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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Filed by Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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SUIZA FOODS CORPORATION
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(Name of Registrant as Specified In Its Charter)
BOARD OF DIRECTORS OF SUIZA FOODS CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No:
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(3) Filing Party:
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(4) Date Filed:
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(1)Set forth the amount on which the filing fee is calculated and state how it
was determined.
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SUIZA FOODS CORPORATION
3811 TURTLE CREEK BLVD.
SUITE 1300
DALLAS, TEXAS 75219
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1997
------------------------
As a stockholder of Suiza Foods Corporation (the "Company"), you are hereby
given notice of and invited to attend in person or by proxy the Annual Meeting
of Stockholders of the Company (the "Meeting") to be held at the Dallas Museum
of Art, Horchow Auditorium, 1717 North Harwood, Dallas, Texas 75201, Tuesday,
May 13, 1997, at 10:30 a.m. local time, for the following purposes:
1. To elect three Class II directors to serve until the expiration of their
terms and until their successors are elected and qualified;
2. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock, $.01 par value per share,
from 20,000,000 shares to 100,000,000 shares;
3. To approve the adoption of the Suiza Foods Corporation 1997 Stock Option
and Restricted Stock Plan;
4. To approve the adoption of the 1997 Employee Stock Purchase Plan of
Suiza Foods Corporation;
5. To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for fiscal year 1997; and
6. To transact such other business as may properly come before the Meeting
and any adjournment(s) thereof.
The Board of Directors has fixed the close of business on March 19, 1997 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Meeting and any adjournment(s) thereof.
Only stockholders of record at the close of business on the Record Date are
entitled to notice of and to vote at the meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT YOU
EXPECT TO ATTEND, THE COMPANY DESIRES TO HAVE MAXIMUM REPRESENTATION AT THE
MEETING AND RESPECTFULLY REQUESTS THAT YOU SIGN, DATE, AND MAIL PROMPTLY THE
ENCLOSED PROXY IN THE POSTAGE PAID ENVELOPE PROVIDED. NO ADDITIONAL POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. A PROXY MAY BE REVOKED BY A STOCKHOLDER
AT ANY TIME PRIOR TO ITS USE AS SPECIFIED IN THE ENCLOSED PROXY STATEMENT.
By Order of the Board of Directors
GREGG L. ENGLES
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Dallas, Texas
April 3, 1997
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED.
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SUIZA FOODS CORPORATION
3811 TURTLE CREEK BLVD.
SUITE 1300
DALLAS, TEXAS 75219
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PROXY STATEMENT
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1997
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This Proxy Statement is furnished in connection with the solicitation by
Suiza Foods Corporation (the "Company") of proxies to be voted at its Annual
Meeting of Stockholders to be held at 10:30 a.m. on Tuesday, May 13, 1997, at
the Dallas Museum of Art, Horchow Auditorium, 1717 North Harwood, Dallas, Texas
75201, (the "Meeting") and at any adjournment(s) thereof for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders. This Proxy
Statement and the enclosed Proxy Card was first mailed or given to stockholders
on or about April 7, 1997.
Any proxy may be revoked by a stockholder at any time prior to its use by
execution of another proxy bearing a later date, by written notice to the
Secretary of the Company at the address set forth above or by oral or written
statement at the Meeting. Shares represented by any proxy properly executed and
received prior to the Meeting will be voted at the Meeting in accordance with
the proxy or, if the proxy does not specify, in accordance with the
recommendation of the Board of Directors.
Stockholders of record at the close of business on March 19, 1997 (the
"Record Date") are entitled to notice of and to vote at the Meeting. On the
Record Date, the Company had 15,153,229 shares of common stock, par value $.01
per share (the "Common Stock"), outstanding. Each share of Common Stock
outstanding on the Record Date is entitled to one vote on any matter submitted
to the holders of Common Stock for a vote. Stockholders are not entitled to
cumulate their votes in the election of directors.
A quorum for the Meeting requires the presence in person or by proxy of
stockholders entitled to cast a majority of the votes entitled to be cast at the
Meeting. If a quorum is not present, the Meeting may be adjourned from time to
time without further notice, if the time and place of the adjourned meeting are
announced at the Meeting, until a quorum is obtained. Shares held by
stockholders present at the meeting in person who do not vote on a particular
matter, ballots marked "abstain" with respect to a matter and "broker nonvotes"
that cannot be voted on a matter will be counted as present at the Meeting for
quorum purposes, but will be deemed not to have been cast and will have no legal
effect on the vote with respect to any such matter.
MATTERS TO BE BROUGHT BEFORE THE MEETING
PROPOSAL 1--ELECTION OF DIRECTORS
The Board of Directors has proposed Cletes O. Beshears, David F. Miller and
Hector M. Nevares as nominees for reelection as Class II directors to serve for
three year terms and until their successors are elected and qualified. A
plurality of the votes cast at the Meeting is required to elect each nominee.
Shares represented by proxies will be voted for the election of the nominees
named below unless authority to do so is withheld. If, at the time of the
Meeting, a nominee should be unable to serve, the shares represented by a proxy
may be voted for a substitute nominee to be designated by the Board of
Directors. For information regarding each of the nominees, see "Executive
Officers and Directors".
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE FOR CLASS II
DIRECTOR.
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PROPOSAL 2--APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Certificate of Incorporation to increase the
Company's number of authorized shares of Common Stock from 20,000,000 shares to
100,000,000 shares.
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding Common Stock of the
Company. Adoption of the proposed amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common Stock
of the Company, except for effects incidental to increasing the number of shares
of the Company's Common Stock outstanding, such as dilution of the earnings per
share and voting rights of current holders of Common Stock. The Company's Common
Stock has no preemptive rights. If the amendment is adopted, it will become
effective upon filing of a Certificate of Amendment of the Company's Certificate
of Incorporation with the Secretary of the State of Delaware.
If the amendment to the Company's Certificate of Incorporation is approved,
the increased number of authorized shares of Common Stock will be available for
issuance, from time to time, for such purposes and consideration, and on such
terms, as the Board of Directors may approve and no further vote of the
stockholders of the Company will be sought, except as required by applicable law
or by the rules of The New York Stock Exchange (the "NYSE"). Management believes
that the limited number of currently authorized but unissued shares of Common
Stock unduly restricts the Company's ability to respond to business needs and
opportunities. The availability of additional shares of Common Stock for
issuance will afford the Company flexibility in the future by assuring that
there will be sufficient authorized but unissued shares of Common Stock for
possible acquisitions, financing requirements, stock splits and other corporate
purposes. The Company has no definite plans for the use of the Common Stock for
which authorization is sought.
Pursuant to the requirements of the NYSE, on which the Company's Common
Stock is listed, stockholder approval is required (in addition to the initial
authorization of the shares) for the issuance of Common Stock (or securities
convertible into Common Stock) under certain circumstances. These circumstances
include the issuance of a number of shares equal to or in excess of 20% of the
number of shares outstanding before such issuance, the adoption of certain types
of stock option or purchase plans or other arrangements in which stock may be
acquired by officers or directors of the Company and issuances that would result
in a change of control of the Company.
The existence of additional authorized shares of Common Stock could have the
effect of rendering more difficult or discouraging hostile takeover attempts.
The Company is not aware of any existing or planned effort on the part of any
party to accumulate material amounts of voting stock, or to acquire the Company
by means of a merger, tender offer, solicitation of proxies in opposition to
management or otherwise, or to change the Company's management, nor is the
Company aware of any person having made any offer to acquire the voting stock or
assets of the Company.
In addition to the 15,153,229 shares of Common Stock outstanding at March
15, 1997, the Board has reserved an aggregate of 3,032,510 shares for issuance
upon exercise of options and rights granted under the Company's stock option and
stock purchase plans, including 1,150,000 shares and 250,000 shares reserved for
issuance under the Suiza Foods Corporation 1997 Stock Option and Restricted
Stock Plan and the 1997 Employee Stock Purchase Plan of Suiza Foods Corporation,
respectively, for which stockholder approval is sought herein, leaving a balance
of 1,814,261 authorized, unissued and unreserved shares of Common Stock.
The affirmative vote of the holders of a majority of the outstanding shares
of the Common Stock will be required to approve this amendment to the Company's
Certificate of Incorporation. As a result, abstentions and broker non-votes will
have the same effect as negative votes.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDING THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK.
PROPOSAL 3-- APPROVAL OF THE SUIZA FOODS CORPORATION 1997 STOCK OPTION AND
RESTRICTED STOCK PLAN
Effective as of February 24, 1997, the Board of Directors adopted the Suiza
Foods Corporation 1997 Stock Option and Restricted Stock Plan (the "1997 Plan"),
subject to stockholder approval. A summary of the material features of the 1997
Plan follows. This summary does not purport to be complete and is qualified in
its entirety by reference to the text of the 1997 Plan, a copy of which is
attached as Appendix A and is incorporated herein by reference.
GENERAL. The 1997 Plan provides for grants of stock options ("Options") and
restricted stock ("Restricted Stock") to certain directors and to officers, key
employees and consultants of the Company and its subsidiaries. The 1997 Plan
will be administered by a committee of non-employee directors (the "Stock Option
Committee") designated by the Board of Directors or by the Board of Directors as
a whole.
SHARES ISSUABLE THROUGH THE 1997 PLAN. A total of 1,150,000 shares of
Common Stock are authorized and reserved for issuance under the 1997 Plan upon
the exercise of Options or grants of Restricted Stock. Proportionate adjustments
will be made to the number of shares of the Common Stock subject to the 1997
Plan in the event of any recapitalization, stock dividend, stock split,
combination of shares or other change in the Common Stock. The Board or the
Stock Option Committee may also provide additional anti-dilution protection to a
participant under the terms of such participant's Option or Restricted Stock
agreement. Shares of Common Stock subject to Options or Restricted Stock grants
that are canceled, terminated or forfeited will again be available for issuance
under the 1997 Plan.
