Grantors shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into the Lender
Interest Rate Agreements, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, each Grantor hereby
agrees with Secured Party as follows:
SECTION 1. Grant of Security.
Each Grantor hereby assigns to Secured Party, and hereby grants to
Secured Party a security interest in, all of such Grantor's right, title and
interest in and to the following, in each case whether now or hereafter existing
or in which Grantor now has or hereafter acquires an interest and wherever the
same may be located (the "Collateral"):
(a) all equipment in all of its forms (including, but not limited
to, all machinery, all computers, all data processing, computer or office
equipment, all furniture and all trucks and other vehicles), all parts
thereof and all accessions thereto (any and all such equipment, parts and
accessions being the "Equipment");
(b) all inventory in all of its forms (including, but not limited
to, (i) all goods held by such Grantor for sale or lease or to be
furnished under contracts of service or so leased or furnished, (ii) all
raw materials, work in process, finished goods, samples, and materials
used or consumed in the manufacture, packing, shipping, advertising,
selling, leasing, furnishing or production of such inventory or otherwise
used or consumed in such Grantor's business, (iii) all goods in which such
Grantor has an interest in mass or a joint or other interest or right of
any kind, and (iv) all goods which are returned to or repossessed by such
Grantor) and all accessions thereto and products thereof (all such
inventory, accessions and products being the "Inventory") and all
negotiable and non-negotiable documents of title (including without
limitation warehouse receipts, dock receipts and bills of lading) issued
by any Person covering any Inventory (any such negotiable document of
title being a "Negotiable Document of Title");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights
IX-2
<PAGE>
and obligations of any kind owned by or owing to such Grantor and all
rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, documents, instruments, general intangibles or
other obligations (any and all such accounts, contract rights, chattel
paper, documents, instruments, general intangibles and other obligations
being the "Accounts", and any and all such security agreements, leases and
other contracts being the "Related Contracts");
(d) all agreements to which such Grantor is a party, including
without limitation those listed in Schedule 1(d) annexed hereto, as each
such agreement may be amended, restated, supplemented or otherwise
modified from time to time (said agreements, as so amended, restated,
supplemented or otherwise modified, being referred to herein individually
as an "Assigned Agreement" and collectively as the "Assigned Agreements"),
including, without limitation, (i) all rights of such Grantor to receive
moneys due or to become due under or pursuant to the Assigned Agreements,
(ii) all rights of such Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements,
(iii) all claims of such Grantor for damages arising out of any breach of
or default under the Assigned Agreements, and (iv) all rights of such
Grantor to terminate, amend, supplement, modify or exercise rights or
options under the Assigned Agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder;
(e) all cash, money, currency and deposit accounts, including
without limitation demand, time, savings, passbooks or similar accounts
maintained with Lenders or other banks, savings and loan associations or
other financial institutions;
(f) all trademarks, trademark applications, trade names, trade
secrets, trade dress, service marks, business names, patents, patent
applications, licenses, copyrights and copyright applications owned by
such Grantor, and all goodwill associated with any of the foregoing;
(g) to the extent not included in any other paragraph of this
Section 1, all other general intangibles (including without limitation
unpatented formulas, recipes, manufacturing methods and processes,
inventions, discoveries, tax refunds, rights to payment or performance,
choses in action and judgments taken on any rights or claims included in
the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products
thereof;
IX-3
<PAGE>
(i) all books, records, ledger cards, files, sales records, sales
and promotional data, invoices, product specifications, drawings,
advertising materials, customer lists, cost and pricing information,
supplier lists, business plans, catalogs, quality control manuals,
blueprints, correspondence, computer programs, tapes, disks and related
data processing software that at any time evidence or contain information
relating to any of the Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon; and
(j) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral. For purposes of this Agreement, the term "proceeds" includes
whatever is receivable or received when Collateral or proceeds are sold,
exchanged, collected or otherwise disposed of, whether such disposition is
voluntary or involuntary.
SECTION 2. Security for Obligations.
This Agreement secures, and the Collateral assigned by each Grantor
is collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including without limitation the payment of amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all Secured Obligations
with respect to such Grantor. "Secured Obligations" means
(a) with respect to Company, all obligations and liabilities of
every nature of Company now or hereafter existing under or arising out of
or in connection with the Credit Agreement and the other Loan Documents
and any Lender Interest Rate Agreement, and
(b) with respect to each Additional Grantor, all obligations and
liabilities of every nature of Additional Grantors now or hereafter
existing under or arising out of or in connection with the Subsidiary
Guaranty,
in each case together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary,
IX-4
<PAGE>
direct or indirect, absolute or contingent, liquidated or unliquidated, whether
or not jointly owed with others, and whether or not from time to time decreased
or extinguished and later increased, created or incurred, and all or any portion
of such obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from Secured
Party or any Lender or Interest Rate Exchanger as a preference, fraudulent
transfer or otherwise, and all obligations of every nature of Grantors now or
hereafter existing under this Agreement.
SECTION 3. Grantors Remain Liable.
Anything contained herein to the contrary notwithstanding, (a) each
Grantor shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Secured Party of any of its rights hereunder shall
not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (c) Secured Party shall
not have any obligation or liability under any contracts and agreements included
in the Collateral by reason of this Agreement, nor shall Secured Party be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 4. Representations and Warranties.
Each Grantor represents and warrants as of the date it becomes a
party hereto as follows:
(a) Ownership of Collateral. Except as expressly permitted by the
Credit Agreement and except for the security interest created by this
Agreement, such Grantor owns the Collateral owned by such Grantor free and
clear of any Lien.
(b) Locations of Equipment and Inventory. All of the Equipment and
Inventory is, as of the date such Grantor has become a party hereto,
located at the places specified in Schedule 4(b) annexed hereto.
(c) Negotiable Documents of Title. No Negotiable Documents of Title
are outstanding with respect to any of the Inventory.
(d) Office Locations. The chief place of business, the chief
executive office and the office where such Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that
evidence Accounts are located at the locations set forth on Schedule 4(d)
annexed hereto.
IX-5
<PAGE>
(e) Names. No Grantor has in the past done, and no Grantor now does,
business under any other name (including any trade-name or fictitious
business name) except the names listed in Schedule 4(e) annexed hereto.
(f) Delivery of Certain Collateral. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have been
delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
(g) Perfection. The security interests in the Collateral granted to
Secured Party for the ratable benefit of the Lenders and Interest Rate
Exchangers hereunder constitute valid security interests in the
Collateral. Upon the filing of UCC financing statements naming each
Grantor as "debtor", naming Secured Party as "secured party" and
describing the Collateral in the filing offices set forth on Schedule 4(g)
annexed hereto, the security interests in the Collateral granted to
Secured Party for the ratable benefit of the Lenders and Interest Rate
Exchangers will, to the extent a security interest in the Collateral may
be perfected by filing UCC financing statements, constitute perfected
security interests therein prior to all other Liens.
SECTION 5. Further Assurances.
(a) Each Grantor agrees that from time to time, at the expense of
Grantors, such Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, each Grantor will:
(i) at the request of Secured Party, mark conspicuously each item of chattel
paper included in the Accounts, each Related Contract and, at the request of
Secured Party, each of its records pertaining to the Collateral, with a legend,
in form and substance satisfactory to Secured Party, indicating that such
Collateral is subject to the security interest granted hereby, (ii) at the
request of Secured Party, deliver and pledge to Secured Party hereunder all
promissory notes and other instruments (including checks) and all original
counterparts of chattel paper constituting Collateral, duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Secured Party, (iii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as Secured Party
may request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (iv) promptly after the acquisition by such
Grantor of any item of
IX-6
<PAGE>
Equipment which is covered by a certificate of title under a statute of any
jurisdiction under the law of which indication of a security interest on such
certificate is required as a condition of perfection thereof, execute and file
with the registrar of motor vehicles or other appropriate authority in such
jurisdiction an application or other document requesting the notation or other
indication of the security interest created hereunder on such certificate of
title, (v) within 30 days after the end of each calendar year and June 30 of
each calendar year, deliver to Secured Party copies of all such applications or
other documents filed during such semiannual period and copies of all such
certificates of title issued during such semiannual period indicating the
security interest created hereunder in the items of Equipment covered thereby,
(vi) at any reasonable time, upon request by Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by Secured Party, or
persons designated by Secured Party, and (vii) at Secured Party's request,
appear in and defend any action or proceeding that may affect such Grantor's
title to or Secured Party's security interest in all or any part of the
Collateral.
(b) Each Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of any Grantor. Each Grantor
agrees that a carbon, photographic or other reproduction of this Agreement or of
a financing statement signed by such Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Each Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
SECTION 6. Certain Covenants of Grantors.
Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the
Collateral;
(b) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change
in such Grantor's chief place of business, chief executive office or
residence or the office where such Grantor keeps its records regarding the
Accounts and all originals of all chattel paper that evidence Accounts;
and
IX-7
<PAGE>
(d) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except
to the extent the validity thereof is being contested in good faith;
provided that such Grantor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of
any proposed sale under any judgement, writ or warrant of attachment
entered or filed against such Grantor or any of the Collateral as a result
of the failure to make such payment.
SECTION 7. Special Covenants With Respect to Equipment and Inventory.
Each Grantor shall:
(a) keep the Equipment and Inventory owned by such Grantor at the
places therefor specified on Schedule 4(b) annexed hereto or, upon 30
days' prior written notice to Secured Party, at such other places in
jurisdictions where all action that may be necessary or desirable, or that
Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby, or to enable Secured
Party to exercise and enforce its rights and remedies hereunder, with
respect to such Equipment and Inventory shall have been taken;
(b) cause the Equipment owned by such Grantor to be maintained and
preserved in the same condition, repair and working order as when new,
ordinary wear and tear excepted, and in accordance with such Grantor's
past practices. Each Grantor shall promptly furnish to Secured Party a
statement respecting any material loss or damage to any of the Equipment
owned by such Grantor;
(c) keep correct and accurate records of Inventory owned by such
Grantor, itemizing and describing the kind, type and quantity of such
Inventory, such Grantor's cost therefor and (where applicable) the current
list prices for such Inventory;
(d) if any Inventory is in possession or control of any of such
Grantor's agents or processors, if the aggregate book value of all such
Inventory exceeds $300,000, and in any event upon the occurrence of an
Event of Default (as defined in the Credit Agreement) or the occurrence of
an Early Termination Date (as defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in
the form prepared by the International Swap and Derivatives Association
Inc. or a similar event under any similar swap agreement) under any Lender
Interest Rate Agreement (either such occurrence being an "Event of
Default" for purposes of this Agreement), instruct such agent or processor
to hold all such Inventory
IX-8
<PAGE>
for the account of Secured Party and subject to the instructions of
Secured Party.
(e) promptly upon the issuance and delivery to such Grantor of any
Negotiable Document of Title, deliver such Negotiable Document of Title to
Secured Party.
SECTION 8. Insurance.
Each Grantor shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in accordance with the terms of the
Credit Agreement.
SECTION 9. Special Covenants with respect to Accounts and Related Contracts.
(a) Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, and all originals of all chattel paper that
evidence Accounts, at the location therefor specified in Section 4 or, upon 30
days' prior written notice to Secured Party, at such other location in a
jurisdiction where all action that may be necessary or desirable, or that
Secured Party may request, in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Secured Party to
exercise and enforce its rights and remedies hereunder, with respect to such
Accounts and Related Contracts shall have been taken. Each Grantor will hold and
preserve such records and chattel paper and will permit representatives of
Secured Party at any time during normal business hours to inspect and make
abstracts from such records and chattel paper, and each Grantor agrees to render
to Secured Party, at Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto. Promptly upon the
request of Secured Party, each Grantor shall deliver to Secured Party complete
and correct copies of each Related Contract.
(b) Each Grantor shall, for not less than 3 years from the date on
which such Account arose, maintain (i) complete records of each Account of such
Grantor, including records of all payments received, credits granted and
merchandise returned, and (ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor under the Accounts and Related Contracts. In
connection with such collections, each Grantor may take (and, at Secured Party's
direction, shall take) such action as such Grantor or Secured Party may deem
necessary or advisable to enforce collection of amounts due or to become due
under the Accounts; provided, however, that Secured Party shall have the right
at any time, upon the occurrence and during the continuation of an Event of
Default or a Potential Event of Default and upon written notice
IX-9
<PAGE>
to such Grantor of its intention to do so, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to Secured Party
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to such Grantor thereunder directly to Secured Party, to
notify each Person maintaining a lockbox or similar arrangement to which account
debtors or obligors under any Accounts have been directed to make payment to
remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to Secured Party and, upon such notification and at the expense of
Grantors, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by such Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence,
(i) all amounts and proceeds (including checks and other instruments) received
by such Grantor in respect of the Accounts and the Related Contracts shall be
received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section
18, and (ii) such Grantor shall not adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon.
SECTION 10. Special Provisions With Respect to the Assigned Agreements.
(a) Each Grantor shall at its expense:
(i) if consistent with sound business practices, perform and observe
all terms and provisions of the Assigned Agreements to be performed or
observed by it, maintain the Assigned Agreements in full force and effect,
enforce the Assigned Agreements in accordance with their terms, and take
all such action to such end as may be from time to time requested by
Secured Party; and
(ii) upon the reasonable request of Secured Party, furnish to
Secured Party, promptly upon receipt thereof, copies of all notices,
requests and other documents received by such Grantor under or pursuant to
the Assigned Agreements, and from time to time (A) furnish to Secured
Party such information and reports regarding the Assigned Agreements as
Secured Party may reasonably request and (B) upon request of Secured Party
make to the parties to such Assigned Agreements such demands and requests
for information and reports or for action as such Grantor is entitled to
make under the Assigned Agreements.
(b) Upon the occurrence and during the continuance of an Event of
Default, no Grantor shall:
IX-10
<PAGE>
(i) cancel or terminate any of the Assigned Agreements or consent to
or accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
(iii) waive any default under or breech of the Assigned Agreements;
(iv) consent to or permit or accept any prepayment of amounts to
become due under or in connection with the Assigned Agreements, except as
expressly provided therein; or
(v) take any other action in connection with the Assigned Agreements
that would materially impair the value of the interest or rights of such
Grantor thereunder or that would materially impair the interest or rights
of Secured Party.
SECTION 11. Deposit Accounts.
Upon the occurrence and during the continuation of an Event of
Default, Secured Party may exercise dominion and control over, and refuse to
permit further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Secured Party constituting
part of the Collateral.
SECTION 12. License of Patents, Trademarks, Copyrights, etc.
Each Grantor hereby assigns, transfers and conveys to Secured Party,
effective upon the occurrence of any Event of Default, the nonexclusive right
and license to use all trademarks, tradenames, copyrights, patents or technical
processes owned or held by such Grantor that are necessary for the use and
enjoyment of the Collateral and any other collateral granted by such Grantor as
security for the Secured Obligations, together with any goodwill associated
therewith, all to the extent necessary to enable Secured Party to use, possess
and realize on the Collateral and to enable any successor or assign to enjoy the
benefits of the Collateral. This right and license shall inure to the benefit of
all successors, assigns and transferees of Secured Party and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.
Such right and license is granted free of charge, without requirement that any
monetary payment whatsoever be made to such Grantor.
SECTION 13. Transfers and Other Liens.
No Grantor shall:
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<PAGE>
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit
Agreement; or
(b) except for the security interest created by this Agreement,
create or suffer to exist any Lien upon or with respect to any of the
Collateral to secure the indebtedness or other obligations of any Person.
SECTION 14. Secured Partner Appointed Attorney-in-Fact.
Each Grantor hereby irrevocably appoints Secured Party as such
Grantor's attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor, Secured Party or otherwise, from time
to time in Secured Party's discretion to take any action and to execute any
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including without limitation:
(a) upon the occurrence and during the continuance of an Event of
Default, to obtain and adjust insurance required to be maintained by such
Grantor or paid to Secured Party pursuant to Section 8;
(b) upon the occurrence and during the continuance of an Event of
Default, to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(c) upon the occurrence and during the continuance of an Event of
Default, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) upon the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by Secured
Party in its sole discretion, any such payments made by Secured Party to
become obligations of such Grantor to Secured Party, due and payable
immediately without demand;
(f) upon the occurrence and during the continuance of an Event of
Default, to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments,
IX-12
<PAGE>
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuance of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Grantors' expense, at
any time or from time to time, all acts and things that Secured Party
deems necessary to protect, preserve or realize upon the Collateral and
Secured Party's security interest therein in order to effect the intent of
this Agreement, all as fully and effectively as such Grantor might do.
SECTION 15. Secured Party May Perform.
If any Grantor fails to perform any agreement contained herein,
Secured Party may itself perform, or cause performance of, such agreement, and
the expenses of Secured Party incurred in connection therewith shall be payable
by such Grantor under Section 19(b).
SECTION 16. Standard of Care.
The powers conferred on Secured Party hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property.
SECTION 17. Remedies.
If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Collateral), and also may (a) require
each Grantor to, and each Grantor hereby agrees that it will at its expense and
upon request of Secured Party forthwith, assemble all or part of the Collateral
as directed by Secured Party and make it available to Secured Party at a place
to be designated by Secured Party that is reasonably convenient to both parties,
(b) enter onto the
IX-13
<PAGE>
property where any Collateral is located and take possession thereof with or
without judicial process, (c) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (d) take possession of any Grantor's premises or place custodians
in exclusive control thereof, remain on such premises and use the same and any
of such Grantor's equipment for the purpose of completing any work in process,
taking any actions described in the preceding clause (c) and collecting any
Secured Obligation, and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party or
any Lender or Interest Rate Exchanger may be the purchaser of any or all of the
Collateral at any such sale and Secured Party, as agent for and representative
of Lenders and Interest Rate Exchangers (but not any Lender or Lenders or
Interest Rate Exchanger or Interest Rate Exchangers in its or their respective
individual capacities unless Requisite Obligees (as defined in Section 21(a))
shall otherwise agree in writing), shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to such Grantor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against Secured Party arising
by reason of the fact that the price at which any Collateral may have been sold
at such a private sale was less than the price which might have been obtained at
a public sale, even if Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree. If the proceeds of any sale
or other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be jointly and severally liable for the deficiency
and the fees of any attorneys employed by Secured Party to collect such
deficiency.
IX-14
<PAGE>
SECTION 18. Application of Proceeds.
Except as expressly provided elsewhere in this Agreement, all
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral shall be applied as
provided in subsection 2.4D of the Credit Agreement.
SECTION 19. Indemnity and Expenses.
(a) Grantors jointly and severally agree to indemnify Secured Party,
each Lender and each Interest Rate Exchanger from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including without limitation enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's or
such Lender's or Interest Rate Exchanger's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Secured Party
upon demand the amount of any and all costs and expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, that
Secured Party may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or (iv)
the failure by any Grantor to perform or observe any of the provisions hereof.
(c) The obligations of Grantors in this Section 19 shall survive the
termination of this Agreement and the discharge of Grantors' other obligations
under this Agreement, the Lender Interest Rate Agreements, the Credit Agreement
and the other Loan Documents.
SECTION 20. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Grantors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured
IX-15
<PAGE>
Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantors. Upon any such termination Secured Party will,
at Grantors' expense, execute and deliver to Grantors such documents as Grantors
shall reasonably request to evidence such termination.
SECTION 21. Secured Party as Administrative Agent.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 17 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the holders of a majority of the aggregate notional amount
(or, with respect to any Lender Interest Rate Agreement that has been terminated
in accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "Requisite Obligees"). In furtherance of the foregoing provisions of
this Section 21(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 21(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and
IX-16
<PAGE>
become vested with all the rights, powers, privileges and duties of the retiring
or removed Secured Party under this Agreement, and the retiring or removed
Secured Party under this Agreement shall promptly (i) transfer to such successor
Secured Party all sums, securities and other items of Collateral held hereunder,
together with all records and other documents necessary or appropriate in
connection with the performance of the duties of the successor Secured Party
under this Agreement, and (ii) execute and deliver to such successor Secured
Party such amendments to financing statements, and take such other actions, as
may be necessary or appropriate in connection with the assignment to such
successor Secured Party of the security interests created hereunder, whereupon
such retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Administrative
Agent's resignation or removal hereunder as Secured Party, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Secured Party hereunder.
SECTION 22. Additional Grantors.
From time to time subsequent to the date hereof, Subsidiaries of
Company may become parties hereto as additional Grantors (each an "Additional
Grantor") by executing a counterpart of this Agreement and delivering
supplements to Schedule 4(b), Schedule 4(d), Schedule 4(e) and Schedule 4(g) in
substantially the forms annexed hereto, which supplements shall thereby
supplement and amend such Schedules. Upon delivery of any such counterpart to
Administrative Agent and Secured Party, notice of which is hereby waived by
Grantors, each such Additional Grantor shall be a Grantor and shall be as fully
a party hereto as if such Additional Grantor were an original signatory hereto.
Each Grantor expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Grantor
hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Grantor hereunder.
SECTION 23. Amendments; Etc.
No amendment, modification, termination or waiver of any provision
of this Agreement, and no consent to any departure by any Grantor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by Secured Party and, in the case of any such amendment or modification, by
Grantors; provided that any amendment hereto pursuant to Section 22 shall be
effective upon execution by any Additional Grantor and Grantors hereby waive any
requirement of notice of or consent to any such amendment. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
IX-17
<PAGE>
SECTION 24. Notices.
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
provided in subsection 10.8 of the Credit Agreement or as set forth under such
party's name on the signature pages hereof or such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
SECTION 25. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of
any power, right or privilege hereunder shall impair such power, right 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 any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 26. Severability.
In case any provision in or obligation under this Agreement 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.
SECTION 27. 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.
SECTION 28. Governing Law; Terms; Rules of Construction.
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, EXCEPT TO THE EXTENT THAT
THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST
IX-18
<PAGE>
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Credit Agreement, terms used in Articles 8
and 9 of the Uniform Commercial Code in the State of New York are used herein as
therein defined. The rules of construction set forth in subsection 1.3 of the
Credit Agreement shall be applicable to this Agreement mutatis mutandis.
SECTION 29. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, 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 GRANTOR, 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 SUCH GRANTOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SECTION 24; (IV) AGREES THAT SERVICE AS PROVIDED IN
CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH
GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION;
AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 29 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.
SECTION 30. Waiver of Jury Trial.
GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. 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 Grantor and Secured Party acknowledge that this waiver is
a material inducement for Grantors and Secured Party to enter into a business
relationship, that Grantors and Secured Party have 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 Grantor and Secured Party further
warrant and represent that each has reviewed this waiver with its legal counsel,
and that each 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
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<PAGE>
IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SECTION 30 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
SECTION 31. Counterparts.
This Agreement may be executed in one or more 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.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, Grantors and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
AURORA FOODS INC.
By:__________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Secured Party
By:__________________________
Name:
Title:
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<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Grantor has caused
this Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of ____________________, [199_] [200_].
[NAME OF ADDITIONAL GRANTOR]
By:__________________________
Name:
Title:
Notice Address:
_____________________________
_____________________________
_____________________________
IX-22
<PAGE>
SCHEDULE 1(d)
TO
SECURITY AGREEMENT
Assigned Agreements
Name of Grantor Assigned Agreements
- --------------- -------------------
IX-23
<PAGE>
SCHEDULE 4(b)
TO
SECURITY AGREEMENT
Locations of Equipment and Inventory
Name of Grantor Locations of Equipment and Inventory
- --------------- ------------------------------------
IX-24
<PAGE>
SCHEDULE 4(d)
TO
SECURITY AGREEMENT
Office Locations
Name of Grantor Office Locations
- --------------- ----------------
IX-25
<PAGE>
SCHEDULE 4(e)
TO
SECURITY AGREEMENT
Other Names
Name of Grantor Other Names
- --------------- -----------
IX-26
<PAGE>
SCHEDULE 4(g)
TO
SECURITY AGREEMENT
Filing Offices
--------------
IX-27
<PAGE>
EXHIBIT X
[FORM OF VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT]
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
This VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT (this
"Agreement") is dated as of June __, 1998 and entered into by and among AURORA
FOODS INC., a Delaware corporation ("Company") (Company being referred to herein
as a "Grantor"; provided that after the Effective Date, "Grantors" shall mean
and include Company and any Additional Grantors (as hereinafter defined)), and
THE CHASE MANHATTAN BANK, as administrative agent for and representative of (in
such capacity herein called "Secured Party") the financial institutions
("Lenders") party to the Credit Agreement referred to below and any Interest
Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pursuant to that certain Third Amended and Restated Credit
Agreement dated as of June __, 1998 (said Third Amended and Restated Credit
Agreement, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined)
by and among Company, Lenders, Secured Party, as Administrative Agent, National
Westminster Bank PLC, as Syndication Agent, and Swiss Bank Corporation, as
Documentation Agent, Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
B. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreement (collectively, the
"Lender Interest Rate Agreements") with one or more Lenders or their Affiliates
(in such capacity, collectively, "Interest Rate Exchangers") in accordance with
the terms of the Credit Agreement, and it is desired that the obligations of
Company under the Lender Interest Rate Agreements, including without limitation
the obligation of Company to make payments thereunder in the event of early
termination thereof (all such obligations being the "Interest Rate
Obligations"), together with all obligations of Company under the Credit
Agreement and the other Loan Documents, be secured hereunder.
