<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SUIZA FOODS CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[SUIZA FOODS LOGO APPEARS HERE]
Suiza
Foods
Suiza Foods Corporation
1999 Proxy Statement
and
Notice of Annual Meeting
Your vote is important.
Please take a moment to read the information and instructions inside.
<PAGE>
You are invited...
April 9, 1999
Dear Stockholder,
Please come to our annual stockholders' meeting on Wednesday, May 19, 1999.
After we vote on this year's proposals, we will present a brief report on our
recent financial results and our current operations. You will have the
opportunity to ask questions and make comments.
Enclosed with this proxy statement is our 1998 Annual Report. As you will see
in our Annual Report, we believe that we are making some very significant and
positive changes in the dairy industry. We are also making positive changes in
the way we communicate with you. This year's proxy statement is written in
"plain English." We hope you find it easier to read and understand. We welcome
your comments on our new communications efforts.
Because we are always looking for new ways to bring value to our stockholders,
we are also introducing telephone voting and internet voting this year, in
addition to the usual method of voting by mail. We hope you find these
simplified procedures useful.
We hope to see you at the annual meeting.
Sincerely,
[PHOTO
/s/ Gregg L. Engles APPEARS
--------------------------- HERE]
Gregg L. Engles
Chairman of the Board and
Chief Executive Officer
1998 Statistics:
(compared to 1997)
Diluted EPS Up 41%*
Sales Up 85%
Operating Income Up 84%*
21 Acquisions Completed
*Before nonrecurring merger and other costs, extraordinary loss from early
extinguishment of debt, extraordinary gain from discontinued operations, loss
from discontinued operations, and income (loss) from sale of tax credits, all
net of applicable taxes.
2
<PAGE>
Notice of 1999 Annual Meeting of Stockholders
Your vote is important.
Please vote early even if you plan to attend the meeting. See page 7 for
instructions on voting by mail, telephone or internet.
We will hold this year's annual stockholders' meeting on Wednesday, May 19,
1999 at 10:00 am. Like last year, we will hold the meeting at the Dallas Museum
of Art, Horchow Auditorium, 1717 North Harwood, Dallas, Texas 75201.
At the meeting, we will ask you to consider and vote on
* the re-election of Stephen L. Green and John R. Muse as members of our
Board of Directors,
* an increase in the number of shares of common stock reserved for issuance
under our 1997 Stock Option and Restricted Stock Plan (our "Stock Option
Plan") from 4 million shares to 5.5 million shares, and
* the ratification of our Board of Directors' selection of Deloitte & Touche
LLP as our independent auditors for 1999.
We will also discuss and take action on any other business that is properly
brought before the meeting.
If you were a stockholder on March 25, 1999, you are entitled to vote on the
proposals to be considered at this year's meeting. We look forward to hearing
from you.
By order of the Board of Directors,
Sincerely,
/s/ Michelle P. Goolsby
-----------------------------------
Michelle P. Goolsby
Executive Vice President, General Counsel
and Corporate Secretary
3
<PAGE>
Table of Contents
Questions and Answers:
Why did I receive this proxy statement?......4
I received more than one proxy statement. Why?......4
What will occur at the annual meeting?......5
How many votes are necessary to re-elect the nominees for director?......6
What if a nominee is unwilling or unable to stand for re-election?......6
How many votes are necessary to approve the proposed increase in the number of
shares of common stock reserved for issuance under our Stock Option Plan?......6
How many votes are necessary to ratify the selection of Deloitte & Touche LLP as
independent auditors?......7
How do I vote if I'm not planning to attend the annual meeting?......7
What if I want to change my vote?......7
How do I raise an issue for discussion or vote at the annual meeting?......8
Where can I find the voting results of the meeting?......9
What if I don't vote?......9
How much will this solicitation cost and who's paying for it?......9
More About the Proposals......10-13
Other Information You Need to Make an
Informed Decision:
Who is on our Board of Directors?......14-18
How are Board members paid?.......19
Who are our executive officers?......20-22
How do we pay our executive officers?......23-29
How much stock do our officers and directors own?......30
Questions and Answers
Why did I receive this proxy statement?
On April 9, 1999, we began mailing this proxy statement to everyone who was a
stockholder as of March 25, 1999. We prepare a proxy statement each year to let
our stockholders know when and where we will hold our annual stockholders'
meeting.
More importantly, the proxy statement
* includes detailed information about the matters that will be
discussed and voted on at the meeting, and
* provides you with updated information about our company that you will
need to consider in order to make an informed decision at the
meeting.
I received more than one proxy statement. Why?
Your shares are probably registered differently or are in more than one
account. Please vote for each proxy that you received.
4
<PAGE>
Questions and Answers
What will occur at the annual meeting?
First, we will determine whether enough stockholders are present at the meeting
to conduct business. A stockholder will be deemed to be "present" at the
meeting if the stockholder
* is present in person, or
* is not present in person but has voted by proxy card, telephone or
internet prior to the meeting.
According to our Bylaws, the holders of at least 16,855,660 shares must be
present at this year's meeting in order to conduct the meeting. If the holders
of fewer than 16,855,660 shares are present at themeeting, then we will
reschedule the meeting. The new meeting date will be announced at the meeting.
If there are enough stockholders present at the meeting, then we will vote on
* a proposal to re-elect Stephen L. Green and John R. Muse as members of
our Board of Directors,
* a proposal to increase the number of shares of common stock reserved
for issuance under our Stock Option Plan from 4 million shares to 5.5
million shares, and
* a proposal to ratify our Board of Directors' selection of Deloitte &
Touche LLP as our independent auditors for 1999.
On each proposal, you are entitled to one vote for each share of stock that you
own. Cumulative voting is not permitted.
Each of the proposals has been approved by our Board of Directors. The Board of
Directors is now soliciting your vote on the proposals.
After each proposal has been voted on at the meeting we will discuss and take
action on any other matter that is properly brought before the meeting.
Finally, some of our officers will report on our recent financial results and
our current operations.
The members of the Board of Directors recommend that you vote FOR each of the
proposals.
5
<PAGE>
Questions and Answers
How many votes are necessary to re-elect the nominees for director?
The two nominees receiving the highest number of "yes" votes will be elected as
directors. This number is called a "plurality."
What if a nominee is unwilling or unable to stand for re-election?
Each of the persons nominated for re-election has agreed to stand for re-
election. However, if unexpected events arise which cause either of them to be
unable to stand for re-election, then either
* the Board of Directors can vote at the meeting to reduce the size of
the Board of Directors, or
* the Board of Directors may, during the meeting, nominate another
person for director.
It is important for you to understand that if our Board of Directors nominates
someone at the meeting, then the person to whom you have given your proxy will
be able to use his or her discretion to vote on your behalf for the candidate of
his or her choice.
