<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DEAN FOODS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[DEAN FOODS LOGO]
3600 North River Road
Franklin Park, Illinois 60131
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Dean Foods Company which will be held on Tuesday, September 30, 1997, at 10:00
A.M., local time, in Oakbrook Terrace, Illinois.
The enclosed Notice of 1997 Annual Meeting and Proxy Statement contain
details concerning the business to be conducted at the Annual Meeting. The
Board of Directors of the Company recommends a vote "FOR" the election of the
four directors nominated to serve until the 2000 Annual Meeting of
Stockholders; "FOR" the amendments to the Company's 1989 Stock Awards Plan
proposed by the Board of Directors; "FOR" the increase in the maximum tax
deductible amounts of certain annual incentive bonuses proposed by the Board
of Directors; and "FOR" the ratification of Price Waterhouse as independent
accountants of the Company for the 1998 fiscal year. As is customary, there
will be a report on the Company's business, and stockholders will have an
opportunity to inquire about the affairs of the Company that may be of general
interest.
Please sign and return your proxy card in the enclosed envelope at your
earliest convenience to assure that your shares will be represented and voted
at the meeting even if you are unable to attend.
Sincerely,
[LOGO OF HOWARD M. DEAN]
Howard M. Dean
Chairman of the Board and
Chief Executive Officer
August 22, 1997
<PAGE>
NOTICE OF 1997 ANNUAL MEETING
The Annual Meeting of Stockholders of Dean Foods Company will be held on
Tuesday, September 30, 1997, at 10:00 A.M., Central Daylight Savings Time, at
the Drury Lane Oakbrook Terrace, 100 Drury Lane, Oakbrook Terrace, Illinois,
for the purpose of considering and acting upon the following:
(1) The election of four directors to serve until the 2000 Annual Meeting.
(2) A proposal of the Board of Directors to approve amendments to the
Company's 1989 Stock Awards Plan.
(3) A proposal of the Board of Directors to approve an increase in the
maximum tax deductible amounts of certain annual incentive bonuses.
(4) Approval of the selection of Price Waterhouse as independent
accountants for the Company and its subsidiaries for the fiscal year
ending May 31, 1998.
(5) Such other matters as may properly come before the meeting.
Directions to the site of the Annual Meeting appear at the conclusion of the
Proxy Statement.
The Board of Directors has fixed the close of business on August 8, 1997, as
the record date for the determination of stockholders entitled to vote at the
meeting, and only holders of shares of Company Common Stock of record at the
close of business on that day will be entitled to vote. The stock transfer
books will not be closed. A complete list of stockholders entitled to vote at
the meeting will be available for examination by any stockholder of record for
any purpose germane to the meeting during normal business hours at the offices
of the Drury Lane Oakbrook Terrace, 100 Drury Lane, Oakbrook Terrace,
Illinois, during the 10-day period preceding the meeting. A copy of the
Company's Annual Report for fiscal year 1997 is concurrently being mailed to
each person named in such list.
The 1997 Annual Meeting may be postponed or adjourned from time to time
without any notice other than by announcement at the meeting of any
postponements or adjournments thereof, and any and all business for which
notice is hereby given may be transacted at any such postponed or adjourned
meeting.
Whether or not you expect to be present at the meeting, please date, sign
and return the enclosed proxy, which is solicited by the Board of Directors.
The proxy is revocable and will not affect your right to vote in person in the
event you attend the meeting.
Eric A. Blanchard
Secretary
August 22, 1997
YOU ARE URGED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY.
THANK YOU.
<PAGE>
DEAN FOODS COMPANY
3600 NORTH RIVER ROAD
FRANKLIN PARK, ILLINOIS 60131
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Dean Foods
Company, a Delaware corporation, for use at the Annual Meeting of Stockholders
to be held on September 30, 1997 (the "1997 Annual Meeting") and any
adjournment thereof. A proxy in the accompanying form, properly executed and
received by the Secretary prior to the closing of the polls on the particular
matter and not revoked, will be voted FOR the election of directors as set
forth therein (unless otherwise designated), and will be voted in accordance
with the specifications made thereon with regard to the proposal of the Board
of Directors to amend the Company's 1989 Stock Awards Plan, the proposal of
the Board of Directors to increase the maximum tax deductible amounts of
certain annual incentive bonuses and the proposal of the Board of Directors to
approve the selection of independent accountants, or, to the extent no
specification is made, will be voted in the election of directors as described
under "Election of Directors" below, and will be voted FOR such amendments,
FOR such increase and FOR the selection of independent accountants. A proxy
with respect to any matter may be revoked at any time prior to the closing of
the polls on such matter at the 1997 Annual Meeting by giving notice of
revocation or a duly executed proxy bearing a later date to the Secretary
prior to the closing of the polls on such matter. The approximate date of
mailing this Proxy Statement is August 22, 1997. The cost of soliciting
proxies will be borne by the Company. The Company will solicit proxies by
mail, and directors, officers and employees of the Company may solicit proxies
by telephone, telegraph, facsimile transmission or in person. The Company has
retained Morrow & Company, Inc. to aid in the solicitation of proxies at a fee
of $6,000 plus customary expenses.
Only holders of Company Common Stock of record on the books of the Company
at the close of business on August 8, 1997 will be entitled to vote at the
meeting. On that date there were 40,566,767 shares outstanding, the holders of
which are entitled to one vote per share. A majority of the outstanding shares
of Company Common Stock will constitute a quorum for the transaction of
business at the 1997 Annual Meeting.
Pursuant to Delaware law, shares entitled to cast votes on a matter at the
1997 Annual Meeting which are the subject of an ABSTAIN on that matter will be
treated for quorum and all other purposes relevant to that matter as being
present at the meeting and entitled to vote and thus will have the same effect
as a vote of such shares against that matter. Shares entitled to cast votes on
a matter at the meeting which are the subject of a broker non-vote on that
matter will be treated as present for quorum purposes relevant to that matter,
but will not be included in determining whether a majority or other required
percentage of the "shares present and entitled to vote" on that matter has
been obtained.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors consists of three classes of directors elected to serve
staggered three-year terms of office. The class to be elected at the 1997
Annual Meeting consists of four directors to hold office until the 2000 Annual
Meeting of Stockholders and until their successors shall have been elected and
qualified. The nominees for the class to be elected are Paula Hannaway Crown,
John P. Frazee, Jr., Thomas A. Ravencroft, and Janet Hill (all of whom, except
Janet Hill, currently serve on the Board of Directors).
A policy governing the retirement of Directors from the Board was adopted in
1989 and amended in 1993. Pursuant to such policy, (i) any non-employee
Director who is elected as a Director of the Company prior to his/her 65th
birthday and discontinues his/her principal position or identification which
prevailed at the time of election must submit his/her resignation as a
Director upon the request of the Corporate Governance Committee of the Board
of Directors (as successor to the Nominating Committee of the Board of
Directors) and the Chairman of the Board; (ii) any non-employee Director who
is elected as a Director of the Company to a term expiring after his/her 70th
birthday must submit his/her resignation as of the first day of the month
after such birthday; (iii) any Director who is an employee of the Company or
any of its subsidiaries must submit his/her resignation as a Director of the
Company at the first meeting of the Board after termination of his/her
employment with the Company and its subsidiaries; and (iv) notwithstanding the
foregoing, a Director who is serving or has previously served as Chief
Executive Officer of the Company must submit his/her resignation as a Director
of the Company upon the request of a majority of the Board of Directors made
at any time subsequent to one month before his/her 70th birthday.
If the accompanying form of proxy is properly executed, the persons named as
proxies therein will (unless otherwise designated) vote the shares of Company
Common Stock represented by such executed proxy for the election of the four
persons named below. In case any of the nominees is not a candidate at the
meeting, an event which the Board of Directors does not anticipate, the
enclosed proxy may be voted for a substitute nominee and (unless otherwise
designated) will be voted for the other nominees named. Information supplied
by the nominees and all other directors concerning their ages, business
experience, and periods of service as Directors is shown below.
2
<PAGE>
NOMINEES FOR ELECTION AT THE 1997 ANNUAL MEETING
FOR THREE-YEAR TERMS EXPIRING IN 2000:
PAULA HANNAWAY CROWN, Vice President of Henry Crown and
Company (a private investment company) since 1985. Director of
the Company since 1992; member of Audit Committee. Age 38.
[PHOTO]
JOHN P. FRAZEE, JR., Chairman of the Board of Directors,
President and Chief Executive Officer of Paging Network, Inc.
(PAGENET) (a wireless messaging communications company) since
August 1997; President and Chief Operating Officer of Sprint
Corporation (a telecommunications company) from March 1993 to
August 1993; Chairman and Chief Executive Officer of Centel
Corporation (a telecommunications company) from 1988 to 1993.
Director of Nalco Chemical Company (a specialty chemical
company) since 1985, Security Capital Group Incorporated
(creator and operator of real estate investment trusts) since
1991, Homestead Village, Inc. (developer and operator of
extended lodging properties) since 1991, and Paging Network,
Inc. since 1995. Director of the Company since 1988; member of
Audit and Corporate Governance Committees. Age 52.
[PHOTO]
THOMAS A. RAVENCROFT, President--Dairy Division of the Company
since 1994, Senior Vice President of the Company since 1989,
Group Vice President from 1988 to 1989 and Vice President,
Corporate Planning from 1970 to 1988. Director of the Company
since 1979. Age 60.
[PHOTO]
JANET HILL, Vice President of Alexander & Associates (a
corporate consulting firm) since 1981; President of Staubach,
Alexander, Hill (a commercial real estate consulting firm)
since 1995. Director of First Union Bank of Virginia (a bank
holding company) since 1996, Progressive Corporation (an
insurance company) since 1996, and Wendy's International, Inc.
(a restaurant corporation) since 1995. Age 49.
[PHOTO]
3
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE IN 1999:
EDWARD A. BRENNAN, Retired since August 1995. Chairman and
Chief Executive Officer of Sears, Roebuck and Co. from 1986 to
August 1995. Director of Minnesota Mining & Manufacturing
Company (a home product and chemical company) since 1986, AMR
Corporation (an air transportation company) since 1987, Morgan
Stanley, Dean Witter, Discover & Co. (a financial services
company) since 1993, The Allstate Corporation (an insurance
company) since 1993, Unicom Corporation (an electric company)
since 1995, and The SABRE Group (an electronic travel-related
products and services distributor) since 1996. Director of the
Company since March 1996; Chairman of Audit Committee; member
of Executive Committee. Age 63.
[PHOTO]
JOHN S. LLEWELLYN, JR., Retired since January 1997. President
and Chief Executive Officer of Ocean Spray Cranberries, Inc.
(marketing cooperative of cranberry and citrus growers) from
1988 to 1997. Director of the Company since 1994; Chairman of
Compensation Committee; member of Nominating and Corporate
Governance Committees. Age 62.
[PHOTO]
PHILIP A. MARINEAU, President and Chief Operating Officer of
the Company since December 1996; President and Chief Operating
Officer from 1993 to 1995, and Executive Vice President and
Chief Operating Officer from 1992 to 1993, of The Quaker Oats
Company (a diversified food company). Director of Arthur J.
Gallagher & Co. (an international broker of property/casualty
and human resource risk management programs) since 1991, and
Pete's Brewing Company (a craft brewer company) since 1996.
Age 50.
