<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
__X__ Quarterly report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended August 30, 1998
-----------------
or
_____ Transition report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to __________________
Commission file number 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 North River Road, Franklin Park, Illinois 60131
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 678-1680
---------------------------
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
--- ---
The number of shares of the Registrant's Common Stock, par value $1 per share,
outstanding as of the date of this report was 39,342,030.
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DEAN FOODS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
AUGUST 30,1998 AND AUGUST 24, 1997
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
August 30, August 24,
1998 1997
----------- ---------------
<S> <C> <C>
(Unaudited)
Net sales $ 825,104 $ 619,856
Costs of products sold 633,928 469,755
Delivery, selling and administrative expenses 144,867 106,934
------------- -------------
Operating earnings 46,309 43,167
Interest expense (9,056) (3,626)
Interest income 309 385
------------- -------------
Income from continuing operations before income taxes 37,562 39,926
Provision for income taxes 14,649 15,618
------------- -------------
Income from continuing operations 22,913 24,308
Loss from discontinued operations, net of taxes (1,741) (2,761)
------------- -------------
Net income $ 21,172 $ 21,547
============= =============
Basic income (loss) per share:
Income from continuing operations $ .57 $ .60
Loss from discontinued operations (.04) (.07)
-------------- -------------
Net income $ .53 $ .53
============== =============
Diluted income (loss) per share:
Income from continuing operations $ .56 $ .59
Loss from discontinued operations (.04) (.07)
-------------- -------------
Net income $ .52 $ .52
============== =============
Weighted average common shares:
Basic 40,023 40,427
============== =============
Diluted 40,983 41,224
============== =============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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DEAN FOODS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 30, 1998 AND MAY 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
August 30, May 31,
1998 1998
---------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS: $ 22,513 $ 11,932
Cash and cash equivalents
Accounts and notes receivable, less allowance for
doubtful accounts of $4,438 and $4,212, respectively 251,040 225,970
Inventories 181,579 135,405
Other current assets 48,028 46,931
------------ ------------
Total Current Assets 503,160 420,238
------------ ------------
PROPERTIES:
Property, plant and equipment, at cost 1,038,724 966,226
Accumulated depreciation 432,359 415,162
------------ ------------
Total Properties, net 606,365 551,064
------------ ------------
NET ASSETS OF DISCONTINUED OPERATIONS 291,997 288,037
------------ ------------
OTHER ASSETS:
Intangibles, net of amortization of
$14,001 and $11,537, respectively 351,662 334,597
Other Assets 6,726 13,253
------------ ------------
Total Other Assets 358,388 347,850
------------ ------------
TOTAL ASSETS $ 1,759,910 $ 1,607,189
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES: $ - $ 12,000
Notes payable to banks
Current installments of long-term obligations 8,340 9,014
Accounts payable and accrued expenses 321,600 311,303
Dividends payable 8,514 8,079
Federal and state income taxes payable 26,875 12,518
------------ ------------
Total Current Liabilities 365,329 352,914
LONG-TERM OBLIGATIONS 687,639 558,233
DEFERRED LIABILITIES 70,246 76,776
SHAREHOLDERS' EQUITY 636,696 619,266
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,759,910 $ 1,607,189
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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DEAN FOODS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
AUGUST 30, 1998 AND AUGUST 24, 1997
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
August 30, August 24,
1998 1997
---------- ----------
<S> <C> <C>
(Unaudited)
Net cash provided from continuing operations $ 13,210 $ 33,410
---------- ----------
Cash flows from investing activities:
Capital expenditures (30,368) (26,397)
Proceeds from disposition of property,
plant and equipment 282 294
Acquisitions, net of cash acquired (85,768) (41,923)
---------- ----------
Net cash used in investing activities (115,854) (68,026)
---------- ----------
Cash flows from financing activities
Issuance of long-term obligations 140,000 -
Repayment of long-term obligations (11,324) (111)
Issuance (repayment) of notes payable to banks, net (12,000) 49,000
Unexpended industrial revenue bond proceeds 5,965 2,976
Cash dividends paid (7,983) (7,650)
Issuance of common stock 4,268 9,046
---------- ----------
Net cash provided by financing activities 118,926 53,261
---------- ----------
Net cash provided from (used by) discontinued operations (5,701) 1,097
---------- ----------
Increase in cash and temporary cash investments 10,581 19,742
Cash and temporary cash investments -
beginning of period 11,932 4,386
---------- ----------
Cash and temporary cash investments - end of period $ 22,513 $ 24,128
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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DEAN FOODS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousand unless otherwise noted.
1. BASIS OF PRESENTATION
In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the following
unaudited condensed consolidated financial statements have been included herein.
Certain information and footnote disclosures normally included in the financial
statements have been omitted. These unaudited condensed consolidated financial
statements should be read in conjunction with the Company's 1998 Annual Report
on Form 10-K. The results of operations for the three-month period ended August
30, 1998 are not necessarily indicative of the operating results for the full
year.
2. DISCONTINUED OPERATIONS
Net sales of discontinued operations were $110.8 million and $109.6 million for
the first quarters ended August 30, 1998 and August 24, 1997, respectively. The
income tax benefit included in discontinued operations was $1.2 million and $1.8
million for the August 30, 1998 and August 24, 1997 periods, respectively. Loss
from discontinued operations includes interest expense allocations (based on the
short-term interest expense incurred and changes in working capital levels) of
$2.0 million and $2.1 million for the quarters ended August 30, 1998 and August
24, 1997, respectively.
3. SHAREHOLDERS' EQUITY
On September 29, 1998, the Company's shareholders approved an increase in the
Company's authorized $1 par value Common Stock from 80 million shares to 150
million shares. The Board of Directors of the Company, at its regularly
scheduled Board Meeting on September 29, 1998, authorized a two million share
increase in its common shares authorized for repurchase. The purpose of any
such repurchases is to offset dilution from the Company's stock option programs
and to provide shares to utilize in acquisitions made for Company common stock.
Subsequent to the close of the first quarter, the Company repurchased
approximately 750,000 shares of its stock, under the previously existing Board
authorization.
4. INVENTORIES
The following is a tabulation of inventories by class at August 30, 1998, August
24, 1997, and May 31, 1998.
<TABLE>
<CAPTION>
August 30, August 24, May 31,
1998 1997 1998
---------- ---------- ---------
(Unaudited)
<S> <C> <C> <C>
Raw materials and supplies $ 40,444 $ 25,230 $ 45,266
Materials in process 34,122 28,594 12,432
Finished goods 116,696 101,349 87,390
----------- ----------- ----------
191,262 155,173 145,088
Less: Excess of current cost over stated
value of last-in, first-out inventories 9,683 10,442 9,683
----------- ----------- ----------
Total inventories $ 181,579 $ 144,731 $ 135,405
=========== =========== ==========
</TABLE>
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5. BUSINESS SEGMENT INFORMATION
The following is a tabulation of the Company's business segment information for
the three months ended August 30, 1998 and August 24, 1997.
