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EXHIBIT 10.43
EXECUTION COPY
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (this "Agreement") is made and entered
into as of April 6, 1999, by and between Southern Foods Group, L.P., a Delaware
limited partnership (the "Partnership"), Dairy Farmers of America, Inc., a
Kansas cooperative marketing association ("DFA"), Xxxx Xxxxxxxx ("Xxxxxxxx"),
and Xxxxxxx X. Xxxx ("Xxxx").
WHEREAS, Xxxx has made substantial contributions to the increase that
has occurred in the value of the Partnership and its business operations, and
the Partnership desires to reward Xxxx and align his personal financial
interests with those of the Partnership and its partners by entering into this
Agreement; and
WHEREAS, Xxxxxxxx and DFA are hereinafter referred to collectively as
the "Partners"; and
WHEREAS, capitalized terms that are not otherwise defined herein shall
have the meanings ascribed to such terms in the Second Amended and Restated
Agreement of Limited Partnership of the Partnership, as amended (the
"Partnership Agreement");
NOW, THEREFORE, in consideration of the premises, the mutual terms and
conditions herein contained and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Definition of Change in Control. For the purposes of this Agreement,
"Change in Control" means (a) the redemption by the Partnership or the transfer
or sale to DFA of all or substantially all of Xxxxxxxx'x Common Partner
Interests in the Partnership (but only if such redemption or transfer or sale is
in connection with any of the events described in subsections (c), (d) and (e)
of this Paragraph 1); (b) the transfer or sale to an Outside Party (as
hereinafter defined) of all or substantially all of Xxxxxxxx'x Common Partner
Interests in the Partnership; (c) the transfer or sale to an Outside Party of
all or substantially all of the Common Partner Interests in the Partnership; (d)
the merger, consolidation or other combination of the Partnership with one or
more unaffiliated partnerships, corporations or other entities, in which the
Partnership is not the surviving entity (or survives only as the subsidiary of
another entity); or (e) the transfer, sale, assignment or other disposition of
all or substantially all of the assets of the Partnership to an Outside Party.
As used herein, "Outside Party" means any entity or person other than the
Partners or any entity or person that directly or indirectly controls, is
controlled by, or is under common control with, either of the Partners.
2. Payment to Xxxx Upon Change in Control. As part of or in connection
with any Change in Control, the Partnership agrees to pay or the Partnership and
the Partners otherwise agree to cause Xxxx to receive, as compensation for
services rendered, the aggregate value set forth below, which, to the extent
possible, shall consist of consideration of the same type (cash, securities and
other property, rights or interests of any description) and be paid in the same
manner as is issued or
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issuable to the holders of Common Partner Interests in the Partnership in
exchange for such Common Partner Interests as part of or in connection with the
Change in Control, in accordance with the following terms and conditions:
(a) Amount of Consideration. The aggregate amount of such
consideration (the "Consideration Amount") shall be equal to the excess of (i)
the consideration which Xxxx would be entitled to receive in such Change in
Control as if he was the holder at the time of such Change in Control of the
Xxxx Deemed Partnership Interest (as hereinafter defined) and such interest was
subject to the same adjustments or special allocations (on a proportionate
basis) as Xxxxxxxx has at any time after the date hereof agreed would be
applicable to Xxxxxxxx'x Common Partner Interest in the Partnership under the
Partnership Agreement or any other binding written agreement, over (ii)
$1,000,000 in value of such consideration (as determined in good faith by the
Partnership and allocated among cash and non-cash items in the same proportions
as the consideration that Xxxxxxxx receives in the Change in Control). The
payment to Xxxx of the Consideration Amount (as increased by the Gross-Up
Payment described below) shall proportionately reduce the amount of
consideration in the Change in Control that each of the Partners shall receive
in respect of their Common Partner Interests. For purposes of this Agreement,
the "Xxxx Deemed Partnership Interest" at the time of a Change in Control shall
mean such Common Partner Interest as would be held by Xxxx at such time if, as
of the date hereof, Xxxx held a two percent (2%) Common Partner Interest and the
actual holders of Common Partner Interests held, instead of the Common Partner
Interests actually held, the Common Partner Interests shown below for such
Partners:
SFG Management Limited Liability Company .98%
Xxxx Xxxxxxxx 48.51%
Dairy Farmers of America, Inc. 48.51%
Xxxxxxx X. Xxxx 2.00%
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100.00%
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In addition, the Consideration Amount shall be increased by an
additional cash payment (the "Gross-Up Payment") which will be in an amount such
that, after payment by Xxxx of all applicable federal income taxes, Medicare
taxes and Utah state taxes on the Consideration Amount and on the Gross-Up
Payment, Xxxx is in substantially the same position as if the Consideration
Amount were treated as a gain recognized on a sale by Xxxx of a Common Partner
Interest in the Partnership, the gain from which would be taxed for applicable
federal and state tax purposes as long term capital gains taxed at the
applicable federal and state tax rates for long term capital gains in effect as
of the date of the Change in Control.
