-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I2OJ9s2uuW20BrMLkTnjatq1W2vxgUqVk8GcOi15PuoHXmtlGVD5bO1aBQA1a3yZ cVdupgPxBhwipCsRFu36gw== 0000950134-02-003133.txt : 20020415 0000950134-02-003133.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950134-02-003133 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEAN FOODS CO/ CENTRAL INDEX KEY: 0000931336 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 752559681 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-12755 FILM NUMBER: 02598646 BUSINESS ADDRESS: STREET 1: 2515 MCKINNEY AVENUE LB 30 STREET 2: SUITE 1200 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2143033400 MAIL ADDRESS: STREET 1: 3811 TURTLE CREEK BLVD STREET 2: SUITE 1300 CITY: DALLAS STATE: TX ZIP: 75219 FORMER COMPANY: FORMER CONFORMED NAME: SUIZA FOODS CORP DATE OF NAME CHANGE: 19941013 10-K405 1 d95076e10-k405.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 001-12755 DEAN FOODS COMPANY (Exact name of Registrant as specified in its charter) DEAN FOODS LOGO --------------------- DELAWARE 75-2559681 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
2515 MCKINNEY AVENUE SUITE 1200 DALLAS, TEXAS 75201 (214) 303-3400 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 filers pursuant to Item 405 of Regulation S-K 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 aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant at March 25, 2002, based on the $73.10 per share closing price for the company's common stock on the New York Stock Exchange, was approximately $3.0 billion. The number of shares of the Registrant's common stock outstanding as of March 25, 2002 was 44,731,854. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement for its Annual Meeting of Stockholders to be held on or about May 30, 2002 (to be filed) are incorporated by reference into Part III of this Form 10-K. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- PART I 1 Business.................................................... 1 2 Properties.................................................. 15 PART II 5 Market for Our Common Stock and Related Matters............. 19 6 Selected Financial Data..................................... 20 Management's Discussion and Analysis of Financial Condition 7 and Results of Operations................................... 21 Quantitative and Qualitative Disclosures About Market 7A Risk........................................................ 35 8 Consolidated Financial Statements........................... 37 PART III 10 Directors and Executive Officers............................ 38 11 Executive Compensation...................................... 38 Security Ownership of Certain Beneficial Owners and 12 Management.................................................. 38 13 Certain Relationships and Related Transactions.............. 38 PART IV Exhibits, Financial Statement Schedules and Reports on Form 14.. 8-K......................................................... 38
PART I ITEM 1. BUSINESS GENERAL We are the leading processor and distributor of fresh milk and other dairy products in the United States, and a leader in the specialty foods industry. We have five operating divisions, including Dairy Group, Morningstar Foods, Specialty Foods, Puerto Rico and International. Our principal executive offices are located at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201. Our telephone number is (214) 303-3400. We maintain a worldwide web site at http://www.deanfoods.com. We were incorporated in Delaware in 1994. BRIEF HISTORY We commenced operations in 1988 through a predecessor entity. Our original operations consisted solely of a packaged ice business. As a result of our acquisition strategy in the packaged ice industry, we became one of the largest manufacturers and distributors of packaged ice in the United States. We entered the dairy business in December 1993 when we acquired Suiza Dairy Corporation, a regional dairy processor located in Puerto Rico. We have grown our dairy business rapidly since then, primarily through a focused acquisition strategy. Since our acquisition of Suiza Dairy in 1993, we have completed 44 dairy acquisitions, including our acquisition of Chicago-based Dean Foods Company in December 2001. For more information about the Dean Foods acquisition, see "-- Developments Since January 1, 2001 -- Acquisition of Dean Foods Company and Related Events." Primarily as a result of our acquisition strategy in the dairy industry, we are now the largest processor and distributor of dairy products in the United States. We completed our initial public offering in April 1996 (under the name of "Suiza Foods Corporation"). Initially our common stock was traded in the Nasdaq National Market. In January 1997, we completed a second public offering. Our common stock began trading on the New York Stock Exchange in March 1997 under the symbol "SZA." Our common stock continues to trade on the New York Stock Exchange under our new symbol: "DF." In August 1997, we acquired Franklin Plastics, Inc., a company engaged in the business of manufacturing and selling plastic containers, in connection with our acquisition of a dairy company related to Franklin Plastics. We then began acquiring other companies in the plastic container business including Continental Can in May 1998. By 1999, we had built one of the largest plastic packaging companies in the United States. In April 1998, we sold our packaged ice operations in order to focus our resources on our dairy and packaging operations. In July 1999, having made a decision to further focus our resources on our core dairy business, we sold all of our U.S. plastic packaging operations to Consolidated Container Company in exchange for cash and a 43.1% interest in the purchaser. In March and May 2000 we sold the European packaging operations that we acquired as part of our acquisition of Continental Can. Except for our interest in Consolidated Container Company, we no longer have any investments in the packaging industry. Effective January 1, 2000, we completed the acquisition of Southern Foods Group, L.P., the third largest dairy processor in the United States at the time of the acquisition. As a result of that transaction, we greatly expanded the geographic reach of our Dairy Group and became the largest dairy company in the United States. The Southern Foods transaction was completed through a joint venture with Dairy Farmers of America ("DFA"), the nation's largest dairy farmers cooperative, pursuant to which DFA obtained a 33.8% interest in our Dairy Group. On December 21, 2001, we completed our acquisition of Dean Foods Company. As a result, we are now one of the leading food and beverage companies in the United States. In connection with that transaction, we purchased the 33.8% minority interest in our Dairy Group held by DFA, in exchange for cash, the operations of 11 plants that we were required to divest in connection with the Dean Foods transaction and certain other consideration. Also on December 21, 2001, immediately after we completed the acquisition of Dean Foods, 1 the acquired company changed its name to Dean Holding Company and we changed our name from Suiza Foods Corporation to Dean Foods Company. For more information about the Dean Foods acquisition and related transactions, see "-- Developments Since January 1, 2001 -- Acquisition of Dean Foods Company and Related Events." The following timeline graphically depicts our history: [TIME LINE GRAPHIC] DEVELOPMENTS SINCE JANUARY 1, 2001 ACQUISITION OF DEAN FOODS COMPANY AND RELATED EVENTS Acquisition of Dean Foods Company and Related Name Changes -- On December 21, 2001, we completed our acquisition of Dean Foods Company ("Old Dean"). Prior to the acquisition, Old Dean was the nation's second largest dairy processor, with $4.6 billion in sales during the 12-month period ended November 25, 2001. To effect this transaction, Old Dean was merged into our wholly-owned subsidiary, Blackhawk Acquisition Corp. Blackhawk Acquisition Corp. survived the merger and immediately changed its name to "Dean Holding Company." Immediately thereafter, we changed our name from Suiza Foods Corporation to Dean Foods Company and our trading symbol on the New York Stock Exchange changed from "SZA" to "DF." As a result of the merger, each share of common stock of Old Dean was converted into 0.429 shares of our common stock and the right to receive $21.00 in cash. There were approximately 36.0 million shares of Old Dean common stock outstanding at the time of the merger. Consequently, we issued approximately 15.5 million shares, and paid approximately $756.8 million in cash, to Old Dean's shareholders as consideration for their shares. Purchase of Minority Interest in Dairy Group and Divestiture of 11 Plants -- Also on December 21, 2001, and in connection with our acquisition of Old Dean, we purchased Dairy Farmers of America's ("DFA's") 33.8% stake in our Dairy Group for consideration consisting of: (1) approximately $145.4 million in cash, (2) a contingent promissory note in the original principal amount of $40.0 million, and (3) the operations of 11 plants located in nine states where we and Old Dean had overlapping operations. As additional consideration, we amended a milk supply agreement with DFA to provide that if we do not, within a specified period following the completion of our acquisition of Old Dean, offer DFA the right to supply raw milk to certain of Old Dean's dairy plants, we could be required to pay liquidated damages of up to $47.0 million. See Note 19 to our Consolidated Financial Statements and "Part II -- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors." As a result of this transaction, we now own 100% of our Dairy Group. The plants divested included: (i) our Burger Dairy operations based in New Paris, Indiana; (ii) our Coburg Dairy operations based in N. Charleston, South Carolina (which was an operation of Old Dean); (iii) our Cream O'Weber operations based in Salt Lake City, Utah (which was an operation of Old Dean); (iv) our Flav-O-Rich Dairies operations based in London, Kentucky and Bristol, Virginia; (v) our H. Meyer Dairy operations based in Cincinnati, Ohio (which was an operation of Old Dean); (vi) our Huntsville Dairy operations based in Huntsville, Alabama; (vii) our Oberlin Farms ("Dairymen's") operations based in Cleveland, Ohio; (viii) our U.C. Milk ("Goldenrod") operations based in Madisonville, Kentucky (which was an operation of Old Dean); and (ix) our Velda Farms operations based in Miami, Florida and Winterhaven, Florida. The divested plants were acquired by National Dairy Holdings, LP, as assignee of DFA. 2 New Credit Facility, Increased Receivables Securitization Facility and Assumed Indebtedness -- We financed the cash portion of the consideration paid to the shareholders of Old Dean, as well as the cash portion of the purchase price for DFA's 33.8% interest in our Dairy Group and certain related transaction costs, primarily with borrowings under a new $2.7 billion credit facility provided by a syndicate of lenders. This facility, which replaces our former parent-level credit facility and the former Suiza Dairy Group credit facility, provides us with a revolving line of credit of up to $800.0 million to be used for general corporate and working capital purposes (including the financing of future acquisitions and stock buybacks, if any, subject to certain limitations contained in the credit facility documents) and two term loans in the amounts of $900.0 million and $1.0 billion, respectively. Both term loans were fully funded at closing. No funds were borrowed under the revolving credit facility. The revolving credit facility will expire, and the $900.0 million term loan will mature, in July 2007. The $1.0 billion term loan will mature in July 2008. Outstanding borrowings under the credit facility are secured by liens on substantially all of our domestic assets (including the assets of our subsidiaries, except for the capital stock of Old Dean's subsidiaries and the real property owned by Old Dean and its subsidiaries). The credit agreement contains various financial and other restrictive covenants as well as certain mandatory prepayment provisions, all of which are more specifically described in Note 10 to our Consolidated Financial Statements. An additional portion of the cash consideration paid at closing was provided by new funding under our existing receivables securitization facility. On December 21, 2001, we sold Old Dean's receivables into the facility, thereby increasing the amount of the facility by $150.0 million to $400.0 million. See Note 10 to our Consolidated Financial Statements. Certain of Old Dean's indebtedness remains outstanding after the merger, including $700.0 million of outstanding indebtedness under certain senior notes, and certain capital lease obligations. See Note 10 to our Consolidated Financial Statements for more information about our indebtedness and "Part II -- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors." Stock Award Plans -- In connection with the Old Dean acquisition, all options to purchase Old Dean stock outstanding at the time of the acquisition were automatically converted into options to purchase our stock. Upon conversion, those options represented options to purchase a total of approximately 2.7 million shares of our stock. Old Dean option holders had the right, as a result of the "change in control" triggered by our acquisition of Old Dean, to surrender their New Dean stock options to us, in lieu of exercise, in exchange for a cash payment (which payments, in many cases, exceeded the amount that the option holder could have received upon exercise), provided the options were surrendered by March 21, 2002. The holders of approximately 809,000 options exercised their surrender rights. See Note 2 to our Consolidated Financial Statements. Upon completion of the Old Dean acquisition, we adopted Old Dean's 1989 Stock Awards Plan and reserved approximately 1.9 million shares (subject to adjustment as permitted by the plan) of our stock for issuance under that plan after the merger. Options surrendered by Old Dean optionees have been added back to the pool of shares available for issuance under the plan, as permitted by the plan. Approximately 2.6 million shares were available for issuance under that plan as of March 25, 2002. Finally, due to the increased size of our employee base, upon completion of the merger, we increased the number of shares reserved for issuance under our pre-existing stock option plan from 7.5 million to 12.5 million. New Directors -- In connection with our acquisition of Old Dean and as required by the related merger agreement, we increased the size of our Board of Directors, effective December 21, 2001, from 10 members to 15 members. All five of the new members were nominated by Old Dean, and all served on the Board of Directors of Old Dean prior to the acquisition. All of our pre-acquisition directors remain on the Board. Also pursuant to the merger agreement, Mr. Howard Dean (formerly the Chairman of the Board and Chief Executive Officer of Old Dean) was named Chairman of our Board of Directors. He will remain as Chairman until his retirement (no later than June 2002), at which time Gregg Engles will re-assume the role of Chairman of the Board. Mr. Engles was Chairman of our Board and Chief Executive Officer prior to the acquisition. He is currently Chief Executive Officer and Vice Chairman of the Board. 3 INTEGRATION AND RATIONALIZATION ACTIVITIES As a result of our acquisition of Old Dean, we expect to achieve annual cost savings of at least $60.0 million in 2002, increasing to at least $120.0 million by the end of 2004. In early 2002, we began the process of implementing various planned cost savings initiatives necessary to achieve these savings. As part of these efforts, in February 2002, we announced the elimination of approximately 200 corporate staff positions at Old Dean. We have also closed, or announced the closure of, 4 plants since completion of the Old Dean acquisition and reduced (or intend to reduce) our workforce accordingly. We will continue to finalize and implement our initial integration and rationalization plans throughout 2002. During 2001, as part of our overall integration and cost reduction strategy in effect prior to the Old Dean acquisition, we closed 3 plants and reduced our workforce accordingly. See Note 16 to our Consolidated Financial Statements. We have recently announced that part of our strategy after the Old Dean acquisition will be to divest certain non-core assets. Since the completion of the Old Dean acquisition, we have sold two small non-core businesses that we acquired as part of Old Dean's Specialty Foods division, including a transportation business and Old Dean's boiled peanut business. ANNOUNCEMENT OF STOCK SPLIT On February 21, 2002, we announced that our Board of Directors has declared a two-for-one split of our common stock, which will entitle shareholders of record on April 8, 2002 to receive one additional share of common stock for each share held on that date. The new shares will be issued after the market closes on April 23, 2002. As a result of the split, the total number of shares of our common stock outstanding will increase from approximately 44.7 million to approximately 89.5 million. All of the share numbers in this Annual Report on Form 10-K are presented without giving effect to the upcoming stock split. See Note 23 to our Consolidated Financial Statements. DEVELOPMENTS RELATED TO CONSOLIDATED CONTAINER COMPANY Since July 1999, we have owned a 43.1% interest in Consolidated Container Company ("CCC"), one of the nation's largest manufacturers of rigid plastic containers and our primary supplier of plastic bottles and bottle components. During 2001, due to a variety of operational difficulties, CCC consistently reported operating results that were significantly weaker than expected, which resulted in significant losses in the third and fourth quarters. Consequently, our 2001 earnings were adversely affected. CCC has implemented several changes in an effort to return to stable profitability. However, in November 2001 CCC announced that it does not expect to see the benefits of these changes for at least several quarters. Also, as a result of CCC's performance in 2001, CCC became unable to comply with the financial covenants contained in its credit facility. Accordingly, we concluded that our investment in CCC was impaired and that the impairment was not temporary. Therefore, we wrote off our remaining investment in CCC in the fourth quarter of 2001. In February 2002, CCC's lenders agreed to restructure CCC's credit agreement to modify the financial covenants, subject to the agreement of CCC's primary shareholders to guarantee certain of CCC's indebtedness. Because CCC is an important and valued supplier of ours, and in order to protect our interest in CCC, we agreed to provide a limited guarantee of up to $10.0 million of CCC's revolving credit indebtedness. The guaranty will expire in January 2003. Please see Note 19 to our Consolidated Financial Statements for further information regarding our guarantee of CCC's indebtedness. See also "Part II -- Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations -- Risk Factors." PURCHASE OF MINORITY INTEREST IN SPANISH OPERATIONS In August 2001, we purchased the 25% minority interest in Leche Celta, our Spanish dairy processor, for approximately $12.6 million. We now own 100% of our European dairy operations. 4 RECENT DEVELOPMENTS WITH CERTAIN BUSINESS PARTNERS Restructure of Milk Supply Arrangements -- The primary raw material used in our operations is raw milk. We purchase a significant portion of our raw milk requirements from DFA. We have entered into a series of supply contracts with DFA over the past several years designed to ensure a reliable source of raw milk for our plants. In December 2001, we amended our supply agreements with DFA in order to provide ourselves with greater flexibility in the procurement of raw milk. The primary modification to the supply agreements was the reduction of the termination notice period from one year to 60 days. We paid DFA approximately $28.5 million as consideration for this amendment. Because this payment related to the modification of existing agreements, we recorded the $28.5 million payment as an expense in the fourth quarter of 2001. Certain Co-Packing Arrangements -- Prior to the completion of the Old Dean acquisition, Old Dean had a long-term arrangement with Nestle pursuant to which Old Dean manufactured Nestle's Coffee Mate(R) coffee creamers and Nesquik(R) single-serve milks. Because these Nestle products compete directly with our International Delight(R) and Hershey's(R) milk products, we have agreed with Nestle that we will phase out manufacturing and distributing these Nestle products by the end of 2003. From 1987 through 2001, our Morningstar Foods division processed and sold Lactaid(R) brand lactose-reduced milk in the western portion of the United States. This arrangement was terminated at the end of 2001 due to a number of factors including primarily contractual restrictions that did not permit us to fully realize the opportunities in the lactose-reduced milk category (such as the ability to satisfy our customers' demands for private label lactose-reduced milk). Old Dean has historically produced lactose-reduced milk under the Dairy Ease(R) brand, which it licensed from a third party. In November 2001, Old Dean bought the rights to the brand. We now intend to focus our efforts in the lactose-reduced category on Dairy Ease(R) and on private labels for our customers. Enron -- In June 1999, we entered into a contract with Enron Energy Services pursuant to which we contracted to purchase electricity for certain of our plants at a discounted rate for a ten-year period. Enron filed for bankruptcy protection on December 1, 2001, and subsequently elected to reject our contract in its bankruptcy. Since we do not expect to be able to replace the arrangement we had with Enron, we do expect Enron's bankruptcy, and its rejection of our contract, to adversely impact our results of operations. We do not expect the impact to be material. See "Part II -- Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations -- Known Trends and Uncertainties." RECENT PRODUCT DEVELOPMENTS During the fourth quarter of 2001, we launched single-serve Hershey's(R) milks and milkshakes in plastic bottles. In January 2002, we introduced our new single-serve Folgers(R) Jakada(TM) coffee beverage. CURRENT BUSINESS STRATEGY Over the next several years, we will be focused on consistently creating and maximizing shareholder value primarily through the following strategies: BE OUR CUSTOMERS' SUPPLIER OF CHOICE We intend to maintain and extend our leadership position in the dairy case by continuing to provide our customers with excellent quality, service and price. We have one of the most extensive refrigerated "direct store delivery" systems in the United States, with over 6,000 routes spanning virtually the entire United States. Using this system, we have a unique capability to provide unmatched service and convenience to our customers. We intend to leverage that system to grow with our customers and increase our revenues. DELIVER OUR SYNERGY TARGETS We expect to achieve annual cost savings synergies in connection with the Old Dean acquisition of at least $60.0 million in 2002, increasing to at least $120.0 million by the end of 2004. We intend to achieve these 5 synergies by vigorously pursuing economies of scale in purchasing, product development and manufacturing and by eliminating duplicative costs. INVEST IN AND BUILD UPON OUR GROWTH PLATFORMS We believe that innovation is key to growing our sales and our profitability. Therefore, we intend to invest in and build upon our largest growth platforms, including single-serve dairy-based refrigerated beverages; functional beverages, including soymilk and lactose-reduced milk; beverage enhancers, such as coffee creamers; and food enhancers, such as refrigerated dips and salad dressings. RATIONALIZE OUR ASSET BASE We intend to carefully examine the portfolio of assets and businesses that we acquired through the Old Dean acquisition and (i) divest non-core businesses that do not fit into our long-term business plans, and (ii) sell or close plants with overlapping markets or excess capacity in order to increase our efficiency, thereby lowering our cost structure. INVEST OUR CASH Our company generates a significant amount of free cash flow. In addition to investing in our growth platforms, we intend to invest our capital where returns are greatest, including on acquisitions in our core lines of business, and on reductions of indebtedness. INDUSTRY OVERVIEW The dairy industry is a mature industry which has traditionally been characterized by slow to flat growth, low profit margins, fragmentation and excess capacity. Excess capacity has resulted from the development of more efficient manufacturing techniques, the establishment of captive dairy manufacturing operations by large grocery retailers and little to no growth in the demand for fresh milk products. Over the past decade, the dairy industry has been in the process of consolidating. As the industry has consolidated, large regional dairy processors have emerged. Consolidation has tended to raise efficiencies in the typically low-margin dairy industry. However, consumption of dairy products remains flat and has even declined in some regions of the country. We believe that the consolidation trend will continue as dairy processors continue to seek to become more profitable. Also, innovation has become increasingly important as processors seek to increase consumption, sales and margins through product differentiation and branding. OPERATING DIVISIONS We currently have five operating divisions, including Dairy Group, Morningstar Foods, Specialty Foods, Puerto Rico and International. DAIRY GROUP We sell primarily fresh dairy products through our Dairy Group, with our product mix weighted heavily toward fluid milk. Products that we sell through our Dairy Group include: - fluid milk, including flavored milks and buttermilk, - ice cream and novelties, - half-and-half and whipping cream, - condensed milk, - cottage cheese, - sour cream, 6 - yogurt, - dips, - coffee creamers, - juice and juice drinks, and - water. Our Dairy Group operates its business in a generally decentralized manner organized by geographic region, including the Northeast region, the Southeast region, the Southwest region and the Midwest region. The dairy operations of Old Dean have been operationally integrated into our Dairy Group, primarily into our Midwest region. Our Dairy Group manufactures its products in 96 plants in 33 states. For more information about plants in the Dairy Group regions, see "-- Item 2. Properties." Primarily due to the highly perishable nature of its products, our Dairy Group delivers its products directly from its plants or distribution warehouses to its customers in trucks that we own or lease. This form of delivery is called a "direct store delivery" or "DSD" system. We have one of the most extensive refrigerated DSD systems in the United States, with over 6,000 routes spanning virtually the entire United States. Using its DSD system, the Dairy Group also acts as distributor for certain other manufacturers of refrigerated products in certain parts of the country. The Dairy Group sells its products primarily on a local or regional basis through its internal sales force to a wide variety of retail and food service customers including grocery stores, club stores, convenience stores, institutional food service, gas stores, schools, restaurants and hotels. The Dairy Group's customer base is large, and we are not dependent on any single customer. The Dairy Group's sales are slightly seasonal, with sales tending to be higher in the third and fourth quarters. In 2001, our Dairy Group manufactured and marketed approximately two-thirds of its dairy products under its proprietary or licensed local and regional brand names. The remaining one-third of the Dairy Group's 7 products were manufactured and sold on a private-label (or "customer brand") basis for customers. Proprietary or licensed brands used in the Dairy Group include the following:
NORTHEAST REGION SOUTHEAST REGION MIDWEST REGION SOUTHWEST REGION - ---------------- ---------------- -------------- ---------------- fitmilk(R) Barbers(R) Barber's(R) Adohr Farms(R) Garelick Farms(R) Broughton(R) Borden(R) (licensed brand) Alta Dena(R) kidsmilk(TM) Country Delite(R) Country Charm(R) Barbe's(R) LehighValley(R) Dairy Fresh(R) Country Fresh(R) Berkeley Farms(TM) Nature's Pride(TM) Dean's(R) Dean's(R) Borden(R) (licensed brand) Sealtest(R) Flav-O- Rich(R) (licensed fitmilk(R) (licensed brand) brand) Brown's(TM) kidsmilk(TM) Swiss(R) Frostbite(R) Creamland(TM) Land O'Lakes(R) (licensed Tuscan(R) Louis Trauth(R) brand) Dairy Gold(TM) Wengert's(R) Meadowbrook(R) Liberty(R) Dean's(R) Pet(R) (licensed brand) London's(R) Foremost(TM) Reiter(R) Maplehurst(R) Gandy's(R) Shenandoah's Pride(R) Mayfield(R) Hygeia(R) McArthur(R) Meadow Gold(R) Pet(R) (licensed brand) Model(R) Purity(TM) Mountain High(R) Schenkel's All*Star(R) Oak Farms(R) TG Lee(R) Poudre Valley(R) Verifine(R) Price's(TM) Robinson(R) Schepps(R) Swiss(TM) Viva(R)
Sales in the Dairy Group to unaffiliated customers totaled $5.1 billion in 2001. For more financial information about our Dairy Group, see "Part II -- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 21 to our Consolidated Financial Statements. MORNINGSTAR FOODS Morningstar Foods sells primarily extended shelf life (or "ESL") fluid, aerosol and other dairy and non-dairy products. Its product offerings include: - dairy and non-dairy coffee creamers, - flavored ESL milks, lactose-reduced milks and milk-based beverages, - soymilk, - dips and dressings, - aerosol whipped topping, - dairy and non-dairy frozen whipped topping, - egg substitute, and - cultured dairy products. Old Dean's National Refrigerated Products (or "NRP") segment has been combined with our Morningstar division. 8 Morningstar Foods markets and sells its products primarily on a national basis to a wide variety of retail and food service outlets and in a number of foreign countries through an internal sales force and independent brokers. Morningstar Foods' customer base is large, and it is not dependent on any single customer. Morningstar Foods' products tend to have a longer shelf-life than those produced in our Dairy Group. Therefore, its products are delivered primarily by common carrier; although some of its products are distributed through our Dairy Group's DSD system. Sales of some of Morningstar's products are higher in the fourth quarter. Morningstar Foods manufactures its products in 15 plants located across the United States. For more information about Morningstar Foods' manufacturing plants, see "-- Item 2. Properties." In 2001, Morningstar Foods manufactured and marketed approximately 40% of its products under its proprietary or licensed national brand names. The remaining 60% of Morningstar Foods' products were manufactured and sold on a private-label (or "customer brand") basis for customers. Morningstar Foods' nationally branded products include, among others: International Delight(R) coffee creamers, Marie's(R) dips and salad dressings, Mocha Mix(R) non-dairy coffee creamer, Naturally Yours(TM) sour cream, Second Nature(R) eggs, Sun Soy(R) soymilk, Dairy Ease(R) lactose-free milks, Dean's(R) dips and dressings and Dairy Fresh(R) aerosol whipped toppings. Products that we produce under licensed brands include: Hershey's(R) milks, Folgers(R) Jakada(TM) chilled coffee beverage, Farm Rich(R) coffee creamers, Coffee Rich(R) coffee creamers and Yoo-Hoo(R) chocolate milk drink. Sales in Morningstar Foods to unaffiliated customers totaled approximately $766.9 million in 2001. For more financial information about Morningstar Foods, see "Part II -- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 21 to our Consolidated Financial Statements. SPECIALTY FOODS Our Specialty Foods group is comprised entirely of the former Specialty Foods segment of Old Dean. Our Specialty Foods group offers a diverse product mix that includes pickles, relishes, peppers, powdered coffee creamers and other powdered products, sauces, puddings and nutritional beverages. Our Specialty Foods division is one of the largest pickle processors and marketers in the United States. Its pickle, relish and pepper products are sold nationally, primarily under various customer brands, but are also sold under some of our proprietary brands including Arnold's(R), Atkins(R), Cates(R), Dailey(R), Heifetz(R), Nalley's(R), Paramount(R), Peter Piper(R), Rainbo(R), Roddenberry(R) and Schwartz(R), and marketed and distributed to grocery store chains, wholesalers and foodservice customers, and in bulk to other food processors. Specialty Foods produces a number of specialty sauces, including shrimp, seafood, tarter, horseradish, chili and sweet and sour sauces, and sells them to retail grocers in the Eastern, Midwestern and Southern United States. These products are sold under the Bennett's(R) and Hoffman House(R) brand names. Specialty Foods also sells shortening powders and other high-fat formulas used in baking, beverage mixes, gravies and sauces, and premium and low-fat powdered products sold primarily under private labels to vending operators, office beverage service companies and institutional foodservice distributors with national distribution to restaurants, schools, health care institutions, hotels and vending and fast-food operators. Non-dairy creamers are 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 sold to international customers in Australia, Canada, the Far East, Mexico, South America, Europe, Africa and the Middle East. We believe that our Specialty Foods segment is the largest manufacturer of powdered non-dairy coffee creamers in the United States. Other products produced by Specialty Foods include various aseptic sauces, puddings and weight loss and nutritional beverages. These products are sterilized under a process which allows storage for prolonged periods 9 without refrigeration. Aseptic products are sold nationally, primarily under private labels, to distributors that supply restaurants, schools, hotels and other segments of the foodservice and grocery industries. Due to their relatively long shelf-lives, Specialty Foods' products are delivered to our customers' stores and warehouses primarily by common carrier. Specialty Foods produces its products in 13 plants located across the United States, as well as one plant in England. For more information about Specialty Foods' manufacturing plants, see "-- Item 2. Properties." Specialty Foods' sales to unaffiliated customers totaled approximately $18.7 million between December 21, 2001 and December 31, 2001. PUERTO RICO We have a strong dairy operation on the island of Puerto Rico, operated under the name "Suiza Dairy." Suiza Dairy sells primarily fresh dairy products with its product mix weighted heavily toward fluid milk and juice drinks. We have 3 plants across the island. For more information about our Puerto Rico properties, see "-- Item 2. Properties." Suiza Dairy delivers its products through a DSD system. It sells its products through an internal sales force to a wide variety of retail and food service customers including grocery stores, club stores, convenience stores, institutional food service, gas stores, schools, restaurants and hotels. In 2001, Suiza Dairy manufactured and marketed over 95% of its products under its proprietary brand names. The remaining products were manufactured and sold on a private-label (or "customer brand") basis for customers. Puerto Rico's sales to unaffiliated customers totaled approximately $221.8 million in 2001. INTERNATIONAL Our international dairy operations consist solely of our Spanish operations conducted through Leche Celta. Leche Celta sells primarily ultra-high temperature ("UHT") fluid milk. Leche Celta manufactures its products in 4 plants located in the Galicia and Cantabria regions of Spain. For more information about Leche Celta's plants, see "-- Item 2. Properties." Leche Celta delivers its products primarily through independent trucking companies delivering directly to our customers' warehouses. It sells its products through an internal sales force to a wide variety of customers, including mainly large and mid-sized retailers. In 2001, Leche Celta manufactured and marketed approximately 60% of its products under its proprietary brands, and the remaining 40% under private-label brands for customers. Leche Celta's sales to unaffiliated customers totaled approximately $171.0 million in 2001. RAW MATERIALS AND SUPPLY The primary raw materials used in our operations are raw milk and butterfat. We purchase our raw milk and butterfat from independent farmers and farmers' co-operatives, typically pursuant to contractual arrangements. Raw milk and butterfat are generally readily available. The prices of raw milk and butterfat in the United States are regulated by the federal government through federal market orders and price support programs, and many state and other governments regulate raw milk and butterfat pricing through their own programs. For more information about raw milk and butterfat pricing in the United States, please see "-- Government Regulation -- Milk Industry Regulation." Prices of raw milk and butterfat can fluctuate widely. We purchase cucumbers under seasonal grower contracts with a variety of growers. We supply seeds and advise growers regarding planting techniques. We also monitor and arrange for the control of insects, direct the harvest and, for some crops, provide automated harvesting services. Other raw materials, such as coffee, juice concentrates, sweeteners, syrups, oils and packaging supplies are generally available from numerous suppliers and we are not dependent on any single supplier for these materials. 10 Certain of our raw materials are purchased under long-term contracts in order to obtain lower costs. The prices of our raw materials increase and decrease depending on supply and demand. COMPETITION Our businesses are highly competitive. We have many competitors in each of our major product, service and geographic markets. Competition in our businesses is based primarily on: - service, - price, - brand recognition, - quality, and - breadth of product line. GOVERNMENT REGULATION PUBLIC HEALTH As a manufacturer and distributor of food products, we are subject to a number of food safety regulations, including the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the U.S. Food and Drug Administration ("FDA"). This comprehensive regulatory scheme governs the manufacture (including composition and ingredients), labeling, packaging and safety of food in the United States. The FDA: - regulates manufacturing practices for foods through its current good manufacturing practices regulations, - specifies the standards of identity for certain foods, including many of the products we sell, and - prescribes the format and content of certain information required to appear on food product labels. In addition, the FDA enforces the Public Health Service Act and regulations issued thereunder, which authorize regulatory activity necessary to prevent the introduction, transmission or spread of communicable diseases. These regulations require, for example, pasteurization of milk and milk products. We are also subject to numerous other federal, state and local regulations involving such matters as the licensing of dairy manufacturing facilities, enforcement by government health agencies of standards for our products, inspection of our facilities and regulation of our trade practices in connection with the sale of food products. In December 2001, the U.S. Senate and House of Representatives approved two bioterrorism bills intended to improve our country's readiness for a chemical or biological attack. Both bills contain food security provisions which would significantly expand the legal authority of the FDA with respect to foods and create additional grounds for finding violations of the Federal Food, Drug and Cosmetic Act. If enacted, such legislation could increase administrative requirements and increase the costs of operating our businesses. We use quality control laboratories in our manufacturing facilities to test raw ingredients and finished products. Product quality and freshness are essential to the successful distribution of our products. To monitor product quality at our facilities, we maintain quality control programs to test products during various processing stages. We believe that our facilities and manufacturing practices comply with all material government regulations. EMPLOYEE SAFETY REGULATIONS We are subject to certain health and safety regulations including regulations issued pursuant to the U.S. Occupational Safety and Health Act. These regulations require us to comply with certain manufacturing, 11 health and safety standards to protect our employees from accidents. We believe that we are in material compliance with all employee safety regulations. ENVIRONMENTAL REGULATIONS We are subject to various environmental regulations. Ammonia, a refrigerant used extensively in our operations, is considered an "extremely" hazardous substance pursuant to U.S. federal environmental laws due to its toxicity. Also, certain of our facilities discharge biodegradable wastewater into municipal waste treatment facilities in excess of levels permitted under local regulations. Because of this, certain of our subsidiaries are required to pay waste water surcharges or to construct waste water pretreatment facilities. To date, such waste water surcharges have not had a material effect on our consolidated financial statements. We maintain above-ground or underground petroleum storage tanks at many of our facilities. These tanks are periodically inspected to determine compliance with applicable regulations. We may be required to make expenditures from time to time in order to maintain compliance of these tanks. We do not expect environmental compliance to have a material impact on our capital expenditures, earnings or competitive position in the foreseeable future. MILK INDUSTRY REGULATION The federal government and several state agencies establish minimum prices that we must pay to producers for raw milk and butterfat. These prices, which are calculated by economic formula based on supply and demand, vary by region and by the type of product manufactured using the raw product. Federal minimum prices change monthly. Class I butterfat and skim milk prices (which are the prices we are required to pay for raw milk that is processed into fluid milk products) and Class II skim milk prices (which are the prices we are required to pay for raw milk that is processed into products such as cottage cheese, creams, ice cream and sour cream) for each month are announced by the federal government by the 23rd day of the immediately preceding month. Class II butterfat prices for each month are announced on the 5th day after the end of that month. Some states have opted out of the federal pricing system, and have established their own methods of establishing minimum prices for raw milk and butterfat. A very few states also regulate the price that we can charge our retail customers for our products. From 1996 until its expiration in October 2001, the Northeast Dairy Compact Commission set a minimum price for raw milk in New England independent of the price set by the federal milk marketing orders. Under that compact, the price we paid for raw milk in New England exceeded the price we were paying for raw milk in other parts of the country. The Northeast Dairy compact expired by its terms on October 31, 2001. However, in replacement of the compact, certain members of Congress have proposed legislation that would establish a minimum Class I floor price, with a regional differential added to the floor price to be paid into a national pooling system. We do not know whether this or any other legislation raising minimum prices will be enacted by Congress or, if enacted, the extent to which these compacts would increase the prices we pay for raw milk. In Spain, the government has established a quota system regulating the amount of milk that can be sold by individual farmers and farm cooperatives, which affects the manner in which we purchase raw milk, as well as the prices we pay for raw milk. 12 EMPLOYEES As of December 31, 2001 we employed over 31,000 people in the following categories:
NO. OF EMPLOYEES % OF TOTAL ---------------- ---------- Dairy Group................................................ 24,709 78.4% Morningstar Foods.......................................... 2,350 7.5 Specialty Foods............................................ 2,869 9.1 Puerto Rico................................................ 981 3.1 International.............................................. 242 0.8 Corporate(1)............................................... 352(1) 1.1 ------ ----- Total............................................ 31,503 100.0% ====== =====
- --------------- (1) In February 2002, we announced the elimination of approximately 200 corporate staff positions at Old Dean. MINORITY HOLDINGS We own a 43.1% interest in Consolidated Container Company ("CCC"), one of the nation's largest manufacturers of rigid plastic containers and our largest supplier of plastic bottles and bottle components. We have owned that interest since July 1999 when we sold our U.S. plastic packaging operations to CCC. Vestar Capital Partners controls CCC through a 50.9% ownership interest. The remaining 6% of CCC is owned indirectly by Alan Bernon, a member of our Board of Directors, and his brother Peter Bernon. Pursuant to our agreements with Vestar, we control 2 of the 7 seats on CCC's Management Committee. We have also entered into various supply agreements with CCC pursuant to which we have agreed to purchase certain of our requirements for plastic bottles and bottle components from CCC. In 2001, we spent approximately $95.4 million on products purchased from CCC. Because CCC has issued certain senior notes, CCC files annual, quarterly and other reports with the Securities and Exchange Commission. More information about CCC can be found on its website at www.cccllc.com or in its filings with the Securities and Exchange Commission available at www.sec.gov. Please see Note 4 to our Consolidated Financial Statements for more information about our investment in CCC. In February 2002, we executed a limited guaranty of up to $10.0 million of CCC's revolving credit debt. See Note 19 to our Consolidated Financial Statements for more information about the guaranty. We own a 13.2% interest in Horizon Organic Holding Company, America's largest organic food company. Horizon sells a full line of branded organic products, including milk, half-and-half, cheese, butter, yogurt, sour cream, cottage cheese and juices. Horizon's common stock is traded on the Nasdaq National Market under the symbol "HCOW." Pursuant to our agreement with Horizon, we control one seat on Horizon's Board of Directors. We have an agreement with Horizon pursuant to which we have a right of first negotiation in the event the Board of Directors of Horizon decides to sell the company. We also have co- packing agreements with Horizon pursuant to which we manufacture products for Horizon and which prohibit us from competing with Horizon in certain territories with respect to certain types of organic dairy products. Our co-packing fees from Horizon totaled approximately $6.3 million in 2001. More information about Horizon can be found on its website at www.horizonorganic.com or in their filings with the Securities and Exchange Commission available at www.sec.gov. Please see Note 4 to our Consolidated Financial Statements for more information about our investment in Horizon. One of our subsidiaries, Dean Dip and Dressing, owns a 37.2% interest in White Wave, Inc. White Wave is the maker of Silk(R) soymilks, soy coffee creamers and soy cultured products, as well as certain tofu products. The remaining 62.8% of White Wave is owned by individual shareholders who are not affiliated with us, including members of the White Wave management team. Pursuant to our agreement with White Wave and its individual shareholders, we have the option to purchase the remaining interest in White Wave for a discounted appraised value, beginning in September 2002. Also pursuant to our agreement with White Wave 13 and its individual shareholders, we have the right to elect 2 of the 7 members of White Wave's Board of Directors. In June 2001, White Wave filed a lawsuit against us in the District Court of Colorado claiming that our acquisition of Old Dean was an impermissible transfer of the White Wave shares by Dean Dip and Dressing. White Wave also claimed that such transfer triggered a right of first refusal under our agreements with White Wave, entitling White Wave's other shareholders to buy the shares of White Wave held by Dean Dip and Dressing. On December 5, 2002, the District Court of Colorado denied White Wave's claims, ruling in our favor and holding that White Wave had no such right of first refusal as a result of our acquisition of Old Dean. On December 17, 2001, White Wave appealed the decision of the District Court of Colorado to the United States Court of Appeals for the Tenth Circuit. This appeal is currently pending. We intend to vigorously pursue this litigation, but there can be no assurance as to how the court will rule. Please see Note 4 to our Consolidated Financial Statements for more information about our investment in White Wave. We own a 50.0% interest in a joint venture known as Dairy Marketing Alliance. The remaining 50.0% of Dairy Marketing Alliance is owned by Land O'Lakes, Inc., a Minnesota cooperative corporation. The purpose of the joint venture is to develop and market Land O'Lakes(R) brand value-added dairy products, initially including creams, sour creams and milk beverages. The joint venture has a royalty-free license from Land O'Lakes Cooperative corporation to use certain Land O'Lakes(R) trademarks in connection with the sale of milk in small bottles, creams, sour cream and whipping cream. The joint venture has granted to us a royalty-bearing sublicense to utilize the Land O'Lakes(R) trademarks in the manufacture and sale of these products in certain parts of the United States through December 31, 2005. Our interest in this venture was owned by Old Dean prior to our acquisition of Old Dean. We also own a 15.6% interest in Momentx, Inc. Momentx is the owner and operator of dairy.com, an online vertical exchange focused on bringing farmers, farm cooperatives, processors and manufacturers together in an electronic marketplace for the exchange of goods and services, supply chain efficiency tools and dairy farm optimization tools. The remaining interests in Momentx are owned by various other dairy processing companies, dairy cooperatives and certain other individual investors who are not affiliated with us. Pursuant to Momentx' shareholder agreements, the founding stockholders, of which we are one, are entitled collectively to elect 4 of the 7 seats on Momentx' Board of Directors. Gregg Engles, our Chief Executive Officer, is Chairman of the Board of Momentx. We are also a user of dairy.com's services and in 2001 we spent approximately $0.1 million on services purchased from Momentx. Please see Note 4 to our Consolidated Financial Statements for more information about our investment in Momentx. WHERE YOU CAN GET MORE INFORMATION If you would like more information about our company, write or call us at: Dean Foods Company 2515 McKinney Avenue, Suite 1200 Dallas, Texas 75201 (214) 303-3400 Attention: Investor Relations Our fiscal year ends on December 31. We furnish our stockholders with annual reports containing audited financial statements and other appropriate reports. In addition, we file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Old Dean, which is now known as Dean Holding Company and is a wholly-owned subsidiary of ours, also files annual, quarterly and current reports with the Securities and Exchange Commission. You may read and copy any reports, statements or other information that we or Dean Holding Company file at the Securities and Exchange Commission's public reference rooms in Washington D.C. You can request copies of these documents, upon payment of a duplicating fee, by writing to the Securities and Exchange Commission. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our Securities and Exchange Commission filings are also available to the public on the Internet at http://www.sec.gov. 14 ITEM 2. PROPERTIES DAIRY GROUP Our Dairy Group currently conducts its manufacturing operations from the following plants, most of which are owned:
NUMBER REGION OF PLANTS LOCATIONS OF PLANTS - ------ --------- ----------------------------- Northeast................................... 12 - Bangor, Maine - Lynn, Massachusetts - Franklin, Massachusetts - Mendon, Massachusetts - Burlington, New Jersey - Union, New Jersey - Rensselaer, New York - Belleville, Pennsylvania - Lansdale, Pennsylvania - Lebanon, Pennsylvania - Schuylkill Haven, Pennsylvania - Bennington, Vermont Southeast................................... 18 - Birmingham, Alabama - Louisville, Kentucky - Newport, Kentucky - Hickory, North Carolina - Winston-Salem, North Carolina - Wilkesboro, North Carolina - Marietta, Ohio - Toledo, Ohio - Akron, Ohio - Springfield, Ohio - Erie, Pennsylvania - Sharpsville, Pennsylvania - Florence, South Carolina - Spartanburg, South Carolina - Kingsport, Tennessee - Nashville, Tennessee - Portsmouth, Virginia - Springfield, Virginia Midwest..................................... 24 - Birmingham, Alabama - Miami, Florida - Orlando, Florida - Orange City, Florida - Braselton, Georgia - Belvidere, Illinois - Chemung, Illinois - Huntley, Illinois
15
NUMBER REGION OF PLANTS LOCATIONS OF PLANTS - ------ --------- ----------------------------- - O'Fallon, Illinois - Rockford, Illinois - Huntington, Indiana - Rochester, Indiana - Evart, Michigan - Flint, Michigan - Grand Rapids, Michigan - Livonia, Michigan - Thief River Falls, Minnesota - Woodbury, Minnesota - Bismark, North Dakota - Toledo, Ohio - Sioux Falls, South Dakota - Athens, Tennessee - Nashville, Tennessee - Sheboygan, Wisconsin Southwest................................... 42 - Buena Park, California - City of Industry, California - Escondido, California* - Fullerton, California - Hayward, California - Riverside, California - Tulare, California - San Leandro, California - South Gate, California - Delta, Colorado - Denver, Colorado (2) - Englewood, Colorado - Grand Junction, Colorado - Greeley, Colorado - Honolulu, Hawaii(2) - Hilo, Hawaii - Boise, Idaho - Pocatello, Idaho - New Orleans, Louisiana - Shreveport, Louisiana - Westwego, Louisiana - Billings, Montana - Great Falls, Montana - Kalispell, Montana - Lincoln, Nebraska
- --------------- * We have announced the closure of the Escondido, California plant.
16
NUMBER REGION OF PLANTS LOCATIONS OF PLANTS - ------ --------- ----------------------------- - Reno, Nevada - Albuquerque, New Mexico(2) - Tulsa, Oklahoma - Dallas, Texas (2) - El Paso, Texas - Houston, Texas - Lubbock, Texas - McKinney, Texas - San Antonio, Texas - Sulphur Springs, Texas - Waco, Texas - Orem, Utah - Salt Lake City, Utah
Each of the Dairy Group's manufacturing plants also serves as a distribution facility. In addition, our Dairy Group has numerous distribution branches located across the country, some of which are owned but most of which are leased. The Dairy Group's headquarters are located in Dallas, Texas in leased premises. MORNINGSTAR FOODS Morningstar Foods currently conducts its manufacturing operations from plants in the following locations, all but two of which are owned: - Tempe, Arizona - City of Industry, California(2) - Gustine, California - Greeley, Colorado - Jacksonville, Florida - Thornton, Illinois - Murray, Kentucky - Frederick, Maryland - Delhi, New York - Arlington, Tennessee - Sulphur Springs, Texas - Mt. Crawford, Virginia - Madison, Wisconsin - Richland Center, Wisconsin Morningstar Foods' corporate headquarters are located in leased premises in Dallas, Texas. 17 SPECIALTY FOODS Specialty Foods currently conducts its manufacturing operations from plants in the following locations, all but one of which are owned: - Atkins, Arkansas* - Cairo, Georgia* - LaJunta, Colorado - New Hampton, Iowa - Chicago, Illinois - Dixon, Illinois - Pecatonica, Illinois - Plymouth, Indiana - Benton Harbor, Michigan - Wayland, Michigan - Faison, North Carolina - Portland, Oregon - Green Bay, Wisconsin - Oxfordshire, U.K. - --------------- * Specialty Foods has announced the closure of its Cairo, Georgia and Atkins, Arkansas plants. Specialty Foods' headquarters are located at its plant in Green Bay, Wisconsin. PUERTO RICO Our Puerto Rico operation currently manufactures its products in plants in the following locations, most of which are owned: - Aguadilla - Lares - San Juan INTERNATIONAL Our Spanish operation currently manufactures its products from plants in the following locations, all of which are owned: - Pontedeume, Galicia - Meira, Galicia - Meruelo, Cantabria - Escairon, Galicia CORPORATE Our corporate headquarters are located in leased premises at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201. 18 PART II ITEM 5. MARKET FOR OUR COMMON STOCK AND RELATED MATTERS Our common stock began trading on the Nasdaq National Market on April 17, 1996, and continued trading on the Nasdaq until March 5, 1997, when it began trading on the New York Stock Exchange under the symbol "SZA." We changed our trading symbol to "DF" effective December 24, 2001. The following table sets forth the high and low sales prices of our common stock as quoted on the New York Stock Exchange for the last two fiscal years. At March 25, 2002, there were approximately 6,100 record holders of our common stock.
HIGH LOW ------ ------ 2000: First Quarter............................................. $44.88 $36.00 Second Quarter............................................ 49.00 37.81 Third Quarter............................................. 52.44 44.50 Fourth Quarter............................................ 51.50 40.44 2001: First Quarter............................................. 50.57 42.00 Second Quarter............................................ 56.85 43.80 Third Quarter............................................. 64.73 52.20 Fourth Quarter............................................ 72.47 54.90 2002: First Quarter (through March 25, 2002).................... 75.18 60.88
We have never declared or paid a cash dividend on our common stock. We intend to retain all earnings to cover working capital fluctuations and to fund capital expenditures, scheduled debt repayments, stock buybacks and acquisitions and we do not anticipate paying cash dividends on our common stock in the foreseeable future. Moreover, we are restricted from paying cash dividends pursuant to the terms of our senior credit facility. For non-registered issuances of securities during the past three years, please see the discussion of the March 1998 issuances in "-- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Preferred Securities." 19 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data as of and for each of the five years in the period ended December 31, 2001 has been derived from our audited consolidated financial statements. The selected financial data do not purport to indicate results of operations as of any future date or for any future period. The selected financial data should be read in conjunction with our Consolidated Financial Statements and related Notes.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 2001 2000 1999 1998 1997 ----------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS EXCEPT SHARE DATA) Operating data: Net sales................................................. $ 6,230,116 $ 5,756,303 $ 4,481,999 $ 3,320,940 $ 1,795,868 Cost of sales............................................. 4,750,100 4,330,067 3,487,075 2,557,908 1,381,084 ----------- ----------- ----------- ----------- ----------- Gross profit.............................................. 1,480,016 1,426,236 994,924 763,032 414,784 Operating costs and expenses: Selling and distribution................................ 855,192 812,274 518,962 376,928 209,271 General and administrative.............................. 184,790 182,570 148,009 112,169 58,708 Amortization of intangibles............................. 53,349 52,441 38,513 31,479 14,916 Plant closing, merger and other costs................... 9,550 3,388 12,566 37,003 Other operating (income) expense........................ (17,306) 7,500 ----------- ----------- ----------- ----------- ----------- Total operating costs and expenses.................. 1,085,575 1,058,173 718,050 520,576 319,898 ----------- ----------- ----------- ----------- ----------- Operating income............................................ 394,441 368,063 276,874 242,456 94,886 Other (income) expense: Interest expense, net..................................... 101,787 112,586 49,233 52,082 36,664 Financing charges on trust issued preferred securities.... 33,581 33,595 38,584 30,213 Equity in (earnings) loss of unconsolidated affiliates.... 23,620 (11,453) (2,630) (78) Other (income) expense, net............................... 4,690 (630) (1,416) (4,212) (24,483) ----------- ----------- ----------- ----------- ----------- Total other expense................................. 163,678 134,098 83,771 78,005 12,181 ----------- ----------- ----------- ----------- ----------- Income from continuing operations before income taxes....... 230,763 233,965 193,103 164,451 82,705 Income taxes................................................ 83,739 90,303 75,463 59,823 43,375 Minority interest in earnings............................... 31,431 29,911 8,813 1,559 ----------- ----------- ----------- ----------- ----------- Income from continuing operations........................... 115,593 113,751 108,827 103,069 39,330 Income (loss) from discontinued operations.................. (3,161) 717 ----------- ----------- ----------- ----------- ----------- Income before extraordinary gain (loss) and cumulative effect of accounting change............................... 115,593 113,751 108,827 99,908 40,047 Extraordinary gain (loss)................................... (4,317) 4,968 904 31,698 (11,283) Cumulative effect of accounting change...................... (1,446) ----------- ----------- ----------- ----------- ----------- Net income.......................................... $ 109,830 $ 118,719 $ 109,731 $ 131,606 $ 28,764 =========== =========== =========== =========== =========== Net income applicable to common stock............... $ 109,830 $ 118,719 $ 109,731 $ 131,369 $ 28,464 =========== =========== =========== =========== =========== Basic earnings per common share: Income from continuing operations......................... $ 4.10 $ 4.03 $ 3.31 $ 3.12 $ 1.32 Income (loss) from discontinued operations................ (0.10) 0.02 Extraordinary gain (loss)................................. (0.15) .18 .03 0.96 (0.38) Cumulative effect of accounting change.................... (0.05) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 3.90 $ 4.21 $ 3.34 $ 3.98 $ 0.96 =========== =========== =========== =========== =========== Diluted earnings per common share: Income from continuing operations......................... $ 3.71 $ 3.68 $ 3.11 $ 2.90 $ 1.25 Income (loss) from discontinued operations................ (0.08) 0.02 Extraordinary gain (loss)................................. (0.11) .14 .02 0.76 (0.36) Cumulative effect of accounting change.................... (0.04) ----------- ----------- ----------- ----------- ----------- Net income.......................................... $ 3.56 $ 3.82 $ 3.13 $ 3.58 $ 0.91 =========== =========== =========== =========== =========== Average common shares: Basic..................................................... 28,151,398 28,195,043 32,861,218 32,953,290 29,508,791 =========== =========== =========== =========== =========== Diluted................................................... 36,892,074 36,671,264 42,858,492 41,965,564 31,348,591 =========== =========== =========== =========== =========== Other data: Ratio of earnings to combined fixed charges and preferred stock dividends(1)...................................... 2.87x 2.58x 3.75x 3.36x 2.89x Balance sheet data (at end of period): Total assets.............................................. $ 6,731,897 $ 3,780,478 $ 2,658,922 $ 3,013,783 $ 1,403,462 Long-term debt(2)......................................... 3,068,497 1,353,269 712,068 932,969 828,659 Mandatorily redeemable convertible trust issued preferred securities.............................................. 584,605 584,032 683,505 682,938 Total stockholders' equity................................ 1,475,880 598,832 583,972 655,771 359,310
- --------------- (1) For purposes of calculating the ratio of earnings to combined fixed charges and preferred stock dividends, "earnings" represents income before income taxes plus fixed charges. "Fixed charges" consist of interest on all debt, amortization of deferred financing costs and the portion of rental expense that we believe is representative of the interest component of rent expense. Preferred stock dividends consist of dividends, adjusted to a pre-tax basis, on our Series A Preferred Stock, which we redeemed in 1998. (2) Includes amounts outstanding under subsidiary lines of credit and the current portion of long-term debt. 20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We are the leading processor and distributor of fresh milk and other dairy products in the United States and a leader in the specialty foods industry. We have five operating divisions including Dairy Group, Morningstar Foods, Specialty Foods, Puerto Rico and International. Please see "Part I-Item 1. Business" for a general description of our business. In accordance with applicable accounting rules, three of our operating divisions are separately reportable business segments: Dairy Group, Morningstar Foods and Specialty Foods. DEVELOPMENTS SINCE JANUARY 1, 2001 Please see "Part I-Item 1. Business -- Developments Since January 1, 2001" for a description of recent developments. RESULTS OF OPERATIONS The following table presents certain information concerning our results of operations, including information presented as a percentage of net sales.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 2001 2000 1999 -------------------- -------------------- -------------------- DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT ---------- ------- ---------- ------- ---------- ------- (DOLLARS IN THOUSANDS) Net sales....................... $6,230,116 100.0% $5,756,303 100.0% $4,481,999 100.0% Cost of sales................... 4,750,100 76.2 4,330,067 75.2 3,487,075 77.8 ---------- ----- ---------- ----- ---------- ----- Gross profit.................... 1,480,016 23.8 1,426,236 24.8 994,924 22.2 Operating costs and expenses: Selling and distribution...... 855,192 13.7 812,274 14.1 518,962 11.5 General and administrative.... 184,790 3.0 182,570 3.2 148,009 3.3 Amortization of intangibles... 53,349 0.9 52,441 0.9 38,513 0.9 Plant closing costs........... 9,550 0.2 3,388 0.1 12,566 0.3 Other operating (income) expense.................... (17,306) (0.3) 7,500 0.1 ---------- ----- ---------- ----- ---------- ----- Total operating expenses............ 1,085,575 17.5 1,058,173 18.4 718,050 16.0 ---------- ----- ---------- ----- ---------- ----- Total operating income.......... $ 394,441 6.3% $ 368,063 6.4% $ 276,874 6.2% ========== ===== ========== ===== ========== =====
The sales and operating expenses of minority-owned businesses, including Consolidated Container Company, are not included in the table presented above, but are instead condensed onto a single line below operating income (see discussion below under "Other (Income) Expense"). YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 Note: We completed our acquisition of Old Dean on December 21, 2001. Because Old Dean's results of operations for the last few days of 2001 are included in our Consolidated Financial Statements, full year comparisons may be less meaningful than they would be otherwise. Also, comparison data is not provided for our Specialty Foods segment since we owned it for only the last 10 days of the year. Segment data for Specialty Foods for the period since the acquisition are included in Note 21 to our Consolidated Financial Statements. More complete segment data for Specialty Foods can be found in the transition report on Form 10-KT of Dean Holding Company for the seven-month period ended December 31, 2001. Net Sales -- Net sales increased 8.2% to $6.23 billion during 2001 from $5.76 billion in 2000. Approximately $103.1 million of this increase was due to the acquisition of Old Dean on December 21, 2001. Net sales for the Dairy Group increased 8.4%, or $391.3 million, in 2001, and net sales for Morningstar Foods increased 8.9%, or $62.7 million in 2001. $74.7 million and $9.7 million of these increases, respectively, are due to the sales of Old Dean being included in our results since December 21, 2001 (the date of acquisition). 21 The remaining portions of these increases were primarily due to an increase in prices charged for our products in response to higher raw milk and butterfat costs, and occurred despite a small decline in volume. Cost of Sales -- Our cost of sales ratio was 76.2% in 2001 compared to 75.2% in 2000. The cost of sales ratio for the Dairy Group increased to 77.1% in 2001 from 75.9% in 2000 and the cost of sales ratio for Morningstar Foods increased to 67.6% in 2001 from 66.8% in 2000. These increases were due to higher raw milk and butterfat costs in 2001. Operating Costs and Expenses -- Our operating expense ratio was 17.5% in 2001 compared to 18.4% in 2000. Included in 2001 operating costs were the following non-recurring items: - A gain of $47.5 million on the divestiture of the 11 plants transferred to National Dairy Holdings (as assignee of Dairy Farmers of America) in connection with the acquisition of Old Dean (which gain represented the difference between fair value and the carrying value of the plants), - An expense of $28.5 million resulting from a payment to Dairy Farmers of America as consideration for modifications to our milk supply arrangements, - Expenses of $9.6 million for plant closings, and - An expense of $1.7 million resulting from the impairment in value of a water plant in Grand Rapids, Michigan. In 2000 the following non-recurring expenses were included in operating costs: - Litigation settlement costs of $7.5 million, and - Expenses of $3.4 million for plant closings. Excluding these nonrecurring items, our operating expense ratio in 2001 was 17.6% compared to 18.2% in 2000. The operating expense ratio at the Dairy Group, excluding non-recurring items, was 17.8% in 2001 compared to 18.3% in 2000. This decrease was primarily due to various cost savings initiatives (most of which were temporary) implemented during 2001 in response to a difficult operating environment. These initiatives resulted in lower selling and general and administrative costs during 2001. The operating expense ratio at Morningstar Foods was 18.8% in both 2001 and 2000. Although similar cost savings initiatives were implemented at Morningstar Foods in 2001 as were implemented at the Dairy Group, their overall operating expense ratio remained steady due to higher distribution and selling expenses related to the introduction of new products. Operating Income -- Operating income in 2001 was $394.4 million, an increase of $26.3 million from 2000 operating income of $368.1 million. Our operating margin in 2001 was 6.3% compared to 6.4% in 2000. Excluding the nonrecurring items listed above, our operating income increased $7.7 million in 2001 to $386.7 million and our operating margin decreased to 6.2% in 2001 from 6.6% in 2000. The Dairy Group's operating margin, excluding the non-recurring items, decreased to 5.1% in 2001 from 5.8% in 2000. This decrease was due to higher raw milk costs during 2001, partly offset by lower operating costs. Morningstar Foods' operating margin declined to 13.6% in 2001 from 14.3% in 2000. This decrease was due to higher butterfat costs in 2001. Other (Income) Expense -- Total other expense increased by $29.6 million in 2001. Interest expense decreased to $101.8 million in 2001 from $112.6 million in 2000. This decrease was the result of lower debt balances and lower interest rates in 2001. Financing charges on preferred securities were $33.6 million in both years. Income from investments in unconsolidated affiliates, which relates primarily to our 43.1% minority interest in Consolidated Container Company ("CCC"), was a loss of $23.6 million in 2001 compared to income of $11.5 million in 2000. Included in the 2001 loss is an impairment charge of $21.1 million related to the write-off of our investment in CCC. During 2001, due to a variety of operational difficulties, CCC consistently reported operating results that were significantly weaker than expected, which resulted in significant losses in the third and fourth quarters. CCC has implemented several changes in an effort to return 22 to stable profitability. However, in November 2001 CCC announced that it did not expect to see the benefits of these changes for at least several quarters. Also, as a result of CCC's performance in 2001, CCC became unable to comply with the financial covenants contained in its credit facility. Accordingly, we concluded that our investment in CCC was impaired and that the impairment was not temporary. In the fourth quarter of 2001, we wrote off our remaining investment in CCC. Other income and expense also includes $4.4 million of impairment charges related to two other small investments. Income Taxes -- Income tax expense was recorded at an effective rate of 36.3% in 2001 compared to 38.6% in 2000. This decrease was due primarily to the favorable settlement of a contested state tax issue during 2001. Our tax rate varies as the mix of earnings contributed by our various business units changes, and as tax savings initiatives are adopted. Minority Interest -- Minority interest in earnings, which was primarily the 33.8% ownership interest of Dairy Farmers of America in our Dairy Group, increased to $31.4 million in 2001 compared to $29.9 million in 2000. On December 21, 2001, in connection with our acquisition of Old Dean, we purchased the 33.8% stake that was owned by Dairy Farmers of America. See Note 2 to our Consolidated Financial Statements. We now own 100% of our Dairy Group. In 2001, we also purchased the 25% minority interest of Leche Celta. We now own 100% of our Spanish operations. Extraordinary Gain (Loss) -- On December 21, 2001, simultaneously with the acquisition of Old Dean, we replaced our former credit facilities with a new credit facility. As a result, we recognized a $4.3 million extraordinary loss, net of an income tax benefit of $3.0 million, for the write-off of deferred financing costs related to the early retirement of our former credit facilities. See Note 10 to our Consolidated Financial Statements. In 2000 we recognized a $5.0 million extraordinary gain, net of income tax expense of $2.8 million, which included the following items related to the early extinguishment of our previous senior credit facility: - A $6.5 million gain, net of income tax expense of $3.6 million, for interest rate derivatives which became unhedged and were marked to fair market value, and - A $1.5 million loss, net of an income tax benefit of $0.8 million, for the write-off of deferred financing costs. Cumulative Effect of Accounting Change -- Effective January 1, 2001 we adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities (as amended). Our adoption of this accounting standard resulted in the recognition of $1.4 million, net of an income tax benefit of $1.5 million and minority interest benefit of $0.7 million, as a charge to earnings. YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Net Sales -- Net sales increased 28.4% to $5.76 billion during 2000 from $4.48 billion in 1999. Excluding the effect of our packaging operations, sales increased $1.72 billion or 43.1% in 2000. Net sales for our Dairy Group increased by $1.56 billion, or 50.2%, in 2000 compared to 1999 mainly due to acquisitions, particularly the acquisition of Southern Foods Group. Net sales for Morningstar Foods increased by $49.1 million, or 7.5%, in 2000 due to increased sales of higher-priced products. Cost of Sales -- Our cost of sales ratio was 75.2% in 2000 compared to 77.8% in 1999. The cost of sales ratio for the Dairy Group decreased to 75.9% in 2000 from 79.6% in 1999. This ratio improved due to improved performance at dairies owned more than twelve months, lower raw material costs and because Southern Foods Group, which we acquired effective January 1, 2000, has a lower cost of sales ratio than some of our other dairies because of its extensive use of direct store delivery. The customer base of Southern Foods Group is somewhat different from our other dairies, which requires Southern Foods to charge higher prices to cover higher distribution costs. The cost of sales ratio for Morningstar Foods improved to 66.8% from 69.0%, due to an increased emphasis on cost savings initiatives, as well as increased sales of higher priced products. 23 Operating Costs and Expenses -- Our operating expense ratio was 18.4% in 2000 compared to 16.0% in 1999. The operating expense ratio at our Dairy Group was 17.9% in 2000 compared to 15.1% in 1999. This ratio increased due to - higher distribution costs at Southern Foods Group as a result of its extensive direct store delivery routes in rural areas, and - increased distribution costs in 2000 because of higher fuel costs. These cost increases were partly offset by a $3.6 million pre-tax gain in the second quarter of 2000 related to the curtailment of certain defined benefit plans. Included in operating costs for the Dairy Group in 2000 were plant closing costs of $2.1 million and litigation settlement costs of $7.5 million. In 1999, plant closing costs amounted to $8.7 million. The operating expense ratio at Morningstar Foods was 18.9% in 2000 compared to 18.2% in 1999. This ratio increased due to higher marketing expenses in 2000 related to new products. In 1999, plant closing costs amounted to $0.5 million. Operating Income -- Operating income in 2000 was $368.1 million, an increase of 32.9% from 1999 operating income of $276.9 million. Excluding the effect of our packaging operations, our operating income in 2000 increased $141.2 million or 62.3%. Our operating income margin increased to 6.4% in 2000 compared to 6.2% in 1999 (5.7% excluding the contribution of our packaging operations in 1999). Operating margin at the Dairy Group improved to 6.2% in 2000 from 5.3% in 1999. This increase in operating income margin was due to improved performance at dairies owned more than twelve months. Morningstar Foods' operating margin improved to 14.3% in 2000 from 12.8% in 1999 due to increased sales of higher margin products. Other (Income) Expense -- Total other expense increased in 2000 by $50.3 million. Interest expense increased to $112.6 million in 2000 from $49.2 million in 1999. This increase was due to additional debt used to finance acquisitions, and also as a result of higher interest rates. Financing charges on preferred securities decreased to $33.6 million in 2000 from $38.6 million in 1999 as a result of the redemption of $100.0 million of 5.0% preferred securities held by Dairy Farmers of America in connection with our acquisition of Southern Foods Group, L.P. Income from investments in unconsolidated affiliates, which is primarily related to our minority interest in Consolidated Container Company, amounted to $11.5 million in 2000. These earnings included $0.8 million, representing our proportional share of a favorable adjustment to previously recorded restructuring charges at Consolidated Container Company. During 1999 we reported $2.6 million in income from investments in unconsolidated subsidiaries, primarily Consolidated Container Company. Income Taxes -- Income tax expense was recorded at an effective rate of 38.6% in 2000 compared to 39.1% during 1999. This decrease was a result of the sale of our U.S. packaging operations, which had a higher effective tax rate than our dairy operations, and certain tax saving initiatives implemented during 2000. Minority Interest -- Minority interest in earnings increased to $29.9 million in 2000 from $8.8 million in 1999. Effective January 1, 2000 we entered into a joint venture with Dairy Farmers of America ("DFA") into which we contributed our domestic fluid dairy operations and DFA contributed the operations of Southern Foods Group and their interests in certain other joint ventures with us. DFA received a 33.8% ownership interest in the joint venture, which is shown as a minority interest on our consolidated financial statements. During 1999, minority interest in earnings consisted primarily of DFA ownership interests in two smaller joint ventures: Suiza GTL, LLC and Land-O-Sun, LLC. On December 21, 2001, in connection with our acquisition of Old Dean, we purchased the 33.8% stake that was owned by Dairy Farmers of America. See Note 2 to our Consolidated Financial Statements. We now own 100% of our Dairy Group. 24 Extraordinary Gain -- During the first quarter of 2000 we recognized a $5.0 million extraordinary gain, net of income tax expense of $2.8 million, which included the following items related to the early extinguishment of our previous senior credit facility: - A $6.5 million gain, net of income tax expense of $3.6 million, for interest rate derivatives which became unhedged and were marked to fair market value, and - A $1.5 million loss, net of an income tax benefit of $0.8 million, for the write-off of deferred financing costs. CRITICAL ACCOUNTING POLICIES "Critical accounting policies" are defined as those that are both most important to the portrayal of a company's financial condition and results, and that require management's most difficult, subjective or complex judgments. In many cases the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles with no need for the application of our judgment. In certain circumstances, however, the preparation of our consolidated financial statements in conformity with generally accepted accounting principles requires us to use our judgment to make certain estimates and assumptions. These estimates affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We have identified the policies described below as our critical accounting policies. See Note 1 to our Consolidated Financial Statements for a detailed discussion of these and other accounting policies. Revenue Recognition and Accounts Receivable -- Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, the product has been shipped to the customer and there is a reasonable assurance of collection of the sales proceeds. Revenue is reduced by sales incentives that are recorded by estimating expense based on our historical experience. We provide credit terms to customers generally ranging up to 30 days, perform ongoing credit evaluation of our customers and maintain allowances for potential credit losses based on historical experience. Insurance Accruals -- We retain selected levels of property and casualty risks, primarily related to employee health care, workers' compensation claims and other casualty losses. Many of these potential losses are covered under conventional insurance programs with third party carriers with high deductible limits. In other areas, we are self-insured with stop-loss coverages. Accrued liabilities for incurred but not reported losses related to these retained risks are calculated based upon loss development factors provided by our external insurance brokers and actuaries. The loss development factors are subject to change based upon actual history and expected trends in costs, among other factors. Valuation of Long-Lived and Intangible Assets and Goodwill -- Historically, we assessed the impairment of identifiable intangible, long-lived assets and related goodwill whenever events or changes in circumstances indicated that the carrying amount of the asset may not have been recoverable. To determine whether impairment existed, we compared the expected future net operating cash flows, undiscounted and without interest charges, to the carrying amount of the underlying assets. We would have considered a potential impairment if the recorded value of these assets exceeded the associated future net operating cash flows. Any potential impairment loss would have been measured as the amount by which the carrying value exceeded the fair value of the asset. Fair value of assets would have been measured by market value, if an active market existed, or by a forecast of expected future net operating cash flows, discounted at a rate commensurate with the risk involved. In 2002, Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" became effective and as a result, goodwill will no longer be amortized. We recorded approximately $45.5 million of goodwill amortization in 2001. In lieu of amortization, we are required to perform a transitional impairment assessment of our goodwill in 2002 and annual impairment tests thereafter. As of December 31, 2001, we had $2.95 billion of unamortized goodwill included on our balance sheet. Under SFAS 142, any identifiable intangibles with an indefinite life will not be amortized, but instead tested for impairment in accordance with the standard. 25 Purchase Price Allocation -- We allocate the cost of acquisitions to the assets acquired and liabilities assumed. All identifiable assets acquired, including identifiable intangibles, and liabilities assumed are assigned a portion of the cost of the acquired company, normally equal to their fair values at the date of acquisition. The excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed is recorded as goodwill. We record the initial purchase price allocation based on evaluation of information and estimates available at the date of the financial statements. As final information regarding fair value of assets acquired and liabilities assumed is evaluated and estimates are refined, appropriate adjustments are made to the purchase price allocation. To the extent that such adjustments indicate that the fair value of assets and liabilities differ from their preliminary purchase price allocations, such difference would adjust the amounts allocated to those assets and liabilities and would change the amounts allocated to goodwill. The final purchase price allocation includes the consideration of a number of factors to determine the fair value of individual assets acquired and liabilities assumed including quoted market prices, forecast of expected cash flows, net realizable values, estimates of the present value of required payments and determination of remaining useful lives. For significant acquisitions, we utilize valuation specialists and appraisers to assist in the determination of the fair value of long-lived assets, including identifiable intangibles. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Emerging Issues Task Force (the "Task Force") of the Financial Accounting Standards Board has reached a consensus on Issue No. 00-14, "Accounting for Certain Sales Incentives," which becomes effective for us in the first quarter of 2002. This issue addresses the recognition, measurement and income statement classification of sales incentives that have the effect of reducing the price of a product or service to a customer at the point of sale. Our current accounting policy for recording sales incentives within the scope of this issue is to record estimated coupon expense based on historical coupon redemption experience which is consistent with the requirements of this issue. Therefore, our adoption of this issue will have no impact on our consolidated financial statements. In April 2001, the Task Force reached a consensus on Issue No. 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products." We will adopt this Issue in the first quarter of 2002, as required. Under this Issue, certain consideration paid to our customers (such as slotting fees) will be required to be classified as a reduction of revenue, rather than recorded as an expense. Adoption of this Issue will result in the reclassification of certain costs; however, there will be no change in reported net income. In June 2001, FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 addresses financial accounting and reporting for business combinations. Under the new standard, all business combinations entered into after June 30, 2001 are to be accounted for by the purchase method. We have applied the provisions of SFAS No. 141 to all business combinations completed after June 30, 2001, including the acquisition of Old Dean. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. We adopted SFAS No. 142 on January 1, 2002. SFAS No. 142 requires that goodwill no longer be amortized, but instead requires a transitional goodwill impairment assessment and annual impairment tests thereafter. Any transitional impairment loss resulting from the adoption will be recognized as the effect of a change in accounting principle in our income statement. We are currently in the process of completing the transitional impairment assessment and any impact on our financial statements. We must complete the first step of this test to determine if we have an impairment by June 30, 2002 and, if we have an impairment, we must complete the final step and record any impairment by December 31, 2002. SFAS No. 142 also requires that recognized intangible assets be amortized over their respective estimated useful lives. As part of the adoption, we are currently reassessing the useful lives and residual values of all intangible assets. Any recognized intangible asset determined to have an indefinite useful life will not be amortized, but instead tested for impairment in accordance with the standard. In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the 26 period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 will become effective for us in fiscal year 2003. We are currently evaluating the impact of adopting this pronouncement on our consolidated financial statements. FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" in August 2001 and it became effective for us beginning January 1, 2002. SFAS No. 144, which supercedes SFAS No. 121, provides a single, comprehensive accounting model for impairment and disposal of long-lived assets and discontinued operations. Our adoption of this standard will not have a material impact on our consolidated financial statements. LIQUIDITY AND CAPITAL RESOURCES HISTORICAL CASH FLOW During 2001, we met our working capital needs with cash flow from operations along with borrowings under our former credit facilities. Net cash provided by operating activities was $310.2 million for 2001 as contrasted to $297.7 million for 2000, an increase of $12.5 million. Net cash provided by operating activities was impacted by: - A decrease of $3.3 million in net income plus non-cash items in 2001 as compared to 2000; and - Changes in working capital components which improved by $15.8 million in 2001 compared to the previous year. Net cash used in investing activities was $1.28 billion in 2001 compared to $380.3 million in 2000, an increase of $900.2 million. Cash paid for acquisitions increased to $1.15 billion in 2001 from $336.0 million in 2000 primarily as a result of the acquisition of Old Dean in 2001. CURRENT DEBT OBLIGATIONS Effective December 21, 2001, in connection with our acquisition of Old Dean, we replaced our former credit facilities with a new $2.7 billion credit facility provided by a syndicate of lenders. This facility provides us with a revolving line of credit of up to $800.0 million and two term loans in the amounts of $900.0 million and $1.0 billion, respectively. Both term loans were fully funded upon closing of the Old Dean acquisition and the proceeds were used to repay debt under our former credit facilities, to repay Old Dean's credit facility, to purchase DFA's ownership stake in our Dairy Group, and to pay certain other obligations. The revolving line of credit, which expires on July 15, 2007 and is to be used for general corporate and working capital purposes (including the financing of future acquisition and stock buybacks, if any, subject to certain limitations contained in the credit facility documents) was undrawn. The senior credit facility contains various financial and other restrictive covenants and requirements that we maintain certain financial ratios, including a leverage ratio (computed as the ratio of the aggregate outstanding principal amount of defined indebtedness to EBITDA) and an interest coverage ratio (computed as the ratio of EBITDA to interest expense). In addition, this facility requires that we maintain a minimum level of net worth (as defined by the agreement). The agreement contains standard default triggers, including without limitation: failure to maintain compliance with the financial and other covenants contained in the agreement, default on certain of our other debt, a change in control and certain other material adverse changes in our business. The agreement does not contain any default triggers based on our debt rating. See Note 10 to our Consolidated Financial Statements for further information regarding the terms of our credit agreement, including interest rates, principal payment schedules and mandatory prepayment provisions. At December 31, 2001 we had outstanding borrowings of $1.9 billion under our senior credit facility. In addition, $30.4 million of letters of credit secured by the credit facility were issued but undrawn. As of December 31, 2001 approximately $769.6 million was available for future borrowings under this credit facility, 27 subject to satisfaction of certain conditions contained in the loan agreement. We are currently in compliance with all covenants contained in our credit agreement. An additional portion of the cash consideration paid for the Old Dean acquisition and related transactions was provided by new funding under our existing receivables securitization facility. On December 21, 2001, we sold Old Dean's receivables into the facility, thereby increasing the amount of the facility by $150.0 million to $400.0 million. See Note 10 to our Consolidated Financial Statements for more information about our receivables securitization facility. In addition, certain of Old Dean's indebtedness remains outstanding after the acquisition, including $700.0 million of outstanding indebtedness under certain senior notes, approximately $22.0 million of industrial development revenue bonds, and certain capital lease obligations. See Note 10 to our Consolidated Financial Statements. The table below summarizes our obligations for indebtedness and lease obligations at December 31, 2001 (dollars in thousands):
PAYMENTS DUE BY PERIOD INDEBTEDNESS & LEASE ------------------------------------------------------------------ OBLIGATIONS TOTAL 2002 2003 2004 2005 2006 THEREAFTER - -------------------- ---------- -------- --------- -------- -------- -------- ---------- Senior credit facility............ $1,900,000 $ 72,500 $ 145,000 $145,000 $167,500 $190,000 $1,180,000 Senior notes(1)....... 700,000 100,000 600,000 Receivables-backed loan................ 400,000 400,000 Foreign subsidiary term loan........... 35,172 4,818 6,077 7,250 6,982 6,699 3,346 Other lines of credit.............. 2,317 2,317 Industrial development revenue bonds....... 28,001 455 555 555 555 555 25,326 Capital lease obligations and other............... 44,796 16,882 3,549 19,151 4,491 281 442 Operating leases...... 357,870 66,946 63,248 50,047 42,823 31,379 103,427 ---------- -------- --------- -------- -------- -------- ---------- Totals...... $3,468,156 $163,918 $ 218,429 $622,003 $322,351 $228,914 $1,912,541 ========== ======== ========= ======== ======== ======== ==========
- --------------- (1) Represents face value of senior notes. In addition to the letters of credit secured by our credit facility, we had at December 31, 2001 approximately $71.1 million of letters of credit with three other banks that were issued but undrawn. These were required by various utilities and government entities for performance and insurance guarantees. We do have certain other commitments and contingent obligations. Please see Note 19 to our Consolidated Financial Statements for a description of these commitments and contingent obligations. We do not have any ownership interests or relationships with any special-purpose entities (or "bankruptcy remote" entities), other than our ownership of the special purpose entities formed to facilitate our receivables securitization program and our mandatorily redeemable preferred securities. The assets and liabilities of those entities are fully reflected on our balance sheet. We have no other significant off-balance sheet arrangements, special purpose entities, financing partnerships or guaranties, nor any debt or equity triggers based on our stock price or credit rating. PREFERRED SECURITIES On March 24, 1998, we issued $600.0 million of company-obligated 5.5% mandatorily redeemable convertible preferred securities of a Delaware business trust in a private placement to "qualified institutional buyers" under Rule 144A under the Securities Act of 1933. The 5.5% preferred securities, which are recorded net of related fees and expenses, mature 30 years from the date of issue. Holders of these securities are entitled 28 to receive preferential cumulative cash distributions at an annual rate of 5.5% of their liquidation preference of $50 each. These distributions are payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year. These trust issued preferred securities are convertible at the option of the holders into an aggregate of approximately 7.7 million shares of our common stock, subject to adjustment in certain circumstances, at a conversion price of $78.25 (equivalent to a conversion rate of .6390 shares per security). These preferred securities are also redeemable, at our option, at any time after April 2, 2001 at specified amounts and are mandatorily redeemable at their liquidation preference amount of $50 per share at maturity or upon occurrence of certain specified events. FUTURE CAPITAL REQUIREMENTS During 2002, we intend to invest a total of approximately $250.0 million in capital expenditures primarily for our existing manufacturing facilities and distribution capabilities. We intend to fund these expenditures using cash flow from operations. Of this amount, we intend to spend it as follows:
OPERATING DIVISION AMOUNT - ------------------ ------ (DOLLARS IN MILLIONS) Dairy Group.......................................... $178.0 Morningstar Foods.................................... 50.0 Specialty Foods...................................... 12.0 Other................................................ 10.0 ------ $250.0 ======
We expect that cash flow from operations will be sufficient to meet our requirements for our existing businesses for the foreseeable future. In the future, we may pursue additional acquisitions that are compatible with our core business strategy. Any such acquisitions, as well as any stock repurchases, will be funded through cash flows from operations or borrowings under our credit facility. If necessary, we believe that we have the ability to secure additional financing for our future capital requirements. KNOWN TRENDS AND UNCERTAINTIES ACQUISITIONS AND DIVESTITURES We have recently announced that we intend to continue to make acquisitions in our core businesses and, over the next several years, to divest non-core businesses. RAW MATERIAL PRICES The primary raw materials used in our operations are raw milk and butterfat. The prices we pay for these materials are regulated by the federal government, and in some cases by state and other regulatory agencies. Prices of raw milk and butterfat can be very volatile. In general, we change the prices that we charge our customers for our products on a monthly basis, as the costs of our raw materials fluctuate. However, there can be a lag between the time of a raw material cost increase and the effectiveness of a corresponding price increase to our customers, and in some cases we are contractually restrained with respect to the means and timing of implementing price increases. Also, at some point price increases do erode our volumes. These factors can cause volatility in our earnings. Our operating profit margin tends to fluctuate with the price of our raw materials. CURRENT ECONOMIC CLIMATE Many of our customers in the airline, food service and hospitality industries have suffered decreases in sales volumes since the events of September 11 and the resulting economic climate. While we have seen some improvements in these areas, our sales to some of these customers continue to be weaker than prior to 29 September 11 and may take several months to recover. Some of our customers in the retail grocery industry have also suffered decreased sales volumes as a result of the current economic climate, and we have seen some of those customers file for bankruptcy protection in recent months. While we do not expect this trend to have a material adverse effect on our business, we do expect this trend to continue until our economy returns to more stable levels. INTEREST RATES We have hedged a portion of our variable interest rate exposure by entering into interest rate swap agreements that have the effect of "converting" the hedged debt from variable rate debt to fixed rate debt. Approximately 40% of our variable rate debt is currently hedged. The percentage of our total debt that is hedged will fluctuate as our debt level fluctuates. Moveover, we constantly monitor the prevailing interest rate environment, and may increase the percentage of our debt that is hedged if interest rates threaten to increase to substantially higher levels, or become more volatile. RATIONALIZATION ACTIVITIES As part of our overall integration and cost reduction strategy, we recorded plant closing and other non-recurring costs during 2001, 2000 and 1999 in the amounts of $9.6 million, $3.4 million and $12.6 million, respectively. These charges included the following costs: - Workforce reductions as a result of plant closings, plant rationalizations and consolidation of administrative functions. The plans included an overall reduction of 198 people in 2001, 205 people in 2000 and 315 people in 1999, who were primarily plant employees associated with the plant closings and rationalization. The costs were charged to our earnings in the period that the plan was established in detail and employee severance and benefits had been appropriately communicated; - Shutdown costs, including those costs necessary to prepare the plant facilities for closure; - Costs incurred after shutdown such as lease obligations or termination costs, utilities and property taxes; and - Write-downs of property, plant and equipment and other assets, primarily for asset impairments as a result of facilities no longer used in operations. The impairments related primarily to owned building, land and equipment at the facilities that were sold and written down to their estimated fair value. As part of our purchase price allocations, we accrued costs of $28.0 million in 2001 and $11.0 million in 2000 pursuant to plans to exit certain activities and operations of acquired businesses in order to rationalize production and reduce costs and inefficiencies. Several plants were closed in connection with our acquisition of Southern Foods in 2000. We have implemented certain plans to shut down plants and administrative offices in connection with our acquisition of Old Dean, which was completed on December 21, 2001. We will continue to finalize and implement our initial integration and rationalization plans related to the Old Dean acquisition and we expect to refine our estimate of costs associated with these plans. The principal components of the plans will include the following: - Workforce reductions, to be charged against acquisition liabilities for these costs; - Shutdown costs, including those costs that are necessary to prepare facilities for closure; and - Costs incurred after shutdown such as lease obligations or termination costs, utilities and property taxes after shutdown. We do not expect any of these costs to have a material adverse impact on our results of operations. For more information on our restructuring and exit plans see Note 16 to our Consolidated Financial Statements. 30 TAX RATE Our 2001 tax rate was approximately 36.3%. However, we believe that our effective tax rate will increase to a range of approximately 37.0% to 38.0% over the next several years, as Old Dean's tax rate was higher than our tax rate prior to the Old Dean acquisition. In addition, the 2001 tax rate was favorably impacted by the settlement of a contested state tax issue. UTILITY COSTS In 1999, we entered into a contract with Enron Energy Services pursuant to which we contracted to purchase electricity for certain of our plants at a discounted rate for a ten-year period. Enron filed for bankruptcy protection on December 1, 2001, and subsequently elected to reject our contract in its bankruptcy. We do not expect to be able to replace the economic benefits of our contract with Enron. Therefore, we expect our utility costs to return to market levels in the future. See "-- Risk Factors" for a description of various other risks and uncertainties concerning our business. RISK FACTORS This report contains statements about our future that are not statements of historical fact. Most of these statements are found in Items 1, 7 and 7a of this report under the following subheadings: "Current Business Strategy," "Government Regulation," "Industry Overview," "Raw Materials and Supply," "Liquidity and Capital Resources," "Known Trends and Uncertainties" and "Quantitative and Qualitative Disclosures About Market Risk." In some cases, you can identify these statements by terminology such as "may," "will," "should," "could," "expects," "seek to," "anticipates," "plans," "believes," "estimates," "intends," "predicts," "potential" or "continue" or the negative of such terms and other comparable terminology. These statements are only predictions, and in evaluating those statements, you should carefully consider the risks outlined below. Actual performance or results may differ materially and adversely. WE MAY HAVE DIFFICULTIES MANAGING OUR GROWTH We have expanded our operations rapidly in recent years, particularly with the acquisition of Chicago-based Dean Foods Company ("Old Dean") in December 2001. This rapid growth places a significant demand on our management and our financial and operational resources, which subjects us to various risks, including among others: - inability to successfully integrate or operate acquired businesses, - inability to retain key customers of acquired or existing businesses, and - inability to realize or delays in realizing expected benefits from our increased size. The integration of businesses we have acquired or may acquire in the future may also require us to invest more capital than we expected or require more time and effort by management than we expected. If we fail to effectively manage the integration of the businesses we have acquired, particularly Old Dean, our operations and financial results will be affected, both materially and adversely. OUR FAILURE TO SUCCESSFULLY COMPETE COULD ADVERSELY AFFECT OUR PROSPECTS AND FINANCIAL RESULTS Our business is subject to significant competition based on a number of factors. See "Part I -- Item 1. Business -- Competition." If we fail to successfully compete against our competitors, our business will be adversely affected. The consolidation trend is continuing in the retail grocery and foodservice industries. As our customer base continues to consolidate, we expect competition among us and our competitors to intensify as we compete for the business of fewer customers. As the consolidation continues, there can be no assurance that we will be able to keep our existing customers, or to gain new customers. Winning new customers is particularly important to our future growth, as demand tends to be relatively flat in our industry. Moreover, as our 31 customers become larger, they will have greater purchasing leverage, and could force prices and margins, particularly for our Dairy Group, lower than current levels. We could also be adversely affected by any expansion of capacity by our existing competitors or by new entrants in our markets. OUR INNOVATION EFFORTS MAY NOT SUCCEED We have invested, and intend to continue to invest, significant resources in product innovation in an effort to increase our sales and profit margins as well as the overall consumption of dairy products. We believe that sales and profit growth through innovation is a significant source of growth for our business. The success of our innovation initiatives will depend on customer and consumer acceptance of our products, of which there can be no assurance. If our innovation efforts do not succeed, or if we do not have adequate resources to invest in innovation, we may not be able to continue to significantly increase sales or profit margins. CHANGES IN RAW MATERIAL AND OTHER INPUT COSTS CAN ADVERSELY AFFECT US The most important raw materials that we use in our operations are raw milk, butterfat and high density polyethylene resin. The prices of these materials increase and decrease depending on supply and demand and, in some cases, governmental regulation. For more information about the pricing of raw milk, see "Part I -- Item 1. Business -- Raw Materials and Supply" and "Part I -- Item 1. Business -- Government Regulation -- Milk Industry Regulation." Prices of raw milk, butterfat and certain other raw materials used in our Morningstar Foods and Specialty Foods segments can fluctuate widely over short periods of time. In many cases we are able to adjust our pricing to reflect changes in raw material costs. Volatility in the cost of our raw materials can adversely affect our performance, however, as price changes often lag changes in costs. These lags tend to erode our profit margins. Extremely high raw material costs can also put downward pressure on our margins and our volumes. We were adversely affected in 2001 by raw material costs. Although raw material costs have returned to normal levels in 2002 to date, we cannot predict future changes in raw material costs. Because we deliver a majority of our products directly to our customers through our "direct store delivery" system, we are a large consumer of gasoline. Increases in fuel prices can adversely affect our results of operations. Also, since we lost our energy supply agreement with Enron (see "Item 1. Business -- Developments since January 1, 2001 -- Enron"), we will pay market prices for electricity in the foreseeable future. As we are a significant consumer of electricity, any significant increase in energy prices could adversely affect our financial performance. WE HAVE SUBSTANTIAL DEBT AND OTHER FINANCIAL OBLIGATIONS AND WE MAY INCUR EVEN MORE DEBT We have substantial debt and other financial obligations and significant unused borrowing capacity. See "-- Liquidity and Capital Resources." We have pledged substantially all of our assets (including the assets of our subsidiaries) to secure our indebtedness. Our high debt level and related debt service obligations: - require us to dedicate significant cash flow to the payment of principal and interest on our debt which reduces the funds we have available for other purposes, - may limit our flexibility in planning for or reacting to changes in our business and market conditions, - impose on us additional financial and operational restrictions, and - expose us to interest rate risk since a portion of our debt obligations are at variable rates. Our ability to make scheduled payments on our debt and other financial obligations depends on our financial and operating performance. Our financial and operating performance is subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. A significant increase in interest rates could adversely impact our financial results. If we do not comply with the 32 financial and other restrictive covenants under our credit facilities (see Note 10 to our Consolidated Financial Statements), we may default under them. Upon default, our lenders could accelerate the indebtedness under the facilities, foreclose against their collateral or seek other remedies. LOSS OF RIGHTS TO ANY OF OUR LICENSED BRANDS COULD ADVERSELY AFFECT US We sell certain of our products under licensed brand names such as Hershey's(R), Borden(R), Pet(R), Folgers(R) Jakada(TM), Land-O-Lakes(R) and others. In some cases, we have invested, and intend to continue to invest, significant capital in product development and marketing and advertising related to these licensed brands. Should our rights to manufacture and sell products under any of these names be terminated for any reason, our financial performance and results of operations could be materially and adversely affected. NEGATIVE PUBLICITY AND/OR SHORTAGES OF MILK SUPPLY RELATED TO MAD COW DISEASE AND/OR FOOT AND MOUTH DISEASE COULD ADVERSELY AFFECT US Recent incidences of bovine spongiform encephalopathy ("BSE" or "mad cow disease") in some European countries have raised public concern about the safety of eating beef and using or ingesting certain other animal-derived products. The World Health Organization, the U.S. Food and Drug Administration and the United States Department of Agriculture have all affirmed that BSE is not transmitted to milk. However, we are still subject to risk as a result of public misperception that milk products may be affected by mad cow disease. To date, we have not seen any measurable impact on our milk sales in Spain or the United States resulting from concerns about mad cow disease. However, should public concerns about the safety of milk or milk products escalate as a result of further occurrences of mad cow disease, we could suffer a loss of sales, which could have a material and adverse affect our financial results. Foot and Mouth Disease ("FMD") is a highly contagious disease of cattle, swine, sheep, goats, deer and other cloven-hooved animals. FMD causes severe losses in the production of meat and milk; however, FMD does not pose a health risk to humans. While there have been several recent occurrences of FMD in Europe, the United States has been free of FMD since 1929. To date, we have not seen a measurable impact on our supply of raw milk in Spain as a result of FMD. However, should FMD become widespread in Spain, a milk supply shortage could develop, which would affect our ability to obtain raw milk for our Spanish operations and the price that we are required to pay for raw milk in Spain. If we are unable to obtain a sufficient amount of raw milk to satisfy our Spanish customers' needs, and/or if we are forced to pay a significantly higher price for raw milk in Spain, our financial results in Spain could be materially and adversely affected. Likewise, if there is an outbreak of FMD in the United States, a shortage of raw milk could develop in the United States, which would affect our ability to obtain raw milk and the price that we are required to pay for raw milk in the United States. If we are unable to obtain a sufficient amount of raw milk to satisfy our U.S. customers' needs and/or if we are forced to pay a significantly higher price for raw milk in the United States, our consolidated financial results could be materially and adversely affected. WE COULD BE REQUIRED TO PAY SUBSTANTIAL LIQUIDATED DAMAGES TO DAIRY FARMERS OF AMERICA, IF WE FAIL TO OFFER THEM THE RIGHT TO SUPPLY RAW MILK TO CERTAIN OF OLD DEAN'S PLANTS In connection with our purchase of the minority interest in our Dairy Group, we entered into an agreement with Dairy Farmers of America ("DFA"), the nation's largest dairy farmers' cooperative and our primary supplier of raw milk, pursuant to which we have agreed to pay to DFA liquidated damages in an amount of up to $47.0 million if we fail to offer them the right, within a specified period of time after completion of the Old Dean acquisition, to supply raw milk to certain of Old Dean's plants. The amount of damages to be paid, if any, would be determined on a plant-by-plant basis for each Old Dean plant's milk supply that is not offered to DFA, based generally on the amount of raw milk used by the plant. We would be required to pay the liquidated damages even if we were prohibited from offering the business to DFA by an injunction, restraining order or contractual obligation. See Note 19 to our Consolidated Financial Statements for further information regarding this agreement. Old Dean currently has milk supply agreements with several raw milk suppliers other than DFA. If any such supplier believes that it has rights to continue to supply Old Dean's plants beyond the deadline dates contained in our agreement with DFA, and is successful in legally 33 establishing any such rights, we may be prohibited from offering DFA the right to supply certain of the Old Dean plants and, therefore, be required to pay all or a portion of the liquidated damages to DFA. WE COULD BE REQUIRED TO SATISFY OUR PAYMENT OBLIGATIONS UNDER OUR GUARANTY OF CONSOLIDATED CONTAINER COMPANY'S DEBT In February 2002, we executed a limited guarantee of certain indebtedness of Consolidated Container Company ("CCC"), in which we own a 43.1% interest. See Note 19 to our Consolidated Financial Statements for information concerning the terms of the guaranty. CCC has experienced various operational difficulties over the past 6 to 9 months, which has adversely affected its financial performance. CCC's ability to repay the guaranteed indebtedness will depend on a variety of factors, including its ability to successfully implement its business plan, of which there can be no assurance. WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS We sell food products for human consumption, which involves risks such as: - product contamination or spoilage, - product tampering, and - other adulteration of food products. Consumption of an adulterated, contaminated or spoiled product may result in personal illness or injury. We could be subject to claims or lawsuits relating to an actual or alleged illness or injury, and we could incur liabilities that are not insured or that exceed our insurance coverages. Although we maintain quality control programs designed to address food quality and safety issues, an actual or alleged problem with the quality, safety or integrity of our products at any of our facilities could result in: - product withdrawals, - product recalls, - negative publicity, - temporary plant closings, and - substantial costs of compliance or remediation. Any of these events could have a material and adverse effect on our financial condition, results of operations or cash flows. POOR WEATHER CAN ADVERSELY AFFECT OUR SPECIALTY FOODS SEGMENT Our Specialty Foods segment purchases cucumbers under seasonal grower contracts with a variety of growers located near our plants. See "Part I -- Item 1. Business -- Raw Materials and Supply." Bad weather in one of the growing areas can damage or destroy the crop in that area. If we are not able to buy cucumbers from one of our local growers due to bad weather, we are forced to purchase cucumbers from non-local sources at substantially higher prices, which can have an adverse affect on Specialty Foods' results of operations. LOSS OF OR INABILITY TO ATTRACT KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS Our success depends to a large extent on the skills, experience and performance of our key personnel. The loss of one or more of these persons could hurt our business. We do not maintain key man life insurance on any of our executive officers, directors or other employees. If we are unable to attract and retain key personnel, our business will be adversely affected. 34 CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW COULD DETER TAKEOVER ATTEMPTS Some provisions in our certificate of incorporation and bylaws could delay, prevent or make more difficult a merger, tender offer, proxy contest or change of control. Our stockholders might view any such transaction as being in their best interests since the transaction could result in a higher stock price than the current market price for our common stock. Among other things, our certificate of incorporation and bylaws: - authorize our board of directors to issue preferred stock in series with the terms of each series to be fixed by our board of directors, - divide our board of directors into three classes so that only approximately one-third of the total number of directors is elected each year, - permit directors to be removed only for cause, and - specify advance notice requirements for stockholder proposals and director nominations. In addition, with certain exceptions, the Delaware General Corporation Law restricts mergers and other business combinations between us and any stockholder that acquires 15% or more of our voting stock. We also have a stockholder rights plan. Under this plan, after the occurrence of specified events, our stockholders will be able to buy stock from us or our successor at reduced prices. These rights do not extend, however, to persons participating in takeover attempts without the consent of our board of directors. Accordingly, this plan could delay, defer, make more difficult or prevent a change of control. WE ARE SUBJECT TO ENVIRONMENTAL REGULATIONS We, like others in similar businesses, are subject to a variety of federal, foreign, state and local environmental laws and regulations including, but not limited to, those regulating waste water and storm water, air emissions, storage tanks and hazardous materials. We believe that we are in material compliance with these laws and regulations. Future developments, including increasingly stringent regulations, could require us to make currently unforeseen environmental expenditures. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE FLUCTUATIONS In order to reduce the volatility of earnings that arises from changes in interest rates, we manage interest rate risk through the use of interest rate swap agreements. These swaps have been designated as hedges against variable interest rate exposure on loans under our senior credit facility. The following table summarizes our various interest rate swap agreements:
NOTIONAL AMOUNTS ---------------- FIXED INTEREST RATES EXPIRATION DATE 2001 - -------------------- --------------- ---------------- (IN MILLIONS) 4.90% to 4.93%....................................... December 2002 $275.0 6.07% to 6.24%....................................... December 2002 325.0 6.23%................................................ June 2003 50.0 6.69%................................................ December 2004 100.0 6.69% to 6.74%....................................... December 2005 100.0 6.78%................................................ December 2006 75.0
These swap agreements provide hedges for loans under our credit facility by limiting or fixing the LIBOR interest rates specified in the credit facility at the interest rates noted above until the indicated expiration dates of these interest rate derivative agreements. 35 These derivative agreements were previously designated as hedges for borrowings under our terminated Suiza Dairy Group credit facility, but were redesignated upon completion of the Old Dean acquisition. We have also entered into interest rate swap agreements that provide hedges for loans under Leche Celta's term loan. See Note 10 to our Consolidated Financial Statements. The following table summarizes these agreements:
FIXED INTEREST RATES EXPIRATION DATE NOTIONAL AMOUNTS - ------------- --------------- ------------------------------------------------------- 5.54% November 2003 1,500,000,000 pesetas (approximately $8.0 million as of December 31, 2001) 5.6% November 2004 2,000,000,000 pesetas (approximately $10.7 million as of December 31, 2001)
We are exposed to market risk under these arrangements due to the possibility of interest rates on our credit facilities falling below the rates on our interest rate derivative agreements. We incurred $6.9 million of additional interest expense, net of taxes and minority interest, during 2001 as a result of interest rates on our variable rate debt falling below the agreed-upon interest rate on our existing swap agreements. Credit risk under these arrangements is remote since the counterparties to our interest rate derivative agreements are major financial institutions. A majority of our debt obligations are currently at variable rates. We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in interest rates. As of December 31, 2001, the analysis indicated that such interest rate movement would not have a material effect on our financial position, results of operations or cash flows. However, actual gains and losses in the future may differ materially from that analysis based on changes in the timing and amount of interest rate movement and our actual exposure and hedges. FOREIGN CURRENCY We are exposed to foreign currency risk due to operating cash flows and various financial instruments that are denominated in foreign currencies. Our most significant foreign currency exposures relate to the British pound and the euro. At this time, we believe that potential losses due to foreign currency fluctuations would not have a material impact on our consolidated financial position, results of operations or operating cash flow. 36 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS Our Consolidated Financial Statements for 2001 are included in this report on the following pages.