<TABLE>
<CAPTION>
(Unaudited)
Dairy Pickles Specialty Corporate Consolidated
---------- --------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
August 30, 1998
Net sales $ 651,665 $ 93,405 $ 80,034 $ - $ 825,104
Operating earnings $ 32,503 $ 11,104 $ 11,169 $ (8,467) $ 46,309
August 24, 1997
Net sales $ 455,962 $ 90,460 $ 73,434 $ - $ 619,856
Operating earnings $ 32,413 $ 9,322 $ 10,993 $ (9,561) $ 43,167
</TABLE>
6. LEGAL PROCEEDINGS
See PART II, Item 1 for a discussion of pending legal proceedings.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER FISCAL 1999 VERSUS FIRST QUARTER FISCAL 1998
RESULTS OF CONTINUING OPERATIONS
Net sales for the first quarter of fiscal 1999 of $825.1 million were $205.2
million, or 33.1%, higher than sales of $619.9 million in the prior year. While
net sales increased in all business segments, the majority of the sales increase
was due to the acquisitions completed in the Dairy segment. Operating earnings
increased 7.3% or $3.1 million over the prior year, reflecting strong
improvement in the Pickles segment and reductions in Corporate expenses.
BUSINESS SEGMENTS
DAIRY - Dairy segment sales of $651.7 million were 42.9%, or $195.7
million, higher than sales of $456.0 million in the prior year. Net sales
increases were primarily the result of acquisitions and a 5% volume increase in
the core Dairy business. Operating earnings were roughly even with the prior
year. Rising butterfat prices had only a slightly positive impact on the Dairy
segment, as benefits to the fluid business were offset by negative impacts in
the ice cream and extended shelf life operations. The first quarter is the
prime selling season for the Company's ice cream and, therefore, the high
butterfat costs impacted this segment to a greater extent than it would in other
times of the year. Integration costs related to recent acquisitions and
manufacturing start-up costs and introductory marketing expenses associated with
the Milk Chugs product also had a negative impact on Dairy segment earnings.
Current forecasts indicate that butterfat and raw milk costs will continue to
rise to record levels through at least October 1998, before declining.
PICKLES - Net sales in the Pickles segment for the first quarter of $93.4
million increased $2.9 million, or 3.3%, from $90.5 million in the prior year.
The increase in net sales is due to the acquisition of the Schwartz Pickle
Company, which offset a slight volume decrease in the core business, which is
expected to be timing in nature. Operating earnings increased $1.8 million, or
19.1%, as cost savings and the earnings from the Schwartz acquisition more than
offset the volume decline in the core business.
SPECIALTY - The Specialty segment experienced increased sales of $6.6
million, or 9.0%, to $80.0 million. Operating earnings increased 1.6% from the
prior year. The Dean Dip and Dressing division experienced increased sales but
lower operating earnings as a result of increased marketing and advertising
expenses. Sales and earnings increased in the Specialty segment's Food Products
division as efficiencies at a new dryer improved during the quarter and
contributed to the increased earnings.
CORPORATE
Corporate expenses decreased $1.1 million in the first quarter of fiscal 1999
versus the same period in the prior year. The decrease is primarily due to
lower compensation expense related to certain stock based incentive plans.
INTEREST EXPENSE
Interest expense increased $5.4 million during the first quarter compared to the
prior year, primarily the result of additional interest expense associated with
increased borrowings under the revolving
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credit agreement used to fund acquisitions and the issuance of $150 million of
Senior Notes during the second quarter of fiscal 1998.
INCOME TAXES
The effective income tax rate for the first quarter of fiscal 1999 was 39.0%
compared to a rate of 39.1% for the first quarter a year ago.
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of taxes, was $1.7 million for the first
quarter of fiscal 1999, compared to a loss of $2.8 million in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
As of August 30, 1998 there have been no material changes in the Company's
liquidity or its capital resources from those described in the Management's
Discussion and Analysis contained in the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1998. Cash and temporary cash investments
were $22.5 million at August 30, 1998.
Working capital at August 30, 1998 was $137.8 million compared to $67.3
million at May 31, 1998, and inventories at August 30, 1998 were $181.6 million,
an increase of $46.2 million over the balance at May 31, 1998. The increase in
working capital and inventories were primarily the result of two Dairy
acquisitions completed during the first quarter of fiscal 1999 and the Pickles
segment's typical seasonal inventory increase from the cucumber harvest. The
August 30, 1998 inventories were $36.8 million higher than inventories a year
ago due to the additional inventory associated with acquisitions completed
during fiscal 1999 and the latter half of fiscal 1998.
Seasonal working capital requirements are funded using the Company's
Revolving Credit Agreement and bilateral lines of credit. There were no
short-term borrowings outstanding at August 30, 1998, compared to $12.0 million
outstanding at May 31 ,1998.
CASH FLOWS - The change in cash for the first quarter of fiscal 1999 was an
increase of $10.6 million. Net cash provided from continuing operations was
$13.2 million for the first quarter of fiscal 1999 compared to $33.4 million in
the prior year. Net cash used in investing activities was $115.9 million for
first quarter fiscal 1999 versus $68.0 million in fiscal 1998. First quarter
fiscal 1999 investing activities include $85.8 million of cash paid for
acquisitions compared to $41.9 million paid during the first quarter of fiscal
1998. Net cash provided by financing activities was $118.9 million and $53.3
million for the first quarters of fiscal 1999 and fiscal 1998, respectively.
Fiscal 1999 financing activities include additional long-term borrowings under
the Company's Revolving Credit Agreement of $140.0 million. The current quarter
also reflects the repayment of $12.0 million of short-term notes payable versus
a $49.0 million issuance of short-term notes payable during the prior year
period.
SUBSEQUENT EVENTS
On September 23, 1998, the Company sold the stock of Dean Foods Vegetable
Company to Agrilink Foods, Inc. ("Agrilink") for $365.6 million in cash, a $30.0
million Agrilink subordinated note and Agrilink's aseptic foods business. Cash
proceeds were utilized to repay debt outstanding under the Company's revolving
credit agreement. Due to the uncertainty of realizability of the $30.0 million
subordinated note, the note has been valued at zero. The Company estimates the
after-tax gain on the sale of Vegetables segment to be approximately $80.0
million. The estimated gain is subject to final valuations and appraisals of
assets and completion of post-closing audits.
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Subsequent to quarter-end, the Company completed the acquisition of U.C.
Milk Company for cash consideration and announced a merger agreement with
Berkley Farms, Inc.