(b) Payment of Consideration. The Consideration Amount plus
the Gross-Up Payment shall be payable hereunder not later than the closing of
the Change in Control.
(c) No Amendment to Adversely Affect Xxxx'x Rights. Each of
the Partners hereby agrees not to amend the Partnership Agreement in any manner
which would adversely affect Xxxx'x rights hereunder, without the prior written
consent of Xxxx, except for (i) an amendment pursuant to which Xxxxxxxx agrees
to a special allocation or similar adjustment applicable to Xxxxxxxx'x Common
Partner Interest in the Partnership, as contemplated in Paragraph 2(a) above, or
(ii) an amendment which generally applies to all holders of Common Partner
Interests. The
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Partnership shall promptly notify Xxxx of any such amendments or the entry into
any other binding agreement relating to special allocations or other adjustments
applicable to Xxxxxxxx'x Common Partner Interest.
3. Coordination with Release of Claims, Confidentiality and
Non-Competition Agreement.
(a) Termination of this Agreement. In the event that (i)
Xxxx'x employment with the Partnership terminates and he is entitled to receive
payments under that certain Release of Claims, Confidentiality and
Non-Competition Agreement of even date herewith between the Partnership and Xxxx
(the "Other Agreement"), and (ii) he does not elect to terminate the Other
Agreement pursuant to the applicable provisions of Paragraph 6 thereof, then
this Agreement shall terminate as of the close of the thirty (30) day period
following the Calculation Date described in Paragraph 6 of the Other Agreement,
subject to the provisions of Paragraph 7 thereof in the event a Change in
Control occurs within one year following the Calculation Date.
Upon such termination of this Agreement, Xxxx shall no longer
be entitled to receive any payments whatsoever under this Agreement and neither
the Partners nor the Partnership shall be obligated to pay or cause to be paid
the Consideration Amount, the Gross-Up Payment or any other amounts hereunder
should a Change in Control thereafter occur. In addition, notwithstanding
anything contained herein to the contrary, upon payment of the Consideration
Amount and the Gross-Up Payment hereunder, this Agreement shall thereupon
terminate and shall not be effective for any subsequent Change in Control.
(b) Offset of Previous Amounts Paid. In the event that a
Change in Control occurs within the 180 day period following the Calculation
Date under the Other Agreement, Xxxx shall nonetheless be entitled to receive
the Consideration Amount and the Gross-Up Payment as set forth herein; provided,
however, that the cash portion of the consideration due hereunder shall be
reduced by the aggregate amount of any payments made by the Partnership to Xxxx
under the Other Agreement.
4. Transferability: Rights of Xxxx'x Heirs and Successors. This
Agreement is not transferable by Xxxx during his life. If any rights exercisable
by Xxxx or deliverable to Xxxx under this Agreement have not been exercised or
delivered, respectively, at the time of Xxxx'x death, such rights shall be
exercisable by his estate or by the beneficiary or beneficiaries designated by
Xxxx in a writing filed with the Secretary of the Partnership prior to his
death.
