-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ky/IxpU5nc54m+0Cfjzmm3cFXZIelqVWQXcVaAFDWkdod1DDHcTMTTez4p94fwFN WyIFQqzwrxXyRUP8rg55cw== 0000950137-97-001459.txt : 19970409 0000950137-97-001459.hdr.sgml : 19970409 ACCESSION NUMBER: 0000950137-97-001459 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970223 FILED AS OF DATE: 19970407 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEAN FOODS CO CENTRAL INDEX KEY: 0000027500 STANDARD INDUSTRIAL CLASSIFICATION: DAIRY PRODUCTS [2020] IRS NUMBER: 360984820 STATE OF INCORPORATION: DE FISCAL YEAR END: 0527 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08262 FILM NUMBER: 97575705 BUSINESS ADDRESS: STREET 1: 3600 N RIVER RD CITY: FRANKLIN PARK STATE: IL ZIP: 60131 BUSINESS PHONE: 7086781680 MAIL ADDRESS: STREET 1: 3600 N RIVER RD CITY: FRANKLIN PARK STATE: IL ZIP: 60131 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the quarterly period ended February 23, 1997 or ----------------------- Transition report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the transition period from to ------------------ ------------------ Commission file number 0-1118 -------- DEAN FOODS COMPANY - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 36-0984820 - ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 3600 North River Road, Franklin Park, Illinois 60131 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (847) 678-1680 ---------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of the Registrant's Common Stock, par value $1 per share, outstanding as of the date of this report was 40,226,521. ---------- Total number of pages 45. --- 1 2 PART I - FINANCIAL INFORMATION A. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In the opinion of the Company, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the following unaudited condensed consolidated financial statements have been included herein. Certain information and footnote disclosures normally included in the financial statements have been omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's 1996 Annual Report on Form 10-K. 2 3 ITEM 1. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTERS AND NINE MONTHS ENDED FEBRUARY 23, 1997 AND FEBRUARY 25, 1996 (In Thousands Except for Per Share Amounts)
Third Quarter Ended Nine Months Ended ---------------------------- ---------------------------- February 23, February 25, February 23, February 25, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Net sales $745,012 $717,976 $2,230,781 $2,074,839 Costs of products sold 571,151 572,175 1,726,043 1,622,087 Delivery, selling and administrative expenses 132,681 127,260 388,794 372,040 -------- -------- ---------- ---------- Operating earnings 41,180 18,541 115,944 80,712 Interest expense (6,647) (8,192) (19,745) (21,061) Interest income 147 256 645 1,017 -------- -------- ---------- ---------- Income before income taxes 34,680 10,605 96,844 60,668 Provision for income taxes 14,045 3,878 39,223 24,268 -------- -------- ---------- ---------- Net income $ 20,635 $ 6,727 $ 57,621 $ 36,400 ======== ======== ========== ========== Net income per common share $ .51 $ .17 $ 1.43 $ .91 ======== ======== ========== ========== Dividends per share (Declared and paid) $ .19 $ .18 $ .57 $ .54 ======== ======== ========== ========== Weighted average common shares 40,162 40,119 ========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements. 3 4 CONDENSED CONSOLIDATED BALANCE SHEETS FEBRUARY 23, 1997 AND MAY 26, 1996 (In Thousands)
February 23, May 26, 1997 1996 ------------ ---------- (Unaudited) ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 11,345 $ 10,399 Accounts and notes receivable, less allowance for doubtful accounts of $3,621 and $3,201, respectively 181,826 188,222 Inventories 302,449 278,731 Other current assets 108,893 107,047 ------------ ------------ Total Current Assets 604,513 584,399 ------------ ------------ PROPERTIES: Property, plant and equipment, at cost 1,031,805 993,826 Accumulated depreciation 511,847 468,159 ------------ ------------ 519,958 525,667 ------------ ------------ OTHER ASSETS 117,001 112,174 ------------ ------------ Total Assets $1,241,472 $1,222,240 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Notes payable to banks $ 65,000 $ 92,000 Current installments of long-term obligations 11,499 11,855 Accounts payable and accrued expenses 287,821 287,305 Dividends payable 7,718 7,297 Federal and state income taxes 8,486 - ------------ ------------ Total Current Liabilities 380,524 398,457 LONG-TERM OBLIGATIONS (Less current installments included above) 223,392 221,653 DEFERRED LIABILITIES 93,474 94,438 SHAREHOLDERS' EQUITY 544,082 507,692 ------------ ------------ Total Liabilities and Shareholders' Equity $1,241,472 $1,222,240 ============ ============
See accompanying Notes to Condensed Consolidated Financial Statements. 4 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED FEBRUARY 23, 1997 AND FEBRUARY 25, 1996 (In Thousands)
Nine Months Ended ----------------- February 23, February 25, 1997 1996 ------------ ------------ (Unaudited) Net cash provided from operations $ 95,859 $ 14,846 ------------ ------------ Cash flows from investing activities: Capital expenditures (47,500) (74,548) Proceeds from disposition of property, plant and equipment 1,312 2,038 Acquisition of business, net of cash acquired - (66,070) Proceeds from business divested 2,000 - ------------ ------------ Net cash used in investing activities (44,188) (138,580) ------------ ------------ Cash flows from financing activities: Issuance of long-term obligations 8,200 9,799 Repayment of long-term obligations (3,817) (2,624) Issuance (Repayment) of notes payable to banks, net (27,000) 148,000 Unexpended industrial revenue bond proceeds (7,524) (3,552) Cash dividends paid (22,196) (21,108) Issuance of common stock 1,612 1,519 ------------ ------------ Net cash provided by (used in) financing activities (50,725) 132,034 ------------ ------------ Increase in cash and cash equivalents 946 8,300 Cash and cash equivalents - beginning of period 10,399 4,826 ------------ ------------ Cash and cash equivalents - end of period $ 11,345 $ 13,126 ============ ============
See accompanying Notes to Condensed Consolidated Financial Statements. 5 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. INVENTORIES The following is a tabulation of inventories by class at February 23, 1997, February 25, 1996, and May 26, 1996 (In Thousands).
February 23, February 25, May 26, 1997 1996 1996 ------------ -------------- ----------- (Unaudited) Raw materials and supplies $ 47,229 $ 50,231 $ 56,671 Materials in process 90,776 96,642 65,447 Finished goods 183,041 224,591 172,316 -------- -------- -------- 321,046 371,464 294,434 Less: Excess of current cost over stated value of last-in, first-out inventories 18,597 15,151 15,703 -------- -------- -------- Total inventories $302,449 $356,313 $278,731 ======== ======== ========
2. BUSINESS SEGMENT INFORMATION The following is a tabulation of the Company's business segment information for the quarters and nine month periods ended February 23, 1997 and February 25, 1996 (In Thousands).