[PHOTO]
RICHARD P. MAYER, Retired since 1995. Chairman and Chief
Executive Officer of Kraft General Foods North America (a
diversified food company) from 1991 to January 1995; President
of General Foods Corporation, 1989-1991. Director of Brown-
Forman Corporation (a liquor and wine company) since 1995 and
True North Communications Inc. (an advertising agency holding
company) since 1997. Director of the Company since March 1996;
member of Compensation Committee. Age 57.
[PHOTO]
4
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE IN 1998:
LEWIS M. COLLENS, President of Illinois Institute of
Technology and Chairman and Chief Executive Officer of IIT
Research Institute since 1990; Dean of IIT Chicago-Kent
College of Law from 1974 to 1990. President of the Council of
Presidents of the Teacher's Academy for Mathematics and
Science since 1990. Director of AMSTED Industries (a
manufacturer of components for the railroad and construction
industries) since 1991. Director of the Company since December
1991; member of Audit and Corporate Governance Committees.
Age 59.
[PHOTO]
HOWARD M. DEAN, Chairman of the Board of Directors of the
Company since 1989, Chief Executive Officer since 1987 and
President and Chief Operating Officer from 1970 to 1989.
Director of Ball Corporation (a diversified manufacturer of
containers and hi-tech products) since 1984, Yellow
Corporation (a nationwide common carrier) since 1987 and Nalco
Chemical Company (a specialty chemical company) since 1987.
Director of the Company since 1970; Chairman of Executive
Committee. Age 60.
[PHOTO]
BERT A. GETZ, Chairman, President and Director of Globe
Corporation (a diversified investment firm) since 1974.
Director of Ameritas Life Insurance Corporation since 1990 and
Bank of America Illinois from 1992 to 1996; member of Bank of
America Illinois Advisory Board since 1996. Director of the
Company since 1989; member of Compensation and Corporate
Governance Committees. Age 60.
[PHOTO]
ANDREW J. MCKENNA, Chairman and Chief Executive Officer and
Director of Schwarz Paper Company (a printer, converter and
distributor of packaging and promotional materials) since
1964. Director of AON Corporation (an insurance holding
company) since 1970, Skyline Corporation (a manufacturer of
mobile homes) since 1971, Chicago National League Ball Club,
Inc. since 1981, Tribune Company (a communications company)
since 1982, Chicago Bears Football Club, Inc. since 1985,
McDonald's Corporation since 1991, First National Bank of
Chicago since 1993, and First Chicago NBD Corporation since
1997. Director of the Company since 1983; Chairman of
Corporate Governance Committee; member of Executive and
Compensation Committees. Age 67.
[PHOTO]
5
<PAGE>
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors held ten meetings during fiscal year 1997.
The Audit Committee of the Board of Directors meets with management of the
Company and the Company's independent accountants to discuss the scope and
results of the annual audit by the independent accountants, the fees of and
services to be performed by the independent accountants, and the adequacy of
the Company's system of internal controls. The Audit Committee met twice in
fiscal year 1997.
The Compensation Committee of the Board of Directors reviews and recommends,
subject to the approval of the Board of Directors, salaries and other forms of
cash compensation of elected Company officers, grants options and other awards
under the Company's 1989 Stock Awards Plan, administers such plan, the
Company's Supplemental Incentive Compensation Plan and the Company's
Supplemental Benefit Plan, and reviews other personnel and compensation
matters with the Company's management. The Compensation Committee met three
times in fiscal year 1997.
The Corporate Governance Committee of the Board of Directors, which in
fiscal year 1997 succeeded to the functions of the former Nominating
Committee, is authorized to nominate individuals for election or reelection to
the Board at any Annual Meeting of Stockholders and appoint individuals to
fill any vacancy resulting from the resignation or retirement of a director.
The Corporate Governance Committee considers suggestions regarding candidates
for election to the Board submitted by stockholders in writing to the
Secretary of the Company. With regard to the 1998 Annual Meeting, any such
suggestion must be received by the Secretary no later than the date by which
stockholder proposals for the 1998 Annual Meeting must be received as
described below under the heading "Submission of Stockholder Proposals". The
Corporate Governance Committee did not meet in fiscal year 1997; the
candidates for election at the 1997 Annual Meeting were nominated by the Board
of Directors as a whole.
During fiscal year 1997, each director of the Company who was not a salaried
officer, employee, or paid consultant was paid an annual fee of $25,000 and
fees of $1,200 for each meeting of the Board of Directors attended in person,
$1,000 for each committee meeting attended in person and $1,000 for each Board
or committee meeting attended by telephone. Such directors were also
reimbursed for their out-of-pocket expenses of attending Board and committee
meetings. Under a deferred compensation plan adopted in 1982 by the Board,
directors may elect to defer payment of all or a portion of their annual fees,
board meeting fees and committee meeting fees until after they cease to be
directors. Deferred fees, and certain other amounts credited to the directors'
accounts during 1996 in connection with the termination of a 1986 directors'
retirement plan, accrue interest semiannually at the average prime rate.
Directors may elect to have all or a portion of their deferred fees and such
other amounts credited to a Company Common Stock account in Units based upon
the market value of Company Common Stock on the dates credited. Additional
Units are automatically awarded based upon dividends paid on Company Common
Stock. Following termination of service as a director, a director is entitled
to receive in cash (paid in annual installments determined by the Compensation
Committee, which administers the plan) the market value of the Company Common
Stock underlying the Units in such director's Company Common Stock account.
6
<PAGE>
The following table sets forth the number of Units credited as of July 31,
1997 to the Company Common Stock Accounts for the directors who were not
officers, employees, or paid consultants and
who were participating in the Company's deferred compensation plan for
directors. Each Unit is equivalent in value to one share of Company Common
Stock.
<TABLE>
<CAPTION>
NAME NUMBER OF UNITS
---- ---------------
<S> <C>
Edward A. Brennan........................................ 1,817.06
Lewis M. Collens......................................... 6,511.78
Paula Hannaway Crown..................................... 5,418.36
John P. Frazee, Jr. ..................................... 6,045.95
Bert A. Getz............................................. 13,849.63
John S. Llewellyn, Jr. .................................. 2,289.31
Andrew J. McKenna........................................ 16,466.83
</TABLE>
During fiscal year 1997, the Board of Directors adopted the 1996 Director
Stock Awards Plan, under which the Board may from time to time grant directors
who are not employees of the Company or any of its subsidiaries non-qualified
options to purchase shares of Company Common Stock at the market value on the
date of grant and/or restricted Company Common Stock. The maximum number of
shares which may be issued under the Plan is 100,000 (subject to adjustment).
Pursuant to the Plan, during fiscal year 1997 non-qualified options at
$29.00 per share were granted as follows: Mr. Brennan--3,000 shares; Mr.
Collens--3,000 shares; Ms. Crown--3,000 shares; Mr. Frazee--3,000 shares; Mr.
Getz--3,000 shares; Mr. Llewellyn--3,000 shares; Mr. Mayer--3,000 shares; and
Mr. McKenna--3,000 shares. Each option has a term of ten years, but, if
earlier, will expire five years after the optionee terminates his or her
service with the Board of Directors. Subject to acceleration in the event of a
"change in control" (defined the same as in the agreements described below
under the heading "Change in Control Agreements") or the optionee's death or
disability while a director, each option becomes exercisable over four years
at the rate of 25% per year, commencing one year after the date of grant,
provided the optionee is still a Company director and not an employee of the
Company or any of its subsidiaries. Upon exercise of an option, the Company is
obligated to make a cash payment to the optionee to compensate him or her for
the tax liability incurred in connection with the exercise thereof. In the
event of a change in control (as so defined), the optionee may, during the
succeeding 90 days, in lieu of exercising the option, surrender it to the
Company in return for a cash payment equal to the excess of the highest fair
market value, during the thirty days preceding or succeeding the event, of the
shares for which the option is then exercisable over their exercise price,
plus an amount sufficient to compensate the optionee for the individual income
tax liability incurred in connection with the surrender of such option.
7
<PAGE>
EXECUTIVE COMPENSATION
The following tables and text discuss the compensation paid in fiscal year
1997 and the two prior fiscal years to the Company's Chief Executive Officer
and the four other most highly compensated executive officers of the Company
serving at the end of fiscal year 1997, and one former executive officer of
the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------------------- ------------- -----------
SECURITIES
UNDERLYING LTIP ALL OTHER
NAME AND OTHER ANNUAL OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(9) (#) ($) ($)
------------------ ---- --------- -------- ------------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Howard M. Dean 1997 $568,037 $637,338 -- 119,451 326,923 $ 38,067(10)
Chairman of the Board 1996 $568,037 $157,886 -- 25,200 -- $ 39,178
and Chief Executive 1995 $524,342 $335,579 -- 21,000 -- $ 13,721
Officer
Philip A. Marineau 1997(1) $312,500 $276,863(7) -- 39,962 -- $ 3,300(10)
President and Chief 1996 -- -- -- -- -- --
Operating Officer 1995 -- -- -- -- -- --
(since December 6,
1996)
Thomas L. Rose 1997(2) $229,587 $365,382 -- 69,352 -- $2,681,429(10,11)
President and Chief 1996 $382,828 $ 96,173(7) -- 18,216 -- $ 78,762
Operating Officer 1995 $361,842 $226,192 -- 12,500 -- $ 103,462
(until December 6,
1996)
Thomas A. Ravencroft 1997 $277,859(4) $290,699(7) -- 43,974 68,130 $ 15,141(10)
Senior Vice President 1996 $241,616(5) $ 70,646(7) -- 11,050 -- $ 14,455
and President--Dairy 1995 $219,267(6) $160,729(7) -- 4,375 -- $ 6,271
Division
William R. McManaman 1997 $295,696 $261,975(7) -- 28,432 -- $ 16,753(10)
Vice President--Finance 1996(3) $171,415 $120,750(7,8) -- 12,150 -- --
and Chief Financial 1995 -- -- -- -- -- --
Officer
Jeffrey P. Shaw 1997 $203,061 $162,670(7) -- 22,805 68,130 $ 9,150(10)
Group Vice President-- 1996 $203,061 $ 23,539(7) -- 7,399 -- $ 12,957
Vegetables and 1995 $180,000 $160,165(7) -- 4,375 -- $ 5,424
President of Dean Foods
Vegetable Company
</TABLE>
- --------
(1) Mr. Marineau became employed by the Company, as President and Chief
Operating Officer, as of December 6, 1996.
(2) Mr. Rose retired from employment with the Company on December 31, 1996.
(3) Mr. McManaman became employed by the Company, as Vice President--Finance
and Chief Financial Officer, as of October 16, 1995.
(4) Includes $8,000 of deferred compensation.
(5) Includes $96,000 of deferred compensation.
(6) Includes $88,200 of deferred compensation.
8
<PAGE>
(7) Pursuant to the Company's 1989 Stock Awards Plan, eligible employees may
elect to receive Company Common Stock in lieu of all or a portion of
incentive cash bonuses otherwise payable to them. At the time of
issuance, the shares have a fair market value equal to 115% of the cash
bonus which the employee elects to receive in Company Common Stock. The
bonuses reflected include the fair market value of such shares in excess
of the bonus amounts which the executive elected to receive in Company
Common Stock.
(8) Mr. McManaman's first year bonus was agreed to by the Company at the time
he was employed.
