<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:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
PRELIMINARY COPY
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 29, 1998, at 10:00
A.M., local time, in Oakbrook Terrace, Illinois.
The enclosed Notice of 1998 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 2001 Annual Meeting of
Stockholders; and "FOR" the proposed increase in the authorized shares of the
Company. 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,
/s/ Howard M. Dean
Howard M. Dean
Chairman of the Board and
Chief Executive Officer
August 21, 1998
<PAGE>
PRELIMINARY COPY
NOTICE OF 1998 ANNUAL MEETING
The Annual Meeting of Stockholders of Dean Foods Company will be held on
Tuesday, September 29, 1998, 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 2001 Annual Meeting.
(2) A proposal of the Board of Directors to approve an increase in the
authorized stock of the Company.
(3) 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 7, 1998, 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 1998 is concurrently being mailed to
each person named in such list.
The 1998 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 21, 1998
YOU ARE URGED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY.
THANK YOU.
<PAGE>
PRELIMINARY COPY
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 29, 1998 (the "1998 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 increase the authorized shares of the Company 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
increase. 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 1998 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 21, 1998. 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 7, 1998 will be entitled to vote at the
meeting. On that date there were [ ] 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 1998 Annual Meeting.
Pursuant to Delaware law, shares entitled to cast votes on a matter at the
1998 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 1998
Annual Meeting consists of four directors to hold office until the 2001 Annual
Meeting of Stockholders and until their successors shall have been elected and
qualified. The nominees for the class to be elected are Lewis M. Collens,
Howard M. Dean, Bert A. Getz, and Andrew J. McKenna (all of whom currently
serve on the Board of Directors).
Pursuant to a policy governing the retirement of Directors from the Board,
(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 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 1998 ANNUAL MEETING
FOR THREE-YEAR TERMS EXPIRING IN 2001:
LEWIS M. COLLENS, President of Illinois Institute of [PHOTO]
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 and Chicago Stock Exchange since 1998.
Director of the Company since December 1991; member of Audit
and Corporate Governance Committees. Age 60.
HOWARD M. DEAN, Chairman of the Board of Directors of the [PHOTO]
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 61.
BERT A. GETZ, Chairman, President and Director of Globe [PHOTO]
Corporation (a diversified investment firm) since 1974.
Director of Ameritas Life Insurance Corporation since 1990.
Director of the Company since 1989; member of Compensation and
Corporate Governance Committees. Age 61.
ANDREW J. MCKENNA, Chairman and Chief Executive Officer and [PHOTO]
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, 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 68.
3
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE IN 2000: [photo]
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 39.
JOHN P. FRAZEE, JR., Chairman of the Board of Directors, [photo]
President and Chief Executive Officer of Paging Network, Inc.
(PAGENET) (a wireless messaging and information delivery
company) since August 1997. 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 53.
THOMAS A. RAVENCROFT, President--Dairy Division of the Company [photo]
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 61.
JANET HILL, Vice President of Alexander & Associates (a [photo]
corporate consulting firm) since 1981; President of Staubach,
Alexander, Hill (a commercial real estate consulting firm)
since 1995. Director of Wendy's International, Inc. (a
restaurant corporation) since 1995, First Union Bank of
Virginia (a bank holding company) since 1996, and Progressive
Corporation (an insurance company) since 1996. Member of Audit
Committee. Age 50.
4
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE IN 1999:
EDWARD A. BRENNAN, Retired since 1995. Chairman and Chief [photo]
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 & 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 64.
JOHN S. LLEWELLYN, JR., Retired since 1997. President and [photo]
Chief Executive Officer of Ocean Spray Cranberries, Inc.
(marketing cooperative of cranberry and citrus growers) from
1988 to 1997. Director of Paging Network, Inc. (PAGENET) (a
wireless messaging and information delivery company) since
1997. Director of the Company since 1994; Chairman of
Compensation Committee; member of Corporate Governance
Committee. Age 63.
RICHARD E. BAILEY, President and Chief Operating Officer of [photo]
the Company since March 1998; Executive Vice President,
Worldwide Food Operations of Philip Morris Companies Inc. from
1996 to 1998; Executive Vice President, Operations of Kraft
Foods North America from 1988 to 1996. Director of the Company
since March 1998. Age 51.
RICHARD P. MAYER, Retired since 1995. Chairman and Chief [photo]
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 1994, and
True North Communications Inc. (an advertising agency holding
company) since 1997. Director of the Company since March 1996;
member of Compensation Committee. Age 58.