YEAR 2000 COMPLIANCE
As discussed in the Company's Annual Report on Form 10-K, the Company is
currently assessing and modifying its computer, production and facility systems
and business processes to provide for their continued functionality. The
Company is also continuing to assess the readiness of external parties and
coordinating efforts to address the Year 2000 issue with those entities. The
Company is augmenting previously scheduled computer maintenance with procedures
designed to locate and correct Year 2000 problems and accelerating normal
equipment and software replacement schedules. The Company continues to expect
that substantially all new systems upgrades or reprogramming efforts 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.
FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly 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 this 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 and
butterfat prices, interest rate fluctuations, competitive pricing pressures,
marketing and cost-management programs, changes in government programs and
shifts in market demand. Additional information concerning these and other
risks is contained in the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1998.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
------------------
There has been no material change in the legal proceedings reported
under Item 3 - Legal Proceedings, of the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1998.
Item 6. Exhibits and Reports on Form 8-K
----------------------------------
(a) Exhibits
3(a) Dean Foods Company Restated Certificate of
Incorporation dated February 8, 1988, as amended
September 29, 1998
10(a) Amendatory Agreement by and between the Company
and Agrilink Foods, Inc. dated July 24, 1998, and
Second Amendatory Agreement by and between the
Company and Agrilink Foods, Inc. dated
September 23, 1998
11 Basic and Diluted Income per Share
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedules
.1 Three Months Ended August 30, 1998
.2 Three Months Ended August 24, 1997 (Restated)
(b) Reports on Form 8-K
(1) The Company filed a Current Report on Form 8-K, dated
July 27, 1998, with regards to the Company's Press
release dated July 27, 1998, "Dean Agrees to Sell
Vegetable Operations; Will Focus Resources on Dairy
Business"
(2) The Company filed a Current Report on Form 8-K, dated
September 23, 1998, with regards to the sale of the
stock of Dean Foods Vegetable Company.
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SIGNATURES
Pursuant to the requirements 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
-----------------------
(Registrant)
DATE: October 14, 1998 William R. McManaman
----------------- ------------------------------
WILLIAM R. McMANAMAN
Vice President, Finance and
Chief Financial Officer
DATE: October 14, 1998 William M. Luegers, Jr.
---------------- ----------------------------
WILLIAM M. LUEGERS, JR.
Controller
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Exhibit 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
DEAN FOODS COMPANY, a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the corporation is DEAN FOODS COMPANY and the name under
which the corporation was originally incorporated was DELAWARE DEAN FOODS
COMPANY.
The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State was April 1, 1968.
2. This Restated Certificate of Incorporation only restates and integrates
and does not further amend the provisions of the Certificate of Incorporation
of the Corporation as heretofore amended or supplemented and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or
changes to read as herein set forth in full:
FIRST: The name of the corporation is
DEAN FOODS COMPANY
SECOND: The address of its registered office in the State of Delaware
is 229 South State Street, in the City of Dover, County of Kent. The name
of its registered agent at such address is United States Corporation
Company.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware, including but not
<PAGE> 2
limited to the purchase, sale, dealing in, manufacture, processing, cutting,
storing and shipping of food products of all types.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 90,000,000 shares, all of which
shall be of a par value of $1 per share, of which 80,000,000 shares shall be
Common Stock and of which 10,000,000 shares shall be Preferred Stock.
Each share of the Common Stock shall entitle the holder thereof to one
vote, in person or by proxy, at any and all meetings of the stockholders of the
corporation upon all propositions before such meetings, including the election
of directors of the corporation.
The Preferred Stock may be issued from time to time in one or more series,
each series consisting of as many shares as the Board of Directors shall
determine, and with such designation for each such series as shall be stated and
expressed in the resolution or resolutions providing for the issue of each such
series adopted by the Board of Directors. The Board of Directors in any such
resolution or resolutions is expressly authorized to fix and express for each
series:
(i) the voting powers, if any, of the holders of stock of such
series;
(ii) the rate per annum and the times and conditions upon which the
holders of stock of such series shall be entitled to receive dividends,
whether such dividends shall be cumulative or non-cumulative and, if
cumulative, the terms upon which such dividends shall be cumulative;
(iii) the price or prices and the time or times and the manner in
which the stock of such series shall be redeemable, if such stock is made
redeemable;
(iv) the rights to which the holders of the shares of stock of such
series shall be entitled upon any voluntary or involuntary liquidation,
dissolution, or winding up of the corporation;
(v) the terms, if any, upon which shares of stock of such series
shall be convertible into, or exchangeable for, shares of stock of any
other class or classes or of any other series of the same or any other
class or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any; and
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(vi) any other designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, so far as they are not inconsistent with the
provisions of the Certificate of Incorporation, as from time to time
amended, and to the full extent now or hereafter permitted by the laws of
Delaware.
All shares of the Preferred Stock of any one series shall be identical to
each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon, if
cumulative, shall be cumulative.
No stockholder of this corporation shall by reason of his holding shares of
any class have any pre-emptive or preferential right to purchase or subscribe to
any shares of any class of this corporation now or hereafter to be authorized,
or any notes, debentures, bonds, or other securities convertible into or
carrying options or warrants to purchase shares of any class, now or hereafter
to be authorized, whether or not the issuance of any such shares, or such notes,
debentures, bonds or other securities, would adversely affect the dividend or
voting rights of such stockholder, other than such rights, if any, as the Board
of Directors, in its discretion from time to time may grant and at such price as
the Board of Directors in its discretion may fix; and the Board of Directors may
issue shares of any class of this corporation, or any notes, debentures, bonds,
or other securities convertible into or carrying options or warrants to purchase
shares of any class, without offering any such shares of any class, either in
whole or in part, to the existing stockholders of any class.
FIFTH: The Board of Directors is expressly authorized to make, alter, amend
and repeal the by-laws of the corporation. By-laws of the corporation may also
be made, altered, amended or repealed by the stockholders, but only by the
affirmative vote of the holders of at least 80% of the outstanding stock of the
corporation entitled to vote (which percentage shall not be increased by the
by-laws of the corporation). The affirmative vote of the holders of at least 80%
of-the outstanding stock of the corporation entitled to vote shall be required
to amend, alter or repeal this Article FIFTH.
SIXTH: Election of directors need not be by written ballot unless the
by-laws so provide.
SEVENTH: The number of directors of the corporation shall be fixed by the
by-laws and may be altered from time to time as may be provided therein, but in
no event shall the number of directors of the corporation be less than three nor
more than twelve. At the annual election of directors to be held at the annual
meeting of stockholders in 1973, the directors to be
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elected by the holders of all classes of stock entitled to vote therein shall be
divided into three classes, as nearly equal in number as practicable, the term
of office of those of the first class to expire at the first annual meeting of
stockholders after their election, the term of office of those of the second
class to expire at the second annual meeting of stockholders after their
election, and the term of office of those of the third class to expire at the
third annual meeting of stockholders after their election. At each annual
meeting held after such classification and election to be held in 1973, the
directors elected to succeed those whose terms expire shall be elected for a
term of office to expire at the third annual meeting of stockholders after their
election. The affirmative vote of the holders of at least 80% of the outstanding
stock of the corporation entitled to vote shall be required to amend, alter or
repeal this Article SEVENTH. In no event shall the number of directors of any
class exceed four.