(9) The Securities and Exchange Commission ("SEC") rules regarding executive
compensation do not require disclosure unless the amount of such other
annual compensation for a fiscal year is greater than or equal to either
$50,000 or 10 percent of the total annual salary and bonus for such
fiscal year reported for the named executive officer, whichever is less.
(10) Consists of matching contributions (Mr. Dean: $2,375; Mr. Rose: $241; Mr.
Ravencroft: $3,184; Mr. McManaman: $2,730; and Mr. Shaw: $2,258) and
other contributions (Mr. Dean: $3,300; Mr. Marineau: $3,300; Mr. Rose:
$61; Mr. Ravencroft: $3,300; Mr. McManaman: $3,300; and Mr. Shaw: $3,300)
for eligible covered employees made by the Company pursuant to the Dean
Foods Company Investment and Profit Sharing Plan, and accruals (Mr. Dean:
$32,392; Mr. Rose: $5,959; Mr. Ravencroft: $8,657; Mr. McManaman:
$10,723; and Mr. Shaw: $3,592) for the lump sum payments at retirement
under the Dean Foods Company Supplemental Benefit Plan described under
"Retirement Benefits" below and, in the case of Mr. Rose, the amount
described in Footnote 11 below.
(11) Includes $55,500 paid by the Company as the fourth of five annual
installments to provide Mr. Rose with a relocation allowance. The $55,500
paid to Mr. Rose in fiscal year 1997 reimbursed him for additional home
mortgage interest and taxes relating to Mr. Rose's move during fiscal
year 1995 from Rockford, Illinois to the Chicago metropolitan area. Also
includes a supplemental lump sum retirement payment and consulting, non-
compete and severance payments (but not payment of full bonus for fiscal
1997) made and to be made, and the value of continuing life, health and
dental insurance, leased car, financial consulting services and country
club dues reimbursement provided and to be provided, by the Company to
Mr. Rose in connection with his retirement after 42 years of service with
the Company, aggregating up to $2,625,627. Does not include lump sum
distributions to Mr. Rose in connection with his retirement pursuant to
the terms of the Company's Salaried Employees Pension Plan and the
Company's Supplemental Benefit Plan. In connection with Mr. Rose's
retirement, the Company amended his outstanding stock options to
accelerate their exercisability, and in the case of his incentive stock
options (in exchange for a 20% reduction in the number of shares subject
thereto), converted them to non-qualified options that include an
obligation of the Company to compensate him for the tax liability
incurred in connection with the exercise thereof and extended their
exercisability.
9
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE APPRECIATION FOR
OPTION TERM (10 YEARS)(5)
-------------------------------------------------
INDIVIDUAL GRANTS 5% ($) 10% ($)
------------------------------------------ ----------------------- -------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS POTENTIAL POTENTIAL
UNDERLYING GRANTED TO EXERCISE PRICE PER AGGREGATE PRICE PER AGGREGATE
OPTIONS EMPLOYEES OR BASE SHARE AT POTENTIAL SHARE AT POTENTIAL
GRANTED IN FISCAL PRICE EXPIRATION EXPIRATION REALIZABLE EXPIRATION REALIZABLE
NAME (#) YEAR ($/SH) DATE DATE VALUE DATE VALUE
---- ---------- ---------- -------- ---------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Howard M. Dean.......... 30,318(1) 4.4% $22.87 07/26/06 $ 37.25 $ 435,973 $ 59.32 $ 1,105,091
45,173(2) 6.5% $27.50 07/26/06 $ 37.25 $ 440,437 $ 59.32 $ 1,437,405
43,960(3) 6.3% $32.00 07/26/06 $ 37.25 $ 230,790 $ 59.32 $ 1,200,987
Philip A. Marineau...... 25,462(1) 3.7% $27.50 12/02/06 $ 44.79 $ 440,238 $ 71.33 $ 1,115,999
14,500(4) 2.1% $27.50 12/02/06 $ 44.79 $ 250,705 $ 71.33 $ 635,535
Thomas L. Rose.......... 17,602(1) 2.5% $22.87 07/26/06 $ 37.25 $ 253,117 $ 59.32 $ 641,593
26,227(2) 3.8% $27.50 07/26/06 $ 37.25 $ 255,713 $ 59.32 $ 834,543
25,523(3) 3.7% $32.00 07/26/06 $ 37.25 $ 133,996 $ 59.32 $ 697,288
Thomas A. Ravencroft.... 5,855(4) 0.8% $22.87 07/26/06 $ 37.25 $ 84,195 $ 59.32 $ 213,415
6,354(1) 0.9% $22.87 07/26/06 $ 37.25 $ 91,371 $ 59.32 $ 231,603
16,099(2) 2.3% $27.50 07/26/06 $ 37.25 $ 156,965 $ 59.32 $ 512,270
15,666(3) 2.3% $32.00 07/26/06 $ 37.25 $ 82,247 $ 59.32 $ 427,995
William R. McManaman.... 3,175(4) 0.5% $22.87 07/26/06 $ 37.25 $ 45,657 $ 59.32 $ 115,729
4,610(1) 0.7% $22.87 07/26/06 $ 37.25 $ 66,292 $ 59.32 $ 168,035
10,464(2) 1.5% $27.50 07/26/06 $ 37.25 $ 102,024 $ 59.32 $ 332,964
10,183(3) 1.5% $32.00 07/26/06 $ 37.25 $ 53,461 $ 59.32 $ 278,200
Jeffrey P. Shaw......... 3,870(4) 0.6% $22.87 07/26/06 $ 37.25 $ 55,651 $ 59.32 $ 141,062
2,611(1) 0.4% $22.87 07/26/06 $ 37.25 $ 37,546 $ 59.32 $ 95,171
8,273(2) 1.2% $27.50 07/26/06 $ 37.25 $ 80,662 $ 59.32 $ 263,247
8,051(3) 1.2% $32.00 07/26/06 $ 37.25 $ 42,268 $ 59.32 $ 219,953
</TABLE>
- --------
(1) Non-qualified option granted under the Company's 1989 Stock Awards Plan at
an exercise price equal to the market price on the date of grant. Such
option becomes exercisable over four years at the rate of 25% per year,
commencing one year after the date of grant, subject to acceleration in
the event of a "change in control" of the Company (defined the same as in
the agreements described below under the heading "Change in Control
Agreements"). Under the option as originally granted, the Company was
obligated to compensate the optionee for the tax liability incurred in
connection with the exercise of such option, but not in excess of the
aggregate increase in the market value of the shares after the date of
grant.
(2) Non-qualified option granted under the Company's 1989 Stock Awards Plan
with the same terms as the non-qualified option described in Footnote 1
above except the exercise price. The exercise price of this option
exceeded the market price on the date of grant by approximately 20%.
(3) Non-qualified option granted under the Company's 1989 Stock Awards Plan
with the same terms as the non-qualified option described in Footnote 1
above except the exercise price. The exercise price of this option
exceeded the market price on the date of grant by approximately 40%.
(4) Incentive stock option granted under the Company's 1989 Stock Awards Plan
at an exercise price equal to the market price on the date of grant. Such
option becomes exercisable over four years at the rate of 25% per year,
commencing one year after the date of grant, subject to acceleration
10
<PAGE>
in the event of a "change in control" of the Company (defined the same as
in the agreements described below under the heading "Change in Control
Agreements").
(5) The potential prices per share at expiration date and aggregate potential
realizable values result from calculations assuming 5% and 10% growth
rates in share price as prescribed by the SEC and are not intended to
forecast future price appreciation of Common Stock of the Company nor the
actual value that the named executives will realize. Executives will
realize the indicated values only if the price of Company Common Stock
appreciates by the hypothetical annual percentage increases indicated.
11
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Howard M. Dean 0 $ 0 116,867 / 156,532 $1,237,567 / $1,610,815
Philip A. Marineau 0 $ 0 0 / 39,962 $ 0 / $434,587
Thomas L. Rose 0 $ 0 128,023 / 0 $ 1,307,560 / $0
Thomas A. Ravencroft 0 $ 0 28,454 / 55,820 $ 302,453 / $583,531
William R. McManaman 0 $ 0 3,037 / 37,545 $ 34,941 / $404,264
Jeffrey P. Shaw 0 $ 0 12,821 / 31,360 $ 134,942 / $326,650
</TABLE>
- --------
(1) Based upon a 1997 fiscal year end Company Common Stock price of $38.375
per share.
EMPLOYMENT AGREEMENT
On December 2, 1996, the Company entered into an employment agreement with
Philip A. Marineau in connection with his becoming employed by the Company as
its President and Chief Operating Officer. At that time, the Company granted
options to Mr. Marineau as described above under the heading "Option/SAR
Grants in Last Fiscal Year." The employment agreement provides for a minimum
annual salary of $625,000, participation in the Company's Supplemental Benefit
Plan and (in some instances on specified bases) in excess personal liability
insurance coverage and other Company benefit programs, and an agreement of the
kind described below under the heading "Change in Control Agreements". The
agreement is for a term of three years, but may be terminated by Mr. Marineau
earlier in certain circumstances. Subject to certain exceptions and to
variations in the event of termination on account of death or disability,
during the two years following his employment Mr. Marineau will receive
$625,000 per year and he and his dependents will be entitled to continuing
participation in the Company's health care program. The agreement includes
non-competition, non-solicitation and confidentiality obligations on the part
of Mr. Marineau which survive its termination.
RETIREMENT BENEFITS
A majority of the Company's salaried employees, including salaried employees
of certain wholly-owned subsidiaries, are covered under the Dean Foods Company
Salaried Employees Pension Plan, a qualified defined benefit plan to which
only the Company and such subsidiaries contribute. Benefits are based upon the
following: (a) for years of service through 1985, a participant's highest
average "qualifying earnings" paid during five consecutive years out of the
last 15 years of service (including earnings for years after 1985) and (b) for
years of service after 1985, the sum of the benefits accrued for each year of
service by the participant based on "qualifying earnings" in each such year,
except that benefits relating to a participant's service at an entity acquired
by the Company may be based on a slightly different formula which takes into
account the pension benefits for service covered under the
12
<PAGE>
acquired entity's plan prior to the date such plan was merged into the
Company's pension plan. "Qualifying earnings" for any year means total
compensation (excluding bonuses for years of service prior to 1995 and
excluding deferred compensation for all years), subject to such year's limit
applicable to tax-qualified retirement plans ($235,840 for calendar year 1993;
$150,000 for each of calendar years 1994, 1995 and 1996; $160,000 for calendar
year 1997; and indexed for each year thereafter). In the case of executives
named in the Summary Compensation Table, qualifying earnings are the
equivalent of "Salary", excluding amounts described in Footnotes 4 through 6
to such Table, plus "Bonus". Benefits are integrated with Social Security on a
step-rate basis with the following integration levels: (a) for benefits earned
through 1985, $10,200 and (b) for benefits earned thereafter, Social Security
covered compensation. Annual benefits payable from the plan are currently
subject to a limit of $125,000 under the Internal Revenue Code of 1986, as
amended. Such limit is subject to additional upward adjustments for cost-of-
living increases each year.
