<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-50681
----------------
AURORA FOODS INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 194-3303521
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
</TABLE>
1000 Union Station, Suite 300
St. Louis, MO 63103
(Address of Principal Executive Office, Including Zip Code)
(314) 241-0303
(Registrant's Telephone Number, Including Area Code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 Or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter Period that the
registrant was required to file such reports), and (2) has been subject to such
filing Requirements for the past 90 days. Yes [X] No [_]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the Latest practicable date.
<TABLE>
<CAPTION>
Shares
Outstanding
May 12, 2000
------------
<S> <C>
Common stock, $0.01 par value................................... 67,049,811
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
See pages 2 through 19.
1
<PAGE>
AURORA FOODS INC.
BALANCE SHEETS
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents........................... $ 659 $ 315
Accounts receivable (net of $1,663 and $1,311
allowance, respectively)........................... 103,826 96,332
Inventories ........................................ 118,950 123,967
Prepaid expenses and other assets................... 23,165 21,876
Current deferred tax assets......................... 17,338 17,338
---------- ----------
Total current assets.............................. 263,938 259,828
Property, plant and equipment, net.................. 255,059 257,443
Deferred tax asset.................................. 9,792 2,357
Goodwill and other intangible assets, net........... 1,294,358 1,294,995
Asset held for sale................................. 800 800
Other assets........................................ 36,017 35,693
---------- ----------
Total assets...................................... $1,859,964 $1,851,116
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Senior secured term debt............................ $ 565,812 $ 571,571
Senior secured revolving debt facility.............. 170,600 105,600
Senior subordinated notes........................... 402,000 402,049
Accounts payable.................................... 51,569 87,942
Accrued liabilities................................. 107,266 105,192
---------- ----------
Total current liabilities......................... 1,297,247 1,272,354
Other liabilities................................... 2,260 2,504
---------- ----------
Total liabilities................................. 1,299,507 1,274,858
---------- ----------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 25,000,000 shares
authorized; no shares issued or outstanding........ -- --
Common stock, $0.01 par value; 250,000,000 shares
authorized; 67,049,811 shares issued and
outstanding........................................ 670 670
Paid-in capital..................................... 648,254 648,254
Promissory notes.................................... (323) (323)
Accumulated deficit................................. (88,144) (72,343)
---------- ----------
Total stockholders' equity........................ 560,457 576,258
---------- ----------
Total liabilities and stockholders' equity........ $1,859,964 $1,851,116
========== ==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
AURORA FOODS INC.
STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March March 31,
31, 2000 1999
-------- -------------
(as restated)
<S> <C> <C>
Net sales.............................................. $322,748 $254,264
Cost of goods sold..................................... 138,402 104,703
-------- --------
Gross profit......................................... 184,346 149,561
-------- --------
Brokerage, distribution and marketing expenses:
Brokerage and distribution........................... 38,733 21,930
Trade promotions..................................... 77,745 69,508
Consumer marketing................................... 32,160 21,677
-------- --------
Total brokerage, distribution and marketing expenses... 148,638 113,115
Amortization of goodwill and other intangibles......... 10,751 8,872
Selling, general and administrative expenses........... 12,061 7,568
Other financial, legal and accounting expenses......... 9,601 --
Transition expenses.................................... 1,365 4,277
-------- --------
Total operating expenses............................... 182,416 133,832
-------- --------
Operating income..................................... 1,930 15,729
Interest expense, net.................................. 24,371 14,582
Amortization of deferred financing expense............. 708 396
Other bank and financing expenses...................... 87 52
-------- --------
Income (loss) before income taxes.................... (23,236) 699
Income tax expense (benefit)........................... (7,435) 217
-------- --------
Net income (loss).................................... $(15,801) $ 482
======== ========
Basic and diluted income (loss) per share.............. $ (0.24) $ 0.01
======== ========
Weighted average number of shares outstanding.......... 67,050 67,016
======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
AURORA FOODS INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common Stock
-------------
Additional
Paid-in Promissory Accumulated
Shares Amount Capital Notes Deficit Total
------ ------ ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1999................... 67,050 $670 $648,254 $(323) $(72,343) $576,258
Net loss................ -- -- -- -- (15,801) (15,801)
------ ---- -------- ----- -------- --------
Balance at March 31,
2000................... 67,050 $670 $648,254 $(323) $(88,144) $560,457
====== ==== ======== ===== ======== ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
AURORA FOODS INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March March 31,
31, 2000 1999
-------- -------------
(as restated)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $(15,801) $ 482
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization........................ 17,484 12,148
Deferred income taxes................................ (7,435) 217
Change in assets and liabilities, net of effects of
businesses acquired:
Increase in accounts receivable..................... (7,494) (2,647)
Decrease in inventories............................. 5,016 4,020
Increase in prepaid expenses and other assets....... (1,373) (6,550)
Increase (decrease) in accounts payable............. (36,572) 451
Decrease in accrued liabilities..................... (7,134) (9,058)
Decrease in other noncurrent liabilities............ (244) --
-------- --------
Net cash used in operating activities.............. (53,553) (937)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment............ (3,536) (6,404)
Changes to other non-current assets and liabilities... (1,640) (1,648)
Payment for acquisition of business................... (36) (15,280)
-------- --------
Net cash used in investing activities.............. (5,212) (23,332)
-------- --------
Cash flows from financing activities:
Proceeds from senior secured revolving and term
debt................................................ 65,000 29,150
Repayment of borrowings.............................. (5,759) (5,000)
Capital contributions, net of officer promissory
notes............................................... -- 17
Debt issuance and equity raising costs............... (132) --
-------- --------
Net cash provided by financing activities.......... 59,109 24,167
-------- --------
Increase (decrease) in cash and cash equivalents....... 344 (102)
Cash and cash equivalents, beginning of period......... 315 354
-------- --------
Cash and cash equivalents, end of period............... $ 659 $ 252
======== ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
AURORA FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
Restatements
Prior to the issuance of the Aurora Foods Inc. (the "Company") financial
statements as of and for the year ended December 31, 1999, it was determined
that the results reported in the Company's Form 10-K as of and for the year
ended December 31, 1998 as well as the interim results reported in the
Company's Forms 10-Q as of and for the periods ended September 30, 1998, March
31, 1999, June 30, 1999 and September 30, 1999 were misstated. Upon further
investigation, it was determined that liabilities that existed for certain
trade promotion and marketing activities and other expenses (primarily sales
returns and allowances, distribution and consumer marketing) were not properly
recognized as liabilities and that certain assets were overstated (primarily
accounts receivable, inventories and fixed assets). In addition, certain
activities were improperly recognized as sales. As a result, the financial
statements as of and for the year ended December 31, 1998 as well as the
quarterly financial data as of and for the interim periods ended September 30,
1998, March 31, 1999, June 30, 1999 and September 30, 1999 have been restated.
The restated financial statements as of and for the three months ended March
31, 1999, have been included in the condensed consolidated financial statements
included herein.
For the three months ended March 31, 1999, these misstatements primarily
understated trade promotions expense by $8.1 million, overstated net sales by
$6.8 million, overstated brokerage and distribution expense by $2.7 million and
understated cost of goods sold by $0.6 million. After adjusting for the
misstatements, the Company recalculated its income tax provision reducing
income tax expense by $4.9 million.
A summary of the effects of the restatement is set forth in Note 9.
The restatements are a result of an investigation conducted by a special
committee (the "Special Committee") formed by the Company's Board of Directors.
The Special Committee retained legal counsel, which retained an independent
accounting firm to assist in the investigation. The Board of Directors has
determined that the Special Committee's role in the investigation has been
concluded. All further matters related to this investigation will be addressed
by the Board of Directors. The Company has been incurring, and continues to
incur, charges in connection with investigating these matters. In addition, as
a result of the restatements, the Company was in default of a number of
provisions of its credit agreement and is in default under its senior
subordinated notes indentures (see Note 5). The Company has been incurring, and
continues to incur, financial, legal and accounting expenses, charges to obtain
waivers on its defaults and other charges related to amending its financing
facilities. These charges are expensed when incurred and reflected in the
Company's statements of operations.
Interim Financial Statements
The interim financial statements of the Company, included herein, have not
been audited by independent accountants. The statements include all
adjustments, such as normal recurring accruals, which management considers
necessary for a fair presentation of the financial position and operating
results of the Company for the periods presented. The statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in conformity
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The operating results for interim
periods are not necessarily indicative of results to be expected for an entire
year. Certain prior period amounts have been reclassified to conform to the
current period's presentation.
For further information, reference should be made to the financial
statements of the Company and notes thereto included in the annual report on
Form 10-K of Aurora Foods Inc. for the year ended December 31, 1999.
6
<PAGE>
The Company
The Company was incorporated in Delaware on June 19, 1998, as the successor
to Aurora Foods Holdings Inc. ("Holdings") and its subsidiary, AurFoods
Operating Co., Inc. (formerly known as Aurora Foods Inc.) ("AurFoods"), both of
which were incorporated in Delaware in December 1996. AurFoods was wholly-owned
by Holdings, which in turn was wholly-owned by MBW Investors LLC ("MBW LLC").
AurFoods was formed for the purpose of acquiring the Mrs. Butterworth's(R)
syrup business ("MBW") from Conopco, Inc., a subsidiary of Unilever United
States, Inc. ("Conopco" or the "Predecessor"). AurFoods subsequently acquired
the Log Cabin(R) syrup business ("LC") from Kraft Foods, Inc. ("Kraft") in July
1997 and the Duncan Hines(R) baking mix business ("DH") from The Procter &
Gamble Company ("P&G") in January 1998.
Van de Kamp's, Inc. ("VDK") was a wholly-owned subsidiary of VDK Holdings,
Inc., a Delaware corporation ("VDK Holdings"), and was incorporated in Delaware
in July 1995 for the purpose of acquiring the Van de Kamp's(R) frozen seafood
and frozen dessert businesses from The Pillsbury Company in September 1995. VDK
then acquired the Mrs. Paul's(R) frozen seafood business from the Campbell Soup
Company in May 1996 and the Aunt Jemima(R) frozen breakfast and Celeste(R)
frozen pizza businesses from Quaker Oats in July 1996. VDK Holdings was wholly-
owned by VDK Foods LLC ("VDK LLC"). On April 8, 1998, MBW LLC and VDK LLC
formed Aurora/VDK LLC ("New LLC"). MBW LLC contributed all of the capital stock
of Holdings and VDK LLC contributed all of the capital stock of VDK Holdings to
New LLC (the "Contribution").
On July 1, 1998, Holdings, AurFoods, VDK Holdings and VDK merged with and
into the Company, and the Company consummated an initial public offering of
12,909,372 shares of its Common Stock (the "IPO"). Concurrently with the IPO,
New LLC also sold 1,590,628 shares of the Company's Common Stock to the public
at a price of $21.00 per share. The sale of stock by New LLC and the IPO are
together herein referred to as the "Equity Offerings." Also, concurrently with
the IPO, the Company issued $200.0 million aggregate principal amount of 8.75%
senior subordinated notes due 2008 (the "New Notes") and borrowed
$225.0 million of senior secured term debt and $99.0 million out of a total of
$175.0 million of available senior secured revolving debt.
On April 1, 1999, the Company acquired 100% of the stock in Sea Coast Foods,
Inc. ("Seacoast") for a purchase price of $51.2 million, subject to adjustment
based on an "earn-out" clause, from Galando Investment Limited Partnership,
Carey-On Limited Partnership, Joseph A. Galando, Barbara J. Galando, Stanley J.
Carey and Mary K. Carey. Seacoast markets the line of Chef's Choice(R) frozen
skillet meals.
On November 1, 1999, the Company acquired all the assets and certain
liabilities of the Lender's Bagel business ("Lender's") for a purchase price of
$275.5 million from The Eggo Company, a subsidiary of the Kellogg Company
("Kellogg's"). Concurrently with the acquisition of Lender's, the Company
borrowed $275.0 million of senior secured term debt under its senior credit
facilities.
The Company has acquired premium, well recognized brands with strong brand
equity that have been undermarketed and undermanaged in recent years and have
become non-core businesses to their corporate parents. The Company's objective
is to renew the growth of its brands by giving them focus, strategic direction,
marketing resources and a dedicated sales and marketing organization. The
Company then sustains the growth of the brands with high levels of marketing
support directed towards consumer promotions, new products and new packaging.
Each of the Company's brands is a leading national brand with significant
market share and strong consumer awareness. The Company competes in two
segments of the food industry, dry grocery and frozen food, and sells its
products nationwide to supermarkets and other retail channels. The Company
sells its products through food brokers to wholesale and retail grocery
accounts. The products are distributed either directly to the customer or
through independent wholesalers. The Company also sells its syrup and frozen
food products in the foodservice distribution channel. Foodservice customers
include military bases, restaurant chains and business/industry.
7
<PAGE>
The company groups its brands into two general divisions: dry grocery
division and frozen food division. The dry grocery division includes Duncan
Hines(R) brand baking mix products and Mrs. Butterworth's(R) and Log Cabin(R)
brand syrup products. The frozen food division includes Van de Kamp's(R) and
Mrs. Paul's(R) frozen seafood products, Aunt Jemima(R) frozen breakfast
products, Celeste(R) frozen pizza products, Chef's Choice(R) frozen skillet
meals and Lender's(R) bagel products.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The policies utilized by the Company in the preparation of the consolidated
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 December 31. Certain prior year amounts
have been reclassified to conform with the current year's presentation.
Principles of Consolidation
The Consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. All significant intercompany transactions are
eliminated.
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 the Company's 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 three to thirty
years. Costs that improve an asset or extend its useful life are capitalized,
while repairs and maintenance costs are expensed as incurred.
Depreciable lives for major classes of assets are as follows:
<TABLE>
<S> <C>
Computers........................................................ 3-5 years
Furniture and fixtures........................................... 2-8 years
Machinery and equipment.......................................... 10-15 years
Buildings and improvements....................................... 20-30 years
</TABLE>
Goodwill and Other Intangible Assets
Goodwill and other intangible assets include goodwill, trademarks and
various identifiable intangible assets purchased by the Company. Goodwill,
which represents the excess of cost over the net tangible assets of acquired
businesses, is being amortized over forty years using the straight-line method.
Other intangible assets, which include the costs of trademarks and other
identifiable intangibles, are being amortized using the straight-line method
over periods ranging from five to forty years.
8
<PAGE>
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 March 31, 2000.
Other Assets
Other assets consist of deferred loan acquisition costs, systems software,
packaging design and plates, and other miscellaneous assets. Deferred loan
acquisition costs are being amortized using the effective interest method over
the terms of the respective debt.
Revenue Recognition
Revenue is recognized upon shipment of product and transfer of title to
customers. Net sales are reported after deducting returns and allowances.
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 its debt, approximate book
value at March 31, 2000. As of March 31, 2000, the Company's 8 3/4% senior
subordinated notes were trading at 35 with an effective yield of 30.9% and the
Company's 9 7/8% senior subordinated notes were trading at 38 with an effective
yield of 33.4%. In addition, as a result of the March 29, 2000 amendment to the
Company's senior secured debt agreement (see Note 5), the interest rates on the
Company's senior secured debt were adjusted, increasing the effective rate by
1.25% on the senior secured tranche B debt, and by 1.5% on the senior secured
tranche A and revolving debt.
Concentration of Credit Risk
The Company sells its products to supermarkets, foodservice operators 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 March 31, 2000.
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 Expenses
Advertising expenses are included in consumer marketing and include the
costs to produce, distribute and air print media, television and radio
advertising for the Company's products. Such costs are expensed ratably over
the year in relation to revenues.
Trade Promotions Expense
Trade promotions expense includes the costs paid to retailers to promote the
Company's products. Such costs include amounts paid to customers for space in
the retailers' stores ("slotting fees"), amounts paid to provide samples of the
Company's products to consumers, and amounts paid to obtain favorable display
positions in the retailers' stores. These deals are offered to customers in
lump sum payments and as rate per unit allowances as dictated by industry
norms. The Company expenses slotting fees when incurred or, when under a
contract, over a period not to exceed 12 months and expenses other trade
promotions in the period during which the promotions occur.
9
<PAGE>
Stock Based Compensation
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), Accounting
for Stock Based Compensation, allows companies to measure compensation cost in
connection with employee stock compensation plans either using a fair value-
based method or to continue to use the intrinsic value-based method prescribed
by Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock
Issued to Employees, and its related interpretations, which generally does not
result in compensation cost. The Company measures compensation cost in
accordance with APB 25.
Impact of New Accounting Pronouncements
On June 15, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for
Derivative Instruments and Hedging Activities. SFAS 133 is effective for all
fiscal years beginning after June 15, 2000. SFAS 133 requires that all
derivatives be recorded on the balance sheet at fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction. Management
of the Company anticipates that, due to its limited use of derivative
instruments, the adoption of SFAS 133 will not have a significant effect on the
Company's results of operations or its financial position.
NOTE 3--ACQUISITIONS
The Company acquired 100% of the common stock of Seacoast on April 1, 1999
and the Lender's assets on November 1, 1999. Had the Lender's and Seacoast
acquisitions and related financings taken place January 1, 1999, the unaudited
pro forma results of operations would have been as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
-------- -------------
(actual) (pro forma)
(as restated)
<S> <C> <C>
Net sales............................................. $322,748 $331,425
======== ========
Gross profit.......................................... $184,346 $192,697
======== ========
Operating income...................................... $ 1,930 $ 19,963
======== ========
</TABLE>
NOTE 4--INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March December 31,
31, 2000 1999
-------- ------------
<S> <C> <C>
Raw materials......................................... $ 21,626 $ 29,187
Work in process....................................... 1,182 1,262
Finished goods........................................ 86,408 83,900
Packaging and other supplies.......................... 9,734 9,618
-------- --------
$118,950 $123,967
======== ========
</TABLE>
NOTE 5--DEBT
Senior Secured Debt
As a result of the adjustments to the Company's unaudited interim financial
results for the first, second and third quarters of 1999 and the third quarter
of 1998, and adjustments to its audited financial results for the
10
<PAGE>
year ended December 1998, the Company was in default of a number of provisions
of the agreement covering its senior secured debt. The Company and the lenders
amended this agreement effective March 29, 2000. The amendment to this
agreement includes provisions that:
. contemplate the sale by the Company of accounts receivable;
. amend the financial covenants;
. waive certain existing defaults of covenants and breaches of
representations and warranties;
. provide, until the defaults are cured or waived, a forbearance from
exercising remedies that are available as a result of the Company's
defaults under the Indentures governing the senior subordinated debt
until June 30, 2000; or earlier, in the event that the senior
subordinated debt would be accelerated; and
. establish the interest rate on borrowings made pursuant to the facility.
Senior Subordinated Debt
As a result of the adjustments to the Company's unaudited interim financial
results for the first, second and third quarters of 1999 and the third quarter
of 1998, and adjustments to its audited financial results for the year ended
December 1998, the Company was in default under its indentures. The Company has
initiated discussions with the senior subordinated debtholders to promptly
obtain consents for amendments to the indentures and waivers of past defaults
thereunder.
NOTE 6--TRANSITION EXPENSES
Transition expenses consist of one-time costs incurred to integrate the
acquired business, including relocation expenses, recruiting fees, sales
support, production transition and other unique transitional expenses.
NOTE 7--EARNINGS PER SHARE
Basic earnings per share represents the income available to common
stockholders divided by the weighted average number of common shares
outstanding during the measurement period. Diluted earnings per share
represents the income available to common stockholders divided by the weighted
average number of common shares outstanding during the measurement period while
also giving effect to all potentially dilutive common shares that were
outstanding during the period. Potentially dilutive common shares consist of
stock options (the dilutive impact is calculated by applying the "treasury
stock method").
The table below summarizes the numerator and denominator for the basic and
diluted loss per share calculations (in thousands except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
2000 1999
-------- -------------
(actual) (as restated)
<S> <C> <C>
Numerator:
Net income (loss).................................. $(15,801) $ 482
======== =======
Denominator:
Weighted average number of basic shares............ 67,050 67,016
Effect of dilutive securities...................... -- --
-------- -------
Weighted average number of diluted shares.......... 67,050 67,016
======== =======
Basic and diluted earnings (loss) per share.......... $ (0.24) $ 0.01
======== =======
</TABLE>
11
<PAGE>
NOTE 8--SEGMENT INFORMATION
The Company groups its business in two operating segments; dry grocery
division and frozen food division. The operating segments are managed as
strategic units due to their distinct manufacturing methodologies, distribution
channels and dedicated segment management teams. The dry grocery division
includes Duncan Hines(R) baking mix products, and Mrs. Butterworth's(R) and Log
Cabin(R) syrup products. The frozen food division includes Van de Kamp's(R) and
Mrs. Paul's(R) frozen seafood products, Aunt Jemima(R) frozen breakfast
products, Celeste(R) frozen pizza products, Chef's Choice(R) frozen skillet
meal products and Lender's(R) bagel products.
The following table presents a summary of operations by segment (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 31, March 31,
2000 1999
---------- -------------
(as restated)
<S> <C> <C>
Net sales
Dry grocery....................................... $ 105,581 $ 97,224
Frozen food....................................... 217,167 157,040
---------- ----------
Total........................................... $ 322,748 $ 254,264
========== ==========
Operating income (loss)
Dry grocery....................................... $ (2,972) $ 8,321
Frozen food....................................... 4,902 7,408
---------- ----------
Total........................................... $ 1,930 $ 15,729
========== ==========
Total assets
Dry grocery....................................... $ 893,469 $ 886,144
Frozen food....................................... 966,495 576,421
---------- ----------
Total........................................... $1,859,964 $1,462,565
========== ==========
Depreciation and amortization
Dry grocery....................................... $ 7,060 $ 6,151
Frozen food....................................... 9,766 5,647
---------- ----------
Total........................................... $ 16,826 $ 11,798
========== ==========
Capital expenditures
Dry grocery....................................... $ 900 $ 3,401
Frozen food....................................... 2,636 3,003
---------- ----------
Total........................................... $ 3,536 $ 6,404
========== ==========
</TABLE>
12
<PAGE>
NOTE 9--RESTATEMENT
As described in Note 1, the March 31, 1999 financial statements have been
restated. A summary of the effects of the restatement follows (in thousands,
except per share data):
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1999
------------------------
As Previously As
Reported Restated
------------- ----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.......................... $ 253 $ 253
Accounts receivable, net........................... 107,753 84,740
Inventories........................................ 75,078 77,863
Prepaid expenses and other assets.................. 11,781 13,400
Asset held for sale................................ 3,000 3,000
Current deferred tax assets........................ 10,840 19,277
---------- ----------
Total current assets............................. 208,705 198,533
Property, plant and equipment, net................... 160,370 159,153
Deferred tax asset................................... -- 2,629
Goodwill and other intangible assets, net............ 1,077,121 1,074,770
Other assets......................................... 27,535 27,480
---------- ----------
Total assets..................................... $1,473,731 $1,462,565
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Current portion of senior secured term debt........ $ 20,000 $ 20,000
Senior secured revolving debt facility............. 115,000 115,000
Accounts payable................................... 60,329 60,848
Accrued liabilities................................ 48,782 76,547
---------- ----------
Total current liabilities........................ 244,111 272,395
Non-current deferred tax liabilities............... 8,350 --
Other liabilities.................................. 12,372 12,372
Senior secured term debt........................... 195,000 195,000
Senior subordinated notes.......................... 402,196 402,196
---------- ----------
Total liabilities................................ 862,029 881,963
---------- ----------
Stockholders' equity:
Preferred stock, $0.01 par value; 25,000,000 shares
authorized; no shares issued or outstanding....... -- --
Common stock, $0.01 par value; 250,000,000 shares
authorized; 67,016,173 shares issued and
outstanding....................................... 670 670
Paid-in capital.................................... 647,889 647,889
Promissory notes................................... (545) (545)
Accumulated deficit................................ (36,312) (67,412)
---------- ----------
Total stockholders' equity....................... 611,702 580,602
---------- ----------
Total liabilities and stockholders' equity....... $1,473,731 $1,462,565
========== ==========
</TABLE>
13
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
March 31, 1999
-------------------------
As Previously
Reported As Restated
------------- -----------
<S> <C> <C>
Net Sales........................................... $261,050 $254,264
Cost of goods sold.................................. 104,128 104,703
-------- --------
Gross profit...................................... 156,922 149,561
-------- --------
Brokerage, distribution and marketing expenses:
Brokerage and distribution........................ 24,634 21,930
Trade promotions.................................. 61,373 69,508
Consumer marketing................................ 22,558 21,677
-------- --------
Total brokerage, distribution and marketing
expenses........................................... 108,565 113,115
Amortization of goodwill and other intangibles...... 8,772 8,872
Selling, general and administrative expenses........ 7,342 7,568
Transition expenses................................. 4,272 4,277
-------- --------
Total operating expenses............................ 128,951 133,832
-------- --------
Operating income.................................. 27,971 15,729
Interest expense, net............................... 14,579 14,582
Amortization of deferred financing expense.......... 397 396
Other bank and financing expenses................... 53 52
-------- --------
Income before income taxes.......................... 12,942 699
Income tax expense.................................. 5,112 217
-------- --------
Net income........................................ $ 7,830 $ 482
======== ========
Basic and diluted earnings per share................ $ 0.12 $ 0.01
======== ========
Weighted average number of shares outstanding....... 67,016 67,016
======== ========
</TABLE>
NOTE 10--SUBSEQUENT EVENTS
On April 19, 2000, the Company entered into a one-year agreement to sell, on
a periodic basis, specified accounts receivable in amounts up to $60.0 million.
The use of any proceeds from the sale of such specified receivables is
restricted to payments for the purchase of assets and repayment of debt.
In April 2000, the Company announced that it intends to streamline its
operations and management structure. As a result, the Company anticipates
taking a one-time charge of up to $10.0 million in the second quarter of 2000
to reflect the consolidation of all the Company's managerial functions into its
existing St. Louis offices and the closure of its Columbus and San Francisco
locations.
14
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reference is made to the Company's Financial Statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the annual report on Form 10-K of Aurora Foods Inc. for
the year ended December 31, 1999.
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the historical
financial information included in the Financial Statements and notes thereto
included in the annual report on Form 10-K of the Company for the year ended
December 31, 1999. Unless otherwise noted, years (2000 and 1999) in this
discussion refer to the Company's March-ending quarters.
Restatements
Prior to the issuance of the Company's financial statements as of and for
the year ended December 31, 1999, it was determined that the results reported
in the Company's Form 10-K as of and for the year ended December 31, 1998 as
well as the interim results reported in the Company's Forms 10-Q as of and for
the periods ended September 30, 1998, March 31, 1999, June 30, 1999 and
September 30, 1999 were misstated. Upon further investigation, it was
determined that liabilities that existed for certain trade promotion and
marketing activities and other expenses (primarily sales returns and
allowances, distribution and consumer marketing) were not properly recognized
as liabilities and that certain assets were overstated (primarily accounts
receivable, inventories and fixed assets). In addition, certain activities were
improperly recognized as sales. As a result, the financial statements as of and
for the year ended December 31, 1998 as well as the quarterly financial data as
of and for the interim periods ended September 30, 1998, March 31, 1999, June
30, 1999 and September 30, 1999 have been restated. The restated financial
statements as of and for the three months ended March 31, 1999 have been
included in the condensed consolidated financial statements included herein.
For the three months ended March 31, 1999, these misstatements primarily
understated trade promotions expense by $8.1 million, overstated net sales by
$6.8 million, overstated brokerage and distribution expense by $2.7 million and
understated cost of goods sold by $0.6 million. After adjusting for the
misstatements, the Company recalculated its income tax provision reducing
income tax expense by $4.9 million.
Trade promotions expense includes the costs paid to retailers to promote the
Company's products. Such costs include amounts paid to customers for space in
the retailers' stores ("slotting fees"), amounts paid to provide samples of the
Company's products to consumers, and amounts paid to obtain favorable display
positions in the retailers' stores. These promotions are offered to customers
in lump sum payments and as rate per unit allowances as dictated by industry
norms. The Company expenses slotting fees when incurred or, when under a
contract, over a period not to exceed 12 months and expenses other trade
promotions in the period during which the deals occur. Customers collect
payment from the Company for trade promotion expenses utilizing one of two
primary methods. In some cases, the Company includes a separate line on the
face of the invoice that reduces the net amount invoiced. This is typically
referred to as an "off-invoice" amount. The Company records the sale to the
customer at the list price of its product when the product is shipped and
records the cost of the off-invoice amount as an expense in the appropriate
period in accordance with the Company's policy. In order to collect money from
the Company for trade promotion deals that are not provided in an "off-invoice"
form, customers deduct specified deal costs from their payments on other
invoices. The Company records the sale to the customer at the list price of its
product when the product is shipped. In this case, however, the Company
estimates the amount of trade promotion expense and accrues it at the time of
shipment. As customers take deductions from their invoices upon payment, the
Company charges these deductions against the accrual.