5. No Rights As a Partner. This Agreement does not confer, and Xxxx
shall not have, any rights of a partner in the Partnership.
6. Application of Withholding Taxes. The parties agree that all
payments to Xxxx hereunder will constitute payment of compensation for services
rendered to the Partnership. Xxxx acknowledges that all such payments shall be
subject to applicable tax withholding and payroll taxes, including without
limitation state and federal income taxes and FICA and Medicare taxes. Xxxx
agrees that such required tax withholdings shall be a condition for receiving
the Consideration Amount and the Gross-Up Payment.
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7. Miscellaneous.
(a) Notices. Any notices, claims or demands which any party is
required or may desire to give to another under or in conjunction with this
Agreement shall be in writing, and shall be given by addressing the same to such
other party(ies) at the address set forth below, and by (i) depositing the same
so addressed, postage prepaid, first class, certified or registered, in the
United States mail (herein referred to as "Mailing"), (ii) overnight delivery by
a nationally recognized overnight courier service (e.g. UPS, Federal Express),
(iii) delivering the same personally to such other party(ies), or (iv) if a fax
number is listed below, transmitting by facsimile and Mailing the original. Any
notice shall be deemed to have been given five (5) U.S. Post Office delivery
days following the date of Mailing; one business day after timely delivery to an
overnight courier; if by personal delivery, upon such delivery; or if by
facsimile, the day of transmitter's confirmation of receipt of a facsimile
transmission if transmitted within customary business hours, or if not
transmitted within customary business hours, the following business day.
If to the Partnership or Xxxxxxxx:
Southern Foods Group, L.P.
0000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xx. Xxxx Xxxxxxxx
Fax No.: (000) 000-0000
If to DFA:
Dairy Farmers of America, Inc.
Xxxxxxxxxxx Xxxxx
00000 Xxxxx Xxxxxxxxx Xxxxx Blvd., Suite 1000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx Xxx
Fax No.: (000) 000-0000
If to Xxxx:
Xx. Xxxxxxx X. Xxxx
0000 Xxxx 0000 Xxxxx
Xxxxxxx, Xxxx 00000
Fax No.:
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Any party may change its address for notice by giving notice in accordance with
the terms of this Section 7(a).
(b) Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
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(c) Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and still be legal, valid or enforceable.
(d) Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements or
understandings, whether written or oral, with respect to the subject matter
hereof. No terms, conditions or warranties, other than those contained herein,
and no amendments or modifications hereto shall be binding unless made in
writing and signed by the parties hereto.
(e) Binding Effect. This Agreement shall extend to and be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, representatives, successors and assigns.
(f) Remedies. If Xxxx shall file any judicial action for
enforcement of this Agreement and successfully recover compensation or damages,
he shall be entitled to recover in such proceeding an additional amount equal to
interest at ten percent (10%) per annum on the amount recovered from the date
such amount was due and payable together with all expenses and reasonable
attorneys' fees incurred in obtaining legal advice and counseling respecting his
rights under this Agreement and in prosecuting and disposing of such action. The
provisions of this Section shall be cumulative and without prejudice to any
other right or remedy to which Xxxx may be entitled either at law, in equity or
under this Agreement and shall not constitute the exclusive remedy of Xxxx for
breach of this Agreement.
(g) Waiver. The waiver by either party hereto of a breach of
any term or provision of this Agreement shall not operate or be construed as a
waiver of a subsequent breach of the same provisions by either party or of the
breach of any other term or provision of this Agreement.
(h) Titles. Titles of the paragraphs herein are used solely
for convenience and shall not be used for interpretation or construing any word,
clause, paragraph or provision of this Agreement.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, but which together shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
SOUTHERN FOODS GROUP, L.P.
By: SFG Management Limited Liability
Company
By:
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Its:
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DAIRY FARMERS OF AMERICA, INC.
By:
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Its:
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XXXX XXXXXXXX
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XXXXXXX X. XXXX
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