AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 2001
REGISTRATION NO. 333-64936
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUIZA FOODS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 2026 75-2559681
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
2515 MCKINNEY AVENUE
SUITE 1200
DALLAS, TEXAS 75201
(214) 303-3400
(Address, Including Zip Code, and Telephone Number, including Area
Code, of Registrant's Principal Executive Offices)
------------------------------
MICHELLE P. GOOLSBY
EXECUTIVE VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER,
GENERAL COUNSEL AND CORPORATE SECRETARY
2515 MCKINNEY AVENUE
SUITE 1200
DALLAS, TEXAS 75201
(214) 303-3400
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------
COPIES TO:
WILLIAM A. MCCORMACK CARTER W. EMERSON, P.C.
HUGHES & LUCE, L.L.P. H. KURT VON MOLTKE
1717 MAIN STREET KIRKLAND & ELLIS
SUITE 2800 200 EAST RANDOLPH DRIVE
DALLAS, TEXAS 75201 CHICAGO, ILLINOIS 60601
(214) 939-5500 (312) 861-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement and the
satisfaction or waiver of all other conditions to the merger of a wholly-owned
subsidiary of the Registrant and Dean as described in the Agreement and Plan of
Merger dated as of April 4, 2001.
------------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE REGISTRATION FEE
Common Stock, $0.01 par value per share..... 18,509,450 $53.31 $986,738,780 $246,685(3)
(1) This registration statement covers the number of shares of Suiza Foods
Corporation common stock, par value $0.01 per share, issuable upon
consummation of the merger of Dean Foods Company with a wholly-owned
subsidiary of Suiza. The number of shares of Suiza common stock to be issued
in the merger will depend on the price of Suiza's common stock and the
number of shares of Dean common stock issued and outstanding immediately
prior to the merger. The proposed maximum amount to be registered is based
on an exchange ratio of 0.429 shares of Suiza common stock to be issued in
the merger for each issued and outstanding share of Dean common stock, the
number of shares of Dean common stock issued and outstanding as of
August 10, 2001, which was 35,769,877 shares, and the number of shares of
Dean common stock issuable upon exercise of Dean stock options outstanding
as of August 10, 2001. The registrant hereby registers such additional
indeterminate number of shares of Suiza common stock as may be necessary in
the event that the exchange ratio is adjusted above 0.429 under the
circumstances described in the joint proxy statement/prospectus.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(c) under the Securities Act. The maximum price per
share information is based on the average of the high and the low sale
prices of Suiza's common stock, $0.01 par value per share, reported on the
New York Stock Exchange on August 8, 2001.
(3) Of this amount, $201,414 was previously paid.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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REFERENCES TO ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and
financial information about Suiza and Dean from other documents that are not
included in or delivered with this joint proxy statement/prospectus. You can
obtain those documents free of charge by requesting them in writing or by
telephone from the appropriate company at the following addresses and telephone
numbers:
Suiza Foods Corporation Dean Foods Company
Investor Relations Director of Corporate Communications
2515 McKinney Avenue 3600 North River Road
Suite 1200 Franklin Park, Illinois 60131
Dallas, Texas 75201 (800) 971-3326
(800) 431-9214
See "Where You Can Find More Information" on page 99.
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT!
[SUIZA LOGO] AUGUST 14, 2001 [DEAN LOGO]
Dear Stockholder:
We are pleased to report that on April 4, 2001, the boards of directors of
Suiza Foods Corporation and Dean Foods Company approved a merger agreement that
provides for the combination of our companies.
Upon completion of the merger, each stockholder of Dean will receive, in
exchange for each Dean share held, 0.429 shares of Suiza's common stock plus
$21.00 in cash, subject to adjustment in certain circumstances as described in
this joint proxy statement/prospectus. Suiza will issue approximately
15.3 million shares of common stock to Dean's stockholders in the merger
(excluding shares to be issued as a result of the exercise of currently
outstanding Dean stock options). These shares will represent approximately 35%
of the outstanding shares of Suiza's common stock after the merger. Because
Dean's name carries a significant amount of consumer recognition and loyalty as
a result of Dean's 76-year history of delivering quality products to its
customers, Suiza will change its name to Dean Foods Company at the time of the
merger, and Suiza's trading symbol on the New York Stock Exchange will change
from "SZA" to "DF."
Our merger agreement contains several conditions which must be satisfied
before we can complete the merger. One such condition requires that Dean's
stockholders approve the merger. Another condition requires that Suiza's
stockholders approve the issuance of Suiza's common stock in connection with the
merger.
In order to ensure that Suiza has a sufficient number of options and stock
awards available after the merger to reward and incent its expanded ranks of key
employees and directors, Suiza is also proposing that its stockholders approve,
if the merger occurs, (1) Suiza's adoption of Dean's 1989 Stock Awards Plan, and
(2) an increase in the number of shares of its common stock reserved for
issuance under Suiza's 1997 Stock Option and Restricted Stock Plan.
This joint proxy statement/prospectus contains a great deal of important
information that you should consider in determining your vote. IN PARTICULAR,
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 21 FOR A DISCUSSION OF CERTAIN RISKS
THAT YOU SHOULD CONSIDER.
Both of our companies will hold special stockholder meetings for the purpose
of voting on the proposals described in this joint proxy statement/prospectus.
We are furnishing you this document in connection with the solicitation of your
vote by the boards of directors of our companies at these meetings. The dates,
times and places of the meetings are:
For Suiza's stockholders: For Dean's stockholders:
Friday, September 21, 2001 Friday, September 14, 2001
10:00 A.M. Central Time 9:00 A.M. Central Time
Hotel Crescent Court O'Hare International Center
400 Crescent Court Auditorium
Dallas, Texas 75201 10275 West Higgins Road
Rosemont, Illinois, 60018
We are very excited about this transaction, and believe that our companies
will be able to create more value together than either company could achieve
alone. We believe that the merger is in the best interest of our stockholders,
and recommend that you vote "FOR" the proposals described in this joint proxy
statement/ prospectus.
Please read this document carefully.
Sincerely,
/s/ Gregg L. Engles /s/ Howard M. Dean
Gregg L. Engles Howard M. Dean
Chairman of the Board and Chairman of the Board and
Chief Executive Officer Chief Executive Officer
Suiza Foods Corporation Dean Foods Company
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Suiza stock to be issued under this
joint proxy statement/prospectus or determined if this joint proxy
statement/prospectus is accurate or adequate. Any representation to the contrary
is a criminal offense.
This joint proxy statement/prospectus is dated August 14, 2001, and is first
being mailed to stockholders of Suiza and Dean on or about August 15, 2001.
[LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF SUIZA FOODS CORPORATION
Suiza will hold a special stockholder meeting on Friday, September 21, 2001
at 10:00 a.m., Central Time. The meeting will be held at the Hotel Crescent
Court, 400 Crescent Court, Dallas, Texas 75201.
At the meeting, we will ask you to consider and vote on the following
proposals:
- a proposal to approve:
- the issuance of Suiza's common stock to Dean's stockholders in the
merger, as contemplated by the Agreement and Plan of Merger dated
April 4, 2001 among Suiza, Blackhawk Acquisition Corp., a wholly-owned
subsidiary of Suiza, and Dean; and
- the reservation of an additional number of shares of Suiza's common
stock for issuance after the merger pursuant to stock-based awards
outstanding at the time of the merger under Dean's stock awards plans;
- a proposal to approve Suiza's adoption of Dean's 1989 Stock Awards Plan
and the reservation of 1,894,864 shares of Suiza's common stock for
issuance after the merger pursuant to that plan, if the merger occurs; and
- a proposal to increase the number of shares of Suiza's common stock
reserved for issuance under Suiza's 1997 Stock Option and Restricted Stock
Plan from 7.5 million shares to 12.5 million shares, if the merger occurs.
We will also discuss and take action on any other business that is properly
brought before the meeting.
Holders of at least a majority of the shares of Suiza's common stock
outstanding on August 10, 2001 must be present at the meeting in order to
conduct the meeting. You will be deemed to be "present" at the meeting if you:
- are present in person;
- are not present in person, but you have voted by proxy card, telephone or
internet prior to the meeting; or
- are not present in person and have not voted by proxy card, telephone or
internet but your broker returns a proxy card on your behalf.
THE HOLDERS OF A MAJORITY OF SUIZA'S SHARES WITH VOTING POWER PRESENT AT THE
MEETING (IN PERSON OR BY PROXY) MUST VOTE FOR EACH PROPOSAL IN ORDER FOR THE
PROPOSAL TO BE APPROVED.
If you were a Suiza stockholder at the close of business on August 10, 2001,
you are entitled to vote on the proposals to be considered at the meeting.
Whether or not you plan to attend the meeting, we urge you to vote now by mail,
telephone or internet, according to the instructions on the enclosed proxy card.
You can change your vote at any time before the meeting for any reason. To
change your vote before the meeting, you may:
- write to us or submit a later-dated proxy to us at 2515 McKinney Avenue,
Suite 1200, Dallas, Texas 75201, Attention: Corporate Secretary;
- vote again by telephone or internet by following the instructions listed
on the enclosed proxy card (the last vote entered before the meeting
begins will be counted); or
- if you are a registered Suiza stockholder, come to the meeting and change
your vote in writing.
Suiza's board of directors has unanimously approved each of the merger
proposal, the proposal to adopt the Dean stock awards plan and the proposal to
increase the Suiza option plan, and recommends that you vote "FOR" all three of
the proposals.
[LOGO]
Michelle P. Goolsby
Executive Vice President,
Chief Administrative Officer,
General Counsel and Secretary
August 14, 2001
[DEAN LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF DEAN FOODS COMPANY
Dean will hold a special stockholder meeting on Friday, September 14, 2001
at 9:00 a.m., Central Time. The meeting will be held at O'Hare International
Center Auditorium, 10275 West Higgins Road, Rosemont, Illinois 60018.
At the meeting, we will ask you to consider and vote on a proposal to
approve the Agreement and Plan of Merger dated April 4, 2001 among Suiza,
Blackhawk Acquisition Corp., a wholly owned subsidiary of Suiza, and Dean and
the merger contemplated by that agreement, as more fully described in this joint
proxy statement/ prospectus.
We will also discuss and take action on any other business that is properly
brought before the meeting.
Holders of at least a majority of the shares of Dean's common stock
outstanding on August 10, 2001 must be present at the meeting in order to
conduct the meeting. You will be deemed to be "present" at the meeting if you:
- are present in person;
- are not present in person, but you have voted by proxy card prior to the
meeting; or
- are not present in person and have not voted by proxy card but your broker
returns a proxy card on your behalf.
THE HOLDERS OF A MAJORITY OF DEAN'S OUTSTANDING SHARES MUST VOTE FOR THE
PROPOSAL IN ORDER FOR IT TO BE APPROVED. THEREFORE, IF YOU DON'T VOTE, IT WILL
HAVE THE SAME EFFECT AS IF YOU VOTED AGAINST THE MERGER.
If you were a Dean stockholder at the close of business on August 10, 2001,
you are entitled to vote on the proposal to be considered at the meeting.
Whether or not you plan to attend the meeting, we urge you to vote now by
completing and returning the enclosed proxy card. You can change your vote at
any time before the meeting for any reason. To change your vote before the
meeting, either:
- write to us or submit a later-dated proxy to us at 3600 North River Road,
Franklin Park, Illinois 60131, Attention: Corporate Secretary; or
- if you are a registered Dean stockholder, come to the meeting and change
your vote in writing.
Dean's board of directors has unanimously approved the merger proposal and
recommends that you vote "FOR" the merger proposal.
/s/ Dale E. Kleber
Dale E. Kleber
Vice President, Secretary and
General Counsel
August 14, 2001
TABLE OF CONTENTS
PAGE
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QUESTIONS AND ANSWERS
I am a Dean stockholder. If the merger is completed, what
will I receive in exchange for my shares of Dean?....... 1
I am a Dean stockholder. What do I need to do to get my
cash and shares of Suiza's common stock?................ 1
When do you expect the merger to be completed?............ 1
How can I be sure I receive notice of any press releases
about the merger?....................................... 1
What do I need to do now?................................. 1
What if I vote now, but then decide I want to change my
vote?................................................... 2
What happens if I don't vote? How many votes are necessary
to approve the proposals?............................... 2
If my shares are held in a brokerage account, will my
broker vote my shares for me?........................... 2
I am a Suiza stockholder. Will I receive any cash or stock
as a result of the merger?.............................. 3
I am a Dean stockholder. Will I have to pay taxes on the
cash and stock I receive in the merger?................. 3
Will Dean's stockholders continue to receive dividends
after the merger?....................................... 3
I am a Suiza stockholder. Can I vote in favor of the
merger proposal and against one or both of the option
plan proposals?......................................... 3
How can I find out whether the proposals were approved by
the stockholders?....................................... 3
Can I demand an appraisal of my shares?................... 3
Who do I call if I have further questions?................ 3
SUMMARY INFORMATION......................................... 4
The Companies............................................. 4
Reasons for the Merger.................................... 6
Our Recommendations to Stockholders Concerning the
Merger.................................................. 6
The Merger and the Merger Agreement....................... 7
Comparative Market Price Information...................... 14
Comparative Per Share Data................................ 14
Selected Historical Financial Information of Suiza........ 16
Selected Historical Financial Information of Dean......... 17
Selected Unaudited Pro Forma Consolidated Financial
Information of Suiza.................................... 18
Opinions of Financial Advisors............................ 19
Interests of Certain Persons in the Merger................ 19
Suiza's Option Plan Proposals............................. 20
Stockholder Votes Required to Approve the Proposals....... 20
RISK FACTORS................................................ 21
Risks Relating to the Merger.............................. 21
Risks Relating to the Combined Company's Business......... 25
THE MERGER AND THE MERGER AGREEMENT......................... 30
Background of the Merger.................................. 30
Dean's Reasons for the Merger............................. 33
Recommendation of Dean's Board of Directors............... 36
Dean's Covenant to Recommend.............................. 37
Suiza's Reasons for the Merger............................ 37
Recommendation of Suiza's Board of Directors.............. 39
Suiza's Covenant to Recommend............................. 39
Structure of the Merger................................... 39
What Dean's Stockholders Will Receive..................... 39
Exchange of Shares........................................ 41
What Suiza's Stockholders Will Hold After the Merger...... 42
PAGE
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Ownership of Suiza After the Merger....................... 42
Management of Suiza After the Merger...................... 42
Name Change and Listing of Suiza's Common Stock........... 43
Timing of Closing......................................... 43
Regulatory Matters and Divestitures....................... 43
Principal Conditions to the Completion of the Merger...... 44
Representations and Warranties in the Merger Agreement.... 45
Solicitation Restriction on Dean.......................... 47
Termination of the Merger Agreement....................... 48
Fees and Expenses......................................... 49
Treatment of Dean Stock Options and Other Equity
Interests............................................... 50
Interim Operations of Suiza and Dean...................... 50
Certain Employee Benefit Matters.......................... 52
Indemnification of Dean's Directors and Officers.......... 52
Additional Covenants in the Merger Agreement.............. 52
Material Federal Income Tax Consequences of the Merger.... 53
Amendment of the Merger Agreement......................... 55
Accounting Treatment...................................... 55
Appraisal Rights.......................................... 55
The Related Transactions.................................. 58
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION........... 59
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION............................................... 61
OPINIONS OF FINANCIAL ADVISORS.............................. 69
Opinion of Dean's Financial Advisor....................... 69
Opinions of Suiza's Financial Advisors.................... 73
INTERESTS OF CERTAIN PERSONS IN THE MERGER.................. 80
Termination and Change in Control Benefits................ 80
Dean's Stock Options and Performance Awards............... 81
Deferred Compensation Plans............................... 82
Supplemental Benefit Plan................................. 82
Merger Severance Plan..................................... 83
Dean Discretionary Stay Bonus Pool........................ 83
Dean Resignation and Retirement Payments.................. 83
Indemnification; Directors' and Officers' Insurance....... 83
SUIZA'S OPTION PLAN PROPOSALS............................... 84
Reasons for the Option Plan Proposals..................... 84
Proposal to Adopt Dean's Stock Awards Plan................ 84
Proposal to Increase Suiza's Existing Option Plan......... 86
Recommendation of Suiza's Board of Directors.............. 87
INFORMATION ABOUT THE MEETINGS AND VOTING................... 88
Matters Relating to the Stockholder Meetings.............. 88
How to Vote by Proxy...................................... 90
Suiza Proposals........................................... 91
Dean Proposal............................................. 91
Proxy Solicitation........................................ 91
Other Business; Adjournments.............................. 92
ii
PAGE
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COMPARISON OF STOCKHOLDER RIGHTS............................ 93
DESCRIPTION OF SUIZA'S STOCK................................ 98
Authorized Suiza Stock.................................... 98
Suiza Common Stock........................................ 98
Transfer Agent and Exchange Agent......................... 98
Stock Exchange Listing; Delisting and Deregistration of
Dean Common Stock....................................... 98
LEGAL OPINIONS.............................................. 99
EXPERTS..................................................... 99
FUTURE STOCKHOLDER PROPOSALS................................ 99
WHERE YOU CAN FIND MORE INFORMATION......................... 99
ANNEXES:
Annex A -- Agreement and Plan of Merger
Annex B -- Opinion of Goldman, Sachs & Co.
Annex C -- Opinion of Bear, Stearns & Co. Inc.
Annex D -- Opinion of Morgan Stanley & Co. Incorporated
Annex E -- Section 262 of the Delaware General Corporation Law
Annex F -- Dean's 1989 Stock Awards Plan, as amended if the merger occurs
Annex G -- Tax Information About Dean's Stock Awards Plan
Annex H -- Tax Information About Suiza's Stock Option Plan
iii
QUESTIONS AND ANSWERS
I AM A DEAN STOCKHOLDER. IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE IN
EXCHANGE FOR MY SHARES OF DEAN?
You will receive a combination of cash and Suiza stock. Specifically, you
will receive, in exchange for each of your Dean shares, $21.00 in cash plus
0.429 shares of Suiza's common stock, subject to adjustment if the price of
Suiza's common stock is below $32.71 when the merger occurs. In that case, the
mix of cash and stock that you receive would change. You would receive less cash
and more stock, without changing the total value you receive in exchange for
your Dean shares. For more information, see "The Merger and the Merger
Agreement--What Dean's Stockholders Will Receive" on page 39. The reason for
this adjustment is to ensure that the merger will qualify as a "tax-free
reorganization" under federal tax laws. For more information about the tax
consequences of the merger, see "The Merger and the Merger Agreement--Material
Federal Income Tax Consequences of the Merger" on page 53. The final mix of cash
and stock will be determined on the day of the merger, and we will issue a press
release on that day announcing the final per share amounts of cash and stock to
be issued in the merger.
I AM A DEAN STOCKHOLDER. WHAT DO I NEED TO DO TO GET MY CASH AND SHARES OF
SUIZA'S COMMON STOCK?
Promptly following the merger, Suiza will mail you instructions for
exchanging your shares. You do not need to do anything now, other than read this
document and vote.
WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
In addition to stockholder approvals, we must also obtain certain regulatory
approvals. We are working to obtain these approvals as soon as possible. At this
time, we expect to complete the merger during the fourth calendar quarter of
2001. As soon as we have obtained the necessary regulatory approvals, we will
issue a press release announcing the exact time that the merger will be
completed.
HOW CAN I BE SURE I RECEIVE NOTICE OF ANY PRESS RELEASES ABOUT THE MERGER?
To receive copies of any Suiza press releases concerning the merger:
- go to Suiza's website at www.suizafoods.com and click on "Press Releases."
Sign up to receive e-mail notification of any Suiza press releases by
entering your internet e-mail address in the box on the middle of the
page; or
- call Suiza's Investor Relations department toll-free at 1-800-431-9214 and
ask to be added to Suiza's mailing list for press releases concerning the
merger.
To receive copies of any Dean press releases concerning the merger:
- go to Dean's website at www.deanfoods.com and click on "Financial" and
then click on "Financial News." Click on "E-mail Alerts Signup" at the top
of your screen, and follow the instructions on the screen to receive
e-mail notification of any Dean press releases; or
- call Dean's Director of Corporate Communications toll-free at
1-800-971-3326 and ask to be added to Dean's mailing list for press
releases concerning the merger.
WHAT DO I NEED TO DO NOW?
First, you should carefully read this document. The next step is to vote.
Please see the enclosed proxy card for instructions on how to vote.
1
WHAT IF I VOTE NOW, BUT THEN DECIDE I WANT TO CHANGE MY VOTE?
You can change your vote at any time before your stockholder meeting for any
reason. If you are a Suiza stockholder, you can change your vote before Suiza's
stockholder meeting by:
- writing to Suiza or submitting a later-dated proxy to Suiza at 2515
McKinney Avenue, Suite 1200, Dallas, Texas 75201, Attention: Corporate
Secretary;
- voting again by telephone or internet by following the instructions listed
on the enclosed proxy card (the last vote entered before the meeting
begins will be counted); or
- if you are a registered Suiza stockholder, coming to Suiza's stockholder
meeting and changing your vote in writing.
If you are a Dean stockholder, you can change your vote before Dean's
stockholder meeting by:
- writing to Dean or submitting a later-dated proxy to Dean at 3600 North
River Road, Franklin Park, Illinois 60131, Attention: Corporate Secretary;
or
- if you are a registered Dean stockholder, coming to Dean's stockholder
meeting and changing your vote in writing.
WHAT HAPPENS IF I DON'T VOTE? HOW MANY VOTES ARE NECESSARY TO APPROVE THE
PROPOSALS?
If you are a Dean stockholder and you don't vote or you "abstain", your
ballot will have the same effect as if you voted against the merger, because
approval of the merger requires the affirmative vote of a majority of the
outstanding shares of Dean's common stock.
If you are a Suiza stockholder and you don't vote, your failure to vote may
affect whether there will be enough stockholders present (in person or by proxy)
at the Suiza stockholder meeting to hold the meeting. A majority of Suiza's
outstanding shares must be present (in person or by proxy) at the meeting in
order to conduct the meeting. A Suiza stockholder's failure to vote may also
affect whether the shares issued in the merger and under Dean's stock awards
plan and the additional shares proposed for authorization under Suiza's option
plan will qualify for listing on the New York Stock Exchange. The holders of at
least 50% of Suiza's outstanding stock must vote (by voting any of "yes," "no"
or "abstain") in order for shares issued in the merger, and under Dean's stock
awards plan and the additional shares proposed for authorization under Suiza's
option plan, to be listed on the New York Stock Exchange. If you are a Suiza
stockholder and you "abstain" on any of the three proposals, your ballot will
have the practical effect of a vote against that proposal, because abstaining
shares are counted as shares present at the meeting, and approval of each
proposal requires the affirmative vote of the holders of a majority of the
shares with voting power present at the meeting. For purposes of the New York
Stock Exchange requirement, "abstaining" is a form of voting.
IF MY SHARES ARE HELD IN A BROKERAGE ACCOUNT, WILL MY BROKER VOTE MY SHARES FOR
ME?
Generally, if your shares are held in a brokerage account, they are not
officially registered in your name but, rather, in your broker's name. In this
case, your shares are said to be held in "street name." If your shares are not
held in "street name" by your broker, then you are a "registered stockholder."
If your shares are held in "street name," you can only vote through your
broker because your shares are officially held in the name of your broker. If
you want to vote in person at the meeting, you must have a proper power of
attorney from your broker. If you want to vote by mail, telephone or internet,
you must do so by following the instructions on the enclosed voting card. Even
though your shares are held in your broker's name, your broker cannot vote for
you without your instruction (although your broker can cause your shares to be
present for quorum purposes even if you do not give an instruction on how to
vote). You should therefore instruct your broker how to vote for you by
following the directions on the enclosed voting card provided by your broker.
If you are a registered stockholder, your broker cannot vote for you at all,
or cause your shares to be present at the meeting for quorum purposes. If you
are a registered stockholder, you can only vote
2
by one of the means indicated on the enclosed proxy card or by voting in person
at the meeting. Likewise, you will only be deemed to be present at the meeting
if you come to the meeting in person, or if you vote prior to the meeting (by
voting any of "yes," "no" or "abstain") according to the instructions on the
enclosed proxy card.
If you received more than one copy of this joint proxy statement/prospectus,
then your shares are probably held in more than one account, and you should vote
on each proxy card that you receive in order to ensure that all of your shares
are voted.
I AM A SUIZA STOCKHOLDER. WILL I RECEIVE ANY CASH OR STOCK AS A RESULT OF THE
MERGER?
No. Suiza's stockholders will not receive any cash or stock in connection
with the merger. You will simply continue to hold the stock you currently own.
If you wish to exchange your existing stock certificates after the merger for
certificates that bear Suiza's new name, you may send your certificates, after
the merger, to Suiza's transfer agent for exchange. Your new certificates will
represent exactly the same number of shares as your old certificates.
I AM A DEAN STOCKHOLDER. WILL I HAVE TO PAY TAXES ON THE CASH AND STOCK I
RECEIVE IN THE MERGER?
You will recognize taxable gain equal to the lesser of (1) the amount of
cash you receive in the merger and (2) an amount equal to (a) the fair market
value of the Suiza common stock and cash that you receive in the merger minus
(b) your tax basis (which is generally equal to your cost) for the shares of
Dean common stock that you are exchanging in the merger. For a further
discussion of the possible tax consequences of the merger, see "The Merger and
the Merger Agreement--Material Federal Income Tax Consequences of the Merger" on
page 53.
WILL DEAN'S STOCKHOLDERS CONTINUE TO RECEIVE DIVIDENDS AFTER THE MERGER?
No. Suiza has never paid dividends and does not anticipate paying dividends
in the foreseeable future, even after the merger is completed. However, subject
to approval by Dean's board of directors, Dean will continue paying its regular
quarterly dividend until the merger is completed.
I AM A SUIZA STOCKHOLDER. CAN I VOTE IN FAVOR OF THE MERGER PROPOSAL AND AGAINST
ONE OR BOTH OF THE OPTION PLAN PROPOSALS?
Yes. When you vote, you will be asked to vote "for," "against" or "abstain"
on the merger proposal and the two option plan proposals as separate votes, and
you can vote for, against or abstain in any combination on Suiza's three
proposals. See the enclosed proxy card.
HOW CAN I FIND OUT WHETHER THE PROPOSALS WERE APPROVED BY THE STOCKHOLDERS?
Immediately after the stockholder meetings, Suiza and Dean will issue press
releases announcing the voting results of the meetings.
CAN I DEMAND AN APPRAISAL OF MY SHARES?
Each Dean stockholder has the right to a judicial appraisal of the fair
value of his or her shares under Delaware law. The procedure for perfecting
appraisal rights is described under "The Merger and the Merger
Agreement--Appraisal Rights" on page 55. Suiza's stockholders do not have
appraisal rights.
WHO DO I CALL IF I HAVE FURTHER QUESTIONS?
Suiza stockholders may call Suiza's Investor Relations department toll-free
at 1-800-431-9214.
Dean stockholders may call Dean's Director of Corporate Communications
toll-free at 1-800-971-3326.
3
SUMMARY INFORMATION
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS JOINT PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE PROPOSALS FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER AGREEMENT, YOU SHOULD CAREFULLY
READ THIS DOCUMENT AND THE DOCUMENTS TO WHICH WE HAVE REFERRED YOU. SEE "WHERE
YOU CAN FIND MORE INFORMATION" ON PAGE 98.
THE COMPANIES
SUIZA FOODS CORPORATION
AND BLACKHAWK ACQUISITION CORP.
Suiza Foods Corporation, based in Dallas, Texas, is the leading manufacturer
and distributor of dairy products in the United States. Suiza currently divides
its business into three broad groups: Suiza Dairy Group, Morningstar Foods and
International/Other.
Suiza Dairy Group sells primarily fresh dairy products, with its product mix
weighted heavily toward fluid milk, including flavored milks and buttermilk.
Other products that Suiza Dairy Group sells include ice cream and ice cream
novelties, half-and-half and whipping cream, condensed milk, cottage cheese,
sour cream, yogurt, dips, coffee creamers, juice, juice drinks and water. Suiza
Dairy Group manufactures its products in 67 plants in 29 states, and markets its
products primarily on a local or regional basis. Due to the highly perishable
nature of many of its products, it delivers its products directly from its
plants or distribution warehouses to its customers in trucks owned or leased by
Suiza Dairy Group. Suiza Dairy Group has one of the most extensive refrigerated
"direct store delivery" systems in the United States, with over 4,300 delivery
routes across the country. In 2000, Suiza Dairy Group manufactured and marketed
approximately two thirds of its dairy products under its proprietary and
licensed brand names. The remaining one third of Suiza Dairy Group's products
were manufactured and sold on a private-label (or "customer brand") basis for
customers. Proprietary brands used in Suiza Dairy Group include the following
regional brands: ADOHR FARMS-Registered Trademark-,
BARBE'S-Registered Trademark-, BROUGHTON-Registered Trademark-, BROWN'S
DAIRY-Registered Trademark-, COUNTRY DELITE-TM-, COUNTRY
FRESH-Registered Trademark-, DAIRY GOLD-Registered Trademark-,
DAIRYMENS-Registered Trademark-, FLAV-O-RICH-Registered Trademark-,
HYGEIA-Registered Trademark-, LEHIGH VALLEY FARMS-Registered Trademark-,
LONDON'S-Registered Trademark-, MEADOW GOLD-Registered Trademark-, MODEL
DAIRY-TM-, GARELICK FARMS-Registered Trademark-, NATURE'S PRIDE-TM-, OAK
FARMS-Registered Trademark-, POUDRE VALLEY-Registered Trademark-,
ROBINSON-Registered Trademark-, SCHENKEL'S ALL STAR DAIRY-TM-,
SCHEPPS-Registered Trademark-, SHENANDOAH'S PRIDE-Registered Trademark-, SWISS
DAIRY-TM-, LOUIS TRAUTH DAIRY-Registered Trademark-,
TUSCAN-Registered Trademark- and VELDA FARMS-Registered Trademark-. Suiza Dairy
Group also sells products, on a regional basis, under certain partner or
licensed brands including BORDEN-Registered Trademark-,
FOREMOST-Registered Trademark- and PET-Registered Trademark-, and under its
proprietary KIDSMILK-Registered Trademark- and FITMILK-Registered Trademark-
brands. In 2000, Suiza Dairy Group's sales comprised approximately 81% of
Suiza's total sales.
Morningstar Foods sells primarily extended shelf life (ESL) fluid, aerosol
and other dairy and non-dairy products. Its product offerings include dairy and
non-dairy coffee creamers, flavored and unflavored ESL milks, lactose-free milk
and soymilk, aerosol whipped topping, dairy and non-dairy frozen whipped
topping, egg substitute and cultured dairy products. Morningstar Foods markets
its products primarily on a national basis and in several foreign countries.
Unlike Suiza Dairy Group, Morningstar Foods' specialty and ESL products are
delivered to customers primarily by common carrier. Morningstar Foods
manufactures its products in ten plants across the United States. In 2000,
Morningstar Foods manufactured and marketed approximately 40% of its products
under its proprietary and licensed brand names. The remaining approximately 60%
of Morningstar Foods' products were manufactured and sold on a private label (or
"customer brand") basis for customers. Proprietary brands used by Morningstar
Foods include the following national brands: INTERNATIONAL
DELIGHT-Registered Trademark-, SUN SOY-TM-, SECOND NATURE-Registered Trademark-,
NATURALLY YOURS-Registered Trademark- and MOCHA MIX-Registered Trademark-.
Morningstar Foods has also entered into agreements to sell products under
certain partner or licensed brands including HERSHEY'S-Registered Trademark- and
FOLGER'S JAKADA-Registered Trademark-. In 2000, Morningstar Foods' sales
comprised approximately 12% of Suiza's total sales.
4
Suiza's international operations consist of its 75% interest in Leche Celta,
one of the largest dairy processors in Spain. Leche Celta operates three plants
in Spain, and sells primarily branded ultra-high temperature (UHT) fluid milk.
Suiza also has operations on the island of Puerto Rico conducted under the name
"Suiza Dairy." Suiza Dairy operates four plants across the island, and
manufactures primarily fresh dairy products with its product mix weighted
heavily toward branded fluid milk and juice drinks. Additionally, Suiza owns
43.1% of Consolidated Container Company, one of the nation's largest
manufacturers of rigid plastic containers.
Blackhawk Acquisition Corp. is a newly formed Delaware corporation and a
wholly-owned subsidiary of Suiza. Blackhawk was organized solely for the purpose
of effecting the merger with Dean Foods Company. Blackhawk has no material
assets and has not engaged in any activities except for the execution and
approval of the merger agreement.
The principal executive offices of Suiza and Blackhawk are located at 2515
McKinney Avenue, Suite 1200, Dallas, Texas 75201, telephone number
(214) 303-3400.
Unless otherwise indicated, references to Suiza in this joint proxy
statement/prospectus are to Suiza Foods Corporation and all of its subsidiaries.
References to Blackhawk in this joint proxy statement/prospectus are to
Blackhawk Acquisition Corp.
DEAN FOODS COMPANY
Dean Foods Company, based in Franklin Park, Illinois, is one of the nation's
leading processors and distributors of dairy products, producing a full line of
branded and private label products. Dean is also a leading manufacturer and
distributor of specialty food products, including pickles and non-dairy coffee
creamers, and refrigerated products, including dips and salad dressings. Dean's
business is organized into three groups: the Dairy Group, the Specialty Foods
Group and the National Refrigerated Products Group.
The Dairy Group produces and distributes fluid milk, ice cream and ice cream
novelties, and cultured products, including cottage cheese, sour cream and
yogurt. Other products sold by Dean's Dairy Group include juice, juice drinks
and water. Dean's Dairy Group manufactures its products in 40 plants in 19
states, and markets its products on a national, regional and local basis. Due to
the perishable nature of the products, the Dairy Group delivers most of its
products directly from plants or distribution centers to its customers in trucks
owned or leased by the Company. The Dairy Group manufactures and markets the
majority of its dairy products under its proprietary and licensed brand names.
The remaining products are manufactured and sold on a private-label basis to
customers. The Dairy Group's proprietary brands include
CHUG-REGISTERED TRADEMARK-, COUNTRY CHARM-REGISTERED TRADEMARK-,
DEAN'S-Registered Trademark-, MILK CHUG-REGISTERED TRADEMARK- and other strong
regional brand names including: ALTA DENA-REGISTERED TRADEMARK-,
BARBER'S-REGISTERED TRADEMARK-, BELL/GANDY'S-TM-, BERKELEY FARMS-TM-,
COBURG-REGISTERED TRADEMARK-, CREAMLAND-TM-, CREAM
O'WEBER-REGISTERED TRADEMARK-, DAIRY EXPRESS-TM-, GANDY'S-TM-, GOLDENROD-TM-, H.
MEYER DAIRY-REGISTERED TRADEMARK-, MAPLEHURST-REGISTERED TRADEMARK-,
MAYFIELD-REGISTERED TRADEMARK-, MCARTHUR-REGISTERED TRADEMARK-, MEADOWBROOK-TM-,
PRICE'S-TM-, PURITY-TM-, REITER-TM-, T.G. LEE-REGISTERED TRADEMARK-,
VERIFINE-REGISTERED TRADEMARK- and WENGERT'S-REGISTERED TRADEMARK-. The Dairy
Group also sells products under certain licensed brands, including LAND
O'LAKES-REGISTERED TRADEMARK-. The Dairy Group's sales comprised approximately
73% of Dean's sales in fiscal 2001.
The Specialty Foods Group manufactures and distributes a number of specialty
food products to supermarkets, other retail outlets and foodservice customers.
Products include non-dairy coffee creamers, pickles, relishes, pickled peppers
and other assorted specialty items, and aseptic cheese sauces, puddings and
other aseptically packaged products. The Specialty Foods Group manufactures its
products in 15 plants in 10 states and in one plant in the United Kingdom, and
markets its products primarily on a regional and local basis. The majority of
products manufactured by the Specialty Foods Group are sold under private labels
to supermarkets, other retail outlets, foodservice distributors and in bulk to
other food processors through direct warehouse delivery. The Specialty Foods
Group's proprietary brands for pickles and related products include
ARNOLD'S-REGISTERED TRADEMARK-, ATKINS-REGISTERED TRADEMARK-, AUNT
JANE'S-REGISTERED TRADEMARK-, BENNETTS-REGISTERED TRADEMARK-,
CATES-REGISTERED TRADEMARK-, DAILEY-REGISTERED TRADEMARK-,
DEAN'S-REGISTERED TRADEMARK-, FLAVOR CHARM-REGISTERED TRADEMARK-,
HEIFETZ-REGISTERED TRADEMARK-, NALLEY'S-REGISTERED TRADEMARK-,
PARAMONT-REGISTERED TRADEMARK-, PETER PIPER'S-REGISTERED TRADEMARK-,
RAINBO-REGISTERED TRADEMARK-,
5
RODDENBERY'S-REGISTERED TRADEMARK-, SCHWARTZ'S-REGISTERED TRADEMARK- and
STEINFELD'S WESTERN ACRES-REGISTERED TRADEMARK-. The Specialty Foods Group's
sales comprised approximately 18% of Dean's sales in fiscal 2001.
The National Refrigerated Products Group (NRP) manufactures and distributes
extended shelf life dairy products, refrigerated dips, produce dips and
refrigerated salad dressings. NRP manufactures its products in six plants in
five states and markets its products on a national, regional and local basis.
NRP distributes its products from its plants or distribution centers through
direct warehouse delivery. The majority of the products manufactured by NRP are
sold under its proprietary and licensed brand names. NRP's proprietary brands
include DEAN FOODS ULTRA-REGISTERED TRADEMARK-, DEAN'S-REGISTERED TRADEMARK-,
DIPS-FOR-ONE-TM-, MARIE'S-REGISTERED TRADEMARK- and MILK
CHUG-REGISTERED TRADEMARK-. NRP's licensed brands include
COFFEE-MATE-REGISTERED TRADEMARK-, GRIP'N GO-REGISTERED TRADEMARK-, NESQUIK-TM-
and VITAMITE-REGISTERED TRADEMARK-. NRP oversees Dean's subsidiary that owns a
minority interest in White Wave, which produces soy-based products under the
brand name SILK-REGISTERED TRADEMARK-. NRP also oversees Dean's joint venture
with LAND O'LAKES-REGISTERED TRADEMARK-. NRP's sales comprised 9% of Dean's
sales in fiscal 2001.
The principal executive offices of Dean are located at 3600 North River
Road, Franklin Park, Illinois 60131, telephone number (847) 678-1680.
References to Dean in this joint proxy statement/prospectus are to Dean
Foods Company and all of its subsidiaries. References to "we" or "us" are
references to both Suiza and Dean.
REASONS FOR THE MERGER (SEE PAGES 33 AND 37)
Our boards of directors believe that the merger will create value for the
stockholders of both companies by enabling them to participate in a combined
company with enhanced prospects for growth and profitability. Set forth below
are a few of the reasons why we are proposing the merger:
- We have complementary product offerings and geographic reach. Merging our
businesses will create the first truly national dairy and specialty food
company with the geographic reach, management depth and product mix
necessary to grow and compete effectively against larger, more diversified
food and beverage companies. Together, we will be better positioned to
meet the needs of our customers, including our large national customers
who would benefit from the added service, convenience and value that a
national dairy company could provide.
- By combining our businesses, we expect to further reduce our costs, which
will allow us to become more efficient and, therefore, compete more
effectively.
- After the merger, we will have greater resources to invest in innovation
and marketing. We believe that innovation is critical to increased sales
and consumption of dairy products, which should benefit the entire
industry. We also believe that increased marketing will help increase
sales.
OUR RECOMMENDATIONS TO STOCKHOLDERS CONCERNING THE MERGER (SEE PAGES 36 AND 39)
To Dean's stockholders:
Dean's board of directors believes that the merger is fair and in the best
interests of Dean and its stockholders and unanimously recommends that you vote
"FOR" the proposal to approve the merger agreement and the merger.
To Suiza's stockholders:
Suiza's board of directors believes that the merger is fair and in the best
interests of Suiza and its stockholders and unanimously recommends that you vote
"FOR" the proposal:
- to issue Suiza's common stock to Dean's stockholders in the merger; and
6
- to reserve a sufficient number of additional Suiza shares for issuance
after the merger pursuant to stock-based awards outstanding at the time of
the merger under Dean's stock awards plans.
THE MERGER AND THE MERGER AGREEMENT (SEE PAGE 30)
We have attached the merger agreement as Annex A to this joint proxy
statement/prospectus. We encourage you to read the merger agreement in its
entirety because it is the legal document that governs the merger.
WHAT DEAN'S STOCKHOLDERS WILL RECEIVE (SEE PAGE 39)
Each of Dean's stockholders will receive, for each share of Dean's stock
held immediately prior to the merger, $21.00 in cash plus 0.429 shares of
Suiza's common stock, subject to adjustment if Suiza's stock price is below
$32.71 at the time of the merger (as further explained under this heading). Had
the merger occurred on April 4, 2001, the day the merger agreement was signed,
the total value received by each Dean stockholder would have been as follows:
PER DEAN SHARE
----------------------------------------------------------------------------------------------
D E F
A B C (AXC) (B+D) (D/E)
--------------------- -------- ------------------- -------------------- -------------- ---------------------
STOCK AS A PERCENTAGE
VALUE OF ONE VALUE OF SUIZA TOTAL VALUE OF TOTAL VALUE
SUIZA SHARE(1) CASH NO. OF SUIZA SHARES STOCK TO BE RECEIVED TO BE RECEIVED TO BE RECEIVED
--------------------- -------- ------------------- -------------------- -------------- ---------------------
$46.15 $21.00 0.429 $19.80 $40.80 48.5%
------------------------------
(1) Based on Suiza's weighted average sale price on the New York Stock Exchange
on April 4, 2001.
If the merger had occurred on August 9, 2001, the total value received by
each Dean stockholder would have been as follows:
PER DEAN SHARE
-----------------------------------------------------------------------------------------
D E F
A B C (AXC) (B+D) (D/E)
--------------------- -------- ------------------- -------------- --------------- ---------------------
VALUE OF SUIZA STOCK AS A PERCENTAGE
VALUE OF ONE STOCK TO BE TOTAL VALUE OF TOTAL VALUE
SUIZA SHARE(1) CASH NO. OF SUIZA SHARES RECEIVED TO BE RECEIVED TO BE RECEIVED
--------------------- -------- ------------------- -------------- --------------- ---------------------
$53.57 $21.00 0.429 $22.98 $43.98 52.3%
------------------------------
(1) Based on Suiza's weighted average sale price on the New York Stock Exchange
on August 9, 2001.
The value actually received by each Dean stockholder will depend on the
weighted average sale price of Suiza's stock on the day of the merger. The table
below illustrates how the value to be received by Dean's stockholders could
change.
PER DEAN SHARE
----------------------------------------------------------------------------------------------
D E F
A B C (AXC) (B+D) (D/E)
--------------------- -------- ------------------- -------------------- -------------- ---------------------
STOCK AS A PERCENTAGE
VALUE OF ONE VALUE OF SUIZA TOTAL VALUE OF TOTAL VALUE
SUIZA SHARE CASH NO. OF SUIZA SHARES STOCK TO BE RECEIVED TO BE RECEIVED TO BE RECEIVED
--------------------- -------- ------------------- -------------------- -------------- ---------------------
$60.00 $21.00 0.429 $25.74 $46.74 55.1%
55.00 21.00 0.429 23.60 44.60 52.9
50.00 21.00 0.429 21.45 42.45 50.5
45.00 21.00 0.429 19.31 40.31 47.9
40.00 21.00 0.429 17.16 38.16 45.0
35.00 21.00 0.429 15.02 36.02 41.7
7
It is possible that the mix of cash and stock to be received by Dean's
stockholders could change. At the time we entered into the merger agreement, we
structured the merger in a way that we believe allows the merger to qualify as a
"tax-free reorganization" under federal tax laws. Assuming the merger qualifies
as a tax-free reorganization, if you are a Dean stockholder you will recognize
taxable gain equal to the lesser of (1) the amount of cash you receive in the
merger and (2) an amount equal to (a) the fair market value of the Suiza common
stock and cash that you receive in the merger minus (b) your tax basis (which is
generally equal to your cost) for the shares of Dean common stock that you are
exchanging in the merger.
We have been advised that, in order for the merger to qualify as a tax-free
reorganization, the total value of the stock issued by Suiza to Dean's
stockholders in connection with the merger should be at least 40% of the total
purchase price paid by Suiza for all of Dean's outstanding common stock.
Therefore, in order to preserve the status of the merger as a "tax-free
reorganization," the merger agreement provides that if Suiza's stock price is
below a certain "threshold price" when the merger occurs, the mix of stock and
cash to be delivered to each Dean stockholder will change (without changing the
total value received by each stockholder). Each Dean stockholder would receive
more stock and less cash so that the stock portion of the purchase price
represents at least 40% of the total purchase price.
The "threshold price" of Suiza's stock (below which the mix of cash and
stock to be received by Dean's stockholders will be adjusted) is $32.71,
assuming none of Dean's stockholders exercise dissenter's rights. If any of
Dean's stockholders exercise dissenter's rights, the "threshold price" will
increase slightly.
The table below illustrates how the mix of cash and stock paid for each Dean
share would change if the price of Suiza's stock is below $32.71 when the merger
occurs, assuming $32.71 is the "threshold price."
PER DEAN SHARE
----------------------------------------------------------------------------------------------
D E F
A B C (AXC) (B+D) (D/E)
--------------------- -------- ------------------- -------------------- -------------- ---------------------
STOCK AS A PERCENTAGE
VALUE OF ONE VALUE OF SUIZA TOTAL VALUE OF TOTAL VALUE
SUIZA SHARE CASH NO. OF SUIZA SHARES STOCK TO BE RECEIVED TO BE RECEIVED TO BE RECEIVED
--------------------- -------- ------------------- -------------------- -------------- ---------------------
$32.00 $20.82 0.434 $13.89 $34.71 40.0%
31.00 20.56 0.443 13.73 34.29 40.0
30.00 20.31 0.452 13.56 33.87 40.0
Suiza will not issue any fractional shares of stock in the merger. If a Dean
stockholder would be entitled to a fractional share of stock, Suiza will instead
pay that stockholder the value of the fractional share in cash. In determining
that value, Suiza will assume that one whole share of stock is worth an amount
equal to the average closing price of Suiza's stock on the New York Stock
Exchange over the 10 trading day period ending two business days prior to the
date the merger occurs.
WHAT SUIZA'S STOCKHOLDERS WILL HOLD AFTER THE MERGER (SEE PAGE 42)
Suiza's stockholders will not receive any cash or additional stock as a
result of the merger. They will simply continue to own their existing shares of
Suiza's stock after the merger. If you are a Suiza stockholder and you wish to
exchange your existing stock certificates after the merger for certificates that
bear Suiza's new name, you may send your certificates, after the merger, to
Suiza's transfer agent for exchange. Your new certificates will represent
exactly the same number of shares as your old certificates.
8
OWNERSHIP OF SUIZA AFTER THE MERGER (SEE PAGE 42)
Suiza will issue approximately 15.3 million shares of common stock (which
will represent approximately 35% of the outstanding shares of Suiza's common
stock after the merger) to Dean's stockholders in the merger, not including
shares to be issued pursuant to stock-based awards outstanding under Dean's
stock awards plans. If all of the options outstanding under Dean's plans as of
August 10, 2001 were exercised at the time of the merger, Suiza would issue
approximately 3.2 million additional shares (assuming the closing price for
Suiza's common stock on the last day before the merger is the same as the
closing price for Suiza's stock on August 9, 2001, which was $54.48 per share).
MANAGEMENT OF SUIZA AFTER THE MERGER (SEE PAGE 42)
At the time of the merger, Howard Dean, Chairman of the Board and Chief
Executive Officer of Dean, will become Chairman of the Board of Suiza. Mr. Dean
will also join Suiza's Executive and Management Committees.
Gregg Engles, current Chairman of the Board and Chief Executive Officer of
Suiza, will retain his title of Chief Executive Officer of Suiza, and he will
re-assume the title of Chairman of the Board upon Mr. Dean's retirement in
June 2002. Suiza has agreed to expand the size of its board of directors from 10
to 15 upon completion of the merger, and to elect five persons (including
Mr. Dean) appointed by Dean and agreed upon by Suiza to fill the additional
seats. See "The Merger and the Merger Agreement--Management of Suiza After the
Merger" on page 42 for a list of those five persons. All of Suiza's current
directors will remain on Suiza's board of directors.
NAME CHANGE AND LISTING OF SUIZA'S COMMON STOCK (SEE PAGE 43)
Suiza will change its name to "Dean Foods Company" when the merger occurs.
In connection with the name change, Suiza's trading symbol on the New York Stock
Exchange will change from "SZA" to "DF."
REGULATORY MATTERS AND DIVESTITURES (SEE PAGE 43)
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR
Act), the Federal Trade Commission (FTC) and the Antitrust Division of the U.S.
Department of Justice (DOJ) have the right to study the legality of the merger
under the antitrust laws, prior to its consummation. On May 9, 2001, the DOJ
requested certain information and documentation from us in connection with their
review of the merger. We substantially complied with the information requests at
the end of July 2001. By statute, the DOJ has 30 days (although we will allow
them more time) from the date of our substantial compliance with the information
requests to review the information we submitted and to decide whether to
commence litigation in an attempt to prevent consummation of the merger. If the
DOJ believes that the merger will have adverse competitive effects, it could
commence legal action under the antitrust laws of the United States seeking a
court order to block the transaction altogether, to require divestiture of
various assets of Suiza or Dean, to place restrictions on the combined company's
operations after the merger or to require other concessions or other relief.
Private parties (including individual states) may also bring legal action under
the antitrust laws.
Prior to signing the merger agreement, we analyzed the effects of the
proposed merger under the antitrust laws. In an effort to resolve potential
antitrust concerns, Suiza agreed to transfer to Dairy Farmers of America, Inc.
(DFA), simultaneously with the occurrence of the merger, six plants located in
areas where Suiza's and Dean's operations overlap. In exchange for the six
plants and certain other consideration, DFA will transfer its minority interest
in Suiza Dairy Group to Suiza. DFA has assigned its right to acquire the six
plants to National Dairy Holdings, LP (National Dairy), an entity in which
9
DFA owns a minority interest. Therefore, Suiza expects to transfer the six
plants directly to National Dairy. See "The Merger and the Merger Agreement--The
Related Transactions" on page 58.
In addition to the merger, Suiza's transaction with DFA and Suiza's
transaction with National Dairy are subject to review by the DOJ under the HSR
Act prior to their consummation. On May 25, 2001, the DOJ requested certain
information and documentation from Suiza in connection with the DOJ's review of
the transaction between Suiza and DFA. Suiza substantially complied with the
information request at the end of July 2001. By statute, the DOJ has 30 days
(although Suiza will allow them more time) from the date of Suiza's substantial
compliance with the information requests to review the information Suiza
submitted and to decide whether to commence litigation in an attempt to prevent
consummation of Suiza's transaction with DFA or to seek other concessions or
relief. On July 20, 2001, Suiza and National Dairy received a request for
additional information from the DOJ regarding the transfer of the six plants
from Suiza to National Dairy. Suiza is currently in the process of responding to
the information request, and expects to have substantially complied with the
request by the end of August 2001. Once Suiza and National Dairy have provided
the DOJ with the requested information, the DOJ will have 30 days (or more time
if Suiza and National Dairy decide to grant them an extension) to decide whether
to commence litigation in an attempt to prevent consummation of Suiza's
transaction with National Dairy or to seek other concessions or relief.
Assuming the divestiture of the six plants, we do not believe that the
merger will violate any antitrust laws. Similarly, we do not believe that either
Suiza's transaction with DFA or Suiza's transaction with National Dairy violates
any antitrust laws. However, we cannot assure you that a governmental agency or
private party will not challenge the merger or either of the related
transactions on antitrust grounds or, if they make a challenge, what the result
will be or how long it could take to resolve any such challenges. Specifically,
we could be required to divest more operations than we currently anticipate,
sell the six plants to someone other than National Dairy, modify the terms of
Suiza's agreements with DFA, or agree to certain restrictions on the combined
company's operations after the merger, any of which could delay completion of
the merger, lessen the expected benefits of the merger to the combined company,
jeopardize Suiza's ability to obtain financing for the merger and the related
transactions on acceptable terms and/or adversely affect the combined company's
results of operations after the merger.
Suiza and Dean have agreed to use reasonable best efforts to avoid or
eliminate all impediments to the merger raised under the antitrust laws by the
DOJ or any other regulator so that the merger may close as soon as possible, and
by December 31, 2001 at the latest. Specifically, we have agreed that we will
make any divestiture or take any other action that limits our ability to operate
any of our current businesses, product lines or assets, so long as the
divestiture or other action is conditioned on the closing of the merger and
would not, in Suiza's opinion, have a material adverse effect on the combined
company. We have also agreed to use reasonable best efforts to avoid or have
lifted any government-imposed restriction that would prevent or delay the merger
beyond December 31, 2001, even if it means defending through litigation any
claim brought by any party opposing the merger. See "The Merger and the Merger
Agreement--Additional Covenants in the Merger Agreement" on page 52.
PRINCIPAL CONDITIONS TO THE COMPLETION OF THE MERGER (SEE PAGE 44)
We will complete the merger only if the following conditions are satisfied
or waived:
- The relevant antitrust "waiting period" under the HSR Act has expired;
- The stockholders of Suiza and Dean have approved the merger proposals;
10
- The New York Stock Exchange has authorized the listing of the Suiza stock
to be issued in connection with the merger and to be reserved for issuance
after the merger under Dean's stock awards plans; and
- There is no law or order by a court or other governmental entity
prohibiting the merger or having the effect of making the merger illegal.
Suiza's obligation to complete the merger is subject to the following
additional conditions:
- The representations and warranties made by Dean in the merger agreement
must be true in all material respects at the time of the merger except
where the failure to be true would not cause a material adverse effect
(see "The Merger and the Merger Agreement--Representations and Warranties
in the Merger Agreement" on page 45);
- Dean must comply in all material respects with its pre-closing obligations
and covenants under the merger agreement;
- There must be no change, occurrence or circumstance in the business,
operations, assets, financial condition or results of operations of Dean
or any of its subsidiaries that has a material adverse effect on Dean; and
- Suiza must receive, at the time of the merger, the written opinion of its
outside tax counsel that the merger qualifies as a tax-free reorganization
(see "The Merger and the Merger Agreement--Material Federal Income Tax
Consequences of the Merger" on page 53).
Dean's obligation to complete the merger is subject to the following
additional conditions:
- The representations and warranties made by Suiza and Blackhawk in the
merger agreement must be true in all material respects at the time of the
merger except where the failure to be true would not cause a material
adverse effect (see "The Merger and the Merger Agreement--Representations
and Warranties in the Merger Agreement" on page 45);
- Suiza and Blackhawk must comply in all material respects with their
pre-closing obligations and covenants under the merger agreement;
- There must be no change, occurrence or circumstance in the business,
operations, assets, financial condition or results of operations of Suiza
or any of its subsidiaries that has a material adverse effect on Suiza;
and
- Dean must receive, at the time of the merger, the written opinion of its
outside tax counsel that the merger qualifies as a tax-free reorganization
(see "The Merger and the Merger Agreement--Material Federal Income Tax
Consequences of the Merger" on page 53).
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 48)
CIRCUMSTANCES UNDER WHICH EITHER PARTY CAN TERMINATE THE MERGER
AGREEMENT. Suiza and Dean could mutually agree to terminate the merger
agreement for any reason at any time. Either Suiza or Dean could also terminate
the merger agreement at any time if any one of the following events occurs:
- the merger is not completed by December 31, 2001;
- there is a governmental order that is final and nonappealable preventing
the closing of the merger;
- the other party's stockholders fail to give the required approval of the
merger proposal; or
- the other party breaches any of its representations or warranties (except
where such breach would not cause a material adverse effect), covenants or
obligations under the merger
11
agreement, and the breach is incapable of being cured, or is not cured, in
all material respects, by December 31, 2001.
ADDITIONAL CIRCUMSTANCES UNDER WHICH SUIZA CAN TERMINATE THE MERGER
AGREEMENT. Suiza can also terminate the merger agreement if:
- Dean's board of directors fails to call Dean's special stockholder meeting
in accordance with the merger agreement;
- Dean's board of directors fails to recommend to Dean's stockholders that
they vote for the merger;
- Dean's board of directors withdraws, modifies or qualifies its
recommendation in a manner adverse to Suiza, or takes any action or makes
any statement inconsistent with its recommendation; or
- Dean enters into an agreement to sell its business, or control of its
business, to another buyer.
ADDITIONAL CIRCUMSTANCES UNDER WHICH DEAN CAN TERMINATE THE MERGER
AGREEMENT. Dean can also terminate the merger agreement if:
- Suiza's board of directors fails to call Suiza's special stockholder
meeting in accordance with the merger agreement;
- Suiza's board of directors fails to recommend to Suiza's stockholders that
they vote for the issuance of Suiza's common stock pursuant to the merger
agreement;
- Suiza's board of directors withdraws, modifies or qualifies its
recommendation in a manner adverse to Dean, or takes any action or makes
any statement inconsistent with its recommendation; or
- Dean's board of directors decides to sell its business to another buyer,
because the other offer is (1) more favorable to Dean's stockholders from
a financial point of view, (2) likely to be completed and (3) either
accompanied by financing commitments or not subject to a financing
contingency.
EFFECTS OF TERMINATING THE MERGER AGREEMENT. Dean must pay Suiza a
termination fee of $45 million in cash if:
- The merger agreement is terminated by Suiza for one of the reasons listed
under "The Merger and the Merger Agreement--Termination of the Merger
Agreement--Additional circumstances under which Suiza can terminate the
merger agreement";
- The merger agreement is terminated by Dean as a result of Dean's board of
directors deciding to sell its business to another buyer because the other
offer is (1) more favorable to Dean's stockholders from a financial point
of view, (2) likely to be completed and (3) either accompanied by
financing commitments or not subject to a financing contingency; or
- Dean receives a proposal from another buyer to buy Dean's business prior
to termination of the merger agreement, AND THEN
Suiza and Dean mutually agree to terminate the agreement or Suiza
terminates the merger agreement because Dean breached a representation or
covenant in the merger agreement and did not or could not cure it by
December 31, 2001 or either party terminates the merger agreement because
the merger is not completed by December 31, 2001 or either party terminates
the merger agreement because the other party's stockholders failed to
approve the merger proposals, AND THEN within 180 days after the
termination, Dean enters into an agreement to sell 50% or more of its
business to the other buyer.
12
If Suiza terminates the merger agreement because Dean's stockholders fail to
approve the merger, Dean must reimburse Suiza for one-half of Suiza's expenses
incurred in connection with the merger, up to a maximum of $10 million. If the
merger agreement is terminated and Dean must pay Suiza a termination fee of
$45 million, Dean must also reimburse Suiza for all of Suiza's expenses incurred
in connection with the merger, up to a maximum of $15 million. If Dean
terminates the merger agreement because Suiza's stockholders fail to approve the
issuance of Suiza's common stock pursuant to the merger agreement, Suiza must
reimburse Dean for one-half of Dean's expenses incurred in connection with the
merger, up to a maximum of $10 million.
TREATMENT OF DEAN STOCK OPTIONS AND OTHER EQUITY INTERESTS (SEE PAGE 50)
When the merger occurs, each outstanding option to acquire shares of Dean's
common stock will automatically convert into a fully exercisable option to
purchase a certain number of shares of Suiza's common stock. The conversion rate
for Dean's options will depend on the price of Suiza's stock when the merger
occurs. The exercise price of each outstanding option will also be adjusted. Had
the merger closed on August 9, 2001, an option to purchase 100 shares of Dean's
stock at $35.00 per share would have been converted into an option to purchase
81 shares of Suiza's stock at $42.97 per share. All other terms and conditions
that currently apply to the Dean stock options will remain the same. All other
Dean stock-based awards automatically will convert into fully vested awards with
respect to Suiza's common stock based on the same conversion formula as Dean's
options.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 53)
For a discussion of the possible tax consequences of the merger to Dean's
stockholders, please see "The Merger and the Merger Agreement--Material Federal
Income Tax Consequences of the Merger" on page 53.
Because Suiza's stockholders will not receive any cash or stock in the
merger, the merger will not cause Suiza's stockholders to recognize any taxable
gain or loss.
ACCOUNTING TREATMENT (SEE PAGE 55)
The merger will be accounted for using the purchase method of accounting.
APPRAISAL RIGHTS (SEE PAGE 55)
Each of Dean's stockholders has the right to a judicial appraisal of the
fair value of his or her shares under Delaware law. The procedure for perfecting
appraisal rights is described under the heading "The Merger and the Merger
Agreement--Appraisal Rights" on page 55. Suiza's stockholders do not have
appraisal rights.
THE RELATED TRANSACTIONS (SEE PAGE 58)
In connection with the merger, Suiza has entered into an agreement with
Dairy Farmers of America, Inc. (DFA) to purchase DFA's 33.8% interest in Suiza
Dairy Group in exchange for:
- approximately $165 million in cash, subject to adjustment as described in
the agreement between Suiza and DFA;
- a subordinated contingent promissory note in the original principal amount
of $50 million (which will increase annually based on changes in the
consumer price index, up to a maximum of $120 million) payable only in the
event that Suiza terminates or breaches one of its existing milk supply
agreements with DFA prior to the twentieth anniversary of the merger date;
and
13
- six plants (and the operations associated with those plants) located in
areas where Suiza's and Dean's operations overlap. DFA has assigned its
right to acquire these plants to National Dairy Holdings, LP (National
Dairy), an entity in which DFA owns a minority interest. Therefore, when
the merger occurs, Suiza expects to transfer the six plants to National
Dairy rather than to DFA.
Also as part of the consideration to be paid to DFA, Suiza intends to amend
one of Suiza's current milk supply agreements with DFA to provide that if Suiza
does not, within a specified period after closing, offer DFA the right to supply
raw milk, or manage the supply of raw milk, to certain of Dean's dairy plants
after the merger, Suiza could be required to pay liquidated damages to DFA in an
amount of up to $80 million. Any such liquidated damages would be paid, without
interest, over a five-year period and would reduce the principal amount of the
$50 million contingent promissory note described above by an amount equal to
approximately 25% of such payments.
Suiza's proposed acquisition of DFA's minority interest in Suiza Dairy Group
is contingent on, and is expected to occur simultaneously with, the completion
of the merger. However, completion of the transaction with DFA is not a
condition to completion of the merger.
References to "the related transactions" in this joint proxy
statement/prospectus are references to (1) Suiza's buy-out of DFA's interest in
Suiza Dairy Group, and (2) Suiza's transfer of the six plants to National Dairy
(as a result of DFA's assignment of its right to acquire such plants to National
Dairy).
Both related transactions are subject to antitrust review under the
Hart-Scott-Rodino Act. See "Risk Factors--Risks Relating to the Merger--The
merger could be delayed if the related transactions fail to close" on page 23.