PAGE ---- Independent Auditors' Report................................ F-1 Consolidated Balance Sheets as of December 31, 2001 and 2000...................................................... F-2 Consolidated Statements of Income for the years ended December 31, 2001, 2000 and 1999.......................... F-3 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999.............. F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.......................... F-5 Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies............ F-6 2. Acquisitions.......................................... F-10 3. Extraordinary Gains and Losses and Discontinued Operations............................................. F-13 4. Investments in Unconsolidated Affiliates.............. F-13 5. Inventories........................................... F-15 6. Property, Plant and Equipment......................... F-15 7. Intangible and Other Assets........................... F-15 8. Accounts Payable and Accrued Expenses................. F-16 9. Income Taxes.......................................... F-16 10. Long-Term Debt........................................ F-18 11. Mandatorily Redeemable Trust Issued Preferred Securities............................................. F-22 12. Stockholders' Equity.................................. F-22 13. Other Comprehensive Income............................ F-27 14. Employee Retirement and Profit Sharing Plans.......... F-27 15. Post-Retirement Benefits Other Than Pensions.......... F-30 16. Plant Closing Costs................................... F-31 17. Other Operating (Income) Expense...................... F-33 18. Supplemental Cash Flow Information.................... F-34 19. Commitments and Contingencies......................... F-34 20. Fair Value of Financial Instruments................... F-36 21. Business and Geographic Information and Major Customers.............................................. F-37 22. Quarterly Results of Operations (unaudited)........... F-40 23. Subsequent Events..................................... F-41 24. Related Party Transactions............................ F-42
37 INDEPENDENT AUDITORS' REPORT To the Board of Directors Dean Foods Company Dallas, Texas We have audited the accompanying consolidated balance sheets of Dean Foods Company and subsidiaries (the "Company") (formerly known as Suiza Foods Corporation) as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Dean Foods Company and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Dallas, Texas March 4, 2002 F-1 DEAN FOODS COMPANY CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ----------------------------- 2001 2000 ------------- ------------- (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) ASSETS Current assets: Cash and cash equivalents................................. $ 78,260 $ 31,110 Receivables, net of allowance for doubtful accounts of $38,784 and $24,171.................................... 775,824 519,318 Inventories............................................... 440,247 186,713 Refundable income taxes................................... 3,375 3,925 Deferred income taxes..................................... 127,579 54,634 Prepaid expenses and other current assets................. 56,899 22,231 ---------- ---------- Total current assets.............................. 1,482,184 817,931 Property, plant and equipment............................... 1,668,592 1,003,769 Intangible and other assets................................. 3,581,121 1,958,778 ---------- ---------- Total............................................. $6,731,897 $3,780,478 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses..................... $1,044,409 $ 567,342 Income taxes payable...................................... 33,582 4,342 Current portion of long-term debt......................... 96,972 128,224 ---------- ---------- Total current liabilities......................... 1,174,963 699,908 Long-term debt.............................................. 2,971,525 1,225,045 Other long-term liabilities................................. 243,695 34,202 Deferred income taxes....................................... 281,229 123,614 Mandatorily redeemable convertible trust issued preferred securities (redemption value of $599,920 and $599,945 plus accrued dividends)........................................ 584,605 584,032 Minority interest in subsidiaries........................... 514,845 Commitments and contingencies (Note 19) Stockholders' equity: Preferred stock, none issued Common stock, 43,936,490 and 27,285,649 shares issued and outstanding, with a par value of $0.01 per share....... 439 273 Additional paid-in capital................................ 962,145 166,361 Retained earnings......................................... 543,139 433,309 Accumulated other comprehensive loss...................... (29,843) (1,111) ---------- ---------- Total stockholders' equity........................ 1,475,880 598,832 ---------- ---------- Total............................................. $6,731,897 $3,780,478 ========== ==========
See notes to consolidated financial statements. F-2 DEAN FOODS COMPANY CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, ------------------------------------------ 2001 2000 1999 ------------ ------------ ------------ (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) Net sales............................................. $ 6,230,116 $ 5,756,303 $ 4,481,999 Cost of sales......................................... 4,750,100 4,330,067 3,487,075 ----------- ----------- ----------- Gross profit.......................................... 1,480,016 1,426,236 994,924 Operating costs and expenses: Selling and distribution............................ 855,192 812,274 518,962 General and administrative.......................... 184,790 182,570 148,009 Amortization of intangibles......................... 53,349 52,441 38,513 Plant closing costs................................. 9,550 3,388 12,566 Other operating (income) expense.................... (17,306) 7,500 ----------- ----------- ----------- Total operating costs and expenses.......... 1,085,575 1,058,173 718,050 ----------- ----------- ----------- Operating income...................................... 394,441 368,063 276,874 Other (income) expense: Interest expense, net............................... 101,787 112,586 49,233 Financing charges on trust issued preferred securities....................................... 33,581 33,595 38,584 Equity in (earnings) loss of unconsolidated affiliates....................................... 23,620 (11,453) (2,630) Other (income) expense, net......................... 4,690 (630) (1,416) ----------- ----------- ----------- Total other expense......................... 163,678 134,098 83,771 ----------- ----------- ----------- Income before income taxes............................ 230,763 233,965 193,103 Income taxes.......................................... 83,739 90,303 75,463 Minority interest in earnings......................... 31,431 29,911 8,813 ----------- ----------- ----------- Income before extraordinary gain (loss) and cumulative effect of accounting change......................... 115,593 113,751 108,827 Extraordinary gain (loss)............................. (4,317) 4,968 904 Cumulative effect of accounting change................ (1,446) ----------- ----------- ----------- Net income............................................ $ 109,830 $ 118,719 $ 109,731 =========== =========== =========== Basic earnings per common share: Income before extraordinary gain (loss) and cumulative effect of accounting change........... $ 4.10 $ 4.03 $ 3.31 Extraordinary gain (loss)........................... (0.15) .18 .03 Cumulative effect of accounting change.............. (0.05) ----------- ----------- ----------- Net income.......................................... $ 3.90 $ 4.21 $ 3.34 =========== =========== =========== Diluted earnings per common share: Income before extraordinary gain (loss) and cumulative effect of accounting change........... $ 3.71 $ 3.68 $ 3.11 Extraordinary gain (loss)........................... (0.11) .14 .02 Cumulative effect of accounting change.............. (0.04) ----------- ----------- ----------- Net income.......................................... $ 3.56 $ 3.82 $ 3.13 =========== =========== =========== Average common shares -- Basic........................ 28,151,398 28,195,043 32,861,218 =========== =========== =========== Average common shares -- Diluted...................... 36,892,074 36,671,264 42,858,492 =========== =========== ===========
See notes to consolidated financial statements. F-3 DEAN FOODS COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED COMMON STOCK OTHER TOTAL ------------------- ADDITIONAL RETAINED COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE SHARES AMOUNT PAID-IN CAPITAL EARNINGS INCOME (LOSS) EQUITY INCOME ---------- ------ --------------- -------- ------------- ------------- ------------- (DOLLARS IN THOUSANDS) Balance, January 1, 1999....... 33,598,074 $336 $ 446,230 $204,859 $ 4,346 $ 655,771 Issuance of common stock..... 1,106,207 11 27,382 27,393 Purchase and retirement of treasury stock............. (5,416,723) (54) (198,085) (198,139) Net income................... 109,731 109,731 $109,731 Other comprehensive income (Note 13): Cumulative translation adjustment............... (10,784) (10,784) (10,784) -------- Comprehensive income....... $ 98,947 ---------- ---- --------- -------- -------- ---------- ======== Balance, December 31, 1999..... 29,287,558 293 275,527 314,590 (6,438) 583,972 Issuance of common stock..... 1,279,956 13 39,327 39,340 Purchase and retirement of treasury stock............. (3,281,865) (33) (148,493) (148,526) Net income................... 118,719 118,719 $118,719 Other comprehensive income (Note 13): Cumulative translation adjustment............... 5,327 5,327 5,327 -------- Comprehensive income....... $124,046 ---------- ---- --------- -------- -------- ---------- ======== Balance, December 31, 2000..... 27,285,649 273 166,361 433,309 (1,111) 598,832 Issuance of common stock..... 1,314,647 13 62,629 62,642 Purchase and retirement of treasury stock............. (123,334) (2) (6,056) (6,058) Net income................... 109,830 109,830 $109,830 Acquisition of Dean Foods Company.................... 15,459,528 155 739,211 739,366 Other comprehensive income (Note 13): Cumulative effect of accounting change........ (6,403) (6,403) (6,403) Change in fair value of derivative instruments... (9,438) (9,438) (9,438) Reclassification of minority interest portion of derivative fair values................... (10,033) (10,033) (10,033) Cumulative translation adjustment............... (2,232) (2,232) (2,232) Minimum pension liability adjustment............... (626) (626) (626) -------- Comprehensive income......... $ 81,098 ---------- ---- --------- -------- -------- ---------- ======== Balance, December 31, 2001..... 43,936,490 $439 $ 962,145 $543,139 $(29.843) $1,475,880 ========== ==== ========= ======== ======== ==========
See notes to consolidated financial statements. F-4 DEAN FOODS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, ------------------------------------ 2001 2000 1999 ----------- ---------- --------- (DOLLARS IN THOUSANDS) Cash flows from operating activities: Net income............................................ $ 109,830 $ 118,719 $ 109,731 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................... 154,887 144,983 116,645 (Gain) loss on disposition of assets............... (46,366) 768 5,352 Minority interest.................................. 51,402 52,187 14,614 Equity in (earnings) loss of unconsolidated affiliates....................................... 23,620 (11,453) (2,630) Extraordinary (gain) loss.......................... 4,317 (4,968) (904) Cumulative effect of accounting change............. 1,446 Write-down of impaired assets...................... 6,812 394 6,790 Deferred income taxes.............................. 41,173 50,916 22,199 Other.............................................. 2,402 1,265 3,863 Changes in operating assets and liabilities, net of acquisitions: Receivables...................................... (3,677) (43,104) 41,878 Inventories...................................... (2,611) (18,977) 22,709 Prepaid expenses and other assets................ (16,370) 2,321 (20,492) Accounts payable and accrued expenses............ (24,456) 5,950 (58,954) Income taxes..................................... 7,798 (1,323) 22,704 ----------- ---------- --------- Net cash provided by operating activities..... 310,207 297,678 283,505 ----------- ---------- --------- Cash flows from investing activities: Net additions to property, plant, and equipment....... (137,244) (136,876) (187,642) Cash outflows for acquisitions and investments........ (1,146,077) (335,956) (235,837) Net proceeds from divestitures........................ 89,037 383,112 Other................................................. 2,821 3,542 2,383 ----------- ---------- --------- Net cash used in investing activities......... (1,280,500) (380,253) (37,984) ----------- ---------- --------- Cash flows from financing activities: Proceeds from issuance of debt........................ 2,203,725 1,284,492 538,995 Repayment of debt..................................... (1,173,335) (947,443) (631,065) Payments of deferred financing, debt restructuring and merger costs....................................... (47,125) (12,014) Proceeds from issuance of minority interest........... 8,983 Distributions to minority interest holders............ (10,363) (16,438) (10,122) Issuance of common stock, net of expenses............. 50,599 28,514 16,060 Redemption of common and preferred stock.............. (6,058) (148,526) (198,139) Redemption of trust issued preferred securities....... (100,055) ----------- ---------- --------- Net cash provided by (used in) financing activities.................................. 1,017,443 88,530 (275,288) ----------- ---------- --------- Increase (decrease) in cash and cash equivalents........ 47,150 5,955 (29,767) Cash and cash equivalents, beginning of period.......... 31,110 25,155 54,922 ----------- ---------- --------- Cash and cash equivalents, end of period................ $ 78,260 $ 31,110 $ 25,155 =========== ========== =========
See notes to consolidated financial statements. F-5 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation -- Our consolidated financial statements include the accounts of our wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. We also own equity interests of less than 50% in certain companies that we do not control but over which we have significant influence. Those interests are accounted for in our consolidated financial statements using the equity method of accounting. Under the equity method of accounting, our investments in these affiliates are presented as a single amount in our consolidated balance sheets and our proportional share of their earnings are presented in our consolidated statements of income as a single line item under "other income." See Note 4 for a description of our investments in unconsolidated affiliates. Other investments over which we do not exercise significant influence are accounted for under the cost method of accounting. The preparation of our consolidated financial statements in conformity with generally accepted accounting principles requires us to use our judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates under different assumptions or conditions. Cash Equivalents -- We consider temporary cash investments with a remaining maturity of three months or less to be cash equivalents. Inventories -- Inventories are stated at the lower of cost or market. Dairy and certain specialty products are valued on the first-in, first-out ("FIFO") method while the majority of pickles and powdered products inventories are valued using the last-in, first-out ("LIFO") method. The costs of finished goods inventories include raw materials, direct labor and indirect production and overhead costs. Property, Plant and Equipment -- Property, plant and equipment are stated at acquisition cost, plus capitalized interest on borrowings during the actual construction period of major capital projects. Also included in property, plant and equipment are certain direct costs related to the implementation of computer software for internal use. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets, as follows:
ASSET USEFUL LIFE ----- ----------- Buildings and improvements Seven to 40 years Machinery and equipment Three to 20 years
Capitalized leases are amortized over the shorter of their lease term or their estimated useful lives. Expenditures for repairs and maintenance which do not improve or extend the life of the assets are expensed as incurred. Intangible and Other Assets -- Intangible and other assets include the following intangibles, which are amortized over their related estimated useful lives:
ASSET USEFUL LIFE ----- ----------- Goodwill Straight-line method over 25 to 40 years Identifiable intangible assets: Customer lists Straight-line method over seven to ten years Customer supply contracts Straight-line method over the terms of the agreements (primarily 15 years) Trademarks/trade names Straight-line method over ten to 40 years Noncompetition agreements Straight-line method over the terms of the agreements Patents Straight-line method over fifteen years Deferred financing costs Interest method over the terms of the related debt
F-6 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Effective January 1, 2002, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, we no longer amortize goodwill. As part of the adoption, we are currently reassessing the useful lives and residual values of all intangible assets. Any recognized intangible asset determined to have an indefinite useful life will no longer be amortized. We periodically assess the net realizable value of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. To determine whether an impairment exists, we compare the expected future net operating cash flows, undiscounted and without interest charges, to the carrying amount of the underlying assets. We would consider a potential impairment if the recorded value of these assets exceeded the associated future net operating cash flows. Any potential impairment loss would be measured as the amount by which the carrying value exceeds the fair value of the asset. Fair value of assets would be measured by market value, if an active market exists, or by a forecast of expected future net operating cash flows, discounted at a rate commensurate with the risk involved. Foreign Currency Translation -- The financial statements of our foreign subsidiaries are translated to U.S. dollars in accordance with the provisions of SFAS No. 52, "Foreign Currency Translation." The functional currency of our foreign subsidiaries is generally the local currency of the country. Accordingly, assets and liabilities of the foreign subsidiaries are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at the average rates prevailing during the year. Changes in exchange rates, which affect cash flows and the related receivables or payables are recognized as transaction gains and losses in the determination of net income. The cumulative translation adjustment in stockholders' equity reflects the unrealized adjustments resulting from translating the financial statements of our foreign subsidiaries. Minority Interest in Subsidiaries -- Minority interest in results of operations of consolidated subsidiaries represents the minority shareholders' share of the income or loss of various consolidated subsidiaries. The minority interest in the consolidated balance sheet reflects the original investment by these minority shareholders in these consolidated subsidiaries, along with their proportional share of the earnings or losses of these subsidiaries less any cash distributions made. Employee Stock Options and Restricted Stock -- We measure compensation expense for our stock-based employee compensation plans using the intrinsic value method and provide the required pro forma disclosures of the effect on net income and earnings per share as if the fair value-based method had been applied in measuring compensation expense. Revenue Recognition and Accounts Receivable -- Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, the product has been shipped to the customer and there is a reasonable assurance of collection of the sales proceeds. Revenue is reduced by sales incentives that are recorded by estimating expense based on our historical experience. We provide credit terms to customers generally ranging up to 30 days, perform ongoing credit evaluation of our customers and maintain allowances for potential credit losses based on historical experience. Income Taxes -- All of our wholly-owned U.S. operating subsidiaries are included in our consolidated tax return. In addition, our proportional share of the operations of our majority-owned subsidiaries and certain of our equity method affiliates, which are organized as limited liability companies or limited partnerships are also included in our consolidated tax return. Our Puerto Rico and foreign subsidiaries are required to file separate income tax returns in their local jurisdictions. Certain distributions from these subsidiaries are subject to U.S. income taxes; however, available tax credits of these subsidiaries may reduce or eliminate these U.S. income tax liabilities. Deferred income taxes are provided for temporary differences between amounts recorded in the consolidated financial statements and tax bases of assets and liabilities using currently enacted current tax F-7 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) rates. Deferred tax assets, including the benefit of net operating loss carry-forwards, are evaluated based on the guidelines for realization and may be reduced by a valuation allowance if deemed necessary. Advertising Expense -- Advertising expense is comprised of media, agency and production expenses. Advertising expenses are charged to income during the period incurred, except for expenses related to the development of a major commercial or media campaign which are charged to income during the period in which the advertisement or campaign is first presented by the media. Advertising expenses charged to income totaled $42.4 million in 2001, $63.1 million in 2000 and $43.5 million in 1999. Additionally, prepaid advertising costs were $2.1 million at December 31, 2001. There were no prepaid advertising costs at December 31, 2000. Comprehensive Income -- We consider all changes in equity from transactions and other events and circumstances, except those resulting from investments by owners and distributions to owners, to be comprehensive income. Adoption of New Accounting Pronouncements -- SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended, became effective for us as of January 1, 2001. We hedge a portion of our exposure to variable interest rates using interest rate swaps. These swaps, designated as cash flow hedging instruments, are used to hedge a portion of our debt, with the objective of minimizing our interest rate risk and stabilizing cash flows. These swaps are required to be recorded as an asset or liability on our consolidated balance sheet at fair value, with an offset to other comprehensive income to the extent the hedge is effective. Derivative gains and losses included in other comprehensive income are reclassified into earnings as the underlying transaction occurs. Any ineffectiveness in our hedges is recorded as an adjustment to interest expense. Our adoption of this accounting standard as of January 1, 2001 resulted in: - the recognition of a liability related to our cash flow hedges of $16.3 million, - a charge, net of income taxes and minority interest, of $1.4 million to earnings as a cumulative effect of the adoption of this new standard, and - a charge, net of income taxes and minority interest, of $6.4 million to other comprehensive income as a cumulative effect of the adoption of this new standard. As of December 31, 2001, our derivative liability totaled $44.1 million on our consolidated balance sheet including approximately $27.8 million recorded as a component of accounts payable and accrued expenses and $16.3 million recorded as a component of other long-term liabilities. Hedge ineffectiveness, determined in accordance with SFAS No. 133 and included in our income statement, totaled approximately $93,000 for the year ended December 31, 2001. Approximately $6.9 million of losses (net of taxes and minority interest) were reclassified to interest expense from other comprehensive income during the year ended December 31, 2001. We estimate that approximately $16.5 million of net derivative losses (net of income taxes) included in other comprehensive income will be reclassified into earnings within the next twelve months. These losses will partially offset the lower interest payments recorded on our variable rate debt. In September 2000, the Emerging Issues Task Force ("Task Force") of the Financial Accounting Standards Board ("FASB") reached a consensus on Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs," which became effective for us in the fourth quarter of 2000. This issue required the disclosure of our accounting policies for shipping and handling costs and their income statement classification. Our shipping and handling costs are included in both costs of sales and selling and distribution expense, depending on the nature of such costs. Shipping and handling costs reflected in costs of sales include the cost of shipping products to customers through third party carriers, inventory warehouse costs and product loading and handling costs. Shipping and handling costs reflected in selling and distribution expense consist primarily of route delivery costs for both company-owned delivery routes and independent distributor routes, to the F-8 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) extent that such independent distributors are paid a delivery fee. These shipping and handling costs that were recorded as a component of selling and distribution expense were approximately $662.2 million, $614.1 million and $370.4 million during 2001, 2000 and 1999, respectively. Recently Issued Accounting Pronouncements -- The Task Force also reached a consensus on Issue No. 00-14, "Accounting for Certain Sales Incentives," which becomes effective for us in the first quarter of 2002. This issue addresses the recognition, measurement and income statement classification of sales incentives that have the effect of reducing the price of a product or service to a customer at the point of sale. Our current accounting policy for recording sales incentives within the scope of this issue is to record estimated coupon expense based on historical coupon redemption experience which is consistent with the requirements of this issue. Therefore, our adoption of this issue will have no impact on our consolidated financial statements. In April 2001, the Task Force reached a consensus on Issue No. 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products." We will adopt this Issue in the first quarter of 2002, as required. Under this Issue, certain consideration paid to our customers (such as slotting fees) will be required to be classified as a reduction of revenue, rather than recorded as an expense. Adoption of this Issue will result in the reclassification of certain costs; however, there will be no change in reported net income. In June 2001, FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 addresses financial accounting and reporting for business combinations. Under the new standard, all business combinations entered into after June 30, 2001 have been accounted for by the purchase method. We have and will continue to apply the provisions of SFAS No. 141 to all business combinations completed after June 30, 2001. The acquisition of Old Dean (see Note 2) was accounted for in accordance with SFAS 141. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. We adopted SFAS No. 142 on January 1, 2002. SFAS No. 142 requires that goodwill no longer be amortized, but instead requires a transitional goodwill impairment assessment and annual impairment tests thereafter. Any transitional impairment loss resulting from the adoption will be recognized as the effect of a change in accounting principle in our income statement. Amortization of goodwill was $45.5 million for the year ended December 31, 2001. We are currently in the process of completing the transitional impairment assessment and calculating any impact on our financial statements. We must complete the first step of this test to determine if we have an impairment by June 30, 2002 and, if we have an impairment, we must complete the final step and record any impairment by December 31, 2002. SFAS No. 142 also requires that recognized intangible assets be amortized over their respective estimated useful lives. As part of the adoption, we are currently reassessing the useful lives and residual values of all intangible assets. Any recognized intangible asset determined to have an indefinite useful life will not be amortized, but instead tested for impairment in accordance with the standard. In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 will become effective for us in fiscal year 2003. We are currently evaluating the impact of adopting this pronouncement on our consolidated financial statements. FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" in August 2001 and it became effective for us beginning January 1, 2002. SFAS No. 144, which supercedes SFAS No. 121, provides a single, comprehensive accounting model for impairment and disposal of long-lived assets and discontinued operations. Our adoption of this standard will not have a material impact on our consolidated financial statements. F-9 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Reclassifications -- Certain reclassifications have been made to conform the prior years' consolidated financial statements to the current year classifications. 2. ACQUISITIONS Acquisition of Dean Foods Company -- On December 21, 2001, we completed our acquisition of Dean Foods Company ("Old Dean"). As a result of this transaction, Old Dean was merged with and into our wholly-owned subsidiary, Blackhawk Acquisition Corp. Blackhawk Acquisition Corp. survived the merger and immediately changed its name to Dean Holding Company. Immediately after completion of the merger, we changed our name to Dean Foods Company. As a result of the merger, each share of common stock of Old Dean was converted into 0.429 shares of our common stock and the right to receive $21.00 in cash. The aggregate purchase price recorded was $1.7 billion, including $756.8 million of cash paid to Old Dean stockholders, common stock valued at $739.4 million and estimated transaction costs of $55.7 million. The value of the 15,459,528 common shares issued was determined based on the average market price of our common stock during the period from April 2 through April 10, 2001 (the merger was announced on April 5, 2001). In addition, each of the 3.6 million options to purchase Old Dean's common stock outstanding on December 21, 2001 was converted into an option to purchase 0.752 shares of our stock. As discussed below, the holders of these options had the right, during the ninety day period following the acquisition, to surrender their stock options to us, in lieu of exercise, in exchange for a cash payment. Also on December 21, 2001, in connection with our acquisition of Old Dean, we purchased Dairy Farmers of America's ("DFA") 33.8% stake in our Dairy Group for consideration consisting of: (1) approximately $145.4 million in cash, (2) a contingent promissory note in the original principal amount of $40 million, and (3) the operations of eleven plants (including seven of our plants and four of Old Dean's plants) located in nine states where we and Old Dean had overlapping operations. As additional consideration, we amended a milk supply agreement with DFA to provide that if we do not, within a specified period following the completion of our acquisition of Old Dean, offer DFA the right to supply raw milk to certain of the Old Dean dairy plants, we could be required to pay liquidated damages of up to $47.0 million. See Note 19 for further discussion of these contingent obligations. As a result of this transaction, we now own 100% of our Dairy Group. In connection with the merger, we entered into a new credit facility and expanded our receivables-backed loan facility. We used the proceeds from the credit facility and receivables-backed loan facility to fund the cash portion of the merger consideration and the acquisition of DFA's minority interest, to refinance certain indebtedness and to pay certain transaction costs. See Note 10. Old Dean's operations and the acquisition of DFA's minority interest are reflected in our consolidated financial statements after December 21, 2001. F-10 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the currently estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of Old Dean, and includes the effects of divesting four Old Dean plants. We have not completed a final allocation of the purchase price to the fair values of assets and liabilities of Old Dean and the related business integration plans. We expect that the ultimate purchase price allocation may include additional adjustments to the fair values of depreciable tangible assets, identifiable intangible assets (some of which will have indefinite lives) and the carrying values of certain liabilities. Accordingly, to the extent that such assessments indicate that the fair value of the assets and liabilities differ from their preliminary purchase price allocations, such difference would adjust the amounts allocated to those assets and liabilities and would change the amounts allocated to goodwill.
AT DECEMBER 21, 2001 -------------------- (IN THOUSANDS) Current assets.............................................. $ 694,453 Property, plant, and equipment.............................. 725,258 Intangible assets........................................... 236,978 Goodwill.................................................... 1,515,267 Other assets................................................ 79,945 ---------- Total assets acquired............................. 3,251,901 Current liabilities......................................... 540,458 Other liabilities........................................... 285,209 Long-term debt.............................................. 685,645 ---------- Total liabilities assumed......................... 1,511,312 ---------- Net assets acquired......................................... $1,740,589 ==========
Of the approximately $237.0 million of acquired intangible assets, approximately $206.5 million was preliminarily assigned to trademarks and trade names that are not subject to amortization and approximately $30.5 million was assigned to customer contracts that have a weighted-average useful life of approximately 17 years. The approximately $1.5 billion of goodwill was assigned to Old Dean's Dairy Group, NRP and Specialty segments in the amounts of $1.01 billion, $215.0 million and $290.0 million, respectively. None of the goodwill is expected to be deductible for tax purposes. The initial purchase price allocation of Old Dean includes a liability of approximately $82.3 million for payment obligations to Old Dean employees related to Old Dean stock options as a result of the change in control of Old Dean. Under Old Dean's stock option agreements, upon a change in control, employees had the right to surrender their stock options to us, in lieu of exercise, in exchange for a cash payment during the ninety day period following the change in control. The required cash payment will vary depending on the type of stock option and the grant date with certain stock options requiring a cash payment equal to the difference between the exercise price and the highest closing price of our stock during the sixty day period beginning thirty days before and ending 30 days after the completion of the change in control transaction, and certain of the stock option agreements require a tax gross-up payment upon surrender. We have also accrued a change in control obligation of approximately $4.9 million for payments to 18 officers under Old Dean's long-term incentive plan and for transition bonuses to 5 officers of Old Dean, both of which became earned and payable upon consummation of the merger; and severance obligations of approximately $17.5 million related to the termination of certain employees and officers of Old Dean as a result of the decision to eliminate certain Old Dean administrative functions. F-11 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Acquisition of Minority Interest in Spanish Operations -- In August of 2001, we purchased the 25% minority interest in Leche Celta, our Spanish dairy processor, for approximately $12.6 million. We funded this purchase with cash flow from operations. General -- In total, we completed the acquisitions of 15 dairy businesses during 2001, 2000 and 1999, which included the following acquisitions that were significant at the time of completion:
DATE COMPANY PURCHASE PRICE - ---- ------- -------------- (IN THOUSANDS) December 2001.................................... Dean Foods Company $1,740,589 January 2000..................................... Southern Foods Group 435,606
These acquisitions and the smaller dairy businesses acquired were funded primarily with borrowings under our credit facilities, along with the issuance in 2001 and 1999 of 15,459,528 and 77,233 shares of our common stock, respectively, with fair market values of $739.4 million and $3.2 million, respectively. All acquisitions were accounted for using the purchase method of accounting as of their respective acquisition dates, and accordingly, only the results of operations of the acquired companies subsequent to their respective acquisition dates are included in our consolidated financial statements. At the acquisition date, the purchase price was allocated to assets acquired, including identifiable intangibles, and liabilities assumed based on their fair market values. The excess of the total purchase prices over the fair values of the net assets acquired represented goodwill. In connection with the acquisitions (including the Old Dean acquisition), assets were acquired and liabilities were assumed subject to final purchase price adjustments and allocations as follows:
YEAR ENDED DECEMBER 31, ---------------------------------- 2001 2000 1999 ----------- --------- -------- (IN THOUSANDS) Purchase prices: Cash paid, net of cash acquired................. $ 1,146,077 $ 331,543 $230,611 Cash acquired in acquisitions................... 15,060 6,327 9,976 Common stock issued............................. 739,366 3,193 Subsidiary preferred and common securities issued and minority partnership interests.... 340,336 18,500 Operations of 11 plants......................... 287,989 Subordinated contingent promissory note issued....................................... 40,000 ----------- --------- -------- Total purchase prices................... 2,228,492 678,206 262,280 Fair values of net assets acquired: Assets acquired................................. 2,283,882 473,648 94,514 Liabilities assumed............................. (1,511,436) (187,907) (21,273) ----------- --------- -------- Total fair value of net assets acquired......... 772,446 285,741 73,241 ----------- --------- -------- Goodwill.......................................... $ 1,456,046 $ 392,465 $189,039 =========== ========= ========
F-12 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The unaudited results of operations on a pro forma basis for the year ended December 31, 2001 and 2000, as if the acquisition of Old Dean, and the purchase of DFA's minority interest (including the divestiture of the 11 plants transferred in partial consideration of that interest) had occurred as of the beginning of 2000 are as follows:
YEAR ENDED DECEMBER 31, -------------------------------- 2001 2000 --------------- -------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales................................................... $10,058,288 $9,239,049 Income from continuing operations before taxes.............. 289,058 296,079 Net income from continuing operations....................... 178,411 182,702 Earnings per share from continuing operations: Basic..................................................... $ 4.13 $ 4.19 Diluted................................................... $ 3.85 $ 3.91
3. EXTRAORDINARY GAINS AND LOSSES AND DISCONTINUED OPERATIONS On December 21, 2001, simultaneously with our acquisition of Old Dean, we replaced our former credit facilities with a new credit facility. As a result, we recognized a $4.3 million extraordinary loss, net of an income tax benefit of $3.0 million, for the write-off of deferred financing costs related to the early retirement of our former credit facilities. During the first quarter of 2000, we recognized a $5.0 million extraordinary gain, net of income tax expense of $2.8 million, which included the following items related to the early extinguishment of our previous senior credit facility: - A $6.5 million gain, net of income tax expense of $3.6 million, for interest rate derivatives which became unhedged and were marked to fair market value, and - A $1.5 million loss, net of an income tax benefit of $0.8 million, for the write-off of deferred financing costs. In the fourth quarter of 1999 we recorded a gain of $0.9 million, net of income taxes of $0.5 million, when contingencies related to the sale of our packaged ice operations in 1998 were resolved favorably. 4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES Investment in Consolidated Container Company -- We own a 43.1% interest in Consolidated Container Company ("CCC"), one of the nation's largest manufacturers of rigid plastic containers and our largest supplier of plastic bottles and bottle components. We have owned that interest since July 1999 when we sold our U.S. plastic packaging operations to CCC. Vestar Capital Partners controls CCC through a 50.9% ownership interest. The remaining 6% of CCC is owned indirectly by Alan Bernon, a member of our Board of Directors, and his brother Peter Bernon. Pursuant to our agreements with Vestar, we control 2 of the 7 seats on CCC's Management Committee. For all periods prior to July 2, 1999, our former U.S. plastic packaging operations are included in our consolidated financial statements. Included in consolidated sales for the first six months of 1999 were sales of $245.0 million related to those operations. Beginning July 2, 1999, the assets and liabilities and results of operations of our formerly consolidated U.S. plastic packaging operations are eliminated from our consolidated financial statements. Since July 2, 1999, our investment in CCC has been accounted for under the equity method of accounting. During 2001, F-13 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) due to a variety of operational difficulties, CCC consistently reported operating results that were significantly weaker than expected, which resulted in significant losses in the third and fourth quarters. CCC has implemented several changes in an effort to return to stable profitability. However, in November 2001 CCC announced that it did not expect to see the benefits of these changes for at least several quarters. As a result, CCC became unable to comply with the financial covenants contained in its credit facility. Accordingly, we concluded that our investment was impaired and wrote off our remaining investment during the fourth quarter of 2001. Our investment in CCC was recorded at $0 and $23.7 million at December 31, 2001 and 2000, respectively. Equity in (earnings) loss of unconsolidated affiliates in our consolidated income statement includes the following amounts related to CCC.
YEAR ENDED DECEMBER 31, ---------------------------- 2001 2000 1999 ------- -------- ------- (DOLLARS IN THOUSANDS) Equity in (earnings) loss of CCC....................... $ 2,779 $ (7,929) $(6,024) Equity in CCC restructuring and other nonrecurring charges.............................................. 1,724 (756) 4,948 Amortization of difference between investment balance and underlying equity interest in net assets......... (1,904) (2,567) (1,363) Write-off investment in CCC............................ 21,126 -- -- ------- -------- ------- Total equity in (earnings) loss of CCC....... $23,725 $(11,252) $(2,439) ======= ======== =======
In February 2002, CCC's lenders agreed to restructure CCC's credit agreement to modify the financial covenants, subject to the agreement of CCC's primary shareholders to guarantee certain of CCC's indebtedness. Because CCC is an important and valued supplier of ours, and in order to protect our interest in CCC, we agreed to provide a limited guarantee of up to $10.0 million of CCC's revolving credit indebtedness. The guaranty will expire in January 2003. Please see Note 19 to our Consolidated Financial Statements for further information regarding our guarantee of CCC's indebtedness. Investment in Horizon Organic -- As of December 31, 2001 and 2000 we had a 13.2% and 13.6%, respectively, interest in Horizon Organic, America's largest organic food company. We account for this investment under the equity method of accounting. We believe that we have the ability to influence the operating policies of Horizon given the size of our investment and the fact that we control one seat on their Board. Horizon's common stock is traded on the Nasdaq under the symbol "HCOW." The quoted stock price ranged from $4.45 to $16.88 during 2001. The closing stock price on December 31, 2001 was $16.52 per share, resulting in a market value of our investment of $22.1 million. Our investment in Horizon Organic at December 31, 2001 and 2000 was $16.5 million and $16.4 million, respectively, and our equity in earnings included in our consolidated statement of income for 2001 and 2000 was $0.1 million and $0.2 million, respectively. Investment in White Wave -- One of our subsidiaries, Dean Dip and Dressing, owns a 37.2% interest in White Wave, Inc., maker of Silk(R) soy milks, soy coffee creamers and soy cultured products, as well as certain tofu products. We account for this investment under the equity method of accounting. This investment was made by Dean Dip & Dressing prior to our acquisition of Old Dean. Investment in Momentx -- As of December 31, 2001 and 2000 we had a 15.6% and 12.4% interest in Momentx, Inc., respectively. Our investment in Momentx at December 31, 2001 and 2000 was $1.2 million and $4.2 million, respectively. Momentx is the owner and operator of dairy.com, an online vertical exchange dedicated to the dairy industry. We account for this investment under the cost method of accounting. During 2001, we recorded an impairment charge on this investment of $3.6 million in "Other (income) expense, net" to reflect the current value of our equity stake based on their latest financing. F-14 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. INVENTORIES
DECEMBER 31, ------------------- 2001 2000 -------- -------- (IN THOUSANDS) Raw materials and supplies.................................. $161,673 $ 99,315 Finished goods.............................................. 278,574 87,398 -------- -------- Total............................................. $440,247 $186,713 ======== ========
6. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- (IN THOUSANDS) Land........................................................ $ 146,831 $ 102,331 Buildings and improvements.................................. 520,914 327,477 Machinery and equipment..................................... 1,370,683 863,740 ---------- ---------- 2,038,428 1,293,548 Less accumulated depreciation............................... (369,836) (289,779) ---------- ---------- Total............................................. $1,668,592 $1,003,769 ========== ==========
For 2001 and 2000, we capitalized $3.4 million and $3.5 million in interest, respectively, related to borrowings during the actual construction period of major capital projects, which is included as part of the cost of the related asset. 7. INTANGIBLE AND OTHER ASSETS
DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- (IN THOUSANDS) Goodwill.................................................... $3,108,326 $1,790,523 Identifiable intangibles.................................... 462,798 224,129 Deposits and other.......................................... 96,190 36,444 Investments in unconsolidated affiliates.................... 67,026 44,831 Deferred income taxes....................................... 19,704 41 ---------- ---------- 3,754,044 2,095,968 Less accumulated amortization............................... (172,923) (137,190) ---------- ---------- Total............................................. $3,581,121 $1,958,778 ========== ==========
F-15 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
DECEMBER 31, --------------------- 2001 2000 ---------- -------- (IN THOUSANDS) Accounts payable............................................ $ 472,206 $370,355 Payroll and benefits........................................ 236,527 71,219 Other accrued liabilities................................... 335,676 125,768 ---------- -------- $1,044,409 $567,342 ========== ========
9. INCOME TAXES The following table presents the 2001, 2000 and 1999 provisions for income taxes.
YEAR ENDED DECEMBER 31, --------------------------- 2001(1) 2000(2) 1999(3) ------- ------- ------- (IN THOUSANDS) Current taxes payable: Federal............................................... $39,840 $47,010 $31,480 State................................................. 6,516 8,668 10,041 Foreign and other..................................... 3,944 2,151 6,433 Deferred income taxes................................... 33,439 32,474 27,509 ------- ------- ------- Total......................................... $83,739 $90,303 $75,463 ======= ======= =======
- --------------- (1) Excludes a $3.0 million income tax benefit related to an extraordinary loss and a $1.5 million income tax benefit related to a cumulative effect of accounting change. (2) Excludes a $2.8 million income tax expense related to extraordinary gains. (3) Excludes a $0.5 million income tax expense related to extraordinary gains. The following is a reconciliation of income taxes computed at the U.S. federal statutory tax rate to the income taxes reported in the consolidated statements of income:
YEAR ENDED DECEMBER 31, --------------------------- 2001 2000 1999 ------- ------- ------- (IN THOUSANDS) Tax expense at statutory rates.......................... $80,767 $81,888 $67,586 State income taxes...................................... 3,699 9,315 7,795 Tax effect of tax-exempt earnings....................... (3,253) (2,687) (2,612) Nondeductible goodwill.................................. 5,527 4,229 1,968 Other................................................... (3,001) (2,442) 726 ------- ------- ------- Total......................................... $83,739 $90,303 $75,463 ======= ======= =======
F-16 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The tax effects of temporary differences giving rise to deferred income tax assets and liabilities were:
DECEMBER 31, --------------------- 2001 2000 --------- --------- (IN THOUSANDS) Deferred income tax assets: Net operating loss carry-forwards......................... $ 10,709 $ 20,007 Asset valuation reserves.................................. 317 5,493 Non-deductible accruals................................... 136,415 41,894 State and foreign tax credits............................. 12,854 3,381 Derivative instruments.................................... 14,624 Other..................................................... 8,134 6,469 Valuation allowances...................................... (1,537) --------- --------- 181,516 77,244 Deferred income tax liabilities: Depreciation and amortization............................. (300,093) (118,886) Tax credit basis differences.............................. (7,854) (6,251) Basis differences in unconsolidated affiliates............ (7,515) (21,046) --------- --------- (315,462) (146,183) --------- --------- Net deferred income tax liability................. $(133,946) $ (68,939) ========= =========
These net deferred income tax assets (liabilities) are classified in our consolidated balance sheets as follows:
DECEMBER 31, --------------------- 2001 2000 --------- --------- (IN THOUSANDS) Current assets.............................................. $ 127,579 $ 54,634 Noncurrent assets........................................... 19,704 41 Noncurrent liabilities...................................... (281,229) (123,614) --------- --------- Total............................................. $(133,946) $ (68,939) ========= =========
At December 31, 2001, we had approximately $28.2 million of net operating losses and approximately $12.9 million of tax credits available for carry-over to future years. The losses are subject to certain limitations and will expire beginning in 2008. A valuation allowance of $1.5 million has been established because we believe it is not "more likely than not" that all of the deferred tax assets relating to state net operating losses and credit carry-overs will be realized prior to the date they are scheduled to expire. F-17 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. LONG-TERM DEBT
DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- (IN THOUSANDS) Senior credit facility...................................... $1,900,000 $ -- Subsidiary debt obligations: Senior notes.............................................. 658,211 Suiza Dairy Group credit facility (now terminated)........ 1,095,000 Receivables-backed loan................................... 400,000 150,000 Foreign subsidiary term loan.............................. 35,172 39,519 Uncommitted line of credit................................ 20,000 Other lines of credit..................................... 2,317 Industrial development revenue bonds...................... 28,001 8,845 Capital lease obligations and other....................... 44,796 39,905 ---------- ---------- 3,068,497 1,353,269 Less current portion........................................ (96,972) (128,224) ---------- ---------- Total............................................. $2,971,525 $1,225,045 ========== ==========
Terminated Credit Facilities -- In connection with our acquisition of Old Dean effective December 21, 2001, we replaced our then existing parent-level and Suiza Dairy Group credit facilities with a new senior credit facility, as described under "Senior Credit Facility" below. The old parent-level credit facility provided us with a revolving line of credit of up to $300.0 million to be used for general corporate and working capital purposes. The Suiza Dairy Group credit facility provided us with an $805.0 million revolving line of credit, a $625.0 million term loan and a $180.0 million term loan. Both facilities would have expired in January 2005. Senior Credit Facility -- Simultaneously with the closing of our acquisition of Old Dean, we entered into a new $2.7 billion credit facility with a syndicate of lenders. The senior credit facility provides an $800.0 million revolving line of credit, a Tranche A $900.0 million term loan and a Tranche B $1.0 billion term loan. At closing, we borrowed $1.9 billion under this facility's term loans. Proceeds of these borrowings were used to repay debt under the terminated credit facilities, to pay the merger consideration to Old Dean's shareholders, to repay Old Dean's credit facility and certain other obligations, to purchase DFA's ownership stake in our Dairy Group, and to pay certain transaction costs. The $800.0 million revolver was not used. See "Credit Facility Terms" below for a description of the terms of the senior credit facility. Credit Facility Terms -- Amounts outstanding under the senior credit facility bear interest at a rate per annum equal to one of the following rates, at our option: - a base rate equal to the higher of the Federal Funds rate plus 50 basis points or the prime rate, plus a margin that varies from 25 to 150 basis points for the revolving credit facility and Tranche A term loan and varies from 125 to 200 basis points for the Tranche B term loan, depending on our leverage ratio (which is the ratio of defined indebtedness to EBITDA), or - the London Interbank Offering Rate ("LIBOR") computed as LIBOR divided by the product of one minus the Eurodollar Reserve Percentage, plus a margin that varies from 150 to 275 basis points for the revolving credit facility and Tranche A term loan and varies from 250 to 325 basis points for the Tranche B term loan, depending on our leverage ratio. The interest rate in effect on the senior credit facility, including the applicable interest rate margin, was 4.67% at December 31, 2001. We have interest rate swap agreements in place, however, that hedge F-18 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $925.0 million of this facility at an average rate of 5.95%, plus the applicable interest rate margin. Interest is payable quarterly or at the end of the applicable interest period. Scheduled principal payments on the Tranche A $900.0 million term loan are due in the following installments: - $16.87 million quarterly from March 31, 2002 through December 31, 2002; - $33.75 million quarterly from March 31, 2003 through December 31, 2004; - $39.38 million quarterly from March 31, 2005 through December 31, 2005; - $45.0 million quarterly from March 31, 2006 through December 31, 2006; - $56.25 million quarterly from March 31, 2007 through June 30, 2007; and - A final payment of $112.5 million on July 15, 2007. Scheduled principal payments on the Tranche B $1.0 billion term loan are due in the following installments: - $1.25 million quarterly from March 31, 2002 through December 31, 2002; - $2.5 million quarterly from March 31, 2003 through December 31, 2007; - a payment of $472.5 million on March 31, 2008; and - A final payment of $472.5 million on July 15, 2008. No principal payments are due on the $800.0 million line of credit until maturity on July 15, 2007. The credit agreement also requires mandatory principal prepayments in certain circumstances including without limitation: (1) upon the occurrence of certain asset dispositions not in the ordinary course of business, (2) upon the occurrence of certain debt and equity issuances when our leverage ratio is greater than 3.0 to 1.0, and (3) after December 31, 2002, annually when our leverage ratio is greater than 3.0 to 1.0. As of December 31, 2001, our leverage ratio was 3.47. In consideration for the revolving commitments, we pay a commitment fee on unused amounts of the senior credit facility that ranges from 37.5 to 50 basis points, based on our leverage ratio. The senior credit facility contains various financial and other restrictive covenants and requirements that we maintain certain financial ratios, including a leverage ratio (computed as the ratio of the aggregate outstanding principal amount of defined indebtedness to EBITDA) and an interest coverage ratio (computed as the ratio of EBITDA to interest expense). In addition, this facility requires that we maintain a minimum level of net worth (as defined by the agreement). Our leverage ratio must be less than or equal to:
PERIOD RATIO - ------------------------------------------------------------ ------------ 12-21-01 through 12-31-02................................... 4.25 to 1.00 01-01-03 through 12-31-03................................... 4.00 to 1.00 01-01-04 through 12-31-04................................... 3.75 to 1.00 01-01-05 and thereafter..................................... 3.25 to 1.00
Our interest coverage ratio must be greater than or equal to 3.00 to 1.00. Our consolidated net worth must be greater than or equal to $1.2 billion, as increased each quarter by an amount equal to 50% of our consolidated net income for the quarter, plus 75% of the amount by which stockholders' equity is increased by certain equity issuances. As of December 31, 2001, the minimum net worth requirement was $1.2 billion. F-19 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The facility also contains limitations on liens, investments, the incurrence of additional indebtedness and acquisitions, and prohibits certain dispositions of property and restricts certain payments, including dividends. The credit facility is secured by liens on substantially all of our domestic assets (including the assets of our subsidiaries, but excluding the capital stock of Old Dean's subsidiaries, and the real property owned by Old Dean and its subsidiaries). The agreement contains standard default triggers, including without limitation: failure to maintain compliance with the financial and other covenants contained in the agreement, default on certain of our other debt, a change in control and certain other material adverse changes in our business. The agreement does not contain any default triggers based on our debt rating. We are currently in compliance with all covenants contained in the credit agreement. Senior Notes -- Old Dean had certain senior notes outstanding at the time of the acquisition which remain outstanding. The notes carry the following interest rates and maturities: - $95.7 million ($100 million face value), at 6.75% interest, maturing in 2005; - $250.6 million ($250 million face value), at 8.15% interest, maturing in 2007; - $187.3 million ($200 million face value), at 6.625% interest, maturing in 2009; and - $124.6 million ($150 million face value), at 6.9% interest, maturing in 2017. These notes were issued by Old Dean. The related indentures do not contain financial covenants but they do contain certain restrictions including a prohibition against Old Dean and its subsidiaries granting liens on their respective real estate interests and a prohibition against Old Dean granting liens on the stock of its subsidiaries. The indentures also place certain restrictions on Old Dean's ability to divest assets not in the ordinary course of business. Receivable-Backed Loan -- On June 30, 2000 we entered into a $150.0 million receivables securitization facility pursuant to which certain of our subsidiaries sell their accounts receivable to a wholly-owned special purpose limited liability company intended to be bankruptcy-remote. The special purpose limited liability company then transfers the receivables to a third party asset-backed commercial paper conduit sponsored by a major financial institution. The sale of the subsidiary accounts receivable included the receivables existing on that date, as well as all receivables created by such subsidiaries thereafter. In February 2001, we increased the facility to $175.0 million and in June 2001, we further increased it to $250.0 million. In connection with our acquisition of Old Dean effective December 21, 2001, we increased the facility to $400.0 million. The receivables-backed loan bears interest at a variable rate based on the commercial paper yield as defined in the agreement. The average interest rate on the receivables-backed loan at December 31, 2001 was 2.29%. Foreign Subsidiary Term Loan -- In connection with our acquisition of Leche Celta in February 2000, our Spanish subsidiary obtained a 7 billion peseta (as of December 31, 2001, approximately $37.5 million) non-recourse term loan from a Spanish lender, all of which was borrowed at closing and used to finance a portion of the purchase price. The loan, which is secured by the stock of Leche Celta, will expire on February 21, 2007, bears interest at a variable rate based on the ratio of Leche Celta's debt to EBITDA (as defined in the corresponding loan agreement), and requires semi-annual principal payments. The interest rate in effect on this loan at December 31, 2001 was 6.25%. Uncommitted Line of Credit -- On October 4, 2000, our Dairy Group entered into an agreement with First Union National Bank pursuant to which it could borrow up to $20.0 million from time to time on an uncommitted basis. This line of credit was terminated when our former credit facilities were repaid on December 21, 2001. F-20 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other Lines of Credit -- Leche Celta, our Spanish subsidiary, is our only subsidiary with currently outstanding lines of credit separate from the credit facilities described above. Leche Celta's principal line of credit, which is in the principal amount of 2.5 billion pesetas (as of December 31, 2001 approximately $13.4 million), was obtained on July 12, 2000, bears interest at a variable interest rate based on the ratio of Leche Celta's debt to EBITDA (as defined in the corresponding loan agreement), is secured by our stock in Leche Celta and will expire in June 2007. At December 31, 2001, $2.3 million was drawn on this line of credit at an average interest rate of 4.8%. Industrial Development Revenue Bonds -- Certain of our subsidiaries have revenue bonds outstanding some of which require nominal annual sinking fund redemptions. Typically, these bonds are secured by irrevocable letters of credit issued by financial institutions, along with first mortgages on the related real property and equipment. Interest on these bonds is due semiannually at interest rates that vary based on market conditions which, at December 31, 2001 ranged from 1.02% to 6.63%. Other Subsidiary Debt -- Other subsidiary debt includes various promissory notes for the purchase of property, plant, and equipment and capital lease obligations. The various promissory notes payable provide for interest at varying rates and are payable in monthly installments of principal and interest until maturity, when the remaining principal balances are due. Capital lease obligations represent machinery and equipment financing obligations which are payable in monthly installments of principal and interest and are collateralized by the related assets financed. Scheduled Maturities -- The scheduled maturities of long-term debt, which include capitalized lease obligations, at December 31, 2001, were as follows (in thousands): 2002........................................................ $ 96,972 2003........................................................ 155,181 2004........................................................ 571,956 2005........................................................ 279,528 2006........................................................ 197,535 Thereafter.................................................. 1,809,114 ---------- Subtotal.......................................... $3,110,286 Less discount on senior notes..................... (41,789) ---------- Total outstanding debt............................ $3,068,497 ==========
Letters of Credit -- At December 31, 2001 there were $30.4 million of issued but undrawn letters of credit secured by our senior credit facility. In addition to the letters of credit secured by our credit facility, we had at December 31, 2001 approximately $71.1 million of letters of credit with three other banks that were issued but undrawn. These were required by various utilities and government entities for performance and insurance guarantees. Interest Rate Agreements -- We have interest rate swap agreements in place that have been designated as hedges against variable interest rate exposure on loans under our senior credit facility. These swap agreements provide hedges for loans under our senior credit facility by limiting or fixing the LIBOR interest rates specified in the senior credit facility at the interest rates noted below until the indicated expiration dates of these interest rate swap agreements. F-21 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes our various interest rate agreements:
NOTIONAL AMOUNTS ----------------- FIXED INTEREST RATES EXPIRATION DATE 2001 2000 - -------------------- --------------- ------- ------- (IN MILLIONS) 4.90% to 4.93%..................................... December 2002 $275.0 6.07% to 6.24%..................................... December 2002 325.0 $325.0 6.08% to 6.11%..................................... June 2003 50.0 6.23%.............................................. June 2003 50.0 6.69%.............................................. December 2004 100.0 6.69% to 6.74%..................................... December 2005 100.0 6.78%.............................................. December 2006 75.0
In connection with the termination of our former credit facilities in connection with the Old Dean acquisition, derivative agreements that were outstanding upon such termination were redesignated as hedges under the new senior credit facility. For a discussion of the treatment of derivative agreements effective January 1, 2001 see Note 1 to our Consolidated Financial Statements. See Note 20 to our Consolidated Financial Statements for a disclosure of the fair value of our interest rate derivative agreements. We have also entered into interest rate swap agreements that provide hedges for loans under Leche Celta's term loan. The following table summarizes these agreements:
FIXED INTEREST RATES EXPIRATION DATE NOTIONAL AMOUNTS - -------------------- --------------- -------------------------------------------------- 5.54%....... November 2003 1,500,000,000 pesetas (approximately $8.0 million as of December 31, 2001) 5.6%........ November 2004 2,000,000,000 pesetas (approximately $10.7 million as of December 31, 2001)
We are exposed to market risk under these arrangements due to the possibility of interest rates on the credit facilities falling below the rates on our interest rate swap agreements. Credit risk under these arrangements is remote since the counterparties to our interest rate swap agreements are major financial institutions. 11. MANDATORILY REDEEMABLE TRUST ISSUED PREFERRED SECURITIES On March 24, 1998, we issued $600.0 million of company-obligated 5.5% mandatorily redeemable convertible preferred securities of a Delaware business trust subsidiary in a private placement to "qualified institutional buyers" under Rule 144A under the Securities Act of 1933, as amended. The 5.5% preferred securities, which are recorded net of related fees and expenses, mature 30 years from the date of issue. Holders of these securities are entitled to receive preferential cumulative cash distributions at an annual rate of 5.5% of their liquidation preference of $50 each. These distributions are payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year. These trust issued preferred securities are convertible at the option of the holders into an aggregate of approximately 7.7 million shares of our common stock, subject to adjustment in certain circumstances, at a conversion price of $78.25 (equivalent to a conversion rate of .6390 shares per security). These preferred securities are also redeemable, at our option, at any time after April 2, 2001 at specified amounts and are mandatorily redeemable at their liquidation preference amount of $50 per share at maturity or upon occurrence of certain specified events. 12. STOCKHOLDERS' EQUITY Our authorized shares of capital stock include 1,000,000 shares of preferred stock and 500,000,000 shares of common stock with a par value of $.01 per share. F-22 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock Option and Restricted Stock Plans -- We currently have two stock option plans with shares remaining available for issuance. These plans, our 1997 Stock Option and Restricted Stock Plan and the 1989 Dean Foods Company Stock Option Plan (which we adopted upon completion of our acquisition of Old Dean), provide for grants of stock options, restricted stock and other stock-based awards to employees, officers, directors and, in some cases, consultants, up to a maximum of approximately 12.5 million and 1.9 million shares, respectively. Approximately 7.1 million shares remained available for issuance under the plans as of March 25, 2002. Options and other stock-based awards vest in accordance with provisions set forth in the applicable award agreements. The following table summarizes the status of our stock-based compensation programs:
WEIGHTED AVERAGE OPTIONS EXERCISE PRICE ---------- ---------------- Outstanding at December 31, 1998........................ 4,707,871 $30.56 Granted............................................... 1,078,169 35.22 Canceled.............................................. (208,021) 42.70 Exercised............................................. (980,768) 15.13 ---------- Outstanding at December 31, 1999........................ 4,597,251 $34.68 Granted............................................... 1,366,900 38.27 Canceled.............................................. (206,701) 42.21 Exercised............................................. (1,231,179) 20.79 ---------- Outstanding at December 31, 2000........................ 4,526,271 $38.96 Granted............................................... 1,244,150 43.67 Options issued to Old Dean option holders............. 2,685,112 46.16 Canceled.............................................. (290,818) 46.40 Exercised............................................. (1,132,785) 38.96 ---------- Outstanding at December 31, 2001...................... 7,031,930 $42.32 ========== Exercisable at December 31, 1999........................ 2,927,217 $30.17 Exercisable at December 31, 2000........................ 2,400,853 38.50 Exercisable at December 31, 2001(1)..................... 4,851,092(1) 43.14
- --------------- (1) In connection with our acquisition of Old Dean, all options to purchase Old Dean stock outstanding at the time of the acquisition were automatically converted into options to purchase our stock. Upon conversion, those options represented options to purchase a total of approximately 2.7 million shares of our common stock. Also, the acquisition triggered certain "change in control" rights contained in the option agreements, which consisted of the right to surrender the options to us, in lieu of exercise, in exchange for cash, provided the options were surrendered prior to March 21, 2002. Options to purchase approximately 809,000 shares were surrendered. See Note 2 to our Consolidated Financial Statements. F-23 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes information about options outstanding and exercisable at December 31, 2001:
OPTIONS OUTSTANDING ------------------------------------------------- OPTIONS EXERCISABLE WEIGHTED-AVERAGE ------------------------------ RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE --------------- ----------- ---------------- ---------------- ----------- ---------------- $ 0 to $17.25 136,350 3.91 $12.24 136,350 $12.24 20.25 to 29.88 608,680 4.99 $28.11 608,680 $28.11 30.41 to 43.71 4,383,100 6.79 $39.44 2,243,892 $38.63 48.54 to 53.10 967,314 5.69 $49.79 935,384 $49.82 58.00 to 73.64 936,486 5.39 $61.73 926,786 $61.75
We have elected to follow Accounting Principles Board Opinion No. 25 and related interpretations in accounting for our stock options. All options granted to date have been to employees, officers or directors. Accordingly, no compensation expense has been recognized since stock options granted were at exercise prices which approximated or exceeded market value at the grant date. Had compensation expense been determined for stock option grants using fair value methods provided for in SFAS No. 123, Accounting for Stock-Based Compensation, our pro forma net income and net income per common share would have been the amounts indicated below:
YEAR ENDED DECEMBER 31, ---------------------------------------- 2001 2000 1999 ---------- ---------- ---------- (IN THOUSANDS, EXCEPT SHARE DATA) Compensation cost............................ $ 27,750 $ 27,278 $ 18,861 Net income: As reported................................ 109,830 118,719 109,731 Pro forma.................................. 92,209 104,272 98,245 Net income per share: As reported -- basic....................... 3.90 4.21 3.34 As reported -- diluted..................... 3.56 3.82 3.13 Pro forma -- basic......................... 3.28 3.70 2.99 Pro forma -- diluted....................... 3.08 3.43 2.86 Stock option share data: Stock options granted during period........ 1,244,150 1,366,900 1,078,169 Weighted average option fair value......... $ 22.30(a) $ 20.57(b) $ 18.00(c)
- --------------- (a) Calculated in accordance with the Black-Scholes option pricing model, using the following assumptions: expected volatility of 40%, expected dividend yield of 0%, expected option term of seven years and risk-free rates of return as of the date of grant of ranging from 4.51% to 5.19% based on the yield of seven-year U.S. Treasury securities. (b) Calculated in accordance with the Black-Scholes option pricing model, using the following assumptions: expected volatility of 40%; expected dividend yield of 0%; expected option term of four to ten years and risk-free rates of return as of the date of grant ranging from 6.03% to 6.74% based on the yield of seven-year U.S. Treasury securities. (c) Calculated in accordance with the Black-Scholes option pricing model, using the following assumptions: expected volatility of 40%; expected dividend yield of 0%; expected option term of four to ten years and risk-free rates of return as of the date of grant of 5.1% based on the yield of ten-year U.S. Treasury securities. F-24 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Rights Plan -- On February 27, 1998, our Board of Directors declared a dividend of one common share purchase right for each outstanding share of common stock to the stockholders of record on March 18, 1998. The rights are not exercisable until ten days subsequent to the announcement of the acquisition of or intent to acquire a beneficial ownership of 15% or more in Dean Foods Company. At such time, each right entitles the registered holder to purchase from us that number of shares of common stock at an exercise price of $210.00, with a market value of up to two times the exercise price. At any time prior to such date, a required majority may redeem the rights in whole, but not in part, at a price of $0.01 per right. The rights will expire on March 18, 2008, unless our Board of Directors extends the term of, or redeems, the rights. Earnings Per Share -- Basic earnings per share is based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is based on the weighted average number of common shares outstanding and the effect of all dilutive common stock equivalents during each period. The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS:
YEAR ENDED DECEMBER 31, --------------------------------------- 2001 2000 1999 ----------- ----------- ----------- Basic EPS computation: Numerator: Income from continuing operations........ $ 115,593 $ 113,751 $ 108,827 Denominator: Average common shares.................... 28,151,398 28,195,043 32,861,218 Basic EPS from continuing operations........ $ 4.10 $ 4.03 $ 3.31 Diluted EPS computation: Numerator: Income from continuing operations........ $ 115,593 $ 113,751 $ 108,827 Net effect on earnings from assumed conversion of mandatorily redeemable convertible preferred securities....... 21,324 21,334 24,501 ----------- ----------- ----------- Income applicable to common stock........ $ 136,917 $ 135,085 $ 133,328 =========== =========== =========== Denominator: Average common shares -- basic........... 28,151,398 28,195,043 32,861,218 Stock option conversion.................. 1,073,893 793,680 901,151 Dilutive effect of assumed conversion of mandatorily redeemable convertible preferred securities................... 7,666,783 7,682,541 9,096,123 ----------- ----------- ----------- Average common shares -- diluted.............. 36,892,074 36,671,264 42,858,492 =========== =========== =========== Diluted EPS from continuing operations........ $ 3.71 $ 3.68 $ 3.11
F-25 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Share Repurchases -- On September 15, 1998, our Board of Directors authorized an open market share repurchase program of up to $100.0 million of our common stock. On September 28, 1999, the Board increased the program by $100.0 million to $200.0 million and on November 17, 1999 authorized a further increase to $300.0 million. We fulfilled the $300.0 million authorization during the second quarter of 2000, and on May 19, 2000, the Board increased the program by $100.0 million to $400.0 million. On November 2, 2000 the Board authorized a further increase to $500.0 million. Set forth in the chart below is a summary of the stock we have repurchased pursuant to this program through December 31, 2001.