Our transfer agent, Harris Bank, will count the votes and act as of election.
How many votes are necessary to approve the proposed increase in the number of
shares of common stock reserved for issuance under our Stock Option Plan?
The holders of a majority of the shares having voting power present at the
meeting (in person or by proxy) must vote for this proposal in order for it to
pass. On this proposal, you may vote "for," "against" or "abstain." If you
"abstain," your ballot will have the practical effect of a vote against the
matter, because abstaining shares are counted as shares with voting power
present at the meeting. The New York Stock Exchange requires that, in order
shares issued under the plan to be listed on the New York Stock Exchange, over
50% of all shares entitled to vote on this proposal must cast a vote on this
proposal. For purposes of the New York Stock Exchange requirement,
"abstaining" is a form of voting.
6
<PAGE>
Questions and Answers
How do I vote if I'm not planning to attend the annual meeting?
There are three ways to vote. You may either
* mark your selections on the enclosed proxy card; date and sign the
card; and return the card in the enclosed envelope,
* dial 1-888-215-9330; enter your control number (found on your proxy
card) and follow the voice prompts, or
* go to website www.harrisbank.com/wproxy; enter your control number and
follow the simple instructions on the screen.
Please understand that voting by any means other than voting in person at the
meeting has the effect of appointing Gregg Engles, our Chief Executive Officer,
and Michelle Goolsby, our General Counsel, as your proxies. They will be
required to vote on the three proposals described in this proxy statement
exactly as you have voted. However, if any other matter requiring a stockholder
vote is properly raised at the meeting, then Mr. Engles and Ms. Goolsby will be
authorized to use their discretion to vote on such issues on your behalf.
We encourage you to vote now (by mail,telephone or internet) even if you plan to
attend the meeting in person.
How many votes are necessary to ratify the selection of Deloitte & Touche LLP
independent auditors?
The Board of Directors has responsibility for selection of our independent
auditors. Stockholder ratification is not required. However, the Board of
Directors is soliciting your opinion regarding the selection of Deloitte &
Touche LLP. The Board of Directors plans to take your opinion into account in
selecting our independent auditors for 2000.
What if I want to change my vote?
You can revoke your vote on a proposal any time before the meeting for any
reason. To revoke your proxy before the meeting, either
* write to our Corporate Secretary at 2515 McKinney Avenue, Suite 1200,
LB 30, Dallas, Texas 75201, or
* vote again, either by telephone or internet (the last vote before the
meeting begins will be counted).
You may also come to the meeting and change your vote in writing or orally.
Your vote by mail, telephone or internet is completely confidential.
7
<PAGE>
Questions and Answers
How do I raise an issue for discussion or vote at the annual meeting?
According to our bylaws, if a stockholder wishes to present a proposal for
consideration at an annual meeting, he or she must send written notice of the
proposal by certified mail to our Corporate Secretary by no later than March 1
of the year of the meeting. We have not received notice of any stockholder
proposals to be presented at this year's meeting.
If you would like your proposal to be included in next year's proxy statement,
you must submit it to our Corporate Secretary in writing by no later than
December 31, 1999. We will include your proposal in our next annual proxy
statement if it is a proposal that we would be required to include in our proxy
statement pursuant to the rules of the Securities and Exchange Commission.
You may write to our Corporate Secretary at 2515 McKinney Avenue, Suite 1200, LB
30, Dallas, TX 75201.
If a stockholder raises a matter at the meeting that requires a stockholder
vote, the person to whom you have given your proxy will use his or her
discretion to vote on the matter on your behalf.
According to our bylaws, any proposal properly raised at the meeting by a
stockholder will require the affirmative vote of a majority of the shares deemed
present at the meeting (whether in person or by proxy).
8
<PAGE>
Questions and Answers
What if I don't vote?
If your shares are in a brokerage account and you do not vote, your brokerage
firm could
* vote your shares, if it is permitted by the New York Stock Exchange,
or
* leave your shares unvoted.
Generally, New York Stock Exchange rules will
* permit your broker to vote your shares on our proposals regarding the
election of directors and the ratification of Deloitte & Touche LLP,
and
* prohibit your broker from voting your shares on our proposal to
increase the number of shares reserved for issuance under our Stock
Option Plan.
If you do not vote your shares and your broker returns a ballot on your behalf,
your broker's vote will most likely be deemed a "broker non-vote" on the
proposal to increase the number of shares reserved for issuance under our Stock
Option Plan. Broker non-votes will be counted as "present" at the meeting for
purposes of determining whether enough stockholders are "present" to conduct
business at the meeting. However, broker non-votes will be deemed not to be
"shares having voting power." Since our proposal to increase the number of
shares reserved for issuance under our Stock Option Plan requires a "yes" vote
from the holders of a "majority of the shares having voting power present at the
meeting," broker non-votes will have no practical effect on the outcome of the
proposal.
How much will this solicitation cost, and who is paying for it?
We have engaged Corporate Investor Communications, Inc. to assist in the
distribution of proxy materials and the solicitation of votes. In addition,
certain of our officers may solicit proxies by mail, telephone, fax or e-mail.
We will pay Corporate Investor Communications a fee of $6,500, plus $4 per
holder contacted, a $300 set-up fee and out-of-pocket expenses. We will also pay
all other costs associated with this proxy statement and the solicitation of
proxies. Upon request, we will reimburse stockbrokers, dealers, banks and
trustees, or their nominees, for reasonable expenses incurred by them in
forwarding proxy material to beneficial owners of shares of our common stock.
Where can I find the voting results of the meeting?
We will announce preliminary voting results at the meeting. We will publish the
final results in our quarterly report on Form 10-Q for the second quarter of
1999. We will file that report with the Securities and Exchange Commission, and
you can get a copy by contacting either our Investor Relations office
(214/303-3400) or the Securities and Exchange Commission at 800/SEC-0330 or
www.sec.gov.
If you sign your proxy card, but do not specify how you want to vote on a
proposal, then your shares will be voted FOR that proposal.
9
<PAGE>
More About the Proposals
Proposal One: Re-Election of Directors
This year's nominees for re-election to the Board of Directors are:
Stephen L. Green - Director since October 1994
[PHOTO Mr. Green, age 48, has served as a general partner of Canaan Capital
APPEARS Partners, L.P., the general partner of Canaan Capital Limited
HERE] Partnership and Canaan Capital Offshore Limited Partnership, C.V.,
former principal stockholders of Suiza Foods, since November 1991.
From October 1985 until November 1991, Mr. Green served as Managing
Director of GE Capital's Corporate Finance Group. Mr. Green is also
on the Board of Directors of Chartwell Re Corporation and Advance
Paradigm, Inc., each of which is a public company.