COMPARATIVE MARKET PRICE INFORMATION (SEE PAGE 59)
The following table sets forth the closing prices per share of Suiza's
common stock and Dean's common stock on the New York Stock Exchange composite
tape on April 4, 2001, the last trading day prior to the public announcement of
the proposed merger, and on August 9, 2001. The table also sets forth the value
of the Suiza common stock that a Dean stockholder would have received for one
Dean common share and the total value of the cash and Suiza common stock that a
Dean stockholder would have received for one Dean common share, assuming that
the merger had taken place on those dates and assuming that Dean's stockholders
will receive 0.429 shares of Suiza common stock and a cash payment of $21.00 for
each Dean share held. See "The Merger and the Merger Agreement--What Dean's
Stockholders Will Receive" on page 39.
CLOSING PRICE CLOSING PRICE
OF SUIZA'S OF DEAN'S VALUE OF TOTAL VALUE OF CASH
COMMON COMMON SUIZA STOCK AND SUIZA STOCK
STOCK STOCK TO BE RECEIVED TO BE RECEIVED
------------- ------------- -------------- -------------------
April 4, 2001.......................... $46.44 $32.50 $19.92 $40.92
August 9, 2001......................... 54.48 41.49 23.37 44.37
COMPARATIVE PER SHARE DATA
Set forth below are the income from continuing operations, cash dividends
and book value per common share data for Suiza on a historical basis and on a
pro forma consolidated basis and for Dean on a historical basis and on a pro
forma consolidated basis per Dean equivalent share.
Dean's equivalent pro forma per share data was computed by multiplying
Suiza's pro forma per share data by the exchange ratio of 0.429 shares of Suiza
common stock for each share of Dean common stock.
14
The information below should be read together with Suiza's and Dean's
historical financial statements and related notes contained in the annual
reports and other information that we have filed with the Securities and
Exchange Commission and incorporated by reference in this joint proxy
statement/prospectus and with the pro forma financial information beginning on
page 61. See "Where You Can Find More Information" on page 98. The pro forma
data shown below is unaudited and is presented for illustrative purposes only.
This information is not necessarily indicative of the historical results that
would have occurred had the companies always been combined or the future results
of the combined company after the merger and the related transactions. See
"Unaudited Pro Forma Condensed Consolidated Financial Information" on page 61
for an explanation of the assumptions underlying the pro forma financial
information.
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2000
---------------- ------------------
(UNAUDITED)
SUIZA'S HISTORICAL PER SHARE DATA
Income from continuing operations--basic.................... $2.12 $4.03
Income from continuing operations--diluted.................. 1.91 3.68
Cash dividends(1)........................................... 0.00 0.00
Book value.................................................. 23.69 21.95
YEAR ENDED
MAY 27, 2001
--------------
DEAN'S HISTORICAL PER SHARE DATA
Income from continuing operations--basic.................... $ 2.10
Income from continuing operations--diluted.................. 2.07
Cash dividends(1)........................................... 0.90
Book value.................................................. 19.77
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2000
---------------- ------------------
(UNAUDITED)
PRO FORMA PER SHARE DATA OF SUIZA COMMON STOCK
Income from continuing operations--basic.................... $1.81 $4.36
Income from continuing operations--diluted.................. 1.70 4.04
Cash dividends(1)........................................... 0.00 0.00
Book value.................................................. 34.01 N/A
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2000
---------------- ------------------
(UNAUDITED)
EQUIVALENT PRO FORMA PER SHARE DATA OF DEAN COMMON STOCK
Income from continuing operations--basic.................... $0.78 $1.87
Income from continuing operations--diluted.................. 0.73 1.73
Cash dividends(1)........................................... 0.00 0.00
Book value.................................................. 14.59 N/A
------------------------
(1) Suiza has never paid dividends and does not intend to pay dividends in the
forseeable future. Dean's current quarterly dividend is $0.225. Prior to
completion of the merger, Dean will continue to pay dividends, subject to
approval and declaration by Dean's board of directors.
15
SELECTED HISTORICAL FINANCIAL INFORMATION OF SUIZA
The following selected historical annual financial information has been
derived from Suiza's audited consolidated financial statements as of and for
each of the years ended December 31, 1996 through 2000. The following selected
historical financial information for the six months ended June 30, 2001 and 2000
is unaudited and derived from the consolidated financial information included in
Suiza's Form 10-Q for the quarter ended June 30, 2001; however, in the opinion
of Suiza's management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation have been made. This information
is a summary and should be read together with Suiza's historical financial
statements and related notes contained in the annual reports and other
information that Suiza has filed with the Securities and Exchange Commission and
incorporated by reference in this joint proxy statement/prospectus. See "Where
You Can Find More Information" on page 99.
SIX MONTHS ENDED
JUNE 30,
----------------------------
2001 2000
------------- -------------
(in thousands except share data)
Operating data:
Net sales............................... $3,001,427 $2,828,495
Gross profit............................ 719,653 700,377
Operating income........................ 186,780(2) 179,628(3)
Income from continuing operations....... 58,120(2) 54,127(3)
Net income.............................. 56,674(2) 59,095(3)
Common stock data:
Basic earnings per common share:
Income from continuing operations..... $ 2.12(2) $ 1.87(3)
Net income............................ 2.06(2) 2.04(3)
Diluted earnings per common share:
Income from continuing operations..... $ 1.91(2) $ 1.73(3)
Net income............................ 1.87(2) 1.86(3)
Balance sheet data (at end of period):
Total assets............................ $3,760,968 $3,676,234
Long-term debt(1)....................... 1,135,563 1,279,860
Mandatorily redeemable convertible trust
issued preferred securities........... 584,323 583,796
Total stockholders' equity.............. 656,187 603,432
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------- ------------- ------------- ------------- -------------
(in thousands except share data)
Operating data:
Net sales............................... $5,756,303 $4,481,999 $3,320,940 $1,795,868 $1,207,565
Gross profit............................ 1,426,236 994,924 763,032 414,784 236,769
Operating income........................ 368,063(4) 276,874(5) 242,456 94,886(7) 61,010(8)
Income from continuing operations....... 113,751(4) 108,827(5) 103,069 39,330(7) 46,863(8)
Net income.............................. 118,719(4) 109,731(5) 131,606(6) 28,764(7) 46,963(8)
Common stock data:
Basic earnings per common share:
Income from continuing operations..... $ 4.03(4) $ 3.31(5) $ 3.12 $ 1.32(7) $ 1.99(8)
Net income............................ 4.21(4) 3.34(5) 3.98(6) 0.96(7) 1.99(8)
Diluted earnings per common share:
Income from continuing operations..... $ 3.68(4) $ 3.11(5) $ 2.90 $ 1.25(7) $ 1.90(8)
Net income............................ 3.82(4) 3.13(5) 3.58(6) 0.91(7) 1.91(8)
Balance sheet data (at end of period):
Total assets............................ $3,780,478 $2,658,922 $3,013,783 $1,403,462 $ 833,624
Long-term debt(1)....................... 1,225,045 689,397 893,077 777,813 432,372
Mandatorily redeemable convertible trust
issued preferred securities........... 584,032 683,505 682,938
Total stockholders' equity.............. 598,832 583,972 655,771 359,310 213,854
----------------------------------
(1) Excludes current portion of long-term debt.
(2) Six months ended June 30, 2001 operating income, income from continuing
operations and net income include pre-tax charges of $0.8 million
($0.3 million net of income taxes and minority interest, or $0.01 per
diluted share) related to plant closures. Six months ended June 30, 2001 net
income also includes a charge of $1.4 million ($0.04 per diluted share)
related to the cumulative effect of an accounting change, net of income tax
and minority interest.
(3) Six months ended June 30, 2000 operating income, income from continuing
operations and net income include pre-tax charges of $3.0 million
($1.5 million net of income taxes and minority interest, or $0.04 per
diluted share) related to plant closures. Six months ended June 30, 2000 net
income also includes an extraordinary gain of $5.0 million ($0.13 per
diluted share) on the early extinguishment of debt, net of income taxes.
(4) 2000 operating income, income from continuing operations and net income
include pre-tax charges of $3.4 million ($1.8 million net of income taxes
and minority interest, or $0.05 per diluted share) related to plant
closures. Income from continuing operations and net income also include
earnings of $0.8 million ($0.4 million net of income taxes, or $0.01 per
diluted share) related to an equity method investee's reversal of plant
closure charges, and $7.5 million ($5.0 million net of minority interest, or
$0.14 per diluted share) related to litigation settlement costs. 2000 net
income also includes an extraordinary gain of $5.0 million ($0.14 per
diluted share) on the early extinguishment of debt, net of income taxes.
(5) 1999 operating income, income from continuing operations and net income
include pre-tax charges of $12.6 million ($8.1 million net of income taxes,
or $0.19 per diluted share) related to plant closures. Income from
continuing operations and net income also include $4.9 million
($3.0 million net of income taxes, or $0.07 per diluted share) related to an
equity method investee's plant closures. 1999 net income also includes a
gain of $0.9 million ($0.02 per diluted share) from discontinued operations,
net of income taxes.
(6) 1998 net income includes a loss of $3.2 million ($0.08 per diluted share)
from discontinued operations, net of income taxes, and a gain of
$31.7 million ($0.76 per diluted share) from the sale of discontinued
operations, net of income taxes.
(7) 1997 operating income, income from continuing operations and net income
include a pre-tax charge of $37.0 million ($34.7 million net of income
taxes, or $1.11 per diluted share) related to plant closure, merger, and
other costs. 1997 net income also includes income of $0.7 million ($0.02 per
diluted share) from discontinued operations, net of income taxes, and an
extraordinary loss of $11.3 million ($0.36 per diluted share) from the early
extinguishment of debt, net of income taxes.
(8) 1996 operating income, income from continuing operations and net income
include a pre-tax charge of $0.6 million ($0.4 million net of income taxes,
or $0.02 per diluted share) related to plant closure, merger, and other
costs. 1996 net income also includes income of $2.3 million ($0.10 per
diluted share) from discontinued operations, net of income taxes, and an
extraordinary loss of $2.2 million ($0.09 per diluted share) from the early
extinguishment of debt, net of income taxes.
16
SELECTED HISTORICAL FINANCIAL INFORMATION OF DEAN
The following selected historical financial information has been derived
from Dean's audited consolidated financial statements as of and for each of the
years ended May 1997 through 2001. This information is a summary and should be
read together with Dean's historical financial statements and related notes
contained in the annual reports and other information that Dean has filed with
the Securities and Exchange Commission and incorporated by reference in this
joint proxy statement/prospectus. See "Where You Can Find More Information" on
page 99.
YEAR ENDED MAY(1)
-------------------------------------------------------------------------
2001 2000 1999 1998 1997
------------- ------------- ------------- ------------- -------------
(in thousands except share data)
Operating data:
Net sales(6)........................................ $4,440,366 $4,102,572 $3,784,893 $2,762,277 $2,487,498
Gross profit(6)..................................... 1,052,659 994,576 841,652 654,476 583,694
Operating income.................................... 181,558(3) 222,612(4) 153,338(5) 162,519 138,671
Income from continuing operations................... 74,652(3) 106,118(4) 70,331(5) 87,980 73,988
Net income.......................................... 74,652(3) 106,118(4) 151,222(5) 106,302 86,704
Common stock data:
Basic earnings per share:
Income from continuing operations................. $ 2.10(3) $ 2.79(4) $ 1.77(5) $ 2.17 $ 1.84
Net income........................................ 2.10(3) 2.79(4) 3.80(5) 2.63 2.16
Diluted earnings per share:
Income from continuing operations................. $ 2.07(3) $ 2.77(4) $ 1.74(5) $ 2.13 $ 1.83
Net income........................................ 2.07(3) 2.77(4) 3.74(5) 2.57 2.15
Balance sheet data:
Total assets........................................ $2,317,387 $2,003,542 $1,911,876 $1,607,189 $1,133,680
Long-term obligations(2)............................ 940,170 758,725 631,286 558,233 208,931
Stockholders' equity................................ 704,616 657,685 716,414 619,266 567,681
Other data:
Cash dividends per share............................ $ 0.90 $ 0.88 $ 0.84 $ 0.80 $ 0.76
------------------------------
(1) Dean's fiscal year end is the last Sunday in May.
(2) Excludes current portion of long-term debt.
(3) 2001 operating income, income from continuing operations and net income
include a pre-tax charge of $22,151 ($13,734 net of income taxes, or $0.38
per diluted share) for merger-related costs and income from continuing
operations and net income also includes a pre-tax gain of $10,000 ($6,200
net of income taxes or $0.17 per diluted share) on the sale of a
subordinated note.
(4) 2000 operating income, income from continuing operations and net income
include a pre-tax charge of $6,078 ($3,768 net of income taxes, or $0.10 per
diluted share) related to plant closures.
(5) 1999 operating income, income from continuing operations and net income
include a pre-tax charge of $18,105 ($11,044 net of income taxes, or $0.27
per diluted share) related to plant closures. 1999 net income also includes
a gain of $83,820 ($2.07 per diluted share) from the sale of discontinued
operations, net of income taxes.
(6) Net sales and gross profit have been restated to reflect the adoption of
Emerging Issues Task Force Issue No. 00-10 "Accounting for Shipping and
Handling Fees and Costs" in the fourth quarter of fiscal 2001. The effect of
the adoption was to increase 2000 net sales by $36,936 and gross profit by
$33,158, 1999 net sales by $29,745 and gross profit by $27,674, 1998 net
sales by $26,443 and gross profit by $24,491 and 1997 net sales by $26,935
and gross profit by $24,922. The adoption of EITF 00-10 did not impact
reported operating income or net income.
17
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION OF SUIZA (SEE PAGE 61)
The selected pro forma financial data set forth below for the six months
ended June 30, 2001 and the year ended December 31, 2000 is derived from the
historical financial statements of Suiza and Dean and gives effect to the merger
and the related transactions. The pro forma financial information shown below
for the six months ended June 30, 2001 is derived from Dean's results of
operations for the six months ended May 27, 2001, and Suiza's results of
operations for the six months ended June 30, 2001. The pro forma financial
information shown below for the year ended December 31, 2000 is derived from
Dean's results of operations for the twelve months ended November 26, 2000, and
Suiza's results of operations for the twelve months ended December 31, 2000.
The pro forma balance sheet data shown below is presented as if the merger
and the related transactions had occurred on June 30, 2001 and the operating
data shown below assumes the merger and the related transactions occurred on
January 1, 2000. This information is not necessarily indicative of the
historical results that would have occurred had the companies always been
combined or the future results of the combined company after the merger and the
related transactions. This information should be read together with the
historical financial statements of Suiza and Dean filed with the Securities and
Exchange Commission and incorporated by reference in this joint proxy statement/
prospectus and the "Unaudited Pro Forma Condensed Consolidated Financial
Information" beginning on page 61 of this joint proxy statement/prospectus.
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2000
-------------- ------------------
(in thousands except share data)
Operating data:
Net sales................................................. $ 4,999,778 $ 9,421,933
Operating income.......................................... 275,618 593,877
Income from continuing operations......................... 77,507 189,809
Income per share from continuing operations:
Basic..................................................... $ 1.81 $ 4.36
Diluted................................................... 1.70 4.04
Average common shares:
Basic..................................................... 42,747,901 43,484,617
Diluted................................................... 51,815,337 52,282,336
Balance sheet data (at end of period):
Total assets.............................................. $ 6,638,321 N/A
Long-term debt, excluding current portion................. 3,012,637 N/A
Mandatorily redeemable convertible trust issued preferred
securities.............................................. 584,323 N/A
Total stockholders' equity................................ 1,462,098 N/A
18
OPINIONS OF FINANCIAL ADVISORS (SEE PAGE 69)
In deciding to approve the merger, the boards of directors of each of Suiza
and Dean considered the opinions of their respective financial advisors as to
the fairness from a financial point of view of the consideration to be paid by
Suiza in the merger.
On April 4, 2001, Goldman, Sachs & Co. delivered its oral opinion, which it
subsequently confirmed in a written opinion dated April 4, 2001, to Dean's board
of directors that, as of that date, the per share merger consideration to be
received by the holders of Dean common stock was fair from a financial point of
view to the holders of such shares. The opinion of Goldman Sachs does not
constitute a recommendation as to how any Dean stockholder should vote at Dean's
stockholder meeting.
The written opinion of Goldman Sachs, dated April 4, 2001, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is contained in Annex B. DEAN'S STOCKHOLDERS ARE
URGED TO, AND SHOULD, READ THE OPINION IN ITS ENTIRETY.
On April 4, 2001, Bear, Stearns & Co. Inc. and Morgan Stanley & Co.
Incorporated rendered their oral opinions, subsequently confirmed by each in
written opinions dated April 4, 2001, to Suiza's board of directors that, as of
that date, the per share merger consideration to be paid by Suiza pursuant to
the merger agreement was fair from a financial point of view to Suiza. The
opinions of Bear Stearns and Morgan Stanley were directed to Suiza's board of
directors, do not address any other aspect of the transaction and do not
constitute a recommendation as to how any Suiza stockholder should vote at
Suiza's stockholder meeting.
The written opinions of Bear Stearns and Morgan Stanley, each dated
April 4, 2001, which set forth assumptions made, matters considered and
limitations on the review undertaken in connection with the opinions, are
contained in Annexes C and D. SUIZA'S STOCKHOLDERS ARE URGED TO, AND SHOULD,
READ THE OPINIONS IN THEIR ENTIRETY.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 80)
If you are a Dean stockholder, when you consider the recommendation of
Dean's board of directors that Dean's stockholders vote in favor of the merger
agreement and the merger, you should be aware that some of Dean's executive
officers and directors have interests in the merger that are different from your
own interests as a Dean stockholder. For example:
- all stock options held by Dean's officers and directors will become
immediately exercisable upon completion of the merger;
- if the merger occurs, certain of Dean's officers (including Howard Dean,
who is also on Dean's board of directors) will receive cash or stock
awards under performance awards agreements issued pursuant to Dean's 1989
Stock Awards Plan; and
- certain of Dean's officers (including Mr. Dean) will receive substantial
cash payments if their employment is terminated (voluntarily or
involuntarily) at certain times following the merger.
The purpose of the Dean benefit programs giving rise to these interests is to
encourage Dean's officers and directors to continue serving Dean and working to
maximize stockholder value even though the pending merger may result in their
loss of employment or directorship or their diminished corporate position.
19
SUIZA'S OPTION PLAN PROPOSALS (SEE PAGE 84)
Suiza believes that granting stock options to its key employees and
directors is an effective way to:
- attract and retain the best available personnel for positions of
substantial responsibility; and
- align the interests of key employees and directors with those of Suiza's
stockholders.
Suiza believes that when its employees and directors own stock in the
company, they are motivated to promote the company's success. Therefore, a
significant portion of Suiza's key employees' overall compensation consists of
stock options.
As a result of the significant number of additional employees that the
combined company will have after the merger occurs, the number of shares
currently available for issuance under Suiza's stock option plan will be
insufficient to meet the combined company's needs after the merger to
effectively create incentives for management of the larger company.
Therefore, Suiza proposes to adopt Dean's 1989 Stock Awards Plan, if the
merger occurs, and make certain amendments to the plan as described under
"Suiza's Option Plan Proposals--Proposal to Adopt Dean's Stock Awards Plan" on
page 84. If this proposal is approved, Suiza will be authorized to issue
1,894,864 shares of its common stock (which amount will increase by the amount
of outstanding options that expire or are terminated and that may be reissued
under the terms of the plan) pursuant to options or other stock awards to be
granted under the plan after the merger.
Suiza also proposes to increase the number of shares reserved for issuance
under Suiza's existing stock option plan from 7.5 million shares to
12.5 million shares, if the merger occurs. See "Suiza's Option Plan
Proposals--Proposal to Increase Suiza's Existing Option Plan" on page 86.
STOCKHOLDER VOTES REQUIRED TO APPROVE THE PROPOSALS (SEE PAGE 89)
For Suiza's stockholders:
In order to approve each of:
- the proposal to issue shares of Suiza's common stock to Dean's
stockholders in the merger and to reserve a sufficient number of
additional shares of Suiza's common stock for issuance pursuant to
stock-based awards outstanding at the time of the merger under Dean's
stock awards plans;
- the proposal to approve Suiza's adoption of Dean's 1989 Stock Awards Plan
and the reservation of 1,894,864 shares of Suiza's common stock for
issuance after the merger pursuant to that plan, if the merger occurs; and
- the proposal to increase the number of shares reserved for issuance under
Suiza's stock option plan from 7.5 million to 12.5 million, if the merger
occurs,
holders of at least a majority of Suiza's stock with voting power present
(in person or by proxy) at Suiza's stockholder meeting must vote "FOR" the
particular proposal. As of August 10, 2001, directors and executive officers
of Suiza and their affiliates were entitled to vote 1,849,102 shares of
Suiza's common stock, which represented 6.7% of Suiza's stock outstanding on
August 10, 2001.
For Dean's stockholders:
In order to approve the proposal to approve the merger agreement and the
merger, holders of at least a majority of Dean's outstanding shares must vote
"FOR" the proposal. As of August 10, directors and executive officers of Dean
and their affiliates were entitled to vote 532,287 shares of Dean's common
stock, which represented 1.5% of Dean's stock outstanding on August 10, 2001.
20
RISK FACTORS
This document, and the documents incorporated herein by reference, contain
statements about the future that are not statements of fact, but are merely
estimates. We believe that our estimates are based on reasonable assumptions.
Nevertheless, you should keep in mind that the statements are only estimates.
Actual results may differ materially and adversely. We claim protection for
ourselves in making these "forward-looking" statements under the "safe harbor"
for forward-looking statements provided by the Securities Litigation Reform Act
of 1995.
The sections in this document which contain forward-looking statements
include this "Risk Factors" section as well as the sections entitled "Questions
and Answers," "Summary Information," "The Merger and the Merger
Agreement--Background of the Merger," "The Merger and the Merger
Agreement--Dean's Reasons for the Merger," "The Merger and the Merger
Agreement--Suiza's Reasons for the Merger," "Unaudited Pro Forma Condensed
Consolidated Financial Information" and "Opinions of Financial Advisors."
Forward-looking statements can be identified by words such as "believes,"
"expects," "anticipates," "intends," "estimates," "plans" or other similar
expressions. Some examples of the forward-looking statements in this document,
and in the documents incorporated herein by reference, include our statements
about:
- The timing of the completion of proposed merger;
- The amount of money that each of Suiza and Dean will spend on
merger-related expenditures, and the timing of those expenditures;
- The extent of divestitures or other relief that will be necessary to
obtain regulatory approval for the merger and the related transactions;
- Suiza's ability to obtain financing for the merger and the related
transactions upon the terms contemplated;
- The combined company's sales after the merger;
- The impact we expect the proposed merger, and the related transactions, to
have on the combined company's sales and earnings per share;
- The combined company's ability to successfully integrate our businesses
within the predicted timeframe;
- The amount of cost savings and overall operational efficiencies we expect
to realize as a result of the proposed merger and the related
transactions;
- The combined company's ability to implement and continue its branding
initiatives and product innovations in a cost effective manner and to
profit from those initiatives; and
- Each of Suiza's and Dean's ability to meet stated financial goals prior to
completion of the merger.
In evaluating our forward-looking statements, and in deciding your vote, you
should carefully consider the risks outlined below, as well as the risks set
forth in Suiza's and Dean's filings with the SEC. See "Where You Can Find More
Information" on page 99.
RISKS RELATING TO THE MERGER
THE VALUE OF THE SUIZA SHARES AND THE AMOUNT OF CASH THAT DEAN'S STOCKHOLDERS
WILL RECEIVE IN THE MERGER DEPENDS ON SUIZA'S STOCK PRICE WHEN THE MERGER
OCCURS, SO DEAN'S STOCKHOLDERS MAY RECEIVE LESS VALUE IN SUIZA SHARES AND/OR
LESS CASH THAN THEY CURRENTLY ANTICIPATE.
The value of the Suiza stock to be received by Dean's stockholders, and the
number of Suiza's shares and the amount of cash that each Dean stockholder will
receive, will depend on Suiza's stock price at the time of the merger. The price
of Suiza's stock could be lower at the time of the merger
21
than it is now or was on April 4, 2001, the date the merger agreement was
signed. For examples of how the value of Suiza's stock to be received by Dean's
stockholders, and the number of shares and the amount of cash to be received,
could change by the time of the merger, see "The Merger and the Merger
Agreement--What Dean's Stockholders Will Receive" on page 39. We expect the
merger to be completed during the fourth calendar quarter of 2001. However, the
exact timing of completion of the merger will depend on when we receive
regulatory approval for the merger. Therefore, we cannot be certain when the
merger will be completed, or if it will be completed, and it could take
substantially longer than we are expecting.
There are many factors that could affect the price of Suiza's stock between
now and the time of the merger, many of which are beyond Suiza's control. These
factors include, among others, Suiza's and Dean's operating performance and
financial results between now and the time of the merger (especially as compared
to Suiza's and Dean's projected operating performance and financial results) and
market conditions generally. For more information about various factors that
could affect the companies' operating performance, and therefore Suiza's stock
price, between now and the time of the merger, see "Risk Factors--Risks Relating
to the Combined Company's Business" on page 25, and the other risks set forth in
Suiza's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 and
Dean's Annual Report on Form 10-K for the fiscal year ended May 27, 2001 filed
with the SEC.
OBTAINING REQUIRED REGULATORY APPROVALS AND SATISFYING CLOSING CONDITIONS MAY
DELAY, PREVENT THE COMPLETION OF, OR SUBSTANTIALLY CHANGE THE PROJECTED BENEFITS
OF, THE MERGER.
Completion of the merger is conditioned upon the expiration or termination
of the "waiting period" under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the absence of any governmental order prohibiting the closing of the
transaction or making it illegal, among other conditions. Obtaining regulatory
approval could delay the completion of the merger for a significant period of
time after Suiza's and Dean's stockholders have approved the merger. See "The
Merger and the Merger Agreement--Regulatory Matters and Divestitures" on
page 43 for a description of the regulatory approvals necessary in connection
with the merger. We cannot be certain when or if the required regulatory
approvals will be obtained, or when, or if, the other conditions to closing of
the merger will be satisfied.
Generally, in order to proceed with the merger, we must first satisfy any
concerns that the U.S. Department of Justice (DOJ) might have regarding the
competitive effects of the merger. If the DOJ believes that the merger would
violate federal antitrust law by substantially lessening competition in any line
of commerce affecting U.S. consumers, they have the authority to challenge the
merger on antitrust grounds. The DOJ can challenge the merger by seeking a
federal court order temporarily and/or permanently blocking the transaction.
They may also challenge the merger after the merger is completed. We can give no
assurance as to the terms and conditions, if any, that we might be required to
comply with in order to satisfy any antitrust concerns that the DOJ, or any
court reviewing the merger, may have. We may not be able to satisfy their
concerns at all. If we are required to divest operations or lines of business
beyond our current expectations, or to agree to alter the terms of the merger or
the related transactions or to agree to restrictions on the combined company's
operations after the merger, the benefits of the merger could be substantially
diminished, completion of the merger could be delayed, or Suiza's ability to
obtain financing for the merger and the related transactions on acceptable terms
could be jeopardized. Moreover, we can give no assurance that the DOJ will not
attempt to block the merger altogether. We also cannot assure you that any such
attempts by the DOJ would not be successful.
In certain circumstances, state antitrust enforcement officials or private
parties also have the ability to attempt to block the proposed transaction if
they have concerns about the competitive effects of the proposed transaction.
While state approval is not formally required, we can give no assurance that any
such challenge would not be successful.
22
THE MERGER COULD BE DELAYED IF THE RELATED TRANSACTIONS FAIL TO CLOSE.
In connection with the merger, Suiza has agreed to purchase the minority
interest in Suiza Dairy Group, L.P. held by Dairy Farmers of America, Inc.
(DFA). As part of the purchase price for DFA's minority interest in Suiza Dairy
Group, Suiza has agreed to transfer to DFA the assets and related business
operations of six fluid milk processing plants located in areas where Suiza's
operations overlap with Dean's operations. DFA has assigned its right to acquire
these six plants to National Dairy Holdings, LP (National Dairy), an entity in
which DFA holds a minority interest. Therefore, Suiza expects to transfer the
six plants directly to National Dairy.
Both Suiza's purchase of DFA's minority interest in Suiza Dairy Group and
Suiza's transfer of the six plants to National Dairy are subject to antitrust
review by the Department of Justice (DOJ) under the Hart-Scott-Rodino Act. If
the DOJ believes that either transaction would violate federal antitrust law by
substantially lessening competition in any line of commerce affecting U.S.
consumers, it has the authority to challenge one or both of such transactions on
antitrust grounds by seeking to block one or both transactions altogether, or by
seeking various other remedies.
We cannot be certain when or if regulatory approval for these transactions
will be obtained. Although the closing of these transactions is not a condition
to completion of the merger, a delay in obtaining regulatory approval could
delay completion of the merger. If the DOJ successfully blocks the transfer of
the six plants to National Dairy, or if the transfer of the six plants to
National Dairy fails to be completed for any other reason (such as delay by the
DOJ in approving the transaction), Suiza may be required to find another
purchaser for these plants, which could significantly delay the merger, have a
material adverse impact on the projected benefits of the merger to the combined
company and the combined company's expected financial performance after the
merger, adversely affect the terms on which Suiza can negotiate a sale of these
plants, jeopardize Suiza's ability to obtain financing for the merger and/or the
related transactions on acceptable terms and/or result in the termination of the
merger agreement if Suiza cannot find another purchaser of the plants on
acceptable terms by December 31, 2001.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE SUIZA'S AND DEAN'S OPERATIONS AND
REALIZE THE FULL BENEFITS THAT WE ANTICIPATE FROM THE MERGER.
The merger involves the integration of two companies that have previously
operated independently. The difficulties of combining Suiza's and Dean's
businesses include:
- maintaining customer relations so that the combined company does not
suffer a loss of sales;
- efficiently coordinating and rationalizing operations, including
purchasing, production and distribution, among the various facilities of
both companies in a way that allows the combined company to realize
projected cost savings; and
- integrating, retaining and optimizing diverse personnel resources,
administrative structures and company cultures among various locations.
Among the factors considered by Suiza's board of directors and Dean's board
of directors in connection with their approvals of the merger agreement were the
opportunities for economies of scale, operating improvements, improved customer
service, expanded product offerings and better marketing and distribution. We
cannot give any assurance that these benefits will be realized within the time
periods or to the extent contemplated. We could be required to invest more
capital than we are expecting or more time and effort by management than we are
expecting in order to realize the benefits we are projecting from the merger,
particularly in light of the operating difficulties that Dean has experienced
over the past year. The combination of our companies could even result in a loss
of certain customers if those customers believe they could get better service or
value from any of our competitors.
23
If the combined company fails to effectively manage the integration of our
businesses and the improvement of Dean's business, the combined company's
operations and financial results after the merger will be affected, both
materially and adversely.
THIRD-PARTY RIGHTS MAY BE TRIGGERED BY THE MERGER AND REQUIRE AMENDMENT OR
RE-NEGOTIATION OF CERTAIN CONTRACTS.
We will be required to re-negotiate or obtain waivers of contractual terms
in contracts with certain customers, suppliers, licensors and business partners
in order to continue the existing business operations of both companies
following the merger. Certain companies that license or supply products to or
are partnered with Suiza or Dean compete with each other or with Suiza or Dean,
and could refuse to amend their contracts with Suiza or Dean to accommodate the
merger, or fail to agree to terms acceptable to Suiza or Dean. The failure of
either company to obtain waivers of any change-of-control provisions triggered
by the merger or other terms affected by the merger could give rise to
termination or other rights of the contracting party adverse to Suiza or Dean
which could have a material adverse impact on the combined company's operations
following the merger and negatively impact the expected benefits of the merger.
WE WILL INCUR SIGNIFICANT TRANSACTION EXPENSES AND INTEGRATION-RELATED COSTS IN
CONNECTION WITH THE MERGER TRANSACTION.
Both Suiza and Dean will incur significant costs and expenses related to the
merger prior to closing (regardless of when or whether the merger is completed),
including costs incurred in attempting to obtain regulatory approval for the
transaction, fees paid to obtain financing commitments and various other
transaction costs. Also, a significant delay in the closing of the merger beyond
our current expectations could substantially burden the financial and management
resources of both companies, which could have an adverse effect on our
operations and/or financial results.
If any of the conditions to closing contained in the merger agreement are
not timely satisfied in accordance with the terms of the merger agreement, the
merger agreement could be terminated and the transaction would not be completed
at all. In that case, both Suiza and Dean would have incurred significant costs
without achieving the expected benefits of the proposed merger. Suiza is
currently capitalizing its merger-related expenses, while Dean is currently
expensing all of its merger-related expenses. If the merger is not completed,
all costs incurred by Suiza in attempting to complete the merger would be
reflected as expenses on Suiza's consolidated income statement in the period
during which the merger agreement is terminated, which would have a significant
adverse impact on Suiza's earnings per share in the period such costs are
recorded.
If the merger occurs, the combined company will incur charges to operations
to reflect costs associated with integrating the operations of the two
companies, and these charges could be substantial. Some of these costs may be
expensed after the closing of the merger and could adversely affect the results
of the combined company which could adversely impact the market price of Suiza's
common stock after the merger. Although Suiza and Dean expect that the
elimination of duplicative costs, as well as the realization of other
efficiencies related to the integration of the businesses, may offset additional
expenses over time, we cannot assure you that a net benefit will be achieved as
a result of the merger, in the near term or at all.
SUIZA MAY NOT BE ABLE TO OBTAIN THE FINANCING NEEDED FOR THE MERGER ON FAVORABLE
TERMS.
Suiza has entered into a credit agreement with certain lenders to provide
financing for the merger and the related transactions. See "The Merger and the
Merger Agreement--The Related Transactions" on page 57. However, the lenders
have the right to decide not to actually fund the loan if there is a material
adverse change in Suiza's or Dean's business between now and the time of the
merger. Moreover, the lenders' commitments to fund under the credit agreement
expire on December 31, 2001.
24
If a material adverse change does occur, or if the merger is not completed by
December 31, 2001 and Suiza's lenders do not agree to extend their commitments,
Suiza will be forced to obtain an alternate source of financing, which may be
more expensive for Suiza and/or have an adverse impact on the combined company's
capital structure or may be unavailable on terms acceptable to Suiza.
THE MERGER COULD CAUSE DILUTION TO THE COMBINED COMPANY'S EARNINGS PER SHARE.
Although we expect the merger and the related transactions to be accretive
to the combined company's earnings after the merger, the merger and the related
transactions could have a dilutive effect if:
- the costs of the transaction and integration-related costs exceed our
expectations;
- we fail to realize the expected benefits from synergies anticipated from
the merger;
- Suiza or Dean substantially underperforms prior to completion of the
merger; or
- the combined company substantially underperforms following the merger.
Dilution to the combined company's earnings per share after the merger could
adversely affect the market price of the combined company's common stock.
RISKS RELATING TO THE COMBINED COMPANY'S BUSINESS
As part of the purchase price for their Dean shares, Dean's stockholders
will receive shares of Suiza's common stock. Suiza's business is subject to a
number of risks and the combined company's business will continue to be subject
to those risks after completion of the merger. Dean's stockholders should
consider the following risks relating to the combined company's business in
deciding how to vote. Risks specific to Dean's business are not discussed in
this joint proxy statement/prospectus but are incorporated by reference to
Dean's Annual Report on Form 10-K for the fiscal year ended May 27, 2001 filed
with the SEC. See "Where You Can Find More Information" on page 99.
THE COMBINED COMPANY'S FAILURE TO SUCCESSFULLY COMPETE COULD ADVERSELY AFFECT
ITS PROSPECTS AND FINANCIAL RESULTS.
Suiza's business is subject to significant competition based on a number of
factors, and the combined company's business will continue to be subject to
significant competition after the merger. If the combined company fails to
successfully compete against its competitors, its business will be adversely
affected.
Significant consolidation is currently underway in the retail grocery and
food service industries. As the combined company's customer base continues to
consolidate, we expect competition among the combined company and its
competitors to further intensify as the combined company competes for the
business of fewer customers. As this consolidation continues, there can be no
assurance that the combined company will be able to keep Suiza's and Dean's
existing customers, or to gain new customers. Winning new customers will be
particularly important to the combined company's growth, as demand tends to be
relatively flat in our industry. Moreover, as our customers become larger, they
will have significantly greater purchasing leverage, and may force prices and
margins significantly lower than current levels.
The combined company could also be adversely affected by any expansion of
capacity by its competitors or by new entrants in our markets. In addition,
dairy processors like Suiza and Dean are facing pressure from other beverage
companies seeking to expand their influence over consumer beverage choices.
These larger competitors may adversely affect the combined company in its fight
for shelf space and consumption of its products.
25
THE COMBINED COMPANY'S INNOVATION EFFORTS MAY NOT SUCCEED.
Both Suiza and Dean have invested, and we intend to continue after the
merger to invest, significant resources in product innovation in an effort to
increase sales and profit margins as well as the overall consumption of dairy
products. We believe that sales and profit growth through innovation will be a
significant source of growth in the dairy industry. Innovation may improve
demand, which has been relatively flat for a number of years. Further,
innovation is particularly important because we expect margins on non
value-added dairy products to be compressed as our customer base consolidates.
The success of the combined company's innovation initiatives will depend on
customer and consumer acceptance of its products, of which there can be no
assurance. If these innovation efforts do not succeed, or if the combined
company does not have adequate resources to invest in innovation, the combined
company may not be able to continue to significantly increase demand for our
products, our sales or profit margins.
INCREASES IN THE COMBINED COMPANY'S RAW MATERIAL AND SUPPLY COSTS COULD
ADVERSELY AFFECT THE COMBINED COMPANY'S FINANCIAL RESULTS.
The most important raw materials that Suiza and Dean use in their operations
are raw milk and cream (including butterfat). These will continue to be the
combined company's primary raw materials after the merger. The prices of these
materials increase and decrease depending on supply and demand and, in some
cases, governmental regulation. Prices of raw milk and cream (including
butterfat) can fluctuate widely over short periods of time. This volatility in
the cost of raw materials could adversely affect the combined company's
performance.
Also, because the combined company will deliver a majority of its products
directly to customers through its "direct store delivery" system the combined
company will be a large consumer of diesel fuel. Suiza experienced increased
fuel costs in 2000 and 2001 to date as a result of increased fuel prices.
Further increases in fuel prices beyond our expectations could adversely affect
the combined company's results of operations.
Consolidated Container Company, in which Suiza owns a 43.1% interest, uses
high density, polyethylene resin (HDPE) as its primary raw material. Due to
recent increases in the cost of petroleum products, Consolidated Container
incurred sharply increased costs for HDPE during 2000 and the first six months
of 2001, which adversely affected its results of operations for those periods
and, accordingly, Suiza's earnings per share for those periods. Consolidated
Container is also Suiza's primary supplier of plastic bottles. Pursuant to
Suiza's supply agreements with Consolidated Container, the price Suiza pays for
plastic bottles increases as the cost of HDPE increases. Suiza is adversely
affected by these cost increases to the extent they are not passed on to Suiza's
customers. Should the cost of HDPE rise even higher than expected, the combined
company's financial results, including its gross profit and earnings per share,
could be adversely affected.
THE COMBINED COMPANY WILL HAVE SUBSTANTIAL DEBT.
Suiza has substantial debt and other financial obligations.
If the merger is completed, the combined company will be even more highly
leveraged. Suiza intends to borrow approximately $750 million to pay the cash
portion of the purchase price for the merger, $165 million to pay the cash
portion of the purchase price for the related transactions (subject to
adjustment), and an additional amount to refinance certain of Dean's
indebtedness. Suiza has pledged the stock of some of its subsidiaries to secure
its existing debt, and the combined company will pledge a substantial portion of
its assets to secure the debt incurred in connection with the merger.
The combined company's high debt level and new credit agreement will:
- limit the combined company's ability to obtain additional financing in the
future without obtaining prior consent;
26
- require the combined company to dedicate a significant portion of its cash
flow to the payment of principal and interest on its debt, which reduces
the funds it will have available for other purposes;
- limit the combined company's flexibility in planning for, or reacting to,
changes in the combined company's business and market conditions;
- impose additional financial and operational restrictions; and
- expose the combined company to interest rate risk since a portion of its
debt obligations will bear interest at variable rates.
The combined company's ability to make scheduled payments on its debt and
other financial obligations will depend on its financial and operating
performance. Its financial and operating performance will be subject to
prevailing economic conditions and to financial, business and other factors,
some of which will be beyond the combined company's control. If the combined
company does not comply with the financial and other restrictive covenants under
its debt agreements, it may default under these agreements. Upon default, the
combined company's lenders could accelerate the indebtedness under the
agreements, foreclose against their collateral or seek other remedies.
THE COMBINED COMPANY MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS.
Suiza and Dean sell food products for human consumption, which involves
risks such as:
- product contamination or spoilage;
- product tampering; and
- other adulteration of food products.
Consumption of an adulterated, contaminated or spoiled product may result in
personal illness or injury. The combined company could be subject to claims or
lawsuits relating to an actual or alleged illness or injury, and the combined
company could incur liabilities that are not insured or that exceed the combined
company's insurance coverages.
Although both Suiza and Dean maintain quality control programs designed to
address food quality and safety issues, an actual or alleged problem with the
quality, safety or integrity of our products at any of our facilities could
result in:
- product withdrawals;
- product recalls;
- negative publicity;
- reduced demand for our products;
- temporary plant closings; and
- substantial costs of compliance or remediation.
Any of these events could have a material and adverse effect on the combined
company's financial condition, results of operations or cash flows.
LOSS OF OR INABILITY TO ATTRACT KEY PERSONNEL COULD ADVERSELY AFFECT THE
COMBINED COMPANY'S BUSINESS.
The combined company's success depends to a large extent on the skills,
experience and performance of key personnel. The loss of one or more of these
persons could hurt the combined company's business. The combined company will
not maintain key man life insurance on any of its executive officers, directors
or other employees. Also, Suiza and Dean have experienced, and the combined
company could continue to experience, some difficulty in attracting management
personnel due to the currently low unemployment rates in the United States. If
the combined company is unable to attract and retain key personnel, its business
will be adversely affected.
27
LOSS OF RIGHTS TO ANY OF THE COMBINED COMPANY'S LICENSED BRANDS COULD ADVERSELY
AFFECT THE COMBINED COMPANY.
Suiza and Dean sell a significant portion of their products under licensed
brand names, such as BORDEN-REGISTERED TRADEMARK-,
COFFEE-MATE-REGISTERED TRADEMARK-, HERSHEY'S-REGISTERED TRADEMARK-, LAND O'
LAKES-REGISTERED TRADEMARK-, NESQUIK-REGISTERED TRADEMARK- and
PET-REGISTERED TRADEMARK-. Should the combined company's rights to manufacture
and sell products under any of these names be terminated, the combined company's
financial performance and results of operations could be materially and
adversely affected.
NEGATIVE PUBLICITY AND/OR SHORTAGES OF MILK SUPPLY RELATED TO MAD COW DISEASE
AND/OR FOOT AND MOUTH DISEASE COULD ADVERSELY AFFECT THE COMBINED COMPANY.
Recent incidences of bovine spongiform encephalopathy (BSE or "mad cow
disease") in some European countries have raised public concern about the safety
of eating beef and using or ingesting certain other animal-derived products. The
World Health Organization, the U.S. Food and Drug Administration and the United
States Department of Agriculture have all affirmed that BSE is not transmitted
to milk. Moreover, recent incidences of mad cow disease have occurred primarily
in Europe. No cases of disease in humans or livestock caused by BSE have been
detected in the United States. Notwithstanding these facts, we are still subject
to risk as a result of public misperception that milk products may be affected
by mad cow disease. To date, Suiza has not seen any measurable impact on its
milk sales in Spain, and neither Suiza nor Dean has seen any measurable impact
on its milk sales in the United States, resulting from concerns about mad cow
disease. However, should public concerns about the safety of milk or milk
products escalate as a result of further occurrences of mad cow disease, the
combined company could suffer a loss of sales, which could have a material and
adverse affect on its financial results.
Foot and Mouth Disease (FMD) is a highly contagious disease of cattle,
swine, sheep, goats, deer, and other cloven-hooved animals. FMD causes severe
losses in the production of meat and milk. While there have been several recent
occurrences of FMD in Europe, the United States has been free of FMD since 1929.
To date, Suiza has not seen a measurable impact on its supply of raw milk in
Spain as a result of FMD. However, should FMD become widespread in Spain, a milk
supply shortage could develop, which would affect Suiza's ability to obtain raw
milk for its Spanish operations and the price that it is required to pay for raw
milk in Spain. If Suiza is unable to obtain a sufficient amount of raw milk to
satisfy its Spanish customers' needs and/or if Suiza is forced to pay a
significantly higher price for raw milk in Spain, the combined company's
financial results in Spain could be materially and adversely affected. Likewise,
if there is an outbreak of FMD in the United States, a shortage of raw milk
could develop in the United States, which would affect the combined company's
ability to obtain raw milk and the price that the combined company is required
to pay for raw milk in the United States. If the combined company is unable to
obtain a sufficient amount of raw milk to satisfy its U.S. customers' needs
and/or if the combined company is forced to pay a significantly higher price for
raw milk in the United States, its consolidated financial results could be
materially and adversely affected.
CERTAIN PROVISIONS OF SUIZA'S CERTIFICATE OF INCORPORATION AND BYLAWS AND
DELAWARE LAW COULD DETER TAKEOVER ATTEMPTS.
Some provisions in Suiza's certificate of incorporation and bylaws could
delay, prevent or make more difficult a merger, tender offer, proxy contest or
change of control of the combined company. Stockholders of the combined company
might view any such transaction as being in their best interests since the
transaction could result in a higher stock price of the combined company's
common stock. Among other things, Suiza's certificate of incorporation and
bylaws:
- authorize Suiza's board of directors to issue preferred stock in series
with the terms of each series to be fixed by Suiza's board of directors;
28
- divide Suiza's board of directors into three classes so that only
approximately one-third of the total number of directors is elected each
year;
- permit directors to be removed only for cause; and
- specify advance notice requirements for stockholder proposals and director
nominations.
In addition, with some exceptions, the Delaware General Corporation Law will
restrict mergers and other business combinations between the combined company
and any stockholder that acquires 15% or more of the combined company's voting
stock.
Suiza also has a stockholder rights plan which will remain in place
following the merger. Under this plan, after the occurrence of specified events,
stockholders will be able to buy stock from the combined company at reduced
prices. These rights would not extend, however, to persons participating in
takeover attempts without the consent of the board of directors. Accordingly,
this plan could delay, defer, make more difficult or prevent a change of control
of the combined company.
THE COMBINED COMPANY WILL BE SUBJECT TO GOVERNMENTAL REGULATIONS, AND ITS
OPERATIONS AND PROFITABILITY COULD BE ADVERSELY AFFECTED BY CHANGES IN
REGULATIONS OR NEW REGULATIONS.
Our operations are subject to federal, foreign, state and local governmental
regulation, and will continue to be after the merger. While Suiza and Dean each
believes that it is in compliance with all material existing governmental
regulations, future material noncompliance by the combined company, or any
material changes in these laws and regulations, could adversely affect the
combined company's ability to operate its business as currently conducted or the
profitability of its operations.
Under the Federal Milk Marketing Order program, the federal government and
several state agencies establish minimum regional prices paid to producers for
raw milk. These prices, which are calculated by economic formula based on supply
and demand, vary depending on the type of product manufactured using the raw
milk. In New England, the Northeast Dairy Compact Commission sets a minimum
price for milk independent of the price set by the federal milk marketing
orders. The price Suiza pays for raw milk in New England currently exceeds the
price Suiza pays for raw milk in other parts of the country, and we expect that
to continue to be the case after the merger. Several other states are
considering adopting compacts among milk producers which would establish minimum
prices paid by milk processors, including the combined company, to raw milk
producers in those states. We do not know whether new compacts will be
authorized by Congress or, if authorized, the extent to which these compacts
would increase the prices the combined company will be required to pay for raw
milk. A substantial increase in the price the combined company is required to
pay for raw milk beyond its expectations could have an adverse effect on the
combined company's results of operations, to the extent those increases are not
passed on to customers. Moreover, even if those costs are passed on to
customers, the combined company could suffer a loss of sales if the price of
processed milk and other dairy products rises beyond the price that the combined
company's customers and consumers are willing to pay.
The combined company, like others in similar businesses, will also be
subject to a variety of federal, foreign, state and local environmental laws and
regulations including, but not limited to, those regulating food quality,
manufacturing standards, labeling, packaging, waste water, stormwater, air
emissions, storage tanks and hazardous materials, occupational health and
safety, labor, discrimination and other matters.
While Suiza and Dean believe that both companies are currently in compliance
with all material governmental regulations, we cannot be certain what effect any
future material noncompliance, or any material changes in those laws and
regulations, including changes in the laws regulating minimum prices for raw
milk, could have on the combined company's business. Material changes in those
laws and regulations could have positive or adverse effects on the combined
company's business.
29
THE MERGER AND THE MERGER AGREEMENT
The following summary of the merger and the merger agreement is qualified by
reference to the complete text of the merger agreement. The merger agreement is
incorporated by reference and attached as Annex A.
BACKGROUND OF THE MERGER
For the last several years, management of Suiza has considered Dean to be a
logical merger partner, primarily because of Suiza's and Dean's complementary
distribution capabilities and product mix. In early 1998, Dean began to explore
various strategic and financial options aimed at increasing stockholder value.
At that time, Suiza and Dean held discussions concerning the possibility of a
business combination. In connection with those discussions, Suiza and Dean
entered into a confidentiality agreement which included a three-year standstill
provision, and conducted limited due diligence, including mutual management
presentations. Suiza and Dean terminated their negotiations in February 1998
primarily due to differences over integration and management succession issues.
In early 2000, after Suiza acquired Southern Foods, Mr. Dean and Mr. Engles
again began to discuss a merger of the two companies. Although Suiza and Dean
identified a number of benefits to such a combination, the discussions again
stalled.
In March 2000, Dean retained Goldman, Sachs & Co. to assist Dean in
connection with a possible transaction with Suiza or another entity, and in
consideration of various other financial alternatives available to Dean.
By late 2000, Suiza began to view Dean as vulnerable to takeover in light of
Dean's then-current market valuation and certain management succession issues
that Suiza perceived at Dean. During the first weekend of December 2000,
Mr. Dean and Mr. Engles attended a social event hosted by Dairy Farmers of
America (DFA). During that weekend, Mr. Engles asked Mr. Dean whether Dean would
be interested in discussing a possible business combination. Mr. Dean indicated
that he had been considering various strategic alternatives for Dean, and that,
given Dean's then current outlook, the timing might be right to again consider a
business combination with Suiza. Mr. Engles and Mr. Dean agreed to meet to
explore the possibility of a transaction.
On January 26, 2001, at a regularly scheduled meeting, Dean's board of
directors discussed various strategic alternatives for Dean, including the
possibility of a business combination with Suiza. Mr. Dean reviewed his recent
discussions with Mr. Engles, and Goldman Sachs discussed certain transaction
alternatives with the board. Dean's board authorized Mr. Dean to continue
discussions with Suiza.
On January 31, 2001, Mr. Engles, Mr. Dean and another executive of Suiza met
to further discuss the possibility of a business combination. At the meeting,
Mr. Dean outlined the basic terms on which Dean's board of directors would
consider a combination with Suiza. Mr. Engles and Mr. Dean agreed to arrange a
meeting of their financial advisors to further explore the possibility of a
combination.
On February 6, 2001, Suiza's and Dean's financial advisors met to discuss
possible terms of a transaction between Suiza and Dean. At that meeting, the
advisors agreed that certain due diligence must be completed before either
company could further consider the transaction.
Also during January and February 2001, Suiza held several discussions with
DFA, owner of approximately 33.8% of Suiza Dairy Group, concerning the
possibility of a business combination between Suiza and Dean. During Suiza's
discussions with DFA concerning the possible transaction with Dean, Suiza and
DFA agreed that it would not be feasible for Suiza to proceed with the merger
unless Suiza owned 100% of its dairy operations. Therefore, Suiza and DFA began
discussing possible scenarios pursuant to which Suiza would purchase DFA's
interest in Suiza Dairy Group.
30
On February 8, 2001, at a meeting held in Dallas, executives of Suiza
advised their board of directors of Suiza's discussions with Dean. Suiza's board
of directors authorized management to continue discussions with Dean.
On February 9, 2001, Suiza and Dean signed a confidentiality agreement which
included a two-year standstill provision. Shortly thereafter, Dean began
delivering preliminary due diligence information to Suiza. At that time, Suiza
also began considering various structuring issues related to the merger, and
began discussing with its lenders and financial advisors various financing
alternatives for the transactions with Dean and DFA. As Suiza's review of the
due diligence materials provided by Dean progressed, Suiza, with the assistance
of its financial advisors, began to form a preliminary opinion concerning the
value to Suiza of Dean's shares.
On February 13, 2001, during a special meeting of Dean's board, Dean's
management reported that forecasted earnings for Dean's third quarter and full
fiscal year would likely be below analysts' expectations. Dean's board,
management and financial advisors discussed the impact of the anticipated
earnings shortfall on a potential transaction with Suiza. The next day,
Mr. Dean called Mr. Engles to advise him that Dean would not meet projected
earnings targets for the third and fourth quarters of 2001.
On February 21, 2001, executives of Suiza and Dean, accompanied by their
financial advisors, met to discuss Suiza's preliminary due diligence findings
and Dean's current and projected financial performance. Mr. Engles indicated to
Mr. Dean that he expected to submit an offer to acquire Dean after obtaining the
approval of Suiza's directors.
On February 22, 2001, at a special meeting, Dean's directors were briefed by
Dean's management and financial advisors regarding the due diligence meetings
and discussions with Suiza's executives on the previous day.
Also on February 22, 2001, at a regularly scheduled meeting, executives of
Suiza, together with Suiza's legal and financial advisors, discussed with
Suiza's board the status of Suiza's discussions with Dean, the results of
Suiza's preliminary due diligence investigation, and the preliminary price offer
that Suiza intended to deliver to Dean, subject to further due diligence.
Suiza's board authorized management to make the offer and to continue its due
diligence review. Suiza's legal counsel also presented an analysis of antitrust
issues relating to a combination of Suiza and Dean.
On February 27, 2001, Suiza, through its financial advisors, delivered its
preliminary price offer to Dean, subject to further due diligence.
On February 28, 2001, Dean's management and advisors briefed Dean's board
over the telephone on the terms and conditions of Suiza's offer to purchase
Dean.
On March 5, 2001, at a meeting of Dean's board of directors, Dean's
management and financial advisors described the terms and conditions of Suiza's
purchase offer. Dean's outside legal advisors also reviewed the fiduciary duties
of the directors in connection with the possible sale of the company. Dean's
board also discussed potential synergies from a combination with Suiza, the
proposed timetable for the merger, expected market reaction and strategic
alternatives to the Suiza offer.
On March 9, 2001, Dean issued a press release announcing that it would not
meet projected earnings targets for the third and fourth fiscal quarters of 2001
and that it had hired Goldman Sachs to assist it in evaluating various strategic
and financial alternatives.
On March 12, 2001, various executives and representatives of Suiza visited
Dean to conduct further due diligence. On March 13, 2001, as part of the due
diligence process, Suiza's management and Dean's management made presentations
to each other regarding their businesses. Also that week, various executives and
representatives of Dean visited Suiza to begin a due diligence investigation
concerning Suiza's business.
31
Throughout March, Suiza's discussions with DFA concerning the terms of
Suiza's buy-out of DFA's interest in Suiza Dairy Group continued. Also
throughout March, Suiza continued its discussions with various commercial
lenders regarding obtaining a commitment for financing for the proposed
transaction, met with certain rating agencies and discussed with communications
professionals Suiza's merger communications plan in the event that an agreement
should be reached between Suiza and Dean.
On March 20, 2001, Suiza delivered an initial draft of a merger agreement to
Dean.
On March 21, 2001, Suiza's board of directors held a special meeting. At
that meeting, Suiza's executives and legal and financial advisors discussed with
the board the status of Suiza's discussions with Dean, the results of Suiza's
due diligence investigation and Suiza's financial advisors' recommendations
concerning valuation. Suiza's board of directors decided on a definitive price
offer, and authorized management to deliver the definitive offer and to continue
negotiations with Dean.
On March 22, 2001, Suiza, through its financial advisors, delivered its
definitive offer to Dean.
On March 23, 2001, Dean's board of directors held a regularly scheduled
meeting. Dean's management and financial advisors reviewed with the board the
status of their discussions with Suiza, the proposed transaction structure,
financing issues, key contractual terms and due diligence findings as well as
expressions of interest from other parties. Dean's legal counsel also presented
an analysis of antitrust issues relating to a combination of Dean and Suiza.
Dean's board authorized management to continue discussions with Suiza with the
objective of negotiating a final agreement.
On March 26, 2001, Mr. Dean and Mr. Engles, accompanied by their financial
advisors, met to negotiate the draft merger agreement and to discuss various
management and integration issues. Mr. Engles and Mr. Dean reached agreement on
several key points, and agreed that Mr. Engles, Mr. Dean, other Suiza and Dean
executives and their legal and financial advisors would meet in Dallas on
March 28, 2001 to finalize the merger agreement. During the meeting held on
March 28, Suiza and Dean reached an impasse concerning the consideration to be
paid by Suiza and other key issues, and the companies suspended their merger
discussions.
On March 29, 2001, Dean's board met and was briefed by Dean's management and
financial and legal advisors regarding the companies' discussions in Dallas.
Dean's advisors reviewed with the board the contractual issues that had not been
resolved, Suiza's proposed agreement with DFA for divestiture of certain Suiza
and Dean plants, DFA's proposed agreement with National Dairy Holding, LP
(National Dairy) assigning DFA's interest in those plants to National Dairy and
the effect of such agreements on a combination of Dean and Suiza. The board
authorized Dean's management and advisors to resume discussions with Suiza.
On March 30, 2001, Mr. Dean called Mr. Engles. During that conversation,
they reached agreement on several material provisions of the merger agreement,
and agreed to continue discussions through their executives and advisors to
finalize the merger agreement. Also that day, Suiza's board of directors
convened a special meeting to discuss the proposed transaction. Suiza's
management updated Suiza's board on the status of its discussions with Dean, DFA
and Suiza's commercial lenders. Suiza's board authorized management to continue
its negotiations with Dean and agreed to meet again on April 4, 2001 to consider
approving the final transaction.
From March 30 to April 1, 2001, Suiza's and Dean's executives and advisors
continued negotiating the merger agreement, and Suiza's executives and advisors
continued negotiating the purchase agreement with DFA and the commitment letters
for Suiza's proposed financing.
On April 2, 2001, Mr. Dean and Mr. Engles, accompanied by certain other
executives and their advisors, met in an attempt to resolve the remaining
material terms of the merger agreement. They
32
reached agreement on most of the material terms and agreed to attempt to
finalize and sign the agreement on April 4.
On April 3, 2001, Dean's board of directors met to discuss the previous
days' negotiations between Dean and Suiza. Dean's legal advisors explained the
resolution of the key contractual issues and reviewed the status of Suiza's
related agreements with DFA and DFA's proposed agreement with National Dairy.
Dean's financial advisors also discussed with the board contacts from unrelated
third parties who might have a potential interest in acquiring Dean or a portion
of Dean's assets.
On April 4, 2001, the merger agreement negotiations were completed. Also on
that day, Suiza's agreement with DFA was finalized and Suiza reached agreement
with its lenders concerning the terms of their financing commitments.
Also on April 4, 2001, Dean's board of directors met to consider the
proposed merger with Suiza, and approved the merger and the merger agreement.
See "--Dean's Reasons for the Merger" below for a discussion of matters
considered and actions taken at this meeting.
Also on April 4, 2001, Suiza's board of directors met to consider the
proposed merger with Dean and the proposed transaction with DFA, and approved
both transactions. See "--Suiza's Reasons for the Merger" on page 37 for a
discussion of matters considered and actions taken at this meeting.
On the evening of April 4, 2001, Suiza received the signed commitments of
its commercial lenders to provide financing for the proposed transactions. Suiza
and Dean then signed the merger agreement and exchanged signature pages. Suiza
also signed the purchase agreement with DFA and the parties exchanged signature
pages.
On the morning of April 5, 2001, Suiza and Dean issued a joint press release
announcing the proposed merger.
DEAN'S REASONS FOR THE MERGER
Dean's board of directors approved the merger agreement and the merger by a
unanimous vote of all members. In the course of reaching its decision to approve
the merger agreement and the merger, Dean's board of directors consulted with
Dean's management, as well as its outside legal counsel and its financial
advisor. At its meeting on April 4, 2001, Dean's board of directors unanimously:
- Determined that the merger is fair and in the best interests of Dean and
its stockholders and that the cash consideration, the exchange ratio and
the per share merger consideration is fair from a financial point of view
to Dean's stockholders;
- Approved the merger agreement and the merger;
- Directed that the merger agreement be submitted for consideration by
Dean's stockholders; and
- Recommended that Dean's stockholders vote "FOR" the proposal to approve
the merger agreement and the merger.
