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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended May 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from________ to___________
COMMISSION FILE NO.: 1-08262
DEAN FOODS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-0984820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 N. RIVER ROAD, FRANKLIN PARK, ILLINOIS 60131
(Address of principal executive offices) (Zip Code)
(847) 678-1680
Registrant's telephone number, including area code
Securities registered pursuant to Sections 12(b) and 12(g) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
COMMON STOCK, PAR VALUE $1 PER SHARE NEW YORK STOCK EXCHANGE
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 by check mark if disclosure of delinquent files pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The number of shares of Common Stock, Par Value $1 Per Share, of the
Registrant outstanding as of August 7, 1998 was 40,089,172. The aggregate market
value of such outstanding shares on August 7, 1998 was $2.10 billion, based upon
the closing price for the Common Stock on the New York Stock Exchange on such
date.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference in the
respective Parts hereof indicated:
1. Registrant's Annual Report to Shareholders for Fiscal Year Ended May 31,
1998 (referred to herein as the "Company's Fiscal 1998 Annual Report"):
Part I and Part II
2. Registrant's Proxy Statement for its Annual Meeting of Stockholders to be
held on September 29, 1998 (referred to herein as the "Company's 1998
Proxy Statement"): Part III
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PART I
ITEM 1. BUSINESS.
GENERAL
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Dean Foods Company and its subsidiaries ("the Company") is engaged in
the processing, distribution and sales of dairy, pickle, specialty and vegetable
products. The predecessor to Dean Foods Company was incorporated in Illinois in
1925.
The Company's principal products are Dairy (fluid milk and cultured
products, ice cream and extended shelf life products), Pickles (pickles,
relishes and specialty items), Specialty (powdered products, refrigerated salad
dressings, dips, sauces and puddings) and Vegetables (frozen and canned). A
significant portion of the Company's products are sold under private labels. The
Company also operates a trucking business hauling less-than-truckload freight,
concentrating primarily on refrigerated and frozen cartage, the results of which
are reported in the Specialty segment.
STRATEGIC DIRECTION
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The Company continues to refine and execute its previously announced
long-term strategic plan. As part of this on-going review, on July 27, 1998, the
Company announced it had reached a definitive agreement to sell its Vegetables
segment for approximately $400 million in cash plus the aseptic foods business
of Agrilink Foods, Inc. The transaction is expected to close in the second
quarter of fiscal 1999. There can be no assurance that the sale of the
Vegetables segment will be completed pursuant to the agreement. Accordingly, the
description of the Company's business and properties below includes a
description of the Vegetables segment as it has been and currently is being
operated by the Company. Vegetables segment results of operations are presented
as discontinued operations in the financial statements and other financial
information presented in this Annual Report on Form 10-K.
In fiscal 1996, the Company conducted a strategic business review of
all operations, focusing on its markets, competitors and capabilities, and
identified a strategic plan designed to enhance long-term shareholder value. As
a result, in May 1996 the Company recorded a pre-tax special charge to
continuing operations of $102.4 million ($64.9 million after-tax, or $1.62 per
share) related to the adoption of a plan to reduce costs, rationalize production
capacity and provide for severance and environmental costs. Complete
implementation of the plan resulted in the elimination of more than 500
manufacturing and administrative positions and the disposition or closure of six
manufacturing facilities.
BUSINESS ACQUISITIONS
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Acquisitions have been an important factor in the Company's strategy
and continued growth. The Company's acquisition strategy is to focus on food
companies having a well-established reputation for quality products and services
that meet selected financial criteria, including return on invested capital and
market value added. The Company continues to take advantage of industry
consolidation trends, specifically within the dairy segment, and to focus on
companies that can provide significant operating efficiencies. The Company has
completed 20 acquisitions in the last five years. These companies, businesses
and assets were acquired for cash, installment notes or a combination thereof.
The listing below summarizes the acquisitions completed by fiscal year:
FISCAL YEAR 1998
Purity Dairies, a dairy processor Nashville, Tennessee
Coburg Dairy, a dairy processor Charleston, South
Carolina
Dairy business of American Stores Company (Lucky Buena Park, Escondido,
San Leandro and
Stores) Sacremento, California
Wengert's Dairy, a dairy processor Lebanon, Pennsylvania
Sani-Dairy Division of Penn Traffic Company, a Johnstown, Pennsylvania
dairy processor
Maplehurst Dairy, a dairy processor Indianapolis, Indiana
H. Meyer Dairy Company, a dairy processor Cincinnati, Ohio
Milk Products LLC, a dairy processor Albuquerque, New
Mexico and El Paso,
Texas
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Schwartz Pickle Company, a refrigerated pickles Chicago, Illinois
processor
Marie's Salad Dressing, a processor of salad Thornton, Illinois
dressings and vegetable dips
FISCAL YEAR 1997
Tri-State Dairy, Inc., a dairy processor Miami, Florida
Meadows Distribution Co., Inc., an ice cream and Batavia, Illinois
frozen foods distributor
FISCAL YEAR 1996
Norcal Crossetti Foods, Inc., a frozen vegetable Watsonville, California
and fruit processor
Paramount Foods, Inc., a pickle processor Louisville, Kentucky
Rod's Food Products, a specialty foods processor City of Industry,
California
of aerosol toppings and extended shelf life
products
FISCAL YEAR 1995
Gold Star Dairy, a dairy processor Clovis, New Mexico
Rio Grande Foods, Inc., a frozen vegetable McAllen, Texas
processor
FISCAL YEAR 1994
Longlife Dairy Products, a processor of extended Jacksonville, Florida
shelf life products
Birds Eye frozen vegetable business Waseca, Minnesota;
Fulton, New York and
Celaya Mexico
Bennett's premium sauce line Green Bay, Wisconsin
Subsequent to fiscal 1998 year-end, the Company completed the
acquisitions of two dairy processors, Barber Dairies, Inc. and Hillside Dairy,
for cash consideration. The Company has also announced it has reached a
definitive agreement to acquire U.C. Milk Company, a dairy processor, for cash
consideration.
BUSINESS SEGMENTS
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Information regarding the Company's Dairy, Pickles and Specialty
business segments for the last three fiscal years is set forth in the Company's
Fiscal 1998 Annual Report (Exhibit 13a hereto) at page 34 in Note 15 to the
consolidated financial statements. Such information, excluding the first
sentence of such note, is hereby incorporated herein by reference.
Dairy Segment
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Fluid Milk and Cultured Products
The Company processes raw milk and other raw materials into fluid milk
and cultured products. The Company believes that it is the largest fluid milk
processor in the United States. Although industry data is not available, the
Company estimates that it has a 12% market share in domestic fluid milk.
Included in the fluid products category is homogenized, low-fat and skim milk
plus buttermilk, chocolate milk and juice products. Cultured dairy products
include cottage cheese, yogurt and sour cream.
Fluid milk and fresh cultured products are sold to grocery store
chains, convenience stores, smaller retail grocery outlets, warehouse club
stores, grocery warehouses and institutional customers in the Midwest and
Midsouth, in parts of the Southeastern, Southwestern and Rocky Mountain states,
parts of Pennsylvania and New York, California and Mexico.
In addition to the strong Dean's brand in the Midwest and Mid-South,
fluid milk and cultured dairy products are sold in various areas under
well-established labels such as Bell, Coburg, Cream o'Weber, Creamland, H.
Meyer, Gandy's, Maplehurst, Mayfield, McArthur, Meadow Brook, Price's, Purity,
Reiter, T.G. Lee, Verifine and Wengert's. A substantial portion of the Company's
fluid milk and cultured products volume is sold under private labels.
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The fluid milk and cultured products business is extremely competitive
and productivity is therefore very important. The Company continues to reinvest
a substantial portion of its total capital budget in its dairy plants and
distribution systems to maintain and improve efficiencies. Fiscal 1998 major
capital expenditures included the construction and implementation of the small
bottle (Milk Chugs) product line at several plants located in the Midwest,
Northeast and Southeast. Fiscal 1998 expenditures also included costs associated
with the completion of the new fluid milk plant in Braselton, Georgia, which
began production during the second quarter. Major capital expenditures in fiscal
1997 included the initial construction of the new Braselton, Georgia, fluid milk
processing plant, expansion of the filler room at the Sharpsville, Pennsylvania
facility and new labeling equipment at the Athens, Tennessee plant. Capital
expenditures during fiscal 1996 included new packaging equipment for one-pint
and ten-ounce, plastic, resealable bottles at its Athens, Tennessee dairy plant,
the expansion of the Erie, Pennsylvania milk cooler and additional processing
capacity at the Company's Rochester, Indiana and Huntley, Illinois milk plants.
Major capital projects during fiscal 1995 included additional processing
equipment and costs related to plant consolidation of the Lubbock and San
Angelo, Texas dairy processing plants, a cooler expansion at the Rochester,
Indiana dairy plant, a waste water treatment system at the Belleville,
Pennsylvania dairy plant and computer equipment at the Florida dairy operations.
Capital expenditure projects for 1994 included cooler expansions at its Evart,
Michigan; Chemung, Illinois; and Louisville, Kentucky dairy plants; corrugated
case and palletizer at its El Paso, Texas dairy plant; blowmold packaging
equipment at its Rochester, Indiana dairy plant and construction of a dairy
distribution and cooler facility in Greenville, South Carolina.
Sales of fluid milk and cultured products to unaffiliated customers for
the fiscal years 1998, 1997 and 1996 were $1,574 million, $1,386 million, and
$1,235 million, respectively.
Ice Cream and Frozen Desserts
The Company produces packaged and bulk ice cream products which are
sold through supermarkets, convenience stores, smaller retail grocery outlets,
restaurants and other foodservice users. The product line includes ice cream
(regular, lowfat and non-fat), fruit sherbets, frozen yogurts, and novelties
made with ice cream, sherbet and ices. These products are sold under a variety
of regional brands and numerous private labels in the Midwest, Mid-South,
Southeast, Southwest, and parts of the Rocky Mountain states under numerous
well-established brands. Such brands include Dean's, Dean's Country Charm,
Gandy's, Creamland, Cream o'Weber, Bell, Price's, Fitzgerald, Fieldcrest,
Mayfield, McArthur/T.G.Lee, Reiter and Verifine. Sales of ice cream and frozen
dessert products are substantially greater during the summer months than during
the rest of the year. Additionally, the Company produces and supplies
Baskin-Robbins ice cream products in the Midwest and Southwest.
Fiscal 1998 capital expenditures included the expansion of an ice cream
storage facility and the purchase of frozen novelties vending machines at the
Company's subsidiary in Athens, Tennessee. Capital expenditures during fiscal
1997 and fiscal 1996 included additional processing equipment at the Company's
Belvidere, Illinois and Athens, Tennessee ice cream plants. During fiscal 1995
capital expenditures included plant expansion and replacement of refrigeration
equipment at the Belvidere, Illinois ice cream plant. Major projects in 1994
included a stick novelty line, freezer expansion and new distribution facilities
in Athens, Tennessee and new processing equipment in Akron, Ohio.
Sales to unaffiliated customers for the fiscal years 1998, 1997 and
1996 were $332 million, $261 million and $235 million, respectively.
Extended Shelf Life
The Company processes extended shelf life fluid, aerosol and other
dairy products. Extended shelf life products include whipping creams, half and
half dairy creamers, aerosol whipped creams and non-dairy toppings, coffee
creamers, flavored milks and lactose-reduced milks.
Extended shelf life products are distributed nationwide under Dean
brands such as Dairy Pure, Dean Ultra and Easy 2%, as well as well-known
licensed national brands and private labels. In fiscal 1997 the Company
consolidated Ryan Milk Company and Longlife Dairy Products into Ryan Foods
Company.
The extended shelf life products business is extremely competitive and
productivity is therefore very important. The Company continues to reinvest in
its extended shelf life plants and distribution systems to maintain and improve
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efficiencies. Capital expenditures in fiscal 1998 included investment in a new
high-temperature processor and cooler expansion at its Murray, Kentucky plant.
In fiscal 1997, the Company divested its Ready Foods plant in Philadelphia,
Pennsylvania and consolidated production into the Murray, Kentucky facility,
where the Company invested in a new aerosol filling line. During fiscal 1996,
capital expenditures included the installation of new racking and inventory
systems and cooler expansion at its Murray, Kentucky plant
Sales of extended shelf life products to unaffiliated customers for
fiscal 1998, fiscal 1997 and 1996 were $147 million, $141 million and $141
million, respectively.
Pickles Segment
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Pickles, Relishes and Specialty Items
The Company is one of the largest pickle processors and marketers in
the United States with sales nationwide. Pickles, relishes, pickled peppers and
other assorted specialty items are sold under several brand names, including
Arnold's, Atkins, Aunt Jane's, Cates, Dailey, Heifetz, Paramount, Peter Piper,
Rainbo, Roddenbery and Schwartz's. Branded and private label products are
marketed and distributed to retail grocery store chains, wholesalers and the
foodservice industry and in bulk to other food processors.
Capital expenditures in fiscal 1998 included the investment in
non-fermenting processing equipment, a new water treatment system and banana
pepper handling equipment. During fiscal 1997 the Company closed its Eaton
Rapids, Michigan plant and consolidated production into existing facilities and
continued to modernize its remaining manufacturing facilities. During fiscal
1996 capital improvements were made to upgrade and modernize the Company's
manufacturing facilities and reduce transportation costs. Major capital
expenditure projects during fiscal 1995 included the installation of processing
equipment at the Company's Cairo, Georgia plant. Fiscal 1994 capital
expenditures included the construction of a new processing room at the Company's
LaJunta, Colorado plant.
The processing of pickle products is seasonal, dependent to a large
extent upon the growing season of cucumbers in the summer months. Inventories
are therefore higher in the fall and winter months than in the spring and early
summer.
The Company markets a number of specialty sauces, including shrimp,
seafood, tartar, horseradish, chili and sweet and sour sauces, in the Eastern,
Midwestern and Southern United States to retail grocers. Products are sold under
the Bennett's and Hoffman House brand names.
Sales to unaffiliated customers for the fiscal years 1998, 1997 and
1996 were $349 million, $371 million and $373 million, respectively.
Specialty Segment
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Powdered Products
Non-dairy coffee creamers are the Company's principal powdered
products. Powdered premium and low-fat products are sold primarily under private
labels to vending operators, office beverage service companies and institutional
foodservice distributors with national distribution which supply restaurants,
schools, health care institutions, hotels and vending and fast-food operations.
Non-dairy creamers are also sold for private label distribution to all classes
of the retail trade and sold in bulk to a number of other food companies for use
as an ingredient in their food products. Powdered products are also sold to
international customers in Australia, Canada, the Far East, Mexico, South
America, Europe, Africa and the Middle East. The Company believes that it is the
largest manufacturer of powdered non-dairy coffee creamers in the United States.
The Company's non-dairy coffee creamers are an economical and convenient
substitute for milk and cream. These products require no refrigeration and have
long shelf lives.
The Company, through an affiliate, provides stabilizers and other dry
ingredients to the United Kingdom, Continental Europe and other foreign markets.
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Fiscal 1998 and fiscal 1997 capital expenditures included the
construction of a new dryer in Wayland, Michigan, which began operation during
the third quarter of fiscal 1998. Capital expenditures during fiscal 1996
included the construction of a new production facility in the United Kingdom.
There were no major capital expenditures during fiscal years 1994 and 1995.
Sales to unaffiliated customers for the fiscal years 1998, 1997 and
1996 were $161 million, $153 million and $129 million, respectively.
Salad Dressings, Dips, Sauces and Puddings
The Company's aseptic products primarily include ready-to-serve natural
cheese sauces, puddings and other specialty sauces which are sterilized under a
process which allows storage for prolonged periods without refrigeration.
Aseptic products are sold nationwide, primarily under private labels to
distributors which supply restaurants, schools, hotels and other segments of the
foodservice industry. Fiscal 1998 capital expenditures included receiving room
upgrades at the Company's City of Industry, California facility. There were no
major capital expenditures during fiscal years 1997 and 1996. Major capital
expenditures in fiscal 1995 and 1994 included a multi-phase project to
significantly upgrade the Dixon, Illinois facility with the completion of a new
batch make-up room.
The Company manufactures vegetable-fat-based party dips, low-fat sour
cream and sour cream replacements at its Rockford, Illinois facility. These
products are sold nationally, but primarily east of the Rockies, under the
Dean's, King and private label brands in supermarkets and other retail outlets
through distributor or direct warehouse delivery. Dean's brand
vegetable-fat-based dips, available in regular, lowfat and non-fat varieties,
have the leading market position nationwide and the Company's Birds Eye Veggie
Dip is the second leading produce dip. At the beginning of fiscal 1998, the
Company completed the acquisition of the Marie's business. The Marie's product
line includes refrigerated salad dressings, vegetable dips, salsas and fruit
glazes. During fiscal 1996 the Company acquired Rod's Food Products which
brought a significant West Coast presence to several of Dean's product lines.
Rod's supplies a large and growing Western United States customer base with
retail snack dips and other oil-based products, as well as flavored salad
dressings for the foodservice trade. Retail products are sold under the Rod's,
Imo, Slender Choice, Chivo and Zesty brand names and a number of private labels.
Sales to unaffiliated customers for the fiscal years 1998, 1997 and
1996 were $147 million, $122 million and $100 million, respectively.
DFC Transportation
DFC Transportation Company, a transportation and logistics subsidiary
of the Company, operates nationwide with a fleet of approximately 122 tractors
and 267 trailers, providing less-than-truckload refrigerated and frozen cartage
service. Its customers include food and industrial companies. A significant
portion of its revenues are derived from the brokerage of various types of
freight.
Revenues from unaffiliated customers were $27 million in each of the
fiscal years ended 1998, 1997 and 1996. Revenues relating to hauling products
for other divisions and subsidiaries of the Company have been eliminated.
Vegetables Segment
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Frozen and Canned Vegetables
The Company processes and markets frozen and canned vegetables
consisting of corn, peas, green beans, carrots, beets, spinach, peas and
carrots, green lima beans and various mixed vegetable blends. Additional
products in the frozen vegetable line include asparagus, broccoli, Brussels
sprouts, cauliflower, fordhook lima beans, southern greens, okra, crowder and
black-eyed peas, celery and vegetable blends with pasta and with rice. The
processing and canning of fresh vegetables is seasonal in nature, with most of
the canning activity in the Midwest occurring during harvesting periods. The
Company believes the geographic diversity of its plants and growing areas
provides the ability to balance production. The packaging of processed frozen
vegetables occurs year-round. As a result of the seasonal nature of the
vegetable business, inventory levels vary significantly during the year.
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Also included in the Vegetables segment are sales of canned meats
processed under bid contracts with the federal government. Such sales vary
greatly from year to year because of the nature of the federal government's
procurement practices. Margins are small since these contracts are taken
primarily to absorb overhead of the Company's canning operation during
seasonally idle periods of production.
Frozen vegetables account for approximately 75% of the total vegetable
sales. The Company is the largest frozen vegetable processor in the United
States and the third largest vegetable processor overall. Products are marketed
under several brand names including Birds Eye, Freshlike and Veg-All, as well as
under customer brand names or in-house brands. The Company's Birds Eye and
Veg-All vegetable brands are marketed throughout the United States. The
Freshlike canned and frozen vegetable line is marketed primarily in the Midwest.
Other vegetable products are marketed under private labels or in-house brands
throughout the United States and exported to the Far East, Mid-East, Europe,
Mexico, Canada and the Caribbean. Consumer products are distributed through
traditional retail and mass merchandising retail outlets and include Company
brands and buyers' brands of all products. Institutional customers, including
hotels, restaurants, in-plant feeding programs, and schools are serviced through
foodservice distributors with products packaged in larger containers.
Fiscal 1998 capital investment included receiving and processing
improvements at its Green Bay, Wisconsin facility, new freezer equipment in
Fairwater, Wisconsin and a new canning facility in Cambria, Wisconsin. The
Company also incurred expenditures related to consolidation of operations at its
Watsonville, California plant in fiscal 1998. During fiscal 1997, the Company
closed six plants and consolidated production capacity into its remaining
processing facilities. Major capital expenditures included new processing and
freezing equipment and expanded quality assurance and R&D facilities. During
fiscal 1996, major capital expenditures included new electronic sorting
equipment, upgraded freezing capacity, improved warehousing and new management
information systems. Fiscal 1995 major capital expenditures included the
completion of the new carrot line in Uvalde, Texas and a waste water treatment
plant in Celaya, Mexico. Major capital projects in 1994 included the
installation of a carrot processing line at Uvalde, Texas and an expansion of
the office facilities in Green Bay, Wisconsin.
Sales to unaffiliated customers, which are not included in Net Sales as
the Vegetables segment is treated as a discontinued operation, for fiscal years
1998, 1997 and 1996 were $553 million, $558 million and $574 million,
respectively.
RAW MATERIALS AND SUPPLIES
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The Company's business is dependent upon obtaining adequate supplies of
raw and processed agricultural products. Historically, the Company has been able
to obtain adequate supplies of agricultural products.
Raw milk and other agricultural products are generally purchased
directly from farmers and farm cooperatives. The Company does not have long-term
purchase contracts for agricultural products. The price of raw milk is
extensively regulated. Raw milk costs during the first half of fiscal 1998 were
significantly lower in comparison to the same period in fiscal 1997; raw milk
costs rose during the last half of fiscal 1998 to a level above the same period
in the prior year. Raw milk costs peaked at record levels in the second quarter
of fiscal 1997, then declined sharply during the third quarter and rose during
the last quarter of fiscal 1997. In fiscal 1996, raw milk costs were slightly
below fiscal 1995 levels during the first six months and then increased to
higher levels than fiscal 1995 by year-end. Early indications are that raw milk
costs will not change significantly during the first quarter and will then rise
to near record levels during the second quarter of fiscal 1999.
The Company produces most of its plastic gallon and half-gallon
container requirements for its fluid milk business. Glass containers for pickles
and related products are purchased from one main supplier and can requirements
for canned vegetables are primarily furnished by two can manufacturers, as
required, at competitive prices.
Certain commodities, such as corn syrups, vegetable oils, sugar and
casein, and various packaging supplies are purchased from numerous sources on a
normal purchase order basis, with vegetables and cucumbers purchased under
seasonal grower contracts. The Company is not dependent upon any single supplier
and is confident that any lost supplier requirements could be replaced in the
ordinary course of business.
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In its pickle and vegetable operations, the Company supplies seed to
and advises growers regarding planting techniques, monitors and arranges for the
control of insects, directs the harvest, and, for some crops, provides automated
harvesting service.
Although Southeast crops were late and short of expectations due to
adverse growing conditions, fiscal 1998 cucumber costs approximated fiscal 1997
costs. In fiscal 1999, cucumber costs are expected to be comparable to fiscal
1998. Fiscal 1997 cucumber cost approximated fiscal 1996 costs. Raw cucumber
costs were higher in fiscal 1996 compared with fiscal 1995 due to the poor
Southeast cucumber harvest and the necessity to source cucumber requirements
from higher cost growing areas. The cost of raw cucumbers increased in fiscal
1995 as a result of weather-related costs after being relatively stable during
the previous fiscal year.
Vegetable supplies are largely dependent on regional weather and
growing conditions. Although there have been adverse weather-related growing
conditions in certain parts of the country, early indications are that supplies
will be adequate, with fiscal 1999 crop costs approximating fiscal 1998 cost
levels, despite minor exceptions in Texas and Mexico. Fiscal 1998 raw product
costs were relatively flat overall in comparison to fiscal 1997 and 1996 costs.
DISTRIBUTION
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Dairy products are principally delivered to grocery chain stores or
warehouses directly from the Company's processing plants by the Company, in
trucks which it owns or leases, and by independent distributors. In certain
states, products are also delivered to the Company's distribution branches from
which distribution is then made to customers. The Company has continued its
efforts to streamline its distribution system for Dairy products. Major
economies have been effected in recent years through consolidation of
distribution branches and routes, with emphasis on direct truck delivery to
retail stores and warehouses of grocery chains. The Company's Pickles, Specialty
and Vegetables products are delivered to warehouses and food distributors by the
Company's fleet of trucks and outside freight carriers. Inventories of frozen
and canned vegetables are maintained by the Company in warehouses throughout the
country in order to maintain a ready supply for rapid delivery to local
retailers.
COMPETITION
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The Company's business is highly price competitive with relatively low
operating margins. Quality and customer service are important factors in
securing and maintaining business. An important aspect of the Company's service
to customers is computer ordering, shipping and billing systems. Referred to in
the food industry as "Efficient Consumer Response", the Company has over the
last several years made a substantial commitment to these areas. The Company's
Dairy business operates in a number of different geographical markets, competing
in some against national companies and in others against regional or local
companies. In certain markets, some supermarket chain stores have their own
dairy products processing plants. Generally, in each major market and product
class there are a number of competitors, some of which have greater sales and
assets than the Company's operations in that market. The Company's Pickles,
Specialty and Vegetables products are marketed nationwide and, in some cases,
internationally. The degree of penetration and competitive conditions in each
market varies, but the Company does not consider that it has any material
competitive advantage in any of its major markets or product classes.
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EMPLOYEES
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The Company employs approximately 14,500 employees (11,200 full-time).
Approximately 6,600 employees are represented by the International Brotherhood
of Teamsters and other unions under seventy collective bargaining agreements.
Nineteen of these agreements expire during fiscal 1999. Generally, the Company
considers its employee relations to be good. The following table details the
above information by Continuing Operations and the Vegetables segment.
<TABLE>
<CAPTION>
Number of Expiration
Union Bargaining of Union
Total Full-Time Employees Agreements Contracts
----- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Continuing Operations 13,200 10,700 5,300 60 18
Vegetables Segment 3,300 500 1,300 10 1
Total 14,500 11,200 6,600 70 19
</TABLE>
The Company has approximately 5,000 seasonal positions at its pickle
processing plants (1,000) and vegetable operations (4,000), principally during
the summer months. At times, the Company has experienced difficulties in meeting
seasonal employee needs. The Company estimates that two individuals are hired
for each seasonal position. A number of strategies have been employed to retain
seasonal employees including incentive programs and employee sharing programs.
ENVIRONMENT
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On July 10, 1996, a subsidiary of the Company was fined approximately
$4 million in a lawsuit filed by the United States of America in the United
States District Court for the Middle District of Pennsylvania alleging
violations of the Federal Water Pollution Control Act relating to the discharge
of conventional, non-hazardous substances. The Company appealed the lower court
ruling on the grounds that the fine should be substantially reduced. In July
1998, the appellate court affirmed the lower court's decision. On August 31,
1998 the Company paid the fine of $4.5 million (including interest) to the
Environmental Protection Agency. The Company provided for this exposure in 1996
and in light of reserves existing, the imposed fine will not have a material
effect on the financial position or results of operations of the Company.
The Company's compliance with Federal, State and local regulations
relating to the discharge of material into the environment or otherwise relating
to the protection of the environment has not had a material effect on the
Company's capital expenditures, earnings or competitive position. The Company's
fiscal 1996 special charge to earnings included a provision covering the
estimated potential environmental cleanup costs associated with the closure of
certain manufacturing facilities. The Company continues to give considerable
attention to the impact or potential impact of its operations on the
environment.
ITEM 2. PROPERTIES.
The Company owns sixty-four of its processing plants (four of which
are subject to mortgage) and leases the other four under leases expiring from
fiscal 2000 through fiscal 2011. The Company has various distribution branches
and storage warehouses located throughout the country, some of which are owned
and some leased. The Company considers its properties suitable and adequate for
the conduct of its business. A number of the Vegetables facilities are operated
only during the vegetable intake season. All other production facilities are
principally operated at or near capacity levels, but generally on the basis of
fewer than three shifts per day.
Further information relating to the Company's leases is contained in the
Note 10 to consolidated financial statements appearing in the Company's Fiscal
1998 Annual Report (Exhibit 13a hereto) on page 33. Such information is hereby
incorporated by reference.
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The locations of the Company's processing facilities, by product
category within business segment, are set forth below:
<TABLE>
<CAPTION>
DAIRY
<S> <C>
Fluid Milk and Cultured Products
Buena Park, California Barberton, Ohio
Escondido, California Cincinnati, Ohio
San Leandro, California Springfield, Ohio
Sacremento, California Belleville, Pennsylvania
Miami, Florida Erie, Pennsylvania
Orange City, Florida Johnstown, Pennsylvania
Orlando, Florida Lebanon, Pennsylvania
Braselton, Georgia Sharpsville, Pennsylvania
Chemung, Illinois Charleston, South Carolina
Huntley, Illinois Athens, Tennessee
Rockford, Illinois Nashville, Tennessee
Indianapolis, Indiana El Paso, Texas
Rochester, Indiana Lubbock, Texas
Louisville, Kentucky Salt Lake City, Utah
Evart, Michigan Sheyboygan, Wisconsin
Albuquerque, New Mexico
Ice Cream and Frozen Desserts
Buena Vista, California Athens, Tennessee
Belvidere, Illinois Nashville, Tennessee
Albuquerque, New Mexico Barberton, Ohio
Extended Shelf Life
Jacksonville, Florida Murray, Kentucky
PICKLES
Pickles, Relishes and Specialty Items
Atkins, Arkansas Plymouth, Indiana
LaJunta, Colorado Croswell, Michigan
Sanford, Florida Faison, North Carolina
Cairo, Georgia Green Bay, Wisconsin
Chicago, Illinois
SPECIALTY
Powdered Products
Pecatonica, Illinois Wayland, Michigan
Rockford, Illinois Abingdon, Oxon, United Kingdom
Salad Dressings, Dips, Sauces and Puddings
City of Industry, California Rockford, Illinois
Dixon, Illinois Thornton, Illinois
DFC Transportation Huntley, Illinois
VEGETABLES
Frozen and Canned Vegetables
Oxnard, California Cambria, Wisconsin
Watsonville, California Darien, Wisconsin
Arlington, Minnesota Fairwater, Wisconsin
Waseca, Minnesota Green Bay, Wisconsin
Fulton, New York Hortonville, Wisconsin
Uvalde, Texas Celaya, Mexico
</TABLE>
10
<PAGE> 11
Distribution branches for the Dairy segment are located in Alabama,
California, Florida, Georgia, Idaho, Illinois, Nevada, New Mexico, New York,
Ohio, Pennsylvania, South Carolina, Tennessee, Texas, and Virginia.
Distribution warehouses for the Pickles, Specialty and Vegetables
segments are maintained adjacent to many processing plants with public
warehouses throughout the United States for further distribution of pickle and
vegetable products. The Company maintains powdered product warehouses utilized
throughout the United States. A Company-owned transportation terminal and
maintenance facility is located in Illinois.
ITEM 3. LEGAL PROCEEDINGS.
Information on legal proceedings is contained in the Company's Fiscal
1998 Annual Report (Exhibit 13a hereto) on page 33 in Note 13 to the
consolidated financial statements. Such information is hereby incorporated
herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended May 31, 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------------------------------------
Information regarding the Company's executive officers is set forth in
Item 10 of Part III of this Report.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the New York Stock Exchange
under the ticker symbol DF. The range of Common Stock sales prices for each of
the quarters during the past two fiscal years (as reported by the New York Stock
Exchange) and the frequency and amount of Common Stock dividends declared the
past two fiscal years are set forth under the caption "Quarterly Financial Data"
at page 35 of the Company's Fiscal 1998 Annual Report (Exhibit 13a hereto) in
the rows captioned "Stock Price Range" and "Dividend Rate". Such rows and the
column and row captions related thereto are hereby incorporated herein by
reference.
The approximate number of holders of record of the Company's Common
Stock on August 7, 1998, was 8,695.
Restrictions on the Company's ability to pay dividends on its Common
Stock are described in the fifth paragraph of Note 4 to the consolidated
financial statements at page 29 of the Company's Fiscal 1998 Annual Report
(Exhibit 13a hereto), which paragraph is hereby incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for each of the Company's last five fiscal
years is set forth at page 36 of the Company's Fiscal 1998 Annual Report
(Exhibit 13a hereto) under the caption "Summary of Operations". Such selected
financial data is hereby incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
A discussion of the Company's financial condition, cash flows and
results of operations, including information with respect to liquidity and
capital resources, is set forth at pages 17 through 21 of the Company's Fiscal
1998 Annual Report (Exhibit 13a hereto) under the caption "Financial Review",
which discussion is hereby incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's consolidated balance sheets as of May 31, 1998 and May
25, 1997 and related consolidated statements of income, of shareholders' equity
and of cash flows for each of the three fiscal years in the period ended May 31,
1998, and the notes thereto, together with the report thereon of independent
accountants, are set forth on pages 22 through 37 of the Company's Fiscal 1998
Annual Report (Exhibit 13a hereto). Such financial statements, notes thereto and
the report thereon of independent accountants are hereby incorporated herein by
reference.
Financial data for each quarter within the two most recent fiscal years
is set forth under the caption "Quarterly Financial Data" at page 35 of the
Company's Fiscal 1998 Annual Report (Exhibit 13a hereto) in the rows captioned
"Net Sales", "Gross Profit", "Income from Continuing Operations", "Net Income"
and "Per Common Share Data: Basic Income (Loss) Per Share and Diluted Income
(Loss) Per Share". Such rows and row captions related thereto are hereby
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
12
<PAGE> 13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Company's directors (including nominees for
election at the Company's Annual Meeting of Stockholders to be held September
29, 1998) is set forth at pages 2 through 7 of the Company's 1998 Proxy
Statement under the captions "ELECTION OF DIRECTORS" and "CERTAIN INFORMATION
REGARDING THE BOARD OF DIRECTORS". Such information is hereby incorporated
herein by reference.
Information supplied by the Company's executive officers who are not
also directors of the Company concerning their ages, business experiences, and
periods of service as executive officers is as follows:
<TABLE>
<CAPTION>
Served in
Position with such position
the Company Age since
----------- --- -----
<S> <C> <C> <C>
Robert E. Baker.............................Vice President, 51 1997
Strategic Planning
Eric A. Blanchard...........................Vice President, 42 1993
Secretary and General Counsel
Jenny L. Carpenter..........................Group Vice President, 52 1995
Specialty Business Unit
Gary A. Corbett.............................Vice President, Governmental 50 1993
and Dairy Industry Relations
Neil J. Finerty.............................Vice President, 53 1997
Human Resources
Gary D. Flickinger..........................Vice President, 56 1993
Production and Engineering
Daniel E. Green.............................Group Vice President, and 53 1992
President, Ryan Foods Company
James R. Greisinger.........................Group Vice President and 57 1992
President, Dean Pickle and
Specialty Products Company
Cameron C. Hitchcock........................Treasurer 36 1997
Alan W. Hooper..............................Vice President 49 1997
Special Projects
Dale E. Kleber..............................Vice President and 42 1997
Associate General Counsel
William M. Luegers, Jr. ....................Corporate Controller 44 1997
William R. McManaman........................Vice President, Finance 51 1996
and Chief Financial Officer
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
George A. Muck..............................Vice President, 60 1970
Research and Development
Douglas A. Parr.............................Vice President, 56 1993
Dairy Sales and Marketing
Dennis J. Purcell...........................Group Vice President and 55 1993
President, Specialty Business Unit
Gary P. Rietz...............................Chief Information Officer 42 1997
Jeffrey P. Shaw.............................Group Vice President and 41 1992
President, Dean Foods
Vegetable Company
</TABLE>
Each of the executive officers, including executive officers who are
also directors, was elected to serve as an executive officer until the next
annual meeting of directors, scheduled for September 29, 1998.
All of the Company's executive officers listed in Part III, Item 10
have been employees of the Company for more than five years, with the exception
of Mr. Baker, Mr. Finerty, Mr. Hitchcock, Mr. Luegers, Mr. McManaman and Mr.
Rietz. Prior to assuming their current positions,
- - Mr. Blanchard was the Company's secretary and general counsel;
- - Ms. Carpenter was the Company's Director of Marketing and Sales-Specialty
Foods Division;
- - Mr. Corbett was in the Company's sales administration management;
- - Mr. Flickinger was the Director of Production - Dairy and a divisional
general manager;
- - Mr. Green was the Company's Vice President, Corporate Planning and
Development;
- - Mr. Greisinger was a Company Vice President and President of Dean Pickle
and Specialty Products Company;
- - Mr. Hooper was the Company's Director of Strategic Projects;
- - Mr. Kleber was a Corporate attorney;
- - Mr. Parr was a Company regional sales manager;
- - Mr. Purcell was Senior Vice President of Sales and Marketing of Dean
Pickle and Specialty Products Company;
- - Mr. Shaw was President of the Company's Richard A. Shaw, Inc.
subsidiary, which was subsequently merged into Dean Foods Vegetable
Company.
Mr. Baker was employed by the Company during 1997. Mr. Baker, prior to his
employment by the Company, was the Vice President - Marketing & Strategic
Planning of Specialty Foods Company, a diversified food company.
Mr. Finerty has been employed by the Company since 1995. Prior to assuming his
present duties, he was Director - Industrial Relations. Mr. Finerty, prior to
his employment with the Company, was Assistant Director - Labor Relations of
Borden Inc., a diversified food and dairy company.
Mr. Hitchcock was employed by the Company in 1997. Mr. Hitchcock, prior to his
employment with the Company, was Vice President - Corporate Finance of Duetsche
Morgan Grenfell, Inc., the global investment banking arm of Duetsche Bank Group.
Mr. Luegers has been employed by the Company since 1996. Mr. Luegers, prior to
his employment with the Company, was Director of Accounting of Brunswick
Corporation, a diversified marine and recreational products company.
Mr. McManaman has been employed by the Company since 1996. Mr. McManaman, prior
to his employment by the Company, was the Vice President - Finance of Brunswick
Corporation, a diversified marine and recreational products company.
14
<PAGE> 15
Mr. Rietz was employed by the Company in 1997. Mr. Rietz, prior to his
employment with the Company, was Business Systems Manager - North American
Beverage Division of Quaker Oats Company, a diversified food and beverage
company.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding the cash compensation of the Company's executive
officers, compensation pursuant to plans and compensation of the Company's
directors (including nominees for election at the Company's Annual Meeting of
stockholders to be held September 29, 1998) is set forth in the Company's 1998
Proxy Statement at pages 6 through 7 under the caption "CERTAIN INFORMATION
REGARDING THE BOARD OF DIRECTORS" and at pages 8 through 15 under the caption
"EXECUTIVE COMPENSATION." Such information is hereby incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners
and management is set forth in the Company's 1998 Proxy Statement at page 20
under the caption "PRINCIPAL HOLDERS OF VOTING SECURITIES". Such information is
hereby incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
15
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Report. The
page number, if any, listed opposite a document indicates the
page number in the sequential numbering system in the manually
signed original of this Report where such document can be found.
<TABLE>
<CAPTION>
(1) Financial Statements Page No.
<S> <C>
The consolidated balance sheets at May 31, 1998 and May 25,
1997, the related consolidated statements of income, of
shareholders' equity and of cash flows for each of the
three fiscal years in the period ended May 31, 1998, and
the notes thereto, together with the report thereon of
PricewaterhouseCoopers LLP dated June 29, 1998, except as
to Note 3 which is as of July 27, 1998, as incorporated by
reference in Part II, Item 8 of this Report.
(2) Financial Statement Schedules
Report of independent accountants on financial
statement schedule 18
Schedule VIII - Valuation and qualifying accounts 19
All other schedules have been omitted
because they are not applicable, or not
required, or because the required
information is shown in the consolidated
financial statements or notes thereto.
Separate financial statements of the
Registrant have been omitted since the
Registrant is primarily an operating
company and all subsidiaries included in
the consolidated financial statements, in
the aggregate, do not have minority equity
interest and/or indebtedness to any person
other than the Registrant or its
consolidated subsidiaries in amounts which
together exceed 5% of total consolidated
assets at May 31, 1998, except for
indebtedness incurred in the ordinary
course of business which is not overdue and
which matures within one year from the date
of its creation.
(3) Exhibits
See Exhibit Index 20 - 21
(b) Reports on Form 8-K.
The Registrant filed a Current Report on Form 8-K, dated July 27,
1998, with regards to the Registrant's Press Release, dated the
same, "Dean Agrees to Sell Vegetable Operations; Will Focus
Resources on Dairy Business".
</TABLE>
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DEAN FOODS COMPANY
By William R. McManaman
---------------------------
William R. McManaman
(Vice President, Finance and
Chief Financial Officer)
Date: August 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
HOWARD M. DEAN Chairman of the Board August 31, 1998
- ----------------------------
Howard M. Dean and Director
RICHARD E. BAILEY President and Director August 31, 1998
- ----------------------------
Richard E. Bailey
EDWARD A. BRENNAN Director August 31, 1998
- ----------------------------
Edward A. Brennan
LEWIS M. COLLENS Director August 31, 1998
- ----------------------------
Lewis M. Collens
PAULA H. CROWN Director August 31, 1998
- ----------------------------
Paula H. Crown
JOHN P. FRAZEE, JR. Director August 31, 1998
- ----------------------------
John P. Frazee, Jr.
BERT A. GETZ Director August 31, 1998
- ----------------------------
Bert A. Getz
JANET HILL Director August 31, 1998
- ----------------------------
Janet Hill
JOHN S. LLEWELLYN, JR. Director August 31, 1998
- ----------------------------
John S. Llewellyn, Jr.
RICHARD P. MAYER Director August 31, 1998
- ----------------------------
Richard P. Mayer
ANDREW J. MCKENNA Director August 31, 1998
- ----------------------------
Andrew J. McKenna
THOMAS A. RAVENCROFT Senior Vice President August 31, 1998
- ----------------------------
Thomas A. Ravencroft and Director
</TABLE>
17
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
Dean Foods Company
Our audits of the consolidated financial statements referred to in our report
dated June 29, 1998, except as to Note 3, which is as of July 27, 1998,
appearing on page 37 of the Dean Foods Company Annual Report to Shareholders for
Fiscal Year Ended May 31, 1998 (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PricewaterCoopers LLP
Chicago, Illinois
June 29, 1998
18
<PAGE> 19
DEAN FOODS COMPANY AND SUBSIDIARIES
---------------
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Amount
charged
Balance at (credited) Accounts Balance
beginning to costs and written at end
Classification of period expenses off of period
- -------------- --------- -------- ------- ---------
(In thousands)
Fiscal Year Ended May 31, 1998
- ------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts and notes
receivable.....................................$3,085 $2,790 $1,663 $4,212
====== ====== ====== ======
Fiscal Year Ended May 25, 1997
Allowance for doubtful
accounts and notes
receivable.....................................$2,691 $ 846 $ 452 $3,085
====== ====== ====== ======
Fiscal Year Ended May 26, 1996
Allowance for doubtful
accounts and notes
receivable.....................................$3,607 $1,866 $2,782 $2,691
====== ====== ====== ======
</TABLE>
19
<PAGE> 20
EXHIBIT INDEX
The following documents are the exhibits to this Report. For convenient
reference, each exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K. The page number, if any, listed
opposite an exhibit indicates the page number in the sequential numbering system
in the manually signed original of this Report where such exhibit can be found.
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
(3) Articles of Incorporation and By-Laws
a. Dean Foods Company Restated Certificate of Incorporation dated
February 8, 1988 (filed as Exhibit 3(a) to Registrant's Form
10-K Annual Report for Fiscal Year Ended May 29, 1988 and
incorporated herein by reference)
b. By-Laws of Registrant, as amended May 22, 1998 22-40
(4) Instruments defining the rights of security holders, including indentures
a. Rights Agreement dated May 22, 1998 41-84
(10) Material contracts
a. Amended and Restated Dean Foods Company Management Deferred
Compensation Plan, dated as of June 1, 1994 (filed as Exhibit
10(a) to Registrant's Form 10-K Annual Report for Fiscal Year
Ended May 29, 1994 and incorporated herein by reference)
b. Dean Foods Company Retirement Plan for Certain Directors
(filed as Exhibit 10(a) to Registrant's Form 10-K Annual Report
for Fiscal Year Ended December 28, 1985 and incorporated herein
by reference)
c. Form of Agreement dated March 17, 1986, between Registrant and
each of its current executive officers (filed as Exhibit 10(b)
to Registrant's Form 10-K Annual Report for Fiscal Year Ended
December 28, 1985 and incorporated herein by reference)
d. Form of Indemnification Agreement between Registrant and each of
its directors and officers serving at any time after October 5,
1987 (filed as Exhibit 10(m) to Registrant's Form 10-K Annual
Report for Fiscal Year
Ended May 29, 1988, and incorporated herein by reference)
e. Amended and Restated Dean Foods Company Directors Deferred
Compensation Plan, dated March 25, 1988 (filed as Exhibit
10(j) to Registrant's Form 10-K Annual Report for Fiscal Year
Ended May 28, 1989 and incorporated herein by reference)
f. Dean Foods Company Supplemental Benefit Plan for eligible
officers, as amended and restated on May 24, 1991 (filed as
Exhibit 10(k) to Registrant's Form 10-K Annual Report for
Fiscal Year ended May 26, 1991 and incorporated herein by
reference)
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
g. Dean Foods Company Supplemental Incentive Compensation Plan
for certain officers, as amended March 31, 1989 (filed as
Exhibit 10(l) to Registrant's Form 10-K Annual Report for
Fiscal Year Ended May 28, 1989 and incorporated herein by
reference)
h. Dean Foods Company Director Stock Option Plan, dated September
30, 1992 (filed as Exhibit 10(i) to Registrant's Form 10-K
Annual Report for Fiscal Year ended May 30, 1993 and
incorporated herein by reference)
i. $500 million Credit Agreement dated as of March 31, 1998 85-151
j. Severance Agreement dated March 4, 1998 between the Company
and Richard E. Bailey, President and Chief Operating Officer 152-153
k. Stock Purchase Agreement by and between the Company and
Agrilink Foods, Inc dated July 24, 1998 154-237
l. Severance Agreement dated July 13, 1998 between the Company
and Jeffrey P. Shaw, Group Vice President and President of
Dean Foods Vegetable Company 238-245
(11) Computation of Basic and Diluted Income Per Share 246
(12) Computation of Ratio of Earnings to Fixed Charges 247
(13) Annual report to security holders, Form 10-Q or quarterly report to
security holders
a. Dean Foods Company Annual Report to Shareholders for Fiscal
Year Ended May 31, 1998 248-288
With the exception of the financial statements, report of
independent accountants thereon and certain other information
expressly incorporated herein by reference, the Registrant's
Annual Report to Shareholders for Fiscal Year Ended May 31,
1998 is not to be deemed filed as part of this Report.
(21) Subsidiaries of the Registrant
a. Subsidiaries of the Registrant as of May 31, 1998 289
(23) Consents of Experts and Counsel
a. Consent of Independent Accountants dated August 31, 1998 290
(27) Financial Data Schedules
.1. Fiscal Year-Ended May 31, 1998 291
.2. Fiscal Year-Ended May 25, 1997(Restated) 292
.3. Fiscal Year-Ended May 26, 1996(Restated) 293
</TABLE>
21
<PAGE> 1
EXHIBIT 3(b)
IN EFFECT May 22, 1998
BY-LAWS
OF
DEAN FOODS COMPANY
ARTICLE I
OFFICES
Section l. Registered Office. The registered office of the
corporation required by The General Corporation Law of the State of
AMENDED Delaware shall be established and maintained at the office of The
10/3/86 Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, State of Delaware, and the address of the registered
office may be changed from time to time by the Board of
Directors.
Section 2. Principal Office. The principal office of the
corporation shall be located at 3600 North River Road, Franklin Park,
Illinois. The corporation may have such other offices, either within
or without the State of Delaware, as the business of the corporation
may require from time to time.
ARTICLE II
STOCKHOLDERS
Section l. Annual Meeting. The annual meeting of stockholders
for the election of directors and for the transaction of such other
AMENDED business as may be properly brought before the meeting shall
5/22/98 be held at such place, either within or without the State of
Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the
meeting.
Section 2. Special Meeting. Special meetings of the stockholders
may be called by the Chairman of the Board or the President and shall
AMENDED be called by the Secretary at the written request (meeting the
5/31/85 requirements set forth in the Certificate of Incorporation) of
either a majority of the Board of Directors, or the holders of at
least 80% of the outstanding shares of Common Stock of the
corporation. Such special meetings may be held at such time and place,
within or without the State of Delaware, and for such purpose or
purposes as shall be stated in the notice of the meeting.
<PAGE> 2
Section 3. Notice of Meetings. Except as otherwise provided by
statute, written or printed notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten
days nor more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the Secretary, to
each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in
the United States mail in a sealed envelope addressed to the
stockholder at his last known post office address as it appears on the
stock record books of the corporation, with postage thereon prepaid.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken, unless the
adjournment is for more than thirty days or a new record date is fixed
for the adjourned meeting.
Section 4. Record Dates. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of
stockholders at any adjournment thereof or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before
the date of such meeting, or more than sixty days prior to any other
action. If no record date is fixed:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the
close of business on the day next preceding the day on which
notice is given,
(b) The record date for determining stockholders for any
other purpose shall be the close of business on the day on which
the Board of Directors adopts the resolution or resolutions
relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a
new record date for the adjourned meeting. In no event shall the stock
transfer books of the corporation be closed.
Section 5. List of Voting Stockholders. The officer who has
charge of the stock ledger of the corporation shall prepare and make,
at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of and the number of shares
registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten
days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting
is to be held, and the list shall be produced and kept at the time and
place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
2
<PAGE> 3
Section 6. Quorum. The holders of a majority of the stock issued
and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote thereat
present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or
represented by proxy any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 7. Voting. Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation, of the
resolution or resolutions of the Board of Directors setting forth the
voting powers, if any, of the holders of any series of Preferred
Stock, or of these By-Laws shall be entitled to one vote, in person or
by proxy, for each share of stock entitled to vote held by such
stockholder, but no proxy shall be voted after three years from its
date unless such proxy provides for a longer period. All elections or
directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation, by the resolution or resolutions of the
Board of Directors setting forth the voting rights, if any, of the
holders of any series of Preferred Stock, or by the laws of the State
of Delaware.
Section 8. Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officers, agent or
proxy as the By-Laws of such corporation may prescribe, or, in
the absence of such provision, as the Board of Directors of such
corporation may determine.
(b) Shares standing in the name of a deceased person may be
voted by his administrator or his executor either in person or by
proxy, but no guardian, conservator or trustee shall be entitled,
as such fiduciary, to vote shares held by him without a transfer
of such shares into his name.
(c) Shares standing in the name of receiver may be voted by
such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer
thereof into his name, if authority so to do be contained in an
appropriate order of the court by which such receiver was
appointed, and a certified copy of such order is filed with the
Secretary of the corporation before or at the time of the
meeting.
(d) A stockholder whose shares are pledged shall be entitled
to vote such shares unless in the transfer by the pledgor on the
books of the corporation he has expressly empowered the pledgee
to vote thereon, in which case only the pledgee or his proxy may
represent such stock and vote thereon.
3
<PAGE> 4
(e) If shares or other securities having voting power stand
in names of two or more persons, or if two or more persons have
the same fiduciary relationship respecting the same shares,
unless the Secretary of the corporation is given written notice
to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the
following effect:
(l) The act of the majority voting binds all;
(2) In all other cases, the effect provided by the laws
of the State of Delaware.
(f) Shares of the corporation belonging to it shall not be
voted, directly or indirectly, at any meeting, and shall not be
counted in determining the total number of outstanding shares at
any given time, but shares of the corporation held by it in a
fiduciary capacity may be voted and shall be counted in
determining the number of outstanding shares at any given time.
Section 9. Proxies. At all meetings of stockholders, a
stockholder may vote in person or by written proxy filed with the
Secretary of the corporation before or at the time of the meeting. To
revoke his proxy as to any matter before the meeting, a stockholder
must deliver written notice to that effect to the Secretary before
that matter is submitted to a vote of the stockholders.
Section 10. Advance Notice of Stockholder Nominations and
Stockholder Business. Nominations of persons for election to the Board
of Directors and the proposal of business to be transacted by the
stockholders may be made at an annual or special meeting of the
stockholders only (a) pursuant to the corporation's notice with
respect to such meeting, (b) by or at the direction of the Board of
AMENDED Directors or (c) by any stockholder of the corporation who was a
5/22/98 stockholder of record on the record date set with respect to such
meeting as provided for in Section 4, who is entitled to vote at
the meeting and who has complied with the notice procedures set forth
in this Section 10. For nominations or other business to be properly
brought before an annual or special meeting by a stockholder pursuant
to clause (c) above, the stockholder must give timely notice thereof
in writing to the Secretary of the corporation and such business must
be a proper matter for stockholder action under the General
Corporation Law of the State of Delaware (the "General Corporation
Law") and a proper matter for consideration at such meeting under the
Certificate of Incorporation and these By-Laws. To be timely, (i) in
the case of special meetings of the stockholders and in the case of
the corporation's 1998 annual meeting of stockholders, a stockholder's
notice must be delivered to the Secretary at the principal executive
offices of the corporation not earlier than the 90th day prior to such
meeting and not later than the close of business on the later of the
60th day prior to such meeting or the 10th day following the day on
which public announcement of the date of such meeting is first made
and (ii) in the case of all annual
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meetings of stockholders subsequent to the 1998 annual meeting, a
stockholder's notice must be delivered to the Secretary at the
principal executive offices of the corporation not less than 60 days
nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting of stockholders; provided, however, that in the
event that the date of the annual meeting is more than 30 days prior
to or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the
date of such meeting is first made. Such stockholder's notice shall
set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including, if
so required, such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b)
as to any other business that the stockholder proposes to bring before
the meeting, a brief description of such business, the reasons for
conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on
whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such
stockholder and of such beneficial owner as they appear on the
corporation's books and (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such
stockholder and such beneficial owner. Persons nominated by
stockholders to serve as directors of the corporation who have not
been nominated in accordance with this Section 10 shall not be
eligible to serve as directors. Only such business shall be conducted
at an annual or special meeting of stockholders as shall have been
brought before the meeting in accordance with this Section 10. The
chairman of the meeting shall determine whether a nomination or any
business proposed to be transacted by the stockholders has been
properly brought before the meeting and, if any proposed nomination or
business has not been properly brought before the meeting, the
chairman shall declare that such proposed business or nomination shall
not be presented for stockholder action at the meeting. For purposes
of this Section 10, "public announcement" shall mean disclosure in a
press release reported by the Dow Jones News Service, Associated Press
or a comparable national news service. Nothing in this Section 10
shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act.
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ARTICLE III
BOARD OF DIRECTORS
Section l. General Powers and Duties. The property, business and
affairs of the corporation shall be managed by its Board of Directors.
Section 2. Number and Term of Office. The number of directors of
the corporation shall be twelve. In accordance with Article Seventh of
AMENDED the Certificate of Incorporation of the corporation, the directors
5/22/98 shall be divided into three classes with staggered terms, with each
class to be as nearly equal in number as practicable. The directors of
each class shall be elected for a term of office to expire at the
third annual meeting of stockholders after their election, as provided
in Article Seventh of the Certificate of Incorporation. Each director
shall hold office until the expiration of his or her term and until
his or her successor shall be elected.
Section 3. Resignations. Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made
in writing and shall take effect at the time specified therein or, if
no time be specified, at the time of its receipt by the President or
Secretary of the corporation. The acceptance of a resignation shall
not be necessary to make it effective.
Section 4. Vacancies. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in
office, though less than a quorum, by majority vote may appoint any
qualified person to fill such vacancy, which person shall hold office
the unexpired term and until his successor shall be duly chosen.
Section 5. Increase or Decrease of Number. The number of
AMENDED directors may be increased or decreased by amendment of these By-Laws
1/26/96 by the affirmative vote of a majority of the directors, though less
than a quorum, and by like vote the additional directors may be
chosen to hold office until the next annual election and until their
successors are elected and qualified.
Section 6. Regular Meetings. The regular annual meeting of the
Board of Directors shall be held without other notice than this By-Law
as promptly as possible after the annual meeting of stockholders in
each year. The place of such meeting shall be the same as that of the
annual meeting of stockholders immediately preceding. The Board of
Directors may provide, by resolution, the time and place, either
within or without the State of Delaware, for the holding of additional
regular meetings without notice other than such resolution.
Section 7. Special Meetings. Special meetings of the Board of
Directors may be held at any time on the call of the Chairman of the
Board or of the President and shall be called by the Chairman of the
AMENDED Board or the President at the request in writing of any five (5)
5/13/85 directors. Special meetings of the Board of Directors may be held at
such place, either within or without the State of Delaware, as shall
be specified or fixed in the call for such meeting or notice thereof.
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Section 8. Notice of Special Meetings. Notice of each special
meeting shall be mailed by or at the direction of the Secretary to
each director addressed to him at his residence or usual place of
business at least three days before the day on which the meeting is to
be held, or shall be sent to him by telegram, or be delivered
personally, at least two days before the day on which the meeting is
to be held. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail in a sealed envelope so
addressed, with postage thereon prepaid. If notice be given by
telegraph, such notice shall be deemed to be delivered when the same
is delivered to the telegraph company. Notice may be waived in writing
by any director, either before or after the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 9. Quorum. A majority of the total number of directors
as at the time specified by the By-Laws shall constitute a quorum for
the transaction of business at any meeting of the Board of Directors.
In the absence of a quorum, a majority of the directors present may
adjourn the meeting from time to time until a quorum be had, and
without other notice than by announcement at the meeting at which the
adjournment has been taken.
Section l0. Manner of Acting. Except as otherwise provided by
statute, by the Certificate of Incorporation, as amended, or these
By-Laws, the act of the majority of the directors present at a meeting
at which a quorum is present shall be the act of the Board of
Directors.
Section ll. Compensation. Directors shall receive such annual fee
or meeting fee for their services as shall be established by
resolution of the Board of Directors plus expenses of attendance at
Board and Committee meetings, if any. The Board may also authorize the
payment of a fee for the attendance of any director at meetings of
Committees of the Board. Nothing herein contained shall be construed
to preclude any director from serving the corporation in any other
capacity and receiving his regular compensation therefor.
Section l2. Executive Committee. An Executive Committee
AMENDED consisting of four members of the Board of Directors may be elected by
10/2/87 the Board of Directors. A chairman of said committee shall be elected
by the Board of Directors from among the members of the Executive
Committee. Each director serving on the Executive Committee shall hold
office until the Annual Meeting held next after his election and until
his successor shall have been elected or qualified. If an Executive
Committee is elected, it shall, during the intervals between the
meetings of the Board of Directors, and so far as it lawfully may,
possess and exercise all of the authority of the Board of Directors in
the management of the business of the corporation, in all cases in
AMENDED which specific directions shall not have been given by the Board of
10/30/69 Directors, provided that notwithstanding the foregoing, the Executive
Committee shall not have authority:
(l) To take any action to amend the Certificate of
Incorporation;
(2) To adopt a plan of merger or plan of consolidation with
another corporation or corporations;
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(3) To recommend to the stockholders the sale, lease, exchange,
mortgage, pledge or other disposition of all or
substantially all of the property and assets of the
corporation if not made in the usual and regular course of
its business;
(4) To recommend to the stockholders a voluntary dissolution of
the corporation or a revocation thereof;
(5) To amend, alter or repeal the By-Laws of the corporation;
(6) To elect or remove officers of the corporation or members of
the Executive Committee;
(7) To fix the compensation of any member of the Executive
Committee;
(8) To declare dividends;
(9) To amend, alter or repeal any resolution of the Board of
Directors which by its terms provides that it shall not be
amended, altered or repealed by the Executive Committee.
The Executive Committee shall keep minutes of the proceeding of their
meetings which shall be submitted to the Board of Directors at the
next meeting of the Board if the Board shall so request. Three members
of the Committee shall constitute a quorum for the transaction of
business, provided that if any member or members thereof are absent
from a meeting or disqualified from membership on the Committee, the
remaining member or members thereof present at any meeting and not
disqualified from voting (whether or not he or they would otherwise
constitute a quorum) may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent
or disqualified member. Meetings of the Executive Committee shall be
called upon the request of any member of the Executive Committee and
notice of such meetings shall in each instance be given to each member
of the Committee at least twenty-four hours before the meeting either
orally or in writing. A fixed sum and expenses of attendance, if any,
may be allowed and paid for attendance at each meeting of the
Executive Committee, the amount of such sum to be designated by the
Board of Directors.
Section l3. Presumption of Assent. A director of the corporation
who is present at a meeting of the Board of Directors at which action
on any corporate matter is taken shall be conclusively presumed to
have assented to the action taken unless his dissent shall be entered
in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the
meeting before the adjournment of the meeting. Such right to dissent
shall be sent by registered mail to the Secretary of the corporation
immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such
action.
Section l4. Informal Action. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed
with the minutes of proceedings of the Board or committee.
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Section l5. Presence at Meetings. Members of the Board of
Directors or any committee thereof may participate in a meeting of
such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation shall
constitute presence at such meeting.