ADMINISTRATION OF THE 1997 PLAN. The Board or the Stock Option Committee
will administer the 1997 Plan and has authority to select the participants that
will be granted Options and Restricted Stock, to terminate the plan or
accelerate vesting of Options and Restricted Stock to determine the nature,
extent, timing, exercise price, vesting and duration of Options and Restricted
Stock, to prescribe all other terms and conditions consistent with the 1997
Plan, to interpret the 1997 Plan, to establish any rules or regulations relating
to the 1997 Plan that it determines to be appropriate, and to make any other
determination that it believes necessary or advisable for the proper
administration of the 1997 Plan.
STOCK OPTIONS AND RESTRICTED STOCK. From time to time, the Chief Executive
Officer of the Company will recommend to the Board or the Stock Option Committee
individuals he or she believes should receive Options or Restricted Stock
grants, the amount of shares of Common Stock he or she believes should be
subject to such Option or Restricted Stock grant, and, with respect to any
recommended Option, whether the Option should be a qualified or nonqualified
option. The Board or the Stock Option Committee will consider, but need not
accept, the Chief Executive Officer's grant recommendations. Each non-employee
director of the Company or its subsidiaries will receive nonqualified options to
purchase 7,500 shares of Common Stock on each June 30 that such director serves
on the Company's Board of Directors; provided, that such number will be reduced
to the extent (if any) that such director receives options on such date under an
automatic grant pursuant to the Company's 1995 Stock Option and Restricted Stock
Plan. As of December 31, 1996, a total of approximately 2,400 employees of the
Company, including all officers, are eligible to participate in the 1997 Plan.
The Board or the Stock Option Committee may grant nonqualified stock options
or incentive stock options to purchase shares of Common Stock. The Board or the
Stock Option Committee will determine the number and exercise price of the
Options, and the time or times that the Options become exercisable, provided
that an Option exercise price may not be less than the fair market value of the
Common Stock on the date of grant. The Board or the Stock Option Committee may
award shares of Restricted Stock without requiring the payment of cash
consideration for such shares. The term of an Option will also be
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determined by the Board or the Stock Option Committee, provided that the term of
a qualified Option may not exceed 10 years. The 1997 Plan provides that each
grant of Options or Restricted Stock will vest in accordance with the applicable
Option or Restricted Stock agreement. The Option exercise price may be paid in
cash, or, at the Company's option, in shares of Common Stock.
TERMINATION OF EMPLOYMENT. If a participant dies or becomes disabled, all
vested Options may be exercised at any time within one year (or their remaining
term of the Option, if less). If a participant ceases to be a Company employee
for any other reason, he or she must exercise any vested Options within ninety
days.
AMENDMENTS TO THE 1997 PLAN. The Board or the Stock Option Committee may
amend or discontinue the 1997 Plan at any time subject to certain restrictions
set forth in the 1997 Plan. Except in limited circumstances, no amendment or
discontinuance may adversely affect any previously granted Option or Restricted
Stock award without the consent of the recipient thereof.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations and does not
purport to be complete. Reference should be made to the applicable provisions of
the Internal Revenue Code of 1986 (the "Code"). There also may be state, local
and foreign income tax consequences applicable to transactions involving Options
or Restricted Stock. In addition, the following description does not address
specific tax consequences applicable to an individual participant who receives
an incentive Option and does not address special rules that may be applicable to
directors and officers.
STOCK OPTIONS. Under existing federal income tax provisions, a participant
who receives stock options will not normally realize any income, nor will the
Company normally receive any deduction for federal income tax purposes, upon the
grant of an Option.
When a non-qualified stock option granted pursuant to the 1997 Plan is
exercised, the employee generally will realize ordinary income (compensation)
measured by the difference between the aggregate purchase price of the Common
Stock as to which the option is exercised and the aggregate fair market value of
the Common Stock on the exercise date, and the Company generally will be
entitled to a tax deduction in the year the Option is exercised equal to the
amount the employee is required to treat as ordinary income. Any taxable income
recognized in connection with a non-qualified stock option exercised by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. The basis for determining gain or loss upon a
subsequent disposition of Common Stock acquired upon the exercise of a
non-qualified stock option will be the purchase price paid to the Company for
the Common Stock increased by an amount included in the optionee's taxable
income resulting from the exercise of such option. The holding period for
determining whether gain or loss on such subsequent disposition is short-term or
long-term generally begins on the date on which the optionee acquires the Common
Stock.
An employee generally will not recognize any income upon the exercise of an
incentive stock option, but the exercise may, depending on particular factors
relating to the employee, subject the employee to the alternative minimum tax.
An employee will recognize capital gain or loss in the amount of the difference
between the exercise price and the sale price on the sale or exchange of stock
acquired pursuant to the exercise of an incentive stock option, provided that
the employee does not dispose of such stock within two years from the date of
grant and one year from the date of exercise of the incentive stock option (the
"Required Holding Periods"). An employee disposing of such shares before the
expiration of the Required Holding Periods will recognize ordinary income equal
to the lesser of (i) the difference between the option price and the fair market
value of the stock on the date of exercise, or (ii) the total amount of gain
realized. The remaining gain or loss is generally treated as short term or long
term gain or loss depending on how long the shares are held. The Company will
not be entitled to a federal income tax deduction in connection
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with the exercise of an incentive stock option, except where the employee
disposes of the shares of Common Stock received upon exercise before the
expiration of the Required Holding Periods.
RESTRICTED STOCK. A restricted stock award is not currently taxable income
to a participant for so long as the stock is subject to a substantial risk of
forfeiture and cannot be transferred free of forfeiture. The participant will
generally be taxed on compensation income equal to the fair market value of the
stock on the date the restrictions on the shares lapse.
The participant may elect under Section 83(b) of the Code, however, to be
taxed immediately on the value of the shares awarded as of the date of grant.
Such an election must be made within 30 days after the award of shares and must
be filed with the Internal Revenue Service. If the participant makes the Section
83(b) election and subsequently forfeits his or her shares, no deduction is
permitted with respect to the forfeiture.
The participant's tax basis in shares acquired through a stock award equals
the amount of compensation income recognized upon vesting (or upon grant, in the
case of a Section 83(b) election). Generally, if the participant subsequently
sells the shares, any gain or loss will be capital.
REASON FOR PROPOSAL
The purpose of the 1997 Plan is to increase stockholder value and to advance
the interests of the Company by furnishing equity incentives designed to attract
and retain the best available personnel for positions of substantial
responsibility and to provide incentives to such personnel to promote the
success of the business of the Company and its subsidiaries. The Board of
Directors believes that the 1997 Plan is in the best interest of the Company and
its stockholders.
The affirmative vote of the holders of a majority of the total votes cast
with respect to the 1997 Plan proposal is required to approve the 1997 Plan.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering whether to vote for approval of the 1997 Plan, stockholders
should be aware that each of the directors, nominees for director and executive
officers will be eligible for Option grants and Restricted Stock awards under
the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE SUIZA FOODS
CORPORATION 1997 STOCK OPTION AND RESTRICTED STOCK PLAN.
PROPOSAL 4--APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN OF SUIZA FOODS
CORPORATION
Effective as of February 24, 1997, the Board of Directors adopted the 1997
Employee Stock Purchase Plan of Suiza Foods Corporation (the "Purchase Plan"),
subject to stockholder approval. A summary of the material features of the
Purchase Plan follows. This summary does not purport to be complete and is
qualified in its entirety by reference to the text of the Purchase Plan, a copy
of which is attached as Appendix B and is incorporated herein by reference.
GENERAL. Under the Purchase Plan, eligible employees may purchase Common
Stock of the Company at a discount from the market price through a program of
voluntary, regular payroll deductions. The Purchase Plan will be administered by
a committee of non-employee directors (the "Compensation Committee") designated
by the Board of Directors. The Compensation Committee will appoint an
administrator who will be responsible for the implementation of the Purchase
Plan, including the allocation of funds and Common Stock purchased thereunder,
and record keeping.
SHARES ISSUABLE THROUGH THE PURCHASE PLAN. A total of 250,000 shares of
Common Stock are authorized and reserved for issuance under the Purchase Plan.
Appropriate adjustments to the aggregate number of shares available under the
Purchase Plan will be made, in the discretion of the Compensation
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Committee, in the event of any recapitalization, stock dividend, stock split,
combination of shares or other change in the Common Stock. The 250,000 shares of
Common Stock authorized for sale under the Purchase Plan may be purchased by the
Company in the open market, or may be authorized and unissued shares, treasury
shares, or any combination thereof.
ADMINISTRATION OF THE PURCHASE PLAN. The Compensation Committee has
complete authority to construe, interpret and administer the provisions of the
Purchase Plan.
THE PURCHASE PLAN. Employees of the Company and its subsidiaries, including
members of the Board of Directors who are employees, and whose customary
employment is more than 20 hours per week and 5 months in a calendar year and
who have at least six months of service are eligible to participate in the
Purchase Plan. Employees who own five percent (5%) or more of the Company's
outstanding Common Stock may not purchase stock under the Purchase Plan. As of
December 31, 1996, a total of approximately 2,400 employees of the Company and
its subsidiaries, including all officers (except for Gregg L. Engles), are
eligible to participate in the Purchase Plan.
Under the Purchase Plan, the Compensation Committee may permit eligible
employees to purchase, through regular payroll deductions, shares of Common
Stock at a purchase price equal to ninety percent (90%) of the fair market value
of a share of Common Stock on the last day of an option period. An option period
is one calendar month. Under the Purchase Plan, the fair market value of a share
of Common Stock will be equal to the closing price of a share of Common Stock on
the date in question.
A participant may contribute up to a maximum of fifteen percent (15%) of
his/her base compensation for the purchase of shares pursuant to the Purchase
Plan. Payroll deductions will be accumulated and will be used to purchase shares
of Common Stock at the end of the option period. A participant may decrease (but
cannot increase) or suspend payroll deductions during an option period or
withdraw from participation in the Purchase Plan at any time. No participant may
purchase more than $25,000 of Common Stock in any calendar year, measured using
the fair market value of a share of Common Stock at the time each option is
granted.
