<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 1998.
REGISTRATION NO. 333-50681
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE
AMENDMENT NO. 1
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>
DELAWARE 2045 94-3303521
(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 MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE 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>
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 are identical for both Equity Offerings. See "Underwriting".
Of the 14,500,000 shares of Common Stock offered, 12,909,372 shares of
Common Stock are being sold by the Company and 1,590,628 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. For factors 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 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........................... $21.00 $1.26 $19.74 $19.74
Total(3)............................ $304,500,000 $18,270,000 $254,831,003 $31,398,997
</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 $350,175,000,
$21,010,500, $254,831,003, and $74,333,497, 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 July 1,
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 June 25, 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 27, 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 7,742,210 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 and the Refinancings, for the quarter ended March 28, 1998, pro
forma as adjusted net loss per share of $1.43 included $1.53 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.......... 10,972,966 shares
International Equity
Offering.................... 1,936,406 shares
Total....................... 12,909,372 shares
Common Stock offered by the
Selling Stockholder:
U.S. Equity Offering.......... 1,352,033 shares
International Equity
Offering.................... 238,595 shares
Total....................... 1,590,628 shares
Common Stock to be outstanding
after the Equity Offerings...... 67,000,000 shares (1)
Use of Proceeds by the
Company (2)..................... To redeem $35.0 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 $211.7 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
$423.1 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 28, 1998 of $1.43 per share included $1.53 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 had 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 60,000 129,000 121,323(1)
Transition expenses................. 2,113 3,405 3,405 1,926 1,926 1,926
--------- ------------ ------------ --------- ----------- ------------
Total operating expenses............ 73,893 399,948 399,948 101,789 248,704 241,027
--------- ------------ ------------ --------- ----------- ------------
Operating income (loss)........... 23,398 101,182 101,182 (50,138) (103,478) (95,801)
Interest income..................... (151) (515) (515) (223) (253) (253)
Interest expense.................... 18,393 84,502 58,748 12,837 21,126 14,687
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 41,154 (63,316) (125,590) (110,703)
Income tax expense (benefit)........ 779 4,865 16,256 (360) (21,393) (14,843)
--------- ------------ ------------ --------- ----------- ------------
Net income (loss) before
extraordinary item.............. $ 1,235 $ 7,451 $ 24,898 $ (62,956) $(104,197) $ (95,860)
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Extraordinary loss on early
extinguishment of debt............ -- (1,876)
--------- ---------
Net income (loss)................... $ 1,235 $ (64,832)
--------- ---------
--------- ---------
</TABLE>
7
<PAGE>
<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....................... 29,053(7) 29,053(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)............. 54,091(7) 54,091(7)
------------ -----------
------------ -----------
Pro forma as adjusted basic and
diluted earnings per share(3)..... $ 0.37 $ (1.43)
------------ ------------
------------ ------------
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 1,413,497
Long-term debt (including current
portion)........................ 279,919 652,377 937,136(6) 709,192
Stockholders' equity.............. 65,223 154,029 337,498 583,975
</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
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. Immediately prior to the Equity Offerings, Aurora Foods Inc. has
54,090,628 shares of Common Stock outstanding. 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
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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 The
Chase Manhattan Bank (the "Senior Credit Facilities"), the indenture (the "New
Indenture") related to the Company's 8 3/4% 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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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
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<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 $28.31 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 is 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 was 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 8 3/4% 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 $423.1
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 are
estimated to be approximately $250.2 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 $26.9 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
Information", "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "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 this
Prospectus. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward-looking statements.
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
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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 the 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 has
agreed to receive its $9.7 million portion of its 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 1,590,628 shares of Common Stock in the Equity Offerings
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 $13.61(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 the initial public offering price of $21.00
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 $489.6
million or $7.31 per share. This represents an immediate increase in net
tangible book value per share to the existing stockholder of $6.30 per share and
an immediate dilution of $28.31 per share to new investors purchasing shares at
the 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>
Initial public offering price per share.................. $ 21.00
Pro forma deficit in net tangible book value per
share before giving effect to the Equity Offerings $ (13.61 (1)
Increase per share attributable to new investors..... 6.30
---------
Pro forma as adjusted deficit in net tangible book value
per share after giving effect to the Equity
Offerings.............................................. (7.31)
---------
Dilution per share to new investors...................... $ 28.31
---------
---------
</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... 54,090,628(1) 80.7% $ 401,660(2) 59.7% $ 7.43(1)
New investors.......... 12,909,372 19.3 271,097(3) 40.3 21.00
---------- ----------- -------------- ----------- -------
Total............ 67,000,000 100.0% $ 672,757 100.0% $ 10.04
---------- ----------- -------------- ----------- -------
---------- ----------- -------------- ----------- -------
</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. Immediately prior to the Equity Offerings, Aurora Foods Inc. has
54,090,628 shares of Common Stock outstanding. 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) At the initial public offering price of $21.00 per share of Common Stock.
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............................. $ -- $ -- $ -- $ 306.8(1)
Aurora Senior Bank Facilities........................ 450.0 450.0 423.1(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............................. 652.4 937.2 690.5 709.2
--------- ------------ ------------- -----------------
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...................................... 217.9 401.3 646.2(2) 646.2(2)
Promissory notes..................................... (0.6) (0.7) (0.7) (0.7)
Accumulated deficit.................................. (63.6) (63.6) (62.2)(2) (62.2)(2)
--------- ------------ ------------- -----------------
Total stockholders' equity......................... 154.0 337.5 584.0 584.0
--------- ------------ ------------- -----------------
Total capitalization............................. $ 806.4 $ 1,274.7 $ 1,274.5 $ 1,293.2
--------- ------------ ------------- -----------------
--------- ------------ ------------- -----------------
</TABLE>
- ------------------------
(1) The Senior Credit Facilities provide 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
$500.0 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. Immediately prior to the Equity Offerings, Aurora Foods Inc. will
have 54,090,628 shares of Common Stock outstanding. 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........................ 29,053(2)
--------------
--------------
Pro forma basic and diluted earnings
per share $ 0.14(2)
-----------
-----------
Pro forma weighted average number of
shares outstanding................. 54,091(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..................... (25,754)(i) 58,748
Amortization of deferred financing
expense............................ (3,084)(i) 1,491
Other bank and financing expenses.... -- 304
------------- -----------
Income before income taxes......... 28,838 41,154
Income tax expense................... 11,391(j) 16,256
------------- -----------
Net income......................... $ 17,447 $ 24,898
------------- -----------
------------- -----------
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 $ 0.37
-----------
-----------
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 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. Immediately prior to the Equity Offerings, Aurora Foods Inc. has
54,090,628 shares of Common Stock outstanding. 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 (7,677)(v,w)
Transition expenses........... 1,926 -- -- -- 1,926 --
----------- ------------- ---------------- ---------------- ----------- --------
Total operating expenses...... 101,789 477 144,597 1,841 248,704 (7,677)
----------- ------------- ---------------- ---------------- ----------- --------
Operating loss.............. (50,138) 1,152 (53,701) (791) (103,478) 7,677
Interest income............... (223) -- (30) (253) --
Interest expense.............. 12,837 -- 7,279 1,010(s) 21,126 (6,439) (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) 14,887
Income tax (benefit).......... (360) -- (19,464) (1,569)(t) (21,393) 6,550(y)
----------- ------------- ---------------- ---------------- ----------- --------
Net (loss) income before
extraordinary item........ $ (62,956) $ 1,152 $ (42,002) $ (391) $(104,197) $ 8,337
----------- ------------- ---------------- ---------------- ----------- --------
----------- ------------- ---------------- ---------------- ----------- --------
Adjusted EBITDA
Basic and diluted loss per
share before extraordinary
item........................ $ (2.17)(2)
-----------
-----------
Weighted average number of
shares outstanding.......... 29,053(2)
-----------
-----------
Pro forma basic and diluted
loss per share.............. $ (1.93)(2)
-----------
-----------
Pro forma weighted average
number of shares
outstanding................. 54,091(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........ 121,323
Transition expenses........... 1,926
-------------
Total operating expenses...... 241,027
-------------
Operating loss.............. (95,801)
Interest income............... (253)
Interest expense.............. 14,687
Amortization of deferred
financing expense........... 373
Other bank and financing
expenses.................... 95
-------------
Loss before income tax...... (110,703)
Income tax (benefit).......... (14,843)
-------------
Net (loss) income before
extraordinary item........ $ (95,860)
-------------
-------------
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.. $ (1.43)
-------------
-------------
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 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. Immediately prior to the Equity Offerings, Aurora Foods Inc. had
54,090,628 shares of Common Stock outstanding. 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 had 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 reflect (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 expenses 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 8.75%)................................................ 17,500
Senior Credit Facilities ($306.8 million estimated at 6.950%)................................ 21,323
Commitment fee on unused senior revolving facility ($100.0 million at 0.375%)................ 375
--------------
Cash interest expense...................................................................... 58,948
Less: bond premium amortization.............................................................. (200)
--------------
Pro forma as adjusted interest expense................................................... $ 58,748
--------------
--------------
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 expenses 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 this Prospectus, based on the
value of the Company at the Equity Offerings. This expense reflects an
initial public offering price per share of $21.00 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 Incentive 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............................................................................. 4,375
Senior Credit Facilities.............................................................. 5,331
Commitment fee on unused senior debt.................................................. 93
--------
Cash interest expense............................................................... 14,737
Less: bond premium amortization....................................................... (50)
--------
Pro forma as adjusted interest expense............................................ $ 14,687
--------
--------
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 $73.1 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 (1,505)(g) 23,935
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 $ 1,405 $ 1,413,497
---------- ---------- ------------ ---------------- ------------- -----------------
---------- ---------- ------------ ---------------- ------------- -----------------
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 (296,966)(f) 296,815
Senior subordinated notes.......... 202,007 100,000 -- 302,377 100,000(f) 402,377
Other liabilities.................. -- 15,000 14,500(c) 29,500 (17,128)(i) 12,372
Deferred tax liabilities........... 7,771 -- (7,771)(d) -- -- --
---------- ---------- ------------ ---------------- ------------- -----------------
Total liabilities.............. 715,522 347,543 11,529 1,074,594 (245,072) 829,522
---------- ---------- ------------ ---------------- ------------- -----------------
Total stockholders' equity:
Common stock....................... 291(3) -- 250 )(3 541(3) 129(j) 670
Paid-in capital.................... 217,900 198,635 (15,309)(e) 401,226 245,007(j) 646,233
Promissory notes................... (565) (107) -- (672) -- (672)
Retained earnings.................. (63,597) (39,494) 39,494(e) (63,597) 1,341(k) (62,256)
---------- ---------- ------------ ---------------- ------------- -----------------
Stockholders' equity........... 154,029 159,034 24,435 337,498 246,477 583,975
---------- ---------- ------------ ---------------- ------------- -----------------
Total liabilities and
stockholders' equity......... $ 869,551 $ 506,577 $ 35,964 $ 1,412,092 $ 1,405 $ 1,413,497
---------- ---------- ------------ ---------------- ------------- -----------------
---------- ---------- ------------ ---------------- ------------- -----------------
</TABLE>
See accompanying notes to Unaudited Pro Forma Balance Sheet
- ------------------------------
(1) Based on an initial public offering price of $21.00 per share of Common
Stock.
(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. Immediately prior to the Equity Offerings, Aurora Foods Inc. has
54,090,628 shares of Common Stock outstanding. 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 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................. $ 271.1
Uses:
Repayment of Aurora Senior Bank Facilities............................ 26.9
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............................. 20.9
------------
Remaining Cash........................................................ $ --
------------
Gross proceeds to the Company from the Refinancings..................... 506.8
Uses:
Repayment of principal on VDK Notes................................... 65.0
Redemption premium on VDK Notes....................................... 11.0
Repayment of Aurora Senior Bank Facilities............................ 423.1
Fees and expenses..................................................... 7.7
------------
Remaining cash........................................................ $ --
------------
------------
</TABLE>
(g) Reflects a $3.4 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 $2.6 million to the liability recorded
in connection with the incentive plan expense.
(j) Reflects the gross proceeds of the Equity Offerings of $271.1 million, net
of underwriting discounts, fees and expenses of $20.9 million, partially
offset by the adjustment to incentive plan expense of $5.1 million.
(k) Reflects the impact on retained earnings of the adjustment to incentive plan
expense, net of tax, of $4.2 million, partially offset by the write-off of
deferred financing costs, net of tax, of $2.9 million related to the
repayment of the Aurora Senior Bank Facilities.
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................................... 29,053(3) 29,053(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................................... 29,053(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. Immediately prior to the Equity Offerings, Aurora Foods Inc. had
54,090,628 shares of Common Stock outstanding. 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 and
allocated selling expense 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. 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 substantially
all of the assets of the Company. The Senior Credit Facilities also contain
other restrictive
42
<PAGE>
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.
61
<PAGE>
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 19, 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 $58.9 million. 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 $56.6 million was recorded in the first and second quarters of 1998.
The incentive plan expense has been recorded as a liability of MBW Investors
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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 4,154,014 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 2,700,109, 429,197, and 268,248 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 756,460 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 to be $64.7 million . Through
December 31, 1997, no incentive plan expense had been recorded by VDK based on
the estimated valuation of VDK at that time. Incentive plan expense of $64.7
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 $12.4
million and has been recorded as additional incentive plan expense and other
liabilities. The tax benefit of the tax gross-up payment and related
distributions of $19.0 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"), 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
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3,588,196 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 2,271,196, 243,279, and 91,458 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 982,263 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
determinations and interpretations under the 1998 Incentive Plan are final,
binding and conclusive on all
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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 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.
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.
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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)................. 54,090,628 100.0% (1,590,628) 52,500,000 78.4%
VDK Foods LLC(3).................. 23,877,882 44.1% 23,877,882 35.6%
Fenway Partners Capital Fund,
L.P.(4)......................... 16,617,701 30.7% 16,617,701 24.8%
McCown De Leeuw & Co.
entities(5)(6).................. 16,376,896 30.3% 16,376,896 24.4%
California Public Employees
Retirement System(6)............ 3,751,713 6.9% 3,751,713 5.6%
Dartford Partnership L.L.C.(7).... 7,294,261 13.5% 7,294,261 10.9%
Tiger Oats Limited(8)............. 4,235,014 7.8% 4,235,014 6.3%
UBS Capital LLC(9)................ 4,235,014 7.8% 4,235,014 6.3%
OFFICERS AND DIRECTORS:
Ian R. Wilson(7).................. 7,294,261 13.5% 7,294,261 10.9%
James B. Ardrey(7)................ 7,294,261 13.5% 7,294,261 10.9%
Ray Chung(7)...................... 7,294,261 13.5% 7,294,261 10.9%
M. Laurie Cummings(7)............. 7,294,261 13.5% 7,294,261 10.9%
Thomas J. Ferraro(10)............. 488,420 * 488,420 *
Thomas O. Ellinwood(11)........... 279,336 * 279,336 *
Clive A. Apsey(8)................. 4,235,014 7.8% 4,235,014 6.3%
Charles Ayres(5).................. 16,376,896 30.3% 16,376,896 24.4%
David E. De Leeuw(5).............. 16,376,896 30.3% 16,376,896 24.4%
Charles J. Delaney(9)............. 4,235,014 7.8% 4,235,014 6.3%
Richard C. Dresdale(4)............ 16,617,701 30.7% 16,617,701 24.8%
Andrea Geisser(4)................. 16,617,701 30.7% 16,617,701 24.8%
Peter Lamm(4)..................... 16,617,701 30.7% 16,617,701 24.8%
Tyler T. Zachem(5)................ 16,376,896 30.3% 16,376,896 24.4%
All directors and executive
officers of the Company as a
group (14 persons).............. 49,526,642 91.6% 49,526,642 73.9%
</TABLE>
- ------------------------
* Less than 1%.
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared power
to dispose, or direct the disposition of, a security. The table above
assumes that 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 16,293,996.5, 193,972.0 and 129,732.5 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, 15,753,502.3, 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 6,036,572 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"), 428,553 shares of Common Stock owned by
McCown De Leeuw & Co. III (Europe), L.P., an investment partnership whose
general partner is MDC III, 100,433 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"), 130,579 shares of
Common Stock owned by Gamma Fund LLC, a California limited liability
company, 5,715,496 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"), 91,970 shares of Common Stock owned by Delta
Fund LLC, a California limited liability company and 121,580 shares of
Common Stock owned by McCown De Leeuw & Co. IV Associates, L.P., an
investment partnership whose general partner is MDC IV. 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 15,525,222.1, 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 LLC and Gamma Fund LLC are made by
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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 3,751,713 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 3,556,605.5, or 5.3%, of the shares of Common Stock
outstanding.
(7) Includes 3,923,171.4 shares of Common Stock owned by Dartford to be
distributed upon the dissolution of MBW Investors LLC, 1,099,820 shares of
Common Stock held directly by VDK Foods LLC, and 2,271,196.5 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
152,881 shares of Common Stock transferred to a trust for the benefit of
certain family members of Ian R. Wilson, an aggregate of 120,086 shares of
Common Stock transferred to trusts for the benefit of certain family members
of Ray Chung, and 38,993 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 disclaims 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 464,309 shares of Common Stock which will be distributed to Tiger
Oats in connection with the Equity Offerings and 3,770,706 shares held
directly by VDK Foods LLC. In the event the Underwriters exercise the
over-allotment option, Tiger Oats will beneficially own 4,014,773.6, 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 464,309 shares of Common Stock which will be distributed to UBS in
connection with the Equity Offerings and 3,770,706 shares held directly by
VDK Foods LLC. In the event the Underwriters exercise the over-allotment
option, UBS will beneficially own 4,014,773.6, 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 128,759 shares of Common Stock to be distributed to Mr. Ferraro
under the Aurora Plan. Mr. Ferraro disclaims beneficial ownership as to
128,759 of such shares, which were transferred to a trust for the benefit of
certain of his family members.
(11) Includes 243,279 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
Stockholder".
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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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
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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
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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 2,700,109, 429,197, and 268,248 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 2,271,196, 243,279, and 91,458 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 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 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 $2,500,000 or, in the aggregate in excess of $5,000,000,
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 any person (other than
MDC and certain of its affiliates (the "MDC Entities"), Dartford, Fenway
CALPERS, UBS and Tiger Oats), 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.
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
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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 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
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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 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
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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 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):
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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 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).
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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
<PAGE>
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.
98
<PAGE>
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
<PAGE>
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 and Allocated Selling Expense 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-55
Statements of Assets to be Acquired as of December 28, 1996 and December 30, 1995...................... F-56
Statements of Operations for the years ended December 28, 1996, December 31, 1995 and December 31,
1994.................................................................................................. F-57
Notes to Financial Statements.......................................................................... F-58
Statement of Operations for the six months ended June 28, 1997 (unaudited) and June 29, 1996
(unaudited)........................................................................................... F-63
PREDECESSOR BUSINESS TO VDK HOLDINGS, INC.
VAN DE KAMP'S AND FROZEN DESSERT PRODUCT LINES OF PET INCORPORATED
Report of Independent Accountants...................................................................... F-64
Combined Statements of Income for the operating period July 1, 1995 through September 18, 1995 and for
the year ended June 30, 1995.......................................................................... F-65
Notes to Combined Statements of Income................................................................. F-66
</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.
F-45
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 12--INCOME TAXES (CONTINUED)
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 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
F-46
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 14--SAVINGS AND BENEFIT PLANS (CONTINUED)
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 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.
F-47
<PAGE>
VDK HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
NOTE 16--INCENTIVE PLAN EXPENSE (CONTINUED)
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
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 have 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..................................... 2,341,750
BT Alex. Brown Incorporated............................. 2,341,750
Donaldson, Lufkin & Jenrette Securities Corporation..... 2,341,750
Credit Suisse First Boston Corporation.................. 2,341,750
SBC Warburg Dillon Read Inc............................. 2,341,750
Chase Securities Inc.................................... 616,250
------------------
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 $.74 per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $.10 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, Swiss Bank Corporation acting through its division, SBC Warburg
Dillon Read, BT Alex. Brown International, Donaldson, Lufkin & Jenrette
International, Credit Suisse First Boston (Europe) Limited and Chase Manhattan
International Limited.
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
U-1
<PAGE>
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 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.
U-2
<PAGE>
The Common Stock has been approved for listing, subject to notice of
issuance, on the New York Stock Exchange and 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 perform various
other investment banking and commercial banking services from time to time for
the Company and its affiliates. CSI is acting as an Initial Purchaser in
connection with the Note Offering and Chase Manhattan International Limited is
acting as an International Underwriter in connection with the Equity Offerings.
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 is also acting as administrative agent
and CSI acted as arranging agent for the Senior Credit Facilities. Affiliates of
CSI are limited partners of McCown De Leeuw & Co. III, L.P., McCown De Leeuw &
Co. IV, L.P. and Fenway Partners Capital Fund, L.P. Swiss Bank Corporation is
also a participant in the Senior Credit Facilities.
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>
On the back inside cover the following trademarks of the Company appear:
Duncan Hines; Log Cabin; Mrs. Butterworth's; Mrs. Paul's; Aunt Jemima; Celeste;
Van de Kamp's; and Aurora Foods Inc.
<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............................ 15
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 JULY 20, 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 or officer of the Company, or is or was serving at
the request of the Company 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
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 Article VI, PROVIDED, HOWEVER, that the
II-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS (CONTINUED)
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 or officer 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 pursuant to which the Company indemnifies such
person to the fullest extent permitted under its By-Laws providing, 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 Merger Agreement, dated as of June 22, 1998, between Aurora Foods Inc. and A Foods Inc.
2.2 Merger Agreement, dated as of June 25, 1998, among Aurora Foods Holdings Inc., AurFoods Operating Co.
Inc., VDK Holdings, Inc., Van de Kamp's, Inc. and Aurora 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>
- ------------------------
** 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 Certificate of Merger dated, June 23, 1998, 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>
- ------------------------
** 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 Indenture, dated as of July 1, 1998 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 Registration Rights Agreement, dated July 1, 1998 between Aurora Foods Inc. and Chase Securities Inc.,
Goldman, Sachs & Co. and Natwest Capital Markets Limited.
5.1 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 Purchase Agreement, dated June 25, 1998 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, dated as of July 1, 1998, between Ian R. Wilson and Aurora Foods Inc.
10.8 Employment Agreement, dated as of July 1, 1998, between James B. Ardrey and Aurora Foods Inc.
10.9 Employment Agreement, dated as of July 1, 1998, between Ray Chung and Aurora Foods Inc.
10.10 Employment Agreement, dated as of July 1, 1998, between M. Laurie Cummings and Aurora Foods Inc.
</TABLE>
- ------------------------
** 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>
10.11 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 Third Amended and Restated Credit Agreement, dated as of July 1, 1998 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).**
</TABLE>
- ------------------------
** 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>
10.24 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 Expense Agreement, made as of July 1, 1998 between Aurora Foods Inc. and Dartford Partnership L.L.C.
10.33 Advisory Agreement, made as of April 8, 1998 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, made as of April 8, 1998 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 Advisory Agreement, made as of April 8, 1998 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>
- ------------------------
** 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>
10.36 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 Indemnity Agreement, dated as of July 1, 1998, between Ian R. Wilson and Aurora Foods Inc.
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.**
10.49 Indemnity Agreement, dated as of July 1, 1998, between James B. Ardrey and Aurora Foods Inc.
10.50 Indemnity Agreement, dated as of July 1, 1998, between Clive A. Apsey and Aurora Foods Inc.
10.51 Indemnity Agreement, dated as of July 1, 1998, between Charles Ayres and Aurora Foods Inc.
10.52 Indemnity Agreement, dated as of July 1, 1998, between David E. De Leeuw and Aurora Foods Inc.
10.53 Indemnity Agreement, dated as of July 1, 1998, between Charles J. Delaney and Aurora Foods Inc.
</TABLE>
- ------------------------
** Previously filed with the Commission.
II-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.54 Indemnity Agreement, dated as of July 1, 1998, between Richard C. Dresdale and Aurora Foods Inc.
10.55 Indemnity Agreement, dated as of July 1, 1998, between Andrea Geisser and Aurora Foods Inc.
10.56 Indemnity Agreement, dated as of July 1, 1998, between Peter Lamm and Aurora Foods Inc.
10.57 Indemnity Agreement, dated as of July 1, 1998, between Tyler T. Zachem and Aurora Foods Inc.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of PricewaterhouseCoopers LLP
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Coopers & Lybrand LLP.
23.6 Consent of PricewaterhouseCoopers LLP
23.7 Consent of Richards & O'Neil, LLP (included in Exhibit 5.1 hereto).
27.1 Financial Data Schedule.**
</TABLE>
- ------------------------
** Previously filed with the Commission.
II-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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.
II-9
<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 Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco,
California, on July 14, 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
Post-Effective Amendment No. 1 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 July 14, 1998
Ian R. Wilson Officer)
/s/ JAMES B. ARDREY Vice Chairman and Director
- ------------------------------ July 14, 1998
James B. Ardrey
Chief Financial Officer
/s/ M. LAURIE CUMMINGS and Secretary
- ------------------------------ (Principal Financial July 14, 1998
M. Laurie Cummings Officer and Principal
Accounting Officer)
/s/ CLIVE APSEY Director
- ------------------------------ July 14, 1998
Clive Apsey
/s/ CHARLES AYRES Director
- ------------------------------ July 14, 1998
Charles Ayres
/s/ DAVID E. DE LEEUW Director
- ------------------------------ July 14, 1998
David E. De Leeuw
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ CHARLES J. DELANEY Director
- ------------------------------ July 14, 1998
Charles J. Delaney
/s/ RICHARD C. DRESDALE Director
- ------------------------------ July 14, 1998
Richard C. Dresdale
/s/ ANDREA GEISSER Director
- ------------------------------ July 14, 1998
Andrea Geisser
/s/ PETER LAMM Director
- ------------------------------ July 14, 1998
Peter Lamm
/s/ TYLER T. ZACHEM Director
- ------------------------------ July 14, 1998
Tyler T. Zachem
</TABLE>
II-11
<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 Merger Agreement, dated as of June 22, 1998, between Aurora Foods Inc. and A Foods Inc.......
2.2 Merger Agreement, dated as of June 25, 1998, among Aurora Foods Holdings Inc., AurFoods
Operating Co. Inc., VDK Holdings, Inc., Van de Kamp's, Inc. and Aurora 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 Certificate of Merger, dated June 23, 1998, 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.**..............................................................
</TABLE>
- ------------------------
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
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).**.........
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 Indenture, dated as of July 1, 1998 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 Registration Rights Agreement, dated July 1, 1998 between Aurora Foods Inc. and Chase
Securities Inc., Goldman, Sachs & Co. and Natwest Capital Markets Limited....................
5.1 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 Purchase Agreement, dated June 25, 1998 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).**.....
</TABLE>
- ------------------------
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.7 Employment Agreement, dated as of July 1, 1998, between Ian R. Wilson and Aurora Foods
Inc..........................................................................................
10.8 Employment Agreement, dated as of July 1, 1998, between James B. Ardrey and Aurora Foods
Inc..........................................................................................
10.9 Employment Agreement, dated as of July 1, 1998, between Ray Chung and Aurora Foods Inc.......
10.10 Employment Agreement, dated as of July 1, 1998, 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 Third Amended and Restated Credit Agreement, dated as of July 1, 1998 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).**................
</TABLE>
- ------------------------
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
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 Expense Agreement, made as of July 1, 1998 between Aurora Foods Inc. and Dartford Partnership
L.L.C........................................................................................
10.33 Advisory Agreement, made as of April 8, 1998 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, made as of April 8, 1998 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 Advisory Agreement, made as of April 8, 1998 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>
- ------------------------
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
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 Indemnity Agreement, dated as of July 1, 1998, between Ian R. Wilson and Aurora Foods Inc....
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.**..............................................................
10.49 Indemnity Agreement, dated as of July 1, 1998, between James B. Ardrey and Aurora Foods
Inc..........................................................................................
10.50 Indemnity Agreement, dated as of July 1, 1998, between Clive A. Apsey and Aurora Foods
Inc..........................................................................................
10.51 Indemnity Agreement, dated as of July 1, 1998, between Charles Ayres and Aurora Foods Inc....
10.52 Indemnity Agreement, dated as of July 1, 1998, between David E. De Leeuw and Aurora Foods
Inc..........................................................................................
10.53 Indemnity Agreement, dated as of July 1, 1998, between Charles J. Delaney and Aurora Foods
Inc..........................................................................................
10.54 Indemnity Agreement, dated as of July 1, 1998, between Richard C. Dresdale and Aurora Foods
Inc..........................................................................................
10.55 Indemnity Agreement, dated as of July 1, 1998, between Andrea Geisser and Aurora Foods
Inc..........................................................................................
10.56 Indemnity Agreement, dated as of July 1, 1998, between Peter Lamm and Aurora Foods Inc.......
10.57 Indemnity Agreement, dated as of July 1, 1998, between Tyler T. Zachem and Aurora Foods
Inc..........................................................................................
23.1 Consent of PricewaterhouseCoopers LLP........................................................
23.2 Consent of PricewaterhouseCoopers LLP........................................................
23.3 Consent of PricewaterhouseCoopers LLP........................................................
</TABLE>
- ------------------------
** Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
23.4 Consent of Deloitte & Touche LLP.............................................................
23.5 Consent of Coopers & Lybrand LLP.............................................................
23.6 Consent of PricewaterhouseCoopers LLP........................................................
23.7 Consent of Richards & O'Neil, LLP (included in Exhibit 5.1 hereto)...........................
27.1 Financial Data Schedule.**...................................................................
</TABLE>
- ------------------------
** Previously filed with the Commission.
<PAGE>
Exhibit 2.1
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER dated as of June 22, 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.
-2-
<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 the Constituent
Corporations or of either thereof.
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 /S/ RAY CHUNG
--------------------------------
Name: Ray Chung
Title: Executive Vice President
A FOODS INC.,
a Delaware corporation
By /S/ RAY CHUNG
--------------------------------
Name: Ray Chung
Title: Executive Vice President
-3-
<PAGE>
Exhibit 2.2
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER dated as of June 25, 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 (f/k/a A Foods Inc.) ("NEW AURORA").