Dean's board of directors identified and considered a variety of potential
positive factors in its deliberations concerning the merger agreement and the
merger, including the following:
- Dean's and Suiza's financial condition, results of operations, business
quality, prospects and businesses as separate entities and on a combined
basis, including:
-- The revenues, cash flows and operating margins of Dean, Suiza and
the combined company; and
-- The recent and historical stock price performance of Dean's common
stock and Suiza's common stock;
33
- the strategic nature of the merger and increased opportunity for growth;
- the greater financial strength expected to enable the combined company to
increase research and development expenditures to develop new innovative
products and increase demand for and consumption of their milk and related
products;
- the other potential benefits of scale to be derived from a combination of
Dean and Suiza, including the expected cost savings and efficiencies,
improved operating margins, enhanced marketing and sales support, improved
distribution capabilities and greater ability to serve the rapidly
consolidating national retail grocery and food services industries;
- the likely market position and competitiveness resulting from a
combination of Dean and Suiza, the complementary operating strengths and
compatible business strategies of the two companies, the potential for
synergies from a combination of the companies and the resulting potential
to increase stockholder value;
- Suiza's demonstrated ability to implement its growth strategy and
integrate its acquisitions successfully and Suiza's ability to access
capital markets to fund its growth;
- Suiza's proven management team;
- the fact that five persons (including Howard Dean) to be agreed upon by
Suiza and Dean prior to completion of the merger will be elected to fill
five new seats on Suiza's board of directors after the merger;
- the fact that Mr. Dean will become Chairman of the board of directors of
the combined company and a member of its executive and management
committees after the merger is completed;
- the fact that, although Dean did not actively auction its business, Dean
had publicly announced on March 8, 2001 that it had retained Goldman,
Sachs & Co. to explore strategic and financial alternatives and did not
receive any proposals from any other company to merge with or acquire Dean
or any other attractive proposals for any other transaction with Dean;
- the possible alternatives to the merger, including continuing to operate
Dean as an independent company and the associated risks in light of
(1) Dean's failure to meet quarterly earnings expectations for 8 out of
the 12 fiscal quarters preceding the approval of the merger agreement,
(2) the difficulties Dean has experienced in integrating several of its
recent acquisitions, (3) the competitive pressures Dean has faced and
expects to continue to face from other dairy and non-dairy beverage
companies, (4) the steady decline in milk consumption nationwide and
(5) Howard Dean's planned retirement and Dean's concerns about identifying
a clear successor capable of effectively leading Dean's business as a
stand-alone company;
- the opportunity for Dean's stockholders to participate in a larger company
and, as stockholders of the combined company, to participate in any
increases in the value of its businesses following the merger;
- the fact that the exchange ratio would enable Dean's stockholders after
the merger to own approximately 36% of the common stock of the combined
company (on a diluted basis assuming exercise of only the outstanding
Suiza and Dean options) or approximately 30% of the common stock of the
combined company (on a diluted basis assuming the exercise of outstanding
Suiza and Dean options and conversion of Suiza's mandatorily redeemable
convertible trust issued preferred securities);
- the intrinsic value and historical market prices of Dean's common stock
and the fact that the cash consideration and the exchange ratio (based on
Suiza's trading price at the close of business on April 3, 2001, the last
trading day before Dean's board of directors approved the
34
merger agreement) to be paid by Suiza in the merger together represented a
premium of 25.7% to Dean's trading price at the close of business on
April 3, 2001;
- the directors' belief that the consideration to be paid by Suiza in the
merger represented the highest price per share that could be negotiated
with Suiza;
- the presentation by Goldman, Sachs & Co. to Dean's board of directors on
April 4, 2001, including the oral opinion of Goldman, Sachs & Co.
presented to Dean's board of directors to the effect that, as of April 4,
2001, the per share merger consideration to be received by Dean
stockholders in the merger was fair from a financial point of view (See
"Opinions of Financial Advisors--Opinion of Dean's Financial Advisor" on
page 69);
- the likely ability to complete the merger as a reorganization for United
States federal income tax purposes in which Dean stockholders generally
would not recognize any gain or loss, except for any gain or loss realized
in connection with the cash component of the merger consideration and any
cash received for fractional shares of Suiza's common stock (See
"--Material Federal Income Tax Consequences of the Merger" on page 53);
- the financial and non-financial terms and conditions of the merger
agreement, including:
-- the merger consideration;
-- the fact that the closing condition requiring the accuracy of Dean's
representations in the merger agreement generally excludes any
inaccuracies that would not have a material adverse effect on Dean;
-- the fact that Suiza's obligation to complete the merger is not
conditioned on Suiza's receipt of any financing or on Suiza's
purchase of the 33.8% limited partnership interest in Suiza Dairy
Group, held by Dairy Farmers of America, as described under the
heading "--The Related Transactions" on page 58;
-- the right of Dean's board of directors, in connection with the
discharge of their fiduciary duties to Dean and its stockholders or
in response to certain unsolicited alternative acquisition
proposals, to withdraw, modify or qualify its recommendation to
Dean's stockholders to approve the merger agreement and pursue a
competing transaction with another party, and the financial
consequences of such withdrawal, modification or qualification;
-- the absence of any right of Suiza to terminate the merger agreement
if the value of a share of Suiza common stock rises above any
particular level prior to the consummation of the merger; and
-- the fact that Suiza will be required to reimburse Dean for one-half
of Dean's expenses incurred in connection with the merger, up to a
maximum of $10 million, if Dean terminates the merger agreement
because Suiza's stockholders fail to approve the merger; and
- the belief that the terms of the merger agreement, including Suiza's and
Dean's representations, warranties and covenants, and the conditions to
their respective obligations, are reasonable.
Dean's board of directors also identified and considered a variety of
potential negative factors in its deliberations concerning the merger agreement
and the merger, including the following:
- the risk that the potential benefits sought in the merger might not be
fully realized;
35
- the possibility that the merger might not be consummated and the potential
adverse effects of the public announcement of the merger on:
-- Dean's sales and operating results,
-- Dean's ability to attract and retain key employees, and
-- Dean's overall competitive position;
- the risk that key personnel might not remain employees of the combined
company following the merger;
- the absence of any right of Dean to terminate the merger agreement if the
value of Suiza's common stock falls below any particular level prior to
the merger;
- the impact of the loss of Dean's status as an independent company on
Dean's stockholders, employees, suppliers and customers;
- the fact that Dean will be required to reimburse Suiza for one-half of
Suiza's expenses incurred in connection with the merger, up to a maximum
of $10 million, if Suiza terminates the merger agreement because Dean's
stockholders fail to approve the merger agreement; and
- the fact that Suiza does not have an investment grade debt rating.
Dean's board of directors specifically considered that the inclusion in the
merger agreement of the covenant prohibiting any solicitation by Dean of
alternative acquisition proposals and the $45 million termination fee and up to
$15 million expense reimbursement provisions were each a prerequisite to Suiza's
willingness to enter into the transaction. Dean's board of directors considered
that while these provisions might have the effect of discouraging other offers,
Dean's board of directors retained the ability to negotiate with third parties
expressing an unsolicited interest in Dean after the announcement of the
transaction, and Dean's board of directors determined that the benefits to
Dean's stockholders of securing an agreement with Suiza outweighed any potential
detriment.
The discussion in this section about the information and factors considered
by Dean's board of directors is not intended to be exhaustive but Dean believes
it includes all material factors considered by Dean's board of directors. In
view of the complexity and wide variety of information and factors, both
positive and negative, considered by Dean's board of directors, Dean's board of
directors did not find it practical to quantify, rank or otherwise assign
relative or specific weights to the factors considered. In addition, Dean's
board of directors did not reach any specific conclusion with respect to each of
the factors considered, or any aspect of any particular factor, but, rather,
conducted an overall analysis of the factors described above, including thorough
discussions with Dean's management and legal and financial advisors. In
considering the factors described above, individual members of Dean's board of
directors may have given different weight to different factors. Dean's board of
directors considered all these factors as a whole and believed the factors
supported its decision to approve the merger agreement and the merger. After
taking into consideration all of the factors described above, Dean's board of
directors concluded that the merger was fair to, and in the best interests of,
Dean and its stockholders and that Dean should proceed with the merger.
RECOMMENDATION OF DEAN'S BOARD OF DIRECTORS
Dean's board of directors believes that the merger is fair and in the best
interests of Dean and its stockholders and unanimously recommends that Dean's
stockholders vote "FOR" the proposal to approve the merger agreement and the
merger.
36
DEAN'S COVENANT TO RECOMMEND
The merger agreement requires Dean's board of directors to recommend
adoption of the merger agreement and the merger to Dean's stockholders. However,
Dean's board of directors is permitted to withdraw or change its recommendation
prior to approval of the merger by Dean's stockholders if Dean's board of
directors determines in good faith, after consultation with its outside counsel,
that it is required to take such action to satisfy its fiduciary duties and Dean
has not breached its non-solicitation duties as described below under
"--Solicitation Restriction on Dean" on page 47.
SUIZA'S REASONS FOR THE MERGER
Suiza's board of directors believes that the merger will create significant
value for Suiza's stockholders by enabling them to participate in a combined
company with enhanced prospects for growth and profitability. Set forth below
are a few of the reasons why Suiza is proposing the merger:
- Suiza and Dean have complementary product offerings and geographic reach.
Merging our businesses will create the first truly national dairy and
specialty food company with the geographic reach, management depth and
product mix necessary to grow and compete effectively against larger, more
diversified food and beverage companies. Together, we will be better
positioned to meet the needs of our customers, including our large
national customers who would benefit from the added service, convenience
and value that a national dairy company could provide.
- By combining Suiza and Dean, Suiza expects to further reduce costs, which
will allow Suiza to become more efficient and, therefore, to compete more
effectively.
- After the merger, Suiza will have greater resources to invest in
innovation and marketing. Suiza believes that innovation is critical to
increased sales and increased consumption, which should benefit the entire
industry. Increased marketing should help to increase sales.
At a meeting of Suiza's board of directors held on April 4, 2001, after due
consideration, Suiza's board of directors unanimously took the following
actions, among others:
- determined that the merger is in the best interest of Suiza and its
stockholders and that the amount of cash and stock to be delivered to
Dean's stockholders under the merger agreement is fair from a financial
point of view to Suiza;
- approved the merger agreement;
- approved the issuance and reservation of a sufficient number of shares of
common stock to comply with Suiza's obligations under the merger
agreement;
- approved the indebtedness that Suiza expects to incur in order to pay the
cash portion of the purchase price for the merger and the related
transactions;
- approved the conversion of all outstanding options to acquire shares of
Dean's stock into options to acquire shares of Suiza's stock in accordance
with the merger agreement;
- directed that the proposal to issue Suiza's stock to Dean's stockholders
and to reserve sufficient shares to permit the exercise of all converted
Dean stock-based awards pursuant to the merger agreement be submitted to a
vote of Suiza's stockholders;
- recommended that Suiza's stockholders vote "FOR" the merger proposal;
- approved the change of Suiza's name to Dean Foods Company upon closing of
the merger;
- approved an increase in the size of Suiza's board from 10 to 15, and
resolved to agree with Dean on designees to fill those seats at the time
of the merger and to appoint Howard Dean as
37
Chairman of the Board and a member of the Executive Committee of the Board
and a member of Suiza's management committee until his retirement in
June 2002; and
- approved the transaction with Dairy Farmers of America.
In approving the transaction and making its recommendation, Suiza's board of
directors consulted with Suiza's management as well as its internal and external
legal counsel and its financial advisors, and it carefully considered the
following material factors:
- the strategic nature of the merger, including the potential for enabling
Suiza to better serve customers and the increased opportunities for growth
that could result from the merger;
- Suiza's ability after the merger to invest greater amounts in research and
development in an effort to increase sales and consumption of dairy
products by developing new and innovative products;
- various expected cost savings and efficiencies;
- the potential impact of the proposed merger and the related transaction on
Suiza's projected financial results, capital structure, and stock price;
- certain potential adverse effects including potential losses of customers
or other business relationships;
- Suiza's demonstrated ability to successfully integrate businesses;
- with respect to the price to be paid to Dean's stockholders:
-- Dean's financial condition, recent and projected results of
operations, business quality and prospects;
-- Dean's recent and historical stock price performance;
-- the value of certain of Dean's brands and investments; and
-- the presentations by Bear, Stearns & Co. Inc. and Morgan Stanley &
Co. Incorporated to Suiza's board of directors on April 4, 2001,
including their opinions that, as of April 4, 2001, the per share
merger consideration to be paid by Suiza was fair from a financial
point of view to Suiza, as well as the data, assumptions and
analysis underlying the opinions;
- certain other terms and conditions of the merger agreement, such as:
-- Suiza's right to terminate the merger agreement upon a material
adverse change in Dean's business, operations, assets, financial
condition or results of operations, taken as a whole;
-- Dean's agreement not to solicit other bids for Dean or to accept
unsolicited bids unless the Dean stockholder meeting has not yet
occurred and the other offer is superior to Suiza's (meaning that it
is more favorable to Dean's stockholders from a financial point of
view), is likely to close and is either accompanied by financing
commitments or not subject to a financing contingency; and
-- Dean's agreement to pay Suiza a $45 million fee if (1) Suiza
terminates the merger agreement under certain circumstances, or
(2) Dean terminates the merger agreement as a result of its
acceptance of a superior offer or if Dean sells 50% or more of its
business to another buyer (see "--Solicitation Restriction on Dean"
on page 47 and "--Termination of the Merger Agreement" on page 48);
38
- the likelihood of obtaining regulatory approval for the transaction, the
likely timeframe for receiving such approval, the possible actions that
Suiza might be required to take in order to receive such approval, the
advisability of agreeing in advance to divest certain plants, and which
plants to divest;
- the financial and non-financial terms of the proposed financing for the
merger and the related transactions; and
- certain corporate governance and management succession issues.
In view of the number and wide variety of factors considered in connection
with its evaluation of the merger and the complexity of these matters, Suiza's
board of directors did not find it practicable to, nor did it attempt to,
quantify, rank or otherwise assign relative weights to the specific factors that
it considered. Suiza's board of directors considered the separate opinions of
Bear Stearns and Morgan Stanley that, as of April 4, 2001, the per share merger
consideration to be paid by Suiza was fair from a financial point of view to
Suiza. See "Opinions of Financial Advisors--Opinions of Suiza's Financial
Advisors" on page 73. In addition, Suiza's board of directors did not undertake
to make any specific determination as to whether any particular factor, or any
aspect of any particular factor, was favorable or unfavorable to Suiza's board
of directors' ultimate determination or assign any particular weight to any
factor, but rather Suiza's board of directors conducted an overall analysis of
the factors described above, including thorough discussions with and questioning
of Suiza's management and legal and financial advisors. In considering the
factors described above, individual members of Suiza's board of directors may
have given different weight to different factors. Suiza's board of directors
considered all these factors as a whole, and considered the factors, in the
aggregate, to be favorable to Suiza and to support its determination to
recommend the merger and related stock issuance.
RECOMMENDATION OF SUIZA'S BOARD OF DIRECTORS
Suiza's board of directors believes that the terms of the merger agreement
are fair to and in the best interests of Suiza and its stockholders and
unanimously recommends to its stockholders that they vote "FOR" the proposal to
approve:
- the issuance of Suiza's common stock in the merger; and
- the reservation of an additional number of shares of Suiza's common stock
for issuance pursuant to stock-based awards outstanding at the time of the
merger under Dean's stock awards plans.
SUIZA'S COVENANT TO RECOMMEND
Suiza's board of directors is required to recommend approval of the merger
proposal to you. Suiza's board of directors is permitted to withdraw or change
this recommendation, however, if Dean withdraws or changes its recommendation to
its stockholders.
STRUCTURE OF THE MERGER
When the merger occurs, Dean will merge into Blackhawk, a direct
wholly-owned subsidiary of Suiza, with Blackhawk being the surviving
corporation, and Blackhawk's name will be changed to Dean Dairy Company.
Effectively, as a result of the merger, Dean will become a wholly-owned
subsidiary of Suiza.
WHAT DEAN'S STOCKHOLDERS WILL RECEIVE
Each of Dean's stockholders will receive, for each share of Dean's stock
held immediately prior to the merger, $21.00 in cash plus 0.429 shares of
Suiza's common stock, subject to adjustment if Suiza's stock price is below
$32.71 at the time of the merger (as further explained under this heading). Had
39
the merger occurred on April 4, 2001, the day the merger agreement was signed,
the total value received by each Dean stockholder would have been as follows:
PER DEAN SHARE
----------------------------------------------------------------------------------------------
D E F
A B C (AXC) (B+D) (D/E)
--------------------- -------- ------------------- -------------------- -------------- ---------------------
STOCK AS A PERCENTAGE
VALUE OF ONE VALUE OF SUIZA TOTAL VALUE OF TOTAL VALUE
SUIZA SHARE(1) CASH NO. OF SUIZA SHARES STOCK TO BE RECEIVED TO BE RECEIVED TO BE RECEIVED
--------------------- -------- ------------------- -------------------- -------------- ---------------------
$46.15 $21.00 0.429 $19.80 $40.80 48.5%
--------------------------
(1) Based on Suiza's weighted average sale price on the New York Stock Exchange
on April 4, 2001.
If the merger had occurred on August 9, 2001, the total value received by
each Dean stockholder would have been as follows:
PER DEAN SHARE
----------------------------------------------------------------------------------------------
D E F
A B C (AXC) (B+D) (D/E)
--------------------- -------- ------------------- -------------------- -------------- ---------------------
STOCK AS A PERCENTAGE
VALUE OF ONE VALUE OF SUIZA TOTAL VALUE OF TOTAL VALUE
SUIZA SHARE(1) CASH NO. OF SUIZA SHARES STOCK TO BE RECEIVED TO BE RECEIVED TO BE RECEIVED
--------------------- -------- ------------------- -------------------- -------------- ---------------------
$53.57 $21.00 0.429 $22.98 $43.98 52.3%
--------------------------
(1) Based on Suiza's weighted average sale price on the New York Stock Exchange
on August 9, 2001.
The value actually received by each Dean stockholder will depend on the
weighted average sale price of Suiza's stock on the day of the merger. The table
below illustrates how the value to be received by Dean's stockholders could
change.
PER DEAN SHARE
----------------------------------------------------------------------------------------------
D E F
A B C (AXC) (B+D) (D/E)
--------------------- -------- ------------------- -------------------- -------------- ---------------------
STOCK AS A PERCENTAGE
VALUE OF ONE VALUE OF SUIZA TOTAL VALUE OF TOTAL VALUE
SUIZA SHARE CASH NO. OF SUIZA SHARES STOCK TO BE RECEIVED TO BE RECEIVED TO BE RECEIVED
--------------------- -------- ------------------- -------------------- -------------- ---------------------
$60.00 $21.00 0.429 $25.74 $46.74 55.1%
55.00 21.00 0.429 23.60 44.60 52.9
50.00 21.00 0.429 21.45 42.45 50.5
45.00 21.00 0.429 19.31 40.31 47.9
40.00 21.00 0.429 17.16 38.16 45.0
35.00 21.00 0.429 15.02 36.02 41.7
It is possible that the mix of cash and stock to be received by Dean's
stockholders could change. At the time we entered into the merger agreement, we
structured the merger in a way that we believe allows the merger to qualify as a
"tax-free reorganization" under federal tax laws. Assuming the merger qualifies
as a tax-free reorganization, if you are a Dean stockholder, you will recognize
taxable gain equal to the lesser of (1) the amount of cash you receive in the
merger and (2) an amount equal to (a) the fair market value of the Suiza common
stock and cash that you receive in the merger minus (b) your tax basis (which is
generally equal to your cost) for the shares of Dean common stock that you are
exchanging in the merger.
We have been advised that, in order for the merger to qualify as a tax-free
reorganization, the total value of the stock issued by Suiza to Dean's
stockholders in connection with the merger should be at least 40% of the total
purchase price paid by Suiza for all of Dean's outstanding common stock.
Therefore, in order to preserve the status of the merger as a "tax-free
reorganization," the merger agreement provides that if Suiza's stock price is
below a certain "threshold price" when the merger occurs, the mix of cash and
stock to be delivered to each Dean stockholder will change (without changing the
total value received by such stockholder). Each Dean stockholder would receive
more
40
stock and less cash so that the stock portion of the purchase price represents
at least 40% of the total purchase price.
The "threshold price" of Suiza's stock (below which the mix of stock and
cash to be received by Dean's stockholders will be adjusted) is $32.71, assuming
none of Dean's stockholders exercise dissenter's rights. If any of Dean's
stockholders exercise dissenter's rights, the "threshold price" will increase
slightly.
The table below illustrates how the mix of cash and stock paid for each Dean
share would change if the price of Suiza's stock is below $32.71 when the merger
occurs, assuming $32.71 is the "threshold price."
PER DEAN SHARE
----------------------------------------------------------------------------------------------
D E F
A B C (AXC) (B+D) (D/E)
--------------------- -------- ------------------- -------------------- -------------- ---------------------
STOCK AS A PERCENTAGE
VALUE OF ONE VALUE OF SUIZA TOTAL VALUE OF TOTAL VALUE
SUIZA SHARE CASH NO. OF SUIZA SHARES STOCK TO BE RECEIVED TO BE RECEIVED TO BE RECEIVED
--------------------- -------- ------------------- -------------------- -------------- ---------------------
$32.00 $20.82 0.434 $13.89 $34.71 40.0%
31.00 20.56 0.443 13.73 34.29 40.0
30.00 20.31 0.452 13.56 33.87 40.0
The final mix of cash and stock will be determined on the day of the merger,
and we will issue a press release on that day announcing the final per share
amounts of cash and stock to be paid in the merger.
Any shares of Dean's common stock owned by Dean at the time of the merger
will be canceled without any payment for those shares.
If, prior to the time the merger occurs, Suiza's common stock or Dean's
common stock is changed into a different number of shares or different class by
reason of any stock dividend, stock split or similar event, the per share merger
consideration will be appropriately adjusted to provide Dean's stockholders with
the same economic effect as contemplated by the merger agreement.
Suiza will not issue any fractional shares of stock in the merger. If a Dean
stockholder would be entitled to a fractional share of stock, Suiza will instead
pay that stockholder the value of the fractional share in cash. In determining
that value, Suiza will assume that one whole share of stock is worth an amount
equal to the average closing price of Suiza's common stock on the New York Stock
Exchange over the 10 trading day period ending two business days prior to the
date the merger occurs.
EXCHANGE OF SHARES
When the merger occurs, Suiza will deposit with a designated exchange agent:
- the shares of Suiza common stock issuable in exchange for all outstanding
Dean common stock; and
- cash sufficient to pay the cash portion of the merger consideration to
Dean's stockholders.
Suiza will then cause the exchange agent to mail to Dean's stockholders
instructions for exchanging their shares. When a Dean stockholder surrenders its
shares of Dean's stock to the exchange agent according to the exchange agent's
instructions, it will be entitled to receive Suiza common stock and cash in the
amounts described under "--What Dean's Stockholders Will Receive" on page 39. No
interest will be paid or accrue on the cash portion of the merger consideration.
One year after the merger, the exchange agent will return all remaining shares
and funds to Suiza and any remaining unexchanged shares of Dean common stock may
be surrendered to Suiza in exchange for the merger consideration, without
interest, after that time.
41
Dean stockholders who do not exchange their shares will not be entitled to
receive any cash or other distributions payable by Suiza on the Suiza shares
that they would be entitled to receive in the merger until the applicable Dean
shares are surrendered. Upon surrender and subject to applicable laws, however,
those holders will promptly receive distributions already paid to Dean
stockholders who exchanged their shares, without interest, together with cash in
lieu of fractional shares and, at the appropriate payment date, any dividends
and distributions with a record date after the effective date of the merger but
a payment date after surrender of that holder's shares of Dean common stock.
WHAT SUIZA'S STOCKHOLDERS WILL HOLD AFTER THE MERGER
Suiza's stockholders will not receive any cash or stock in connection with
the merger. They will simply continue to hold the shares of Suiza's stock they
currently own. If Suiza stockholders wish to exchange their existing stock
certificates after the merger for certificates that bear Suiza's new name, they
may send their certificates, after the merger, to Suiza's transfer agent for
exchange. The new certificates will represent exactly the same number of shares
as your old certificates.
OWNERSHIP OF SUIZA AFTER THE MERGER
Suiza will issue approximately 15.3 million shares of common stock (which
would represent approximately 35% of the outstanding shares of Suiza's common
stock after the merger) to Dean's stockholders in the merger, not including
shares to be issued pursuant to stock-based awards outstanding at the time of
the merger under Dean's stock awards plans. If all of the options outstanding as
of August 10, 2001 under Dean's plans were exercised at the time of the merger,
Suiza would issue approximately 3.2 million additional shares (assuming the
closing price for Suiza's common stock on the last day before the merger is the
same as the closing price for Suiza's stock on August 9, 2001, which was $54.48
per share).
MANAGEMENT OF SUIZA AFTER THE MERGER
At the time of the merger, Howard Dean, the current Chairman of the Board
and Chief Executive Officer of Dean, will become Chairman of the Board of Suiza.
Mr. Dean will also join Suiza's Executive and Management Committees. Gregg
Engles, the current Chairman of the Board and Chief Executive Officer of Suiza,
will retain his title of Chief Executive Officer of Suiza, and he will re-assume
the title of Chairman of the Board upon Mr. Dean's retirement in June 2002.
Suiza's board of directors has approved a five-seat increase in the size of its
board of directors, effective when the merger occurs. Suiza has agreed to elect
the following five individuals (who were selected by Dean) to fill those five
seats:
Howard M. Dean, age 64, has been Chairman of Dean's board of directors since
1989. Mr. Dean has served as Dean's Chief Executive Officer since 1987 and
Dean's President and Chief Operating Officer from 1970 to 1989. Mr. Dean also
has served as a director of Ball Corporation (a diversified manufacturer of
containers and hi-tech products) since 1984 and Yellow Corporation (a nationwide
common carrier) since 1987. Mr. Dean has been a director of Dean since 1970 and
is Chairman of the Executive Committee of Dean's board of directors.
Lewis M. Collens, age 63, is President of Illinois Institute of Technology
and Chairman and Chief Executive Officer of IIT Research Institute and has
served in such capacity since 1990. Mr. Collens was Dean of IIT Chicago-Kent
College of Law from 1974 to 1980 and has been a director of AMSTED Industries (a
manufacturer of components for the railroad and construction industries) since
1991. Mr. Collens has served as a director of Dean since December 1991, is
currently serving as Chairman of the Audit Committee of Dean's board of
directors and is a member of the Corporate Governance Committee of Dean's board
of directors.
Janet Hill, age 53, is Vice President of Alexander & Associates (a corporate
consulting firm) and has served in such capacity since 1981. Ms. Hill has also
served as a director of Wendy's
42
International, Inc. (a restaurant corporation) since 1995, Progressive
Corporation (an insurance company) since 1996, Nextel Communications, Inc. (a
wireless communications company) since 1999 and Houghton Mifflin Company (a
publishing company) since 2000. Ms. Hill has been a director of Dean since 1997
and is a member of the Audit Committee of Dean's board of directors.
John S. Llewellyn, Jr., age 66, has been retired since 1997. Before his
retirement, Mr. Llewellyn was President and Chief Executive Officer of Ocean
Spray Cranberries, Inc. (marketing cooperative of cranberry and citrus growers)
from 1988 to 1997. Mr. Llewellyn has been a director of Paging Network, Inc. (a
wireless messaging and information delivery company) since 1997 and a director
of Dean since 1994. Mr. Llewellyn serves as a member of the Compensation and
Corporate Governance Committees of Dean's board of directors.
J. Christopher Reyes, age 47, is Chairman of Reyes Holdings, L.L.C. (a
private food and beverage distribution company) and has served in such capacity
since 1976. Mr. Reyes also has served as a director of Wintrust Financial
Corporation (a financial services holding company) since 1997. Mr. Reyes has
served as a director of Dean since 1999 and is a member of the Audit Committee
of Dean's board of directors.
Mr. Reyes will be elected for a term expiring at the first annual meeting
after the merger, Ms. Hill and Mr. Collens will be elected for a term expiring
at the second annual meeting after the merger, and Mr. Dean and Mr. Llewellyn
will be elected for a term expiring at the third annual meeting after the
merger. All of Suiza's current directors will remain on Suiza's board of
directors.
Suiza's existing management will remain in place after the merger.
NAME CHANGE AND LISTING OF SUIZA'S COMMON STOCK
Suiza will change its name to "Dean Foods Company" when the merger occurs.
In connection with the name change, Suiza's trading symbol on the New York Stock
Exchange will change from "SZA" to "DF."
TIMING OF CLOSING
The closing will occur after the conditions set forth in the merger
agreement have been satisfied or waived, unless Suiza and/or Dean terminate the
merger agreement or agree to a different date. On the closing date, we will
file a certificate of merger with the Secretary of State of the State of
Delaware and make all other filings or recordings required under the Delaware
General Corporation Law, at which time the merger will be effective.
REGULATORY MATTERS AND DIVESTITURES
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR
Act), the Federal Trade Commission (FTC) and the Antitrust Division of the U.S.
Department of Justice (DOJ) have the right to study the legality of the merger
under the antitrust laws, prior to its consummation. On May 9, 2001, the DOJ
requested certain information and documentation from us in connection with their
review of the merger. We substantially complied with the information requests at
the end of July 2001. By statute, the DOJ has 30 days (although we will allow
them more time) from the date of our substantial compliance with the information
requests to review the information we submitted and to decide whether to
commence litigation in an attempt to prevent consummation of the merger. If the
DOJ believes that the merger will have adverse competitive effects, it could
commence legal action under the antitrust laws of the United States seeking a
court order to block the transaction altogether, to require divestiture of
various assets of Suiza or Dean, to place restrictions on the combined company's
operations after the merger or to require other concessions or other relief.
Private parties (including individual states) may also bring legal action under
the antitrust laws.
43
Prior to signing the merger agreement, we analyzed the effects of the
proposed merger under the antitrust laws. In an effort to resolve potential
antitrust concerns, Suiza agreed to transfer to Dairy Farmers of America, Inc.
(DFA), simultaneously with the occurrence of the merger, six plants located in
areas where our operations overlap. In exchange for the six plants and certain
other consideration, DFA will transfer its minority interest in Suiza Dairy
Group to Suiza. DFA has assigned its right to acquire the six plants to National
Dairy Holdings, LP (National Dairy), an entity in which DFA owns a minority
interest. Therefore, Suiza expects to transfer the six plants directly to
National Dairy. See "--The Related Transactions" on page 58.
In addition to the merger, both Suiza's transaction with DFA and Suiza's
transaction with National Dairy are subject to review by the DOJ under the HSR
Act prior to their consummation. On May 25, 2001 the DOJ requested certain
information and documentation from Suiza in connection with the DOJ's review of
the transaction between Suiza and DFA. Suiza substantially complied with the
information request at the end of July 2001. By statute, the DOJ has 30 days
(although Suiza will allow them more time) from the date of Suiza's substantial
compliance with the information request to review the information Suiza
submitted and to decide whether to commence litigation in an attempt to prevent
consummation of Suiza's transaction with DFA or to seek other concessions or
relief. On July 20, 2001, Suiza and National Dairy received a request for
additional information from the DOJ regarding the transfer of the six plants
from Suiza to National Dairy. Suiza is currently in the process of responding to
the information request, and expects to have substantially complied with the
request by the end of August 2001. Once Suiza and National Dairy have provided
the DOJ with the requested information, the DOJ will have 30 days (or more time
if Suiza and National Dairy decide to grant them an extension) to decide whether
to commence litigation in an attempt to prevent consummation of the Suiza's
transaction with National Dairy or to seek other concessions or relief.
Assuming the divestiture of the six plants, we do not believe that the
merger will violate any antitrust laws. Similarly, we do not believe that either
Suiza's transaction with DFA or Suiza's transaction with National Dairy violates
any antitrust laws. However, we cannot assure you that a governmental agency or
private party will not challenge the merger or either of the related
transactions on antitrust grounds or, if they make a challenge, what the result
will be or how long it could take to resolve any such challenges. Specifically,
we could be required to divest more operations than we currently anticipate, to
sell the six plants to someone other than National Dairy, to modify the terms of
Suiza's agreements with DFA or to agree to certain restrictions on the combined
company's operations after the merger, any of which could delay completion of
the merger, lessen the expected benefits of the merger to the combined company,
jeopardize Suiza's ability to obtain financing for the merger and the related
transactions on acceptable terms and/or adversely affect the combined company's
results of operations after the merger.
Suiza and Dean have agreed to use reasonable best efforts to avoid or
eliminate all impediments to the merger raised under the antitrust laws by the
DOJ or any other regulator so that the merger may close as soon as possible, and
by December 31, 2001 at the latest. Specifically, we have agreed that we will
make any divestiture or take any other action that limits our ability to operate
any of our current businesses, product lines or assets, so long as the
divestiture or other action is conditioned on the closing of the merger and
would not, in Suiza's opinion, have a material adverse effect on the combined
company. We have also agreed to use reasonable best efforts to avoid or have
lifted any government-imposed restriction that would prevent or delay the merger
beyond December 31, 2001, even if it means defending through litigation any
claim brought by any party opposing the merger. See "--Additional Covenants in
the Merger Agreement" on page 52.
PRINCIPAL CONDITIONS TO THE COMPLETION OF THE MERGER
We will complete the merger only if the following conditions are satisfied
or waived:
- the relevant antitrust "waiting period" under the Hart-Scott-Rodino Act
has expired;
44
- the stockholders of Suiza and Dean have approved the merger proposals;
- the New York Stock Exchange has authorized the listing of the Suiza stock
to be issued in connection with the merger and to be reserved for issuance
under Dean's stock awards plans; and
- there is no law or order by a court or other governmental entity
prohibiting the merger or having the effect of making the merger illegal.
Suiza's obligation to complete the merger is subject to the following
additional conditions:
- the representations and warranties made by Dean in the merger agreement
must be true in all material respects at the time of the merger except
where the failure to be true would not cause a material adverse effect
(see "--Representations and Warranties in the Merger Agreement" below);
- Dean must comply in all material respects with its pre-closing obligations
and covenants under the merger agreement;
- there must be no change, occurrence or circumstance in the business,
operations, assets, financial condition or results of operations of Dean
or any of its subsidiaries that has a material adverse effect on Dean; and
- Suiza must receive, at the time of the merger, the written opinion of its
outside tax counsel that the merger qualifies as a tax-free reorganization
(see "--Material Federal Income Tax Consequences of the Merger" on
page 53).
Dean's obligation to complete the merger is subject to the following
additional conditions:
- the representations and warranties made by Suiza and Blackhawk in the
merger agreement must be true in all material respects at the time of the
merger except where the failure to be true would not cause a material
adverse effect (see "--Representations and Warranties in the Merger
Agreement" below);
- Suiza and Blackhawk must comply in all material respects with their
pre-closing obligations and covenants under the merger agreement;
- there must be no change, occurrence or circumstance in the business,
operations, assets, financial condition or results of operations of Suiza
or any of its subsidiaries that has a material adverse effect on Suiza;
and
- Dean must receive, at the time of the merger, the written opinion of its
outside tax counsel that the merger qualifies as a tax-free reorganization
(see "--Material Federal Income Tax Consequences of the Merger" on
page 53).
REPRESENTATIONS AND WARRANTIES IN THE MERGER AGREEMENT
The merger agreement contains substantially reciprocal representations and
warranties of Suiza and Dean as to, among other things:
- the due organization, valid existence and good standing of the companies
and their subsidiaries;
- each company's capital structure;
- each company's authority to enter into the merger agreement and complete
the merger;
- required consents from government entities and the absence of conflicts
with material agreements;
- each company's compliance with laws;
- the accuracy of each company's reports filed with the SEC;
45
- the accuracy of each company's financial statements;
- the absence of certain adverse changes or events;
- full disclosure of liabilities;
- litigation;
- employee benefits matters;
- tax matters;
- each company's compliance with the Foreign Corrupt Practices Act;
- environmental matters;
- required stockholder approvals;
- broker's or finder's fees;
- the applicability of certain takeover provisions of state law;
- each company's insurance;
- each company's material contracts;
- each company's principal customers and suppliers;
- each company's intellectual property;
- the opinions of each company's financial advisors;
- each company's rights agreements; and
- the accuracy of the information supplied for use in this joint proxy
statement/prospectus.
Suiza also represented and warranted (1) as to having obtained certain
lenders' commitments to provide financing for the cash portion of the purchase
price for the merger and the related transactions, and (2) as to Blackhawk's
absence of business activities since its incorporation.
Many of the representations and warranties in the merger agreement are
qualified by a material adverse effect standard, which, for purposes of the
merger agreement, means any change or effect that, individually or when taken
together with all other such changes or effects, would be materially adverse to
the business, operations, assets, financial condition, or results of operations
of the company making the representation and its subsidiaries, taken as a whole.
None of the following will be taken into account in determining whether there
has been a material adverse effect: (1) any change in the market price or
trading volume of the capital stock of the company making the representation
after April 4, 2001, the date of the merger agreement; (2) the suspension of
trading in securities on the NYSE; (3) any adverse change, event, development or
offset arising from or relating to general business or economic conditions, or
general business or economic conditions relating to any industries in which the
company making the representation participates, if it is not specific to the
company making the representation; and (4) any adverse change, event,
development or effect arising from or relating to any change in U.S. generally
accepted accounting principles.
The representations and warranties in the merger agreement will not survive
the merger.
SOLICITATION RESTRICTION ON DEAN
Dean has agreed that it and its officers, directors, employees, agents and
representatives will not pursue an alternative business combination transaction.
Prohibited actions include each of the following:
- initiating, soliciting, encouraging or facilitating any inquiry or offer
relating to (1) a merger, business combination or other similar
transaction involving Dean or any of its significant
46
subsidiaries, (2) any purchase or sale of 10% or more of Dean's
consolidated assets or (3) any purchase or sale of or tender offer for
Dean's common stock that would result in any person owning 20% or more of
the total voting power of Dean or any of its significant subsidiaries;
- having any discussions with or providing any information to any person
relating to such a transaction;
- approving or recommending such a transaction; and
- entering into any letter of intent or other agreement relating to such a
transaction.
Dean also agreed in the merger agreement to immediately terminate any
ongoing discussions relating to any such transaction.
Dean is permitted, however, to take any of the above actions in response to
an unsolicited bona fide written offer if:
- Dean's stockholder meeting has not occurred;
- Dean has not breached the prohibitions described under this heading;
- Dean's board of directors determines in good faith, after consultation
with outside counsel, that it is required to do so to discharge its duties
under Delaware law or Dean's board of directors concludes in good faith
that the third party proposal is reasonably likely to result in a proposal
to Dean's stockholders that is superior to the merger with Suiza, meaning
that it is (1) more favorable to Dean's stockholders than the merger from
a financial point of view, (2) likely to be completed, and (3) either
accompanied by financing commitments or not subject to a financing
contingency;
- Dean receives from the other party an executed confidentiality agreement
containing terms customary for such transactions; and
- Dean notifies Suiza of the name of the person making the unsolicited
written offer, and the material terms and conditions of the offer, prior
to providing any information or data or entering into discussions with the
third party.
Dean may not sign any agreement, letter of intent or similar document
accepting any unsolicited or other third party offer, and may not submit to the
vote of its stockholders any proposal to approve an alternative acquisition
transaction, until after the merger agreement is terminated in accordance with
its terms.
After Dean's stockholder meeting, if the merger is approved, Dean will not
be permitted to accept any alternative business combination proposal, even if
the alternative proposal is unsolicited and/or is, in the opinion of Dean's
board of directors, superior to the proposed merger with Suiza, unless Dean pays
Suiza a $45 million termination fee and reimburses Suiza for all of Suiza's
expenses incurred in connection with the merger, up to a maximum of
$15 million.
TERMINATION OF THE MERGER AGREEMENT
CIRCUMSTANCES UNDER WHICH EITHER PARTY CAN TERMINATE THE MERGER
AGREEMENT. Suiza and Dean could mutually agree to terminate the merger
agreement for any reason at any time. Either Suiza or Dean could also terminate
the merger agreement at any time if any one of the following occurs:
- the merger is not completed by December 31, 2001;
- there is a governmental order that is final and nonappealable preventing
the closing of the merger;
- the other party's stockholders fail to give the required approval of the
merger proposal; or
47
- the other party breaches any of its representations or warranties (except
where such breach would not cause a material adverse effect), covenants or
obligations under the merger agreement, and the breach is incapable of
being cured, or is not cured, in all material respects, by December 31,
2001.
ADDITIONAL CIRCUMSTANCES UNDER WHICH SUIZA CAN TERMINATE THE MERGER
AGREEMENT. Suiza can also terminate the merger agreement if:
- Dean's board of directors fails to call Dean's special stockholder meeting
in accordance with the merger agreement;
- Dean's board of directors fails to recommend to Dean's stockholders that
they vote for the merger;
- Dean's board of directors withdraws, modifies or qualifies its
recommendation in a manner adverse to Suiza, or takes any action or makes
any statement inconsistent with its recommendation; or
- Dean enters into an agreement to sell its business, or control of its
business, to another buyer.
ADDITIONAL CIRCUMSTANCES UNDER WHICH DEAN CAN TERMINATE THE MERGER
AGREEMENT. Dean can also terminate the merger agreement if:
- Suiza's board of directors fails to call Suiza's special stockholder
meeting in accordance with the merger agreement;
- Suiza's board of directors fails to recommend to Suiza's stockholders that
they vote for the issuance of Suiza's common stock pursuant to the merger
agreement;
- Suiza's board of directors withdraws, modifies or qualifies its
recommendation in a manner adverse to Dean, or takes any action or makes
any statement inconsistent with its recommendation; or
- Dean's board of directors decides to sell its business to another buyer,
because the other offer is (1) more favorable to Dean's stockholders from
a financial point of view, (2) likely to be completed and (3) either
accompanied by financing commitments or not subject to a financing
contingency.
EFFECTS OF TERMINATING THE MERGER AGREEMENT. Dean must pay Suiza a
termination fee of $45 million in cash if:
- the merger agreement is terminated by Suiza for one of the reasons listed
above under "--Additional circumstances under which Suiza can terminate
the merger agreement";
- the merger agreement is terminated by Dean as a result of Dean's board of
directors deciding to sell its business to another buyer because the other
offer is (1) more favorable to Dean's stockholders from a financial point
of view, (2) likely to be completed and (3) either accompanied by
financing commitments or not subject to a financing contingency; or
- Dean receives a proposal from another buyer to buy Dean's business prior
to termination of the merger agreement, AND THEN
Suiza and Dean mutually agree to terminate the agreement OR Suiza
terminates the merger agreement because Dean breached a representation or
covenant in the merger agreement and did not or could not cure it by
December 31, 2001 OR either party terminates the merger agreement because
the merger is not completed by December 31, 2001 OR either party
terminates the merger agreement because the other party's stockholders
failed to approve the merger proposals, AND THEN
48
within 180 days after the termination, Dean enters into an agreement to
sell 50% or more of its business to the other buyer.
If Suiza terminates the merger agreement because Dean's stockholders fail to
approve the merger, Dean must reimburse Suiza for one-half of Suiza's expenses
incurred in connection with the merger, up to a maximum of $10 million. If the
merger agreement is terminated and Dean must pay Suiza a termination fee of
$45 million, Dean must also reimburse Suiza for all of Suiza's expenses incurred
in connection with the merger, up to a maximum of $15 million. If Dean
terminates the merger agreement because Suiza's stockholders fail to approve the
merger, Suiza must reimburse Dean for one-half of Dean's expenses incurred in
connection with the merger, up to a maximum of $10 million.
FEES AND EXPENSES
Except as described above under "--Termination of the Merger
Agreement--Effects of Terminating the Merger Agreement" on page 48, Suiza and
Dean will pay all their own costs and expenses in connection with the merger
agreement and merger, except that:
- Blackhawk will pay any and all transfer taxes imposed in connection with
the merger;
- Suiza and Dean will share equally expenses relating to independent third
party analyses of cost savings and operational synergies; and
- Suiza and Dean will share equally expenses incurred for filing, printing
and mailing this joint proxy statement/prospectus.
We estimate that the aggregate transaction costs incurred by Suiza and Dean
in connection with the merger (excluding Suiza's financing fees and related
expenses) will total approximately $58 million.
Dean's transaction costs will total approximately $27 million, including
approximately $11 million which will be payable regardless of whether the merger
is completed. Dean's transaction costs will consist primarily of fees and
expenses for investment bankers, attorneys, accountants and other professionals,
and financial printing and other related charges.
Suiza's transaction costs (excluding Suiza's financing fees and related
expenses) will total approximately $31 million, including approximately
$19 million which will be payable regardless of whether the merger is completed.
Suiza's transaction costs consist primarily of fees and expenses for investment
bankers, attorneys, accountants and other professionals, filing fees, stock
exchange listing fees, and financial printing and other related charges. In
addition, Suiza estimates that its financing fees and related expenses will
total approximately $46 million, a substantial portion of which will be payable
regardless of whether the merger is completed.
49
TREATMENT OF DEAN STOCK OPTIONS AND OTHER EQUITY INTERESTS
When the merger occurs, each outstanding option to acquire shares of Dean's
common stock will automatically convert into a fully exercisable option to
purchase a number of shares of Suiza's common stock. The conversion rate for
Dean's options will depend on the price of Suiza's stock when the merger occurs.
Also, Dean common stock appreciation rights, phantom stock awards and
performance share awards granted under Dean plans will automatically convert
into fully vested stock appreciation rights, phantom stock awards and
performance share awards with respect to Suiza's common stock based on the same
conversion formula as the options. The formula for determining the precise
number of shares of Suiza common stock into which each outstanding Dean
stock-based award will be exercisable is:
- the number of shares of Dean common stock to which the corresponding Dean
option or other stock-based award was subject, multiplied by
- the sum of (1) the exchange ratio for the number of shares of Suiza common
stock issued in exchange for shares of Dean common stock in the merger
(which will be 0.429, subject to adjustment as described under "--What
Dean's Stockholders Will Receive" on page 39), plus (2) the per share cash
amount paid in the merger (which will be $21.00, subject to adjustment as
described under "--What Dean's Stockholders Will Receive" on page 39)
divided by the closing price for a share of Suiza common stock as reported
on the NYSE on the last trading day immediately preceding the merger
closing date,
- rounded to the nearest whole share of Suiza common stock.
The per share exercise price for each share of Suiza common stock subject to
the new Suiza option or other stock-based award will equal:
- the per share exercise price of the corresponding Dean option or other
stock-based award, divided by
- the sum of (1) the exchange ratio for the number of shares of Suiza common
stock issued in exchange for shares of Dean common stock in the merger
(which will be 0.429, subject to adjustment as described under "--What
Dean's Stockholders Will Receive" on page 39), plus (2) the per share cash
amount paid in the merger (which will be $21.00, subject to adjustment as
described under "--What Dean's Stockholders Will Receive" on page 39)
divided by the closing price for a share of Suiza common stock as reported
on the NYSE on the last trading day immediately preceding the merger
closing date.
Had the merger closed on August 9, 2001, an option to purchase 100 shares of
Dean's stock at $35.00 per share would have been converted into an option to
purchase 81 shares of Suiza's stock at $42.97 per share.
All other terms of Dean's stock options and other stock-based awards will
remain unchanged after the conversion. Suiza has agreed to file a registration
statement with the Securities and Exchange Commission on an appropriate form to
the extent necessary to register shares of Suiza's common stock subject to the
converted options and other stock-based awards.
INTERIM OPERATIONS OF SUIZA AND DEAN
We have agreed to restrictions on both of our companies until the effective
time of the merger. In general, we are each required to conduct our business in
all material respects in the usual and ordinary course, consistent with past
practice; to use our commercially reasonable efforts to preserve substantially
intact our present business organizations and material lines of business,
maintain our material rights, maintain our assets and preserve our relationships
with key employees, customers,
50
suppliers and others having business dealings with us; and to perform in all
material respects our obligations under our material contracts.
In addition, except for specifically enumerated items, Dean is not permitted
to:
- increase any compensation outside the ordinary course of business, grant
any severance, establish any bonus plan or other employee benefit plan, or
amend or take other actions that would be materially adverse to Dean
regarding any of its material contracts, employee benefit plans or other
agreements, programs or policies;
- declare any dividends other than intercompany dividends in the ordinary
course of business and normal quarterly dividends based on record dates of
May 25, 2001, August 24, 2001 and November 23, 2001 if the merger has not
occurred by these dates;
- redeem or acquire any of its securities;
- adopt a plan to liquidate, restructure or recapitalize Dean;
- reclassify any Dean stock or issue any securities in substitution of any
Dean stock;
- issue any stock options or modify the terms of any options to make them
materially less favorable to Dean;
- acquire or agree to acquire any business except for any acquisitions that
do not involve the aggregate payment of more than $10 million by Dean and
that do not present a material risk of making it more difficult to obtain
any consents or approvals, including antitrust consents, required to close
the merger;
- sell, pledge or otherwise dispose of any material assets other than sales
of inventories and assets in the ordinary course of business and
consistent with past practice;
- release any third party from obligations under any confidentiality or
standstill agreement;
- amend its bylaws in a way that adversely impacts the closing of the merger
or amend its charter in any way;
- incur any obligation for borrowed money that would interfere with the
merger or increase the cost to Suiza of closing the merger;
- incur any capital expenditure outside the ordinary course of business;
- make any loan or investment in any person other than a wholly-owned
subsidiary;
- enter into any material contract providing for an exclusive arrangement
for a term of more than one year;
- enter into any agreement that could restrict Suiza from competing in any
line of business or in any geographic area;
- enter into any specified types of material contract;
- enter into or extend any exclusive agreement for milk supply unless it
terminates or can be terminated before December 31, 2001 without penalty;
- dispose of any part of its investment in White Wave, Inc. or amend any
agreements relating to that investment; or
- agree in writing to do any of these things.
Prior to the merger, Suiza is not permitted to:
- take any action that would result in its stock being de-listed by the
NYSE;
51
- declare any dividends other than inter-company dividends in the ordinary
course of business consistent with past practice;
- amend its charter or bylaws in a way that adversely impacts the closing of
the merger;
- repurchase any shares of Suiza common stock during the 10 trading day
period ending two business days prior to the closing date;
- close or agree to an acquisition unless it does not present a material
risk of making it more difficult to obtain any consents or approvals,
including antitrust consents, required to close the merger; or
- agree in writing to do any of these things.
CERTAIN EMPLOYEE BENEFIT MATTERS
The merger agreement provides that Suiza will, for a period of one year from
the date the merger occurs, provide compensation and employee benefits to
current and former Dean employees who are, at the time of the merger closing,
entitled to such compensation and benefits, which in the aggregate are
substantially comparable to the compensation and benefits that Dean currently
provides them. This agreement does not apply to employees covered by collective
bargaining agreements, for whom Suiza must only comply with the terms of the
collective bargaining agreements. Suiza has also agreed to assume all deferred
compensation, incentive compensation or vacation and other paid time off plans,
policies or arrangements maintained or contributed to by Dean and any
employment, consulting, retention, severance or similar agreement to which Dean
is a party with any of its employees, in accordance with the terms in effect
immediately prior to the merger. Suiza may revise such plans, policies or
arrangements for benefits accruing after the merger occurs.
The merger agreement also includes detailed covenants of both companies with
respect to various other employee benefits matters.
INDEMNIFICATION OF DEAN'S DIRECTORS AND OFFICERS
The merger agreement provides that:
- all rights to indemnification existing in favor of directors, officers or
employees of Dean in the certificate of incorporation or bylaws of Dean on
April 4, 2001 as they relate to matters occurring through the date of the
merger will survive the merger and will continue in full force and effect
after the merger; and
- for six years after the date the merger occurs, Suiza will maintain
officers' and directors' liability insurance covering matters or events
occurring prior to the effective time of the merger. This insurance must
be no less favorable than the policies in effect on April 4, 2001, except
that Suiza is not required to pay more than twice the amount of annual
premiums paid by Dean prior to the merger.
ADDITIONAL COVENANTS IN THE MERGER AGREEMENT
We have agreed to other covenants in the merger agreement, including the
following:
REASONABLE BEST EFFORTS COVENANT. We have each agreed to use our reasonable
best efforts to take all actions and to do all things necessary, proper or
advisable under the merger agreement and applicable law to complete the merger.
Suiza agreed to use its reasonable best efforts to close the financing
contemplated by its new credit facility, which will replace Suiza's existing
facilities upon completion of the merger, and to use the funds from the
financing to complete the merger.
AGREEMENT TO SEEK REGULATORY APPROVAL. We have each agreed to promptly make
all filings under the Hart-Scott-Rodino Act regarding the merger, which we have,
and to promptly make any other required submissions under that act. We have each
additionally agreed to use our reasonable best efforts to cooperate with one
another to (1) determine which filings and notifications are required to
52
be made under applicable law, and which consents are required to be obtained
from governmental entities in order to close the merger; (2) timely make all
these filings and notifications and timely seek all these consents and
(3) promptly respond to any request for information from any governmental
entities.
We have each agreed to use our reasonable best efforts to have lifted or
terminated any order or judgment that would restrain or prevent the closing of
the merger by December 31, 2001. We have also agreed to use our reasonable best
efforts to take any steps necessary to avoid or eliminate all impediments under
any antitrust law asserted by a governmental entity so that the merger may close
as soon as possible and by December 31, 2001 at the latest.
Additionally, we have agreed to divest or hold separate any of our
respective businesses, product lines or assets, so long as the action is
conditioned upon the merger closing and would not, in Suiza's opinion, have a
material adverse effect on the combined company. Suiza specifically agreed to
divest six specific milk processing plants and assets used to operate such
plants if necessary in order to obtain consent under applicable antitrust laws.
Dean agreed not to take any actions, such as divesting any assets or businesses,
that would limit the combined company's freedom of action regarding its
business, without Suiza's prior written consent.
ADDITIONAL MUTUAL COVENANTS. The merger agreement also contains mutual
covenants relating to the holding of our stockholder meetings, access to
information and employees of the other party, and public announcements with
respect to the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the anticipated material U.S. federal
income tax consequences of the merger to you if you are a Dean stockholder. This
discussion addresses only those stockholders who hold their shares of Dean
common stock as a capital asset. This discussion does not describe all of the
U.S. federal income tax consequences that may be relevant to particular Dean
stockholders in light of their individual circumstances. It also does not
describe all of the U.S. federal income tax consequences if you are subject to
special rules, such as:
- a financial institution;
- a mutual fund;
- a tax-exempt organization;
- an insurance company;
- a dealer in securities or foreign currencies;
- a trader in securities who elects to apply a mark-to-market method of
accounting;
- a foreign holder;
- a person who holds shares of Dean common stock as a hedge against currency
risk or as part of a straddle, constructive sale or conversion
transaction; or
- a person who acquired shares of Dean common stock upon the exercise of
warrants or employee stock options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code of 1986, as amended, and the related
regulations, rulings and decisions in effect as of the date of this joint proxy
statement/prospectus. All of these rules are subject to change, possibly with
retroactive effect. Tax consequences under state, local and foreign laws and
U.S. federal laws other than U.S. federal income tax laws, are not addressed.
The merger has been structured so as to qualify as a tax-fee reorganization
under Section 368(a) of the Internal Revenue Code. Assuming the merger qualifies
as a tax-free reorganization, you will not be required to recognize a taxable
gain on the Suiza common stock you receive in the merger. However, depending on
how much you paid for your shares of Dean common
53
stock, you may have taxable gain as a result of the cash you receive in the
merger. The amount of that gain will be equal to the lesser of (1) the amount of
cash you receive in the merger and (2) an amount equal to (a) the fair market
value of the Suiza common stock and cash that you receive in the merger minus
(b) your tax basis (which is generally equal to your cost) for the shares of
Dean common stock that you are exchanging in the merger. If you own two or more
blocks of Dean common stock acquired on different days and/or for different
prices, this computation must be made separately for each such block. Any such
gain will generally be a long-term capital gain if you held the shares of Dean
common stock exchanged for more than one year. However, if the receipt of cash
has the effect of a distribution of a dividend (determined by application of
Section 302 of the Internal Revenue Code on a stockholder-by-stockholder basis),
this gain will be treated as a dividend, and taxed as ordinary income, to the
extent of your share of the undistributed accumulated earnings and profits of
Dean. The likelihood of dividend treatment may depend on the value of the Suiza
stock received in the merger compared to the amount of cash received in the
merger. The likelihood of dividend treatment may also depend on whether you, or
persons whose stock ownership is attributed to you, also hold Suiza common stock
prior to the merger, and may depend on other factors. YOU SHOULD CONSULT YOUR
TAX ADVISOR CONCERNING THE POSSIBILITY THAT ALL OR A PORTION OF THE CASH YOU
RECEIVE IN EXCHANGE FOR YOUR DEAN COMMON STOCK WILL BE TREATED AS A DIVIDEND.
Your aggregate tax basis in the Suiza common stock you receive in the merger
will equal (1) your aggregate tax basis in the shares of Dean common stock you
are exchanging minus (2) the amount of any cash consideration you receive, plus
(3) the amount of gain, if any, you recognize in the merger (including any
portion of such gain that is treated as a dividend). The holding period of the
Suiza common stock you receive generally will include the holding period of the
shares of Dean common stock you exchanged.
No fractional shares of Suiza common stock will be issued in the merger. If
you receive cash in lieu of a fractional share, you will be treated as having
received such fractional share in the merger and then having exchanged such
fractional share for cash in a redemption by Suiza. You will generally recognize
gain or loss on such a deemed redemption of the fractional share in an amount
equal to the cash received minus your tax basis allocable to the fractional
share. Any capital gain or loss will be long-term capital gain or loss if you
held the common stock exchanged for more than one year.
If you exercise your appraisal rights and receive a payment in cash for your
Dean common stock, you will recognize capital gain or loss if you held the Dean
common stock as a capital asset at the time the merger occurs. This gain or loss
will be equal to (1) the amount of cash you receive minus (2) your aggregate tax
basis for the shares of Dean common stock so sold, provided that the cash
payment you receive is not treated as a dividend under Section 302 of the
Internal Revenue Code. A sale of Dean common stock pursuant to an exercise of
appraisal rights will not constitute a dividend if you own no stock in Suiza
after the merger, either actually or constructively within the meaning of
Section 318 of the Internal Revenue Code. See "--Appraisal Rights" on page 55.
Because Suiza's stockholders will not receive any cash or stock in the
merger, the merger will not cause Suiza's stockholders to recognize any gain or
loss.
This discussion is intended to provide only a general summary of the
material federal income tax consequences of the merger. This discussion is not a
complete analysis or description of all potential federal income tax
consequences of the merger. This discussion does not address tax consequences
that may vary with, or are contingent on, individual circumstances. In addition,
it does not address any non-income tax or any foreign, state or local tax
consequences of the merger. ACCORDINGLY, IF YOU ARE A DEAN STOCKHOLDER, SUIZA
AND DEAN STRONGLY URGE YOU TO CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR UNITED STATES FEDERAL, STATE OR LOCAL OR FOREIGN INCOME OR OTHER TAX
CONSEQUENCES TO YOU OF THE MERGER.
54
AMENDMENT OF THE MERGER AGREEMENT
We may amend the merger agreement at any time before or after approval by
our respective stockholders. However, after the stockholders have approved the
proposals, we cannot make an amendment to the merger agreement which requires
further approval by stockholders without such approval.
At any time before the merger occurs, we may, without stockholder approval:
- extend the time in which any obligations of the other parties must be
performed;
- waive any inaccuracies in the representations and warranties; and
- waive compliance with any of the agreements or conditions in the merger
agreement.
ACCOUNTING TREATMENT
The merger will be accounted for using the purchase method of accounting.
Under this accounting method, Suiza will record Dean's assets and liabilities at
their fair values, and, if the purchase price exceeds the total of these fair
values, Suiza will record the excess as goodwill. Suiza will include Dean's
revenues and expenses in its financial statements beginning on the date the
merger occurs.
APPRAISAL RIGHTS
If a corporation proposes to merge with another firm, stockholders are
sometimes entitled to appraisal (or dissenters') rights when the transaction
closes, depending on the circumstances. Appraisal rights give a stockholder the
right to receive the fair value for its shares as determined in a judicial
appraisal proceeding, instead of what is being paid in the merger.
If you are a Dean stockholder, you do have appraisal rights under Delaware
law in connection with the merger. If you are a Suiza stockholder, you are not
entitled to appraisal rights under Delaware law in connection with the merger.
If you are a Dean stockholder and you do not wish to accept the
consideration to be paid under the merger agreement, you may elect to have the
fair value of your Dean common stock, exclusive of any element of value arising
from the accomplishment or expectation of the merger, judicially determined and
paid in cash, together with a fair rate of interest, if any, provided that you
comply strictly with the provisions and requirements of Section 262 of the
Delaware General Corporation Law.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under Delaware law, and is qualified in its entirety by the
full text of Section 262, which is attached as Annex E to this joint proxy
statement/prospectus. Each reference in Section 262 and in this summary to a
"stockholder" means a record holder of the shares of Dean common stock who has
asserted appraisal rights.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, a corporation must notify each of its stockholders
of record who were such as of the record date for the meeting and for whom
appraisal rights are available, not less than 20 days prior to the meeting, that
appraisal rights are available, and must include in the notice a copy of
Section 262. If you are a Dean stockholder, this joint proxy
statement/prospectus constitutes notice to you of your appraisal rights. If you
are a Dean stockholder and want to exercise appraisal rights or preserve the
right to do so you should review carefully Annex E to this joint proxy
statement/prospectus. If you fail to comply strictly with the procedures
specified in Section 262 on a timely and proper basis you will lose your
appraisal rights. The procedures for exercising your right to appraisal is
complex, so we strongly encourage Dean's stockholders who consider exercising
such rights to seek the advice of counsel.
55
If you are a Dean stockholder and you wish to exercise your right to
appraisal under Section 262 of the DGCL, you must satisfy each of the conditions
listed below.
- You must deliver to Dean a written demand for appraisal of your Dean
shares before the vote on the merger agreement at the Dean stockholder
meeting. This written demand for appraisal is in addition to and separate
from any proxy or vote against the merger agreement. Merely voting
against, abstaining from voting or failing to vote in favor of adoption of
the merger agreement will not constitute a demand for appraisal within the
meaning of Section 262.
- You must not vote for adoption of the merger agreement. A failure to vote
will satisfy this requirement, but a vote in favor of the merger agreement
will constitute a waiver of your right of appraisal. Accordingly, if you
want to maintain appraisal rights you must either check the "Against" box
or the "Abstain" box on the proxy card or refrain from executing and
returning the enclosed proxy card.
- You must continuously hold the shares from the date of making the demand
through the effective time of the merger. Accordingly, if you are a record
holder of Dean stock when you make the written demand for appraisal but
then transfer the Dean shares prior to the effective time of the merger
you will lose your right to appraisal.
If you make a demand for appraisal, you or someone on your behalf must give
notice in your name as it appears on your Dean stock certificates, specifying
your mailing address, the number of shares you own and your intention to demand
appraisal. If your Dean shares are owned of record in a fiduciary capacity, for
example by a trustee, guardian or custodian, the demand should be made in that
capacity, and if the shares are owned of record by more than one person, for
example in a joint tenancy or tenancy in common, the demand should be executed
by or on behalf of all owners. An authorized agent, including one or more joint
owners, may make a demand for appraisal on your behalf. However, the agent must
identify you as the record owner or owners and expressly disclose the fact that,
in making the demand, the agent is acting as agent for the owner or owners.
A record holder, such as a broker who holds shares as nominee for several
beneficial owners, may exercise appraisal rights with respect to the Dean shares
held for one or more beneficial owners while not exercising the rights with
respect to the Dean shares held for one or more other beneficial owners. The
written demand should set forth the number of shares as to which appraisal is
sought, and where no number of shares is expressly mentioned the demand will be
presumed to cover all shares held in the name of the record owner. If you are a
Dean stockholder who holds shares in brokerage accounts or other nominee forms
and you wish to exercise appraisal rights, we urge you to consult with your
broker to determine the appropriate procedures for the nominee to make a demand
for appraisal.
If you elect to exercise appraisal rights, you must mail or deliver a
written demand to: Dean Foods Company, 3600 North River Road, Franklin Park,
Illinois 60131, Attention: Corporate Secretary.
Within ten days after the effective time of the merger, Blackhawk, as the
surviving corporation of the merger, must give written notice that the merger
has become effective to each Dean stockholder who has complied with
Section 262. Within 120 days after the effective time, but not thereafter,
either Blackhawk or any stockholder who has complied with the requirements of
Section 262 may file a petition in the Delaware Court of Chancery seeking a
determination of the value of the shares of Dean common stock held by all
dissenting stockholders. Blackhawk does not presently intend to file a petition,
and if you seek to exercise appraisal rights you should not assume that
Blackhawk will file a petition or that Blackhawk will initiate any negotiations
with respect to the fair value of your shares. If you are a Dean stockholder and
want to have your Dean shares appraised you should be prepared to initiate any
petitions necessary for the perfection of your appraisal rights within the time
periods and in the manner prescribed in Section 262. Since Blackhawk has no
obligation to file a petition, your failure to file a petition within the period
specified could result in a loss of your appraisal rights. In any event,
56
at any time within 60 days after the effective time, or at any time thereafter
with the written consent of Blackhawk, if you demand appraisal you will have the
right to withdraw your demand and to accept payment of the consideration
provided in the merger agreement.
If you comply with the provisions of Section 262 within 20 days after the
effective time of the merger, you may request in writing and receive from
Blackhawk a statement setting forth the aggregate number of shares not voted in
favor of the merger agreement and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. Blackhawk
must mail this statement to you within 10 days of receipt of your request.