TERMINATION OF EMPLOYMENT. If a participant's employment terminates for any
reason before the end of an option period, his or her participation in the
Purchase Plan ceases immediately, and any shares of Common Stock purchased under
the Purchase Plan and any accumulated employee contributions will be distributed
to such participant.
AMENDMENTS TO THE PURCHASE PLAN. The Board of Directors may amend or
terminate the Purchase Plan at any time subject to certain restrictions set
forth in the Purchase Plan. The Purchase Plan will automatically terminate after
ten years, or on the date all shares authorized to be sold thereunder have been
sold, subject to the right of the Board of Directors to terminate the Purchase
Plan at any earlier time.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations and does not
purport to be complete. Reference should be made to the applicable provisions of
the Code. There may also be state, local and foreign income tax consequences
applicable to purchases of Common Stock.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code. A participant under the
Purchase Plan will not recognize income subject to federal income tax at the
commencement of an option period or at the time shares are purchased. Funds
withheld under the Purchase Plan and applied toward the purchase of Common Stock
are taxed to the participant in the same manner as other regular earnings. The
purchase of shares under the Purchase Plan may have additional tax consequences
for a participant.
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A taxable event will not occur until a participant sells or makes a gift of
the shares purchased through the Purchase Plan. Whether the participant disposes
of the shares during or after the 2-year period following the last day of the
relevant option period (the "Holding Period") will determine the federal income
tax consequences to the participant.
Participants who purchase shares under the Purchase Plan and dispose of them
within 2 years of the last day of the applicable option period will recognize
ordinary income on the difference between the price paid per share and the fair
market value on the last business day of the option period, regardless of the
market price of the shares at the time of the sale. A corresponding deduction
will be available to the Company. In addition, a participant who sells shares
within the applicable Holding Period will recognize a capital gain or loss on
the difference between the amount realized on the sale and his or her "basis" in
the shares. The participant's "basis" equals the price paid plus any ordinary
income recognized as a result of the sale.
If a participant disposes of shares purchased under the Purchase Plan more
than 2 years after the last day of the applicable option period, or dies at any
time while holding shares, ordinary income will be equal to the lesser of (i)
the fair market value of the shares at the time of disposition minus the price
paid under the Purchase Plan; or (ii) 10% of the fair market value of the shares
on the last day of the applicable option period. The Company would not be
entitled to a deduction for this amount. In addition, a capital gain will be
recognized on the excess, if any, of the amount recognized on a sale over the
participant's basis (the amount paid per share plus the ordinary income as a
result of the sale). Any loss will be treated as a capital loss.
REASON FOR PROPOSAL
The purpose of the Purchase Plan is to make available to eligible employees
of the Company and its subsidiaries a means of purchasing shares of Common Stock
through voluntary, regular payroll deductions. The Board of Directors believes
that the Purchase Plan is in the best interest of the Company and its
stockholders.
The affirmative vote of the holders of a majority of the total votes cast
with respect to the Purchase Plan is required to approve the Purchase Plan.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering whether to vote for approval of the Purchase Plan,
stockholders should be aware that, with the exception of Gregg Engles, the
Chairman of the Board and Chief Executive Officer of the Company, each of the
directors, nominees for directors and executive officers will be eligible to
participate in the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1997 EMPLOYEE
STOCK PURCHASE PLAN OF SUIZA FOODS CORPORATION.
PROPOSAL 5--RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent certified public accountants, served as
independent auditors for the Company for the fiscal year ended December 31, 1996
and has reported on the Company's financial statements. The Board of Directors,
upon the recommendation of the Audit Committee, has selected Deloitte & Touche
LLP as the Company's independent auditors for fiscal year 1997 and recommends
that the stockholders ratify this selection. The Board of Directors has been
advised that Deloitte & Touche LLP has no relationship with the Company or its
subsidiaries.
A representative of Deloitte & Touche LLP is expected to be present at the
Meeting, will have an opportunity to make a statement if he desires to do so and
is expected to be available to respond to appropriate questions.
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Stockholder ratification is not required for the selection of Deloitte &
Touche LLP as the Company's independent auditors for fiscal year 1997 because
the Board of Directors has responsibility for selection of the Company's
independent auditors. The selection is being submitted for ratification with a
view toward soliciting the opinion of stockholders, which opinion will be taken
into consideration in future deliberations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF DELOITTE
& TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information believed by the Company
to be accurate based on information provided to it concerning the beneficial
ownership of Common Stock by: (i) each stockholder who is known by the Company
to own beneficially in excess of 5% of the outstanding Common Stock; (ii) each
director of the Company; (iii) each executive officer named in the Summary
Compensation Table; and (iv) all executive officers and directors as a group, as
of March 15, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
BENEFICIAL OWNER OF COMMON STOCK(1) OF CLASS
- ----------------------------------------------------------------------------------- ------------------- -----------
<S> <C> <C>
Gregg L. Engles.................................................................... 1,333,672(2) 8.8%
Cletes O. Beshears................................................................. 151,204(3) 1.0
Hector M. Nevares.................................................................. 342,492(4) 2.3
Tracy L. Noll...................................................................... 60,963(5) *
Gayle O. Beshears.................................................................. 322,740(6) 2.1
Stephen L. Green................................................................... 22,217(7) *
Robert L. Kaminski................................................................. 611,646 4.0
David F. Miller.................................................................... 88,182 *
P. Eugene Pender................................................................... 7,400(8) *
Robert Piccinini................................................................... 6,900(9) *
Canaan............................................................................. 22,217(10) *
John Hancock....................................................................... 1,723,267(11) 11.4
Pacific Mutual..................................................................... 968,745(12) 6.4
T. Rowe Price Small-Cap Value Fund................................................. 625,000 4.1
The Kaufman Fund, Inc.............................................................. 1,300,000(13) 8.6
All executive officers and directors as a as a group (12 persons).................. 3,065,153 19.4
</TABLE>
- ------------------------
* Less than 1%
(1) Percentages are based on the total number of shares outstanding, plus the
total number of outstanding options that are exercisable within 60 days.
(2) Includes 96,600 shares subject to options granted under the Option and
Restricted Stock Plan that are exercisable within 60 days. Mr. Engles'
address is 3811 Turtle Creek Blvd., Suite 1300, Dallas, Texas 75219.
(3) Includes 102,432 shares subject to options granted under the Option and
Restricted Stock Plan and the Exchange Plan that are exercisable within 60
days.
(4) Includes 69,264 shares held by Neva Holdings, Inc., a company wholly owned
by Mr. Nevares and his family, and 24,725 shares subject to options granted
under the Option and Restricted Stock Plan that are exercisable within 60
days.
8
<PAGE>
(5) Includes 54,050 shares subject to options granted under the Option and
Restricted Stock Plan that are exercisable within 60 days.
(6) Includes 306,370 shares subject to options granted under the Option and
Restricted Stock Plan and the Exchange Plan that are exercisable within 60
days.
(7) Consists solely of shares owned by Canaan Capital Limited Partnership and
Canaan Capital Offshore Limited Partnership, C.V. Mr. Green may be deemed to
share beneficial ownership of such shares since he serves as a general
partner of Canaan Capital Partners, L.P., the general partner of such
entities (the "Canaan General Partner"), and shares voting and investment
power with the other general partners of the Canaan General Partner.
(8) Includes 6,900 shares subject to options granted under the Option and
Restricted Stock Plan that are exercisable within 60 days.
(9) Consists of 6,900 shares subject to options granted under the Option and
Restricted Stock Plan that are exercisable within 60 days.
(10) Includes 2,373 shares held by Canaan Capital Limited Partnership and 19,844
shares held by Canaan Capital Offshore Limited Partnership, C.V. The Canaan
General Partner exercises sole voting and investment power with respect to
such shares.
(11) Includes 1,694,447 shares held by John Hancock Mutual Life Insurance
Company and 28,820 shares held by John Hancock Life Insurance Company of
America, an indirect, wholly owned subsidiary of John Hancock Mutual Life
Insurance Company. John Hancock's address is T-50th Floor, 200 Clarendon
Street, Boston, Massachusetts 02117.
(12) Includes 879,941 shares held by Pacific Mutual Life Insurance Company and
88,804 shares held by PM Group Life Insurance Co., an indirect, wholly owned
subsidiary of Pacific Mutual Life Insurance Company, each of which exercises
independent voting and investment power with respect to such shares. Pacific
Mutual's address is 700 Newport Center Drive, Newport Beach, California
92660.
(13) The Kaufman Fund, Inc.'s address is 140 E. 45th Street, 43rd Floor, New
York, New York 10017.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934, as amended (the "Exchange Act"),
requires the Company's executive officers and directors and persons who own more
than ten percent (10%) of a registered class of the Company's equity securities
(collectively, the "Reporting Persons") to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and to furnish the
Company with copies of these reports. The Company believes that all filings
required to be made by the Reporting Persons during the fiscal year ended
December 31, 1996 were made on a timely basis.
9
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of the Company as of February 28, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Gregg L. Engles(1)............................ 39 Chairman of the Board and Chief Executive Officer
Cletes O. Beshears*(1)(2)..................... 70 President and Director
Hector M. Nevares*(1)......................... 46 Vice Chairman of the Board
William P. Brick.............................. 45 Executive Vice President, Chief Operating Officer and
Assistant Secretary
Gayle O. Beshears(2)(3)....................... 68 Executive Vice President and Director
Tracy L. Noll................................. 48 Vice President, Chief Financial Officer and Secretary
John W. Madden................................ 31 Vice President, Treasurer and Assistant Secretary
Stephen L. Green(3)(4)(5)..................... 46 Director
Robert L. Kaminski............................ 46 Director
David F. Miller*.............................. 67 Director
P. Eugene Pender(3)(4)(5)..................... 66 Director
Robert Piccinini.............................. 55 Director
</TABLE>
- ------------------------
* Nominee for Class II Director.