Aurora Holdings, Old Aurora, VDK Holdings and Van de Kamp's are 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").
Any of the Chairman, Vice Chairman, Chief Financial Officer, Executive Vice
President, Vice President, Secretary or Assistant Secretary of New Aurora is
authorized to sign the Certificate of Merger.
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 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
-2-
<PAGE>
annual meeting of the stockholders of New Aurora 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 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]
-3-
<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:/s/ James B. Ardrey
--------------------------------
Name: James B. Ardrey
Title: Executive Vice President
AURFOODS OPERATING CO. INC.
By:/s/ James B. Ardrey
--------------------------------
Name: James B. Ardrey
Title: Executive Vice President
VDK HOLDINGS, INC.
By:/s/ James B. Ardrey
--------------------------------
Name: James B. Ardrey
Title: Executive Vice President
VAN DE KAMP'S, INC.
By:/s/ James B. Ardrey
--------------------------------
Name: James B. Ardrey
Title: Executive Vice President
AURORA FOODS INC.
-4-
<PAGE>
By:/s/ James B. Ardrey
--------------------------------
Name: James B. Ardrey
Title: Vice Chairman
-5-
<PAGE>
Exhibit 2.14
CERTIFICATE OF MERGER
OF
AURORA FOODS INC.
(A MARYLAND CORPORATION)
WITH AND INTO
A FOODS INC.
(A DELAWARE CORPORATION)
* * * * * *
The undersigned corporation does 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 is on file at the office of 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 23
day of June, 1998.
A FOODS INC.
By /s/ RAY CHUNG
--------------------------------
Name: Ray Chung
Title: Executive Vice President
-2-
<PAGE>
Exhibit 4.13
EXECUTION COPY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AURORA FOODS INC.
8 3/4% Senior Subordinated Notes due 2008
-----------
INDENTURE
Dated as of July 1, 1998
-----------
WILMINGTON TRUST COMPANY
Trustee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definitions and Incorporation by Reference. . . . . . . . 1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Definitions. . . . . . . . . . . . . . . . . . . . 17
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. . . . 18
SECTION 1.4. Rules of Construction. . . . . . . . . . . . . . . . . . 18
ARTICLE II
The Securities. . . . . . . . . . . . . . . 20
SECTION 2.1. Form, Dating and Terms . . . . . . . . . . . . . . . . . 20
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . 25
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . 26
SECTION 2.4. Paying Agent To Hold Money in Trust. . . . . . . . . . . 27
SECTION 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . 27
SECTION 2.6. Transfer and Exchange. . . . . . . . . . . . . . . . . . 27
SECTION 2.7. Mutilated, Destroyed, Lost or Stolen Securities. . . . . 30
SECTION 2.8. Outstanding Securities . . . . . . . . . . . . . . . . . 31
SECTION 2.9. Temporary Securities . . . . . . . . . . . . . . . . . . 31
SECTION 2.10. Cancellation . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.11. Payment of Interest; Defaulted Interest. . . . . . . . . 32
SECTION 2.12. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.13. Form of Certificate to be Delivered in Connection
with Transfers to Institutional Accredited Investors . . 32
SECTION 2.14. Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulation S. . . . . . . . . 35
SECTION 2.15. Computation of Interest. . . . . . . . . . . . . . . . . 36
ARTICLE III
Redemption. . . . . . . . . . . . . . . . 36
SECTION 3.1. Notices to Trustee . . . . . . . . . . . . . . . . . . . 36
SECTION 3.2. Selection of Securities To Be Redeemed . . . . . . . . . 36
SECTION 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . 37
SECTION 3.4. Effect of Notice of Redemption 37
SECTION 3.5. Deposit of Redemption Price. . . . . . . . . . . . . . . 37
SECTION 3.6. Securities Redeemed in Part. . . . . . . . . . . . . . . 38
i
<PAGE>
ARTICLE IV
Covenants. . . . . . . . . . . . . . . . 38
SECTION 4.1. Payment of Securities. . . . . . . . . . . . . . . . . . 38
SECTION 4.2. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.3. Limitation on Indebtedness . . . . . . . . . . . . . . . 38
SECTION 4.4. Limitation on Restricted Payments. . . . . . . . . . . . 39
SECTION 4.5. Limitation on Restrictions on Distributions from
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.6. Limitation on Sales of Assets. . . . . . . . . . . . . . 42
SECTION 4.7. Limitation on Affiliate Transactions . . . . . . . . . . 45
SECTION 4.8. Change of Control. . . . . . . . . . . . . . . . . . . . 45
SECTION 4.9. Limitation on Sale of Subsidiary Capital Stock . . . . . 46
SECTION 4.10. Future Security Guarantors . . . . . . . . . . . . . . . 46
SECTION 4.11. Limitation on Lines of Business. . . . . . . . . . . . . 47
SECTION 4.12. Maintenance of Office or Agency for Registration
of Transfer, Exchange and Payment of Securities. . . . . 47
SECTION 4.13. Appointment to Fill a Vacancy in the Office of
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.14. Provision as to Paying Agent . . . . . . . . . . . . . . 47
SECTION 4.15. Maintenance of Corporate Existence . . . . . . . . . . . 48
SECTION 4.16. Compliance Certificate . . . . . . . . . . . . . . . . . 49
SECTION 4.17. Further Instruments and Acts . . . . . . . . . . . . . . 49
ARTICLE V
Successor Company. . . . . . . . . . . . . . 49
SECTION 5.1. When Company May Merge or Transfer Assets. . . . . . . . 49
ARTICLE VI
Defaults and Remedies. . . . . . . . . . . . . 50
SECTION 6.1. Events of Default. . . . . . . . . . . . . . . . . . . . 50
SECTION 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.4. Waiver of Past Defaults. . . . . . . . . . . . . . . . . 53
SECTION 6.5. Control by Majority. . . . . . . . . . . . . . . . . . . 53
SECTION 6.6. Limitation on Suits. . . . . . . . . . . . . . . . . . . 53
SECTION 6.7. Rights of Holders to Receive Payment . . . . . . . . . . 54
SECTION 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . 54
SECTION 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . 54
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . 55
ARTICLE VII
Trustee . . . . . . . . . . . . . . . . 55
ii
<PAGE>
SECTION 7.1. Duties of Trustee. . . . . . . . . . . . . . . . . . . . 55
SECTION 7.2. Rights of Trustee. . . . . . . . . . . . . . . . . . . . 56
SECTION 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . 57
SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . 57
SECTION 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . 58
SECTION 7.6. Reports by Trustee to Holders. . . . . . . . . . . . . . 58
SECTION 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . 58
SECTION 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . 59
SECTION 7.9. Successor Trustee by Merger. . . . . . . . . . . . . . . 59
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . 60
SECTION 7.11. Preferential Collection of Claims Against Company. . . . 60
ARTICLE VIII
Discharge of Indenture; Defeasance. . . . . . . . . . 60
SECTION 8.1. Discharge of Liability on Securities; Defeasance . . . . 60
SECTION 8.2. Conditions to Defeasance . . . . . . . . . . . . . . . . 61
SECTION 8.3. Application of Trust Money . . . . . . . . . . . . . . . 63
SECTION 8.4. Repayment to Company . . . . . . . . . . . . . . . . . . 63
SECTION 8.5. Indemnity for U.S. Government Obligations. . . . . . . . 63
SECTION 8.6. Reinstatement. . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE IX
Amendments. . . . . . . . . . . . . . . . 63
SECTION 9.1. Without Consent of Holders . . . . . . . . . . . . . . . 63
SECTION 9.2. With Consent of Holders. . . . . . . . . . . . . . . . . 64
SECTION 9.3. Compliance with Trust Indenture Act. . . . . . . . . . . 65
SECTION 9.4. Revocation and Effect of Consents and Waivers. . . . . . 65
SECTION 9.5. Notation on or Exchange of Securities. . . . . . . . . . 66
SECTION 9.6. Trustee To Sign Amendments . . . . . . . . . . . . . . . 66
ARTICLE X
Subordination. . . . . . . . . . . . . . . 66
SECTION 10.1. Agreement To Subordinate . . . . . . . . . . . . . . . . 66
SECTION 10.2. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . 67
SECTION 10.3. Default on Senior Indebtedness or Guarantor Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.4. Acceleration of Payment of Securities. . . . . . . . . . 68
SECTION 10.5. When Distribution Must Be Paid Over. . . . . . . . . . . 69
SECTION 10.6. Subrogation. . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.7. Relative Rights. . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.8. Subordination May Not Be Impaired by Company or
the Subsidiary Guarantors. . . . . . . . . . . . . . . . 69
SECTION 10.9. Rights of Trustee and Paying Agent . . . . . . . . . . . 70
iii
<PAGE>
SECTION 10.10. Distribution or Notice to Representative . . . . . . . . 70
SECTION 10.11. Article X Not To Prevent Events of Default or
Limit Right To Accelerate. . . . . . . . . . . . . . . . 70
SECTION 10.12. Trust Moneys Not Subordinated. . . . . . . . . . . . . . 71
SECTION 10.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . . 71
SECTION 10.14. Trustee To Effectuate Subordination. . . . . . . . . . . 71
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. . . . . 72
SECTION 10.18. Legend . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XI
Subsidiary Guarantee . . . . . . . . . . . . . 73
SECTION 11.1. Subsidiary Guarantee . . . . . . . . . . . . . . . . . . 73
SECTION 11.2. Limitation on Liability. . . . . . . . . . . . . . . . . 74
SECTION 11.3. Successors and Assigns . . . . . . . . . . . . . . . . . 75
SECTION 11.4. No Waiver. . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.5. Right of Contribution. . . . . . . . . . . . . . . . . . 75
SECTION 11.6. No Subrogation . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.7. Modification . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XII
Miscellaneous. . . . . . . . . . . . . . . 76
SECTION 12.1. Trust Indenture Act Controls . . . . . . . . . . . . . . 76
SECTION 12.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 12.3. Communication by Holders with other Holders. . . . . . . 77
SECTION 12.4. Certificate and Opinion as to Conditions Precedent . . . 77
SECTION 12.5. Statements Required in Certificate or Opinion. . . . . . 77
SECTION 12.6. When Securities Disregarded. . . . . . . . . . . . . . . 78
SECTION 12.7. Rules by Trustee, Paying Agent and Registrar . . . . . . 78
SECTION 12.8. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 78
SECTION 12.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . 78
SECTION 12.10. No Recourse Against Others . . . . . . . . . . . . . . . 78
SECTION 12.11. Successors . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 12.12. Multiple Originals . . . . . . . . . . . . . . . . . . . 78
SECTION 12.13. Variable Provisions. . . . . . . . . . . . . . . . . . . 78
SECTION 12.14. Qualification of Indenture . . . . . . . . . . . . . . . 78
SECTION 12.15. Table of Contents; Headings. . . . . . . . . . . . . . . 79
</TABLE>
iv
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EXHIBIT A Form of Initial Note
EXHIBIT B Form of Exchange Note
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INDENTURE dated as of July 1, 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 party and for
the equal and ratable benefit of the Holders of the Company's 83/4% 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 83/4% Series B 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 July 1, 2003 (such redemption price being described
in the Security) plus (2) all required interest payments due on such Security
through July 1, 2003, computed using a discount rate equal to the Treasury
Rate
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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.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City or Wilmington, Delaware are
authorized or required by law
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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 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
3
<PAGE>
"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 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
4
<PAGE>
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, (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
5
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Company, expressed as a decimal, in each case, determined on a consolidated
basis in accordance with GAAP and (ix) the cash contributions to any employee
stock ownership plan or similar trust to the extent such contributions are
used by such plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss)
of the Company and its consolidated Subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income: (i) any net
income (loss) of any Person if such Person is not a Subsidiary, except that
(A) subject to the limitations contained in clause (iv) below, the Company's
equity in the net income of any such Person for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Subsidiary
as a dividend or other distribution (subject, in the case of a dividend or
other distribution to a Subsidiary, to the limitations contained in clause
(iii) below) and (B) the Company's equity in a net loss of any such Person
for such period shall be included in determining such Consolidated Net
Income; (ii) any net income (loss) of any person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; (iii) any net income (loss) of any Subsidiary if
such Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Subsidiary,
directly or indirectly, to the Company, except that (A) subject to the
limitations contained in (iv) below, the Company's equity in the net income
of any such Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash that could have been
distributed by such Subsidiary during such period to the Company or another
Subsidiary as a dividend (subject, in the case of a dividend that could have
been made to another Subsidiary, to the limitation contained in this clause)
and (B) the Company's equity in a net loss of any such Subsidiary for such
period shall be included in determining such Consolidated Net Income; (iv)
any gain (but not loss) realized upon the sale or other disposition of any
assets of the Company or its consolidated Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which are not sold or otherwise disposed of
in the ordinary course of business and any gain or loss realized upon the
sale or other disposition of any Capital Stock of any Person; (v) any
extraordinary gain or loss; and (vi) the cumulative effect of a change in
accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on
a consolidated basis in accordance with GAAP, as of the end of the most
recent fiscal quarter of the Company ending prior to the taking of any action
for the purpose of which the determination is being made as (i) the par or
stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii)
any retained earnings or earned surplus less (A) any accumulated deficit and
(B) any amounts attributable to Disqualified Stock.
"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.
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"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 Notes as provided in the Registration Rights Agreement, the Company's
83/4% Series B Senior Subordinated 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 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.
7
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"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,
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
8
<PAGE>
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 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 Notes" means the Company's 83/4% 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.
9
<PAGE>
"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 Initial 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 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
10
<PAGE>
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 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
11
<PAGE>
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 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, 1998, 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 Notes are offered to
persons other than distributors (as defined in Regulation S under the
Securities Act) and (B) the Issue Date.
12
<PAGE>
"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.
"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 July 1,
1998, among the Company, 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
13
<PAGE>
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.
"Senior Subordinated Indebtedness" means the Securities, the Existing
Notes 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
14
<PAGE>
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having
capital, surplus and undivided profits aggregating in excess of $250.0
million (or the foreign currency equivalent thereof) and whose long-term
debt, or whose parent holding company's long-term debt, is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act), (iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) Investments in commercial paper, maturing not more than 180 days after
the date of acquisition, issued by a corporation (other than an Affiliate of
the Company) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard and Poor's Ratings Group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
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 July 1, 2003; provided, however, that
if the period from the redemption date to July 1, 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.
15
<PAGE>
"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.
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
"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 Global Note"............................... 2.1
"Regulation S Note"...................................... 2.1
"Regulation S Legend".................................... 2.1
"Release Date"........................................... 2.1
"Resale Restriction Termination Date".................... 2.3
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Defined in
Term Section
---- --------
<S> <C>
"Restricted Payment"..................................... 4.4(a)
"Rule 144A".............................................. 2.1
"Rule 144A Global Note".................................. 2.1
"Rule 144A Note"......................................... 2.1
"Subsequent Series Securities"........................... 2.2
"Successor Company"...................................... 5.1
</TABLE>
SECTION I.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 I.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;
(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
17
<PAGE>
(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.
18
<PAGE>
ARTICLE II
The Securities
--------------
SECTION 2.1. Form, Dating and Terms. (a) The Initial Notes are
being offered and sold by the Company pursuant to a Purchase Agreement,
dated June 25, 1998, among the Company, Chase Securities Inc., Goldman,
Sachs & Co. and NatWest Capital Markets Limited.
Initial Notes 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 Notes 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 Notes 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 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.
19
<PAGE>
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 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 OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
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THE HOLDER OF THIS SECURITY 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 UNDER THE SECURITIES
ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH
CASE IN A MINIMUM PRINCIPAL AMOUNT 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 ANY OTHER 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:
"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
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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 "ACCREDITED INVESTOR" WITHIN THE
MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT
THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, IN EACH CASE IN 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."
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
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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 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 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.
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(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
in writing 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 II.2. Execution and Authentication. One Officer shall
sign the Securities for the Company by manual or facsimile signature. If
the Officer whose signature is on 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 Notes 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 Notes 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 an Officer 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 Notes, Exchange
Securities or Subsequent Series Securities. The aggregate principal amount
of notes which may be authenticated and delivered under this Indenture is
limited to $400.0 million outstanding
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except as provided in Section 2.7. 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 II.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. 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 II.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
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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 II.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 II.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 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
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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
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.
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(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.
(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.
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(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 II.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 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 II.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 II.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
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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 II.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 new
Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancellation.
SECTION II.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 II.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.
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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
Attention: Corporate Trust Administration
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the 8 3/4% 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
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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
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.
3. We agree on our own behalf and on behalf of any investor
account for which we are purchasing the Securities that (i) if it is an
insurance company, the funds to be used to purchase the Securities by it
constitute (A) assets of an insurance company general account maintained by
it and the acquisition and holding of each such Security by such account is
exempt under United States Department of Labor Prohibited Transaction Class
Exemption ("PTCE") 95-60 or (B) assets of an insurance company pooled
separate account and the acquisition and holding of each such Note by such
account is exempt under PTCE 90-1, and (ii) if it is not an insurance
company, no part of the funds to be used to purchase the Securities to be
purchased by it constitute assets of any plan or employee benefit plan such
that the use of such assets constitutes a non-exempt prohibited transaction
under ERISA or the Code. The representation is made in reliance upon the
list furnished to the purchaser by the Company, if requested by the
purchaser, of the plans and employee benefit plans with respect to which
the Company is a party in interest or a disqualified person and is based
upon the purchaser's determination that a statutory or administrative
exemption is applicable or that the Company and its Affiliates are not
parties in interest or disqualified persons with respect to the purchaser
or holder plan or employee benefit plan. As used in this paragraph, the
terms "employee benefit plan" and "party in interest" shall have the
meanings assigned to such terms in Section 3 of ERISA, the term "Affiliate"
shall have the meaning assigned to such term in Section 407(d)(7) of ERISA
and the terms "disqualified person" and "plan" shall have the meanings
assigned to such terms in Section 4975 of the Code.
TRANSFEREE:
---------------------
BY
------------------------------
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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 Administration
Re: Aurora Foods Inc.
8 3/4% 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;
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.
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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 II.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 III.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 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 III.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 III.3. Notice of Redemption. At least 30 days but not more than
60
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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.
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 III.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 III.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.
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SECTION III.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 IV.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.
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 IV.2. SEC Reports. Notwithstanding that the Company may not be
required to remain 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 IV.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);
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(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.
(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 IV.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
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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 on or subsequent to the
Issue Date (other than an issuance or sale to a Subsidiary of the Company or
an employee stock ownership plan or other trust established by the Company or
any of its Subsidiaries); (C) aggregate Net Cash Proceeds from 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;
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provided that the aggregate amount paid, loaned or advanced pursuant 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 IV.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 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.
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SECTION IV.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 thereof at a purchase price of 100% of the
principal amount thereof plus accrued and unpaid interest to the purchase
date; (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 and Pari Passu Notes 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
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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 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
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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.
(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 IV.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 paid 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
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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 IV.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
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
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deemed to have breached its obligations under this Indenture by virtue
thereof.
SECTION IV.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.
SECTION IV.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. The Existing Indentures contain similar provisions with
respect to the Existing Notes.
SECTION IV.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 IV.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.
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SECTION IV.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 IV.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,
(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.
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(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 IV.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 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 IV.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
signer of his or her duties as an Officer of the Company he or she would
normally have knowledge of any Default or Event of Default and whether or not
the signer knows of any Default or Event of Default that occurred during such
period. If he or she does, 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 Section 314(a)(4).
SECTION IV.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 V.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),
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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);
(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;
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(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;
(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;
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(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
(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
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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.
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
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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;
(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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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 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
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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.
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
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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 Section 313(a). The Trustee also shall comply with
TIA Section 313(b). The Trustee shall also transmit by mail all reports
required by TIA Section 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
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.
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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.
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.
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SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 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 Section 310(b); provided, however, that there shall
be excluded from the operation of TIA Section 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 Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or
been removed shall be subject to TIA Section 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)
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
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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;
(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;
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(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.
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.
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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;
(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
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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;
(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
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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.
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.
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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 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.
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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 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
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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 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
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(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 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
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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.
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
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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.
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.
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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, 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
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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.
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.
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(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 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
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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.
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
Attention: M. Laurie Cummings
if to the Subsidiary Guarantors:
c/o Aurora Foods Inc.
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
Attention: M. Laurie Cummings
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.
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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 Section 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 Section 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 signer, 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.
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
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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 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.
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IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
AURORA FOODS INC.
By: /s/ James B. Ardrey
----------------------------
Name: James B. Ardrey
Title: Vice Chairman
WILMINGTON TRUST COMPANY, as Trustee
By: /a/ Donald G. Mackelcan
-----------------------------
Name: Donald G. Mackelcan
Title: Assistant Vice President
<PAGE>
Exhibit 4.15
AURORA FOODS INC.
$200,000,000
83/4% Senior Subordinated Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
------------------------------------------
July 1, 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 25, 1998 (the "Purchase Agreement"),
$200,000,000 aggregate principal amount of its 83/4% 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:
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
<PAGE>
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 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
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<PAGE>
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.
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
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<PAGE>
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 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.
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
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<PAGE>
any other reason, securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities 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 (as defined in Section 3(a)
below) 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(j) 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
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<PAGE>
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 Securities and Exchange Securities covered by such
registration statement either receives the copies of the supplemented or
amended prospectus contemplated by Section 4(j) 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
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<PAGE>
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
(A) the applicable Registration Statement is filed, (B) the Exchange Offer
Registration Statement is declared effective and the Registered Exchange
Offer is consummated, (C) the Shelf Registration Statement is declared
effective or (D) 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
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<PAGE>
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 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, and if
requested, each Exchanging Dealer and the Holders (if applicable), but only as
to events set forth in clauses (i) and (ii) below, 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):
(i) 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;
(ii) of any request by the Commission for amendments or supplements to
any Registration Statement or the prospectus included therein or for additional
information;
(iii) 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;
(iv) 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
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<PAGE>
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, 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
9
<PAGE>
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 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
10
<PAGE>
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.
(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 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
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<PAGE>
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
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
12
<PAGE>
sales of Securities, Exchange Securities or Private Exchange Securities), to
which that Holder 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 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 to make the statements therein 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 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, 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
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<PAGE>
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 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, 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 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) 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 to assume the defense of such action within
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<PAGE>
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 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 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
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<PAGE>
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 information supplied by the Company on the one hand or to any
Holders' 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 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 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). 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
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<PAGE>
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;
(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.
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<PAGE>
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 herein are inserted for convenience of
reference only and are not intended to be a part of, or to affect the meaning or
interpretation of, this Agreement.
(g) 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.
(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.
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<PAGE>
(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.
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Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
AURORA FOODS INC.
By: /s/ James B. Ardrey
--------------------------------
Name: James B. Ardrey
Title: Vice Chairman
Accepted:
CHASE SECURITIES INC.
By: /s/ illegible
----------------------------
Authorized Signatory
GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co.
----------------------------
Authorized Signatory
NATWEST CAPITAL MARKETS LIMITED
By: /s/ illegible
----------------------------
Authorized Signatory
20
<PAGE>
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."
21
<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."
22
<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
- ----------------------------
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.
23
<PAGE>
Transmittal. The Company has agreed to pay all expenses incident to the
Registered Exchange Offer (including the expenses of one counsel for the
Holders 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.
24
<PAGE>
ANNEX D
/ / 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.
25
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
AURORA FOODS INC.
By: /s/ James B. Ardrey
---------------------
Name: James B. Ardrey
Title: Vice Chairman
Accepted:
CHASE SECURITIES INC.
By: /s/ illegible
-------------------------
Authorized Signatory
GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co.
-------------------------
Authorized Signatory
NATWEST CAPITAL MARKETS LIMITED
By: /s/ illegible
-------------------------
Authorized Signatory
26
<PAGE>
Ex 5.1
July 1,1998
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, as amended (the "Registration Statement")
of Aurora Foods Inc. (the "Company") filed with the Securities and Exchange
Commission on April 22, 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 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,
/s/ Richard & O'Neil, LLP
<PAGE>
Exhibit 10.3
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AURORA FOODS INC.
83/4% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
dated June 25, 1998
among
AURORA FOODS INC.
and
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
NATWEST CAPITAL MARKETS LIMITED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AURORA FOODS INC.
$200,000,000
83/4% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
June 25, 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:
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 (the "Initial Purchasers") $200,000,000
aggregate principal amount of its 83/4% Senior Subordinated Notes due 2008 (the
"Notes"). The Notes will be issued pursuant to an Indenture to be dated as of
July 1, 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 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
<PAGE>
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 of the Company.
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 on or prior to the Closing
Date (as defined in Section 4 hereof), Van de Kamp's, Inc., a Delaware
corporation ("VDK"), Aur Foods Operating Co. Inc. (formerly Aurora 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.
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
2
<PAGE>
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, 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 Merger, the Company will
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
3
<PAGE>
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.
(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, 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
4
<PAGE>
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.
(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
5
<PAGE>
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 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 affect
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
6
<PAGE>
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 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 clause (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
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
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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 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 (gg), the
term "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.
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(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.
(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 97.50% of
the
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<PAGE>
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
in Section 4(b) herein.
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 Notes in reliance on
Regulation S, each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:
(i) the Notes 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 Notes, and will
offer and sell the Notes, (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 Notes 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 Notes, 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 Notes sold in
reliance on Regulation S, it will have sent to each distributor, dealer or
other person receiving a selling concession, fee or other remuneration that
purchases Notes 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."
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(v) it has not and will not enter into any contractual arrangement
with any distributor with respect to the distribution of the Notes, 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 Notes 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 Notes 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 Notes 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 Notes 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 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 Richards & O'Neil L.L.P.,
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 July
1, 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,
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<PAGE>
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
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
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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 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 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
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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) Counsel to the Company 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.
(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
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<PAGE>
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.
(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.
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(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 Notes which such defaulting Initial Purchaser agreed but failed
to purchase by other persons satisfactory to the Company and the non-defaulting
Initial Purchasers, 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 Notes 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 Notes 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
16
<PAGE>
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 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
17
<PAGE>
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
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 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
18
<PAGE>
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 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
19
<PAGE>
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 Predecessors, (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.
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., 32 Old Slip, 9th Floor, New
York, New York 10004, Attention: Donald T. Hansen, Registration Group
and to NatWest Capital Markets Limited, 660 Madison Avenue, New York,
New York 10021, Attention: Field Smith (Fax: 212-418-4598); or
(b)if to the Company, shall be delivered or sent by mail or
facsimile transmission to the address of the Company: 456 Montgomery
Street, Suite 2200, San Francisco, California 94133, Attn: M. Laurie
Cummings, with a copy to Frank Schiff, Esq., White & Case LLP, 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.
20
<PAGE>
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.
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.
21
<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: /s/ James B. Ardrey
----------------------------------
Name: James B. Ardrey
Title: Vice Chairman
Accepted:
CHASE SECURITIES INC.
By: /s/ illegible
-----------------------
Authorized Signatory
GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co.
-----------------------
Authorized Signatory
NATWEST CAPITAL MARKETS LIMITED
By: /s/ illegible
-----------------------
Authorized Signatory
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Aggregate Principal
Initial Purchasers Amount of Notes
<S> <C>
Chase Securities Inc. $120,000,000
Goldman, Sachs & Co. $ 40,000,000
NatWest Capital Markets Limited $ 40,000,000
Total
------------
------------
$200,000,000
</TABLE>
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
AURORA FOODS INC.
$200,000,000
83/4% Senior Subordinated Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
July 1, 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 25, 1998 (the "Purchase Agreement"), $200,000,000 aggregate
principal amount of its 83/4% 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:
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
<PAGE>
(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 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
2
<PAGE>
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.
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 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
3
<PAGE>
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.
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, securities validly tendered pursuant to
the Registered Exchange Offer are not exchanged for Exchange Securities 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 (as defined in Section 3(a)
below) 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(j) 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 Securities and Exchange Securities covered by such registration
statement either receives the copies of the supplemented or amended prospectus
contemplated by Section 4(j) 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
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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 (A) the applicable Registration
Statement is filed, (B) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (C) the Shelf
Registration Statement is declared effective or (D) 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
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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 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, and if
requested, each Exchanging Dealer and the Holders (if applicable), but only as
to events set forth in clauses (i) and (ii) below, 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):
(i) 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;
(ii) of any request by the Commission for amendments or supplements to
any Registration Statement or the prospectus included therein or for additional
information;
(iii) 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;
(iv) 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
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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, 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 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
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<PAGE>
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.
(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).
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<PAGE>
(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 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
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, 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 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 to make the statements therein not misleading, and shall
9
<PAGE>
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 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, 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 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, 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 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
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<PAGE>
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)
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 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 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 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 information
supplied by the Company on the one hand or to any Holders' 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 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
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<PAGE>
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 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). 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
12
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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;
(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 herein are inserted for convenience of
reference only and are not intended to be a part of, or to affect the meaning or
interpretation of, this Agreement.
(g) 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.
(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.
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(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.
14
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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
15
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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."
16
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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."
17
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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 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.
- -----------------------------
/ 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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ANNEX D
- 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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EXHIBIT B
FORM OF OPINION OF
COUNSEL TO THE COMPANY
Counsel to the Company 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.
2. The Company's authorized capitalization consists of
__________ 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 obligation
of the Company, enforceable against the Company 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 obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be
limited by applicable bankruptcy,
<PAGE>
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).
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 Notes 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 which we are
aware 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 Notes 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 under the Securities Act and
applicable state securities laws as provided in the Registration
Rights Agreement.
2
<PAGE>
9. Neither the consummation of the transactions contemplated by
this Agreement nor the sale, issuance, execution or delivery of the
Notes will violate Regulation T, U or X of the Federal Reserve Board.
10. To our knowledge, 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 our knowledge, 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.
