UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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Dean Foods Company

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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2007 PROXY STATEMENT AND
NOTICE OF ANNUAL MEETING

DEAN FOODS COMPANY

Notice of Stockholders’ Meeting

We will hold this year’s annual stockholders’ meeting on Friday, May 18, 2007 at 10:00 a.m. at the Dallas Museum of Art, 1717 North Harwood, Dallas, Texas 75201.

At the meeting, we will ask you to consider and vote on the following proposals recently adopted by our Board of Directors:

	§		Proposal One: A proposal to re-elect Alan J. Bernon, Gregg L. Engles and Ronald Kirk as members of our Board of Directors for a three-year term,
	§		Proposal Two: A proposal to approve a new equity incentive plan, and
	§		Proposal Three: A proposal to ratify our Audit Committee’s selection of Deloitte & Touche LLP as our independent auditor for 2007.

We will also vote on a proposal submitted by a stockholder that is opposed by our Board of Directors.

Finally, we will discuss and take action on any other business that is properly brought before the meeting.

If you were a stockholder on March 23, 2007, you are entitled to vote on the proposals to be considered at this year’s meeting.

This Notice and the accompanying proxy statement are first being mailed to stockholders on or about April 19, 2007.

By order of the Board of Directors,

Sincerely,

Michelle P. Goolsby
Executive Vice President,
Chief Administrative Officer,
General Counsel and Corporate Secretary

TABLE OF CONTENTS

You Are Invited			5
Questions and Answers
Why did I receive this proxy statement?			6
I received more than one proxy statement. Why?			6
What will occur at the annual meeting?			6
How many votes are necessary to re-elect the nominees for director?			7
What if a nominee for director is unwilling or unable to stand for re-election?			7
How many votes are necessary to pass the other proposals?			7
How do I vote?			7
Where can I find the voting results of the meeting?			8
What if I want to change my vote?			8
What if I do not vote?			8
How do I raise an issue for discussion or vote at the annual meeting?			8
How much will this solicitation cost and who will pay for it?			9
Special Dividend			9
Proposals by Our Board of Directors
Proposal One: Re-Election of Directors			9
Proposal Two: Approval of a New Equity Incentive Plan (the “New Plan”)			10
Proposal Three: Ratification of Selection of Independent Auditor			17
Stockholder Proposal
What is the Company’s position regarding the Stockholder Proposal?			18
Other Information
Who is on our Board of Directors?			19
Who are our independent directors?			21
What are the responsibilities of our Board of Directors?			22

How much are Board members paid?			23
What are the Committees of our Board of Directors and who serves on those Committees?			24
What are the responsibilities of our Board Committees?			24
How can you communicate with our Board of Directors?			27
What is the process for nominating directors?			27
Do we have a Code of Ethics?			28
Lead Director			28
Chief Compliance Officer			28
Disclosure Committee			28
Audit Committee			29
Report of the Audit Committee			29
Executive Compensation			30
Report of the Compensation Committee			30
How is the compensation of our Named Executive Officers determined?			31
Who are our executive officers?			38
How much are our Named Executive Officers paid?			39
Executive Officer Severance			44
How much stock do our executive officers and directors own?			49
Do we have any holders who beneficially own more than 5% of our common stock?			49
What are our policies regarding transactions with related persons and what relationships do we have with our executive officers and directors?			50
Have our equity compensation plans been approved by our stockholders?			51
Section 16(a) Beneficial Ownership Reporting Compliance			52
Appendix A
Dean Foods Company 2007 Stock Incentive Plan			53

YOU ARE INVITED
April 19, 2007

Dear Fellow Stockholders,

We hope that you will come to our annual stockholders’ meeting on Friday, May 18, 2007. At the annual meeting, after we vote on the proposals described in this proxy statement, we will present a brief report on our 2006 results and our outlook for 2007 and beyond. As always, we will conclude the meeting by inviting you to ask questions and make comments. For your convenience, we will present a live webcast of the annual meeting, which you can access through our corporate website at www.deanfoods.com.

     If you have questions regarding any of the matters contained in this proxy statement, please contact our Investor Relations department at 800.431.9214. We look forward to seeing you at this year’s meeting.

Sincerely,

Gregg L. Engles
Chairman of the Board and
Chief Executive Officer

Why did I receive this proxy statement?

On April 19, 2007, we began mailing this proxy statement to everyone who was a stockholder of our Company on March 23, 2007. One purpose of this proxy statement is to let our stockholders know when and where we will hold our annual stockholders’ meeting.