John R. Muse - Director since November 1997
[PHOTO Mr. Muse, 48, is co-founder, Chief Operating Officer and a partner of
APPEARS Hicks, Muse, Tate & Furst Incorporated. Prior to the formation of
HERE] Hicks, Muse, Tate & Furst in 1989, Mr. Muse headed the
investment/merchant banking activities of Prudential Securities for
the southwest region of the United States from 1984 to 1989. In
addition to serving on our Board of Directors, he also serves as
Chairman of the Board for Arena Brands, Inc., Lucchese, Inc. and
Sunrise Television Corp. and as a director of Glass's Group, LIN
Television Corporation, Olympus Real Estate Corporation and Regal
Cinemas, Inc. Mr. Muse was a member of the Board of Directors of The
Morningstar Group, Inc. prior to our merger in November 1997.
Mr. Green and Mr. Muse were unanimously nominated by our Board of Directors,
based upon the recommendation of the Nominating Committee of the Board of
Directors. They have each consented to be re-elected as members of our Board of
Directors.
Our Board of Directors recommends a vote FOR Mr. Green and a vote FOR Mr. Muse.
10
<PAGE>
More About the Proposals
Proposal Two: Increase the Number of Shares of Common Stock
Reserved for Issuance Under Our Stock Option Plan
From 4 Million Shares to 5.5 Million Shares
* The plan allows for grants of stock options (incentive or nonqualified) and
restricted stock to
* certain directors,
* key employees and
* consultants
of Suiza and its subsidiaries.
* The plan is administered by the Stock Option Committee of our Board of
Directors. That committee is made up of only non-employee directors.
* Shares subject to options or restricted stock grants that are canceled or
forfeited become immediately available for re-issuance.
Reasons for the Proposal
We believe that granting stock options to our key employees and directors is an
effective way to
* attract and retain the best available personnel for positions of
substantial responsibility, and
* align the interests of our key employees and directors with those of
our stockholders.
We believe that when our employees and directors own stock in our company, they
are motivated to promote our success.
As of March 31, 1999, there were 2,892,419 options or shares of restricted stock
outstanding under the plan; 875,601 shares currently remain available for
issuance under the plan.
Our Board of Directors believes that the number of shares reserved for issuance
under the plan should be increased from 4 million shares to 5.5 million shares
in order to ensure that sufficient shares are available under the plan to reward
and motivate existing employees and to attract new employees in the future,
particularly in light of the rapid growth that we have experienced and the
future growth and expansion of our business that we expect.
* The plan was adopted by our Board in February 1997 and approved by our
stockholders at our 1997 annual meeting. The number of shares reserved for
issuance under the plan was increased in November 1997 and in May 1998.
* In considering your vote, please remember that our officers and directors are
eligible for grants and awards under the plan.
* Our non-employee directors may elect to receive their annual fee in shares of
restricted stock rather than in cash. Shares issued as fees are issued under
the plan.
11
<PAGE>
More About the Proposals
About Our Stock Option Plan
* The Stock Option Committee may amend or discontinue the plan at any time
subject to certain restrictions in the plan. Stockholder approval is required
for some amendments, to the extent required by the Internal Revenue Code and
stock exchange requirements. No amendment may adversely affect any previously
granted option or restricted stock award, unless the holder of the award
consents.
* From time to time our Chief Executive Officer will recommend to the Stock
Option Committee persons he believes should receive grants under the plan. The
committee will consider, but need not accept, the Chief Executive Officer's
recommendations.
The plan was amended effective April 1, 1999 to prohibit re-pricing of options
without approval of our stockholders. We have never re-priced our stock options.
* Incentive stock options must comply with certain requirements imposed by the
Internal Revenue Code, including that the exercise price may not be less than
the fair market value our common stock on the grant date, and the term may not
exceed 10 years.
* Each of our non-employee directors, including members of the Stock Option
Committee, automatically receives nonqualified options to purchase 7,500
shares of common stock on June 30 of each year of his term. Those options are
immediately exercisable and have an exercise price equal to the closing market
price of our common stock on the date of grant.
* If an option holder dies or becomes disabled, all of his or her vested options
may be exercised any time within 1 year (or the remaining term of the option,
if less). If a person ceases to be employed by us for any reason, he or she
must exercise any vested options within 90 days.
* Option exercise prices may be paid in cash or, at our option, in shares of our
common stock.
* See Annex A to this proxy statement for tax information about the plan.
Our Board of Directors recommends a vote FOR the proposal to increase the number
of shares of common stock reserved for issuance under our Stock Option Plan.
12
<PAGE>
More About the Proposals
Proposal Three: Ratification of Selection of Auditors
Our Board of Directors, upon the recommendation of the Audit Committee of the
Board of Directors, has selected Deloitte & Touche LLP to serve as our
independent auditors for the 1999 fiscal year and is soliciting your
ratification of that selection.
Deloitte & Touche LLP has served as independent auditors for us since our
formation. In their role as independent auditors, they report on our financial
statements. They also assist us with due diligence activities in connection with
our acquisitions, consult with us on information technology matters and provide
general accounting and tax consulting.
A representative of Deloitte & Touche LLP will be present at the meeting. He or
she will have an opportunity to make a statement and will be available to
respond to appropriate questions.
Your ratification of our Board of Directors' selection of Deloitte & Touche LLP
is not necessary because our Board of Directors has responsibility for selection
of our independent auditors. However, the Board of Directors will take your
vote on this proposal into consideration when selecting our independent auditors
in the future.
Our Board of Directors recommends a vote FOR the proposal to ratify the
selection of Deloitte & Touche LLP as our independent auditors for 1999.
13
<PAGE>
Other Information You Need to Make an Informed Decision
Who is on our Board of Directors?
In addition to our two directors proposed for re-election, the following persons
currently serve on our Board of Directors:
Gregg L. Engles - Director since October 1994
Chairman of the Board
[PHOTO Mr. Engles, age 41, has served as Chairman of our Board of
APPEARS Directors and as our Chief Executive Officer since October 1994.
HERE] Prior to the formation of our company, he served as Chairman of
the Board and Chief Executive Officer of certain predecessors to
our company. He currently serves on the Board of Directors of
Evercom, Inc., an independent provider of inmate
telecommunication services, and Texas Capital Bankshares. His
term will expire in 2001.
Cletes O. Beshears - Director since October 1994
Vice Chairman of the Board
Mr. Beshears, age 72, joined our company in October 1994 as [PHOTO
President and Chief Operating Officer. In July 1997, he became APPEARS
Vice Chairman of our Board of Directors. He relinquished his titles HERE]
of Chief Operating Officer in October 1996 and President in June 1997,
but continues to act as our consultant in connection with our
acquisition efforts. He served as President and Chief Executive Officer
of Velda Farms from April 1994 to April 1995. From March 1988 to April
1994, he provided consulting services to companies pursuing acquisitions
of dairy companies. From 1980 to 1988, he served as Vice President of
The Southland Corporation and Chief Operating Officer of its Dairy Group.