15
<PAGE>
A summary of the effects of the restatement follows (in thousands, except
per share data):
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1999
------------------------
As Previously As
Reported Restated
------------- ----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.......................... $ 253 $ 253
Accounts receivable, net........................... 107,753 84,740
Inventories........................................ 75,078 77,863
Prepaid expenses and other assets.................. 11,781 13,400
Asset held for sale................................ 3,000 3,000
Current deferred tax assets........................ 10,840 19,277
---------- ----------
Total current assets............................. 208,705 198,533
Property, plant and equipment, net................. 160,370 159,153
Deferred tax asset................................. -- 2,629
Goodwill and other intangible assets, net.......... 1,077,121 1,074,770
Other assets....................................... 27,535 27,480
---------- ----------
Total assets..................................... $1,473,731 $1,462,565
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Current portion of senior secured term debt........ $ 20,000 $ 20,000
Senior secured revolving debt facility............. 115,000 115,000
Accounts payable................................... 60,329 60,848
Accrued liabilities................................ 48,782 76,547
---------- ----------
Total current liabilities........................ 244,111 272,395
Non-current deferred tax liabilities............... 8,350 --
Other liabilities.................................. 12,372 12,372
Senior secured term debt........................... 195,000 195,000
Senior subordinated notes.......................... 402,196 402,196
---------- ----------
Total liabilities................................ 862,029 881,963
---------- ----------
Stockholders' equity:
Preferred stock, $0.01 par value; 25,000,000 shares
authorized; no shares issued or outstanding....... -- --
Common stock, $0.01 par value; 250,000,000 shares
authorized; 67,016,173 shares issued and
outstanding....................................... 670 670
Paid-in capital.................................... 647,889 647,889
Promissory notes................................... (545) (545)
Accumulated deficit................................ (36,312) (67,412)
---------- ----------
Total stockholders' equity....................... 611,702 580,602
---------- ----------
Total liabilities and stockholders' equity....... $1,473,731 $1,462,565
========== ==========
</TABLE>
16
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
March 31, 1999
----------------------
As Previously As
Reported Restated
------------- --------
<S> <C> <C>
Net sales............................................... $261,050 $254,264
Cost of goods sold...................................... 104,128 104,703
-------- --------
Gross profit.......................................... 156,922 149,561
-------- --------
Brokerage, distribution and marketing expenses:
Brokerage and distribution............................ 24,634 21,930
Trade promotions...................................... 61,373 69,508
Consumer marketing.................................... 22,558 21,677
-------- --------
Total brokerage, distribution and marketing expenses.... 108,565 113,115
Amortization of goodwill and other intangibles.......... 8,772 8,872
Selling, general and administrative expenses............ 7,342 7,568
Transition expenses..................................... 4,272 4,277
-------- --------
Total operating expenses................................ 128,951 133,832
-------- --------
Operating income........................................ 27,971 15,729
Interest expense, net................................... 14,579 14,582
Amortization of deferred financing expense.............. 397 396
Other bank and financing expenses....................... 53 52
-------- --------
Income before income taxes.............................. 12,942 699
Income tax expense...................................... 5,112 217
-------- --------
Net income.............................................. $ 7,830 $ 482
======== ========
Basic and diluted earnings per share.................... $ 0.12 $ 0.01
======== ========
Weighted average number of shares outstanding........... 67,016 67,016
======== ========
EBITDA(1)............................................... $ 39,675 $ 27,525
======== ========
Adjusted EBITDA(2)...................................... $ 43,947 $ 31,803
======== ========
</TABLE>
- --------
(1) EBITDA is defined as net income plus income tax expense, interest expense,
amortization of deferred financing expense, other bank and financing
expenses, depreciation and amortization of goodwill and other intangibles.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate whether cash flow will
be sufficient for cash requirements. The calculation of EBITDA does not
include the commitments of the Company for capital expenditures and payment
of debt and should not be deemed to represent funds available to the
Company. EBITDA, as presented, may not be comparable to similarly titled
measures of other companies.
(2) Adjusted EBITDA is defined as EBITDA plus transition expenses.
17
<PAGE>
Results of Operations
The following table sets forth the historical and pro forma results of
operations for the periods indicated as well as the percentage which the
historical and pro forma items in the Statements of Operations bear to net
sales. The statements include a presentation of the pro forma results of
operations as if the Lender's and Seacoast acquisitions and related financings
had taken place January 1, 1999. Certain amounts from prior years have been
reclassified to conform to the Company's current year presentation, and
financial information for the three months ended March 31, 1999 has been
restated as discussed above.
Statements of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Actual Three Months Ended Pro Forma Three
-------------------------------- Months Ended
March 31, 2000 March 31, 1999 March 31, 1999
--------------- -------------- -------------------
(as
restated)(1) (as restated)(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $322,748 100.0% $254,264 100.0% $ 331,425 100.0%
Cost of goods sold...... 138,402 42.9 104,703 41.2 138,728 41.9
-------- ----- -------- ----- --------- ------
Gross profit............ 184,346 57.1 149,561 58.8 192,697 58.1
-------- ----- -------- ----- --------- ------
Brokerage, distribution
and marketing expenses:
Brokerage and
distribution......... 38,733 12.0 21,930 8.6 37,214 11.2
Trade promotions...... 77,745 24.1 69,508 27.3 84,847 25.6
Consumer marketing.... 32,160 10.0 21,677 8.5 25,134 7.6
-------- ----- -------- ----- --------- ------
Total brokerage,
distribution and
marketing expenses..... 148,638 46.1 113,115 44.5 147,195 44.4
Amortization of goodwill
and other intangibles.. 10,751 3.3 8,872 3.5 10,340 3.1
Selling, general and
administrative
expenses............... 12,061 3.7 7,568 3.0 10,922 3.3
Other financial, legal
and accounting
expenses............... 9,601 3.0 -- 0.0 -- 0.0
Transition expenses..... 1,365 0.4 4,277 1.7 4,277 1.3
-------- ----- -------- ----- --------- ------
Total operating
expenses............... 182,416 56.5 133,832 52.6 172,734 52.1
-------- ----- -------- ----- --------- ------
Operating income........ 1,930 0.6 15,729 6.2 19,963 6.0
Interest and other
financing expenses,
net.................... 25,166 7.8 15,030 5.9 22,219 6.7
-------- ----- -------- ----- --------- ------
Income (loss) before
income taxes........... (23,236) (7.2) 699 0.3 (2,256) (0.7)
Income tax expense
(benefit).............. (7,435) (2.3) 217 0.1 (902) (0.3)
-------- ----- -------- ----- --------- ------
Net income (loss)....... $(15,801) (4.9)% $ 482 0.2% (1,354) (0.4)%
======== ===== ======== ===== ========= ======
Earnings (loss) per
share.................. $ (0.24) N/A $ 0.01 N/A $ (0.02) N/A
======== ===== ======== ===== ========= ======
EBITDA(2)............... $ 18,756 5.8% $ 27,525 10.8% $ 34,729 10.5%
======== ===== ======== ===== ========= ====== === ===
Adjusted EBITDA(3)...... $ 29,722 9.2% $ 31,803 12.5% $ 42,796 12.9%
======== ===== ======== ===== ========= ====== === ===
Adjusted EPS(4)......... $ (0.13) N/A $ 0.05 N/A $ 0.02 N/A
======== ===== ======== ===== ========= ======
</TABLE>
- --------
(1) As restated. See "--Restatements" and Note 9 to the condensed consolidated
financial statements.
(2) EBITDA is defined as net income (loss) plus income tax expense (benefit),
interest expense, amortization of deferred financing expense, other bank
and financing expenses, depreciation and amortization of
18
<PAGE>
goodwill and other intangibles. The Company believes EBITDA provides
additional information for determining its ability to meet debt service
requirements. EBITDA does not represent and should not be considered an
alternative to net income or cash flow from operations as determined by
generally accepted accounting principles. EBITDA does not necessarily
indicate whether cash flow will be sufficient for cash requirements and
should not be deemed to represent funds available to the Company. The
calculation of EBITDA does not include the commitments of the Company for
capital expenditures and payment of debt. EBITDA, as presented, may not be
comparable to similarly titled measures of other companies.
(3) Adjusted EBITDA is defined as EBITDA plus other financial, legal and
accounting expenses and transition expenses. In addition, for pro forma
purposes, adjusted EBITDA excludes $4,789 of charges made by Kellogg's to
the Lender's business to reflect an allocation of Kellogg's corporate
selling, general and administrative expenses and to reflect overhead on a
Lender's facility that was not purchased by the Company. These costs will
not be incurred by the Company on an ongoing basis. The Company has
included $1,000 as incremental selling, general and administrative expenses
as its estimate of the incremental expenses associated with operating the
Lender's business.
(4) Adjusted EPS is defined as earnings (loss) per share plus the per share
after tax effect of other financial, legal and accounting expenses and
transition expenses.
The Company manages its business in two operating segments, the frozen food
division and the dry grocery division. The separate financial information of
each segment is presented consistently with the manner in which results are
evaluated by the chief operating decision-maker in deciding how to allocate
resources and in assessing performance.
The frozen foods division has six brands, Van de Kamp's(R) and Mrs.
Paul's(R) seafood products, Aunt Jemima(R) frozen breakfast products and
Celeste(R) frozen pizza products and the 1999 additions--Chef's Choice(R)
frozen skillet meal products and Lender's(R) bagel products. The dry grocery
division consists of three brands, Mrs. Buttersworth(R) and Log Cabin(R) syrup
products and Duncan Hines(R) baking mix products, which was acquired in 1998.
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
(as restated)
The following table sets forth certain historical results of operations data
by division for the three months ended March 31, 2000 and 1999 (as restated):
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
2000 1999
----------------- ----------------
Frozen Dry Frozen Dry
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales................................. $217,167 $105,581 $157,040 $97,224
Cost of goods sold........................ 98,048 40,354 67,295 37,408
-------- -------- -------- -------
Gross profit............................ 119,119 65,227 89,745 59,816
-------- -------- -------- -------
Brokerage, distribution and marketing
expenses:
Brokerage and distribution.............. 25,019 13,714 14,835 7,095
Trade promotions........................ 50,159 27,586 43,493 26,015
Consumer marketing...................... 16,954 15,206 15,345 6,332
-------- -------- -------- -------
Total brokerage, distribution and
marketing expenses....................... 92,132 56,506 73,673 39,442
Amortization of goodwill and other
intangibles.............................. 5,352 5,399 3,726 5,146
Selling, general and administrative
expenses................................. 8,908 3,153 4,846 2,722
Other financial, legal and accounting
expenses(1).............................. 6,460 3,141 -- --
Transition expenses....................... 1,365 -- 92 4,185
-------- -------- -------- -------
Total operating expenses.............. 114,217 68,199 82,337 51,495
-------- -------- -------- -------
Operating income (loss)................... $ 4,902 $ (2,972) $ 7,408 $ 8,321
======== ======== ======== =======
</TABLE>
19
<PAGE>
- --------
(1) Other financial, legal and accounting expenses were allocated to each
division based on the percentage of each division's net sales to total net
sales.
Net Sales. Net sales increased from $254.3 million in 1999 to $322.7 million
in 2000, or 26.9%, due to increased net sales in both the frozen foods division
and the dry grocery division.
Frozen Foods. Frozen foods division net sales increased from $157.0
million in 1999 to $217.2 million in 2000, or 38.3%, due primarily to the
acquisitions of Chef's Choice(R) in April 1999 and Lender's(R) in November
1999. Before giving effect to the Chef's Choice(R) and Lender's(R)
acquisitions, net sales in 2000 were $147.4 million, a decrease of $9.6
million compared to 1999. This decrease was due primarily to the timing of
Lent in 1999 versus 2000, lower pizza sales and the impact of an increased
unit count per package in Aunt Jemima(R) waffles that was not accompanied
by a price increase. As a result, consumers were able to purchase more
product for the same price, thus deceasing their repeat purchases and
reducing the Company's overall net sales. This change was made as a
competitive response to a similar change by Kellogg's on its EGGO product.
Chef's Choice(R) contributed $19.2 million to net sales and Lender's(R)
generated $50.6 million of net sales during 2000.
Dry Grocery. Dry grocery division net sales increased from $97.2 million
in 1999 to $105.6 million in 2000, or 8.6%, due primarily to higher unit
volumes for both breakfast and baking products. Breakfast products net
sales increased 11.5%, due primarily to a 5.7% increase in unit volume and
a favorable sales mix including higher retail sales as a percentage of
total breakfast sales. Baking products net sales increased 6.4% due
primarily to a 4.1% increase in unit volume.
Gross Profit. Gross profit increased from $149.6 million in 1999 to $184.3
million in 2000, an increase of 23.3%, due to increased gross profit in both
the frozen foods division and the dry grocery division. As a percentage of net
sales, gross profit decreased from 58.8% in 1999 to 57.1% in 2000. The decline
in gross profit as a percentage of net sales was driven primarily by a decline
at the frozen foods division.
Frozen Foods. Gross profit increased from $89.7 million in 1999 to
$119.1 million in 2000, an increase of 32.7% due primarily to the
acquisitions of Chef's Choice(R) in April 1999 and Lender's(R) in November
1999. As a percentage of net sales, gross profit decreased from 57.1% in
1999 to 54.9% in 2000. This decline in gross profit as a percentage of net
sales was due to lower gross margins on Aunt Jemima(R) waffles resulting
from an increase in the number of waffles per carton and increased sales to
foodservice and club customers, which typically have lower gross margins
and lower associated marketing expenses. In addition, the Chef's Choice(R)
acquisition affected the division's gross margin, as the Chef's Choice(R)
business generates a lower gross margin than the other retail brands.
Dry Grocery. Gross profit increased from $59.8 million in 1999 to $65.2
million in 2000, an increase of 9.0% due primarily to the increase in net
sales. As a percentage of net sales, gross profit increased from 61.5% in
1999 to 61.8% in 2000. The increase in gross profit as a percentage of net
sales was due primarily to an improvement in breakfast products partially
offset by declines in baking products. The improvement in breakfast
products was due primarily to a favorable sales mix, including higher
retail breakfast sales as a percentage of total breakfast sales, offset in
part by higher raw material and packaging costs. Retail breakfast sales
typically have higher gross margins than sales to club stores, military
distributors and foodservice customers. Baking products experienced lower
gross margins primarily as a result of higher commodity and packaging
expenses.
Brokerage, Distribution and Marketing Expenses. Brokerage, distribution and
marketing expenses increased from $113.1 million in 1999 to $148.6 million in
2000, an increase of 31.4%, as a result of increases in both divisions. As a
percentage of net sales, brokerage, distribution and marketing expenses
increased from 44.5% of net sales in 1999 to 46.1% of net sales in 2000 due
primarily to increases as a percentage of net sales in the dry grocery division
that were partially offset by decreases in the frozen foods division. Brokerage
20
<PAGE>
and distribution costs, which include broker commissions, freight, warehousing
and term discounts, increased from 8.6% of net sales in 1999 to 12.0% of net
sales in 2000 due primarily to higher freight and warehousing expenditures as a
percentage of net sales in the dry grocery division. Trade promotions expense,
which consists of incentives offered to food retailers to carry and promote
Aurora products, decreased from 27.3% of net sales in 1999 to 24.1% of net
sales in 2000 due to rate reductions in trade promotion spending in the frozen
foods division. Consumer marketing expenses, which include the costs of
advertising, coupons and market research, increased from 8.5% of net sales in
1999 to 10.0% of net sales in 2000 primarily due to increases as a percentage
of net sales in the dry grocery division that were partially offset by
decreases in the frozen foods division.
Frozen Foods. Brokerage, distribution and marketing expenses increased
from $73.7 million in 1999 to $92.1 million in 2000, an increase of 25.1%,
due primarily to the acquisitions of Chef's Choice(R) in April 1999 and
Lender's(R) in November 1999. As a percentage of net sales, brokerage,
distribution and marketing expenses decreased from 46.9% of net sales in
1999 to 42.4% of net sales in 2000. This decrease was driven primarily by
declines in trade promotions expense and consumer marketing expenses as a
percentage of net sales that were partially offset by an increase in
brokerage and distribution. Trade promotions expense decreased from 27.7%
of net sales in 1999 to 23.1% of net sales in 2000. The decrease in trade
promotions as a percentage of net sales is due primarily to cost
containment initiatives that lowered the overall rate of trade spending and
the acquisitions of Chef's Choice(R) and Lender's(R) which have lower trade
promotion spending rates than the other frozen foods division brands.
Consumer marketing expenses decreased from 9.8% of net sales in 1999 to
7.8% of net sales in 2000. This decrease was due primarily to the inclusion
of the Lender's(R) and Chef's Choice(R) businesses in 2000, which
experience a lower level of consumer spending as a percentage of net sales.
Excluding the impact of the Lender's(R) and Chef's Choice(R) acquisitions,
consumer spending as a percentage of net sales was comparable to 1999.
Brokerage and distribution expenses increased from 9.4% of net sales 1999
to 11.5% of net sales in 2000. This increase is due primarily to the
inclusion of the Lender's(R) business in 2000. The Lender's(R) business
incurs higher distribution costs due to the fresh bagel distribution
system.
Dry Grocery. Brokerage, distribution and marketing expenses increased
from $39.4 million in 1999 to $56.5 million in 2000, an increase of $17.1
million. As a percentage of net sales, brokerage, distribution and
marketing expenses increased from 40.6% in 1999 to 53.5% in 2000. This
increase was driven primarily by increases in brokerage and distribution
expenses and consumer marketing expenses as a percentage of net sales that
were partially offset by a decrease in trade promotions. Brokerage and
distribution expenses increased from 7.3% of net sales in 1999 to 13.0% of
net sales in 2000. This increase is primarily a result of freight fuel
surcharges and higher inventory storage costs. Consumer marketing expenses
increased from 6.5% of net sales in 1999 to 14.4% of net sales in 2000.
This increase is due to increases in coupon activity on the breakfast
brands. Trade promotions expense decreased from 26.8% of net sales in 1999
to 26.1% of net sales in 2000. This decrease is due to a shift from trade
promotions programs to consumer marketing programs on both the breakfast
and baking products.
Amortization of Goodwill and Other Intangibles. Amortization of goodwill and
other intangibles increased from $8.9 million in 1999 to $10.8 million in 2000
due to the impact of acquisitions of the Chef's Choice(R) and Lender's(R)
businesses. Frozen foods amortization totaled $5.4 million and $3.7 million in
2000 and 1999, respectively. Dry grocery amortization totaled $5.4 million and
$5.1 million in 2000 and 1999, respectively.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $7.6 million in 1999 to $12.1 million in
2000, or 59.4%, due primarily to the incremental costs necessary to manage the
acquired Chef's Choice(R) and Lender's(R) businesses, the costs related to the
employment of new management and other compensation related costs. As a
percentage of net sales, selling, general and administrative expenses increased
from 3.0% in 1999 to 3.7% in 2000. Frozen foods selling, general and
administrative expenses increased from $4.8 million in 1999 to $8.9 million in
2000, or 83.8%, due to the
21
<PAGE>
addition of acquired businesses. Dry grocery selling, general and
administrative expenses increased from $2.7 million in 1999 to $3.2 million in
2000, or 15.8%.
Other Financial, Legal and Accounting Expenses. As a result of the
investigation into the Company's accounting practices, the resulting
restatement of its financial statements and related matters (see --
"Restatements"), the Company has incurred, and continues to incur financial,
legal and accounting expenses, charges to obtain waivers on its events of
default and charges related to amending its financing facilities. Such costs,
which totaled $9.6 million for the three months ended March 31, 2000, are
expensed when incurred by the Company.
Transition Expenses. The Company incurred $4.3 million in transition
expenses in 1999 primarily due to the integration of the Duncan Hines business.
During 2000, the Company incurred approximately $1.4 million primarily related
to the integration of the Chef's Choice(R) and Lender's(R) businesses. These
expenses represent one-time costs incurred to integrate acquired businesses.
Operating Income. Operating income decreased from $15.7 million in 1999 to
$1.9 million in 2000. As a percentage of net sales, operating income decreased
from 6.2% in 1999 to 0.6% in 2000. Operating income in 2000 was affected by the
$9.6 million of other financial, legal and accounting expenses and by
transition expenses in both 1999 and 2000. Before giving effect to other
financial, legal and accounting expenses and transition expenses, operating
income decreased from $20.0 million in 1999 to $12.9 million in 2000. This
decrease was primarily due to the increases in brokerage and distribution
expenses and consumer marketing expenses by the dry grocery division, which
outpaced the gross profit improvement from 1999 to 2000.
Interest and Other Financing Expenses. The aggregate of net interest income
and expense, amortization of loan fees and other bank and financing expenses
increased from $15.0 million in 1999 to $25.2 million in 2000, or 67.4%. The
increase was due primarily to the additional debt associated with the
acquisitions of Chef's Choice(R) in April 1999 and Lender's(R) in November
1999. In addition, higher interest rates and an increased debt level in 2000
contributed to higher interest expense.
Income Tax Expense (Benefit). During 1999, the Company recorded income tax
expense of $0.2 million, which yielded an effective tax rate of 31.0%. During
2000, the Company recorded an income tax benefit of $7.4 million, which yielded
an effective tax rate of 32.0%.
Net Income (Loss). The Company incurred net income of $0.5 million in 1999
compared to a net loss of $15.8 million in 2000. The loss in 2000 included the
other financial, legal and accounting expenses and was impacted by the overall
decline in operating income described above.
22
<PAGE>
Pro Forma Three Months Ended March 31, 2000 Compared to the Pro Forma Three
Months Ended March 31, 1999 (as restated)
The following table sets forth certain pro forma results of operations data
by division for the three months ended March 31, 2000 and 1999 (as restated) as
if the Chef's Choice(R) and Lender's(R) acquisitions and related financings had
taken place January 1, 1999:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
2000 1999
----------------- ----------------
Frozen Dry Frozen Dry
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Pro forma net sales........................ $217,167 $105,581 $234,201 $97,224
Pro forma cost of goods sold............... 98,048 40,354 101,320 37,408
-------- -------- -------- -------
Pro forma gross profit..................... 119,119 65,227 132,881 59,816
-------- -------- -------- -------
Pro forma brokerage, distribution and
marketing expenses:
Pro forma brokerage and distribution..... 25,019 13,714 30,119 7,095
Pro forma trade promotions............... 50,159 27,586 58,832 26,015
Pro forma consumer marketing............. 16,954 15,206 18,802 6,332
-------- -------- -------- -------
Total pro forma brokerage, distribution
and marketing expenses.................. 92,132 56,506 107,753 39,442
Pro forma amortization of goodwill and
other intangibles......................... 5,352 5,399 5,194 5,146
Pro forma selling, general and
administrative expenses................... 8,908 3,153 8,200 2,722
Pro forma other financial, legal and
accounting expenses(1).................... 6,460 3,141 -- --
Pro forma transition expenses.............. 1,365 -- 92 4,185
-------- -------- -------- -------
Total pro forma operating expenses....... 114,217 68,199 121,239 51,495
-------- -------- -------- -------
Pro forma operating income (loss).......... $ 4,902 $ (2,972) $ 11,642 $ 8,321
======== ======== ======== =======
</TABLE>
- --------
(1) Other finanical, legal and accounting expenses were allocated to each
division based on the percentage of each division's net sales to total net
sales.
Pro Forma Net Sales. On a pro forma basis, net sales decreased from $331.4
million in 1999 to $322.7 million in 2000, or 2.6%. The decline in net sales
was attributable to the decline in frozen foods division sales that was
partially offset by sales growth in the dry grocery division.
Frozen Foods. On a pro forma basis, frozen foods division net sales
decreased from $234.2 million in 1999 to $217.2 million in 2000, or 7.3%
due primarily to the timing of Lent in 1999 versus 2000, lower pizza sales
and the impact of an increased unit count per package in Aunt Jemima(R)
waffles that was not accompanied by a price increase. As a result,
consumers were able to purchase more product for the same price, thus
decreasing their repeat purchases and reducing the Company's overall net
sales. In addition, on a pro forma basis Lender's(R) net sales declined as
a result of consumption declines compared to prior year.
Dry Grocery. On a pro forma basis, dry grocery division net sales
increased from $97.2 million in 1999 to $105.6 million in 2000, or 8.6% due
primarily to higher unit volumes for both breakfast and baking products.
Breakfast products net sales increased 11.5% due primarily to a 5.7%
increase in unit volume and a favorable sales mix including higher retail
sales as a percentage of total breakfast sales. Baking products net sales
increased 6.4% due to primarily to a 4.1% increase in unit volume.
Pro Forma Gross Profit. On a pro forma basis, gross profit decreased from
$192.7 million in 1999 to $184.3 million in 2000, a decrease of 4.3%. As a
percentage of net sales, pro forma gross profit decreased from 58.1% in 1999 to
57.1% in 2000. The decline in pro forma gross profit as a percentage of net
sales was primarily due to a decline in the frozen foods division.
Frozen Foods. On a pro forma basis, frozen foods division gross profit
declined from $132.9 million in 1999 to $119.1 million in 2000, or 10.4%.
The decrease was primarily due to the decline in
23
<PAGE>
net sales from 1999 to 2000. As a percentage of net sales, gross profit
decreased from 56.7% in 1999 to 54.9% in 2000. This decline in gross profit
as a percentage of net sales was due primarily to lower gross margins on
Aunt Jemima(R) waffles resulting from an increase in the number of waffles
per carton and increased sales to food service and club customers, which
typically have lower gross margins and lower associated marketing expenses.
Dry Grocery. Gross profit increased from $59.8 million in 1999 to $65.2
million in 2000, an increase of 9.0% due primarily to the increase in net
sales. As a percentage of net sales, gross profit increased from 61.5% in
1999 to 61.8% in 2000. The increase in gross profit as a percentage of net
sales was due primarily to an improvement in breakfast products that were
partially offset by declines in baking products. The improvement in
breakfast products was due primarily to a favorable sales mix, including
higher retail breakfast sales as a percentage of total breakfast sales
offset in part by higher raw material and packaging costs. Retail breakfast
sales typically have higher gross margins than sales to club stores,
military distributors and foodservice customers. Baking products
experienced lower gross margins primarily as a result of higher commodity
and packaging expenses.
Pro Forma Brokerage, Distribution and Marketing Expenses. On a pro forma
basis, brokerage, distribution and marketing expenses increased from $147.2
million in 1999 to $148.6 million in 2000, an increase of 1.0%. As a percentage
of net sales, pro forma brokerage, distribution and marketing expenses
increased from 44.4% of net sales in 1999 to 46.1% of net sales in 2000. On a
pro forma basis, brokerage and distribution costs increased from 11.2% of net
sales in 1999 to 12.0% of net sales in 2000. Pro forma trade promotion expenses
decreased from 25.6% of net sales in 1999 to 24.1% of net sales in 2000. Pro
forma consumer marketing expenses increased from 7.6% of net sales in 1999 to
10.0% of net sales in 2000.
Frozen Foods. On a pro forma basis, brokerage, distribution and
marketing expenses decreased from $107.8 million in 1999 to $92.1 million
in 2000, a 14.5% decline. As a percentage of net sales, brokerage,
distribution and marketing expenses decreased from 46.0% in 1999 to 42.4%
in 2000. This decrease was driven primarily by a decline in trade
promotions expense and brokerage and distribution expenses as a percentage
of net sales. The decline in trade promotions expense as a percentage of
net sales is due primarily to cost containment initiatives that lowered the
overall rate of trade spending. The decline in brokerage and distribution
expenses as a percentage of net sales is due primarily to a reduction of
discount payment terms offered to customers.
Dry Grocery. On a pro forma basis, brokerage, distribution and marketing
expenses increased from $39.4 million in 1999 to $56.5 million in 2000, an
increase of $17.1 million. As a percentage of net sales, brokerage,
distribution and marketing expenses increased from 40.6% in 1999 to 53.5%
in 2000. This increase was driven primarily by increases in brokerage and
distribution expenses and consumer marketing expenses as a percentage of
net sales that were partially offset by a decrease in trade promotions.
Brokerage and distribution expenses increased from 7.3% of net sales in
1999 to 13.0% of net sales in 2000. This increase is primarily a result of
freight fuel surcharges and higher inventory storage costs. Consumer
marketing expenses increased from 6.5% of net sales in 1999 to 14.4% of net
sales in 2000. This increase is due to increases in coupon activity on the
breakfast brands. Trade promotions expense decreased from 26.8% of net
sales in 1999 to 26.1% of net sales in 2000. This decrease is due to a
shift from trade promotions programs to consumer marketing programs on both
the breakfast and baking products.
Pro Forma Amortization of Goodwill and Other Intangibles. On a pro forma
basis, amortization of goodwill and other intangibles increased from $10.3
million in 1999 to $10.8 million in 2000. Frozen foods amortization totaled
$5.2 million and $5.4 million in 1999 and 2000, respectively. Dry grocery
amortization totaled $5.1 million and $5.4 million in 1999 and 2000,
respectively.
Pro Forma Selling, General and Administrative Expenses. On a pro forma
basis, selling, general and administrative expenses increased from $10.9
million in 1999 to $12.1 million in 2000, or 10.4%. The increase
24
<PAGE>
in pro forma selling, general and administrative expenses was due primarily to
the costs related to the employment of new management and other compensation-
related costs. Frozen foods pro forma selling, general and administrative
expenses increased from $8.2 million in 1999 to $8.9 million in 2000, or 8.6%.
Dry grocery selling, general and administrative expenses increased from $2.7
million in 1999 to $3.2 million in 2000, or 15.8%.
Pro Forma Other Financial, Legal and Accounting Expenses. As a result of the
investigation into the Company's accounting practices, the resulting
restatement of its financial statements and related matters (see--
"Restatements"), the Company has incurred, and continues to incur, financial,
legal and accounting expenses, charges to obtain waivers on its events of
default and charges related to amending its financing facilities. Such costs,
which totaled $9.6 million for the three months ended March 31, 2000, are
expensed when incurred by the Company.
Pro Forma Transition Expenses. The Company incurred $4.3 million in
transition expenses in 1999 primarily due to the integration of the Duncan
Hines business. During 2000, the Company incurred approximately $1.4 million
primarily related to the integration of the Chef's Choice(R) and Lender's(R)
businesses. These expenses represent one-time costs incurred to integrate
acquired businesses.
Pro Forma Operating (Loss) Income. On a pro forma basis, operating income
decreased from $20.0 million in 1999 to $1.9 million in 1999. Excluding the
effects of the other financial, legal and accounting expenses and transition
expenses in both years, operating income decreased from $24.2 million in 1999
to $12.9 million in 2000, a decrease of 46.8%. This decrease is the result of
the decline in pro forma net sales and pro forma gross profit and increases in
pro forma brokerage, distribution and marketing expenses and pro forma selling,
general and administrative expenses.
Pro Forma Interest and Other Financing Expenses. On a pro forma basis, the
aggregate of net interest income and expense, amortization of loan fees and
other bank and financing expenses increased from $22.2 million in 1999 to $25.2
million in 2000. This increase is due to higher interest rates on the floating
rate debt and an increased debt level in 2000.
Pro Forma Income Tax Expense. On a pro forma basis, the income tax benefit
recorded increased from $0.9 million in 1999 to $7.4 million in 2000. The
effective tax rate for 1999 was 40.0%, which was impacted favorably by certain
state tax credits applied for by the Company that increase the pro forma income
tax benefit. The effective tax rate for 2000 was 32.0%.
Pro Forma Net Loss. On a pro forma basis, the Company's net loss increased
from $1.4 million in 1999 to $15.8 million in 2000.
Liquidity and Capital Resources
For the three months ended March 31, 2000, the Company used $53.6 million to
fund operating activities compared to the three months ended March 31, 1999,
when $0.9 million in cash was used in operations. The increase in cash used in
2000 was primarily a result of the net loss incurred during the period and an
increase in the cash necessary to fund accounts payable. During the three
months ended March 31, 2000, the Company substantially reduced its past due
accounts payable from the levels that existed at December 31, 1999.
Net cash used in investing activities for the three months ended March 31,
2000, was approximately $5.2 million compared to cash used in investing of
$23.3 million during the three months ended March 31, 1999. Investing
activities in 2000 consisted of additions to fixed assets of $3.5 million and
additions to other assets of $1.6 million. Investing activities in 1999
consisted of $6.4 million of additions to fixed assets and to other assets of
$1.6 million. In addition, in 1999 the Company invested in additional
manufacturing frozen seafood products capacity with the purchase of a
production facility in Yuba City, CA, and the associated
25
<PAGE>
working capital. Capital expenditures were funded from borrowings on the
Company's senior secured revolving debt facility.