     More importantly, this proxy statement:

•   Includes detailed information about the matters that will be discussed and voted on at the meeting, and

•   Provides updated information about our Company that you should consider in order to make an informed decision at the meeting.

I received more than one proxy statement. Why?

If you received more than one proxy statement, your shares are probably registered differently or are in more than one account. Please vote each proxy that you received.

What will occur at the annual meeting?

First we will determine whether enough stockholders are present at the meeting to conduct business. A stockholder will be deemed to be present at the meeting if the stockholder:

•   Is present in person, or

•   Is not present in person but has voted by telephone, online or mail prior to the meeting.

     According to our bylaws, holders of at least 64,739,530 shares of our common stock (which is a majority of the shares of our common stock that were outstanding on March 23, 2007) must be present at this year’s meeting in order to conduct the meeting. Abstentions and “broker non-votes” are counted as present and entitled to vote for purposes of determining if enough stockholders are present (in person or by proxy) to conduct the meeting. A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

     If holders of fewer than 64,739,530 shares are present at the meeting, we will reschedule the meeting. The new meeting date will be announced at the meeting. If enough stockholders are present at the meeting to conduct business, then we will vote on:

•   Proposal One: A proposal to re-elect Alan J. Bernon, Gregg L. Engles and Ronald Kirk as members of our Board of Directors for a three-year term,

•   Proposal Two: A proposal to approve a new equity incentive plan, and

•   Proposal Three: A proposal to ratify our Audit Committee’s selection of Deloitte & Touche LLP as our independent auditor for 2007.

     Proposals One, Two and Three have been approved by our Board of Directors. The Board of Directors is now soliciting your vote on these proposals and recommends that you vote FOR each of Proposals One, Two and Three.

     We will also vote on one stockholder proposal that our Board of Directors opposes.

     On each proposal, you are entitled to one vote for each share of stock that you owned on March 23, 2007. Cumulative voting is not permitted.

How many votes are necessary to re-elect the nominees for director?

The three nominees receiving the highest number of “yes” votes will be elected as directors. This number is called a plurality.

What if a nominee for director is unwilling

or unable to stand for re-election?

Each of the persons nominated for re-election has agreed to stand for re-election. However, if unexpected events arise which cause one or more of them to be unable to stand for re-election, then either:

•   The Board of Directors can vote at the meeting to reduce the size of the Board of Directors, or

•   The Board of Directors may, during the meeting, nominate another person for director.

     Please understand that if our Board of Directors nominates someone at the meeting, the person(s) to whom you have given your proxy will be able to use his or her discretion to vote on your behalf.

How many votes are necessary to pass

the other proposals?

The Audit Committee of our Board of Directors has responsibility for selection of our independent auditor. Stockholder ratification is not required. However, the Board of Directors is soliciting your opinion regarding the selection of Deloitte & Touche LLP. The Audit Committee of the Board of Directors plans to take your opinion into account in selecting our independent auditor for 2008.

     Proposals Two and Three and the stockholder proposal must receive the affirmative vote of a majority of the shares having voting power present (in person and by proxy) at the meeting in order to pass.

How do I vote?

To vote, follow the instructions on the enclosed proxy card or voting card.

     If you are a registered stockholder, you can also vote at the meeting. If your shares are in a brokerage account, you might not be a registered stockholder. In this case, your shares would not be officially registered in your name; rather, they would be registered in your broker’s name (which is sometimes called “street name”). If your shares are in street name, you cannot vote in person at the meeting unless you have a proper power of attorney from your broker. You should, therefore, vote by telephone, online or mail according to the instructions on the enclosed voting card in order to ensure that your vote is counted.

     Please understand that voting by any means other than voting in person at the meeting has the effect of appointing Gregg Engles, our Chairman of the Board and Chief Executive Officer, and Michelle Goolsby, our Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary, as your proxies. They will be required to vote on the proposals described in this proxy statement exactly as you have voted.

     However, if any other matter requiring a stockholder vote is properly raised at the meeting, then Mr. Engles and Ms. Goolsby will be authorized to use their discretion to vote on such issues on your behalf.

     If you sign your proxy card, but do not specify how you want to vote on a proposal, your shares will be voted FOR Proposals One, Two and Three, and AGAINST the stockholder proposal.

Where can I find the voting results of the meeting?

We will announce preliminary voting results at the meeting. We will publish the final results in our quarterly report on Form 10-Q for the second quarter of 2007. We will file that report with the Securities and Exchange Commission (“SEC”) in August of this year, and you can obtain a copy on our website at www.deanfoods.com, on the SEC’s website at www.sec.gov, or by contacting our Investor Relations department at 800.431.9214 or the SEC at 800.SEC.0330.