5
<PAGE>
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors held sixteen meetings during fiscal year 1998.
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 four times
in fiscal year 1998.
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 1998.
The Corporate Governance Committee of the Board of Directors 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 1999 Annual Meeting, any such suggestion must be received by the
Secretary no later than the date by which stockholder proposals for the 1999
Annual Meeting must be received as described below under the heading "Deadline
for Submission of Stockholder Proposals for Inclusion in 1999 Proxy
Materials". The Corporate Governance Committee met once in fiscal year 1998;
the candidates for election at the 1998 Annual Meeting were nominated by the
Corporate Governance Committee.
During fiscal year 1998, each director of the Company who was not a salaried
officer, employee, or paid consultant was paid an annual fee of $30,000 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,
1998 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.........................................
Lewis M. Collens..........................................
Paula Hannaway Crown......................................
John P. Frazee, Jr........................................
Bert A. Getz..............................................
John S. Llewellyn, Jr.....................................
Richard P. Mayer..........................................
Andrew J. McKenna.........................................
</TABLE>
Under the 1996 Director Stock Awards Plan, 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 1998 non-qualified options at
$39.00 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
1998 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 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- ------------ -------
SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL COMPENSATION OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(8) (#) ($) ($)
------------------ ---- --------- -------- ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Howard M. Dean 1998 $676,371 $843,630(5) -- 215,517 683,723 $65,661(9)
Chairman of the Board 1997 $568,037 $637,338 -- 119,451 326,923 $38,067
and Chief Executive
Officer 1996 $568,037 $157,886 -- 25,200 -- $39,178
Thomas A. Ravencroft 1998 $302,000(1) $319,863(5) -- 48,745 268,602 $26,032(9)
Senior Vice President
and 1997 $277,859(2) $290,699(5) -- 43,974 68,130 $15,141
President--Dairy
Division 1996 $241,616(3) $ 70,646(5) -- 11,050 -- $14,455
William R. McManaman 1998 $307,500 $268,614(5) $205,374(6) 30,022 -- $25,415(9)
Vice President--Finance
and 1997 $295,696 $261,975(5) -- 28,432 -- $16,753
Chief Financial Officer 1996 $171,415 $120,750(5,6) -- 12,150 -- --
Jeffrey P. Shaw 1998 $220,000 $198,000(7) -- 29,663 170,899 $16,191(9)
Group Vice President-- 1997 $203,061 $162,670(5) -- 22,805 68,130 $ 9,150
Vegetable and President
of 1996 $203,061 $ 23,539(5) -- 7,399 -- $12,957
Dean Foods Vegetable
Company
Douglas A. Parr 1998 $226,721(4) $188,643(5) -- 23,670 109,844 $14,839(9)
Vice President--Dairy
Sales 1997 $179,345 $134,752(5) -- 14,388 54,487 $ 5,375(9)
and Marketing 1996 $173,280 $ 37,663(5) -- 6,075 -- $ 7,729(9)
</TABLE>
- --------
(1) Includes $88,000 of deferred compensation.
(2) Includes $8,000 of deferred compensation.
(3) Includes $96,000 of deferred compensation.
(4) Includes $22,000 of deferred compensation.
(5) 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.
(6) Mr. McManaman became employed by the Company, as Vice President--Finance
and Chief Financial Officer, as of October 16, 1995. His first year bonus
was agreed to by the Company at the time he was employed. At that time, he
was also given the opportunity to participate in a performance shares
program on the same basis as officers who had earlier been granted
8
<PAGE>
performance shares awards for fiscal year 1996. Because his participation
was not implemented until 1997, the $205,374 payment is treated as "Other
Annual Compensation" rather than an "LTIP Payout".
(7) Includes $99,000 of bonus specifically related to the pending sale of Dean
Foods Vegetable Company.
(8) 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.
(9) Consists of matching contributions (Mr. Dean: $5,000; Mr. Ravencroft:
$3,347; Mr. McManaman: $4,513; Mr. Shaw: $3,879; and Mr. Parr: $3,874) and
other contributions (Mr. Dean: $3,300; Mr. Ravencroft: $3,300; Mr.
McManaman: $3,300; Mr. Shaw: $3,300; and Mr. Parr: $3,300) for eligible
covered employees made by the Company pursuant to the Dean Foods Company
Savings and Investment Plan, and accruals (Mr. Dean: $57,361; Mr.