C. Additional Grantors shall execute and deliver counterparts to
that certain Subsidiary Guaranty (said Subsidiary Guaranty, as it may be
amended, restated, supplemented or otherwise modified from time to time, being
the "Subsidiary Guaranty") in favor of Secured Party for the benefit of Lenders
and any Interest Rate Exchangers, pursuant to which each Additional Grantor
shall guaranty the prompt payment and performance when due of all obligations of
Company under the
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Credit Agreement and the other Loan Documents and all obligations of Company
under the Lender Interest Rate Agreements, including without limitation the
obligation of Company to make payments thereunder in the event of early
termination thereof.
D. Grantors own and use in their business, and will in the future
adopt and so use, various intangible assets, including trademarks, service
marks, designs, logos, indicia, trade names, corporate names, company names,
business names, fictitious business names, trade styles and/or other source
and/or business identifiers and applications pertaining thereto (collectively,
the "Trademarks").
E. Secured Party desires Grantors to assign and grant to it a lien
on and security interest in all of Grantors' existing and future Trademarks, all
registrations that have been or may hereafter be issued or applied for thereon
in the United States and any state thereof and in foreign countries (the
"Registrations"), all common law and other rights in and to the Trademarks in
the United States and any state thereof and in foreign countries (the "Trademark
Rights"), all goodwill of Grantors' business symbolized by the Trademarks and
associated therewith, including without limitation the documents and things
described in Section 1(b) (the "Associated Goodwill"), and all proceeds of the
Trademarks, the Registrations, the Trademark Rights and the Associated Goodwill,
and Grantors agree to assign and grant to Secured Party a secured and protected
interest in the Trademarks, the Registrations, the Trademark Rights, the
Associated Goodwill and all the proceeds thereof as provided herein.
F. Pursuant to the Security Agreement, each Grantor has assigned and
granted to Secured Party a lien on and security interest in, among other assets,
all Grantors' equipment, inventory, accounts and general intangibles relating to
the products and services sold or delivered under or in connection with the
Trademarks such that, upon the occurrence and during the continuation of an
Event of Default (as defined in the Credit Agreement) or the occurrence of an
Early Termination Date (as defined in a Master Agreement or an Interest Rate
Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate Agreement
(either such occurrence being an "Event of Default" for purposes of this
Agreement), Secured Party would be able to exercise its remedies consistent with
the Security Agreement, this Agreement and applicable law to foreclose upon
Grantors' business and use the Trademarks, the Registrations and the Trademark
Rights in conjunction with the continued operation of such business, maintaining
substantially the same product and service specifications and quality as
maintained by Grantors, and benefit from the Associated Goodwill.
G. It is a condition precedent to the extensions of credit by
Lenders under the Credit Agreement that Grantors shall
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have assigned and granted the security interests and undertaken the obligations
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into the Lender
Interest Rate Agreements, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, each Grantor hereby
agrees with Secured Party as follows:
SECTION 1. Assignment and Grant of Security.
Each Grantor hereby grants to Secured Party a security interest in
all of such Grantor's right, title and interest in and to the following, in each
case whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "Collateral"):
(a) each of the Trademarks and rights and interests in Trademarks
which are presently, or in the future may be, owned or held (whether
pursuant to a license or otherwise) by such Grantor, in whole or in part
(including without limitation the Trademarks specifically identified in
Schedule I annexed hereto, as the same may be amended pursuant hereto from
time to time), and including all Trademark Rights with respect thereto and
all federal, state and foreign Registrations therefor heretofore or
hereafter granted or applied for, the right (but not the obligation) to
register claims under any state or federal trademark law or regulation or
any trademark law or regulation of any foreign country and to apply for,
renew and extend the Trademarks, Registrations and Trademark Rights, the
right (but not the obligation) to sue or bring opposition or cancellation
proceedings in the name of such Grantor or in the name of Secured Party or
otherwise for past, present and future infringements of the Trademarks,
Registrations or Trademark Rights and all rights (but not obligations)
corresponding thereto in the United States and any foreign country, and
the Associated Goodwill; it being understood that the rights and interests
included herein shall include, without limitation, all rights and
interests pursuant to licensing or other contracts in favor of such
Grantor pertaining to the Trademarks, Registrations or Trademark Rights
presently or in the future owned or used by third parties but, in the case
of third parties which are not Affiliates of such Grantor, only to the
extent permitted by such licensing or other contracts or otherwise
permitted by applicable law and, if not so permitted under any such
contracts and applicable law, only with the consent of such third parties;
(b) the following documents and things in such Grantor's possession,
or subject to such Grantor's right to possession, related to (Y) the
production, sale and delivery
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by such Grantor, or by any Affiliate, licensee or subcontractor of such
Grantor, of products or services sold or delivered by or under the
authority of such Grantor in connection with the Trademarks, Registrations
or Trademark Rights (which products and services shall, for purposes of
this Agreement, be deemed to include, without limitation, products and
services sold or delivered pursuant to merchandising operations utilizing
any Trademarks, Registrations or Trademark Rights); or (Z) any retail or
other merchandising operations conducted under the name of or in
connection with the Trademarks, Registrations or Trademark Rights by such
Grantor or any Affiliate, licensee or subcontractor of such Grantor:
(i) all lists and ancillary documents that identify and
describe any of such Grantor's customers, or those of their
Affiliates, licensees or subcontractors, for products sold and
services delivered under or in connection with the Trademarks or
Trademark Rights, including without limitation any lists and
ancillary documents that contain a customer's name and address, the
name and address of any of its warehouses, branches or other places
of business, the identity of the Person or Persons having the
principal responsibility on a customer's behalf for ordering
products or services of the kind supplied by such Grantor, or the
credit, payment, discount, delivery or other sale terms applicable
to such customer, together with information setting forth the total
purchases, by brand, product, service, style, size or other
criteria, and the patterns of such purchases;
(ii) all product and service specification documents and
production and quality control manuals used in the manufacture or
delivery of products and services sold or delivered under or in
connection with the Trademarks or Trademark Rights;
(iii) all documents which reveal the name and address of any
source of supply, and any terms of purchase and delivery, for any
and all materials, components and services used in the production of
products and services sold or delivered under or in connection with
the Trademarks or Trademark Rights; and
(iv) all documents constituting or concerning the then current
or proposed advertising and promotion by such Grantor or its
Affiliates, licensees or subcontractors of products and services
sold or delivered under or in connection with the Trademarks or
Trademark Rights including, without limitation, all documents which
reveal the media used or to be used and the cost for all such
advertising conducted within the described period or planned for
such products and services; and
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(c) all patents and patent applications and rights and interests in
patents and patent applications that are presently, or in the future may
be, owned, held (whether pursuant to a license or otherwise) or used by
such Grantor in whole or in part (including, without limitation, the
patents and patent applications listed in Schedule II annexed hereto, as
the same may be amended pursuant hereto from time to time), all rights
(but not obligations) corresponding thereto (including without limitation
the right (but not the obligation) to sue for past, present and future
infringements in the name of such Grantor or in the name of Secured
Party), and all re-issues, divisions, continuations, renewals, extensions
and continuations-in-part thereof (all of the foregoing being collectively
referred to as the "Patents"); it being understood that the rights and
interests assigned hereby shall include, without limitation, all rights
and interests pursuant to licensing or other contracts in favor of such
Grantor pertaining to any Patent presently or in the future owned, held or
used by third parties but, in the case of third parties which are not
Affiliates of such Grantor, only to the extent permitted by such licensing
or other contracts or otherwise permitted by applicable law and, if not so
permitted under any such contracts and applicable law, only with the
consent of such third parties;
(d) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that
at any time evidence or contain information relating to any of the
Collateral or are otherwise necessary or helpful in the collection thereof
or realization thereupon; and
(e) all proceeds, products, rents and profits (including without
limitation license royalties and proceeds of infringement suits) of or
from any and all of the foregoing Collateral and, to the extent not
otherwise included, all payments under insurance (whether or not Secured
Party is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of
the foregoing Collateral. For purposes of this Agreement, the term
"proceeds" includes whatever is receivable or received when Collateral or
proceeds are sold, exchanged, collected or otherwise disposed of, whether
such disposition is voluntary or involuntary.
SECTION 2. Security for Obligations.
This Agreement secures, and the Collateral assigned by each Grantor
is collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including without limitation the payment of amounts that
would become due but for the operation of the automatic stay
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under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all
Secured Obligations with respect to such Grantor. "Secured Obligations" means
(a) with respect to Company, all obligations and liabilities of
every nature of Company now or hereafter existing under or arising out of
or in connection with the Credit Agreement and the other Loan Documents
and any Lender Interest Rate Agreement, and
(b) with respect to each Additional Grantor, all obligations and
liabilities of every nature of Grantors now or hereafter existing under or
arising out of or in connection with the Subsidiary Guaranty,
in each case together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest, Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Grantors now or hereafter existing under this Agreement.
SECTION 3. Grantors Remain Liable.
Anything contained herein to the contrary notwithstanding, (a) each
Grantor shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Secured Party of any of its rights hereunder shall
not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (c) Secured Party shall
not have any obligation or liability under any contracts and agreements included
in the Collateral by reason of this Agreement, nor shall Secured Party be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
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SECTION 4. Representations and Warranties.
Each Grantor represents and warrants as of the date it becomes a
party hereto as follows:
(a) Ownership of Collateral. Except as expressly permitted by the
Credit Agreement and for the security interest assigned and created by
this Agreement, such Grantor is the legal and beneficial owner of the
entire right, title and interest in and to (i) each Material Trademark
Property (as defined in subsection 4(b) of this Agreement), free and clear
of any Lien other than Liens of mechanics, materialmen, attorneys and
other similar liens imposed by laws in the ordinary course of business in
connection with the establishment, creation or application for
Registration of any Trademarks, Registrations or Trademark Rights for sums
not yet delinquent or being contested in good faith (such Liens being
referred to herein as "Permitted Trademark Liens"), and (ii) each Material
Patent (as defined in subsection 4(b) of this Agreement), free and clear
of any Lien other than Liens of mechanics, materialmen, attorneys and
other similar liens imposed by law in the ordinary course of business in
connection with the establishment, creation or application for any Patent
for sums not yet delinquent or being contested in good faith (such Liens
being referred to herein as "Permitted Patent Liens"). Except such as may
have been filed in favor of Secured Party relating to this Agreement, no
effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any filing or
recording office, including the United States Patent and Trademark Office.
(b) Description of Collateral. A true and complete list of all
Trademarks, Registrations and Trademark Rights owned or held (whether
pursuant to a license or otherwise) by such Grantor, in whole or in part,
as of the date such Grantor has entered into this Agreement is set forth
in Schedule I annexed hereto. Each Trademark, Registration or Trademark
Right designated on Schedule I annexed hereto as a Material Trademark
Property, and each other Trademark, Registration or Trademark Right
hereafter arising or otherwise owned or held by any Grantor that is
material to any of such Grantor's business or operations is referred to
herein as a "Material Trademark Property". A true and complete list of all
Patents owned or held (whether pursuant to a license or otherwise) by such
Grantor, in whole or in part, as of the date such Grantor has entered into
this Agreement is set forth in Schedule II annexed hereto. Each Patent
designated on Schedule II annexed hereto as a Material Patent and each
other Patent hereafter arising or otherwise owned or held by such Grantor
that is material to any of such Grantor's business or operations is
referred to herein as a "Material Patent".
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(c) Validity and Enforceability of Collateral. To the knowledge of
Grantors, each Material Trademark Property and each Material Patent is
valid, subsisting and enforceable. As of the date each Grantor has entered
into this Agreement, such Grantor is not aware of any pending or
threatened claim by any third party that any Material Trademark Property
or any Material Patent is invalid or unenforceable or that the use of any
Material Trademark Property or any Material Patent violates the rights of
any third person or of any basis for any such claim, and there is no such
pending or threatened claim whether arising prior to or after the
Effective Date, that could reasonably be expected to have a Material
Adverse Effect.
(d) Office Locations. The chief place of business, the chief
executive office and the office where such Grantor keeps its records
regarding the Collateral is at the locations set forth on Schedule III
annexed hereto.
(e) Names. No Grantor has in the past done, and no Grantor now does,
business under any other name (including any trade name or fictitious
business name) except under the names listed on Schedule IV annexed
hereto.
(f) Perfection. The security interests in the Collateral granted to
Secured Party for the ratable benefit of the Lenders and Interest Rate
Exchangers hereunder constitute valid security interests in the
Collateral. Upon the filing of UCC financing statements naming each
Grantor as "debtor", naming Secured Party as "secured party" and
describing the Collateral in the filing offices set forth on Schedule V
annexed hereto and the recording of this Agreement with the United States
Patent and Trademark Office, the security interests in the Collateral
granted to Secured Party for the ratable benefit of the Lenders and
Interest Rate Exchangers will, to the extent a security interest in the
Collateral may be perfected by filing UCC financing statements and
recording this Agreement, constitute valid and perfected security
interests therein prior to all other Liens (subject only to Permitted
Patent Liens and Permitted Trademark Liens).
SECTION 5. Further Assurances; New Trademarks, Registrations and Trademark
Rights; New Patents and Patent Applications; Certain Inspection
Rights.
(a) Each Grantor agrees that from time to time, at the expense of
Grantors, such Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest assigned or purported to be assigned or granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
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Without limiting the generality of the foregoing, each Grantor will: (i) at the
request of Secured Party, take reasonable steps to indicate that such Collateral
is subject to the security interest granted hereby, (ii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as Secured Party
may request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (iii) use its best efforts to obtain any
necessary consents of third parties to the assignment and perfection of a
security interest to Secured Party with respect to any Collateral, and (iv) at
Secured Party's request, appear in and defend any action or proceeding that may
materially affect such Grantor's title to or Secured Party's security interest
in all or any part of the Collateral.
(b) Each Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of any Grantor. Each Grantor
agrees that a carbon, photographic or other reproduction of this Agreement or of
a financing statement signed by such Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Each Grantor hereby authorizes Secured Party to modify this
Agreement without obtaining such Grantor's approval of or signature to such
modification by (i) amending Schedule I annexed hereto to include reference to
any right, title or interest in any existing Trademark, Registration or
Trademark Right or any Trademark, Registration or Trademark Right acquired or
developed by any Grantor after its execution hereof or to delete any reference
to any right, title or interest in any Trademark, Registration or Trademark
Right in which no Grantor has or claims any right, title or interest, or (ii)
amending Schedule II annexed hereto to include reference to any right, title or
interest in any existing Patent or any Patent acquired or developed by any
Grantor after its execution hereof or to delete any reference to any right,
title or interest in any Patent in which no Grantor has or claims any right,
title or interest.
(d) Each Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
(e) If any Grantor shall obtain rights to any new Trademarks,
Registrations or Trademark Rights, or to any patentable inventions, or become
entitled to the benefit of any patent application or patent or any reissue,
division, continuation, renewal, extension, or continuation-in-part of any
Patent or any improvement in any Patent, the provisions of this Agreement shall
automatically apply thereto. Each Grantor shall
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promptly notify Secured Party in writing of any of the foregoing rights or
benefits, including, without limitation, rights to any new Trademarks or
Trademark Rights, acquired by such Grantor after the date hereof and of any
Registrations issued or applications for Registration made after the date
hereof, which notice shall state whether such Trademark, Registration or
Trademark Right constitutes a Material Trademark Property or whether such Patent
constitutes a Material Patent. Within a reasonable time after the filing of an
application for Registration for any Trademark, or an application for any Patent
the applicable Grantor shall execute, deliver and record in all places where
this Agreement is recorded an appropriate Patent and Trademark Security
Agreement, substantially in the form hereof, with appropriate insertions, or an
amendment to this Agreement, in form and substance satisfactory to Secured
Party, pursuant to which such Grantor shall assign and grant a security interest
to the extent of its interest in such Registration or Patent as provided herein
to Secured Party unless so doing would, in the reasonable judgment of such
Grantor, after due inquiry, result in the grant of a Patent or Registration in
the name of Secured Party, in which event such Grantor shall give written notice
to Secured Party as soon as reasonably practicable and the filing shall instead
be undertaken as soon as practicable but in no case later than immediately
following the grant of such Patent or Registration.
(f) Each Grantor hereby grants to Secured Party and its employees,
representatives and agents the right to visit such Grantor's and any of its
Affiliate's or subcontractor's plants, facilities and other places of business
that are utilized in connection with the manufacture, production, inspection,
storage or sale of products and services sold or delivered under any of the
Patents, Trademarks, Registrations or Trademark Rights (or which were so
utilized during the prior six month period), and to inspect the quality control
and all other records relating thereto upon reasonable notice to such Grantor
and as often as may be reasonably requested.
SECTION 6. Certain Covenants of Grantors.
Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the
Collateral;
(b) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change
in such Grantor's chief place of business or chief executive office or the
office where such Grantor keeps its records regarding the Collateral;
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(d) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except
to the extent the validity thereof is being contested in good faith;
provided that such Grantor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of
any proposed sale under any judgment, writ or warrant of attachment
entered or filed against such Grantor or any of the Collateral as a result
of the failure to make such payment;
(e) not sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit
Agreement;
(f) except for Permitted Patent Liens and Permitted Trademark Liens
and the security interest assigned and created by this Agreement, not
create or suffer to exist any Lien upon or with respect to any of the
Collateral to secure the indebtedness or other obligations of any Person;
(g) diligently keep reasonable records respecting the Collateral
assigned by it hereunder and at all times keep at least one complete set
of its records concerning substantially all of the Patents, Trademarks,
Registrations and Trademark Rights at its chief executive office or
principal place of business;
(h) not permit the inclusion in any contract to which it becomes a
party of any provision that could or might in any way conflict with this
Agreement or impair or prevent the assignment and creation of a security
interest in any Grantor's rights and interests in any property included
within the definitions of any Patents, Trademarks, Registrations,
Trademark Rights and Associated Goodwill acquired;
(i) use proper statutory notice in connection with its use of each
Material Patent and Material Trademark Property to the extent reasonably
necessary for the protection of such Material Patent or Material Trademark
Property;
(j) use consistent standards of quality (which may be consistent
with such Grantor's past practices) in the manufacture, sale and delivery
of products and services sold or delivered under or in connection with the
Trademarks, Registrations and Trademark Rights, including, to the extent
applicable, in the operation and maintenance of its retail stores and
other merchandising operations; and
(k) upon any officer of such Grantor obtaining knowledge thereof,
promptly notify Secured Party in writing of any event that may materially
and adversely affect the value of the Collateral or any portion thereof,
the ability
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of any Grantor or Secured Party to dispose of the Collateral or any
portion thereof, or the rights and remedies of Secured Party in relation
thereto, including without limitation the levy of any legal process
against the Collateral or any portion thereof
SECTION 7. Amounts Payable in Respect of the Collateral.
Except as otherwise provided in this Section 7, each Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantors in respect of the Collateral or any portion thereof. In connection with
such collections, each Grantor may take (and, at Secured Party's direction,
shall take) such action as such Grantor or Secured Party may deem necessary or
advisable to enforce collection of such amounts; provided, however, that Secured
Party shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default or a Potential Event of Default and upon
written notice to such Grantor of its intention to do so, to notify the obligors
with respect to any such amounts of the existence of the security interest
assigned and created hereby, and to direct such obligors to make payment of all
such amounts directly to Secured Party, and, upon such notification and at the
expense of Grantors, to enforce collection of any such amounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as such Grantor might have done. After receipt by such Grantor
of the notice from Secured Party referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by such Grantor in respect of amounts due to such Grantor in respect of
the Collateral or any portion thereof shall be received in trust for the benefit
of Secured Party hereunder, shall be segregated from other funds of such Grantor
and shall be forthwith paid over or delivered to Secured Party in the same form
as so received (with any necessary endorsement) to be held as cash Collateral
and applied as provided by Section 14, and (ii) such Grantor shall not adjust,
settle or compromise the amount or payment of any such amount or release wholly
or partly any obliger with respect thereto or allow any credit or discount
thereon.
SECTION 8. Patent or Trademark Applications and Litigation.
(a) Each Grantor shall have the duty diligently to prosecute any
trademark application relating to any Material Trademark Property that is
pending as of the date such Grantor has entered into this Agreement, to make
federal application on any existing or future registerable but unregistered
Material Trademark Property (whenever it is commercially reasonable in the
reasonable judgement of such Grantor to do so), and to file and prosecute
opposition and cancellation proceedings, renew Registrations and do any and all
acts which are necessary or desirable to preserve and maintain all rights in all
Material Trademark Properties. Any expenses incurred in connection therewith
shall be borne solely by Grantors. No Grantor shall
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abandon any Material Trademark Property unless it is commercially reasonable in
the judgment of such Grantor to do so.
(b) Each Grantor shall have the duty diligently to prosecute any
patent application relating to any Material Patent that is pending as of the
date such Grantor has entered into this Agreement and to do any and all acts
which are necessary or desirable to preserve and maintain all rights in all
Material Patents. Any expenses incurred in connection therewith shall be borne
solely by Grantors. Each Grantor shall not, as to any patentable invention or
Patent that constitutes or could constitute a Material Patent, abandon any
pending patent application or any Patent without the prior written consent of
Secured Party.
(c) Except as provided in Section 8(e), each Grantor shall have the
right to commence and prosecute in its own name, as real party in interest, for
its own benefit and at its own expense, such suits, proceedings or other actions
for infringement, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Collateral. Secured Party
shall provide, at Grantor's expense, all reasonable and necessary cooperation in
connection with any such suit, proceeding or action including, without
limitation, joining as a necessary party.
(d) Each Grantor shall promptly, following its becoming aware
thereof, notify Secured Party of the institution of, or of any adverse
determination in, any proceeding (whether in the United States Patent and
Trademark Office or any federal, state, local or foreign court) described in
subsection 8(a), 8(b) or 8(c) or regarding such Grantor's claim of ownership in
or right to use any of the Trademarks, Registrations or Trademark Rights, its
right to register the same, or its right to keep and maintain such Registration.
Such Grantor shall provide to Secured Party any information with respect thereto
requested by Secured Party.
(e) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, Secured Party
shall have the right (but not the obligation) to bring suit, in the name of any
Grantor, Secured Party or otherwise, to enforce any Patent, Trademark,
Registration, Trademark Right and any license thereunder and to enforce its
rights hereunder in Associated Goodwill, in which event each Grantor shall, at
the request of Secured Party, do any and all lawful acts and execute any and all
documents required by Secured Party in aid of such enforcement and each Grantor
shall promptly, upon demand, reimburse and indemnify Secured Party as provided
in Section 15 in connection with the exercise of its rights under this Section
8. To the extent that Secured Party shall elect not to bring suit to enforce any
Patent, Trademark, Registration, Trademark Right or any license thereunder or to
enforce its rights hereunder in Associated Goodwill as provided in this Section
8(e), each Grantor agrees to use all reasonable
X-13
<PAGE>
measures, whether by action, suit, proceeding or otherwise, to prevent the
infringement of any of the Patents, Trademarks, Registrations or Trademark
Rights or of Grantors' or Secured Party's rights in Associated Goodwill by
others and for that purpose agrees to diligently maintain any action, suit or
proceeding against any Person so infringing necessary to prevent such
infringement.
SECTION 9. Non-Disturbance Agreements, etc.