In the course of preparation by the Company of the Offering
Memorandum, we have participated in conferences with representatives of the
Company and representatives of the independent public accountants for the
Company and you and your counsel at which conferences the contents of the
Offering Memorandum and related matters were discussed. We are not passing
upon and do not assume any responsibility for the accuracy, completeness
and fairness of the Offering Memorandum (except as expressly provided
above). Based on such participation in the preparation of the Offering
Memorandum, but without independent check or verification, and subject to
the preceding paragraph and the final paragraph hereof, we do not believe
that the Offering Memorandum (other than the financial statements and other
financial and statistical information contained therein, as to which we
express no opinion or 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.
The opinions contained in paragraphs 5 and 6 are subject to the
following additional limitation, qualification, exception and assumption:
We express no opinion as to the enforceability of any
indemnification or contribution provisions in the documents referred
to in such paragraphs, to the
3
<PAGE>
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.
The opinion contained in paragraph 8 is subject to the following
additional assumption:
We have assumed that the pro forma adjustments appearing in the
Pro Forma Financial Information contained in the Offering Memorandum
has been calculated on a basis consistent with Regulation S-X of the
Securities Act.
The opinions expressed herein are limited to questions arising
under the Federal laws of the United States, the law of the State of New
York and the General Corporation Law of the State of Delaware.
This opinion is given pursuant to Section 6(c) of the Purchase
Agreement. This opinion may not be used or relied upon by or published or
communicated to any person or entity other than the addressee hereof for
any purpose whatsoever without our prior written consent in each instance.
4
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 1, 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
2
<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
3
<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: /s/ Ray Chung
------------------------------
Name: Ray Chung
Title: Executive Vice President
/s/ Ian R. Wilson
----------------------------------
Ian R. Wilson
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Exhibit 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 1, 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: /s/ Ray Chung
--------------------------------
Name: Ray Chung
Title: Executive Vice President
/s/ James B. Ardrey
-----------------------------------
James B. Ardrey
<PAGE>
Exhibit 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 1, 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
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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, if requested, 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 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) to reflect the impact of
such hiring, 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:
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.
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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: /s/ James B. Ardrey
------------------------
Name: James B. Ardrey
Title: Vice Chairman
/s/ Ray Chung
------------------------
Ray Chung
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Exhibit 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 1, 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, if requested, 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.
6
<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 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
7
<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
8
<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
9
<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) to reflect the impact of such hiring, 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
10
<PAGE>
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 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.
11
<PAGE>
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.
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: /s/ Ray Chung
-----------------------------
Name: Ray Chung
Title: Executive Vice President
/s/ M. Laurie Cummings
--------------------------------
M. Laurie Cummings
13
<PAGE>
Exhibit 10.20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JULY 1, 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
UBS AG, STAMFORD BRANCH,
AS DOCUMENTATION AGENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AURORA FOODS INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION 1.
Page
<S> <C>
DEFINITIONS..................................................................................................... 2
1.1 Certain Defined Terms.................................................................................. 2
1.2 Accounting Terms Utilization of GAAP for Purposes of Calculations
Under Agreement............................................................................. 39
1.3 Other Definitional Provisions............................................................... 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............................................................................. 59
2.6 Special Provisions Governing Eurodollar Rate Loans.......................................... 59
2.7 Increased Costs; Taxes; Capital Adequacy.................................................... 62
2.8 Obligation of Lenders and Issuing Lenders to Mitigate....................................... 66
SECTION 3.
LETTERS OF CREDIT............................................................................................... 67
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein..................................................................................... 67
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........................................................................ 73
3.5 Indemnification; Nature of Issuing Lender's Duties.......................................... 74
3.6 Increased Costs and Taxes Relating to Letters of Credit..................................... 75
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT....................................................................... 76
4.1 Conditions to Term Loans and Revolving Loans................................................ 76
4.2 Conditions to All Loans..................................................................... 80
4.3 Conditions to Letters of Credit............................................................. 81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 5.
REPRESENTATIONS AND WARRANTIES.................................................................................. 82
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries................................................................................ 82
5.2 Authorization of Borrowing, etc............................................................. 83
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..................................................................... 88
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...................................................... 93
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.........................................................................102
6.11 Interest Rate Protection....................................................................104
6.12 Further Assurances..........................................................................104
SECTION 7.
NEGATIVE COVENANTS..............................................105
7.1 Indebtedness................................................................................105
7.2 Liens and Related Matters...................................................................106
7.3 Investments; Joint Ventures.................................................................108
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
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, and Duncan
Hines Transaction Agreements................................................................121
8.15 Default Under Subordination Provisions......................................................121
SECTION 9.
AGENTS....................................................122
9.1 Appointment.................................................................................122
9.2 Powers; General Immunity....................................................................124
9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness.........125
9.4 Right to Indemnity..........................................................................126
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....................................................................................130
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
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.......................................135
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
</TABLE>
iv
<PAGE>
ANNEXES
Annex A Pricing Grid
EXHIBITS
<TABLE>
<S> <C>
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
</TABLE>
v
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
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
</TABLE>
vi
<PAGE>
AURORA FOODS INC.
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED CREDIT AGREEMENT is dated as
of July 1, 1998 and entered into by and among AURORA FOODS INC., a newly formed
Delaware corporation ("Aurora"), 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 UBS
AG, Stamford Branch, as documentation agent (in such capacity, "Documentation
Agent").
R E C I T A L S
WHEREAS, A Foods (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, 1998 (the "Existing Credit
Agreement"), pursuant to which the Existing Lenders made loans to, and acquired
participations in letters of credit for the account of, A Foods to enable A
Foods to consummate the transactions contemplated by the Duncan Hines
Acquisition Agreement;
WHEREAS, Company proposes to (i) issue Company Common Stock in
an initial public offering (the "Initial Public Offering"), (ii) issue
$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, Aurora, 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 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 repay
the outstanding principal and associated prepayment premium on 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;
WHEREAS, Company desires that all of its future Subsidiaries
guaranty all of the
<PAGE>
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 AurFoods Operating Co. Inc., a Delaware
corporation, formerly Aurora Foods Inc. and MBW Foods Inc.
"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
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.
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"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 July 1, 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", which Applicable
Margin shall be adjusted on each Adjustment Date; 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 Potential Event of Default shall
become an Event of Default, then, effective upon such Potential Event
of 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 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 in the column headed "Less than 4.75:1 but Greater than or
Equal to 4.25:1."
"Applied Amount" has the meaning assigned to that term in
subsection 2.4C(ii).
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"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 $5,000,000 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.
"Aurora" has the meaning assigned to that term in the Recitals
to this Agreement.
"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, (y) the rate which is 1/2 of 1% in excess of the Federal Funds
Effective Rate or (z) the secondary market rate for certificates of
deposit (grossed up for maximum statutory reserve requirements) plus
1.00%.
"Base Rate Loans" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection
2.2A.
"Business" means the assets and liabilities of Company
relating to the manufacture and sale of pancake syrup and pancake and
waffle mix marketed under the Mrs. Butterworth's and Country Crock
brand names, as set forth in the Acquisition Agreement.
"Business Day" means (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of New
York or is a day on which banking institutions located in such state
are authorized or required by law or other governmental action to
close, and (ii)
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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.
"CALPERS" means the California Public Employees Retirement
System.
"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(iii).
"Chase" means The Chase Manhattan Bank and its successors,
including, without limitation, its successors by merger.
"Closing Date" means December 31, 1996.
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<PAGE>
"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.
"Company" means, prior to the Effective Date, A Foods, and on
and after the Effective Date, Aurora.
"Company Common Stock" means the common stock of Company, par
value $0.01 per share.
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"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(vi) that would
otherwise be treated as a Consolidated Capital Expenditure.
"Consolidated Cash Interest Coverage Ratio" means, for any
period, the ratio of (i) Consolidated EBITDA for such period to (ii)
Consolidated Cash Interest Expense for such period.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense payable in Cash during such period.
"Consolidated Current Assets" means, as at any date of
determination, the total assets of 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 and any
current tax asset.
"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, but excluding all short-term
Indebtedness for borrowed money and the current portion of any
long-term Indebtedness of the Company, in each case to the extent
included therein, and any current
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<PAGE>
taxes payable and the current portion of any deferred taxes.
"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 Effective 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 Advisory Agreement, (7) non-recurring charges
incurred prior to September 30, 1998 related to 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 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(vi) (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
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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 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.
"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.
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<PAGE>
"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 (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 Effective 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
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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 Advisory Agreement" means that certain Advisory
Agreement dated as of April 8, 1998, by and between Company and
Dartford, 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.
"Dartford Expense Agreement" means that certain Expense
Agreement dated as of July 1, 1998, by and between Company and
Dartford, 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.
"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.
"Duncan Hines Acquisition" means the transactions contemplated
by the Duncan Hines Acquisition Agreement.
"Duncan Hines Acquisition Agreement" means that certain Asset
Sale and Purchase Agreement, dated as of November 26, 1997 by and
between MBW LLC and P&G, which agreement was assigned to the Company.
"Duncan Hines Assumption Agreement" means that certain
Assumption Agreement dated as of January 16, 1998, by and between P&G
and Company.
"Duncan Hines Business" has the meaning assigned to that term
in the Recitals to this Agreement.
"Duncan Hines Patent and Trademark Security Agreement" means
that certain Patent and Trademark Security Agreement dated as of
January 16, 1998, by and between Company and Chase, as in effect on the
Effective Date and as such agreement may
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thereafter be amended, restated, supplemented or otherwise modified
from time to time to the extent permitted under subsections 7.12A.
"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.
"Effective Date" means the date (on or before July 1, 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
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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.
"Environmental Claim" means any written accusation,
allegation, notice of violation, claim, demand, abatement order or
other order or direction (conditional or otherwise) by any governmental
authority or any Person for any damage, including, without limitation,
personal injury (including sickness, disease or death), tangible or
intangible property damage, contribution, indemnity, indirect or
consequential damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for
fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Company,
any of its Subsidiaries, any of their respective Affiliates that are
directly or indirectly controlled by Company, or any Facility.
"Environmental Laws" means all laws, statutes, ordinances,
orders, rules, regulations, plans, policies or decrees and the like
relating to (i) environmental matters, including, without limitation,
those relating to fines, injunctions, penalties, damages, contribution,
cost recovery compensation, losses or injuries resulting from the
Release or threatened Release of Hazardous Materials, (ii) the
generation, use, storage, transportation or disposal of Hazardous
Materials, or (iii) occupational safety and health, public health and
safety, industrial hygiene or protection of wetlands, in any manner
applicable to Company or any of its Subsidiaries or any of their
respective properties, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. 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 after
the Effective Date.
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"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 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
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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.
"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
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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 Advisory Agreement" means that certain Advisory
Agreement dated as of April 8, 1998, by and between Company and Fenway,
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.
"FFDC Act" means the Federal Food, Drug and Cosmetic Act, as
amended from time to time, and any successor statute.
"First Priority" means, with respect to any Lien purported to
be created in any Collateral pursuant to any Collateral Document, that
(i) such Lien has priority over any other Lien on such Collateral and
(ii) such Lien is the only Lien (other than Permitted Encumbrances and
Liens permitted pursuant to subsection 7.2A) to which such Collateral
is subject.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its
Subsidiaries ending on December 31 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).
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"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.
"Gilster Co-Pack Agreement" means the Production Agreement,
dated as of June 4, 1998, by and between the Company and Gilster-Mary
Lee Corporation, 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.
"Governmental Acts" has the meaning assigned to that term in
subsection 3.5.
"Governmental Authorization" means any permit, license,
authorization, plan, directive, consent order or consent decree of or
from any federal, state or local governmental authority, agency or
court.
"Guaranty" means, individually, each of the 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.
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"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 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 September 30, 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.
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"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to hedge Company or
any of its Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means each date for
calculating the Adjusted Eurodollar Rate, for purposes of determining
the interest rate in respect of an Interest Period. The Interest Rate
Determination Date in respect of calculating the Adjusted Eurodollar
Rate shall be the second Business Day prior to the first day of the
related Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter.
"Inventory" means, with respect to any Person as of any date
of determination, all goods, merchandise and other personal property
which are then held by such Person for sale or lease, including raw
materials and work in process.
"Investment" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a
beneficial interest in, stock or other Securities of any other Person
(other than a Person that, prior to such purchase or acquisition, was a
Wholly Owned Subsidiary of Company), or (ii) any direct or indirect
loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital
contribution by Company or any of its Subsidiaries to any other Person
other than a Wholly Owned Subsidiary of Company, including all
Indebtedness and accounts receivable acquired from that other Person
that are not current assets or did not arise from sales to that other
Person in the ordinary course of business; provided, however, that the
term "Investment" shall not include (a) current trade and customer
accounts receivable for goods furnished or services rendered in the
ordinary course of business and payable in accordance with customary
trade terms, (b) advances and prepayments to suppliers for goods and
services in the ordinary course of business, (c) stock or other
securities acquired in connection with the satisfaction or enforcement
of Indebtedness or claims due or owing to Company or any of its
Subsidiaries or as security for any such Indebtedness or claims,
(d) Cash held in Deposit Accounts with banks and trust companies
(other than Lenders) not exceeding $5,000,000 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
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agrees or is otherwise obligated to issue such Letter
of Credit, determined as provided in subsection 3.1B(ii).
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal
form; provided that in no event shall any corporate Subsidiary of any
Person be considered to be a Joint Venture to which such Person is a
party.
"Kraft" means Kraft Foods, Inc., a Delaware corporation.
"Landlord Consent and Estoppel" means, with respect to any
Leasehold Property, a letter, certificate or other instrument in
writing from the lessor under the related lease, satisfactory in form
and substance to Administrative Agent, pursuant to which such lessor
agrees, for the benefit of Administrative Agent, (i) that without any
further consent of such lessor or any further action on the part of the
Loan Party holding such Leasehold Property, such Leasehold Property may
be encumbered pursuant to a Mortgage and may be assigned to the
purchaser at a foreclosure sale or in a transfer in lieu of such a sale
(and to a subsequent third party assignee if Administrative Agent, any
Lender, or an Affiliate of either so acquires such Leasehold Property),
(ii) that such lessor shall not terminate such lease as a result of a
default by such Loan Party thereunder without first giving
Administrative Agent notice of such default and at least 30 days (or,
if such default cannot reasonably be cured by Administrative Agent
within such period, such longer period as may reasonably be required)
to cure such default, (iii) to the matters contained in a Collateral
Access Agreement, and (iv) to such other matters relating to such
Leasehold Property as Administrative Agent may reasonably request.
"Leasehold Property" means any leasehold interest of any Loan
Party as lessee under any lease of real property, other than any such
leasehold interest designated from time to time by Administrative Agent
in its sole discretion as not being required to be included in the
Collateral.
"Lender" and "Lenders" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together
with their successors and permitted assigns pursuant to subsection
10.1, and the term "Lenders" shall include Swing Line Lender unless the
context otherwise requires, provided that the term "Lenders", when 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
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specified as the "Lending Office" on Schedule 2.1, or such other office
or offices as such Lender may from time to time notify Company and
Administrative Agent.
"Letter of Credit" or "Letters of Credit" means Commercial
Letters of Credit and Standby Letters of Credit issued or to be issued
by Issuing Lenders for the account of Company pursuant to subsection
3.1.
"Letter of Credit Usage" means, as at any date of
determination, the sum of (i) the maximum aggregate amount which is or
at any time thereafter may become available for drawing under all
Letters of Credit then outstanding (whether or not the conditions to
drawing thereunder have been met) plus (ii) the aggregate amount of all
drawings under Letters of Credit honored by Issuing Lenders and not
theretofore reimbursed by Company (including any such reimbursement out
of the proceeds of Revolving Loans pursuant to subsection 3.3B).
"Leverage Ratio" means, as of any date of determination, the
ratio of Consolidated Total Debt, as of the date of determination, to
Consolidated EBITDA, for the twelve-month period ending on the date of
determination, in each case calculated for 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 Guarantor, 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.
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"Log Cabin Business" means the assets of the retail syrup
business marketed under the Log Cabin and Country Kitchen trademarks
and the foodservice business marketed under the Log Cabin, Log Cabin
Lite and Wigwam trademarks and under private label arrangements.
"Log Cabin 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 the Log Cabin Patent
License Agreement.
"Management Fees" means the fees payable by Company pursuant
to the MDC Advisory Agreement, the Dartford Advisory Agreement and the
Fenway Advisory Agreement.
"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 Agreement" means that certain Advisory Agreement
dated as of April 8, 1998, by and between Company and MDC Management
Company III, L.P., as in
22
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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.
"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, McCown De Leeuw & Co. IV Associates,
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.
"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.
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"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 8-3/4% 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 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
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on behalf of such corporation by its chairman of the board (if an
officer), its president, its chief financial officer or a vice
president; provided that every Officer's Certificate with respect to
the compliance with a condition precedent to the making of any Loans
hereunder shall include (i) a statement that the officer making or
giving such Officer's Certificate has read such condition and any
definitions or other provisions contained in this Agreement relating
thereto, (ii) a statement that, in the opinion of the signer he or
she has made or has caused to be made such examination or
investigation as is necessary to enable him or her to express an
informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion
of the signer, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the
lessee at any time) of any property (whether real, personal or mixed)
that is not a Capital Lease other than any such lease under which that
Person is the lessor.
"P&G" 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(vi).
"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
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Internal Revenue Code or by ERISA) incurred in the ordinary
course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have
been made therefor;
(iii) Liens incurred or deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(iv) any attachment or judgment Lien not
constituting an Event of Default under subsection 8.8;
(v) leases or subleases granted to others not
interfering in any material respect with the ordinary conduct
of the business of Company or any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, minor
defects, encroachments or irregularities in title and other
similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of
Company or any of its Subsidiaries;
(vii) any (a) interest or title of a lessor or
sublessor under any Capital Lease permitted by subsection
7.1(iii) or any Operating Lease not prohibited by this
Agreement, (b) restriction or encumbrance that the interest or
title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under
such lease to any restriction or encumbrance referred to in
the preceding clause (b);
(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 XVI annexed hereto representing any Indebtedness
of Company incurred in connection with any Permitted Acquisition
payable to the seller in connection therewith,
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as such note may be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under subsection
7.12B; provided that no Permitted Seller Note shall (i) be
guarantied by any Subsidiary of Company or secured by any property
of Company or any of its Subsidiaries or (ii) bear cash interest at
a rate in excess of 12% per annum; and provided further, that no
Permitted Seller Note shall provide for any prepayment or repayment
of all or any portion of the principal thereof prior to the date of
the final scheduled installment of principal of any of the Loans.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability
companies, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts
or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Pledge Agreement" means that certain 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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"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.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
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"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 Agreement, the Dartford Advisory Agreement, the Fenway
Advisory Agreement, the Transition Agreements, the Log Cabin Transition
Agreements, the Red Wing Co-Pack Agreements, the Dartford Expense
Agreement, the Gilster Co-Pack Agreement 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 other than stock repurchases for Company's
1998 Employee Stock Purchase Program, (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 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
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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.
"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
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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 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
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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
Indenture 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 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.
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"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.
"Syndication Agent" has the meaning assigned to that term in
the introduction to this Agreement.
"Tax" or "Taxes" means any present or future tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature and
whatever called, by whomsoever, on whomsoever and wherever imposed,
levied, collected, withheld or assessed; provided that "Tax on the
overall net income" of a Person shall be construed as a reference to a
tax imposed by the jurisdiction in which that Person's principal office
(and/or, in the case of a Lender, its relevant Lending Office) is
located or in which that Person is deemed to be doing business on all
or part of the net income, profits or gains of that Person (whether
worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction, or
otherwise).
"Term Loan Commitment" means the aggregate commitment of a
Lender to make a Tranche A Term Loan 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 subsection 2.1A(i).
"Term Notes" means one or more of the Tranche A Term Notes.
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"Tiger" means Gloriande (Luxembourg) SarL, a corporation
organized under the laws of Luxembourg and an affiliate of Tiger Oats.
"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 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 in connection with the Transaction.
"Transition Agreements" means, collectively, (i) that certain
License Agreement
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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.
"UBS" means UBS Capital LLC, a New York limited liability
company.
"UBS AG" means UBS AG, Stamford Branch and its successors,
including, without limitation, any successors by merger.
"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 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.
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"VDK Subordinated Notes" means the 12% 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 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).
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(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 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 $15,000,000 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
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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;
(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
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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 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
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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) 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
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borrowing in accordance therewith.
C. Disbursement of Funds. All Term Loans and all Revolving
Loans under this Agreement shall be made by Lenders simultaneously and
proportionately to their respective Pro Rata Shares, it being understood that
no Lender shall be responsible for any default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder nor shall the
Commitment of any Lender to make the particular type of Loan requested be
increased or decreased as a result of a default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder. Promptly after
receipt by Administrative Agent of a Notice of Borrowing pursuant to
subsection 2.1B (or telephonic notice in lieu thereof), Administrative Agent
shall notify each Lender or Swing Line Lender, as the case may be, of the
proposed borrowing and of the amount of such Lender's Pro Rata Share of the
applicable Loans.
Each Lender shall make the amount of its Loan available to
Administrative Agent not later than 12:00 Noon (New York time) on the
applicable Funding Date, and Swing Line Lender shall make the amount of its
Swing Line Loan available to Administrative Agent not later than 12:00 Noon
(New York time) on the applicable Funding Date, in each case in same day
funds, at the Funding and Payment Office. Except as provided in subsection
2.1A(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.
E. Notes. Company shall execute and deliver on the Effective
Date (i) to
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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.
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
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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;
(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;
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(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) 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
45
<PAGE>
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.
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.
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<PAGE>
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:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TERM LOANS
<S> <C>
- --------------------------------------------------------------------------------------------------
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
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TERM LOANS
<S> <C>
- --------------------------------------------------------------------------------------------------
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
==================================================================================================
</TABLE>
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.
(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:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
SCHEDULED REDUCTION
DATE OF REVOLVING LOAN
COMMITMENTS
<S> <C>
- --------------------------------------------------------------------------------------------------
June 30, 2005 $175,000,000
- --------------------------------------------------------------------------------------------------
</TABLE>
; 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.
---------------------------------------
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<PAGE>
(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 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
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<PAGE>
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 $55,000,000 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 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) or (viii)), 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 employees or directors of Company and its Subsidiaries
pursuant to any employee stock option or stock purchase plan or other
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<PAGE>
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 $5,000,000.
(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
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).
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<PAGE>
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 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.
52
<PAGE>
D. Application of Proceeds of
Collateral and Payments Under Guaranties.
(i) Application of Proceeds of Collateral. Except as provided in
subsection 2.4B(iii)(a) with respect to prepayments from Net Cash Proceeds of
Asset Sales, all proceeds received by Administrative Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral under any Collateral Document may, in the discretion of
Administrative Agent, be held by Administrative Agent as Collateral for, and/or
(then or at any time thereafter) applied in full or in part by Administrative
Agent against, the applicable Secured Obligations (as defined in such Collateral
Document) in the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including without limitation
reasonable compensation to Administrative Agent and its agents and
counsel, and all other reasonable expenses, liabilities and advances
made or incurred by Administrative Agent in connection therewith, and
all amounts for which Administrative Agent is entitled to
indemnification under such Collateral Document and all advances made by
Administrative Agent thereunder for the account of the applicable Loan
Party, and to the payment of all reasonable costs and expenses paid or
incurred by Administrative Agent in connection with the exercise of any
right or remedy under such Collateral Document, all in accordance with
the terms of this Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to
the payment of all other such Secured Obligations for the ratable
benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whosoever may
be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments received
by Administrative Agent under any Guaranty shall be applied promptly from time
to time by Administrative Agent in the following order of priority:
(a) To the payment of the reasonable costs and expenses of any
collection or other realization under such Guaranty, including without
limitation reasonable compensation to Administrative Agent and its
agents and counsel, and all expenses, liabilities and advances made or
incurred by Administrative Agent in connection therewith, all in
accordance with the terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess of such payments,
to the payment of all other Guarantied Obligations (as defined in such
Guaranty) for the ratable benefit of the holders thereof; and
(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.
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<PAGE>
E. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the Notes
shall be made in same day funds and without defense, setoff or counterclaim,
free of any restriction or condition, and delivered to Administrative Agent not
later than 12:00 Noon (New York time) on the date due at the Funding and Payment
Office for the account of Lenders; funds received by Administrative Agent after
that time on such due date shall be deemed to have been paid by Company on the
next succeeding Business Day. Company hereby authorizes Administrative Agent to
charge its accounts with such Administrative Agent in order to cause timely
payment to be made to Administrative Agent of all principal, interest, fees and
expenses due hereunder (subject to sufficient funds being available in its
accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except as
provided in subsection 2.2C, all payments in respect of the principal amount of
any Loan shall include payment of accrued interest on the principal amount being
repaid or prepaid, and all such payments (and in any event any payments made in
respect of any Loan on a date when interest is due and payable with respect to
such Loan) shall be applied to the payment of interest before application to
principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such payments
relate, in each case proportionately to Lenders' respective Pro Rata Shares.
Administrative Agent shall promptly distribute to each Lender, at its applicable
Lending Office specified on Schedule 2.1 or at such other address as such Lender
may request, its Pro Rata Share of all such payments received by Administrative
Agent and the commitment fees of such Lender when received by Administrative
Agent pursuant to subsection 2.3. Notwithstanding the foregoing provisions of
this subsection 2.4E(iii) if, pursuant to the provisions of subsection 2.6C, any
Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if
any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, Administrative Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest hereunder
or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing
of any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all Loans
evidenced by that Note and all principal payments 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.
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<PAGE>
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 accordance with subsection
7.7(vi), 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 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
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this Agreement affecting the London interbank market, adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on
the basis provided for in the definition of Adjusted Eurodollar Rate,
Administrative Agent shall on such date give notice (by telecopy or by
telephone confirmed in writing) to Company and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans, until such time as Administrative Agent notifies
Company and Lenders that the circumstances giving rise to such notice no
longer exist (such notification not to be unreasonably withheld or delayed)
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given
by Company with respect to the Loans in respect of which such determination
was made shall be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In
the event that on any date any Lender shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with Company and Administrative Agent)
that the making, maintaining or continuation of its Eurodollar Rate Loans (i)
has become unlawful as a result of compliance by such Lender in good faith with
any law, treaty, governmental rule, regulation, guideline or order (or would
conflict with any such treaty, governmental rule, regulation, guideline or order
not having the force of law even though the failure to comply therewith would
not be unlawful) or (ii) has become impracticable, or would cause such Lender
material hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the London interbank market,
then, and in any such event, such Lender shall be an "Affected Lender" and it
shall on that day give notice (by telecopy or by telephone confirmed in writing)
to Company and Administrative Agent of such determination (which notice
Administrative Agent shall promptly transmit to each other Lender). Thereafter
(a) the obligation of the Affected Lender to make Loans as, or to convert Loans
to, Eurodollar Rate Loans, shall be suspended until such notice shall be
withdrawn by the Affected Lender, (b) to the extent such determination by the
Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to a Notice of 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.
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Company shall compensate each Lender, upon written request by that Lender
(which request shall set forth the basis for requesting such amounts), for
all reasonable losses, expenses and liabilities (including, without
limitation, any interest paid by that Lender to lenders of funds borrowed by
it to make or carry its Eurodollar Rate Loans and any loss, expense or
liability sustained by that Lender in connection with the liquidation or
reemployment of such funds) which that Lender may sustain: (i) if for any
reason (other than a default by that Lender) a borrowing of any Eurodollar
Rate Loan does not occur on a date specified therefor in a Notice of
Borrowing or a telephonic request for borrowing, or a conversion to or
continuation of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Conversion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment (including without
limitation any prepayment pursuant to subsection 2.4B(i)) or conversion of
any of its Eurodollar Rate Loans occurs on a date that is not the last day of
an Interest Period applicable to that Loan, (iii) if any prepayment of any of
its Eurodollar Rate Loans is not made on any date specified in a notice of
prepayment given by Company, or (iv) as a consequence of any other default by
Company in the repayment of its Eurodollar Rate Loans when required by the
terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may
make, carry or transfer Eurodollar Rate Loans at, to, or for the account of
any of its branch offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans.
Calculation of all amounts payable to a Lender under this subsection 2.6 and
under subsection 2.7A shall be made as though that Lender had actually funded
each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar
deposit bearing interest at the rate obtained pursuant to clause (i) of the
definition of Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of such Eurodollar deposit from an offshore
office of that Lender to a domestic office of that Lender in the United States
of America; provided, however, that each Lender may fund each of its Eurodollar
Rate Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.
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
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law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasigovernmental authority (whether or not having the force of
law):
(i) results in a change in the basis of taxation of such
Lender (or its applicable lending office) (other than a change with
respect to any Tax on the overall net income of such Lender) with
respect to this Agreement or any of its obligations hereunder or any
payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve
(including, without limitation, any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement against assets held by, or deposits or
other liabilities in or for the account of, or advances or loans by, or
other credit extended by, or any other acquisition of funds by, any
office of such Lender (other than any such reserve or other
requirements with respect to Eurodollar Rate Loans that are reflected
in the definition of Adjusted Eurodollar Rate; or
(iii) imposes any other condition (other than with respect
to a Tax matter) on or affecting such Lender (or its applicable lending
office) or its obligations hereunder, or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender
of agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or
to reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, Lender shall
promptly notify Company and Administrative Agent thereof and Company shall
promptly pay to such Lender, upon receipt of the statement referred to in the
next sentence, such additional amount or amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender shall reasonably determine) as may be necessary to compensate such
Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Company (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under
this subsection 2.7A, which statement shall be prima facie evidence of such
additional amounts.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net income
of any Lender) imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United States
of America or any other jurisdiction from which a payment is made by or on
behalf of Company.
(ii) Withholding of Taxes. If Company or any other Person is
required by law
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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 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
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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, 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
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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 Term Loans pursuant to subsection 2.1A(i), 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 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
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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 $15,000,000;
(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 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
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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.
(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
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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.
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
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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.
(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
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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 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
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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 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
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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").
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.