(1) Member of the Executive Committee of the Board of Directors.
(2) Cletes O. Beshears and Gayle O. Beshears are brothers.
(3) Member of the Audit Committee of the Board of Directors.
(4) Member of the Compensation Committee of the Board of Directors.
(5) Member of the Stock Option Committee of the Board of Directors.
GREGG L. ENGLES. Mr. Engles joined the Company in October 1994 as Chairman
of the Board and Chief Executive Officer. Mr. Engles has served as Chairman of
the Board and Chief Executive Officer of Reddy Ice since May 1988, Chairman of
the Board of Suiza-Puerto Rico since December 1993, and Chairman of the Board of
Velda Farms since April 1994. In addition, Mr. Engles has served as President of
Kaminski Engles Capital Corporation ("KECC") since May 1988 and as President of
Engles Management Corporation ("EMC") since February 1993. KECC and EMC are
investment banking and consulting firms. Mr. Engles was also President of Engles
Capital Corporation, an investment banking and consulting firm, from May 1989 to
October 1992. Mr. Engles is a director and member of the compensation committee
of Columbus Realty Trust, a public real estate investment trust.
CLETES O. BESHEARS. Mr. C.O. Beshears joined the Company in October 1994 as
director, President and Chief Operating Officer. Mr. C.O. Beshears served as
President and Chief Executive Officer of Velda Farms from April 1994 to April
1995. From March 1988 to April 1994, Mr. C.O. Beshears provided consulting
services to companies pursuing acquisitions of dairy companies. From 1980 to
1988, Mr. C.O. Beshears served as Vice President of The Southland Corporation
and Chief Operating Officer of its Dairy Group. From 1965 to 1980, Mr. C.O.
Beshears served as Division Manager of several of The Southland Corporation's
regional dairies, including Velda Farms. Mr. Beshears relinquished the title of
Chief Operating Officer in October 1996.
10
<PAGE>
HECTOR M. NEVARES. Mr. Nevares joined the Company as a director in October
1994. Mr. Nevares served as President of Suiza-Puerto Rico from June 1983 until
September 1996, having served in additional executive capacities at Suiza-Puerto
Rico since June 1974. In September 1996, Mr. Nevares became Vice Chairman of the
Board. Mr. Nevares is a director of First Federal Savings Bank, a public
company, in San Juan, Puerto Rico.
WILLIAM P. BRICK. Mr. Brick joined the Company in July 1996 as Executive
Vice President and became Chief Operating Officer of the Company in October
1996. Prior to joining the Company, Mr. Brick served as Vice President--Sales
and Marketing for the Metropoulos Management Group from February 1996 until June
1996. From August 1995 until January 1996, Mr. Brick served as Vice
President--Sales and Marketing for Ultra Products. From April 1995 until August
1995, Mr. Brick owned and operated a private golf course in Ontario, Canada. Mr.
Brick served in various marketing capacities, including Vice President of Sales,
for The Morningstar Group, Inc. from October 1991 until December 1994. From 1988
until August 1991, Mr. Brick served in various marketing capacities for Palm
Dairies Inc. in Calgary, Alberta.
GAYLE O. BESHEARS. Mr. G.O. Beshears joined the Company as a director in
October 1994. In September 1996, Mr. G.O. Beshears became an Executive Vice
President of the Company. Mr. G.O. Beshears served as President of Reddy Ice
from May 1988 until September 1996. From January 1985 to May 1988, Mr. G.O.
Beshears served as Division Manager of the Reddy Ice division of The Southland
Corporation. Prior to January 1985, Mr. G.O. Beshears served in a number of
capacities for The Southland Corporation's Dairy Group, including Division
Manager of Midwest Farms Dairy.
TRACY L. NOLL. Mr. Noll joined the Company in October 1994 as Vice
President, Chief Financial Officer and Secretary. Prior to joining the Company,
Mr. Noll served as Controller of Foxmeyer Corporation from June 1994 until
September 1994. From March 1988 until June 1994, Mr. Noll served as Vice
President and Chief Financial Officer of The Morningstar Group Inc., the parent
company of Velda Farms until its acquisition by the Company in April 1994.
JOHN W. MADDEN. Mr. Madden joined the Company in October 1994 as Vice
President and Treasurer. From November 1990 to October 1994, Mr. Madden was
employed by and associated during various periods with KECC, EMC and Engles
Capital Corporation. From July 1988 to July 1990, Mr. Madden was employed as an
analyst with Bankers Trust Company.
STEPHEN L. GREEN. Mr. Green was elected to the Company's Board of Directors
in October 1994. Mr. Green has served as a General Partner of Canaan Capital
Partners, L.P., the general partner of Canaan Capital Limited Partnership and
Canaan Capital Offshore Limited Partnership, C.V., principal stockholders of the
Company, since November 1991. From October 1985 until November 1991, Mr. Green
served as Managing Director of GE Capital Corporation's Corporate Finance Group.
Mr. Green is a director of Chartwell Re Corporation and CapMAC Holdings Inc.,
each of which is a public company.
ROBERT L. KAMINSKI. Mr. Kaminski was elected to the Company's Board of
Directors in November 1994. Mr. Kaminski has served as President of Robert
Kaminski Interests, Inc. since 1984 and has been a principal in KECC since 1988.
Robert Kaminski Interests, Inc. and KECC are both investment banking and
consulting firms.
DAVID F. MILLER. Mr. Miller was elected to the Company's Board of Directors
in March 1997, to fill the vacancy created by the resignation of Robert
Bartholomew. Prior to his retirement in 1990, Mr. Miller served as Vice Chairman
of the Board and Chief Operating Officer of J.C. Penney, Inc. ("J.C. Penney")
since 1987. At the time of his retirement, Mr. Miller had served in various
capacities for J.C. Penney for a total of 37 years. Mr. Miller is a director of
Winn-Dixie Stores, Inc.
P. EUGENE PENDER. Mr. Pender was elected to the Company's Board of
Directors in October 1994. Prior to his retirement in December 1987, Mr. Pender
served as Vice President and Controller of The
11
<PAGE>
Southland Corporation. Thereafter, Mr. Pender served as a consultant to The
Southland Corporation until March 1991.
ROBERT PICCININI. Mr. Piccinini was elected to the Company's Board of
Directors in November 1995. Mr. Piccinini has served as Chairman of the Board
and Chief Executive Officer of Save Mart Supermarkets since 1985. Prior to 1985,
Mr. Piccinini served in a number of capacities at Save Mart, including President
from 1981 to 1985 and Vice President from 1971 to 1981.
BOARD OF DIRECTORS AND MEETINGS
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. Directors for each class will be elected at the
annual meeting of stockholders held in the year in which the term for such class
expires and will serve for three years. The terms of Cletes O. Beshears, David
F. Miller and Hector M. Nevares will expire at the 1997 annual meeting and, if
reelected, at the 2000 annual meeting; the terms of Gregg L. Engles, P. Eugene
Pender and Robert Piccinini will expire at the 1998 annual meeting; and the
terms of Gayle O. Beshears, Robert L. Kaminski and Stephen L. Green will expire
at the 1999 annual meeting.
The business of the Company is managed under the direction of the Board of
Directors. The Board meets during the Company's fiscal year to review
significant developments affecting the Company and to act on matters requiring
Board approval. The Board of Directors held ten meetings during the fiscal year
ended December 31, 1996. The Board also acted by unanimous written consent on
several occasions.
COMMITTEES OF THE BOARD OF BOARD OF DIRECTORS
The Board of Directors has established Audit, Compensation and Stock Option
Committees, which devote attention to specific subjects and assist the Board of
Directors in the discharge of its responsibilities. The functions of each
committee and its current members are described below.
AUDIT COMMITTEE. The Audit Committee consists of three members appointed by
the Board of Directors from directors, a majority of whom are neither officers
nor employees of the Company or its subsidiaries. The Audit Committee recommends
to the Board of Directors the appointment of a firm of independent certified
public accountants to conduct audits of the books, records and accounts of the
Company and monitors the performance, findings and reports of, and approves the
fee arrangement with the independent certified public accountants. The Audit
Committee also reviews accounting objectives and procedures of the Company and
makes reports and recommendations to the Board of Directors as it deems
appropriate. The Audit Committee currently consists of Messrs. Pender
(chairman), G.O. Beshears and Green. The Audit Committee held no formal meeting
during the fiscal year ended December 31, 1997.
COMPENSATION COMMITTEE. The Compensation Committee consists of two members
of the Board of Directors who are neither officers nor employees of the Company.
The Compensation Committee determines the compensation of the Chief Executive
Officer and, with the assistance of management, of senior executive employees of
the Company (including salary, bonus and benefits). The Compensation Committee
will also administer the Purchase Plan, if such plan is approved by the
stockholders herein. The Compensation Committee currently consists of Messrs.
Pender (chairman) and Piccinini. The Compensation Committee held one formal
meeting during the fiscal year ended December 31, 1996.
STOCK OPTION COMMITTEE. The Stock Option Committee consists of two members,
Messrs. Pender and Piccinini, neither of whom are employees or officers of the
Company. The Stock Option Committee administers the Suiza Foods Corporation
Exchange Stock Option and Restricted Stock Plan and the Suiza Foods Corporation
1995 Stock Option and Restricted Stock Plan, and will administer the 1997 Plan,
if such plan is approved by the stockholders herein (collectively, the "Stock
Option Plans"). In general, the Stock Option Committee construes, interprets and
administers the Stock Option Plans and the provisions of the options granted
thereunder, prescribes and amends rules for the operation of the Stock Option
Plans and
12
<PAGE>
makes all other determinations necessary or advisable for implementation and
administration of the Stock Option Plans. The Stock Option Committee has full
and final authority to select the key employees to whom awards are granted, the
number of shares of Common Stock subject to awards and the terms of awards,
including the exercise price and vesting period of options. During the fiscal
year ended December 31, 1996, the Stock Option Committee acted only by unanimous
consent and did not hold any formal meetings.
