Employment Agreement between Aurora Foods Inc. and William R. McManaman (Executive Vice President & CFO)

Summary

Aurora Foods Inc. and William R. McManaman entered into an agreement effective April 1, 2002, under which Mr. McManaman will serve as Executive Vice President and Chief Financial Officer. The agreement outlines his duties, annual salary of $400,000 (with potential increases), eligibility for annual and long-term bonuses, stock options, and participation in company benefit plans. It also covers reimbursement for business and transition expenses, vacation entitlements, and the terms for employment duration and termination. The agreement sets clear expectations for both parties regarding compensation and responsibilities.

EX-10.27 6 dex1027.txt EMPLOYMENT AGREEMENT BETWEEN AURORA FOODS INC AND WILLIAM R. MCMANAMAN Exhibit 10.27 ------------- EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT is made as of April 1, 2002 (the "Effective Date") between Aurora Foods Inc., a Delaware corporation (the "Company") and William R. McManaman (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. 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 the prior written consent of the Chief Executive Officer of 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, 2002, 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 -1- 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 as may be established by the Company from time to time (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. For the Company's fiscal year ending December 31, 2002, the Annual Bonus shall not be less than 100% of Salary paid in 2002 (the Salary for such fiscal year shall be prorated since Executive shall have been employed by the Company for less than a full year), and for the Company's fiscal year ending December 31, 2003, the Annual Bonus shall not be less than 50% of Salary paid in 2003. Except as otherwise provided in this Agreement, the Annual Bonus shall be prorated for any period less than a full year. 3.3. Long Term Incentive Bonus Plan. Executive shall have the right to participate in any Long Term Incentive Bonus Plan the Company may adopt from time to time to the extent senior executives may generally be entitled to participate. The bonus as may be allowed in connection with such Plan shall be referred to herein as the "Long Term Incentive Bonus." 3.4. Stock Options. The Company shall grant to the Executive under the Company's 2000 Long Term Incentive Plan stock options to purchase 500,000 shares of Common Stock of the Company (the "Stock Options"). The Stock Options will have an exercise price based on the trading price of Common Stock on the close of business on the date of grant and will vest in accordance with the Company's 2000 Equity Incentive Plan and as follows: 125,000 on December 31, 2002, 125,000 on December 31, 2003, 125,000 on December 31, 2004 and 125,000 on December 31, 2005. 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, (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 -2- 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 twenty (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. Transition Expenses. During the term of his employment hereunder, the Company shall reimburse Executive for reasonable documented 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 LaGrange, Illinois and the Metropolitan Area. In addition, Company shall reimburse Executive for the documented cost of leasing a furnished apartment in the Metropolitan Area up to an amount to be mutually agreed between the Company and the Executive. Payments under this Section 3.8 for travel and housing expenses shall in no event exceed $60,000 per year. In addition, 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 3.8. 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. 3.9. Transportation Stipend. During the term of his employment hereunder, the Executive shall be entitled to a monthly 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. 3.10. Legal Fees. The Company shall pay directly to legal counsel as the Executive shall direct, up to $15,000 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. -3- 4.2. Indemnification. The Company agrees that in connection with the Executive's service hereunder and in additional positions as provided under Section 4.1, the Executive shall be entitled to the benefit of any indemnification provisions in the indemnification agreement between Executive and the Company dated as of the date hereof 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. 5.2. 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 -4- 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: 6.1. Non-Competition. While the Executive is employed by the Company, 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. For one year immediately following termination of his employment, 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 Affiliate with the United States in any Restricted Business or undertake planning for a Restricted 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 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; provided, however, that Executive shall be permitted to continue to serve as a director of Amcore Financial Inc. 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 -5- 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 Section 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 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 Sections 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 Sections 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, either (i) as determined by Board in good faith upon receipt and reliance of sufficient competent medical advice or (ii) as satisfying the definition of "disability" under the Company's disability insurance policy, 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 material breach of any of his obligations set forth in this Agreement; (b) the -6- 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 thereof; (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; provided, that the Executive shall receive written notice of the occurrence of any event contemplated under sections (a) or (d) hereunder and Executive shall have failed to cure the conduct, activity or event thereunder within 30 days. 