If and to the extent that any Grantor is permitted to license the
Collateral, Secured Party shall enter into a non-disturbance agreement or other
similar arrangement, at Grantors' request and expense, with such Grantor and any
licensee of any Collateral permitted hereunder in form and substance
satisfactory to Secured Party pursuant to which (a) Secured Party shall agree
not to disturb or interfere with such licensee's rights under its license
agreement with such Grantor so long as such licensee is not in default
thereunder and (b) such licensee shall acknowledge and agree that the Collateral
licensed to it is subject to the security interest assigned and created in favor
of Secured Party and the other terms of this Agreement.
SECTION 10. Secured Party Appointed Attorney-in-Fact.
Each Grantor hereby irrevocably appoints Secured Party as such
Grantor's attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor, Secured Party or otherwise, from time
to time in Secured Party's discretion to take any action and to execute any
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including without limitation:
(a) upon the occurrence and during the continuance of an Event of
Default, to endorse such Grantor's name on all applications, documents,
papers and instruments necessary for Secured Party in the use or
maintenance of the Collateral;
(b) upon the occurrence and during the continuance of an Event of
Default, to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(c) upon the occurrence and during the continuance of an Event of
Default, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (b) above;
(d) upon the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the
X-14
<PAGE>
Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by Secured
Party in its sole discretion, any such payments made by Secured Party to
become obligations of such Grantor to Secured Party, due and payable
immediately without demand; and
(f) upon the occurrence and during the continuance of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Secured Party pursuant to Section 13(b), (ii) to grant or
issue an exclusive or non-exclusive license to the Collateral or any
portion thereof to any Person, and (iii) otherwise generally to sell,
transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though Secured Party
were the absolute owner thereof for all purposes, and to do, at Secured
Party's option and Grantors' expense, at any time or from time to time,
all acts and things that Secured Party deems necessary to protect,
preserve or realize upon the Collateral and Secured Party's security
interest therein in order to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.
SECTION 11. Secured Party May Perform.
If any Grantor fails to perform any agreement contained herein,
Secured Party may itself perform, or cause performance of, such agreement, and
the expenses of Secured Party incurred in connection therewith shall be payable
by such Grantor under Section 15.
SECTION 12. Standard of Care.
The powers conferred on Secured Party hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for monies
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property of a similar nature.
X-15
<PAGE>
SECTION 13. Remedies.
If any Event of Default shall have occurred and be continuing:
(a) Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "Code") (whether or not the Code applies to the affected
Collateral), and also may (i) require each Grantor to, and each Grantor
hereby agrees that it will at its expense and upon request of Secured
Party forthwith, assemble all or part of the Collateral as directed by
Secured Party and make it available to Secured Party at a place to be
designated by Secured Party that is reasonably convenient to both parties,
(ii) enter onto the property where any Collateral is located and take
possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store the Collateral or otherwise prepare
the Collateral for disposition in any manner to the extent Secured Party
deems appropriate, (iv) take possession of any Grantor's premises or place
custodians in exclusive control thereof, remain on such premises and use
the same for the purpose of taking any actions described in the preceding
clause (iii) and collecting any Secured Obligation, (v) exercise any and
all rights and remedies of Grantors under or in connection with the
contracts related to the Collateral or otherwise in respect of the
Collateral, including without limitation any and all rights of Grantors to
demand or otherwise require payment of any amount under, or performance of
any provision of, such contracts, and (vi) without notice except as
specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or
times and at such price or prices and upon such other terms as Secured
Party may deem commercially reasonable. Secured Party or any Lender or
Interest Rate Exchanger may be the purchaser of any or all of the
Collateral at any such sale and Secured Party, as agent for and
representative of Lenders and Interest Rate Exchangers (but not any Lender
or Lenders or Interest Rate Exchanger or Interest Rate Exchangers in its
or their respective individual capacities unless Requisite Obligees (as
defined in Section 17(a)) shall otherwise agree in writing), shall be
entitled, for the purpose of bidding and making settlement or payment of
the purchase price for all or any portion of the Collateral sold at any
such public sale, to use and apply any of the Secured Obligations as a
credit on account of the purchase price for any Collateral payable by
Secured Party at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Grantor, and each
X-16
<PAGE>
Grantor hereby waives (to the extent permitted by applicable law) all
rights of redemption, stay and/or appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. Each Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to such Grantor of the
time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Secured Party
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Each Grantor hereby waives any
claims against Secured Party arising by reason of the fact that the price
at which any Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if
Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be jointly and severally liable for the
deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
(b) Upon written demand from Secured Party, each Grantor shall
execute and deliver to Secured Party an assignment or assignments of the
Patents, Trademarks, Registrations, Trademark Rights and the Associated
Goodwill and such other documents as are requested by Secured Party. Each
Grantor agrees that such an assignment and/or recording shall be applied
to reduce the Secured Obligations outstanding only to the extent that
Secured Party (or any Lender) receives cash proceeds in respect of the
sale of, or other realization upon, the Collateral.
(c) Within five Business Days after written notice from Secured
Party, each Grantor shall make available to Secured Party, to the extent
within each applicable Grantor's power and authority, such personnel in
such Grantor's employ on the date of such Event of Default as Secured
Party may reasonably designate, by name, title or job responsibility, to
permit such Grantor to continue, directly or indirectly, to produce,
advertise and sell the products and services sold or delivered by such
Grantor under or in connection with the Patents, Trademarks, Registrations
and Trademark Rights, such persons to be available to perform their prior
functions on Secured Party's behalf and to be compensated by Secured Party
at Grantors' expense on a per diem, pro rata basis consistent with the
salary and benefit structure applicable to each as of the date of such
Event of Default.
X-17
<PAGE>
SECTION 14. Application of Proceeds.
Except as expressly provided elsewhere in this Agreement, all
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral shall be applied as
provided in subsection 2.4D of the Credit Agreement.
SECTION 15. Indemnity and Expenses.
(a) Grantors jointly and severally agree to indemnify Secured Party,
each Lender and each Interest Rate Exchanger from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including without limitation enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's or
such Lender's or Interest Rate Exchanger's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Secured Party
upon demand the amount of any and all costs and expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, that
Secured Party may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or (iv)
the failure by any Grantor to perform or observe any of the provisions hereof.
(c) The obligations of Grantors in this Section 15 shall survive the
termination of this Agreement and the discharge of Grantors' other obligations
under this Agreement, the Interest Rate Agreements, the Credit Agreement and the
other Loan Documents.
SECTION 16. Continuing Security Interest; Transfer of Loans.
This Agreement shall assign and create a continuing security
interest in the Collateral and shall (a) remain in full force and effect until
the payment in full of the Secured Obligations, the cancellation or termination
of the Commitments and the cancellation or expiration of all outstanding Letters
of Credit, (b) be binding upon Grantors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full
X-18
<PAGE>
of all Secured Obligations, the cancellation or termination of the Commitments
and the cancellation or expiration of all outstanding Letters of Credit, the
security interest assigned and granted hereby shall terminate and all rights to
the Collateral shall revert to the applicable Grantors. Upon any such
termination Secured Party will, at Grantors' expense, execute and deliver to
Grantors such documents as Grantors shall reasonably request to evidence such
termination.
SECTION 17. Secured Party as Administrative Agent.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 13 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the holders of a majority of the aggregate notional amount
(or, with respect to any Lender Interest Rate Agreement that has been terminated
in accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "Requisite Obligees"). In furtherance of the foregoing provisions of
this Section 17(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 17(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and
X-19
<PAGE>
become vested with all the rights, powers, privileges and duties of the retiring
or removed Secured Party under this Agreement, and the retiring or removed
Secured Party under this Agreement shall promptly (i) transfer to such successor
Secured Party all sums, securities and other items of Collateral held hereunder,
together with all records and other documents necessary or appropriate in
connection with the performance of the duties of the successor Secured Party
under this Agreement, and (ii) execute and deliver to such successor Secured
Party such amendments to financing statements, and take such other actions, as
may be necessary or appropriate in connection with the assignment to such
successor Secured Party of the security interests created hereunder, whereupon
such retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Administrative
Agent's resignation or removal hereunder as Secured Party, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Secured Party hereunder.
SECTION 18. Amendments; Etc.
No amendment, modification, termination or waiver of any provision
of this Agreement, and no consent to any departure by any Grantor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by Secured Party and, in the case of any such amendment or modification, by
Grantors; provided that any amendment hereto pursuant to Section 21 or Section
5(c) shall be effective upon execution by any Additional Grantor and Grantors
hereby waive any requirement of notice of or consent to any such amendment. Any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
SECTION 19. Notices.
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be
provided in subsection 10.8 of the Credit Agreement or as set forth under such
party's name on the signature pages hereof or such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
X-20
<PAGE>
SECTION 20. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of
any power, right or privilege hereunder shall impair such power, right 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 any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 21. Additional Grantors.
From time to time subsequent to the date hereof, Subsidiaries of
Company may become parties hereto as additional Grantors (each an "Additional
Grantor") by executing an acknowledgement to this Agreement substantially in the
form of Schedule VI annexed hereto. Upon delivery of any such acknowledgment to
Administrative Agent and Secured Party, notice of which is hereby waived by
Grantors, each such Additional Grantor shall be a Grantor and shall be as fully
a party hereto as if such Additional Grantor were an original signatory hereto.
Each Grantor expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Grantor
hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Grantor hereunder.
SECTION 22. Severability.
In case any provision in or obligation under this Agreement 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.
SECTION 23. 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.
SECTION 24. Governing Law; Terms; Rules of Construction.
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
X-21
<PAGE>
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, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined. The rules of construction set forth
in subsection 1.3 of the Credit Agreement shall be applicable to this Agreement
mutatis mutandis.
SECTION 25. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, 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 GRANTOR, 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 SUCH GRANTOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SECTION 19; (IV) AGREES THAT SERVICE AS PROVIDED IN
CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH
GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION;
AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 25 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.
SECTION 26. Waiver of Jury Trial.
GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. 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 Grantor and Secured Party acknowledge that this waiver is
a material inducement for Grantors and Secured Party to enter into a business
relationship, that Grantors and Secured Party have 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 Grantor and Secured Party further
warrant and represent that
X-22
<PAGE>
each has reviewed this waiver with its legal counsel, and that each 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 SECTION 26 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
SECTION 27. Counterparts.
This Agreement may be executed in one or more 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.
[Remainder of page intentionally left blank]
X-23
<PAGE>
IN WITNESS WHEREOF, Grantors and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
AURORA FOODS INC.
By: ______________________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Secured Party
By: ______________________________________
Name:
Title:
X-24
<PAGE>
SCHEDULE I
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
United States
Registered Trademark Registration Registration
Owner Description Number Date
---------- ------------- ------------ ------------
X-25
<PAGE>
SCHEDULE II
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
PATENTS ISSUED
--------------
Patent No. Issue Date Invention
---------- ---------- ---------
PATENTS PENDING
---------------
Applicant's Name Date Filed Application No. Invention Inventor
---------------- ---------- --------------- --------- --------
X-26
<PAGE>
SCHEDULE III
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
Office Locations
----------------
Name of Grantor Office Location
--------------- ---------------
X-27
<PAGE>
SCHEDULE IV
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
Other Names
-----------
Name of Grantor Other Names
--------------- -----------
X-28
<PAGE>
SCHEDULE V
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
Filing Offices
--------------
X-29
<PAGE>
SCHEDULE VI
TO VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
[FORM OF ACKNOWLEDGEMENT]
This Acknowledgement, dated __________________, [199_] [200_], is
delivered pursuant to Section 21 of the Van De Kamp's Patent and Trademark
Security Agreement referred to below. The undersigned hereby agrees that this
Acknowledgement may be attached to the Van De Kamp's Patent and Trademark
Security Agreement dated June __, 1998, by and among the Grantors referred to
therein and The Chase Manhattan Bank, as Secured Party (the "Van De Kamp's
Patent and Trademark Security Agreement", capitalized terms defined therein
being used herein as therein defined), that the undersigned by executing and
delivering this Acknowledgement hereby becomes a Grantor under the Van De Kamp's
Patent and Trademark Security Agreement in accordance with Section 21 thereof
and agrees to be bound by all of the terms thereof, and that the Patents,
Registrations and Trademark Rights described on this Acknowledgement shall be
deemed to be part of the and shall become part of the Collateral and shall
secure all Secured Obligations.
[NAME OF ADDITIONAL GRANTOR]
By: ________________________________
Name:
Title:
Notice Address:
____________________________________
____________________________________
____________________________________
____________________________________
X-30
<PAGE>
Trademark Registrations
-----------------------
Registered Trademark Registration Registration
Owner Description Number Date Jurisdiction
---------- ----------- ------------ ------------ ------------
Patents Issued
--------------
Patent No. Issue Date Invention Inventor
---------- ---------- --------- --------
Patents Pending
---------------
Applicant's Name Date Filed Application No. Invention Inventor
---------------- ---------- --------------- --------- --------
X-31
<PAGE>
EXHIBIT XI
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am the duly elected [Title] of Aurora Foods Inc., a Delaware
corporation ("Company");
(2) I have reviewed the terms of that certain Third Amended and
Restated Credit Agreement dated as of June __, 1998, by and among Company, the
financial institutions listed therein as Lenders, The Chase Manhattan Bank, as
Administrative Agent, National Westminster Bank PLC, as Syndication Agent, and
Swiss Bank Corporation, as Documentation Agent, as amended, restated,
supplemented or otherwise modified to the date hereof (said Third Amended and
Restated Credit Agreement, as so amended, restated, supplemented or otherwise
modified, being the "Credit Agreement", the terms defined therein and not
otherwise defined in this Certificate (including Attachment No. 1 annexed hereto
and made a part hereof) being used in this Certificate as therein defined), and
the terms of the other Loan Documents, and I have made, or have caused to be
made under my supervision, a review in reasonable detail of the transactions and
condition of Company and its Subsidiaries during the accounting period covered
by the attached financial statements; and
(3) The examination described in paragraph (2) above did not
disclose, and I have no knowledge of, the existence of any condition or event
which constitutes an Event of Default or Potential Event of Default during or at
the end of the accounting period covered by the attached financial statements or
as of the date of this Certificate[, except as set forth below].
[Set forth [below] [in a separate attachment to this Certificate]
are all exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Company has taken, is taking, or proposes to take with respect to each such
condition or event:
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________]
XI-1
<PAGE>
The foregoing certifications, together with the computations set
forth in Attachment No. 1 annexed hereto and made a part hereof and the
financial statements delivered with this Certificate in support hereof, are made
and delivered this __ day of ________, [199_] [200_] pursuant to subsection
6.1(iv) of the Credit Agreement.
AURORA FOODS INC.
By: ___________________________
Name:
Title:
XI-2
<PAGE>
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of ______________, [199_][200_] and pertains to the period
from ______________, [199_][200_], to [199_][200_]. Subsection references herein
to relate to subsections of the Credit Agreement.
================================================================================
A. Indebtedness
- --------------------------------------------------------------------------------
1. Indebtedness under Capital Leases of
the type described in subsection
7.1(iii)(a): $__________
- --------------------------------------------------------------------------------
2. Indebtedness in respect of sale and lease-back transactions expressly
permitted under subsection 7.8: $__________
- --------------------------------------------------------------------------------
3. Indebtedness secured by Liens permitted
under subsection 7.2A(iii): $__________
- --------------------------------------------------------------------------------
4. Indebtedness of the type described in
subsection 7.1(iii) (A.1 + A.2 + A.3): $__________
- --------------------------------------------------------------------------------
5. Maximum Indebtedness permitted under
subsection 7.1(iii): $10,000,000
- --------------------------------------------------------------------------------
6. Aggregate principal amount of Permitted
Seller Notes issued after the Effective
Date: $__________
- --------------------------------------------------------------------------------
7. Maximum principal amount permitted under
subsection 7.1(vii): $10,000,000
- --------------------------------------------------------------------------------
8. Indebtedness of the type described in
subsection 7.1(viii): $__________
- --------------------------------------------------------------------------------
9. Maximum Indebtedness permitted under
subsection 7.1(viii): $15,000,000
- --------------------------------------------------------------------------------
B. Liens
- --------------------------------------------------------------------------------
1. Indebtedness secured by Liens described
in subsection 7.2A(iii): $__________
- --------------------------------------------------------------------------------
2. Original purchase price (or cost of
acquisition, construction or improvement) of
assets financed with Indebtedness secured by
Liens permitted under subsection 7.2A(iii): $__________
- --------------------------------------------------------------------------------
3. Percentage of purchase price (or cost of acquisition, construction or
improvement) financed with Indebtedness secured by Liens permitted under
subsection 7.2A(iii) ((B. 1)/(B.2)): $___________
- --------------------------------------------------------------------------------
XI-3
<PAGE>
- --------------------------------------------------------------------------------
4. Maximum percentage permitted to be
financed under subsection 7.2A(iii): 100%
- --------------------------------------------------------------------------------
5. Minimum percentage permitted to be
financed under subsection 7.2A(iii): 80%
- --------------------------------------------------------------------------------
6. Proceeds of Indebtedness permitted by
subsection 7.1(iii)(c) incurred
during period and secured by Liens on assets: $__________
- --------------------------------------------------------------------------------
7. Fair market value of assets securing
Liens described in item B.6: $__________
- --------------------------------------------------------------------------------
8. Percentage of fair market value constituted
by proceeds of Indebtedness ((B.6)/(B.7)): $__________
- --------------------------------------------------------------------------------
9. Minimum percentage permitted under
subsection 7.2A(iv): 80%
- --------------------------------------------------------------------------------
10. Indebtedness secured by Liens described
in subsection 7.2A(vi): $__________
- --------------------------------------------------------------------------------
11. Indebtedness secured by Liens on assets under
Capital Leases permitted under subsection 7.2A(v): $__________
- --------------------------------------------------------------------------------
12. Maximum Indebtedness permitted to be secured by
Liens under subsection 7.2A(vi): $2,500,000
- --------------------------------------------------------------------------------
C. Investments
- --------------------------------------------------------------------------------
1. Investments consisting of advances made
during Fiscal Year-to-date to make
payments contemplated by subsection
7.5(v)(a): $__________
- --------------------------------------------------------------------------------
2. Minimum permitted under subsection
7.5(v)(a): $_________
- --------------------------------------------------------------------------------
3. Investments of the type described in
subsection 7.3(iii): $__________
- --------------------------------------------------------------------------------
4. Maximum permitted under subsection
7.3(v): $7,500,000
- --------------------------------------------------------------------------------
XI-4
<PAGE>
- --------------------------------------------------------------------------------
D. Contingent Obligations
- --------------------------------------------------------------------------------
1. Net amount which Company would be liable to pay to
counterparties under Interest Rate Agreements of the
type described in subsection 7.4(iii) in the event
such Interest Rate Agreements were terminated on the
date hereof: $__________
- --------------------------------------------------------------------------------
2. Maximum amount permitted under subsection 7.4(iii): $2,500,000
- --------------------------------------------------------------------------------
3. Contingent Obligations under guarantees in the
ordinary course of business of the type described in
subsection 7.4(v): $__________
- --------------------------------------------------------------------------------
4. Maximum permitted under subsection
7.4(v): $500,000
- --------------------------------------------------------------------------------
5. Contingent Obligations of the type
described in subsection 7.4(vii): $__________
- --------------------------------------------------------------------------------
6. Maximum permitted under subsection
7.4(vii): $500,000
- --------------------------------------------------------------------------------
E. Restricted Junior Payments
- --------------------------------------------------------------------------------
1. Restricted Junior Payments made during
Fiscal Year-to-date of the type described
in subsection 7.5(v)(a): $__________
- --------------------------------------------------------------------------------
2. Aggregate advances made during Fiscal Year-to-date
to make payments contemplated by subsection 7.5(v)(a)
(E.1 + C.1): $__________
- --------------------------------------------------------------------------------
3. Maximum permitted under subsection
7.5(v)(a): $__________
- --------------------------------------------------------------------------------
4. Restricted Junior Payments made after the Effective
Date of the type described in subsection 7.5(vi): $__________
- --------------------------------------------------------------------------------
5. Maximum permitted under subsection
7.5(vi): $2,000,000
- --------------------------------------------------------------------------------
F. Minimum Interest Coverage Ratio ([calculated on a
pro forma basis for Fiscal Quarters ending prior to
the Effective Date for the four-Fiscal Quarter period
ending, _________ [199_] [200 ]) $__________
- --------------------------------------------------------------------------------
1. Consolidated Net Income:
- --------------------------------------------------------------------------------
2. Consolidated Interest Expense (to the extent
deducted in determining Consolidated Net Income): $__________
- --------------------------------------------------------------------------------
XI-5
<PAGE>
- --------------------------------------------------------------------------------
3. Depreciation (to the extent deducted in
determining Consolidated Net Income): $__________
- --------------------------------------------------------------------------------
4. Depletion (to the extent deducted in
determining Consolidated Net Income): $__________
- --------------------------------------------------------------------------------
5. Amortization (to the extent deducted in
determining Consolidated Net Income): $__________
- --------------------------------------------------------------------------------
6. Federal, state, local and foreign income
taxes (to the extent deducted in determining
Consolidated Net Income): $__________
- --------------------------------------------------------------------------------
7. Transaction fees paid to the MDC Entities
and/or Dartford and/or Fenway in connection
with acquisitions made in accordance with
the terms of the MDC Advisory Services
Agreement, the Dartford Management Agreement
and the Fenway Agreement (to the extent
deducted in determining Consolidated Net
Income): $__________
- --------------------------------------------------------------------------------
8. Non-recurring charges incurred prior to
_________ __, 1998 with respect to
relocation of Company's assets related to
the Business and the Log Cabin Business (to
the extent deducted in determining
Consolidated Net Income) (if greater than
$6,000,000, enter "$6,000,000"): $__________
- --------------------------------------------------------------------------------
9. Non-recurring charges incurred prior to
_________ __, 1999 with respect to
relocation of the Company's assets (if
greater than $15,000,000, enter
"$15,000,000"): $__________
- --------------------------------------------------------------------------------
10. Manufacturing overhead charges related to
the Duncan Hines Transitional Supply
Agreement (if greater than $8,200,000, enter
"$8,200,000"): $__________
- --------------------------------------------------------------------------------
11. Other non-cash items reducing Consolidated
Net Income (to the extent deducted in
determining Consolidated Net Income): $__________
- --------------------------------------------------------------------------------
12. Extraordinary and unusual losses (to the
extent deducted in determining Consolidated
Net Income): $__________
- --------------------------------------------------------------------------------
13. Non-cash items increasing Consolidated Net
Income: $__________
- --------------------------------------------------------------------------------
14. Extraordinary and unusual gains: $__________
- --------------------------------------------------------------------------------
15. Consolidated EBITDA ((F.1 + F.2 + F.3 + F.4
+ F.5 + F.6 + F.7 + F.8 + F.9 + F.10) -
(F.11 + F.12)): $__________
- --------------------------------------------------------------------------------
XI-6
<PAGE>
- --------------------------------------------------------------------------------
16. Consolidated Cash Interest Expense: $__________
- --------------------------------------------------------------------------------
17. Interest Coverage Ratio ((F.13):(F.14)): _____:1.00
- --------------------------------------------------------------------------------
18. Minimum Interest Coverage Ratio required
under section 7.6A: _____:1.00
- --------------------------------------------------------------------------------
G. Maximum Leverage Ratio ([calculated on a
pro forma basis for Fiscal Quarters
ending prior to the Effective Date] as of
____________, [199_] [200_]) $__________
- --------------------------------------------------------------------------------
1. Consolidated Total Debt: $__________
- --------------------------------------------------------------------------------
2. Cash on hand of Company minus $3,500,000 (if
difference is equal to or less than zero,
enter "0"): $__________
- --------------------------------------------------------------------------------
3. Consolidated EBITDA for the four-Fiscal
Quarter period ended on the above date (F.13
above): $__________
- --------------------------------------------------------------------------------
4. Leverage Ratio ((G.1- G.2)/G.3):
- --------------------------------------------------------------------------------
5. Maximum Leverage Ratio permitted under
subsection 7.6B: _____: 1.00
- --------------------------------------------------------------------------------
H. Minimum Fixed Charge Coverage Ratio
([calculated on a pro forma basis for Fiscal
Quarters ending prior to the Effective Date]
for the four-Fiscal Quarter period ending
___________, [199_][200_]) $__________
- --------------------------------------------------------------------------------
1. Consolidated EBITDA (F.13 above): $__________
- --------------------------------------------------------------------------------
2. Scheduled amortization of Indebtedness of
and its Subsidiaries (as reduced by payments
previously made), and discount or premium
relating to any such Indebtedness, whether
expensed or capitalized: $__________
- --------------------------------------------------------------------------------
3. Consolidated Cash Interest Expense (F.14
above): $__________
- --------------------------------------------------------------------------------
4. Consolidated Capital Expenditures: $__________
- --------------------------------------------------------------------------------
5. Taxes actually paid in cash by Subsidiaries: $__________
- --------------------------------------------------------------------------------
6. Consolidated Fixed Charges (H.2 + H.3 + H.4
+ H.5): $__________
- --------------------------------------------------------------------------------
7. Fixed Charge Coverage Ratio ((H.1):(H.6)): _____:1.00
- --------------------------------------------------------------------------------
XI-7
<PAGE>
- --------------------------------------------------------------------------------
8. Minimum Fixed Charge Coverage Ratio
required under subsection 7.6C: _____:1.00
- --------------------------------------------------------------------------------
I. Consolidated Capital Expenditures (for
the Fiscal Year ending ___________in $__________
December [199_] [200_] [to date])
- --------------------------------------------------------------------------------
1. Consolidated Capital Expenditures: $__________
- --------------------------------------------------------------------------------
2. Maximum Consolidated Capital Expenditures
Amount permitted under subsection 7.6D (as
adjusted (calculations and supporting
information therefor attached hereto) in
accordance with the provisos to such
subsection): $__________
- --------------------------------------------------------------------------------
J. Fundamental Changes
- --------------------------------------------------------------------------------
1. Aggregate fair market value of assets sold
in Asset Sales described in subsection
7.7(v) during the period commencing
___________, [199_] [200_]: $__________
- --------------------------------------------------------------------------------
2. Consolidated EBITDA (F. 13 above): $__________
- --------------------------------------------------------------------------------
3. Maximum Asset Sales permitted under
subsection 7.7(v) (.10 x (J. 2)): $__________
- --------------------------------------------------------------------------------
4. Consideration received in Asset Sales
described in subsection 7.7(vi) during the
period commencing ___________, [199_]
[200_]: $__________
- --------------------------------------------------------------------------------
5. Cash consideration received in Asset Sales
described in subsection 7.7(v) during the
period commencing ___________, [199_]
[200_]: $__________
- --------------------------------------------------------------------------------
6. Minimum cash consideration permitted
under subsection 7.7(v) (.80 x (J.4)): $__________
- --------------------------------------------------------------------------------
[K. Consolidated Excess Cash Flow (for the
Fiscal Year ending December 31, [199_]
[200 ]) [ONLY USE FOR FISCAL YEAR [1998]
AND THEREAFTER] $__________
- --------------------------------------------------------------------------------
1. Consolidated EBITDA (F.13 above): $__________
- --------------------------------------------------------------------------------
2. Extraordinary and unusual cash gains (to
the extent included in item F.12 above): $__________
- --------------------------------------------------------------------------------
3. Consolidated Working Capital Adjustment: $__________
- --------------------------------------------------------------------------------
XI-8
<PAGE>
- --------------------------------------------------------------------------------
4. 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): $__________
- --------------------------------------------------------------------------------
5. Consolidated Capital Expenditures (net of
any proceeds of related financings with
respect to such expenditures): $__________
- --------------------------------------------------------------------------------
6. Expenditures made in connection with any
Permitted Acquisition pursuant to
subsection 7.7(vi) (net of any proceeds
of 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 in accordance with the terms
of the MDC Advisory Services Agreement,
the Dartford Management Agreement and the $__________
Fenway Agreement:
- --------------------------------------------------------------------------------
7. Consolidated Interest Expense (F.14
above): $__________
- --------------------------------------------------------------------------------
8. Extraordinary and unusual cash losses (to
the extent included in item F.10 above): $__________
- --------------------------------------------------------------------------------
9. Consolidated Excess Cash Flow ((K.1 + K2 +
K3) - (K.4 + K5 + K.6 + K.7 + K8)): $__________
- --------------------------------------------------------------------------------
10. Portion of Consolidated Excess Cash Flow
required to be prepaid (.50x or .25x if
Leverage Ratio is less than ____:1.00 (K.9)) $__________
================================================================================
XI-9
<PAGE>
EXHIBIT XII
[FORM OF OPINION OF COUNSEL TO LOAN PARTIES]
[LETTERHEAD OF WHITE & CASE]
June __, 1998
The Chase Manhattan Bank,
as Administrative Agent under the
Third Amended and Restated Credit
Agreement referred to below
270 Park Avenue
New York, New York 10017
National Westminster Bank PLC,
as Syndication Agent under the
Third Amended and Restated Credit
Agreement referred to below
____________________
____________________
Swiss Bank Corporation,
as Documentation Agent under the
Third Amended and Restated Credit
Agreement referred to below
____________________
____________________
and
The Lenders Listed on
Schedule A Annexed Hereto
Re: Third Amended and Restated Credit Agreement dated as of June
__, 1998, by and among Aurora Foods Inc., the financial
institutions listed therein as Lenders, The Chase Manhattan
Bank, as Administrative Agent, National Westminster Bank PLC,
as Syndication Agent, and Swiss Bank Corporation, as
Documentation Agent
Ladies and Gentlemen:
We have acted as special counsel to (i) Aurora Foods Inc., a
Delaware corporation ("Company"), in connection with that certain Third Amended
and Restated Credit Agreement dated as of June __, 1998 (the "Credit Agreement";
capitalized terms used herein without definition have the same meanings as in
the Credit Agreement), by and among Company, the financial institutions listed
therein as Lenders, The Chase Manhattan Bank, as
XII-1
<PAGE>
Administrative Agent, National Westminster Bank PLC, as Syndication Agent, and
Swiss Bank Corporation, as Documentation Agent and (ii) the Loan Parties in
connection with documents executed in connection with the Credit Agreement. This
opinion is rendered to you in compliance with subsection 4.1J of the Credit
Agreement.