In January 1981, because a substantial portion of the compensation for
elected officers of the Company did not then qualify as pension plan earnings,
the Board of Directors adopted the Dean Foods Company Supplemental Benefit
Plan to provide for the payment of supplemental retirement benefits. Under the
plan as amended, each officer and each of certain other highly compensated
employees (or the officer's or employee's designated beneficiary) is entitled
to receive an additional monthly retirement benefit and a lump sum retirement
benefit. The additional monthly retirement benefit, which is payable in the
event the employee's employment with the Company is terminated on account of
death or after five years of service, is equal to the excess of what the
employee's (or beneficiary's) monthly benefit under the Salaried Employees
Pension Plan would have been without regard to Internal Revenue Service
limitations over the employee's (or beneficiary's) actual monthly benefit
under such Plan. The lump sum retirement benefit, which is payable in the
event the employee's employment with the Company is terminated on account of
death or after five years of service (or, at a proportionately reduced amount,
in the event of fewer years of service), is equal to the sums of amounts
credited to the employee's account annually during the employee's
participation in the plan together with interest on credited amounts accrued
annually at eight percent (8%). The amount credited annually equals (i) a
percentage set by the Board of Directors (2.2% during 1996 and 2.6% during
1997) of the excess of the employee's qualifying earnings for such year under
the Dean Foods Company Investment and Profit Sharing Plan determined without
regard to such year's limit applicable to tax-qualified retirement plans over
such limit, plus (ii) provided the employee makes his or her maximum matchable
contribution to that Plan for such year, the amount of the matching
contribution the Company would have made under that Plan with respect to the
excess described in clause (i) had there been no limit on qualifying earnings
applicable to tax-qualified retirement plans. For officers who were
participants in the plan on October 1, 1996, under "grandfather" provisions
added in connection with amendments to the plan effective that date, the
additional monthly retirement benefits will not be reduced from what they
would have been but for such amendments.
Currently, Messrs. Dean, Marineau, Ravencroft, McManaman, Shaw and 16 other
executive officers participate in the plan. Prior to his retirement, Mr. Rose
also participated.
Total estimated annual benefits for the executive officers, other than Mr.
Rose, named in the Summary Compensation Table are shown below. The benefits
shown for them (i) are based on each executive officer's current compensation,
(ii) are assumed payable under the plan options providing benefits for the
life of the employee only, and (iii) are based on service through normal
retirement age (age 65). Pension benefits may be payable prior to age 65 upon
early retirement, disability or death.
13
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
NAME PENSION AT AGE 65
---- -----------------
<S> <C>
Howard M. Dean......................................... $757,153
Philip A. Marineau..................................... $191,541
Thomas A. Ravencroft................................... $365,322
William R. McManaman................................... $205,706
Jeffrey P. Shaw........................................ $216,975
</TABLE>
Based on each executive officer's current compensation and the current
percentage set by the Board of Directors, and on service through normal
retirement age (age 65), the estimated lump sum payments under the
Supplemental Benefit Plan at retirement for the executive officers, other than
Mr. Rose, named in the Summary Compensation Table are: Mr. Dean: $470,000; Mr.
Marineau: $780,000; Mr. Ravencroft: $105,000; Mr. McManaman: $385,000; and Mr.
Shaw: $575,000.
Upon his retirement from the Company on December 31, 1996, Mr. Rose became
entitled to an annual pension of $161,825 (in lieu of which he elected under
the terms of the plans to receive an actuarially equivalent lump sum payment)
and a lump sum of $107,183.
CHANGE IN CONTROL AGREEMENTS
The Company is a party to agreements with Messrs. Dean, Marineau, Ravencroft,
McManaman and Shaw and 16 other executive officers which provide that in the
event of such executive's voluntary or involuntary termination of employment
(other than retirement at or after his or her "normal retirement date", or
termination for "good cause", or death, or being "permanently disabled" for
six months, as such terms are defined in the agreements) within two years
after a "change in control" of the Company, he or she will promptly be paid
(i) accrued salary and vacation pay, (ii) any unpaid bonus for the preceding
year and (iii) the equivalent of base salary, annual bonus and the value of
certain financial planning and tax preparation services for two years (or, if
less, for the period until his or her normal retirement date), based on levels
during the preceding year. In addition, during the two years following such
termination (or any lesser period until the executive's death or normal
retirement date), the Company will maintain all life insurance, dental,
medical, health and accident and disability plans, programs or arrangements in
which the executive was entitled to participate immediately prior to the
change in control (or will arrange for substantially the same benefits); and
at the expiration of such period will provide the executive with at least the
same life insurance and health coverage to which he or she would be entitled
if he or she retired at that time with fifteen years of service; in each case
subject to offset for any substantially similar benefits provided by any new
employer. The executive will also be given credit under the Dean Foods Company
Salaried Employees Pension Plan (or any successor plan) and Supplemental
Benefit Plan for service during such period, and his or her compensation for
purposes of such plans will reflect the payments referred to above. To the
extent such credit or calculation of compensation is not permitted by the
terms of a plan, the present value of the benefit he or she would otherwise
receive will be paid to him or her promptly after termination of employment.
In the event the payments to the executive on account of accrued amounts and
additional salary, bonus and financial planning and tax preparation services,
either alone or together with other amounts the executive would have the right
to receive from the Company, would constitute a "parachute payment" as defined
in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
and if the reduction of such payments would result in no portion of such
payments or other amounts being subject to the excise tax imposed by Section
4999 of the Code and in no
14
<PAGE>
disallowance of a deduction by the Company pursuant to Section 280G(a) of the
Code, such payments are to be reduced to the extent necessary to accomplish
such results. The Company has agreed to reimburse the executive for legal fees
and expenses incurred by him or her in enforcing any right or benefit provided
by his or her agreement.
For purposes of the agreements, a "change in control" of the Company occurs
if: (i) there is a change in control that would be required to be reported
under Item 5(f) of Schedule 14A of Regulation 14A under the Securities
Exchange Act of 1934, as amended, (ii) any person, entity or group is,
directly or indirectly, the beneficial owner of securities representing 20% or
more of the Company's combined voting power, (iii) a majority of the members
of any class of Company directors are persons not nominated or elected by the
Board of Directors or (iv) the Company (or any substantial portion of its
assets) is combined with or acquired by another person or entity. However, no
"change in control" occurs on account of: (i) any transaction or series of
transactions which has been approved in advance by a majority of the Board of
Directors (exclusive of directors employed or otherwise affiliated with the
person or entity seeking the change in control), (ii) certain acquisitions by
underwriters in connection with underwritten public offerings or (iii) any
acquisition by any defined contribution plan qualified pursuant to the Code
maintained for the benefit of employees of the Company and/or its
subsidiaries.
In return for the benefits provided by his or her agreement, each executive
agrees to continue to perform the regular duties of his or her current office
(and/or such duties of such other positions to which he or she may be elected
or assigned), subject to termination of employment by the Company at any time
and to resignation by him or her at any time on at least three months' prior
written notice or on his or her normal retirement date on 30 days' prior
written notice.
The Company may terminate any agreement, as of and with respect to any
change in control occurring after a date at least two years after notice of
termination, by written notice to the executive.
These agreements may be regarded as having an "anti-takeover" effect.
15
<PAGE>
COMPARISON OF FIVE YEAR (1) CUMULATIVE TOTAL RETURN (2) OF DEAN FOODS
COMPANY COMMON STOCK, S&P 500 INDEX AND S&P FOODS INDEX (3)
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Measurement Period DEAN S&P
(Fiscal Year Covered) FOODS CO. 500 S&P FOODS
- ------------------- ---------- --------- ---------
<S> <C> <C> <C>
Measurement Pt-
FYE 5/31/92 $100 $100 $100
FYE 5/31/93 $110 $112 $105
FYE 5/31/94 $116 $116 $104
FYE 5/31/95 $122 $140 $131
FYE 5/31/96 $109 $180 $155
FYE 5/30/97 $174 $232 $204
</TABLE>
- --------
(1) Compares fiscal years ending on or about May 31st of the years indicated.
(2) The comparison of total return on investment (change in year end stock
price plus reinvested dividends) for each of the periods assumes that $100
was invested on June 1, 1992 in Dean Foods Company Common Stock, and in
each of the Standard & Poors ("S&P") 500 Index and the S&P Foods Index,
both of which are published industry indices.
(3) Companies in the S&P Foods Index are as follows: CPC International, Inc.,
Campbell Soup Company, ConAgra Inc., General Mills, Inc., The H. J. Heinz
Company, Hershey Foods Corporation, Kellogg Company, The Quaker Oats
Company, Ralston Purina Company, Sara Lee Corporation, Unilever N.V., and
Wm. Wrigley, Jr. Company.
16
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1997 consisted of
Messrs. Llewellyn (Chair), Getz, Mayer and McKenna, none of whom is a former
or current officer or employee of the Company or any of its subsidiaries.
There were no interlocks or relationships requiring disclosure under
applicable SEC rules.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is composed of four directors, none of whom is a former or
current officer or employee of the Company or any of its subsidiaries. The
Committee reviews and recommends, subject to the approval of the Board of
Directors, the Company's compensation policies and programs. In its
deliberations, the Committee receives and considers recommendations from Mr.
Dean, the Company's Chairman and Chief Executive Officer. However, Mr. Dean is
not present during any deliberations directly involving his compensation.
The Company's compensation policies are designed to attract and retain
highly capable executives and provide performance incentives for such
executives. The ultimate objective of the Company's compensation policies and
programs is to increase stockholder value by linking management's compensation
to the Company's performance. Accordingly, a Company executive's total cash
compensation will vary in relation to the Company's performance, the financial
performance of those business operations in which the executive is most
directly involved, if applicable, individual achievement and other factors. In
addition, the grant of stock options and performance shares awards to Company
executives is considered an effective incentive for the creation of
shareholder value, since the value of stock options is directly linked to
increases in the per share price of Company Common Stock and the value of
performance shares awards is directly linked to the Company's financial
performance and the per share price of Company Common Stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
deductibility of certain compensation paid to the Chief Executive Officer and
the other four highest paid executive officers at the end of each fiscal year,
with respect to fiscal years commencing on or after January 1, 1994.
Compensation paid pursuant to programs meeting certain specified requirements
is exempted from this limitation. The Committee has taken and intends to
continue to take actions, including seeking stockholder approval, to ensure
that the Company's executive compensation programs meet such requirements,
except in those cases where the Committee believes stockholder interests are
best served by retaining flexibility of approach.
In conformance with the foregoing compensation philosophy, the total annual
compensation for executives of the Company and its subsidiaries is determined
under three principal compensation programs--base salary, annual incentive
bonuses and stock-based awards granted under the Company's 1989 Stock Awards
Plan. These three compensation programs, as implemented for the 1997 fiscal
year, are described below.
Base Salary. An executive's base salary is determined after a review of
external comparisons using studies prepared by compensation consulting firms,
other salary surveys and internal comparisons against peers. Such data may or
may not include some of the companies reflected in the S&P Foods Index used in
the stock performance graph above. Base salaries, in general, are intended to
correspond to the median of the base salaries paid by comparable companies to
their executives in
17
<PAGE>
comparable positions. Salary reviews typically occur once a year. Adjustments
may be made to base salary for geographic disparities in the cost of living,
salary anomalies resulting from acquisitions, individual potential for
advancement and other factors.
Incentive Bonuses. Annual incentive bonuses are paid pursuant to three
discretionary programs.
