-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HtK26V+qLANmWRONGxuh5oHIFo1agwkg6el3eWiU/4lGvSErpti/hNQo/9x07k+K lFMKgfV+eoDqdeMRXnuEzw== 0000950134-99-007359.txt : 19990816 0000950134-99-007359.hdr.sgml : 19990816 ACCESSION NUMBER: 0000950134-99-007359 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUIZA FOODS CORP CENTRAL INDEX KEY: 0000931336 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 752559681 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12755 FILM NUMBER: 99688341 BUSINESS ADDRESS: STREET 1: 2515 MCKINNEY AVENUE LB 30 STREET 2: SUITE 1200 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2145289922 MAIL ADDRESS: STREET 1: 3811 TURTLE CREEK BLVD STREET 2: SUITE 1300 CITY: DALLAS STATE: TX ZIP: 75219 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1999 1 ================================================================================ 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 ================================================================================ 2 TABLE OF CONTENTS
Page ---- 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
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SUIZA FOODS CORPORATION CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, 1999 1998 ----------- ------------ (unaudited) (Dollars in thousands) 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 =========== ===========
See notes to consolidated financial statements. 3 4 SUIZA FOODS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- ---------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (Dollars in thousands, except per share data) 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 ============ ============ ============ ============
See notes to consolidated financial statements. 4 5 SUIZA FOODS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED JUNE 30, ---------------------------- 1999 1998 ----------- ----------- (Dollars in thousands) 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 =========== ===========
See notes to consolidated financial statements. 5 6 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 6 7 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
AT JUNE 30, AT DECEMBER 31, 1999 1998 ------------ -------------- (IN THOUSANDS) Raw materials and supplies................. $ 127,988 $ 113,118 Finished goods............................. 103,801 110,220 ------------ -------------- Total................................. $ 231,789 $ 223,338 ============ ==============
5. DEBT
AT JUNE 30, AT DECEMBER 31, 1999 1998 ----------- --------------- (IN THOUSANDS) 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 =========== ===========
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 7 8 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. 8 9 The following table summarizes our various interest rate agreements as of June 30, 1999:
NOTIONAL AMOUNT -------------- (IN THOUSANDS) 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
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 9 10 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:
THREE MONTHS ENDED JUNE 30, ------------------------------------------------------------------------------------------------ 1999 1998 ---------------------------------------------- ----------------------------------------------- SEGMENT SEGMENT DAIRY PACKAGING TOTAL DAIRY PACKAGING TOTAL ---------- ---------- ---------- ---------- ---------- ---------- (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
SIX MONTHS ENDED JUNE 30, -------------------------------------------------------------------------------------- 1999 1998 ------------------------------------------ ------------------------------------------ SEGMENT SEGMENT DAIRY PACKAGING TOTAL DAIRY PACKAGING TOTAL ---------- ---------- ---------- ---------- ---------- ---------- (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
- -------------------------- (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:
THREE MONTHS ENDED JUNE 30, ----------------------------------------------------------------------------------- 1999 1998 --------------------------------------- ---------------------------------------- CORPORATE/ CORPORATE/ SEGMENT OTHER TOTAL SEGMENT OTHER TOTAL ---------- ---------- ---------- ---------- ---------- ---------- (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
SIX MONTHS ENDED JUNE 30, ----------------------------------------------------------------------------------- 1999 1998 --------------------------------------- ---------------------------------------- CORPORATE/ CORPORATE/ SEGMENT OTHER TOTAL SEGMENT OTHER TOTAL ---------- ---------- ---------- ---------- ---------- ---------- (in 000's) Segment operating income(loss)..... $ 158,590 $ (14,755) $ 143,835 $ 113,481 $ (7,036) $ 106,445
10 11 Geographic information for 1999 and 1998 (in 000's):
REVENUES ---------------------------------------------------------------- LONG-LIVED ASSETS THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, AT JUNE 30, ---------------------------- ---------------------------- ---------------------------- 1999 1998 1999 1998 1999 1998 ---------- ---------- ---------- ---------- ---------- ---------- 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 ========== ========== ========== ========== ========== ==========
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):
Balance At Charge Payments June 30, 1999 ------ -------- ------------- Workforce severance obligations....... $ 628 $(460) $ 168 Lease and other obligations........... 495 (46) 449 ------- ----- ----- Total $ 1,123 $(506) $ 617 ======= ===== =====
11 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):
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 ---------- -------- ---------- ------- ----------- --------- ---------- ------------ 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% ========== ======== ========== ======= =========== ========= ========== ===========
- --------------- (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. 12 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 13 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. 14 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. 15 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 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. 17 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. 18 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 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. 20 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 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:
TYPE INTEREST RATE LIMITS NOTIONAL AMOUNTS EXPIRATION DATE - ---- -------------------- ---------------- --------------- 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
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 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: Stephen L. Green - 26,968,162 votes for; 100,628 votes withheld John R. Muse - 26,968,012 votes for; 100,778 votes withheld
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 Exhibits 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
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 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 25 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 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
EX-3 2 AMENDED & RESTATED BYLAWS 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. - 1 - 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 - 2 - 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. - 3 - 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 - 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. - 5 - 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. - 6 - 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. - 7 - 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 - 8 - 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 - 9 - 10 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, - 10 - 11 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 - 11 - 12 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. - 12 - 13 (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. - 13 - 14 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. EX-10.1 3 AMENDED & RESTATED 1997 STOCK OPTION 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 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 2 3 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 3 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 4 5 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 5 6 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 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 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 EX-10.2 4 CONSENT & WAIVER 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-10.3 5 EXECUTIVE DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.3 SUIZA FOODS CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN Table of Contents
Page ---- 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
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. 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- 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- 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- 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- 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- 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- 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- 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- 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- 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. -11- 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: ---------------------------------- EX-11 6 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS SUIZA FOODS CORPORATION (In thousands, except share and per-share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------------- ---------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============
EX-21 7 SUBSIDIARIES OF THE REGISTRANT 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 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 2 3 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 3 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 4 5 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 5 6 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 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 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 9 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 10 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 11 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 12 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 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 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 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 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 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 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 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 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 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 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 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 24 EXHIBIT 10.3 SUIZA FOODS CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN Table of Contents
Page ---- 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
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. 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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: ---------------------------------- 37 EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS SUIZA FOODS CORPORATION (In thousands, except share and per-share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------------- ---------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============
38 EXHIBIT 21 LIST OF SUBSIDIARIES
Name of Subsidiary State of Incorporation - ------------------ ---------------------- 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
- 1 - 39
Name of Subsidiary State of Incorporation - ------------------ ---------------------- 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
- 2 - EX-27 8 FINANCIAL DATA SCHEDULE
5 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. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 57,338 8,612 428,557 0 231,789 788,287 934,349 0 3,173,569 565,421 975,629 683,213 0 337 707,093 3,173,569 1,118,844 1,118,844 855,895 180,790 406 0 24,881 56,872 22,092 32,147 0 0 0 32,147 0.95 0.87
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