Section l6. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors
of the corporation, which, to the extent provided in the resolution,
shall have and may exercise all the powers and authority of the
ADDED Board of Directors with respect to the management of the business
10/2/87 affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority of the Board in
reference to amending the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by
the Board of Directors, fix the designations and any of the
preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation
or the conversion into, or the exchange of such shares for, shares of
any other class or classes or any other series of the same or any
other class or classes of stock of the corporation or fix the number
of shares of any series of stock or authorize the increase or decrease
of the shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending these
By-Laws; and, unless the resolution, these By-Laws or the Certificate
of Incorporation expressly so provides, no such committee shall have
the power or authority to declare a dividend, to authorize the
issuance of stock or to adopt a Certificate of Ownership and Merger.
Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of
Directors and the Board may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Additionally, in
the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and
not disqualified from voting, whether or not a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting
in the place of any such absent or disqualified member. Each committee
shall keep regular minutes of its meetings and report the same to the
Board of Directors when required."
ARTICLE IV
COMPANY OFFICERS
Section l. Number. The officers of the corporation shall be a
AMENDED Chairman of the Board, a President, one or more Vice Presidents, a
01/26/96 Secretary and a Treasurer, all of whom shall be elected by the
Board of Directors; and in addition, during such periods as an
Executive Committee shall be appointed, the Board of Directors shall
select one of the members thereof to fill the office of Chairman of
the Executive Committee. The Board of Directors may elect or appoint
one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other
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subordinate officers and agents as the Board may determine, to hold
office for such period and with such authority and to perform such
duties as may be prescribed by these By-Laws or as the Board may from
time to time determine. Any two or more offices (including without
AMENDED limitation President, Chairman of the Board and Chairman of the
10/1/87 Executive Committee) may be held by the same person, except the
offices of President and Vice President, and the offices of President
and Secretary.
Section 2. Election, Term of Office and Qualifications. The
officers of the corporation shall be elected annually by the Board of
Directors at the first meeting of the Board held after the annual
meeting of stockholders. If the election of officers shall not be held
at such meeting, such election shall be held as soon thereafter as the
same can conveniently be held. Each officer shall hold his office
until his successor shall have been duly elected and shall have
qualified or until his death, resignation or removal. The Chairman of
the Board and the Chairman of the Executive Committee (if any) shall
be members of the Board, but none of the other officers need be a
member of the Board. Election or appointment of an officer or agent
shall not of itself create contract rights.
Section 3. Removal. Any of the officers or agents appointed by
the Board of Directors may be removed by the Board of Directors,
whenever in its judgment the best interest of the corporation will be
served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by
the Board of Directors for the unexpired portion of the term.
Section 5. Bonds. If the Board of Directors by resolution shall
so require, any officer or agent of the corporation shall give bond to
the corporation in such amount and with such surety as the Board of
Directors may deem sufficient, conditioned upon the faithful
performance of the respective duties and offices.
Section 6. Chairman of the Board; Chief Executive Officer.
AMENDED The Chairman of the Board (and in his absence, disability, or at his
12/2/88 discretion, the President) shall be the chief executive officer of
the corporation. The Chairman of the Board shall preside at all
meetings of stockholders and of the Board of Directors; and shall be
the superior officer to all other officers of the corporation. Subject
to the direction and authority of the Board of Directors, the Chairman
of the Board shall be responsible for the implementation and direction
of corporate policy, shall have authority over all officers of the
corporation in the execution of the corporate policies as reflected in
the orders and resolutions of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of
Directors from time to time.
Section 7. President. Subject to the general control of the Board
of Directors and the Chairman of the Board, the President shall be
AMENDED the chief operating officer of the corporation and as such shall have
12/2/88 the active management of, and exercise detailed supervision over, the
business and affairs of the corporation and over its several officers.
In the absence or disability or at the direction of the Chairman of
the Board, the President shall preside at all meetings of the
stockholders and at meetings of the Board of Directors. Subject to
such general control, the President shall perform all duties usually
incident to the
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office of President and such other duties as may be prescribed by the
Chairman of the Board or the Board of Directors from time to time.
AMENDED Section 8. The Vice Presidents. In the absence or disability
1/26/96 of the President, the Vice Presidents shall perform the duties of
the President, and the Vice Presidents shall perform such other
duties as from time to time may be assigned to them by the
Chairman of the Board, the President or the Board of Directors. The
Board of Directors from time to time may determine the number and
relative seniority of the Vice Presidents.
Section 9. Treasurer. The Treasurer shall have charge and
custody of, and be responsible for, all funds and securities of the
corporation; receive and give receipts for monies due and payable to
the corporation from any source whatsoever; deposit or cause to be
deposited all monies in the name and to the credit of the corporation
in such banks, trust companies or other depositaries as may be
designated or selected by the Board of Directors; keep or cause to be
kept full and accurate records and accounts of receipts and
disbursements in books of the corporation and see that said books are
kept in proper form and that they correctly show the financial
transactions of the corporation; disburse or supervise the
disbursement of the funds of the corporation as may be directed by the
Board of Directors or by his superior officers, and take or cause to
be taken proper vouchers for such disbursements; furnish to the Board
of Directors, to any Executive Committee thereof, to the President,
and to such other officers as the Board may designate, at such times
as may be required, an account of all his transactions as Treasurer;
be responsible under the direction of his superior officers, the Board
of Directors, and any Executive Committee thereof, for activities
relating to the obtaining and disbursement of capital; and in general,
perform all of the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by his
superior officers, the Board of Directors, and any Executive Committee
thereof. The books and papers of the Treasurer shall at all times be
open to the inspection of the President and each member of the Board
of Directors.
Section l0. Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and keep the minutes of
such meetings in one or more books provided for that purpose; see that
all notices are duly given in accordance with the provisions of these
By-Laws, or as required by law; be custodian of the corporate records
and of the seal of the corporation and see that the seal of the
corporation or a facsimile thereof is affixed to or impressed on all
certificates for shares prior to the issue thereof, and all documents,
the execution of which on behalf of the corporation under its seal is
duly authorized; sign with the Chairman of the Board, the President,
or a Vice President certificates for shares of the corporation, the
issue of which shall have been authorized by resolution of the Board
of Directors; have general charge of the stock transfer books of the
corporation and keep or cause to be kept the stock record and transfer
books in such manner as to show at any time the total number of shares
issued and outstanding, the names and addresses of the holders of
record thereof as furnished to him by such record holders, the number
of shares held by each and the time when each became such holder of
record; see that the reports, statements, certificates and all other
documents and records required by law are properly made, kept and
filed; and in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned
to him by his superior officers, the Board of Directors, and any
Executive Committee thereof.
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Section 11. Assistant Treasurers. At the request of the
Treasurer, or in his absence or disability, the Assistant Treasurers
shall perform all duties of the Treasurer, and when so acting shall
have all the powers of, and be subject to all the restrictions upon,
the Treasurer. Any such Assistant Treasurer shall perform such other
duties as from time to time may be assigned to him by his superior
officers, the Board of Directors, and any Executive Committee thereof.
Section l2. Assistant Secretaries. At the request of the
Secretary, or in his absence or disability, the Assistant Secretaries
shall perform the duties of the Secretary, including without
limitation the signing, with the Chairman of the Board, the President
or a Vice President, of certificates for shares of the corporation,
and when so acting shall have all the powers of, and be subject to all
the restrictions imposed upon, the Secretary. Any such Assistant
Secretary shall perform such other duties as from time to time may be
assigned to him by his superior officers, the Board of Directors, and
any Executive Committee thereof.
Section l3. Compensation. The compensation of the officers shall
be fixed from time to time by the Board of Directors; provided that no
officer shall be prevented from receiving such compensation by reason
of the fact that he is also a director of the corporation.
Section l4. Delegation of Duties. In case of the absence of
disability to act of any officer of the corporation and of any person
authorized to act in his place, the Board of Directors may, for the
time being, delegate the powers and duties, or any of them, to any
AMENDED other office or any director or other person whom it may select, and
10/1/87 the President (or in his absence, the Chairman of the Board) shall
have the power to delegate such powers and duties subject to such
action as the Board of Directors or any Executive Committee thereof,
may take with respect to the same matter.
ARTICLE V
DIVISIONS AND DIVISIONAL OFFICERS
Section l. Establishment of Divisions. The Board of Directors
may cause the business and operations of this corporation to be
divided into one or more divisions, based upon product manufactured,
geographical territory, character and type of operations, operating
units or upon such other basis as the Board of Directors may from time
to time determine to be advisable. Such divisions may operate under
division or tradenames approved for such purpose by the Board of
Directors and in such other manner as may be authorized by the Board.
Section 2. Divisional Officers. The Board of Directors of the
corporation may appoint such officers of the division with such titles
(such as President, Vice President, Secretary, Treasurer, Assistant
Secretaries and Assistant Treasurers of such division) as may from
time to time be deemed appropriate. Divisional officers shall have
such authority with respect to the affairs of their respective
divisions as officers with like titles generally have with respect to
the affairs of any independent corporation or as may from time to time
be assigned by the Chairman of the Board.
With respect to the affairs of each division and in the regular
course of its business, the officers of such division may sign
contracts and other documents in the name of the division; provided,
however, that
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in no case shall the officer of any one division have authority to
bind another division of the corporation or to bind the corporation
except as to the business and affairs of the division of which he is
an officer.
ARTICLE VI
SHARES, CERTIFICATES FOR SHARES
AND TRANSFER OF SHARES
Section l. Regulation. The Board of Directors may make such
rules and regulations as it may deem expedient concerning the
issuance, transfer and registration of certificates for shares of the
corporation, including the appointment of transfer agents and
registrars.
Section 2. Certificates for Shares. Certificates representing
shares of the corporation shall be respectively numbered serially for
each class of shares, or series thereof, as they are issued, shall be
impressed with the corporate seal or a facsimile thereof, and shall be
signed by the Chairman of the Board or the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary; provided that such signatures may
be facsimile on any certificate countersigned by an independent
transfer agent or its employee, or by an independent registrar or its
employee. Each certificate shall exhibit the name of the corporation,
state that the corporation is organized or incorporated under the laws
of the State of Delaware, the name of the person to whom issued, the
date of issue, the class (or series of any class) and number of shares
represented thereby and the par value of the shares represented
thereby or that such shares are without par value. If the corporation
be authorized to issue stock of more than one class or of more than
one series of any class, the designations, preferences and relative,
participating, optional or other special rights of each class of stock
or series thereof, and the qualifications, limitations or restrictions
of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificates which the
corporation shall issue to represent such class or series of stock;
provided that, except as otherwise provided by law, in lieu of the
foregoing requirement, there may set forth on the face or back of the
certificates a statement that the corporation will furnish without
charge to each stockholder who so requests the designations,
preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or
rights. Each certificate shall be otherwise in such form as may be
prescribed by the Board of Directors and as shall conform to the rules
of any Stock Exchange on which the shares may be listed.
Section 3. Cancellation of Certificates. All certificates
surrendered to the corporation for transfer shall be cancelled and no
new certificates shall be issued in lieu thereof until the former
certificate for a like number of shares shall have been surrendered
and cancelled, except as herein provided with respect to lost, stolen
or destroyed certificates.
Section 4. Lost, Stolen or Destroyed Certificates. Any
stockholder claiming that his certificate for shares is lost, stolen,
or destroyed may make an affidavit or affirmation of that fact and
lodge the same with the Secretary of the corporation, accompanied by a
signed application for a new certificate. Thereupon, and upon the
giving of a satisfactory bond of indemnity to the corporation not
exceeding in amount double the value of the shares represented by such
certificate,
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such value to be determined by the President and Treasurer of the
corporation, a new certificate may be issued of the same tenor and
representing the same number, class and series of shares as were
represented by the certificate alleged to be lost, stolen or
destroyed.
Section 5. Transfer of Shares. Shares of the corporation shall
be subject to transfer on the books of the corporation by the holder
thereof in person or by his duly authorized attorney, upon the
surrender and cancellation of a certificate or certificates for a like
number of shares. Upon presentation and surrender of a certificate for
shares properly endorsed and payment of all taxes therefore, the
transferee shall be entitled to a new certificate or certificates in
lieu thereof. As against the corporation, a transfer of shares can be
made only on the books of the corporation and in the manner
hereinabove provided, and the corporation shall be entitled to treat
the holder of record of any share as the owner thereof and shall not
be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by
the statutes of the State of Delaware.
ARTICLE VII
DIVIDENDS AND RESERVES
Section l. Dividends. Dividends upon the outstanding shares of
the corporation (other than liquidating dividends) may be declared
from its surplus or, in case there be no such surplus, out of its net
profits for the fiscal year in which the dividend is declared and/or
the preceding year. However, if the capital of the corporation shall
have been diminished in any way to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets, no
dividend shall be declared and paid out of such net profits until the
deficiency in the amount of capital represented by the issued and
outstanding stock of all classes having a preference upon the
distribution of assets shall have been repaired. Subject to the
provisions of the Certificate of Incorporation, as amended from time
to time and to any other lawful commitments of the corporation, and
subject to the provisions of statute, dividends may be declared and
made payable at such times and in such amounts as the Board of
Directors may from time to time determine. Dividends may be declared
at any regular or special meeting of the Board and may be paid in cash
or other property or in the form of a stock dividend.
Section 2. Reserves. Before declaring any dividend or making any
distribution of net profits, the Board of Directors, from time to
time, may set apart out of any funds of the corporation available for
dividends, a reserve or reserves for working capital, or to meet
contingencies, or for any other lawful purpose, and also, from time to
time, may abolish or decrease any such reserve or reserves.
ARTICLE VIII
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section l. Contracts. Any contract or instrument authorized by
the Board of Directors or duly appointed Executive Committee may be
executed by the Chairman of the Board, the President or any Vice
President and attested by the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer. In addition, the Board of
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Directors may authorize any other officer or officers, agent or
agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its
name, unless authorized by resolution of the Executive Committee or
the Board of Directors. Such authority may be general or confined to
specific instances.
Section 3. Checks, Drafts, Notes, etc. All checks, drafts or
other orders for the payment of money and all notes or other evidences
of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents, of the corporation and
in such manner as shall from time to time be determined by resolution
of the Board of Directors.
Section 4. Depositaries. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit
of the corporation in such banks, trust companies or other
depositaries as the Board of Directors may designate.
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form and shall have
inscribed thereon the name of the corporation and the words "Corporate
Seal Delaware". Said seal may be used by causing it, or a facsimile or
equivalent thereof, to be impressed or affixed or reproduced.
ARTICLE X
FISCAL YEAR
AMENDED The fiscal year of the corporation shall be a 52-53 week fiscal
5/23/86 year which ends on the last Sunday of May.
ARTICLE XI
STOCK IN OTHER CORPORATIONS
Any shares of stock in any other corporation which may from time
to time be held by this corporation may be represented and voted at
any meeting (or consent in lieu thereof) of shareholders of such
corporation by the Chairman of the Board, the President, a Vice
President or the Secretary of this corporation, or by any other person
or persons thereunto authorized by the Board of Directors, or by any
proxy designated by written instrument of appointment executed in the
name of this corporation by its Chairman of the Board, President, or a
Vice President and attested by the Secretary, any Assistant Secretary,
the Treasurer or any Assistant Treasurer.
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ARTICLE XII
GENERAL WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions
of these By-Laws, or under the provisions of the Certificate of
Incorporation, as amended, or under the provisions of the General
Corporation Law of the State of Delaware, waiver thereof in writing,
signed by the person or persons entitled to such notice, either before
or after the time stated therein, shall be deemed equivalent to the
giving of such notice. The presence of a stockholder in person or by
proxy at any meeting of stockholders, and the presence of a director,
in person, at any meeting of the Board of Directors, shall be deemed
to be the equivalent of such waiver, unless such presence is for the
sole purpose of objecting to the lack of sufficient notice.
ARTICLE XIII
INDEMNIFICATION
Section l. Each person who was or is a party or is threatened to
be made a party to or is involved, including involvement as a witness,
in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he (i) is or was
or has agreed to become a director or officer of the corporation or
AMENDED (ii) is or was serving or has agreed to serve (at or during such time
10/2/87 as such individual is or was a director or officer of the
corporation) as an employee, agent or fiduciary of the corporation or,
at the request of the corporation, as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture,
trust or other enterprise or entity, including service with respect to
an employee benefit plan, or by reason of any action alleged to have
been taken or omitted by such person in any such capacity, shall be
indemnified and held harmless by the corporation to the fullest extent
permitted by Delaware law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to
provide prior to such amendment), against all expense, liability and
loss (including attorneys' fees, judgments, fines, excise taxes or
penalties under the Employee Retirement Income Security Act of 1974,
amounts paid or to be paid in settlement and amounts expended in
seeking indemnification granted to such person under applicable law,
this Article, the corporation's Certificate of Incorporation or any
agreement with the corporation) actually and reasonably incurred or
suffered by such person in connection with such action, suit or
proceeding and any appeal thereof, and such indemnification shall
continue as to any such person who has ceased to be a director or
officer of the corporation and shall inure to the benefit of any such
person's heirs, executors and administrators, if in each case such
person acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action, suit or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding or any appeal thereof by judgment,
order, settlement, conviction, or plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that such
person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
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<PAGE> 17
corporation, and, with respect to any criminal action or proceeding,
had reasonable cause to believe his conduct was unlawful.
Section 2. Each person who was or is a party or is threatened to
be made a party to or is involved, including involvement as a witness,
in any action, suit or proceeding by or in the right of the
corporation to procure a judgment in its favor, by reason of the fact
that he (i) is or was or has agreed to become a director or officer of
the corporation or (ii) is or was serving or has agreed to serve (at
or during such time as such individual is or was a director or officer
of the corporation) as an employee, agent or fiduciary of the
corporation or, at the request of the corporation, as a director,
officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise or entity,
including service with respect to an employee benefit plan, or by
reason of any action alleged to have been taken or omitted by such
person in any such capacity, shall be indemnified and held harmless by
the corporation to the fullest extent permitted by Delaware law, as
the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law
permitted the corporation to provide prior to such amendment) against
all expense (including attorneys' fees and amounts expended in seeking
indemnification granted to such person under applicable law, this
Article, the corporation's Certificate of Incorporation or any
agreement with the corporation) actually and reasonably incurred or
suffered by such person in connection with such action, suit or
proceeding and any appeal thereof, and such indemnification shall
continue as to any such person who has ceased to be a director or
officer of the corporation and shall inure to the benefit of any such
person's heirs, executors and administrators, if in each case such
person acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court
of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnification
for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper.
Section 3. To the extent that any person referred to in Section
l or 2 of this Article has been successful on the merits or otherwise,
including the dismissal of an action without prejudice, in defense of
any action, suit or proceeding and any appeal thereof referred to
therein or in defense of any claim, issue or matter therein, he shall
be indemnified against all expense (including attorneys' fees and
amounts expended in seeking indemnification granted to such person
under applicable law, this Article, the corporation's Certificate of
Incorporation or any agreement with the corporation) actually and
reasonably incurred by him in connection therewith.
Section 4. Any indemnification under Section l or 2 of this
Article (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of any person referred to in Section l or 2 is proper
in the circumstances because he has met the applicable standard of
conduct set forth therein. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum (as defined in these
By-Laws) consisting of directors who were not parties to such action,
suit or proceeding, or (ii) if such quorum is not obtainable, or, even
if
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obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion.
Section 5. Expenses incurred by any person referred to in
Section l or 2 of this Article in defending a civil or criminal
action, suit or proceeding and any appeal thereof shall be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding and any appeal thereof upon receipt by the corporation
of an undertaking by or on behalf of such person to repay such amount
if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
Section 6. If a claim for indemnification (including an
advancement of expenses) under Section l or 2 is not paid in full by
the corporation within thirty (30) days after a written claim has been
received by the corporation, the claimant may at any time thereafter
bring suit in any court of competent jurisdiction against the
corporation to recover the unpaid amount of the claim and, if the
claimant is successful in establishing his right to indemnification
(or advancement of expenses), in whole or in part, in any such action
(or settlement thereof), he shall be entitled to be paid by the
corporation the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a
claim for an advancement of expenses where the required undertaking,
if any, has been tendered to the corporation) that the indemnitee has
not met the applicable standard of conduct described in Section l or
2.
Section 7. Any person serving as a director or officer of
another corporation, partnership, joint venture or other enterprise, a
majority of whose equity interests are owned by the corporation (a
"subsidiary"), directly or through one or more other subsidiaries,
shall be conclusively presumed to be serving in such capacity at the
request of the corporation.
Section 8. Persons who after the date of the adoption of this
provision become or remain directors or officers of the corporation or
who, while a director or officer of the corporation, become or remain
a director, officer, employee, agent or fiduciary of another entity at
the request of the corporation, shall be conclusively presumed to have
relied on the rights to indemnification (including advancement of
expenses) contained in this Article XIII in entering or continuing
such service. The rights contained in this Article shall apply to
claims made against a person arising out of acts or omissions which
occurred prior to the adoption hereof as well as those which occur
after such adoption.
Section 9. The rights conferred on any person in Sections l and 2
shall not be exclusive of any other right which such person may have
or hereafter acquire under any law, provision of the Company's
Certificate of Incorporation or these By-Laws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section l0. All rights to indemnification and advancement of
expenses provided by this Article shall be deemed to be a contract
between the corporation and each person referred to in Section l or 2
at any time while this Article is in effect. Any repeal or
modification of this Article, or any repeal or modification of the
relevant provisions of the Delaware General Corporation Law or any
other applicable law, shall not in any way diminish any rights to
indemnification or advancement of expenses to such person or the
obligations of the corporation.
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Section 11. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee, agent
or fiduciary of the corporation or, if at the request of the
corporation, of any other corporation, partnership, joint venture,
trust or other enterprise or entity, including employee benefit plans,
against any expense, liability or loss, whether or not the corporation
would have power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
Section l2. The Board of Directors is authorized to enter into a
contract with any director, officer, employee, agent or fiduciary of
the corporation, or any person serving at the request of the
corporation as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other
enterprise or entity, including employee benefit plans, providing for
indemnification rights equivalent to or, if the Board of Directors so
determines, greater than those provided for in this Article XIII.
Section l3. The Board of Directors may, by resolution, extend the
provisions of this Article pertaining to indemnification and
advancement of expenses to any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by reason of the fact that he is or was or
has agreed to become an employee, agent or fiduciary of the
corporation, or is or was serving or has agreed to serve at the
request of the corporation as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or
other enterprise (notwithstanding that such individual may not be or
have been or have ever agreed to become a director or officer of the
corporation).
Section l4. The invalidity or unenforceability of any provision
of this Article shall not affect the validity or enforceability of the
remaining provisions of this Article.
ARTICLE XIV
AMENDMENTS
These By-Laws may be altered, amended or repealed and new or
other By-Laws may be made and adopted by the vote of a majority of the
total number of directors as at the time specified by the By-Laws, at
AMENDED any regular or special meeting of the Board of Directors, and without
10/2/87 prior notice of intent so to do.
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<PAGE> 1
EXHIBIT 4(a)
- --------------------------------------------------------------------------------
DEAN FOODS COMPANY
AND
HARRIS TRUST AND SAVINGS BANK
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF MAY 22 , 1998
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<PAGE> 2
Table of Contents
Page
Recitals Recitals.................................................... 1
Section 1. Certain Definitions..........................................1
Section 2. Appointment of Rights Agent..................................8
Section 3. Issuance of Rights Certificates..............................8
Section 4. Form of Rights Certificates.................................10
Section 5. Execution, Countersignature and Registration................10
Section 6. Transfer, Division, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates................................................11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights......................................................11
Section 8. Cancellation and Destruction of Rights Certificates.........13
Section 9. Reservation and Availability of Preferred Stock.............14
Section 10. Preferred Stock Record Date.................................15
Section 11. Adjustments to Purchase Price, Number of Shares or Number of
Rights......................................................15
Section 12. Certification of Adjustments................................27
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.......................................................27
Section 14. Fractional Rights and Fractional Shares.....................30
Section 15. Rights of Action............................................31
Section 16. Agreement of Rights Holders Concerning Transfer and Ownership
of Rights...................................................31
Section 17. Rights Holder Not Deemed a Stockholder......................31
Section 18. Concerning the Rights Agent.................................32
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Section 19. Merger or Consolidation or Change of Name of Rights Agent...32
Section 20. Duties of Rights Agent......................................33
Section 21. Change of Rights Agent......................................35
Section 22. Issuance of New Rights Certificates.........................36
Section 23. Redemption and Termination..................................36
Section 24. Notice of Certain Events....................................37
Section 25. Notices.....................................................38
Section 26. Supplements and Amendments..................................38
Section 27. Successors..................................................40
Section 28. Benefits of this Agreement..................................40
Section 29. Severability................................................40
Section 30. Governing Law...............................................40
Section 31. Counterparts................................................40
Section 32. Descriptive Headings........................................40
Section 33. Grammatical Construction....................................40
Exhibit A - Certificate of Designation, Preferences and Rights
of Junior Participating Preferred Stock, Series A
Exhibit B - Form of Rights Certificate
Exhibit C - Form of Summary of Rights
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<PAGE> 4
RIGHTS AGREEMENT
------------------------------
RIGHTS AGREEMENT, dated as of May 22, 1998, between Dean Foods
Company, a Delaware corporation (the "Company"), and Harris Trust and Savings
Bank (the "Rights Agent").
RECITALS
The Board of Directors of the Company has authorized and declared
the payment of a dividend of one preferred share purchase right (a "Right") for
each share of Common Stock (as defined in Section 1) outstanding on the Record
Date (as defined in Section 1) and has authorized the issuance of one Right for
each share of Common Stock issued after the Record Date and before the earliest
of the Distribution Date, the Redemption Date, the Exchange Date and the
Expiration Date (as such terms are defined in Section 1) and in certain cases
following the Distribution Date. Each Right will represent, as of the Record
Date, the right to purchase one one-thousandth of one share of Preferred Stock
(as defined in Section 1) upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth in this Agreement, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" means any Person who or which, together
with all Affiliates and Associates of such Person, is (or has previously been,
at any time after the date of this Agreement, whether or not such Person(s)
continues to be) the Beneficial Owner of 15% or more of the Common Stock
then outstanding (determined without taking into account any securities
exercisable or exchangeable for, or convertible into, Common Stock, other than
any such securities beneficially owned by the Acquiring Person and Affiliates
and Associates of such Person). However, "Acquiring Person" shall not include
any Exempt Person.
Notwithstanding the foregoing, a Person shall not become an
"Acquiring Person" solely as the result of (i) an acquisition of Common Stock by
the Company or any Subsidiary which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to 15% or more of the Common Stock then outstanding as determined
above, or (ii) such Person becoming the Beneficial Owner of 15% or more of the
Common Stock then outstanding as determined above solely as a result of an
Exempt Event; provided, however, that if a Person becomes the Beneficial Owner
of 15% or more of the Common Stock then outstanding as determined above solely
by reason of such a share acquisition by the Company or the occurrence of such
an Exempt Event and such Person shall, after becoming the
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<PAGE> 5
Beneficial Owner of such Common Stock, become the Beneficial Owner of any
additional shares of Common Stock by any means whatsoever (other than as a
result of the subsequent occurrence of an Exempt Event, a stock dividend or a
subdivision of the Common Stock into a larger number of shares or a similar
transaction), then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if a majority of the Continuing
Directors (as defined below) or, if there are then no Continuing Directors, a
majority of the Board of Directors of the Company determines in good faith that
a Person who would otherwise be an "Acquiring Person," as defined pursuant to
the foregoing provisions of this Section 1(a), has become such inadvertently,
and such Person divests as promptly as practicable a sufficient number of Common
Shares so that such Person would no longer be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this Section 1(a), then such Person
shall not be deemed to be an "Acquiring Person" for any purposes of this
Agreement. The determination of whether such Person's becoming an Acquiring
Person shall have been inadvertent and the determination of whether the
divestment of sufficient shares shall have been made as promptly as practicable
shall be made by a majority of the Continuing Directors or, if there are then no
Continuing Directors, a majority of the Board of Directors of the Company.
(b) "Adjustment Number" has the meaning set forth in, and shall be
calculated in accordance with, the Certificate of Designation, Preferences
and Rights of Junior Participating Preferred Stock, Series A, attached as
Exhibit A hereto.
(c) "Affiliate" has the meaning given to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on
the date of this Agreement; provided that, for purposes of this Agreement, the
term "Affiliate" shall not include any Person that is an Exempt Person.
(d) "Associate" has the meaning given to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on
the date of this Agreement; provided that, for purposes of this Agreement,
the term "Associate" shall not include any Person that is an Exempt Person.
(e) Except as provided below, a Person shall be deemed to be the
"Beneficial Owner" of, and shall be deemed to "beneficially own," any
securities:
(i) which such Person or any Affiliate or Associate of such
Person beneficially owns, directly or indirectly;
(ii) which such Person or any Affiliate or Associate of such
Person has, directly or indirectly, the right or obligation (whether
or not then exercisable or effective) to acquire pursuant to any
agreement, arrangement or understanding (whether or not in writing),
or upon the exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or otherwise;
provided,
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however, that a Person will not be deemed the Beneficial Owner of, or
to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any Affiliate
or Associate of such Person until such tendered securities are
accepted for purchase or exchange; and provided further, that prior to
the occurrence of a Triggering Event, a Person will not be deemed the
Beneficial Owner of, or to beneficially own, securities obtainable
upon exercise of the Rights;
(iii) which such Person or any Affiliate or Associate of such
Person has, directly or indirectly, the right (whether or not then
exercisable) to vote, or to direct the voting of, pursuant to any
agreement, arrangement or understanding (whether or not in writing);
provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security pursuant to this
clause (iii) if the agreement, arrangement or understanding to vote,
or to direct the voting of, such security (A) arises solely from a
revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
Exchange Act and applicable rules and regulations thereunder and (B)
is not also then reportable under Item 6 (or any comparable or
successor item) of Schedule 13D under the Exchange Act (or any
comparable or successor schedule or report);
(iv) which such Person or any Affiliate or Associate of such
Person has "beneficial ownership" of as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act
or any successor provision; or
(v) which are beneficially owned, directly or indirectly, by
any other Person or any Affiliate or Associate of such other Person
with whom such Person or any Affiliate or Associate of such Person has
any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in clause (iii) of this
Section 1(d)) or disposing of any securities of the Company.
Nothing in the preceding sentence shall cause a Person engaged in
business as an underwriter of securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such Person's participation
in good faith in a firm commitment underwriting until the expiration of 40 days
after the date of such acquisition.
Notwithstanding anything in this Agreement to the contrary, for
purposes of this Agreement, no Person shall be treated as the "Beneficial Owner"
of, or be deemed to "beneficially own," any securities solely by reason of the
ownership of those securities by any other Person that is an Exempt Person.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company,
shall mean the number of such securities then issued and outstanding
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<PAGE> 7
together with the number of such securities not then actually issued and
outstanding which such Person would be deemed to own beneficially under the
preceding provisions in this definition.
(f) "Business Combination" has the meaning set forth in Section
13 of this Agreement.
(g) "Business Day" means any day other than a Saturday, Sunday
or a day on which banking institutions in the State of New York or Illinois are
authorized or obligated by law or executive order to close.
(h) "Close of Business" on any given date means 5:00 p.m.,
Chicago time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m. Chicago time, on the next succeeding
Business Day.
(i) "Common Equivalent Share" has the meaning set forth in
Section 11(c)(2)(C) of this Agreement.
(j) "Common Share" has the meaning set forth in Section
11(c)(2)(C) of this Agreement.
(k) "Common Stock" when used with reference to the Company means
the Common Stock, par value $1.00 per share, of the Company (as the same may be
changed by reason of any combination, subdivision or reclassification of the
Common Stock). "Common Stock" when used with reference to any Person (other
than the Company prior to a Business Combination) means shares of capital stock
of such Person (if such Person is a corporation) of any class or series, or
units of equity interests in such Person (if such Person is not a corporation)
of any class or series, the terms of which shares or units do not limit (as a
fixed amount and not merely in proportional terms) the amount of dividends or
income payable or distributable on such shares or units or the amount of assets
distributable on such shares or units upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person and do not provide that
such shares or units are subject to redemption at the option of such Person, or
any shares of capital stock or units of equity interests into which the
foregoing shall be reclassified or changed; provided, however, that if at any
time there are more than one such class or series of capital stock of or equity
interests in such Person, "Common Stock" of such Person will include all such
classes and series substantially in the proportion of the total number of
shares or other units of each such class or series outstanding at such time.
(l) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board of
Directors of the Company, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person or a representative, designee or nominee of an
Acquiring Person or of any such Affiliate or Associate, and who was a member of
the Board of Directors of the Company on the date of this Agreement, and (ii)
any Person who becomes a member of the Board of Directors of the Company after
the date of this Agreement, while
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<PAGE> 8
such Person is a member of the Board of Directors of the Company, who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative, designee or nominee of an Acquiring Person or of any such
Affiliate or Associate, if such Person's nomination for election, or election,
to the Board of Directors of the Company is recommended or approved by a
majority of the Continuing Directors.
(m) "Current Market Price" per share of Common Stock, Common
Equivalent Share or any other security on any date is the average of the daily
closing prices per share of such Common Stock, Common Equivalent Share or any
other security for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date for the purpose of any computation under
this Agreement except computations made pursuant to Section 11(c)(3), and for
the Trading Day immediately prior to such date for the purpose of any
computation under Section 11(c)(3); provided, however, that in the event that
the Current Market Price per share of Common Stock, Common Equivalent Share or
any other security is determined during a period following the announcement by
the issuer of such Common Stock, Common Equivalent Share or any other security
of (i) a dividend or distribution on such Common Stock, Common Equivalent Share
or any other security other than a regular quarterly cash dividend, or (ii) any
subdivision, combination or reclassification of such Common Stock, Common
Equivalent Share or any other security, and prior to the expiration of 30
Trading Days after the "ex-dividend" date for such dividend or distribution or
the record date for such subdivision, combination or reclassification, then, and
in each such case, the "Current Market Price" must be appropriately adjusted to
take into account such dividend, distribution, subdivision, combination or
reclassification. The closing price for each Trading Day shall be the last sale
price, regular way, on such day, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, on such day,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange ("NYSE") or, if the Common Stock, Common Equivalent Share or any
other security is not listed or admitted to trading on the NYSE, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal United States national securities exchange on
which the Common Stock, Common Equivalent Share or any other security is listed
or admitted to trading or, if the Common Stock, Common Equivalent Share or any
other security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the Common
Stock, Common Equivalent Share or any other security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the security selected by a majority
of the Board of Directors of the Company or, if at the time of such selection
there is an Acquiring Person and at least one Continuing Director, by a majority
of the Continuing Directors. If no such market maker is making a market, the
fair market value of such shares on such day as determined in good faith by a
majority of the Board of Directors of the Company or, if at the time of such
determination there is an Acquiring Person, by a majority of the Continuing
Directors or, if there are then no Continuing Directors, by a nationally
recognized investment banking firm selected by the Board of Directors
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<PAGE> 9
of the Company having no current or former relationship with an Acquiring
Person, or by the Board of Directors of the issuer of such Common Stock, Common
Equivalent Share or any other security shall be used, which determination shall
be described in a statement filed with the Rights Agent and shall be binding and
conclusive for all purposes. The term "Trading Day" means a day on which the
principal United States national securities exchange on which the Common Stock,
Common Equivalent Share or any other security is listed or admitted to trading
is open for the transaction of business or, if the Common Stock, Common
Equivalent Share or any other security is not listed or admitted to trading on
any United States national securities exchange, but is traded in the
over-the-counter market, then any day for which the high bid and low asked
prices in the over-the-counter market are reported, or if the Common Stock,
Common Equivalent Share or any other security is not traded in the
over-the-counter market, then a Business Day. If the Preferred Stock is not
publicly traded, the "current per share market price" of the Preferred Stock
shall be conclusively deemed to be the current per share market price of the
Common Shares as determined pursuant to this Section 1(m) (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied by the Adjustment Number.
(n) "Distribution Date" means the earlier of (i) the tenth day
after the Stock Acquisition Date and (ii) the tenth Business Day after
commencement or public disclosure of an intention to commence (including,
without limitation, any such commencement or public disclosure which occurs
before or after the date of this Agreement and prior to the issuance of the
Rights) a tender offer or exchange offer by a Person if, after acquiring the
maximum number of securities sought pursuant to such offer, such Person, or any
Affiliate or Associate of such Person, would be an Acquiring Person. A majority
of the Continuing Directors or, if there are then no Continuing Directors, a
majority of the Board of Directors of the Company may defer the date set forth
in clause (ii) of the preceding sentence to a specified later date or to an
unspecified later date to be determined by a subsequent action or event.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute.
(p) "Exchange Date" means the time at which Rights are exchanged
pursuant to Section 11(c)(3).
(q) "Exempt Event" means with respect to any Person, the
acquisition by such Person of Beneficial Ownership of Common Stock solely
as a result of the occurrence of a Triggering Event and the effect of such
Triggering Event on the last proviso of clause (ii) of the definition of
Beneficial Owner, other than a Triggering Event in which such Person becomes an
Acquiring Person.
(r) "Exempt Person" means (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company or of any Subsidiary
of the Company, and (iv) any Person holding Common Stock for any such employee
benefit plan or for employees of the
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<PAGE> 10
Company or of any Subsidiary of the Company pursuant to the terms of any such
employee benefit plan.
(s) "Exercise Amount" means the amount payable by the holder as a
condition to the exercise of one Right. Until and unless it shall be adjusted in
accordance with this Agreement, the Exercise Amount shall be $200.
(t) "Expiration Date" means the Close of Business on August 10,
2008.
(u) "Person" means any individual, firm, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity, and shall include any "group" as
that term is used in Rule 13d-5(b) under the Exchange Act (or any successor
provision).
(v) "Preferred Stock" means the Company's Junior Participating
Preferred Stock, Series A, par value $1.00 per share, having the rights and
preferences set forth in the Certificate of Designation, Preferences and Rights
of Junior Participating Preferred Stock, Series A, attached hereto as Exhibit A.
(w) "Principal Party" means (i) in the case of any Business
Combination described in clause (i), (ii) or (iii) of the first sentence of
Section 13(a), (A) the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted or for which they are
exchanged in such Business Combination or, if there is more than one such
issuer, the issuer of the Common Stock which has the greatest aggregate market
value or (B) if no securities are so issued, the Person that survives or results
from the Business Combination or, if there is more than one such Person, the
Person the Common Stock of which has the greatest aggregate market value, and
(ii) in the case of any Business Combination described in clause (iv) of the
first sentence in Section 13(a), the Person that receives the greatest portion
of the assets or earning power transferred pursuant to such Business Combination
or, if each Person that is a party to such Business Combination receives the
same portion of the assets or earning power so transferred or if the Person
receiving the greatest portion of the assets or earning power cannot reasonably
be determined, whichever of such Persons is the issuer of the Common Stock which
has the greatest aggregate market value; provided, however, that in any such
case, if the Common Stock of such Person is not at such time and has not been
continuously over the preceding 12-month period registered under Section 12 of
the Exchange Act and such Person is a direct or indirect Subsidiary of one or
more other Persons, then (x) "Principal Party" refers to whichever of such other
Persons has Common Stock that is and has been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act; (y) if the
Common Stocks of two or more of such other Persons are and have been so
registered, "Principal Party" refers to whichever of such other Persons is the
issuer of the Common Stock which has the greatest aggregate market value; or
(z) if the Common Stock of none of such other Persons has been so registered,
"Principal Party" refers to whichever of such other Persons (other than an
individual) is the Person which has the equity securities with the greatest
aggregate market value. In case such Person is owned, directly or indirectly, by
a joint venture formed by two or more
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<PAGE> 11
Persons that are not owned, directly or indirectly, by the same Person, the
rules set forth above apply to each of the chains of ownership having an
interest in such joint venture as if such Person were a Subsidiary of both or
all of such joint venturers and the Principal Parties in each such chain shall
bear the obligations set forth in Section 13 in the same ratio as their direct
or indirect interests in such Person bear to the total of such interests.
(x) "Purchase Price:" Until the Trigger Date, the term Purchase
Price means the price at which one-one thousandth of a share of Preferred Stock
shall be purchasable with the Rights. The Purchase Price shall be $200 per one
one-thousandth of a share of Preferred Stock until and unless it shall be
adjusted pursuant to this Agreement. Immediately after the Trigger Date, the
term "Purchase Price" shall mean the price per Common Share for which Common
Shares shall be purchasable with the Rights. Thereafter the term "Purchase
Price" as applied with respect to each kind of stock or other property
purchasable with the Rights as a result of adjustments prescribed by this
Agreement shall mean the price at which each share of such stock or the smallest
available unit of such other property is purchasable with the Rights.
(y) "Record Date" means the Close of Business on August 10, 1998.
(z) "Redemption Date" means the time at which the Rights are
scheduled to be redeemed as provided in Section 23.
(aa) "Redemption Price" has the meaning given to such term in
Section 23.
(bb) "Securities Act" means the Securities Act of 1933, as
amended, and any successor statute.
(cc) "Stock Acquisition Date" means the first date of public
disclosure by the Company, an Acquiring Person or otherwise that an Acquiring
Person has become such.
(dd) "Subsidiary" has the meaning given to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
(ee) "Trigger Date" means the first date upon which a Person
becomes an Acquiring Person.
(ff) "Triggering Event" shall mean a Person becoming an
Acquiring Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
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<PAGE> 12
Section 3. Issuance of Rights Certificates.
(a) Until the Distribution Date: (i) the Rights shall be issued
in respect of and shall be evidenced by the certificates representing the
shares of Common Stock issued and outstanding on the Record Date and shares of
Common Stock issued or which become outstanding after the Record Date and prior
to the earliest of the Distribution Date, the Redemption Date, the Exchange
Date and the Expiration Date (which certificates for Common Stock shall be
deemed to also be certificates evidencing the Rights), and not by separate
certificates; (ii) the registered holders of such shares of Common Stock shall
also be the registered holders of the Rights associated with such shares; and
(iii) the Rights shall be transferable only in connection with the transfer of
shares of Common Stock, and the surrender for transfer of any certificate for
such shares of Common Stock shall also constitute the surrender for transfer of
the Rights associated with such shares. As soon as practicable after the
Company has notified the Rights Agent of the occurrence of the Distribution
Date, the Rights Agent, at the expense of the Company, shall (except as
otherwise provided in Section 7(e)) mail, by first-class, insured, postage
prepaid mail, to each record holder of the Common Stock as of the Close of
Business on the Distribution Date, as shown by the records of the Company, at
the address of such holder shown on such records, one or more certificates
evidencing the Rights ("Rights Certificates"), in substantially the form of
Exhibit B hereto, evidencing one Right (as adjusted from time to time pursuant
to this Agreement) for each share of Common Stock so held. From and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) Rights shall be issued in respect of all shares of Common
Stock which are issued or sold by the Company after the Record Date but prior
to the earliest of the Distribution Date, the Redemption Date, the Exchange
Date and the Expiration Date. In addition, in connection with the issuance or
sale of Common Stock by the Company following the Distribution Date and prior
to the earliest of the Redemption Date, the Exchange Date and the Expiration
Date, the Company shall, with respect to Common Stock so issued or sold
(i) pursuant to the exercise of stock options issued prior to the Distribution
Date or under any employee plan or arrangement created prior to the
Distribution Date, or (ii) upon the exercise, conversion or exchange of
securities issued by the Company prior to the Distribution Date, issue Rights
and Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale; provided, however, that (x) no such
Rights and Rights Certificate shall be issued if, and to the extent that, the
Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued and (y) no such Rights
and Rights Certificates shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Certificates issued after the Record Date representing shares of Common Stock
outstanding on the Record Date and shares of Common Stock issued after the
Record Date but prior to the earliest of the Distribution Date, the Redemption
Date, the Exchange Date and the Expiration Date shall have impressed, printed,
or written on, or otherwise affixed to them a legend substantially in the
following form:
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<PAGE> 13
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Dean Foods
Company and Harris Trust and Savings Bank as Rights Agent, dated as of
May 22, 1998 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of Dean Foods Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced
by this certificate. Dean Foods Company will mail to the holder of
this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances,
Rights that were, are or become beneficially owned by Acquiring
Persons or their Associates or Affiliates (as such terms are defined
in the Rights Agreement) may become null and void and the holder of
any of such Rights (including any subsequent holder) shall not have
any right to exercise such Rights.
(c) Notwithstanding any other provision of this Agreement, neither
the Company, the Rights Agent nor anyone else shall have any obligation to issue
any Rights Certificate to an Acquiring Person or to anyone else in whose hands
the Rights nominally represented by such Certificate shall be null and void
either initially or in connection with a request to register a transfer of
Rights represented by a certificate previously issued. Furthermore, neither the
Company, the Rights Agent nor anyone else shall be obligated to issue Rights
Certificates to any person making a tender offer which if consummated could
render such person an Acquiring Person or to any Affiliate or Associate of such
person until and unless the tender offer is withdrawn and the person shall have
established to the Company's reasonable satisfaction that such person does not
intend to become an Acquiring Person. The Company shall be entitled to require
any person claiming the right to receive a Rights Certificate to present such
evidence as the Company shall require in good faith to establish to the
Company's satisfaction that the Rights represented by that Certificate have not
become null and void under the provisions in Section 7(e) or that the Company is
not entitled to withhold such certificate under the provisions of the preceding
sentence.
Section 4. Form of Rights Certificates. The Rights Certificates (and the
form of election to purchase shares and form of assignment to be printed on the
reverse thereof) shall be in substantially the form of Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Rights may from
time to time be listed, or to conform to usage. Subject to the provisions of
this Agreement, the Rights Certificates, whenever issued, shall be dated as of
the Distribution Date, and on their face shall entitle the holders thereof to
purchase such number of shares of Preferred Stock as shall be set forth therein
at the Purchase Price set forth
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<PAGE> 14
therein, but the number and kind of such securities and the Purchase Price
shall be subject to adjustment as provided in this Agreement.
Section 5. Execution, Countersignature and Registration.
(a) Each Rights Certificate shall be executed on behalf of the
Company by the Company's Chief Executive Officer, President, Chief Financial
Officer, Treasurer or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Company's Secretary or an Assistant
Secretary, either manually or by facsimile signature. Each Rights Certificate
shall be countersigned by the Rights Agent either manually or, if permitted by
the Company, by facsimile signature and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company who shall have
signed a Rights Certificate shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificate nevertheless may be countersigned by the Rights Agent
and issued and delivered with the same force and effect as though the Person who
signed such Rights Certificate had not ceased to be such officer of the Company;
and any Rights Certificate may be signed on behalf of the Company by any Person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent shall keep or
cause to be kept, at its principal corporate trust office, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced by each Rights Certificate, and the
certificate number and the date of issuance of each Rights Certificate.
Section 6. Transfer, Division, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 3(c) and Section 14, at any
time after the Close of Business on the Distribution Date and at or prior to the
Close of Business on the earliest of the Redemption Date, the Exchange Date and
the Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, divided, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of shares of Preferred Stock (or following a Triggering Event or a Business
Combination, other securities, cash or other property, as the case may be) as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, divide, combine
or exchange any Rights Certificate shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, divided, combined or exchanged at the principal
corporate office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. As a condition to such
transfer, division,
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<PAGE> 15
combination or exchange, the Company may require payment by the surrendering
holder of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection therewith. Neither the Rights Agent nor the Company shall
be obligated to take any action whatsoever with respect to the transfer of any
such surrendered Rights Certificate until the registered holder shall have duly
completed and executed the form of assignment on the reverse side of such Rights
Certificate and shall have provided such additional evidence of the identity of
the Beneficial Owner (or such former or proposed Beneficial Owner) thereof or
such Beneficial Owner's Affiliates or Associates as the Company shall reasonably
request.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will make and deliver a new Rights Certificate of like
tenor to the Rights Agent for delivery to the registered owner in lieu of the
Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Each Right shall entitle (except as otherwise provided in this
Agreement) the registered holder thereof, upon the exercise thereof as provided
in this Agreement, to purchase, for the Purchase Price, at any time after the
Distribution Date and prior to the earliest of the Expiration Date, the Exchange
Date and the Redemption Date, one one-thousandth (1/1000) of a share of
Preferred Stock, subject to adjustment from time to time as provided in
Sections 11 and 13.
(b) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided in this Agreement) in
whole or in part (except that no fraction of a Right may be exercised) at any
time after the Distribution Date and prior to the earliest of the Expiration
Date, the Exchange Date and the Redemption Date, by surrendering the Rights
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal corporate trust office of
the Rights Agent, together with payment of the Exercise Amount for each Right
exercised.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Amount for each Right exercised and an amount equal to
any applicable transfer tax required to be paid by the surrendering holder
pursuant to Section 9(d), the Rights Agent shall, subject to the provisions of
this Agreement, thereupon promptly (i)(A) requisition from any transfer agent
for the Preferred Stock (or make available, if the Rights Agent is the transfer
agent for such shares) certificates for the Preferred Stock (or other
securities, as the case may be) to be purchased (and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests), or
(B) if the Company shall have elected to deposit the total number of shares of
Preferred Stock (or other securities, as the case may be) issuable upon exercise
of the Rights with a depositary agent, requisition from the depositary agent
depositary receipts representing such Preferred Stock (or other securities, as
the
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<PAGE> 16
case may be) as are to be purchased (in which case certificates for the
Preferred Stock (or other securities, as the case may be) represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company shall direct the depositary agent to comply with such request;
(ii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder; and (iii) if appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14 of this Agreement and, promptly after receipt thereof, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate. In the event that the Company is obligated to issue other
securities (including shares of Common Stock) of the Company, pay cash and/or
distribute other property pursuant to this Agreement, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Rights
Certificate or to his duly authorized assigns, subject to the provisions of
Section 3(c) and Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, any
Rights that are or were formerly beneficially owned on or after the earlier of
the Distribution Date and the Trigger Date by (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a direct or indirect
transferee of an Acquiring Person (or of an Associate or Affiliate of such
Acquiring Person) who becomes or becomes entitled to be a transferee after the
Acquiring Person becomes such, or (iii) a direct or indirect transferee of an
Acquiring Person (or of an Associate or Affiliate of such Acquiring Person) who
becomes or becomes entitled to be a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
direct or indirect transfer (whether or not for consideration) from the
Acquiring Person (or from an Associate or Affiliate of such Acquiring Person) to
holders of equity interests in such Acquiring Person (or to holders of equity
interests in any Associate or Affiliate of such Acquiring Person) or to any
Person with whom the Acquiring Person (or an Associate or Affiliate of such
Acquiring Person) has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a direct or indirect transfer which a
majority of the Continuing Directors or, if there are then no Continuing
Directors, a majority of the Board of Directors of the Company determines is
part of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e), shall, immediately upon the
occurrence of a Triggering Event and without any further action, be null and
void and no holder of such Rights shall have any rights whatsoever with respect
to such Rights whether under this Agreement or otherwise, provided, however,
that, in the case of transferees under clause (ii) or clause (iii) above, any
Rights beneficially owned by such transferee shall be null and void only if and
to the extent such Rights were formerly
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<PAGE> 17
beneficially owned by a Person who was, at the time such Person beneficially
owned such Rights, or who later became, an Acquiring Person or an Affiliate or
Associate of such Acquiring Person. The Company shall use all reasonable efforts
to ensure that the provisions of this Section 7(e) are complied with, but shall
have no liability to any holder of a Rights Certificate or to any other Person
as a result of the Company's failure to make, or any delay in making (including
any such failure or delay by the Continuing Directors or the Board of Directors
of the Company) any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to the registered holder of a Rights Certificate upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate contained
in the form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former or proposed
Beneficial Owner) thereof or the Affiliates or Associates of such Beneficial
Owner (or former or proposed Beneficial Owner) as the Company shall reasonably
request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, division,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
the provisions of this Agreement. The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available at all times out of its authorized and unissued
shares of Preferred Stock or its authorized and issued shares of Preferred Stock
held in its treasury (and, following the occurrence of a Triggering Event or a
Business Combination, out of its authorized and unissued shares of Common Stock
and/or other securities or out of its authorized and issued shares of Common
Stock and/or other securities held in its treasury) free from preemptive rights
or any right of first refusal, a sufficient number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, shares of Common Stock
and/or other securities) to permit the exercise in full of all Rights from time
to time outstanding.
(b) The Company further covenants and agrees, so long as the
Preferred Stock (and, following the occurrence of a Triggering Event or a
Business Combination, shares of Common
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<PAGE> 18
Stock and/or other securities) issuable upon the exercise of Rights may be
listed on any United States national securities exchange or quoted on any
automated quotation system, to use its best efforts to cause, from and
after the time that the Rights become exercisable, all such shares and/or other
securities reserved for such issuance to be listed on such exchange or quoted
on such automated quotation system upon official notice of issuance upon such
exercise.
(c) The Company further covenants and agrees that it will take all
such action as may be necessary to ensure that all shares of Preferred Stock
(and, following the occurrence of a Triggering Event or a Business Combination,
shares of Common Stock and/or other securities) delivered upon the exercise of
Rights shall, at the time of delivery of the certificates for such shares and/or
such other securities (subject to payment of the Purchase Price), be duly and
validly authorized and issued, fully paid, nonassessable, freely tradeable, not
subject to liens or encumbrances, and free of preemptive rights, rights of first
refusal or any other restrictions or limitations on the transfer or ownership
thereof, of any kind or nature whatsoever.
(d) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the original issuance or delivery of the Rights
Certificates or of any certificates for shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to (i) pay any transfer tax which
may be payable in respect of any transfer involved in the issuance or delivery
of any Rights Certificates or the issuance or delivery of any certificates for
shares of Preferred Stock (or Common Stock and/or other securities as the case
may be) to a Person other than, or in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
(ii) transfer or deliver any Rights Certificate or issue or deliver any
certificates for shares of Preferred Stock (or Common Stock and/or other
securities as the case may be) upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
(e) The Company shall (i) as soon as practicable following a
Triggering Event (or such earlier time following the Distribution Date as may be
required by law), prepare and file a registration statement on an appropriate
form under the Securities Act with respect to the securities purchasable upon
exercise of the Rights, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of (A) the
date as of which Rights are no longer exercisable for such securities and
(B) the Expiration Date. The Company shall also take such action as may be
necessary or appropriate under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercise of the
Rights. The Company may temporarily suspend, for a period of time not to exceed
90 days after the date of a Triggering Event, the exercisability of the Rights
in order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall make a public
announcement stating that the exercisability of the Rights has been
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<PAGE> 19
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect.
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Stock (or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (and/or such other securities, as the
case may be) on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are open.
Section 11. Adjustments to Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number and kind of securities, cash and other
property obtainable upon exercise of each Right and the number of Rights
outstanding shall be subject to adjustment from time to time as provided in this
Section 11.
(a) Adjustments Prior to Trigger Date:
(1) In the event the Company shall at any time after the date of
this Agreement and prior to the Trigger Date (i) pay a
dividend or make a distribution on the Common Stock payable
in shares of Common Stock, (ii) subdivide (by a stock split
or otherwise) the outstanding Common Stock into a larger
number of shares, (iii) combine (by a reverse stock split or
otherwise) the outstanding Common Stock into a smaller
number of shares (and any of the actions described in
clauses (i), (ii) or (iii) are herein called a "stock
split") then:
(A) The number of Rights outstanding shall be adjusted
so that after giving effect to such stock split the
number of Rights outstanding shall be exactly equal to
the number of shares of Common Stock outstanding (and
so that prior to the Distribution Date one Right shall
be associated with every share of Common Stock
outstanding after such Stock Split);
(B) The Exercise Amount shall be adjusted by multiplying
the Exercise Amount in effect immediately prior to such
stock split by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding
immediately
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<PAGE> 20
prior to such stock split and the denominator of which
shall be the number of shares of Common Stock
outstanding immediately after such stock split;
(C) The Purchase Price for each one one-thousandth of
a share of Preferred Stock shall not change; and
(D) The fraction of a share of Preferred Stock purchasable
with each Right immediately after such stock split
shall be equal to the product derived by multiplying
the fraction of a share of Preferred Stock purchasable
with each Right immediately prior to such stock split
times the fraction cited in clause (B) above.
The following example illustrates the intended operation of the
preceding provisions. Assume that initially, each Right would
(when and if it became exercisable) entitle its holder to
purchase one one-thousandth of a share of Preferred Stock for
$200 (and accordingly the initial Exercise Amount and the initial
Purchase Price per one one-thousandth of a share of Preferred
Stock are each $200). Assume further that prior to the
Distribution Date, the Company splits its Common Stock two for
one (thereby doubling the number of shares of Common Stock
outstanding). The intended operation of the preceding adjustment
provisions is that: (i) the number of Rights outstanding would
also double; (ii) one Right would be associated with each share
of Common Stock outstanding after the stock split; (iii) each
Right would have an Exercise Amount equal to $100; (iv) each
Right will entitle its holder (when and if the Right becomes
exercisable) to purchase one two-thousandth of one share of
Preferred Stock; and (v) the Purchase Price for each one
one-thousandth of a share of Preferred Stock would remain $200 so
that the price for each one two-thousandth of a share of
Preferred Stock purchasable with each Right would be $100.
(2) Adjustment in Rights Certificates: In the event the
Distribution Date shall occur and the Company shall issue
separate certificates to represent the Rights, the following
provisions shall thereafter apply:
(A) In the event the number of Rights outstanding are
increased pursuant to Section 11(a)(1), the Company
shall as promptly as reasonably possible distribute to
the record holders of the Rights on the record date for
the stock split giving rise to the increase in the
number of Rights certificates representing the
additional Rights issuable by reason of such stock
split.
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<PAGE> 21
(B) In the event the number of Rights outstanding are
reduced pursuant to Section 11(a) by reason of the
occurrence of a reverse stock split or its
functional equivalent, then each Rights certificate
outstanding prior to such reverse stock split shall
thereafter represent the reduced number of Rights into
which the Rights represented by such certificate
immediately prior to such reverse stock split shall
have been converted by reason of the occurrence of that
reverse stock split.
(b) Basic Triggering Event Adjustments: Upon the first occurrence of
a Triggering Event (except as otherwise provided in this Agreement), each Right
shall be changed so that immediately after the Triggering Event:
(1) it shall no longer be exercisable for Preferred Stock
but rather shall be exercisable for Common Stock;
(2) the number of shares of Common Stock which may be acquired
upon exercise of each Right shall be equal to the result
obtained by dividing (x) 50% of the Current Market Price
per share of Common Stock on the date of the occurrence of
the Triggering Event into (y) the Exercise Amount in effect
immediately prior to the Triggering Event; and
(3) the Purchase Price per Common Share purchasable with each
Right shall be equal to 50% of the Current Market Price per
share of Common Stock on the date of the occurrence of the
Triggering Event.
(c) Other Post Triggering Event Adjustments.
(1) At any time after the occurrence of a Triggering Event, a
majority of the Continuing Directors or, if there are then
no Continuing Directors, a majority of the Board of
Directors of the Company shall have the right to reduce
the Exercise Amount by such amount as such majority shall
desire provided that (i) the reduction shall not result in a
Purchase Price lower than the par value per share of the
shares purchasable with the Rights, and (ii) a majority of
the Continuing Directors or, if there are then no
Continuing Directors, a majority of the Board of Directors
of the Company shall determine that such reduction is not
contrary to the interests of holders of Rights (other than
any Acquiring Person or any other Person in whose hands the
Rights are void), including, without limitation, such
Directors shall in good faith determine that the value of
the Rights (to holders other than any Acquiring Person or
any other Person in whose hands the
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<PAGE> 22
Rights are void) immediately after any such reduction will
be at least equal to or greater than the value of such
Rights immediately prior to the public announcement of such
reduction. The term "Reduction Amount" means the amount of
the reduction in the Exercise Amount which shall be made in
accordance with the preceding sentence. In the event any
reduction shall actually be made in accordance with this
paragraph, then the number of Common Shares purchasable with
each Right shall be reduced to an amount having a Current
Value equal to the remainder derived by subtracting the
Reduction Amount from the Current Value as of the date of
such adjustment of the number of Common Shares purchasable
with each Right immediately prior to such adjustment. For
purposes of the preceding sentence, (i) the "Current Value"
of a particular number of Common Shares shall be equal to
the product derived by multiplying that particular number
times the greater of (x) the Current Market Price
(calculated as prescribed in Section 1) or (y) the closing
price per share (calculated as prescribed in Section 1) for
the Common Shares on the Trading Day immediately prior to
the day on which the adjustment shall be made and (ii) "the
number of Common Shares purchasable with each Right
immediately prior to such adjustment" shall be the number
after giving effect to the adjustment to be made on the
Trigger Date pursuant to Section 11(b) and any other
adjustments which shall have been prescribed by this
Agreement for the period from the Trigger Date to the date
upon which the adjustment shall be made under this Section
11(c)(1). Upon making each adjustment under this Section
11(c)(1), the Purchase Price for each of the Common Shares
purchasable after making such adjustment shall be reduced to
the quotient derived by dividing the Exercise Amount in
effect after such reduction by the number of Common Shares
purchasable with each Right after giving effect to the
reduction prescribed by this Section 11(c)(1).