In our capacity as such counsel, we have examined originals, or
copies identified to our satisfaction as being true copies, of such records,
documents or other instruments as in our judgment are necessary or appropriate
to enable us to render the opinions expressed below. These records, documents
and instruments included the following:
(a) All records of proceedings and actions of the respective Boards
of Directors of each of the Loan Parties relating to the Credit Agreement
and the transactions contemplated thereby;
(b) The Credit Agreement;
(c) The Revolving Credit and Tranche A Term Notes delivered on the
Effective Date (collectively, the "Notes");
(d) The Collateral Account Agreement;
(e) The Pledge Agreement;
(f) The Security Agreement;
(g) The Mortgages;
(h) The Van De Kamp's Patent and Trademark Security Agreement; and
(i) Copies of Uniform Commercial Code financing statements and
fixture filings (collectively, the "Financing Statements") to be filed in
the filing offices listed for the Company on Schedule I annexed hereto
(the "Filing Offices") in the states (the "Relevant States") in which such
Filing Offices are located.
The documents referenced in items (b) through (i) above are
collectively referred to herein as the "Loan Documents".
In connection with this opinion, we have also examined such other
agreements, documents, certificates and other statements of government officials
and corporate officers of the Loan Parties and such other papers as we have
deemed necessary as a basis for such opinions. In all such examinations, we have
assumed the genuineness of all signatures on original and certified documents
and the conformity to original or certified documents of all documents submitted
to us as conformed or photostatic copies.
XII-2
<PAGE>
On the basis of the foregoing, and in reliance thereon, and subject
to the limitations, qualifications and exceptions set forth below, we are of the
opinion that:
1. Each Loan Party is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all corporate
power and authority necessary to own and operate its properties and carry out
its business as now conducted.
2. Each Loan Party has all requisite corporate power and authority
to execute and deliver the Loan Documents to which it is a party and any
financing statements or fixture filings to be executed in connection therewith
(collectively, the "Financing Statements") in which it is named as Debtor and to
perform the Loan Documents to which it is a party and to carry out the
transactions contemplated thereby.
3. The authorized and outstanding capital stock of each Loan Party
is as set forth on Schedule B annexed hereto. The Loan Party listed on Schedule
C annexed hereto is the record owner of the Pledged Shares (as defined in the
Pledge Agreement).
4. The execution and delivery of each of the Loan Documents and the
Financing Statements and the performance of each of the Loan Documents have been
duly authorized by all necessary corporate action on the part of each Loan Party
which is a party thereto or which is named therein as a Debtor. Each Loan
Document and each Financing Statement has been duly executed and delivered by
each Loan Party which is a party thereto or which is named therein as a Debtor,
and each Loan Document constitutes the valid and binding obligation of such Loan
Party, enforceable against such Loan Party in accordance with its terms, except
as the enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally or by general equitable principles (regardless of whether the
issue of enforceability is considered in a proceeding in equity or at law).
5. None of the execution or delivery by the Loan Parties of the Loan
Documents to which it is a party or the Financing Statements in which it is
named as a debtor nor the performance by the Loan Parties of the Loan Documents
nor the consummation of the transactions contemplated thereby will (i) conflict
with, result in a breach or violation of, or constitute a default under, any of
the terms, conditions or provisions of any New York State or Federal or Delaware
corporation law, statute, rule or regulation (including, without limitation,
Regulations T, U or X of the Board of Governors of the Federal Reserve System)
or any order, writ, judgment, injunction or decree of any New York State or
Federal court or other adjudicative body or arbitrator to which Company or any
Loan Party or any of their respective assets or properties is subject and of
which we are aware, or (ii) result in the creation of any
XII-3
<PAGE>
Lien upon any of the properties or assets of any Loan Party under any order
referred to in clause (i) above (other than Liens created pursuant to the Loan
Documents and the Financing Statements).
6. Upon delivery to the Administrative Agent pursuant to the Pledge
Agreement of the certificates representing the Pledged Shares, and assuming (i)
continued possession by the Administrative Agent (or an agent of the
Administrative Agent) of the certificates representing the Pledged Shares in the
State or New York, (ii) that the Administrative Agent has taken delivery of the
certificates representing the Pledged Shares in good faith and (iii) that
neither the Administrative Agent nor any Lender has notice, prior to or on the
date of delivery of such Pledged Shares, of an adverse claim within the meaning
of the Uniform Commercial Code (the "UCC") as in effect on the date hereof in
the State of New York (the "New York UCC"), the execution of the Pledge
Agreement by the Loan Parties will create a perfected security interest in favor
of the Administrative Agent in the Pledged Shares, which security interest has
priority over all other liens except as follows:
(a) we express no opinion as to any Loan Party's right in or title
to the Pledged Shares;
(b) priority may be subject to claims or liens in favor of the
United States, or any State of the United States or any agency,
instrumentality or political subdivision thereof, including, without
limitation, (i) liens for the payment of Federal, state or local taxes
which are given priority by operation of law, (ii) liens under Title IV of
the Employee Retirement Income Security Act of 1974, as amended, and (iii)
claims arising under the Federal Priority Statute (31 U.S.C. ss. 3713);
(c) we express no opinion as to the security interest of the
Administrative Agent in proceeds of or distributions on the Pledged
Shares; and
(d) we express no opinion as to the priority of the security
interests in the Pledged Shares as against any lien creditor (as such term
is defined in Article 9 of the New York UCC) or any buyer, to the extent
that the security interests therein purport to secure any advances or
other extensions of credit other than obligations incurred pursuant to
existing commitments under the Credit Agreement.
7. The Security Agreement creates a valid lien and security interest
in favor of the Administrative Agent in the Collateral (as defined in the
Security Agreement) purported to be covered thereby. The Financing Statements
are in appropriate form and upon the filing of such Financing Statements in the
applicable Filing Offices, assuming that the representations made by each of the
Loan Parties in the Security Agreement with respect to the locations of their
respective Collateral (as
XII-4
<PAGE>
defined in the Security Agreement) are true and correct, all filings,
registrations and recordings necessary or appropriate to create, maintain,
preserve, protect and perfect the security interests granted by each Loan Party
to Administrative Agent under the Security Agreement in respect of all
Collateral (as defined in the Security Agreement) will have been accomplished in
accordance with the UCC as in effect on the date hereof in the respective
Relevant States and the security interests granted by the Loan Parties to the
Administrative Agent pursuant to the Security Agreement in and to such
Collateral will constitute perfected security interests therein to the extent
that such Collateral consists of the type of property in which a security
interest may be perfected by filing a financing statement or fixture financing
statement, as applicable, under the UCC as in effect on the date hereof in the
Relevant States except as follows:
(a) we express no opinion as to perfection of the security interest
of the Administrative Agent in machinery and equipment physically located
at [the plant of Cereal Food Processors, Inc. in Bonner Springs, Kansas]
to the extent such machinery and equipment are fixtures as defined in
Section 9-313 of the UCC;
(b) we express no opinion as to the security interest of the
Administrative Agent in proceeds of or distributions on the Collateral;
(c) in the case of Collateral referred to in this paragraph 9,
Article 9 of the UCC requires the filing of continuation statements within
the period of six months prior to the expiration of five years from the
date of the original filings, in order to maintain the effectiveness of
the filings referred to in this paragraph; and
(d) in the case of property which becomes Collateral after the date
hereof, Section 552 of the United States Bankruptcy Code limits the extent
to which priority acquired by a debtor after the commencement of a case
under the Federal Bankruptcy Code may be subject to a security interest
arising from a security agreement entered into by the debtor before the
commencement of such case.
8. Assuming the truth and accuracy of the representations of the
Loan Parties in the Van de Kamp's Patent and Trademark Security Agreement, upon
the filing of the Financing Statements relating to the Collateral under the Van
de Kamp's Patent and Trademark Security Agreement in the offices of the
Secretary of State of the Relevant States and the recording of the Van de Kamp's
Patent and Trademark Security Agreement in the trademark records of the United
States Patent and Trademark Office and in the patent records of the United
States Patent and Trademark office, we are aware of no additional actions to be
taken in order to create and perfect security interests in favor of
Administrative Agent in the Trademarks (as defined in the Van
XII-5
<PAGE>
de Kamp's Patent and Trademark Security Agreement) described on Schedule I
annexed to the Van de Kamp's Patent and Trademark Security Agreement or the
Patents (as defined in the Van de Kamp's Patent and Trademark Security
Agreement) described on Schedule II to the Van de Kamp's Patent and Trademark
Security Agreement. However, we express no opinion as to the sufficiency of the
foregoing actions to create and perfect security interests in such Patents and
Trademarks to the extent federal law is determined to be applicable to the
creation and perfection of such security interests. In addition, we express no
opinion as to whether federal law or the laws of the states in which the Filing
Offices are located governs the validity or perfection of such security
interests. We express no opinion as to the validity or perfection of a security
interest in the Trademarks described on Schedule I annexed to the Van de Kamp's
Patent and Trademark Security Agreement or the Patents described on Schedule II
annexed to the Van de Kamp's Patent and Trademark Security Agreement to the
extent the rights of the Loan Parties in such Trademarks or Patents are granted,
created or vested under the laws of Puerto Rico, Canada or any other country or
jurisdiction outside the United States.
9. Upon receipt by Administrative Agent of any cash representing
Collateral under the Collateral Account Agreement and assuming Administrative
Agent maintains dominion and control of the Collateral Account in the manner set
forth in the Collateral Account Agreement, the Collateral Account Agreement will
create in favor of Administrative Agent a perfected security interest in the
Collateral Account.
10. The choice of law of the State of New York as the governing law
of each of the Loan Documents is a valid choice of law.
11. None of the Loan Parties is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. No Loan Party is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
12. [All Obligations under the Credit Agreement are within the
definition of "Designated Senior Indebtedness" contained in the subordination
provisions of the Subordinated Bridge Loan Documents.]
13. No law of the State of New York regulating the maximum rate of
interest which may be charged, taken or received applies to the Loans.
To the extent that the obligations of any of the Loan Parties may be
dependent upon such matters, we have assumed for purposes of this opinion (i)
that each party to the agreements
XII-6
<PAGE>
and contracts referred to herein (including, without limitation, the Loan
Parties except in the case of clause (iii) of this sentence) is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation; (ii) that each such party has the requisite
corporate or other organizational power and authority to perform its obligations
under such agreements and contracts, as applicable, and (iii) that such
agreements and contracts have been duly authorized, executed and delivered by,
and each of them constitutes the legally valid and binding obligation of, such
parties, as applicable, enforceable against such parties in accordance with
their respective terms. Except as expressly covered in this opinion, we are not
expressing any opinion as to the effect of compliance by any Lender with any
state or federal laws or regulations applicable to the transactions because of
the nature of any of its businesses.
The opinions contained in paragraphs 4, 6, 7, 8, and 9 are subject
to the following additional limitations, qualifications, exceptions and
assumptions:
(a) We express no opinion as to the enforceability of any
indemnification or contribution provisions in the Loan Documents to the
extent the rights to indemnification or contribution provided for therein
are violative of any law, rule or regulation (including any securities
law, rule or regulation) or public policy relating thereto.
(b) There may be limitations upon the exercise of remedial or
procedural provisions contained in the Loan Documents, but such
limitations do not make the rights and remedies provided in or
contemplated by the Loan Documents inadequate for the practical
realization of the rights and remedies afforded thereby.
(c) We express no opinion as the applicability to the Loan Documents
of Section 548 of the Bankruptcy Code (11 U.S.C. Section 548) or Article
10 of the New York Debtor and Creditor Law relating to fraudulent
transfers and obligations.
(d) We wish to point out that the law of the State of New York
generally imposes an obligation of good faith and reasonableness in the
performance and enforcement of contracts.
A copy of this opinion letter may be delivered by any of you to any
Eligible Assignee in connection with and at the time of any assignment and
delegation by any of you as a Lender to such Eligible Assignee of all or a
portion of your Loans and Commitments in accordance with the provisions of the
Credit Agreement, and such Eligible Assignee may rely on the opinions expressed
above as if this opinion letter were addressed and delivered to such Eligible
Assignee on the date hereof.
XII-7
<PAGE>
This opinion is rendered only to Syndication Agent, Documentation
Agent, Administrative Agent and Lenders and is solely for their benefit in
connection with the above transactions. This opinion may not be relied upon by
Syndication Agent, Documentation Agent, Administrative Agent or Lenders for any
other purpose, or quoted to or relied upon by any other person, firm or
corporation for any purpose without our prior written consent.
The opinions expressed above are limited to questions arising under
the Federal law of the United States, the General Corporation Law of the State
of Delaware and the law of the State of New York, except that our opinions set
forth in paragraphs 7 and 8 above (to the extent governed by a law other than
that of the Federal law of the United States of America, the General Corporation
Law of the State of Delaware and the law of the State of New York) are based
upon our review of generally available compilations of law relating to such
matters.
Very truly yours,
White & Case
XII-8
<PAGE>
SCHEDULE A
LENDERS
XII-9
<PAGE>
SCHEDULE I
FILING OFFICES
XII-10
<PAGE>
SCHEDULE B
CAPITALIZATION OF LOAN PARTIES
1. Aurora Foods Inc.
XII-11
<PAGE>
SCHEDULE C
RECORD OWNERS OF PLEDGED SHARES
XII-12
<PAGE>
EXHIBIT XIII
[FORM OF OPINION OF SIMPSON THACHER & BARTLETT]
June __, 1998
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
National Westminster Bank PLC,
as Syndication Agent
____________________
____________________
Swiss Bank Corporation,
as Documentation Agent
____________________
____________________
and
The Lenders Party to the Third
Amended and Restated Credit
Agreement Referenced Below
Re: Loans to Aurora Foods Inc.
Ladies and Gentlemen:
We have acted as counsel to The Chase Manhattan Bank, as
Administrative Agent (in such capacity, the "Administrative Agent"), National
Westminster Bank PLC, as Syndication Agent (in such capacity, the "Syndication
Agent"), and Swiss Bank Corporation, as Documentation Agent (in such capacity,
the "Documentation Agent"), in connection with the preparation and delivery of a
Third Amended and Restated Credit Agreement dated as of June __, 1998 (the
"Credit Agreement") among Aurora Foods Inc., a Delaware corporation ("Company"),
the financial institutions listed therein as lenders ("Lenders"), the
Administrative Agent, Syndication Agent and Documentation Agent (collectively,
Administrative Agent, Syndication Agent and Documentation Agent are "Agents")
and in connection with the preparation and delivery of certain related
documents.
This opinion is delivered to you pursuant to Section 4.1(K) of the
Credit Agreement. Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
XIII-1
<PAGE>
In connection with this opinion, we have participated in various
conferences with representatives of Company and Agents and conferences and
telephone calls with White & Case and Richards & O'Neil, LLP, counsel to Loan
Parties, during which the Credit Agreement and related matters have been
discussed, and we have also participated in the meeting held on the date hereof
(the "Closing") incident to the funding of the initial loans made under the
Credit Agreement. Moreover, we have examined the following documents:
(a) the forms of the Credit Agreement and the exhibits thereto,
including the forms of the promissory notes annexed thereto (the "Notes");
(b) the opinion letter of White & Case (the "W&C Opinion");
(c) the officers' certificates and other documents delivered at the
Closing.
In such examination, we have assumed the legal capacity of all
natural persons, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified, conformed or photostatic copies and the conformity of such documents
to the original documents.
Insofar as our opinion expressed below relates to the matters set
forth in the W&C Opinion, we have assumed without independent investigation the
correctness of the matters set forth therein, and our opinion is subject to the
assumptions, qualifications and limitations set forth in the W&C Opinion. We
have also assumed that the Credit Agreement and the Notes constitute valid and
legally binding obligations of the Agents and the Lenders.
Based upon the foregoing, and subject to the qualifications and
comments set forth below, we are of the opinion that, insofar as the law of the
State of New York is concerned, the Credit Agreement and the Notes constitute
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with their terms.
Our opinion is subject to the following qualifications:
(d) Our opinion is subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(e) We express no opinion as to any indemnification obligations of
the Company under the Credit Agreement to the
XIII-2
<PAGE>
extent such obligations might be deemed to be inconsistent with public policy.
(f) We express no opinion as to the provisions of Section 10.4 of
the Credit Agreement purporting to grant a right to setoff to participants.
(g) We express no opinion as to any provision of the Credit
Agreement that purports to establish an evidentiary standard for determinations
by the Lenders or the Agents.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York.
This opinion is rendered to you in connection with the
above-described transaction. This opinion may not be relied upon by you for any
other purpose or relied upon by any other person, firm or corporation without
our prior written consent.
Very truly yours,
SIMPSON THACHER & BARTLETT
XIII-3
<PAGE>
EXHIBIT XIV
[FORM OF OPINION OF LOCAL COUNSEL]
June __, 1998
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
National Westminster Bank PLC,
as Syndication Agent
[ADDRESS]
Swiss Bank Corporation,
as Documentation Agent
[ADDRESS]
And each of the Lenders parties to the Third Amended
and Restated Credit Agreement referred to below
We have acted as special counsel in the State of ____________ (the
"State") to Aurora Foods Inc., a Delaware corporation (the "Borrower") in
connection with (a) the Third Amended and Restated Credit Agreement, dated as of
June __, 1998 (the "Credit Agreement"), among Borrower, the financial
institutions from time to time parties thereto (the "Lenders"), The Chase
Manhattan Bank, as Administrative Agent, National Westminster Bank PLC, as
Syndication Agent and Swiss Bank Corporation, as Documentation Agent and (b) the
Third Amended and Restated Security Agreement (the "Security Agreement")
delivered pursuant to the Credit Agreement.
The opinions expressed below are furnished to you pursuant to the Credit
Agreement. Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings ascribed to them in the Credit
Agreement.
In arriving at the opinions expressed below,
(a) we have examined and relied on the originals, or copies certified or
otherwise identified to our satisfaction, of each of (1) the Credit Agreement,
(2) the Security Agreement and (3) the mortgage listed on Schedule 1 (the "State
Mortgage");
(b) we have examined unfiled copies of financing statements (collectively,
the "Financing Statements") naming Borrower as Debtor and the Administrative
Agent as Secured Party and describing the Collateral (as defined in the Security
Agreement and the State Mortgage) as to which security interests may be
XIV-1
<PAGE>
perfected by filing under the Uniform Commercial Code of the State (the "Filing
Collateral"), which we understand will be filed in the filing offices listed on
Schedule 2 (the "Filing Offices"); and
(c) we have examined such corporate documents and records of the Loan
Parties and such other instruments and certificates of public officials,
officers and representatives of the loan parties and other Persons, and we have
made such investigations of law, in each case as we have deemed appropriate as a
basis for such opinions.