During the three months ended March 31, 2000, financing activities provided
cash of $59.1 million. The Company repaid $5.8 million in principal on its
senior secured term debt and borrowed $65.0 million on the revolving facility
to fund its operations, capital expenditures, software and packaging design
expenditures, and its repayment of borrowings.
Senior Secured Debt
As a result of the adjustments to the Company's unaudited interim financial
results for the first, second and third quarters of 1999 and the third quarter
of 1998, and adjustments to its audited financial results for the year ended
December 1998, the Company was in default of a number of provisions of the
agreement covering its senior secured debt. The Company and the lenders amended
this agreement effective March 29, 2000. The amendment to the agreement
includes provisions that:
. contemplate the sale by the Company of accounts receivable;
. amend the financial covenants;
. waive certain existing defaults of covenants and breaches of
representations and warranties;
. provide, until the defaults are cured or waived, a forbearance from
exercising remedies that are available as a result of the Company's
defaults under the Indentures governing the senior subordinated debt
until June 30, 2000; or earlier, in the event that the senior
subordinated debt would be accelerated; and
. establish the interest rate on borrowings made pursuant to the facility.
The Company's recent defaults and the amount of borrowings the Company has
incurred have the potential to limit the Company's ability to pay its
obligations as they become due, to obtain additional financing and to operate
the business.
Senior Subordinated Debt
As a result of the adjustments to the Company's unaudited interim financial
results for the first, second and third quarters of 1999 and the third quarter
of 1998, and adjustments to its audited financial results for the year ended
December 1998, the Company was in default under its indentures. The Company has
initiated discussions with the senior subordinated debtholders to promptly
obtain consents for amendments to the indentures and waivers of past defaults
thereunder.
Interest Rate Collar Agreements
At March 31, 2000, the Company was party to three interest rate swap
agreements. The company entered into these agreements as a means of managing
its interest rate risk. Risks associated with the interest rate swap and collar
agreements 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 interest rate swap and collar agreements to not
be material.
Recent Developments
Accounts Receivable Sale
On April 19, 2000, the Company entered into a one-year agreement to sell, on
a periodic basis, specified accounts receivable in amounts up to $60.0 million.
The use of any proceeds from the sale of such specified receivables is
restricted to payments for the purchase of assets and repayment of debt.
26
<PAGE>
Consolidation
In April 2000, the Company announced that it intends to consolidate its
operations and management structure. As a result, the Company anticipates
taking a one-time charge of up to $10.0 million in the second quarter of 2000
to reflect the consolidation of all the Company's managerial functions into its
existing St. Louis offices and the closure of its Columbus and San Francisco
locations.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements made by or on behalf of the Company. The Company
and its representatives may from time to time make written or oral statements
that are "forward-looking" including statements contained in this report and
other filings with the Securities and Exchange Commission and in reports to the
Company's stockholders. Certain statements, 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
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: the availability of funding for operations; the
outcome of the Securities Actions and other current litigation; the ability of
the Company to service its high level of indebtedness; the ability to attract
and retain qualified management; the ability of new management to implement a
successful strategy; whether the Company's lenders continue to forbear from
accelerating the Company's senior debt obligations; the Company's success in
obtaining from its bondholders waivers of defaults under its senior
subordinated notes; the actions of the Company's competitors; general economic
and business conditions; industry trends; demographics; raw material costs;
integration of acquired businesses into the Company; the ability to
successfully consolidate its operations; terms and development of capital; and
changes in, or the failure or inability to comply with, governmental rules and
regulations, including, without limitation, FDA and environmental rules and
regulations. See "--Liquidity and Capital Resources." Given these
uncertainties, undue reliance should not be placed on such forward-looking
statements. Unless otherwise required by law, the Company disclaims an
obligation to update any such factors or to publicly announce the results of
any revisions to any forward-looking statements contained herein to reflect
future events or developments.
ITEM 3: QUANTITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The Company entered into interest rate swap and collar agreements for non-
trading purposes. Risks associated with the interest rate swap and collar
agreements 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 interest rate swap and collar agreements not to
be material.
27
<PAGE>
PART II--OTHER INFORMATION
ITEM I: LEGAL PROCEEDINGS
As of May 10, 2000, the Company has been served with eighteen complaints in
purported class action lawsuits filed in the United States District Court for
the Northern District of California. The complaints received by the Company
allege that, among other things, as a result of accounting irregularities, the
Company's previously issued financial statements were materially false and
misleading and thus constituted violations of federal securities laws by the
Company and the directors and officers who resigned on February 17, 2000 (Ian
R. Wilson, James B. Ardrey, Ray Chung and M. Laurie Cummings). The actions
allege that the defendants violated Sections 10(b) and/or Section 20(a) of the
Securities Exchange Act and Rule 10b-5 promulgated thereunder (the "Securities
Actions"). The Securities Actions complaints seek damages in unspecified
amounts. These Securities Actions purport to be brought on behalf of purchasers
of the Company's Common Stock during various periods, all of which fall between
October 28, 1998 and April 2, 2000. The Company believes that additional
purported class action lawsuits similar to those described above have been or
may be filed. The Company is currently evaluating these claims and possible
defenses thereto and intends to defend these suits vigorously.
On April 14, 2000, certain of the Company's current and former directors
were named as defendants in a derivative lawsuit filed in the Superior Court of
the State of California, in the County of San Francisco, alleging breach of
fiduciary duty, mismanagement and related causes of action based upon the
Company's restatement of its financial statements. The Company believes that
the litigation is procedurally defective, in light of the plaintiffs' failure
to make prior demand on the Board to investigate the claims in question. The
Company therefore intends to move to dismiss these claims. If the case
proceeds, the Company may be obligated to indemnify and advance the defense
costs of the directors named in the suit, pending a final determination of the
action.
Pursuant to the Company's articles of incorporation, and certain of its
contractual obligations, the Company has agreed to indemnify its officers and
directors under certain circumstances against claims arising from the lawsuits.
The Company may be obligated to indemnify certain of its officers and directors
for the costs they may incur as a result of the lawsuits.
While it is not feasible to predict or determine the final outcome of these
or similar proceedings, or to estimate the amounts or potential range of loss
with respect to these matters, management believes that an adverse outcome with
respect to such proceedings could have a material adverse impact on the
company's financial position, results of operations and cash flow.
The Company is also subject to litigation in the ordinary course of
business. In the opinion of management, the ultimate outcome of any existing
litigation, other than the Securities Actions described above, would not have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Senior Secured Debt
As a result of the adjustments to the Company's unaudited interim financial
results for the first, second and third quarters of 1999 and the third quarter
of 1998, and adjustments to its audited financial results for the year ended
December 1998, the Company was in default of a number of provisions of the
agreement covering its senior secured debt. The Company and the lenders amended
this agreement effective March 29, 2000. The amendment to the agreement
includes provisions that:
. contemplate the sale by the Company of accounts receivable;
. amend the financial covenants;
. waive certain existing defaults of covenants and breaches of
representations and warranties;
28
<PAGE>
. provide, until the defaults are cured or waived, a forbearance from
exercising remedies that are available as a result of the Company's
defaults under the Indentures governing the senior subordinated debt
until June 30, 2000; or earlier, in the event that the senior
subordinated debt would be accelerated; and
. establish the interest rate on borrowings made pursuant to the facility.
Senior Subordinated Debt
As a result of the adjustments to the Company's unaudited interim financial
results for the first, second and third quarters of 1999 and the third quarter
of 1998, and adjustments to its audited financial results for the year ended
December 1998, the Company was in default under its indentures. The Company has
initiated discussions with the senior subordinated debtholders to promptly
obtain consents for amendments to the indentures and waivers of past defaults
thereunder.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
2.1 Asset Purchase Agreement, dated as of December 18, 1996, by and
between MBW Foods Inc. (as successor-in-interest to MBW Acquisition
Corp.) and Conopco, Inc., as amended. (Incorporated by reference to
Exhibit 2.1 to Aurora Foods Inc.'s Form S-4 filed on August 21, 1997,
File No. 333-24715 ("Aurora S-4")).
2.2 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 the Aurora S-4).
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 the Aurora Foods Inc.'s
Form 8-K filed on January 30, 1998 (the "Form 8-K")).
2.4 Merger Agreement, dated as of June 22, 1998, between the Aurora Foods
Inc. and A Foods Inc. (Incorporated by reference to Exhibit 2.1 to the
Aurora Foods Inc.'s Form S-1 filed on April 22, 1998, as amended, File
No. 338-50681 (the "S-1")).
2.5 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 A Foods Inc. (Incorporated by reference to Exhibit
2.2 to the S-1).
2.6 Certificate of Merger, dated June 23, 1998, of Aurora Foods Inc. with
and into A Foods Inc. (Incorporated by reference to Exhibit 2.14 to
the S-1).
2.7 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 Van de Kamp's, Inc.'s Form 10-Q for the
quarter ended March 31, 1997).
2.8 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 Van de Kamp's, Inc.'s Form 10-Q for the quarter ended
March 31, 1997).
2.9 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).
2.10 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).
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
2.11 Asset Purchase and Sale Agreement, dated as of January 17, 1996,
between Shellfish Acquisition Company, LLC ("Shellfish") and Campbell
Soup Company ("Campbell"). (Incorporated by reference to 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 schedule of which is
incorporated by reference to Exhibit 2.1 to Van de Kamp's, Inc.'s Form
8-K dated May 6, 1996).
2.12 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 the Van de Kamp's, Inc.'s Form 10-Q for the quarter ended March 20,
1996).
2.13 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")).
2.14 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).
2.15 Asset Purchase Agreement, dated as of March 10, 1999, by and among the
Company and Sea Coast Foods, Inc., Galando Investments Limited
Partnership, Carry-on Limited Partnership, Joseph Galando, Barbara J.
Galando, Stanley J. Carey and Mary K. Carey. (Incorporated by
reference to Exhibit 2.1 to the Form 10-Q for the quarter ended March
31, 1999).
2.16 Asset Purchase Agreement Dated September 24, 1999 between Aurora Foods
Inc. and The Eggo Company. (Incorporated by reference to Exhibit 2.1
to the Aurora Foods Inc. 8-K dated November 1, 1999).
3.1 Certificate of Incorporation of A Foods Inc., filed with the Secretary
of State of the State of Delaware on June 19, 1998. (Incorporated by
reference to Exhibit 3.1 to the S-1).
3.2 Amended and Restated By-laws of Aurora Foods Inc. (Incorporated by
reference to exhibit 3.2 to the S-1).
4.1 Indenture dated as of February 10, 1997, governing the 9 7/8% Series B
Senior Subordinated Notes due 2007 by and between Aurora Foods Inc.
and Wilmington Trust Company. (Incorporated by reference to Exhibit
4.1 to the Aurora S-4).
4.2 Specimen Certificate of 9 7/8% Series B Senior Subordinated Notes due
2007 (included in Exhibit 4.1 hereto). (Incorporated by reference to
Exhibit 4.2 to the Aurora S-4).
4.3 Form of Note Guarantee to be issued by future subsidiaries of Aurora
Foods Inc. pursuant to the Indenture (included in Exhibit 4.1 hereto).
(Incorporated by reference to Exhibit 4.4 to the Aurora S-4). 4.4
Indenture dated as of July 1, 1997, governing the 9 7/8% Series D
Senior Subordinated Notes due 2007 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).
4.5 Specimen Certificate of 9 7/8% Series D Senior Subordinated Notes due
2007 (included in Exhibit 4.4 hereto). (Incorporated by reference to
Exhibit 4.3 to the Aurora S-4).
4.6 Form of Note Guarantee to be issued by future subsidiaries of Aurora
Foods Inc. pursuant to the Series D Indenture (included in Exhibit 4.4
hereto). (Incorporated by reference to Exhibit 4.8 to the Aurora S-4).
4.7 Securityholders Agreement, dated as of April 8, 1998, by and among
Aurora/VDK LLC, MBW Investors LLC, VDK Foods LLC and the other parties
signatory thereto. (Incorporated by reference to Exhibit 4.2 to the S-
1).
4.8 Indenture dated as of July 1, 1998, governing the 8 3/4% Senior
Subordinated Notes due 2008 by and between Aurora Foods Inc. and
Wilmington Trust Company. (Incorporated by reference to Exhibit 4.13
to the S-1).
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
4.9 Specimen Certificate of 8% Senior Subordinated Notes due 2008
(Incorporated by reference to Exhibit 4.9 of the Aurora Foods Inc. 10-
K for the fiscal year ended December 31, 1999. (the "1999 10-K")).
4.10 Specimen Certificate of the Common Stock. (Incorporated by reference
to Exhibit 4.1 to the S-1).
4.11 Supplemental Indenture, governing the 9 7/8% Series D Senior
Subordinated Notes due 2007, dated as of April 1, 1999, among Sea
Coast Foods, Inc., Aurora Foods Inc. and Wilmington Trust Company, as
Trustee. (Incorporated by reference to Exhibit 4.11 of the 1999 10-K).
4.12 Supplemental Indenture, governing the 9 7/8% Series C Senior
Subordinated Notes due 2007, dated as of April 1, 1999, among Sea
Coast Foods, Inc., Aurora Foods Inc. and Wilmington Trust Company, as
Trustee. (Incorporated by reference to Exhibit 4.12 of the 1999 10-K).
4.13 Supplemental Indenture, governing the 8 3/4% Senior Subordinated Notes
due 2008, dated as of April 1, 1999, among Sea Coast Foods, Inc.,
Aurora Foods Inc. and Wilmington Trust Company, as Trustee.
(Incorporated by reference to Exhibit 4.13 of the 1999 10-K).
10.1 VDK Holdings, Inc. Incentive Compensation Plan. (Incorporated by
reference to Exhibit 10.1 to S-1).
10.2 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).
10.3* 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).
10.4* 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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 the Company). (Incorporated by reference to
Exhibit 10.16 to Aurora Foods Inc.'s Form 10-K, filed on March 27,
1998 (the "Aurora 10-K")).
10.9 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 the Company).
(Incorporated by reference to Exhibit 10.18 to the Aurora 10-K).
10.10* Amendment No. 1 to Ferraro Employment Agreement, dated as of January
1, 1998, between Aurora Foods Inc. and Thomas J. Ferraro.
(Incorporated by reference to Exhibit 10.10 to the S-1).
10.11* Amendment No. 1 to Willett Employment Agreement, dated as of January
1, 1998, between C. Gary Willett and Aurora Foods Inc. (Incorporated
by reference to Exhibit 10.13 to the S-1).
10.12* Employment Agreement between Ian R. Wilson and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.7 to the S-1).
10.13* Employment Agreement between James B. Ardrey and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.8 to the S-1).
10.14* Employment Agreement between Ray Chung and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.9 to the S-1).
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
10.15* Employment Agreement between M. Laurie Cummings and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.10 to the S-1).
10.16* Amendment No. 1 to Ellinwood Amended and Restated Employment
Agreement, dated as of January 1, 1998, between Thomas O. Ellinwood
and Van de Kamp's, Inc. (Incorporated by reference to Exhibit 10.15 to
the S-1).
10.17* Amended and Restated Employment Agreement, dated as of March 11, 1997,
by and between Thomas O. Ellinwood and Van de Kamp's, Inc.
(Incorporated by reference to Exhibit 10.16 to the S-1).
10.18* Employment Agreement, dated as of February 16, 1998, by and between
Van de Kamp's, Inc. and Anthony A. Bevilacqua. (Incorporated by
reference to Exhibit 10.17 to the S-1).
10.19 Expense Agreement, made as of July 1, 1998, between Aurora Foods Inc.
and Dartford Partnership L.L.C. (Incorporated by reference to Exhibit
10.32 to the S-1).
10.20* 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. (Incorporated by
reference to Exhibit 10.33 to the S-1).
10.21* 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. (Incorporated
by reference to Exhibit 10.34 to the S-1).
10.22* 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. (Incorporated by
reference to Exhibit 10.35 to the S-1).
10.23 Indemnity Agreement, dated as of July 1, 1998, between Ian R. Wilson
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.46 to
the S-1).
10.24 Indemnity Agreement, dated as of July 1, 1998, between James B. Ardrey
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.49 to
the S-1).
10.25 Indemnity Agreement, dated as of July 1, 1998, between Clive A. Apsey
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.50 to
the S-1).
10.26 Indemnity Agreement, dated as of July 1, 1998, between David E. De
Leeuw and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.52 to the S-1).
10.27 Indemnity Agreement, dated as of July 1, 1998, between Charles J.
Delaney and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.53 to the S-1).
10.28 Indemnity Agreement, dated as of July 1, 1998, between Richard C.
Dresdale and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.54 to the S-1).
10.29 Indemnity Agreement, dated as of July 1, 1998, between Andrea Geisser
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.55 to
the S-1).
10.30 Indemnity Agreement, dated as of July 1, 1998, between Peter Lamm and
Aurora Foods Inc. (Incorporated by reference to Exhibit 10.56 to the
S-1).
10.31* 1998 Employee Stock Purchase Plan (Incorporated by reference to
Exhibit 10.48 to the Aurora Foods Inc. Form 10-K for the fiscal year
ended December 31, 1998).
10.32 Production Agreement, dated as of June 4, 1998, by and between Aurora
Foods Inc. and Gilster-Mary Lee Corporation. (Incorporated by
reference to Exhibit 10.48 to the S-1).
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
10.33* 1998 Long Term Incentive Plan (Incorporated by reference to Exhibit
10.50 to the Aurora Foods Inc. Form 10-K for the fiscal year ended
December 31, 1998).
10.34 Fifth Amended and Restated Credit Agreement dated November 1, 1999 and
entered into by and among Aurora Foods Inc., as Borrower, the Lenders
listed therein, the Chase Manhattan Bank, as Administrative Agent for
the Lenders, National Westminster Bank PLC, as Syndication Agent, and
UBS AG, Stamford Branch, as Documentation Agent (Incorporated by
reference to Exhibit 10.1 to the Aurora Foods Inc. 8-K dated November
1, 1999).
10.35 First Amendment, Forbearance and Waiver, dated as of March 29, 2000,
to the Fifth Amended and Restated Credit Agreement dated November 1,
1999 and entered into by and among Aurora Foods Inc., as Borrower, the
Lenders listed therein, the Chase Manhattan Bank, as Administrative
Agent for the Lenders, National Westminster Bank PLC, as Syndication
Agent, and UBS AG, Stamford Branch, as Documentation Agent.
10.36 Amendment, dated as of April 28, 2000, to the Fifth Amended and
Restated Credit Agreement dated November 1, 1999 and entered into by
and among Aurora Foods Inc., as Borrower, the Lenders listed therein,
the Chase Manhattan Bank, as Administrative Agent for the Lenders,
National Westminster Bank PLC, as Syndication Agent, and UBS AG,
Stamford Branch, as Documentation Agent.
10.37 Collective Bargaining Agreement between Lender's Bagel Bakery and
Bakery, Confectionery and Tobacco Workers of America Local # 429--
September 1, 1998 to August 31, 2001. (Incorporated by reference to
Exhibit 10.35 of the 1999 10-K).
10.38 Receivables Purchase Agreement, dated as of April 19, 2000, and
entered into by and between Aurora Foods Inc., as Seller, and the
Chase Manhattan Bank, as Borrower.
10.39 Employment Agreement dated as of March 21, 2000, among Aurora Foods
Inc. and Christopher T. Sortwell.
27.1 Financial Data Schedule for the period ended March 31, 2000 submitted
to the Securities and Exchange Commission in electronic format.
</TABLE>
- --------
*Represents management contracts or compensatory plans or arrangements
33
<PAGE>
(b) Reports on Form 8-K
Date Filed
January 11 and
January 12, 2000 Amendments to 8-K in connection with the
Acquisition of Lender's Bagel business. The
financial statements included with the 8-K/A's were
as follows:
(a) Financial statements of the Business Acquired:
the statement of Acquired Assets and
Liabilities as of December 31, 1998 (audited)
and September 30, 1999 (unaudited) and the
Statement of Operations for the year ended
December 31, 1998 (audited) and nine months
ended September 30, 1999, together with the
report of independent accountants thereon.
(b) Pro Forma Financial Information: the pro forma
statement of operations of Aurora Foods Inc.
for the year ended December 31, 1998 and the
nine months ended September 30, 1999 and the
pro forma balance sheet as of September 30,
1999 together with notes.
February 22, 2000 Press release announcing a special committee has
been formed to conduct an investigation into the
Company's accounting practices.
March 3, 2000 Complaints filed against the Company and certain of
its officers and directors.
April 4, 2000 Press release announcing new management and
restatement of financial results.
April 20, 2000 The Company's sale of certain accounts receivable
and adjusted EBITDA.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused the report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AURORA FOODS INC.
/s/ Christopher T. Sortwell
Date: May 15, 2000 By: _________________________________
Christopher T. Sortwell
Chief Financial Officer
(Duly Authorized Officer,
Principal Financial Officer and
Principal Accounting Officer)
35
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
2.1 Asset Purchase Agreement, dated as of December 18, 1996, by and
between MBW Foods Inc. (as successor-in-interest to MBW Acquisition
Corp.) and Conopco, Inc., as amended. (Incorporated by reference to
Exhibit 2.1 to Aurora Foods Inc.'s Form S-4 filed on August 21, 1997,
File No. 333-24715 ("Aurora S-4")).
2.2 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 the Aurora S-4).
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 the Aurora Foods Inc.'s
Form 8-K filed on January 30, 1998 (the "Form 8-K")).
2.4 Merger Agreement, dated as of June 22, 1998, between the Aurora Foods
Inc. and A Foods Inc. (Incorporated by reference to Exhibit 2.1 to the
Aurora Foods Inc.'s Form S-1 filed on April 22, 1998, as amended, File
No. 338-50681 (the "S-1")).
2.5 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 A Foods Inc. (Incorporated by reference to Exhibit
2.2 to the S-1).
2.6 Certificate of Merger, dated June 23, 1998, of Aurora Foods Inc. with
and into A Foods Inc. (Incorporated by reference to Exhibit 2.14 to
the S-1).
2.7 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 Van de Kamp's, Inc.'s Form 10-Q for the
quarter ended March 31, 1997).
2.8 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 Van de Kamp's, Inc.'s Form 10-Q for the quarter ended
March 31, 1997).
2.9 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).
2.10 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).
2.11 Asset Purchase and Sale Agreement, dated as of January 17, 1996,
between Shellfish Acquisition Company, LLC ("Shellfish") and Campbell
Soup Company ("Campbell"). (Incorporated by reference to 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 schedule of which is
incorporated by reference to Exhibit 2.1 to Van de Kamp's, Inc.'s Form
8-K dated May 6, 1996).
2.12 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 the Van de Kamp's, Inc.'s Form 10-Q for the quarter ended March 20,
1996).
2.13 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")).
2.14 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).
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
2.15 Asset Purchase Agreement, dated as of March 10, 1999, by and among the
Company and Sea Coast Foods, Inc., Galando Investments Limited
Partnership, Carry-on Limited Partnership, Joseph Galando, Barbara J.
Galando, Stanley J. Carey and Mary K. Carey. (Incorporated by
reference to Exhibit 2.1 to the Form 10-Q for the quarter ended March
31, 1999).
2.16 Asset Purchase Agreement Dated September 24, 1999 between Aurora Foods
Inc. and The Eggo Company. (Incorporated by reference to Exhibit 2.1
to the Aurora Foods Inc. 8-K dated November 1, 1999).
3.1 Certificate of Incorporation of A Foods Inc., filed with the Secretary
of State of the State of Delaware on June 19, 1998. (Incorporated by
reference to Exhibit 3.1 to the S-1).
3.2 Amended and Restated By-laws of Aurora Foods Inc. (Incorporated by
reference to exhibit 3.2 to the S-1).
4.1 Indenture dated as of February 10, 1997, governing the 9 7/8% Series B
Senior Subordinated Notes due 2007 by and between Aurora Foods Inc.
and Wilmington Trust Company. (Incorporated by reference to Exhibit
4.1 to the Aurora S-4).
4.2 Specimen Certificate of 9 7/8% Series B Senior Subordinated Notes due
2007 (included in Exhibit 4.1 hereto). (Incorporated by reference to
Exhibit 4.2 to the Aurora S-4).
4.3 Form of Note Guarantee to be issued by future subsidiaries of Aurora
Foods Inc. pursuant to the Indenture (included in Exhibit 4.1 hereto).
(Incorporated by reference to Exhibit 4.4 to the Aurora S-4). 4.4
Indenture dated as of July 1, 1997, governing the 9 7/8% Series D
Senior Subordinated Notes due 2007 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).
4.5 Specimen Certificate of 9 7/8% Series D Senior Subordinated Notes due
2007 (included in Exhibit 4.4 hereto). (Incorporated by reference to
Exhibit 4.3 to the Aurora S-4).
4.6 Form of Note Guarantee to be issued by future subsidiaries of Aurora
Foods Inc. pursuant to the Series D Indenture (included in Exhibit 4.4
hereto). (Incorporated by reference to Exhibit 4.8 to the Aurora S-4).
4.7 Securityholders Agreement, dated as of April 8, 1998, by and among
Aurora/VDK LLC, MBW Investors LLC, VDK Foods LLC and the other parties
signatory thereto. (Incorporated by reference to Exhibit 4.2 to the S-
1).
4.8 Indenture dated as of July 1, 1998, governing the 8 3/4% Senior
Subordinated Notes due 2008 by and between Aurora Foods Inc. and
Wilmington Trust Company. (Incorporated by reference to Exhibit 4.13
to the S-1).
4.9 Specimen Certificate of 8% Senior Subordinated Notes due 2008
(Incorporated by reference to Exhibit 4.9 of the Aurora Foods Inc. 10-
K for the fiscal year ended December 31, 1999. (the "1999 10-K")).
4.10 Specimen Certificate of the Common Stock. (Incorporated by reference
to Exhibit 4.1 to the S-1).
4.11 Supplemental Indenture, governing the 9 7/8% Series D Senior
Subordinated Notes due 2007, dated as of April 1, 1999, among Sea
Coast Foods, Inc., Aurora Foods Inc. and Wilmington Trust Company, as
Trustee. (Incorporated by reference to Exhibit 4.11 of the 1999 10-K).
4.12 Supplemental Indenture, governing the 9 7/8% Series C Senior
Subordinated Notes due 2007, dated as of April 1, 1999, among Sea
Coast Foods, Inc., Aurora Foods Inc. and Wilmington Trust Company, as
Trustee. (Incorporated by reference to Exhibit 4.12 of the 1999 10-K).
4.13 Supplemental Indenture, governing the 8 3/4% Senior Subordinated Notes
due 2008, dated as of April 1, 1999, among Sea Coast Foods, Inc.,
Aurora Foods Inc. and Wilmington Trust Company, as Trustee.
(Incorporated by reference to Exhibit 4.13 of the 1999 10-K).
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
10.1 VDK Holdings, Inc. Incentive Compensation Plan. (Incorporated by
reference to Exhibit 10.1 to S-1).
10.2 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).
10.3* 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).
10.4* 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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 the Company). (Incorporated by reference to
Exhibit 10.16 to Aurora Foods Inc.'s Form 10-K, filed on March 27,
1998 (the "Aurora 10-K")).
10.9 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 the Company).
(Incorporated by reference to Exhibit 10.18 to the Aurora 10-K).
10.10* Amendment No. 1 to Ferraro Employment Agreement, dated as of January
1, 1998, between Aurora Foods Inc. and Thomas J. Ferraro.
(Incorporated by reference to Exhibit 10.10 to the S-1).
10.11* Amendment No. 1 to Willett Employment Agreement, dated as of January
1, 1998, between C. Gary Willett and Aurora Foods Inc. (Incorporated
by reference to Exhibit 10.13 to the S-1).
10.12* Employment Agreement between Ian R. Wilson and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.7 to the S-1).
10.13* Employment Agreement between James B. Ardrey and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.8 to the S-1).
10.14* Employment Agreement between Ray Chung and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.9 to the S-1).
10.15* Employment Agreement between M. Laurie Cummings and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.10 to the S-1).
10.16* Amendment No. 1 to Ellinwood Amended and Restated Employment
Agreement, dated as of January 1, 1998, between Thomas O. Ellinwood
and Van de Kamp's, Inc. (Incorporated by reference to Exhibit 10.15 to
the S-1).
10.17* Amended and Restated Employment Agreement, dated as of March 11, 1997,
by and between Thomas O. Ellinwood and Van de Kamp's, Inc.
(Incorporated by reference to Exhibit 10.16 to the S-1).
10.18* Employment Agreement, dated as of February 16, 1998, by and between
Van de Kamp's, Inc. and Anthony A. Bevilacqua. (Incorporated by
reference to Exhibit 10.17 to the S-1).
10.19 Expense Agreement, made as of July 1, 1998, between Aurora Foods Inc.
and Dartford Partnership L.L.C. (Incorporated by reference to Exhibit
10.32 to the S-1).
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
10.20* 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. (Incorporated by
reference to Exhibit 10.33 to the S-1).
10.21* 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. (Incorporated
by reference to Exhibit 10.34 to the S-1).
10.22* 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. (Incorporated by
reference to Exhibit 10.35 to the S-1).
10.23 Indemnity Agreement, dated as of July 1, 1998, between Ian R. Wilson
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.46 to
the S-1).
10.24 Indemnity Agreement, dated as of July 1, 1998, between James B. Ardrey
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.49 to
the S-1).
10.25 Indemnity Agreement, dated as of July 1, 1998, between Clive A. Apsey
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.50 to
the S-1).
10.26 Indemnity Agreement, dated as of July 1, 1998, between David E. De
Leeuw and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.52 to the S-1).
10.27 Indemnity Agreement, dated as of July 1, 1998, between Charles J.
Delaney and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.53 to the S-1).
10.28 Indemnity Agreement, dated as of July 1, 1998, between Richard C.
Dresdale and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.54 to the S-1).
10.29 Indemnity Agreement, dated as of July 1, 1998, between Andrea Geisser
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.55 to
the S-1).
10.30 Indemnity Agreement, dated as of July 1, 1998, between Peter Lamm and
Aurora Foods Inc. (Incorporated by reference to Exhibit 10.56 to the
S-1).
10.31* 1998 Employee Stock Purchase Plan (Incorporated by reference to
Exhibit 10.48 to the Aurora Foods Inc. Form 10-K for the fiscal year
ended December 31, 1998).
10.32 Production Agreement, dated as of June 4, 1998, by and between Aurora
Foods Inc. and Gilster-Mary Lee Corporation. (Incorporated by
reference to Exhibit 10.48 to the S-1).
10.33* 1998 Long Term Incentive Plan (Incorporated by reference to Exhibit
10.50 to the Aurora Foods Inc. Form 10-K for the fiscal year ended
December 31, 1998).