What if I want to change my vote?

You can revoke your vote on a proposal at any time before the meeting for any reason. To revoke your proxy before the meeting, either:

•  Write to our Corporate Secretary at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201, or

•  Vote again, either by telephone or online (your last vote before the meeting begins will be counted).

     If you are a registered stockholder (or if you hold your shares in “street name” and have a proper power of attorney from your broker), you may also come to the meeting and change your vote in writing or orally.

What if I do not vote?

If you do not vote, your failure to vote could affect whether there are enough stockholders present at the meeting to hold the meeting. Holders of a majority of the outstanding shares of our common stock must be present (in person or by proxy) in order to conduct the meeting. Proxies received but marked as abstentions, if any, will be included in the calculation of the number of shares considered to be present at the meeting for quorum purposes. Because abstentions represent shares entitled to vote, the effect of an abstention will be the same as a vote against a proposal. However, abstentions will have no effect on Proposal One regarding the election of directors.

     “Broker non-votes” will be considered present for quorum purposes but will not be considered present and entitled to vote on any matter for which a broker does not have authority. Accordingly, “broker non-votes” will not have any impact on the outcome of any proposal.

     If your shares are held in “street name” and you do not vote, your brokerage firm could:

•  Vote for you, if it is permitted by the exchange or organization of which your broker is a member, or

•  Leave your shares unvoted.

     Your broker will be permitted to vote for you on Proposals One and Three regarding the election of directors and the ratification of Deloitte & Touche LLP. If you do not provide your broker with proper instructions, your broker will not be permitted to vote for you on the new equity incentive plan or the stockholder proposal.

How do I raise an issue for discussion or vote at the annual meeting?

According to our bylaws, if a stockholder wishes to present a proposal for consideration at an annual meeting, he or she must send written notice of the proposal by certified mail to our Corporate Secretary by no later than March 1 of the year of the meeting.

     If you would like your proposal to be included in next year’s proxy statement, you must submit it to our Corporate Secretary in writing by no later than December 12, 2007. We will include your proposal in our next annual proxy statement if it is a proposal that we are required to include in our proxy statement pursuant to the rules of the Securities and Exchange Commission.

     You may write to our Corporate Secretary at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201.

     According to our bylaws, any proposal properly raised at the meeting by a stockholder will require the affirmative vote of a majority of the shares deemed present at the meeting (whether in person or by proxy).

How much will this solicitation cost and who will pay for it?

We have engaged Georgeson Inc. to assist in the distribution of proxy materials and the solicitation of votes. In addition, certain of our officers may solicit proxies by mail, telephone, fax, e-mail or in person. We will pay Georgeson Inc. a fee of up to $12,000, plus certain expenses. We also will pay all other costs associated with this proxy statement and the solicitation of proxies. Upon request, we will reimburse stockbrokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding proxy materials to beneficial owners of shares of our common stock.

Special Dividend

On April 2, 2007, we paid to stockholders of record as of March 27, 2007, a $15 per share special cash dividend. As a result of the payment of a special cash dividend, the number of shares subject to options, the exercise prices of outstanding options and the number of unvested restricted stock units were adjusted effective as of March 27, 2007, in accordance with the terms of the plans under which they were issued. The information concerning options and restricted stock units in this proxy statement, where noted, is presented on a post-adjustment basis for all periods presented.

 

Proposal One: Re-Election of Directors

Our Board of Directors is divided into three classes serving three-year terms. This year’s nominees for re-election to the Board of Directors for a three-year term are the following Class III directors:

Alan J. Bernon

Director since August 1997

Mr. Bernon, age 52, has served as President of our Dairy Group since January 1, 2006. From 1997 through the end of 2005, he served as Chief Operating Officer of the Northeast Region of our Dairy Group. He was originally elected to our Board of Directors in connection with our acquisition of The Garelick Companies in 1997. From September 1985 until July 1997, Mr. Bernon served as President of The Garelick Companies.

Gregg L. Engles

Chairman of the Board, Director since October 1994

Mr. Engles, age 49, has served as our Chief Executive Officer and as a director since the formation of our Company in October 1994. From October 1994 until December 21, 2001, he served as Chairman of the Board. When we acquired the former Dean Foods Company (“Legacy Dean”), Mr. Howard Dean was named Chairman of the Board pursuant to the merger agreement concerning our acquisition of Legacy Dean, and Mr. Engles was named Vice Chairman of the Board. In April 2002, Mr. Dean retired, and Mr. Engles resumed his position as Chairman of the Board. Prior to the formation of our Company, he served as Chairman of the Board and Chief Executive Officer of certain predecessors to our Company. In addition to ours, Mr. Engles also serves on the Board of Directors of TreeHouse Foods, Inc.