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Notwithstanding anything to the contrary contained in this
subsection 3.5, Company shall retain any and all rights it may have against any
Issuing Lender for any liability arising solely out of the gross negligence or
willful misconduct of such issuing Lender, as determined by a final judgment of
a court of competent jurisdiction.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
In the event that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by any Issuing Lender or Lender with any guideline,
request or directive issued or made after the date hereof by any central bank or
other governmental or quasi-governmental authority (whether or not having the
force of law):
(i) results in any change in the basis of taxation of such
Issuing Lender or Lender (or its applicable lending or letter of credit
office) (other than a change with respect to any Tax on the overall net
income of such Issuing Lender or Lender) with respect to the issuing or
maintaining of any Letters of Credit or the purchasing or maintaining
of any participations therein or any other obligations under this
Section 3, whether directly or by such being imposed on or suffered by
any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve
(including, without limitation, any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement in respect of any Letters of Credit
issued by any Issuing Lender or participations therein purchased by any
Lender; or
(iii) imposes any other condition on or affecting such
Issuing Lender or Lender (or its applicable lending or letter of credit
office) regarding this Section 3 or any Letter of Credit or any
participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (reasonably determined by such Issuing Lender or
Lender) as may be necessary to compensate such Issuing Lender or Lender for any
such increased cost or reduction in amounts received or receivable hereunder.
Such Issuing Lender or Lender shall deliver to Company a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Issuing Lender or Lender under this subsection 3.6, which
statement shall be prima facie evidence of such additional amounts.
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SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of
Letters of Credit hereunder are subject to the satisfaction of the following
conditions.
4.1 Conditions to Term Loans and Revolving Loans.
The obligations of Lenders to make the Term Loans and the
Revolving Loans are, in addition to the conditions precedent specified in
subsection 4.2, subject to prior or concurrent satisfaction of the following
conditions:
A. 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.
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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 primary gross proceeds from the
Initial Public Offering.
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 principal 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 Transaction, 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.
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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 Mortgaged
Properties 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 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 LLP, 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
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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 (a)
Bass, Berry & Sims and (b) Buchanan Ingersoll Professional Corporation, local
counsel to the Agents, dated as of the Effective 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 Holdings for the years ending December 31, 1996
and December 27, 1997, (ii) unaudited financial statements of Holdings as at
March 28, 1998 (iii) audited financial statements of VDK Holdings for the
operating period September 19, 1995 through June 29, 1996 and for the year ended
June 30, 1997, (iv) unaudited financial statements of VDK Holdings for the nine
months ended March 31, 1998, and (v) a pro forma consolidated balance sheet of
Company and its Subsidiaries as at March 31, 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 March 31, 1998, as adjusted as described in this clause (v),
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
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to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by
Administrative Agent, acting on behalf of Lenders, and their counsel shall be
satisfactory in form and substance to Administrative Agent and such counsel,
and Administrative Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.
4.2 Conditions to All Loans.
The obligations of Lenders to make Loans on each Funding Date
are subject to the following further conditions precedent:
A. Administrative Agent shall have received on or before that
Funding Date, in accordance with the provisions of subsection 2.1B, 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 is required to be
so disclosed pursuant to subsection 5.6 or 6.1(x) prior to the making
of the last preceding
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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.
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
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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(vi). Upon
consummation of any such Permitted Acquisition, such Permitted Acquisition shall
have been duly authorized by all necessary corporate action of such Loan Party.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and
performance of the Loan Documents and the Related Agreements and the issuance,
delivery and payment of the Notes have been duly authorized by all necessary
corporate or other action on the part of each of the Loan Parties thereto.
B. No Conflict. After giving effect to the consummation of the
transactions contemplated hereby to occur on the Effective Date, the execution,
delivery and performance by each of the Loan Parties of the Loan Document and
the Related Agreements to which they are parties, the issuance, delivery and
payment of the Notes and the consummation of the
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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 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
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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 balance sheets of Holdings as at December 27, 1997 and
March 28, 1998 and the related unaudited statements of income and changes in
stockholder's equity and of cash flows of Holdings for the period from
December 27, 1997 through March 28, 1998, and (ii) the audited statements of
operations and changes in stockholder's equity and cash flows of VDK Holdings
as at June 30, 1997 and the related unaudited statements of operations and
cash flows of VDK Holdings as at March 31, 1998 for the nine months then
ended, copies of which have heretofore been furnished to each Lender, present
fairly in all respects the financial condition of Holdings and VDK Holdings
as at such dates (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 and except for the Transaction, 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 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, 1997.
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
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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 December 31, 1996 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, 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. 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 January 16, 1998 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") necessary for the operation of Van de Kamp's as conducted on the
Effective Date, 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
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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 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
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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 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.
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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;
(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,
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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 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 the 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.
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B. Governmental Authorizations. No authorization, approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for either (i) the pledge or grant
by any Loan Party of the Liens purported to be created in favor of
Administrative Agent pursuant to any of the Collateral Documents or (ii) the
exercise by Administrative Agent of any rights or remedies in respect of any
Collateral (whether specifically granted or created pursuant to any of the
Collateral Documents or created or provided for by applicable law), except
for filings or recordings contemplated by subsection 5.16A 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 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.
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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.
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 September 30, 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
are not 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.
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SECTION 6.
AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 6.
6.1 Financial Statements and Other Reports.
Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Company will deliver to Administrative Agent (and
Administrative Agent will, after receipt thereof, deliver to each Lender):
(i) Monthly Financials: (a) as soon as available after
fiscal month-end July 1998 and August 1998 and (b) 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;
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(iii) Year-End Financials: as soon as available and in any
event within 90 days after the end of each Fiscal Year, (a) the
consolidated and consolidating balance sheets of Company and its
Subsidiaries as at the end of such Fiscal Year and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast
delivered pursuant to subsection 6.1(xiii) for the Fiscal Year covered
by such financial statements, all in reasonable detail and certified by
the chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management
for such Fiscal Year, and (c) in the case of such consolidated
financial statements, a report thereon of independent certified public
accountants of recognized national standing selected by Company and
reasonably satisfactory to Administrative Agent, which report shall be
unqualified as to the ability of Company and its Subsidiaries to
continue as a going concern and as to scope of audit, and shall state
that such consolidated financial statements fairly present, in all
material respects, the consolidated financial position of Company and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally
accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with
each delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (ii) and (iii) above, (a) an Officer's
Certificate of Company stating that the signer has reviewed the terms
of this Agreement and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Company and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signer does not have knowledge of the existence as at the
date of such Officer's Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if
any such condition or event existed or exists, specifying the nature
and period of existence thereof and what action Company has taken, is
taking and proposes to take with respect thereto; and (b) a Compliance
Certificate demonstrating in reasonable detail compliance during and at
the end of the applicable accounting periods with the restrictions
contained in 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
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Company and its Subsidiaries delivered pursuant to subdivisions
(i), (ii), (iii) or (xiii) of this subsection 6.1 will differ
in any material respect from the consolidated financial
statements that would have been delivered pursuant to
such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (i), (ii),
(iii) or (xiii) of this subsection 6.1 following such change,
consolidated financial statements of Company and its
Subsidiaries for (y) the current Fiscal Year to the effective
date of such change and (z) the two full Fiscal Years immediately
preceding the Fiscal Year in which such change is made, in each
case prepared on a pro forma basis as if such change had been
in effect during such periods, and (b) together with each delivery
of financial statements pursuant to subdivision (i), (ii), (iii) or
(xiii) of this subsection 6.1 following such change, a written
statement of the chief accounting officer or chief financial officer of
Company setting forth the differences which would have resulted if such
financial statements had been prepared without giving effect to such
change;
(vi) Accountants' Certification: together with each
delivery of consolidated financial statements of Company and its
Subsidiaries pursuant to subdivision (iii) above, a written statement
by the independent certified public accountants giving the report
thereon stating whether, in connection with their audit examination,
any condition or event, insofar as such condition or event relates to
the covenants set forth in subsection 7.6, that constitutes an Event of
Default or Potential Event of Default has come to their attention and,
if such a condition or event has come to their attention, specifying
the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Event of Default or Potential Event of Default
that would not be disclosed in the course of their audit examination;
(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports submitted to Company by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of Company and its Subsidiaries made by such
accountants, including, without limitation, any comment letter
submitted by such accountants to management in connection with their
annual audit;
(viii) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by 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
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(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
is required to be disclosed in a current report filed by Company with
the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5
and 6 of such Form as in effect on the date hereof) if Company were
required to file such reports under the Exchange Act, or (d) of the
occurrence of any event or change that has caused or evidences, either
in any case or in the aggregate, a Material Adverse Effect, an
Officer's Certificate specifying the nature and period of existence of
such condition, event or change, or specifying the notice given or
action taken by any such Person and the nature of such claimed Event of
Default, Potential Event of Default, default, event or condition, and
what action Company has taken, is taking and proposes to take with
respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any
officer of Company obtaining knowledge of the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting 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 $1,000,000 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
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Multiemployer Plan sponsor concerning an ERISA Event;
and (b) such other documents or governmental reports or filings
relating to any Employee Benefit Plan as Administrative Agent shall
reasonably request;
(xiii) Financial Plans: as soon as available and in any event
no later than 90 days after the beginning of Fiscal Year 1999, 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
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consolidated basis).
6.3 Payment of Taxes and Claims; Tax Consolidation.
A. Company will, and will cause each of its Subsidiaries to,
pay all material taxes and all assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
income, businesses or franchises before any penalty accrues thereon, and all
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; provided that no such
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings timely instituted and diligently conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
B. Company will not, nor will it permit any of its
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any Person other than a Subsidiary consolidated with the Company.
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.
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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.
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'
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security interests, if any, created by the Loan Documents. Administrative
Agent agrees to deliver a copy of any such report to Company with the
understanding that Company acknowledges and agrees that (i) it will indemnify
and hold harmless each Agent and Lender from any costs, losses or liabilities
relating to any Loan Party's use of or reliance on such report, (ii) no Agent
nor any Lender makes any representation or warranty with respect to such
report, and (iii) by delivering such report to Company, no Agent nor any
Lender is requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
C. Company shall promptly advise Administrative Agent in
writing and in reasonable detail of (i) any Release of any Hazardous Materials
required to be reported to any federal, state, local or foreign governmental or
regulatory agency under any applicable Environmental Laws, (ii) any and all
written communications with respect to any Environmental Claims that have a
reasonable possibility of giving rise to a Material Adverse Effect or with
respect to any Release of Hazardous Materials required to be reported to any
federal, state or local governmental or regulatory agency, (iii) any remedial
action taken by Company or any other Person in response to (x) any Hazardous
Materials on, under or about any Facility, the existence of which has a
reasonable possibility of resulting in an Environmental Claim having a Material
Adverse Effect, or (y) any Environmental Claim that could have a Material
Adverse Effect, (iv) Company's discovery of any occurrence or condition on any
real property adjoining or in the vicinity of any Facility that could cause such
Facility or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws, and (v)
any request for information from any governmental agency that suggests such
agency is investigating whether Company or any of its Subsidiaries may be
potentially responsible for a Release of Hazardous Materials.
D. Company shall promptly notify Administrative Agent of (i)
any proposed acquisition of stock, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to expose Company or any of its
Subsidiaries to, or result in, Environmental Claims that could have a Material
Adverse Effect or that could reasonably be expected to have a material adverse
effect on any Governmental Authorization then held by Company or any of its
Subsidiaries and (ii) any proposed action to be taken by Company or any of its
Subsidiaries to commence manufacturing, industrial or other similar operations
that could reasonably be expected to subject Company or any of its Subsidiaries
to additional laws, rules or regulations, including, without limitation, laws,
rules and regulations requiring additional environmental permits or licenses.
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.
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6.8 Company's Remedial Action Regarding Hazardous Materials.
Company shall promptly take, and shall cause each of its
Subsidiaries promptly to take, any and all necessary remedial action in
connection with the presence, storage, use, disposal, transportation or
Release of any Hazardous Materials on or under any Facility in order to
comply with all applicable Environmental Laws and Governmental Authorizations
unless the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. In the event Company or any of its Subsidiaries
takes any remedial action with respect to any Hazardous Materials on or under
any Facility, Company or such Subsidiary shall conduct and complete such
remedial action in material compliance with all applicable Environmental
Laws, and in accordance with the policies, orders and directives of all
federal, state and local governmental authorities except when, and only to
the extent that, Company's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or Release of any Hazardous Materials
is being contested in good faith by Company or such Subsidiary.
6.9 Execution of Subsidiary Guaranty and Subsidiary Security
Agreements by Subsidiaries and Future Subsidiaries.
In the event that any Person becomes a Subsidiary of Company
after the date hereof, Company will promptly notify Administrative Agent of that
fact and cause each such Subsidiary to execute and deliver to Administrative
Agent a counterpart of the Subsidiary Guaranty, the Pledge Agreement and the
Security Agreement and a new patent and trademark agreement substantially
similar to the Patent and Trademark Security Agreement, the Log Cabin Patent and
Trademark Security Agreement, 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
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other matters as Administrative Agent may reasonably request, all of the
foregoing to be reasonably satisfactory in form and substance to
Administrative Agent and its counsel.
6.10 Conforming Leasehold Interests; Matters Relating to
Additional Real Property Collateral.
A. Conforming Leasehold Interests. If Company or any of its
Subsidiaries acquires any Leasehold Property, Company shall, or shall cause such
Subsidiary to, use its best efforts (without requiring Company or such
Subsidiary to relinquish any material rights or incur any material obligations
or to expend more than a nominal amount of money over and above the
reimbursement, if required, of the landlord's out-of-pocket costs, including
attorneys fees) to cause such Leasehold Property to be a Conforming Leasehold
Interest.
B. Additional Mortgages, etc. From and after the Closing Date,
in the event that (i) Company or any Subsidiary Guarantor acquires any fee
interest in real property or any Leasehold Property (other than a fee interest
in a Real Property Asset or Leasehold Property with a value of $500,000 or less)
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 (other than
a fee interest in a Real Property Asset or Leasehold Property with a value of
$500,000 or less), 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;
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(iv) Title Insurance. (a) If required by Administrative
Agent, an ALTA mortgagee title insurance policy or an unconditional
commitment therefor (a "Mortgage Policy") issued by the Title Company
with respect to such Mortgaged Property, in an amount satisfactory to
Administrative Agent, insuring fee simple title to, or a valid
leasehold interest in, such Mortgaged Property vested in such Loan
Party and assuring Administrative Agent that such Mortgage creates a
valid and enforceable First Priority mortgage Lien on such Mortgaged
Property, subject only to a standard survey exception, which Mortgage
Policy (1) shall include an endorsement for mechanics' liens, for
future advances under this Agreement and for any other matters
reasonably requested by Administrative Agent and (2) shall provide for
affirmative insurance and such reinsurance as Administrative Agent may
reasonably request, all of the foregoing in form and substance
reasonably satisfactory to Administrative Agent; and (b) evidence
satisfactory to Administrative Agent that such Loan Party has (i)
delivered to the Title Company all certificates and affidavits required
by the Title Company in connection with the issuance of the Mortgage
Policy and (ii) paid to the Title Company or to the appropriate
governmental authorities all expenses and premiums of the Title Company
in connection with the issuance of the Mortgage Policy and all
recording and stamp taxes (including mortgage recording and intangible
taxes) payable in connection with recording the Mortgage in the
appropriate real estate records;
(v) Title Report. If no Mortgage Policy is required with
respect to such Mortgaged Property, a title report issued by the Title
Company with respect thereto, dated not more than 30 days prior to the
date such Mortgage is to be recorded and satisfactory in form and
substance to Administrative Agent;
(vi) 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
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and prepared by environmental consultants satisfactory to
Administrative Agent, concerning any environmental hazards
or liabilities to which Company or any of its Subsidiaries
may be subject with respect to such Mortgaged Property.
6.11 Interest Rate Protection.
Within 180 days after the Effective Date, Company shall enter
into one or more Interest Rate Agreements with respect to the Loans, in an
amount of not less than 50% of the aggregate amount of Consolidated Total Debt,
which Interest Rate Agreements shall have the effect of establishing a maximum
interest rate of not more than 10% per annum with respect to such notional
principal amount, each such Interest Rate Agreement to be in form and substance
satisfactory to Administrative Agent and with a term of not less than three
years from the Effective Date.
6.12 Further Assurances.
At any time or from time to time upon the request of
Administrative Agent, Company will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and things
as Administrative Agent may reasonably request in order to effect fully the
purposes of the Loan Documents and to provide for payment of the Obligations in
accordance with the terms of this Agreement, the Notes and the other Loan
Documents. In furtherance and not in limitation of the foregoing, 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.
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<PAGE>
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));
(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 $15,000,000 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 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
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<PAGE>
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 $25,000,000.
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;
(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
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<PAGE>
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
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
(i) Company and its Subsidiaries may make and own
Investments in Cash Equivalents;
(ii) 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;
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(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 Company and its Subsidiaries in
an aggregate amount not to exceed at any time $1,000,000;
(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 $1,000,000.
7.5 Restricted Junior Payments.
Company shall not, and shall not permit any of its
Subsidiaries to, directly or
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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 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 to such
redemption or defeasance) 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 plus the applicable
premium; and (vii) 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.
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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:
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------
MINIMUM CONSOLIDATED
TEST PERIOD CASH INTEREST COVERAGE
RATIO
- --------------------------------------------------------------------------------------------------
7/01/98 - 12/31/98 1.90:1.00
- --------------------------------------------------------------------------------------------------
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
==================================================================================================
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------
MAXIMUM
TEST PERIOD LEVERAGE RATIO
- --------------------------------------------------------------------------------------------------
7/01/98 - 12/31/98 5.70:1.00
- --------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------
</TABLE>
104
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------
MAXIMUM
TEST PERIOD LEVERAGE RATIO
- --------------------------------------------------------------------------------------------------
7/01/04 - 6/30/05 3.00:1.00
==================================================================================================
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------
MINIMUM FIXED CHARGE
TEST PERIOD COVERAGE RATIO
- --------------------------------------------------------------------------------------------------
7/01/98 - 12/31/98 1.10:1.00
- --------------------------------------------------------------------------------------------------
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
==================================================================================================
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------
MAXIMUM CONSOLIDATED
FISCAL YEAR CAPITAL EXPENDITURES
(OR PORTION THEREOF) AMOUNT
- --------------------------------------------------------------------------------------------------
Fiscal Year ending in December 1998 $25,000,000
and each Fiscal Year thereafter
- --------------------------------------------------------------------------------------------------
</TABLE>
; 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
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<PAGE>
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.
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 three 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 for the three applicable
Fiscal Quarters ending prior to the Effective Date are as set forth on Schedule
7.6E annexed hereto.
(ii) With respect to any period during which new Subsidiaries,
assets or businesses are acquired pursuant to subsection 7.7(vi), 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
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<PAGE>
acquisition had been consummated or incurred at the beginning 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) 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
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<PAGE>
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 and its Subsidiaries 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(vi)(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 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.
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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, Dartford, UBS, Tiger and CALPERS 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, (vi) amounts paid under the Dartford Expense Agreement, and (vii) 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 (ii) such other lines of
business as may be consented to by Administrative Agent and Requisite Lenders.
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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 Agreement, the Dartford Advisory
Agreement, the Fenway Advisory Agreement, the Transition Agreements, the Log
Cabin Transition Agreements, the Duncan Hines Transition Agreements, the Gilster
Co-Pack Agreement 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 December 31.
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
$2,500,000 or more or any items of Indebtedness with an aggregate principal
amount of $5,000,000 or more or (b) any Contingent Obligation in an individual
principal amount of $2,500,000 or more or any Contingent Obligations with an
aggregate principal amount of $5,000,000 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 $2,500,000 or more or
any items of Indebtedness with an aggregate principal amount of $5,000,000 or
more or any Contingent Obligation in an individual principal amount of
$2,500,000 or more or any Contingent Obligations with an aggregate principal
amount of $5,000,000 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
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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 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 $2,500,000
or (ii) in the aggregate at any time an amount in excess of $5,000,000 (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.
Any Person (other than the MDC Entities, Dartford, Fenway,
UBS, Tiger and CALPERS), including a "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) which includes such Person, shall
purchase or otherwise acquire, directly or indirectly, beneficial ownership of
Securities of Company and, as a result of such purchase or acquisition, any
Person (together with its associates and Affiliates), shall directly or
indirectly
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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, and
Duncan Hines Transaction Agreements.
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 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
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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
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. UBS
AG is hereby appointed Documentation
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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 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
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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 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)
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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.
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.
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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.
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.
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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.
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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, 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
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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 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
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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 (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).
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 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,
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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 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
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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 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
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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 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.
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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.
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
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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.
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.
129
<PAGE>
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 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
130
<PAGE>
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 this nature, it being understood and
agreed by Company that in any event a Lender may make disclosures reasonably
required by any Affiliate or 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
131
<PAGE>
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.
132
<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: /s/ James B. Ardrey
--------------------------------------------
Name: James B. Ardrey
Title: Vice Chairman
Notice Address:
456 Montgomery Street, Suite 2200
San Francisco, California 94104
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: /s/ Thomas H. Kozlark
---------------------
Name: Thomas H. Kozlark
Title: Vice President
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: /s/ Jacqueline L. Arambulo
---------------------------
Name: Jacqueline L. Arambulo
Title: Vice President
Notice Address:
Gleacher NatWest Inc.
660 Madison Avenue, 17th Floor
New York, New York 10021
Attention: W. Wakefield Smith
Telephone: (212) 418-4525
Facsimile: (212) 418-4598
<PAGE>
UBS AG, STAMFORD BRANCH
individually and as
Documentation Agent
By: /s/ Jorg Rauthe
----------------------
Name: Jorg Rauthe
Title: Associate Director
Loan Portfolio Support, US
By: /s/ Denise M. Clerkin
----------------------
Name: Denise M. Clerkin
Title: Associate Director
Loan Portfolio Support, US
Notice Address:
Warburg Dillon Read
677 Washington Boulevard
Stamford, Connecticut 06910
Attention: Lara Kavanagh
Telephone: (213) 719-4181
Facsimile: (213) 719-4176
<PAGE>
MARINE MIDLAND BANK
By: /s/ Susan LeFevre
----------------------
Name: Susan LeFevre
Title: Authorized Signatory
Notice Address:
Marine Midland Bank
140 Broadway, 5th Floor
New York, New York 10005
Attention: Russell Thomas
Telephone: (212) 658-2749
Facsimile: (212) 658-2586
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By: /s/ Karen L. Knudsen
---------------------------
Name: Karen L. Knudsen
Title: Vice President
Notice Address:
Harris Trust and Savings Bank
111 West Monroe Street
Floor 18 West
Chicago, Illinois 60690
Attention: Karen Knudsen
Telephone: (312) 461-4085
Facsimile: (312) 765-8095
<PAGE>
FLEET NATIONAL BANK
By: /s/ Howard J. Diamond
----------------------
Name: Howard J. Diamond
Title: Assistant Vice President
Notice Address:
Fleet National Bank
One Federal Street, MAOF0324
Boston, Massachusetts 02110
Attention: Howard J. Diamond
Telephone: (617) 346-0042
Facsimile: (617) 346-5093
With a copy to:
Fleet National Bank
1185 Avenue of the Americas
New York, New York 10036
Attention: Jed Duncan
Telephone: (212) 819-6010
Facsimile: (212) 819-6201
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By: /s/ Dean Balice By: /s/ W. Leroy Startz
--------------------------- ---------------------------
Name: Dean Balice Name: W. Leroy Startz
Title: Senior Vice President Title: Vice President
Branch Manager
Notice Address:
Credit Agricole Indosuez (Chicago)
55 East Monroe Street, Suite 4700
Chicago, Illinois 60603
Attention: Theodore Tice
Telephone: (312) 917-7463
Facsimile: (312) 372-3455
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Greg Wilson
---------------------------
Name: Greg Wilson
Title: Commercial Banking Officer
Notice Address:
U.S. Bank National Association
First Bank Place
MPFP 0702
601 Second Avenue South
Minneapolis, Minnesota 55402
Attention: Elliot Jaffee
Telephone: (612) 973-0543
Facsimile: (612) 973-0825
<PAGE>
WELLS FARGO BANK, N.A.
By: /s/ Michael Real
---------------------------
Name: Michael Real
Title: Assistant Vice President
Notice Address:
Wells Fargo Bank, N.A.
555 Montgomery Street, 17th Floor
an Francisco, California 94111
Attention: Margot Golding
Telephone: (415) 396-6036
Facsimile: (415) 975-7302
<PAGE>
SUNTRUST BANK, ATLANTA
By: /s/ Dyer Melzon
-------------------------
Name: Dyer Melzon
Title: Associate
By: /s/ Rainer Zeck
-------------------------
Name: Rainer Zeck
Title: Vice President
Notice Address:
SunTrust Bank, Atlanta
25 Park Place, 26th Floor, MC 075
Atlanta, Georgia 30303
Attention: Dirk McCloud
Telephone: (404) 724-3446
Facsimile: (404) 575-2693
<PAGE>
SUMMIT BANK
By: /s/ Seiji P. Nakamura
---------------------------
Name: Seiji P. Nakamura
Title: Assistant Treasurer
Notice Address:
Summit Bank
750 Walnut Avenue, 3rd Floor
Cranford, New Jersey 07016
Attention: Wayne Troutman
Telephone: (908) 709-5339
Facsimile: (908) 709-6433
Notice Address:
Att: Seiji P. Nakamura
Telephone: (908) 709-6022
Facsimile: (908) 709-6122
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ C. Joseph Richardson
--------------------------
Name: C. Joseph Richardson
Title: Vice President
Notice Address:
PNC BANK
201 East Fifth Street
Cincinnati, Ohio 45202
Attention: Jeff Stein
Telephone: (513) 651-8692
Facsimile: (513) 651-8951
<PAGE>
NATIONAL CITY BANK
By: /s/ Lisa B. Lisi
---------------------------
Name: Lisa B. Lisi
Title: Assistant Vice President
Notice Address:
National City Bank
1900 East Ninth Street, 10th Floor
Cleveland, Ohio 44114
Attention: Lisa Lisi
Telephone: (216) 575-9166
Facsimile: (216) 222-0003
<PAGE>
PARIBAS
By: /s/ Judith A. Dowling By: /s/ Lee S. Buckner
--------------------------- ---------------------------
Name: Judith A. Dowling Name: Lee S. Buckner
Title: Vice President Title: Managing Director
Notice Address:
Paribas
101 California Street, Suite 3150
San Francisco, California 94111
Attention: Judith A. Dowling
Telephone: (415) 398-6811
Facsimile: (415) 398-4240
<PAGE>
MITSUBISHI TRUST AND BANKING
By: /s/ Beatrice E. Kossodo
---------------------------
Name: Beatrice E. Kossodo
Title: Senior Vice President
Notice Address:
Mitsubishi Trust and Banking
520 Madison Avenue, 25th Floor
New York, New York 10022
Attention: Bea Kossodo
Telephone: (212) 891-8363
Facsimile: (212) 644-6825
<PAGE>
BAYERISCHE VEREINSBANK
By: /s/ Erich Ebner von Eschenbach
--------------------------------
Name: Erich Ebner von Eschenbach
Title: Vice President
By: /s/ Sylvia Cheng
--------------------------------
Name: Sylvia Cheng
Title: Vice President
Notice Address:
Bayerische Vereinsbank
150 East 42nd Street, 39th Floor
New York, New York 10017
Attention: Erich Ebner
Telephone: (212) 672-5778
Facsimile: (212) 672-5516
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/ Braxton B. Comer
---------------------------
Name: Braxton B. Comer
Title: Senior Vice President
Notice Address:
First Union National Bank
First Union National Center
5th Floor
301 South College Street
Charlotte, North Carolina 28288-0737
Attention: Ben Howatt
Telephone: (704) 383-1357
Facsimile: (704) 374-3300
<PAGE>
BANQUE NATIONALE DE PARIS
By: /s/ Serge Besreyard By: /s/ Stephanie Rogers
--------------------------- ---------------------------
Name: Serge Besreyard Name: Stephanie Rogers
Title: Vice President Title: Vice President
Notice Address:
Banque Nationale de Paris
499 Park Avenue
New York, New York 10022
Attention: Stephanie Rogers
Telephone: (212) 415-9438
Facsimile: (212) 418-8269
<PAGE>
STAR BANK NATIONAL ASSOCIATION
By: /s/ Mark A. Whitson
---------------------------
Name: Mark A. Whitson
Title: Vice President
Notice Address:
Star Bank
425 Walnut Street, 8th Floor
Cincinnati, Ohio 45201
Attention: Mark Whitson
Telephone: (513) 632-2013
Facsimile: (513) 632-2068
<PAGE>
DLJ CAPITAL FUNDING, INC.
By: /s/ Stephan Illegible
---------------------------
Name:
Title:
Notice Address:
DLJ Capital Funding, Inc.
277 Park Avenue
New York, New York 10172
Attention: Diane Albanese
Telephone: (212) 892-2903
Facsimile: (212) 892-6031
<PAGE>
THE TRAVELERS INSURANCE COMPANY
By: /s/ Teresa M. Torrey
---------------------------
Name: Teresa M. Torrey
Title: Second Vice President
Notice Address:
The Travelers Insurance Company
One Tower Square, 9PB
Hartford, Connecticut 06183-2030
Attention: Teresa M. Torrey
Telephone: (860) 277-5952
Facsimile: (860) 954-5243
<PAGE>
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Hans-Josef Thiele By: /s/ Susan L. Pearson
--------------------------- ---------------------------
Name: Hans-Josef Thiele Name: Susan L. Pearson
Title: Director Title: Director
Notice Address:
Deutsche Morgan Grenfell
31 West 52nd Street, 24th Floor
New York, New York 10019
Attention: Thomas Foley
Telephone: (212) 469-8205
Facsimile: (212) 474-8212
<PAGE>
ANNEX A
TO CREDIT AGREEMENT
PRICING GRID
RATIO OF CONSOLIDATED TOTAL DEBT TO CONSOLIDATED EBITDA
<TABLE>
<CAPTION>
Less than
5.25 but Less than Less than Less than Less than
Greater 5:00 but 4.75:1 but 4.25:1 but 3.75:1 but
Greater than than or Greater than Greater than Greater than Greater than
or Equal to Equal or Equal to or Equal to or Equal to or Equal 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>
Applicable Margin for
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%
Applicable Margin for
Commitment Fee:............. 0.50% 0.50% 0.375% 0.375% 0.375% 0.30% 0.30%
</TABLE>
<PAGE>
Exhibit 10.20
EXHIBIT I
[FORM OF NOTICE OF BORROWING]
NOTICE OF BORROWING
Pursuant to that certain Third Amended and Restated Credit Agreement
dated as of July 1, 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 UBS AG, Stamford Branch, 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
_____________________
(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>
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 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 July 1, 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 UBS AG, Stamford Branch, 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 July 1, 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 UBS AG, Stamford Branch, 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.