Ravencroft: $19,385; Mr. McManaman: $17,602; Mr. Shaw: $9,012; and Mr.
Parr: $7,665) for the lump sum payments at retirement under the Dean Foods
Company Supplemental Benefit Plan described under "Retirement Benefits"
below.
9
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE APPRECIATION
FOR OPTION TERM (10 YEARS)(5)
-------------------------------------------
INDIVIDUAL GRANTS 5% ($) 10% ($)
---------------------------------------------------- --------------------- ---------------------
% OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED POTENTIAL POTENTIAL
UNDERLYING TO EXERCISE MARKET PRICE PER AGGREGATE PRICE PER AGGREGATE
OPTIONS EMPLOYEES OR BASE PRICE ON SHARE AT POTENTIAL SHARE AT POTENTIAL
GRANTED IN FISCAL PRICE DATE OF EXPIRATION EXPIRATION REALIZABLE EXPIRATION REALIZABLE
NAME (#) YEAR ($/SH) GRANT DATE DATE VALUE DATE VALUE
- ---- ---------- --------- -------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Howard M. Dean.......... 13,528(1) 1.7% $38.00 $38.00 5/27/07 $61.90 $323,319 $ 98.56 $ 819,256
10,250(2) 1.3% $38.00 $38.00 5/27/07 $61.90 $244,975 $ 98.56 $ 620,740
19,719(3) 2.5% $24.67 $38.00 5/27/07 $40.18 $305,842 $ 63.99 $ 775,351
15,587(3) 1.9% $32.87 $38.00 5/27/07 $53.54 $322,183 $ 85.26 $ 816,603
22,266(3) 2.8% $26.87 $38.00 5/27/07 $43.77 $376,295 $ 69.69 $ 953,430
11,217(3) 1.4% $26.87 $38.00 5/27/07 $43.77 $189,567 $ 69.69 $ 480,312
15,587(3) 1.9% $29.87 $38.00 5/27/07 $48.66 $292,880 $ 77.48 $ 742,097
18,704(3) 2.3% $28.13 $38.00 5/27/07 $45.82 $330,874 $ 72.96 $ 838,500
22,503(3) 2.8% $22.87 $38.00 5/27/07 $37.25 $323,593 $ 59.32 $ 820,234
33,528(3) 4.2% $27.50 $38.00 5/27/07 $44.79 $579,699 $ 71.33 $1,469,532
32,628(3) 4.1% $32.00 $38.00 5/27/07 $52.12 $656,475 $ 83.00 $1,664,028
Thomas A. Ravencroft.... 4,628(1) 0.6% $38.00 $38.00 5/27/07 $61.90 $110,609 $ 98.56 $ 280,272
1,750(2) 0.2% $38.00 $38.00 5/27/07 $61.90 $ 41,825 $ 98.56 $ 105,980
1,782(3) 0.2% $24.67 $38.00 5/27/07 $40.18 $ 27,639 $ 63.99 $ 70,068
2,164(3) 0.3% $26.87 $38.00 5/27/07 $43.77 $ 36,572 $ 69.69 $ 92,662
776(3) 0.1% $29.87 $38.00 5/27/07 $48.66 $ 14,581 $ 77.48 $ 36,945
5,641(3) 0.7% $28.13 $38.00 5/27/07 $45.82 $ 99,789 $ 72.96 $ 252,886
3,711(3) 0.5% $29.13 $38.00 5/27/07 $47.45 $ 67,986 $ 75.56 $ 172,302
4,716(3) 0.6% $22.87 $38.00 5/27/07 $37.25 $ 67,816 $ 59.32 $ 171,898
11,949(3) 1.5% $27.50 $38.00 5/27/07 $44.79 $206,598 $ 71.33 $ 523,725
11,628(3) 1.4% $32.00 $38.00 5/27/07 $52.12 $233,955 $ 83.00 $ 593,028
William R. McManaman.... 11,275(1) 1.4% $38.00 $38.00 5/27/07 $61.90 $269,473 $ 98.56 $ 682,814
3,422(3) 0.4% $22.87 $38.00 5/27/07 $37.25 $ 49,208 $ 59.32 $ 124,732
7,767(3) 1.0% $27.50 $38.00 5/27/07 $44.79 $134,291 $ 71.33 $ 340,428
7,558(3) 0.9% $32.00 $38.00 5/27/07 $52.12 $152,067 $ 83.00 $ 385,458
Jeffrey P. Shaw......... 7,367(1,4) 0.9% $38.00 $38.00 5/27/07 $61.90 $176,071 $ 98.56 $ 446,146
2,250(2,4) 0.3% $38.00 $38.00 5/27/07 $61.90 $ 53,775 $ 98.56 $ 136,260
3,567(3,4) 0.4% $28.13 $38.00 5/27/07 $45.82 $ 63,100 $ 72.96 $ 159,909
2,273(3,4) 0.3% $22.87 $38.00 5/27/07 $37.25 $ 36,686 $ 59.32 $ 82,851
7,200(3,4) 0.9% $27.50 $38.00 5/27/07 $44.79 $124,488 $ 71.33 $ 315,576
7,006(3,4) 0.9% $32.00 $38.00 5/27/07 $52.12 $140,961 $ 83.00 $ 357,306
Douglas A. Parr......... 2,937(1) 0.4% $38.00 $38.00 5/27/07 $61.90 $ 70,194 $ 98.56 $ 177,865
10,000(1) 1.2% $54.38 $54.38 12/5/07 $88.58 $342,000 $141.05 $ 866,700
1,800(2) 0.2% $38.00 $38.00 5/27/07 $61.90 $ 43,020 $ 98.56 $ 109,008
1,276(3) 0.2% $22.87 $38.00 5/27/07 $37.25 $ 18,349 $ 59.32 $ 46,510
3,881(3) 0.5% $27.50 $38.00 5/27/07 $44.79 $ 67,102 $ 71.33 $ 170,104
