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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 001-12755
SUIZA FOODS CORPORATION
(Exact name of the registrant as specified in its charter)
[SUIZA FOOD LOGO]
---------------
DELAWARE 75-2559681
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2515 MCKINNEY AVENUE, SUITE 1200
DALLAS, TEXAS 75201
(214) 303-3400
(Address, including zip code, and telephone number, including
area code, of the registrant's principal executive offices)
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of August 9, 1999 the number of shares outstanding of each class of
common stock was:
Common Stock, par value $.01 33,744,127
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements.............................................................................. 3
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............ 13
Item 3 - Quantitative and Qualitative Disclosures About Market Risk....................................... 23
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders.............................................. 24
Item 6 - Exhibits and Reports on Form 8-K................................................................. 24
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUIZA FOODS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(unaudited)
(Dollars in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ................................................... $ 57,338 $ 54,922
Temporary investments ....................................................... 8,612 9,216
Accounts receivable, net .................................................... 428,557 452,185
Inventories ................................................................. 231,789 223,338
Prepaid expenses and other current assets ................................... 15,634 25,924
Net assets held for sale .................................................... 15,000
Refundable income taxes ..................................................... 7,908 24,455
Deferred income taxes ....................................................... 23,449 23,859
----------- -----------
Total current assets ........................................................ 788,287 813,899
Property, plant and equipment, net ............................................. 934,349 846,956
Deferred income taxes .......................................................... 1,243 2,528
Intangible and other assets .................................................... 1,449,690 1,350,400
----------- -----------
Total .......................................................................... $ 3,173,569 $ 3,013,783
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses ....................................... $ 484,193 $ 500,303
Income taxes payable ........................................................ 19,671 18,876
Current portion of long-term debt and subsidiary lines of credit ............ 61,557 39,892
----------- -----------
Total current liabilities ................................................... 565,421 559,071
Long-term debt ................................................................. 975,629 893,077
Other long-term liabilities .................................................... 58,029 64,449
Deferred income taxes .......................................................... 40,492 28,702
Mandatorily redeemable convertible trust issued preferred securities ........... 683,213 682,938
Minority interest in subsidiaries .............................................. 143,355 129,775
Commitments and contingencies
Stockholders' equity:
Common stock, 33,712,312 and 33,598,074 shares issued and outstanding ....... 337 336
Additional paid-in capital .................................................. 450,927 446,230
Retained earnings ........................................................... 257,879 204,859
Accumulated other comprehensive income(loss) ................................ (1,713) 4,346
----------- -----------
Total stockholders' equity .................................................. 707,430 655,771
----------- -----------
Total .......................................................................... $ 3,173,569 $ 3,013,783
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
SUIZA FOODS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales ........................................................ $ 1,118,844 $ 768,120 $ 2,272,030 $ 1,361,241
Cost of sales .................................................... 855,895 582,213 1,776,522 1,038,361
------------ ------------ ------------ ------------
Gross profit ..................................................... 262,949 185,907 495,508 322,880
Operating costs and expenses:
Selling and distribution ...................................... 124,332 89,127 246,188 159,328
General and administrative .................................... 41,733 24,676 80,837 44,121
Amortization of intangibles ................................... 10,054 7,248 19,977 12,986
Plant closing and other costs ................................. 4,671 4,671
------------ ------------ ------------ ------------
Total operating costs and expenses ............................ 180,790 121,051 351,673 216,435
------------ ------------ ------------ ------------
Operating income ................................................. 82,159 64,856 143,835 106,445
Other (income) expense:
Interest expense, net ......................................... 15,235 8,445 31,178 21,847
Financing charges on preferred securities ..................... 9,646 9,646 19,293 10,895
Other (income) expense net .................................... 406 (739) (101) (1,441)
------------ ------------ ------------ ------------
Total other (income) expense .................................. 25,287 17,352 50,370 31,301
------------ ------------ ------------ ------------
Income from continuing operations before income taxes and
minority interests ............................................... 56,872 47,504 93,465 75,144
Income taxes ..................................................... 22,092 17,325 36,103 26,912
Minority interest in earnings .................................... 2,633 549 4,342 549
------------ ------------ ------------ ------------
Income from continuing operations ................................ 32,147 29,630 53,020 47,683
Loss from discontinued operations ................................ (3,161)
------------ ------------ ------------ ------------
Income before extraordinary items ................................ 32,147 29,630 53,020 44,522
Extraordinary gain ............................................... 31,698 31,698
------------ ------------ ------------ ------------
Net income ....................................................... $ 32,147 $ 61,328 $ 53,020 $ 76,220
============ ============ ============ ============
Net income applicable to common stock ............................ $ 32,147 $ 61,253 $ 53,020 $ 76,058
============ ============ ============ ============
Average common shares: Basic ..................................... 33,730,348 32,516,846 33,686,492 31,645,463
Average common shares: Diluted ................................... 43,805,753 43,582,369 43,845,578 39,030,791
Basic earnings per common share:
Income from continuing operations ............................. $ 0.95 $ 0.91 $ 1.57 $ 1.50
Loss from discontinued operations ............................. (0.10)
Extraordinary gain ............................................ 0.97 1.00
------------ ------------ ------------ ------------
Net income .................................................... $ 0.95 $ 1.88 $ 1.57 $ 2.40
============ ============ ============ ============
Diluted earnings per common share:
Income from continuing operations ............................. $ 0.87 $ 0.82 $ 1.48 $ 1.39
Loss from discontinued operations ............................. (0.08)
Extraordinary gain ............................................ 0.72 0.81
------------ ------------ ------------ ------------
Net income .................................................... $ 0.87 $ 1.54 $ 1.48 $ 2.12
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
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SUIZA FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................................... $ 53,020 $ 76,220
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations ................................................ 3,161
Depreciation and amortization .................................................... 63,202 36,807
Minority interest ................................................................ 4,342 549
Extraordinary gain ............................................................... (31,698)
Deferred income taxes ............................................................ 15,235 5,340
(Gain) loss on disposition of assets ............................................. 4,522 (148)
Other ............................................................................ 1,224 (620)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................................... 38,792 (21,594)
Inventories ................................................................... (3,221) (13,300)
Prepaid expenses and other assets ............................................. (6,574) 10,014
Accounts payable, accrued expenses and other liabilities ...................... (48,110) 22,325
Income taxes .................................................................. 19,621 8,218
----------- -----------
Net cash provided by continuing operations .................................. 142,053 95,274
Net cash used by discontinued operations .................................... (2,068)
----------- -----------
Net cash provided by operating activities ................................... 142,053 93,206
Cash flows from investing activities:
Additions to property, plant and equipment ............................................ (104,758) (64,714)
Cash outflows for acquisitions ........................................................ (147,230) (446,184)
Net proceeds from the sale of discontinued operations ................................. 172,732
Net proceeds from divestitures
6,795
Additions to equity investments ....................................................... (3,726)
Other ................................................................................. 1,675 1,289
----------- -----------
Net cash used by continuing operations ...................................... (247,244) (336,877)
Net cash used by discontinued operations .................................... (14,022)
----------- -----------
Net cash used by investing activities ....................................... (247,244) (350,899)
Cash flows from financing activities:
Proceeds from the issuance of debt .................................................... 105,787 722,445
Repayment of debt ..................................................................... (5,107) (1,052,648)
Payment of deferred financing and debt restructuring .................................. (1,256)
Issuance of common stock, net of expenses ............................................ 2,123 27,517
Issuance of trust issued preferred securities, net of expenses ........................ 582,500
Redemption of common stock ............................................................ (2,975)
Proceeds from issuance of minority interest ........................................... 8,983
Distributions to minority interest .................................................... (1,204)
Other ................................................................................. (150)
----------- -----------
Net cash provided by financing activities ................................... 107,607 278,408
----------- -----------
Increase in cash and cash equivalents .................................................... 2,416 20,715
Cash and cash equivalents, beginning of period ........................................... 54,922 24,388
----------- -----------
Cash and cash equivalents, end of period ................................................. $ 57,338 $ 45,103
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
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SUIZA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. GENERAL
The consolidated financial statements contained in this report are
unaudited. In our opinion, we have made all necessary adjustments (which include
only normal recurring adjustments) in order to present fairly, in all material
respects, our consolidated financial position, results of operations and cash
flows as of the dates and for the periods presented. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. Our
results of operations for the period ended June 30, 1999 may not be indicative
of our operating results for the full year. The financial statements contained
in this report should be read in conjunction with our 1998 consolidated
financial statements contained in our Annual Report on Form 10-K as filed with
the Securities and Exchange Commission on March 29, 1999.
2. SUBSEQUENT EVENTS
On July 2, 1999, we sold our U.S. plastic packaging operations
(Franklin Plastics, Inc. and Plastic Containers, Inc.) to Consolidated Container
Company LLC, a newly formed company which owns Reid Plastics Holdings, Inc. and
is controlled by Vestar Capital Partners III, L.P. Pursuant to this transaction,
we and the minority interest shareholders of Franklin Plastics, Inc. received a
43% and 6% interest, respectively, in Consolidated Container Company LLC. In
addition, Consolidated Container Company LLC assumed approximately $135 million
of our debt, paid to us at closing our intercompany debt and preferred stock
investment, including interest and dividends, of approximately $364 million, and
paid to the minority interest holders of Franklin Plastics, Inc. their preferred
stock investment of approximately $9 million. Our interest in Consolidated
Container Company LLC will be accounted for under the equity method of
accounting.
On July 23, 1999, we announced that we have signed a definitive
agreement to acquire Valley of Virginia Cooperative Milk Producers Association,
an agricultural marketing cooperative with dairy processing plants in
Springfield, Virginia and Mt. Crawford, Virginia. Valley of Virginia, which had
net sales of approximately $206 million during the 12 months ended February 28,
1999, sells milk and ice cream products in Virginia, Maryland, Pennsylvania,
Delaware and the District of Columbia, and ultra-high temperature dairy products
across the eastern half of the United States, primarily under the Shenandoah's
Pride(R) brand. The acquisition has been approved by our Board of Directors and
by the Board of Directors of Valley of Virginia, and is subject to customary
conditions, including the receipt of certain governmental approvals and the
approval of the members of Valley of Virginia. Valley of Virginia has also
conditioned its obligation to close upon receipt of certain tax rulings by the
Internal Revenue Service. Valley of Virginia will sell its interest in Valley
Rich Dairy based in Roanoke, Virginia to another purchaser prior to the closing
of the transaction. The transactions are expected to close in the fourth quarter
of 1999.
On August 2, 1999, we announced the formation of a new joint venture
with Dairy Farmers of America ("DFA") pursuant to which our southern California
dairy operations have been combined with DFA's southern California dairy
operations to form a business with revenues of approximately $270 million. The
joint venture includes our Swiss Dairy business, based in Riverside, California
with annual revenues of approximately $120 million, and the fluid milk business
of Adohr Farms, based in Southgate, California with annual revenues of
approximately $150 million. We own a 75% interest in the venture and DFA owns
the remaining 25%. We will manage the venture, which will be the sole entity
through which we and DFA will conduct fluid milk operations in the 10
southernmost counties in California. In
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connection with the transaction, we and DFA redeemed the interests of two
minority holders of Adohr's milk business.
3. TEMPORARY INVESTMENTS
Temporary investments during all periods and for all dates shown
consisted of U.S. Government obligations due within one year, certificates of
deposit or Eurodollar deposits due within one year and highly rated commercial
paper. The carrying value of temporary investments approximated market value.
4. INVENTORIES
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
1999 1998
------------ --------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies................. $ 127,988 $ 113,118
Finished goods............................. 103,801 110,220
------------ --------------
Total................................. $ 231,789 $ 223,338
============ ==============
</TABLE>
5. DEBT
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
1999 1998
----------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Senior credit facility ................................ $ 783,500 $ 719,500
Subsidiary debt obligations:
Senior secured notes .............................. 130,636 131,078
Lines of credit ................................... 60,837 46,160
Industrial development revenue bonds .............. 12,428 12,635
Capital lease obligations and other ............... 49,785 23,596
----------- -----------
1,037,186 932,969
Less current portion .................................. (61,557) (39,892)
----------- -----------
Total ............................................. $ 975,629 $ 893,077
=========== ===========
</TABLE>
Senior Credit Facility -- Our senior credit facility provides us with a
line of credit of up to $1 billion to be used for general corporate and working
capital purposes, including the financing of acquisitions. Our senior credit
facility expires March 31, 2003, unless extended in accordance with its terms.
Amounts outstanding under our senior credit facility bear interest at a
rate per annum equal to one of the following rates, at our option: (i) a "base
rate" equal to the higher of the Federal Funds rate plus 50 basis points or a
prime rate, or (ii) the London Interbank Offering Rate ("LIBOR") plus a margin
that varies from 50 to 75 basis points depending on our ratio of debt (as
defined in the credit agreement) to our net earnings, before deductions for
interest, taxes, depreciation and amortization ("EBITDA"). We pay a commitment
fee for unused credit under our senior credit facility that ranges from 15 to 23
basis points, based on our ratio of debt to EBITDA. Interest is payable
quarterly or at the end of the applicable interest period. The average interest
rate in effect on our senior credit facility, including the applicable interest
rate margin, was 5.7% during the second quarter of 1999.
Our senior credit facility contains various financial and other
restrictive covenants and requires that we maintain certain financial ratios,
including a leverage ratio (computed as the ratio of the aggregate outstanding
principal amount of debt to EBITDA) and an interest coverage ratio (computed as
the ratio of EBITDA to interest expense). In addition, the senior credit
facility requires that we maintain a minimum
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level of net worth. The senior credit facility also contains limitations on
liens, investments, the incurrence of additional debt and acquisitions, and
prohibits certain property sales. Our senior credit facility is secured by the
stock of certain of our subsidiaries.
Subsidiary Debt Obligations --During the quarter, the debt obligations
of our subsidiaries included senior secured notes, lines of credit, industrial
development revenue bonds and other obligations.
Plastic Containers, Inc., which we sold to Consolidated Container
Company LLC on July 2, 1999 (see Note 2 above), issued senior secured notes in
December 1996. These notes, which were fully redeemed in connection with our
sale of Plastic Containers, Inc. to Consolidated Container Company LLC,
o had an original par value of $125 million,
o were due in 2006,
o bore interest at a fixed interest rate of 10% payable
semi-annually in July and December of each year, and
o were secured by the stock of certain of Plastic Containers,
Inc.'s subsidiaries, as well as substantially all of the
assets of Plastic Containers, Inc., other than inventory,
receivables and certain equipment.
When we acquired Plastic Containers, Inc. in May 1998, we redeemed
approximately $3.8 million of these notes (at a redemption price of 101% of par
value) pursuant to a mandatory tender offer. We revalued the remaining notes to
fair value using a market yield of 8.6%, which resulted in a premium of $10.4
million at acquisition date. Prior to our sale of Plastic Containers, Inc., this
premium was being amortized as an adjustment to interest expense over the life
of the notes.
Borrowings under our subsidiaries' lines of credit are generally
subject to limitations based on a borrowing base and bear interest generally at
floating interest rates. Of the outstanding borrowings under these lines of
credit, which at June 30, 1999 included only foreign subsidiary borrowings,
$51.7 million is classified as a current liability since such borrowings are
expected to be repaid within one year; the remaining $9.1 million is classified
as long term and will be repaid at various dates through 2003.
Certain of our subsidiaries have revenue bonds outstanding, certain of
which require aggregate annual sinking fund redemptions aggregating $0.7 million
and are secured by irrevocable letters of credit issued by financial
institutions, along with first mortgages on certain real property and equipment.
Interest on these bonds is due semiannually at interest rates that vary based on
market conditions which, at June 30, 1999, ranged from 3.7% to 3.9%.
Other subsidiary debt includes various promissory notes for the
purchase of property, plant and equipment and capital lease obligations. The
promissory notes payable provide for interest at varying rates and are payable
in monthly installments of principal and interest until maturity, when the
remaining principal balances are due. Capital lease obligations represent
machinery and equipment financing obligations which are payable in monthly
installments of principal and interest and are collateralized by the related
assets financed.
Interest Rate Agreements -- We have interest rate derivative agreements
in place, including interest rate caps, swaps and collars that have been
designated as hedges against our variable interest rate exposure on our loans
under our senior credit facility.
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The following table summarizes our various interest rate agreements as
of June 30, 1999:
<TABLE>
<CAPTION>
NOTIONAL
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Interest rate caps with an interest rate limit of 8% expiring March 2000 ....... $ 60,000
Interest rate swaps with interest rates ranging from 6.03% to 6.14%
expiring between December 2000 and December 2003 ............................... 435,000
Interest rate collars with an interest rate range of 6.08% to 7.5%
expiring between December 2002 and June 2003 ................................... 100,000
</TABLE>
These derivative agreements were entered into for the purpose of
providing hedges for loans under our senior credit facility by limiting or
fixing the LIBOR interest rates specified in the senior credit facility at the
interest rates noted above until the indicated expiration dates of these
interest rate derivative agreements. The original costs and premiums of these
derivative agreements are being amortized on a straight-line basis as a
component of interest expense. We used the cash proceeds that we received from
the sale of our U.S. plastic packaging operations on July 2, 1999, to reduce
outstanding debt under our senior credit facility. As a result, certain of our
existing interest rate agreements will no longer be designated as hedges and
will be marked to market with any resulting gain or loss recognized in the third
quarter of 1999. We do not believe that this will have a material impact on our
consolidated financial position or results of operations.
We are exposed to market risk under interest rate derivative agreements
because interest rates on our senior credit facility could fall below the rates
on the interest rate derivative agreements. Credit risk under these agreements
is remote since the counterparties to our interest rate derivative agreements
are major financial institutions.
6. ACQUISITIONS
On June 22, 1999, we completed our previously announced acquisition of
Broughton Foods Company. Broughton Foods Company, which had sales of
approximately $179 million in 1998, is a manufacturer and distributor of fresh
and ultra high temperature ("UHT") milk, ice cream and other UHT dairy products
in Michigan, Ohio, West Virginia, Kentucky, Tennessee and parts of the eastern
United States. Pursuant to an agreement with the U.S. Department of Justice
Antitrust Division, we must sell Broughton Foods Company's operations in Pulaski
County, Kentucky by October 30, 1999. As a result, the portion of the purchase
price allocable to the operation has been classified as assets held for sale.
During the first quarter of 1999, we completed the acquisitions of
three small businesses in our dairy segment including:
o Ultra Products, L.L.C., a manufacturer of shelf-stable coffee
creamers that has become part of our Morningstar division,
o New England Dairies, located in our Northeast region, and
o Thompson Beverage Systems, L.P., a beverage packaging design
company.
All of our acquisitions in 1999 have been funded primarily through
borrowings under our senior credit facility with the exception of the
acquisition of Thompson Beverage Systems, L.P. Our acquisition of Thompson
Beverage Systems, L.P. was funded at closing through the issuance of 77,233
shares of our common stock.
All of the above acquisitions have been accounted for using the
purchase method of accounting. The purchase price of each of the acquisitions
was allocated to assets acquired, including identifiable intangibles, and
liabilities assumed based on their estimated fair market values. The excess of
the total
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purchase prices over the estimated fair values of the net assets represented
goodwill. These allocations are tentative and subject to change.
7. BUSINESS AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
Our two reportable segments during the quarter were dairy and
packaging. Reportable segments are strategic business units that offer different
products and services. They are managed separately because each business
requires different technology and marketing strategies. In our dairy segment, we
manufacture and distribute primarily fluid milk (including flavored milks), ice
cream and novelties, dairy and non-dairy coffee creamers, half-and-half and
whipping cream, sour cream, cottage cheese, yogurt and dairy and non-dairy
frozen whipped toppings. We also manufacture and distribute fruit juices and
other flavored drinks, bottled water and coffee in our dairy segment. On July 2,
1999, we sold our U.S. plastic packaging operations (Franklin Plastics, Inc.,
and Plastic Containers, Inc.) to Consolidated Container Company LLC, a newly
formed company in which we own a minority interest. See Note 2 above for more
information about such sale. Our remaining packaging operations, which will
cease to be reported as a separate segment in the third quarter of 1999, consist
of our European metal can and flexible film operations.
The accounting policies of our segments are the same as those described
in the summary of significant accounting policies set forth in Note 1 to our
1998 consolidated financial statements, contained in our 1998 Annual Report on
Form 10-K. The amounts in the following tables are derived from reports used by
our executive management team:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------------------------
1999 1998
---------------------------------------------- -----------------------------------------------
SEGMENT SEGMENT
DAIRY PACKAGING TOTAL DAIRY PACKAGING TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(in 000's) -- -- -- -- -- --
Revenues from external ........ $ 934,794 $ 184,050 $1,118,844 $ 674,499 $ 93,621 $ 768,120
customers .....................
Intersegment revenues ......... 9,448 10,145 19,593 3,225 5,067 8,292
Segment operating income(1) ... 67,784 23,204 90,988 57,727 10,114 67,841
Total segment assets .......... 2,279,188 838,684 3,117,872 1,745,225 776,773 2,521,998
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------------------
1999 1998
------------------------------------------ ------------------------------------------
SEGMENT SEGMENT
DAIRY PACKAGING TOTAL DAIRY PACKAGING TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(in 000's)
Revenues from external customers .... $1,912,459 $ 359,571 $2,272,030 $1,230,472 $ 130,769 $1,361,241
Intersegment revenues ............... 16,036 18,674 34,710 5,600 10,218 15,818
Segment operating income(1) ......... 117,678 40,912 158,590 99,057 14,424 113,481
</TABLE>
- --------------------------
(1) 1999 Dairy figure includes a pre-tax charge for plant closing and other
costs of $4.7 million.