The undersigned officer, to the best of his or her knowledge, and
III-1
<PAGE>
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
$[1] New York, New York
July 1, 1998
FOR VALUE RECEIVED, AURORA FOODS INC., a Delaware corporation
("Company"), promises to pay to [2] ("Payee") or its registered assigns the
principal amount of [3] ($[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 July 1, 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 UBS AG,
Stamford Branch, 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.
This Note is one of Company's "Tranche A Term Notes" in the aggregate
principal amount of $225,000,000 and is issued
IV-1
<PAGE>
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.
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
IV-2
<PAGE>
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
$[1] New York, New York
July 1, 1998
FOR VALUE RECEIVED, AURORA FOODS INC., a Delaware corporation
("Company"), promises to pay to the order of [2] ("Payee") or its registered
assigns, on or before June 30, 2005, the lesser of (x) [3] ($[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 July 1, 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 UBS AG,
Stamford Branch, 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.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in
V-2
<PAGE>
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
<TABLE>
<CAPTION>
Amount of Outstanding
Type of Amount of Principal Principal
Loan Made Loan Made Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---------- --------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
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
July 1, 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 July 1, 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 UBS AG,
Stamford Branch, 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 prepayment at the option of Company as
provided in subsection
VI-1
<PAGE>
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]
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:
VI-2
<PAGE>
TRANSACTIONS
ON
SWING LINE NOTE
<TABLE>
<CAPTION>
Outstanding
Amount of Amount of Principal
Loan Made Principal Paid Balance Notation
Date This Date This Date This Date Made By
- -------- --------- -------------- ------------ --------
<S> <S> <C> <C> <C>
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
VI-3
<PAGE>
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 July 1, 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 UBS AG, Stamford
Branch, 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.
VII-1
<PAGE>
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.
VII-2
<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. Section 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
VII-3
<PAGE>
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 Contributing Guarantor from
the other Contributing Guarantors as
VII-4
<PAGE>
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. Section 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 similar swap agreement) under any Lender Interest
Rate Agreement (either such occurrence being an "Event of
VII-5
<PAGE>
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 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,
VII-6
<PAGE>
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
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
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<PAGE>
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;
(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)
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<PAGE>
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 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
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<PAGE>
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 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
VII-10
<PAGE>
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 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
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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 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.
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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 remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
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<PAGE>
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 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
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<PAGE>
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
discharged from its duties and obligations under this Guaranty.
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<PAGE>
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 July 1, 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 July 1, 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 UBS AG,
Stamford Branch, 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 Guaranty, as it may be
amended, restated, supplemented or
VIII-1
<PAGE>
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;
(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
VIII-2
<PAGE>
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, 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
VIII-3
<PAGE>
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.
Section 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 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
VIII-4
<PAGE>
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:
(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.
VIII-5
<PAGE>
(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.
VIII-6
<PAGE>
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 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
VIII-7
<PAGE>
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 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
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<PAGE>
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;
(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
VIII-9
<PAGE>
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 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)
VIII-10
<PAGE>
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 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
VIII-11
<PAGE>
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 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
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<PAGE>
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.
(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
VIII-13
<PAGE>
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.
(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
VIII-14
<PAGE>
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
(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,
VIII-15
<PAGE>
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 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
VIII-16
<PAGE>
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 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.
VIII-17
<PAGE>
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 (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.
VIII-18
<PAGE>
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]
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 July 1, 1998, by and among the Pledgors referred to
therein and The Chase Manhattan Bank, as Secured Party.
<TABLE>
<CAPTION>
Part A
Par Number Percentage
Value of of
Stock Shares Outstanding
Stock Class of Certificate Shares
Pledgor Issuer Stock Nos. Pledged
- ------- ------ -------- ----------- ----- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Part B
Pledgor Debt Issuer Amount of Indebtedness
- ------- ----------- ----------------------
<S> <C> <C>
</TABLE>
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 July 1, 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:
<TABLE>
<CAPTION>
Stock Issuer Class of Stock Par Value Number Percentage of
Stock Certificate of Outstanding
Nos. Shares Shares Pledged
- ------------ -------- ----------- --------- ------ --------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Debt Issuer Amount of Indebtedness
----------- ----------------------
<S> <C>
</TABLE>
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 July 1, 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>
<TABLE>
<CAPTION>
Stock Issuer Class of Stock Par Value Number Percentage of
Stock Certificate of Outstanding
Nos. Shares Shares Pledged
- ------------ -------- ----------- --------- ------ --------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Debt Issuer Amount of Indebtedness
----------- ----------------------
<S> <C>
</TABLE>
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 July 1, 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 July 1, 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 UBS AG, Stamford Branch, 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 of Company under the Lender Interest Rate Agreements, including
IX-1
<PAGE>
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 and obligations of any
kind owned by or owing to such Grantor and all rights in, to and under all
security
IX-2
<PAGE>
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;
(i) all books, records, ledger cards, files, sales records, sales and
promotional data, invoices, product specifications, drawings, advertising
materials, customer
IX-3
<PAGE>
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. Section 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, 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
IX-4
<PAGE>
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.
(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
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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 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
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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
(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
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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 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
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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 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
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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:
(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
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<PAGE>
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:
(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,
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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, 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.
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<PAGE>
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 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
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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.
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
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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 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.
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<PAGE>
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 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,
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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 HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR
IX-18
<PAGE>
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 IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 30 AND EXECUTED BY EACH OF THE
PARTIES
IX-19
<PAGE>
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]
IX-20
<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:
IX-21
<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
<TABLE>
<CAPTION>
<S> <C>
Name of Grantor Assigned Agreements
</TABLE>
IX-23
<PAGE>
SCHEDULE 4(b)
TO
SECURITY AGREEMENT
Locations of Equipment and Inventory
<TABLE>
<CAPTION>
<S> <C>
Name of Grantor Locations of Equipment and Inventory
</TABLE>
IX-24
<PAGE>
SCHEDULE 4(d)
TO
SECURITY AGREEMENT
Office Locations
<TABLE>
<CAPTION>
<S> <C>
Name of Grantor Office Locations
</TABLE>
IX-25
<PAGE>
SCHEDULE 4(e)
TO
SECURITY AGREEMENT
Other Names
<TABLE>
<CAPTION>
<S> <C>
Name of Grantor Other Names
</TABLE>
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 July 1, 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 July 1, 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 UBS AG,
Stamford Branch, 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 Credit Agreement and the other Loan
Documents and all obligations
X-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. 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 have assigned and
granted the security interests and undertaken the obligations contemplated by
this Agreement.
X-2
<PAGE>
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 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
X-3
<PAGE>
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
(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
X-4
<PAGE>
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
under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), of
all Secured Obligations with respect to such Grantor. "Secured Obligations"
means
(a) with respect to Company, all obligations and
X-5
<PAGE>
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.
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
X-6
<PAGE>
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".
(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
X-7
<PAGE>
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. 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
X-8
<PAGE>
(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 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,
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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;
(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,
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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 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
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<PAGE>
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 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
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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 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
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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 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
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<PAGE>
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.
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
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<PAGE>
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
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.
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<PAGE>
(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.
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
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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 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
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"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 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
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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.
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
X-20
<PAGE>
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 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.
X-21
<PAGE>
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 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-22
<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-23
<PAGE>
SCHEDULE I
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
<TABLE>
<CAPTION>
Registered United States Registration Registration
Owner Trademark Description Number Date
- ------------ --------------------- ------------ ------------
<S> <C> <C> <C>
</TABLE>
X-24
<PAGE>
SCHEDULE II
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
PATENTS ISSUED
--------------
<TABLE>
<CAPTION>
Patent No. Issue Date Invention
---------- ---------- ---------
<S> <C> <C>
</TABLE>
PATENTS PENDING
<TABLE>
<CAPTION>
Applicant's Name Date Filed Application No. Invention Inventor
- ---------------- ---------- -------------- --------- --------
<S> <C> <C> <C> <C>
</TABLE>
X-25
<PAGE>
SCHEDULE III
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
<TABLE>
<CAPTION>
Office Locations
Name of Grantor ---------------- Office Location
--------------- ---------------
<S> <C> <C>
</TABLE>
X-26
<PAGE>
SCHEDULE IV
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
<TABLE>
<CAPTION>
Other Names
Name of Grantor ----------- Other Names
--------------- -----------
<S> <C> <C>
</TABLE>
X-27
<PAGE>
SCHEDULE V
TO
VAN DE KAMP'S PATENT AND TRADEMARK SECURITY AGREEMENT
Filing Offices
--------------
X-28
<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 July 1, 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-29
<PAGE>
Trademark Registrations
<TABLE>
<CAPTION>
Registered Trademark Registration Registration
Owner Description Number Date Jurisdiction
- ---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
</TABLE>
Patents Issued
<TABLE>
<CAPTION>
Patent No. Issue Date Invention Inventor
- --------- ---------- --------- --------
<S> <C> <C> <C>
</TABLE>
Patents Pending
<TABLE>
<CAPTION>
Applicant's Name Date Filed Application No. Invention Inventor
- ---------------- ---------- -------------- --------- --------
<S> <C> <C> <C> <C>
</TABLE>
X-30
<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 July 1, 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
UBS AG, Stamford Branch, 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)): $___________
- -------------------------------------------------------------------------------
4. Maximum percentage permitted to be
- -------------------------------------------------------------------------------
XI-3
<PAGE>
- -------------------------------------------------------------------------------
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): $__________
- -------------------------------------------------------------------------------
3. Depreciation (to the extent deducted in
XI-5
<PAGE>
- -------------------------------------------------------------------------------
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)): $__________
- -------------------------------------------------------------------------------
16. Consolidated Cash Interest Expense: $__________
- -------------------------------------------------------------------------------
17. Interest Coverage Ratio ((F.13):(F.14)): _____:1.00
- -------------------------------------------------------------------------------
XI-6
<PAGE>
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
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]) $__________
XI-7
<PAGE>
- -------------------------------------------------------------------------------
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: $__________
- -------------------------------------------------------------------------------
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
XI-8
<PAGE>
- -------------------------------------------------------------------------------
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]
July 1, 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
- --------------------
- --------------------
UBS AG, Stamford Branch,
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 July 1,
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 UBS AG, Stamford Branch, 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 July 1, 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 UBS AG, Stamford Branch, 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.
On the basis of the foregoing, and in reliance thereon, and subject to
the limitations, qualifications and exceptions set
XII-2
<PAGE>
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 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).
XII-3
<PAGE>
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. Section 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 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
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<PAGE>
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 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
XII-5
<PAGE>
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 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
XII-6
<PAGE>
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.
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.
XII-7
<PAGE>
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]
July 1, 1998
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
National Westminster Bank PLC,
as Syndication Agent
- --------------------
- --------------------
UBS AG, Stamford Branch,
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 UBS AG, Stamford Branch, 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 July 1, 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.
In connection with this opinion, we have participated in various
conferences with representatives of Company and Agents
XIII-1
<PAGE>
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 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
XIII-2
<PAGE>
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]
July 1, 1998
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
National Westminster Bank PLC,
as Syndication Agent
[ADDRESS]
UBS AG, Stamford Branch,
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 July 1, 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
UBS AG, Stamford Branch, 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
perfected by filing under the Uniform Commercial Code of the State (the "Filing
Collateral"), which we understand will be
XIV-1
<PAGE>
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;
(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
XIV-2
<PAGE>
(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 July 1, 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
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<PAGE>
Settlement Date, the principal amount of any outstanding Loans included
within the Assigned Share, such payment to be made by 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.
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<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
XV-4
<PAGE>
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.
(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.
XV-5
<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 July 1, 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 UBS AG, Stamford Branch, 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
XV-6
<PAGE>
By:
---------------
Name:
Title:
XV-7
<PAGE>
ANNEX A
Assignor Payment Instructions:
- ------------------------------
- -------------------------
- -------------------------
- -------------------------
Attention:
---------------
Reference:
---------------
Assignor Notice Addresses:
- --------------------------
- -------------------------
- -------------------------
- -------------------------
Attention:
---------------
Reference:
---------------
XV-8
<PAGE>
ANNEX B
Assignee Payment Instructions:
- -----------------------------
- -------------------------
- -------------------------
- -------------------------
Attention:
---------------
Reference:
---------------
Assignee Notice Addresses:
- --------------------------
- -------------------------
- -------------------------
- -------------------------
Attention:
---------------
Reference:
---------------
XV-9
<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
XVI-1
<PAGE>
amount of the Senior Debt outstanding thereunder.
"Senior Credit Agreement" shall mean the Third Amended and Restated
Credit Agreement, dated as of July 1, 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
UBS AG, Stamford Branch, 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_].
XVI-2
<PAGE>
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.
(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
XVI-3
<PAGE>
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.
(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
XVI-4
<PAGE>
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 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
XVI-5
<PAGE>
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:
(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
XVI-6
<PAGE>
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 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
XVI-7
<PAGE>
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 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
XVI-8
<PAGE>
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
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
XVI-9
<PAGE>
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 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 July 1, 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 UBS AG, Stamford Branch, 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
July 1, 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 July 1, 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 UBS AG, Stamford Branch, 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. Section 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
XVIII-3
<PAGE>
rate paid by Secured Party to its customers for deposits of like amounts and
terms.
(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.
XVIII-4
<PAGE>
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.
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
XVIII-5
<PAGE>
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.
(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
XVIII-6
<PAGE>
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.
(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
XVIII-7
<PAGE>
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 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.
XVIII-8
<PAGE>
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.
[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 UBS AG, Stamford Branch, as Documentation Agent, have
entered into that certain Third Amended and Restated Credit Agreement dated as
of July 1, 1998 (said Third Amended and Restated Credit Agreement, as amended,
restated, supplemented or otherwise modified from time to time,
XIX-1
<PAGE>
being the "Credit Agreement") with [Company] [Aurora Foods Inc., a
Delaware corporation of which Company is a subsidiary ("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.
XIX-2
<PAGE>
3. Real Property Holder consents to the installation or placement of
the Collateral on the Premises, and Real Property 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
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<PAGE>
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.
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]
Erie, Pennsylvania
OPEN-END
MORTGAGE
from
AURORA FOODS INC., Mortgagor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Mortgagee
DATED AS OF JULY 1, 1998
After recording, please return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
XIX-1
<PAGE>
[Erie]
OPEN-END MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE, dated as of June ___, 1998 is made by AURORA FOODS
INC., a Delaware corporation ("Mortgagor"), whose address is 445 Hutchinson
Avenue, Columbus, Ohio 43235, to THE CHASE MANHATTAN BANK, a New York banking
corporation, whose address is 270 Park Avenue, New York, New York 10017, as
Agent (in such capacity, "Mortgagee") for itself and for the several banks and
financial institutions from time to time parties to that certain Third Amended
and Restated Credit Agreement dated as of the date hereof among Mortgagor, the
several banks and other financial institutions from time to time parties thereto
(collectively, the "Lenders"; individually, a "Lender"), National Westminster
Bank PLC, as Syndication Agent, UBS AG, Stamford Branch, as Documentation Agent
and Mortgagee (as the same may be amended, restated, supplemented, modified or
replaced from time to time, the "Credit Agreement"). References to this
"Mortgage" shall mean this instrument and any and all renewals, modifications,
amendments, supplements, extensions, consolidations, substitutions, spreaders
and replacements of this instrument. Unless otherwise defined herein,
capitalized terms shall have the meanings ascribed to them in the Credit
Agreement.
Background
WHEREAS, Mortgagor proposes to (i) issue equity of Mortgagor in an
initial public offering (the "Initial Public Offering"), (ii) issue a rule 144A
private placement or a public offering of at least $200,000,000 principal amount
of New Subordinated Notes and (iii) refinance certain of its existing
Indebtedness (collectively, the "Transactions");
WHEREAS, as of the date of the Initial Public Offering, Mortgagor will
be the survivor of mergers involving A Foods, Holdings, Mortgagor, VDK Holdings
and Van de Kamp's;
WHEREAS, Mortgagor has requested that Mortgagee and the Lenders enter
into the Credit Agreement to provide a portion of the funds required to (i)
refinance the existing Indebtedness under the Existing Credit Agreement, (ii)
reduce the VDK Subordinated Notes, (iii) pay the Transaction Costs and (iv)
provide for the working capital requirements and for general corporate purposes
of Mortgagor and its Subsidiaries;
WHEREAS, Mortgagor is the fee owner of the parcel(s) of real property
together with the improvements located thereon (the "Improvements") described on
Schedule A attached hereto (the "Real Estate"); and
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<PAGE>
WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders
have agreed, among other things, to make the Term Loans, Revolving Loans and
Swing Line Loans to, and the Issuing Lender has agreed to issue the Letters of
Credit for the account of, Mortgagor on the condition (among others) that
Mortgagor grant to Mortgagee a first lien upon and perfected security interest
in, among other things, all estate, right, title and interest of the Mortgagor
in and to the Real Estate pursuant to the terms hereof;
NOW THEREFORE, in consideration of the premises and for the sum of Ten
Dollars ($10.00), the receipt and sufficiency of which is hereby acknowledged,
Mortgagor hereby agrees as follows:
Granting Clauses
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure:
(a) the repayment of principal of and interest on (including, without
limitation, accruing at the then applicable rate provided in the Credit
Agreement after maturity of the Loans and reimbursement obligations under
the Letters of Credit and interest accruing at the then applicable rate
provided in the Credit Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to any Loan Party, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) the
Loans and all other obligations (including the reimbursement Obligations
under the Letters of Credit) and liabilities of Mortgagor to Mortgagee, the
Issuing Lender and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, the
Notes, the Loans, the Letters of Credit, the other Loan Documents, any
Interest Rate Agreement entered into by Mortgagor with any Lender, any cash
management services agreement entered into by Mortgagor with any Lender or
any Affiliate of any Lender, or any other document made, delivered or given
in connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all reasonable fees, charges and
disbursements of counsel to the Agent, the Issuing Lender or any Lender
that are required to be paid by any Loan Party pursuant to the Credit
Agreement, any other Loan Document or any such Interest Rate Agreement or
cash management services agreement entered into by Mortgagor with any
Lender or any Affiliate of any Lender) (the items set forth above being
referred to collectively as the "Indebtedness"); and
(b) the performance of all covenants, agreements, obligations and
liabilities of Mortgagor (the "Obligations")
XX-3
<PAGE>
under or pursuant to the provisions of the Credit Agreement, the Notes,
the Loans, the Letters of Credit, this Mortgage, any other document
securing payment of the Indebtedness (the "Security Documents"), any
other Loan Document or any such Interest Rate Agreement or cash management
services agreement entered into by Mortgagor with any Lender or any
Affiliate of any Lender and any amendments, supplements, extensions,
renewals, restatements, replacements or modifications of any of the
foregoing (the Credit Agreement, the Notes, the Loans, the Letters of
Credit, the applications for Letters of Credit, this Mortgage and all
other documents and instruments from time to time evidencing, securing
or guaranteeing the payment of the Indebtedness or the performance of the
Obligations, as any of the same may be amended, supplemented, extended,
renewed, restated, replaced or modified from time to time, are
collectively referred to as the "Loan Documents"); and
MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND
HEREBY MORTGAGES, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(C) all right, title and interest of Mortgagor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights, development
rights, air rights, mineral rights, oil and gas rights and all estates,
rights, titles, interests, privileges, licenses, tenements, hereditaments
and appurtenances belonging, relating or appertaining to the Real Estate,
and any reversions, remainders, rents, issues, profits and revenue thereof
and all land lying in the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances and
additions thereto and substitutions or replacements thereof (together with,
in each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Mortgagor and now or subsequently
attached to, or contained in or used in any way in connection with any
operation or letting of the Real Estate, including but without limiting the
generality of the foregoing, all screens, awnings, shades, blinds,
curtains, draperies, artwork, carpets, rugs, storm doors and windows,
furniture and furnishings, heating, electrical, and mechanical equipment,
lighting, switchboards, plumbing, ventilating, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window cleaning
apparatus),
XX-4
<PAGE>
telephones, communication systems (including satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the foregoing
in this paragraph (D) being referred to as the "Equipment");
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to, the
Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or constructed, assembled or placed by Mortgagor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials owned by the Mortgagor and to be incorporated in or on
the Real Estate whether stored at the Real Estate or offsite, and, in each
such case, without any further mortgage, conveyance, assignment or other
act by Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "Leases"), and all rights of Mortgagor in respect of cash and
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other benefits
arising from the use and enjoyment of the Mortgaged Property (as defined
below) (collectively, the "Rents");
(G) all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the ownership and
operation of the Real Estate or the Equipment or any part thereof; all
general intangibles related to the ownership and operation of the
Improvements now existing or hereafter arising;
(H) all unearned premiums under insurance policies now or
subsequently obtained by Mortgagor relating to the Real Estate or Equipment
and Mortgagor's interest in and to all proceeds of any such insurance
policies (including title insurance policies) including the right to
collect and receive such proceeds, subject to the provisions relating to
insurance generally set forth below; and all awards and other compensation,
including the interest payable thereon and the right to collect and receive
the same, made to the present or any subsequent owner of the Real Estate or
Equipment for the taking by eminent domain, condemnation or otherwise, of
all or
XX-5
<PAGE>
any part of the Real Estate or any easement or other right therein;
(I) all right, title and interest of Mortgagor in and to (i) all
contracts from time to time executed by Mortgagor or any manager or agent
on its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment (collectively, the "Contracts"), (ii)
all consents, licenses, building permits, certificates of occupancy and
other governmental approvals relating to construction, completion,
occupancy, use or operation of the Real Estate or any part thereof
(collectively, the "Permits") and (iii) all drawings, plans, specifications
and similar or related items relating to the Real Estate (collectively, the
"Plans");
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Mortgagee as provided in
this Mortgage; all capital, operating, reserve or similar accounts held by
or on behalf of Mortgagor and related to the ownership and operation of the
Mortgaged Property, whether now existing or hereafter arising and all
monies held in any of the foregoing accounts and any certificates or
instruments related to or evidencing such accounts;
(K) all accounts and revenues arising from the operation of the
rental Improvements including, without limitation, (i) any right to payment
now existing or hereafter arising for rental of hotel rooms or other space
or for goods sold or leased or for services rendered, whether or not yet
earned by performance, arising from the operation of the Improvements or
any other facility on the Mortgaged Property and (ii) all rights to payment
from any consumer credit-charge card organization or entity including,
without limitation, payments arising from the use of the American Express
Card, the Visa Card, the Carte Blanche Card, the Mastercard or any other
credit card, including those now existing or hereafter created,
substitutions therefor, proceeds thereof (whether cash or non-cash, movable
or immovable, tangible or intangible) received upon the sale, exchange,
transfer, collection or other disposition or substitution thereof and any
and all of the foregoing and proceeds therefrom; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Mortgagor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "Premises", and
those described
XX-6
<PAGE>
in the foregoing clauses (A) through (L) are collectively referred to as the
"Mortgaged Property").
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged unto Mortgagee, its successors and assigns for the
uses and purposes set forth, until the Indebtedness is fully paid and the
Obligations fully performed or otherwise discharged.
Terms and Conditions
Mortgagor further represents, warrants, covenants and agrees with
Mortgagee as follows:
0.1 Warranty of Title. Mortgagor warrants that Mortgagor has good
title to the Real Estate in fee simple and good title to the rest of the
Mortgaged Property, subject only to the matters that are set forth in Schedule B
of the title insurance policy or policies being issued to Mortgagee to insure
the lien of this Mortgage (the "Permitted Exceptions") or any Permitted Liens
under the Loan Documents and Mortgagor shall warrant, defend and preserve such
title and the lien of the Mortgage thereon against all claims of all persons and
entities. Mortgagor further warrants that it has the right to mortgage the
Mortgaged Property.
0.2 Payment of Indebtedness. Mortgagor shall pay the Indebtedness at
the times and places and in the manner specified in the Credit Agreement and
shall perform all the Obligations as required under the Loan Documents.
0.3 Requirements.
(a) Mortgagor shall promptly comply with, or cause to be complied
with, and conform to all present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, rules, regulations and requirements applicable to
the Mortgaged Property, and irrespective of the nature of the work to be done,
of each of the United States of America, any State and any municipality, local
government or other political subdivision thereof and any agency, department,
bureau, board, commission or other instrumentality of any of them, now existing
or subsequently created (collectively, "Governmental Authority") which has
jurisdiction over the Mortgaged Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property. All present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, rules, regulations and requirements of every
Governmental Authority applicable to Mortgagor or to any of the Mortgaged
Property and all covenants, restrictions, and conditions which now or later may
be applicable to any of the Mortgaged Property are collectively referred to as
the "Legal Requirements".
XX-7
<PAGE>
(b) From and after the date of this Mortgage, Mortgagor shall not by
act or omission permit any building or other improvement on any premises not
subject to the lien of this Mortgage to rely on the Premises or any part thereof
or any interest therein to fulfill any Legal Requirement, and Mortgagor hereby
assigns to Mortgagee any and all rights to give consent for all or any portion
of the Premises or any interest therein to be so used. Mortgagor shall not by
act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Mortgagor represents
that each parcel of the Real Estate constitutes a legally subdivided lot, in
compliance with all subdivision laws and similar Legal Requirements. Any act or
omission by Mortgagor which would result in a violation of any of the provisions
of this subsection shall be void.
0.4 Payment of Taxes and Other Impositions. (a) Promptly when due,
Mortgagor shall pay and discharge all taxes of every kind and nature (including,
without limitation, all real and personal property, income, franchise,
withholding, transfer, gains, profits and gross receipts taxes), all charges for
any easement or agreement maintained for the benefit of any of the Mortgaged
Property, all general and special assessments, levies, permits, inspection and
license fees, all water and sewer rents and charges and all other public charges
even if unforeseen or extraordinary, imposed upon or assessed against or which
may become a lien on any of the Mortgaged Property, or arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are collectively referred to as the
"Impositions"). Mortgagor shall within 10 business days after request by
Mortgagee deliver to Mortgagee (i) original or copies of receipted bills and
cancelled checks evidencing payment of such Imposition if it is a real estate
tax or other public charge and (ii) evidence reasonably acceptable to Mortgagee
showing the payment of any other such Imposition. If by law any Imposition, at
Mortgagor's option, may be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Mortgagor may elect to pay
such Imposition in such installments and shall be responsible for the payment of
such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Mortgagee
under this Mortgage or otherwise, without notice or demand to Mortgagor, to pay
any Imposition after the date such Imposition shall have become due, and to add
to the Indebtedness the amount so paid, together with interest from the time of
payment at the rate of interest set forth in Section 4.4 (c) of the Credit
Agreement (the "Default Rate"). Any sums paid by Mortgagee in discharge of any
Impositions shall be (i) a lien on the Premises secured hereby prior to any
right or title to, interest in, or claim upon the Premises subordinate to the
lien of this Mortgage, and (ii) payable on demand by Mortgagor to Mortgagee
together with interest at the Default Rate as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to
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<PAGE>
receive any credit or credits toward the satisfaction of this Mortgage or on
any interest payable thereon for any taxes assessed against the Mortgaged
Property or any part thereof, and shall not claim any deduction from the
taxable value of the Mortgaged Property by reason of this Mortgage.
(d) Mortgagor shall have the right before any delinquency occurs to
contest or object in good faith to the amount or validity of any Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in any way as relieving, modifying, or extending Mortgagor's covenant to pay any
such Imposition at the time and in the manner provided in this Section unless
(i) Mortgagor has given prior written notice to Mortgagee of Mortgagor's intent
so to contest or object to an Imposition, (ii) Mortgagor shall demonstrate to
Mortgagee's satisfaction that the legal proceedings shall operate conclusively
to prevent the sale of the Mortgaged Property, or any part thereof, to satisfy
such Imposition prior to final determination of such proceedings and (iii)
Mortgagor shall furnish a good and sufficient bond or surety or other security
as requested by and reasonably satisfactory to Mortgagee in the amount of the
Impositions which are being contested plus any interest and penalty which may be
imposed thereon and which could become a lien against the Real Estate or any
part of the Mortgaged Property.
(e) Upon written notice to Mortgagor, Mortgagee after an Event of
Default (as defined below) shall be entitled to require Mortgagor to pay monthly
in advance to Mortgagee the equivalent of 1/12th of the estimated annual
Impositions. Mortgagee shall keep such funds in a separate account, and
Mortgagor shall not be entitled to interest thereon. Mortgagee shall use such
funds to pay the Impositions as they become due and any funds remaining may be
applied by Mortgagee, in its sole discretion, to the Indebtedness in the reverse
order of Maturity.