If you timely file a petition for an appraisal, the Delaware Chancery Court
will hold a hearing on your petition. The court will determine whether you are
entitled to appraisal rights and will appraise the "fair value" of your shares,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. The costs of the action may be
determined by the Delaware Chancery Court and taxed upon the parties as the
Delaware Chancery Court deems equitable. Upon application of a petitioning
former Dean stockholder, the Delaware Chancery Court may also order that all or
a portion of the expenses incurred by any former Dean stockholder in connection
with the appraisal proceeding, including reasonable attorneys' fees and the fees
and expenses of experts, be charged pro rata against the value of all of the
shares entitled to appraisal. IF YOU ARE CONSIDERING SEEKING APPRAISAL YOU
SHOULD BE AWARE THAT THE FAIR VALUE OF YOUR DEAN SHARES AS DETERMINED UNDER
SECTION 262 COULD BE MORE THAN, THE SAME AS, OR LESS THAN THE CONSIDERATION THAT
YOU WOULD RECEIVE PURSUANT TO THE MERGER AGREEMENT IF YOU DID NOT SEEK APPRAISAL
OF YOUR DEAN SHARES, AND THAT THE OPINION RENDERED BY GOLDMAN SACHS & CO. IS NOT
AN OPINION AS TO FAIR VALUE UNDER SECTION 262.
In determining fair value, the Delaware Chancery Court is to take into
account all relevant factors. In the case of WEINBERGER V. UOP, INC., the
Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered, and
that "fair price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court stated that, in
making this determination of fair value, the court must consider market value,
asset value, dividends, earnings prospects, the nature of the enterprise and any
other facts which could be ascertained as of the date of the merger that throw
any light on future prospects of the merged corporation. In the Weinberger case,
the Delaware Supreme Court stated that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the date
of the merger and not the product of speculation, may be considered."
Section 262 provides that fair value is to be "exclusive of any element of value
arising from the accomplishment or expectation of the merger." In CEDE & CO. V.
TECHNICOLOR, INC., the Delaware Supreme Court stated that such exclusion is a
"narrow exclusion [that] does not encompass known elements of value."
If you properly demand an appraisal in compliance with Section 262 you will
not, after the effective time of the merger, be entitled to vote the shares that
are the subject of the demand for any purpose nor will you be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares as of a record date
prior to the effective time of the merger).
At any time before the 60th day after the effective time of the merger you
will have the right to withdraw your demand for appraisal and to accept the
terms offered in the merger. After this period, you may withdraw the demand for
appraisal only with the consent of Blackhawk. If no petition for appraisal is
filed with the Delaware Chancery Court within 120 days after the effective time
of the merger, or if you withdraw the demand for appraisal as discussed in the
preceding sentences, your rights to appraisal will cease, and you will be
entitled to receive the merger consideration. You may
57
withdraw your demand for appraisal by delivering to Blackhawk a written
withdrawal of your demand for appraisal and acceptance of the merger at the
following address: 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201,
Attention: Corporate Secretary. No appraisal proceeding in the Delaware Chancery
Court may be dismissed as to any stockholder without the approval of the
Delaware Chancery Court, and the approval may be conditioned upon terms the
Delaware Chancery Court deems fair. If Blackhawk does not approve your request
to withdraw a demand for appraisal when the approval is required and the
Delaware Chancery Court does not approve the dismissal of an appraisal
proceeding, you will be entitled to receive only the appraised value determined
in the appraisal proceeding. This value could be lower than the value of the
merger consideration.
If you fail to comply strictly with the procedures set forth in Section 262
you will lose your statutory appraisal rights.
THE RELATED TRANSACTIONS
In connection with the merger, Suiza has entered into an agreement with
Dairy Farmers of America (DFA) to purchase DFA's 33.8% interest in Suiza Dairy
Group in exchange for:
- approximately $165 million in cash, subject to adjustment as described
below;
- a subordinated contingent promissory note in the original principal amount
of $50 million (which will increase annually based on changes in the
consumer price index, up to a maximum of $120 million) payable only in the
event that Suiza terminates or breaches one of its existing milk supply
agreements with DFA prior to the twentieth anniversary of the merger date;
and
- six plants (and the operations associated with those plants) located in
areas where Suiza's and Dean's operations overlap.
Also as part of the consideration to be paid to DFA, Suiza intends to amend
one of Suiza's current milk supply agreements with DFA to provide that if Suiza
does not, within a specified period after closing, offer DFA the right to supply
raw milk, or manage the supply of raw milk, to certain of Dean's dairy plants
after the merger, Suiza could be required to pay up to $80 million of liquidated
damages to DFA. Any such liquidated damages would be paid, without interest,
over a five-year period and would reduce the principal amount of the
$50 million contingent promissory note described above by an amount equal to
approximately 25% of such payments.
The cash portion of the purchase price is subject to adjustment based on
(1) DFA and its affiliate's pro rata share of the earnings of Suiza Dairy Group
and the amount of distributions made by Suiza Dairy Group to DFA and one of its
affiliates before the closing and (2) the level of current assets and current
liabilities associated with the six processing plants to be transferred as part
of the purchase price. In addition, the parties will increase or decrease the
cash portion of the purchase price based on the amount of earnings (before
interest expense, taxes and depreciation and amortization) that the six
processing plants are reasonably expected to generate. Instead of an adjustment
to the cash portion of the purchase price based on such earnings, Suiza and DFA
may agree to the transfer of additional dairy operations to DFA, or some
combination of cash and additional dairy operations. Suiza intends to pay the
cash portion of the purchase price using proceeds from a loan under its new
credit facility. See "Risk Factors--Risks Relating to the Merger--Suiza may not
be able to obtain the financing needed for the merger on favorable terms" on
page 24 and "Where You Can Find More Information" on page 99.
The promissory note will have a term of twenty years and will bear interest
based on the consumer price index. Interest will not be paid in cash. Instead,
interest will be added to the principal amount of the note annually, up to a
maximum principal amount of $120 million. Suiza may prepay the note in whole or
in part at any time, without penalty. DFA may require Suiza to pay the note in
full if Suiza materially breaches or terminates one of its milk supply
agreements with DFA without renewal or
58
replacement with another milk supply agreement with DFA. Suiza may terminate the
note in the event DFA materially breaches or terminates one of its milk supply
agreements without renewal or replacement with another milk supply agreement
with Suiza, or if DFA becomes insolvent, enters bankruptcy, liquidates or
dissolves. The note will expire at the end of twenty years, without any
obligation by Suiza to pay any portion of the principal or interest.
The six dairy plants to be transferred are located where Suiza and Dean have
overlapping operations. The plants are Dean's Barber Dairies fluid milk plant in
Birmingham, Alabama; Suiza's Velda Farms plant in Miami, Florida; Suiza's Velda
Farms plant in Winter Haven, Florida; Dean's H. Meyer Dairy Company plant in
Cincinnati, Ohio; Dean's Coburg Dairy, Inc. plant in North Charleston, South
Carolina; and Dean's Cream O Weber Dairy, Inc. plant in Salt Lake City, Utah.
See "--Additional Covenants in the Merger Agreement" on page 52 for a discussion
of covenants and agreements in the merger agreement that are related to the
transfer of these properties, and "Risk Factors--Risks Relating to the
Merger--The merger could be delayed if the related transactions fail to close"
on page 23.
DFA has assigned its right to acquire the six plants to National Dairy
Holdings, LP, in which DFA owns a minority interest. Therefore, when the merger
occurs, Suiza expects to transfer the six plants to National Dairy rather than
to DFA.
Suiza's proposed acquisition of DFA's minority interest in Suiza Dairy Group
is contingent on, and is expected to occur simultaneously with, the completion
of the merger. However, completion of the transaction with DFA is not a
condition to completion of the merger.
This discussion of the related transactions assumes the terms of certain
amendments to Suiza's agreements with DFA that the parties expect to sign prior
to the time of the merger.
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
Suiza's common stock and Dean's common stock are both listed on the New York
Stock Exchange. Suiza's ticker symbol on the NYSE is "SZA" and Dean's ticker
symbol on the NYSE is "DF". The following table shows, for the calendar periods
indicated, the high and low sales prices per share of
59
Suiza common stock and Dean common stock, as reported on the NYSE composite
tape, and the cash dividends per share.
SUIZA COMMON STOCK DEAN COMMON STOCK
------------------------------ ------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
-------- -------- -------- -------- -------- --------
1998
First quarter............................ $67.00 $55.00 $0.00 $60.69 $48.88 $0.200
Second quarter........................... 63.00 53.31 0.00 55.75 45.13 0.200
Third quarter............................ 61.25 26.50 0.00 57.44 41.00 0.210
Fourth quarter........................... 51.63 25.69 0.00 50.00 39.50 0.210
1999
First quarter............................ $50.25 $32.56 $0.00 $41.88 $33.38 $0.210
Second quarter........................... 41.88 29.63 0.00 42.19 32.94 0.210
Third quarter............................ 40.69 30.00 0.00 44.31 38.75 0.220
Fourth quarter........................... 39.75 32.63 0.00 46.56 34.63 0.220
2000
First quarter............................ $44.88 $36.00 $0.00 $39.75 $22.38 $0.220
Second quarter........................... 49.00 37.81 0.00 34.44 23.63 0.220
Third quarter............................ 52.44 44.50 0.00 35.88 28.44 0.225
Fourth quarter........................... 51.50 40.44 0.00 34.88 26.00 0.225
2001
First quarter............................ $50.57 $42.00 $0.00 $38.50 $28.06 $0.225
Second quarter........................... 56.85 43.80 0.00 42.90 32.25 0.225
Third quarter (through August 9, 2001)... 58.50 52.20 0.00 42.09 39.75 0.225
On April 4, 2001, the last full trading day prior to the public announcement
of the merger, the closing price for Suiza's common stock was $46.44. The
closing price for Dean's common stock was $32.50 on that same day. On August 9,
2001, the closing price was $54.48 for Suiza's common stock and $41.49 for
Dean's common stock. WE URGE YOU TO OBTAIN CURRENT MARKET QUOTATIONS FOR SUIZA'S
COMMON STOCK AND DEAN'S COMMON STOCK BEFORE MAKING ANY DECISION ON THE MERGER.
When the merger occurs, Suiza will change its name to "Dean Foods Company."
In connection with the name change, Suiza's trading symbol on the NYSE will
change from "SZA" to "DF".
The merger agreement permits Dean to declare its regular quarterly cash
dividends to stockholders, based on record dates of May 25, 2001, August 24,
2001 and November 23, 2001, if the merger has not occurred by those dates. Dean
declared a dividend of $0.225 per share to stockholders of record on May 25,
2001, which was paid on June 15, 2001, and declared a dividend of $0.225 per
share to stockholders of record on August 24, 2001 that will be paid on
September 14, 2001. If Dean declares a dividend on one of these dividend record
dates and the closing of the merger occurs prior to the payment of the
dividends, Suiza will pay these dividends on the scheduled payment date to
Dean's stockholders of record as of the particular dividend record date. Suiza
has not paid dividends on its common stock in the past and does not expect to in
the foreseeable future.
60
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The pro forma financial information of Suiza shown under this heading for
the year ended December 31, 2000 and the six months ended June 30, 2001 is
derived from the historical financial statements of Suiza and Dean and gives
effect to the merger and the related transactions. The Dean historical financial
information included in the pro forma financial information for the year ended
December 31, 2000 is derived from Dean's results of operations for the twelve
months ended November 26, 2000. The Dean historical financial information
included in the pro forma financial information for the six months ended
June 30, 2001 is derived from Dean's results of operations for the six months
ended May 27, 2001. Dean's actual fiscal year ends on the last Sunday of May.
The pro forma balance sheet data shown under this heading is presented as if the
merger and the related transactions had occurred on June 30, 2001 and the pro
forma income statement data shown under this heading assumes the merger and the
related transactions occurred on January 1, 2000.
The merger will be treated as a purchase business combination for accounting
purposes, and the Dean assets acquired and liabilities assumed will be recorded
at their fair value. The actual purchase price for the acquisition of Dean
cannot be determined yet since the acquisition has not yet been completed.
Holders of Dean common stock will receive a combination of cash and Suiza common
stock for each share of Dean common stock they own as of the closing of the
merger. For the purpose of the following pro forma financial information, we
have assumed that Suiza's common stock price is $47.83 (based on an average of
closing prices for Suiza's common stock from April 2, 2001 through April 10,
2001) and that 35.6 million shares of Dean common stock are outstanding at the
date of the merger. The allocations of the purchase price to Dean's assets,
intangible assets and liabilities are only preliminary allocations based on
estimates of fair values and will change when actual fair values are determined.
The pro forma statements of income shown under this heading do not include
cost savings from synergies which may be achievable subsequent to the closing of
the merger or the impact of non-recurring items directly related to the merger.
The pro forma financial information shown under this heading is unaudited,
is presented for informational purposes only, is not necessarily indicative of
the financial position or results of operations that would actually have
occurred had the merger or the related transactions been consummated as of the
dates or at the beginning of the periods presented, nor is it necessarily
indicative of future operating results or financial position. The pro forma
financial information shown under this heading and the accompanying notes should
be read together with the historical financial statements and related notes
contained in the annual reports and other information that we have filed with
the Securities and Exchange Commission and incorporated by reference in this
joint proxy statement/prospectus. See "Where You Can Find More Information" on
page 99.
61
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT SHARE DATA)
YEAR ENDED DECEMBER 31, 2000
RECLASSIFICATION PURCHASE OF
HISTORICAL HISTORICAL ACQUISITION OF DIVESTED MINORITY
SUIZA DEAN OF DEAN OPERATIONS[G] INTEREST PRO FORMA
---------- ---------- ----------- ---------------- ----------- ----------
Net sales........................ $5,756,303 $4,193,293[a] $ -- $(527,663) $ -- $9,421,933
Cost of sales.................... 4,330,067 3,165,289[a] (399,135) 7,096,221
---------- ---------- ---------- --------- -------- ----------
Gross profit..................... 1,426,236 1,028,004 -- (128,528) -- 2,325,712
Operating costs and expenses:
Selling and distribution....... 812,274 643,215[a] (91,474) 1,364,015
General and administrative..... 182,570 131,618 (16,138) (1,000)[h] 297,050
Amortization of intangibles and
other assets................. 52,441 22,271 (14,200)[d] (3,760) 56,752
Plant closing and other
costs........................ 3,388 6,078 (2,948) 6,518
Litigation settlement costs.... 7,500 7,500
---------- ---------- ---------- --------- -------- ----------
Total operating costs and
expenses................... 1,058,173 803,182 (14,200) (114,320) (1,000) 1,731,835
---------- ---------- ---------- --------- -------- ----------
Operating income................. 368,063 224,822 14,200 (14,208) 1,000 593,877
Other (income) expense:
Interest expense, net.......... 112,586 60,606 84,970[e] 16,830[i] 274,992
Finance charges on trust issued
preferred securities......... 33,595 33,595
Equity in earnings of
unconsolidated affiliates.... (11,453) (11,453)
Income on divested
operations................... (8,706) 8,706[h]
Other income, net.............. (630) (10,000)[c] (188) (10,818)
---------- ---------- ---------- --------- -------- ----------
Total other (income)
expense.................... 134,098 50,606 84,970 (8,894) 25,536 286,316
---------- ---------- ---------- --------- -------- ----------
Income from continuing operations
before income taxes............ 233,965 174,216 (70,770) (5,314) (24,536) 307,561
Income taxes..................... 90,303 66,689 (28,165)[f] (5,314) (6,332)[f] 117,181
Minority interest in earnings.... 29,911 (29,340)[h] 571
---------- ---------- ---------- --------- -------- ----------
Income from continuing
operations..................... $ 113,751 $ 107,527 $ (42,605) $ -- $ 11,136 $ 189,809
========== ========== ========== ========= ======== ==========
Earnings per share from
continuing operations:
Basic............................ $ 4.03 $ 4.36
Diluted.......................... $ 3.68 $ 4.04
Average common shares:
Basic............................ 28,195,043 15,289,574 43,484,617[j]
Diluted.......................... 36,671,264 15,611,072 52,282,336[k]
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income.
62
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT SHARE DATA)
SIX MONTHS ENDED JUNE 30, 2001
RECLASSIFICATION PURCHASE OF
HISTORICAL HISTORICAL ACQUISITION OF DIVESTED MINORITY
SUIZA DEAN OF DEAN OPERATIONS[G] INTEREST PRO FORMA
---------- ---------- ----------- ---------------- ----------- ----------
Net sales.................... $3,001,427 $2,264,311[a] $ -- $(265,960) $ -- $4,999,778
Cost of sales................ 2,281,774 1,738,639[a] (202,478) 3,817,935
---------- ---------- ---------- --------- ------- ----------
Gross profit................. 719,653 525,672 -- (63,482) -- 1,181,843
Operating costs and expenses:
Selling and distribution... 414,818 350,469[a] (46,487) 718,800
General and
administrative........... 90,415 74,727 (7,417) (500)[h] 157,225
Amortization of intangibles
and other assets......... 26,797 12,235 (7,931)[d] (1,744) 29,357
Plant closing and other
costs.................... 843 843
Merger-related costs....... 22,151[b] (22,151)[b]
---------- ---------- ---------- --------- ------- ----------
Total operating costs and
expenses............... 532,873 459,582 (30,082) (55,648) (500) 906,225
---------- ---------- ---------- --------- ------- ----------
Operating income............. 186,780 66,090 30,082 (7,834) 500 275,618
Other (income) expense:
Interest expense, net...... 53,236 36,041 38,470[e] 7,573[i] 135,320
Finance charges on trust
issued preferred
securities............... 16,791 16,791
Equity in earnings of
unconsolidated
affiliates............... (2,859) (2,859)
Income on divested
operations............... (5,174) 5,174[h]
Other income, net.......... 502 502
---------- ---------- ---------- --------- ------- ----------
Total other (income)
expense................ 67,670 36,041 38,470 (5,174) 12,747 149,754
---------- ---------- ---------- --------- ------- ----------
Income from continuing
operations before income
taxes...................... 119,110 30,049 (8,388) (2,660) (12,247) 125,864
Income taxes................. 44,649 11,652 (2,858)[f] (2,660) (2,829)[f] 47,954
Minority interest in
earnings................... 16,341 (15,938)[h] 403
---------- ---------- ---------- --------- ------- ----------
Income from continuing
operations................. $ 58,120 $ 18,397 $ (5,530) $ -- $ 6,520 $ 77,507
========== ========== ========== ========= ======= ==========
Earnings per share from
continuing operations:
Basic........................ $ 2.12 $ 1.81
Diluted...................... $ 1.91 $ 1.70
Average common shares:
Basic........................ 27,458,327 15,289,574 42,747,901[j]
Diluted...................... 35,948,466 15,866,871 51,815,337[k]
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income.
63
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except share data)
[a] The Emerging Issues Task Force of the Financial Accounting Standards Board
Issue No. 00-10 "Accounting for Shipping and Handling Fees and Costs" was
adopted by Dean in the fourth quarter of its fiscal year ended May 27, 2001.
This resulted in a reclassification to Dean's income statement for its
fiscal year ended May 27, 2001. This reclassification has been reflected in
the historical Dean amounts in these pro forma financial statements. There
was no net impact on Dean's operating income or net income as a result of
this reclassification.
[b] Dean recorded a pre-tax charge of $22.2 million ($13.7 million after-tax) in
the fourth quarter of fiscal 2001 for merger-related costs. These charges
consist of professional fees of $4.5 million, severance and employee stay
costs of $2.7 million and a $15.0 million charge relating to a lease
commitment on office space that the Company will not occupy. These costs
directly related to the merger have been eliminated from the pro forma
statement of income for the six months ended June 30, 2001.
[c] On December 1, 2000, Dean sold a $30 million subordinated note which was
received as part of the proceeds from the sale of Dean's vegetable business
in Dean's 1999 fiscal year, for cash proceeds of $10 million. Due to the
uncertainty of the collectibility of the note, the note was originally
valued at a nominal amount. As a result of the sale, Dean reversed
$10 million of the original reserve against the note, resulting in a
$10 million pre-tax gain in its second quarter of fiscal 2001.
[d] Pro forma adjustment to eliminate Dean's historical amortization of
goodwill, net of the amounts related to Dean's divested operations.
On June 29, 2001, the Financial Accounting Standards Board issued a new
business combinations financial accounting standard and a new goodwill and
intangible asset financial accounting standard. The new business
combinations financial accounting standard and the portion of the new
intangible asset financial accounting standard related to the elimination of
the requirement to amortize goodwill and intangibles with indefinite lives,
are effective for acquisistions completed after June 30, 2001 and therefore
no amortization for goodwill or intangibles with indefinite lives has been
included for the purchase of Dean. The remaining provisions of the new
intangible asset financial accounting standard which will discontinue the
requirement to amortize existing goodwill and existing intangibles with
indefinite lives for business combinations completed prior to June 30, 2001
are not effective for Suiza until January 1, 2002. Since these remaining
provisions are not yet effective, Suiza will continue to amortize historical
goodwill and intangibles with indefinite lives until January 1, 2002 when
such amortization will cease. No pro forma adjustment has been included for
the elimination of historical Suiza amortization of goodwill and intangibles
with indefinite lives.
Suiza has not completed an assessment of the fair value of assets and
liabilities of Dean and the related business integration plans. Suiza
expects that the ultimate purchase price allocation will include adjustments
to the fair values of depreciable tangible assets, allocations of a portion
of the purchase price to identifiable intangible assets (some of which will
have indefinite lives) and adjustments to the carrying value of certain
liabilities. Accordingly, to the extent that such assessments indicate that
the fair value of the assets and liabilities differ from their net book
values, such difference would adjust the amounts allocated to those assets
and liabilities and would change the amounts allocated to goodwill. Assuming
a weighted average useful life of depreciable assets of 15 years, every
$5 million of excess purchase price which is reallocated between depreciable
assets and goodwill will result in a change in depreciation expense for the
year ended December 31, 2000 of approximately $0.3 million.
64
[e] Pro forma adjustment to reflect interest expense on the new credit facility
borrowings and borrowings under the receivable-backed loan, partially offset
by the elimination of interest expense related to the debt, as follows:
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED
2000 JUNE 30, 2001
------------- ----------------
Interest on proceeds under new credit facility assuming
a weighted average interest rate of 9.14% for the
year and 8.22% for the six month period.............. $165,722 $ 74,574
Interest on borrowings under receivable-backed loan
assuming a weighted average interest rate of 6.91%
for the year and 5.75% for the six month period...... 27,642 11,507
Letter of credit and commitment fees................... 4,043 1,979
Amortization of fair value adjustment on Dean's debt... 5,177 2,532
Amortization of deferred financing costs............... 7,287 3,644
Less historical interest expense on the following debt:
Suiza's credit facility, including letter of credit
and commitment fees................................ (98,266) (41,196)
Suiza's receivable-backed loan....................... (5,482) (4,793)
Amortization of deferred financing costs............. (2,257) (1,135)
Dean's commercial paper and revolving credit
facility........................................... (18,896) (8,642)
-------- --------
Pro forma adjustment to interest expense on debt
facilities........................................... $ 84,970 $ 38,470
======== ========
A 0.125% increase in the interest rate on the new credit facility and the
borrowings under the receivable-backed loan would increase interest expense
by $3.0 million and $1.5 million for the year ended December 31, 2000 and
the six months ended June 30, 2001, respectively.
[f] Pro forma adjustment to reflect income taxes at an estimated overall
effective rate of 38.1%.
[g] Pro forma adjustment to reclassify the operations of the six milk processing
plants to be divested to a single line item, "Income on divested
operations."
[h] Pro forma adjustment to reflect Suiza's acquisition of DFA's minority
interest in Suiza Dairy Group and the elimination of the minority interest
charge related to DFA's minority interest. In addition, management fees
payable to DFA of $1.0 million and $0.5 million for the year ended
December 31, 2000 and the six months ended June 30, 2001, respectively, have
been eliminated.
[i] Pro forma adjustment to reflect interest expense on $184.2 million in
borrowings under the new credit facility to fund the purchase, assuming a
weighted average interest rate of 9.14% and 8.22% for the year ended
December 31, 2000 and the six months ended June 30, 2001, respectively.
These borrowings will be used to pay the cash portion of consideration (as
adjusted for DFA's share of undistributed earnings after January 1, 2001) to
purchase DFA's minority interest in Suiza Dairy Group.
[j] Pro forma shares reflect historical Suiza basic shares adjusted for the
issuance of shares to Dean stockholders in connection with the merger.
[k] Pro forma shares reflect historical Suiza diluted shares adjusted for the
issuance of shares to Dean stockholders in connection with the merger, and
the dilutive impact of Dean stock options being converted to Suiza options
in connection with the merger.
These pro forma statements of income do not include adjustments to reflect
cost savings from synergies which may be achieveable subsequent to the
closing of the merger or the impact of non-recurring items directly related
to the merger. In connection with the refinancing of existing credit
facilities, Suiza will record an extraordinary loss of $5.0 million, net of
income taxes of $3.0 million, related to the write-off of unamortized
deferred financing costs of the old credit facility. Suiza will also
recognize an estimated gain of $22.0 million, net of income taxes of
$14.0 million, on the sale of existing Suiza plants to DFA in connection
with the purchase of DFA's minority interest in Suiza Dairy Group.
65
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE DATA)
AS OF JUNE 30, 2001
RECLASSIFICATION
OF PURCHASE OF
HISTORICAL HISTORICAL ACQUISITION DIVESTED MINORITY
SUIZA DEAN OF DEAN OPERATIONS[D] INTEREST[E] PRO FORMA
---------- ---------- ----------- ---------------- ----------- ----------
Current assets:
Cash and cash equivalents..... $ 22,938 $ 22,616 $ -- $ -- $ -- $ 45,554
Receivables, net of allowance
for doubtful accounts....... 500,816 363,079 (36,426) 827,469
Inventories................... 194,465 220,087 10,451 [a] (10,283) 414,720
Refundable income taxes....... 4,392 4,392
Deferred income taxes......... 53,361 49,340 (3,487)[a] 99,214
Prepaid expenses and other
current assets.............. 42,946 39,909 (15,972)[c] (1,408) 65,475
---------- ---------- ---------- --------- --------- ----------
Total current assets........ 818,918 695,031 (9,008) (48,117) -- 1,456,824
Property, plant and equipment,
net........................... 1,006,372 919,298 (118,206) 1,807,464
Carrying value of assets to be
divested...................... 222,672 (222,672)
Intangible and other assets..... 1,935,678 703,058 910,232 [a],[b],[c] (101,244) (73,691) 3,374,033
---------- ---------- ---------- --------- --------- ----------
Total....................... $3,760,968 $2,317,387 $ 901,224 $ (44,895) $(296,363) $6,638,321
========== ========== ========== ========= ========= ==========
Current liabilities:
Accounts payable and accrued
expenses.................... $ 544,278 $ 494,638 $ 17,567 [a],[c] $ (32,224) $ -- $1,024,259
Income taxes payable.......... 8,782 24,574 (3,060)[b] 14,013 44,309
Current portion of long-term
debt........................ 136,011 4,398 (5,000)[c] 135,409
---------- ---------- ---------- --------- --------- ----------
Total current liabilities... 689,071 523,610 9,507 (32,224) 14,013 1,203,977
Long-term debt.................. 1,135,563 940,170 752,703 [a],[c] 184,201[c] 3,012,637
Other long-term liabilities..... 41,755 30,678 45,459 [a] 117,892
Deferred income taxes........... 129,798 118,313 8,395 [a] (12,671) 243,835
Mandatorily redeemable
convertible trust issued
preferred securities.......... 584,323 584,323
Minority interest in
subsidiaries.................. 524,271 (510,712) 13,559
Stockholders' equity............ 656,187 704,616 85,160 [a],[b] 16,135 1,462,098
---------- ---------- ---------- --------- --------- ----------
Total....................... $3,760,968 $2,317,387 $ 901,224 $ (44,895) $(296,363) $6,638,321
========== ========== ========== ========= ========= ==========
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
66
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands except share data)
(a) In connection with the merger, Suiza will pay each Dean stockholder $21.00
in cash per share and issue 0.429 shares of Suiza common stock for each
share of Dean common stock held (35.6 million shares in total as of
June 30, 2001). If Suiza's stock price is below $32.71 at the time of the
merger, the mix of stock and cash to be delivered to each Dean stockholder
will be adjusted. In addition, based on Suiza's stock price as of June 29,
2001, Suiza will issue approximately 0.824 Suiza stock options for each
outstanding stock option of Dean.
The following summarizes the total assumed purchase price and related
preliminary allocation to the net assets acquired:
Total purchase price:
Fair value of common stock based on an average Suiza share
price of $47.83......................................... $ 731,238
Cash consideration........................................ 748,441
Fair value of exchange stock options...................... 63,510
Estimated Suiza transaction costs......................... 31,000
----------
Net purchase price...................................... $1,574,189
==========
Purchase price allocation:
Net purchase price........................................ $1,574,189
Historical net assets acquired............................ (704,616)
Estimated additional Dean transaction costs, net of tax... 19,800
----------
Excess purchase price..................................... 889,373
Adjustment of Dean's senior notes to fair value........... (65,299)
Adjustment of Dean's employee benefit plan liabilities and
other liabilities:
Current amounts......................................... 1,300
Non-current amounts..................................... 45,459
Adjustment of Dean's interest rate swaps to fair value.... (2,193)
Adjustment of Dean's inventory to FIFO.................... (10,451)
Deferred tax effect of fair value adjustments............. 11,882
----------
Excess purchase price allocated to goodwill............... $ 870,071
==========
Suiza has not completed an assessment of the fair value of assets and
liabilities of Dean and the related business integration plans. Suiza
expects that the ultimate purchase price allocation will include adjustments
to the fair values of depreciable tangible assets, allocations of a portion
of the purchase price to identifiable intangible assets (some of which will
have indefinite lives) and adjustments to the carrying value of certain
liabilities, including the establishment of any potential liabilities
associated with business integration plans and termination and change in
control benefits. Accordingly, to the extent that such assessments indicate
that the fair value of the assets and liabilities differ from their net book
values, such differences would be allocated to those assets and liabilities
and would change the amounts allocated to goodwill.
(b) In connection with the refinancing of existing credit facilities discussed
in (c) below, Suiza will record an extraordinary loss of $5.0 million, net
of income taxes of $3.0 million, related to the write-off of unamortized
deferred financing costs of the old credit facility.
(c) In connection with the merger, Suiza will enter into a new credit facility,
will expand its receivable-backed loan facility, and will refinance certain
indebtedness.
67
The following table summarizes the sources and uses of the borrowings under
the new credit facility and the increase in the receivable-backed loan:
PURCHASE OF
ACQUISITION MINORITY
OF DEAN INTEREST TOTAL
----------- ----------- ----------
Sources:
Proceeds from the new credit facility............. $1,813,844 $184,201 $1,998,045
Proceeds from the receivable-backed loan.......... 150,000 150,000
---------- -------- ----------
Total sources..................................... $1,963,844 $184,201 $2,148,045
========== ======== ==========
Uses:
Repayment of existing Suiza credit facility,
including accrued interest of $1.7 million...... $ 935,261 $ -- $ 935,261
Repayment of Dean revolving credit facility and
existing debt on the six divested plants,
including accrued interest of $1.9 million...... 219,114 219,114
Payment of cash consideration to Dean
stockholders.................................... 748,441 748,441
Payment of cash consideration to acquire DFA
minority interest............................... 184,201 184,201
Payment of estimated additional financing costs on
new credit facility............................. 36,900 36,900
Payment of estimated additional Suiza transaction
costs........................................... 24,128 24,128
---------- -------- ----------
Total Uses........................................ $1,963,844 $184,201 $2,148,045
========== ======== ==========
Suiza has paid approximately $9.0 million of financing costs on the new
credit facility and approximately $7.0 million of transaction costs for the
merger through June 30, 2001. These costs are included in prepaid expenses
in Suiza's historical balance sheet at June 30, 2001. These amounts have
been reclassified to intangibles and other assets in this pro forma balance
sheet. The estimated additional financing costs of $36.9 million and
transaction costs of $24.1 million are also included in intangibles and
other assets in this pro forma balance sheet.
(d) Represents the reclassification to a single line item, "Carrying value of
assets to be divested," of the historical carrying values of the net assets
of six divested milk processing plants as part of the purchase price for
DFA's minority interest in Suiza Dairy Group.
(e) Reflects the acquisition of DFA's minority interest in Suiza Dairy Group for
estimated consideration of approximately $424.2 million consisting of
(i) $184.2 million in cash (as adjusted for DFA's share of undistributed
earnings after January 1, 2001) and (ii) the net assets of six milk
processing plants at fair value. The estimated consideration does not
include any amounts related to agreements with DFA related to the
subordinated contingent promissory note or the contingent liability for
liquidated damages under an amendment to one of Suiza's milk supply
agreements. As a result of the acquisition of DFA's minority interest in
Suiza Dairy Group and the related sale of Suiza plants, Suiza will recognize
an estimated gain of $22.0 million, net of income taxes of $14.0 million. In
addition, Suiza will also recognize an additional reduction in equity of
$5.9 million to fully recognize an accumulated other comprehensive loss on
interest rate swaps that had previously been partially allocated to DFA's
minority interest in Suiza Dairy Group.
68
OPINIONS OF FINANCIAL ADVISORS
OPINION OF DEAN'S FINANCIAL ADVISOR
OPINION OF GOLDMAN, SACHS & CO.
On April 4, 2001, Goldman Sachs delivered its oral opinion, which it
subsequently confirmed in a written opinion dated April 4, 2001, to Dean's board
of directors that, as of April 4, 2001, the per share merger consideration to be
received by Dean's stockholders was fair from a financial point of view to
Dean's stockholders.
THE WRITTEN OPINION OF GOLDMAN SACHS, DATED APRIL 4, 2001, ATTACHED AS
ANNEX B TO THIS JOINT PROXY STATEMENT/PROSPECTUS, INCLUDES GOLDMAN SACHS'
ASSUMPTIONS, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN
CONNECTION WITH THE OPINION. GOLDMAN SACHS PROVIDED ITS ADVISORY SERVICES AND
ITS OPINION FOR THE INFORMATION AND ASSISTANCE OF DEAN'S BOARD OF DIRECTORS IN
CONNECTION WITH ITS CONSIDERATION OF THE MERGER. IT IS NOT A RECOMMENDATION AS
TO HOW ANY DEAN STOCKHOLDERS SHOULD VOTE AT DEAN'S STOCKHOLDER MEETING OR WITH
RESPECT TO THE MERGER. IF YOU ARE A DEAN STOCKHOLDER, YOU SHOULD READ THE
OPINION IN ANNEX B.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the merger agreement;
- Dean's annual reports to stockholders and annual reports on Form 10-K for
the five fiscal years ended May 28, 2000 and Suiza's annual reports to
stockholders and annual reports on Form 10-K for the five years ended
December 31, 2000;
- a number of Dean's and Suiza's interim reports to stockholders and
quarterly reports on Form 10-Q;
- a number of other communications from Dean and Suiza to their respective
stockholders; and
- a number of internal financial analyses and forecasts for Dean prepared by
its management and for Suiza prepared by its management, both of which
included certain cost savings, operating synergies and impacts of proposed
divestitures projected by the managements of Dean and Suiza to result from
the merger and the related transactions, including, in the case of those
forecasts provided by Suiza's management, as adjusted by Dean's management
(referred to below as the synergies and divestiture impacts).
Goldman Sachs also held discussions with members of Dean's and Suiza's
senior managements regarding their assessments of the strategic rationale for,
and the potential benefits of, the merger and the past and current business
operations, financial condition and future prospects of each of their companies.
In addition, Goldman Sachs reviewed the reported price and trading activity for
Dean's common stock and Suiza's common stock, compared certain financial and
stock market information for Dean and Suiza with similar information for certain
other companies the securities of which are publicly traded, and reviewed the
financial terms of certain recent business combinations in the dairy, commodity
food and branded food and beverage industries specifically and in other
industries generally. Goldman Sachs also performed such other studies and
analyses that it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial, accounting and other information discussed with or reviewed by it and
assumed the accuracy and completeness of that financial, accounting and other
information for purposes of rendering its opinion. In addition, Goldman Sachs
did not make an independent evaluation or appraisal of the assets and
liabilities of Dean or Suiza, nor was any provided to Goldman Sachs. Goldman
Sachs assumed, with the consent of Dean's board of directors, that the internal
financial forecasts prepared by Dean's and Suiza's managements, including the
synergies and divestiture impacts, were reasonably prepared on a basis
reflecting the then
69
best currently available estimates and judgments of Dean and Suiza. Goldman
Sachs also assumed that all material governmental, regulatory or other consents
and approvals necessary to close the merger will be obtained without any adverse
effect on Dean, Suiza or the combined company or the contemplated benefits of
the merger.
In addition, Goldman Sachs was not requested to solicit, and did not
solicit, interest from other parties with respect to an acquisition of or other
business combination with Dean.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to Dean's board of
directors. Some of the summaries of the financial analyses include information
presented in table format. You should read the tables together with the full
text of each summary. The tables alone do not constitute a complete description
of the financial analyses.
HISTORICAL TRADING ANALYSIS. Goldman Sachs reviewed the historical trading
prices and volumes for Dean's and Suiza's common stock from April 3, 1998
through April 3, 2001. This analysis showed that the weighted average trading
price of Dean's common stock was $34.21 for the last three months of this
period, $32.43 for the last six months of this period, $31.45 for the last year
of this period and $37.48 for the entire three-year period. The weighted average
trading prices of Suiza's common stock was $47.37 for the last three months of
this period, $46.25 for the last six months of this period, $46.09 for the last
year of this period and $41.17 for the entire three-year period.
SELECTED COMPANIES ANALYSIS. Goldman Sachs reviewed and compared certain
financial and stock market information for Dean with 14 selected publicly traded
food industry companies with an equity market capitalization ranging from
approximately $320 million to approximately $4 billion, referred to in the table
below as mid-cap food industry companies, and 14 selected publicly traded food
industry companies with equity market capitalizations of more than $9 billion,
referred to in the table below as large-cap food industry companies. Goldman
Sachs selected these companies because they are publicly traded companies with
operations that for purposes of this analysis may be considered similar to Dean.
However, none of the companies used in the selected companies analysis is
identical to Dean or Suiza. The market data and financial information were based
on publicly available financial statements and the earnings estimates were based
on analysts' estimates from IBES, Inc., a data service that compiles estimates
of securities research analysts.
The following table presents Dean's enterprise value (which is composed of
Dean's equity market capitalization, together with its outstanding debt net of
cash) as a multiple of Dean's latest twelve months of (1) sales, (2) earnings
before interest, taxes, depreciation and amortization (EBITDA), and
(3) earnings before interest and taxes (EBIT). The table also presents Dean's
price-to-projected earnings ratios for calendar years 2001 and 2002, based on an
assumed Dean stock price and assumed
70
total merger consideration. The table then compares this Dean information to the
means and medians presented for the selected mid-cap and large-cap food industry
companies as a group.
ENTERPRISE VALUE MULTIPLES CALENDARIZED
OF PRICE/EARNINGS
LATEST TWELVE MONTHS MULTIPLES
------------------------------------ ----------------------
SALES EBITDA EBIT 2001 2002
-------- -------- -------- -------- --------
Dean(1)................................................ 0.5x 6.1x 9.4x 11.7x 10.3x
Dean(2)................................................ 0.6 7.1 11.0 14.8 13.0
Mid-cap Food Industry Companies:
Mean................................................. 1.4x 10.7x 13.5x 14.9x 12.8x
Median............................................... 1.0 9.1 14.0 13.0 10.4
Large-cap Food Industry Companies:
Mean................................................. 2.1x 11.2x 14.2x 19.6x 17.8x
Median............................................... 1.9 10.4 13.2 19.3 17.8
------------------------------
(1) Based on Dean's closing stock price per share of $32.53 on April 3, 2001.
(2) Based on Suiza's closing stock price per share of $46.39 on April 3, 2001,
which stock price would yield total merger consideration per share to Dean
stockholders of $40.90, which is the sum of (a) $21 per Dean share in cash
consideration and (b) $19.90 per Dean share in value of Suiza stock at an
exchange ratio of 0.429 Suiza shares per Dean share.
SELECTED TRANSACTION ANALYSIS. Goldman Sachs reviewed publicly available
information for selected merger or acquisition transactions in the dairy and
commodity food industries in the last ten years. The following table sets forth
the high, mean, median and low enterprise value to sales, EBITDA and EBIT of the
selected comparable transactions, calculated in each case based on available
information for the latest twelve months prior to each transaction:
ENTERPRISE VALUE MULTIPLES OF
LATEST TWELVE MONTHS
------------------------------------
SALES EBITDA EBIT
-------- -------- --------
Selected Dairy Transactions:
High...................................................... 1.60x 45.1x 80.3x
Mean...................................................... 0.55 10.4 19.0
Median.................................................... 0.47 8.5 13.7
Low....................................................... 0.14 3.0 7.3
Selected Commodity Foods Transactions:
High...................................................... 1.92x 18.3x 41.6x
Mean...................................................... 0.80 8.9 13.3
Median.................................................... 0.70 8.4 11.1
Low....................................................... 0.13 5.8 8.0
DISCOUNTED CASH FLOW ANALYSIS OF DEAN. Goldman Sachs performed a discounted
cash flow analysis to determine a range of implied present values per share of
Dean's common stock. Cash flows were discounted to the end of March 2001. In
performing this analysis, Goldman Sachs used estimates supplied by Dean's
management, discount rates ranging from 9.0% to 13.0% and multiples of terminal
year 2005 estimated EBITDA ranging from 5.5x to 7.5x. This analysis resulted in
implied per share present values ranging from $34.24 to $58.11.
Using Dean's management's estimates, Goldman Sachs then performed a
sensitivity analysis with respect to sales growth and EBIT margin. The analysis
was based on an 11.0% discount rate and multiple of terminal year 2005 estimated
EBITDA of 6.5x and used a range of changes in sales growth ranging from a
decrease by 4.0% to an increase by 4.0% and a range of changes in EBIT margin
71
ranging from a decrease by 1.0% to an increase by 1.0%. This analysis resulted
in implied per share present values ranging from $27.57 to $67.17.
ILLUSTRATIVE FUTURE MARKET TRADING PRICES ANALYSIS
DEAN. Goldman Sachs estimated the range of possible present values of the
estimated future stock price of Dean, as a stand-alone company, to Dean
stockholders. In order to estimate the company's future stock price, Goldman
Sachs used Dean management's projections of earnings per share for Dean on a
stand-alone basis for fiscal years 2001-2004, adjusted such projections to
calendar years ending December 31, 2001-2003, and applied potential one-year
forward price/earnings multiples for Dean ranging from 9.0x to 12.0x. Further,
Goldman Sachs added the payment of assumed dividends of $0.89 in calendar year
2001, $0.91 in calendar year 2002 and $0.93 in calendar year 2003 to the
resulting future stock price in those calendar years. Goldman Sachs then applied
discount rates ranging from 9.0% to 12.0% to calculate the present value of the
future stock price. Goldman Sachs noted that the possible present value of the
future stock price of Dean on a stand-alone basis ranged from $26.88 to $40.40.
COMBINED COMPANY. Goldman Sachs estimated the range of possible present
values of the total consideration to be paid to Dean stockholders. Goldman Sachs
assumed that the cash consideration was received tax-free and reinvested in
Suiza stock at Suiza's market price as of April 3, 2001, and then estimated the
range of possible present values of the estimated future stock price of the
combined company to Dean stockholders. Goldman Sachs used Dean management's
projections of GAAP earnings per share for Dean on a stand-alone basis for
fiscal years 2001-2004, adjusted the earnings assuming the effectiveness of the
then proposed new Financial Accounting Standards Board (FASB) rules (regarding
the non-amortization of goodwill) and then adjusted such projections to calendar
year end 2001-2003. Goldman Sachs used estimates for Suiza GAAP earnings per
share, which were prepared by Suiza's management for calendar year 2001, and
used estimates of IBES, Inc. for earnings per share for calendar years 2002 and
2003, in each case adjusting the earnings assuming the effectiveness of the then
proposed new FASB rules (regarding the non-amortization of goodwill). Goldman
Sachs estimated the pro forma earnings of the combined company for calendar
years 2001, 2002 and 2003, assuming achievement of synergies (net of divestiture
impacts) in calendar years 2001, 2002 and 2003 as estimated by Dean management's
projections and Suiza management's projections, as adjusted by Dean management.
Goldman Sachs estimated the range of possible future stock prices by applying
potential one-year forward price/earnings multiples for the combined
company--ranging from 8.0x to 12.0x--to the estimated earnings per share for the
combined company. Goldman Sachs then applied discount rates ranging from 9.0% to
12.0% to calculate the present value of the future stock price. Goldman Sachs
noted that the implied present value per share to Dean stockholders ranged from
$34.89 to $62.97.
The preparation of a fairness opinion is a complex process which makes it
difficult to provide a partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of each of these analyses in their
totality. No company or transaction used in the above analyses as a comparison
is directly comparable to Dean or Suiza or the proposed merger. The analyses
were prepared solely for purposes of Goldman Sachs' providing its opinion to
Dean's board of directors as to the fairness from a financial point of view of
the per share merger consideration to Dean's stockholders. The analyses are not
appraisals and do not necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts of future results
are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by those analyses. Because
these analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their advisors, none of
Dean,
72
Suiza, Goldman Sachs or any other person assumes responsibility if future
results are materially different from those forecast. As described above,
Goldman Sachs' opinion to Dean's board of directors was one of many factors
taken into consideration by Dean's board of directors in making its
determination to approve the merger agreement and the merger. This summary is
not a complete description of the analysis performed by Goldman Sachs. If you
are a Dean stockholder, you should read the written opinion of Goldman Sachs set
forth in Annex B.
INTEREST OF GOLDMAN SACHS IN THE MERGER
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Dean, having provided certain investment banking services to Dean
from time to time, including having acted as underwriter of public offerings of
$250,000,000 aggregate principal amount of 8.15% Senior Notes due 2007 of Dean,
$200,000,000 aggregate principal amount of 6.625% Senior Notes due 2009 of Dean
and $150,000,000 aggregate principal amount of 6.9% Senior Notes due 2017 of
Dean, having acted as a dealer in Dean's commercial paper. Goldman Sachs also
acted as Dean's financial advisor in connection with, and participated in
certain of the negotiations leading to, the merger agreement, and may provide
investment banking services to Suiza in the future. Goldman Sachs provides a
full range of financial advisory and securities services and, in the course of
its normal trading activities, may from time to time effect transactions and
hold securities, including derivative securities, of Dean or Suiza for its own
account and for the accounts of customers.
Pursuant to a letter agreement dated March 20, 2000, Dean engaged Goldman
Sachs to act as its financial advisor in connection with, among other things, a
possible transaction with Suiza. Pursuant to the terms of the letter agreement,
Dean (1) agreed to pay Goldman Sachs an annual advisory fee of $250,000, payable
on the date of the execution of the letter agreement and on each anniversary of
the date of the letter agreement so long as Dean continued to retain Goldman
Sachs (and paid Goldman Sachs such $250,000 advisory fees in each of March 2000
and March 2001, (2) paid Goldman Sachs when the merger agreement was signed a
fee of $2,500,000, and (3) has agreed to pay Goldman Sachs, when the merger
occurs, a transactional fee equal to 0.725% of the aggregate consideration paid
in the merger, reduced by the $250,000 annual advisory fee paid less than one
year prior to the merger and the $2,500,000 fee previously paid when the merger
agreement was signed. Dean also agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorney's fees, and to indemnify
Goldman Sachs against certain liabilities, including certain liabilities under
the federal securities laws.
OPINIONS OF SUIZA'S FINANCIAL ADVISORS
Pursuant to a letter agreement dated March 19, 2001, Suiza retained Bear
Stearns and Morgan Stanley to act as its financial advisors in connection with
the merger. Suiza's board of directors selected Bear Stearns and Morgan Stanley
to act as Suiza's financial advisors based on each firm's qualifications,
expertise, reputation and knowledge of Suiza's business and affairs. At Suiza's
board of directors meeting on April 4, 2001, Bear Stearns and Morgan Stanley
each provided an oral opinion, subsequently confirmed by each in written
opinions dated April 4, 2001, that, as of that date, and based upon and subject
to the various considerations set forth in the respective opinions, the per
share merger consideration to be paid by Suiza pursuant to the merger agreement
was fair from a financial point of view to Suiza.
THE SEPARATE WRITTEN OPINIONS OF BEAR STEARNS AND MORGAN STANLEY, EACH DATED
APRIL 4, 2001, ARE ATTACHED AS ANNEXES C AND D TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. EACH OPINION SETS FORTH ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
73
UNDERTAKEN BY BEAR STEARNS AND MORGAN STANLEY IN PROVIDING THEIR OPINIONS. THE
WRITTEN OPINIONS OF BEAR STEARNS AND MORGAN STANLEY ARE DIRECTED TO SUIZA'S
BOARD OF DIRECTORS AND ADDRESS ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW
TO SUIZA AS OF THE DATE OF THE OPINIONS OF THE PER SHARE MERGER CONSIDERATION TO
BE PAID BY SUIZA PURSUANT TO THE MERGER AGREEMENT. THE WRITTEN OPINIONS OF BEAR
STEARNS AND MORGAN STANLEY DO NOT ADDRESS ANY OTHER ASPECT OF THE TRANSACTION
AND ARE NOT RECOMMENDATIONS TO SUIZA'S STOCKHOLDERS AS TO HOW TO VOTE AT SUIZA'S
STOCKHOLDER MEETING. THE FOLLOWING INFORMATION ONLY PROVIDES A SUMMARY OF THE
OPINIONS OF BEAR STEARNS AND MORGAN STANLEY AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE OPINIONS. IF YOU ARE A SUIZA STOCKHOLDER, YOU ARE URGED TO
CAREFULLY READ THE ENTIRE OPINIONS IN ANNEXES C AND D.
Neither Bear Stearns' nor Morgan Stanley's opinion addresses the merits of
the underlying business decision by Suiza to engage in the merger and related
transactions. In addition, neither Bear Stearns' nor Morgan Stanley's opinion
addresses the prices at which the Suiza common stock will actually trade at any
time and neither Bear Stearns nor Morgan Stanley expresses any recommendation or
opinion as to how the holders of Suiza common stock should vote at Suiza's
special meeting.
OPINION OF BEAR STEARNS
In connection with providing its opinion, Bear Stearns, among other things:
- reviewed the April 3, 2001 drafts of the merger agreement and the
agreements for the related transactions;
- reviewed Suiza's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the years ended December 31, 1998 through December 31, 2000
and Suiza's Reports on Form 8-K for the three years ended April 4, 2001;
- reviewed certain operating and financial information, including
projections for the five years ended December 21, 2005, provided to it by
Suiza's management relating to Suiza's business and prospects;
- reviewed certain estimates of cost savings and other combination benefits
(referred to below as synergies) expected to result from the merger,
prepared and provided to Bear Stearns by Suiza's management;
- met with certain members of Suiza's senior management to discuss Suiza's
business, operations, historical and projected financial results and
future prospects;
- reviewed Dean's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended May 31, 1998 through May 28, 2000,
its Quarterly Reports on Form 10-Q for the periods ended August 27, 2000
and November 26, 2000 and its Reports on Form 8-K for the three years
ended April 4, 2001;
- reviewed certain forecasts and other internal financial data provided to
Bear Stearns by Dean;
- met with certain members of Dean's senior management to discuss Dean's
business, operations, historical and projected financial results and
future prospects;
- reviewed the historical prices, trading multiples and trading volumes of
the common shares of Suiza and Dean;
- reviewed publicly available financial data, stock market performance data
and trading multiples of companies which it deemed generally comparable to
Suiza and Dean;
- reviewed the terms of recent mergers and acquisitions of companies which
it deemed generally comparable to the merger of Suiza and Dean;
- performed discounted cash flow analyses based on the financial forecasts
for Dean and estimates of the synergies for the combined company furnished
to it by management of Suiza and Dean;
74
- reviewed the pro forma financial results, financial condition and
capitalization of Suiza giving effect to the merger and the related
transactions; and
- conducted such other studies, analyses, inquiries and investigations as
Bear Stearns deemed appropriate.
Bear Stearns relied upon and assumed, with the consent of Suiza's board of
directors and without independent verification, the accuracy and completeness of
the financial and other information, including without limitation the
projections and estimates of the synergies expected to result from the merger,
provided to Bear Stearns by Suiza's management. With respect to the projected
financial results of each of Suiza and Dean and the potential synergies that
could be achieved upon consummation of the merger, Bear Stearns assumed, with
Suiza's consent, that the information provided was reasonably prepared on bases
reflecting the best currently available estimates and judgments of senior
managements of Suiza and Dean as to the expected future performance of Suiza and
Dean. Bear Stearns did not assume any responsibility for the independent
verification of any such information or of the projections and estimates of the
potential synergies provided to it.
In arriving at its opinion, Bear Stearns did not perform or obtain any
independent appraisal of the assets or liabilities (contingent or otherwise) of
Suiza or Dean, nor was it furnished with any such appraisals. Bear Stearns
assumed that:
- the merger will qualify as a tax-free reorganization for federal income
tax purposes;
- the final form of each of the merger agreement and the agreements for the
related transactions would not vary in any respect material to its
analysis of the last drafts provided to it; and
- the merger and the related transactions would each be consummated in a
timely manner and in accordance with the terms of the merger agreement and
agreements for the related transactions, in each case, without any
regulatory limitations, restrictions, conditions, amendments or
modifications that collectively would have a material adverse effect on
Suiza or Dean or the contemplated benefits of the merger.
OPINION OF MORGAN STANLEY
In connection with providing its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of Suiza and Dean;
- reviewed certain internal financial statements and other financial and
operating data concerning Suiza and Dean prepared by Suiza's and Dean's
managements;
- discussed the past and current operations and financial condition and the
prospects of Suiza, including information relating to certain strategic,
financial and operational benefits anticipated from the merger, with
senior executives of Suiza;
- discussed the past and current operations and financial condition and the
prospects of Dean with senior executives of Dean;
- discussed and reviewed certain financial projections for Suiza, prepared
by Suiza's management, and for Dean, prepared by Dean's management;
- reviewed information relating to certain strategic, financial and
operational benefits anticipated from the merger prepared by the
management of Suiza;
- reviewed the pro forma impact of the merger on the earnings and
capitalization ratios of Suiza;
75
- reviewed the reported prices and trading activity for Suiza common stock
and Dean common stock;
- compared the financial performance of Suiza and Dean and the prices and
trading activity of Suiza common stock and Dean common stock with those of
certain other publicly traded companies and their securities;
- reviewed the financial terms, to the extent publicly available, of certain
comparable transactions;
- participated in certain discussions and negotiations among representatives
of Suiza and Dean and their financial and legal advisors;
- reviewed the merger agreement, the agreements for the related transactions
and certain related agreements; and
- performed other studies and analyses and considered other factors that
Morgan Stanley deemed appropriate.
Morgan Stanley assumed and relied upon, without independent verification,
the accuracy and completeness of the information reviewed by it for the purposes
of its opinion. In relying on the financial statements and the other financial
and operating data provided by Suiza and Dean, including financial projections
and information relating to certain strategic, financial and operational
benefits anticipated from the merger, Morgan Stanley assumed, with Suiza's
consent, that the information provided was reasonably prepared on bases
reflecting the best currently available estimates and judgments of the prospects
of Suiza and Dean, respectively. Morgan Stanley did not make any independent
valuation or appraisal of the assets or liabilities of Suiza or Dean, nor was
Morgan Stanley furnished with any such appraisals. Morgan Stanley's opinion was
necessarily based on financial, economic, market and other conditions in effect
on, and the information made available to Morgan Stanley as of, April 4, 2001.
Morgan Stanley assumed, with Suiza's consent, that the merger and the
related transactions would be consummated in a timely manner and in accordance
with the terms set forth in the merger agreement and the agreements for the
related transactions, and that obtaining all necessary regulatory approvals for
the merger and the related transactions would not have a materially adverse
effect on Suiza or Dean or the contemplated benefits of the merger. Morgan
Stanley also assumed that the merger would qualify as a tax-free reorganization
for U.S. federal income tax purposes.
PRESENTATION TO SUIZA'S BOARD OF DIRECTORS
THE FOLLOWING IS A SUMMARY OF THE MATERIAL FINANCIAL ANALYSES JOINTLY
PERFORMED BY BEAR STEARNS AND MORGAN STANLEY AND JOINTLY PRESENTED TO SUIZA'S
BOARD OF DIRECTORS ON APRIL 4, 2001, IN CONNECTION WITH THE RENDERING OF THE
ORAL AND WRITTEN OPINIONS OF BEAR STEARNS AND MORGAN STANLEY. BEAR STEARNS AND
MORGAN STANLEY JOINTLY PREPARED THE PRESENTATION MADE TO SUIZA'S BOARD OF
DIRECTORS AND EACH OF THEM RELIED ON THE ANALYSES INCLUDED IN THE PRESENTATION
IN RENDERING THEIR OPINIONS.
While the following summaries describe the material analyses and factors
reviewed by Bear Stearns and Morgan Stanley for their opinions, the descriptions
are not intended to be a comprehensive description of all the analyses performed
and factors considered by Bear Stearns and Morgan Stanley in arriving at their
opinions. The preparation of a fairness opinion is a complex process involving
the application of subjective business judgment in determining the most
appropriate and relevant methods of financial analysis and, therefore, is not
necessarily susceptible to partial analysis or summary description. In arriving
at their opinions, Bear Stearns and Morgan Stanley considered the results of all
of their analyses as a whole. Furthermore, Bear Stearns and Morgan Stanley
believe that selecting any portion of their analyses, without considering all
analyses, would create an incomplete view of the processes underlying their
opinions. In addition, Bear Stearns and Morgan Stanley may have given
76
various analyses and factors more or less weight than other analyses and factors
and may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described below should not be taken to be the views of either Bear
Stearns or Morgan Stanley of the actual value of Suiza or Dean.
Some of these summaries of financial analyses include information presented
in tabular format. In order to understand fully the financial analyses used by
Bear Stearns and Morgan Stanley, the tables must be read together with the text
of each summary. The tables alone do not constitute a complete description of
the financial analyses.
HISTORICAL PUBLIC MARKET TRADING VALUE. Bear Stearns and Morgan Stanley
reviewed the recent stock price performance of Suiza and Dean based on an
analysis of the historical closing prices and trading volumes for the period
beginning April 5, 1999, and ending April 3, 2001, each as reported on the New
York Stock Exchange. The following table lists the low and high daily closing
prices of shares of Suiza common stock and Dean common stock for this period.
HISTORICAL
COMMON STOCK
PRICES
-------------------
LOW HIGH
-------- --------
Suiza....................................................... $29.88 $52.06
Dean........................................................ 23.94 46.25
COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS. Bear Stearns and Morgan
Stanley compared financial information of Suiza and Dean with financial
information for nine publicly traded companies which Bear Stearns and Morgan
Stanley deemed generally comparable to Suiza and Dean. The companies included
the following three baking companies and six commodity food companies:
BAKING COMPANIES COMMODITY FOOD COMPANIES
------------------------------------- -------------------------------------
Earthgrains Company Del Monte Foods Company
Flowers Foods, Inc. Dole Food Company, Inc.
Interstate Bakeries Corp. Fresh Del Monte Produce, Inc.
Pilgrim's Pride Corp.
Smithfield Foods, Inc.
Tyson Foods, Inc.
Bear Stearns and Morgan Stanley analyzed, among other things, the current
enterprise value (i.e., market value of equity adjusted for capital structure)
of each company expressed as a multiple of last twelve months (LTM) earnings
before expenses for interest, taxes, depreciation and amortization (EBITDA), and
the market price per share of each company's common stock on April 3, 2001,
expressed as a multiple of estimated calendar year 2001 net earnings per share.
As of April 3, 2001, and based on estimates of net earnings per share taken from
securities research analysts, in the case of the comparable publicly traded
companies, and from financial projections prepared by Suiza's management, in the
case of Suiza and Dean, the statistics for Suiza, Dean and the comparable
publicly-traded companies are set forth below:
BAKING COMPANIES
------------------------------------------
HARMONIC
SUIZA DEAN LOW HIGH MEDIAN MEAN(1)
-------- -------- -------- -------- -------- ---------
LTM EBITDA Multiple......................... 6.5x 5.9x 5.3x 8.7x 7.1x 6.8x
2001 Net Earnings Per Share Multiple........ 10.9x 13.9x 11.0x 22.5x 16.3x 15.2x
COMMODITY FOOD COMPANIES
------------------------------------------
HARMONIC
LOW HIGH MEDIAN MEAN(1)
-------- -------- -------- ---------
LTM EBITDA Multiple......................... 6.0x 6.8x 6.4x 6.4x
2001 Net Earnings Per Share Multiple........ 7.4x 17.2x 9.6x 9.8x
------------------------------
(1) Harmonic mean is calculated by taking the reciprocal of the arithmetic mean
of the reciprocals of the applicable multiples and is used to give equal
investment weight to each of the comparable companies.
77
No company used in the comparable publicly traded companies analysis is
identical to Suiza or Dean. In evaluating the comparable publicly traded
companies analysis, Bear Stearns and Morgan Stanley made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Suiza and Dean. These other matters include the impact of competition
on Suiza, Dean and the comparable companies and the industries in which they are
principally engaged, such industries' growth and the absence of any material
adverse change in the financial condition and prospects of Suiza, Dean or the
comparable companies or the industries in which they are principally engaged or
in the financial markets in general.
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. As part of their analyses,
Bear Stearns and Morgan Stanley reviewed publicly available information
regarding the following nine transactions since 1997 involving companies which
operate in the dairy industry:
DATE ACQUIROR TARGET
-------------- ---------------------------------------------------- ---------------------------------
December 2000 Vestar Capital Partners, L.P. Michael Foods, Inc.
and Goldner Hawn, Johnson & Morrison Incorporated
September 2000 Dean Foods Company Land O' Lakes, Inc.
September 1999 Suiza Foods Corporation Southern Foods Group, L.P.
April 1999 Parmalat Finanziaria SpA Farmland Dairies, Inc.
March 1999 Unigate PLC Terranova Foods PLC
February 1999 Parmalat Finanziaria SpA Cirio SpA
July 1998 ConAgra, Inc. Nabisco, Inc.
(tablespreads and egg-substitutes
businesses)
May 1998 Parmalat Finanziaria SpA Pauls Ltd.
November 1997 Saputo Group Inc. Stella Foods, Inc.
For each of these transactions, Bear Stearns and Morgan Stanley reviewed the
prices paid and analyzed the implied enterprise value of the acquired company as
a multiple of LTM EBITDA. This analysis indicated multiples ranging from 5.9x to
9.0x LTM EBITDA for these transactions, with a median multiple of 7.9x and a
harmonic mean of 7.7x. Bear Stearns and Morgan Stanley also analyzed the
enterprise value as a multiple of LTM EBITDA for Dean implied by the per share
merger consideration. Based on EBITDA for Dean for the LTM period ended
February 28, 2001, as adjusted by Suiza management, the per share merger
consideration implied a multiple of 6.9x, based on a closing share price for
Suiza of $46.39 on April 3, 2001.