PERIOD NO. OF SHARES REPURCHASED PURCHASE PRICE - ------ ------------------------- -------------- Third Quarter 1998.............................. 1,000,000 $ 30.4 million Fourth Quarter 1998............................. 510,400 15.6 million Second Quarter 1999............................. 79,700 3.0 million Third Quarter 1999.............................. 1,850,515 66.7 million Fourth Quarter 1999............................. 3,486,508 128.4 million First Quarter 2000.............................. 688,800 27.2 million Second Quarter 2000............................. 966,065 42.2 million Third Quarter 2000.............................. 1,587,000 77.0 million Fourth Quarter 2000............................. 40,000 2.1 million First Quarter 2001.............................. 123,334 6.1 million ---------- -------------- Total................................. 10,332,322 $398.7 million ========== ==============
As of March 25, 2002, $101.3 million remains available for spending under this program. Repurchased shares are treated as effectively retired in the consolidated financial statements. F-26 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. OTHER COMPREHENSIVE INCOME Comprehensive income comprises net income plus all other changes in equity from non-owner sources. The amount of income tax (expense) benefit allocated to each component of other comprehensive income during the year ended December 31, 2001 and 2000 are included below.
TAX BENEFIT PRE-TAX (EXPENSE) INCOME AND MINORITY NET (LOSS) INTEREST AMOUNT -------- ------------ -------- (IN THOUSANDS) Accumulated other comprehensive income, January 1, 2000.............................................. $(11,152) $ 4,714 $ (6,438) Cumulative translation adjustment................... (2,381) 931 (1,450) Reclassification adjustment for disposal............ 11,139 (4,362) 6,777 -------- -------- -------- Accumulated other comprehensive income, December 31, 2000.............................................. $ (2,394) $ 1,283 $ (1,111) Cumulative translation adjustment................... (3,676) 1,444 (2,232) Cumulative effect of accounting change.............. (16,278) 9,875 (6,403) Net change in fair value of derivative instruments....................................... (44,844) 28,474 (16,370) Amounts reclassified to income statement related to derivatives....................................... 17,230 (10,298) 6,932 Reclassification of minority interest portion on derivative fair values............................ (10,033) (10,033) Minimum pension liability adjustment................ (1,059) 433 (626) -------- -------- -------- Accumulated other comprehensive income, December 31, 2001.............................................. $(51,021) $ 21,178 $(29,843) ======== ======== ========
14. EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS We sponsor various defined benefit and defined contribution retirement plans, including various employee savings and profit sharing plans, and contribute to various multi-employer pension plans on behalf of our employees. Substantially all full-time union and non-union employees who have completed one or more years of service and have met other requirements pursuant to the plans are eligible to participate in these plans. During 2001, 2000 and 1999, our retirement and profit sharing plan expenses were as follows:
YEAR ENDED DECEMBER 31, ---------------------------- 2001 2000 1999 -------- ------- ------- (IN THOUSANDS) Defined benefit plans.................................. $ 1,277 $ 2,482 $ 3,994 Defined contribution plans............................. 15,821 6,792 7,572 Multi-employer pension plans........................... 5,671 5,599 4,937 -------- ------- ------- $ 22,769 $14,873 $16,503 ======== ======= =======
Defined Benefit Plans -- The benefits under our defined benefit plans are based on years of service and employee compensation. Our funding policy is to contribute annually the minimum amount required under ERISA regulations. Plan assets consist principally of investments made with insurance companies under a group annuity contract. F-27 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the funded status of our defined benefit plans and the amounts recognized in our consolidated balance sheets:
DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- (IN THOUSANDS) Change in benefit obligation: Benefit obligation at beginning of year..................... $ 89,370 $71,673 Service cost.............................................. 1,594 2,274 Interest cost............................................. 6,671 6,573 Assumption change......................................... 620 Plan amendments........................................... 60 1,381 Actuarial (gain) loss..................................... 4,346 1,802 Acquisitions.............................................. 186,506 18,724 Divestitures.............................................. (580) (1,412) Benefits paid............................................. (7,149) (7,994) Plan curtailments......................................... (285) (3,727) Plan settlements.......................................... (981) Other..................................................... 109 76 ---------- ---------- Benefit obligation at end of year........................... 280,281 89,370 ---------- ---------- Change in plan assets: Fair value of plan assets at beginning of year.............. 92,753 79,166 Actual return on plan assets.............................. (5,150) 1,221 Acquisitions.............................................. 99,012 18,644 Divestitures.............................................. (609) Employer contribution..................................... 579 1,679 Plan settlements.......................................... (1,270) Benefits paid............................................. (7,149) (7,994) Other..................................................... 85 37 ---------- ---------- Fair value of plan assets at end of year.................... 178,251 92,753 ---------- ---------- Funded status............................................... (102,030) 3,383 Unrecognized net transition obligation.................... 573 1,317 Unrecognized prior service cost........................... 2,803 2,596 Unrecognized net (gain)loss............................... 9,976 (7,799) Minimum liability adjustment.............................. (2,809) (1,651) ---------- ---------- Net amount recognized....................................... $ (91,487) $(2,154) ========== ========== Amounts recognized in the consolidated balance sheets at December 31 of each year consist of: Prepaid benefit cost........................................ $ 2,335 $2,125 Accrued benefit liability................................... (95,650) (4,279)
F-28 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- (IN THOUSANDS) Intangible asset............................................ 1,202 Accumulated other comprehensive income...................... 626 ---------- ---------- Net amount recognized....................................... $ (91,487) $(2,154) ========== ========== Weighted-average assumptions as of December 31: Discount rate............................................... 7.25% 7.75% Expected return on plan assets.............................. 6.75-9.00% 6.75-9.50% Rate of compensation increase............................... 0-5.00% 0-5.00%
DECEMBER 31, --------------------------- 2001 2000 1999 ------- ------- ------- (IN THOUSANDS) Components of net periodic benefit cost (income): Service cost.......................................... $ 1,594 $ 2,274 $ 4,151 Interest cost......................................... 6,671 6,573 5,052 Expected return on plan assets........................ (7,647) (8,204) (6,157) Amortization of unrecognized transition obligation.... 106 140 188 Amortization of prior service cost.................... 207 147 138 Amortization of unrecognized net gain................. (47) (622) (3) Recognized net actuarial (gain) loss from curtailment........................................ 311 (3,899) Recognized net loss from divestitures................. 148 ------- ------- ------- Net periodic benefit cost (income)...................... $ 1,343 $(3,591) $ 3,369 ======= ======= =======
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $82.8 million, $81.3 million, and $67.8 million, respectively, as of December 31, 2001, and $32.7 million, $32.7 million and $30.4 million, respectively, as of December 31, 2000, excluding pension plans related to our disposed U.S. packaging operations. Defined Contribution Plans -- Certain of our non-union personnel may elect to participate in savings and profit sharing plans sponsored by us. These plans generally provide for salary reduction contributions to the plans on behalf of the participants of between 1.0% and 17.0% of a participant's annual compensation and provide for employer matching and profit sharing contributions as determined by our Board of Directors. In addition, certain union hourly employees are participants in company-sponsored defined contribution plans which provide for employer contributions in various amounts ranging from $21 to $39 per pay period per participant. Multi-Employer Pension Plans -- Certain of our subsidiaries contribute to various multi-employer union pension plans, which are administered jointly by management and union representatives and cover substantially all full-time and certain part-time union employees who are not covered by our other plans. The Multi-Employer Pension Plan Amendments Act of 1980 amended ERISA to establish funding requirements and obligations for employers participating in multi-employer plans, principally related to employer withdrawal from or termination of such plans. We could, under certain circumstances, be liable for unfunded vested benefits or other expenses of jointly administered union/management plans. At this time, we have not established any liabilities because withdrawal from these plans is not probable or reasonably possible. F-29 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. POST-RETIREMENT BENEFITS OTHER THAN PENSIONS Certain of our subsidiaries provide health care benefits to certain retirees who are covered under specific group contracts. As defined by the specific group contract, qualified covered associates may be eligible to receive major medical insurance with deductible and co-insurance provisions subject to certain lifetime maximums. The following table sets forth the funded status of these plans and the amounts recognized in our consolidated balance sheets:
DECEMBER 31, ---------------------- 2001 2000 ---------- --------- (IN THOUSANDS) Change in benefit obligation: Benefit obligation at beginning of year..................... $ 6,892 $ 5,156 Service cost.............................................. 140 29 Interest cost............................................. 504 450 Actuarial loss............................................ 2,124 1,340 Plan amendments........................................... (2,111) (566) Acquisitions.............................................. 13,793 1,110 Participant contributions................................. 157 Assumption charge......................................... (222) Benefits paid............................................. (672) (627) ---------- --------- Benefit obligation at end of year........................... 20,605 6,892 Fair value of plan assets at end of year.................... -- -- ---------- --------- Funded status............................................... (20,605) (6,892) Unrecognized prior service cost........................... (2,633) (566) Unrecognized net loss..................................... 2,106 218 ---------- --------- Net amount recognized -- accrued benefit liability.......... $ (21,132) $(7,240) ========== ========= Weighted-average assumptions as of December 31: Discount rate............................................... 7.25% 7.75% Health care inflation: Initial rate................................................ 8.00-11.00% 7.12-9.50% Ultimate rate............................................... 5.00-6.00% 5.00-6.00% Year of ultimate rate achievement........................... 2008-2015 2005-2015
DECEMBER 31, ------------------ 2001 2000 1999 ---- ---- ---- (IN THOUSANDS) Components of net periodic benefit cost: Service and interest cost................................... $644 $479 $278 Amortization of unrecognized net gain....................... (43) (51) (40) Amortization of prior service cost.......................... (43) Recognized actuarial loss................................... 217 65 ---- ---- ---- Net periodic benefit cost................................... $775 $493 $238 ==== ==== ====
F-30 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percent change in assumed health care cost trend rates would have the following effects:
1-PERCENTAGE- 1-PERCENTAGE- POINT INCREASE POINT DECREASE -------------- -------------- (IN THOUSANDS) Effect on total of service and interest cost components... $109 $ (99) Effect on post-retirement obligation...................... 987 (921)
16. PLANT CLOSING COSTS Plant Closing Costs -- As part of an overall integration and cost reduction strategy, we recorded plant closing and other non-recurring costs during 2001, 2000 and 1999 in the amount of $9.6 million, $3.4 million and $12.6 million, respectively. In addition, our share of Consolidated Container Company's restructuring charges were expenses of $1.7 million, income of $0.8 million, and expenses of $4.9 million during 2001, 2000 and 1999, respectively. These amounts were reported as an adjustment to equity in earnings of unconsolidated affiliates. During 2001, we recorded charges related to the closing of three plants with consolidation of production into other plants. The charges recorded for our integration and cost reduction programs in 2000 reflect several approved efficiency and integration efforts including restructuring of our corporate office departments, elimination of a production shift and certain maintenance activities at our Puerto Rico operations, and closing of our Hartford, Connecticut plant. During 1999, we recorded charges related to the closing of four plants with consolidation of production into other plants, the disposition of a small cheese processing plant, consolidation of administrative offices within one of our regions and severance costs incurred at the corporate office as well as our European and Puerto Rico operations. The principal components of these plans include the following: - Workforce reductions as a result of plant closings, plant rationalizations and consolidation of administrative functions. The plans included an overall reduction of 198 people in 2001, 205 people in 2000 and 315 people in 1999, who were primarily plant employees associated with the plant closings and rationalization. The costs were charged to our earnings in the period that the plan was established in detail and employee severance and benefits had been appropriately communicated. All employees had been terminated as of December 31, 2001; however, certain payment obligations remain; - Shutdown costs, including those costs that are necessary to prepare the plant facilities for closure; - Costs incurred after shutdown such as lease obligations or termination costs, utilities and property taxes; and - Write-downs of property, plant and equipment and other assets, primarily for asset impairments as a result of facilities that are no longer used in operations. The impairments relate primarily to owned building, land and equipment at the facilities which are being sold and were written down to their estimated fair value. F-31 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Activity with respect to plant closing and other non-recurring costs for 2001 is summarized below:
BALANCE AT BALANCE AT DECEMBER 31, DECEMBER 31, 2000 CHARGES PAYMENTS 2001 ------------ ------- -------- ------------ (IN THOUSANDS) Cash charges: Workforce reduction costs............... $1,179 $1,088 $(1,599) $ 668 Shutdown costs.......................... 363 624 (527) 460 Lease obligations after shutdown........ 118 183 (182) 119 Other................................... 843 (590) 253 ------ ------ ------- ------ Subtotal.................................. $1,660 2,738 $(2,898) $1,500 ====== ======= ====== Noncash charges: Write-down of property, plant and equipment............................ 6,812 ------ Total charges............................. $9,550 ======
Activity with respect to plant closing and other non-recurring costs for 2000 is summarized below:
BALANCE AT BALANCE AT DECEMBER 31, DECEMBER 31, 1999 CHARGES PAYMENTS 2000 ------------ ------- -------- ------------ (IN THOUSANDS) Cash charges: Workforce reduction costs............... $3,073 $2,176 $(4,070) $1,179 Shutdown costs.......................... 468 564 (669) 363 Lease obligations after shutdown........ 438 95 (415) 118 Other................................... 40 159 (199) ------ ------ ------- ------ Subtotal.................................. $4,019 2,994 $(5,353) $1,660 ====== ======= ====== Noncash charges: Write-down of property, plant and equipment............................ 394 ------ Total charges............................. $3,388 ======
There have not been significant adjustments to the plans and the majority of future cash requirements to reduce the liability at December 31, 2001 are expected to be completed within a year. Acquired Facility Closing Costs -- As part of our purchase price allocations, we accrued costs in 2001 and 2000 pursuant to plans to exit certain activities and operations of acquired businesses in order to rationalize production and reduce costs and inefficiencies. Several plants were closed in connection with our acquisition of Southern Foods. Production from these plants was moved to our other facilities. We also have implemented plans to shut down plants and administrative offices in connection with our acquisition of Old Dean. We will continue to finalize and implement our initial integration and rationalization plans and expect to refine our estimate of amounts in our purchase price allocations associated with these plans. The principal components of the plans include the following: - Workforce reductions as a result of plant closings, plant rationalizations and consolidation of administrative functions and offices, resulting in an overall reduction of 557 plant and administrative personnel. The costs incurred were charged against our acquisition liabilities for these costs. As of December 31, 2001, 481 employees had not yet been terminated; F-32 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - Shutdown costs, including those costs that are necessary to clean and prepare the plant facilities for closure; and - Costs incurred after shutdown such as lease obligations or termination costs, utilities and property taxes after shutdown of the plant or administrative office. Activity with respect to these acquisition liabilities for 2001 is summarized below:
ACCRUED ACCRUED CHARGES AT CHARGES AT DECEMBER 31, DECEMBER 31, 2000 ACCRUALS PAYMENTS 2001 ------------ -------- -------- ------------ (IN THOUSANDS) Workforce reduction costs................ $ 997 $19,357 $ (325) $20,029 Shutdown costs........................... 7,271 8,647 (3,297) 12,621 ------ ------- ------- ------- Total.................................... $8,268 $28,004 $(3,622) $32,650 ====== ======= ======= =======
Activity with respect to these acquisition liabilities for 2000 is summarized below:
ACCRUED ACCRUED CHARGES AT CHARGES AT DECEMBER 31, DECEMBER 31, 1999 ACCRUALS PAYMENTS 2000 ------------ -------- -------- ------------ (IN THOUSANDS) Workforce reduction costs................ $624 $ 1,268 $ (895) $ 997 Shutdown costs........................... 332 9,735 (2,796) 7,271 ---- ------- ------- ------ Total.................................... $956 $11,003 $(3,691) $8,268 ==== ======= ======= ======
17. OTHER OPERATING (INCOME) EXPENSE During the fourth quarter of 2001, we recognized a net of $17.3 million of other operating income which includes the following: - A gain of $47.5 million on the divestiture of the 11 plants transferred to National Dairy Holdings (as assignee of Dairy Farmers of America) in connection with the acquisition of Old Dean. The gain represented the difference between fair value and the carrying value of the plants; - An expense of $28.5 million resulting from a payment to Dairy Farmers of America as consideration for certain modifications to our existing milk supply arrangements; and - An expense of $1.7 million resulting from the impairment in value of a water plant. During the fourth quarter of 2000, we recognized $7.5 million of other operating expense associated with a settlement with the Department of Justice (the "DOJ") related to certain activities of West Lynn Creamery. The activities alleged by the DOJ occurred prior to our acquisition of West Lynn Creamery in June 1998. F-33 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 18. SUPPLEMENTAL CASH FLOW INFORMATION
YEAR ENDED DECEMBER 31, ----------------------------- 2001 2000 1999 -------- -------- ------- (IN THOUSANDS) Cash paid for interest and financing charges, net of capitalized interest................................ $139,984 $142,205 $87,548 Cash paid for taxes................................... 24,983 31,883 40,003 Noncash transactions: Issuance of common stock in connection with business acquisitions..................................... 739,366 -- 3,193 Issuance of subsidiary preferred and common securities in connection with two acquisitions... -- 340,336 18,500 Operations of 11 plants in connection with acquisition of minority interest................. 287,989 -- -- Issuance of subordinated contingent promissory note in connection with acquisition of minority interest......................................... 40,000 -- --
19. COMMITMENTS AND CONTINGENCIES Leases -- We lease certain property, plant and equipment used in our operations under both capital and operating lease agreements. Such leases, which are primarily for machinery, equipment and vehicles, have lease terms ranging from 1 to 20 years. Certain of the operating lease agreements require the payment of additional rentals for maintenance, along with additional rentals based on miles driven or units produced. Rent expense, including additional rent, was $87.3 million, $66.9 million, and $45.1 million for the years ended December 31, 2001, 2000 and 1999, respectively. The composition of capital leases which are reflected as property, plant and equipment in our consolidated balance sheets are as follows:
DECEMBER 31, ----------------- 2001 2000 ------- ------- (IN THOUSANDS) Buildings and improvements.................................. $11,251 $ 2,102 Machinery and equipment..................................... 4,666 10,770 Less accumulated amortization............................... (1,973) (4,267) ------- ------- $13,944 $ 8,605 ======= =======
F-34 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future minimum payments at December 31, 2001, under non-cancelable capital and operating leases with terms in excess of one year are summarized below:
CAPITAL OPERATING LEASES LEASES ------- --------- (IN THOUSANDS) 2002........................................................ $ 3,750 $ 66,946 2003........................................................ 2,184 63,248 2004........................................................ 1,829 50,047 2005........................................................ 3,025 42,823 2006........................................................ 100 31,379 Thereafter.................................................. 108 103,427 ------- -------- Total minimum lease payments................................ 10,996 $357,870 ======== Less amount representing interest........................... (1,100) ------- Present value of capital lease obligations.................. $ 9,896 =======
Guaranty of Certain Indebtedness of Consolidated Container Company -- We own a 43.1% interest in Consolidated Container Company ("CCC"), the nation's largest manufacturer of rigid plastic containers and our primary supplier of plastic bottles and bottle components. During 2001, as a result of various operational difficulties, CCC became unable to comply with the financial covenants in its credit facility. In February 2002, CCC's lenders agreed to restructure the credit agreement to modify the financial covenants, subject to the agreement of CCC's primary shareholders to guarantee certain of CCC's debt. Because CCC is an important and valued supplier of ours, and in order to protect our interest in CCC, we agreed to provide a limited guaranty. The guaranty, which expires on January 5, 2003, is limited in amount to the lesser of (1) 49% of the principal, interest and fees of CCC's "Tranche 3" revolver, and (2) $10 million. CCC's "Tranche 3" revolver can only be drawn upon by CCC when its Tranche 1 and Tranche 2 revolvers are fully drawn. If CCC draws on the Tranche 3 revolver, no voluntary pre-payments may be made on the Tranche 1 and 2 revolvers until the Tranche 3 revolver is fully re-paid. Our guaranty cannot be drawn upon until the Tranche 3 loan is due and payable (whether at its January 5, 2003 maturity or by acceleration), and no more than one demand for payment may be made by the banks. We have entered into an agreement with Alan Bernon and Peter Bernon, who collectively own 6% of CCC, pursuant to which, collectively, they have agreed to reimburse us for 12% of any amounts paid by us under the guaranty. Contingent Obligations Related to Milk Supply Arrangements and Divested Operations -- On December 21, 2001, in connection with our acquisition of Old Dean, we purchased Dairy Farmers of America's ("DFA") 33.8% stake in our Dairy Group for consideration consisting of (1) approximately $145.4 million in cash, (2) a contingent promissory note in the original principal amount of $40.0 million, and (3) the operations of 11 plants located in nine states where we and Old Dean had overlapping operations (which plants were actually transferred to National Dairy Holdings, L.P., as assignee of DFA). As additional consideration, we amended a milk supply agreement with DFA to provide that if we do not, within a certain period of time after the completion of the Old Dean acquisition, offer DFA the right to supply raw milk to certain of the Old Dean dairy plants, we could be required to pay liquidated damages of up to $47.0 million. Specifically, the liquidated damages to DFA provision provides that: - If we have not offered DFA the right to supply all of our raw milk requirements for certain of Old Dean's plants by either (i) the end of the 18th full month after December 21, 2001, or (ii) with respect to certain other plants, the end of the 6th full calendar month following the expiration of milk supply agreements in existence at those plants on December 21, 2001, or F-35 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - If DFA is prohibited from supplying those plants because of an injunction, restraining order or otherwise as a result of or arising from a milk supply contract to which we are party, we must pay DFA liquidated damages determined and paid on a plant-by-plant basis, based generally on the amount of raw milk used by that plant. Liquidated damages would be payable in arrears in equal, quarterly installments over a 5-year period, without interest. If we are required to pay any such liquidated damages, the principal amount of the $40.0 million contingent promissory note will be reduced by an amount equal to 25% of the liquidated damages paid. The contingent promissory note is designed to ensure that DFA, one of our primary suppliers of raw milk, has the opportunity to retain our milk supply business for 20 years, or be paid for the loss of that business. The contingent promissory note has a 20-year term and bears interest based on the consumer price index. Interest will not be paid in cash. Instead, interest will be added to the principal amount of the note annually, up to a maximum principal amount of $96.0 million. We may prepay the note in whole or in part at any time, without penalty. The note will only become payable if we ever materially breach or terminate one of our milk supply agreements with DFA without renewal or replacement. Otherwise, the note will expire at the end of 20 years, without any obligation to pay any portion of the principal or interest. We retained certain liabilities of the businesses of the 11 plants divested to National Dairy Holdings, where those liabilities were deemed to be "non-ordinary course" liabilities. We also have the obligation to indemnify National Dairy Holdings for any damages incurred by it in connection with those retained liabilities, or in connection with any breach of the divestiture agreement. We do not expect any liability that we may have for these retained liabilities, or any indemnification liability, to be material. We believe we have created adequate reserves for any such potential liability. Litigation, Investigations and Audits -- We and our subsidiaries are parties, in the ordinary course of business, to certain other claims, litigation, audits and investigations. We believe we have created adequate reserves for any liability we may incur in connection with any such currently pending or threatened matter. In our opinion, the settlement of any such currently pending or threatened matter is not expected to have a material adverse impact on our financial position, results of operations or cash flows. 20. FAIR VALUE OF FINANCIAL INSTRUMENTS Pursuant to SFAS No. 107, "Disclosure About Fair Value of Financial Instruments," we are required to disclose an estimate of the fair value of our financial instruments as of December 31, 2001 and 2000. SFAS No. 107 defines the fair value of financial instruments as the amount at which the instrument could be exchanged in a current transaction between willing parties. Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are considered equivalent to fair value. In addition, because the interest rates on our senior credit facility and most other debt are variable, their fair values approximate their carrying values. We have senior notes with an aggregate face value of $700.0 million with fixed interest rates ranging from 6.625% to 8.15% at December 31, 2001. These notes were issued by Old Dean prior to our acquisition of Old Dean, and were marked to fair value in our purchase price allocation. F-36 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) We have entered into various interest rate agreements to reduce our sensitivity to changes in interest rates on our variable rate debt. The fair values of these instruments and our senior notes were determined based on current values for similar instruments with similar terms. The following table presents the carrying value and fair value of our senior notes and interest rate agreements at December 31:
2001 2000 ------------------------------ ------------------------------ CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE OF LIABILITY LIABILITY OF ASSET LIABILITY ----------------- ---------- ----------------- ---------- (IN THOUSANDS) Senior notes.................... $(658,211) $(658,211) Interest rate agreements........ (44,140) (44,140) $3,696 $(16,278)
21. BUSINESS AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS We currently have three reportable segments: Dairy Group, Morningstar Foods and Specialty Foods. Our Dairy Group segment manufactures and distributes fluid milk, ice cream and novelties, half-and-half and whipping cream, sour cream, cottage cheese, yogurt and dips, as well as fruit juices and other flavored drinks and bottled water. Morningstar Foods manufactures dairy and non-dairy coffee creamers, whipping cream and pre-whipped toppings, dips and dressings, specialty products such as lactose-reduced milk, soy milk and extended shelf-life milks, as well as certain other refrigerated and extended shelf-life products. Specialty Foods processes and markets pickles, powdered products such as non-dairy coffee creamers, and sauces and puddings. We obtained Specialty Foods as part of our acquisition of Old Dean on December 21, 2001; therefore the sales and operating income listed below represent only the last few days of December 2001. Our Puerto Rico and Spanish operations do not meet the definition of a segment and are reported in "Corporate/ Other." Prior to the third quarter of 1999, we had a Packaging segment. As a result of the sale of a majority interest in our U.S. plastic packaging operations effective July 2, 1999, as discussed in Note 4, we no longer have a reportable packaging segment under current accounting rules. However, two small packaging businesses have been included in the packaging segment until their disposition in March and May 2000. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate performance based on operating profit not including non-recurring gains and losses and foreign exchange gains and losses. We do not allocate income taxes, management fees or unusual items to segments. In addition, there are no significant non-cash items reported in segment profit or loss other than depreciation and amortization and the $47.5 million gain on the divestiture of the 11 plants transferred to National Dairy Holdings (as assignee of Dairy Farmers of America) in connection with the acquisition of Old Dean which is reported in our Dairy Group segment in 2001. The amounts in the following tables are the amounts obtained from reports used by our executive management team for the year ended December 31:
2001 2000 1999 ---------- ---------- ---------- (IN THOUSANDS) Net sales from external customers: Dairy Group.................................... $5,051,672 $4,660,329 $3,101,800 Morningstar Foods.............................. 766,922 704,246 655,159 Specialty Foods................................ 18,709 Packaging...................................... 42,286 489,814 Corporate/Other................................ 392,813 349,442 235,226 ---------- ---------- ---------- Total.......................................... $6,230,116 $5,756,303 $4,481,999 ========== ========== ==========
F-37 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 2000 1999 ---------- ---------- ---------- (IN THOUSANDS) Intersegment sales: Dairy Group.................................... $ 14,133 $ 14,680 $ 8,838 Morningstar Foods.............................. 90,476 60,213 19,370 Specialty Foods................................ Packaging...................................... 18,674 Corporate/Other................................ ---------- ---------- ---------- Total.......................................... $ 104,609 $ 74,893 $ 46,882 ========== ========== ========== Operating income: Dairy Group(1)................................. $ 323,755 $ 289,630 $ 164,575 Morningstar Foods(2)........................... 104,294 100,944 83,641 Specialty Foods................................ 2,168 Packaging(3)................................... 415 50,402 Corporate/Other(4)............................. (35,776) (22,926) (21,744) ---------- ---------- ---------- Total.......................................... 394,441 368,063 276,874 Other (income) expense: Interest expense and financing charges......... 135,368 146,181 87,817 Equity in (loss) earnings of unconsolidated affiliates.................................. 23,620 (11,453) (2,630) Other (income) expense, net.................... 4,690 (630) (1,416) ---------- ---------- ---------- Consolidated earnings before tax............... $ 230,763 $ 233,965 $ 193,103 ========== ========== ========== Depreciation and amortization: Dairy Group.................................... $ 113,780 $ 105,717 $ 64,046 Morningstar Foods.............................. 24,574 22,849 19,644 Specialty Foods................................ 353 Packaging...................................... 1,529 23,020 Corporate/Other................................ 16,180 14,888 9,935 ---------- ---------- ---------- Total.......................................... $ 154,887 $ 144,983 $ 116,645 ========== ========== ========== Assets: Dairy Group.................................... $4,922,224 $2,912,231 $1,750,389 Morningstar Foods.............................. 858,656 424,819 458,450 Specialty Foods................................ 625,382 Packaging...................................... 196,792 Corporate/Other................................ 325,635 443,428 253,291 ---------- ---------- ---------- Total.......................................... $6,731,897 $3,780,478 $2,658,922 ========== ========== ==========
F-38 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 2000 1999 ---------- ---------- ---------- (IN THOUSANDS) Capital expenditures: Dairy Group.................................... $ 89,125 $ 90,901 $ 104,023 Morningstar Foods.............................. 37,401 28,162 20,344 Specialty Foods................................ Packaging...................................... 1,313 23,650 Corporate/Other................................ 10,718 16,500 39,625 ---------- ---------- ---------- Total.......................................... $ 137,244 $ 136,876 $ 187,642 ========== ========== ==========
- --------------- (1) Operating income includes plant closing and other non-recurring charges of $9.6 million, $2.1 million and $8.7 million in 2001, 2000 and 1999, respectively. Operating income in 2001 includes a gain of $47.5 million related to the divestiture of 11 plants as part of the acquisition of Dean Foods, an expense of $28.5 million resulting from certain changes to our milk supply agreements, and an impairment charge of $1.7 million on a water plant. Operating income in 2000 includes litigation settlement costs of $7.5 million. (2) Operating income includes plant closing and other non-recurring charges of $0.5 million in 1999. (3) Included in operating income are plant closing and other non-recurring charges of $0.2 million in 1999. (4) Operating income includes plant closing and other non-recurring charges of $1.3 million, and $3.2 million in 2000 and 1999, respectively.
REVENUES LONG-LIVED ASSETS ------------------------------------ ----------------------- 2001 2000 1999 2001 2000 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) Geographic Information United States.......... $5,837,302 $5,364,575 $4,002,144 $4,987,908 $2,723,408 Puerto Rico............ 221,794 226,661 235,226 124,079 127,487 Europe................. 171,020 165,067 244,629 118,022 111,611 ---------- ---------- ---------- ---------- ---------- Total............... $6,230,116 $5,756,303 $4,481,999 $5,230,009 $2,962,506 ========== ========== ========== ========== ==========
We have no one customer within any segment which represents greater than ten percent of our consolidated revenues. F-39 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 22. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the unaudited quarterly results of operations for 2001 and 2000:
QUARTER ------------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 2001: Net sales............................ $1,474,352 $1,527,074 $1,555,731 $1,672,959 Gross profit......................... 356,515 363,127 360,296 400,078 Income before extraordinary items and cumulative effect of accounting change(1).......................... 23,517 34,603 29,422 28,051 Net income(1)........................ 22,071(2) 34,603 29,422 23,734(3) Basic earnings per common share(4): Income before extraordinary items and cumulative effect of accounting change............... 0.86 1.26 1.06 0.94 Net income......................... 0.81 1.26 1.06 0.80 Diluted earnings per common share(4): Income before extraordinary items and cumulative effect of accounting change............... 0.81 1.11 0.95 0.86 Net income......................... 0.77 1.11 0.95 0.75 2000: Net sales............................ $1,394,141 $1,434,354 $1,439,947 $1,487,861 Gross profit......................... 340,158 360,218 354,320 371,540 Income before extraordinary gain(5)............................ 20,594 33,533 31,189 28,435 Net income(5)........................ 25,562(6) 33,533 31,189 28,435 Basic earnings per common share(4): Income before extraordinary gain... 0.71 1.16 1.13 1.05 Net income......................... 0.88 1.16 1.13 1.05 Diluted earnings per common share(4): Income before extraordinary gain... 0.69 1.04 1.01 .95 Net income......................... 0.82 1.04 1.01 .95
- --------------- (1) The results for the first, third and fourth quarters include plant closing and other non-recurring charges, net of minority interest when applicable, of $0.3 million, $1.0 million and $4.5 million, respectively. Results in the fourth quarter also include a gain of $29.5 million related to the divestiture of 11 plants as part of the acquisition of Dean Foods, an expense of $17.4 million resulting from certain changes to our milk supply agreements, an impairment charge of $0.7 million, net of minority interest, on a water plant, a charge of $12.9 million related to the impairment of our investment in Consolidated Container, and a charge of $2.7 million resulting from the impairment of two small investments. All amounts are net of income taxes. (2) Results for the first quarter of 2001 include a cumulative effect of accounting change expense of $1.4 million related to our adoption of FAS 133, Accounting for Derivative Instruments and Hedging Activities. F-40 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) Included in the results for the fourth quarter is an extraordinary loss of $4.3 million for the write-off of deferred financing costs related to the early retirement of our former credit facilities. (4) Earnings per common share calculations for each of the quarters were based on the basic and diluted weighted average number of shares outstanding for each quarter, and the sum of the quarters may not necessarily be equal to the full year earnings per common share amount. (5) The results for the first, second, and third quarters of 2000 include plant closing and other non-recurring charges of $0.7 million, $0.8 million and $0.3 million respectively. Results in the fourth quarter include a charge of $5.0 million for litigation settlement costs and a gain of $0.4 million related to plant closing credits at Consolidated Container. All amounts are net of income tax and minority interest. (6) Results for the first quarter of 2000 include an extraordinary gain related to interest rate derivatives which became unhedged, net of an extraordinary loss for the write-off of deferred financing costs. 23. SUBSEQUENT EVENTS Stock Split -- On February 21, 2001, we announced that our Board of Directors has declared a two-for-one split of our common stock. The split will entitle shareholders of record on April 8, 2002 to receive one additional share of common stock for each share held on that date. The split will be effected after the close of business on April 23, 2002. Common shares outstanding, giving retroactive effect to the stock split, at December 31, 2001 and 2000 are 87.9 million shares and 54.6 million shares, respectively. Pro forma earnings per common share, giving retroactive effect to the stock split, are as follows:
YEAR ENDED DECEMBER 31, ------------------------------------ 2001 2000 1999 ---------- ---------- ---------- Basic earnings per common share: Income before extraordinary gain (loss) and cumulative effect of accounting change...... $2.05 $2.02 $1.66 Extraordinary gain (loss)...................... (.08) .09 .01 Cumulative effect of accounting change......... (.02) ---------- ---------- ---------- Net income..................................... $1.95 $2.11 $1.67 ========== ========== ========== Diluted earnings per common share: Income before extraordinary gain (loss) and cumulative effect of accounting change...... $1.86 $1.84 $1.56 Extraordinary gain (loss)...................... (.06) .07 .01 Cumulative effect of accounting change......... (.02) ---------- ---------- ---------- Net income..................................... $1.78 $1.91 $1.57 ========== ========== ========== Shares used in per share calculations: Average common shares -- Basic................. 56,302,796 56,390,086 65,722,436 Average common shares -- Diluted............... 73,784,148 73,342,528 85,716,984
F-41 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Hedging Transactions -- In March 2002, we entered into forward starting swaps that begin in December 2002 with a notional amount of $725.0 million and fixed interest rates ranging from 4.29% to 5.315%. These swaps have been designated as hedges against interest rate exposure on loans under our senior credit facility and under one of our subsidiary's term loans. These derivatives provide hedges for loans by limiting or fixing the interest rates specified in the senior credit facility or subsidiary term loan at the interest rates noted below until the indicated expiration dates of the interest rate derivative agreements.
FIXED INTEREST RATES EXPIRATION DATE NOTIONAL AMOUNTS - -------------------- --------------- ---------------- 4.29% to 4.6875%............................................ December 2003 $275.0 million 4.8525% to 4.855%........................................... December 2004 $150.0 million 5.195% to 5.315%............................................ December 2005 $300.0 million
Guarantee of Indebtedness of Consolidated Container Company -- In February 2002, we agreed to provide a limited guaranty of certain indebtedness of Consolidated Container Company. See Note 19, to our Consolidated Financial Statements. 24. RELATED PARTY TRANSACTIONS Aircraft Leases -- On August 1, 2000, we entered into a five-year aircraft lease agreement with Neptune Colorado, LLC, a limited liability company owned by Gregg Engles (our Chief Executive Officer and Vice Chairman of the Board of Directors) and Pete Schenkel (President of our Dairy Group and also a member of our Board of Directors). Pursuant to the lease agreement, we agreed to lease an airplane from Neptune Colorado at a rate of $1,000 per hour for each hour of flight with a minimum of 40 hours of flight per month. We also pay a non-refundable equipment reserve charge equal to $83.10 per engine hour used during the term of the agreement. Reserve funds are used by the lessor for engine overhauls, removal or replacement during the term of the agreement. We are responsible for paying all taxes related to and insurance for the airplane, as well as all operating costs, crew salaries, benefits, landing and customs fees, hangar and storage charges and any fines or penalties arising from its operation or use of the airplane. We paid an aggregate of $0.6 million in 2001 and $0.2 million in 2000 to Neptune Colorado, LLC under the lease. In June 2001, we entered into a six-year aircraft lease agreement with Curan, LLC, a limited liability company also owned by Gregg Engles and Pete Schenkel. Pursuant to the lease agreement, we agreed to lease an airplane from Curan at a rate of $122,000 per month. We also must set up a non-refundable equipment reserve account, the amount of which will be determined periodically by a third party. Reserve funds are used by the lessor for engine overhauls, removal or replacement during the term of the agreement. We are responsible for paying all taxes related to and insurance for the airplane, as well as all operating costs, crew salaries, benefits, landing and customs fees, hangar and storage charges and any fines or penalties arising from its operation or use of the airplane. We paid an aggregate of $0.9 million to Curan, LLC during 2001 under the lease. Real Property Lease -- We lease the land for our Franklin, Massachusetts plant from a partnership in which Alan Bernon, Chief Operating Officer of the Northeast region of our Dairy Group and a member of our Board of Directors, owns a 13.45% minority interest. (The remaining interests are owned by members of Mr. Bernon's family.) The lease payments totaled $0.6 million in each of 2001, 2000 and 1999. Purchases of Orange Juice Concentrate -- Some of our subsidiaries purchase a portion of their requirements for frozen concentrated orange juice from an entity in which Gregg Engles owns a limited partnership interest. We have no written agreement with the supplier. All purchases are based on purchase orders. We monitor the market price for frozen concentrated orange juice and purchase the product from the supplier offering the lowest price, inclusive of all charges. Our purchases from this supplier totaled approximately $0.0 in 2001, $0.1 million in 2000, and $1.8 million in 1999. F-42 DEAN FOODS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Minority Interest in Consolidated Container Holding Company -- Alan Bernon, Chief Operating Officer of the Northeast region of our Dairy Group and a member of our Board of Directors, together with his brother, Peter Bernon, own 12.0% of Franklin Plastics, Inc., which owns 49.1% of Consolidated Container Company ("CCC"). We own the remaining 88.0% of Franklin Plastics. In March 2002, we entered into an agreement with Alan Bernon and Peter Bernon pursuant to which they have agreed to reimburse us, collectively, for 12% of any amounts paid by us under our guaranty of a portion of CCC's indebtedness. See Note 19 for a description of the terms of the guaranty. Purchases of Raw Milk and Cream and Buy-Out of DFA -- We have entered into a series of milk supply agreements with Dairy Farmers of America, Inc. ("DFA"), which owned 33.8% of our Dairy Group through December 21, 2001, to supply certain of our plants with all of their milk requirements. The agreements generally specify that we pay DFA based on price announcements supplied by DFA from time to time, subject to certain limitations. We paid DFA approximately $1.79 billion in 2001 and $1.37 billion in 2000 for milk purchases under these agreements. We purchased DFA's interest in our Dairy Group for cash, the operations of 11 plants, and certain contingent obligations. See Notes 2 and 19. Consulting Fees -- During 2000 and 1999, we paid fees to Tex Beshears, a former officer and director, for acquisition consulting services related to certain completed acquisitions totaling $3.9 million and $0.5 million, respectively, which have been capitalized as part of the purchase price of the acquisitions. In 2000, we paid consulting fees of approximately $0.5 million to Peter Bernon, brother of Alan Bernon, for acquisition-related consulting services. F-43 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS Incorporated herein by reference to our proxy statement (to be filed) for our May 30, 2002 Annual Meeting of Stockholders. ITEM 11. EXECUTIVE COMPENSATION Incorporated herein by reference to our proxy statement (to be filed) for our May 30, 2002 Annual Meeting of Stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference to our proxy statement (to be filed) for our May 30, 2002 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated herein by reference to our proxy statement (to be filed) for our May 30, 2002 Annual Meeting of Stockholders. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS The following consolidated financial statements are filed as part of this report or are incorporated herein as indicated:
PAGE ---- Independent Auditors' Report................................ F-1 Consolidated Balance Sheets as of December 31, 2001 and 2000...................................................... F-2 Consolidated Statements of Income for the years ended December 31, 2001 and 2000 and 1999....................... F-3 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999.............. F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.......................... F-5 Notes to Consolidated Financial Statements.................. F-6
FINANCIAL STATEMENT SCHEDULES Independent Auditors' Report Schedule II -- Valuation and Qualifying Accounts EXHIBITS See Index to Exhibits. 38 REPORTS ON FORM 8-K We filed no Current Reports on Form 8-K during the last quarter of 2001. 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. By: /s/ BARRY A. FROMBERG ------------------------------------ Barry A. Fromberg Executive Vice President and Chief Financial Officer Dated April 1, 2002 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.
NAME TITLE DATE ---- ----- ---- /s/ BARRY A. FROMBERG Principal Accounting Officer April 1, 2002 --------------------------------------------------- Barry A. Fromberg /s/ HOWARD M. DEAN Chairman of the Board April 1, 2002 --------------------------------------------------- Howard M. Dean /s/ GREGG L. ENGLES Chief Executive Officer and Vice April 1, 2002 --------------------------------------------------- Chairman of the Board Gregg L. Engles /s/ ALAN BERNON Director April 1, 2002 --------------------------------------------------- Alan Bernon /s/ LEWIS M. COLLENS Director April 1, 2002 --------------------------------------------------- Lewis M. Collens /s/ TOM DAVIS Director April 1, 2002 --------------------------------------------------- Tom Davis /s/ STEPHEN L. GREEN Director April 1, 2002 --------------------------------------------------- Stephen L. Green /s/ JANET HILL Director April 1, 2002 --------------------------------------------------- Janet Hill /s/ JOSEPH S. HARDIN, JR. Director April 1, 2002 --------------------------------------------------- Joseph S. Hardin, Jr. /s/ JOHN S. LLEWELLYN, JR. Director April 1, 2002 --------------------------------------------------- John S. Llewellyn, Jr.
39
NAME TITLE DATE ---- ----- ---- /s/ JOHN MUSE Director April 1, 2002 --------------------------------------------------- John Muse /s/ HECTOR M. NEVARES Director April 1, 2002 --------------------------------------------------- Hector M. Nevares /s/ P. EUGENE PENDER Director April 1, 2002 --------------------------------------------------- P. Eugene Pender /s/ J. CHRISTOPHER REYES Director April 1, 2002 --------------------------------------------------- J. Christopher Reyes /s/ PETE SCHENKEL Director April 1, 2002 --------------------------------------------------- Pete Schenkel /s/ JIM TURNER Director April 1, 2002 --------------------------------------------------- Jim Turner
40 INDEPENDENT AUDITORS' REPORT To the Board of Directors Dean Foods Company Dallas, Texas We have audited the consolidated financial statements of Dean Foods Company and subsidiaries (the "Company") (formerly known as Suiza Foods Corporation) as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001, and have issued our report thereon dated March 4, 2002; such report is included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of Dean Foods Company and subsidiaries, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Dallas, Texas March 4, 2002 SCHEDULE II DEAN FOODS COMPANY AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 Allowance for doubtful accounts deducted from accounts receivable:
RECOVERIES BALANCE OF WRITE-OFF OF BEGINNING CHARGED TO ACCOUNTS UNCOLLECTIBLE BALANCE YEAR OF YEAR INCOME ACQUISITIONS DISPOSITIONS WRITTEN OFF ACCOUNTS END OF YEAR - ---- --------- ---------- ------------ ------------ ----------- ------------- ----------- (IN THOUSANDS) 1999................. $19,303 $ 4,766 $ 1,646 $1,188 $158 $ 5,836 $18,849 2000................. 18,849 10,277 8,314 2,776 215 10,708 24,171 2001................. 24,171 5,326 17,871 469 170 8,285 38,784
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 -- Amended and Restated Reorganization Agreement (incorporated by reference from our Registration Statement on Form S-1 (File No. 333-1858)). 3.1 -- Amended and Restated Certificate of Incorporation (filed herewith). 3.2 -- Amended and Restated Bylaws (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-12755)). 4.1 -- Specimen of Common Stock Certificate (filed herewith). 4.2 -- Registration Rights Agreement (incorporated by reference to our Registration Statement on Form S-1 (File No. 333-1858)). 4.3 -- Rights Agreement dated March 6, 1998 among us and Harris Trust & Savings Bank, as rights agent, which includes as Exhibit A the Form of Rights Certificate (incorporated by reference from the Registration Statement on Form 8-A filed on March 10, 1998 (File No. 1-12755)). 4.4 -- Certificate of Trust related to our trust-issued preferred securities (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12755)). 4.5 -- Amended and Restated Declaration of Trust related to our trust-issued preferred securities (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12755)). 4.6 -- Indenture for the 5.5% Convertible Subordinated Debentures, dated as of March 24, 1998, among us and Wilmington Trust Company, as Indenture Trustee (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12755)). 4.7 -- Form of 5.5% Preferred Securities (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12755)). 4.8 -- Form of 5.5% Convertible Subordinated Debenture (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12755)). 4.9 -- Preferred Securities Guarantee Agreement, dated as of March 24, 1998, between us, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12755)). 4.10 -- Registration Rights Amendment, dated March 24, 1998, between us, Suiza Capital Trust II, and Donaldson, Lufkin, Jenrette Securities Corporation, Bear, Stearns & Co. Inc. and J.P. Morgan & Co. (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12755)). *10.1 -- Fourth Amended and Restated 1997 Stock Option and Restricted Stock Plan (filed herewith). 10.2 -- Form of First Amendment to the Fourth Amended and Restated 1997 Stock Option and Restricted Stock Plan (filed herewith) 10.3 -- 1989 Dean Foods Stock Awards Plan (incorporated by reference from our definitive proxy statement/prospectus filed August, 2001,) *10.4 -- Executive Deferred Compensation Plan (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-12755)). *10.5 -- Third Amended and Restated 1997 Employee Stock Purchase Plan (filed herewith). 10.6 -- Stockholders Agreement dated July 31, 1997 among us, Franklin Plastics, Peter M. Bernon and Alan J. Bernon (incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, as amended on October 24, 1997 (File No. 1-12755)). 10.7 -- Contribution and Merger Agreement by and among Suiza Foods Corporation, Franklin Plastics, Inc. and affiliates, Vestar Packaging LLC, Reid Plastics Holdings, Inc. and affiliates, Consolidated Container Holdings LLC, Consolidated Container Company LLC and Reid Plastics Group LLC dated as of April 29, 1999, as amended (incorporated by reference from our Current Report on Form 8-K dated July 19, 1999, File No. 1-12755).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.8 -- Amendment No. 1 to Contribution and Merger Agreement dated June 28, 1999 (incorporated by reference from our Current Report on Form 8-K dated July 19, 1999, File No. 1-12755). 10.9 -- Amended and Restated Limited Liability Company Agreement of Consolidated Container Holdings, LLC (incorporated by reference from our Current Report on Form 8-K dated July 19, 1999, File No. 1-12755). 10.10 -- Amended and Restated Contribution Agreement, Plan of Merger and Purchase Agreement dated September 30, 1999 between us, Dairy Farmers of America, and certain other parties regarding our acquisition of Southern Foods Group, L.P. (incorporated by reference from our Quarterly Report on Form 10-Q the quarter ended September 30, 1999, File No. 1-12755). 10.11 -- Agreement and Plan of Merger dated April 4, 2001 among us, Old Dean and Blackhawk Acquisition Corp. (incorporated by reference from our Current Report on Form 8-K filed April 5, 2001, File No. 1-12755). 10.12 -- Amended and Restated Securities Purchase Agreement, dated December 21, 2001 (incorporated by reference to our 8-K dated January 7, 2002, File No. 1-12755). 10.13 -- $2.7 million Credit Agreement dated July 31, 2001 among us and our senior lenders (incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, File No. 1-12755). 10.14 -- First Amendment to Credit Agreement dated December 19, 2001 (incorporated by reference to our 8-K filed January 7, 2002, File No. 1-12755). 10.15 -- Amended and Restated Receivables Purchase Agreement dated December 21, 2001 related to our receivables-backed loan (filed herewith). 10.16 -- Amended and Restated Receivables Sale Agreement dated December 21, 2001 (filed herewith). 10.17 -- Amended and Restated Receivables Transfer Agreement dated December 21, 2001 related to Morningstar Foods (filed herewith). *10.32 -- Form of Severance Agreement for our dairy executive officers (incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-12755). *10.33 -- Form of Severance Agreement for certain senior officers (incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-12755). *10.34 -- Form of Severance Agreement for certain other officers (incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-12755). 21 -- List of Subsidiaries (filed herewith). 23 -- Consent of Deloitte & Touche LLP (filed herewith).
- --------------- * Management or compensatory contract EX-3.1 3 d95076ex3-1.txt AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF DEAN FOODS COMPANY Dean Foods Company, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The date of filing of the Corporation's original Certificate of Incorporation (the "Certificate of Incorporation") with the Secretary of State was September 19, 1994, under the original name of Suiza Foods Corporation. 2. On December 21, 2001, this Restated Certificate of Incorporation was duly adopted by the directors of the Corporation pursuant to Sections 141 and 245 of the General Corporation Law of Delaware. This Restated Certificate of Incorporation restates and integrates and does not further amend the Certificate of Incorporation, as heretofore amended and supplemented, and there is no discrepancy between the provisions of the Certificate of Incorporation, as heretofore amended and supplemented, and the provisions of this Amended and Restated Certificate of Incorporation. The text of the Certificate of Incorporation is hereby restated in its entirety as follows: [Remainder of page intentionally left blank] -1- ARTICLE I The name of the Corporation is Dean Foods Company. ARTICLE II The name of the Corporation's registered agent and the address of its registered office in the State of Delaware is The Prentice-Hall Corporation System, Inc., 2711 Centerville Road, Suite 400, New Castle County, Wilmington, DE 19808. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. ARTICLE IV A. The total number of shares of capital stock that the Corporation shall have the authority to issue is 501,000,000, consisting of (a) 1,000,000 shares of Preferred Stock, $.01 par value per share, and (b) 500,000,000 shares of Common Stock, $.01 par value per share. B. DESIGNATIONS OF PREFERRED STOCK 1. Shares of Preferred Stock may be issued from time to time in one or more series, each such series to have distinctive serial designations, as shall hereafter be determined in the resolution or resolutions providing for the issue of such series from time to time adopted by the Board of Directors pursuant to the authority which is hereby vested in the Board of Directors. 2. Each series of Preferred Stock (i) may have such number of shares; (ii) may have such voting power, full or limited, or may be without voting power; (iii) may be subject to redemption at such time or times and at such prices; (iv) may be entitled to receive dividends (which may be cumulative or noncumulative), payable in cash, securities or property, at such rate or rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable in any other class or classes or series of stock; -2- (v) may be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation at such price or prices or at such rates of exchange, and with such adjustments; (vi) may be entitled to the benefit of a sinking fund or purchase fund to be applied to the purchase or redemption of shares of such series in such amount or amounts; (vii) may be entitled to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issue of any additional stock (including additional shares of such series or of any other series) and upon payment of dividends or the making of other distributions on, and the purchase, redemption, or other acquisition by the Corporation or any subsidiary, of any outstanding stock of the Corporation, or of other affirmative or negative covenants; (viii) may have certain rights in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, and relative rights of priority of payment of shares of that series; and (ix) may have such other relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof; all as shall be stated in a resolution or resolutions providing for the issue of such Preferred Stock. Except where otherwise set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Preferred Stock, the number of shares comprising such series may be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors. C. SERIES A PREFERRED STOCK The Corporation, does hereby designate 11,691 shares of authorized but unissued Preferred Stock as Series A Preferred Stock (the "Series A Preferred Stock"), and does hereby fix the voting powers, preferences and relative participation, optional, or other special rights and qualifications, limitations, or restrictions thereof as follows: 1. Stated Value. The Series A Preferred Stock shall have a stated value of $320 per share. 2. Dividends. The holders of Series A Preferred Stock, in preference to the holders of the Common Stock, shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available to distribution to stockholders, cumulative dividends of $25.60 per share per annum, and no more. Dividends shall accumulate and (if declared) be payable semiannually on the first day of March and September in each year (each a "Dividend Payment Date" or collectively, "Dividend Payment Dates"), commencing March 1, 1998, except that if any Dividend Payment Date is not a business day in Dallas, Texas, then such semi-annual dividend shall be payable on the next succeeding business day and such next succeeding business day shall be the Dividend Payment Date. Dividends on the shares of Series A Preferred Stock shall accrue and be cumulative from the date of their original issue and (if declared) will be -3- payable on each Dividend Payment Date to stockholders of record on the record date, which shall be not more than 45 days nor less than 10 days preceding such Dividend Payment Date, fixed for such purpose by Board of Directors in advance of such Dividend Payment Date. If no date is fixed by the Board of Directors, the record date shall be 10 days preceding the Dividend Payment Date. The amount of dividends payable on shares of Series A Preferred Stock for each full semiannual dividend period shall be computed by dividing $25.60 by two. Dividends payable on the Series A Preferred Stock for any period less than a full semiannual period shall be computed on the basis of a 360-day year of twelve 30-day months; provided, however, that the dividends payable on the Series A Preferred Stock for the initial dividend period shall be $12.80. Notwithstanding the foregoing, and except as provided below in Section 4 with respect to certain redemptions, dividends on the Series A Preferred Stock do not accrue until the applicable Dividend Payment Date, at which time they accrue in full. Dividends paid on shares of Series A Preferred Stock in an amount less than the total amount of the dividends at the time, accumulated and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. No interest shall be payable on any dividends paid after the applicable Dividend Payment Date. So long as any shares of Series A Preferred Stock shall be outstanding, no dividend shall be paid or declared, no funds shall be set aside for payment of dividends, and no distribution shall be made on the Common Stock or other Preferred Stock of the Corporation ranking junior to the Series A Preferred Stock until all dividends accrued on the Series A Preferred Stock have been paid for the current and all prior dividend periods. 3. Liquidation Preference. Upon the liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive in full out of the assets of the Corporation available for distribution to stockholders, including its capital, before any amount shall be paid to, or distributed among, the holders of Common Stock or other Preferred Stock ranking junior to the Series A Preferred Stock, the sum of $320 per share, plus all accrued and unpaid dividends to the time of payment. 4. Redemption. 4.01 Option to Redeem. Outstanding shares of Series A Preferred Stock may be redeemed, as a whole or in part, at the option of the Corporation by vote of its Board of Directors at any time or from time to time, upon no less than 30 or more than 120 days' notice. If less than all the outstanding shares of the Series A Preferred Stock are to be redeemed, the shares to be redeemed shall be determined by lot or pro rata, in the manner that the Board of Directors prescribes. The redemption price for shares of the Series A Preferred Stock shall be $320 per share plus accrued and unpaid dividends to the date fixed for redemption. For purposes of redemptions made under this Section 4.01 only, pro rata dividends on any shares of Series A Preferred Stock to be redeemed shall be deemed to accrue as of the date fixed for redemption upon satisfaction of the requirements set forth in Section 4.03 below. 4.02 Notice. Written notice of redemption shall be given to each holder of record of the shares of Series A Preferred Stock to be redeemed, by mailing a notice of -4- redemption to the holder by first class mail, at the holder's address as it shall appear on the stock record books of the Corporation, at least 30 days and not more than 120 days before the date fixed for redemption. Each notice shall specify the shares of stock to be redeemed, the redemption price, the date fixed for redemption, the place for payment of the redemption price and for surrender of the certificate representing the shares to be redeemed, and if less than the total number of shares held by the holder are to be redeemed, the number of shares of the holder to be redeemed. 4.03 Set Aside of Redemption Funds. If notice of redemption shall have been given as provided in Section 4.02 and if, on or before the date fixed for redemption, the redemption price shall have been provided and set aside by the Corporation (with a bank with trust powers or in a separate account of the Corporation) for the pro rata benefit of the holders of the shares called for redemption, then, from and after the date fixed for redemption, the shares of Series A Preferred Stock called for redemption shall no longer be deemed outstanding, the dividends on the shares shall cease to accumulate, and all rights with respect to the shares shall cease and terminate, except only the right of the holders of the shares to receive the redemption price of the shares called for redemption, but without interest. The Board of Directors may designate a bank with trust powers as a depositary of the funds to be used for redemption of the shares and as agent of the Corporation for the giving of the notices of redemption, the receipt of the shares called for redemption and the payment of the redemption price, the acts of the designated agent on behalf of the Corporation to be as effective and to have the same results as if the acts were done by the Corporation. Any monies deposited by the Corporation with a designated bank and unclaimed at the end of six years from the date fixed for redemption shall be repaid to the Corporation upon its request, after which repayment the holders of the shares called for redemption shall look only to the Corporation for the payment of those monies. 4.04 No Sinking Fund. The Corporation shall not be obligated to make payments into or to maintain any sinking fund for the Series A Preferred Stock. 5. Voting. Each share of Series A Preferred Stock shall have one vote on all matters upon which holders of Common Stock are entitled to vote. Shares of Series A Preferred Stock and shares of Common Stock shall be treated as one class or series of shares for all voting purposes except to the extent a class or series vote is provided by law. 6. Preemptive Rights. No holders of any shares of Series A Preferred Stock, as such, shall have any preemptive or preferential right to subscribe for or purchase any shares of any class or series of capital stock of the Corporation, now or later authorized, or any securities convertible into, or carrying options or warrants to purchase, shares of any class or series, now or later authorized, whether issued for cash, property, services, by way of dividends or otherwise. 7. Limitations. In addition to other rights as may be provided under applicable law, without the affirmative vote of the holders of a majority of the outstanding Series A Preferred Stock, the Corporation may not authorize or create any class or series of stock ranking prior to the Series A Preferred Stock with respect to dividends or the distribution of -5- assets in liquidation. ARTICLE V In furtherance and not limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to alter, amend, or repeal the bylaws of the Corporation or to adopt new bylaws. ARTICLE VI Cumulative voting for the election of directors shall not be permitted. ARTICLE VII No stockholder of the Corporation shall by reason of his holding shares of any class of its capital stock have any preemptive or preferential right to purchase or subscribe for any shares of any class of the Corporation, now or hereafter to be authorized, or any notes, debentures, bonds or other securities convertible into or carrying warrants, rights, or options to purchase shares of any class or any other security, 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, voting, or any other rights of such stockholder; and the Board of Directors may issue shares of any class of the Corporation, or any notes, debentures, bonds, or other securities convertible into or carrying warrants, rights, or options to purchase shares of any class, without offering any such shares of any class, either in whole or in part, to the existing holders of any class of stock of the Corporation. ARTICLE VIII A. The number of directors constituting the initial Board of Directors is three and thereafter the number of directors shall be as set forth in, or pursuant to the Bylaws of, the Corporation. The Board of Directors shall be divided into three classes, designated Classes I, II and III, which shall be as nearly equal in number as possible. Initially, directors of Class I shall be elected to hold office for a term expiring at the next succeeding annual meeting of stockholders, directors of Class II shall be elected to hold office for a term expiring at the second succeeding annual meeting of stockholders and directors of Class III shall be elected to hold office for a term expiring at the third succeeding annual meeting of stockholders. At each annual meeting of stockholders following such initial classification and election, the respective successors of each class shall be elected for three year terms. B. Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding to elect or remove directors, any or all of the directors of the Corporation may be -6- removed at any time, but only for cause and only by the affirmative vote of a majority of the stockholders then entitled to vote in the election of directors. For this purpose, "cause" means (i) the director's commission of an act of fraud or embezzlement against the Corporation; (ii) conviction of the director of a felony or a crime involving moral turpitude; (iii) the director's gross negligence or willful misconduct in performing the director's duties to the Corporation or its stockholders; or (iv) a director's breach of fiduciary duty owed to the Corporation. ARTICLE IX Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the chief executive officer of the Corporation or by a majority of the members of the Board of Directors. Special meetings of the stockholders of the Corporation may not be called by any other person or persons. ARTICLE X A director of the Corporation shall not 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 that 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 Corporation Law is amended after the filing of this Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing paragraph 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. ARTICLE XI A. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer shall be indemnified and held harmless by the corporation to the fullest extent authorized by the -7- Delaware General Corporation 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 permitted prior thereto), against all expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee's heirs, executors, and administrators; PROVIDED, HOWEVER, that, except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Article XII shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); PROVIDED, HOWEVER, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Article or otherwise. B. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under paragraph A of this Article is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation (except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days), the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law, and in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder or by the -8- Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such advancement of expenses under this Article or otherwise shall be on the Corporation. C. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to the advancement of expenses conferred in this Article XII shall not be exclusive of any other right that any person may have or hereafter acquire under this Certificate of Incorporation or any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. D. INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director or officer of the Corporation or another corporation, partnership, joint venture, trust, or other enterprise against any expense, liability, or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability, or loss under the Delaware General Corporation Law. E. INDEMNITY OF EMPLOYEES AND AGENTS OF THE CORPORATION. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article XII with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. -9- IN WITNESS WHEREOF, the undersigned officer of the Corporation hereby certifies that the facts herein stated are true, and accordingly has signed this instrument this 21st day of December, 2001. /s/ Michelle P. Goolsby -------------------------------------- Michelle P. Goolsby Executive Vice President and Secretary -10- EX-4.1 4 d95076ex4-1.txt SPECIMEN OF COMMON STOCK CERTIFICATE EXHIBIT 4.1 DELAWARE [Cert. No.] [Number of Shares] COMMON STOCK CUSIP 242370 10 4 $.01 PAR VALUE SEE REVERSE FOR CERTAIN DEFINITIONS [LOGO] This Certifies that: is the owner of FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF DEAN FOODS COMPANY [Number of Shares] DATED: - ------------------------------------- PRESIDENT AND CHIEF EXECUTIVE OFFICER COUNTERSIGNED AND REGISTERED: - ------------------------------------- EXECUTIVE VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER, GENERAL COUNSEL AND SECRETARY The Corporation will furnish to any shareholder upon request and without charge, a summary of the designations, relative rights, preferences and limitations of the shares of each class and of each series of each preferred or special class, so far as the same have been fixed, and the authority of the Board to establish other series and to fix the relative rights, preferences and limitations of the shares of any class or series by amendment of the articles. [Cert. No.] [Number of Shares] [Number of Shares] Dean Foods Company [Date] EX-10.1 5 d95076ex10-1.txt 4TH AMENDED/RESTATED 1997 STOCK OPTION PLAN EXHIBIT 10.1 [DEAN LOGO] DEAN FOODS COMPANY FOURTH AMENDED AND RESTATED 1997 STOCK OPTION AND RESTRICTED STOCK PLAN 1. Purpose of the Plan. This Plan shall be known as the Dean Foods Company Fourth Amended and Restated 1997 Stock Option and Restricted Stock Plan. The purpose of the Plan is to attract and retain the best available persons for positions of substantial responsibility and to provide incentives to such persons to promote the success of the business of Dean Foods Company and its subsidiaries. Certain options granted under this Plan are intended to qualify as "incentive stock options" pursuant to Section 422 of the Internal Revenue Code of 1986, as amended from time to time, while certain other options granted under the Plan will constitute Nonqualified Options. 2. Definitions. As used herein, the following definitions shall apply: "Board" means the Board of Directors of the Company. "Change in Control" means (1) any "person" (as such term is used in Section 13(d) of the Exchange Act) becomes the "beneficial owner" (as determined pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or (2) during any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the members of the Company's Board of Directors (the "Board") and any new director, whose election to the Board or nomination for election to the Board by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (3) the Company or any subsidiary of the Company shall merge with or consolidate into any other company, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding immediately thereafter securities representing more than sixty percent (60%) of the combined voting power of the voting securities of the Company or such surviving entity (or its ultimate parent, if applicable) outstanding immediately after such merger or consolidation; or (4) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets or such a plan is commenced. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. "Committee" means the committee described in Section 19 that administers the Plan or, if no such committee has been appointed, the full Board. "Common Stock" means the common stock, $.01 par value per share, of the Company. Except as otherwise provided herein, all Common Stock issued pursuant to this Plan shall have the same rights as all other issued and outstanding shares of Common Stock, including but not limited to voting rights, the right to dividends, if declared and paid, and the right to pro rata distributions of the Company's assets in the event of liquidation. "Company" means Dean Foods Company, a Delaware corporation, formerly known as Suiza Foods Corporation. "Consultant" means any consultant or advisor who renders bona fide services to the Company or one of its Subsidiaries, which services are not in connection with the offer or sale of securities in a capital-raising transaction. "Date of Grant" shall have the meaning set forth in Section 8 hereof. "Divested Business Unit" shall have the meaning set forth in Section 10 hereof. "Employee" means any officer or other key employee of the Company or one of its Subsidiaries (including any director who is also an officer or key employee of the Company or one of its Subsidiaries). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exercise Price" shall have the meaning set forth in Section 9 hereof. "Fair Market Value" means the closing sale price (or average of the quoted closing bid and asked prices if there is no closing sale price reported) of the Common Stock on the date specified as reported by the principal national exchange or trading system on which the Common Stock is then listed or traded. If there is no reported price information for the Common Stock, the Fair Market Value will be determined by the Board or the Committee, in its sole discretion. In making such determination, the Board or the Committee may, but shall not be obligated to, commission and rely upon an independent appraisal of the Common Stock. "Immediate Family Members" shall have the meaning set forth in Section 15 hereof. "Non-Employee Director" means an individual who is a "non-employee director" as defined in Rule 16b-3 under the Exchange Act and also an "outside director" within the meaning of Treasury Regulation ss. 1.162-27(e)(3). "Nonqualified Option" means any Option that is not a Qualified Option. "Option" means a stock option granted pursuant to Section 6 of this Plan. "Optionee" means any Employee, Consultant or Non-Employee Director who receives an Option. 2 "Participant" means any Employee, Consultant or Non-Employee Director who receives an Option or Restricted Stock pursuant to this Plan. "Qualified Option" means any Option that is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. "Qualifying Retirement" means retirement by an Optionee from employment or other service to the Company or any Subsidiary after such Optionee reaches the age of 65. "Restricted Stock" means Common Stock awarded to an Employee, Consultant or Non-Employee Director pursuant to Section 7 of this Plan. "Restricted Stock Cap" shall have the meaning set forth in Section 7 hereof. "Rule 16b-3" means Rule 16b-3 of the rules and regulations under the Exchange Act, as Rule 16b-3 may be amended from time to time, and any successor provisions to Rule 16b-3 under the Exchange Act. "Subsidiary" means any now existing or hereinafter organized or acquired company of which more than fifty percent (50%) of the issued and outstanding voting interests are owned or controlled directly or indirectly by the Company or through one or more Subsidiaries of the Company. "10-Percent Stockholder" shall have the meaning set forth in Section 9 hereof. 3. Term of Plan. The Plan has been adopted by the Board effective as of February 24, 1997 and approved by the stockholders of the Company. The Plan shall continue in effect until terminated pursuant to Section 19. 4. Shares Subject to the Plan. Except as otherwise provided in Section 18 hereof, the aggregate number of shares of Common Stock issuable upon the exercise of Options or upon the grant of Restricted Stock pursuant to this Plan shall be 12,500,000 shares. Such shares may either be authorized but unissued shares or treasury shares. The Company shall, during the term of this Plan, reserve and keep available a number of shares of Common Stock sufficient to satisfy the requirements of the Plan. If an Option should expire or become unexercisable for any reason without having been exercised in full, or Restricted Stock should fail to vest and be forfeited in whole or in part for any reason, then the shares that were subject thereto shall, unless the Plan has terminated, be available for the grant of additional Options or Restricted Stock under this Plan, subject to the limitations set forth above. 5. Eligibility. Qualified Options may be granted under Section 6 of the Plan to such Employees of the Company or its Subsidiaries as may be determined by the Board or the Committee. Nonqualified Options may be granted under Section 6 of the Plan to such Employees, Consultants and Non-Employee Directors of the Company or its Subsidiaries as may be determined by the Board or the Committee. Restricted Stock may be granted under Section 7 of the Plan to such Employees, Consultants and Non-Employee Directors of the Company or its Subsidiaries as may be determined by the Board or the Committee. Subject to the limitations and 3 qualifications set forth in this Plan, the Board or the Committee shall also determine the number of Options or shares of Restricted Stock to be granted, the number of shares subject to each Option or Restricted Stock grant, the exercise price or prices of each Option, the vesting and exercise period of each Option and the vesting and/or forfeiture provisions relating to Restricted Stock, whether an Option may be exercised as to less than all of the Common Stock subject thereto, and such other terms and conditions of each Option or grant of Restricted Stock, if any, as are consistent with the provisions of this Plan. In connection with the granting of Qualified Options, the aggregate Fair Market Value (determined at the Date of Grant of a Qualified Option) of the shares with respect to which Qualified Options are exercisable for the first time by an Optionee during any calendar year (under all such plans of the Optionee's employer company and its parent and subsidiary corporations as defined in Section 424(e) and (f) of the Code, or a corporation or a parent or subsidiary corporation of such corporation issuing or assuming an Option in a transaction to which Section 424(a) of the Code applies) shall not exceed $100,000 or such other amount as from time to time provided in Section 422(d) of the Code or any successor provision. 6. Grant of Options. (a) Except as limited by Sections 4 and 5 hereof, the Board or the Committee shall determine the number of shares of Common Stock to be offered from time to time pursuant to Options granted hereunder and shall grant Options under the Plan. The grant of Options shall be evidenced by Option agreements containing such terms and provisions as are approved by the Board or the Committee and executed on behalf of the Company by an appropriate officer. (b) Unless the Board or the Committee determines otherwise with respect to a particular year, each Non-Employee Director will automatically be granted a Nonqualified Option to purchase 7,500 shares of Common Stock (subject to adjustment pursuant to Section 18 hereof), at an exercise price equal to the Fair Market Value of the Common Stock on the Date of Grant, on June 30 of each year. 7. Restricted Stock. The Board or the Committee shall from time to time determine the number of shares of Common Stock to be granted as Restricted Stock; provided that no more than an aggregate amount of 75,000 shares of Restricted Stock may be issued under the Plan (such limit being herein referred to as the "Restricted Stock Cap"). Any shares of Restricted Stock that fail to vest and are forfeited shall not count against the Restricted Stock Cap set forth in the preceding sentence. The grant of Restricted Stock shall be evidenced by Restricted Stock agreements containing such terms and provisions as are approved by the Board or the Committee and executed on behalf of the Company by an appropriate officer. 8. Date of Grant. The date of grant of an Option or Restricted Stock under the Plan (the "Date of Grant") shall be the date on which the Board or the Committee awards the Option or Restricted Stock or, if the Board or the Committee so determines, the date specified by the Board or the Committee as the date the award is to be effective. Notice of the grant shall be given to each Participant to whom an Option or Restricted Stock is granted promptly after the date of such grant. 9. Price. The exercise price for each share of Common Stock subject to an Option (the "Exercise Price") granted pursuant to Section 6 of the Plan shall be determined by the Board or the Committee at the Date of Grant; provided, however, that (a) the Exercise Price for any 4 Option shall not be less than 100% of the Fair Market Value of the Common Stock at the Date of Grant, and (b) if the Optionee owns on the Date of Grant more than 10 percent of the total combined voting power of all classes of stock of the Company or its parent or any of its subsidiaries, as more fully described in Section 422(b)(6) of the Code or any successor provision (such stockholder is referred to herein as a "10-Percent Stockholder"), the Exercise Price for any Qualified Option granted to such Optionee shall not be less than 110% of the Fair Market Value of the Common Stock at the Date of Grant. The Board or the Committee in its discretion may award shares of Restricted Stock under Section 7 of the Plan to Participants without requiring the payment of cash consideration for such shares. 10. Vesting. (a) Subject to the provisions of this Plan, each Option and Restricted Stock award under the Plan shall vest or be subject to forfeiture in accordance with the provisions set forth in the applicable Option agreement or Restricted Stock agreement. (b) In addition to the vesting provisions contained in each Option and Restricted Stock agreement, each Option and share of Restricted Stock granted under the Plan shall also be subject to the following vesting provisions: (i) If the Company shall sell or otherwise divest of all of its ownership interest in any Subsidiary or any business unit or operation (a "Divested Business Unit") owned by the Company or any Subsidiary, then the outstanding unvested Options and shares of Restricted Stock held by each employee of such Divested Business Unit shall automatically vest in full as of the date of the consummation of such sale or divestiture; (ii) Each unvested Option and share of Restricted Stock shall immediately vest in full upon the death of the holder of such Option or Restricted Stock; (iii) Each unvested Option and share of Restricted Stock shall immediately vest in full upon any Change in Control; (iv) Each unvested Option and share of Restricted Stock shall immediately vest in full upon the permanent and total disability (as defined within the meaning of Section 22(e)(3) of the Code) of the holder of such Option or Restricted Stock; and (iv) In the event of the Qualifying Retirement of a Participant, all unvested Options and shares of Restricted Stock held by such Participant shall automatically vest in full as of the effective date of such Participant's Qualifying Retirement. 11. Exercise. (a) An Optionee may pay the exercise price of the shares of Common Stock as to which an Option is being exercised by the delivery of cash, check or wire transfer. (b) If the shares to be purchased are covered by an effective registration statement under the Securities Act of 1933, as amended, any Option may be exercised by a broker-dealer acting on behalf of an Optionee if (i) the broker-dealer has received from the Company confirmation of the existence and validity of the Option to be exercised, together with instructions from the Optionee requesting the Company to deliver the shares of Common Stock subject to such Option to the broker-dealer on behalf of the Optionee and specifying the account into which such shares should be deposited, (ii) adequate provision has been made with respect 5 to the payment of any withholding taxes due upon such exercise, and (iii) the broker-dealer and the Optionee have otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220, or any successor provision, and any other applicable regulations. 12. Expiration of Options. (a) No Option shall be exercisable at any time after the expiration of ten (10) years from the Date of Grant; provided, however, that if the Optionee with respect to a Qualified Option is a 10-Percent Stockholder on the Date of Grant of such Qualified Option, then such Option shall not be exercisable after the expiration of five (5) years from its Date of Grant. (b) In addition, if an Optionee ceases to be an employee of the Company or any Subsidiary for any reason (including because such Optionee is an employee of a Divested Business Unit), such Optionee's vested Options shall expire on the earlier of the expiration date contained in the corresponding Option Agreement or (a) 60 days following the date such Optionee ceases to be an employee of the Company or any Subsidiary, if such cessation of service is not due to the death, Qualifying Retirement or permanent and total disability (within the meaning of Section 22(e)(3) of the Code) of the Optionee, or (b) twelve months following the date such Optionee ceases to be an employee of the Company or any Subsidiary, if such cessation of service is due to the death or permanent and total disability (as defined above) of the Optionee. Options held by an Optionee who has retired pursuant to a Qualifying Retirement will remain exercisable until the earlier of (i) the tenth anniversary of the date the Option was granted, and (ii) the first anniversary of the Optionee's death. Upon the death of an Optionee, any vested Option exercisable on the date of death may be exercised by the Optionee's estate or by a person who acquires the right to exercise such Option by bequest or inheritance or by reason of the death of the Optionee, provided that such exercise occurs within the shorter of the remaining option term of the Option and twelve months after the date of the Optionee's death. (c) Notwithstanding any provision of this Plan or any Option Agreement to the contrary, no Optionee may, under any circumstances, exercise a vested Option following termination of employment if the Optionee is discharged due to the Optionee's willful or intentional fraud, embezzlement or other conduct seriously detrimental to the Company or any Subsidiary. The determination of whether or not an Optionee has been discharged for any of the reasons specified in the preceding sentence will be made by the Committee. 13. Option Financing. Upon the exercise of any Option granted under the Plan, the Company may, but shall not be required to, make financing available to the Participant for the purchase of shares of Common Stock pursuant to such Option on such terms as the Board or the Committee may specify. 14. Withholding of Taxes. The Board or the Committee shall make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes that the Company is required by any law or regulation of any governmental authority to withhold in connection with any Option or Restricted Stock including, but not limited to, withholding the issuance of all or any portion of the shares of Common Stock subject to such Option or Restricted Stock until the Participant reimburses the Company for the amount it is required to withhold with respect to such taxes, canceling any portion of such issuance in an amount sufficient to reimburse the Company for the amount it is required to withhold or taking any other action reasonably required to satisfy the Company's withholding obligation. 6 15. Conditions Upon Issuance of Shares. (a) The Company shall not be obligated to sell or issue any shares upon the exercise of any Option granted under the Plan or to deliver Restricted Stock unless the issuance and delivery of shares complies with all provisions of applicable federal and state securities laws and the requirements of any national exchange or trading system on which the Common Stock is then listed or traded. (b) As a condition to the exercise of an Option or the grant of Restricted Stock, the Company may require the person exercising the Option or receiving the grant of Restricted Stock to make such representations and warranties as may be necessary to assure the availability of an exemption from the registration requirements of applicable federal and state securities laws. (c) The Company shall not be liable for refusing to sell or issue any shares covered by any Option or for refusing to issue Restricted Stock if the Company cannot obtain authority from the appropriate regulatory bodies deemed by the Company to be necessary to sell or issue such shares in compliance with all applicable federal and state securities laws and the requirements of any national exchange or trading system on which the Common Stock is then listed or traded. In addition, the Company shall have no obligation to any Participant, express or implied, to list, register or otherwise qualify the shares of Common Stock covered by any Option or Restricted Stock. (d) No Participant will be, or will be deemed to be, a holder of any Common Stock subject to an Option unless and until such Participant has exercised his or her Option and paid the purchase price for the subject shares of Common Stock. Each Option under this Plan shall be transferable only by will or the laws of descent and distribution and shall be exercisable during the Participant's lifetime only by such Participant; provided, however, that the Committee may (but need not) permit transfer without consideration by such Participant to (i) the spouse, children or grandchildren of the Participant ("Immediate Family Members"), (ii) a trust or trusts, or to a guardian under the Uniform Gift to Minors Act, for the exclusive benefit of such Immediate Family Members, or (iii) a partnership or other entity in which such Immediate Family Members are the only partners, provided that subsequent transfers of transferred Options shall be prohibited except by will or the laws of descent and distribution. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that, for purposes of each Option agreement and Section 11 hereof, the term "Optionee" shall be deemed to refer to the transferee (however, the events of termination of employment, if any, set forth in the agreement and the obligation to pay withholding taxes shall continue to apply to the transferor). Qualified Options shall be nontransferable except by will or the laws of descent and distribution, and may only be exercisable during the Participant's lifetime, by the Participant. 16. Restrictions on Shares. Shares of Common Stock issued pursuant to the Plan may be subject to restrictions on transfer under applicable federal and state securities laws. The Board may impose such additional restrictions on the ownership and transfer of shares of Common Stock issued pursuant to the Plan as it deems desirable; any such restrictions shall be set forth in any Option agreement entered into hereunder. 