In rendering the opinions expressed below, we have assumed, with your
permission, without independent investigation or inquiry, (a) the authenticity
of all documents submitted to us as originals, (b) the genuineness of all
signatures on all documents that we examined and (c) the conformity to authentic
originals of documents submitted to us as certified, conformed or photostatic
copies.
Based upon and subject to the foregoing, we are of the opinion that:
1. The execution and delivery by Borrower of the Security Agreement, the
performance by Borrower of its obligations thereunder and the creation and
perfection of any security interest upon or with respect to any of the
properties of Borrower provided for therein 1. do not and will not violate any
Requirement of Law of the State and 2. except for the filings described on
Schedule 2 to perfect the security interests created by the Security Agreement
with respect to the Filing Collateral and the recordings described on Schedule 1
attached hereto to perfect the liens created by the State Mortgage do not and
will not require any Governmental Authorization.
2. (a) The provisions of the Security Agreement create in favor of the
Agent a legal, valid and enforceable security interest in the Collateral.
(b) The Agent, upon filing of the Financing Statements in the Filing
Offices, will have a perfected security interest in the Filing Collateral.
3. The State Mortgage
(a) constitutes a legal, valid and binding obligation of Borrower
enforceable against Borrower in accordance with its terms;
(b) is in proper form for recording;
(c) complies as to form with all existing Requirements of Law;
XIV-2
<PAGE>
(d) creates in favor of the Mortgagee (as defined in such State Mortgage)
a legal, valid and binding lien on the real property and fixtures described in
such State Mortgage, enforceable as such against Borrower and, when recorded in
the applicable office listed on Schedule 1, all other Persons; and
(e) when recorded in the applicable office listed on Schedule 1, will
constitute a perfected lien on the real property and fixtures described in such
State Mortgage.
The facts that (a) the State Mortgage secures the guaranty of obligations
arising under a term loan facility and a revolving line of credit and (b) the
Term Loans and Revolving Loans may from time to time be repaid in full or in
part and reborrowed in accordance with the terms of the Credit Agreement will
not result in a subordination of the liens of the State Mortgage to any other
lien on the real property and fixtures described in such State Mortgage or
otherwise impair the priority of the liens of such State Mortgage.
4. The courts of the State will enforce those provisions in the Security
Agreement and the State Mortgage which provide that the validity, construction
and enforceability of such documents will be governed by the laws of the State
of New York, except that the Courts of the State may apply the internal law of
the State to determine the perfection and effect of perfection of the liens
created under such documents and the application of remedies in enforcing such
liens with respect to property located in the State.
Our opinions set forth in paragraphs 2 and 3 above are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
We are members of the bar of the State and we express no opinion as to the
laws of any jurisdiction other than the laws of the State and the Federal laws
of the United States of America.
This opinion has been rendered solely for your benefit and for the benefit
of your Eligible Assignees pursuant to the Credit Agreement in connection with
the Credit Agreement and the transactions contemplated thereby and may not be
used, circulated, quoted, relied upon or otherwise referred to for any other
purpose without our prior written consent; provided, however, that this opinion
may be delivered to your regulators, accountants, attorneys and other
professional advisers and may be used in connection with any legal or regulatory
proceeding relating to the subject matter of this opinion.
Very truly yours,
XIV-3
<PAGE>
Schedule 1
MORTGAGE RECORDINGS
IN THE STATE OF _______________
Description of Mortgage
Recording Office
Mortgage dated as of June __, 1998 Office of __________
County Clerk
from Aurora Foods Inc., as Mortgagor, to
The Chase Manhattan Bank, as Mortgagee
XIV-4
<PAGE>
Schedule 2
FILING OFFICES
IN THE STATE OF ________________
1. Office of the Secretary of State of the State of ______________
2. Office of the ______________ County Clerk
XIV-5
<PAGE>
EXHIBIT XV
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and
between the parties designated as Assignor ("Assignor") and Assignee
("Assignee") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "Schedule of
Terms") and relates to that certain Credit Agreement described in the Schedule
of Terms (said Credit Agreement, as amended, restated, supplemented or otherwise
modified to the date hereof and as it may hereafter be amended, restated,
supplemented or otherwise modified from time to time, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein being
used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
(a) Effective upon the Settlement Date specified in Item 4 of the
Schedule of Terms (the "Settlement Date"), Assignor hereby sells and assigns to
Assignee, without recourse, representation or warranty (except as expressly set
forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Loan Documents with respect to
Assignor's Commitments and outstanding Loans, if any, which represents, as of
the Settlement Date, the percentage interest specified in Item 3 of the Schedule
of Terms of all rights and obligations of Lenders arising under the Credit
Agreement and the other Loan Documents with respect to the Commitments and any
outstanding Loans (the "Assigned Share"). Without limiting the generality of the
foregoing, the parties hereto hereby expressly acknowledge and agree that any
assignment of all or any portion of Assignor's rights and obligations relating
to Assignor's Revolving Loan Commitment shall include (i) in the event Assignor
is an Issuing Lender with respect to any outstanding Letters of Credit (any such
Letters of Credit being "Assignor Letters of Credit"), the sale to Assignee of a
participation in the Assignor Letters of Credit and any drawings thereunder as
contemplated by subsection 3.1C of the Credit Agreement and (ii) the sale to
Assignee of a ratable portion of any participations previously purchased by
Assignor pursuant to said subsection 3.1C with respect to any Letters of Credit
other than the Assignor Letters of Credit.
(b) In consideration of the assignment described above, Assignee
hereby agrees to pay to Assignor, on the Settlement Date, the principal amount
of any outstanding Loans included within the Assigned Share, such payment to be
made by
XV-1
<PAGE>
wire transfer of immediately available funds in accordance with the applicable
payment instructions set forth in Item 5 of the Schedule of Terms.
(c) Assignor hereby represents and warrants that Item 3 of the
Schedule of Terms correctly sets forth the amount of the Commitments, the
outstanding Term Loan and the Pro Rata Share corresponding to the Assigned
Share.
(d) Assignor and Assignee hereby agree that, upon giving effect to
the assignment and assumption described above, (i) Assignee shall be a party to
the Credit Agreement and shall have all of the rights and obligations under the
Loan Documents, and shall be deemed to have made all of the covenants and
agreements contained in the Loan Documents, arising out of or otherwise related
to the Assigned Share, and (ii) Assignor shall be absolutely released from any
of such obligations, covenants and agreements assumed or made by Assignee in
respect of the Assigned Share. Assignee hereby acknowledges and agrees that the
agreement set forth in this Section 1(d) is expressly made for the benefit of
Company, Agents, Assignor and the other Lenders and their respective successors
and permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the Commitments and any
outstanding Loans shall have no effect on the Commitments, the outstanding
Tranche A Term Loan and the respective Pro Rata Shares corresponding to the
Assigned Shares as set forth in Item 3 of the Schedule of Terms or on the
interest of Assignee in any outstanding Revolving Loans corresponding thereto,
and (iii) from and after the Settlement Date, Administrative Agent shall make
all payments under the Credit Agreement in respect of the Assigned Share
(including without limitation all payments of principal and accrued but unpaid
interest, commitment fees and letter of credit fees with respect thereto) (1) in
the case of any such interest and fees that shall have accrued prior to the
Settlement Date, to Assignor, and (2) in all other cases, to Assignee; provided
that Assignor and Assignee shall make payments directly to each other to the
extent necessary to effect any appropriate adjustments in any amounts
distributed to Assignor and/or Assignee by Administrative Agent under the Loan
Documents in respect of the Assigned Share in the event that, for any reason
whatsoever, the payment of consideration contemplated by Section 1(b) occurs on
a date other than the Settlement Date.
XV-2
<PAGE>
SECTION 2. Certain Representations, Warranties and Agreements.
(a) Assignor represents and warrants that it is the legal and
beneficial owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Loan Documents or for any representations, warranties,
recitals or statements made therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Assignor to Assignee or by or on behalf
of Company or of any other Loan Party to Assignor or Assignee 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 Assignor 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.
(c) Assignee represents and warrants that it is an Eligible
Assignee; that it has experience and expertise in the making or purchasing of
loans such as the Loans; that it has acquired the Assigned Share for its own
account in the ordinary course of its business and without a view to
distribution of the 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 subsection 10.1 of the Credit Agreement, the disposition of
the Assigned Share or any interests therein shall at all times remain within its
exclusive control); and that it has received, reviewed and approved a copy of
the Credit Agreement (including all Exhibits and Schedules thereto).
(d) Assignee represents and warrants that it has received from
Assignor such financial information regarding Company and its Subsidiaries as is
available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the assignment evidenced by this Agreement,
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. Assignor shall have no duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.
XV-3
<PAGE>
(e) Each party to this Agreement represents and warrants to the
other party hereto that it has full power and authority to enter into this
Agreement and to perform its obligations hereunder in accordance with the
provisions hereof, that this Agreement has been duly authorized, executed and
delivered by such party and that this Agreement constitutes a legal, valid and
binding obligation of such party, enforceable against such party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 3. Miscellaneous.
(a) Each of Assignor and Assignee hereby agrees from time to time,
upon request of the other such party hereto, to take such additional actions and
to execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party (including, if applicable, any party required to evidence its consent
to or acceptance of this Agreement) against whom enforcement of such change,
waiver, discharge or termination is sought.
(c) 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, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of subsection 10.8 of the Credit
Agreement.
(d) In case any provision in or obligation under this Agreement
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.
(e) 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.
XV-4
<PAGE>
(f) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more 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.
(h) This Agreement shall become effective upon the date (the
"Assignment Effective Date") upon which all of the following conditions are
satisfied: (i) the execution of a counterpart hereof by each of Assignor and
Assignee, (ii) the giving of notice to Company, (iii) the receipt by
Administrative Agent of the processing and recordation fee referred to in
subsection 10.1B(i) of the Credit Agreement, (iv) in the event Assignee is a
Non-US Lender (as defined in subsection 2.7B(iii)(a) of the Credit Agreement),
the delivery by Assignee to Administrative Agent of such forms, certificates or
other evidence with respect to United States federal income tax withholding
matters as Assignee may be required to deliver to Administrative Agent pursuant
to said subsection 2.7B(iii)(a), (v) the execution of a counterpart hereof by
Administrative Agent as evidence of its consent hereto to the extent required
under subsection 10.1B(i) of the Credit Agreement and by Administrative Agent as
evidence of its acceptance hereof in accordance with subsection 10.1B(ii) of the
Credit Agreement, (vi) the receipt by Administrative Agent of originals or
telefacsimiles of the counterparts described above and authorization of delivery
thereof, and (vii) the recordation by Administrative Agent in the Register of
the pertinent information regarding the assignment effected hereby in accordance
with subsection 10.1B(ii) of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers hereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
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<PAGE>
SCHEDULE OF TERMS
1. Company: AURORA FOODS INC., a Delaware corporation
2. Name and Date of Credit Agreement: Third Amended and Restated Credit
Agreement dated as of June __, 1998, by and among Company, the financial
institutions listed therein as Lenders, The Chase Manhattan Bank, as
Administrative Agent, National Westminster Bank PLC, as Syndication Agent,
and Swiss Bank Corporation, as Documentation Agent.
3. Amounts:
Re: Tranche A Re: Revolving
Term Loans Loans
(a) Aggregate $__________ $__________
Commitments of
all Lenders: ___________% ___________%
(b) Assigned
Share/Pro Rata
Share: $__________ $__________
(c) Amount of
Assigned Share
of Commitments: $__________ $___________
(d) Amount of
Assigned Share: $__________ $___________
4. Settlement Date: ___________________, [199_][200_]
5. Payment Instructions:
ASSIGNOR: ASSIGNEE:
See Annex A See Annex B
6. Notice Addresses:
ASSIGNOR: ASSIGNEE:
See Annex A See Annex B
7. Signatures:
[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignor as Assignee
By: _________________ By: ________________
Name: Name:
Title: Title:
Consented to and accepted in
accordance with subsections 10.1B(i)
and (ii) of the Credit Agreement
THE CHASE MANHATTAN BANK,
as Administrative Agent
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<PAGE>
By: _________________
Name:
Title:
XV-7
<PAGE>
ANNEX A
Assignor Payment Instructions:
___________________________
___________________________
___________________________
Attention:_________________
Reference:_________________
Assignor Notice Addresses:
___________________________
___________________________
___________________________
Attention:_________________
Reference:_________________
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<PAGE>
ANNEX B
Assignee Payment Instructions:
___________________________
___________________________
___________________________
Attention:_________________
Reference:_________________
Assignee Notice Addresses:
___________________________
___________________________
___________________________
Attention:_________________
Reference:_________________
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<PAGE>
EXHIBIT XVI
[FORM OF PERMITTED SELLER NOTE]
___% NON-NEGOTIABLE SUBORDINATED NOTE
[Insert Date] $__________
AURORA FOODS INC., a Delaware corporation (the "Borrower"), hereby
promises upon the terms and subject to the provisions hereof to pay to [NAME OF
SELLER] (the "Holder"), the principal amount of [__________] Dollars
($_________).
This _____% Non-Negotiable Junior Subordinated Note (the "Note") was
issued pursuant to the Purchase Agreement (the "Purchase Agreement") dated as of
[__________, [199_] [200_], between the Borrower and the Holder.
1. Definitions. As used herein, the following terms shall have the
following meanings:
"Indebtedness" means (i) all obligations for borrowed money or for
the deferred purchase price of property or services (including, without
limitation, all obligations contingent or otherwise in connection with
acceptance, letter of credit or similar facilities, (ii) all obligations
evidenced by bonds, notes, debentures or other similar instruments or
securities, (iii) all indebtedness created or arising under any sale and
leaseback arrangement, conditional sale or other title retention agreement with
respect to property owned or acquired (whether or not the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (iv) all rental obligations under
capital leases to the extent not included in clause (iii) above, (v) all
guarantees (direct or indirect), all contingent reimbursement obligations under
undrawn letters of credit and all other contingent obligations in respect of, or
obligations to purchase or otherwise acquire or to assure payment of,
indebtedness of others and (vi) indebtedness of others secured by any lien upon
property, whether or not assumed, but only to the extent of such property's fair
market value.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Senior Agent" shall mean The Chase Manhattan Bank, as
Administrative Agent for the Lenders under the Senior Credit Agreement, and its
successors in such capacity, or if there is then no acting Administrative Agent
under the Senior Credit Agreement, financial institutions holding a majority in
principal amount of the Senior Debt outstanding thereunder.
XVI-1
<PAGE>
"Senior Credit Agreement" shall mean the Third Amended and Restated
Credit Agreement, dated as of June __, 1998, by and among the Borrower, the
financial institutions listed therein as Lenders, The Chase Manhattan Bank, as
Administrative Agent, National Westminster Bank PLC, as Syndication Agent, and
Swiss Bank Corporation, as Documentation Agent, as amended, restated, modified
or supplemented from time to time hereafter, together with any credit agreement
or similar document from time to time executed by the Borrower to evidence any
Refinancing (as defined in the definition of Senior Indebtedness) or successive
Refinancings.
"Senior Indebtedness" shall mean (i) all Obligations (as defined in
the Senior Credit Agreement) (including Contingent Obligations, as defined in
the Senior Credit Agreement) now or hereafter incurred pursuant to and in
accordance with the terms of the Senior Debt Documents, (ii) any additional
Indebtedness incurred under or pursuant to the Senior Credit Agreement and the
other Senior Debt Documents whether such Obligations or additional Indebtedness
involve principal prepayment charges, interest (including, without limitation,
interest accruing after the filing of a petition initiating any proceeding under
the Bankruptcy Code, whether or not allowed as a claim in such proceeding)
indemnities or reimbursement of fees, expenses or other amounts, and (iii) any
indebtedness incurred for the purpose of refinancing, restructuring, extending
or renewing (collectively, "Refinancing") the obligations of the Borrower under
the Senior Credit Agreement as set forth in clauses (i) and (ii) above.
"Senior Debt Documents" shall mean the Senior Credit Agreement and
all other documents and instruments delivered or filed in connection with the
creation or incurrence of any Senior Indebtedness (including, without
limitation, the guaranty agreements executed and delivered by the subsidiaries
of the Borrower in respect of the Obligations under the Senior Credit
Agreement).
"Senior Lenders" shall mean the financial institutions party to the
Senior Credit Agreement as "Lenders" from time to time.
2. Payment of Interest. Interest shall accrue on the unpaid
principal amount of this Note from the date hereof at the rate of [_____]% per
annum [NOT TO EXCEED 12%] (the "Interest Rate"), calculated on the basis of a
365 day year: The Borrower shall pay interest semi-annually in arrears on the
fifteenth day of January and July in each year (each, an "Interest Payment
Date") commencing on ___________, [199_] [200_].
3. Payment of Principal.
(a) Scheduled Payment. Subject to the provisions of Section 4
hereof, on [__________], [199_][200_] (the "Maturity Date"), the Borrower shall
pay to the holder of this Note the entire principal amount of this Note, plus
all accrued and unpaid interest hereon which is then unpaid.
XVI-2
<PAGE>
(b) Optional Prepayments. Subject to the provisions of Section 4
hereof, the Borrower may, at any time and from time to time, without premium or
penalty, prepay all or a portion of the unpaid principal amount of this Note,
together with unpaid interest accrued since the preceding Interest Payment Date
to which interest has been paid on such portion of the principal amount which it
is prepaying; provided, that no such prepayment shall be made if such prepayment
is then prohibited by the terms of any Senior Indebtedness. A prepayment of less
than all of the unpaid principal amount of this Note shall not relieve the
Borrower of its obligation to make the scheduled payment on this Note on the
Maturity Date. Each partial payment under this Note shall first be credited to
accrued and unpaid interest on the principal being prepaid, and the remainder
shall be credited to principal. Whenever any payment to be made hereunder shall
be due on a date which is not a business day, the payment shall be made on the
next succeeding business day and such extension of time shall be included in the
computation of interest with respect to such payment.
4. Subordination.
(a) Agreement to Subordinate. The Borrower and, by its acceptance
hereof, each Holder agree that the indebtedness of the Borrower evidenced by
this Note, whether for principal, interest on any other amount payable under or
in respect hereof and all rights or claims arising out of or associated with
such Indebtedness (the "Subordinated Obligations"), shall be junior and
subordinate in right of payment to the prior payment in full in cash of all
Senior Indebtedness, in accordance with the provisions of this Section 4. Each
holder of Senior Indebtedness shall be deemed to have acquired Senior
Indebtedness in reliance upon the agreements of the Borrower and the holder of
this Note contained in this Section 4. The provisions of this Section 4 shall be
reinstated if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by any holder of Senior Indebtedness or
any representative of such holder upon the insolvency, bankruptcy or
reorganization of the Borrower. Any provision of this Note to the contrary
notwithstanding (other than the provision contained in Section 6), the Borrower
shall not make, and no Holder shall accept, any payment or prepayment of
principal, or prepayment of other amounts due thereunder, of any kind whatsoever
(including without limitation by distribution of assets, set off, exchange or
any other manner) with respect to the Subordinated Obligations at any time when
any of the Senior Indebtedness remains outstanding. Holder may receive interest
payments in respect of the Subordinated Obligations in accordance with the terms
of this Note except to the extent and at the times prohibited or restricted by
the provisions of this Section 4. In no event shall the Holder commence any
action or proceeding to contest the provisions of this Section 4 or the priority
of the Liens (as defined in the Senior Credit Agreement) granted to the holders
of the Senior Indebtedness by the Borrower. No Holder shall take, accept or
receive any collateral security from the Borrower for the payment of the
Subordinated Obligations.
XVI-3
<PAGE>
(b) Liquidation, Dissolution, Bankruptcy. In the event of any
insolvency, bankruptcy, dissolution, winding up, liquidation, arrangement,
reorganization, marshalling of assets or liabilities, composition, assignment
for the benefit of creditors or other similar proceedings relating to the
Borrower, its debts, its property or its operations, whether voluntary or
involuntary, including, without limitation the filing of any petition or the
taking of any action to commence any of the foregoing (which, in the case of
action by a third party, is not dismissed within 60 days) (a "Bankruptcy
Event"), all Senior Indebtedness shall first be paid in full in cash or other
immediately available funds before Holder shall be entitled to receive or retain
any payment or distribution of assets of the Borrower with respect to any
Subordinated Obligations. In the event of any such Bankruptcy Event, any payment
or distribution of assets to which Holder would be entitled if the Subordinated
Obligations were not subordinated to the Senior Indebtedness in accordance with
this Section 4, whether in cash, property, securities or otherwise, shall be
paid or delivered by the debtor, custodian, trustee or agent or other Person
making such payment or distribution, or by the Holder if received by it,
directly to the Senior Agent on behalf of the holders of the Senior Indebtedness
for application to the payment of the Senior Indebtedness remaining unpaid, to
the extent necessary to make payment in full in cash or other immediately
available funds of all Senior Indebtedness remaining unpaid, after giving effect
to any concurrent payment or distribution to or for the holders of the Senior
Indebtedness.
(c) No Payments with Respect to Subordinated Obligations in Certain
Circumstances.
(i) In circumstances in which Section 4(b) is not applicable, no
payment of any nature (including, without limitation, any distribution of
assets) in respect of the Subordinated Obligations (including, without
limitation, pursuant to any judgment with respect thereto or on account of the
purchase or redemption or other acquisition of Subordinated Obligations, by set
off, prepayment exchange or other manner) shall be made by or on behalf of the
Borrower if, at the time of such payment:
(A) a default in the payment when due (whether at the maturity
thereof, or upon acceleration of maturity or otherwise and without giving
effect to any applicable grace periods) of all or any portion of the Senior
Indebtedness (whether of principal, interest or any other amount with
respect thereto) shall have occurred, and such default shall not have been
cured or waived in accordance with the terms of the Senior Debt Documents;
or
(B) subject to the last sentence of this Section 4(c), (x) the
Borrower shall have received notice from the Senior Agent of the occurrence
of one or more Events of Default (as defined in the Senior Credit
Agreement) in respect of the Senior Indebtedness (other than payment
defaults described in Section 4(c)(i)(A) above), (y) each such Event of
Default shall not have been cured or waived in accordance with the
XVI-4
<PAGE>
terms of the Senior Debt Documents, and (z) 180 days shall not have elapsed
since the date such notice was received.
The Borrower may resume payments (and may make any payments missed
due to the application of Section 4(c)(i) in respect of the Subordinated
Obligations or any judgment with respect thereto:
(A) in the case of a default referred to in clause (A) of this
Section 4(c)(i), upon a cure or waiver thereof in accordance with the terms
of the Senior Debt Documents; or
(B) in the case of an Event of Default or Events of Default referred
to in clause (B) of this Section 4(c)(i), upon the earlier to occur of (1)
the cure or waiver of all such Events of Default in accordance with the
terms of the Senior Debt Documents, or (2) the expiration of such period of
180 days.
(ii) Following any acceleration of the maturity of any Senior
Indebtedness and as long as such acceleration shall continue unrescinded and
unannulled, such Senior Indebtedness shall first be paid in full in cash, or
provision for such payment shall be made in a manner satisfactory to the holders
of the Senior Indebtedness, before any payment is made on account of or applied
on the Subordinated Obligations.
(iii) The Borrower shall give prompt written notice to the Holder of
(A) any default in respect of Senior Obligations referred to in Section
4(c)(i)(A) and (B) any notice of the type described in Section 4(c)(i)(B) from
the Senior Agent.
(d) When Distribution Must Be Paid Over. In the event that Holder
shall receive any payment or distribution of assets that Holder is not entitled
to receive or retain under the provisions of this Note, Holder shall hold any
amount so received in trust for the holders of Senior Indebtedness, shall
segregate such assets from other assets held by Holder and shall forthwith turn
over such payment or distribution (without liability for interest thereon) to
the Senior Agent on behalf of the holders of Senior Indebtedness in the form
received (with any necessary endorsement) to be applied to Senior Indebtedness.