COMPENSATION OF DIRECTORS
The Company pays its unaffiliated outside directors an annual fee of
$15,000, payable quarterly, plus a fee of $1,000 for each board meeting
attended. (As referred to herein, an unaffiliated outside director is a director
who is not an employee or officer of the Company or any of its subsidiaries, nor
a beneficial owner of 345,000 or more shares of Common Stock, nor an employee or
affiliate of a beneficial owner of 345,000 or more shares of Common Stock; the
Company's current unaffiliated outside directors are Messrs. Pender and
Piccinini). The Company also pays its unaffiliated outside directors $1,000
annually for serving on a board committee and an additional $2,000 annually for
chairing any such committee. The Company reimburses its directors for expenses
incurred in attending board and committee meetings.
Directors are eligible to receive stock options and restricted stock awards
pursuant to the Suiza Foods Corporation 1995 Stock Option and Restricted Stock
Plan (the "1995 Plan"). On January 1, 1996, Mr. Piccinini received nonqualified
stock options to purchase 3,450 shares of Common Stock at $12.32 per share; and
on June 30, 1996, Messrs. Pender and Piccinini each received non-qualified stock
options to purchase 3,450 shares of Common Stock at $17.25 per share. The 1995
Plan provides that each unaffiliated outside director will automatically receive
nonqualified stock options to purchase 3,450 shares of Common Stock on the date
such person becomes a director of the Company and on each June 30 thereafter
that such person continues to serve as a director. These options vest
immediately and are exercisable at fair market value on the date of grant, as
determined by the Board of Directors. Each unaffiliated outside director will
automatically receive stock options to purchase an aggregate of 7,500 shares of
Common Stock on each June 30 that such person continues to serve as a director
if the 1997 Plan is approved by the stockholders herein.
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
Prior to the completion of a corporate combination (the "Combination") in
March 1995, the executive officers of the Company did not receive any
compensation from the Company, although certain of these officers received
compensation from entities that became subsidiaries of the Company pursuant to
the Combination. Messrs. Engles, C.O. Beshears, G.O. Beshears and Noll now
receive compensation from Suiza Management Corporation, a wholly owned
subsidiary of the Company, in accordance with their respective employment
agreements. Mr. Nevares, who was formerly the President of the Company's Puerto
Rico dairy subsidiaries (collectively, "Suiza-Puerto Rico"), receives
compensation from Suiza-Puerto Rico.
The following table sets forth the annual cash compensation paid or accrued
by the Company to its Chief Executive Officer and its other four and most highly
compensated executive officers for the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERN
------------------------------------- COMPENSATION
OTHER ANNUAL SHARES ALL-OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS $(1) OPTIONS(#) ($)(2)
- -------------------------------------- ------------ ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gregg L. Engles ...................... 1996 $ 420,000 $ 210,000 -- 13,800 --
Chairman of the Board and Chief 1995(3) 299,467 180,000 -- 138,000 --
Executive Officer
Cletes O. Beshears ................... 1996 367,500 165,375 -- 20,700 --
President 1995 291,509 175,300 -- 138,000 --
Hector M. Nevares .................... 1996 294,000 97,020 -- 5,175 --
Vice Chairman of the Board 1995 280,000 92,400 -- 34,500 --
Gayle O. Beshears .................... 1996 241,817 106,590 -- 5,175 $ 400
Executive Vice President 1995 216,711 95,172 -- 34,500 9,019
Tracy L. Noll ........................ 1996 170,000 70,000 -- 6,900 --
Vice President and Chief Financial 1995 160,000 43,200 -- 77,625 --
Officer
</TABLE>
- ------------------------
(1) In each case, the aggregate value of perquisites and other personal benefits
does not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus reported for the named executive officer.
(2) The amounts shown in the "All Other Compensation" column consist of
contributions by the Company to a 401(k) plan on behalf of the named
executive.
(3) Reflects only payments for the nine months following completion of the
Combination, prior to which no compensation was paid by any of the entities
combined in the Combination.
During 1996, options to purchase an aggregate of 411,153 shares of Common
Stock at fair market value as of the date of grant were granted under the 1995
Plan. The following table provides information regarding stock options granted
during 1996 to the executive officers of the Company named in the Summary
Compensation Table.
14
<PAGE>
OPTION GRANTS DURING 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES DURING PRICE ($/ EXPIRATION ----------------------
NAME GRANTED(#) 1996 SHARE) DATE 5%($) 10%($)
- ---------------------------------- ----------- ------------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gregg L. Engles................... 13,800 3.4% $ 12.32 1/01/2006 $ 106,922 $ 270,962
Cletes O. Beshears................ 20,700 5.0 12.32 1/01/2006 160,384 406,442
Hector M. Nevares................. 5,175 1.3 12.32 1/01/2006 40,096 101,611
Gayle O. Beshears................. 5,175 1.3 12.32 1/01/2006 40,096 101,611
Tracy L. Noll..................... 6,900 1.7 12.32 1/01/2006 53,461 135,481
</TABLE>
- ------------------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission. The
actual value, if any, an executive officer may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised. There is no assurance the value realized by an executive officer
will be at or near the assumed 5% or 10% levels.
The following table provides information regarding the exercise of stock
options during 1996 and the year-end option values.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR END(#) AT YEAR END ($)(1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gregg L. Engles................ -- -- 46,000 105,800 $ 448,040 $ 1,005,514
Cletes O. Beshears............. -- -- 49,532 117,999 495,581 1,131,556
Hector M. Nevares.............. -- -- 11,500 28,175 112,010 265,058
Gayle O. Beshears.............. -- -- 293,145 28,175 5,807,632 265,058
Tracy L. Noll.................. -- -- 25,875 58,650 252,023 558,762
</TABLE>
- ------------------------
(1) The value of in-the-money options at year-end is based on the fair market
value of $20.25 per share of Common Stock, which was the closing price for
the Company's Common Stock on December 31, 1996, as reported on the Nasdaq
National Market.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
The Company entered into employment agreements with Messrs. Engles and C.O.
Beshears in March 1995, pursuant to which Mr. Engles serves as Chairman of the
Board and Chief Executive Officer of the Company and Mr. C.O. Beshears serves as
President of the Company. The employment agreements provide that Messrs. Engles
and C.O. Beshears will receive annual base salaries of $420,000 and $367,500,
respectively, as well as incentive cash bonuses. If certain minimum levels of
net income are met, Mr. Engles and Mr. C.O. Beshears may earn an incentive cash
bonus of up to 100% and 90% respectively, of the respective annual base
salaries. Based on the Company's net income during 1996, Mr. Engles received an
incentive cash bonus of $210,000 and Mr. C.O. Beshears received an incentive
cash bonus of $165,375. The Board of Directors is required to review cash
compensation arrangements for Messrs. Engles and C.O. Beshears annually and
provide for such increases as may be warranted in accordance with the Company's
policies.
15
<PAGE>
The employment agreements of Messrs. Engles and C.O. Beshears had initial
terms of three years, but have been extended until March 31, 1999. These
agreements may be terminated by the Company prior to completion of the term upon
the death or disability of the employee, "with cause", or in the event the
employee materially breaches the agreement. As defined in the employment
agreements, the term "with cause" means any termination of the employee for: (i)
commission of an act of fraud or embezzlement against the Company; (ii)
conviction of a felony or a crime involving moral turpitude; (iii) gross
negligence or willful misconduct in performing the employee's duties; or (iv)
breach of fiduciary duty in connection with the employee's employment. Messrs.
Engles' and C.O. Beshears' employment agreements also contain two-year
non-compete provisions, which apply if the respective employee is terminated
with cause or in the event the employee materially breaches the agreement.
Hector M. Nevares serves as Vice Chairman of the Board and receives an
annual base salary of $294,000 and an annual bonus equal to 33% of his base
salary, pursuant to an employment agreement entered into in December 1993 and
amended in March 1995. Mr. Nevares may earn up to an additional 27% (or a
combined maximum of up to 60%) of his annual base salary if certain minimum
levels of operating income are met at Suiza-Puerto Rico. Based on operating
income at Suiza-Puerto Rico during 1996, Mr. Nevares received an incentive cash
bonus of $97,020 for 1996. The Company is required to review Mr. Nevares' cash
compensation arrangements annually and provide for such increases as may be
warranted in accordance with the Company's policies. The agreement had an
initial term expiring on December 15, 1996, but has been extended until March
31, 1999. This Agreement is terminable by the Company prior to the completion of
its term only upon the death or disability of Mr. Nevares or "for cause". As
defined in Mr. Nevares' employment agreement, the term "for cause" means any
termination of the employee for: (i) misconduct or action damaging or
detrimental to the Company; (ii) engaging in conduct that would constitute a
crime; (iii) the use, possession, sale, transportation, distribution or being
under the influence of a controlled substance other than as prescribed by a
licensed physician; or (iv) misappropriation of the Company's funds or
conviction of a crime involving a felony. Mr. Nevares' employment agreement
contains a five-year non-compete provision, which applies upon termination of
his employment agreement for any reason.
Mr. G.O. Beshears has agreed to a three-year noncompetition covenant, which
applies if he is terminated for any reason.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions concerning the executive officers of the Company for
1996 were made by the Compensation Committee of the Board of Directors. Messrs.
Green, Kaminski, Pender and Piccinini served as members of the Compensation
Committee at various times during the fiscal year ended December 31, 1996.
Velda Farms, Inc., a wholly-owned subsidiary of the Company ("Velda Farms"),
purchases a portion of its requirements for frozen concentrated orange juice
from an entity in which Mr. Kaminski owns a minority limited partner interest.