EIGHTH: I. The affirmative vote of the holders of at least 80% of the
Voting Shares of the corporation, voting as a single class, shall be required to
authorize, adopt, approve or carry out:
(A) any agreement or plan of merger or consolidation of this
corporation to which a Related Entity or an affiliate of a Related Entity
is a party;
(B) any sale, lease, exchange, transfer or other disposition of all
or substantially all of the assets of the corporation or of any other
person in a transaction to which a Related Entity or an affiliate of a
Related Entity is a party; or
(C) any issuance or delivery by the corporation of its Voting Shares
to a Related Entity or an affiliate of a Related Entity.
II. The affirmative vote required by Item I shall be in addition to any
vote of the stockholders of the corporation otherwise required.
III. The provisions of Item I shall not apply to any transaction specified
therein if:
(A) such transaction would not otherwise require a vote of
stockholders;
(B) the Board of Directors shall have approved, by resolution, a
memorandum of understanding substantially consistent with such transaction
prior to the time any party to such transaction became a Related Entity or
an affiliate of a Related Entity; or
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(C) each party to such transaction other than the corporation is a
corporation of which at least a majority of the outstanding voting shares
are owned of record or beneficially by the corporation and its
subsidiaries.
IV. The Board of Directors shall have the power and duty to determine, for
the purposes of this Article EIGHTH, on the basis of the information known to
it: (A) whether another party to any transaction specified in Item I is a
Related Entity or an affiliate of a Related Entity, and (B) whether the
memorandum of understanding referred to in Item III is substantially consistent
with a transaction. Any such determination made in good faith shall be
conclusive.
V. The term "Related Entity" means any person who beneficially owns,
directly or indirectly, or has the right to acquire (whether pursuant to
agreement or upon exercise of conversion rights, warrants or options or
otherwise) 5% or more of the Voting Shares (considered as a single class) of the
corporation, the holders of which are entitled to vote on a transaction
specified in Item I. A person shall be deemed to beneficially own (in addition
to any other shares beneficially owned, directly or indirectly, by such person)
any Voting Shares owned by any affiliate of such person, any shares which such
person or any affiliate of such person has the right to vote or to direct the
voting and any Voting Shares with respect to which such person or any affiliate
of such person has any agreement, arrangement or understanding with any other
person or persons concerning the acquisition, holding, disposition or voting of
such shares. Any stockholder action by consent shall be deemed to be a
stockholders' vote. The term "Voting Shares" means shares the holders of which
at the time are entitled to vote in the election of a majority of the directors.
The term "person" means an individual, corporation, partnership, association,
joint stock company, joint venture, trust, voting trust, business trust,
unincorporated organization, or other entity. The term "affiliate of a Related
Entity" means any person who directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with a
Related Entity.
VI. The affirmative vote of the holders of at least 80% of the Voting
Shares of the corporation shall be required to amend, alter or repeal this
Article EIGHTH.
NINTH: No action may be taken by the stockholders of the corporation
without a meeting unless a consent in writing, setting forth the action so
taken, shall be signed by the holders of at least 80% of the outstanding stock
of the corporation entitled to vote. The affirmative vote of the holders of at
least 80% of the outstanding stock of the corporation entitled to vote shall be
required to amend, alter or repeal this Article NINTH.
5
<PAGE> 6
TENTH: Special meetings of the stockholders of the corporation may be called,
and may only be called, by the Chairman of the Board or the President or, as
hereinafter provided, by the Secretary. The Secretary shall call special
meetings of the stockholders at the written request of either:
(i) a majority of the Board of Directors or
(ii) the holders of at least 80% of the outstanding stock of the
corporation entitled to vote.
Any such request of the Board of Directors or the stockholders shall be
signed by the persons requesting such meeting and addressed to the Secretary,
shall state the purpose or purposes for which the meeting is to be called and
shall include such additional information concerning the persons requesting the
meeting and the purpose or purposes for the meeting as may be necessary to
prepare any materials required by applicable law in connection with the meeting.
The affirmative vote of the holders of at least 80% of the outstanding stock of
the corporation entitled to vote shall be required to amend, alter or repeal
this Article TENTH.
ELEVENTH: No person who was or is a director of the corporation shall be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is amended after the effective date of this Article to further
eliminate or limit, or to authorize further elimination or limitation of, the
personal liability of directors for breach of fiduciary duty as a director, then
the personal liability of a director to the corporation or its stockholders
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law as so amended. For purposes of this Article, "fiduciary
duty as a director" shall include any fiduciary duty arising out of serving at
the request of the corporation as a director of another corporation,
partnership, joint venture, trust or other enterprise, and "personally liable to
the corporation" shall include any liability to such other corporation,
partnership, joint venture, trust or other enterprise, and any liability to the
corporation in its capacity as a security holder, joint venturer, partner,
beneficiary, creditor or investor of or in any such other corporation,
partnership, joint venture, trust or other enterprise.
6
<PAGE> 7
Any repeal or modification of the foregoing provisions of this Article by
the stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification. The foregoing provisions shall not eliminate or limit the
liability of a director for any act or omission occurring prior to the effective
date of this Article.
TWELFTH: Section 1. 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 (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, 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 by-laws 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 corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe his conduct was unlawful.
7
<PAGE> 8
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 by-laws 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 1 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
by-laws or any agreement
8
<PAGE> 9
with the corporation) actually and reasonably incurred by him in connection
therewith.
Section 4. Any indemnification under Section 1 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 1 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
the by-laws of the corporation) consisting of directors who were not parties to
such action, suit or proceeding, or (ii) if such quorum is not obtainable, or,
even if 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 1 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 1 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 1 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,
9
<PAGE> 10
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 TWELFTH 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 1 or 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, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 10. 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 1 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 of
indemnification or advancement of expenses to such person or the obligations of
the corporation.
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 12. 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 TWELFTH.
Section 13. 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
10
<PAGE> 11
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 14. The invalidity or unenforceability of any provision of this
Article shall not affect the validity or unforceability of the remaining
provisions of this Article.
THIRTEENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
FOURTEENTH: The corporation reserves the right to amend, alter, change or
repeal any provision now or hereafter contained in this Restated Certificate of
Incorporation, and to add new provisions, in the manner now or hereafter
prescribed by statute; and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors and officers pursuant to this
Restated Certificate of Incorporation in its present form or as hereafter
amended are granted subject to this reservation.
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors in accordance with Section 245 of the General Corporation
Law of the State of Delaware.