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 30 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 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 Sections 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, Long Term Incentive Bonus or Annual Bonus as provided in Sections 3.1 and 3.2, respectively (provided, that in the case of the Annual Bonus or Long Term Incentive 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 3.11, (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 30 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. 8.7. Resignation. If Executive is a director of Company or any of its Subsidiaries or Affiliates, without the need for any further action, he shall be deemed to have resigned from these positions effective as of the Termination Date. 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 3.5 through 3.10, (c) all amounts due under the Company's Long Term Incentive Bonus Plan as provided under the terms thereof, and (d) to the extent not already -7- granted, the grant of Stock Options contemplated by Section 3.4; provided, that 50% of all Stock Options that are not vested on the date of death shall be automatically vested and otherwise Executive's rights in the event of death with respect to the Stock Options shall be governed by a stock option certificate, and (e) 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, (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 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 and (c) 50% of all Stock Options that are not vested on the date of such termination shall be automatically vested. 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, 2002 (such Annual Bonus to be prorated for the period that Executive is employed by the Company in 2002) 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, 2003 (such Annual Bonus to be prorated -8- for the period that Executive is employed by the Company in 2003) in an amount equal to 50% of Salary in effect at the time notice of termination is given; and (d) 50% of all Stock Options that are not vested on the date of such termination shall be automatically vested. 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 (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 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 the Rights Not Subject to Release and 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, the Executive Long Term Incentive Plan and Rights Not Subject to Release 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. -9- (a) 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, death or incapacity, 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; (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; and (iii) Rights Not Subject to Release. (b) The parties hereto acknowledge that in connection with a change in ownership or control of the Company or a sale of a substantial portion of the Company's assets, certain payments and benefits to or for the benefit of the Executive, whether pursuant to this Agreement or otherwise, could be subject to the tax described at Section 4999 of the Internal Revenue Code (the "Code"). In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Code and (ii) but for this Section 9.7(b) would be subject to the excise tax imposed by Section 4999 of the Code, then the Executive's payments and benefits, if any, under this Agreement shall be reduced, as hereinafter described, (but not below zero) to the extent, and only to the extent, necessary to ensure that no portion of any payment or benefit to or for the benefit of the Executive would constitute an "excess parachute payment" as defined in Section 280G of the Code; provided, that if, after taking into account all applicable federal, state and local income and employment taxes and the excise tax imposed by Section 4999, the payments and benefits to or for the benefit of the Executive would be greater on an after-tax basis without any such reduction, then no reduction in the Executive's payments or benefits shall be made by reason of this Section 9.7(b). If the payments and benefits that would otherwise be paid or provided to the Executive under this Agreement are required to be reduced but not eliminated to comply with the provisions of this Section 9.7(b), the payments and benefits shall be reduced in the following order, unless otherwise elected by the Executive: (i) the payments under Section 9.7(a)(i) shall be reduced, (ii) if necessary, benefits under the Long Term Incentive Bonus shall be reduced, (iii) if necessary, benefits under Section 9.7(a)(ii) shall be reduced and (iv) if necessary, acceleration under the Stock Options shall be reduced, in each case such reduction to be made in accordance with and only to the extent required under this Section 9.7(b). If, as a result of any reduction required by this Section 9.7(b), amounts previously paid to the Executive exceed the amount to which the Executive is entitled, the Executive will promptly return the excess amount to the Company. Unless the Company and the Executive otherwise agree in writing, any determination required under this Section 9.7(b) shall be made in writing by the Company's independent public accountants (the "Accountants"). For purposes of -10- making the calculations required by this Section 9.7(b), the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Executive shall furnish to the accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 9.7(b). 10. LITIGATION. Executive agrees that during his employment or thereafter, he shall do all things, including the giving of evidence in suits and other proceedings, which Company shall deem necessary or proper to obtain, maintain or assert rights accruing to Company during his employment involving matters about which Executive has knowledge, information or expertise. All reasonable expenses incurred by Executive in fulfilling the duties set forth in this Section shall be reimbursed by Company. 11. 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. 12. 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. 13. 