(Unaudited) Dairy Vegetables Pickles Specialty Corporate Consolidated ---------- ------------- ----------- ----------- ------------ ------------ THIRD QTR. ENDED February 23, 1997 Net sales $ 443,126 $143,445 $ 82,617 $ 75,824 $ - $ 745,012 Operating earnings $ 26,959 $ 8,509 $ 7,817 $ 9,047 $(11,152) $ 41,180 February 25, 1996 Net sales $ 409,199 $146,515 $ 88,048 $ 74,214 $ - $ 717,976 Operating earnings $ 13,525 $ (547) $ 4,859 $ 6,245 $ (5,541) $ 18,541 NINE MONTHS ENDED February 23, 1997 Net sales $1,327,758 $410,597 $267,349 $225,077 $ - $2,230,781 Operating earnings $ 69,679 $ 20,996 $ 24,718 $ 27,461 $(26,910) $ 115,944 February 25, 1996 Net sales $1,196,683 $424,128 $268,602 $185,426 $ - $2,074,839 Operating earnings $ 53,028 $ 11,714 $ 14,537 $ 18,796 $(17,363) $ 80,712
6 7 3. LEGAL PROCEEDINGS See PART II, Item 1 for a discussion of pending legal proceedings. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS A.) Liquidity and Capital Resources As of February 23, 1997 there have been no material changes in the Company's liquidity or its capital resources from those described in the Management's Discussion and Analysis contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 26, 1996. Cash and cash equivalents were $11.3 million at February 23, 1997, an increase of $.9 million from the balance at May 26, 1996. The inventories at February 23, 1997 were $302.4 million, an increase of $23.7 million over the balance at May 26, 1996, reflecting the typical seasonal increase resulting from the vegetable and cucumber harvests. The February 23, 1997 inventories were $53.9 million lower than inventories at February 25, 1996 reflecting the lower value of inventories in the Vegetables and Pickles segments. In the fourth quarter of fiscal 1996 the Company recorded a pre-tax provision of $150.0 million related to the adoption of a plan to reduce costs, rationalize production capacity and provide for projected severance and environmental costs. At May 26, 1996 the remaining accruals were $49.0 million. During the first nine months of fiscal 1997 the Company expended $15.0 million, primarily for plant closure and severance activities. Short-term borrowings outstanding at February 23, 1997, were $65.0 million, a decrease of $27.0 million from the balance outstanding at May 26, 1996. The short-term borrowings are $112.0 million less than at February 25, 1996, due primarily to lower inventory and receivable balances in the Vegetables and Pickles segments in fiscal 1997. Working capital at February 23, 1997 was $224.0 million compared to $185.9 million at May 26, 1996. The Company's debt-to-capital ratio was 35.5% at February 23, 1997 compared with 39.1% at May 26, 1996 and 41.2% at February 25, 1996. B.) Results of Operations Sales Net sales for the third quarter of fiscal 1997 of $745.0 million were 4% higher than sales of $718.0 million in the prior year. For the nine months, net sales increased 8% to $2.2 billion in fiscal 1997 from $2.1 billion last year. The sales increases in both periods are primarily due to increases in the Dairy and Specialty segments. Dairy sales for the quarter of $443.1 million were 8% higher than sales of $409.2 million in the prior year. For the nine months, Dairy sales increased 11%, to $1.3 billion from $1.2 billion in fiscal 1996. The increased sales in both periods are primarily the result of increased selling prices which reflected the pass-through of higher raw milk costs, which peaked at record levels in the second quarter of fiscal 1997 and then declined during the third quarter. For the nine month period overall dairy volume is up 1%, as a 7 8 4% increase in fluid milk is largely offset by a 2% decline in ice cream and a decline resulting from the sale of an Extended Shelf Life plant. The Vegetables segment sales of $143.4 million in the third quarter and $410.6 million for the nine months in fiscal 1997 are down approximately 2% and 3%, respectively, from sales of $146.5 million and $424.1 million in the same periods in the prior year. The decline in both periods is due primarily to lower private label sales. The Pickles segment sales of $82.6 million in the third quarter of fiscal 1997 were down 6% compared to the same quarter last fiscal year, primarily due to a shift in customer sales mix which focused on eliminating the sales of low margin products. Sales for the nine month period of $267.3 million were relatively flat in relation to the prior year. The Specialty segment sales for both the third quarter and nine month periods increased over the prior year. Third quarter sales were up 2% to $75.8 million from $74.2 million in 1996. For the nine months, sales increased 21% to $225.1 million from $185.4 million, primarily due to sales of a December 1995 acquisition and increased sales of the segment's non-dairy creamer products. Operating Earnings Operating earnings for the third quarter of fiscal 1997 of $41.2 million, were more than double the operating earnings of $18.5 million in fiscal 1996. For the nine months, operating earnings of $115.9 million were $35.2 million, or 44%, higher than in the same period of the prior year. Each of the Company's business segments reported increased operating earnings in both the quarter and nine month periods. Dairy segment operating earnings of $27.0 million in the third quarter of fiscal 1997 doubled the operating earnings of $13.5 million in the third quarter of 1996. For the nine months, dairy operating earnings of $69.7 million were $16.7 million, or 31%, higher than in fiscal 1996. The results for both periods reflect improved earnings from the sales increase discussed above and improved operating efficiencies in several plants. In the third quarter of fiscal 1997, an increasing butterfat differential, which effectively reduces the cost of the Company's skim and lowfat dairy products, benefited the results in this segment. In the second quarter of 1997, as well as the third quarter of 1996, a declining butterfat differential negatively effected this segment's operating results. The net change resulting from the changing butterfat was favorable by approximately $5.5 million in the third quarter of fiscal 1997 versus the third quarter of the prior year. Operating earnings in the Vegetables segment of $8.5 million in the third quarter of fiscal 1997 represented a significant turnaround from the operating loss of $.5 million in the same quarter of fiscal 1996. The improved third quarter results were principally because of favorable manufacturing variances resulting from improved procurement and increased operating efficiencies, lower warehousing costs and reduced operating expenses, all of which offset the lower sales volume in fiscal 1997. For the nine month period, operating earnings of $21.0 million are up 79% over those of fiscal 1996. The Pickles segment recorded operating earnings of $7.8 million in the third quarter of fiscal 1997, a 61% increase over operating earnings of $4.9 million in the prior fiscal year. For the nine months, fiscal 1997 operating earnings of $24.7 million were 70% higher than those of fiscal 1996. The improvements in the quarter and nine month periods of 1997 are the result of improved procurement and manufacturing efficiencies and a shift in customer sales mix, as discussed above. 8 9 The Specialty segment operating earnings for the third quarter and nine month periods of fiscal 1997 of $9.0 million and $27.5 million, respectively, are substantially ahead of the $6.2 million and $18.8 million operating earnings in the same periods of the prior year. The improvement in operating earnings in fiscal 1997 is primarily the result of higher sales in the powdered products operation and the earnings of the December 1995 acquisition. The increased Corporate expenses in the third quarter of fiscal 1997 are principally the result of increased compensation and stock plan accruals reflecting improved 1997 results. The increase in Corporate expenses for the nine month period reflect the increased compensation expenses as well as increased pension and other expenses related to the Company's 1997 management changes. Interest Expense Interest expense in the third quarter of $6.6 million is $1.5 million lower than the interest expense in the same period of the prior year reflecting significantly lower average borrowings. For the nine month period, interest expense is down approximately $1.3 million from the prior year primarily as a result of the lower third quarter average borrowings. Income Taxes The effective income tax rate for both the third quarter and nine month periods of fiscal 1997 was 40.5% compared with a rate of 36.6% in the third quarter and 40.0% for the first nine months of fiscal 1996. 9 10 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings There has been no material change in the legal proceedings reported under Item 3 - Legal Proceedings, of the Company's Form 10-K Annual Report, for the fiscal year ended May 26, 1996. ITEM 6. Exhibits and Reports on Form 8-K a.) Exhibits Item 10(a) - Employment Agreement dated December 2, 1996 between the Company and Philip A. Marineau. Item 10(b) - Severance, Consulting and Non-Complete Agreement dated December 5, 1996 between the Company and Thomas L. Rose. Item 12 - Computation of Ratio of Earnings to Fixed Charges. Item 27 - Financial Data Schedules. b.) Reports on Form 8-K The Company filed a Current Report on Form 8-K, dated December 6, 1996, with regards to the Company's Press Release dated December 2, 1996, "Dean Foods Selects New President". 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DEAN FOODS COMPANY --------------------------- (Registrant) DATE: April 7, 1997 William R. McManaman --------------------------- WILLIAM R. McMANAMAN Vice President, Finance and Chief Financial Officer DATE: April 7, 1997 William M. Luegers --------------------------- WILLIAM M. LUEGERS Controller 11 EX-10.(A) 2 EMPLOYMENT AGREEMENT 1 EXHIBIT 10(a) EMPLOYMENT AGREEMENT AGREEMENT made on December 2 , 1996 between Dean Foods Company, a Delaware corporation (the "Company"), and Philip A. Marineau ("Executive"). In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Employment. The Company shall employ Executive, and Executive accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date hereof and ending as provided in paragraph 4 hereof (the "Employment Period"). 