From 1965 to 1980, he served as Division Manager of several of the Southland
Corporation's regional dairies, including Velda Farms. His term will expire
in 2000.
14
<PAGE>
Other Information You Need to Make an Informed Decision
Who is on our Board of Directors?
Hector M. Nevares - Director since October 1994
Vice Chairman of the Board
[PHOTO Mr. Nevares, age 48, served as a consultant for us from March
APPEARS 1998 through March 1999. He was President of Suiza Dairy (Puerto
HERE] Rico) from June 1983 until September 1996, having served in
additional executive capacities at Suiza Dairy (Puerto Rico)
since June 1974. In September 1996, Mr. Nevares became Vice
Chairman of our Board of Directors. He is a director of First
Federal Savings Bank, a public company, in San Juan, Puerto
Rico. His term will expire in 2000.
Alan J. Bernon - Director since August 1997
Mr. Bernon, age 44, serves as President of Suiza GTL, LLC, our [PHOTO
new subsidiary formed in connection with our December 1998 acquisition APPEARS
of Tuscan Farms/Lehigh Valley Dairies. As President of Suiza GTL, he HERE]
is responsible for all of our dairy operations in the northeastern
United States. He was elected to our Board in connection with our
acquisition of Garelick Farms. From September 1985 until July 1997,
he served as President of the Garelick Companies. His term will expire
in 2001.
Joseph S. Hardin, Jr. - Director since May 1998
[PHOTO Mr. Hardin, age 53, has served as Chief Executive Officer of
APPEARS Kinko's, Inc. since May 1997. Kinko's provides business services
HERE] through more than 1,000 retail locations worldwide. From 1986 to
April 1997, he held a variety of positions with increasing
responsibility at Wal-Mart Stores, Inc., most recently as an
Executive Vice President and as the President and Chief
Executive Officer of SAM's Club, the wholesale division of Wal-
Mart Stores, Inc. His term will expire in 2001.
15
<PAGE>
Other Information You Need to Make an Informed Decision
Who is on our Board of Directors?
David F. Miller - Director since March 1997
[PHOTO Mr. Miller, age 69, served as Vice Chairman of the Board and
APPEARS Chief Operating Officer of J.C. Penney Company, Inc. from 1987
HERE] until his retirement in 1990. Prior to his retirement, he served
in various capacities for J.C. Penney for a total of 37 years.
He is also a director of Winn-Dixie Stores, Inc. His term will
expire in 2000.
P. Eugene Pender - Director since October 1994
Mr. Pender, age 67, served as Vice President and Controller of [PHOTO
The Southland Corporation until his retirement in December 1987. APPEARS
After his retirement, he served as a consultant to The Southland HERE]
Corporation until March 1991. His term will expire in 2001.
Jim L. Turner - Director since November 1997
[PHOTO Mr. Turner, age 52, has served as the Chairman, President and
APPEARS Chief Executive Officer of Dr. Pepper Holdings, Inc. and Dr.
HERE] Pepper Bottling Company of Texas since 1985. Mr. Turner was a
member of the Board of Directors of The Morningstar Group, Inc.
prior to our merger in November 1997. He is also a director of
All American Bottling Corporation. His term will expire in 2000.
16
<PAGE>
Other Information You Need to Make an Informed Decision
Who is on our Board of Directors?
Also currently serving on our Board of Directors until May 19, 1999, the date
of our annual meeting, are Mr. Delton Parks and Mr. Robert Kaminski. Mr. Parks'
and Mr. Kaminski's terms will expire on the date of the annual meeting.
In February of 1999, our Board of Directors voted, at the recommendation of
our Board of Directors' Nominating Committee, to reduce the number of seats on
our Board of Directors from 12 to 7. The members of the Board of Directors
believe that a smaller Board of Directors will increase the effectiveness,
efficiency and focus of our Board. In order to satisfy the requirements of our
bylaws, our Board of Directors voted to effect the reduction in phases, in
accordance with the following schedule:
Number of Eliminated
Effective Date of Reduction Directorships
Date of Annual Stockholders'
Meeting, 1999 2
Date of Annual Stockholders'
Meeting, 2000 2
Date of Annual Stockholders'
Meeting, 2001 1
The terms of four of our directors will expire on the date of this year's annual
meeting. Since two of those seats will be eliminated as of the date of our
annual meeting, our Board of Directors did not nominate Mr. Delton Parks or Mr.
Robert Kaminski for re-election.
17
<PAGE>
Other Information You Need to Make an Informed Decision
Who is on our Board of Directors?
Board Committees
- - -------------------------------------------------------------------------------
Board Member Audit Compensation Executive Nominating Stock Option
- - -------------------------------------------------------------------------------
Engles *
- - -------------------------------------------------------------------------------
Beshears *
- - -------------------------------------------------------------------------------
Nevares *
- - -------------------------------------------------------------------------------
Green * * *
- - -------------------------------------------------------------------------------
Hardin * *
- - -------------------------------------------------------------------------------
Miller *
- - -------------------------------------------------------------------------------
Pender ** ** ** **
- - -------------------------------------------------------------------------------
Turner * *
- - -------------------------------------------------------------------------------
Meetings in 1998 2 3 1 2 2
**Chairman
Audit Committee: Reviews auditing, accounting, financial reporting and internal
control functions. Recommends our independent accountants and reviews their
services and fees.
Compensation Committee: Administers executive compensation programs, policies
and practices. Acts in an advisory role on employee compensation.
Executive Committee: Limited powers to act on behalf of the Board of Directors
when the Board of Directors is not in session. Meets only as needed and acts
only by unanimous vote.
Nominating Committee: Determines qualifications for directors, and considers and
recommends nominees for election as directors. Will consider stockholder
recommendations submitted in writing and addressed to our Corporate Secretary.
Stock Option Committee: Administers our stock option and restricted stock
plans.
18
<PAGE>
Other Information You Need to Make an Informed Decision
How is our Board of Directors paid?
* Employee directors receive no compensation for serving on the Board of
Directors or its committees other than their normal salaries.
* Non-employee directors receive
. an annual grant of 7,500 immediately exercisable stock options, a
$15,000 annual fee, payable quarterly in arrears,
. $1,000 for each meeting attended,
. $1,000 for each committee served on,
. $2,000 for chairing a committee, and reimbursement of travel expenses
for attending meetings.
All of our non-employee directors elected to receive theirfees earned during
1998 in shares of restricted stock rather than in cash.
Our Board of Directors held 4 regular and 12 special meetings in 1998, and acted
3 times by written consent.
Non-employee directors may elect to receive their $15,000 annual fee in shares
of restricted common stock rather than in cash. If a director makes this
election, he will receive shares with a value equal to 150% of the cash amount
owed to him. 1/3 of the restricted shares vest on the date of grant; 1/3 vest
on the first anniversary of the grant date; and the final 1/3 vest on the second
anniversary of the grant date.