3,776(3) 0.5% $32.00 $38.00 5/27/07 $52.12 $ 75,973 $ 83.00 $ 192,576
</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").
(2) 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 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").
(3) Non-qualified option granted independent of the Company's 1989 Stock
Awards Plan in exchange for the elimination of the Company's obligation to
compensate the optionee for the tax liability incurred in connection with
the eventual exercise of a then outstanding non-qualified option granted
under such Plan. The exercise price equals the market price on the date of
grant of the outstanding option. Such option becomes exercisable over
three years at the rate of 33% each
10
<PAGE>
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").
(4) Notwithstanding the previously indicated Footnote to this Number of
Securities, such option will become exercisable immediately upon the
closing of the pending sale of Dean Foods Vegetable Company, as described
under "Certain Arrangements Related to the Pending Sale of Dean Foods
Vegetable Company" below.
(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.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Howard M. Dean 37,733 $681,233 197,260/253,743 $4,053,967/$5,202,420
Thomas A. Ravencroft 0 $ 0 57,620/75,399 $1,209,172/$1,550,999
William R. McManaman 0 $ 0 29,294/41,310 $ 600,499/$796,460
Jeffrey P. Shaw 0 $ 0 27,534/46,310 $ 555,346/$907,659
Douglas A. Parr 0 $ 0 17,868/34,245 $ 366,218/$424,388
</TABLE>
- --------
(1) Based upon a 1998 fiscal year end Company Common Stock price of $49.25 per
share.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS
OR OTHER UNDER NON-STOCK PRICE-
NUMBER OF PERIOD BASED PLANS
SHARES, UNITS UNTIL ------------------------
OR OTHER MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#)(1) OR PAYOUT (#) (#) (#)
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Howard M. Dean -- 3 years 5,550 11,100 16,650
Thomas A. Ravencroft -- 3 years 1,500 3,000 4,500
William R. McManaman -- 3 years 1,550 3,100 4,650
Jeffrey P. Shaw -- 3 years 1,050 2,100 3,150
Douglas A. Parr -- 3 years 600 1,200 1,800
</TABLE>
- --------
(1) Awards are not expressed in these terms. Provided a threshold is met, each
award entitles the executive to receive a payment following the end of the
three year (fiscal years 1998, 1999 and 2000) performance period, based on
the Company's return on invested capital during such performance period.
Such payments are to be made 50% in Company Common Stock and 50% in cash
(based on the then market value of Company Common Stock).
11
<PAGE>
EMPLOYMENT ARRANGEMENT
In connection with Richard E. Bailey becoming employed by the Company in March
1998 as its President and Chief Operating Officer, the Company granted to him,
on the date he commenced employment, non-qualified options for 40,000 shares
of the kind described in Footnote 1 under "Option/SAR Grants in Last Fiscal
Year" above. The Company further agreed that Mr. Bailey's annual salary would
be $625,000 (subject to annual review), that he would participate in the
Company's Supplemental Benefit Plan and (in some instances on specified bases)
in other Company benefit programs, and that the Company would enter into an
agreement with him of the kind described below under the heading "Change in
Control Agreements". In the event the Company terminates Mr. Bailey's
employment during the first three years for any reason other than cause (as
defined), Mr. Bailey will be entitled to a lump sum payment of $1,250,000.