Notwithstanding the foregoing, the right to reduce the
Exercise Amount pursuant to this Section 11(c)(1) shall not
be exercised at any time during which the exchange option
set forth in Section 11(c)(3) is exercisable, unless a
majority of the Continuing Directors (or, if there are then
no Continuing Directors, a majority of the Board of
Directors of the Company) in good faith determines that
exercise of the Section 11(c)(1) right to reduce the
Exchange Amount would provide greater value to the holders
of the Rights (other than any Acquiring Person or any other
Person in whose hands the Rights are void) than exercise of
the Section 11(c)(3) exchange option.
(2) Use of Common Equivalent Shares: In the event that the
number of shares of Common Stock which are authorized by
the Company's
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<PAGE> 23
certificate of incorporation, but which are not outstanding
or reserved for issuance for purposes other than upon
exercise of the Rights ("Available Common Stock") is not
sufficient to permit the exercise in full of the Rights
after the adjustment made in accordance with Section 11(b),
then:
(A) the Company shall first reduce the Exercise Amount
pursuant to Section 11(c)(1) by a Reduction Amount
equal to the lesser of (i) the amount which shall
be sufficient to reduce the amount of Common Stock
purchasable with the Rights (after giving effect to the
adjustment prescribed by Section 11(c)(1)) to a number
of shares not in excess of the Available Common Stock
or (ii) the maximum amount permitted by Section
11(c)(1).
(B) If the amount of the adjustment required by the
preceding sentence shall not be sufficient to reduce
the amount of Common Stock purchasable with the
Rights to a number of shares not in excess of the
Available Common Stock, then (i) first, the Available
Common Stock shall be allocated among the outstanding
Rights so that each Right shall entitle its holder to
purchase the same quantity of Available Common Stock
and (ii) second, each Right shall additionally entitle
its holder to (x) purchase a fraction of a share of
Preferred Stock which when multiplied times the
Adjustment Number then in effect under the terms of the
Preferred Stock produces a product equal to the
remainder derived by subtracting the number of shares
of Common Stock purchasable with each Right after the
allocation specified in clause (i) from the number of
shares of Common Stock which would have been
purchasable with such Right if the Corporation had had
a sufficient number of shares of Common Stock to permit
the Right to be exercisable entirely for Common Stock
(such remainder being referred to herein as the
"Unallocated Shares") or (y) receive cash in an amount
equal to the Current Value of the Unallocated Shares
(calculated as prescribed in Section 11(c)(1)) as of
the date of substitution of cash for such Shares, or
(z) receive any combination of the foregoing so long as
each Right entitles its holder to receive the same
amount of fractional shares of Preferred Stock and
cash.
(C) The fraction of a share of Preferred Stock equal to the
reciprocal of the Adjustment Number in effect at the
time the
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<PAGE> 24
term shall be applied shall be deemed to be a "Common
Equivalent Share" for purposes of this Agreement. The
Company shall take all actions reasonably necessary so
that as nearly as possible each Common Equivalent Share
represents substantially the same interest in the
Company, has the same dividend rate, and has other
characteristics as similar as possible to one share of
Common Stock. The term "Common Share" whenever it is
used in this Agreement means both a share of Common
Stock and a Common Equivalent Share.
(D) If circumstances after the initial Trigger Date
require the use of Common Equivalent Shares, the
Company shall use its best efforts to obtain
authorization to issue a sufficient quantity of Common
Stock to permit Common Stock to be issued upon exercise
of the Rights and/or any exercise of the exchange right
under the following Section. Each time the Company's
authorized Common Stock shall be increased, the
adjustment required under the preceding paragraphs
shall be redone to maximize the amount of Common Stock
issuable upon exercise of the Rights. To the extent
excess authorized Common Stock remains after the
readjustment required by the preceding sentence, the
holder of any outstanding Common Equivalent Share shall
have the right at any time to require the Company to
exchange that share for a share of Common Stock.
(E) In no event, however, shall the Company be
obligated to reserve any Common Stock for issuance
under the Rights until and unless a Triggering Event
actually occurs.
(F) In no event shall the Company issue any Preferred
Stock except for issuances caused by exercise of
the Rights and except for issuances required by this
Section 11(c) (2) or Section 11(d)(6).
(3) Exchange Option:
(A) At any time after the occurrence of a Triggering
Event and prior to (i) the time any Person (other
than an Exempt Person), together with all Affiliates
and Associates of such Person, becomes the Beneficial
Owner of 50% or more of the Common Stock then
outstanding and (ii) the occurrence of a
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<PAGE> 25
Business Combination, a majority of the Continuing
Directors or, if there are then no Continuing
Directors, a majority of the Board of Directors of the
Company may, at their option, cause the Company to
exchange for all or part of the then-outstanding and
exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section
7(e) hereof), shares of Common Stock at an exchange
ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after
the date of this Agreement (such exchange ratio being
referred to herein as the "Exchange Ratio"). Any
partial exchange shall be effected on a pro rata basis
based on the number of Rights (other than Rights which
have become void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.
(B) Immediately upon the action of a majority of the
Continuing Directors or, if there are then no
Continuing Directors, a majority of the Board of
Directors of the Company ordering the exchange of any
particular Rights pursuant to this Section
11(c)(3) and without any further action and without any
notice, the right to exercise those particular Rights
shall terminate and the only right a holder shall have
thereafter with respect to any of those particular
Rights shall be to receive the number of shares of
Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such
exchange and in addition, the Company shall promptly
mail a notice of any such exchange to all of the
holders of such Rights in accordance with Section 25 of
this Agreement; provided, however, that the failure to
give, any delay in giving or any defect in, such notice
shall not affect the validity of such exchange. Each
such notice of exchange will state the method by which
the exchange of the Common Stock for Rights will be
effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. The Company
shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of
such fractional shares of Common Stock, the Company
shall pay to the registered holders of the Rights
Certificates with regard to which such fractional
shares of Common Stock would otherwise be issuable an
amount in
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<PAGE> 26
cash equal to the product derived by multiplying (x)
the subject fraction, by (y) the last sale price of the
Company's Common Stock on the fifth Trading Day
following the public announcement of the exchange by
the Company, or, in case no such sale takes place on
such day, the average of the closing bid and asked
prices on such day, in either case on a when issued
basis (taking into account the exchange), as reported
in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the NYSE (or, if the Company's Common Stock
is not so listed or traded, then as determined in the
manner provided under the definition of "Current Market
Price," adjusted to take into account the exchange). In
determining whether any particular holder shall be
obligated to receive cash in lieu of a fractional
share, the holder shall be entitled to have all Rights
beneficially owned by such holder aggregated so that
only one fractional share shall be attributable to all
the Rights so beneficially owned.
(d) Antidilution Adjustments After the Trigger Date:
(1) In the event the Company shall at any time after the
Trigger Date effect any stock split with respect to its
Common Stock, then the Purchase Price to be in effect after
such stock split shall be determined by multiplying the
Purchase Price in effect immediately prior to such action by
a fraction, the numerator of which shall be the number of
Common Shares outstanding immediately prior to such stock
split and the denominator of which shall be the number of
Common Shares outstanding immediately after such stock
split.
(2) In case the Company shall at any time after the Trigger
Date fix a record date for the making of a distribution to
holders of Common Stock (including any such distribution
made in connection with a reclassification of the Common
Stock or a consolidation or merger in which the Company is
the surviving corporation) of securities (other than Common
Stock and rights, options or warrants referred to in Section
11(d)(3)), cash (other than a regular periodic cash dividend
at an annual rate not in excess of (x) 125% of the annual
rate of the regular cash dividend paid on the Common Stock
during the immediately preceding fiscal year or (y) in the
event that a regular cash dividend was not paid on the
Common Stock during such preceding fiscal year, 5% of the
Current Market Price of the Common Stock on the date such
regular cash dividend was first declared),
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<PAGE> 27
property, evidences of indebtedness or assets, the Purchase
Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price per
share of Common Stock on such record date, less the fair
market value (as determined in good faith by a majority of
the Continuing Directors or, if at the time of such
determination there are no Continuing Directors, by a
nationally recognized investment banking firm selected by
the Board of Directors of the Company having no current or
former relationship with an Acquiring Person, whose
determination shall be described in a statement filed with
the Rights Agent) of such securities, cash, property,
evidences of indebtedness or assets to be so distributed in
respect of one share of Common Stock, and the denominator of
which shall be such Current Market Price per share of Common
Stock on such record date. Such adjustments shall be made
successively whenever such a record date is fixed; and in
the event that such distribution is not made following such
adjustment, the Purchase Price shall be readjusted to be the
Purchase Price which would have been in effect if such
record date had not been fixed.
(3) If the Company shall at any time after the Trigger Date
fix a record date for the issuance of rights, options or
warrants to holders of Common Shares entitling them to
subscribe for or purchase Common Shares (or securities
convertible into Common Shares) at a price per Common Share
(or, in the case of a convertible security, having a
conversion price per Common Share) less than the Current
Market Price per share of Common Stock on such record date
and requiring that the conversion or purchase right be
exercised within 45 calendar days after such record date,
the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of
Common Shares outstanding on such record date, plus the
number of Common Shares which the aggregate exercise and/or
conversion price for the total number of Common Shares which
are obtainable upon exercise and/or conversion of such
rights, options, warrants or convertible securities would
purchase at such Current Market Price, and the denominator
of which shall be the number of shares of Common Shares
outstanding on such record date, plus the number of
additional Common Shares which may be obtained upon exercise
and/or conversion of such rights, options, warrants or
convertible securities. In case such subscription price may
be paid in a consideration part or
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<PAGE> 28
all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith
by a majority of the Continuing Directors or, if at the time
of such determination there are no Continuing Directors, by
a nationally recognized investment banking firm selected by
the Board of Directors of the Company having no current or
former relationship with an Acquiring Person, whose
determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent.
Common Shares owned by or held for the account of the
Company or any Subsidiary of the Company shall not be deemed
outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or
warrants are not issued following such adjustment, the
Purchase Price shall be readjusted to be the Purchase Price
which would have been in effect if such record date had not
been fixed.
(4) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in
its sole discretion shall determine to be advisable in order
that any combination or subdivision of the Common Stock,
issuance wholly for cash of any Common Stock at less than
the Current Market Price, issuance wholly for cash of Common
Stock or securities which by their terms are convertible
into or exchangeable or exercisable for Common Shares, stock
dividends or issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the
Company to holders of its Common Shares, shall not be
taxable to such stockholders.
(5) After each adjustment of the Purchase Price pursuant to
any of subsections (1) - (4) immediately above, the number
of Common Shares purchasable with each Right shall be
adjusted to the quotient derived by dividing the Purchase
Price as constituted after giving effect to such adjustment
into the Exercise Amount.
(6) The Company shall not take any of the actions described in
any of subsections (1) - (3) above at a time when any Common
Equivalent Shares are outstanding unless the Company shall
take substantively identical actions with respect to the
outstanding Common Stock and outstanding Common Equivalent
Shares. Conversely, the Company shall not take any actions
with respect to outstanding Common
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<PAGE> 29
Equivalent Shares analogous to those described in any of
subsections (1) - (3) above unless the Company shall take
substantively identical actions with respect to the
outstanding Common Stock and outstanding Common Equivalent
Shares.
(e) Recapitalizations.
(1) In the event that after the Trigger Date, the Company
shall issue any securities in a reclassification of the
Common Stock or in any other recapitalization (including any
such reclassification in connection with a consolidation or
merger in which the Company is the surviving corporation),
then in each such event:
(A) the property purchasable with each Right shall be
adjusted to be whatever the owner of that Right would
have owned by reason of both (i) the exercise of
that Right immediately prior to such recapitalization
or reclassification and (ii) the effect of that
recapitalization or reclassification on the property
assumed to have been received in such exercise.
(B) The Exercise Amount shall be allocated among the
shares of stock and/or other units of property for
which the Right shall be exercisable after giving
effect to the adjustment cited in clause (A) based on
the fair market value of such property to determine the
Purchase Price for each such share and/or unit.
(2) To illustrate the intended operation of this provision,
assume that: (i) immediately prior to a reclassification,
each Right were exercisable for 10 Common Shares and the
Exercise Amount were $200 (resulting in a purchase price
of $20 per Common Share); (ii) as a result of the
Reclassification, each outstanding Common Share is
reclassified into two New Common Shares and one Series B
Share; and (iii) immediately after the reclassification, the
market value of each New Common Share was $30 and the market
value of each Series B share was $15. Immediately after the
assumed reclassification, each Right would be exercisable
for 20 New Common Shares at a purchase price of $8 per share
and ten Series B Shares at a purchase price of $4 per share.
(f) In the event a Triggering Event shall occur, or in the event
there shall be a recapitalization or reclassification pursuant to Section 11(e),
or in the event there shall be any merger or other action which shall cause a
change in the property purchasable with the Rights under Section 13, or in the
event there shall be any other occurrence or development which shall cause the
property
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<PAGE> 30
purchasable with the Rights to consist in whole or in part of anything
other than Preferred Stock, then and in any such event:
(1) The certificates representing the Rights shall
automatically be deemed to represent the adjusted terms of
the Rights without the need to replace such certificates.
The Company shall thereafter make arrangements for the
production of certificates representing the revised terms of
the Rights resulting from such adjustment and shall use such
certificates to represent Rights for which new certificates
shall be issuable by reason of a transfer of record
ownership or by reason of a request by the existing record
owner for a replacement certificate representing the revised
terms of the Rights.
(2) The principles underlying the adjustment provisions in
this Section 11 and elsewhere in this Agreement shall be
applied to fairly and proportionately adjust the shares
or other property purchasable with the Rights and the
purchase price for each share or other property unit
purchasable with the Rights after giving effect to the
adjustments required by reason of such event to reflect any
subsequent capital changes or other events. Without limiting
by implication the generality of the preceding sentence, the
provisions of Sections 7, 9, 10, 12, 13, 14 and 24 of this
Agreement which related to the Preferred Stock shall after
the occurrence of any such event apply in a substantively
identical manner to the shares or other property purchasable
with the Rights after giving effect to such event.
(g) Before taking any action that would cause an adjustment reducing
the Purchase Price per share at which shares are purchasable with the Rights
below the par value of those shares, the Company shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares at such
adjusted Purchase Price.
(h) In any case in which this Section 11 shall require that an
adjustment be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date the shares of Common
Stock and other securities, cash or property of the Company, if any, issuable
upon such exercise over and above the shares of Common Stock and other
securities, cash or property of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or other securities, cash or property upon the
occurrence of the event requiring such adjustment.
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<PAGE> 31
(i) The Company covenants and agrees that on and after the Trigger
Date neither it nor any combination of it and its subsidiaries shall
(i) consolidate with any other Person, or (ii) merge with or into any other
Person or (iii) directly or indirectly sell, lease, or otherwise transfer or
dispose of (in one transaction or a series of related transactions) assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries taken as a whole to any other Person if (A) at the
time of or immediately after such consolidation, merger, sale, lease, transfer,
or disposition there are any rights, warrants, securities or other instruments
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights,
(B) prior to, simultaneously with or immediately after such consolidation,
merger, sale, lease, transfer, or disposition the stockholders (or equity
holders) of the Person who constitutes, or would constitute, the Principal Party
in such transaction shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates or Associates or (C) the form or
nature of organization of the Principal Party would preclude or limit the
exercisability of the Rights. The Company shall not consummate any such
consolidation, merger, sale, lease, transfer, or disposition unless prior
thereto the Company and such other Person shall have executed and delivered to
the Rights Agent a supplemental agreement evidencing compliance with this
Section 11(i).
(j) The Company covenants and agrees that, after the Trigger Date it
will not, except as permitted by Section 11(c)(3) of this Agreement, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will, directly or indirectly,
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights.
Section 12. Certification of Adjustments. Whenever an adjustment is made
as provided in Sections 11 and 13, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the stock then purchasable with the Rights a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate (or, if no Rights Certificates have been issued, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 25.
Notwithstanding the foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment. Any adjustment to be made pursuant to
Sections 11 and 13 of this Agreement shall be effective as of the date of the
event giving rise to such adjustment. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment therein contained, and
shall not be obligated or responsible for calculating any adjustment, nor shall
it be deemed to have knowledge of such an adjustment unless and until it shall
have received such certificate.
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Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) A "Business Combination" shall be deemed to occur in the event
that, in or following a Triggering Event, (i) the Company shall, directly or
indirectly, consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction that complies with
Section 11(i) and Section 11(j) of this Agreement) in a transaction in which the
Company is not the continuing, resulting or surviving corporation of such merger
or consolidation, (ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(i) and Section 11(j) of this
Agreement) shall, directly or indirectly, consolidate with the Company, or shall
merge with and into the Company, in a transaction in which the Company is the
continuing, resulting or surviving corporation of such merger or consolidation
and, in connection with such merger or consolidation, all or part of the Common
Stock shall be changed (including, without limitation, any conversion into or
exchange for securities of the Company or of any other Person, cash or any other
property), (iii) the Company shall, directly or indirectly, effect a share
exchange in which all or part of the Common Stock shall be changed (including,
without limitation, any conversion into or exchange for securities of any other
Person, cash or any other property) or (iv) the Company shall, directly or
indirectly, sell, lease, exchange, mortgage, pledge or otherwise transfer or
dispose of (or one or more of its Subsidiaries shall directly or indirectly
sell, lease, exchange, mortgage, pledge or otherwise transfer or dispose of), in
one transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person (other than the Company or
any of its Subsidiaries in one or more transactions each and all of which comply
with Section 11(i) and Section 11(j) of this Agreement).
In the event of a Business Combination, proper provision shall be
made so that each holder of a Right (except as otherwise provided in this
Agreement) shall thereafter have the right to receive, upon the exercise of each
Right, such number of shares of Common Stock of the Principal Party as shall be
equal to the result obtained by dividing the Exercise Amount in effect prior to
the Business Combination by 50% of the Current Market Price per share of the
Common Stock of such Principal Party immediately prior to the consummation of
such Business Combination. All shares of Common Stock of any Person for which
any Right may be exercised after consummation of a Business Combination as
provided in this Section 13(a) shall, when issued upon exercise thereof in
accordance with this Agreement, be duly and validly authorized and issued, fully
paid, nonassessable, freely tradeable, not subject to liens or encumbrances, and
free of preemptive rights, rights of first refusal or any other restrictions or
limitations on the transfer or ownership thereof of any kind or nature
whatsoever. The Purchase Price per share for such Common Stock immediately after
such Business Combination shall be equal to 50% of the Current Market Price per
share of the Common Stock of such Principal Party immediately prior to the
consummation of such Business Combination.
(b) After consummation of any Business Combination, (i) the
Principal Party shall be liable for, and shall assume, by virtue of such
Business Combination and without the necessity of any further act, all the
obligations and duties of the Company pursuant to this
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<PAGE> 33
Agreement, (ii) the term "Company" as used in this Agreement shall thereafter be
deemed to refer to such Principal Party and (iii) such Principal Party shall
take all steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock in accordance with Section 9) in connection
with such Business Combination as necessary to ensure that the provisions of
this Agreement shall thereafter be applicable, as nearly as reasonably may be,
in relation to the shares of its Common Stock thereafter deliverable upon the
exercise of the Rights.
(c) The Company shall not consummate any Business Combination unless
prior thereto (i) the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance (other than shares reserved for issuance pursuant to this Agreement to
the holders of Rights) to permit the exercise in full of the Rights in
accordance with this Section 13, (ii) the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the fulfillment of the Principal Party's obligations and the terms
as set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable on or after the date of such Business Combination,
the Principal Party, at its own expense, shall (A) prepare and file, if
necessary, a registration statement on an appropriate form under the Securities
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights, (B) use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date, (C) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act, (D) use its best efforts to qualify or
register the Rights and the securities purchasable upon exercise of the Rights
under the state securities or "blue sky" laws of such jurisdictions as may be
necessary or appropriate, (E) use its best efforts to list the Rights and the
securities purchasable upon exercise of the Rights on a United States national
securities exchange and (F) obtain waivers of any rights of first refusal or
preemptive rights in respect of the Common Stock of the Principal Party subject
to purchase upon exercise of outstanding Rights, (iii) the Company and the
Principal Party shall have furnished to the Rights Agent an opinion of
independent counsel stating that such supplemental agreement is a legal, valid
and binding agreement of the Principal Party enforceable against the Principal
Party in accordance with its terms, and (iv) the Company and the Principal Party
shall have filed with the Rights Agent a certificate of a nationally recognized
firm of independent accountants setting forth the number of shares of Common
Stock of such issuer which may be purchased upon the exercise of each Right
after the consummation of such Business Combination.
(d) The provisions of this Section 13 shall similarly apply to
successive Business Combinations. In the event a Business Combination shall be
consummated at any time after the occurrence of a Triggering Event, the Rights
which have not theretofore been exercised shall thereafter be exercisable for
the consideration and in the manner described in Section 13(a). The provisions
of Section 11(b) of this Agreement shall be applicable to events which occur
after a Business Combination.
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<PAGE> 34
(e) Notwithstanding any other provision of this Agreement, no
adjustment to the number or kind of shares (or fractions of a share), cash or
other property for which a Right is exercisable or the number of Rights
outstanding or associated with each share of Common Stock or any similar or
other adjustment shall be made or be effective if such adjustment would have the
effect of reducing or limiting the benefits the holders of the Rights would have
had absent such adjustment, including, without limitation, the benefits under
Sections 11 and 13, unless the terms of this Agreement are amended so as to
preserve such benefits, provided that this paragraph shall not prevent any
change prior to the Trigger Date permitted by Section 26(a) and provided that
this Section 13(e) shall not be deemed to limit or impair the right to engage in
an exchange pursuant to Section 11(c)(3).
(f) The Company covenants and agrees that it shall not effect any
Business Combination if at the time of, or immediately after such Business
Combination, there are any rights, options, warrants or other instruments
outstanding which would diminish or otherwise eliminate the benefits intended to
be afforded by the Rights.
(g) Without limiting the generality of this Section 13, in the event
the nature of the organization of any Principal Party shall preclude or limit
the acquisition of Common Stock of such Principal Party upon exercise of the
Rights as required by Section 13(a) as a result of a Business Combination, it
shall be a condition to such Business Combination that such Principal Party
shall take such steps (including, but not limited to, a reorganization) as may
be necessary to ensure that the benefits intended to be derived under this
Section 13 upon the exercise of the Rights are assured to the holders thereof.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractional Rights or
to distribute Rights Certificates which evidence fractional Rights.
(b) The Company shall permit the issuance and trading of Preferred
Stock in fractional shares such that the smallest fractional share tradeable at
any particular time shall equal the reciprocal of the Adjustment Number in
effect at that particular time. The Company shall not be required to issue
fractions of shares of Preferred Stock (other than fractions which are integral
multiples of the reciprocal of the Adjustment Number) upon exercise of the
Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of the
reciprocal of the Adjustment Number). Fractions of shares of Preferred Stock
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Stock. In lieu
of fractional shares of Preferred Stock that are not integral multiples of the
reciprocal of the Adjustment Number, the Company may at its option (i) issue
scrip or warrants in registered form (either represented by a certificate or
uncertificated) or in bearer form (represented by a certificate)
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<PAGE> 35
which shall entitle the holder to receive the reciprocal of the Adjustment
Number of one share of Preferred Stock upon the surrender of such scrip or
warrants aggregating the reciprocal of the Adjustment Number of one share of
Preferred Stock, or (ii) pay to the registered holders of Rights Certificates at
the time such Rights Certificates are exercised as provided in this Agreement an
amount in cash equal to the same fraction of the relevant closing price of a
share of Preferred Stock. For purposes of this Section 14(b), the relevant
closing price of a share of Preferred Stock shall be the closing price of a
share of Preferred Stock (as determined pursuant to the second sentence of the
definition of "Current Market Price" in Section 1) for the Trading Day
immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of shares
of Common Stock or Common Equivalent Shares or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of such fractional shares of
Common Stock, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional shares of Common Stock would
otherwise be issuable an amount in cash equal to the product derived by
multiplying (x) the subject fraction, by (y) the closing price of a share of
Common Stock (as determined pursuant to the second sentence of the definition of
"Current Market Price" in Section 1) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by his acceptance thereof expressly waives
any right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as otherwise provided in this Agreement).
Section 15. Rights of Action. Except as otherwise provided, all rights of
action in respect of this Agreement are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, any
registered holders of associated Common Stock); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, any share of associated
Common Stock), without the consent of the Rights Agent or of the holder of any
other Right, may, on his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his rights pursuant to this Agreement.
Without limiting the foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and will be
entitled to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any Person subject
to, this Agreement.
Section 16. Agreement of Rights Holders Concerning Transfer and Ownership
of Rights. Every holder of a Right by accepting the same consents and agrees
with the Company and the Rights Agent and with every other holder of a Right
that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
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<PAGE> 36
(b) after the Distribution Date, the Rights Certificates will be
transferable on the registry books of the Rights Agent only if surrendered at
the principal corporate trust office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person
in whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificate or the associated Common Stock certificate
made by anyone other than the Company, the transfer agent for the stock
purchasable with such Right or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to
the contrary.
Section 17. Rights Holder Not Deemed a Stockholder. No holder, as such, of
any Rights Certificate shall be entitled to vote or to receive dividends or
distributions or shall be deemed for any purpose the holder of Preferred Stock
or any other securities, cash or other property which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained in this Agreement or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company, including, without limitation, any right (i) to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, (ii) to give or withhold consent to any corporate action,
(iii) to receive notice of meetings or other actions affecting stockholders
(except as provided in Section 24), (iv) to receive dividends, distributions or
subscription rights, (v) to institute, as a holder of Preferred Stock or other
securities issuable on exercise of the Rights represented by any Rights
Certificate, any derivative action on behalf of the Company, or otherwise, until
and only to the extent that the Right or Rights evidenced by such Rights
Certificate shall have been exercised in accordance with the provisions of this
Agreement.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith, willful misconduct or breach of this Agreement on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises. The indemnity provided for herein shall survive the expiration of the
Rights, the termination of this Agreement, and the resignation or removal of the
Rights Agent. The costs and expenses of enforcing this right of indemnification
shall also be paid by the Company.
The Rights Agent may conclusively rely upon and shall be protected
and shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this Agreement in
reliance upon any Rights Certificate or certificate for Preferred
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<PAGE> 37
Stock or Common Stock or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement or other paper or document
reasonably believed by it to be genuine and to be signed, executed and, when
necessary, verified or acknowledged, by the proper Person or Persons.
Notwithstanding anything in this Agreement to the contrary, in no
event shall the Rights Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Rights Agent has been advised of the likelihood of such
loss or damage and regardless of the form of the action.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any document or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. In case at the time
such successor Rights Agent shall succeed to the agency created by this
Agreement any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificate so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificate either in the name of the predecessor Rights Agent or in the name of
the successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions and no implied duties or obligations shall be read into this
Agreement against the Rights Agent, by all of which the Company and the holders
of Rights Certificates, by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, the Rights
Agent may consult with legal counsel (who may be legal counsel for the Company),
and the opinion of such
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counsel shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or the determination of Current
Market Price) be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be specifically prescribed in this Agreement) may be deemed to
be conclusively proved and established by a certificate signed by the Chairman,
the Chief Executive Officer, the President, the Chief Financial Officer, the
General Counsel, the Treasurer, any Vice President or the Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for the
negligence, bad faith, willful misconduct or breach of this Agreement by it or
its attorneys or agent.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery of this
Agreement (except the due execution and delivery of this Agreement by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Rights Certificate; nor shall it be responsible for any change or
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13 or 23 or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after actual
notice of any change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock, Common Stock or
other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock, Common Stock or
other securities will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performance by the Rights
Agent of the provisions of this Agreement.
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<PAGE> 39
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman, the Chief Executive Officer, the President, the Chief Financial
Officer, the General Counsel, the Treasurer, any Vice President or the Secretary
of the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than ten Business Days after the date
any officer of the Company actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application subject to the proposed action or omission and/or specifying the
action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though the Rights Agent were not
serving as such under this Agreement. Nothing in this Agreement shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
(k) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(l) The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement or the designation of
any Person as an Acquiring Person, Affiliate or Associate)
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<PAGE> 40
under this Agreement unless and until the Rights Agent shall be specifically
notified in writing by the Company of such fact, event or determination.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon notice of 30 days in writing mailed to the Company and to each transfer
agent of the Common Stock or Preferred Stock by registered or certified mail
and, at the expense of the Company, to the holders of the Rights Certificates by
either (i) first-class mail or (ii) by disclosure in a periodic report of the
Company required to be filed under the Exchange Act, any permitted report under
the Exchange Act, a press release of the Company or in any proxy or other
communication of the Company with its stockholders. The Company may remove the
Rights Agent or any successor Rights Agent upon notice of 30 days in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock or Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by either (i)
first-class mail or (ii) by disclosure in a periodic report of the Company
required to be filed under the Exchange Act, any permitted report under the
Exchange Act, a press release of the Company or in any proxy or other
communication of the Company with its stockholders. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. Notwithstanding any other
provision of this Agreement, in no event shall the resignation or removal of a
Rights Agent be effective until a successor Rights Agent shall have been
appointed and have accepted such appointment. If the Company shall fail to make
such appointment within a period of 30 days after such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by any holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then the incumbent Rights Agent or the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing business
under the laws of the United States or of the State of Illinois or the State of
New York (or of any other state of the United States so long as such
corporation is authorized to conduct a banking, corporate trust or stock
transfer business in the State of Illinois or the State of New York) in good
standing, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for such purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock; the Company shall also either (i) mail a notice thereof in
writing to the registered holders of the Rights Certificates or (ii) make a
disclosure with respect thereto in a periodic report of the Company required to
be filed under the Exchange Act, any permitted report under the Exchange Act, a
press release of the
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<PAGE> 41
Company or in any proxy or other communication of the Company with its
stockholders. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights Certificates to the contrary,
the Company may, at its option, issue new Rights Certificates evidencing Rights
in such form as may be approved by a majority of the Board of Directors of the
Company or, if there is then an Acquiring Person and at least one Continuing
Director, by a majority of the Continuing Directors to reflect any adjustment or
change in the Purchase Price per share and the number or kind or class of
securities, cash or other property purchasable under the Rights Certificates
made in accordance with the provisions of this Agreement.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Trigger Date and (ii) the Expiration Date,
redeem all but not less than all of the then-outstanding Rights at a redemption
price of $.01 per Right (the "Redemption Price") appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date of this Agreement. The Company may, at its option, pay the Redemption
Price in cash, shares (including fractional shares) of Common Stock (based on
the Current Market Price of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors. The
redemption of the Rights by the Board of Directors of the Company may be made
effective at such time, on such basis and with such conditions as the Board of
Directors of the Company in its sole discretion may establish.
(b) At the time and date of effectiveness set forth in any
resolution of the Board of Directors of the Company ordering the redemption of
the Rights, without any further action and without any further notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price; provided, however,
that such resolution of the Board of Directors of the Company may be revoked,
rescinded or otherwise modified at any time prior to the time and date of
effectiveness set forth in such resolution, in which event the right to exercise
will not terminate at the time and date originally set for such termination by
the Board of Directors of the Company. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
The Company shall also give notice of such redemption to the Rights Agent. The
Company may elect to give notice of such redemption to the holders of the
then-outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the issuance of Rights Certificates, on the registry books of the transfer
agent for the Common Stock. Any notice which is mailed in the manner provided in
this Agreement shall be deemed given, whether or not the holder receives the
notice. In connection with any redemption permitted under this Section 23, the
Company may, at its option, discharge all of its obligations with respect to the
Rights by (i) issuing a press release
- 38 -
<PAGE> 42
announcing the manner of redemption of the Rights and (ii) mailing payment of
the Redemption Price to the registered holders of the Rights at their last
addresses as they appear on the registry books of the Rights Agent or, prior to
the issuance of the Rights Certificates, on the registry books of the transfer
agent for the Common Stock, and upon such action, all outstanding Rights
Certificates shall be null and void without any further action by the Company.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23, and other than in connection with
the purchase of shares of Common Stock prior to the earlier of the Distribution
Date and the Expiration Date.
Section 24. Notice of Certain Events. In case the Company, on or after the
Distribution Date, shall propose to (a) pay any dividend payable in stock of any
class to the holders of its Common Shares or to make any other distribution to
the holders of its Common Shares (other than a regular periodic cash dividend at
an annual rate not in excess of 125% of the annualized rate of the cash dividend
paid on the Common Shares during the immediately preceding fiscal year), or
(b) offer to the holders of its Common Shares rights, options or warrants to
subscribe for or to purchase any additional shares of Common Shares or shares of
stock of any class or any other securities, rights or options, or (c) effect any
reclassification of the Common Shares (other than a reclassification involving
only the subdivision of outstanding shares of Common Shares, a change in the par
value of such Common Shares or a change from par value to no par value), or
(d) directly or indirectly effect any consolidation or merger into or with, or
effect any sale, lease, exchange, or other transfer or disposition (or to permit
one or more of its Subsidiaries to effect any sale, lease, exchange or other
transfer or disposition), in one transaction or a series of related
transactions, of more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, or (e) effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Right, in accordance with Section 25,
a notice of such proposed action, which shall specify any record date for the
purposes of such stock dividend or distribution of rights, or the date on which
such reclassification, consolidation, merger, sale, lease, exchange, transfer,
disposition, liquidation, dissolution or winding up is to take place and if such
holders will or may participate therein, the date of participation therein by
the holders of Common Shares, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (a) or (b) above
at least 20 days prior to the record date for determining holders of the Common
Shares for purposes of such action, and in the case of any such other action, at
least 20 days prior to the date of the taking of such proposed action or the
date of participation therein, if any, by the holders of Common Shares,
whichever shall be the earlier. The failure to give notice as required by this
Section 24 or any defect therein shall not affect the legality or validity of
the action taken by the Company or the vote upon any such action.
In case any Triggering Event or Business Combination shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, in accordance with Section 25, notice of
the occurrence of such Triggering Event or Business Combination, which shall
specify the Triggering Event or Business Combination and include a description
of the consequences of such event to holders of Rights under Section 11 or 13.
- 39 -
<PAGE> 43
Section 25. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Dean Foods Company
3600 N. River Road
Franklin Park, Illinois 60131
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sent by registered or certified
mail, and shall be deemed given upon receipt, addressed (until another address
is filed in writing with the Company) as follows:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company (or, if no Rights Certificates have been issued, if sent by
first-class mail, postage prepaid, addressed to each holder of a certificate
representing shares of Common Stock at the address of such holder as shown on
the Company's Common Stock registry books).
Section 26. Supplements and Amendments.
(a) At any time prior to the Trigger Date, a majority of the Board
of Directors of the Company may, and the Rights Agent shall, if so directed,
supplement or amend any provision of this Agreement, including, without
limitation, the Beneficial Ownership percent as set forth in Section 1 at which
a Person becomes an Acquiring Person and the definition of Exempt Person as
set forth in Section 1 to include any Person in addition to the Persons
described therein, without the approval of any holders of Rights.
(b) From and after the Trigger Date, a majority of the Board of
Directors of the Company may, and the Rights Agent shall, if so directed, amend
this Agreement without the approval of any holders of Rights Certificates (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained in
this Agreement which may be defective or inconsistent with any other provision
of this Agreement or (iii) to change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable, so long as such
change or supplement is not prohibited by Section 11(j) or Section 13(f) and
would not otherwise adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or any other Person in whose hands
the rights are void under the provisions of Section 7(e)).
- 40 -
<PAGE> 44
(c) Except as otherwise provided in Section 26(b):
(1) The Board of Directors of the Company (or, where
specifically provided for in this Agreement, the Continuing
Directors) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and
powers specifically granted to the Board of Directors of the
Company or the Company, or as may be necessary or advisable
in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the
provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the
administration of this Agreement (including a determination
to redeem or not redeem the Rights, to exchange or not
exchange the Rights for Common Stock or other securities of
the Company, or to amend or supplement this Agreement). No
such action, interpretation or determination (or omission
with respect to the foregoing) shall subject the Board of
Directors of the Company or the Continuing Directors to any
liability to the holders of the Rights.
(2) Immediately upon the action of a majority of the Board
of Directors of the Company providing for any amendment or
supplement pursuant to this Section 26, and without any
further action and without notice, such amendment or
supplement shall be deemed effective. Promptly following the
adoption of any amendment or supplement pursuant to this
Section 26, the Company shall deliver to the Rights Agent a
copy, certified by the Secretary or any Assistant Secretary
of the Company, of resolutions of a majority of the Board of
Directors of the Company adopting such amendment or
supplement. Upon such delivery, the amendment or supplement
shall be administered by the Rights Agent as part of this
Agreement in accordance with the terms of this Agreement, as
so amended or supplemented.
(d) Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment that changes the rights and duties of the Rights Agent
under this Agreement will be effective against the Rights Agent without the
execution of such supplement or amendment by the Rights Agent.
Section 27. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
- 41 -
<PAGE> 45
Section 28. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of Rights any legal or equitable right, remedy or claim under
this Agreement; and this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Rights.
Section 29. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid and enforceable
under applicable law, but if any provision of this Agreement shall be held to be
prohibited by or unenforceable under applicable law, (i) such provision shall be
applied to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and (ii) all other provisions of this
Agreement shall remain in full force and effect. No rule of strict construction,
rule resolving ambiguities against the person who drafted the provision giving
rise to such ambiguities, or other such rule of interpretation shall be applied
against any party with respect to this Agreement.
Section 30. Governing Law. This Agreement and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the internal laws of Delaware applicable to contracts to be made
and performed entirely within Delaware, except as to the rights and obligations
of the Rights Agent, which shall be governed by and construed in accordance with
the laws of the State of Illinois.
Section 31. Counterparts. This Agreement may be executed in counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and both such counterparts shall together constitute but one and the
same instrument.
Section 32. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions of this
Agreement.
Section 33. Grammatical Construction. Throughout this Agreement, where
such meanings would be appropriate, (a) any pronouns used herein shall include
the corresponding masculine, feminine or neuter forms (e.g., references to "he"
shall also include "she" and "it" and references to "who" and "whom" shall also
include "which") and (b) the plural form of nouns and pronouns shall include the
singular and vice-versa.
- 42 -
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
DEAN FOODS COMPANY
By________________________________
Title:
HARRIS TRUST AND SAVINGS BANK
as Rights Agent
By________________________________
Title:
- 43 -
<PAGE> 1
EXHIBIT 10(i)
CONFORMED COPY
$500,000,000
CREDIT AGREEMENT
dated as of March 31, 1998
among
Dean Foods Company,
The Banks Listed Herein,
The Chase Manhattan Bank,
as Administrative Agent,
NationsBank, N.A.,
as Syndication Agent,
and
Wachovia Bank, N.A.,
as Documentation Agent
------------------------------------------------------------------------
The First National Bank of Chicago,
Harris Trust & Savings Bank,
The Northern Trust Company,
Bank of America NT&SA
and
Mellon Bank, N.A.,
as Co-Agents
Chase Securities Inc.
as Arranger
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
ARTICLE 1
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions...................................................1
SECTION 1.02. Accounting Terms and Determinations..........................13
SECTION 1.03. Types of Borrowings..........................................13
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend..........................................14
SECTION 2.02. Notice of Committed Borrowing................................14
SECTION 2.03. Competitive Bid Borrowings...................................15
SECTION 2.04. Notice to Banks; Funding of Loans............................19
SECTION 2.05. Notes........................................................19
SECTION 2.06. Maturity of Loans............................................20
SECTION 2.07. Interest Rates...............................................20
SECTION 2.08. Fees.........................................................22
SECTION 2.09. Optional Termination or Reduction of Commitments.............22
SECTION 2.10. Method of Electing Interest Rates............................22
SECTION 2.11. Mandatory Termination of Commitments.........................24
SECTION 2.12. Optional Prepayments.........................................24
SECTION 2.13. General Provisions as to Payments............................24
SECTION 2.14. Funding Losses...............................................25
SECTION 2.15. Regulation D Compensation....................................25
SECTION 2.16. Computations of Interest and Fees............................26
SECTION 2.17. Change of Control............................................26
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing......................................................27
SECTION 3.02. Borrowings...................................................28
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power................................28
</TABLE>
<PAGE> 3
<TABLE>
PAGE
<S> <C> <C>
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention................................................29
SECTION 4.03. Binding Effect...............................................29
SECTION 4.04. Financial Information........................................29
SECTION 4.05. Litigation...................................................30
SECTION 4.06. Compliance with Laws; ERISA..................................30
SECTION 4.07. Environmental and Health Matters.............................30
SECTION 4.08. Taxes........................................................31
SECTION 4.09. Subsidiaries.................................................31
SECTION 4.10. Regulatory Restrictions on Borrowing.........................31
SECTION 4.11. Liens........................................................31
SECTION 4.12. Full Disclosure..............................................31
ARTICLE 5
COVENANTS
SECTION 5.01. Information..................................................32
SECTION 5.02. Payment of Obligations.......................................34
SECTION 5.03. Maintenance of Property; Insurance...........................34
SECTION 5.04. Conduct of Business and Maintenance of Existence.............34
SECTION 5.05. Compliance with Laws.........................................35
SECTION 5.06. Inspection of Property, Books and Records....................35
SECTION 5.07. Mergers and Sales of Assets..................................35
SECTION 5.08. Use of Proceeds..............................................35
SECTION 5.09. Negative Pledge..............................................35
SECTION 5.10. Adjusted Debt to Adjusted Total Capital......................36
SECTION 5.11. Fixed Charge Coverage Ratio..................................37
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default............................................37
SECTION 6.02. Notice of Default............................................39
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization................................39
SECTION 7.02. Agents and Affiliates........................................39
SECTION 7.03. Action by Administrative Agent...............................39
SECTION 7.04. Consultation with Experts....................................40
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 7.05. Liability of Agents..........................................40
SECTION 7.06. Indemnification..............................................40
SECTION 7.07. Credit Decision..............................................40
SECTION 7.08. Successor Administrative Agent...............................41
SECTION 7.09. Administrative Agent's Fee...................................41
SECTION 7.10. Other Agents.................................................41
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.....41
SECTION 8.02. Illegality...................................................42
SECTION 8.03. Increased Cost and Reduced Return............................43
SECTION 8.04. Taxes........................................................44
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans........................................46
SECTION 8.06. Substitution of Bank.........................................46
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices......................................................47
SECTION 9.02. No Waivers...................................................47
SECTION 9.03. Expenses; Indemnification....................................47
SECTION 9.04. Sharing of Set-Offs..........................................48
SECTION 9.05. Amendments and Waivers.......................................48
SECTION 9.06. Confidentiality..............................................49
SECTION 9.07. Successors and Assigns.......................................49
SECTION 9.08. Collateral...................................................51
SECTION 9.09. Governing Law; Submission to Jurisdiction....................51
SECTION 9.10. Counterparts; Integration; Effectiveness.....................51
SECTION 9.11. WAIVER OF JURY TRIAL.........................................51
</TABLE>
iii
<PAGE> 5
PRICING SCHEDULE
COMMITMENT SCHEDULE
EXHIBIT A - Form of Revolving Credit Note
EXHIBIT B - Form of Competitive Bid Note
EXHIBIT C - Form of Competitive Bid Request
EXHIBIT D - Form of Invitation for Competitive Bid
EXHIBIT E - Form of Competitive Bid
EXHIBIT F - Form of Opinion of Counsel for the Borrower
EXHIBIT G - Form of Opinion of Davis Polk & Wardwell, Special Counsel
for the Administrative Agent
EXHIBIT H - Form of Assignment and Assumption Agreement
iv
<PAGE> 6
AGREEMENT dated as of March 31, 1998, among DEAN FOODS COMPANY, the BANKS
listed on the signature pages hereof, THE CHASE MANHATTAN BANK, as
Administrative Agent, NATIONSBANK, N.A., as Syndication Agent, and WACHOVIA
BANK, N.A., as Documentation Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Competitive Bids setting
forth Competitive Bid Absolute Rates pursuant to Section 2.03.
"ADJUSTED CONSOLIDATED DEBT" means, at any date, (a) Consolidated Debt for
Borrowed Money minus (b) in the case of any determination thereof made with
respect to a date during the two fiscal quarters of the Borrower ending most
nearly on November 30 and February 28, respectively, of any Fiscal Year, and to
the extent otherwise included in the calculation of Consolidated Debt for
Borrowed Money, the Inventory Financing Amount, all determined as of such date.
For purposes of this definition, "Inventory Financing Amount" means at any date
the outstanding amount of Consolidated Debt for Borrowed Money with a stated
maturity of not more than 270 days borrowed for the purpose of financing
purchases of inventory by the Borrower and its Consolidated Subsidiaries, but in
no event greater than the lesser of (A) the amount (if any) by which (I) the
inventory of the Borrower and its Consolidated Subsidiaries as of the then-most
recent Monthly Accounting Date occurring more than 15 Domestic Business Days
prior to such date exceeds (II) the amount of such inventory as of the Monthly
Accounting Date occurring most nearly on the then-most recent June 30th and (B)
$125,000,000.
"ADMINISTRATIVE AGENT" means The Chase Manhattan Bank in its capacity as
administrative agent for the Banks hereunder, and its successors in such
capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
<PAGE> 7
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Bank.
"AGENTS" means, collectively, the Administrative Agent, the Documentation
Agent and the Syndication Agent, and "Agent" means any of the foregoing.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of
its Competitive Bid Loans, its Competitive Bid Lending Office.
"ASSIGNEE" has the meaning set forth in Section 9.07(c).
"BANK" means each bank listed on the signature pages hereof, each Assignee
which becomes a Bank pursuant to Section 9.07(c), and their respective
successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher of (i)
the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds
Rate for such day.
"BASE RATE LOAN" means (i) a Committed Loan which bears interest at the
Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount
which was a Base Rate Loan immediately before it became overdue.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"BORROWER" means Dean Foods Company, a Delaware corporation, and its
successors.
"BORROWER'S 1997 FORM 10-K" means the Borrower's annual report on Form 10-K
for 1997, as filed with the Securities and Exchange Commission pursuant to the
Exchange Act.
"BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on Form
10-Q for the quarter ended November 23, 1997, as filed with the Securities and
Exchange Commission pursuant to the Exchange Act.
2
<PAGE> 8
"BORROWING" has the meaning set forth in Section 1.03.
"CHANGE OF CONTROL" has the meaning set forth in Section 2.17.
"CLOSING DATE" means the date on or after the Effective Date on which the
conditions specified in Section 3.01 shall first have been satisfied.
"COMMITMENT" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the Commitment Schedule, or, in the case of
any Assignee that becomes a Bank after the date hereof, as may be set forth in
the relevant Assignment and Assumption Agreement executed pursuant to Section
9.07(c), as such amount may be reduced from time to time pursuant to Section
2.09.
"COMMITMENT SCHEDULE" means the Commitment Schedule attached hereto and
identified as such.
"COMMITMENT TERMINATION DATE" means March 31, 2003, or, if such day is not
a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case the
Commitment Termination Date shall be the next preceding Euro- Dollar Business
Day.
"COMMITTED LOAN" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Committed
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"COMPETITIVE BID" means an offer by a Bank to make a Competitive Bid Loan
in accordance with Section 2.03.
"COMPETITIVE BID ABSOLUTE RATE" has the meaning set forth in Section
2.03(d).
"COMPETITIVE BID ABSOLUTE RATE LOAN" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"COMPETITIVE BID LENDING OFFICE" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Competitive Bid Lending Office by notice to the
Borrower and the Administrative Agent; provided that any Bank may from time
3
<PAGE> 9
to time by notice to the Borrower and the Administrative Agent designate
separate Competitive Bid Lending Offices for its Competitive Bid LIBOR Loans, on
the one hand, and its Competitive Bid Absolute Rate Loans, on the other hand, in
which case all references herein to the Competitive Bid Lending Office of such
Bank shall be deemed to refer to either or both of such offices, as the context
may require.
"COMPETITIVE BID LIBOR LOAN" means a loan to be made by a Bank pursuant to
a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01).
"COMPETITIVE BID LOAN" means a Competitive Bid LIBOR Loan or a Competitive
Bid Absolute Rate Loan.
"COMPETITIVE BID MARGIN" has the meaning set forth in Section
2.03(d)(ii)(C).
"COMPETITIVE BID NOTES" means promissory notes of the Borrower,
substantially in the form of Exhibit B hereto, evidencing the obligation of the
Borrower to repay the Competitive Bid Loans, and "Competitive Bid Note" means
any one of such promissory notes issued hereunder.
"CONSOLIDATED DEBT FOR BORROWED MONEY" means at any date Debt of the
Borrower and its Consolidated Subsidiaries of the type referred to in clauses
(i), (ii) and (iv) of the definition of Debt.
"CONSOLIDATED EBIT" means, for any fiscal period, Consolidated Net Income
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of (i) Consolidated Interest
Expense and (ii) income tax expense.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest expense
of the Borrower and its Consolidated Subsidiaries determined on a consolidated
basis for such period.
"CONSOLIDATED NET INCOME" means, for any fiscal period, the net income of
the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis for such period, exclusive of the effect of any extraordinary gain or
loss.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements if such statements were prepared as of such
date.
4
<PAGE> 10
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument (and, for purposes
of Section 5.09 and the definitions of Material Debt and Material Financial
Obligations, all contingent obligations of such nature), (vi) all Debt secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vii) all Debt of others Guaranteed by such
Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"DOCUMENTATION AGENT" means Wachovia Bank, N.A., in its capacity as
documentation agent for the Banks hereunder, and its successors in such
capacity.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 9.10.
5
<PAGE> 11
"ENVIRONMENTAL AND HEALTH LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
human health and safety (including without limitation occupational safety and
health standards), the environment, the effect of the environment on human
health or to emissions, discharges or releases of pollutants, contaminants,
Hazardous Substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Administrative Agent.
"EURO-DOLLAR LOAN" means (i) a Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-
Dollar Loan immediately before it became overdue.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance with
the Pricing Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to Section
2.07(b) on the basis of a London Interbank Offered Rate.
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"EURO-DOLLAR 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 (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING CREDIT AGREEMENT" means the $300,000,000 Amended and Restated
Credit Agreement dated as of February 4, 1997 among the Borrower, the banks
listed therein, Harris Trust & Savings Bank, as Co-Agent, and Morgan Guaranty
Trust Company of New York, as Agent.
"FACILITY FEE RATE" means a rate per annum determined in accordance with
the Pricing Schedule.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day; provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to The Chase Manhattan Bank on such day on
such transactions as determined by the Administrative Agent.
"FIXED RATE LOANS" means Euro-Dollar Loans or Competitive Bid Loans
(excluding Competitive Bid LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01) or both.
"FISCAL YEAR" means a fiscal year of the Borrower, and "Fiscal Year" for
any particular year means the fiscal year of the Borrower ended or ending during
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the specified calendar year (for example, "Fiscal Year 1997" means the fiscal
year of the Borrower ending most nearly on May 25, 1997).
"GROUP OF LOANS" means at any time a group of Loans consisting of (i) all
Committed Loans which are Base Rate Loans at such time or (ii) all Euro- Dollar
Loans having the same Interest Period at such time; provided that, if a
Committed Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Article 8, such Loan shall be included in the same Group or
Groups of Loans from time to time as it would have been in if it had not been so
converted or made.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "GUARANTEE"
used as a verb has a corresponding meaning.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INTEREST PERIOD" means:
(1) with respect to each Euro-Dollar Loan, the period commencing on the
date of borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending one,
two, three or six months thereafter, as the Borrower may elect in the applicable
notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business
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<PAGE> 14
Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Commitment
Termination Date shall end on the Commitment Termination Date;
(2) with respect to each Competitive Bid LIBOR Loan, the period commencing
on the date of borrowing specified in the applicable Notice of Borrowing and
ending such whole number of months thereafter as the Borrower may elect in
accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Commitment
Termination Date shall end on the Commitment Termination Date; and
(3) with respect to each Competitive Bid Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 10 days)
as the Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
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<PAGE> 15
(b) any Interest Period which would otherwise end after the Commitment
Termination Date shall end on the Commitment Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LIBOR AUCTION" means a solicitation of Competitive Bids setting forth
Competitive Bid Margins based on the London Interbank Offered Rate pursuant to
Section 2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"LOAN" means a Base Rate Loan, a Euro-Dollar Loan or a Competitive Bid Loan
and "Loans" means Base Rate Loans, Euro-Dollar Loans or Competitive Bid Loans or
any combination of the foregoing.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.07(b).
"MATERIAL DEBT" means Debt (other than the Notes) of the Borrower and/or
one or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal or face amount exceeding $20,000,000.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of Debt
and/or payment obligations in respect of Derivatives Obligations of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, exceeding in the aggregate $20,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $5,000,000.
"MONTHLY ACCOUNTING DATE" means each Sunday occurring most nearly on the
last day of a calendar month (whether before or after such last day),
representing the last day of each four-week or five-week accounting period of
the Borrower.
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"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"NOTES" means the Competitive Bid Notes and the Revolving Credit Notes, and
"Note" means any one of such notes.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing or a Notice of
Competitive Bid Borrowing.
"NOTICE OF COMMITTED BORROWING" has the meaning set forth in Section 2.02.
"NOTICE OF COMPETITIVE BID BORROWING" has the meaning set forth in Section
2.03(f).
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.10.
"OTHER TAXES" has the meaning set forth in Section 8.04.
"PARENT" means, with respect to any Bank, any Person controlling such Bank.
"PARTICIPANT" has the meaning set forth in Section 9.07(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was
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<PAGE> 17
at such time a member of the ERISA Group for employees of any Person which was
at such time a member of the ERISA Group.
"PRICING SCHEDULE" means the Pricing Schedule attached hereto and
identified as such.
"PRIME RATE" means the rate of interest publicly announced by The Chase
Manhattan Bank in New York City from time to time as its Prime Rate.
"QUARTERLY DATE" means each March 31, June 30, September 30 and December
31.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 51% of the aggregate unpaid
principal amount of the Loans.
"REVOLVING CREDIT NOTES" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the obligation of the
Borrower to repay the Committed Loans, and "Revolving Credit Note" means any one
of such promissory notes issued hereunder.
"REVOLVING CREDIT PERIOD" means the period from and including the Closing
Date to but excluding the Commitment Termination Date.
"SUBSIDIARY" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"SYNDICATION AGENT" means NationsBank, N.A., in its capacity as syndication
agent for the Banks hereunder, and its successors in such capacity.
"TAXES" has the meaning set forth in Section 8.04.
"TELERATE PAGE 3750" has the meaning set forth in Section 2.07(b).
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan,
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determined on a plan termination basis using the assumptions prescribed by the
PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value
of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
"VOTING STOCK" has the meaning set forth in Section 2.17.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Borrower notifies the Administrative Agent
that the Borrower wishes to amend any covenant in Article 5 to eliminate the
effect of any change in generally accepted accounting principles on the
operation of such covenant (or if the Administrative Agent notifies the Borrower
that the Required Banks wish to amend Article 5 for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article 2 on the same date, all of which Loans are of the same type (subject to
Article 8) and have the same initial Interest Period. Borrowings are classified
for purposes of this Agreement either by reference to the pricing of Loans
comprising such Borrowing (e.g., a "FIXED RATE BORROWING" is a Euro-Dollar
Borrowing or a Competitive Bid Borrowing (excluding any such Borrowing
consisting of Competitive Bid LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01), and a "EURO-DOLLAR BORROWING" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2
under which participation therein is determined (i.e., a "COMMITTED BORROWING"
IS A
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Borrowing under Section 2.01 in which all Banks participate in proportion to
their Commitments, while a "Competitive Bid Borrowing" is a Borrowing under
Section 2.03 in which the Bank participants are determined on the basis of their
bids in accordance therewith).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit Period, each
Bank severally agrees, on the terms and conditions set forth in this Agreement,
to make loans to the Borrower pursuant to this Section from time to time in
amounts such that the aggregate principal amount of Committed Loans by such Bank
at any one time outstanding shall not exceed the amount of its Commitment. Each
Borrowing under this Section shall be in an aggregate principal amount of
$10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing
may be in the aggregate amount available in accordance with Section 3.02) and
shall be made from the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow under this
Section, prepay Loans to the extent permitted by Section 2.12 and reborrow at
any time during the Revolving Credit Period under this Section.
SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give the
Administrative Agent notice (a "Notice of Committed Borrowing") not later than
11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing and
(y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day in
the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate or a Euro-Dollar Rate; and
(d) in the case of a Euro-Dollar Borrowing, the duration of the Interest
Period applicable thereto, subject to the provisions of the definition of
Interest Period.
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SECTION 2.03. Competitive Bid Borrowings. (a) The Competitive Bid Option.
In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may,
as set forth in this Section, request the Banks during the Revolving Credit
Period to make offers to make Competitive Bid Loans to the Borrower. The Banks
may, but shall have no obligation to, make such offers and the Borrower may, but
shall have no obligation to, accept any such offers in the manner set forth in
this Section.
(b) Competitive Bid Request. When the Borrower wishes to request offers to
make Competitive Bid Loans under this Section, it shall transmit to the
Administrative Agent by facsimile transmission a Competitive Bid Request
substantially in the form of Exhibit C hereto so as to be received not later
than 11:00 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such other
time or date as the Borrower and the Administrative Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the
Competitive Bid Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Competitive Bids requested are to set forth a
Competitive Bid Margin or a Competitive Bid Absolute Rate.
The Borrower may request offers to make Competitive Bid Loans for more than
one Interest Period in a single Competitive Bid Request. No Competitive Bid
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Administrative Agent may agree) of any
other Competitive Bid Request.
(c) Invitation for Competitive Bids. Promptly upon receipt of a Competitive
Bid Request, the Administrative Agent shall send to the Banks by facsimile
transmission an Invitation for Competitive Bids substantially in the form
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of Exhibit D hereto, which shall constitute an invitation by the Borrower to
each Bank to submit Competitive Bids offering to make the Competitive Bid Loans
to which such Competitive Bid Request relates in accordance with this Section.
(d) Submission and Contents of Competitive Bids. (i) Each Bank may submit a
Competitive Bid containing an offer or offers to make Competitive Bid Loans in
response to any Invitation for Competitive Bids. Each Competitive Bid must
comply with the requirements of this subsection (d) and must be submitted to the
Administrative Agent by facsimile transmission at its offices specified in or
pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York City time) on
the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) 10:00 A.M. (New York City time) on the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Competitive Bid Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective); provided that
Competitive Bids submitted by the Administrative Agent (or any affiliate of the
Administrative Agent) in the capacity of a Bank may be submitted, and may only
be submitted, if the Administrative Agent or such affiliate notifies the
Borrower of the terms of the offer or offers contained therein not later than
(x) one hour prior to the deadline for the other Banks, in the case of a LIBOR
Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case
of an Absolute Rate Auction. Subject to Articles 3 and 6, any Competitive Bid so
made shall be irrevocable except with the written consent of the Administrative
Agent given on the instructions of the Borrower.
(ii) Each Competitive Bid shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Competitive Bid Loan for which
each such offer is being made, which principal amount (w) may be
greater than or less than the Commitment of the quoting Bank, (x) must
be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed
the principal amount of Competitive Bid Loans for which offers were
requested and (z) may be subject to an aggregate limitation as to the
principal amount of Competitive Bid Loans for which offers being made
by such quoting Bank may be accepted,
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(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Competitive Bid
Margin") offered for each such COMPETITIVE BID LOAN, expressed as a
percentage (specified to the nearest 1/10,000th of 1%) to be added to
or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the
"COMPETITIVE BID ABSOLUTE RATE") offered for each such Competitive Bid
Loan, and
(E) the identity of the quoting Bank.
A Competitive Bid may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the related
Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E hereto or
does not specify all of the information required by subsection
(d)(ii),
(B) contains qualifying, conditional or similar language,
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Competitive Bids, or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Administrative Agent shall promptly notify the
Borrower of the terms (x) of any Competitive Bid submitted by a Bank that is in
accordance with subsection (d), and (y) of any Competitive Bid that amends,
modifies or is otherwise inconsistent with a previous Competitive Bid submitted
by such Bank with respect to the same Competitive Bid Request. Any such
subsequent Competitive Bid shall be disregarded by the Administrative Agent
unless such subsequent Competitive Bid is submitted solely to correct a manifest
error in such former Competitive Bid. The Administrative Agent's notice to the
Borrower shall specify (A) the aggregate principal amount of Competitive Bid
Loans for which offers have been received for each Interest Period specified in
the related Competitive Bid Request, (B) the respective principal amounts and
Competitive Bid Margins or Competitive Bid Absolute Rates, as the case may be,
so offered and (C) if applicable, limitations on the aggregate principal amount
of
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Competitive Bid Loans for which offers in any single Competitive Bid may be
accepted.