The following are reconciliations of reportable segment amounts to our
consolidated totals:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------------------------------------
1999 1998
--------------------------------------- ----------------------------------------
CORPORATE/ CORPORATE/
SEGMENT OTHER TOTAL SEGMENT OTHER TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(in 000's)
Segment operating income (loss) ... $ 90,988 $ (8,829) $ 82,159 $ 67,841 $ (2,985) $ 64,856
Total segment assets .............. 3,117,872 55,697 3,173,569 2,521,998 43,470 2,565,468
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------------------------------
1999 1998
--------------------------------------- ----------------------------------------
CORPORATE/ CORPORATE/
SEGMENT OTHER TOTAL SEGMENT OTHER TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(in 000's)
Segment operating income(loss)..... $ 158,590 $ (14,755) $ 143,835 $ 113,481 $ (7,036) $ 106,445
</TABLE>
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Geographic information for 1999 and 1998 (in 000's):
<TABLE>
<CAPTION>
REVENUES
---------------------------------------------------------------- LONG-LIVED ASSETS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, AT JUNE 30,
---------------------------- ---------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States ........ $ 998,895 $ 680,193 $2,037,260 $1,211,353 $2,177,650 $1,703,723
Puerto Rico .......... 60,591 62,813 120,384 124,774 124,053 122,682
Europe ............... 59,358 25,114 114,386 25,114 83,579 78,800
---------- ---------- ---------- ---------- ---------- ----------
Total ................ $1,118,844 $ 768,120 $2,272,030 $1,361,241 $2,385,282 $1,905,205
========== ========== ========== ========== ========== ==========
</TABLE>
No customer within either segment represented greater than ten percent
of our consolidated revenues during the quarter.
8. COMPREHENSIVE INCOME
During 1998 we adopted Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income," issued in June 1997. For
interim periods, SFAS 130 requires disclosure of comprehensive income, which is
composed of net income and other comprehensive income items. Other comprehensive
income items are revenues, expenses, gains and losses that under generally
accepted accounting principles are excluded from net income and reflected as a
component of equity. Consolidated comprehensive income was $29.4 million and
$47.0 million for the three- and six-month periods ended June 30, 1999,
respectively, which included net income as reported and comprehensive income
adjustments primarily for foreign currency losses of $4.6 million ($2.8 million
net of taxes) for the three-month period ended June 30, 1999 and $9.9 million
($6.1 million net of taxes) for the six-month period ended June 30, 1999.
Consolidated comprehensive income was $60.1 million and $75.0 million for the
three- and six-month periods ended June 30, 1998, respectively, ($28.4 million
and $46.5 million before discontinued operations and an extraordinary gain)
which includes foreign currency losses of $1.2 million for both periods.
9. STOCKHOLDERS' EQUITY
On September 15, 1998, our Board of Directors authorized an open market
share repurchase program of up to $100 million of our common stock. During the
second quarter of 1999, we repurchased 79,700 shares of common stock for a total
purchase price of approximately $3 million pursuant to this Board authorization.
Prior to the second quarter of 1999, we had purchased an additional $46 million
of our common stock pursuant to the same Board authorization.
10. PLANT CLOSING AND OTHER NON-RECURRING COSTS
During the second quarter of 1999, as part of an overall integration
and cost reduction strategy, we recorded plant closing and other non-recurring
costs of $4.7 million. The impact of the charge was to reduce earnings from $.94
per diluted share to $.87 per diluted share. These costs included the following:
o Closing of one dairy plant and consolidation of production into an
expanded plant,
o Disposition of a small cheese processing plant, and
o Consolidation of administrative offices in one of our regions.
The costs included non-cash asset and plant disposition charges of
$3.6 million as well as other costs of $1.1 million. Set forth below is a
summary of the types and amounts of these other costs that were recognized as
accrued expenses during the second quarter of 1999, and the cash payments made
against such accruals during the period (dollars in thousands):
<TABLE>
<CAPTION>
Balance At
Charge Payments June 30, 1999
------ -------- -------------
<S> <C> <C> <C>
Workforce severance obligations....... $ 628 $(460) $ 168
Lease and other obligations........... 495 (46) 449
------- ----- -----
Total $ 1,123 $(506) $ 617
======= ===== =====
</TABLE>
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
We are a leading manufacturer and distributor of dairy products in the
United States. We also have holdings in the consumer goods packaging industry.
Our two reportable segments during the quarter were dairy and packaging. On
July 2, 1999, we sold our U.S. plastic packaging operations (Franklin Plastics,
Inc. and Plastic Containers, Inc.) to Consolidated Container Company LLC, in
which we own a minority interest. Our remaining packaging operations, which will
cease to be reported as a separate segment in the third quarter of 1999, consist
of our European metal can and flexible film businesses. The following table
presents certain information concerning our results of operations during the
three- and six-month periods ended June 30, 1999 and 1998, including information
presented as a percentage of net sales (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------------ -------------------------------------------------
1999 1998 1999 1998
-------------------- ------------------- ---------------------- ------------------------
% OF % OF % OF % OF
NET NET NET NET
DOLLARS SALES DOLLARS SALES DOLLARS SALES DOLLARS SALES
---------- -------- ---------- ------- ----------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Dairy ................. $ 934,794 $ 674,499 $ 1,912,459 $1,230,472
Packaging ............. 184,050 93,621 359,571 130,769
---------- -------- ---------- ------- ----------- --------- ---------- -----------
Total ............. 1,118,844 100% 768,120 100% 2,272,030 100% 1,361,241 100%
Cost of sales .......... 855,895 76.5 582,213 75.8 1,776,522 78.2 1,038,361 76.3
---------- -------- ---------- ------- ----------- --------- ---------- -----------
Gross profit ........... 262,949 23.5 185,907 24.2 495,508 21.8 322,880 23.7
Operating expenses:
Selling and distrib ... 124,332 11.1 89,127 11.6 246,188 10.8 159,328 11.7
G&A ................... 41,733 3.8 24,676 3.2 80,837 3.6 44,121 3.2
Amortization .......... 10,054 0.9 7,248 1.0 19,977 0.9 12,986 1.0
Plant closing &
other ................ 4,671 0.4 4,671 0.2
---------- -------- ---------- ------- ----------- --------- ---------- -----------
Total ............. 180,790 16.2 121,051 15.8 351,673 15.5 216,435 15.9
---------- -------- ---------- ------- ----------- --------- ---------- -----------
Operating income
(loss):
Dairy1 ............... 67,784 6.0 57,727 7.5 117,678 5.2 99,057 7.3
Packaging ............ 23,204 2.1 10,114 1.3 40,912 1.8 14,424 1.0
Corporate ............ (8,829) (0.8) (2,985) (0.4) (14,755) (0.7) (7,036) (0.5)
---------- -------- ---------- ------- ----------- --------- ---------- -----------
Total ............. $ 82,159 7.3% $ 64,856 8.4% $ 143,835 6.3% $ 106,445 7.8%
========== ======== ========== ======= =========== ========= ========== ===========
</TABLE>
- ---------------
(1) 1999 figures include plant closing and other non-recurring costs of
$4.7 million.
SECOND QUARTER AND YEAR-TO-DATE 1999 COMPARED TO SECOND QUARTER AND YEAR-TO-DATE
1998
Net Sales. Net sales increased 45.7% to $1.12 billion in the second
quarter of 1999 from $768.1 million in the second quarter of 1998. For the six
month period ended June 30, net sales increased 66.9% to $2.27 billion in 1999
from $1.36 billion in 1998. Net sales in our dairy segment grew to $934.8
million in the second quarter of 1999 from $674.5 million in the second quarter
of 1998, and to $1.91 billion in the first six months of 1999 compared to $1.23
billion in the same period of 1998, primarily due to acquisitions. Net sales in
our packaging segment grew to $184.1 million in the second quarter of 1999 from
$93.6 million in the second quarter of 1998, and to $359.6 in the first six
months of 1999 compared to $130.8 million in the same period of 1998. Packaging
increases were due to our acquisition of Continental Can in the second quarter
of 1998, our acquisitions of several smaller businesses in 1998 and our opening
of several new facilities.
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<PAGE> 13
Cost of Sales. Our cost of sales ratio was 76.5% in the second quarter
of 1999 compared to 75.8% in the second quarter of 1998, and 78.2 % for the
first six months of 1999 compared to 76.3% for the same period of 1998. The cost
of sales ratio for our dairy group rose to 76.6% in the second quarter of 1999
compared to 75.6% in 1998 due to the effect of lower profit margins from newly
acquired businesses. For the first six months of 1999, the cost of sales ratio
in our dairy segment increased to 78.5% compared to 76.2% in the same period of
1998, primarily due to a higher basic formula price for milk during the first
quarter of 1999, along with the effect of lower profit margins from newly
acquired businesses. The cost of sales ratio for our packaging group fell to
76.1% in the second quarter of 1999 from 77.2% in the same period of 1998 and
fell to 76.4% in the first six months of 1999 from 76.7% in the same period of
1998. These decreases were primarily due to synergies realized from combining
our existing packaging business with those of Continental Can.
Operating Expenses. Our operating expense ratio was 16.2% in the second
quarter of 1999 compared to 15.8% in the second quarter of 1998, and 15.5% for
the first six months of 1999 compared to 15.9% for the same period of 1998. The
operating expense ratio for our dairy group increased to 16.2% in the second
quarter of 1999 compared to 15.9% in 1998 due to $4.7 million in plant closing
and other non-recurring charges. These charges include the costs of closing a
milk plant, selling a cheese processing business, and consolidating
administrative offices in our Midwest region. Excluding these charges, our
operating expense ratio was comparable to 1998 levels. Despite these charges the
operating expense ratio for our dairy group decreased to 15.3% for the first six
months of 1999 compared to 15.7% for the same period of 1998, due to
efficiencies in selling and general and administrative costs. The operating
expense ratio for our packaging group decreased to 11.3% and 12.2% in the second
quarter and first six months of 1999, respectively, from 12.1% and 12.3% in the
same periods of 1998 due to savings in delivery expense.
Operating Income. Operating income increased 26.7% to $82.2 million in
the second quarter of 1999 from $64.9 million in the second quarter of 1998. For
the six-month period ended June 30, operating income increased 35.1% to $143.8
million in 1999 from $106.4 million in 1998. Excluding plant closing and other
non-recurring costs, operating income increased 39.5% to $148.5 million in the
first six months of 1999, compared to the same period in 1998. However,
operating income margin decreased to 7.3% in the first quarter of 1999 from 8.4%
in the same period of 1998, and decreased to 6.3% for the first six months of
1999 from 7.8% in 1998. This decline is primarily due to plant closing and other
non-recurring charges, a higher basic formula price for milk during the first
quarter of 1999 and lower margins for companies acquired in 1998, partly offset
by improved operating efficiencies in our dairy operations held for more than
one year.
Other (Income) Expense. Interest expense increased to $15.2 million in
the second quarter of 1999 from $8.4 million in 1998, and increased to $31.2
million in the first six months of 1999 from $21.8 million in the same period of
1998, primarily due to the increased levels of debt used to finance
acquisitions. Financing charges on preferred securities increased to $19.3
million in the first six months of 1999 from $10.9 million in 1998, reflecting
o the issuance on February 20, 1998 of $100 million of 5.0%
preferred securities related to our acquisition of Land-O-Sun,
and
o the issuance on March 24, 1998 of $600 million of 5.5%
preferred securities.
Discontinued Operations and Extraordinary Items. In the six months
ended June 30, 1998, we reported a loss from discontinued operations of $3.2
million, net of an income tax benefit of $2.1 million. Extraordinary items in
1998 were
o a $35.5 million extraordinary gain, net of income tax expense
of $22.0 million, resulting from the April 1998 sale of our
packaged ice business, and
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<PAGE> 14
o a $3.8 million loss, net of an income tax benefit of $2.3 million,
from the write-off of deferred financing costs and the recognition
of interest rate swap losses in connection with our May 1998
early-extinguishment of the term portion of our credit facility.
Net Income. We reported net income of $32.1 million in the second
quarter of 1999 compared to $61.3 million in the second quarter of 1998. In the
second quarter, income from continuing operations was $32.1 million in 1999
compared to $29.6 million in 1998. For the first six months, we reported net
income of $53.0 million in 1999 compared to $76.2 million in 1998. Income from
continuing operations for the same period was $53.0 million in 1999 compared to
$47.7 million in 1998.
RECENT DEVELOPMENTS
Sale of our U.S. Plastic Packaging Operations
On July 2, 1999, we sold our U.S. plastic packaging operations
(Franklin Plastics, Inc. and Plastic Containers, Inc.) to Consolidated Container
Company LLC, a newly formed company which owns Reid Plastics Holdings, Inc., for
cash and a 43% minority interest in this new company. For more information about
this transaction, see Note 2 to our Consolidated Financial Statements contained
in this report.
Completed Acquisitions
On June 22, 1999, we completed our previously announced acquisition of
Broughton Foods Company. Broughton Foods Company, which had sales of
approximately $179 million in 1998, is a manufacturer and distributor of fresh
and UHT milk, ice cream and other UHT dairy products in Michigan, Ohio, West
Virginia, Kentucky, Tennessee and parts of the eastern United States.
During the first quarter of 1999, we completed three small acquisitions
in our dairy segment, including:
o Ultra Products, L.L.C. - a manufacturer of shelf-stable coffee
creamers that has become a part of our Morningstar division,
o New England Dairies - located in our Northeast region, and
o Thompson Beverage Systems, L.P., a beverage packaging design
company.
For more information about our acquisitions during the first and second
quarters of 1999, see Note 6 to our Consolidated Financial Statements
contained in this report.
On August 2, 1999, we announced the formation of a new joint venture
with Dairy Farmers of America pursuant to which our southern California dairy
operations were combined with DFA's Adohr Farms to form a business with annual
revenues of approximately $270 million. We own 75% of the venture and DFA owns
the remaining 25%. We will manage the entity. For more information about this
transaction, see Note 2 to our Consolidated Financial Statements
contained in this report.
Proposed Acquisition
On July 23, 1999, we announced that we have signed a definitive
agreement to acquire Valley of Virginia Cooperative Milk Producers Association,
an agricultural marketing cooperative with dairy processing plants in
Springfield, Virginia and Mt. Crawford, Virginia. For more information about
this transaction, see Note 2 to our Consolidated Financial Statements
contained in this report.
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<PAGE> 15
Stock Repurchase
On September 15, 1998, our Board of Directors authorized an open market
share repurchase program of up to $100 million of our common stock. During the
second quarter of 1999, we repurchased 79,700 shares of common stock for a total
purchase price of approximately $3 million pursuant to this Board authorization.
Prior to the second quarter of 1999, we had purchased an additional $46 million
of our common stock pursuant to the same Board authorization.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, we had total stockholders' equity of $707.4
million, total debt of $1.04 billion (including long-term debt and the current
portion of long-term debt) and $683.2 million of mandatorily redeemable
convertible trust issued preferred securities.
Cash Flow
Historically, we have met our working capital needs with cash flow from
operations along with borrowings under our senior credit facility. Net cash
provided by continuing operations was $142.1 million for the first six months of
1999 as contrasted to $95.3 million for the first six months of 1998. Investing
activities in the first six months of 1999 included approximately $104.8 million
in capital expenditures of which $81.8 million was spent in our dairy segment,
$19.0 million was spent in our packaging segment, and $4.0 million was spent at
corporate. Investing activities during the first six months of 1999 also
included $147.2 million of cash paid for acquisitions,as compared to $273.5
million, net of divestitures, for 1998. Financing activities during the first
six months of 1999 included approximately $3 million of cash spent to
repurchase shares of our common stock in the open market.
Current Debt Obligations
On May 29, 1998 we amended our senior credit facility. Pursuant to this
amendment, we terminated and repaid the term loan facility and expanded the
revolving loan facility to $1 billion. At June 30, 1999, approximately $189.8
million was available under our senior credit facility. On July 2, 1999, we sold
our U.S. plastic packaging operations to Consolidated Container Company LLC, in
which we own a 43% minority interest. Pursuant to that transaction, Consolidated
Container Company LLC assumed approximately $135 million of our debt (which
consisted of senior secured notes issued by a subsidiary). Consolidated
Container Company LLC also paid to us at closing our intercompany debt and
preferred stock investment, including interest and dividends, of approximately
$364 million; all of which was used to pay down outstanding debt under our
senior credit facility. For more information regarding our debt obligations, see
Note 5 to our Consolidated Financial Statements contained in this
report. We are currently in compliance with all covenants and financial ratios
contained in our debt agreements.
Future Capital Requirements
We have budgeted a total of approximately $150 to $160 million in
capital expenditures during 1999, of which $105 million has been spent to date.
We intend to spend approximately $40 to $50 million in our dairy segment during
the remainder of 1999 to expand and maintain our manufacturing facilities and
for fleet replacement. We have budgeted approximately $4 million during the
remainder of 1999 for capital expenditures in our remaining packaging
operations.
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<PAGE> 16
We have current commitments to expend approximately $142 million in
cash on two currently proposed dairy acquisitions, including the previously
announced proposed acquisition of Valley of Virginia Cooperative Milk Producers
Association. We expect to fund these acquisitions out of cash flow from
operations and/or borrowings under our senior credit facility.
We expect that cash flow from operations will be sufficient to meet our
requirements for our existing businesses for the remainder of 1999 and for the
foreseeable future. In the future, we intend to pursue additional acquisitions
in our existing regional markets as well as new markets, and to seek strategic
acquisition opportunities that are compatible with our core business. We expect
to fund future acquisitions out of cash flow from operations and/or from
borrowings under our senior credit facility. If necessary, we believe that we
also have the ability to secure additional financing to pursue this strategy.
KNOWN TRENDS AND UNCERTAINTIES
Year 2000 Compliance
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000, or Y2K, problem. The
Year 2000 problem arises from the way dates are recorded and computed in most
applications, operating systems, hardware and embedded chips. If the problem is
not corrected, systems that use a date in its prescribed function may fail or
produce erroneous results before, on and after the year 2000.
We have substantially completed our work on our comprehensive project
to address Year 2000 issues that may adversely impact our business, which
included enterprise systems and related applications; plant floor systems
and equipment; personal computers and related applications; networks and
communications; supplier and customer chains; internal and external Electronic
Data Interchange and associated interfaces; and miscellaneous equipment (time
clocks, postage machines, facsimiles, etc.).
The Year 2000 compliance plan was broken into five phases including
awareness, assessment/inventory, remediation, certification and testing, all of
which have been substantially completed. The primary unfinished tasks are
vendor supplied software updates, which are underway, and some personal computer
swap-outs. In addition, we are in the process of testing our key manufacturing
processes for compliance issues. We believe that the Year 2000 issue will have
no significant impact on our plant operations.
A critical step in our strategic plan is the coordination of Year 2000
readiness with third parties. We have received confirmation from over 90% of our
suppliers and vendors that their systems are Year 2000 compliant. We have
continual contact with our remaining suppliers and vendors in an effort to
ensure that they are pursuing acceptable compliance efforts so that they will
have minimal impact on our business. Contingency plans are being developed in
any areas that pose a possible threat.
As a result of the diverse information systems that are being used by
companies that we have acquired and also due to technological enhancements, we
have had an ongoing information systems development plan to move these acquired
companies' systems to our standard platform systems with scheduled replacement
of systems throughout the organization. Year 2000 compliance is a significant
16
<PAGE> 17
portion of our overall development plan.
Should any critical service providers, suppliers (including utility
suppliers) or customers fail to achieve compliance, there may be an adverse
impact on our operation. We believe the most reasonably likely worst case
scenario to be temporary interruptions in production as a result of failure of
utility suppliers to provide adequate power, which could result in potential
lost sales and profits. Our current assessment of risks, based on the most
reasonable worst case scenario, is that there will be no significant adverse
impact on our operations or financial performance. We believe that if any
disruption to operations does occur, it will be isolated and/or short-term in
duration.
We have incurred and expensed approximately $4.5 million through June
30, 1999 for remediation costs associated with our Year 2000 compliance
activities and we expect to incur and expense an additional $.5 million in the
future to complete the remediation of our information systems and to write off
unamortized costs for systems replaced. In addition to these remediation costs
expensed, we have also capitalized approximately $8.5 million of capital
expenditures through June 30, 1999 for the replacement and upgrading of
purchased software and hardware for both existing systems and the systems of
acquired businesses pursuant to our Year 2000 compliance activities and our
on-going information systems development plan and we have budgeted an additional
$.5 million of capital expenditures for the remainder of 1999 for the purchase
of additional replacement systems. Budgeted amounts are based on our
conservative estimates and actual results could differ as the plan is further
implemented; however, we do not expect to incur any material additional costs.
Euro Currency Conversion
Companies conducting business in or having transactions denominated in
certain European currencies are facing the European Union's pending conversion
to a new common currency, the "euro." This conversion is expected to be
implemented over a three-year period. On January 1, 1999, the euro became the
official currency for accounting and tax purposes of several countries of the
European Union and the exchange rate between the euro and local currencies was
fixed. In 2002, the euro will replace the individual nation's currencies. Since
we have packaging operations in Europe, the conversion to the euro will have an
effect on us. We are currently considering the specific nature of the impact of
the conversion on our operations, but we currently believe that there will be no
material adverse impact of the conversion on our operations or financial
performance.
Trends in Tax Rates
Our 1998 tax rate was approximately 36.4%. We believe that our
effective tax rate will range from 37% to 40% for the next several years. Our
effective tax rate is affected by various tax advantages applicable to our
Puerto Rico based operations. Any additional acquisitions could change this
effective tax rate.
RISK FACTORS
This report contains certain statements about our future that are not
statements of historical fact. In some cases, you can identify these statements
by terminology such as "may," "will," "should," "expects," "anticipates,"
"plans," "believes," "estimates," "intends," "predicts," "potential" or
"continue" or the negative of such terms and other comparable terminology. These
statements are only predictions, and in evaluating those statements, you should
carefully consider the risks outlined below. Actual performance or results may
differ materially and adversely.
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<PAGE> 18
We may have difficulties executing our acquisition strategy, which
could affect our growth and financial condition.
We intend to expand our business primarily through acquisitions. Our
ability to expand through acquisitions is subject to various risks, including
o rising acquisition prices,
o increased antitrust constraints on our proposed acquisitions
and acquisition strategy,
o fewer suitable acquisition candidates, and
o limitations on our financing sources.
If we are not able to expand our business through acquisitions at the
rate we have planned, our stock price may be adversely affected.
If we fail to effectively manage our growth, our business could be
adversely affected.