0.5 Insurance. (a) Mortgagor shall maintain or cause to be
maintained on all of the Premises
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other
further risks and hazards as now are or subsequently may be covered by an
"all risk" policy or a fire policy covering "special" causes of loss. The
policy shall include building ordinance law endorsements and the policy
limits shall be automatically reinstated after each loss;
(ii) comprehensive general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language of such endorsement), covering all claims for personal injury,
bodily injury or death, or property damage occurring on, in or about the
Premises in an amount not less than $10,000,000 combined single limit with
respect to injury and property damage relating to any one occurrence plus
such excess limits as Mortgagee shall reasonably request from time to time;
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<PAGE>
(iii) when and to the extent required by Mortgagee, insurance against
loss or damage by any other risk commonly insured against by persons
occupying or using like properties in the locality or localities in which
the Real Estate is situated;
(iv) insurance against rent loss, extra expense or business
interruption (and/or soft costs, in the case of new construction), to the
extent applicable, in amounts reasonably satisfactory to Mortgagee, but not
less than one year's gross rent or gross income;
(v) during the course of any construction or repair of Improvements,
comprehensive general liability insurance under a policy including the
"broad form CGL endorsement" (or which incorporates the language of such
endorsement), (including coverage for elevators and escalators, if any).
The policy shall include coverage for independent contractors and completed
operations. The completed operations coverage shall stay in effect for two
years after construction of any Improvements has been completed. The
policy shall provide coverage on an occurrence basis against claims for
personal injury, including, without limitation, bodily injury, death or
property damage occurring on, in or about the Premises and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate
minimum protection to a limit of not less than that reasonably required by
Mortgagee with respect to personal injury, bodily injury or death to any
one or more persons or damage to property;
(vi) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Mortgagor (or Mortgagor's
contractors) engaged on or with respect to the Premises in such amounts as
are required by law;
(vii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical loss," including collapse, water damage,
flood and earthquake and transit coverage, during construction or repairs
of the Improvements, with deductible approved by Mortgagee, in nonreporting
form, covering the total value of work performed and equipment, supplies
and materials furnished (with an appropriate limit for soft costs in the
case of construction);
(viii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, and insurance against rent,
extra expense, business interruption and soft costs, if applicable, arising
from any such breakdown, in such amounts as are reasonably satisfactory to
Mortgagee but not less than the lesser of $1,000,000 or 10% of the value of
the Improvements;
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<PAGE>
(ix) if any portion of the Premises are located in an area identified
as a special flood hazard area by the Federal Emergency Management Agency
or other applicable agency, flood insurance in an amount reasonably
satisfactory to Mortgagee, but in no event less than the maximum limit of
coverage available under the National Flood Insurance Act of 1968, as
amended; and
(x) such other insurance in such amounts as Mortgagee may reasonably
request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30-days' prior written notice to Mortgagee, and (ii) with
respect to all property insurance, provide for deductibles not to exceed
$25,000, contain a "Replacement Cost Endorsement" without any deduction made for
depreciation and with no co-insurance penalty (or attaching an agreed amount
endorsement satisfactory to Mortgagee), with loss payable solely to Mortgagee
(modified, if necessary, to provide that proceeds in the amount of replacement
cost may be retained by Mortgagee without the obligation to rebuild) as its
interest may appear, without contribution, under a "standard" or "New York" type
mortgagee clause acceptable to Mortgagee and be written by insurance companies
having an A.M. Best Company, Inc. rating of A or higher and a financial size
category of not less than XII, or otherwise as approved by Mortgagee. Liability
insurance policies shall name Mortgagee as an additional insured and contain a
waiver of subrogation against Mortgagee; all such policies shall indemnify and
hold Mortgagee harmless from all liability claims occurring on, in or about the
Premises and the adjoining streets, sidewalks and passageways. The amounts of
each insurance policy and the form of each such policy shall at all times be
satisfactory to Mortgagee. Each policy shall expressly provide that any
proceeds which are payable to Mortgagee shall be paid by check payable to the
order of Mortgagee only and requiring the endorsement of Mortgagee only. If any
required insurance shall expire, be withdrawn, become void by breach of any
condition thereof by Mortgagor or by any lessee of any part of the Mortgaged
Property or become void or unsafe by reason of the failure or impairment of the
capital of any insurer, or if for any other reason whatsoever such insurance
shall become unsatisfactory to Mortgagee (based on the standards set forth
herein), Mortgagor shall immediately obtain new or additional insurance
satisfactory to Mortgagee (based on the standards set forth herein). Mortgagor
shall not take out any separate or additional insurance which is contributing in
the event of loss unless it is properly endorsed and otherwise satisfactory to
Mortgagee in all respects.
(b) Mortgagor shall deliver to Mortgagee an original of each
insurance policy required to be maintained, or a certificate of such insurance
reasonably acceptable to Mortgagee, together with a copy of the declaration page
for each such policy. Mortgagor shall (i) pay as they become due all premiums
for such
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<PAGE>
insurance, (ii) not later than 15 days prior to the expiration of each policy
to be furnished pursuant to the provisions of this Section, deliver a renewed
policy or policies, or duplicate original or originals thereof, marked
"premium paid," or accompanied by such other evidence of payment satisfactory
to Mortgagee with standard non-contributory mortgage clauses in favor of and
reasonably acceptable to Mortgagee. Upon request of Mortgagee, Mortgagor
shall cause its insurance underwriter or broker to certify to Mortgagee in
writing that all the requirements of this Mortgage governing insurance have
been satisfied.
(c) If Mortgagor is in default of its obligations to insure or
deliver any such prepaid policy or policies, then Mortgagee, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Mortgagor shall pay to Mortgagee on demand such
premium or premiums so paid by Mortgagee with interest from the time of payment
at the Default Rate and the same shall be deemed to be secured by this Mortgage
and shall be collectible in the same manner as the Indebtedness secured by this
Mortgage.
(d) Mortgagor shall increase the amount of property insurance
required to equal 100% replacement cost pursuant to the provisions of this
Section at the time of each renewal of each policy (but not later than 12 months
from the date of this Mortgage and each successive 12 month period to occur
thereafter) by using the F.W. Dodge Building Index to determine whether there
shall have been an increase in the replacement value since the most recent
adjustment and, if there shall have been such an increase, the amount of
insurance required shall be adjusted accordingly.
(e) Mortgagor promptly shall comply with and conform to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Mortgagor or to any of the Mortgaged Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged Property. Mortgagor shall not use or permit the
use of the Mortgaged Property in any manner which would permit any insurer to
cancel any insurance policy or void coverage required to be maintained by this
Mortgage.
(f) If the Mortgaged Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Mortgagor for any personal
injury, bodily injury or property damage incurred on or about the Premises,
Mortgagor shall give immediate notice thereof to Mortgagee. If the Mortgaged
Property is damaged by fire or other casualty and the cost to repair such damage
is less than the lesser of (i) 30% of the replacement cost of the Improvements
at the affected Real Estate site and (ii) $2,000,000, then provided that no
Event of Default shall have occurred and be continuing, Mortgagor shall have
the right to adjust such loss, and the insurance proceeds relating to such loss
may be paid over to Mortgagor; provided that Mortgagor shall, promptly after any
such damage, repair all such damage
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regardless of whether any insurance proceeds have been received or whether
such proceeds, if received, are sufficient to pay for the costs of repair.
If the Mortgaged Property is damaged by fire or other casualty, and the cost
to repair such damage exceeds the above limit, or if an Event of Default
shall have occurred and be continuing, then Mortgagor authorizes and empowers
Mortgagee, at Mortgagee's option and in Mortgagee's sole discretion, as
attorney-in-fact for Mortgagor, to make proof of loss, to adjust and
compromise any claim under any insurance policy, to appear in and prosecute
any action arising from any policy, to collect and receive insurance proceeds
after consultation with Mortgagor, and to deduct therefrom Mortgagee's
reasonable expenses incurred in the collection process. Each insurance
company concerned is hereby authorized and directed to make payment for such
loss directly to Mortgagee. Mortgagee shall have the right to require
Mortgagor to repair or restore the Mortgaged Property, and Mortgagor hereby
designates Mortgagee as its attorney-in-fact for the purpose of making any
election required or permitted under any insurance policy relating to repair
or restoration. The insurance proceeds or any part thereof received by
Mortgagee may be applied by Mortgagee toward reimbursement of all reasonable
costs and expenses of Mortgagee in collecting such proceeds, and the balance,
at Mortgagee's option in its sole and absolute discretion, to the principal
(to the installments in inverse order of maturity, if payable in
installments) and interest due or to become due under the Notes, the Credit
Agreement or the other Loan Documents, to fulfill any other Obligation of
Mortgagor, to the restoration or repair of the property damaged, or released
to Mortgagor. In the event Mortgagee elects to release such proceeds to
Mortgagor, Mortgagor shall be obligated to use such proceeds to restore or
repair the Mortgaged Property. Application by Mortgagee of any insurance
proceeds toward the last maturing installments of principal and interest due
or to become due on the Loans shall not excuse Mortgagor from making any
regularly scheduled payments due thereunder, nor shall such application
extend or reduce the amount of such payments.
(g) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force shall pass to the purchaser or grantee and Mortgagor hereby appoints
Mortgagee its attorney-in-fact, in Mortgagor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
(h) Upon written notice to Mortgagor, Mortgagee after an Event of
Default shall be entitled to require Mortgagor to pay monthly in advance to
Mortgagee the equivalent of 1/12th of the estimated annual premiums due on such
insurance. Mortgagee shall keep such funds in a separate account and Mortgagor
shall not be entitled to interest thereon. Mortgagee shall use such funds to
pay the annual premiums as they become due and any funds remaining may be
applied by Mortgagee, in its sole discretion, to the Indebtedness in reverse
order of Maturity.
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(i) Mortgagor may maintain insurance required under this Mortgage by
means of one or more blanket insurance policies maintained by Mortgagor;
provided, however, that (A) any such policy shall specify, or Mortgagor shall
furnish to Mortgagee a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Mortgaged Property and any sublimits in
such blanket policy applicable to the Premises and the other Mortgaged Property,
(B) each such blanket policy shall include an endorsement providing that, in the
event of a loss resulting from an insured peril, insurance proceeds shall be
allocated to the Mortgaged Property in an amount equal to the coverages required
to be maintained by Mortgagor as provided above and (C) the protection afforded
under any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property.
0.6 Restrictions on Liens and Encumbrances. Except for the lien of
this Mortgage, the Liens permitted under the Credit Agreement and the Permitted
Exceptions, Mortgagor shall not further mortgage, nor otherwise encumber the
Mortgaged Property nor create or suffer to exist any lien, charge or encumbrance
on the Mortgaged Property, or any part thereof, whether superior or subordinate
to the lien of this Mortgage and whether recourse or non-recourse.
0.7 Due on Sale and Other Transfer Restrictions. Except as may be
permitted in the Credit Agreement, Mortgagor shall not sell, transfer, convey or
assign all or any portion of, or any interest in, the Mortgaged Property.
0.8 Maintenance; No Alteration; Inspection; Utilities. (a) Mortgagor
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements.
Mortgagor shall repair, restore, replace or rebuild promptly any part of the
Premises which may be damaged or destroyed by any casualty whatsoever. The
Improvements shall not be demolished or materially altered, nor any material
additions built, without the prior written consent of Mortgagee, which, with
respect to alterations or additions that do not materially and adversely affect
the value of the Mortgaged Property or, in Mortgagee's discretion, interfere
with the ongoing operations of the business conducted on the Mortgaged Property,
will not be unreasonably withheld.
(b) Mortgagee and any persons authorized by Mortgagee shall have the
right to enter and inspect the Premises during normal business hours and the
right to inspect all work done, labor performed and materials furnished in and
about the Improvements and the right to inspect and make copies of all books,
contracts and records of Mortgagor relating to the ownership and operation of
the Mortgaged Property.
(c) Mortgagor shall pay or cause to be paid when due all utility
charges which are incurred for gas, electricity, water or sewer services
furnished to the Premises and all other
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<PAGE>
assessments or charges of a similar nature, whether public or private,
affecting the Premises or any portion thereof, whether or not such
assessments or charges are liens thereon.
0.9 Condemnation/Eminent Domain. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagor authorizes Mortgagee, at Mortgagee's
option and in Mortgagee's sole discretion, as attorney-in-fact for Mortgagor, to
commence, appear in and prosecute, in Mortgagee's or Mortgagor's name, any
action or proceeding relating to any condemnation of the Mortgaged Property, or
any portion thereof, and to settle or compromise any claim in connection with
such condemnation. If Mortgagee elects not to participate in such condemnation
proceeding, then Mortgagor shall, at its expense, diligently prosecute any such
proceeding and shall consult with Mortgagee, its attorneys and experts and
cooperate with them in any defense of any such proceedings. All awards and
proceeds of condemnation shall be assigned to Mortgagee to be applied in the
same manner as insurance proceeds, as provided above, and Mortgagor agrees to
execute any such assignments of all such awards as Mortgagee may request.
0.10 Restoration. If Mortgagee elects to release funds to Mortgagor
for restoration of any of the Mortgaged Property, then such restoration shall be
performed only in accordance with the following conditions:
(i) prior to the commencement of any restoration, the plans and
specifications for such restoration, and the budgeted costs, shall be
submitted to and approved by Mortgagee which approval shall not be
unreasonably withheld;
(ii) prior to making any advance of restoration funds, Mortgagee shall
be satisfied that the remaining restoration funds, together with
Mortgagor's own funds from insurance or otherwise, are sufficient to
complete the restoration and to pay all related expenses, including
interest on the Indebtedness and real estate taxes on the Premises, during
restoration;
(iii) at the time of any disbursement of the restoration funds, (A) no
Event of Default (as defined below) shall then have occurred, (B) no
mechanics' or materialmen's liens shall have been filed and remain
undischarged, except those to be discharged by the disbursement of the
requested restoration funds and (C) a satisfactory bring-down or
continuation of title insurance on the Premises shall be delivered to
Mortgagee;
(iv) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
Mortgagee's receipt of reasonably satisfactory evidence from Mortgagor (or
its architect or contractor) of the stage of completion and of performance
of
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<PAGE>
the work in a good and workmanlike manner and in accordance with the
contracts, plans and specifications acceptable to Mortgagee;
(v) with respect to each advance of restoration funds, Mortgagee may
retain 10% of the amount of such advance as a holdback until the
restoration is fully completed;
(vi) the restoration funds shall bear no interest and may be
commingled with Mortgagee's other funds;
(vii) Mortgagee may impose such other reasonable conditions as are
customarily imposed by construction lenders; and
(viii) any restoration funds remaining shall be retained by Mortgagee
and may be applied by Mortgagee, in its sole discretion, to the
Indebtedness in the inverse order of maturity.
0.11 Leases. (a) Mortgagor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Mortgaged Property
other than in favor of Mortgagee, or (ii) without the prior written consent of
Mortgagee, execute or permit to exist any Lease of any of the Mortgaged
Property.
(b) As to any Lease consented to by Mortgagee, Mortgagor shall:
(i) promptly perform all of the provisions of the Lease on the part
of the lessor thereunder to be performed;
(ii) promptly enforce all of the provisions of the Lease on the part
of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or
in any manner connected with the Lease or the obligations of Mortgagor as
lessor or of the lessee thereunder;
(iv) exercise, within 5 business days after a request by Mortgagee,
any right contained in the Lease to request from the lessee a certificate
with respect to the status thereof;
(v) simultaneously deliver to Mortgagee copies of any notices of
default which Mortgagor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Mortgagee a fully executed counterpart of
the Lease; and
(vii) promptly deliver to Mortgagee, upon Mortgagee's request, an
assignment of the Mortgagor's interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within 10 days after a
request by Mortgagee, a written statement, certified by Mortgagor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Mortgaged
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<PAGE>
Property, the terms of all Leases and the spaces occupied and rentals payable
thereunder, and a list of all Leases which are then in default, including the
nature and magnitude of the default; such statement shall be accompanied by
credit information with respect to the lessees and such other information as
Mortgagee may request.
(d) All Leases entered into by Mortgagor after the date hereof, if
any, and all rights of any lessees thereunder shall be subject and subordinate
in all respects to the lien and provisions of this Mortgage unless Mortgagee
shall otherwise elect in writing.
(e) As to any Lease now in existence or subsequently consented to by
Mortgagee, except to the extent expressly provided for in such Lease, Mortgagor
shall not accept a surrender or terminate, cancel, rescind, supplement, alter,
revise, modify or amend such Lease or permit any such action to be taken nor
shall Mortgagor accept the payment of rent more than thirty (30) days in advance
of its due date.
(f) Each Lease entered into after the date hereof shall provide that
any act or omission of Mortgagor that would give any lessee the right,
immediately or after lapse of a period of time, to cancel or terminate such
Lease, or to abate or offset against the payment of rent or to claim a partial
or total eviction, such lessee shall not exercise such right until it has given
written notice of such act or omission to Mortgagee and until a reasonable
period for remedying such act or omission shall have elapsed following the
giving of such notice without a remedy being effected.
(g) Each Lease entered into after the date hereof shall provide that
in the event of the enforcement by Mortgagee of any remedy under this Mortgage,
the lessee shall, if requested by Mortgagee or any other person succeeding to
the interest of Mortgagee as a result of such enforcement, attorn to Mortgagee
or to such person and shall recognize Mortgagee or such successor in interest as
lessor under the Lease without change in the provisions thereof; provided,
however, that Mortgagee or such successor in interest shall not be: (i) bound
by any payment of an installment of rent or additional rent which may have been
made more than 30 days before the due date of such installment; (ii) bound by
any amendment or modification to the Lease made without the consent of Mortgagee
or such successor in interest; (iii) liable for any previous act or omission of
Mortgagor (or its predecessors in interest); (iv) responsible for any monies
owing by Mortgagor to the credit of such lessee or subject to any credits,
offsets, claims, counterclaims, demands or defenses which the lessee may have
against Mortgagor (or its predecessors in interest); (v) bound by any covenant
to undertake or complete any construction of the Premises or any portion
thereof; or (vi) obligated to make any payment to such lessee other than any
security deposit actually delivered to Mortgagee or such successor in interest.
Each lessee or other occupant, upon request by Mortgagee or such successor in
interest, shall execute
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<PAGE>
and deliver an instrument or instruments confirming such attornment. To the
extent permitted by law, subsections (d)-(g) of this Section shall be
self-operative and any failure of any Lease to include such language shall
not impair the binding effect of such provisions on any lessee under such
Lease.
0.12 Further Assurances. To further assure Mortgagee's rights under
this Mortgage, Mortgagor agrees upon demand of Mortgagee to do any act or
execute any additional documents (including, but not limited to, security
agreements on any personalty included or to be included in the Mortgaged
Property and a separate assignment of each Lease in recordable form) as may
reasonably be required by Mortgagee to confirm the lien of this Mortgage and all
other rights or benefits conferred on Mortgagee.
0.13 Mortgagee's Right to Perform. If Mortgagor fails to perform any
of the covenants or agreements of Mortgagor within the time period provided
herein for such performance, Mortgagee, without waiving or releasing Mortgagor
from any obligation or default under this Mortgage, may, at any time (but shall
be under no obligation to) pay or perform the same, and the amount or cost
thereof, with interest at the Default Rate, shall immediately be due from
Mortgagor to Mortgagee and the same shall be secured by this Mortgage and shall
be a lien on the Mortgaged Property prior to any right, title to, interest in or
claim upon the Mortgaged Property attaching subsequent to the lien of this
Mortgage. No payment or advance of money by Mortgagee under this Section shall
be deemed or construed to cure Mortgagor's default or waive any right or remedy
of Mortgagee.
0.14 Events of Default. The occurrence of an Event of Default under
the Credit Agreement shall constitute an Event of Default hereunder.
0.15 Remedies.
(a) Upon the occurrence of any Event of Default, in addition to any
other rights and remedies Mortgagee may have pursuant to the Loan Documents, or
as provided by law, and without limitation, the Indebtedness and all other
amounts payable with respect to the Loans, the Letters of Credit, the Credit
Agreement, this Mortgage, the other Security Documents and the other Loan
Documents shall become due and payable as provided in the Credit Agreement.
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived. In addition,
upon the occurrence of any Event of Default, Mortgagee may immediately take such
action, without notice or demand (to the extent permitted by law), as it deems
advisable to protect and enforce its rights against Mortgagor and in and to the
Mortgaged Property, including, but not limited to, the following actions, each
of which may be pursued concurrently or otherwise, at such time and in such
manner as Mortgagee may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Mortgagee:
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<PAGE>
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or any
part of the Mortgaged Property, (B) institute and maintain an action on the
Notes, the Credit Agreement or any other Loan Document, (C) sell all or
part of the Mortgaged Property (Mortgagor expressly granting to Mortgagee
the power of sale), or (D) take such other action at law or in equity for
the enforcement of this Mortgage or any of the Loan Documents as the law
may allow. Mortgagee may proceed in any such action to final judgment and
execution thereon for all sums due hereunder, together with interest
thereon at the Default Rate and all costs of suit, including, without
limitation, reasonable attorneys' fees and disbursements. Interest at the
Default Rate shall be due on any judgment obtained by Mortgagee from the
date of judgment until actual payment is made of the full amount of the
judgment.
(ii) Mortgagee may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the Mortgaged
Property or any other collateral as security for the Indebtedness and
Obligations enter into and upon the Mortgaged Property and each and every
part thereof and exclude Mortgagor and its agents and employees therefrom
without liability for trespass, damage or otherwise (Mortgagor hereby
agreeing to surrender possession of the Mortgaged Property to Mortgagee
upon demand at any such time) and use, operate, manage, maintain and
control the Mortgaged Property and every part thereof. Following such
entry and taking of possession, Mortgagee shall be entitled, without
limitation, (x) to lease all or any part or parts of the Mortgaged Property
for such periods of time and upon such conditions as Mortgagee may, in its
discretion, deem proper, (y) to enforce, cancel or modify any Lease and (z)
generally to execute, do and perform any other act, deed, matter or thing
concerning the Mortgaged Property as Mortgagee shall deem appropriate as
fully as Mortgagor might do.
(b) The holder of this Mortgage, in any action to foreclose it, shall
be entitled to the appointment of a receiver. In case of a foreclosure sale,
the Real Estate may be sold, at Mortgagee's election, in one parcel or in more
than one parcel and Mortgagee is specifically empowered, (without being required
to do so, and in its sole and absolute discretion) to cause successive sales of
portions of the Mortgaged Property to be held.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Mortgage, and notwithstanding to the
contrary any exculpatory or non-recourse language which may be contained herein,
Mortgagee shall be entitled to enjoin such breach and obtain specific
performance of any covenant, agreement, term or condition and Mortgagee shall
have the right to invoke any equitable right or remedy as though other remedies
were not provided for in this Mortgage.
0.16 Right of Mortgagee to Credit Sale. Upon the
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occurrence of any sale made under this Mortgage, whether made under the power
of sale or by virtue of judicial proceedings or of a judgment or decree of
foreclosure and sale, Mortgagee may bid for and acquire the Mortgaged
Property or any part thereof. In lieu of paying cash therefor, Mortgagee may
make settlement for the purchase price by crediting upon the Indebtedness or
other sums secured by this Mortgage the net sales price after deducting
therefrom the expenses of sale and the cost of the action and any other sums
which Mortgagee is authorized to deduct under this Mortgage. In such event,
this Mortgage, the Notes, the Credit Agreement, the other Loan Documents and
documents evidencing expenditures secured hereby may be presented to the
person or persons conducting the sale in order that the amount so used or
applied may be credited upon the Indebtedness as having been paid.
0.17 Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Mortgagor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Mortgaged Property. Any
such receiver or receivers shall have all the usual powers and duties of
receivers in like or similar cases and all the powers and duties of Mortgagee in
case of entry as provided in this Mortgage, including, without limitation and to
the extent permitted by law, the right to enter into leases of all or any part
of the Mortgaged Property, and shall continue as such and exercise all such
powers until the date of confirmation of sale of the Mortgaged Property unless
such receivership is sooner terminated.
0.18 Extension, Release, etc. (a) Without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Indebtedness,
Mortgagee may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed, at
any time at Mortgagee's option any parcel, portion or all of the Mortgaged
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Mortgage shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the lien of this Mortgage until the lien amount shall equal
the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the lien of this Mortgage or any liens,
rights, powers or remedies of
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Mortgagee hereunder, and such liens, rights, powers and remedies shall
continue unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage subject to the rights of any tenants of the Mortgaged Property. The
failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Indebtedness or
to foreclose the lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
0.19 Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code (the "Code")of the
State in which the Mortgaged Property is located. If an Event of Default shall
occur under this Mortgage, then in addition to having any other right or remedy
available at law or in equity, Mortgagee shall have the option of either (i)
proceeding under the Code and exercising such rights and remedies as may be
provided to a secured party by the Code with respect to all or any portion of
the Mortgaged Property which is personal property (including, without
limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Mortgaged Property in accordance with
Mortgagee's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Mortgagee
shall elect to proceed under the Code, then five business days' notice of sale
of the personal property shall be deemed reasonable notice and the reasonable
expenses of retaking, holding, preparing for sale, selling and the like incurred
by Mortgagee shall include, but not be limited to, reasonable attorneys' fees
and legal expenses. At Mortgagee's request, Mortgagor shall assemble the
personal property and make it available to Mortgagee at a place designated by
Mortgagee which is reasonably convenient to both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage
upon recording or registration in the real estate records of the proper office
shall constitute a financing statement filed as a "fixture filing" within the
meaning of Sections 9-313 and 9-402 of the Code; (iii) Mortgagor is the record
owner of the Real Estate; and (iv) the addresses of Mortgagor and Mortgagee are
as set forth on the first page of this Mortgage.
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<PAGE>
(c) Mortgagor, upon request by Mortgagee from time to time, shall
execute, acknowledge and deliver to Mortgagee one or more separate security
agreements, in form satisfactory to Mortgagee, covering all or any part of the
Mortgaged Property and will further execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Mortgagee may
reasonably request in order to perfect, preserve, maintain, continue or extend
the security interest under and the priority of this Mortgage and such security
instrument. Mortgagor further agrees to pay to Mortgagee on demand all
reasonable costs and expenses incurred by Mortgagee in connection with the
preparation, execution, recording, filing and re-filing of any such document and
all reasonable costs and expenses of any record searches for financing
statements Mortgagee shall reasonably require. Mortgagor shall from time to
time, on request of Mortgagee, deliver to Mortgagee an inventory in reasonable
detail of any of the Mortgaged Property which constitutes personal property. If
Mortgagor shall fail to furnish any financing or continuation statement required
hereunder within 10 business days after request by Mortgagee, then pursuant to
the provisions of the Code, Mortgagor hereby authorizes Mortgagee, without the
signature of Mortgagor, to execute and file any such financing and continuation
statements. The filing of any financing or continuation statements in the
records relating to personal property or chattels shall not be construed as in
any way impairing the right of Mortgagee to proceed against any personal
property encumbered by this Mortgage as real property, as set forth above.
0.20 Assignment of Rents. Mortgagor hereby assigns to Mortgagee the
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or any part thereof, and to apply the Rents on account of the
Indebtedness. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full, but Mortgagee
hereby waives the right to enter the Mortgaged Property for the purpose of
collecting the Rents and Mortgagor shall be entitled to collect, receive, use
and retain the Rents until the occurrence of an Event of Default under this
Mortgage; such right of Mortgagor to collect, receive, use and retain the Rents
may be revoked by Mortgagee upon the occurrence of any Event of Default under
this Mortgage by giving not less than five business days' written notice of such
revocation to Mortgagor; in the event such notice is given, Mortgagor shall pay
over to Mortgagee, or to any receiver appointed to collect the Rents, any lease
security deposits, and shall pay monthly in advance to Mortgagee, or to any such
receiver, the fair and reasonable rental value as determined by Mortgagee for
the use and occupancy of the Mortgaged Property or of such part thereof as may
be in the possession of Mortgagor or any affiliate of Mortgagor, and upon
default in any such payment Mortgagor and any such affiliate will vacate and
surrender the possession of the Mortgaged Property to
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Mortgagee or to such receiver, and in default thereof may be evicted by
summary proceedings or otherwise. Mortgagor shall not accept prepayments of
installments of Rent to become due for a period of more than one month in
advance (except for security deposits and estimated payments of percentage
rent, if any).
0.21 Trust Funds. All lease security deposits of the Real Estate
shall be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within 10 days after request by Mortgagee, Mortgagor shall furnish
Mortgagee satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Mortgagee, which statement shall be certified
by Mortgagor.
0.22 Additional Rights. The holder of any subordinate lien on the
Mortgaged Property shall have no right to terminate any Lease whether or not
such Lease is subordinate to this Mortgage nor shall any holder of any
subordinate lien join any tenant under any Lease in any action to foreclose the
lien or modify, interfere with, disturb or terminate the rights of any tenant
under any Lease. By recordation of this Mortgage all subordinate lienholders
are subject to and notified of this provision, and any action taken by any such
lienholder contrary to this provision shall be null and void. Upon the
occurrence of any Event of Default, Mortgagee may, in its sole discretion and
without regard to the adequacy of its security under this Mortgage, apply all or
any part of any amounts on deposit with Mortgagee under this Mortgage against
all or any part of the Indebtedness. Any such application shall not be
construed to cure or waive any Default or Event of Default or invalidate any act
taken by Mortgagee on account of such Default or Event of Default.
0.23 Changes in Method of Taxation. In the event of the passage after
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of mortgages or debts secured thereby for
federal, state or local purposes, or the manner of collection of any such taxes,
and imposing a tax, either directly or indirectly, on mortgages or debts secured
thereby, the holder of this Mortgage shall have the right to declare the
Indebtedness due on a date to be specified by not less than 30 business days'
written notice to be given to Mortgagor unless within such 30 business day
period Mortgagor shall assume as an Obligation hereunder the payment of any tax
so imposed until full payment of the Indebtedness and such assumption shall be
permitted by law.
0.24 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been sufficiently given or served when served
in the manner set forth in Section 10.8 of the Credit Agreement.
0.25 No Oral Modification. This Mortgage may not be changed or
terminated orally. Any agreement made by Mortgagor
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<PAGE>
and Mortgagee after the date of this Mortgage relating to this Mortgage shall
be superior to the rights of the holder of any intervening or subordinate
lien or encumbrance.
0.26 Partial Invalidity. In the event any one or more of the
provisions contained in this Mortgage shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding anything to the contrary contained in this Mortgage
or in any provisions of the Indebtedness or Loan Documents, the obligations of
Mortgagor and of any other obligor under the Indebtedness or Loan Documents
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.