CERTAIN ARRANGEMENTS RELATED TO THE PENDING SALE OF DEAN FOODS VEGETABLE
COMPANY
On July 27, 1998, the Company announced the pending sale of Dean Foods
Vegetable Company. In connection with that pending sale, the Company has
agreed to pay a selling bonus to Jeffrey P. Shaw of approximately $1,160,000
upon the closing of the pending sale and has agreed that the unexpired options
held by him at the time of the closing will thereupon become exercisable. In
the event his employment is actually or constructively terminated by the
purchaser without cause (as defined) within two years after the closing, the
Company has agreed to provide him with 27 months of payments (at an annual
rate approximately equal to his salary and target bonus for fiscal year 1999),
up to 27 months of medical, dental and life insurance coverage, and up to
$25,000 (net of current Company payments of legal expenses of up to $850
related to these arrangements) for outplacement services.
RETIREMENT BENEFITS
A majority of the Company's salaried employees, and certain non-union hourly
employees, are covered under the Dean Foods Company Retirement Plan (formerly
known as the Dean Foods Company Salaried Employees Pension Plan), a tax-
qualified "pension equity" defined benefit plan. Benefits are based upon the
aggregate of the percentages of a participant's highest average "total
compensation" paid during any 60 consecutive months out of the last 180 months
of service accumulated for each year of service. Such percentage for each year
prior to 1986 ranged from 1% to 1.5%, and for each year after 1985 ranges from
1% to 22% dependent upon the participant's then age plus years of service.
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 acquired entity's plan
prior to the date such plan was merged into the Retirement Plan. Benefits are
payable monthly (or, at the participant's election, in a lump sum actuarial
equivalent) beginning at age 65. "Total compensation" means total compensation
excluding deferred compensation and any bonuses other than annual incentive
bonuses, subject to each calendar year's limit applicable to tax-qualified
retirement plans ($160,000 for calendar year 1998; and indexed for each year
thereafter). Annual benefits payable from the plan are currently subject to a
limit of $130,000 under the Internal Revenue Code of 1986, as amended. Such
limit is subject to upward adjustments for cost-of-living increases. For
employees who were participants in the plan on December 31, 1997, under
"grandfather" provisions added in connection with amendments to the plan
effective January 1, 1998, the benefits accumulated for 1986 through 1997 will
not be reduced from what they would have been but for such amendments. For
those of such employees who were age 59 or older on December 31, 1997, such
"grandfather" provisions also extend to years after 1997.
12
<PAGE>
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 Retirement 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) the percentage, if any, set by
the Board of Directors (2.6% during fiscal year 1997 and the first half of
fiscal year 1998 and, currently, 0% thereafter) of the excess of the
employee's total compensation (as defined for purposes of the Retirement Plan)
for such year under the Dean Foods Company Savings and Investment Plan
(formerly known as 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 such
total compensation 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, Ravencroft, McManaman, Shaw, Parr and 16 other
executive officers participate in the plan.
Total estimated annual benefits for the executive officers named in the
Summary Compensation Table are shown below. The benefits shown for them (i)
are based on each executive officer's current total compensation (including an
estimate of such executive officer's annual incentive bonus for fiscal year
1999), (ii) are assumed payable under the plan options providing benefits for
the life of the executive officer only, and (iii) are based on service through
normal retirement age (age 65). Reduced pension benefits may be payable prior
to age 65 upon early retirement, disability or death.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
NAME PENSION AT AGE 65
---- -----------------
<S> <C>
Howard M. Dean.......................................... $716,355
Thomas A. Ravencroft.................................... $378,958
William R. McManaman.................................... $160,883
Jeffrey P. Shaw......................................... $167,709
Douglas A. Parr......................................... $106,790
</TABLE>
13
<PAGE>
Based on each executive officer's current total compensation (including such
estimated annual incentive bonus) 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 named in the Summary Compensation
Table are: Mr. Dean: $455,000; Mr. Ravencroft: $110,000; Mr. McManaman:
$350,000; Mr. Shaw: $535,000; and Mr. Parr: $110,000.