We have expanded our operations rapidly in recent years and intend to
continue this expansion. This rapid growth places a significant demand on our
management and our financial and operational resources. Our growth strategy is
subject to various risks, including
o inability on our part to successfully integrate or operate
acquired businesses,
o inability to retain key customers of acquired businesses, and
o inability to realize or delays in realizing expected benefits
from our increased size.
The integration of businesses we have acquired or may acquire in the future may
also require us to invest more capital than we expected or require more time and
effort by management than we expected. If we fail to effectively manage the size
and growth of our business, our operations and financial results could be
affected, both materially and adversely.
Our failure to successfully compete could adversely affect our
prospects and financial results.
Our businesses are subject to intense competition. We have many
competitors in each of our major product, service and geographic markets, and
some of these competitors are larger, more established and better capitalized.
If we fail to successfully compete against our competitors, our business will be
adversely affected.
Our dairy business is subject to significant competition from dairy
operations and large national food service distributors that operate in our
markets. Competition in the dairy business is based primarily on
o service,
o price,
o brand recognition,
o quality, and
o breadth of product line.
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<PAGE> 19
The dairy industry has excess production capacity and has been
consolidating for many years. This excess production capacity is the result of
o improved manufacturing techniques,
o the establishment of captive dairy operations by large grocery
retailers, and
o limited growth in the demand for fresh milk products.
We could be adversely affected by any expansion of capacity by our
existing competitors or by new entrants in our markets.
We compete in the packaging business on the basis of a number of
factors, including price, quality and service. Our principal competitors in this
business are larger independent manufacturing companies and vertically
integrated food and industrial companies that operate captive packaging
manufacturing facilities.
Our substantial debt and other financial obligations expose us to risks
that could adversely affect our financial condition.
As of June 30, 1999, we had substantial debt and other financial
obligations, including
o approximately $1.04 billion of borrowings (including $783.5
million under our senior credit facility, $60.8 million under
our subsidiary lines of credit, $49.8 million of subsidiary
debt obligations and $130.6 million of senior secured notes
which were fully redeemed in connection with the sale of our
U.S. plastic packaging operations), and
o $683.2 million of 5.0% preferred securities and 5.5% preferred
securities.
Those amounts compare to our stockholders' equity of $707.4 million as
of June 30, 1999.
Our senior credit facility provides us with a line of credit of up to
$1 billion to be used for general corporate and working capital purposes. As of
June 30, 1999, we would have been able to borrow an additional $189.8 million
under our senior credit facility. However, on July 2, 1999, we sold our U.S.
plastic packaging operations pursuant to which we received, in addition to a 43%
minority interest in the purchaser, approximately $364 million in cash proceeds,
all of which were used to reduce outstanding debt under our senior credit
facility. We have pledged the stock of some of our subsidiaries to secure this
facility and the assets of other subsidiaries to secure other indebtedness. Our
senior credit facility and related debt service obligations
o limit our ability to obtain additional financing in the future
without obtaining prior consent,
o require us to dedicate a significant portion of our cash flow
to the payment of interest on our debt, which reduces the
funds we have available for other purposes,
o limit our flexibility in planning for, or reacting to, changes
in our business and market conditions, and
o impose on us additional financial and operational
restrictions.
Our ability to make scheduled payments on our debt and other financial
obligations depends on our financial and operating performance. Our financial
and operating performance is subject to prevailing
19
<PAGE> 20
economic conditions and to financial, business and other factors, some of which
are beyond our control. If we do not comply with the financial and other
restrictive covenants under our senior credit facility, we may default under
this facility. Upon default, our lenders could accelerate the indebtedness under
this facility, foreclose against their collateral or seek other remedies.
Increases in our raw material costs could adversely affect our
profitability.
The most important raw materials that we use in our operations are raw
milk and cream (including butterfat). The prices of these materials increase and
decrease depending on supply and demand and, in some cases, governmental
regulation. In many cases, we are not able to pass on the increased price of raw
materials to our customers due primarily to timing problems. Therefore,
volatility in the cost of our raw materials can adversely affect our
profitability and financial performance.
Changes in regulations could adversely affect many aspects of our
business.
Under the Federal Milk Marketing Order program, the federal government
and several state agencies establish minimum regional prices paid to producers
for raw milk. In 1996, the U.S. Congress passed legislation to phase out the
Federal Milk Marketing Order program. This program is currently scheduled to be
phased out by October 1999. The U.S. Department of Agriculture ("USDA") has also
recently issued final rules which would implement changes to this program,
including changes in pricing classifications for certain dairy products.
Additional legislation has been introduced in Congress to modify the USDA's
final rules and implement other proposed pricing changes. We do not know which,
if any, of the various proposed changes will be adopted, and we do not know what
effect any final legislation or the termination of this federal program will
have on the market for dairy products. In addition, various states have adopted
or are considering adopting compacts among milk producers, which would establish
minimum prices paid by milk processors, including us, to raw milk producers.
Legislation has been proposed to extend the existing Northeast Dairy Compact and
authorize a Southern Compact. We do not know whether new compacts will be
authorized or, if authorized, the extent to which these compacts would increase
the prices we pay for raw milk.
As a manufacturer and distributor of food products, we are subject to
federal, state and local laws and regulations relating to
o food quality,
o manufacturing standards,
o labeling, and
o packaging.
Our operations are subject to other federal, foreign, state and local
governmental regulation, including laws and regulations relating to occupational
health and safety, labor, discrimination and other matters. Material changes in
these laws and regulations could have positive or adverse effects on our
business.
Our business involves risks of product liability claims which could
result in significant costs.
We sell food products for human consumption, which involves risks such
as
o product contamination or spoilage,
o product tampering, and
o other adulteration of food products.
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<PAGE> 21
Consumption of an adulterated, contaminated or spoiled product may
result in personal illness or injury. We could be subject to claims or lawsuits
relating to an actual or alleged illness or injury, and we could incur
liabilities that are not insured or that exceed our insurance coverages.
An actual or alleged problem with the quality or safety of products at
any of our facilities could result in
o product withdrawals,
o product recalls,
o negative publicity,
o temporary plant closings, and
o substantial costs of compliance.
Any of these events could have a material and adverse effect on our
financial condition.
Loss of key personnel could adversely affect our business.
Our success depends to a large extent on the skills, experience and
performance of our executive management. The loss of one or more of these
persons could hurt our business. We do not maintain key man life insurance on
any of our executive officers or directors.
Year 2000 problems for us or our suppliers or customers could increase
our liabilities or expenses and impact our profitability.
We are in the process of addressing our Year 2000 computer issues. If
we do not complete the necessary systems modifications on a timely basis or if
important service providers, suppliers or customers are unable to resolve their
Year 2000 issues in a timely manner, our operations could be adversely affected
and we could experience increased liabilities and expenses as a result.
Provisions of our certificate of incorporation, bylaws and Delaware law
could deter takeover attempts.
Some provisions in our certificate of incorporation and bylaws could
delay, prevent or make more difficult a merger, tender offer, proxy contest or
change of control. Our stockholders might view any such transaction as being in
their best interests since the transaction could result in a higher stock price
than the current market price for our common stock. Among other things, our
certificate of incorporation and bylaws
o authorize our board of directors to issue preferred stock in
series with the terms of each series to be fixed by our board
of directors,
o divide our board of directors into three classes so that only
approximately one-third of the total number of directors is
elected each year,
o permit directors to be removed only for cause, and
o specify advance notice requirements for stockholder proposals
and director nominations.
In addition, with some exceptions, the Delaware General Corporation Law
restricts mergers and other business combinations between us and any stockholder
that acquires 15% or more of our voting stock.
21
<PAGE> 22
We also have a stockholder rights plan. Under this plan, after the
occurrence of specified events, our stockholders will be able to buy stock from
us or our successor at reduced prices. These rights do not extend, however, to
persons participating in takeover attempts without the consent of our board of
directors. Accordingly, this plan could delay, defer, make more difficult or
prevent a change of control.
Environmental regulations could result in charges or increase our costs
of doing business.
We, like others in similar businesses, are subject to a variety of
federal, foreign, state and local environmental laws and regulations including,
but not limited to, those regulating waste water and stormwater, air emissions,
storage tanks and hazardous materials. We believe that we are in material
compliance with these laws and regulations. Future developments, including
increasingly stringent regulations, could require us to make currently
unforeseen environmental expenditures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE AGREEMENTS
At June 30, 1999, we had interest rate derivative agreements in place,
including interest rate caps, swaps and collars which have been designated as
hedges against our variable interest rate exposure on loans under our senior
credit facility. The following table summarizes our various interest rate
agreements:
<TABLE>
<CAPTION>
TYPE INTEREST RATE LIMITS NOTIONAL AMOUNTS EXPIRATION DATE
- ---- -------------------- ---------------- ---------------
<S> <C> <C> <C>
Caps.......... 8.0% $60.0 million March 2000
Swaps......... 6.03% to 6.14% 110.0 million December 2000
50.0 million March 2001
225.0 million December 2002
50.0 million December 2003
Collars....... 6.08% and 7.50% 100.0 million December 2002
To June 2003
</TABLE>
The original costs and premiums of these derivative agreements are
being amortized on a straight-line basis as a component of interest expense.
These derivative agreements provide hedges for senior credit facility loans by
limiting or fixing the LIBOR interest rates specified in the senior credit
facility (5.6% at June 30, 1999, including the LIBOR margin) at the interest
rates specified above until the indicated expiration dates of these interest
rate derivative agreements.
FOREIGN CURRENCY
We are exposed to foreign currency risk due to operating cash flows and
various financial instruments that are denominated in foreign currencies. Our
most significant foreign currency exposures relate to the French franc and the
German mark. Potential losses due to foreign currency fluctuations would not
have a material impact on our consolidated financial position, results of
operations or operating cash flow.
22
<PAGE> 23
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 19, 1999, we held our annual meeting of stockholders. At the
annual meeting, we submitted the following matters to a vote of our
stockholders:
o the re-elections of Stephen L. Green and John R. Muse as
members of our Board of Directors,
o an increase in the number of shares of our common stock
reserved for issuance under our 1997 Stock Option and
Restricted Stock Plan from 4 million shares to 5.5 million
shares, and
o the ratification of our Board of Directors' selection of
Deloitte & Touche LLP as our independent auditors for fiscal
year 1999.
At the annual meeting, the stockholders re-elected the directors named
above, approved the proposed increase in the number of shares reserved for
issuance under our 1997 Stock Option and Restricted Stock Plan and ratified the
selection of Deloitte & Touche LLP as our independent auditors.
The vote of the stockholders with respect to each such matter was as
follows:
o Re-election of directors:
<TABLE>
<S> <C>
Stephen L. Green - 26,968,162 votes for; 100,628 votes withheld
John R. Muse - 26,968,012 votes for; 100,778 votes withheld
</TABLE>
o Approval of the proposed increase in the number of shares
reserved for issuance under our 1997 Stock Option and
Restricted Stock Plan:
19,471,263 votes for; 7,483,403 against; 31,155 abstentions;
82,969 broker non-votes
o Ratification of our selection of Deloitte & Touche LLP as our
independent auditors:
27,028,230 votes for; 30,766 against; 9,794 abstentions
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
Exhibits
<S> <C>
3 Amended and Restated Bylaws
10.1 Amended and Restated 1997 Stock Option and Restricted Stock Plan
10.2 Consent and Waiver
10.3 Executive Deferred Compensation Plan
11 Statement re computation of per share earnings.
21 Subsidiaries
27 Financial Data Schedules
</TABLE>
Reports on Form 8-K
o We filed a Current Report on Form 8-K on May 5, 1999 in
connection with our announcements of the proposed sale of a
majority interest in our U.S. plastic packaging operations,
and the settlement of the antitrust lawsuit brought against us
in connection with our proposed acquisition of Broughton Foods
Company.
23
<PAGE> 24
o We filed a Current Report on Form 8-K on July 2, 1999 in
connection with the closing of our acquisition of Broughton
Foods Company.
o We filed a Current Report on Form 8-K on July 19, 1999 in
connection with the closing of the sale of our U.S. plastic
packaging operations.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUIZA FOODS CORPORATION
/s/ Barry A. Fromberg
------------------------
Barry A. Fromberg Executive Vice President,
Chief Financial Officer (Principal Accounting
Officer)
Date: August 13, 1999
24
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3 Amended and Restated Bylaws
10.1 Amended and Restated 1997 Stock Option and Restricted Stock Plan
10.2 Consent and Waiver
10.3 Executive Deferred Compensation Plan
11 Statement re computation of per share earnings
21 Subsidiaries
27 Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT 3
AMENDED AND RESTATED
BYLAWS
OF
SUIZA FOODS CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation
shall be established and maintained at 1013 Centre Road, Wilmington, Delaware
19804-1297.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or as the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. An annual meeting of stockholders shall be
held on such day in each fiscal year of the corporation and at such time and
place as may be fixed by the Board of Directors, at which meeting the
stockholders shall (i) elect directors to fill the class of directors whose
terms are expiring at such meeting, and (ii) transact such other business as may
properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written or printed notice of the
annual meeting, stating the place, day and hour thereof, shall be given to each
stockholder entitled to vote thereat at such address as appears on the books of
the corporation, not less than ten days nor more than sixty days before the date
of the meeting. Any stockholder of the corporation entitled to vote at an annual
meeting may seek to transact other corporate business at the annual meeting,
provided that such business is set forth in a written notice and mailed by
certified mail, to the secretary of the corporation and received no later than
March 1 of any calendar year; provided, however, that if less than 35 days'
notice of an annual meeting of stockholders is given, such notice to transact
corporate business shall have been made or delivered to the secretary of the
corporation not later than the close of business on the seventh day following
the day on which the notice of meeting was mailed. Notwithstanding the
foregoing, such notice shall also comply with any applicable federal securities
laws.
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<PAGE> 2
Section 4. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or the
certificate of incorporation, may be called only by the Chief Executive Officer,
and shall be called by the Chief Executive Officer or the Secretary at the
request in writing of a majority of the Board of Directors.
Section 5. Notice of Special Meetings. Written or printed notice of a
special meeting of stockholders, stating the place, day and hour and purpose or
purposes thereof, shall be given to each stockholder entitled to vote thereat at
such address as appears on the books of the corporation, not less than ten days
nor more than sixty days before the date of the meeting.
Section 6. Business at Special Meetings. Business transacted at all
special meetings of stockholders shall be confined to the purposes stated in the
notice thereof.
Section 7. Stockholder List. At least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of voting shares held by each, shall be prepared by
the Secretary. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any stockholder
during the meeting.
Section 8. Quorum. The holders of a majority of the votes attributed to
the shares of capital stock issued and outstanding and entitled to vote thereat
shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute, the certificate
of incorporation or these bylaws. A holder of a share shall be treated as being
present at a stockholders' meeting if the holder of such share is present in
person at the meeting or represented at the meeting by a valid proxy, regardless
of whether (i) the instrument granting such proxy is marked as casting a vote or
abstaining, or is left blank, or (ii) the holder's shares are voted by a broker
with no power to vote such shares with respect to some or all matters to be
voted upon at the meeting. The stockholders present may adjourn the meeting
despite the absence of a quorum. When a meeting is adjourned for less than
thirty days in any one adjournment and a new record date is not fixed for the
adjourned meeting, it shall not be necessary to give any notice of the adjourned
meeting if the time and place to which the meeting is adjourned are announced at
the meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted on the original date
of the meeting. When a meeting is adjourned for thirty days or more, or when
after the adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given as in the case of an original
meeting.
Section 9. Required Vote. When a quorum is present at any meeting, the
vote of the holders of a majority of the shares having voting power represented
in person or by proxy shall decide any question brought before such meeting
other than elections of directors or any other matter upon which a different
vote is required by the express provision of any statute, the certificate of
incorporation of the corporation or these bylaws, in which event such express
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<PAGE> 3
provision shall govern and control the decision of such question. Directors
shall be elected by a plurality of the votes cast in the election. Shares voted
on a matter or matters by a broker with no power to vote such shares with
respect to that matter or matters will be deemed to be shares not having voting
power with respect to that matter or matters only.
Section 10. Proxies. (a) Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
(b) Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy pursuant to subsection (a) of
this Section, the following shall constitute a valid means by which a
stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing another
person or persons to act for him as proxy. Execution may be
accomplished by the stockholder or his authorized officer, director,
employee or agent signing such writing or causing his or her signature
to be affixed to such writing by any reasonable means including, but
not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or persons to
act for him as proxy by transmitting or authorizing the transmission of
a telegram, cablegram, or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly authorized
by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or other means
of electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or
other electronic transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that determination shall
specify the information upon which they relied.
(c) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to subsection (b)
of this Section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
(d) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to subsection (b)
of this Section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
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<PAGE> 4
Section 11. Voting. Unless otherwise provided by statute or the
certificate of incorporation, each stockholder shall have one vote for each
share of stock having voting power, registered in his name on the books of the
corporation.
Section 12. Consent of Stockholders in Lieu of Meeting. Any action
required to be taken at any annual or special meeting of stockholders, or any
action which may be taken at any annual or special meeting of stockholders, may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
such consent or consents are delivered to the corporation. Every written consent
shall bear the date of signatures of each stockholder and no written consent
shall be effective to take the corporate action referred to therein unless,
within sixty days of the earliest dated consent, written consents signed by a
sufficient number of holders to take action are delivered to the corporation.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Section 13. Inspectors. (a) The corporation shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting
and make a written report thereof. The corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the chairman
of the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a meeting
and the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
(c) The date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the polls unless the Delaware Court of Chancery, upon application by
a stockholders, shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots,
the inspectors shall be limited to an examination of the proxies, any envelopes
submitted with those proxies, any information provided in accordance with
Article II, Section 6(b)(ii), ballots and the regular books and records of the
corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf
- 4 -
<PAGE> 5
of banks, brokers, their nominees or similar persons that represent more votes
than the holder of a proxy is authorized by the record owner to cast, or more
votes than the stockholder holds of record. If the inspectors consider other
reliable information for the limited purpose permitted herein, the inspectors at
the time they make their certification pursuant to subsection (b)(v) of this
Section shall specify the precise information considered by them including the
person or persons from whom they obtained the information, when the information
was obtained, the means by which the information was obtained and the basis for
the inspector's belief that such information is accurate and reliable.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the corporation shall be
managed by a Board of Directors. The Board may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute, by the
certificate of incorporation or these bylaws directed or required to be
exercised or done by the stockholders.
Section 2. Number of Directors.
(a) The Board of Directors shall be divided into three classes,
designated Classes I, II and III, which shall be as nearly equal in number as
possible. The initial Directors of Class I shall be elected to hold office for a
term expiring at the next succeeding annual meeting, the initial Directors of
Class II shall be elected to hold office for a term expiring at the second
succeeding annual meeting, and the initial Directors of Class III shall be
elected to hold office for a term expiring at the third succeeding annual
meeting. At each annual meeting of stockholders following such initial
classification and election, the respective successors of each class shall be
elected for three year terms.
(b) The number of directors shall be fixed from time to time by
resolution of the Board of Directors. In case of any increase in the number of
directors in advance of an annual meeting of stockholders, each additional
director shall be elected by the directors then in office, although less than a
quorum, to hold office until the next election of the class for which such
director shall have been chosen (as provided in the last sentence of this
subsection(b)), or until his successor shall have been duly chosen. No decrease
in the number of directors shall shorten the term of any incumbent director. Any
newly created or eliminated directorships resulting from an increase or decrease
shall be apportioned by the Board among the three classes of directors so as to
maintain such classes as nearly equal in number as possible.
Section 3. Election and Term. Except as provided in Section 4 of this
Article III, directors to fill the class of directors whose terms are expiring
at such meeting shall be elected at the annual meeting of the stockholders, and
each such director shall be elected for a three year term and until his
successor shall have been elected and shall qualify, or until his death,
resignation or removal from office. Directors need not be stockholders of the
corporation.
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<PAGE> 6
Section 4. Vacancies and Newly Created Directorships. If the office of
any director or directors becomes vacant by reason of death, resignation,
retirement, disqualification, removal from office, or otherwise, or the number
of directors constituting the whole Board shall be increased, a majority of the
remaining or existing directors, though less than a quorum, may choose a
successor or successors, or the director or directors to fill the new
directorship or directorships, who shall hold office for the unexpired term in
respect to which such vacancy occurred or, in the case of a new directorship or
directorships, until the next annual meeting of the stockholders at which
members of the director's class are elected.
Section 5. Removal. A director may be removed only for cause. For this
purpose, "cause" means (i) the director's commission of an act of fraud or
embezzlement against the Corporation; (ii) conviction of the director of a
felony or a crime involving moral turpitude; (iii) the director's gross
negligence or willful misconduct in performing the director's duties to the
Corporation or its stockholders; or (iv) a director's breach of fiduciary duty
owed to the Corporation.
Section 6. Nominations for Directors. Nominations for election to the
Board of Directors of the corporation at a meeting of the stockholders may be
made by the Board of Directors, or on behalf of the Board of Directors by a
Nominating Committee appointed by the Board of Directors, or by any stockholder
of the corporation entitled to vote for the election of directors at such
meeting. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing and mailed by certified mail, to
the secretary of the corporation and (i) in the case of an annual meeting,
received no later than March 1 of any calendar year; provided, however, that if
less than 35 days' notice of a meeting of stockholders called for the election
of directors is given to the stockholders, such nomination by such stockholder
shall have been made or delivered to the secretary of the corporation not later
than the close of business on the seventh day following the day on which the
notice of meeting was mailed, and (ii) in the case of a special meeting of
stockholders, received not later than the close of business on the tenth day
following the day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first.
Such notice shall set forth as to each proposed nominee who is not an incumbent
director (i) the name, age, business address and, if known, residence address of
each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee and the nominating
stockholder, and (iv) any other information concerning the nominee that must be
disclosed of nominees in proxy solicitations pursuant to Rule 14(a) of the
Securities Exchange Act of 1934, as amended.
The chairman of the board, or in his absence the president, may, if the
facts warrant, determine and declare to the meeting of stockholders that
nomination was not made in accordance with the foregoing procedure and that the
defective nomination shall be disregarded.
