CONFIDENTIAL
July 1, 2003
Aurora Foods Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Agreement in Principle
Dear Sirs and Madams:
This letter, upon your execution and return, will confirm our
Agreement in Principle for an investment (the "Investment") in Aurora Foods
Inc., a Delaware corporation (the "Company"), by ▇.▇. Childs Equity Partners
III, L.P. (the "Investor") on the terms and conditions set forth herein.
The Investor understands and acknowledges that the Investment will be
made in the context of the Company's restructuring (the "Restructuring") of
its current capital structure to, among other things, reduce its outstanding
indebtedness and resolve liquidity issues that it currently faces.
1. Investment. The Company shall issue and sell to the Investor, and
the Investor shall purchase from the Company, shares of common stock, par
value $0.01 per share ("Common Stock"), of the Company substantially on the
terms set forth herein and on the Term Sheet attached hereto as Annex A ("Term
Sheet").
2. Definitive Agreement. The Company and the Investor shall negotiate
in good faith and use reasonable best efforts to enter into, on or before July
9, 2003, a definitive stock purchase agreement ("Definitive Agreement") in
form and substance reasonably acceptable to the Company and the Investor,
which Definitive Agreement shall contain reasonable and customary
representations and warranties (none of which will survive closing),
agreements, covenants and conditions providing for consummation of the
Investment.
3. Exclusivity. The Company shall not, and the Company shall require
each of its affiliates and their respective officers, directors, employees,
representatives and agents not to, directly or indirectly, (i) initiate,
solicit, encourage or otherwise facilitate any inquiry, proposal, offer or
discussion with any party (other than the Investor) concerning any merger,
reorganization, consolidation, recapitalization, business combination,
liquidation, dissolution, share exchange, sale of stock, sale or license of
material assets or similar business transaction involving the Company, (ii)
furnish any non-public information concerning the business, properties or
assets of the Company to any party (other than the Investor) or (iii) engage
in discussions or negotiations (other than the Investor) with respect to, or
consummate, any such transaction. The Company shall immediately notify any
party with which discussions or negotiations of the nature described in this
paragraph 3 are pending that the Company is terminating such discussions or
negotiations. If the Company receives any inquiry, proposal or offer of the
nature described in this paragraph 3, the Company shall, within one business
day after such receipt, notify the Investor of such inquiry, proposal or
offer, including the identity of the other party and the terms of such
inquiry, proposal or offer. Notwithstanding the provisions of paragraph 7
hereof, the exclusivity provisions set forth in this paragraph 3 shall
automatically terminate on the sooner of (i) the execution and delivery of the
Definitive Agreement or (ii) 5:00 p.m. New York City time on July 9, 2003.
4. Access to Information. The Company shall continue to provide the
Investor and its accountants, attorneys and other representatives and agents
with access to its offices, facilities, properties, documents, records, and
other information (including legal, financial and operating data), and shall
make its officers, employees, agents, accountants, and representatives
available to answer the Investor's (or its representatives or agents)
inquiries concerning the Company's business, operations, financial condition,
assets, liabilities, and all other matters relevant to the Investment .
5. Public Announcements. The Company shall disclose the contents of
any public statement relating to this Agreement in Principle to the Investor,
and give the Investor the opportunity to comment thereon, prior to public
disclosure thereof, and shall incorporate the Investor's reasonable comments
to the same.
6. Confidentiality. The Company and the Investor acknowledge and
agree that (i) the Confidentiality Agreement, dated October 2, 2002, between
the ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., as agent for the Company and its affiliates, has been
terminated and is no longer in force or effect and (ii) the transactions
contemplated by this Agreement in Principle are subject to the
Confidentiality, Secrecy and Non-Disclosure Agreement dated March 25, 2003
("Confidentiality Agreement") between the Company and the Investor; provided,
however that notwithstanding anything in the Confidentiality Agreement, the
parties (and each employee, representative, or other agent of the parties) may
disclose to any and all persons, without limitation of any kind, the tax
treatment and any facts that may be relevant to the tax structure of the
Restructuring beginning on the earliest of (i) the date of the public
announcement of discussions relating to the Restructuring, (ii) the date of
public announcement of the Restructuring, or (iii) the date of the execution
of an agreement (with or without conditions) to enter into the Restructuring,
provided, however, that neither party (nor any employee, representative or
other agent thereof) may disclose any other information that is not relevant
to understanding the tax treatment and tax structure of the Restructuring
(including the identity of any party and any information that could lead
another to determine the identity of any party), or any other information to
the extent that such disclosure could result in a violation of any federal or
state securities law.
7. Termination. This agreement in principle (i) shall terminate
automatically upon the execution of the Definitive Agreement and (ii) may be
terminated by either party, on or after July 9, 2003, by providing written
notice of such termination to the other party, if the Definitive Agreement has
not been executed prior to that date.