The first program, established under the 1989 Stock Awards Plan, provides
for bonuses based on one or more Company financial performance criteria
established by the Compensation Committee during the first ninety days of the
fiscal year. For bonuses payable under this program for the 1997 fiscal year
and the current fiscal year, the financial performance criterion is return on
invested capital. In no event may the bonus amount paid to an executive under
this bonus program for a fiscal year exceed $950,000 ($1,500,000 if the
proposal of the Board of Directors described below under the heading "Proposal
to Increase Maximum Tax Deductible Amounts of Certain Annual Incentive
Bonuses" is approved). Under a second incentive bonus program, which is not
part of the 1989 Stock Awards Plan, executives participating in the first
program may receive additional annual bonuses based primarily, if not
exclusively, on the achievement of personal performance goals set during the
first ninety days of the fiscal year.
Such bonuses are payments calculated as percentages of an executive's base
salary. Generally, a target total bonus for both programs is determined for
each executive ranging from 50% to 85% of base salary depending upon the
executive's position and scope of responsibility. It is intended that, if
certain performance goals are achieved, an executive's total cash compensation
will be competitive. A majority of the aggregate annual incentive bonuses paid
for the 1997 fiscal year to executives who participated in the foregoing bonus
programs consisted of the Company financial performance-based bonus.
Under a separate cash bonus plan, the Company pays bonuses to certain other
executive officers who have primary responsibilities within a particular
operating subsidiary or division of the Company and who normally do not
participate in the programs described above. Under this plan, the bonus
amounts are based upon achievement of return on invested capital targets and
individual performance goals established each year by the Company's senior
management.
For fiscal year 1997, bonuses for executive officers ranged from
approximately 43% to 112% of their base salaries and their total cash
compensation ranged from less than the 50th percentile to the 75th percentile
of such total cash compensation paid by comparable companies to their
executives in comparable positions.
Executives also have the opportunity to receive, in lieu of cash, all or a
portion of their annual incentive bonuses in the form of Company Common Stock
having a fair market value on the date of the award of 115% of that portion of
the bonus elected to be received in Company Common Stock. This feature is
designed to further encourage Company Common Stock ownership by Company
executives. Of the aggregate annual incentive bonus amounts granted by the
Company to executives for fiscal year 1997, 41.5% was issued in the form of
Company Common Stock.
Stock-Based Awards. Under the Company's 1989 Stock Awards Plan, executives
may be granted stock options, stock bonus awards, stock appreciation rights,
restricted stock, performance shares awards and other equity-related awards.
It is the Committee's belief that Company executives are more effectively
motivated to manage the Company's business in the best interest of its
18
<PAGE>
stockholders when such executives possess an ownership interest in the Company
parallel to the stockholders. It has been the Committee's practice to utilize
incentive stock options, non-qualified options and equity-related bonus awards
to achieve commonality of interest with the stockholders in the long-term
performance of the Company.
The number of options and performance shares already held by a particular
executive is not a factor in determining the number of options and performance
shares granted. Generally, the aggregate value of stock options and
performance shares awards granted to a particular executive is determined with
reference to the median aggregate value of stock-based compensation awarded to
a survey group of company executives having similar responsibilities. The
survey group was developed by a nationally recognized compensation consulting
firm using survey data relating to executives of companies with gross revenues
comparable to those of the Company. Such survey group may or may not have
included some of the companies reflected in the S&P Foods Index used in the
stock performance graph above.
During fiscal year 1997, stock option grants were made to executives by the
Compensation Committee.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The base salary of Howard M. Dean during fiscal year 1997 was established in
accordance with the Company's compensation policy for base salaries described
above. Mr. Dean's base salary fell between the 25th and 50th percentiles of
base salaries paid by the survey group during calendar 1996.
Mr. Dean's combined base salary and incentive bonuses for fiscal year 1997
was at approximately the 50th percentile for total compensation paid to CEOs
in the survey group previously noted. Stock options were awarded to Mr. Dean
in fiscal year 1997 having an aggregate value at the median value of stock-
based compensation awarded to CEOs in the survey group.
John S. Llewellyn, Jr., Chairman
Bert A. Getz
Richard P. Mayer
Andrew J. McKenna
Members of the Compensation
Committee
19
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of August 8, 1997, information with respect
to the Company Common Stock beneficially owned by: (i) any person known by the
Company to be the beneficial owner of more than five percent of the
outstanding Company Common Stock, (ii) each director and each nominee for
director of the Company, (iii) each executive officer named in the Summary
Compensation Table, and (iv) all directors and officers of the Company as a
group. Each of the directors had, as of such date, sole voting and disposition
power as to the shares shown in the table as beneficially owned by him or her,
other than those shown as being shares as to which beneficial ownership is
disclaimed.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- ---------------------------------------------------------------------------------
<S> <C> <C>
Lydia M. O'Connor, c/o Stuart Levin & Associates,
P.C.,
255 Revere Drive, Suite 110, Northbrook, IL 60062,
owns individually................................... 307,545 .8%
and has sole voting and investment power as to....... 1,930,703 (1) 4.7%
--------- ---
2,238,248 5.5%
========= ===
Edward A. Brennan..................................... 2,250 (2) *
Lewis M. Collens...................................... 5,750 (2) *
Paula H. Crown........................................ 5,750 (2) *
Howard M. Dean........................................ 481,657 (2,3) 1.2%
John P. Frazee, Jr.................................... 10,073 (2) *
Bert A. Getz.......................................... 14,750 (2,4) *
Janet Hill............................................ 0 *
John S. Llewellyn, Jr................................. 2,750 (2) *
Philip A. Marineau.................................... 6,348 *
Richard P. Mayer...................................... 5,750 (2) *
William R. McManaman.................................. 22,759 (2) *
Andrew J. McKenna..................................... 12,268 (2) *
Thomas A. Ravencroft.................................. 170,721 (2) .4%
Thomas L. Rose........................................ 73,857 (2) .2%
Jeffrey P. Shaw....................................... 31,714 (2) *
All directors and officers of the Company as a group
(29 persons)......................................... 1,117,419 (5) 2.8%
</TABLE>
- --------
*Less than 0.1%
(1) Ms. O'Connor is the sole trustee (with sole voting and investment power)
of two trusts holding, in the aggregate, 1,930,703 shares. She has a 50%
life interest in the income from such trusts.
(2) Includes shares which may be acquired pursuant to stock options within 60
days after August 8, 1997: Mr. Brennan: 750; Mr. Collens: 4,750; Ms.
Crown: 4,750; Mr. Dean: 128,047; Mr. Frazee: 4,750; Mr. Getz: 4,750; Mr.
Llewellyn: 2,750; Mr. Mayer: 750; Mr. McManaman: 10,143; Mr. McKenna:
4,750; Mr. Ravencroft: 44,671; Mr. Rose: 32,932; and Mr. Shaw: 22,281.
(3) Includes 144,614 shares with respect to which Mr. Dean disclaims
beneficial ownership.
(4) Includes 2,500 shares with respect to which Mr. Getz disclaims beneficial
ownership.
(5) Includes 147,114 shares with respect to which directors and officers
disclaim beneficial ownership and 423,735 shares which directors and
officers have the right to acquire pursuant to stock options within 60
days after August 8, 1997.
20
<PAGE>
PROPOSAL TO AMEND THE 1989 STOCK AWARDS PLAN
On July 25, 1997, the Board of Directors approved several amendments to the
Company's 1989 Stock Awards Plan. In doing so, the Board of Directors provided
that the amendments would be submitted to the stockholders of the Company at
the 1997 Annual Meeting, and that if such amendments were not approved by the
stockholders the amendments would terminate and be of no force or effect. For
purposes of the following discussion, the 1989 Stock Awards Plan as it exists
prior to the effectiveness of such amendments is referred to as the "Existing
Plan."
The amendments to the Existing Plan: (1) increase the maximum number of
shares which may be issued upon the exercise or payment of awards by 2,000,000
shares (subject to adjustment as provided in the Existing Plan); (2) increase
to 500,000 shares (subject to adjustment in certain events) the number of
shares with respect to which options, stock appreciation rights and/or
performance shares may be awarded to any employee during a specified period,
and change that period from the five fiscal years 1995-1999 to the ten fiscal
years 1998-2007; (3) extend to July 24, 2007 the last date on which "incentive
stock options" ("ISOs") under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), may be granted; and (4) modify or eliminate
certain provisions to reflect 1996 amendments to Rule 16b-3 under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3").
The action by the Board of Directors was prompted by a review of the number
of shares that remain available for delivery under the Existing Plan. As of
August 8, 1997, of the 3,200,000 shares available for issuance upon the
exercise or payment of awards granted under the Plan, 2,434,990 shares had not
yet been issued. Of these, 2,217,494 shares were the subject of outstanding
awards, leaving only 217,496 shares available for issuance under additional
awards assuming all outstanding awards are fully exercised or paid. The Board
of Directors has determined that this would be an appropriate time to increase
the number of shares available for delivery.
Recognizing that the proposed increase in the number of shares available for
delivery would require stockholder approval, the Board of Directors also
reviewed the Plan's limitation on the number of shares with respect to which
options, stock appreciation rights and/or performance shares may be awarded to
any employee during a specified period (any increase in which also requires
stockholder approval). Such a limitation is one of the requirements in order
for the appreciation in the value of stock options, stock appreciation rights
and certain other performance-based compensation (including performance shares
awards) granted under a plan to be excluded from the $1,000,000 individual
limit in Section 162(m) of the Code ("Code Section 162(m)") on the amount of
remuneration of certain officers in any fiscal year that is deductible by the
Company. The limitation on shares in the Existing Plan, which applies to the
period of five fiscal years ending in 1999, is 250,000 shares. In view of the
anticipated extension of the life of the Plan resulting from the proposed
increase in the maximum number of shares deliverable under the Plan, the Board
believes that this would be an appropriate time to increase the limitation and
to have it apply to a new longer period.
Under the Code, ISOs may not be granted under a plan more than ten years
after the date of its original approval (or subsequent re-approval). Thus, the
Existing Plan provides that no ISO may be granted under it after August 1,
1999. In view of the anticipated extension of the life of the Plan resulting
from the proposed increase in the maximum number of shares deliverable under
the Plan, the Board believes an extension of the ISO deadline until ten years
after the Board's approval of the increase would also be appropriate.
21
<PAGE>
The Board's review also resulted in approval of certain amendments related
to 1996 changes in Rule 16b-3. Rule 16b-3 provides exemptions from the short-
swing profit liability provisions of the Securities Exchange Act of 1934 for
certain transactions in connection with equity-based employee benefit plans
such as the 1989 Stock Awards Plan. Prior to the 1996 changes, Rule 16b-3
required that such plans (and material amendments thereto) be approved by
stockholders and that such plans be administered by a committee consisting
solely of "disinterested persons." In 1996, the stockholder approval
requirement and the "disinterested person" concept were both eliminated. As
changed, Rule 16b-3 contemplates that transactions may be exempted, among
other ways, through action by a committee of at least two "non-employee
directors." The amendments approved by the Board reflect these changes. Such
amendments do not require stockholder approval, but are being submitted for
such approval.