11
<PAGE> 12
IN WITNESS WHEREOF, DEAN FOODS COMPANY has caused this certificate to be
signed by Howard M. Dean, its President, and attested by William D. Fischer, its
Secretary, this 28th day of January, 1988.
DEAN FOODS COMPANY
By: /s/ Howard M. Dean
------------------------
Howard M. Dean
President
ATTEST:
By: /s/ William D. Fischer
------------------------
William D. Fischer
Secretary
12
<PAGE> 13
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 10/05/1998
981386196 - 0675421
STATE OF DELAWARE
,
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DEAN FOODS COMPANY
DEAN FOODS COMPANY, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, at a meeting duly
held July 24, 1998, duly adopted a resolution, filed with the minutes of the
Board, proposing and declaring advisable the following amendment to the Restated
Certificate of Incorporation of the Corporation:
RESOLVED, that in the opinion of the Board of Directors, it is
advisable that the Certificate of Incorporation of the Corporation be
amended as follows:
The first sentence of article "FOURTH" shall be amended in its
entirety to read as follows:
"The total number of shares of all classes of stock which the
corporation shall have authority to issue is 160,000,000 shares, all of
which shall be of a par value of $1 per share, of which 150,000,000 shares
shall be Common Stock and of which 10,000,000 shares shall be Preferred
Stock."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a meeting of the stockholders of the Corporation was duly called and held, at
which meeting the necessary number of shares as required by statute were voted
in favor of the amendment.
<PAGE> 14
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by William R. McManaman, its Vice President - Finance and Chief
Financial Officer and attested by Eric A. Blanchard, its Vice President and
Secretary, this 29th day of September, 1998.
DEAN FOODS COMPANY
By: /s/ William R. McManaman
---------------------------------
William R. McManaman
Vice President - Finance and
Chief Financial Officer
ATTEST:
/s/ Eric A. Blanchard
- -----------------------------------------------
ERIC A. BLANCHARD, Vice President and Secretary
SUBSCRIBED and SWORN to before
me this 29th day of September, 1998.
/s/ Betty J. Zabratanski
- ------------------------------------- OFFICIAL SEAL
Betty J. Zabratanski, Notary Public BETTY J. ZABRATANSKI
My Commission Expires 2/26/99 NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES: 02/26/99
<PAGE> 1
EXHIBIT 10(a)
AMENDATORY AGREEMENT
THIS AMENDATORY AGREEMENT (this "Amendatory Agreement") is entered into on
September 10, 1998, by and between Dean Foods Company, a Delaware corporation
("Dean"), and Agrilink Foods, Inc., a New York corporation ("Agrilink"), with
respect to the Stock Purchase Agreement dated July 24, 1998 by and between them
(the "Stock Purchase Agreement") and the Asset Transfer Agreement dated July 24,
1998 by and between them (the "Asset Transfer Agreement"). Dean and Agrilink are
sometimes referred to herein as a "Party" and collectively as the "Parties".
In consideration of the premises and the mutual agreements herein
contained, the Parties agree as follows:
1. Each of the following items is removed from Exhibit C to the Stock
Purchase Agreement:
WASECA, MINNESOTA item 1
WATSONVILLE, CALIFORNIA item 5
FAIRWATER, WISCONSIN items 2 and 3
2. The term "Title Insurance Commitments" used in the Stock Purchase
Agreement includes, in addition to the title insurance commitments
identified in Section 3(b)(x)(D) of the Stock Purchase Agreement, each
of the following:
Commitment for Title Insurance dated July 27, 1998 issued by First
American Title Insurance Company related to the Ft. Atkinson,
Wisconsin Owned Premises
Commitment for Title Insurance dated August 10, 1998 issued by First
American Title Insurance Company related to the Cedar Grove, Wisconsin
Owned Premises
Commitment for Title Insurance dated July 13, 1998 issued by First
American Title Insurance Company related to the Brillion, Wisconsin
Owned Premises
3. The two pages attached hereto as Appendix A replace Section (O) and
(P) of Schedule 3(b)(xv) of the Seller Disclosure Schedule delivered
by Dean in connection with the Stock Purchase Agreement.
4. The three pages attached hereto as Appendix B replace Schedule 3(b)
(xxviii) of the Seller Disclosure Schedule delivered by Dean in
connection with the Stock Purchase Agreement.
<PAGE> 2
5. Notwithstanding Section 2(d) of the Stock Purchase Agreement, Dean
agrees that Agrilink may delay the Closing under the Stock Purchase
Agreement from September 8, 1998 until as late as September 22, 1998.
Dean certifies to Agrilink that, after giving effect to this
Amendatory Agreement, each of the conditions specified in Section
7(a)(i) through (iv), inclusive, of the Stock Purchase Agreement (in
the case of the condition specified in Section 7(a)(iv), to the
Knowledge of the Seller (as defined in the Stock Purchase Agreement))
is satisfied on September 8, 1998. In return for such agreement and
certification, Agrilink waives each of the conditions to the
obligation of Agrilink to consummate the Closing set forth in Section
7(a) (i) through (vi), inclusive, of the Stock Purchase Agreement and
in Section 7(a)(xii) of the Stock Purchase Agreement except insofar as
such Section relates to Sections 7(a)(vii) through (xi), inclusive, of
the Stock Purchase Agreement.
6. Dean acknowledges that pursuant to the final sentence of Section 3(v)
of the Asset Transfer Agreement, Agrilink has furnished information to
Dean under cover of David M. Mehalick's letter to Brian D. Hogan dated
August 18, 1998. Agrilink acknowledges that pursuant to the final
sentence of Section 3(b)(xxiv) of the Stock Purchase Agreement, Dean
has furnished information to Agrilink under cover of Dale Hecox's
undated letter to David M. Mehalick received by facsimile on August
21, 1998. Agrilink confirms that the post-retirement medical benefit
obligations to current and former salaried employees of Dean Foods
Vegetable Company ("DFVC"), to current and former Wisconsin union and
non-union, hourly employees of DFVC and to union retirees of the Birds
Eye (General Foods) Fulton, New York and Waseca, Minnesota plants
described in such information are obligations of DFVC for which Dean
shall bear no further responsibility subsequent to the Closing under
the Stock Purchase Agreement.
7. Each of the following items is removed from Schedule A to the form of
License Agreement that is Exhibit A to the Asset Transfer Agreement:
<TABLE>
<CAPTION>
MARK REGISTRATION NO.