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<PAGE> 7
ARTICLE IV
MEETINGS OF THE BOARD
Section 1. First Meeting. The first meeting of each newly elected Board
of Directors shall be held at the location of and immediately following the
annual meeting of stockholders, and no notice of such meeting shall be necessary
to the newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present; or the Board may meet at such place and time
as shall be fixed by the consent in writing of all the directors. All meetings
of the Board of Directors may be held at such place, either within or without
the State of Delaware, as from time to time shall be determined by the Board of
Directors.
Section 2. Regular Meetings. Regular meetings of the Board may be held
at such time and place and on such notice, if any, as shall be determined from
time to time by the Board.
Section 3. Special Meetings. Special meetings of the Board may be
called by the President or the Chairman of the Board on twenty-four hours'
notice to each director, delivered either personally or by mail or by telegram
or telecopier. Special meetings shall be called by the President or the
Secretary in like manner and on like notice on the written request of one
director.
Section 4. Quorum and Voting. At all meetings of the Board, a majority
of the directors at the time in office shall be necessary and sufficient to
constitute a quorum for the transaction of business; and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, the certificate of incorporation or these bylaws. If a quorum shall
not be present at any meeting of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 5. Telephone Meetings. Directors may attend any meeting of the
Board or any committee thereof by conference telephone, radio, television or
similar means of communication by means of which all persons participating in
the meeting can hear each other, and all members so attending shall be deemed
present at the meeting for all purposes including the determination of whether a
quorum is present.
Section 6. Action by Written Consent. Any action required or permitted
to be taken by the Board or any committee thereof, under the applicable
provisions of any statute, the certificate of incorporation, or these bylaws,
may be taken without a meeting if a consent in writing, setting forth the action
so taken, is signed by all the members of the Board or committee, as the case
may be.
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<PAGE> 8
ARTICLE V
COMMITTEES
Section 1. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate one or more directors to
constitute an Executive Committee, which Committee, to the extent provided in
such resolution, shall have and may exercise all of the authority of the Board
of Directors in the business and affairs of the corporation except where action
by the Board of Directors is expressly required by statute. The Executive
Committee shall keep regular minutes of its proceedings and report the same to
the Board when required.
Section 2. Other Committees. The Board of Directors may similarly
create other committees for such terms and with such powers and duties as the
Board deems appropriate.
Section 3. Committee Rules; Quorum. Each committee may adopt rules
governing the method of calling and time and place of holding its meetings.
Unless otherwise provided by the Board of Directors, a majority of any committee
shall constitute a quorum for the transaction of business, and the act of a
majority of the members of such committee present at a meeting at which a quorum
is present shall be the act of such committee.
ARTICLE VI
COMPENSATION OF DIRECTORS
The Board of Directors shall have authority to determine, from time to
time, the amount of compensation, if any, which shall be paid to its members for
their services as directors and as members of committees. The Board shall also
have power in its discretion to provide for and to pay to directors rendering
services to the corporation not ordinarily rendered by directors as such,
special compensation appropriate to the value of such services as determined by
the Board from time to time. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
ARTICLE VII
NOTICES
Section 1. Methods of Notice. Whenever any notice is required to be
given to any stockholder, director or committee member under the provisions of
any statute, the certificate of incorporation or these bylaws, such notice shall
be delivered personally or shall be given in writing by mail addressed to such
stockholder, director or committee member at such address as appears on the
books of the corporation, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail with postage
thereon prepaid. Notice to directors and committee members may also be given by
telegram, which notice shall be
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<PAGE> 9
deemed to be given at the time it is delivered to the telegraph office, or by
telecopy, which notice shall be deemed to be given at the time it is transmitted
or in person, which notice shall be deemed to be given when received.
Section 2. Waiver of Notice. Whenever any notice is required to be
given to any stockholder, director or committee member under the provisions of
any statute, the certificate of incorporation or these bylaws, a waiver thereof
in writing signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Attendance at any meeting shall constitute a waiver of
notice thereof except as otherwise provided by statute.
ARTICLE VIII
OFFICERS
Section 1. Executive Officers. The executive officers of the
corporation shall consist of at least a President and a Secretary, each of whom
shall be elected by the Board of Directors. The Board of Directors may also
elect as officers of the corporation a Chairman of the Board, one or more Vice
Presidents, one or more of whom may be designated Executive or Senior Vice
Presidents and may also have such descriptive titles as the Board shall deem
appropriate, and a Treasurer. Any two or more offices may be held by the same
person.
Section 2. Election and Qualification. The Board of Directors at its
first meeting after each annual meeting of stockholders shall elect the officers
of the corporation.
Section 3. Other Officers and Agents. The Board may elect or appoint
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, and
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 4. Salaries. The salaries of all officers of the corporation
shall be fixed by the Board of Directors except as otherwise directed by the
Board.
Section 5. Term, Removal and Vacancies. The officers of the corporation
shall hold office until their successors are chosen and qualify. Any officer or
agent of the corporation may be removed at any time by the affirmative vote of a
majority of the Board of Directors, or by the President. Any vacancy occurring
in any office of the corporation may be filled by the Board of Directors or
otherwise as provided in this Article.
Section 6. Execution of Instruments. The Chairman of the Board and the
President (and such other officers as are authorized thereunto by resolution of
the Board of Directors) may execute in the name of the corporation bonds, notes,
debentures and other evidences of indebtedness, stock certificates, deeds,
mortgages, deeds of trust, indentures, contracts, leases, agreements and other
instruments, requiring a seal under the seal of the corporation, and may
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execute such documents where not requiring a seal, except where such documents
are required by law to be otherwise signed and executed, and except where the
signing and execution thereof shall be exclusively delegated to some other
officer or agent of the corporation.
Section 7. Duties of Officers. The duties and powers of the officers of
the corporation shall be as provided in these bylaws, or as provided for
pursuant to these bylaws, or (except to the extent inconsistent with these
bylaws or with any provision made pursuant hereto) shall be those customarily
exercised by corporate officers holding such offices.
Section 8. Chairman of the Board. The Chairman of the Board shall
preside when present at all meetings of the Board of Directors and at all
meetings of the stockholders. He shall advise and counsel the other officers of
the corporation and shall exercise such powers and perform such duties as shall
be assigned to or required of him from time to time by the Board of Directors.
The Chairman of the Board shall have all of the powers granted by the bylaws to
the President and from time to time may delegate all, or any, of his powers and
duties to the President.
Section 9. President. The President shall be ex-officio a member of all
standing committees, have general powers of oversight, supervision and
management of the business and affairs of the corporation, and see that all
orders and resolutions of the Board of Directors are carried into effect.
In the event another executive officer has been designated Chief
Executive Officer of the corporation by the Board of Directors, then (i) such
other executive officer shall have all of the powers granted by the bylaws to
the President; and (ii) the President shall, subject to the powers of
supervision and control thereby conferred upon the Chief Executive Officer, be
the chief operating officer of the corporation and shall have all necessary
powers to discharge such responsibility including general supervision of the
affairs of the corporation and general and active control of all of its
business.
The President shall perform all the duties and have all the powers of
the Chairman of the Board in the absence of the Chairman of the Board.
Section 10. Vice Presidents. The Vice Presidents in the order
determined by the Board of Directors shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President, and
shall perform such other duties as the Board of Directors, the Chairman of the
board and the President may prescribe.
Section 11. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for the committees of the Board of Directors when required.
Except as may be otherwise provided in these bylaws, he shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors and the President. He shall keep in safe custody the seal
of the corporation, if any, and shall have authority to affix the same to any
instrument requiring it,
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an when so affixed it may be attested by his signature. The Board of Directors
may give general authority to any other officer to affix the seal of the
corporation and to attest the affixing by his signature. In the absence of the
Treasurer and all Assistant Treasurers, the Secretary shall perform all the
duties and have all the powers of the Treasurer.
Section 12. Assistant Secretaries. The Assistant Secretaries in the
order determined by the Board of Directors shall, in the absence or disability
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such other duties as the Board of Directors, the Chairman of
the Board and President may prescribe.
Section 13. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the Board of Directors, the Chairman of the Board and the President, whenever
they may require it, an account of all of his transactions as Treasurer and of
the financial condition of the corporation.
Section 14. Assistant Treasurers. The Assistant Treasurers in the order
determined by the Board of Directors shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties as the Board of Directors, the Chairman of the Board
and the President may prescribe.
ARTICLE IX
SHARES AND STOCKHOLDERS
Section 1. Certificates Representing Shares. Every holder of stock in
the corporation shall be entitled to have a certificate signed by, or in the
name of the corporation by the Chairman or Vice Chairman of the Board of
Directors, or the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the corporation.
The signature of any such officer may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon such certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of its issuance. If the corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
issue to
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represent such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests the designations,
preferences and relative, participating, optional or other special rights of
each class or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
Section 2. Transfer of Shares. Subject to valid transfer restrictions
and to stop-transfer orders directed in good faith by the corporation to any
transfer agent to prevent possible violations of federal or state securities
laws, rules or regulations, or for any other lawful purpose, upon surrender to
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 3. Fixing Record Date.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the date on which notice
is given, or, if notice is waived, at the close of business on the date next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by this Section, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by statute, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
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(c) In order that the corporation may determine the stockholders
entitled to receive payment for any dividend or other distribution or allotment
of any rights or the stockholders entitled to receive any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record for determining stockholders for
any such purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.
Section 4. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of any share or shares to receive dividends, and to vote as such owner,
and for all other purposes as such owner; and the corporation shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Delaware.
Section 5. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
ARTICLE X
GENERAL
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, or of the resolutions, if any, providing for any series of stock, may be
declared by the Board of Directors at any meeting thereof, or by the Executive
Committee at any meeting thereof. Dividends may be paid in cash, in property or
in shares of the capital stock of the corporation, subject to the provisions of
the certificate of incorporation or of the resolutions, if any, providing for
any series of stock.
Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in the absolute discretion, deem proper
as a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose or purposes as the directors shall think conducive to the interests of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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Section 3. Shares of Other Corporations. The Chairman of the Board, the
President and any Vice President is authorized to vote, represent and exercise
on behalf of the corporation all rights incident to any and all shares of any
other corporation or other entity standing in the name of the corporation. The
authority herein granted to said officer may be exercised either by said officer
in person or by any person authorized so to do by proxy or power of attorney
duly executed by said officer. Notwithstanding the above, however, the Board of
Directors, in its discretion, may designate by resolution any additional person
to vote or represent said shares of other corporations and other entities.
Section 4. Checks. All checks, drafts, bills of exchange or demands for
money of the corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 5. Corporate Records. The corporation shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders giving the names and
addresses of all stockholders and the number and class and series, if any, of
shares held by each. All other books and records of the corporation may be kept
at such place or places within or without the State of Delaware as the Board of
Directors may from time to time determine.
Section 6. Fiscal Year. The fiscal year of the corporation shall be
fixed by the Board of Directors; if no so fixed, it shall be the calendar year.
ARTICLE XI
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws may be
adopted at any annual meeting of the stockholders or at any special meeting of
the stockholders at which a quorum is present or represented, if notice thereof
is contained in the notice of such special meeting, by the affirmative vote of
the holders of 66-2/3 percent of the shares entitled to vote at such meeting, or
by the affirmative vote of a majority of the entire Board of Directors at any
regular meeting of the Board or at any special meeting of the Board.
<PAGE> 1
EXHIBIT 10.1
SUIZA FOODS CORPORATION
AMENDED AND RESTATED
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.
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"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 Section
1.162-27(e)(3).
"Nonqualified Option" means any Option that is not a Qualified
Option.
"Option" means a stock option granted pursuant to Section 6 of
this Plan.
"Optionee" means any Employee, Consultant or 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
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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 5,500,000 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 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
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approved by the Board or the Committee and executed on behalf of the Corporation
by an appropriate officer. The aggregate number of shares of Common Stock with
respect to which Options may be granted to any single Participant during a
calendar year shall not exceed the number of shares subject to the Plan referred
to in Section 4. Any Options that are granted and subsequently lapse or are
cancelled or forfeited will nonetheless count against this limit. For this
purpose, repricing of an Option shall be considered as the cancellation of the
Option and the grant of a new Option.
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
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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.
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
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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.
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 Option under this Plan shall be transferable only by will
or the laws of descent and distribution and shall be exercisable during the
Participant's lifetime only by such Participant; provided, however, that the
Committee may (but need not) permit transfer without consideration by such
Participant to (i) the spouse, children or grandchildren of the Participant
("Immediate Family Members"), (ii) a trust or trusts, or to a guardian under the
Uniform Gift to Minors Act, for the exclusive benefit of such Immediate Family
Members, or (iii) a partnership or other entity in which such Immediate Family
Members are the only partners, provided that subsequent transfers of transferred
Options shall be prohibited except by will or the laws of descent and
distribution. Following transfer, any such Options shall continue to be subject
to the same terms and conditions as were applicable
6
<PAGE> 7
immediately prior to transfer, provided that, for purposes of each Option
agreement and Section 11 hereof, the term "Participant" shall be deemed to refer
to the transferee (however, the events of termination of employment, if any, set
forth in the agreement and the obligation to pay withholding taxes shall
continue to apply to the transferor). Incentive Stock Options shall be
nontransferable except by will or the laws of descent and distribution, and may
only be exercisable during the Participant's lifetime, by the Participant.
16. Restrictions on Shares. Shares of Common Stock issued pursuant to
the Plan may be subject to restrictions on transfer under applicable federal and
state securities laws. The Board may impose such additional restrictions on the
ownership and transfer of shares of Common Stock issued pursuant to the Plan as
it deems desirable; any such restrictions shall be set forth in any Option
agreement entered into hereunder.
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 (a) impair any Option without the consent of the holder of the Option, or
(b) decrease the exercise price of any Option without the consent of the
stockholders of the Corporation. Notwithstanding the foregoing, in the event of
a modification, extension or renewal of a Qualified Option, the Board or the
Committee may increase the exercise price of such Option if necessary to retain
the qualified status of such Option.
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 consistent with the
provisions of this Plan as are determined by the Board or the Committee, may be
executed on
7
<PAGE> 8
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, and subject to the stockholder approval requirements of sections 422
and 162(m)(4)(C) of the Code, the Board may amend any provision of this Plan in
any respect in its discretion.
20. Continued Employment Not Presumed. Nothing in this Plan or any
document describing it nor the grant of any Option or Restricted Stock shall
give any Participant the right to continue in the employment of the 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.
8
<PAGE> 1
EXHIBIT 10.2
CONSENT AND WAIVER
[Southern California Dairy Venture]
CONSENT AND WAIVER (this "Consent and Waiver"), dated as of July 23,
1999, relating to the Amended and Restated Credit Agreement, dated as of May 22,
1998 (as amended, supplemented or otherwise modified and in effect on the date
hereof, the "Credit Agreement"), between Suiza Foods Corporation, a Delaware
corporation (the "Company"), the lenders party thereto (the "Lenders") and First
Union National Bank, as administrative agent for the Lenders (in such capacity,
the "Agent").
WHEREAS, Swiss Dairy Corporation, a Delaware corporation (hereinafter
referred to as "Swiss Dairy"), is a Wholly Owned Subsidiary of the Company and
party to the Subsidiary Guarantee and Security Agreement (as defined in the
Credit Agreement);
WHEREAS, Adohr Farms, LLC, a limited liability company (hereinafter
referred to as "Adohr") is owned directly or indirectly by Dairy Farmers of
America, Inc., a Kansas cooperative marketing association ("DFA"), Mid-Am
Capital, LLC ("Mid-Am"), Louis J. Stremick ("Stremick") and Michael W. Malone
("Malone");
WHEREAS, the Company, DFA, Mid-Am, Stremick and Malone desire to enter
into a series of transactions pursuant to which: (i) Adohr will transfer certain
of its assets (subject to certain debt owing to Mid-Am) relating to its "fluid
dairy" business to Suiza SoCal, LLC, a Delaware limited liability company (the
"California Venture"), in exchange for equity interests in the California
Venture which will be transferred by Adohr to DFA, Stremick and Malone, and
Adohr will retain its assets relating to its "non-fluid dairy" business; (ii)
the California Venture will purchase the inventory of the "fluid dairy" business
from Adohr; (iii) Mid-Am will contribute certain debt owing to it to the
California Venture in exchange for preferred equity interests in the California
Venture; (iv) Suiza SoCal Holdings, Inc., a Delaware corporation and
Wholly-Owned Subsidiary of the Company ("Suiza Sub"), will contribute Swiss
Dairy to, or Swiss Dairy will transfer all its assets to, or be merged with and
into, the California Venture, such that the California Venture will survive as a
Subsidiary of Suiza Sub and as a result of which Suiza Sub will receive
preferred and common equity interests in the California Venture; and (v) Suiza
Sub and DFA shall purchase from Stremick and Malone all of their equity
interests in the California Venture (collectively, the "Transaction");
WHEREAS, upon consummation of the Transaction: (i) seventy percent
(70%) or more of each of the common and preferred ownership interests of the
California Venture will be owned and controlled by Suiza Sub; and (ii) the
remaining common and preferred ownership interests of the California Venture
will be owned and controlled by DFA and Mid-Am;
WHEREAS, pursuant to the Transaction, the existing fluid dairy and
bottled water operations of the Company and DFA located in Southern California
will be operated by the California Venture; and
<PAGE> 2
WHEREAS, certain aspects of the Transaction require the consent of the
Majority Lenders or the waiver by the Majority Lenders of certain provisions of
the Credit Agreement and the Security Documents, in each case in accordance with
the terms thereof.
NOW, THEREFORE, the Majority Lenders hereby agree as follows:
1. Defined Terms. Except as otherwise defined in this Consent and
Waiver, terms defined in the Credit Agreement are used herein as defined
therein.
2. Consent and Waiver of Credit Agreement Provisions. Subject to the
conditions set forth in Section 6 hereto and compliance with the covenants set
forth in Section 7 hereto, notwithstanding Sections 7.15, 8.03, 8.05 and 8.17 of
the Credit Agreement and the other terms and provisions of the Credit Agreement:
(a) the Majority Lenders hereby consent to the consummation of
the Transaction on substantially the terms set forth in the recitals to
this Consent and Waiver;
(b) the Majority Lenders hereby waive the provisions of
Sections 8.03 and 8.05 of the Credit Agreement to the extent
application of such provisions would prohibit the merger of Swiss Dairy
or Adohr with and into the California Venture, the contribution of
ownership interests in, or the transfer of assets of, Swiss Dairy or
Adohr to the California Venture or the issuance of ownership interests
in the California Venture to the Company or Suiza Sub, DFA, Mid-Am,
Stremick, Malone or other Persons;
(c) the Majority Lenders hereby waive the provisions of
Section 7.15 of the Credit Agreement to the extent they restrict or
prevent the California Venture from issuing or having outstanding
Equity Rights;
(d) the Majority Lenders hereby waive the provisions of
Sections 8.17(a), (b) and (c) of the Credit Agreement to the extent
such provisions:
(i) would require that the California Venture or any
now-owned or hereafter acquired or formed Subsidiary of the
California Venture be a Wholly Owned Subsidiary;
(ii) would require that the California Venture or any
now-owned or hereafter acquired or formed Subsidiary of the
California Venture become a party, by Joinder Agreement or
otherwise, to the Subsidiary Guarantee and Security Agreement
or any similar agreement; or
(iii) would prohibit or prevent the constituent
documents of the California Venture, or of any now-owned or
hereafter acquired or formed Subsidiary thereof, or any
indenture, agreement, instrument or other arrangement to which
the California Venture or such Subsidiary may be a party, from
prohibiting or restraining or having the effect of prohibiting
or restraining or imposing materially adverse conditions upon
the ability of the California Venture,
2
<PAGE> 3
or any such Subsidiary thereof, to incur Indebtedness, grant
Liens, make loans, advances or Investments or sell, assign,
transfer or otherwise dispose of Property;
provided, that the California Venture shall not incur
Indebtedness or grant Liens other than Indebtedness or Liens
in favor of the Company or its Wholly-Owned Subsidiaries or
Indebtedness or Liens of Adohr or Persons or Property acquired
by, or merged into, the California Venture, which Indebtedness
and Liens (x) otherwise satisfy the requirements of Sections
8.06 and 8.07 of the Credit Agreement, as applicable, (y)
existed before such acquisition or merger and were not created
in anticipation thereof and (z) in the case of Liens, were
created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the
cost of the Property subject thereto (provided that (A) no
such Lien shall extend to or cover any Property of the Company
or any Subsidiary other than the Property so acquired, and (B)
the principal amount of Indebtedness secured by any such Lien
shall at no time exceed the fair market value (as determined
in good faith by a Responsible Financial Officer of the
Company) of such Property at the time it was acquired);
provided, further, that the California Venture shall not make
loans, advances or Investments or sell, assign, transfer or
otherwise dispose of Property except in accordance with
Sections 8.08 or 8.05(c) of the Credit Agreement, as
applicable; and
provided, further, that such constituent documents,
indentures, agreements or other arrangements shall impose no
restrictions on the ability of the California Venture to pay
dividends or make other distributions, other than to give
priority to the payment of any dividends or distributions to
any preferred capital stock or other preferred ownership
interests in the California Venture;
(e) the Majority Lenders hereby acknowledge and agree that the
California Venture and each of its Subsidiaries shall be a Subsidiary
of the Company, but shall not be an Affiliate of the Company, for all
purposes of the Credit Agreement; and
(f) subject to compliance with the other terms of the Credit
Agreement, the Majority Lenders hereby consent to the Company's future
acquisition of all or any portion of the remaining ownership interests
in the California Venture; provided, however, upon the acquisition by
the Company or its Subsidiaries of all the outstanding capital stock,
Equity Rights and other ownership interests of the California Venture,
the California Venture shall execute a Joinder Agreement and thereby
become a party to the Subsidiary Guarantee and Security Agreement.
3. Waiver of Security Agreement Provisions. Notwithstanding Sections 2
and 5.04 of the Security Agreement, the Majority Lenders hereby waive any
violation of the Security Agreement that would occur as a result of: (a) the
Company's or Suiza Sub's ownership of less than all the ownership interests of
the California Venture; or (b) any restrictions on the transfer or encumbrance
of the Company's or Suiza Sub's interest in the California Venture.