0.27 Mortgagor's Waiver of Rights. To the fullest extent permitted by
law, Mortgagor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Mortgaged Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Mortgaged Property from attachment, levy or sale under
execution or exemption from civil process. To the full extent Mortgagor may do
so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, exemption, extension or
redemption, or requiring foreclosure of this Mortgage before exercising any
other remedy granted hereunder and Mortgagor, for Mortgagor and its successors
and assigns, and for any and all persons ever claiming any interest in the
Mortgaged Property, to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the secured indebtedness and
marshalling in the event of foreclosure of the liens hereby created. Mortgagor
further waives, to the extent permitted by applicable law, all notices of any
Event of Default (except as may be provided for under the terms of this
Mortgage) or of Mortgagee's election to exercise or its actual exercise of any
right, remedy or recourse provided for under this Mortgage.
0.28 Remedies Not Exclusive. Mortgagee shall be entitled to enforce
payment of the Indebtedness and performance of the Obligations and to exercise
all rights and powers under this Mortgage or under any of the other Loan
Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness and Obligations may now or
hereafter be otherwise secured, whether by mortgage, security agreement, pledge,
lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its
enforcement, shall prejudice or in any manner affect Mortgagee's right to
realize upon or
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<PAGE>
enforce any other security now or hereafter held by Mortgagee, it being
agreed that Mortgagee shall be entitled to enforce this Mortgage and any
other security now or hereafter held by Mortgagee in such order and manner as
Mortgagee may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Mortgagee is intended to be exclusive of any
other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute. Every power or
remedy given by any of the Loan Documents to Mortgagee or to which it may
otherwise be entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Mortgagee. In no
event shall Mortgagee, in the exercise of the remedies provided in this
Mortgage (including, without limitation, in connection with the assignment of
Rents to Mortgagee, or the appointment of a receiver and the entry of such
receiver on to all or any part of the Mortgaged Property), be deemed a
"mortgagee in possession," and Mortgagee shall not in any way be made liable
for any act, either of commission or omission, in connection with the
exercise of such remedies.
0.29 Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold one or more additional mortgages, liens, deeds of trust or other security
(directly or indirectly) for the Indebtedness upon other property in the State
in which the Premises are located (whether or not such property is owned by
Mortgagor or by others) or (c) both the circumstances described in clauses (a)
and (b) shall be true, then to the fullest extent permitted by law, Mortgagee
may, at its election, commence or consolidate in a single foreclosure action all
foreclosure proceedings against all such collateral securing the Indebtedness
(including the Mortgaged Property), which action may be brought or consolidated
in the courts of any county in which any of such collateral is located.
Mortgagor acknowledges that the right to maintain a consolidated foreclosure
action is a specific inducement to Mortgagee to extend the Indebtedness, and
Mortgagor expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Mortgagor further agrees that if
Mortgagee shall be prosecuting one or more foreclosure or other proceedings
against a portion of the Mortgaged Property or against any collateral other than
the Mortgaged Property, which collateral directly or indirectly secures the
Indebtedness, or if Mortgagee shall have obtained a judgment of foreclosure and
sale or similar judgment against such collateral, then, whether or not such
proceedings are being maintained or judgments were obtained in or outside the
State in which the Premises are located, Mortgagee may commence or continue
foreclosure proceedings and exercise its other remedies granted in this Mortgage
against all or any part of the Mortgaged Property and Mortgagor waives any
objections to the commencement
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<PAGE>
or continuation of a foreclosure of this Mortgage or exercise of any other
remedies hereunder based on such other proceedings or judgments, and waives
any right to seek to dismiss, stay, remove, transfer or consolidate either
any action under this Mortgage or such other proceedings on such basis.
Neither the commencement nor continuation of proceedings to foreclose this
Mortgage nor the exercise of any other rights hereunder nor the recovery of
any judgment by Mortgagee in any such proceedings shall prejudice, limit or
preclude Mortgagee's right to commence or continue one or more foreclosure or
other proceedings or obtain a judgment against any other collateral (either
in or outside the State in which the Premises are located) which directly or
indirectly secures the Indebtedness, and Mortgagor expressly waives any
objections to the commencement of, continuation of, or entry of a judgment in
such other proceedings or exercise of any remedies in such proceedings based
upon any action or judgment connected to this Mortgage, and Mortgagor also
waives any right to seek to dismiss, stay, remove, transfer or consolidate
either such other proceedings or any action under this Mortgage on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Mortgagee may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties
to dispose of and administer all collateral securing the Indebtedness
(directly or indirectly) in the most economical and least time-consuming
manner.
0.30 Successors and Assigns. All covenants of Mortgagor contained in
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its successors and assigns, and no other person or entity shall have
standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or in part by Mortgagee at any time if in its sole
discretion it deems such waiver advisable. All such covenants of Mortgagor
shall run with the land and bind Mortgagor, the successors and assigns of
Mortgagor (and each of them) and all subsequent owners, encumbrancers and
tenants of the Mortgaged Property, and shall inure to the benefit of Mortgagee,
its successors and assigns. The word "Mortgagor" shall be construed as if it
read "Mortgagors" whenever the sense of this Mortgage so requires and if there
shall be more than one Mortgagor, the obligations of the Mortgagors shall be
joint and several.
0.31 No Waivers, etc. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the holder of any subordinate lien on the Mortgaged
Property, any
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<PAGE>
part of the security held for the obligations secured by this Mortgage
without, as to the remainder of the security, in anyway impairing or
affecting the lien of this Mortgage or the priority of such lien over any
subordinate lien.
0.32 Governing Law, etc. This Mortgage shall be governed by and
construed in accordance with the laws of the State in which the Premises are
located, except that Mortgagor expressly acknowledges that by its terms the
Notes and the Credit Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of law, and for purposes of consistency, Mortgagor agrees that in any in
personam proceeding related to this Mortgage the rights of the parties to this
Mortgage shall also be governed by and construed in accordance with the laws of
the State of New York governing contracts made and to be performed in that
State, without regard to principles of conflict of law.
0.33 Waiver of Trial by Jury. Mortgagor and Mortgagee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein. Mortgagor hereby waives all rights to interpose any counterclaim in
any suit brought by Mortgagee hereunder and all rights to have any such suit
consolidated with any separate suit, action or proceeding.
0.34 Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of
the Mortgaged Property or any part thereof or interest therein," the word
"Mortgagee" shall mean "Mortgagee or any successor Agent," the word "Notes"
shall mean "the Notes or any other evidence of indebtedness secured by this
Mortgage," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Mortgage are for
convenience or reference only and in no way limit or amplify the provisions
hereof.
0.35 Future Advances. This Mortgage is executed and delivered to
secure, among other things, future advances. It is understood and agreed that
this Mortgage secures present and future advances made for the benefit of
Mortgagor and that the lien of such future advances shall relate back to the
date of this Mortgage.
0.36 Open-End Mortgage. This Mortgage is an "Open-End Mortgage" as
set forth in 42 Pa. C.S.A. Section 8143 and secures
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<PAGE>
obligations up to the maximum amount of indebtedness outstanding at any one
time equal to $75,000,000, plus accrued and unpaid interest, including, but
not limited to, advances for the payment of taxes and municipal assessments,
maintenance charges, insurance premiums, costs incurred for the protection of
the Mortgaged Property or the lien of this Mortgage, expenses incurred by
Mortgagee by reason of default by Mortgagor under this Mortgage, the Credit
Agreement, the Notes, the Loans, the Letters of Credit or any other Loan
Documents and advances for construction, alteration or renovation on the
Mortgaged Property or for any other purposes, together with all other sums
due hereunder or secured hereby.
0.37 Receipt of Copy. Mortgagor acknowledges that it has received a
true copy of this Mortgage.
0.38 Release. If Mortgagor shall and does pay to Mortgagee the full
principal amount of the Indebtedness secured hereby, together with all interest
accrued thereon, and keeps all the other covenants and agreements contained
herein and in the Notes, the Credit Agreement and in the other Loan Documents,
all in the manner and at the times set forth herein or in the Notes, the Credit
Agreement and in the other Loan Documents, and if Mortgagor shall also pay all
reasonable satisfaction costs, including, but not limited to, reasonable
attorneys' fees and the cost of recording a satisfaction piece and, if
appropriate, a power-of-attorney to satisfy this Mortgage, then and from
thenceforth this Mortgage and the estate hereby created, granted, transferred
and assigned shall cease and become void.
This Mortgage has been duly executed by Mortgagor on the date first
above written.
ATTEST AURORA FOODS INC.
[corporate seal]
By:______________________ By:_____________________
The address of the within-named Mortgagee is:
The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017
For the Mortgagee
___________________________
[Print Name]
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<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this, the _____ day of , 1998, before me, a Notary Public
in and for the State and County aforesaid, the undersigned officer, personally
appeared ____________________, who acknowledged [her] [him]self to be the
[______________________] President of AURORA FOODS INC., a Delaware corporation
and that [s]he, as such officer, being authorized to do so, executed the
foregoing instrument for the purposes therein contained, by signing the name
of the corporation by [her][him]self as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
______________________________
Notary Public
[Notarial Seal]
My Commission Expires:
XX-29
<PAGE>
Schedule A
Description of the Premises
[Attach Legal Description of all parcels]
XX-30
<PAGE>
Exhibit 10.32
EXPENSE AGREEMENT
THIS EXPENSE AGREEMENT is made as of the 1st day of July, 1998, by and
between DARTFORD PARTNERSHIP L.L.C. ("Dartford"), a Delaware limited liability
company, and AURORA FOODS INC., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company and Dartford desire to set forth their understanding
with respect to the reimbursement by the Company of certain amounts that may be
incurred, paid or payable by Dartford with respect to corporate headquarters
expenses.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Term. The Company hereby agrees to pay to Dartford during the period
(the "Term") beginning on the date hereof (the "Effective Date") and, subject to
Section 3 hereof, ending on the Termination Date (as defined below), the amounts
set forth herein, as reimbursement for certain expenses incurred or to be
incurred by Dartford in providing corporate headquarters space for the Company
and in operating the Company's corporate headquarters office. "Termination
Date" shall mean the earlier to occur of (i) the second anniversary of the
Effective Date or (ii) the date on which Ian R. Wilson is no longer employed by
the Company as its Chief Executive Officer. Notwithstanding the foregoing, in
the event Ian R. Wilson is no longer employed by the Company as its Chief
Executive Officer but the Company requests that Dartford provide, and Dartford
agrees to provide, certain administrative or managerial services to the Company,
the Company and Dartford agree to negotiate the terms under which Dartford will
provide such services, with such terms to be mutually acceptable to the Company
and Dartford.
2. Payments to Dartford. Subject to the terms and conditions hereof,
during the Term the Company shall pay to Dartford the amount of Eight Hundred
Thousand Dollars ($800,000) per annum, payable in advance in quarterly
installments on the first day of each calendar quarter (January 1, April 1,
July 1 and October 1) in the amount of Two Hundred Thousand Dollars ($200,000)
per quarterly installment or pro rata amount for any period shorter than a
calendar quarter, with such installments to be paid by wire transfer in
immediately available funds to such bank account or person as Dartford may
direct the Company from time to time. The amounts payable to Dartford under
this Agreement are fixed and will not be increased or decreased in the event
that the actual expenses incurred by Dartford in operating the Company's
headquarters office are greater than or less than $800,000 per annum, as the
case may be.
<PAGE>
3. Early Termination. Prior to the expiration of the Term hereunder, the
Company shall have the right to terminate this Agreement by 30 days prior
written notice to Dartford; provided, that in the event of any such termination
by the Company, the Company shall pay to Dartford an amount (the "Early
Termination Amount") equal to the aggregate amount that would have been paid to
Dartford under Section 2 hereof for the remainder of the Term as if no early
termination by the Company had been made. The Early Termination Amount shall be
payable in full by the Company to Dartford on the effective date of any such
early termination by the Company.
4. Notices. All notices, requests, demands and other communications
hereunder must be in writing and shall be deemed to have been duly given if
delivered by overnight courier or by hand or if mailed first class, certified
mail, return receipt requested, postage and registry fees prepaid and addressed
as follows:
If to Dartford:
Dartford Partnership L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Ian R. Wilson
If to the Company:
Aurora Foods Inc.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Chief Executive Officer
Addresses may be changed by a notice in writing in accordance with the
provisions of this Section 4.
5. Miscellaneous. This Agreement shall be construed and enforced in
accordance with, and shall be governed by the laws of the State of New York,
without giving effect to the conflict of laws principles thereof. This
Agreement embodies the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and understandings relating to the
subject matter hereof including, without limitation, the Management Services
Agreement dated December 31, 1996 between Aurora Foods Inc. (f/k/a MBW Foods,
Inc.) and Dartford and the Amended and Restated Management Services Agreement
dated July 9, 1996 between Van de Kamp's, Inc. and Dartford, both of which
agreements have been terminated as of the Effective Date. This Agreement may
not be modified or amended, and no term or provision hereof may be waived or
discharged, except in a writing signed by the party against which such
modification, amendment, waiver or
2
<PAGE>
discharge is sought to be enforced. This Agreement cannot be assigned
(including without limitation by merger or otherwise by operation of law) by
either party hereto. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof. This
Agreement may be executed in several counterparts of original or facsimile
signature, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
DARTFORD PARTNERSHIP L.L.C.
By: /s/ Ray Chung
------------------------
Name: Ray Chung
Title: Member
AURORA FOODS INC.
By: /s/ James B. Ardrey
------------------------
Name: James B. Ardrey
Title: Vice Chairman
3
<PAGE>
Exhibit 10.33
ADVISORY AGREEMENT
This ADVISORY AGREEMENT is made as of the 8th day of April, 1998, by and
between AURORA/VDK LLC, a Delaware limited liability company ("Aurora/VDK LLC"),
and DARTFORD PARTNERSHIP L.L.C., a Delaware limited liability company (the
"Advisor"). For purposes of this Agreement, the "Company" shall mean Aurora/VDK
LLC, any successor thereto by reason of merger, transfer of substantially all of
its assets and liabilities or otherwise, and each of their direct and indirect
subsidiaries.
W I T N E S E T H:
WHEREAS, MBW Investors LLC ("MBW LLC"), a Delaware limited liability
company, and VDK Foods LLC ("VDK LLC"), a Delaware limited liability company,
have formed Aurora/VDK LLC (the "Contribution") pursuant to a Contribution
Agreement dated as of April 8, 1998 between MBW LLC and VDK LLC; and
WHEREAS, subject to the terms and conditions of this Agreement, the Company
desires to retain the Advisor, and the Advisor desires to be retained by the
Company, and the parties hereto desire to terminate the Amended and Restated
Management Services Agreement dated July 9, 1996 between the Advisor and Van de
Kamp's, Inc. and the Management Services Agreement dated December 31, 1996
between the Advisor and MBW Foods Inc. (n/k/a Aurora Foods Inc.).
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Terms of Agreement and Duties.
(a) Engagement. The Company hereby retains the Advisor to provide
advisory services to the Company on a non-exclusive basis for a period (the
"Term") beginning on the date hereof and ending on the earlier of (x) the second
anniversary of the closing of the initial public offering of Aurora Foods Inc.
("AFI"), a successor entity to Aurora/VDK LLC to be formed pursuant to a
contemplated reorganization of the Company and (y) the date on which the
employment of Ian R. Wilson as Chief Executive Officer of AFI pursuant to a
written Employment Agreement between AFI and such person(s) has terminated;
provided; that the Advisor may terminate this Agreement on not less than 60 days
prior written notice to the Company. In the event of any termination of this
Agreement (including upon expiration of the Term), (i) any accrued and unpaid
obligations of the Company owed under Sections 2 or 3 hereof, and (ii) the
Company's obligations under Section 4 hereof shall survive to the maximum extent
permitted by law.
<PAGE>
(b) Duties. During the Term, the Advisor will render such services
(the "Services") as the Company may reasonably request from time to time in
connection with actual and potential acquisitions by the Company or any of its
direct or indirect subsidiaries and the financing thereof.
2. Compensation of Advisor.
In the event that during the Term the Company or any direct or
indirect subsidiary thereof either (i) consummates an acquisition of the stock
or assets of another entity (including without limitation by merger or
consolidation), enters into a joint venture with another entity, or effects any
similar investment or business combination (each, an "Acquisition"), or
(ii) initiates any discussions or negotiations or undertakes a review of a
possible Acquisition that is ultimately consummated within one year following
termination of the Term, then in either case the Company shall pay to the
Advisor on the closing date of such Acquisition, in consideration of Services
rendered with respect thereto, a transaction fee (a "Transaction Fee") in an
amount equal to one-third-of-one percent (0.333%) of the Acquisition Price (as
defined below), by wire transfer of immediately available funds to an account
specified by the Advisor to the Company.
"Acquisition Price" means the sum of (A) the cash purchase price
actually received, plus (B) the fair market value of any equity securities
issued to or retained by the seller in connection with the Acquisition, plus
(C) the face value of any promissory note or other debt instrument issued to the
seller in connection with such Acquisition less any discounts thereto, plus
(D) the amount of any liabilities assumed by the Company or a direct or indirect
subsidiary thereof in connection with such Acquisition plus (E) the fair market
value of any other property paid as consideration in connection with the
Acquisition, including installment or deferred payments, if any, in which case
the Transaction Fee with respect to such installment or deferred payments shall
be paid after giving effect to the present value thereof. If such installment
or deferred payments are conditioned upon the achievement of certain
contingencies (other than the passage of time) such fees shall be payable in
respect of such installment or deferred payments as, when and if received by the
seller.
3. Contribution Fee. In connection with Services rendered with respect
to the Contribution, the Company hereby agrees to pay the Advisor a fee in the
amount of $1,500,000, together with reimbursement of any unreimbursed or unpaid
expenses incurred by the Advisor in connection with the Contribution, with such
fee and expenses to be payable by the Company on the earlier of (x) the closing
of an initial public offering of common stock by the Company (or any successor
to the Company by merger, consolidation or reorganization of the Company, by
incorporation or otherwise), or (y) September 30, 1998.
2
<PAGE>
4. Expenses; Indemnification.
(a) Expenses. Whether or not any of the transactions contemplated by
this Agreement or any other agreement shall be consummated, the Company agrees
to pay on demand all expenses incurred by the Advisor or any of its affiliates
in connection with this Agreement and such other transactions and all operations
hereunder, including but not limited to (i) the fees and disbursements of: (A)
counsel to the Advisor, (B) accountant to the Advisor, and (C) any other
consultants or advisors retained by the Advisor or either of the parties
identified in clauses (A) and (B) arising in connection therewith, and (ii) any
out-of-pocket expenses incurred by the Advisor in connection with the provision
of services hereunder or the attendance at any meeting of the board of directors
(or any committee thereof) of the Company or any of its affiliates.
(b) Indemnity and Liability. In consideration of the execution and
delivery of this Agreement by the Advisor, the Company hereby agrees to
indemnify and hold the Advisor and each of its members, partners, shareholders,
affiliates, directors, officers, fiduciaries, employees and agents and each of
the members, partners, shareholders, affiliates, directors, officers,
fiduciaries, employees and agents of each of the foregoing (collectively, the
"Indemnitees") free and harmless from and against any and all actual or
threatened claims, actions, causes of action, suits, losses, liabilities and
damages, and expenses in connection therewith, including without limitation
reasonable attorneys' fees and disbursements and other litigation costs
(collectively, the "Indemnified Liabilities"), incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to the execution,
delivery, performance, enforcement or existence of this Agreement or the
transactions contemplated hereby (including but not limited to any
indemnification obligations assumed or incurred by any Indemnitee to or on
behalf of the Company, or any of its accountants or other representatives,
agents or affiliates) except for any such Indemnified Liabilities arising
directly from such Indemnitees's gross negligence or willful misconduct, and if
and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. None of the Indemnitees shall be liable to
the Company or any of its affiliates for any act or omission suffered or taken
by such Indemnitee as a result of, or arising out of, or relating to the
execution, delivery, performance, enforcement or existence of this Agreement or
the transactions contemplated hereby that does not constitute gross negligence
or willful misconduct.
5. Assignment, etc. Except as provided below, neither party shall have
the right to assign this Agreement. The Advisor acknowledges that its services
under this Agreement are unique. Accordingly, any purported assignment by the
Advisor (other than as provided below) shall be void. Notwithstanding the
foregoing, the Advisor may assign all or part of its rights and obligations
hereunder to any affiliate of the Advisor which provides services similar to
those called for by this Agreement, in which event the Advisor shall be
3
<PAGE>
released of all of its rights, other than the rights in Section 4 hereof, and
obligations hereunder.
6. Amendments and Waivers. No amendment or waiver of any term, provision
or condition of this Agreement shall be effective, unless in writing and
executed by each of the Advisor and the Company. No waiver on any one occasion
shall extend to or effect or be construed as a waiver of any right or remedy on
any future occasion. No course of dealing of any person nor any delay or
omission in exercising any right or remedy shall constitute an amendment of this
Agreement or a waiver of any right or remedy of any party hereto.
7. Governing Law; Jurisdiction.
(a) Choice of Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the State of New York
without giving effect to any choice or conflict of law provision or rule that
would cause the application of the domestic substantive law of any other
jurisdiction.
(b) Consent to Jurisdiction. Each of the parties agrees that all
actions, suits or proceedings arising out of or based upon this Agreement or the
subject matter hereof shall be brought and maintained exclusively in the federal
and state courts of the State of New York located in the Borough of Manhattan in
New York City. Each of the parties hereto by execution hereof (i) hereby
irrevocably submits to the jurisdiction of the above-named courts for the
purpose of any action, suit or proceeding arising out of or based upon this
Agreement or the subject matter hereof and (ii) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that it
is immune from extraterritorial injunctive relief or other injunctive relief,
that its property is exempt or immune from attachment or execution, that any
such action, suit or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding brought or
maintained in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than one of the
above-named courts, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the above-named
courts, or that this Agreement or the subject matter hereof may not be enforced
in or by any of the above-named courts. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, at the
address specified in or pursuant to Section 9 is reasonably calculated to give
actual notice and waives and agrees not to assert by way of motion, as a defense
or otherwise, in any such action, suit or proceeding any claim that service of
process made in accordance with Section 9 does not constitute good and
sufficient service of process. The
4
<PAGE>
provisions of this Section 7(b) shall not restrict the ability of any party to
enforce in any court any judgment obtained in one of the above-named courts.
(c) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE.
Each of the parties hereto acknowledges that it has been informed by each other
party that the provisions of this Section 7(c) constitute a material inducement
upon which such party is relying and will rely in entering into this Agreement
and the transactions contemplated hereby. Any of the parties hereto may file an
original counterpart or a copy of this Agreement with any court as written
evidence of the consent of each of the parties hereto to the waiver of its right
to trial by jury.
8. Severability. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then such
unenforceable provision shall be deemed eliminated from this Agreement for the
purpose of such proceedings to the extent necessary to permit the remaining
provisions to be enforced. To the full extent, however, that the provisions of
any applicable law may be waived, they are hereby waived to the end that this
Agreement be deemed to be a valid and binding agreement enforceable in
accordance with its terms, and in the event that any provision hereof shall be
found to be invalid or unenforceable, such provision shall be construed by
limiting it so as to be valid and enforceable to the maximum extent consistent
with and possible under applicable law.
9. Notices. All notices, requests, demands and other communications
hereunder must be in writing and shall be deemed to have been duly given if (a)
delivered by hand, (b) sent (i) by overnight courier or (ii) by registered or
certified mail, return receipt requested, postage and registry fees prepaid, or
(c) sent by facsimile with a confirmation receipt, in each case addressed as
follows:
If to the Advisor:
Dartford Partnership L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, California 94104
Attention: Ian R. Wilson
5
<PAGE>
If to the Company:
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Chief Executive Officer
with a copy to:
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
Attention: Richard C. Dresdale
with a copy to:
McCown De Leeuw & Co., Inc.
101 East 52nd Street, 31st Floor
New York, NY 10022
Attention: Charles Ayres
Addresses may be changed by a notice in writing in accordance with the
provisions of this Section 9.
10. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof, including without
limitation (i) the Management Services Agreement dated December 31, 1996 between
the Advisor and MBW Foods Inc. (n/k/a Aurora Foods Inc.), and, (ii) the Amended
and Restated Management Services Agreement dated as of July 9, 1996 between Van
de Kamp's, Inc. and Advisor, and (iii) the New Compensation Agreement, dated as
of April 8, 1998, by and among the Company, the Advisor and certain other
parties signatory thereto.
11. Counterparts. This Agreement may be executed in one or more original
or facsimile counterparts, all of which together shall constitute one and the
same instrument.
6
<PAGE>
12. Successors. This Agreement shall be binding on the successors and
assigns of any party hereto (including without limitation AFI or any other
successor to the Company by reason of the merger, consolidation, or
reorganization (by incorporation or otherwise) of the Company).
7
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of this 8th day of April, 1998.
AURORA/VDK LLC
By: /s/ Ray Chung
-----------------------------------
Name: Ray Chung
Title: Executive Vice President
VDK HOLDINGS, INC.
By: /s/ Ray Chung
-----------------------------------
Name: Ray Chung
Title: Executive Vice President
AURORA FOODS HOLDINGS, INC.
By: /s/ Ray Chung
-----------------------------------
Name: Ray Chung
Title: Executive Vice President
VAN DE KAMP'S, INC.
By: /s/ Ray Chung
-----------------------------------
Name: Ray Chung
Title: Executive Vice President
AURORA FOODS INC.
By: /s/ Ray Chung
-----------------------------------
Name: Ray Chung
Title: Executive Vice President
DARTFORD PARTNERSHIP L.L.C.
By: /s/ James B. Ardrey
-----------------------------------
Name: James B. Ardrey
Title: Member
8
<PAGE>
Exhibit 10.34
ADVISORY AGREEMENT
This ADVISORY AGREEMENT is made as of the 8th day of April, 1998, by and
between AURORA/VDK LLC, a Delaware limited liability company ("Aurora/VDK LLC"),
and MDC MANAGEMENT COMPANY III, L.P., a California limited partnership (the
"Advisor"). For purposes of this Agreement, the "Company" shall mean Aurora/VDK
LLC, any successor thereto by reason of merger, transfer of substantially all of
its assets and liabilities or otherwise, and each of their direct and indirect
subsidiaries.
W I T N E S E T H:
WHEREAS, MBW Investors LLC ("MBW LLC"), a Delaware limited liability
company, and VDK Foods LLC ("VDK LLC"), a Delaware limited liability company,
have formed Aurora/VDK LLC (the "Contribution") pursuant to a Contribution
Agreement dated as of April 8, 1998 between MBW LLC and VDK LLC; and
WHEREAS, subject to the terms and conditions of this Agreement, the Company
desires to retain the Advisor, and the Advisor desires to be retained by the
Company, and the parties hereto desire to terminate the Advisory Services
Agreement dated December 31, 1996 between the Advisor and MBW Foods Inc. (n/k/a
Aurora Foods Inc.).
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Terms of Agreement and Duties.
(a) Engagement. The Company hereby retains the Advisor to provide
advisory services to the Company on a non-exclusive basis for a period (the
"Term") beginning on the date hereof and ending on the later of (x) the second
anniversary of the closing of the initial public offering (the "IPO") of Aurora
Foods Inc. ("AFI"), a successor entity to Aurora/VDK LLC to be formed pursuant
to a contemplated reorganization of the Company and (y) the date on which MDC
(as such term is defined in the Securityholders Agreement dated as of April 8,
1998 (the "Securityholders Agreement")) beneficially owns less than 50% of the
number of shares of common stock of the Public Company (as defined in the
Securityholders Agreement) beneficially owned by MDC as of the closing of the
IPO; provided; that the Advisor may terminate this Agreement on not less than 60
days prior written notice to the Company. In the event of any termination of
this Agreement (including upon expiration of the Term), (i) any accrued and
unpaid obligations of the Company owed under Sections 2 or 3 hereof, and (ii)
the Company's obligations under Section 4 hereof shall survive to the maximum
extent permitted by law.
<PAGE>
(b) Duties. During the Term, the Advisor will render such services
(the "Services") as the Company may reasonably request from time to time in
connection with actual and potential acquisitions by the Company or any of its
direct or indirect subsidiaries and the financing thereof.
2. Compensation of Advisor.
(a) In the event that during the Term the Company or any direct or
indirect subsidiary thereof either (i) consummates an acquisition of the stock
or assets of another entity (including without limitation by merger or
consolidation), enters into a joint venture with another entity, or effects any
similar investment or business combination (each, an "Acquisition"), or
(ii) initiates any discussions or negotiations or undertakes a review of a
possible Acquisition that is ultimately consummated within one year following
termination of the Term, then in either case the Company shall pay to the
Advisor on the closing date of such Acquisition, in consideration of Services
rendered with respect thereto, a transaction fee (a "Transaction Fee") in an
amount equal to one-third-of-one percent (0.333%) of the Acquisition Price (as
defined below), by wire transfer of immediately available funds to an account
specified by the Advisor to the Company.
"Acquisition Price" means the sum of (A) the cash purchase price
actually received, plus (B) the fair market value of any equity securities
issued to or retained by the seller in connection with the Acquisition, plus
(C) the face value of any promissory note or other debt instrument issued to the
seller in connection with such Acquisition less any discounts thereto, plus
(D) the amount of any liabilities assumed by the Company or a direct or indirect
subsidiary thereof in connection with such Acquisition plus (E) the fair market
value of any other property paid as consideration in connection with the
Acquisition, including installment or deferred payments, if any, in which case
the Transaction Fee with respect to such installment or deferred payments shall
be paid after giving effect to the present value thereof. If such installment
or deferred payments are conditioned upon the achievement of certain
contingencies (other than the passage of time) such fees shall be payable in
respect of such installment or deferred payments as, when and if received by the
seller.
(b) During the Term, the Company shall pay to the Advisor an annual
fee of $500,000 payable quarterly in advance commencing October 1, 1998;
provided, that no fee shall be payable under this Section 2(b) if the IPO closes
on or before September 30, 1998.