7 17. Modification of Options. At any time and from time to time, the Board or the Committee may execute an instrument providing for modification, extension or renewal of any outstanding Option, provided that no such modification, extension or renewal shall (a) impair any Option without the consent of the holder of the Option, or (b) decrease the exercise price of any Option without the consent of the stockholders of the Company. Notwithstanding the foregoing, in the event of a modification, extension or renewal of a Qualified Option, the Board or the Committee may increase the exercise price of such Option if necessary to retain the qualified status of such Option. Any amendment to the Plan shall apply to all Options and shares of Restricted Stock outstanding at the time of such amendment in addition to all awards granted thereafter, subject to the limitations of clause (a) of the first sentence of this Section 17. 18. Effect of Change in Stock Subject to the Plan. In the event that each of the outstanding shares of Common Stock (other than shares held by dissenting stockholders) shall be changed into or exchanged for a different number or kind of shares of stock of the Company or of another company (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares or otherwise), or in the event a stock split or stock dividend occurs, then there shall be substituted for each share of Common Stock then subject to Options or Restricted Stock awards or available for Options or Restricted Stock awards the number and kind of shares of stock into which each outstanding share of Common Stock (other than shares held by dissenting stockholders) shall be so changed or exchanged, or the number of shares of Common Stock as is equitably required in the event of a stock split or stock dividend, together with an appropriate adjustment of the Exercise Price. The Board may, but shall not be required to, provide additional anti-dilution protection to a Participant under the terms of the Participant's Option or Restricted Stock agreement. 19. Administration. (a) The Plan shall be administered by the Board or by a committee of the Board comprised solely of two or more Non-Employee Directors appointed by the Board (the "Committee"). Options and Restricted Stock may be granted under Sections 6 and 7, respectively, only (i) by the Board as a whole, or (ii) by majority agreement of the members of the Committee. Option agreements and Restricted Stock agreements, in the forms as approved by the Board or the Committee, and containing such terms and conditions consistent with the provisions of this Plan as are determined by the Board or the Committee, may be executed on behalf of the Company by the Chairman of the Board, the President or any Vice President of the Company. The Board or the Committee shall have complete authority to construe, interpret and administer the provisions of this Plan and the provisions of the Option agreements and Restricted Stock agreements granted hereunder; to prescribe, amend and rescind rules and regulations pertaining to this Plan; to suspend or discontinue this Plan; and to make all other determinations necessary or deemed advisable in the administration of the Plan. The determinations, interpretations and constructions made by the Board or the Committee shall be final and conclusive. No member of the Board or the Committee shall be liable for any action taken, or failed to be taken, made in good faith relating to the Plan or any award thereunder, and the members of the Board or the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys' fees) arising therefrom to the fullest extent permitted by law. (b) Although the Board or the Committee may suspend or discontinue the Plan at any time, all Qualified Options must be granted before February 24, 2007. 8 (c) Subject to any applicable requirements of Rule 16b-3 or of any national exchange or trading system on which the Common Stock is then listed or traded, and subject to the stockholder approval requirements of Sections 422 and 162(m)(4)(C) of the Code, the Board may amend any provision of this Plan in any respect in its discretion. 20. Continued Employment Not Presumed. Nothing in this Plan or any document describing it nor the grant of any Option or Restricted Stock shall give any Participant the right to continue in the employment of the Company or affect the right of the Company to terminate the employment of any such person with or without cause. 21. Liability of the Company. Neither the Company, its directors, officers or employees or the Committee, nor any Subsidiary which is in existence or hereafter comes into existence, shall be liable to any Participant or other person if it is determined for any reason by the Internal Revenue Service or any court having jurisdiction that any Qualified Option granted hereunder does not qualify for tax treatment as an incentive stock option under Section 422 of the Code. 22. GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF STATE OF DELAWARE AND THE UNITED STATES, AS APPLICABLE, WITHOUT REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF. 23. Severability of Provisions. If any provision of this Plan is determined to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect the remaining provisions of the Plan, but such invalid, illegal or unenforceable provision shall be fully severable, and the Plan shall be construed and enforced as if such provision had never been inserted herein. Last Amended and Restated January 2002 9 EX-10.2 6 d95076ex10-2.txt 1ST AMENDMENT TO 4TH AMENDED/RESTATED STOCK PLAN EXHIBIT 10.2 FIRST AMENDMENT TO THE DEAN FOODS COMPANY FOURTH AMENDED AND RESTATED 1997 STOCK OPTION AND RESTRICTED STOCK PLAN WHEREAS, Dean Foods Company has adopted that certain Fourth Amended and Restated Stock Option and Restricted Stock Plan (the "Plan"); and WHEREAS, Section 19 of the Plan grants the Stock Option Committee of the Board of Directors of Dean Foods Company (the "Committee") complete authority to construe, interpret and administer the provisions of the Plan and to prescribe, amend and rescind rules and regulations pertaining to the Plan in its discretion; and WHEREAS, Section 17 of the Plan provides that any amendment to the Plan shall apply to all awards outstanding at the time of such amendment in addition to all awards granted thereafter, subject to certain limitations contained therein; and WHEREAS, the Plan has been previously amended to allow for transfers of stock options by optionees to certain family members of the optionee, to a trust for the exclusive benefit of such family members, or to a partnership or other entity in which the family members are the only partners; and WHEREAS, the Committee desires to amend the Plan, effective as of the date herein stated, to provide the same rights of transfer to holders of restricted stock issued under the Plan. EFFECTIVE AS OF FEBRUARY 21, 2002, Section 15(d) of the Plan is hereby amended in its entirety to read as follows: (d) No Participant will be, or will be deemed to be, a holder of any Common Stock subject to an Option unless and until such Participant has exercised his or her Option and paid the purchase price for the subject shares of Common Stock. Each Option and each share of Restricted Stock granted under this Plan shall be transferable only by will or the laws of descent and distribution and shall be exercisable during the Participant's lifetime only by such Participant; provided, however, that the Participant may transfer his or her Options or Restricted Stock without consideration to (i) the spouse, children or grandchildren of the Participant ("Immediate Family Members"), (ii) a trust or trusts, or to a guardian under the Uniform Gift to Minors Act, for the exclusive benefit of such Immediate Family Members, or (iii) a partnership or other entity in which such Immediate Family Members are the only partners, provided that subsequent transfers of those Options or shares of Restricted Stock shall be prohibited except by will or the laws of descent and distribution. Following transfer, any such Options or Restricted Stock shall continue to be subject to Page 1 of 2 the same terms and conditions as were applicable immediately prior to transfer; provided that, for purposes of each Option agreement and Restricted Stock agreement and Section 11 hereof, the term "Optionee" shall be deemed to refer to the transferee (however, the events of termination of employment, if any, set forth in the agreement and the obligation to pay withholding taxes shall continue to apply to the transferor). Qualified Options shall be nontransferable except by will or the laws of descent and distribution, and may only be exercisable during the Participant's lifetime, by the Participant. THIS AMENDMENT, once executed by all of the members of the Committee, shall be effective as of February 21, 2002 and shall be applicable to all outstanding Options and shares of Restricted Stock, and to all Options and Restricted Stock awards granted after such date. -------------------------------- P. Eugene Pender -------------------------------- Stephen L. Green -------------------------------- Joseph S. Hardin, Jr. -------------------------------- John S. Llewellyn, Jr. Page 2 of 2 EX-10.5 7 d95076ex10-5.txt 3RD AMENDED/RESTATED 1997 EMPLOYEE STOCK PLAN EXHIBIT 10.5 THIRD AMENDED AND RESTATED 1997 EMPLOYEE STOCK PURCHASE PLAN OF DEAN FOODS COMPANY I. INTRODUCTION The purpose of the Third Amended and Restated 1997 Employee Stock Purchase Plan (the "Plan") is to make available to eligible employees of Dean Foods Company (the "Company"), and certain related companies a means of purchasing shares of Dean Common Stock through voluntary, regular payroll deductions. The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974, but is intended to qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan shall be administered, interpreted and construed in accordance with Section 423 of the Code. Participation in the Plan is entirely voluntary, and the Company makes no recommendations to employees as to whether they should or should not participate. II. DEFINITIONS 2.1. DEFINITIONS. The following words and phrases shall have the following meanings: "ADMINISTRATOR" means the entity or person designated to act as Administrator of the Plan pursuant to Section 6.1. "BASE COMPENSATION" means gross compensation for the relevant pay period, including overtime pay, but excluding all bonuses, severance pay, any extraordinary pay, expense allowances/reimbursements, moving expenses and income from restricted stock or stock option awards. For these purposes, gross compensation includes any amount that would be included in taxable income but for the fact that it was contributed to a qualified plan pursuant to an elective deferral under Section 401(k) of the Code or contributed under a salary reduction agreement pursuant to Section 125 of the Code. "BOARD" means the Board of Directors of the Company. "BROKER" means a duly licensed securities dealer, broker or agent designated to act as Broker of the Plan pursuant to Section 6.2. "COMMITTEE" means the Compensation Committee of the Board, which, to the extent required by Rule 16b-3, shall consist entirely of non-employee directors (as defined in Rule 16b-3). Page 1 of 9 "COMPANY" means Dean Foods Company (formerly known as Suiza Foods Corporation). "COMMON STOCK" means Dean's Common Stock, par value $.01 per share. "CODE" has the meaning set forth in Article I. "DEAN COMPANY" means the Company or any Related Corporation. "ELIGIBLE EMPLOYEE" means any employee of any Dean Company, excluding any employee (a) who has been employed by a Dean Company for less than 60 days, (b) whose customary employment with the employee's Employer is 20 hours or less per week, (c) whose customary employment with the employee's Employer is not for more than five months in any calendar year, or (d) who immediately after the grant of an option under this Plan to the employee would (in accordance with the provisions of Sections 423 and 424(d) of the Code) own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the "employer corporation" or of its "Parent Corporations" or "Subsidiary Corporations," as defined in Section 424 of the Code. "EMPLOYER" means, with respect to any Participant, the Dean Company of which the Participant is an Eligible Employee. "FAIR MARKET VALUE" means, with respect to a share of Common Stock, the last sales price (or average of the quoted closing bid and asked prices if there is no closing sales price reported) of a share of Common Stock as reported by the New York Stock Exchange (or by the principal national stock exchange on which the Common Stock is then listed) on the date of valuation, if such date is a business day, or the immediately preceding business day, if such date is not a business day. "INDEMNIFIED PERSON" has the meaning set forth in SECTION 9.2. "INITIAL OPTION PERIOD" means the Option Period commencing on the Plan Start Date and ending on July 31, 1997. "1933 ACT" means the Securities Act of 1933, as amended. "OPTION" means an option granted pursuant to this Plan at the beginning of each Option Period to acquire Common Stock. "OPTION EXERCISE DATE" means the last day of each Option Period. "OPTION PERIOD" means each calendar month during the period beginning on the Plan Start Date and ending on June 30, 2007, unless the Plan is terminated earlier. Page 2 of 9 "PAYROLL DEDUCTION ACCOUNT" means, with respect to each Participant, the amounts credited to the Participant's account from the payroll deductions made by the Participant under this Plan, less any amounts withdrawn from such account (for payment of Common Stock, payment to the Participant, payment of withholding and other taxes or amounts or payment of other obligations or amounts). "PARTICIPANT" has the meaning set forth in SECTION 3.2. "PLAN" means the Third Amended and Restated 1997 Employee Stock Purchase Plan of Dean Foods Company as the same may be amended from time to time. "PLAN START DATE" means July 1, 1997. "RELATED CORPORATION" means any present or future corporation which would be a "subsidiary corporation" or "parent corporation" of the Company as such terms are defined in Section 424 of the Code. "RULE 16B-3" means Rule 16b-3 under the 1933 Act. "STOCK ACCOUNT" means, with respect to each Participant, the number of shares of Common Stock credited under this Plan to the Participant's account. Dividends with respect to shares of Common Stock credited to a Participant's Stock Account shall be paid to the Participant and shall not be held in either the Participant's Stock Account or Payroll Deduction Account. III. PARTICIPATION 3.1. ELIGIBLE EMPLOYEES. Subject to ARTICLE VIII, all Eligible Employees as of the beginning of each Option Period may participate in the Plan for such Option Period at their election. 3.2. PARTICIPATION PROCEDURES. If an Eligible Employee does not otherwise have an election to become a Participant in effect, each Eligible Employee choosing to participate in the Plan (herein called a "Participant") during an Option Period shall enroll as a Participant in the Plan by filing with the Participant's Employer a completed enrollment form (authorized by the Administrator) no later than 15 days prior to the beginning of any Option Period (including the Initial Option Period). 3.3. EMPLOYEE CONTRIBUTIONS. Subject to other limitations provided in this Plan, a Participant may contribute under the Plan a minimum of one percent (1%) and a maximum of fifteen percent (15%) of the Participant's Base Compensation. Contributions may be made only through regular payroll deductions, net of any tax or other withholdings. An enrollment form and payroll deduction authorization will remain effective for each Option Period until terminated in writing by a Participant or until the Participant is no longer Page 3 of 9 eligible to participate in the Plan. The payroll deduction authorization may be reduced or terminated at any time by the Participant's written request submitted to the Participant's Employer; provided, however, that a Participant may not recommence or increase payroll deductions until the beginning of the next Option Period, nor may a Participant make more than one revision of the Participant's payroll deduction authorization in any Option Period. Termination of deductions shall constitute withdrawal from the Plan as set forth in Section 3.5 and cancellation of any outstanding Options of the Participant. Reduction or termination of deductions will become effective as soon as practicable after a Participant's written request is received by the Participant's Employer. 3.4. PARTICIPANT RESTRICTION. Notwithstanding any provisions of this Plan to the contrary, no Participant will be granted an option under this Plan which would permit the Participant's rights to purchase shares of stock under all employee stock purchase plans of the Company and "parent corporations" and "subsidiary corporations" (within the meaning of Section 424 of the Code) to accrue at a rate which exceeds $25,000 of the Fair Market Value of such stock (determined at the time each Option is "Granted" (within the meaning of Code Section 423(b)(8)) for each calendar year during which any Option granted to such Participant is outstanding at any time, as provided in Sections 423 and 424(d) of the Code. 3.5. WITHDRAWAL FROM PLAN. A Participant may withdraw from the Plan (thereby canceling all Options then in existence) at any time by giving written notice to the Participant's Employer and to the Administrator. The Administrator shall, as soon as practicable after receiving written notice of a Participant's withdrawal from the Plan, cause to be delivered to the Participant a check representing any funds held to the credit of the Participant's Payroll Deduction Account. A Participant who has withdrawn from the Plan may thereafter reenter the Plan by following the procedure described under Section 3.2, but not sooner than the beginning of the next Option Period after the Participant has withdrawn from participation. 3.6. TERMINATION OF PARTICIPANT'S EMPLOYMENT. Upon termination of a Participant's employment from the Dean Companies for any reason, including death or disability, the Participant's Payroll Deduction Account in the Plan shall be closed, and all existing Options held by the Participant shall be canceled. The Administrator shall, as soon as practicable after termination of a Participant's employment, cause to be delivered to the Participant or the Participant's estate or the Participant's designated beneficiary as provided below, as applicable, a check representing any funds held to the credit of the Participant's Payroll Deduction Account. In the event of a Participant's death, the Participant's Payroll Deduction Account shall be delivered and paid to the estate of such Participant or to a beneficiary designated by the Participant in writing on a form approved by the Administrator. IV. OPTIONS TO PURCHASE STOCK; MAXIMUM SHARES AVAILABLE 4.1. MAXIMUM SHARES. The maximum number of shares which shall be issued under the Plan, subject to adjustment upon changes in Common Stock under Article VII, shall be 500,000 shares. Page 4 of 9 4.2. OFFERINGS. Subject to Article XIII, the Company shall make consecutive offerings on the beginning of each Option Period to Participants to purchase Common Stock as long as shares authorized remain available for issuance. Each offering as of the beginning of each Option Period shall be the total number of shares authorized under Section 4.1, less the number of shares issued by purchases of Common Stock under Section 5.5 in prior Option Periods. V. PURCHASE OF STOCK PURSUANT TO OPTIONS 5.1. PAYROLL DEDUCTION ACCOUNTS. Each Dean Company will deduct from its Participants' paychecks such amounts as have been authorized by the Participants and, promptly after the end of each month, remit to the Administrator all amounts so deducted during the month, together with a report showing each Participant and the amounts allocable to the Payroll Deduction Account of each Participant. The Administrator shall credit each Participant's Payroll Deduction Account with the amount of such deposits, and shall reduce the Participant's Payroll Deduction Account by the purchase price of all Common Stock purchased by the Participant under this Plan and by any other withdrawals from the Participant's Payroll Deduction Account. The Plan, through its Administrator, shall purchase for the Stock Accounts of the Participants shares of Common Stock with funds received under the Plan. 5.2. STOCK ACCOUNTS. The Broker will open and maintain a Stock Account in the name of each Participant to which will be credited all shares of Common Stock purchased for the Participant's benefit. All shares held under the Plan will be registered in the name of the Plan or the Broker, and will remain so registered until the shares are delivered to the Participant. The Participant shall have the right to sell all or any part of the shares held in the Participant's Stock Account, pursuant to procedures established by the Broker. 5.3. GRANT OF OPTIONS AND PURCHASE. Subject to ARTICLE VIII, each person who is a Participant on the first day of an Option Period will as of the first day of such Option Period be granted an Option for such period. Such Option will be for the number of shares of Common Stock to be determined by dividing (a) the balance in the Participant's Payroll Deduction Account on the Option Exercise Date, by (b) the purchase price per share of Common Stock determined under Section 5.4 below. The number of shares of Common Stock receivable by each Participant upon exercise of an Option for an Option Period shall be reduced, on a substantially proportionate basis, in the event that the number of shares then available under the Plan is otherwise insufficient. 5.4. PURCHASE PRICE. On Option Exercise Dates occurring prior to January 1, 2001, the purchase price of each share of Common Stock purchased pursuant to the exercise of an Option shall be .90 multiplied by the Fair Market Value of the Common Stock on the last day of the Option Period. On Option Exercise Dates occurring after January 1, 2001, the purchase price of each share of Common Stock purchased pursuant to the exercise of an Option shall be 0.85 multiplied by the Fair Market Value of the Common Stock on the last day of the Option Period. Page 5 of 9 5.5. EXERCISE OF OPTIONS. Each person who is a Participant in the Plan on each Option Exercise Date will be deemed to have exercised on that Option Exercise Date the Option granted to the Participant for that Option Period. Upon such exercise, the balance of the Participant's Payroll Deduction Account shall be applied to the purchase of the number of shares of Common Stock determined under Section 5.3, and the amount of shares of Common Stock purchased shall be credited to the Participant's Stock Account. In the event that the balance of the Participant's Payroll Deduction Account following an Option Period is in excess of the total purchase price of the shares of Common Stock so purchased, the balance of the Payroll Deduction Account shall be returned to the Participant. Notwithstanding anything herein to the contrary, the Company's obligation to sell and deliver shares of Common Stock under the Plan is subject to the approval required of any governmental authority in connection with the authorization, issuance, sale or transfer of such shares, to any requirements of the New York Stock Exchange or any national securities exchange applicable thereto, and to compliance by the Company with other applicable legal requirements in effect from time to time, including without limitation any applicable tax withholding requirements. 5.6. NO ASSIGNMENT OF PARTICIPANT'S INTEREST IN PLAN. A Participant may not assign, sell, transfer, pledge, hypothecate or alienate any Options or other interests in or rights under the Plan. Options under the Plan are exercisable by a Participant during the Participant's lifetime only by the Participant. All employees shall have the same rights and privileges under the Plan. 5.7. VESTING. Each Participant will immediately acquire full ownership of all shares of Common Stock at the time such shares are credited to the Participant's Stock Account. 5.8. DIVIDENDS, SPLITS AND DISTRIBUTIONS. Any stock dividends or stock splits in respect of shares held in the Participant's Stock Account will be credited to the Participant's account automatically. Any distributions to holders of Common Stock or other securities or rights to subscribe for additional shares of Common Stock will be handled in the same manner as a cash dividend, unless the Participant instructs the Administrator to the contrary. 5.9. VOTING RIGHTS. The Broker will deliver to each Participant as promptly as practicable, by mail or otherwise, all notices of meetings, proxy statements and other material distributed by the Company to its stockholders. The full shares of Common Stock in each Participant's Stock Account will be voted in accordance with the Participant's signed proxy instructions duly delivered to the Broker or pursuant to any other method of voting available to holders of Common Stock. There will be no charge to the Participant for the Administrator's retention or delivery of stock certificates, or in connection with notices, proxies or other such material. 5.10. NO INTEREST TO BE PAID. No interest will be paid to or credited to the Payroll Deduction Accounts or Stock Accounts of the Participants. Page 6 of 9 VI. ADMINISTRATION OF PLAN 6.1. THE ADMINISTRATOR AND THE COMMITTEE. To carry out the purposes of the Plan, the Committee shall appoint an Administrator. The Administrator may be any company or individual that the Committee deems qualified, including the Company. The Administrator shall be responsible for the implementation of the Plan, including allocation of funds to the Payroll Deduction Accounts and distribution of purchased Common Stock to the Stock Accounts, and keeping adequate and accurate records of such activities for the Participants. The Committee shall be entitled to adopt and apply guidelines and procedures consistent with the purposes of the Plan. In order to effectuate the purposes of the Plan, the Committee shall have the discretionary authority to construe and interpret the Plan, to supply any omissions therein, to reconcile and correct any errors or inconsistencies, to decide any questions in the administration and application of the Plan, and to make equitable adjustments for any mistakes or errors made in the administration of the Plan, and all such actions or determinations made by the Committee, and the application of rules and regulations to a particular case or issue by the Committee, in good faith, shall not be subject to review by anyone, but shall be final, binding and conclusive on all persons ever interested hereunder. 6.2. BROKER. The Administrator may, in its discretion, with the consent and approval of the Committee, appoint a Broker. The Broker may be any company or individual that the Committee deems qualified; provided, however, that the Broker shall be a licensed security dealer, broker, or agent authorized to make purchases and sales of Common Stock. 6.3. REPORTING TO PARTICIPANTS. The Broker will make available to each Participant an accounting of the Participant's Stock Account. VII. ADJUSTMENT UPON CHANGES IN COMMON STOCK 7.1. CHANGES IN COMMON STOCK. If any change is made in the Common Stock (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Administrator will make appropriate adjustments in the number of shares and price per share of Common Stock subject to the Plan or to any Option granted under the Plan. 7.2. DISSOLUTION; MERGER; CAPITAL REORGANIZATION; ETC. In the event of (i) a dissolution or liquidation of the Company; (ii) a merger or consolidation in which the Company is not the surviving corporation, or a reverse merger in which the Company is the surviving corporation but the shares of Common Stock by virtue of the merger are converted into other property, whether in the form of securities, cash or otherwise; or (iii) any other capital reorganization in which more than 50 percent of the shares of Common Stock entitled to vote are exchanged, the Plan shall terminate, unless another corporation assumes the responsibility of Page 7 of 9 continuing the operation of the Plan or the Committee determines in its discretion that the Plan shall nevertheless continue in full force and effect. If the Committee elects to terminate the Plan, the Administrator shall send to each Participant cash in an amount equal to the funds held to the credit of such Participant's Payroll Deduction Account. 7.3. COMPANY'S RIGHT TO RESTRUCTURE, ETC. The grant of any right to a Participant pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. VIII. AMENDMENT; TERMINATION OF PLAN 8.1. AMENDMENT. The Company, acting through the Committee, reserves the right to amend or terminate the Plan at any time or times; provided, however, any amendment that would require the consent of stockholders under applicable law, rule or regulation (including, without limitation, the Code, the Exchange Act or any self regulatory organization such as a national securities exchange), will not be made unless such stockholders' consent is obtained. 8.2. TERMINATION. In addition, the Plan shall terminate automatically on the tenth anniversary of the Plan Start Date, or on any Option Exercise Date when Participants become entitled to purchase a number of shares greater than the number of reserved shares remaining available for purchase, subject to the allocation of remaining shares pursuant to the last sentence of Section 5.3. Upon termination of the Plan, all amounts held in the Payroll Deduction Accounts shall, to the extent not used to purchase shares of Common Stock, be refunded to the Participants entitled thereto. IX. MISCELLANEOUS 9.1. EXPENSES OF PLAN. No fees or commissions will be charged for the purchase of Common Stock by Participants under the Plan. The Broker's brokerage commissions incurred in connection with sales of Common Stock by Participants or other transactions in Participants' Stock Accounts will be paid by the Participants. If the Company is acting as Administrator, no expenses of administration will be charged to the Participants. 9.2. INDEMNIFICATION. In the event and to the extent not insured against under any contract of insurance with an insurance company, the Company shall indemnify and hold harmless each "Indemnified Person," as defined below, against any and all claims, demands, suits, proceedings, losses, damages, interest, penalties, expenses (specifically including, but not limited to, counsel fees to the extent approved by the Board or otherwise provided by law, court costs and other reasonable expenses of litigation), and liability of every kind, including amounts paid in settlement, with the approval of the Board, arising from any action or cause of action related to the Indemnified Person's act or acts or failure to act. Such indemnity shall apply regardless of whether such claims, demands, suits, proceedings, losses, damages, interest, Page 8 of 9 penalties, expenses and liability arise in whole or in part from (a) the negligence or other fault of the Indemnified Person, or (b) from the imposition on such Indemnified Person of any civil penalties or excise taxes pursuant to the Code or any other applicable laws; except when the same is judicially determined to be due to gross negligence, fraud, recklessness, or willful or intentional misconduct of such Indemnified Person. "Indemnified Person" shall mean each member of the Board, the Administrator, each member of the Committee and each other employee of any Dean Company who is allocated fiduciary responsibility hereunder. 9.3. NO CONTRACT OF EMPLOYMENT INTENDED. The granting of any rights to an Eligible Employee under this Plan shall not constitute an agreement or understanding, express or implied, on the part of any Dean Company, to employ such Eligible Employee for any specified period. 9.4. GOVERNING LAW. The construction, validity and operation of this Plan shall be governed by the laws of the State of Delaware. 9.5. SEVERABILITY OF PROVISIONS. If any provision of this Plan is determined to be invalid, illegal or unenforceable, such invalidity, illegality or unenforcability shall not affect the remaining provisions of this Plan, but such invalid, illegal or unenforceable provisions shall be fully severable, and the Plan shall be construed and enforced as if such provision had never been inserted herein. 9.6. NO LIABILITY OF THE COMPANY. Neither the Company, its directors, officers or employees of the Committee, nor any Related Corporation which is in existence or hereafter comes into existence, shall be liable to any Participant or other person if it is determined for any reason by the Internal Revenue Service or any court having jurisdiction that the Plan does not qualify under Section 423 of the Code. The Company has caused this Plan to be adopted effective as of the Plan Start Date. Last Amended and Restated: February 2002 Page 9 of 9 EX-10.15 8 d95076ex10-15.txt AMENDED/RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT 10.15 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of December 21, 2001 Among DAIRY GROUP RECEIVABLES, L.P., as Seller, THE SERVICERS, THE COMPANIES, THE FINANCIAL INSTITUTIONS and BANK ONE, NA (MAIN OFFICE CHICAGO), as Agent AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT TABLE OF CONTENTS
Page ARTICLE I PURCHASE ARRANGEMENTS..............................................................................Page 2 Section 1.1 Purchase Facility.......................................................Page 2 Section 1.2 Increases...............................................................Page 3 Section 1.3 Decreases...............................................................Page 4 Section 1.4 Payment Requirements....................................................Page 4 ARTICLE II PAYMENTS AND COLLECTIONS...........................................................................Page 5 Section 2.1 Payments................................................................Page 5 Section 2.2 Collections Prior to Amortization.......................................Page 5 Section 2.3 Collections Following Amortization......................................Page 6 Section 2.4 Application of Collections..............................................Page 6 Section 2.5 Payment Recission.......................................................Page 7 Section 2.6 Maximum Purchaser Interests.............................................Page 7 ARTICLE III COMPANY FUNDING....................................................................................Page 8 Section 3.1 CP Costs................................................................Page 8 Section 3.2 CP Costs Payments.......................................................Page 8 Section 3.3 Calculation of Bank One Company Costs...................................Page 8 Section 3.4 Selection and Calculation of CP (Tranche) Accrual Periods...............Page 8 ARTICLE IV FINANCIAL INSTITUTION FUNDING......................................................................Page 9 Section 4.1 Financial Institution Funding...........................................Page 9 Section 4.2 Yield Payments..........................................................Page 10 Section 4.3 Selection and Continuation of Tranche Periods...........................Page 10 Section 4.4 Financial Institution Discount Rates....................................Page 11 Section 4.5 Suspension of the LIBO Rate.............................................Page 11 ARTICLE V REPRESENTATIONS AND WARRANTIES.....................................................................Page 13 Section 5.1 Representations and Warranties of The Seller Parties....................Page 13 Section 5.2 Financial Institution Representations and Warranties....................Page 18 ARTICLE VI CONDITIONS OF PURCHASES............................................................................Page 19 Section 6.1 Conditions Precedent to Initial Incremental Purchase....................Page 19 Section 6.2 Conditions Precedent to All Purchases and Reinvestments.................Page 19
i AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT ARTICLE VII COVENANTS..........................................................................................Page 20 Section 7.1 Affirmative Covenants of The Seller Parties.............................Page 20 Section 7.2 Negative Covenants of The Seller Parties................................Page 30 ARTICLE VIII ADMINISTRATION AND COLLECTION......................................................................Page 31 Section 8.1 Designation of Servicers................................................Page 31 Section 8.2 Duties of Servicer......................................................Page 32 Section 8.3 Collection Notices......................................................Page 34 Section 8.4 Responsibilities of Seller..............................................Page 35 Section 8.5 Reports.................................................................Page 35 Section 8.6 Servicing Fees..........................................................Page 35 ARTICLE IX AMORTIZATION EVENTS................................................................................Page 35 Section 9.1 Amortization Events.....................................................Page 35 Section 9.2 Remedies................................................................Page 38 ARTICLE X INDEMNIFICATION....................................................................................Page 39 Section 10.1 Indemnities by The Seller Parties.......................................Page 39 Section 10.2 Increased Cost and Reduced Return.......................................Page 42 Section 10.3 Other Costs and Expenses................................................Page 43 Section 10.4 Allocations.............................................................Page 43 ARTICLE XI THE AGENT..........................................................................................Page 44 Section 11.1 Authorization and Action................................................Page 44 Section 11.2 Delegation of Duties....................................................Page 44 Section 11.3 Exculpatory Provisions..................................................Page 44 Section 11.4 Reliance by Agent.......................................................Page 45 Section 11.5 Non-Reliance on Agent and Other Purchasers..............................Page 45 Section 11.6 Reimbursement and Indemnification.......................................Page 45 Section 11.7 Agent in its Individual Capacity........................................Page 46 Section 11.8 Successor Agent.........................................................Page 46 ARTICLE XII ASSIGNMENTS; PARTICIPATIONS........................................................................Page 46 Section 12.1 Assignments.............................................................Page 46 Section 12.2 Participations..........................................................Page 48
ii AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT ARTICLE XIII INTENTIONALLY OMITTED..............................................................................Page 48 ARTICLE XIV MISCELLANEOUS......................................................................................Page 48 Section 14.1 Waivers and Amendments..................................................Page 48 Section 14.2 Notices.................................................................Page 49 Section 14.3 Ratable Payments........................................................Page 50 Section 14.4 Protection of Ownership Interests of the Purchasers.....................Page 50 Section 14.5 Confidentiality.........................................................Page 51 Section 14.6 Bankruptcy Petition.....................................................Page 51 Section 14.7 Limitation of Liability.................................................Page 52 Section 14.8 CHOICE OF LAW...........................................................Page 52 Section 14.9 CONSENT TO JURISDICTION.................................................Page 52 Section 14.10 WAIVER OF JURY TRIAL....................................................Page 52 Section 14.11 Integration; Binding Effect; Survival of Terms..........................Page 53 Section 14.12 Counterparts; Severability; Section References..........................Page 53 Section 14.13 Bank One Roles..........................................................Page 53 Section 14.14 Characterization........................................................Page 54
iii AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Exhibits and Schedules Exhibit I Definitions Exhibit II Form of Purchase Notice Exhibit III Places of Business of the Seller Parties; Locations of Records; Federal Employer Identification Number(s) Exhibit IV Names of Collection Banks; Collection Accounts Exhibit V Form of Compliance Certificate Exhibit VI Form of Collection Account Agreement Exhibit VII Form of Assignment Agreement Exhibit VIII Credit and Collection Policies Exhibit IX [Intentionally omitted.] Exhibit X Form of Monthly Report Exhibit XI Form of Performance Undertaking Schedule A Commitments Schedule B Closing Documents Schedule C Dean Entities Schedule D Originators Schedule E Notice Addresses Schedule F Top Twenty-Five Obligors Schedule G Chase Lock-Boxes
iv AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT DAIRY GROUP RECEIVABLES, L.P. AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT This Amended and Restated Receivables Purchase Agreement dated as of December 21, 2001, is among Dairy Group Receivables, L.P., a Delaware limited partnership ("Seller"), each of the parties listed on the signature pages hereof as a Servicer, (the Servicers, together with Seller, the "Seller Parties," and each a "Seller Party"), the entities listed on Schedule A to this Agreement under the heading "Financial Institution" (together with any of their respective successors and assigns hereunder, the "Financial Institutions"), the entities listed on Schedule A to this Agreement under the heading "Company" (together with any of their respective successors and assigns hereunder, the "Companies") and Bank One, NA (Main Office Chicago), as agent for the Purchasers hereunder or any successor agent hereunder (together with its successors and assigns hereunder, the "Agent"). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I. PRELIMINARY STATEMENTS The Seller Parties (other than the Dean Entities), Bank One, NA (Main Office Chicago), in its capacity as a Financial Institution, Falcon Asset Securitization Corporation (the "Bank One Company") and the Agent are parties to that certain Receivables Purchase Agreement, dated as of June 30, 2000, as amended by the following amendments: (i) the First Amendment thereto, dated as of August 1, 2000, (ii) the Second Amendment thereto, dated as of February 9, 2001, (iii) the Third Amendment thereto, dated as of June 28, 2001, and (iv) the Fourth Amendment thereto, dated as of November 1, 2001 (as so amended, the "Original Agreement"). Atlantic Asset Securitization Corp. (the "CL Company") desires to become a party to the Original Agreement, and each of Credit Lyonnais New York Branch, a French banking corporation duly licensed under the laws of the State of New York ("CLNY") and Credit Agricole Indosuez, a branch of a French banking corporation ("Credit Ag"), desires to become a Financial Institution party to the Original Agreement. Each Dean Entity desires to become a Servicer party to the Original Agreement. Seller has transferred and assigned pursuant to the Original Agreement, and desires to continue to transfer and assign Purchaser Interests to the Purchasers from time to time. Each Company may, in its absolute and sole discretion, purchase the Purchaser Interests from Seller from time to time. AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT In the event that any Company declines to make any purchase, such Company's Related Financial Institutions shall, at the request of Seller, purchase Purchaser Interests that such Company declined to purchase from time to time. Bank One, NA (Main Office Chicago) has been requested and is willing to act as Agent on behalf of the Companies and the Financial Institutions in accordance with the terms hereof. The parties hereto now desire to amend and restate the Original Agreement in its entirety to read as set forth herein. AGREEMENT Now Therefore , in consideration of the foregoing and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree that, subject to satisfaction of the conditions precedent set forth in Section 6.1 hereof, the Original Agreement is hereby amended and restated in its entirety to read as follows: ARTICLE I PURCHASE ARRANGEMENTS Section 1.1 Purchase Facility. (a) Upon the terms and subject to the conditions hereof, Seller may, at its option, sell and assign Purchaser Interests to the Agent for the benefit of one or more of the Purchasers. In accordance with the terms and conditions set forth herein, each Company may, at its option, instruct the Agent to purchase on behalf of such Company, or if any Company shall decline to purchase, the Agent shall purchase, on behalf of such declining Company's Related Financial Institutions, Purchaser Interests from time to time in an amount not to exceed at such time (i) in the case of each Company, its Company Purchase Limit and (ii) in the aggregate, the lesser of (A) the Purchase Limit and (B) the aggregate amount of the Commitments during the period from the date hereof to but not including the Facility Termination Date. (b) Seller may, upon at least 10 Business Days' notice to the Agent, terminate in whole or reduce in part, ratably among the Financial Institutions, the unused portion of the Purchase Limit; provided that (i) each partial reduction of the Purchase Limit shall be in an amount equal to $5,000,000 or an integral multiple thereof and (ii) the aggregate of the Company Purchase Limits for all of the Companies shall also be terminated in whole or reduced in part, ratably among the Companies, by an amount equal to such termination or reduction in the Purchase Limit. Page 2 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 1.2 Increases. Seller shall provide the Agent with at least two Business Days' prior notice in a form set forth as Exhibit II hereto of each Incremental Purchase (a "Purchase Notice"). Each Purchase Notice shall be subject to Section 6.2 hereof and, except as set forth below, (i) shall be irrevocable and shall specify the requested Purchase Price (which, in the case of the initial Incremental Purchase hereunder shall not be less than $10,000,000 and in the case of subsequent Incremental Purchases shall not be less than $1,000,000), (ii) the date of purchase (which, in the case of Incremental Purchases after the initial Incremental Purchase hereunder, shall not exceed four per calendar month), (iii) in the case of an Incremental Purchase to be funded by any of the Financial Institutions, the requested Discount Rate and Tranche Period and (iv) in the case of an Incremental Purchase to be funded by the CL Company or by the Bank One Company (other than substantially with Pooled Commercial Paper), the requested CP (Tranche) Accrual Period. Following receipt of a Purchase Notice, the Agent will promptly notify each Company of such Purchase Notice and the Agent will identify the Companies that agree to make the purchase. If any Company declines to make a proposed purchase, Seller may cancel the Purchase Notice as to all Purchasers or, in the absence of such a cancellation, the Incremental Purchase of the Purchaser Interest, which such Company has declined to purchase, will be made by such declining Company's Related Financial Institutions in accordance with the rest of this Section 1.2. If the proposed Incremental Purchase or any portion thereof is to be made by any of the Financial Institutions, the Agent shall send notice of the proposed Incremental Purchase to the applicable Financial Institutions concurrently by telecopier, telex or cable specifying (i) the date of such Incremental Purchase, which date must be at least one Business Day after such notice is received by the applicable Financial Institutions, (ii) each Financial Institution's Pro Rata Share of the aggregate Purchase Price of the Purchaser Interests the Financial Institutions in such Financial Institution's Purchaser Group are then purchasing and (iii) the requested Discount Rate and Tranche Period. On the date of each Incremental Purchase, upon satisfaction of the applicable conditions precedent set forth in Article VI and the conditions set forth in this Section 1.2, the Companies and/or the Financial Institutions, as applicable, shall deposit to the Facility Account, in immediately available funds, no later than 12:00 noon (Chicago time), an amount equal to (i) in the case of a Company that has agreed to make such Incremental Purchase, such Company's Pro Rata Share of the aggregate Purchase Price of the Purchaser Interests of such Incremental Purchase or (ii) in the case of a Financial Institution, such Financial Institution's Pro Rata Share of the aggregate Purchase Price of the Purchaser Interests the Financial Institutions in such Financial Institution's Purchaser Group are then purchasing. Each Financial Institution's Commitment hereunder shall be limited to purchasing Purchaser Interests that the Company in such Financial Institution's Purchaser Group has declined to purchase. Each Financial Institution's obligation shall be several, such that the failure of any Financial Institution to make available to Seller any funds in connection with any purchase shall not relieve any other Financial Institution of its obligation, if any, hereunder to make funds available on the date of such purchase, but no Financial Institution shall be responsible for the failure of any other Financial Institution to make funds available in connection with any purchase. Page 3 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 1.3 Decreases. Seller shall provide the Agent with prior written notice in conformity with the Required Notice Period (a "Reduction Notice") of any proposed reduction of Aggregate Capital from Collections and the Agent will promptly notify each Purchaser of such Reduction Notice after Agent's receipt thereof. Such Reduction Notice shall designate (i) the date (the "Proposed Reduction Date") upon which any such reduction of Aggregate Capital shall occur (which date shall give effect to the applicable Required Notice Period), and (ii) the amount of Aggregate Capital to be reduced that shall be applied ratably to the Purchaser Interests of the Companies and the Financial Institutions in accordance with the amount of Capital (if any) owing to the Companies (ratably, based on their respective Pro Rata Shares), on the one hand, and the amount of Capital (if any) owing to the Financial Institutions (ratably to each Financial Institution, based on the ratio of such Financial Institution's Capital at such time to the aggregate Capital of all of the Financial Institutions at such time), on the other hand (the "Aggregate Reduction"). Only one (1) Reduction Notice shall be outstanding at any time. Concurrently with any reduction of Aggregate Capital pursuant to this Section, Seller shall pay to the applicable Purchaser all Broken Funding Costs arising as a result of such reduction. No Aggregate Reduction will be made following the occurrence of the Amortization Date without the consent of the Agent. Section 1.4 Payment Requirements. All amounts to be paid or deposited by any Seller Party pursuant to any provision of this Agreement or any other Transaction Documents shall be paid or deposited in immediately available funds in accordance with the terms hereof. Such Seller Party shall use its reasonable best efforts to pay or deposit all such amounts no later than 12:00 noon (Chicago time) on the day when due. Any such payment or deposit not received by 1:00 pm (Chicago time) shall be deemed to be received on the next succeeding Business Day. If such amounts are payable to a Purchaser, they shall be paid to such Purchaser at the "Payment Address" specified for such Purchaser on Schedule A or such other address specified in writing to each other party hereto. If such amounts are payable to the Agent, they shall be paid to the Agent at 1 Bank One Plaza, Chicago, Illinois 60670 until otherwise notified by the Agent. Upon notice to Seller, the Agent may debit the Facility Account for all amounts due and payable hereunder. All computations of Yield, per annum fees or discount calculated as part of any CP Costs, per annum fees hereunder and per annum fees under any Fee Letter shall be made on the basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder or under any other Transaction Document shall be payable on a day that is not a Business Day, such amount shall be payable on the next succeeding Business Day. Page 4 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT ARTICLE II PAYMENTS AND COLLECTIONS Section 2.1 Payments. Notwithstanding any limitation on recourse contained in this Agreement, Seller shall immediately pay to the Agent or relevant Purchaser, as applicable, when due, for the account of the relevant Purchaser or Purchasers on a full recourse basis, (i) such fees as set forth in each Fee Letter (which fees collectively shall be sufficient to pay all fees owing to the Financial Institutions and other Funding Sources), (ii) all CP Costs, (iii) all amounts payable as Yield, (iv) all amounts payable as Deemed Collections (which shall be immediately due and payable by Seller and applied to reduce outstanding Aggregate Capital hereunder in accordance with Sections 2.2 and 2.3 hereof), (v) all amounts required pursuant to Section 2.6, (vi) all amounts payable pursuant to Article X, if any, (vii) all Servicer costs and expenses, including the Servicing Fee, in connection with servicing, administering and collecting the Receivables, (viii) all Broken Funding Costs (any request for reimbursement of which shall be accompanied by a certificate in reasonable detail demonstrating the reasonable calculation of ay such amount) and (ix) all Default Fees (collectively, the "Obligations"). If any Person fails to pay any of the Obligations (other than the Default Fee) when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid. Notwithstanding the foregoing, no provision of this Agreement or any Fee Letter shall require the payment or permit the collection of any amounts hereunder in excess of the maximum permitted by applicable law. If at any time Seller receives any Collections or is deemed to receive any Collections, Seller shall immediately pay such Collections or Deemed Collections to the applicable Servicer for application in accordance with the terms and conditions hereof and, at all times prior to such payment, such Collections or Deemed Collections shall be held in trust by Seller for the exclusive benefit of the Purchasers and the Agent. Section 2.2 Collections Prior to Amortization. Prior to the Amortization Date, any Collections and/or Deemed Collections received by each Servicer shall be set aside and held in trust by such Servicer for the benefit of the Agent and the Purchasers for the payment of any accrued and unpaid Aggregate Unpaids or for a Reinvestment as provided in this Section 2.2. If at any time any Collections and/or Deemed Collections are received by any Servicer prior to the Amortization Date, (i) such Servicer shall set aside the Termination Percentage (hereinafter defined) of Collections and/or Deemed Collections evidenced by the Purchaser Interests of each Terminating Financial Institution, shall set aside Collections to be used to effect any Aggregate Reduction in accordance with Section 1.3 and shall set aside amounts necessary to pay Obligations due on the next succeeding Settlement Date and (ii) Seller hereby requests and the Purchasers (other than any Terminating Financial Institutions) hereby agree to make, simultaneously with such receipt, a reinvestment (each a "Reinvestment") with that portion of the balance of each and every Collection and Deemed Collection received by any Servicer that is part of any Purchaser Interest (other than any Purchaser Interests of Terminating Financial Institutions), such that after giving effect to such Reinvestment, the amount of Capital of such Purchaser Interest immediately after such receipt and corresponding Reinvestment shall be equal to the amount of Capital immediately Page 5 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT prior to such receipt (but giving effect to any ratable reduction thereof pursuant to application of an Aggregate Reduction). On each Settlement Date prior to the occurrence of the Amortization Date, the Servicers shall remit to the Agent's or applicable Purchaser's account the amounts set aside during the preceding Settlement Period that have not been subject to a Reinvestment and apply such amounts (if not previously paid in accordance with Section 2.1) first, to reduce unpaid CP Costs, Yield and other Obligations and second, to reduce the Capital of all Purchaser Interests of Terminating Financial Institutions, applied ratably to each Terminating Financial Institution according to its respective Termination Percentage. If such Capital, CP Costs, Yield and other Obligations shall be reduced to zero, any additional Collections received by any Servicer (i) if applicable, shall be remitted to the Agent's or applicable Purchaser's account to the extent required to fund any Aggregate Reduction on such Settlement Date and (ii) any balance remaining thereafter shall be remitted from such Servicer to Seller on such Settlement Date. Such Servicer shall use its reasonable best efforts to remit all deposit amounts in the Agent's or applicable Purchaser's account no later than 12:00 noon (Chicago time) on such Settlement Date. Any such amounts not received by Agent or the applicable Purchaser by 1:00 pm (Chicago time) shall be deemed to be received on the next succeeding Business Day. Each Terminating Financial Institution shall be allocated a ratable portion of Collections from its Termination Date until such Terminating Financial Institution's Capital, if any, shall be paid in full. This ratable portion shall be calculated on the Termination Date of each Terminating Financial Institution as a percentage equal to (i) Capital of such Terminating Financial Institution outstanding on its Termination Date, divided by (ii) the Aggregate Capital outstanding on such Termination Date (the "Termination Percentage"). Each Terminating Financial Institution's Termination Percentage shall remain constant prior to the Amortization Date. On and after the Amortization Date, each Termination Percentage shall be disregarded, and each Terminating Financial Institution's Capital shall be reduced ratably with all Financial Institutions in accordance with Section 2.3. Section 2.3 Collections Following Amortization. On the Amortization Date and on each day thereafter, the Servicers shall set aside and hold in trust, for the holder of each Purchaser Interest, all Collections received on such day and an additional amount for the payment of any accrued and unpaid Aggregate Unpaids owed by Seller and not previously paid by Seller in accordance with Section 2.1. On and after the Amortization Date, the Servicers shall, at any time upon the request from time to time by (or pursuant to standing instructions from) the Agent (i) remit to the Agent's or applicable Purchaser's account the amounts set aside pursuant to the preceding sentence, and (ii) apply such amounts to reduce the Capital associated with each such Purchaser Interest and any other Aggregate Unpaids. Section 2.4 Application of Collections. If there shall be insufficient funds on deposit for the Servicers to distribute funds in payment in full of the aforementioned amounts pursuant to Section 2.2 or 2.3 (as applicable), the Servicers shall distribute funds: first, to the payment of each Servicer's reasonable actual out-of-pocket costs and expenses in connection with servicing, administering and collecting the Receivables, Page 6 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT including the Servicing Fee, if Seller or one of its Affiliates is not then acting as a Servicer, second, to the reimbursement of the Agent's and the Purchasers' costs of collection and enforcement of this Agreement, third, ratably to the payment of all accrued and unpaid fees under the Fee Letters, CP Costs and Yield, fourth, (to the extent applicable) to the ratable reduction of the Aggregate Capital (without regard to any Termination Percentage), fifth, for the ratable payment of all other unpaid Obligations, provided that to the extent such Obligations relate to the payment of Servicer costs and expenses, including the Servicing Fee, when Seller or one of its Affiliates is acting as a Servicer, such costs and expenses will not be paid until after the payment in full of all other Obligations, and sixth, after the Aggregate Unpaids have been indefeasibly reduced to zero, to Seller. Collections applied to the payment of Aggregate Unpaids shall be distributed in accordance with the aforementioned provisions, and, giving effect to each of the priorities set forth in Section 2.4 above, shall be shared ratably (within each priority) among the Agent and the Purchasers in accordance with the amount of such Aggregate Unpaids owing to each of them in respect of each such priority. Section 2.5 Payment Recission. No payment of any of the Aggregate Unpaids shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or must otherwise be returned or refunded for any reason. Seller shall remain obligated for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the Agent (for application to the Person or Persons who suffered such recission, return or refund) the full amount thereof, plus the Default Fee from the date of any such recission, return or refunding. Section 2.6 Maximum Purchaser Interests. Seller shall ensure that the Purchaser Interests of the Purchasers shall at no time exceed in the aggregate 100%. If the aggregate of the Purchaser Interests of the Purchasers exceeds 100%, Seller shall pay to the Purchasers (ratably based on the ratio of each Purchaser's Capital at such time to the Aggregate Capital at such time) within one (1) Business Day an amount to be applied to reduce the Aggregate Capital, such that after giving effect to such payment the aggregate of the Purchaser Interests equals or is less than 100%. Page 7 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 2.7 Clean Up Call. In addition to Seller's rights pursuant to Section 1.3, Seller shall have the right, upon two Business Days' prior written notice to the Agent and the Purchasers, at any time following the reduction of the Aggregate Capital to a level that is less than 20.0% of the original Purchase Limit hereunder, to repurchase from the Purchasers all, but not less than all, of the then outstanding Purchaser Interests. The purchase price in respect thereof shall be an amount equal to the Aggregate Unpaids (including any Broken Funding Costs arising as a result of such repurchase) through the date of such repurchase, payable in immediately available funds. Such repurchase shall be without representation, warranty or recourse of any kind by, on the part of, or against any Purchaser or the Agent. ARTICLE III COMPANY FUNDING Section 3.1 CP Costs. Seller shall pay CP Costs with respect to the Capital associated with each Purchaser Interest of the Companies for each day that any Capital in respect of any such Purchaser Interest is outstanding. Each Purchaser Interest of the Bank One Company funded substantially with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share the Capital in respect of such Purchaser Interest represents in relation to all assets held by the Bank One Company and funded substantially with Pooled Commercial Paper. Each other Purchaser Interest of the Bank One Company and each Purchaser Interest of the CL Company shall accrue CP Costs for each day during its CP (Tranche) Accrual Period at the rate determined in accordance with the definition of "Company Costs" set forth in Exhibit I. Section 3.2 CP Costs Payments. On each Settlement Date relating to a CP (Tranche) Accrual Period, Seller shall pay to the applicable Company an aggregate amount equal to all accrued and unpaid CP Costs in respect of the Capital associated with all Purchaser Interests of such Company for the related CP (Tranche) Accrual Period in accordance with Article II. Section 3.3 Calculation of Bank One Company Costs. On the third Business Day immediately preceding each Settlement Date relating to a CP (Pool) Accrual Period, the Bank One Company shall calculate the aggregate amount of its Company Costs with respect to all Purchaser Interests funded substantially with Pooled Commercial Paper for the applicable CP (Pool) Accrual Period and shall notify the Agent of such aggregate amount. Within two Business Days of the Agent's receipt of notification of such Company Costs, the Agent shall notify Seller of the amount of such Company Costs due and payable on such Settlement Date. Section 3.4 Selection and Calculation of CP (Tranche) Accrual Periods. (a) In the case of Purchaser Interests of the Bank One Company, Seller shall (and following the occurrence and during the continuance of a Potential Amortization Event or an Amortization Event, shall with consultation from, and approval by, the Bank Page 8 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT One Company), from time to time request CP (Tranche) Accrual Periods for the Purchaser Interests of the Bank One Company other than those funded substantially with Pooled Commercial Paper, provided, that (i) the consent of the Agent shall be required (such consent not to be unreasonably withheld), (ii) Seller must elect CP (Tranche) Accrual Periods for all Purchaser Interests of the Bank One Company, such that after giving effect to such election, no Purchaser Interest of the Bank One Company is funded with Pooled Commercial Paper and (iii) Seller may only make such election once hereunder. In the case of Purchaser Interests of the CL Company, Seller shall, with consultation from, and approval by, the CL Company (such approval not to be unreasonably withheld), from time to time request CP (Tranche) Accrual Periods for the Purchaser Interests of the CL Company. (b) Seller or the applicable Company, upon notice to and consent by the other received at least three (3) Business Days prior to the end of a CP (Tranche) Accrual Period (the "Terminating CP Tranche") for any Purchaser Interest, may, effective on the last day of the Terminating CP Tranche: (i) divide any such Purchaser Interest into multiple Purchaser Interests, (ii) combine any such Purchaser Interest with one or more other Purchaser Interests that have a Terminating CP Tranche ending on the same day as such Terminating CP Tranche or (iii) combine any such Purchaser Interest with a new Purchaser Interest (other than a Purchaser Interest funded substantially with Pooled Commercial Paper) to be purchased on the day such Terminating CP Tranche ends, provided, that in no event may a Purchaser Interest of any Purchasers be combined with a Purchaser Interest of any other Purchaser. (c) Seller shall: at least three (3) Business Days prior to the expiration of any Terminating CP Tranche, give the applicable Company (or its agent) irrevocable notice of the new CP (Tranche) Accrual Period associated with such Terminating CP Tranche and the amount of Capital to be allocated to such new CP (Tranche) Accrual Period. Seller shall use its reasonable best efforts to give such notice such that the applicable Company (or its agent) receives it no later than 12:00 noon (Chicago time) on the day such request is being made. Any such request not received by the applicable Company by 1:00 pm (Chicago time) shall be deemed to be received on the next succeeding Business Day. ARTICLE IV FINANCIAL INSTITUTION FUNDING Section 4.1 Financial Institution Funding. Each Purchaser Interest of the Financial Institutions shall accrue Yield for each day during its Tranche Period at either the LIBO Rate or the Prime Rate in accordance with the terms and conditions hereof. Until Seller gives notice to the Agent of another Discount Rate in accordance with Section 4.4, the initial Discount Rate for any Purchaser Interest transferred to the Financial Institutions pursuant to the terms and conditions hereof shall be the Prime Rate. If any Purchaser Interest of any Company is assigned or transferred to, or funded by, any Funding Source of Page 9 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT such Company pursuant to any Funding Agreement or to or by any other Person, each such Purchaser Interest so assigned, transferred or funded shall each be deemed to have a new Tranche Period commencing on the date of any such transfer or funding and shall accrue Yield for each day during its Tranche Period at either the LIBO Rate or the Prime Rate in accordance with the terms and conditions hereof as if each such Purchaser Interest was held by a Financial Institution, and with respect to each such Purchaser Interest, the transferee thereof or lender with respect thereto shall be deemed to be a Financial Institution in the transferring Company's Purchaser Group for purposes hereof; provided that until Seller gives notice to the Agent of another Discount Rate in accordance with Section 4.4, the initial Discount Rate for any Purchaser Interest so transferred shall be the Prime Rate. Section 4.2 Yield Payments. On the Settlement Date for each Purchaser Interest of the Financial Institutions, Seller shall pay to the applicable Financial Institutions an aggregate amount equal to the accrued and unpaid Yield for the entire Tranche Period of each such Purchaser Interest in accordance with Article II. Section 4.3 Selection and Continuation of Tranche Periods. (a) In the case of Purchaser Interests of any Financial Institution in the Purchaser Group of the Bank One Company, Seller shall (and following the occurrence and during the continuance of a Potential Amortization Event or an Amortization Event, shall with consultation from, and approval by, the applicable Financial Institution), from time to time request Tranche Periods for the Purchaser Interests of such Financial Institutions. In the case of Purchaser Interests of any Financial Institution in the Purchaser Group of the CL Company, Seller shall, with consultation from, and approval by, the applicable Financial Institution (such approval not to be unreasonably withheld), from time to time request Tranche Periods for the Purchaser Interests of such Financial Institution. Notwithstanding the foregoing provisions of this subsection (a), if at any time the Financial Institutions shall have a Purchaser Interest, Seller shall always request Tranche Periods such that at least one Tranche Period shall end on the date specified in clause (A) of the definition of Settlement Date. (b) Seller or the applicable Financial Institution, upon notice to and consent by the other received at least three (3) Business Days prior to the end of a Tranche Period (the "Terminating Tranche") for any Purchaser Interest, may, effective on the last day of the Terminating Tranche: (i) divide any such Purchaser Interest into multiple Purchaser Interests, (ii) combine any such Purchaser Interest with one or more other Purchaser Interests that have a Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such Purchaser Interest with a new Purchaser Interest to be purchased on the day such Terminating Tranche ends, provided, that in no event may a Purchaser Interest of any Purchasers be combined with a Purchaser Interest of any other Purchaser. Page 10 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 4.4 Financial Institution Discount Rates. Seller may select the LIBO Rate or the Prime Rate for each Purchaser Interest of the Financial Institutions. Seller shall: (i) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a new Discount Rate and (ii) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Prime Rate is being requested as a new Discount Rate, give the applicable Financial Institution irrevocable notice of the new Discount Rate for the Purchaser Interest associated with such Terminating Tranche. Seller shall use its reasonable best efforts to give such notice such that the applicable Financial Institution receives it no later than 12:00 noon (Chicago time) on the day such request is being made. Any such request not received by the applicable Financial Institution by 1:00 pm (Chicago time) shall be deemed to be received on the next succeeding Business Day. Until Seller gives notice to the applicable Financial Institution of another Discount Rate, the initial Discount Rate for any Purchaser Interest transferred to the Financial Institutions pursuant to the terms and conditions hereof (or transferred to, or funded by, any Funding Source pursuant to any Funding Agreement or to or by any other Person) shall be the Prime Rate. Section 4.5 Suspension of the LIBO Rate. (a) If any Financial Institution notifies the Agent that it has determined that funding its Pro Rata Share of the Purchaser Interests of the Financial Institutions in such Financial Institution's Purchaser Group at the LIBO Rate would violate any applicable law, rule, regulation or directive of any governmental or regulatory authority, whether or not having the force of law, or that (i) deposits of a type and maturity appropriate to match fund its Purchaser Interests at the LIBO Rate are not available or (ii) the LIBO Rate does not accurately reflect the cost of acquiring or maintaining a Purchaser Interest at the LIBO Rate, then the Agent shall suspend the availability of the LIBO Rate for the Financial Institutions in such Financial Institution's Purchaser Group and require Seller to select the Prime Rate for any Purchaser Interest funded by the Financial Institutions in such Financial Institution's Purchaser Group accruing Yield at the LIBO Rate. (b) If less than all of the Financial Institutions in such Financial Institution's Purchaser Group give a notice to the Agent pursuant to Section 4.5(a), each Financial Institution which gave such a notice shall be obliged, at the request of Seller, the Company in such Financial Institution's Purchaser Group or the Agent, to assign all of its rights and obligations hereunder to (i) another Financial Institution in such Financial Institution's Purchaser Group or (ii) another funding entity nominated by Seller or the Agent that is acceptable to the Company in such Financial Institution's Purchaser Group and willing to participate in this Agreement through the Liquidity Termination Date in the place of such notifying Financial Institution; provided that (i) the notifying Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such notifying Financial Institution's Pro Rata Share of the Capital and Yield owing to all of the Financial Institutions in such Financial Institution's Purchaser Group and all accrued but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Page 11 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Purchaser Interests of the Financial Institutions in such Financial Institution's Purchaser Group, and (ii) the replacement Financial Institution otherwise satisfies the requirements of Section 12.1(b). Section 4.6 Extension of Liquidity Termination Date. (a) Seller may request one or more 364-day extensions of the Liquidity Termination Date then in effect by giving written notice of such request to the Agent (each such notice an "Extension Notice") at least 60 days prior to the Liquidity Termination Date then in effect. After the Agent's receipt of any Extension Notice, the Agent shall promptly advise each Financial Institution of such Extension Notice. Each Financial Institution may, in its sole discretion, by a written irrevocable notice (a "Consent Notice") given to the Agent on or prior to the 30th day prior to the Liquidity Termination Date then in effect (such period from the date of the Extension Notice to such 30th day being referred to herein as the "Consent Period"), consent to such extension of such Liquidity Termination Date; provided, however, that such extension shall not be effective with respect to a Financial Institution if such Financial Institution: (i) notifies the Agent during the Consent Period that such Financial Institution does not wish to consent to such extension or (ii) fails to respond to the Agent within the Consent Period (each Financial Institution that does not wish to consent to such extension or fails to respond to the Agent within the Consent Period is herein referred to as a "Non-Renewing Financial Institution"). If at the end of the Consent Period, there is no Non-Renewing Financial Institution then, the Liquidity Termination Date shall be irrevocably extended until the date that is 364 days after the Liquidity Termination Date then in effect. If at the end of the Consent Period there is a Non-Renewing Financial Institution, then unless such Non-Renewing Financial Institution assigns its rights and obligations hereunder pursuant to Section 4.6(b) (each such Non-Renewing Financial Institution whose rights and obligations under this Agreement and the other applicable Transaction Documents are not so assigned is herein referred to as a "Terminating Financial Institution"), the then existing Liquidity Termination Date shall be extended for an additional 364 days with respect to all Financial Institutions other than the Terminating Financial Institution; provided, however, that (i) the Purchase Limit shall be reduced on the Termination Date applicable to each Terminating Financial Institution by an aggregate amount equal to the Terminating Commitment Availability of each Terminating Financial Institution and shall thereafter continue to be reduced by amounts equal to any reduction in the Capital of any Terminating Financial Institution (after application of Collections pursuant to Sections 2.2 and 2.3), (ii) the Company Purchase Limit of each Company shall be reduced by the aggregate amount of the Terminating Commitment Amount of each Terminating Financial Institution in such Company's Purchaser Group and (iii) the Commitment of each Terminating Financial Institution shall be reduced to zero on the Termination Date applicable to such Terminating Financial Institution. Upon reduction to zero of the Capital of all of the Purchaser Interests of a Terminating Financial Institution (after application of Collections thereto pursuant to Sections 2.2 and 2.3) all rights and obligations of such Terminating Financial Institution hereunder shall be terminated and such Terminating Financial Institution shall no longer be a "Financial Institution"; provided, however, that the provisions of Page 12 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Article X shall continue in effect for its benefit with respect to Purchaser Interests held by such Terminating Financial Institution prior to its termination as a Financial Institution. (b) Upon receipt of notice from the Agent pursuant to Section 4.6(a) of any Non-Renewing Financial Institution, one or more of the Financial Institutions (including any Non-Renewing Financial Institution) may proffer to the Agent and the Company in such Non-Renewing Financial Institution's Purchaser Group the names of one or more institutions meeting the criteria set forth in Section 12.1(b)(i) that are willing to accept assignments of and assume the rights and obligations under this Agreement and the other applicable Transaction Documents of the Non-Renewing Financial Institution. Provided the proffered name(s) are acceptable to the Agent and the Company in such Non-Renewing Financial Institution's Purchaser Group, the Agent shall notify the remaining Financial Institutions of such fact, and the then existing Liquidity Termination Date shall be extended for an additional 364 days upon satisfaction of the conditions for an assignment in accordance with Section 12.1, and the Commitment of each Non-Renewing Financial Institution shall be reduced to zero. (c) Any requested extension may be approved or disapproved by a Financial Institution in its sole discretion. In the event that the Commitments are not extended in accordance with the provisions of this Section 4.6, the Commitment of each Financial Institution shall be reduced to zero on the Liquidity Termination Date. Upon reduction to zero of the Commitment of a Financial Institution and upon reduction to zero of the Capital of all of the Purchaser Interests of such Financial Institution all rights and obligations of such Financial Institution hereunder shall be terminated and such Financial Institution shall no longer be a "Financial Institution"; provided, however, that the provisions of Article X shall continue in effect for its benefit with respect to Purchaser Interests held by such Financial Institution prior to its termination as a Financial Institution. ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.1 Representations and Warranties of The Seller Parties. Each Seller Party hereby represents and warrants to the Agent and the Purchasers, as to itself, as of the date hereof and as of the date of each Incremental Purchase and the date of each Reinvestment that: (a) Corporate Existence and Power. Such Seller Party is a corporation, limited liability company or limited partnership duly organized and validly existing in good standing under the laws of its state of organization. Each such Seller Party is duly qualified to do business and is in good standing as a foreign corporation or entity, and has and holds all corporate or other power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except to the extent that the failure to so qualify or hold could not reasonably be expected to have a Material Adverse Effect. Page 13 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (b) Power and Authority; Due Authorization, Execution and Delivery. The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and, in the case of Seller, Seller's use of the proceeds of purchases made hereunder, are within its corporate or other powers and authority and have been duly authorized by all necessary corporate or other action on its part. This Agreement and each other Transaction Document to which such Seller Party is a party has been duly executed and delivered by such Seller Party. (c) No Conflict. The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate or articles of incorporation or by-laws (or equivalent organizational documents) or any shareholder agreements, voting trusts or similar arrangements applicable to its authorized shares or other equity interests, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any material agreement, contract or instrument to which it is a party or by which it or any of its property is bound or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on assets of such Seller Party or its Subsidiaries (except as created hereunder); and no transaction contemplated hereby requires compliance with any bulk sales act or similar law. (d) Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder. (e) Actions, Suits. There are no actions, suits or proceedings pending, or to the best of such Seller Party's knowledge, threatened, against or affecting such Seller Party, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Such Seller Party is not in default with respect to any order of any court, arbitrator or governmental body. (f) Binding Effect. This Agreement and each other Transaction Document to which such Seller Party is a party constitute the legal, valid and binding obligations of such Seller Party enforceable against such Seller Party in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). Page 14 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (g) Accuracy of Information. All information heretofore furnished by or on behalf of such Seller Party or any of its Affiliates to the Agent or the Purchasers for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by or on behalf of such Seller Party or any of its Affiliates to the Agent or the Purchasers will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances made or presented. (h) Use of Proceeds. No proceeds of any purchase hereunder will be used (i) for a purpose that violates, or would be inconsistent with, Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction that is subject to Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) Good Title. Immediately prior to each purchase hereunder, Seller shall be the legal and beneficial owner of the Receivables and Related Security with respect thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller's ownership interest in each Receivable, its Collections and the Related Security. (j) Perfection. This Agreement, together with the filing of the financing statements contemplated hereby, is effective to, and shall, upon each purchase hereunder, transfer to the Agent for the benefit of the relevant Purchaser or Purchasers (and the Agent for the benefit of such Purchaser or Purchasers shall acquire from Seller) a valid and perfected first priority undivided percentage ownership or security interest in each Receivable existing or hereafter arising and in the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Agent's (on behalf of the Purchasers) ownership or security interest in the Receivables, the Related Security and the Collections. (k) Jurisdiction of Organization; Places of Business, etc. Exhibit III correctly sets forth such Seller Party's legal name, jurisdiction of organization, Federal Employer's Identification Number and State Organizational Identification Number. Such Seller Party's principal places of business and chief executive office and the offices where such Seller Party keeps all of its Records are located at the address(es) listed on Exhibit III, or such other locations of which the Agent has been notified in accordance with Section 7.2(a) in jurisdictions where all action required by Section 14.4(a) has been taken and completed. Such Seller Party has not within the period of six months prior to the date Page 15 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT hereof, (i) changed its location (as defined in Section 9-307 of the UCC), except as set forth on Exhibit III or (ii) changed its legal name (except as set forth on Exhibit III), corporate structure or become a "new debtor" (as defined in Section 9-102(a)(56) of the UCC) with respect to a currently effective security agreement previously entered into by any other Person. Seller is a Delaware limited partnership and is a "registered organization" (within the meaning of Section 9-102 of the UCC in effect in the State of Delaware). (l) Collections. The conditions and requirements set forth in Section 7.1(j) and Section 8.2 have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts of Seller at each Collection Bank and the post office box number of each Lock- Box, are listed on Exhibit IV. Seller has not granted any Person, other than the Agent as contemplated by this Agreement, dominion and control or "control" (within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of any Lock-Box or Collection Account, or the right to take dominion and control or "control" (within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event. (m) Material Adverse Effect. (i) Each of the Initial Servicers represents and warrants that since December 31, 1999, and each of the Additional Servicers represents and warrants that since December 31, 2000, and each of the Dean Entities represents and warrants that since May 31, 2001, no event has occurred that would have a material adverse effect on the financial condition or operations of such Servicer and its Subsidiaries taken as a whole or the ability of such Servicer to perform its obligations under this Agreement and (ii) Seller represents and warrants that since June 30, 2000, no event has occurred that would have a material adverse effect on (A) the financial condition or operations of Seller, (B) the ability of Seller to perform its obligations under the Transaction Documents or (C) the collectibility of the Receivables generally or of any material portion of the Receivables. (n) Names. In the past five (5) years, Seller has not used any corporate names, trade names or assumed names other than Suiza Receivables, L.P. and the name in which it has executed this Agreement. (o) Ownership of Seller. Suiza Dairy Group, L.P. and Provider own, directly or indirectly, 100% of the limited partnership interests and 99.9% of the partnership interests of Seller, free and clear of any Adverse Claim (except any Adverse Claim in favor of the Collateral Agent in accordance with the Dean Credit Agreement). Dairy Group Receivables GP, LLC (f/k/a Suiza Receivables GP, LLC) is the general partner of Seller and owns, directly or indirectly, 100% of the general partnership interests and 0.1% of the partnership interests of Seller, free and clear of any Adverse Claim (except any Adverse Claim in favor of the Collateral Agent in accordance with the Dean Credit Agreement). There are no options or other rights to acquire any partnership interest of Seller. 100% of the membership interests of Dairy Group Receivables GP, LLC are owned, directly or indirectly by Provider. Page 16 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (p) Not a Holding Company or an Investment Company. Such Seller Party is not a "holding company" or a "subsidiary holding company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Such Seller Party is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or any successor statute. (q) Compliance with Law. Such Seller Party has complied in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with any Writing or Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Writing or Contract is in violation of any such law, rule or regulation. (r) Compliance with Credit and Collection Policies. Such Seller Party has complied in all material respects with its Credit and Collection Policy with regard to each Receivable and any related Writing or Contract, and has not made any material change to such Credit and Collection Policy, except such material change as to which the Agent has been notified in accordance with Section 7.1(a)(vii). (s) Payments to Originators and Morningstar . With respect to each Receivable transferred to Seller by each Originator under the Receivables Sale Agreement, Seller has given reasonably equivalent value to such Originator in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by any Originator of any Receivable under the Receivables Sale Agreement is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 101 et seq.), as amended. With respect to each Receivable transferred to MRC by Morningstar under the Transfer Agreement, MRC has given reasonably equivalent value to Morningstar in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by Morningstar of any Receivable under the Transfer Agreement is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 101 et seq.), as amended. (t) Enforceability of Contracts. Each Contract, if any, with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). Page 17 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (u) Eligible Receivables. Each Receivable included in the Net Receivables Balance as an Eligible Receivable on the date of its purchase under the Receivables Sale Agreement was an Eligible Receivable on such purchase date. (v) Net Receivables Balance. Seller has determined that, immediately after giving effect to each purchase hereunder, the Net Receivables Balance is at least equal to the sum of (i) the Aggregate Capital, plus (ii) the Aggregate Reserves. (w) Accounting. The manner in which such Seller Party accounts for the transactions contemplated by this Agreement, the Receivables Sale Agreement and the Transfer Agreement does not jeopardize the true sale analysis. (x) No Adverse Selection. To the extent that any Originator has retained Receivables that would be Eligible Receivables but that have not been transferred to Seller under the Receivables Sale Agreement, such Originator has not selected those Receivables to be transferred hereunder in any manner that materially adversely affects the Agent or the Purchasers hereunder. To the extent that Morningstar has retained Receivables that would be Eligible Receivables but that have not been transferred to MRC under the Transfer Agreement, Morningstar has not selected those Receivables to be transferred thereunder in any manner that materially adversely affects the Agent or the Purchasers hereunder. Section 5.2 Financial Institution Representations and Warranties. Each Financial Institution hereby represents and warrants to the Agent and the Company in such Financial Institution's Purchaser Group that: (a) Existence and Power. Such Financial Institution is a corporation or a banking association duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, and has all corporate power to perform its obligations hereunder. (b) No Conflict. The execution and delivery by such Financial Institution of this Agreement and the performance of its obligations hereunder are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its certificate or articles of incorporation or association or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any material agreement, contract or instrument to which it is a party or by which any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on its assets, except, in any case, where such contravention or violation could not reasonably be expected to have a material adverse effect on (i) the financial condition or operations of such Financial Institution, (ii) the ability of such Financial Institution to perform its obligations under this Agreement or (iii) the legality, validity or enforceability of this Page 18 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Agreement. This Agreement has been duly authorized, executed and delivered by such Financial Institution. (c) Governmental Authorization. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Financial Institution of this Agreement and the performance of its obligations hereunder, except that has already been received. (d) Binding Effect. This Agreement constitutes the legal, valid and binding obligation of such Financial Institution enforceable against such Financial Institution in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law). ARTICLE VI CONDITIONS OF PURCHASES Section 6.1 Conditions Precedent to Initial Incremental Purchase. The effectiveness of this Agreement is subject to the conditions precedent that the Agent shall have received on or before the Closing Date those documents listed on Schedule B and the Agent and the Purchasers shall have received all fees and expenses required to be paid on or prior to the date hereof pursuant to the terms of this Agreement and the Fee Letters. Section 6.2 Conditions Precedent to All Purchases and Reinvestments. Each purchase of a Purchaser Interest and each Reinvestment shall be subject to the further conditions precedent that in the case of each such purchase or Reinvestment: the Servicers shall have delivered to the Agent on or prior to the date of such purchase, in form and substance satisfactory to the Agent, all Periodic Reports, including, without limitation, the most recent Periodic Report as and when due under Section 8.5, and upon the Agent's request, the Servicers shall have delivered to the Agent at least three (3) days prior to such purchase or Reinvestment an interim Monthly Report showing the amount of Eligible Receivables; the Facility Termination Date shall not have occurred; (c) the Agent shall have received such other approvals, opinions or documents as it may reasonably request and (d) on the date of each such Incremental Purchase or Reinvestment, the following statements shall be true (and acceptance of the proceeds of such Incremental Purchase or Reinvestment shall be deemed a representation and warranty by Seller that such statements are then true): (i) the representations and warranties set forth in Section 5.1 are true and correct on and as of the date of such Incremental Purchase or Reinvestment as though made on and as of such date; Page 19 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (ii) no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that will constitute an Amortization Event, and no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that would constitute a Potential Amortization Event; and (iii) the Aggregate Capital does not exceed the Purchase Limit and the aggregate Purchaser Interests do not exceed 100%. It is expressly understood that each Reinvestment shall, unless otherwise directed by the Agent or any Purchaser, occur automatically on each day that any Servicer shall receive any Collections without the requirement that any further action be taken on the part of any Person and notwithstanding the failure of Seller to satisfy any of the foregoing conditions precedent in respect of such Reinvestment. The failure of Seller to satisfy any of the foregoing conditions precedent in respect of any Reinvestment shall give rise to a right of the Agent, which right may be exercised at any time on demand of the Agent, to rescind the related purchase and direct Seller to pay to the Agent for the benefit of the Purchasers an amount equal to the Collections prior to the Amortization Date that shall have been applied to the affected Reinvestment. ARTICLE VII COVENANTS Section 7.1 Affirmative Covenants of The Seller Parties. Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, as set forth below: (a) Financial Reporting. Such Seller Party will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Agent): (i) Annual Reporting. Within 90 days after the close of each of its respective fiscal years, audited, unqualified consolidated financial statements (which shall include balance sheets, statements of income and retained earnings and a statement of cash flows) for Provider for such fiscal year certified in a manner acceptable to the Agent by independent public accountants acceptable to the Agent. (ii) Quarterly Reporting. Within 45 days after the close of the first three (3) quarterly periods of each of its respective fiscal years, (A) consolidated balance sheets of Provider and its Subsidiaries as at the close of each such period, (B) consolidated statements of income and retained earnings and a statement of cash flows for Provider for the Page 20 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT period from the beginning of such fiscal year to the end of such quarter, (C) the balance sheet of Seller as at the close of each such period and (D) statements of income and retained earnings and a statement of cash flows for Seller, all certified by its respective chief financial officer or treasurer. (iii) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit V signed by an Authorized Officer of the Seller Parties and dated the date of such annual financial statement or such quarterly financial statement, as the case may be. (iv) Shareholders Statements and Reports. Promptly upon the furnishing thereof to the shareholders of such Seller Party, to the extent not available electronically, copies of all financial statements, reports and proxy statements so furnished. (v) S.E.C. Filings. Promptly upon the filing thereof, to the extent not available electronically, copies of all annual, quarterly, monthly or other regular reports that Provider or any of its Subsidiaries files with the Securities and Exchange Commission. (vi) Copies of Notices. Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than the Agent, copies of the same. (vii) Change in Credit and Collection Policies. At least thirty (30) days prior to the effectiveness of any material change in or material amendment to any Credit and Collection Policy, a copy of such Credit and Collection Policy then in effect and a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting the Agent's and the Required Purchasers' consent thereto. (viii) Copies of Dean Credit Agreement Amendments. Promptly after execution thereof, copies of each amendment to the Dean Credit Agreement as in effect from time to time notwithstanding any language to the contrary contained in the definition of "Dean Credit Agreement." (ix) Other Information. Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of such Page 21 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Seller Party as the Agent may from time to time reasonably request in order to protect the interests of the Agent and the Purchasers under or as contemplated by this Agreement. (b) Notices. Such Seller Party will notify the Agent in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto: (i) Amortization Events or Potential Amortization Events. The occurrence of each Amortization Event and each Potential Amortization Event, by a statement of an Authorized Officer of such Seller Party. (ii) Judgment and Proceedings. (1) The entry of any judgment or decree against Provider or any Servicer or any of its respective Subsidiaries if the aggregate amount of all judgments and decrees then outstanding against Provider or such Servicer and its respective Subsidiaries could reasonably be expected to have a Material Adverse Effect, and (2) the institution of any litigation, arbitration proceeding or governmental proceeding against Provider that, if adversely determined, could reasonably be expected to have a Material Adverse Effect, or against any Servicer; and (B) the entry of any judgment or decree or the institution of any litigation, arbitration proceeding or governmental proceeding against Seller. (iii) Material Adverse Effect. The occurrence of any event or condition that has had, or could reasonably be expected to have, a Material Adverse Effect. (iv) Termination Date. The occurrence of the "Termination Date" under and as defined in the Receivables Sale Agreement. (v) Defaults Under Other Agreements. The occurrence of a default or an event of default under any other financing arrangement pursuant to which such Seller Party is a debtor or an obligor that could reasonably be expected to have a Material Adverse Effect. (c) Compliance with Laws and Preservation of Corporate Existence. Such Seller Party will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject if noncompliance with any such law, rule, regulation, order, writ, judgment, injunction, decree or award could reasonably be expected to have a Material Adverse Effect. Such Seller Party will preserve and maintain its corporate existence, rights, franchises and privileges in the Page 22 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except where the failure to so qualify or remain qualified could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect. (d) Audits. Such Seller Party will furnish to the Agent (with the Agent providing copies thereof to each Financial Institution, subject to the Agent receiving any necessary consents to disclosure) from time to time such information with respect to it and the Receivables as the Agent or the Required Purchasers may reasonably request. Such Seller Party will, from time to time during regular business hours as requested by the Agent upon reasonable notice, permit the Agent, or its agents or representatives (and shall cause each Originator and Morningstar) to permit the Agent or its agents or representatives), (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Receivables and the Related Security, including, without limitation, the related Writings or Contracts, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Person's financial condition or the Receivables and the Related Security or any Person's performance under any of the Transaction Documents or any Person's performance under the Writings or Contracts and, in each case, with any of the officers or employees of Seller or any Servicer having knowledge of such matters. All such examinations and visits shall be at the sole cost of such Seller Party; provided, however, that (i) for so long as no Amortization Event or Potential Amortization Event shall have occurred and be continuing and (ii) the result of the immediately preceding examination and/or visit of such Seller Party shall have been reasonably satisfactory to the Agent, such cost shall be borne by such Seller Party not more than once per calendar year (although in no event shall the foregoing be construed to limit the Agent or its agents or representatives to one such examination and/or visit during such calendar year period with respect to such Seller Party, provided, that if the Agent or its agents or representatives fails to make any such examination and/or visit during any calendar year period, any Financial Institution or its agent or representatives may make such examination and/or visit in the Agent's stead). (e) Keeping and Marking of Records and Books. (i) The Servicers will (and will cause each Originator and Morningstar to) maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). The Servicers will (and will cause each Originator and Morningstar to) give the Agent notice of any Page 23 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT material change in the administrative and operating procedures referred to in the previous sentence. (ii) Such Seller Party will (and will cause each Originator and Morningstar to) (A) on or prior to June 30, 2000 with respect to any Seller Party or Originator (other than GTL, Tuscan Dairies, Tuscan Management and each Dean Entity), on or prior to June 28, 2001 with respect to GTL, Tuscan Dairies and Tuscan Management, and on or prior to the date hereof with respect to any Seller Party or Originator that is a Dean Entity, mark its master data processing records and other books and records relating to the Purchaser Interests with a legend, acceptable to the Agent, describing the Purchaser Interests and (B) upon the request of the Agent following the occurrence and during the continuance of an Amortization Event (x) mark each Writing or Contract with a legend describing the Purchaser Interests and (y) deliver to the Agent all Writings and Contracts (including, without limitation, all multiple originals of any such Writing or Contract) relating to the Receivables. (f) Compliance with Contracts and Credit and Collection Policies. Such Seller Party will timely and fully (i) perform and comply with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and (ii) comply in all material respects with its respective Credit and Collection Policy in regard to each Receivable and any related Contract. (g) Performance and Enforcement of Receivables Sale Agreement. Seller will, and will require each Originator to, perform each of their respective obligations and undertakings under and pursuant to the Receivables Sale Agreement, will purchase Receivables thereunder in strict compliance with the terms thereof and will vigorously enforce the rights and remedies accorded to Seller under the Receivables Sale Agreement. Seller will require MRC to perform its obligations and undertakings under the Transfer Agreement, to purchase Receivables thereunder in strict compliance with the terms thereof and to vigorously enforce the rights and remedies accorded to it under the Transfer Agreement. Seller will take all actions to perfect and enforce its rights and interests (and the rights and interests of the Agent and the Purchasers as assignees of Seller) under the Receivables Sale Agreement as the Agent may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Receivables Sale Agreement and requiring MRC to make claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Transfer Agreement. (h) Ownership. Seller will (or will cause each Originator to) take all necessary action to (i) vest legal and equitable title to the Receivables, the Related Security and the Collections purchased under the Receivables Sale Agreement irrevocably in Seller, free and clear of any Adverse Claims other than Adverse Claims in favor of the Agent and Page 24 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT the Purchasers (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller's interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of Seller therein as the Agent may reasonably request), and (ii) establish and maintain, in favor of the Agent, for the benefit of the Purchasers, a valid and perfected first priority undivided percentage ownership interest (and/or a valid and perfected first priority security interest) in all Receivables, Related Security and Collections to the full extent contemplated herein, free and clear of any Adverse Claims other than Adverse Claims in favor of the Agent for the benefit of the Purchasers (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Agent's (for the benefit of the Purchasers) interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of the Agent for the benefit of the Purchasers as the Agent may reasonably request). (i) Purchasers' Reliance. Seller acknowledges that the Purchasers are entering into the transactions contemplated by this Agreement in reliance upon Seller's identity as a legal entity that is separate from the Originators. Therefore, from and after June 30, 2000, Seller shall take all reasonable steps, including, without limitation, all steps that the Agent or any Purchaser may from time to time reasonably request, to maintain Seller's identity as a separate legal entity and to make it manifest to third parties that Seller is an entity with assets and liabilities distinct from those of the Originators and any Affiliates thereof and not just a division of an Originator or any such Affiliate. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, Seller will: (A) conduct its own business in its own name and require that all full-time employees of Seller, if any, identify themselves as such and not as employees of any Originator or any Affiliate thereof (including, without limitation, by means of providing appropriate employees with business or identification cards identifying such employees as Seller's employees); (B) compensate all employees, consultants and agents directly, from Seller's own funds, for services provided to Seller by such employees, consultants and agents and, to the extent any employee, consultant or agent of Seller is also an employee, consultant or agent of any Originator or any Affiliate thereof, allocate the compensation of such employee, consultant or agent between Seller and Originator or such Affiliate, as applicable, on a basis that reflects the services rendered to Seller and such Originator or such Affiliate, as applicable; Page 25 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (C) clearly identify its offices (by signage or otherwise) as its offices and, if such office is located in the offices of any Originator or any Affiliate thereof, allocate fairly any overhead for shared office space; (D) have a separate telephone number or extension, which will be answered only in its name and separate stationery, invoices and checks in its own name; (E) conduct all transactions with the Originators and the Servicers (including, without limitation, any delegation of its obligations hereunder as Servicers) strictly on an arm's-length basis, allocate all overhead expenses (including, without limitation, telephone and other utility charges) for items shared between Seller and each Originator (or any Affiliate thereof) on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use; (F) at all times have as its general partner a limited liability company having at least one Independent Manager; (G) observe all corporate and/or limited partnership formalities as a distinct entity, and ensure that all corporate and/or limited partnership actions relating to (A) the selection, maintenance or replacement of the general partner, (B) the dissolution or liquidation of Seller or (C) the initiation of, participation in, acquiescence in or consent to any bankruptcy, insolvency, reorganization or similar proceeding involving Seller, are duly authorized by the Independent Manager of the general partner; (H) maintain Seller's books and records separate from those of each Originator and any Affiliate thereof and otherwise readily identifiable as its own assets rather than assets of such Originator and any Affiliate thereof; (I) prepare its financial statements separately from those of each Originator and Morningstar and insure that any consolidated financial statements of such Originator or any Affiliate thereof that include Seller and that are filed with the Securities and Exchange Commission or any other governmental agency have notes clearly stating that Seller is a separate corporate entity and that its assets will be available first and foremost to satisfy the claims of the creditors of Seller; Page 26 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (J) except as herein specifically otherwise provided, maintain the funds or other assets of Seller separate from, and not commingled with, those of any Originator or any Affiliate thereof and only maintain bank accounts or other depository accounts to which Seller alone is the account party and from which Seller alone (or the Agent hereunder) has the sole power to make withdrawals; (K) pay all of Seller's operating expenses from Seller's own assets (except for certain payments by the Originators or other Persons pursuant to allocation arrangements that comply with the requirements of this Section 7.1(i)); (L) operate its business and activities such that: it does not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, other than the transactions contemplated and authorized by this Agreement and the Receivables Sale Agreement (it being understood that Seller may enter into the transactions contemplated by the Demand Note); and does not create, incur, guarantee, assume or suffer to exist any indebtedness or other liabilities, whether direct or contingent, other than (1) as a result of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (2) the incurrence of obligations under this Agreement, (3) the incurrence of obligations, as expressly contemplated in the Receivables Sale Agreement, to make payment to each Originator thereunder for the purchase of Receivables from any Originator under the Receivables Sale Agreement, and (4) the incurrence of operating expenses in the ordinary course of business of the type otherwise contemplated by this Agreement; (M) maintain its limited partnership agreement in conformity with this Agreement, such that it does not amend, restate, supplement or otherwise modify its limited partnership agreement in any respect that would impair its ability to comply with the terms or provisions of any of the Transaction Documents, including, without limitation, Section 7.1(i) of this Agreement; (N) maintain the effectiveness of, and continue to perform under the Receivables Sale Agreement and the Demand Note, such that it does not amend, restate, supplement, cancel, terminate or otherwise modify the Receivables Sale Agreement or the Demand Note, or give any consent, waiver, directive or approval under the Receivables Sale Agreement or the Demand Note, or waive any default, action, omission or breach under the Receivables Sale Agreement or Page 27 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT under the Demand Note, or otherwise grant any indulgence under the Receivables Sale Agreement or the Demand Note, without (in each case) the prior written consent of the Agent and the Required Purchasers; (O) maintain its limited partnership separateness such that it does not merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions, and except as otherwise contemplated herein) all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person, nor at any time create, have, acquire, maintain or hold any interest in any Subsidiary; (P) maintain at all times the Required Capital Amount (as defined in the Receivables Sale Agreement) and refrain from making any dividend, distribution, redemption of capital stock or partnership interest or payment of any subordinated indebtedness that would cause the Required Capital Amount to cease to be so maintained; (Q) take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion issued by Locke & Liddell & Sapp LLP, as counsel for Seller, in connection with the closing or initial Incremental Purchase or initial Reinvestment under this Agreement and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times. (j) Collections. Such Seller Party will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (2) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to Receivables are remitted directly to Seller or any Affiliate of Seller, Seller will (except as otherwise specified in Section 8.2(b)) remit (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof, and, at all times prior to such remittance, Seller will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Agent and the Purchasers. Seller will maintain exclusive ownership, dominion and control (subject to the terms of this Agreement) of each Lock-Box and Collection Account and shall not grant the right to take dominion and control or grant "control" (within the meaning of Section 9- 104 of the UCC of all applicable jurisdictions) of any Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to the Agent as contemplated by this Agreement. (k) Taxes. Such Seller Party will file all tax returns and reports required by law to be filed by it and will promptly pay all taxes and governmental charges at Page 28 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT any time owing except, in the case of each Seller Party other than Seller, for taxes not yet due or that are being diligently contested in good faith by appropriate proceedings and that have been adequately reserved against in accordance with GAAP. Seller will pay when due any taxes payable in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of any Company, the Agent or any Financial Institution. (l) Payment to Originators and Morningstar. With respect to any Receivable purchased by Seller from any Originator, such sale shall be effected under, and in strict compliance with the terms of, the Receivables Sale Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to such Originator in respect of the purchase price for such Receivable. With respect to any Receivable purchased by MRC from Morningstar, such sale shall be effected under, and in strict compliance with the terms of, the Transfer Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to MRC in respect of the purchase price for such Receivable. (m) Local Collections. On or prior to the date that is 45 days after the date hereof (the "Lock-Box Date"), Seller shall have notified all Obligors of Receivables originated by any Local Originator to pay all Collections on such Receivables directly to a Lock-Box or Collection Account and, to the extent any such Lock-Box or Collection Account is not in existence on the date hereof, Seller shall have delivered, on or prior to the Lock-Box Date, an executed Collection Account Agreement acceptable to the Agent with respect to such new Lock-Box or Collection Account. (n) Amendments to Existing Collection Account Agreements. On or prior to the Lock-Box Date, Seller shall deliver to the Agent duly executed amendments to each of the Collection Account Agreements executed and delivered in connection with the Original Agreement, each such amendment to be in form and substance reasonably satisfactory to the Agent. (o) Chase Accounts. Such Seller Party will, prior to the Lock-Box Date, (i) terminate (or caused to be terminated) the Chase Bank of Texas as a Collection Bank and (ii) instruct all Obligors currently remitting payments to the Lock-Boxes and Collection Accounts identified on Schedule G (the "Chase Lock-Boxes") to remit such payments to another existing Lock-Box or Collection Account or a new Lock-Box or Collection Account as to which such Seller Party will, within the time period specified above, deliver to the Agent an executed Collection Account Agreement acceptable to the Agent with respect to such new Lock-Box or Collection Account. On and after the Lock-Box Date, such Seller Party will not permit any Collections or any other proceeds of Receivables to be deposited to the Chase Lock-Boxes or the associated Collection Accounts. Page 29 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 7.2 Negative Covenants of The Seller Parties. Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, that: (a) Name Change, Jurisdiction of Organization, Offices, Records and Books of Accounts. Such Seller Party will not change its name, identity, corporate or other organizational structure or jurisdiction of organization (within the meaning of Sections 9-503 and/or 9-507 of the UCC of all applicable jurisdictions) or relocate its chief executive office, principal place of business or any office where Records are kept unless it shall have: (i) given the Agent at least thirty (30) days' prior written notice thereof and (ii) delivered to the Agent all financing statements, instruments and other documents requested by the Agent in connection with such change or relocation. (b) Change in Payment Instructions to Obligors. Except as may be required by Section 7.1(m) or by the Agent pursuant to Section 8.2(b), such Seller Party will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless the Agent shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement acceptable to the Agent with respect to the new Collection Account or Lock-Box; provided, however, that the Servicers may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account. (c) Modifications to Writings, Contracts and Credit and Collection Policies. Such Seller Party will not, and will not permit any Originator or Morningstar to, make any change to such Originator's or Morningstar's Credit and Collection Policy that could materially (either individually or in the aggregate) adversely affect the collectibility of the Receivables or materially (either individually or in the aggregate) decrease the credit quality of any newly created Receivables. Except as provided in Section 8.2(d), the Servicers will not, and will not permit any Originator or Morningstar to, extend, amend or otherwise modify the terms of any Receivable or the Writing or Contract related thereto other than in accordance with such Originator's or Morningstar's Credit and Collection Policy. (d) Sales, Liens. Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any Receivable, Related Security or Collections, or upon or with respect to the Writing or Contract under which any Receivable arises, or any Lock-Box or Collection Account, or assign any right to receive income with respect thereto (other than, in each case, the creation of the interests therein in favor of the Agent and the Purchasers provided for herein), and Seller will defend the right, title and interest of the Agent and Page 30 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT the Purchasers in, to and under any of the foregoing property, against all claims of third parties claiming through or under Seller or any Originator or Morningstar. Seller will not create or suffer to exist any mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any of its inventory, the financing or lease of which gives rise to any Receivable. (e) Net Receivables Balance. At no time prior to the Amortization Date shall Seller permit the Net Receivables Balance to be less than an amount equal to the sum of (i) the Aggregate Capital plus (ii) the Aggregate Reserves. (f) Termination Date Determination. Seller will not designate the Termination Date (as defined in the Receivables Sale Agreement), or send any written notice to any Originator in respect thereof, without the prior written consent of the Agent, except with respect to the occurrence of such Termination Date arising pursuant to Section 5.1(d) of the Receivables Sale Agreement. (g) Restricted Junior Payments. From and after the occurrence of any Amortization Event, Seller will not make any Restricted Junior Payment if, after giving effect thereto, Seller would fail to meet its obligations set forth in Section 7.2(e). (h) Demand Notes. At no time shall Seller cause or permit the aggregate outstanding principal balance of the Demand Note to exceed the sum of $21,325,653. ARTICLE VIII ADMINISTRATION AND COLLECTION Section 8.1 Designation of Servicers. (a) The servicing, administration and collection of the Receivables shall be conducted by such Person or Persons (each such Person, a "Servicer") so designated from time to time in accordance with this Section 8.1. Each of Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity and Tuscan Management is hereby designated as, and hereby agrees to perform the duties and obligations of, Servicer pursuant to the terms of this Agreement. The Agent may, and at the direction of the Required Purchasers shall, at any time following an Amortization Event, designate as Servicer any Person to succeed Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, any Dean Entity or Tuscan Management, or any successor Servicer. (b) Without the prior written consent of the Agent and the Required Purchasers, neither Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, any Dean Entity nor Tuscan Management shall be permitted to delegate any of its duties or responsibilities as Servicer to any Person other than (i) Seller and (ii) with respect to certain Charged-Off Receivables, outside collection agencies in accordance with Page 31 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT its customary practices. Seller shall not be permitted to further delegate to any other Person any of the duties or responsibilities of a Servicer delegated to it by Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, any Dean Entity or Tuscan Management. If at any time following an Amortization Event the Agent shall designate as Servicer any Person other than Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, any Dean Entity or Tuscan Management, all duties and responsibilities theretofore delegated by Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, any Dean Entity or Tuscan Management to Seller may, at the discretion of the Agent, be terminated forthwith on notice given by the Agent to Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, any Dean Entity or Tuscan Management, as applicable, and to Seller. (c) Notwithstanding the foregoing subsection (b), (i) each of Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity and Tuscan Management shall be and remain primarily liable to the Agent and the Purchasers for the full and prompt performance of all of its duties and responsibilities as a Servicer hereunder and (ii) the Agent and the Purchasers shall be entitled to deal exclusively with Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity and Tuscan Management in matters relating to the discharge by a Servicer of its duties and responsibilities hereunder. The Agent and the Purchasers shall not be required to give notice, demand or other communication to any Person other than Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity or Tuscan Management in order for communication to a Servicer and its sub-servicer or other delegate with respect thereto to be accomplished. Each of Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity and Tuscan Management, at all times that it is a Servicer, shall be responsible for providing any sub-servicer or other delegate of a Servicer with any notice given to a Servicer under this Agreement. Section 8.2 Duties of Servicer. Each Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Receivable from time to time, all in accordance in all material respects with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance in all material respects with the applicable Originator's or Morningstar's Credit and Collection Policy. (b) Each Servicer will instruct all Obligors to pay all Collections directly to a Lock-Box or Collection Account; provided, however, that (i) prior to the date that is 45 days after the date hereof, to the extent an Obligor of a Receivable originated by a Local Originator currently remits Collections to a local employee of a Local Originator, the applicable Servicer will insure that such local employee remits such Collections to a local depository account no less frequently than weekly and within two (2) Business Days of such local employee's deposit of such Collections, such Servicer will cause such Collections to be deposited directly to a Lock-Box or Collection Account; and (ii) to the extent that the Originator (other than a Local Originator) of the Receivable giving rise to such Collections Page 32 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT or Morningstar, as applicable, currently permits the Obligor of such Receivable to pay such Collections to a local employee of such Originator or Morningstar, as applicable, such Servicer will insure that such local employees remit such Collections to a local depository account no less frequently than weekly, and within two (2) Business Days of such local employee's deposit of such Collections, such Servicer will cause such Collections to be deposited directly to a Lock-Box or Collection Account. With respect to payments relating to Receivables that are remitted directly to any Servicer, such Servicer will remit such payments (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof, and, at all times prior to such remittance, such Servicer will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Agent and the Purchasers. Each Servicer shall effect a Collection Account Agreement substantially in the form of Exhibit VI with each bank party to a Collection Account at any time. Prior to the delivery of any Collection Notice to any Collection Bank, in the case of any remittances received in any Lock-Box or Collection Account that shall have been identified, to the satisfaction of the applicable Servicer, to not constitute Collections or other proceeds of the Receivables or the Related Security (which identification shall occur no later than two (2) Business Days after such amounts are received therein), such Servicer shall promptly (and, in any event, no later than one (1) Business Day after such identification) remit such items to the Person identified to it as being the owner of such remittances and cause such amounts to be removed from such Lock-Box or Collection Account. From and after the date the Agent delivers to any Collection Bank a Collection Notice pursuant to Section 8.3, the Agent may request that the Servicers, and the Servicers thereupon promptly shall instruct all Obligors with respect to the Receivables, to remit all payments thereon to a new depositary account specified by the Agent and, at all times thereafter, Seller and the Servicers shall not deposit or otherwise credit, and shall not permit any other Person to deposit or otherwise credit to such new depositary account any cash or payment item other than Collections. (c) The Servicers shall administer the Collections in accordance with the procedures described herein and in Article II. The Servicers shall set aside and hold in trust for the account of Seller and the Purchasers their respective shares of the Collections in accordance with Article II. The Servicers shall, upon the request of the Agent, segregate, in a manner acceptable to the Agent, all cash, checks and other instruments received by it from time to time constituting Collections from the general funds of each of the Servicers or Seller prior to the remittance thereof in accordance with Article II. If the Servicers shall be required to segregate Collections pursuant to the preceding sentence, the Servicers shall segregate and deposit with a bank designated by the Agent such allocable share of Collections of Receivables set aside for the Purchasers on the second Business Day following receipt by any Servicer of such Collections, duly endorsed or with duly executed instruments of transfer. (d) The Servicers may, in accordance with the applicable Originator's or Morningstar's Credit and Collection Policy, extend the maturity of any Receivable or adjust the Outstanding Balance of any Receivable as the Servicers determine to be appropriate Page 33 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT to maximize Collections thereof; provided, however, that such extension or adjustment shall not alter the status of such Receivable as a Delinquent Receivable or Charged-Off Receivable or limit the rights of the Agent or the Purchasers under this Agreement. Notwithstanding anything to the contrary contained herein, upon the occurrence and during the continuance of an Amortization Event and until such time as the Aggregate Unpaids have been indefeasibly paid in full, the Agent shall have the absolute and unlimited right to direct the Servicers to commence or settle any legal action with respect to any Receivable or to foreclose upon or repossess any Related Security. (e) The Servicers shall hold in trust for Seller and the Purchasers all Records that (i) evidence or relate to the Receivables, the related Writings and Contracts and Related Security or (ii) are otherwise necessary or desirable to collect the Receivables and shall, as soon as reasonably practicable upon demand of the Agent, deliver or make available to the Agent all such Records, at a place selected by the Agent. The Servicers shall, as soon as reasonably practicable following receipt thereof turn over to Seller any cash collections or other cash proceeds received with respect to Indebtedness not constituting Receivables. The Servicers shall, from time to time at the request of any Purchaser, furnish to the Purchasers (promptly after any such request) a calculation of the amounts set aside for the Purchasers pursuant to Article II. (f) Any payment by an Obligor in respect of any indebtedness owed by it to any Originator or Morningstar or Seller shall, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Agent, be applied as a Collection of any Receivable of such Obligor (starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other obligation of such Obligor. Section 8.3 Collection Notices. The Agent is authorized at any time to date and to deliver to the Collection Banks the Collection Notices. Seller hereby agrees that, effective when the Agent delivers such notice, the Agent (for the benefit of the Purchasers) shall have exclusive ownership and sole "control" (within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of each Lock-Box, the Collection Accounts and the amounts on deposit therein. In case any authorized signatory of Seller whose signature appears on a Collection Account Agreement shall cease to have such authority before the delivery of such notice, such Collection Notice shall nevertheless be valid as if such authority had remained in force. Seller hereby authorizes the Agent, and agrees that the Agent shall be entitled to (i) endorse Seller's name on checks and other instruments representing Collections, (ii) enforce the Receivables, the related Writings and Contracts and the Related Security and (iii) take such action as shall be necessary or desirable to cause all cash, checks and other instruments constituting Collections of Receivables to come into the possession of the Agent rather than Seller or any Servicer. Page 34 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 8.4 Responsibilities of Seller. Anything herein to the contrary notwithstanding, the exercise by the Agent and the Purchasers of their rights hereunder shall not release the Servicers, the Originators, Morningstar or Seller from any of their duties or obligations with respect to any Receivables or under the related Writings or Contracts. The Purchasers shall have no obligation or liability with respect to any Receivables or related Writings or Contracts, nor shall any of them be obligated to perform the obligations of Seller. Section 8.5 Reports. The Servicers shall prepare and forward to the Agent and each Financial Institution (i) on the 20th calendar day of each month and at such times as the Agent or the Required Purchasers shall request, a Monthly Report and (ii) at such times as the Agent or the Required Purchasers shall request, a listing by Obligor of all Receivables together with an aging of such Receivables. In addition, during any time when the long-term debt rating of Provider is rated Ba3 or lower by Moody's Investors Service, Inc. and BB- or lower by Standard & Poor's Ratings Group, the Servicers shall prepare and forward to the Agent and each Financial Institution on Wednesday of each calendar week, an abbreviated Monthly Report in a form acceptable to the Agent (each such report, a "Weekly Report") with respect to and as of the end of the immediately preceding calendar week. Section 8.6 Servicing Fees. In consideration of each of Morningstar's, Country Fresh's, Land-O-Sun's, Southern Foods', GTL's, Tuscan Dairies', each Dean Entity's and Tuscan Management's agreement to each act as a Servicer hereunder, the Purchasers hereby agree that, so long as each of Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity and Tuscan Management shall continue to perform as a Servicer hereunder, Seller shall pay over to Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity and Tuscan Management collectively, a fee (the "Servicing Fee") on each Settlement Date (other than a Settlement Date relating to a CP (Tranche) Accrual Period) for the immediately preceding Settlement Period equal to 1% (one percent) of the lesser of the (a) the average Net Receivables Balance during such Settlement Period and (b) the average Capital of all Receivables during such period, as compensation for its servicing activities. Such Servicing Fee shall be allocated among Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity and Tuscan Management as Morningstar, Country Fresh, Land-O-Sun, Southern Foods, GTL, Tuscan Dairies, each Dean Entity and Tuscan Management shall mutually determine. ARTICLE IX AMORTIZATION EVENTS Section 9.1 Amortization Events. The occurrence of any one or more of the following events shall constitute an Amortization Event: Page 35 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (a) Any Seller Party shall fail (i) to make any payment or deposit of any amount consisting of Capital required hereunder when due, or (ii) to make any payment or deposit of any other amount required hereunder when due and such failure shall continue for two (2) consecutive Business Days, or (iii) to perform or observe any term, covenant or agreement set forth in Section 7.2 hereof, or (iv) to perform or observe any term, covenant or agreement set forth in Section 7.1(a)(iv), (a)(v), (a)(viii) or (c)(second sentence only), and such failure shall continue for thirty (30) consecutive days or (v) to perform or observe any other term, covenant or agreement hereunder (other than as referred to in clauses (i), (ii), (iii) or (iv) of this paragraph (a)) and such failure shall continue for five (5) consecutive Business Days. (b) Any representation, warranty, certification or statement made by any Seller Party in this Agreement, any other Transaction Document or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect when made or deemed made. (c) Failure of Seller to pay any Indebtedness when due; or the failure of any other Seller Party to pay Indebtedness when due in excess of $50,000,000; or the default by any Seller Party in the performance of any term, provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of any Seller Party shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof. (d) (i) Any Seller Party or Provider shall generally not pay its debts as such debts become due or shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted by or against any Seller Party or Provider seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or (iii) any Seller Party or Provider shall take any corporate action to authorize any of the actions set forth in clauses (i) or (ii) above in this subsection (d). (e) Seller shall fail to comply with the terms of Section 2.6 hereof and such failure shall not have been remedied within one Business Day. (f) (i) As at the end of any calendar month, the average of the Default Ratios for the three most recently-ended calendar months shall exceed 7.75%; or (ii) as at the end of any calendar month, the average of the Dilution Ratios for the three most recently- ended calendar months shall exceed 4%; or (iii) as at the end of any calendar month ending on or prior to August 31, 2002, the average of the Delinquency Ratios for the three Page 36 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT most recently-ended calendar months shall exceed 3.75%; or (iv) as at the end of any calendar month ending after August 31, 2002, the average of the Delinquency Ratios for the three most recently-ended calendar months shall exceed 3.00%. (g) A Change of Control shall occur. (h) (i) One or more final judgments for the payment of money shall be entered against Seller or (ii) one or more final judgments for the payment of money in an amount in excess of $50,000,000, individually or in the aggregate, shall be entered against any Servicer on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgment shall continue unsatisfied and in effect for thirty (30) consecutive days without a stay of execution. (i) The "Termination Date" under and as defined in the Receivables Sale Agreement shall occur under the Receivables Sale Agreement or the Seller or any Originator shall fail to observe any term or condition of the Sale Agreement or shall waive its right to enforce the terms and conditions of the Sale Agreement; or any Originator shall for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to Seller under the Receivables Sale Agreement (other than an Immaterial Originator which ceases to transfer Receivables subject to and in accordance with Section 1.7 of the Receivables Sale Agreement). (j) This Agreement shall terminate in whole or in part (except in accordance with its terms), or shall cease to be effective or to be the legally valid, binding and enforceable obligation of Seller, or any Obligor shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability, or the Agent for the benefit of the Purchasers shall cease to have a valid and perfected first priority security interest in the Receivables, the Related Security and the Collections with respect thereto and the Collection Accounts. (k) Provider shall fail to perform or observe any term, covenant or agreement required to be performed by it under the Performance Undertaking, or the Performance Undertaking shall cease to be effective or to be the legally valid, binding and enforceable obligation of Provider, or Provider shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability. (l) The Agreement of General Partner shall terminate in whole or in part or shall cease to be effective or to be the legally valid, binding and enforceable obligation of the general partner of the Seller or the general partner of the Seller or the Seller shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability, or the general partner of the Seller shall fail in any respect to perform its obligations under the Agreement of General Partner. Page 37 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (m) Provider shall fail to own, free and clear of any Adverse Claims, in the aggregate, either directly or indirectly, 100% of the limited partnership interests of Seller and 99.9% of the partnership interests of Seller; or Dairy Group Receivables GP, LLC (f/k/a Suiza Receivables GP, LLC) shall fail to own, free and clear of any Adverse Claims (except any Adverse Claim in favor of the Collateral Agent in accordance with the Dean Credit Agreement), 100% of the general partnership interests of Seller and 0.1% of the partnership interests of Seller; or Provider and Suiza Dairy Group, L.P. shall fail to own, free and clear of any Adverse Claims (except any Adverse Claim in favor of the Collateral Agent in accordance with the Dean Credit Agreement), in the aggregate, either directly or indirectly, 100% of the membership interests of Dairy Group Receivables GP, LLC. (n) Provider shall fail to comply with the Dean Financial Covenants. Section 9.2 Remedies. Upon the occurrence and during the continuation of an Amortization Event, the Agent may, or upon the direction of the Required Purchasers shall, take any of the following actions: (i) replace any Person then acting as Servicer; (ii) declare the Amortization Date to have occurred, whereupon the Amortization Date shall forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Seller Party; provided, however, that (A) upon the occurrence of an Amortization Event described in Section 9.1(d)(ii), or of an actual or deemed entry of an order for relief with respect to any Seller Party under the Federal Bankruptcy Code, the Amortization Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Seller Party and (B) upon the occurrence of an Amortization Event described in Section 9.1(a), 9.1(d) or 9.1(e), by three (3) Business Days' notice to the Agent, each other Purchaser and Seller, the affected Financial Institution in the case of a Section 9.1(a) Amortization Event and any Financial Institution in the case of a Section 9.1(d) or 9.1(e) Amortization Event may terminate its Commitment hereunder, whereupon such Financial Institution shall be deemed to be a "Terminating Financial Institution" for all purposes hereof; (iii) to the fullest extent permitted by applicable law, declare that the Default Fee shall accrue with respect to any of the Aggregate Unpaids outstanding at such time; (iv) deliver the Collection Notices to the Collection Banks; (v) notify Obligors of the Purchasers' interest in the Receivables; and (vi) notify Provider of the Purchaser's interest in the Demand Note, make demand for any and all payments due thereunder and direct that such payments be made directly to the Agent or its designee. The aforementioned rights and remedies shall be without limitation, and shall be in addition to all other rights and remedies of the Agent and the Purchasers otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative. Page 38 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT ARTICLE X INDEMNIFICATION Section 10.1 Indemnities by The Seller Parties. Without limiting any other rights that the Agent, any Purchaser, any Funding Source or any of their respective Affiliates may have hereunder or under applicable law, (A) Seller hereby agrees to indemnify (and pay upon demand to) the Agent, each Purchaser, each Funding Source and their respective Affiliates, assigns, officers, directors and employees (each an "Indemnified Party") from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys' fees (which attorneys may be employees of the Agent or such Purchaser) and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or as a result of this Agreement, or the use of the proceeds of any purchase hereunder, or the acquisition, funding or ownership, either directly or indirectly, by a Purchaser or a Funding Source of a Purchaser Interest or of an interest in the Receivables, or any Receivable or any Contract or any Writing, or any action of any Seller Party, any Originator, Morningstar or any Affiliate of any of the foregoing and (B) the Servicers hereby agree to indemnify (and pay upon demand to) each Indemnified Party for Indemnified Amounts awarded against or incurred by any of them arising out of any Servicer's activities as Servicer hereunder excluding, however, in all of the foregoing instances under the preceding clauses (A) and (B): (i) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification; (ii) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or (iii) franchise taxes and taxes imposed by the jurisdiction in which such Indemnified Party's principal executive office is located, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the characterization for income tax purposes of the acquisition by the Purchasers of Purchaser Interests as a loan or loans by the Purchasers to Seller secured by the Receivables, the Related Security, the Collection Accounts and the Collections; provided, however, that nothing contained in this sentence shall limit the liability of any Seller Party or limit the recourse of the Purchasers to any Seller Party for amounts otherwise Page 39 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT specifically provided to be paid by such Seller Party under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, Seller shall indemnify each Indemnified Party for Indemnified Amounts (including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Seller or any Servicer) relating to or resulting from: (i) any representation or warranty made by any Seller Party or any Originator or Morningstar in its capacity as seller under the Receivables Sale Agreement or Receivables Transfer Agreement, as applicable (or any officers of any such Person) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by any such Person pursuant hereto or thereto, which shall have been false or incorrect when made or deemed made; (ii) the failure by Seller, any Servicer, any Originator or Morningstar to comply with any applicable law, rule or regulation with respect to any Receivable or Writing or Contract related thereto, or the nonconformity of any Receivable or Writing or Contract included therein with any such applicable law, rule or regulation or any failure of any Originator or Morningstar to keep or perform any of its obligations, express or implied, with respect to the Writing or Contract; (iii) any failure of Seller, any Servicer, any Originator or Morningstar to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document; (iv) any products liability, personal injury or damage suit, or other similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Writing or Contract or any Receivable; (v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Writing or Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services; (vi) the commingling of Collections of Receivables at any time with other funds; Page 40 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby, the use of the proceeds of an Incremental Purchase or a Reinvestment, the ownership of the Purchaser Interests or any other investigation, litigation or proceeding relating to Seller, any Servicer, any Originator or Morningstar in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby; (viii) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding; (ix) any Amortization Event described in Section 9.1(d); (x) any failure of Seller to acquire and maintain legal and equitable title to, and ownership of any Receivable and the Related Security and Collections with respect thereto from the applicable Originator or Morningstar, free and clear of any Adverse Claim (other than as created hereunder); or any failure of Seller to give reasonably equivalent value to applicable Originator under the Receivables Sale Agreement in consideration of the transfer thereunder by such Originator of any Receivable, or any failure of MRC to give reasonably equivalent value to Morningstar under the Receivables Transfer Agreement in consideration of the transfer by MRC of any Receivable thereunder or any attempt by any Person to void such transfer under statutory provisions or common law or equitable action; (xi) any failure to vest and maintain vested in the Agent for the benefit of the Purchasers, or to transfer to the Agent for the benefit of the Purchasers, legal and equitable title to, and ownership of, a first priority perfected undivided percentage ownership interest (to the extent of the Purchaser Interests contemplated hereunder) or security interest in the Receivables, the Related Security and the Collections, free and clear of any Adverse Claim (except as created by the Transaction Documents); (xii) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivable, the Related Security and Collections with respect Page 41 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT thereto, and the proceeds of any thereof, whether at the time of any Incremental Purchase or Reinvestment or at any subsequent time; (xiii) any action or omission by any Seller Party that reduces or impairs the rights of the Agent or the Purchasers with respect to any Receivable or the value of any such Receivable; (xiv) any attempt by any Person to void any Incremental Purchase or Reinvestment hereunder under statutory provisions or common law or equitable action; and (xv) the failure of any Receivable included in the calculation of the Net Receivables Balance as an Eligible Receivable to be an Eligible Receivable at the time so included. Section 10.2 Increased Cost and Reduced Return. (a) If after June 30, 2000 with respect to any Funding Source relating to the Bank One Company, or after the date hereof with respect to any other Funding Source, any such Funding Source shall be charged any fee, expense or increased cost on account of the adoption of any applicable law, rule or regulation (including any applicable law, rule or regulation regarding capital adequacy) or any change therein, 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 with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency (a "Regulatory Change"): (i) that subjects any Funding Source to any charge or withholding on or with respect to any Funding Agreement or a Funding Source's obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Funding Source of any amounts payable under any Funding Agreement (except for changes in the rate of tax on the overall net income of a Funding Source or taxes excluded by Section 10.1) or (ii) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of a Funding Source, or credit extended by a Funding Source pursuant to a Funding Agreement or (iii) that imposes any other condition the result of which is to increase the cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the rate of return on a Funding Source's capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, upon demand by the Agent, Seller shall pay to the Agent, for the benefit of the relevant Funding Source, such amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source for such increased cost or such reduction. Page 42 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (b) If less than all of the Financial Institutions are subject to any Regulatory Change giving rise to a demand by the Agent pursuant to Section 10.2(a), each Financial Institution so subject, at the request of Seller, the Company in such Financial Institution's Purchaser Group or the Agent, shall assign all of its rights and obligations hereunder to (i) another Financial Institution in such Financial Institution's Purchaser Group or (ii) another funding entity nominated by Seller or the Agent that is acceptable to the Company in such Financial Institution's Purchaser Group and willing to participate in this Agreement through the Liquidity Termination Date in the place of such notifying Financial Institution and that is not so subject; provided that (i) the subject Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such notifying Financial Institution's Pro Rata Share of the Capital and Yield owing to all of the Financial Institutions in such Financial Institution's Purchaser Group and all accrued but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Purchaser Interests of the Financial Institutions in such Financial Institution's Purchaser Group, and (ii) the replacement Financial Institution otherwise satisfies the requirements of Section 12.1(b). Section 10.3 Other Costs and Expenses. Seller shall pay to the Agent and each Purchaser on demand all costs and out-of-pocket expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder, including without limitation, the cost of any Purchaser's auditors auditing the books, records and procedures of any Seller Party, reasonable fees and out-of-pocket expenses of legal counsel for each Purchaser and the Agent (which such counsel may be employees of any Purchaser or the Agent) with respect thereto and with respect to advising any Purchaser or the Agent as to their respective rights and remedies under this Agreement. Seller shall pay to the Agent on demand any and all costs and expenses of the Agent and the Purchasers, if any, including reasonable counsel fees and expenses in connection with the enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following an Amortization Event. Seller shall reimburse each Company on demand for all other costs and expenses incurred by such Company ("Other Costs"), including, without limitation, the cost of auditing such Company's books by certified public accountants, the cost of rating the Commercial Paper by independent financial rating agencies, and the reasonable fees and out-of-pocket expenses of counsel for such Company or any counsel for any shareholder of such Company with respect to advising such Company or such shareholder as to matters relating to such Company's operations. Section 10.4 Allocations. Each Company shall allocate the liability for Other Costs among Seller and other Persons with whom such Company has entered into agreements to purchase interests in receivables ("Other Sellers"). If any Other Costs are attributable to Seller and not attributable to any Other Seller, Seller shall be solely liable for such Other Costs. However, if Other Costs are attributable to Other Sellers and not attributable to Seller, such Other Sellers shall be solely liable for such Other Costs. All allocations to be Page 43 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT made pursuant to the foregoing provisions of this Article X shall be made by the applicable Company in its sole discretion and shall be binding on Seller and the Servicers. ARTICLE XI THE AGENT Section 11.1 Authorization and Action. Each Purchaser hereby designates and appoints Bank One to act as its agent hereunder and under each other Transaction Document, and authorizes the Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to the Agent by the terms of this Agreement and the other Transaction Documents together with such powers as are reasonably incidental thereto. The Agent shall not have any duties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with any Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for the Agent. In performing its functions and duties hereunder and under the other Transaction Documents, the Agent shall act solely as agent for the Purchasers and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for any Seller Party or any of such Seller Party's successors or assigns. The Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement, any other Transaction Document or applicable law. The appointment and authority of the Agent hereunder shall terminate upon the indefeasible payment in full of all Aggregate Unpaids. Each Purchaser hereby authorizes the Agent to execute each of the Uniform Commercial Code financing statements on behalf of such Purchaser (the terms of which shall be binding on such Purchaser). Section 11.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement and each other Transaction Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 11.3 Exculpatory Provisions. Neither the Agent nor any of its directors, officers, agents or employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement or any other Transaction Document (except for its, their or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Purchasers for any recitals, statements, representations or warranties made by any Seller Party contained in this Agreement, any other Transaction Document or any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement, or any other Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any other Transaction Document or any other document furnished in connection herewith or therewith, or for any failure of any Seller Party to Page 44 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT perform its obligations hereunder or thereunder, or for the satisfaction of any condition specified in Article VI, or for the perfection, priority, condition, value or sufficiency of any collateral pledged in connection herewith. The Agent shall not be under any obligation to any Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the Seller Parties. The Agent shall not be deemed to have knowledge of any Amortization Event or Potential Amortization Event unless the Agent has received notice from Seller or a Purchaser. Section 11.4 Reliance by Agent. The Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to Seller), independent accountants and other experts selected by the Agent. The Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive such advice or concurrence of the Required Purchasers or all of the Purchasers, as applicable, as it deems appropriate and it shall first be indemnified to its satisfaction by the Purchasers, provided that unless and until the Agent shall have received such advice, the Agent may take or refrain from taking any action, as the Agent shall deem advisable and in the best interests of the Purchasers. The Agent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of the Required Purchasers or all of the Purchasers, as applicable, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Purchasers. Section 11.5 Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges that neither the Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including, without limitation, any review of the affairs of any Seller Party, shall be deemed to constitute any representation or warranty by the Agent. Each Purchaser represents and warrants to the Agent that it has and will, independently and without reliance upon the Agent or any other Purchaser and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of Seller and made its own decision to enter into this Agreement, the other Transaction Documents and all other documents related hereto or thereto. Section 11.6 Reimbursement and Indemnification. The Financial Institutions agree to reimburse and indemnify the Agent and its officers, directors, employees, representatives and agents, ratably based on the ratio of each Financial Institution's Commitment to the aggregate Commitment, to the extent not paid or reimbursed by the Seller Parties (i) for any amounts for which the Agent, acting in its capacity as Agent, is entitled to reimbursement by the Seller Parties hereunder and (ii) for any other expenses incurred by the Agent, Page 45 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT in its capacity as Agent and acting on behalf of the Purchasers, in connection with the administration and enforcement of this Agreement and the other Transaction Documents. Section 11.7 Agent in its Individual Capacity. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with Seller or any Affiliate of Seller as though the Agent were not the Agent hereunder. With respect to the acquisition of Purchaser Interests pursuant to this Agreement, the Agent shall have the same rights and powers under this Agreement in its individual capacity as any Purchaser and may exercise the same as though it were not the Agent, and the terms "Financial Institution," "Related Financial Institution," "Purchaser," "Financial Institutions," "Related Financial Institutions," and "Purchasers" shall include the Agent in its individual capacity. Section 11.8 Successor Agent. The Agent may, upon five days' notice to Seller and the Purchasers, and the Agent will, upon the direction of all of the Purchasers (other than the Agent, in its individual capacity) resign as Agent. If the Agent shall resign, then the Required Purchasers during such five-day period shall appoint, with the consent of the Seller, such consent not to be unreasonably withheld or delayed, from among the Purchasers a successor agent. If for any reason no successor Agent is appointed by the Required Purchasers during such five-day period, then effective upon the termination of such five day period, the Purchasers shall perform all of the duties of the Agent hereunder and under the other Transaction Documents and Seller and the Servicers (as applicable) shall make all payments in respect of the Aggregate Unpaids directly to the applicable Purchasers and for all purposes shall deal directly with the Purchasers. After the effectiveness of any retiring Agent's resignation hereunder as Agent, the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Transaction Documents and the provisions of this Article XI and Article X shall continue in effect for its benefit with respect to any actions taken or omitted to be taken by it while it was Agent under this Agreement and under the other Transaction Documents. ARTICLE XII ASSIGNMENTS; PARTICIPATIONS Section 12.1 Assignments. Each Seller Party, the Agent and each Purchaser hereby agree and consent to the complete or partial assignment by any Company of all or any portion of its rights under, interest in, title to and obligations under this Agreement to any Funding Source pursuant to any Funding Agreement or to any other Person, and upon such assignment, such Company shall be released from its obligations so assigned. Further, each Seller Party, the Agent and each Purchaser hereby agree that any assignee of any Company of this Agreement or of all or any of the Purchaser Interests of any Company shall have all of the rights and benefits under this Agreement as if the term "Company" explicitly referred to and included such party (provided that (i) the Purchaser Interests of any such assignee that is a Company or a commercial paper conduit shall accrue CP Costs based on Page 46 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT such Company's Company Costs or on such commercial paper conduit's cost of funds, respectively, and (ii) the Purchaser Interests of any other such assignee shall accrue Yield pursuant to Section 4.1), and no such assignment shall in any way impair the rights and benefits of any Company hereunder. Neither Seller nor any Servicer shall have the right to assign its rights or obligations under this Agreement. (b) Any Financial Institution may at any time and from time to time assign to one or more Persons ("Purchasing Financial Institutions") all or any part of its rights and obligations under this Agreement pursuant to an assignment agreement, substantially in the form set forth in Exhibit VII hereto (the "Assignment Agreement") executed by such Purchasing Financial Institution and such selling Financial Institution. The consent of the Company in such selling Financial Institution's Purchaser Group and the consent of Seller shall be required prior to the effectiveness of any such assignment; provided, however, that in the event Seller fails to consent to any proposed Purchasing Financial Institution during the thirty (30) day period following Seller's initial receipt of a request for Seller's consent to any such assignment, only the consent of the Company in such selling Financial Institution's Purchaser Group shall thereafter be required with respect to any such assignment. Each assignee of a Financial Institution must (i) have a short-term debt rating of A-1 or better by Standard & Poor's Ratings Group and P-1 by Moody's Investor Service, Inc. and (ii) agree to deliver to the Agent, promptly following any request therefor by the Agent or the Company in such selling Financial Institution's Purchaser Group, an enforceability opinion in form and substance satisfactory to the Agent and such Company. Upon delivery of the executed Assignment Agreement to the Agent, such selling Financial Institution shall be released from its obligations hereunder to the extent of such assignment. Thereafter the Purchasing Financial Institution shall for all purposes be a Financial Institution party to this Agreement and shall have all the rights and obligations of a Financial Institution (including, without limitation, the applicable obligations of a Related Financial Institution) under this Agreement to the same extent as if it were an original party hereto and no further consent or action by Seller, the Purchasers or the Agent shall be required. (c) Each of the Financial Institutions agrees that in the event that it shall cease to have a short-term debt rating of A-1 or better by Standard & Poor's Ratings Group and P-1 by Moody's Investor Service, Inc. (or, solely in the case of CLNY, a short-term debt rating of A-2 or better by Standard & Poor's Ratings Group and P-2 by Moody's Investor Service, Inc.) (an "Affected Financial Institution"), such Affected Financial Institution shall be obliged, at the request of the Company in such Affected Financial Institution's Purchaser Group or the Agent, to assign all of its rights and obligations hereunder to (x) another Financial Institution in such Affected Financial Institution's Purchaser Group or (y) another funding entity nominated by the Agent and acceptable to the Company in such Affected Financial Institution's Purchaser Group, and willing to participate in this Agreement through the Liquidity Termination Date in the place of such Affected Financial Institution; provided that the Affected Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such Financial Institution's Pro Rata Share of the Aggregate Capital and Yield owing to the Financial Institutions Page 47 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT in such Affected Financial Institution's Purchaser Group and all accrued but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Purchaser Interests of the Financial Institutions in such Affected Financial Institution's Purchaser Group. Section 12.2 Participations. Any Financial Institution may, in the ordinary course of its business at any time sell to one or more Persons (each a "Participant") participating interests in its Pro Rata Share of the Purchaser Interests of the Financial Institutions in such Financial Institution's Purchaser Group or any other interest of such Financial Institution hereunder. Notwithstanding any such sale by a Financial Institution of a participating interest to a Participant, such Financial Institution's rights and obligations under this Agreement shall remain unchanged, such Financial Institution shall remain solely responsible for the performance of its obligations hereunder, and Seller, each Company and the Agent shall continue to deal solely and directly with such Financial Institution in connection with such Financial Institution's rights and obligations under this Agreement. Each Financial Institution agrees that any agreement between such Financial Institution and any such Participant in respect of such participating interest shall not restrict such Financial Institution's right to agree to any amendment, supplement, waiver or modification to this Agreement, except for any amendment, supplement, waiver or modification described in Section 14.1(b)(i). ARTICLE XIII INTENTIONALLY OMITTED ARTICLE XIV MISCELLANEOUS Section 14.1 Waivers and Amendments. No failure or delay on the part of the Agent or any Purchaser in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given. (b) No provision of this Agreement may be amended, supplemented, modified or waived except in writing in accordance with the provisions of this Section 14.1(b). Each Company, Seller and the Agent, at the direction of the Required Purchasers, may enter into written modifications or waivers of any provisions of this Agreement, provided, however, that no such modification or waiver shall: (i) without the consent of each affected Purchaser, (A) extend the Liquidity Termination Date or the date of any Page 48 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT payment or deposit of Collections by Seller or any Servicer, (B) reduce the rate or extend the time of payment of Yield or any CP Costs (or any component of Yield or CP Costs), (C) reduce any fee payable to the Agent for the benefit of the Purchasers, (D) except pursuant to Article XII hereof, change the amount of the Capital of any Purchaser, any Financial Institution's Pro Rata Share, any Company's Pro Rata Share, any Financial Institution's Commitment or any Company's Company Purchase Limit (other than, to the extent applicable, pursuant to Section 4.6), (E) amend, modify or waive any provision of the definition of Required Purchasers or this Section 14.1(b), (F) consent to or permit the assignment or transfer by Seller of any of its rights and obligations under this Agreement, (G) change the definition of "Eligible Receivable,""Loss Reserve," Yield and Servicer Reserve," "Default Ratio," "Delinquency Ratio," "Dilution Reserve," or "Dilution Ratio" or (H) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (G) above in a manner that would circumvent the intention of the restrictions set forth in such clauses; or (ii) without the written consent of the then Agent, amend, modify or waive any provision of this Agreement if the effect thereof is to affect the rights or duties of such Agent. Notwithstanding the foregoing, (i) without the consent of the Financial Institutions, but with the consent of Seller, the Agent may amend this Agreement solely to add additional Persons as Financial Institutions hereunder and (ii) the Agent, the Required Purchasers and each Company may enter into amendments to modify any of the terms or provisions of Article XI, Article XII, Section 14.13 or any other provision of this Agreement without the consent of any Seller Party, provided that such amendment has no negative impact upon such Seller Party. Any modification or waiver made in accordance with this Section 14.1 shall apply to each of the Purchasers equally and shall be binding upon each Seller Party, the Purchasers and the Agent. Section 14.2 Notices. Except as provided in this Section 14.2, all communications and notices provided for hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or telecopy numbers set forth on Schedule E hereto or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication shall be effective if given by telecopy, upon the receipt thereof, if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or if given by any other means, when received at the address specified in this Section 14.2. Seller hereby authorizes the Agent and the Purchasers to effect purchases and, selections of CP (Tranche) Accrual Periods, Tranche Periods and Discount Rates based on telephonic notices made by any Person whom the Agent or applicable Page 49 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Purchaser in good faith believes to be acting on behalf of Seller. Seller agrees to deliver promptly to the Agent and each applicable Purchaser a written confirmation of each telephonic notice signed by an authorized officer of Seller; provided, however, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs from the action taken by the Agent or applicable Purchaser, the records of the Agent or applicable Purchaser shall govern absent manifest error. Section 14.3 Ratable Payments. If any Purchaser, whether by setoff or otherwise, has payment made to it with respect to any portion of the Aggregate Unpaids owing to such Purchaser (other than payments received pursuant to Section 10.2 or 10.3) in a greater proportion than that received by any other Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such Purchaser agrees, promptly upon demand, to purchase for cash without recourse or warranty a portion of such Aggregate Unpaids held by the other Purchasers so that after such purchase each Purchaser will hold its ratable proportion of such Aggregate Unpaids; provided that if all or any portion of such excess amount is thereafter recovered from such Purchaser, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 14.4 Protection of Ownership Interests of the Purchasers. Seller agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or reasonably desirable, or that the Agent may request, to perfect, protect or more fully evidence the Purchaser Interests, or to enable the Agent or the Purchasers to exercise and enforce their rights and remedies hereunder. Without limiting the foregoing, Seller will, upon the request of the Agent, execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments and documents, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or evidence such Purchaser Interests. At any time after the occurrence and during the continuation of an Amortization Event, the Agent may, or the Agent may direct Seller or any Servicer to, notify the Obligors of Receivables, at Seller's expense, of the ownership or security interests of the Purchasers under this Agreement and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to the Agent or its designee. Seller or the Servicers (as applicable) shall, at any Purchaser's request, withhold the identity of such Purchaser in any such notification. (b) If any Seller Party fails to perform any of its obligations hereunder, the Agent or any Purchaser may (but shall not be required to) perform, or cause performance of, such obligations, and the Agent's or such Purchaser's costs and expenses incurred in connection therewith shall be payable by Seller as provided in Section 10.3. Each Seller Party irrevocably authorizes the Agent at any time and from time to time in the sole discretion of the Agent, and appoints the Agent as its attorney-in-fact, to act on behalf of such Seller Party (i) to execute on behalf of Seller as debtor and to file financing or continuation statements (and amendments thereto and assignments thereof) necessary or desirable in the Agent's sole discretion to perfect and to maintain the perfection and priority Page 50 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT of the interest of the Purchasers in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as the Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the interests of the Purchasers in the Receivables. This appointment is coupled with an interest and is irrevocable. The authorization set forth in the second sentence of this Section 14.4(b) is intended to meet all requirements for authorization by a debtor under Article 9 of any applicable enactment of the UCC, including, without limitation, Section 9-509 thereof. Section 14.5 Confidentiality. Each Seller Party and each Purchaser shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential or proprietary information with respect to the Agent and each Purchaser and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that such Seller Party and such Purchaser and its officers and employees may disclose such information to such Seller Party's and such Purchaser's external accountants and attorneys and as required by any applicable law or order of any judicial or administrative proceeding. (b) Anything herein to the contrary notwithstanding, each Seller Party hereby consents to the disclosure of any nonpublic information with respect to it (i) to the Agent, the Financial Institutions or the Companies by each other, (ii) by the Agent or the Purchasers to any prospective or actual assignee or participant of any of them and (iii) by the Agent or any Purchaser to any rating agency, Funding Source, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to any Company or any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which Bank One or CLNY acts as the administrative agent and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing. In addition, the Purchasers and the Agent may disclose any such nonpublic information pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law). Section 14.6 Bankruptcy Petition. Seller, the Servicers, the Agent and each Financial Institution hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any Funding Source that is a special purpose bankruptcy remote entity or of any Company, it will not institute against, or join any other Person in instituting against, any such entity or any Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Page 51 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 14.7 Limitation of Liability. Except with respect to any claim arising out of the willful misconduct or gross negligence of any Company, the Agent or any Financial Institution, no claim may be made by any Seller Party or any other Person against any Company, the Agent or any Financial Institution or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and each Seller Party hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 14.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS. Section 14.9 CONSENT TO JURISDICTION. EACH SELLER PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT AND EACH SELLER PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST ANY SELLER PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY AGAINST THE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE AGENT OR ANY PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. Section 14.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER. Page 52 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 14.11 Integration; Binding Effect; Survival of Terms. (a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy). This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by any Seller Party pursu ant to Article V, (ii) the indemnification and payment provisions of Article X, and Sections 14.5 and 14.6 shall be continuing and shall survive any termination of this Agreement. Section 14.12 Counterparts; Severability; Section References. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement that are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and sections of, and schedules and exhibits to, this Agreement. Section 14.13 Bank One Roles. Each of the Purchasers acknowledges that Bank One acts, or may in the future act, (i) as administrative agent for the Bank One Company or any Financial Institution in the Bank One Company's Purchaser Group, (ii) as issuing and paying agent for certain Commercial Paper, (iii) to provide credit or liquidity enhancement for the timely payment for certain Commercial Paper and (iv) to provide other services from time to time for the Bank One Company or any Financial Institution in the Bank One Company's Purchaser Group (collectively, the "Bank One Roles"). Without limiting the generality of this Section 14.13, each Purchaser hereby acknowledges and consents to any and all Bank One Roles and agrees that in connection with any Bank One Role, Bank One may take, or refrain from taking, any action that it, in its discretion, deems appropriate, including, without limitation, in its role as administrative agent for the Bank One Company. Page 53 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Section 14.14 Characterization. It is the intention of the parties hereto that each purchase hereunder shall constitute and be treated as an absolute and irrevocable sale, which purchase shall provide the applicable Purchaser with the full benefits of ownership of the applicable Purchaser Interest. Except as specifically provided in this Agreement, each sale of a Purchaser Interest hereunder is made without recourse to Seller; provided, however, that (i) Seller shall be liable to each Purchaser and the Agent for all representations, warranties, covenants and indemnities made by Seller pursuant to the terms of this Agreement, and (ii) such sale does not constitute and is not intended to result in an assumption by any Purchaser or the Agent or any assignee thereof of any obligation of Seller or any Originator or any other Person arising in connection with the Receivables, the Related Security, or the related Writings or Contracts, or any other obligations of Seller or any Originator. (b) In addition to any ownership interest that the Agent may from time to time acquire pursuant hereto, Seller hereby grants to the Agent for the ratable benefit of the Purchasers a valid and perfected security interest in all of Seller's right, title and interest in, to and under all Receivables now existing or hereafter arising, the Collections, each Lock-Box, each Collection Account, all Related Security, all other rights and payments relating to such Receivables, and all proceeds of any thereof prior to all other liens on and security interests therein to secure the prompt and complete payment of the Aggregate Unpaids. The Agent and the Purchasers shall have, in addition to the rights and remedies that they may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable law, which rights and remedies shall be cumulative. Section 14.15 Withholding. Any Purchaser that is not incorporated under the laws of the United States of America, or a state thereof, agrees to deliver to the Agent (with copies to Seller) two duly completed copies of United States Internal Revenue Service Forms W- 8BEN or W-8ECI, certifying in either case that such Purchaser is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. Section 14.16 Confirmation and Ratification of Terms. (a) Upon the effectiveness of this Agreement, each reference to the Original Agreement in any other Transaction Document, and any document, instrument or agreement executed and/or delivered in connection with the Original Agreement or any other Transaction Document, shall mean and be a reference to this Agreement. (b) The other Transaction Documents and all agreements, instruments and documents executed or delivered in connection with the Original Agreement or any other Transaction Document shall each be deemed to be amended to the extent necessary, if any, to give effect to the provisions of this Agreement, as the same may be amended, modified, supplemented or restated from time to time. Page 54 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (c) The effect of this Agreement is to amend and restate the Original Agreement in its entirety, and to the extent that any rights, benefits or provisions in favor of the Agent or any Purchaser existed in the Original Agreement and continue to exist in this Agreement without any written waiver of any such rights, benefits or provisions prior to the date hereof, then such rights, benefits or provisions are acknowledged to be and to continue to be effective from and after June 30, 2000. This Agreement is not a novation. (d) The parties hereto agree and acknowledge that any and all rights, remedies and payment provisions under the Original Agreement, including, without limitation, any and all rights, remedies and payment provisions with respect to (i) any representation and warranty made or deemed to be made pursuant to the Original Agreement, or (ii) any indemnification provision, shall continue and survive the execution and delivery of this Agreement. (e) The parties hereto agree and acknowledge that any and all amounts owing as or for Capital, Yield, CP Costs, fees, expenses or otherwise under or pursuant to the Original Agreement, immediately prior to the effectiveness of this Agreement shall be owing as or for Capital, Yield, CP Costs, fees, expenses or otherwise, respectively, under or pursuant to this Agreement. Section 14.17 Excess Funds. Each of Seller, each Servicer, each Purchaser and the Agent agrees that any Company shall be liable for any claims that such party may have against such Company only to the extent that such Company has funds in excess of those funds necessary to pay matured and maturing Commercial Paper of such Company and to the extent such excess funds are insufficient to satisfy the obligations of such Company hereunder, such Company shall have no liability with respect to any amount of such obligations remaining unpaid and such unpaid amount shall not constitute a claim against such Company. Any and all claims against any Company shall be subordinate to the claims against such Company of the holders of such Company's Commercial Paper and any Person providing liquidity support to such Company. (SIGNATURE PAGES FOLLOW) Page 55 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof. DAIRY GROUP RECEIVABLES, L.P., as Seller By: Dairy Group Receivables GP, LLC, Its: General Partner By: --------------------------------- Name: Title: S-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT FALCON ASSET SECURITIZATION CORPORATION, as a Company By: -------------------------------------- Name: Title: Authorized Signatory BANK ONE, NA (MAIN OFFICE CHICAGO), as a Financial Institution and as Agent By: -------------------------------------- Name: Title: Authorized Signatory S-2 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT ATLANTIC ASSET SECURITIZATION CORP., as a Company By: Credit Lyonnais New York Branch Its: Attorney-In-Fact By: -------------------------------------- Name: Title: CREDIT LYONNAIS NEW YORK BRANCH, as a Financial Institution By: -------------------------------------- Name: Title: S-3 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT CREDIT AGRICOLE INDOSUEZ, as a Financial Institution By: -------------------------------------- Name: Title: S-4 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT ALTA-DENA CERTIFIED DAIRY, INC., as a Servicer ALTA-DENA HOLDINGS, INC., as a Servicer BELL DAIRY PRODUCTS, INC., as a Servicer BERKELEY FARMS, INC., as a Servicer COUNTRY FRESH, LLC, as a Servicer CREAMLAND DAIRIES, INC., as a Servicer DEAN NORTHEAST, LLC (f/k/a SUIZA GTL, LLC), as a Servicer DEAN FOODS ICE CREAM COMPANY, as a Servicer DEAN FOODS COMPANY OF INDIANA, INC., as a Servicer DEAN MILK COMPANY, INC., as a Servicer DEAN FOODS NORTH CENTRAL, INC., as a Servicer DEAN FOODS COMPANY OF CALIFORNIA, INC., as a Servicer DEAN DAIRY PRODUCTS COMPANY, as a Servicer GANDY'S DAIRIES, INC., as a Servicer LAND-O-SUN DAIRIES, LLC, as a Servicer LIBERTY DAIRY COMPANY, as a Servicer MAYFIELD DAIRY FARMS, INC., as a Servicer MCARTHUR DAIRY, INC., as a Servicer MEADOW BROOK DAIRY COMPANY, as a Servicer MORNINGSTAR FOODS INC., as a Servicer PURITY DAIRIES, INCORPORATED, as a Servicer REITER DAIRY, INC., as a Servicer RYAN FOODS NORTH CENTRAL, INC., as a Servicer RYAN FOODS COMPANY, LLC, as a Servicer T. G. LEE FOODS, INC., as a Servicer TUSCAN/LEHIGH MANAGEMENT, L.L.C., as a Servicer VERIFINE DAIRY PRODUCTS CORPORATION OF SHEBOYGAN, INC., as a Servicer By: -------------------------------------- Name: Cory M. Olson Title: Vice President of each of the above named Servicers S-5 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SOUTHERN FOODS GROUP, L.P., as a Servicer By: SFG Management Limited Liability Company Its: General Partner By: --------------------------------- Name: Cory M. Olson Title: Vice President S-6 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT TUSCAN/LEHIGH DAIRIES, L.P., as a Servicer By: Tuscan/Lehigh Management, L.L.C. Its: General Partner By: --------------------------------- Name: Title: S-7 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Additional Servicers" means each of GTL, Tuscan Dairies and Tuscan Management. "Adverse Claim" means a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person's assets or properties in favor of any other Person. "Affected Financial Institution" has the meaning specified in Section 12.1(c). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or any Subsidiary of such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" has the meaning set forth in the preamble to this Agreement. "Aggregate Capital" means, on any date of determination, the aggregate amount of Capital of all Purchaser Interests outstanding on such date. "Aggregate Reduction" has the meaning specified in Section 1.3. "Aggregate Reserves" means, on any date of determination, the sum of the Loss Reserve, the Dilution Reserve, and the Yield and Servicer Reserve. "Aggregate Unpaids" means, at any time, an amount equal to the sum of all, Aggregate Capital and all other unpaid Obligations (whether due or accrued) at such time. "Agreement" means this Amended and Restated Receivables Purchase Agreement, as it may be amended or modified and in effect from time to time. "Agreement of General Partner" means that certain agreement dated as of June 30, 2000 between the Agent for the benefit of the Purchasers and Dairy Group Receivables GP, LLC (f/k/a Suiza Receivables GP, LLC), as general partner of Seller. Exh. I-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Amortization Date" means the earliest to occur of (i) the day on which any of the conditions precedent set forth in Section 6.2 are not satisfied, (ii) the Business Day immediately prior to the occurrence of an Amortization Event set forth in Section 9.1(d)(ii), (iii) the Business Day specified in a written notice from the Agent following the occurrence of any other Amortization Event, and (iv) the date that is 15 Business Days after the Agent's receipt of written notice from Seller that it wishes to terminate the facility evidenced by this Agreement. "Amortization Event" has the meaning specified in Article IX. "Applicable Percentage" means, as of any date of determination, the Applicable Percentage, under and as defined in the Dean Credit Agreement (as in effect from time to time notwithstanding any language to the contrary contained in the definition of "Dean Credit Agreement"), applicable to Revolving Loans under and as defined in the Dean Credit Agreement (as in effect from time to time notwithstanding any language to the contrary contained in the definition of "Dean Credit Agreement"). "Assignment Agreement" has the meaning set forth in Section 12.1(b). "Authorized Officer" means, with respect to any Person, its president, corporate controller, treasurer or chief financial officer. "Bank One" means Bank One, NA (Main Office Chicago) in its individual capacity and its successors. "Bank One Company" has the meaning set forth in the Preliminary Statements to this Agreement. "Broken Funding Costs" means for any Purchaser Interest that: (i) has its Capital reduced (A) without compliance by Seller with the notice requirements hereunder or (B) in the case of any Purchaser Interest of the CL Company or any Purchaser Interest of the Bank One Company other than any Purchaser Interest funded substantially with Pooled Commercial Paper, on any date other than a Settlement Date hereunder or (ii) does not become subject to an Aggregate Reduction following the delivery of any Reduction Notice or (iii) is assigned or funded pursuant to a Funding Agreement or otherwise transferred or terminated prior to the date on which it was originally scheduled to end; an amount equal to the excess, if any, of (A) the CP Costs or Yield (as applicable) that would have accrued during the remainder of the Tranche Periods or the tranche periods for Commercial Paper determined by the applicable Purchaser to relate to such Purchaser Interest (as applicable) subsequent to the date of such reduction, assignment or termination (or in respect of clause (ii) above, the date such Aggregate Reduction was designated to occur pursuant to the Reduction Notice) of the Capital of such Purchaser Interest if such reduction, assignment or termination had not occurred or such Reduction Notice had not been delivered, over (B) the sum of (x) to the extent all or a portion of such Capital is allocated to another Purchaser Interest, the amount Exh. I-2 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT of CP Costs or Yield actually accrued during the remainder of such period on such Capital for the new Purchaser Interest, and (y) to the extent such Capital is not allocated to another Purchaser Interest, the income, if any, actually received net of any costs of redeployment of funds during the remainder of such period by the holder of such Purchaser Interest from investing the portion of such Capital not so allocated. In the event that the amount referred to in clause (B) exceeds the amount referred to in clause (A), the relevant Purchaser or Purchasers agree to pay to Seller the amount of such excess. All Broken Funding Costs shall be due and payable hereunder upon demand. "Business Day" means any day on which banks are not authorized or required to close in New York, New York or Chicago, Illinois or any other city specified in writing by a Purchaser to the Agent, each other Purchaser and the Seller, and The Depository Trust Company of New York is open for business, and, if the applicable Business Day relates to any computation or payment to be made with respect to the LIBO Rate, any day on which dealings in dollar deposits are carried on in the London interbank market. "Capital" of any Purchaser Interest means, at any time, (A) the Purchase Price of such Purchaser Interest, minus (B) the sum of the aggregate amount of Collections and other payments received by the Agent or the applicable Purchaser that in each case are applied to reduce such Capital in accordance with the terms and conditions of this Agreement; provided that such Capital shall be restored (in accordance with Section 2.5) in the amount of any Collections or other payments so received and applied if at any time the distribution of such Collections or payments are rescinded, returned or refunded for any reason. "Change of Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock or other equity interest of any Seller Party. "Charged-Off Receivable" means a Receivable: (i) as to which the Obligor thereof has taken any action, or suffered any event to occur, of the type described in Section 9.1(d) (as if references to Seller Party therein refer to such Obligor); (ii) as to which the Obligor thereof, if a natural person, is deceased, (iii) that has been written off Seller's books as uncollectible, (iv) that, consistent with the applicable Originator's or Morningstar's Credit and Collection Policy, would be written off Seller's books as uncollectible, (v) that has been identified by Seller as uncollectible or (vi) as to which any payment, or part thereof, remains unpaid for 90 days or more from the original invoice date for such payment. "CL Company" has the meaning set forth in the Preliminary Statements to this Agreement. "CLNY" has the meaning set forth in the Preliminary Statements to this Agreement. "Closing Date" means December 21, 2001. Exh. I-3 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Collateral Agent" means First Union National Bank, in its capacity as administrative agent under the Dean Credit Agreement. "Collection Account" means each concentration account, depositary account, lock- box account or similar account in which any Collections are collected or deposited and that is listed on Exhibit IV. "Collection Account Agreement" means each agreement substantially in the form of Exhibit VI, or such other form as may be acceptable to the Agent, among the applicable Originator, the Seller, Collection Bank and the Agent. "Collection Bank" means, at any time, any of the banks holding one or more Collection Accounts. "Collection Notice" means a notice, in substantially the form of Annex A to Exhibit VI, from the Agent to a Collection Bank or any similar or analogous notice from the Agent to a Collection Bank. "Collections" means, with respect to any Receivable, all cash collections and other cash proceeds in respect of such Receivable, including, without limitation, all yield, Finance Charges or other related amounts accruing in respect thereof and all cash proceeds of Related Security with respect to such Receivable. "Commercial Paper" means promissory notes of any Company issued by such Company in the commercial paper market. "Commitment" means, for each Financial Institution, the commitment of such Financial Institution to purchase Purchaser Interests from Seller to the extent that the Company in such Financial Institution's Purchaser Group declines to purchase such Purchaser Interest, in an amount not to exceed (i) in the aggregate, the amount set forth opposite such Financial Institution's name on Schedule A to this Agreement, as such amount may be modified in accordance with the terms hereof (including, without limitation, any termination of Commitments pursuant to Section 4.6 hereof) and (ii) with respect to any individual purchase hereunder, its Pro Rata Share of the Purchase Price therefor. "Company" has the meaning set forth in the preamble to this Agreement. "Company Costs" means: (i) for any Purchaser Interest purchased by the Bank One Company and funded substantially with Pooled Commercial Paper (as defined below), for any day, the sum of (i) discount or yield accrued on Pooled Commercial Paper on such day, plus (ii) any and all accrued commissions in respect of placement agents and Commercial Paper dealers, and issuing and paying agent fees incurred, in respect of such Pooled Commercial Paper for Exh. I-4 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT such day, plus (iii) other costs associated with funding small or odd-lot amounts with respect to all receivable purchase facilities which are funded by Pooled Commercial Paper for such day, minus (iv) any accrual of income net of expenses received on such day from investment of collections received under all receivable purchase facilities funded substantially with Pooled Commercial Paper, minus (v) any payment received on such day net of expenses in respect of broken funding costs related to the prepayment of any purchaser interest of the Bank One Company pursuant to the terms of any receivable purchase facilities funded substantially with Pooled Commercial Paper. In addition to the foregoing costs, if Seller shall request any Incremental Purchase during any period of time determined by the Bank One Company (or by the Bank One Company's agent on its behalf) in its sole discretion to result in incrementally higher Company Costs with respect to the Bank One Company applicable to such Incremental Purchase by the Bank One Company, the Capital associated with any such Incremental Purchase shall, during such period, be deemed to be funded by the Bank One Company in a special pool (which may include capital associated with other receivable purchase facilities) for purposes of determining such additional Company Costs applicable only to such special pool and charged each day during such period against such Capital. Each Purchaser Interest funded substantially with Pooled Commercial Paper will accrue Company Costs with respect to the Bank One Company each day on a pro rata basis, based upon the percentage share the Capital in respect of such Purchaser Interest represents in relation to all assets held by the Bank One Company and funded substantially with Pooled Commercial Paper. For the purposes of this paragraph (i), "Pooled Commercial Paper" means Commercial Paper notes of the Bank One Company subject to any particular pooling arrangement by the Bank One Company, but excluding Commercial Paper issued by the Bank One Company for a tenor and in an amount specifically requested by any Person in connection with any agreement effected by the Bank One Company. For each Settlement Period, the Bank One Company shall calculate its aggregate Company Costs for such Settlement Period and report such Company Costs to the Agent pursuant to Section 3.3 of this Agreement. (ii) for any Purchaser Interest purchased by the Bank One Company other than any Purchaser Interest funded substantially with Pooled Commercial Paper, an amount equal to the Capital of such Purchaser Interest multiplied by a per annum rate equivalent to the "weighted average cost" (as defined below) related to the issuance of Commercial Paper of the Bank One Company that is allocated, in whole or in part, to fund the Bank One Company's Pro Rata Share of Aggregate Capital (and which may also be allocated in part to the funding of other assets of the Bank One Company); provided, however, that if any component of such rate is a discount rate, in calculating such rate for the Bank One Company's Pro Rata Share of the Aggregate Capital for such date, the rate used to calculate such component of such rate shall be a rate resulting from converting such discount rate to an interest bearing equivalent rate per annum. As used in this definition, the "weighted average cost" shall consist of (x) the actual interest rate paid to purchasers of Commercial Paper issued by the Bank One Company, (y) the costs associated with the issuance of such Commercial Paper (including dealer fees and commissions to placement agents), and (z) interest on other borrowing or funding sources by the Bank One Company, Exh. I-5 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT including to fund small or odd dollar amounts that are not easily accommodated in the commercial paper market; and (iii) for any Purchaser Interest purchased by the CL Company, for any CP (Tranche) Accrual Period, an amount equal to the Capital of such Purchaser Interest multiplied by a rate per annum equal to the sum of (i) the rate or, if more than one rate, the weighted average of the rates, determined by converting to an interest-bearing equivalent rate per annum the discount rate (or rates) at which Commercial Paper of the CL Company having a term equal to such CP (Tranche) Accrual Period and to be issued to fund or to maintain such Purchaser Interest by the CL Company (including, without limitation, the related Capital and accrued and unpaid interest thereon) may be sold by any placement agent or commercial paper dealer selected by CLNY (or other agent of the CL Company) for the CL Company, as agreed between each such placement agent or dealer and CLNY (or such other agent); plus, (ii) the commissions and charges charged by such placement agent or dealer with respect to such Commercial Paper of the CL Company, expressed as a percentage of such face amount, converted to an interest-bearing equivalent rate per annum. "Company Purchase Limit" means, for each Company, the purchase limit of such Company with respect to the purchase of Purchaser Interests from Seller, in an amount not to exceed (i) in the aggregate, the amount set forth opposite such Company's name on Schedule A to this Agreement, as such amount may be modified in accordance with the terms hereof (including Section 4.6(b)) and (ii) with respect to any individual purchase hereunder, its Pro Rata Share of the Purchase Price therefor. "Consent Notice" has the meaning set forth in Section 4.6(a). "Consent Period" has the meaning set forth in Section 4.6(a). "Concentration Limit" means, at any time, (a) for any Obligor other than an Obligor for which a Special Concentration Limit has been designated, 3% of the aggregate Outstanding Balance of all Eligible Receivables, or (b) for Wal-Mart Stores, Inc., 12%, for Albertson's Inc., 7%, and for any other Obligor designated by Agent, such other percentage as Agent may designate (each of the foregoing, a "Special Concentration Limit"); provided, that in the case of an Obligor and any Affiliate of such Obligor, the Concentration Limit shall be calculated as if such Obligor and such Affiliate are one Obligor; and provided, further, that the Required Purchasers may, upon not less than five Business Days' notice to Seller, cancel any Special Concentration Limit. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of Exh. I-6 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or application for a letter of credit. "Contract" means, with respect to any Receivable, any and all written or oral agreements pursuant to which such Receivable arises or that evidences such Receivable. "Country Fresh" means Country Fresh, LLC, a Michigan limited liability company. "CP (Pool) Accrual Period" means, with respect to any Purchaser Interest held by the Bank One Company and funded substantially with Pooled Commercial Paper, each calendar month. "CP (Tranche) Accrual Period" means (i) with respect to any Purchaser Interest held by the Bank One Company other than any Purchaser Interest funded substantially with Pooled Commercial Paper, a period of at least 1 day and not to exceed 90 days as selected by Seller pursuant to Section 3.4 and approved by the Agent; and (ii) with respect to any Purchaser Interest held by the CL Company, a period commencing on, and including, the date selected by CLNY (as agent for the CL Company), or the last day of the immediately preceding CP (Tranche) Accrual Period for such Purchaser Interest (whichever is latest) and ending on, but excluding, the date that falls such number of days (of at least one day and not to exceed 90 days) thereafter as CLNY (as agent for the CL Company) shall select (provided that not more than 10 CP (Tranche) Accrual Periods with respect to Purchaser Interests of the CL Company shall be in effect at any one time); provided, however, that (i) any CP (Tranche) Accrual Period (other than of one day) that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day, (ii) in the case of CP (Tranche) Accrual Periods of one day, (A) the initial CP (Tranche) Accrual Period shall be the day of the related Incremental Purchase; and (B) any subsequently occurring CP (Tranche) Accrual Period that is one day shall, if the immediately preceding CP (Tranche) Accrual Period is more than one day, be the last day of such immediately preceding CP (Tranche) Accrual Period, and if the immediately preceding CP (Tranche) Accrual Period is one day, be the day next following such immediately preceding CP (Tranche) Accrual Period; and (iii) in the case of any CP (Tranche) Accrual Period that commences before the Amortization Date and would otherwise end on a date occurring after the Amortization Date, such CP (Tranche) Accrual Period shall end on the Amortization Date. The duration of each CP (Tranche) Accrual Period that commences after the Amortization Date shall be of such duration as selected by the applicable Company. "CP Costs" means, for each day, the aggregate discount or yield accrued with respect to the Purchaser Interests of each respective Company as determined in accordance with the definition of "Company Costs." "Credit Ag" has the meaning set forth in the Preliminary Statements to this Agreement. Exh. I-7 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Credit and Collection Policy" means each Originator's and Morningstar's credit and collection policies and practices relating to Writings, Contracts and Receivables existing on the date hereof and summarized in Exhibit VIII hereto, as modified from time to time in accordance with this Agreement. "Dean Acquisition" means any transaction, or any series of related transactions, by which Suiza Foods Corporation or any of its Subsidiaries (i) acquires the going business of Dean Foods, Inc. or all or substantially all of the assets of Dean Foods, Inc., whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or in a series of transactions) at least a majority (in number of votes) of the securities of Dean Foods, Inc. which have ordinary voting power for the election of directors or a majority (by percentage of voting power) of the equity interests of Dean Foods, Inc. "Dean Credit Agreement" means that certain Credit Agreement, dated as of July 31, 2001, by and among Provider, certain Subsidiaries of Provider, the financial institutions party thereto as lenders, Bank One, NA, as syndication agent, Harris Trust and Savings Bank and Suntrust Bank, as co-documentation agents and First Union National Bank, as administrative agent, as amended by the First Amendment to Credit Agreement, dated as of December 19, 2001, and as in effect on the date hereof, without giving effect to any further amendment or other modification thereof. "Dean Entity" means each of the entities listed on Schedule C to this Agreement. "Dean Financial Covenants" means the financial covenants set forth in Section 5.9 of the Dean Credit Agreement. "Deemed Collections" means the aggregate of all amounts Seller shall have been deemed to have received as a Collection of a Receivable. Seller shall be deemed to have received a Collection of a Receivable at any time (i) to the extent that the Outstanding Balance of any such Receivable is either (x) reduced as a result of any defective or rejected goods or services, any discount, rebate or any adjustment or otherwise by Seller (other than cash Collections on account of the Receivables and other than Receivables that, consistent with the applicable Originator's or Morningstar's Credit and Collection Policy, have been written off Seller's books as uncollectible other than as a result of any of the other conditions or events set forth in this definition) or (y) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction) or (ii) any of the representations or warranties in Article V are no longer true with respect to such Receivable or (iii) the failure of any Contract with respect to such Receivable to create a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon or (iv) the failure of any Writing to give rise to a valid and enforceable Receivable in the amount of the Outstanding Balance thereof. Exh. I-8 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Default Fee" means with respect to any amount due and payable by Seller in respect of any Aggregate Unpaids, an amount equal to interest on any such unpaid Aggregate Unpaids at a rate per annum equal to 2% above the Prime Rate. "Default Ratio" means, as at the end of any calendar month, a percentage equal to (a) the sum of (i) the Outstanding Balance of all Receivables as to which any payment, or part thereof, remains unpaid for 90 days or more from the original invoice date for such payment plus (ii) the Outstanding Balance of all Receivables that were written off Seller's books as uncollectible during such calendar month, divided by (b) the aggregate Outstanding Balance of all Receivables. "Defaulted Receivable" means a Receivable as to which any payment, or part thereof, remains unpaid for 90 days or more from the original invoice date for such payment. "Delinquency Ratio" means, for a calendar month, a percentage equal to (a) the Outstanding Balance of all Delinquent Receivables as at the end of such calendar month divided by (b) the Outstanding Balance of all Receivables. "Delinquent Receivable" means a Receivable as to which any payment, or part thereof, remains unpaid for at least 60 days but not more than 90 days from the original invoice date for such payment. "Demand Note" means, that certain promissory note, dated as of December 21, 2001, by Dean Foods Company (as successor-in-interest to Suiza Foods Corporation) in favor of Seller, in the maximum principal sum of $21,325,653, as amended, renewed, supplemented or otherwise modified from time to time. "Dilution Ratio" means, as at the end of any calendar month, a percentage equal to (i) the aggregate amount of all Dilutions arising during such calendar month (other than Rebate/Billbacks) with respect to all Receivables divided by (ii) the aggregate amount of sales by all Originators for the calendar month ending two months prior to such calendar month. "Dilution Reserve" means an amount equal to the result of multiplying the Net Receivables Balance by the greater of (a) 0.07 and (b) the following: (2 X ED + ((DS-ED) X (DS/ED))) X DHR where: ED = the average of the Dilution Ratios for the twelve most recently-ended calendar months. Exh. I-9 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT DS = the highest of the average Dilution Ratios for any two-calendar-month period occurring during the twelve most recently-ended calendar months. DHR = the result of dividing the aggregate amount of all sales by all Originators during the prior one and a half calendar months by the aggregate Outstanding Balance of all Eligible Receivables. "Dilutions" means, for each calendar month, the aggregate amount of reductions or cancellations described in clause (i) of the definition of "Deemed Collections" during such month (other than Rebate/Billbacks). "Discount Rate" means, the LIBO Rate or the Prime Rate, as applicable, with respect to each Purchaser Interest of the Financial Institutions. "Eligible Receivable" means, at any time, a Receivable: (i) the Obligor of which (a) if a natural person, is a resident of the United States or, if a corporation or other business organization, is organized under the laws of the United States or any political subdivision thereof and has its chief executive office in the United States; (b) is not an Affiliate of any of the parties hereto; and (c) is not a federal or state government or a federal or state governmental subdivision or agency, (ii) the Obligor of which is not a Top Twenty- Five Obligor or, in the case of any Receivable the Obligor of which is a Top Twenty-Five Obligor, is not the Obligor of Defaulted Receivables the aggregate Outstanding Balance of which constitutes more than 25% of the Outstanding Balance of all Receivables of such Obligor, (iii) that is not a Charged-Off Receivable or a Delinquent Receivable, (iv) that (a) by its terms is due and payable within 30 days of the original billing date therefor and has not had its payment terms extended or (b) that by its terms is due and payable within 90 days of the original billing date therefor and has not had its payment terms extended, the Outstanding Balance of which, when combined with all other Eligible Receivables that are due and payable within 90 days of the original billing date therefor, does not exceed an amount equal to 5% of the Outstanding Balance of all Receivables; provided, however, that in the case of the foregoing clauses (a) and (b), no such Receivable shall be considered an Eligible Receivable to the extent of the Outstanding Balance relating to any goods giving rise to such Receivable that are provided on a "bill and hold" basis (i.e., are billed Exh. I-10 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT but held or stored at a warehouse prior to shipment to the Obligor of such Receivable) for so long as such goods are so held are stored; (v) that is an "account" or "chattel paper" within the meaning of the UCC of all applicable jurisdictions, (vi) that is denominated and payable only in United States dollars in the United States, (vii) that arises either (A) under a Contract that, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms or (B) under a Writing to the extent that such Receivable is the legal, valid and binding obligation of the related Obligor, (viii) that arises under a Writing or Contract that (A) does not require the Obligor under such Writing or Contract to consent to the transfer, sale or assignment of the rights and duties of the applicable Originator or Morningstar or any of its assignees under such Writing or Contract and (B) does not contain a confidentiality provision that purports to restrict the ability of any Purchaser to exercise its rights under this Agreement, including, without limitation, its right to review the Writing or Contract, (ix) that arises under a Contract that contains an obligation to pay a specified sum of money, contingent only upon the sale of goods or the provision of services by the applicable Originator or Morningstar or pursuant to a Writing that evidences the amount to be paid, (x) that, together with the Writing or Contract related thereto, does not contravene any law, rule or regulation applicable thereto (including, without limitation, any law, rule and regulation relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no part of the Writing or Contract related thereto is in violation of any such law, rule or regulation, (xi) that satisfies all applicable requirements of the applicable Credit and Collection Policy, (xii) that was generated in the ordinary course of the applicable Originator's or Morningstar's business, (xiii) that arises solely from the sale of goods or the provision of services to the related Obligor by the applicable Originator or Morningstar, and not by any other Person (in whole or in part), Exh. I-11 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (xiv) as to which the Agent has not notified Seller that the Agent has determined that such Receivable or class of Receivables is not acceptable as an Eligible Receivable, including, without limitation, because such Receivable arises under a Writing or Contract that is not acceptable to the Agent, (xv) that is not subject to any right of rescission, set-off, counterclaim, any other defense (including defenses arising out of violations of usury laws) of the applicable Obligor against the applicable Originator or Morningstar or any other Adverse Claim, and the Obligor thereon holds no right as against such Originator or Morningstar to cause such Originator or Morningstar to repurchase the goods or merchandise the sale of which shall have given rise to such Receivable (except with respect to sale discounts effected pursuant to the Writing or Contract, or defective goods returned in accordance with the terms of the Writing or Contract); provided, however, that only that portion of such Receivable that is subject to any such right of rescission, set-off, counterclaim, other defense or Adverse Claim shall be considered to be ineligible pursuant to this clause (xv), (xvi) that is not the subject of a Rebate/Billback; provided, however, that only that portion of such Receivable that is subject to such Rebate/Billback shall be considered to be ineligible pursuant to this clause (xvi), (xvii) as to which the applicable Originators or Morningstar has satisfied and fully performed all obligations on its part with respect to such Receivable required to be fulfilled by it, and no further action is required to be performed by any Person with respect thereto other than payment thereon by the applicable Obligor, (xviii) all right, title and interest to and in which has been validly transferred by the applicable Originators or Morningstar directly to Seller under and in accordance with the Receivables Sale Agreement, and Seller has good and marketable title thereto free and clear of any Adverse Claim, (xix) that represents all or part of the sales price of merchandise, insurance and services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended and (xix) the Obligor of which is a local municipality that, when the Outstanding Balance of which is aggregated with the Outstanding Balances of all other Eligible Receivables the Obligors of which are local municipalities, does not exceed 10% of the aggregate Outstanding Balance of all Eligible Receivables. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Exh. I-12 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Extension Notice" has the meaning set forth in Section 4.6(a). "Facility Account" means Seller's Account No. 2000013850892 at First Union National Bank, ABA No. 053000219. "Facility Termination Date" means the earliest of (i) the Liquidity Termination Date and (ii) the Amortization Date. "Federal Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy," as amended and any successor statute thereto. "Federal Funds Effective Rate" means, for any period, a fluctuating interest rate per annum for each day during such period equal to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the preceding Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities; or (b) if such rate is not so published for any day that is a Business Day, the average of the quotations at approximately 10:30 a.m. (Chicago time) for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. "Fee Letter" means each of (i) that certain letter agreement dated as of the date hereof among Seller, the Bank One Company and Bank One, as it may be amended or modified and in effect from time to time and (ii) that certain letter agreement dated as of the date hereof among Seller, the CL Company and CLNY, as it may be amended or modified and in effect from time to time. "Finance Charges" means, with respect to a Writing or Contract, any finance, interest, late payment charges or similar charges owing by an Obligor pursuant to such Writing or Contract. "Financial Institutions" has the meaning set forth in the preamble in this Agreement. "Funding Agreement" means this Agreement and any agreement or instrument executed by any Funding Source with or for the benefit of a Company. "Funding Source" means with respect to any Company (i) such Company's Related Financial Institution(s) or (ii) any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to such Company. "GAAP" means generally accepted accounting principles in effect in the United States of America as of the date of this Agreement. Exh. I-13 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "GTL" means Dean Northeast, LLC (f/ka/ Suiza GTL, LLC), a Delaware limited liability company. "Immaterial Originator" means any Originator as to which the aggregate Outstanding Balance of all Receivables sold by such Originator to Seller under the Receivables Sale Agreement as of any date of determination is less than 10% of the aggregate Outstanding Balance of all Receivables sold by all Originators to Seller under the Receivables Sale Agreement as of such date. "Incremental Purchase" means a purchase of one or more Purchaser Interests that increases the total outstanding Aggregate Capital hereunder. "Initial Servicer" means each of Morningstar, Country Fresh, Land-O-Sun and Southern Foods. "Indebtedness" of a Person means such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations that are evidenced by notes, acceptances, or other instruments, (v) capitalized lease obligations, (vi) net liabilities under interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and (viii) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA. "Independent Manager" shall mean a manager of the limited liability company that is the general partner of Seller who is not at such time, and has not been at any time during the preceding five (5) years, (A) a director, officer, employee or affiliate of Seller, any Originator or Morningstar, or any of their respective Subsidiaries or Affiliates, or (B) the beneficial owner (at the time of such Person's appointment as an Independent Manager or at any time thereafter while serving as an Independent Manager) of any of any partnership interest of Seller, any Originator or Morningstar, or any of their respective Subsidiaries or Affiliates, having general voting rights. "Land-O-Sun" means Land-O-Sun Dairies, LLC, a Delaware limited liability company. "LIBO Rate" means the rate per annum equal to the sum of (i) (a) the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of the relevant Tranche Period, and having a maturity equal to such Tranche Period, provided that, (i) if Reuters Screen FRBD is not available to the Agent for any reason, the applicable LIBO Rate for the relevant Tranche Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars Exh. I-14 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Tranche Period, and having a maturity equal to such Tranche Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Agent, the applicable LIBO Rate for the relevant Tranche Period shall instead be the rate determined by the Agent to be the rate at which Bank One offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Tranche Period, in the approximate amount to be funded at the LIBO Rate and having a maturity equal to such Tranche Period, divided by (b) one minus the maximum aggregate reserve requirement (including all basic, supplemental, marginal or other reserves) that is imposed against the Agent in respect of Eurocurrency liabilities, as defined in Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time (expressed as a decimal), applicable to such Tranche Period plus (ii) the Applicable Percentage. The LIBO Rate shall be rounded, if necessary, to the next higher 1/16 of 1%. "Liquidity Termination Date" means December 20, 2002. "Local Originator" means each of Liberty Dairy Company, Mayfield Dairy Farms, Inc., McArthur Dairy, Inc., Purity Dairies, Incorporated, Reiter Dairy, Inc., T.G. Lee Foods, Inc., and Verifine Dairy Products Corporation of Sheboygan, Inc. "Lock-Box" means each locked postal box with respect to which a bank who has executed a Collection Account Agreement has been granted exclusive access for the purpose of retrieving and processing payments made on the Receivables and that is listed on Exhibit IV. "Lock-Box Date" is defined in Section 7.1(m). "Loss Reserve" means the product of (a) the Net Receivables Balance and (b) 0.09, provided, that, if prior to September 20, 2002, the average Delinquency Ratios, as at the end of any calendar month, for the three most recently ended calendar months shall exceed 3.5%, then the Loss Reserve from and after the relevant date of determination, shall be determined by multiplying the Net Receivables Balance by the Loss Reserve Percentage. "Loss Reserve Percentage" means, for any Purchaser Interest on any date, an amount equal to the greater of: (i) 2 times the Loss Ratio multiplied by the Loss Horizon Ratio and (ii) 0.09, where: Loss Ratio = As at the last day of any calendar month, the highest three month rolling average Aged Receivable Ratio in the most recent twelve months prior to such month. Exh. I-15 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Aged Receivable Ratio = As at the last day of any calendar month, (x) the sum of the Outstanding Balance of all Delinquent Receivables as of such day, plus the Outstanding Balance of all Charged-Off Receivables (without giving effect to clause (vi) of the definition of "Charged-Off Receivable") as of such day, divided by (y) the aggregate sales for the calendar month occurring two months immediately prior to such month. Loss Horizon Ratio = As at the last day of any calendar month, (x) the aggregate amount of sales of all of the Originators for the two calendar months ending immediately prior to such month, divided by (y) the aggregate Outstanding Balance of all Eligible Receivables as of such day. "Material Adverse Effect" means a material adverse effect on (i) the financial condition or operations of any Seller Party and its Subsidiaries taken as a whole, (ii) the ability of any Seller Party to perform its obligations under this Agreement or Provider to perform its obligations under the Performance Undertaking, (iii) the legality, validity or enforceability of this Agreement or any other Transaction Document, (iv) any Purchaser's interest in the Receivables generally or in any significant portion of the Receivables, the Related Security or the Collections with respect thereto, or (v) the collectibility of the Receivables generally or of any material portion of the Receivables. "Monthly Report" means a report, in substantially the form of Exhibit X hereto (appropriately completed), furnished by the Servicers to the Agent pursuant to Section 8.5. "Morningstar" means Morningstar Foods Inc., a Delaware corporation. "MRC" means Morningstar Receivables Corp., a Delaware corporation. "Net Receivables Balance" means, at any time, the aggregate Outstanding Balance of all Eligible Receivables at such time reduced by the aggregate amount by which the Outstanding Balance of all Eligible Receivables of each Obligor and its Affiliates exceeds the Concentration Limit for such Obligor. "Non-Renewing Financial Institution" has the meaning set forth in Section 4.6(a). "Obligations" shall have the meaning set forth in Section 2.1. Exh. I-16 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Obligor" means a Person obligated to make payments pursuant to a Writing or Contract. "Original Agreement" has the meaning set forth in the Preliminary Statements to this Agreement. "Original Sale Agreement" has the meaning set forth in the Receivables Sale Agreement. "Original Transfer Agreement" has the meaning set forth in the Receivables Sale Agreement. "Originator" means each of the entities listed on Schedule D hereto, in their respective capacities as sellers under the Receivables Sale Agreement. "Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof. "Participant" has the meaning set forth in Section 12.2. "Performance Undertaking" means that certain Performance Undertaking, dated as of December 21, 2001, by Provider in favor of Seller, substantially in the form of Exhibit XI, as the same may be amended, restated or otherwise modified from time to time. "Periodic Report" means each Monthly Report and Weekly Report. "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Pooled Commercial Paper" has the meaning set forth in paragraph (i) of the definition of "Company Costs." "Potential Amortization Event" means an event that, with the passage of time or the giving of notice, or both, would constitute an Amortization Event. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Proposed Reduction Date" has the meaning set forth in Section 1.3. "Pro Rata Share" means, (a) for each Financial Institution, a percentage equal to (i) the Commitment of such Financial Institution, divided by (ii) the aggregate amount of all Exh. I-17 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Commitments of all Financial Institutions in such Financial Institution's Purchaser Group, adjusted as necessary to give effect to the application of the terms of Section 4.6 and (b) for each Company, a percentage equal to (i) the Company Purchase Limit of such Company, divided by (ii) the aggregate amount of all Company Purchase Limits of all Companies hereunder. "Provider" means Dean Foods Company, a Delaware corporation, together with its successors and assigns. "Purchase Limit" means $400,000,000, as such amount may be modified in accordance with the terms of Section 4.6(b). "Purchase Notice" has the meaning set forth in Section 1.2. "Purchase Price" means, with respect to any Incremental Purchase of a Purchaser Interest, the amount paid to Seller for such Purchaser Interest that shall not exceed the least of (i) the amount requested by Seller in the applicable Purchase Notice, the unused portion of the Purchase Limit on the applicable purchase date and the excess, if any, of the Net Receivables Balance (less the Aggregate Reserves) on the applicable purchase date over the aggregate outstanding amount of Aggregate Capital determined as of the date of the most recent Monthly Report, taking into account such proposed Incremental Purchase. "Purchaser Group" means with respect to (i) each Company, a group consisting of such Company and its Related Financial Institutions and (ii) each Financial Institution, a group consisting of such Financial Institution, the Company for which such Financial Institution is a Related Financial Institution and each other Financial Institution that is a Related Financial Institution for such Company. "Purchasers" means each Company and each Financial Institution. "Purchaser Interest" means, at any time, an undivided percentage ownership interest (computed as set forth below) associated with a designated amount of Capital, selected pursuant to the terms and conditions hereof in (i) each Receivable arising prior to the time of the most recent computation or recomputation of such undivided interest, (ii) all Related Security with respect to each such Receivable, and (iii) all Collections with respect to, and other proceeds of, each such Receivable. Each such undivided percentage interest shall equal: C -------- NRB - AR where: C = the Capital of such Purchaser Interest. AR = the Aggregate Reserves. NRB = the Net Receivables Balance. Exh. I-18 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Such undivided percentage ownership interest shall be initially computed on its date of purchase. Thereafter, until the Amortization Date, each Purchaser Interest shall be automatically recomputed (or deemed to be recomputed) on each day prior to the Amortization Date. The variable percentage represented by any Purchaser Interest as computed (or deemed recomputed) as of the close of the business day immediately preceding the Amortization Date shall remain constant at all times thereafter. "Purchasing Financial Institution" has the meaning set forth in Section 12.1(b). "Rebate/Billback" means, with respect to any Receivable, any incentives provided to the Obligor thereof related to volume rebates or price incentives, the dollar amount of which is known at the time of invoice of such Receivable. "Receivable" means all indebtedness and other obligations owed to the applicable Originator or Morningstar (at the time it arises, and before giving effect to any transfer or conveyance under the Transfer Agreement, the Receivables Sale Agreement or hereunder) or owed to Seller (after giving effect to any transfer or conveyance under the Transfer Agreement, the Receivables Sale Agreement or hereunder) or in which Seller or such Originator or Morningstar has a security interest or other interest, including, without limitation, any indebtedness, obligation or interest constituting an account, chattel paper, instrument or general intangible, arising in connection with the sale of goods or the rendering of services by such Originator or Morningstar, as applicable, and further includes, without limitation, the obligation to pay any Finance Charges with respect thereto. Indebtedness and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations represented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising from any other transaction; provided that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless of whether the account debtor or Seller treats such indebtedness, rights or obligations as a separate payment obligation. Receivables Sale Agreement" means that certain Amended and Restated Receivables Sale Agreement, dated as of December 21, 2001, among the Originators and Seller, as the same may be amended, restated or otherwise modified from time to time. "Records" means, with respect to any Receivable, all Writings or Contracts and other documents, books, records and other information (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property Exh. I-19 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT and rights) relating to such Receivable, any Related Security therefor and the related Obligor. "Reduction Notice" has the meaning set forth in Section 1.3. "Regulatory Change" has the meaning set forth in Section 10.2(a). "Reinvestment" has the meaning set forth in Section 2.2. "Related Financial Institution" means with respect to each Company, each Financial Institution set forth opposite such Company's name in Schedule A to this Agreement and/or, in the case of an assignment pursuant to Section 12.1, set forth in the applicable Assignment Agreement. "Related Security" means, with respect to any Receivable: (i) all security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Writing or Contract related to such Receivable or otherwise, together with all financing statements and security agreements describing any collateral securing such Receivable, (ii) all guaranties, letters of credit, insurance, "supporting obligations" (within the meaning of Section 9-102(a) of the UCC of all applicable jurisdictions) and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Writing or Contract related to such Receivable or otherwise, (iii) all service contracts and other contracts and agreements associated with such Receivable, (iv) all Records related to such Receivable, (v) all of Seller's right, title and interest in, to and under the Receivables Sale Agreement and the Transfer Agreement in respect of such Receivable and all of Seller's right, title and interest in, to and under the Performance Undertaking, (vi) all of Seller's right, title and interest in, to and under the Demand Note, and (vii) all proceeds of any of the foregoing. Exh. I-20 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Required Notice Period" means the number of days required notice set forth below applicable to the Aggregate Reduction indicated below:
Aggregate Reduction Required Notice Period ------------------- ---------------------- < or = to $100,000,000 two Business Days >$100,000,000 to $250,000,000 five Business Days >or = to $250,000,000 ten Business Days
"Required Purchasers" means, at any time, collectively, the Financial Institutions with Commitments in excess of 66-2/3% of the aggregate Commitments and the Companies with Company Purchase Limits in excess of 66-2/3% of the aggregate amount of all Company Purchase Limits of all Companies hereunder. "Restricted Junior Payment" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of capital stock or other equity interest of Seller now or hereafter outstanding, except a dividend or distribution payable solely in shares of that class of stock or equity interest or in any junior class of stock or other junior equity interest of Seller, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of capital stock or other equity interest of Seller now or hereafter outstanding, (iii) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to the Subordinated Loans (as defined in the Receivables Sale Agreement), (iv) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of capital stock or other equity interest of Seller now or hereafter outstanding, and (v) any payment of management fees by Seller (except for reasonable management fees to the Originators or their respective Affiliates in reimbursement of actual management services performed). "Seller" has the meaning set forth in the preamble to this Agreement. "Seller Parties" has the meaning set forth in the preamble to this Agreement. "Servicer" means at any time any Person or Persons (which may be the Agent) then authorized pursuant to Article VIII to service, administer and collect Receivables. "Servicing Fee" has the meaning set forth in Section 8.6. "Settlement Date" means (A) the 5th Business Day of each month, (B) the last day of the relevant CP (Tranche) Accrual Period in respect of each Purchaser Interest held by the Bank One Company other than any Purchaser Interest funded substantially with Pooled Commercial Paper and in respect of each Purchaser Interest held by the CL Company and Exh. I-21 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (C) the last day of the relevant Tranche Period in respect of each Purchaser Interest of the Financial Institutions. "Settlement Period" means (A) in respect of each Purchaser Interest of the Bank One Company funded substantially with Pooled Commercial Paper, the immediately preceding CP (Pool) Accrual Period, (B) in respect of each other Purchaser Interest of the Bank One Company and each Purchaser Interest of the CL Company, the entire CP (Tranche) Accrual Period of such Purchaser Interest and (C) in respect of each Purchaser Interest of the Financial Institutions, the entire Tranche Period of such Purchaser Interest. "Southern Foods" means Southern Foods Group, L.P., a Delaware limited partnership. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, limited liability company, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of Seller. "Terminating Commitment Amount" means, with respect to any Terminating Financial Institution, an amount equal to the Commitment (without giving effect to clause (iii) of the proviso to the penultimate sentence of Section 4.6(a)) of such Terminating Financial Institution, minus, an amount equal to 2% of such Commitment. "Terminating Commitment Availability" means, with respect to any Terminating Financial Institution, the positive difference (if any) between (a) an amount equal to the Commitment (without giving effect to clause (iii) of the proviso to the penultimate sentence of Section 4.6(a)) of such Terminating Financial Institution, minus, an amount equal to 2% of such Commitment minus (b) the Capital of the Purchaser Interests funded by such Terminating Financial Institution. "Termination Date" means, with respect to a Terminating Financial Institution, the date on which such Terminating Financial Institution became a Non-Renewing Financial Institution or, in the case of Section 9.2, the date such Financial Institution terminates its Commitment in accordance therewith. "Termination Percentage" has the meaning set forth in Section 2.2. "Terminating CP Tranche" has the meaning set forth in Section 3.4(b). "Terminating Financial Institution" has the meaning set forth in Section 4.6(a). Exh. I-22 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Terminating Tranche" has the meaning set forth in Section 4.3(b). "Top Twenty-Five Obligors" means, of all Obligors of Receivables, the twenty-five Obligors having the highest aggregate outstanding balances of all Receivables as of the immediately preceding December 19th, provided that until the first occurrence of such date after the date hereof, the Top Twenty-Five Obligors shall be those Obligors listed on Schedule F. "Transfer Agreement" has the meaning set forth in the Receivables Sale Agreement. "Tranche Period" means, with respect to any Purchaser Interest held by a Financial Institution: (a) if Yield for such Purchaser Interest is calculated on the basis of the LIBO Rate, a period of one, two, three or six months, or such other period as may be mutually agreeable to the applicable Financial Institution and Seller, commencing on a Business Day selected by Seller or the applicable Financial Institution pursuant to this Agreement. Such Tranche Period shall end on the day in the applicable succeeding calendar month that corresponds numerically to the beginning day of such Tranche Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such Tranche Period shall end on the last Business Day of such succeeding month; or (b) if Yield for such Purchaser Interest is calculated on the basis of the Prime Rate, a period commencing on a Business Day selected by Seller and agreed to by the applicable Financial Institution, provided no such period shall exceed one month. If any Tranche Period would end on a day that is not a Business Day, such Tranche Period shall end on the next succeeding Business Day, provided, however, that in the case of Tranche Periods corresponding to the LIBO Rate, if such next succeeding Business Day falls in a new month, such Tranche Period shall end on the immediately preceding Business Day. In the case of any Tranche Period for any Purchaser Interest that commences before the Amortization Date and would otherwise end on a date occurring after the Amortization Date, such Tranche Period shall end on the Amortization Date. The duration of each Tranche Period that commences after the Amortization Date shall be of such duration as selected by the applicable Financial Institution. "Transaction Documents" means, collectively, this Agreement, each Purchase Notice, the Receivables Sale Agreement, the Transfer Agreement, each Collection Account Agreement, the Performance Undertaking, the Fee Letters, the Agreement of General Partner, the Demand Notes, the Subordinated Note (as defined in the Receivables Sale Agreement) and all other instruments, documents and agreements executed and delivered in connection herewith. Exh. I-23 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT "Tuscan Dairies" means Tuscan/Lehigh Dairies, L.P., a Delaware limited partnership. "Tuscan Management" means Tuscan/Lehigh Management, L.L.C., a Delaware limited liability company. "UCC" means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction. "Weekly Report" has the meaning set forth in Section 8.5. "Writing" means, with respect to any Receivable, any and all instruments, invoices, purchase orders or other writings (which may be electronic) (other than Contracts) pursuant to which such Receivable arises or that evidences such Receivable. "Yield" means for each respective Tranche Period relating to Purchaser Interests of the Financial Institutions, an amount equal to the product of the applicable Discount Rate for each Purchaser Interest multiplied by the Capital of such Purchaser Interest for each day elapsed during such Tranche Period, annualized on a 360 day basis. "Yield and Servicer Reserve" means, on any date, an amount equal to 2.5% of the Net Receivables Balance as of the close of business of the Servicers on such date. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of Illinois, and not specifically defined herein, are used herein as defined in such Article 9. Exh. I-24 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT II FORM OF PURCHASE NOTICE [Date] Bank One, NA (Main Office Chicago), Falcon Asset Securitization Corporation as Agent c/o Bank One, NA (Main Office Chicago), 1 Bank One Plaza, 21st Floor as Agent Asset-Backed Finance 1 Bank One Plaza Chicago, Illinois 60670-0596 Suite IL1-0079, 1-19 Chicago, Illinois 60670-00079 Attention: [Ann Somers] Attention: Asset Backed Finance Credit Lyonnais New York Branch 1301 Avenue of the Americas Atlantic Asset Securitization Corp. 12th Floor c/o Credit Lyonnais New York Branch New York, New York 10019 1301 Avenue of the Americas 12th Floor Attention: [___________] New York, New York 10019 Attention: Credit Agricole Indosuez 55 E. Monroe Suite 4700 Chicago, Illinois 60603 Attention: [___________] Re: PURCHASE NOTICE Ladies and Gentlemen: Reference is hereby made to the Amended and Restated Receivables Purchase Agreement, dated as of December 21, 2001, by and among , Dairy Group Receivables, L.P., as Seller, the Servicers party thereto, the Financial Institutions party thereto, the Companies party thereto, and Bank One, NA (Main Office Chicago), as Agent (the "Receivables Purchase Agreement"). Capitalized terms used herein shall have the meanings assigned to such terms in the Receivables Purchase Agreement. Exh. II-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT The Agent and the Purchasers are hereby notified of the following Incremental Purchase: Purchase Price: $ ---------------------------------- Date of Purchase: ----------------------------------- Requested Discount Rate: [LIBO Rate] [Prime Rate] [Commercial Paper rate]
Please credit the Purchase Price in immediately available funds to our Facility Account on the above-specified date of purchase as set forth below: [Account Name] [Account No.] [Bank Name & Address] [ABA #] Reference: Telephone advice to: [Name] @ tel. No. ( ) Please advise [Name] at telephone no ( ) _________________ if any Company will not be making this purchase. In connection with the Incremental Purchase to be made on the above listed "Date of Purchase" (the "Purchase Date"), the Seller hereby certifies that the following statements are true on the date hereof, and will be true on the Purchase Date (before and after giving effect to the proposed Incremental Purchase): (i) the representations and warranties of the Seller set forth in Section 5.1 of the Receivables Purchase Agreement are true and correct on and as of the Purchase Date as though made on and as of such date; (ii) no event has occurred and is continuing, or would result from the proposed Incremental Purchase, that will constitute an Amortization Event or a Potential Amortization Event; (iii) the Facility Termination Date has not occurred, the Aggregate Capital does not exceed the Purchase Limit and the aggregate Purchaser Interests do not exceed 100%; and Exh. II-2 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (iv) the amount of Aggregate Capital is $_________ after giving effect to the Incremental Purchase to be made on the Purchase Date. Very truly yours, DAIRY GROUP RECEIVABLES, L.P. By: -------------------------------------- Name: Title: Exh. II-3 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT III JURISDICTION OF ORGANIZATION; PRINCIPAL PLACES OF BUSINESS; CHIEF EXECUTIVE OFFICES; LOCATIONS OF RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBER(S); STATE ORGANIZATIONAL NUMBER; OTHER NAMES See Attached. Exh. III-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT IV NAME OF COLLECTION BANKS; COLLECTION ACCOUNTS See Attached. Exh. IV-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT V FORM OF COMPLIANCE CERTIFICATE To: Bank One, NA (Main Office Chicago), as Agent This Compliance Certificate is furnished pursuant to that certain Amended and Restated Receivables Purchase Agreement dated as of December 21, 2001, among Dairy Group Receivables, L.P., as Seller, the Servicers party thereto, the Financial Institutions party thereto, the Companies party thereto, and Bank One, NA (Main Office Chicago), as Agent (the "Agreement"). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Agreement. THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected _____________________ of [Insert name of applicable Seller Party or Originator] (the "Applicable Party"). 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Applicable Party and its Subsidiaries during the accounting period covered by the attached financial statements. 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event that constitutes an Amortization Event or Potential Amortization Event during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth in paragraph 5 below. 4. Schedule I attached hereto sets forth financial data and computations evidencing the compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct. 5. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action that the Applicable Party has taken, is taking, or proposes to take with respect to each such condition or event: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Exh. V-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT 6. As of the date hereof, the jurisdiction of organization of Seller and each Servicer is [_________], each of Seller and each Servicer is a "registered organization" (within the meaning of Section 9-102 of the UCC in effect in such applicable jurisdiction) and neither Seller nor any Servicer has changed its jurisdiction of organization since the date of the Agreement. Exh. V-2 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this __ day of _________, ____. DAIRY GROUP RECEIVABLES, L.P. By: Name: Title: Exh. V-3 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE I TO COMPLIANCE CERTIFICATE A. Schedule of Compliance as of __________, ____ with Section ___ of the Agreement. Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement. This schedule relates to the month ended: --------------- Exh. V-4 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT VI (1)FORM OF COLLECTION ACCOUNT AGREEMENT [On letterhead of Originator/Morningstar] ___________, ____ [Lock-Box Bank/Concentration Bank/Depositary Bank] Re: [Applicable Originator] Ladies and Gentlemen: Reference is hereby made to P.O. Box # in [city, state, zip code] (the "Lock-Box") of which you have exclusive control for the purpose of receiving mail and processing payments therefrom pursuant to that certain [name of lock-box agreement] between you and [applicable Originator] (the "Company") dated (the "Agreement"). You hereby confirm your agreement to perform the services described therein. Among the services you have agreed to perform therein, is to endorse all checks and other evidences of payment, and credit such payments to the Company's checking account no. maintained with you in the name of the Company (the "Lock-Box Account"). The Company hereby informs you that pursuant to that certain Amended and Restated Receivables Sale Agreement, dated as of December 21, 2001, among the Company, the other parties thereto as Originators and Dairy Group Receivables, L.P. (the "Seller"), the Company has transferred all of its right, title and interest in and to, and exclusive ownership and control of, the Lock-Box and the Lock-Box Account to Seller. Seller has granted a security interest in the Lock-Box and the Lock-Box Account to Bank One (as defined below), as agent. The Company and Seller hereby request that the name of the Lock-Box Account be changed to "[applicable Servicer], as Servicer." The Company and Seller hereby irrevocably instruct you, and you hereby agree, that (i) if at any time you receive any instruction originated by Bank One, NA (Main Office Chicago) ("Bank One") directing the disposition of funds in the Lock-Box Account you will comply with such instruction without further consent of the Company, Seller or any other party, provided, that until you receive notice in the form attached hereto as Annex A (a "Default Notice") from Bank One, Seller and the Company, as servicer, shall be entitled to give instructions directing the disposition of funds in the Lock-Box Account; and (ii) upon receiving the Default Notice, (A) you will take all instructions regarding the Lock-Box - ---------- (1) Changes to this form have been made to grant "control" with the meaning of Revised Article 9. Exh. VI-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Account and the disposition of funds therein solely from Bank One, (B) the name of the Lock-Box Account will be changed to Bank One for itself and as agent (or any designee of Bank One) and Bank One will have exclusive ownership of and access to and sole control of the Lock-Box and the Lock-Box Account, and neither the Company, Seller, nor any of their respective affiliates will have any control of the Lock-Box or the Lock-Box Account or any access thereto, (C) you will either continue to send the funds from the Lock-Box to the Lock-Box Account, or will redirect the funds as Bank One may otherwise request, (D) you will transfer monies on deposit in the Lock-Box Account, at any time, as directed by Bank One, (E) all services to be performed by you under the Agreement will be performed on behalf of Bank One, and (F) all correspondence or other mail that you have agreed to send to the Company or Seller will be sent to Bank One at the following address: Bank One, NA (Main Office Chicago), as Agent Suite __, 21st Floor 1 Bank One Plaza Chicago, Illinois 60670-__ Attention: Credit Manager, Asset Backed Securities Division Moreover, upon such notice, Bank One for itself and as agent will have all rights and remedies given to the Company (and Seller, as the Company's assignee) under the Agreement. Seller agrees, however, to continue to pay all fees and other assessments due thereunder at any time. You hereby acknowledge that monies deposited in the Lock-Box Account, the Lock-Box Account and any other account established with you by Bank One for the purpose of receiving funds from the Lock-Box are subject to the liens of Bank One for itself and as agent, and will not be subject to deduction, set-off, banker's lien or any other right you or any other party may have against the Company or Seller (including, without limitation, any security interest therein arising by operation of law or otherwise, which security interest is hereby released). You hereby acknowledge and agree that (i) you are executing this letter agreement and agree to perform hereunder in your capacity as a "bank" as defined in Section 9-102 of the UCC; (ii) the Lock-Box Account is a "Deposit Account" as defined in Section 9- 102(a)(29) of the UCC; (iii) regardless of any provision in any other agreement, for purposes of the UCC, Illinois shall be deemed to be your jurisdiction (with the meaning of Section 9- 304 of the UCC); (iv) you have not entered into, and until termination of this letter agreement will not enter into, any agreement with any other party relating to the Lock-Box Account and/or any financial assets credited thereto pursuant to which you have agreed to comply with instructions (within the meaning of Section 9-104 of the UCC) of such other party; (v) except for the claims and interest of Bank One and Seller in the Lock-Box Account, you do not know of any lien on or claim to, or interest in the Lock-Box Account; and (vi) if any party asserts any lien, encumbrance or similar process against the Lock-Box Exh. VI-2 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Account, you will promptly notify Bank One and Seller thereof. All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of Illinois. THIS LETTER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. This letter agreement may be executed in any number of counterparts and all of such counterparts taken together will be deemed to constitute one and the same instrument. This letter agreement contains the entire agreement between the parties, and may not be altered, modified, terminated or amended in any respect, nor may any right, power or privilege of any party hereunder be waived or released or discharged, except upon execution by all parties hereto of a written instrument so providing. In the event that any provision in this letter agreement is in conflict with, or inconsistent with, any provision of the Agreement, this letter agreement will exclusively govern and control. Each party agrees to take all actions reasonably requested by any other party to carry out the purposes of this letter agreement or to preserve and protect the rights of each party hereunder. Exh. VI-3 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Please indicate your agreement to the terms of this letter agreement by signing in the space provided below. This letter agreement will become effective immediately upon execution of a counterpart of this letter agreement by all parties hereto. Very truly yours, [APPLICABLE ORIGINATOR] By: -------------------------------------- Name: Title: DAIRY GROUP RECEIVABLES, L.P. By: -------------------------------------- Name: Title: Acknowledged and agreed to this __ day of ____ [COLLECTION BANK] By: ------------------------------------ Name: Title: BANK ONE, NA (MAIN OFFICE CHICAGO), as Agent By: ------------------------------------ Name: Title: Exh. VI-4 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT ANNEX A FORM OF NOTICE [On letterhead of Bank One] ____________, ____ [Collection Bank/Depositary Bank/Concentration Bank] Re: [Applicable Originator] Ladies and Gentlemen: We hereby notify you that we are exercising our rights pursuant to that certain letter agreement among [applicable Originator], Dairy Group Receivables, L.P., you and us, to have the name of, and to have exclusive ownership and sole control of, account number ________ (the "Lock-Box Account") maintained with you. You are hereby instructed not to accept any direction, instructions or entitlement orders with respect to the Lock-Box Account or the funds credited thereto from any person or entity other than the Agent, unless otherwise ordered by a court of competent jurisdiction. [Lock-Box Account will henceforth be a zero-balance account, and funds deposited in the Lock-Box Account should be sent at the end of each day to __________ .] You have further agreed to perform all other services you are performing under that certain agreement dated ________ between you and [applicable Originator] on our behalf. We appreciate your cooperation in this matter. Very truly yours, BANK ONE, NA (MAIN OFFICE CHICAGO) (for itself and as agent) By: -------------------------------------- Title: ----------------------------------- Annex A-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT VII FORM OF ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT (this "Assignment Agreement") is entered into as of the ___ day of ____________, ____, by and between _____________________ ("Assignor") and __________________ ("Assignee"). PRELIMINARY STATEMENTS A. This Assignment Agreement is being executed and delivered in accordance with Section 12.1(b) of that certain Amended and Restated Receivables Purchase Agreement dated as of December 21, 2001, by and among Dairy Group Receivables, L.P., as Seller, the Servicers party thereto, the Financial Institutions party thereto, the Companies party thereto, and Bank One, NA (Main Office Chicago), as Agent (as amended, modified or restated from time to time, the "Purchase Agreement"). Capitalized terms used and not otherwise defined herein are used with the meanings set forth or incorporated by reference in the Purchase Agreement. B. Assignor is a Financial Institution party to the Purchase Agreement, and Assignee wishes to become a Financial Institution thereunder; and C. Assignor is selling and assigning to Assignee an undivided ____________% (the "Transferred Percentage") interest in all of Assignor's rights and obligations under the Purchase Agreement and the Transaction Documents, including, without limitation, Assignor's Commitment and (if applicable) the Capital of Assignor's Purchaser Interests as set forth herein. AGREEMENT The parties hereto hereby agree as follows: 1. The sale, transfer and assignment effected by this Assignment Agreement shall become effective (the "Effective Date") two (2) Business Days (or such other date selected by the Agent in its sole discretion) following the date on which a notice substantially in the form of Schedule II to this Assignment Agreement ("Effective Notice") is delivered by the Agent to the Company in the Assignor's and Assignee's Purchaser Group, Assignor and Assignee. From and after the Effective Date, Assignee shall be a Financial Institution party to the Purchase Agreement for all purposes thereof as if Assignee were an original party thereto and Assignee agrees to be bound by all of the terms and provisions contained therein. Exh. VII-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT 2. If Assignor has no outstanding Capital under the Purchase Agreement, on the Effective Date, Assignor shall be deemed to have hereby transferred and assigned to Assignee, without recourse, representation or warranty (except as provided in paragraph 6 below), and the Assignee shall be deemed to have hereby irrevocably taken, received and assumed from Assignor, the Transferred Percentage of Assignor's Commitment and all rights and obligations associated therewith under the terms of the Purchase Agreement, including, without limitation, the Transferred Percentage of Assignor's future funding obligations under Article I of the Purchase Agreement. 3. If Assignor has any outstanding Capital under the Purchase Agreement, at or before 12:00 noon, local time of Assignor, on the Effective Date Assignee shall pay to Assignor, in immediately available funds, an amount equal to the sum of (i) the Transferred Percentage of the outstanding Capital of Assignor's Purchaser Interests (such amount, being hereinafter referred to as the "Assignee's Capital"); (ii) all accrued but unpaid (whether or not then due) Yield attributable to Assignee's Capital; and (iii) accruing but unpaid fees and other costs and expenses payable in respect of Assignee's Capital for the period commencing upon each date such unpaid amounts commence accruing, to and including the Effective Date (the "Assignee's Acquisition Cost"); whereupon, Assignor shall be deemed to have sold, transferred and assigned to Assignee, without recourse, representation or warranty (except as provided in paragraph 6 below), and Assignee shall be deemed to have hereby irrevocably taken, received and assumed from Assignor, the Transferred Percentage of Assignor's Commitment and the Capital of Assignor's Purchaser Interests (if applicable) and all related rights and obligations under the Purchase Agreement and the Transaction Documents, including, without limitation, the Transferred Percentage of Assignor's future funding obligations under Article I of the Purchase Agreement. 4. Concurrently with the execution and delivery hereof, Assignor will provide to Assignee copies of all documents requested by Assignee that were delivered to Assignor pursuant to the Purchase Agreement. 5. Each of the parties to this Assignment Agreement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment Agreement. 6. By executing and delivering this Assignment Agreement, Assignor and Assignee confirm to and agree with each other, the Agent and the other Financial Institutions in the Assignor's and Assignee's Purchaser Group as follows: (a) other than the representation and warranty that it has not created any Adverse Claim upon any interest being transferred hereunder, Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made by any other Person in or in connection with the Purchase Agreement or the Transaction Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of Assignee, the Purchase Agreement or any other instrument or document furnished pursuant thereto or the perfection, priority, condition, value or sufficiency of any collateral; (b) Assignor makes no representation or warranty and assumes no responsibility with respect to Exh. VII-2 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT the financial condition of the Seller, any Obligor, any Seller Affiliate or the performance or observance by the Seller, any Obligor, any Seller Affiliate of any of their respective obligations under the Transaction Documents or any other instrument or document furnished pursuant thereto or in connection therewith; (c) Assignee confirms that it has received a copy of the Purchase Agreement and copies of such other Transaction Documents, and other documents and information as it has requested and deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (d) Assignee will, independently and without reliance upon the Agent, any Company, the Seller or any other Financial Institution or Purchaser 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 action under the Purchase Agreement and the Transaction Documents; (e) Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Transaction Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (f) Assignee agrees that it will perform in accordance with their terms all of the obligations that, by the terms of the Purchase Agreement and the other Transaction Documents, are required to be performed by it as a Financial Institution (including, without limitation, as a Related Financial Institution) or, when applicable, as a Purchaser. 7. Each party hereto represents and warrants to and agrees with the Agent that it is aware of and will comply with the provisions of the Purchase Agreement, including, without limitation, Article I and Sections 4.1 and 14.6 thereof. 8. Schedule I hereto sets forth the revised Commitment of Assignor, the Company for which Assignee shall act as a Related Financial Institution and the Commitment of Assignee, as well as administrative information with respect to Assignee. 9. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS. 10. Assignee hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all senior indebtedness for borrowed money of any Company, it will not institute against, or join any other Person in instituting against, any Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Exh. VII-3 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by their respective duly authorized officers of the date hereof. [ASSIGNOR] By: -------------------------------------- Title: [ASSIGNEE] By: -------------------------------------- Title: Exh. VII-4 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE I TO ASSIGNMENT AGREEMENT LIST OF LENDING OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS Date: _______________, ____ Transferred Percentage: ________%
A-1 A-2 B-1 B-2 --------------- ------------- ----------- ------------- COMMITMENT COMMITMENT (PRIOR TO GIVING (AFTER GIVING RATABLE SHARE EFFECT TO THE EFFECT TO THE OUTSTANDING OF ASSIGNMENT ASSIGNMENT CAPITAL OUTSTANDING ASSIGNOR AGREEMENT) AGREEMENT) (IF ANY) CAPITAL - -------- --------------- ------------- ----------- -------------
A-2 B-1 B-2 ------------- ----------- ------------- COMMITMENT (AFTER GIVING RATABLE SHARE EFFECT TO THE OUTSTANDING OF ASSIGNMENT CAPITAL OUTSTANDING ASSIGNEE AGREEMENT) (IF ANY) CAPITAL - -------- ------------- ----------- -------------
Assignee is a Related Financial Institution for: _________________________ Address for Notices - -------------- - -------------- Attention: Phone: Fax: Exh. VII-5 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE II TO ASSIGNMENT AGREEMENT EFFECTIVE NOTICE TO: , Assignor ------------------------ ------------------------ ------------------------ ------------------------ TO: , Assignee ------------------------ ------------------------ ------------------------ ------------------------ TO: , Company ------------------------ ------------------------ ------------------------ ------------------------ The undersigned, as Agent under the Amended and Restated Receivables Purchase Agreement dated as of December 21, 2001, by and among Dairy Group Receivables, L.P., as Seller, the Servicers party thereto, the Financial Institutions party thereto, the Companies party thereto, and the undersigned, hereby acknowledges receipt of executed counterparts of a completed Assignment Agreement dated as of ____________, ____ between __________________, as Assignor, and __________________, as Assignee. Terms defined in such Assignment Agreement are used herein as therein defined. 1. Pursuant to such Assignment Agreement, you are advised that the Effective Date will be ______________, ____. 2. Each of the Company in the Assignor's Purchaser Group and Seller hereby consent to the Assignment Agreement as required by Section 12.1(b) of the Purchase Agreement. Exh. VII-6 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT [3. Pursuant to such Assignment Agreement, the Assignee is required to pay $____________ to Assignor at or before 12:00 noon (local time of Assignor) on the Effective Date in immediately available funds.] Very truly yours, BANK ONE, NA (MAIN OFFICE CHICAGO), individually and as Agent By: --------------------------- Name: Title: [APPLICABLE COMPANY] By: --------------------------- Name: Title: DAIRY GROUP RECEIVABLES, L.P. By: --------------------------- Name: Title: Exh. VII-7 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT VIII CREDIT AND COLLECTION POLICIES See Exhibit V to Receivables Sale Agreement Exh. VIII-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT IX [Intentionally omitted.] Exh. IX-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT X FORM OF MONTHLY REPORT The above is a true and accurate accounting pursuant to the terms of the Amended and Restated Receivables Purchase Agreement dated December 21, 2001 (as amended, restated or otherwise modified from time to time, the "Agreement"), by and among Dairy Group Receivables, L.P., as Seller, the Servicers party thereto, the Financial Institutions party thereto, the Companies party thereto, and Bank One, NA (Main Office Chicago), as Agent, and I have no knowledge of the existence of any conditions or events that constitute an Amortization Event or Potential Amortization Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by this monthly report or as of the date of this certificate, except as set forth below. By: -------------------------- Name: ------------------------ Title: ----------------------- Company Name: ---------------- Date: ------------------------ X-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT XI PERFORMANCE UNDERTAKING XI-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE A COMMITMENTS, COMPANY PURCHASE LIMITS, PAYMENT ADDRESSES AND RELATED FINANCIAL INSTITUTIONS Commitments and Payment Addresses of Financial Institutions
Financial Institution Commitment Payment Address --------------------- ---------- --------------- Bank One, NA (Main Office Chicago) $204,000,000 Bank One, NA (Main Office Chicago) Asset Backed Finance Suite IL1-0596, 1-21 1 Bank One Plaza Chicago, Illinois 60670-0596 Fax: (312) 732-4487 Credit Lyonnais New York Branch $102,000,000 1301 Avenue of the Americas 12th Floor New York, New York 10019 Credit Agricole Indosuez $102,000,000 55 E. Monroe Suite 4700 Chicago, Illinois 60603
Company Purchase Limits, Payment Addresses and Related Financial Institutions of Companies
Company Related Purchase Financial Company Limit Payment Address Institution(s) ------- -------- --------------- -------------- Falcon Asset $200,000,000 c/o Bank One, NA (Main Bank One, NA Securitization Office Chicago), as Agent (Main Office Corporation Asset Backed Finance Chicago) Suite IL1-0079, 1-19 1 Bank One Plaza Chicago, Illinois 60670-0079 Fax: (312) 732-1844 Atlantic Asset $200,000,000 c/o Credit Lyonnais New Credit Lyonnais Securitization Corp. York Branch New York 1301 Avenue of the Americas Branch, Credit 12th Floor Agricole New York, New York 10019 Indosuez
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE B DOCUMENTS TO BE DELIVERED TO THE AGENT ON OR PRIOR TO THE CLOSING DATE PART I: Documents to be Delivered in Connection with the Receivables Sale Agreement 1. Executed copies of the Receivables Sale Agreement, duly executed by the parties thereto. 2. Copy of the Resolutions of the Board of Directors, members or partners, as applicable, of each Originator certified by its Secretary, authorizing such Originator's execution, delivery and performance of the Receivables Sale Agreement and the other documents to be delivered by it thereunder. 3. Articles or Certificate of Incorporation, Certificate of Limited Partnership, Certificate of Formation or equivalent organization document of each Originator, certified by the Secretary of State of the jurisdiction of organization of such Originator on or within thirty (30) days prior to the Closing Date. 4. Good Standing Certificate for each Originator issued by the Secretaries of State of its state of organization and each jurisdiction where it has material operations, each of which is listed on Attachment A hereto. 5. A certificate of the Secretary of each Originator certifying: (i) the names and signatures of the officers authorized on its behalf to execute the Receivables Sale Agreement and any other documents to be delivered by it thereunder and (ii) a copy of the By-Laws, Limited Partnership Agreement, Limited Liability Company Agreement or equivalent governing document for each Originator. 6. Pre-filing state and federal tax lien, judgment lien and UCC lien searches against each Dean Entity from the jurisdictions listed on Attachment B hereto. 7. Time stamped receipt copies of proper financing statements, duly filed under the UCC on or before the Closing Date in all jurisdictions as may be necessary or, in the opinion of Seller (or its assigns), desirable, under the UCC of all appropriate jurisdictions or any comparable law in order to perfect the ownership interests contemplated by the Receivables Sale Agreement. 8. Time stamped receipt copies of proper UCC termination statements, if any, necessary to release all security interests and other rights of any Person in the Receivables, Writings, Contracts or Related Security previously granted by any Originator. 8A. Time stamped receipt copies of proper UCC-3 amendments to each UCC-1 previously filed pursuant to the Original Sale Agreement as listed below: Sch. B-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT 9. Executed Collection Account Agreements for each Lock-Box and Collection Account listed on Attachment C hereto. 10. A favorable opinion of legal counsel for each Originator reasonably acceptable to Seller (or its assigns) that addresses the following matters and such other matters as Seller (or its assigns) may reasonably request:(2) -- Each Originator is a corporation, limited partnership or limited liability company duly organized, validly existing, and in good standing under the laws of its state of incorporation. -- Each Originator has all requisite authority to conduct its business in each jurisdiction where failure to be so qualified would have a material adverse effect on each Originator's business. -- Each Originator has all requisite power and authority to execute, deliver and perform all of its obligations under the Receivables Sale Agreement and each other Transaction Document to which it is a party. -- The execution and delivery by each Originator of the Receivables Sale Agreement and each other Transaction Document to which it is a party and its performance of its obligations thereunder have been duly authorized by all necessary corporate action and proceedings on the part of each Originator and will not: (a) require any action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of UCC financing statements); (b) contravene, or constitute a default under, any provision of applicable law or regulation or of its articles or certificate of incorporation or bylaws (or equivalent organizational and governing documents) or of any agreement, judgment, injunction, order, decree or other instrument binding upon each Originator; or (c) result in the creation or imposition of any Adverse Claim on assets of each Originator or any of its Subsidiaries (except as contemplated by the Receivables Sale Agreement). -- The Receivables Sale Agreement and each other Transaction Document to which it is a party has been duly executed and delivered by - ---------- (2) Also to include any other opinions previously given. Sch. B-2 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT each Originator and constitutes the legal, valid, and binding obligation of each Originator enforceable in accordance with its terms, except to the extent the enforcement thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and subject also to the availability of equitable remedies if equitable remedies are sought. -- The provisions of the Receivables Sale Agreement are sufficient to constitute authorization by each Originator for the filing of the financing statements required under the Receivables Sale Agreement. -- With respect to each Originator, for the purposes of the Uniform Commercial Code as in effect in its state of organization, such Originator is a "registered organization". -- The provisions of the Receivables Sale Agreement are effective to create a valid security interest in favor of Seller in all Receivables and upon the filing of financing statements, Seller shall acquire a first priority, perfected security interest in such Receivables. -- To the best of the opinion giver's knowledge, there is no action, suit or other proceeding against any Originator or any Affiliate of any Originator, that would materially adversely affect the business or financial condition of any Originator and its Affiliates taken as a whole or that would materially adversely affect the ability of any Originator to perform its obligations under the Receivables Sale Agreement. 11. A "true sale" opinion and "substantive consolidation" opinion of counsel for the Originators with respect to the transactions contemplated by the Receivables Sale Agreement. 12. A Compliance Certificate. 13. Executed copies of (i) all consents from and authorizations by any Persons and (ii) all waivers and amendments to existing credit facilities, that are necessary in connection with the Receivables Sale Agreement. 14. Executed copies of the Subordinated Notes (as defined in the Receivables Sale Agreement) by Seller in favor of Originators. 15. A direction letter executed by Originators authorizing Seller (and its assignees) and directing warehousemen to allow Seller (and its assignees) to inspect and make copies from Originators' books and records maintained at off-site data processing or storage facilities. Sch. B-3 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT PART II: Documents to Be Delivered in Connection with the Agreement 1. Executed copies of the Agreement, duly executed by the parties thereto. 2. Copy of the Resolutions of the Board of Directors, managers or partners of each Seller Party and Provider certified by its Secretary, manager or general partner, as applicable, authorizing such Person's execution, delivery and performance of this Agreement and the other documents to be delivered by it hereunder. 3. Articles or Certificate of Incorporation, Certificate of Limited Partnership, Certificate of Formation or equivalent organization document of each Seller Party and Provider and, certified by the Secretary of State of its organization on or within thirty (30) days prior to the Closing Date. 4. Good Standing Certificate for each Seller Party and Provider issued by the Secretaries of State of its state of organization and each jurisdiction where it has material operations, each of which is listed on Attachment A hereto. 5. A certificate of the Secretary of each Seller Party and Provider certifying (i) the names and signatures of the officers authorized on its behalf to execute this Agreement and any other documents to be delivered by it hereunder and (ii) a copy of such Person's By-Laws, Limited Partnership Agreement, Limited Liability Company Agreement or equivalent governing document. 6. Pre-filing state and federal tax lien, judgment lien and UCC lien searches against each Seller Party that is a Dean Entity from the jurisdictions listed on Attachment B hereto. 7. Time stamped receipt copies of proper financing statements, duly filed under the UCC on or before the Closing Date of the applicable initial Incremental Purchase in all jurisdictions as may be necessary or, in the opinion of the Agent, desirable, under the UCC of all appropriate jurisdictions or any comparable law in order to perfect the ownership interests contemplated by this Agreement. 8. Time stamped receipt copies of proper UCC termination statements, if any, necessary to release all security interests and other rights of any Person in the Receivables, Writings, Contracts or Related Security previously granted by Seller. 8A. Time stamped receipt copies of proper UCC-3 amendments to each UCC-1 previously filed pursuant to the Original Agreement as listed below: 9. Executed copies of Collection Account Agreements for each Lock-Box and Collection Account listed on Attachment C hereto. Sch. B-4 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT 10. A favorable opinion of legal counsel for the Seller Parties and Provider reasonably acceptable to the Agent that addresses the following matters and such other matters as the Agent may reasonably request:(3) -- Each Seller Party and Provider is a corporation, limited partnership or limited liability company, as applicable, duly incorporated or organized, validly existing, and in good standing under the laws of its state of incorporation or organization. -- Each Seller Party and Provider has all requisite authority to conduct its business in each jurisdiction where failure to be so qualified would have a material adverse effect on such Person's business. -- Each Seller Party and Provider has all requisite power and authority to execute, deliver and perform all of its obligations under this Agreement and each other Transaction Document to which it is a party. -- The execution and delivery by each Seller Party and Provider of this Agreement and each other Transaction Document to which it is a party and its performance of its obligations thereunder have been duly authorized by all necessary corporate action and proceedings on the part of such Person and will not: (a) require any action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of UCC financing statements); (b) contravene, or constitute a default under, any provision of applicable law or regulation or of its articles or certificate of incorporation or bylaws or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Person; or (c) result in the creation or imposition of any Adverse Claim on assets of such Person or any of its Subsidiaries (except as contemplated by this Agreement). -- This Agreement and each other Transaction Document to which such Person is a party has been duly executed and delivered by such Person and constitutes the legal, valid, and binding obligation of such Person, enforceable in accordance with its terms, except to the extent the enforcement thereof may be limited by bankruptcy, insolvency or - ---------- (3) Also to include any other opinions previously delivered. Sch. B-5 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT similar laws affecting the enforcement of creditors' rights generally and subject also to the availability of equitable remedies if equitable remedies are sought. -- The provisions of this Agreement are sufficient to constitute authorization by Seller for the filing of the financing statements required under this Agreement. -- For the purposes of the Delaware UCC, Seller is a "registered organization". -- The provisions of this Agreement are effective to create a valid security interest in favor of the Agent for the benefit of the Purchasers in all Receivables, and upon the filing of financing statements, the Agent for the benefit of the Purchasers shall acquire a first priority, perfected security interest in such Receivables. -- To the best of the opinion giver's knowledge, there is no action, suit or other proceeding against any Seller Party, Provider or any of their respective Affiliates, that would materially adversely affect the business or financial condition of such Person and its Affiliates taken as a whole or that would materially adversely affect the ability of such Person to perform its obligations under any Transaction Document to which it is a party. 11. If requested by the Company in such Financial Institution's Purchaser Group or the Agent, a favorable opinion of legal counsel for each Financial Institution, reasonably acceptable to such Company and the Agent that addresses the following matters: -- This Agreement has been duly authorized by all necessary corporate action of such Financial Institution. -- This Agreement has been duly executed and delivered by such Financial Institution and, assuming due authorization, execution and delivery by each of the other parties thereto, constitutes a legal, valid and binding obligation of such Financial Institution, enforceable against such Financial Institution in accordance with its terms. 12. A Compliance Certificate. 13. The Fee Letters. 14. A Monthly Report as at November 30, 2001. Sch. B-6 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT 15. Executed copies of (i) all consents from and authorizations by any Persons and (ii) all waivers and amendments to existing credit facilities, that are necessary in connection with this Agreement. 16. A direction letter executed by Seller and the applicable Servicer authorizing the Agent and any Company, and directing warehousemen to allow the Agent and any Company to inspect and make copies from Seller's books and records maintained at off-site data processing or storage facilities. 17. For each Purchaser that is not incorporated under the laws of the United States of America, or a state thereof, two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Purchaser is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. 18. Executed copies of the Performance Undertaking of Provider. 19. Evidence satisfactory to the Agent of the consummation of the Dean Acquisition. 20. The "Demand Note" issued under and as defined in the Original Agreement marked cancelled and an executed copy of the Demand Note issued under and as defined in the Agreement. 21. Executed copies of the Intercreditor Agreement, dated as of the date of the date hereof, by and among the Agent and First Union National Bank, as administrative agent under the Dean Credit Agreement. 22. A duly executed Officer's Certificate of Provider, certifying a true, correct and complete copy of the Dean Credit Agreement and the related security documents. 23. Each Company shall have received copies of a Funding Agreement, in form and substance satisfactory to such Company, duly executed by the parties thereto. PART III: Documents to be Delivered in Connection with the Receivables Transfer Agreement Executed copies of the Receivables Sale Agreement, duly executed by the parties thereto. 1. Copy of the Resolutions of the Board of Directors, members or partners, as applicable, of Morningstar certified by its Secretary, authorizing Morningstar's execution, delivery and performance of the Transfer Agreement and the other documents to be delivered by it thereunder. 2. Articles or Certificate of Incorporation of Morningstar, certified by the Secretary of State of the jurisdiction of organization of Morningstar on or within thirty (30) days prior to the Closing Date. Sch. B-7 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT 3. Good Standing Certificate for Morningstar issued by the Secretaries of State of its state of organization and each jurisdiction where it has material operations, each of which is listed on Attachment A hereto. 4. A certificate of the Secretary of Morningstar certifying: (i) the names and signatures of the officers authorized on its behalf to execute the Transfer Agreement and any other documents to be delivered by it thereunder and (ii) a copy of its By-Laws. 5. Time stamped receipt copies of proper financing statements, duly filed under the UCC on or before the Closing Date in all jurisdictions as may be necessary or, in the opinion of Seller (or its assigns), desirable, under the UCC of all appropriate jurisdictions or any comparable law in order to perfect the ownership interests contemplated by the Transfer Agreement. 6. Time stamped receipt copies of proper UCC termination statements, if any, necessary to release all security interests and other rights of any Person in the Receivables, Writings, Contracts or Related Security previously granted by Morningstar. 7. Time stamped receipt copies of proper UCC-3 amendments to each UCC-1 previously filed pursuant to the Original Transfer Agreement. 8. A favorable opinion of legal counsel for Morningstar reasonably acceptable to Seller (or its assigns) that addresses the following matters and such other matters as Seller (or its assigns) may reasonably request:(4) -- Morningstar is a corporation duly organized, validly existing, and in good standing under the laws of its state of incorporation. -- Morningstar has all requisite authority to conduct its business in each jurisdiction where failure to be so qualified would have a material adverse effect on Morningstar's business. -- Morningstar has all requisite power and authority to execute, deliver and perform all of its obligations under the Transfer Agreement and each other Transaction Document to which it is a party. -- The execution and delivery by Morningstar of the Transfer Agreement and each other Transaction Document to which it is a party and its performance of its obligations thereunder have been duly authorized by all necessary corporate action and proceedings on the part of Morningstar and will not: - ---------- (4) Also to include any other opinions previously given. Sch. B-8 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (a) require any action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of UCC financing statements); (b) contravene, or constitute a default under, any provision of applicable law or regulation or of its articles or certificate of incorporation or bylaws, or of any agreement, judgment, injunction, order, decree or other instrument binding upon Morningstar; or (c) result in the creation or imposition of any Adverse Claim on assets of Morningstar or any of its Subsidiaries (except as contemplated by the Transfer Agreement). -- The Transfer Agreement and each other Transaction Document to which it is a party has been duly executed and delivered by Morningstar and constitutes the legal, valid, and binding obligation of Morningstar enforceable in accordance with its terms, except to the extent the enforcement thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and subject also to the availability of equitable remedies if equitable remedies are sought. -- The provisions of the Transfer Agreement are sufficient to constitute authorization by Morningstar for the filing of the financing statements required under the Transfer Agreement. -- With respect to Morningstar, for the purposes of the UCC as in effect in its state of incorporation, Morningstar is a "registered organization". -- The provisions of the Transfer are effective to create a valid security interest in favor of MRC in all Receivables and upon the filing of financing statements, MRC shall acquire a first priority, perfected security interest in such Receivables. -- To the best of the opinion giver's knowledge, there is no action, suit or other proceeding against Morningstar or any Affiliate of Morningstar, that would materially adversely affect the business or financial condition of Morningstar and its Affiliates taken as a whole or that would materially adversely affect the ability of Morningstar to perform its obligations under the Transfer Agreement. 9. A "true sale" opinion and "substantive consolidation" opinion of counsel for Morningstar with respect to the transactions contemplated by the Transfer Agreement. Sch. B-9 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT 10. A Compliance Certificate. 11. Executed copies of (i) all consents from and authorizations by any Persons and (ii) all waivers and amendments to existing credit facilities, that are necessary in connection with the Transfer Agreement. 12. Executed copies of the Subordinated Transfer Note (as defined in the Transfer Agreement) by MRC in favor of Morningstar. Sch. B-10 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE C DEAN ENTITIES DEAN FOODS ICE CREAM COMPANY VERIFINE DAIRY PRODUCTS CORPORATION OF SHEBOYGAN, INC. LIBERTY DAIRY COMPANY DEAN FOODS COMPANY OF INDIANA, INC. DEAN MILK COMPANY, INC. DEAN FOODS NORTH CENTRAL, INC. ALTA-DENA CERTIFIED DAIRY, INC. ALTA-DENA HOLDINGS, INC. DEAN FOODS COMPANY OF CALIFORNIA, INC. BERKELEY FARMS, INC. DEAN DAIRY PRODUCTS COMPANY MEADOW BROOK DAIRY COMPANY REITER DAIRY, INC. PURITY DAIRIES, INCORPORATED MCCARTHUR DAIRY, INC. T. G. LEE FOODS, INC. MAYFIELD DAIRY FARMS, INC. CREAMLAND DAIRIES, INC. BELL DAIRY PRODUCTS, INC. GANDY'S DAIRIES, INC. CREAMLAND DAIRIES, INC. RYAN FOODS COMPANY, LLC RYAN FOODS NORTH CENTRAL, INC. Sch. C-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE D ORIGINATORS Morningstar Receivables Corp. Country Fresh, LLC Land-O-Sun Dairies, LLC Southern Foods Group, L.P. Dean Northeast, LLC (f/k/a Suiza GTL, LLC) Tuscan/Lehigh Dairies, L.P. Tuscan/Lehigh Management, L.L.C. Alta-Dena Certified Dairy, Inc. Alta-Dena Holdings, Inc. Bell Dairy Products, Inc. Berkeley Farms, Inc. Creamland Dairies, Inc. Dean Dairy Products Company Dean Foods Company of California, Inc. Dean Foods Company of Indiana, Inc. Dean Foods Ice Cream Company Dean Foods North Central, Inc. Dean Milk Company, Inc. Gandy's Dairies, Inc. Liberty Dairy Company Mayfield Dairy Farms, Inc. McArthur Dairy, Inc. Meadow Brook Dairy Company Purity Dairies, Incorporated Reiter Dairy, Inc. Ryan Foods Company, LLC Ryan Foods North Central, Inc. T. G. Lee Foods, Inc. Verifine Dairy Products Corporation of Sheboygan, Inc. Sch. D-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE E NOTICE ADDRESSES The Agent: Falcon: Bank One, NA (Main Office Chicago), as Falcon Asset Securitization Corporation Agent c/o Bank One, NA (Main Office Chicago), 1 Bank One Plaza as Agent Suite IL1-0596, 1-21 1 Bank One Plaza Chicago, Illinois 60670-0596 Suite IL1-0079, 1-19 Attention: Asset Backed Finance Chicago, Illinois 60670-00079 Facsimile: (312) 732-4487 Attention: Asset Backed Finance Facsimile: (312) 732-4487 CLNY: Atlantic: Credit Lyonnais New York Branch c/o Credit Lyonnais New York Branch 1301 Avenue of the Americas 1301 Avenue of the Americas 12th Floor 12th Floor New York, New York 10019 New York, New York 10019 Attention: Attention: Facsimile: Facsimile: Credit Agricole: Seller and each Seller Party: Credit Agricole Indosuez See Exhibit III under the heading "Principal 55 E. Monroe Place of Business" Suite 4700 Chicago, Illinois 60603 Attention: Facsimile:
Sch. E-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE F TOP TWENTY-FIVE OBLIGORS
SUIZA DEAN TOTAL % 1 Wal-Mart/Sams Wholesale 27,263,173 22,148,465 49,411,638 8.1% 2 Albertsons/American Stores 14,194,302 11,310,569 25,504,871 4.2% 3 Royal Ahold/Stop and Shop 5,829,341 6,078,820 11,908,161 2.0% 4 Meijers 10,809,353 10,809,353 1.8% 5 Safeway/Randalls/Tom Thumb 7,166,617 3,604,703 10,771,320 1.8% 6 Kroger/Fred Meyer/Ralphs 4,207,539 3,195,274 7,402,813 1.2% 7 Flemming Foods 2,996,224 4,283,050 7,279,274 1.2% 8 Baskin Robbins 7,169,638 7,169,638 1.2% 9 Sysco 3,950,589 2,976,245 6,926,834 1.1% 10 Super Value, Inc. 2,676,646 4,040,688 6,717,334 1.1% 11 Publix Supermarkets 2,849,073 3,839,635 6,688,708 1.1% 12 Price Choppers 5,231,414 5,231,414 0.9% 13 K-Mart 4,403,529 739,342 5,142,872 0.8% 14 A&P Consolidated 4,832,655 4,832,655 0.8% 15 Food Lion Stores 1,820,949 2,952,885 4,773,834 0.8% 16 Acme Markets 4,384,750 4,384,750 0.7% 17 Alliant 2,926,404 1,188,945 4,115,348 0.7% 18 Giant Eagle Inc. 4,105,995 4,105,995 0.7% 19 Gordon Food Service 3,478,970 3,478,970 0.6% 20 Winn Dixie 1,057,459 2,391,088 3,448,547 0.6% 21 Bi-Lo 3,398,971 3,398,971 0.6% 22 Central Grocers 3,179,888 3,179,888 0.5% 23 C&S/ Pathmark 3,179,045 3,179,045 0.5% 24 Costco Corp. 3,081,970 3,081,970 0.5% 25 Consolidated Dairy 2,901,617 2,901,617 0.5%
Sch. F-1 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT SCHEDULE G CHASE LOCK-BOXES
RELATED COLLECTION SELLER PARTY LOCK-BOX ACCOUNT - ------------ -------- ------------------ Creamland Dairies, Inc. (Price's PRICES Chase Bank of Creameries Division) PO BOX 7 Texas EL PASO, TX 79940 Price's Creameries 151 018 10230 Southern Foods Group, L.P. Oak Farms Dairy (Dallas) Chase Bank of P.O. Box 910067 Texas Dallas, TX 75391-0067 2200 Ross Avenue Dallas, TX 75201 Account # 08800946079 Oak Farms Dairy Chase Bank of (San Antonio) Texas P.O. Box 910126 2200 Ross Avenue Dallas, TX 72391-0126 Dallas, TX 75201 Account # 08800946087
Sch. G-1 EX-10.16 9 d95076ex10-16.txt AMENDED/RESTATED RECEIVABLES SALES AGREEMENT EXHIBIT 10.16 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT DATED AS OF DECEMBER 21, 2001, AMONG THE ORIGINATORS NAMED HEREIN AND DAIRY GROUP RECEIVABLES, L.P., as Buyer AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT TABLE OF CONTENTS
Page ARTICLE I AMOUNTS AND TERMS OF THE PURCHASE...............................................................2 Section 1.1 Purchase of Receivables.......................................................2 Section 1.2 Payment for the Purchase......................................................3 Section 1.3 Purchase Price Credit Adjustments.............................................5 Section 1.4 Payments and Computations, Etc................................................6 Section 1.5 Transfer of Records...........................................................6 Section 1.6 Characterization..............................................................7 Section 1.7 Termination of Immaterial Originator..........................................7 ARTICLE II REPRESENTATIONS AND WARRANTIES..................................................................8 Section 2.1 Representations and Warranties of Originator..................................8 ARTICLE III CONDITIONS OF PURCHASE.........................................................................13 Section 3.1 Conditions Precedent to Purchase.............................................13 Section 3.2 Conditions Precedent to Subsequent Payments..................................13 ARTICLE IV COVENANTS......................................................................................14 Section 4.1 Affirmative Covenants of the Originator......................................14 Section 4.2 Negative Covenants of the Originators........................................20 ARTICLE V TERMINATION EVENTS.............................................................................21 Section 5.1 Termination Events...........................................................21 Section 5.2 Remedies.....................................................................23 ARTICLE VI INDEMNIFICATION................................................................................23 Section 6.1 Indemnities by the Originators...............................................23 Section 6.2 Other Costs and Expenses.....................................................26 ARTICLE VII MISCELLANEOUS..................................................................................27 Section 7.1 Waivers and Amendments.......................................................27 Section 7.2 Notices......................................................................27
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Page Section 7.3 Protection of Ownership Interests of Buyer...................................27 Section 7.4 Confidentiality..............................................................28 Section 7.5 Bankruptcy Petition..........................................................29 Section 7.6 Limitation of Liability......................................................30 Section 7.7 CHOICE OF LAW................................................................30 Section 7.8 CONSENT TO JURISDICTION......................................................30 Section 7.9 WAIVER OF JURY TRIAL.........................................................30 Section 7.10 Integration; Binding Effect; Survival of Terms...............................31 Section 7.11 Counterparts; Severability; Section References...............................31 Section 7.12 Confirmation and Ratification of Terms.......................................32
-ii- Exhibits and Schedules Exhibit I - Definitions Exhibit II - Principal Place of Business; Location(s) of Records; Federal Employer Identification Number; Other Names Exhibit III - Lock-Boxes; Collection Accounts; Collection Banks Exhibit IV - Form of Compliance Certificate Exhibit V - Credit and Collection Policies Exhibit VI - [Intentionally Omitted.] Exhibit VII - Form of Subordinated Note Schedule A List of Documents to Be Delivered to Buyer Prior to the Purchase