19
<PAGE>
Other Information You Need to Make an Informed Decision
Who are our executive officers?
Gregg L. Engles - Chief Executive Officer and Chairman of the Board
See Mr. Engles' biography on page 14.
G. Irwin Gordon - President and Chief Operating Officer
Mr. Gordon, age 48, joined us in August 1997 as Executive Vice President
and Chief Marketing Officer. In February 1998, he became President and
Chief Operating Officer. Prior to joining us, he served in various
capacities for PepsiCo, Inc. including most recently as Senior Vice
President - Global Branding for Frito Lay from May 1996 until August 1997,
Senior Vice President - Marketing and Sales from September 1992 until
April 1996 and Region President - Southern Europe from November 1991 until
August 1992. From January 1985 to October 1991, he served as president and
general manager of various international Frito Lay companies.
William P. Brick - Chief Operating Officer, U.S. Dairy Operations
Mr. Brick, age 47, joined us in July 1996 as Executive Vice President. In
October 1996, he became Chief Operating Officer of our Dairy Group. Prior
to joining us, he served as Vice President - Sales and Marketing for the
Metropoulos Management Group from February 1996 until June 1996. From 1995
until January 1996, he served as Vice President - Sales and Marketing for
Ultra Products. He served in various capacities, including Vice President
of Sales, for The Morningstar Group, Inc. from 1991 until December 1994,
and in several capacities for Palm Dairies Inc. in Calgary, Alberta from
1988 until 1991.
William L. Estes - President and Chief Executive Officer, Suiza Packaging Group
Mr. Estes, age 52, joined us in February 1998. From November 1996 until
February 1998, he served as President and Chief Operating Officer of
McKesson Corporation's McKesson-Carrollton operations. From 1993 until
November 1996, he served in various capacities with Foxmeyer Health
Corporation, most recently as President and Chief Operating Officer. Prior
to joining Foxmeyer, he served as Vice President and Chief Operating
Officer of The Body Shop, Inc., from 1991 until 1993. For the period from
1983 until 1991, he served in various capacities with PepsiCo, primarily
with Frito Lay.
20
<PAGE>
Other Information You Need to Make an Informed Decision
Who are our executive officers?
Barry A. Fromberg - Executive Vice President and Chief Financial Officer
Mr. Fromberg, age 43, joined us in June 1998 as Executive Vice President
and Chief Financial Officer. Prior to joining us, he served as Chairman
and Chief Executive Officer of a subsidiary of Paging Network, Inc.
("PageNet") from 1995 to 1998. He was Senior Vice President and Chief
Financial Officer of PageNet from 1993 to 1995. He served as Executive
Vice President and Chief Financial Officer of Simmon Communications, Inc.,
a cable television operator from 1987 to 1993. From 1980 to 1987 he was
Manager of Corporate Development for Comcast Corporation. Mr. Fromberg was
a Senior Accountant with Coopers and Lybrand from 1977 to 1980.
Tracy L. Noll - Executive Vice President, Corporate Development
Mr. Noll, age 50, joined us in October 1994. Since June 1998, he has
served as Executive Vice President, Corporate Development. From1994 until
June 1998, he served as our Executive Vice President and Chief Financial
Officer. From November 1997 until June 1998, he also served as Executive
Vice President and Chief Administrative Officer. Prior to joining us, he
served as Controller of Foxmeyer Health Corporation from June 1994 until
September 1994. From 1988 until June 1994, he served as Vice President and
Chief Financial Officer of The Morningstar Group, Inc.
Miguel Calado - Executive Vice President
Mr. Calado, age 43, joined us in September 1998 as Executive Vice
President. Prior to joining us, he served in a number of senior executive
positions at PepsiCo from 1983 until September 1998, most recently as
Senior Vice President - Finance and Chief Financial Officer for Frito Lay
International. Prior to joining PepsiCo in1983, he served at various
capacities in Samarco Mineracao, S.A. in Brazil.
Michelle P. Goolsby - Executive Vice President, General Counsel and Corporate
Secretary
Ms. Goolsby, age 41, joined us in July 1998 as Executive Vice President,
General Counsel and Corporate Secretary. From September 1988 until July
1998, Ms. Goolsby held various positions with the law firm of Winstead
Sechrest & Minick, most recently as a partner, chair of the Business
section and a member of the Compensation Committee. Prior to joining
Winstead Sechrest & Minick, she held various positions with the Trammel
Crow Company.
21
<PAGE>
Other Information You Need to Make an Informed Decision
Who are our executive officers?
Our Chief Operating Officers for our operating regions are:
Alan J. Bernon - Northeast region
See Mr. Bernon's biography on page 15.
Delton C. Parks - Midwest region
Mr. Parks, age 59, has served as Chief Operating Officer of our Midwest
region since we completed our merger with Country Fresh in November 1997.
He has served as President of Country Fresh since 1980.
Rick Fehr - Southeast region
Mr. Fehr, age 47, has served as Chief Operating Officer of our Southeast
region since February 1998. He joined us in November 1996 as Vice
President of Operations. Prior to joining us, he served in various
capacities with The Morningstar Group, Inc. from 1988, including most
recently Vice President of Operations.
Carlos Gonzalez - Caribbean region
Mr. Gonzalez, age 51, has served as Chief Operating Officer of our
Caribbean region since November 1997. He has served in various capacities
at Suiza Dairy (Puerto Rico) from November 1997 to the present, and from
1983 until December 1992. Between December 1992 and July 1995, he served
as President and Chief Executive Officer of Young & Rubicam,Inc. (Mexico).
From August 1995 until rejoining us in November 1997, he served as
Executive Vice President of Young & Rubicam, Inc. (U.S.), overseeing their
operations in Latin America.
Herman Graffunder - Morningstar division
Mr. Graffunder, age 53, has served as Chief Operating Officer of our
Morningstar division since February 1999. He joined us in February of 1998
as Senior Vice President, Operations. Prior to joining us, he was
President of Authentic Specialty Foods andCalidad Foods from 1993 to
January 1998. From 1990 to 1993, he served as President and Chief
Operating Officer of Oak Farms Dairy and from 1984 to 1990, he served as
division manager for several of the The Southland Corporation's and The
Morningstar Group. Inc.'s regional operations.
22
<PAGE>
Other Information You Need to Make an Informed Decision
How do we pay our executive officers?