(f) Acceptance and Notice by Borrower. Not later than 11:00 A.M. (New York
City time) on (x) the third Euro-Dollar Business Day prior to the proposed date
of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Competitive Bid Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be effective), the Borrower shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection (e). In the case of acceptance, such
notice (a "Notice OF COMPETITIVE BID BORROWING") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Competitive Bid in whole or in part; provided that:
(i) the aggregate principal amount of each Competitive Bid Borrowing
may not exceed the applicable amount set forth in the related Competitive
Bid Request;
(ii) the principal amount of each Competitive Bid Borrowing must be
$10,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers may only be made on the basis of ascending
Competitive Bid Margins or Competitive Bid Absolute Rates, as the case may
be; and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Administrative Agent. If offers are made by two or more
Banks with the same Competitive Bid Margins or Competitive Bid Absolute Rates,
as the case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Competitive Bid Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Banks as
nearly as possible (in multiples of $1,000,000, as the Administrative Agent may
deem appropriate) in proportion to the aggregate principal amounts of such
offers. Determinations by the Administrative Agent of the amounts of Competitive
Bid Loans shall be conclusive in the absence of manifest error.
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SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of
the contents thereof and of such Bank's share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available its share of
such Borrowing, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section 9.01.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Administrative Agent will
make the funds so received from the Banks available to the Borrower at the
Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Administrative Agent such Bank's share of such Borrowing, the Administrative
Agent may assume that such Bank has made such share available to the
Administrative Agent on the date of such Borrowing in accordance with subsection
(b) of this Section and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Administrative Agent, such Bank and the Borrower severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal
to the higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Committed Loans of each Bank shall be
evidenced by a single Revolving Credit Note payable to the order of such Bank
for the account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Committed Loans and the
Competitive Bid Loans of each Bank shall be evidenced by a single Competitive
Bid Note payable to the order of such Bank for the account of its Applicable
Lending Office in an amount equal to the aggregate amount of the Commitments
hereunder.
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(b) Upon receipt of each Bank's Notes pursuant to Section 3.01(a), the
Administrative Agent shall forward such Notes to such Bank. Each Bank shall
record the date, amount and type of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect thereto on the
applicable Note, and may, if such Bank so elects in connection with any transfer
or enforcement of its Notes, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding; provided that the failure of any Bank to make any
such recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Notes and to attach to and make a part of its Notes a
continuation of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. (a) The outstanding principal balance of
each Committed Loan shall be due and payable (together with accrued interest
thereon) on the Commitment Termination Date.
(b) Each Competitive Bid Loan included in any Competitive Bid Borrowing
shall mature, and the principal amount thereof shall be due and payable
(together with accrued interest thereon), on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the Base Rate
for such day. Such interest shall be payable quarterly in arrears on each
Quarterly Date and, with respect to the principal amount of any Base Rate Loan
converted to a Euro-Dollar Loan, on each date a Base Rate Loan is so converted.
Any overdue principal of or interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the rate otherwise applicable to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the London Interbank Offered Rate applicable to such Interest Period. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period means
(i) the arithmetic mean (rounded upward, if necessary, to the nearest 1/16 of
1%) of the offered rates for deposits in dollars, for a period approximately
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equal to such Interest Period and in an amount approximately equal to the
average principal amount of the applicable Loans, quoted on the second
Euro-Dollar Business Day prior to the first day of such Interest Period as such
rate appears on the display designated as page "3750" on the Telerate Service
(or such other page as may replace page "3750" on the Telerate Service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for Dollar deposits) ("Telerate Page 3750") as of
11:00 a.m. (London time) on such date or (ii) if, as of 11:00 a.m. (London time)
on any such date fewer than two such rates appear on Telerate Page 3750, the
average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
rates per annum at which deposits in dollars are offered to the principal London
office of The Chase Manhattan Bank in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of its Loan for such Interest Period and for a period of time
comparable to such Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the higher of (i) the sum of 2% plus the Base Rate for such day and (ii) the
sum of 2% plus the Euro-Dollar Margin for such day plus the London Interbank
Offered Rate applicable to such Loan at the date such payment was due.
(d) Subject to Section 8.01, each Competitive Bid LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(b) as if the related Competitive Bid LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Competitive Bid Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Competitive Bid
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Competitive Bid Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Competitive Bid Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the Base Rate for such day.
(e) The Administrative Agent shall determine each interest rate applicable
to the Loans hereunder. The Administrative Agent shall give prompt notice to the
Borrower and the participating Banks of each rate of interest so
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determined, and its determination thereof shall be conclusive in the absence of
manifest error.
SECTION 2.08. Fees. The Borrower shall pay to the Administrative Agent for
the account of the Banks ratably in proportion to their Commitments a facility
fee at a rate for each day equal to the Facility Fee Rate for such day,
determined in accordance with the Pricing Schedule. Such facility fee shall
accrue (i) from and including the Effective Date to but excluding the date of
termination of the Commitments in their entirety, on the daily aggregate amount
of the Commitments (whether used or unused) and (ii) from and including such
date of termination to but excluding the date the Loans shall be repaid in their
entirety, on the daily aggregate outstanding principal amount of the Loans, and
shall be payable quarterly in arrears on each Quarterly Date and on the date of
termination of the Commitments in their entirety (and, if later, the date the
Loans shall be repaid in their entirety).
SECTION 2.09. Optional Termination or Reduction of Commitments. During the
Revolving Credit Period, the Borrower may, upon at least five Domestic Business
Days' notice to the Administrative Agent, (i) terminate the Commitments at any
time, if no Loans are outstanding at such time or (ii) ratably reduce from time
to time by an aggregate amount of $10,000,000 or a larger multiple of
$1,000,000, the aggregate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.
SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in
each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject in each case to the
provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day
and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, subject to Section
2.14 in the case of any such conversion or continuation effective on any
day other than the last day of the then current Interest Period applicable
to such Loans.
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Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Administrative Agent not later than 10:00 A.M.
(New York City time) on the third Euro-Dollar Business Day before the conversion
or continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each $5,000,000 or any larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if the Loans being converted are to be Euro-Dollar
Loans, the duration of the next succeeding Interest Period applicable
thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the Borrower
pursuant to subsection (a) above, the Administrative Agent shall promptly notify
each Bank of the contents thereof and such notice shall not thereafter be
revocable by the Borrower. If the Borrower fails to deliver a timely Notice of
Interest Rate Election to the Administrative Agent for any Group of Euro-Dollar
Loans, such Loans shall be converted into Base Rate Loans on the last day of the
then current Interest Period applicable thereto.
(d) An election by the Borrower to change or continue the rate of interest
applicable to any Group of Loans pursuant to this Section shall not constitute a
"Borrowing" subject to the provisions of Section 3.02.
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SECTION 2.11. Mandatory Termination of Commitments. The Commitments shall
terminate on the Commitment Termination Date.
SECTION 2.12. Optional Prepayments. (a) Subject in the case of any
Euro-Dollar Borrowing to Section 2.14, the Borrower may, upon at least one
Euro-Dollar Business Day's notice to the Administrative Agent, prepay any Group
of Base Rate Loans (or any Competitive Bid Borrowing bearing interest at the
Base Rate pursuant to Section 8.01) or any Group of Euro-Dollar Loans, in each
case in whole at any time, or from time to time in part in amounts aggregating
$10,000,000 or any larger multiple of $1,000,000, by paying the principal amount
to be prepaid together with accrued interest thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the Loans of
the several Banks included in such Group.
(b) Except as provided in subsection (a) above, the Borrower may not prepay
all or any portion of the principal amount of any Competitive Bid Loan prior to
the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
SECTION 2.13. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 9.01. The
Administrative Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Administrative Agent for the account of the
Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans
or of fees shall be due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding Domestic Business
Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. Whenever any payment of principal of, or interest on, the
Competitive Bid Loans shall be due on a day which is not a Euro-Dollar Business
Day, the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day. If the date for any payment of
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principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent that the Borrower
shall not have so made such payment, each Bank shall repay to the Administrative
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Administrative Agent, at
the Federal Funds Rate.
SECTION 2.14. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the
last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.07(c), or if the Borrower fails to
borrow, prepay or convert any Fixed Rate Loans after notice has been given to
any Bank in accordance with Section 2.04(a), 2.10(c) or 2.12(c), the Borrower
shall reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such payment or conversion or failure to borrow,
prepay or convert; provided that such Bank shall have delivered to the Borrower
a certificate setting forth in reasonable detail the calculation of the amount
of such loss or expense, which amount shall be conclusive absent manifest error.
SECTION 2.15. Regulation D Compensation. Each Bank may require the Borrower
to pay, contemporaneously with each payment of interest on the Euro-Dollar
Loans, additional interest on the related Euro-Dollar Loan of such Bank at a
rate per annum determined by such Bank up to but not exceeding the excess of (i)
(A) the applicable London Interbank Offered Rate divided by (B) one minus the
Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered
Rate. Any Bank wishing to require payment of such additional interest (x) shall
so notify the Borrower and the Administrative Agent, in which case such
additional interest on the Euro-Dollar Loans of such Bank shall be payable to
such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least three Euro-Dollar Business Days after the
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giving of such notice and (y) shall notify the Borrower at least five
Euro-Dollar Business Days prior to each date on which interest is payable on the
Euro-Dollar Loans of the amount then due it under this Section.
SECTION 2.16. Computations of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.17. Change of Control. If a Change of Control shall occur (i) the
Borrower will, within ten days after the occurrence thereof, give each Bank
notice thereof and shall describe in reasonable detail the facts and
circumstances giving rise thereto and (ii) each Bank may, by three Domestic
Business Days' notice to the Borrower and the Administrative Agent given not
later than 30 days after such Change of Control, terminate its Commitment, which
shall thereupon be terminated, and declare the Notes held by it (together with
accrued interest thereon) and any other amounts payable hereunder for its
account to be, and such Notes and such other amounts shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
For purposes of this Section, the following terms have the following
meanings:
A "CHANGE OF CONTROL" shall occur if (i) any person or group of persons
(within the meaning of Section 13 or 14 of the Exchange Act) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 20% or more in voting
power of the outstanding Voting Stock of the Borrower or (ii) during any period
of 12 consecutive calendar months, individuals who were directors of the
Borrower on the first day of such period (together with individuals whose
nomination for election or election as directors were recommended or approved by
a majority of such directors on such first day) shall cease to constitute a
majority of the board of directors of the Borrower.
"VOTING STOCK" means capital stock of any class or classes (however
designated) having ordinary voting power for the election of directors of the
Borrower, other than stock having such power only by reason of the happening of
a contingency.
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ARTICLE 3
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur upon the
satisfaction of the following conditions (with respect to each document, dated
the Closing Date unless otherwise indicated):
(a) receipt by the Administrative Agent of a duly executed Revolving Credit
Note and a duly executed Competitive Bid Note for the account of each Bank dated
on or before the Closing Date complying with the provisions of Section 2.05;
(b) receipt by the Administrative Agent of an opinion of Eric A. Blanchard,
Esq., general counsel of the Borrower, substantially in the form of Exhibit F
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(c) receipt by the Administrative Agent of an opinion of Davis Polk &
Wardwell, special counsel for the Administrative Agent, substantially in the
form of Exhibit G hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Administrative Agent of evidence satisfactory to it of
(i) the termination, effective on or before the Effective Date, of the
commitments under the Existing Credit Agreement, (ii) the repayment in full, not
later than the Effective Date, of all loans (if any) thereunder, together with
interest accrued thereon to the Effective Date, and (iii) the payment in full,
not later than the Effective Date, of all accrued and unpaid facility fees and
all other amounts due and payable thereunder;
(e) satisfaction of the Required Banks as to the absence of any material
adverse change in the business, financial position, results of operations or
prospects of the Borrower and its Consolidated Subsidiaries, considered as a
whole, since May 25, 1997; and
(f) receipt by the Administrative Agent of all documents the Administrative
Agent may reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the Notes, and
any other matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent.
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The Administrative Agent shall promptly notify the Borrower and the Banks of the
Closing Date, and such notice shall be conclusive and binding on all parties
hereto. The Borrower and the Banks that are parties to the Existing Credit
Agreement and comprising the "Required Banks" thereunder agree that the
commitments under the Existing Credit Agreement shall terminate in their
entirety simultaneously with and subject to the effectiveness of this Agreement
and that the Borrower shall be obligated to pay on the Effective Date the
accrued facility fees thereunder to but excluding such date.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the
occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) the fact that the Closing Date shall have occurred;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, as the case may be;
(c) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate amount
of the Commitments;
(d) the fact that, immediately before and after such Borrowing, no Default
shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(c), (d) and (e) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all
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material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Borrower of this Agreement and
the Notes are within the corporate powers of the Borrower, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the creation
or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms.
SECTION 4.04. Financial Information. (a) The consolidated statement of
financial position of the Borrower and its Consolidated Subsidiaries as of May
25, 1997 and the related consolidated statements of income and cash flows for
the Fiscal Year then ended, reported on by Price Waterhouse and set forth in the
Borrower's 1997 Form 10-K, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such Fiscal Year.
(b) The unaudited condensed consolidated statement of financial position of
the Borrower and its Consolidated Subsidiaries as of November 23, 1997 and the
related unaudited condensed consolidated statements of income and cash flows for
the six months then ended, set forth in the Borrower's Latest Form 10-Q, a copy
of which has been delivered to each of the Banks, fairly present, in conformity
with generally accepted accounting principles (other than with respect to
omission of footnote disclosure and other information, all to the extent
permitted to be omitted from a filing on Form 10-Q filed with the Securities and
Exchange Commission pursuant to the Exchange Act) applied on a basis consistent
with the financial statements referred to in subsection (a) of this Section, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such six month period (subject to normal year-end adjustments).
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(c) Since May 25, 1997 there has been no material adverse change in the
business, financial position, results of operations or prospects of the Borrower
and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting,
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable probability
of an adverse decision which could materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole, or which in
any manner draws into question the validity of this Agreement or the Notes.
SECTION 4.06. Compliance with Laws; ERISA. (a) Each of the Borrower and its
Subsidiaries is in compliance with all applicable laws, ordinances, rules,
regulations and requirements of governmental authorities (including, without
limitation, Environmental and Health Laws and ERISA and the rules and
regulations thereunder), except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings.
(b) Each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue Code with respect to
each Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect of
any Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security under
ERISA or the Internal Revenue Code or (iii) incurred any liability under Title
IV of ERISA other than a liability to the PBGC for premiums under Section 4007
of ERISA.
SECTION 4.07. Environmental and Health Matters. In the ordinary course of
its business, the Borrower conducts an ongoing review of the effect of material
Environmental and Health Laws on the business, operations and properties of the
Borrower and its Subsidiaries, in the course of which it identifies and
evaluates associated liabilities and costs (including, without limitation, any
capital or operating expenditures required for clean-up or closure of properties
presently or previously owned, any capital or operating expenditures required to
achieve or maintain compliance with environmental protection standards imposed
by law or as a condition of any license, permit or contract, any related
constraints on
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operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site disposal
of wastes or Hazardous Substances, and any actual or potential liabilities to
third parties, including employees, and any related costs and expenses). On the
basis of this review, the Borrower has reasonably concluded that such associated
liabilities and costs, including the costs of compliance with Environmental and
Health Laws, are unlikely to have a material adverse effect on the business,
financial condition, results of operations or prospects of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's corporate Subsidiaries
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
SECTION 4.10. Regulatory Restrictions on Borrowing. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or otherwise subject to any regulatory scheme
which restricts its ability to incur debt.
SECTION 4.11. Liens. Except as permitted pursuant to Section 5.09, there
are no Liens on any asset owned by the Borrower or any Subsidiary.
SECTION 4.12. Full Disclosure. All information heretofore furnished by the
Borrower to any Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such information
hereafter furnished by the Borrower to any Agent or any Bank will be, true and
accurate in all material respects on the date as of which such information is
stated or certified. The Borrower has disclosed to the Banks in writing any and
all facts which materially and adversely affect or may affect (to the extent the
Borrower can now reasonably foresee), the business, operations or financial
condition of the
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Borrower and its Consolidated Subsidiaries, taken as a whole, or the ability of
the Borrower to perform its obligations under this Agreement.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder
or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the Banks:
(a) as soon as available and in any event within 90 days after the end of
each Fiscal Year of the Borrower, a consolidated statement of financial position
of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal
Year and the related consolidated statements of income and cash flows for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous Fiscal Year, all reported on in a manner acceptable to the Securities
and Exchange Commission and audited by Price Waterhouse or other independent
public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end of
each of the first three quarters of each Fiscal Year of the Borrower, a
condensed consolidated statement of financial position of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
condensed consolidated statements of income and cash flows for such quarter and
for the portion of the Borrower's Fiscal Year ended at the end of such quarter,
setting forth in the case of such statements of income and cash flows, in
comparative form the figures for the corresponding quarter and the corresponding
portion of the Borrower's previous Fiscal Year, all certified (subject to normal
year-end adjustments) as to fairness of presentation, generally accepted
accounting principles (other than for footnote presentation and similar
disclosure) and consistency by the chief financial officer or the chief
accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the chief financial
officer, the chief accounting officer or the treasurer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 5.09 to
5.11, inclusive, on the date of such financial statements and (ii) stating
whether any Default exists on the
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date of such certificate and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
(d) within five days after any officer of the Borrower obtains knowledge of
any Default, if such Default is then continuing, a certificate of the chief
financial officer, the chief accounting officer or the treasurer of the Borrower
setting forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed;
(f) promptly upon the filing thereof, copies of all registration statements
(other than the exhibits thereto and any registration statements on Form S-8 or
its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents)
which the Borrower shall have filed with the Securities and Exchange Commission;
(g) if and when any member of the ERISA Group (i) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security, a certificate of the chief financial
officer or the chief accounting officer of the Borrower setting forth details as
to such occurrence and action, if any, which the Borrower or applicable member
of the ERISA Group is required or proposes to take; and
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(h) from time to time such additional information regarding the financial
position or business of the Borrower and its Subsidiaries as the Administrative
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and discharge,
and will cause each Subsidiary to pay and discharge, at or before maturity, all
their respective material obligations and liabilities (including, without
limitation, tax liabilities and claims of materialmen, warehousemen and the like
which if unpaid might by law give rise to a Lien), except where the same may be
contested in good faith by appropriate proceedings, and will maintain, and will
cause each Subsidiary to maintain, in accordance with generally accepted
accounting principles, appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to, maintain
(either in the name of the Borrower or in such Subsidiary's own name) with
financially sound and responsible insurance companies, insurance on all their
respective properties in at least such amounts, against at least such risks and
with such risk retention as are usually maintained, insured against or retained,
as the case may be, in the same general area by companies of established repute
engaged in the same or a similar business; and will furnish to the Banks, upon
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Borrower will continue, and will cause each Subsidiary to continue, to engage in
business of the same general type as now conducted by the Borrower and its
Subsidiaries, and will preserve, renew and keep in full force and effect, and
will cause each Subsidiary to preserve, renew and keep in full force and effect
their respective corporate existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business; provided
that nothing in this Section 5.04 shall prohibit (i) the merger of a Subsidiary
into the Borrower or the merger or consolidation of a Subsidiary with or into
another Person if the corporation surviving such consolidation or merger is a
Subsidiary and if, in each case, after giving effect thereto, no Default shall
have occurred and be continuing or (ii) the termination of the corporate
existence of any Subsidiary if the Borrower in good faith determines that such
termination is in the best interest of the Borrower and is not materially
disadvantageous to the Banks.
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SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental and Health Laws and ERISA and the
rules and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of any Bank at such Bank's
expense to visit and inspect any of their respective properties, to examine and
make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times, upon
such reasonable notice and as often as may reasonably be desired.
SECTION 5.07. Mergers and Sales of Assets. The Borrower will not (i)
consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, all or any substantial part of the
assets of the Borrower and its Subsidiaries, taken as a whole, to any other
Person; provided that the Borrower may merge with another Person if (x) the
Borrower is the corporation surviving such merger and (y) after giving effect to
such merger, no Default shall have occurred and be continuing.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans made under this
Agreement will be used by the Borrower for general corporate purposes. None of
such proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
SECTION 5.09. Negative Pledge. Neither the Borrower nor any Subsidiary will
create, assume or suffer to exist any Lien on any asset (including without
limitation the stock of any Subsidiary) now owned or hereafter acquired by it,
except:
(a) Liens existing on the date of this Agreement securing Debt outstanding
on the date of this Agreement in an aggregate principal or face amount not
exceeding $15,000,000;
(b) any Lien existing on any asset of any corporation at the time such
corporation becomes a Subsidiary and not created in contemplation of such event;
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(c) any Lien on any asset securing Debt incurred or assumed for the purpose
of financing all or any part of the cost of acquiring such asset; provided that
such Lien attaches to such asset concurrently with or within 90 days after the
acquisition thereof;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by the
Borrower or a Subsidiary and not created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section; provided that such Debt is not increased and is not
secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do not
secure Debt or Derivatives Obligations, (ii) do not secure any obligation in an
amount, in aggregate together with the amount of all other obligations then
secured by Liens pursuant to this clause (g), exceeding $50,000,000 and (iii) do
not in the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business;
(h) Liens on cash and cash equivalents securing Derivatives Obligations;
provided that the aggregate amount of cash and cash equivalents subject to such
Liens may at no time exceed $10,000,000; and
(i) Liens not otherwise permitted by the foregoing clauses of this Section,
securing Debt in an aggregate principal or face amount at any date not to exceed
5% of the consolidated stockholders' equity of the Borrower and its Consolidated
Subsidiaries, determined as of such date.
SECTION 5.10. Adjusted Debt to Adjusted Total Capital. The ratio of (i)
Adjusted Consolidated Debt to (ii) the sum of Adjusted Consolidated Debt plus
consolidated stockholders' equity of the Borrower and its Consolidated
Subsidiaries (including for this purpose any amount attributable to stock which
is required to be redeemed or is redeemable at the option of the holder, if
certain events or conditions occur or exist or otherwise), in each case
determined at such date, shall at no time exceed 0.65 to 1.00.
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SECTION 5.11. Fixed Charge Coverage Ratio. As of the last day of each
fiscal quarter of the Borrower, the ratio of (i) Consolidated EBIT to (ii)
Consolidated Interest Expense, in each case for the four consecutive fiscal
quarters of the Borrower and its Consolidated Subsidiaries ending on such day,
shall not be less than 3.0 to 1.0.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay (i) when due any principal of any Loan
or (ii) within five days when due, any interest, any fees or any other amount
payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant contained in
Article 5, other than those contained in Sections 5.01 through 5.06;
(c) the Borrower shall fail to observe or perform any covenant or agreement
contained in this Agreement (other than those covered by clause (a) or (b)
above) for 10 days after notice thereof has been given to the Borrower by the
Administrative Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by the
Borrower in this Agreement or in any certificate, financial statement or other
document delivered pursuant to this Agreement shall prove to have been incorrect
in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the acceleration of
the maturity of any Material Debt or enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
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itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against the
Borrower or any Subsidiary seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $5,000,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $5,000,000; or
(j) judgments or orders for the payment of money in excess of $5,000,000
shall be rendered against the Borrower or any Subsidiary and such judgments or
orders shall continue unsatisfied and unstayed for a period of 10 days;
then, and in every such event, the Administrative Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Commitments, by notice
to the Borrower terminate the Commitments and they shall thereupon terminate,
and (ii) if requested by Banks holding more than 50% of the aggregate principal
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amount of the Loans, by notice to the Borrower declare the Loans (together with
accrued interest thereon) to be, and the Loans shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower; provided that in
the case of any of the Events of Default specified in clause (g) or (h) above
with respect to the Borrower, without any notice to the Borrower or any other
act by the Administrative Agent or the Banks, the Commitments shall thereupon
automatically terminate and the Loans (together with accrued interest thereon)
shall automatically become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.
SECTION 6.02. Notice of Default. The Administrative Agent shall give notice
to the Borrower under Section 6.01(c) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the Notes as are
delegated to the Administrative Agent by the terms hereof or thereof, together
with all such powers as are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Each of The Chase Manhattan Bank,
NationsBank, N.A. and Wachovia Bank, N.A. shall have the same rights and powers
under this Agreement as any other Bank and may exercise or refrain from
exercising the same as though it were not an Agent, and each of The Chase
Manhattan Bank, NationsBank, N.A. and Wachovia Bank, N.A. and its respective
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not an Agent.
SECTION 7.03. Action by Administrative Agent. The obligations of the
Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article 6.
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SECTION 7.04. Consultation with Experts. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agents. Neither any Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks or (ii) in the
absence of its own gross negligence or willful misconduct. Neither any Agent nor
any of its affiliates nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of the Borrower; (iii) the satisfaction of
any condition specified in Article 3, except receipt of items required to be
delivered to the Administrative Agent; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. No Agent shall incur any liability by acting
in reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, facsimile transmission or similar writing) believed
by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with
its Commitment, indemnify each Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
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SECTION 7.08. Successor Administrative Agent. The Administrative Agent may
resign at any time by giving notice thereof to the Banks and the Borrower. Upon
any such resignation, the Required Banks shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent gives notice
of resignation, then the retiring Administrative Agent may, on behalf of the
Banks, appoint a successor Administrative Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation hereunder as Administrative Agent,
the provisions of this Article shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent.
SECTION 7.09. Administrative Agent's Fee. The Borrower shall pay to the
Administrative Agent for its own account fees in the amounts and at the times
previously agreed upon between the Borrower and the Administrative Agent.
SECTION 7.10. Other Agents. The Syndication Agent and the Documentation
Agent shall have no responsibilities hereunder in their respective capacities as
Agents after the Closing Date. No Bank referred to as a Co-Agent on the
signature pages hereof shall have any responsibility or obligation under this
Agreement in its capacity as Co-Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any Euro-Dollar Loan or
Competitive Bid LIBOR Loan:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that (i) adequate and reasonable means do not
exist for ascertaining the London Interbank Offered Rate for use in establishing
the interest rate for such Loan for such Interest Period, or (ii) deposits in
dollars
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(in the applicable amounts) are not generally available in the London interbank
market for such Interest Period, or
(b) in the case of Euro-Dollar Loans, Banks having 50% or more of the
aggregate principal amount of the affected Loans advise the Administrative Agent
that the London Interbank Offered Rate as determined by the Administrative Agent
will not adequately and fairly reflect the cost to such Banks of funding their
Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make Euro-Dollar Loans or to continue or convert
outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each
outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the
last day of the then current Interest Period applicable thereto. Unless the
Borrower notifies the Administrative Agent at least two Domestic Business Days
before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, (i) if such
Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be
made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a
Competitive Bid LIBOR Borrowing, the Competitive Bid LIBOR Loans comprising such
Borrowing shall bear interest for each day from and including the first day to
but excluding the last day of the Interest Period applicable thereto at the Base
Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Administrative Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding
Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to
the Administrative Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving such notice and
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will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. If such notice is given, each Euro-Dollar Loan of such Bank then
outstanding shall be converted to a Base Rate Loan either (a) on the last day of
the then current Interest Period applicable to such Euro-Dollar Loan if such
Bank may lawfully continue to maintain and fund such Loan to such day or (b)
immediately if such Bank shall determine that it may not lawfully continue to
maintain and fund such Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the
date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Competitive Bid, in the case of
any Competitive Bid Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify or
deem applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
any such requirement included in an applicable Euro-Dollar Reserve Percentage),
special deposit, insurance assessment or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank (or its
Applicable Lending Office) or shall impose on any Bank (or its Applicable
Lending Office) or the London interbank market any other condition affecting its
Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans and the
result of any of the foregoing is to increase the cost to such Bank (or its
Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to
reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Notes with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Administrative Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, (including any determination by any such authority, central bank or
comparable agency that,
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for purposes of capital adequacy requirements, the Commitments hereunder do not
constitute commitments with an original maturity of one year or less) has or
would have the effect of reducing the rate of return on capital of such Bank (or
its Parent) as a consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within 15 days after demand by such Bank (with
a copy to the Administrative Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank (or its Parent) for
such reduction.
(c) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 8.04. Taxes. (a) For the purposes of this Section 8.04(a), the
following terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings with respect to any payment by the Borrower
pursuant to this Agreement or under any Note, and all liabilities with respect
thereto, excluding (i) in the case of each Bank and each Agent, taxes imposed on
its income, and franchise or similar taxes imposed on it, by a jurisdiction
under the laws of which such Bank or Agent (as the case may be) is organized or
in which its principal executive office is located or, in the case of each Bank,
in which its Applicable Lending Office is located and (ii) in the case of each
Bank, any United States withholding tax imposed on such payments but only to the
extent that such Bank is subject to United States withholding tax at the time
such Bank first becomes a party to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes and
any other excise or property taxes, or similar charges or levies, which arise
from any payment made pursuant to this Agreement or under any Note or from the
execution or delivery of, or otherwise with respect to, this Agreement or any
Note.
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(b) Any and all payments by the Borrower to or for the account of any Bank
or any Agent hereunder or under any Note shall be made without deduction for any
Taxes or Other Taxes; provided that, if the Borrower shall be required by law to
deduct any Taxes or Other Taxes from any such payments, (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
such Bank or Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions, (iii) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower shall furnish to the Administrative Agent, at its
address referred to in Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and each Agent for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Bank or Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be paid within 15 days after such Bank or
Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the United
States, on or prior to the date of its execution and delivery of this Agreement
in the case of each Bank listed on the signature pages hereof and on or prior to
the date on which it becomes a Bank in the case of each other Bank, and from
time to time thereafter if requested in writing by the Borrower (but only so
long as such Bank remains lawfully able to do so), shall provide the Borrower
with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which exempts the Bank from United States withholding tax or
reduces the rate of withholding tax on payments of interest for the account of
such Bank or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Bank has failed to provide the
Borrower with the appropriate form pursuant to Section 8.04(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which such form originally was required to be provided), such Bank
shall not be entitled to indemnification under Section 8.04(b) or (c) with
respect to Taxes imposed by the United States; provided that if a Bank, which is
otherwise exempt from or subject to a reduced rate of withholding tax, becomes
subject to
45
<PAGE> 51
Taxes because of such Bank's failure to deliver a form required hereunder, the
Borrower shall take such steps as such Bank shall reasonably request to assist
such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section, then such Bank will change the
jurisdiction of its Applicable Lending Office if, in the judgment of such Bank,
such change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar Loans.
If (i) the obligation of any Bank to make, or convert outstanding Loans to,
Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank
has demanded compensation under Section 8.03 or 8.04 with respect to its Euro-
Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Administrative Agent, have elected that
the provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or continued
as or converted into) Euro-Dollar Loans shall instead be Base Rate Loans (on
which interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks); and
(b) after each of its Euro-Dollar Loans has been repaid (or converted to a
Base Rate Loan), all payments of principal which would otherwise be applied to
repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans
instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other Banks.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank to
make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 or 8.04, the Borrower shall
have the right, with the assistance of the Administrative Agent, to seek a
mutually satisfactory substitute bank or banks (which may be one or more of the
Banks) to purchase the Notes and assume the Commitment of such Bank.
46
<PAGE> 52
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, facsimile
transmission or similar writing) and shall be given to such party: in the case
of the Borrower, the Administrative Agent or any Bank, at its address or
facsimile number set forth on the signature pages hereof or in the case of any
party, such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the Administrative Agent and the Borrower.
Each such notice, request or other communication shall be effective (i) if given
by facsimile transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt is received, (ii) if given by mail, 72
hours after such communication is deposited in the U.S. mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section; provided that notices
to the Administrative Agent under Article 2 or Article 8 shall not be effective
until received.
SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent
or any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all
reasonable out-of-pocket expenses of the Administrative Agent, including
reasonable fees and disbursements of special counsel for the Administrative
Agent, in connection with the preparation and administration of this Agreement,
any waiver or consent hereunder or any amendment hereof or any Default or
alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by the Administrative Agent and each Bank,
including (without duplication) the reasonable fees and disbursements of outside
counsel, in connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any
47
<PAGE> 53
investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of this Agreement or any actual or proposed use of proceeds of
Loans hereunder; provided that no Indemnitee shall have the right to be
indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to any Note held by it which is greater than the proportion received by any
other Bank in respect of the aggregate amount of principal and interest due with
respect to any Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Notes
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Notes held by the Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall impair the right of any Bank to exercise any right
of set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Administrative Agent are affected thereby, by the
Administrative Agent); provided that no such amendment or waiver shall, unless
signed by all the Banks, (i) increase or decrease the Commitment of any Bank
(except for a ratable decrease in the Commitments of all Banks) or subject any
Bank to any additional obligation, (ii) reduce the principal of or rate of
interest on any Loan, or any fees hereunder, (iii) postpone the date fixed for
any payment of principal of or interest on any Loan, or any fees hereunder or
for any scheduled reduction or termination of any Commitment, or (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Notes, or the number of Banks, which shall be required for the Banks or any of
them to take any action under this Section or any other provision of this
Agreement.
48
<PAGE> 54
SECTION 9.06. Confidentiality. Each Bank agrees to exercise all reasonable
efforts to keep confidential any information delivered or made available by the
Borrower to it (including without limitation pursuant to Section 5.06) which is
clearly indicated to be confidential information; provided that nothing herein
shall prevent any Bank from disclosing such information (i) to any other Bank,
(ii) to its officers, directors, employees, agents, attorneys and accountants
who have a need to know such information in accordance with customary banking
practices and who receive such information having been made aware of the
restrictions set forth in this Section, (iii) upon the order of any court or
administrative agency, (iv) upon the request or demand of any regulatory agency
or authority having jurisdiction over such Bank, (v) which has been publicly
disclosed, (vi) to the extent reasonably required in connection with any
litigation to which the Administrative Agent, any Bank, the Borrower or their
respective affiliates may be a party, (vii) to the extent reasonably required in
connection with the exercise of any remedy hereunder, (viii) to such Bank's
legal counsel and independent auditors, and (ix) to any actual or proposed
participant or assignee of all or part of its rights hereunder which has agreed
in writing to be bound by the provisions of this Section 9.06.
SECTION 9.07. Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights or obligations under this Agreement without
the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that such
Bank will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii), (iii), or (iv) of Section 9.05 without the
consent of the Participant. The Borrower agrees that each Participant shall, to
the extent provided in its participation agreement, be entitled to the benefits
of Article 8 and Section 2.15 with respect to its participating interest. An
assignment or other transfer which is
49
<PAGE> 55
not permitted by subsection (c) or (d) below shall be given effect for purposes
of this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $10,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit H hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Borrower
and the Administrative Agent, which such consents shall not be unreasonably
withheld; provided that if an Assignee is an affiliate of such transferor Bank
or was a Bank immediately prior to such assignment, no such consent shall be
required; and provided further that such assignment may, but need not, include
rights of the transferor Bank in respect of outstanding Competitive Bid Loans.
Upon execution and delivery of such instrument and payment by such Assignee to
such transferor Bank of an amount equal to the purchase price agreed between
such transferor Bank and such Assignee, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the transferor
Bank, the Administrative Agent and the Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to the Assignee. In
connection with any such assignment, the transferor Bank shall pay to the
Administrative Agent an administrative fee for processing such assignment in the
amount of $3,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall deliver to the Borrower
and the Administrative Agent certification as to exemption from deduction or
withholding of any United States federal income taxes in accordance with Section
8.04.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 or 8.04 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written consent or by
reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to
50
<PAGE> 56
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
SECTION 9.08. Collateral. Each of the Banks represents to each Agent and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.09. Governing Law; Submission to Jurisdiction. This Agreement and
each Note shall be governed by and construed in accordance with the laws of the
State of New York, without regard to conflicts of law. The Borrower hereby
submits to the nonexclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings against the Borrower arising out
of or relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
SECTION 9.10. Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Administrative Agent of
counterparts hereof signed by each of the parties hereto (or, in the case of any
party as to which an executed counterpart shall not have been received, receipt
by the Administrative Agent in form satisfactory to it of telegraphic, facsimile
or other written confirmation from such party of execution of a counterpart
hereof by such party).
SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENTS AND
THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
51
<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DEAN FOODS COMPANY
By /s/ Cameron C. Hitchcock
---------------------------------
Title: Treasurer
Address: 3600 North River Road
Franklin Park, IL 60131
Attention: Cameron C. Hitchcock
Facsimile: (847) 233-5501
AGENTS AND BANKS:
THE CHASE MANHATTAN BANK
Address: 270 Park Avenue
New York, NY 10017
Attention: John F. Mix
Facsimile number: (212) 270-1063
with a copy to:
Chase Securities Inc.
Address: 10 S. LaSalle Street
Chicago, Illinois 60603
Attention: Cassandra Garrison
Facsimile number: (312) 807-4550
52
<PAGE> 58
NATIONSBANK, N.A.
By /s/ Lisa S. Donoghue
-----------------------------------
Title: Senior Vice President
Address: 233 S. Wacker Dr. #2800
Attention: Lisa S. Donoghue
Facsimile number: (312) 234-5601
WACHOVIA BANK, N.A.
By /s/ Todd Bagle
-----------------------------------
Title: Vice President
Address: 191 Peachtree St.
Atlanta, GA 30303
Attention: Todd Eagle
Facsimile number: (404) 332-6898
53
<PAGE> 59
CO-AGENTS AND BANKS:
THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Agent
By /s/ Deborah E. Stevens
--------------------------------------
Title: Authorized Agent
Address: One First National Plaza
Chicago, IL 60670-0088
Attention: Deborah E. Stevens
Facsimile number: (312) 732-1117
HARRIS TRUST $ SAVINGS BANK,
as Co-Agent
By /s/ Karen L. Knudsen
-------------------------------------
Address: 111 West Monroe
Floor 18W
Chicago, IL 60603
Attention: Karen L. Knudsen
Facsimile number: (312) 765-8095
THE NORTHERN TRUST COMPANY,
as Co-Agent
By /s/ Sidney R. Dillard
--------------------------------------
Title: Vice President
Address: 50 South LaSalle
Chicago, IL 60675
Attention: Sidney R. Dillard
Facsimile number: (312) 444-5055
<PAGE> 60
BANK OF AMERICA NT&SA,
as Co-Agent
By /s/ G. Burton Queen
-------------------------------------
Title: Managing Director
Address: 231 South LaSalle Street
Chicago, IL 60697
Attention: G. Burton Queen
Facsimile number: (312) 987-1276
MELLON BANK, N.A.,
as Co-Agent
By /s/ Ryan F. Busch
-------------------------------------
Title: Assistant Vice President
Address: One Mellon Bank Center
Suite 4525
Pittsburgh, PA 15258-0001
Attention: Ryan F. Busch
Facsimile number: (412) 236-1914
<PAGE> 61
BANKS:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Christopher C. Kunhardt
------------------------------------------
Title: Vice President
Address: 60 Wall Street, 22nd Floor
New York, NY 10260-0060
Attention: Patricia Merritt
Facsimile number: (212) 648-5249
FIRST AMERICAN NATIONAL BANK
By /s/ Alexis Griffin
------------------------------------------
Title: Bank Officer
Address: Fourth and Union Streets
3rd Floor
Nashville, TN 37237-0310
Attention: Alexis Griffin
Facsimile number: (615) 748-2485
LASALLE NATIONAL BANK
By /s/ Richard P. Bott
------------------------------------------
Title: Senior Vice President
Address: 135 South LaSalle Street
Suite 210
Chicago, IL 60603
Attention: Joy Lippo
Facsimile number: 312-904-1706
<PAGE> 62
SUNTRUST BANK, ATLANTA
By /s/ Brian M. Davis
------------------------------------------
Title: Assistant Vice President
By /s/ F. Steven Parrish
------------------------------------------
Title: Vice President
Address: 25 Park Place
Atlanta, GA 30303
Attention: Brian M. Davis
Facsimile number: (404) 230-5305
BANKERS TRUST COMPANY
By /s/ David J. Bell
------------------------------------------
Title: Vice President
Address: One Bankers Trust Plaza
New York, NY 10006
Attention: David Bell
Facsimile number: (212) 250-7218
THE BANK OF NEW YORK
By /s/ John C. Lambert
------------------------------------------
Title: Vice President
Address: One Wall Street, 19th Floor
New York, NY 10286
Attention: John C. Lambert
Facsimile number: (212) 635-1208
<PAGE> 63
BANK ONE ILLINOIS, N.A.
By /s/ Regina L. Dutton
------------------------------------------
Title: Assistant Vice President
By /s/ Jon Flusser
------------------------------------------
Address: 200 S. Wacker Drive
Chicago, IL 60606
Attention: Mark Niedzwiedz
Facsimile number: (312) 627-5850
FIRST UNION NATIONAL BANK
By /s/ Mary J. Amatore
------------------------------------------
Title: Vice President
Address: One First Union Center
Charlotte, NC 28288-0745
Attention: Mary J. Amatore
Facsimile number: (704) 383-7236
<PAGE> 64
AGENTS:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ John F. Mix
------------------------------------------
Title: Vice President
Address: 270 Park Avenue
New York, NY 10017
Attention: John F. Mix
Facsimile number: (212) 270-1063
With a copy to:
Chase Securities Inc.
Address: 10 S. LaSalle Street
Chicago, Illinois 60603
Attention: Cassandra Garrison
Facsimile number: (312) 807-4550
NATIONSBANK, N.A.
as Syndication Agent
By /s/ Lisa S. Donoghue
------------------------------------------
Title: Senior Vice President
WACHOVIA BANK, N.A.
as Documentation Agent
By /s/ Todd Eagle
------------------------------------------
Title: Vice President
<PAGE> 65
PRICING SCHEDULE
Each of "EURO-DOLLAR MARGIN" and "FACILITY FEE RATE" means, for any date,
the rates set forth below in the row opposite such term and in the column
corresponding to the "Pricing Level" that applies at such date:
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V Level VI Level VII
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Euro-Dollar 0.14% 0.155% 0.17% 0.21% 0.25% 0.325% 0.375%
Margin
- ---------------------------------------------------------------------------------------------------
Facility Fee 0.06% 0.07% 0.08% 0.09% 0.125% 0.175% 0.25%
Rate
- ---------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"LEVEL I PRICING" applies at any date if, at such date, the Borrower's
long-term debt is rated A+ or higher by S&P or A1 or higher by Moody's.
"LEVEL II PRICING" applies at any date if, at such date, (i) the Borrower's
long-term debt is rated A or higher by S&P or A2 or higher by Moody's and (ii)
Level I Pricing does not apply.
"LEVEL III PRICING" applies at any date if, at such date, (i) the
Borrower's long-term debt is rated A- or higher by S&P or A3 or higher by
Moody's and (ii) neither Level I Pricing nor Level II Pricing applies.
"LEVEL IV PRICING" applies at any date if, at such date, (i) the Borrower's
long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by Moody's and
(ii) none of Level I Pricing, Level II Pricing and Level III Pricing applies.
"LEVEL V PRICING" applies at any date if, at such date, (i) the Borrower's
long-term debt is rated BBB or higher by S&P or Baa2 or higher by Moody's and
(ii) none of Level I Pricing, Level II Pricing, Level III Pricing and Level IV
Pricing applies.
"LEVEL VI PRICING" applies at any date if, at such date, (i) the Borrower's
long-term debt is rated BBB- or higher by S&P or Baa3 or higher by Moody's and
(ii) none of Level I Pricing, Level II Pricing, Level III Pricing, Level IV
Pricing and Level V Pricing applies.
"LEVEL VII PRICING" applies at any date if, at such date, no other Pricing
Level applies.
<PAGE> 66
"MOODY'S" means Moody's Investors Service, Inc.
"PRICING LEVEL" refers to the determination of which of Level I, Level II,
Level III, Level IV, Level V, Level VI or Level VII applies at any date.
"S&P" means Standard & Poor's Ratings Services.
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of the Borrower
without third-party credit enhancement, and any rating assigned to any other
debt security of the Borrower shall be disregarded. The rating in effect at any
date is that in effect at the close of business on such date.
The following provisions are applicable so long as the Borrower's long-term
debt is rated at least BBB- by S&P and at least Baa3 by Moody's: If the Borrower
is split-rated and the ratings differential is one level, the higher of the two
ratings will apply (e.g. A-/Baa1 results in Level III Pricing). If the Borrower
is split-rated and the ratings differential is more than one level, the average
of the two ratings (or the higher of two intermediate ratings) shall be used
(e.g. A-/Baa2 results in Level IV Pricing, as does A-/Baa3).
2
<PAGE> 67
COMMITMENT SCHEDULE
COMMITMENT NAME OF BANK
- ---------- ------------
$ 50,000,000 The Chase Manhattan Bank
$ 45,000,000 NationsBank, N.A.
$ 45,000,000 Wachovia Bank, N.A.
$ 40,000,000 The First National Bank of Chicago
$ 40,000,000 Harris Trust & Savings Bank
$ 40,000,000 The Northern Trust Company
$ 40,000,000 Bank of America NT&SA
$ 40,000,000 Mellon Bank, N.A.
$ 20,000,000 Morgan Guaranty Trust Company of New York
$ 20,000,000 First American National Bank
$ 20,000,000 LaSalle National Bank
$ 20,000,000 SunTrust Bank, Atlanta
$ 20,000,000 Bankers Trust Company
$ 20,000,000 The Bank of New York
$ 20,000,000 Bank One Illinois, N.A.
$ 20,000,000 First Union National Bank
Total: $500,000,000
============
<PAGE> 1
EXHIBIT 10(j)
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT, dated the 4th day of March, 1998 (the
"Agreement") by and between DEAN FOODS COMPANY ("Dean") and RICHARD E. BAILEY
("Employee").
WHEREAS, Dean has offered employment to Employee as President and Chief
Operating Officer of Dean; and
WHEREAS, Employee has accepted the offer of employment from Dean
subject to the execution of a severance agreement; and
WHEREAS, the parties desire to provide a severance agreement in the
event of the termination of Employee's employment with Dean without cause;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, Dean and Employee agree as follows:
In the event that, at any time during the first three (3) years of
employment, Dean terminates Employee's employment with Dean for any reason other
than for cause, Dean will pay Employee severance in the amount of One Million
Two Hundred Fifty Thousand Dollars ($1,250,000), payable within thirty (30) days
after termination.
Any severance paid to Employee at any time after completion of the
third year of employment will be at the discretion of Dean.
For purposes of this Agreement "for cause" shall mean:
1. Employee dies or becomes incapacitated due to physical or mental
illness so as to be unable to perform his duties as President and Chief
Operating Officer for a period exceeding sixty (60) days;
2. Employee refuses or willfully fails to substantially perform the
duties and responsibilities assigned to him as President and Chief Operating
Officer; or
3. Employee engages in any act of fraud, dishonesty, or other
intentional or willful misconduct, including, but not limited to, violation of
the Dean Code of Conduct.
<PAGE> 2
Termination of this Agreement by Dean for cause shall require a
determination by the Chief Executive Officer that, in such Chief Executive
Officer's good faith opinion, Employee was guilty of any of the conduct set
forth in the foregoing provisions of this paragraph and specifying the specific
examples of such conduct.
This Agreement shall be governed by the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
DEAN FOODS COMPANY
______________________________ By: ___________________________
RICHARD E. BAILEY
Title: __________________________
2
<PAGE> 1
EXHIBIT 10(k)
================================================================================
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
DEAN FOODS COMPANY
AND
AGRILINK FOODS, INC.
================================================================================
JULY 24, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S><C>
1. Definitions..............................................................................................2
2. Purchase and Sale of Target Shares......................................................................10
(a) Basic Transaction.....................................................................10
(b) Purchase Price and Transfer of Consideration..........................................10
(c) Assumption of Certain Liabilities.....................................................10
(d) The Closing...........................................................................11
(e) Deliveries at the Closing.............................................................11
(f) Closing Date Adjusted Net Working Capital Adjustment..................................11
(i) Estimated Closing Date Adjusted Net Working
Capital......................................................................11
(ii) Closing Date Adjusted Net Working Capital............................11
3. Representations and Warranties of the Seller............................................................13
(a) Representations and Warranties Concerning the Seller, Dean
International and Holding Company............................................................13
(i) Organization.........................................................13
(ii) Authorization of Transaction.........................................13
(iii) Noncontravention.....................................................14
(iv) Holding Company Status...............................................14
(v) Brokers' Fees........................................................16
(vi) Seller's Target-Related Intellectual Property........................16
(vii) Seller's Target-Related Employee Benefits............................16
(b) Representations and Warranties Concerning the Targets.................................17
(i) Organization, Qualification, and Power...............................17
(ii) Target Shares........................................................17
(iii) Noncontravention.....................................................17
(iv) Subsidiaries.........................................................18
(v) Financial Statements.................................................18
(vi) Events Subsequent to Most Recent Fiscal Year End.....................18
(vii) Legal Compliance.....................................................20
(viii) Regulatory Matters...................................................20
(ix) Tax Matters..........................................................21
(x) Real Property........................................................22
(xi) Personal Property....................................................23
(xii) Intellectual Property................................................23
</TABLE>
<PAGE> 3
<TABLE>
<S><C>
(xiii) Sufficiency of Assets...............................................25
(xiv) Inventory...........................................................25
(xv) Contracts...........................................................25
(xvi) Notes and Accounts Receivable.......................................27
(xvii) Powers of Attorney..................................................27
(xviii) Insurance...........................................................27
(xix) Litigation..........................................................27
(xx) Arbitration.........................................................28
(xxi) Product Warranty....................................................28
(xxii) Employees...........................................................28
(xxiii) Top Customers.......................................................28
(xxiv) Employee Benefits...................................................28
(xxv) Guaranties..........................................................29
(xxvi) Environmental and Public Safety Matters.............................29
(xxvii) Certain Business Relationships With the Seller and Its
Affiliates................................................................30
(xxviii) Undisclosed Liabilities.............................................30
(xxix) Books and Records...................................................30
(xxx) Annual Incentive Bonus Plan.........................................31
(xxxi) Year 2000 Compliance................................................31
(xxxii) Disclosure..........................................................31
4. Representations and Warranties of the Buyer.............................................................31
(a) Organization of the Buyer.............................................................31
(b) Authorization of Transaction..........................................................31
(c) Noncontravention......................................................................31
(d) Brokers' Fees.........................................................................32
(e) Financing.............................................................................32
(f) Investment............................................................................32
5. Pre-Closing Covenants...................................................................................33
(a) General...............................................................................33
(b) Regulatory Matters and Approvals......................................................33
(c) Operation of Business of the Targets .................................................33
(d) Operation of Business of the Aseptic Business.........................................34
(e) Full Access to the Buyer..............................................................34
(f) Full Access to the Seller.............................................................34
(g) Notice of Developments................................................................34
(h) Exclusivity to the Buyer..............................................................34
(i) Exclusivity to the Seller.............................................................35
(j) ......................................................................................35
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S><C>
6. Post-Closing Covenants..................................................................................35
(a) General...............................................................................35
(b) Section 338(h)(10) Election...........................................................35
(c) Allocation of Purchase Price..........................................................35
(d) Retention of and Access to Records....................................................36
(e) Employees and Employee Benefit Plans..................................................36
(f) DFVC Name Change. ....................................................................38
(g) Non-Compete...........................................................................38
(h) Post-Closing License of Seller's Dean Trademark.......................................39
(i) Settlement of Seller Group Payments...................................................40
(j) Release of IRB Guarantee. ...........................................................40
7. Conditions to Obligation to Close.......................................................................40
(a) Conditions to Obligation of the Buyer.................................................40
(b) Conditions to Obligation of the Seller................................................42
8. Indemnification.........................................................................................44
(a) General...............................................................................44
(b) Indemnification of Buyer Indemnitees..................................................44
(c) Indemnification of Seller Indemnitees.................................................45
(d) Limitation on Indemnification Obligations.............................................45
(e) Cooperation...........................................................................46
(f) Third Party Claims Subject to Indemnification.........................................46
(g) Exclusivity...........................................................................48
9. Tax Matters.............................................................................................48
(a) Preparation and Filing of Income Tax Returns..........................................48
(b) Income Tax Refunds and Benefits.......................................................49
(c) Cooperation on Tax Matters............................................................49
(d) Control Rights........................................................................50
(e) Expenses..............................................................................50
(g) Certain Taxes.........................................................................50
10. Termination.............................................................................................51
(a) Termination of Agreement..............................................................51
(b) Effect of Termination.................................................................52
11. Miscellaneous...........................................................................................52
(a) Press Releases and Public Announcements...............................................52
(b) No Third-Party Beneficiaries..........................................................52
(c) Expenses..............................................................................52
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S><C>
(d) Entire Agreement......................................................................52
(e) Succession and Assignment.............................................................53
(f) Counterparts..........................................................................53
(g) Headings..............................................................................53
(h) Notices...............................................................................53
(i) Governing Law.........................................................................54
(j) Amendments and Waivers................................................................54
(k) Severability..........................................................................54
(l) Construction..........................................................................54
(m) Incorporation of Exhibits and Disclosure Schedules....................................55
- iv -
</TABLE>
<PAGE> 6
Exhibit A - Closing Date Birds Eye License Agreement
Exhibit B - Continued Employee Severance Pay and Benefits
Exhibit C - Certain Title Commitment Items
Exhibit D - Substance of Opinion of General Counsel of the Seller
Exhibit E - Substance of Opinion of Special Counsel to Birds Eye Mexico
Exhibit F - Substance of Opinion of Counsel to the Buyer
Seller Disclosure Schedule - Exceptions to Representations and Warranties
Buyer Disclosure Schedule - Exceptions to Representations and Warranties
- v -
<PAGE> 7
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into on July 24,
1998, by and between Dean Foods Company, a Delaware corporation (the "Seller"),
and Agrilink Foods, Inc., a New York corporation (the "Buyer"). The Buyer and
the Seller are sometimes referred to herein as a "Party" and collectively as the
"Parties."
The Seller owns (i) directly, all of the outstanding capital stock of Dean
Foods Vegetable Company, a Wisconsin corporation ("DFVC"), and (ii) indirectly
through Dean Foods International Investments, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Seller ("Dean International"), all of the
outstanding capital stock of BEMSA Holding, Inc., a Delaware corporation and a
wholly-owned subsidiary of Dean International ("Holding Company"). DFVC and
Holding Company directly own all of the issued and outstanding capital stock of
Birds Eye de Mexico SA de CV, a limited liability company organized under the
laws of Mexico ("Birds Eye Mexico" and, together with DFVC, the "Targets"). The
Buyer owns and operates an aseptic business conducted out of its Benton Harbor,
Michigan facility (the "Aseptic Business").
This Agreement contemplates a transaction in which the Seller will sell or
cause to be sold to the Buyer and/or one or more subsidiaries of the Buyer, for
consideration comprised of cash and the Aseptic Business of the Buyer (or, under
certain circumstances, for consideration comprised solely of cash), all of the
outstanding capital stock of DFVC and Holding Company. If the consideration
includes the Aseptic Business, the transfer of the Aseptic Business to the
Seller will be effected pursuant to the Asset Transfer Agreement by and between
the Seller and the Buyer of even date herewith (the "Asset Transfer Agreement").
In connection with such transaction (i) the Seller will transfer to the Buyer
and/or one or more subsidiaries of the Buyer all of the Seller's right, title
and interest in the trademarks of the Seller that are used in the businesses of
the Targets, subject to a royalty-free three-year license back to the Seller of
one of such trademarks for certain uses, (ii) the Seller will assign to the
Buyer or a subsidiary of the Buyer Seller's rights as licensor under the
agreement pursuant to which it licenses Kraft General Foods, Inc. ("Kraft") to
use certain of such trademarks and (iii) if the consideration includes the
Aseptic Business, the Buyer will grant to the Seller a royalty-free perpetual
license of certain of the Buyer's trademarks used in the Aseptic Business for
certain uses. In connection with the sale of the capital stock of DFVC and
Holding Company, the transferee of Seller's rights under the agreement referred
to in clause (ii) of the preceding sentence will assume Seller's obligations
thereunder and the Buyer will undertake certain severance obligations related to
employees of the Targets.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
<PAGE> 8
1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"All Cash Alternative" has the meaning set forth in Section 2(b).
"Aseptic Business" has the meaning set forth in the preface.
"Asset Transfer Agreement" has the meaning set forth in the preface.
"Birds Eye Mexico" has the meaning set forth in the preface.
"Birds Eye Mexico Series A Stock" means the Series A Stock of Birds Eye
Mexico.
"Birds Eye Mexico Series B Stock" means the Series B Stock of Birds Eye
Mexico.
"Birds Eye Dips Trademark" means "BIRDS EYE" for dairy based dips and for
caramel dips, U.S. Reg. No. 1,982,485.
"Buyer" has the meaning set forth in the preface.
"Buyer Disclosure Schedule" means the schedule entitled "Buyer Disclosure
Schedule" heretofore delivered by the Buyer, which schedule is arranged in
sections corresponding to the lettered and numbered subsections contained in
Section 4.
"Buyer Indemnitee" has the meaning set forth in Section 8(b).
"CERCLA" has the meaning set forth in Section 3(b)(xxvi)(E).
"Closed Premises" means the DFVC facilities and related real estate located
at Brillion and Cedar Grove, Wisconsin, Bellingham, Washington, and McAllen,
Texas.
"Closing" has the meaning set forth in Section 2(d).
"Closing Date" has the meaning set forth in Section 2(d).
- 2 -
<PAGE> 9
"Closing Date Birds Eye License Agreement" means a license agreement in form
and substance as set forth in Exhibit A attached hereto between the transferee
of the Seller's rights in and to the Birds Eye Dips Trademark, as licensor, and
the Seller, as licensee.
"Closing Date Adjusted Net Working Capital" means the amount equal to the
excess of (i) all inventory and trade receivables of the Targets as of the close
of business on the day immediately preceding the Closing Date over (ii) all
trade accounts payable and inventory-related accruals of the Targets as of the
close of business on the day immediately preceding the Closing Date, as finally
determined in accordance with Section 2(f)(ii)(A). Items included in Closing
Date Adjusted Net Working Capital shall be valued on the basis for their
valuation set forth in the notes to the Most Recent Balance Sheet, except that
inventory shall be valued on a first-in, first-out basis. The quantities and
types of inventory included in Closing Date Adjusted Net Working Capital shall
be the Targets' book inventory as of the close of business on the day
immediately preceding the Closing Date (reflecting any subsequent postings as of
the close of business on the day immediately preceding the Closing Date made in
accordance with the Targets' past practices), and no physical inventory shall be
conducted.
"Closing Date Adjusted Net Working Capital Statement" has the meaning set
forth in Section 2(f)(ii)(A).
"Closing Date Adjusted Net Working Capital Target" means $155,188,000.
"COBRA" means the requirement of Part 6 of Subtitle B of Title I of ERISA
and Code Section 4980B.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Confidentiality Agreement" means the letter agreement, dated April 24, 1998
between the Buyer and the Seller.
"Consolidated Income Tax Returns" has the meaning set forth in Section
9(a)(i).
"Continued Employees" has the meaning set forth in Section 6(e).
"Controlled Group" has the meaning set forth in Section 3(b)(xxiv).
"Control Group Liability" means any joint and several liability imposed by
law on entities that are Affiliates of each other.
"Damages" means all liabilities, demands, claims, actions or causes of
action, regulatory, legislative or judicial proceedings or investigations,
assessments, levies, losses, fines, penalties,
- 3 -
<PAGE> 10
damages, costs and expenses, including, without limitation, reasonable fees and
expenses of attorneys, accountants and other professionals sustained or
incurred in connection with the defense or investigation of any claim.
"Dean International" has the meaning set forth in the preface.
"Delaware General Corporation Law" means the General Corporation Law of the
State of Delaware.
"DFVC" has the meaning set forth in the preface.
"DFVC Common Stock" means any share of the Common Stock, par value $0.01 per
share, of DFVC.
"DFVC Savings Plan" has the meaning set forth in Section 6(e)(iii).
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit
Plan or fringe benefit or other retirement, bonus, or incentive plan or program,
including without limitation any stock option or other equity-based plan or
severance plan or arrangement.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental Requirements" means all federal, state, local and foreign
statutes, regulations, ordinances and similar provisions having the force or
effect of law, all judicial and administrative orders and determinations, and
all common law, concerning pollution or protection of the environment and public
health and safety, including without limitation all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
- 4 -
<PAGE> 11
"Estimated Closing Date Adjusted Net Working Capital" has the meaning set
forth in Section 2(f)(i).
"Estimated Cash Purchase Price" means the amount of cash set forth in clause
(i) of the first sentence of Section 2(b), before any adjustment or increase
referred to in such clause, or, in the event the All Cash Alternative becomes
applicable, the amount of cash set forth in the penultimate sentence of Section
2(b), in either case increased by (i) any excess of Estimated Closing Date
Adjusted Net Working Capital over the Closing Date Adjusted Net Working Capital
Target or decreased by any excess of the Closing Date Adjusted Net Working
Capital Target over Estimated Closing Date Adjusted Net Working Capital and (ii)
the amount of the purchase price increase (if any) provided in Section 6(b).
"Existing Birds Eye License Agreement" means the Trademark License
Agreement, dated December 27, 1993, by and between the Seller and Kraft (a part
of Kraft's rights under which have been assigned by it to Orange-Co, Inc.).
"Farmers Processing" means Farmers Processing, Inc., a California
corporation.
"FDC Act" means the Federal Food, Drug and Cosmetic Act, as amended from
time to time.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 3(b)(v).
"Foreign Plans" has the meaning set forth in Section 3(b)(xxiv).