3
<PAGE> 4
4. Release of Capital Stock of Swiss Dairy. The Agent is hereby
authorized and directed to deliver all stock certificates and related stock
powers with respect to Swiss Dairy to the Company to facilitate the consummation
of the Transaction. Effective upon the merger of Swiss Dairy into the California
Venture or the transfer of substantially all the assets of, or ownership
interests in, Swiss Dairy to the California Venture, (i) the Subsidiary
Guarantee and Security Agreement is hereby terminated as to Swiss Dairy and
Swiss Dairy is hereby released from all obligations thereunder, (ii) the capital
stock of Swiss Dairy is hereby released from the Lien of the Security Agreement
or the Subsidiary Guarantee and Security Agreement, as the case may be, and
(iii) all references to Swiss Dairy in the Credit Agreement and the Security
Documents are hereby deleted.
5. Representations and Warranties of the Company. The Company
represents and warrants to the Agent and the Lenders that (with respect to
matters pertaining to itself and each of its Subsidiaries) as of the date hereof
and as of the date of the consummation of the Transaction:
(a) no Default has occurred and is otherwise continuing under
the Credit Agreement;
(b) except as permitted by this Consent and Waiver, the
representations and warranties made by the Company in Section 7 of the
Credit Agreement, and by each Obligor in each of the other Loan
Documents to which it is a party, are true and complete on and as of
the date of this Consent and Waiver, and the date of the consummation
of the Transaction, with the same force and effect as if made on and as
of each such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date);
(c) on a pro forma basis after giving effect to the
Transaction, the Company shall remain in compliance with Sections 8.10,
8.11 and 8.13 of the Credit Agreement; and
(d) the businesses being conducted by Adohr to be transferred
to the California Venture are in the same line or lines of business
currently engaged in by certain Subsidiaries of the Company, or as
permitted by Section 8.14 of the Credit Agreement.
6. Conditions Precedent. The effectiveness of this Consent and Waiver
is subject to the receipt by the Agent of the following documents, each of which
shall be satisfactory to the Agent in form and substance:
(a) certified copies of the Amended and Restated Operating
Agreement and Certificate of Formation of Limited Liability Company (or
equivalent documents) of the California Venture;
4
<PAGE> 5
(b) Uniform Commercial Code searches for Adohr for each
jurisdiction in which Adohr conducts its business or in which any of
its Properties are located (or otherwise as the Agent may reasonably
request);
(c) appropriately completed and duly executed copies of
Uniform Commercial Code Financing Statements, sufficient to perfect in
the Agent a security interest in the ownership interests of the
California Venture owned by the Company or Suiza Sub, in accordance
with the Security Agreement or the Subsidiary Guarantee and Security
Agreement;
(d) an opinion, appropriately dated, of counsel to the
California Venture covering such matters as the Agent may reasonably
request;
(e) if requested by the Agent, environmental surveys and
assessments prepared by one or more firms of licensed engineers
(familiar with the identification of toxic and hazardous substances) in
form and substance satisfactory to the Agent, such environmental survey
and assessment to be based upon physical on-site inspections by such
firm of each of the existing sites and facilities owned, operated or
leased by Adohr and to continue to be owned, operated or leased by the
California Venture as well as an historical review of the uses of such
sites and facilities and of the business and operations of Adohr;
(f) an amendment to the Security Agreement pursuant to which
the Company shall pledge all of its right, title and interest in or to
Suiza Sub to the Agent for the benefit of the Lenders, and
(g) a Joinder Agreement from Suiza Sub, whereby Suiza Sub
shall become a party to the Subsidiary Guarantee and Security
Agreement.
7. Covenants. In addition to any covenants set forth in the Credit
Agreement, the Company covenants and agrees with the Lenders and the Agent that:
(a) the Company, together with its Subsidiaries (other than
the California Venture), shall at all times collectively retain voting
control of at least 51% of each class of capital stock or other
ownership interests of the California Venture; and
(b) notwithstanding anything to the contrary in the
definitions of "EBITDA", the Company shall include within EBITDA for
any period no more than the pro rata share (equal to the aggregate
shares of capital stock or other ownership interests in the California
Venture then held by the Company and its Subsidiaries (other than the
California Venture) divided by the total shares of outstanding capital
stock or other ownership interests in the California Venture) of the
California Venture's operating income, depreciation and amortization,
and other income for such period.
8. Miscellaneous. Except as expressly provided herein, the Credit
Agreement and the Security Documents shall remain unmodified and in full force
and effect. This Consent and Waiver may be executed in any number of
counterparts, all of which taken together shall
5
<PAGE> 6
constitute one and the same instrument and any of the parties hereto may execute
this Consent and Waiver by signing any such counterpart. This Consent and Waiver
shall be governed by, and construed in accordance with, the law of the State of
New York.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Waiver to be duly executed and delivered as of the day and year first above
written.
COMPANY:
SUIZA FOODS CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
AGREED AND ACCEPTED:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By: /s/ Jorge A. Gonzalez
-------------------------------
Name: Jorge A. Gonzalez
Title: Senior Vice President
LENDERS:
FIRST UNION NATIONAL BANK
By: /s/ Jorge A. Gonzalez
-----------------------------------
Name: Jorge A. Gonzalez
Title: Senior Vice President
THE FIRST NATIONAL BANK
OF CHICAGO
By: /s/ Kathy Turner
-----------------------------------
Name: Kathy Turner
Title: Authorized Officer
7
<PAGE> 8
BANK ONE, TEXAS, N.A.
By: /s/ Kathy Turner
-----------------------------------
Name: Kathy Turner
Title: Vice President
BANK OF AMERICA NT&SA
By: /s/ Tom F. Scharfenberg
-----------------------------------
Name: Tom F. Scharfenberg
Title: Managing Director
BANK OF AMERICA, N.A.
By: /s/ Tom F. Scharfenberg
-----------------------------------
Name: Tom F. Scharfenberg
Title: Managing Director
BANCO POPULAR DE PUERTO RICO
By: /s/ John Incandela
-----------------------------------
Name: John Incandela
Title: Senior Vice President
By:
-------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By: /s/ M.D. Smith
-----------------------------------
Name: M.D. Smith
Title: Agent Operations
8
<PAGE> 9
THE BANK OF TOKYO - MITSUBISHI,
LTD., DALLAS OFFICE
By: /s/ D. Barnell
-----------------------------------
Name: D. Barnell
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Katherine L. Abbott
-----------------------------------
Name: Katherine L. Abbott
Title: First Vice President
Managing Director
By: /s/ Bradley C. Peterson
-----------------------------------
Name: Bradley C. Peterson
Title: Vice President, Manager
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
-----------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
FLEET NATIONAL BANK
By: /s/ Steve Kalin
-----------------------------------
Name: Steve Kalin
Title: Vice President
WELLS FARGO BANK (TEXAS) N.A.
By: /s/ Austin D. Nettle
-----------------------------------
Name: Austin D. Nettle
Title: Banking Officer
9
<PAGE> 10
CIBC INC.
By: /s/ Katherine Bass
-----------------------------------
Name: Katherine Bass
Title: Executive Director
CIBC World Markets Corp.,
As Agent
HARRIS TRUST AND SAVINGS BANK
By: /s/ Dianna D. Carr
-----------------------------------
Name: Dianna D. Carr
Title: Vice President
COBANK ACB
By: /s/ Brian J. Klatt
-----------------------------------
Name: Brian J. Klatt
Title: Vice President
AMSOUTH BANK
By: /s/ Brock E. Fredette
-----------------------------------
Name: Brock E. Fredette
Title: Vice President
BANKBOSTON N.A.
By: /s/ Esteban Arrondo
-----------------------------------
Name: Esteban Arrondo
Title: Vice President
10
<PAGE> 11
BANQUE NATIONALE DE PARIS
HOUSTON AGENCY
By: /s/ Warren Parham
-----------------------------------
Name: Warren Parham
Title: Vice President
BHF (USA) CAPITAL CORPORATION
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By: /s/ Walter R. Wolff
-----------------------------------
Name: Walter R. Wolff
Title: Joint General Manager
By:
-------------------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED
By:
-------------------------------------
Name:
Title:
11
<PAGE> 12
MELLON BANK, N.A.
By: /s/ Louis E. Flori
-----------------------------------
Name: Louis E. Flori
Title: Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By: /s/ Nobuo Tominaga
-----------------------------------
Name: Nobuo Tominaga
Title: Chief Manager
NATEXIS BANQUE BFCE
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
NATIONAL CITY BANK OF
KENTUCKY
By: /s/ Tom Gurbach
-----------------------------------
Name: Tom Gurbach
Title: Vice President
THE ROYAL BANK OF SCOTLAND PLC
By:
-------------------------------------
Name:
Title:
12
<PAGE> 13
THE SANWA BANK, LIMITED,
NEW YORK BRANCH
By:
-------------------------------------
Name:
Title:
STB DELAWARE FUNDING TRUST I
By: /s/ Donald C. Hargadon
-----------------------------------
Name: Donald C. Hargadon
Title: Assistant Vice President
SUNTRUST BANK, ATLANTA
By: /s/ F. Steven Parrish
-----------------------------------
Name: F. Steven Parrish
Title: Vice President
By: /s/ Patrick M. Kotors
-----------------------------------
Name: Patrick M. Kotors
Title: Banking Officer
THE TOKAI BANK, NEW YORK BRANCH
By:
-------------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:
-------------------------------------
Name:
Title:
13
<PAGE> 14
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By: /s/ Brian O'Leary
-----------------------------------
Name: Brian O'Leary
Title: Vice President
By: /s/ Marcus Edward
-----------------------------------
Name: Marcus Edward
Title: Vice President
ERSTE BANK
By: /s/ Arcinee Hovanessian
-----------------------------------
Name: Arcinee Hovanessian
Title: Vice President, Erste Bank
New York Branch
By: /s/ John S. Runnion
-----------------------------------
Name: John S. Runnion
Title: First Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
-------------------------------------
Name:
Title:
MICHIGAN NATIONAL BANK
By: /s/ Eric Harge
-----------------------------------
Name: Eric Harge
Title: Commercial Relationship Manager
14
<PAGE> 15
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /s/ Pieter Kodde
-----------------------------------
Name: David L. Streeter
Title: Senior Vice President
By: /s/ David L. Streeter
-----------------------------------
Name: David L. Streeter
Title: Vice President
15
<PAGE> 1
EXHIBIT 10.3
SUIZA FOODS CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS................................................................................1
ARTICLE II ELIGIBILITY................................................................................2
ARTICLE III CREDITS TO ACCOUNT.........................................................................3
ARTICLE IV BENEFITS...................................................................................4
ARTICLE V PAYMENT OF BENEFITS AT TERMINATION.........................................................5
ARTICLE VI IN-SERVICE WITHDRAWALS.....................................................................6
ARTICLE VII ADMINISTRATION OF THE PLAN.................................................................7
ARTICLE VIII CLAIMS REVIEW PROCEDURE....................................................................8
ARTICLE IX LIMITATION OF RIGHTS.......................................................................9
ARTICLE X LIMITATION OF ASSIGNMENT AND PAYMENTS TO
LEGALLY INCOMPETENT DISTRIBUTEE...........................................................10
ARTICLE XI AMENDMENT TO OR TERMINATION OF THE PLAN...................................................10
ARTICLE XII GENERAL AND MISCELLANEOUS.................................................................10
</TABLE>
<PAGE> 2
SUIZA FOODS CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
PREAMBLE
WHEREAS, Suiza Foods Corporation (the "Company"), a corporation formed
under the laws of the State of Delaware, desires to establish a deferred
compensation plan for the exclusive benefit of a select group of management and
highly compensated employees of the Company and its Affiliates to provide an
additional means by which such employees may defer funds for their retirement;
NOW, THEREFORE, the Company hereby establishes the Suiza Foods
Corporation Executive Deferred Compensation Plan (the "Plan"), effective July 1,
1999.
ARTICLE I
DEFINITIONS
1.1 "Account" shall mean the individual bookkeeping record established
by the Committee showing the monetary value of the interest in the Plan of each
Participant or Beneficiary.
1.2 "Affiliate" shall mean a member of a controlled group of
corporations (as defined in Section 414(b) of the Code), a group of trades or
businesses (whether or not incorporated) which are under common control (as
defined in Section 414(c) of the Code), or an affiliated service group (as
defined in Section 414(m) of the Code) of which the Company is a member; and any
entity otherwise required to be aggregated with the Company pursuant to Section
414(o) of the Code or the regulations issued thereunder.
1.3 "Annual Compensation" shall mean the total amounts paid or accrued
by the Company or an Affiliate to an employee as remuneration for personal
services rendered during each Plan Year, including bonuses and commissions, as
reported on the employee's federal income tax withholding statement or
statements (IRS Form W-2 or its subsequent equivalent), together with any
amounts not includable in such employee's gross income pursuant to Sections 125
or 402(g) of the Code, and any amounts deferred by such employee pursuant to
Section 3.1 hereof.
1.4 "Beneficiary" shall mean the Beneficiary designated by each
Participant under the 401(k) Plan; provided, however, that a Participant may
designate a different Beneficiary hereunder by delivering to the Committee a
written beneficiary designation, in the form provided by the Committee, and
executed specifically with respect to this Plan.
1.5 "Board" shall mean the Board of Directors of the Company.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and the rules and regulations promulgated thereunder.
<PAGE> 3
1.7 "Committee" shall mean the Compensation Committee of the Board.
1.8 "Company" shall mean Suiza Foods Corporation or its successor or
successors.
1.9 "Disability" shall mean a physical or mental condition which, in
the opinion of the Committee, prevents a Participant from being able to perform
the substantial duties of his employment with the Company and is expected to be
of long duration or to result in death.
1.10 "Effective Date" shall mean July 1, 1999.
1.11 "401(k) Plan" shall mean the Suiza Foods Corporation 401(k) Plan.
1.12 "Participant" shall mean an individual who has been designated by
the Committee as being eligible to participate in the Plan.
1.13 "Plan" shall mean the Suiza Foods Corporation Executive Deferred
Compensation Plan set forth in this document, as it may be amended from time to
time.
1.14 "Plan Year" shall mean the twelve month period beginning each
January 1 and ending each December 31, except that the first Plan Year shall
commence July 1, 1999 and end December 31, 1999.
1.15 "Profit Sharing Credit" shall mean the amount contributed to the
Participant's Account as a profit sharing credit pursuant to Section 3.3 hereof.
1.16 "Trust" shall mean the Suiza Foods Corporation Executive Deferred
Compensation Plan Trust.
1.17 "Valuation Date" shall mean each business day on which the
financial markets are open for trading activity or such other dates as may be
established by the Committee.
-2-
<PAGE> 4
ARTICLE II
ELIGIBILITY
Participation in the Plan shall be made available to a select group of
individuals, as determined by the Committee, who are providing services to the
Company or an Affiliate in key positions of management and responsibility. Such
individuals may elect to participate hereunder by executing a participation
agreement in such form and at such time as the Committee shall require, provided
that each participation agreement shall be executed no later than the day
immediately preceding the Plan Year for which an individual elects to make
contributions to the Plan in accordance with the provisions of Section 3.1
hereof. Notwithstanding the foregoing, in the first year in which an individual
becomes eligible to participate in the Plan, he may elect to participate in the
Plan by executing a participation agreement, in such form as the Committee shall
require, within thirty (30) days of the date on which he is notified by the
Committee of his eligibility to participate in the Plan. In such event, his
election to participate in the Plan shall become effective as of the first full
payroll period beginning on or after the Committee's receipt of his
participation agreement. The determination as to the eligibility of any
individual to participate in the Plan shall be in the sole and absolute
discretion of the Committee, whose decision in that regard shall be conclusive
and binding for all purposes hereunder.
ARTICLE III
CREDITS TO ACCOUNT
3.1 For any Plan Year, a Participant who elects to contribute to the
401(k) Plan the lesser of: (i) the maximum elective deferral permitted under
Section 402(g)(1) of the Code with respect to the taxable year in which such
Plan Year begins, or (ii) the maximum elective contributions permitted under the
terms of the 401(k) Plan with respect to such Plan Year, may, in the manner
prescribed by the Committee, irrevocably elect to defer a whole percentage of
the Annual Compensation otherwise payable to such Participant with respect to
such Plan Year, not to exceed the maximum amount established by the Committee.
Any amounts deferred, pursuant to this Article III, from the Annual Compensation
otherwise payable to a Participant shall be transferred to the Trust and
credited to the Account of such Participant as soon as practicable after the
date on which such amounts would otherwise have been paid to the Participant.
3.2 The Committee shall credit a matching contribution to the Account
of each Participant who has deferred amounts under the Plan during any Plan Year
under Section 3.1 above. The matching contribution, if any, shall be computed as
follows: (i) The Committee shall first compute a maximum matching contribution
for each Participant, taking into account salary deferrals made by the
Participant under both the Plan and the 401(k) Plan, using the formula applied
by the 401(k) Plan with respect to percentage of salary deferrals matched and
the maximum percentage of compensation which is subject to the match, but using
the Participant's Annual Compensation (not exceeding the maximum compensation
that may be considered on behalf of a participant in the 401(k) Plan unless
otherwise approved by the Board of Directors of the Company); (ii) the Committee
shall then determine the amount of matching contributions
-3-
<PAGE> 5
made for the Participant under the 401(k) Plan; and (iii) the difference between
(i) and (ii) is the matching contribution to be credited to the Participant's
Account under the Plan. The Committee shall credit matching contribution, if
any, to the Account of each Participant entitled thereto as soon as
administratively practicable following the payroll period during which the
Participant's deferral under Section 3.1 to which the matching contribution
relates is withheld from his Annual Compensation and the Company shall transfer
a similar amount to the Trust on or as soon as administratively practicable
following such date.
3.3 For each Plan Year, the Committee shall credit each Participant's
Account with an amount that represents a Profit Sharing Credit. The Profit
Sharing Credits shall be equal in amount to the additional contribution, if any,
which would have been allocated as a non-matching contribution to the
Participant's account in the 401(k) Plan if the Participant had not elected to
defer, pursuant to this Plan, Annual Compensation that otherwise would have been
paid for the 401(k) Plan plan year coinciding with or ending in the Plan Year.
The Committee shall credit the Profit Sharing Credits to the Account of each
Participant entitled thereto as soon as administratively practicable following
the date that the Company makes a profit sharing contribution to the 401(k) Plan
and the Company shall transfer an equivalent amount to the Trust on or as soon
as administratively practicable following such date.
3.4 At the time of making the deferrals elections described in Section
3.1 and at such other times as is allowed by the Committee, the Participant
shall designate, on a form provided by the Committee, the types of investments,
including life insurance policies, in which the Participant's Account will be
deemed to be invested for purposes of determining the amount of earnings to be
credited to that Account. On a quarterly or other basis selected by the
Committee, the Committee shall credit to each Participant's Account an amount
equal to the interest, earnings or losses that would have resulted to the
Account if the amounts credited to the Account were invested as elected by the
Participant. If the Participant designates a deemed investment in a life
insurance policy, the rate of earnings to be credited to such Participant's
Account shall be as set forth in a split-dollar life insurance agreement or
other agreement concerning such a policy.
ARTICLE IV
BENEFITS
4.1 After the death of a Participant, the Beneficiary of such
Participant shall be entitled to the entire value of all amounts credited to
such Participant's Account, determined as of the Valuation Date coincident with
or preceding the date of distribution, including any additional amount credited
to such Participant's Account as a result of life insurance proceeds payable on
the Participant's death.
-4-
<PAGE> 6
4.2 After the Disability of a Participant, such Participant shall be
entitled to the entire value of all amounts credited to such Participant's
Account, determined as of the Valuation Date coincident with or preceding the
date of Disability. Such amount shall be payable to the Participant at the time
and in the manner determined by the Committee.
4.3 After a Participant's termination of employment for any reason
other than death or Disability, such Participant shall be entitled to the entire
value of all amounts credited to the Account of such Participant, determined as
of the Valuation Date coincident with or preceding the date of distribution.
ARTICLE V
PAYMENT OF BENEFITS AT TERMINATION
5.1 In the case of a Participant who terminates employment with the
Company, the amount credited to the Participant's Account (provided it is more
than $25,000) shall be paid in cash to the Participant, at the time the
distribution of the Account is to commence, from among the following optional
forms of benefit as elected by the Participant on the form provided by Company
upon his or her initial participation in the Plan.
(1) a lump sum distribution;
(2) substantially equal annual installments over five (5) years;
(3) substantially equal annual installments over ten (10) years; or
(4) substantially equal annual installments over fifteen (15) years.
However, if the amount credited to a Participant's account is $25,000 or less at
the time distribution of the Account is to commence, payment will be made in a
lump sum. Furthermore, notwithstanding the commencement of installment payments
under this Section 5.1, all remaining amounts credited to a Participant's
Account shall be distributed in a lump sum, at such time as the value of such
remaining amounts is $25,000 or less.
Payment shall commence as soon as practicable following the
Participant's termination of employment with the Company, or, if so elected by
the Participant in the Participant's deferral election form provided by the
Committee, as soon as practicable during the calendar year following the year in
which such event occurs. If installment payments are made, the unpaid balance of
the Participant's Account shall continue to share in the income and losses
attributable thereto, in accordance with the provisions of the Trust, during the
period for which installment payments are made. A Participant may modify the
optional form of benefit that he or she has previously elected, as long as he or
she provides the Committee with written notice at least one (1) year in advance
of the effective date of the change.
-5-
<PAGE> 7
5.2 Payment of a Participant's benefit on account of death shall be
made in a lump sum in cash. Payment of a Participant's death benefit shall be
made to the Beneficiary of such Participant as soon as practicable following the
Committee's receipt of proper notice of such Participant's death.