Summary Compensation Table
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------
Restricted Options
Name and Stock Granted
Principal Position Year Salary Bonus Awards (in shares)
- - ------------------- ---- ------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Gregg L. Engles 1998 $765,355 $572,985 120,000
Chairman of the Board and 1997 $500,000 $600,000 353,000
Chief Executive Officer 1996 $420,000 $210,000 13,800
G. Irwin Gordon 1998 $490,385 $278,614 60,000
President and Chief 1997/1/ $ 97,446/1/ $ 88,155 50,000
Operating Officer
William P. Brick 1998 $396,769 $211,766 35,000
Chief Operating Officer, 1997 $305,000 $291,000 213,000
U.S. Dairy Operations 1996 $241,817 $106,590 $100,000/2/ 250,000
William L. Estes 1998/3/ $274,444/3/ $274,950
President and Chief
Executive Officer,
Packaging Group
Delton C. Parks/4/ 1998 $500,000 15,000
Chief Operating Officer, 1997/4/ $500,000
Midwest Region 1996/4/ $500,000
</TABLE>
These were our five most highly paid executive officers in 1998. These officers
are referred to in this proxy statement as our "named executive officers."
Notes to Summary Compensation Table:
1. Mr. Gordon began his employment with us on August 11, 1997. The amount
shown in the Salary column for 1997 is the portion of his annual salary that he
earned between August 11 and December 31, 1997.
2. We gave Mr. Brick 6,250 fully vested shares of restricted stock on May 22,
1996. The closing market price for our common stock on that day was $16.00 per
share. As of December 31, 1998, he still held 2,249 of those shares, and their
value on that date was $114,558.
3. Mr. Estes began his employment with us on February 25, 1998. The amount
shown in the Salary column for 1998 is the portion of his annual salary that he
earned between February 25 and December 31, 1998.
4. Mr. Parks is employed by our subsidiary Country Fresh, Inc. We completed
our merger with Country Fresh on November 25, 1997.
23
<PAGE>
Other Information You Need to Make an Informed Decision
How do we pay our executive officers?
<TABLE>
<CAPTION>
Option Grants in 1998
(to named executive officers)
Potential Realizable
Percent of Value at Assumed
No. of Total Annual Rates of Stock
Shares Options Price Appreciation for
Underlying Granted to Exercise Option Term/2/
Options Employees Price Expiration -----------------------
Name Granted/1/ During 1998 ($/share) Date 5% 10%
---- ----------- --------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gregg L. Engles 120,000 10.2575% $ 58.50 1/02/08 $4,414,800 $11,187,600
G. Irwin Gordon 35,000 2.9917 $ 58.50 1/02/08 $1,287,650 $ 3,263,050
25,000 2.1369 $ 51.25 7/31/08 $ 805,750 $ 2,042,000
William P. Brick 35,000 2.9917 $ 58.50 1/02/08 $1,287,650 $ 3,263,050
William L. Estes/3/
Delton C. Parks 15,000 1.2822 $ 58.50 1/02/08 $ 551,850 $ 1,398,450
</TABLE>
_________________________________________
Notes to Option Grant Table:
1 All vest as follows: 1/3 on first anniversary of grant, 1/3 on second
anniversary of grant and 1/3 on third anniversary of grant.
2 The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the SEC. The actual value, if any, that 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.
3 Mr. Estes has not received any options to purchase our common stock. He does,
however, participate in the stock option plan of our Franklin Plastics
subsidiary.
Option Exercises in 1998
(by named executive officers)
<TABLE>
<CAPTION>
No. of Shares Underlying Value of Unexercised
Unexcercised In-the-Money
Option at Year End Option at Year End
Shares Acquired ---------------------------- ----------------------------
Name on Exercise Value Realized/1/ Exercisable Unexcercisable Exercisable Unexercisable
- - ----- -------------- ---------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gregg L. Engles 147,200 $2,861,108 317,667 159,933 $6,506,250 $1,261,921
G. Irwin Gordon 16,667 93,333 $ 150,961 $ 350,352
William P. Brick 45,999 $1,812,288 191,669 60,332 $4,377,681 $ 848,206
William L. Estes
Delton C. Parks 120,000 $6,036,090 109,068 15,000 $4,456,246 $ 186,750
</TABLE>
_________________________________________
Notes to Option Exercise Table:
1 Reflects the closing stock price on the exercise date, minus the exercise
price.
2 The value of in-the-money options is calculated at $50.9375 per share, our
closing stock price on December 31, 1998.
24
<PAGE>
Other Information You Need to Make an Informed Decision
How do we pay our executive officers?
Employment Contracts and Change in Control Arrangements
* Severance agreements with named executive officers
We entered into severance agreements with each of our named executive officers
in January 1999 pursuant to which we must
* pay each of the named executive officers a lump sum of cash,
* continue the executive's insurance benefits for 2 years, and
* accelerate the vesting of all unvested options held by the
executive if, in connection with or within 2 years after a "change
in control" (as defined in the agreements) of our company
if, in connection with or within 2 years after a "change in control" (as defined
in the agreements) of our company
* the named executive officer's employment is terminated by us or any
successor of ours without "cause" (as defined in the agreements),
or
* the named executive officer's employment is terminated by the
executive for "good reason" (as defined in the agreements).
Each of the named executive officers, except for Mr. Parks (see below), will
receive a cash payment of 3 times his base annual salary, plus 3 times his
target bonus for the year in which the termination occurs, in addition to a
gross-up payment to pay for any applicable excise taxes. Each of the named
executive officers except for Mr. Parks also has the right, at any time
beginning on the first anniversary of a change in control and ending on the
second anniversary of a change in control, to voluntarily terminate his
employment for any reason and receive a cash payment in an amount equal to one
half of the executive's base annual salary plus one-half of his targeted bonus
for the year in which the termination occurs. The agreements also contain
* a covenant not to compete pursuant to which the executives have
agreed not to compete with us for 2 years after termination,
* a confidentiality provision pursuant to which the executives have
agreed not to divulge any of our confidential information, and
* agreements not to solicit any of our employees for 2 years after
termination.
Mr. Estes' agreement also provides that he will receive all of the benefits
described above in the event of his termination (either without cause or by Mr.
Estes for good reason) within 2 years after a change in control of our company,
or a change in control of our U.S. plastic packaging operations.
* Employment Agreement with Delton Parks
Country Fresh, Inc., one of our subsidiaries, entered into an employment
agreement with Delton Parks, Chief Operating Officer for our Midwest region,
effective February 1994. We assumed this agreement when we acquired Country
Fresh in November 1997.
The agreement provides for
* a minimum annual base salary of $500,000, plus
* an annual bonus equal to 2% of any excess consolidated pre-tax
earnings of Country Fresh over the budgeted amount, plus
* certain life and disability insurance benefits, plus
25
<PAGE>
Other Information You Need to Make an Informed Decision
How do we pay our executive officers?
Employment Contracts and Change in Control Arrangements (cont'd)
* a 5-year pension benefit equal to 50% of his average annual
compensation for the 5 years immediately before his retirement or
termination of employment (reduced by any other retirement benefits
attributable to company contributions), plus
* certain fringe benefits as are provided from time to time to other
high level executives of Country Fresh.