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Entities" has the meaning set forth in Section 3(b)(vii).
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended from time to time.
"Holding Company" has the meaning set forth in the preface.
"Holding Company Common Stock" means any share of the Common Stock, no par
value per share, of Holding Company.
"Income Tax" means any federal, state, local or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
- 5 -
<PAGE> 12
"Income Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Income Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Indemnified Party" means a party that is entitled to indemnification from
another party pursuant to Section 8.
"Indemnifying Party" means a party that is required to provide
indemnification to another party pursuant to Section 8.
"Independent Firm" has the meaning set forth in Section 2(f)(ii)(A).
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"IRB" means the Village of Fairwater, Wisconsin, Tax Exempt Adjustable Mode
Industrial Development Refunding Revenue Bonds, Series 1990, for the benefit of
DFVC in the original principal amount of $2.45 million.
"IRB Guarantee" means the Guarantee Agreement, dated May 1, 1997, between
the Seller and Wachovia Bank of North Carolina with respect to the IRB.
"Knowledge of the Seller" means (i) the actual knowledge, without special
investigation, of William McManaman, the Vice President, Finance and Chief
Financial Officer of the Seller, or Jeffrey P. Shaw, Thomas E. Osetek, Richard
L. Claiborn or Byron Johnson, the President, Senior Vice President, Sales and
Marketing, Vice President, Finance and Vice President, Manufacturing,
respectively, of DFVC, and (ii) the actual knowledge, without independent
investigation, of the Seller which arises from the review of an executed
certificate of each of the Persons described above
- 6 -
<PAGE> 13
under (i) regarding the accuracy of the representations and warranties of the
Seller contained in Section 3 of the July 16, 1998 draft of this Agreement,
which certificates were distributed by the Seller prior to the date of this
Agreement to such Persons along with the representations and warranties of the
Seller contained in Section 3 of the July 16, 1998 draft of this Agreement and
the July 14, 1998 draft of the Seller Disclosure Schedule.
"Kraft" has the meaning set forth in the preface.
"Leased Premises" has the meaning set forth in Section 3(b)(x)(B).
"Mexican Premises" means the real property owned by Birds Eye Mexico and the
facilities thereon.
"Most Recent Balance Sheet" means the statement of assets and liabilities
with respect to the fiscal year ended May 31, 1998 contained in the Financial
Statements.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3(b)(v).
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Non-Compete Businesses" has the meaning set forth in Section 6(g).
"Non-Compete Period" has the meaning set forth in Section 6(g).
"Objection Notice" has the meaning set forth in Section 2(f)(ii)(A).
"Owned Premises" has the meaning set forth in Section 3(b)(x)(A).
"Parties" has the meaning set forth in the preface.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a Governmental Entity.
"Proprietary Information" means "Proprietary Information" as such term is
used in the Confidentiality Agreement.
"Purchase Price" has the meaning set forth in Section 2(b).
- 7 -
<PAGE> 14
"Records Retention Date" has the meaning set forth in Section 6(d).
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Section 338(h)(10) Election" has the meaning set forth in Section 6(b).
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's and similar
liens being contested in good faith if the related payment obligation is then
due and payable, (b) liens for taxes not yet due and payable or for taxes that
the taxpayer is contesting in good faith, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, (d) other liens
arising in the ordinary course of business and not incurred in connection with
the borrowing of money and (e) solely with respect to owned real property, other
encumbrances which, in the aggregate, do not materially adversely affect the
value of such real property or the owner's ability to use such real property for
its intended purpose.
"Seller" has the meaning set forth in the preface.
"Seller Disclosure Schedule" means the schedule entitled "Seller Disclosure
Schedule" heretofore delivered by the Seller, which schedule is arranged in
sections corresponding to the lettered and numbered subsections contained in
Section 3.
"Seller Indemnitee" has the meaning set forth in Section 8(c).
"Seller Plans" has the meaning set forth in Section 3(b)(vii).
"Seller's Dean Trademark" means the bird-on-mailbox logo of the Seller, U.S.
Reg. Nos. 1,342,947, 1,343,368, 1,500,715, 1,519,979 and 1,953,924.
"Seller's Retirement Plan" has the meaning set forth in Section 6(e)(iv).
"Seller's Savings Plan" has the meaning set forth in Section 3(a)(vii).
"Seller's Target-Related Intellectual Property" has the meaning set forth in
Section 3(a)(vi).
"Silage-Related Litigation" means (i) Southern Michigan Beef Company and
Decaturland Investments vs. DFVC, Case No. 97-42-482-CK-H (State of Michigan in
the Circuit Court for the County of Van Buren), (ii) Steve Hovander and Star
Hovander d/b/a Hovander Farms vs. DFVC,
- 8 -
<PAGE> 15
No. 97-2-00707-7 (Superior Court of the State of Washington in and for the
County of Whatcom) and (iii) Richard J. Cipri vs. DFVC et al., File No.
92-37-137-CE-B (State of Michigan in the Circuit Court for the County of Van
Buren) and any other litigation arising out of the same facts and circumstances
as such litigation.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"SWDA" has the meaning set forth in Section 3(b)(xxvi)(E).
"Targets" has the meaning set forth in the preface.
"Targets' Dean-Related Packaging/Labels" means all of the packaging and
label inventory (including label inventory affixed to finished goods) of the
Targets that exists (or which has been ordered by the Targets but not yet
delivered) at the Closing Date which bears the Seller's Dean Trademark.
"Targets' Intellectual Property" has the meaning set forth in Section
3(b)(xii)(B).
"Target Shares" means all of the outstanding DFVC Common Stock and Birds Eye
Mexico Series A Stock and Birds Eye Mexico Series B Stock.
"Taxes" means all taxes, charges, fees, premiums, levies, penalties or other
assessments imposed by any United States federal, state or local or foreign
taxing authority, including, but not limited to, Income Taxes, franchise or
capital stock taxes, sales taxes, use taxes, gross receipts taxes, real or
personal property taxes, excise taxes, transfer taxes, payroll, withholding,
social security or other taxes (including taxes or premiums for unemployment
insurance or similar governmental impositions), including any interest,
penalties or additions attributable thereto.
- 9 -
<PAGE> 16
"Third Party Claims" shall mean any claims for Damages which are asserted or
threatened by a Person, other than a Party or a successor or assign of a Party,
against any Indemnified Party or to which an Indemnified Party is subject from
such a Person.
"Threshold Amount" has the meaning set forth in Section 8(d)(ii).
"Title Insurance Commitments" has the meaning set forth in Section
3(b)(x)(D).
"WARN Act" has the meaning set forth in Section 6(e)(vi).
2. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees that it will purchase from the Seller and Dean
International, and the Seller agrees that it will (and will cause Dean
International to) sell to the Buyer, for the consideration specified in Section
2(b), all of the outstanding capital stock of DFVC and Holding Company, and the
Seller agrees that in connection with such purchase and sale it will (i)
transfer all of the Seller's right, title and interest in and to Seller's
Target-Related Intellectual Property to the Buyer, subject to the Closing Date
Birds Eye License Agreement and (ii) assign to the Buyer Seller's rights as
licensor under the Existing Birds Eye License Agreement. It is expressly agreed
by the Parties that the Buyer may choose to have title to some or all of such
Target Shares and Seller's Target-Related Intellectual Property and/or the
Existing Birds Eye License Agreement conveyed to one or more Subsidiaries of the
Buyer rather than to the Buyer, provided that each such Subsidiary and the
particular assets to which it is to take title are identified to the Seller at
least 15 days prior to the Closing Date. In such event, except to the extent the
context otherwise requires, each of the references to the Buyer herein
(including without limitation in the representations and warranties of the Buyer
in Section 4) shall be a reference not only to the Buyer but also to each such
Subsidiary.
(b) Purchase Price and Transfer of Consideration. The consideration
referred to in Section 2(a) is (i) $390,000,000 in cash, adjusted as provided in
Section 2.2(f)(ii) and increased by the amount of the purchase price increase
(if any) provided in Section 6(b), and (ii) the Aseptic Business of the Buyer
(collectively, the "Purchase Price"). For the convenience of the Parties, any
cash payment will be made solely to the Seller, which will be responsible for
forwarding to Dean International its portion of such cash payment. It is
expressly agreed by the Parties that the Seller may choose to have the Aseptic
Business conveyed to one or more subsidiaries of the Seller rather than to the
Seller, provided that each such Subsidiary and the particular assets to which it
is to take title are identified to the Buyer at least 15 days prior to the
Closing Date. Notwithstanding the foregoing, unless the Closing has occurred
prior to September 22, 1998 or the Parties have otherwise agreed in writing (in
their respective sole discretion), and unless prior to such date all applicable
waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act
with respect to the transfer of the Aseptic Business to the Seller shall have
expired or otherwise been terminated (in
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either case without threat by any Governmental Entity of any action, suit or
proceeding described in Section 7(a)(iv) based on any antitrust statute,
regulation, rule or other restriction), then effective on such date the
consideration referred to in Section 2(a) and the "Purchase Price" shall each be
$523,000,000 in cash, adjusted as provided in Section 2.2(f)(ii) and increased
by the amount of the purchase price increase (if any) provided in Section 6(b)
(the "All Cash Alternative"). If the All Cash Alternative becomes applicable,
the Asset Transfer Agreement shall terminate in accordance with the terms
thereof.
(c) Assumption of Certain Liabilities. In connection with the purchase
and sale contemplated herein, the transferee of Seller's rights as licensor
under the Existing Birds Eye License Agreement shall assume Seller's obligations
thereunder (and, if such transferee is a Subsidiary of the Buyer, the Buyer
shall guarantee such Subsidiary's performance of the assumed obligations).
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis in
Chicago, Illinois, commencing at 9:00 a.m. local time on the second business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date and time as the Parties may mutually
determine (the date and time of the Closing, the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments and documents
referred to in Section 7(a), (ii) the Buyer will deliver to the Seller the
various certificates, instruments and documents referred to in Section 7(b),
(iii) the Seller and Dean International will deliver or cause to be delivered to
the Buyer stock certificates representing all of the Holding Company Common
Stock and all of the Target Shares owned by the Seller, endorsed in blank or
accompanied by duly executed assignment documents, (iv) the Buyer will pay to
the Seller in cash, by wire transfer or delivery of other immediately available
funds, an amount equal to the Estimated Cash Purchase Price and (v) if the All
Cash Alternative has not become applicable, the transfer of the Aseptic Business
to the Seller pursuant to the Asset Transfer Agreement shall be consummated.
(f) Closing Date Adjusted Net Working Capital Adjustment.
(i) Estimated Closing Date Adjusted Net Working Capital. At least
3 business days in advance of the Closing, the Seller shall prepare in
good faith and deliver to the Buyer an estimate of Closing Date
Adjusted Net Working Capital ("Estimated Closing Date Adjusted Net
Working Capital").
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<PAGE> 18
(ii) Closing Date Adjusted Net Working Capital.
(A) Determination of Closing Date Adjusted Net Working
Capital. Within 45 days of the Closing Date, the Buyer and its
independent auditors shall deliver to the Seller a statement of
Closing Date Adjusted Net Working Capital (the "Closing Date
Adjusted Net Working Capital Statement"). The Buyer and its
auditors will (i) make available to the Seller and its agents,
attorneys and accountants upon reasonable advance notice all
records and work papers necessary to understand the Closing Date
Adjusted Net Working Capital Statement and to calculate Closing
Date Adjusted Net Working Capital and (ii) allow the Seller and
its agents, attorneys and accountants upon reasonable advance
notice to interview any Buyer or Target personnel or independent
auditor personnel significantly involved in the preparation of the
Closing Date Adjusted Net Working Capital Statement. If the Seller
disagrees with the computation of Closing Date Adjusted Net
Working Capital contained in the Closing Date Adjusted Net Working
Capital Statement, the Seller may, within 30 days after receipt of
the Closing Date Adjusted Net Working Capital Statement, deliver a
notice (the "Objection Notice") to the Buyer setting forth the
objections of the Seller and, to the extent reasonably possible,
Closing Date Adjusted Net Working Capital as determined by the
Seller. The Buyer and the Seller will use reasonable efforts to
resolve any disagreements as to the computation of Closing Date
Adjusted Net Working Capital, but if they do not obtain a final
resolution within 15 days after the Buyer has received the
Objection Notice, the Buyer and the Seller will jointly retain
Arthur Andersen LLP, or, if such firm is unwilling to serve,
another independent accounting firm of recognized national
standing that is not a public accountant of the Buyer, the Seller
or any of their respective Affiliates (an "Independent Firm") to
resolve any remaining disagreements. If the Buyer and the Seller
are unable to agree on the choice of an Independent Firm, the
choice will be selected by lot from those top five accounting
firms that are Independent Firms or, if no top five accounting
firm is an Independent Firm or is willing to serve, selected by
lot from those Independent Firms that are willing to serve. The
Buyer and the Seller will direct the chosen Independent Firm to
render a determination within 30 days of its retention and the
Buyer and the Seller and their respective agents will cooperate
with the chosen Independent Firm during its engagement. The chosen
Independent Firm will consider only those issues related to the
determination of Closing Date Adjusted Net Working Capital set
forth in the Objection Notice which the Buyer and the Seller have
been unable to resolve. The determination of the chosen
Independent Firm will be based on and consistent with the
definition of Closing Date Adjusted Net
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<PAGE> 19
Working Capital included herein. The determination of the chosen
Independent Firm will be conclusive and binding upon the Buyer and
the Seller. In any proceeding described above in this paragraph,
all of the costs and expenses of the Buyer (including reasonable
attorneys' fees and expenses) shall be borne by the Buyer, all of
the costs and expenses of the Seller (including reasonable
attorneys' fees and expenses) shall be borne by the Seller and all
costs and expenses of the chosen Independent Firm shall be borne
by the Buyer in the event that the Closing Date Adjusted Net
Working Capital reflected in the Closing Date Adjusted Net Working
Capital Statement, as adjusted to reflect the resolution by the
Parties of any objections of the Seller to the Closing Date
Adjusted Net Working Capital Statement, is lower than Closing Date
Adjusted Net Working Capital; otherwise the Seller shall bear all
the costs and expenses of the chosen Independent Firm.
(B) Payment. If Closing Date Adjusted Net Working Capital
exceeds Estimated Closing Date Adjusted Net Working Capital, the
Buyer shall pay to the Seller within 5 business days of the final
determination of Closing Date Adjusted Net Working Capital the
amount of such excess, which shall be payable in cash by wire
transfer or delivery of other immediately available funds. If
Closing Date Adjusted Net Working Capital is less than Estimated
Closing Date Adjusted Net Working Capital, the Seller shall pay to
the Buyer within 5 business days of the final determination of
Closing Date Adjusted Net Working Capital the amount of such
deficit, which shall be payable in cash by wire transfer or
delivery of other immediately available funds. No interest shall
be paid with respect to any adjustment amount due and timely paid
pursuant to this subsection.
3. Representations and Warranties of the Seller.
(a) Representations and Warranties Concerning the Seller, Dean
International and Holding Company. The Seller represents and warrants to the
Buyer that, subject in the case of the representations and warranties in each
particular section below to the exceptions set forth in the corresponding
section of the Seller Disclosure Schedule:
(i) Organization. Each of the Seller, Dean International and
Holding Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Holding
Company is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where such qualification is
required. Holding Company has corporate power and corporate
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<PAGE> 20
authority to carry on the businesses in which it is engaged and to own
and use the properties owned or used by it.
(ii) Authorization of Transaction. The Seller has full corporate
power and corporate authority to execute and deliver this Agreement
and all other agreements contemplated hereby to which the Seller is or
is to be a party and to perform its obligations hereunder and
thereunder. The board of directors of the Seller has duly approved
this Agreement and all other agreements contemplated hereby to which
the Seller is or is to be a party and has duly authorized the Seller's
execution and delivery of this Agreement and all such other agreements
and the consummation of the transactions on the part of the Seller
contemplated hereby and thereby. This Agreement and all such other
agreements constitute the valid and legally binding obligations of the
Seller, enforceable in accordance with their respective terms, except
as enforceability may be limited by bankruptcy or other laws affecting
creditor's rights generally and limitations on the availability of
equitable remedies. Dean International has full corporate power and
corporate authority to sell the Target Shares of Holding Company as
contemplated by this Agreement. The board of directors of Dean
International, and the Seller as the sole stockholder of Dean
International, have duly approved such sale.
(iii) Noncontravention. Neither the execution and delivery of this
Agreement and the other agreements contemplated hereby to which the
Seller is or is to be a party, nor the consummation of the
transactions on the part of the Seller or Dean International
contemplated hereby and thereby, (i) violates any constitution,
statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental
agency or court to which the Seller, Dean International or Holding
Company is subject (except that no representation or warranty is made
with respect to any antitrust statute, regulation, rule or other
restriction) or any provision of the charter or bylaws of the Seller,
Dean International or Holding Company or (ii) conflicts with, results
in a breach of, constitutes a default under, results in the
acceleration of, creates in any party the right to accelerate,
terminate, modify or cancel, or requires any notice under, any
agreement, contract, lease, license, instrument or other arrangement
to which the Seller, Dean International or Holding Company is a party
or by which any of them is bound or to which any of their assets is
subject (or results in the imposition of any Security Interest upon
any of their assets). Neither the Seller, Dean International nor
Holding Company needs to give any notice to, make any filing with or
obtain any authorization, consent or approval of, any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, other than in connection
with the provisions of the Hart-Scott-Rodino Act and the
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<PAGE> 21
Securities Exchange Act, and other than any other notice, filing, authorization,
consent or approval that has been given, made or obtained.
(iv) Holding Company Status.
(A) Holding Company was formed on June 4, 1998 solely for
the purpose of holding capital stock of Birds Eye Mexico. Holding
Company has no asset other than capital stock of Birds Eye Mexico
and cash, has conducted no business or operations, has incurred no
liabilities or obligations other than expenses related to its
incorporation and its continuing corporate existence and has not
had any employees.
(B) The entire authorized capital stock of Holding Company
consists of 200 shares of Holding Company Common Stock, 100 of
which are issued and outstanding and none of which are held in
treasury. Such outstanding shares are owned of record by Dean
International, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state
securities laws), Security Interests or purchase rights. Neither
the Seller, Dean International nor Holding Company is a party to
any option, warrant, purchase right or other contract or
commitment that could require any of them to issue, sell, transfer
or otherwise dispose of any capital stock of Holding Company
(other than this Agreement). Neither the Seller nor Dean
International is a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of any
capital stock of Holding Company. The section of the Seller
Disclosure Schedule corresponding to this Section 3(a)(iv)(B)
lists the directors and officers of Holding Company.
(C) The section of the Seller Disclosure Schedule
corresponding to this Section 3(a)(iv)(C) lists all state, local
and foreign Income Tax Returns filed with respect Holding Company
since its formation, indicates which of those Income Tax Returns
have been audited, and indicates which of those Income Tax Returns
are currently the subject of audit. Holding Company is not a party
to any tax allocation or sharing agreement which allocates tax
liability to Holding Company independently of the allocation
elected under Treasury Regulation Section 1.1552-1. Since its
formation, Holding Company has not been a member of an Affiliated
Group filing a consolidated U.S. federal Income Tax Return (other
than a group the common parent of which was the Seller), and
Holding Company has no liability for the taxes of any Person
(other than any of the Seller and its Subsidiaries) under Reg.
Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or
otherwise.
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<PAGE> 22
(D) Holding Company has timely filed all tax and information
returns required to be filed and has paid or has accrued on its
books and set up an adequate reserve for the payment of all Taxes
reflected on such returns required to be paid in respect of the
periods covered by such returns and has accrued on its books and
set up an adequate reserve for the payment of all Taxes
anticipated to be payable in respect of periods through the end of
the calendar month preceding the date hereof. Holding Company is
not delinquent in the payment of any Taxes, assessment or
governmental charge. No deficiencies for any Taxes have been
proposed, asserted or assessed against Holding Company that have
not been resolved or settled, and no requests for waivers of the
time to assess any Taxes against Holding Company are pending or
have been agreed to. Holding Company is not currently the subject
of an audit or examination of any of its tax returns by the
Internal Revenue Service or any state, municipal or other taxing
authority. Holding Company is not a party to any action or
proceeding by any Governmental Entities for the assessment or
collection of Taxes. Deferred taxes of Holding Company have been
accounted for in accordance with GAAP.
(v) Brokers' Fees. Neither the Seller nor any of its Subsidiaries
has any liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated
by this Agreement for which the Buyer or any of its Subsidiaries
(including the Targets and Holding Company subsequent to the Closing)
could become liable or obligated.
(vi) Seller's Target-Related Intellectual Property. The section of
the Seller Disclosure Schedule corresponding to this Section 3(a)(vi)
identifies each patent or trademark registration or pending application
which has been issued to or is filed by the Seller with respect to any
of the Seller's Intellectual Property, in each case that is used by
either Target in the conduct of its business ("Seller's Target-Related
Intellectual Property"). The Seller has made available to the Buyer
correct and complete copies of all such patents, registrations and
applications. No trade name or unregistered trademark owned by the
Seller is used by either of the Targets in connection with its
business. With respect to each item of Seller's Target-Related
Intellectual Property (in the case of each such item other than a
United States item, to the Knowledge of the Seller): (i) Seller
possesses all right, title and interest in and to the item, free and
clear of any Security Interest, license, agreement, consent or other
restriction which adversely affects the use or ownership of such item;
(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge; and (iii) no action, suit, proceeding,
hearing, investigation, charge, complaint,
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<PAGE> 23
claim or demand is pending or, to the Knowledge of the Seller,
threatened against the Seller or any of its Subsidiaries which
challenges the legality, validity, enforceability, use or ownership of
the item.
(vii) Seller's Target-Related Employee Benefits. The section of
the Seller Disclosure Schedule corresponding to this Section 3(a)(vii)
lists each Employee Benefit Plan that the Seller maintains (other than
any severance arrangement for which neither the Buyer nor any of its
Subsidiaries (including the Targets and Holding Company subsequent to
the Closing) could become liable or obligated) under which any employee
of either of the Targets is provided coverage (the "Seller Plans").
Seller has made available to Buyer true and correct copies of all such
Employee Benefit Plans. The Dean Foods Company Savings and Investment
Plan (the "Seller's Savings Plan") has previously received a
determination letter from the Internal Revenue Service that the plan is
qualified under Section 401(a) of the Code and nothing has occurred
since the date of such determination that would materially and
adversely affect the qualification of such plan. The Seller's Savings
Plan has been maintained and administered in compliance in all material
respects with ERISA and the Code.
(b) Representations and Warranties Concerning the Targets. The Seller
represents and warrants to the Buyer that, subject in the case of the
representations and warranties in each particular section below to the
exceptions set forth in the corresponding section of the Seller Disclosure
Schedule:
(i) Organization, Qualification, and Power. Each of the Targets
is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. Each of the Targets is duly
authorized to conduct business and is in good standing under the laws
of each other jurisdiction where such qualification is required. Each
of the Targets has corporate (or limited liability company, as
applicable) power and corporate (or limited liability company, as
applicable) authority to carry on the businesses in which it is engaged
and to own and use the properties owned or used by it. The section of
the Seller Disclosure Schedule corresponding to this Section 3(b)(i)
lists the directors and officers of each of the Targets.
(ii) Target Shares. The entire authorized capital stock of DFVC
consists of 3,000 shares of DFVC Common Stock, 1,000 of which are
issued and outstanding and none of which are held in treasury. The
entire authorized capital stock of Birds Eye Mexico consists of (x)
1,000 shares of Birds Eye Mexico Series A Stock, all of which are
issued and outstanding and none of which are held in treasury, and (y)
5,000 shares of Birds Eye Mexico Series B Stock, all of which are
issued and
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<PAGE> 24
outstanding and none of which are held in treasury. Such outstanding
shares are owned of record as set forth in the section of the Seller
Disclosure Schedule corresponding to this Section 3(b)(ii), in each
case free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws),
Security Interests or purchase rights. Neither the Seller, Dean
International, Holding Company nor either of the Targets is a party to
any option, warrant, purchase right or other contract or commitment
that could require any of them to issue, sell, transfer, or otherwise
dispose of any capital stock of either of the Targets (other than this
Agreement). Neither the Seller, Dean International nor Holding Company
is a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of either
of the Targets.
(iii) Noncontravention. The consummation of the transactions
contemplated by this Agreement do not (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge or other restriction of any government, governmental agency or
court to which either of the Targets is subject (except that no
representation or warranty is made with respect to any antitrust
statute, regulation, rule or other restriction) or any provision of the
charter or bylaws (or similar governing documents) of either of the
Targets or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice
under, any material agreement, contract, lease, license, instrument or
other arrangement to which either of the Targets is a party or by which
either of them is bound or to which any of their assets is subject (or
result in the imposition of any Security Interest upon any of their
assets). Neither of the Targets needs to give any notice to, make any
filing with or obtain any authorization, consent or approval of, any
government or governmental agency in order for the Parties to
consummate the transactions or perform the obligations contemplated by
this Agreement, other than in connection with the provisions of the
Hart-Scott-Rodino Act, and other than any notice, filing,
authorization, consent or approval that has been given, made or
obtained.
(iv) Subsidiaries. Neither of the Targets has any Subsidiary.
Neither of Targets owns any interest in any other corporation,
partnership, joint venture or other business entity, other than the
ownership by DFVC of shares of Birds Eye Mexico Series B Stock and of
one-half of the capital stock of Farmers Processing.
(v) Financial Statements. The financial statements previously
delivered to the Buyer (collectively, the "Financial Statements"),
consisting of an unaudited statement of assets and liabilities (and
notes thereto) as of May 31, 1998 (the "Most Recent Fiscal Year End")
and unaudited income and cash flows (and notes thereto)
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<PAGE> 25
for the fiscal years ended May 31, 1998 and May 25, 1997 for the
Targets, have been derived from the internal books and records of the
Targets, which have been maintained in a manner consistent with the
accounting practices of the Seller, and the financial information
reflected in the Financial Statements is included in the Seller's
consolidated financial statements which are prepared in accordance
with GAAP consistently applied. The Seller makes no other
representation or warranty with respect to the Financial Statements.
(vi) Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse
change in the business, operations or financial condition of the
Targets taken as a whole. Without limiting the generality of the
foregoing, since that date:
(A) neither of the Targets has sold, leased, transferred or
assigned any material assets, tangible or intangible, except for
sales of inventory in the ordinary course of its business;
(B) no party (including either of the Targets) has
accelerated, terminated, made material modifications to or
canceled any material agreement, contract, lease or license to
which either of the Targets is a party or by which either of them
is bound;
(C) neither of the Targets has made any material capital
expenditures materially in excess of the budgeted amount for
capital expenditures previously provided to the Buyer by the
Seller;
(D) neither of the Targets has made any material capital
investment in, or any material loan to, any other Person;
(E) there has not been any increase in the obligations owed
by either of the Targets for borrowed money;
(F) neither of the Targets has mortgaged, pledged or
subjected to any Security Interest any of its assets or
properties;
(G) neither of the Targets has waived or released any of its
material rights;
(H) neither of the Targets has granted any license or
sublicense of any material rights under or with respect to any of
its Intellectual Property;
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<PAGE> 26
(I) there has been no change made or authorized in the
charter or bylaws (or similar governing documents) of either of
the Targets;
(J) neither of the Targets has issued, sold or otherwise
disposed of any of its capital stock, or granted any options,
warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock;
(K) neither of the Targets has experienced any material
damage, destruction or loss (whether or not covered by insurance)
to its property;
(L) neither of the Targets has made any loan to, or entered
into any other transaction with, any of its directors or officers
other than the advance or reimbursement of reasonable business
expenses incurred or to be incurred in the ordinary course of
business;
(M) neither of the Targets has entered into any employment
contract with any of its directors or officers or any collective
bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(N) neither of the Targets has granted any increase in the
compensation payable or to become payable to any of its directors
or officers, except for annual increases in the ordinary course of
business consistent with past practice;
(O) neither of the Targets has adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance or
other plan, contract or commitment for the benefit of any of its
directors and officers (or taken any such action with respect to
any other Employee Benefit Plan);
(P) neither of the Targets has made any other material
change in employment terms for any of its directors or officers
outside the ordinary course of its business;
(Q) neither of the Targets has made any change in its
accounting principles for financial reporting;
(R) neither of the Targets has experienced any material
adverse change in its business, operations or financial condition;
and
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<PAGE> 27
(S) neither of the Targets has committed to any of the
foregoing.
(vii) Legal Compliance. Each of the Targets has complied in all
material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings and charges thereunder) of federal, state, local and foreign
governments (and all departments, agencies and political subdivisions
thereof) (collectively, "Governmental Entities"). No material
investigation, review, inquiry or proceeding by any Governmental Entity
with respect to either of the Targets is pending or, to the Knowledge
of the Seller, threatened. None of the Targets currently is subject to
any agreement, contract or decree with any Governmental Entity arising
out of any current or previously existing violations or alleged
violations.
(viii) Regulatory Matters. Each of the Targets possesses all
regulatory permits, licenses and other governmental authorizations and
approvals which it is required by applicable law to obtain, all of
which have been duly obtained and are in full force and effect; each of
the Targets is in compliance in all material respects with the
respective terms and conditions thereof, and there are no material
proceedings pending or, to the Knowledge of the Seller, threatened
seeking to revoke, cancel or suspend, or to adversely modify, any
thereof. The consummation of the transactions contemplated hereby will
not result in the revocation, cancellation, suspension or adverse
modification of any thereof.
(ix) Tax Matters.
(A) The section of the Seller Disclosure Schedule
corresponding to this Section 3(b)(ix)(C) lists all state, local
and foreign Income Tax Returns filed with respect to either of the
Targets for taxable periods ended on or after May 28, 1995,
indicates which of those Income Tax Returns have been audited, and
indicates which of those Income Tax Returns are currently the
subject of audit.
(B) Neither of the Targets is a party to any tax allocation
or sharing agreement which allocates tax liability to the Targets
independently of the allocation elected under Treasury Regulation
Section 1.1552-1. With respect to taxable periods beginning on or
after January 1, 1988, neither of the Targets (A) has been a
member of an Affiliated Group filing a consolidated U.S. federal
Income Tax Return (other than a group the common parent of which
was the Seller) or (B) has any liability for the taxes of any
Person (other than any of the Seller and its Subsidiaries) under
Reg.
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<PAGE> 28
Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or
otherwise.
(C) Each of DFVC and Holding Company is a member of a
selling consolidated group (within the meaning of Section
338(h)(10)(A)(i) of the Code) of which the Seller is the common
parent.
(D) The Targets have each timely filed all tax and
information returns required to be filed and paid (or the Seller
has paid or caused to be paid on behalf of the Targets), or have
accrued on their respective books and set up adequate reserves for
the payment of, all Taxes reflected on such returns or required to
be paid in respect of the periods covered by such returns and have
accrued on their respective books and set up an adequate reserve
for the payment of all Taxes anticipated to be payable in respect
of periods through the end of the calendar month preceding the
date hereof. Neither Target is delinquent in the payment of any
Taxes, assessment or governmental charge. No deficiencies for any
Taxes have been proposed, asserted or assessed against either
Target that have not been resolved or settled, and no requests for
waivers of the time to assess any Taxes against either Target are
pending or have been agreed to. Neither of Targets is currently
the subject of an audit or examination of any of its tax returns
by the Internal Revenue Service or any state, municipal or other
taxing authority. Neither Target is a party to any action or
proceeding by any Governmental Entity for the assessment or the
collection of Taxes. Deferred taxes of each Target have been
accounted for in accordance with GAAP.
(E) Each of the Targets has withheld amounts from its
employees and stockholders in compliance with the tax withholding
provisions of applicable federal, state and local laws, has filed
all federal, state and local returns and reports for all periods
for which such returns or reports are due with respect to income
tax withholding, social security, unemployment taxes, income and
other Taxes (and all payments or deposits with respect to such
taxes have been timely made) and has notified all employees and
stockholders of their obligations to file all forms, statements
and reports with it in accordance with applicable federal, state
and local tax laws and have taken reasonable steps to insure that
such employees and stockholders have filed all such forms,
statements and reports with it.
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(x) Real Property.
(A) The section of the Seller Disclosure Schedule
corresponding to this Section 3(b)(x)(A) lists all real property
that either of the Targets owns (the "Owned Premises"). With
respect to each such parcel of owned real property:
i. the identified owner has good and marketable title to
the parcel of real property, free and clear of any Security
Interest, easement, covenant or other restriction, except for
Security Interests, easements, covenants and other
restrictions which have been disclosed by the Title Insurance
Commitment for the respective real property and other
easements and restrictions existing generally with respect to
properties of a similar character which do not affect
materially and adversely the current use, occupancy or value,
or the marketability of title, of the property subject
thereto (provided that for purposes of indemnification
pursuant to Section 8 the representations and warranties
contained in this Section 3(b)(x)(A)(i) shall be deemed made
as if the items described on Exhibit C were not included in
the Title Commitments);
ii. there are no pending or, to the Knowledge of the
Seller, threatened condemnation proceedings, lawsuits or
administrative actions relating to the property or other
matters affecting materially and adversely the current use,
occupancy or value thereof;
iii. there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any
portion thereof or interest therein; and
iv. there are no parties (other than the respective
Target) in possession of the parcel of real property, other
than tenants under any leases disclosed in the section of the
Seller Disclosure Schedule corresponding to Section
3(b)(x)(B) who are in possession of space to which they are
entitled.
(B) The section of the Seller Disclosure Schedule
corresponding to this Section 3(b)(x)(B) lists all real property
leased or subleased to or by either of the Targets (the "Leased
Premises").
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(C) None of the businesses conducted by either of the
Targets on any of the Owned Premises or Leased Premises, and, to
the Knowledge of the Seller, none of the improvements included in
the Owned Premises or the Leased Premises, is in material
violation of any building line or use or occupancy restriction,
limitation, condition or covenant of record, any zoning or
building law, code or ordinance, or any public utility or other
easement.
(D) The Seller has delivered or caused to be delivered to
the Buyer (i) copies of recent ALTA (or equivalent) title
insurance commitments with respect to each of the Owned Premises,
other than the Mexican Premises and the Brillion, Cedar Grove and
Ft. Atkinson, Wisconsin facilities, committing to insure title in
such real estate, subject in each case only to the exceptions
contained therein (collectively, the "Title Insurance
Commitments"). The Seller has delivered or caused to be delivered
to the Buyer correct and complete copies of all existing title
insurance policies and surveys in the possession or control of the
Seller with respect to the Owned Premises.
(xi) Personal Property. Each of the Targets has good title to, or
a valid leasehold in, or a contractual or common law right to use, all
of the personal property it uses in the conduct of its business, free
and clear of all Security Interests.
(xii) Intellectual Property.
(A) Neither of the Targets has infringed upon,
misappropriated or violated any Intellectual Property rights of
third parties, nor has either of the Targets received any
complaint, claim, demand or notice alleging any such infringement,
misappropriation or violation (including any claim that either of
the Targets must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the
Seller, no third party has infringed upon, misappropriated or
violated any Intellectual Property rights of either of the Targets
in any respect.
(B) The section of the Seller Disclosure Schedule
corresponding to this Section 3(b)(xii)(B) identifies each patent
or registration which has been issued to either of the Targets
with respect to any of the Intellectual Property of the Targets
and identifies each pending patent application or application for
registration which either of the Targets has made with respect to
any of the Intellectual Property of the Targets (the "Targets'
Intellectual Property"). The section of the Seller Disclosure
Schedule corresponding to this Section 3(b)(xii)(B) also
identifies each license, agreement or other permission which
either of the Targets has granted to any third party with
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respect to any of the Targets' Intellectual Property (together
with any exceptions). The Seller has made available to the Buyer
correct and complete copies of all such patents, registrations,
applications, licenses, agreements and permissions (as amended to
date). The section of the Seller Disclosure Schedule corresponding
to this Section 3(b)(xii)(B) also identifies each trade name or
trademark of a third party used by either of the Targets in
connection with its business, other than any trade names or
trademarks of third parties used by either of the Targets under
private label arrangements for such third parties. With respect to
each item of the Targets' Intellectual Property required to be so
identified in the Seller Disclosure Schedule: (i) the relevant
Target possess all right, title and interest in and to the item,
free and clear of any Security Interest, license or other
restriction; (ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge; (iii) no
action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the Knowledge of the
Seller, threatened against either of the Targets which challenges
the legality, validity, enforceability, use or ownership of the
item; and (iv) neither of the Targets has ever agreed to indemnify
any Person for or against any infringement, misappropriation or
other conflict with respect to the item.
(C) The section of the Seller Disclosure Schedule
corresponding to this Section 3(b)(xii)(C) identifies each item of
Intellectual Property that any third party (other than Seller)
owns or licenses as licensee and that either of the Targets uses
pursuant to license, sublicense, agreement or permission, other
than any trade names or trademarks of third parties used by either
of the Targets under private label arrangements for such third
parties. With respect to each item of Intellectual Property
required to be so identified in the Seller Disclosure Schedule,
neither of the Targets has granted any sublicense or similar right
with respect to the license, sublicense, agreement or permission.
(xiii) Sufficiency of Assets. The assets owned or leased by the
Targets or which the Targets have a contractual right to use, together
with Seller's Target-Related Intellectual Property, include all of the
assets necessary for the conduct of the Targets' businesses as
conducted on the date of this Agreement.
(xiv) Inventory. The inventory of each of the Targets is of a
quality and quantity which is usable or saleable in the ordinary course
of its business, except to the extent of the reserve for inventory
writedown reflected in the Most Recent Balance Sheet as adjusted in
accordance with past custom and practice for operations and
transactions through the Closing Date. Each ingredient and finished
product included in the inventory of each of the Targets: (i) complies
in all material respects
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with (x) the FDC Act and all acts amending or supplementing the FDC Act
(including, without limitation, the Food Additive Amendment of 1958),
and (y) the pure food and drug laws of each and all states of the
United States into which any such product would normally be shipped by
the respective Target, (ii) is not adulterated or misbranded within the
meaning of the FDC Act or such state laws, (iii) is not prohibited from
being introduced into interstate commerce under the provisions of
Sections 404 or 505 of the FDC Act, and (d) does not contain a
hazardous substance or a banned substance.
(xv) Contracts. The section of the Seller Disclosure Schedule
corresponding to this Section 3(b)(xv) lists the following contracts
and other agreements to which either of the Targets is a party:
(A) any partnership, joint venture or other similar
agreement or arrangement;
(B) any agreement concerning confidentiality or
noncompetition;
(C) any agreement with the Seller or an Affiliate of the
Seller (other than between the Targets);
(D) any employment agreement or change in control agreement
with any of its directors, officers or employees;
(E) any collective bargaining agreement;
(F) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the
borrowing of money or any related security agreement;
(G) any agreement under which it has advanced or loaned any
amount to any of its directors, officers and employees other than
the advance or reimbursement of reasonable business expenses
incurred or to be incurred in the ordinary course of business;
(H) any agreement under which either of the Targets is
lessee or lessor of or holds or operates any real property;
(I) any agreement under which either of the Targets is
lessee or lessor of or holds or operates any material personal
property;
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(J) any warehouse agreement;
(K) any agreement for the sale or purchase of products or
services other than purchase or sale orders entered into in the
ordinary course of business;
(L) any agreement under which a sale of any of the Owned
Premises is pending;
(M) any environmental indemnity agreement for the benefit of
a party other than either of the Targets;
(N) any license, sublicense, agreement or permission (as
licensee or licensor) with respect to any of Targets' Intellectual
Property;
(O) any co-pack, tolling or supply agreement; or
(P) any other agreement or group of related agreements with
the same party involving more than $250,000 per year and not
terminable by the Target that is a party thereto on 6 months' or
less notice without penalty.
The Seller has made available to the Buyer a correct and complete copy of each
such contract or agreement. With respect to each such contract or agreement
(insofar as the following relates to any party thereto other than a Target, to
the Knowledge of the Seller): (i) the contract or agreement is in full force and
binding upon the parties thereto; (ii) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification or acceleration, under the
contract or agreement; and (iii) no party has repudiated any provision of the
contract or agreement. The Seller has also made available to the Buyer a written
summary of the significant terms (other than with respect to pricing and
specifications) of the letter agreement, dated June 15, 1998, by and between the
Seller and Ball Corporation (relating to the supply of cans to the Seller).
(xvi) Notes and Accounts Receivable. The notes and accounts
receivable of each of the Targets are reflected properly on its books
and records, are valid receivables subject to no setoffs or
counterclaims, are collectible at their aggregate face amount, except
to the extent of the allowances for deductions and the reserve for bad
debts reflected in the Most Recent Balance Sheet as adjusted in
accordance with past custom and practice for operations and
transactions through the Closing Date.
(xvii) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of either of the Targets.
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(xviii) Insurance. The section of the Seller Disclosure Schedule
corresponding to this Section 3(b)(xviii) contains a description of all
policies of fire, liability, workers' compensation and other forms of
insurance providing insurance coverage to or for either of the Targets,
and the name of the owner of each such policy. All premiums with
respect thereto have been paid when due and no notice of cancellation
or termination has been received with respect to any such policy. All
such policies and the coverage provided thereunder will continue to be
in full force and effect through the Closing Date (but, except in the
case of coverage under those policies owned solely by either of the
Targets, if any, the coverage provided to or for the Targets thereunder
may be canceled as of the Closing Date). No such insurer has any right
of payment, whether by way of set-off, indemnity or otherwise, of any
nature whatsoever, against either Target in respect of any recovery
under any such policy.
(xix) Litigation. The section of the Seller Disclosure Schedule
corresponding to this Section 3(b)(xix) sets forth each instance in
which either of the Targets: (i) is subject to any outstanding
injunction, judgment, order, decree, ruling or charge or (ii) is a
party to any action, suit, proceeding, hearing or investigation of, in
or before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction. The section of the
Seller Disclosure Schedule corresponding to this Section 3(b)(xix) also
sets forth all actions, suits, proceedings, hearings or investigations
of, in or before any court or quasi-judicial or administrative agency
of any federal, state, local or foreign jurisdiction with which, to the
Knowledge of the Seller, either of the Targets has been threatened.
(xx) Arbitration. Neither of the Targets is a party to, or bound
by, any decree, order or arbitration award (or agreement entered into
in any administrative, judicial or arbitration proceeding) with respect
to or affecting its properties, assets, personnel or business
activities.
(xxi) Product Warranty. Neither of the Targets has made any oral
or written warranties with respect to the quality or absence of defects
of its products which it has sold and which are in force as of the date
hereof. There are no claims pending or, to the Knowledge of the Seller,
anticipated or threatened against either of the Targets with respect to
the quality of or absence of defects in such products. Neither of the
Targets has paid or been required to pay direct, incidental or
consequential damages to any person in connection with any of such
products.
(xxii) Employees. To the Knowledge of the Seller, no executive,
key employee or significant group of employees plans to terminate
employment with
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<PAGE> 35
either of the Targets during the next 12 months. Neither of the Targets
has experienced any strike or material grievance, claim of unfair labor
practice, or other collective bargaining dispute within the past two
years. To the Knowledge of the Seller, there is no organizational
effort presently being made or threatened by or on behalf of any labor
union with respect to employees of either of the Targets.
(xxiii) Top Customers. The section of the Seller Disclosure
Schedule corresponding to this Section 3(b)(xxiii) sets forth a
complete and correct list of the top 10 customers by dollar volume of
the Targets, taken as a whole, during the fiscal year ended May 31,
1998. Except in the ordinary course, to the Knowledge of the Seller
none of such customers intends to cease doing business with either of
the Targets or to significantly reduce the general level of business it
is currently doing with either of the Targets.
(xxiv) Employee Benefits. The section of the Seller Disclosure
Schedule corresponding to this Section 3(b)(xxiv) lists each Employee
Benefit Plan of either of the Targets in which the employees of the
Targets participate on the date hereof. The Seller has made available
to the Buyer true and correct copies (or summaries) of all such
Employee Benefit Plans. Except as set forth in the section of the
Seller Disclosure Schedule corresponding to this Section 3(b)(xxiv),
DFVC does not participate in or contribute to any Employee Benefit Plan
that is a Multiemployer Plan. DFVC has not incurred any liability to
the PBGC, the Internal Revenue Service, any Multiemployer Plan or
otherwise with respect to any Employee Pension Benefit Plan currently
or previously maintained by members of the controlled group of
companies (as defined in Sections 414(b) and (c) of the Code) that
includes the Seller (the "Controlled Group") that has not been
satisfied in full, and no condition exists that presents a material
risk to any member of the Controlled Group of incurring such a
liability, other than any liability for premiums due to the PBGC. The
Targets would not incur any withdrawal liability under any
Multiemployer Plan of the Targets if a complete withdrawal were to
occur under such Plan as of the Closing Date. No payment (excluding any
payment the right to which was created subsequent to the Closing Date)
that will be made by any Target to any DFVC Continued Employee after
the Closing Date on account of the transactions contemplated by this
Agreement will be non-deductible to the Targets or subject to excise
tax, under Code Section 280G or Code Section 4999, nor will any Target
be required to "gross up" any DFVC Continued Employee because of the
imposition of such excise tax. The Seller will make available to the
Buyer within 30 days after the date of this Agreement information
regarding the post-retirement medical benefits currently provided to
employees of the Targets and the obligations existing under FAS 106
with respect to such employees.
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<PAGE> 36
Each Employee Benefit Plan which is maintained by Birds Eye Mexico (the "Foreign
Plans") has been maintained and administered in all material respects in
accordance with all applicable laws.
(xxv) Guaranties. Neither of the Targets is a guarantor or
otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person.
(xxvi) Environmental and Public Safety Matters.
(A) Each of the Targets and, to the Knowledge of the Seller,
its predecessors has complied in all material respects and is in
compliance in all material respects with all Environmental
Requirements.
(B) Without limiting the generality of the foregoing, each
of the Targets has obtained, has complied in all material respects
with and is in compliance in all material respects with all
material permits, licenses and other authorizations required to be
obtained by it pursuant to Environmental Requirements applicable
to its Owned Premises and Leased Premises.
(C) Neither of the Targets has received any written or oral
notice, report or other information regarding any actual or
alleged violation of Environmental Requirements, or any actual or
alleged liabilities or potential liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, under any
Environmental Requirements, relating to any of the Owned Premises
or Leased Premises.
(D) None of the following exists at any of the Owned
Premises or Leased Premises: (1) underground storage tanks, (2)
asbestos-containing material in any friable and damaged form or
condition, (3) materials or equipment containing polychlorinated
biphenyls or other hazardous substances or (4) landfills, surface
impoundments or disposal areas.
(E) Neither of the Targets has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or
released any substance, including without limitation any hazardous
substance, or owned or operated any property or facility, in a
manner that has given or would give rise to any liability,
including any liability for response costs, corrective action
costs, personal injury, property damage, natural resources damages
or attorney fees, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or the
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Solid Waste Disposal Act, as amended ("SWDA"), or any other
Environmental Requirements; nor, to the Knowledge of the Seller,
has any predecessor of either of the Targets done so.
(F) This Section 3(b)(xxvi) contains the sole and exclusive
representations and warranties of the Seller with respect to
environmental and public safety matters, including without
limitation any arising under any Environmental Requirements, to
the exclusion among others of the Seller's representations and
warranties in Section 3(b)(vii).
(xxvii) Certain Business Relationships With the Seller and Its
Affiliates. Neither of the Targets has been involved in any business
arrangement or relationship (including without limitation any support
service arrangement) with the Seller or any of its Affiliates other
than the Targets within the past 12 months, and the Seller and such
Affiliates do not own any material asset, tangible or intangible (other
than Seller's Target-Related Intellectual Property), which is used in
the business of either of the Targets.
(xxviii) Undisclosed Liabilities. To the Knowledge of the Seller,
all of the obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due,
and regardless of when asserted) that would have been required to be
reflected, disclosed or reserved against in the Most Recent Balance
Sheet, in accordance with the accounting practices of the Seller, have
been so reflected, disclosed or reserved against in such Balance Sheet,
or in the notes thereto.
(xxix) Books and Records. The corporate records books, transfer
books and stock ledgers of the Targets are complete and accurate in all
material respects and reflect all meetings, consents and other material
actions of the organizers, incorporators, stockholders, boards of
directors, and committees of the boards of directors of each of the
Targets, and all transactions in their respective capital stocks, since
their respective inception.
(xxx) Annual Incentive Bonus Plan. The Seller's Annual Incentive
Bonus Plan for its 1999 fiscal year, insofar as it relates to employees
of the Targets, has been prepared in accordance with the Seller's past
practice and custom.
(xxxi) Year 2000 Compliance. To the Knowledge of the Seller, the
amounts budgeted by the Targets for fiscal year 1999 with respect to
ensuring that the computer systems (including all hardware, software,
firmware, operating systems and application programs) owned by the
Targets are year 2000 compliant are sufficient
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<PAGE> 38
to bring the computer systems owned by the Targets as of the date of
this Agreement into year 2000 compliance.
(xxxii) Disclosure. No representation or warranty by the Seller in
this Agreement or in any document, written statement, certificate or
schedule required to be furnished to the Buyer pursuant hereto or in
connection with the transactions contemplated hereby, contains any
untrue statement of a material fact.
4. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that, subject in the case of the representations and
warranties in each particular section below to the exceptions set forth in the
corresponding section of the Buyer Disclosure Schedule:
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. The Buyer has full corporate power
and corporate authority to execute and deliver this Agreement and all other
agreements contemplated hereby to which the Buyer is or is to be a party and to
perform its obligations hereunder and thereunder. The board of directors of the
Buyer has duly approved this Agreement and all other agreements contemplated
hereby to which the Buyer is or is to be a party and has duly authorized the
Buyer's execution and delivery of this Agreement and all such other agreements
and the consummation of the transactions on the part of the Buyer contemplated
hereby and thereby. This Agreement and all such other agreements constitute the
valid and legally binding obligations of the Buyer, enforceable in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy or other laws affecting creditor's rights generally and limitations
on the availability of equitable remedies.
(c) Noncontravention. Neither the execution and delivery of this
Agreement and the other agreements contemplated hereby to which the Buyer is or
is to be a party, nor the consummation of the transactions on the part of the
Buyer contemplated hereby and thereby, (i) violates any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to which the Buyer
is subject (except that no representation or warranty is made with respect to
any antitrust statute, regulation, rule or other restriction) or any provision
of the charter or bylaws (or similar governing documents) of the Buyer or (ii)
conflicts with, results in a breach of, constitutes a default under, results in
the acceleration of, creates in any party the right to accelerate, terminate,
modify or cancel, or requires any notice under, any agreement, contract, lease,
license, instrument or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject (or results in the
imposition of any Security Interest upon any of its assets). The Buyer does not
need to give any notice to, make any filing with or obtain any authorization,
consent or approval of, any government or governmental agency in order for the
Parties to consummate the transactions
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contemplated by this Agreement, other than in connection with the provisions of
the Hart-Scott-Rodino Act.
(d) Brokers' Fees. Neither the Buyer nor any of its Subsidiaries has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement for
which the Seller or any of its Subsidiaries could become liable or obligated.
(e) Financing. The Buyer has furnished to the Seller correct and
complete copies of written confirmations from third parties which provide the
Buyer with adequate financing in connection with the transactions contemplated
by this Agreement (excluding any financing that would be required if the All
Cash Alternative becomes applicable), and the Buyer shall provide to the Seller
on or before August 10, 1998 correct and complete copies of (i) a written
agreement from a third party which provides the Buyer with adequate financing to
consummate the transactions contemplated by this Agreement (excluding any
financing that would be required if the All Cash Alternative becomes applicable)
and (ii) a highly confident letter with respect to financing the additional cash
consideration to be paid by the Buyer if the All Cash Alternative becomes
applicable (the form and substance of which written agreement and highly
confident letter shall be reasonably acceptable to the Seller).
(f) Investment. The Buyer understands that the capital stock of DFVC
and Holding Company has not been, and shall not be, registered under the
Securities Act, or under any state securities laws, and is being offered and
sold in reliance upon United States federal and state exemptions for
transactions not involving any public offering. The Buyer acknowledges that it
is acquiring the capital stock of DFVC and Holding Company solely for its own
account for investment purposes, and not with a view to, or intention to effect,
the distribution thereof in violation of the Securities Act or any applicable
state securities laws, and that the capital stock of DFVC and Holding Company
may not be disposed of in contravention of the Securities Act or any applicable
state securities laws. The Buyer represents that it is a sophisticated investor
with knowledge and experience in business and financial matters, is able to
evaluate the risks and benefits of the investment in the capital stock of DFVC
and Holding Company, has received certain information concerning each of the
Targets and has had the opportunity to obtain additional information as desired
in order to evaluate the merits of and the risks inherent in purchasing the
capital stock of DFVC and Holding Company.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties shall use its reasonable best efforts
to take all action and to do all things necessary, proper or advisable in order
to consummate and make effective, as soon as reasonably practicable, the
transactions contemplated by this Agreement (including
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satisfaction, but not waiver of, the closing conditions set forth in Section 7).
The Seller shall take such further action (including the execution and delivery
of such further instruments and documents) as the Buyer reasonably may request
in connection with (i) changing title to the name of DFVC with respect to any
real property which is owned by DFVC but the title to which is not in the name
of DFVC and (ii) removing any Security Interest listed on Exhibit C on any of
the Owned Premises, all at the sole cost and expense of the Seller.
(b) Regulatory Matters and Approvals. Each of the Parties shall (and
the Seller shall cause Dean International, Holding Company and each of the
Targets to) give any notices to, make any filings with, and use its reasonable
best efforts to obtain any authorizations, consents and approvals of,
governments and governmental agencies in connection with the matters referred to
in Sections 3(a)(iii), 3(b)(iii) and 4(c). Without limiting the generality of
the foregoing, the Buyer and the Seller shall each file any Notification and
Report Forms and related material that it may be required to file in connection
with the transactions contemplated by this Agreement with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act, shall each use its reasonable best efforts to
obtain an early termination of the applicable waiting period, and shall each
make any further filings pursuant thereto that may be necessary, proper or
advisable.
(c) Operation of Business of the Targets. The Seller shall cause each
of the Targets to conduct its business only in the ordinary course and
consistent with past practice, including causing each of the Targets to use all
commercially reasonable efforts to preserve intact its present business and
organization, to keep available the services of its current officers and
employees, to preserve its relationships with customers, suppliers and others
having business dealings with it and to maintain in full force and effect all
material contracts, documents and arrangements. The Seller shall also cause each
of the Targets to not make any material change to its inventory management
practices and to manage its inventories in accordance with past custom and
practice. The foregoing notwithstanding, the Parties expressly contemplate and
the restriction contained in the preceding sentence shall not apply to, and
Seller shall be permitted to engage in, the historical practice of the Seller to
sweep cash out of bank accounts of the Targets on a daily basis.
(d) Operation of Business of the Aseptic Business. The Buyer shall
cause the Aseptic Business to conduct its business only in the ordinary course
and consistent with past practice, including causing the Aseptic Business to use
all commercially reasonable efforts to preserve intact its present business and
organization, to keep available the services of its current officers and
employees, to preserve its relationships with customers, suppliers and others
having business dealings with it and to maintain in full force and effect all
material contracts, documents and arrangements. The Buyer shall also cause the
Aseptic Business to not make any material change to its inventory management
practices and to manage its respective inventories in accordance with past
custom and practice.
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(e) Full Access to the Buyer. The Seller shall cause each of the
Targets to permit representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere unreasonably with the
normal business operations of such Target, to all premises, properties,
personnel, books, records (including tax records and accounting work papers),
contracts and documents of or pertaining to such Target. The Buyer shall treat
and hold all information it receives from either of the Targets in the course of
the access contemplated by this Section 5(e) as Proprietary Information.
(f) Full Access to the Seller. The Buyer shall permit representatives
of the Seller to have full access at all reasonable times, and in a manner so as
not to interfere unreasonably with the normal business operations of the Aseptic
Business, to all premises, properties, personnel, books, records (including tax
records and accounting work papers), contracts and documents of or pertaining to
the Aseptic Business. The Seller shall treat and hold all information it
receives from the Buyer in the course of the access contemplated by this Section
5(f) as Proprietary Information.
(g) Notice of Developments. Each Party shall give prompt written
notice to the other in the event its own representations and warranties are
discovered to be untrue as of the time made or in the event such Party
determines that such representations and warranties shall be untrue as if made
at and as of the Closing Date. No disclosure by any Party pursuant to this
Section 5(g), however, shall be deemed to amend or supplement the Seller
Disclosure Schedule or the Buyer Disclosure Schedule or to cure any
misrepresentation or breach of warranty.
(h) Exclusivity to the Buyer. After the execution and delivery of this
Agreement, the Seller shall not (and shall not cause or permit Dean
International, Holding Company or either of the Targets to) solicit, initiate,
participate in discussions of or encourage the submission of any proposal or
offer from any Person relating to any or all of the capital stock of either of
the Targets or of Holding Company or to the acquisition of all or substantially
all of the assets of either of the Targets or of Holding Company (including any
acquisition structured as a merger, consolidation or share exchange). The Buyer
acknowledges that prior to the execution and delivery of this Agreement, the
Seller has solicited indications of interest in and/or bids regarding such
transactions.
(i) Exclusivity to the Seller. After the execution and delivery of
this Agreement, the Buyer shall not solicit, initiate, participate in
discussions of or encourage the submission of any proposal or offer from any
Person relating to the acquisition of all or substantially all of the Aseptic
Business (including any acquisition structured as a merger, consolidation or
share exchange).
(j) Title Insurance Commitments. The Seller will use its commercially
reasonable efforts to obtain and cause to be delivered to the Buyer prior to the
Closing an ALTA (or equivalent) title insurance commitment with respect to each
of the Brillion, Cedar Grove and Ft. Atkinson, Wisconsin Owned Premises and a
certificate of a Governmental Entity of Mexico regarding liens with respect to
the Mexican Premises.
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6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as the other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 8). Each of the
Parties shall, and shall cause its officers, directors, employees and
accountants, and each of its Subsidiaries, to assist and cooperate fully with
the other Party and its officers, employees, accountants, counsel, financial
advisors and other representatives (as reasonably requested), in connection with
the preparation of any reports, schedules and other documents required to be
filed as a result of the transactions contemplated hereunder pursuant to the
requirements of federal and state securities laws, including for illustrative
purposes only, the preparation of audited financial statements and pro forma
financial information in connection with any reporting obligation under Section
13 or 15(d) of the Securities Exchange Act and Form 8-K.
(b) Section 338(h)(10) Election. At the option of the Buyer, and
provided written request is made of the Seller by the Buyer on or before the
Closing, the Seller will join with the Buyer in making an election under Section
338(h)(10) of the Code (and any corresponding elections under state or local tax
law) (collectively a "Section 338(h)(10) Election") with respect to the purchase
and sale of the capital stock of DFVC and Holding Company hereunder, and if such
Election is made by the Buyer, the Purchase Price and the Estimated Cash
Purchase Price shall automatically be increased by an amount equal to exactly
$13,200,000. Any such request to the Seller shall constitute Buyer's
representation and warranty that it is eligible to make the Section 338(h)(10)
Election.
(c) Allocation of Purchase Price. The Parties agree that for tax
purposes: (i) the Seller's Target-Related Intellectual Property will be valued
at $105 million; and (ii) the balance of the Purchase Price will be allocated to
the Holding Company Common Stock and to the Target Shares owned by the Seller
(or, in the event there is a timely Section 338(h)(10) Election, will be
allocated, together with the liabilities of DFVC and other relevant items, to
the assets of Holding Company and DFVC (including the Birds Eye Mexico Series A
Stock and Series B Stock held by Holding Company and DFVC) as the Buyer
determines consistent with the Code and applicable rules and regulations
thereunder). In the event the Purchase Price includes the Aseptic Business, the
value of the Aseptic Business for purposes of the foregoing will be determined
by appraisal as provided in the Asset Transfer Agreement. The Buyer will notify
the Seller of its allocations pursuant to (ii) above no later than 60 days after
the Closing Date. The Seller will have 30 days to review and approve such
allocations, such approval not to be unreasonably withheld or delayed. The
Seller and the Buyer agree to report the allocation of the Purchase Price in a
manner entirely
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<PAGE> 43
consistent with such valuations and allocations and agree to act in accordance
with such valuations and allocations in the preparation of financial statements
and filing of all tax returns (including, without limitation, filing Form 8594
(or Form 8023 in the event a Section 338(h)(10) Election is made by the Buyer
and the Seller) with its Federal income tax return for the taxable year that
includes the date of the Closing) and in the course of any tax audit, tax review
or tax litigation relating thereto.