-iii- AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT THIS AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT, dated as of December 21, 2001, is by and among each of the parties listed on the signatures pages hereof as an originator (each, an "Originator" and, collectively, the "Originators"), and Dairy Group Receivables, L.P. a Delaware limited partnership ("Buyer"). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I hereto (or, if not defined in Exhibit I hereto, the meaning assigned to such term in Exhibit I to the Purchase Agreement). PRELIMINARY STATEMENTS Certain of the Originators (the "Existing Originators") and Buyer entered into that certain Receivables Sale Agreement, dated as of June 30, 2000 (as amended, restated or otherwise modified prior to the date hereof, the "Original Sale Agreement"), pursuant to which the Existing Originators sold all of their Receivables and certain related property to Buyer. The Existing Originators desire to continue to sell and assign to Buyer, and the other Originators now desire to sell and assign to Buyer, all of each such Originator's right, title and interest in and to such Receivables, together with the Related Security and Collections with respect thereto. Buyer desires to purchase such Receivables, Related Security and Collections. Buyer continues to own all Receivables of the Existing Originators outstanding as of the close of business on the Business Day immediately prior to the date hereof and previously conveyed pursuant to the Original Sale Agreement (such Receivables, the "Previously Sold Receivables"). Each Originator and Buyer intend the transactions contemplated hereby to be true sales of the Receivables from such Originator to Buyer, providing Buyer with the full benefits of ownership of the Receivables, and neither the Originators nor Buyer intend these transactions to be, or for any purpose (other than tax) to be characterized as, loans from Buyer to any Originator. Following the purchase of Receivables from the Originators, Buyer will sell undivided interests therein and in the associated Related Security and Collections pursuant to that certain Amended and Restated Receivables Purchase Agreement dated as of December 21, 2001 (as the same may from time to time hereafter be amended, supplemented, restated or otherwise modified, the "Purchase Agreement") among Buyer, the Servicers (as defined therein), the Companies (as defined therein), the financial institutions from time to time party thereto as "Financial Institutions" and Bank One, NA (Main Office Chicago), as agent for the Companies and AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT Financial Institutions or any successor agent appointed pursuant to the terms of the Purchase Agreement (in such capacity, the "Agent"). Each of the Originators and Buyer now desire to amend and restate the Original Sale Agreement in its entirety, subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree that, subject to the satisfaction of the conditions precedent set forth in Section 3.1 hereof, the Original Sale Agreement is hereby amended and restated in its entirety to read as follows: ARTICLE I AMOUNTS AND TERMS OF THE PURCHASE Section 1.1 Purchase of Receivables. (a) Effective on the date hereof, in consideration for the Purchase Price and upon the terms and subject to the conditions set forth herein, each Originator does hereby sell, assign, transfer, set-over and otherwise convey to Buyer, without recourse (except to the extent expressly provided herein), and Buyer does hereby purchase from each Originator, all of such Originator's right, title and interest in and to all Receivables existing as of the close of business on the Business Day immediately prior to the date hereof other than the Previously Sold Receivables (which have been previously sold and assigned to Buyer) and all Receivables thereafter arising through and including the Termination Date, together, in each case, with all Related Security relating thereto and all Collections thereof. In accordance with the preceding sentence, on the date hereof Buyer shall acquire all of such Originator's right, title and interest in and to all Receivables existing as of the close of business on the Business Day immediately prior to the date hereof (other than the Previously Sold Receivables) and thereafter arising through and including the Termination Date, together with all Related Security relating thereto and all Collections thereof. Buyer shall be obligated to pay the Purchase Price for the Receivables purchased hereunder in accordance with Section 1.2. In connection with consummation of the Purchase Price for any Receivables purchased hereunder, Buyer may request that each Originator deliver, and each Originator shall deliver, such approvals, opinions, information, reports or documents as Buyer may reasonably request. (b) It is the intention of the parties hereto that the Purchase of Receivables made hereunder shall constitute a sale, which sale is absolute and irrevocable and provides Buyer with the full benefits of ownership of the Receivables. Except for the 2 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT Purchase Price Credits owed pursuant to Section 1.3, the sale of Receivables hereunder is made without recourse to the Originators; provided, however, that (i) each Originator shall be liable to Buyer for all representations, warranties, covenants and indemnities made by such Originator pursuant to the terms of the Transaction Documents to which such Originator is a party, and (ii) such sale does not constitute and is not intended to result in an assumption by Buyer or any assignee thereof of any obligation of such Originator or any other Person arising in connection with the Receivables, the related Contracts and/or other Related Security or any other obligations of such Originator. In view of the intention of the parties hereto that the Purchase of Receivables made hereunder shall constitute a sale of such Receivables rather than loans secured thereby, each Originator agrees that it will, on or prior to the date hereof and in accordance with Section 4.1(e)(ii), mark its master data processing records relating to the Receivables with a legend acceptable to Buyer and to the Agent (as Buyer's assignee), evidencing that Buyer has pur chased such Receivables as provided in this Agreement and to note in its financial statements that its Receivables have been sold to Buyer (it being understood and agreed that the Existing Originators shall have complied with the terms of this sentence prior to the date hereof in accordance with the Original Sale Agreement). Upon the request of Buyer or the Agent (as Buyer's assignee), each Originator will execute and file such financing or continuation state ments, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate to perfect and maintain the perfection of Buyer's ownership interest in the Receivables and the Related Security and Collections with respect thereto, or as Buyer or the Agent (as Buyer's assignee) may reasonably request. Section 1.2 Payment for the Purchase. (a) The Purchase Price for the Purchase of Receivables in existence on the close of business on the Business Day immediately preceding the date hereof (the "Initial Cutoff Date") shall be payable in full by Buyer to the Originator of such Receivables on the date hereof, and shall be paid to such Originator in the following manner: (i) by delivery of immediately available funds, to the extent of funds made available to Buyer in connection with its subse quent sale of an interest in such Receivables to the Purchasers under the Purchase Agreement; and (ii) the balance, by delivery of the proceeds of a subordinated revolving loan from such Originator to Buyer (a "Subordinated Loan") in an amount not to exceed the least of (A) the remaining unpaid portion of such Purchase Price, (B) the maximum Subordinated Loan that could be borrowed without rendering Buyer's Net Worth less than the Required Capital Amount and (C) the maximum Subordinated Loan that 3 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT could be borrowed without rendering the Net Value less than the aggregate outstanding principal balance of the Subordinated Loans (including the Subordinated Loan proposed to be made on such date). Each Originator is hereby authorized by Buyer to endorse on the schedule attached to its Subordinated Note an appropriate notation evidencing the date and amount of each advance thereunder, as well as the date of each payment with respect thereto, provided that the failure to make such notation shall not affect any obligation of Buyer thereunder. The Purchase Price for each Receivable coming into existence after the Initial Cutoff Date shall be due and owing in full by Buyer to the Originator of such Receivable or its designee on the date each such Receivable came into existence (except that Buyer may, with respect to any such Purchase Price, offset against such Purchase Price any amounts owed by such Originator to Buyer hereunder and which have become due but remain unpaid) and shall be paid to such Originator in the manner provided in the following paragraphs (b), (c) and (d). (b) With respect to any Receivables coming into existence after the Initial Cutoff Date, on each Settlement Date, Buyer shall pay the Purchase Price therefor in accordance with Section 1.2(d) and in the following manner: first, by delivery of immediately available funds, to the extent of funds available to Buyer from its subsequent sale of an interest in the Receivables to the Agent for the benefit of the Purchasers under the Purchase Agreement or other cash on hand (including, without limitation, as a result of the contribution of Receivables to the capital of Buyer by either of Buyer's partners); and second, by delivery of the proceeds of a Subordinated Loan, provided that the making of any such Subordinated Loan shall be subject to the provisions set forth in Section 1.2(a)(ii). Subject to the limitations set forth in Section 1.2(a)(ii), each Originator irrevocably agrees to advance each Subordinated Loan requested by Buyer on or prior to the Termination Date. The Subordinated Loans shall be evidenced by, and shall be payable in accordance with the terms and provisions of the Subordinated Notes and shall be payable solely from funds which Buyer is not required under the Purchase Agreement to set aside for the benefit of, or otherwise pay over to, the Purchasers. (c) From and after the Termination Date, no Originator shall be obligated to (but each may, at its option), sell Receivables to Buyer. 4 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (d) Although the Purchase Price for each Receivable coming into existence after the Initial Cutoff Date shall be due and payable in full by Buyer to the Originator of such Receivable on the date such Receivable came into existence, settlement of the Purchase Price between Buyer and each Originator shall be effected on a monthly basis on Settlement Dates with respect to all Receivables coming into existence during the same Calculation Period and based on the information contained in the Monthly Report delivered by the Servicers pursuant to Article VIII of the Purchase Agreement for the Calculation Period then most recently ended. Although settlement shall be effected on Settlement Dates, increases or decreases in the amount owing under the Subordinated Notes made pursuant to Section 1.2(b) shall be deemed to have occurred and shall be effective as of the last Business Day of the Calculation Period to which such settlement relates. Section 1.3 Purchase Price Credit Adjustments. If on any day: (a) the Outstanding Balance of a Receivable is: (i) reduced as a result of any defective or rejected or returned goods or services, any discount, rebate or any adjustment or otherwise by the Originator of such Receivable (other than cash Collections on account of the Receivables and other than Receivables that, consistent with the applicable Originator's Credit and Collection Policy, have been written off Seller's books as uncollectible other than as a result of any of the other condi tions or events set forth in this definition), (ii) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction), or (b) any of the representations and warranties set forth in Article II are not true when made or deemed made with respect to any Receivable, or (c) any Contract with respect to any Receivable shall fail to create a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, then, in such event, Buyer shall be entitled to a credit (each, a "Purchase Price Credit") against the Purchase Price otherwise payable hereunder to the Originator of such Receivable equal to (x) in the case of any Receivable reduced or cancelled pursuant to clause (a) above, the amount of such reduction or cancellation and (y) in all other cases, the Outstanding Balance of such Receivable (calculated before giving effect to the applicable reduction or cancellation). If such Purchase Price Credit exceeds the Original Balance of the Receivables 5 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT of such Originator coming into existence on any day, then such Originator shall pay the remaining amount of such Purchase Price Credit in cash immediately, provided that if the Termination Date has not occurred, such Originator shall be allowed to deduct the remaining amount of such Purchase Price Credit from any indebtedness owed to it under such Originator's Subordinated Note. Section 1.4 Payments and Computations, Etc. All amounts to be paid or deposited by Buyer hereunder shall be paid or deposited in accordance with the terms hereof on the day when due in immediately available funds to the account of each Originator designated from time to time by such Originator or as otherwise directed by such Originator. In the event that any payment owed by any Person hereunder becomes due on a day that is not a Business Day, then such payment shall be made on the next succeeding Business Day. If any Person fails to pay any amount hereunder when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid in full; provided, however, that such Default Fee shall not at any time exceed the maximum rate permitted by applicable law. All computations of interest payable hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Section 1.5 Transfer of Records. (a) In connection with the Purchase of Receivables hereunder, each Originator hereby sells, transfers, assigns and otherwise conveys to Buyer all of such Origina tor's right and title to and interest in the Records relating to all Receivables sold hereunder, without the need for any further documentation in connection with the Purchase. In connection with such transfer, each Originator hereby grants to each of Buyer, the Agent and the Servicer of its Receivables an irrevocable, non-exclusive license to use, without royalty or payment of any kind, all software used by such Originator to account for its Receivables, to the extent necessary to administer such Receivables, whether such software is owned by such Originator or is owned by others and used by such Originator under license agreements with respect thereto, provided that should the consent of any licensor of such software be required for the grant of the license described herein, to be effective, such Originator hereby agrees that upon the request of Buyer (or Buyer's assignee), such Originator will use its reasonable efforts to obtain the consent of such third-party licensor. The license granted hereby shall be irrevocable until the indefeasible payment in full of the Aggregate Unpaids, and shall terminate on the date this Agreement terminates in accordance with its terms. (b) Each Originator (i) shall take such action requested by Buyer and/or the Agent (as Buyer's assignee), from time to time hereafter, that may be necessary or appropriate to ensure that Buyer and its assigns under the Purchase Agreement have an enforceable ownership interest in the Records relating to the Receivables purchased from 6 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT such Originator hereunder, and (ii) shall use its reasonable efforts to ensure that Buyer, the Agent and the applicable Servicer each has an enforceable right (whether by license or sublicense or otherwise) to use all of the computer software used to account for the Receivables and/or to recreate such Records. Section 1.6 Characterization. If, notwithstanding the intention of the parties expressed in Section 1.1(b), any sale or contribution by any Originator to Buyer of Receivables hereunder shall be characterized as a secured loan and not a sale or such sale shall for any reason be ineffective or unenforceable, then this Agreement shall be deemed to constitute a security agreement under the UCC and other applicable law. For this purpose and without being in derogation of the parties' intention that the sale of Receivables hereunder shall constitute a true sale thereof, each Originator hereby grants to Buyer a duly perfected security interest in all of such Originator's right, title and interest in, to and under all Receivables now existing and hereafter arising, all Collections and Related Security with respect thereto, each Lock-Box and Collection Account, the Transfer Agreement, all other rights and payments relating to such Originator's Receivables and all proceeds of the foregoing to secure the prompt and complete payment of a loan deemed to have been made in an amount equal to the Purchase Price of the Receivables together with all other obligations of such Originator hereunder, which security interest shall be prior to all other Adverse Claims thereto. Buyer and its assigns shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable law, which rights and remedies shall be cumulative. Section 1.7 Termination of Immaterial Originator. Any Originator that is an Immaterial Originator at the relevant time of determination may terminate its obligation to sell and assign Receivables to Buyer hereunder so long as each of the following conditions is satisfied: (i) Buyer (and its assigns, including the Agent) shall have received prior written notice from such Originator (a "Termi nating Originator") specifying the effective date for such termination which shall not be sooner than 30 days after Buyer (and its assigns) receives such notice; (ii) Immediately after giving effect to such termination, the Net Receivables Balance is at least equal to the sum of the Aggregate Capital plus the Aggregate Reserves (and such Terminating Origina tor in its capacity as a Servicer shall have delivered a Monthly Report setting forth the calculations evidencing satisfaction of this condition precedent); 7 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (iii) Both immediately before and after giving effect to such termination, no Termination Event or Potential Termination Event hereunder and no Amortization Event or Potential Amortization Event under the Purchase Agreement shall have occurred and be continuing or shall reasonably be expected occur and such Terminating Originator shall be deemed to have represented and warranted as to such on and as of the Termination Effective Date (such representation and warranty to survive such Terminating Originator's termination as a party hereto); (iv) No Material Adverse Effect shall occur as a result of such termination or shall reasonably be expected to occur, and such Terminating Originator shall be deemed to have represented and warranted as to such on and as of the Termination Effective Date (such representation and warranty to survive such Terminating Originator's termination as a party hereto); and (v) No other Originator shall have terminated its obligation to transfer Receivables hereunder prior to the Termination Effective Date (as hereinafter defined). Any termination by an Originator pursuant to this Section 1.7 shall become effective on (the "Termination Effective Date") the later to occur of (i) the first Business Day that follows the day on which the requirements of foregoing clauses (i) through (v) shall have been satisfied or (ii) the date specified in the notice referred to in the foregoing clause (i). Any termination by an Originator pursuant to this Section 1.7 shall terminate such Originator's right and obligation to sell Receivables and the related Related Security and Collections hereunder to Buyer and Buyer's agreement, with respect to such Originator, to purchase such Receivables and Related Security and Collections; provided, however, that such termination shall not relieve such Originator of any of its other obligations, to the extent such obligations relate to Receivables (and Related Security and Collections with respect thereto) originated by such Originator prior to the Termination Effective Date. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of Originator. Each Originator hereby represents and warrants to Buyer on the date hereof, on the date of the Purchase and on each date that any Receivable of such Originator comes into existence that: 8 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (a) Corporate Existence and Power. Such Originator is a corpora tion, limited liability company or limited partnership duly organized and validly existing in good standing under the laws of its state of organization. Each such Originator is duly qualified to do business and is in good standing as a foreign corporation or entity, and has and holds all corporate or other power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except to the extent that the failure to so qualify or hold could not reasonably be expected to have a Material Adverse Effect. (b) Power and Authority; Due Authorization, Execution and Delivery. The execution and delivery by such Originator of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and such Originator's use of the proceeds of the Purchase from such Originator made hereunder, are within its corporate or other powers and authority, and have been duly authorized by all necessary corporate or other action on its part. This Agreement and each other Transaction Document to which such Originator is a party has been duly executed and delivered by such Originator. (c) No Conflict. The execution and delivery by such Originator of this Agreement and each other Transaction Document to which it is a party, and the perfor mance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate or articles of incorporation or by-laws (or equivalent organizational documents) or any shareholder agreements, voting trusts or similar arrangements applicable to any of its authorized shares or other equity interests, (ii) any law, rule or regulation applicable to it, (iii) any restric tions under any material agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on assets of such Originator or its Subsidiaries (except as created hereunder). No transaction contemplated hereby requires compliance with any bulk sales act or similar law. (d) Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Originator of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereun der. (e) Actions, Suits. There are no actions, suits or proceedings pending, or to the best of such Originator's knowledge, threatened, against or affecting such Originator, or any of its properties, in or before any court, arbitrator or other body, that 9 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT could reasonably be expected to have a Material Adverse Effect. Such Originator is not in default with respect to any order of any court, arbitrator or governmental body. (f) Binding Effect. This Agreement and each other Transaction Document to which such Originator is a party constitute the legal, valid and binding obligations of such Originator enforceable against such Originator in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (g) Accuracy of Information. All information heretofore furnished by such Originator or any of its Affiliates to Buyer (or its assigns) for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by such Originator or any of its Affiliates to Buyer (or its assigns) will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances made or presented. (h) Use of Proceeds. No proceeds of any Purchase Price payment to such Originator hereunder will be used (i) for a purpose that violates, or would be inconsis tent with, any law, rule or regulation applicable to such Originator or (ii) to acquire any security in any transaction which is subject to Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) Good Title. Immediately prior to the Purchase hereunder and upon the creation of each Receivable coming into existence after the Initial Cut-Off Date, such Originator (i) is the legal and beneficial owner of the Receivables to be sold by such Originator hereunder, and (ii) is the legal and beneficial owner of the Related Security with respect thereto or possesses a valid and perfected security interest therein, in each case, free and clear of any Adverse Claim, except as created by the Transaction Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect such Originator's ownership interest in each Receivable, its Collections and the Related Security. (j) Perfection. This Agreement, together with the filing of the financing statements contemplated hereby, is effective to transfer to Buyer (and Buyer shall acquire from such Originator) (i) legal and equitable title to, with the right to sell and 10 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT encumber each Receivable existing or hereafter arising, together with the Collections with respect thereto, and (ii) all of such Originator's right, title and interest in the Related Security associated with each Receivable, in each case, free and clear of any Adverse Claim, except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Buyer's ownership interest in the Receivables, the Related Security and the Collections. (k) Jurisdiction of Organization; Places of Business; etc. Exhibit II correctly sets forth such Originator's legal name, jurisdiction of organization, Federal Em ployer's Identification Number and State Organizational Identification Number. Such Origina tor's principal places of business and chief executive office and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit II or such other locations of which Buyer has been notified in accordance with Section 4.2(a) in jurisdictions where all action required by Section 4.2(a) has been taken and completed. Such Originator has not within the period of six months prior to the date hereof, (i) changed its location (as within the meaning of Section 9-307 of the UCC), except as set forth on Exhibit II or (ii) changed its legal name (except as set forth on Exhibit II), corporate structure or become a "new debtor" (as within the meaning of Section 9-102(a)(56) of the UCC) with respect to a currently effective security agreement previously entered into by any other Person. Such Originator is a "registered organization" (within the meaning of Section 9-102 of the UCC as in effect in the applicable jurisdiction). (l) Collections. The conditions and requirements set forth in Section 4.1(j) have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts of such Originator at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit III. Such Originator has not granted any Person, other than Buyer (and its assigns) dominion and control or "control" (within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of any Lock-Box or Collection Account, or the right to take dominion and control or "control" (within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event. (m) Material Adverse Effect. Since December 31, 1999, in the case of each Existing Originator and, May 31, 2001 in the case of each other Originator, no event has occurred that would have a Material Adverse Effect. (n) Names. In the past five (5) years, such Originator has not used any corporate names, trade names or assumed names other than as listed on Exhibit II. 11 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (o) Not a Holding Company or an Investment Company. Such Originator is not a "holding company" or a "subsidiary holding company" of a "holding com pany" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Such Originator is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or any successor statute. (p) Compliance with Law. Such Originator has complied in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with any Writing or Contract related thereto, does not contravene any laws, rules or regulations applica ble thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Writing or Contract is in violation of any such law, rule or regu lation. (q) Compliance with Credit and Collection Policies. Such Origina tor has complied in all material respects with such Originator's Credit and Collection Policy with regard to each Receivable and any related Writing or Contract, and has not made any material change to such Credit and Collection Policy, except such material change as to which Buyer (or its assigns) has been notified in accordance with Section 4.1(a)(vii). (r) Payments to Originator. With respect to each Receivable transferred to Buyer by such Originator hereunder, the Purchase Price received by such Originator constitutes reasonably equivalent value in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by such Originator of any Receivable hereunder is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. ss.ss. 101 et seq.), as amended. (s) Enforceability of Contracts. Each Contract, if any, with respect to each Receivable sold by such Originator hereunder is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (t) Eligible Receivables. Each Receivable sold by such Originator hereunder and included at any time in the Net Receivables Balance as an Eligible 12 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT Receivable was, on the later to occur of the date of the Purchase and the date it came into existence, an Eligible Receivable on such date. (u) Accounting. The manner in which such Originator accounts for the transactions contemplated by this Agreement does not jeopardize the true sale analysis. (v) No Adverse Selection. To the extent that such Originator has retained Receivables that would be Eligible Receivables but which have not been transferred to Buyer hereunder, such Originator has not selected those Receivables to be transferred hereunder in any manner that materially adversely affects Buyer. ARTICLE III CONDITIONS OF PURCHASE Section 3.1 Conditions Precedent to Purchase. The effectiveness of this Agreement is subject to the conditions precedent that Buyer shall have received on or before the Closing Date those documents listed on Schedule A and all of the conditions to the effectiveness of the Purchase Agreement shall have been satisfied or waived in accordance with the terms thereof. Section 3.2 Conditions Precedent to Subsequent Payments. Buyer's obligation to pay for Receivables coming into existence after the Initial Cutoff Date shall be subject to the further conditions precedent that the Facility Termination Date shall not have occurred; (b) Buyer (or its assigns) shall have received such other approvals, opinions or documents as it may reasonably request and (c) on the date such Receivable came into existence, the following statements shall be true (and acceptance of the proceeds by any Originator of any payment for such Receivable shall be deemed a representation and warranty by such Originator that such statements are then true): (i) the representations and warranties of such Originator set forth in Article II are true and correct on and as of the date such Receivable came into existence as though made on and as of such date; and (ii) no event has occurred and is continuing that will constitute a Termination Event or a Potential Termination Event. 13 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT Notwithstanding the foregoing conditions precedent, upon payment of the Purchase Price for any Receivable (whether by payment of cash, through an increase in the amounts outstanding under the Subordinated Notes, by offset of amounts owed to Buyer and/or by offset of capital contributions), title to such Receivable and the Related Security and Collections with respect thereto shall vest in Buyer, whether or not the conditions precedent to Buyer's obligation to pay for such Receivable were in fact satisfied. The failure of any Originator to satisfy any of the foregoing conditions precedent, however, shall give rise to a right of Buyer to rescind the related purchase and direct such Originator to pay to Buyer an amount equal to the Purchase Price payment that shall have been made with respect to any Receivables related thereto. ARTICLE IV COVENANTS Section 4.1 Affirmative Covenants of the Originators. Until the date on which this Agreement terminates in accordance with its terms, each Originator hereby cove nants as set forth below: (a) Financial Reporting. Such Originator will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish to Buyer (and its assigns to the extent not furnished by Buyer under the Purchase Agreement): (i) Annual Reporting. Within 90 days after the close of each of its respective fiscal years, audited, unqualified consolidated financial statements (which shall include balance sheets, statements of income and retained earnings and a statement of cash flows) for Provider for such fiscal year certified in a manner acceptable to the Buyer by independent public accountants acceptable to the Buyer. (ii) Quarterly Reporting. Within 45 days after the close of the first three (3) quarterly periods of each of its respective fiscal years, (A) consolidated balance sheets of Provider and its Subsidiaries as at the close of each such period and (B) consolidated statements of income and retained earnings and a statement of cash flows for Provider for the period from the beginning of such fiscal year to the end of such quarter. (iii) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substan tially the form of Exhibit IV signed by such Originator's Authorized 14 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT Officer and dated the date of such annual financial statement or such quarterly financial statement, as the case may be. (iv) Copies of Notices. Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than Buyer or the Agent, copies of the same. (v) Change in Credit and Collection Policies. At least thirty (30) days prior to the effectiveness of any material change in or material amendment to such Originator's Credit and Collection Policy, a copy of such Originator's Credit and Collection Policy then in effect and a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables of such Originator or decrease the credit quality of any newly created Receivables of such Originator, requesting Buyer's consent thereto. (vi) Other Information. Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of such Originator as Buyer (or its assigns) may from time to time reasonably request in order to protect the interests of Buyer (and its assigns) under or as contem plated by this Agreement. (b) Notices. Such Originator will notify the Buyer (or its assigns) in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto: (i) Termination Events or Potential Termina tion Events. The occurrence of each Termination Event and each Potential Termination Event, by a statement of an Authorized Officer of such Originator. (ii) Judgment and Proceedings. The entry of any judgment or decree against such Originator or any of its Subsidiaries if the aggregate amount of all judgments and decrees then outstanding against Originator and its Subsidiaries that could reasonably be expected to have a Material Adverse Effect, and the institution of any litigation, arbitration proceeding or governmental proceeding against such Originator. 15 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (iii) Material Adverse Effect. The occurrence of any event or condition that has had, or could reasonably be expected to have, a Material Adverse Effect. (iv) Defaults Under Other Agreements. The occurrence of a default or an event of default under any other financing arrangement pursuant to which such Originator is a debtor or an obligor that could reasonably be expected to have a Material Adverse Effect. (c) Compliance with Laws and Preservation of Corporate Exis tence. Such Originator will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject if noncom pliance with any such law, rule, regulation, order, writ, judgment, injunction, decree or award could reasonably be expected to have a Material Adverse Effect. Such Originator will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except where the failure to so qualify or remain qualified could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect. (d) Audits. Such Originator will furnish to Buyer (or its assigns) from time to time such information with respect to it and the Receivables as Buyer (or its assigns) may reasonably request. Such Originator will, from time to time during regular business hours as requested by Buyer (or its assigns), upon reasonable notice, permit Buyer (or its assigns) or their respective agents or representatives (and shall cause Morningstar to permit Buyer (or its assigns) or their respective agents and representatives), (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Originator relating to the Receivables of such Originator and the Related Security, including, without limitation, the related Writings or Contracts, and (ii) to visit the offices and properties of such Originator for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Originator's financial condition or the Receivables of such Originator and the Related Security or such Originator's performance under any of the Transaction Documents or such Originator's performance under the Contracts and, in each case, with any of the officers or employees of such Originator having knowledge of such matters. All such examinations and visits shall be at the sole cost of such Originator; provided, however, that (i) for so long as no Termination Event or Potential Termination Event shall have occurred and be continuing and (ii) the result of the immediately preceding examination and/or visit of such Originator shall have been reasonably satisfactory to the Buyer (and its assigns), such cost shall be borne by such Originator not more than once per calendar year (although in no event shall the foregoing be construed to 16 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT limit the Buyer (or its assigns) to one such examination and/or visit during such calendar year period with respect to such Originator, provided, that if Buyer (or the Agent as Buyer's assign or its agents or representatives) fails to make any such examination and/or visit during any calendar year period, any Financial Institu tion (as Buyer's assign) or its agent or representatives may make such examination and/or visit in Buyer's stead). (e) Keeping and Marking of Records and Books. (i) Such Originator will (and will cause Morningstar to) maintain and implement administrative and operating proce dures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). Such Originator will (and will cause Morningstar to) give Buyer (or its assigns) notice of any material change in the administrative and operating procedures referred to in the previous sentence. (ii) Such Originator will (and will cause Morningstar to) (A) on or prior to June 30, 2000 with respect to any Existing Originator (other than GTL, Tuscan Dairies, Tuscan Management and each Dean Entity), on or prior to June 28, 2001 with respect to GTL, Tuscan Dairies and Tuscan Management, and on or prior to the date hereof with respect to each Dean Entity, mark its master data processing records and other books and records relating to the Receivables of such Originator with a legend, acceptable to Buyer (or its assigns), describing Buyer's ownership interests in the Receivables and further describing the Purchaser Interests of the Agent (on behalf of the Purchasers) under the Purchase Agreement and (B) upon the request of Buyer (or its assigns) following the occurrence and during the continuance of a Termination Event hereunder or an Amortization Event under the Purchase Agreement, (x) mark each Writing or Contract with a legend describing Buyer's ownership interests in the Receivables of such Originator and further describing the Purchaser Interests of the Agent (on behalf of the Purchasers) and (y) deliver to Buyer (or its assigns) all Writings and Contracts (including, without limitation, all multiple originals of any such Writing or Contract) relating to the Receivables. 17 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (f) Compliance with Contracts and Credit and Collection Policies. Such Originator will (and will cause Morningstar to) timely and fully (i) perform and comply with all provisions, covenants and other promises required to be observed by it under the Writings or Contracts related to the Receivables of such Originator or Morningstar, as applica ble, and (ii) comply in all material respects with the applicable Credit and Collection Policy in regard to each Receivable and the related Writing or Contract. (g) Ownership. Such Originator will (and, in the case of MRC, will cause Morningstar to) take all necessary action to establish and maintain, irrevocably in Buyer, (A) legal and equitable title to the Receivables of such Originator and the Collections and (B) all of such Originator's right, title and interest in the Related Security associated with the Receiv ables of such Originator, in each case, free and clear of any Adverse Claims other than Adverse Claims in favor of Buyer (and its assigns) (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Buyer's interest in such Receiv ables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of Buyer as Buyer (or its assigns) may reasonably request). MRC will cause Morningstar to take all necessary action to vest legal and equitable title to the Receivables, the Related Security and the Collections purchased under the Transfer Agreement irrevocably in MRC, free and clear of any Adverse Claims other than Adverse Claims in favor of Buyer (and its assigns) (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect MRC's interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of MRC therein as Buyer (or its assigns) may reasonably request). (h) Purchasers' Reliance. Each Originator acknowledges that the Agent and the Purchasers are entering into the transactions contemplated by the Purchase Agreement in reliance upon Buyer's identity as a legal entity that is separate from such Origina tor and any Affiliates thereof. Therefore, from and after the date of execution and delivery of this Agreement, such Originator will take all reasonable steps including, without limitation, all steps that Buyer or any assignee of Buyer may from time to time reasonably request to maintain Buyer's identity as a separate legal entity and to make it manifest to third parties that Buyer is an entity with assets and liabilities distinct from those of such Originator and any Affiliates thereof and not just a division of such Originator or any such Affiliate. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, such Originator (i) will not hold itself out to third parties as liable for the debts of Buyer nor purport to own the Receivables and other assets acquired by Buyer, (ii) will take all other actions necessary on its part to ensure that Buyer is at all times in compliance with the covenants set forth in Section 7.1(i) of the Purchase Agreement and (iii) will cause 18 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT all tax liabilities arising in connection with the transactions contemplated herein or otherwise to be allocated between such Originator and Buyer on an arm's-length basis and in a manner consistent with the procedures set forth in U.S. Treasury Regulations Sections 1.1502-33(d) and 1.1552-1. (i) Collections. Such Originator will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (2) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to Receivables are remitted directly to such Originator or any Affiliate of such Originator, such Originator will remit (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof and, at all times prior to such remittance, such Originator will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of Buyer and its assigns. Such Originator will transfer exclusive ownership, dominion and control (including "control" within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of each Lock-Box and Collection Account to Buyer and, will not grant the right to take dominion and control or grant "control" (within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of any Lock- Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to Buyer (or its assigns) as contemplated by this Agreement and the Purchase Agreement. (j) Taxes. Such Originator will file all tax returns and reports required by law to be filed by it and promptly pay all taxes and governmental charges at any time owing except for taxes not yet due or that are being diligently contested in good faith by appropriate proceedings and that have been adequately reserved against in accordance with GAAP. Such Originator will pay when due any taxes payable in connection with the Receivables of such Originator, exclusive of taxes on or measured by income or gross receipts of Buyer and its assigns. (k) Performance and Enforcement of Transfer Agreement. MRC will and will require Morningstar to, perform each of their respective obligations and undertakings under and pursuant to the Transfer Agreement, will purchase Receivables thereunder in strict compliance with the terms thereof and will vigorously enforce the rights and remedies accorded to MRC under the Transfer Agreement. MRC will take all actions to perfect and enforce its rights and interests (and the rights and interests of Buyer as assignee of MRC) under the Transfer Agreement as Buyer (or its assigns) may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Transfer Agreement. 19 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (l) Payment to Morningstar. With respect to any Receivable purchased by MRC from Morningstar, such sale shall be effected under, and in strict compli ance with the terms of, the Transfer Agreement, including without limitation, the terms relating to the amount and timing of payments to be made to Morningstar in respect of the purchase price for such Receivable. (m) Local Collections. On or prior to the Lock-Box Date, such Originator (if and to the extent it is a Local Originator) shall have notified all Obligors of Receivables originated by such Originator to pay all Collections on such Receivables directly to a Lock-Box or Collection Account and, to the extent any such Lock-Box or Collection Account is not in existence on the date hereof, such Originator shall have transferred exclusive owner ship, dominion and control (including "control" within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of such Lock-Box or Collection Account to Buyer (or its assigns) and shall have delivered, on or prior to the Lock-Box Date, an executed Collection Account Agreement acceptable to Buyer (and its assigns) with respect to such new Lock-Box or Collection Account. (n) Amendments to Existing Collection Account Agreements. On or prior to the Lock-Box Date, such Originator shall deliver to Buyer (and its assigns) duly executed amendments to each of the Collection Account Agreements executed and delivered in connection with the Original Sale Agreement, each such amendment to be in form and sub stance reasonably satisfactory to Buyer (and its assigns). (o) Chase Accounts. Such Originator will, prior to the Lock-Box Date (if and to the extent any Collections of Receivables originated by such Originator are currently remitted to a Chase Lock-Box), (i) terminate (or caused to be terminated) the Chase Bank of Texas as a Collection Bank and (ii) instruct all Obligors currently remitting payments to any Chase Lock-Box to remit such payments to another existing Lock-Box or Collection Account or a new Lock-Box or Collection Account as to which such Originator will, within the time period specified above, transfer exclusive ownership, dominion and control (including "control" within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of such Lock-Box or Collection Account to Buyer (or its assigns) and shall have delivered, on or prior to the Lock-Box Date, an executed Collection Account Agreement acceptable to Buyer (and its assigns) with respect to such new Lock-Box or Collection Account. On and after the Lock- Box Date, such Originator will not permit any Collections or any other proceeds of Receivables originated by it to be deposited to the Chase Lock-Boxes or the associated Collection Accounts. Section 4.2 Negative Covenants of the Originators. Until the date on which this Agreement terminates in accordance with its terms, each Originator hereby covenants that: 20 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (a) Name Change, Jurisdiction of Organization, Offices and Books of Account. Such Originator will not change its name, identity, corporate or other organiza tional structure or jurisdiction of organization (within the meaning of Sections 9-503 and/or 9- 507 of the UCC of all applicable jurisdictions) or relocate its chief executive office, principal place of business or any office where Records are kept unless it shall have: (i) given Buyer (or its assigns) at least thirty (30) days' prior written notice thereof and (ii) delivered to Buyer (or its assigns) all financing statements, instruments and other documents requested by Buyer (or its assigns) in connection with such change or relocation acceptable to the Agent. (b) Change in Payment Instructions to Obligors. Such Originator will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless Buyer (or its assigns) shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box; provided, however, that such Originator may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account. (c) Modifications to Writings, Contracts and Credit and Collection Policy. Such Originator will not (and MRC will not permit Morningstar to) make any change to its Credit and Collection Policy that could materially (either individually or in the aggregate) adversely affect the collectibility of the Receivables of such Originator or Morningstar, as applicable, or materially (either individually or in the aggregate) decrease the credit quality of any newly created Receivables of such Originator or Morningstar, as applicable. Except as otherwise permitted in its capacity as Servicer pursuant to Article VIII of the Purchase Agreement, no Originator will (and MRC will not permit Morningstar to) extend, amend or otherwise modify the terms of any Receivable or the Writing or Contract related thereto other than in accordance with such Originator's Credit and Collection Policy. (d) Sales, Liens. Such Originator will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any Receivable of such Originator or any Related Security or Collections, or upon or with respect to the Writing or Contract under which any Receivable of such Originator arises, or any Lock-Box or Collection Account, or assign any right to receive income with respect thereto (other than, in each case, the creation of the interests therein in favor of Buyer provided for herein), and such Originator will 21 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT defend the right, title and interest of Buyer in, to and under any of the foregoing property, against all claims of third parties claiming through or under such Originator. Such Originator shall not create or suffer to exist any mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any of its inventory the financing or lease of which gives rise to any Receivable of such Originator except in favor of the Collateral Agent in accordance with the Dean Credit Agree ment. (e) No Adverse Selection. To the extent that such Originator has retained Receivables that would be Eligible Receivables but which have not been transferred to Buyer hereunder, such Originator will not select those Receivables to be transferred hereunder in any manner that materially adversely affects Buyer. (f) Accounting for Purchase. Such Originator will not, and will not permit any Affiliate to, account for (whether in financial statements or otherwise) the transac tions contemplated hereby in any manner other than the sale of the Receivables of such Originator and the Related Security by such Originator to Buyer (other than for tax purposes) or in any other respect account for the transactions contemplated hereby in any manner other than as a sale of the Receivables of such Originator and the Related Security by such Originator to Buyer (other than for tax purposes) except to the extent that such transactions are not recog nized on account of consolidated financial reporting in accordance with GAAP. ARTICLE V TERMINATION EVENTS Section 5.1 Termination Events. The occurrence of any one or more of the following events shall constitute a Termination Event: (a) Any Originator shall fail (i) to make any payment or deposit of any amount consisting of principal required hereunder when due, or (ii) to make any payment or deposit of any other amount required hereunder when due and such failure shall continue for two (2) consecutive Business Days or (iii) to perform or observe any term, covenant or agreement set forth in Section 4.2 hereunder or (iv) to perform or observe any term, covenant or agreement set forth in Section 4.1(a) (iv) or (c)(second sentence only) hereunder (other than as referred to in clauses (i), (ii) or (iii) of this paragraph (a)) or in any other Transaction Document to which it is a party and such failure shall continue for thirty (30) consecutive days or (v) to perform or observe any term, covenant or agreement hereunder (other than as referred to in clauses (i), (ii), (iii) or (iv) of this paragraph (a) or in any other Transaction Document to which it is a party and such failure shall continue for five (5) consecutive Business Days. 22 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (b) Any representation, warranty, certification or statement made by any Originator in this Agreement, any other Transaction Document to which it is a party or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect when made or deemed made. (c) Failure of any Originator to pay any Indebtedness when due in excess of $50,000,000; or the default by such Originator in the performance of any term, provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of such Originator shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof. (d) Any Originator shall generally not pay its debts as such debts become due or shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted by or against any Originator seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or (iii) any Originator shall take any corporate action to authorize any of the actions set forth in the foregoing clauses (i) or (ii) of this subsection (d). (e) A Change of Control shall occur with respect to any Originator. (f) One or more final judgments for the payment of money in an amount in excess of $50,000,000, individually or in the aggregate, shall be entered against any Originator on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgment shall continue unsatisfied and in effect for thirty (30) consecutive days without a stay of execution. Section 5.2 Remedies. Upon the occurrence and during the continuation of a Termination Event, Buyer may take any of the following actions: (i) declare the Termination Date to have occurred, whereupon the Termination Date shall forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Originator; provided, however, that upon the occurrence of a Termination Event described in Section 5.1(d), or of an actual or deemed entry of an order for relief with respect to any Originator under the Federal Bankruptcy Code, the Termination Date shall 23 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Originator and (ii) to the fullest extent permitted by applicable law, declare that the Default Fee shall accrue with respect to any amounts then due and owing by each Originator to Buyer. The aforementioned rights and remedies shall be without limitation and shall be in addition to all other rights and remedies of Buyer and its assigns otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative. ARTICLE VI INDEMNIFICATION Section 6.1 Indemnities by the Originators. Without limiting any other rights that Buyer may have hereunder or under applicable law, each Originator hereby agrees to indemnify (and pay upon demand to) Buyer and its assigns (and their respective Affiliates), officers, directors and employees (each an "Indemnified Party") from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys' fees (which attorneys may be employees of Buyer or any such assign) and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by Buyer of an interest in the Receivables of such Originator, or any Contract or any Writing, excluding, however: (i) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification; (ii) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or (iii) franchise taxes and taxes imposed by the jurisdiction in which such Indemnified Party's principal executive office is located, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the character ization for income tax purposes of the acquisition by the Purchasers of Pur chaser Interests under the Purchase Agreement as a loan or loans 24 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT by the Purchasers to Buyer secured by, among other things, the Receivables, the Related Security and the Collections; provided, however, that nothing contained in this sentence shall limit the liability of any Originator or limit the recourse of Buyer to any Originator for amounts otherwise specifically provided to be paid by such Originator under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, each Originator shall indemnify Buyer for Indemni fied Amounts (including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Originator) relating to or resulting from: (i) any representation or warranty made by such Originator (or any officers of such Originator) under or in connection with this Agreement, any other Transaction Document or any other informa tion or report delivered by such Originator pursuant hereto or thereto that shall have been false or incorrect when made or deemed made; (ii) the failure by such Originator, to comply with any applicable law, rule or regulation with respect to any Receivable or Writing or Contract related thereto, or the nonconformity of any Receivable or Writing or Contract included therein with any such applicable law, rule or regulation or any failure of such Originator to keep or perform any of its obligations, express or implied, with respect to any Writing or Contract; (iii) any failure of such Originator to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document; (iv) any products liability, personal injury or damage, suit or other similar claim arising out of or in connection with mer chandise, insurance or services that are the subject of any Writing or Contract or any Receivable; (v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable of such Originator (including, without limitation, a defense based on such Receivable or the related Writing or Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accor dance with its terms), or any other claim resulting from the sale of the mer chandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services; 25 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (vi) the commingling of Collections of Receiv ables of such Originator at any time with other funds; (vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby, the use of the proceeds of any Purchase Price payment, the ownership of the Receivables of such Originator or any other investigation, litigation or proceeding relating to such Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby; (viii) any inability to litigate any claim against any Obligor in respect of any Receivable of such Originator as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding; (ix) any Termination Event described in Section 5.1(d); (x) any failure to vest and maintain vested in Buyer, or to transfer to Buyer, legal and equitable title to, and ownership of, the Receivables of such Originator and the Collections, and all of such Originator's right, title and interest in the Related Security associated with the Receivables of such Originator, in each case, free and clear of any Adverse Claim; (xi) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivable of such Originator and the Related Security and Collections with respect thereto, and the proceeds of any thereof, whether at the time of the Purchase or at any subsequent time; (xii) any action or omission by such Originator which reduces or impairs the rights of Buyer with respect to any Receivable of such Originator or the value of any such Receivable; 26 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (xiii) any attempt by any Person to void the Purchase hereunder under statutory provisions or common law or equitable action; (xiv) the failure of any Receivable of such Originator included in the calculation of the Net Receivables Balance as an Eligible Receivable to be an Eligible Receivable at the time so included; and (xv) any failure of MRC to acquire and maintain legal and equitable title to, and ownership of any Receivable and the Related Security and Collections with respect thereto from Morningstar, free and clear of any Adverse Claim (other than as created hereunder); or any failure of MRC to give reasonably equivalent value to Morningstar under the Transfer Agree ment in consideration of the transfer by Morningstar of any Receivable, or any attempt by any Person to void such transfer under statutory provisions or common law or equitable action. Section 6.2 Other Costs and Expenses. Each Originator shall be jointly and severally liable for, and shall pay on demand, to Buyer all costs and out-of-pocket expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder. Each Originator shall pay to Buyer on demand any and all costs and expenses of Buyer, if any, including reasonable counsel fees and expenses in connection with the enforcement of this Agreement against such Originator and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following a Termination Event. ARTICLE VII MISCELLANEOUS Section 7.1 Waivers and Amendments. (a) No failure or delay on the part of Buyer (or its assigns) in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given. 27 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (b) No provision of this Agreement may be amended, supple mented, modified or waived except in writing signed by both Originators and Buyer and, to the extent required under the Purchase Agreement, the Agent and the Purchasers or the Required Purchasers. Section 7.2 Notices. All communications and notices provided for hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or telecopy numbers set forth on Schedule E to the Purchase Agreement or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication shall be effective if given by telecopy, upon the receipt thereof, if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or if given by any other means, when received at the address specified in this Section 7.2. Section 7.3 Protection of Ownership Interests of Buyer. (a) Each Originator agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or desirable, or that Buyer (or its assigns) may request, to perfect, protect or more fully evidence the interest of Buyer hereunder and the Purchaser Interests, or to enable Buyer (or its assigns) to exercise and enforce their rights and remedies hereunder. Without limiting the foregoing, each Originator will, upon the request of Buyer (or its assigns), execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments and documents, that may be necessary or desirable, or that Buyer (or its assigns) may reasonably request, to perfect, protect or evidence such interest of Buyer (or such Purchaser Interests). At any time, Buyer (or its assigns) may, at the applicable Originator's sole cost and expense, direct such Originator to notify the Obligors of Receivables of such Origina tor of the ownership interests of Buyer under this Agreement and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to Buyer or its designee. (b) If any Originator fails to perform any of its obligations hereunder, Buyer (or its assigns) may (but shall not be required to) perform, or cause perfor mance of, such obligations, and Buyer's (or such assigns') costs and expenses incurred in connection therewith shall be payable by the Originators as provided in Section 6.2. Each Originator irrevocably authorizes Buyer (and its assigns) at any time and from time to time in the sole discretion of Buyer (or its assigns), and appoints Buyer (and its assigns) as its attorney(ies)-in-fact, to act on behalf of such Originator (i) to execute on behalf of such Originator as debtor and to file financing or continuation statements (and amendments 28 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT thereto and assignments thereof) necessary or desirable in Buyer's (or its assigns') sole discretion to perfect and to maintain the perfection and priority of the interest of Buyer in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as Buyer (or its assigns) in their sole discretion deem necessary or desirable to perfect and to maintain the perfection and priority of Buyer's interests in the Receivables. This appointment is coupled with an interest and is irrevocable. The authorization set forth in the second sentence of this Section 7.3(b) is intended to meet all requirements for authorization by a debtor under Article 9 of any applicable enactment of the UCC, including without limitation, Section 9-509 thereof. Section 7.4 Confidentiality. (a) Each Originator shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confiden tial or proprietary information with respect to the Agent and each Purchaser and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that such Originator and its officers and employees may disclose such information to such Originator's external accountants and attorneys and as required by any applicable law or order of any judicial or administrative proceeding. (b) Anything herein to the contrary notwithstanding, each Origina tor hereby consents to the disclosure of any nonpublic information with respect to it (i) to Buyer, the Agent, the Financial Institutions or the Companies by each other, (ii) by Buyer, the Agent or the Purchasers to any prospective or actual assignee or participant of any of them and (iii) by the Agent or any Purchaser to any rating agency, Funding Source, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to any Company or any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which Bank One or CLNY acts as the administrative agent and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing. In addition, the Purchasers and the Agent may disclose any such nonpublic information pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law). (c) Buyer shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential or propri etary information with respect to each Originator, the Obligors and their respective businesses obtained by it in connection with the due diligence evaluations, structuring, negotiating and execution of the Transaction Documents, and the consummation of the 29 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT transactions contem plated herein and any other activities of Buyer arising from or related to the transactions contemplated herein provided, however, that each of Buyer and its employees and officers shall be permitted to disclose such confidential or proprietary information: (i) to the Agent and the other Purchasers, (ii) to any prospective or actual assignee or participant of the Agent or the other Purchasers who execute a confidentiality agreement for the benefit of the Originators and Buyer on terms comparable to those required of Buyer hereunder with respect to such disclosed information, (iii) to any rating agency, Funding Source, provider of a surety, guaranty or credit or liquidity enhancement to any Company, (iv) to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, and (v) to the extent required pursuant to any applicable law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings with competent jurisdiction (whether or not having the force or effect of law) so long as such required disclosure is made under seal to the extent permitted by applicable law or by rule of court or other applicable body. Section 7.5 Bankruptcy Petition. Each Originator and Buyer each hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any Funding Source that is a special purpose bank ruptcy remote entity or of any Company, it will not institute against, or join any other Person in instituting against, any such entity or any Company any bankruptcy, reorganization, arrange ment, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. (a) Each Originator covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding obligations of Buyer under the Purchase Agreement, it will not institute against, or join any other Person in instituting against, Buyer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceed ings or other similar proceeding under the laws of the United States or any state of the United States. Section 7.6 Limitation of Liability. Except with respect to any claim arising out of the willful misconduct or gross negligence of any Company, the Agent or any Financial Institution, no claim may be made by any Originator or any other Person against any Company, the Agent or any Financial Institution or their respective Affiliates, directors, officers, employ ees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and each Originator hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 30 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT Section 7.7 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOV ERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS. Section 7.8 CONSENT TO JURISDICTION. EACH ORIGINATOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH ORIGINATOR PURSU ANT TO THIS AGREEMENT AND EACH ORIGINATOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJEC TION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF BUYER (OR ITS ASSIGNS) TO BRING PROCEEDINGS AGAINST ANY ORIGINATOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY ORIGINATOR AGAINST BUYER (OR ITS ASSIGNS) OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH ORIGINATOR PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. Section 7.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY ORIGINATOR PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER. Section 7.10 Integration; Binding Effect; Survival of Terms. (a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. 31 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (b) This Agreement shall be binding upon and inure to the benefit of each Originator and Buyer, and their respective successors and permitted assigns (including any trustee in bankruptcy). No Originator may assign any of its rights and obligations hereunder or any interest herein without the prior written consent of Buyer. Buyer may assign at any time its rights and obligations hereunder and interests herein to any other Person without the consent of any Originator. Without limiting the foregoing, each Originator acknowledges that Buyer, pursuant to the Purchase Agreement, may assign to the Agent, for the benefit of the Purchas ers, its rights, remedies, powers and privileges hereunder and that the Agent may further assign such rights, remedies, powers and privileges to the extent permitted in the Purchase Agreement. Each Originator agrees that the Agent, as the assignee of Buyer, shall, subject to the terms of the Purchase Agreement, have the right to enforce this Agreement and to exercise directly all of Buyer's rights and remedies under this Agreement (including, without limitation, the right to give or withhold any consents or approvals of Buyer to be given or withheld hereunder) and each Originator agrees to cooperate fully with the Agent in the exercise of such rights and remedies. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accor dance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by the Originators pursuant to Article II; (ii) the indemnification and payment provisions of Article VI; and (iii) Section 7.5 shall be continu ing and shall survive any termination of this Agreement. Section 7.11 Counterparts; Severability; Section References. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and sections of, and schedules and exhibits to, this Agreement. Section 7.12 Confirmation and Ratification of Terms. (a) Upon the effectiveness of this Agreement, each reference to the Original Sale Agreement in any other Transaction Document, and any document, instrument or agreement executed and/or delivered in connection with the Original Sale Agreement or any other Transaction Document, shall mean and be a reference to this Agreement. 32 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT (b) The other Transaction Documents and all agreements, instru ments and documents executed or delivered in connection with the Original Sale Agreement or any other Transaction Document shall each be deemed to be amended to the extent necessary, if any, to give effect to the provisions of this Agreement, as the same may be amended, modified, supplemented or restated from time to time. (c) The effect of this Agreement is to amend and restate the Original Sale Agreement in its entirety, and to the extent that any rights, benefits or provisions in favor of Buyer (or its assigns) existed in the Original Sale Agreement and continue to exist in this Agreement without any written waiver of any such rights, benefits or provisions prior to the date hereof, then such rights, benefits or provisions are acknowledged to be and to continue to be effective from and after June 30, 2000. This Agreement is not a novation. (d) The parties hereto agree and acknowledge that any and all rights, remedies and payment provisions under the Original Sale Agreement, including, without limitation, any and all rights, remedies and payment provisions with respect to (i) any represen tation and warranty made or deemed to be made pursuant to the Original Sale Agreement, or (ii) any indemnification provision, shall continue and survive the execution and delivery of this Agreement. [SIGNATURE PAGE FOLLOWS] 33 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof. DAIRY GROUP RECEIVABLES, L.P. By: Dairy Group Receivables GP, LLC Its: General Partner By: -------------------------------- Name: Title: 34 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT ALTA-DENA HOLDINGS, INC., as an Originator ALTA-DENA CERTIFIED DAIRY, INC., as an Originator BELL DAIRY PRODUCTS, INC., as an Originator BERKELEY FARMS, INC., as an Originator COUNTRY FRESH, LLC , as an Originator CREAMLAND DAIRIES, INC., as an Originator DEAN NORTHEAST, LLC (f/k/a SUIZA GTL, LLC), as an Originator DEAN FOODS COMPANY OF INDIANA, INC., as an Originator DEAN MILK COMPANY, INC., as an Originator DEAN FOODS NORTH CENTRAL, INC., as an Originator DEAN FOODS ICE CREAM COMPANY , as an Originator DEAN FOODS COMPANY OF CALIFORNIA, INC., as an Originator DEAN DAIRY PRODUCTS COMPANY , as an Originator GANDY'S DAIRIES, INC., as an Originator LAND-O-SUN DAIRIES, LLC , as an Originator LIBERTY DAIRY COMPANY, as an Originator MAYFIELD DAIRY FARMS, INC., as an Originator MCARTHUR DAIRY, INC., as an Originator MEADOW BROOK DAIRY COMPANY, as an Originator MORNINGSTAR RECEIVABLES CORP., as an Originator PURITY DAIRIES, INCORPORATED, as an Originator REITER DAIRY, INC., as an Originator RYAN FOODS NORTH CENTRAL, INC., as an Originator RYAN FOODS COMPANY, LLC, as an Originator T. G. LEE FOODS, INC., as an Originator TUSCAN/LEHIGH MANAGEMENT, L.L.C., as an Originator VERIFINE DAIRY PRODUCTS CORPORATION OF SHEBOYGAN, INC., as an Originator By: ----------------------------------- Name: Cory M. Olson Title: Vice President of each of the above named Originators 35 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT SOUTHERN FOODS GROUP, L.P., as an Originator By: SFG Management Limited Liability Company Its: General Partner By: ------------------------------------- Name: Cory M. Olson Title: Vice President 36 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT TUSCAN/LEHIGH DAIRIES, L.P., as an Originator By: Tuscan/Lehigh Management, L.L.C. Its: General Partner By: ------------------------------------- Name: Title: 37 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT EXHIBIT I Definitions This is Exhibit I to the Agreement (as hereinafter defined). As used in the Agreement and the Exhibits, Schedules and Annexes thereto, capitalized terms have the meanings set forth in this Exhibit I (such meanings to be equally applicable to the singular and plural forms thereof). If a capitalized term is used in the Agreement, or any Exhibit, Schedule or Annex thereto, and not otherwise defined therein or in this Exhibit I, such term shall have the meaning assigned thereto in Exhibit I to the Purchase Agreement. "Agent" has the meaning set forth in the Preliminary Statements to the Agreement. "Agreement" means the Amended and Restated Receivables Sale Agreement, dated as of December 21, 2001, between the Originators and Buyer, as the same may be amended, restated or otherwise modified. "Buyer" has the meaning set forth in the preamble to the Agreement. "Calculation Period" means each calendar month or portion thereof which elapses during the term of the Agreement. The first Calculation Period shall commence on the Closing Date and the final Calculation Period shall terminate on the Termination Date. "Change of Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of any Originator. "Credit and Collection Policy" means each Originator's credit and collection policies and practices relating to Writings, Contracts and Receivables existing on the date hereof and summarized in Exhibit V, as modified from time to time in accordance with the Agreement. "Default Fee" means a per annum rate of interest equal to the sum of (i) the Prime Rate, plus (ii) 2% per annum. "Demand Notes" has the meaning set forth in the Purchase Agreement. "Dilutions" means, at any time, the aggregate amount of reductions or cancellations described in Section 1.3(a) of the Agreement. Exh. I-1 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT "Discount Factor" means a percentage calculated to provide Buyer with a reasonable return on its investment in the Receivables of any Originator after taking account of (i) the time value of money based upon the anticipated dates of collection of the Receivables of such Originator and the cost to Buyer of financing its investment in the Receivables during such period and (ii) the risk of nonpayment by the Obligors. The Originator of such Receivables and Buyer may agree from time to time to change the Discount Factor based on changes in one or more of the items affecting the calculation thereof, provided that any change to the Discount Factor shall take effect as of the commencement of a Calculation Period, shall apply only prospectively and shall not affect the Purchase Price payment made prior to the Calculation Period during which such Originator and Buyer agree to make such change. "Initial Cutoff Date" has the meaning set forth in Section 1.2(a). "Material Adverse Effect" means a material adverse effect on (i) the financial condition or operations of any Originator and its Subsidiaries taken as a whole, (ii) the ability of any Originator to perform its obligations under the Agreement or any other Transaction Document, (iii) the legality, validity or enforceability of the Agreement or any other Transaction Document, (iv) any Originator's, Buyer's, the Agent's or any Purchaser's interest in the Receiv ables generally or in any significant portion of the Receivables, the Related Security or Collec tions with respect thereto, or (v) the collectibility of the Receivables generally or of any material portion of the Receivables. "Morningstar" means Morningstar Foods Inc., in its capacity as seller under the Transfer Agreement. "MRC" means Morningstar Receivables Corp., a Delaware corporation. "Net Value" means, as of any date of determination, an amount equal to the sum of (i) the aggregate Outstanding Balance of the Receivables at such time, minus (ii) the sum of (A) the Aggregate Capital outstanding at such time, plus (B) the Aggregate Reserves. "Net Worth" means, with respect to as of the last Business Day of each Calculation Period preceding any date of determination, the excess, if any, of (a) the aggregate Outstanding Balance of the Receivables at such time, over (b) the sum of (i) the Aggregate Capital outstanding at such time, plus (ii) the aggregate outstanding principal balance of the Subordinated Loans (including any Subordinated Loan proposed to be made on the date of determination). "Original Balance" means, with respect to any Receivable coming into existence after the Initial Cutoff Date, the Outstanding Balance of such Receivable on the date it was created. Exh. I-2 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT "Original Sale Agreement" has the meaning set forth in the Preliminary State ments to the Agreement. "Originator" has the meaning set forth in the preamble to the Agreement. "Potential Termination Event" means an event which, with the passage of time or the giving of notice, or both, would constitute a Termination Event. "Previously Sold Receivable" has the meaning set forth in the Preliminary Statements to the Agreement. "Purchase" means the purchase pursuant to Section 1.1(a) of the Agreement by Buyer from any Originator of the Receivables of such Originator and the Related Security and Collections related thereto, together with all related rights in connection therewith. "Purchase Agreement" has the meaning set forth in the Preliminary Statements to the Agreement. "Purchase Price" means, with respect to the Purchase from any Originator hereunder, the aggregate price to be paid by Buyer to such Originator for such Purchase in accordance with Section 1.2 of the Agreement for the Receivables of such Originator, Collec tions and Related Security being sold to Buyer, which price shall equal on any date (i) the product of (x) the Outstanding Balance of such Receivables on such date, multiplied by (y) one minus the Discount Factor in effect on such date, minus (ii) any Purchase Price Credits to be credited against the Purchase Price otherwise payable to such Originator in accordance with Section 1.3 of the Agreement. "Purchase Price Credit" has the meaning set forth in Section 1.3 of the Agreement. "Receivable" means all indebtedness and other obligations owed to an Origina tor or Morningstar (at the times it arises, and before giving effect to any transfer or conveyance under the Transfer Agreement or the Agreement) or Buyer (after giving effect to the transfers under the Transfer Agreement and the Agreement) or in which Morningstar, an Originator or Buyer has a security interest or other interest, including, without limitation, any indebtedness, obligation or interest constituting an account, chattel paper, instrument or general intangible, arising in connection with the sale of goods or the rendering of services by an Originator or Morningstar, and further includes, without limitation, the obligation to pay any Finance Charges with respect thereto. Indebtedness and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations repre sented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising Exh. I-3 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT from any other transac tion; provided, further, that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless or whether the account debtor or Morningstar or the Originator of such Receivable treats such indebtedness, rights or obligations as a separate payment obligation. "Related Security" means, with respect to any Receivable of any Originator: (i) all of such Originator's interest (and, in the case of MRC, all of Morningstar's interest) in the inventory and goods (including returned or repossessed inventory or goods), if any, the sale, financing or lease of which by such Originator or Morningstar, as applicable, gave rise to such Receivable, and all insurance contracts with respect thereto, (ii) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Writing or Contract related to such Receivable or otherwise, together with all financing statements and security agreements describing any collateral securing such Receivable, (iii) all guaranties, letters of credit, insurance, "supporting obligations" (within the meaning of Section 9-102(a) of the UCC of all applicable jurisdictions) and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Writing or Contract related to such Receivable or otherwise, (iv) all service contracts and other contracts and agreements associated with such Receivable, (v) all Records related to such Receivable, (vi) all of such Originator's right, title and interest in each Lock-Box and each Collection Account, (vii) all of MRC's interest in, to and under the Transfer Agreement, and (viii) all proceeds of any of the foregoing. "Required Capital Amount" means, as of any date of determination, the greater of (a) an amount equal to the sum of (i) the twenty-four month rolling average of Exh. I-4 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT Dilutions, plus (ii) the result obtained in the foregoing clause (i) of this definition, multiplied by 10% and (b)$4,500,000. "Settlement Date" means, with respect to each Calculation Period, the date that is the 5th Business Day of the month following such Calculation Period. "Subordinated Loan" has the meaning set forth in Section 1.2(a) of the Agreement. "Subordinated Note" means a promissory note in substantially the form of Exhibit VII hereto as more fully described in Section 1.2 of the Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Termination Date" means the earliest to occur of (i) the Facility Termination Date, (ii) the Business Day immediately prior to the occurrence of a Termination Event set forth in Section 5.1(d), (iii) the Business Day specified in a written notice from Buyer to Originator following the occurrence of any other Termination Event, and (iv) the date which is 15 Business Days after Buyer's receipt of written notice from Originator that it wishes to terminate the facility evidenced by the Agreement. "Termination Event" has the meaning set forth in Section 5.1 of the Agreement. "Transaction Documents" means, collectively, this Agreement, the Transfer Agreement, each Collection Account Agreement, the Demand Notes, the Subordinated Notes and all other instruments, documents and agreements executed and delivered in connection herewith. "Transfer Agreement" means that certain Amended and Restated Receivables Transfer Agreement dated as of December 21, 2001, between Morningstar and MRC, as amended, restated, supplemented or otherwise modified from time to time. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of Illinois, and not specifically defined herein, are used herein as defined in such Article 9. Exh. I-5 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT EXHIBIT II PRINCIPAL PLACE OF BUSINESS; LOCATION(S) OF RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBER; OTHER NAMES See Exhibit III to the Purchase Agreement AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT EXHIBIT III NAME OF COLLECTION BANKS; COLLECTION ACCOUNTS See Exhibit IV to the Purchase Agreement AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT EXHIBIT IV Form of Compliance Certificate This Compliance Certificate is furnished pursuant to that certain Amended and Restated Receivables Sale Agreement dated as of December 21, 2001, by and among the Originators named therein, and Dairy Group Receivables, L.P. a Delaware limited partnership ("Buyer") (the "Agreement"). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Agreement. THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected ______________ of [name(s) of Originator(s)]. 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of [name(s) of Originator(s)] and its Subsidiaries during the accounting period covered by the attached financial statements. 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Termination Event or a Potential Termination Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below. 4. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action that [name(s) of Originator(s)] has taken, is taking, or proposes to take with respect to each such condition or event: 5. As of the date hereof, the jurisdiction of organization of [name(s) of Originator(s)] is [_______] and [name(s) of Originator(s)] is a "registered organization" (within the meaning of Section 9-102 of the UCC in effect in such applicable jurisdiction) and [name(s) of Originator(s)] has not changed its jurisdiction of organization since the date of the Agreement. The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this day of , 20__. By: ------------------------ [Name] AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT EXHIBIT V Credit and Collection Policies SEE ATTACHED DOCUMENTS AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT EXHIBIT VI [Intentionally omitted.] AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT EXHIBIT VII Form of Subordinated Note SUBORDINATED NOTE ______________, 2000 1. Note. FOR VALUE RECEIVED, the undersigned, Dairy Group Receivables, L.P., a Delaware limited partnership ("SPV"), hereby unconditionally promises to pay to the order of [name of Originator], a(n) __________ [corporation][limited partnership][limited liability company] ("Originator"), in lawful money of the United States of America and in immediately available funds, on the date following the Termination Date which is one year and one day after the date on which (i) the Outstanding Balance of all Receivables sold under the "Sale Agreement" referred to below has been reduced to zero and (ii) Originator has paid to the Buyer all indemnities, adjustments and other amounts which may be owed thereunder in connection with the Purchases (the "Collection Date"), the aggregate unpaid principal sum outstanding of all "Subordinated Loans" made from time to time by Originator to SPV pursuant to and in accordance with the terms of that certain Amended and Restated Receivables Sale Agreement dated as of December 21, 2001, among Originator, the other Originators named therein and SPV (as amended, restated, supplemented or otherwise modified from time to time, the "Sale Agreement"). Reference to Section 1.2 of the Sale Agreement is hereby made for a statement of the terms and conditions under which the loans evidenced hereby have been and will be made. All terms which are capitalized and used herein and which are not otherwise specifically defined herein shall have the meanings ascribed to such terms in the Sale Agreement. 2. Interest. SPV further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full hereof at a rate equal to the Prime Rate; provided, however, that if SPV shall default in the payment of any principal hereof, SPV promises to pay, on demand, interest at the rate of the Prime Rate plus 2.00% per annum on any such unpaid amounts, from the date such payment is due to the date of actual payment. Interest shall be payable on the first Business Day of each month in arrears; provided, however, that SPV may elect on the date any interest payment is due hereunder to defer such payment and upon such election the amount of interest due but unpaid on such date shall constitute principal under this Subordinated Note. The outstanding principal of any loan made under this Subordinated Note shall be due and payable on the Collection Date and may be repaid or prepaid at any time without premium or penalty. 3. Principal Payments. Originator is authorized and directed by SPV to enter on the grid attached hereto, or, at its option, in its books and records, the date and amount of each loan made by it which is evidenced by this Subordinated Note and the Exh. VII-1 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT amount of each payment of principal made by SPV, and absent manifest error, such entries shall constitute prima facie evidence of the accuracy of the information so entered; provided that neither the failure of Originator to make any such entry or any error therein shall expand, limit or affect the obligations of SPV hereunder. 4. Subordination. Originator shall have the right to receive, and SPV shall make, any and all payments relating to the loans made under this Subordinated Note provided that, after giving effect to any such payment, the aggregate Outstanding Balance of Receivables (as each such term is defined in the Purchase Agreement hereinafter referred to) owned by SPV at such time exceeds the sum of (a) the Aggregate Unpaids (as defined in the Purchase Agreement) outstanding at such time under the Purchase Agreement, plus (b) the aggregate outstanding principal balance of all loans made under this Subordinated Note. Originator hereby agrees that at any time during which the conditions set forth in the proviso of the immediately preceding sentence shall not be satisfied, Originator shall be subordinate in right of payment to the prior payment of any indebtedness or obligation of SPV owing to the Agent or any Purchaser under that certain Amended and Restated Receivables Purchase Agreement dated as of December 21, 2001, by and among SPV, the Servicers (as defined therein), various "Purchasers" from time to time party thereto, and Bank One, NA (Main Office Chicago), as the "Agent" (as amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement"). The subordination provisions contained herein are for the direct benefit of, and may be enforced by, the Agent and the Purchasers and/or any of their respective assignees (collectively, the "Senior Claimants") under the Purchase Agreement. Until the date on which all "Capital" outstanding under the Purchase Agreement has been repaid in full and all other obligations of SPV and/or the Servicers thereunder and under the "Fee Letters" referenced therein (all such obligations, collectively, the "Senior Claim") have been indefeasibly paid and satisfied in full, Originator shall not institute against SPV any proceeding of the type described in Section 5.1(d) of the Sale Agreement unless and until the Collection Date has occurred. Should any payment, distribution or security or proceeds thereof be received by Originator in violation of this Section 4, Originator agrees that such payment shall be segregated, received and held in trust for the benefit of, and deemed to be the property of, and shall be immediately paid over and delivered to the Agent for the benefit of the Senior Claimants. 5. Bankruptcy; Insolvency. Upon the occurrence of any proceeding of the type described in Section 5.1(d) of the Sale Agreement involving SPV as debtor, then and in any such event the Senior Claimants shall receive payment in full of all amounts due or to become due on or in respect of the Aggregate Capital and the Senior Claim (including "CP Costs" and "Yield" as defined and as accruing under the Purchase Agreement after the commencement of any such proceeding, whether or not any or all of such CP Costs or Yield is an allowable claim in any such proceeding) before Originator is entitled to receive payment on account of this Subordinated Note, and to that end, any payment or distribution of assets of SPV of any kind or character, whether in cash, securities or other property, in any Exh. VII-2 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT applicable insolvency proceeding, which would otherwise be payable to or deliverable upon or with respect to any or all indebtedness under this Subordinated Note, is hereby assigned to and shall be paid or delivered by the Person making such payment or delivery (whether a trustee in bankruptcy, a receiver, custodian or liquidating trustee or otherwise) directly to the Agent for application to, or as collateral for the payment of, the Senior Claim until such Senior Claim shall have been paid in full and satisfied. 6. Amendments. This Subordinated Note shall not be amended or modified except in accordance with Section 7.1 of the Sale Agreement. The terms of this Subordinated Note may not be amended or otherwise modified without the prior written consent of the Agent for the benefit of the Purchasers. 7. GOVERNING LAW. THIS SUBORDINATED NOTE HAS BEEN MADE AND DELIVERED AT CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS. WHEREVER POSSIBLE EACH PROVISION OF THIS SUBORDINATED NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS SUBORDINATED NOTE. 8. Waivers. All parties hereto, whether as makers, endorsers, or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. Originator additionally expressly waives all notice of the acceptance by any Senior Claimant of the subordination and other provisions of this Subordinated Note and expressly waives reliance by any Senior Claimant upon the subordination and other provisions herein provided. 9. Assignment. This Subordinated Note may not be assigned, pledged or otherwise transferred to any party other than Originator without the prior written consent of the Agent, and any such attempted transfer shall be void. [SIGNATURE PAGE FOLLOWS] Exh. VII-3 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT DAIRY GROUP RECEIVABLES, L.P. By:_____________________________ Title: Exh. VII-4 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT Schedule to SUBORDINATED NOTE SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL
Amount of Amount of Unpaid Subordinated Principal Principal Notation made Date Loan Paid Balance by - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- ------------- - ---- ------------ --------- --------- -------------
Exh. VII-5 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT SCHEDULE A DOCUMENTS TO BE DELIVERED TO BUYER ON OR PRIOR TO THE PURCHASE SEE PART I OF SCHEDULE B TO THE PURCHASE AGREEMENT. EX-10.17 10 d95076ex10-17.txt AMENDED/RESTATED RECEIVABLES TRANSFER AGREEMENT EXHIBIT 10.17 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT DATED AS OF DECEMBER 21, 2001 BETWEEN MORNINGSTAR FOODS, INC, as Seller, AND MORNINGSTAR RECEIVABLES CORP., as Buyer AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT TABLE OF CONTENTS
Page ---- ARTICLE I AMOUNTS AND TERMS OF THE PURCHASE......................................................2 Section 1.1 Purchase of Receivables.................................................2 Section 1.2 Payment for the Purchase................................................3 Section 1.3 Purchase Price Credit Adjustments.......................................5 Section 1.4 Payments and Computations, Etc..........................................6 Section 1.5 Transfer of Records.....................................................6 Section 1.6 Characterization........................................................7 ARTICLE II REPRESENTATIONS AND WARRANTIES.........................................................7 Section 2.1 Representations and Warranties of Morningstar...........................7 ARTICLE III CONDITIONS OF PURCHASE................................................................12 Section 3.1 Conditions Precedent to Purchase.......................................12 Section 3.2 Conditions Precedent to Subsequent Payments............................12 ARTICLE IV COVENANTS.............................................................................13 Section 4.1 Affirmative Covenants of the Originator................................13 Section 4.2 Negative Covenants.....................................................18 ARTICLE V TERMINATION EVENTS....................................................................19 Section 5.1 Termination Events.....................................................19 Section 5.2 Remedies...............................................................21 ARTICLE VI INDEMNIFICATION.......................................................................21 Section 6.1 Indemnities by Morningstar.............................................21 Section 6.2 Other Costs and Expenses...............................................24 ARTICLE VII MISCELLANEOUS.........................................................................24 Section 7.1 Waivers and Amendments.................................................24