2. Position and Duties. (a) During the Employment Period, Executive shall serve as the chief operating officer of the Company, and shall have the normal duties, responsibilities and authority of an executive serving in such position, subject to supervision and control by the Board of Directors of the Company (the "Board") and the chief executive officer of the Company (the "CEO"). Executive shall have the title President and Chief Operating Officer of the Company. During the Employment Period, Executive shall also serve as a director of the Company for so long as the Board nominates him to that position and he is elected to it and as a director of any affiliate of the Company designated by the Board for so long as the Board causes him to be elected to such position. (b) Executive shall report to the CEO. (c) During the Employment Period, Executive shall devote his best efforts and his full business time and attention (except for permitted vacation periods, reasonable periods of illness or other incapacity and, provided such activities do not interfere with the performance by Executive of his duties and responsibilities hereunder, participation in charitable and civic endeavors and management of Executive's personal investments and business interests) to the business and affairs of the Company, its subsidiaries and affiliates. Executive shall perform his duties and responsibilities hereunder to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. (d) Executive shall perform his duties and responsibilities hereunder principally in the Chicago, Illinois metropolitan area. (e) Executive is entering into this Agreement with the desire of becoming the chief executive officer of the Company not later than December 31, 2001, but without any commitment from the Company that such will be the case. If at any 2 time during the Employment Period the Board provides Executive with a written formal offer (the "CEO Position Offer") to make Executive the chief executive officer of the Company as of a date (which may be either a specified date or an outside date) not later than December 31, 2001 and which sets forth the terms of such offer (including the effect of such offer on the terms of this Agreement, and possibly including a provision that service as chief executive officer will be at the pleasure of the Board rather than pursuant to contract), Executive will discuss such offer, and any changes to its terms that he may wish to propose, with the Board. 3. Salary and Benefits. (a) Pursuant to authorization by the Compensation Committee of the Board, and under the Dean Foods Company 1989 Stock Awards Plan, on the date hereof Executive will be granted incentive stock options and non-qualified stock options to purchase shares of the Company's common stock (the numbers of shares to be determined by such Committee, on a basis consistent with that used by such Committee in making similar determinations, so that such options have an aggregate value on the date hereof of $400,000) at an exercise price per share equal to the fair market value of such a share on the date hereof. Such options will be in the respective forms of the incentive stock options and non-qualified stock options granted under such Plan most recently prior to the date hereof, except that such non-qualified options will provide for accelerated full vesting at the end of the Employment Period unless the Employment Period ends early pursuant to paragraph 4 hereof on account of a Termination for Cause or a Termination by Executive for CEO Position Offer Deadlock. (b) The Company agrees to pay Executive a salary during the Employment Period, in monthly installments. Executive's initial salary shall be $625,000 per annum. Executive's salary may be changed by the Board at any time or from time to time after May 31, 1998, but may not be reduced below $625,000. (c) Executive shall be entitled during the Employment Period to participate, on the same basis as the CEO, in both the corporate performance and personal performance components of the Company's incentive pay program in effect from time to time; provided (i) that the percentage of Executive's salary to which the formula under such program shall be applied for any of the following fiscal years shall be the following percentage for such fiscal year: fiscal year ending in 1997-60%; fiscal year ending in 1998-65%; fiscal year ending in 1999-70%; fiscal year ending in 2000-75%; and (ii) the amount of incentive pay to which Executive shall be entitled for the Company's fiscal year ending in 1997 and for the Company's fiscal year ending in 2000 pursuant to such program shall be a pro rata portion (based on the days Executive is employed by the Company during such fiscal year) of the amount to which Executive would have been entitled had he been employed by the Company for all of such fiscal year. - 2 - 3 (d) Executive shall be entitled during the Employment Period to participate in the Dean Foods Company Supplemental Benefits Plan. (e) Executive shall be entitled during the Employment Period to be covered, on the same basis and in the same amount as the CEO, by any excess personal liability insurance provided by the Company from time to time. Such coverage is currently provided in the amount of $10,000,000. (f) The Company shall reimburse Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. (g) In addition to the salary, incentive pay and other benefits payable to Executive pursuant to the preceding provisions of this paragraph, Executive shall be entitled during the Employment Period to participate, on the same general basis as other executive officers of the Company, in those other Company benefit programs for which the CEO is from time to time eligible as determined from time to time by the Board. Such other benefit programs currently include the Dean Foods Company 1989 Stock Awards Plan, pension plan, 401 (k) plan, insurance (life, short-term disability, long-term disability, health and dental), annual physical, vacation, personal use of airline mileage awards, company car, country club dues, financial consulting and change of control agreement. However, it is expressly understood by Executive that, in view of the options being granted to Executive pursuant to (a) above, until May 26, 1997 Executive will not be eligible to participate in the Dean Foods Company 1989 Stock Awards Plan except to the extent the incentive pay provisions of (c) above operate under such Plan and except for participation in the program thereunder permitting an executive to elect to receive Company common stock in lieu of all or a portion of incentive cash bonuses otherwise payable to him. It is further expressly understood by Executive that his change of control agreement will provide for the elimination of any duplication of the payments and benefits provided under this Agreement. 4. Employment Period. (a) Except as hereinafter provided, the Employment Period shall continue until, and shall end upon, November 30, 1999. (b) Notwithstanding (a) above, the Employment Period shall end early upon the first to occur of any of the following events: (i) Executive's death; - 3 - 4 (ii) the Company's termination of Executive's employment on account of Executive's having become unable (as determined by the Board in good faith) to regularly perform his duties hereunder by reason of illness or incapacity for a period of more than six (6) consecutive months ("Termination for Disability"); (iii) the Company's termination of Executive's employment for Cause ("Termination for Cause"); (iv) the Company's termination of Executive's employment other than a Termination for Disability or a Termination for Cause ("Termination without Cause"); (v) Executive's termination of Executive's employment for Good Reason, by means of advance written notice to the Company at least thirty (30) days prior to the effective date of such termination identifying such termination as a Termination by Executive for Good Reason ("Termination by Executive for Good Reason"); or (vi) Executive's termination of Executive's employment for CEO Position Offer Deadlock, by means of advance written notice to the Company at least ninety (90) days prior to the effective date of such termination identifying such termination as a Termination by Executive for CEO Position Offer Deadlock ("Termination by Executive for CEO Position Offer Deadlock"). (c) For purposes of this Agreement, "Cause" shall mean: (i) the commission by Executive of a felony or a crime involving moral turpitude; (ii) the commission by Executive of a fraud; (iii) the commission by Executive of any act involving dishonesty or disloyalty with respect to the Company or any of its subsidiaries or affiliates; (iv) conduct by Executive tending to bring the Company or any of its subsidiaries or affiliates into substantial public disgrace or disrepute; (v) gross negligence or willful misconduct by Executive with respect to the Company or any of its subsidiaries or affiliates; - 4 - 5 (vi) repudiation of this Agreement by Executive or Executive's abandonment of his employment with the Company (it being expressly understood that neither a Termination by Executive for Good Reason nor a Termination by Executive for CEO Position Offer Deadlock shall constitute such a repudiation or abandonment); (vii) breach by Executive of any of the agreements in paragraph 9 hereof; or (viii) any other breach by Executive of this Agreement which is material and which is not cured within thirty (30) days after written notice thereof to Executive from the Company. (d) For purposes of this Agreement, "Good Reason" shall mean: (i) any breach by the Company of this Agreement which is material (including without limitation any substantial reduction by the Company in Executive's duties, responsibilities or authority) and which is not cured within thirty (30) days after written notice thereof to the Company from Executive; or (ii) the election or appointment of a chief executive officer of the Company other than Howard M. Dean. (e) For purposes of this Agreement, "CEO Position Offer Deadlock" shall mean Executive's unwillingness to accept the CEO Position Offer after discussion with the Board of any changes thereto proposed by Executive and the inclusion therein of any such changes to which the Board is agreeable. 