Ronald Kirk

Director since February 2003

Mr. Kirk, age 52, has been a partner with the law firm of Vinson & Elkins since February 2005. He was a partner with the law firm of Gardere Wynne Sewell LLP from 1994 through January 2005. From June 1995 to November 2001, he also served as Mayor of the City of Dallas, Texas. In addition to ours, Mr. Kirk also serves on the Board of Directors of two other public companies: Brinker International, a restaurant operator (where he also serves on the Governance and Executive Committees), and Petsmart Inc. (where he also serves on the Corporate Governance Committee).

     Mr. Bernon, Mr. Engles and Mr. Kirk were each unanimously nominated for re-election by our Board of Directors following the recommendation of the Governance Committee of our Board of Directors. They have each consented to be re-elected as members of our Board of Directors.

 

Proposal Two: Approval of a New Equity Incentive Plan (the “New Plan”)

The Proposal

We currently have two equity incentive plans: the 1997 Stock Option and Restricted Stock Plan (we refer to this plan, as amended, as the “Old Suiza Plan”) and the 1989 Stock Awards Plan (we refer to this plan, as amended, as the “Old Dean Plan”). The number of shares available for issuance under the Old Suiza Plan and the Old Dean Plan (together, the “Old Plans”) are 3,303,731 and 217,000, respectively.

     The number of shares currently available for issuance under the Old Plans is now less than the number of shares necessary for one year’s grant consistent with our prior practices. If the New Plan is approved by our stockholders, the shares remaining available for grant under the Old Plans, plus an additional six million shares under the New Plan, will become available for the issuance of equity awards.

     Our Board of Directors is proposing to approve a new equity incentive plan in order to allow the Compensation Committee of our Board of Directors greater flexibility in determining the types of awards that it can grant and to simplify the administration of our equity plans. Equity awards are an important part of our compensation program and align the interests of our directors and key employees with the long-term interests of our stockholders through the awards of stock options and other equity vehicles.

     Our Board of Directors also believes that adopting the New Plan and thereby increasing the total number of shares available for awards is necessary to ensure that a sufficient number of shares will be available to continue to attract and retain directors, executive officers and other key employees. If the New Plan is not approved, the Company expects that it will not have enough shares in the Old Plans to provide key employees and directors an annual equity grant in 2008 consistent with our prior practices and compensation policies. If the New Plan is approved by our stockholders, we plan to register the offer and sale of the shares of common stock on a registration statement on Form S-8.

     In addition to requiring stockholder approval of the New Plan under requirements of the New York Stock Exchange, stockholder approval is necessary for us to meet requirements for tax deductibility of certain awards under the New Plan pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Section 162(m) of the Code limits the annual federal tax deduction for compensation paid to our Chief Executive Officer and the other four most highly compensated executive officers to $1 million. Certain performance-based compensation is excluded from this limitation.

Description of the New Plan

The following is a summary of our New Plan. For a more complete understanding of the New Plan, please refer to the entire text of the New Plan, a copy of which is included with this proxy statement as Appendix A.

     The purposes of the New Plan are to attract and retain non-employee directors, consultants, executive personnel and other key employees of outstanding ability, to motivate them by means of performance-related incentives and to enable them to participate in our growth and financial success. Eligibility to participate in the New Plan is limited to our non-employee directors, consultants and employees (including officers and directors who are employees), and the non-employee directors, consultants and employees of our subsidiaries.

     The New Plan would be administered by our Compensation Committee, which consists entirely of independent directors. The Compensation Committee will, from time to time, determine the specific persons to whom awards under the New Plan will be granted, the extent of any such awards and the terms and conditions of each award. The Compensation Committee may delegate this authority, in its discretion, to the Chief Executive Officer and/or such other officer as it shall specify, but only with respect to individuals who are not executive officers of the Company. The Compensation Committee or its designee, pursuant to the terms of the New Plan, also will make all other necessary decisions and interpretations under the New Plan.

     Under the New Plan, the Compensation Committee may grant awards of various types of equity-based compensation, including stock options, stock appreciation rights (“SARs”), restricted stock and restricted stock units, performance shares and performance units and other types of stock-based awards. The maximum number of shares that are available to be awarded under the New Plan is six million shares of common stock of the Company, plus any shares remaining for issuance under the Old Plans. The maximum number of shares of our common stock that may be issued under the New Plan with respect to incentive stock options may not exceed one million shares. In addition, no participant may be granted awards of restricted stock, restricted stock units, performance shares and performance units covering more than one million shares in any calendar year and no more than one participant may be granted options and SARs with respect to one million shares of our common stock in any calendar year under the New Plan. No more than $5,000,000 may be paid to any one participant with respect to cash-based awards made during a calendar year under the New Plan. The total number of shares available under the New Plan for awards other than options or SARs shall not exceed two million shares.