Purchases by Velda Farms from this supplier totaled approximately $1.7 for the
fiscal year ended December 31, 1996. Reddy Ice Corporation, a wholly-owned
subsidiary of the Company ("Reddy Ice"), purchases plastic bags for use in its
ice operations from a plastic bag manufacturer in which Mr. Kaminski owns a
minority interest. Reddy Ice's purchases from this supplier totaled
approximately $346,000 for the fiscal year ended December 31, 1996. An affiliate
of Mr. Piccinini purchases fresh milk from Model Dairy, Inc., a wholly-owned
subsidiary of the Company ("Model Dairy"). In addition, Model Dairy purchases
certain supplies and products used in its business, primarily plastic bottles
and cottage cheese, from this entity. Sales of fresh milk by Model Dairy to this
entity totaled approximately $16.2 million for the fiscal year ended December
31, 1996. Purchases of supplies and products by Model Dairy from this entity
totaled approximately $1.6 million for the fiscal year ended December 31, 1996.
16
<PAGE>
COMPENSATION COMMITTEE'S AND STOCK OPTION COMMITTEE'S REPORT ON EXECUTIVE
COMPENSATION
The Compensation Committee is responsible for recommending to the full Board
of Directors salary amounts for the Company's Chief Executive Officer and the
other executive officers and making the final determination regarding bonus
arrangements to such persons. The Stock Option Committee is responsible for
making the final determination regarding awards of stock options and restricted
stock to such persons.
Compensation to executive officers is designed to attract and retain highly
capable executives, to motivate the performance of executives in support of the
achievement of the Company's strategic financial and operating performance
objectives and to reward performance that meets this standard. The Company is
engaged in highly competitive businesses and must attract and retain qualified
executives in order to be successful. In 1996, executive compensation was
comprised of the following elements:
BASE SALARY. The base salary for the Chief Executive Officer and the
other executive officers of the Company was determined after review of
publicly available information concerning the base salaries of executives
with similar responsibilities in companies engaged in businesses similar to
the Company's, the responsibilities of each executive officer and the
subjective evaluation of such officer's contribution to the Company.
ANNUAL INCENTIVE COMPENSATION. Year-end cash bonuses are designed to
motivate the Chief Executive Officer and the other executive officers to
achieve annual financial and other goals based on the strategic financial
and operating performance objectives of the Company. In conjunction with the
Compensation Committee's review of the strategic and operating plans of the
Company, the Compensation Committee established target performance levels
for the executive officers based on the Company's consolidated net income.
Bonus amounts were paid to the executive officers based on the target
performance level reached.
STOCK OPTION PLAN. The 1995 Plan forms the basis of the Company's
long-term incentive plan for its executive officers. The Compensation
Committee believes that a significant portion of executive compensation
should be dependent on value created for the stockholders. Stock options are
generally granted annually, at fair market value on the date of the grant.
In selecting recipients for option grants and in determining the size of
such grants, the Stock Option Committee considers various factors such as
the earnings levels of the Company and the contributions of the individual
recipient to the Company.
Executive officers also receive benefits typically offered to executives by
companies engaged in businesses similar to the Company's core businesses and
various benefits generally available to employees of the Company (such as health
insurance). It is the Company's policy to qualify compensation paid to executive
officers for deductibility under applicable provisions of the Internal Review
Code, including Section 162(m).
1996 COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Engles' base salary
for 1996 was $420,000. Mr. Engles' bonus potential was up to 100% of base
salary, with a potential range of 0% to 100% of base salary. Mr. Engles'
1996 cash bonus, which was based on the degree of attainment of financial
goals established in 1995 and 1996, reflects the fact that in 1996 the
Company's net income increased substantially. In 1996, Mr. Engles received
an option grant under the 1995 Plan. In making the option grant, the Stock
Option Committee considered the factors described above under "Stock Option
Plan".
Stephen L. Green
P. Eugene Pender
Members of the Compensation Committee
and the Stock Option Committee
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CORPORATE PERFORMANCE GRAPH
The following graph compares the cumulative total return of the Company's
Common Stock during the period commencing April 17, 1996, the date public
trading of the Common Stock began following the Company's initial public
offering, to December 31, 1996, with the Standard & Poor's 500 Stock Index (the
"S&P 500 Index") and a peer group index (the "Peer Group Index") of United
States companies within Standard Industrial Codes 2020 to 2029 (dairy products).
The S&P 500 Index includes 500 United States companies in the industrial,
transportation, utilities and financial sectors and is weighted by market
capitalization. The graph depicts the results of investing $100 in the Common
Stock, the S&P 500 Index and the Peer Group Index at closing prices on April 17,
1996, and assumes that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SUIZA FOODS CORPORATION S&P 500 STOCKS DAIRY PRODUCTS STOCKS
<S> <C> <C> <C>
4/17/96 100.000 100.000 100.000
4/30/96 93.443 102.057 99.820
5/31/96 119.672 104.641 103.744
6/28/96 113.115 105.089 103.936
7/31/96 106.557 100.405 94.071
8/30/96 114.754 102.609 96.538
9/30/96 113.115 108.359 100.876
10/31/96 113.115 111.332 107.252
11/29/96 122.951 119.841 106.204
12/31/96 132.787 117.474 112.434
</TABLE>
THE STOCK PRICE PERFORMANCE DEPICTED IN THE CORPORATE PERFORMANCE GRAPH IS
NOT NECESSARILY INDICATIVE OF FUTURE PRICE PERFORMANCE. THE CORPORATE
PERFORMANCE GRAPH WILL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE IN ANY
FILING BY THE COMPANY UNDER THE SECURITIES ACT OR THE EXCHANGE ACT.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1996, John Hancock Life Insurance Company and an
affiliate ("John Hancock") and Pacific Mutual Life Insurance Company and an
affiliate ("Pacific Mutual") held $31.0 million and $5.0 million, respectively,
of the Company's outstanding subordinated notes (the "Subordinated Notes"). Upon
completion of a public offering of Common Stock in January 1997, John Hancock
was paid approximately $34.7 million (including approximately $3.7 million in
prepayment penalties) and Pacific Mutual was paid approximately $5.6 million
(including approximately $0.6 million in prepayment penalties) in repayment of
the entire amount of their outstanding Subordinated Notes, together with accrued
interest on the principal amounts repaid. In April 1996, John Hancock and
Pacific Mutual were paid approximately $14.0 million (including approximately
$1.4 million in prepayment penalties) and approximately $3.5 million (including
approximately $0.4 million in prepayment penalties), respectively, from the net
proceeds from the Company's initial public offering in repayment of certain 15%
Subordinated Notes, together with accrued interest on the principal amounts
repaid. Robert Bartholomew, who served as a director of the Company from October
1994 until February 1997, is affiliated with Pacific Mutual.
Velda Farms purchases a portion of its requirements for frozen concentrated
orange juice from an entity in which Messrs. Engles, Kaminski and Madden
collectively own a minority limited partner interest. Velda Farms has no written
agreement with this supplier, and all purchases are based on purchase orders.
Management of Velda Farms monitors the market price for frozen concentrated
orange juice by maintaining contact with a number of potential suppliers and
purchases the product from the supplier offering the lowest price, inclusive of
delivery and other service charges. Management believes that the terms of the
purchase orders are at least as favorable to the Company as could be obtained in
an arm's-length transaction with an unaffiliated third party. Purchases by Velda
Farms from this supplier totaled $1.7 million for the fiscal year ended December
31, 1996.
Reddy Ice purchases plastic bags for use in its ice business from a plastic
bag manufacturer in which Messrs. Engles, Kaminski and Madden own a minority
equity interest. The seller principally manufactures bread bags. Reddy Ice's
purchases from this supplier totaled approximately $346,000 for the fiscal year
ended December 31, 1996. Management believes that the terms of the purchase
orders are at least as favorable to the Company as could have been obtained in
an arms'-length transaction with an unaffiliated third party.
An affiliate of Mr. Piccinini purchases fresh milk from Model Dairy. Sales
of fresh milk by Model Dairy to this entity totaled approximately $16.2 million
for the fiscal year ended December 31, 1996. This entity is Model Dairy's
largest customer. In addition, Model Dairy purchases certain supplies and
products used in its business, primarily plastic bottles and cottage cheese,
from this entity. Purchases of these items by Model Dairy from this entity
totaled approximately $1.6 million for the fiscal year ended December 31, 1996.
In August 1996, the Company entered into a financial advisory agreement with
an affiliate of Mr. Nevares, pursuant to which the affiliate provides investment
banking and consulting services concerning certain tax credits generated by the
Company's Puerto Rico dairy operations. In September 1996, the Company paid this
entity $99,000 under the agreement in connection with the sale by the Company of
a portion of the Puerto Rico tax credits. The agreement expires in April 1997.
In March 1997, the Company acquired all of the outstanding capital stock of
PureIce of the South, Inc. ("PureIce"), a manufacturer and distributor of ice
products in Florida, for a purchase price of approximately $5.3 million, plus
the assumption of certain outstanding indebtedness. David F. Miller, a nominee
for Class II director, was a majority stockholder of PureIce and received an
aggregate of approximately $2.9 million of the purchase price at the closing of
the acquisition, including 88,182 shares of Common Stock.
19
<PAGE>
STOCKHOLDER PROPOSALS
A proper proposal submitted by a stockholder in accordance with applicable
rules and regulations for presentation at the Company's 1998 annual meeting that
is received at the Company's principal executive office, 3811 Turtle Creek
Blvd., Suite 1300, Dallas, Texas 75219, Attention: Tracy L. Noll, by November
30, 1997, will be included in the Company's proxy statement and form of proxy
for that meeting.