5. Post-Employment Period Payments. (a) If the Employment Period ends pursuant to paragraph 4 hereof on November 30, 1999, or if the Employment Period ends early pursuant to paragraph 4 hereof for any reason, Executive shall cease to have any rights to salary, bonus (if any) or benefits other than: (i) any salary which has accrued but is unpaid, and any reimbursable expenses which have been incurred but are unpaid, as of the end of the Employment Period, (ii) (but only to the extent provided in any benefit plan in which Executive has participated as an employee of the Company) any plan benefits which by their terms extend beyond termination of Executive's employment and (iii) any other amounts(s) payable pursuant to the succeeding provisions of this paragraph 5. (b) If the Employment Period ends pursuant to paragraph 4 hereof on November 30, 1999: (i) the Company shall pay to Executive amounts equal to the - 5 - 6 amounts Executive would have received as salary (based on a salary of $625,000 per annum) had the Employment Period remained in effect until November 30, 2001, at the times such amounts would have been paid (in the event Executive is entitled during the payment period to any payments under any disability benefit plan or the like in which Executive has participated as an employee of the Company, less such payments); and (ii) until November 30, 2001 or such earlier time as Executive commences other employment, Executive and his dependents shall continue to be eligible to participate, on the same basis as other employees of the Company, in the Company's health care program in effect from time to time. Executive agrees that the period subsequent to November 30, 1999 during which he and his dependents continue to be eligible to participate in such health care program shall count toward the period of continuation coverage required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and any comparable state laws. It is expressly understood that the Company's payment obligations under this (b) shall cease in the event Executive breaches any of his agreements in paragraph 6, 8 or 9 hereof. (c) If the Employment Period ends early pursuant to paragraph 4 hereof on account of Executive's death, the Company shall pay to Executive's estate amounts equal to the amounts Executive would have received as salary (based on a salary of $625,000 per annum or, if greater, Executive's salary then in effect) had the Employment Period remained in effect until November 30, 1999, at the times such amounts would have been paid. (d) If the Employment Period ends early pursuant to paragraph 4 hereof on account of a Termination for Disability, the Company shall pay to Executive amounts equal to the amounts Executive would have received as salary (based on a salary of $625,000 per annum) had the Employment Period remained in effect until November 30, 1999, at the times such amounts would have been paid (in the event Executive is entitled during the payment period to any payments under any disability benefit plan or the like in which Executive has participated as an employee of the Company, less such payments). It is expressly understood that the Company's payment obligations under this (d) shall cease in the event Executive breaches any of his agreements in paragraph 6, 8 or 9 hereof. (e) If the Employment Period ends early pursuant to paragraph 4 hereof on account of a Termination for Cause, the Company shall make no further payments to Executive except as contemplated in (a)(i) and (ii) above. (f) If the Employment Period ends early pursuant to paragraph 4 hereof on account of a Termination without Cause or a Termination by Executive for Good Reason: (i) the Company shall pay to Executive amounts equal to the amounts Executive would have received as salary (based on a salary of $625,000 per annum) had the Employment Period remained in effect until the second anniversary of the end of the Employment Period, at the times such amounts would have been paid (in the - 6 - 7 event Executive is entitled during the payment period to any payments under any disability benefit plan or the like in which Executive has participated as an employee of the Company, less such payments); and (ii) until the second anniversary of the end of the Employment Period, or such earlier time as Executive commences other employment, Executive and his dependents shall continue to be eligible to participate, on the same basis as other employees of the Company, in the Company's health care program in effect from time to time. Executive agrees that the period subsequent to the end of the Employment Period during which he and his dependents continue to be eligible to participate in such health care program shall count toward the period of continuation coverage required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and any comparable state laws. It is expressly understood that the Company's payment obligations under this (f) shall cease in the event Executive breaches any of his agreements in paragraph 6, 8 or 9 hereof. (g) If the Employment Period ends early pursuant to paragraph 4 hereof on account of a Termination by Executive for CEO Position Offer Deadlock, the Company shall make no further payments to Executive except as contemplated in (a)(i) and (ii) above. 6. Inventions and Other Intellectual Property. Executive agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, trademarks, slogans, product or other designs, advertising or marketing programs, and all similar or related information which relate to the Company's or any of its subsidiaries' or affiliates' actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive, whether alone or jointly with others, while employed by the Company or any such subsidiary or affiliate ("Work Product") belong to the Company or such subsidiary or affiliate. Executive will promptly disclose such Work Product to the CEO and perform all actions reasonably requested by the CEO (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 7. Limitation/Illinois Disclosure. Paragraph 6 of this Agreement regarding the ownership of inventions and other intellectual property does not apply to the extent application thereof is prohibited by any law the benefits of which cannot be waived by Executive. Executive hereby waives the benefits of any such law to the maximum extent permitted by law. In accordance with Section 2872 of the Illinois Employee Patent Act, Ill. Rev. Stat. Chap. 140, Section 301 et. seq. (1983), Executive is hereby advised that in the event and to the extent such Act is applicable to Executive, paragraph 6 of this Agreement regarding the ownership of inventions and other intellectual property does not apply to any invention for which no equipment, supplies, facilities or trade secret information of the Company or any of its subsidiaries or affiliates was used and which was developed entirely on Executive's own time, unless (i) the invention - 7 - 8 relates to the business of the Company or any of its subsidiaries or affiliates or to the Company's or any of its subsidiaries' or affiliates' actual or demonstrably anticipated research or development or (ii) the invention results from any work performed by Executive for the Company or any of its subsidiaries or affiliates. 8. Confidential Information. Executive acknowledges that the information, observations and data obtained by him while employed by the Company pursuant to this Agreement concerning the business or affairs of the Company or any of its subsidiaries or affiliates (unless and except to the extent the foregoing become generally known to and available for use by the public other than as a result of Executive's acts or omissions to act, "Confidential Information") are the property of the Company or such subsidiary or affiliate. Therefore, Executive agrees that he shall not disclose any Confidential Information without the prior written consent of the CEO unless and except to the extent that such disclosure is (i) made in the ordinary course of Executive's performance of his duties under this Agreement or (ii) required by any subpoena or other legal process (in which event Executive will give the Company prompt notice of such subpoena or other legal process in order to permit the Company to seek appropriate protective orders), and that he shall not use any Confidential Information for his own account without the prior written consent of the CEO. Executive shall deliver to the Company at the termination of the Employment Period, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information, the Work Product or the business of the Company or any of its subsidiaries or affiliates which he may then possess or have under his control. 9. Non-Compete, Non-Solicitation. (a) Executive acknowledges that in the course of his employment with the Company pursuant to this Agreement he will become familiar with trade secrets and customer lists of and other confidential information concerning the Company and its subsidiaries and affiliates and that his services have been and will be of special, unique and extraordinary value to the Company. (b) Executive agrees that during the Employment Period he shall not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an officer, director, stockholder, investor or employee of or in any other corporation or enterprise or otherwise, engage or be engaged in, or assist any other person, firm, corporation or enterprise in engaging or being engaged in, the development, processing, marketing, distribution or sale of any product of a kind then actively being developed, processed, marketed, distributed or sold by the Company or any of its subsidiaries or affiliates. Executive further agrees that for two years after the Employment Period he shall not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an - 8 - 9 officer, director, stockholder, investor or employee of or in any other corporation or enterprise or otherwise, engage or be engaged in, or assist any other person, firm, corporation or enterprise in engaging or being engaged in, the development, processing, marketing, distribution or sale of any product of a kind actively being developed, processed, marketed, distributed or sold by the Company or any of its subsidiaries or affiliates at the end of the Employment Period, in any geographic area in which the Company or any of its subsidiaries or affiliates is engaged in such development, processing, marketing, distribution or selling (whether through production, calling on customers or prospective customers, or otherwise) at the end of the Employment Period. (c) Executive further agrees that during the Employment Period and for two years thereafter he shall not in any manner, directly or indirectly, (i) induce or attempt to induce any employee of the Company or of any of its subsidiaries or affiliates to quit or abandon his employ, or any customer of the Company or of any of its subsidiaries or affiliates to quit or abandon its relationship, for any purpose whatsoever, or (ii) in connection with any business to which the first sentence of (b) above applies, call on, service, solicit or otherwise do business with any then current or prospective customer of the Company or of any of its subsidiaries or affiliates. (d) Nothing in this paragraph 9 shall prohibit Executive from being: (i) a stockholder in a mutual fund or a diversified investment company or (ii) a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation. (e) If, at the time of enforcement of this paragraph, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. 