10.34 Fifth Amended and Restated Credit Agreement dated November 1, 1999 and
entered into by and among Aurora Foods Inc., as Borrower, the Lenders
listed therein, the Chase Manhattan Bank, as Administrative Agent for
the Lenders, National Westminster Bank PLC, as Syndication Agent, and
UBS AG, Stamford Branch, as Documentation Agent (Incorporated by
reference to Exhibit 10.1 to the Aurora Foods Inc. 8-K dated November
1, 1999).
10.35 First Amendment, Forbearance and Waiver, dated as of March 29, 2000,
to the Fifth Amended and Restated Credit Agreement dated November 1,
1999 and entered into by and among Aurora Foods Inc., as Borrower, the
Lenders listed therein, the Chase Manhattan Bank, as Administrative
Agent for the Lenders, National Westminster Bank PLC, as Syndication
Agent, and UBS AG, Stamford Branch, as Documentation Agent.
10.36 Amendment, dated as of April 28, 2000, to the Fifth Amended and
Restated Credit Agreement dated November 1, 1999 and entered into by
and among Aurora Foods Inc., as Borrower, the Lenders listed therein,
the Chase Manhattan Bank, as Administrative Agent for the Lenders,
National Westminster Bank PLC, as Syndication Agent, and UBS AG,
Stamford Branch, as Documentation Agent.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
10.37 Collective Bargaining Agreement between Lender's Bagel Bakery and
Bakery, Confectionery and Tobacco Workers of America Local # 429--
September 1, 1998 to August 31, 2001. (Incorporated by reference to
Exhibit 10.35 of the 1999 10-K).
10.38 Receivables Purchase Agreement, dated as of April 19, 2000, and
entered into by and between Aurora Foods Inc., as Seller, and the
Chase Manhattan Bank, as Borrower.
10.39 Employment Agreement dated as of March 21, 2000, among Aurora Foods
Inc. and Christopher T. Sortwell.
27.1 Financial Data Schedule for the period ended March 31, 2000 submitted
to the Securities and Exchange Commission in electronic format.
</TABLE>
- --------
*Represents management contracts or compensatory plans or arrangements
40
<PAGE>
EXHIBIT 10.35
EXECUTION COPY
--------------
FIRST AMENDMENT, FORBEARANCE AND WAIVER
FIRST AMENDMENT, FORBEARANCE AND WAIVER, dated as of March 29, 2000 (this
"Amendment"), to the Fifth Amended and Restated Credit Agreement, dated as of
---------
November 1, 1999 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Aurora Foods Inc. (the "Company"), the
---------------- -------
financial institutions parties thereto (the "Lenders"), The Chase Manhattan
-------
Bank, as the administrative agent for the Lenders (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").
-------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make,
and have made, certain loans and other extensions of credit to the Company; and
WHEREAS, the Company has requested, and, upon this Amendment becoming
effective, the Lenders have agreed, that certain provisions of the Credit
Agreement be modified in the manner provided for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Terms defined in the Credit Agreement and used
-------------
herein shall have the meanings given to them in the Credit Agreement.
SECTION 2. Amendments to Credit Agreement.
------------------------------
(a) Amendments to Subsection 1.1. Subsection 1.1 of the Credit Agreement
----------------------------
is hereby amended by deleting the defined terms "Adjustment Date", "Applicable
Margin", "Consolidated EBITDA", "Consolidated Fixed Charges" and "Interest
Payment Date" therefrom and adding the following definitions in proper
alphabetical order:
"Amendment Effective Date" means the effective date of the First
Amendment, Forbearance and Waiver, dated as of March 29, 2000, to this
Agreement among the Company, certain Lenders parties thereto and the
Administrative Agent.
"Applicable Margin" means (x) with respect to Revolving Loans and
Tranche A Term Loans, 2.25% if such Loans are Base Rate Loans and 3.25% if
such Loans are Eurodollar Rate Loans, (y) with respect to Tranche B Term
Loans shall be 2.75% if such Loans are
<PAGE>
2
Base Rate Loans and 3.75% if such Loans are Eurodollar Rate Loans, and (z)
with respect to the Commitment Fee shall be 0.50%.
"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)
non-recurring charges incurred in Fiscal Year 2000 not to exceed $500,000
in the aggregate, (7) fees and expenses incurred in Fiscal Year 2000 in
connection with the discovery, investigation and subsequent remediation of
certain accounting irregularities and the restatement of financial
statements in connection therewith, not to exceed $25,000,000 in the
aggregate, (8) severance expenses incurred in Fiscal Year 2000 not to
exceed $5,000,000 in the aggregate, (9) all other non-cash items reducing
Consolidated Net Income and (10) 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 7.6F, if applicable.
"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 and (iv) income
taxes actually paid in cash by Company or any of its Subsidiaries.
"Interest Payment Date" means (i) with respect to any Base Rate Loan,
the last Business Day of each month of each year 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 one month, "Interest Payment Date" shall also include the date that is
one month after the commencement of such Interest Period.
(b) Amendment to Subsection 2.2B. Subsection 2.2B of the Credit Agreement
----------------------------
is hereby amended by deleting the phrase "either a one -, two-, three - or six-
month period;" from the first sentence thereof and substituting in lieu thereof
the following phrase:
"either a one-, two- or three-month period;".
(c) Amendment to Subsection 2.3A. Subsection 2.3A of the Credit Agreement
----------------------------
is hereby amended by deleting the last sentence thereof and substituting in lieu
thereof the following sentence:
"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 monthly
in arrears on the last day of each month of each year and on the Revolving
Loan Commitment Termination Date."
<PAGE>
3
(d) Amendment to Subsection 5.3. Subsection 5.3 of the Credit Agreement is
---------------------------
hereby amended by deleting such subsection in its entirety and substituting in
lieu thereof the following:
A. Financial Statements. The audited financial statements of the
--------------------
Company for the year ended December 31, 1999, when delivered to the
Administrative Agent, shall not reflect any material differences from the
draft financial statements previously delivered to Lenders on the Amendment
Effective Date. 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 as set forth on Schedule 5.3 annexed hereto, during the period
------------
from December 31, 1999 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, 1999.
(e) Amendment to Subsection 5.4. Subsection 5.4 of the Credit Agreement is
---------------------------
hereby amended by deleting the first sentence thereof and substituting in lieu
thereof the following sentence:
"Since December 31, 1999, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, other than the discovery of certain audit adjustments for
Fiscal Years 1998 and 1999 and related events as disclosed to the Lenders
as of the Amendment Effective Date."
(f) Amendment to Subsection 5.6. Subsection 5.6 of the Credit Agreement is
---------------------------
hereby amended by deleting the first word thereof and substituting in lieu
thereof the following phrase:
"Except as set forth on Schedule 5.6 annexed hereto, there".
(g) Amendments to Subsection 6.1. Subsection 6.1 is hereby amended as
----------------------------
follows:
(i) by amending subsection 6.1(i) in the following manner:
(A) by adding the following phrase immediately after the word
"Subsidiaries" set forth in the fourth line thereof: "and
balance sheet, cash flow statements and a cash flow forecast
of at least four weeks' duration of the Company and its
Subsidiaries"; and
(B) by adding the following proviso at the end thereof:
<PAGE>
4
"provided, that with respect to statements delivered
--------
pursuant to this section for Fiscal Year 2000, such
statements shall set forth in each case in comparative form
solely the corresponding figures from the consolidated plan
and financial forecast for the Fiscal Year 2000 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."; and
(ii) by adding the following phrase after the first reference to
"Fiscal Quarter" in subsection 6.1(ii):
"(other than any Fiscal Quarter ending December 31)"
(h) Amendment to Subsection 7.1(viii). Subsection 7.1(viii) of the Credit
---------------------------------
Agreement is hereby amended by deleting the period at the end thereof and
substituting in lieu thereof the following:
"; provided that the aggregate principal amount of such other
--------
Indebtedness incurred in Fiscal Year 2000 may not exceed at any time
$5,000,000 plus $5,000,000 to be allocated to trade letters of credit
incurred in the ordinary course of business that have been fully cash
collateralized."
(i) Amendment to Subsection 7.2A(vi). Subsection 7.2A(vi) of the Credit
--------------------------------
Agreement is hereby amended by deleting the period at the end thereof and
substituting in lieu thereof the following:
"; provided that Liens to secure trade letters of credit incurred in
--------
the ordinary course of business that have been fully cash collateralized
shall be permitted in an aggregate amount not to exceed $5,000,000."
(j) Amendment to Subsection 7.4(vii). Subsection 7.4(vii) of the Credit
--------------------------------
Agreement is hereby amended by adding the following parenthetical to the proviso
thereof after the phrase "Contingent Obligations":
"(excluding any liability in respect of Contingent Obligations
relating to trade letters of credit incurred in the ordinary course of
business that have been fully cash collateralized, which aggregate
amount shall not exceed $5,000,000)".
(k) Amendment to Subsection 7.3(v). Subsection 7.3(v) of the Credit
------------------------------
Agreement is hereby amended by deleting the period at the end thereof and
substituting in lieu thereof the following:
<PAGE>
5
"; provided that for Fiscal Year 2000, the Company and its
--------
Subsidiaries may not make any other Investments pursuant to this subsection
7.3(v)."
(l) Amendment to Subsection 7.5. Subsection 7.5 of the Credit Agreement is
---------------------------
hereby amended by adding the following sentence at the end thereof:
"Notwithstanding any of the foregoing, the Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly,
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment (other than (A) regularly scheduled interest payments and (B) fees
incurred in obtaining consents from the holders of Subordinated Notes that
are paid from the proceeds of equity investments in the Company made on or
after the Amendment Effective Date from resources outside the Company) at
any time during Fiscal Year 2000. Any mandatory prepayment or reduction
that would otherwise be required by subsection 2.4(iii)(c) as a result of
the equity investments from resources outside the Company used to pay fees
described in clause (B) above shall not be so required."
(m) Amendments to Subsection 7.6. Subsection 7.6 of the Credit Agreement
----------------------------
is hereby amended as follows:
(i) by deleting the portion of the table appearing at the end of
subsection 7.6A of the Credit Agreement relating to the periods set
forth below and substituting in lieu thereof the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
MINIMUM CONSOLIDATED CASH INTEREST
TEST PERIOD COVERAGE RATIO
-----------------------------------------------------------------------------------------------
<S> <C>
10/01/99 - 12/31/99 1.75:1.00
-----------------------------------------------------------------------------------------------
1/01/00 - 3/31/00 1.40:1.00
-----------------------------------------------------------------------------------------------
4/01/00 - 6/30/00 1.25:1.00
-----------------------------------------------------------------------------------------------
7/01/00 - 9/30/00 1.25:1.00
-----------------------------------------------------------------------------------------------
10/01/00 - 12/31/00 1.40:1.00
-----------------------------------------------------------------------------------------------
</TABLE>
(ii) by deleting the portion of the table appearing at the end of
subsection 7.6B of the Credit Agreement relating to the periods set
forth below and substituting in lieu thereof the following:
<PAGE>
6
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
MAXIMUM
TEST PERIOD LEVERAGE RATIO
-----------------------------------------------------------------------------------------------
<S> <C>
10/01/99 - 12/31/99 6.75:1.00
-----------------------------------------------------------------------------------------------
1/01/00 - 3/31/00 8.25:1.00
-----------------------------------------------------------------------------------------------
4/01/00 - 6/30/00 8.75:1.00
-----------------------------------------------------------------------------------------------
7/01/00 - 9/30/00 8.75:1.00
-----------------------------------------------------------------------------------------------
10/01/00 - 12/31/00 6.50:1.00
-----------------------------------------------------------------------------------------------
</TABLE>
(iii) by deleting the portion of the table appearing at the end of
subsection 7.6C of the Credit Agreement relating to the periods set
forth below and substituting in lieu thereof the following:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
MINIMUM FIXED CHARGE
TEST PERIOD COVERAGE RATIO
-----------------------------------------------------------------------------------------------
<S> <C>
10/01/99 - 12/31/99 1.05:1.00
-----------------------------------------------------------------------------------------------
1/01/00 - 3/31/00 0.95:1.00
-----------------------------------------------------------------------------------------------
4/01/00 - 6/30/00 0.85:1.00
-----------------------------------------------------------------------------------------------
7/01/00 - 9/30/00 0.85:1.00
-----------------------------------------------------------------------------------------------
10/01/00 - 12/31/00 1.00:1.00
-----------------------------------------------------------------------------------------------
</TABLE>
(iv) by deleting the table appearing in subsection 7.6D of the Credit
Agreement and substituting in lieu thereof the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
FISCAL YEAR MAXIMUM CONSOLIDATED CAPITAL
(OR PORTION THEREOF) EXPENDITURES AMOUNT
-----------------------------------------------------------------------------------------------
<S> <C>
Fiscal Year ending in December 1998 and December $40,000,000
1999
-----------------------------------------------------------------------------------------------
Fiscal Year ending in December 2000 and each $25,000,000
Fiscal Year thereafter
-----------------------------------------------------------------------------------------------
</TABLE>
(v) by adding the following phrase to the first sentence of subsection
7.6D after the phrase "provided that the Maximum Consolidated Capital
--------
Expenditures Amount for any Fiscal Year":
<PAGE>
7
", other than Fiscal Year 2000,";
(vi) by deleting the proviso appearing immediately after the table set
forth in subsection 7.6D of the Credit Agreement in its entirety;
(vii) by renaming subsection 7.6E as subsection 7.6F and adding the
following as a new subsection 7.6E:
E. Minimum Consolidated EBITDA. Company shall not permit, for
---------------------------
any month beginning with March 2000, Consolidated EBITDA to be
less than zero.
(viii) by deleting subsection 7.6F(i) in its entirety and substituting in
lieu thereof the following:
"(i) With respect to calculations of Consolidated Fixed Charges,
Consolidated EBITDA and Consolidated Cash Interest Expense for any
four-Fiscal Quarter period which includes any date in Fiscal Year
1999 (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 Consolidated EBITDA and Consolidated Fixed Charges
for the four applicable Fiscal Quarters ending in Fiscal Year 1999
are as set forth on Schedule 7.6F annexed hereto; and (b) that, with
-------------
respect to calculations of Consolidated Cash Interest Expense, the
amount of Consolidated Interest Expense for the four applicable
Fiscal Quarters ending in Fiscal Year 1999 are as set forth on
Schedule 7.6F annexed hereto."; and
-------------
(ix) by adding the following phrase to the first sentence of subsection
7.6F(ii) after the words "With respect to any period":
"after January 1, 2000".
(n) Amendments to Subsection 7.7(vi). Subsection 7.7(vi) of the Credit
--------------------------------
Agreement is hereby amended by deleting the period at the end thereof and
substituting in lieu thereof the following:
"; provided further, that notwithstanding the foregoing, the Company or any
Subsidiary of the Company shall not be permitted to make any acquisitions
of assets or businesses pursuant to this subsection 7.7(vi) at any time
during Fiscal Year 2000."
(o) Amendment to Annex A. Annex A to the Credit Agreement is hereby
--------------------
amended by deleting said Annex in its entirety.
(p) Amendments to Schedules. The Schedules to the Credit Agreement are
-----------------------
hereby amended as follows:
<PAGE>
8
(i) by adding a new Schedule 5.6 to the Credit Agreement in the
------------
form of Schedule 5.6 to this Amendment; and
------------
(ii) by deleting Schedule 7.6E to the Credit Agreement in its entirety and
-------------
substituting in lieu thereof a new Schedule 7.6F in the form of
-------------
Schedule 7.6F to this Amendment.
-------------
(q) Amendment to Security Agreement. The Security Agreement is hereby
-------------------------------
amended by adding the following phrase to Section 2(a) after the words "and any
Lender Interest Rate Agreement":
"and any amounts by which the aggregate amount debited from any
deposit, concentration, operating or disbursement account maintained
by the Company with any Lender or any affiliate of any Lender, as a
result of processing of payment orders issued by the Company, exceeds
the aggregate funds on deposit in such account".
(r) Amendment to Pledge Agreement. The Pledge Agreement is hereby amended
-----------------------------
by adding the following phrase to Section 2(a) after the words "and any Lender
Interest Rate Agreements":
"and any amounts by which the aggregate amount debited from any
deposit, concentration, operating or disbursement account maintained
by the Company with any Lender or any affiliate of any Lender, as a
result of processing of payment orders issued by the Company, exceeds
the aggregate funds on deposit in such account".
SECTION 3. Waivers to the Credit Agreement.
-------------------------------
(a) Waivers in Respect of Financial Condition Covenants. Any breach by
---------------------------------------------------
the Company of the financial condition covenants set forth in subsections 7.6A
through 7.6C of the Credit Agreement with respect to any test period ending in
1998 or 1999, and any Event of Default or Potential Event of Default resulting
from any such breach, is hereby waived.
(b) Waivers in Respect of Representations and Warranties Regarding
--------------------------------------------------------------
Financial Statements. Any breach by the Company of the representations and
- --------------------
warranties made or deemed made by it in respect of subsection 5.3, 5.4, 5.6 or
5.18 of the Credit Agreement or in respect of financial statements delivered
pursuant to subsection 6.1 of the Credit Agreement before March 28, 2000, as a
result of any of the financial statements directly or indirectly referred to
therein or so delivered being different from the restatements thereof furnished
to the Lenders as contemplated by this Amendment, and any Event of Default or
Potential Event of Default resulting from any such breach, is hereby waived.
(c) Waivers in Respect of Representations and Warranties Regarding No
-----------------------------------------------------------------
Conflict. Any breach by the Company of the representations and warranties made
- --------
or deemed made by it in respect of subsection 5.2B(ii) of the Credit Agreement
as a result of any Specified Indenture
<PAGE>
9
Default (as defined below), and any Event of Default or Potential Event of
Default resulting from any such breach, is hereby waived.
(d) Waivers in Respect of Covenants to Deliver Financial Statements. Any
---------------------------------------------------------------
breach by the Company of subsection 6.1(i) of the Credit Agreement with respect
to the delivery of consolidated financial statements of the Company and its
Subsidiaries for the fiscal months ended (i) January 31, 2000 and February 29,
2000, and any Event of Default or Potential Event of Default resulting from any
such breach, is hereby waived for the period ending May 15, 2000 only and (ii)
April 30, 2000, and any Event of Default or Potential Event of Default
resulting from any such breach, is hereby waived for the period ending May 31,
2000 only. Any breach by the Company of subsection 6.1(ii) of the Credit
Agreement with respect to the delivery of consolidated financial statements of
the Company and its Subsidiaries for the Fiscal Quarter ended March 31, 2000,
and any Event of Default or Potential Event of Default resulting from any such
breach, is hereby waived for the period ending May 31, 2000 only. Any breach by
the Company of subsection 6.1(iii) of the Credit Agreement with respect to the
delivery of audited consolidated financial statements of the Company and its
Subsidiaries for the fiscal year ended December 31, 1999, and any Event of
Default or Potential Event of Default resulting from any such breach, is hereby
waived for the period ending April 17, 2000 only. Any breach by the Company of
subsection 6.1(xiii) of the Credit Agreement with respect to the delivery of
consolidated financial statements of the Company and its Subsidiaries for the
fiscal year ended December 31, 2000, and any Event of Default or Potential Event
of Default resulting from any such breach, is hereby waived for the period
ending April 17, 2000 only.
(e) Waiver in Respect of Failure to Deliver Financial Information. Any
-------------------------------------------------------------
breach by the Company of subsection 8.16 of the Credit Agreement with respect to
the delivery of a satisfactory audited statement of the assets and liabilities
acquired pursuant to the Lender's Bagels Acquisition as of December 31, 1998 or
a satisfactory audited statement of operations with respect to Lender's Bagels
for the fiscal year ended December 31, 1998, and any Event of Default or
Potential Event of Default resulting from any such breach, is hereby waived.
(f) Waivers in Respect of Receivables Transaction. Any breach by the
---------------------------------------------
Company of subsection 2.4B(iii)(a), 7.2 or 7.7 of the Credit Agreement with
respect to the consummation of a receivables sale agreement, on terms and
conditions satisfactory to the Administrative Agent and the Requisite Lenders
(such receivables sale agreement, the "Receivables Transaction") and the use of
-----------------------
the Net Proceeds thereof (with respect to any breach of subsection 2.4B(iii)(a),
solely to the extent such Net Proceeds do not exceed $60,000,000 in any 30-day
period) and any Event of Default or Potential Event of Default resulting from
any such breach, is hereby waived for the period ending March 31, 2001 only.
(g) Waivers in Respect of Other Transaction. Any breach by the Company
---------------------------------------
of subsection 7.1, 7.2, 7.7 or 7.8 of the Credit Agreement with respect to (i) a
barter transaction involving the exchange with Active Media Services of
inventory for trade credits and the sale or financing of such trade credits to
or with First International Bank for approximately $3,600,000 or (ii) a sale and
leaseback transaction of certain pancake and waffle equipment to achieve local
tax
<PAGE>
10
relief involving the Industrial Development Commission of the City of
Jacksonville, and any Event of Default or Potential Event of Default resulting
from any such breach, is hereby waived.
(h) Waivers in Respect of Amendments of Documents Relating to Subordinated
----------------------------------------------------------------------
Indebtedness. Any breach by the Company of subsection 7.12B of the Credit
- ------------
Agreement as a result of any amendment or payment made to cure or waive any
Specified Indenture Default (as defined below), and any Event of Default or
Potential Event of Default resulting from any such breach, is hereby waived;
provided that the terms of any such amendment or payment shall be satisfactory
- --------
to the Administrative Agent and the Requisite Lenders.
SECTION 4. Forbearance. Each of the Lenders parties hereto agree
-----------
that, for the period from the Amendment Effective Date to the Section 4
Termination Date (as defined below), such Lender will not exercise any of the
remedies available to it, and will not instruct the Administrative Agent to
exercise or consent to the Administrative Agent exercising any of the remedies
available to it, in either case under any of the Loan Documents (including,
without limitation, to accelerate the Loans or terminate the commitments as
contemplated in Section 8 of the Credit Agreement) solely as a result of the
occurrence of any Event of Default or Potential Event of Default arising under
subsection 8.2(ii) of the Credit Agreement by virtue of the existence of any
breach or default by the Company of the Indenture dated as of February 10, 1997
with Wilmington Trust Company, as Trustee, or of the Indenture dated as of July
1, 1997 with Wilmington Trust Company, as Trustee, or of the Indenture dated as
of July 1, 1998 with Wilmington Trust Company, as Trustee (such Indentures, the
"Specified Indentures"; and such breaches or defaults, the "Specified Indenture
-------------------- -------------------
Defaults"). The provisions of this Section 4 shall not apply to subsection 4.2
- --------
of the Credit Agreement. The "Section 4 Termination Date" shall be the earliest
of (i) June 30, 2000 or (ii) the date on which all the Specified Indenture
Defaults have been cured or waived, through amendments to the Specified
Indentures or otherwise or (iii) the date on which a notice of acceleration
under any Specified Indenture has been delivered to the Company.
SECTION 5. Extensions of Letters of Credit. The Issuing Lender is
-------------------------------
hereby authorized to extend any currently outstanding "evergreen" Letters of
Credit issued pursuant to subsection 3.1 of the Credit Agreement.
SECTION 6. Blocked Account Agreement. The Company hereby agrees to
-------------------------
enter into a springing blocked account agreement with the Administrative Agent,
pursuant to which the Company shall pledge to the Administrative Agent to secure
the obligations of the Company to the Lenders any cash received by the Company;
provided that (i) any amounts received pursuant to the Receivables Transaction,
- --------
and (ii) an amount of up to $1,500,000 to be used for administrative and payroll
purposes, shall not be so pledged.
SECTION 7. Conditions to Effectiveness. This Amendment shall become
---------------------------
effective on the date (the "Amendment Effective Date") on which all of the
------------------------
following conditions precedent have been satisfied or waived:
<PAGE>
11
(a) The Administrative Agent shall have received this Amendment,
executed and delivered by a duly authorized officer of each of the Company,
the Guarantor, and the Requisite Lenders.
(b) The Administrative Agent shall have received evidence that each
of the Dartford Advisory Agreement and the Dartford Expense Agreement has
been terminated.
(c) Each Lender shall have received payment of all interest, fees and
other amounts due and payable thereunder through the Amendment Effective
Date.
(d) The Company shall have paid all accrued fees and expenses of the
Administrative Agent and the reasonable expenses of the Lenders, including
the accrued fees and expenses of counsel to the Administrative Agent.
(e) The Company shall have delivered drafts of the restated financial
statements for the fiscal year ended December 31, 1999 and such financial
statements shall be consistent with the information with respect to the
financial results and condition of the Company disclosed in the
Presentation to the Bank Group dated March 22, 2000.
(f) After giving effect to the Amendment, no Event of Default or
Potential Event of Default shall have occurred and be continuing, other
than any Event of Default or Potential Event of Default referred to in
Section 4 hereof.
(g) The Lenders shall have received such legal opinions (including
opinions from counsel to the Company and the Guarantor), documents and
other instruments (including organizational and shareholder documents for
each of the Company and the Guarantor) as are customary for transactions of
this type or as they may reasonably request.
SECTION 8. Representations and Warranties. To induce the Lenders parties
------------------------------
hereto to enter into this Amendment, the Company hereby represents and warrants
to the Administrative Agent and all of the Lenders that:
(i) the representations and warranties made by the Company in the
Loan Documents are true and correct in all material respects on and as of
the Amendment Effective Date, after giving effect to the effectiveness of
this Amendment, as if made on and as of the Amendment Effective Date,
except for the representations and warranties set forth in subsection 5.8A
of the Credit Agreement in respect of the Specified Indenture Defaults; and
(ii) upon consummation of the Receivables Transaction, such
Receivables Transaction will not conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a Potential Event of
Default or an Event of Default under the Credit Agreement as amended hereby
or a default under the Subordinated Note Indentures.
<PAGE>
12
SECTION 9. Effect on the Loan Documents. (a) Except as specifically
----------------------------
amended above, the Credit Agreement and all other Loan Documents shall continue
to be in full force and effect and are hereby in all respects ratified and
confirmed.
(b) The execution, delivery and effectiveness of this Amendment,
including the waivers by the Lenders provided in Section 3 hereof, shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of any Lender or the Administrative Agent under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
SECTION 10. Amendment Fee. The Company shall pay to each Lender which
-------------
executes and delivers this Amendment prior to 5:00 p.m., New York City time,
March 29, 2000, a fee equal to 0.50% of the sum of such Lender's (a) Revolving
Credit Commitment, (b) outstanding Tranche A Term Loans and (c) outstanding
Tranche B Term Loans, such fee to be earned as of the Amendment Effective Date
and payable on the earlier of April 14, 2000 or the date on which the initial
receivables sale pursuant to the Receivables Transaction is consummated.
SECTION 11. Costs, Expenses and Taxes. The Company agrees to pay on demand
-------------------------
all actual and reasonable and documented out-of-pocket costs and expenses of the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of this Amendment and the other
instruments and documents to be delivered thereunder and hereunder, including,
without limitation, the reasonable and documented fees and out-of-pocket
expenses of counsel for the Administrative Agent (including allocated costs of
internal counsel) with respect thereto and with respect to advising the
Administrative Agent as to its rights and responsibilities hereunder and
thereunder. The Company further agrees to pay on demand all costs and expenses
of the Administrative Agent and each of the Lenders, if any (including, without
limitation, counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Amendment
and the other instruments and documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses (including allocated
costs of internal counsel) in connection with the enforcement of rights under
this Section 9.
SECTION 12. Affirmation of Subsidiary Guaranty, Pledge Agreement and Credit
---------------------------------------------------------------
Agreement. The Guarantor hereby (a) consents to the modification of the Credit
- ---------
Agreement contemplated hereby and (b) acknowledges and agrees that the
guarantees contained in the Subsidiary Guaranty, the pledge of stock contained
in the Pledge Agreement and the obligations contained in the Credit Agreement as
modified hereby are, and shall remain, in full force and effect after giving
effect to this Amendment.
SECTION 13. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
13
SECTION 14. Execution in Counterparts. This Amendment may be executed by
-------------------------
one or more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Amendment
signed by all the parties shall be lodged with the Company and the
Administrative Agent.
<PAGE>
14
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
AURORA FOODS INC.
By: _______________________________________
Name:__________________________________
Title:_________________________________
SEA COAST FOODS, INC.
By: _______________________________________
Name:__________________________________
Title:_________________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By: _______________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
[NAME OF LENDER]
By: _____________________________________
Name:
Title:
<PAGE>
Schedule 5.6
------------
Litigation
SCHEDULE 5.6: Litigation
- -------------------------
Securities Actions Pending (All filed in the Northern District of California)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Case Counsel for Plaintiff Filed
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kenneth Steiner, et al. v. Aurora Foods Inc. et al. Robert S. Green, Esq. 2/22/2000
No: C-00-0602-MHP Rob Jagarjian, Esq.
Girard & Green, LLP
160 Sansome St., Suite 300
San Francisco, CA 94101
(415) 981-4800
- ---------------------------------------------------------------------------------------------------------
Riemer v. Aurora Foods Inc. et. al. Jill Manning, Esq. 2/22/2000
No.: C-00-0609 Kirby McInerney & Squire, LLP
221 Main Street, Suite 1300
San Francisco, CA 94105
- ---------------------------------------------------------------------------------------------------------
Hayes, et al. v. Aurora Foods Inc. et al. Randi Bandman, Esq. 2/22/2000
No: C-00-20200-PVT Deborah Vanore (legal ass't.)
Milberg Weiss Bershad Hynes &
Lerach
600 West Broadway, Ste. 1800
San Diego, CA 92101
(619) 231-1058
- ---------------------------------------------------------------------------------------------------------
Dr. Raphael Reiss, et al. v. Aurora Foods Inc. et al. Joseph J. Tabacco, Jr., Esq. 2/23/2000
No: C-00-0614-JL Berman, DeValerio, Pease &
Tabacco, P.C.
425 California Street, Ste. 2025
San Francisco, CA 94104
(415) 433-3200
- ---------------------------------------------------------------------------------------------
Kevin P. Coyle, et al. v. Aurora Foods Inc. et al. Robert S. Green, Esq. and 2/23/2000
No: C-00-0623-SI Rob Jagarjian, Esq.
Girard & Green, LLP
160 Sansome St., Suite 300
San Francisco, CA 94101
(415) 981-4800
Michael L. Brautigam
Law Offices of Gene Mesh &
Assocs.