(d) Retention of and Access to Records. Until the seventh anniversary
of the Closing Date (the "Records Retention Date"), the Buyer shall (and shall
cause each of its Subsidiaries, including the Targets, to) permit the Seller and
its attorneys, accountants, agents and designees such access to, and right to
copy, the records and documents of Holding Company and each of the Targets which
exist at the Closing (regardless of whether such documents or records are in the
possession of Holding Company, a Target, the Buyer or an Affiliate of the Buyer)
as the Seller may deem reasonably necessary or reasonably desirable. Any such
examination and copying shall be at the expense of the Seller, shall be
performed at the place where such records and documents are regularly maintained
and shall not unreasonably interfere with the normal business activities of the
furnishing party. In the event that the Buyer (or any of its Affiliates) intends
to destroy any of such records or documents prior to the Records Retention Date,
it shall so notify the Seller in writing at least 90 days before taking such
action (and the Seller shall have the right to review and remove at its expense
any of such records or documents to be destroyed).
(e) Employees and Employee Benefit Plans.
(i) Subject to the succeeding provisions of this Section 6(e),
the Buyer will cause the Targets to continue in employment immediately
following the Closing Date (or, in the case of an employee within
clause (ii) of this sentence, immediately following the date of his or
her commencement of or return to active employment) (i) each employee
on the Targets' active payroll on the Closing Date and (ii) each
employee of the Targets not on the Targets' active payroll on the
Closing Date on account of an approved leave of absence, disability
leave or layoff if such employee returns to active employment with the
respective Target immediately upon the conclusion of any such leave or
layoff, or within the period required by law or any applicable
collective bargaining agreement (all employees continuing such
employment being referred to herein as "Continued Employees"). Such
continued employment and the benefits to be provided to the Continued
Employees shall recognize the date of hire and time of service with the
respective Target and its Affiliates (and their respective
predecessors) for all purposes except as otherwise expressly provided
in this Section 6(e). Nothing contained in this (i) shall confer upon
any Continued Employee the right to continued employment by the
respective Target for any period of time after immediately after the
Closing Date (or date of commencement of or return to active
employment, as applicable) which is not
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otherwise required by law or the terms of any applicable collective
bargaining agreement. The Targets shall continue to be bound by, and
the Buyer will cause the Targets to honor the terms of, each collective
bargaining agreement which applies to the Continued Employees. The
Buyer shall cause DFVC, at its sole expense, to provide each Continued
Employee with any severance pay and benefits applicable to such
Continued Employee pursuant to Exhibit B.
(ii) Effective as of the Closing Date, the Continued Employees
shall cease to be covered under the employee benefit plans of the
Seller, if any, and shall participate under the employee benefit plans,
programs and policies maintained or established by the respective
Target. Each employee benefit plan, program or policy maintained or
established by either Target with respect to any Continued Employees
shall credit the Continued Employees covered thereby for all purposes
(unless such crediting would result in a duplication of benefits) with
the service that was recognized immediately prior to the Closing Date
under the comparable plan of the Seller or the comparable plan of the
respective Target maintained immediately prior to the Closing and, with
respect to each plan that is an Employee Welfare Benefit Plan, the
Continued Employees shall be covered without regard to any waiting
period or pre-existing condition restriction and shall receive credit
for all deductibles, co-payments and other out-of-pocket expenses
incurred under the Seller's plans during the portion of the applicable
plan year that precedes the Closing Date. The Seller shall use its
reasonable best efforts (i) to assign or otherwise transfer to DFVC any
group policy or contract governing welfare benefits for the DFVC
Continued Employees that is maintained on a stand-alone basis for such
employees and (ii) if requested by the Buyer, in the case of a group
policy or contract governing welfare benefits for DFVC Continued
Employees and other employees of the Seller, to assign or otherwise
transfer to DFVC the portion of the policy or contract covering the
DFVC Continued Employees.
(iii) Effective as of the Closing Date, the Buyer shall cause DFVC
to establish for the DFVC Continued Employees a defined contribution
plan, or make the DFVC Continued Employees eligible for an existing
defined contribution plan of the Buyer, that is qualified under Section
401(a) of the Code (the "DFVC Savings Plan"). Upon the Seller's receipt
of evidence satisfactory to it relative to the establishment or the
availability of the DFVC Savings Plan and that such Plan is qualified
under Section 401(a) of the Code, the Seller shall cause the trustee of
the Seller's Savings Plan to transfer the account balances of the
Continued Employees in the Seller's Savings Plan to the DFVC Savings
Plan, including without limitation, any outstanding participant loans.
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<PAGE> 45
(iv) Effective as of the Closing Date, the Continued Employees
shall cease active participation in the Dean Foods Company Retirement
Plan (the "Seller's Retirement Plan"). The Seller shall retain all
assets of the Seller's Retirement Plan and the liabilities for benefits
of the Continued Employees accrued through the Closing Date under the
Seller's Retirement Plan. Each Continued Employee will be entitled to a
distribution of his or her benefits accrued as of the Closing Date
under the Seller's Retirement Plan after the employee, in addition to
satisfying the otherwise applicable requirements for commencement of
his or her benefits under the terms of such Plan, has retired or is
terminated from employment with DFVC.
(v) The Seller agrees that it shall be solely responsible for the
provision of health care continuation coverage required pursuant to the
terms of COBRA for those former employees of DFVC whose entitlement to
such continuation coverage occurred before the Closing Date. The Buyer
shall cause DFVC, to the extent required, to offer "continuation
coverage" under its group health plans to all Continued Employees and
to comply with all notice and other requirements under COBRA or similar
state statue so that the Seller shall have no liability or obligation
under COBRA or a similar state statue to the Continued Employees as a
result of the transactions contemplated by this Agreement.
(vi) The Buyer shall cause DFVC, for a period of 90 days after the
Closing Date, not to cause any of the Continued Employees to suffer
"employment loss" for purposes of the Worker Adjustment and Retraining
Notification Act and related regulations (the "WARN Act"), if such
employment loss could create any liability for the Seller.
(f) DFVC Name Change. Immediately following the Closing, the Buyer
shall change the name of DFVC to a name which is different from and not
confusingly similar to "Dean Foods Vegetable Company" and which does not contain
the word "Dean." The Buyer acknowledges that, subject to (h) below, neither it
nor Holding Company nor either of the Targets will have any right, title or
interest in or to the name "Dean" or any variation thereof subsequent to the
Closing Date.
(g) Non-Compete. The Seller agrees not to (and to cause its
Subsidiaries not to), during the period of 5 years following the Closing (the
"Non-Compete Period"), directly or indirectly own any interest in, manage,
control, participate in, consult with, render services for or in any manner
engage in, any business engaged in the manufacture or sale of frozen or canned
vegetable products (other than vegetable dips, snack dips, guacamole dips,
pickles or pickle-related products), within any geographical area in which, at
the Closing Date, either of the Targets engages in such business (the
"Non-Compete Businesses"); provided that nothing herein shall prohibit the
Seller and its Subsidiaries from: (i) acquiring any interest in any Person
which, directly or indirectly, engages
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in any of the Non-Compete Businesses and subsequently managing, controlling,
participating in, consulting with or rendering services for such Person or
engaging through such Person in any of the Non-Compete Businesses, so long as
(x) the sale of the products which relate to the Non-Compete Businesses on a
worldwide basis does not account for more than the lesser of (1) $50,000,000 in
sales on an annual basis and (2) 5% of the sales of such Person either
immediately before or after such acquisition or (y) if within 270 days of such
acquisition the Seller disposes of to a Person which is not an Affiliate of the
Seller, or enters into a definitive agreement with a Person which is not an
Affiliate of the Seller to dispose of, that portion of the acquired business
that engages in the Non-Compete Businesses; or (ii) owning less than 20% of the
equity securities or other interest in any Person, provided such ownership is
passive other than the exercise of shareholder rights. If, at the time of
enforcement of this Section, a court holds that the restrictions stated herein
are unreasonable under circumstances then existing, the Buyer and the Seller
agree that the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area. The
Parties agree that money damages would not be an adequate remedy for any breach
of this Section. Therefore, in the event of a breach or threatened breach of
this Section, the Buyer or its successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce, or prevent any violation of, the provisions hereof (without posting
a bond or other security). Seller agrees that the restrictions contained in this
Section are reasonable.
(h) Post-Closing License of Seller's Dean Trademark. Subject to the
terms and conditions of this Section, the Seller grants to the Buyer and the
Targets, for a period of up to 2 years from the Closing Date, the right to use
the Targets' Dean-Related Packaging/Labels on frozen or canned vegetable
products sold by the Targets subsequent to the Closing in accordance with the
past custom and practice of the Targets. The Buyer shall cause any such product
on which any of the Targets' Dean-Related Packaging/Labels is used to be of a
character and quality substantially equivalent to the character and quality of
such product manufactured and sold, or caused to be manufactured and sold, by
the Targets before the Closing Date. The Buyer shall cause the Targets to not
use any other mark, name, style or design in association with any of the
Targets' Dean-Related Packaging/Labels or to in any way alter or modify any of
the Targets' Dean-Related Packaging/Labels (including without limitation any
Seller's Dean Trademark thereon) without the prior written consent of the
Seller. The Buyer shall cause the Targets to destroy and not use any damaged or
imperfect Targets' Dean-Related Packaging/Labels. From time to time upon
reasonable notice, the Seller shall have the right, at its expense, to conduct
inspections during normal business hours of the manufacturing operations of the
Targets to ensure that the Targets are complying with the foregoing obligations.
(i) Settlement of Seller Group Payments. The Seller shall
periodically pay over to the Buyer all payments received by the Seller or any of
its Subsidiaries subsequent to the Closing Date which relate to the receivables
of either of the Targets, net of any deductions taken against the
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<PAGE> 47
receivables of the Seller or any of its Affiliates attributable to either of the
Targets. The amounts of such payments and related deductions attributable to the
Targets shall be as specified by the party making the payment; provided that the
amount of any such payments and deductions not specified by the party making the
payment as relating to either of the Targets shall be determined by the Seller
in good faith subject to the reasonable approval of the Buyer.
(j) Release of IRB Guarantee. Not later than the first anniversary
of the Closing Date, the Buyer shall either (i) cause the Seller to be fully and
forever released in a writing satisfactory to the Seller from all obligations
under the IRB Guarantee or (ii) fully satisfy and discharge all indebtedness to
which the IRB Guarantee relates and provide the Seller with evidence thereof
satisfactory to the Seller.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties of the Seller set forth
in Section 3 shall be true and correct in all material respects at and
as of the Closing Date as if made at and as of the Closing Date, except
for the effects of actions contemplated herein or permitted hereunder;
(ii) if the All Cash Alternative has not become applicable, the
representations and warranties of the Seller set forth in Section 4 of
the Asset Transfer Agreement shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of the
Closing Date, except for the effects of actions contemplated herein or
permitted hereunder or contemplated in or permitted under the Asset
Transfer Agreement;
(iii) the Seller shall have performed and complied in all
material respects with all of its covenants hereunder (and under the
Asset Transfer Agreement unless the All Cash Alternative has become
applicable) that are to be performed or complied with prior to the
Closing;
(iv) no action, suit or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would
(A) prevent consummation of any of the transactions contemplated by
this Agreement (excluding the transfer of the Aseptic Business to the
Seller if the All Cash Alternative has become applicable), (B) cause
any of the transactions contemplated by this Agreement (excluding the
transfer of the
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Aseptic Business to the Seller if the All Cash Alternative has
become applicable) to be rescinded following consummation, (C) affect
materially and adversely the right of the Buyer to own the capital
stock of DFVC and Holding Company and to control Holding Company and
the Targets, (D) affect materially and adversely the right of Holding
Company or DFVC to own the capital stock of Birds Eye Mexico owned by
it or (E) affect materially and adversely the right of the Targets
(taken as a whole) to own their assets and to operate their businesses
(and no such injunction, judgment, order, decree, ruling or charge
shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in Section
7(a)(i)-(iv) is satisfied;
(vi) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act with respect to the
transactions contemplated by this Agreement (excluding the transfer of
the Aseptic Business to the Seller if the All Cash Alternative has
become applicable) shall have expired or otherwise been terminated and
the Parties, Dean International and the Targets shall have received
all other material authorizations, consents, and approvals of
governments and governmental agencies referred to in Sections
3(a)(iii), 3(b)(iii) and 4(c) and in the sections of the Seller
Disclosure Schedule and Buyer Disclosure Schedule corresponding
thereto;
(vii) the Buyer shall have received from the Seller intellectual
property transfer documents in recordable form with respect to the
transfer of the Seller's Target-Related Intellectual Property;
(viii) the Buyer shall have received from the Seller a duly
executed assignment document with respect to the Existing Birds Eye
License Agreement;
(ix) the Buyer shall have received from the General Counsel of
the Seller an opinion as to the respective matters set forth in Exhibit
D attached hereto, based on customary reliance and subject to customary
qualifications and, insofar as such opinion relates to matters of
Wisconsin law, subject to the assumption that Wisconsin law does not
differ from Illinois law to any extent material to such opinion,
addressed to the Buyer, and dated as of the Closing Date;
(x) the Buyer shall have received from special counsel to
Birds Eye Mexico an opinion as to the respective matters set forth in
Exhibit E attached hereto, based on customary reliance and subject to
customary qualifications, addressed to the Buyer, and dated as of the
Closing Date;
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(xi) the Buyer shall have received from each person who is,
immediately prior to the Closing, a director or officer of Holding
Company or either of the Targets and who has been identified to the
Seller by the Buyer in writing at least 20 days prior to the Closing as
being subject to this condition, his written resignation, effective as
of the Closing, from each position as a director or officer of each of
the Targets; and
(xii) all actions to be taken by the Seller, Dean International,
Holding Company and the Targets in connection with consummation of the
transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties of the Buyer set forth
in Section 4 shall be true and correct in all material respects at and
as of the Closing Date as if made at and as of the Closing Date,
except for the effects of actions contemplated herein or permitted
hereunder;
(ii) if the All Cash Alternative has not become applicable, the
representations and warranties of the Buyer set forth in Section 3 of
the Asset Transfer Agreement shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of the
Closing Date, except for the effects of actions contemplated herein or
permitted hereunder or contemplated in or permitted under the Asset
Transfer Agreement;
(iii) the Buyer shall have performed and complied in all
material respects with all of its covenants hereunder (and under the
Asset Transfer Agreement unless the All Cash Alternative has become
applicable) that are to be performed or complied with prior to the
Closing;
(iv) no action, suit or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would
(A) prevent consummation of any of the transactions contemplated by
this Agreement (excluding the transfer of the Aseptic
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Business to the Seller if the All Cash Alternative has become
applicable), (B) cause any of the transactions contemplated by this
Agreement (excluding the transfer of the Aseptic Business to the
Seller if the All Cash Alternative has become applicable) to be
rescinded following consummation or (C) unless the All Cash
Alternative has become applicable, affect materially and adversely the
right of the Seller to own and control the Aseptic Business and to
operate its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(v) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Section
7(b)(i)-(iv) is satisfied;
(vi) the Seller shall have procured all third party
authorizations, consents and approvals required under its credit
facilities identified in the section of the Seller Disclosure Schedule
corresponding to Section 3(a)(iii);
(vii) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act with respect to the
transactions contemplated by this Agreement (excluding the transfer of
the Aseptic Business to the Seller if the All Cash Alternative has
become applicable) shall have expired or otherwise been terminated and
the Parties, Dean International and the Targets shall have received all
other material authorizations, consents, and approvals of governments
and governmental agencies referred to in Sections 3(a)(iii), 3(b)(iii)
and 4(c) and in the sections of the Seller Disclosure Schedule and
Buyer Disclosure Schedule corresponding thereto;
(viii) the Seller and the transferee of its rights in and to the
Birds Eye Dips Trademark shall have entered into the Closing Date Birds
Eye License Agreement;
(ix) the Seller shall have received from the transferee of
Seller's rights as licensor under the Existing Birds Eye License
Agreement a duly executed assumption document with respect to such
License Agreement (and, if applicable, the related guarantee
contemplated in Section 2(c));
(x) the Seller shall have received from special counsel to
the Buyer an opinion as to the respective matters set forth in Exhibit
F attached hereto, based on customary reliance and subject to
customary qualifications, addressed to the Seller, and dated as of the
Closing Date; and
(xi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and
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other documents required to effect the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 7(b) if it executes
a writing so stating at or prior to the Closing.
8. Indemnification.
(a) General. From and after the Closing, the Parties shall be
indemnified as provided in this Section 8. For the purposes of this Section 8,
each Party shall be deemed to have remade all of its representations and
warranties contained in this Agreement at the Closing with the same effect as if
originally made at the Closing; provided that for purposes thereof the Seller
Disclosure Schedule shall be deemed amended to reflect any changes therein
furnished to the Buyer by the Seller in writing in connection with the Closing
that are contemplated herein or permitted herein.
(b) Indemnification of Buyer Indemnitees. The Seller shall
indemnify, save and keep the Buyer and its successors and permitted assigns, and
their respective directors, officers, employees and agents, and the heirs,
executors and personal representatives of each of the foregoing (each a "Buyer
Indemnitee" and collectively the "Buyer Indemnitees"), harmless against and from
all Damages sustained or incurred by any Buyer Indemnitee as a result of or
arising out of:
(i) any inaccuracy in or breach of any representation
and warranty made by the Seller to the Buyer herein or in any other
document executed in connection with the Closing;
(ii) any breach by the Seller of, or failure of the
Seller to comply with, any of the covenants or obligations under
this Agreement to be performed by the Seller (including, without
limitation, the obligations of the Seller under this Section 8);
(iii) any Control Group Liability of the Seller or any
of its Affiliates arising out of events occurring or circumstances
existing prior to the Closing Date which is not directly attributable
to Holding Company or either of the Targets;
(iv) any judgment rendered in, or settlement approved by
the Seller of, the Silage-Related Litigation;
(v) any Income Taxes of Holding Company or the Targets
for which the Seller is responsible under Section 9(a); or
(vi) the Seller's failure to satisfy its obligations
under any Seller Plan.
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<PAGE> 52
(c) Indemnification of Seller Indemnitees. The Buyer shall
indemnify, save and keep the Seller and Dean International and their respective
successors and permitted assigns, and their respective directors, officers,
employees and agents, and the heirs, executors and personal representatives of
each of the foregoing (each a "Seller Indemnitee" and collectively the "Seller
Indemnitees"), harmless against and from all Damages sustained or incurred by
any Seller Indemnitee as a result of or arising out of:
(i) any inaccuracy in or breach of any representation and
warranty made by the Buyer to the Seller herein or in any other
document executed in connection with the Closing;
(ii) any breach by the Buyer, or failure of the Buyer to comply
with, any of the covenants or obligations under this Agreement to be
performed by the Buyer (including, without limitation, the obligations
of the Buyer under this Section 8);
(iii) the operations, acts, omissions or status of Holding
Company or either of the Targets, except to the extent the Seller is
required to provide indemnification under Section 8(b) with respect to
any Damages as a result of or arising out of events occurring or
circumstances existing prior to the Closing Date; or
(iv) the IRB Guarantee.
(d) Limitation on Indemnification Obligations.
(i) All representations and warranties of the Seller and the
Buyer contained in this Agreement, other than any intentional
misrepresentation (which shall not be subject to any survival period),
the representations and warranties of the Seller in Sections 3(b)(ix)
and 3(a)(vii) and any representation and warranty of the Buyer pursuant
to Section 6(b), shall survive the Closing and continue in full force
and effect for a period of 18 months thereafter. Each of the
representations and warranties of the Seller contained in Section
3(b)(ix) and any representation and warranty of the Buyer pursuant to
Section 6(b) shall survive the Closing and continue in full force and
effect until thirty days after the expiration of the statute of
limitations applicable to the subject thereof. Each of the
representations and warranties of the Seller contained in Section
3(a)(vii) shall survive the Closing and continue in full force and
effect thereafter. A claim by a Buyer Indemnitee or a Seller
Indemnitee for indemnification under Section 8(b)(i) or 8(c)(i),
respectively, shall be ineffective unless such Person delivers a
written claim for indemnification within the survival period specified
in this Section 8(d)(i) as applicable to the representation or
warranty that is the subject of such claim.
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<PAGE> 53
(ii) Notwithstanding anything to the contrary contained herein,
(A) the Buyer Indemnitees shall only be entitled to indemnification
pursuant to Section 8(b)(i) once the aggregate amount otherwise payable
to the Buyer Indemnitees pursuant to such Section exceeds an amount
equal to $5,000,000 (the "Threshold Amount"), and after such aggregate
amount exceeds such dollar amount the Buyer Indemnitees shall be
entitled to seek indemnification only for indemnification claims above
the Threshold Amount, and (B) the indemnification to which the Buyer
Indemnitees are entitled pursuant to Section 8(b)(i) shall be subject
to an aggregate ceiling equal to $125,000,000; provided that such
Threshold Amount and such ceiling shall not apply to any breaches of
representation and warranties contained in Sections 3(b)(ix) or
3(a)(vii) or to any intentional misrepresentation.
(e) Cooperation. Subject to the provisions of Section 8(f), the
Indemnifying Party shall have the right, at the Indemnifying Party's own
expense, to participate in the defense of any Third Party Claim, and if said
right is exercised, the Indemnifying Party and the Indemnified Party shall
cooperate in the investigation and defense of said Third Party Claim.
(f) Third Party Claims Subject to Indemnification.
(i) Promptly following the receipt of notice of a Third Party
Claim for which it may seek indemnification hereunder, the party
receiving the notice of the Third Party Claim shall notify the
Indemnifying Party of such Third Party Claim. The failure to give such
notice shall not relieve the Indemnifying Party of its obligations
under this Agreement except to the extent that the Indemnifying Party
is prejudiced as a result of the failure to give such notice. Within 15
business days after receipt of the notice by the Indemnifying Party
pursuant to the preceding sentence, the Indemnifying Party shall notify
the Indemnified Party whether it elects to undertake the defense of the
Third Party Claim. If the Indemnifying Party elects to undertake the
defense of such Third Party Claim, it shall do so at its own expense
with counsel of its own choosing and it shall acknowledge in writing
its indemnification obligations as provided in this Agreement to the
Indemnified Party as to such Third Party Claim. If the Indemnifying
Party elects not to defend such Third Party Claim or fails to pursue
the defense of such Third Party Claim diligently, the Indemnified Party
shall have the right to undertake the defense of such Third Party Claim
through counsel of its own choosing. The Party that defends the Third
Party Claim shall keep the other Party fully advised of the progress
and disposition of such claim.
(ii) In the event the Indemnifying Party elects not to
undertake the defense of a Third Party Claim or fails to pursue
diligently the defense of such claim and the
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Indemnified Party litigates or otherwise contests or settles the Third
Party Claim, then, provided that and to the extent that a final
determination has been made that the Indemnified Party is entitled to
indemnification therefor hereunder, the Indemnifying Party shall
promptly reimburse the Indemnified Party for amounts paid to litigate
or otherwise contest or settle such claim and all amounts paid in
satisfaction of a judgment against the Indemnified Party in contesting
such claim and in providing its right to indemnification hereunder,
all in accordance with the provisions of this Section 8.
(iii) No Third Party Claim will be settled by the Indemnifying
Party or the Indemnified Party without the consent of the other, which
consent will not be unreasonably withheld or delayed; provided,
however, that if such claim asserts that the Indemnifying Party is
jointly and severally liable and the Indemnified Party shall be fully
released from all liability relating to such Third Party Claim in
connection with such settlement, the Indemnifying Party shall not be
required to obtain the consent of the Indemnified Party. If, however,
the Indemnified Party refuses to consent to a bona fide offered
settlement which the Indemnifying Party wishes to accept, the
Indemnified Party shall be required to continue to defend such Third
Party Claim free of any participation by the Indemnifying Party, at the
sole expense of the Indemnified Party. In such event, the Indemnifying
Party shall pay to the Indemnified Party the amount of the offer of
settlement which the Indemnified Party refused to accept, plus the
costs and expenses incurred by the Indemnified Party prior to the date
the Indemnifying Party notifies the Indemnified Party of the offer of
settlement for which the Indemnified Party is entitled to
indemnification, all in accordance with the terms of this Section 8,
and, upon the payment or receipt of such amount, as the case may be,
the Indemnifying Party shall have no further liability with respect to
such Third Party Claim. The Indemnifying Party shall be entitled to
recover from the Indemnified Party any additional expenses incurred by
the Indemnifying Party as a result of the decision of the Indemnified
Party to pursue the matter.
(iv) In lieu of the provisions set forth above, the following
provisions shall apply with respect to the Silage-Related Litigation.
The Seller shall assume and control the defense of the Silage-Related
Litigation with counsel of its own choice. The Seller shall have the
exclusive right to settle any such Litigation. The Buyer and DFVC shall
have no right to participate in the defense of the Silage-Related
Litigation or in connection with any settlement discussions related
thereto or to make any decision or determination in connection
therewith. However, the Buyer will, and will cause DFVC to, cooperate
with the Seller and its counsel in the contest or defense of such
Litigation, including making available their personnel and providing
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such testimony and access to their books and records as shall be
reasonably requested by the Seller, at the sole cost and expense of
the Seller.
(g) Exclusivity.
(i) Except to the extent such limitation is prohibited by law
and such prohibition is not waivable by the Buyer Indemnitees, the
indemnification provisions of this Section 8 shall constitute the
exclusive remedy of the Buyer Indemnitees in connection with this
Agreement or the transactions contemplated herein, including without
limitation for any of the matters described in Sections 8(b). To the
maximum extent permitted by law, each of the Buyer Indemnitees waives
the benefit of any such prohibition.
(ii) Except to the extent such limitation is prohibited by law
and such prohibition is not waivable by the Seller Indemnitees, the
indemnification provisions of this Section 8 shall constitute the
exclusive remedy of the Seller Indemnitees in connection with this
Agreement or the transactions contemplated herein, including without
limitation for any of the matters described in Sections 8(c). To the
maximum extent permitted by law, each of the Seller Indemnitees waives
the benefit of any such prohibition.
9. Tax Matters.
(a) Preparation and Filing of Income Tax Returns.
(i) The Seller will include the income of DFVC (including any
deferred income triggered into income by Reg. Section 1.1502-13 and any
excess loss accounts taken into income under Reg. Section 1.1502-19) on
the Seller's federal consolidated or applicable consolidated or
combined state or local Income Tax return (collectively, "Consolidated
Income Tax Returns") for all periods through the Closing Date and pay
any Income Taxes attributable to such income. For purposes of preparing
all such Consolidated Income Tax Returns, the income of DFVC will be
apportioned to the period up to and including the Closing Date and the
period after the Closing Date by closing the books of DFVC as of the
end of the day on which the Closing occurs.
(ii) The Seller shall prepare or cause to be prepared and file
or cause to be filed all Income Tax returns (other than Consolidated
Income Tax Returns) for the Targets for all periods ending on or prior
to the Closing Date which are filed after the Closing Date and shall
pay all Income Taxes attributable to the taxable income reported on
such Income Tax returns. All such Income Tax returns shall be prepared
and filed in a manner consistent with past practice of the Seller.
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(iii) The Buyer shall prepare or cause to be prepared and file
or cause to be filed any Income Tax returns (other than Consolidated
Income Tax Returns) of the Targets for Tax periods which begin before
the Closing Date and end after the Closing Date. The Buyer shall submit
each such Income Tax return to the Seller for the Seller's review and
approval at least 20 days prior to the due date for filing such Income
Tax return. The Seller shall pay to the Buyer within 10 days after the
date on which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such
Tax period ending at the end of the day on which the Closing occurs.
(iv) Notwithstanding the foregoing, the Seller shall have no
obligation to pay any Income Taxes of either Target that are
attributable to any transaction not in the ordinary course of business
occurring subsequent to the Closing Date. For purposes of this Section
9(a), the income of the Targets will be apportioned to the period up to
and including the end of the day on which the Closing occurs and the
period thereafter by closing the books of the Targets as of the end of
such day. Any credits relating to a Tax period that begins before and
ends after the end of the day on which the Closing occurs shall be
taken into account as though the relevant Tax period ended at the end
of such day. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with the
prior practice of the respective Target.
(b) Income Tax Refunds and Benefits. Any Income Tax refunds that are
received by the Buyer or either of the Targets, and any amounts credited against
Income Tax to which the Buyer or either of the Targets becomes entitled, that
relate to Tax periods or portions thereof ending on or before the end of the day
on which the Closing occurs shall be for the account of the Seller, and the
Buyer shall pay over to the Seller any such refund or the amount of any such
credit within 10 days after receipt thereof or entitlement thereto. The Buyer
will, and will cause the Targets to, cooperate with the Seller in obtaining such
refunds (or reduction in Income Tax liability), including through the filing of
amended Income Tax returns or refund claims. The Seller agrees to reimburse the
Buyer and the Targets for any Income Taxes resulting from the disallowance of
such Income Tax refund or credit on audit or otherwise.
(c) Cooperation on Tax Matters. The Buyer and the Seller shall, and
the Buyer shall cause the Targets to, cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of all
Tax returns pursuant to this Section 9 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include (i) the
retention and (upon the other party's request) provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding, (ii) making available, on a mutually convenient basis, personnel
(including officers, directors, employees and agents) to provide
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additional information and explanation of any material provided hereunder and
(iii) making available, on a mutually convenient basis, personnel reasonably
required as witnesses or for purposes of providing information or documents in
connection with any administrative or judicial proceeding relating to taxes. The
Buyer and the Seller agree, and the Buyer agrees to cause the Targets, (i) to
retain all books and records (including Income Tax Returns and work papers) with
respect to Tax matters pertinent to the Targets relating to any Tax period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Buyer or the Seller, any
extensions thereof) for the respective Tax periods, and to abide by all record
retention agreements entered into with any taxing authority, and (ii) to give
the other party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so requests, to
allow the other party to take possession of such books and records. The Buyer
and the Seller further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant to Section 6043
of the Code and all Treasury Department Regulations promulgated thereunder.
(d) Control Rights. The party responsible under this Agreement for
filing the relevant Income Tax Return shall control any audits by, disputes
with, and administrative, judicial or other proceedings by or against taxing
authorities related thereto. Subject to the preceding sentence, in the event an
adverse determination may result in each party having responsibility for any
amount of Income Taxes under this Agreement, each party shall be entitled to
fully participate in that portion of the proceedings relating to the Income
Taxes with respect to which it may incur liability hereunder. For purposes of
this Section 9(d), the term "participation" shall include (i) participation in
conferences, meetings or proceedings with any tax authority, the subject matter
of which includes an item for which such party may have liability hereunder,
(ii) participation in appearances before any court or tribunal, the subject
matter of which includes an item for which a party may have liability hereunder
and (iii) with respect to the matters described in clauses (i) and (ii),
participation in the submission and determination of the content of the
documentation, protests, memoranda of fact and law, briefs and the conduct of
oral arguments and presentations.
(e) Expenses. The Buyer and the Seller shall bear their own expenses
incurred in connection with audits and other administrative or judicial
proceedings relating to Income Taxes for which such party and its Affiliates are
liable under this Agreement.
(f) Post-Closing Transactions not in the Ordinary Course. The Buyer
and the Seller agree to report all transactions not in the ordinary course of
business occurring after the day on which the Closing occurs on Buyer's federal
income tax return to the extent permitted by Reg. ss.1.1502-76(b)(1)(B). The
Buyer agrees to indemnify the Seller and its Affiliates for any additional
Income Tax owed by the Seller (including Income Tax owed by the Seller due to
this indemnification payment) resulting from any transaction described in the
preceding sentence.
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(g) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
State Gains Tax, New York City Transfer Tax and any similar tax imposed in other
states or subdivisions), shall be paid by the Buyer when due, and the Buyer
will, at its own expense, file all necessary Tax returns and other documentation
with respect to all such transfer, documentary, sales, use, stamp, registration
and other Taxes and fees, and, if required by applicable law, the Seller will,
and will cause its Affiliates to, join in the execution of any such Tax returns
and other documentation.
10. Termination.
(a) Termination of Agreement. Either or both of the Parties may
terminate this Agreement with the prior authorization of its or their board(s)
of directors as provided below:
(i) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing: (A) in the event
the Seller has breached its representations, warranties, covenants or
agreements contained in this Agreement, in any respect material to the
transactions contemplated by this Agreement, the Buyer has notified the
Seller of the breach, and the breach has continued without cure for a
period of 30 days after such notice; (B) if the Closing shall not have
occurred on or before October 15, 1998 by reason of the failure of any
condition precedent under Section 7(a) (unless the failure results
primarily from the Buyer breaching any representation, warranty,
covenant or agreement contained in this Agreement or, unless the All
Cash Alternative has become applicable, in the Asset Transfer
Agreement); or (C) a court of competent jurisdiction or a governmental
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement (excluding the transfer of the Aseptic
Business to the Seller if the All Cash Alternative has become
applicable) and such order, decree, ruling or other action shall have
become final and non-appealable; and
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing: (A) in the event
the Buyer has breached its representations, warranties, covenants or
agreements contained in this Agreement or, unless the All Cash
Alternative has become applicable, in the Asset Transfer Agreement in
any respect material to the transactions contemplated by this
Agreement, the Seller has notified the Buyer of the breach, and the
breach has
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continued without cure for a period of 30 days after such notice; (B)
if the Closing shall not have occurred on or before October 15, 1998
by reason of the failure of any condition precedent under Section 7(b)
(unless the failure results primarily from the Seller breaching any
representation, warranty or covenant contained in this Agreement or,
unless the All Cash Alternative has become applicable, in the Asset
Transfer Agreement); or (C) a court of competent jurisdiction or a
governmental regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement (excluding the transfer of
the Aseptic Business to the Seller if the All Cash Alternative has
become applicable) and such order, decree, ruling or other action
shall have become final and non-appealable.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a), all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach and except for rights and
obligations under the Confidentiality Agreement, which shall survive any such
termination).
11. Miscellaneous.
(a) Press Releases and Public Announcements. Neither Party (nor any
of its Affiliates) shall issue any press release or make any public announcement
or disclosure relating to the subject matter of this Agreement without the prior
written approval of the other Party, which approval shall not be unreasonably
withheld or delayed, unless such disclosure is required by applicable law or
governmental regulation or by order of a court of competent jurisdiction (in
which case prior to making such disclosure the Party which proposes to make such
disclosure shall give written notice to the other Party, describing in
reasonable detail the proposed content of such disclosure, and shall permit the
other Party to review and comment upon the form and substance of such
disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that the
provisions of Section 8 concerning indemnification are intended for the benefit
of the Indemnified Parties and their respective heirs, executors, personal
representatives, successors and assigns.
(c) Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the Party incurring such expenses; provided that (i) the Buyer shall promptly
pay all out-of-pocket expenses incurred by the Seller or any of its
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Subsidiaries in connection with any assistance or cooperation requested by the
Buyer pursuant to the second sentence of Section 6(a) and (ii) the Seller shall
promptly pay all out-of-pocket expenses incurred by the Buyer or any of its
Subsidiaries in connection with any assistance or cooperation requested by the
Buyer pursuant to the second sentence of Section 6(a).
(d) Entire Agreement. This Agreement, the Asset Transfer Agreement
and the Confidentiality Agreement constitute the entire agreement between the
Parties and supersede any prior understandings, agreements or representations by
or between the Parties, written or oral, to the extent they related in any way
to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Party.
(f) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but which together shall constitute
one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be sent by registered or certified mail,
return receipt requested, postage prepaid and addressed to the intended
recipient as set forth below:
If to the Seller:
Dean Foods Company
3600 N. River Road
Franklin Park, IL 60131-2185
Attention: President
With a copy (which shall not constitute notice to the Seller)
to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Attention: Brian D. Hogan, Esq.
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If to the Buyer:
Agrilink Foods, Inc.
90 Linden Place
Rochester, NY 14625
Attn: Dennis M. Mullen, Chief Executive Officer
With a copy (which shall not constitute notice to the
Buyer) to:
Harris Beach & Wilcox, LLP
130 East Main Street
Rochester, NY 14604
Attn: David M. Mehalick, Esq.
or by any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail or electronic mail). No such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims and
other communications to it hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
(j) Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Closing with the prior
authorization of their respective boards of directors. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Parties. No waiver by any Party of any default, misrepre
sentation or breach of warranty or covenant hereunder shall, unless expressly so
provided therein, be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean "including, without limitation." As used in this
Agreement (including any amendments hereto), the masculine, feminine or neuter
gender and the singular or plural number shall be deemed to include the others
whenever the context so requires. For purposes of this Agreement, the Targets
shall be deemed to be Affiliates of the Seller prior to the Closing Date and
Affiliates of the Buyer after the Closing Date.
(m) Incorporation of Exhibits and Disclosure Schedules. The Exhibits
identified in this Agreement, the Seller Disclosure Schedule and the Buyer
Disclosure Schedule are incorporated herein by reference and made a part hereof.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
AGRILINK FOODS, INC.
By: __________________________________
Title: _______________________________
DEAN FOODS COMPANY
By: __________________________________
Title: _______________________________
<PAGE> 64
EXHIBIT A
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (including Schedule A hereto, this "Agreement") is
made on [_____________], 1998, by and between Agrilink Foods, Inc., a New York
corporation ("Licensor"), and Dean Foods Company, a Delaware corporation
("Licensee"). Certain capitalized terms used herein are defined in Section 1.
Recitals:
Pursuant to the Stock Purchase Agreement, dated July 24, 1998, by and
between Licensee and Licensor (the "Stock Purchase Agreement"), Licensee is
transferring to Licensor all of Licensee's right, title and interest in the
trademark set forth on Schedule A attached hereto (the "Trademark").
Licensee is engaged in the vegetable dip, snack dip and guacamole dip
business (the "Continuing Business") and utilizes the Trademark in connection
therewith.
As provided in the Stock Purchase Agreement, Licensee is transferring the
Trademark to Licensor subject to a royalty-free three-year license back to
Licensee of the Trademark for use in the Continuing Business.
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which the parties acknowledge, the parties agree as follows:
1. Definitions
In this Agreement, the following terms shall have the following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Confidential Information" means and includes all information relating to
Dip Products, together with all information concerning any party's business
activities, processes, technology, know-how of every kind, customers, suppliers,
contracts, finances, personnel, research, plans, policies and intentions,
including matters which, though technically not confidential or trade secrets,
might prove prejudicial to the relevant party if disclosed to others.
Confidential Information shall not include information which (a) is or becomes
publicly known otherwise than by a breach of this or any other agreement, (b) is
already known to the disclosing party prior to disclosure by the party
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<PAGE> 65
claiming the information was Confidential Information, (c) is disclosed to the
disclosing party by a third party who has a legal right to make the disclosure
or (d) is required to be disclosed to the public by applicable law. The parties
acknowledge that any party shall be permitted to disclose Confidential
Information required to be disclosed by law to certain governmental authorities
and, in such circumstances, the disclosing party shall take all reasonable steps
to protect the confidentiality of such Confidential Information.
"Dean Logo" means the bird-on-mailbox logo of Licensee, U.S. Reg. Nos.
1,519,979 and 1,342,947.
"Dip Product" means a vegetable dip, snack dip or guacamole dip product
which is presently or hereafter manufactured, distributed or sold by Licensee or
any of its Affiliates.
"Permitted Use" means use of the Trademark in association with the sale of
a Dip Product.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Promotional and Advertising Material" means labels, packages, advertising
brochures, catalogues and other written or graphic material, all media
advertising including television, radio, newspaper and other media advertising
and all other materials upon which the Trademark is placed.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Term" means a term commencing as of the date hereof and ending upon the
third anniversary of the date of this Agreement.
"Territory" means anywhere in the United States or Canada.
2. Grant of Rights
2.1. Subject to the terms and conditions of this Agreement, Licensor
grants to Licensee an exclusive right (including without limitation as against
Licensor) to use the Trademark for any Permitted Use in the Territory during the
Term.
2.2. Licensor shall maintain at its expense the registration of the
Trademark currently in effect as described on Schedule A attached hereto.
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<PAGE> 66
3. No Royalty
3.1. Licensee will have the right to use the Trademark for any Permitted
Use during the Term of this Agreement on a royalty-free basis. Licensee shall
have no obligation to use the Trademark or to sell or attempt to sell any Dip
Products in association with the Trademark.
4. Rights of Ownership
4.1. Licensee acknowledges that:
(a) the Trademark is the exclusive property of Licensor;
(b) nothing in this Agreement gives Licensee any right,
title or interest in or to the Trademark by itself or in
combination with any other words, except in accordance with
this Agreement; and
(c) all use and any goodwill generated through the use of the
Trademark shall enure exclusively to the benefit of
Licensor.
5. Standards
5.1. Dip Products manufactured and sold, or caused to be sold, by
Licensee in association with the Trademark shall be of a character or quality
substantially equivalent to the respective standards, specifications and
operating procedures relating to Dip Products manufactured and sold, or caused
to be sold, by Licensee before the date of this Agreement.
5.2. Licensee shall use the Trademark only for a Permitted Use.
5.3. Licensee shall not use any other mark, name, style or design (other
than the Dean Logo on the back panel of product packaging) in association with
the Trademark without the written consent of Licensor, which consent shall not
be unreasonably withheld. Licensee shall not add to or modify the Trademark
without the prior written consent of Licensor.
5.4. Licensee shall not register or attempt to register the Trademark or
any other mark, name, style or design which is confusingly similar to the
Trademark, but shall fully cooperate with Licensor by providing any and all
information and materials and executing whatsoever documents as may be
reasonably necessary to facilitate the registration, renewal or maintenance of
the Trademark or the enforcement of the Trademark against infringement, as may
be requested by Licensor at the expense of Licensor; and Licensee shall have no
obligation to maintain the Trademark other than providing such information and
materials and executing such documents.
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6. Right to Inspect
6.1. Licensee shall maintain a vigorous quality control and safety
assurance program with respect to Dip Products. From time to time during the
Term and upon reasonable notice, Licensor shall have the right to appoint at its
expense an independent quality inspector or other representative or professional
to conduct inspections during normal business hours of the manufacturing
operations of Licensee for Dip Products on which Licensee uses the Trademark and
to ensure that Licensee is complying with its obligations under this Agreement.
In addition, from time to time during the Term, Licensor shall have the right to
request and receive samples of Licensee's Promotional and Advertising Material
for Dip Products, and to approve of any material changes therein or thereof from
the versions used by the Seller prior to the Closing Date, which approval shall
not be unreasonably withheld or delayed. Licensor shall cause any inspector or
other representative or professional appointed pursuant to this Section to
execute a confidentiality agreement in favor of Licensee, the form of such
confidentiality agreement to be acceptable to Licensee in its reasonable
judgment.
7. Infringement
7.1. Licensee shall promptly notify Licensor of any conflicting use or
any act of infringement, passing-off or unfair competition involving the
Trademark or any marks which may be confusingly similar to the Trademark which
come to Licensee's attention.
7.2. Licensor, at its own expense, shall have the exclusive right to
institute, defend and settle any litigation or proceedings involving the
Trademark. At Licensor's expense, Licensee shall cooperate with Licensor and
shall supply such information and do such acts as are reasonably requested by
Licensor or desirable in relation to any such litigation or proceedings.
Notwithstanding the foregoing, if Licensor fails to pursue or diligently pursue
a claim or action against a third party which is infringing on the Trademark
(each of such determinations to be made in the good faith judgment of Licensee),
Licensee shall have the right to commence litigation or take any other action
against such third party, with counsel of its own choice, at the sole cost and
expense of (and with any recovery for the sole benefit of) Licensee. In such
event, Licensee shall keep Licensor fully advised of the progress and
disposition of such litigation or action. Licensor shall have no right to
participate in any such litigation or other action or in connection with any
settlement discussions related thereto or to make any decision or determination
in connection therewith. Licensor shall cooperate with Licensee and its counsel
as reasonably requested by Licensee, at the sole cost and expense of Licensee.
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8. Indemnity and Recalls
8.1. Licensee shall indemnify Licensor and its successors and assigns,
and their respective directors, officers, employees and agents, and the heirs,
executors and personal representatives of each of the foregoing (the
"Indemnified Parties") in respect of any and all claims, costs, damages, fines,
penalties, expenses and liabilities, including without limitation all economic
losses and all legal and other professional costs, which may be suffered or
incurred by any Indemnified Party, in connection with a claim, demand, action,
suit or proceeding brought by a Person and arising out of or relating to (a) the
manufacture, sale or distribution of any Dip Product bearing the Trademark, (b)
the use or distribution by Licensee or its agents of Promotional and Advertising
Material bearing the Trademark or (c) any product liability matter relating to
any Dip Product bearing the Trademark or any alleged defect or failure or
impurity in any Dip Product or its packaging bearing the Trademark including,
without limitation, all costs of any product recall in connection with any Dip
Product bearing the Trademark and any loss of property, economic loss, bodily
injury or death of any Person relating to any such Dip Product or its packaging;
provided, however, that such indemnification shall not extend to claims that the
Trademark used in accordance with this Agreement infringes the trademark or
copyright rights of third parties. Licensor shall not settle any such matter
without obtaining Licensee's prior written consent to the terms of settlement,
such consent not to be unreasonably withheld.
8.2. The need for any product recall of any Dip Product bearing the
Trademark and the manner in which such product recall shall occur shall be
determined by senior executive officers of Licensee in consultation with senior
executive officers of Licensor. Licensee shall pay the costs of all product
recalls relating to any Dip Product bearing the Trademark. Licensee shall handle
all aspects of any such product recall relating to any Dip Product bearing the
Trademark. In the event of a product recall, Licensor and Licensee shall
mutually agree upon the manner in which all consumer queries and complaints are
to be handled, and Licensee hereby agrees to expressly disclaim, in each
communication required as part of such recall, any association between such
recall and Licensor's vegetable business which uses the Trademark.
9. Termination
9.1. If one party is in material default of its obligations under this
Agreement, the other party may give notice in writing to the defaulting party
requiring the defaulting party to remedy the default within 30 days. If the
defaulting party fails to remedy the default within 30 days, the other party may
terminate this Agreement by notice in writing to the defaulting party effective
on the date of delivery of the written notice in accordance with this Agreement.
9.2. If Licensee files a petition under any federal or state bankruptcy
or insolvency law seeking reorganization, arrangement or any other relief
thereunder, or a petition is filed against Licensee under any federal or state
bankruptcy or insolvency law, or Licensee makes an assignment
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for the benefit of creditors or seeks or consents to the appointment of a
receiver, liquidator or trustee, or a receiver, liquidator or trustee is
appointed for Licensee or its property, or Licensee otherwise demonstrates an
inability to pay its debts as they become due, then this Agreement shall
terminate automatically.
9.3. This Agreement shall terminate at the end of the Term.
10. Consequences of Termination
10.1. Upon termination of this Agreement, Licensee shall:
(a) immediately cease all use of the Trademark and thereafter
shall not sell any products bearing the Trademark; and
(b) immediately cease use of the Promotional and Advertising
Material which is in Licensee's possession, power or
control.
11. Disclosure of Confidential Information
11.1. The parties agree that they shall not, directly or indirectly, at
any time either during the continuance of this Agreement or at any time
following the termination hereof, disclose or use any Confidential Information
which they acquire or learn by reason of this Agreement.
11.2. The parties acknowledge that a breach of this Section of this
Agreement by any party may cause irreparable harm and in the event of such a
breach, the nondefaulting party may seek immediate equitable and other relief
from a court of competent jurisdiction upon proof of such breach.
12. Amendments and Waivers
The parties may mutually amend any provision of this Agreement. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the parties. No waiver by any party of any
default, misrepresentation or breach of warranty or covenant hereunder shall,
unless expressly so provided therein, be deemed to extend to any prior or subse
quent default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
occurrence.
13. Headings
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
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14. Governing Law
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Illinois without giving effect to any choice
or conflict of law provision or rule (whether of the State of Illinois or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois.
15. Notices
All notices, requests, demands, claims and other communications
hereunder shall be in writing. Any notice, request, demand, claim or other
communication hereunder shall be sent by registered or certified mail, return
receipt requested, postage prepaid and addressed to the intended recipient as
set forth below:
If to Licensor:
Agrilink Foods, Inc.
90 Linden Place
Rochester, NY 14625
Attn: Mr. Dennis M. Mullen, Chief Executive Officer
With a copy (which shall not constitute notice to Licensor)
to:
Harris Beach & Wilcox, LLP
130 East Main Street
Rochester, NY 14604
Attn: David M. Mehalick, Esq.
If to Licensee:
Dean Foods Company
3600 N. River Road
Franklin Park, IL 60131-2185
Attention: President
With a copy (which shall not constitute notice to Licensee)
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Attention: Brian D. Hogan, Esq.
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or by any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail or electronic mail). No such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims and
other communications to it hereunder are to be delivered by giving the other
party notice in the manner herein set forth.
16. Independent Contractors
The relationship between the parties is that of independent contractors.
Nothing contained in this Agreement shall be deemed to create a partnership,
association, joint venture or agency between the parties.
17. Extended Meanings
The use of the singular in this Agreement shall include the plural and vice
versa.
18. Entire Agreement
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements or representations by or between the parties, written or oral, to the
extent they relate in any way to such subject matter.
19. Other Limitations
Notwithstanding anything to the contrary contained in this Agreement,
Licensor shall be excused from its obligations under Section 2 of this Agreement
to the extent that there is any infirmity in the Trademark or its registration
listed on Schedule A attached hereto as of the date of this Agreement or the use
of the Trademark by Licensee as of the date of this Agreement or thereafter
infringes the rights of any third party.
20. Severability
Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
21. Assignment
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Either party may assign this Agreement in connection with the transfer or
sale of all or substantially all of its business to which the Trademark relates,
with the prior written consent of the other party, or the merger or
consolidation of that party with or into another entity, without the prior
written consent of the other party. In addition, Licensee may assign this
Agreement, or sublicense any of its rights under this Agreement, to any of its
Affiliates, and shall promptly thereafter notify the Licensor of any such
assignment. This Agreement shall be binding upon any permitted assignee or
successor of either party and any permitted sublicensee of Licensee. No
assignment by either party or sublicense by Licensee shall relieve the assignor
or sublicensor from its obligations hereunder.
22. Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed an original but which together shall constitute one and the same
instrument.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
AGRILINK FOODS, INC.
By ___________________________________
Title: _______________________________
DEAN FOODS COMPANY
By ___________________________________
Title: _______________________________
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SCHEDULE A
TRADEMARK
MARK REGISTRATION NO.
"BIRDS EYE" U.S. Reg. No. 1,982,485
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EXHIBIT B
Continued Employee Severance Pay and Benefits
1. Entitlement to Severance Benefits. An Employee shall be entitled
to the Benefits set forth in Section 2 below (a) upon any involuntary
termination of his or her employment with DFVC at or subsequent to the Closing
Date, unless such termination is due to his or her death or is a termination by
DFVC for Cause or Disability, or (b) upon any voluntary termination of his or
her employment with DFVC at or subsequent to the Closing Date (other than
voluntary retirement) that is for Good Reason; provided in either case that the
termination occurs, with respect to any VP Employee, within two years after the
Closing Date and, with respect to any other Employee, within one year after the
Closing Date.
2. Amount of Severance Benefits. The Benefits payable to each VP
Employee under the circumstances set forth in Section 1 shall be equal to:
(a) an amount equal to 2 times Compensation, which amount
shall be payable in cash in equal monthly installments
over the 24 month period beginning in the first month
immediately following such termination;
(b) continued DFVC-provided medical, dental and life insurance
coverage for two years after the date employment ends, on
the same basis the VP Employee received such coverage
immediately prior thereto (or, if more favorable to the VP
Employee, on the same basis the VP Employee received such
coverage immediately prior to the Closing Date); and
(c) prompt reimbursement of out-placement fees up to $10,000.
The Benefits payable to each Optionee Employee under the
circumstances set forth in Section 1 shall be equal to:
(a) an amount equal to 1 times Compensation, which amount
shall be payable in cash in equal monthly installments
over the 24 month period beginning in the first month
immediately following such termination; and
(b) continued DFVC-provided medical, dental and life insurance
coverage for one year after the date employment ends, on
the same basis the Optionee Employee received such
coverage immediately
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prior thereto (or, if more favorable to the Optionee
Employee, on the same basis the Optionee Employee received
such coverage immediately prior to the Closing Date).
The Benefits payable to each Other Employee under the circumstances set
forth in Section 1 shall be equal to:
(a) an amount equal to 1.5 times Weekly Compensation times the
number of completed years of service with DFVC (and
related companies) and its predecessors as of the date of
termination, which amount shall be payable in cash in
equal monthly installments over the 24 month period
beginning in the first month immediately following such
termination.
In addition to the foregoing, under the circumstances set forth in
Section 1, the Buyer will also cause DFVC to pay in cash to each Employee who
immediately prior to the Closing Date is a participant in the Seller's Annual
Incentive Bonus Plan an amount equal to (a) the pro rata portion (based on days
elapsed since the next preceding last Saturday in May) of the target bonus for
such Employee under any incentive bonus plan in which such Employee participates
at the time of such termination or (b) if such termination occurs on or prior to
May 29, 1999, and if such amount is greater than the amount described in (a),
the amount accrued for the Seller's 1999 fiscal year under the Seller's Annual
Incentive Bonus Plan as of the Closing Date with respect to such Employee, which
amount shall be payable promptly following May 29, 1999; provided that if the
employment of any such Employee is terminated prior to May 29, 1999 for any
reason other than by a Target for Cause, such bonus payment shall be made
immediately following such termination.
3. Voluntary Termination for Good Reason. Voluntary termination by
the Employee for Good Reason means termination due to the occurrence of one or
more of the following events:
(a) a material adverse change in the Employee's duties or job
responsibilities without the Employee's express written
consent;
(b) a reduction in the Employee's base salary or target
incentive compensation without the Employee's express
written consent;
(c) a material reduction, in the aggregate, in the kind or
level of employee benefits or fringe benefits to which the
Employee was entitled immediately prior to the Closing
Date, other than under equity purchase or equity awards
plans and provided that the substitution of a nonqualified
plan
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<PAGE> 77
or arrangement for a qualified plan or arrangement in and
of itself shall not be deemed to involve a change in
benefits; or
(d) the Buyer or DFVC requiring the Employee to relocate the
Employee's office to a place more than fifty miles from
its present location, without the Employee's express
written consent.
4. Definitions.
"Cause" means with respect to an Employee (i) the Employee's
conviction of a felony or a crime involving moral turpitude; (ii) the Employee's
conviction of a fraud; (iii) the Employee's commission of any act involving
dishonesty or disloyalty with respect to DFVC (or any related entity); (iv)
intentional conduct by the Employee tending to bring DFVC (or any related
entity) into substantial public disgrace or disrepute; (v) the Employee`s gross
negligence or willful misconduct with respect to DFVC (or any related entity);
or (vi) the Employee's abandonment of employment with DFVC (or any related
entity) other than as a result of death or Disability.
"Compensation" means the Employee's base annual salary as of the
Closing Date, or as of the date of termination, if greater, plus the amount of
the targeted incentive compensation bonus that would be payable for the year in
which the termination occurs under any such incentive plan in which the Employee
participates. "Weekly Compensation" is determined by dividing Compensation by
52.
"Disability" means termination under the circumstances set forth
in the applicable disability policies in effect immediately prior to the Closing
Date.
"Employee" means each Continued Employee other than any
Continued Employee employed only on a seasonal basis and any Continued Employee
covered by a collective bargaining agreement.
"VP Employee" means each Employee who is a President or Vice
President of DFVC at any time at or after the Closing Date.
"Optionee Employee" means each Employee, other than a VP
Employee, who has received an option under the Dean Foods Company 1989 Stock
Awards Plan at any time prior to the Closing Date.
"Other Employee" means each Employee who is not a VP Employee or
an Optionee Employee.
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EXHIBIT C
CERTAIN TITLE COMMITMENT ITEMS
SEE ATTACHED.
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<PAGE> 79
EXHIBIT D
Substance of Opinion of General
Counsel to the Seller *
1. Each of the Seller, Holding Company and DFVC is a corporation existing and
in good standing under the laws of the jurisdiction of its incorporation.
2. The Board of Directors of the Seller has adopted by requisite vote the
resolutions necessary to authorize the execution, delivery and performance
of this Agreement, the Asset Transfer Agreement (and the License Agreement
contemplated thereby), the Closing Date Birds Eye License Agreement and the
assignment document with respect to the Existing Birds Eye License
Agreement by the Seller. No approval of this Agreement, the Asset Transfer
Agreement (or the License Agreement contemplated thereby), the Closing Date
Birds Eye License Agreement or the assignment document with respect to the
Existing Birds Eye License Agreement by the stockholders of the Seller is
required.
3. The Board of Directors and stockholders of Dean International have adopted
by requisite vote the resolutions necessary to authorize the sale of
Holding Company Common Stock as contemplated by this Agreement.
4. The Seller has corporate power to enter into and perform its obligations
under this Agreement, the Asset Transfer Agreement (and the License
Agreement contemplated thereby), the Closing Date Birds Eye License
Agreement and the assignment document with respect to the Existing Birds
Eye License Agreement. The Seller has duly executed and delivered this
Agreement, the Asset Transfer Agreement (and the License Agreement
contemplated thereby), the Closing Date Birds Eye License Agreement and the
assignment document with respect to the Existing Birds Eye License
Agreement. Each of this Agreement, the Asset Transfer Agreement (and the
License Agreement contemplated thereby), the Closing Date Birds Eye License
Agreement and the assignment document with respect to the Existing Birds
Eye License Agreement is the valid and binding obligation of the Seller and
is enforceable against the Seller in accordance with its terms.
5. Dean International has corporate power to sell the Holding Company Common
Stock as contemplated by this Agreement.
6. The Seller owns beneficially and of record all of the outstanding stock of
DFVC. The issuance of all such stock has been duly authorized and all of
such stock has been validly issued and is fully paid and nonassessable.
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<PAGE> 80
7. Dean International owns beneficially and of record all of the outstanding
stock of Holding Company. The issuance of all such stock has been duly
authorized and all of such stock has been validly issued and is fully paid
and nonassessable.
* If the License Agreement contemplated by the Asset Purchase Agreement is
to be entered into by a Subsidiary of the Seller, opinions corresponding to
those described above as appropriate shall also be given with respect to
such Subsidiaries.
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EXHIBIT E
Substance of Opinion of
Special Counsel to Birds Eye Mexico
1. Birds Eye Mexico is a limited liability company existing and in good
standing under the laws of Mexico.
2. The authorized capital stock of Birds Eye Mexico consists of (i) 1,000
shares of Birds Eye Mexico Series A Stock and (ii) 5,000 shares of Birds
Eye Mexico Series B Stock. 1,000 shares of Birds Eye Mexico Series A Stock
and 5,000 shares of Birds Eye Mexico Series B Stock are outstanding and no
shares of Birds Eye Mexico Series A Stock or Series B Stock are held in
treasury. The issuance of all such outstanding shares was duly authorized
and all of such outstanding shares have been validly issued and are fully
paid and nonassessable. All of the shares of Birds Eye Mexico Series A
Stock are held of record by Holding Company. 4,999 shares and 1 share of
Birds Eye Mexico Series B Stock are held of record by Holding Company and
DFVC, respectively.
3. The consummation of the transactions contemplated by this Agreement does
not violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any
government, governmental agency or court to which Birds Eye Mexico is
subject or any provision of the charter or bylaws (or similar governing
documents) of Birds Eye Mexico. Birds Eye Mexico does not need to obtain
any authorization, consent or approval of its directors or stockholders, or
to give any notice to, make any filing with or obtain any authorization,
consent or approval of, any government or governmental agency, in order for
the Parties to consummate the transactions contemplated by this Agreement,
other than any notice, filing, authorization, consent or approval that has
been given, made or obtained.
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EXHIBIT F
Substance of Opinion of Counsel
to the Buyer*
1. The Buyer is a corporation existing and in good standing under the laws of
the jurisdiction of its incorporation.
2. The Board of Directors of the Buyer has adopted by requisite vote the
resolutions necessary to authorize the execution, delivery and performance
of this Agreement, the Asset Transfer Agreement (and the License Agreement
contemplated thereby), the Closing Date Birds Eye License Agreement and the
assumption document with respect to the Existing Birds Eye License
Agreement by the Buyer. No approval of this Agreement, the Asset Transfer
Agreement (or the License Agreement contemplated thereby), the Closing Date
Birds Eye License Agreement or the assumption document with respect to the
Existing Birds Eye License Agreement by the stockholders of the Buyer is
required.
3. The Buyer has corporate power to enter into and perform its obligations
under this Agreement, the Asset Transfer Agreement (and the License
Agreement contemplated thereby), the Closing Date Birds Eye License
Agreement and the assumption document with respect to the Existing Birds
Eye License Agreement. The Buyer has duly executed and delivered this
Agreement, the Asset Transfer Agreement (and the License Agreement
contemplated thereby), the Closing Date Birds Eye License Agreement and the
assumption document with respect to the Existing Birds Eye License
Agreement. This Agreement, the Asset Transfer Agreement (and the License
Agreement contemplated thereby), the Closing Date Birds Eye License
Agreement and the assumption document with respect to the Existing Birds
Eye License Agreement are the valid and binding obligation of the Buyer and
are enforceable against the Buyer in accordance with their respective
terms.
* If any of the Target Shares, the Seller's Target-Related Intellectual
Property or the Existing Birds Eye License Agreement is conveyed to one or
more Subsidiaries of the Buyer rather than to the Buyer, opinions
corresponding to those described above shall also be given with respect to
the Subsidiaries which are the recipients and, if applicable, with respect
to the guarantee contemplated in Section 2(c).