10. Enforcement. Because Executive's services are unique and because Executive has access to Confidential Information and Work Product, the parties hereto agree that the Company would be damaged irreparably in the event any of the provisions of paragraph 6, 8 or 9 hereof were not performed in accordance with their specific terms or were otherwise breached and that money damages would be an inadequate remedy for any such non-performance or breach. Therefore, the Company or its successors or assigns shall be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). - 9 - 10 11. Executive Representations. Executive represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. 12. Survival. Paragraphs 6, 8 and 9 hereof shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. 13. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or mailed by first class mail, return receipt requested, to the recipient at the address below indicated: Notices to Executive: Mr. Philip A. Marineau Notices to the Company: Mr. Howard M. Dean Chairman of the Board and Chief Executive Officer Dean Foods Company 3600 North River Road Franklin Park, IL 60131 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or mailed. 14. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. -10- 11 15. Complete Agreement. This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and effective as of its date supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way. 16. Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement. 17. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective heirs, executors, personal representatives, successors and assigns, except that neither party may assign any of his or its rights or delegate any of his or its obligations hereunder without the prior written consent of the other party. Executive hereby consents to the assignment by the Company of all of its rights and obligations hereunder to any successor to the Company by merger or consolidation or purchase of all or substantially all of the Company's assets; in each case provided such transferee or successor assumes the liabilities of the Company hereunder. 18. Choice of Law. This Agreement shall be governed by the internal law, and not the laws of conflicts, of the State of Illinois. 19. Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. DEAN FOODS COMPANY By: ------------------------- Its: Chairman of the Board and Chief Executive Officer ---------------------------- Philip A. Marineau - 11 - EX-10.(B) 3 SEVERANCE, CONSULTING AGREEMENT 1 EXHIBIT 10(B) SEVERANCE, CONSULTING AND NON-COMPETE AGREEMENT This Agreement is made and entered into as of December 5, 1996 by and between DEAN FOODS COMPANY, a Delaware corporation (the "Company"), and THOMAS L. ROSE ("Executive"). RECITALS: A. Executive has for many years served as an executive of the Company, he is presently serving as President of the Company, he will continue to hold this office position until his successor shall have been elected, and he will thereafter remain an employee of the Company until December 31, 1996 (the "Severance Date") and serve as Vice-Chairman for such period as the Board of Directors determines in its sole discretion. B. The Company desires to continue to make use of Executive's expertise after the Severance Date on a consulting basis and to prevent any competitive business from securing or utilizing the services of Executive to the extent and for the period hereinafter provided. C. Executive desires to continue working for the Company on the terms and conditions hereinafter set forth. NOW THEREFORE, in consideration of the recitals and the mutual agreements herein contained, the parties hereto agree as follows: 1. Severance Benefits. The following severance benefits, which are required by law or contract, shall be provided to Executive: (a) Five weeks of vacation compensation. (b) Any benefits due under the Company's Management Deferred Compensation Plan, 1989 Stock Awards Plan and any qualified retirement plan. (c) Executive has elected to receive a lump-sum retirement benefit payable on January 2, 1997, such benefit to be provided to Executive pursuant to the Company's Amended and Restated Supplemental Benefit Plan. In addition, the Company will provide the following special severance benefits to Executive: (d) Executive's fiscal 1997 incentive bonus, calculated in accordance with the Company's existing formula and based on (i) a base pay amount equal to the wages earned by Executive through the Severance Date plus the consulting fees earned by Executive until the first to occur of May 25, 1997 or the 2 end of the Consulting Term (as hereinafter defined) and (ii) a personal performance rating of 80%. Such bonus shall be payable in August, 1997. (e) A severance payment, payable within 30 days after the first anniversary of the end of the Consulting Term, calculated in the manner set forth in clause (d) above, except that the base pay amount shall be $383,000.00 and provided that such bonus shall not be less than $197,000.00. (f) Company life, health and dental insurance benefits at employee contribution rates until October 13, 2001, or the date on which comparable employer-provided benefits are available to Executive. (g) Use of a Company-leased car comparable to the car currently used by Executive until December 31, 1998 in accordance with Company policies relating thereto from time to time in effect. (h) Payment of up to $6,000 per year for financial consulting services provided to Executive until April 15, 1999. (i) Country club dues reimbursement until December 31, 1998 in accordance with Company policies relating thereto from time to time in effect. (j) A supplemental lump sum retirement benefit, payable on January 2, 1997, of $420,562, such benefit to be provided to Executive in excess of the benefit to be provided to him under the Company's Amended and Restated Supplemental Benefit Plan (described in Section 1(c) hereof). (k) A supplemental lump sum retirement benefit, payable in September, 1997, equal to 140% of the excess, if any, of the 1997 fiscal bonus calculated in the manner set forth in clause (d) above over $197,000.00. (l) The Company's payment to Executive in fiscal 1998 of the final $55,500 installment of Executive's relocation allowance previously agreed upon by the parties. The Company also agrees to amend as of the date hereof all existing incentive stock option agreements between the Company and Executive pursuant to the terms of the Amendment to Incentive Stock Option Agreements set forth in Exhibit A hereto, and further agrees to amend as of the date hereof all existing Non-Qualified Stock Option Agreements between the Company and Executive to conform to the terms set forth in the form attached hereto as Exhibit B. 2 3 2. Nature and Term of Consulting Services. The Company hereby agrees to engage Executive, and Executive hereby agrees to serve the Company, as a full-time consultant during the term (the "Consulting Term") commencing on the Severance Date and ending on the first to occur of (a) Executive's inability, including as a result of his death or disability, or his refusal in his sole discretion to serve as a full-time consultant of the Company as described herein or (b) such date as the Chief Executive Officer of the Company (the "CEO") shall determine in his sole discretion that the Executive's full-time consulting services are no longer required. During the Consulting Term, Executive shall devote his best efforts and his full business time and attention in rendering such services as reasonably requested by the CEO. 3. Compensation Benefits. (a) Consulting Fees. During the Consulting Term, Executive shall be paid consulting fees in the amount of $31,917.00 per month. In the event that the Consulting Term ends after May 25, 1997, Executive shall be paid one or more additional consulting payments, payable within 30 days after the first to occur of the end of the Consulting Term or the end of each fiscal year after fiscal 1997, in an amount equal to 51.4% of the consulting fees earned by Executive during such fiscal year. (b) Reasonable Expenses. During the Consulting Term, the Company will reimburse Executive for his reasonable expenses necessarily incurred in the performance of his assigned duties, subject to the Company's policies relating thereto from time to time in effect. (c) Performance Bonuses. Executive and the Company agree that, except as otherwise described herein, all existing benefits of Executive under any bonus or incentive compensation plan of the Company shall be terminated and the benefits described in this Agreement are substituted in lieu thereof. 4. No Competition; Confidentiality. In consideration of the payments to be made to Executive hereunder and the additional non-compete payment of $963,000, payable in 24 monthly installments of $32,000.00 during the two-year period (the "Non-Compete Period") commencing immediately after the end of the Consulting Term plus a final installment of $195,000.00, payable within 30 days after the Non-Compete Period, Executive agrees that: (a) During the Consulting Term, Executive will not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an officer, director, 3 4 stockholder, investor or employee of or in any other corporation or enterprise or otherwise, engage or be engaged in, or assist any other person, firm, corporation or enterprise in engaging or being engaged in, the development, processing, marketing, distribution or sale of any product of a kind actively being developed, processed, marketed, distributed or sold by the Company or any of its subsidiaries or affiliates (collectively, the "Dean Companies"), in any geographic area in which the Company or any of its subsidiaries or affiliates is engaged in such development, processing, marketing, distribution or selling (whether through production, calling on customers or prospective customers, or otherwise) at the end of the Consulting Term. During the Non-Compete Period, in the event that Executive engages in any of the foregoing activities, all benefits, consulting fees and other payments to which he would otherwise be entitled hereunder, other than the benefits provided in clauses (d), (j) and (k) of Section 1, shall forthwith cease. Executive further covenants and agrees that, during the Consulting Term and the Non-Compete Period, he shall not induce, attempt to induce, or in any way assist or act in concert with any other person, firm or entity in inducing or attempting to induce, any employee or agent of any of the Dean Companies to terminate his, her or its relationship with any of the Dean Companies. Nothing contained herein