2605 Burnet Avenue
Cincinnati, OH 45219
(513) 221-8800
- ---------------------------------------------------------------------------------------------------------
Pentler v. Aurora Foods Inc. et. al. James Jay Seirmarco, Esq. 2/24/2000
No.: C-00-0759 Abbey, Gardy & Squitieri, LLP
595 Market Street, Suite 2500
San Francisco, CA 94105
- ---------------------------------------------------------------------------------------------------------
Craner v. Aurora Foods Inc. et. al. Betsy Manifold, Esq. 2/25/2000
No.: C-00-0661 Wolf Haldenstein Adler Freeman &
Herz LLP
750 B Street, Suite 2770
San Diego, CA 92101
(619) 239-4599
- ---------------------------------------------------------------------------------------------------------
Brown, et al. v. Aurora Foods Inc. et al. Behram V. Parekh, Esq. 2/28/2000
No: C-00-0670-EDL Weiss & Yourman
10940 Wilshire Blvd., 24th Fl.
Los Angeles, CA 90024
(310) 208-2800/2388
- ---------------------------------------------------------------------------------------------------------
Long, et al. v. Aurora Foods Inc. et al. Randi Bandman, Esq. 2/29/2000
No: C-00-0711-PJH Deborah Vanore (legal ass't.)
Milberg Weiss Bershad Hynes &
Lerach
600 West Broadway, Ste. 1800
San Diego, CA 92101
(619) 231-1058
- ---------------------------------------------------------------------------------------------------------
Leist, et al. v. Aurora Foods Inc. et al. Randi Bandman, Esq. 3/2/2000
No: C-00-0736-CW Deborah Vanore (legal ass't.)
Milberg Weiss Bershad Hynes &
Lerach
600 West Broadway, Ste. 1800
San Diego, CA 92101
(619) 231-1058
- ---------------------------------------------------------------------------------------------------------
Marie Crotty v. Aurora Foods Inc. et. al. Randi Bandman, Esq. 3/14/2000
No: C-00-0915-WHA Deborah Vanore (legal ass't.)
Milberg Weiss Bershad Hynes &
Lerach
600 West Broadway, Ste. 1800
San Diego, CA 92101
(619) 231-1058
- ---------------------------------------------------------------------------------------------------------
Ricky H. Camp v. Aurora Foods Inc. et. al. Randi Bandman, Esq. 3/17/2000
No: C-00-0962-WHA Deborah Vanore (legal ass't.)
Milberg Weiss Bershad Hynes &
Lerach
600 West Broadway, Ste. 1800
San Diego, CA 92101
(619) 231-1058
- ---------------------------------------------------------------------------------------------------------
Kastenbaum v. Aurora Foods Inc. et. al. William F. Jonckheer, Esq. 3/5/2000
No.: C-00-0784 Schubert & Reed
2 Embarcadero Center #1050
San Francisco, CA 94111
(415) 788-4220
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The company believes that additional actions have been or may be filed relating
to similar matters as the above actions.
In addition, the Company is in communication with, and cooperating with, all
relevant governmental authorities in connection with the Company's restatement
of earnings.
<PAGE>
SCHEDULE 7.6F
-------------
(000's)
<TABLE>
<CAPTION>
Consolidated Consolidated Consolidated Interest Consolidated Fixed
EBITDA Total Debt Expense Charges
------ ---------- ------- -------
<S> <C> <C> <C> <C>
March Quarter 1999 $ 48,579 $ 1,007,196 $ 22,042 $ 34,647
June Quarter 1999 $ 39,025 $ 1,077,898 $ 22,298 $ 37,075
September Quarter 1999 $ 47,761 $ 1,113,778 $ 23,436 $ 36,178
December Quarter 1999 $ 41,456 $ 1,079,539 $ 22,568 $ 36,734
</TABLE>
<PAGE>
EXECUTION COPY
--------------
EXHIBIT 10.36
AMENDMENT
AMENDMENT, dated as of April 28, 2000 (this "Amendment"), to the Fifth
---------
Amended and Restated Credit Agreement, dated as of November 1, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among Aurora Foods Inc. (the "Company"), the financial institutions parties
-------
thereto (the "Lenders"), The Chase Manhattan Bank, as the administrative agent
-------
for the Lenders (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").
-------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make, and have made, certain loans and other extensions of credit to the
Company; and
WHEREAS, the Company has requested, and, upon this Amendment becoming
effective, the Lenders have agreed, that certain provisions of the Credit
Agreement be modified in the manner provided for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Terms defined in the Credit Agreement and
-------------
used herein shall have the meanings given to them in the Credit Agreement.
SECTION 2. Amendment to Credit Agreement. Subsection 1.1 of the Credit
-----------------------------
Agreement is hereby amended by deleting the defined term "Interest Payment Date"
therefrom in its entirety and substituting in lieu thereof the following:
"Interest Payment Date" means, with respect to any Base Rate
Loan and any Eurodollar Rate Loan, the last Business Day of each
month of each year.
SECTION 3. Conditions to Effectiveness. This Amendment shall be
---------------------------
effective as of March 29, 2000 upon receipt by the Administrative Agent of this
Amendment, executed and delivered by a duly authorized officer of each of the
Company, the Guarantor, and the Requisite Lenders.
SECTION 4. Representations and Warranties. To induce the Lenders
------------------------------
parties hereto to enter into this Amendment, the Company hereby represents and
warrants to the Administrative
<PAGE>
2
Agent and all of the Lenders that the representations and warranties made by the
Company in the Loan Documents are true and correct in all material respects on
and as of the date hereof, after giving effect to the effectiveness of this
Amendment, as if made on and as of the date hereof, except as otherwise provided
in the First Amendment, Forbearance and Waiver, dated as of March 29, 2000, to
the Credit Agreement.
SECTION 5. Effect on the Loan Documents. The Credit Agreement and all
----------------------------
other Loan Documents shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed.
SECTION 6. Costs, Expenses and Taxes. The Company agrees to pay on
-------------------------
demand all actual and reasonable and documented out-of-pocket costs and expenses
of the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification and amendment of this Amendment and the
other instruments and documents to be delivered thereunder and hereunder,
including, without limitation, the reasonable and documented fees and out-of-
pocket expenses of counsel for the Administrative Agent (including allocated
costs of internal counsel) with respect thereto and with respect to advising the
Administrative Agent as to its rights and responsibilities hereunder and
thereunder. The Company further agrees to pay on demand all costs and expenses
of the Administrative Agent and each of the Lenders, if any (including, without
limitation, counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Amendment
and the other instruments and documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses (including allocated
costs of internal counsel) in connection with the enforcement of rights under
this Section 6.
SECTION 7. Affirmation of Subsidiary Guaranty, Pledge Agreement and
--------------------------------------------------------
Credit Agreement. The Guarantor hereby (a) consents to the modification of the
- ----------------
Credit Agreement contemplated hereby and (b) acknowledges and agrees that the
guarantees contained in the Subsidiary Guaranty, the pledge of stock contained
in the Pledge Agreement and the obligations contained in the Credit Agreement as
modified hereby are, and shall remain, in full force and effect after giving
effect to this Amendment.
SECTION 8. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9. Execution in Counterparts. This Amendment may be executed by
-------------------------
one or more of the parties to this Amendment on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Amendment
signed by all the parties shall be lodged with the Company and the
Administrative Agent.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
AURORA FOODS INC.
By: _________________________________________
Name:
Title:
SEA COAST FOODS, INC.
By: _________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By: _________________________________________
Name:
Title:
<PAGE>
4
[NAME OF LENDER]
By: _________________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.38
EXECUTION COPY
--------------
This RECEIVABLES PURCHASE AGREEMENT, dated as of April 19, 2000, is entered
into by and between Aurora Foods Inc., a Delaware corporation (the "Seller"),
and The Chase Manhattan Bank, a New York banking corporation (the "Purchaser").
WHEREAS, Seller desires to sell, transfer, assign and convey Pools (as
defined in Exhibit A) of certain Eligible Receivables (as defined in Exhibit A)
from time to time to Purchaser on the terms and conditions set forth herein;
WHEREAS, Purchaser has agreed to buy such Pools of Eligible Receivables
from Seller on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Seller and Purchaser agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. The terms defined in Exhibit A are
---------------------
used in this Agreement as so defined.
SECTION 1.02. Terms Generally. The definitions of terms herein shall
---------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." The word "will"
shall be construed to have the same meaning and effect as the word "shall."
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder," and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
subsections, Exhibits and Schedules shall be construed to refer to Articles and
subsections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.03. Accounting Terms; GAAP. Except as otherwise expressly
----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP.
<PAGE>
2
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
Section 2.01. Purchase and Sale of Receivables. On the terms and subject
--------------------------------
to the conditions of this Agreement and without recourse (except to the extent
specifically provided herein), Seller may sell, transfer, assign and convey (but
shall have no obligation to sell, transfer, assign and convey) to Purchaser, and
Purchaser shall purchase from Seller from time to time on a Funding Date prior
to the Termination Date, Eligible Receivables; provided, however, that (i) the
Initial Installment of the Purchase Price of each Pool to be sold and purchased
shall be at least $1,000,000, and (ii) after giving effect to such sale and
purchase on any such Funding Date, Net Investment shall not exceed the Facility
Limit. Eligible Receivables to be sold hereunder on a Funding Date shall be
identified on a Schedule of Eligible Receivables (substantially in the form of
Exhibit C) and attached to a Bill of Sale (substantially in the form of Exhibit
B).
(a) Sale of Pools of Eligible Receivables. On each Funding Date, Seller
shall sell, transfer, assign and otherwise convey to Purchaser, without recourse
to Seller (except as specifically provided herein) (i) all right, title and
interest of Seller in and to the Pool of Eligible Receivables identified on the
Schedule of Eligible Receivables attached to the applicable Bill of Sale, and
all moneys due or to become due with respect thereto; and (ii) the Related
Security of such Eligible Receivables ((i) and (ii) collectively, the "Conveyed
Property").
(b) Purchaser Does Not Assume Obligations. The foregoing sales, transfers,
assignments, and conveyances do not constitute and are not intended to result in
a creation or an assumption by Purchaser of any obligation of Seller in
connection with the Purchased Receivables or any agreement or instrument
relating thereto, including, without limitation, any obligation to any Obligors.
(c) Purchase of Pools. In consideration of the sale of the Purchased
Receivables and other Conveyed Property sold by Seller to Purchaser on the
Closing Date and on each Funding Date, as the case may be, Purchaser shall pay
to Seller the Purchase Price of each Pool of Purchased Receivables in the manner
set forth below. The Purchaser shall pay the Initial Installment of the Purchase
Price for each Pool on the Funding Date for such Pool. The Balance Payment
portion of the Purchase Price for a Pool shall be payable as follows: (i) if on
any date prior to Completion of such Pool, the aggregate amount of Collections
with respect to such Pool of Purchased Receivables received and actually paid to
Purchaser is equal to or greater than the sum of the Initial Installment of the
Purchase Price plus the Discount Fee with respect to such Pool of Purchased
Receivables (each such Pool, a "Zero Net Investment Pool"), (A) within two (2)
Business Days of such date, Purchaser shall pay to Seller in cash the portion of
the Balance Payment, if any, with respect to such Pool which has been collected
as of such date and (B) thereafter, Purchaser shall pay to Seller (without
duplication) in cash on each Business Day the portion of the Balance Payment, if
any, with respect to such Pool which was collected on such Business Day and is
available to Purchaser (if not already paid pursuant to preceding clause (A)),
and (ii) without duplication, within two (2) Business Days of Completion,
Purchaser shall pay to Seller in cash the balance of the Balance Payment due
after giving effect to all previous payments in respect of the Balance Payment
for such Pool under clause (i) above; provided that,
--------
<PAGE>
3
notwithstanding anything to the contrary contained above, no portion of the
Balance Payment owing in respect of any Pool shall be payable until all prior
Pools have reached Completion or have become Zero Net Investment Pools; and
provided, further, that if Seller is not in compliance with Section 5.01(l)(i),
- -------- -------
any Balance Payment that would otherwise be payable to Seller shall be applied
first to the Administrative Fee Account as provided for in Section 5.01(1)(ii).
If the aggregate Dilution Shortfall for a Pool exceeds the aggregate Balance
Difference for such Pool then the Purchaser may offset against such amount any
Balance Payment in respect of any other Pool that is or may become due to the
Seller hereunder.
(d) Determination of the Initial Installment of the Purchase Price. (i)
The Initial Installment of the Purchase Price of each Receivable in a Pool will
be determined as follows: The Purchaser shall purchase Receivables for the
Purchase Advance Percentage of the Aggregate Amount thereof (such amount, the
"Reserve Adjusted Amount" of such Receivable). The "Initial Installment of the
Purchase Price" for a Receivable will be an amount equal to (x) the Reserve
Adjusted Amount of such Receivable minus (y) a discount fee (the "Discount Fee")
equal to the Target Yield Percentage of such Reserve Adjusted Amount. The
"Target Yield Percentage" is the percentage of the Reserve Adjusted Amount of a
Receivable that, when subtracted from such amount, will cause the effective per
annum yield on the Initial Installment of the Purchase Price of such Receivable,
when collected by the Purchaser, to equal the Target Yield per annum, assuming
such Receivable is collected in accordance with the Collection Cycle Assumption
then in effect for such Receivable. Initially the Target Yield will be
calculated on the assumption that the weighted average number of days from the
Funding Date to the date on which the Collections in respect of the Receivables
in a particular Pool equal the sum of the Initial Installment of the Purchase
Price and the Discount Fee applicable thereto will be collected is 18 days (such
assumption, the "Collection Cycle Assumption"). The Purchaser will have the
right to adjust the Collection Cycle Assumption for Pools sold on a day other
than a Tuesday. In addition the Purchaser shall adjust the Collection Cycle
Assumption for subsequent Pools to reflect the actual collection experience for
previously sold Pools and the Seller's historical collection experience, such
adjustments to be made based upon Pools most recently Completed, or if not then
Completed, that did not Complete within the Collection Cycle Assumption
applicable thereto. The "Target Yield" for each Pool is a rate per annum equal
to the ABR determined on the relevant Funding Date plus 2.50%, calculated on the
basis of a year of 365 days and actual days elapsed. The Seller and the
Purchaser acknowledge that all of the Purchase Price adjustments are prospective
in nature and will not affect the Purchase Price of Pools sold prior to any such
adjustment. The Initial Installment of the Purchase Price and the Discount Fee
in respect of each Pool shall be allocated to each Purchased Receivable in such
Pool ratably based on the Reserve Adjusted Amount of such Receivable.
(e) Accounting Records. In connection with the sale and assignment of
Purchased Receivables hereunder, Seller agrees, at its own expense, on each
Funding Date, to indicate or cause to be indicated clearly and unambiguously in
its accounting records that such Purchased Receivables and the other Conveyed
Property described in Section 2.01 have been sold to Purchaser pursuant to this
Agreement as of the applicable Funding Date.
(f) True Sale. It is the express intent of Seller and Purchaser that the
assignment and conveyance of the Purchased Receivables and other Conveyed
Property by Seller to Purchaser
<PAGE>
4
pursuant to this Agreement be construed as an absolute sale of such Purchased
Receivables and Conveyed Property by Seller to Purchaser.
(g) Taxation. Both Seller and Purchaser agree that neither of them will
take or assert any position on any filings made with any federal or state taxing
authorities which is inconsistent with the characterization of the assignment
and conveyance of the Purchased Receivables and other Conveyed Property as a
sale, provided that Purchaser shall not be requested to contest any adverse
determination by any such taxing authorities unless it has received an indemnity
reasonably satisfactory to it.
(h) Additional Rights as Purchaser. As further confirmation of the sale of
the Receivables, it is understood and agreed that the Purchaser shall have the
following rights:
(i) the Purchaser shall have the right at any time to notify,
or require that Seller at its own expense notify, the respective Obligors
of the Purchaser's ownership of the Purchased Receivables or to otherwise
verify the Purchased Receivables directly with the relevant Obligors and
may direct that payment of all amounts due or to become due under the
Purchased Receivables be made directly to the Purchaser or its designee;
(ii) the Purchaser shall have the right to (A) sue for
collection on any Purchased Receivables or (B) sell any Purchased
Receivables to any Person for a price that is acceptable to the Purchaser;
(iii) Seller shall, upon the Purchaser's written request and at
Seller's expense, (A) assemble all of Seller's documents, instruments and
other records (including credit files and computer tapes or disks) that (1)
evidence or will evidence or record Receivables sold by Seller and (2) are
otherwise necessary or desirable to effect Collections of such Purchased
Receivables (collectively, the "Documents") and (B) deliver the Documents
to the Purchaser or its designee at a place designated by the Purchaser. In
recognition of Seller's need to have access to any Documents which may be
transferred to the Purchaser hereunder, whether as a result of its
continuing business relationship with any Obligor for Receivables purchased
hereunder, the Purchaser hereby grants to Seller an irrevocable license to
access the Documents transferred by Seller to the Purchaser and to access
any such transferred computer software in connection with any activity
arising in the ordinary course of Seller's business; provided, that Seller
--------
shall not disrupt or otherwise interfere with the Purchaser's use of and
access to the Documents and its computer software during such license
period; and
(iv) Seller hereby grants to the Purchaser an irrevocable power
of attorney (coupled with an interest) to take any and all steps in
Seller's name necessary or desirable, in the reasonable opinion of the
Purchaser, to collect all amounts due under the Purchased Receivables,
including, without limitation, enforcing the Purchased Receivables and
exercising all rights and remedies in respect thereof and endorsing
Seller's name on checks and other instruments representing Collections.
<PAGE>
5
(i) No Repurchase. Except to the extent expressly set forth herein, Seller
shall not have any right or obligation under this Agreement, by implication or
otherwise, to repurchase from Purchaser any Purchased Receivables or to rescind
or otherwise retroactively effect any purchase of any Purchased Receivables
after the Funding Date relating thereto.
(j) Application of Collections. Purchaser and Seller agree that payments
received from an Obligor will be applied as follows (notwithstanding any
agreement with such Obligor):
(A) if such Obligor specifies a particular invoice to which a
particular amount is to be paid or deducted, then such payment or deduction
will be applied to such invoice;
(B) if such Obligor specifies multiple invoices to which payment
or deductions are to be made, but fails to specify the particular amount to
be paid or deducted from each particular invoice, then the payment or
deductions shall be made on a pro rata basis against all such specified
invoices; and
(C) if such Obligor fails to specify an invoice to which payment
or deductions are to be made, then such payment or deductions will be
applied against the oldest invoice of such Obligor first;
in each case without regard to whether the Receivable evidenced by such invoice
is a Purchased Receivable.
ARTICLE III
CONDITIONS OF PURCHASE AND SALE OF RECEIVABLES
SECTION 3.01. Conditions Precedent to the Initial Purchase and Sale of
--------------------------------------------------------
Receivables. The purchase and sale of the first Pool of Eligible Receivables
- -----------
hereunder is subject to the condition precedent that Purchaser shall have
received, or waived the receipt of, on or before the Closing Date the following,
each (unless otherwise indicated) in form and substance reasonably acceptable to
Purchaser:
(a) Certified copies of Seller's 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 Seller is qualified as
a foreign corporation to do business, each dated a recent date prior to the
Closing Date;
(b) Copies of Seller's Bylaws certified as of the Closing Date by
its corporate secretary or an assistant secretary as being in full force
and effect without modification or amendment;
(c) Resolutions of Seller's Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement and
the other Transaction Documents to which it is a party, certified as of the
Closing Date by its corporate secretary
<PAGE>
6
or an assistant secretary as being in full force and effect without
modification or amendment;
(d) Signature and incumbency certificates of Seller's officers
executing this Agreement and the other Transaction Documents to which it is
a party (on which certificate Purchaser may conclusively rely until such
time as it shall receive from Seller a revised certificate meeting the
requirements of this subsection (d));
(e) Executed originals of this Agreement;
(f) Such other documents as Purchaser may reasonably request;
(g) Evidence reasonably satisfactory to Purchaser of the filing of
Financing Statements (Form UCC-1) naming Seller as debtor and Purchaser as
secured party and covering the Purchased Receivables and Related Security,
in form and substance satisfactory to the Purchaser, or other similar
instruments or documents as may be necessary or appropriate under the UCC
of all appropriate jurisdictions or any comparable law to transfer Seller's
interests in all Purchased Receivables and Related Security to the
Purchaser;
(h) Certified copies of Requests for Information or Copies (Form UCC-
11) (or a similar search report certified by a party acceptable to
Purchaser), dated a date reasonably close to the Closing Date, listing all
effective financing statements which name Seller (under its present name
and any previous names) as debtor and which are filed in the jurisdictions
in which filings were made pursuant to subsection (g) above, together with
copies of such financing statements (none of which shall cover any Eligible
Receivables or Contracts other than those subject to the release referred
to below);
(i) A release, in form and substance satisfactory to the Purchaser,
of the security interests of the lenders under the Seller's bank credit
facility in Purchased Receivables and Related Security;
(j) Opinions of (1) Ropes & Gray, counsel to Seller, in form and
substance satisfactory to Purchaser and (2) White & Case, special New York
counsel to Seller, in form and substance satisfactory to Purchaser;
(k) Evidence of payment to Purchaser of all transaction fees payable
by Seller on or prior to the Closing Date as set forth in the Fee Letter;
(l) Payment of all reasonable legal fees and other fees and out-of-
pocket expenses as to which Purchaser has presented bills or invoices on or
prior to the Closing Date;
(m) Schedule of Approved Obligors;
(n) An executed participation agreement, entered into by the
Subordinated Participants, in form and substance satisfactory to the
Purchaser, pursuant to which such
<PAGE>
7
Subordinated Participants agree to purchase a subordinated participation in
the Pools in an amount equal to $9,000,000 on a Net Investment basis (the
"Participation Agreement");
(o) An executed Receivables Management Services agreement, entered
into by the Administrator and Purchaser, in form and substance satisfactory
to the Purchaser, pursuant to which Administrator shall have agreed to
perform certain administrative functions for the Purchaser hereunder (the
"Administration Agreement"); and
(p) Evidence of the establishment of the Administrative Fee Account
and the availability of funds deposited in such account to be applied
towards the Administrative Fee pursuant to Section 5.01(l).
SECTION 3.02. Conditions Precedent to each Purchase and Sale of Eligible
----------------------------------------------------------
Receivables. Each purchase and sale of Eligible Receivables hereunder shall be
- -----------
subject to the conditions precedent that:
(a) At least one (1) Business Day prior to a Funding Date, Seller
shall deliver to Purchaser, with a copy to the Administrator, a written
statement in the form of Exhibit D (the "Funding Certificate") designating
such Funding Date, setting forth Eligible Receivables to be sold on such
Funding Date (indicating the name of each Approved Obligor, the Related
Security, if any, to each Eligible Receivable and listing separately the
Aggregate Amount of each such Eligible Receivable and of the Pool).
(b) On each Funding Date the following statements shall be true after
giving effect to the purchase and sale of each Pool on such Funding Date
(and Seller by accepting the Initial Installment of the Purchase Price for
each such Pool shall be deemed to have certified that):
(i) The representations and warranties contained in
Section 4.01 are correct on and as of such Funding Date as though
specifically made on and as of such Funding Date;
(ii) No event has occurred and is continuing, or would
result from such purchase and sale of the Pool, which constitutes an
Event of Termination or would constitute an Event of Termination but
for the requirement that notice be given or time elapse or both;
(iii) After giving effect to the proposed purchase and sale
the Net Investment does not exceed the Facility Limit.
(c) A Bill of Sale covering the Eligible Receivables as set forth in
the Schedule of Eligible Receivables to be sold and purchased on that
Funding Date shall be duly executed by Seller and delivered to Purchaser.
(d) Seller shall have delivered to Purchaser or its designee an
invoice register in connection with the particular Pool of Eligible
Receivables to be sold and purchased, in
<PAGE>
8
the form of a diskette or magnetic tape, or in such other form and
substance reasonably acceptable to Purchaser, showing each Approved
Obligor's name, the invoice date, invoice number and net invoice amount of
each Eligible Receivable to be sold and purchased and any other information
concerning each such account as Purchaser may reasonably require.
(e) The Collections on the Eligible Receivables in the Pool to be
sold and purchased shall be payable through a system of post office lock-
boxes and blocked accounts satisfactory to Purchaser.
(f) In the case of any Receivables to be sold hereunder which are
Government Receivables, Seller shall have taken all steps necessary to
comply with the Assignment of Claims Act of 1940, as amended, and all
other applicable law prior to such sale.
(g) The Subordinated Participants shall be in compliance with their
obligations under the Participation Agreement.
(h) The Administration Agreement shall be in full force and effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of Seller. Seller represents
----------------------------------------
and warrants as follows:
(a) Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and is duly
qualified to transact business, and is in good standing, in every
jurisdiction where the failure to be so qualified would materially
adversely affect (i) the collectibility of any Purchased Receivable or (ii)
the ability of Seller to perform its obligations hereunder.
(b) The execution, delivery and performance by Seller of this
Agreement, each Bill of Sale and all other instruments and documents to be
delivered hereunder, and the transactions contemplated hereby and thereby,
are within Seller's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene Seller's charter, bylaws or
any contractual restriction binding on or affecting Seller, do not
contravene or require compliance with (except to the extent Seller has
complied therewith) any applicable law and do not result in or require the
creation of any Lien (excluding any Lien created hereunder) upon or with
respect to any of its properties.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by Seller of this
Agreement, any Bill of Sale or any other document or instrument to be
delivered hereunder except for the filing of the UCC Financing Statements
referred to in Article III and any approvals, authorizations and filings
related to
<PAGE>
9
Government Receivables referred to in Section 3.02, all of which, either at
the Closing Date or at any Funding Date, as the case may require, shall
have been duly made and shall be in full force and effect.
(d) This Agreement constitutes, and each Bill of Sale when delivered
hereunder shall constitute, the legal, valid and binding obligation of
Seller enforceable against Seller in accordance with its respective terms,
subject to the effect of general principles of equity (regardless of
whether considered in a proceeding in equity or at law) and of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors' rights generally.
(e) Seller is not engaged in, or a party to or, to its knowledge
threatened with, any legal action, suit, investigation or other proceeding
by or before any court, arbitrator or administrative agency, which in any
manner may materially adversely affect the performance of its obligations
under this Agreement, and Seller does not know of any basis for any such
legal action, suit, investigation or proceeding. There are no outstanding
or, to Seller's knowledge, threatened or contemplated governmental orders,
directives or actions, rulings, decrees, judgments or stipulations which in
any manner may materially adversely affect the performance of Seller's
obligations under this Agreement.
(f) Each Scheduled Receivable and each Purchased Receivable shall be
an Eligible Receivable and no effective financing statement or other
instrument similar in effect covering any Scheduled Receivable or Purchased
Receivable shall at any time be on file in any recording office except such
as may be filed in favor of Purchaser in accordance with this Agreement or
such as shall be covered by the release referred to in Section 3.01(i).
(g) All Related Security is free and clear of any Adverse Claim
except as created hereby and no effective financing statement or other
instrument similar in effect covering any Related Security shall at any
time be on file in any recording office except such as may be filed in
favor of Purchaser in accordance with this Agreement or such as shall be
covered by the release referred to in Section 3.01(i).
(h) No Weekly Settlement Report (if prepared by Seller or to the
extent that information contained therein is supplied by Seller),
information, exhibit, financial statement, document, book, record or report
or other materials furnished or to be furnished by Seller to Purchaser in
connection with this Agreement is or shall be inaccurate in any material
respect as of the date it is or shall be dated or as of the date so
furnished, or contains or shall contain any material misstatement of fact
or omits or shall omit to state a material fact or any fact necessary to
make the statements contained therein not materially misleading.
(i) The chief executive offices of Seller are located at the address
of Seller referred to in Section 11.02 and the principal place of business
and the offices where Seller keeps all its books, records and documents
evidencing Eligible Receivables, the related Contracts and Related
Security, if any, are located at the addresses specified in
<PAGE>
10
Exhibit E (or at such other locations, notified to Purchaser in accordance
with Section 5.01(f)).
(j) No change has or shall have occurred in Seller's property,
assets, business or financial condition or capital, organization or legal
structure since April 14, 2000 which would have a Material Adverse Effect.
(k) All Receivables sold hereunder to Purchaser have been and will be
transferred to Purchaser in good faith and for fair consideration or
reasonably equivalent value and without intent to hinder, delay or defraud
creditors of Seller.
(l) Seller is not an "investment company" as defined in, or subject
to regulation under, the Investment Company Act of 1940, as amended.
(m) No transaction contemplated hereby with respect to Seller
requires compliance with, or will be subject to avoidance under, any bulk
sales act or similar law.
(n) The Purchase Price of the Purchased Receivables is equivalent to
the fair market value of such Purchased Receivables.
ARTICLE V
GENERAL COVENANTS OF SELLER
SECTION 5.01. Affirmative Covenants of Seller. So long as Purchaser shall
-------------------------------
have any interest in any Purchased Receivables or until the Termination Date,
whichever is later, Seller shall, unless Purchaser shall otherwise consent in
writing:
(a) Compliance with Laws, Etc. Comply with all applicable laws,
rules, regulations, orders and provisions with respect to it, its business
and properties and all Purchased Receivables, related Contracts and Related
Security except to the extent such noncompliance would not have a Material
Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and maintain
Seller's corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify to transact business and
remain so qualified and in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualification would have a Material
Adverse Effect on (i) the interests of Purchaser, (ii) the collectibility
of any Purchased Receivable or (iii) the ability of Seller to perform its
obligations hereunder.
(c) Audits. As often as is commercially reasonable, following three
(3) Business Days' prior written notice to Seller, during regular business
hours, permit Purchaser, or its agents or representatives, (i) to examine
and make abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or
<PAGE>
11
under the control of Seller relating to the Purchased Receivables,
including, without limitation, the related Contracts, and to make copies of
any of the foregoing with respect to Purchased Receivables and (ii) to
visit the principal place of business of Seller for the purpose of
examining such materials described in clause (i) above, and to discuss
matters relating to Purchased Receivables and Conveyed Property or Seller's
performance hereunder with any of the officers or employees of Seller
having knowledge of such matters.
(d) Keeping of Records and Books of Account. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Seller's Receivables in the event of
the destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables.
(e) Performance and Compliance with Receivables and Contracts. At
Seller's expense, timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by Seller
under the Contracts related to Purchased Receivables.
(f) Location of Records. Keep its principal place of business and
chief executive offices, and the offices where it keeps its records
concerning its Receivables and all Contracts and Related Security related
thereto (and all original documents relating thereto), at the address(es)
of Seller referred to in Section 4.01(i) or, upon 30 days' prior written
notice to Purchaser, at such other locations in a jurisdiction where all
action required by Section 5.01(j) shall have been taken and completed.
(g) Credit and Collection Policies. Comply in all material respects
with its Credit and Collection Policy in regard to each Purchased
Receivable, Related Security and related Contracts.