No transaction used in the analysis of selected precedent transactions is
identical to the merger. In evaluating these transactions, Bear Stearns and
Morgan Stanley made judgments and assumptions with regard to industry
performance, business, economic, market and financial conditions an other
matters, many of which are beyond the control of Suiza and Dean. These other
matters include the impact of competition on Suiza, Dean, or the companies
involved in the precedent transactions and the industries in which they are
principally engaged, such industries' growth and the absence of any material
adverse change in the financial condition and prospects of Suiza, Dean or the
companies involved in the precedent transactions or the industries in which they
are principally engaged or in the financial markets in general.
DISCOUNTED CASH FLOW ANALYSIS. Bear Stearns and Morgan Stanley performed a
discounted cash flow analysis of Dean using a financial forecast for Dean
prepared by Dean's management as adjusted
78
and projected by Suiza. Bear Stearns and Morgan Stanley calculated Dean's
discounted cash flow value by using discount rates ranging from 7.5% to 9.0% and
terminal values based on perpetual annual growth rates for unlevered free cash
flow of 0.5% to 1.5%. This analysis yielded a range of per share values for Dean
common stock of $32.75 to $51.50.
SECURITIES RESEARCH ANALYSTS' DISCOUNTED PRICE TARGETS FOR SUIZA COMMON
STOCK. Bear Stearns and Morgan Stanley reviewed and analyzed future public
market trading price targets for Suiza common stock prepared and published by
securities research analysts during the period from February 15, 2001, to
March 9, 2001. These targets reflected each research analyst's estimate of the
future public market trading price of Suiza common stock at the end of the
particular time period considered for each estimate. Using a discount rate of
10.5%, Suiza's cost of equity as estimated using the capital asset pricing
model, Bear Stearns and Morgan Stanley discounted these estimates to April 3,
2001 to arrive at a range of present values of these targets of $45 to $59 per
Suiza common share.
Bear Stearns and Morgan Stanley noted that the public market trading prices
published by the securities research analysts do not reflect current market
trading prices for Suiza common stock and that these estimates are subject to
uncertainties, including the future financial performance of Suiza and future
financial market conditions.
PRO FORMA ANALYSIS OF THE TRANSACTION. Bear Stearns and Morgan Stanley
analyzed the impact of the merger, pro forma as if the merger closed on
January 1, 2001, on Suiza and observed that, based on financial projections for
Suiza and estimates of synergies, each as prepared by Suiza's management, and on
a financial forecast for Dean prepared by Dean's management as adjusted and
projected by Suiza's management, the transaction would result in accretion to
cash earnings per share for Suiza stockholders in calendar year 2001 and
accretion to current GAAP earnings per share for Suiza stockholders in calendar
year 2002. Bear Stearns and Morgan Stanley also noted that the pro forma
analysis suggested that the transaction would result in a more leveraged capital
structure for Suiza.
In performing their analyses, Bear Stearns and Morgan Stanley made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of Suiza or
Dean. Any estimates contained in the financial advisors' analyses are not
necessarily indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by the estimates.
These analyses were prepared solely as part of the analyses of Bear Stearns and
Morgan Stanley of the fairness to Suiza from a financial point of view of the
per share merger consideration to be paid by Suiza and were conducted in
connection with the delivery of the opinions of Bear Stearns and Morgan Stanley
to Suiza's board of directors.
The per share merger consideration to be paid by Suiza and other terms of
the merger were determined through arm's-length negotiations between Suiza and
Dean and were approved by Suiza's board of directors. Bear Stearns and Morgan
Stanley provided advice to Suiza during the negotiations; however, neither Bear
Stearns nor Morgan Stanley recommended any specific merger consideration to
Suiza or that any given merger consideration constituted the only appropriate
consideration for the merger. As described above, the opinions of Bear Stearns
and Morgan Stanley were among many factors taken into consideration by Suiza's
board of directors in making its decision to approve the merger and related
transactions. Consequently, the analyses of Bear Stearns and Morgan Stanley as
described above should not be viewed as determinative of whether Suiza's board
of directors would have been willing to agree to a different amount or form of
merger consideration to be paid by Suiza in connection with the merger.
INTERESTS OF BEAR STEARNS AND MORGAN STANLEY IN THE MERGER
Each of Bear Stearns and Morgan Stanley is an internationally recognized
investment banking and advisory firm. Each of Bear Stearns and Morgan Stanley,
as part of its investment banking and financial advisory businesses, is
continuously engaged in the valuation of businesses and securities in
79
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
Bear Stearns previously has been engaged by Suiza to provide certain
investment banking and financial advisory services for which Bear Stearns
received customary fees. In the ordinary course of business, Bear Stearns may
actively trade the equity and debt securities of Suiza and Dean for its own
account and for the account of its customers and, accordingly, may at any time
hold a long or short position in such securities.
In the ordinary course of business, Morgan Stanley and its affiliates may
from time to time trade in the securities or indebtedness of Suiza or Dean for
its own account, the accounts of investment funds and other clients under the
management of Morgan Stanley and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities or
indebtedness. In the past, Morgan Stanley and its affiliates have provided
financial advisory and financing services for Dean and have received fees for
the rendering of these services.
Pursuant to their engagement letter with Suiza, Bear Stearns and Morgan
Stanley provided financial advisory services and financial fairness opinions to
Suiza in connection with the merger and Suiza agreed to pay an aggregate fee of
$12 million to Bear Stearns and Morgan Stanley in respect of the services
provided. A substantial portion of this fee is contingent on successful
consummation of the merger. Suiza has also agreed to reimburse Bear Stearns and
Morgan Stanley for their expenses incurred in performing their services. In
addition, Suiza has agreed to indemnify each of Bear Stearns and Morgan Stanley
and their affiliates, their respective directors, officers, agents and employees
and each person, if any, controlling Bear Stearns or Morgan Stanley or any of
their affiliates against certain liabilities and expenses, including certain
liabilities under the federal securities laws, related to or arising out of the
engagement of Bear Stearns and Morgan Stanley.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of Dean's board of directors with respect
to the merger, you should be aware that certain members of the management and
the board of directors of Dean have interests in the merger that may be
different from, or in addition to, the interests of the other stockholders of
Dean.
Agreements between Dean and its directors, officers and employees described
below provide that if Dean's stockholders approve the merger, the stock option,
stock award or other benefit provided in such agreement will vest, and the
director, officer or employee will have the right to receive certain cash and
stock awards and/or the right to receive certain payments if their employment is
terminated, as provided in these agreements. Dean expects to amend such
agreements to provide that such persons will only receive those benefits if the
merger occurs. The description of the agreements below assumes that such
amendments have been made.
In certain cases, if the payments or other benefits described below, either
alone or together with other benefits, would constitute a "parachute payment"
under Section 280G of the Internal Revenue Code of 1986, the combined company
will be required to reimburse the employee receiving the payment or other
benefit for the Federal excise taxes that are imposed on those payments or other
benefits plus the additional taxes due on the reimbursement. Reimbursements for
these potential amounts to 18 of Dean's officers could approximate $6 million.
TERMINATION AND CHANGE IN CONTROL BENEFITS
Dean is a party to agreements with 18 of its officers which provide that in
the event the officer's employment is terminated within two years after a
"change in control" of Dean, other than at
80
retirement after the officer's "normal retirement date," a termination for "good
cause," death, or being permanently disabled for six months, the officer will be
paid certain guaranteed amounts. These guaranteed amounts are also payable if
the officer voluntarily terminates employment within the 60-day period that
begins on the first anniversary of the merger. The guaranteed payments include
all salary and accrued vacation through the date of termination, incentive
compensation accrued but not yet paid for the preceding year, prorated incentive
compensation for the current year, and two times the officer's base salary and
annual incentive bonus, plus the cost of financial planning and tax preparation
services for the most recent year. In addition, during the two years following
such termination (or any lesser period until the executive's death, disability
or normal retirement date), the combined company will continue all health,
dental, life, accident and disability coverage for the officer, or will arrange
for substantially the same benefits for the officer. The coverage described in
the preceding sentence is in each case subject to offset for any substantially
similar benefits provided by a new employer. The officer will also be provided
certain outplacement services.
As a result of a change in control, Dean's officers will also be entitled to
an enhancement of their pension benefits under both the Salaried Employees
Pension Plan and the Supplemental Benefit Plan. The additional pension benefit
is determined by including the additional compensation payable pursuant to the
change in control agreements and an additional two years of service. For
18 Dean officers, the aggregate value of pension enhancement due to a change in
control is approximately $1.5 million. Dean also agreed to reimburse the
executive for legal fees and expenses incurred by any of these officers in
enforcing any right or benefit provided by the change in control agreements.
For purposes of these agreements, the completion of the merger will
constitute a "change in control" of Dean, entitling the officers to the benefits
under the agreements, and the combined company will assume the obligation to pay
these benefits. If all of the payments are triggered, the total cash payment,
excluding tax reimbursements, would be approximately $15 million.
DEAN'S STOCK OPTIONS AND PERFORMANCE AWARDS
1989 STOCK AWARDS PLAN
Under Dean's 1989 Stock Awards Plan, certain of Dean's officers and certain
employees have been granted incentive options or non-qualified options to
purchase shares of Dean common stock at the market value of the common stock on
the date of grant, stock appreciation rights and/or restricted Dean common
stock, and other performance awards. As of August 10, 2001, options to purchase
3,387,320 shares of Dean common stock (which will automatically convert into
options to purchase Suiza stock as described under "The Merger and the Merger
Agreement--Treatment of Dean Stock Options and Other Equity Interests" on
page 49) are held by Dean officers and employees pursuant to this plan. When
granted, the options became exercisable either 25% or 33 1/3% per year,
commencing one year after the grant. As of August 10, 2001, options to purchase
1,045,754 shares of Dean's stock (which will automatically convert into options
to purchase Suiza stock as described under "The Merger and the Merger
Agreement--Treatment of Dean Stock Options and Other Equity Interests" on
page 50) are not exercisable. When the merger occurs, all of the options that
are not currently exercisable will become exercisable. All options not exercised
before the merger will be converted into options to acquire Suiza common stock.
Eighteen of Dean's key employees are covered by performance awards
agreements issued under the 1989 Stock Awards Plan pursuant to which they are
entitled to cash payments if Dean's earnings per share meets certain performance
levels. If Dean's earnings per share are less than the target, the employee may
be entitled to a smaller payment, and if Dean's earnings per share exceed the
target, the employee is entitled to a larger payment up to a maximum of 200% of
the award that would be paid had the earnings per share met or exceeded the
target. If the merger occurs, all awards that were granted as of June 1, 2000
will be vested and the employees' performance goals will automatically be
81
considered to be satisfied at the 100% level in calculating the amount of the
award. The award will be payable in cash or in shares of Suiza's stock, at the
election of the employee, subject to the same conversion formula that applies to
all other stock-based awards under Dean's 1989 Stock Awards Plan. See "The
Merger and the Merger Agreement--Treatment of Dean Stock Options and Other
Equity Interests" on page 50. If each of these employees elects to receive cash,
the total payments to employees would be approximately $4.0 million. If any
employee elects to receive Suiza shares, he or she will receive 115% of the
number of shares that his or her cash award otherwise would have purchased.
Shares will not be distributed to the employee until one year after the date the
merger occurs.
1992 AND 1996 DIRECTOR STOCK AWARDS PLANS
Under Dean's 1992 and 1996 Director Stock Awards Plans, the non-employee
members of Dean's board of directors have been granted non-qualified options to
purchase shares of Dean common stock at the market value on the date of grant,
stock appreciation rights and/or restricted Dean common stock. As of August 10,
2001, options to purchase 143,500 shares of Dean's stock (which will
automatically convert into options to purchase Suiza stock as described under
"The Merger and the Merger Agreement--Treatment of Dean Stock Options and Other
Equity Interests" on page 49) are held by Dean directors pursuant to these
plans. When granted, the options became exercisable either 25% or 33 1/3% per
year, commencing one year after the grant. As of August 10, 2001, options to
purchase 36,090 shares of Dean's stock (which will automatically convert into
options to purchase Suiza stock as described under "The Merger and the Merger
Agreement--Treatment of Dean Stock Options and Other Equity Interests" on
page 50) are not exercisable. When the merger occurs, all of the options that
are not currently exercisable will become exercisable. All options not exercised
before the merger will be converted into options to purchase Suiza stock,
subject to the same conversion formula that applies to all other stock-based
awards under Dean's 1989 Stock Awards Plan. See "The Merger and the Merger
Agreement--Treatment of Dean Stock Options and Other Equity Interests" on
page 50. A director may, in lieu of exercising the option, surrender it to the
combined company in return for a cash payment equal to (1) the highest fair
market value of Dean stock during the thirty days preceding or succeeding the
completion of the merger less (2) the exercise price of the option.
DEFERRED COMPENSATION PLANS
Under Dean's Deferred Compensation Plan and Directors Deferred Compensation
Plan, certain key employees and directors have elected to defer a portion of
their compensation until after termination of their employment. Deferrals earn
interest at a guaranteed rate. Participants under the Directors Deferred
Compensation Plan can elect to have their deferrals earn interest at a rate
equal to the total annual return on Dean's common stock. If a change in control
occurs, the committee that administers the plan may elect to pay the deferred
compensation to the participants.
SUPPLEMENTAL BENEFIT PLAN
The Dean Supplemental Benefit Plan provides retirement benefits in excess of
the benefits payable under the Dean pension and savings plans for approximately
65 employees. The benefit amount payable under the Supplemental Benefit Plan is
equal to the sum of (1) the matching and profit sharing contributions that would
have been made to the savings plan but for the compensation limitations
applicable to the savings plan under the Internal Revenue Code, and (2) the
benefit that the employees cannot receive under the pension plan because of the
compensation and benefit limitations of the Internal Revenue Code. Individuals
who were officers of Dean as of October 1, 1996 are entitled to some minimum
benefit guarantees. Immediately prior to a change in control, Dean will be
required to establish a trust, commonly called a rabbi trust, and to pay
approximately $14 million to such trust,
82
which represents the projected value of the benefits previously earned under the
Supplemental Benefit Plan.
MERGER SEVERANCE PLAN
Each Dean employee at the Rosemont, Franklin Park and Rockford, Illinois
facilities will be entitled to benefits under the Merger Severance Plan if
within one year after the merger (1) the employee is involuntarily terminated
other than for cause or as a result of disability, (2) his or her compensation
is reduced, or (3) the employee declines a relocation of greater than 50 miles
from his or her current place of employment. The amount of severance required to
be paid varies based on the job classification and years of service of the
employee. Option-eligible employees and above are entitled to 2 weeks of pay for
each year of service with a minimum of 26 weeks and a maximum of 52 weeks and a
prorated bonus payment. Bonus-eligible employees are entitled to 1.5 weeks of
pay for each year of service with a minimum of 21 weeks and a maximum of 52
weeks and a prorated bonus payment. Non-bonus-level "exempt employees" are
entitled to 1.5 weeks of pay for each year of service with a minimum of 17 weeks
and a maximum of 52 weeks. "Nonexempt" and hourly employees are entitled to 1
week of pay for each year of service with a minimum of 13 weeks and a maximum of
26 weeks. Health, dental and life insurance benefits will continue during the
severance period and the combined company will be obligated to provide limited
outplacement assistance and pay for unused vacation time.
DEAN DISCRETIONARY STAY BONUS POOL
Dean has established a plan under which it will pay up to $5.0 million in
bonuses to approximately 180 employees who remain in the employ of the combined
company for four months following the merger, unless such employee is terminated
prior to such date. If the merger agreement is terminated, the stay bonuses will
be paid to the eligible employees who are employed by Dean at the time the
agreement is terminated.
DEAN RESIGNATION AND RETIREMENT PAYMENTS
Dean has agreed to make various payments and provide certain continuing
benefits to Richard E. Bailey, its former President and Chief Operating Officer,
in connection with his resignation, including the value of continuing life,
health and dental insurance, outplacement services and financial counseling
services. Of these payment and benefit amounts, $1.35 million is contingent upon
the closing of the merger. In addition, Mr. Bailey's outstanding stock options
became immediately exercisable on April 30, 2001.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The combined company is obligated, for six years after the merger, to
maintain in effect Dean's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the time the merger occurs, with
the limitation that the combined company is not required to expend on annual
premiums for this insurance more than twice the amount of the annual premiums
paid by Dean prior to the merger.
The combined company is obligated, to the fullest extent permitted by law,
to indemnify and hold harmless, and provide advancement of expenses to, each
person who is or has been an officer or director of Dean with respect to acts or
omissions by them in their capacities as officers, directors or employees of
Dean or taken at the request of Dean at any time on or prior to the effective
time of the merger, including for acts and omissions occurring in connection
with the approval of the merger agreement and the merger.
83
SUIZA'S OPTION PLAN PROPOSALS
REASONS FOR THE OPTION PLAN PROPOSALS
Suiza believes that granting stock options to its key employees and
directors is an effective way to:
- attract and retain the best available personnel for positions of
substantial responsibility; and
- align the interests of its key employees and directors with those of
Suiza's stockholders.
Suiza believes that when its employees and directors own stock in the
company, they are motivated to promote the company's success. Therefore, a
significant portion of Suiza's key employees' overall compensation consists of
stock options.
As a result of the significant number of additional employees that the
combined company will have after the merger occurs, the number of shares
currently available for issuance under Suiza's stock option plan will be
insufficient to meet the combined company's needs after the merger to
effectively create incentives for management of the larger company.
Therefore, Suiza proposes, if the merger occurs, to adopt Dean's Stock
Awards Plan and to increase the number of shares reserved for issuance under
Suiza's existing plan.
PROPOSAL TO ADOPT DEAN'S STOCK AWARDS PLAN
In connection with the merger, a number of shares of Suiza's common stock
will be reserved for issuance pursuant to stock-based awards outstanding at the
time of the merger under Dean's 1989 Stock Awards Plan (which will automatically
convert into options to purchase Suiza stock as described under "The Merger and
the Merger Agreement--Treatment of Dean Stock Options and Other Equity
Interests" on page 50). In addition, Suiza proposes to adopt Dean's 1989 Stock
Awards Plan, and reserve an additional 1,894,864 shares of Suiza's common stock
(which amount will increase by the amount of outstanding options that expire or
are terminated and that may be reissued under the terms of the plan) for
issuance under the plan after the merger occurs.
If the proposal is approved, Suiza will amend Dean's plan to provide that:
- directors and key employees of Suiza and each of Suiza's affiliated
companies, including Dean, will be eligible for grants under the plan;
- non-employee directors will only be eligible for grants of nonqualified
stock options, restricted stock and stock appreciation rights (SARs) under
the plan;
- stock-based awards granted under the plan will relate to the stock of
Suiza rather than Dean; and
- the limitation in Dean's plan that prevents Dean from issuing options to
purchase more than 500,000 shares in a 10-year period to any one employee
will not apply after the merger occurs.
The following is a brief summary of some of the terms of the plan, as
expected to be amended. The full plan, as it will be amended and restated, is
attached as Annex F to this joint proxy statement/ prospectus.
ABOUT THE DEAN STOCK AWARDS PLAN
- The Stock Option Committee of Suiza's board of directors will administer
the plan. That committee is made up of only non-employee directors.
- The Stock Option Committee may amend or discontinue the plan at any time
subject to certain restrictions in the plan. Stockholder approval is
required for some amendments, as required by
84
the Internal Revenue Code and stock exchange rules. No amendment may
adversely affect any previously granted option or other award, unless the
holder of the award consents. No incentive stock options may be granted
under the plan after July 24, 2007.
- From time to time Suiza's Chief Executive Officer will recommend to the
Stock Option Committee persons he believes should receive grants under the
plan. The committee will consider, but need not accept, the Chief
Executive Officer's recommendations.
- The plan will be amended to allow for grants of stock options (incentive
or nonqualified), restricted stock, SARs, performance share awards, and
other awards authorized by the plan to key employees of Suiza (including
employees who are directors) and its subsidiaries, including Dean and its
subsidiaries, and grants of nonqualified stock options, restricted stock
and SARs to non-employee directors. As of August 10, 2001 there were
approximately 430 holders of options, restricted stock, SARs, and
performance share awards under the plan.
- The Stock Option Committee decides the terms of all grants and awards
under the plan. However, incentive stock options must comply with certain
requirements imposed by the Internal Revenue Code, including that the
exercise price may not be less than the fair market value of the common
stock on the grant date, and the term may not exceed 10 years.
- Option exercise prices may be paid in cash or in shares of Suiza common
stock or a combination of cash and shares.
- The plan was originally adopted in 1989, and amended in each of 1994, 1997
and 1999.
- SARS. The Stock Option Committee may grant SARs to employees or
non-employee directors in connection with or instead of an option. An
employee or director who receives an SAR will receive on exercise the
excess of the fair market value of a specified number of shares at the
time of exercise over a specified price for such stock. The Stock Option
Committee will decide whether to pay the amount in shares, cash or a
combination of cash and shares, and may take into account any preference
expressed by the holder of the SAR. The Stock Option Committee may also
grant SARs as an alternative to a previously or contemporaneously granted
option. In this case, the optionee will have a right to receive the excess
of the fair market value of the shares the optionee would have purchased
by exercising the option over the option price. The option is cancelled to
the extent the SAR is exercised and the SAR is cancelled to the extent the
option is exercised.
- PERFORMANCE SHARES AWARDS. The Stock Option Committee may grant
performance shares awards that will give an employee the right to receive
payments based on whether performance goals are achieved during a period
of at least one fiscal year determined by the committee. The payments may
be in cash, shares, or a combination of cash or shares. The Stock Option
Committee will set performance goals, which are tied to one or more
financial performance criteria including return on invested capital, total
stockholder return (i.e., appreciation in the market price of Suiza common
stock plus dividends paid), return on stockholders' equity and/or earnings
per share. The committee will also adopt a formula that will establish a
range between a minimum level of achievement that must be attained before
any amount will be paid, and a maximum level of achievement that will
result in a maximum payment. No recipient of a performance shares award
has any rights as a stockholder until certificates representing any shares
earned under the award are issued to the recipient. The committee may
impose restrictions on the transfer of shares issued pursuant to such
awards. Except as otherwise provided by the committee, on a termination of
employment during the performance measurement period, the performance
shares award is forfeited by the employee.
- OTHER AWARDS. The Stock Option Committee may grant other awards under the
plan, either alone or in addition to options, SARs, restricted stock and
performance shares awards. These
85
may include convertible securities and other forms of award measured in
whole or in part by the value of shares, the performance of the employee
or the performance of Suiza or any affiliate. Such awards may be payable
in shares, cash or a combination of cash and shares. The Stock Option
Committee determines the numbers of shares to be awarded pursuant to such
awards and all other conditions of the awards. In the case of awards
involving the right to purchase shares, the purchase price may not be less
than 85% of the fair market value of such shares at the time the award is
granted and not less than the par value of such stock.
- SUPPLEMENTAL CASH PAYMENTS. A non-qualified option or SAR agreement may
provide that on exercise Suiza will make a cash payment to the holder of
such non-qualified option or SAR based on a formula designed to reimburse
the individual for any income tax liability resulting from such exercise.
- Shares subject to options, restricted stock, SARs or performance shares
award, or other award grants that are cancelled or forfeited become
immediately available for re-issuance.
See Annex G to this joint proxy statement/prospectus for tax information
about the plan.
PROPOSAL TO INCREASE SUIZA'S EXISTING OPTION PLAN
In addition to adopting Dean's plan, Suiza also proposes to increase the
number of shares reserved for issuance under its existing option plan from
7.5 million to 12.5 million. Suiza's board of directors believes that both of
these actions are necessary to ensure that the combined company has a sufficient
pool of options and other stock awards to incent its expanded ranks of key
employees after the merger.
ABOUT SUIZA'S STOCK OPTION PLAN
- As of August 10, 2001 there were 4,774,758 shares issuable under
outstanding awards and 1,761,045 shares remaining available for issuance
pursuant to Suiza's existing plan.
- Suiza's stock option plan is administered by the Stock Option Committee of
Suiza's board of directors. That committee is made up of only non-employee
directors.
- The plan does not have a fixed termination date. However, the Stock Option
Committee may amend or discontinue the plan at any time subject to certain
restrictions in the plan. Stockholder approval is required for some
amendments, to the extent required by the Internal Revenue Code and stock
exchange requirements. No amendment may adversely affect any previously
granted option or restricted stock award, unless the holder of the award
consents.
- From time to time Suiza's Chief Executive Officer will recommend to the
Stock Option Committee persons he believes should receive grants under the
plan. The committee will consider, but need not accept, the Chief
Executive Officer's recommendations.
- The plan allows for grants of stock options (incentive or nonqualified)
and restricted stock to certain directors, key employees and consultants
of Suiza. Suiza currently has approximately 500 holders of options or
restricted stock under the plan.
- Each non-employee director, including members of the Stock Option
Committee, automatically receives nonqualified options to purchase 7,500
shares of common stock on June 30 of each year of his term. Those options
are immediately exercisable and have an exercise price equal to the
closing market price of Suiza's common stock on the date of the grant.
- Suiza's non-employee directors may elect to receive their annual fee in
shares of restricted stock rather than in cash. Shares issued as fees are
issued under the plan. Suiza's officers and key employees are also
eligible to receive grants of restricted stock. No more than 75,000 shares
of restricted stock may be issued under the plan.
86
- The plan was amended effective April 1, 1999 to prohibit re-pricing of
options without approval of Suiza's stockholders. Suiza has never
re-priced its stock options.
- The Stock Option Committee decides the terms of all grants and awards
under the plan. However, incentive stock options must comply with certain
requirements imposed by the Internal Revenue Code, including that the
exercise price may not be less than the fair market value of Suiza's
common stock on the grant date, and the term may not exceed 10 years.
- Option exercise prices may be paid in cash or, at Suiza's option, in
shares of Suiza's common stock in which case the exercise must be
completed in a brokered transaction.
- If an option holder dies or becomes disabled, all of his or her vested
options may be exercised any time within 1 year (or the remaining term of
the option, if less). If a person ceases to be employed by Suiza for any
reason, other than death or retirement, he or she must exercise any vested
options within 60 days.
- If an option holder retires, any unvested options held by such holder will
automatically vest, if such person has reached the age of 65. Such vested
options may be exercised at any time prior to the 10th anniversary of the
grant date.
- Shares subject to options or restricted stock grants that are cancelled or
forfeited become immediately available for re-issuance.
- The plan was adopted by Suiza's board of directors in February 1997 and
approved by Suiza's stockholders in 1997. The number of shares reserved
for issuance under the plan was increased in November 1997, May 1998,
May 1999 and May 2000.
In considering your vote, please remember that Suiza's officers and
directors are eligible for grants and awards under the plan. You should also
note that, if the merger occurs and Suiza's stockholders pass both option plan
proposals, a total of 8,655,909 shares of Suiza common stock will be available
for issuance under all of Suiza's stock option and stock award plans after the
merger.
See Annex H to this joint proxy statement/prospectus for tax information
about Suiza's stock option plan.
RECOMMENDATION OF SUIZA'S BOARD OF DIRECTORS
Suiza's board of directors has adopted and unanimously approved both of the
option plan proposals, and recommends that Suiza's stockholders vote "FOR" both
of these proposals.
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INFORMATION ABOUT THE MEETINGS AND VOTING
Suiza's board of directors is using this joint proxy statement/prospectus to
solicit proxies from Suiza's stockholders for the Suiza stockholder meeting.
Dean's board of directors is also using this document to solicit proxies from
Dean's stockholders for use at the Dean stockholder meeting. We are first
mailing this joint proxy statement/prospectus and accompanying form of proxy to
Suiza's and Dean's stockholders on or about August 15, 2001.
MATTERS RELATING TO THE STOCKHOLDER MEETINGS
SUIZA MEETING DEAN MEETING
TIME AND PLACE: Friday, September 21, 2001 Friday, September 14, 2001
10:00 A.M., Central Time 9:00 A.M., Central Time
Hotel Crescent Court O'Hare International
400 Crescent Court Center Auditorium
Dallas, Texas 75201 10275 West Higgins Road
Rosemont, Illinois, 60018
Dallas, Texas Chicago, Illinois
PURPOSE OF MEETING: To vote on the following items: To vote on the following items:
- a proposal to approve: - the merger agreement and the
merger; and
-- the issuance of Suiza's
common stock to Dean's - any other business that
stockholders in the properly comes before the
merger; and meeting.
-- the reservation of an
additional number of
shares of Suiza's common
stock for issuance
pursuant to stock-based
awards outstanding at the
time of the merger under
Dean's stock awards plans.
- a proposal to approve
Suiza's adoption of Dean's
1989 Stock Awards Plan and
the reservation of 1,894,864
shares of Suiza's common
stock for issuance after the
merger pursuant to that
plan, if the merger occurs;
- a proposal to increase the
number of shares of Suiza's
common stock reserved for
issuance under Suiza's 1997
Stock Option and Restricted
Stock Plan from 7.5 million
shares to 12.5 million
shares, if the merger
occurs; and
- any other business that
properly comes before the
meeting.
88
RECORD DATE: The record date for shares The record date for shares
entitled to vote is entitled to vote is
August 10, 2001. August 10, 2001.
OUTSTANDING SHARES HELD ON There were 27,813,370 shares There were 35,769,877 shares
RECORD DATE: of Suiza common stock of Dean common stock
outstanding on the record outstanding on the record
date. date.
SHARES ENTITLED TO VOTE: Shares entitled to vote are Shares entitled to vote are
Suiza common stock held at Dean common stock held at the
the close of business on the close of business on the
record date. Each share of record date. Each share of
Suiza common stock is Dean common stock is entitled
entitled to one vote. Shares to one vote. Shares held by
held by Suiza in its treasury Dean in its treasury will not
will not be voted. be voted.
SUIZA MEETING DEAN MEETING
QUORUM REQUIREMENT: A quorum of stockholders is A quorum of stockholders is
necessary to hold a valid necessary to hold a valid
meeting. The presence, in meeting. The presence, in
person or by proxy, of the person or by proxy, of the
holders of shares holders of shares
representing a majority of representing a majority of
the shares of Suiza common the shares of Dean common
stock outstanding on the stock entitled to vote at the
record date is a quorum. meeting is a quorum.
Abstentions and broker non- Abstentions and broker non-
votes count as present at the votes count as present at the
stockholder meeting for stockholder meeting for
establishing a quorum. Shares establishing a quorum. Shares
held by Suiza in its treasury held by Dean in its treasury
do not count toward a quorum. do not count toward a quorum.
SHARES BENEFICIALLY OWNED BY 1,849,102 shares of Suiza 532,287 shares of Dean common
SUIZA AND DEAN DIRECTORS AND common stock, excluding stock, excluding exercisable
EXECUTIVE OFFICERS AS OF THE exercisable options. These options. These shares
RECORD DATE: shares represent in total represent in total
approximately 6.7% of the approximately 1.5% of the
voting power of Suiza's voting power of Dean's common
common stock outstanding on stock outstanding on the
the record date. record date.
VOTE NECESSARY TO APPROVE Approval of the merger Approval of the merger
SUIZA AND DEAN PROPOSALS: proposal and approval of each agreement and the merger
of the option plan proposals requires the affirmative vote
each requires the affirmative of holders of a majority of
vote of holders of at least a the outstanding shares of
majority of Suiza's common Dean common stock.
stock present (in person or
by proxy) and with voting
power at Suiza's stockholder
meeting where a quorum is
present.
89
VOTING IN PERSON. If you plan to attend a meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker or other nominee, you must obtain a proxy,
executed in your favor, from your broker to be able to vote at the meeting.
BROKER NON-VOTES. If your shares are held in an account at a broker or
bank, you must instruct the broker or bank on how to vote your shares. If you do
not instruct your broker on how to vote for you, your broker may turn in a
ballot for you that will count your shares as present for quorum purposes, but
your broker will not be entitled to vote on the proposals for you. If your
broker takes this action, it is called a "broker non-vote." If you are a Dean
stockholder and you do not instruct your broker on how to vote by marking your
vote in the broker's proxy form enclosed with this mailing, your failure to so
instruct your broker will have the same effect as a vote against the merger
agreement and the merger. If you are a Suiza stockholder and do not instruct
your broker on how to vote, your broker non-vote will not affect the outcome of
the vote on the merger proposal or the option plan proposal at Suiza's
stockholder meeting. Your broker will vote for you only if you provide
instructions on how to vote by marking your vote in the broker's proxy form
enclosed with this mailing.
PEOPLE WITH DISABILITIES. We will provide reasonable assistance (including
audio enhancement) to help you participate in the stockholder meetings if you
tell us about your disability and your plan to attend Suiza's or Dean's
stockholder meeting. Please call or write Suiza Investor Relations or Dean's
Corporate Secretary in advance if you require these services or other special
accommodations at your stockholder meeting at the number or address under
"Summary Information--The Companies" on page 4.
HOW TO VOTE BY PROXY
VOTING YOUR PROXY. You may vote in person at your meeting or by proxy. We
recommend you vote by proxy even if you plan to attend your meeting. You can
always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it in time to vote, one of the individuals named as your
proxy will vote for you as you have directed. You may vote for or against the
proposals or abstain from voting.
CHANGING YOUR VOTE. You can change your vote at any time before your
stockholder meeting for any reason.
If you are a Suiza stockholder, you can change your vote before Suiza's
stockholder meeting by:
- writing to Suiza or submitting a later-dated proxy to Suiza at 2515
McKinney Avenue, Suite 1200, Dallas, Texas 75201, Attention: Corporate
Secretary;
- voting again by telephone or internet by following the instructions listed
on the enclosed proxy card (the last vote entered before the meeting
begins will be counted); or
- if you are a registered Suiza stockholder, coming to Suiza's stockholder
meeting and changing your vote in writing.
If you are a Dean stockholder, you can change your vote before Dean's
stockholder meeting by:
- writing to Dean or submitting a later-dated proxy to Dean at 3600 North
River Road, Franklin Park, Illinois 60131, Attention: Corporate Secretary;
or
- if you are a registered Dean stockholder, coming to Dean's stockholder
meeting and changing your vote in writing.
PROXIES FOR PARTICIPANTS IN DEAN 401(K) PLAN. If you are a participant in
the Dean 401(k) Plan, shares held in your account under the plan will not be
voted unless you sign and return the proxy card. The proxy card will represent
the proportionate number of shares you hold under the 401(k) plan,
90
based on the number of Dean Stock Fund units allocated to your account. The
trustee under the 401(k) plan will only vote for you if it receives instructions
from you.
SUIZA PROPOSALS
At Suiza's stockholder meeting, Suiza will ask its stockholders to vote on
the following proposals:
- a proposal to approve:
-- the issuance of Suiza's common stock to Dean's stockholders in the
merger; and
-- the reservation of an additional number of shares of Suiza's common
stock for issuance after the merger pursuant to stock-based awards
outstanding at the time of the merger under Dean's stock awards
plans;
- a proposal to approve Suiza's adoption of Dean's 1989 Stock Awards Plan
and the reservation of 1,894,864 shares of Suiza's common stock for
issuance after the merger pursuant to that plan, if the merger occurs; and
- a proposal to increase the number of shares of Suiza's common stock
reserved for issuance under Suiza's 1997 Stock Option and Restricted Stock
Plan from 7.5 million shares to 12.5 million shares, if the merger occurs.
The merger will not occur unless the Suiza merger proposal is approved by
Suiza's stockholders. Suiza will not reserve the proposed additional 1,894,864
shares of stock for issuance after the merger pursuant to Dean's 1989 Stock
Awards Plan unless Suiza's proposal to adopt the Dean plan is approved by
Suiza's stockholders and the merger occurs. The number of shares issuable under
Suiza's stock option plan will not increase unless Suiza's option plan increase
proposal is approved by Suiza's stockholders and the merger occurs.
DEAN PROPOSAL
At Dean's stockholder meeting, Dean will ask its stockholders to vote on a
proposal to approve the merger agreement and the merger. The merger will not
occur unless the Dean merger proposal is approved by Dean's stockholders.
IF YOU ARE A REGISTERED STOCKHOLDER AND YOU SUBMIT YOUR PROXY BUT DO NOT
MAKE SPECIFIC CHOICES, THE PERSON NAMED ON YOUR PROXY CARD AS YOUR PROXY WILL
FOLLOW YOUR BOARD OF DIRECTORS' RECOMMENDATIONS AND VOTE FOR YOU:
SUIZA DEAN
----- ----
"FOR" the Suiza merger proposal; "FOR" the Dean merger proposal; and
"FOR" the Suiza proposal to adopt Dean's
stock awards plan, if the merger occurs;
"FOR" the Suiza proposal to increase Suiza's
existing option plan, if the merger occurs;
and
"FOR" any proposal by Suiza's board of "FOR" any proposal by Dean's board of
directors to adjourn the Suiza stockholder directors to adjourn the Dean stockholder
meeting. meeting.
PROXY SOLICITATION
We will each pay our own costs of soliciting proxies.
In addition to this mailing, our employees may solicit proxies personally,
electronically or by telephone. Suiza estimates that it will pay the firm of
Georgeson & Co. a fee of approximately $12,500
91
plus expenses to help with the solicitation. Dean estimates that it will also
pay Morrow & Co. a fee of approximately $7,500 plus expenses to help with the
solicitation. The extent to which these proxy soliciting efforts will be
necessary depends entirely upon how promptly proxies are submitted. You should
submit your proxy without delay. We also reimburse brokers and other nominees
for their expenses in sending these materials to you and getting your voting
instructions.
Do not send in any stock certificates with your proxy cards. Suiza will mail
transmittal forms with instructions for the surrender of Dean common stock as
soon as practicable after the completion of the merger.
OTHER BUSINESS; ADJOURNMENTS
We are not currently aware of any other business to be acted upon at either
meeting. Under the laws of Delaware, where Suiza is incorporated, and under
Suiza's by-laws, only business within the purpose or purposes described in the
meeting notice may be raised at the Suiza stockholder meeting. Under the laws of
Delaware, where Dean is incorporated, and under Dean's by-laws, only business
within the purpose or purposes described in the meeting notice may be raised at
the Dean stockholder meeting.
Adjournments may be made for the purpose of, among other things, soliciting
additional proxies. Any adjournment may be made from time to time by approval of
the holders of shares representing a majority of the votes present in person or
by proxy at the meeting, whether or not a quorum exists, without further notice
other than by an announcement made at the meeting. We do not currently intend to
seek an adjournment of either stockholder meeting.
92
COMPARISON OF STOCKHOLDER RIGHTS
The following pages compare the material differences between the rights of a
Suiza stockholder under the current Suiza certificate of incorporation and
by-laws (left column) and the rights of a Dean stockholder under the current
Dean certificate of incorporation and by-laws (right column). Copies of these
documents will be sent to Dean stockholders upon request. See "Where You Can
Find More Information" on page 99. A summary by its nature is not complete. We
encourage you to refer to the relevant portions of Suiza's certificate of
incorporation and by-laws, Dean's certificate of incorporation and by-laws, each
incorporated in this document by reference and the relevant provisions of
Delaware law.
GENERAL
SUIZA DEAN
----- ----
- If the merger is completed, Suiza's - If the merger is completed, the rights
certificate of incorporation and by-laws of Dean's stockholders who become Suiza
will be the same as the present stockholders in the merger will be
documents, except that Suiza's governed by Delaware law and Suiza's
certificate of incorporation will be certificate of incorporation and
further amended by merger of Suiza with by-laws. Suiza's certificate of
a wholly-owned subsidiary to change incorporation and by-laws will be the
Suiza's name to "Dean Foods Company." same as the present documents, except
This name-change merger does not require that Suiza's certificate of
the approval of Suiza's stockholders. incorporation will be amended by merger
of Suiza with a wholly-owned subsidiary
to change Suiza's name to "Dean Foods
Company."
- Suiza's authorized stock consists of - Dean's authorized stock consists of
500,000,000 shares of common stock, with 150,000,000 shares of common stock, with
a par value of $0.01 per share and a par value of $1.00 per share, and
1,000,000 shares of preferred stock, 10,000,000 shares of preferred stock,
with a par value of $0.01 per share. If with a par value of $1.00 per share.
the merger is completed, the authorized
common stock and the authorized
preferred stock will remain the same.
See "Description of Suiza Stock" on
page 98.
93
AMENDMENT OF CHARTER
SUIZA DEAN
----- ----
Suiza's certificate of incorporation may - Generally, Dean's certificate of
be amended by the vote of a majority of incorporation may be amended by the
the outstanding shares of Suiza common affirmative vote of a majority of the
stock. outstanding shares of Dean common stock.
- However, the amendment of certain
articles of Dean's certificate of
incorporation, including Article V
regarding the amendment of by-laws,
Article VII regarding the number and
term of directors, Article IX regarding
stockholder action by written consent in
lieu of a meeting, and Article X
regarding the calling of special
stockholder meetings, requires the
affirmative vote of the holders of at
least 80% of the outstanding shares of
Dean common stock.
AMENDMENT OF BY-LAWS
SUIZA DEAN
----- ----
Suiza's by-laws may be adopted, amended Dean's by-laws may be adopted, amended
or repealed by: or repealed by:
-- 2/3 of the shares entitled to vote -- holders of at least 80% of the
at a stockholder meeting; or outstanding shares of Dean common
-- a majority of the entire board of stock; or
directors. -- a majority of the total number of
directors.
NUMBER OF DIRECTORS
SUIZA DEAN
----- ----
The number of Suiza directors is Dean's board of directors has 12 seats,
determined by Suiza's board of of which 10 are currently filled and 2
directors. The current number of are currently vacant.
directors is 10. If the merger is
completed, Suiza's board of directors
will be increased by five so that the
board of directors will include 15
individuals. See "The Merger and the
Merger Agreement--Management of Suiza
After the Merger" on page 42.
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NOMINATION OF DIRECTORS
SUIZA DEAN
----- ----
A Suiza stockholder may recommend a per- A Dean stockholder must make any nomina-
son for nomination as a director in tion for a director in writing to Dean's
writing to Suiza's Secretary. The Secretary. In the case of an annual
nomination must be received by March 1 stockholder meeting, the nomination must
of any calendar year if notice of an generally be received at least 60 days
annual stockholder meeting at which but no more than 90 days prior to the
directors are to be elected is given at first anniversary of the preceding
least 35 days prior to the meeting. If year's annual meeting. In the case of a
directors are to be elected at a special special stockholder meeting, the nomina-
stockholder meeting or notice is given tion must be received at least 60 days
less than 35 days prior to an annual but no more than 90 days prior to the
stockholder meeting, the nomination must meeting.
be delivered by the close of business on
the seventh day after the day the notice
was mailed.
VOTING STOCK
SUIZA DEAN
----- ----
- Suiza's common stockholders are entitled - Dean's common stockholders are entitled
to vote as a single class. to vote as a single class.
- Suiza's preferred stockholders are - Each share of Dean Series A Preferred
entitled to voting rights as designated Stock entitles the holder thereof to 100
by Suiza's board of directors. votes on all matters submitted to a vote
Currently, Suiza has no outstanding of Dean's stockholders. Currently, Dean
shares of preferred stock. has no outstanding shares of Series A
Preferred Stock.
MEETINGS OF STOCKHOLDERS
SUIZA DEAN
----- ----
An annual meeting must be held every An annual meeting must be held every
year, the time and place of which is year, the time and place of which is
fixed by Suiza's board of directors. fixed by Dean's board of directors.
Notice of the meeting must be received Notice of the meeting must be received
not less than 10 nor more than 60 days not less than 10 nor more than 50 days
prior to the stockholder meeting. The prior to the annual meeting. The
Chief Executive Officer may, or the Chairman of the Board or the President
Secretary, upon written request of a may, and the Secretary, upon written
majority of Suiza's board of directors, request of a majority of Dean's board of
shall call stockholder meetings for any directors or the holders of at least 80%
purpose. Notice of any such meeting must of the outstanding shares of common
be received not less than 10 nor more stock of Dean, shall call stockholder
than 60 days prior to the stockholder meetings for any purpose. Notice of any
meeting. such meeting must be received not less
than 10 nor more than 50 days prior to
the stockholder meeting.
95
STOCKHOLDER PROPOSALS
SUIZA DEAN
----- ----
A Dean stockholder wishing to bring
A Suiza stockholder wishing to bring - business before a stockholder's meeting
business before the annual must provide written notice to the
stockholder meeting must provide Secretary at Dean's principal executive
written notice received at Suiza's offices. In the case of an annual
principal offices by March 1 of any stockholder meeting, the proposal must
calendar year if notice of an annual generally be received at least 60 days but
meeting is given at least 35 days no more than 90 days prior to the first
prior to the meeting. If notice is anniversary of the preceding year's annual
given less than 35 days prior to an meeting. In the case of a special
annual meeting, the proposal must be stockholder meeting, the proposal must be
delivered by the close of business on received at least 60 days but no more than
the seventh day after the day the
notice was mailed. 90 days prior to the meeting.
- The stockholder's written notice must
include:
-- a brief description of the proposal;
-- the stockholder's name and address;
-- the class and number of shares owned
beneficially by the stockholder;
-- a brief description of the reasons
why the proposal should be discussed
at the annual meeting; and
-- disclosure of any material interest
that the stockholder has in the
subject matter of the proposal.
STOCKHOLDER ACTION WITHOUT MEETING
SUIZA DEAN
----- ----
Any stockholder action can be taken Any stockholder action can be taken
without a meeting only upon written without a meeting only upon written
consent of a majority of the stock consent of 80% of the stock outstanding
outstanding entitled to vote. entitled to vote.
APPROVAL OF, AND SPECIAL RIGHTS WITH RESPECT TO, MERGERS OR CONSOLIDATIONS AND
OTHER TRANSACTIONS
SUIZA DEAN
----- ----
- Unless specifically required by Suiza's - Unless specifically required by Dean's
certificate of incorporation, no vote of certificate of incorporation, no vote of
stockholders is required to authorize a stockholders is required to authorize a
merger with or into a wholly-owned merger with or into a wholly-owned
subsidiary if certain conditions are subsidiary if certain conditions are
met. met.
- Suiza's certificate of incorporation, as - Under Dean's restated certificate of
amended, does not provide otherwise. incorporation, as amended, the
affirmative vote of holders of 80% of
shares entitled to vote is required for
the adoption or authorization of any
merger or consolidation with a "Related
Entity."
96
STOCKHOLDERS RIGHTS PLANS
SUIZA DEAN
----- ----
Suiza has entered into a Rights Agreement, Dean has entered into a Rights Agreement,
dated as of March 6, 1998, between Suiza and dated as of May 22, 1998, as amended, between
Harris Trust and Savings Bank, as rights Dean and Harris Trust and Savings Bank, as
agent, pursuant to which Suiza has issued rights agent, pursuant to which Dean has
rights, exercisable only upon the occurrence issued rights, exercisable only upon the
of certain events, to purchase its common occurrence of certain events, to purchase its
stock at a discount of 50%.The rights issued Common Stock at a discount of 50%. The rights
pursuant to the terms of the Rights Agreement issued pursuant to the terms of the Rights
will not be triggered by the merger and the Agreement will not be triggered by the merger
related transactions. and the related transactions.
97
DESCRIPTION OF SUIZA'S STOCK
The following summary of the terms of Suiza common stock is not meant to be
complete and is qualified by reference to the relevant provisions of Delaware
law and Suiza's certificate of incorporation and by-laws. We will send to you a
copy of Suiza's certificate of incorporation and by-laws upon request. See
"Where You Can Find More Information" on page 99.
AUTHORIZED SUIZA STOCK
Under Suiza's certificate of incorporation, as amended, Suiza's authorized
capital stock consists of 500 million shares of common stock, $0.01 par value
and 1 million shares of preferred stock, $0.01 par value. As of August 10, 2001,
the record date for Suiza shares entitled to vote, 27,813,370 shares of Suiza
common stock were issued and outstanding.
SUIZA COMMON STOCK
OUTSTANDING SHARES. The outstanding shares of Suiza common stock are, and
the shares of Suiza common stock to be issued pursuant to the merger will be,
duly authorized, validly issued, fully paid and non-assessable.
VOTING RIGHTS. Each Suiza stockholder is, and each Suiza stockholder after
the merger will be, entitled to one vote for each share held of record on the
applicable record date on all matters submitted to a vote of stockholders.
DIVIDEND RIGHTS. Suiza stockholders are, and Suiza stockholders after the
merger will be, entitled to receive dividends as may be declared from time to
time by Suiza's board of directors out of legally available funds. However,
Suiza has never paid dividends and does not intend to pay dividends at any time
in the foreseeable future.
RIGHTS UPON LIQUIDATION. Suiza stockholders are, and Suiza stockholders
after the merger will be, entitled to share pro rata, upon any liquidation or
dissolution of Suiza, in all remaining assets available for distribution to
stockholders after payment or providing for Suiza's liabilities.
PREEMPTIVE RIGHTS. Suiza stockholders do not have, and Suiza stockholders
after the merger will not have, preemptive right to purchase, subscribe for or
otherwise acquire any unissued or treasury shares or other securities.
TRANSFER AGENT AND EXCHANGE AGENT
Computershare Investor Services is the transfer agent and registrar for
Suiza's common stock and will be the exchange agent for the merger. When the
merger occurs Computershare will mail a letter of transmittal with instructions
to each holder of record of Dean common stock outstanding immediately prior to
the merger for use in exchanging certificates formerly representing shares of
Dean common stock for certificates representing shares of Suiza common stock.
Certificates should not be surrendered by any Dean stockholders until they have
received instructions from Computershare.
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION OF DEAN COMMON STOCK
It is a condition to the merger that the shares of Suiza common stock
issuable in the merger and to be reserved for issuance pursuant to stock-based
awards outstanding at the time of the merger under Dean's plan be approved for
listing on the NYSE at or prior to the time of the merger, subject to official
notice of issuance. If the merger is completed, Dean common stock will cease to
be listed on any stock exchange. Also, effective when the merger occurs, Suiza
will change its name to Dean Foods Company and its trading symbol on the NYSE
will change from "SZA" to "DF."
98
LEGAL OPINIONS
The validity of the Suiza common stock to be issued to Dean stockholders
pursuant to the merger will be passed upon by Hughes & Luce, L.L.P. Also, it is
a condition to the completion of the merger that Suiza and Dean receive opinions
from Hughes & Luce, L.L.P. and Kirkland & Ellis, respectively, with respect to
the tax treatment of the merger. See "The Merger and the Merger Agreement--
Principal Conditions to the Completion of the Merger" on page 44 and "The Merger
and the Merger Agreement--Material Federal Income Tax Consequences of the
Merger" on page 53.
EXPERTS
The financial statements and the related financial statement schedules of
Suiza incorporated in this joint proxy statement/prospectus by reference from
Suiza's Annual Report on Form 10-K for the year ended December 31, 2000 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The financial statements and financial statement schedule of Dean
incorporated in this joint proxy statement/prospectus by reference to Dean's
Annual Report on Form 10-K for the year ended May 27, 2001 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
FUTURE STOCKHOLDER PROPOSALS
SUIZA
Any stockholder proposal for a Suiza annual meeting must be sent to Suiza's
Corporate Secretary at the address of Suiza's principal executive office given
under "Summary Information--The Companies" on page 4. The deadlines for receipt
of a proposal to be considered for inclusion in Suiza's proxy statement relating
to its 2002 annual stockholder meeting and for notice of a proposal for which a
stockholder will conduct his or her own solicitation are, respectively,
December 31, 2001 and March 1, 2002.
DEAN
Dean will hold an annual meeting in the year 2001 only if the merger has not
already been completed. Stockholders may submit proposals appropriate for
stockholder action at Dean's annual meetings consistent with Dean's by-laws and
regulations adopted by the Securities and Exchange Commission. The deadline for
receipt of a proposal to be considered for inclusion in Dean's proxy statement
and proxy for the 2001 annual meeting has expired.
WHERE YOU CAN FIND MORE INFORMATION
Suiza and Dean file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (SEC). You may
read and copy any reports, statements or other information that we file at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. Our SEC filings are also available to
the public from commercial document retrieval services and at the website
maintained by the SEC at "http://www.sec.gov".
Suiza filed a registration statement on Form S-4 to register with the SEC
the Suiza common stock to be issued to Dean stockholders in the merger. This
joint proxy statement/prospectus is a part of that registration statement and
constitutes a prospectus of Suiza in addition to being a proxy statement of
99
Suiza and Dean for each company's stockholder meetings. As permitted by SEC
rules, this joint proxy statement/prospectus does not contain all the
information that you can find in the registration statement or the exhibits to
the registration statement.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement/ prospectus. This means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
joint proxy statement/prospectus, except for any information superseded by other
information in, or incorporated by reference in, this joint proxy
statement/prospectus. This joint proxy statement/prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about our companies and their
financial performance.
SUIZA'S SEC FILINGS
Annual Report on Form 10-K Fiscal Year ended December 31, 2000
Quarterly Reports on Form 10-Q Quarters ended March 31, 2001 and June 30,
2001
Current Reports on Form 8-K Filed on April 5, 2001 (amended by
Form 8-K/A filed on April 10, 2001), and
May 3, 2001
Suiza's proxy statement for its 2000 annual Filed on April 23, 2001
meeting of stockholders
The description of Suiza's common stock Filed on February 19, 1997
contained in Suiza's registration statement
filed on Form 8-A
The description of Suiza's common stock Filed on March 10, 1998
purchase rights contained in Suiza's
registration statement filed on Form 8-A
DEAN'S SEC FILINGS
Annual Report on Form 10-K Fiscal Year ended May 27, 2001
Current Reports on Form 8-K Filed on June 19, 2001 and June 27, 2001
Dean's proxy statement for its 2000 annual Filed on August 25, 2000
meeting of stockholders
The description of Dean's common stock contained in Dean's registration
statement filed under Section 12 of the Securities Exchange Act of 1934, and any
amendment or report filed for the purpose of updating that description
The description of Dean's preferred share purchase rights contained in Dean's
registration statement filed under Section 12 of the Securities Exchange Act of
1934, and any amendment or report filed for the purpose of updating that
description
Suiza and Dean also are incorporating by reference all documents that they
file with the SEC pursuant to Section 13(a), 13(c), 14 or 15 (d) of the Exchange
Act between the date of this joint proxy statement/prospectus and the dates of
their respective special stockholders meetings.
Suiza has supplied all information contained or incorporated by reference in
this joint proxy statement/prospectus relating to Suiza, and Dean has supplied
all such information relating to Dean.
100
You may have already been sent some of the documents incorporated by
reference, but you can obtain any of them from us or the SEC. Documents
incorporated by reference are available from us without charge, excluding all
exhibits, unless we have specifically incorporated by reference an annex that is
attached to this joint proxy statement/prospectus. Stockholders may obtain these
documents incorporated by reference by requesting them in writing or by
telephone from the appropriate party at the following address:
Suiza Foods Corporation Dean Foods Company
Investor Relations Director of Corporate Communications
2515 McKinney Avenue 3600 North River Road
Suite 1200 Franklin Park, Illinois 60131
Dallas, Texas 75201 (800) 971-3326
(800) 431-9214
You can also get more information by visiting Suiza's web site at
www.suizafoods.com and Dean's web site at www.deanfoods.com. Web site materials
are not part of this joint proxy statement/ prospectus.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus to vote on the Suiza
proposals and the Dean proposal. We have not authorized anyone to provide you
with information that is different from what is contained in this joint proxy
statement/prospectus. This joint proxy statement/prospectus is dated August 10,
2001. You should not assume that the information contained in the joint proxy
statement/prospectus is accurate as of any date other than such date, and
neither the mailing of this joint proxy statement/prospectus to stockholders nor
the issuance of Suiza common stock in the merger shall create any implication to
the contrary.
101
ANNEX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 4, 2001
BY AND AMONG
SUIZA FOODS CORPORATION
BLACKHAWK ACQUISITION CORP.
AND
DEAN FOODS COMPANY
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TABLE OF CONTENTS
PAGE NO.
---------
ARTICLE I THE MERGER.................................................. A-5
Section 1.01. The Merger.................................................. A-5
Section 1.02. Closing; Closing Date; Effective Time....................... A-5
Section 1.03. Effect of the Merger........................................ A-6
Section 1.04. Certificate of Incorporation; Bylaws........................ A-6
Section 1.05. Directors and Officers...................................... A-6
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.......... A-6
Section 2.01 Merger Consideration; Conversion and Cancellation of
Securities.................................................. A-6
Section 2.02 Treatment of Stock Options and Other Equity-Based Awards.... A-8
Section 2.03. Exchange and Surrender of Certificates...................... A-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-11
Section 3.01. Organization and Qualification; Subsidiaries................ A-11
Section 3.02. Charter and Bylaws.......................................... A-11
Section 3.03. Capitalization.............................................. A-11
Section 3.04. Authority................................................... A-12
Section 3.05. No Conflict; Required Filings and Consents.................. A-12
Section 3.06. Permits; Compliance......................................... A-13
Section 3.07. SEC Filings; Financial Statements........................... A-13
Section 3.08. Absence of Certain Changes or Events........................ A-13
Section 3.09. No Undisclosed Liabilities.................................. A-14
Section 3.10. Absence of Litigation....................................... A-14
Section 3.11. Employee Benefit Plans; Labor Matters....................... A-14
Section 3.12. Taxes....................................................... A-16
Section 3.13. Affiliates.................................................. A-17
Section 3.14. Certain Business Practices.................................. A-17
Section 3.15. Environmental Matters....................................... A-17
Section 3.16. Vote Required............................................... A-18
Section 3.17. Brokers..................................................... A-19
Section 3.18. Takeover Provisions......................................... A-19
Section 3.19. Insurance................................................... A-19
Section 3.20. Certain Material Contracts.................................. A-19
Section 3.21. Principal Customers and Suppliers........................... A-19
Section 3.22. Intellectual Property....................................... A-20
Section 3.23. Opinion of Financial Advisor................................ A-20
Section 3.24. Rights Agreement............................................ A-20
Section 3.25. Information Supplied........................................ A-20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..... A-21
Section 4.01. Organization and Qualification; Subsidiaries................ A-21
Section 4.02. Charter and Bylaws.......................................... A-21
Section 4.03. Capitalization.............................................. A-21
Section 4.04. Authority................................................... A-22
Section 4.05. No Conflict; Required Filings and Consents.................. A-22
Section 4.06. Permits; Compliance......................................... A-23
Section 4.07. SEC Filings; Financial Statements........................... A-23
Section 4.08. Absence of Certain Changes or Events........................ A-23
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PAGE NO.
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Section 4.09. No Undisclosed Liabilities.................................. A-24
Section 4.10. Absence of Litigation....................................... A-24
Section 4.11. Employee Benefit Plans; Labor Matters....................... A-24
Section 4.12. Taxes....................................................... A-26
Section 4.13. Certain Business Practices.................................. A-27
Section 4.14. Environmental Matters....................................... A-28
Section 4.15. Vote Required............................................... A-28
Section 4.16. Brokers..................................................... A-28
Section 4.17. Takeover Provisions......................................... A-28
Section 4.18. Insurance................................................... A-28
Section 4.19. Certain Material Contracts.................................. A-28
Section 4.20. Principal Customers and Suppliers........................... A-29
Section 4.21. Intellectual Property....................................... A-29
Section 4.22. Opinion of Financial Advisors............................... A-29
Section 4.23. Rights Agreement............................................ A-29
Section 4.24. Commitment Letters.......................................... A-29
Section 4.25. Information Supplied........................................ A-30
Section 4.26. Merger Sub Operations....................................... A-30
ARTICLE V COVENANTS................................................... A-30
Section 5.01. Affirmative Covenants of the Company........................ A-30
Section 5.02. Negative Covenants of the Company........................... A-31
Section 5.03. Affirmative and Negative Covenants of Parent and Merger
Sub......................................................... A-32
Section 5.04. Non-Solicitation............................................ A-33
Section 5.05. Access and Information...................................... A-35
Section 5.06. Appropriate Action; Consents; Filings....................... A-36
Section 5.07. Public Announcements........................................ A-38
Section 5.07. NYSE Listing................................................ A-38
Section 5.09. Employee Benefit Plan....................................... A-38
Section 5.10. Name of Parent.............................................. A-39
Section 5.11. Board of Directors of Parent................................ A-39
Section 5.12. Tax Treatment............................................... A-39
Section 5.13. Reasonable Best Efforts..................................... A-39
ARTICLE VI ADDITIONAL AGREEMENTS....................................... A-40
Section 6.01. Meeting of Stockholders..................................... A-40
Section 6.02. Preparation of Proxy Statement.............................. A-40
Section 6.03. Indemnification............................................. A-41
ARTICLE VII CLOSING CONDITIONS.......................................... A-42
Section 7.01. Conditions to Obligations of Each Party Under This
Agreement................................................... A-42
Section 7.02. Additional Conditions to Obligations of the Parent and
Merger Sub.................................................. A-42
Section 7.03. Additional Conditions to Obligations of the Company......... A-43
ARTICLE VIII TERMINATION................................................. A-44
Section 8.01. Termination................................................. A-44
Section 8.02. Effect of Termination....................................... A-45
Section 8.03. Fees and Expenses........................................... A-45
ARTICLE IX GENERAL PROVISIONS.......................................... A-46
Section 9.01. Non-Survival of Representations, Warranties and
Agreements.................................................. A-46
Section 9.02. Notices..................................................... A-46
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PAGE NO.
---------
Section 9.03. Certain Definitions......................................... A-47
Section 9.04. Headings and Table of Contents.............................. A-48
Section 9.05. Severability................................................ A-48
Section 9.06. Entire Agreement............................................ A-48
Section 9.07. Assignment, Binding Effect.................................. A-48
Section 9.08. Interpretation.............................................. A-48
Section 9.09. Specific Performance........................................ A-48
Section 9.10. Amendment................................................... A-49
Section 9.11. Waiver; Remedies Cumulative................................. A-49
Section 9.12. Governing Law............................................... A-49
ARTICLE X THE MERGER.................................................. A-49
Section 9.13. Counterparts................................................ A-49
EXHIBITS:
Exhibit 5.06(d) Certain Properties
Exhibit 7.02(d)(1) Tax Opinion Back-up Certificate (Parent)
Exhibit 7.02(d)(2) Tax Opinion Back-up Certificate (Company)
SCHEDULES:
Company Disclosure Schedule
Parent Disclosure Schedule
A-4
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 4, 2001 (this
"Agreement"), is by and among Suiza Foods Corporation, a Delaware corporation
("Parent"), Blackhawk Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Parent ("Merger Sub"), and Dean Foods Company, a Delaware
corporation (the "Company").
WHEREAS, the Company, upon the terms and subject to the conditions of this
Agreement and in accordance with the Delaware General Corporation Law ("Delaware
Law"), will merge with and into Merger Sub (the "Merger"), and pursuant thereto,
the issued and outstanding shares of common stock, $1.00 par value per share, of
the Company (the "Company Common Stock") will be converted into the right to
receive the merger consideration set forth herein;
WHEREAS, the Board of Directors of the Company has determined that the
Merger is advisable, fair to, and in the best interests of, the Company and its
stockholders and has approved and adopted this Agreement and the transactions
contemplated hereby;
WHEREAS, the Board of Directors of Parent has determined that the Merger is
advisable, fair to, and in the best interests of, Parent and its stockholders
and has approved and adopted this Agreement and the transactions contemplated
hereby;
WHEREAS, the Board of Directors of Merger Sub has approved and adopted this
Agreement and Parent, as the sole stockholder of Merger Sub, will adopt this
Agreement promptly after the execution hereof by the parties hereto;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the United States Internal Revenue Code of 1986, as
amended (the "Code"); and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement (including SECTION 2.01(B)), and in accordance with
Delaware Law, at the Effective Time (as defined in SECTION 1.02), the Company
will be merged with and into Merger Sub. As a result of the Merger, the separate
corporate existence of the Company will cease and Merger Sub will continue as
the surviving corporation of the Merger (the "Surviving Corporation"). Certain
terms used in this Agreement are defined in SECTION 9.03.