shall preclude Executive from owning less than 5% of any class of publicly-traded securities of any corporation. (b) Executive will not divulge, furnish or make accessible to anyone, otherwise than in the regular course of performance of his duties hereunder, or use for his benefit or for the benefit of any other person, firm, corporation or other entity, any trade secret, knowledge or other information with respect to the confidential or secret processes, plans, devices or materials of any of the Dean Companies. (c) All developments, processes, inventions, equipment or products, except those of a nature totally unrelated to those utilized by any of the Dean Companies, whether patentable or unpatentable, made, conceived or resulting from work done solely by Executive or jointly with Company employees or agents or acquired by him prior to the end of the Consulting Term shall be the sole property of the Dean Companies, irrespective of whether so made, conceived or resulting from work done, or acquired, during business hours or after business hours. Executive further agrees to execute all documents necessary to vest full and unencumbered title thereto in the Company and to do all things deemed necessary 4 5 by the Company to obtain patent protection thereon in all countries or to maintain the same as trade secrets, if the Company so elects, at the Company's expense. (d) The provisions of this Section 4(b) and (c) shall survive the expiration or termination of this Agreement. (e) If under the circumstances existing at the time of enforcement of any of the provisions of this Section 4, the period, scope or area described therein shall be found or held to be unreasonable, the parties agree that the maximum period, scope or area reasonable under the circumstances shall be substituted for the stated period, scope or area. 5. Tax Consequences. Executive expressly acknowledges and agrees that the payments to be made hereunder to him by the Company shall be taxed to him as items of ordinary income and that the Company will withhold from the payments to be made hereunder as may be required by applicable law. 6. Relief for Breach. Executive recognizes and agrees that his covenants and undertakings contained herein relate to matters which, for purposes of this Agreement exclusively, are of a special and unique character and that a breach thereof by Executive will result in irreparable injury to the Company for which there is no adequate remedy at law. Executive, therefore, expressly agrees that if he shall at any time breach or in any manner violate any of the terms of this Agreement, the Company shall be entitled, at any time after any such breach, to immediately obtain in any court of competent jurisdiction injunctive relief against Executive (in addition to, and not in substitution for, any and all other relief to which the Company may be entitled either at law or in equity) prohibiting Executive from committing such breach or violation and compelling compliance by Executive with his obligations hereunder. Executive agrees that the Company shall be entitled to recover all costs of successfully enforcing any provision of this Agreement, including reasonable attorneys' fees. In the event of any breach or violation by Executive of any of his covenants herein, any applicable non-compete period set forth in Section 4 shall be extended automatically for a period equal to the period during which Executive committed such breach or violation. In addition, in the event Executive shall breach this Agreement in any manner, all benefits, consulting fees and other payments to which he would otherwise be entitled under this Agreement, other than the benefits provided in clauses (d), (j) and (k) of Section 1, shall forthwith cease. 7. Waiver and Release. In consideration of the benefits set forth above, Executive promises to waive and to release the Dean Companies from liability for all rights and claims, whether or not they are presently known to exist, that Executive has against the Dean Companies relating in any way to his employment or separation from employment. For the purposes of this waiver and release, the Dean Companies should be 5 6 understood to also include all present and former directors, shareholders, employees and agents of the Dean Companies. It also means successors and assigns of the Dean Companies. The rights and claims which Executive waives and releases in this Agreement, include, to every extent allowed by law, those arising under the Employee Retirement Income Security Act of 1974, the Civil Rights Acts of 1866, 1871 and 1964, the Rehabilitation Act of 1973, and the Age Discrimination in Employment Act of 1967, as amended by the Older Worker's Benefit Protection Act of 1990. This is not a complete list, and Executive waives and releases all similar rights and claims under all other federal, state and local discrimination provisions and all other statutory and common law causes of action relating in any way to his employment or separation from employment. The Company and Executive each agree that they shall not undertake or make any disparaging conduct or derogatory statements concerning the other. Further, the terms and the amounts of the benefits shall remain confidential and shall not be disclosed by Executive to anyone other than his spouse, financial advisor and attorney, provided they agree to nondisclosure. 8. Personal Services; Assignment. (a) Executive shall perform all consulting services as an independent contractor and not as an employee of the Company. All payments of consulting fees to Executive hereunder shall be made to him in person or upon his personal receipt or endorsement, and shall not be grantable, transferable or otherwise assignable in anticipation of payment thereof, in whole or in part, by his voluntary or involuntary act, or by operation of law, and shall not be liable or taken for any obligation to him; it being intended that no right to any such payment shall occur until the conditions prescribed herein with respect thereto shall have been complied with. (b) This Agreement shall be binding upon and inure to the benefit of the parties, their legal representatives, successors and assigns, and all persons entitled to benefits hereunder; provided, however, that Executive may not delegate any of his duties hereunder. 9. No Collateral. The rights of Executive under this Agreement shall be solely those of an unsecured creditor of the Company. 10. Entire Agreement; Amendment. This Agreement contains the entire understanding and agreement between the parties with respect to the subject matter hereof and may not be amended, modified or supplemented in any respect except by a subsequent written agreement duly executed by Executive and the CEO of the Company. Executive expressly agrees that the provisions of this Agreement supersede and replace completely as of the date hereof all agreements relating to his compensation from any of the Dean Companies. 6 7 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly received or made if mailed by United States registered or express mail, postage paid, return receipt requested, addressed as follows: If to Executive, to: Thomas L. Rose If to the Company, to: Dean Foods Company 3600 North River Road Franklin Park, Illinois 60131 Attention: Chief Executive Officer or if delivered in person to either Executive or the CEO of the Company or to such other person or such other address as either party may hereunder designate by written notice to the other party. Each such communication shall be deemed to have been given and received as of the opening of business on the second business day after so mailed or at the time of delivery if delivered in person. 12. Governing Law. The provisions of this Agreement shall be construed according to the laws of the State of Illinois, and the invalidity or unenforceability of any paragraph or portion of this Agreement shall not affect the remaining parts hereof. 13. Construction. The language used herein shall be deemed to be the language chosen by all parties to express their mutual understanding with respect to the subject matter of this Agreement and no rule of strict construction shall apply to any term or provision hereof. 14. Purchasing Power Not Guaranteed. Except as otherwise specifically provided herein, the monetary amounts payable pursuant to this Agreement have been negotiated between the parties, who have taken into account the possible effects of inflation and have specifically agreed that no adjustments of the amounts referred to herein shall be required at any time for any reason, including without limitation depreciation in the purchasing power of the dollar. 7 8 IN WITNESS WHEREOF, the undersigned have hereunto executed this Agreement as of the date first above written. /s/ Thomas L. Rose DEAN FOODS COMPANY - ----------------------------- Thomas L. Rose By: /s/ Howard M. Dean ---------------------------- Its: Chairman & CEO ---------------------------- 8 9 Exhibit A AMENDMENT TO INCENTIVE STOCK OPTION AGREEMENTS This Amendment is made and entered into as of December ___, 1996 by and between DEAN FOODS COMPANY, a Delaware corporation (the "Company"), and THOMAS L. ROSE ("Executive"). WHEREAS, the Company, pursuant to authorization of the Compensation Committee of its Board of Directors, and Executive desire to amend all existing incentive stock option agreements (collectively, the "ISO Agreements") between the Company and Executive in the manner set forth herein. NOW THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto amend each of the ISO Agreements as follows: 1. The first sentence of paragraph 1 of each ISO Agreement is amended by reducing the aggregate number of Option Shares (as such term is defined in such ISO Agreement) by 20%, provided that any fraction resulting from such reduction is rounded up to the next higher whole number of Option Shares. 2. The second sentence of paragraph 1 of each ISO Agreement is deleted in its entirety and the following sentence is inserted in its place: "Your option is not intended to be, and will not be treated as, an 'incentive stock option' as such term is defined in Section 422A(b) of the Internal Revenue Code of 1986, as amended (the 'Code')." 