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 -11- 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: William R. McManaman 204 S. Spring Avenue LaGrange, IL 60525 With a copy to: Roger C. Siske Sonnenschein Nath & Rosenthal 8000 Sears Tower 233 South Wacker Drive Chicago, IL 60606 Facsimile: 312 ###-###-#### If to the Company: Aurora Foods Inc. 11432 Lackland Road St. Louis, MO 63146 Attention: Chief Executive Officer Facsimile: (314) 632-5633 With a copy to: Lauren I. Norton Ropes & Gray One International Place Boston, MA 02110 Facsimile: 617 ###-###-#### 14. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. Certain capitalized terms are used in this Agreement with the specific meanings defined below in this Section 14. 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. 14.1. "AAA" is defined in Section 20. 14.2. "Accountants" is defined in Section 9.7(b). -12- 14.3. "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. 14.4. "Annual Bonus" is defined in Section 3.2. 14.5. "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. 14.6. "Benefits Termination Date" is defined in Section 9.4. 14.7. "Board" is defined in Section 2. 14.8. "Cause" is defined in Section 8.3. 14.9. "Change of Control" means: (a) any person (used as such term is defined in Sections 1.3(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 -13- 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 (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, 2001 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. (d) Within any twenty-four (24) consecutive month period, persons who were members of the Board immediately prior to such twenty-four (24) month period, together with any persons who were first elected as directors (other than as a result of any settlement or proxy or consent solicitation contest or any action taken to avoid such a contest) during such twenty-four (24) month period by or upon the recommendation of persons who were members of the Board immediately prior to such twenty-four (24) month period and who constituted a majority of the Board at the time of such election, cease to constitute a majority of the Board. 14.10. "Code" is defined in Section 9.7(b). 14.11. "Common Stock" means the common stock, $.01 par value, of the Company. 14.12. "Company" is defined in the preamble to this Agreement. 14.13. "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 14.13 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 during the term, whether or not it existed on the effective date. 14.14. "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. -14- 14.15. "Documents" is defined in Section 5.2. 14.16. "Effective Date" is defined in the preamble. 14.17. "Executive" is defined in the preamble. 14.18. "Exchange Act" means the Securities and Exchange Act of 1934, as amended. 14.19. "Fenway" means Fenway Capital Partners Fund, L.P., a Delaware limited partnership, and Fenway Capital Partners Fund II, L.P., a Delaware limited partnership. 14.20. "Good Reason" is defined in Section 8.5. 14.21. "Long Term Incentive Bonus" is defined in Section 3.3. 14.22. "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 Dc Leeuw & Co. IV Associates, L.P. 14.23. "Metropolitan Area" means the St. Louis, Missouri metropolitan area. 14.24. "Non-Competition Period" is defined in Section 6.1. 14.25. "Permitted Holders" means Fenway, McCown, Delta Fund LLC, California Public Employees Retirement System, Tiger Oats Limited and UBS Capital LLC. 14.26. "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. 14.27. "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. 14.28. "Proprietary Rights" is defined in Section 5.3. 14.29. "Release" is defined in Section 9.4. 14.30. "Restricted Business" shall mean International Multi-Foods, General Mills, Gorton's or Weston Ltd. or any of their successors. 14.31. "Rights Not Subject To Release" shall mean (1) any future claim to enforce rights of Executive under this Agreement, (2) any rights to indemnification under any bylaws, certificate of incorporation or an agreement between the Company or its Subsidiaries and Executive, respecting indemnification of directors and officers, (3) any rights under any directors and officers liability insurance policies maintained by the Company or its Subsidiaries, and (4) -15- any vested rights under any employee benefit or pension benefit plan of the Company or its Subsidiaries in accordance with the terms and conditions of such plan. 14.32. "Salary" is defined in Section 3.1. 14.33. "Stock Options" is defined in Section 3.4. 14.34. "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. 14.35. "Termination Date" is defined in Section 1.2. 14.36. "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. 15. 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 agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which is 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. 16. 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. 17. COUNTERPARTS. This Agreement may he 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. -16- 18. 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. 19. 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, 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. 20. 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 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, as of the date first above written. THIS AGREEMENT CONTAINS A BINDING ARBITRATION CLAUSE THAT MAY BE ENFORCED BY THE PARTIES. THE COMPANY: THE EXECUTIVE: AURORA FOODS INC. By: /s/ Dale F. Morrison /s/ William R. McManaman ------------------------------- ------------------------ Title: Chief Executive Officer William R. McManaman Date Signed: October 28, 2002 Date Signed: October 28, 2002 -17- 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 April 1, 2002 (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 the Company and its 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 Rights Not Subject to Release (as defined in the Employment Agreement). 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 as of the date first written above. Signature: _____________________ William R. McManaman Date Signed: _____________________ -18-