Mr. Parks' agreement has no finite term. His employment continues "at will."
However, if his employment is terminated for any reason other than disability,
or if he terminates his employment for "good reason" (as defined in the
agreement), he will receive
* a severance payment equal to his average annual compensation for the
3 full fiscal years before his termination (except that he will not
be entitled to any severance pay after he reaches age 65),
* continuation of his insurance benefits for one year, and
* the pension benefit described above.
Mr. Parks' cash severance payment under the severance agreement he executed with
us in January 1999 (described above) will be an amount equal to 2 times his base
annual salary, plus 2 times his target bonus for the year in which the
termination occurs (reduced by any payments he receives upon termination
pursuant to his employment agreement).
Certain Relationships and Related Transactions
* Some of our subsidiaries purchase a portion of their requirements for frozen
concentrated orange juice from an entity in which Mr. Engles owns a limited
partner interest. We have no written agreement with this supplier. All
purchases are based on purchase orders. We monitor the market price for
frozen concentrated orange juice and purchase the product from the supplier
offering the lowest price, inclusive of all charges. We believe that the
terms of the purchase orders are at least as favorable to us as could be
obtained in an arm's length transaction with an unaffiliated third party. Our
purchases from this supplier totaled $2,562,578 million during 1998.
* In July 1997, we entered into a consulting agreement with Mr. Beshears,
pursuant to which Mr. Beshears serves as a consultant to us for dairy
acquisitions. Pursuant to this agreement, Mr. Beshears receives an annual
consulting fee of $250,000. In addition, he is entitled to a transaction fee
equal to 1% of the purchase price of any acquisition that he introduces to us
that is ultimately consummated. In connection with acquisitions completed
during 1998, we paid him aggregate transaction fees of $5,049,254.
* Mr. Nevares retired as Chief Operating Officer of our Caribbean region in
March 1998. At that time, we entered into a one year consulting agreement
with him pursuant to which he received a consulting fee of $180,000.
26
<PAGE>
Other Information You Need to Make an Informed Decision
How do we pay our executive officers?
Report of the Compensation and Stock Option Committees Page 1 of 3
Who determines how much the executive officers are paid?
* The Compensation Committee is responsible for recommending to the
full Board the salary amounts for our Chief Executive Officer and
each of our 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.
The Compensation and Stock Option Committees were assisted in making certain
market and industry studies by Towers Perrin, an independent consulting firm.
This Report By:
Stephen L. Green
Joseph S. Hardin, Jr.
P. Eugene Pender
Members of the Compensation Committee and the Stock Option Committee
What are our goals?
The goals of the Compensation Committee in setting compensation for our
executive officers are
* 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.
27
<PAGE>
Other Information You Need to Make an Informed Decision
How do we pay our executive officers?
Report of the Compensation and Stock Option Committees Page 2 of 3
In 1998, executive compensation consisted of the following:
Base Salary
The base salary for Gregg Engles, the Chief Executive Officer, and for each of
the other executive officers was determined after review of
* publicly available information concerning the base salaries of
executives with similar responsibilities in companies of comparable
size in general industry and in the food industry,
* the responsibilities of each executive officer, and
* the subjective evaluation of such officer's overall performance and
contribution to the company.
In connection with this review, the Compensation Committee engaged Towers
Perrin, an independent compensation consulting firm, to provide information
concerning comparable compensation levels at other publicly held companies and
other relevant information.
Annual Incentive Compensation
Year-end cash bonuses are designed to motivate Mr. Engles 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 in some cases on the
company's earnings per share and in others on the performance of particular
operating units over which the executive has control. Bonus amounts were paid to
the executive officers for 1998 based on target performance levels reached.
Stock Options
The Stock Option Plan forms the basis of the company's long-term incentive plan
for 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, with an exercise
price of 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 long term incentives granted to
executive officers in companies of comparable size in general industry and in
the food industry, the earnings levels of the company and the contributions of
the individual recipient to the company.
Benefits
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 all employees of the company (such as
health insurance).
28
<PAGE>
Other Information You Need to Make an Informed Decision
How do we pay our executive officers?
Report of the Compensation and Stock Option Committees Page 3 of 3
Performance Graph
The following graph compares
* the cumulative total return of the company's common stock since the date of
the company's initial public offering on April 17, 1996, with
* the Standard & Poor's 500 Stock Index, and
* a peer group index of United States dairy products companies, assuming a $100
investment on April 17, 1996. Points plotted are as of December 31 of each
year. The company has never paid dividends.
[GRAPH APPEARS HERE]
1998 Compensation of Chief Executive Officer
Mr. Engles' base salary for 1998 was $765,000. His base salary for 1998 was
fixed in late 1997, based on the criteria described on page 2 of this Report
under the heading "Base Salary."
Mr. Engles' target bonus for 1998 was 70% of his base salary, with a potential
range of 0% to 140% of his base salary, depending on the degree of attainment of
budgeted earnings per share set for the company in 1997. Mr. Engles' actual
bonus earned during 1998 was $572,985, or 75% of his base salary for 1998. His
bonus reflects the fact that in 1998 the company's earnings per share were
slightly higher than the budgeted target.
In 1998, Mr. Engles received options to purchase 120,000 shares of common stock.
In making this option grant, the Stock Option Committee considered the factors
described on page 2 of this Report under the heading "Stock Options."
Stephen L. Green
Joseph S. Hardin, Jr.
P. Eugene Pender
29
<PAGE>
Other Information You Need to Make an Informed Decision
How much stock do our executive officers and directors own?
Set forth below is information as of March 25, 1999 concerning
* each stockholder known by us to beneficially own more than 5% of our
outstanding common stock,
* each director and each executive officer, and
* all directors and executive officers as a group.
Beneficial Owner Common Stock Percent of Class (1)
---------------- ------------ --------------------
Gregg L. Engles.......................... 1,635,822 (2) 4.7%
G. Irwin Gordon.......................... 45,001 (3) *
William P. Brick......................... 213,844 (4) *
William L. Estes......................... 6,000 *
Delton C. Parks.......................... 118,431 (5) *
Barry A. Fromberg........................ 5,000 *
Tracy L. Noll............................ 118,788 (6) *
Miguel Calado............................ - -
Michelle P. Goolsby...................... 2,000 *
Cletes O. Beshears....................... 223,160 (7) *
Hector M. Nevares........................ 387,872 (8) 1.1%
Alan J. Bernon........................... 421,620 (9) 1.2%
Stephen L. Green......................... 21,125 (10) *
Joseph S. Hardin, Jr..................... 7,972 (11) *
Robert L. Kaminski....................... 494,721 (12) 1.4%
David F. Miller.......................... 108,577 (13) *
John R. Muse............................. 202,154 (14) *
P. Eugene Pender......................... 25,682 (15) *
Jim L. Turner............................ 79,114 (16) *
All executive officers and directors
as a group (19 persons)................. 4,150,056 (17) 11.9%
Notes to Beneficial Ownership Table:
(1) Percentages are based on 33,711,318 shares of common stock outstanding as of
March 25, 1999, plus the total number of outstanding options held by a
particular individual that are exercisable within 60 days.