(e) Exercise of Remedies. So long as any Senior Indebtedness is
outstanding (including any loans, any letters of credit, any commitments to lend
or any lender guarantees), Holder (solely in its capacity as a holder of this
Note) shall not exercise any rights or remedies with respect to an Event of
Default under this Note, including, without limitation, any action (l) to demand
or sue for collection of amounts payable hereunder, (2) to accelerate the
principal of this Note, or (3) to commence or join with any other creditor
(other than the holder of a majority in principal amount of the Senior
Indebtedness) in commencing any proceeding in connection with or premised on the
occurrence of a Bankruptcy Event prior to the earlier of:
XVI-5
<PAGE>
(A) the payment in full in cash or other immediately available funds
of all Senior Indebtedness;
(B) the initiation of a proceeding (other than a proceeding
prohibited by clause (3) of this Section 4(e)) in connection with or
premised upon the occurrence of a Bankruptcy Event;
(C) the expiration of 180 days immediately following the receipt by
the Senior Agent of notice of the occurrence of such Event of Default from
the Holder; and
(D) the acceleration of the maturity of the Senior Indebtedness;
provided, however, that if, with respect to (B) and (D) above, such proceeding
or acceleration, respectively, is rescinded, or with respect to (C) above,
during such 180-day period such Event of Default has been cured or waived, the
prohibition against taking the actions described in this section 4(e) shall
automatically be reinstated as of the date of the rescission, cure or waiver, as
applicable. In all events, unless an event described in clause (A), (B) or (D)
above has occurred and not been rescinded, the Holder shall give thirty (30)
days prior written notice to the Senior Agent before taking any action described
in this Section 4(e), which notice shall describe with specificity the action
that the Holder in good faith intends to take.
(f) Acceleration of Payment of Note. If this Note is declared due
and payable prior to the Maturity Date, no direct or indirect payment that is
due solely by reason of such declaration shall be made, nor shall application be
made of any distribution of assets of the Borrower (whether by set off or in any
other manner, including, without limitation, from or by way of collateral) to
the payment, purchase or other acquisition or retirement of this Note, unless,
in either case, (i) all amounts due or to become due on or in respect of the
Senior Indebtedness (including with respect to any outstanding letters of
credit) shall have been previously paid in full in cash or other immediately
available funds or in any other manner satisfactory to all holders of such
Senior Indebtedness, (ii) all commitments to lend under Senior Indebtedness
shall have been terminated, (iii) all guarantees constituting Senior
Indebtedness shall have been terminated and (iv) all lender guarantees
constituting Senior Indebtedness shall have been permanently reduced to zero.
(g) Proceedings Against Borrower. So long as any Senior Indebtedness
is outstanding (including any loans, any commitments to lend or open lender
guarantees or any lender guarantees, Holder (solely in its capacity as a holder
of this Note) shall not commence any bankruptcy, insolvency, reorganization or
other similar proceeding against Borrower.
(h) Amending Senior Indebtedness. Any holder of Senior Indebtedness
may, at any time and from time to time, without the consent of or notice to
Holder (i) modify or amend the terms of the Senior Indebtedness provided that
such Senior
XVI-6
<PAGE>
Indebtedness cannot be extended or renewed past June 30, 2005, (ii) sell,
exchange, release, fail to perfect a lien on or a security interest in or
otherwise in any manner deal with or apply any property pledged or mortgaged to
secure, or otherwise securing, Senior Indebtedness, (iii) release any guarantor
or any other person liable in any manner for the Senior Indebtedness, (iv)
exercise or refrain from exercising any rights against Borrower or any other
person, (v) apply any sums by whomever paid or however realized to Senior
Indebtedness or (vi) take any other action that might be deemed to impair in any
way the rights of the holder of this Note. Any and all of such actions may be
taken by the holders of Senior Indebtedness without incurring responsibility to
Holder and without impairing or releasing the obligations of Holder to the
holders of Senior Indebtedness.
(i) Certain Rights in Bankruptcy. Holder hereby irrevocably
authorizes and empowers each holder of Senior Indebtedness (and its
representative or representatives) to demand, sue for, collect and receive all
payments and distributions under the terms of this Note, to file and prove all
claims (including claims in bankruptcy) relating to this Note, to exercise any
right to vote arising with respect to this Note and any claims hereunder in any
bankruptcy, insolvency or similar proceeding and take any and all other actions
in the name of Holder (solely in its capacity as a holder of this Note), as such
holder of Senior Indebtedness determines to be necessary or appropriate.
(j) Subrogation. No payment or distribution to any holder of Senior
Indebtedness pursuant to the provisions of this Note shall entitle Holder to
exercise any right of subrogation in respect thereof until (i)(w) all Senior
Indebtedness shall have been paid in full in cash or other immediately available
funds or in any other manner satisfactory to all holders of Senior Indebtedness,
(x) all commitments to lend under Senior Indebtedness shall have been
terminated, (y) all guarantees constituting Senior Indebtedness shall have been
terminated and (z) all lender guarantees constituting Senior Indebtedness shall
have been permanently reduced to zero or (ii) all holders of Senior Indebtedness
have consented in writing to the taking of such action.
(k) Relative Rights. The provisions of this Section 4 are for the
benefit of the holders of Senior Indebtedness (and their successors and assigns)
and shall be enforceable by them directly against Holder. Holder acknowledges
and agrees that any breach of the provisions of this Section 4 will cause
irreparable harm for which the payment of monetary damages may be inadequate.
For this reason, Holder agrees that, in addition to any remedies at law or
equity to which a holder of the Senior Indebtedness may be entitled, a holder of
the Senior Indebtedness will be entitled to an injunction or other equitable
relief to prevent breaches of the provisions of this Section 4 and/or to compel
specific performance of such provisions. The provisions of this Section 4 shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of Senior Indebtedness is rescinded or must otherwise be returned by
any holder of Senior Indebtedness upon the occurrence of a Bankruptcy Event or
XVI-7
<PAGE>
otherwise, all as though such payment had not been made. The provisions of this
Section 4 are not intended to impair and shall not impair as between Borrower
and Holder, the obligation of Borrower, which is absolute and unconditional, to
pay Holder all amounts owing under this Note.
(l) Reliance on Orders and Decrees. Subject to the provisions of
Section 4(d) hereof, upon any payment or distribution of assets of Borrower,
whether in cash, property, securities or otherwise, Holder shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which any insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to Holder for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 4.
5. Events of Default.
(a) Definition. The following shall be an "Event of Default" under
this Note;
(i) the Borrower shall fail to make any payment of interest on this
Note when the same shall become due and payable and such failure shall
continue for a period of 5 days;
(ii) the Borrower shall fail to make any payment of the principal of
this Note when the same shall become due and payable, whether on the
Maturity Date or otherwise;
(iii) (A) the Borrower shall commence any case, proceeding or action
(x) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to its debts, or (y)
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, (B) the
Borrower shall make a general assignment for the benefit of its creditors,
(C) there shall be commenced against the Borrower any case, proceeding or
other action of a nature referred to in clause (A) above which shall not
have been vacated or discharged within 60 days from the commencement
thereof, or (D) a court shall enter a decree or order for relief in any
involuntary case under Title 11 of the United States Code, as amended from
time to time, or any applicable bankruptcy or similar law now or hereafter
in effect, which
XVI-8
<PAGE>
decree or order is not stayed, vacated, discharged, or bonded pending
appeal within 60 days from the entry thereof; or
(iv) the acceleration of the maturity of the Senior Indebtedness.
(b) Remedies. If an Event of Default shall occur and be continuing,
then, subject to the provisions of Section 4, the Holder may, upon written
notice to the Borrower, declare all amounts owing under this Note to be
immediately due and payable.
Subject to the immediately preceding paragraph and to Section 4
above, the Holder shall also have all other rights in respect of this Note
following the occurrence and during the continuance of an Event of Default which
are available pursuant to applicable law or in equity.
[6. Right of Set-Off. Anything in this Note to the contrary
notwithstanding, nothing in this Note shall preclude the Borrower from timely
exercising such Borrower's right pursuant to Section _____ of the Purchase
Agreement to set-off indemnification claims against this Note and/or interest
payments under this Note.]
7. No Presentment. The Borrower, for itself and any guarantors
hereof, and their successors and assigns, waives presentment, demand, protest
and notice thereof or of dishonor, and waives any right to be released by reason
of any extension of time or change in the terms of payment.
8. Amendment. So long as any Senior Indebtedness is outstanding
(including any commitment under the Senior Agent Documents) the terms of this
Note may be amended only with the consent of the Senior Agent. Subject to the
foregoing, without the consent of the Senior Agent hereof, this Note may be
amended by the Borrower and the Holder to cure any ambiguity, defect or
inconsistency that does not affect the subordination provisions hereof or the
rights of the Senior Lenders.
9. Cancellation. After all unpaid principal and interest owed on
this Note has been paid in full, this Note shall be surrendered to the Borrower
for cancellation and shall not be reissued.
10. Transfer Restrictions: Acknowledgment of Security Interest. This
Note shall not be transferrable by the Holder hereof without the prior written
consent of the Borrower (which consent shall not be unreasonably withheld). The
Holder hereby acknowledges, and agrees to, the Borrower's grant of its interest
herein to the Lenders under the Credit Agreement, dated as of the date hereof,
to collaterally secure the Borrower's obligations under such Credit Agreement.
11. Payment of Expenses. The Borrower agrees to pay all costs and
expenses (including reasonable attorneys' fees) reasonably incurred by the
Holder after the occurrence and during the continuance of an Event of Default in
enforcing any obligations under this Note or in collecting any payments due
XVI-9
<PAGE>
from Borrower under this Note (including in connection with a bankruptcy or
insolvency proceeding with respect to the Borrower).
12. Governing Law. The construction, validity and interpretation of
this Note shall be governed by and construed in accordance with the domestic
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
13. Descriptive Headings. The descriptive headings of this Note are
inserted for convenience only, and do not constitute a part of this Note.
XVI-10
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Note on the date first written above.
AURORA FOODS INC.
By: _______________________________
Name:
Title:
Agreed:
[NAME OF SELLER]
By: _______________________________
Name:
Title:
XVI-11
<PAGE>
EXHIBIT XVII
[FORM OF CERTIFICATE RE NON-BANK STATUS]
CERTIFICATE RE NON-BANK STATUS
Reference is hereby made to that certain Third Amended and Restated
Credit Agreement dated as of June __, 1998 (said Third Amended and Restated
Credit Agreement, as amended, restated, supplemented or otherwise modified to
the date hereof, being the "Credit Agreement"), by and among Aurora Foods Inc.,
a Delaware corporation, the financial institutions listed therein as Lenders
("Lenders"), The Chase Manhattan Bank, as Administrative Agent, National
Westminster Bank PLC, as Syndication Agent, and Swiss Bank Corporation, as
Documentation Agent. Pursuant to subsection 2.7B(iii) of the Credit Agreement,
the undersigned hereby certifies that it is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue Code of 1986, as amended.
[NAME OF LENDER]
By: _______________________________
Name:
Title:
XVII-1
<PAGE>
EXHIBIT XVIII
[FORM OF COLLATERAL ACCOUNT AGREEMENT]
COLLATERAL ACCOUNT AGREEMENT
This COLLATERAL ACCOUNT AGREEMENT (this "Agreement") is dated as of
June __, 1998 and entered into by and between AURORA FOODS INC., a Delaware
corporation ("Pledgor"), and THE CHASE MANHATTAN BANK, as administrative agent
for and representative of (in such capacity herein called "Secured Party") the
financial institutions ("Lenders") party to the Third Amended and Restated
Credit Agreement referred to below.
PRELIMINARY STATEMENTS
A. Pursuant to that certain Third Amended and Restated Credit
Agreement dated as of June __, 1998 (said Third Amended and Restated Credit
Agreement, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined),
by and among Pledgor, Lenders, Secured Party, as Administrative Agent, National
Westminster Bank PLC, as Syndication Agent, and Swiss Bank Corporation, as
Documentation Agent, Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Pledgor.
B. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and issue Letters of Credit under the Credit
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. Certain Definitions.
The following terms used in this Agreement shall have the following
meanings:
"Collateral" means (i) the Collateral Account, (ii) all amounts on
deposit from time to time in the Collateral Account, (iii) all interest, cash,
instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Collateral, and (iv) to the extent not covered by clauses (i) through
(iii) above, all proceeds of any or all of the foregoing Collateral.
XVIII-1
<PAGE>
"Collateral Account" means the restricted deposit account
established and maintained by Secured Party pursuant to subsection 2(a).
"Secured Obligations" means all obligations and liabilities of every
nature of Pledgor now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in bankruptcy
with respect to Pledgor, would accrue on such obligations), reimbursement of
amounts drawn under Letters of Credit, fees, expenses, indemnities or otherwise,
whether voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Secured Party or any Lender as a preference,
fraudulent transfer or otherwise, and all obligations of every nature of Pledgor
now or hereafter existing under this Agreement.
SECTION 2. Establishment and Operation of Collateral Account.
(a) Secured Party is hereby authorized to establish and maintain at
its office at ________________________________, as a blocked account in the name
of Secured Party and under the sole dominion and control of Secured Party, a
restricted deposit account designated as "Aurora Foods Inc. Collateral Account".
(b) The Collateral Account shall be operated in accordance with the
terms of this Agreement.
(c) All amounts at any time held in the Collateral Account shall be
beneficially owned by Pledgor but shall be held in the name of Secured Party
hereunder, for the benefit of Lenders, as collateral security for the Secured
Obligations upon the terms and conditions set forth herein. Pledgor shall have
no right to withdraw, transfer or, except as expressly set forth herein,
otherwise receive any funds deposited into the Collateral Account.
(d) Anything contained herein to the contrary notwithstanding, the
Collateral Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or hereafter be
in effect.
SECTION 3. Deposits of Cash Collateral.
(a) All deposits of funds in the Collateral Account shall be made by
wire transfer (or, if applicable, by intra-bank transfer from another account of
Pledgor) of immediately available funds, in each case addressed as follows:
XVIII-2
<PAGE>
Account No.:
ABA No.:
Reference:
Attention:
Pledgor shall, promptly after initiating a transfer of funds to the Collateral
Account, give notice to Secured Party by telefacsimile of the date, amount and
method of delivery of such deposit.
(b) If an Event of Default has occurred and is continuing and, in
accordance with Section 8 of the Credit Agreement, Pledgor is required to pay to
Secured Party an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding under the Credit Agreement,
Pledgor shall deliver funds in such an amount for deposit in the Collateral
Account in accordance with Section 3(a). Upon any drawing under any outstanding
Letter of Credit in respect of which Pledgor has deposited in the Collateral
Account any amounts described above, Secured Party shall apply such amounts to
reimburse the Issuing Lender for the amount of such drawing. In the event the
amount deposited in the Collateral Account pursuant to this Section 3(b) exceeds
the maximum amount available to be drawn under all Letters of Credit, Secured
Party shall apply such excess amount then on deposit in the Collateral Account
in accordance with subsection 2.4D of the Credit Agreement.
(c) Pledgor shall, promptly after initiating a transfer of funds to
the Collateral Account, give notice to Secured Party by telefacsimile of the
date, amount and method of delivery of such deposit.
SECTION 4. Pledge of Security for Secured Obligations.
Pledgor hereby pledges and assigns to Secured Party, and hereby
grants to Secured Party a security interest in, all of Pledgor's right, title
and interest in and to the Collateral as collateral security for the prompt
payment or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all
Secured Obligations.
SECTION 5. No Investment of Amounts in the Collateral Account; Interest on
Amounts in the Collateral Account.
(a) Cash held by Secured Party in the Collateral Account shall not
be invested by Secured Party but instead shall be maintained as a cash deposit
in the Collateral Account pending application thereof as elsewhere provided in
this Agreement.
(b) To the extent permitted under Regulation Q of the Board of
Governors of the Federal Reserve System, any cash held in the Collateral Account
shall bear interest at the standard rate paid by Secured Party to its customers
for deposits of like amounts and terms.
XVIII-3
<PAGE>
(c) Subject to Secured Party's rights under Section 12, any interest
earned on deposits of cash in the Collateral Account in accordance with
subsection 5(b) shall be deposited directly into and held in the Collateral
Account.
SECTION 6. Representations and Warranties.
Pledgor represents and warrants as follows:
(a) Ownership of Collateral. Pledgor is (or at the time of transfer
thereof to Secured Party will be) the legal and beneficial owner of the
Collateral from time to time transferred by Pledgor to Secured Party, free
and clear of any Lien except for the security interest created by this
Agreement.
(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 grant by Pledgor of the
security interest granted hereby, (ii) the execution, delivery or
performance of this Agreement by Pledgor, or (iii) the perfection of or the
exercise by Secured Party of its rights and remedies hereunder (except as
may have been taken by or at the direction of Pledgor).
(c) Perfection. The pledge and assignment of the Collateral pursuant
to this Agreement creates a valid and perfected first priority security
interest in the Collateral, securing the payment of the Secured
Obligations.
(d) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Pledgor with respect
to the Collateral is accurate and complete in all respects.
SECTION 7. Further Assurances.
Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Pledgor will: (a) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as Secured
Party may request, in order to perfect and preserve the security interests
granted or purported to be granted hereby and (b) at Secured Party's request,
appear in and defend any action or proceeding that may affect Pledgor's
beneficial title to or Secured Party's security interest in all or any part of
the Collateral.
SECTION 8. Transfers and other Liens.
XVIII-4
<PAGE>
Pledgor agrees that it will not (a) sell, assign (by operation of
law or otherwise) or otherwise dispose of any of the Collateral or (b) create or
suffer to exist any Lien upon or with respect to any of the Collateral, except
for the security interest under this Agreement.
SECTION 9. Secured Party Appointed Attorney-in-Fact.
Pledgor hereby irrevocably appoints Secured Party as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, Secured Party or otherwise, from time to time in Secured
Party's discretion to take any action and to execute any instrument that Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation to file one or more financing or
continuation statements, or amendments thereto, relative to all or any part of
the Collateral without the signature of Pledgor.
SECTION 10. Secured Party May Perform.
If Pledgor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
Pledgor under subsection 10.2 of the Credit Agreement.
SECTION 11. Standard of Care.
The powers conferred on Secured Party hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral, it being understood that Secured Party shall have no responsibility
for (a) taking any necessary steps (other than steps taken in accordance with
the standard of care set forth above to maintain possession of the Collateral)
to preserve rights against any parties with respect to any Collateral or (b)
taking any necessary steps to collect or realize upon the Secured Obligations or
any guarantee therefor, or any part thereof, or any of the Collateral. Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property of like kind.
SECTION 12. Remedies.
(a) If any Event of Default or Potential Event of Default shall have
occurred and be continuing, Secured Party may (i) transfer any or all of the
Collateral to an account established in Secured Party's name (whether at Secured
Party or otherwise) or (ii) otherwise register title to any Collateral in the
name of Secured Party or one of its nominees or agents, without reference to any
interest of Pledgor.
XVIII-5
<PAGE>
(b) If any Event of Default shall have occurred and be continuing,
subject to the provisions of subsection 3(b), Secured Party may exercise in
respect of the Collateral, in addition to all other rights and remedies
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "Code") (whether or not the Code applies to the affected
Collateral).
(c) If the proceeds of any disposition of the Collateral are
insufficient to pay all the Secured Obligations, Pledgor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.
(d) Anything contained herein to the contrary notwithstanding, any
of the Collateral consisting of cash held by Secured Party in the Collateral
Account shall be subject to Secured Party's rights of set-off under subsection
10.4 of the Credit Agreement.
SECTION 13. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Pledgor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders herein or otherwise. Upon the payment in full of all Secured
Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Pledgor. Upon any such termination Secured Party shall, at Pledgor's
expense, execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence such termination and Pledgor shall be entitled to
the return, upon its request and at its expense, against receipt and without
recourse to Secured Party, of such of the Collateral as shall not have been
otherwise applied pursuant to the terms hereof.
SECTION 14. Secured Party as Administrative Agent.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement.
XVIII-6
<PAGE>
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums held by Secured Party hereunder (which
shall be deposited in a new Collateral Account established and maintained by
such successor Secured Party), together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Secured Party under this Agreement, and (ii) execute and deliver to
such successor Secured Party such amendments to financing statements, and take
such other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the provisions of this Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
SECTION 15. Amendments; Etc.
No amendment, modification, termination or waiver of any provision
of this Agreement, and no consent to any departure by Pledgor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Secured Party and, in the case of any such amendment or modification, by
Pledgor. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 16. 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, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex (with
received answerback), or three Business Days after depositing it in the United
States mail with postage prepaid and properly addressed; provided that notices
to Secured Party shall not be effective until received. For the purposes hereof,
the
XVIII-7
<PAGE>
address of each party hereto shall be as provided in subsection 10.8 of the
Credit Agreement.
SECTION 17. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of
any power, right or privilege hereunder shall impair such power, right 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 any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 18. Severability.
In case any provision in or obligation under this Agreement 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.
SECTION 19. 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.
SECTION 20. Governing Law; Terms.
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, EXCEPT TO THE EXTENT THAT
THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein or in the Credit Agreement, terms used in Articles 8 and 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 21. Counterparts.
This Agreement may be executed in one or more 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.
XVIII-8
<PAGE>
[Remainder of page intentionally left blank]
XVIII-9
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
AURORA FOODS INC.
By: _______________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Secured Party
By: _______________________________
Name:
Title:
XVIII-10
<PAGE>
EXHIBIT XIX
[FORM OF COLLATERAL ACCESS AGREEMENT]
COLLATERAL ACCESS AGREEMENT
RECORDING REQUESTED BY:
Simpson Thacher & Bartlett
AND WHEN RECORDED MAIL TO:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Scott Lorinsky
Re: AURORA FOODS INC.
- --------------------------------------------------------------------------------
Space above this line for recorder's use only
REAL PROPERTY HOLDER'S WAIVER AND CONSENT AGREEMENT
This REAL PROPERTY HOLDER'S WAIVER AND CONSENT AGREEMENT (this
"Agreement") is dated as of ____, [199_][200_] and entered into by
__________________, a ___________________ ("Real Property Holder"), to and for
the benefit of THE CHASE MANHATTAN BANK, having offices at 270 Park Avenue, New
York, New York 10017, as administrative agent (in such capacity, "Administrative
Agent") for the financial institutions ("Lenders") which are or may hereafter
become parties to the Credit Agreement (as hereinafter defined).
R E C I T A L S
C. [Aurora Foods Inc.] [Name of Subsidiary], a [_________]
corporation ("Company"), has possession of and occupies all or a portion of the
property described on Exhibit A annexed hereto (the "Premises").
D. Company's interest in the Premises [arises under the lease
agreement (the "Lease")][is subject to the [mortgage][deed of trust] (the
"Mortgage")] more particularly described on Exhibit B annexed hereto, pursuant
to which Real Property Holder has rights, upon the terms and conditions set
forth therein, to take possession of, and otherwise assert control over, the
Premises.
E. Administrative Agent, Lenders, National Westminster Bank PLC, as
Syndication Agent, and Swiss Bank Corporation, as Documentation Agent, have
entered into that certain Third Amended and Restated Credit Agreement dated as
of June __, 1998 (said Third Amended and Restated Credit Agreement, as amended,
restated, supplemented or otherwise modified from time to time, being the
"Credit Agreement") with [Company] [Aurora Foods Inc., a Delaware corporation of
which Company is a subsidiary
XIX-1
<PAGE>
("Borrower")] and Company has executed [a guaranty,] a security agreement and
other collateral documents in relation to the Credit Agreement.
F. [Company's guaranty of] the extensions of credit made by Lenders
to [Company] [Borrower] under the Credit Agreement will be secured, in part, by
all raw materials, work-in-process and finished goods inventory of Company
(including all inventory of Company now or hereafter located on the Premises
(the "Inventory")) and all equipment, machinery and other goods used in
Company's business (including all equipment of Company now or hereafter located
on the Premises (the "Equipment" and, together with the Inventory, the
"Collateral")).
G. Administrative Agent has requested that Real Property Holder
execute this Agreement as a condition to the extension of credit to [Company]
[Borrower] under the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Real Property Holder hereby represents and warrants to, and
covenants and agrees with, Administrative Agent as follows:
1. Real Property Holder hereby (a) waives and releases unto
Administrative Agent and its successors and assigns any and all rights granted
by or under any present or future laws to levy or distraint for rent or any
other charges which may be due to Real Property Holder against the Collateral,
and any and all other claims, liens and demands of every kind which it now has
or may hereafter have against the Collateral, and (b) agrees that any rights it
may have in or to the Collateral, no matter how arising (to the extent not
effectively waived pursuant to clause (a) of this paragraph 1), shall be second
and subordinate to the rights of Administrative Agent in respect thereof. Real
Property Holder acknowledges that the Collateral is and will remain personal
property and not fixtures even though it may be affixed to or placed on the
Premises.