3. Paragraph 3 of each ISO Agreement is deleted in its entirety and the following is inserted in its place: "3. Your option will be exerciseable immediately as to all of the Option Shares." Except as otherwise provided in paragraph 4 hereof, your option will expire on the second business day immediately following the tenth anniversary of the Grant Date. Each time you wish to exercise your option to purchase Option Shares, you must give the Company written notice of exercise (attention Secretary), which notice must specify the number of full Option Shares to be purchased and the purchase price to be paid therefor. You may exercise your option with respect to all or any part of the Option Shares, but you may not exercise your option as to a fraction of a full share. Your written notice of exercise must be accompanied by payment in full of the purchase price, in the form of cash or a check, bank draft or money order payable to the order of the Company or shares of Company Common Stock already owned by you (valued at the fair market value thereof on the date of 10 exercise) or a combination thereof. If you are a member of the Board or an officer of the Company at the time of exercise, your written notice of exercise must also be accompanied by your signed election pursuant to Section 83(b) of the Code (on a form acceptable to the Company) to include in your gross income for your tax year in which the exercise occurs the excess of the fair market value (at the time of exercise) of the Option Shares to be purchased over the purchase price to be paid therefor. Fair market value for all purposes of this Agreement will be determined by the Committee." 4. Subparagraph 4(a) of each ISO Agreement is deleted in its entirety and replaced with the following: "4.(a) Except as hereinafter set forth in this paragraph 4, if your employment with the Company terminates for any reason, your option may be exercised within five (5) years after the date of such termination (in the event of your death, by your estate or by the person who acquired the right to exercise your option by bequest or inheritance or by reason of the laws of descent and distribution), but not beyond the second business day immediately following the tenth anniversary of the Grant Date." 5. Paragraph 5 of each ISO Agreement is deleted in its entirety and replaced with the following: "5. Promptly after an effective exercise of your option in whole or in part, the Company will make a cash payment to you equal to the percentage determined as provided below of the excess of the fair market value (at the time of the option exercise) of the Option Shares as to which you are then exercising your option over their option price. The percentage referred to above will be determined by (a) dividing (i) the Tax Rate derived from the federal income tax rates in effect for your tax year in which the option exercise occurs by (ii) the quantity one minus such Tax Rate, and (b) multiplying the result by 100; subject to the limitation that such percentage may not exceed 100%. The Tax Rate, for such purpose, will be the total (expressed as a decimal) of your individual state income tax rate (reduced by any federal income tax deduction therefor) plus the maximum marginal federal income tax rate for individuals such that there does not exist a lower marginal federal income tax rate which would be applicable if adjusted gross income or taxable income were increased, disregarding any alternative minimum tax or other alternative or add-on tax based on tax preference items." 6. Paragraph 7 of each ISO Agreement is deleted in its entirety and replaced with the following: 11 "7. In the event of any Change of Control prior to the expiration of your option, you may, at any time during the 90 days following such event (but not after the expiration of your option), in lieu of exercising your option, surrender your option to the Company and receive therefor a cash payment equal to the sum of: (a) an amount equal to the excess of (i) the highest aggregate fair market value, during the period beginning 30 days before and ending 30 days after such event, of the Option Shares as to which your option is surrendered, over (ii) the option price of such Options Shares, plus (b) the percentage of the amount set forth in (a) above determined as provided in paragraph 5 hereof based on the federal income tax rates in effect for your tax year in which the surrender occurs, subject to the limitation that such percentage may not exceed 100%. If you wish to so surrender your option, you must give the Company written notice of surrender (attention Secretary), which notice must specify the number of Option Shares which then remain subject to your option. A "Change of Control" will be deemed to have occurred if: (i) there is a change in control of the Company that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A, promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); or (ii) any person or entity (which includes any "group" as such term is used in Section 13(d)(3) of the Exchange Act) is, directly or indirectly, the "beneficial owner" (as such term is used in Rule 13d-3 under the Exchange Act) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (computed as described in such Rule); or (iii) a majority of the members of any class of directors of the Company are persons who were neither nominated by the Board for election by the stockholders nor elected by the Board to fill vacancy(ies) on the Board; or (iv) the Company (or any substantial portion of its assets) is combined with or acquired by another person or other entity; provided, however, that (v) no "Change of Control" shall be deemed to have occurred with respect to any transaction (or series of transactions) which shall have been approved in advance by a majority of the Board, exclusive of members who are employed by or otherwise affiliated with the person or other entity seeking to effect the Change of Control; (vi) a "Change of Control" shall not include any acquisition of voting stock by any underwriting syndicate or underwriter for so long as such syndicate or underwriter holds the voting stock for distribution to the public pursuant to an underwriting agreement between the Company and such syndicate or underwriter; and (vii) a "Change of Control" shall not include any acquisition by any defined contribution plan which is qualified pursuant to the applicable provisions of the Code and is maintained for the benefit of the employees of the Company and/or its subsidiaries." 12 Except as otherwise provided herein, each of the ISO Agreements shall remain in full force and effect unamended. IN WITNESS WHEREOF, the undersigned have hereunto executed this Amendment as of the date first above written. DEAN FOODS COMPANY _______________________________ By: _________________________ Thomas L. Rose Its: _________________________ 13 [DEAN FOODS LETTERHEAD] Exhibit B AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION AGREEMENT [Grant Date] [Name] [Address] [City, State] Dear [Name]: I am pleased to advise you that on [Grant Date], (the "Grant Date"), the Committee for the Company's 1989 Stock Awards Plan (which Plan, as the same may hereafter be amended from time to time, is referred to as the "Plan") granted the following option, effective and speaking as of the Grant Date: 1. You are hereby granted the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of shares of the Company's Common Stock, par value $1 per share (herein the "Option Shares") at a purchase price of $______ per Option Share. Your option is not intended to be, and will not be treated as, an "incentive stock option" as such term is defined in Section 422A(b) of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Your option is irrevocable and is intended to conform in all respects with the Plan as presently written. Inconsistencies between your option and the Plan will be resolved according to the terms of the Plan, a copy of which has been supplied to you. 3. Your option will be exercisable immediately as to all of the Option Shares. Except as otherwise provided in paragraph 4 hereof, your option will expire on the tenth anniversary of the Grant Date. 14 Each time you wish to exercise your option to purchase Option Shares, you must give the Company written notice of exercise (attention Secretary), which notice must specify the number of full Option Shares to be purchased and the purchase price to be paid therefor. You may exercise your option with respect to all or any part of the Option Shares as to which your option has become exercisable, but you may not exercise your option as to a fraction of a full share. Your written notice of exercise must be accompanied by payment in full of the purchase price, in the form of cash or a check, bank draft or money order payable to the order of the Company or shares of Company Common Stock already owned by you (valued at the fair market value thereof on the date of exercise) or a combination thereof. If you are a member of the Board or an officer of the Company at the time of exercise, your written notice of exercise must also be accompanied by your signed election pursuant to Section 83(b) of the Code (on a form acceptable to the Company) to include in your gross income for your tax year in which the exercise occurs the excess of the fair market value (at the time of exercise) of the Option Shares to be purchased over the purchase price to be paid therefor. Fair market value for all purposes of this Agreement will be determined by the Committee. 4. (a) Except as hereinafter set forth in this paragraph, if your employment with the Company terminates because of your death or disability or terminates for any other reason after you have reached age sixty, your option must be exercised within five (5) years after the date of such termination (in the event of your death, by your estate or by the person who acquired the right to exercise your option by bequest or inheritance or by reason of the laws of descent and distribution), to the extent to which your option is exercisable at the date of such termination, but not beyond the tenth anniversary of the Grant Date. If at any time you take an authorized leave of absence, the Committee may (but 2 15 need not) determine that for this purpose you will be deemed to continue in the Company's or a subsidiary's employment. (b) You may not under any circumstances exercise your option following termination of employment if you are discharged because of fraud, embezzlement, insubordination or other misconduct seriously detrimental to the Company or any subsidiary of the Company. The determination of whether or not you have been discharged for any of the reasons specified in the preceding sentence will be made by the Committee, and the Committee's determination will be binding and conclusive on the Company and you. (c) In any event, if you are a member of the Board or an officer of the Company, your option may not be exercised during the first six months after it is granted, except in the event of your death or disability prior to the expiration of such six-month period. 