The Existing Plan was originally adopted by the Board of Directors and
approved by the Company's stockholders in 1989. Amendments (including an
increase in the maximum number of shares which may be issued upon the exercise
or payment of awards) were approved by the Company's stockholders in 1994. The
purpose of the Existing Plan is to promote the long-term financial interests
of the Company and its Affiliates by (i) attracting and retaining personnel,
(ii) motivating personnel by means of growth-related incentives, (iii)
providing incentive compensation opportunities that are competitive with those
of other major corporations and (iv) furthering the identity of interests of
participants with those of the stockholders of the Company. The Board of
Directors believes that the Existing Plan has been successful to date in
accomplishing its purpose, and that its purpose will be further served by the
proposed amendments.
Approval of the proposed amendments will not necessarily result in the
awarding of options, stock appreciation rights and/or performance shares
awards which would not otherwise have been awarded had sufficient shares been
available, nor in assuring that the deductibility of the remuneration of
covered employees will not be affected by Code Section 162(m). For a statement
of the Compensation Committee's policy regarding the awarding of options and
performance shares awards, and for a statement of its current policy with
respect to qualifying compensation paid to the Company's executive officers
under Code Section 162(m), see "Report of Compensation Committee."
The following is a brief summary of some of the terms of the Existing Plan
as amended by the proposed amendments (the "Plan") and is qualified in its
entirety by, and made subject to, the Plan set forth as Appendix A hereto.
Plan Summary
The Plan permits the granting of stock options, stock appreciation rights
("SARs"), restricted stock, performance shares awards and other awards to
full-time employees of the Company and its Affiliates (i.e., its subsidiaries
and other entities in which the Company has a direct or indirect equity
interest). Stock options may be either "incentive stock options" ("ISOs")
under Section 422 of the Code or other options ("non-qualified options").
Administration and Eligibility. The Plan is administered by a committee of
the Board of Directors (the "Committee"). The Plan empowers the Committee,
among other things, to interpret the Plan, to make all determinations deemed
necessary or advisable for its administration, to choose the times at which
and the employees to whom awards are to be made and to award to such employees
options (including ISOs), SARs, shares of restricted stock, performance shares
awards and other awards.
22
<PAGE>
Although certain employees have heretofore been granted awards as described
below under "Certain Awards Heretofore Granted under the Existing Plan," the
employees to receive future awards under the Plan have not yet been selected.
The Company and its subsidiaries currently employ approximately 11,800
persons.
Shares Subject to the Plan; Adjustment. The maximum number of shares of
Common Stock which may be issued pursuant to the Plan is 5,200,000. If awards
expire unexercised or unpaid or are cancelled, terminated or forfeited without
the issuance of shares, such shares are again available under the Plan. Shares
issued pursuant to the Plan may be authorized and unissued shares, treasury
shares or a combination thereof.
The maximum number of shares of Common Stock with respect to which options,
SARs and/or performance shares awards may be awarded during the period of ten
fiscal years ending in 2007 to any employee is 500,000.
The maximum number of shares subject to the Plan and the maximum number of
shares with respect to which options, SARs and/or performance shares awards
may be awarded during the period of ten fiscal years ending in 2007 to any
eligible employee, and the shares and option and reference prices under
outstanding awards, are subject to adjustment in the event of certain "Organic
Changes" (as defined in the Plan) and/or to prevent dilution or enlargement of
award rights. The Committee may provide in award agreements that in the event
of a change in control (or tender offer or accumulation of Common Stock),
merger, consolidation, reorganization, recapitalization, sale or exchange of
substantially all of the assets or dissolution of the Company, the benefits
under such awards may be accelerated and/or cash payments may be made in lieu
of such benefits in order to prevent the dilution or enlargement of rights
thereunder.
Options. The Plan authorizes the Committee to award options to purchase
Common Stock. Options may be either ISOs or non-qualified options, except
that, as long as required by Code Section 422, no ISO may be awarded after
July 24, 2007 or to any employee of an Affiliate which is not a subsidiary
corporation (as such term is used in Code Section 424(f)) of the Company. In
the case of ISOs, the option price may not be less than 100% of the fair
market value of such stock at the time the option is granted or the par value
of such stock. In the case of non-qualified options, the option price may not
be less than 85% of the fair market value of such stock at the time the option
is granted and not less than the par value of such stock. The Plan allows
optionees, to the extent permitted by the Committee, to pay the exercise price
of options in cash, Common Stock (valued at its fair market value on the date
of exercise), a combination thereof or any other consideration.
SARs. The Plan authorizes the Committee to grant SARs. An SAR entitles the
holder to receive upon exercise the excess of the fair market value of a
specified number of shares of Common Stock at the time of exercise over a
specified price. The Company will pay such amount to the holder 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 account any preference expressed by the holder). SARs granted as an
alternative to a previously or contemporaneously granted option entitle the
optionee, in lieu of exercising the option, to receive the excess of the fair
market value of a share of Common Stock on the date of exercise over the
option price multiplied by the number of shares as to which the optionee is
exercising the SAR. If an SAR is alternative to an option, the option is
cancelled to the extent the appreciation right is exercised and the SAR is
cancelled to the extent the option is exercised.
23
<PAGE>
Restricted Stock. The Plan authorizes the Committee to grant restricted
Common Stock with such restriction periods as the Committee may designate.
During the restriction period, stock certificates evidencing restricted shares
are held by the Company and restricted shares may not be sold, assigned,
transferred, pledged or otherwise encumbered. Other than these restrictions on
transfer and any other restrictions the Committee may impose, the participant
has all the rights of a holder of Common Stock as to shares of restricted
stock. The Committee may permit or require the payment of cash dividends to be
deferred and, if the Committee so determines, reinvested in additional
restricted stock or otherwise invested or accruing a yield. 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. Except as otherwise provided by the Committee at or
subsequent to the time of grant, upon termination of the participant's
employment during the restriction period all shares still subject to
restriction are forfeited by the participant.
Performance Shares Awards. The Plan authorizes the Committee to grant
performance shares awards. A performance shares award grants the holder the
right to receive, following the end of a period of at least one fiscal year
specified by the Committee, cash or Common Stock or a combination thereof as
determined by the Committee in an aggregate amount based on the achievement of
targets for such period based on one or more Company financial performance
criteria established by the Committee not later than the ninetieth day of the
period. For performance shares awards made not later than the ninetieth day of
the current fiscal year of the Company, the criterion is return on invested
capital, but the Committee may in the future use, either in substitution
therefor or in addition thereto, total shareholder return (i.e., appreciation
in the market price of Common Stock plus dividends paid), return on
stockholders' equity and/or earnings per share. Subject to the provisions of
the Plan, the Committee has the sole and complete authority to determine all
the conditions of such awards. No recipient of a performance shares award has
or acquires any rights as a holder of the Common Stock subject to such award,
including without limitation voting and dividend rights, unless and until the
certificates representing the shares potentially issuable pursuant to such
award are issued to the recipient. The Committee may impose restrictions on
the transfer of shares issued pursuant to such awards. 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. Except as otherwise provided by the Committee
at or subsequent to the time of grant, upon a termination of employment during
the performance measurement period, the performance shares award is forfeited
by the participant.
Other Awards. Other awards, either alone or in addition to options, SARs,
restricted stock and performance shares awards, may be granted under the Plan.
These may include, without limitation, convertible securities, and other forms
of award measured in whole or in part by the value of shares, 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. Subject to the provisions of the Plan, the Committee has
the sole and complete authority to determine the numbers of shares to be
awarded pursuant to such awards and all other conditions of the awards. A
participant may defer all or a portion of any such award in accordance with
procedures established by the Committee. In the case of awards involving the
right to purchase Common Stock, the purchase price may not be less than 85% of
the fair market value of such stock at the time the award is granted and not
less than the par value of such stock. Other 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.
24
<PAGE>
Supplemental Cash Payments. Subject to the Committee's discretion, a non-
qualified option or SAR agreement may require the Company to make a cash
payment to the holder thereof upon exercise based on a formula designed to
reimburse the holder for any income tax liability resulting from such exercise
and the receipt of such payment.
Fair Market Value. Fair market value for purposes of the Plan is determined
in accordance with procedures established by the Committee. The closing price
of Common Stock on August 8, 1997 was $45.9375.
Surrender. If so provided by the Committee, an award may be surrendered to
the Company on such terms and conditions, and for such consideration, as the
Committee determines.
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 U.S. or 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.
Term and Exercisability of Awards. Awards may be granted for such terms, and
are exercisable, as the Committee determines. Awards are not transferable,
except by will and the laws of descent and distribution, and during a
participant's lifetime are exercisable or receivable only by the participant
or his or her legal representative.
Withholding. The Committee has the power to withhold, or require a
participant to remit to the Company, an amount sufficient to cover withholding
taxes with respect to shares issuable and/or amounts payable pursuant to the
Plan. If so permitted by the Committee, a participant may elect to satisfy
such taxes by having shares issuable under the Plan withheld or by delivering
other shares to the Company.
Amendment and Termination. The Plan may be suspended, terminated or amended
by the Board of Directors or the Committee at any time, but no suspension,
termination or amendment shall impair the rights of the holder of any award
therefore granted without his or her consent. Subject to the same limitation
on impairment of rights, the Committee may amend or modify an outstanding
award to the extent it would have had the authority to initially grant the
award as so amended or modified. Notwithstanding the general rights of the
Board of Directors and the Committee to amend the Plan, the Plan may not be
amended 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.
25
<PAGE>
CERTAIN EQUITY-RELATED AWARDS HERETOFORE GRANTED UNDER THE EXISTING PLAN:
As of August 8, 1997, awards under the Existing Plan for Fiscal Years 1997 and
1998 had been made as follows(1):
<TABLE>
<CAPTION>
SECURITIES
SECURITIES UNDERLYING
UNDERLYING PERFORMANCE
NAME OPTIONS(2) SHARES AWARDS(3)
---- ---------- ----------------
<S> <C> <C> <C>
Howard M. Dean FY 1997 119,451 0
FY 1998 23,778 5,550-16,650
Philip A. Marineau FY 1997 39,962 0
FY 1998 32,623 4,300-12,900
Thomas L. Rose FY 1997 69,352 0
FY 1998 0 0
Thomas A. Ravencroft FY 1997 43,974 0
FY 1998 6,378 1,500-4,500
William R. McManaman FY 1997 40,582 0
FY 1998 11,275 1,550-4,650
Jeffrey P. Shaw FY 1997 22,805 0
FY 1998 21,185 1,050-3,150
All Current Executive Officers of the FY 1997 386,465 0
Company
as a Group FY 1998 154,348 24,350-73,050
All Recipients FY 1997 718,165 0
FY 1998 328,948 24,350-73,050
</TABLE>
- --------
(1) Table does not include bonuses under the Existing Plan described below
under "Proposal to Increase Maximum Tax Deductible Amounts of Certain
Annual Incentive Bonuses."
(2) Options granted under the Company's 1989 Stock Awards Plan at an exercise
price not less than the market price on the date of grant. Such options
become exercisable over four years at the rate of 25% per year, commencing
one year after the date of grant, subject to acceleration in the event of
a "change in control" of the Company (defined the same as in the
agreements described above under the heading "Change in Control
Agreements"). Under the non-qualified options awarded in fiscal year 1997
as originally granted, the Company was obligated to compensate the
optionee for the tax liability incurred in connection with the exercise of
such options, but not in excess of the aggregate increase in the market
value of the shares after the date of grant. Also during fiscal year 1997,
ISOs with respect to 28,629 shares previously granted to Mr. Rose were
converted into non-qualified options to purchase 22,905 shares. See
Footnote 11 to the Summary Compensation Table.