Stockholders wanting to present proposals for action at the next annual
meeting must give written notice by certified mail, in accordance with Article
II, Section 3 of the Company's Bylaws, to the Secretary of the Company at the
address set forth on the cover page of this Proxy Statement no later than March
1 of any calendar year; provided however, that in the event less than 35 days'
notice of an annual meeting of stockholders is given, such notice by a
stockholder must be made and delivered to the Secretary of the Company not later
than the close of business on the seventh day following the day on which the
notice of annual meeting is mailed. Stockholder proposals may be presented to
the annual meeting in person by the stockholder submitting such proposal or a
representative who is qualified under Delaware law to present the proposal on
the stockholder's behalf. The chairman presiding at any meeting of the
stockholders may, in his sole discretion, refuse to allow a stockholder or the
stockholder's representative to present any proposal which the Company would not
be required to include in a proxy statement pursuant to any rule promulgated by
the Securities and Exchange Commission.
PERSONS MAKING THE SOLICITATION
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company. The cost of soliciting proxies in the accompanying form will be paid by
the Company. Officers of the Company may solicit proxies by mail, telephone or
telegraph. Upon request, the Company will reimburse brokers, dealers, banks and
trustees, or their nominees, for reasonable expenses incurred by them in
forwarding proxy material to beneficial owners of shares of the Common Stock.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for action
at the meeting other than the matters set forth herein. Should any other matter
requiring a vote of stockholders arise, the proxies in the enclosed form confer
upon the person or persons entitled to vote the shares represented by such
proxies discretionary authority to vote the same in accordance with their best
judgment in the interest of the Company.
20
<PAGE>
FINANCIAL STATEMENTS
A copy of the 1996 Annual Report of the Company containing audited financial
statements accompanies this Proxy Statement. The consolidated balance sheets of
Suiza Food Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996
contained on pages 24 through 43 of the 1996 Annual Report to Stockholders of
Suiza Food Corporation and the Selected Financial Data and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained on pages 17 through 23 of such Annual Report are incorporated by this
reference in this Proxy Statement. The remainder of the Annual Report does not
constitute a part of the proxy solicitation material.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM A COPY OF
THIS PROXY STATEMENT IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON AND BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS
DAY OF RECEIPT OF SUCH REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K. REQUESTS SHOULD BE DIRECTED TO TRACY L. NOLL, SUIZA FOODS CORPORATION,
3811 TURTLE CREEK BLVD., SUITE 1300, DALLAS, TEXAS 75219.
By Order of the Board of Directors,
GREGG L. ENGLES
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
April 3, 1997
21
<PAGE>
APPENDIX A
SUIZA FOODS CORPORATION 1997 STOCK OPTION
AND RESTRICTED STOCK PLAN
<PAGE>
SUIZA FOODS CORPORATION
1997 STOCK OPTION AND RESTRICTED STOCK PLAN
1. PURPOSE OF THE PLAN. This Plan shall be known as the Suiza Foods
Corporation 1997 Stock Option and Restricted Stock Plan. The purpose of the Plan
is to attract and retain the best available personnel for positions of
substantial responsibility and to provide incentives to such personnel to
promote the success of the business of Suiza Foods Corporation 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 Corporation.
"Common Stock" means the Common Stock, $.01 par value per share, of the
Corporation. Except as otherwise provided herein, all Common Stock issued
pursuant to the 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 Corporation's assets in the event of liquidation.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the committee described in Section 19 that administers the
Plan or, if no such committee has been appointed, the full Board.
"Consultant" means any consultant or advisor who renders bona fide services
to the Corporation or one of its Subsidiaries, which services are not in
connection with the offer or sale of securities in a capital-raising
transaction.
"Corporation" means Suiza Foods Corporation, a Delaware corporation.
"Date of Grant" means the date on which an Option is granted or Restricted
Stock is awarded pursuant to this Plan 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.
"Employee" means any officer or other key employee of the Corporation or one
of its Subsidiaries (including any director who is also an officer or key
employee of the Corporation or one of its Subsidiaries).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"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 trading day immediately prior to 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.
"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 Section1.162-27(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.
1
<PAGE>
"Optionee" means any Employee, Consultant or director who receives an
Option.
"Participant" means any Employee, Consultant or director who receives an
Option or Restricted Stock pursuant to this Plan.
"Plan" means this Suiza Foods Corporation 1997 Stock Option and Restricted
Stock Plan, as amended from time to time.
"Qualified Option" means any Option that is intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the Code.
"Restricted Stock" means Common Stock awarded to an Employee, Consultant or
director pursuant to Section 7 of this Plan.
"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 stock is owned or controlled directly or indirectly by the Corporation or
through one or more Subsidiaries of the Corporation.
3. TERM OF PLAN. The Plan has been adopted by the Board effective as of
February 24, 1997. To permit the granting of Qualified Options under the Code,
and to qualify awards of Options or Restricted Stock hereunder as "performance
based" under Section 162(m) of the Code, the Plan will be submitted for approval
by the stockholders of the Corporation by the affirmative votes of the holders
of a majority of the shares of Common Stock then issued and outstanding, for
approval no later than the next annual meeting of stockholders. If the Plan is
not so approved by the stockholders of the Corporation, then any Options
previously granted under the Plan will be Nonqualified Options, regardless of
whether the option agreements relating thereto purport to grant Qualified
Options. The Plan shall continue in effect until terminated pursuant to Section
19(a).
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 1,150,000 shares. Such shares may either be authorized but unissued
shares or treasury shares. The Corporation 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 Corporation 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 directors of the
Corporation 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 directors of the Corporation or its Subsidiaries as
may be determined by the Board or the Committee. Subject to the limitations and
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
2
<PAGE>
exercisable for the first time by an Optionee during any calendar year (under
all such plans of the Optionee's employer corporation 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
(collectively, such corporations described in this sentence are hereinafter
referred to as "Related Corporations")) 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. Except as provided in Section 19(b), 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 Corporation by an appropriate officer.
In connection with the granting of any Options under the Plan, the aggregate
number of shares of Common Stock issuable to any single Participant shall not
exceed the number of shares subject to the Plan referred to in Section 4.
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; provided that such number of shares will be reduced to the extent (if any)
that such director receives options on such date under an automatic grant
pursuant to the Corporation's 1995 Stock Option and Restricted Stock Plan.
7. RESTRICTED STOCK. The Board or the Committee shall determine the number
of shares of Common Stock to be granted as Restricted Stock from time to time
under the Plan. 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 Corporation by an
appropriate officer.
8. TIME OF GRANT OF OPTIONS. The date of grant of an Option or Restricted
Stock under the Plan 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 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 Corporation 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. Subject to Section 12 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. The Board or the Committee may, but shall not be
required to, permit acceleration of vesting or termination of forfeiture
provisions upon any sale of the Corporation or similar transaction. A
Participant's Option or Restricted Stock agreement may contain such additional
provisions with respect to vesting as the Board or the Committee may specify.
3
<PAGE>
11. EXERCISE. A Participant 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, at the Corporation's option, by the delivery of shares of Common Stock
having a Fair Market Value on the date immediately preceding the exercise date
equal to the Exercise Price.
If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, as amended, any Option granted under
the Plan may be exercised by a broker-dealer acting on behalf of an Optionee if
(a) the broker-dealer has received from the Optionee or the Corporation a fully-
and duly-endorsed agreement evidencing such Option, together with instructions
signed by the Optionee requesting the Corporation 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,
(b) adequate provision has been made with respect to the payment of any
withholding taxes due upon such exercise, and (c) 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.
12. WHEN QUALIFIED OPTIONS MAY BE EXERCISED. No Qualified 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. In addition, if an Optionee of a Qualified
Option ceases to be an employee of the Corporation or any Related Corporation
for any reason, such Optionee's vested Qualified Options shall not be
exercisable after (a) 90 days following the date such Optionee ceases to be an
employee of the Corporation or any Related Corporation, if such cessation of
service is not due to the death 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 Corporation or
any Related Corporation, if such cessation of service is due to the death or
permanent and total disability (as defined above) of the Optionee. Upon the
death of an Optionee, any vested Qualified 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 Qualified Option by bequest or inheritance or by reason
of the death of the Optionee, provided that such exercise occurs within both the
remaining option term of the Qualified Option and twelve months after the date
of the Optionee's death. This Section 12 only provides the outer limits of
allowable exercise dates with respect to Qualified Options; the Board or the
Committee may determine that the exercise period for a Qualified Option shall
have a shorter duration than as specified above.
13. OPTION FINANCING. Upon the exercise of any Option granted under the
Plan, the Corporation 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 Corporation 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 Corporation 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 Corporation
for the amount it is required to withhold or taking any other action reasonably
required to satisfy the Corporation's withholding obligation.
15. CONDITIONS UPON ISSUANCE OF SHARES. The Corporation 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.
4
<PAGE>
As a condition to the exercise of an Option or the grant of Restricted
Stock, the Corporation 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.
The Corporation 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
Corporation cannot obtain authority from the appropriate regulatory bodies
deemed by the Corporation 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 Corporation 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.
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 Qualified 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. Each nonqualified Option under
this Plan shall be transferable only by will, the laws of descent and
distribution, pursuant to a domestic relations order issued by a court of
competent jurisdiction, or to a trust established by the Participant for estate
planning purposes.
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.
17. MODIFICATION OF OPTIONS. Except as provided in Section 19(b) of this
Plan, 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 impair the Option without the consent of the holder of the Option.
Notwithstanding the foregoing, in the event of such a modification,
substitution, 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.
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 Corporation or of another corporation (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
5
<PAGE>
consistent with the provisions of this Plan as are determined by the Board or
the Committee, may be executed on behalf of the Corporation by the Chairman of
the Board, the President or any Vice President of the Corporation. 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 Corporation 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 within ten (10) years from
the effective date of the Plan or the date the Plan is approved by the
stockholders of the Corporation, whichever is earlier.
(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,
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 Corporation
or affect the right of the Corporation to terminate the employment of any such
person with or without cause.
21. LIABILITY OF THE CORPORATION. Neither the Corporation, 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 TEXAS 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.