5. Promptly after an effective exercise of your option in whole or in part, the Company will make a cash payment to you equal to the percentage determined as provided below of the excess of the fair market value (at the time of the option exercise) of the Option Shares as to which you are then exercising your option over their option price. The percentage referred to above will be determined by (a) dividing (i) the Tax Rate derived from the federal income tax rates in effect for your tax year in which the option exercise occurs by (ii) the quantity one minus such Tax Rate, and (b) multiplying the result by 100; subject to the limitation that such percentage may not exceed 100%. The Tax Rate, for such purpose, will be the total (expressed as a decimal) of your individual state income tax rate (reduced by any federal income tax deduction therefor) plus the maximum marginal federal income tax rate for individuals such that there does not exist a lower marginal federal income tax rate which would be applicable if adjusted gross income or taxable income were 3 16 increased, disregarding any alternative minimum tax or other alternative or add-on tax based on tax preference items. 6. Exercise of your option may be suspended if the Board of Directors or the Committee 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 Board of Directors or the Committee. 7. In the event of any Change of Control prior to the expiration of your option, you may, at any time during the 90 days following such event (but not after the expiration of your option), in lieu of exercising your option, surrender your option to the Company and receive therefor a cash payment equal to the sum of: (a) an amount equal to the excess of (i) the highest aggregate fair market value, during the period beginning 30 days before and ending 30 days after such event, of the Option Shares as to which your option is surrendered, over (ii) the option price of such Option Shares, plus (b) the percentage of the amount set forth in (a) above determined as provided in paragraph 5 hereof based on the federal income tax rates in effect for your tax year in which the surrender occurs, subject to the limitation that such percentage may not exceed 100%. If you wish to so surrender your option, you must give the Company written notice of surrender (attention Secretary), which notice must specify the number of Option Shares which then remain subject to your option. A "Change of Control" will be deemed to have occurred if: (i) there is a change in control of the Company that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A, promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); or (ii) any person or entity (which includes any "group" as such term is used in Section 13(d)(3) of the Exchange Act) is, directly or indirectly, the "beneficial owner" (as such term is used in Rule 13d-3 under the 4 17 Exchange Act) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (computed as described in such Rule); or (iii) a majority of the members of any class of directors of the Company are persons who were neither nominated by the Board for election by the stockholders nor elected by the Board to fill vacancy(ies) on the Board; or (iv) the Company (or any substantial portion of its assets) is combined with or acquired by another person or other entity; provided, however, that (v) no "Change of Control" shall be deemed to have occurred with respect to any transaction (or series of transactions) which shall have been approved in advance by a majority of the Board, exclusive of members who are employed by or otherwise affiliated with the person or other entity seeking to effect the Change of Control; (vi) a "Change of Control" shall not include any acquisition of voting stock by any underwriting syndicate or underwriter for so long as such syndicate or underwriter holds the voting stock for distribution to the public pursuant to an underwriting agreement between the Company and such syndicate or underwriter; and (vii) a "Change of Control" shall not include any acquisition by any defined contribution plan which is qualified pursuant to the applicable provisions of the Code and is maintained for the benefit of the employees of the Company and/or its subsidiaries. 8. The issuance of Company Common Stock to you in the event you exercise your option has been registered by the Company under the Securities Act of 1933 on the Company's Form S-8 Registration Statement, No. 33-33775 (the "Registration Statement"). By executing this Agreement, you acknowledge that you have received a copy of the Company's Prospectus dated March 28, 1990 (including the Appendix thereto giving information as of May 24, 1991), which is a part of the Registration Statement, and a copy of the Company's Annual Report to its stockholders for the year ended May __, 199_. By executing this Agreement you agree that you will not reoffer, resell or otherwise dispose of any Option Shares in any manner which would 5 18 violate the Securities Act of 1933 or any other federal or state securities law, and further agree to reimburse the Company for any loss, damage or expense of any kind which it may suffer by reason of any breach at any time of such agreement, including but not limited to any liabilities which the Company may have under the Securities Act of 1933 or any other federal or state securities law. You hereby agree that the Company will have no obligation to you to keep effective or current its existing Registration Statement, or to file or keep effective or current any additional registration statement concerning any Option Shares. 9. (a) 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 the Company's Common Stock are entitled to receive securities or other assets with respect to or in exchange for the Company's Common Stock (an "Organic Change"), the Committee shall make appropriate changes to insure that your option thereafter represents the right to acquire, in lieu of or in addition to the shares of the Company's Common Stock immediately theretofore acquirable upon exercise, such securities or assets as may be issued or payable with respect to or in exchange for an equivalent number of shares of the Company's Common Stock; and in the event of any stock dividend, stock split or combination of shares, the Board of Directors shall make appropriate changes in the number of shares authorized by the Plan to be delivered thereafter, and the Committee shall make appropriate changes in the number of shares covered by your option and the exercise price specified herein (and in the event of a spinoff, the Committee may make similar changes), in order to prevent the dilution or enlargement of your option 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 6 19 receive the same would result, the number of shares in question shall be decreased to the next lower whole number of shares. (b) As used in this Agreement, the term "Option Shares" includes, in addition to the shares described in the first paragraph hereof as the shares subject to your option, any other shares or other securities which may be issued as a result of subparagraph (a). 10. Your option will not be assignable or transferable by you other than by will or by the laws of descent and distribution, and during your lifetime will be exercisable only by you or your legal representative. 11. Any notice to be given to the Company under the terms of this Agreement will be addressed to the Company in care of its Secretary at 3600 North River Road, Franklin Park, Illinois 60131, and any notice to be given to you will be addressed to you at the address given beneath your signature hereto, or at such other address as you may direct in writing. Any such notice will be deemed to have been duly given if and when enclosed in a properly sealed envelope addressed as aforesaid, registered and deposited, postage and registry fee prepaid, in a post office or branch post office regularly maintained by the United States Government. 12. The Company may withhold from any amount owed to you by the Company (or may require a subsidiary or other Affiliate [as defined in the Plan] to withhold from any amount owed to you by it and remit to the Company), or may require you to remit to the Company, an amount sufficient to satisfy any withholding or other tax due with respect to any shares to be issued by the Company upon the exercise of your option and/or any payment to be made by the Company upon exercise or surrender of your option, and the Committee may defer the issuance of such shares and/or the making of such payment unless indemnified to its satisfaction. 7 20 13. Nothing in this Agreement confers any right on you to continue in the employ of the Company or any subsidiary or other Affiliate or affects in any way the right of the Company or any subsidiary or other Affiliate, as the case may be, to terminate your employment at any time. 14. This Agreement will be binding upon and inure to the benefit of any successor or successors of the Company. In order to evidence the grant of your option, please execute the extra copy of this Agreement in the space provided and return the same to the Company, whereupon this Agreement will constitute a binding option agreement between us. Very truly yours, DEAN FOODS COMPANY By_________________________ Howard M. Dean, Chairman The undersigned hereby acknowledges that the undersigned has carefully read all of the provisions in this Agreement, including, without limitation, the provision of paragraph 8 hereof regarding the effect of the undersigned's execution of this Agreement. The undersigned hereby agrees to be bound by all provisions set forth in this Agreement and the Plan. NAME: _____________________________________ ADDRESS: _____________________________________ _____________________________________ SOCIAL SECURITY #: _____________________________________ DATED: _____________________________________ 8 EX-12 4 COMPUTATION OF EARNINGS 1 Exhibit 12 Dean Foods Company Computation of Ratio of Earnings to Fixed Charges
39 Weeks Ended February 23, 1997 ----------------- Income before taxes $ 96,844 -------- Fixed charges: Interest expense 19,745 Portion of rentals (33%) 7,606 -------- Total fixed charges 27,351 -------- Earnings before taxes and fixed charges $124,195 ======== Ratio of earnings to fixed charges 4.5 ========
EX-27 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Registrants' Quarterly Report on Form 10-Q for the quarterly period ended February 23, 1997. 1,000 9-MOS MAY-25-1997 MAY-26-1996 FEB-23-1997 11,345 0 185,447 3,621 302,449 604,513 1,031,805 511,847 1,241,472 380,524 223,392 0 0 41,479 502,603 1,241,472 745,012 745,012 571,151 571,151 131,716 818 6,647 34,680 14,045 20,635 0 0 0 20,635 .51 .51
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