(h) Collections. Instruct all Approved Obligors to cause all
Collections with respect to Purchased Receivables to be deposited directly
with the appropriate Lock-Box Provider(s) (in substantially the form
attached hereto as Exhibit F). If any Approved Obligor causes any
Collections with respect to Purchased Receivables to be deposited with
Seller, rather than the appropriate Lock-Box Provider(s), Seller shall
promptly cause such Collections to be re-deposited with the appropriate
Lock-Box Provider(s).
(i) Repurchase of Nonperforming Receivables. Seller hereby covenants
and agrees to repurchase from Purchaser each Nonperforming Receivable
within three Business Days of its becoming a Nonperforming Receivable (the
"Repurchase Date"), but in any event before the Completion of the
applicable Pool at the "Repurchase Amount". The Repurchase Amount as to any
Nonperforming Receivable shall be equal to the sum of the portion of the
Initial Installment of the Purchase Price allocable to such Nonperforming
Receivable and the portion of the Discount Fee allocable to such
Nonperforming Receivable. Subject to Section 11.08, all payments referred
to in this Section 5.01(i) shall be made in cash. Purchaser agrees that,
after payment by Seller to Purchaser of the
<PAGE>
12
Repurchase Amount for such Nonperforming Receivable, Purchaser will return
to Seller any documents relating to such Nonperforming Receivable and, upon
request by Seller, take any steps reasonably necessary to effect the
transfer of such Nonperforming Receivable to Seller.
(j) Further Action. Seller agrees that from time to time, at its
expense, it will promptly execute and deliver all further instruments and
documents, and take all further action that Purchaser may reasonably
request in order to perfect, protect or more fully evidence the Purchased
Receivables held by Purchaser hereunder, or to enable Purchaser to exercise
or enforce any of its rights hereunder. Without limiting the generality of
the foregoing, Seller will, upon the request of Purchaser: (i) execute and
file such financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be
necessary or appropriate, (ii) mark conspicuously each Contract with a
legend, acceptable to Purchaser, evidencing the interests of Purchaser in
each of the Purchased Receivables and (iii) mark its master data processing
records evidencing such Purchased Receivables and related Contracts with
such legend. The Seller hereby authorizes Purchaser, if Seller fails to do
so pursuant to clause (i) of the preceding sentence, to file one or more
financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Purchased Receivables
and the Related Security now existing or hereafter arising without the
signature of the Seller where permitted by law. If Seller fails to perform
any of its agreements or obligations under this Agreement, Purchaser may
(but shall not be required to) itself perform, or cause performance of,
such agreement or obligation, and the reasonable expenses of Purchaser
incurred in connection therewith shall be payable by Seller.
(k) Taxes. Pay and discharge promptly all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials
and supplies or otherwise which, if unpaid, might give rise to a Lien upon
such properties or any part thereof; provided, however,that such payment
-------- -------
and discharge shall not be required with respect to any such tax,
assessment, charge, levy or claim so long as (i) the validity or amount
thereof shall be contested in good faith by appropriate proceedings and
Seller shall set aside on its books adequate reserves as required by GAAP
with respect thereto and (ii) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse
Effect.
(l) Administrative Fee Account. (i) Seller agrees that it shall
establish an account (the "Administrative Fee Account") with a bank or
other financial institution satisfactory to Purchaser, for the benefit of
Purchaser and solely for the purpose of paying the "Administrative Fee".
The Administrative Fee means, on any date of determination, the amount that
would be payable by Purchaser to the Administrator if the Administration
Agreement were to be terminated on such date, assuming that Completion of
Pools outstanding on the date of termination will take place ninety days
following such termination date. Seller shall, at all times, maintain on
deposit in the Administrative Fee Account an amount equal to the greater of
(A) the Administrative Fee and (B) $70,000.
<PAGE>
13
Seller agrees that Purchaser shall have exclusive control and the sole
right to issue withdrawal instructions over the Administrative Fee Account.
Except for Purchaser, no other Person shall have any legal or beneficial
interest in the Administrative Fee Account; (ii) If Seller fails to comply
with clause (i) hereto, Seller hereby authorizes Purchaser to transfer any
Balance Payment otherwise payable to the Seller into the Administrative Fee
Account, in an amount equal to any outstanding Administrative Fee.
(m) Assistance to Administrator. Seller agrees that, at the request
of Purchaser, Seller will assist in servicing the Receivables and will
furnish to the Administrator any information reasonably required by the
Administrator to assist the Administrator in performing its duties under
the Administration Agreement.
SECTION 5.02. Reporting Requirements of Seller. So long as Purchaser shall
--------------------------------
any interest in any Purchased Receivables or until the Termination Date,
whichever is later, Seller shall, unless Purchaser consents in writing, furnish
to Purchaser and to each Subordinated Participant:
(a) promptly after the filing thereof, copies of all filings by
Seller or any Subsidiary of Seller of any notice of a "Reportable Event" as
defined in subsections (b)(4), (b)(5) and (b)(6) of Section 4043 of ERISA,
but excluding any such filings which relate to a Reportable Event
reasonably expected to not have a material adverse effect on the financial
condition and operations of Seller and the consolidated Subsidiaries of
Seller and promptly after receipt thereof, copies of any written
communication from the Pension Benefit Guaranty Corporation or any other
agency of the federal government with respect to any filing described
above;
(b) as soon as possible and in any event within five (5) Business
Days after the occurrence of each Event of Termination or each event which,
with the giving of notice or lapse of time or both, would constitute an
Event of Termination, the statement of the chief financial officer of
Seller setting forth details of such Event of Termination or event and the
remedial action which Seller proposes to take with respect thereto;
(c) (i) except as otherwise provided below, as soon as available and
in any event within 30 days after each fiscal month-end (other than March,
June, September and December), the consolidated and consolidating
statements of income (through the "Earnings Before Tax" line) of Seller and
its Subsidiaries and balance sheet, cash flow statements and a cash flow
forecast of at least four weeks' duration of the Seller 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 monthly consolidated and consolidating plan and financial
forecast for such fiscal year prepared by the Seller, all in reasonable
detail and certified by the chief financial officer of Seller as being
fairly stated in all material respects, subject to changes resulting from
audit and normal year-end adjustments; provided, that with respect to
--------
statements delivered pursuant to this section for the Seller's fiscal year
ending December 31, 2000, such statements shall set forth in each case in
comparative form solely the corresponding figures
<PAGE>
14
from the monthly consolidated and consolidating plan and financial forecast
for such fiscal year, 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; and, provided, further, that with respect to the delivery of
-------- -------
consolidated financial statements of the Seller and its Subsidiaries for
the fiscal months ended (A) January 31, 2000 and February 29, 2000, such
statements shall be delivered by May 15, 2000 and (B) April 30, 2000, such
statements shall be delivered by May 31, 2000;
(ii) except as otherwise provided below, as soon as available and in
any event within 45 days after the end of each fiscal quarter (other than
any fiscal quarter ending December 31), the consolidated and consolidating
balance sheets of Seller 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 Seller 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 monthly consolidated and consolidating plan and financial
forecast for such fiscal year prepared by the Seller, all in reasonable
detail and certified by the chief financial officer of Seller that they
fairly present, in all material respects, the financial condition of Seller
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; provided,
--------
that with respect to the delivery of consolidated financial statements of
the Seller and its Subsidiaries for the fiscal quarter ended March 31,
2000, such statements shall be delivered by May 31, 2000;
(iii) except as otherwise provided below, 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 Seller 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 Seller 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 monthly consolidated and
consolidating plan and financial forecast for such fiscal year prepared by
the Seller, all in reasonable detail and certified by the chief financial
officer of Seller that they fairly present, in all material respects, the
financial condition of Seller and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated and (b) in the case of such consolidated financial
statements, a report thereon of independent certified public accountants of
recognized national standing selected by Seller and reasonably satisfactory
to Purchaser, which report shall be unqualified as to scope of audit, and
shall state that such consolidated financial statements fairly present, in
all material respects, the consolidated financial position of Seller 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; provided, that with respect to the delivery of consolidated
--------
financial
<PAGE>
15
statements of the Seller and its Subsidiaries for the fiscal year ended
December 31, 1999, such statements shall be delivered by April 17, 2000;
(iv) together with each delivery of financial statements of Seller and
its Subsidiaries pursuant to subdivisions (ii) and (iii) above, a
certificate of the chief financial officer of Seller stating that the
signer has reviewed the terms of this Agreement and has made, or caused to
be made under his supervision, a review in reasonable detail of the
transactions and condition of Seller 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 certificate, of any condition or event that constitutes an
Event of Termination or would constitute an Event of Termination but for
the requirement that notice be given or time elapse or both, or, if any
such condition or event existed or exists, specifying the nature and period
of existence thereof and what action Seller has taken, is taking and
proposes to take with respect thereto;
(d) immediate written notice of the occurrence of (i) any breach of
Seller's representations and warranties, including but not limited to any
assertion by any Approved Obligor of any dispute (bona fide or otherwise)
or other defense to payment of Purchased Receivables contained in Pools
which have not reached Completion and (ii) Seller's intention to permit
(after the applicable Funding Date) any new or additional credit, discount,
allowance or offset to any Obligor such that when aggregated with all other
credits, discounts, allowances or offsets previously permitted with respect
to other Purchased Receivables in the same Pool, and with any Approved
Obligor's return of, or desire to return any merchandise purchased from
Seller in connection with any Purchased Receivable(s) exceeds 15% of the
Aggregate Amount of all Purchased Receivables in such Pool which have not
previously become Nonperforming Receivables. If any of the foregoing
results in a Purchased Receivable becoming a Nonperforming Receivable such
notice shall indicate the manner in which the Repurchase Amount shall be
paid and the date of repurchase (which shall not be later than the
Completion of the applicable Pool);
(e) [reserved];
(f) promptly, from time to time, such other information, documents,
records or reports respecting any Eligible Receivable(s), Approved
Obligor(s), Contract(s), Adverse Claim(s), current Credit and Collection
Policy, Related Security or the financial condition or operations of Seller
as Purchaser may from time to time reasonably request.
SECTION 5.03. Negative Covenants of Seller. So long as Purchaser shall
----------------------------
have any interest in any Purchased Receivables or until the Termination Date,
whichever is later, Seller shall not, without the prior written consent of
Purchaser:
(a) Sales, Liens, Etc. Except as otherwise provided herein, (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist any Adverse Claim upon or with respect to any
Purchased Receivable, related Contract or Related Security, to the extent
of Purchaser's interest in such Related Security, or any Lock-
<PAGE>
16
Box Provider account to which any Collections of any Purchased Receivable
are sent other than (A) liens for taxes, assessments or levies not yet due
and payable, (B) materialmen's, workmen's and similar liens imposed by
operation of law, or (ii) assign any right to receive income in respect of
any of the foregoing except an assignment under the Seller's bank credit
facilities of the right to receive the Balance Payment.
(b) Change in Payment Instructions to Obligors. Without the consent
of the Purchaser, add any institution as a Lock-Box Provider (other than an
institution named in the definition of the term Lock-Box Provider) with
respect to Purchased Receivables or terminate any existing Lock-Box
Agreement or Blocked Account Agreement relating to Purchased Receivables or
make any change in its instructions to Obligors, Approved Obligors or Lock-
Box Providers regarding payments relating to Purchased Receivables.
(c) Change in Corporate Name. Make any change to Seller's corporate
name, identity or corporate structure unless, prior to the effective date
of any such name change, Seller delivers to Purchaser such Financing
Statements (Forms UCC-1 and UCC-3) duly executed by Seller which Purchaser
may request to reflect such name change, together with such other documents
and instruments that Purchaser may reasonably request in connection with
such name change.
(d) Accounting Treatment. Prepare any financial statements that shall
account for the transactions contemplated hereby, nor will it in any other
respect account for the transactions contemplated hereby, in a manner that
is inconsistent with Purchaser's ownership interest in the Purchased
Receivables.
SECTION 5.04. Changes in Fundamental Policies and Procedures. (a) So long
----------------------------------------------
as Purchaser shall have any interest in any Purchased Receivables or until the
Termination Date, whichever is later, this Section 5.04 shall govern Seller's
right to:
(i) (A) Extend, amend or otherwise modify the terms of any Purchased
Receivable, or (B) amend, modify or waive any term or condition of any
Contract related thereto which would impair the collectibility of any
Purchased Receivable; and
(ii) Make any change in (A) any material Credit and Collection Policy
(except as required to take into account the duties and activities of the
Administrator under the Administration Agreement) or (B) any form of
Contract, if any, related to Receivables which change would, in any case,
impair the collectibility of any Purchased Receivable.
Any change, amendment, modification or extension described in clauses (i) and
(ii) above is hereinafter referred to as a "Fundamental Change."
(b) On or before the effective date of each Fundamental Change occurring
prior to the Termination Date, Seller shall promptly notify Purchaser in writing
of the complete details of such Fundamental Change. Such notice shall include
the statement that Purchaser will either have to grant its consent or indicate
its disapproval of such Fundamental Change within five (5) Business Days
following the receipt of such notice. Purchaser shall not unreasonably withhold
its consent
<PAGE>
17
to any Fundamental Change. In the event Purchaser does not consent to such
Fundamental Change, then and at all times prior to the Termination Date, all
Receivables to which such Fundamental Change applies or which are affected
thereby shall cease to be Eligible Receivables as of the date of Purchaser's
disapproval of such Fundamental Change. In the event Purchaser does not respond
within such five (5) Business Day period, Purchaser shall be deemed to have
consented to such Fundamental Change.
(c) At all times on or after the Termination Date, Seller shall make no
Fundamental Change which might affect any Purchased Receivable still outstanding
without the prior written consent of Purchaser.
ARTICLE VI
OBLIGORS
SECTION 6.01. Concentration Limit. On any Funding Date, with respect to
-------------------
each Approved Obligor, the ratio of (i) the Aggregate Amount of the outstanding
Purchased Receivables of such Approved Obligor under the Receivables Purchase
Agreement (taking into account the Eligible Receivables of such Approved Obligor
to be included in any Pool to be purchased on such Funding Date) to (ii) the
Aggregate Amount of the outstanding Purchased Receivables of all Approved
Obligors under the Receivables Purchase Agreement (taking into account the
Eligible Receivables of all Approved Obligors to be included in any Pool to be
purchased on such Funding Date) shall not exceed the Concentration Limit
applicable to such Approved Obligor.
SECTION 6.02. Additional Approved Obligors. Seller may request of
----------------------------
Purchaser in writing that additional Obligors of Seller become Approved
Obligors. Purchaser shall have the right to accept or decline in good faith any
such request. Purchaser shall also have the right at any time upon one (1)
Business Day advance written notice to Seller to disapprove of any Approved
Obligor whenever Purchaser shall determine in good faith that such Approved
Obligor does not meet Purchaser's reasonable eligibility requirements for credit
approval. Purchaser's good faith exercises of its acceptance or declination of
Obligors of Seller as Approved Obligors and Purchaser's determinations of
eligibility requirements for Purchaser's credit approval shall be based on
standards no different than Purchaser would otherwise apply in connection with
Purchaser's other clients.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following events (each
---------------------
an "Event of Termination") shall occur:
(a) Seller shall fail to make any payment to be made by it hereunder
when due; or
<PAGE>
18
(b) Any representation or warranty made or deemed to be made by
Seller (or any of its officers) under or in connection with this Agreement
or any certificate or report delivered pursuant hereto shall prove to have
been false or incorrect in any material respect when made (excluding any
representation or warranty made in Section 4.01(f) or 4.01(g), so long as
Seller is in compliance with its obligations under Section 5.01(i)); or
(c) (i) Seller shall fail to perform or observe any term, covenant or
agreement contained in Section 5.03 or 5.04 on its part to be performed or
observed by it; or (ii) Seller shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to be
performed or observed by it and any such failure shall remain unremedied
for ten (10) Business Days after written notice thereof shall have been
given by Purchaser to Seller; or (iii) Seller shall fail to perform or
observe any term, covenant or agreement contained in any other Transaction
Document on its part to be performed or observed by it and any such failure
shall remain unremedied after notice and for any applicable grace period;
or
(d) (i) Failure of Seller or any of its Subsidiaries to pay when due
(a) any principal of or interest on 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 (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 Seller 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); provided, that
--------
any breach or default existing on the Closing Date under the Credit
Agreement which has been waived or under any Indenture pursuant to which no
notice of acceleration has been delivered shall not constitute an Event of
Termination under this clause (ii) during the period for which such waiver
is in effect or prior to any such notice of acceleration, as the case may
be; or
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Seller 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 Seller or any of its Subsidiaries (other than Immaterial
Subsidiaries) under the Bankruptcy Code or under any other applicable
<PAGE>
19
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 Seller 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 Seller 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 Seller 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
(f) (i) Seller 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 Seller or any of its Subsidiaries
(other than Immaterial Subsidiaries) shall make any assignment for the
benefit of creditors; or (ii) Seller 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 Seller 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
(g) 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 Seller 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
(h) There shall have occurred any event which materially adversely
affects the collectibility of any material portion of Purchased Receivables
or there shall have occurred any other event which materially adversely
affects the ability of Seller to perform hereunder (including, without
limitation, the ability of Seller to collect the Purchased Receivables); or
(i) Any Person other than a Sponsor, including a "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) which includes such Person, shall, after the Closing Date, purchase
or otherwise acquire, directly or indirectly, beneficial ownership of
securities of Seller and, as a result of such purchase or acquisition, any
Person (together with its associates and Affiliates), shall directly or
<PAGE>
20
indirectly beneficially own in the aggregate securities representing more
than 35% of the combined voting power of Seller voting securities; or
(j) The Administration Agreement shall terminate;
then, and in any such event, Purchaser may by notice to Seller declare the
Termination Date to have occurred, except that, in the case of any event
described in subsection (e) or (f) above, the Termination Date shall be deemed
to have occurred automatically upon the occurrence of such event. Upon the
occurrence of the Termination Date, Purchaser shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies, if any, provided under the UCC of the applicable jurisdiction and
other applicable laws, which rights shall be cumulative.
ARTICLE VIII
PARTICIPATIONS AND ASSIGNMENTS
Purchaser retains the right at any time and from time to time to sell or
assign the Receivables, in whole or in part, or to sell participation interests
in any amount in any Pool of Purchased Receivables to one or more participants
as Purchaser may deem desirable.
ARTICLE IX
INDEMNIFICATION
In addition to the payment of expenses pursuant to Section 11.07, whether
or not the transactions contemplated hereby shall be consummated, Seller agrees
to defend, indemnify, pay and hold harmless Purchaser, each Person that acquires
a participation interest in the Receivables, and the officers, directors,
trustees, partners, employees, agents (including the Administrator), attorneys
and affiliates of Purchaser and each such Person (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), 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 Transaction Documents or the
transactions contemplated hereby or thereby (including, without limitation,
Purchaser's agreement to purchase Receivables hereunder or the use or intended
use of the proceeds of any of such purchase) (collectively called the
"Indemnified Liabilities"); provided that Seller shall not have any obligation
to any Indemnitee hereunder with respect to any Indemnified Liabilities to the
extent, and only to the extent, of any particular liability, obligation,
<PAGE>
21
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; provided, further, that
Seller shall have no obligation under this Article IX to Indemnitees with
respect to, and Indemnified Liabilities shall in no event include losses arising
from a delay in payment, or a default, by an Obligor with respect to any
Purchased Receivable. The agreements in this Article IX shall survive the
collection of all Purchased Receivables, the termination of this Agreement and
the payment of all amounts payable hereunder.
To the extent that the undertaking to defend, indemnify, pay and hold
harmless set forth in the preceding paragraph may be unenforceable because it is
violative of any law or public policy, Seller 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.
ARTICLE X
TERM; OPTION FEES
SECTION 10.01. Term. This Agreement shall have a term of 364 days from the
----
date hereof provided that Seller shall have the right to terminate this
Agreement at any time upon five Business Days' prior written notice to
Purchaser. Termination of the Agreement shall also constitute a reduction of the
Facility Limit to zero as of the effective date of such termination.
SECTION 10.02. Partial Reductions of Facility Limit. Seller may, upon not
------------------------------------
less than five Business Days' prior written notice to Purchaser, at any time and
from time to time terminate in whole or permanently reduce in part, without
premium or penalty, the Facility Limit; provided that any such partial reduction
--------
of the Facility Limit shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $250,000 in excess of that amount. Seller's notice to
Purchaser shall designate the effective 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 Facility Limit shall be effective on the date
specified in such notice.
SECTION 10.03. Option Fee. Seller agrees to pay to Purchaser an option fee
----------
for the period from and including the date hereof to but excluding the
Termination Date equal to 1/2 of 1% per annum on the average of the daily excess
of the Facility Limit over the greater of (i) the Net Investment and (ii)
$9,000,000, for the period for which such fee is paid. Such Option Fee shall be
calculated on the basis of a 365-day year and the actual number of days elapsed
and shall be payable monthly in arrears on the last day of each month and on the
Termination Date, commencing on April 30, 2000.
SECTION 10.04. Payments Due on Non-Business Days; Past Due Amounts.
---------------------------------------------------
Whenever any payment to be made under this Agreement shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day. Amounts not paid when due in accordance with the terms
of this Agreement shall bear interest at a rate equal at all times to the ABR
plus 2%, payable on demand.
<PAGE>
22
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments and Waivers. No amendment, modification, or
----------------------
termination, or waiver or consent of any provision of this Agreement, shall be
effective unless the same shall be in writing and signed by Seller and
Purchaser, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 11.02. Notices. Any notice or other communication required shall be
-------
in writing addressed to the respective party as set forth below and may be
personally served, telecopied, sent by overnight courier service or U.S. mail
and shall be deemed to have been given when received by any person at the
address specified below.
Notices shall be addressed as follows:
If to Seller: Aurora Foods Inc.
1000 St. Louis Union Station, Suite 300
St. Louis, MO 63103
ATTN: Christopher T. Sortwell,
Chief Financial Officer
Telecopy: (314) 632-5633
with copies to: Fenway Partners, Inc.
152 West 57/th/ Street, 59/th/ Floor
New York, NY 10019
ATTN: Andrea Geisser
Telecopy: (212) 581-1205
and
McCown De Leeuw & Co.
65 East 55/th/ Street, 36/th/ Floor
New York, NY 10022
ATTN: David De Leeuw
Telecopy: (212) 355-6283
If to Purchaser: The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
ATTN: Kathryn A. Duncan
Telecopy: (212) 972-0009
with copies to: Fenway Partners, Inc.
152 West 57/th/ Street, 59/th/ Floor
New York, NY 10019
<PAGE>
23
ATTN: Andrea Geisser
Telecopy: (212) 581-1205
and
McCown De Leeuw & Co.
65 East 55/th/ Street, 36/th/ Floor
New York, NY 10022
ATTN: David De Leeuw
Telecopy: (212) 355-6283
SECTION 11.03. No Waiver; Remedies. No failure or delay on the part of
-------------------
Purchaser to exercise, or any partial exercise of, any power, right, or
privilege hereunder or under any other Transaction Document shall impair such
power, right, or privilege or be construed to be a waiver of any default or
Event of Termination. All rights and remedies existing hereunder or under any
other Transaction Document are cumulative to and not exclusive of any rights or
remedies otherwise available.
SECTION 11.04. Binding Effect; Assignability. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns except that Seller shall not assign its rights or
obligations hereunder.
SECTION 11.05. Survival. All agreements, representations and warranties
--------
made herein shall survive the execution and delivery of this Agreement and the
termination of this Agreement. Notwithstanding anything in this Agreement or
implied by law to the contrary, the agreements of Seller set forth in Section
5.04(c) and Article IX shall survive any termination of this Agreement, the
Closing Date or any Funding Date, as the case may be.
SECTION 11.06. Governing Law. This Agreement shall be governed by, and
-------------
shall be construed and interpreted in accordance with, the laws of the State of
New York.
SECTION 11.07. Costs, Expenses and Taxes. In addition to the rights of
-------------------------
indemnification granted to Purchaser and each Person that acquires a
participation interest in the Receivables under Article IX, Seller agrees to pay
all reasonable out-of-pocket costs and expenses incurred by Purchaser and the
Subordinated Participants in connection with the preparation, execution,
delivery and administration (including periodic auditing not to exceed two times
in any twelve (12) month period) of this Agreement, the other documents to be
delivered in connection herewith and any amendments thereto including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel (including
fees allocable to in-house counsel) for Purchaser and the Subordinated
Participants with respect thereto and with respect to advising Purchaser and the
Subordinated Participants as to their respective rights and remedies under this
Agreement and any other applicable Transaction Documents, and all reasonable
costs and expenses (including such reasonable counsel fees and expenses)
incurred in connection with the enforcement of this Agreement and/or the other
documents to be delivered in connection herewith.
SECTION 11.08. Netting of Payments. Payments hereunder may be made on a net
-------------------
basis.
<PAGE>
24
SECTION 11.09. Acknowledgment of Administrator. Seller and Purchaser
-------------------------------
acknowledge that as of the date hereof, The CIT Group/Commercial Services, Inc.
is the Administrator. For purposes of determining when Purchaser has received
Collections, such Collections shall be deemed to be received by Purchaser when
the Administrator has credited Purchaser's accounts with immediately available
funds.
SECTION 11.10. Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts, each of which when so executed shall be deemed to be
an original and all of which when taken together shall constitute one and the
same Agreement.
SECTION 11.11. Consent to Jurisdiction. SELLER AND PURCHASER HEREBY
-----------------------
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK
STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND SELLER AND PURCHASER HEREBY IRREVOCABLY
AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVE ANY OBJECTION EITHER OF THEM
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
SECTION 11.12. Waiver of Jury Trial. SELLER AND PURCHASER HEREBY WAIVE
--------------------
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT. SELLER AND PURCHASER ALSO WAIVE ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF PURCHASER. 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. SELLER AND PURCHASER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. SELLER AND PURCHASER
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, AND THE 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.
<PAGE>
25
SECTION 11.13. Severability. The invalidity, illegality, or
------------
unenforceability in any jurisdiction of any provision of this Agreement shall
not affect or impair the remaining provisions of this Agreement, or such
provision or obligation in any other jurisdiction.
SECTION 11.13. Headings. Section and subsection headings are included
--------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purposes or be given substantive effect.
<PAGE>
26
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
AURORA FOODS INC.
By: __________________________
Name:
Title:
THE CHASE MANHATTAN BANK
By: __________________________
Name:
Title:
<PAGE>
27
Table of Exhibits
Exhibit A Definitions
Exhibit B Bill of Sale
Exhibit C Form of Schedule of Eligible Receivables
Exhibit D Funding Certificate
Exhibit E Address List
Exhibit F Notification Letter
<PAGE>
EXHIBIT A
As used in the Receivables Purchase Agreement and the Administration
Agreement, unless otherwise specified, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Base CD Rate in effect on such day plus
1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest
per annum publicly announced from time to time by Purchaser as its prime
rate in effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by the Purchaser
in connection with extensions of credit to debtors); "Base CD Rate" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate
and (ii) a fraction, the numerator of which is one and the denominator of
which is one minus the CD Reserve Percentage and (b) the CD Assessment
Rate; and "Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as
being in effect on such day (or, if such day shall not be a Business Day,
the next preceding Business Day) by the Board through the public
information telephone line of the Federal Reserve Bank of New York (which
rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following
such day), or, if such rate shall not be so reported on such day or such
next preceding Business Day, the average of the secondary market quotations
for three-month certificates of deposit of major money center banks in New
York City received at approximately 10:00 A.M., New York City time, on such
day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by Purchaser from three New York City negotiable certificate
of deposit dealers of recognized standing selected by it. Any change in the
ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate or
the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate, the Three-
Month Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"Administration Agreement" has the meaning assigned to such term in
Section 3.01(o) of the Receivables Purchase Agreement.
"Administrative Fee" has the meaning assigned to such term in Section
5.01(l) of the Receivables Purchase Agreement.
"Administrator" means, initially, The CIT Group/Commercial Services,
Inc.
"Adverse Claim" means a lien, security interest or similar charge or
encumbrance or any other right or claim of any Person.
"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
<PAGE>
2
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.
"Aggregate Amount" means the aggregate net invoice dollar amount of a
Pool of Eligible Receivables or of one or more Eligible Receivables, as the
case may be (i.e., as reduced by any credits, discounts, allowances or
deductions then entitled and expected to be taken by the Approved Obligor
of any such Eligible Receivable) as estimated by Seller on the Funding Date
for such Pool and, with respect to the initial Pool to be purchased,
satisfactory to Purchaser, which amount is set forth in the Funding
Certificate relating to such Pool of Purchased Receivables.
"Agreement" means the agreement in which the term is used (including
all schedules, exhibits, annexes and appendices thereto).
"Approved Obligor" means each of Seller's customers approved by
Purchaser as of the Closing Date and every other customer who is approved
by Purchaser thereafter pursuant to Section 6.02 of the Receivables
Purchase Agreement.
"Balance Payment" means with respect to any Pool of Purchased
Receivables an amount equal to the excess, if any, of:
(i) the sum of the Balance Difference for all Receivables in such
Pool over
(ii) the sum of the Dilution Shortfall for all Receivables in such
Pool.
"Balance Difference" means, with respect to each Purchased Receivable,
an amount equal to the positive difference, if any, of (x) the amount of
Collections actually received in respect of such Receivable over (y) the
sum of (A) the portion of the Initial Installment of the Purchase Price for
such Pool allocable to such Receivable and (B) the portion of the Discount
Fee for such Pool allocable to such Receivable.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect and all rules
and regulations promulgated thereunder.
"Bill of Sale" means a document (substantially in the form of Exhibit
B attached to the Receivables Purchase Agreement) evidencing the sale,
transfer and assignment of Eligible Receivables and Related Security from
Seller to Purchaser.
"Blocked Account" means each demand deposit account into which the
Lock-Box Providers deposit items pursuant to the respective Lock-Box
Agreements and as to which Purchaser is authorized to issue a Control
Election pursuant to the Blocked Account Agreements, as in effect from time
to time.
<PAGE>
3
"Blocked Account Agreements" means an agreement entered into between
Seller and Purchaser with respect to each Blocked Account and acknowledged
by each Lock-Box Provider, respectively, as in effect from time to time.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by
law to close.
"CD Assessment Rate" means for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
maintained by the Federal Deposit Insurance Corporation (the "FDIC")
classified as well-capitalized and within supervisory subgroup "B" (or a
comparable successor assessment risk classification) within the meaning of
12 C.F.R. (S) 327.4 (or any successor provision) to the FDIC (or any
successor) for the FDIC's (or such successor's) insuring time deposits at
offices of such institution in the United States.