SECTION 1.02. CLOSING; CLOSING DATE; EFFECTIVE TIME. Unless this Agreement
shall have been terminated pursuant to SECTION 8.01, and subject to the
satisfaction or waiver of the conditions set forth in ARTICLE VII, the
consummation of the Merger and the closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Hughes & Luce,
L.L.P., 1717 Main Street, Dallas, Texas as soon as practicable (but in any event
within two business days) after the satisfaction or waiver of the conditions set
forth in ARTICLE VII, or at such other date, time and place as Parent and the
Company may agree; provided, that the conditions set forth in ARTICLE VII shall
have been satisfied or waived at or prior to such time. The date on which the
Closing takes place is referred to herein as the "Closing Date." As promptly as
practicable on the Closing Date, the parties hereto will cause the Merger to be
consummated by filing a certificate of merger with the Secretary of State of the
State of Delaware, in such form as required by, and executed in accordance with,
the relevant provisions of Delaware Law (the date and time of such filing, or
such later date or time agreed upon by Parent and the Company and set forth
therein, being the "Effective Time").
A-5
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger will be as provided in the applicable provisions of Delaware Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges and powers of the Company and
Merger Sub will vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and the Merger Sub will become the debts, liabilities
and duties of the Surviving Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective Time,
the certificate of incorporation of Merger Sub, as in effect immediately prior
to the Effective Time, will be the certificate of incorporation of the Surviving
Corporation and thereafter will continue to be its certificate of incorporation
until amended as provided therein and pursuant to Delaware Law. The bylaws of
Merger Sub, as in effect immediately prior to the Effective Time, will be the
bylaws of the Surviving Corporation and thereafter will continue to be its
bylaws until amended as provided therein and pursuant to Delaware Law.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub will be
the directors of the Surviving Corporation at the Effective Time, each to hold
office in accordance with the charter and bylaws of the Surviving Corporation,
in each case until their respective successors are duly elected or appointed and
qualified. The officers of Merger Sub immediately prior to the Effective Time
will be the officers of the Surviving Corporation at the Effective Time, each to
hold office in accordance with the bylaws of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. MERGER CONSIDERATION; CONVERSION AND CANCELLATION OF
SECURITIES. At the Effective Time, by virtue of the Merger and without any
action on the part of the Parent and Merger Sub, the Company or their respective
stockholders:
(a) Subject to the other provisions of this ARTICLE II, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (excluding any Company Common Stock described in
SECTION 2.01(D)) will be converted into the right to receive (i) $21.00 in
cash (as may be adjusted in accordance with SECTION 2.01(B), the "Cash
Consideration") and (ii) 0.429 (as may be adjusted in accordance with
SECTION 2.01(B), the "Exchange Ratio") shares of common stock, $.01 par
value per share, of Parent ("Parent Common Stock") (such Cash Consideration
and Parent Common Stock collectively, the "Per Share Merger Consideration").
(b) If on the day upon which the Effective Time occurs (or if no trading
of Parent Common Stock on the New York Stock Exchange (the "NYSE") takes
place prior to the Effective Time on such day, the last date prior to the
date upon which the Effective Time occurs upon which there was trading of
Parent Common Stock on the NYSE), the fair market value, based on the volume
weighted average per share sales price of the Parent Common Stock on that
day on the NYSE ("Parent Common Stock Closing Price"), of all shares of
Parent Common Stock to be delivered in connection with the Merger, minus the
product of (x) the Parent Common Stock Closing Price and (y) 20,000 (the
"Total Stock Value") would be (but for adjustments made pursuant to this
SECTION 1.01(B)) less than 40% of the sum of (i) the number of the Converted
Shares (as defined in SECTION 2.01(E)) multiplied by the Cash Consideration,
(ii) the amount of cash paid by Parent and/or any of its subsidiaries to
acquire shares of Company Common Stock within the two year period prior to
the date of the Merger, (iii) the Total Stock Value, (iv) the number of
Dissenting Shares, multiplied by the sum of (A) the Cash Consideration and
(B) the product of the Exchange Ratio (prior to any adjustment) and the
Parent Common Stock Closing Price, and (v) the product of (x) the Parent
Common Stock Closing Price and (y) 20,000 (such sum being referred to as the
A-6
"Total Merger Consideration") then the Exchange Ratio and the Cash
Consideration shall be adjusted as follows: The adjusted Exchange Ratio
shall be equal to (i) the sum of (A) 40% of the dollar amount of the Total
Merger Consideration determined as provided in the preceding sentence and
(B) the product of (x) the Parent Common Stock Closing Price and
(y) 20,000, divided by (ii) the product of (A) the number of Converted
Shares and (B) the Parent Common Stock Closing Price, and the adjusted Cash
Consideration shall be equal to (i) 60% of the dollar amount of the Total
Merger Consideration as determined above, minus the sum of (A) the amount of
cash paid by Parent and/or any of its subsidiaries to acquire shares of
Company Common Stock within the two year period prior to the date of the
Merger, (B) the number of Dissenting Shares, multiplied by the sum of
(x) the Cash Consideration (prior to any adjustment) and (y) the product of
the Exchange Ratio (prior to any adjustment) and the Parent Common Stock
Closing Price, and (C) the product of (x) the Parent Common Stock Closing
Price and (y) 20,000, divided by (ii) the number of Converted Shares.
(c) Notwithstanding the foregoing subsection (a), if between the date of
this Agreement and the Effective Time, the outstanding shares of Parent
Common Stock or Company Common Stock will have been changed into a different
number of shares by reason of any dividend payable in stock, split,
combination or similar event, the Per Share Merger Consideration will be
correspondingly adjusted to reflect such stock dividend, split, combination
or similar event.
(d) Notwithstanding any provision of this Agreement to the contrary,
(i) each share of Company Common Stock held in the treasury of the Company
or owned by any subsidiary of the Company, and each share of Company Common
Stock owned by Parent, Merger Sub or any other subsidiary of Parent
immediately prior to the Effective Time will be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto, and (ii) each share of Company Common Stock that is issued and
outstanding immediately prior to the Effective Time and that is held by a
stockholder who has properly exercised appraisal rights with respect thereto
in accordance with Section 262 of Delaware Law (the "Dissenting Shares"),
will not be converted into or be exchangeable for the right to receive the
Per Share Merger Consideration, and such stockholder will be entitled to
receive payment of the appraised value of each such share in accordance with
the provisions of Section 262 of Delaware Law unless and until such
stockholder fails to perfect or will have effectively waived, withdrawn or
lost its rights to appraisal and payment in accordance with Delaware Law.
If, after the Effective Time, any stockholder holding Dissenting Shares
fails to perfect or shall have effectively waived, withdrawn or lost such
appraisal right, such shares of Company Common Stock will thereupon be
treated as if they had been converted into and to have become exchangeable
for, at the Effective Time, the right to receive the Per Share Merger
Consideration to which such stockholder is entitled, without any interest
thereon. The Company will give Parent prompt notice of any demands received
by the Company for appraisal of shares of Company Common Stock and, prior to
the Effective Time, Parent will have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company will not, except with the prior written consent
of Parent, make any payment with respect to, or settle or offer to settle,
any such demands or agree to do any of the foregoing.
(e) All shares of Company Common Stock shall cease to be outstanding and
will automatically be canceled and retired, and each certificate previously
evidencing Company Common Stock outstanding immediately prior to the
Effective Time (other than Company Common Stock described in
SECTION 2.01(D)) (the "Converted Shares") will thereafter represent the
right to receive, subject to SECTION 2.03(C), that number of shares of
Parent Common Stock and the Cash Consideration determined pursuant to
SECTION 2.01(A) (the "Merger Consideration") and, if applicable, cash
pursuant to SECTION 2.03(C). The owners of certificates previously
evidencing Converted Shares will cease to have any rights with respect to
such Converted Shares except as otherwise provided herein or by law. Such
certificates previously evidencing Converted Shares will
A-7
be exchanged for certificates evidencing whole shares of Parent Common Stock
upon the surrender of such certificates in accordance with the provisions of
SECTION 2.03, without interest. No fractional shares of Parent Common Stock
will be issued in connection with the Merger and, in lieu thereof, a cash
payment shall be made pursuant to SECTION 2.03(C).
(f) Each share of common stock, par value $0.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time will be
converted into one share of common stock, par value $0.01 per share, of the
Surviving Corporation.
SECTION 2.02. TREATMENT OF STOCK OPTIONS AND OTHER EQUITY-BASED AWARDS.
(a) Each outstanding option to purchase, stock appreciation right, phantom
stock award, or performance share award (other than performance share awards
which are generally payable in cash) relating to Company Common Stock
(collectively, a "Company Common Stock Award") granted prior to the Effective
Time and which remains outstanding immediately prior to the Effective Time will
cease to represent a right to acquire shares of Company Common Stock and will be
converted (as so converted, a "Company Converted Stock Award"), at the Effective
Time, into an option to acquire, stock appreciation right, phantom stock award,
or performance share award (other than performance share awards which are
generally payable in cash) relating to, as applicable, on the same terms and
conditions as were applicable under the Company Common Stock Award (but taking
into account any change thereto, including the acceleration thereof provided for
in the applicable Company stock option plan or in any award agreement by reason
of this Agreement or the transactions contemplated hereby) that number of shares
of Parent Common Stock determined by multiplying (a) the number of shares of
Company Common Stock subject to such Company Common Stock Award by (b) the sum
of (i) the Exchange Ratio plus (ii) the Cash Consideration per share divided by
the closing price for a share of Parent Common Stock as reported on the NYSE on
the last trading day immediately preceding the Closing Date (such sum, the
"Stock Award Exchange Ratio") (rounded, if necessary, to the nearest whole share
of Parent Common Stock). The exercise price per share for each share of Parent
Common Stock subject to such Company Converted Stock Award will be equal to the
per share exercise price specified in the Company Common Stock Award divided by
the Stock Award Exchange Ratio (rounded to the nearest one-hundredth of a cent).
Notwithstanding the foregoing, in the case of any Company Common Stock Award to
which Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code, the option price, the number of shares subject to such
option and the terms and conditions of exercise of such option will be
determined in a manner consistent with the requirements of Section 424(a) of the
Code. Performance share awards which are generally payable in cash, but which
permit the holder to elect receipt of shares (as provided in the applicable
grant agreement), shall be converted into a right to elect to receive new shares
of Parent Common Stock.
(b) As soon as practicable after the Effective Time, Parent shall cause to
be included under a registration statement on Form S-8 of Parent all shares of
Parent Common Stock which are subject to Company Converted Stock Awards, and
shall maintain the effectiveness of such registration statement until all
Company Converted Stock Awards have been exercised, expired or forfeited.
SECTION 2.03. EXCHANGE AND SURRENDER OF CERTIFICATES.
(a) As soon as practicable after the Effective Time, each record holder of
certificates previously evidencing Converted Shares will be entitled to receive,
and Parent shall cause the Exchange Agent (as defined in
SECTION 2.03(E) below) to issue and pay, as applicable, to each such record
holder or to such persons as such holder may request upon surrender of such
certificates to the Exchange Agent, (i) a certificate or certificates
representing the number of whole shares of Parent Common Stock into which the
Converted Shares so surrendered will have been converted as aforesaid, in such
denominations and registered in such names as such holder may request, and
(ii) the Cash Consideration into which the Converted Shares so surrendered will
have been converted. If such holder would otherwise be entitled to fractional
shares of Parent Common Stock, such holder will upon surrender of the
certificates
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representing such shares held as aforesaid, be paid an amount in cash in
accordance with the provisions of SECTION 2.03(C). Until so surrendered and
exchanged, each certificate previously evidencing Converted Shares will
represent solely the right to receive the Merger Consideration and cash in lieu
of fractional shares. Unless and until any such certificates will be so
surrendered and exchanged, no dividends or other distributions payable to the
holders of record of Parent Common Stock as of any time on or after the
Effective Time will be paid to the holders of record of Converted Shares;
PROVIDED, HOWEVER, that Parent will deposit with the Exchange Agent any such
dividends or other distributions payable with respect to the Parent Common Stock
represented by any unsurrendered certificates evidencing Converted Shares, and
upon any such surrender and exchange of such certificates, Parent will cause the
Exchange Agent to pay to the holders of record of Converted Shares (i) the
amount, without interest thereon, of dividends and other distributions, if any,
with a record date on or after the Effective Time theretofore paid with respect
to such whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions, if any, with a record date
on or after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock.
(b) All shares of Parent Common Stock issued and all Cash Consideration paid
upon the surrender for exchange of certificates previously representing
Converted Shares in accordance with the terms hereof (including any cash paid
pursuant to SECTION 2.03(C)) will be deemed to have been issued in full
satisfaction of all rights pertaining to such Converted Shares. At and after the
Effective Time, there will be no further registration of transfers on the stock
transfer books of the Surviving Corporation of Company Common Stock that was
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates that previously evidenced Converted Shares are presented to
the Surviving Corporation for any reason, they will be canceled and exchanged as
provided in this ARTICLE II.
(c) No certificates or scrip evidencing fractional shares of Parent Common
Stock will be issued upon the surrender for exchange of certificates, and such
fractional share interests will not entitle the owner thereof to any rights of a
stockholder of Parent. In lieu of any such fractional shares, Parent will cause
the Exchange Agent to pay to the owner thereof, upon surrender of such
certificate for exchange pursuant to this ARTICLE II, an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the
Closing Price by (ii) the fractional interest to which the owner thereof would
otherwise be entitled (after taking into account all Converted Shares held of
record by such owner and all full shares of Parent Common Stock issued in
respect thereof).
(d) Parent will be entitled to cause the Exchange Agent to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any former holder of Converted Shares such amounts as Parent (or any affiliate
thereof) is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld, such withheld amounts will be treated
for all purposes of this Agreement as having been paid to the former holder of
the Converted Shares in respect of which such deduction and withholding was made
by Parent.
(e) At or prior to the Effective Time, Merger Sub will appoint a bank or
trust company reasonably acceptable to the Company as agent for the holders of
Converted Shares (the "Exchange Agent") to receive and disburse the Merger
Consideration to which holders of Converted Shares become entitled pursuant to
SECTION 2.01. At the Effective Time, Merger Sub or Parent will provide the
Exchange Agent with sufficient shares of Parent Common Stock and sufficient cash
to allow the Merger Consideration to be paid by the Exchange Agent for each
share of Company Common Stock then entitled to receive the Merger Consideration
(collectively, the "Payment Fund").
(f) Promptly after the Effective Time, Merger Sub or Parent will cause the
Exchange Agent to mail to each record holder of a certificate or certificates
that immediately prior to the Effective Time
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represented Converted Shares (the "Certificates"), a form of letter of
transmittal (which will specify that delivery will be effected, and risk of loss
and title to the Certificates will pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment.
(i) Upon surrender to the Exchange Agent of a Certificate, together with
such letter of transmittal duly executed and completed in accordance with
its instructions and such other documents as may be requested, the holder of
such Certificate will be entitled to receive in exchange for such
Certificate, subject to any required withholding of taxes, the Merger
Consideration and such Certificate will forthwith be canceled. No interest
will be paid or accrued on the Merger Consideration upon the surrender of
the Certificates.
(ii) If payment or delivery is to be made to a person other than the
person in whose name the Certificate surrendered is registered, it will be a
condition of payment and delivery that the Certificate so surrendered be
properly endorsed, with signature properly guaranteed, or otherwise be in
proper form for transfer and that the person requesting such payment and
delivery pay any transfer or other taxes required by reason of the payment
or delivery to a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable.
(iii) Subject to SECTION 2.01(D), until surrendered in accordance with
the provisions of this SECTION 2.03, each Certificate (other than
Certificates held by persons referred to in SECTIONS 2.01(D)(I) and
2.01(D)(II)) will represent for all purposes only the right to receive the
applicable Merger Consideration, without interest and subject to any
required withholding of taxes.
(g) Promptly following the date that is one year after the Effective Time,
the Exchange Agent will return to the Surviving Corporation all cash,
certificates and other property in its possession that constitute any portion of
the Payment Fund, and the duties of the Exchange Agent will terminate.
Thereafter, each holder of a Certificate formerly representing a share of
Company Common Stock may surrender such Certificate to the Surviving Corporation
and (subject to applicable abandoned property, escheat, and similar laws)
receive in exchange therefor the Merger Consideration without any interest. At
any time after the one year anniversary of the Effective Time, the Surviving
Corporation will be entitled to require the Exchange Agent to deliver to it any
funds (including any interest received with respect thereto) that had been made
available to the Exchange Agent, and holders of Certificates not surrendered
prior to midnight on the day preceding the Surviving Corporation's request for
such funds shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates without any interest thereon. Notwithstanding the foregoing,
neither the Parent, Merger Sub, the Surviving Corporation nor the Exchange Agent
will be liable to any holder of a Certificate for Merger Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law. Notwithstanding the foregoing, the Surviving Corporation will be
entitled to receive from time to time all interest or other amounts earned with
respect to the Payment Fund as such amounts accrue or become available.
(h) Parent and the Company shall cooperate in the preparation, execution and
filing of all returns, applications or other documents regarding any transfer,
stamp, recording, documentary or other taxes and any other fees and similar
taxes which become payable in connection with the Merger other than
(i) transfer and stamp taxes payable in respect of transfers pursuant to
SECTION 2.03(F)(II) and (ii) income or similar taxes payable by the stockholders
of the Company (collectively, "Transfer Taxes"). From and after the Effective
Time, Parent shall pay or cause to be paid, without deduction or withholding
from any amounts payable to the holders of Company Common Stock, all Transfer
Taxes.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and Merger Sub
that, except as disclosed in the Company Reports (as defined in
SECTION 3.07(A)) filed prior to the date of this Agreement:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its subsidiaries is a corporation, limited partnership or limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, has all
requisite corporate, limited partnership or limited liability company power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, other than where the failure to be so duly qualified and in good
standing would not have a Company Material Adverse Effect. The term "Company
Material Adverse Effect" as used in this Agreement shall mean any change or
effect that, individually or when taken together with all other such changes or
effects, would be materially adverse to the business, operations, assets,
financial condition, or results of operations of the Company and its
subsidiaries, taken as a whole; PROVIDED, that none of the following shall be
deemed in and of themselves to constitute, and none of the following shall be
taken into account in determining whether there has been, a Company Material
Adverse Effect:(i) any change in the market price or trading volume of the
capital stock of the Company after the date hereof, (ii) the suspension of
trading in securities generally on the New York Stock Exchange or the American
Stock Exchange or the NASDAQ National Market, (iii) any adverse change, event,
development or offset arising from or relating to (A) general business or
economic conditions or (B) general business or economic conditions relating to
any industries in which the Company or any of its subsidiaries participates, in
each case which is not specific to the Company and its subsidiaries, and
(iv) any adverse change, event, development or effect arising from or relating
to any change in U.S. generally accepted accounting principles.
SECTION 3.02. CHARTER AND BYLAWS. The Company has heretofore furnished to
Parent complete and correct copies of the charter and the bylaws, in each case
as amended or restated, of the Company. The Company is not in violation of any
of the provisions of its charter or bylaws.
SECTION 3.03. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (i) 10,000,000
shares of Preferred Stock par value $1.00 per share, and (ii) 150,000,000 shares
of Company Common Stock. As of March 31, 2001, 35,603,696 shares of Company
Common Stock were issued and outstanding and no shares of Preferred Stock were
issued and outstanding. Each of the outstanding shares of capital stock of the
Company is duly authorized, validly issued, fully paid and nonassessable, and
has not been issued in violation of (nor are any of the authorized shares of
capital stock of the Company subject to) any preemptive or similar rights
created by statute, the charter or bylaws of the Company, or any agreement to
which the Company is a party or bound. The outstanding shares of capital stock
of the subsidiaries of the Company are owned, of record and beneficially, by the
Company or another subsidiary of the Company, free and clear of all security
interests, liens, pledges or charges.
(b) Except as set forth in the disclosure schedule delivered to Parent by
the Company (the "Company Disclosure Schedule"), there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
(including stock appreciation rights, phantom stock or similar rights,
arrangements, or commitments) to which the Company or any of its subsidiaries is
a party relating to the issued or unissued capital stock of the Company or any
of its subsidiaries or obligating the Company or any of its subsidiaries to
grant, issue or sell any shares of the capital stock
A-11
of the Company or any of its subsidiaries by sale, lease, license or otherwise.
Except as set forth in the Company Disclosure Schedule, there are no material
obligations, contingent or otherwise, of the Company or any of its subsidiaries
to (i) repurchase, redeem or otherwise acquire any shares of the capital stock
of the Company or any of its subsidiaries or (ii) provide funds to, or make any
investment in (in the form of a loan, capital contribution or otherwise), or
provide any guarantee with respect to the obligations of, any other person,
other than advances to subsidiaries in the normal course of business. Except as
described in the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries (x) directly or indirectly owns, (y) has agreed to purchase or
otherwise acquire or (z) holds any interest convertible into or exchangeable or
exercisable for, any material amount of capital stock (or equivalent equity
interest) of any person (other than direct or indirect wholly-owned subsidiaries
of the Company). Except as set forth in the Company Disclosure Schedule, there
are no material agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be entitled to
receive any payment based on the revenues or earnings, or calculated in
accordance therewith, of the Company or any of its subsidiaries. There are no
material voting trusts, proxies or other agreements or understandings to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound with respect to the voting of any shares of capital
stock of the Company or any of its subsidiaries.
SECTION 3.04. AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (subject to, with respect to the consummation
of the Merger, the approval of this Agreement by the Requisite Company
Stockholder Vote as described in SECTION 3.16). This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery thereof by Parent and Merger Sub, constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company does not,
and the consummation of the transactions contemplated hereby will not
(i) conflict with or violate the charter or bylaws, in each case as amended or
restated, of the Company or any of its subsidiaries, (ii) conflict with or
violate any federal, state, foreign or local law, statute, ordinance, rule,
regulation, order, judgment, injunction or decree (collectively, "Laws")
applicable to the Company or any of its subsidiaries or by which any of their
assets is bound or subject or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or require payment under, or result in the
creation of a Lien on any of the assets of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by or to which the
Company or any of its subsidiaries or any of their assets is bound or subject,
except, with respect to clauses (ii) and (iii) above, (A) such conflicts,
violations, breaches, defaults, terminations, amendments, accelerations,
cancellations, payments, or Liens as would not have a Company Material Adverse
Effect or (B) as set forth in the Company Disclosure Schedule.
(b) No filing with or notification to, and no consent, license, approval,
permit, waiver, order or authorization of, any governmental or regulatory
authority, foreign or domestic (collectively, "Governmental Entities") is
necessary for the execution of this Agreement by the Company or the consummation
by the Company of the transactions contemplated by this Agreement, except:
(i) the filing of a premerger notification and report form under the
Hart-Scott-Rodino Antitrust Improvements
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Act of 1976, as amended (the "HSR Act"), (ii) the filing with the Securities and
Exchange Commission (the "SEC") of: (A) the Joint Proxy Statement/Prospectus (as
defined in SECTION 6.02); and (B) such reports under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, (iii) the
filing of the certificate of merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, and (iv) such filings with or notifications
to, and such consents, license, approvals, permits, waivers, orders, or
authorizations of, any Governmental Entities the failure of which to make or
receive would not have a Company Material Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE. Each of the Company and its subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "Company Permits"), and there is
no Litigation (as defined in SECTION 3.10) pending or, to the Company's
knowledge, threatened regarding suspension or cancellation of any of the Company
Permits, other than the failure to so possess, or such Litigation which would
not have a Company Material Adverse Effect. Neither the Company nor any of its
subsidiaries is in conflict with, or in default (nor has there occurred any
event that with notice or lapse of time or both would become a default) or
violation of (a) any Law applicable to the Company or any of its subsidiaries or
by or to which any of their assets is bound or subject or (b) any of the Company
Permits, except for such conflicts, defaults or violations as would not have a
Company Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed with the SEC all forms, reports, statements, and
documents required to be filed by it pursuant to the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act"), and the Exchange Act, and the rules and regulations promulgated
thereunder, together with all amendments thereto and will file all such forms,
reports, statements and documents required to be filed by it prior to the
Effective Time (collectively, the "Company Reports"), and has otherwise complied
in all material respects with the requirements of the Securities Act and the
Exchange Act.
(b) As of their respective dates, the Company Reports did not and (in the
case of Company Reports filed after the date of this Agreement) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were or (in the case of Company
Reports filed after the date of this Agreement) will be made, not misleading.
(c) Each of the historical consolidated balance sheets included in or
incorporated by reference into the Company Reports as of its date, and each of
the historical consolidated statements of income and earnings, stockholders'
equity, and cash flows included in or incorporated by reference into the Company
Reports (including any related notes and schedules) fairly presents or will (in
the case of Company Reports filed after the date of this Agreement) fairly
present in all material respects the consolidated financial condition, results
of operations, stockholders' equity, and cash flows, as the case may be, of the
Company and its subsidiaries for the periods set forth (subject, in the case of
unaudited statements, to normal year-end audit adjustments), in each case, in
accordance with generally accepted accounting principles consistently applied
during the periods involved ("GAAP").
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Company Reports filed prior to the date of this Agreement or as set forth in
the Company Disclosure Schedule and except for the transactions contemplated
hereby, from May 28, 2000 (the "Company Balance Sheet Date") through the date
hereof, the Company and its subsidiaries, taken as a whole, have conducted their
businesses only in the ordinary course and in a manner consistent with past
A-13
practice and there has not been: (a) any damage, destruction or loss (whether or
not covered by insurance) with respect to any assets of the Company or any of
its subsidiaries that would have a Company Material Adverse Effect; (b) any
material change by the Company or any of its subsidiaries in their accounting
methods, principles or practices (except as may be required by applicable Law or
GAAP); (c) any declaration, setting aside or payment of any dividends or
distributions in respect of shares of the capital stock of the Company or any of
its subsidiaries (other than dividends permitted in Article V), or any
redemption, purchase or other acquisition by the Company or any of its
subsidiaries of any of their securities (other than repurchases after the
Company Balance Sheet Date pursuant to stock repurchase programs disclosed in
the Company Reports); (d) any split, combination or reclassification of any
capital stock of the Company or any of its subsidiaries or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of capital stock of the Company or any of its
subsidiaries; (e) any acquisition, divestiture, or investment in the equity or
debt securities of any person (including in any joint venture or similar
arrangement) material to the Company and its subsidiaries, taken as a whole;
(f) any entry by the Company or any of its subsidiaries into any commitment or
transaction material to the Company and its subsidiaries, taken as a whole,
other than in the ordinary course of business and consistent with past practice;
or (g) any Company Material Adverse Effect.
SECTION 3.09. NO UNDISCLOSED LIABILITIES. As of the date hereof, except as
and to the extent set forth in the Company Disclosure Schedule, in the audited
consolidated financial statements of the Company for the period ended as of
May 28, 2000, in the condensed consolidated balance sheets of the Company as of
August 27, 2000, November 26, 2000 and February 25, 2001 or in the Company
Reports, neither the Company nor any of its subsidiaries has any material
liabilities or obligations, absolute, accrued, contingent or otherwise
(collectively, "Liabilities"), of a type required to be recorded on a balance
sheet or notes thereto under GAAP which are not so recorded.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth in the Company
Disclosure Schedule and except as would not have a Company Material Adverse
Effect, there is no claim, action, suit, litigation, proceeding, arbitration,
investigation or audit of any kind, at law or in equity (including actions or
proceedings seeking injunctive relief) (collectively, "Litigation"), pending or,
to the Company's knowledge, threatened against the Company or any of its
subsidiaries or any assets or rights of the Company or any of its subsidiaries
and neither the Company nor any of its subsidiaries is subject to any material,
continuing order of, consent decree, settlement agreement or other similar
material written agreement with, or, continuing investigation by, any
Governmental Entity, or any material judgment, order, writ, injunction, decree
or award of any Government Entity or arbitrator, including, without limitation,
cease-and-desist or other orders.
SECTION 3.11. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Set forth in the Company Disclosure Schedule is a complete and correct
list of all employee benefit plans, arrangements or agreements, including, but
not limited to, any employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), all plans or policies providing for "fringe benefits," all other
bonus, incentive compensation, deferred compensation, profit sharing, severance,
stock option, stock purchase, stock appreciation right, supplemental
unemployment, layoff, consulting, or any other similar plan, agreement, policy
or understanding, and any trust, escrow or other agreement related thereto,
which provides benefits, or describes policies or procedures applicable, to any
officer, employee, director, consultant, former officer or former director of
the Company, any of its subsidiaries, or any other ERISA Affiliate, or any
dependent or beneficiary thereof (each, a "Company Employee Plan," and
collectively, the "Company Employee Plans"). The term "Company ERISA Affiliate"
means any corporation, trade or business which together with the Company would
be deemed to be a single employer under the provisions of ERISA or Code
Section 414. Except as set forth in the Company Disclosure Schedule or as
otherwise contemplated pursuant to this Agreement, neither the Company
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nor any of its subsidiaries has communicated to any employee of the Company or
any of its subsidiaries any intention or commitment to materially modify any
Company Employee Plan or to establish or implement any other material benefit
plan, program or arrangement.
(b) With respect to each Company Employee Plan, the Company has made
available to Parent true, correct and complete copies of (i) the plan documents
and summary plan descriptions and any amendments or modifications thereto other
than for any plans that are Multiemployer Plans (defined below); (ii) the most
recent determination letter, if applicable, received from the Internal Revenue
Service (the "IRS") and a copy of any pending applications with the IRS;
(iii) the annual reports required to be filed for the two most recent plan
years, including all attachments, exhibits and schedules thereto; (iv) the two
most recent actuarial reports, if applicable; (v) all related trust agreements,
insurance contracts or other funding agreements; and (vi) all other documents,
records or other materials related thereto reasonably requested by Parent.
(c) Except as set forth in the Company Disclosure Schedule, (i) each of the
Company Employee Plans has been operated and administered in all material
respects in compliance with applicable Law, including but not limited to ERISA
and the Code; (ii) each of the Company Employee Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a determination
letter from the IRS to such effect and the Company knows of no event that would
cause the disqualification of any such Employee Plan; (iii) with respect to each
Company Employee Plan that is subject to Title IV of ERISA, the present value of
such Company Employee Plan's "accumulated benefit obligation," based on
reasonable actuarial assumptions set forth in the actuarial statement for the
Company Employee Plan, did not, as of its then latest valuation date, exceed the
fair value of the assets of such Employee Plan allocable to such obligation in
an amount that would have a Company Material Adverse Effect; (iv) no Company
Employee Plan provides welfare benefits (whether or not insured) with respect to
current or former employees of the Company or any of its subsidiaries beyond
their retirement or other termination of service, other than coverage mandated
by applicable law; (v) no liability under Title IV of ERISA or Section 412 of
the Code has been incurred (directly or indirectly) by the Company or a Company
ERISA Affiliate that has not been satisfied in full; (vi) no Company Employee
Plan is a "multiemployer pension plan," as such term is defined in
Section 3(37) of ERISA ("Multiemployer Plan"), or a plan described in
Section 4063 of ERISA; (vii) all contributions or other amounts payable by the
Company or any Company ERISA Affiliate as of the Closing Date with respect to
each Company Employee Plan in respect of current or prior plan years have been
paid or accrued in accordance with GAAP and, if applicable, Section 412 of the
Code; (viii) neither the Company, any subsidiary, nor any other Company ERISA
Affiliate has engaged in a transaction in connection with which the Company or
any of its subsidiaries or any other Company ERISA Affiliate would be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
tax imposed pursuant to Section 4975 or 4976 of the Code that would have a
Company Material Adverse Effect; (ix) there are no pending, anticipated or, to
the knowledge of the Company, threatened claims (other than routine claims for
benefits) by, on behalf of or against any of the Company Employee Plans or any
trusts related thereto or against any employee benefit plan formerly maintained
by the Company or any of its subsidiaries; (x) the Company Employee Plans could
be terminated as of the Closing Date without any liability to Parent, the
Company or any of its subsidiaries or any other ERISA Affiliate that,
individually or in the aggregate, would have a Company Material Adverse Effect;
(xi) each agreement, contract or other commitment, obligation or arrangement
relating to a Company Employee Plan or the assets of a Company Employee Plan (or
its related trust) including, but not limited to, each administrative services
agreement, insurance policy or annuity contract, may be amended or terminated at
any time without any liability, cost, or expense, individually or in the
aggregate, to the Company Employee Plan, the Company, or any of its subsidiaries
that would have a Company Material Adverse Effect; (xii) neither the Company,
any of its subsidiaries, nor any other Company ERISA Affiliate maintains or has
ever participated in a multiple employer welfare arrangement as described in
Section 3(40)(A) of ERISA; (xiii) no Lien has been filed by any person or
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entity and no Lien exists by operation of law or otherwise on the assets of the
Company or any of its subsidiaries relating to, or as a result of, the operation
or maintenance of any Company Employee Plan, and the Company has no knowledge of
the existence of facts or circumstances that would result in the imposition of
such Lien; (xiv) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (1) result in any
material payment becoming due to any director or any employee of the Company or
any of its subsidiaries; (2) materially increase any benefits otherwise payable
under any Company Employee Plan; (3) result in any acceleration of the time of
payment or vesting of any benefits under any Company Employee Plan to any
material extent; or (4) result, separately or in the aggregate, in an "excess
parachute payment" within the meaning of Section 280G of the Code; and (xv) no
amounts payable under any Company Employee Plan or other agreement or
arrangement shall fail to be deductible for United States federal income tax
purposes by virtue of Section 162(m) of the Code.
(d) The Company, its subsidiaries, and each other Company ERISA Affiliate
has or will have, as of Closing, made all contributions to each Multiemployer
Plan required by the terms of such Multiemployer Plan or any collective
bargaining agreement, and except as set forth in the Company Disclosure
Schedule, none of the Company, any of its subsidiaries, any other Company ERISA
Affiliate, Parent or Merger Sub would be subject to any withdrawal liability
under Part 1 of Subtitle E of Title IV of ERISA if, as of the Closing Date, the
Company, any of its subsidiaries, or any other Company ERISA Affiliate were to
engage in a complete withdrawal (as defined in ERISA Section 4203) or a partial
withdrawal (as defined in ERISA Section 4205) from any Multiemployer Plan which
withdrawal liability is likely to be incurred in connection with the Merger and
the other transactions contemplated hereby and would have a Company Material
Adverse Effect.
(e) The Company and its subsidiaries are in compliance with all applicable
Laws respecting employment, employment practices and wages and hours and with
all provisions of each collective bargaining agreement to which it is a party,
other than any noncompliance that would not have a Company Material Adverse
Effect. There is no pending or, to the Company's knowledge, threatened
(i) labor dispute, strike or work stoppage against the Company or any of its
subsidiaries which may materially interfere with the respective business
activities of the Company or any of its subsidiaries prior to or after the
Effective Time or (ii) charge or complaint against the Company or any of its
subsidiaries by the National Labor Relations Board or any comparable state
agency, other than such dispute, strike, stoppage, charge or complaint that
would not have a Company Material Adverse Effect.
SECTION 3.12. TAXES. Except as set forth in the Company Disclosure
Schedule and except for such matters as would not have a Company Material
Adverse Effect, (i) all returns and reports ("Tax Returns") required to be filed
by or with respect to the Company and each of its subsidiaries have been filed;
(ii) the Company and each of its subsidiaries has paid all Taxes that are due
from or with respect to it; (iii) the Company and each of its subsidiaries has
withheld and paid all Taxes required by all applicable laws to be withheld or
paid in connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party; (iv) there are no outstanding
agreements, waivers, or arrangements extending the statutory period of
limitation applicable to any claim for, or the period for the collection or
assessment of, Taxes due from or with respect to the Company or any of its
subsidiaries for any taxable period; (v) no material audit, action, proceeding,
investigation, dispute or claim by any court, governmental or regulatory
authority, or similar person is being conducted or is pending or, to the
Company's knowledge, threatened in regard to any Taxes due from or with respect
to the Company or any of its subsidiaries or any Tax Return filed by or with
respect to the Company or any of its subsidiaries; (vi) no claim has been made
by a taxing authority in a jurisdiction in which the Company does not file Tax
Returns that the Company is required to file Tax Returns in such jurisdictions;
(vii) no material assessment of any deficiency for Taxes is proposed against the
Company or any of its subsidiaries or any of their assets; (viii) there are no
Liens for Taxes (other than for current Taxes not yet due and payable) upon the
assets of the Company or any of its
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subsidiaries; (ix) neither the Company nor any of its subsidiaries has any
obligation or liability for the payment of Taxes of any other person arising as
a result of Treas. Reg. Section1.1502-6 (or any corresponding provision of
state, local or foreign income tax laws) any obligation to indemnify another
person or as a result of the Company or any of its subsidiaries assuming or
succeeding to the Tax liability of any other person as a successor, transferee
or otherwise; (x) all Taxes accrued but not yet due and all contingent
liabilities for Taxes are adequately reflected in the reserves for Taxes in the
financial statements referred to in SECTION 3.07; and (xi) none of the Company
or any of its subsidiaries has been a party to any distribution occurring during
the last two years in which the parties to such distribution treated the
distribution as one to which Section 355 of the Code is applicable.
SECTION 3.13. AFFILIATES. To the knowledge of the Company as of the date
hereof, the only persons who may be deemed to be affiliates of the Company under
Rule 145 of the Securities Act are its directors and executive officers. The
Company acknowledges that certificates representing shares of Parent Common
Stock issued to affiliates of the Company will bear an appropriate legend under
the Securities Act.
SECTION 3.14. CERTAIN BUSINESS PRACTICES. Since the date that is five years
prior to the date of this Agreement none of the Company or any of its
subsidiaries, or, to the Company's knowledge, any directors, officers, agents or
employees of the Company or any of its subsidiaries has (a) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (c) made any other unlawful payment.
SECTION 3.15. ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Company Disclosure Schedule:
(i) the properties, operations and activities of the Company and its
subsidiaries are in compliance with all applicable Environmental Laws (as
defined in SECTION 3.15(B)), other than any failure to comply as would not
have a Company Material Adverse Effect;
(ii) the Company and its subsidiaries and the properties and operations
of the Company and its subsidiaries are not subject to any existing, pending
or to the Company's knowledge, threatened action, suit, claim,
investigation, inquiry or proceeding by or before any Governmental Entity
under any Environmental Law, other than such actions, suits, claims,
investigations, inquiries or proceedings as would not have a Company
Material Adverse Effect;
(iii) all notices, permits, licenses, or similar formal authorizations,
if any, required to be obtained or filed by the Company or any of its
subsidiaries under any Environmental Law in connection with any aspect of
the business of the Company or its subsidiaries, including without
limitation those relating to the treatment, storage, disposal or release of
a Hazardous Substance (as defined in SECTION 3.15(C)), have been duly
obtained or filed and will remain valid and in effect after the Merger, and
the Company and its subsidiaries are in compliance with the terms and
conditions of all such notices, permits, licenses and similar
authorizations, other than any such failure to obtain, file, or maintain in
effect, or such noncompliance as would not have a Company Material Adverse
Effect;
(iv) the Company and its subsidiaries have satisfied and are currently
in compliance with all financial responsibility requirements applicable to
their operations and imposed by any Governmental Entity under any
Environmental Law, and the Company and its subsidiaries have not received
any notice of noncompliance with any such financial responsibility
requirements, other than any such failure to satisfy or noncompliance as
would not have a Company Material Adverse Effect;
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(v) there are no environmental conditions existing on any property of
the Company or its subsidiaries or resulting from the Company's or such
subsidiaries' operations or activities, past or present, at any location,
that would give rise to any on-site or off-site remedial obligations imposed
on the Company or any of its subsidiaries under any Environmental Laws or
that would impact the soil, groundwater, surface water or human health,
other than any such conditions as would not have a Company Material Adverse
Effect;
(vi) to the knowledge of the Company, since the effective date of the
relevant requirements of applicable Environmental Laws and to the extent
required by such applicable Environmental Laws, all hazardous or otherwise
regulated substances generated by the Company and its subsidiaries have been
transported only by carriers authorized under Environmental Laws to
transport such substances and wastes, and disposed of only at treatment,
storage, and disposal facilities authorized under Environmental Laws to
treat, store or dispose of such substances and wastes, other than any such
noncompliance as would not have a Company Material Adverse Effect; and
(vii) there has been no exposure of any person or property to Hazardous
Substances or any pollutant or contaminant, nor has there been any release
of Hazardous Substances, or any pollutant or contaminant into the
environment by the Company or its subsidiaries or in connection with their
properties or operations that would give rise to any claim against the
Company or any of its subsidiaries for damages or compensation, other than
any such exposure or release as would not have a Company Material Adverse
Effect.
(b) For purposes of this Agreement, the term "Environmental Laws" shall mean
any and all laws, statutes, ordinances, rules, regulations, permits or orders of
any Governmental Entity pertaining to health or the environment currently in
effect in any and all jurisdictions in which the Company, Parent or any of their
respective subsidiaries, as applicable, owned or owns property or has conducted
or conducts business, including without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, any state Laws
implementing the foregoing federal laws, and all other environmental
conservation or protection laws.
(c) For purposes of this Agreement, the term "Hazardous Substance" means any
substance presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous under any Environmental Law.
Hazardous Substances include any substance to which exposure is regulated by any
Governmental Entity or any Environmental Law, including without limitation any
toxic waste, pollutant, contaminant, Hazardous Substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos containing material, urea formaldehyde, foam insulation, lead or
polychlorinated biphenyls.
SECTION 3.16. VOTE REQUIRED.
(a) The Board of Directors of the Company at a meeting duly called and held
(i) determined that the Merger is advisable and fair and in the best interests
of the Company and its stockholders; (ii) approved the Merger and this Agreement
and the transactions contemplated by this Agreement; (iii) recommended approval
of this Agreement and the Merger by the Company's stockholders; and
(iv) directed that the Merger be submitted for consideration by the Company's
stockholders.
(b) The only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger and adopt this Agreement is the
affirmative vote of holders of a majority of the outstanding shares of the
Company Common Stock entitled to vote thereon represented, in person or by
proxy, at a meeting at which a quorum is present, in accordance with the
rules of the NYSE and Delaware Law (the "Requisite Company Stockholder Vote").
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SECTION 3.17. BROKERS. Except for the fees payable to Goldman, Sachs &
Co., no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. Prior to the execution of this Agreement, the Company has delivered
to Parent a complete and correct copy of all agreements referenced in the
Company Disclosure Schedule pursuant to which any person or such firm will be
entitled to any payment or indemnification relating to the transactions
contemplated by this Agreement.
SECTION 3.18. TAKEOVER PROVISIONS. The Board of Directors of the Company
has approved the Merger and this Agreement, and such approval is sufficient to
render inapplicable to the Merger, this Agreement and the transactions
contemplated by this Agreement, Section 203 of Delaware Law and Article EIGHT of
the Company's Restated Certificate of Incorporation, as amended. Except as
otherwise disclosed in the Company Disclosure Schedule, no other "fair price"
"moratorium", "control share acquisition" or other form of antitakeover statute
or regulation, charter provision or contract that relates to or includes "fair
price," "moratorium," or other antitakeover provision is applicable to the
Merger or the other transactions contemplated hereby and could materially and
adversely affect the Merger or the other transactions contemplated hereby.
SECTION 3.19. INSURANCE. The Company and each of its subsidiaries is
currently insured, and has been insured, for reasonable amounts against such
risks as companies engaged in a similar business and similarly situated would,
in accordance with good business practice, customarily be insured.
SECTION 3.20. CERTAIN MATERIAL CONTRACTS. As of the date hereof and except
as set forth in the Company Disclosure Schedule or as disclosed in the Company
Reports, neither the Company nor any of its subsidiaries is a party to or bound
by (i) any "material contracts" (as such term is defined in Item 601(b)(10) of
Regulation S-K); (ii) any material joint ventures, partnerships, or similar
arrangements; (iii) other agreements or arrangements that give rise to a right
of the other parties thereto to terminate such material contract or to a right
of first refusal or similar right thereunder as a result of the execution and
delivery of this Agreement and the consummation by the Company of the Merger and
the other transactions contemplated hereby; (iv) any material employment,
consulting, severance or termination agreement with any director, officer,
employee, agent or consultant of the Company or any of its subsidiaries;
(v) any material severance programs, policies, plans or arrangements to which
the Company or any of its subsidiaries is obligated, whether or not written
(except that any of such items that are imposed by applicable Law need not be
disclosed on the Company Disclosure Schedule); or (vi) any agreements, licenses
or other arrangements that could, after the Effective Time, restrict Parent or
any of its affiliates or any successor thereto, from engaging in or competing
with any line of business or in any geographic area (collectively, the "Company
Material Contracts"). All Company Material Contracts are valid and in full force
and effect except to the extent they have previously expired in accordance with
their terms or if the failure to be in full force and effect would not have a
Company Material Adverse Effect. Neither the Company nor any of its subsidiaries
has violated any provision of, or committed or failed to perform any act which,
with or without notice, lapse of time or both, would constitute a default under
the provisions of, any Company Material Contract, except in each case for those
violations and defaults which would not result in a Company Material Adverse
Effect.
SECTION 3.21. PRINCIPAL CUSTOMERS AND SUPPLIERS. The Company has made
available to Parent a list of the ten largest customers by approximate dollar
volume of the Company and its subsidiaries (the "Largest Customers") and the ten
largest suppliers by approximate dollar volume of the Company and its
subsidiaries (the "Largest Suppliers"), with the amount of revenues or payments,
as applicable, attributable to each such customer and supplier for the Company's
1999 and 2000 fiscal years and the first nine months of its 2001 fiscal year.
Except as described in the Company Disclosure Schedule, none of the Largest
Customers or Largest Suppliers has terminated or materially altered its
relationship with the Company since the beginning of the Company's 2001 fiscal
year, or, to the Company's knowledge,
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threatened to do so or otherwise notified the Company of any intention to do so,
except for any such terminations or alterations as would not have a Company
Material Adverse Effect.
SECTION 3.22. INTELLECTUAL PROPERTY.
(a) The Company and its subsidiaries own, or have the right to use without
infringing or violating the rights of any third parties, except where such
infringement or violation has not had, or would not have, a Company Material
Adverse Effect: (i) each trademark, trade name, brand name, service mark or
other trade designation owned or licensed by or to the Company or any of its
subsidiaries, each patent, copyright and similar intellectual property owned or
licensed to or by the Company and each license, royalty, assignment or other
similar agreement and each registration and application relating to the
foregoing that is material to the conduct of the business of the Company and its
subsidiaries taken as a whole; and (ii) each agreement relating to technology,
know-how or processes that the Company or its subsidiaries is licensed or
authorized to use, or which it licenses or authorizes others to use, that is
material to the conduct of the business of the Company and its subsidiaries
taken as a whole (collectively, the "Company Intellectual Property"). No consent
of third parties will be required for the use of the Company Intellectual
Property after the Effective Time, except as set forth in the Company Disclosure
Schedule or where the failure to obtain such consent would not have, a Company
Material Adverse Effect. No claim has been asserted by any person against the
Company or any of its subsidiaries regarding the ownership of or the right to
use any Company Intellectual Property or challenging the rights of the Company
or any of its subsidiaries with respect to any of the Company Intellectual
Property which would have a Company Material Adverse Effect.
(b) Except as set forth in the Company Disclosure Schedule, to the Company's
knowledge, no person or entity has asserted any claim that any product, activity
or operation of the Company or any of its subsidiaries infringes upon or
involves, or has resulted in the infringement of, any proprietary right of such
person or entity, except for such infringement which has not had or would not
have a Company Material Adverse Effect; and no proceedings have been instituted,
are pending or, to the Company's knowledge, are threatened which challenge the
rights of the Company or any of its subsidiaries with respect thereto, which
would have a Company Material Adverse Effect.
SECTION 3.23. OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Goldman, Sachs & Co. to the effect that, as of the date of this
Agreement, the Per Share Merger Consideration to be received by the holders of
the Company Common Stock in the Merger is fair, from a financial point of view,
to such holders.
SECTION 3.24. RIGHTS AGREEMENT. The Company has made available to Parent a
true and complete copy of the Company's Rights Agreement in effect on the date
hereof. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in a "Distribution Date" as
defined in such Rights Agreement or the triggering of any other right or
entitlement of the Company's stockholders under such Rights Agreement.
SECTION 3.25. INFORMATION SUPPLIED.
(a) None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in (A) the Form S-4 (as defined in
SECTION 6.02) will, at the time the Form S-4 is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (B) the Joint Proxy Statement/ Prospectus will, on the date
it is first mailed to stockholders of the Company or Parent or at the time of
the meeting of the stockholders of the Company or Parent, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
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With regard to the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus, such information will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder.
(b) Notwithstanding the foregoing provisions of this SECTION 3.25, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by Parent for inclusion or
incorporation by reference therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, hereby represent and warrant
to the Company that, except as disclosed in the Parent Reports (as defined in
SECTION 4.07) filed prior to the date of this Agreement:
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent
and its subsidiaries is a corporation, limited partnership or limited liability
company, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization, has all requisite
corporate, limited partnership or limited liability company power and authority
to own, lease and operate its properties and to carry on its business as it is
now being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a Parent Material Adverse Effect. The term "Parent Material Adverse Effect"
as used in this Agreement shall mean any change or effect that, individually or
when taken together with all other such changes or effects, would be materially
adverse to the business, operations, assets, financial condition, or results of
operations of the Parent and its subsidiaries, taken as a whole; PROVIDED, that
none of the following shall be deemed in and of themselves to constitute, and
none of the following shall be taken into account in determining whether there
has been, a Parent Material Adverse Effect:(i) any change in the market price or
trading volume of the capital stock of the Parent after the date hereof, (ii)
the suspension of trading in securities generally on the NYSE or the American
Stock Exchange or the NASDAQ National Market, (iii) any adverse change, event,
development or offset arising from or relating to (A) general business or
economic conditions or (B) general business or economic conditions relating to
any industries in which the Parent or any of its subsidiaries participates, in
each case which is not specific to the Parent and its subsidiaries, and
(iv) any adverse change, event, development or effect arising from or relating
to any change in U.S. generally accepted accounting principles.
SECTION 4.02. CHARTER AND BYLAWS. Parent has heretofore furnished to the
Company complete and correct copies of the charter and the bylaws, in each case
as amended or restated, of Parent. Parent is not in violation of any of the
provisions of its charter or bylaws.
SECTION 4.03. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of (i) 1,000,000 shares
of Preferred Stock par value $.01 per share, and (ii) 500,000,000 shares of
Parent Common Stock. As of March 31, 2001, 27,455,865 shares of Parent Common
Stock were issued and outstanding and no shares of Preferred Stock were issued
and outstanding. Each of the outstanding shares of capital stock of Parent is
duly authorized, validly issued, fully paid and nonassessable, and has not been
issued in violation of (nor are any of the authorized shares of capital stock of
Parent subject to) any preemptive or similar rights created by statute, the
charter or bylaws of Parent, or any agreement to which Parent is a party or
bound. Except as set forth in the Parent Disclosure Schedule, the outstanding
shares of capital stock of
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the subsidiaries of Parent are owned, of record and beneficially, by Parent or
another subsidiary of Parent, free and clear of all security interests, liens,
pledges or charges.
(b) Except as set forth in the disclosure schedule delivered to the Company
(the "Parent Disclosure Schedule"), there are no options, warrants or other
rights, agreements, arrangements or commitments of any character (including
stock appreciation rights, phantom stock or similar rights, arrangements or
commitments) to which Parent or any of its subsidiaries is a party relating to
the issued or unissued capital stock of Parent or any of its subsidiaries or
obligating Parent or any of its subsidiaries to grant, issue or sell any shares
of the capital stock of Parent or any of its subsidiaries by sale, lease,
license or otherwise. Except as set forth in the Parent Disclosure Schedule,
there are no material obligations, contingent or otherwise, of Parent or any of
its subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of
the capital stock of Parent or any of its subsidiaries or (ii) provide funds to,
or make any investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the obligations of, any
other person, other than advances to subsidiaries in the normal course of
business. Except as described in the Parent Disclosure Schedule, neither Parent
nor any of its subsidiaries (x) directly or indirectly owns, (y) has agreed to
purchase or otherwise acquire or (z) holds any interest convertible into or
exchangeable or exercisable for, any material amount of capital stock (or
equivalent equity interest) of any person (other than direct or indirect
wholly-owned subsidiaries of the Parent). Except as set forth in the Parent
Disclosure Schedule, there are no material agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled to receive any payment based on the revenues or
earnings, or calculated in accordance therewith, of Parent or any of its
subsidiaries. There are no material voting trusts, proxies or other agreements
or understandings to which Parent or any of its subsidiaries is a party or by
which Parent or any of its subsidiaries is bound with respect to the voting of
any shares of capital stock of Parent or any of its subsidiaries.
SECTION 4.04. AUTHORITY. Parent has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of Parent are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (subject to, with respect to the issuance of shares of
Parent Common Stock upon consummation of the Merger, the approval of this
Agreement by the Requisite Parent Stockholder Vote as described in
SECTION 4.15). This Agreement has been duly executed and delivered by Parent
and, assuming the due authorization, execution and delivery thereof by the
Company, constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent does not, and the
consummation of the transactions contemplated hereby will not (i) conflict with
or violate the charter or bylaws, in each case as amended or restated, of Parent
or any of its subsidiaries, (ii) conflict with or violate any Laws applicable to
Parent or any of its subsidiaries or by which any of their assets is bound or
subject or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of a Lien on any of the
assets of Parent or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or any of its subsidiaries is a
party or by or to which Parent or any of its subsidiaries or any of their assets
is bound or subject, except, with respect to clauses (ii) and (iii) above, such
conflicts, violations, breaches, defaults, terminations, amendments,
accelerations, cancellations, payments or Liens as would not have a Parent
Material Adverse Effect, or (B) as set forth in the Parent Disclosure Schedule.
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(b) No filing with or notification to, and no consent, license, approval,
permit, waiver, order or authorization of, any Governmental Entity is necessary
for the execution of this Agreement by the Parent or the consummation by Parent
of the transactions contemplated by this Agreement, except: (i) the filing of a
premerger notification and report form under the HSR Act; (ii) the filing with
the SEC of: (A) the Joint Proxy Statement/Prospectus; and (B) such reports under
the Exchange Act, as may be required in connection with this Agreement and the
transactions contemplated by this Agreement; (iii) the filing of the certificate
of merger with the Delaware Secretary of State and appropriate documents with
the relevant authorities of other states in which the Merger Sub is qualified to
do business; and (iv) such filings with or notifications to, and such consents,
license, approvals, permits, waivers, orders, or authorizations of, any
Governmental Entities the failure of which to make or receive would not have a
Parent Material Adverse Effect.
SECTION 4.06. PERMITS; COMPLIANCE. Except as set forth in the Parent
Disclosure Schedule, each of Parent and its subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "Parent Permits"), and there is no Litigation
pending or, to Parent's knowledge, threatened regarding suspension or
cancellation of any of the Parent Permits, other than the failure to so possess,
or such Litigation which would not have a Parent Material Adverse Effect.
Neither Parent nor any of its subsidiaries is in conflict with, or in default
(nor has there occurred any event that with notice or lapse of time or both
would become a default) or violation of (a) any Law applicable to Parent or any
of its subsidiaries or by or to which any of their assets is bound or subject or
(b) any of the Parent Permits, except for such conflicts, defaults or violations
as would not have a Parent Material Adverse Effect.
SECTION 4.07. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has filed with the SEC all forms, reports, statements, and
documents required to be filed by it pursuant to the Securities Act and the
Exchange Act, and the rules and regulations promulgated thereunder, together
with all amendments thereto and will file all such forms, reports, statements
and documents required to be filed by it prior to the Effective Time
(collectively, the "Parent Reports"), and has otherwise complied in all material
respects with the requirements of the Securities Act and the Exchange Act.
(b) As of their respective dates, Parent Reports did not and (in the case of
Parent Reports filed after the date of this Agreement) will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were or (in the case of Parent Reports filed
after the date of this Agreement) will be made, not misleading.
(c) Each of the historical consolidated balance sheets included in or
incorporated by reference into Parent Reports as of its date, and each of the
historical consolidated statements of income and earnings, stockholders' equity,
and cash flows included in or incorporated by reference into Parent Reports
(including any related notes and schedules) fairly presents or will (in the case
of Parent Reports filed after the date of this Agreement) fairly present in all
material respects the consolidated financial condition, results of operations,
stockholders' equity, and cash flows, as the case may be, of Parent and its
subsidiaries for the periods set forth (subject, in the case of unaudited
statements, to normal year-end audit adjustments), in each case, in accordance
with GAAP.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Parent Reports filed prior to the date of this Agreement or as set forth in the
Company Disclosure Schedule and except for the transactions contemplated hereby,
from December 31, 2000 (the "Parent Balance Sheet Date") through the date
hereof, Parent and its subsidiaries, taken as a whole, have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and there has not been: (a) any damage, destruction or loss (whether or
not covered by insurance) with respect to any assets of
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Parent or any of its subsidiaries that would have a Parent Material Adverse
Effect; (b) any material change by Parent or any of its subsidiaries in their
accounting methods, principles or practices (except as may be required by
applicable Law or GAAP); (c) any declaration, setting aside or payment of any
dividends or distributions in respect of shares of the capital stock of Parent
or any of its subsidiaries (other than dividends permitted in Article V), or any
redemption, purchase or other acquisition by Parent or any of its subsidiaries
of any of their securities (other than repurchases after the Parent Balance
Sheet Date pursuant to stock repurchase programs disclosed in the Parent
Reports); (d) any split, combination or reclassification of any capital stock of
Parent or any of its subsidiaries or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of Parent or any of its subsidiaries; (e) any
acquisition, divestiture, or investment in the equity or debt securities of any
person (including in any joint venture or similar arrangement) material to
Parent and its subsidiaries, taken as a whole; (f) any entry by Parent or any of
its subsidiaries into any commitment or transaction material to Parent and its
subsidiaries, taken as a whole, other than in the ordinary course of business
and consistent with past practice; or (g) any Parent Material Adverse Effect.
SECTION 4.09. NO UNDISCLOSED LIABILITIES. As of the date hereof, except as
and to the extent set forth in the Parent Disclosure Schedule, in the audited
consolidated financial statements of Parent for the period ended as of
December 31, 2000 or in the Parent Reports, neither Parent nor any of its
subsidiaries has any material Liabilities of a type required to be recorded on a
balance sheet or notes thereto under GAAP which are not so recorded.
SECTION 4.10. ABSENCE OF LITIGATION. Except as set forth in the Parent
Disclosure Schedule and except as would not have a Parent Material Adverse
Effect, there is no Litigation pending or, to Parent's knowledge, threatened
against Parent or any of its subsidiaries or any assets or rights of Parent or
any of its subsidiaries and neither Parent nor any of its subsidiaries is
subject to any material continuing order of, consent decree, settlement
agreement or other similar material written agreement with, or, continuing
investigation by, any Governmental Entity, or any material judgment, order,
writ, injunction, decree or award of any Government Entity or arbitrator,
including, without limitation, cease-and-desist or other orders.
SECTION 4.11. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Set forth in the Parent Disclosure Schedule is a complete and correct
list of all employee benefit plans, arrangements or agreements, including, but
not limited to, any employee benefit plan within the meaning of
Section 3(3) of ERISA, all plans or policies providing for "fringe benefits,"
all other bonus, incentive compensation, deferred compensation, profit sharing,
severance, stock option, stock purchase, stock appreciation right, supplemental
unemployment, layoff, consulting, or any other similar plan, agreement, policy
or understanding, and any trust, escrow or other agreement related thereto,
which provides benefits, or describes policies or procedures applicable, to any
officer, employee, director, consultant, former officer or former director of
Parent, any of its subsidiaries, or any other Parent ERISA Affiliate, or any
dependent or beneficiary thereof (each, a "Parent Employee Plan," and
collectively, the "Parent Employee Plans"). The term "Parent ERISA Affiliate"
means any corporation, trade or business which together with Parent would be
deemed to be a single employer under the provisions of ERISA or Code
Section 414. Except as set forth in the Parent Disclosure Schedule or as
otherwise contemplated pursuant to this Agreement, neither Parent nor any of its
subsidiaries has communicated to any employee of Parent or any of its
subsidiaries any intention or commitment to materially modify any Parent
Employee Plan or to establish or implement any other material benefit plan,
program or arrangement.
(b) With respect to each Parent Employee Plan, the Parent has made available
to Company true, correct and complete copies of (i) the plan documents and
summary plan descriptions and any amendments or modifications thereto other than
for any plans that are Multiemployer Plans; (ii) the
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most recent determination letter, if applicable, received from the IRS and a
copy of any pending applications with the IRS; (iii) the annual reports required
to be filed for the two most recent plan years, including all attachments,
exhibits and schedules thereto; (iv) the two most recent actuarial reports, if
applicable; (v) all related trust agreements, insurance contracts or other
funding agreements; and (vi) all other documents, records or other materials
related thereto reasonably requested by Company.