5.3 Notwithstanding the provisions of sections 5.1 or 5.2, the benefits
payable hereunder may be paid before they would otherwise be payable if, based
on a change in the federal or applicable state tax or revenue laws, a published
ruling or similar announcement issued by the Internal Revenue Service, a
regulation issued by the Secretary of the Treasury, a decision by a court of
competent jurisdiction involving a Participant or a Beneficiary, or a closing
agreement made under Section 7121 of the Code that is approved by the Internal
Revenue Service and involves a Participant, the Committee determines that a
Participant has or will recognize income for federal or state income tax
purposes with respect to amounts that are or will be payable under the Plan
before they otherwise would be paid. The amount of any payments pursuant to this
Section 5.3 shall not exceed the lesser of: (a) the amount in the Participant's
Account or (b) the amount of taxable income with respect to which the tax
liability is assessed or determined.
5.4 The payment of benefits under the Plan shall begin at the date
specified in accordance with the provisions of Sections 5.1 and 5.2 hereof;
provided that, in case of administrative necessity, the starting date of payment
of benefits may be delayed up to thirty (30) days as long as such delay does not
result in the Participant or Beneficiary receiving the distribution in a
different taxable year than if no such delay had occurred.
ARTICLE VI
IN-SERVICE WITHDRAWALS
6.1 (HARDSHIP WITHDRAWALS): In the event of an unforeseeable emergency,
a Participant may make a request to the Committee for a withdrawal from the
Account of such Participant. For purposes of this Section, the term
"unforeseeable emergency" shall mean a severe financial hardship to the
Participant resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent (as defined in Section 152(a) of the Code) of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. Any determination of the existence
of an unforeseeable emergency and the amount to be withdrawn on account thereof
shall be made by the Committee, in its sole and absolute discretion. However,
notwithstanding the foregoing, a withdrawal will not be permitted to the extent
that the financial hardship is or may be relieved: (i) through reimbursement or
compensation by insurance or otherwise; (ii) by liquidation of the Participant's
assets, to the extent that liquidation of such assets would not itself cause
severe financial hardship; or (iii) by
-6-
<PAGE> 8
cessation of deferrals under this Plan. In no event shall the need to send a
Participant's child to college or the desire to purchase a home be deemed to
constitute an unforeseeable emergency. No member of the Committee shall vote or
decide upon any matter relating to the determination of the existence of such
member's own financial hardship or the amount to be withdrawn on account
thereof. A request for a hardship withdrawal must be made in the manner
prescribed by the Committee, and must be expressed as a specific dollar amount.
The amount of a hardship withdrawal may not exceed the amount required to meet
the severe financial hardship. All hardship withdrawals shall be paid in a lump
sum in cash.
6.2 (SCHEDULED IN-SERVICE WITHDRAWALS): On a form prescribed by the
Committee, a Participant, prior to the beginning of any Plan Year, can elect to
receive that Plan Year's deferrals made pursuant to Section 3.1, matching
contributions made pursuant to Section 3.2, any additional contributions made
that Plan Year pursuant to Section 3.3, and earnings thereon at a date specified
by the Participant. Such date shall be no earlier than five (5) years from the
last day of the Plan Year for which the deferrals and matching and other
contributions are made. A Participant may extend the scheduled in-service
withdrawal date for any Plan Year, as long as the Participant provides advance
written notice to the Committee at least one year before the scheduled payment
date, and such extension is for a period of not less than one year from the
previous, scheduled in-service withdrawal date. A Participant may not extend the
scheduled in-service withdrawal more than twice without the consent of the
Committee. Any withdrawal under this Section 6.2 shall be made in a single lump
sum, in cash.
6.3 (UNSCHEDULED IN-SERVICE WITHDRAWALS): Notwithstanding any other
provision herein to the contrary, prior to the end of any calendar month, a
Participant who is actively employed or has started receiving installment
payments, (as provided in Section 5.1 above) may elect to accelerate the date on
which payment of his benefit hereunder would otherwise be made, using a form
provided by and filed with the Committee. Upon such election, the amount to
which such Participant is entitled shall be any whole percentage, from ten
percent (10%) to ninety percent (90%) of the benefit otherwise payable
hereunder, which shall be distributed in one lump sum, in cash, as soon as
administratively practicable after the end of the calendar month in which the
early distribution election is made. Ten percent (10%) of any amounts withdrawn
from such Participant's Account shall be forfeited as of the date of such
distribution.
If, at the time of such election, the Participant is employed by the
Company or an Affiliate, such Participant shall be prohibited from participating
in the Plan for the balance of the Plan Year and for the following Plan Year,
and no amounts shall be credited to his or her Account pursuant to Section 3.1
hereunder during this period. The Participant may again elect to participate in
the Plan as of the first full payroll period after the last day of the period of
ineligibility by executing a new participation agreement within the time prior
to such date established by the Committee.
-7-
<PAGE> 9
6.4 Withdrawals shall be charged pro rata to the investment options in
which amounts credited to a Participant's Account are deemed to be invested
pursuant to Section 3.5 hereof.
ARTICLE VII
ADMINISTRATION OF THE PLAN
7.1 The Plan shall be administered by the Committee. The members of the
Committee shall not receive compensation with respect to their services for the
Committee. The members of the Committee shall serve without bond or security for
the performance of their duties hereunder unless applicable law makes the
furnishing of such bond or security mandatory or unless required by the Company.
Any member of the Committee may resign by delivering a written resignation to
the Company and to the other members of the Committee.
7.2 The Committee shall perform any act which the Plan authorizes
expressed by a vote at a meeting or in a writing signed by a majority of its
members without a meeting. The Committee may, by a writing signed by a majority
of its members, appoint any member of the Committee to act on behalf of the
Committee. Any person who is a member of the Committee shall not vote or decide
upon any matter relating solely to such member or vote in any case in which the
individual right or claim of such member to any benefit under the Plan is
particularly involved. If, in any matter or case in which a person is so
disqualified to act, the remaining persons constituting the Committee cannot
resolve such matter or case, the Board will appoint a temporary substitute to
exercise all the powers of the disqualified person concerning the matter or case
in which such person is disqualified.
7.3 The Committee may designate in writing other persons to carry out
its responsibilities under the Plan, and may remove any person designated to
carry out its responsibilities under the Plan by notice in writing to that
person. The Committee may employ persons to render advice with regard to any of
its responsibilities. All usual and reasonable expenses of the Committee shall
be paid by the Company. The Company shall indemnify and hold harmless each
member of the Committee from and against any and all claims and expenses
(including, without limitation, attorneys' fees and related costs), in
connection with the performance by such member of duties in that capacity, other
than any of the foregoing arising in connection with the willful neglect or
willful misconduct of the person so acting.
7.4 The Committee shall establish rules and procedures, not contrary to
the provisions of the Plan, for the administration of the Plan and the
transaction of its business. The Committee shall determine the eligibility of
any individual to participate in the Plan, shall interpret the Plan in its sole
and absolute discretion, and shall determine all questions arising in the
administration, interpretation and application of the Plan. All determinations
of the Committee shall be conclusive and binding on all employees, Participants
and Beneficiaries.
-8-
<PAGE> 10
7.5 Any action to be taken hereunder by the Company shall be taken by
resolution adopted by the Board or by a committee thereof; provided, however,
that by resolution, the Board or a committee thereof may delegate to any officer
of the Company the authority to take any such actions hereunder.
ARTICLE VIII
CLAIMS REVIEW PROCEDURE
8.1 In the event that a Participant or Beneficiary is denied a claim
for benefits under this Plan (the "Claimant"), the Committee shall provide to
the Claimant written notice of the denial which shall set forth:
(a) the specific reason or reasons for the denial;
(b) specific references to pertinent Plan provisions on which the
Committee based its denial;
(c) a description of any additional material or information needed
for the Claimant to perfect the claim and an explanation of
why the material or information is needed;
(d) a statement that the Claimant may:
(i) request a review upon written application to the Committee;
(ii) review pertinent Plan documents; and
(iii) submit issues and comments in writing; and
(e) that any appeal the Claimant wishes to make of the adverse
determination must be in writing and received by the Committee
within sixty (60) days after receipt of the Committee's notice
of denial of benefits. The Committee's notice must further
advise the Claimant that failure to appeal the action to the
Committee in writing within the sixty (60) day period will
render the Committee's determination final, binding, and
conclusive.
8.2 If the Claimant should appeal to the Committee, the Claimant, or
the duly authorized representative of such Claimant, may submit, in writing,
whatever issues and
-9-
<PAGE> 11
comments such Claimant, or the duly authorized representative of such Claimant,
feels are pertinent. The Committee shall re-examine all facts related to the
appeal and make a final determination as to whether the denial of benefits is
justified under the circumstances. The Committee shall advise the Claimant in
writing of its decision on the appeal, the specific reasons for the decision,
and the specific Plan provisions on which the decision is based. The notice of
the decision shall be given within sixty (60) days of the Claimant's written
request for review, unless special circumstances (such as a hearing) would make
the rendering of a decision within the sixty (60) day period infeasible, but in
no event shall the Committee render a decision regarding the denial of a claim
for benefits later than 120 days after its receipt of a request for review. If
an extension of time for review is required because of special circumstances,
written notice of the extension shall be furnished to the Claimant prior to the
date the extension period commences. The Committee's notice of denial of
benefits shall identify the address to which the Claimant may forward an appeal.
ARTICLE IX
LIMITATION OF RIGHTS
The establishment of this Plan shall not be construed as giving to any
Participant, employee of the Company or any person whomsoever, any legal,
equitable or other rights against the Company, or its officers, directors,
agents or shareholders, or as giving to any Participant or Beneficiary any
equity or other interest in the assets or business of the Company or shares of
Company stock or as giving any employee the right to be retained in the
employment of the Company. All employees of the Company and Participants shall
be subject to discharge to the same extent they would have been if this Plan had
never been adopted.
ARTICLE X
LIMITATION OF ASSIGNMENT AND PAYMENTS TO
LEGALLY INCOMPETENT DISTRIBUTEE
10.1 No benefits which shall be payable under the Plan to any person
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose
of the same shall be void. No benefit shall in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any person, nor shall it
be subject to attachment or legal process for or against any person, except to
the extent required by law.
10.2 Whenever any benefit which shall be payable under the Plan is to
be paid to or for the benefit of any person who is then a minor or determined by
the Committee, on the basis of
-10-
<PAGE> 12
qualified medical advice, to be incompetent, the Committee need not require the
appointment of a guardian or custodian, but shall be authorized to cause the
same to be paid over to the person having custody of the minor or incompetent,
or to cause the same to be paid to the minor or incompetent without the
intervention of a guardian or custodian, or to cause the same to be paid to a
legal guardian or custodian of the minor or incompetent, if one has been
appointed, or to cause the same to be used for the benefit of the minor or
incompetent.
ARTICLE XI
AMENDMENT TO OR TERMINATION OF THE PLAN
The Committee reserves the right at any time to amend or terminate the
Plan in whole or in part. No amendment shall have the effect of retroactively
depriving Participants or Beneficiaries of rights already accrued under the
Plan. Upon termination of the Plan, the Committee may, in its sole and absolute
discretion, and notwithstanding any other provision hereunder to the contrary,
direct that all benefits hereunder will be paid as soon as administratively
practicable thereafter.
ARTICLE XII
GENERAL AND MISCELLANEOUS
12.1 Severability. In the event that any provision of this Plan shall
be declared illegal or invalid for any reason, said illegality or invalidity
shall not affect the remaining provisions of this Plan but shall be fully
severable and this Plan shall be construed and enforced as if said illegal or
invalid provision had never been inserted herein.
12.2 Construction. The Section headings and numbers are included only
for convenience of reference and are not to be taken as limiting or extending
the meaning of any of the terms and provisions of this Plan. Whenever
appropriate, words used in the singular shall include the plural or the plural
may be read as the singular.
12.3 Governing Law. The validity and effect of this Plan and the rights
and obligations of all persons affected hereby shall be construed and determined
in accordance with the laws of the State of Texas unless superseded by federal
law.
12.4 No Requirement to Fund. The Company is not required to set aside
any assets for payment of the benefits provided under this Plan. A Participant
shall have no security interest in any amounts credited hereunder on such
Participant's behalf. It is the Company's intention that this Plan be construed
as a plan which is unfunded and maintained primarily for the purpose of
providing deferred compensation for a select group of highly compensated
employees.
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<PAGE> 13
12.5 Taxes. All amounts payable hereunder shall be reduced by any and
all federal, state and local taxes imposed upon the Participant or a Beneficiary
which are required to be paid or withheld by the Company.
IN WITNESS WHEREOF, Suiza Foods Corporation, the Company, has caused
its corporate seal to be affixed hereto and these presents to be duly executed
in its name and behalf by its proper officers thereunto duly authorized this
_____ day of June, 1999.
COMPANY:
SUIZA FOODS CORPORATION
By:
----------------------------------
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
SUIZA FOODS CORPORATION
(In thousands, except share and per-share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Basic EPS computation:
Numerator:
Income from continuing operations ...................... $ 32,147 $ 29,630 $ 53,020 $ 47,683
Less preferred stock dividends......................... (75) (162)
------------ ------------ ------------ ------------
Income applicable to common stock ...................... $ 32,147 $ 29,555 $ 53,020 $ 47,521
============ ============ ============ ============
Denominator:
Average common shares .................................. 33,730,348 32,516,846 33,686,492 31,645,463
============ ============ ============ ============
Basic EPS from continuing operations ....................... $ 0.95 $ 0.91 $ 1.57 $ 1.50
============ ============ ============ ============
Diluted EPS calculation:
Numerator:
Income from continuing operations ...................... $ 32,147 $ 29,630 $ 53,020 $ 47,683
Less preferred stock dividends ......................... (75) (162)
Net effect on earnings from conversion of mandatorily
redeemable convertible preferred securities ........ 5,981 5,981 11,962 6,755
------------ ------------ ------------ ------------
Income applicable to common stock ...................... $ 38,128 $ 35,536 $ 64,982 $ 54,276
============ ============ ============ ============
Denominator:
Average common shares - basic .......................... 33,730,348 32,516,846 33,686,492 31,645,463
Stock option conversion ................................ 979,300 1,969,220 1,062,954 2,165,329
Dilutive effect of conversion of manditorily
redeemable convertible preferred securities .......... 9,096,105 9,096,303 9,096,132 5,219,999
------------ ------------ ------------ ------------
Average common shares - diluted ........................ 43,805,753 43,582,369 43,845,578 39,030,791
============ ============ ============ ============
Diluted EPS from continuing operations ................... $ 0.87 $ 0.82 $ 1.48 $ 1.39
============ ============ ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 10.1
SUIZA FOODS CORPORATION
AMENDED AND RESTATED
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.
1
<PAGE> 2
"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 Section
1.162-27(e)(3).
"Nonqualified Option" means any Option that is not a Qualified
Option.
"Option" means a stock option granted pursuant to Section 6 of
this Plan.
"Optionee" means any Employee, Consultant or 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
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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 5,500,000 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 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
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<PAGE> 4
approved by the Board or the Committee and executed on behalf of the Corporation
by an appropriate officer. The aggregate number of shares of Common Stock with
respect to which Options may be granted to any single Participant during a
calendar year shall not exceed the number of shares subject to the Plan referred
to in Section 4. Any Options that are granted and subsequently lapse or are
cancelled or forfeited will nonetheless count against this limit. For this
purpose, repricing of an Option shall be considered as the cancellation of the
Option and the grant of a new Option.
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
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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.
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
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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.
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 Option under this Plan shall be transferable only by will
or the laws of descent and distribution and shall be exercisable during the
Participant's lifetime only by such Participant; provided, however, that the
Committee may (but need not) permit transfer without consideration by such
Participant to (i) the spouse, children or grandchildren of the Participant
("Immediate Family Members"), (ii) a trust or trusts, or to a guardian under the
Uniform Gift to Minors Act, for the exclusive benefit of such Immediate Family
Members, or (iii) a partnership or other entity in which such Immediate Family
Members are the only partners, provided that subsequent transfers of transferred
Options shall be prohibited except by will or the laws of descent and
distribution. Following transfer, any such Options shall continue to be subject
to the same terms and conditions as were applicable
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immediately prior to transfer, provided that, for purposes of each Option
agreement and Section 11 hereof, the term "Participant" shall be deemed to refer
to the transferee (however, the events of termination of employment, if any, set
forth in the agreement and the obligation to pay withholding taxes shall
continue to apply to the transferor). Incentive Stock Options shall be
nontransferable except by will or the laws of descent and distribution, and may
only be exercisable during the Participant's lifetime, by the Participant.
16. Restrictions on Shares. Shares of Common Stock issued pursuant to
the Plan may be subject to restrictions on transfer under applicable federal and
state securities laws. The Board may impose such additional restrictions on the
ownership and transfer of shares of Common Stock issued pursuant to the Plan as
it deems desirable; any such restrictions shall be set forth in any Option
agreement entered into hereunder.
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 (a) impair any Option without the consent of the holder of the Option, or
(b) decrease the exercise price of any Option without the consent of the
stockholders of the Corporation. Notwithstanding the foregoing, in the event of
a modification, extension or renewal of a Qualified Option, the Board or the
Committee may increase the exercise price of such Option if necessary to retain
the qualified status of such Option.
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 consistent with the
provisions of this Plan as are determined by the Board or the Committee, may be
executed on
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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, and subject to the stockholder approval requirements of sections 422
and 162(m)(4)(C) of the Code, the Board may amend any provision of this Plan in
any respect in its discretion.
20. Continued Employment Not Presumed. Nothing in this Plan or any
document describing it nor the grant of any Option or Restricted Stock shall
give any Participant the right to continue in the employment of the 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.
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EXHIBIT 10.2
CONSENT AND WAIVER
[Southern California Dairy Venture]
CONSENT AND WAIVER (this "Consent and Waiver"), dated as of July 23,
1999, relating to the Amended and Restated Credit Agreement, dated as of May 22,
1998 (as amended, supplemented or otherwise modified and in effect on the date
hereof, the "Credit Agreement"), between Suiza Foods Corporation, a Delaware
corporation (the "Company"), the lenders party thereto (the "Lenders") and First
Union National Bank, as administrative agent for the Lenders (in such capacity,
the "Agent").
WHEREAS, Swiss Dairy Corporation, a Delaware corporation (hereinafter
referred to as "Swiss Dairy"), is a Wholly Owned Subsidiary of the Company and
party to the Subsidiary Guarantee and Security Agreement (as defined in the
Credit Agreement);
WHEREAS, Adohr Farms, LLC, a limited liability company (hereinafter
referred to as "Adohr") is owned directly or indirectly by Dairy Farmers of
America, Inc., a Kansas cooperative marketing association ("DFA"), Mid-Am
Capital, LLC ("Mid-Am"), Louis J. Stremick ("Stremick") and Michael W. Malone
("Malone");
WHEREAS, the Company, DFA, Mid-Am, Stremick and Malone desire to enter
into a series of transactions pursuant to which: (i) Adohr will transfer certain
of its assets (subject to certain debt owing to Mid-Am) relating to its "fluid
dairy" business to Suiza SoCal, LLC, a Delaware limited liability company (the
"California Venture"), in exchange for equity interests in the California
Venture which will be transferred by Adohr to DFA, Stremick and Malone, and
Adohr will retain its assets relating to its "non-fluid dairy" business; (ii)
the California Venture will purchase the inventory of the "fluid dairy" business
from Adohr; (iii) Mid-Am will contribute certain debt owing to it to the
California Venture in exchange for preferred equity interests in the California
Venture; (iv) Suiza SoCal Holdings, Inc., a Delaware corporation and
Wholly-Owned Subsidiary of the Company ("Suiza Sub"), will contribute Swiss
Dairy to, or Swiss Dairy will transfer all its assets to, or be merged with and
into, the California Venture, such that the California Venture will survive as a
Subsidiary of Suiza Sub and as a result of which Suiza Sub will receive
preferred and common equity interests in the California Venture; and (v) Suiza
Sub and DFA shall purchase from Stremick and Malone all of their equity
interests in the California Venture (collectively, the "Transaction");
WHEREAS, upon consummation of the Transaction: (i) seventy percent
(70%) or more of each of the common and preferred ownership interests of the
California Venture will be owned and controlled by Suiza Sub; and (ii) the
remaining common and preferred ownership interests of the California Venture
will be owned and controlled by DFA and Mid-Am;
WHEREAS, pursuant to the Transaction, the existing fluid dairy and
bottled water operations of the Company and DFA located in Southern California
will be operated by the California Venture; and
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WHEREAS, certain aspects of the Transaction require the consent of the
Majority Lenders or the waiver by the Majority Lenders of certain provisions of
the Credit Agreement and the Security Documents, in each case in accordance with
the terms thereof.
NOW, THEREFORE, the Majority Lenders hereby agree as follows:
1. Defined Terms. Except as otherwise defined in this Consent and
Waiver, terms defined in the Credit Agreement are used herein as defined
therein.