2. Real Property Holder certifies that (a) Real Property Holder is
the [landlord under the Lease][beneficiary under the Mortgage], (b) the
[Lease][Mortgage] is in full force and effect and has not been amended,
modified, or supplemented except as set forth on Exhibit B annexed hereto, (c)
there is no defense, offset, claim or counterclaim by or in favor of Real
Property Holder against Company under the [Lease][Mortgage] or against the
obligations of Real Property Holder under the [Lease][Mortgage], (d) no notice
of default has been given under or in connection with the [Lease][Mortgage]
which has not been cured, and Real Property Holder has no knowledge of the
occurrence of any other default under or in connection with the
[Lease][Mortgage], and (e) except as disclosed to Administrative Agent, no
portion of the Premises is encumbered in any way by any deed of trust or
mortgage lien or ground or superior lease.
3. Real Property Holder consents to the installation or placement of
the Collateral on the Premises, and Real Property
XIX-2
<PAGE>
Holder grants to Administrative Agent a license to enter upon and into the
Premises to do any or all of the following with respect to the Collateral:
assemble, have appraised, display, remove, maintain, prepare for sale or lease,
repair, transfer, or sell (at public or private sale). In entering upon or into
the Premises, Administrative Agent hereby agrees to indemnify, defend and hold
Real Property Holder harmless from and against any and all claims, judgments,
liabilities, costs and expenses incurred by Real Property Holder caused solely
by Administrative Agent's entering upon or into the Premises and taking any of
the foregoing actions with respect to the Collateral. Such costs shall include
any damage to the Premises made by Administrative Agent in severing and/or
removing the Collateral therefrom.
4. Real Property Holder agrees that it will not prevent
Administrative Agent or its designee from entering upon the Premises at all
reasonable times to inspect or remove the Collateral. In the event that Real
Property Holder has the right to, and desires to, obtain possession of the
Premises [(either through expiration of the Lease or termination thereof due to
the default of Company thereunder)] [(through the exercise of its rights under
the Mortgage upon a default by Company thereunder)], Real Property Holder will
deliver notice (the "Real Property Holder's Notice") to Administrative Agent to
that effect. Within the 45 day period after Administrative Agent receives the
Real Property Holder's Notice, Administrative Agent shall have the right, but
not the obligation, to cause the Collateral to be removed from the Premises.
During such 45 day period, Real Property Holder will not remove the Collateral
from the Premises nor interfere with Administrative Agent's actions in removing
the Collateral from the Premises or Administrative Agent's actions in otherwise
enforcing its security interest in the Collateral. Notwithstanding anything to
the contrary in this paragraph, Administrative Agent shall at no time have any
obligation to remove the Collateral from the Premises.
5. Real Property Holder shall send to Administrative Agent a copy of
any notice of default under the [Lease][Mortgage] sent by Real Property Holder
to Company. In addition, Real Property Holder shall send to Administrative Agent
a copy of any notice received by Real Property Holder of a breach or default
under any other lease, mortgage, deed of trust, security agreement or other
instrument to which Real Property Holder is a party which may affect Company's
rights in, or possession of, the Premises.
6. All notices to Administrative Agent under this Agreement shall be
in writing and sent to Administrative Agent at its address set forth on the
signature page hereof by telefacsimile, by United States mail, or by overnight
delivery service.
7. The provisions of this Agreement shall continue in effect until
Real Property Holder shall have received Administrative Agent's written
certification that all amounts advanced under the Credit Agreement have been
paid in full.
XIX-3
<PAGE>
8. 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, without regard to
conflicts of laws principles.
XIX-4
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the day and year first set forth above.
[NAME OF REAL PROPERTY HOLDER]
By: _______________________________
Name:
Title:
By its acceptance hereof, as of the day and year first set forth
above, Administrative Agent agrees to be bound by the provisions hereof.
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: _______________________________
Name:
Title:
XIX-5
<PAGE>
EXHIBIT A TO COLLATERAL ACCESS AGREEMENT
LEGAL DESCRIPTION OF PREMISES
XIX-6
<PAGE>
EXHIBIT B TO COLLATERAL ACCESS AGREEMENT
DESCRIPTION OF [LEASE] [MORTGAGE]
XIX-7
<PAGE>
EXHIBIT XX
[FORM OF MORTGAGE]
MORTGAGE
[TO BE PROVIDED]
XX-8
<PAGE>
Exhibit 10.46
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into
as of this __ day of June 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and ___________________, a director of the Company
(the "Director").
W I T N E S S E T H:
WHEREAS, the Company and the Director recognize that the legal risks
and potential liabilities associated with lawsuits filed against the directors
of the Company pose a significant deterrent to experienced and capable
individuals serving as directors of the Company;
WHEREAS, the Company recognizes that the result of the foregoing may
be to encourage those directors who nonetheless determine to serve the Company
in such capacity to act with undue conservatism in the performance of their
duties to the Company and, thus, may result in less effective direction,
supervision and management of the Company's business and operations;
WHEREAS, Section 145 of the Delaware General Corporation Law is not
exclusive of other rights to which those indemnified thereunder may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise and, thus, does not by itself limit the extent to which the Company
may indemnify (and advance expenses to) persons serving as its directors;
WHEREAS, the Company desires to have the Director begin or continue
to serve as a director of the Company, free from undue concern for
unpredictable, inappropriate or unreasonable legal risks and personal
liabilities by reason of performing his duty to the Company or his status as a
director, and the Director desires to begin or continue to serve as a director
of the Company.
NOW, THEREFORE, in consideration of the premises, mutual covenants
and agreements of the parties contained herein and the mutual benefits to be
derived from this Agreement, the parties hereto covenant and agree as follows:
1. Agreement to Serve. The Director agrees to begin or to continue
to serve the Company as a director, provided, however, that nothing contained in
this Agreement shall create or supersede or amend any existing contract of
employment between the Company and the Director, or the Securityholders
Agreement dated as of April 8, 1998 and the termination of the Director's
relationship with the Company by either party hereto shall not be restricted by
this Agreement. Should the Director and the Company agree and
<PAGE>
subject to any written employment agreement between the Director and the
Company, the Director may also serve another corporation, limited liability
company, partnership, joint venture, employee benefit plan, trust including,
without limitation, any subsidiary or other enterprise affiliated with the
Company (any and all of which are collectively referred to herein as an
"Affiliate"), in which event the terms and provisions of this Agreement shall
automatically apply to any such other service to the full extent permitted by
applicable law without the need for any additional action on the part of the
Director or the Company.
2. Indemnity.
(A) Subject to the conditions and limitations of this
Paragraph 2 (including without limitation Paragraph 2(B) below), the
Company shall, to the fullest extent permitted by the Delaware
General Corporation Law as it may then be in effect, indemnify and
hold the Director and his estate, heirs and legal representatives
(each an "Indemnified Party") harmless if any of them is, becomes or
was a party to or witness or other participant in, or is or was
threatened to be made a party to or witness or other participant in,
any Claim (as defined below) by reason of (or arising in part out
of) an Indemnifiable Event (as defined below) against any and all
expenses (including attorneys', accountants' and other experts'
fees, disbursements and expenses), judgments, fines, penalties,
excise taxes and amounts paid or to be paid in settlement incurred
by the Indemnified Party in connection with preparation for or in
defense of such Claim (collectively, "Indemnified Amounts"). "Claim"
means any threatened, pending or completed action, cause of action,
suit or proceeding, whether civil, criminal, administrative or
investigative or other, including, without limitation, an action by
or in the right of any corporation (including without limitation,
the Company) of any type or kind, domestic or foreign, or any
limited liability company, partnership, joint venture, trust,
employee benefit plan or other enterprise, whether predicated on
foreign, federal, state or local law and whether formal or informal.
"Indemnifiable Event" means any event or occurrence related to the
fact that the Director is or was or has agreed to become a director
or other representative of the Company, or is or was serving or has
agreed to serve in any capacity, at the request of the Company, in
any other corporation, limited liability company, partnership, joint
venture, employee benefit plan, trust or other enterprise, or by
reason of anything done or not done by the Director in any such
capacity.
(B) Any indemnification under paragraph (A) of this Paragraph
2 shall be made by the Company only as authorized in the specific
case upon a determination that the Director acted in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interests of the Company and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct
was unlawful; provided, however, that
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<PAGE>
no indemnification shall be made in respect of any Claim as to which
the Director shall have been adjudged to be liable to the Company
unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, the Indemnified Party is fairly and reasonably entitled to
indemnity for such Indemnified Amounts which the Court of Chancery
of the State of Delaware or such other court shall deem proper. Such
determination (each, a "Board Action") shall be made (1) by the
Board of Directors by a majority vote of the directors who are not a
party to such Claim with respect to an Indemnifiable Event, even if
less than a quorum, or (2) by a committee of such directors
appointed by a majority vote of such directors, even if less than a
quorum, or (3) by the Board of Directors acting upon an opinion in
writing of independent legal counsel, if there are no such directors
or if a majority of such directors so direct.
(C) Notwithstanding anything in the Company's Certificate of
Incorporation, By-Laws, or this Agreement to the contrary, if so
requested by an Indemnified Party the Company shall advance (an
"Expense Advance") (within 30 days of such request) any and all
Indemnified Amounts relating to a Claim to such Indemnified Party,
upon the receipt of a written undertaking by or on behalf of such
Indemnified Party to repay such Expense Advance if a judgment or
other final adjudication adverse to such Indemnified Party (as to
which all rights or appeal therefrom have been exhausted or lapsed)
establishes that such Indemnified Party, with respect to such Claim,
is not eligible for indemnification.
(D) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Paragraph 2 shall not be deemed
exclusive of any other rights to which an Indemnified Party seeking
indemnification or advancement of expenses may be entitled under any
by-law, other agreement, vote of stockholders or disinterested
directors, policy of insurance or otherwise, both as to action of
the Director in his official capacity and as to action in another
capacity while holding such office.
(E) For the purposes of this Paragraph 2, references to "the
Company" shall include, in addition to the resulting corporation or
limited liability company, any constituent corporation or limited
liability company (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents, so that the
Director if he is or was a director, officer, employee or agent of
such
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<PAGE>
constituent entity, or is or was serving at the request of such
constituent entity as a director, officer, employee, agent, trustee,
fiduciary or other representative of another corporation, limited
liability company, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of
this Paragraph 2 with respect to the resulting or surviving entity
as he would have with respect to such constituent entity if its
separate existence had continued.
(F) Any repeal or modification of relevant provisions of the
Delaware General Corporation Law or any other applicable laws shall
not in any way diminish any rights to indemnification of an
Indemnified Party or the obligations of the Company arising
hereunder except to the extent required by law. All rights and
obligations of the Company and the Director and the other
Indemnified Parties under this Agreement shall continue in full
force and effect despite the subsequent amendment or modification of
the Company's Certificate of Incorporation or Bylaws, as such are in
effect on the date hereof, and such rights and obligations shall not
be affected by any such amendment or modification, any resolution of
the Board of Directors or the stockholders of the Company, or any
other corporate action which in any way seeks to diminish any of the
rights of the Director and the other Indemnified Parties or the
obligations of the Company under this Agreement. If this Paragraph 2
or any portion hereof shall be invalidated on any ground by any
court of competent jurisdiction, then the Company shall nevertheless
indemnify each Indemnified Party as to Indemnified Amounts with
respect to any Claim, no matter by whom brought, and advance
expenses (including attorneys', accountants' and other experts'
fees, disbursements and expenses), in each such Claim to the full
extent permitted by any applicable portion of this Paragraph 2 that
shall not have been invalidated and to the full extent permitted by
applicable law.
(G) Anything herein to the contrary notwithstanding, the
settlement of any Claim that is entered into without the prior
written consent of the Company shall be covered by the terms hereof
as determined by the Company in its sole discretion pursuant to
Paragraph 2B.
(H) Notwithstanding any other provision of this Agreement, to
the extent that the Indemnified Party has been successful on the
merits or otherwise in defense of any or all Claims relating in
whole or in part to an Indemnifiable Event or in defense of any
issue or matter therein, including, without limitation, dismissal
without prejudice, the Indemnified Party shall be indemnified
against any and all Indemnified Amounts paid or to be paid in
settlement of such Claim. In connection with any determination by
Board
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<PAGE>
Action or by a court of competent jurisdiction that the Indemnified
Party is not entitled to be indemnified hereunder, the burden of
proof shall be on the Company to establish that the Indemnified
Party is not so entitled.
3. Payment of Indemnity. Indemnified Amounts and Expense Advances,
if any, provided to any Indemnified Party by the Company under this Agreement
upon the final disposition or conclusion of a Claim unless otherwise ordered by
the court before which such Claim was brought, shall be paid by the Company (net
of all amounts, if any, previously advanced to the Indemnified Parry or Parties
pursuant to Paragraph 2C) to the Indemnified Party (or to such other person as
the Indemnified Party may designate in writing to the Company) within 30 days
after the receipt of the Indemnified Party's written request therefor, which
request shall include a reasonably comprehensive accounting of amounts for which
indemnification is being sought and shall refer to one or more of the
provision(s) of this Agreement pursuant to which such claim is being made. All
expenses associated with the indemnification process set forth in this Agreement
or enforcements of rights hereunder shall be paid by the Company.
4. Termination of an Action is Nonconclusive. The termination of any
Action, no matter by whom brought, by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the Director has not met the applicable standard(s) of
conduct set forth in Paragraph 2 of this Agreement.
5. Partial Indemnification; Interest.
(A) If it is determined by the court before which a Claim is
brought or a court having competent jurisdiction that the
Indemnified Party is entitled to indemnification as to some claims,
issues or matters, but not as to other claims, issues or matters
involved in such Claim, no matter by whom brought, the court shall
authorize the reasonable proration of the Indemnified Amounts with
respect to which indemnification is sought by the Indemnified Party,
among such claims, issues or matters as the court shall deem
appropriate in light of all of the circumstances of such Claim.
(B) If it is determined by the court before which such Claim
was brought or a court having competent jurisdiction that certain
Indemnified Amounts incurred by the Indemnified Party are, for
whatever reason, unreasonable in amount, the court shall authorize
indemnification to be paid by the Company to the Indemnified Party
for only such amounts as the court shall deem reasonable in light of
all of the circumstances of such Claim.
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6. Representation of Company. The Company represents and warrants to
the Director that neither the execution and delivery of this Agreement by the
Company nor the consummation of the transactions set forth herein or
contemplated hereby will conflict with or result in any violation of, or
constitute a breach of, or a default under, the Certificate of Incorporation or
Bylaws of the Company, or under any contract, instrument, agreement,
understanding, mortgage, indenture, lease, insurance policy, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company.
7. Insurance.
(A) To the extent the Company maintains at any time an
insurance policy or policies providing directors' and officers'
liability insurance, Indemnitee shall be covered by such policy or
policies, in accordance with its or their terms, to the maximum
extent of the coverage available for any other Company director or
officer under such insurance policy. The purchase and maintenance of
such insurance shall not in any way limit or affect the rights and
obligations of the parties hereto, and the execution and delivery of
this Agreement shall not in any way be construed to limit or affect
the rights and obligations of the Company or of the other parties
under any such insurance policy.
(B) In the event of payment to an Indemnified Party under this
Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of recovery with respect to such
payment of the Indemnified Party, who shall execute and deliver all
instruments, documents, and other papers and shall perform any and
all acts or deeds reasonably necessary or advisable to secure such
rights.
8. Notice to the Company by Director. The Director agrees to, and
each other Indemnified Party shall, notify the Company promptly upon being
served with or having knowledge of any citation, summons, complaint, indictment
or any other similar document relating to any Action which is reasonably likely
to result in a claim of indemnification under this Agreement.
9. Continuation of Rights and Obligations. The terms and provisions
of this Agreement shall survive and continue as to the Director and the other
Indemnified Parties notwithstanding whether the Director ceases to be a director
of the Company or of an Affiliate.
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10. Amendment and Modification. This Agreement may be amended,
modified or supplemented only by the written agreement of the Director and the
Company (subject to approval by the Board of Directors).
11. Assignment. This Agreement shall not be assigned (including
without limitation by operation of law or merger) by the Company or the Director
without the prior written consent of the other party hereto, except that the
Company may assign its rights and obligations under this Agreement to any
Affiliate for whom the Director is serving as an executive thereof, provided,
however, that no permitted assignment shall release the assignor from its
obligations hereunder. Subject to the foregoing, this Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, including, without
limitation, any successor to the Company by way of merger, consolidation and/or
disposition of all or substantially all of the capital stock or assets of the
Company.
12. Governing Law. All matters with respect to this Agreement,
including, without limitation, matters of validity, construction, effect and
performance, shall be governed by the internal laws of the State of Delaware
applicable to contracts made and to be performed therein between the residents
thereof (regardless of the laws that might otherwise be applicable under
principles of conflicts of law).
13. Headings. The headings used in this Agreement are for
convenience and reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14. Severability. Without limiting the provisions of Paragraph 2G
hereof, if any provision of this Agreement shall be deemed invalid,
unenforceable or inoperative, or if a court of competent jurisdiction determines
that any of the provisions of this Agreement contravene public policy, this
Agreement shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such provisions
which are held to be invalid, unenforceable or inoperative or which contravene
public policy by such court shall be deemed, without further action, to be
modified, amended and/or limited, but only to the extent necessary to render the
same valid and enforceable, and the Company shall thereafter indemnify the
Indemnified Party against reasonable expenses (including attorneys',
accountants' and other experts' fees, disbursements and expenses), judgments,
fines and amounts incurred in settlement with respect to any Action, no matter
by whom brought, to the full extent permitted by any applicable provisions of
this Agreement that shall not have been invalidated and to the full extent
otherwise permitted by the Delaware General Corporation Law as it may then be in
effect.
15. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given
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when delivered by hand or two (2) business days after being mailed by a
recognized international private courier (by way of example, FedEx and UPS) or
by certified or registered mail, return receipt requested, with postage prepaid:
15.1. If to the Director, to:
or to such other person or address as the Director shall furnish to the
Company in writing.
15.2. If to the Company, to:
Aurora Foods Inc.
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
Attention:______________
or to such other person or address as the Company shall furnish to the Director
in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
DIRECTOR AURORA FOODS INC.
- ----------------------------- --------------------------------
Name:
Title:
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AURORA FOODS INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the 1998 Employee Stock Purchase Plan is to
provide employees of the Company and its Designated Subsidiaries with an
opportunity to purchase Common Stock of the Company through accumulated payroll
deductions. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The provisions of the Plan, accordingly, shall be construed so
as to extend and limit participation in a manner consistent with the
requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Aurora Foods Inc., a Delaware corporation,
and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, exclusive of payments for overtime, shift premium, incentive
compensation, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
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(i) "Exercise Date" shall mean the last Trading Day of each Offering
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the NASDAQ
National Market or The NASDAQ Small Cap Market of The NASDAQ Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "Offering Period" shall mean a period of approximately six (6)
months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after January 1 and terminating on the
last Trading Day in the period ending the following June 30, or commencing on
the first Trading Day on or after July 1 (beginning in 1998) and terminating on
the last Trading Day in the period ending the following December 31. The
duration of Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 1998 Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
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(p) "Trading Day" shall mean a day on which national stock exchanges
and the NASDAQ System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company for the three
(3) months immediately preceding a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods with a new Offering Period commencing on the first Trading Day on or
after January 1 and July 1 of each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 20 hereof. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the tine a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an
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amount not exceeding fifteen percent (15%) of the Compensation which he or she
receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may decrease the rate of his or her
payroll deductions during the Offering Period to 0% by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (O%) at any time during an
Offering Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than 5,000
shares (subject to any adjustment pursuant to Section 19), and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as
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provided in Section 8 hereof, unless the participant has withdrawn pursuant to
Section 10 hereof. The Option shall expire on the last day of the Offering
Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an
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Employee for the participant's customary number of hours per week of employment
during the period in which the participant is subject to such payment in lieu of
notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 200,000 shares. Shares issued under the Plan may be authorized but
unissued shares or reacquired shares; provided, however, that a maximum of
100,000 (as adjusted according to Section 19, hereof) of the shares may be
authorized but unissued shares. If, on a given Exercise Date, the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
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<PAGE>
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if tiny.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase per Offering Period (pursuant to Section 7), as well as
the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason
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thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an option.
(b) In the event of the proposed dissolution or liquidation of the
Company, the Offering Period then in progress shall be shortened by setting a
new Exercise Date (the "New Exercise Date"), and shall terminate immediately
prior to the consummation of such proposed dissolution or liquidation, unless
provided otherwise by the Board. The New Exercise Date shall be before the date
of the Company's proposed dissolution or liquidation. The Board shall notify
each participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, the Offering Period
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been change to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offing Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any other applicable law, regulation or
stock exchange rule), the Company shall obtain stockholder approval in such a
manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts
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withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Condition Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of in option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in, the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. Subject to S@on 19, the Plan shall become effective upon
the date of the Company's initial public offering of its equity securities
registered on Form S-I with the Securities and Exchange Commission. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 20 hereof.
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Exhibit 10.48
PRODUCTION AGREEMENT
This Production Agreement (the "Agreement") is made as of the 4th day of
June, 1998, by and between Aurora Foods Inc., a Delaware corporation ("Buyer"),
and Gilster-Mary Lee Corporation, a Missouri corporation ("Producer").
WITNESSETH
WHEREAS, Buyer possesses formulas and processes for the manufacture of
certain food products described in Schedule A hereto (the "Products");
WHEREAS, Producer is engaged in the business of manufacturing and mixing
food products, including food products similar to the Products;
WHEREAS, Producer has facilities and expertise for the production of
the Products; and
WHEREAS, Buyer and Producer desire to define and develop a business
relationship whereby Producer will manufacture and sell, and Buyer will
purchase, the Products subject to the terms and conditions set forth herein.
NOW THEREFORE, for mutual and adequate consideration, Producer and Buyer
agree as follows:
1. TERM. This Agreement is effective immediately, but Buyer and Producer
acknowledge that production of the Products shall not commence
immediately. For purposes of calculating the Original Term (as hereinafter
defined) of this Agreement, this Agreement shall be deemed to commence as
of the first day any of the Products are delivered to the Buyer (the
"Commencement Date") and, unless earlier terminated in accordance with
Section 21 hereof, the Agreement shall end on the fifth anniversary of the
Commencement Date (the "Original Term"). The Buyer shall have the option
to extend this Agreement on the same terms and conditions set forth herein
for an additional two year period (the "Option Term") by giving written
notice to the Producer of Buyer's exercise of the option not later than
one-hundred eighty (180 ) days prior to the expiration of the Original
Term. In addition, the Agreement 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, the Option Term or any Renewal Term. If the Producer shall
give notice to Buyer of its decision not to renew no later than
one-hundred eighty (180 ) days prior to the
<PAGE>
expiration of the Original Term and the Buyer shall give notice to the
Producer of Buyer's exercise of the option not later than one-hundred
eighty (180) days prior to the expiration of the Original Term, the
Buyer's notification shall control, regardless of whether that notice is
given before or after receipt of the Producer's notice. The "Agreement
Term" shall mean (i) the Original Term, (ii) if the Buyer exercises the
option, the Option Term and (iii) if this Agreement is renewed, the
Renewal Term or Terms.
2. PRODUCTION FACILITIES. The Products will be manufactured at Producer's
facilities located at Centralia, Illinois (the "Centralia 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"). As soon as is reasonably practicable, Producer agrees that it
shall, at its sole cost and expense, add not less than an additional 8,000
square feet of warehouse space to the Centralia Plant.
3. PRODUCERS; PRODUCTION.
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. Such quantities shall not exceed the capacity
of the Manufacturing Equipment (as hereinafter defined), unless, after
servicing Producer's existing business, additional capacity, using
Producer's then existing equipment, is available at another of Producer's
facilities.
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"). Between the date hereof and
the date of the first production of the Products by Producer, Producer and
Buyer agree to in good faith discuss reasonable changes to the existing
quality control standards and operating procedures relating to the
production of the Products. Buyer agrees to in good faith consider and, if
deemed acceptable by Buyer, implement such quality control and operating
procedure changes as may be proposed by Producer. Buyer may modify the
Specifications from time to time on 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,
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operating techniques, manufacturing procedures and other technical
information necessary and appropriate for the manufacture of the Products;
provided, however, that Producer understands that Buyer is relying upon
Producer's expertise in suggesting to Buyer and implementing the
appropriate procedures for the manufacture of the Products.