(c) Except as set forth in the Parent Disclosure Schedule, (i) each of the
Parent Employee Plans has been operated and administered in all material
respects in compliance with applicable Law, including but not limited to ERISA
and the Code; (ii) each of the Parent Employee Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a determination
letter from the IRS to such effect and Parent knows of no event that would cause
the disqualification of any such Parent Employee Plan; (iii) with respect to
each Parent Employee Plan that is subject to Title IV of ERISA, the present
value of such Parent Employee Plan's "accumulated benefit obligation," based on
reasonable actuarial assumptions set forth in the actuarial statement for the
Parent Employee Plan, did not, as of its then latest valuation date, exceed the
fair value of the assets of such Parent Employee Plan allocable to such
obligation in an amount that would have a Parent Material Adverse Effect;
(iv) no Parent Employee Plan provides welfare benefits (whether or not insured)
with respect to current or former employees of Parent or any of its subsidiaries
beyond their retirement or other termination of service, other than coverage
mandated by applicable law; (v) no liability under Title IV of ERISA or
Section 412 of the Code has been incurred (directly or indirectly) by Parent or
a Parent ERISA Affiliate that has not been satisfied in full; (vi) no Parent
Employee Plan is a Multiemployer Plan, or a plan described in Section 4063 of
ERISA; (vii) all contributions or other amounts payable by Parent or any Parent
ERISA Affiliate as of the Closing Date with respect to each Parent Employee Plan
in respect of current or prior plan years have been paid or accrued in
accordance with GAAP and, if applicable, Section 412 of the Code;
(viii) neither Parent, any subsidiary, nor any other Parent ERISA Affiliate has
engaged in a transaction in connection with which Parent or any of its
subsidiaries or any other Parent ERISA Affiliate would be subject to either a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code that would have a Parent
Material Adverse Effect; (ix) there are no pending, anticipated or, to the
knowledge of Parent, threatened claims (other than routine claims for benefits)
by, on behalf of or against any of the Parent Employee Plans or any trusts
related thereto or against any employee benefit plan formerly maintained by
Parent or any of its subsidiaries; (x) the Parent Employee Plans could be
terminated as of the Closing Date without any liability to Company, the Parent
or any of its subsidiaries or any other ERISA Affiliate that, individually or in
the aggregate, would have a Parent Material Adverse Effect; (xi) each agreement,
contract or other commitment, obligation or arrangement relating to a Parent
Employee Plan or the assets of a Parent Employee Plan (or its related trust)
including, but not limited to, each administrative services agreement, insurance
policy or annuity contract, may be amended or terminated at any time without any
liability, cost, or expense, individually or in the aggregate, to the Parent
Employee Plan, the Parent, or any of its subsidiaries that would have a Parent
Material Adverse Effect; (xii) neither Parent, any of its subsidiaries, nor any
other Parent ERISA Affiliate maintains or has ever participated in a multiple
employer welfare arrangement as described in Section 3(40)(A) of ERISA;
(xiii) no Lien has been filed by any person or entity and no lien exists by
operation of law or otherwise on the assets of Parent or any of its subsidiaries
relating to, or as a result of, the operation or maintenance of any Parent
Employee Plan, and Parent has no knowledge of the existence of facts or
circumstances that would result in the imposition of such Lien; (xiv) neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (1) result in any material payment
becoming due to any director or any employee of Parent or any of its
subsidiaries; (2) materially increase any benefits otherwise payable under any
Parent Employee Plan; (3) result in any acceleration of the time of payment or
vesting of any benefits under any Parent Employee Plan to any material extent;
or (4) result, separately or in the
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aggregate, in an "excess parachute payment" within the meaning of Section 280G
of the Code; and (xv) no amounts payable under any Parent Employee Plan or other
agreement or arrangement shall fail to be deductible for United States federal
income tax purposes by virtue of Section 162(m) of the Code.
(d) The Parent, its subsidiaries, and each other Parent ERISA Affiliate has
or will have, as of Closing, made all contributions to each Multiemployer Plan
required by the terms of such Multiemployer Plan or any collective bargaining
agreement, and except as set forth in the Parent Disclosure Schedule, none of
the Parent, any of its subsidiaries, any other Parent ERISA Affiliate, Parent or
Merger Sub would be subject to any withdrawal liability under Part 1 of Subtitle
E of Title IV of ERISA if, as of the Closing Date, the Parent, any of its
subsidiaries, or any other Parent ERISA Affiliate were to engage in a complete
withdrawal (as defined in ERISA Section 4203) or a partial withdrawal (as
defined in ERISA Section 4205) from any Multiemployer Plan which withdrawal
liability is likely to be incurred in connection with the Merger and the other
transactions contemplated hereby and would have a Parent Material Adverse
Effect.
(e) Parent and its subsidiaries are in compliance with all applicable Laws
respecting employment, employment practices and wages and hours and with all
provisions of each collective bargaining agreement to which it is a party, other
than any noncompliance that would not have a Parent Material Adverse Effect.
There is no pending or, to Parent's knowledge, threatened (i) labor dispute,
strike or work stoppage against Parent or any of its subsidiaries which may
materially interfere with the respective business activities of Parent or any of
its subsidiaries prior to or after the Effective Time, or (ii) charge or
complaint against Parent or any of its subsidiaries by the National Labor
Relations Board or any comparable state agency, other than such dispute, strike,
stoppage, charge or complaint that would not have a Parent Material Adverse
Effect.
SECTION 4.12. TAXES. Except as set forth in the Parent Disclosure
Schedule and except for such matters as would not have a Parent Material Adverse
Effect, (i) all returns and reports ("Tax Returns") required to be filed by or
with respect to Parent and each of its subsidiaries have been filed;
(ii) Parent and each of its subsidiaries has paid all Taxes that are due from or
with respect to it; (iii) Parent and each of its subsidiaries has withheld and
paid all Taxes required by all applicable laws to be withheld or paid in
connection with any amounts paid or owing to any employee, creditor, independent
contractor or other third party; (iv) there are no outstanding agreements,
waivers, or arrangements extending the statutory period of limitation applicable
to any claim for, or the period for the collection or assessment of, Taxes due
from or with respect to Parent or any of its subsidiaries for any taxable
period; (v) no material audit, action, proceeding, investigation, dispute or
claim by any court, governmental or regulatory authority, or similar person is
being conducted or is pending or, to the Parent's knowledge, threatened in
regard to any Taxes due from or with respect to Parent or any of its
subsidiaries or any Tax Return filed by or with respect to Parent or any of its
subsidiaries; (vi) no claim has been made by a taxing authority in a
jurisdiction in which Parent does not file Tax Returns that Parent is required
to file Tax Returns in such jurisdictions; (vii) no material assessment of any
deficiency for Taxes is proposed against Parent or any of its subsidiaries or
any of their assets; (viii) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of Parent or any of its
subsidiaries; (ix) neither Parent nor any of its subsidiaries has any obligation
or liability for the payment of Taxes of any other person arising as a result of
Treas. Reg. Section1.1502-6 (or any corresponding provision of state, local or
foreign income tax laws) any obligation to indemnify another person or as a
result of Parent or any of its subsidiaries assuming or succeeding to the Tax
liability of any other person as a successor, transferee or otherwise; (x) all
Taxes accrued but not yet due and all contingent liabilities for Taxes are
adequately reflected in the reserves for Taxes in the financial statements
referred to in SECTION 4.07; and (xi) none of Parent or any of its subsidiaries
has been a party to any distribution occurring during the last two years in
which the parties to such distribution treated the distribution as one to which
Section 355 of the Code is applicable.
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SECTION 4.13. CERTAIN BUSINESS PRACTICES. Since the date that is five years
prior to the date of this Agreement none of Parent or any of its subsidiaries,
or, to the knowledge of Parent, any directors, officers, agents or employees of
Parent or any of its subsidiaries has (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (c) made any other unlawful payment.
SECTION 4.14. ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Parent Disclosure Schedule:
(i) the properties, operations and activities of Parent and its subsidiaries
are in compliance with all applicable Environmental Laws, other than any
failure to comply as would not have a Parent Material Adverse Effect;
(ii) Parent and its subsidiaries and the properties and operations of Parent
and its subsidiaries are not subject to any existing, pending or to the
Parent's knowledge, threatened action, suit, claim, investigation,
inquiry or proceeding by or before any Governmental Entity under any
Environmental Law, other than such actions, suits, claims,
investigations, inquiries or proceedings as would not have a Parent
Material Adverse Effect;
(iii) all notices, permits, licenses, or similar formal authorizations, if
any, required to be obtained or filed by Parent or any of its
subsidiaries under any Environmental Law in connection with any aspect
of the business of Parent or its subsidiaries, including without
limitation those relating to the treatment, storage, disposal or
release of a Hazardous Substance, have been duly obtained or filed and
will remain valid and in effect after the Merger, and Parent and its
subsidiaries are in compliance with the terms and conditions of all
such notices, permits, licenses and similar authorizations, other than
any such failure to obtain, file, or maintain in effect, or such
noncompliance as would not have a Parent Material Adverse Effect;
(iv) Parent and its subsidiaries have satisfied and are currently in
compliance with all financial responsibility requirements applicable to
their operations and imposed by any Governmental Entity under any
Environmental Law, and Parent and its subsidiaries have not received
any notice of noncompliance with any such financial responsibility
requirements, other than any such failure to satisfy or noncompliance
as would not have a Parent Material Adverse Effect;
(v) there are no environmental conditions existing on any property of Parent
or its subsidiaries or resulting from Parent's or such subsidiaries'
operations or activities, past or present, at any location, that would
give rise to any material on-site or off-site remedial obligations
imposed on Parent or any of its subsidiaries under any Environmental
Laws or that would impact the soil, groundwater, surface water or human
health, other than any such conditions as would not have a Parent
Material Adverse Effect; and
(vi) to the knowledge of Parent, since the effective date of the relevant
requirements of applicable Environmental Laws and to the extent
required by such applicable Environmental Laws, all hazardous or
otherwise regulated substances generated by Parent and its subsidiaries
have been transported only by carriers authorized under Environmental
Laws to transport such substances and wastes, and disposed of only at
treatment, storage, and disposal facilities authorized under
Environmental Laws to treat, store or dispose of such substances and
wastes, other than any such noncompliance as would not have a Parent
Material Adverse Effect; and
(vii) there has been no exposure of any person or property to Hazardous
Substances or any pollutant or contaminant, nor has there been any
release of Hazardous Substances, or any pollutant or contaminant into
the environment by Parent or its subsidiaries or in connection
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with their properties or operations that would give rise to any claim
against Parent or any of its subsidiaries for damages or compensation,
other than any such exposure or release as would not have a Parent
Material Adverse Effect.
SECTION 4.15. VOTE REQUIRED.
(a) The Board of Directors of Parent at a meeting duly called and held:
(i) determined that the Merger is advisable and fair and in the best interests
of Parent and its stockholders; (ii) approved the Merger and this Agreement and
the transactions contemplated by this Agreement; (iii) recommended approval of
this Agreement and the Merger by Parent's stockholders; and (iv) directed that
the Merger be submitted for consideration by Parent's stockholders.
(b) The only vote of the holders of any class or series of Parent capital
stock necessary to approve the issuance of the shares of Parent Common Stock
contemplated by this Agreement is the approval by the holders of a majority of
the shares of Parent Common Stock present and voting at a meeting of its
stockholders at which a quorum is present, in accordance with the rules of the
NYSE (the "Requisite Parent Stockholder Vote").
SECTION 4.16. BROKERS. Except for the fees payable to Bear, Stearns &
Co. Inc. and Morgan Stanley & Co. Incorporated, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
SECTION 4.17. TAKEOVER PROVISIONS. The Board of Directors of Parent has
approved the Merger and this Agreement, and such approval is sufficient to
render inapplicable to the Merger, this Agreement, and the transactions
contemplated by this Agreement, Section 203 of Delaware Law of Parent's
Certificate of Incorporation, as amended. Except as otherwise disclosed in the
Parent Disclosure Schedule, no other "fair price" "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation, charter
provision or contract that relates to or includes "fair price," "moratorium," or
other antitakeover provision is applicable to the Merger or the other
transactions contemplated hereby and could materially and adversely affect the
Merger or the other transactions contemplated hereby.
SECTION 4.18. INSURANCE. Parent and each of its subsidiaries is currently
insured, and has been insured, for reasonable amounts against such risks as
companies engaged in a similar business and similarly situated would, in
accordance with good business practice, customarily be insured.
SECTION 4.19. CERTAIN MATERIAL CONTRACTS. As of the date hereof and except
as set forth in the Parent Disclosure Schedule or as disclosed in the Parent
Reports, neither the Parent nor any of its subsidiaries is a party to or bound
by (i) any "material contracts" (as such term is defined in Item 601(b)(10) of
Regulation S-K); (ii) any material joint ventures, partnerships, or similar
arrangements; (iii) other agreements or arrangements that give rise to a right
of the other parties thereto to terminate such material contract or to a right
of first refusal or similar right thereunder as a result of the execution and
delivery of this Agreement and the consummation by the Parent of the Merger and
the other transactions contemplated hereby; (iv) any material employment,
consulting, severance or termination agreement with any director, officer,
employee, agent or consultant of the Parent or any of its subsidiaries; or
(v) any material severance programs, policies, plans or arrangements to which
Parent or any of its subsidiaries is obligated whether or not written (except
that any such items that are imposed by applicable Law need not be disclosed on
the Parent Disclosure Schedule) (collectively, the "Parent Material Contracts").
All Parent Material Contracts are valid and in full force and effect except to
the extent they have previously expired in accordance with their terms or if the
failure to be in full force and effect would not have a Parent Material Adverse
Effect. Neither the Parent nor any of its subsidiaries has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time or both, would constitute a default under the provisions
of, any Parent
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Material Contract, except in each case for those violations and defaults which
would not result in a Parent Material Adverse Effect.
SECTION 4.20. PRINCIPAL CUSTOMERS AND SUPPLIERS. The Parent has made
available to the Company a list of the ten largest customers by approximate
dollar volume of the Parent and its subsidiaries (the "Largest Customers") and
the ten largest suppliers by approximate dollar volume of the Parent and its
subsidiaries (the "Largest Suppliers"), with the amount of revenues or payments,
as applicable, attributable to each such customer and supplier for the Parent's
1999 and 2000 fiscal years. Except as described in the Parent Disclosure
Schedule, none of the Largest Customers or Largest Suppliers has terminated or
materially altered its relationship with the Parent since the beginning of the
Parent's 2001 fiscal year, or, to the Parent's knowledge, threatened to do so or
otherwise notified the Parent of any intention to do so, except for any such
terminations or alterations as would not have a Parent Material Adverse Effect.
SECTION 4.21. INTELLECTUAL PROPERTY.
(a) Parent and its subsidiaries own, or have the right to use without
infringing or violating the rights of any third parties, except where such
infringement or violation has not had, or would not have a Parent Material
Adverse Effect (i) each trademark, trade name, brand name, service mark or other
trade designation owned or licensed by or to Parent or any of its subsidiaries,
each patent, copyright and similar intellectual property owned or licensed to or
by Parent and each license, royalty, assignment or other similar agreement and
each registration and application relating to the foregoing that is material to
the conduct of the business of Parent and its subsidiaries taken as a whole; and
(ii) each agreement relating to technology, know-how or processes that Parent or
its subsidiaries is licensed or authorized to use, or which it licenses or
authorizes others to use, that is material to the conduct of the business of
Parent and its subsidiaries taken as a whole (collectively, the "Parent
Intellectual Property"). No consent of third parties will be required for the
use of the Parent Intellectual Property after the Effective Time, except as set
forth in the Parent Disclosure Schedule or where the failure to obtain such
consent would not have a Parent Material Adverse Effect. No claim has been
asserted by any person against Parent or any of its subsidiaries regarding the
ownership of or the right to use any Parent Intellectual Property or challenging
the rights of Parent or any of its subsidiaries with respect to any of the
Parent Intellectual Property which would have a Parent Material Adverse Effect.
(b) Except as set forth in the Parent Disclosure Schedule, to Parent's
knowledge, no person or entity has asserted any claim that any product, activity
or operation of Parent or any of its subsidiaries infringes upon or involves, or
has resulted in the infringement of, any proprietary right of such person or
entity, except for such infringement which has not had, or would not have a
Parent Material Adverse Effect; and no proceedings have been instituted, are
pending or, to Parent "s knowledge, are threatened which challenge the rights of
Parent or any of its subsidiaries with respect thereto, which would have a
Parent Material Adverse Effect.
SECTION 4.22. OPINION OF FINANCIAL ADVISORS. Parent has received the
opinions of each of Bear, Stearns & Co. Inc. and Morgan Stanley & Co.
Incorporated to the effect that, as of the date of this Agreement, the Per Share
Merger Consideration is fair, from a financial point of view, to Parent.
SECTION 4.23. RIGHTS AGREEMENT Parent has made available to the Company a
true and complete copy of Parent's Rights Agreement in effect on the date
hereof. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in a "Distribution Date" as
defined in such Rights Agreement or the triggering of any other right or
entitlement of Parent's stockholders under such Rights Agreement.
SECTION 4.24. COMMITMENT LETTERS As of the date of this Agreement, Parent
has obtained and has provided to the Company a true and correct copy of
commitment letters to provide funds sufficient
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to pay the aggregate Cash Consideration contemplated under this Agreement and
any refinancing of the indebtedness of Parent and its subsidiaries required in
connection with the Merger.
SECTION 4.25. INFORMATION SUPPLIED.
(a) None of the information supplied or to be supplied by Parent for
inclusion or incorporation by reference in (A) the Form S-4 will, at the time
the Form S-4 is filed with the SEC, at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (B) the Joint Proxy
Statement/Prospectus will, on the date it is first mailed to stockholders of
Parent or Parent or at the time of the meeting of the stockholders of Parent or
Parent, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. With regard to the information supplied or to be supplied by the
Parent for inclusion or incorporation by reference in the Form S-4 and the Joint
Proxy Statement/ Prospectus, such information will comply as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder.
(b) Notwithstanding the foregoing provisions of this SECTION 4.25, no
representation or warranty is made by Parent with respect to statements made or
incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by the Company for inclusion
or incorporation by reference therein.
SECTION 4.26. MERGER SUB OPERATIONS. Merger Sub has not engaged in any
business since it was incorporated other than in connection with its
organization and the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY. Except as set forth in
the Company Disclosure Schedule, as required by applicable Law, as expressly
contemplated by this Agreement or as otherwise consented to in writing by
Parent, from the date of this Agreement until the Effective Time, the Company
hereby covenants and agrees that the Company will and will cause each of its
subsidiaries to:
(a) operate its business in all material respects only in the usual and
ordinary course consistent with past practices;
(b) use its commercially reasonable efforts to preserve substantially
intact its business organization and material lines of business, maintain
its Company Material Contracts, Company Permits and Company Intellectual
Property and other material rights, retain the services of its respective
officers and key employees and maintain its relationships with its customers
and suppliers and others having business dealings with them to the end that
their goodwill and ongoing businesses will be unimpaired at the Effective
Time;
(c) maintain and keep its assets in as good repair and condition as at
present, ordinary wear and tear excepted, and maintain supplies and
inventories in quantities consistent with its customary business practice;
and
(d) perform in all material respects its obligations under all Company
"material contracts" (as such term is defined in Item 601(b)(10) of
Regulation S-K) to which it is a party or by which it is bound.
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SECTION 5.02. NEGATIVE COVENANTS OF THE COMPANY. Except as set forth in
the Company Disclosure Schedule, as required by applicable Law, as expressly
contemplated by this Agreement or as otherwise consented to in writing by
Parent, from the date of this Agreement until the Effective Time, the Company
will not do, and will not permit any of its subsidiaries to do, any of the
following:
(a) (i) increase the compensation, deferred compensation, or termination
pay payable to or to become payable, to any director, executive officer,
employee, agent or consultant of the Company or any of its subsidiaries
except for increases in the ordinary course of business, including without
limitation, increases resulting from the operation of compensation
arrangements in effect prior to the date hereof; (ii) grant any severance
(other than pursuant to the normal severance policy as in effect on the date
of this Agreement) to, or enter into or amend in any material respect any
employment or severance agreement with, any director, officer, employee,
agent or consultant of the Company or any of its subsidiaries;
(iii) establish, adopt, enter into or amend in any material respect any
bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing or other employee benefit plan or arrangement; or (iv) amend
or otherwise modify in any respect that would be materially adverse to the
Company or any of its subsidiaries, or take any such other materially
adverse actions with respect to, any of the Company Material Contracts, any
Company Employee Plan or any other material employee benefit plans,
programs, agreements, policies or other arrangements described in this
Agreement;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock, except for (i) dividends by
a wholly owned subsidiary of the Company to the Company, or another wholly
owned subsidiary of the Company, (ii) dividends by a non-wholly owned
subsidiary of the Company to the Company, another subsidiary of the Company
or any other equity holder of such subsidiary so long as such dividends are
declared and paid on a pro rata basis in the ordinary course of business
consistent with past practices, and (iii) quarterly dividends of the Company
in amounts consistent with past practices; provided, however, that the
record dates of such dividends shall be as disclosed in the Company
Disclosure Schedule;
(c) (i) redeem, purchase or otherwise acquire, or agree to redeem,
purchase or otherwise acquire any shares of its or any of its subsidiaries'
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its or its subsidiaries' capital stock, or
any options, warrants or conversion or other rights (including any stock
appreciation rights, phantom stock or similar rights) to acquire any shares
of its or its subsidiaries' capital stock or any such securities or
obligations; (ii) adopt a plan with respect to or effect any liquidation,
dissolution, restructuring, reorganization or recapitalization of the
Company; or (iii) split, combine or reclassify any of the Company's capital
stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of the Company's
capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
Liens or limitations on voting rights) of, any shares of any class of its or
its subsidiaries' capital stock (including shares held in treasury), any
securities convertible into or exercisable or exchangeable for any such
shares, or any rights, warrants or options (including any stock appreciation
rights, phantom stock or similar rights) to acquire any such shares, other
than issuances, deliveries, awards, grants or sales of its capital stock
pursuant to obligations outstanding as of the date of this Agreement; or
(ii) amend or otherwise modify the terms of any such rights, warrants or
options the effect of which would be to make such terms materially less
favorable to the Company or any of its subsidiaries;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, by forming a
partnership or joint venture, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets
(collectively, "Acquisitions")
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except for any such Acquisitions (A) in which the fair market value of the
total consideration paid by the Company and its subsidiaries does not exceed
in the aggregate $10,000,000 and (B) that do not present a material risk of
making it more difficult to obtain any consents or approvals (including
pursuant to the HSR Act) required to consummate the transactions
contemplated by this Agreement;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its material assets or any material assets of
any of its subsidiaries (including securities), except for dispositions of
inventories and of assets in the ordinary course of business and consistent
with past practice;
(g) release any third party from its obligations, or grant any consent,
under any existing standstill provision relating to an Acquisition Proposal
(as defined in SECTION 5.04(A)), or under any similar confidentiality or
other agreement, or fail to fully enforce any such agreement;
(h) adopt or propose to adopt any amendments to its bylaws which would
have an adverse impact on the consummation of the Merger and the other
transactions contemplated by this Agreement or adopt or propose to adopt any
amendments to its charter;
(i) incur any obligation for borrowed money or purchase money
indebtedness (including as a guarantor or surety), whether or not evidenced
by a note, bond, debenture or similar instrument if such incurrence would
interfere with or make more difficult the consummation of the Merger or the
other transactions contemplated hereby or increase the cost to Parent of
consummating the Merger and such other transactions or make or incur any
capital expenditure except in the ordinary course of business consistent
with past practice;
(j) make any loan, advance or capital contribution to, or investment in,
any person (other than by the Company to any of its wholly-owned
subsidiaries or by any wholly-owned subsidiary of the Company to another
wholly-owned subsidiary of the Company or to the Company);
(k) enter into any material arrangement, agreement or contract with any
third party (other than customers in the ordinary course of business) that
provides for an exclusive arrangement with that third party for a term of
more than one year;
(l) enter into any arrangement, agreement or contract (i) that could,
after the Effective Time, restrict Parent or any of its affiliates or any
successor thereto, from engaging or competing in any line of business or in
any geographic area except as otherwise may be agreed to by Parent in
connection with the contemplated dispositions set forth in the Company
Disclosure Schedule; or (ii) that would be a Company Material Contract had
such contract been in existence on the date hereof;
(m) enter into, amend or extend any exclusive arrangement, agreement or
contract for milk supply unless such arrangement, agreement or contract
expires or may be terminated on or before December 31, 2001 without penalty;
(n) dispose of any part of its investment in White Wave, Inc., amend in
any material respect the agreements with respect to such investment or waive
any material rights relating thereto; or
(o) agree in writing to do any of the foregoing.
SECTION 5.03. AFFIRMATIVE AND NEGATIVE COVENANTS OF PARENT AND MERGER SUB.
(a) Except as set forth in the Parent Disclosure Schedule, as required by
applicable Law, as expressly contemplated by this Agreement or as otherwise
consented to in writing by the Company,
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from the date of this Agreement until the Effective Time, Parent hereby
covenants and agrees that Parent will and will cause each of its subsidiaries
to:
(i) operate its business in all material respects in the usual and
ordinary course consistent with past practices;
(ii) use its commercially reasonable efforts to preserve substantially
intact its business organization and material lines of business, maintain
its material rights, retain the services of its respective officers and key
employees and maintain its relationships with its customers and suppliers
and others having business dealings with them to the end that their goodwill
and ongoing businesses will be unimpaired at the Effective Time; and
(iii) perform in all material respects its obligations under all Parent
"material contracts" (as such term is defined in Item 601(b)(10) of
Regulation S-K) to which it is a party or by which it is bound.
(b) Except as set forth in the Parent Disclosure Schedule, as required by
applicable Law, or as expressly contemplated by this Agreement or otherwise
consented to in writing by the Company, from the date of this Agreement until
the Effective Time, Parent will not do, and will not permit any of its
subsidiaries to do, any of the following:
(i) knowingly take any action that would result in a failure to maintain
the listing of the Parent Common Stock on the NYSE;
(ii) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock except for (A) dividends by
a wholly owned subsidiary of Parent to Parent, or another wholly owned
subsidiary of Parent, or (B) dividends by a non-wholly subsidiary of Parent
to Parent, another subsidiary of Parent or any other equity holder of such
subsidiary so long as such dividends are declared and paid on a pro rata
basis in the ordinary course of business consistent with past practice;
(iii) adopt or propose to adopt any amendments to its charter or bylaws
which would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(iv) repurchase any shares of Parent Common Stock during the 10 trading
day period ending two business days prior to the Closing Date;
(v) consummate or agree to consummate an Acquisition except for any such
Acquisitions that do not present a material risk of making it more difficult
to obtain any consents or approvals (including pursuant to the HSR Act)
required to consummate the transactions contemplated by this Agreement; or
(vi) agree in writing to do any of the foregoing.
(c) Except as set forth in the Parent Disclosure Schedule, as required by
applicable Law, or as expressly contemplated by this Agreement or otherwise
consented to in writing by the Company, from the date of this Agreement until
the Effective Time, Merger Sub will not engage in any business or other
activities of any nature other than in connection with the Merger and the other
transactions contemplated by this Agreement.
SECTION 5.04. NON-SOLICITATION.
(a) Without limitation on the Company's other obligations under this
Agreement, the Company agrees that neither it nor any of its subsidiaries nor
any of its officers and directors or the officers and directors of any of its
subsidiaries will, and that it will not permit its or its subsidiaries'
employees, agents and representatives (including any investment banker, attorney
or accountant retained by it or any of its subsidiaries) to, directly or
indirectly, except as permitted by SECTION 5.04(C)(i) initiate, solicit,
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encourage or facilitate any inquiries or the making of any proposal or offer
with respect to, or a transaction to effect, a merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution, extraordinary dividend or similar transaction involving it or any
of its Significant Subsidiaries (as defined in SECTION 9.03), or any purchase or
sale of 10% or more of the consolidated assets (including without limitation
stock of its subsidiaries) of the Company and its subsidiaries taken as a whole,
or any purchase or sale of, or tender or exchange offer for, the equity
securities of the Company or any of its subsidiaries that, if consummated, would
result in any person (or the stockholders of such person) beneficially owning
securities representing 20% or more of the total voting power of the Company (or
of the surviving parent entity in such transaction) or any of its Significant
Subsidiaries (any such proposal, offer or transaction (other than a proposal or
offer made by Parent or an affiliate thereof) being hereinafter referred to as
an "Acquisition Proposal"), (ii) have any discussion with or provide any
information or data to any person relating to an Acquisition Proposal, or engage
in or continue any negotiations concerning an Acquisition Proposal, or
facilitate any effort or attempt to make or implement an Acquisition Proposal,
(iii) approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal or (iv) approve or recommend, or propose to approve or
recommend, or execute or enter into, any letter of intent, agreement in
principle, merger agreement, acquisition agreement, option agreement,
confidentiality agreement or other similar agreement or propose publicly or
agree to do any of the foregoing related to any Acquisition Proposal.
(b) The Board of Directors of the Company shall not effect a Change in the
Company Recommendation (as defined in SECTION 6.01(A)) unless:
(1) the Company Stockholders Meeting shall not have occurred and there
shall have been no breach of SECTION 5.04(A), and
(2) after consultation with outside counsel, the Board of Directors of
the Company determines in good faith that it is required to take such action
in order to discharge properly its fiduciary duties under applicable law.
(c) Notwithstanding SECTION 5.04(A) but subject to SECTION 5.04(E), the
Company may engage in any discussions and negotiations with, and provide
information and data to, any person and such person's representatives and
financing sources in response to an unsolicited bona fide written Acquisition
Proposal by any such person, so long as:
(1) the Company Stockholders Meeting shall not have occurred and there
shall have been no breach of SECTION 5.04(A),
(2) the Board of Directors of the Company concludes in good faith that
such Acquisition Proposal is reasonably likely (including after further
discussions and negotiations) to result in a Superior Proposal (as defined
below) or, after consultation with outside counsel, the Board of Directors
of the Company determines in good faith that it is required to take such
action in order to discharge properly its fiduciary duties under applicable
law,
(3) prior to providing any such information or data to any person in
connection with an Acquisition Proposal by any such person, the Board of
Directors of the Company receives from such person an executed
confidentiality agreement having provisions that are customary in such
agreements, as advised by outside counsel, provided that if such
confidentiality agreement contains provisions that are less restrictive than
the comparable provisions, or omits restrictive provisions, contained in the
Confidentiality Agreement dated February 9, 2001 between Parent and the
Company (the "Confidentiality Agreement"), then the Confidentiality
Agreement will be deemed to be amended to contain only such less restrictive
provisions or to omit such restrictive provisions, as the case may be, and
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(4) prior to providing any such information or data or entering into
such discussions or negotiations, the Company notifies Parent promptly of
the name of the person making such Acquisition Proposal and the material
terms and conditions thereof.
(d) For purposes of this Agreement, "Superior Proposal" means a bona fide
written Acquisition Proposal that either is not subject to a financing
contingency, or if it is subject to a financing contingency, is accompanied by
executed financing commitments from bona fide lenders in customary form and in a
sufficient amount, and is on terms that the Board of Directors of the Company in
good faith concludes (following receipt of the advice of its financial advisors
and outside counsel), taking into account, among other things, all legal,
financial, regulatory and other aspects of the proposal and the person making
the proposal, (i) will, if consummated, result in a transaction that is more
favorable to the Company's stockholders from a financial point of view than the
transactions contemplated by this Agreement and (ii) is likely to be completed.
(e) The Company agrees that it will, and will cause its officers, directors,
financial advisors, and representatives to, immediately cease and cause to be
terminated any activities, discussions or negotiations existing as of the date
of this Agreement with any parties conducted heretofore with respect to any
Acquisition Proposal. The Company agrees that it will promptly inform its
directors, officers, key employees, agents and representatives of the
obligations undertaken in this SECTION 5.04.
(f) Prior to the time that this Agreement is terminated in accordance with
its terms, the Company will not sign any agreement, letter of intent or other
similar instrument accepting an Acquisition Proposal by any person other than
Parent. Nothing in this SECTION 5.04 shall permit the Company to terminate this
Agreement (except as specifically provided in Article VIII hereof) or affect any
other obligation of the Company under this Agreement. The Company will not
submit to the vote of its stockholders any Acquisition Proposal other than the
Merger. Notwithstanding anything in this Agreement to the contrary, the Company
or its Board of Directors will be permitted to, to the extent applicable, comply
with Item 1012 of Regulation M-A promulgated under the Exchange Act with regard
to an Acquisition Proposal.
SECTION 5.05. ACCESS AND INFORMATION.
(a) The Company will, and will cause its subsidiaries to (i) afford to
Parent and its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives (collectively, the "Parent
Representatives") reasonable access at reasonable times throughout the period
prior to the Effective Time, upon reasonable prior notice, to the officers,
employees, agents, assets, offices and other facilities of the Company and its
subsidiaries and to the books and records thereof, (ii) furnish promptly to
Parent and the Parent Representatives such information concerning the business,
properties, contracts, records and personnel of the Company and its subsidiaries
(including, without limitation, financial, operating and other data and
information) as may be reasonably requested, from time to time throughout the
period prior to the Effective Time, by Parent, and (iii) afford to any potential
viable purchasers of any assets (including lines of business) of Parent, the
Company or any of their respective subsidiaries as contemplated under
SECTION 5.06(D) and to their officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives reasonable access
at reasonable times throughout the period prior to the Effective Time, upon
reasonable prior notice, to the officers, employees, agents, assets, offices and
other facilities of the Company and its subsidiaries and the books and records
in each case relating to such assets.
(b) Parent will, and will cause its subsidiaries to (i) afford to the
Company and its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives (collectively, the "Company
Representatives") reasonable access at reasonable times throughout the period
prior to the Effective Time, upon reasonable prior notice, to the officers,
employees, accountants, agents, properties, offices and other facilities of
Parent and its subsidiaries and to the books and records thereof and
(ii) furnish promptly to the Company and the Company Representatives
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such information concerning the business, properties, contracts, records and
personnel of Parent and its subsidiaries (including, without limitation,
financial, operating and other data and information) as may be reasonably
requested, from time to time throughout the period prior to the Effective Time,
by the Company.
(c) Notwithstanding the foregoing provisions of this SECTION 5.05, neither
party will be required to grant access or furnish information to the other party
to the extent that such access or the furnishing of such information is
prohibited by Law or would waive any rights to privileged communications. No
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties that are herein contained, and
each such representation and warranty will survive such investigation.
(d) The information received pursuant to subsections (a) and (b) above will
be deemed to be "Confidential Information" for purposes of the Confidentiality
Agreement.
SECTION 5.06. APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) Subject to the terms and conditions in this Agreement, the Company and
Parent will: (i) promptly after the date of this Agreement make their respective
filings under the HSR Act with respect to the Merger and thereafter shall
promptly make any other required submissions under the HSR Act; (ii) use their
reasonable best efforts to cooperate with one another in (A) determining which
filings and notifications are required to be made prior to the Effective Time
under applicable Law with, and which consents, licenses, approvals, permits,
waivers, orders or authorizations are required to be obtained prior to the
Effective Time under applicable Law from, Governmental Entities of the United
States and the several states in connection with the execution and delivery of
this Agreement and the consummation of the Merger and the transactions
contemplated hereby; (B) timely making all such filings and notifications and
timely seeking all such consents, licenses, approvals, permits, waivers, orders
or authorizations; and (C) as promptly as practicable, responding to any request
for information from such Governmental Entities; (iii) subject to any
restrictions under antitrust Laws, to the extent practicable, promptly notify
each other of any communication to that party from any Governmental Entity with
respect to this Agreement and the transactions contemplated hereby and permit
the other party to review in advance any proposed written communication to any
Governmental Entity; (iv) not agree to participate in any meeting with any
Governmental Entity in respect of any filings, investigation or other inquiry
with respect to this Agreement and the transactions contemplated hereby unless
it consults with the other party in advance and, to the extent permitted by such
Governmental Entity, give the other party the opportunity to attend and
participate thereat, in each case to the extent practicable; (v) subject to any
restrictions under antitrust Laws, furnish the other party with copies of all
correspondence, filings and communications (and memoranda setting forth the
substance thereof) between it and its affiliates and their respective
representatives on the one hand, and any Governmental Entity or members of its
staff on the other hand, with respect to this Agreement and the transactions
contemplated hereby (excluding documents and communications which are subject to
preexisting confidentiality agreements and to the attorney client privilege or
work product doctrine); and (vi) furnish the other party with such necessary
information and reasonable assistance as such other party and its affiliates may
reasonably request in connection with their preparation of necessary filings,
registration, or submissions of information to any Governmental Entities in
connection with this Agreement and the transactions contemplated hereby,
including without limitation any filings necessary or appropriate under the
provisions of the HSR Act.
(b) Without limiting SECTION 5.06(A) and subject in all respects to SECTIONS
5.06(C) and 5.06(D), Parent and the Company will: (i) each use its reasonable
best efforts to avoid the entry of, or to have vacated, lifted, reversed,
overturned or terminated, any order, judgment, injunction or decree (whether
temporary, preliminary or permanent) or any other judicial, administrative or
legislative action or proceeding ("Order") that would restrain, prevent or delay
the closing of the transactions contemplated
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by this Agreement, on or before December 31, 2001, including, without
limitation, defending through litigation on the merits any claim asserted in any
court by any party; and (ii) each use its reasonable best efforts to take any
steps necessary to avoid or eliminate each and every impediment under any
antitrust, competition or trade regulation Law that may be asserted by any
Governmental Entity with respect to the Merger so as to enable the Closing to
occur as soon as reasonably possible (and in any event no later than
December 31, 2001).
(c) Without limiting SECTION 5.06(A) and subject in all respects to
SECTION 5.06(D), Parent, on behalf of Parent and the Company, shall agree to
divest, hold separate, or otherwise take or commit to take any action that
limits its freedom of action with respect to, or its ability to retain, any of
the businesses, product lines or assets of Parent and/or the Company or any of
its subsidiaries, provided that any such action is conditioned upon the
consummation of the Merger. The Company agrees and acknowledges that, in
connection with any filing or submission required, action to be taken or
commitment to be made by Parent, the Company or any of its respective
subsidiaries to consummate the Merger or other transactions contemplated in this
Agreement, neither the Company nor any of its subsidiaries shall, without
Parent's prior written consent, divest any assets, commit to any divestiture of
assets or businesses of the Company and its subsidiaries or take any other
action or commit to take any action that would limit the Company's, Parent's or
any of their respective subsidiaries' freedom of action with respect to, or
their ability to retain, any of their businesses, product lines or assets.
(d) Notwithstanding the foregoing paragraphs of this SECTION 5.06, nothing
in this Agreement shall require Parent to agree to the sale, transfer,
divestiture or other disposition of any assets (including any lines of business)
of Parent, the Company or any of their respective subsidiaries or any of the
other actions contemplated in SECTION 5.06(C) if Parent concludes that the
taking of such action or the making of any commitments or the consequences
thereof would be reasonably likely to have a Combined Company Material Adverse
Effect (as defined below). Without limiting the foregoing, Parent hereby agrees
that it will agree to divest the processing plants set forth on
Exhibit 5.06(d) to this Agreement, and such other assets as are reasonably
necessary to operate such plants, in connection with its seeking, and will so
divest such plants if necessary in order to obtain, any necessary consent,
license, approval, permit, waiver, order or authorization under applicable
antitrust laws with respect to the transactions contemplated hereby and that
such divestitures, individually or in the aggregate, shall not constitute a
Combined Company Material Adverse Effect. For purposes of this Agreement
"Combined Company Material Adverse Effect" means any change or effect that,
individually or when taken together with all other such changes or effects,
would be materially adverse to the business, operations, assets, financial
condition, or results of operations of the Parent and its subsidiaries
(including the Company and its subsidiaries) after the Effective Time, taken as
a whole.
(e) Each of Parent and the Company shall give (or shall cause their
respective subsidiaries to give, as applicable) any notices to third parties,
and use (and cause their respective subsidiaries to use, as applicable) all
reasonable best efforts to obtain any other third party consents (i) necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement, (ii) otherwise required under any Company Material Contracts, Company
Permits or other agreements in connection with the consummation of the
transactions contemplated hereby or (iii) required to prevent a Company Material
Adverse Effect or a Parent Material Adverse Effect from occurring. In the event
that any party fails to obtain any third party consent described above and the
parties agree to consummate the Merger without such consent, such party will use
its commercially reasonable efforts, and will take any such actions reasonably
requested by the other parties, to limit the adverse effect upon the Company and
Parent, their respective subsidiaries and their respective businesses resulting
or which could reasonably be expected to result after the Effective Time from
the failure to obtain such consent.
(f) Each of Parent and the Company shall promptly notify the other of
(i) any material change in the current or future business, financial condition
or results of operations of it or any of its material subsidiaries, (ii) any
complaints, investigations or hearings (or communications indicating that the
same
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may be contemplated) of any Governmental Entities with respect to the business
of it or any of its subsidiaries or the transactions contemplated hereby, which,
if adversely determined, would be reasonably expected to have a Company Material
Adverse Effect or a Parent Material Adverse Effect, as applicable, (iii) the
institution or the threat of material litigation involving it or any of its
subsidiaries or (iv) any event or condition that might reasonably be expected to
cause any of its representations, warranties, covenants or agreements set forth
herein not to be true and correct at the Effective Time.
SECTION 5.07. PUBLIC ANNOUNCEMENTS. Parent and the Company will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Merger and will not issue any such press release
or make any such public statement prior to such consultation, except as
otherwise required by applicable Law or the rules of the NYSE. The press release
announcing the execution and delivery of this Agreement will be a joint press
release of Parent and the Company.
SECTION 5.08. NYSE LISTING. Parent will use all commercially reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger to
be approved for listing (subject to official notice of issuance) on the NYSE
prior to the Effective Time.
SECTION 5.09. EMPLOYEE BENEFIT PLANS.
(a) For at least the first twelve months after the Closing Date, Parent will
cause the current and former employees of the Company and its subsidiaries who
are, on the Closing Date, entitled to receive compensation or any benefits from
the Company or any of its subsidiaries to be provided with compensation and
employee benefit plans (other than stock option or other plans involving the
potential issuance of securities of the Company) which, in the aggregate, are
substantially comparable to those currently provided to such employees by the
Company and its subsidiaries, to the extent permitted under laws and regulations
in force from time to time; provided that employees covered by collective
bargaining agreements need not be provided with such benefits other than
pursuant to such collective bargaining agreements. The provisions of this
SECTION 5.09(A) will not create in any current or former employee of the Company
or any of its subsidiaries any rights to employment or continued employment with
Parent, the Company or any of their respective subsidiaries, or any right to
specific terms or conditions of employment.
(b) Notwithstanding anything in this Agreement to the contrary and subject
to the provisions of SECTION 5.09(A), from and after the Closing Date, Parent
will have sole discretion over the hiring, promotion, retention, termination and
other terms and conditions of the employment of the employees of the Company and
its subsidiaries. Subject to the provisions of SECTION 5.09(A), nothing herein
will prevent Parent, the Company or any of their respective subsidiaries from
amending or terminating any Employee Plan maintained by the Company or its
subsidiaries or other employee benefit or fringe benefit plan of Parent in
accordance with its terms.
(c) The Parent will grant all employees of the Company and its subsidiaries
on and after the Closing Date credit for all service with the Company and its
subsidiaries and any of their respective predecessors prior to the Closing Date
for purposes of eligibility and vesting under any employee benefit plan of the
Parent in which the employees may become participants.
(d) As of the Closing Date, Parent will assume, honor and perform, or will
cause the Company and its subsidiaries to assume, honor and perform, the
benefits accrued as of the Closing Date under all deferred compensation,
incentive compensation or vacation and other paid time off plans, policies or
arrangements maintained or contributed to by the Company and its subsidiaries
and any employment, consulting, retention, severance or similar agreement to
which the Company is a party with any employees of the Company or any of its
subsidiaries, in accordance with the terms thereof in effect immediately prior
to the Closing Date. Subject to the requirements of SECTION 5.09(A) and except
as otherwise provided in the Company Disclosure Schedule, Parent may revise and
modify such plans, policies or arrangements for benefits accruing after the
Closing Date.
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(e) The Parent will provide or cause to be provided, effective commencing
immediately after the Closing Date, coverage to all employees of the Company and
its subsidiaries as of the Closing Date, and their spouses and dependents, under
a group health plan which does not contain any exclusion or limitation with
respect to any pre-existing conditions and provides full credit for all
deductibles, co-insurance and out-of-pocket maximums incurred under any group
health plan covering such employees or qualified dependents prior to the Closing
Date and within the same plan year of such employee benefit plan, and Parent
shall be solely responsible for compliance with the requirements of
Section 4980B of the Code and part 6 of the subtitle B of Title I of ERISA
("COBRA"), including, without limitation, the provision of continuation
coverage, with respect to all employees of the Company and its subsidiaries and
their spouses and dependents, for whom a qualifying event occurs before or after
the Closing Date. The terms "group health plan," "continuation coverage,"
"qualifying event," and "qualified beneficiary" are used herein with the
meanings ascribed to them in COBRA.
SECTION 5.10. NAME OF PARENT. Parent will, as of the Effective Time, change
its name to Dean Foods Company.
SECTION 5.11. BOARD OF DIRECTORS OF PARENT. Parent will, as of the Effective
Time, increase the size of its Board of Directors by five seats and cause the
election of the individuals agreed upon by Parent and the Company to its Board
of Directors to fill the vacancies created by such increase in size, one of
which individuals will be elected for a term expiring at the first annual
meeting after the Closing Date, two of which individuals will be elected for a
term expiring at the second annual meeting after the Closing Date, and two of
which individuals will be elected for a term expiring at the third annual
meeting after the Closing Date. The Board of Directors of Parent shall elect
Howard Dean as Chairman of the Board of Parent and a member of Parent's
Management Committee until the earlier of his resignation from the Board of
Directors or he reaches age 65.
SECTION 5.12. TAX TREATMENT. Each party hereto will use all reasonable
efforts to cause the Merger to qualify, and will not take, and will use all
reasonable efforts to prevent any affiliate of such party from taking, any
actions which could prevent the Merger from qualifying as a reorganization under
the provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. Each party
hereto will file all Tax Returns in a manner consistent with treating the Merger
as a reorganization under such provisions of the Code.
SECTION 5.13. REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions herein provided and to applicable
Laws, each of the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, and to
assist and cooperate with the other parties hereto in doing, as promptly as
practicable, all things necessary, proper or advisable under applicable Laws and
regulations to ensure that the conditions set forth in Article VII are satisfied
and to consummate and make effective the transactions contemplated by this
Agreement.
(b) Without limiting the generality of the provisions in
SECTION 5.13(A) above, Parent shall use reasonable best efforts to close the
financing contemplated by the commitment letters delivered to the Company
pursuant to SECTION 4.24 and to use the funds from such financing to consummate
the Merger, including the execution of the loan documents contemplated by such
financing commitments on or before July 31, 2001.
(c) If at any time after the Effective Time any reasonable further action is
necessary or desirable to carry out the purposes of this Agreement, including
the execution of additional instruments, the proper officers and directors of
each party to this Agreement shall take all such necessary reasonable action.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. MEETINGS OF STOCKHOLDERS.
(a) The Company will duly take all lawful action to call, give notice of,
convene and hold a meeting of its stockholders as soon as reasonably practicable
(the "Company Stockholders Meeting") for the purpose of obtaining the Requisite
Company Stockholder Vote and will its use commercially reasonable efforts to
solicit the adoption of the Agreement by the Requisite Company Stockholder Vote;
and the Board of Directors of the Company will recommend adoption of this
Agreement by the stockholders of the Company (the "Company Recommendation"), and
will not (x) withdraw, modify or qualify (or propose to withdraw, modify or
qualify) in any manner adverse to Parent such recommendation or (y) take any
action or make any statement (other than any action described in the foregoing
clause (x)) in connection with the Company Stockholders Meeting inconsistent
with such recommendation (collectively, a "Change in the Company
Recommendation"); provided, however, that the Board of Directors of the Company
may make a Change in the Company Recommendation pursuant to SECTION 5.04 hereof.
Notwithstanding any Change in the Company Recommendation, this Agreement will be
submitted to the stockholders of the Company at the Company Stockholders Meeting
for the purpose of adopting this Agreement and nothing contained herein will be
deemed to relieve the Company of such obligation.
(b) Parent will duly take all lawful action to call, give notice of, convene
and hold a meeting of its stockholders as soon as reasonably practicable (the
"Parent Stockholders Meeting") for the purpose of obtaining the Requisite Parent
Stockholder Approval with respect to the transactions contemplated by this
Agreement and will use its commercially reasonable efforts to solicit the
adoption of this Agreement by the Requisite Parent Stockholder Vote, and the
Board of Directors of Parent will recommend approval of the issuance of Parent
Common Stock pursuant to this Agreement by the stockholders of Parent (the
"Parent Recommendation"), and will not, unless the Company makes a Change in the
Company Recommendation, (x) withdraw, modify or qualify (or propose to withdraw,
modify or qualify) in any manner adverse to the Company's stockholders such
recommendation or (y) take any action or make any statement (other than any
action described in the foregoing clause (x)) in connection with the Parent
Stockholders Meeting inconsistent with such recommendation (collectively, a
"Change in the Parent Recommendation").
SECTION 6.02. PREPARATION OF PROXY STATEMENT. As promptly as reasonably
practicable following the date hereof, the Company and Parent will cooperate in
preparing and each will cause to be filed with the SEC mutually acceptable proxy
materials that constitute the joint proxy statement/prospectus relating to the
matters to be submitted to the stockholders of the Company at the Company
Stockholders Meeting and the matters to be submitted to the stockholders of
Parent at the Parent Stockholders Meeting (such proxy statement/prospectus, and
any amendments or supplements thereto, the "Joint Proxy Statement/Prospectus")
and Parent will prepare and file with the SEC a registration statement on
Form S-4 with respect to the issuance of Parent Common Stock in the Merger (such
Form S-4, and any amendments or supplements thereto, the "Form S-4"). The Joint
Proxy Statement/ Prospectus will be included as a prospectus in and will
constitute a part of the Form S-4 as Parent's prospectus. Each of Parent and the
Company will use reasonable best efforts to have the Joint Proxy
Statement/Prospectus cleared by the SEC and the Form S-4 declared effective by
the SEC and to keep the Form S-4 effective as long as is necessary to consummate
the Merger and the transactions contemplated hereby and thereby. Parent and the
Company will, as promptly as practicable after receipt thereof, provide the
other party copies of any written comments and advise the other party of any
oral comments, with respect to the Joint Proxy Statement/Prospectus or Form S-4
received from the SEC. The parties will cooperate and provide the other with a
reasonable opportunity to review and comment on any amendment or supplement to
the Joint Proxy Statement/Prospectus and the Form S-4
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prior to filing such with the SEC, and will provide each other with a copy of
all such filings made with the SEC. Notwithstanding any other provision herein
to the contrary, no amendment or supplement (including by incorporation by
reference) to the Joint Proxy Statement/Prospectus or the Form S-4 shall be made
without the approval of both parties, which approval will not be unreasonably
withheld or delayed; provided that with respect to documents filed by a party
which are incorporated by reference in the Form S-4 or Joint Proxy
Statement/Prospectus, this right of approval will apply only with respect to
information relating to the other party or its business, financial condition or
results of operations. Parent will use commercially reasonable efforts to cause
the Joint Proxy Statement/Prospectus to be mailed to Parent stockholders, and
the Company will use commercially reasonable efforts to cause the Joint Proxy
Statement/Prospectus to be mailed to the Company's stockholders, in each case as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Parent will also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required to be taken under any applicable
state securities laws in connection with the Merger and each of the Company and
Parent will furnish all information concerning it and the holders of its capital
stock as may be reasonably requested in connection with any such action. Each
party will advise the other party, promptly after it receives notice thereof, of
the time when the Form S-4 has become effective, the issuance of any stop order,
the suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Joint Proxy Statement/Prospectus or the
Form S-4. If at any time prior to the Effective Time any information relating to
Parent or the Company, or any of their respective affiliates, officers or
directors, should be discovered by Parent or the Company, which information
should be set forth in an amendment or supplement to either the Form S-4 or the
Joint Proxy Statement/Prospectus so that any of such documents would not include
any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, the party which discovers such information shall
promptly notify the other party hereto and, to the extent required by applicable
Law, an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and disseminated to the stockholders of Parent and
the Company.
SECTION 6.03. INDEMNIFICATION.
(a) All rights to indemnification existing in favor of directors, officers
or employees of the Company as provided in the certificate of incorporation or
bylaws of the Company, as in effect on the date hereof, with respect to matters
occurring through the Effective Time, will survive the Merger and will continue
in full force and effect thereafter.
(b) Parent will cause to be maintained in effect for six years from the
Effective Time the current policies of the directors' and officers' liability
insurance maintained by the Company (provided that Parent may substitute
therefor policies of at least the same coverage containing terms and conditions
which are not materially less advantageous) with respect to matters or events
occurring prior to the Effective Time to the extent available; provided,
however, that in no event shall Parent be required to expend more than an amount
per year in excess of 200% of the per annum premiums for such insurance paid by
the Company as of the date hereof to maintain or procure insurance coverage
pursuant hereto; and, provided, further that if the annual premiums of such
insurance coverage exceed such amount, Parent shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
(c) Nothing in this Agreement is intended to, will be construed to or will
release, waive or impair any rights to directors' and officers' insurance claims
under any policy that is or has been in existence with respect to the Company or
any of its directors or officers, it being understood and agreed that the
indemnification provided for in this SECTION 6.03 is not prior to or in
substitution for any such claims under such policies.
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ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT.
The respective obligations of each party to effect the Merger and the other
transactions contemplated hereby will be subject to the satisfaction at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in writing by the parties hereto, in whole or in part, to the extent
permitted by applicable Laws:
(a) The Form S-4 shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the Form S-4
shall have been issued by the SEC, and no proceedings for that purpose shall
have been initiated by the SEC. Parent shall have received all Blue Sky and
other authorizations necessary to consummate the transactions contemplated
by this Agreement.
(b) The transactions contemplated by the Agreement shall have been
approved by the Requisite Company Stockholder Vote and by the Requisite
Parent Stockholder Vote.
(c) No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any Order which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
(d) The applicable waiting period under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or been
terminated.
(e) The shares of Parent Common Stock that are to be issued in
connection with the Merger and the shares of Parent Common Stock that will
be subject to Company Converted Stock Awards shall have been authorized for
listing on the NYSE, subject to official notice of issuance.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated hereby are also subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived in writing by Parent, in whole or in part:
(a) Each of the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects (if not
subject to a materiality qualifier) or in all respects (if subject to a
materiality qualifier) as of the Closing Date as though made on and as of
the Closing Date (except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall be true and correct in all material respects (if not
subject to a materiality qualifier) or in all respects (if subject to a
materiality qualifier) as of such earlier date); except where the failure of
such representation and warranty (other than the representation and warranty
contained in SECTION 3.03) to be so true and correct would not result in a
Company Material Adverse Effect. Parent and Merger Sub shall have received a
certificate of a senior executive officer and a senior financial officer of
the Company dated the Closing Date, to such effect.
(b) The Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date. Parent and
Merger Sub shall have received a certificate of a senior executive officer
and a senior financial officer of the Company dated the Closing Date, to
such effect.
(c) There shall have been no change, occurrence or circumstance in the
current business, operations, assets, financial condition or results of
operations of the Company or any of its subsidiaries having or that would
have a Company Material Adverse Effect. Parent and Merger
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Sub shall have received a certificate of a senior executive officer and a
senior financial officer of the Company dated the Closing Date, to such
effect.
(d) Hughes & Luce, L.L.P. shall have delivered to Parent its written
opinion dated the Closing Date substantially to the effect that (i) the
Merger will constitute a reorganization within the meaning of
section 368(a)(1)(A) and section 368(a)(2)(D) of the Code, and (ii) Parent,
Merger Sub and the Company will each be a party to that reorganization
within the meaning of section 368(b) of the Code. In rendering such opinion,
counsel to Parent will be entitled to rely upon the information,
representations and assumptions provided by Parent and the Company in
substantially the form of EXHIBIT 7.02(D)(1) and 7.02(D)(2), respectively.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived in
writing by the Company, in whole or in part:
(a) Each of the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all material
respects (if not subject to a materiality qualifier) or in all respects (if
subject to a materiality qualifier) as of the Closing Date as though made on
and as of the Closing Date (except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall be true and correct in all material
respects (if not subject to a materiality qualifier) or in all respects (if
subject to a materiality qualifier) as of such earlier date); except where
the failure of such representation and warranty (other than the
representation and warranty contained in SECTION 4.03) to be so true and
correct would not result in a Parent Material Adverse Effect. The Company
shall have received a certificate of a senior executive officer and a senior
financial officer of the Parent, dated the Closing Date, to such effect.
(b) Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the
Closing Date. The Company shall have received a certificate of a senior
executive officer and a senior financial officer of the Parent, dated the
Closing Date, to that effect.
(c) There shall have been no change, occurrence or circumstance in the
current business, operations, assets, financial condition, or results of
operations of Parent or any of its subsidiaries having or that would have a
Parent Material Adverse Effect. The Company shall have received a
certificate of a senior executive officer and a senior financial officer of
the Parent, dated the Closing Date, to such effect.
(d) Kirkland & Ellis shall have delivered to the Company its written
opinion dated the Closing Date to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Code and (ii) Parent, Merger Sub and Company
will each be a party to that reorganization within the meaning of
Section 368(b) of the Code. In rendering such opinion, counsel to the
Company will be entitled to rely upon the information, representations and
assumptions provided by Parent and the Company in substantially the form of
EXHIBITS 7.02(D)(1) and 7.02(D)(2), RESPECTIVELY.
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ARTICLE VIII
TERMINATION
SECTION 8.01. TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of this Agreement and the Merger by the stockholders of the
Company or Parent:
(a) by mutual written consent of Parent and the Company;
(b) by Parent, upon the inaccuracy of any representation or warranty of
the Company, or the breach of any covenant or agreement on the part of the
Company set forth in this Agreement, or if any representation or warranty of
the Company shall have become untrue, in each case such that the condition
set forth in SECTIONS 7.02(A) or (B), as the case may be, would be incapable
of being satisfied by December 31, 2001;
(c) by the Company, upon the inaccuracy of any representation or
warranty of the Parent or the Merger Sub, or the breach of any covenant or
agreement on the part of the Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of the Parent or Merger Sub
shall have become untrue, in each case such that the condition set forth in
SECTIONS 7.03(A) or (B) of this Agreement, as the case may be, would be
incapable of being satisfied by December 31, 2001;
(d) by either Parent or the Company if there shall be any Order that is
final and nonappealable preventing the consummation of the Merger, but not
if the party relying on such Order to terminate this Agreement has not
complied with its obligations under SECTION 5.06 of this Agreement;
(e) by either Parent or the Company if the Merger shall not have been
consummated before December 31, 2001; provided, however, that the right to
terminate this Agreement under this SECTION 8.01(E) will not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Merger to occur as of
such date;
(f) by Parent or the Company (provided that the terminating party is not
in material breach of any of its representations, warranties or covenants
under this Agreement), if the Requisite Company Stockholder Approval or the
Requisite Parent Stockholder Approval, respectively, shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of stockholders or of any adjournment thereof at which the vote was
taken;
(g) by Parent, if the Company shall have (i) failed to make the Company
Recommendation or effected a Change in the Company Recommendation (or
resolved to take any such action), whether or not permitted by the terms
hereof, (ii) materially breached its obligations under this Agreement by
reason of a failure to call the Company Stockholders Meeting in accordance
with SECTION 6.01(A) or a failure to prepare and mail to its stockholders
the Joint Proxy Statement/ Prospectus in accordance with SECTION 6.02, or
(iii) entered into or proposed to enter into a letter of intent, agreement
in principle, merger agreement, acquisition agreement, option agreement or
other similar agreement with respect to an Acquisition Proposal;
(h) by the Company, if Parent shall have (i) failed to make the Parent
Recommendation or effected a Change in the Parent Recommendation (or
resolved to take any such action), whether or not permitted by the terms
hereof, or (ii) materially breached its obligations under this Agreement by
reason of a failure to call the Parent Stockholders Meeting in accordance
with SECTION 6.01(B) or a failure to prepare and mail to its stockholders
the Joint Proxy Statement/ Prospectus in accordance with SECTION 6.02; or
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(i) by the Company if the Board of Directors of the Company has
determined to accept a Superior Proposal.
SECTION 8.02. EFFECT OF TERMINATION.
(a) Subject to SECTION 8.02(B), in the event of any permitted termination of
this Agreement by either the Company or Parent as provided in SECTION 8.01, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any of the parties or their respective officers or
directors except with respect to SECTION 3.17, SECTION 4.16, SECTION 5.05(D),
this SECTION 8.02, SECTION 8.03 and ARTICLE IX, which provisions shall survive
such termination, and except that, notwithstanding anything to the contrary
contained in this Agreement, neither Parent nor the Company shall be relieved or
released from any liabilities or damages arising out of its willful breach of
this Agreement.
(b) In the event that:
(i) Parent shall terminate this Agreement pursuant to Section 8.01(g),
(ii) the Company shall terminate this Agreement pursuant to
Section 8.01(i), or
(iii) (A) Parent or the Company shall have terminated this Agreement for
any reason other than pursuant to SECTION 8.01(C), SECTION 8.01(D) or
SECTION 8.01(H), (B) the Company shall have received an Acquisition Proposal
prior to such termination, and (C) within 180 days of such termination, the
Company shall have executed or entered into a letter of intent, agreement in
principle, merger agreement, acquisition agreement, option agreement or
similar agreement or proposed publicly or agreed to do any of the foregoing
with the person making such Acquisition Proposal, and (D) such letter,
agreement or proposal contemplates a merger, reorganization, share exchange,
consolidation, business combination, reorganization, liquidation,
dissolution or similar transaction involving the disposition of 50% or more
of the consolidated assets (including without limitation stock of its
subsidiaries) of the Company and its subsidiaries taken as a whole,
then the Company shall promptly, but in no event later than the date of such
termination (or, if later, with respect to a termination under
SECTION 8.02(B)(iii) above, the date the Company or any of its subsidiaries
enters into any such letter, agreement or proposal or consummates any such
transaction), pay Parent $45 million (the "Termination Fee") by wire transfer of
immediately available funds. If this Agreement is terminated as contemplated in
this SECTION 8.02(B), such termination will not be effective until payment of
the fee required by this SECTION 8.02(B).
(c) The parties acknowledge that the agreements contained in this
SECTION 8.02 and in SECTION 8.03 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, none of the
parties would enter into this Agreement; accordingly, if the Company fails
promptly to pay any amount due pursuant to this SECTION 8.02 or the Company or
Parent fails promptly to pay any amount due pursuant to SECTION 8.03, and, in
order to obtain such payment, the party that has not been so paid commences a
suit which results in a judgment against the Company for the fee set forth in
this SECTION 8.02 or the Expenses set forth in SECTION 8.03, the non-paying
party will pay to the other party its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made. The parties agree that any remedy or amount
payable pursuant to this SECTION 8.02 will not preclude any other remedy or
amount payable hereunder and will not be an exclusive remedy for any breach of
any representation, warranty, covenant or agreement contained in this Agreement.
SECTION 8.03. FEES AND EXPENSES. Without limiting SECTION 8.02, whether or
not the Merger is consummated, all Expenses (as defined below) will be paid by
the party incurring such Expenses, except (a) if the Merger is consummated, the
Surviving Corporation will pay, or cause to be paid, any and all
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transfer taxes imposed in connection with the Merger, (b) Expenses incurred in
connection with the filing, printing and mailing of the Joint Proxy
Statement/Prospectus and Form S-4 and (c) expenses relating to independent third
party analyses of cost savings and operational synergies, which will be shared
equally by Parent and the Company; provided, that if Parent terminates this
Agreement pursuant to SECTION 8.01(F) (provided that the basis for such
termination is the failure of the Company's stockholders to adopt this
Agreement), the Company will reimburse Parent, Merger Sub and their affiliates
(not later than one business day after submission of statements together with
reasonable documentation therefor) for one-half of their Expenses, but in no
event more than $10 million, and if this Agreement is terminated as permitted
herein and the Termination Fee is payable under SECTION 8.02(B) all of their
Expenses, but in no event more than $15 million; provided, further, that if the
Company terminates this Agreement pursuant to SECTION 8.01(F) (provided that the
basis for such termination is the failure of Parent's stockholders to adopt this
Agreement), Parent will reimburse the Company and its affiliates (not later than
one business day after submission of statements together with reasonable
documentation therefor) for one-half of their Expenses, but in no event more
than $10 million. As used in this Agreement, "Expenses" means all out-of-pocket
expenses (including, without limitation, financing commitment fees and all fees
and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby and thereby, including the preparation, printing, filing and
mailing of the Joint Proxy Statement/Prospectus and Form S-4 and the
solicitation of stockholder approvals and all other matters related to the
transactions contemplated hereby and thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
All representations and warranties set forth in this Agreement will terminate at
the Effective Time. All covenants and agreements set forth in this Agreement
will survive in accordance with their terms.