2. Consent and Waiver of Credit Agreement Provisions. Subject to the
conditions set forth in Section 6 hereto and compliance with the covenants set
forth in Section 7 hereto, notwithstanding Sections 7.15, 8.03, 8.05 and 8.17 of
the Credit Agreement and the other terms and provisions of the Credit Agreement:
(a) the Majority Lenders hereby consent to the consummation of
the Transaction on substantially the terms set forth in the recitals to
this Consent and Waiver;
(b) the Majority Lenders hereby waive the provisions of
Sections 8.03 and 8.05 of the Credit Agreement to the extent
application of such provisions would prohibit the merger of Swiss Dairy
or Adohr with and into the California Venture, the contribution of
ownership interests in, or the transfer of assets of, Swiss Dairy or
Adohr to the California Venture or the issuance of ownership interests
in the California Venture to the Company or Suiza Sub, DFA, Mid-Am,
Stremick, Malone or other Persons;
(c) the Majority Lenders hereby waive the provisions of
Section 7.15 of the Credit Agreement to the extent they restrict or
prevent the California Venture from issuing or having outstanding
Equity Rights;
(d) the Majority Lenders hereby waive the provisions of
Sections 8.17(a), (b) and (c) of the Credit Agreement to the extent
such provisions:
(i) would require that the California Venture or any
now-owned or hereafter acquired or formed Subsidiary of the
California Venture be a Wholly Owned Subsidiary;
(ii) would require that the California Venture or any
now-owned or hereafter acquired or formed Subsidiary of the
California Venture become a party, by Joinder Agreement or
otherwise, to the Subsidiary Guarantee and Security Agreement
or any similar agreement; or
(iii) would prohibit or prevent the constituent
documents of the California Venture, or of any now-owned or
hereafter acquired or formed Subsidiary thereof, or any
indenture, agreement, instrument or other arrangement to which
the California Venture or such Subsidiary may be a party, from
prohibiting or restraining or having the effect of prohibiting
or restraining or imposing materially adverse conditions upon
the ability of the California Venture,
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or any such Subsidiary thereof, to incur Indebtedness, grant
Liens, make loans, advances or Investments or sell, assign,
transfer or otherwise dispose of Property;
provided, that the California Venture shall not incur
Indebtedness or grant Liens other than Indebtedness or Liens
in favor of the Company or its Wholly-Owned Subsidiaries or
Indebtedness or Liens of Adohr or Persons or Property acquired
by, or merged into, the California Venture, which Indebtedness
and Liens (x) otherwise satisfy the requirements of Sections
8.06 and 8.07 of the Credit Agreement, as applicable, (y)
existed before such acquisition or merger and were not created
in anticipation thereof and (z) in the case of Liens, were
created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the
cost of the Property subject thereto (provided that (A) no
such Lien shall extend to or cover any Property of the Company
or any Subsidiary other than the Property so acquired, and (B)
the principal amount of Indebtedness secured by any such Lien
shall at no time exceed the fair market value (as determined
in good faith by a Responsible Financial Officer of the
Company) of such Property at the time it was acquired);
provided, further, that the California Venture shall not make
loans, advances or Investments or sell, assign, transfer or
otherwise dispose of Property except in accordance with
Sections 8.08 or 8.05(c) of the Credit Agreement, as
applicable; and
provided, further, that such constituent documents,
indentures, agreements or other arrangements shall impose no
restrictions on the ability of the California Venture to pay
dividends or make other distributions, other than to give
priority to the payment of any dividends or distributions to
any preferred capital stock or other preferred ownership
interests in the California Venture;
(e) the Majority Lenders hereby acknowledge and agree that the
California Venture and each of its Subsidiaries shall be a Subsidiary
of the Company, but shall not be an Affiliate of the Company, for all
purposes of the Credit Agreement; and
(f) subject to compliance with the other terms of the Credit
Agreement, the Majority Lenders hereby consent to the Company's future
acquisition of all or any portion of the remaining ownership interests
in the California Venture; provided, however, upon the acquisition by
the Company or its Subsidiaries of all the outstanding capital stock,
Equity Rights and other ownership interests of the California Venture,
the California Venture shall execute a Joinder Agreement and thereby
become a party to the Subsidiary Guarantee and Security Agreement.
3. Waiver of Security Agreement Provisions. Notwithstanding Sections 2
and 5.04 of the Security Agreement, the Majority Lenders hereby waive any
violation of the Security Agreement that would occur as a result of: (a) the
Company's or Suiza Sub's ownership of less than all the ownership interests of
the California Venture; or (b) any restrictions on the transfer or encumbrance
of the Company's or Suiza Sub's interest in the California Venture.
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4. Release of Capital Stock of Swiss Dairy. The Agent is hereby
authorized and directed to deliver all stock certificates and related stock
powers with respect to Swiss Dairy to the Company to facilitate the consummation
of the Transaction. Effective upon the merger of Swiss Dairy into the California
Venture or the transfer of substantially all the assets of, or ownership
interests in, Swiss Dairy to the California Venture, (i) the Subsidiary
Guarantee and Security Agreement is hereby terminated as to Swiss Dairy and
Swiss Dairy is hereby released from all obligations thereunder, (ii) the capital
stock of Swiss Dairy is hereby released from the Lien of the Security Agreement
or the Subsidiary Guarantee and Security Agreement, as the case may be, and
(iii) all references to Swiss Dairy in the Credit Agreement and the Security
Documents are hereby deleted.
5. Representations and Warranties of the Company. The Company
represents and warrants to the Agent and the Lenders that (with respect to
matters pertaining to itself and each of its Subsidiaries) as of the date hereof
and as of the date of the consummation of the Transaction:
(a) no Default has occurred and is otherwise continuing under
the Credit Agreement;
(b) except as permitted by this Consent and Waiver, the
representations and warranties made by the Company in Section 7 of the
Credit Agreement, and by each Obligor in each of the other Loan
Documents to which it is a party, are true and complete on and as of
the date of this Consent and Waiver, and the date of the consummation
of the Transaction, with the same force and effect as if made on and as
of each such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date);
(c) on a pro forma basis after giving effect to the
Transaction, the Company shall remain in compliance with Sections 8.10,
8.11 and 8.13 of the Credit Agreement; and
(d) the businesses being conducted by Adohr to be transferred
to the California Venture are in the same line or lines of business
currently engaged in by certain Subsidiaries of the Company, or as
permitted by Section 8.14 of the Credit Agreement.
6. Conditions Precedent. The effectiveness of this Consent and Waiver
is subject to the receipt by the Agent of the following documents, each of which
shall be satisfactory to the Agent in form and substance:
(a) certified copies of the Amended and Restated Operating
Agreement and Certificate of Formation of Limited Liability Company (or
equivalent documents) of the California Venture;
4
<PAGE> 13
(b) Uniform Commercial Code searches for Adohr for each
jurisdiction in which Adohr conducts its business or in which any of
its Properties are located (or otherwise as the Agent may reasonably
request);
(c) appropriately completed and duly executed copies of
Uniform Commercial Code Financing Statements, sufficient to perfect in
the Agent a security interest in the ownership interests of the
California Venture owned by the Company or Suiza Sub, in accordance
with the Security Agreement or the Subsidiary Guarantee and Security
Agreement;
(d) an opinion, appropriately dated, of counsel to the
California Venture covering such matters as the Agent may reasonably
request;
(e) if requested by the Agent, environmental surveys and
assessments prepared by one or more firms of licensed engineers
(familiar with the identification of toxic and hazardous substances) in
form and substance satisfactory to the Agent, such environmental survey
and assessment to be based upon physical on-site inspections by such
firm of each of the existing sites and facilities owned, operated or
leased by Adohr and to continue to be owned, operated or leased by the
California Venture as well as an historical review of the uses of such
sites and facilities and of the business and operations of Adohr;
(f) an amendment to the Security Agreement pursuant to which
the Company shall pledge all of its right, title and interest in or to
Suiza Sub to the Agent for the benefit of the Lenders, and
(g) a Joinder Agreement from Suiza Sub, whereby Suiza Sub
shall become a party to the Subsidiary Guarantee and Security
Agreement.
7. Covenants. In addition to any covenants set forth in the Credit
Agreement, the Company covenants and agrees with the Lenders and the Agent that:
(a) the Company, together with its Subsidiaries (other than
the California Venture), shall at all times collectively retain voting
control of at least 51% of each class of capital stock or other
ownership interests of the California Venture; and
(b) notwithstanding anything to the contrary in the
definitions of "EBITDA", the Company shall include within EBITDA for
any period no more than the pro rata share (equal to the aggregate
shares of capital stock or other ownership interests in the California
Venture then held by the Company and its Subsidiaries (other than the
California Venture) divided by the total shares of outstanding capital
stock or other ownership interests in the California Venture) of the
California Venture's operating income, depreciation and amortization,
and other income for such period.
8. Miscellaneous. Except as expressly provided herein, the Credit
Agreement and the Security Documents shall remain unmodified and in full force
and effect. This Consent and Waiver may be executed in any number of
counterparts, all of which taken together shall
5
<PAGE> 14
constitute one and the same instrument and any of the parties hereto may execute
this Consent and Waiver by signing any such counterpart. This Consent and Waiver
shall be governed by, and construed in accordance with, the law of the State of
New York.
6
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Waiver to be duly executed and delivered as of the day and year first above
written.
COMPANY:
SUIZA FOODS CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
AGREED AND ACCEPTED:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By: /s/ Jorge A. Gonzalez
-------------------------------
Name: Jorge A. Gonzalez
Title: Senior Vice President
LENDERS:
FIRST UNION NATIONAL BANK
By: /s/ Jorge A. Gonzalez
-----------------------------------
Name: Jorge A. Gonzalez
Title: Senior Vice President
THE FIRST NATIONAL BANK
OF CHICAGO
By: /s/ Kathy Turner
-----------------------------------
Name: Kathy Turner
Title: Authorized Officer
7
<PAGE> 16
BANK ONE, TEXAS, N.A.
By: /s/ Kathy Turner
-----------------------------------
Name: Kathy Turner
Title: Vice President
BANK OF AMERICA NT&SA
By: /s/ Tom F. Scharfenberg
-----------------------------------
Name: Tom F. Scharfenberg
Title: Managing Director
BANK OF AMERICA, N.A.
By: /s/ Tom F. Scharfenberg
-----------------------------------
Name: Tom F. Scharfenberg
Title: Managing Director
BANCO POPULAR DE PUERTO RICO
By: /s/ John Incandela
-----------------------------------
Name: John Incandela
Title: Senior Vice President
By:
-------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By: /s/ M.D. Smith
-----------------------------------
Name: M.D. Smith
Title: Agent Operations
8
<PAGE> 17
THE BANK OF TOKYO - MITSUBISHI,
LTD., DALLAS OFFICE
By: /s/ D. Barnell
-----------------------------------
Name: D. Barnell
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Katherine L. Abbott
-----------------------------------
Name: Katherine L. Abbott
Title: First Vice President
Managing Director
By: /s/ Bradley C. Peterson
-----------------------------------
Name: Bradley C. Peterson
Title: Vice President, Manager
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
-----------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
FLEET NATIONAL BANK
By: /s/ Steve Kalin
-----------------------------------
Name: Steve Kalin
Title: Vice President
WELLS FARGO BANK (TEXAS) N.A.
By: /s/ Austin D. Nettle
-----------------------------------
Name: Austin D. Nettle
Title: Banking Officer
9
<PAGE> 18
CIBC INC.
By: /s/ Katherine Bass
-----------------------------------
Name: Katherine Bass
Title: Executive Director
CIBC World Markets Corp.,
As Agent
HARRIS TRUST AND SAVINGS BANK
By: /s/ Dianna D. Carr
-----------------------------------
Name: Dianna D. Carr
Title: Vice President
COBANK ACB
By: /s/ Brian J. Klatt
-----------------------------------
Name: Brian J. Klatt
Title: Vice President
AMSOUTH BANK
By: /s/ Brock E. Fredette
-----------------------------------
Name: Brock E. Fredette
Title: Vice President
BANKBOSTON N.A.
By: /s/ Esteban Arrondo
-----------------------------------
Name: Esteban Arrondo
Title: Vice President
10
<PAGE> 19
BANQUE NATIONALE DE PARIS
HOUSTON AGENCY
By: /s/ Warren Parham
-----------------------------------
Name: Warren Parham
Title: Vice President
BHF (USA) CAPITAL CORPORATION
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By: /s/ Walter R. Wolff
-----------------------------------
Name: Walter R. Wolff
Title: Joint General Manager
By:
-------------------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED
By:
-------------------------------------
Name:
Title:
11
<PAGE> 20
MELLON BANK, N.A.
By: /s/ Louis E. Flori
-----------------------------------
Name: Louis E. Flori
Title: Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By: /s/ Nobuo Tominaga
-----------------------------------
Name: Nobuo Tominaga
Title: Chief Manager
NATEXIS BANQUE BFCE
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
NATIONAL CITY BANK OF
KENTUCKY
By: /s/ Tom Gurbach
-----------------------------------
Name: Tom Gurbach
Title: Vice President
THE ROYAL BANK OF SCOTLAND PLC
By:
-------------------------------------
Name:
Title:
12
<PAGE> 21
THE SANWA BANK, LIMITED,
NEW YORK BRANCH
By:
-------------------------------------
Name:
Title:
STB DELAWARE FUNDING TRUST I
By: /s/ Donald C. Hargadon
-----------------------------------
Name: Donald C. Hargadon
Title: Assistant Vice President
SUNTRUST BANK, ATLANTA
By: /s/ F. Steven Parrish
-----------------------------------
Name: F. Steven Parrish
Title: Vice President
By: /s/ Patrick M. Kotors
-----------------------------------
Name: Patrick M. Kotors
Title: Banking Officer
THE TOKAI BANK, NEW YORK BRANCH
By:
-------------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:
-------------------------------------
Name:
Title:
13
<PAGE> 22
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By: /s/ Brian O'Leary
-----------------------------------
Name: Brian O'Leary
Title: Vice President
By: /s/ Marcus Edward
-----------------------------------
Name: Marcus Edward
Title: Vice President
ERSTE BANK
By: /s/ Arcinee Hovanessian
-----------------------------------
Name: Arcinee Hovanessian
Title: Vice President, Erste Bank
New York Branch
By: /s/ John S. Runnion
-----------------------------------
Name: John S. Runnion
Title: First Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
-------------------------------------
Name:
Title:
MICHIGAN NATIONAL BANK
By: /s/ Eric Harge
-----------------------------------
Name: Eric Harge
Title: Commercial Relationship Manager
14
<PAGE> 23
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /s/ Pieter Kodde
-----------------------------------
Name: David L. Streeter
Title: Senior Vice President
By: /s/ David L. Streeter
-----------------------------------
Name: David L. Streeter
Title: Vice President
15
<PAGE> 24
EXHIBIT 10.3
SUIZA FOODS CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS................................................................................1
ARTICLE II ELIGIBILITY................................................................................2
ARTICLE III CREDITS TO ACCOUNT.........................................................................3
ARTICLE IV BENEFITS...................................................................................4
ARTICLE V PAYMENT OF BENEFITS AT TERMINATION.........................................................5
ARTICLE VI IN-SERVICE WITHDRAWALS.....................................................................6
ARTICLE VII ADMINISTRATION OF THE PLAN.................................................................7
ARTICLE VIII CLAIMS REVIEW PROCEDURE....................................................................8
ARTICLE IX LIMITATION OF RIGHTS.......................................................................9
ARTICLE X LIMITATION OF ASSIGNMENT AND PAYMENTS TO
LEGALLY INCOMPETENT DISTRIBUTEE...........................................................10
ARTICLE XI AMENDMENT TO OR TERMINATION OF THE PLAN...................................................10
ARTICLE XII GENERAL AND MISCELLANEOUS.................................................................10
</TABLE>
<PAGE> 25
SUIZA FOODS CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
PREAMBLE
WHEREAS, Suiza Foods Corporation (the "Company"), a corporation formed
under the laws of the State of Delaware, desires to establish a deferred
compensation plan for the exclusive benefit of a select group of management and
highly compensated employees of the Company and its Affiliates to provide an
additional means by which such employees may defer funds for their retirement;
NOW, THEREFORE, the Company hereby establishes the Suiza Foods
Corporation Executive Deferred Compensation Plan (the "Plan"), effective July 1,
1999.
ARTICLE I
DEFINITIONS
1.1 "Account" shall mean the individual bookkeeping record established
by the Committee showing the monetary value of the interest in the Plan of each
Participant or Beneficiary.
1.2 "Affiliate" shall mean a member of a controlled group of
corporations (as defined in Section 414(b) of the Code), a group of trades or
businesses (whether or not incorporated) which are under common control (as
defined in Section 414(c) of the Code), or an affiliated service group (as
defined in Section 414(m) of the Code) of which the Company is a member; and any
entity otherwise required to be aggregated with the Company pursuant to Section
414(o) of the Code or the regulations issued thereunder.
1.3 "Annual Compensation" shall mean the total amounts paid or accrued
by the Company or an Affiliate to an employee as remuneration for personal
services rendered during each Plan Year, including bonuses and commissions, as
reported on the employee's federal income tax withholding statement or
statements (IRS Form W-2 or its subsequent equivalent), together with any
amounts not includable in such employee's gross income pursuant to Sections 125
or 402(g) of the Code, and any amounts deferred by such employee pursuant to
Section 3.1 hereof.
1.4 "Beneficiary" shall mean the Beneficiary designated by each
Participant under the 401(k) Plan; provided, however, that a Participant may
designate a different Beneficiary hereunder by delivering to the Committee a
written beneficiary designation, in the form provided by the Committee, and
executed specifically with respect to this Plan.
1.5 "Board" shall mean the Board of Directors of the Company.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and the rules and regulations promulgated thereunder.
<PAGE> 26
1.7 "Committee" shall mean the Compensation Committee of the Board.
1.8 "Company" shall mean Suiza Foods Corporation or its successor or
successors.
1.9 "Disability" shall mean a physical or mental condition which, in
the opinion of the Committee, prevents a Participant from being able to perform
the substantial duties of his employment with the Company and is expected to be
of long duration or to result in death.
1.10 "Effective Date" shall mean July 1, 1999.
1.11 "401(k) Plan" shall mean the Suiza Foods Corporation 401(k) Plan.
1.12 "Participant" shall mean an individual who has been designated by
the Committee as being eligible to participate in the Plan.
1.13 "Plan" shall mean the Suiza Foods Corporation Executive Deferred
Compensation Plan set forth in this document, as it may be amended from time to
time.
1.14 "Plan Year" shall mean the twelve month period beginning each
January 1 and ending each December 31, except that the first Plan Year shall
commence July 1, 1999 and end December 31, 1999.
1.15 "Profit Sharing Credit" shall mean the amount contributed to the
Participant's Account as a profit sharing credit pursuant to Section 3.3 hereof.
1.16 "Trust" shall mean the Suiza Foods Corporation Executive Deferred
Compensation Plan Trust.
1.17 "Valuation Date" shall mean each business day on which the
financial markets are open for trading activity or such other dates as may be
established by the Committee.
-2-
<PAGE> 27
ARTICLE II
ELIGIBILITY
Participation in the Plan shall be made available to a select group of
individuals, as determined by the Committee, who are providing services to the
Company or an Affiliate in key positions of management and responsibility. Such
individuals may elect to participate hereunder by executing a participation
agreement in such form and at such time as the Committee shall require, provided
that each participation agreement shall be executed no later than the day
immediately preceding the Plan Year for which an individual elects to make
contributions to the Plan in accordance with the provisions of Section 3.1
hereof. Notwithstanding the foregoing, in the first year in which an individual
becomes eligible to participate in the Plan, he may elect to participate in the
Plan by executing a participation agreement, in such form as the Committee shall
require, within thirty (30) days of the date on which he is notified by the
Committee of his eligibility to participate in the Plan. In such event, his
election to participate in the Plan shall become effective as of the first full
payroll period beginning on or after the Committee's receipt of his
participation agreement. The determination as to the eligibility of any
individual to participate in the Plan shall be in the sole and absolute
discretion of the Committee, whose decision in that regard shall be conclusive
and binding for all purposes hereunder.
ARTICLE III
CREDITS TO ACCOUNT
3.1 For any Plan Year, a Participant who elects to contribute to the
401(k) Plan the lesser of: (i) the maximum elective deferral permitted under
Section 402(g)(1) of the Code with respect to the taxable year in which such
Plan Year begins, or (ii) the maximum elective contributions permitted under the
terms of the 401(k) Plan with respect to such Plan Year, may, in the manner
prescribed by the Committee, irrevocably elect to defer a whole percentage of
the Annual Compensation otherwise payable to such Participant with respect to
such Plan Year, not to exceed the maximum amount established by the Committee.
Any amounts deferred, pursuant to this Article III, from the Annual Compensation
otherwise payable to a Participant shall be transferred to the Trust and
credited to the Account of such Participant as soon as practicable after the
date on which such amounts would otherwise have been paid to the Participant.
3.2 The Committee shall credit a matching contribution to the Account
of each Participant who has deferred amounts under the Plan during any Plan Year
under Section 3.1 above. The matching contribution, if any, shall be computed as
follows: (i) The Committee shall first compute a maximum matching contribution
for each Participant, taking into account salary deferrals made by the
Participant under both the Plan and the 401(k) Plan, using the formula applied
by the 401(k) Plan with respect to percentage of salary deferrals matched and
the maximum percentage of compensation which is subject to the match, but using
the Participant's Annual Compensation (not exceeding the maximum compensation
that may be considered on behalf of a participant in the 401(k) Plan unless
otherwise approved by the Board of Directors of the Company); (ii) the Committee
shall then determine the amount of matching contributions
-3-
<PAGE> 28
made for the Participant under the 401(k) Plan; and (iii) the difference between
(i) and (ii) is the matching contribution to be credited to the Participant's
Account under the Plan. The Committee shall credit matching contribution, if
any, to the Account of each Participant entitled thereto as soon as
administratively practicable following the payroll period during which the
Participant's deferral under Section 3.1 to which the matching contribution
relates is withheld from his Annual Compensation and the Company shall transfer
a similar amount to the Trust on or as soon as administratively practicable
following such date.
3.3 For each Plan Year, the Committee shall credit each Participant's
Account with an amount that represents a Profit Sharing Credit. The Profit
Sharing Credits shall be equal in amount to the additional contribution, if any,
which would have been allocated as a non-matching contribution to the
Participant's account in the 401(k) Plan if the Participant had not elected to
defer, pursuant to this Plan, Annual Compensation that otherwise would have been
paid for the 401(k) Plan plan year coinciding with or ending in the Plan Year.
The Committee shall credit the Profit Sharing Credits to the Account of each
Participant entitled thereto as soon as administratively practicable following
the date that the Company makes a profit sharing contribution to the 401(k) Plan
and the Company shall transfer an equivalent amount to the Trust on or as soon
as administratively practicable following such date.
3.4 At the time of making the deferrals elections described in Section
3.1 and at such other times as is allowed by the Committee, the Participant
shall designate, on a form provided by the Committee, the types of investments,
including life insurance policies, in which the Participant's Account will be
deemed to be invested for purposes of determining the amount of earnings to be
credited to that Account. On a quarterly or other basis selected by the
Committee, the Committee shall credit to each Participant's Account an amount
equal to the interest, earnings or losses that would have resulted to the
Account if the amounts credited to the Account were invested as elected by the
Participant. If the Participant designates a deemed investment in a life
insurance policy, the rate of earnings to be credited to such Participant's
Account shall be as set forth in a split-dollar life insurance agreement or
other agreement concerning such a policy.