"CD Reserve Percentage" means for any day, that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System of the United States, or any
successor (the "Board"), for determining the maximum reserve requirement
for a Depositary Institution (as defined in Regulation D of the Board as in
effect from time to time) in respect of new non-personal time deposits in
U.S. Dollars having a maturity of 30 days or more.
"Closing Date" means April 19, 2000.
"Collection Cycle Assumption" has the meaning assigned to such term in
Section 2.01(d) of the Receivables Purchase Agreement.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of any Related Security with respect to such
Receivable.
"Completion" means, with respect to a Pool, the earliest of (i) the
date all amounts due on the Purchased Receivables in such Pool have been
(x) collected, (y) deemed uncollectible due to the Obligor's financial
inability to pay and/or (z) determined to be Nonperforming Receivables,
(ii) 90 days after the Funding Date of the Pool and (iii) the date on which
Purchaser has received, in respect of such Pool, an amount equal to the
Initial Installment of the Purchase Price and the Discount Fee for each
Receivable in such Pool, other than any such Receivable deemed
uncollectible due to the Obligor's financial inability to pay.
"Concentration Limit" means 15%.
"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
<PAGE>
4
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 any 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.
"Contract" means any agreement, if any, between Seller and any Obligor
pursuant to or under which such Obligor shall be obligated to pay for
merchandise or services from time to time.
"Control Election" has the meaning assigned to that term in the
Blocked Account Agreements.
"Conveyed Property" has the meaning assigned to that term in Section
2.01(a) of the Receivables Purchase Agreement.
"Credit Agreement" means the Fifth Amended and Restated Credit
Agreement, dated as of November 1, 1999, entered into by and among Seller,
the financial institutions listed on the signature pages thereof,
Purchaser, as administrative agent, National Westminster Bank plc, as
syndication agent, and UBS AG, Stamford Branch, as documentation agent.
"Credit and Collection Policy" means those credit and collection
policies and practices of Seller relating to Contracts existing on the
Closing Date, all as modified from time to time in compliance with Section
5.04 of the Receivables Purchase Agreement.
"Defaulted Receivable" means any Receivable: (i) as to which any
payment, or part thereof, remains unpaid for 45 days from the original due
date for such payment, or (ii) as to which the Obligor thereof has taken
any action, or suffered any event, of the type described in Section 7.01(e)
of the Receivables Purchase Agreement or (iii) which, consistent with the
Credit and Collection Policy, would be written off Seller's books as
uncollectible.
<PAGE>
5
"Dilution Shortfall" means, with respect to each Purchased Receivable,
an amount equal to the positive difference, if any, of
(x) the sum of
(A) the portion of the Initial Installment of the Purchase
Price for such Pool allocable to such Receivable, and
(B) the portion of the Discount Fee for such Pool allocable
to such Receivable over
(y) the sum of
(A) the amount of any credit, discount, allowance or offset
granted by Seller with respect to any Purchased Receivable
subsequent to determining the Aggregate Amount of the related
Pool and the amount which relates to any merchandise sold to
and returned by an Approved Obligor as to any Purchased
Receivable included in such Pool (to the extent such Purchased
Receivable does not become a Nonperforming Receivable by
virtue thereof), both to the extent that such amounts reduce
the amount of such Purchased Receivable below the sum of (i)
the portion of the Initial Installment of the Purchase Price
of such Pool allocable to such Purchased Receivable and (ii)
the portion of the Discount Fee of such Pool allocable to such
Purchased Receivable, and
(B) an amount equal to the Repurchase Amount of such
Receivable if such Receivable becomes a Nonperforming
Receivable (to the extent such Repurchase Amount has not
theretofore been settled pursuant to Section 5.01(i)).
"Discount Fee" has the meaning assigned to that term in Section
2.01(d) of the Receivables Purchase Agreement.
"Disputed Receivable" means any Receivable which is subject to (i) any
bona fide dispute, claim, offset or defense asserted by the Obligor to
payment thereof (other than any protection provided to debtors under the
operation of bankruptcy or other insolvency laws), or (ii) any other claim
resulting from the sale of merchandise or rendering of services related to
such Receivable or the furnishing of or failure to furnish such merchandise
or services, but excluding any cash discount, if any, available to the
Obligor of a Receivable pursuant to the Credit and Collection Policy.
"Eligible Receivable" means a Receivable:
(i) the Obligor of which is one of Seller's Approved Obligors;
<PAGE>
6
(ii) which is a Receivable representing the extension of credit
by Seller under a Contract in connection with the credit sale by
Seller to an Approved Obligor of merchandise or services;
(iii) which is not a Defaulted Receivable;
(iv) which is a Receivable of an Approved Obligor required to
be paid in full within 30 days of the original invoice date thereof;
(v) which is an "account" or a "general intangible" within
the meaning of Section 9-106 of the UCC;
(vi) which is denominated and payable only in United States
dollars in the United States;
(vii) which is not a Disputed Receivable on the applicable
Funding Date;
(viii) which arises under a Contract which has been duly
authorized and which, together with such Receivable, is in full force
and effect and constitutes the legal, valid and binding obligation of
the Approved Obligor of such Receivable enforceable against such
Approved Obligor in accordance with its terms;
(ix) which, together with the Contract related thereto, does
not contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
(x) which satisfies substantially all applicable requirements
of the Credit and Collection Policy;
(xi) owned by Seller free and clear of any Adverse Claim,
except as created by the Receivables Purchase Agreement;
(xii) as to which Purchaser has not notified Seller that
Purchaser has determined, in accordance with Section 6.02 of the
Receivables Purchase Agreement that such Receivable (or class of
Receivables) is not acceptable for purchase thereunder;
(xiii) which is not a Government Receivable or a receivable owed
by an Obligor domiciled outside of the United States; and
(xiv) the goods of which have been shipped or the services
related to it shall have been performed.
<PAGE>
7
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974 and
all Regulations relating to it, as amended from time to time.
"Event of Termination" has the meaning assigned to that term in Section
7.01 of the Receivables Purchase Agreement.
"Facility Limit" means $60,000,000, as such amount may be reduced from time
to time pursuant to Section 10.02 of the Receivable Purchase Agreement.
"Federal Funds Effective Rate" means for any day, 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 on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by Purchaser from three
federal funds brokers of recognized standing selected by it.
"Fee Letter" means the Fee Letter, dated as of April 19, 2000, between
Seller, Purchaser and Chase Securities Inc.
"Fundamental Change" has the meaning assigned to such term in Section
5.04(a) of the Receivables Purchase Agreement.
"Funding Certificate" has the meaning assigned to such term in Section
3.02(a) of the Receivables Purchase Agreement.
"Funding Date" shall mean each date on which any Pool is purchased under
the Receivables Purchase Agreement.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time.
"Government Receivables" means a Receivable evidencing a claim against the
United States Government which is subject to the Assignment of Claims Act of
1940, 31 USC Section 3727.
"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
<PAGE>
8
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.
"Indenture" means each of the (i) Indenture, dated as of February 10, 1997,
between Seller and Wilmington Trust Company, as Trustee, (ii) Indenture, dated
as of July 1, 1997, between Seller and Wilmington Trust Company, as Trustee, and
(iii) Indenture, dated as of July 1, 1998, between Seller and Wilmington Trust
Company, as Trustee.
"Initial Installment of the Purchase Price" has the meaning assigned to
that term in Section 2.01(d) of the Receivables Purchase Agreement.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Lock-Box Agreement" means those agreement(s), in form and substance
reasonably acceptable to Purchaser, entered into from time to time among Seller
and the Lock-Box Providers providing for the maintenance of lock boxes with the
U.S. Post Office.
"Lock-Box Provider" means any bank or other financial institution
satisfactory to the Purchaser with whom Seller enters into a Lock-Box Agreement
and a Blocked Account Agreement, in either case, at such time as Seller and such
bank have executed both a Lock-Box Agreement and a Blocked Account Agreement.
"Material Adverse Effect" means (a) a material adverse effect upon the
business, operations, material properties, assets or financial condition of
Seller and its Subsidiaries taken as a whole or (b) the material impairment of
the ability of Seller to perform its obligations under the Receivables Purchase
Agreement or (c) the impairment of the ability of Purchaser to enforce the
Receivables Purchase Agreement or collect any of the Purchased Receivables.
"Net Investment" means at any date the sum of the Initial Installments of
the Purchase Price less the aggregate amount of Collections actually received by
the Purchaser other than Collections allocated by the Purchaser to (i) the
Discount Fee and (ii) Balance Payments to the extent paid or payable to Seller.
"Nonperforming Receivable" means a Purchased Receivable (a) with respect to
which there has occurred any breach of Seller's representations and warranties
under Section 4.01 of the Receivables Purchase Agreement with respect thereto,
or (b) that becomes a Disputed Receivable subsequent to the Funding Date on
which it became a Purchased Receivable, or (c) with respect to which Seller has
granted after the applicable Funding Date any credit, discount, allowance or
offset or that relates to any merchandise
<PAGE>
9
sold to and returned by an Approved Obligor if the aggregate amount of all such
discounts, allowances and offsets and reductions due to the returns of
merchandise with respect to all Purchased Receivables in the same Pool exceeds
15% of the Aggregate Amount of all Purchased Receivables in such Pool, which are
not deemed Nonperforming Receivables pursuant to clauses (a) or (b) hereof.
"Obligor" means a Person obligated to make payments to Seller pursuant to a
Contract.
"Participation Agreement" has the meaning assigned to such term in Section
3.01(t) of the Receivables Purchase Agreement.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, 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
and their respective permitted successors and assigns (or in the case of a
governmental person, the successor functional equivalent of such Person).
"Pool" means one or more Eligible Receivables sold on a Funding Date and
identified in the same Bill of Sale.
"Purchase Advance Percentage" of any Pool means 85%; provided, however,
that the Purchaser may reduce such percentage in its discretion if, in the
Purchaser's judgement, actual dilution experienced in respect of the Purchased
Receivables other than on account of credit losses exceeds the amounts assumed
by the Purchaser in deriving the original percentage.
"Purchase Price" means for any Pool of Purchased Receivables, an amount
equal to the Initial Installment of the Purchase Price for such Pool plus the
Balance Payment, if any, for such Pool.
"Purchased Receivable" means an Eligible Receivable due from an Approved
Obligor and purchased under the Receivables Purchase Agreement.
"Purchaser" has the meaning assigned to that term in the recitals of the
Receivables Purchase Agreement.
"Receivable" means the indebtedness of any Obligor under a Contract,
whether constituting an account or general intangible, arising from a sale of
merchandise and/or services by Seller to such Obligor, and includes the right to
payment of any interest or finance charges, if any, and other obligations of
such Obligor with respect thereto.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
entered into between Aurora Foods Inc., as Seller, and The Chase Manhattan Bank,
as
<PAGE>
10
Purchaser, dated April 19, 2000, as the same may be amended, supplemented or
otherwise modified from time to time.
"Related Security" means with respect to any Receivable:
(i) all of Seller's interest in the merchandise (including returned
merchandise and rights of reclamation and replevin), if any, relating to
the sale which gave rise to such Receivable;
(ii) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such Receivable,
whether pursuant to the Contract related to such Receivable or otherwise;
(iii) the assignment to Purchaser of all UCC financing statements
covering any collateral securing payment of such Receivable;
(iv) all guaranties, insurance proceeds and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to such
Receivable or otherwise; and
(v) all proceeds of the foregoing.
"Repurchase Amount" has the meaning assigned to such term in Section
5.01(i) of the Receivables Purchase Agreement.
"Repurchase Date" has the meaning assigned to such term in Section 5.01(i)
of the Receivables Purchase Agreement.
"Reserve Adjusted Amount" has the meaning assigned to such term in Section
2.01(d) of the Receivables Purchase Agreement.
"Scheduled Receivable" means any Eligible Receivable listed in a Funding
Certificate.
"Schedule of Eligible Receivables" means a document substantially in the
form of Exhibit C attached to the Receivables Purchase Agreement listing the
Eligible Receivables, the respective Approved Obligors, the Related Security, if
any, and the Aggregate Amount of each Eligible Receivable to be sold on any
given Funding Date.
"Seller" has the meaning assigned to that term in the recitals of the
Receivables Purchase Agreement.
"Sponsor" means any of Fenway Partners, Inc., McCown DeLeeuw & Co., UBS
Capital, LLC and Tiger Oats, Ltd. and any Affiliates thereof.
<PAGE>
11
"Subordinated Participants" means each of the signatories listed on the
signature pages of the Participation Agreement as a subordinated participant.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, or other entity the outstanding securities or interests of which
having ordinary voting power to elect a majority of the board of directors or
similar governing body of such corporation, partnership or other entity (whether
or not any other class of securities has or might have voting power by reason of
the happening of a contingency) are at the time owned or controlled directly or
indirectly by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries together.
"Target Yield" has the meaning assigned to such term in Section 2.01(d) of
the Receivables Purchase Agreement.
"Target Yield Percentage" has the meaning assigned to such term in Section
2.01(d) of the Receivables Purchase Agreement.
"Termination Date" means the earlier to occur of (i) the date of
termination of the Receivables Purchase Agreement pursuant to its Section 7.01,
or (ii) the date of termination of the Receivables Purchase Agreement pursuant
to its Section 10.01.
"Transaction Documents" means the Receivables Purchase Agreement, the
Participation Agreement and the Administration Agreement.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York, as amended from time to time, and any successor statute;
provided that, if by reason of mandatory provisions of law, the perfection or
the effect of perfection or non-perfection of the security interests in any
collateral is governed by the Uniform Commercial Code as in effect on or after
the date hereof in any other jurisdiction, "UCC" means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provision
hereof relating to such perfection or effect of perfection or non-perfection.
"Weekly Reporting Period" means a seven-day period commencing on Saturday
and ending on Friday of the following week.
"Weekly Settlement Report" means a report to be delivered by Purchaser or
by Administrator on behalf of Purchaser to Seller each Wednesday, or in case
such day is not a Business Day then the next succeeding Business Day, for the
most recently ended Weekly Reporting Period showing, as to all Purchased
Receivables, all amounts collected and deposited with the Lock-Box Provider(s)
during such Weekly Reporting Period, all amounts transferred from the Lock-Box
Provider(s) to Seller, all amounts remitted by Seller to Purchaser and the
amount of any checks that are returned or otherwise dishonored and as to which
the Lock-Box Provider(s) had previously made funds available.
<PAGE>
Exhibit B
BILL OF SALE
The undersigned hereby sells, transfers, assigns and conveys on the
date hereof all its right, title and interest in and to the Eligible Receivables
identified in the attached Schedule of Eligible Receivables, including all
Related Security, if any, in existence as of the date hereof and as described in
the attached Schedule of Eligible Receivables and all moneys due or to become
due with respect thereto, to The Chase Manhattan Bank, ("Purchaser") pursuant to
the Receivables Purchase Agreement between Aurora Foods Inc. ("Seller") and
Purchaser, dated as of April 19, 2000 (the "Receivables Purchase Agreement").
This Bill of Sale is made in consideration of the payment of $______.
This sale is made without recourse except with regard to Nonperforming
Receivables and except that the undersigned hereby represents and warrants that
it is the owner of the Eligible Receivables and the Related Security referred to
above and that there exists no Adverse Claim upon or with respect to such
Eligible Receivables and Related Security.
All the capitalized terms used and not otherwise defined herein have
the same meaning as they have in Exhibit A to the Receivables Purchase
Agreement.
This Bill of Sale shall be governed by, and construed and interpreted
in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be
duly executed and delivered by its duly authorized officer on the date specified
below.
AURORA FOODS INC.
By:________________________________
Name:
Title:
[Date]
<PAGE>
Exhibit C
SCHEDULE OF ELIGIBLE RECEIVABLES SOLD AND PURCHASED AS OF _________
Capitalized terms used herein without definition have the meanings ascribed
thereto in Exhibit A of the Receivables Purchase Agreement between Aurora Foods
Inc. and The Chase Manhattan Bank dated as of April 19, 2000.
*Aggregate Amount Only
The information required on this form may be computer generated.
<PAGE>
EXHIBIT D
FUNDING CERTIFICATE
Notice is hereby given pursuant to Section 3.02(a) of the Receivables
Purchase Agreement dated as of April 19, 2000 between Aurora Foods Inc.
("Seller") and The Chase Manhattan Bank ("Purchaser") that on _________________,
200_, Seller will sell to Purchaser the Pool of Eligible Receivables identified
on Schedule I* attached hereto.
Dated:
Very truly yours,
AURORA FOODS INC.
By:_______________________________
Name:
Title:
_______________________________
* Schedule I shall be in the form of Exhibit C to the Receivable Purchase
Agreement.
<PAGE>
Exhibit E
ADDRESS LIST
Chief Executive Office: Aurora Foods Inc.
1000 St. Louis Union Station, Suite 300
St. Louis, MO 63103
ATTN: Christopher T. Sortwell, Chief Financial
Officer
Telecopy: (314) 632-5633
Principal Place of Business: Aurora Foods Inc.
1000 St. Louis Union Station, Suite 300
St. Louis, MO 63103
ATTN: Christopher T. Sortwell, Chief Financial
Officer
Telecopy: (314) 632-5633
<PAGE>
Exhibit F
NOTIFICATION LETTER
Re: Notice of Purchase and Sale of Receivables
Dear Customer:
We have sold, transferred, assigned and conveyed to The Chase Manhattan
Bank, 270 Park Avenue, New York, N.Y. 10017 all of our right to receive payments
from you for the invoices listed on Exhibit A hereto. Please be further advised
that we have sold, transferred, assigned and conveyed all of our security
interests securing the aforementioned payment.
On behalf of The Chase Manhattan Bank we request you to send, from the
date hereof, all payments due based on the aforementioned invoices listed on
Exhibit A and only those invoices so listed and all proceeds of the related
security to [NAME AND ADDRESS OF LOCK-BOX PROVIDER] for the credit and advice of
The Chase Manhattan Bank [INSERT WIRE INSTRUCTIONS] for the benefit of Aurora
Foods Inc. Any other correspondence regarding such payment should be forwarded
to The Chase Manhattan Bank at the aforementioned address. You are authorized to
rely on a photocopy of this letter.
Very truly yours,
Title:
<PAGE>
EXHIBIT 10.39
Execution Version
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of March 21, 2000 (the "Effective
---------
Date") among Aurora Foods Inc., a Delaware corporation (the "Company") and
- ---- -------
Christopher T. Sortwell (the "Executive").
---------
WHEREAS, the Executive is possessed of certain experience and expertise in
management; and
WHEREAS, the Company wishes to employ the Executive as its Executive Vice
President and Chief Financial Officer and the Executive wishes to accept such
employment.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT.
1.1 Agreement. The Company hereby agrees to employ the Executive, and the
---------
Executive hereby agrees to serve the Company, in each case subject to the terms
and conditions set forth herein.
1.2 Term. The employment of the Executive by the Company shall be for the
----
period commencing on the Effective Date and expiring on the date on which
termination of employment is effective pursuant to the provisions of Section 8
(the "Termination Date"). For all purposes of this Agreement, references to the
----------------
"term" of the Executive's employment hereunder shall mean the period commencing
on the Effective Date and ending on the Termination Date.
2. POSITION AND DUTIES. The Executive shall serve as Executive Vice President
and Chief Financial Officer ("EVP-CFO") of the Company, and shall be accountable
-------
to, and shall have such powers, duties and responsibilities consistent with and
customary to the position of Chief Financial Officer of a corporation the size
of the Company and as may from time to time be prescribed by the Board of
Directors of the Company (the "Board"). The Executive shall perform and
-----
discharge, faithfully, diligently, competently and in good faith such duties and
responsibilities. In addition, during the term hereof, the Company shall cause
and maintain the election of the Executive as a member of the Board. The
Executive (a) shall devote all of his business time and attention and his best
efforts and ability to the business and affairs of the Company and its
Subsidiaries and (b) shall not engage in other business activities whether or
not compensated during the term of this Agreement without prior written consent
of the Board; provided, however, the Executive may devote an amount of time to
-------- -------
be mutually agreed between Executive and the Company winding up activities with
SBC Holdings as provided by
<PAGE>
the Consulting Agreement; provided, further, that after May 31, 2000,
-------- -------
Executive's obligations pursuant to the Consulting Agreement shall not interfere
with his obligations to the Company. The services of the Executive shall be
performed at the offices of the Company in the Metropolitan Area.
3. COMPENSATION. Subject to all of the terms and conditions hereof and to the
performance by the Executive of his duties and obligations to the Company:
3.1 Salary. As compensation for services performed from the Effective
------
Date through December 31, 2001, the Company shall pay the Executive a salary at
a rate of $400,000 per annum, and thereafter such other greater amount as may be
established by the Board annually (such annual rate of salary in effect from
time to time being referred to as the "Salary"). The Salary shall be payable in
------
accordance with the regular payroll practices of the Company. Except as
otherwise provided in this Agreement, the Salary shall be prorated for any
period less than a full year.
3.2 Annual Bonus. As additional compensation for services hereunder, the
------------
Executive shall receive an annual bonus in an amount based on Board-specified
performance targets set in accordance with an executive bonus plan to be adopted
by the Company (such annual bonus in effect from time to time being referred to
as the "Annual Bonus"). Such bonus plan shall provide for the Annual Bonus to
------------
be equal to 100% of Salary in the event the Company achieves 100% of the Board-
specified performance targets, and shall provide for the Annual Bonus to exceed
100% of Salary in the event the Company exceeds the Board-specified performance
targets. For the Company's fiscal year ending December 31, 2000, the Annual
Bonus shall not be less than 100% of Salary paid in 2000 (the Salary for such
fiscal year shall be prorated since Executive shall have been employed by the
Company for less than a full year, but the Annual Bonus shall not be further
prorated by the following sentence), and for the Company's fiscal year ending
December 31, 2001, the Annual Bonus shall not be less than 75% of Salary paid in
2001. Except as otherwise provided in this Agreement, the Annual Bonus shall be
prorated for any period less than a full year.
3.3 Special Bonus. On July 1, 2001, Executive will be eligible to receive
-------------
a cash bonus of $150,000 (the "Special Bonus"). 50% of the Special Bonus will
-------------
be payable based upon the Company's achievement of Board-specified performance
targets and 50% of the Special Bonus will be payable based upon Executive's
continued employment with the Company as of June 30, 2001.
3.4 Stock Options. As soon as practicable after the date of commencement
-------------
of the Executive's employment hereunder, but in any event prior to May 1, 2000,
the Company shall grant to the Executive under the Company's 2000 Stock Option
Plan stock options (the "Stock Options") to purchase 450,000 shares of Common
-------------
Stock of the Company. Such grant shall be subject to shareholder approval of
the Company's 2000 Stock Option Plan. The Stock Options will have an exercise
price based on the trading price of Common Stock on the date of grant.
-2-
<PAGE>
The Stock Options will vest as follows: 112,500 Stock Options vest on each of
December 31, 2000, 2001, 2002 and 2003, subject to the terms of a stock option
certificate.
3.5 Business Expenses. During the term of his employment hereunder, the
-----------------
Executive shall be entitled to receive prompt reimbursement by the Company for
all reasonable business expenses incurred by him on behalf of the Company or any
of its Subsidiaries or Affiliates (in accordance with the policies and
procedures established by the Board from time to time for the Company's
executive officers) in performing services hereunder; provided, however, that
-------- -------
the Executive shall properly account therefor in accordance with requirements
for federal income tax deductibility and the Company's policies and procedures.
3.6 Benefits. From the period commencing on the Effective Date and
--------
subject to any contribution generally required of executives of the Company,
Executive shall be entitled to participate in any and all employee benefit plans
from time to time in effect for senior executives of the Company generally,
except to the extent such plans are in a category of benefit otherwise provided
to Executive. Such participation shall be subject to (i) the terms of the
applicable plan documents, except that the Company will waive minimum service
requirements for participation, if possible (ii) generally applicable Company
policies and (iii) the discretion of the Board or any administrative or other
committee provided for in or contemplated by such plan, provided such discretion
must be exercised reasonably for the proper administration of the subject plan
and not for the purpose of denying benefits to the Executive. The Company may
alter, modify or terminate its employee benefit plans at anytime as it, in its
sole discretion, determines to be appropriate, provided such alterations and
modifications adverse to the Executive are applicable generally to other senior
executives of the Company.
3.7 Vacations. During the term of his employment hereunder, the Executive
---------
shall be entitled to 20 paid working days as vacation in each year and shall
also be entitled to all paid holidays given by the Company to its employees.
The paid vacation days shall be prorated for any period of service hereunder
less than a full year. The Executive shall not be entitled to cash compensation
for any vacation time not taken during the term hereof and shall not be entitled
to accrue unused vacation.
3.8 Life Insurance. The Company shall maintain life insurance for the
--------------
benefit of the Executive in an amount that is three times Executive's Salary.
3.9 Transition Expenses. Until the earlier of two years from the
-------------------
Effective Date and Executive moving his primary residence to the Metropolitan
Area, the Company shall reimburse Executive (a) for reasonable travel expenses,
including reasonable expenses for air and ground transportation and incidental
travel related expenses such as meals, parking, and long distance telephone
charges of Executive incurred in connection with travel between his primary
residence in Michigan and the Metropolitan Area and (b) the cost, up to an
amount to be mutually agreed between the Company and the Executive, of leasing a
furnished apartment in the Metropolitan Area. Executive shall use his
reasonable efforts, taking into account the
-3-
<PAGE>
status of the business, to relocate to the Metropolitan Area as soon as
reasonably possible after the Effective Date. For each applicable tax year, the
Company shall make a lump-sum cash "gross-up" payment to Executive with respect
to taxes paid by Executive in connection with reimbursement of transition costs
pursuant to this Section 3.9. The gross-up payment will be sufficient, after
giving effect to all federal, state and other taxes and charges (including
interest and penalties, if any, imposed as a result of any action or inaction by
the Company) with respect to the gross-up payment, to make Executive whole for
all taxes (including withholding taxes) and any associated interest and
penalties, imposed in connection with the reimbursement of transition costs.
3.10 Relocation of Residence. Up to two years after the Effective Date,
-----------------------
the Company shall reimburse the Executive for the costs, up to an amount to be
mutually agreed between the Company and the Executive, associated with (i) the
closing of the purchase of a house or condominium in the Metropolitan Area
(including but not limited to, loan origination fees and brokers' fees); (ii)
the relocation of personal property (including art and other collectibles) to
such house or condominium; (iii) the sale of the Executive's existing home in
Michigan; and (iv) the reasonable cost of travel expenses, including expenses
for air and ground transportation and incidental travel-related expenses such as
meals, parking and long distance telephone charges incurred by the Executive's
spouse and immediate family in connection with travel to the Metropolitan Area
for the purpose of searching for housing in the Metropolitan Area; provided,
--------
however, that the Executive shall properly account therefor in accordance with
- -------
the requirements for federal income tax deductibility and the Company's policies
and procedures. For each applicable tax year, the Company shall make a lump-sum
cash "gross-up" payment to Executive with respect to taxes paid by Executive in
connection with reimbursement of relocation costs pursuant to this Section 3.10.
The gross-up payment will be sufficient, after giving effect to all federal,
state and other taxes and charges (including interest and penalties, if any,
imposed as a result of any action or inaction by the Company) with respect to
the gross-up payment, to make Executive whole for all taxes (including
withholding taxes) and any associated interest and penalties, imposed in
connection with the reimbursement of relocation costs.
3.11 Transportation Stipend. During the term of his employment hereunder,
----------------------
the Executive shall be entitled to a stipend of $750, to be paid consistent with
Company practice for senior executives, each month to cover expenses associated
with transportation, including leasing or owning an automobile; provided,
--------
however, that the Executive shall properly account therefor in accordance with
- -------
the requirements for federal income tax deductibility and the Company's policies
and procedures.
3.12 Country Club Allowance. Executive shall be entitled to reimbursement
----------------------
of up to (a) $60,000 to cover initiation fees and (b) $6,500 to cover annual
dues at any country club in the Metropolitan Area.; provided, however, that the
-------- -------
Executive shall properly account therefor in accordance with the requirements
for federal income tax deductibility and the Company's policies and procedures.
-4-
<PAGE>
3.13 Legal Fees. The Company shall pay directly to Butzel Long, or such
----------
other legal counsel as the Executive shall direct, up to $10,000 of legal fees
and related expenses incurred in connection with the negotiation of this
agreement.
4. OFFICES; SUBSIDIARIES AND AFFILIATES.
4.1 Generally. In addition to being EVP-CFO of the Company, the Executive
---------
agrees to serve during the term of his employment hereunder, if elected or
appointed thereto, in one or more positions as an officer or director of the
Company or any of its Subsidiaries, or as an officer, trustee, director or other
fiduciary of any pension or other employee benefit plan of the Company or any of
its Subsidiaries. Service in such additional positions will be without
additional compensation except for reimbursement of reasonably related business
expenses on the same terms as provided elsewhere in this Agreement.
4.2 Indemnification. The Company agrees that in connection with the
---------------
Executive's service in additional positions as provided under Section 4.1, the
Executive shall be entitled to the benefit of any indemnification provisions in
the charter and by-laws of the Company and any of its Subsidiaries for which the
Executive serves in such an additional position and any director and officer
liability insurance coverage carried by the Company and any of its Subsidiaries
for which the Executive serves as an officer or director; provided, however,
-------- -------
that this Section 4.2 shall not impose on the Company or any of its Subsidiaries
any obligation to include any such indemnification provisions in its charter or
by-laws or to maintain any such insurance coverage.
5. UNAUTHORIZED DISCLOSURE; INVENTIONS.
5.1 Confidential Information. The Executive acknowledges that the Company
------------------------
and its Subsidiaries and Affiliates continually develop Confidential
Information, that the Executive may develop Confidential Information for the
Company or its Subsidiaries or Affiliates and that the Executive may learn of
Confidential Information during the course of employment. The Executive will
comply with the policies and procedures of the Company and its Subsidiaries and
Affiliates for protecting Confidential Information and agrees not to disclose to
any Person (except as required by applicable law or for the proper performance
of his duties and responsibilities to the Company and its Subsidiaries and
Affiliates), or use for his own benefit or gain, any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company or any of its Subsidiaries or Affiliates. The Executive understands
that this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination.
-5-
<PAGE>
5.2 Protection of Documents. All documents, records, tapes and other
-----------------------
media of every kind and description relating to the business, present or
otherwise, of the Company or its Subsidiaries or Affiliates and any copies, in
whole or in part, thereof (the "Documents"), whether or not prepared by the
---------
Executive, shall be the sole and exclusive property of the Company or its
Subsidiaries or Affiliates. The Executive shall safeguard all Documents and
shall surrender to the Company at the time his employment terminates, or at such
earlier time or times as the Board or its designee may specify, all Documents
then in the Executive's possession or control.