----- ----------------
<S> <C>
Thank You 384,355
Thank You 592,509
Thank You 746,304
Thank You 749,255
Thank You 300,126
</TABLE>
8. In the event the third parties that provide Agrilink with financing in
connection with the transactions contemplated by the Stock Purchase
Agreement require that Agrilink merge DFVC into Agrilink promptly
following the Closing under the Stock Purchase Agreement, and provided
Agrilink does not change its name
<PAGE> 3
in such merger, Dean waives the obligation of Agrilink in the first
sentence of Section 6(f) of the Stock Purchase Agreement. The second
sentence of Section 6(f) of the Stock Purchase Agreement will continue
to apply notwithstanding such waiver. Any such merger shall be a
matter solely between Agrilink and such third parties, and shall not
be a transaction contemplated by the Stock Purchase Agreement or the
Asset Transfer Agreement for purposes thereof. In the event of any
such merger, references to DFVC in the Stock Purchase Agreement with
regard to any time subsequent to such merger (for example, in Section
6(e) of, and in Exhibit B to, the Stock Purchase Agreement) shall be
deemed references to Agrilink.
9. Item 3 on the first page of Schedule 3(k) of the Transferor Disclosure
Schedule delivered by Agrilink in connection with the Asset Transfer
Agreement is revised to read as follows (with an indication that the
listed foreign trademark applies to the Aseptic Business):
3. Foreign Trademarks (See attached regarding registrations)
BONUS and Design
and the following is added to the referenced attachment:
<TABLE>
<CAPTION>
MARK REG./APPN. NO. GOODS
---- -------------- ------
<S> <C> <C>
BONUS Canada canned products: ham and chicken
and Design 104665 sandwich deviled ham sandwich
spread, beef and chicken sandwich
spread, ham and pickle sandwich
spread
</TABLE>
10. Item 15 of Schedule 3(n) of the Transferor Disclosure Schedule
delivered by Agrilink in connection with the Asset Transfer Agreement
is revised to add the following: Co-Pack Agreement dated as of June
21, 1995 with Associated Milk Producers, Inc.
11. The Stock Purchase Agreement shall be amended to add the following
Section 6(k) which shall be and read as follows:
(k) Utilization of Lawson Software. Seller agrees to pay or
reimburse Targets for the initial licensing fee of $63,000 payable to
Lawson Associates, Inc. for continued use by Targets of Lawson
Software as described in the letter to Eric Blanchard dated September
9, 1998.
12. Section 2(f)(i) of the Stock Purchase Agreement shall be amended to
replace the number "3" with the number "4".
<PAGE> 4
13. Schedule 3(k) of the Transferor Disclosure Schedule delivered by
Agrilink in connection with the Asset Transfer Agreement is further
revised to add the following disclosure:
6. Security Interests.
Immediately prior to the Closing, Transferor will grant a
Security Interest in the trademarks referred to in paragraph 2
above to Harris Trust & Savings Bank, which Security Interest
will be subordinated in all respects to the rights of Transferee
under the License Agreement appearing as Exhibit A to the Asset
Transfer Agreement.
Except as expressly provided in this Amendatory Agreement, the Stock
Purchase Agreement and the Asset Transfer Agreement shall remain unamended and
unwaived and shall remain in full force and effect in accordance with their
respective terms. As used in the Stock Purchase Agreement and the Asset Transfer
Agreement, references to "this Agreement" or the like shall refer to the same as
modified by this Amendatory Agreement.
IN WITNESS WHEREOF, the Parties have executed this Amendatory
Agreement on the date first above written.
DEAN FOODS COMPANY
By: /s/ Eric A. Blanchard
------------------------------
Title: VP
-----------------------------
AGRILINK FOODS, INC.
By: /s/ Earl I. Powers
------------------------------
Title: VP
-----------------------------
<PAGE> 5
Appendix A
SCHEDULE 3(b)(xv) (CONTINUED)
CONTRACTS
(O) (1) Tolling Agreement dated May 6, 1995 between DFVC and Stilwell
Foods, Inc.
(2) Supply Agreement dated May 6, 1995, between DFVC and Stilwell
Foods, Inc.
(3) Supply and Marketing Agreement dated February 5, 1997 between DFVC
and Triton International.
(4) Processing and Packaging Agreement dated July 22, 1996 between DFVC
and AGRIPAC, Inc. (Copy of agreement has not been provided to
Buyer).
(P) DFVC and BEMSA enter into form growers contracts with growers of raw
vegetables. Copies of the form contracts have previously been
delivered to Buyer.
Miscellaneous Related to the Above
1. Hauling Agreement between Richard A. Shaw Frozen Foods and Trans
Valley Transport, Incorporated covering the period June 1, 1985 to
May 31, 1986, automatic one-year renewal;
2. Contract for Handling Screen House Waste at Waseca, MN with Gerald
Milbrett dated 1/28/98;
3. Contract for Handling Sweet Corn By-Products at Waseca, MN with
George Klug dated 1/29/96;
4. Agreement between Shaw Frozen Foods and Green Crop Harvesting dated
12/13/93;
5. By-Product Contract with Ben Kleczka Trucking dated 3/6/98;
6. Corn Silage Hauling and Stacking Contract with Winthrop Wood
Products dated 2/20/95;
7. Silage Loading Contract with Winthrop Wood Products dated 2/20/95;
8. Harvesting Service Contract with Gustine Harvesting, Inc. dated
4/7/94;
9. Custom Harvesting Agreement with Razorback Farms, Inc. dated
5/28/98;
<PAGE> 6
SCHEDULE 3(b)(xv) (CONTINUED)
CONTRACTS
10. Contract with Jeffrey Hahn for the delivery, handling, and disposal
of vegetable processing by-products dated June 1, 1992;
11. Operating Agreement with Catarina Produce L.L.C. dated
11/22/97; and
12. Spraying Agreement with Teryjon Aviation, Inc. dated April 22,
1998.
<PAGE> 7
Appendix B
SCHEDULE 3(b)(xxviii)
UNDISCLOSED LIABILITIES
Targets have the obligation to continue to meet their obligations under
contracts and commitments and applicable laws and regulations. See also
Schedules 3(b)(vii) and 3(b)(xxvi).
See also the attached schedule of reserves not reflected in the Financial
Statements.
<PAGE> 8
SECOND AMENDATORY AGREEMENT
THIS SECOND AMENDATORY AGREEMENT (this "Second Amendatory Agreement") is
entered into on September 23, 1998, by and between Dean Foods Company, a
Delaware corporation ("Dean"), and Agrilink Foods, Inc., a New York corporation
("Agrilink"), with respect to the Stock Purchase Agreement dated July 24, 1998,
by and between them and the Asset Transfer Agreement dated July 24, 1998, by and
between them, in each case as previously amended by the Amendatory Agreement
dated September 10, 1998 by and between them (the "Stock Purchase Agreement" and
the "Asset Transfer Agreement", respectively). Dean and Agrilink are sometimes
referred to herein as a "Party" and collectively as the "Parties".
In consideration of the premises and the mutual agreements herein
contained, the Parties agree as follows:
1. The first sentence of Section 2(b) of the Stock Purchase Agreement is
amended to read as follows:
The consideration referred to in Section 2(a) is (i) $360,000,000 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), (ii) the Aseptic Business of the Buyer, and (iii) a promissory
note of the Buyer in the form of the note attached to the Second
Amendatory Agreement dated September 23, 1998 by and between the
Parties as Exhibit A (the "Note") (collectively, the "Purchase
Price").