SECTION 9.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the facsimile number
specified below:
(a) If to any of the Parent and Merger Sub, to:
Suiza Foods Corporation
2515 McKinney Avenue
Suite 1200 Dallas, Texas 75201
Attention: General Counsel
Facsimile: (214) 303-3499
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: William A. McCormack
Facsimile: (214) 939-5849
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(b) If to the Company, to:
Dean Foods Company
3600 North River Road
Franklin Park, Illinois 60131
Attention: General Counsel
Facsimile: (847) 233-5501
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Carter W. Emerson, P.C.
H. Kurt von Moltke
Facsimile: (312) 861-2200
SECTION 9.03. CERTAIN DEFINITIONS. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person.
(b) a person shall be deemed a "beneficial owner" of or to have
"beneficial ownership" of Company Common Stock or Parent Common Stock, as
the case may be, in accordance with the interpretation of the term
"beneficial ownership" as defined in Rule 13d-3 under the Exchange Act, as
in effect on the date hereof; provided that a person shall be deemed to be
the beneficial owner of, and to have beneficial ownership of, Company Common
Stock or Parent Common Stock, as the case may be, which such person or any
affiliate of such person has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise.
(c) "business day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
(d) "Closing Price" shall mean the average closing price of Parent
Common Stock on the NYSE for the 10 trading day period ending two business
days prior to the Closing Date.
(e) "control" (including the terms "controlled," "controlled by," and
"under common control with") means the possession, directly or indirectly,
or as trustee or executor, of the power to direct or cause the direction of
the management or policies of a person, whether through the ownership of
stock or as trustee or executor, by contract or credit arrangement or
otherwise.
(f) "knowledge" or "known" means with respect to any matter in question,
if an executive officer of the Company or Parent, as the case may be, has
knowledge of such matter after reasonably inquiry.
(g) "Liens" means all security interests, liens, claims, pledges,
agreements, charges or other encumbrances of any nature whatsoever.
(h) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, other
entity or group (as used in Section 13(d) of the Exchange Act).
(i) "Significant Subsidiary" means any subsidiary of the Company that
constitutes a "significant subsidiary" of the Company within the meaning of
Rule 1-02(w) of Regulation S-X of the Securities and Exchange Commission.
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(j) "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person, means any corporation, partnership, joint
venture or other legal entity of which the Company, Parent, the Surviving
Corporation or any such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
(k) "Tax" or "Taxes" means any and all taxes, charges, fees, levies,
assessments, duties or other amounts payable to any federal, state, local or
foreign taxing authority or agency, including, without limitation,
(i) income, franchise, profits, gross receipts, minimum, alternative
minimum, estimated, ad valorem, value added, sales, use, service, real or
personal property, capital stock, license, payroll, withholding, disability,
employment, social security, workers compensation, unemployment
compensation, utility, severance, excise, stamp, windfall profits, transfer
and gains taxes, (ii) customs, duties, imposts, charges, levies or other
similar assessments of any kind, and (iii) interest, penalties and additions
to tax imposed with respect thereto.
SECTION 9.04. HEADINGS AND TABLE OF CONTENTS. The headings and the table of
contents contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Section
references herein are, unless the context otherwise requires, references to
sections of this Agreement.
SECTION 9.05. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.06. ENTIRE AGREEMENT. This Agreement (together with the Exhibits,
the Company Disclosure Schedule and the Parent Disclosure Schedule) and the
Confidentiality Agreement constitute the entire agreement of the parties, and
supersede all prior agreements and undertakings, both written and oral, among
the parties or between any of them, with respect to the subject matter hereof.
SECTION 9.07. ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of Law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement; provided that
the third parties referenced in SECTION 6.03 shall be third-party beneficiaries
of Parent's agreement contained in such Section.
SECTION 9.08. INTERPRETATION. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include other persons.
SECTION 9.09. SPECIFIC PERFORMANCE. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants hereunder,
including its failure to take all actions as are necessary on its part to the
consummation of the Merger, will cause irreparable injury to the other parties
for which damages, even if available, will not be an adequate remedy.
Accordingly, each party
A-48
hereby consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its obligations
hereunder.
SECTION 9.10. AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors, as
applicable, at any time prior to the Effective Time; PROVIDED, HOWEVER, that,
after approval of the Merger by the Company Stockholder Vote or the Parent
Stockholder Vote, as applicable, no amendment, which under applicable Law or
relevant stock exchange rules may not be made without the approval of such
stockholders, may be made without such further approval. This Agreement may not
be amended except by an instrument in writing signed by the parties hereto.
SECTION 9.11. WAIVER; REMEDIES CUMULATIVE. At any time prior to the
Effective Time, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of any other party hereto, (b) waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance by
any other party with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. For purposes of this
Section 9.11, the Parent and Merger Sub as a group shall be deemed to be one
party. No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed to be a waiver of,
or acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 9.12. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to its rules on conflicts of law.
SECTION 9.13. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[SIGNATURE PAGES FOLLOW]
A-49
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
SUIZA FOODS CORPORATION
By: /s/ GREGG L. ENGLES
-----------------------------------------
Name: Gregg L. Engles
Title: Chief Executive Officer
BLACKHAWK ACQUISITION CORP.
By: /s/ GREGG L. ENGLES
-----------------------------------------
Name: Gregg L. Engles
Title: Chief Executive Officer
DEAN FOODS COMPANY
By: /s/ HOWARD DEAN
-----------------------------------------
Name: Howard Dean
Title: Chief Executive Officer
A-50
ANNEX B
OPINION OF GOLDMAN, SACHS & CO.
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
April 4, 2001
Board of Directors
Dean Foods Company
3600 North River Road
Franklin Park, Illinois 60131
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of common stock, par value $1.00 per
share (the "Company Common Stock"), of Dean Foods Company (the "Company") of the
Per Share Merger Consideration (as defined below) to be received by such holders
pursuant to the Agreement and Plan of Merger dated as of April 4, 2001 by and
among Suiza Foods Corporation ("Parent"), Blackhawk Acquisition Corp., a
wholly-owned subsidiary of Parent ("Merger Sub"), and the Company (the
"Agreement"). Pursuant to the Agreement, the Company will be merged with and
into Merger Sub (the "Merger") and each outstanding share of Company Common
Stock will be converted into the right to receive (i) $21.00 in cash, as such
amount may be adjusted pursuant to Section 2.01(b) of the Agreement (the "Cash
Consideration") and (ii) 0.429 shares of common stock, par value $0.01 per share
(the "Parent Common Stock"), of Parent, as such ratio may be adjusted pursuant
to Section 2.01(b) of the Agreement (the "Stock Consideration", and together
with the Cash Consideration, the "Per Share Merger Consideration"), all as more
fully set forth in the Agreement.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including (i) having acted as underwriter of public offerings
of $250,000,000 aggregate principal amount of 8.15% Senior Notes due 2007 of the
Company, $200,000,000 aggregate principal amount of 6.625% Senior Notes due 2009
of the Company, and $150,000,000 aggregate principal amount of 6.9% Senior Notes
due 2017 of the Company and (ii) having acted as a dealer in the Company's
commercial paper program. We have also acted as financial advisor to the Company
in connection with, and have participated in certain of the negotiations leading
to, the Agreement. Goldman, Sachs & Co. may provide investment banking services
to Parent in the future. Goldman, Sachs & Co. provides a full range of financial
advisory and securities services and, in the course of its normal trading
activities, may from time to time effect transactions and hold securities,
including derivative securities, of the Company or Parent for its own account
and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Shareholders and Annual Reports on Form 10-K of the
Company for the five fiscal years ended May 28, 2000 and of Parent for the five
fiscal years ended December 31, 2000; certain interim reports to stockholders
and Quarterly Reports on Form 10-Q of the Company and Parent; certain other
B-1
communications from the Company and Parent to their respective stockholders; and
certain internal financial analyses and forecasts for the Company and Parent
prepared by their respective managements, including certain cost savings,
operating synergies and divestiture impacts projected by the management of
Parent to result from the transaction contemplated by the Agreement, as adjusted
by the management of the Company (the "Synergies and Impacts"). We also have
held discussions with members of the senior managements of the Company and
Parent regarding their assessment of the strategic rationale for, and the
potential benefits of, the transaction contemplated by the Agreement and the
past and current business operations, financial condition and future prospects
of their respective companies. In addition, we have reviewed the reported price
and trading activity for the Company Common Stock and the Parent Common Stock,
compared certain financial and stock market information for the Company and
Parent with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the dairy, commodity food, and branded food & beverage
industries specifically and in other industries generally and performed such
other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial,
accounting and other information discussed with or reviewed by us and have
assumed such accuracy and completeness for purposes of rendering this opinion.
In addition, we have not made an independent evaluation or appraisal of the
assets and liabilities of the Company or Parent or any of their subsidiaries and
we have not been furnished with any such evaluation or appraisal. In that
regard, we have assumed with your consent that the internal financial forecasts
prepared by the managements of the Company and Parent, including the Synergies
and Impacts, have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the Company and Parent. We also
have assumed that all material governmental, regulatory or other consents and
approvals necessary for the consummation of the transaction contemplated by the
Agreement will be obtained without any adverse effect on the Company, Parent,
the Company and Parent on a combined basis or the contemplated benefits of the
transaction contemplated by the Agreement (other than as contemplated by the
forecasts and the Synergies and Impacts). We were not requested to solicit, and
did not solicit, interest from other parties with respect to an acquisition of
or other business combination with the Company. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Company Common Stock should vote with
respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Per Share
Merger Consideration to be received by the holders of Company Common Stock is
fair from a financial point of view to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
(Goldman, Sachs & Co.)
B-2
ANNEX C
OPINION OF BEAR, STEARNS & CO., INC.
[BEAR, STEARNS & CO., INC. LETTERHEAD]
April 4, 2001
The Board of Directors
Suiza Foods Corporation
2515 McKinney Avenue
Dallas, TX 75201
Ladies and Gentlemen:
We understand that Suiza Foods Corporation ("Suiza"), Blackhawk Acquisition
Corp. ("Merger Sub") and Dean Foods Company ("Dean") have entered into an
Agreement and Plan of Merger dated as of April 4, 2001 (the "Agreement"),
pursuant to which Dean will merge with and into Merger Sub (the "Merger").
Pursuant to the Merger, each share of Dean common stock, par value $1.00 per
share, will be converted into the right to receive 0.429 shares of Suiza common
stock, par value $.01 per share, and $21.00 in cash, subject to a possible
adjustment as specified in the Agreement (the "Per Share Merger Consideration").
Simultaneously with the Merger, we understand that Suiza will repurchase all
interests in the Suiza Dairy Group, L.P. held by the Dairy Farmers of
America, Inc. (the "DFA") and Mid-Am Capital, L.L.C. ("Mid-Am") for a
combination of cash, assets and a promissory note (the "DFA Transaction")
pursuant to the Securities Purchase Agreement dated as of April 4, 2001 among
Suiza, Suiza Dairy Group Holdings, Inc., Suiza Dairy Group, L.P., Suiza
Southeast, LLC, DFA, and, for certain limited purposes, Mid-Am (the "DFA
Agreement"). You have provided us with a copy of the Agreement and the DFA
Agreement.
You have asked us to render our opinion as to whether the Per Share Merger
Consideration is fair, from a financial point of view, to Suiza.
In the course of performing our review and analyses for rendering this
opinion, we have:
- reviewed the April 3 drafts of the Agreement and the DFA Agreement;
- reviewed Suiza's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the years ended December 31, 1998 through December 31, 2000
and its Reports on Form 8-K for the three years ended the date hereof;
- reviewed certain operating and financial information, including
projections for the five years ended December 31, 2005, provided to us by
Suiza's management relating to Suiza's business and prospects;
- reviewed certain estimates of cost savings and other combination benefits
(collectively, the "Synergies") expected to result from the Merger,
prepared and provided to us by Suiza's management;
- met with certain members of Suiza's senior management to discuss Suiza's
business, operations, historical and projected financial results and
future prospects;
- reviewed Dean's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended May 31, 1998 through May 28, 2000,
its Quarterly Reports on Form 10-Q for the periods ended August 27, 2000
and November 26, 2000, and its Reports on Form 8-K for the three years
ended the date hereof;
C-1
- reviewed certain forecasts and other internal financial data provided to
us by Dean;
- met with certain members of Dean's senior management to discuss Dean's
business, operations, historical and projected financial results and
future prospects;
- reviewed the historical prices, trading multiples and trading volumes of
the common shares of Suiza and Dean;
- reviewed publicly available financial data, stock market performance data
and trading multiples of companies which we deemed generally comparable to
Suiza and Dean;
- reviewed the terms of recent mergers and acquisitions which we deemed
generally comparable to the Merger;
- performed discounted cash flow analyses based on the financial forecasts
for Dean and estimates of the Synergies for the combined company furnished
to us by managements of Suiza and Dean;
- reviewed the pro forma financial results, financial condition and
capitalization of Suiza giving effect to the Merger and the DFA
Transaction; and
- conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information, including
without limitation the projections and estimates of the Synergies, provided to
us by management of Suiza. With respect to the projected financial results of
each of Suiza and Dean and the potential Synergies that could be achieved upon
consummation of the Merger, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the senior managements of Suiza and Dean as to the expected future
performance of Suiza and Dean. We have not assumed any responsibility for the
independent verification of any such information or of the projections and
estimates of the Synergies provided to us, and we have further relied upon the
assurances of the senior managements of Suiza and Dean that they are unaware of
any facts that would make the information, projections and estimates of the
Synergies provided to us incomplete or misleading.
In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities (contingent or otherwise) of
Suiza or Dean, nor have we been furnished with any such appraisals. We have
assumed that the Merger will qualify as a tax-free "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code. We have assumed that the
final form of each of the Agreement and the DFA Agreement will not vary in any
respect material to our analysis of the last drafts provided to us. We have
assumed that the Merger and the DFA Transaction will each be consummated in a
timely manner and in accordance with the terms of the Agreement and the DFA
Agreement, respectively, in each case without any regulatory limitations,
restrictions, conditions, amendments or modifications that collectively would
have a material adverse effect on Suiza or Dean or the contemplated benefits of
the Merger.
We do not express any opinion as to the price or range of prices at which
the shares of common stock of Suiza may trade subsequent to the announcement or
consummation of the Merger.
We have acted as a financial advisor to Suiza in connection with the Merger
and will receive a customary fee for such services, a substantial portion of
which is contingent on successful consummation of the Merger. Bear Stearns has
been previously engaged by Suiza to provide certain investment banking and
financial advisory services for which we received customary fees. In the
ordinary course of business, Bear Stearns may actively trade the equity and debt
securities of Suiza and Dean for our own account and for the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
C-2
It is understood that this letter is intended solely for the benefit and use
of the Board of Directors of Suiza and does not constitute a recommendation to
the Board of Directors of Suiza or any holders of Suiza common stock as to how
to vote in connection with the Merger. This opinion does not address Suiza's
underlying business decision to pursue the Merger, the relative merits of the
Merger as compared to any alternative business strategies that might exist for
Suiza or the effects of any other transaction in which Suiza might engage. This
letter is not to be used for any other purpose, or be reproduced, disseminated,
quoted from or referred to at any time, in whole or in part, without our prior
written consent; PROVIDED, however, that this letter may be included in its
entirety in any joint proxy statement/prospectus to be distributed to the
holders of Suiza and Dean common stock in connection with the Merger. Our
opinion is subject to the assumptions and conditions contained herein and is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof. We assume no responsibility for
updating or revising our opinion based on circumstances or events occurring
after the date hereof.
Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Per Share Merger Consideration is fair, from a financial point
of view, to Suiza.
/s/ Bear, Stearns & Co., Inc.
C-3
ANNEX D
OPINION OF MORGAN STANLEY & CO. INCORPORATED
[MORGAN STANLEY & CO. INCORPORATED LETTERHEAD]
April 4, 2001
Board of Directors
Suiza Foods Corporation
2515 McKinney Avenue, Suite 1200
Dallas, TX 75201
Members of the Board:
We understand that Suiza Foods Corporation (the "Company"), Dean Foods
Company ("Dean Foods") and Blackhawk Acquisition Corp., a wholly owned
subsidiary of the Company ("Merger Sub"), have entered into an Agreement and
Plan of Merger, dated as of April 4, 2001 (the "Merger Agreement"), which
provides, among other things, for the merger (the "Merger") of Dean Foods with
and into Merger Sub. Pursuant to the Merger, Dean Foods will become a wholly
owned subsidiary of the Company and each outstanding share of common stock, par
value $1.00 per share, of Dean Foods (the "Dean Foods Common Stock"), other than
shares held in the treasury of Dean Foods, or owned by any subsidiary of Dean
Foods or owned by the Company, Merger Sub or any subsidiary of the Company or as
to which dissenters' rights have been perfected, will be converted into the
right receive (i) $21.00 in cash and (ii) 0.429 of a share of common stock, par
value $.01 per share, of the Company (the "Company Common Stock"), subject to a
possible adjustment as specified in the Merger Agreement (collectively, the "Per
Share Merger Consideration"). We further understand that the Company, Suiza
Dairy Group Holdings, Inc., Suiza Dairy Group, L.P. ("Suiza Dairy Group"), Suiza
Southeast, LLC, Dairy Farmers of America, Inc. ("DFA") and, for certain limited
purposes, Mid-Am Capital, L.L.C. ("Mid-Am") have entered into a Securities
Purchase Agreement dated as of April 4, 2001 (the "DFA Agreement"), pursuant to
which the Company will repurchase all interests in Suiza Dairy Group held by DFA
and Mid-Am for a combination of cash, assets and a promissory note (the "DFA
Transaction"). The terms and conditions of the Merger and the DFA Transaction
are more fully set forth in the Merger Agreement and the DFA Agreement,
respectively.
You have asked for our opinion as to whether the Per Share Merger
Consideration to be paid by the Company pursuant to the Merger Agreement is fair
from a financial point of view to the Company.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and Dean Foods, respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company and Dean Foods prepared by the
managements of the Company and Dean Foods, respectively;
(iii) discussed the past and current operations and financial condition and
the prospects of the Company, including information relating to certain
strategic financial and operational benefits anticipated from the
Merger, with senior executives of the Company;
(iv) discussed the past and current operations and financial condition and
the prospects of Dean Foods with senior executives of Dean Foods;
D-1
(v) discussed and reviewed certain financial projections for the Company and
Dean Foods prepared by the respective managements of the Company and
Dean Foods;
(vi) reviewed information relating to certain strategic, financial and
operational benefits anticipated from the Merger prepared by the
management of the Company;
(vii) reviewed the pro forma impact of the Merger on the earnings and
capitalization ratios of the Company;
(viii) reviewed the reported prices and trading activity for the Company
Common Stock and the Dean Foods Common Stock;
(ix) compared the financial performance of the Company and Dean Foods and
the prices and trading activity of the Company Common Stock and the
Dean Foods Common Stock with that of certain publicly traded companies
and their securities;
(x) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(xi) participated in certain discussions and negotiations among
representatives of the Company and Dean Foods and their financial and
legal advisors;
(xii) reviewed the Merger Agreement, the DFA Agreement and certain related
agreements; and
(xiii) performed such other studies and analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial statements and other financial and
operating data, including financial projections and information relating to
certain strategic financial and operational benefits anticipated from the
Merger, provided by the Company and Dean Foods, we have assumed, with your
consent, that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the prospects of the Company and
Dean Foods, respectively. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company or Dean Foods, nor have we
been furnished with any such appraisals. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have further assumed, with your consent, that the Merger and the DFA
Transaction will be consummated in a timely manner and in accordance with the
terms set forth in the Merger Agreement and the DFA Agreement, respectively, and
that obtaining all necessary regulatory approvals for the Merger and the DFA
Transaction will not have a materially adverse effect on the Company or Dean
Foods or the contemplated benefits of the Merger. We have also assumed that the
Merger will qualify as a tax-free reorganization for U.S. federal income tax
purposes.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Merger and will receive a fee for our services, a
substantial portion of which is contingent upon successful consummation of the
Merger. In the ordinary course of business, Morgan Stanley & Co. Incorporated
("Morgan Stanley") and its affiliates may from time to time trade in the
securities or indebtedness of the Company or Dean Foods for its own account, the
accounts of investment funds and other clients under the management of Morgan
Stanley and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities or indebtedness. In the past,
Morgan Stanley and its affiliates have provided financial advisory and financing
services for Dean Foods and have received fees for the rendering of these
services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this letter
D-2
may be included in its entirety, if required, in any filing made by the Company
with the Securities and Exchange Commission and distributed to stockholders of
the Company and Dean Foods in respect of the Merger. Our opinion does not
address the merits of the underlying business decision by the Company to engage
in the Merger and related transactions. In addition, this opinion does not in
any manner address the prices at which the Company Common Stock will actually
trade at any time and we express no recommendation or opinion as to how the
holders of the Company Common Stock should vote at the stockholders' meeting
held in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion, on the date
hereof, that the Per Share Merger Consideration to be paid by the Company
pursuant to the Merger Agreement is fair from a financial point of view to the
Company.
/s/ Morgan Stanley & Co. Incorporated
D-3
ANNEX E
APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who hold shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251 (g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (1) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association Securities Dealers, Inc. or (2) held of
record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided on subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b., and c. of this
paragraph.
E-1
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient if
it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such
action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or series
of stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a
copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the
date of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation,
either (1) each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date
of the merger or consolidation of (2) the surviving or resulting
corporation shall send such a second notice to all such holders on or
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within 10 days after such effective date; provided however, that if such
second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded appraisal of
such holder's shares in accordance with this subsection. An affidavit of
the secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders
entitled to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than 10 days prior to
the date the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice
is given prior to the effective date, the record date shall be the close
of business on the day next preceding the day on which the notice is
given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholders.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or
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expectation of the merger or consolidation, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account all relevant
factors. In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency
of the proceeding. Upon application by the surviving or resulting corporation or
by any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted such stockholder's certificate of
stock to the Register in Chancery, if such is required, may participate fully in
all proceeding until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates represented by such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed on
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation is
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
E-4
ANNEX F
DEAN FOODS COMPANY
1989 STOCK AWARDS PLAN
(AS AMENDED IF THE MERGER IS COMPLETED)
(As Revised and Restated, Effective )
1. PURPOSE. The purpose of the Dean Foods Company 1989 Amended Stock
Awards Plan (the "Plan") is to promote the long-term financial interests of the
Company and its Affiliates by (a) attracting and retaining personnel,
(b) motivating personnel by means of growth-related incentives, (c) providing
incentive compensation opportunities that are competitive with those of other
major corporations and (d) furthering the identity of interests of Participants
with those of the stockholders of the Company. The purpose of this restatement
of the Plan is to reflect the change of sponsorship of the Plan to Dean Foods
Company, a Delaware corporation that was previously named Suiza Foods
Corporation, and to make other changes to the design of the Plan which were
approved by the shareholders of the former Dean Foods Company and the new Dean
Foods Company in connection with the merger of Dean Foods Company into a
subsidiary of Suiza Foods Corporation.
2. DEFINITIONS. The following definitions are applicable to the Plan:
a. "Affiliate" means (i) any Subsidiary and (ii) any other entity in
which the Company has a direct or indirect equity interest which is
designated an "Affiliate" by the Committee.
b. "Board of Directors" means the Board of Directors of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
d. "Committee" means the Stock Option Committee or, if the Board of
Directors so determines, another committee of two or more directors of the
Company who are "non-employee directors" as such term is used in Rule 16b-3
and are "outside directors" as such term is used in Section 162(m) of the
Code.
e. "Common Stock" means Common Stock of the Company or such other
securities as may be substituted therefor pursuant to paragraph 5(c).
f. "Company" means Dean Foods Company, a Delaware corporation, which
was previously named Suiza Foods Corporation, and its successors.
g. "Eligible Director" means any director of the Company who is not an
employee of the Company or an Affiliate.
h. "Eligible Employee" means any full-time employee of the Company or
an Affiliate.
i. The "Fair Market Value" of the Common Stock shall be determined in
accordance with procedures established by the Committee.
j. "Fiscal Year" means the Company's fiscal year.
k. "Participant" means any Eligible Employee or Eligible Director of
the Company or an Affiliate who has been granted an award pursuant to the
Plan.
l. "Rule 16b-3" means such rule adopted under the Securities Exchange
Act of 1934, as amended, or any successor rule.
F-1
m. "Subsidiary" means any corporation fifty percent or more of the
voting stock of which is owned, directly or indirectly, by the Company.
3. LIMITATION ON AGGREGATE SHARES/INDIVIDUAL TEN-YEAR LIMITATION ON OPTION,
SAR AND PERFORMANCE SHARES AWARDS. Subject to adjustment as provided in
paragraph 5(c), the number of shares of Common Stock which may be issued upon
the exercise or payment of awards granted under the Plan shall not exceed, in
the aggregate, 7,100,000 shares; it being understood that to the extent any
awards expire unexercised or unpaid or are cancelled, terminated or forfeited in
any manner without the issuance of shares of Common Stock thereunder, such
shares shall again be available under the Plan. Such 7,100,000 shares of Common
Stock may be either authorized and unissued shares, treasury shares, or a
combination thereof, as the Committee shall determine.
4. AWARDS. The Committee may grant to Eligible Employees, in accordance
with this paragraph 4 and the other provisions of the Plan, stock options, stock
appreciation rights ("SARs"), restricted stock, performance shares awards and
other awards. The Committee may grant to Eligible Directors, in accordance with
this paragraph 4 and the other provisions of the Plan, nonqualified stock
options, restricted stock, and SARs.
a. OPTIONS.
(i) Options granted to Eligible Employees under the Plan may be
incentive stock options ("ISOs") within the meaning of Section 422A of
the Code or any successor provision, or if granted to Eligible Employees
or Eligible Directors, in such other form, consistent with the Plan, as
the Committee may determine; except that, as long as so provided in such
Section, no ISO may be granted under the Plan after July 24, 2007 or to
any employee of an Affiliate which is not a subsidiary corporation (as
such term is used in subsection (b) of such Section) of the Company.
(ii) The option price per share of Common Stock shall be fixed by the
Committee at (a) in the case of ISOs, not less than 100% of the Fair
Market Value of a share of Common Stock on the date of grant and not less
than the par value of a share of Common Stock and (b) in the case of
other options, not less than 85% of the Fair Market Value of a share of
Common Stock on the date of grant and not less than the par value of a
share of Common Stock.
(iii) Options shall be exercisable at such time or times as the
Committee shall determine at or subsequent to grant.
(iv) An option shall be exercised in whole or in part by written
notice to the Company (to the attention of the Secretary) at any time
prior to its stated expiration and payment in full of the option price
for the shares as to which the option is being exercised. Payment of the
option price may be made, at the discretion of the optionee, and to the
extent permitted by the Committee, (A) in cash (including check, bank
draft, or money order), (B) in Common Stock already owned by the optionee
(valued at the Fair Market Value thereof on the date of exercise),
(C) by a combination of cash and Common Stock, or (D) with any other
consideration.
b. SARS.
(i) An SAR shall entitle its holder to receive from the Company, at
the time of exercise of such right, an amount equal to the excess of the
Fair Market Value (at the date of exercise) of a share of Common Stock
over a specified price fixed by the Committee multiplied by the number of
shares as to which the holder is exercising the SAR. SARs may be in
tandem with any previously or contemporaneously granted option or
independent of any option. The specified price of a tandem SAR shall be
the option price of the related option. The amount
F-2
payable may be paid by the Company in Common Stock (valued at its Fair
Market Value on the date of exercise), cash or a combination thereof, as
the Committee may determine, which determination may take into
consideration any preference expressed by the holder.
(ii) An SAR shall be exercised by written notice to the Company (to
the attention of the Secretary) at any time prior to its stated
expiration. To the extent a tandem SAR is exercised, the related option
will be cancelled and, to the extent the related option is exercised, the
tandem SAR will be cancelled.
c. RESTRICTED STOCK.
(i) The Committee may award to any Eligible Employee or Eligible
Director shares of Common Stock, subject to this paragraph 4(c) and such
other terms and conditions as the Committee may prescribe, (such shares
being called "restricted stock"). Each certificate for restricted stock
shall be registered in the name of the Participant and deposited,
together with a stock power endorsed in blank, with the Company.
(ii) Restricted Stock may be awarded without any consideration other
than services rendered and/or (to the extent permitted by applicable
corporate law on the date of award) services to be rendered.
(iii) There shall be established for each restricted stock award a
restriction period (the "restriction period"), of such length as shall be
determined by the Committee. Shares of restricted stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as
hereinafter provided, during the restriction period. Except for such
restrictions on transfer and such other restrictions as the Committee may
impose, the Participant shall have all the rights of a holder of Common
Stock as to such restricted stock. The Committee, in its sole discretion,
may permit or require the payment of any cash dividends to be deferred
and, if the Committee so determines, reinvested in additional restricted
stock or otherwise invested or accruing a yield. At the expiration of the
restriction period, the Company shall redeliver to the Participant (or
the Participant's legal representative or designated beneficiary) the
certificates deposited pursuant to this paragraph.
(iv) Except as provided by the Committee at or subsequent to the time
of grant, on a termination of employment for any reason during the
restriction period all shares still subject to restriction shall be
forfeited by the Participant.
d. PERFORMANCE SHARES AWARDS.
(i) A performance shares award shall entitle its holder to receive
from the Company, following the expiration of a period of at least one
Fiscal Year specified by the Committee (the "performance measurement
period"), cash or Common Stock or a combination thereof as determined by
the Committee (either at the time of grant or thereafter) in an aggregate
amount based on the level of achievement during the performance
measurement period of one or more Company financial performance criteria.
The aggregate amount received by a Participant shall be determined by a
formula for such Participant established by the Committee not later than
the ninetieth day of the performance measurement period. The formula
shall establish a range between a minimum level of achievement before any
amount will be received and a level of achievement at or above which the
maximum potential amount will be received. Initially, the financial
performance criterion shall be earnings per share, but the Committee may
subsequently use, either in substitution therefor or in addition thereto,
total shareholder return (i.e., appreciation in the market value of a
share of Common Stock plus dividends paid), return on stockholders'
equity and/or return on invested capital.
F-3
(ii) Performance shares awards may be awarded without any
consideration other than services rendered and/or (to the extent
permitted by applicable corporate law on the date of award) services to
be rendered.
(iii) The Committee may impose restrictions on the transfer of shares
of Common Stock issued as a result of achieving formula levels of
performance. Except for such restrictions on transfer, the recipient
shall have all the rights of a holder of Common Stock as to such shares.
(iv) Except as provided by the Committee at or subsequent to the time
of grant, upon the termination of employment for any reason during the
performance measurement period the performance shares award shall be
forfeited by the Participant.
e. OTHER AWARDS.
(i) Other awards may be granted under the Plan, including, without
limitation, convertible debentures, other convertible securities and
other forms of award measured in whole or in part by the value of shares
of Common Stock, the performance of the Participant, or the performance
of the Company, any Affiliate or any operating unit thereof. Such awards
may be payable in Common Stock, cash or a combination thereof, and shall
be subject to such restrictions and conditions, as the Committee shall
determine. At the time of such an award, the Committee shall, if
applicable, determine a performance period and performance goals to be
achieved during the performance period, subject to such later revisions
as the Committee shall deem appropriate to reflect significant unforeseen
events such as changes in laws, regulations or accounting practices,
unusual or nonrecurring items or occurrences. Following the conclusion of
each performance period, the Committee shall determine the extent to
which performance goals have been attained or a degree of achievement
between maximum and minimum levels during the performance period in order
to evaluate the level of payment to be made, if any.
(ii) The purchase price per share of Common Stock under other awards
involving the right to purchase Common Stock (including for this purpose
the right to acquire Common Stock upon the conversion of convertible
securities) shall be fixed by the Committee at not less than 85% of the
Fair Market Value of a share of Common Stock on the date of award and not
less than the par value of a share of Common Stock. Other awards not
involving the right to purchase Common Stock may be awarded without any
consideration other than services rendered and/or (to the extent
permitted by applicable corporate law on the date of award) services to
be rendered.
(iii) A Participant may elect to defer all or a portion of any such
award in accordance with procedures established by the Committee.
Deferred amounts will be subject to such terms and conditions and shall
accrue such yield thereon (which may be measured by the Fair Market Value
of the Common Stock and dividends thereon) as the Committee may
determine. Payment of deferred amounts may be in cash, Common Stock or a
combination thereof, as the Committee may determine. Deferred amounts
shall be considered an award under the Plan. The Committee may establish
a trust or trusts to hold deferred amounts or any portion thereof for the
benefit of Participants.
f. CASH PAYMENTS. SARs and options, which are not ISOs may, in the
Committee's discretion, provide that in connection with exercises thereof
the holders will receive cash payments based on formulas designed to
reimburse holders for their income tax liability resulting from such
exercise and the payment made pursuant to this paragraph 4(f).
g. SURRENDER. If so provided by the Committee at or subsequent to the
time of grant, an award may be surrendered to the Company on such terms and
conditions, and for such consideration, as the Committee shall determine.
F-4
h. FOREIGN ALTERNATIVES. Without amending and notwithstanding the
other provisions of the Plan, in the case of any award to be held by any
Participant who is employed outside the United States or who is a foreign
national, the Committee may specify that such award shall be made on such
terms and conditions different from those specified in the Plan as may, in
the judgment of the Committee, be necessary or desirable to further the
purposes of the Plan.
5. MISCELLANEOUS PROVISIONS.
a. ADMINISTRATION. The Plan shall be administered by the Committee,
subject to the limitations of the Plan, the Committee shall have the sole
and complete authority: (i) to select Participants, (ii) to make awards in
such forms and amounts as it shall determine, (iii) to impose such
limitations, restrictions and conditions upon such awards as it shall deem
appropriate, (iv) to interpret the Plan and to adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the
Plan, (v) to correct any defect or omission or to reconcile any
inconsistency in the Plan or in any award granted hereunder and (vi) to make
all other determinations and to take all other actions necessary or
advisable for the implementation and administration of the Plan. The
Committee's determinations on matters within its authority shall be
conclusive and binding upon the Company and all other persons. All expenses
associated with the Plan shall be borne by the Company, subject to such
allocation to its Affiliates and operating units, as it deems appropriate.
The Committee may, to the extent that any such action will not prevent the
Plan from complying with Section 162(m) of the Code, delegate any of its
authority hereunder to such persons, as it deems appropriate.
b. NON-TRANSFERABILITY. Subject to the provisions of paragraph 5(f),
no award under the Plan, and no interest therein, shall be transferable by a
Participant otherwise than by will or the laws of descent and distribution.
All awards shall be exercisable or received during a Participant's lifetime
only by the Participant or the Participant's legal representative. Any
purported transfer contrary to this provision will nullify the award.
c. ADJUSTMENTS UPON CERTAIN CHANGES. In the event of any
reorganization, recapitalization, reclassification, merger, consolidation,
or sale of all or substantially all of the Company's assets followed by
liquidation, which is effected in such a way that holders of Common Stock
are entitled to receive securities or other assets with respect to or in
exchange for Common Stock (an "Organic Change"), the Committee shall make
appropriate changes to insure that each outstanding award involving the
right to acquire Common Stock thereafter represents the right to acquire, in
lieu of or in addition to the shares of Common Stock immediately theretofore
acquirable upon exercise or payment, such securities or assets as may be
issued or payable with respect to or in exchange for an equivalent number of
shares of Common Stock, and appropriate changes in other outstanding awards;
and in the event of any stock dividend, stock split or combination of
shares, the Board of Directors shall make appropriate changes in the number
of shares authorized by the Plan to be delivered thereafter, and the
Committee shall make appropriate changes in the numbers of shares covered
by, or with respect to which payments are measured under, outstanding awards
and the exercise prices and reference prices specified therein (and in the
event of a spinoff, the Committee may make similar changes), in order to
prevent the dilution or enlargement of award rights. However, no right to
purchase or receive a fraction of a share shall be created; and if, as a
result of any such change, a fractional share would result or the right to
purchase or receive the same would result, the number of shares in question
shall be decreased to the next lower whole number of shares. The Committee
may provide in the agreement evidencing any award for adjustments to such
award in order to prevent the dilution or enlargement of rights thereunder
or for acceleration of benefits thereunder and/or cash payments in lieu of
benefits thereunder in the event of a change in control (or tender offer or
accumulation of Common Stock), merger, consolidation, reorganization,
recapitalization, sale or exchange of all or substantially all of the assets
or dissolution of the Company.
F-5
d. TAX WITHHOLDING. The Committee shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to
satisfy any withholding or other tax payable by the Company with respect to
any amount payable and/or shares issuable under the Plan, and the Committee
may defer such payment or issuance unless indemnified to its satisfaction.
Subject to the consent of the Committee, a Participant may make an
irrevocable election to have shares of Common Stock otherwise issuable under
an award withheld, tender back to the Company shares of Common Stock
received pursuant to an award or deliver to the Company shares of Common
Stock already owned by the Participant having a Fair Market Value sufficient
to satisfy all or part of the Company's withholding or other tax obligations
associated with the transaction. Such election must be made by a Participant
prior to the date on which the relevant tax obligation arises. The Committee
may disapprove of any election and may limit, suspend or terminate the right
to make such elections.
e. LISTING AND LEGAL COMPLIANCE. The Committee may suspend the
exercise or payment of any award if it determines that securities exchange
listing or registration or qualification under any securities laws is
required in connection therewith and has not been completed on terms
acceptable to the Committee.
f. BENEFICIARY DESIGNATION. To the extent permitted by the Committee,
Participants may name, from time to time, beneficiaries (who may be named
contingently or successively) to whom benefits under the Plan are to be paid
in the event of their death before they receive any or all of such benefits.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only
when filed by the Participant in writing with the Committee during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at a Participant's death shall be paid to the Participant's
estate.
g. RIGHTS OF PARTICIPANTS. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or any Affiliate to terminate any
Participant's employment at any time, nor confer upon any Participant any
right to continue in the employ of the Company or any Affiliate for any
period of time or to continue his or her present or any other rate of
compensation. No employee shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a
Participant.
h. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board of
Directors or the Committee may suspend or terminate the Plan or any portion
thereof at any time and may amend it from time to time in such respects as
the Board of Directors or the Committee may deem advisable; provided,
however, that no such amendment shall be made without stockholder approval
to the extent such approval is required by law, agreement or the rules of
any exchange upon which the Common Stock is listed. No such amendment,
suspension or termination shall impair the rights of Participants under
outstanding awards without the consent of the Participants affected thereby.
The Committee may amend or modify any award in any manner to the extent that
the Committee would have had the authority under the Plan to initially grant the
award as so amended or modified. No such amendment or modification shall impair
the rights of the Participant under such award without the consent of such
Participant.
6. EFFECTIVE DATE. The effective date of the Plan as revised and restated
shall be .
F-6
ANNEX G
TAX INFORMATION ABOUT THE DEAN STOCK AWARDS PLAN
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations and does not
purport to be complete. You should refer to the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). There also may be state,
local and foreign income tax consequences applicable to transactions involving
stock options, restricted stock, performance shares awards, SARs and other
awards. In addition, the following description does not address generally
special rules that may be applicable to officers.
STOCK OPTIONS. Under existing federal income tax provisions, an employee or
director who receives stock options will generally not recognize any income, and
Suiza will generally not receive any deduction for federal income tax purposes,
due to the grant of a stock option.
When a nonqualified stock option granted pursuant to the Dean 1989 Stock
Awards Plan is exercised, the optionee generally will recognize ordinary income
(compensation) measured by the difference between the aggregate purchase price
of the common stock purchased and the aggregate fair market value of the common
stock on the exercise date. Suiza generally will be entitled to a deduction in
the year the option is exercised equal to the amount the optionee is required to
treat as ordinary income. Any taxable income recognized in connection with a
nonqualified stock option exercised by an employee or non-employee director will
be subject to tax withholding. The basis for determining gain or loss upon a
subsequent sale of shares acquired on the exercise of a nonqualified stock
option will be the purchase price paid for the shares increased by the amount
included in the optionee's taxable income resulting from the exercise of such
option. The holding period for determining the maximum tax rate applicable to
gain on such disposition begins on the date on which the optionee acquires the
shares.
An employee generally will not recognize any taxable income on the exercise
of an incentive stock option, but the exercise may, depending on particular
factors relating to the employee, subject the employee to the alternative
minimum tax. An employee will recognize capital gain or loss in the amount of
the difference between the exercise price and the sale price on the sale or
exchange of stock acquired pursuant to the exercise of an incentive stock option
as long as the employee does not sell such stock within two years from the date
of grant or one year from the date of exercise of the incentive stock option
(the "Required Holding Periods").
An employee who sells his or her shares before the expiration of the
Required Holding Periods will recognize ordinary income equal to the lesser of
(i) the difference between the option price and the fair market value of the
stock on the date of exercise, or (ii) the total amount of gain realized. The
maximum federal income tax rate on the remaining gain (if any) generally depends
on how long the shares are held. Suiza will not be entitled to a federal income
tax deduction in connection with the exercise of an incentive stock option,
except to the extent the optionee recognizes ordinary income where the employee
disposes of the common stock received on exercise before the expiration of the
Required Holding Periods.
RESTRICTED STOCK. A restricted stock award is not currently taxable income
to an employee (absent the election described below) or non-employee director
for as long as the stock is subject to a substantial risk of forfeiture and
cannot be transferred free of a substantial risk of forfeiture. The holder will
generally be taxed on compensation income equal to the fair market value of the
shares on the date the restrictions on the shares creating a substantial risk of
forfeiture lapse. The holder may elect under Section 83(b) of the Code, however,
to be taxed immediately on the value of the shares awarded as of the date of
grant. Such an election must be made within 30 days after the award of shares
and must be filed with the Internal Revenue Service. If the holder makes the
G-1
Section 83(b) election and subsequently forfeits his or her shares, no deduction
is permitted with respect to the forfeiture.
The optionee's tax basis in shares acquired through a stock award equals the
amount of compensation income recognized on vesting (or on grant, in the case of
a Section 83(b) election). Generally, if the optionee subsequently sells the
shares, any gain or loss will be a capital gain or loss. The holding period for
determining the maximum tax rate applicable to gain on such disposition begins
on the date the holder recognizes ordinary income with respect to the shares.
SARS. An employee or non-employee director does not recognize taxable
income on the grant of an SAR, and Suiza is not entitled to a deduction in
respect of such grant. On the exercise of an SAR, the holder generally
recognizes ordinary income equal to the amount of any cash and the fair market
value (measured on the date of exercise) of any shares received. Suiza will
receive a deduction equal to the amount taxed to the employee or director.
If an employee or non-employee director sells shares received due to the
exercise of an SAR, the difference between the sale price and the tax basis of
the shares (generally the fair market value of such shares on the date of
exercise) is a capital gain or loss gain. Whether such capital gain or loss is
long- or short-term in nature depends on how long the shares were held by the
employee or director.
USE OF STOCK TO PAY OPTION PRICE. The general statements as to tax basis in
the previous paragraphs relating to the disposition of stock received on the
exercise of options apply in the event the optionee pays cash for the option
shares. If, however, the optionee pays for the option shares in whole or in part
by delivering already-owned shares ("old" shares), the tax basis for the option
shares of Common Stock, and thus the consequences of a disposition, differs. If
an optionee delivers old shares in payment of all or part of the exercise price
of a non-qualified option, the optionee does not recognize a gain or loss as a
result of such delivery (but the exercise will result in taxable compensation to
the optionee and a deduction to Suiza as described above). The optionee's tax
basis in, and holding period for, the option shares is determined as follows: as
to option shares equal in number to the old shares delivered, the basis in and
holding period for the old shares carry over on a share-for-share basis; as to
each remaining share, its basis is the fair market value on the date of exercise
and its holding period begins on that date. Any capital gain or loss on the sale
of a particular option share is measured based on the difference between the
selling price and the optionee's actual tax basis for such share.
If an employee delivers old shares (other than old shares acquired on
exercise of an incentive stock option which were not held for the Required
Holding Periods) in payment of all or part of the exercise price of an incentive
stock option, the optionee does not recognize a gain or loss as a result of such
delivery. The optionee's tax basis in and holding period for the option shares
is determined as follows: as to option shares equal in number to the old shares
delivered, the basis in and the holding period for the old shares carries over
on a share-for-share basis; as to each remaining share, its basis equals the
exercise price paid in cash (if any). Thus, in the event option shares are
acquired solely through the delivery of old shares (i.e. none of the exercise
price is paid in cash), the basis of each remaining share is zero. Any capital
gain or loss on the sale of a particular option share is measured based on the
difference between the selling price and the optionee's actual tax basis for
such share. If an incentive stock option is exercised using old shares, a later
disqualifying disposition of the shares received is deemed to have been a
disposition of the shares having the lowest tax basis first.
If an employee pays the exercise price of an incentive stock option in whole
or in part with old shares that were acquired on the exercise of an incentive
stock option and that have not been held for the Required Holding Periods, the
employee recognizes ordinary income under the rules applicable to disqualifying
dispositions and Suiza will have a corresponding deduction. The employee's tax
basis in the option shares which reflect a carry-over basis from the old shares
surrendered is increased by the amount of ordinary income the employee
recognizes.
G-2
PERFORMANCE SHARES AWARDS. An employee does not have taxable income from
the grant of a performance shares award, and Suiza is not entitled to a
deduction due to such grant. The employee will have taxable income
(compensation) when shares are issued and/or cash is paid pursuant to the award,
and Suiza is entitled to a deduction for the compensation income taxed to the
employee. The employee's holding period begins on the date the shares are
issued.
When an employee sells shares received pursuant to a performance shares
award, the difference between the sale price and the tax basis of the shares
(generally the fair market value of the shares on the date such shares were
issued) is a capital gain or loss. Whether such capital gain or loss is
long-term or short-term in nature depends on how long the shares were held by
the employee.
SUPPLEMENTAL CASH PAYMENTS. An employee who receives any supplemental cash
payment when he or she exercises a non-qualified option or SAR is taxed on that
payment, and Suiza will have a deduction for such compensation. A supplemental
cash payment to a employee is intended to provide the employee with sufficient
funds to pay the federal income tax arising both from the exercise of the option
or SAR and the receipt of such payment. Suiza's cash outlay to the employee
should be offset to some extent by Suiza's tax savings arising from the
deductions to which Suiza is entitled because of the exercise of the option or
SAR and the making of such payment. The extent of offset depends on the relative
income tax rates applicable to corporations and individuals at the time of
exercise.
SURRENDER. Any consideration paid to an employee on surrender of an award
other than restricted stock is compensation taxable to the employee as ordinary
income. Dean should be entitled to a deduction for the year of payment in an
amount equal to such compensation. The tax consequences of payment of
consideration to an employee on the surrender of restricted stock will vary
significantly depending on the particular circumstances related to such
restricted stock.
WITHHOLDING. If shares that would otherwise be issued under the Plan are
withheld to satisfy withholding or other taxes, the tax consequences are the
same as if such shares were issued to the employee and then sold by the employee
to Suiza for fair market value. If an employee delivers to Suiza shares which
the employee already owns to satisfy any withholding or other tax payment, the
employee is considered to have sold the stock to Suiza on the date of delivery
for fair market value. The difference between the fair market value of such
shares on the date of delivery and the tax basis of the shares is a capital gain
or loss. Suiza is not entitled to a deduction as a result of such a sale.
Different tax consequences may result if the shares delivered by the employee
were acquired on the exercise of an incentive stock option and have not been
held for the Required Holding Periods.
OTHER AWARDS. Because other awards may take many other forms, as determined
by the Stock Option Committee, it is not possible to describe generally what
their tax treatment will be.
G-3
ANNEX H
TAX INFORMATION ABOUT SUIZA'S STOCK OPTION PLAN
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations and does not
purport to be complete. You should refer to the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). There also may be state,
local and foreign income tax consequences applicable to transactions involving
stock options or restricted stock. In addition, the following description does
not address specific tax consequences applicable to an individual participant
who receives an incentive stock option and does not address special rules that
may be applicable to directors and officers.
STOCK OPTIONS. Under existing federal income tax provisions, a participant
who receives stock options will not normally realize any income, nor will we
normally receive any deduction for federal income tax purposes, upon the grant
of a stock option.
When a nonqualified stock option granted pursuant to our 1997 Stock Option
and Restricted Stock Plan is exercised, the option holder generally will realize
ordinary income (compensation) measured by the difference between the aggregate
purchase price of the common stock purchased and the aggregate fair market value
of our common stock on the exercise date. We generally will be entitled to a
deduction in the year the option is exercised equal to the amount the option
holder is required to treat as ordinary income. Any taxable income recognized in
connection with a nonqualified stock option exercised by an option holder who is
also one of our employees will be subject to tax withholding by us. The basis
for determining gain or loss upon a subsequent sale of common stock acquired
upon the exercise of a nonqualified stock option will be the purchase price paid
to us for the common stock increased by an amount included in the option
holder's taxable income resulting from the exercise of such option. The holding
period for determining the maximum tax rate applicable to gain on such
disposition begins on the date on which the option holder acquires the common
stock.
An employee generally will not recognize any income upon the exercise of an
incentive stock option, but the exercise may, depending on particular factors
relating to the employee, subject the employee to the alternative minimum tax.
An employee will recognize capital gain or loss in the amount of the difference
between the exercise price and the sale price on the sale or exchange of stock
acquired pursuant to the exercise of an incentive stock option, provided that
the employee does not sell such stock within two years from the date of grant or
one year from the date of exercise of the incentive stock option (the "Required
Holding Periods").
An employee who sells his or her shares before the expiration of the
Required Holding Periods will recognize ordinary income equal to the lesser of
(i) the difference between the option price and the fair market value of the
stock on the date of exercise, or (ii) the total amount of gain realized. The
maximum federal income tax rate on the remaining gain or loss generally depends
on how long the shares are held. We will not be entitled to a federal income tax
deduction in connection with the exercise of an incentive stock option, except
where the employee disposes of the common stock received upon exercise before
the expiration of the Required Holding Periods.
RESTRICTED STOCK. A restricted stock award is not currently taxable income
to a participant for so long as the stock is subject to a substantial risk of
forfeiture and cannot be transferred free of a substantial risk of forfeiture.
The participant will generally be taxed on compensation income equal to the
fair market value of the stock on the date the restrictions on the shares
creating a substantial risk of forfeiture lapse.
H-1
The participant may elect under Section 83(b) of the Code, however, to be
taxed immediately on the value of the shares awarded as of the date of grant.
Such an election must be made within 30 days after the award of shares and must
be filed with the Internal Revenue Service. If the participant makes the
Section 83(b) election and subsequently forfeits his or her shares, no deduction
is permitted with respect to the forfeiture.
The participant's tax basis in shares acquired through a stock award equals
the amount of compensation income recognized upon vesting (or upon grant, in the
case of a Section 83(b) election). Generally, if the participant subsequently
sells the shares, any gain or loss will be a capital gain or loss.
H-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (Delaware Law) permits
Suiza's board of directors to indemnify any person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with any threatened, pending or
completed action, suit or proceeding in which such person is made a party by
reason of his or her being or having been a director, officer, employee or agent
of Suiza, or serving or having served, at the request of Suiza, as a director,
officers, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933.
The statute provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
Article XII of Suiza's Certificate of Incorporation provides for
indemnification of its directors, officers, employees and other agents to the
fullest extent permitted by law.
As permitted by sections 102 and 145 of Delaware Law, Suiza's Certificate of
Incorporation eliminates the liability of a Suiza director for monetary damages
to Suiza and its stockholders arising from a breach or alleged breach of a
director's fiduciary duty except for liability under section 174 of Delaware Law
or liability for any breach of the director's duty of loyalty to Suiza or its
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or for any transaction from
which the director derived an improper personal benefit.
In addition, Suiza maintains officers' and directors' insurance covering
certain liabilities that may be incurred by officers and directors in the
performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) List of Exhibits
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
2(a) Agreement and Plan of Merger, dated as of April 4, 2001,
among Suiza, Blackhawk and Dean (included in Annex A to the
joint proxy statement/prospectus contained in this
Registration Statement). The Registrant agrees to furnish
supplementally a copy of the Company Disclosure Schedule and
the Parent Disclosure Schedule to this merger agreement to
the Securities and Exchange Commission upon request.
3(a) Certificate of Incorporation of Suiza dated September 19,
1994 (incorporated by reference from Suiza's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997
(File No. 1-12755)).
3(b) Certificate of Amendment to Certificate of Incorporation of
Suiza dated March 27, 1995 (incorporated by reference from
Suiza's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 1-12755)).
3(c) Certificate of Correction of Certificate of Amendment to
Certificate of Incorporation of Suiza dated June 6, 1995
(incorporated by reference from Suiza's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997 (File No.
1-12755)).
II-1
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
3(d) Certificate of Amendment to Certificate of Incorporation of
Suiza dated February 29, 1996 (incorporated by reference
from Suiza's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 (File No. 1-12755)).
3(e) Certificate of Amendment to Certificate of Incorporation of
Suiza dated May 15, 1997 (incorporated by reference from
Suiza's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 1-12755)).
3(f) Certificate of Amendment of Certificate of Incorporation of
Suiza (incorporated by reference from Suiza's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 1-12755)).
3(g) Amended and Restated Bylaws of Suiza (incorporated herein by
reference to Suiza's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999 (File No. 1-12755)).
5+ Opinion of Hughes & Luce, L.L.P. regarding the validity of
the securities being registered.
8(a)* Form of opinion of Hughes & Luce, L.L.P. regarding certain
federal income tax consequences relating to the merger.
8(b)* Form of opinion of Kirkland & Ellis regarding certain
federal income tax consequences relating to the merger.
10(a) Credit Agreement, dated as of July 31, 2001, among Suiza
Foods Corporation, certain subsidiaries of Suiza Foods
Corporation named therein, as guarantors, the lenders named
therein, First Union National Bank, as administrative agent,
Bank One, N.A., as syndication agent, First Union
Securities, Inc. and Banc One Capital Markets, Inc., as
co-lead arrangers and joint book runners, and Fleet National
Bank, Harris Trust and Savings Bank and Suntrust Bank, N.A.,
as co-documentation agents (incorporated by reference from
Suiza's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 (File No. 1-12755)).
10(b) Amended and Restated 1997 Stock Option and Restricted Stock
Plan (incorporated by reference from Suiza's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999
(File No. 1-12755)).
10(c) Securities Purchase Agreement, dated as of April 4, 2001,
among Suiza, Suiza Dairy Group Holdings, Inc., Suiza Dairy
Group, L.P., Suiza Southeast, LLC, Dairy Farmers of
America, Inc. and Mid-Am Capital, L.L.C. (incorporated by
reference from Suiza's Current Report on Form 8-K filed
April 5, 2001). The Registrant agrees to furnish
supplementally a copy of exhibits to this Securities
Purchase Agreement to the Securities and Exchange Commission
upon request.
21 Subsidiaries of the Registrant (incorporated by reference to
Suiza's Annual Report on 10-K for the fiscal year ended
December 31, 2000 (File No. 1-12755)).
23(a)+ Consent of Deloitte & Touche LLP (for Suiza).
23(b)+ Consent of PricewaterhouseCoopers LLP (for Dean).
23(c)+ Consent of Hughes & Luce, L.L.P. (included in the opinion
filed as Exhibit 5 to this Registration Statement).
23(d)* Consent of Hughes & Luce, L.L.P.
23(e)* Consent of Kirkland & Ellis.
II-2
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
99(a)+ Opinion of Goldman, Sachs & Co. (included as Annex B to the
joint proxy statement/ prospectus contained in this
Registration Statement).
99(b)+ Opinion of Bear, Stearns & Co. Inc. (included as Annex C to
the joint proxy statement/ prospectus contained in this
Registration Statement).
99(c)+ Opinion of Morgan Stanley & Co. Incorporated (included as
Annex D to the joint proxy statement/prospectus contained in
this Registration Statement).
99(d)+ Consent of Goldman, Sachs & Co.
99(e)+ Consent of Bear, Stearns & Co. Inc.
99(f)+ Consent of Morgan Stanley & Co. Incorporated.
99(g)+ Consent of Howard M. Dean.
99(h)+ Consent of Lewis M. Collens.
99(i)+ Consent of Janet Hill.
99(j)+ Consent of John S. Llewellyn, Jr.
99(k)+ Consent of J. Christopher Reyes.
99(l)+ Form of Suiza proxy card.
99(m)+ Form of Dean proxy card.
------------------------
* Previously filed.
+ Filed herewith.
(b) Financial Statements Schedules (incorporated by reference to the
Registrant's Annual Report on 10-K for the fiscal year ended
December 31, 2000 (File No. 1-12755)).
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) That every prospectus (a) that is filed pursuant to
paragraph (1) immediately preceding, or (b) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities
II-3
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(4) To respond to requests for information that is incorporated by
reference into the joint proxy statement/prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form S-4, within one business day of
receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to
the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, Texas, on August 10, 2001.
SUIZA FOODS CORPORATION (REGISTRANT)
By: /s/ GREGG L. ENGLES
-----------------------------------------
Gregg L. Engles,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement on Form S-4 has been signed below by
the following persons on behalf of the Registrant in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ GREGG L. ENGLES
------------------------------------------- Chairman of the Board and August 10, 2001
Gregg L. Engles Chief Executive Officer
*
------------------------------------------- Vice Chairman of the Board August 10, 2001
Pete Schenkel
*
------------------------------------------- Vice Chairman of the Board August 10, 2001
Hector M. Nevares
*
------------------------------------------- Director August 10, 2001
Alan Bernon
*
------------------------------------------- Director August 10, 2001
Tom Davis
*
------------------------------------------- Director August 10, 2001
Stephen L. Green
*
------------------------------------------- Director August 10, 2001
Joseph S. Hardin, Jr.
*
------------------------------------------- Director August 10, 2001
John Muse
II-5
SIGNATURE TITLE DATE
--------- ----- ----
*
------------------------------------------- Director August 10, 2001
P. Eugene Pender
*
------------------------------------------- Director August 10, 2001
Jim Turner
* Executive Vice President
------------------------------------------- and Chief Financial August 10, 2001
Barry A. Fromberg Officer
*By: /s/ GREGG L. ENGLES
--------------------------------------
Gregg L. Engles,
ATTORNEY-IN-FACT
II-6
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
2(a) Agreement and Plan of Merger, dated as of April 4, 2001,
among Suiza, Blackhawk and Dean (included in Annex A to the
joint proxy statement/prospectus contained in this
Registration Statement). The Registrant agrees to furnish
supplementally a copy of the Company Disclosure Schedule and
the Parent Disclosure Schedule to this merger agreement to
the Securities and Exchange Commission upon request.
3(a) Certificate of Incorporation of Suiza dated September 19,
1994 (incorporated by reference from Suiza's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997
(File No. 1-12755)).
3(b) Certificate of Amendment to Certificate of Incorporation of
Suiza dated March 27, 1995 (incorporated by reference from
Suiza's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 1-12755)).
3(c) Certificate of Correction of Certificate of Amendment to
Certificate of Incorporation of Suiza dated June 6, 1995
(incorporated by reference from Suiza's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997 (File No.
1-12755)).
3(d) Certificate of Amendment to Certificate of Incorporation of
Suiza dated February 29, 1996 (incorporated by reference
from Suiza's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 (File No. 1-12755)).
3(e) Certificate of Amendment to Certificate of Incorporation of
Suiza dated May 15, 1997 (incorporated by reference from
Suiza's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 1-12755)).
3(f) Certificate of Amendment of Certificate of Incorporation of
Suiza (incorporated by reference from Suiza's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 1-12755)).
3(g) Amended and Restated Bylaws of Suiza (incorporated herein by
reference to Suiza's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999 (File No. 1-12755)).
5+ Opinion of Hughes & Luce, L.L.P. regarding the validity of
the securities being registered.
8(a)* Form of opinion of Hughes & Luce, L.L.P. regarding certain
federal income tax consequences relating to the merger.
8(b)* Form of opinion of Kirkland & Ellis regarding certain
federal income tax consequences relating to the merger.
10(a) Credit Agreement, dated as of July 31, 2001, among Suiza
Foods Corporation, certain subsidiaries of Suiza Foods
Corporation named therein, as guarantors, the lenders named
therein, First Union National Bank, as administrative agent,
Bank One, N.A., as syndication agent, First Union
Securities, Inc. and Banc One Capital Markets, Inc., as
co-lead arrangers and joint book runners, and Fleet National
Bank, Harris Trust and Savings Bank and Suntrust Bank, N.A.,
as co-documentation agents (incorporated by reference from
Suiza's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 (File No. 1-12755)).
10(b) Amended and Restated 1997 Stock Option and Restricted Stock
Plan (incorporated by reference from Suiza's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999
(File No. 1-12755)).
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
10(c) Securities Purchase Agreement, dated as of April 4, 2001,
among Suiza, Suiza Dairy Group Holdings, Inc., Suiza Dairy
Group, L.P., Suiza Southeast, LLC, Dairy Farmers of
America, Inc. and Mid-Am Capital, L.L.C. (incorporated by
reference from Suiza's Current Report on Form 8-K filed
April 5, 2001). The Registrant agrees to furnish
supplementally a copy of exhibits to this Securities
Purchase Agreement to the Securities and Exchange Commission
upon request.
21 Subsidiaries of the Registrant (incorporated by reference to
Suiza's Annual Report on 10-K for the fiscal year ended
December 31, 2000 (File No. 1-12755)).
23(a)+ Consent of Deloitte & Touche LLP (for Suiza).
23(b)+ Consent of PricewaterhouseCoopers LLP (for Dean).
23(c)+ Consent of Hughes & Luce, L.L.P. (included in the opinion
filed as Exhibit 5 to this Registration Statement).
23(d)* Consent of Hughes & Luce, L.L.P.
23(e)* Consent of Kirkland & Ellis.
99(a)+ Opinion of Goldman, Sachs & Co. (included as Annex B to the
joint proxy statement/ prospectus contained in this
Registration Statement).
99(b)+ Opinion of Bear, Stearns & Co. Inc. (included as Annex C to
the joint proxy statement/ prospectus contained in this
Registration Statement).
99(c)+ Opinion of Morgan Stanley & Co. Incorporated (included as
Annex D to the joint proxy statement/prospectus contained in
this Registration Statement).
99(d)+ Consent of Goldman, Sachs & Co.
99(e)+ Consent of Bear, Stearns & Co. Inc.
99(f)+ Consent of Morgan Stanley & Co. Incorporated.
99(g)+ Consent of Howard M. Dean.
99(h)+ Consent of Lewis M. Collens.
99(i)+ Consent of Janet Hill.
99(j)+ Consent of John S. Llewellyn, Jr.
99(k)+ Consent of J. Christopher Reyes.
99(l)+ Form of Suiza proxy card.
99(m)+ Form of Dean proxy card.
------------------------
* Previously filed.
+ Filed herewith.
(b) Financial Statements Schedules (incorporated by reference to the
Registrant's Annual Report on 10-K for the fiscal year ended
December 31, 2000 (File No. 1-12755)).