3. Contribution Fee. In connection with Services rendered with respect
to the Contribution, the Company hereby agrees to pay the Advisor a fee in the
amount of $1,500,000, together with reimbursement of any unreimbursed or unpaid
expenses incurred by the Advisor in connection with the Contribution, with such
fee and expenses to be payable by the Company on the earlier of (x) the closing
of an initial public offering of common stock by
2
<PAGE>
the Company (or any successor to the Company by merger, consolidation or
reorganization of the Company, by incorporation or otherwise), or (y) September
30, 1998.
4. Expenses; Indemnification.
(a) Expenses. Whether or not any of the transactions contemplated by
this Agreement or any other agreement shall be consummated, the Company agrees
to pay on demand all expenses incurred by the Advisor or any of its affiliates
in connection with this Agreement and such other transactions and all operations
hereunder, including but not limited to (i) the fees and disbursements of: (A)
counsel to the Advisor, (B) accountant to the Advisor, and (C) any other
consultants or advisors retained by the Advisor or either of the parties
identified in clauses (A) and (B) arising in connection therewith, and (ii) any
out-of-pocket expenses incurred by the Advisor in connection with the provision
of services hereunder or the attendance at any meeting of the board of directors
(or any committee thereof) of the Company or any of its affiliates.
(b) Indemnity and Liability. In consideration of the execution and
delivery of this Agreement by the Advisor, the Company hereby agrees to
indemnify and hold the Advisor and each of its members, partners, shareholders,
affiliates, directors, officers, fiduciaries, employees and agents and each of
the members, partners, shareholders, affiliates, directors, officers,
fiduciaries, employees and agents of each of the foregoing (collectively, the
"Indemnitees") free and harmless from and against any and all actual or
threatened claims, actions, causes of action, suits, losses, liabilities and
damages, and expenses in connection therewith, including without limitation
reasonable attorneys' fees and disbursements and other litigation costs
(collectively, the "Indemnified Liabilities"), incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to the execution,
delivery, performance, enforcement or existence of this Agreement or the
transactions contemplated hereby (including but not limited to any
indemnification obligations assumed or incurred by any Indemnitee to or on
behalf of the Company, or any of its accountants or other representatives,
agents or affiliates) except for any such Indemnified Liabilities arising
directly from such Indemnitees's gross negligence or willful misconduct, and if
and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. None of the Indemnitees shall be liable to
the Company or any of its affiliates for any act or omission suffered or taken
by such Indemnitee as a result of, or arising out of, or relating to the
execution, delivery, performance, enforcement or existence of this Agreement or
the transactions contemplated hereby that does not constitute gross negligence
or willful misconduct.
5. Assignment, etc. Except as provided below, neither party shall have
the right to assign this Agreement. The Advisor acknowledges that its services
under this Agreement are unique. Accordingly, any purported assignment by the
Advisor (other than as
3
<PAGE>
provided below) shall be void. Notwithstanding the foregoing, the Advisor may
assign all or part of its rights and obligations hereunder to any affiliate of
the Advisor which provides services similar to those called for by this
Agreement, in which event the Advisor shall be released of all of its rights,
other than the rights in Section 4 hereof, and obligations hereunder.
6. Amendments and Waivers. No amendment or waiver of any term, provision
or condition of this Agreement shall be effective, unless in writing and
executed by each of the Advisor and the Company. No waiver on any one occasion
shall extend to or effect or be construed as a waiver of any right or remedy on
any future occasion. No course of dealing of any person nor any delay or
omission in exercising any right or remedy shall constitute an amendment of this
Agreement or a waiver of any right or remedy of any party hereto.
7. Governing Law; Jurisdiction.
(a) Choice of Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the State of New York
without giving effect to any choice or conflict of law provision or rule that
would cause the application of the domestic substantive law of any other
jurisdiction.
(b) Consent to Jurisdiction. Each of the parties agrees that all
actions, suits or proceedings arising out of or based upon this Agreement or the
subject matter hereof shall be brought and maintained exclusively in the federal
and state courts of the State of New York located in the Borough of Manhattan in
New York City. Each of the parties hereto by execution hereof (i) hereby
irrevocably submits to the jurisdiction of the above-named courts for the
purpose of any action, suit or proceeding arising out of or based upon this
Agreement or the subject matter hereof and (ii) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that it
is immune from extraterritorial injunctive relief or other injunctive relief,
that its property is exempt or immune from attachment or execution, that any
such action, suit or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding brought or
maintained in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than one of the
above-named courts, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the above-named
courts, or that this Agreement or the subject matter hereof may not be enforced
in or by any of the above-named courts. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, at the
address specified in or pursuant to Section 9 is reasonably calculated
4
<PAGE>
to give actual notice and waives and agrees not to assert by way of motion, as a
defense or otherwise, in any such action, suit or proceeding any claim that
service of process made in accordance with Section 9 does not constitute good
and sufficient service of process. The provisions of this Section 7(b) shall
not restrict the ability of any party to enforce in any court any judgment
obtained in one of the above-named courts.
(c) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE.
Each of the parties hereto acknowledges that it has been informed by each other
party that the provisions of this Section 7(c) constitute a material inducement
upon which such party is relying and will rely in entering into this Agreement
and the transactions contemplated hereby. Any of the parties hereto may file an
original counterpart or a copy of this Agreement with any court as written
evidence of the consent of each of the parties hereto to the waiver of its right
to trial by jury.
8. Severability. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then such
unenforceable provision shall be deemed eliminated from this Agreement for the
purpose of such proceedings to the extent necessary to permit the remaining
provisions to be enforced. To the full extent, however, that the provisions of
any applicable law may be waived, they are hereby waived to the end that this
Agreement be deemed to be a valid and binding agreement enforceable in
accordance with its terms, and in the event that any provision hereof shall be
found to be invalid or unenforceable, such provision shall be construed by
limiting it so as to be valid and enforceable to the maximum extent consistent
with and possible under applicable law.
9. Notices. All notices, requests, demands and other communications
hereunder must be in writing and shall be deemed to have been duly given if (a)
delivered by hand, (b) sent (i) by overnight courier or (ii) by registered or
certified mail, return receipt
5
<PAGE>
requested, postage and registry fees prepaid, or (c) sent by facsimile with a
confirmation receipt, in each case addressed as follows:
If to the Advisor:
MDC Management Company III, L.P.
c/o McCown De Leeuw & Co., Inc.
101 East 52nd Street - 31st Floor
New York, NY 10022
Attention: Charles Ayres
If to the Company:
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Chief Executive Officer
with a copy to:
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
Attention: Richard C. Dresdale
with a copy to:
Dartford Partnership L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Ian R. Wilson
Addresses may be changed by a notice in writing in accordance with the
provisions of this Section 9.
6
<PAGE>
10. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof, including without
limitation (i) the Advisory Services Agreement dated December 31, 1996 between
the Advisor and MBW Foods Inc. (n/k/a Aurora Foods Inc.), and, (ii) the New
Compensation Agreement, dated as of April 8, 1998, by and among the Company, the
Advisor and certain other parties signatory thereto.
11. Counterparts. This Agreement may be executed in one or more original
or facsimile counterparts, all of which together shall constitute one and the
same instrument.
12. Successors. This Agreement shall be binding on the successors and
assigns of any party hereto (including without limitation AFI or any other
successor to the Company by reason of the merger, consolidation, or
reorganization (by incorporation or otherwise) of the Company).
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of this 8th day of April, 1998.
AURORA/VDK LLC
By: /s/ Ray Chung
--------------------------------
Name: Ray Chung
Title: Executive Vice President
VDK HOLDINGS, INC.
By: /s/ Ray Chung
--------------------------------
Name: Ray Chung
Title: Executive Vice President
AURORA FOODS HOLDINGS INC.
By: /s/ Ray Chung
--------------------------------
Name: Ray Chung
Title:Executive Vice President
7
<PAGE>
VAN DE KAMP'S, INC.
By: /s/ Ray Chung
--------------------------------
Name: Ray Chung
Title: Executive Vice President
AURORA FOODS INC.
By: /s/ Ray Chung
--------------------------------
Name: Ray Chung
Title: Executive Vice President
MDC MANAGEMENT COMPANY III, L.P.
By: /s/ Charles Ayres
-----------------------------
Name:
Title:
8
<PAGE>
Exhibit 10.35
Execution Copy
ADVISORY AGREEMENT
This Advisory Agreement (this "Agreement") is entered into as of the 8th
day of April 1998 by and between Aurora/VDK LLC, a Delaware limited liability
company ("Aurora/VDK"), and Fenway Partners, Inc., a Delaware corporation
("Fenway"). For purposes of this Agreement, the "Company" shall mean
Aurora/VDK, any successor thereto whether by reason of merger, transfer of
substantially all of the assets and liabilities or otherwise, and each of
their respective direct and indirect subsidiaries.
Whereas, Aurora/VDK has been formed for the purpose of acquiring by
way of contribution all of the outstanding capital stock of VDK Holdings
Inc., a Delaware corporation ("VDK"), and Aurora Foods Holdings Inc., a
Delaware corporation ("Aurora") (such transactions being referred to
herein as the "Contribution"), all on the terms and subject to the
conditions of that certain Contribution Agreement dated as of April 8,
1998 between VDK Foods LLC, a Delaware limited liability company ("VDK
LLC") and MBW Investors LLC, a Delaware limited liability company ("MBW
LLC");
Whereas, a fund (the "Fenway Fund") affiliated with Fenway has
provided equity financing (the "Equity Investments") to VDK LLC and MBW
LLC; and
Whereas, subject to the terms and conditions of this Agreement, the
Company desires to retain Fenway to provide certain advisory services to
the Company, and Fenway desires to provide such services and the parties
hereto desire to terminate the Agreement dated December 31, 1996 between
Fenway and MBW Foods Inc., a subsidiary of Aurora/VDK, relating to
services to be provided by Fenway (the "MBW Agreement");
Now, therefore, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Services. Fenway hereby agrees that, during the term of this Agreement
(the "Term"), it will:
a. provide the Company with advice in connection with the negotiation
and consummation of agreements, contracts, documents and instruments
necessary in respect of any acquisition, including without
limitation, those necessary to provide the Company with financing
from banks or other financial institutions or other entities on
terms and conditions satisfactory to the Company; and
<PAGE>
b. subject to Section 2 (c) below, and for as long as any fee
thereunder is payable, provide the Company with financial,
managerial and operational advice in connection with its operations,
including, without limitation:
i. advice with respect to the investment of funds; and
ii. advice with respect to the development and implementation of
strategies for improving the operating, marketing and financial
performance of the Company.
2. Payment of Fees. The Company hereby agrees to:
a. pay to Fenway a fee in the amount of $1,500,000, together with
reimbursement of Fenway's expenses incurred in connection with the
Contribution, such fees and expenses being payable by the Company on
the earlier to occur of (i) September 30, 1998 or (ii) the closing
of an initial public offering of common stock by the Company (the
"Initial Public Offering");
b. during the Term, allow Fenway to participate in the negotiation and
consummation of any acquisition transactions by the Company (each an
"Acquisition"), and pay to Fenway a fee in connection therewith
equal to 0.333% of the Acquisition Price (as defined below), such
fee to be due and payable for the foregoing services at the closing
of such transaction.
c. during the Term, pay to Fenway an annual fee of $500,000 payable
quarterly in advance commencing October 1, 1998; provided, however,
that such fees shall not be payable if the Initial Public Offering
occurs on or before September 30, 1998.
For purposes of this Agreement, the term "Acquisition Price" means the
sum of (A) the cash purchase price actually received, plus (B) the fair
market value of any equity securities issued to or retained by the seller in
connection with the Acquisition, plus (C) the face value of any promissory
note or other debt instrument issued to the seller in connection with such
Acquisition less any discounts thereto, plus (D) the amount of any liabilities
assumed by the Company or a direct or indirect subsidiary thereof in
connection with such Acquisition plus (E) the fair market value of any other
property paid as consideration in connection with the Acquisition, including
installment or deferred payments, if any, in which case the Transaction Fee
with respect to such installment or deferred payments shall be paid after
giving effect to the present value thereof. If such installment or deferred
payments are conditioned upon the achievement of certain contingencies (other
than the passage of time) such fees shall be payable in respect of such
installment or deferred payments as, when and if received by the seller.
2
<PAGE>
Each payment made pursuant to this Section 2 shall be paid by wire
transfer of immediately available federal funds to the account specified
on Schedule 1 hereto, or to such other account(s) as Fenway may specify
to the Company in writing prior to such payment.
3. Term. This Agreement will terminate upon the later of (a) two years
after the closing of the Initial Public Offering or (b) such time when
Fenway beneficially owns less than 50% of the number of shares of
common stock of the Public Company (as such term is defined in the
Aurora/VDK LLC Securityholders Agreement dated as of April 8, 1998 (the
"Securityholders Agreement")) beneficially owned by MDC (as defined in
the Securityholders Agreement) as of the closing of the Initial Public
Offering. This Agreement shall continue in full force and effect, unless
and until terminated by mutual consent of the parties, for so long as
Fenway (or any successor or permitted assign, as the case may be)
continues to carry on the business of providing services of the type
described in Section 1 above; provided, however, that (a) either party
may terminate this Agreement following a material breach of the terms of
this Agreement by the other party hereto and a failure to cure such
breach within 30 days following written notice thereof and (b) Fenway
may terminate this Agreement upon not less than 60 days written notice
to the Company; and provided, further that each of (x) the obligations
of the Company under Section 4 below, (y) any and all accrued and unpaid
obligations of the Company owed under Section 2 above and (z) the
provisions of Section 7 shall survive any termination of this Agreement
to the maximum extent permitted under applicable law.
4. Expenses; Indemnification
a. Expenses. Whether or not any of the transactions contemplated by
this Agreement or any other agreement shall be consummated, the
Company agrees to pay on demand all expenses incurred by Fenway or
any of its affiliates in connection with this Agreement and such
other transactions and all operations hereunder, including but not
limited to (i) the fees and disbursements of: (A) Ropes & Gray,
special counsel to Fenway and the Fenway Fund, (B) Ernst & Young,
accountant to Fenway and the Fenway Fund, and (C) any other
consultants or advisors retained by Fenway, the Fenway Fund or
either of the parties identified in clauses (A) and (B) arising in
connection therewith, and (ii) any out-of-pocket expenses incurred
by Fenway or any of its affiliates in connection with the provision
of services hereunder or the attendance at any meeting of the board
of directors (or any committee thereof) of the Company or any of its
affiliates.
b. Indemnity and Liability. In consideration of the execution and
delivery of this Agreement by Fenway and the provision of the Equity
Investments by the Fenway Fund, the Company thereby agrees to
indemnify, exonerate and hold
3
<PAGE>
each of the Fenway and the Fenway Fund, and each of their respective
partners, shareholders, affiliates, directors, officers, fiduciaries,
employees, and agents and each of the partners, shareholders, affiliates,
directors, officers, fiduciaries, employees and agents of each of the
foregoing (collectively, the "Indemnitees") free and harmless from and
against any and all actions, causes of action, suits, losses, liabilities
and damages, and expenses in connection therewith, including without
limitation reasonable attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as
a result of, or arising out of, or relating to the Equity Investments, the
execution, delivery, performance, enforcement or existence of this
Agreement or the transactions contemplated hereby (including but not
limited to any indemnification obligations assumed or incurred by any
Indemnitee to or on behalf of the Company, or any of its accountants or
other representatives, agents or affiliates) except for any such
Indemnified Liabilities arising on account of such Indemnitee's gross
negligence or willful misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. None of the Indemnitees shall be liable to the
Company or any of its affiliates for any act or omission suffered or taken
by such Indemnitee as a result of, or arising out of, or relating to the
Equity Investments, the execution, delivery, performance, enforcement or
existence of this Agreement or the transactions contemplated hereby that
does not constitute gross negligence or willful misconduct.
5. Assignment, etc. Except as provided below, neither party shall have the
right to assign this Agreement. Fenway acknowledges that its services
under this Agreement are unique. Accordingly, any purported assignment by
Fenway (other than as provided below) shall be void. Notwithstanding the
foregoing, (a) Fenway may assign all or part of its rights and obligations
hereunder to any affiliate of Fenway which provides services similar to
those called for by this Agreement, in which event Fenway shall be
released of all its rights, other than the rights in Section 4 hereof, and
obligations hereunder, and (b) the provisions hereof for the benefit of
the Fenway Fund shall inure to the benefit of their successors and assigns.
6. Amendments and Waivers. No amendment or waiver of any term, provision or
condition of this Agreement shall be effective, unless in writing and
executed by each of Fenway and the Company. No waiver on any one occasion
shall extend to or effect or be construed as a waiver of any right or remedy
on any future occasion. No course of dealing of any person nor any delay
or omission in exercising any right or remedy shall constitute an amendment
of this Agreement or a waiver of any right or remedy of any party hereto.
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<PAGE>
7. MISCELLANEOUS
a. Choice of Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the State of
New York without giving effect to any choice or conflict of law
provision or rule that would cause the application of the
domestic substantive laws of any other jurisdiction.
b. Consent to Jurisdiction. Each of the parties agrees that all
actions, suits or proceedings arising out of or based upon this
Agreement or the subject matter hereof shall be brought and
maintained exclusively in the federal and state courts of the
State of New York located in the Borough of Manhattan in New York
City. Each of the parties hereto by execution hereof (i) hereby
irrevocably submits to the jurisdiction of the above-named courts
for the purpose of any action, suit or proceeding arising out of
or based upon this Agreement or the subject matter hereof and
(ii) hereby waives to the extent not prohibited by applicable
law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding,, any claim
that it is not subject personally to the jurisdiction of the
above-named courts, that it is immune from extraterritorial
injunctive relief or other injunctive relief, that its property
is exempt or immune from attachment or execution, that any such
action, suit or proceeding may not be brought or maintained in
one of the above-named courts, that any such action, suit or
proceeding brought or maintained in one of the above-named courts
should be dismissed on grounds of FORUM NON COVENIENS, should be
transferred to any court other than one of the above-named
courts, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the
above-named courts, or that this Agreement or the subject matter
hereof may not be enforced in or by any of the above-named
courts. Each of the parties hereto hereby consents to service of
process in any such suit, action or proceeding in any manner
permitted by the laws of the State of New York, agrees that
service of process by registered or certified mail, return receipt
requested, at the address specified in or pursuant to Section 9
is reasonably calculated to give actual notice and waives and
agrees not to assert by way of motion, as a defense or otherwise,
in any such action, suit or proceeding any claim that service of
process made in accordance with Section 9 does not constitute
good and sufficient service of process. The provisions of this
Section7(b) shall not restrict the ability of any party to
enforce in any court any judgment obtained in one of the
above-named courts.
c. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS A
PLAINTIFF, DEFENDANT, OR OTHERWISE),, ANY RIGHT TO TRIAL BY JURY
IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF
ACTION, ACTION, SUIT OR
-5-
<PAGE>
PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE.
Each of the parties hereto acknowledges that it has been informed
by each other party that the provisions of this Section 7(c)
constitute a material inducement upon which such party is relying
and will rely in entering into this Agreement and the
transactions contemplated hereby. Any of the parties hereto may
file an original counterpart or a copy of this Agreement with any
court as written evidence of the consent of each of the parties
hereto to the waiver of its right to trial by jury.
8. MERGER/ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof
and supersedes any prior communication or agreement with respect
thereto. The parties hereto agree that as of the date hereof, the MBW
Agreement shall be terminated and shall be of no further force and
effect.
9. NOTICE. All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this
Agreement shall be in writing and shall be served upon such other party
and such other party's copied persons as specified below by personal
delivery to the address set forth for it below or to such other address
as such party shall have specified by notice to each other party or by
mailing a copy thereof by certified or registered mail, or by Federal
Express or any other reputable overnight courier service, postage
prepaid, with return receipt requested, addressed to such party and
copied persons at such addresses. In the case of service by personal
delivery, it shall be deemed complete on the first business day after
the date of actual delivery to such address. In case of service by mail
or by overnight courier, it shall be deemed complete, whether or not
received, on the third day after the date of mailing as shown by the
registered or certified mail receipt or courier service receipt.
Notwithstanding the foregoing, notice to any party or copied person of
change of address shall be deemed complete only upon actual receipt by
an officer or agent of such party and copied person.
If to the Company, to it at:
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
Attention: Chief Executive Officer
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<PAGE>
If to Fenway, to it at:
152 West 57th Street
New York, NY 10019
Attention: Richard C. Dresdale
With a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
10. Severability. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then
such unenforceable provision shall be deemed eliminated from this
Agreement for the purpose of such proceedings to the extent necessary to
permit the remaining provisions to be enforced. To the full extent,
however, that the provisions of any applicable law may be waived, they
are hereby waived to the end that this Agreement be deemed to be valid
and binding agreement enforceable in accordance with its terms, and in
the event that any provision hereof shall be found to be invalid or
unenforceable, such provision shall be construed by limiting it so as to
be valid and enforceable to the maximum extent consistent with and
possible under applicable law.
11. Counterparts. This Agreement may be executed in any number of
counterparts and by each of the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all
of which together shall constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
THE COMPANY:
AURORA/VDK LLC
BY
--------------------------------------
Title:
AURORA FOODS HOLDINGS INC.
BY
--------------------------------------
Title:
VDK HOLDINGS, INC.
BY
--------------------------------------
Title:
AURORA FOODS INC.
BY
--------------------------------------
Title:
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VAN DE KAMP'S, INC.
By
-------------------------
Title:
FENWAY: FENWAY PARTNERS, INC.
By
-------------------------
Title
9
<PAGE>
Schedule 1 to
Advisory Agreement
WIRE TRANSFER INSTRUCTIONS FOR
FENWAY PARTNERS, INC.
The Chase Manhattan Bank, N.A.
ABA no. 021 000 021
For further credit to
Fenway Partners, Inc.
Acct. no. 967-616085
Re: Aurora fee
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
THE COMPANY: AURORA/VDK LLC
By /s/ Ray Chung
---------------------
Title: Executive Vice President
AURORA FOODS HOLDING INC.
By /s/ Ray Chung
-------------------------------
Title: Excutive Vice President
VDK HOLDINGS, INC.
By /s/ Ray Chung
--------------------------------
Title: Executive Vice President
AURORA FOODS INC.
By /s/ Ray Chung
--------------------------------
Title: Executive Vice President
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<PAGE>
VAN DE KAMP'S, INC.
By /s/ Ray Chung
--------------------------------
Title: Executive Vice President
FENWAY: FENWAY PARTNERS, INC.
By /s/ Peter Lamm
-------------------------
Title
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<PAGE>
Exhibit 10.46
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and Ian R. Wilson, 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
2
<PAGE>
reasonable cause to believe his conduct was unlawful; provided, however,
that 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
3
<PAGE>
the Director if he is or was a director, officer, employee or agent of such
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
4
<PAGE>
settlement of such Claim. In connection with any determination by Board
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 Party 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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<PAGE>
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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<PAGE>
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 2F 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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<PAGE>
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:
Ian R. Wilson
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
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.
/s/ Ian R. Wilson /s/ Ray Chung
- --------------------------- -----------------------------
IAN R. WILSON Name: Ray Chung
Title: Executive Vice President
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Exhibit 10.49
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and James B. Ardrey, 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
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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
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reasonable cause to believe his conduct was unlawful; provided, however,
that 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
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the Director if he is or was a director, officer, employee or agent of such
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
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settlement of such Claim. In connection with any determination by Board
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 Party 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 2F 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:
James B. Ardrey
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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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.
/s/ James B. Ardrey /s/ Ray Chung
- --------------------------- -----------------------------
JAMES B. ARDREY Name: Ray Chung
Title: Executive Vice President
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Exhibit 10.50
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and Clive A. Apsey, 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
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reasonable cause to believe his conduct was unlawful; provided, however,
that 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
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the Director if he is or was a director, officer, employee or agent of such
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
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settlement of such Claim. In connection with any determination by Board
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 Party 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 2F 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:
Clive A. Apsey
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
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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.
/s/ Clive A. Apsey /s/ Ray Chung
- --------------------------- -----------------------------
CLIVE A. APSEY Name: Ray Chung
Title: Executive Vice President
9
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Exhibit 10.51
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and Charles Ayres, 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
2
<PAGE>
reasonable cause to believe his conduct was unlawful; provided, however,
that 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
3
<PAGE>
the Director if he is or was a director, officer, employee or agent of such
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
4
<PAGE>
settlement of such Claim. In connection with any determination by Board
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 Party 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.
5
<PAGE>
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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<PAGE>
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 2F 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
7
<PAGE>
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:
Charles Ayres
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
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.
/s/ Charles Ayres /s/ Ray Chung
- --------------------------- -----------------------------
CHARLES AYRES Name: Ray Chung
Title: Executive Vice President
9
<PAGE>
Exhibit 10.52
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and David E. DeLeeuw, 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
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reasonable cause to believe his conduct was unlawful; provided, however,
that 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
3
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the Director if he is or was a director, officer, employee or agent of such
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
4
<PAGE>
settlement of such Claim. In connection with any determination by Board
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 Party 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.
5
<PAGE>
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 2F 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:
David E DeLeeuw
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
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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.
/s/ David E. De Leeuw /s/ Ray Chung
- --------------------------- -------------------------------
DAVID E. DE LEEUW Name: Ray Chung
Title: Executive Vice President
9
<PAGE>
Exhibit 10.53
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and Charles J. Delaney, 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
2
<PAGE>
reasonable cause to believe his conduct was unlawful; provided, however,
that 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
3
<PAGE>
the Director if he is or was a director, officer, employee or agent of such
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
4
<PAGE>
settlement of such Claim. In connection with any determination by Board
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 Party 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.
5
<PAGE>
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.
6
<PAGE>
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 2F 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
7
<PAGE>
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:
Charles J. Delaney
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
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.
/s/ Charles J. Delaney /s/ Ray Chung
- --------------------------- -------------------------------
CHARLES J. DELANEY Name: Ray Chung
Title: Executive Vice President
9
<PAGE>
Exhibit 10.54
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and Richard C. Dresdale, 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
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reasonable cause to believe his conduct was unlawful; provided, however,
that 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
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the Director if he is or was a director, officer, employee or agent of such
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
4
<PAGE>
settlement of such Claim. In connection with any determination by Board
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 Party 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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<PAGE>
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 2F 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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<PAGE>
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:
Richard C. Dresdale
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
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.
/s/ Richard C. Dresdale /s/ Ray Chung
- --------------------------- -------------------------------
RICHARD C. DRESDALE Name: Ray Chung
Title: Executive Vice President
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<PAGE>
Exhibit 10.55
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and Andrea Geisser, 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
2
<PAGE>
reasonable cause to believe his conduct was unlawful; provided, however,
that 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
3
<PAGE>
the Director if he is or was a director, officer, employee or agent of such
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
4
<PAGE>
settlement of such Claim. In connection with any determination by Board
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 Party 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 2F 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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<PAGE>
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:
Andrea Geisser
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
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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.
/s/ Andrea Geisser /s/ Ray Chung
- --------------------------- -----------------------------
ANDREA GEISSER Name: Ray Chung
Title: Executive Vice President
9
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Exhibit 10.56
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and Peter Lamm, 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
2
<PAGE>
reasonable cause to believe his conduct was unlawful; provided, however,
that 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
3
<PAGE>
the Director if he is or was a director, officer, employee or agent of such
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
4
<PAGE>
settlement of such Claim. In connection with any determination by Board
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 Party 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.
5
<PAGE>
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.
6
<PAGE>
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 2F 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
7
<PAGE>
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:
Peter Lamm
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
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.
/s/ Peter Lamm /s/ Ray Chung
- --------------------------- -----------------------------
PETER LAMM Name: Ray Chung
Title: Executive Vice President
9
<PAGE>
Exhibit 10.57
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of July 1998, by and between Aurora Foods Inc., a Delaware
corporation (the "Company"), and Tyler T. Zachem, 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
2
<PAGE>
reasonable cause to believe his conduct was unlawful; provided, however,
that 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
3
<PAGE>
the Director if he is or was a director, officer, employee or agent of such
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
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settlement of such Claim. In connection with any determination by Board
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 Party 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 2F 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:
Tyler T. Zachem
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
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: Chief Executive Officer
or to such other person or address as the Company shall furnish to the Director
in writing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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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.
/s/ Tyler T. Zachem /s/ Ray Chung
- --------------------------- -------------------------------
TYLER T. ZACHEM Name: Ray Chung
Title: Executive Vice President
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Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of
Post-Effective Amendment No. 1 to this registration Statement on Form S-1
(No. 333-50681) of our report dated July 22, 1996, relating to the financial
satements of Van de Kamp's and Frozen Desserts 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/ PricewaterhouseCoopers LLP
San Francisco, California
July 10, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of
Post-Effective Amendment No. 1 to this Registration Statement on Form S-1
(No. 333-50681) of our report dated March 14, 1997, relating to the financial
satements of Mrs. Butterworth's business, a component of CONOPCO, Inc., which
appears in such Prospectus. We also consent to the reference to us under the
headings "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
July 10, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of
Post-Effective Amendment No. 1 to this Registration Statement on Form S-1
(No. 333-50681) of our report dated September 23, 1997, relating to the
financial satements 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/ PricewaterhouseCoopers LLP
San Francisco, California
July 10, 1998
<PAGE>
INDEPENDENT AUDITORS' CONSENT Exhibit 23.4
We consent to the use in this Post Effective Amendment No. 1 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
July 10, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF COOPERS AND LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 1 to
the 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 29, 1996, and December 30, 1995 and the statements of
operations for the years ended December 26, 1996, December 30, 1995 and
December 31, 1994. We also consent to the reference to our firm under the
caption "Experts."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
July 14, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of
Post-Effective Amendment No. 1 to this Registration Statement on Form S-1
(No. 333-50681) of our report dated March 18, 1998, relating to the financial
satements 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/ PricewaterhouseCoopers LLP
San Francisco, California
July 10, 1998