6
<PAGE>
APPENDIX B
1997 EMPLOYEE STOCK PURCHASE PLAN OF
SUIZA FOODS CORPORATION
<PAGE>
1997 EMPLOYEE STOCK PURCHASE PLAN
OF
SUIZA FOODS CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
I. INTRODUCTION...................................................................... 1
II. DEFINITIONS....................................................................... 1
III. PARTICIPATION..................................................................... 2
IV. OPTIONS TO PURCHASE; MAXIMUM SHARES AVAILABLE..................................... 3
V. PURCHASE OF STOCK PURSUANT TO OPTIONS............................................. 4
VI. ADMINISTRATION OF PLAN............................................................ 5
VII. ADJUSTMENT UPON CHANGES IN COMMON STOCK........................................... 6
VIII. AMENDMENT; TERMINATION OF PLAN.................................................... 6
IX. MISCELLANEOUS..................................................................... 6
</TABLE>
<PAGE>
1997 EMPLOYEE STOCK PURCHASE PLAN OF
SUIZA FOODS CORPORATION
I. INTRODUCTION
The purpose of the 1997 Employee Stock Purchase Plan is to make available to
eligible employees of Suiza Foods Corporation (the "COMPANY"), and certain
related companies a means of purchasing shares of Suiza 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 Suiza.
"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).
"COMPANY" means Suiza Foods Corporation.
"COMMON STOCK" means Suiza's Common Stock, par value $.01 per share.
"CODE" has the meaning set forth in ARTICLE I.
"ELIGIBLE EMPLOYEE" means any employee of any Suiza Company, excluding any
employee (a) who has been employed by a Suiza Company for less than six months,
(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 Suiza 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
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Suiza Foods Corporation 1997 Employee Stock Purchase Plan Page 1
<PAGE>
Stock as reported by the NASDAQ (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 [ ].
"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 [ ], unless the Plan is terminated
earlier.
"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 Suiza Foods Corporation 1997 Employee Stock Purchase Plan
as the same may be amended from time to time.
"PLAN START DATE" means [ ].
"RELATED CORPORATION" means any present or future corporation which (i)
would be a "subsidiary corporation" or "parent corporation" of Suiza Foods
Corporation as such terms are defined in Section 424 of the Code, and (ii) is
designated as a participating employer in this Plan by the Board.
"RULE 16B-3" means Rule 16b-3 under the 1933 Act.
"SUIZA COMPANY" means Suiza Foods Corporation or a Related Corporation.
"STOCK ACCOUNT" means, with respect to each Participant, the number of whole
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 (a) 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.
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Suiza Foods Corporation 1997 Employee Stock Purchase Plan Page 2
<PAGE>
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 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 Suiza 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 Section423(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 (i) a
certificate issued in the name of the Participant representing the number of
full shares of Common Stock held in the Participant's Stock Account and (ii) 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 Suiza Companies for any reason, including
death or disability, the Participant's Stock Account and 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, (i) a certificate issued in the
name of the Participant representing the number of full shares of Common Stock
in the Participant's Stock Account, and (ii) 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 Common Stock and 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 250,000 shares.
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.
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Suiza Foods Corporation 1997 Employee Stock Purchase Plan Page 3
<PAGE>
V. PURCHASE OF STOCK PURSUANT TO OPTIONS
5.1. PAYROLL DEDUCTION ACCOUNTS. Each Suiza 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 Administrator 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, the Administrator or the
Administrator's nominee, 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 Administrator.
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 whole 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; PROVIDED, HOWEVER, that the quotient in this SECTION
5.3 shall be rounded down to a whole number. 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. The purchase price of each share of Common Stock sold
pursuant to the exercise of an Option shall be 0.90 multiplied by the Fair
Market Value of the Common Stock on the last day of the Option Period.
5.5. EXERCISE OF OPTIONS. Each person who is a Participant in the Plan on
the Option Exercise Date will be deemed to have exercised on the 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 whole 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 sold, the
balance of the Payroll Deduction Account shall be returned to the Participant;
PROVIDED, HOWEVER, that if the balance in the Payroll Deduction Account consists
solely of an amount equal to the value of a fractional share it will be retained
in the Payroll Deduction Account and carried over to the next Option Period. No
fractional shares shall be issued hereunder.
Notwithstanding anything herein to the contrary, Suiza'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 NASDAQ or
any national securities exchange applicable thereto, and to compliance by Suiza
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
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Suiza Foods Corporation 1997 Employee Stock Purchase Plan Page 4
<PAGE>
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. DELIVERY OF STOCK. A Participant may instruct the Administrator, in
writing, at any time to deliver to the Participant a certificate, issued in the
name of the Participant, representing any or all of the full shares of Common
Stock held in the Participant's Stock Account. As soon as practicable after
receiving such instructions, the Administrator shall cause the certificate to be
mailed to the Participant. Such instruction to the Administrator, requesting
delivery of a certificate, will not affect the Participant's status under the
Plan unless the Participant also terminates the payroll deduction authorization.
5.9. 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 without charge. Any distributions to
holders of Common Stock or other securities or rights to subscribe for
additional shares of Common Stock will be sold and the proceeds will be handled
in the same manner as a cash dividend, unless the Participant instructs the
Administrator to the contrary.
5.10. VOTING RIGHTS. The Administrator will deliver to each Participant as
promptly as practicable, by mail or otherwise, all notices of meetings, proxy
statements and other material distributed by Suiza 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 Administrator 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.
5.11. NO INTEREST TO BE PAID. No interest will be paid to or credited to
the Payroll Deduction Accounts or Stock Accounts of the Participants.
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 Suiza. The
Administrator shall be responsible for the implementation of the Plan, including
allocation of funds and stock to the Payroll Deduction Accounts and Stock
Accounts and keeping adequate and accurate records 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 Administrator will send to each
Participant a statement at the end of each calendar quarter (or such other
period as determined by the Committee in its sole discretion).
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Suiza Foods Corporation 1997 Employee Stock Purchase Plan Page 5
<PAGE>
Each such statement shall contain information concerning transactions in the
Participant's Payroll Deduction Account and Stock Account during the relevant
period and reflect the balance in the Participant's Payroll Deduction Account
and Stock Account at the end of such period.
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 may 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 Suiza; (ii) a merger or consolidation in which
Suiza is not the surviving corporation, or a reverse merger in which Suiza 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
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 a stock certificate representing the number of whole shares to
which the Participant is entitled. In addition, the Administrator shall send
checks drawn on the Plan's account to each Participant 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 Suiza 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 AND TERMINATION. Suiza, 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.
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. The Broker's brokerage commissions, if any,
incurred in connection with transactions in Common Stock under the Plan, and the
Administrator's administrative charges for maintaining Participants' accounts
relating to purchases of securities and all other expenses of administering or
maintaining the Plan will be paid by the Company. If the Company is acting as
Administrator, no expenses will be charged to the Participants.
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Suiza Foods Corporation 1997 Employee Stock Purchase Plan Page 6
<PAGE>
9.2. INDEMNIFICATION. In the event and to the extent not insured against
under any contract of insurance with an insurance company, Suiza 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, 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
Suiza 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 Suiza 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 SUIZA. Neither Suiza, 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.
IN WITNESS WHEREOF, the Company has caused this Plan to be adopted effective
as of the Plan Start Date.
SUIZA FOODS CORPORATION
By: __________________________________
Name: ________________________________
Title: _______________________________
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Suiza Foods Corporation 1997 Employee Stock Purchase Plan Page 7
<PAGE>
APPENDIX C
FORM OF PROXY
<PAGE>
SUIZA FOODS CORPORATION
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS AT 10:30 A.M.
TUESDAY, MAY 13, 1997
DALLAS MUSEUM OF ART, HORCHOW AUDITORIUM
1717 NORTH HARWOOD, DALLAS, TEXAS 75201
The undersigned stockholder of Suiza Foods Corporation (the "Company")
hereby appoints Gregg L. Engles and Tracy L. Noll or either of them, as proxies,
each with full powers of substitution, to vote the shares of the undersigned at
the above-stated Annual Meeting and at any adjournment(s) thereof:
- -----------------------------------------------------------------------------
(1) Election of Cletes O. Beshears, David F. Miller and Hector M. Nevares as
Class II Directors
FOR all nominees (except as WITHHOLD AUTHORITY
provided to the contrary to vote for all nominees / /
below) / /
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME HERE):
- -----------------------------------------------------------------------------
(2) Approval of an Amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from
20,000,000 shares to 100,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
- -----------------------------------------------------------------------------
(3) Approval of the Suiza Foods Corporation 1997 Stock Option and Restricted
Stock Plan.
/ / FOR / / AGAINST / / ABSTAIN
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(4) Approval of the 1997 Employee Stock Purchase Plan of Suiza Foods
Corporation.
/ / FOR / / AGAINST / / ABSTAIN
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(5) Ratification of the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year 1997.
/ / FOR / / AGAINST / / ABSTAIN
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(6) In their discretion, the proxies are authorized to vote upon such other
business or matters as may properly come before the meeting or any
adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. IF A
CHOICE IS NOT INDICATED WITH RESPECT TO ITEMS (1), (2), (3), (4) AND (5) THIS
PROXY WILL BE VOTED "FOR" SUCH ITEM. THE PROXIES WILL USE THEIR DISCRETION WITH
RESPECT TO ANY MATTER REFERRED TO IN ITEM (6). THIS PROXY IS REVOCABLE AT ANY
TIME BEFORE IT IS EXERCISED.
Receipt herewith of the Company's Annual Report and Notice of Meeting and
Proxy Statement, dated April 3, 1997, is hereby acknowledged.
Dated: ---------------------------------- , 1997
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(Signature(s) of Stockholder(s))
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(Joint owners must EACH sign. Please sign EXACTLY as
your name(s) appear(s) on this card. When signing as
attorney, trustee, executor, administrator, guardian or
corporate officer, please give your FULL title.)
PLEASE SIGN, DATE AND MAIL TODAY.