5. GRANT OF LICENSE. Subject to the terms and conditions of this Agreement,
Buyer hereby grants to Producer, who accepts the same, a non-exclusive,
nonassignable, 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
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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 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 nondisclosing 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 loss, liability, claim, damage, cost and expense (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, money damages may not be an adequate remedy and
that the disclosing party shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such
breach.
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g. The non-disclosing party acknowledges that the Confidential
Information disclosed or to be disclosed by the disclosing party
represents the disclosing party's valuable property, which is
intended to be maintained in perpetuity as trade secret property.
Accordingly, the confidentiality and non-use obligations of Section
6 of this Agreement shall be continuing in nature and shall survive
termination of this Agreement.
7. SALE AND PURCHASE OF PRODUCTS.
a. The terms and conditions contained in this Agreement shall be
effective for all Products sold by the Producer to the Buyer during
the Agreement Term. During the Agreement Term, Producer agrees to
manufacture and sell the Products to Buyer against the Monthly
Production Request (as such term is hereinafter defined in Section
10 of this Agreement) of the Buyer, which request shall be deemed to
be a production purchase order. During the Agreement Term, Producer
agrees to deliver the Products manufactured and sold to Buyer
against shipping orders of Buyer. Except as otherwise set forth in
this Agreement, each contract for the purchase and sale of the
Products shall be initiated hereunder by Buyer's issuance to
Producer of a production purchase order and delivery of such
Products shall be initiated against shipping orders of the Buyer.
Unless Buyer otherwise agrees in writing, ALL PRODUCTION PURCHASE
ORDERS AND SHIPPING ORDERS ARE EXPRESSLY LIMITED TO THE TERMS HEREOF
AND ANY ADDITIONAL OR DIFFERENT TERMS ARE OBJECTED TO WITHOUT
FURTHER NOTIFICATION BY PRODUCER AND BUYER. Shipping orders shall be
issued to the Producer at least ten (10) 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
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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. Subject to the provisions of Section 3 relating to capacity
limitations, if for any reason other than a Force Majeure Event (as
hereinafter defined), 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 for producing such
Product at the Approved Facility. In addition, in the event Producer
is required to produce Products at a Substitute Facility, Producer
shall reimburse Buyer for ah 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
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(both upward and downward) based upon market fluctuations in the
cost of the components that form the line items as set forth in
Schedule C. No change in the purchase price of the Products shall be
made except upon reasonable prior written notice from the Producer
to the Buyer. Any change that is justified as a result of a change
in the cost of components that form the line items as set forth in
Schedule C shall be made not more frequently than once a quarter and
shall be made at the beginning of the next calendar quarter.
Producer and Buyer agree that there shall be no change in the unit
purchase prices of the Products unless the change from the existing
contractual unit purchase price is equal to or greater than ten
cents per case of Products. Notwithstanding the foregoing, Producer
and Buyer agree to recognize changes of less than ten cents per case
of Products through credits or debits, as the case may be, to the
purchase price for the Products on invoices contemplated by Section
8 (f) of this Agreement. 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 date of the execution of this Agreement. Producer
further agrees that the Factory Fixed cost component shall not be
requested to be changed more than one time a year and further agrees
that there shall be no change in the Factory Fixed cost component
through June 4, 2000. 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 date of the execution of
this Agreement. In the event of any price change (including those
changes of less than ten cents per case of Products that are merely
recognized through credit or debits on invoices), 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.
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<PAGE>
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.
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 shipped by the Producer during the preceding business
day. Terms of payment for each invoice will be net ten (10) days
from the date of invoice. Buyer will however batch pay invoices
twice a week causing some minor early and late variances. 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. Producer shall notify
Buyer of any extension of time within which it is permitted to pay
its material vendors for raw materials. In the event of any such
extension, Producer and Buyer agree to extend the time within which
Buyer is required to pay the invoices to Producer.
g. Invoices for payment shall be sent to:
Aurora Foods Inc.
445 Hutchinson Avenue
Suite 960
Columbus, OH 43235
Payments shall be sent to:
Gilster Mary Lee Corporation
1037 State Street
Chester, IL 62233
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.
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<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 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. Annually, Producer shall discuss with Buyer strategic issues
concerning purchasing of raw materials and packaging materials for
the Products. Quarterly, Producer and Buyer shall review purchasing
performance and opportunities.
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 merely 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 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 the
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production capacity of the Manufacturing Equipment. Producer shall
be obligated to deliver to Buyer the quantities of the Products set
forth in each Monthly Production Request. By the last day of each
calendar month, Buyer shall be obligated to purchase and take
delivery of the Products in quantities that are not less than the
quantities as are set forth in the Monthly Production Request for
such calendar month. Producer shall in good faith schedule the
timing and volume of the production of the Products over the course
of each month (with the intention being that Buyer shall not receive
invoices for the production of Products substantially in advance of
the shipping orders for the Products), and Buyer shall in good faith
place shipping orders over the course of each month in a manner
generally consistent with its past practices in an orderly fashion
so that the shipping orders will exhaust the Monthly Production
Request (with the intention being that Producer shall not have
unreasonable day to day increases in the level of inventory of the
finished Products during a month).
11. INVENTORY OF FINISHED PRODUCTS AND 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, either on the floor at such
Approved Facility or in outside warehousing facilities maintained by
the Producer, an inventory of finished Products in quantities equal
to at least five (5) days of the average quantities of such Products
sold to Buyer during the preceding sixty (60) days.
b. With respect to each Approved Facility, Producer agrees, where
possible, 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. Buyer
recognizes that, for some bulk raw materials and corrugated shipping
cases, it will be impossible to maintain a five (5) day inventory.
12. SHIPMENT AND PALLET REQUIREMENTS.
a. Unless otherwise mutually agreed in writing, the Products will be
shipped in pallet quantities on Chep pallets. Chep pallet charges
will be the responsibility of Buyer.
b. In lieu of a pallet exchange arrangement, Producer shall shrink wrap
all pallets containing any of the Products at Producer's sole cost
and expense. Buyer shall not be charged or otherwise be responsible
for the
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cost or expense associated with shrink wrapping the pallets
containing the Products.
c. Buyer and Producer agree to equally share the actual additional
labor costs of building store-ready pallet display modules upon the
request of, and in the manner requested by, Buyer.
d. Shipment of Products shall be coordinated by Producer. 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.
Carriers shall be obtained and contracted by Buyer.
e. Buyer shall be responsible for transportation costs for the Products
from an Approved Facility or outside warehousing facilities
maintained by the Producer to the warehouse or other destination
designated by Buyer.
13. MANUFACTURING EQUIPMENT OF BUYER.
a. Buyer shall supply to Producer, deliver and install, at no cost to
the Producer, certain existing equipment of the Buyer identified in
Schedule D (the "Manufacturing Equipment") that is used in the
production of the Products for installation in the Approved
Facilities identified on Schedule D. Buyer shall use its best
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.
b. Buyer shall control, and be responsible for all of its 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, and shall maintain property
insurance on, all of the Manufacturing Equipment.
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.
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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 the Buyer. Unless Buyer and Producer agree in advance in
writing, Producer agrees that it shall not use such equipment for
any other purpose. In addition, unless Buyer agrees in advance in
writing (which agreement shall not be unreasonably withheld),
Producer agrees that it shall not install any production lines at
the Centralia Plant other than for the production of the Products or
otherwise produce any products at the Centralia Plant other than the
Products.
g. At any time during the Agreement Term, Buyer shall be entitled to
remove from any Approved Facility, at its cost and expense, one or
more (but not all) of the production lines involving any of the
Manufacturing Equipment. Subject to any limitations reasonably
imposed by Producer as a result of space constraints at an Approved
Facility, Buyer shall be entitled to add, at its cost and expense,
one or more production lines involving any Manufacturing Equipment
at an Approved Facility for additional production of the Products.
14. WARRANTIES OF PRODUCER.
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.
Producer warrants that the Products shall be merchantable and fit
for the purpose for which they are intended to be used.
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b. Producer warrants that it has obtained, or prior to the time it
commences production of the Products will have obtained, any
governmental approvals required in connection with the production
and sale of the Products, and will furnish copies or other evidence
satisfactory to Buyer of all such approvals upon the request of
Buyer.
c. Producer warrants that all raw materials and packaging materials for
the manufacturing and packaging of the Products will be sampled and
tested by Producer in accordance with its obligations under this
Agreement, including those contained in Section 15 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 14, 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.
f. Producer warrants that, in connection with this Agreement, Producer
shall comply with all applicable federal, state and local laws and
regulations, including, without limitation, to the extent
applicable, Executive Order 11246 and 41 C.F.R. ss.60-1.4.
g. Producer shall not be responsible for damage to Products caused by
Buyer's carriers, warehouses or distribution centers, or customers.
15. 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
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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.
16. 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.
17. RAW MATERIALS FOR OTHER PRODUCTS OF BUYER.
a. Producer has offered to coordinate and aid in the purchasing of
materials for other locations producing Duncan Hines products for
Buyer.
b. Such purchasing activities will be limited to the following:
1. Establishing approved suppliers with mutual agreement of
Buyer;
2. Furnishing copies of Buyer's approved specifications necessary
to suppliers;
3. Obtaining the same prices for such materials as Producer would
obtain if Producer purchased such materials directly;
4. Receiving production and material requests from outside
manufacturing locations contracted by Buyer;
5. Promptly placing these requests with suppliers to assure
timely delivery of goods to outside manufacturers; and
6. Promptly notifying outside manufacturers and Buyer when
Producer becomes aware that suppliers cannot meet requested
delivery schedules.
Producer is not responsible for the following.
-14-
<PAGE>
1. Producer will not purchase and resell to Buyer or outside
manufacturers materials, but will instead have these materials
billed directly to Buyer.
2. Producer will not undertake any guarantees or warranties
regarding material quality or regulatory compliance. All such
warranties or guarantees will be the responsibility of the
material suppliers.
3. Producer at no time agrees to take title or risk of loss for
raw materials purchased by Buyer for outside manufacturers.
4. Producer will not take responsibility for inventory levels at
outside manufacturers, other than promptly executing and
expediting material requests.
18. FORCE MAJEURE; PRODUCTION AT SUBSTITUTE FACILITIES
a. In the event of strikes; war; civil insurrection; riots; thefts;
inability to obtain necessary labor or materials; fire; flood;
earthquake; or other act of God 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 noncompliance 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 45 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.
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
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<PAGE>
Product that the Monthly Production Request contemplates being
produced from such Approved Facility, Producer shall produce the
amount at a Substitute Facility to the extent reasonably
practicable. In such event, Producer agrees to use its best efforts
to fulfill Buyer's needs, including the use of all uncommitted
production and all possible overtime. 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. In
the event Producer produces the Products at a Substitute Facility,
Producer shall reimburse Buyer for 50% of all incidental damages
(e.g., additional shipping charges) incurred by Buyer as a result of
the Products being produced at a 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, including the use of all uncommitted production and all
possible overtime. 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 to the production requirements of the Buyer.
19. 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 to 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 19(a) will not be exclusive of
or limit any other remedies that may be available to Buyer or Buyer
Indemnified Persons.
b. Buyer will indemnify and hold harmless the Producer and its
representatives, stockholders, controlling persons and affiliates
(collectively, the "Producer Indemnified Persons") for, and will pay
to the
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<PAGE>
Producer Indemnified Persons, the amount of any Damages incurred by
the Producer Indemnified Persons involving a third-party claim
arising, directly or indirectly, from or in connection with any
injury (including death) to person or property to the extent
proximately caused by the Buyer's breach of this Agreement,
negligence or willful misconduct.
The remedies provided in this Section 19(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 19(a)
or 19(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
indemnified party's failure to give such notice.
d. If any proceeding referred to in Section 19(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 19 for any fees of other
counsel or any other expenses with respect to the defense of such
proceeding subsequently incurred by the indemnified party in
connection with the defense of such proceeding. If the indemnifying
party assumes the defense of a proceeding, (i) no compromise or
settlement of such claims may be effected by the indemnifying party
without the indemnified party's consent (which consent shall not be
unreasonably withheld) unless (A) there is no finding or admission
of any violation of legal requirements or any violation of the
rights of any person and no effect on any other claims that may be
made against the indemnified party, and (B) the sole relief provided
is monetary damages that are paid in full by the indemnifying party;
and (ii) the
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<PAGE>
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). Should the
indemnified party elect this option, the indemnifying party shall be
entitled to consent to the counsel selected by the indemnified
party, which consent shall not be unreasonably withheld.
20. 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 $5 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 $10 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.
21. TERMINATION.
a. If either party shall breach any of the provisions of this Agreement
and such breach shall continue for a period of thirty (30) days
after the receipt of written notice specifying the breach to such
party, or should either party (i) file or have filed against it a
bankruptcy petition (which, in the case of a petition filed against
a party, is not thereafter dismissed within sixty days after the
filing of the petition against the party) or (ii) enter into any
type of proceeding under and pursuant to the insolvency or
receivership laws of any state or (iii) make a general assignment
for the benefit of creditors or (iv) a Force Majeure Event occurs
that gives rise to a right of termination under Section 18, then,
and in any such events, the other party shall have
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<PAGE>
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.
b. 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.
c. Upon the effective date of a complete termination of this Agreement:
(i) The license provided for in Section 5 shall terminate.
(ii) Producer shall:
(a) cease any use of the Confidential Information of Buyer;
(b) return to Buyer or destroy all tangible forms of the
Confidential Information of Buyer;
(c) make available for purchase by the Buyer at Producer's
cost all packaging materials and other items of
inventory that, pursuant to Section 9(c), are tailored
exclusively for the Products;
(d) return to Buyer, at Buyer's sole cost and expense, all
of Manufacturing Equipment installed in any of the
Approved Facilities and provide access during normal
business hours to any representatives of Buyer to any
such facilities for the removal of such equipment from
the facilities of the Producer; and
(e) make available for delivery to Buyer any finished
Product inventory maintained by Producer.
(iii) Buyer shall:
(a) within ten days after such termination, purchase at
Producer's cost all packaging materials and other items
of inventory that, pursuant to Section 9(c), are
tailored exclusively for the Products and that are in
good and usable condition;
-19-
<PAGE>
(b) within one hundred eighty 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;
(e) return to Producer or destroy all tangible forms of the
Confidential Information of Producer; and
(f) in the event the termination is as a result of a breach
of the Agreement by the Buyer, Buyer shall (x) within
thirty days after such termination, purchase at
Producer's cost all raw materials in inventory at the
Centralia Plant committed exclusively to Buyer's
production that are in good and usable condition and (y)
within thirty days after such termination, either (A)
pay to Producer an amount equal to the lesser of (1) the
amount that Producer is required to, and does, pay its
suppliers of raw materials for cancellation fees in
connection with orders for raw materials that were
committed exclusively to Buyer's production or (2) the
amount that Producer would be required to pay as a
brokerage fee if, in good faith and in the exercise of
reasonable care, Producer were to have a third party
broker the raw materials that are the subject matter of
such orders to another person or (B) assume the
obligations of the Producer under such orders for raw
materials that were committed exclusively to Buyer's
production. Producer agrees that it shall not cancel
such orders or broker the raw materials that are the
subject of such orders to a third party without first
providing Buyer at least two business days notice of
such actions (which notice shall set forth the cost
associated with each option) and offering Buyer the
opportunity to assume the obligations of the Producer
under the orders.
(iv) Producer shall make conforming deliveries under the terms of
this Agreement for any then-outstanding Orders of Products or
of Raw Materials; and
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<PAGE>
(v) All sums owed Producer by Buyer shall become immediately due
and payable.
22. 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, and if given by
nationally recognized express courier which provides a receipt of
delivery, on the date delivery is completed, and in all cases
addressed to:
It to Producer: Gilster-Mary Lee Corporation
1037 Stale St.
Chester, IL 62233
Attention: Don Welge
Facsimile: (618) 826-2368
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.
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<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 into an agreement with other parties
for the manufacture of any of the 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.
j. Public Notice of Buyer's Ownership of Manufacturing Equipment
Located at Producer's Approved Facilities. Producer shall execute
such bailor/bailee and other informational financing statements as
Buyer may request from time to time to give public notice that the
Manufacturing Equipment owned by Buyer and located at the Producer's
Approved Facilities are the property of Buyer. In addition, Producer
agrees to cooperate with Buyer in obtaining from Producer's lenders
written agreements pursuant to which such lenders acknowledge that
such Manufacturing Equipment is owned by the Buyer and, if
appropriate, release, or subordinate to Buyer, all of such lenders'
interests, if any, in the Manufacturing Equipment.
k. Option to Acquire the Centralia Plant Under Certain Circumstances.
During the Original Term (five years), in the event of a Change in
Control of the Producer (as hereinafter defined) or an Acquisition
of the Producer (as hereinafter defined) without the prior written
consent of Buyer (which consent may be withheld by Buyer in its sole
discretion), Buyer shall, for a period of six months after Buyer
receives notice of such event, have the option to purchase the real
property relating to the Centralia Plant and all attachments to the
real property necessary for the manufacture of Buyer's
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<PAGE>
Products located at the Centralia Plant for the Fair Market Value
(as hereinafter defined) of such property. This option shall in no
way hinder or prevent Producer from entering into any Acquisition or
Change of Control, but shall only affect ownership rights in the
Centralia Plant. Buyer shall be entitled to exercise such option by
giving written notice of such exercise at any time within such six
month period. The closing of such purchase shall occur within sixty
days of the exercise of such option. Buyer shall be transferred fee
simple title to all such property, free and clear of all material
liens and encumbrances, and Buyer shall deliver to the transferor of
such property the purchase price in cash at the closing. Buyer and
the transferor shall each be responsible for making payments or
delivering documents as are customary and usual in transactions of
this nature in Centralia, Illinois (e.g., proration of real estate
taxes, delivery of survey, title insurance, etc.). In the event that
Buyer exercises such option, the rights of Producer (or its
successors or assigns) under this Agreement (including any rights to
produce Products under this Agreement) shall terminate.
For purposes of this Section 22(k), (i) the term "Change in Control
of Producer" shall mean the acquisition of ownership or voting
control, beneficially or of record, by any person or group of
persons acting in concert (other than Don Welge or his estate or
descendants) of shares representing more than fifty percent of the
voting power of the Producer within a twelve month period, (ii) the
term "Acquisition of the Producer" shall mean any transaction or
series of related transactions resulting, directly or indirectly, in
(a) the acquisition of all or substantially all of the assets of the
Producer, (b) the acquisition of more than fifty percent of the
issued and outstanding stock of the Producer within a twelve month
period or (c) the acquisition of the Producer by a merger,
consolidation or other combination; and (iii) the term "Fair Market
Value" of property shall mean the value mutually determined by the
transferor and transferee of such property, or, if they are unable
to mutually agree on such value within thirty days after the
commencement of negotiations on such value, then the value assigned
to such property by an independent appraiser jointly selected by the
transferor and transferee (or, if the transferor and transferee are
unable to jointly select an appraiser, then by an independent
appraiser appointed by the Chicago, Illinois office of the American
Arbitration Association).
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<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. GILSTER-MARY LEE CORPORATION
("Buyer") ("Producer")
By /s/ Thomas J. Ferraro By /s/ Donald E. Welge
---------------------------- -------------------------------
Its President Its President and General Manager
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<PAGE>
Aurora Foods, Inc.
Schedule A
Product List
Gilster-Mary Lee
<PAGE>
- --------------------------------------------------------------------------------
Gilster-Mary Lee Product List (Duncan Hines Bake Mixes)
- --------------------------------------------------------------------------------
BRAND CODE SKU DESCRIPTIONS
- ---------- --------------------
CAKE (20 SKUs)
--------------------
23233 Dark Chocolate Fudge
23443 Devils Food
23227 Fudge Marble
23311 French Vanilla
23269 Lemon
23276 Pineapple
23296 Spice
23304 Strawberry
23429 Swiss Chocolate
23219 White
23457 Yellow
23297 Orange
23241 Banana
23289 Butter Recipe Fudge
23283 Butter Recipe Golden
25481 Caramel
25640 Wild Cherry Vanilla
65105 Butterscotch
28872 Chocolate Mocha
FROSTING (11 SKUs)
--------------------
24138 Chocolate
24152 Dark Chocolate
24145 Milk Chocolate
24131 Vanilla
24229 Cream Cheese
25781 Buttercream
25504 Strawberry
25788 Caramel
25774 Chocolate Buttercream
25661 Wild Cherry Vanilla
29285 Chocolate Mocha
<PAGE>
Aurora Foods, Inc.
Schedule B
Operating Manual
(ON FILE)
Part 1. Raw Material Approved Supplier Lists -- Included
Part 2. Raw Material Specifications -- To be provided
Part 3. Product Protection Program-- To be provided
Part 4 Plant Sanitation-- To be provided
Part 5 Processing --Adherence to Formula Cards-- Example
Provided
Part 6. Product Standards of Identity-- To be provided
Part 7. Quality Control Requirements-- To be provided
Part 8. Hold & Disposition Procedures-- To be provided
Part 9 Regulatory Inspections-- To be provided
Part 10 Qualtity Control Test Methods-- To be provided
Part 11. Product Recall-- To be provided
GILSTER - MARY LEE
<PAGE>
Aurora Foods, Inc.
Schedule C
Tolling Fee By Item
GILSTER - MARY LEE
<PAGE>
CAKE (20 SKUs)
-----------------------
23233 Dark Chocolate Fudge
23443 Devils Food
23227 Fudge Marble
23311 French Vanilla
23269 Lemon
23276 Pineapple
23296 Spice
23304 Strawberry
23429 Swiss Chocolate
23219 White
23457 Yellow
23297 Orange
23241 Banana
23289 Butter Recipe Fudge
23283 Butter Recipe Golden
25481 Caramel Confidential treatment has been requested
25640 Wild Cherry Vanilla for the information contained on this schedule.
65105 Butterscotch
28872 Chocolate Mocha
FROSTING (11 SKUs)
-----------------------
24138 Chocolate
24152 Dark Chocolate
24145 Milk Chocolate
24131 Vanilla
24229 Cream Cheese
25781 Buttercream
25504 Strawberry
25788 Caramel
25774 Chocolate Buttercream
25661 Wild Cherry Vanilla
29285 Chocolate Mocha
<PAGE>
Aurora Foods, Inc.
Schedule D
Equipment List
(ON FILE)
GILSTER - MARY LEE
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of Amendment
No. 3 to this Registration Statement on Form S-1 (No. 333-50681) of our
report dated March 18, 1998, relating to the financial statements of Aurora
Foods Holdings Inc., which appears in such Prospectus. We also consent to the
reference to us under the headings "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
June 22, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of Amendment
No. 3 to this Registration Statement on Form S-1 (No. 333-50681) of our
report dated September 23, 1997, relating to the financial statements of VDK
Holdings, Inc., which appears in such Prospectus. We also consent to the
reference to us under the headings "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
June 22, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of Amendment
No. 3 to this Registration Statement on Form S-1 (No. 333-50681) of our
report dated March 14, 1997, relating to the financial statements of the Mrs.
Butterworth's Business, a component of CONCOPCO, Inc., which appears in such
Prospectus. We also consent to the reference to us under the headings
"Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
June 22, 1998
<PAGE>
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 3 to Registration Statement No.
333-50681 of Aurora Foods Inc. on Form S-1 of our report dated June 9,
1998, on the Duncan Hines Business of The Procter & Gamble Company, appearing
in the Prospectus, which is a part of this Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Cincinnati, Ohio
June 22, 1998
<PAGE>
CONSENT OF COOPERS AND LYBRAND
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. 333-50681) of our report dated August 20, 1997, on our audits of the
statements of assets to be acquired of the Log Cabin Syrup Business, a
component of Kraft Foods, Inc., as of December 28, 1996, and December 30, 1995
and the statements of operations for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994. We also consent to the reference to
our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Chicago, Illinois
June 22, 1998
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of Amendment
No. 3 to this Registration Statement on Form S-1 (No. 333-50681) of our
report dated July 22, 1996, relating to the financial statements of Van de
Kamp's and Frozen Dessert Product Lines of Pet Incorporated, which appears in
such Prospectus. We also consent to the reference to us under the headings
"Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
June 22, 1998