(3) The ranges of the shares which may be awarded are based upon the extent to
which the Company achieves return on invested capital goals during fiscal
year 2000.
Federal Income Tax Consequences
The following discussion is intended only as a brief summary of the federal
income tax consequences of stock options, SARs, restricted stock, Performance
Shares Awards, other awards
26
<PAGE>
and supplemental cash payments. The laws governing the tax aspects of awards
are highly technical and such laws are subject to change in the future, and
any such change could be retroactive and affect the validity of the following
discussion.
Non-Qualified Options. The holder of a non-qualified option does not
recognize taxable income upon the grant thereof, nor is the Company entitled
to a deduction in respect of such grant. Upon the exercise of a non-qualified
option as to any shares, the excess of the fair market value of such shares on
the date of exercise over their option price (the "spread") constitutes
compensation taxable to the optionee as ordinary income. Provided it complies
with applicable tax reporting requirements, the Company should be entitled to
a deduction, in the year of exercise, in an amount equal to such compensation
taxable to the optionee as ordinary income.
Upon an optionee's sale of shares acquired pursuant to the exercise of a
non-qualified option, the difference between the selling 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. The Company is not entitled to a
deduction as a result of such a sale.
ISOs. The holder of an ISO does not recognize taxable income upon the grant
or exercise thereof, nor is the Company entitled to a deduction in respect of
such grant or exercise. However, the spread at exercise constitutes an item
includible in alternative minimum taxable income and may subject the optionee
to, or increase the optionee's liability for, alternative minimum tax. Such
alternative minimum tax or increase therein may be payable even though the
optionee receives no cash upon the exercise of his or her ISO with which to
pay such tax or increase.
Upon an optionee's disposition of shares acquired pursuant to the exercise
of an ISO, if the shares have been held for at least one year and if at least
two years have elapsed since the date of grant (i.e., if the "ISO Holding
Period" has expired), the difference between the selling price and the tax
basis of such shares (such basis generally being the option price of such
shares) is a capital gain or loss to the optionee. The Company is not entitled
to a deduction as a result of such a sale.
If option shares are disposed of before the expiration of the ISO Holding
Period (a "disqualifying disposition"), then (i) if the selling price exceeds
the fair market value of the shares on the date of exercise, the excess of
such fair market value over the tax basis of the shares is taxable to the
optionee as ordinary income, and the excess of the selling price over such
fair market value is taxable to the optionee as a capital gain, (ii) if the
selling price exceeds the tax basis of the shares but does not exceed the fair
market value of the shares on the date of exercise, the excess of the selling
price over the tax basis of the shares is taxable to the optionee as ordinary
income, and (iii) if the selling price is less than the tax basis of the
shares, the difference is a capital loss to the optionee. If, however, the
disposition is a sale to a related party (as defined in Section 267(b) of the
Code to include, for example, a member of the optionee's family or a
corporation of which the optionee owns a majority of the equity interest) or a
gift, then the excess of the fair market value of the shares on the date of
exercise over the tax basis of the shares is taxable to the optionee as
ordinary income. The Company should be entitled to a deduction for the year of
disposition in an amount equal to any amount taxable to the optionee as
ordinary income upon a disqualifying disposition.
SARs. The holder of an SAR does not recognize taxable income upon the grant
thereof, nor is the Company entitled to a deduction in respect of such grant.
Upon the exercise of an SAR, the holder generally recognizes ordinary income
equal to the amount of any cash and the fair market value
27
<PAGE>
(measured on the date of exercise) of any Common Stock received. The Company
should be entitled to a deduction in an amount equal to the amount of ordinary
income recognized by the holder.
Upon a holder's sale of any shares received pursuant to the exercise of an
SAR, the difference between the selling 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.
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 Common Stock ("old" shares), the tax basis
for the option shares, and thus the consequences of a disposition, differs.
If an optionee delivers old shares (other than old shares acquired upon
exercise of an ISO which were not held for the ISO Holding Period) 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 continues to give rise to taxable compensation and to a Company
deduction 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 optionee delivers old shares (other than old shares acquired upon
exercise of an ISO which were not held for the ISO Holding Period) in payment
of all or part of the exercise price of an ISO, 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. Pursuant to
proposed regulations, if an ISO 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 optionee pays the exercise price of an option in whole or in part with
old shares that were acquired upon the exercise of an ISO and that have not
been held for the ISO Holding Period, the optionee recognizes ordinary income
under the rules applicable to disqualifying dispositions. The Company should
be entitled to a corresponding deduction. The optionee'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 optionee recognizes.
Restricted Stock. A participant who is granted restricted stock may, if the
restrictions on it constitute a "substantial risk of forfeiture" as defined in
Section 83 of the Code, make an election under Section 83(b) of the Code (a
"Section 83(b) election") to have the grant taxed as compensation income at
the date of grant in an amount equal to the fair market value on the date of
grant of the shares
28
<PAGE>
subject to such award less any amount paid by the participant for the shares.
The restrictions on restricted stock will constitute a "substantial risk of
forfeiture" if, for example, a sale thereof would subject the participant to
suit under Section 16(b) of the Securities Exchange Act. If the participant is
not permitted to make, or is permitted to make but does not make, a timely
Section 83(b) election, the grant is generally taxed to him or her as
compensation income at the date(s) that the restrictions imposed on the shares
expire, in an amount on each such date equal to the fair market value on such
date of the shares as to which the restrictions expire less any amount paid by
the participant for such shares. Unless a participant is permitted to make,
and makes, a timely Section 83(b) election, any dividends paid on the shares
subject to the award while such shares remain subject to the restrictions are
compensation income to the participant. Provided it complies with applicable
tax reporting requirements, the Company is generally entitled to a deduction
for any compensation income taxed to the participant.
Upon a participant's sale of shares received pursuant to a grant of
restricted stock, the difference between the selling price and the tax basis
of the shares (generally, if a timely Section 83(b) election is made, the fair
market value of the shares on the date of grant or, if a timely Section 83(b)
election is not made, the fair market value of the shares on the date(s) on
which the restrictions on the shares expire) is a capital gain or loss. A
participant's holding period begins on the date of grant if a timely Section
83(b) election is made or on the date(s) on which the restrictions on the
shares expire if no timely Section 83(b) election is made.
Performance Shares Awards. The recipient of a performance shares awards does
not recognize taxable income upon the grant thereof, nor is the Company
entitled to a deduction in respect of such grant. Upon the issuance of shares
and/or the payment of cash pursuant to the award, the recipient recognizes
compensation in an amount equal to the sum of the fair market value of the
issued shares on the date of issuance plus the amount of such cash. Such
compensation is taxed to the recipient as ordinary income for the year of
issuance. Provided it complies with applicable tax reporting requirements, the
Company is generally entitled to a deduction for any compensation income taxed
to the recipient. The recipient's holding period begins on the date the shares
are issued.
Upon a recipient's sale of shares received pursuant to a performance shares
award, the difference between the selling 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.
An exception to the foregoing treatment may occur in the event a recipient
who is subject to Section 16(b) receives shares pursuant to a performance
shares award. In certain circumstances, the fair market value of the shares
received may be determined, and the recipient's holding period may commence,
on a date other than the date the shares are issued.
Supplemental Cash Payments. The amount of any supplemental cash payment to a
participant who exercises a non-qualified option or SAR constitutes
compensation taxable to the participant as ordinary income, and the Company
should be entitled to a deduction for the year of payment in an amount equal
to such compensation.
A supplemental cash payment to a participant is intended to provide the
participant 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. The
Company's cash outlay to the participant should be offset to some extent by
the Company's tax savings arising from the deductions to which the Company is
entitled because of the
29
<PAGE>
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 a participant upon surrender of an
award other than restricted stock is compensation taxable to the participant
as ordinary income. The Company 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 a participant upon the surrender of restricted
stock will vary significantly depending on the particular circumstances
related to such restricted stock.
Accelerated Benefits. In the event that a participant's benefits with
respect to an award pursuant to the Plan are accelerated as the result of a
change in the ownership of the Company or a substantial portion of the
Company's assets (for example, pursuant to a provision in an option
accelerating exercisability upon a change in control), then pursuant to
Sections 280G and 4999 of the Code (which deal with the treatment of "excess
parachute payments") the Company may not be entitled to a deduction for some
or all of the accelerated benefits (and potentially for certain other amounts
payable to the participant) and the participant may be subject, in addition to
the federal income taxes otherwise payable with respect to the award, to a 20%
excise tax on the non-deductible portion of the accelerated benefits (or
amounts).
Withholding. If shares issuable 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 participant and then sold by the participant to the
Company for fair market value.
Any shares of already-owned Common Stock delivered by a participant in
satisfaction of withholding or other taxes should be treated as sold by the
participant to the Company 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 should be a capital gain or loss. The
Company is not entitled to a deduction as a result of such a sale. Different
tax consequences may result if the shares delivered by the participant were
acquired upon the exercise of an ISO and have not been held for the ISO
Holding Period.
Capital Gains. The federal income tax rate applied to capital gains realized
on a current sale of shares by a participant is (i) 20% if the shares have
been held by the participant for more than 18 months ("long-term capital
gains"), (ii) 28% if the shares have been held by the participant for more
than 12 months but not more than 18 months ("mid-term capital gains") and
(iii) the rate that applies to ordinary income (i.e., a graduated rate up to a
maximum of 39.6%) if the shares have been held by the participant for no more
than 12 months ("short-term capital gains"); except that for an individual
whose total taxable income is subject to tax at a 15% rate without regard to
the special rates otherwise applicable to capital gains, the long-term capital
gains rate is reduced to 10% and the 15% rate applies to any mid-term or
short-term capital gains. The 20% (or 10%) rate for long-term capital gains
generally also applies for purposes of the alternative minimum tax. The
capital gains rate will generally be reduced to 18% (8% in the case of an
individual who would otherwise be subject to tax at a 15% rate) for capital
gains realized on assets (i) acquired after December 31, 2000 and (ii) held
for more than 5 years. However, in the case of shares acquired pursuant to the
exercise of an option, this reduced rate will apply only if such option is
granted after December 31, 2000.
Other Awards. Because other awards may take many other forms, as determined
by the Committee, it is not possible to describe generally what their tax
treatment will be.
30
<PAGE>
Accounting Treatment
If a non-qualified option or other award involving the right to purchase
Common Stock is granted at an exercise or purchase price less than fair market
value on the date of grant, the Company incurs compensation expense to the
extent of the difference, which is immediately chargeable against income
unless such non-qualified option or award is subject to a vesting period,
whereupon such expense would be chargeable to income over the vesting period.
The Company incurs similar compensation expense upon the grant of any award
not involving the right to purchase Common Stock (which inherently is
generally granted for nominal consideration), but in the case of restricted
stock such expense is generally chargeable to income over the period during
which restrictions expire. The award of an SAR, a right to a supplemental cash
payment, a non-qualified option which includes a right to a supplemental cash
payment, or a performance shares award results in a charge by the Company
against income as compensation expense of an amount equal to (a) in the case
of a performance shares award, the fair market value at the date of grant of
the Common Stock subject to such award plus any subsequent changes in the fair
market value and (b) in all cases, any change in fair market value or
supplemental cash payment. Each charge against or credit to income resulting
from an award under the Plan is adjusted for the tax effect attributable
thereto. ISOs and non-qualified options granted at fair market value without
any right to a supplemental cash payment do not affect the Company's income
except for the tax effects discussed in the preceding section.