8. Amendments and Waivers. This Agreement in Principle may be amended
or modified and the observance of any term of this Agreement in Principle may
be waived only with the mutual written consent of the Company and the
Investor.
9. Cost and Expenses. Except as may be otherwise provided in the
Definitive Agreement, the Investor, on the one hand, and the Company, on the
other hand, shall each bear all of its own costs and expenses incurred in
connection with this Agreement in Principle and the transactions contemplated
hereby, including the fees and expenses of any financial advisor, counsel,
accountants or other representative retained by it or them.
10. Agreement in Principle. The parties hereto understand and agree
that, except as set forth in the last sentence of this paragraph, this
Agreement in Principle constitutes only a statement of mutual intentions with
respect to the Investment, does not constitute an obligation binding on each
side and does not contain all matters upon which agreement must be reached for
the Investment to be consummated. A binding commitment with respect to the
Investment will result only from the execution of the Definitive Agreement,
subject to the conditions expressed therein. Notwithstanding the two preceding
sentences of this paragraph, the provisions of paragraphs 2 through 9
(inclusive) and paragraph 11 are agreed to be binding on the parties hereto.
11. Governing Law. This agreement in principle and any claim related
directly or indirectly to this agreement in principle shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflict of laws principles thereof.
Each of the Company and the Investor represent and warrant that it is
duly authorized to execute and deliver and perform its obligations under this
Agreement in Principle.
If the foregoing accurately reflects the agreement between us, kindly
so indicate by causing a copy hereof to be signed below and returned to the
undersigned.
Very truly yours,
▇.▇. Childs Equity Partners III, L.P.
By: ▇.▇. Childs Advisors III, L.P.,
its general partner
By: ▇.▇. Childs Associates, L.P.,
its general partner
By: ▇.▇. Childs Associates, Inc.,
its general partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Accepted and agreed to
As of the date first written above:
Aurora Foods Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman and Interim
Chief Executive Officer
ANNEX A
AURORA FOODS INC.
SALE OF COMMON STOCK
TERM SHEET
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Agreement in Principle to which this Term Sheet is annexed.
Issuer: Aurora Foods Inc. (the "Company")
Type of Security: Common Stock
Amount: $200 million (the "Investment")
Investor: ▇.▇. Childs Equity Partners III, L.P.
(the "Investor")
Transaction Value: Approximately $925 million
New Capital Structure (Debt): The parties intend to effect the Restructuring
in a bankruptcy reorganization case, and, in
connection therewith, to propose a plan of
reorganization that provides the following new
debt structure on the effective date of the
Restructuring (the "Effective Date"):
Secured Credit Facility: The existing $655.7
million senior secured credit facility shall
be reduced in principal amount by
approximately $67.3 million, with the
remaining balance being refinanced via a new
approximately $391 million senior secured
credit facility and approximately $197.4
million in new senior unsecured notes. The
Company will also seek to raise a new
approximately $50 million revolving credit
facility, which shall be undrawn at closing
A/R Securitization Facility: The existing A/R
securitization facility with $16.3 million
outstanding shall be terminated.
Senior Unsecured Notes: The 12% senior
unsecured notes and warrants due 2006 in the
aggregate principal amount of $29.1 million
shall be refinanced via approximately $29.1
million in new senior unsecured notes.
Subordinated Notes: Holders of the
subordinated debt shall receive approximately
$110 million in cash and approximately 29.5%
(approximately $90 million) of the
post-restructuring common shares outstanding
New Capital Structure The parties intend to implement the following
(Equity): new equity structure on the Effective Date:
Investor: The Investor shall receive 65.6%
(approximately $200 million) of the
post-restructuring common shares outstanding
Existing Subordinated Notes: The holders of
the existing senior subordinated notes will
receive approximately 29.5% (approximately $90
million) of the post-restructuring common
shares outstanding
Existing Common and Preferred Equity: The
holders of the existing common and preferred
stock shall be entitled to receive
approximately 4.9% (approximately $15 million)
of the post-restructuring common shares
outstanding
Cash Sources and Uses: Cash Sources: $MM
------------ ---
New Senior Term Loan $391.0
JWC Equity Investment 200.0
Net Cash at Closing 4.6
------
Total $595.6
======
Cash Uses: $MM
--------- ---
Repay A/R Securitization Facility $16.3
Cash to Senior Secured Debt 458.3
Cash to Senior Sub Note Holders 110.0
Transaction Expenses 11.0
------
Total $595.6
======
Management: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ would be named CEO
following the Closing
Management Options: Management shall be eligible to purchase
common equity through a management option
plan. Options will vest based on time and
achievement of certain agreed upon performance
targets
Board Representation: The Investor shall be entitled to designate a
majority of the Board members
Break-Up Fee: A break-up fee and expense reimbursement in
the aggregate amount of $10 million shall be
payable to the Investor upon circumstances to
be mutually agreed