2. Section 2(e) of the Stock Purchase Agreement is amended to add the
following at the end thereof:
and (vi) the Buyer will deliver to the Seller the Note.
3. The Seller and the Buyer agree that the Buyer withdraws the election
previously delivered to the Seller pursuant to Section 6(b) of the Stock
Purchase Agreement and that such Section 6(b) is amended to read as follows:
(b) Section 338(h)(10) Election. At the option of the Buyer, and
provided written request (accompanied by Buyer's payment to Seller of cash
in an amount equal to the sum of(i) $13,200,000 plus (ii) an amount
sufficient, in the good faith judgment of Seller, to reimburse Seller on an
after-tax basis for any estimated tax penalty incurred by the Seller as a
result of the deferral of the Section 338(h)(10) Election until a date
subsequent to the Closing) is made of the Seller by the Buyer at least
ninety days prior to July 15, 1999, the Seller will join with the Buyer in
making an election on or before July 15, 1999 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
<PAGE> 9
DFVC and Holding Company hereunder. 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. Any amount payable by Buyer pursuant to
this Section 6(b) will be treated as additional purchase price, but only if
and when Buyer is required to make payment thereof
4. Notwithstanding the definitions thereof in Sections 1 and 2(f)(i) of the
Stock Purchase Agreement, respectively: (a) "Closing Date Adjusted Net Working
Capital" will be determined as of the close of business on September 23, 1998,
and in making such determination the production variance for the period
subsequent to the close of business on September 21, 1998 shall be twice the
daily average production variance for the week ended September 21, 1998; and (b)
"Estimated Closing Date Adjusted Net Working Capital" will be calculated as of
the close of business on September 21, 1998.
5. Notwithstanding the definitions thereof in Sections 1 and 2(e)(i) of the
Asset Transfer Agreement, respectively: (a) "Closing Date Inventory" will be
determined as of the close of business on September 23, 1998; and (b) "Estimated
Closing Date Inventory" will be calculated as of the close of business on
September 21, 1998.
6. Paragraph 6 of Schedule 3(k) of the Transferor Disclosure Schedule
delivered by Agrilink in connection with the Asset Transfer Agreement is amended
to insert after the words "in paragraph 2 above" the words "(other than the
Bonus trademarks)".
7. In addition to all other amounts payable by Agrilink to Dean at the
Closings under the Stock Purchase Agreement and the Asset Transfer Agreement,
Agrilink will pay to Dean the following:
(a) $1,249,392.88, an amount equal to the aggregate of(i) Dean Foods
Vegetable Company's payroll checks deliverable subsequent to the Closing
Date and on or prior to September 25, 1998 assuming there are no personnel
taken on at Dean Foods Vegetable Company subsequent to the Closing Date and
on or prior to September 30, 1998 and (ii) Dean Foods Vegetable Company's
federal and Minnesota withholding payments due September 28 and 29, 1998
assuming no Dean Foods Vegetable Company payroll is paid subsequent to the
Closing Date except as contemplated in (i) above. (Dean agrees that funds
belonging to it (including after giving effect to 14 below) will be in the
Dean Foods Vegetable Company account on which such payroll checks are
written, as and when such checks are presented, in amounts sufficient to
pay such checks, and Dean agrees to make with its own funds such
withholding payments.);
(b) $24,080, representing the Michigan state and county transfer tax
payable by Agrilink in connection with its transfer of its Benton Harbor,
Michigan facility pursuant to the Asset Transfer Agreement, which amount
was advanced to Southwest Metropolitan Title by Dean on Agrilink's behalf
at Agrilink's request; and
2
<PAGE> 10
(c) $8,423.50, representing a pro ration as of the Closing Date of
real estate taxes on such facility to become due and payable for the
current period subsequent to the Closing Date.
8. Each of the following items is removed from Exhibit C to the Stock
Purchase Agreement:
UVALDE, TEXAS item 2
SPRINGVILLE, WISCONSIN (CAMBRIA) item 2
9. Agrilink shall use its best efforts to cause Dean to be fully and
forever released, not later than the first anniversary of the Closing Date under
the Stock Purchase Agreement, in a writing satisfactory to Dean, from all
obligations under the Guaranty Agreement dated March 8, 1991 (the "Cascade
Guaranty") with respect to the obligations of Dean Foods Vegetable Company under
the Construction and Storage Agreement (the "Cascade Agreement") dated December
14, 1990 between Dean Foods Vegetable Company (as successor to Richard A. Shaw,
Inc.) and Cascade Refrigerated Services, Inc. ("Cascade"), which Cascade
Guaranty was assigned by Cascade to Metropolitan Life Insurance Company.
10. Until payment in full of the Promissory Note dated December 13,
1988 "the Hancock Note") to which the Guaranty dated March, 1992 (the "Hancock
Guaranty" and, together with the Cascade Guaranty, the "Guarantees")
guaranteeing the obligations of Dean Foods Vegetable Company, as successor to
Frio Foods, Inc., to John Hancock Mutual Life Insurance Company relates and
until Dean is released from the Cascade Guaranty, Agrilink shall cause Dean
Foods Vegetable Company to timely perform all of its obligations under the
Cascade Agreement and the Hancock Note and Agrilink further agrees as follows:
In the event that Dean is required to make payment to Cascade, Metropolitan
Life, John Hancock Mutual Life Insurance Company or any other party as a result
of any of the Guarantees, and provided Dean gives written notice to Agrilink of
the amount Dean is required to pay along with any supporting documentation,
Agrilink shall, within 15 days of receipt of such notice, pay such amounts in
immediately available funds to Dean or as directed by Dean. In the event that
Agrilink disputes any amounts claimed to be owed under either of the Guarantees,
it shall pay the amounts in dispute into escrow pending resolution of such
dispute.
11. The Parties agree to attempt in good faith subsequent to the Closing
Date to agree upon procedures to deal with the issues raised by the unsigned
letter agreement dated September 18, 1998 attached to this Second Amendatory
Agreement as Exhibit B.
12. Exhibit B to the Asset Transfer Agreement is amended to include the
operative provisions of the form of unsigned letter agreement attached to this
Second Amendatory Agreement as Exhibit C.
13. In furtherance of the intent of Section 6(i) of the Stock Purchase
Agreement, the Parties agree to be bound by the provisions of the form of letter
agreement dated September 18, 1998
3
<PAGE> 11
attached hereto as Exhibit D. The parties further agree to be bound (and Dean
agrees to cause Amboy of Michigan, L.L.C. to be bound) by corresponding
provisions for purposes of the Asset Transfer Agreement.