(2) Includes 379,934 shares subject to exercisable options.
(3) Includes 40,001 shares subject to exercisable options.
(4) Includes 207,669 shares subject to exercisable options.
(5) Includes 114,068 shares subject to exercisable options.
(6) Includes 85,567 shares subject to exercisable options.
(7) Includes 173,265 shares subject to exercisable options.
(8) Includes 69,264 shares held by Neva Holdings, Inc., a company wholly owned
by Mr. Nevares and his family, and 107,175 shares subject to exercisable
options.
(9) Includes 5,000 shares subject to exercisable options.
(10) Includes 15,000 shares subject to exercisable options.
(11) Includes 7,500 shares subject to exercisable options.
(12) Includes 7,500 shares subject to exercisable options, and 12,000 shares
owned by a family trust of which Mr. Kaminski is trustee.
(13) Includes 7,500 shares subject to exercisable options.
(14) Includes 28,750 subject to exercisable options, and 9,150 owned by family
members. Mr. Muse disclaims ownership of the family owned shares.
(15) Includes 1,450 shares owned indirectly through entities controlled by Mr.
Pender and 21,900 shares subject to exercisable options.
(16) Includes 45,351 shares subject to exercisable options. (17) Includes a
total of 1,246,180 shares subject to options held by the executive officers and
directors that are exercisable.
* = Less than 1%
30
<PAGE>
Annex A
Tax Information About our Stock Option Plan
The following general description of federal income tax consequences is based
upon current statutes, regulations and interpretations and does not purport to
be complete. You should refer to the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code"). There also may be state, local
and foreign income tax consequences applicable to transactions involving stock
options or restricted stock. In addition, the following description does not
address specific tax consequences applicable to an individual participant who
receives an incentive stock 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 we
normally receive any deduction for federal income tax purposes, upon the grant
of a stock option.
When a nonqualified stock option granted pursuant to our 1997 Stock Option
and Restricted Stock Plan is exercised, the option holder generally will realize
ordinary income (compensation) measured by the difference between the aggregate
purchase price of the common stock purchased and the aggregate fair market value
of our common stock on the exercise date. We generally will be entitled to a
deduction in the year the option is exercised equal to the amount the option
holder is required to treat as ordinary income. Any taxable income recognized
in connection with a nonqualified stock option exercised by an option holder who
is also one of our employees will be subject to tax withholding by us. The
basis for determining gain or loss upon a subsequent sale of common stock
acquired upon the exercise of a nonqualified stock option will be the purchase
price paid to us for the common stock increased by an amount included in the
option holder's taxable income resulting from the exercise of such option. The
holding period for determining the maximum tax rate applicable to gain on such
disposition begins on the date on which the option holder 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 sell such stock within two years from the date of grant or
one year from the date of exercise of the incentive stock option (the "Required
Holding Periods"). An employee who sells his or her 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 maximum federal income tax rate on the remaining gain or loss
generally depends on how long the shares are held. We will not be entitled to a
federal income tax deduction in connection with the exercise of an incentive
stock option, except where the employee disposes of the 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 a substantial risk 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 creating a
substantial risk of forfeiture 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 a capital gain or loss.
A-1
<PAGE>
PROXY SUIZA FOODS CORPORATION PROXY
Annual Meeting of Stockholders--May 19, 1999
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Gregg L. Engles and Michelle P. Goolsby and each
of them as proxies for the undersigned, with full power of substitution, to act
and to vote all of the shares of common stock of Suiza Foods Corporation held of
record by the undersigned on March 25, 1999, at the annual meeting of
stockholders to be held on Wednesday, May 19, or any adjournment thereof.
IMPORTANT--This Proxy must be signed and dated on the reverse side.
- FOLD AND DETACH HERE -
Dear Stockholder:
On the reverse side of this card are instructions on how to vote your
shares for the election of directors and all other proposals by telephone or
over the Internet. Please consider voting by telephone or over the Internet.
Your vote will be recorded as if you mailed in your proxy card.
Thank you for your attention to these matters.
Suiza Foods Corporation
<PAGE>
SUIZA FOODS CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 1-3. WITHHOLD FOR ALL
1. Election of Directors--01-Stephen L. Green and FOR ALL EXCEPT
02-John R. Muse. / / / / / /
----------------------------------------------
(Except nominee(s) written above)
FOR AGAINST ABSTAIN
2. Proposal to increase the number of shares / / / / / /
reserved for issuance under our 1997 Stock
Option and Restricted Stock Plan.
3. Proposal to ratify Deloitte & Touche LLP as FOR AGAINST ABSTAIN
independent auditors. / / / / / /
In their discretion the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ITEMS 1 THROUGH 3.
Dated: , 1999
--------------------
-----------------------------------
Signature
-----------------------------------
Signature
Please sign exactly as your name or names appear above. For joint accounts,
each owner should sign. When signing as executor, administrator, attorney,
trustee or guardian, etc., please give your title.
DETACH PROXY CARD HERE
CONTROL NUMBER
________________
| |
|______________|
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
SUIZA FOODS CORPORATION encourages you to take advantage of the new and
convenient ways to vote your shares. If voting by proxy, this year you may vote
by mail, or choose one of the two methods described below. Your telephone or
Internet vote authorizes the named proxies to vote your shares in the same
manner as if you had marked, signed, and returned your proxy card. To vote by
telephone or Internet, read the accompanying proxy statement and then follow
these easy steps:
TO VOTE BY PHONE ________________________________________________________
| Call toll free 1-888-215-9330 in the United States |
| or Canada any time on a touch tone telephone. There |
| is NO CHARGE to you for the call. |
| |
| Enter the 6-digit Control Number located above. |
| |
| Option #1: To vote as the Board of Directors |
| recommends on ALL proposals: Press 1 |
| |
| When asked, please confirm your vote by |
| pressing 1 |
| |
| Option #2: If you choose to vote on each proposal |
| separately, press 0 and follow the simple |
| recorded instructions. |
|______________________________________________________|
TO VOTE BY INTERNET ________________________________________________________
| Go to the following website: |
| |
| www.harrisbank.com/wproxy |
| |
| Enter the information requested on your computer |
| screen, including your 6-digit Control Number |
| located above. |
| |
| Follow the simple instructions on the screen. |
|______________________________________________________|
If you vote by telephone or the Internet, DO NOT mail back the proxy card.
THANK YOU FOR VOTING!