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Page ---- Section 7.2 Notices................................................................25 Section 7.3 Protection of Ownership Interests of Buyer.............................25 Section 7.4 Confidentiality........................................................26 Section 7.5 Bankruptcy Petition....................................................27 Section 7.6 Limitation of Liability................................................27 Section 7.7 CHOICE OF LAW..........................................................27 Section 7.8 CONSENT TO JURISDICTION................................................28 Section 7.9 WAIVER OF JURY TRIAL...................................................28 Section 7.10 Integration; Binding Effect; Survival of Terms.........................28 Section 7.11 Counterparts; Severability; Section References.........................29 Section 7.12 Confirmation and Ratification of Terms.................................29
-ii- Exhibits and Schedules Exhibit I - Definitions Exhibit II - Principal Place of Business; Location(s) of Records; Federal Employer Identification Number; Other Names Exhibit III - Lock-Boxes; Collection Accounts; Collection Banks Exhibit IV - Form of Compliance Certificate Exhibit V - Credit and Collection Policies Exhibit VI - [Intentionally Omitted.] Exhibit VII - Form of Subordinated Transfer Note Schedule A List of Documents to Be Delivered to Buyer Prior to the Purchase -iii- AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT THIS AMENDED AND RESTATED RECEIVABLES TRANSFER AGREE MENT, dated as of December 21, 2001, is by and between Morningstar Foods Inc., a Delaware corporation ("Morningstar"), and Morningstar Receivables Corp., a Delaware corporation, ("Buyer"). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I hereto (or, if not defined in Exhibit I hereto, the meaning assigned to such term in Exhibit I to the Purchase Agreement). PRELIMINARY STATEMENTS Morningstar and Buyer entered into that certain Receivables Transfer Agree ment, dated as of June 30, 2000 (as amended, restated or otherwise modified prior to the date hereof, the "Original Transfer Agreement"), pursuant to which Morningstar sold and assigned to Buyer, and Buyer purchased from Morningstar, all of Morningstar's right, title and interest in and to Morningstar's Receivables, together with the Related Security and Collections with respect thereto. Morningstar desires to continue to sell and assign to Buyer, and Buyer desires to continue to purchase Morningstar's Receivables and the Related Security and Collections with respect thereto. Buyer continues to own all Receivables of Morningstar outstanding as of the close of business on the Business Day immediately prior to the date hereof and previously conveyed pursuant to the Original Transfer Agreement (such Receivables, the "Previously Sold Receivables"). Morningstar and Buyer intend the transactions contemplated hereby to be true sales of the Receivables from Morningstar to Buyer, providing Buyer with the full benefits of ownership of the Receivables, and neither Morningstar nor Buyer intend these transactions to be, or for any purpose (other than tax) to be characterized as, loans from Buyer to Morningstar. Following the purchase of Receivables from Morningstar, Buyer will sell its interests therein and in the associated Related Security and Collections pursuant to that certain Amended and Restated Receivables Sale Agreement dated as of December 21, 2001 (as the same may from time to time hereafter be amended, supplemented, restated or otherwise modified, the "Sale Agreement") among Buyer, as an Originator (as defined under the Sale Agreement), the other Originators named therein, and Dairy Group Receivables, L.P. (f/k/a Suiza Receivables, L.P., a Delaware limited partnership ("Dairy Group L.P."). AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Following the purchase of such Receivables from the Originators, Dairy Group L.P. will sell undivided interests therein and in the associated Related Security and Collections pursuant to that certain Amended and Restated Receivables Purchase Agreement dated as of December 21, 2001 (as the same may from time to time hereafter be amended, supplemented, restated or otherwise modified, the "Purchase Agreement") among Dairy Group, L.P., the Originators, as Servicers, the Companies (as defined therein), the financial institutions from time to time party thereto as "Financial Institutions" and Bank One, NA (Main Office Chicago) or any successor agent appointed pursuant to the terms of the Purchase Agreement, as agent for the Companies and such Financial Institutions (in such capacity, the "Agent"). Morningstar and Buyer now desire to amend and restate the Original Transfer Agreement in its entirety, subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree that, subject to the satisfaction of the conditions set forth in Section 3.1 hereof, the Original Transfer Agreement is hereby amended and restated in its entirety to read as follows: ARTICLE I AMOUNTS AND TERMS OF THE PURCHASE Section 1.1 Purchase of Receivables. (a) Effective on the date hereof, in consideration for the Purchase Price and upon the terms and subject to the conditions set forth herein, Morningstar does hereby sell, assign, transfer, set-over and otherwise convey to Buyer, without recourse (except to the extent expressly provided herein), and Buyer does hereby purchase from Morningstar, all of Morningstar's right, title and interest in and to all Receivables existing as of the close of business on the Business Day immediately prior to the date hereof other than the Previously Sold Receivables (which have been previously sold and assigned to Buyer) and all Receivables thereafter arising through and including the Termination Date, together, in each case, with all Related Security relating thereto and all Collections thereof. In accordance with the preceding sentence, on the date hereof Buyer shall acquire all of Morningstar's right, title and interest in and to all Receivables existing as of the close of business on the Business Day immediately prior to the date hereof (other than the Previously Sold Receivables) and thereafter arising through and including the Termination Date, together with all Related Security relating thereto and all Collections thereof. Buyer shall be 2 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT obligated to pay the Purchase Price for the Receivables purchased hereunder in accordance with Section 1.2. In connection with consummation of the Purchase Price for any Receivables purchased hereunder, Buyer may request that Morningstar deliver, and Morningstar shall deliver, such approvals, opinions, information, reports or documents as Buyer may reasonably request. (b) It is the intention of the parties hereto that the Purchase of Receivables made hereunder shall constitute a sale, which sale is absolute and irrevocable and provides Buyer with the full benefits of ownership of the Receivables. Except for the Purchase Price Credits owed pursuant to Section 1.3, the sale of Receivables hereunder is made without recourse to Morningstar; provided, however, that (i) Morningstar shall be liable to Buyer for all representations, warranties, covenants and indemnities made by Morningstar pursuant to the terms of the Transaction Documents to which Morningstar is a party, and (ii) such sale does not constitute and is not intended to result in an assumption by Buyer or any assignee thereof of any obligation of Morningstar or any other Person arising in connection with the Receivables, the related Contracts and/or other Related Security or any other obligations of Morningstar. In view of the intention of the parties hereto that the Purchase of Receivables made hereunder shall constitute a sale of such Receivables rather than loans secured thereby, Morningstar agrees that it will, on or prior to the date hereof and in accordance with Section 4.1(e)(ii), mark its master data processing records relating to the Receivables with a legend acceptable to Buyer, Dairy Group L.P. (as Buyer's assignee) and to the Agent (as Dairy Group L.P.'s assignee), evidencing that Buyer has purchased such Receivables as provided in this Agreement and to note in its financial statements that the Receivables have been sold to Buyer. Upon the request of Buyer, Dairy Group L.P. (as Buyer's assignee) or the Agent (as Dairy Group L.P.'s assignee), Morningstar will execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate to perfect and maintain the perfection of Buyer's ownership interest in the Receivables and the Related Security and Collections with respect thereto, or as Buyer, Dairy Group L.P. or the Agent (as Dairy Group L.P.'s assignee) may reasonably request. Section 1.2 Payment for the Purchase. (a) The Purchase Price for the Purchase of Receivables in existence on the close of business on the Business Day immediately preceding the date hereof (the "Initial Cutoff Date") shall be payable in full by Buyer to Morningstar on the date hereof, and shall be paid to Morningstar in the following manner: (i) by delivery of immediately available funds, to the extent of funds made available to Buyer in connection with its 3 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT subsequent sale of an interest in such Receivables to Dairy Group L.P. under the Sale Agreement; and (ii) the balance, by delivery of the proceeds of a subordinated revolving loan from Morningstar to Buyer (a "Subordinated Transfer Loan") in an amount not to exceed the least of (A) the remaining unpaid portion of such Purchase Price, (B) the maximum Subordinated Loan that could be borrowed without rendering Buyer's Net Worth less than the Required Capital Amount and (C) the maximum Subordinated Transfer Loan that could be borrowed without rendering the Net Value less than the aggregate outstanding principal balance of the Subordinated Transfer Loans (including the Subordinated Transfer Loan proposed to be made on such date). Morningstar is hereby authorized by Buyer to endorse on the schedule attached to the Subordinated Transfer Note an appropriate notation evidencing the date and amount of each advance thereunder, as well as the date of each payment with respect thereto, provided that the failure to make such notation shall not affect any obligation of Buyer thereunder. The Purchase Price for each Receivable coming into existence after the Initial Cutoff Date shall be due and owing in full by Buyer to Morningstar or its designee on the date each such Receivable came into existence (except that Buyer may, with respect to any such Purchase Price, offset against such Purchase Price any amounts owed by Morningstar to Buyer hereunder and which have become due but remain unpaid) and shall be paid to Morningstar in the manner provided in the following paragraphs (b), (c) and (d). (b) With respect to any Receivables coming into existence after the Initial Cutoff Date, on each Settlement Date, Buyer shall pay the Purchase Price therefor in accordance with Section 1.2(d) and in the following manner: first, by delivery of immediately available funds, to the extent of funds available to Buyer from its subsequent sale of an interest in the Receivables to Dairy Group L.P. under the Sale Agreement or other cash on hand; and second, by delivery of the proceeds of a Subordinated Transfer Loan, provided that the making of any such Subordinated Transfer Loan shall be subject to the provisions set forth in Section 1.2(a)(ii). Subject to the limitations set forth in Section 1.2(a)(ii), Morningstar irrevocably agrees to advance each Subordinated Transfer Loan requested by Buyer on or prior to the Termination Date. The Subordinated Transfer Loans shall be evidenced by, and shall be payable in 4 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT accordance with the terms and provisions of the Subordinated Transfer Note and shall be payable solely from funds which Buyer is not required under the Sale Agreement to set aside for the benefit of, or otherwise pay over to, Dairy Group L.P. (and its assigns). (c) From and after the Termination Date, Morningstar shall not be obligated to (but may, at its option), sell Receivables to Buyer. (d) Although the Purchase Price for each Receivable coming into existence after the Initial Cutoff Date shall be due and payable in full by Buyer to Morningstar on the date such Receivable came into existence, settlement of the Purchase Price between Buyer and Morningstar shall be effected on a monthly basis on Settlement Dates with respect to all Receivables coming into existence during the same Calculation Period and based on the information contained in the Monthly Report delivered by the Servicers pursuant to Article VIII of the Purchase Agreement for the Calculation Period then most recently ended. Although settlement shall be effected on Settlement Dates, increases or decreases in the amount owing under the Subordinated Transfer Note made pursuant to Section 1.2(b) shall be deemed to have occurred and shall be effective as of the last Business Day of the Calculation Period to which such settlement relates. Section 1.3 Purchase Price Credit Adjustments. If on any day: (a) the Outstanding Balance of a Receivable is: (i) reduced as a result of any defective or rejected or returned goods or services, any discount, rebate or any adjustment or otherwise by Morningstar (other than cash Collections on account of the Receivables and other than Receivables that, consistent with Morningstar's Credit and Collection Policy, have been written off Morningstar's books as uncollectible other than as a result of any of the other conditions or events set forth in this definition), (ii) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction), or (b) any of the representations and warranties set forth in Article II are not true when made or deemed made with respect to any Receivable, or (c) any Contract with respect to any Receivable shall fail to create a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, 5 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT then, in such event, Buyer shall be entitled to a credit (each, a "Purchase Price Credit") against the Purchase Price otherwise payable hereunder to Morningstar equal to (x) in the case of any Receivable reduced or cancelled pursuant to clause (a) above, the amount of such reduction or cancellation and (y) in all other cases, the Outstanding Balance of such Receivable (calculated before giving effect to the applicable reduction or cancellation). If such Purchase Price Credit exceeds the Original Balance of the Receivables coming into existence on any day, then Morningstar shall pay the remaining amount of such Purchase Price Credit in cash immediately, provided that if the Termination Date has not occurred, Morningstar shall be allowed to deduct the remaining amount of such Purchase Price Credit from any indebtedness owed to it under the Subordinated Transfer Note. Section 1.4 Payments and Computations, Etc. All amounts to be paid or deposited by Buyer hereunder shall be paid or deposited in accordance with the terms hereof on the day when due in immediately available funds to the account of Morningstar as it may designate from time to time and at any time or as Morningstar may otherwise direct. In the event that any payment owed by any Person hereunder becomes due on a day that is not a Business Day, then such payment shall be made on the next succeeding Business Day. If any Person fails to pay any amount hereunder when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid in full; provided, however, that such Default Fee shall not at any time exceed the maximum rate permitted by applicable law. All computations of interest payable hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Section 1.5 Transfer of Records. (a) In connection with the Purchase of Receivables hereunder, Morningstar hereby sells, transfers, assigns and otherwise conveys to Buyer all of its right and title to and interest in the Records relating to all Receivables sold hereunder, without the need for any further documentation in connection with the Purchase. In connection with such transfer, Morningstar hereby grants to each of Buyer, Dairy Group, L.P., the Agent and the Servicer of the Receivables an irrevocable, non-exclusive license to use, without royalty or payment of any kind, all software used by Morningstar to account for its Receivables, to the extent necessary to administer such Receivables, whether such software is owned by Morningstar or is owned by others and used by Morningstar under license agreements with respect thereto, provided that should the consent of any licensor of such software be required for the grant of the license described herein, to be effective, Morningstar hereby agrees that upon the request of Buyer, Dairy Group L.P., the Agent or the Servicer of the Receivables, Morningstar will use its reasonable efforts to obtain the consent of such third-party licensor. The license granted hereby shall be irrevocable until the indefeasible 6 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT payment in full of the Aggregate Unpaids, and shall terminate on the date this Agreement terminates in accordance with its terms. (b) Morningstar (i) shall take such action requested by Buyer (or its assigns), from time to time hereafter, that may be necessary or appropriate to ensure that Buyer and its assigns under the Sale Agreement have an enforceable ownership interest in the Records relating to the Receivables purchased from Morningstar hereunder, and (ii) shall use its reasonable efforts to ensure that Buyer, Dairy Group L.P., the Agent and any Servicer of the Receivables each has an enforceable right (whether by license or sublicense or otherwise) to use all of the computer software used to account for the Receivables and/or to recreate such Records. Section 1.6 Characterization. If, notwithstanding the intention of the parties expressed in Section 1.1(b), any sale or contribution by Morningstar to Buyer of Receivables hereunder shall be characterized as a secured loan and not a sale or such sale shall for any reason be ineffective or unenforceable, then this Agreement shall be deemed to constitute a security agreement under the UCC and other applicable law. For this purpose and without being in derogation of the parties' intention that the sale of Receivables hereunder shall constitute a true sale thereof, Morningstar hereby grants to Buyer a duly perfected security interest in all of Morningstar's right, title and interest in, to and under all Receivables now existing and hereafter arising, all Collections and Related Security with respect thereto, each Lock-Box and Collection Account, all other rights and payments relating to the Receivables and all proceeds of the foregoing to secure the prompt and complete payment of a loan deemed to have been made in an amount equal to the Purchase Price of the Receivables together with all other obligations of Morningstar hereunder, which security interest shall be prior to all other Adverse Claims thereto. Buyer and its assigns shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable law, which rights and remedies shall be cumulative. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of Morningstar. Morningstar hereby represents and warrants to Buyer on the date hereof, on the date of the Purchase and on each date that any Receivable comes into existence that: (a) Corporate Existence and Power. Morningstar is a corporation duly organized and validly existing in good standing under the laws of its state of incorporation. Morningstar is duly qualified to do business and is in good standing as a foreign corporation or entity, and has and holds all corporate or other power and all governmental 7 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except to the extent that the failure to so qualify or hold could not reasonably be expected to have a Material Adverse Effect. (b) Power and Authority; Due Authorization, Execution and Delivery. The execution and delivery by Morningstar of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and Morningstar's use of the proceeds of the Purchase made hereunder, are within its corporate power and authority, and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which Morningstar is a party has been duly executed and delivered by Morningstar. (c) No Conflict. The execution and delivery by Morningstar of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate or articles of incorporation or by-laws or any shareholder agreements, voting trusts or similar arrangements applicable to any of its authorized shares, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any material agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on its assets or its Subsidiaries (except as created hereunder). No transaction contemplated hereby requires compliance with any bulk sales act or similar law. (d) Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by Morningstar of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder. (e) Actions, Suits. There are no actions, suits or proceedings pending, or to the best of Morningstar's knowledge, threatened, against or affecting Morningstar, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Morningstar is not in default with respect to any order of any court, arbitrator or governmental body. (f) Binding Effect. This Agreement and each other Transaction Document to which Morningstar is a party constitute the legal, valid and binding obligations of Morningstar enforceable against Morningstar in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, 8 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (g) Accuracy of Information. All information heretofore furnished by Morningstar or any of its Affiliates to Buyer (or its assigns) for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by Morningstar or any of its Affiliates to Buyer (or its assigns) will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances made or presented. (h) Use of Proceeds. No proceeds of any Purchase Price payment to Morningstar hereunder will be used (i) for a purpose that violates, or would be inconsistent with, any law, rule or regulation applicable to Morningstar or (ii) to acquire any security in any transaction which is subject to Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) Good Title. Immediately prior to the Purchase hereunder and upon the creation of each Receivable coming into existence after the Initial Cut-Off Date, Morningstar (i) is the legal and beneficial owner of the Receivables to be sold hereunder, and (ii) is the legal and beneficial owner of the Related Security with respect thereto or possesses a valid and perfected security interest therein, in each case, free and clear of any Adverse Claim, except as created by the Transaction Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Morningstar's ownership interest in each Receivable, the Collections and the Related Security. (j) Perfection. This Agreement, together with the filing of the financing statements contemplated hereby, is effective to transfer to Buyer (and Buyer shall acquire from Morningstar) (i) legal and equitable title to, with the right to sell and encumber each Receivable existing or hereafter arising, together with the Collections with respect thereto, and (ii) all of Morningstar's right, title and interest in the Related Security associated with each Receivable, in each case, free and clear of any Adverse Claim, except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Buyer's ownership interest in the Receivables, the Related Security and the Collections. 9 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT (k) Jurisdiction of Organization; Places of Business, etc. Exhibit II correctly sets forth Morningstar's legal name, jurisdiction of organization, Federal Employer's Identification Number and State Organizational Identification Number. Morningstar's principal places of business and chief executive office and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit II or such other locations of which Buyer has been notified in accordance with Section 4.2(a) in jurisdictions where all action required by Section 4.2(a) has been taken and completed. Morningstar has not within the period of six months prior to the date hereof, (i) changed its location (within the meaning of Section 9-307 of the UCC) or (ii) changed its legal name, corporate structure or become a "new debtor" (within the meaning of Section 9-102(a)(56) of the UCC) with respect to a currently effective security agreement previously entered into by any other Person. Morningstar is a "registered organization" (within the meaning of Section 9-102 of the UCC as in effect in the applicable jurisdiction). (l) Collections. The conditions and requirements set forth in Section 4.1(j) have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts of Morningstar at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit III. Morningstar has not granted any Person, other than Buyer (and its assigns) dominion and control of any Lock-Box or Collection Account, or the right to take dominion and control or "control" (within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event. (m) Material Adverse Effect. Since December 31, 1999, no event has occurred that would have a Material Adverse Effect. (n) Names. In the past five (5) years, Morningstar has not used any corporate names, trade names or assumed names other than as listed on Exhibit II. (o) Not a Holding Company or an Investment Company. Morningstar is not a "holding company" or a "subsidiary holding company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Morningstar is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or any successor statute. (p) Compliance with Law. Morningstar has complied in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with any Writing or Contract related thereto, does not contravene any laws, rules or 10 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Writing or Contract is in violation of any such law, rule or regulation. (q) Compliance with Credit and Collection Policies. Morningstar has complied in all material respects with its Credit and Collection Policy with regard to each Receivable and any related Writing or Contract, and has not made any material change to such Credit and Collection Policy, except such material change as to which Buyer (or its assigns) has been notified in accordance with Section 4.1(a)(vii). (r) Payments to Morningstar. With respect to each Receivable transferred to Buyer by Morningstar hereunder, the Purchase Price received by such Morningstar constitutes reasonably equivalent value in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by Morningstar of any Receivable hereunder is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 101 et seq.), as amended. (s) Enforceability of Contracts. Each Contract, if any, with respect to each Receivable sold by Morningstar hereunder is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (t) Eligible Receivables. Each Receivable sold by Morningstar hereunder and included at any time in the Net Receivables Balance as an Eligible Receivable was, on the later to occur of the date of the Purchase and the date it came into existence, an Eligible Receivable on such date. (u) Accounting. The manner in which Morningstar accounts for the transactions contemplated by this Agreement does not jeopardize the true sale analysis. (v) No Adverse Selection. To the extent that Morningstar has retained Receivables that would be Eligible Receivables but which have not been transferred to Buyer hereunder, Morningstar has not selected those Receivables to be transferred hereunder in any manner that materially adversely affects Buyer. 11 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT ARTICLE III CONDITIONS OF PURCHASE Section 3.1 Conditions Precedent to Purchase. The effectiveness of this Agreement is subject to the conditions precedent that Buyer shall have received on or before the Closing Date those documents listed on Schedule A and all of the conditions to the effectiveness of the Purchase Agreement and the Sale Agreement shall have been satisfied or waived in accordance with the terms thereof. Section 3.2 Conditions Precedent to Subsequent Payments. Buyer's obligation to pay for Receivables coming into existence after the Initial Cutoff Date shall be subject to the further conditions precedent that the Facility Termination Date shall not have occurred; (b) Buyer (or its assigns) shall have received such other approvals, opinions or documents as it may reasonably request and (c) on the date such Receivable came into existence, the following statements shall be true (and acceptance of the proceeds by Morningstar of any payment for such Receivable shall be deemed a representation and warranty by Morningstar that such statements are then true): (i) the representations and warranties of Morningstar set forth in Article II are true and correct on and as of the date such Receivable came into existence as though made on and as of such date; and (ii) no event has occurred and is continuing that will constitute a Termination Event or a Potential Termination Event. Notwithstanding the foregoing conditions precedent, upon payment of the Purchase Price for any Receivable (whether by payment of cash, through an increase in the amounts outstanding under the Subordinated Transfer Note, by offset of amounts owed to Buyer and/or by offset of capital contributions), title to such Receivable and the Related Security and Collections with respect thereto shall vest in Buyer, whether or not the conditions precedent to Buyer's obligation to pay for such Receivable were in fact satisfied. The failure of Morningstar to satisfy any of the foregoing conditions precedent, however, shall give rise to a right of Buyer to rescind the related purchase and direct Morningstar to pay to Buyer an amount equal to the Purchase Price payment that shall have been made with respect to any Receivables related thereto. 12 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT ARTICLE IV COVENANTS Section 4.1 Affirmative Covenants of the Originators. Until the date on which this Agreement terminates in accordance with its terms, Morningstar hereby covenants as set forth below: (a) Financial Reporting. Morningstar will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish to Buyer (and its assigns) to the extent not furnished by Dairy Group, L.P. under the Purchase Agreement: (i) Annual Reporting. Within 90 days after the close of each of its fiscal years, audited, unqualified consolidated financial statements (which shall include balance sheets, statements of income and retained earnings and a statement of cash flows) for Provider for such fiscal year certified in a manner acceptable to Buyer by independent public accountants acceptable to Buyer. (ii) Quarterly Reporting. Within 45 days after the close of the first three (3) quarterly periods of each of its fiscal years, (A) consolidated balance sheets of Provider and its Subsidiaries as at the close of each such period and (B) consolidated statements of income and retained earnings and a statement of cash flows for Provider for the period from the beginning of such fiscal year to the end of the quarter. (iii) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit IV signed by Morningstar's Authorized Officer and dated the date of such annual financial statement or such quarterly financial statement, as the case may be. (iv) Copies of Notices. Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than Buyer or the Agent, copies of the same. (v) Change in Credit and Collection Policies. At least thirty (30) days prior to the effectiveness of any material change in or material amendment to Morningstar's Credit and Collection Policy, a 13 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT copy of such Credit and Collection Policy then in effect and a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting Buyer's consent thereto. (vi) Other Information. Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of Morningstar as Buyer (or its assigns) may from time to time reasonably request in order to protect the interests of Buyer (and its assigns) under or as contemplated by this Agreement. (b) Notices. Morningstar will notify Buyer (or its assigns) in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto: (i) Termination Events or Potential Termination Events. The occurrence of each Termination Event and each Potential Termination Event, by a statement of an Authorized Officer of Morningstar. (ii) Judgment and Proceedings. The entry of any judgment or decree against Morningstar or any of its Subsidiaries if the aggregate amount of all judgments and decrees then outstanding against Morningstar and its Subsidiaries that could reasonably be expected to have a Material Adverse Effect, and the institution of any litigation, arbitration proceeding or governmental proceeding against Morningstar. (iii) Material Adverse Effect. The occurrence of any event or condition that has had, or could reasonably be expected to have, a Material Adverse Effect. (iv) Defaults Under Other Agreements. The occurrence of a default or an event of default under any other financing arrangement pursuant to which Morningstar is a debtor or an obligor that could reasonably be expected to have a Material Adverse Effect. (c) Compliance with Laws and Preservation of Corporate Existence. Morningstar will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject if noncompliance with any such law, rule, regulation, order, writ, judgment, injunction, decree 14 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT or award could reasonably be expected to have a Material Adverse Effect. Morningstar will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except where the failure to so qualify or remain qualified could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect. (d) Audits. Morningstar will furnish to Buyer (or its assigns) from time to time such information with respect to it and the Receivables as Buyer (or its assigns) may reasonably request. Morningstar will, from time to time during regular business hours as requested by Buyer (or its assigns), upon reasonable notice, permit Buyer (or its assigns) or their respective agents or representatives, (i) to examine and make copies of and abstracts from all Records in the possession or under the control of Morningstar relating to the Receivables and the Related Security, including, without limitation, the related Writings or Contracts, and (ii) to visit the offices and properties of Morningstar for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Morningstar's financial condition or the Receivables and the Related Security or Morningstar's performance under any of the Transaction Documents or Morningstar's performance under the Contracts and, in each case, with any of the officers or employees of Morningstar having knowledge of such matters. All such examinations and visits shall be at the sole cost of Morningstar; provided, however, that (i) for so long as no Termination Event or Potential Termination Event shall have occurred and be continuing and (ii) the result of the immediately preceding examination and/or visit of Morningstar shall have been reasonably satisfactory to Buyer (and its assigns), such cost shall be borne by Morningstar not more than once per calendar year (although in no event shall the foregoing be construed to limit Buyer (or its assigns) to one such examination and/or visit during such calendar year period), provided that if Buyer (or the Agent as Buyer's assign or its agents or representatives) fails to make any such examination and/or visit during any calendar year period, any Financial Institution (as Buyer's assign) or its agent or representatives may make such examination and/or visit in Buyer's stead). (e) Keeping and Marking of Records and Books. (i) Morningstar will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). 15 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Morningstar will give Buyer (or its assigns) notice of any material change in the administrative and operating procedures referred to in the previous sentence. (ii) Morningstar will (A) on or prior to the date hereof, mark its master data processing records and other books and records relating to the Receivables with a legend, acceptable to Buyer (or its assigns), describing Buyer's ownership interests in the Receivables, further describing Dairy Group L.P.'s ownership interests in the Receivables and further describing the Purchaser Interests of the Agent (on behalf of the Purchasers) under the Purchase Agreement and (B) upon the request of Buyer (or its assigns) following the occurrence and during the continuance of a Termination Event hereunder, a Termination Event under the Sale Agreement or an Amortization Event under the Purchase Agreement, (x) mark each Writing or Contract with a legend describing Buyer's ownership interests in the Receivables further describing Dairy Group L.P.'s ownership interests in the Receivables and further describing the Purchaser Interests of the Agent (on behalf of the Purchasers) and (y) deliver to Buyer (or its assigns) all Writings and Contracts (including, without limitation, all multiple originals of any such Writing or Contract) relating to the Receivables. (f) Compliance with Contracts and Credit and Collection Policies. Morningstar will timely and fully (i) perform and comply with all provisions, covenants and other promises required to be observed by it under the Writings or Contracts related to the Receivables and (ii) comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Writing or Contract. (g) Ownership. Morningstar will take all necessary action to establish and maintain, irrevocably in Buyer, (A) legal and equitable title to the Receivables and the Collections and (B) all of Morningstar's right, title and interest in the Related Security associated with the Receivables free and clear of any Adverse Claims other than Adverse Claims in favor of Buyer (and its assigns) (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Buyer's interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of Buyer as Buyer (or its assigns) may reasonably request). (h) Purchasers' Reliance. Morningstar hereby acknowledges that the Agent and the Purchasers are entering into the transactions contemplated by the Purchase Agreement in reliance upon Buyer's identity as a legal entity that is separate from 16 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Morningstar and any Affiliates thereof. Therefore, from and after the date of execution and delivery of this Agreement, Morningstar will take all reasonable steps including, without limitation, all steps that Buyer or any assignee of Buyer may from time to time reasonably request to maintain Buyer's identity as a separate legal entity and to make it manifest to third parties that Buyer is an entity with assets and liabilities distinct from those of Morningstar and any Affiliates thereof and not just a division of Morningstar or any such Affiliate. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, Morningstar (i) will not hold itself out to third parties as liable for the debts of Buyer nor purport to own the Receivables and other assets acquired by Buyer, (ii) will observe all corporate formalities as a distinct entity, (iii) will take all other actions necessary on its part to ensure that Buyer is at all times in compliance with the covenants set forth in Section 7.1(i) of the Purchase Agreement (other than sub- sections (F), (G) and (M)) as though each reference to the "Seller" set forth therein were to Buyer hereunder, (iv) will maintain its Certificate or Articles of Incorporation and By-laws in conformity with this Agreement, such that it does not amend, restate, supplement or otherwise modify its Certificate or Articles of Incorporation or By-Laws in any respect that would impair its ability to comply with the terms or provisions of any of the Transaction Documents to which it is a party and (v) will cause all tax liabilities arising in connection with the transactions contemplated herein or otherwise to be allocated between Morningstar and Buyer on an arm's- length basis and in a manner consistent with the procedures set forth in U.S. Treasury Regulations Sections 1.1502-33(d) and 1.1552-1. (i) Collections. Morningstar will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (2) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to Receivables are remitted directly to Morningstar or any Affiliate of Morningstar, Morningstar will remit (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof and, at all times prior to such remittance, Morningstar will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of Buyer and its assigns. Morningstar will transfer exclusive ownership, dominion and control (including "control" within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of each Lock-Box and Collection Account to Buyer and, will not grant the right to take dominion and control (including "control" within the meaning of Section 9-104 of the UCC of all applicable jurisdictions) of any Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to Buyer (or its assigns) as contemplated by this Agreement and the Purchase Agreement. (j) Taxes. Morningstar will file all tax returns and reports required by law to be filed by it and promptly pay all taxes and governmental charges at any 17 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT time owing except for taxes not yet due or that are being diligently contested in good faith by appropriate proceedings and that have been adequately reserved against in accordance with GAAP. Morningstar will pay when due any taxes payable in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of Buyer and its assigns. (k) Amendments to Existing Collection Account Agreements. On or prior to the date that is 45 days after the date hereof, Morningstar shall deliver to Buyer (and its assigns) duly executed amendments to each of the Collection Account Agreements executed and delivered in connection with the Original Transfer Agreement, each such amendment to be in form and substance reasonably satisfactory to Buyer (and its assigns). Section 4.2 Negative Covenants. Until the date on which this Agreement terminates in accordance with its terms, Morningstar hereby covenants that: (a) Name Change, Jurisdiction of Organization, Offices and Books of Account. Morningstar will not change its name, identity or corporate or other organizational structure or jurisdiction of organization (within the meaning of Sections 9-503 and/or 9-507 of the UCC of all applicable jurisdictions) or relocate its chief executive office, principal place of business or any office where Records are kept unless it shall have: (i) given Buyer (or its assigns) at least thirty (30) days' prior written notice thereof and (ii) delivered to Buyer (or its assigns) all financing statements, instruments and other documents requested by Buyer (or its assigns) in connection with such change or relocation. (b) Change in Payment Instructions to Obligors. Morningstar will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless Buyer (or its assigns) shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box; provided, however, that Morningstar may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account. (c) Modifications to Writings, Contracts and Credit and Collection Policy. Morningstar will not make any change to its Credit and Collection Policy that could materially (either individually or in the aggregate) adversely affect the collectibility of the Receivables or materially (either individually or in the aggregate) decrease the credit quality of any newly created Receivables. Except as otherwise permitted in its capacity as 18 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Servicer pursuant to Article VIII of the Purchase Agreement, Morningstar will not extend, amend or otherwise modify the terms of any Receivable or the Writing or Contract related thereto other than in accordance with Morningstar's Credit and Collection Policy. (d) Sales, Liens. Morningstar will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any Receivable or any Related Security or Collections, or upon or with respect to the Writing or Contract under which any Receivable arises, or any Lock-Box or Collection Account, or assign any right to receive income with respect thereto (other than, in each case, the creation of the interests therein in favor of Buyer provided for herein), and Morningstar will defend the right, title and interest of Buyer in, to and under any of the foregoing property, against all claims of third parties claiming through or under Morningstar. Morningstar shall not create or suffer to exist any mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any of its inventory the financing or lease of which gives rise to any Receivable except in favor of the Collateral Agent in accordance with the Dean Credit Agreement. (e) No Adverse Selection. To the extent that Morningstar has retained Receivables that would be Eligible Receivables but which have not been transferred to Buyer hereunder, Morningstar will not select those Receivables to be transferred hereunder in any manner that materially adversely affects Buyer. (f) Accounting for Purchase. Morningstar will not, and will not permit any Affiliate to, account for (whether in financial statements or otherwise) the transactions contemplated hereby in any manner other than the sale of the Receivables and the Related Security to Buyer (other than for tax purposes) or in any other respect account for or treat the transactions contemplated hereby in any manner other than as a sale of the Receivables. and the Related Security to Buyer (other than for tax purposes) except to the extent that such transactions are not recognized on account of consolidated financial reporting in accordance with GAAP. ARTICLE V TERMINATION EVENTS Section 5.1 Termination Events. The occurrence of any one or more of the following events shall constitute a Termination Event: (a) Morningstar shall fail (i) to make any payment or deposit of any amount consisting of principal required hereunder when due, or (ii) to make any payment or deposit of any other amount required hereunder when due and such failure shall 19 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT continue for two (2) consecutive Business Days or (iii) to perform or observe any term, covenant or agreement set forth in Section 4.2 hereunder or (iv) to perform or observe any term, covenant or agreement set forth in Section 4.1(a) (iv) or (c) (second sentence only) hereunder (other than as referred to in clauses (i), (ii) or (iii) of this paragraph (a)) or in any other Transaction Document to which it is a party and such failure shall continue for thirty (30) consecutive days or (v) to perform or observe any term, covenant or agreement hereunder (other than as referred to in clauses (i), (ii), (iii) or (iv) of this paragraph (a) or any other Transaction Document to which it is a party and such failure shall continue for five (5) consecutive Business Days. (b) Any representation, warranty, certification or statement made by Morningstar in this Agreement, any other Transaction Document to which it is a party or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect when made or deemed made. (c) Failure of Morningstar to pay any Indebtedness when due in excess of $50,000,000; or the default by Morningstar in the performance of any term, provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of Morningstar shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof. (d) (i) Morningstar shall generally not pay its debts as such debts become due or shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted by or against Morningstar seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or (iii) Morningstar shall take any corporate action to authorize any of the actions set forth in the foregoing clauses (i) or (ii) of this subsection (d). (e) A Change of Control shall occur with respect to any Morningstar. (f) One or more final judgments for the payment of money in an amount in excess of $50,000,000, individually or in the aggregate, shall be entered against Morningstar on claims not covered by insurance or as to which the insurance carrier has 20 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT denied its responsibility, and such judgment shall continue unsatisfied and in effect for thirty (30) consecutive days without a stay of execution. Section 5.2 Remedies. Upon the occurrence and during the continuation of a Termination Event, Buyer may take any of the following actions: (i) declare the Termination Date to have occurred, whereupon the Termination Date shall forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by Morningstar; provided, however, that upon the occurrence of a Termination Event described in Section 5.1(d), or of an actual or deemed entry of an order for relief with respect to Morningstar under the Federal Bankruptcy Code, the Termination Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by Morningstar and (ii) to the fullest extent permitted by applicable law, declare that the Default Fee shall accrue with respect to any amounts then due and owing by Morningstar to Buyer. The aforementioned rights and remedies shall be without limitation and shall be in addition to all other rights and remedies of Buyer and its assigns otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative. ARTICLE VI INDEMNIFICATION Section 6.1 Indemnities by Morningstar. Without limiting any other rights that Buyer may have hereunder or under applicable law, Morningstar hereby agrees to indemnify (and pay upon demand to) Buyer and its assigns (and their respective Affiliates), officers, directors and employees (each an "Indemnified Party") from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys' fees (which attorneys may be employees of Buyer or any such assign) and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by Buyer of an interest in the Receivables or any Contract or Writing, excluding, however: (i) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification; (ii) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on 21 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or (iii) franchise taxes and taxes imposed by the jurisdiction in which such Indemnified Party's principal executive office is located, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the characterization for income tax purposes of the acquisition by the Purchasers of Purchaser Interests under the Purchase Agreement as a loan or loans by the Purchasers to Buyer secured by, among other things, the Receivables, the Related Security and the Collections; provided, however, that nothing contained in this sentence shall limit the liability of Morningstar or limit the recourse of Buyer to Morningstar for amounts otherwise specifically provided to be paid by Morningstar under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, Morningstar shall indemnify Buyer for Indemnified Amounts (including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Morningstar) relating to or resulting from: (i) any representation or warranty made by Morningstar (or any officers of Morningstar) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by Morningstar pursuant hereto or thereto that shall have been false or incorrect when made or deemed made; (ii) the failure by Morningstar to comply with any applicable law, rule or regulation with respect to any Receivable or Writing or Contract related thereto, or the nonconformity of any Receivable or Writing or Contract included therein with any such applicable law, rule or regulation or any failure of Morningstar to keep or perform any of its obligations, express or implied, with respect to any Writing or Contract; (iii) any failure of Morningstar to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document; (iv) any products liability, personal injury or damage, suit or other similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Writing or Contract or any Receivable; 22 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT (v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Writing or Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services; (vi) the commingling of Collections of Receivables of Morningstar at any time with other funds; (vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby, the use of the proceeds of any Purchase Price payment, the ownership of the Receivables or any other investigation, litigation or proceeding relating to Morningstar in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby; (viii) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding; (ix) any Termination Event described in Section 5.1(d); (x) any failure to vest and maintain vested in Buyer, or to transfer to Buyer, legal and equitable title to, and ownership of, the Receivables and the Collections, and all of Morningstar's right, title and interest in the Related Security associated with the Receivables, in each case, free and clear of any Adverse Claim; (xi) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivable and the Related Security and Collections with respect thereto, and the proceeds of any thereof, whether at the time of the Purchase or at any subsequent time; 23 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT (xii) any action or omission by Morningstar which reduces or impairs the rights of Buyer with respect to any Receivable or the value of any such Receivable; (xiii) any attempt by any Person to void the Purchase hereunder under statutory provisions or common law or equitable action; and (xiv) the failure of any Receivable included in the calculation of the Net Receivables Balance as an Eligible Receivable to be an Eligible Receivable at the time so included. Section 6.2 Other Costs and Expenses. Morningstar shall be liable for and shall pay on demand, to Buyer all costs and out-of-pocket expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder. Morningstar shall pay to Buyer on demand any and all costs and expenses of Buyer, if any, including reasonable counsel fees and expenses in connection with the enforcement of this Agreement against Morningstar and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following a Termination Event. ARTICLE VII MISCELLANEOUS Section 7.1 Waivers and Amendments. (a) No failure or delay on the part of Buyer (or its assigns) in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given. (b) No provision of this Agreement may be amended, supplemented, modified or waived except in writing signed by both Morningstar and Buyer and, to the extent required under the Purchase Agreement, the Agent and the Purchasers or the Required Purchasers. 24 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Section 7.2 Notices. All communications and notices provided for hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or telecopy numbers set forth on Schedule E to the Purchase Agreement or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication shall be effective if given by telecopy, upon the receipt thereof, if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or if given by any other means, when received at the address specified in this Section 7.2. Section 7.3 Protection of Ownership Interests of Buyer. (a) Morningstar agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or desirable, or that Buyer (or its assigns) may request, to perfect, protect or more fully evidence the interest of Buyer hereunder and the Purchaser Interests, or to enable Buyer (or its assigns) to exercise and enforce their rights and remedies hereunder. Without limiting the foregoing, Morningstar will, upon the request of Buyer (or its assigns), execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments and documents, that may be necessary or desirable, or that Buyer (or its assigns) may reasonably request, to perfect, protect or evidence such interest of Buyer (or such Purchaser Interests). At any time, Buyer (or its assigns) may, at Morningstar's sole cost and expense, direct Morningstar to notify the Obligors of Receivables of the ownership interests of Buyer under this Agreement and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to Buyer or its designee. (b) If Morningstar fails to perform any of its obligations hereunder, Buyer (or its assigns) may (but shall not be required to) perform, or cause performance of, such obligations, and Buyer's (or such assigns') costs and expenses incurred in connection therewith shall be payable by Morningstar as provided in Section 6.2. Morningstar irrevocably authorizes Buyer (and its assigns) at any time and from time to time in the sole discretion of Buyer (or its assigns), and appoints Buyer (and its assigns) as its attorney(ies)-in-fact, to act on behalf of Morningstar (i) to execute on behalf of Morningstar as debtor and to file financing or continuation statements (and amendments thereto and assignments thereof) necessary or desirable in Buyer's (or its assigns') sole discretion to perfect and to maintain the 25 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT perfection and priority of the interest of Buyer in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as Buyer (or its assigns) in their sole discretion deem necessary or desirable to perfect and to maintain the perfection and priority of Buyer's interests in the Receivables. This appointment is coupled with an interest and is irrevocable. The authorization set forth in the second sentence of this Section 7.3(b) is intended to meet all requirements for authorization by a debtor under Article 9 of any applicable enactment of the UCC, including without limitation, Section 9-509 thereof.) Section 7.4 Confidentiality. (a) Morningstar shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential or proprietary information with respect to the Agent and each Purchaser and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that Morningstar and its officers and employees may disclose such information to Morningstar's external accountants and attorneys and as required by any applicable law or order of any judicial or administrative proceeding. (b) Anything herein to the contrary notwithstanding, Morningstar hereby consents to the disclosure of any nonpublic information with respect to it (i) to Buyer, Dairy Group L.P., the Agent, the Financial Institutions or the Companies by each other, (ii) by Buyer, the Agent or the Purchasers to any prospective or actual assignee or participant of any of them and (iii) by the Agent or any Purchaser to any rating agency, Funding Source, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to any Company or any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which Bank One or CLNY acts as the administrative agent and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing. In addition, the Purchasers and the Agent may disclose any such nonpublic information pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law). (c) Buyer shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential or proprietary information with respect to Morningstar, the Obligors and their respective businesses obtained by it in connection with the due diligence evaluations, structuring, negotiating and execution of the Transaction Documents, and the consummation of the transactions contemplated herein and any other activities of Buyer arising from or related to the transactions contemplated herein provided, however, that each of Buyer and its employees and officers shall be permitted to disclose such confidential or proprietary information: (i) to the Agent and the other Purchasers, (ii) to any prospective or actual assignee or participant of the Agent or the other Purchasers who execute a confidentiality agreement for 26 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT the benefit of Morningstar and Buyer on terms comparable to those required of Buyer hereunder with respect to such disclosed information, (iii) to any rating agency, Funding Source provider of a surety, guaranty or credit or liquidity enhancement to any Company, (iv) to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, and (v) to the extent required pursuant to any applicable law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings with competent jurisdiction (whether or not having the force or effect of law) so long as such required disclosure is made under seal to the extent permitted by applicable law or by rule of court or other applicable body. Section 7.5 Bankruptcy Petition. Morningstar and Buyer each hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any Funding Source that is a special purpose bankruptcy remote entity or of any Company, it will not institute against, or join any other Person in instituting against, any such entity or any Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. (a) Morningstar hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding obligations of Buyer under the Purchase Agreement, it will not institute against, or join any other Person in instituting against, Buyer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Section 7.6 Limitation of Liability. Except with respect to any claim arising out of the willful misconduct or gross negligence of any Company, the Agent or any Financial Institution, no claim may be made by Morningstar or any other Person against any Company, the Agent or any Financial Institution or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and Morningstar hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 7.7 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS. 27 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Section 7.8 CONSENT TO JURISDICTION. MORNINGSTAR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY MORNINGSTAR PURSUANT TO THIS AGREEMENT AND MORNINGSTAR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF BUYER (OR ITS ASSIGNS) TO BRING PROCEEDINGS AGAINST MORNINGSTAR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY MORNINGSTAR AGAINST BUYER (OR ITS ASSIGNS) OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY MORNINGSTAR PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. Section 7.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY MORNINGSTAR PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER. Section 7.10 Integration; Binding Effect; Survival of Terms. (a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. (b) This Agreement shall be binding upon and inure to the benefit of Morningstar and Buyer, and their respective successors and permitted assigns (including any trustee in bankruptcy). Morningstar may not assign any of its rights and obligations hereunder or any interest herein without the prior written consent of Buyer. Buyer may assign at any time its rights and obligations hereunder and interests herein to any other 28 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Person without the consent of Morningstar. Without limiting the foregoing, Morningstar acknowledges that Buyer, pursuant to the Sale Agreement, may assign to Dairy Group L.P. its rights, remedies, powers and privileges hereunder and that such rights, remedies, powers and privileges may be further assigned by Dairy Group L.P. to the Agent for the benefit of the Purchasers and that the Agent may further assign such rights, remedies, powers and privileges to the extent permitted in the Purchase Agreement. Morningstar agrees that the Dairy Group L.P., as the assignee of Buyer, and the Agent, as the assignee of Dairy Group L.P. shall, subject to the terms of the Sale Agreement and the Purchase Agreement, have the right to enforce this Agreement and to exercise directly all of Buyer's rights and remedies under this Agreement (including, without limitation, the right to give or withhold any consents or approvals of Buyer to be given or withheld hereunder) and Morningstar agrees to cooperate fully with Dairy Group L.P. and the Agent in the exercise of such rights and remedies. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by Morningstar pursuant to Article II; (ii) the indemnification and payment provisions of Article VI; and (iii) Section 7.5 shall be continuing and shall survive any termination of this Agreement. Section 7.11 Counterparts; Severability; Section References. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and sections of, and schedules and exhibits to, this Agreement. Section 7.12 Confirmation and Ratification of Terms. (a) Upon the effectiveness of this Agreement, each reference to the Original Transfer Agreement in any other Transaction Document, and any document, instrument or agreement executed and/or delivered in connection with the Original Transfer Agreement or any other Transaction Document, shall mean and be a reference to this Agreement. (b) The other Transaction Documents and all agreements, instruments and documents executed or delivered in connection with the Original Transfer 29 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Agreement or any other Transaction Document shall each be deemed to be amended to the extent necessary, if any, to give effect to the provisions of this Agreement, as the same may be amended, modified, supplemented or restated from time to time. (c) The effect of this Agreement is to amend and restate the Original Transfer Agreement in its entirety, and to the extent that any rights, benefits or provisions in favor of Buyer (or its assigns) existed in the Original Transfer Agreement and continue to exist in this Agreement without any written waiver of any such rights, benefits or provisions prior to the date hereof, then such rights, benefits or provisions are acknowledged to be and to continue to be effective from and after June 30, 2000. This Agreement is not a novation. (d) The parties hereto agree and acknowledge that any and all rights, remedies and payment provisions under the Original Transfer Agreement, including, without limitation, any and all rights, remedies and payment provisions with respect to (i) any representation and warranty made or deemed to be made pursuant to the Original Transfer Agreement, or (ii) any indemnification provision, shall continue and survive the execution and delivery of this Agreement. [SIGNATURE PAGE FOLLOWS] 30 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof. MORNINGSTAR FOODS INC., as Seller By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- MORNINGSTAR RECEIVABLES CORP. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT EXHIBIT I Definitions This is Exhibit I to the Agreement (as hereinafter defined). As used in the Agreement and the Exhibits, Schedules and Annexes thereto, capitalized terms have the meanings set forth in this Exhibit I (such meanings to be equally applicable to the singular and plural forms thereof). If a capitalized term is used in the Agreement, or any Exhibit, Schedule or Annex thereto, and not otherwise defined therein or in this Exhibit I, such term shall have the meaning assigned thereto in Exhibit I to the Purchase Agreement. "Agent" has the meaning set forth in the Preliminary Statements to the Agreement. "Agreement" means the Amended and Restated Receivables Transfer Agreement, dated as of December 21, 2001, between the Morningstar and Buyer, as the same may be amended, restated or otherwise modified. "Buyer" has the meaning set forth in the preamble to the Agreement. "Calculation Period" means each calendar month or portion thereof which elapses during the term of the Agreement. The first Calculation Period shall commence on the Closing Date and the final Calculation Period shall terminate on the Termination Date. "Change of Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of Morningstar. "Credit and Collection Policy" means Morningstar's credit and collection policies and practices relating to Writings, Contracts and Receivables existing on the date hereof and summarized in Exhibit V, as modified from time to time in accordance with the Agreement. "Default Fee" means a per annum rate of interest equal to the sum of (i) the Prime Rate, plus (ii) 2% per annum. "Dilutions" means, at any time, the aggregate amount of reductions or cancellations described in Section 1.3(a) of the Agreement. Exh. I-1 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT "Discount Factor" means a percentage calculated to provide Buyer with a reasonable return on its investment in the Receivables after taking account of (i) the time value of money based upon the anticipated dates of collection of the Receivables and the cost to Buyer of financing its investment in the Receivables during such period and (ii) the risk of nonpayment by the Obligors. Morningstar and Buyer may agree from time to time to change the Discount Factor based on changes in one or more of the items affecting the calculation thereof, provided that any change to the Discount Factor shall take effect as of the commencement of a Calculation Period, shall apply only prospectively and shall not affect the Purchase Price payment made prior to the Calculation Period during which Morningstar and Buyer agree to make such change. "Initial Cutoff Date" has the meaning set forth in Section 1.2(a). "Material Adverse Effect" means a material adverse effect on (i) the financial condition or operations of Morningstar and its Subsidiaries taken as a whole, (ii) the ability of Morningstar to perform its obligations under the Agreement or any other Transaction Document, (iii) the legality, validity or enforceability of the Agreement or any other Transaction Document, (iv) Morningstar's, Buyer's, Dairy Group L.P.'s, the Agent's or any Purchaser's interest in the Receivables generally or in any significant portion of the Receivables, the Related Security or Collections with respect thereto, or (v) the collectibility of the Receivables generally or of any material portion of the Receivables. "Morningstar" has the meaning set forth in the preamble. "Net Value" means, as of any date of determination, an amount equal to the sum of (i) the aggregate Outstanding Balance of the Receivables at such time, minus (ii) the sum of (A) the Aggregate Capital outstanding at such time, plus (B) the Aggregate Reserves. "Net Worth" means, with respect to as of the last Business Day of each Calculation Period preceding any date of determination, the excess, if any, of (a) the aggregate Outstanding Balance of the Receivables at such time, over (b) the sum of (i) the Aggregate Capital outstanding at such time, plus (ii) the aggregate outstanding principal balance of the Subordinated Transfer Loans (including any Subordinated Transfer Loan proposed to be made on the date of determination). "Original Balance" means, with respect to any Receivable coming into existence after the Initial Cutoff Date, the Outstanding Balance of such Receivable on the date it was created. "Original Transfer Agreement" has the meaning set forth in the Preliminary Statements to the Agreement. Exh. I-2 "Originator" has the meaning set forth in the Sale Agreement. "Potential Termination Event" means an event which, with the passage of time or the giving of notice, or both, would constitute a Termination Event. "Previously Sold Receivables" has the meaning set forth in the Preliminary Statements to the Agreement. "Purchase" means the purchase pursuant to Section 1.1(a) of the Agreement by Buyer from Morningstar of the Receivables and the Related Security and Collections related thereto, together with all related rights in connection therewith. "Purchase Agreement" has the meaning set forth in the Preliminary Statements to the Agreement. "Purchase Price" means, with respect to the Purchase from Morningstar hereunder, the aggregate price to be paid by Buyer to Morningstar for such Purchase in accordance with Section 1.2 of the Agreement for the Receivables, Collections and Related Security being sold to Buyer, which price shall equal on any date (i) the product of (x) the Outstanding Balance of such Receivables on such date, multiplied by (y) one minus the Discount Factor in effect on such date, minus (ii) any Purchase Price Credits to be credited against the Purchase Price otherwise payable to Morningstar in accordance with Section 1.3 of the Agreement. "Purchase Price Credit" has the meaning set forth in Section 1.3 of the Agreement. "Receivable" means all indebtedness and other obligations owed to Morningstar (at the times it arises, and before giving effect to any transfer or conveyance under the Agreement ) or Buyer (after giving effect to the transfers under the Agreement) or in which Morningstar or Buyer has a security interest or other interest, including, without limitation, any indebtedness, obligation or interest constituting an account, chattel paper, instrument or general intangible, arising in connection with the sale of goods or the rendering of services by Morningstar, and further includes, without limitation, the obligation to pay any Finance Charges with respect thereto. Indebtedness and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations represented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising from any other transaction; provided, further, that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless or Exh. I-3 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT whether the account debtor or Morningstar treats such indebtedness, rights or obligations as a separate payment obligation. "Related Security" means, with respect to any Receivable: (i) all of Morningstar's interest in the inventory and goods (including returned or repossessed inventory or goods), if any, the sale, financing or lease of which by Morningstar, as applicable, gave rise to such Receivable, and all insurance contracts with respect thereto, (ii) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Writing or Contract related to such Receivable or otherwise, together with all financing statements and security agreements describing any collateral securing such Receivable, (iii) all guaranties, letters of credit, insurance, "supporting obligations" (within the meaning of Section 9-102(a) of the UCC of all applicable jurisdictions) and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Writing or Contract related to such Receivable or otherwise, (iv) all service contracts and other contracts and agreements associated with such Receivable, (v) all Records related to such Receivable, (vi) all of Morningstar's right, title and interest in each Lock-Box and each Collection Account, and (vii) all proceeds of any of the foregoing. "Required Capital Amount" means, as of any date of determination, the greater of (a) an amount equal to the sum of (i) the twenty-four month rolling average of Dilutions, plus (ii) the result obtained in the foregoing clause (i) of this definition, multiplied by 10% and (b)$4,500,000. Exh. I-4 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT "Sale Agreement" has the meaning set forth in the Preliminary Statements to the Agreement. "Settlement Date" means, with respect to each Calculation Period, the date that is the 5th Business Day of the month following such Calculation Period. "Subordinated Transfer Loan" has the meaning set forth in Section 1.2(a) of the Agreement. "Subordinated Transfer Note" means a promissory note in substantially the form of Exhibit VII hereto as more fully described in Section 1.2 of the Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Termination Date" means the earliest to occur of (i) the Facility Termination Date, (ii) the Business Day immediately prior to the occurrence of a Termination Event set forth in Section 5.1(d), (iii) the Business Day specified in a written notice from Buyer to Morningstar following the occurrence of any other Termination Event, and (iv) the date which is 15 Business Days after Buyer's receipt of written notice from Morningstar that it wishes to terminate the facility evidenced by the Agreement. "Termination Event" has the meaning set forth in Section 5.1 of the Agreement. "Transaction Documents" means, collectively, this Agreement, the Sale Agreement, each Collection Account Agreement, the Subordinated Transfer Notes and all other instruments, documents and agreements executed and delivered in connection herewith. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of Illinois, and not specifically defined herein, are used herein as defined in such Article 9. Exh. I-5 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT EXHIBIT II PLACES OF BUSINESS OF THE SELLER PARTIES; LOCATIONS OF RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBER(S) See Exhibit III to the Purchase Agreement AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT EXHIBIT III NAME OF COLLECTION BANKS; COLLECTION ACCOUNTS See Exhibit IV to the Purchase Agreement AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT EXHIBIT IV Form of Compliance Certificate This Compliance Certificate is furnished pursuant to that certain Amended and Restated Receivables Transfer Agreement dated as of December 21, 2001, by and between MORNINGSTAR Foods Inc., a Delaware corporation ("Morningstar") and MORNINGSTAR RECEIVABLES CORP., a Delaware corporation ("Buyer") (the "Agreement"). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Agreement. THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected ______________ of Morningstar. 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of Morningstar and its Subsidiaries during the accounting period covered by the attached financial statements. 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Termination Event or a Potential Termination Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below. 4. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action that Morningstar has taken, is taking, or proposes to take with respect to each such condition or event: 5. As of the date hereof, the jurisdiction of Morningstar is [_______] and Morningstar is a "registered organization" (within the meaning of Section 9-102 of the UCC in effect in such applicable jurisdiction) and Morningstar has not changed its jurisdiction of organization since the date of the Agreement. The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this day of , 20__. By: ------------------------------ [Name] AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT EXHIBIT V Credit and Collection Policies See Exhibit V to Receivables Sale Agreement. AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT EXHIBIT VI [Intentionally omitted.] AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT EXHIBIT VII Form of Subordinated Transfer Note SUBORDINATED TRANSFER NOTE ____, 20__ 1. Note. FOR VALUE RECEIVED, the undersigned, Morningstar Receivables Corp., a Delaware corporation ("Buyer"), hereby unconditionally promises to pay to the order of Morningstar Foods Inc., a Delaware corporation ("Morningstar") in lawful money of the United States of America and in immediately available funds, on the date following the Termination Date which is one year and one day after the date on which (i) the Outstanding Balance of all Receivables sold under the "Transfer Agreement" referred to below has been reduced to zero and (ii) Morningstar has paid to Buyer all indemnities, adjustments and other amounts which may be owed thereunder in connection with the Purchases (the "Collection Date"), the aggregate unpaid principal sum outstanding of all "Subordinated Transfer Loans" made from time to time by Morningstar to Buyer pursuant to and in accordance with the terms of that certain Amended and Restated Receivables Transfer Agreement dated as of December 21, 2001, by and between Morningstar and Buyer (as amended, restated, supplemented or otherwise modified from time to time, the "Transfer Agreement"). Reference to Section 1.2 of the Transfer Agreement is hereby made for a statement of the terms and conditions under which the loans evidenced hereby have been and will be made. All terms which are capitalized and used herein and which are not otherwise specifically defined herein shall have the meanings ascribed to such terms in the Sale Agreement. 2. Interest. Buyer further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full hereof at a rate equal to the Prime Rate; provided, however, that if Buyer shall default in the payment of any principal hereof, Buyer promises to pay, on demand, interest at the rate of the Prime Rate plus 2.00% per annum on any such unpaid amounts, from the date such payment is due to the date of actual payment. Interest shall be payable on the first Business Day of each month in arrears; provided, however, that Buyer may elect on the date any interest payment is due hereunder to defer such payment and upon such election the amount of interest due but unpaid on such date shall constitute principal under this Subordinated Transfer Note. The outstanding principal of any loan made under this Subordinated Transfer Note shall be due and payable on the Collection Date and may be repaid or prepaid at any time without premium or penalty. 3. Principal Payments. Morningstar is authorized and directed by SPV to enter on the grid attached hereto, or, at its option, in its books and records, the date and amount of Exh. VII-1 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT each loan made by it which is evidenced by this Subordinated Transfer Note and the amount of each payment of principal made by Buyer, and absent manifest error, such entries shall constitute prima facie evidence of the accuracy of the information so entered; provided that neither the failure of ningstar to make any such entry or any error therein shall expand, limit or affect the obligations of Buyer hereunder. 4. Subordination. Morningstar shall have the right to receive, and Buyer shall make, any and all payments relating to the loans made under this Subordinated Transfer Note provided that, after giving effect to any such payment, the aggregate Outstanding Balance of Receivables (as each such term is defined in the Purchase Agreement hereinafter referred to) owned by Buyer at such time exceeds the sum of (a) the Aggregate Unpaids (as defined in the Purchase Agreement) outstanding at such time under the Purchase Agreement, plus (b) the aggregate outstanding principal balance of all loans made under this Subordinated Transfer Note. Morningstar hereby agrees that at any time during which the conditions set forth in the proviso of the immediately preceding sentence shall not be satisfied, Morningstar shall be subordinate in right of payment to the prior payment of any indebtedness or obligation of Buyer owing to the Dairy Group Receivables L.P. ("Dairy Group L.P.") and its assigns. The subordination provisions contained herein are for the direct benefit of, and may be enforced by, Dairy Group L.P., the Agent or any Purchasers and/or any of their respective assignees (collectively, the "Senior Claimants") under that certain Amended and Restated Receivables Purchase Agreement dated as of December 21, 2001, by and among Dairy Group L.P., the Servicers (as defined therein) various "Purchasers" from time to time party thereto, and Bank One, NA (Main Office Chicago), as the "Agent" (as amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement"). Until the date on which all "Capital" outstanding under the Purchase Agreement has been repaid in full and all other obligations of Buyer, Dairy Group L.P. and/or the Servicers thereunder and under the "Fee Letters" referenced therein (all such obligations, collectively, the "Senior Claim") have been indefeasibly paid and satisfied in full, Morningstar shall not institute against Buyer any proceeding of the type described in Section 5.1(d) of the Transfer Agreement unless and until the Collection Date has occurred. Should any payment, distribution or security or proceeds thereof be received by Morningstar in violation of this Section 4, Morningstar agrees that such payment shall be segregated, received and held in trust for the benefit of, and deemed to be the property of, and shall be immediately paid over and delivered to the Agent for the benefit the Senior Claimants. 5. Bankruptcy; Insolvency. Upon the occurrence of any proceeding of the type described in Section 5.1(d) of the Transfer Agreement involving Buyer as debtor, then and in any such event the Senior Claimants shall receive payment in full of all amounts due or to become due on or in respect of the Aggregate Capital and the Senior Claim (including "CP Costs" and "Yield" as defined and as accruing under the Purchase Agreement after the commencement of any such proceeding, whether or not any or all of such CP Costs or Yield is an allowable claim in any such proceeding) before Morningstar is entitled to receive payment on account of this Exh. VII-2 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Subordinated Transfer Note, and to that end, any payment or distribution of assets of Buyer of any kind or character, whether in cash, securities or other property, in any applicable insolvency proceeding, which would otherwise be payable to or deliverable upon or with respect to any or all indebtedness under this Subordinated Transfer Note, is hereby assigned to and shall be paid or delivered by the Person making such payment or delivery (whether a trustee in bankruptcy, a receiver, custodian or liquidating trustee or otherwise) directly to the Agent for application to, or as collateral for the payment of, the Senior Claim until such Senior Claim shall have been paid in full and satisfied. 6. Amendments. This Subordinated Transfer Note shall not be amended or modified except in accordance with Section 7.1 of the Transfer Agreement. The terms of this Subordinated Transfer Note may not be amended or otherwise modified without the prior written consent of the Agent for the benefit of the Purchasers. 7. GOVERNING LAW. THIS SUBORDINATED TRANSFER NOTE HAS BEEN MADE AND DELIVERED AT CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS. WHEREVER POSSIBLE EACH PROVISION OF THIS SUBORDINATED TRANSFER NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS SUBORDINATED TRANSFER NOTE. 8. Waivers. All parties hereto, whether as makers, endorsers, or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. Morningstar additionally expressly waives all notice of the acceptance by any Senior Claimant of the subordination and other provisions of this Subordinated Transfer Note and expressly waives reliance by any Senior Claimant upon the subordination and other provisions herein provided. 9. Assignment. This Subordinated Transfer Note may not be assigned, pledged or otherwise transferred to any party other than Morningstar without the prior written consent of the Agent, and any such attempted transfer shall be void. [SIGNATURE PAGE FOLLOWS] Exh. VII-3 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT MORNINGSTAR RECEIVABLES CORP. By: ---------------------------------- Title: Exh. VII-4 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT Schedule to SUBORDINATED TRANSFER NOTE SUBORDINATED TRANSFER LOANS AND PAYMENTS OF PRINCIPAL
Amount of Amount of Unpaid Subordinated Principal Principal Notation made Date Loan Paid Balance by - ---- ------------ --------- --------- -------------
Exh. VII-5 AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT SCHEDULE A DOCUMENTS TO BE DELIVERED TO BUYER ON OR PRIOR TO THE PURCHASE SEE PART I OF SCHEDULE B TO THE PURCHASE AGREEMENT. EX-21 11 d95076ex21.txt LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES
TYPE OF JURISDICTION OF NO. OF SHARES % LEGAL NAME ENTITY ORGANIZATION OWNER OR UNITS OWNERSHIP - ---------- ------- --------------- ------------------ ------------- --------- Dean Holding Company Corp DE Dean Foods Company 1,000 common 100.0% (formerly known as (f/n/a Suiza Foods Blackhawk Acquisition Corporation) Corp. (into which Dean Foods Company merged) Neptune Delaware Corp DE Dean Foods Company 1,000 common 100.0% Corporation (f/n/a Suiza Foods Corporation) Morningstar Receivables Corp DE Dean Foods Company 79 common 79.0% Corp. [Receivables (f/n/a Suiza Foods Financing SPV] Corporation) 21.0% Neva Plastics 21 common Manufacturing Co. Dean Capital Trust Trust DE Dean Foods Company (formerly known as Suiza (f/n/a Suiza Foods Capital Trust II) Corporation) Dean Management Corp DE Dean Foods Company 100 common 100.0% Corporation (formerly (f/n/a Suiza Foods known as Suiza Corporation) Management Corporation) Reeves Street, LLC LLC DE Dean Foods Company 100 units 100.0% Suiza Dairy Group Corp NV Dean Foods Company 1,000 common 100.0% Holdings, Inc. (f/n/a Suiza Foods Corporation) Preferred Holdings, Inc. Corp DE Dean Foods Company 1,000 common 100.0% (formerly known as Suiza (f/n/a Suiza Foods Preferred Holdings, Inc.) Corporation) Thompson Beverage Corp DE Dean Foods Company 1,000 common 100.0% Acquisition Corporation (f/n/a Suiza Foods Corporation) Suiza Dairy Group GP, LLC DE Dean Management 100 units 100.0% LLC Corporation (f/n/a Suiza Management Corporation)
1 Dean Dairy Services, LLC DE Dean Management 100.0% LLC (formerly known as Corporation (f/n/a Suiza Dairy Services, Suiza Management LLC) Corporation) Suiza Dairy Group, L.P. LP DE Suiza Dairy Group 99.9% Holdings, Inc. Suiza Dairy Group GP, 0.1% LLC Shenandoah's Pride, Pf'd l.p. int. LLC Dairy Group Aviation, LLC DE Suiza Dairy Group, 100 units 100.0% LLC (formerly known as L.P. Suiza Dairy Group Aviation) Dairy Group Receivables LLC DE Suiza Dairy Group, 100 units 100.0% GP, LLC (formerly L.P. known as Suiza Receivables GP, LLC) [Receivables Financing SPV] Dairy Group Receivables, LP DE Suiza Dairy Group, 99% L.P. (formerly known as L.P. Suiza Receivables, L.P.) [Receivables Financing SPV] Dairy Group 1% Receivables, GP, LLC (f/n/a Suiza Receivables GP, LLC) Country Fresh, LLC LLC MI Dean Southwest, LLC 100 units 100.0% (f/n/a Suiza Southwest, LLC) London's Farm Dairy, LLC DE Dean Southwest, LLC 100 units 100.0% LLC (f/n/a Suiza Southwest, LLC) Dean Northeast, LLC LLC DE Suiza Dairy Group, 100 units 100.0% (formerly known as Suiza L.P. GTL, LLC) New England Dairies, LLC DE Dean Northeast, LLC 100 units 100.0% LLC (f/n/a Suiza GTL, LLC) Tuscan/Lehigh LLC DE Dean Northeast, LLC 100 units 100.0% Management, L.L.C. (f/n/a Suiza GTL, LLC)
2 Tuscan/Lehigh Dairies, LP DE Dean Northeast, LLC 99% L.P. (f/n/a Suiza GTL, LLC) (Limited Partner) Tuscan/Lehigh 1% Management, L.L.C. (General Partner) Dean Southeast, LLC LLC DE Suiza Dairy Group, 100 units 100.0% (formerly known as Suiza L.P. Southeast, LLC) Broughton Foods, LLC LLC DE Dean Southeast, LLC 100 units 100.0% (f/n/a Suiza Southeast, LLC) Dairy Fresh, LLC LLC DE Dean Southeast, LLC 100 units 100.0% (f/n/a Suiza Southeast, LLC) Land-O-Sun Dairies, LLC LLC DE Dean Southeast, LLC 100 units 100.0% (f/n/a Suiza Southeast, LLC) Louis Trauth Dairy, LLC LLC DE Dean Southeast, LLC 100 units 100.0% (f/n/a Suiza Southeast, LLC) Schenkel's All-Star Dairy, LLC DE Dean Southeast, LLC 100 units 100.0% LLC (f/n/a Suiza Southeast, LLC) Schenkel's All-Star LLC DE Dean Southeast, LLC 100 units 100.0% Delivery, LLC (f/n/a Suiza Southeast, LLC) Shenandoah's Pride, LLC LLC DE Dean Southeast, LLC 100 units 100.0% (f/n/a Suiza Southeast, LLC) Dean Southwest, LLC LLC DE Suiza Dairy Group, 100 units 100.0% (formerly known as Suiza L.P. Southwest, LLC) Country Delite Farms, LLC DE Dean Southwest, LLC 100 units 100.0% LLC (f/n/a Suiza Southwest, LLC) Model Dairy, LLC LLC DE Dean Southwest, LLC 100 units 100.0% (f/n/a Suiza Southwest, LLC) Robinson Dairy, LLC LLC DE Dean Southwest, LLC 100 units 100.0% (f/n/a Suiza Southwest, LLC)
3 SFG Management LLC DE Dean Management 100 units 5.0% Limited Liability Corporation (f/n/a Company Suiza Management Corporation) Dean Southwest, LLC 95.0% (f/n/a Suiza Southwest, LLC) Southern Foods Holding LLC DE Dean Southwest, LLC 100 units 100.0% Company, LLC (f/n/a Suiza Southwest, LLC) Southern Foods Group, LP DE Southern Foods 99% LP Interest 99.0% L.P. Holding Company, LLC SFG Management Limited Liability Company 1% GP 1.0% SFG Capital Corporation Corp DE Southern Foods Group, 1,000 common 100.0% L.P. Dean SoCal, LLC LLC DE Dean Southwest II, 100 units 100.0% (formerly known as Suiza LLC SoCal, LLC) Sulphur Springs Cultured LLC DE Dean Southwest, LLC 100 units 100.0% Specialties, LLC (f/n/a Suiza Southwest, LLC) Morningstar Foods Corp DE Dean Foods Company 100 common 100.0% Holdings, Inc. (formerly (f/n/a Suiza Foods known as Suiza U.S. Corporation) Holding Company) Garrido y Compania, LLC LLC DE Morningstar Foods 100 units 100.0% Holdings, Inc. (f/n/a Suiza U.S. Holding Company) Morningstar Foods Inc. Corp DE Morningstar Foods 1,000 common 65.15% Holdings, Inc. (f/n/a Suiza U.S. Holding Company) Preferred Holdings, 228 common 14.85% Inc. (f/n/a Suiza Preferred Holdings, Inc.) Suiza Dairy Group Holdings, Inc. 307 common 20%
4 Morningstar Services Inc. Corp DE Morningstar Foods Inc. 100 common 100.0% Neva Plastics Corp DE Morningstar Foods 177 common 100.0% Manufacturing Corp. Holdings, Inc. (f/n/a Suiza U.S. Holding Company) Suiza Dairy Corporation Corp DE Morningstar Foods 238 common 100.0% Holdings, Inc. (f/n/a Suiza U.S. Holding Company) Suiza Fruit Corporation Corp DE Morningstar Foods 284 common 100.0% Holdings, Inc. (f/n/a Suiza U.S. Holding Company) Southern Foods Services, L.P. DE SFG Management 1% L.P. Limited Liability Company (GP interest) Suiza Dairy Group, L.P. (LP interest) 99% Alta-Dena Certified Corp. DE Dean Southwest II, 100% Dairy, Inc. LLC Alta-Dena Holdings, Inc. Corp. CA Alta-Dena Certified 100 common 100% Dairy, Inc. 31 Logistics, Inc. Corp. DE Dean Midwest, LLC 100 common 100% Barber Dairies, Inc. Corp. DE Dean Southeast II, LLC 100 common 100% Bell Dairy Products, Inc. Corp TX Dean Southwest II, 60,100 common 100% LLC Berkeley Farms, Inc. Corp. CA Dean Southwest II, LLC 100 common 100% Creamland Dairies, Inc. Corp. NM Dean Southwest II, LLC 49,296 common 49% Bell Dairy Products, Inc. 51,336 common 51% Dean Dairy Products Corp. PA Dean Southeast II, LLC 15,000 common 100% Company Dean Dip and Dressing LLC DE Morningstar Foods Inc. 100 units 100% Company, LLC (f/n/a Dean Dip and Dressing Company)
5 Dean Foods Business Corp. DE Dean Holding 100 common 100% Services Company Company (successor to Dean Foods Company) Dean Foods Company of Corp. DE Dean Southwest II, 100 common 100% California, Inc. LLC Dean Foods Company of Corp. DE Dean Midwest, LLC 100 common 100% Indiana, Inc. Dean Foods Ice Cream Corp. DE Dean Dairy Specialties, 100 common 100% Company LLC Dean Foods North Corp. DE Dean Midwest, LLC 200 common 100% Central, Inc. Dean Foods Regional Corp. DE Dean Holding 100 common 100% Business Services, Inc. Company (successor to Dean Foods Company) Dean Milk Company, Inc. Corp. KY Dean Midwest, LLC 200 common 100% Dean Milk Procurement Corp. DE Dean Dairy Specialties, 100 common 100% Company LLC Dean Pickle and Specialty Corp. WI Dean Specialty Foods 10,110 Class A 100% Products Company Group, LLC 20,220 Class B Dean Specialty Foods Corp. DE Dean Specialty Foods 100 common 100% Company Group, LLC Dean Transportation, Inc. Corp. Ohio Dean Dairy Holdings, 100 common 100% LLC DTMC, Inc. Corp. DE Dean Holding 400 (class A) Company (successor to Dean Foods Company) Wengert's Dairy, Inc. 12 (class B) Verifine Dairy 1 (class B) Corporation of Sheboygan, Inc. Reiter Dairy, Inc. 43 (class B) Purity Dairies, Incorporated 139 (class B) Meadow Brook Dairy Company 12 (class B) T.G. Lee Foods, Inc. 20 (class B) McArthur Dairy, Inc. 26 (class B) Mayfield Dairy Farms, Inc. 202 (class B) Creamland Dairies, Inc. 23 (class B) Berkeley Farms, Inc. 7 (class B) Alta-Dena Certified Dairy, Inc. 19 (class B)
6 DTMC, Inc. - cont. Barber Dairies, Inc. 9 (class B) Dean Specialty Foods Company 111 (class B) Dean Dip and Dressing Company, LLC 335 (class B) Dean Pickle & Specialty Products Co. 110 (class B) Dean Pickle & Specialty Products Co. (former Steinfeld 27 (class B) Pickle) Dean Pickle & Specialty Products Co. 18 (class B) Elgin Blenders, Corp. IL Dean Specialty Foods 30,000 common 100% Incorporated Group, LLC Gandy's Dairies, Inc. Corp. TX Dean Southwest II, 137,800 common 100% LLC Liberty Dairy Company Corp. MI Dean Midwest, LLC 26,300 common 100% McArthur Dairy, Inc. Corp. FL Dean Midwest, LLC 36,000 Class A 100% 700,000 Class B Maplehurst Farms, LLC LLC IN Dean Foods Company 99% of Indiana, Inc. RDPC, Inc. 1% Mayfield Dairy Farms, Corp. DE Dean Midwest, LLC 100 common 100% Inc. Meadow Brook Dairy Corp. PA Dean Southeast II, LLC 10 Class A 100% Company 770 Class B The Meadows Corp. IL Dean Midwest, LLC 10,405 common 100% Distributing Company Purity Dairies, Corp DE Dean Midwest, LLC 100 common 100% Incorporated RDPC, Inc. Corp. DE Reiter Dairy, Inc. 100 common 100% Reiter Dairy, Inc. Corp. OH Dean Southeast II, LLC 1,000 common 100% Ryan Foods Company, LLC DE Morningstar Foods Inc. 100 units 100% LLC (f/n/a Ryan Foods Company) Ryan Foods North Corp De Dean Midwest, LLC 1,000 100% Central, Inc. T.G. Lee Foods, Inc. Corp. FL Dean Midwest, LLC 560,000 common 100%
7 Verifine Dairy Products Corp. WI Dean Midwest, LLC 1,996 common 100% Corporation of Sheboygan, Inc. Wengert's Dairy, Inc. Corp. DE Dean Dairy Specialties, 100 common 100% LLC Dean Specialty Foods LLC DE Dean Holding 100 units 100% Group, LLC Company (successor to Dean Foods Company) Ice Cream Products, LLC LLC DE Dean Dairy Specialties, 100 units 100% LLC Dean Dairy Holdings, LLC DE Dean Holding 100 units 100% LLC Company (successor to Dean Foods Company) Dean Midwest, LLC LLC DE Dean Dairy Holdings, 100 units 100% LLC Dean Southeast II, LLC LLC DE Dean Dairy Holdings, 100 units 100% LLC Dean Southwest II, LLC LLC DE Dean Dairy Holdings, 100 units 100% LLC Dean Dairy Specialties, LLC DE Dean Dairy Holdings, 100 units 100% LLC LLC
8 UNRESTRICTED SUBSIDIARIES
TYPE OF JURISDICTION OF NO. OF SHARES % LEGAL NAME ENTITY ORGANIZATION OWNER OR UNITS OWNERSHIP - ---------- ------- --------------- ------------------- ------------- --------- Garrido Alto Grande Corp PR Garrido y Compania, 100 common 100.0% Corp. LLC International Milk Corp. DE Dean Southwest II, 100 common 100% Sales, Inc. (formerly LLC known as Dean Foods International Investments, Inc.) Dean International Corp DE Dean Foods Company 100 common 100.0% Holding Company (f/n/a Suiza Foods (formerly known as Corporation) Suiza International Holding Company) Dean Netherlands B.V. Corp The Netherlands Dean International 200 common (formerly known as Holding Company Suiza Netherlands B.V.) (f/n/a Suiza International Holding Company) Leche Celta, S.L. Corp Spain Dean Netherlands 38,194 84.9% B.V. (f/n/a Suiza Netherlands B.V.) 13.9% Marpu Cartera, S.L. 6,267 Maria Luiza Puchol 0.1% Requeni 54 Patricia Marchal 0.5% Puchol 241 Rodrigo Marchal 0.5% Puchol 241 Lacteos de Santander, Corp Spain Leche Celta, S.L. 100.0% S.A. Distribucion Lacteos Corp. Leche Celta, S.L. 100.0% Ganadeva, S.A. Abastecimientos Distribucion Lacteos 100.0% Lacteos Gallegos S.L. Ganadeva, S.A. Logistica y Gestion Distribucion Lacteos 100.0% Lactea S.L. Ganadeva, S.A. Central Lecheria Distribucion Lacteos 100.0% Gallega, S.L. Ganadeva, S.A.
9 Franklin Holdings, Inc. Corp DE Dean Foods Company 1,000 common 100.0% (formerly known as (f/n/a Suiza Foods Continental Can Corporation) Company, Inc.) Dixie Holding, Inc. Corp NY Franklin Holdings, 100.0% Inc. (f/n/a Continental Can Company, Inc.) Franklin Plastics, Inc. Corp DE Franklin Holdings, 1,277,148 common 88.4562% Inc. (f/n/a Continental Can Company, Inc.) Alan Bernon 87,365 common Peter Bernon 87,364 common [96,181 warrants for common @$10/share] [Captive Insurance Company to be formed] Dean Risk Corp. DE Dean Foods Business 100 Class A 90.1% Management, Inc. Services Company Willis Corroon Corporation of Illinois 11 Class B 9.9% E.B.I. Foods, Ltd. Corp. UK Elgin Blenders, 62,000 common 93.75% Incorporated David Fox 6,000 common 6.25% Importadora y Corp. Mexico Tenedora Dean Foods 4,999 99.9% Distribuidora Dean International, SA de Foods, S.A. de C.V. CV Creamland Dairies, 1 0.1% Inc. Park-It Market Corp. DE International Milk 800 Class A 100% Corporation Sales, Inc. (f/n/a Dean 100 Class B Foods International Investments, Inc.) Tenedora Dean Foods Corp. Mexico International Milk 4,999 99.98% Internacional, S.A. de Sales, Inc. (f/n/a Dean C.V. Foods International Investments, Inc.) Dean Holding Company 1 .02%
10 Dean Dairy Group Corp. DE International Milk 25 100% International Corp. Sales, Inc. (f/n/a Dean (formerly Dean Foods Foods International International Corp. Investments, Inc.) Azuis Holdings, B.V. Dean International 100% Holding Company (f/n/a Suiza International Holding Company) Kingsmi S. L. Azuis Holdings, B.V. 100% Centronor S.L. Azuis Holdings, B.V. 100% Hilstad S.L. Azuis Holdings, B.V. 100% Comerlasa S.L. Azuis Holdings, B.V. 100% Gilicman S.L. Azuis Holdings, B.V. 100% Agrolactur Gilicman S.L. 100% Lacteos Marterra Gilicman S.L. 100% Carnival Ice Cream, Netherlands Antilles Dean Holding 100% N.V. Company (f/n/a Blackhawk Acquisition Corp., successor to Dean Foods Company) Dean Foods Not for IL Dean Holding Company N/A 100% Foundation Profit Corp. (f/n/a Blackhawk Acquisition Corp., successor to Dean Foods Company) T.G. Lee Foods Not for FL T.G. Lee Foods, Inc. N/A 100% Foundation, Inc. Profit Corp.
11 EX-23 12 d95076ex23.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements of Dean Foods Company (formerly known as Suiza Foods Corporation) on Form S-3 (Nos. 333-69627, 333-77813, 333-13119, 333-29207, 333-34133 and 333-45749), Form S-4 (No. 333-29741) and on Form S-8 (Nos. 333-68319, 333-80641, 333-11185, 333-28019, 333-28021, 333-41353, 333-50013, 333-55969, 333-30160, 333-42828, 333-64936 and 333-75820) of our reports dated March 4, 2002, appearing in the Annual Report on Form 10-K of Dean Foods Company for the year ended December 31, 2001. DELOITTE & TOUCHE LLP Dallas, Texas April 1, 2002 -----END PRIVACY-ENHANCED MESSAGE-----