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EXHIBIT 10 (l)
July 13, 1998
PERSONAL AND CONFIDENTIAL
Jeffrey P. Shaw
157 Garden Gate Court
Green Bay, WI 54313
Dear Jeff:
This letter is to confirm our recent conversation and serve as
a binding agreement between you and Dean Foods Company (the "Company").
The Company is seeking bids from third parties for the
purchase of Dean Foods Vegetable Company ("Vegetable"), of which you are a key
employee. Such a purchase, if consummated, could take the form of a purchase of
all or a majority of Vegetable's stock, a purchase of all or substantially all
of Vegetable's assets and the assumption of some or all of Vegetable's
liabilities, or a merger of Vegetable with the purchaser or an affiliate of the
purchaser (each a "Purchase"). Your continued employment pending any Purchase
and your cooperation in connection with any Purchase will be of value to the
Company and its shareholders. Accordingly, as an incentive to you to so continue
employment and cooperate, the Company will provide you with the benefits
described below (the "Special Benefits"). Except as described below, the Special
Benefits will be in addition to all other benefits to which you are entitled as
an employee of Vegetable.
1. Selling Bonus. Provided a Purchase closes on or before
December 31, 1998, and further provided you remain employed by Vegetable
through such closing (or your employment is actually or constructively
terminated by Vegetable without cause (as defined below), or is terminated as a
result of your death or disability, prior to such closing):
(a) The Company will pay to you the selling bonus based on the
Purchase Price (as defined below) set forth in the Schedule attached hereto as
and when such Purchase Price is realized by the Company (with the amount of your
payment interpolated from such Schedule in the event the Purchase Price is
greater than $350 million but less than $500 million).
(b) For purposes of the foregoing, Purchase Price will be
"realized" by the Company when cash, securities or other property (including
without limitation a promissory note) is received, directly or indirectly, by
the Company free and clear of any contingency (other than contingent
indemnification obligations of the Company in connection with the Purchase).
Purchase Price will also be "realized" by the Company to the extent of any
closing escrow or holdback by the
<PAGE> 2
Page 2
purchaser related to the Company's indemnification obligations in connection
with the Purchase. The amount of any contingent earnout will not be "realized"
until received, directly or indirectly, by the Company in cash, securities or
other property free and clear of any contingency other than contingent
indemnification obligations of the Company in connection with the Purchase.
(c) For purposes of the foregoing, Purchase Price means the
amount paid or payable, directly or indirectly, to the Company in a Purchase,
including any amount paid or payable, directly or indirectly, to the Company for
a noncompetition agreement. Purchase Price does not include the amount of any
liabilities assumed or acquired, directly or indirectly, by the purchaser in
connection with the Purchase, nor the amount of any funds provided to Vegetable,
directly or indirectly, by the purchaser or any lender in connection with the
Purchase, nor any amount paid or payable to any individuals for employment or
consulting agreements. "Purchase Price" shall be determined as follows:
(i) If Purchase Price includes securities or other property,
the value thereof will be the fair market value thereof at the close of
the day preceding the day of the closing of the Purchase. If such
securities or other property trade in an established market, the fair
market value thereof will be the closing price thereof at such close.
If such securities or other property do not trade in an established
market, the fair market value thereof will be agreed to between the
parties or, in the absence of such agreement, will be determined in
accordance with (ii) below.
(ii) If the parties are unable to agree upon the fair market
value of any property or securities whose fair market value is to be
agreed upon by them pursuant to (i) above, then each will select an
appraiser of recognized national standing experienced in appraising
securities or other property of such type to determine the fair market
value thereof. The midway point between the two fair market values
established by such appraisers will be the fair market value of such
property or securities for purposes hereof. Each party shall be solely
responsible for paying all of the charges of the appraiser selected by
it for performing services hereunder.
This letter agreement is one of six similar letter agreements of even
date herewith being entered into by the Company with key employees of
Vegetable (collectively with you, the "Letter Parties"). In the event
the Company and the Letter Parties are unable to agree upon the fair
market value of any securities or property whose fair market value is
to be agreed upon pursuant to (i) above, you agree (and each of the
other Letter Parities is agreeing) that a single representative shall
act on behalf of all of the Letter Parties in connection therewith and
that that representative shall be Jeffrey P. Shaw or, in the event he
is unable or unwilling to so act, one of the other Letter Parties
selected by the Letter Parties by a numerical majority thereof.
By way of example, if the Purchase Price is $475 million your
selling bonus will be $971.5 thousand, and if the Purchase Price is $525 million
your selling bonus will be $1,218 thousand.
<PAGE> 3
Page 3
(b) Effective upon the closing of such Purchase, any options to
purchase Company Common Stock granted to you under the Company's 1989 Stock
Awards Plan that remain unexpired and unexercised will fully vest.
2. Post-Sale Severance Benefits. Provided a Purchase closes on or
before December 31, 1998, if (i) you remain employed by Vegetable through such
closing (or your employment is actually or constructively terminated by
Vegetable without cause (as defined below) prior to such closing) and do not
become an employee of the purchaser or an affiliate of the purchaser in
connection with such closing, or you remain employed by the Company or an
affiliate of the Company immediately following such closing or (ii) you become
an employee of the purchaser or an affiliate of the purchaser in connection with
such closing, such employment is actually or constructively terminated by your
employer at any time prior to the second anniversary of such closing without
cause (as defined below) and other than as a result of your death or disability
and you do not reasonably promptly thereafter become an employee of the Company
or an affiliate of the Company, the Company will provide you with the following
benefits (the "Severance Benefits"): (a) payment of $32,000.00 per month over
the 27 months subsequent to such termination (or, if you so elect by written
notice to the Company at any time after such termination, the present value
equivalent of the remaining such payments as of the date of payment of such
present value calculated using a discount rate of 8% per annum compounded),
reduced to take into account any severance payments received by you from the
purchaser or an affiliate of the purchaser as a result of the termination of
your employment (of which severance payments you agree to notify the Company at
the time of such termination), (b) medical, dental and life insurance coverage
for you and your dependents over the 27 months subsequent to such termination
(or, in the case of each such type of coverage, for such shorter period
following such termination until you become eligible for a similar type of
coverage from another source) under the plans and programs of the Company in
effect for Company employees generally from time to time during such period
(including the employee contribution and deductible provisions thereof),
provided such coverage is permitted under the terms of such plans and programs
- -- or, if such coverage is not permitted under the terms of such plans and
programs, the equivalent of coverage under such plans and programs (including
the employee contribution and deductible provisions thereof), and (c)
reimbursement for fees and expenses of any outplacement service retained by you
on account of such termination, in an amount up to $25,000 less the fees and
expenses of any counsel retained by you to review this letter agreement prior to
your signing it which are paid by the Company pursuant to this letter agreement.
The Severance Benefits will be in lieu of all other severance payments, if any,
to which you may otherwise be entitled from the Company or Vegetable, other than
any such severance payments from Vegetable to which you may become entitled
pursuant to the definitive sale agreement entered into with the Purchaser (the
"Sale Agreement Severance Benefits"). The Severance Benefits shall be reduced by
the amount of any Sale Agreement Severance Benefits received by you. The
Severance Benefits shall not be reduced as a result of your failure to mitigate
the amount of such Severance Benefits.
For purposes of this letter agreement, "constructive termination"
means (i) termination of your employment by you or your employer following
implementation by your employer, without your consent, of a material adverse
change in your aggregate compensation (other
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Page 4
than under equity purchase or equity awards plans) or job responsibilities or of
a relocation of your office to a location more than 50 miles from Green Bay,
Wisconsin, or (ii) a termination of your employment with the Company or
Vegetable by you prior to a Purchase following the Company's breach of any of
its agreements in this letter agreement which remains uncured for thirty (30)
days after the Company receives written notice of such breach.
For purposes of this letter agreement, "cause" means: (i) your
conviction of a felony or a crime involving moral turpitude; (ii) your
conviction of a fraud; (iii) your commission of any act involving dishonesty or
disloyalty with respect to your employer or any of its subsidiaries or
affiliates; (iv) intentional conduct by you tending to bring your employer or
any of its subsidiaries or affiliates into substantial public disgrace or
disrepute; (v) your gross negligence or willful misconduct with respect to your
employer or any of its subsidiaries or affiliates; (vi) your abandonment of
employment with your employer or any of its subsidiaries or affiliates other
than as a result of your death or disability; or (vii) your breach of any of
your agreements in this letter agreement which remains uncured for thirty (30)
days after you receive written notice of such breach. Any disputes as to the
existence of "cause" shall be submitted to arbitration with a single arbitrator,
as agreed to by the parties, in Green Bay, Wisconsin, under the rules of the
American Arbitration Association, and the decision of such arbitrator shall be
final and binding upon both parties. All charges of the arbitrator shall be
shared equally by the Company and you.
Your entitlement to the Special Benefits is subject to the further
condition that, so long as you remain employed by Vegetable, you cooperate with
the Company in its efforts to negotiate a Purchase and close it on or before
December 31, 1998, and, in the event you remain employed by Vegetable at the
time any Purchase closes on or before December 31, 1998 and if the purchaser or
an affiliate of the purchaser offers you continued employment in a comparable
position at a location not more than 50 miles from Green Bay, Wisconsin and for
comparable compensation, you accept such offer.
In consideration of the Special Benefits, you promise that so long as
you remain employed by Vegetable, you will, at the closing of any Purchase that
occurs on or before December 31, 1998, waive and release the Company and its
subsidiaries, divisions and affiliated companies (collectively the "Dean
Companies") from liability for all rights and claims, whether or not they are
then known to exist, that you then have or may have against the Dean Companies
relating in any way to your employment or separation from employment, excluding
the benefits and Special Benefits contemplated by this letter agreement. For
the purposes of such waiver and release, the Dean Companies shall be understood
to also include then and former directors, shareholders, employees and agents
of the Dean Companies. It shall also mean successors and assigns of the Dean
Companies.
The rights and claims which you waive and release pursuant to the
preceding paragraph will include, to every extent allowed by law, those
arising under the Employee Retirement Income Security Act of 1974, the Civil
Rights Acts of 1866, 1871 and 1964, the Rehabilitation Act of 1973, and the Age
Discrimination in Employment Act of 1967, as amended by the Older Worker's
Benefit Protection Act of 1990. This is not a complete list, and you will waive
and release all similar
<PAGE> 5
Page 5
rights and claims under all other federal, state and local discrimination
provisions and all other statutory and common law causes of action relating in
any way to your employment or separation from employment, excluding causes of
action for the benefits and Special Benefits contemplated by this letter
agreement.
In consideration of your execution of this letter agreement, the Company
agrees to reimburse you for fees and expenses of any counsel retained by you to
review this letter agreement provided such amount does not exceed Eight Hundred
Fifty Dollars ($850.00).
You agree that subsequent to the closing of any Purchase that occurs on
or before December 31, 1998 you shall not intentionally undertake or make any
disparaging conduct or derogatory statements concerning the Dean Companies.
Further, the terms and the amounts of the Special Benefits shall remain
confidential and shall not be disclosed, directly or indirectly, by you to
anyone other than your spouse and attorney (to whom you may disclose such terms
and amounts provided you advise them, in advance of such disclosure, of the
provisions of this paragraph, and for whose observance of the provisions of this
paragraph you shall be responsible).
You further agree that you will not at any time subsequent to the
closing of any Purchase that occurs on or before December 31, 1998 divulge,
furnish or make accessible to anyone, or use for your benefit or the benefit or
any other person, firm, corporation or other entity, any trade secret, knowledge
or other information with respect to the confidential or secret processes,
plans, devices or materials of any of the Dean Companies. Notwithstanding the
foregoing, no information shall be considered to be confidential, and the
obligation of nondisclosure set forth in this paragraph shall not apply to any
information, that (i) is or becomes publicly known through no fault of yours, or
(ii) which you receive from a third party without violation by such source of
any obligation to the Company or Vegetable.
You also agree that, in the event you fail to comply with any of the
foregoing agreements, your right to receive any further payment of the Special
Benefits described above shall be forfeited and, in addition to any and all
other remedies which may be available to the Company at law or in equity for
such noncompliance by you, the Company shall have the right to injunctive relief
and specific performance to the extent permitted by law.
Except as otherwise expressly provided in this letter agreement in
regard to appraisal or arbitration proceedings contemplated herein, in the event
you institute in good faith any litigation or proceeding to enforce your rights
hereunder, or the Company institutes in good faith any litigation or proceeding
to enforce its rights hereunder, the prevailing party in such litigation or
proceeding shall be reimbursed by the other party for all of its costs and
expenses (including without limitation attorneys' fees) incurred in connection
with such litigation or proceeding.
Nothing in this letter agreement confers any right on you to continue in
the employment of Vegetable or any of the other Dean Companies, or to become an
employee of or continue in the employment of any purchaser of Vegetable or any
affiliate of such a purchaser, or
<PAGE> 6
Page 6
affects in any way the right of any of them, as the case may be, to terminate
your employment at any time.
<PAGE> 7
Page 7
In order to accept this letter agreement and receive the
Special Benefits on the terms provided herein, you must return a signed copy of
this letter to me within ten (10) days after the date of this letter. You are
advised to contact an attorney prior to executing this letter agreement.
Benefits which are required by law will be provided whether or not you execute
this letter agreement.
DEAN FOODS COMPANY
By:________________________
Its:_______________________
I have read and understand this letter agreement and accept and agree to it.
Date: July __, 1998
______________________________________
Jeffrey P. Shaw
<PAGE> 8
Schedule
Purchase Selling
Price Bonus
(in millions of dollars) (in thousands of dollars)
------------------------ ------------------------
350 or less 203
400 464
450 783
500 1,160
In excess of 500 1,160 plus .232% of the
excess
<PAGE> 1
Exhibit 11
Dean Foods Company and Subsidiaries
Computation of Basic and Diluted Income Per Share
-------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income (Loss) from Continuing Operations $ 87,980 $73,988 $(16,865)
Income (Loss) from Discontinued Operations 18,322 12,716 (32,823)
-------- ------- --------
Net Income (Loss) $106,302 $86,704 $(49,688)
======== ======= ========
BASIC INCOME (LoSS) PER SHARE:
Income (Loss) from Continuing Operations $2.17 $1.84 $ (.42)
Income (Loss) from Discontinued Operations .46 .32 (.82)
----- ----- -------
Net Income (Loss) $2.63 $2.16 $ (1.24)
===== ===== =======
Weighted average common shares outstanding 40,469 40,181 40,122
====== ====== =======
DILUTED INCOME (LOSS) PER SHARE:
Income (Loss) from Continuing Operations $2.13 $1.83 $ (.42)
Income (Loss) from Discontinued Operations .44 .32 (.82)
----- ----- -------
Net Income $2.57 $2.15 $ (1.24)
===== ===== =======
Adjusted weighted average common shares* 41,395 40,377 40,140
====== ====== =======
</TABLE>
* Includes weighted average number of potential common shares outstanding.
Potential common shares consist solely of the outstanding options under the
Company's stock options plans.
<PAGE> 1
Exhibit 12
Dean Foods Company and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEARS ENDING MAY
-----------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations
before taxes $143,730 $124,529 $(15,586) $100,582 $95,706
------------ ------------- ------------ ------------ ------------
Fixed charges:
Interest expense 21,101 15,071 16,316 13,298 11,030
Portion of rentals (33%) 10,758 8,417 8,735 6,772 5,907
------------ ------------- ------------ ------------ ------------
Total fixed charges 31,859 23,488 25,051 20,070 16,937
------------ ------------- ------------ ------------ ------------
Earnings from continuing operations before
taxes and fixed charges $175,589 $148,017 $ 9,465 $120,652 $112,643
============ ============= ============ ============ ============
Ratio of earnings to fixed charges 5.5 6.3 0.4 (*) 6.0 6.7
============ ============= ============ ============ ============
</TABLE>
(*) The Fiscal 1996 Ratio of Earnings to Fixed Charges and "Income (Loss) from
Continuing Operations Before Taxes" includes the effect of a pre-tax
special charge to earnings of $102.4 million.
<PAGE> 1
Our Dairy Products business,
consisting of fluid milk
and cultured products,
ice creams and frozen
desserts and extended
shelf life products, drove our
overall sales increase in fiscal
1998 and accounted for 75
percent of our total revenue.
-------------------
The Pickle Products group
furthered its position as the
market leader in pickle sales
to retail and foodservice
customers. The group also
supplies peppers, relishes,
olives, sauces and syrups from
its nine strategically located
processing plants in the U.S.
-------------------
The Specialty Products group
recorded an 11 percent sales
increase in fiscal 1998. Each
product line, which includes
non-dairy creamers and other
powdered products, dips and
dressings, and aseptic shelf
stable puddings and cheese
sauces, contributed to
this performance.
<PAGE> 2
<TABLE>
<CAPTION>
Financial
Highlights Contents
In thousands, except for items marked with an* 1998 1997 1996
- ------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS 1
OPERATIONS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $2,735,834 $2,460,563 $2,240,517
- -------------------------------------------------------------------------------------------
Operating Earnings (Loss) $ 162,519 $ 138,671 $ (593)(a)
- -------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations $ 87,980 $ 73,988 $ (16,865)(a) LETTER TO SHAREHOLDERS 2
- -------------------------------------------------------------------------------------------
Net Income (Loss) $ 106,302 $ 86,704 $ (49,688)(a)
- -------------------------------------------------------------------------------------------
DAIRY PRODUCTS REVIEW 6
COMMON STOCK DATA*
- -------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations
per Diluted Share $ 2.13 $ 1.83 $ (.42)(a)
- -------------------------------------------------------------------------------------------
Net Income (Loss) per Diluted Share $ 2.57 $ 2.15 $ (1.24)(a)
- -------------------------------------------------------------------------------------------
Dividend Rate per Share $ .80 $ .76 $ .72
- -------------------------------------------------------------------------------------------
YEAR-END POSITION PICKLE PRODUCTS REVIEW 12
- -------------------------------------------------------------------------------------------
Working Capital $ 67,324 $ 64,988 $ 24,649
- -------------------------------------------------------------------------------------------
Identifiable Assets $1,319,152 $ 820,825 $ 791,888
- -------------------------------------------------------------------------------------------
Long-Term Obligations $ 558,233 $ 208,931 $ 217,984 SPECIALTY PRODUCTS REVIEW 14
- -------------------------------------------------------------------------------------------
Shareholders' Equity $ 619,266 $ 567,681 $ 507,692
- -------------------------------------------------------------------------------------------
Shares Outstanding 39,970 40,284 40,134
- -------------------------------------------------------------------------------------------
OTHER DATA* FINANCIAL REVIEW 17
- -------------------------------------------------------------------------------------------
Production Plants 52 37 40(b)
- -------------------------------------------------------------------------------------------
Employees 11,200 8,300 8,600(b)
- -------------------------------------------------------------------------------------------
Shareholders 8,600 8,838 9,481 FINANCIAL STATEMENT 22
- -------------------------------------------------------------------------------------------
(a) 1996 continuing operations results include a pre-tax charge of $102,439
($64,906 after-tax, or $1.62 per share) related to the adoption of a plan
to reduce costs, rationalize production capacity and provide for severance
and environmental costs. The 1996 Net Loss includes a pre-tax charge of
$150,000 ($97,720 after-tax, or $2.44 per share) related to the plan NOTES TO FINANCIAL STATEMENTS 27
adoption.
(b) 1996 includes certain plants that have been closed or disposed of and
certain employees that have been affected by the adoption of a plan to
reduce costs, rationalize production capacity and provide for severance and
environmental costs. OFFICERS AND CORPORATE DATA 38
DIRECTORS INSIDE BACK COVER
- --------------------------------------------------------------------------------
</TABLE>
ON THE COVER:
(top to bottom)
- - Teammates at Green Bay quality control lab for pickle products take a break to
celebrate their division's success.
- - Greeters and tour guides at Mayfield Dairy's Braselton, Georgia plant perform
valuable service giving the public an inside look at a top-quality dairy
operations.
- - Store route drivers at Purity Dairies in Nashville pause between driving and
delivering to mark a great year serving their customers.
- - Quality milk flows from Midwest's first Chug line at Chemung, Illinois.
1
<PAGE> 3
After a year of dramatic
growth and record earnings,
we pause to reflect on our
key accomplishments. To Our Shareholders:
Everything we achieved Fiscal 1998 was a fast-paced, extremely
active year for the Dean Foods Team.
started with hard-working We aggressively pursued acquisition
opportunities in our core business
teams, whether on the plant segments, acquiring eight dairies, one
pickle and one specialty operation. We
floor, in the board room, also successfully launched the Milk
Chugs product line in two of our major
at the office, at the store, regional dairy markets. Dean remains
committed to focus on profitable growth
or on the road. opportunities, and as this annual report
demonstrates, we are delivering on our
------------------- commitment.
This year's annual report
features teams from
each of our business
segments; Dairy, Pickles HOWARD M. DEAN
Chairman of the Board
and Specialty. We invite and Chief Executive Officer
you to read about how
RICHARD E. BAILEY
"The Team Works"! President and
Chief Operating Officer
August 7, 1998
2
<PAGE> 4
The Company reported outstanding performance for the second consecutive year.
Sales from continuing operations increased more than 11% in 1998 to $2.7
billion due to acquisitions and growth in our base businesses. Income from
continuing operations was up more than 18% and income per diluted share grew to
$2.13, surpassing the record established in fiscal year 1997 by $.30 per share.
Of particular interest to you, the shareholder, is the fact that during 1998,
Dean Foods provided a 34% total return on your investment - which includes
stock price appreciation and reinvested dividends - on top of a 62% return last
year. Dean intends to meet the challenges of a quickly changing food industry,
and by doing so, deliver superior value to our shareholders.
Our fiscal 1998 accomplishments keep Dean positioned as a leader in our
respective food industry segments. In addition, the Dean Team is committed to
delivering profitable top-line growth, consistent with excellent
consumer-oriented companies. Dean continues to actively pursue innovative
product opportunities, and be proactive in leading a changing industry. The
future looks very bright.
STRATEGIC DIRECTION
We continue to refine and execute our previously announced long-term strategic
plan. As part of this on-going review, we recently announced the divestiture of
our Vegetable segment. The sale, which is expected to close the first half of
fiscal 1999, includes cash of $400 million and the aseptic foods business of
Agrilink Foods, Inc.
We expect the aseptic foods business acquired to immediately triple sales in
our Specialty aseptic foods business.
Dean's commitment to create and deliver long-term sustainable value through our
five key strategies is the foundation on which we will build Dean Food's future:
CORE BUSINESS GROWTH - In fiscal 1998, we profitably grew our core
businesses through new products and acquisitions. Dean is actively pursuing the
introduction of innovative products such as our successful Milk Chug, for
on-the-go consumers. Chugs are expected to be available in all of our Dairy
regions by the middle of 1999. Consumer response to this new products has been
extraordinary and revenue from these products has exceeded our most optimistic
expectations. The Dean Team will continue to invest aggressively in fiscal 1999
to expand the Chugs' market penetration.
INVESTED CAPITAL MANAGEMENT - Return on invested capital (ROIC) is the
primary measure we use to evaluate our annual performance and to motivate our
managers. Our Company goal is to attain a minimum ROIC of 17% consistent with
leading food companies. Investments supporting our growth strategies are
assessed using value based measures to ensure acquisitions and new product
initiatives enhance shareholder value. While these investments support our
growth strategy and maximize long term shareholder value, they will temporarily
reduce annual ROIC until expected synergies and optional production
efficiencies are achieved.
(3)
<PAGE> 5
Our future looks
bright thanks to the
continuing contributions CONTINUOUS MARGIN IMPROVEMENT - The
cost compression initiative, which drives
of dedicated margin improvement, is a central component
of our strategy. We call our program
Dean Team members. Leveraging Ideas for Tomorrow, or LIFT. In
fiscal 1998, through two dedicated teams, we
------------------- implemented LIFT a nine plants in two of our
business segments. The best practices we are
Our mission developing have improved our cost position
and enhanced margins in all of our business
remains clear: segments. Based on our success to date, we
have raised the bar with regard to
provide superior anticipated bottom line savings in the
future.
value to consumers,
ACQUISITIONS - Dean Foods is committed
customers, employees to enhancing shareholder value through
profitable growth and acquisitions,
and shareholders. especially in the Dairy segment. In fiscal
1998, the Company acquired eight dairies,
most of them contiguous to geographic
markets that we currently serve.
Additionally, we entered the California
marketplace for the first time, with five
strategic plants whose sales on an annual
basis approximate $250 million.
In the Pickles segment, we acquired the
Schwartz refrigerated pickle company. This
acquisition expands our capabilities in the
rapidly growing refrigerated foodservice
pickle category.
In our Specialty segment, we acquired the
Marie's refrigerated salad dressing and dip
business, which has performed extremely well
in its first full year of operation. We also
believe that Agrilink's aseptic business will
be an excellent addition to our existing
aseptic line.
(4)
<PAGE> 6
Looking at the acquisitions we have made this past fiscal year, the Company
added nearly $750 million in annualized sales, in line with our commitment to
deliver profitable top-line growth. We expect the dynamic pace of the Dairy
industry consolidation to continue and we intend to pursue strategic
opportunities in the upcoming fiscal year.
FINANCIAL STRATEGY - Our financial strategy is consistent with and
supports the operating strategy of the Company and remains focused on balancing
our investment and future growth needs while providing strong financial returns
to our shareholders. Following the completion of the pending Vegetables segment
divestiture, the Company's debt to capitalization ratio will shrink to near 30%
and our financial flexibility will be significantly bolstered.
MANAGEMENT AND BOARD CHANGES
In the spring of 1998, the Company announced the election of Richard E. Bailey,
a former Kraft executive, as President and Chief Operating Officer. Many of
our key initiatives, including our cost compression and acquisition programs,
will benefit greatly from Dick's management experience and leadership.
Also this past fiscal year, Janet Hill, an executive with Alexander and
Associates, joined the Company as a Director. We are pleased to have such a
highly qualified and experienced individual join our Board.
DEAN'S FUTURE
In today's environment of low inflation and industry consolidation, reducing
costs and serving the customer are the key to creating long-term shareholder
value. Consumers now have less time to shop and prepare meals, driving their
demand for on-the-go foods and beverages. Dean continues to focus its efforts
on introducing innovative new beverage and snack products in convenient
packages which satisfy today's consumer demands. Our mission is still very
clear: we will provide superior value to consumers, customers, employees and
shareholders.
The Dean Team is a group of dedicated people with the desire to profitably grow
the Company and we will continue to invest in their development and growth. We
thank all of our employees for their excellent service and loyalty. We also
thank our customer, suppliers and shareholders for their continued support.
The Team Works!
5
<PAGE> 7
DAIRY
PRODUCTS
In our flagship Dairy Products
business, we had many more
"The Team Works" candidates
than we had space. So, with an
appreciative salute to all of our
many Dairy Teams, the following DEAN FOODS COMPANY SHOWED
dramatic growth in Dairy Products
teams represent the Dean Foods sales in fiscal 1998, driven
mainly by a geographically-
Dairy employees across the nation. strategic acquisition program,
innovative new products, and
------------------- continuing market share gains
in on-going operations.
In fluid milk an cultured products,
We added eight new high-performing
our teams worked, and they operations to our already strong
dairy roster in 1998, helping to
worked exceedingly hard... boost our revenues nearly 15 percent
from $1.8 billion in fiscal 1997 to
on a fluid milk line at our Purity $2.1 billion this past fiscal year.
Dairy Products account for 75
Dairy (Nashville, Tennesee) and percent of the Company's total
revenues.
Coburg Dairy (Charleston, South
The acquisitions, coupled with
Carolina) acquisitions, or at an innovative marketing and
productivity gains at our existing
engineering desk at our new facilities, helped Dean Foods
Company maintain its position as the
Mayfield Dairy's fluid milk facility nation's number one processor of
fluid milk.
in Braselton, Georgia.
The Company is also one of the
country's leading processors of
cultured dairy products, ice cream,
frozen novelties, juices, and
extended shelf life dairy products.
FLUID MILK/CULTURED PRODUCTS
This business is built solidly on a
core group of market-leading regional
brands, including Bell, Cream o'
Weber, Creamland, Dean's, Gandy's,
Mayfield, McArthur, Meadow Brook,
Price's, Reiter, T.G. Lee and
Verifine.
<PAGE> 8
Building further on that base in fiscal 1998, we
added other strong brands such as Maplehurst and
H. Meyer in the Midwest; Purity in the Midsouth, Coburg
in the Southeast and Wengert's in Pennsylvania. We also
acquired the Luckey Stores dairy operations of American
Stores in California. This acquisition gives us access to that
state's huge population base.
We now distribute dairy products in supermarkets,
convenience stores, warehouse and club stores, and
foodservice and institutional customers from 38 facilities
in 15 states covering the Midwest, Midsouth, Northeast,
Southeast, Southwest, and California.
During fiscal 1998, sales in the fluid milk/cultured
products category reached a record high of $1.6 billion.
The unparalleled success of our Milk Chug roll-out under
regional brand names in the Southeast and the Midwest
has far exceeded our initial expectations. Overwhelming
customer and consumer demand for these products bodes
well for our future growth in this category as we introduce
it in other geographic market areas across the country.
(7)
<PAGE> 9
DAIRY
PRODUCTS
From the top route salespeople
at Coburg Dairy to the award- Milk chugs are available in 8-ounce,
wining bottle manufacturing team pint and quart plastic resealable
at Mayfield Dairy, our people bottles shaped like the original round
are dedicated to be the best. glass milk bottles. They have quickly
become a favorite where convenience and
----------------------- portability are a factor, especially
convenience stores, gasoline stations
Perhaps the most popular and other specialty stores with limited
team project is the taste panel inventory space and a need for fast-
for new ice cream products at selling products. The 8-ounce chugs
the corporate headquarters in are also available in an easy-to-carry
Franklin Park, Illinois. Results six-pack format.
are often a good indicator
of consumer tastes and Chocolate milk Chugs have proven to be
preferences the most popular with consumers, and are
also available in a low-fat chocolate
version. Other varieties available are
Vitamin D regular, fat-free regular, 2%
reduced fat, half & half, and
(8) buttermilk.
<PAGE> 10
During the holiday seasons, in November and December, eggnog is also produced
and sold in Milk Chug quart bottles.
For the future we are already looking to leverage the market acceptance of the
Chug packaging by developing new products such as additional milk flavors,
juices, and other types of drinks. In addition, we are testing a wraparound
gallon label to provide greater brand name exposure to consumers.
Among other significant achievements in fiscal 1998 was our increased emphasis
on category management programs with our major customers. These activities
resulted in higher customer sales and reduced supply chain costs -- a
"win/win" for Dean, customers, and consumers. These and other programs should
continue to reap valuable benefits for us in fiscal 1999 and beyond.
ICE CREAM & FROZEN DESSERTS
Dean foods Company's frozen dessert strategy is to provide our customers with a
total program, including regional branded and private label packaged ice cream
and novelties, and fast, efficient distribution capabilities to deliver the
entire needs of the customer's dessert/ice cream department.
(9)
<PAGE> 11
DAIRY
PRODUCTS
The LIFT team, as it is known
at Dean Foods, is a
cross-functional team that
Leverages Ideas For Tomorrow.
That means helping our
employees to identify and
execute their own ideas for Sales in this category rose 27
improving business processes. percent to $332 million, driven in
part by our ability to add
- --------------- outstanding regional brands to our
existing and highly popular
Our largest Extended Shelf portfolio of brands such as Dean,
Life dairy plant in Murray, Mayfield, Reiter and Verifine, as
Kentucky was home for the LIFT well as expanded distribution
team earlier this year. Even through our Meadows acquisition.
in this state-of-the-art
plant, many cost reduction and Another factor in our market growth
productivity improvement is the success of our "Really Cool
opportunities were uncovered. Flavors" program. New fiscal 1998
The dramatic growth of the ESL flavors "Brown Cow," "Hog heaven"
product group makes these and "Banana Pudding" have
opportunities all the more been extremely successful line
important. additions to our existing "Moose
Tracks," "Chocohula" and "Banana
Split" flavors.
Dean manufactures and markets
(10) nearly 70 million gallons of ice
cream and frozen desserts in six
facilities serving customers and
consumers in 26 states.
EXTENDED SHELF LIFE PRODUCTS
Extended Shelf Life (ESL) dairy
products are becoming more
important to the overall dairy
category as retailers and
foodservice distributors recognize
the value of longer code lives in
distribution and at the grocery
shelf.
This product group includes
whipping creams, half & half dairy
creamers, cottage cheese, sour
cream, dressings, aerosol whipped
creams and non-dairy toppings.
<PAGE> 12
A substantial portion of this business also comes from products made on a
licensee basis. We process, sell and deliver Carnation Coffeemate liquid and
Nestle Quik in a 25 state territory.
We also have the exclusive rights for several other licensed brands, including
Nestea iced tea, Dairy Ease lactose-free milk, Vitamite non-dairy beverage, and
Health Source soy beverages.
Foodservice business accounts for about 11 percent of the ESL group's sales
total. An ongoing campaign of improved distribution, new product introductions,
and value-added customer service is aimed at increasing this penetration. In
fiscal 1998, for the second consecutive year, Sysco Food Service Co., one of the
largest foodservice distributors in the industry, named the ESL division as one
of its top 100 suppliers.
(11)
<PAGE> 13
PICKLE
PRODUCTS
How many new ideas and additional
quality can you stuff into a jar or
pail of pickles? Well, at Dean
Foods, where everything we do must DEAN PICKLE AND SPECIALTY PRODUCTS
be top notch or we simply don't do Group experience another strong
it, the answer is a whole lot. performance in fiscal 1998. Our
fiscal 1998 sales were $349
-------------- million.
Our recent acquisition of Schwartz We were successful in reducing our
Pickle, the country's leading invested capital by over $15
packer of refrigerated pickles for million, though ongoing
the foodservice trade, fits right consolidation and operational
in with this philosophy. Schwartz improvements, as we focus an
packs to the tightest specification increasing return on an invested
in the industry using the finest capital.
quality and freshest cucumbers.
Operationally, these efforts have
-------------- been focused on improving labor and
productivity and throughput by
Our original LIFT team was so utilizing automation and warehouse
successful in the Dairy plants they efficiencies A prime example is the
visited, we organized a separate complete rebuilding of our facility
team to bring the same discipline in Faison, North Carolina, due for
to our Pickle and Specialty completion in mid-fiscal 1999.
operations. We expect similar This plant will be a showcase of
results here. state-of-the-art technology and
automation, and will substantially
reduce operating costs.
At the retail sales level we
continue to stress more effective
selling programs. This includes
building stronger relationships
with key customers, and managing
the category for more sales and
better customer profitability.
(12)
<PAGE> 14
We hold the leading share of private label retail and foodservice pickle sales
in the U.S. Our family of retail pickle brands,including Arnold's, Atkins, Aunt
Jane's, Cates, Heifetz, Paramount, Peter Piper, Rainbo and Roddenberry, as well
as our Bennett's and Hoffman House sauces, remain household favorites in their
regional markets.
Near the end of fiscal 1998, we completed the acquisition of Schwartz Pickle
Co., the premier packer of refrigerated pickles to the foodservice industry. At
its two-year old plant in Chicago, Illinois, Schwartz sets the quality standard
for pickles served by restaurant chains and other institutions throughout the
U.S.
Dean Pickle and Specialty Products operates nine processing plants strategically
located throughout the U.S. From these facilities we supply the country's
largest retail and foodservice customers with pickles, peppers, relishes,
olives,sauces and syrups.
(13)
<PAGE> 15
SPECIALTY
PRODUCTS
The team at the Marie's plant
in Thornton, Illinois,
acquired at the beginning of
fiscal 1998, hardly got to
know us before we asked them
to change their labeling
process to bring a fresh look
to Marie's salad dressings.
They made the change without DEAN FOODS COMPANY'S SPECIALTY
missing a beat, and the new Group recorded an 11 percent
package is a huge success. increase in sales in fiscal
1998 to $335 million. Every
--------------- product line in this segment
contributed to growth,
All of our Specialty Products, including our non-dairy
including dips, dressings, creamers and other powdered
powdered products and aseptic products, our dip and dressing
puddings and sauces, rely product lines, and our aseptic
heavily on or experienced shelf-stable puddings and
Research & Development Group cheese sauces.
in Rockford, Illinois. The
team's consistent ability to The addition of new spray
improve quality, taste, dryer at our Wayland, Michigan
shelf-life and cost -- plant supports our continued
sometimes all at once -- gives growth in the powdered
Dean Foods a competitive non-dairy creamer market. The
advantage in every one of our dryer will also allow us to
product lines. enter the shortening and other
high fat powder markets.
The cappuccino craze continues
to drive growth in our creamer
products, which serve as an
ingredient. We also gained
market share in the retail
club stores and mass
merchandising channels of
distribution by adding new
products such as our 40-ounce
canister pack for club stores.
(14)
(15)
<PAGE> 16
Dean Dip & Dressing once again delivered record sales growth in fiscal 1998.
Last year's acquisition of Marie's salad dressings and dips has been
successfully integrated into the overall operations of this division and has
helped drive sales volume, particularly in the fresh produce department of
retail stores where Marie's is a familiar and favorite brand name.
This division's product offerings continue to broaden, including refrigerated
snack dips,refrigerated salad dressings,sour cream,and aerosol whipped toppings
under such strong brand names as Dean's,Marie's,Imo, and Rod's. In most
markets,we maintain the number one or number two brand of refrigerated dairy and
produce dips and salad dressings.
During the past year, we significantly improved the Marie's formula for dips and
salsa, rolled out guacamole dip in all markets and installed a mew aerosol
whipped topping production line at our California plant. The Dip & Dressing
unit's sales and marketing teams are forging strategic partnerships with key
retail customers to ensure a continuation of this strong growth pattern.
15
<PAGE> 17
Specialty Products
Amboy Specialty Foods offers aseptically-produced cheese sauces, puddings, and
other shelf-stable products to manufacturing and foodservice customers
throughout the nation. Sales increased in fiscal 1998, while better production
efficiencies brought down processing cost.
New products and packaging alternatives present excellent opportunities for
continued growth in this category. Several new ethnic-oriented sauces, such as
Stir Fry Sauce, were added to the product line during fiscal 1998. The plastic
pouch continues to enjoy excellent success with foodservice customers interested
in its advantages over the traditional can, We see a huge opportunity to
utilize this technology along with new packaging sizes to pursue other channels
of distribution.
E.B.I. Foods, the Company's affiliate located in the United Kingdom, recorded
another excellent year. Its dry ingredient blends are sold to industrial
customers throughout Europe, and to the Middle East, Far East and Africa.
E.B.I.'s new Abingdon, England production facility has helped this division
provide product to meet the increased demand.
DFC Transportation Company directs and coordinates a vast fleet of vehicles as
part of the largest and most efficient temperature-controlled transportation
systems and full-service logistics support groups in the nation.
Dedicated to maximizing supply chain efficiencies and customer service, DFC
provides added value and cost competitiveness to several Dean product lines, as
well as serving the transportation and logistics needs of other premier food
companies.
We transport truckload and consolidate less-than-truckload shipments of dry,
refrigerated, and frozen products throughout the U.S., Canada and Mexico. A
network of operating centers nationwide connects this transportation function,
which continues to be a powerful support tool for our marketing and selling
efforts.
(16)
<PAGE> 18
DEAN FOODS COMPANY & SUBSIDIARIES
FINANCIAL REVIEW
STRATEGIC DIRECTION
The Company's primary objective is the maximization of shareholder value through
long-term stock appreciation and dividend growth. The Company's fiscal 1998
performance contributed to this objective by delivering record income from
continuing operations of $88.0 million, or $2.13 per diluted share, surpassing
the record established in fiscal year 1997 by $.30 per share. The Company's
strategy remains focused on profitable top-line growth, primarily through
acquisitions and new product initiatives and continuous margin improvements
through our cost compression initiative.
The Company continues to refine and execute its previously announced
long-term strategic plan, the underlying goal of which is to improve
profitability and enhance shareholder value. As part of this on-going review,
the Company recently announced the divestiture of the Vegetables segment for
cash consideration of $400 million plus the aseptic foods business of Agrilink
Foods, Inc. The transaction is expected to close in the first half of fiscal
1999. Due to this announcement, the results of operations have been restated for
all periods to present the Vegetables segment as a discontinued operation. The
following management discussion and analysis pertains to continuing operations
and excludes the impact of the fiscal 1996 special charge, unless otherwise
noted.
FINANCIAL OBJECTIVES AND STRATEGIES
Among the financial objectives and strategies employed by the Company are:
SOUND WORKING CAPITAL MANAGEMENT
The Company employs various procedures to monitor and control the quality and
levels of current assets and liabilities. Due to the quick turn of the Company's
current assets, which consist primarily of accounts receivable and inventory,
working capital is expected to be maintained at relatively moderate levels in
the future. The Company`s historical usage of short-term borrowings to finance
seasonal crop-related requirements will decline substantially after the
completion of the pending sale of the Vegetables segment.
CAPITAL INVESTMENTS
The Company's goal is to maintain and improve the productivity of its assets,
making capital investments which offer returns to the Company greater than its
weighted average cost of capital.
MODERATE AND PRUDENT USE OF DEBT
The Company maintains moderate debt levels considering its business strategy,
cash flow, access to both short-and long-term debt capital markets and leverage
of comparable firms in the food industry. The Company allocates its borrowings
between the short- and long-term debt markets after considering factors such as
cost, stability and liquidity. The long-term debt market has primarily been used
to fund acquisitions and major capital expenditures. The Company`s total debt to
total capitalization ratio at fiscal year-end 1998 was 48.3%, a level which the
Company believes will allow access to both short- and long-term debt markets in
order to fund the Company`s growth. In addition, the proceeds to be received
upon the completion of the pending Vegetables segment sale will provide
additional financial flexibility.
FINANCIAL RISK MANAGEMENT
The Company's primary financial risk is interest rate exposure, which is managed
through a mix of fixed and floating rate debt. Foreign currency risk is not
significant. The Company's policies and controls preclude the use of "leveraged"
derivatives and the use of financial derivatives for purposes considered
speculative.
DIVIDEND POLICY
The Company paid quarterly dividends of $.20 per share in fiscal 1998, up from
$.19 and $.18 per share in fiscal 1997 and 1996, respectively. On July 24, 1998,
the Company increased the quarterly dividend rate 5% to $.21 per share, the
Company's twenty-sixth increase since 1974. The Company has paid a dividend for
55 consecutive years.
STOCK REPURCHASE
The Company may, from time to time, repurchase stock on the open market. During
fiscal 1998, the Company repurchased 730,500 shares of its outstanding common
stock. No shares were repurchased during fiscal years 1997 or 1996. At May 31,
1998, the Company had authorization to repurchase up to an additional 970,000
shares of its common stock.
OPERATING RESULTS
The Company's fiscal year ends on the last Sunday in May; therefore, the 1998
fiscal year included 53 weeks versus 52 weeks in 1997 and 1996.
- --------------------------------------------------------------------------------
(17) Financial Review
- --------------------------------------------------------------------------------
<PAGE> 19
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
RESULTS OF CONTINUING OPERATIONS
The Company's net sales for fiscal 1998 were $2.7 billion compared to $2.5
billion for fiscal 1997, an increase of 11.2%. Acquisitions in the Dairy and
Specialty segments accounted for most of the fiscal 1998 increase. Improved
sales volume in the Dairy and Specialty segments also contributed to the overall
sales increase, with the Specialty segment experiencing a 16% growth in volume,
exclusive of acquisitions.
Income from continuing operations for fiscal year 1998 increased 18.9% to
$88.0 million or $2.13 per diluted share, compared to $74.0 million or $1.83 per
diluted share in the prior year. Fiscal 1998 earnings growth was primarily due
to the Dairy and Specialty business segments.
DEAN FOODS COMPANY & SUBSIDIARIES
FINANCIAL REVIEW
The Company's return on invested capital decreased from 17.5% in fiscal
1997 to 16.0% in fiscal 1998. This decline was primarily due to the additional
invested capital associated with acquisitions and new product initiatives, which
did not contribute substantially to 1998 earnings. Each of these initiatives is
expected to contribute significantly to the Company`s future growth and return
on invested capital.
BUSINESS SEGMENTS
The Company is a diversified food processor and distributor engaged in three
business segments. The Company is a major processor of fluid milk and related
products, ice cream and extended shelf life dairy products serving various
regional markets, with some products distributed nationwide and to Mexico. Dairy
is the Company's largest segment, accounting for 75% of total fiscal 1998 sales,
while the Pickles and Specialty product segments accounted for 13% and 12% of
total sales, respectively. Pickles and Specialty products are sold in regional
markets and nationally, with certain products sold internationally.
The Company is a large user of certain agricultural related commodities,
the prices for which can vary greatly. The competitive conditions and relatively
low profit margins in the food industry necessitate timely adjustment of the
Company's pricing to reflect changes in commodity pricing as well as changes in
other production and distribution related costs.
Segment operating earnings represent total sales less operating expenses
with the following items not deducted: general corporate expense, interest
expense and federal and state income taxes.
DAIRY - Net sales for the Dairy segment increased 14.8%, from $1.8 billion
in fiscal 1997, to $2.1 billion in fiscal 1998. The Dairy sales growth can
largely be attributed to the eight acquisitions completed during fiscal 1998,
the introduction of the Milk Chugs product line and an extra week of sales
activity due to the 53 week fiscal year. Dairy volume for the fiscal year
increased by 20%, also attributable to the fluid milk and ice cream acquisitions
completed during the year and in late fiscal 1997.
Dairy operating earnings for fiscal 1998 were $114.1 million, a 9.9%
increase over the $103.8 in fiscal 1997. The fiscal 1998 earnings benefited from
the impact of 1997 acquisitions and favorable raw milk costs early in the fiscal
year, which resulted in significantly improved first half operating earnings.
The segment`s second half operating earnings declined from fiscal 1997 levels as
less favorable raw milk costs, competitive pricing conditions in selected
regions and increased distribution costs in the extended shelf life operation
more than offset the benefits of the 1997 and 1998 acquisitions.
The Dairy segment`s return on invested capital declined from 18.5% in
fiscal 1997 to 15.0% in fiscal 1998 due to the additional invested capital from
fiscal 1998 acquisitions and increased capital spending associated with the Milk
Chugs product line. Each of these initiatives is expected to improve overall
Company performance in the future.
PICKLES - Fiscal year 1998 Pickles net sales declined to $348.7 million, a
6.0% decrease from $370.8 million in fiscal year 1997. Pickle category trends,
which were flat to declining during fiscal 1998, combined with competitive
market pressures and rationalization of the segment`s product offerings led to
lower fiscal year sales. The Pickles segment volume decline was in line with the
overall industry volume decline of approximately 3%.
Pickles operating earnings of $37.1 million in fiscal 1998 increased from
$36.0 million in fiscal 1997 due largely to overall lower operating costs.
Additionally, the Pickles segment benefited from aggressive invested capital
management, increasing the segment's return on invested capital from 16.1% in
fiscal year 1997 to 18.7% in fiscal year 1998.
SPECIALTY - Fiscal 1998 net sales increased 10.8%, from $301.9 million in
fiscal 1997, to $334.6 million. The addition of Marie's refrigerated salad
dressing business in early fiscal 1998 accounted for most of this increase. Each
of the businesses in this segment reported increased sales and volumes during
fiscal 1998 compared to the prior year.
Operating earnings of $52.2 million in fiscal 1998 were 42.3% higher than
the $36.7 million in fiscal 1997, primarily due to earnings generated by the
Marie's acquisition, increased operating efficiencies at the Dean Dip and
Dressing California operation and significantly improved performance in the
Amboy aseptic cheese and pudding business.
Return on invested capital for the Specialty segment dropped to 23.7% in
fiscal 1998 from 28.9% in fiscal 1997 due to the additional invested capital
associated with the Marie's acquisition and a new dryer in the powdered products
business.
CORPORATE
Fiscal 1998 Corporate expenses of $40.8 million were $3.0 million higher than
fiscal 1997 expenses of $37.8 million. This change was primarily due to
increased incentive and equity-based compensation expenses as a result of
overall improved fiscal year performance.
- --------------------------------------------------------------------------------
(18) Financial Review
- --------------------------------------------------------------------------------
<PAGE> 20
INTEREST EXPENSE
Interest expense increased $6.0 million, to $21.1 million, in fiscal 1998
primarily due to the issuance of additional short- and long-term debt to fund
acquisitions and a significantly higher level of capital expenditures during the
fiscal year.
INCOME TAXES
The effective tax rate for fiscal year 1998 was 38.8% compared to a rate of
40.6% in the prior year. The decline in the effective rate is due to lower state
taxes and increased export and other tax credits in fiscal 1998.
DISCONTINUED OPERATIONS
Income from discontinued operations, net of taxes, was $18.3 million in fiscal
1998 versus $12.7 million in fiscal 1997.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
RESULTS OF CONTINUING OPERATIONS
Net sales increased 9.8% to $2.5 billion in fiscal 1997, from $2.2 billion in
fiscal 1996. An improved sales mix and business acquisitions were the primary
contributing factors to the fiscal 1997 increase.
Earnings for fiscal year 1997 increased over fiscal 1996 with income from
continuing operations of $74.0 million, or $1.83 per diluted share, compared
with a loss of $16.9 million, or $.42 per diluted share, in the prior year.
Fiscal 1996 results included a pre-tax charge to income of continuing operations
of $102.4 million ($64.9 million after-tax, or $1.62 per share) related to the
adoption of a strategic plan to reduce costs, rationalize production capacity
and provide for severance and environmental costs. Absent the fiscal 1996
special charge, fiscal 1997 operating earnings increased by 36.2% over the prior
year. Each of the Company's business segments reported increased earnings during
fiscal 1997. The Company's return on invested capital increased to 17.5% in
fiscal 1997 from 11.1% (pre-special charge) in fiscal 1996.
The strategic plan adopted in fiscal 1996 included the planned elimination
of more than 500 manufacturing and administrative positions and the disposition
or closure of six manufacturing facilities. As of May 31, 1998, the Company had
disposed of or closed all six manufacturing facilities and eliminated all of the
500 positions. Further discussion of the special charge appears in Note 14 to
the consolidated financial statements.
The pre-tax impact of the special charge on the Company's fiscal 1996
operating earnings (loss) by business segment is summarized below:
<TABLE>
<CAPTION>
Operating Operating Earnings
(In thousands) Earnings (Loss) Special Charge before Special Charge
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Dairy $ (2,644) $ 76,694 $ 74,050
- ------------------------------------------------------------------------------
Pickles 10,299 13,704 24,003
- ------------------------------------------------------------------------------
Specialty 25,737 999 26,736
- ------------------------------------------------------------------------------
Corporate (33,985) 11,042 (22,943)
- ------------------------------------------------------------------------------
Consolidated $ (593) $ 102,439 $ 101,846
==============================================================================
</TABLE>
BUSINESS SEGMENTS
DAIRY - Dairy sales for fiscal 1997 increased 11.0%, primarily the result
of increased selling prices which reflected the pass-through of higher raw milk
costs during the year and increased sales related to new customers. Overall,
Dairy volume was up 2%, as a 5% increase in fluid milk volume was offset by a
slight decrease in ice cream volume, and a decline resulting from the sale of an
extended shelf life plant.
Raw milk costs peaked at record levels in the second quarter of fiscal
1997, then declined sharply during the third quarter and rose during the last
quarter of fiscal 1997 to a level comparable to the end of fiscal 1996.
Fiscal 1997 Dairy operating earnings of $103.8 million reflect a 40.1%
increase over the same period in 1996. Performance improved in each of the fluid
milk, ice cream, and extended shelf life operations as a result of higher sales
and improved operating efficiencies.
PICKLES - Sales in fiscal 1997 of $370.8 million were slightly lower in
relation to fiscal 1996 sales of $373.2 million primarily due to a shift in
customer sales mix which focused on rationalizing the segment`s product
offerings and customer base.
Operating earnings of $36.0 million in fiscal 1997 increased from $24.0
million in fiscal 1996, primarily due to more effective procurement, increased
operating efficiencies and improved promotional activities management.
SPECIALTY - Sales for fiscal 1997 increased 17.9% to $301.9 million from
$256.0 million in fiscal 1996. The increase is largely due to the full-year
inclusion of sales generated by a mid-fiscal 1996 acquisition and the increased
sales volume of the segment's non-dairy creamer products.
Fiscal 1997 operating earnings of $36.7 million increased 37.2% over
earnings of $26.7 million in fiscal 1996. The improvement in operating earnings
is attributable to the higher sales of powdered products and the full-year
earnings of the mid-fiscal 1996 acquisition.
CORPORATE
Corporate expenses increased in fiscal 1997 over fiscal 1996 principally as the
result of increased compensation and stock plan accruals reflecting improved
1997 results, as well as increased pension and other expenses related to 1997
management changes.
INTEREST EXPENSE
Fiscal 1997 interest expense decreased $1.2 million, or 7.6%, principally as a
result of decreased debt service on short-term borrowings. The Company had lower
average borrowings at lower weighted average interest rates during fiscal 1997
in comparison to fiscal 1996.
INCOME TAXES
The Company recognized an effective tax rate of 40.6% for fiscal 1997 versus an
effective rate of (8.2)% for fiscal 1996. The 1996 tax provision of $1.3
million, on a pre-tax loss from continuing operations of $15.6 million was due
to the impact of non-deductible goodwill.
DISCONTINUED OPERATIONS
Income from discontinued operations, net of taxes, was $12.7 million in fiscal
1997 versus a loss of $32.8 million in fiscal 1996. The fiscal 1996 loss
includes a pre-tax charge of $47.6 million related to the adoption of a plan to
reduce costs, rationalize production capacity and provide for severance costs.
- --------------------------------------------------------------------------------
(19) Financial Review
- --------------------------------------------------------------------------------
<PAGE> 21
DEAN FOODS COMPANY & SUBSIDIARIES
FINANCIAL REVIEW
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash and capital expenditure requirements have
historically been met through funds generated internally from assets employed.
Working capital at May 31, 1998 was $67.3 million, an increase of $2.3
million over the prior year. The Company's current ratio was 1.19 compared to
1.22 at the end of fiscal 1997. Cash and temporary cash investments at May 31,
1998 were $11.9 million, an increase of $7.5 million from the prior year-end.
Inventories increased $13.3 million principally the result of inventories of
businesses acquired during fiscal 1998.
Seasonal working capital requirements of continuing operations are funded
using short-term debt under the Company`s Revolving Credit Agreement or its
bilateral lines of credit. During fiscal 1998, funds drawn under the Revolving
Credit Agreement and bilateral lines of credit were also used to fund
acquisitions. The short-term borrowings outstanding at the end of fiscal 1998
were $12.0 million, whereas the borrowings outstanding at the end of fiscal 1997
were $3.0 million.
Net property, plant, and equipment at May 31, 1998 increased $169.3 million
this year principally due to the assets of businesses acquired and capital
expenditures, net of dispositions and depreciation. The fiscal 1998 capital
expenditures increase reflects the Company's continued emphasis on investing to
achieve growth from new products, improved operating efficiencies, and expansion
of existing product lines.
The Company's financial strategy includes utilizing a combination of debt
and equity that will maintain a competitive weighted average cost of capital and
provide sufficient liquidity for growth. The Company has access to significant
capital via debt and equity markets. The Company will continue to use the
long-term debt markets in its funding of acquisitions and major capital
expenditures.
During fiscal 1998, the Company entered into a $500 million Revolving
Credit Agreement which matures in 2003. This Credit Agreement replaces the
Company`s prior $300 million Amended and Restated Credit Agreement. Borrowings
under this facility as of May 31, 1998 were $210.0 million. In October 1997, the
Company issued $150 million of 6.9% Notes due 2017. Long-term obligations at May
31, 1998 were $558.2 million, an increase of $349.3 million from last year-end.
The increased debt was used to finance 1998 acquisitions and increased capital
expenditures. The Company's total debt to total capital ratio at May 31, 1998
was 48.3% compared to 28.3% a year ago. The net cash proceeds to be received
upon the completion of the pending sale of the Vegetables segment are expected
to be utilized to repay borrowings under the Revolving Credit Agreement. This
will provide additional capacity to fund future acquisitions and capital
expenditures.
Shareholders' equity at May 31, 1998 was $619.3 million, an increase of
$51.6 million from last year-end, reflecting fiscal year 1998 earnings less
dividends paid to shareholders and common stock repurchased. The Treasury Stock
held at May 31, 1998 is available for use in future acquisitions, for stock
options or for other general business purposes.
CASH FLOWS
The change in cash for fiscal 1998 was an increase of $7.5 million, whereas cash
decreased by $6.0 million during fiscal 1997. The Company's cash flow activities
are as follows:
OPERATING ACTIVITIES - Cash provided from operations for fiscal 1998 was
$162.7 million compared to $147.3 million and $108.9 million for fiscal years
1997 and 1996, respectively. The increased cash provided in 1998 was principally
the result of increased earnings during fiscal 1998.
INVESTING ACTIVITIES - Net cash used in the Company's investing activities
in fiscal 1998 was $472.3 million compared to $67.8 million and $113.7 million
in fiscal years 1997 and 1996, respectively. Capital expenditures and business
acquisitions are the Company's principal investing activities. During 1998, the
Company invested $104.7 million in capital expenditures, compared with $55.6
million and $71.1 million in fiscal 1997 and 1996, respectively. The $49.1
million increase between fiscal 1998 and 1997 reflects the company's commitment
to focus on investing in innovative product growth such as the small bottle
initiative, improved production efficiencies and expansion of existing product
lines. Fiscal 1999 capital expenditures are expected to be slightly higher than
fiscal 1998 due to capital projects related to new product growth, primarily the
continued roll-out of the Dairy segment's small bottle initiative.
The Company invested $369.6 million in 1998 to acquire eight dairies, one
pickle and one specialty operation. The significant fiscal 1998 acquisition
activity reflects the Company's commitment to focus on profitable growth in its
core business segments. During the three years ended May 31, 1998, a total of
$430.2 million was spent to acquire businesses which are discussed in Note 2 to
the consolidated financial statements.
Subsequent to fiscal 1998 year-end, the Company completed the acquisitions
of Barber Dairies, Inc. and Hillside Dairy, each for cash consideration. The
Company also announced it has reached a definitive agreement to acquire U.C.
Milk Company for cash consideration.
FINANCING ACTIVITIES - Net cash provided by financing activities during
fiscal 1998 was $279.0 million compared to net cash used of $125.0 million in
fiscal 1997 and net cash provided of $30.5 million in fiscal 1996. The issuance
of long-term obligations to fund acquisitions and increased capital expenditure
activity is the principal
- --------------------------------------------------------------------------------
(20) Financial Review
- --------------------------------------------------------------------------------
<PAGE> 22
reason for the change in net financing activities between fiscal 1998 and 1997.
The net repayment of $89.0 million of short-term borrowings in fiscal 1997,
which was possible due to the lower level of acquisitions and capital
expenditures in that year, is the principal reason for the fluctuation in net
financing activities between fiscal 1997 and 1996.
Short-term borrowings outstanding at fiscal year end 1998 and 1997 were
$12.0 million and $3.0 million, respectively. Cash dividends paid were $32.0
million in fiscal 1998 compared to $30.1 million and $28.5 million during fiscal
years 1997 and 1996, respectively.
YEAR 2000 COMPLIANCE
The Year 2000 issue results from computer programs using two digits rather than
four to define the applicable year. As the year 2000 approaches, systems using
such programs may be unable to accurately process certain date-based
information. Like many other companies, the Company is continuing to assess and
modify its computer, production and facility systems and business processes to
provide for their continued functionality. The Company is also assessing the
readiness of external entities, including suppliers, vendors, and banking and
insurance partners, and is coordinating its efforts to address the Year 2000
issue with those entities.
In addition, the Company is addressing the Year 2000 issue by both
augmenting previously scheduled computer maintenance with procedures designed to
locate and correct Year 2000 problems and by slightly accelerating its normal
equipment and software replacement schedules. The Company expects that
substantially all new system upgrades or reprogramming efforts, including
contingency planning, will be completed by December 31, 1998. The costs
associated with these procedures have not been and are not expected to be
material to the Company's financial condition or results of operations.
The Company believes that modification of existing software and conversions
to new software will result in Year 2000 compliance. However, given the
complexity of the Year 2000 issue, the impact on business operations due to
failure by the Company to achieve compliance or failure by external entities,
such as suppliers and vendors, to achieve compliance, which the Company cannot
control, could adversely affect the Company's consolidated results of
operations.