CHANGE IN CONTROL AGREEMENTS
The Company is a party to agreements with Messrs. Dean, Ravencroft, McManaman,
Shaw and Parr 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
Retirement 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 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"
14
<PAGE>
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)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period DEAN FOODS, S&P
(Fiscal Year Covered) CO. 500 INDEX S&P FOODS
- --------------------- ----------- --------- ---------
<S> <C> <C> <C>
Measurement Pt-
5/31/93 $100 $100 $100
FYE 5/31/94 $105 $104 $ 99
FYE 5/31/95 $111 $125 $125
FYE 5/31/96 $ 99 $161 $148
FYE 5/31/97 $158 $208 $195
FYE 5/31/98 $208 $272 $264
</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 fiscal year end
stock price plus reinvested dividends) for each of the periods assumes
that $100 was invested on June 1, 1993 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: BestFoods 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 1998 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 1998 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
17
<PAGE>
to correspond to the median of the base salaries paid by comparable companies
to their executives in 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 1998 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 $1,500,000. 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 1998 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 1998, bonuses for executive officers (excluding one
additional bonus specifically related to the pending sale of Dean Foods
Vegetable Company) ranged from approximately 75% to 165% of their base
salaries and their total cash compensation (excluding such additional bonus)
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 1998 (excluding one additional bonus
specifically related to the pending sale of Dean Foods Vegetable Company),
42.9% 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
18
<PAGE>
are more effectively motivated to manage the Company's business in the best
interest of its 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 1998, stock option grants and performance shares awards
were made to executives by the Compensation Committee under the Company's 1989
Stock Awards Plan. During fiscal year 1998, stock option grants were also made
to executives by the Compensation Committee independent of such Plan, as
described with respect to certain grants in Footnote (3) under "Option/SAR
Grants in Last Fiscal Year" above.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The base salary of Howard M. Dean during fiscal year 1998 was established in
accordance with the Company's compensation policy for base salaries described
above. Mr. Dean's base salary was at approximately the 50th percentile of base
salaries paid by the survey group during calendar 1997.
Mr. Dean's combined base salary and incentive bonuses for fiscal year 1998
was at approximately the 75th percentile for total compensation paid to CEOs
in the survey group previously noted. Stock options were awarded to Mr. Dean
in fiscal year 1998 having an aggregate value at approximately the 50th
percentile of the 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 7, 1998, 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 of the Company, (iii)
each executive officer named in the Summary Compensation Table, and (iv) all
directors and executive 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 %
and has sole voting and investment power as to...... 1,930,703(1) %
--------- ---
2,238,248 %
========= ===
Edward A. Brennan.................................... (2) *
Lewis M. Collens..................................... (2) *
Paula H. Crown....................................... (2) *
Howard M. Dean....................................... (2,3) %
John P. Frazee, Jr................................... (2) *
Bert A. Getz......................................... (2,4) *
Janet Hill........................................... (2) *
John S. Llewellyn, Jr................................ (2) *
Richard P. Mayer..................................... (2) *
Andrew J. McKenna.................................... (2) *
William R. McManaman................................. (2) *
Douglas A. Parr...................................... (2)
Thomas A. Ravencroft................................. (2) %
Jeffrey P. Shaw...................................... (2) *
All directors and executive officers of the Company
as a group ( persons)........................... (5) %
</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 7, 1998: Mr. Brennan: ; Mr. Collens: ; Ms.
Crown: ; Mr. Dean: ; Mr. Frazee: ; Mr. Getz: ; Ms.
Hill: ; Mr. Llewellyn: ; Mr. Mayer: ; Mr. McKenna: ;
Mr. McManaman: ; Mr. Parr: ; Mr. Ravencroft: ; and Mr.
Shaw: .
(3) Includes shares with respect to which Mr. Dean disclaims
beneficial ownership.
(4) Includes shares with respect to which Mr. Getz disclaims beneficial
ownership.
(5) Includes shares with respect to which directors and executive
officers disclaim beneficial ownership and shares which directors
and executive officers have the right to acquire pursuant to stock
options within 60 days after August 7, 1998.
20
<PAGE>
PROPOSAL TO INCREASE THE COMPANY'S AUTHORIZED COMMON STOCK
In July 1998, the Company's Board of Directors adopted a resolution setting
forth an amendment to the Company's Certificate of Incorporation, as amended,
that would increase the Company's authorized $1 par value Common Stock from
80,000,000 shares to 150,000,000 shares, and directed that the proposed
amendment be submitted to a vote of the stockholders at the 1998 Annual
Meeting of Stockholders. The amendment, which is permitted by the Delaware
General Corporation Law, is included in Appendix A attached hereto.