5.3 Proprietary Rights. Any and all inventions, discoveries,
------------------
developments, methods, processes, compositions, works, supplier and customer
lists (including information relating to the generation and updating thereof),
concepts and ideas (whether or not patentable or copyrightable) (collectively,
"Inventions") conceived, made, developed, created or reduced to practice
----------
(collectively, "Conceived") by the Executive (whether at the request or
---------
suggestion of the Company or otherwise, whether alone or in conjunction with
others, and whether during regular hours of work or otherwise) during the term
of his employment by the Company, which may be directly or indirectly useful in,
or related to, the business, ventures or other activities of or products
manufactured or sold by the Company or any of its Subsidiaries or Affiliates or
any business or products contemplated by the Company or any of its Subsidiaries
or Affiliates while the Executive was or is an employee, officer or director of
the Company (collectively, "Proprietary Rights"), together with Inventions so
------------------
Conceived by the Executive within the six-month period following the Termination
Date and which directly relate to Company work initiated, conducted, observed,
or contemplated prior to the Termination Date, shall be promptly and fully
disclosed by the Executive to the Board and shall be the exclusive property of
the Company as against the Executive and his successors, heirs, devisees,
legatees and assigns, and the Executive hereby assigns to the Company his entire
right, title and interest therein and shall promptly deliver to the Company all
papers, drawings, models, data and other material relating to any of the
foregoing Proprietary Rights conceived, made, developed, created or reduced to
practice by him as aforesaid. All copyrightable Proprietary Rights shall be
considered "works made for hire." The Executive shall, upon the Company's
request and without any payment therefor or expense with respect thereto,
execute any documents necessary or advisable in the reasonable opinion of the
Company's counsel to assign, and confirm the Company's title in, his entire
right, title and interest in the foregoing Proprietary Rights and to direct
issuance of patents or copyrights to the Company with respect to such
Proprietary Rights as are the Company's exclusive property as against the
Executive and his successors, heirs, devisees, legatees and assigns under this
Section 5.3 or to vest in the Company title to such Proprietary Rights as
against the Executive and his successors, heirs, devisees, legatees and assigns,
the expense of securing any such patent or copyright, however, to be borne by
the Company.
6. RESTRICTED ACTIVITIES. The Executive agrees that some restrictions on his
activities during and after his employment are necessary to protect the
goodwill, Confidential Information and other legitimate interests of the Company
and its Subsidiaries and Affiliates:
-6-
<PAGE>
6.1 Non-Competition. While the Executive is employed by the Company and
---------------
for a period of two years immediately following termination of his employment
(the "Non-Competition Period"), the Executive shall not, directly or indirectly,
----------------------
whether as owner, partner, investor, consultant, agent, employee, co-venturer or
otherwise, compete with the Company or any of its Subsidiaries or Affiliates
within the United States in any Competitive Business or undertake any planning
for any Competitive Business. Without limiting the generality of the foregoing,
during the Non-Competition Period, the Executive will not solicit or encourage
any Person who is or was a customer of the Company or any of its Subsidiaries or
Affiliates to terminate its relationship with any of them, or to conduct with
any other Person any business or activity which such customer conducted with the
Company or any of its Subsidiaries or Affiliates, and which is or would be
detrimental to the Company.
6.2 Outside Activities. The Executive agrees that except as provided by
------------------
the proviso to Section 2, during his employment with the Company, he will not
undertake any outside activity, whether or not competitive with the business of
the Company or any of its Subsidiaries or Affiliates, that could reasonably give
rise to a conflict of interest or otherwise interfere with the performance of
his duties and obligations to the Company or any of its Subsidiaries or
Affiliates.
6.3 Non-Solicitation of Employees. Acknowledging the strong interest of
-----------------------------
the Company in an undisrupted workplace, the Executive further agrees that while
he is employed by the Company and for a period of two years immediately
following termination of his employment, the Executive will not (a) directly, or
indirectly through agents or other representatives, seek to persuade, solicit or
encourage any employee of the Company or any of its Subsidiaries or Affiliates
to discontinue employment with the Company or any of its Subsidiaries or
Affiliates or (b) solicit or encourage any independent contractor providing
services to the Company or any of its Subsidiaries or Affiliates to terminate or
diminish its relationship with the Company or any of its Subsidiaries or
Affiliates.
6.4 Ownership of Securities. Notwithstanding the provisions of this
-----------------------
Sections 6, the Executive shall have the right to acquire as a passive investor
(with no involvement in the operations or management of the business) up to 1%
of any class of securities which is (a) issued by any Person engaged in a
Competitive Business and (b) publicly traded on a national securities exchange
or over-the-counter market.
7. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he has carefully
read and considered all the terms and conditions of this Agreement, including
the restraints imposed upon him pursuant to Sections 5 and 6. The Executive
agrees that such restraints are necessary for the reasonable and proper
protection of the Company and its Subsidiaries and Affiliates and that each and
every one of the restraints is reasonable in respect to subject matter, length
of time and geographic area. The Executive further acknowledges that, were he
to breach any of the covenants contained in Section 5 or 6, the damage to the
Company would be irreparable. The Executive therefore agrees that the Company,
in addition to any other remedies available to it, shall be entitled to
preliminary and permanent injunctive (or other
-7-
<PAGE>
equitable) relief against any breach or threatened breach by the Executive of
any of such covenants, without having to post bond. The Company will be entitled
to recover from the Executive any attorneys fees and costs it incurs in
connection with the successful enforcement of its rights under Section 5 and 6,
and the Executive will be entitled to recover from the Company reasonable
attorneys fees and costs he incurs in connection with the successful defense of
any such enforcement action brought by the Company. The parties further agree
that, in the event that any provision of Section 5 or 6 shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
8. TERMINATION.
8.1 Death. The Executive's employment hereunder shall terminate upon his
-----
death.
8.2 Incapacity. If the Executive shall have been unable to perform his
----------
duties hereunder by reason of any physical or mental illness, injury or other
incapacity (collectively "Incapacity") (a) for any period of 90 consecutive days
----------
or (b) for a total of 150 days in any period of 12 consecutive calendar months,
in the reasonable judgment of the Board, after consultation with such experts,
if any, as the Board may deem necessary or advisable, the Company may terminate
the Executive's employment hereunder by written notice to the Executive. During
any period of Incapacity prior to termination of the Executive's employment
under this Section 8.2, the Company shall continue to pay and provide to the
Executive, as the case may be, all amounts and benefits due the Executive under
Section 3.
8.3 Cause. The Company may terminate the Executive's employment hereunder
-----
for Cause at any time upon written notice to the Executive. For the purposes of
this Agreement, the Company shall have "Cause" to terminate the Executive's
-----
employment hereunder upon: (a) the Executive's breach of any of his obligations
set forth in this Agreement, which breach is not cured within 15 days after
receipt by the Executive from the Board of written notice of such breach; (b)
the Executive's breach of his fiduciary duties as an officer or director of the
Company or any of its Subsidiaries or Affiliates, or as an officer, trustee,
director or other fiduciary of any pension or employee benefit plan of the
Company or any of its Subsidiaries or Affiliates; (c) the Executive's commission
of a felony involving fraud, personal dishonesty or moral turpitude (whether or
not in connection with his employment); or (d) the Executive's failure to follow
the reasonable instructions of the Board, which failure does not cease within 15
days after receipt by the Executive from the Board of written notice of such
failure.
8.4 Other than for Cause. The Company may terminate the Executive's
--------------------
employment hereunder other than for Cause at any time upon written notice to the
Executive.
8.5 Good Reason. The Executive may terminate the Executive's employment
-----------
hereunder for Good Reason at any time upon 60 days' prior written notice to the
Company. In the event of termination of the Executive pursuant to this Section
8.5, the Board may elect to
-8-
<PAGE>
waive the period of notice or any portion thereof. For the purposes of this
Agreement, the Executive shall have "Good Reason" to terminate the Executive's
-----------
employment hereunder upon: (a) material diminution in the nature or scope of
Executive's responsibilities, duties or powers, in each case except in the event
of termination of the Executive's employment pursuant to Section 8.1, 8.2, 8.3
or 8.6, (b) a reduction in the amount of Executive's Salary, (c) the failure by
the Company to pay the Executive his Salary, Special Bonus or Annual Bonus as
provided in Sections 3.1 through 3.3, respectively (provided, that in the case
--------
of the Annual Bonus or the Special Bonus, the Company is not required to pay any
part of such bonus that is conditioned upon certain events, including, without
limitation, the achievement of Board-specified performance targets, unless such
events have occurred), (d) the failure by the Company to grant the Executive the
Stock Options, (e) the material failure, individually or in the aggregate, by
the Company to provide the Executive with the benefits provided for in Sections
3.5 through 3.13, (f) a Change of Control in which the successor company, if
any, to the Company fails to assume this Agreement in its entirety or (g)
subsequent to a Change of Control, the Executive is not the most senior finance
officer of the Company or the successor company, as the case may be.
8.6 Other than for Good Reason. The Executive may terminate his
--------------------------
employment hereunder at any time upon 60 days' prior written notice to the
Company. In the event of termination of the Executive pursuant to this Section
8.6, the Board may elect to waive the period of notice, or any portion thereof.
9. COMPENSATION UPON TERMINATION.
9.1 Death. In the event of the Executive's death during the term hereof,
-----
the Company shall pay or transfer, as the case may be, to the Executive's
designated beneficiary or, if no beneficiary has been designated by the
Executive, to his estate, (a) his Salary that is earned and unpaid at the date
of death, (b) all amounts due the Executive as of the date of Executive's death
pursuant to Sections 3.3 and 3.5 through 3.13, and (c) to the extent not already
granted, the grant of Stock Options contemplated by Section 3.4; provided, that
Executive's rights in the event of death with respect to the Stock Options shall
be governed by a stock option certificate, and (d) at the end of such fiscal
year, an amount equal to the product of (A) the Annual Bonus that the Executive
would otherwise have earned for such fiscal year if death had not occurred
multiplied by (B) a fraction, the numerator of which is the number of days from
- ---------- --
the beginning of such fiscal year until the date of death and the denominator of
which is 365.
9.2 Incapacity. If the Executive's employment shall be terminated by
----------
reason of his incapacity pursuant to Section 8.2, the Company shall (a) continue
through the Termination Date to pay or provide to Executive, as the case may be,
all amounts and benefits due to the Executive through the Termination Date under
Section 3 and (b) pay the Executive at the end of the fiscal year in which the
Termination Date occurred, an amount equal to the product of (A) the Annual
Bonus that the Executive would otherwise have earned for such fiscal year if
termination pursuant to Section 8.2 had not occurred multiplied by (B) a
---------- --
fraction, the
-9-
<PAGE>
numerator of which is the number of days from the beginning of such fiscal year
until the date of termination pursuant to Section 8.2 and the denominator of
which is 365. In addition, the Executive shall receive disability insurance
payments to the extent the Executive is eligible under the Company's disability
insurance policy and applicable law.
9.3 Cause. If the Company shall terminate the Executive's employment for
-----
Cause, the Company shall have no further obligations to the Executive under this
Agreement other than the payment or provision to the Executive, as the case may
be, of all amounts and benefits due the Executive through the Termination Date
under Section 3.
9.4 Other than for Cause; Good Reason. If the Company shall terminate the
---------------------------------
Executive's employment pursuant to Section 8.4 or the Executive shall terminate
the Executive's employment pursuant to Section 8.5, and, if no benefits are
payable to the Executive under a separate severance agreement or an executive
severance plan (acknowledged in writing by the Executive to supersede the
provisions of this Section 9.4) as a result of such termination, then the
Company shall pay or provide to the Executive:
(a) as soon as reasonably practicable after the Termination Date, all
amounts and benefits provided for in Section 3 and due to the Executive
through the Termination Date; and
(b) Executive's Salary in effect at the time notice of termination is
given until the second anniversary of the Termination Date, payable on a
monthly basis or such other time increment as the Executive and the Company
mutually agree, and
(c) to the extent not previously paid, an Annual Bonus for the
fiscal year ending December 31, 2000 (such Annual Bonus to be prorated for
the period that Executive is employed by the Company in 2000) in an amount
equal to 100% of Salary in effect at the time notice of termination is
given, and an Annual Bonus for the fiscal year ending December 31, 2001 in
an amount equal to 75% of Salary in effect at the time notice of
termination is given.
With respect to any termination of employment to which this Section 9.4 applies,
until the earlier to occur of (1) the second anniversary of the Termination Date
or (2) the date on which the Executive receives from another employer (including
self-employment or engaging in an enterprise as a sole proprietor or partner)
medical and dental benefits substantially comparable to those made available by
the Company to the Executive as of the time notice of termination is given (and
without regard to any diminution of such medical and dental benefits made by the
Company in anticipation of such notice of termination) (the "Benefits
--------
Termination Date"), the Company shall, if the Executive was participating in any
- ----------------
Company medical and dental insurance plans pursuant to Section 3.6 immediately
prior to the effectiveness of his termination of employment and subject to any
employee contribution applicable to the Executive immediately prior to such
effectiveness, continue to provide and contribute to the cost of the Executive's
participation in such medical and dental insurance plans so long as the
-10-
<PAGE>
Executive is entitled to continue such participation under applicable law and
plan terms. The obligations of the Company to the Executive under this Section
9.4 (other than clause (a) of the first sentence of this Section 9.4) are
conditioned upon the Executive's signing a release of claims in the form of
Exhibit A (the "Release") within 28 days of the date on which notice of
-------
termination is given and upon such Release remaining in full force and effect
thereafter. Except as otherwise provided, all severance payments under this
Section 9.4 will be in the form of salary continuation, payable in accordance
with the normal payroll practices of the Company and will begin at the Company's
next regular payroll period following the effective date of the Release, but
shall be retroactive to the Termination Date; provided, that payments to the
--------
Executive under this Section 9.4 shall not be reduced by reason of any
compensation payments Executive receives from employment subsequent to the
Termination Date.
9.5 Other than for Good Reason. If the Executive shall terminate his
--------------------------
employment pursuant to Section 8.6, the Company shall have no further
obligations to the Executive under this Agreement other than payment or
provision of all amounts and benefits provided for in Section 3 and due to the
Executive through the Termination Date (provided, that, if, in accordance with
Section 8.6, the Board elects to waive the period of notice, or any portion
thereof, the payment of Salary under this Section 9.5 shall continue through the
notice period or any portion thereof so waived).
9.6 Post-Termination Obligations Generally. Except as expressly set forth
--------------------------------------
in this Section 9, the Stock Option Certificate and as provided by law, the
Company shall have no further obligations to the Executive following expiration
of the term of the Executive's employment hereunder, and performance by the
Company of any obligation specifically provided in this Section 9 shall
constitute full settlement of any claim that the Executive may have on account
of such termination against the Company and its Subsidiaries and Affiliates and
all of their respective past and present officers, directors, stockholders,
controlling Persons, employees, agents, representatives, successors and assigns
and all other others connected with any of them, both individually and in their
official capacities.
9.7 Change of Control. If within two years of a Change of Control, the
-----------------
Executive terminates his employment for Good Reason or the Company terminates
Executive's employment other than for Cause, the Company shall have no further
obligations to the Executive under this Agreement other than (i) a lump sum
payment equal to two times the sum of the Salary and the Annual Bonus paid to
Executive during the preceding twelve months; provided, that if Executive
--------
terminates his employment pursuant to this Section 9.7 during any period prior
to March 21, 2001, the Annual Bonus portion of the calculation shall be fixed at
$400,000 and (ii) continued contributions (if the Executive was participating in
any Company medical and dental insurance plans pursuant to Section 3.6
immediately prior to the effectiveness of his termination of employment and
subject to any employee contribution applicable to the Executive immediately
prior to such effectiveness), until the Benefits Termination Date, to the cost
of Executive's participation in such medical and dental insurance plans so long
as the Executive is entitled to continue such participation under applicable law
and plan terms.
-11-
<PAGE>
10. CONFLICTING AGREEMENTS. Executive hereby represents and warrants that the
execution of this Agreement and the performance of Executive's obligations
hereunder will not breach or be in conflict with any other agreement to which
Executive is a party or is bound and that Executive is not now subject to any
covenants against competition, nonsolicitation or similar covenants that would
affect the performance of Executive's obligations hereunder or would restrict
the Company in its operations, including hiring any additional executives.
Executive has provided the Company with a true and correct copy of all
agreements having executory obligations on the part of the Executive or the
Company between Executive and Executive's former employer or employers and any
similar agreements governing Executive's rights and obligations relating to any
former employer. Executive will not disclose to or use on behalf of the Company
any confidential or proprietary information of a third party without such
party's consent.
11. WITHHOLDING. All payments made by the Company under this Agreement shall
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
12. NOTICES. All notices, requests and demands to or upon the parties hereto to
be effective shall be in writing, by facsimile, by overnight courier or by
registered or certified mail, postage prepaid and return receipt requested, and
shall be deemed to have been duly given or made upon: (a) delivery by hand, (b)
one business day after being sent by nationally recognized overnight courier; or
(c) in the case of transmission by facsimile, when confirmation of receipt is
obtained. Such communications shall be addressed and directed to the parties as
follows (or to such other address as either party shall designate by giving like
notice of such change to the other party):
If to the Executive:
Christopher T. Sortwell
950 E. Glengarry Circle
Bloomfield Hills, MI 48301
with a copy to:
Butzel Long
150 West Jefferson Street, Suite 900
Detroit, MI 48226
Attention: George Kuehn
Facsimile: (313) 225-7080
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<PAGE>
If to the Company:
Aurora Foods Inc.
1000 St. Louis Union Station, Suite 200
St. Louis, MO 63103
Attention: Chief Executive Officer
Facsimile: (314) 632-5633
with a copy to:
Fenway Partners, Inc.
152 West 57th Street, 59th Floor
New York, NY 10019
Attention: Richard C. Dresdale
Facsimile: (212) 757-0609
and
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton, Esq.
Facsimile: (617) 951-7050
13. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. Certain capitalized terms are
used in this Agreement with the specific meanings defined below in this Section
13. Except as otherwise explicitly specified to the contrary or unless the
context clearly requires otherwise, (a) the capitalized term "Section" refers to
sections of this Agreement, (b) the capitalized term "Exhibit" refers to
exhibits to this Agreement, (c) references to a particular Section include all
subsections thereof, (d) the word "including" shall be construed as "including
without limitation" and (e) references to "$" mean United States dollars.
13. "AAA" is defined in Section 19.
---
13.2 "Affiliate" shall mean (a) any Person directly or indirectly
---------
controlling, controlled by or under direct or indirect common control with the
Company (or other specified Person), (b) any other Person which, together with
its Affiliates (as defined in clause (a) above), shall, directly or indirectly,
own beneficially or control the voting of at least 10% of the ownership interest
in the Company (or other specified Person) and (c) any other Person of which the
Company (or other specified Person) and its Affiliates (as defined in clauses
(a) and (b) above) shall, directly or indirectly, own beneficially or control
the voting of at least 10% of any class of outstanding capital stock or other
evidence of beneficial interest or of any interest as a general partner or joint
venturer.
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<PAGE>
13.3 "Annual Bonus" is defined in Section 3.2.
------------
13.4 "Beneficial Owner" shall have the meaning in Rules 13d-3 and 13d-5
----------------
under the Exchange Act, except that a Person shall be deemed to have a
"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.
13.5 "Benefits Termination Date" is defined in Section 9.4.
-------------------------
13.6 "Board" is defined in Section 2.
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13.7 "Cause" is defined in Section 8.3.
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13.8 "Change of Control" means:
-----------------
a. any person (used as such term is defined in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the Beneficial Owner, directly or indirectly,
of more than 35% of the total voting power of the Voting Stock of the
Company; provided that the Permitted Holders are Beneficial Owners of,
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 (used as such term is defined in Sections 13(d) and 14(d) of
the Exchange Act) 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; provided, further, that a person (used as such
term is defined in Sections 13(d) and 14(d) of the Exchange Act) shall
be deemed to be the Beneficial Owner of any Voting Stock of a Person
held by any other Person (the "Parent Corporation") if such other
person (used as such term is defined in Sections 13(d) and 14(d) of
the Exchange Act) is the Beneficial Owner of, directly or indirectly,
more than 35% of the voting power of the Voting Stock of the Parent
Corporation and the Permitted Holders are Beneficial Owners of,
directly or indirectly, in the aggregate, a lesser percentage of the
voting power of the Voting Stock of the 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 the Parent Corporation; or
b. the consummation, through one transaction or a series of
related transactions, of a reorganization, merger or consolidation, in
each case, unless, following such reorganization, merger or
consolidation the shareholders of the Company immediately prior to
such reorganization, merger or consolidation are the Beneficial
Owners, directly or indirectly, of more than 50% of, respectively, the
then outstanding shares of Common Stock resulting from such
reorganization, merger or consolidation and the combined voting power
of the Voting Stock of the Company; or
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<PAGE>
c. the consummation, through one transaction or a series of
related transactions, of (i) a complete liquidation or dissolution of
the Company or (ii) the sale, disposition or other transfer or
removal of assets of the Company to which 40% of the Company's
annualized revenues as of December 31, 1999 are directly
attributable; provided, that a Change of Control shall not be deemed
--------
to have occurred if the entity or entities acquiring control in such
sale or disposition are the Permitted Holders or their Affiliates.
13.9 "Common Stock" means the common stock, $.01 par value, of the
------------
Company.
13.10 "Company" is defined in the preamble to this Agreement.
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13.11 "Competitive Business" means any existing business conducted by the
--------------------
Company or any of its Subsidiaries during the term of the Executive's employment
with the Company; provided that the phrase "existing business" shall for
purposes of this Section 13.11 be deemed to include any business actively
proposed to be conducted by the Company and for which the Company has developed
a formal business or marketing plan.
13.12 "Confidential Information" means any and all information regarding
------------------------
the Company and its Subsidiaries and Affiliates that is not generally known by
others with whom they compete or do business, or with whom they actively plan to
compete or do business, including such information relating to (a) the
development, research, testing, manufacturing, marketing and financial
activities of the Company and its Subsidiaries, (b) the Products, (c) the costs,
sources of supply, financial performance and strategic plans of the Company and
its Subsidiaries and Affiliates, (d) the identity and special needs of the
customers of the Company and its Subsidiaries and Affiliates and (e) the people
and organizations with whom the Company and its Subsidiaries and Affiliates have
business relationships and those relationships, but excluding information which
(i) is generally available to and known by the public or (ii) is or becomes
known on a non-confidential basis from a source other than the Executive.
13.13 "Consulting Agreement" means the Consulting Agreement dated as of May
--------------------
10, 1999, among the Executive, SBC Holdings and The Stroh Companies, Inc.
13.14 "Documents" is defined in Section 5.2.
---------
13.15 "Effective Date" is defined in the preamble.
--------------
13.16 "Executive" is defined in the preamble.
---------
13.17 "Exchange Act" means the Securities and Exchange Act of 1934, as
------------
amended.
13.18 "Fenway" means Fenway Capital Partners Fund, L.P., a Delaware limited
------
partnership, and Fenway Capital Partners Fund II, L.P., a Delaware limited
partnership.
13.19 "Good Reason" is defined in Section 8.5.
-----------
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<PAGE>
13.29 "McCown" means 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.
13.21 "Metropolitan Area" means the St. Louis, Missouri metropolitan area.
-----------------
13.22 "Non-Competition Period" is defined in Section 6.1.
----------------------
13.23 "Permitted Holders" means Fenway, McCown, Delta Fund LLC, California
-----------------
Public Employees Retirement System, Dartford Partnership L.L.C., Tiger Oats
Limited and UBS Capital LLC.
13.24 "Person" means any individual, partnership, corporation, association,
------
trust, joint venture, limited liability company, unincorporated organization or
entity, and any government, governmental department or agency or political
subdivision thereof.
13.25 "Products" means all products planned, researched, developed, tested,
--------
manufactured, sold, licensed, leased or otherwise distributed or put into use by
the Company or any of its Subsidiaries or Affiliates, together with all services
provided or planned by the Company or any of its Subsidiaries or Affiliates,
during the Executive's employment; provided that Products shall not include
products not in distribution and for which there is not active planning,
research, development or testing or for which there is not a current formal
business or marketing plan.
13.26 "Proprietary Rights" is defined in Section 5.3.
------------------
13.27 "Release" is defined in Section 9.4.
-------
13.28 "Salary" is defined in Section 3.1.
------
13.29 "SBC Holdings" means SBC Holdings, Inc. (f/k/a The Stroh Brewery
------------
Company), and, for purposes of Section 2, includes its parent, subsidiaries and
affiliates.
13.30 "Special Bonus" is defined in Section 3.3.
-------------
13.31 "Stock Options" is defined in Section 3.4.
-------------
13.32 "Subsidiary" means any Person of which the Company (or other
----------
specified Person) shall, directly or indirectly, own beneficially or control the
voting of at least a majority of the outstanding capital stock (or other shares
of beneficial interest) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which the Company (or
other specified Person) or a Subsidiary thereof shall be a general partner or
joint venturer without limited liability.
13.33 "Termination Date" is defined in Section 1.2.
----------------
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<PAGE>
13.34 "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.
14. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board and agreed to in writing by the Executive and such officer as may be
specifically authorized by the Board in connection with such approval. No
waiver by either party hereto at any time of compliance with or of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement and the legal relations created
thereby shall be governed by the domestic substantive laws of the State of
Missouri without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
15. SEVERABILITY. If any portion or provision of this Agreement shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
16. COUNTERPARTS. This Agreement may be executed in any one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17. ENTIRE AGREEMENT. This Agreement (together with the Stock Option
Certificate) constitutes the entire agreement between the parties hereto, and
supersedes any and all prior communications, agreements and understandings,
written or oral, with respect to the terms and conditions of the Executive's
employment with the Company.
18. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding
upon (a) the Executive, his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees and (b)
the Company and its successors (including by means of reorganization, merger,
consolidation or liquidation) and permitted assigns. The Company may assign
this Agreement to any of its Subsidiaries or to any successor of the Company by
reorganization, merger, consolidation or liquidation and any transferee of all
or substantially all of the business or assets of the Company or of any division
or line of business of the Company with which the Executive is at any time
associated; provided that, except to the extent it occurs upon a Change of
Control, no such assignment shall operate to release the Company from its
payment and benefit obligations hereunder. The Company requires the personal
services of the Executive hereunder and the Executive may not assign this
Agreement.
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<PAGE>
19. ARBITRATION. With the exception of claims arising under or connected to
Sections 5 and 6, any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted by a single arbitrator in St. Louis, Missouri in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association ("AAA") then in effect; provided, however, that the
--- -------- -------
parties may agree to use an arbitrator other than those provided by the AAA.
The arbitrator shall not have the authority to add to, detract from, or modify,
any provision hereof nor to award punitive damages to any injured party. The
arbitrator shall have the authority to order back-pay and severance
compensation, and, to the extent deemed reasonable and appropriate by such
arbitrator given the issues involved and the outcome of the arbitration, shall
award to the prevailing party reimbursement of out of pocket costs and expenses
(including legal fees) incurred by such party in connection with such dispute or
controversy, together with interest thereon. A decision by a the arbitrator
shall be final and binding. Judgment may be entered on the arbitrator's award
in any court having competent jurisdiction. Responsibility for bearing the cost
of the arbitration shall be determined by the arbitrator and shall be
proportional to the arbitrator's decision on the merits.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands under
seal, as of the date first above written.
THE COMPANY:
AURORA FOODS, INC.
By_________________________________
Name:
Title:
THE EXECUTIVE:
___________________________________
Christopher T. Sortwell
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<PAGE>
Exhibit A
---------
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments and benefits to be
provided in connection with the termination of my employment in accordance with
the terms of the Employment Agreement dated as of March 21, 2000 (as amended and
in effect from time to time, the "Employment Agreement") between Aurora Foods
--------------------
Inc., a Delaware corporation (the "Company"), and me, I, on my own behalf and on
-------
behalf of my personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees and all others connected
with me, hereby release and forever discharge Fenway (as defined in the
Employment Agreement), the Company and their respective Affiliates (as defined
in the Employment Agreement) and all of their respective past and present
officers, directors, stockholders, controlling persons, employees, agents,
representatives, successors and assigns and all others connected with any of
them (all collectively, the "Released"), both individually and in their official
--------
capacities, from any and all rights, liabilities, claims, demands and causes of
action of any type (collectively, "Claims") which I have had in the past, now
------
have, or might now have, through the date of my signing of this Release of
Claims, in any way resulting from, arising out of or connected with my
employment or its termination or pursuant to any federal, state, foreign or
local employment law, regulation or other requirement (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company, each as amended from time to time); provided, however, that the
-------- -------
foregoing release shall not apply to any future claim to enforce the terms of my
Employment Agreement with the Company or any future claim arising from my status
as a vested beneficiary of an employee benefit or pension benefit plan.
In signing this Release of Claims, I acknowledge that I have had at least
21 days from the date of notice of termination of my employment to consider the
terms of this Release of Claims and that such time has been sufficient; that I
am encouraged by the Company to seek the advice of an attorney prior to signing
this Release of Claims; and that I am signing this Release of Claims voluntarily
and with a full understanding of its terms.
I understand that I may revoke this Release of Claims at any time within
seven days of the date of my signing by written notice to the Company and that
this Release of Claims will take effect only upon the expiration of such seven-
day revocation period and only if I have not timely revoked it.
Intending to be legally bound, I have signed this Release of Claims under
seal as of the date first written above.
Signature: ___________________________________
Christopher T. Sortwell
Date Signed: _________________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from balance
sheets and statements of operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 659 253
<SECURITIES> 0 0
<RECEIVABLES> 105,489 85,457
<ALLOWANCES> 1,663 717
<INVENTORY> 118,950 77,863
<CURRENT-ASSETS> 263,938 198,533
<PP&E> 286,686 172,770
<DEPRECIATION> 31,627 13,617
<TOTAL-ASSETS> 1,859,964 1,462,565
<CURRENT-LIABILITIES> 1,297,247 272,395
<BONDS> 1,138,412 732,196
0 0
0 0
<COMMON> 670 670
<OTHER-SE> 559,787 579,932
<TOTAL-LIABILITY-AND-EQUITY> 1,859,964 1,462,565
<SALES> 322,748 254,264
<TOTAL-REVENUES> 322,748 254,264
<CGS> 138,402 104,703
<TOTAL-COSTS> 148,638 113,115
<OTHER-EXPENSES> 33,402 20,570
<LOSS-PROVISION> 376 147
<INTEREST-EXPENSE> 25,166 15,030
<INCOME-PRETAX> (23,236) 699
<INCOME-TAX> (7,435) 217
<INCOME-CONTINUING> (15,801) 482
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (15,801) 482
<EPS-BASIC> (0.24) 0.01
<EPS-DILUTED> (0.24) 0.01
</TABLE>