The affirmative vote of a majority of the outstanding shares of Common Stock
voted at the meeting is required for approval of the proposed amendments to
the Plan.
Approval of the proposed amendments will also constitute re-approval of the
Plan as amended, including re-approval of the bases on which performance
shares awards are granted under the Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS AN AFFIRMATIVE VOTE FOR THE
PROPOSED AMENDMENTS TO THE PLAN.
31
<PAGE>
PROPOSAL TO INCREASE MAXIMUM TAX DEDUCTIBLE AMOUNTS OF CERTAIN ANNUAL
INCENTIVE BONUSES
At the Company's 1994 Annual Meeting of Stockholders, the stockholders
approved the bases for certain performance-based annual incentive bonuses to
be paid pursuant to the 1989 Stock Awards Plan. Such bonuses, which depend on
the Company's achieving certain financial performance goals during a fiscal
year which have been set by the Compensation Committee not later than the
ninetieth day of the fiscal year, may be awarded to any executive officer of
the Company or any manager who has primary responsibility within a particular
operating subsidiary or division of the Company. The approved bases were
return on stockholders' equity, earnings per share, total shareholder return,
return on invested capital and any combination thereof. As approved, this
bonus program included a limitation that the amount of bonus paid to an
employee under this program for a fiscal year could not exceed $950,000.
The Board of Directors has reviewed the bonuses paid to date under this
program and has concluded that the $950,000 annual limitation is too
restrictive. The Board proposes that stockholders approve an increase to
$1,500,000 in the amount of the annual limitation.
Stockholder approval was obtained in 1994 so that, if certain other
conditions within the control of the Compensation Committee were met, bonuses
under this program could be excluded from the $1,000,000 individual limit in
Code Section 162(m) on the amount of remuneration of certain officers in any
fiscal year that is deductible by the Company. Stockholder approval of the
increase in the maximum tax deductible amounts of such bonuses is sought for
the same reason.
CERTAIN BONUSES HERETOFORE PAID UNDER THIS PROGRAM:
For fiscal year 1997, bonuses under this program have been paid as follows:
<TABLE>
<CAPTION>
NAME BONUS(1)
---- ----------
<S> <C>
Howard M. Dean................................................ $ 521,458
Philip A. Marineau............................................ $ 200,000
Thomas L. Rose................................................ $ 413,640
Thomas A. Ravencroft.......................................... $ 0
William R. McManaman.......................................... $ 189,245
Jeffrey P. Shaw............................................... $ 0
All Current Executive Officers of the Company as a group...... $1,545,914
All Recipients................................................ $1,872,485
</TABLE>
- --------
(1) Does not include bonus received under other programs.
The Committee continues to anticipate that a substantial majority of the
potential annual incentive bonus payable for a particular fiscal year to an
employee who participates in the foregoing bonus program will consist of the
performance-based bonus. Under a separate incentive bonus program which is not
part of the 1989 Stock Awards Plan, which may also involve but is not
necessarily limited to financial performance goals set during the first ninety
days of a fiscal year, such participants (and others) may also receive other
annual incentive bonuses. The Company is not seeking to qualify such other
annual incentive bonuses for exclusion from Code Section 162(m).
The affirmative vote of a majority of the outstanding shares of Common Stock
voted at the meeting is required for approval of the proposed increase in the
maximum tax deductible amounts of certain annual incentive bonuses.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS AN AFFIRMATIVE VOTE FOR THE
PROPOSED INCREASE.
32
<PAGE>
APPROVAL OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has again selected Price Waterhouse as
independent accountants to audit the accounts of the Company and its
subsidiaries for the fiscal year ending May 31, 1998, subject to approval of
the stockholders. Such selection was last submitted for stockholder approval
at the 1996 Annual Meeting.
Representatives of Price Waterhouse are expected to be present at the
meeting with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
The Company's financial statements for the fiscal year ended May 25, 1997
were audited by Price Waterhouse. In connection with their audit function,
Price Waterhouse also reviewed filings with the Securities and Exchange
Commission and reports to stockholders, and provided technical assistance to
the Company's accounting staff.
The selection of Price Waterhouse will be considered approved if a majority
of the shares of Company Common Stock voted at the meeting is voted for
approval. If the stockholders do not approve the selection of Price
Waterhouse, the selection of other independent accountants will be considered
by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of reports of ownership, reports of changes of
ownership and written representations under Section 16(a) of the Securities
Exchange Act of 1934 which were furnished to the Company during or with
respect to fiscal year 1997 by persons who were, at any time during fiscal
year 1997, directors or officers of the Company or beneficial owners of more
than 10% of the outstanding shares of Company Common Stock, no such person
failed to file on a timely basis any report required by such Section during
fiscal year 1997.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters that
are to be presented for action at the meeting. Should any other matter come
before the meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matter in
accordance with their judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
All proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than the close of business on April 24, 1998 for
inclusion in the Company's Proxy Statement and form of proxy relating to that
meeting.
Eric A. Blanchard
Secretary
August 22, 1997
33
<PAGE>
APPENDIX A
DEAN FOODS COMPANY
1989 STOCK AWARDS PLAN
(As Proposed to Be Amended Effective September 30, 1997)
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.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" means (a) any subsidiary and (b) any other entity in which
the Company has a direct or indirect equity interest which is designated an
"Affiliate" by the Committee.
"Board of Directors" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Committee" means the Compensation 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.
"Common Stock" means Common Stock, $1.00 par value, of the Company or
such other securities as may be substituted therefor pursuant to paragraph
5(c).
"Company" means Dean Foods Company, a Delaware corporation, and its
successors.
"eligible employee" means any full-time employee of the Company or an
Affiliate.
The "fair market value" of the Common Stock shall be determined in
accordance with procedures established by the Committee.
"fiscal year" means the Company's fiscal year.
"participant" means any employee of the Company or an Affiliate who has
been granted an award pursuant to the Plan.
"Rule 16b-3" means such rule adopted under the Securities Exchange Act of
1934, as amended, or any successor rule.
"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, 5,200,000 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 5,200,000 shares of
Common Stock may be either authorized and unissued shares, treasury shares, or
a combination thereof, as the Committee shall determine.
A-1
<PAGE>
Subject to adjustment as provided in Paragraph 5(c), the number of shares of
Common Stock with respect to which options and stock appreciation rights may
be awarded, and the maximum number of shares of Common Stock potentially
issuable under performance shares awards awarded, during the period of ten
fiscal years ending in 2007 to any eligible employee may not exceed, in the
aggregate, 500,000 shares.
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.
(a) Options.
(i) Options granted under the Plan may be incentive stock options
("ISOs") within the meaning of Section 422A of the Code or any successor
provision, or in such other form, consistent with the Plan, as the
Committee may determine; except that, so 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 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.
A-2
<PAGE>
(c) Restricted Stock.
(i) The Committee may award to any eligible employee 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 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, upon 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.
(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.
A-3
<PAGE>
(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.
(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.
A-4
<PAGE>
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 in the maximum number of shares with respect to which
options, SARs and performance shares awards may be awarded to any eligible
employee during the period of ten fiscal years ending in 2007, 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.
A-5
<PAGE>
(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 due 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 participant's estimated
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 shall be August 2, 1989,
the date of its adoption by the Board of Directors; provided, however, that no
award shall be granted under the Plan unless the holders of at least a
majority of the outstanding shares of Common Stock voting at the Company's
1989 Annual Meeting of Stockholders approve and ratify the Plan.
A-6
<PAGE>
DIRECTIONS TO DEAN FOODS COMPANY
ANNUAL MEETING OF STOCKHOLDERS
DRURY LANE OAKBROOK TERRACE
100 DRURY LANE
OAKBROOK TERRACE, ILLINOIS 60181
(630) 530-8300
Drury Lane is located just north of the Oakbrook Shopping Center. Access to
the complex is somewhat difficult. The map which follows should prove helpful.
Although Drury Lane is bordered on the north by Roosevelt Road, there is no
access to the complex from Roosevelt Road. There is also no access from the
westbound lanes of Butterfield Road.
If you are coming from the City on the Eisenhower/I-290, or from the north or
south on the Tri-State/I-294, follow the exit signs to the East-West Tollway/I-
88. From the Tollway, exit to the right at the "Cermak Road/22nd Street" ramp
immediately after the toll booth. Proceed straight across Cermak Road to Spring
Road. Take Spring Road north to Drury Lane.
If you are coming from the north or south on Route 83, take Route 56
(Butterfield Road) east. Once on Butterfield, you will immediately exit to the
right onto Spring Road, following the signs marked "Drury Lane/Spring Road".
If you are coming from the west on the East-West Tollway/I-88, exit at
Midwest Road (exact toll required). Proceed north on Midwest Road to Route 56
(Butterfield Road) east. Once on Butterfield, you will immediately exit to the
right onto Spring Road, following the signs marked "Drury Lane/Spring Road".
[MAP]
<PAGE>
PROXY
DEAN FOODS COMPANY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 30, 1997
The undersigned Stockholder of Dean Foods Company hereby appoints Howard M.
Dean, Philip A. Marineau and Eric A. Blanchard, and each of them, proxies, with
power of substitution, to vote at the Annual Meeting of Stockholders of the
Company to be held at the Drury Lane Oakbrook Terrace, 100 Drury Lane, Oakbrook
Terrace, Illinois, on Tuesday, September 30, 1997, at 10:00 A.M., Central
Daylight Savings Time, or at any postponement or adjournment thereof, on the
matters described on the reverse side.
THE BOARD OF DIRECTORS FAVORS A VOTE FOR ALL NOMINEES AND FOR ITEMS 2, 3 AND 4.
(Continued and to be signed on reverse side.)
<PAGE>
DEAN FOODS COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Directors for a three-year term expiring in 2000:
Nominees: Paula Hannaway Crown, John P. Frazee, Jr., Thomas A. Ravencroft and
Janet Hill
For All
---------------------------------- For Withhold Except
(Except nominee(s) written above.) [_] [_] [_]
2. Proposal to approve amendments to the For Against Abstain
Company's 1989 Stock Awards Plan: [_] [_] [_]
3. Proposal to approve an increase in the
maximum tax deductible amounts of For Against Abstain
certain annual incentive bonuses: [_] [_] [_]
4. Proposal to approve the selection of
Price Waterhouse as the independent
accountants for the Company and its For Against Abstain
subsidiaries for the fiscal year ending [_] [_] [_]
May 31, 1998:
5. In the discretion of the proxies, the
transaction of such other business
which may properly come before the
meeting, all as described in the Notice For Against Abstain
of 1997 Annual Meeting. [_] [_] [_]
THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED AS DIRECTED ON ITEMS 1 THROUGH 4, BUT
WHERE NO DIRECTION IS INDICATED WILL BE VOTED
FOR ITEMS 1 THROUGH 4.
Dated: __________________ , 1997
Signature(s)_________________________________
_____________________________________________
Important: Please sign exactly as name
appears at left. When shares are held by
joint tenants, both should sign. When signing
as attorney, executor, adminis-trator,
trustee or guardian, please give full title
as such. If a corporation, please sign in
full corporate name by the President or other
authorized offi-cer. If a partnership, please
sign in partnership name by an authorized
person.