ENVIRONMENTAL MATTERS
On July 10, 1996, a subsidiary of the Company was fined approximately $4 million
in a lawsuit filed by the United States of America in the United States District
Court for the Middle District of Pennsylvania alleging violations of the Federal
Water Pollution Control Act relating to the discharge of conventional,
non-hazardous substances. The Company has appealed the lower court ruling on the
grounds that the fine should be substantially reduced. The Appellate Court has
upheld the lower court ruling and the Company is currently considering its
options for settlement or further proceedings. If the Company's efforts in this
regard are ultimately unsuccessful, the fine would be covered by existing
reserves. The Company continues to give attention to the impact of operations on
the environment and compliance with current federal, state and local regulations
relating to the protection of the environment.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." This
new pronouncement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This standard is effective for the Company's fiscal year
ending May 30, 1999.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," was also issued in June 1997, and establishes new standards for
reporting information about operating segments in annual financial statements
and requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. SFAS No. 131 also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This standard is effective for the
Company's fiscal year ending May 30, 1999. The Company expects that the adoption
of SFAS No. 131 will not have a material effect on its existing segment
information disclosures.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June, 1998. This statement standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the statement of financial position and measure them
at fair value. This standard is effective for the Company's 1999 fiscal year and
adoption of this standard is not expected to have a material impact on the
Company's financial condition or results of operations.
FORWARD LOOKING STATEMENTS
Certain statements in this Annual Report are "forward looking statements" as
defined by the Private Securities Litigation Reform Law of 1995. These
statements, which may be indicated by words such as "expects", "intends",
"believes", "forecasts", or other words of similar meaning, involve certain
risks and uncertainties that may cause actual results to differ materially from
expectations as of the date of the Report. These risks include, but are not
limited to, risks associated with the Company's acquisition strategy, adverse
weather conditions resulting in poor harvest conditions, raw milk costs,
interest rate fluctuations, competitive pricing pressures, marketing and
cost-management programs, changes in government programs and shifts in market
demand.
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(21) Financial Review
- --------------------------------------------------------------------------------
<PAGE> 23
DEAN FOODS COMPANY & SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, 1998 and May 25, 1997 (In thousands)
ASSETS 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
- --------------------------------------------------------------------------------------------------
Cash and temporary cash investments $ 11,932 $ 4,386
------------------------------------------------------------------------------------------
Accounts and notes receivable, less allowance for doubtful
accounts of $4,212 and $3,085, respectively 225,970 174,784
------------------------------------------------------------------------------------------
Inventories 135,405 122,130
------------------------------------------------------------------------------------------
Deferred tax assets 12,329 16,939
------------------------------------------------------------------------------------------
Other 34,602 40,644
------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 420,238 358,883
------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST
- --------------------------------------------------------------------------------------------------
Land 35,072 22,554
------------------------------------------------------------------------------------------
Buildings and improvements 280,567 211,604
------------------------------------------------------------------------------------------
Machinery and equipment 542,782 457,588
------------------------------------------------------------------------------------------
Transportation equipment 64,033 50,551
------------------------------------------------------------------------------------------
Construction in progress 43,772 25,179
------------------------------------------------------------------------------------------
966,226 767,476
------------------------------------------------------------------------------------------
Less - Accumulated depreciation 415,162 385,676
------------------------------------------------------------------------------------------
TOTAL PROPERTIES, NET 551,064 381,800
------------------------------------------------------------------------------------------
NET ASSETS OF DISCONTINUED OPERATIONS 288,037 312,855
- --------------------------------------------------------------------------------------------------
OTHER ASSETS
- --------------------------------------------------------------------------------------------------
Goodwill, net of amortization of $9,984 and $6,169, respectively 329,692 62,801
------------------------------------------------------------------------------------------
Other intangible assets, net of amortization of $1,553 and
$1,540, respectively 4,905 2,044
------------------------------------------------------------------------------------------
Other 13,253 15,297
------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 347,850 80,142
------------------------------------------------------------------------------------------
TOTAL ASSETS $1,607,189 $1,133,680
==================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
(22) Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<PAGE> 24
<TABLE>
<CAPTION>
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
- -------------------------------------------------------------------------------------------------
Notes payable to banks $ 12,000 $ 3,000
-----------------------------------------------------------------------------------------
Current installments of long-term obligations 9,014 12,657
-----------------------------------------------------------------------------------------
Accounts payable and accrued expenses 311,303 254,522
-----------------------------------------------------------------------------------------
Dividends payable 8,079 7,738
-----------------------------------------------------------------------------------------
Federal and state income taxes 12,518 15,978
-----------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 352,914 293,895
------------------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS 558,233 208,931
- -------------------------------------------------------------------------------------------------
DEFERRED LIABILITIES
- -------------------------------------------------------------------------------------------------
Deferred income taxes 43,536 25,262
-----------------------------------------------------------------------------------------
Other 33,240 37,911
-----------------------------------------------------------------------------------------
TOTAL DEFERRED LIABILITIES 76,776 63,173
------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------
Preferred stock, $1 par value, 10,000,000 shares authorized,
none issued - -
-----------------------------------------------------------------------------------------
Common stock, $1 par value, 80,000,000 shares authorized,
41,962,091 and 41,544,923 shares issued, respectively 41,962 41,545
-----------------------------------------------------------------------------------------
Capital in excess of par value 31,127 18,073
-----------------------------------------------------------------------------------------
Retained earnings 612,390 538,450
-----------------------------------------------------------------------------------------
Cumulative translation adjustment (290) (218)
-----------------------------------------------------------------------------------------
Less - Treasury stock, at cost, 1,992,420 and 1,261,920
shares, respectively 65,923 30,169
-----------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 619,266 567,681
------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES - -
- -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,607,189 $ 1,133,680
=================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
(23) Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<PAGE> 25
DEAN FOODS COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF INCOME
<TABLE>
<CAPTION>
For the Three Fiscal Years Ended May 31, 1998 (In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 2,735,834 $ 2,460,563 $ 2,240,517
- ------------------------------------------------------------------------------------------------------
Costs of products sold 2,105,849 1,901,791 1,757,810
- ------------------------------------------------------------------------------------------------------
Delivery, selling and administrative expenses 467,466 420,101 380,861
- ------------------------------------------------------------------------------------------------------
Special charge - - 102,439
- ------------------------------------------------------------------------------------------------------
OPERATING EARNINGS (LOSS) 162,519 138,671 (593)
- ------------------------------------------------------------------------------------------------------
Interest expense 21,101 15,071 16,316
- ------------------------------------------------------------------------------------------------------
Interest income 2,312 929 1,323
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 143,730 124,529 (15,586)
- ------------------------------------------------------------------------------------------------------
Provision for income taxes 55,750 50,541 1,279
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 87,980 73,988 (16,865)
- ------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations, net of taxes 18,322 12,716 (32,823)
- ------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 106,302 $ 86,704 $ (49,688)
======================================================================================================
BASIC INCOME (LOSS) PER SHARE:
- ------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 2.17 $ 1.84 $ (.42)
----------------------------------------------------------------------------------------------
Income (loss) from discontinued operations .46 .32 (.82)
----------------------------------------------------------------------------------------------
Net income (loss) $ 2.63 $ 2.16 $ (1.24)
==============================================================================================
DILUTED INCOME (LOSS) PER SHARE:
- ------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 2.13 $ 1.83 $ (.42)
----------------------------------------------------------------------------------------------
Income (loss) from discontinued operations .44 .32 (.82)
----------------------------------------------------------------------------------------------
Net income (loss) $ 2.57 $ 2.15 $ (1.24)
==============================================================================================
WEIGHTED AVERAGE COMMON SHARES:
- ------------------------------------------------------------------------------------------------------
Basic 40,469 40,181 40,122
----------------------------------------------------------------------------------------------
Diluted 41,395 40,377 40,140
==============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
(24) Consolidated Statements of Income
- --------------------------------------------------------------------------------
<PAGE> 26
DEAN FOODS COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Three Fiscal Years Ended May 31, 1998 (In thousands)
- -------------------------------------------------------------------------------------------------------------------
COMMON COMMON CAPITAL IN CUMULATIVE
STOCK STOCK EXCESS OF RETAINED TRANSLATION TREASURY
SHARES VALUE PAR VALUE EARNINGS ADJUSTMENT STOCK
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT MAY 28, 1995 40,078 $41,339 $12,705 $ 560,881 $(228) $(30,171)
- -------------------------------------------------------------------------------------------------------------------
Net loss - - - (49,688) - -
- -------------------------------------------------------------------------------------------------------------------
Issuance of common stock 47 47 1,275 - - -
- -------------------------------------------------------------------------------------------------------------------
Exercise of stock options 9 9 178 - - -
- -------------------------------------------------------------------------------------------------------------------
Cash dividends declared, $.72 per share - - - (28,894) - -
- -------------------------------------------------------------------------------------------------------------------
Cumulative translation adjustment - - - - 239 -
- -------------------------------------------------------------------------------------------------------------------
BALANCES AT MAY 26, 1996 40,134 41,395 14,158 482,299 11 (30,171)
- -------------------------------------------------------------------------------------------------------------------
Net income - - - 86,704 - -
- -------------------------------------------------------------------------------------------------------------------
Issuance of common stock 120 120 3,222 - - -
- -------------------------------------------------------------------------------------------------------------------
Exercise of stock options 30 30 692 - - -
- -------------------------------------------------------------------------------------------------------------------
Issuance of treasury stock - - 1 - - 2
- -------------------------------------------------------------------------------------------------------------------
Cash dividends declared, $.76 per share - - - (30,553) - -
- -------------------------------------------------------------------------------------------------------------------
Cumulative translation adjustment - - - - (229) -
- -------------------------------------------------------------------------------------------------------------------
BALANCES AT MAY 25, 1997 40,284 41,545 18,073 538,450 (218) (30,169)
- -------------------------------------------------------------------------------------------------------------------
Net income - - - 106,302 - -
- -------------------------------------------------------------------------------------------------------------------
Issuance of common stock 358 358 2,397 - - -
- -------------------------------------------------------------------------------------------------------------------
Exercise of stock options 59 59 10,657 - - -
- -------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (731) - - - - (35,754)
- -------------------------------------------------------------------------------------------------------------------
Cash dividends declared, $.80 per share - - - (32,362) - -
- -------------------------------------------------------------------------------------------------------------------
Cumulative translation adjustment - - - - (72) -
- -------------------------------------------------------------------------------------------------------------------
BALANCES AT MAY 31, 1998 39,970 $41,962 $31,127 $ 612,390 $(290) $(65,923)
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
(25) Consolidated Statements of Shareholders' Equity
- --------------------------------------------------------------------------------
<PAGE> 27
DEAN FOODS COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Fiscal Years Ended May 31, 1998 (In thousands) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTINUING OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 87,980 $ 73,988 $ (16,865)
-----------------------------------------------------------------------------------------------------------
Adjustments to reconcile income (loss) from continuing
operations to net cash provided from continuing operations:
-----------------------------------------------------------------------------------------------------------
Depreciation and amortization 60,418 51,434 51,962
--------------------------------------------------------------------------------------------------------
Deferred income taxes 16,131 6,888 (26,932)
--------------------------------------------------------------------------------------------------------
Other long-term deferred liabilities (5,409) 5,351 12,070
--------------------------------------------------------------------------------------------------------
Special charge - - 102,439
--------------------------------------------------------------------------------------------------------
(Increase) decrease in working capital items, net of acquisitions:
--------------------------------------------------------------------------------------------------------
Accounts and notes receivable (16,581) (16,925) (11,002)
----------------------------------------------------------------------------------------------------
Inventories and other current assets 19,857 (3,059) 5,786
----------------------------------------------------------------------------------------------------
Accounts payable and accrued expenses (10,294) 21,199 2,607
----------------------------------------------------------------------------------------------------
Federal and state income taxes 9,342 8,402 (8,970)
----------------------------------------------------------------------------------------------------
Other 1,266 (14) (2,171)
--------------------------------------------------------------------------------------------------------
NET CASH PROVIDED FROM CONTINUING OPERATIONS 162,710 147,264 108,924
-----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
- -------------------------------------------------------------------------------------------------------------------
Capital expenditures (104,683) (55,580) (71,086)
-----------------------------------------------------------------------------------------------------------
Proceeds from dispositions of property,
plant and equipment 1,943 2,093 273
-----------------------------------------------------------------------------------------------------------
Acquisitions, net of cash acquired (369,560) (16,332) (44,305)
-----------------------------------------------------------------------------------------------------------
Proceeds from businesses divested - 2,000 1,399
-----------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (472,300) (67,819) (113,719)
-----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
- -------------------------------------------------------------------------------------------------------------------
Issuance of long-term obligations 357,575 8,200 9,799
-----------------------------------------------------------------------------------------------------------
Repayment of long-term obligations (35,509) (13,475) (11,719)
-----------------------------------------------------------------------------------------------------------
Issuance (repayment) of notes payable to banks, net 9,000 (89,000) 63,000
-----------------------------------------------------------------------------------------------------------
Unexpended industrial revenue bond proceeds 4,656 (4,662) (3,608)
-----------------------------------------------------------------------------------------------------------
Cash dividends paid (32,021) (30,113) (28,474)
-----------------------------------------------------------------------------------------------------------
Issuance of common stock 11,020 4,064 1,509
-----------------------------------------------------------------------------------------------------------
Issuance (purchase) of treasury stock (35,754) 3 -
-----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 278,967 (124,983) 30,507
-----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS 38,169 39,525 (20,139)
- -------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS 7,546 (6,013) 5,573
- -------------------------------------------------------------------------------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS - BEGINNING OF YEAR 4,386 10,399 4,826
- -------------------------------------------------------------------------------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS - END OF YEAR $ 11,932 $ 4,386 $ 10,399
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
(26) Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<PAGE> 28
DEAN FOODS COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Dollar amounts in thousands unless otherwise noted.
1. NATURE OF THE BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS - Dean Foods Company and its subsidiaries ("the
Company") are engaged in the processing, distribution and sales of dairy, pickle
and other specialty food products. The Company operates in three business
segments. The Company's principal products in the Dairy segment are fluid milk
and cultured products, ice cream and extended shelf life products. The Pickles
segment's principal products are pickles, relishes and related items. Specialty
segment products include powdered products, refrigerated salad dressings,
sauces, puddings and dips, as well as the operations of the Company's
transportation subsidiary.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS - The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
DEFINITION OF FISCAL YEAR - The Company's fiscal year ends on the last
Sunday in May. There were 53 weeks in the fiscal year ended May 31, 1998,
whereas there were 52 weeks in fiscal 1997 and 1996.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and all of its wholly-owned and majority-owned
subsidiaries. All significant intercompany transactions and balances are
excluded from the statements.
CASH AND TEMPORARY CASH INVESTMENTS - The Company considers temporary cash
investments with an original maturity of three months or less to be cash
equivalents.
INVENTORIES - Inventories are stated at the lower of cost or market. The
majority of Pickles inventories are valued on the last-in, first-out (LIFO)
method. Dairy and certain Specialty inventories are valued on the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT - Major renewals and betterments are
capitalized while repairs and maintenance which do not improve or extend useful
life are expensed currently. Upon sale, retirement, abandonment or other
disposition of property, the cost and related accumulated depreciation are
eliminated from the accounts and any gain or loss is reflected in income. For
financial statement purposes, depreciation is calculated by the straight-line
method. For income tax purposes, depreciation is calculated using accelerated
methods for certain assets.
INTANGIBLE ASSETS - Excess of cost over fair market value of net
identifiable assets of acquired companies and other intangible assets are
amortized on a straight-line basis over various periods between three years and
forty years.
LONG-LIVED ASSETS - The Company continually reviews intangible assets and
property, plant and equipment for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An estimate of the undiscounted future cash flows or, in the case
of goodwill, undiscounted operating earnings, over the remaining life of the
asset is compared to the carrying amount to determine whether an impairment
exists. The Company believes that no indicators of impairment of long-lived
assets existed at May 31, 1998.
PENSIONS - Substantially all of the Company's employees are covered by
Company or union-management-administered pension plans or profit sharing plans.
The policy with respect to Company-administered pension plans is to fund accrued
pension costs based on determinations made by independent actuaries which
include provisions for service cost, interest cost, return on pension assets and
amortization of prior service cost and unrecognized initial net assets.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
REVENUE RECOGNITION - Revenues are recognized when products are shipped.
INCOME PER COMMON SHARE - Income per share is computed in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." Basic income per common share is based upon the weighted average number
of common shares outstanding during each year. Diluted income per common share
is calculated based upon the sum of the weighted average number of shares
outstanding and the weighted average number of potential common shares
outstanding. Potential common shares consist solely of the outstanding options
under the Company's stock option plans. There are no differences in the income
used to compute the Company's basic and diluted income per share.
STOCK-BASED COMPENSATION - Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has elected to continue to measure
compensation cost using the intrinsic value-based method of accounting as
prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees." Income tax benefits attributable to stock options
exercised are credited to capital in excess of par value.
RECLASSIFICATIONS - Certain previously reported amounts have been
reclassified to conform with year-end 1998 presentations.
- --------------------------------------------------------------------------------
(27) Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<PAGE> 29
DEAN FOODS COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
2. BUSINESS ACQUISITIONS
During fiscal 1998, the Company made the following ten acquisitions:
ACQUISITION CLOSING DATE
- -----------------------------------------------------
DAIRY SEGMENT:
Purity Dairies May 14, 1998
Coburg Dairy March 31, 1998
Dairy Business of American
Stores Company (Lucky Stores) March 2, 1998
Wengert's Dairy February 23, 1998
Sani-Dairy Division of the
Penn Traffic Company January 20, 1998
Maplehurst Dairy, Inc. January 6, 1998
H. Meyer Dairy Company November 24, 1997
Milk Products LLC November 21, 1997
- -----------------------------------------------------
PICKLES SEGMENT:
Schwartz Pickle May 18, 1998
- -----------------------------------------------------
SPECIALTY SEGMENT:
Marie's Salad Dressing May 27, 1997
- -----------------------------------------------------
All of the acquisitions were asset purchases, except the Coburg and Purity
acquisitions which were stock purchases. Cash consideration for all of the above
transactions totaled $369.6 million. In addition to the cash consideration paid
for these businesses, the Company assumed certain liabilities.
On a pro forma basis, the net sales (unaudited) of the Company would have
been $3,254.5 million in 1998 and $3,178.0 million in 1997. The pro forma sales
amounts assume that all of the above acquisitions occurred at the beginning of
each period presented. On a pro forma basis, the results of operations
(unaudited) of the companies acquired would not have had a material effect on
the Company's net income or income per common share in 1998 or 1997.
During fiscal 1997, the Company acquired a dairy operation and a dairy
distributor for $16.3 million in cash consideration. During fiscal 1996, the
Company acquired one operation in each of the Pickles and Specialty segments for
$44.3 million in cash consideration. The pro forma impact as if these
acquisitions had taken place at the beginning of the fiscal year prior to
acquisition is not significant.
All of the above acquisitions were accounted for using the purchase method
of accounting as of their respective acquisition dates, and accordingly, the
operating results of the acquired companies subsequent to their respective
acquisition dates are included in the Company's consolidated financial
statements. The fiscal 1998 acquisitions have been recorded at their estimated
fair values using preliminary valuations of the opening balance sheets. These
estimates of fair value are subject to change when final information concerning
asset and liability valuations are obtained. Goodwill arising from the
acquisitions, totaling an estimated $276.4 million in 1998, $13.5 million in
1997, and $22.6 million in 1996, will be amortized using the straight-line
method over periods up to forty years.
3. DISCONTINUED OPERATIONS
On July 27, 1998, the Company announced it had reached a definitive agreement to
sell its vegetable operations to Agrilink Foods, Inc. for approximately $400
million in cash plus an aseptic foods business, which will be folded into the
Company's Specialty business segment. The transaction is subject to regulatory
approval and is expected to close in the first half of fiscal 1999. Accordingly,
financial information has been restated to present the Vegetables segment as
discontinued operations.
Net Assets of Discontinued Operations are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------
<S> <C> <C>
Current assets $180,930 $203,249
- ------------------------------------------------------
Net plant, property
and equipment 133,276 145,374
- ------------------------------------------------------
Other assets 46,204 47,910
- ------------------------------------------------------
Current liabilities 49,251 60,206
- ------------------------------------------------------
Long-term obligations 2,450 2,995
- ------------------------------------------------------
Deferred liabilities 20,672 20,477
- ------------------------------------------------------
Net assets of discontinued
operations $288,037 $312,855
======================================================
</TABLE>
Net sales of discontinued operations were $533.3 million, $557.8 million and
$573.8 million for 1998, 1997, and 1996, respectively. The income tax provision
(benefit) included in Income (Loss) from Discontinued Operations was $12.2
million, $8.5 million and $(21.0) million for 1998, 1997 and 1996, respectively.
Income from operations of the discontinued segment includes interest expense
allocations (based on short-term interest expense incurred and changes in
working capital levels) of $9.2 million, $10.3 million and $12.0 million in
1998, 1997 and 1996, respectively. The fiscal 1996 loss from discontinued
operations includes a pre-tax charge of $47.6 million related to the adoption of
a plan to reduce costs, rationalize production capacity and provide for
severance costs.
- --------------------------------------------------------------------------------
(28) Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<PAGE> 30
4. BORROWING ARRANGEMENTS
Long-term obligations, less installments due within one year, are summarized
below:
<TABLE>
<CAPTION>
1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
Senior note, 6.75%,
maturing in 2005 $ 99,293 $ 99,192
- -----------------------------------------------------------------
Senior note, 6.9%,
maturing in 2017 147,650 -
- -----------------------------------------------------------------
Revolving Credit Agreement,
maturing in 2003
(average 6.0%) 210,000 -
- -----------------------------------------------------------------
Installment note, 9.64%,
maturing in equal amounts
of $6,500 through 2005 45,500 52,000
- -----------------------------------------------------------------
Installment note, 10.1% - 24,500
- -----------------------------------------------------------------
Industrial revenue bonds,
maturing in varying amounts
through 2021:
Fixed rate, 7.4% 1,900 2,238
--------------------------------------------------------------
Floating rate, 3.85% to
6.2% (average 4.13%) 39,355 33,575
- -----------------------------------------------------------------
Capitalized lease obligations,
6.1% to 9.75%, maturing in
various installments through 2011 20,464 8,956
- -----------------------------------------------------------------
Other obligations, maturing
in varying amounts
through 2004, 6.0% to
10.0% (average 6.42%) 3,085 1,127
- -----------------------------------------------------------------
567,247 221,588
- -----------------------------------------------------------------
Less: Installments due
within one year 9,014 12,657
- -----------------------------------------------------------------
Total long-term obligations $558,233 $208,931
=================================================================
</TABLE>
In fiscal 1998, the Company entered into a $500 million Revolving Credit
Agreement maturing in 2003. The borrowings under the Credit Agreement are
unsecured and for which the Company presently pays a facility fee of 0.07%.
Borrowings under the Credit Agreement bear interest, at the Company's option, at
either fixed or variable rates linked to the Company's overall public debt
credit rating. During fiscal 1998, the maximum borrowings under the Credit
Agreement were $210.0 million; average borrowings were $14.9 million at a
weighted average interest rate of 6.0%. At May 31, 1998, there were $210.0
million of direct borrowings outstanding under this facility.
The Company has $50 million in committed short-term lines of credit
available for borrowing needs. Lending banks are compensated on a fee basis for
the credit lines. During 1998, maximum borrowings under the Company's committed
and uncommitted lines of credit were $150.0 million; average borrowings for the
year were $29.3 million at a weighted average interest rate of 5.8%. At May 31,
1998, the Company had $12.0 million outstanding from uncommitted short-term
lines of credit.
In October 1997, the Company issued $150 million of 6.9% Notes due 2017.
The net proceeds were used to repay existing short-term indebtedness under the
bank credit facilities and for acquisitions.
At May 31, 1998, the most restrictive provisions of the Company's borrowing
arrangements, as included in the Installment Note, were as follows: tangible net
worth of at least $175 million, working capital of at least $60 million, and a
current ratio of at least 1.25 were required to be maintained; approximately $36
million of retained earnings was unrestricted for the payment of cash dividends
and repurchase of common stock; and the Company's ratio of Funded Indebtedness
to Consolidated Total Capitalization (the definition of which reduces
Shareholders' Equity by consolidated intangible assets), the "Indebtedness
Ratio," cannot exceed 65%. As a result of fiscal 1998 acquisition activity, the
Company's Indebtedness Ratio was 65.4% for the period ended May 31, 1998. The
Company received waivers from its Installment Note lenders addressing the
deficiency. The Company was in compliance with all other debt covenants as of
May 31, 1998. The Company has received the necessary waivers from its lenders to
permit the sale of its Vegetables segment.
Maturities of long-term obligations during each of the years 2000 through
2003 are $9,079, $11,974, $10,226 and $219,124, respectively.
Certain land, buildings and machinery and equipment having a net carrying
value of approximately $23 million were mortgaged or otherwise encumbered
against long-term debt of $21 million at May 31, 1998.
The fair value of the Company's long-term debt was determined using
valuation techniques that considered cash flows discounted at current market
rates and management's best estimate for instruments without quoted market
prices. At May 31, 1998 and May 25, 1997 the fair value of long-term debt is
estimated to be $579.0 million and $227.4 million, respectively.
5. SHAREHOLDERS' EQUITY
The 1998 shareholders' rights plan, adopted in May 1998 to replace the 1988
plan, protects shareholders in the event the Company becomes the target of
coercive and unfair takeover tactics. The rights were distributed to
shareholders on the basis of one preferred share purchase right for each share
of Dean Foods Company common stock. Each right is attached to and traded with
the Company's common stock, but will detach and become exercisable ten days
after a public announcement that a person or group has acquired, or has
announced a tender offer for, 15% or more of the Company's common stock. The
rights will initially be
- --------------------------------------------------------------------------------
(29) Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<PAGE> 31
DEAN FOODS COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
exercisable to purchase common stock equivalents for $200 per share. Upon a
person acquiring 15% or more of the Company's common stock, the rights will
entitle the holders (other than the acquiring person) to purchase shares of
common stock at a 50% discount. The rights may be redeemed by the Company for
$.01 per right at any time prior to a public announcement that a person or group
has acquired 15% or more of the Company's common stock. The rights expire on
August 10, 2008, unless previously redeemed or exercised.
The Company may repurchase shares of its common stock from time to time in
the open market, in privately-negotiated transactions or otherwise at a price or
prices reasonably related to the then prevailing market price.
6. STOCK PLANS
A summary of stock option activity for the Company's stock option plans follows:
<TABLE>
<CAPTION>
Number Average
of Shares Option Price
Under Option Per Share
- -------------------------------------------------------
<S> <C> <C>
Options outstanding
at May 28, 1995 1,072,802 $28.09
- -------------------------------------------------------
Changes during the year:
- -------------------------------------------------------
Granted 313,564 28.08
- -------------------------------------------------------
Terminated (18,222) 29.04
- -------------------------------------------------------
Exercised (17,380) 24.87
- -------------------------------------------------------
Options outstanding
at May 26, 1996 1,350,764 28.12
- -------------------------------------------------------
Changes during the year:
- -------------------------------------------------------
Granted 779,570 26.28
- -------------------------------------------------------
Terminated (114,329) 27.94
- -------------------------------------------------------
Exercised (123,211) 26.94
- -------------------------------------------------------
Options outstanding
at May 25, 1997 1,892,794 27.45
- -------------------------------------------------------
Changes during the year:
- -------------------------------------------------------
Granted 828,074 34.77
- -------------------------------------------------------
Terminated (92,771) 30.23
- -------------------------------------------------------
Exercised (416,924) 27.44
- -------------------------------------------------------
Options outstanding
at May 31, 1998 2,211,173 $30.07
=======================================================
</TABLE>
Options exercisable and available for grants at the end of each respective
year are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------
<S> <C> <C> <C>
Exercisable 1,020,194 880,533 715,167
- -------------------------------------------------------
Average option
price per share $28.92 $28.03 $27.96
=======================================================
Available for grants 2,330,613 697,969 1,381,444
=======================================================
</TABLE>
All outstanding options are within the range of $22.87 to $38.00 per share,
except for 60,000 shares granted in fiscal 1998 at approximately $55.00 per
share. The weighted average contractual life of all outstanding options is seven
years.
The Company has adopted the disclosure-only provision under SFAS No. 123,
"Accounting for Stock-Based Compensation," while continuing to measure
compensation cost under APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Had the accounting provisions of SFAS No.123 been adopted, the
effect on net earnings for 1998, 1997, and 1996 would have been immaterial. The
weighted average fair value of options at date of grant was $15.00, $6.64 and
$9.60 during 1998, 1997 and 1996, respectively. The fair value of each option at
date of grant was estimated using the Black-Scholes model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 8.0 8.0 8.0
- --------------------------------------------------------
Risk-free rate of return 6.9% 6.9% 6.5%
- --------------------------------------------------------
Volatility 20.6% 20.0% 23.7%
- --------------------------------------------------------
Dividend yield 2.0% 2.0% 2.0%
- --------------------------------------------------------
</TABLE>
Under the stock option plans, key employees and directors may be granted
stock awards or options to purchase, at fair market value on the date of grant,
a maximum of 5,415,000 shares of the Company's common stock. Of these shares, a
maximum of 215,000 may be granted to non-employee directors. A total of 139,500
shares have been granted to non-employee directors. A total of 92,932
non-qualified options are outstanding, which obligate the Company to make a cash
payment to the optionee, upon exercise, of an amount up to the aggregate
increase in the market value of the common stock since the date of grant.
Options terminate ten years after date of grant.
The Company may, from time to time, offer key employees the opportunity to
elect to receive, in lieu of all or a portion of the cash bonuses otherwise
payable to them, stock awards of shares of the Company's common stock having a
fair market value on the date of the award equal to 115% of such cash bonuses or
portions thereof (Stock Bonus Awards Program). Key employees elected to receive
47,225 and 29,858 shares under the Stock Bonus Awards Program which related to
bonuses in fiscal 1998 and 1997, respectively.
- --------------------------------------------------------------------------------
(30) Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<PAGE> 32
7. INVENTORIES
At May 31, 1998 and May 25, 1997, inventories comprised the following:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 45,266 $ 36,154
- -------------------------------------------------------
Materials in process 12,432 16,326
- -------------------------------------------------------
Finished goods 87,390 80,342
- -------------------------------------------------------
145,088 132,822
- -------------------------------------------------------
Less: Excess of current cost over
stated value of last-in,
first-out inventories 9,683 10,692
- -------------------------------------------------------
Total inventories $135,405 $122,130
=======================================================
</TABLE>
The percentage of costs of products sold determined on the basis of last-in,
first-out cost approximated 23.9% and 28.5% for 1998 and 1997, respectively.
8. INCOME TAXES
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
Provision for income taxes was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
- -----------------------------------------------------
Federal $34,196 $ 37,859 $ 23,243
- -----------------------------------------------------
State and foreign 5,423 5,794 4,968
- -----------------------------------------------------
39,619 43,653 28,211
- -----------------------------------------------------
Deferred tax expense
(benefit):
- -----------------------------------------------------
Federal 12,852 5,191 (25,455)
- -----------------------------------------------------
State and foreign 3,279 1,697 (1,477)
- -----------------------------------------------------
16,131 6,888 (26,932)
- -----------------------------------------------------
Provision for
income taxes $55,750 $ 50,541 $ 1,279
=====================================================
</TABLE>
The effective tax rates differ from the prevailing statutory federal rate
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 35.0% 35.0 %
- ------------------------------------------------------------
State and foreign,
net of federal benefit 4.0 4.6 3.5
- ------------------------------------------------------------
Goodwill amortization 0.7 0.5 (48.4)
- ------------------------------------------------------------
Other, net (0.9) 0.5 1.7
- ------------------------------------------------------------
Effective tax rate 38.8% 40.6% (8.2)%
============================================================
</TABLE>
The components of the deferred income tax assets and liabilities were as
follows:
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
- ----------------------------------------------------------
Accounts receivable $ (3,100) $ 569
- ----------------------------------------------------------
Inventory (4,089) (5,113)
- ----------------------------------------------------------
Self-insurance reserves 14,472 13,404
- ----------------------------------------------------------
Vacation pay 1,670 3,697
- ----------------------------------------------------------
Marketing accruals 4,176 2,156
- ----------------------------------------------------------
Future benefit of special charge - 2,509
- ----------------------------------------------------------
Other (800) (283)
- ----------------------------------------------------------
Total deferred tax assets $ 12,329 $ 16,939
==========================================================
Deferred tax liabilities:
- ----------------------------------------------------------
Fixed assets $(65,062) $(64,006)
- ----------------------------------------------------------
Deferred compensation 10,070 10,238
- ----------------------------------------------------------
DISC deferral (2,428) (2,735)
- ----------------------------------------------------------
Intangibles 4,741 4,603
- ----------------------------------------------------------
Future benefit of special charge 11,659 26,510
- ----------------------------------------------------------
Other (2,516) 128
- ----------------------------------------------------------
Total deferred tax liabilities $(43,536) $(25,262)
==========================================================
</TABLE>
9. EMPLOYEE BENEFIT PLANS
The Company has various profit sharing and retirement plans covering certain
salaried and hourly employees. Amounts charged to operations under all plans
were $17,807, $14,664 and $13,740 in 1998, 1997 and 1996, respectively.
DEFINED BENEFIT PENSION PLANS - Costs for noncontributory defined benefit
plans were $4,675, $3,558 and $3,137 in 1998, 1997 and 1996, respectively. Plan
assets are primarily invested in bonds, stocks and real estate. Significant
weighted average assumptions used in determining net pension costs were:
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------
<S> <C> <C>
Discount rate 7.25% 8.0%
- ----------------------------------------------------
Expected long-term rate of
return on assets 9.0% 8.0%
- ----------------------------------------------------
Rate of increase in
compensation levels (range) 0-5.0% 0-5.0%
- ----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(31) Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<PAGE> 33
DEAN FOODS COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The Company's defined benefit net pension costs included the following
components:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------
<S> <C> <C> <C>
Current service costs $ 3,919 $ 2,732 $ 1,972
- -------------------------------------------------------------
Interest cost on projected
benefit obligation 4,068 4,096 3,369
- -------------------------------------------------------------
Actual return on
plan assets (14,359) (4,167) (8,957)
- -------------------------------------------------------------
Net amortization
and deferral 11,047 897 6,753
- -------------------------------------------------------------
Net pension costs $ 4,675 $ 3,558 $ 3,137
=============================================================
</TABLE>
The following table sets forth the funded status of the Company's defined
benefit plans reconciled to accrued pension costs:
<TABLE>
<CAPTION>
1998 1997
- -----------------------------------------------------------------------
<S> <C> <C>
Present value of projected
benefit obligation:
- -----------------------------------------------------------------------
Vested employees $ 80,795 $ 60,771
- -----------------------------------------------------------------------
Non-vested employees 5,224 5,829
- -----------------------------------------------------------------------
Accumulated benefit obligation 86,019 66,600
- -----------------------------------------------------------------------
Additional amounts due to
future salary increases 27,881 25,096
- -----------------------------------------------------------------------
Total projected benefit obligation 113,900 91,696
- -----------------------------------------------------------------------
Fair value of net assets
available for benefits (103,134) (73,615)
- -----------------------------------------------------------------------
Projected benefit obligation greater
than net assets available 10,766 18,081
- -----------------------------------------------------------------------
Unrecognized prior service cost (2,814) (2,135)
- -----------------------------------------------------------------------
Unrecognized net obligation 2,760 3,247
- -----------------------------------------------------------------------
Unrecognized net loss (9,516) (13,860)
- -----------------------------------------------------------------------
Net accrued pension costs $ 1,196 $ 5,333
=======================================================================
</TABLE>
The Company will retain the earned pension liability related to the vegetable
operations for liabilities through the date of disposition. Accordingly, the
funded status table above includes continuing and discontinued operations.
The majority of pension benefits are based upon the participant's highest
average "total compensation" paid during any sixty consecutive months out of the
last 180 months of service accumulated for each year of service.
The Company participates in various multi-employer union-management-
administered defined contribution pension plans that principally cover
production workers. Pension expense under these plans was $6,606, $5,061 and
$5,236 in 1998, 1997 and 1996, respectively.
PROFIT SHARING PLANS - The Company maintains noncontributory profit sharing
plans for certain employees. Company contributions under these plans are made at
the discretion of the Board of Directors. Expense for these plans was $6,244,
$5,830 and $4,717 in 1998, 1997 and 1996, respectively.
OTHER POSTRETIREMENT BENEFITS - The Company provides health care and life
insurance benefits to certain of its retired employees and eligible dependents.
Employees are eligible for such benefits subject to minimum age and service
requirements. Eligible employees that retire before the normal retirement age,
along with their dependents, are entitled to benefits on a shared contribution
basis. Substantially all benefits terminate at age sixty-five. The Company
retains the right to modify or eliminate these benefits.
Net periodic postretirement benefits expense was $282, $215 and $650 in
1998, 1997 and 1996, respectively. The components of expense follow:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------
<S> <C> <C> <C>
Service cost of
benefits earned $ 52 $ 7 $252
- ------------------------------------------------
Interest cost on liability 230 208 398
- ------------------------------------------------
Net periodic postretirement
benefit cost $282 $215 $650
================================================
</TABLE>
As a result of changes in employee benefit plans during fiscal 1996,
postretirement medical benefits for certain union plans were eliminated
resulting in a curtailment gain of $3,994.
The following table summarizes the postretirement benefit liability:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------
<S> <C> <C>
Retirees $ 2,797 $ 2,022
- -------------------------------------------------------
Fully eligible active participants 381 294
- -------------------------------------------------------
Other active participants 1,061 775
- -------------------------------------------------------
Total 4,239 3,091
- -------------------------------------------------------
Unrecognized net gain (loss) (862) 456
=======================================================
Accrued postretirement benefits $ 3,377 $ 3,547
=======================================================
</TABLE>
The accumulated postretirement benefit obligation was determined using
weighted average discount rates of 7.25% in 1998 and 8.0% in 1997 and 1996,
respectively, and an assumed compensation increase of 5.0%. The health care cost
trend rates were assumed to be 7.0% in 1998, gradually declining to 5.0% over
four years and remaining at that level thereafter. In 1997 the cost trend rates
were assumed to be 7.5%, gradually declining to 5.0% over five years. In 1996
the cost trend rates were assumed to be 8.0%, gradually declining to 5.0% over
six years. The health care cost trend rate assumption has an effect on the
amounts reported. For example, a 1% increase in the health care cost trend rate
would increase the accumulated postretirement benefit obligation by $181 at May
31, 1998, and the net periodic cost by $23.
- --------------------------------------------------------------------------------
(32) Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<PAGE> 34
10. LEASES
Net rental expense, including amounts for leases of one year or less, was
$32,601, $25,505 and $26,470 in 1998, 1997 and 1996, respectively. Sublease
rental income is not significant. A majority of the Company's leases provide
that the Company pay taxes, maintenance, insurance and certain other operating
expenses.
At May 31, 1998, annual minimum rental payments under capital and operating
leases that have initial noncancelable terms in excess of one year were as
follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
- --------------------------------------------------------
<C> <C> <C>
1999 $ 2,959 $17,786
- --------------------------------------------------------
2000 2,980 13,752
- --------------------------------------------------------
2001 3,001 9,684
- --------------------------------------------------------
2002 2,852 7,693
- --------------------------------------------------------
2003 2,804 5,861
- --------------------------------------------------------
Thereafter 17,329 10,261
- --------------------------------------------------------
Total minimum
lease payments 31,925 $65,037
- -------------------------------------------------=======
Less: Imputed interest 11,436
- --------------------------------------
Present value of minimum
lease payments $20,489
======================================
</TABLE>
11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Consolidated accounts payable and accrued expenses at May 31, 1998 and May 25,
1997 comprised the following items:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------
<S> <C> <C>
Trade payables $115,597 $ 93,397
- -------------------------------------------------------
Accrued expenses 97,104 62,958
- -------------------------------------------------------
Accrued insurance 42,608 43,516
- -------------------------------------------------------
Special charge reserve 5,217 9,818
- -------------------------------------------------------
Accrued payroll 41,610 32,672
- -------------------------------------------------------
Accrued taxes, other
than income 6,207 3,977
- -------------------------------------------------------
Accrued pension and
profit sharing 2,960 8,184
- -------------------------------------------------------
Total accounts payable
and accrued expenses $311,303 $254,522
=======================================================
</TABLE>
12. CASH FLOW DATA
Interest and taxes paid included in the Company's cash flow from operations were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------
<S> <C> <C> <C>
Interest paid $ 19,358 $ 15,099 $ 13,330
- ----------------------------------------------------------
Taxes paid 33,573 26,049 39,147
==========================================================
</TABLE>
Liabilities assumed in conjunction with business acquisitions were:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------
<S> <C> <C> <C>
Fair value of assets
acquired $ 460,650 $ 31,172 $ 44,375
- ----------------------------------------------------------
Consideration paid (369,560) (16,332) (44,305)
- ----------------------------------------------------------
Liabilities assumed $ 91,090 $ 14,840 $ 70
==========================================================
</TABLE>
13. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a current defendant in assorted legal matters and from time to
time is the subject of routine investigations by various state and federal
agencies. On July 10, 1996, a federal judge imposed a fine of approximately $4
million on a subsidiary of the Company, alleging violations of the Federal Water
Pollution Control Act relating to the discharge of conventional, non-hazardous
substances. The Company appealed the lower court ruling on the grounds that the
fine should be substantially reduced. The appellate court affirmed the lower
court's decision and the Company is considering its options for settlement or
further proceedings. The Company provided for this exposure in 1996 and in light
of reserves existing, the ultimate resolution of these matters, including the
resolution of the imposed fine, is not expected to have a material effect on the
financial position or results of operations of the Company.
14. SPECIAL CHARGE
In May 1996, the Company adopted a plan to reduce costs, rationalize production
capacity and provide for projected severance and environmental costs which
reduced fiscal 1996 continuing operations' income before taxes, income and
income per share by $102.4 million, $64.9 million and $1.62 per share,
respectively. Included in the original $102.4 million charge was $79.7 million
associated with the write-down to net realizable value of certain assets. The
implementation of the plan included the elimination of more than 500
manufacturing and administrative positions and disposition or closure of six
manufacturing plants.
As of May 31, 1998, the Company had disposed of or closed all six
manufacturing facilities and eliminated all of the 500 positions. Charges
against the provision in 1998 included cash payments of $6.3 million primarily
related to plant closure costs. Non-cash asset write-downs totaling $4.4 million
were also charged against the provision in fiscal 1998. The remaining reserves
are anticipated to be used primarily for the payment of obligations related to
continuing severance benefits and projected environmental costs.
In fiscal 1997, charges against the provision included cash charges of $8.1
million and non-cash charges of $5.2 million. In fiscal 1996, $71.6 million of
non-cash charges were recorded, including $48.1 million of asset write-offs and
$21.3 million of intangible write-offs.
- --------------------------------------------------------------------------------
(33) Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<PAGE> 35
DEAN FOODS COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
15. BUSINESS SEGMENT INFORMATION
The nature of products classified in the business segments presented herein is
described on pages 6 through 16. Intersegment sales are not material. Operating
earnings (loss) of segments do not include interest income or expense and
provision for income taxes. Identifiable assets are those used in the Company's
operations in each segment. Corporate assets consist primarily of cash and
temporary cash investments and deferred tax assets.
<TABLE>
<CAPTION>
DAIRY PICKLES SPECIALTY CORPORATE CONSOLIDATED
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
- ---------------------------------------------------------------------------------------------
Net sales $ 2,052,532 $348,695 $334,607 $ -- $ 2,735,834
- ---------------------------------------------------------------------------------------------
Operating earnings 114,084 37,054 52,187 (40,806) 162,519
- ---------------------------------------------------------------------------------------------
Identifiable assets 919,116 182,463 164,956 52,617 1,319,152
- ---------------------------------------------------------------------------------------------
Depreciation and amortization 43,568 6,880 6,958 3,012 60,418
- ---------------------------------------------------------------------------------------------
Capital expenditures 68,142 12,095 18,829 5,617 104,683
- ---------------------------------------------------------------------------------------------
1997
- ---------------------------------------------------------------------------------------------
Net sales $ 1,787,862 $370,825 $301,876 $ -- $ 2,460,563
- ---------------------------------------------------------------------------------------------
Operating earnings 103,764 35,974 36,685 (37,752) 138,671
- ---------------------------------------------------------------------------------------------
Identifiable assets 510,499 141,344 107,623 61,359 820,825
- ---------------------------------------------------------------------------------------------
Depreciation and amortization 36,913 7,360 5,133 2,028 51,434
- ---------------------------------------------------------------------------------------------
Capital expenditures 34,429 5,751 11,298 4,102 55,580
- ---------------------------------------------------------------------------------------------
1996
- ---------------------------------------------------------------------------------------------
Net sales $ 1,611,266 $373,213 $256,038 $ -- $ 2,240,517
- ---------------------------------------------------------------------------------------------
Operating earnings (loss) (2,644) 10,299 25,737 (33,985) (593)
- ---------------------------------------------------------------------------------------------
Identifiable assets 456,632 151,578 98,480 85,198 791,888
- ---------------------------------------------------------------------------------------------
Depreciation and amortization 37,633 7,903 4,476 1,950 51,962
- ---------------------------------------------------------------------------------------------
Capital expenditures 49,905 6,733 13,544 904 71,086
- ---------------------------------------------------------------------------------------------
</TABLE>
Fiscal 1996 segment operating earnings (loss) include the special charge related
to the adoption of a plan to reduce costs, rationalize production capacity and
provide for severance and environmental costs of $76,694, $13,704, $999 and
$11,042 in the Dairy, Pickles, Specialty and Corporate segments, respectively.
- --------------------------------------------------------------------------------
(34) Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<PAGE> 36
DEAN FOODS COMPANY & SUBSIDIARIES
QUARTERLY
FINANCIAL DATA
<TABLE>
<CAPTION>
Unaudited (In thousands, except for share data) FIRST SECOND THIRD FOURTH FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL 1998
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 619,856 624,933 665,375 825,670 2,735,834
- -----------------------------------------------------------------------------------------------------------------------
Gross profit $ 150,101 145,413 148,234 186,237 629,985
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 24,308 20,525 18,512 24,635 87,980
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 21,547 26,575 24,995 33,185 106,302
- -----------------------------------------------------------------------------------------------------------------------
Per common share data:
- -----------------------------------------------------------------------------------------------------------------------
Basic income (loss) per share
------------------------------------------------------------------------------------------------------------------
Continuing operations $ .60 .51 .45 .61 2.17
--------------------------------------------------------------------------------------------------------------
Discontinued operations $ (.07) .15 .16 .22 .46
--------------------------------------------------------------------------------------------------------------
Net income $ .53 .66 .61 .83 2.63
--------------------------------------------------------------------------------------------------------------
Diluted income (loss) per share
------------------------------------------------------------------------------------------------------------------
Continuing operations $ .59 .50 .44 .60 2.13
--------------------------------------------------------------------------------------------------------------
Discontinued operations $ (.07) .14 .16 .21 .44
--------------------------------------------------------------------------------------------------------------
Net income $ .52 .64 .60 .81 2.57
--------------------------------------------------------------------------------------------------------------
Stock price range
------------------------------------------------------------------------------------------------------------------
High $ 48 1/2 51 3/16 60 5/16 57 5/8 60 5/16
--------------------------------------------------------------------------------------------------------------
Low $ 37 5/8 43 7/16 51 3/4 45 1/2 37 5/8
--------------------------------------------------------------------------------------------------------------
Dividend rate (cents) 20.0 20.0 20.0 20.0 80.0
------------------------------------------------------------------------------------------------------------------
FISCAL 1997
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 595,745 622,872 601,566 640,380 2,460,563
- -----------------------------------------------------------------------------------------------------------------------
Gross profit $ 135,396 130,776 135,417 157,183 558,772
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 18,715 13,966 17,115 24,192 73,988
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 17,910 19,076 20,635 29,083 86,704
- -----------------------------------------------------------------------------------------------------------------------
Per common share data:
- -----------------------------------------------------------------------------------------------------------------------
Basic income (loss) per share
------------------------------------------------------------------------------------------------------------------
Continuing operations $ .47 .34 .43 .60 1.84
--------------------------------------------------------------------------------------------------------------
Discontinued operations $ (.02) .13 .08 .13 .32
--------------------------------------------------------------------------------------------------------------
Net income $ .45 .47 .51 .73 2.16
--------------------------------------------------------------------------------------------------------------
Diluted income (loss) per share
------------------------------------------------------------------------------------------------------------------
Continuing operations $ .47 .34 .43 .59 1.83
--------------------------------------------------------------------------------------------------------------
Discontinued operations $ (.02) .13 .08 .12 .32
--------------------------------------------------------------------------------------------------------------
Net income $ .45 .47 .51 .71 2.15
--------------------------------------------------------------------------------------------------------------
Stock price range
------------------------------------------------------------------------------------------------------------------
High $ 25 29 7/8 33 5/8 39 3/4 39 3/4
--------------------------------------------------------------------------------------------------------------
Low $ 22 1/8 24 1/8 25 7/8 31 7/8 22 1/8
--------------------------------------------------------------------------------------------------------------
Dividend rate (cents) 19.0 19.0 19.0 19.0 76.0
------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's common stock is traded on the New York Stock Exchange under the
ticker symbol: DF.
- --------------------------------------------------------------------------------
(35) Quarterly Financial Data
- --------------------------------------------------------------------------------
<PAGE> 37
DEAN FOODS COMPANY & SUBSIDIARIES
SUMMARY
OF OPERATIONS
<TABLE>
<CAPTION>
(In thousands, except for items marked with an *)
Fiscal Year Ended May, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------
Net sales $2,735,834 2,460,563 2,240,517 2,087,079 2,011,273
----------------------------------------------------------------------------------------------------------------
Operating earnings (loss) $ 162,519 138,671 (593)(a) 112,368 106,036
----------------------------------------------------------------------------------------------------------------
Interest expense $ 21,101 15,071 16,316 13,298 11,030
----------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 87,980 73,988 (16,865)(a) 58,504 56,859
----------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations $ 18,322 12,716 (32,823) 21,555 13,903
----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 106,302 86,704 (49,688)(a) 80,059 71,941(b)
----------------------------------------------------------------------------------------------------------------
Depreciation on properties $ 54,060 48,566 47,968 45,788 43,322
----------------------------------------------------------------------------------------------------------------
Capital expenditures $ 104,683 55,580 71,086 66,597 68,046
----------------------------------------------------------------------------------------------------------------
Number of employees* 11,200 8,300 8,600 9,200 8,200
----------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
- ---------------------------------------------------------------------------------------------------------------------
Working capital $ 67,324 64,988 24,649 52,150 (31,724)
----------------------------------------------------------------------------------------------------------------
Total assets $1,607,189 1,133,680 1,131,625 1,114,157 1,027,149
----------------------------------------------------------------------------------------------------------------
Net plant and equipment $ 551,064 381,800 375,072 399,340 378,388
----------------------------------------------------------------------------------------------------------------
Long-term obligations $ 558,233 208,931 217,984 220,553 131,820
----------------------------------------------------------------------------------------------------------------
Shareholders' equity $ 619,266 567,681 507,692 584,526 524,774
----------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA*
- ---------------------------------------------------------------------------------------------------------------------
Basic income (loss) per share
----------------------------------------------------------------------------------------------------------------
Continuing operations $ 2.17 1.84 (.42)(a) 1.47 1.46(b)
------------------------------------------------------------------------------------------------------------
Discontinued operations $ .46 .32 (.82) .54 .35
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 2.63 2.16 (1.24)(a) 2.01 1.81(b)
------------------------------------------------------------------------------------------------------------
Diluted income (loss) per share
----------------------------------------------------------------------------------------------------------------
Continuing operations $ 2.13 1.83 (.42)(a) 1.46 1.46(b)
------------------------------------------------------------------------------------------------------------
Discontinued operations $ .44 .32 (.82) .54 .35
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 2.57 2.15 (1.24)(a) 2.00 1.81(b)
------------------------------------------------------------------------------------------------------------
Cash dividends per share $ .80 .76 .72 .68 .64
----------------------------------------------------------------------------------------------------------------
Book value per share $ 15.49 14.09 12.65 14.58 13.19
----------------------------------------------------------------------------------------------------------------
Number of shareholders 8,690 8,838 9,481 9,989 8,936
----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 1996 continuing operations results include a pre-tax charge of $102,439
($64,906 after-tax, or $1.62 per share) related to the adoption of a plan
to reduce costs, rationalize production capacity and provide for severance
and environmental costs. The 1996 Net Loss includes a pre-tax charge of
$150,000 ($97,720 after-tax, or $2.44 per share) related to the plan
adoption.
(b) 1994 includes an after-tax net gain of $1,179 ($.03 per share) related to
changes in accounting principles.
- --------------------------------------------------------------------------------
(36) Summary of Operations
- --------------------------------------------------------------------------------
<PAGE> 38
DEAN FOODS COMPANY & SUBSIDIARIES
REPORT OF INDEPENDENT
ACCOUNTANTS
PRICEWATERHOUSECOOPERS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF DEAN FOODS COMPANY:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Dean Foods
Company and subsidiaries at May 31, 1998 and May 25, 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended May 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, IL
June 29, 1998, except as to Note 3
which is as of July 27, 1998
- --------------------------------------------------------------------------------
(37) Report of Independent Accountants
- --------------------------------------------------------------------------------
<PAGE> 39
DEAN FOODS COMPANY & SUBSIDIARIES
OFFICERS
HOWARD M. DEAN
Chairman of the Board and
Chief Executive Officer
RICHARD E. BAILEY
President and Chief Operating Officer
ROBERT E. BAKER
Vice President, Strategic Planning
ERIC A. BLANCHARD
Vice President, Secretary and
General Counsel
JENNY L. CARPENTER
Group Vice President, Specialty Business Unit and General Manager, Dean Dip &
Dressing Co.
GARY A. CORBETT
Vice President, Governmental
and Dairy Industry Relations
NEIL J. FINERTY
Vice President, Human Resources
GARY D. FLICKINGER
Vice President, Production & Engineering
DANIEL E. GREEN
Group Vice President and President,
Ryan Foods Company
JAMES R. GREISINGER
Group Vice President and President,
Dean Pickle and Specialty Products Company
CAMERON C. HITCHCOCK
Treasurer
ALAN W. HOOPER
Vice President, Special Projects
DALE E. KLEBER
Vice President and Associate
General Counsel
WILLIAM M. LUEGERS, JR.
Corporate Controller
WILLIAM R. MCMANAMAN
Vice President, Finance and
Chief Financial Officer
GEORGE A. MUCK
Vice President, Research and Development
DOUGLAS A. PARR
Vice President, Dairy Sales and Marketing
DENNIS J. PURCELL
Group Vice President and President, Specialty Business Unit
THOMAS A. RAVENCROFT
Senior Vice President and President,
Dairy Division
GARY P. RIETZ
Chief Information Officer
JEFFREY P. SHAW
Vice President and President,
Dean Foods Vegetable Company
CORPORATE DATA
DIVIDEND REINVESTMENT SERVICE
A service for Dean shareholders is available whereby dividends can be
automatically reinvested in the Company`s common stock. The plan also provides
for a voluntary quarterly cash payment option for the purchase of additional
stock and safekeeping of shares.
If interested in this service, please write to the transfer agent and request a
copy of Dean's dividend reinvestment brochure:
Harris Trust and Savings Bank
Dividend Reinvestment Service
P.O. Box A3309
Chicago, Illinois 60690
FORM 10-K
Single copies of the Company`s 1998 Annual Report on Securities and Exchange
Commission Form 10-K (without exhibits) will be provided without charge to
shareholders upon written request directed to Director, Corporate
Communications.
STOCK EXCHANGE
New York Stock Exchange Ticker Symbol: DF
FINANCIAL INFORMATION &
INVESTOR RELATIONS INQUIRIES
The Company maintains a direct mailing list to ensure that shareholders with
stock held in broker nominee accounts ("street name") and other interested
parties receive information on a timely basis. Current company financial
information can also be accessed on the Internet through our web site at:
www.deanfoods.com
To be added to the mailing list, or to request financial information, please
direct requests to:
Lu Ann Lilja
Director, Corporate Communications
Dean Foods Company
3600 N. River Road
Franklin Park, Illinois 60131
E-Mail address: [email protected]
TRANSFER AGENT AND REGISTRAR
For inquiries regarding change of address, stock transfer, registered
shareholdings, dividends and lost certificates, please contact:
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
800/721-5167
ANNUAL MEETING
September 29, 1998, 10:00 A.M.
Drury Lane Oak Brook Terrace
100 Drury Lane
Oak Brook Terrace, Illinois 60181
(Location map appears in Proxy Statement.)
CORPORATE OFFICE
3600 N. River Road
Franklin Park, Illinois 60131
847/678-1680
Dairy Ease is a registered trademark of Sterling Winthrop, Inc. Nestle Quik,
Carnation Coffeemate and Nestea are registered trademarks of Nestle Food
Company. Health Source and Vitamite are registered trademarks of Ralston Purina
Company.
- --------------------------------------------------------------------------------
(38) Officers / Corporate Data
- --------------------------------------------------------------------------------
<PAGE> 40
Directors
John P. Frazee, Jr. (2) (4)
Chairman, President and
Chief Executive Officer,
Paging Network, Inc.,
a wireless messaging and
information delivery company
Janet Hill (2)
Vice-President, Alexander
& Associates, a corporate
consulting firm
Howard M. Dean (1)
chairman of the Board
and Chief Executive Officer
- --------------------
Richard E. Bailey (1)
President and Chief
Operating Officer
Richard P. Mayer (3)
Retired Chairman and
Chief Executive Officer, Kraft
General Foods North America,
a diversified food company
Bert A. Getz (3) (4)
Chairman, President and
Director, Globe Corporation,
a diversified investment firm
- -------------------
Lewis M. Collens (2) (4)
President, Illinois Institute
of Technology, and Chairman
and Chief Executive Officer,
IIT Research Institute
Thomas A. Ravencroft
Senior Vice President and
President, Dairy Division
Andrew J. McKenna (1) (3) (4)
Chairman and Chief Executive
Officer, Schwarz Paper Company,
a national printer, converter and
distributor of packaging and
promotional materials
- ----------------------
John S. Llewellyn, Jr. (3) (4)
Retired President and Chief
Executive Officer, Ocean Spray
Cranberries, Inc., a marketing
cooperative of cranberry and
citrus growers
Paula H. Crown (2)
Vice President of Henry
Crown and Company,
a private investment firm
Edward A. Brennan (2)(1)
Retired Chairman and
Chief Executive Officer,
Sears, Roebuck & Co.,
a merchandising company
(1) Executive Committee
(2) Audit Committee
(3) Compensation Committee
(4) Corporate Governance Committee
<PAGE> 1
Exhibit 21(a)
SUBSIDIARIES OF THE REGISTRANT AS OF MAY 31, 1998
Jurisdiction In
Which Organized
---------------
Bell Dairy Products, Inc. Texas
Bowman Dairy Company, Inc. Delaware
Coburg, Inc. South Carolina
Cream o'Weber Dairy, Inc. Utah
Creamland Dairies, Inc. New Mexico
Dean Dairy Products Company Pennsylvania
Dean Dip and Dressing Company Delaware
Dean Foods Company of California Delaware
Dean Foods Company of Indiana Delaware
Dean Foods Vegetable Company Wisconsin
Dean Foods Products Company Delaware
Dean Milk Company, Inc. Kentucky
Dean Pickle and Specialty Products Company Wisconsin
DFC Transportation Company Delaware
E.B.I. Foods, Ltd. United Kingdom
Elgin Blenders, Inc. Illinois
Gandy's Dairies, Inc. Texas
HMDC, Inc. Delaware
Liberty Dairy Company Michigan
McArthur Dairy, Inc. Florida
Mayfield Dairy Farms, Inc. Tennessee
Meadow Brook Dairy Company Pennsylvania
Meadows Distributing Company Illinois
Purity Dairies, Inc. Tennessee
Reiter Dairy, Inc. Ohio
Ryan Foods Company Kentucky
Sani-Dairy, Inc. Delaware
Schwartz Pickle Company Delaware
STDI, Inc. U.S. Virgin Islands
T.G. Lee Foods, Inc. Florida
Verifine Dairy Products Corporation of Sheyboygan Wisconsin
W.B. Roddenbery Co., Inc. Georgia
WGR Dairy, Inc. Delaware
The names of all other subsidiaries have been omitted from the above list
because, when considered in the aggregate as a single subsidiary, they would not
constitute a material subsidiary.
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Forms S-8 (No. 333-36643) and Form S-3 (No. 333-44851) of our
report dated June 29, 1998, except as to Note 3 which is as of July 27, 1998,
which appears on page 37 of the 1998 Annual Report to Shareholders of Dean Foods
Company, which is incorporated in this Annual Report on Form 10-K for the year
ended May 31, 1998. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on page 18 of this
Form 10-K.
PricewaterhouseCoopers LLP
August 31, 1998
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This schedule contains summary financial information extracted from the
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This schedule contains summary financial information extracted from the
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<RESTATED>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 12-MOS
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41,545
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
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</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
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<TOTAL-ASSETS> 1,131,625
<CURRENT-LIABILITIES> 330,271
<BONDS> 217,984
41,395
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<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 1,131,625
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