14. The Parties agree that the following Dean Foods Vegetable Company bank
accounts (the "Accounts"), and the funds therein at the Closing Date, are
intended to be the property of Dean notwithstanding the transfer of Dean Foods
Vegetable Company's stock to Agrilink pursuant to the Stock Purchase Agreement:
Bank of America, 1491800186; Bank of Montreal, 0004-1526-930; Associated
Kellogg, 1477926, 19395047, 19364188 and 19407511; Harris Trust and Savings
Bank, 238-4048; and Wachovia, 0454066112. The Parties agree to cause the
transfer, effective as of the Closing Date, of the Accounts and the funds
therein at the Closing Date to Dean as soon as possible subsequent to the
Closing Date. In the interim, Agrilink shall not cause, or permit Dean Foods
Vegetable Company to cause, the transfer of any of the funds in any of the
Accounts. Nothing in the foregoing shall preclude the automatic transfer of any
of such funds pursuant to the terms of the agreements currently governing the
Accounts. Dean agrees that in the event any of the banks at which the Accounts
are located or any other person or entity has an enforceable claim specifically
satisfiable out of any of such funds (as opposed to out of the funds of Dean or
Dean Foods Vegetable Company in general) for which Dean Foods Vegetable Company
is liable, and provided Agrilink gives written notice to Dean of the amount Dean
Foods Vegetable Company is required to pay along with any supporting
documentation, Dean will, within 15 days of receipt of such notice, reimburse
Dean Foods Vegetable Company for such claim to the extent of such funds. In the
event that Dean disputes any amounts claimed, it shall pay the amounts in
dispute into escrow pending resolution of such dispute.
15. Dean agrees to cooperate with Agrilink in its attempts to obtain the
required consent of Wiscold, Inc. disclosed in Section (J)(8) of Schedule
3(b)(xv) of the Seller Disclosure Schedule delivered by Dean in connection with
the Stock Purchase Agreement, provided that Dean shall not be required to make
any payment or provide any other consideration to Wiscold, Inc.
16. For purposes of the Stock Purchase Agreement and the Asset Transfer
Agreement, the Closing Date shall be the close of business on September 23,
1998.
Except as expressly provided in this Second Amendatory Agreement, the Stock
Purchase Agreement and the Asset Transfer Agreement shall remain unamended and
unwaived and shall remain in full force and effect in accordance with their
respective terms. As used in the Stock Purchase Agreement and the Asset Transfer
Agreement, references to "this Agreement" or the like shall refer to the same as
modified by this Second Amendatory Agreement.
4
<PAGE> 12
IN WITNESS WHEREOF, the Parties have executed this Second Amendatory
Agreement on the date first above written.
DEAN FOODS COMPANY
By:
-----------------------------------
Title
------------------------------
AGRILINK FOODS INC.
By:
-----------------------------------
Title
------------------------------
5
<PAGE> 1
Exhibit 11
Dean Foods Company
Computation of Basic and Diluted Income Per Share
---------------------------------------------------
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
August 30, August 24,
1998 1997
------------- ------------
<S> <C> <C>
Income from Continuing Operations $ 22,913 $ 24,308
Loss from Discontinued Operations (1,741) (2,761)
---------- ----------
Net Income $ 21,172 $ 21,547
========== ==========
BASIC INCOME (LOSS) PER SHARE:
Income from Continuing Operations $ .57 $ .60
Loss from Discontinued Operations (.04) (.07)
---------- ----------
Net Income $ .53 $ .53
========== ==========
Weighted average common shares outstanding 40,023 40,427
========== ==========
DILUTED INCOME (LOSS) PER SHARE:
Income from Continuing Operations $.56 $ .59
Loss from Discontinued Operations (.04) (.07)
---------- ----------
Net Income $ .52 $ .52
========== ==========
Adjusted weighted average common shares* 40,983 41,224
========== ==========
</TABLE>
* Includes weighted average number of potential common shares outstanding.
Potential common shares consist solely of the outstanding options under the
Company's stock option plan.
<PAGE> 1
Exhibit 12
Dean Foods Company
Computation of Ratio of Earnings to Fixed Charges
---------------------------------------------------
(In thousands)
13 Weeks Ended
August 30, 1998
---------------
Income before taxes $ 37,562
------------
Fixed charges:
Interest expense 9,056
Portion of rentals (33%) 2,690
------------
Total fixed charges 11,746
------------
Earnings before taxes and fixed charges $ 49,308
============
Ratio of earnings to fixed charges 4.2
============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrants' Quarterly Report on Form 10-Q for the quarterly period ended August
30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-30-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-30-1998
<CASH> 22,513
<SECURITIES> 0
<RECEIVABLES> 255,478
<ALLOWANCES> 4,438
<INVENTORY> 181,579
<CURRENT-ASSETS> 48,028
<PP&E> 1,038,724
<DEPRECIATION> 432,359
<TOTAL-ASSETS> 1,759,910
<CURRENT-LIABILITIES> 365,329
<BONDS> 687,639
0
0
<COMMON> 42,076
<OTHER-SE> 594,620
<TOTAL-LIABILITY-AND-EQUITY> 1,759,910
<SALES> 825,104
<TOTAL-REVENUES> 825,104
<CGS> 633,928
<TOTAL-COSTS> 633,928
<OTHER-EXPENSES> 144,580
<LOSS-PROVISION> 287
<INTEREST-EXPENSE> 9,056
<INCOME-PRETAX> 37,562
<INCOME-TAX> 14,649
<INCOME-CONTINUING> 22,913
<DISCONTINUED> (1,741)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,172
<EPS-PRIMARY> .53
<EPS-DILUTED> .52
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Registrants'
Quarterly Report on Form 10-Q for the quareterly period ended August 24, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAY-26-1997
<PERIOD-END> AUG-24-1997
<CASH> 24,128
<SECURITIES> 0
<RECEIVABLES> 167,061
<ALLOWANCES> 3,207
<INVENTORY> 144,731
<CURRENT-ASSETS> 47,707
<PP&E> 792,857
<DEPRECIATION> 387,372
<TOTAL-ASSETS> 1,192,622
<CURRENT-LIABILITIES> 334,469
<BONDS> 208,859
0
0
<COMMON> 41,828
<OTHER-SE> 548,646
<TOTAL-LIABILITY-AND-EQUITY> 1,192,622
<SALES> 619,856
<TOTAL-REVENUES> 619,856
<CGS> 469,755
<TOTAL-COSTS> 469,755
<OTHER-EXPENSES> 106,775
<LOSS-PROVISION> 159
<INTEREST-EXPENSE> 3,626
<INCOME-PRETAX> 39,926
<INCOME-TAX> 15,618
<INCOME-CONTINUING> 24,308
<DISCONTINUED> (2,761)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,547
<EPS-PRIMARY> .53
<EPS-DILUTED> .52
</TABLE>