The Company's authorized capital stock was last increased in April 1986.
At August 7, 1998, shares of the Company's Common Stock were
issued and outstanding and there were shares reserved for issuance
pursuant to the Company's 1989 Stock Awards Plan, 1992 Director Stock Option
Plan, and 1996 Director Stock Awards Plan and options granted independent of
those Plans of the kind described in Footnote (3) under "Option/SAR Grants in
Last Fiscal Year" above (the "non-Plan options"). At such date, only
authorized shares of the Company's Common Stock were available for other
purposes.
Except for outstanding awards under the Company's 1989 Stock Awards Plan,
1992 Director Stock Option Plan, 1996 Director Stock Awards Plan and the non-
Plan options, the Company is not now a party to any plan, arrangement,
agreement or understanding, in writing or otherwise, which would require the
issuance of any of its stock. However, as is the case generally from time to
time, the Company is currently considering acquisitions potentially involving
the use of its stock. The Company's Board of Directors believes that the
proposed increase in authorized shares of the Company's Common Stock will
enhance the Company's flexibility in connection with possible future actions
such as stock dividends, stock splits, corporate mergers, acquisitions of
property, issuances of convertible debt or equity securities, options or
warrants, or other uses for corporate purposes.
Although the Company's Board of Directors has no present intention of doing
so, shares of authorized and unissued Company Common Stock and shares held in
the treasury, if any, could (within the limits imposed by applicable law and
the rules of the New York Stock Exchange ("NYSE") as and to the extent that
such rules may be observed by the Company) be issued in one or more
transactions which would make a takeover of the Company more difficult and,
therefore, less likely. Such shares could also be used to dilute the stock
ownership of persons seeking to obtain control of the Company. Also, such
shares could be privately placed with purchasers who might side with the
management of the Company in opposing a hostile tender offer or other attempt
to obtain control. Issuance of the Company's Common Stock as an anti-takeover
device might preclude stockholders from taking advantage of a situation which
might be favorable to their interests. In addition, subject to the
considerations referred to above as to applicable law and rules of the NYSE,
the Company's Board of Directors could, although it has no present intention
of doing so, issue shares of the Company's Common Stock to a holder or holders
who might thereby obtain sufficient voting power to ensure that any proposal
to effect certain transactions involving the Company, to take certain
stockholder action or to amend or repeal any of the provisions that require an
80% vote for amendment or repeal would not receive the 80% vote required
therefor.
The Company's Board of Directors will determine whether, when and on what
terms the issuance of additional shares may be warranted. However, the NYSE
has rules that limit the amount of additional shares that the Company may
issue without stockholder approval. Failure to observe the
21
<PAGE>
rules of the NYSE could result in the delisting of the Company's securities
listed thereon. In the event of such delisting, the Company believes that
other markets having acceptable depth and liquidity would be available.
If the proposed amendment is approved, any or all of the authorized shares
of the Company's Common Stock could be issued without further action by the
Company's stockholders and without first offering such shares to the Company's
stockholders for subscription. The issuance of shares could have the effect of
diluting the earnings per share and book value per share of previously
outstanding shares of Company Common Stock. The issuance of shares otherwise
than on a pro rata basis to all current Company stockholders would reduce the
proportionate interests of the current Company stockholders.
The affirmative vote of a majority of the outstanding shares of the Company
Common Stock entitled to vote at the Company's 1998 Annual Meeting of
Stockholders is required for the approval of the amendment to the Company's
Certificate of Incorporation.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT.
INDEPENDENT ACCOUNTANTS
The Company's financial statements for the fiscal year ended May 31, 1998 were
audited by PricewaterhouseCoopers LLP (the successor to Price Waterhouse LLP).
In connection with their audit function, PricewaterhouseCoopers LLP also
reviewed filings with the Securities and Exchange Commission and reports to
stockholders, and provided technical assistance to the Company's accounting
staff.
The Board of Directors of the Company has selected PricewaterhouseCoopers
LLP as independent accountants to audit the accounts of the Company and its
subsidiaries for the fiscal year ending May 30, 1999.
Representatives of PricewaterhouseCoopers LLP 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.
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 1998 by persons who were, at any time during fiscal
year 1998, 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 1998.
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, except as otherwise provided in Rule 14a-
4(c)(1) under the Securities Exchange Act of 1934.