ARTICLE IV
BENEFITS
4.1 After the death of a Participant, the Beneficiary of such
Participant shall be entitled to the entire value of all amounts credited to
such Participant's Account, determined as of the Valuation Date coincident with
or preceding the date of distribution, including any additional amount credited
to such Participant's Account as a result of life insurance proceeds payable on
the Participant's death.
-4-
<PAGE> 29
4.2 After the Disability of a Participant, such Participant shall be
entitled to the entire value of all amounts credited to such Participant's
Account, determined as of the Valuation Date coincident with or preceding the
date of Disability. Such amount shall be payable to the Participant at the time
and in the manner determined by the Committee.
4.3 After a Participant's termination of employment for any reason
other than death or Disability, such Participant shall be entitled to the entire
value of all amounts credited to the Account of such Participant, determined as
of the Valuation Date coincident with or preceding the date of distribution.
ARTICLE V
PAYMENT OF BENEFITS AT TERMINATION
5.1 In the case of a Participant who terminates employment with the
Company, the amount credited to the Participant's Account (provided it is more
than $25,000) shall be paid in cash to the Participant, at the time the
distribution of the Account is to commence, from among the following optional
forms of benefit as elected by the Participant on the form provided by Company
upon his or her initial participation in the Plan.
(1) a lump sum distribution;
(2) substantially equal annual installments over five (5) years;
(3) substantially equal annual installments over ten (10) years; or
(4) substantially equal annual installments over fifteen (15) years.
However, if the amount credited to a Participant's account is $25,000 or less at
the time distribution of the Account is to commence, payment will be made in a
lump sum. Furthermore, notwithstanding the commencement of installment payments
under this Section 5.1, all remaining amounts credited to a Participant's
Account shall be distributed in a lump sum, at such time as the value of such
remaining amounts is $25,000 or less.
Payment shall commence as soon as practicable following the
Participant's termination of employment with the Company, or, if so elected by
the Participant in the Participant's deferral election form provided by the
Committee, as soon as practicable during the calendar year following the year in
which such event occurs. If installment payments are made, the unpaid balance of
the Participant's Account shall continue to share in the income and losses
attributable thereto, in accordance with the provisions of the Trust, during the
period for which installment payments are made. A Participant may modify the
optional form of benefit that he or she has previously elected, as long as he or
she provides the Committee with written notice at least one (1) year in advance
of the effective date of the change.
-5-
<PAGE> 30
5.2 Payment of a Participant's benefit on account of death shall be
made in a lump sum in cash. Payment of a Participant's death benefit shall be
made to the Beneficiary of such Participant as soon as practicable following the
Committee's receipt of proper notice of such Participant's death.
5.3 Notwithstanding the provisions of sections 5.1 or 5.2, the benefits
payable hereunder may be paid before they would otherwise be payable if, based
on a change in the federal or applicable state tax or revenue laws, a published
ruling or similar announcement issued by the Internal Revenue Service, a
regulation issued by the Secretary of the Treasury, a decision by a court of
competent jurisdiction involving a Participant or a Beneficiary, or a closing
agreement made under Section 7121 of the Code that is approved by the Internal
Revenue Service and involves a Participant, the Committee determines that a
Participant has or will recognize income for federal or state income tax
purposes with respect to amounts that are or will be payable under the Plan
before they otherwise would be paid. The amount of any payments pursuant to this
Section 5.3 shall not exceed the lesser of: (a) the amount in the Participant's
Account or (b) the amount of taxable income with respect to which the tax
liability is assessed or determined.
5.4 The payment of benefits under the Plan shall begin at the date
specified in accordance with the provisions of Sections 5.1 and 5.2 hereof;
provided that, in case of administrative necessity, the starting date of payment
of benefits may be delayed up to thirty (30) days as long as such delay does not
result in the Participant or Beneficiary receiving the distribution in a
different taxable year than if no such delay had occurred.
ARTICLE VI
IN-SERVICE WITHDRAWALS
6.1 (HARDSHIP WITHDRAWALS): In the event of an unforeseeable emergency,
a Participant may make a request to the Committee for a withdrawal from the
Account of such Participant. For purposes of this Section, the term
"unforeseeable emergency" shall mean a severe financial hardship to the
Participant resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent (as defined in Section 152(a) of the Code) of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. Any determination of the existence
of an unforeseeable emergency and the amount to be withdrawn on account thereof
shall be made by the Committee, in its sole and absolute discretion. However,
notwithstanding the foregoing, a withdrawal will not be permitted to the extent
that the financial hardship is or may be relieved: (i) through reimbursement or
compensation by insurance or otherwise; (ii) by liquidation of the Participant's
assets, to the extent that liquidation of such assets would not itself cause
severe financial hardship; or (iii) by
-6-
<PAGE> 31
cessation of deferrals under this Plan. In no event shall the need to send a
Participant's child to college or the desire to purchase a home be deemed to
constitute an unforeseeable emergency. No member of the Committee shall vote or
decide upon any matter relating to the determination of the existence of such
member's own financial hardship or the amount to be withdrawn on account
thereof. A request for a hardship withdrawal must be made in the manner
prescribed by the Committee, and must be expressed as a specific dollar amount.
The amount of a hardship withdrawal may not exceed the amount required to meet
the severe financial hardship. All hardship withdrawals shall be paid in a lump
sum in cash.
6.2 (SCHEDULED IN-SERVICE WITHDRAWALS): On a form prescribed by the
Committee, a Participant, prior to the beginning of any Plan Year, can elect to
receive that Plan Year's deferrals made pursuant to Section 3.1, matching
contributions made pursuant to Section 3.2, any additional contributions made
that Plan Year pursuant to Section 3.3, and earnings thereon at a date specified
by the Participant. Such date shall be no earlier than five (5) years from the
last day of the Plan Year for which the deferrals and matching and other
contributions are made. A Participant may extend the scheduled in-service
withdrawal date for any Plan Year, as long as the Participant provides advance
written notice to the Committee at least one year before the scheduled payment
date, and such extension is for a period of not less than one year from the
previous, scheduled in-service withdrawal date. A Participant may not extend the
scheduled in-service withdrawal more than twice without the consent of the
Committee. Any withdrawal under this Section 6.2 shall be made in a single lump
sum, in cash.
6.3 (UNSCHEDULED IN-SERVICE WITHDRAWALS): Notwithstanding any other
provision herein to the contrary, prior to the end of any calendar month, a
Participant who is actively employed or has started receiving installment
payments, (as provided in Section 5.1 above) may elect to accelerate the date on
which payment of his benefit hereunder would otherwise be made, using a form
provided by and filed with the Committee. Upon such election, the amount to
which such Participant is entitled shall be any whole percentage, from ten
percent (10%) to ninety percent (90%) of the benefit otherwise payable
hereunder, which shall be distributed in one lump sum, in cash, as soon as
administratively practicable after the end of the calendar month in which the
early distribution election is made. Ten percent (10%) of any amounts withdrawn
from such Participant's Account shall be forfeited as of the date of such
distribution.
If, at the time of such election, the Participant is employed by the
Company or an Affiliate, such Participant shall be prohibited from participating
in the Plan for the balance of the Plan Year and for the following Plan Year,
and no amounts shall be credited to his or her Account pursuant to Section 3.1
hereunder during this period. The Participant may again elect to participate in
the Plan as of the first full payroll period after the last day of the period of
ineligibility by executing a new participation agreement within the time prior
to such date established by the Committee.
-7-
<PAGE> 32
6.4 Withdrawals shall be charged pro rata to the investment options in
which amounts credited to a Participant's Account are deemed to be invested
pursuant to Section 3.5 hereof.
ARTICLE VII
ADMINISTRATION OF THE PLAN
7.1 The Plan shall be administered by the Committee. The members of the
Committee shall not receive compensation with respect to their services for the
Committee. The members of the Committee shall serve without bond or security for
the performance of their duties hereunder unless applicable law makes the
furnishing of such bond or security mandatory or unless required by the Company.
Any member of the Committee may resign by delivering a written resignation to
the Company and to the other members of the Committee.
7.2 The Committee shall perform any act which the Plan authorizes
expressed by a vote at a meeting or in a writing signed by a majority of its
members without a meeting. The Committee may, by a writing signed by a majority
of its members, appoint any member of the Committee to act on behalf of the
Committee. Any person who is a member of the Committee shall not vote or decide
upon any matter relating solely to such member or vote in any case in which the
individual right or claim of such member to any benefit under the Plan is
particularly involved. If, in any matter or case in which a person is so
disqualified to act, the remaining persons constituting the Committee cannot
resolve such matter or case, the Board will appoint a temporary substitute to
exercise all the powers of the disqualified person concerning the matter or case
in which such person is disqualified.
7.3 The Committee may designate in writing other persons to carry out
its responsibilities under the Plan, and may remove any person designated to
carry out its responsibilities under the Plan by notice in writing to that
person. The Committee may employ persons to render advice with regard to any of
its responsibilities. All usual and reasonable expenses of the Committee shall
be paid by the Company. The Company shall indemnify and hold harmless each
member of the Committee from and against any and all claims and expenses
(including, without limitation, attorneys' fees and related costs), in
connection with the performance by such member of duties in that capacity, other
than any of the foregoing arising in connection with the willful neglect or
willful misconduct of the person so acting.
7.4 The Committee shall establish rules and procedures, not contrary to
the provisions of the Plan, for the administration of the Plan and the
transaction of its business. The Committee shall determine the eligibility of
any individual to participate in the Plan, shall interpret the Plan in its sole
and absolute discretion, and shall determine all questions arising in the
administration, interpretation and application of the Plan. All determinations
of the Committee shall be conclusive and binding on all employees, Participants
and Beneficiaries.
-8-
<PAGE> 33
7.5 Any action to be taken hereunder by the Company shall be taken by
resolution adopted by the Board or by a committee thereof; provided, however,
that by resolution, the Board or a committee thereof may delegate to any officer
of the Company the authority to take any such actions hereunder.
ARTICLE VIII
CLAIMS REVIEW PROCEDURE
8.1 In the event that a Participant or Beneficiary is denied a claim
for benefits under this Plan (the "Claimant"), the Committee shall provide to
the Claimant written notice of the denial which shall set forth:
(a) the specific reason or reasons for the denial;
(b) specific references to pertinent Plan provisions on which the
Committee based its denial;
(c) a description of any additional material or information needed
for the Claimant to perfect the claim and an explanation of
why the material or information is needed;
(d) a statement that the Claimant may:
(i) request a review upon written application to the Committee;
(ii) review pertinent Plan documents; and
(iii) submit issues and comments in writing; and
(e) that any appeal the Claimant wishes to make of the adverse
determination must be in writing and received by the Committee
within sixty (60) days after receipt of the Committee's notice
of denial of benefits. The Committee's notice must further
advise the Claimant that failure to appeal the action to the
Committee in writing within the sixty (60) day period will
render the Committee's determination final, binding, and
conclusive.
8.2 If the Claimant should appeal to the Committee, the Claimant, or
the duly authorized representative of such Claimant, may submit, in writing,
whatever issues and
-9-
<PAGE> 34
comments such Claimant, or the duly authorized representative of such Claimant,
feels are pertinent. The Committee shall re-examine all facts related to the
appeal and make a final determination as to whether the denial of benefits is
justified under the circumstances. The Committee shall advise the Claimant in
writing of its decision on the appeal, the specific reasons for the decision,
and the specific Plan provisions on which the decision is based. The notice of
the decision shall be given within sixty (60) days of the Claimant's written
request for review, unless special circumstances (such as a hearing) would make
the rendering of a decision within the sixty (60) day period infeasible, but in
no event shall the Committee render a decision regarding the denial of a claim
for benefits later than 120 days after its receipt of a request for review. If
an extension of time for review is required because of special circumstances,
written notice of the extension shall be furnished to the Claimant prior to the
date the extension period commences. The Committee's notice of denial of
benefits shall identify the address to which the Claimant may forward an appeal.
ARTICLE IX
LIMITATION OF RIGHTS
The establishment of this Plan shall not be construed as giving to any
Participant, employee of the Company or any person whomsoever, any legal,
equitable or other rights against the Company, or its officers, directors,
agents or shareholders, or as giving to any Participant or Beneficiary any
equity or other interest in the assets or business of the Company or shares of
Company stock or as giving any employee the right to be retained in the
employment of the Company. All employees of the Company and Participants shall
be subject to discharge to the same extent they would have been if this Plan had
never been adopted.
ARTICLE X
LIMITATION OF ASSIGNMENT AND PAYMENTS TO
LEGALLY INCOMPETENT DISTRIBUTEE
10.1 No benefits which shall be payable under the Plan to any person
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose
of the same shall be void. No benefit shall in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any person, nor shall it
be subject to attachment or legal process for or against any person, except to
the extent required by law.
10.2 Whenever any benefit which shall be payable under the Plan is to
be paid to or for the benefit of any person who is then a minor or determined by
the Committee, on the basis of
-10-
<PAGE> 35
qualified medical advice, to be incompetent, the Committee need not require the
appointment of a guardian or custodian, but shall be authorized to cause the
same to be paid over to the person having custody of the minor or incompetent,
or to cause the same to be paid to the minor or incompetent without the
intervention of a guardian or custodian, or to cause the same to be paid to a
legal guardian or custodian of the minor or incompetent, if one has been
appointed, or to cause the same to be used for the benefit of the minor or
incompetent.
ARTICLE XI
AMENDMENT TO OR TERMINATION OF THE PLAN
The Committee reserves the right at any time to amend or terminate the
Plan in whole or in part. No amendment shall have the effect of retroactively
depriving Participants or Beneficiaries of rights already accrued under the
Plan. Upon termination of the Plan, the Committee may, in its sole and absolute
discretion, and notwithstanding any other provision hereunder to the contrary,
direct that all benefits hereunder will be paid as soon as administratively
practicable thereafter.
ARTICLE XII
GENERAL AND MISCELLANEOUS
12.1 Severability. In the event that any provision of this Plan shall
be declared illegal or invalid for any reason, said illegality or invalidity
shall not affect the remaining provisions of this Plan but shall be fully
severable and this Plan shall be construed and enforced as if said illegal or
invalid provision had never been inserted herein.
12.2 Construction. The Section headings and numbers are included only
for convenience of reference and are not to be taken as limiting or extending
the meaning of any of the terms and provisions of this Plan. Whenever
appropriate, words used in the singular shall include the plural or the plural
may be read as the singular.
12.3 Governing Law. The validity and effect of this Plan and the rights
and obligations of all persons affected hereby shall be construed and determined
in accordance with the laws of the State of Texas unless superseded by federal
law.
12.4 No Requirement to Fund. The Company is not required to set aside
any assets for payment of the benefits provided under this Plan. A Participant
shall have no security interest in any amounts credited hereunder on such
Participant's behalf. It is the Company's intention that this Plan be construed
as a plan which is unfunded and maintained primarily for the purpose of
providing deferred compensation for a select group of highly compensated
employees.
-11-
<PAGE> 36
12.5 Taxes. All amounts payable hereunder shall be reduced by any and
all federal, state and local taxes imposed upon the Participant or a Beneficiary
which are required to be paid or withheld by the Company.
IN WITNESS WHEREOF, Suiza Foods Corporation, the Company, has caused
its corporate seal to be affixed hereto and these presents to be duly executed
in its name and behalf by its proper officers thereunto duly authorized this
_____ day of June, 1999.
COMPANY:
SUIZA FOODS CORPORATION
By:
----------------------------------
<PAGE> 37
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
SUIZA FOODS CORPORATION
(In thousands, except share and per-share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Basic EPS computation:
Numerator:
Income from continuing operations ...................... $ 32,147 $ 29,630 $ 53,020 $ 47,683
Less preferred stock dividends......................... (75) (162)
------------ ------------ ------------ ------------
Income applicable to common stock ...................... $ 32,147 $ 29,555 $ 53,020 $ 47,521
============ ============ ============ ============
Denominator:
Average common shares .................................. 33,730,348 32,516,846 33,686,492 31,645,463
============ ============ ============ ============
Basic EPS from continuing operations ....................... $ 0.95 $ 0.91 $ 1.57 $ 1.50
============ ============ ============ ============
Diluted EPS calculation:
Numerator:
Income from continuing operations ...................... $ 32,147 $ 29,630 $ 53,020 $ 47,683
Less preferred stock dividends ......................... (75) (162)
Net effect on earnings from conversion of mandatorily
redeemable convertible preferred securities ........ 5,981 5,981 11,962 6,755
------------ ------------ ------------ ------------
Income applicable to common stock ...................... $ 38,128 $ 35,536 $ 64,982 $ 54,276
============ ============ ============ ============
Denominator:
Average common shares - basic .......................... 33,730,348 32,516,846 33,686,492 31,645,463
Stock option conversion ................................ 979,300 1,969,220 1,062,954 2,165,329
Dilutive effect of conversion of manditorily
redeemable convertible preferred securities .......... 9,096,105 9,096,303 9,096,132 5,219,999
------------ ------------ ------------ ------------
Average common shares - diluted ........................ 43,805,753 43,582,369 43,845,578 39,030,791
============ ============ ============ ============
Diluted EPS from continuing operations ................... $ 0.87 $ 0.82 $ 1.48 $ 1.39
============ ============ ============ ============
</TABLE>
<PAGE> 38
EXHIBIT 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
<S> <C>
Neptune Delaware Corporation Delaware
Suiza Capital Trust Delaware
Suiza Capital Trust II Delaware
Suiza Management Corporation Delaware
Broughton Foods Company Ohio
LFD Holding Company Delaware
London Farms Dairy, Inc. Delaware
Country Delite Farms, Inc. Delaware
Country Fresh, Inc. Michigan
Burger Dairy Company Indiana
CFI-TMP, Inc. Michigan
Country Fresh Wesley, Inc. Michigan
Dairy Products of Michigan, Inc. Michigan
East Coast Ice Cream, L.L.C. Michigan
Frostbite Brands, Inc. Michigan
Northern Falls Water Company, Inc. Delaware
Southeastern Juice Packers, Inc. Michigan
Dairy Fresh, Inc. Delaware
Garrido y Compania, Inc. Puerto Rico
LOS Holdings, Inc. Delaware
Land-O-Sun Dairies, L.L.C. Delaware
Louis Trauth Dairy, Inc. Delaware
Model Dairy, Inc. Delaware
The Morningstar Group Inc. Delaware
Morningstar Foods Inc. Delaware
Ultra Products, L.L.C. Arizona
Oberlin Farms Dairy, Inc. Ohio
Suiza Dairy Corporation Delaware
Suiza Fruit Corporation Delaware
Suiza GTL Holdings, Inc. Delaware
Suiza GTL, LLC Delaware
Assumed Names for Suiza GTL, LLC:
Footman's, LLC Maine
Footman's Dairy, LLC Maine
Grant's Dairy - Maine, LLC Maine
Sunrise Farms, LLC Maine
West Lynn Creamery - Maine, LLC Maine
Garelick Farms - Massachusetts Massachusetts
Miscoe Springs - Massachusetts Massachusetts
Scangas Bros. Holdings - Massachusetts Massachusetts
West Lynn Creamery - Massachusetts Massachusetts
West Lynn Creamery Realty - Massachusetts Massachusetts
West Lynn Creamery - New Hampshire New Hampshire
Garelick Farms - New Jersey New Jersey
</TABLE>
- 1 -
<PAGE> 39
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
<S> <C>
West Lynn Creamery - New Jersey New Jersey
Fairdale Farms - New York New York
Garelick Farms - New York New York
West Lynn Creamery - New York New York
Nature's Best Rhode Island
West Lynn Creamery - Vermont Vermont
New England Dairies, LLC Delaware
Tuscan/Lehigh Management, LLC Delaware
Tuscan/Lehigh Dairies, L.P. Delaware
Swiss Dairy Corporation Delaware
Thompson Beverage Acquisition Corporation Delaware
Velda Farms, Inc. Delaware
Continental Can Company, Inc. Delaware
Dixie Holding, Inc. New York
Dixie Union Geschaftsfuhrungs GmbH Germany
Dixie Union GmbH & Co. KG Germany
Ferembal S.A. France
Ferembal EST S.A., Ludres near Nancy - 99.99% France
Ferembal Developpement S.A., Ludres near Nancy - 99.99% France
Ferembal Sud Quest S.A., Villeneuve sur Lot (47) - 99.99% France
Ferembal Sud-Est S.A., Veauche near St-Etienne - 99.99% France
Ferembal Nord S.A., Roye (80) - 99.99% France
Ferembal Ouest S.A., Moelan (29) - 99.99% France
Ferembal Industries S.A., Roye (80) - 99.99% France
Ferembal Investissement S.A. (dormant company) - 99.99% France
Obalex A.S. (95%) Czech Republic
Amco S.A.-Buftea (51%) Romania
Franklin Plastics, Inc. Delaware
Consolidated Container Holdings LLC (49%) Delaware
Lockbart Realty Corp. [to be dissolved] New York
Viatech Espana SA Spain
Neva Plastics Manufacturing Corp. Delaware
Plastics Management Group, LLC Massachusetts
</TABLE>
- 2 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Condensed
Financial Statements for the 6-month period ended June 30, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 57,338
<SECURITIES> 8,612
<RECEIVABLES> 428,557
<ALLOWANCES> 0
<INVENTORY> 231,789
<CURRENT-ASSETS> 788,287
<PP&E> 934,349
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,173,569
<CURRENT-LIABILITIES> 565,421
<BONDS> 975,629
683,213
0
<COMMON> 337
<OTHER-SE> 707,093
<TOTAL-LIABILITY-AND-EQUITY> 3,173,569
<SALES> 1,118,844
<TOTAL-REVENUES> 1,118,844
<CGS> 855,895
<TOTAL-COSTS> 180,790
<OTHER-EXPENSES> 406
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,881
<INCOME-PRETAX> 56,872
<INCOME-TAX> 22,092
<INCOME-CONTINUING> 32,147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,147
<EPS-BASIC> 0.95
<EPS-DILUTED> 0.87
</TABLE>