22
<PAGE>
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR INCLUSION IN 1999 PROXY
MATERIALS
All proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than the close of business on April 23, 1999 for
inclusion in the Company's Proxy Statement and form of proxy relating to that
meeting.
ADVANCE NOTICE REQUIREMENT FOR ANY NOMINATION OR MATTER TO BE RAISED BY A
STOCKHOLDER
Effective following the 1998 Annual Meeting of Stockholders, any nomination
for election to the Board of Directors of the Company at any meeting of
stockholders, or proposal of business to be transacted at any meeting of
stockholders, that is not included in the Company's Proxy Statement and form
of proxy relating to the meeting but that a stockholder wishes to make at the
meeting may be made only if it may properly be made by the stockholder at the
meeting and only if the stockholder delivers a notice to the Secretary of the
Company at its principal executive offices on a timely basis. For an annual
meeting, the notice must be so delivered not less than 60 days nor more than
90 days prior to the anniversary of the prior year's annual meeting (unless
the date of the meeting is more than 30 days prior to or more than 60 days
after the anniversary of the prior year's annual meeting, in which event such
notice must be so delivered not earlier than the 90th day prior to the meeting
and not later than the close of business on the later of the 60th day prior to
the meeting or the 10th day following the date on which public announcement of
the meeting date is made). For a special meeting, the notice must be so
delivered not earlier than the 90th day prior to the meeting and not later
than the close of business on the later of the 60th day prior to the meeting
or the 10th day following the date on which public announcement of the meeting
date is made. The notice must set forth the related information required by
Article II, Section 10 of the Company's bylaws. Such information generally
consists of the information relating to any nominee that would be required to
be disclosed in the Company's Proxy Statement for that meeting if the nominee
were proposed by the Company or, as to other matters, a brief description of
the matter, the reason for the proposal and any material interest of the
proposing stockholder (or beneficial owner) in the matter and information
regarding the proposing stockholder (or beneficial owner) and such
stockholder's (or beneficial owner's) beneficial ownership of shares of the
Company.
DISCRETIONARY VOTING OF 1999 PROXIES
The persons named in proxies solicited by the Company's Board of Directors in
connection with the Company's 1999 Annual Meeting of Stockholders will have
discretionary authority to vote such proxies with respect to any matter
properly presented by a stockholder at the meeting that is not specifically
set forth in the notice of the meeting if the Company does not have notice of
such matter on or before August 31, 1999 (unless the date of the meeting is
changed by more than 30 days from September 29, 1999 in which event such
persons will have such discretionary authority if the Company does not have
notice of such matter a reasonable time before the Company mails its proxy
materials for the meeting).
Eric A. Blanchard
Secretary
August 21, 1998
23
<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".
LOGO
<PAGE>
PRELIMINARY COPY
PROXY
DEAN FOODS COMPANY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 29, 1998
The undersigned Stockholder of Dean Foods Company hereby appoints Thomas A.
Ravencroft, Richard E. Bailey 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 29, 1998, 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 ITEM 2.
(Continued and to be signed on reverse side.)
Admission Ticket
LOGO
DEAN FOODS COMPANY
Annual Meeting of Stockholders
Tuesday, September 29, 1998
10:00 A.M. Central Standard Time
Drury Lane Oakbrook Terrace
100 Drury Lane
Oakbrook Terrace, Illinois
Please present this ticket for admission.
<PAGE>
DEAN FOODS COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. ELECTION OF DIRECTORS FOR A THREE-YEAR TERM EXPIRING IN 2001:
Nominees: Lewis M. Collens, Howard M. Dean, Bert A. Getz and Andrew J.
McKenna
For [ ] Withhold [ ] For All Except [ ]
_______________________________
(Except Nominee(s) written above.)
THE BOARD OF DIRECTORS FAVORS A VOTE FOR ALL NOMINEES.
2. PROPOSAL TO APPROVE an increase in the authorized shares of the Company.
For [ ] Against [ ] Abstain [ ]
THE BOARD OF DIRECTORS FAVORS A VOTE FOR ITEM 2.
3. 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
of 1998 Annual Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED ON ITEMS 1
AND 2, BUT WHERE NO DIRECTION IS INDICATED WILL BE VOTED FOR ITEMS 1 AND 2.
DATED , 1998
_______________________________
_______________________________
(SIGNATURE OF STOCKHOLDER(S))
Important: Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
<PAGE>
PLEASE SIGN AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE
DIRECTIONS TO DEAN FOODS COMPANY
ANNUAL MEETING OF STOCKHOLDERS
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]