Performance Shares and Performance Units; Performance Awards; Performance Criteria

The Compensation Committee may grant awards of performance shares or performance units under the New Plan based upon the achievement of specified performance objectives or the occurrence of other events, such as a change in control, as determined by the Compensation Committee in its discretion. The Compensation Committee has the authority to determine other terms and conditions of the performance shares and performance units. Participants may not transfer any shares underlying such awards before they vest. The Compensation Committee may also grant performance awards under the New Plan. Performance awards may be payable in cash or in shares of common stock, and may relate to a single-year performance period, such as an annual bonus award, or multi-year periods.

     The Compensation Committee may establish performance goals applicable to any award, including performance awards, performance shares and performance units. When establishing a performance goal, the Compensation Committee will determine the performance period over which performance against the goal will be measured and the amount of cash or number or value of shares earned based on the level of the performance goal achieved. Additional provisions relating to the setting of the performance goal, certifying achievement of performance against the goal and the amount earned, and the ability to use negative discretion to reduce the amount earned apply to awards made

to executive officers which are intended to meet the tax deductibility rules for “performance-based” compensation under section 162(m) of the Code.

     The New Plan provides that the Compensation Committee may base the performance goals upon the relative or comparative attainment of one or more of the following performance criteria (whether in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies): total stockholder return, stock price, operating earnings or margins, net earnings, return on equity, income, market share, return on investment, return on capital employed, level of expenses, net sales, cash flow and, in the case of persons who are not executive officers, such other criteria as may be determined by the Compensation Committee. Performance criteria may be established on a Company-wide basis or with respect to one or more business units or divisions or subsidiaries. When establishing performance criteria for a performance period, the Compensation Committee may exclude any or all charges or costs associated with restructurings of the Company or any subsidiary, mergers, acquisitions, divestitures, discontinued operations, other unusual or non-recurring items, the cumulative effects of accounting changes or such other objective factors as the Compensation Committee deems appropriate.

Restricted Stock and Restricted Stock Units

The Compensation Committee may grant awards of restricted stock and restricted stock units under the New Plan. The restricted stock and restricted stock units are forfeitable until they vest, and the participant may not transfer the restricted stock before it vests. Unless otherwise determined by the Compensation Committee, the restricted stock and the restricted stock units will generally vest ratably over five years on each anniversary of the date of grant (subject to the participant’s continued service with us) or upon satisfaction of any additional conditions to vesting, such as the achievement of specified performance objectives or changes in control, as determined by the Compensation Committee in its discretion. Unless otherwise determined by the Compensation Committee or provided in an employment or individual severance agreement, if a participant’s service is terminated by reason of death, disability or retirement during the restricted period, a pro rata portion of any restricted stock or restricted stock units held by the participant will vest and become not forfeitable based on the number of full calendar months of the participant’s service relative to the number of months in the restricted period at the date of termination. If a participant’s service is terminated for any other reason, any restricted stock or restricted stock units held by the participant will be immediately forfeited and canceled (unless otherwise determined by the Compensation Committee or provided in an employment or individual severance agreement), and, in any event, all such restricted stock and restricted stock units will be immediately forfeited and canceled upon termination of service for cause.

Stock Options and Stock Appreciation Rights

The Compensation Committee may grant awards of stock options and stock appreciation rights under the New Plan. The stock options may be either “incentive stock options” (as that term is defined in Section 422 of the Code), which provide the recipient with favorable tax treatment, or options that are not incentive stock options (“non-qualified stock options”). The Compensation Committee has the authority to determine the terms and conditions of the stock options, including the number of shares subject to each stock option and SAR, the exercise price per share, which must be at least the fair market value of a share of our common stock on the date of grant (as determined in accordance with the New Plan), and when the stock option or SAR will become exercisable. Unless otherwise determined by the Compensation Committee, the stock options and SARs will become vested and exercisable in three approximately equal installments on each of the first three anniversaries of the date of grant. Options and SARs may also become exercisable upon satisfaction of any additional conditions to vesting, such as the achievement of specified performance objectives or changes in control, as determined by the Compensation Committee in its

discretion. The exercise period for any stock options and SARs awarded under the Plan may not extend beyond ten years from the date of grant.

     Stock options and SARs awarded under the New Plan that become vested and exercisable may be exercised in whole or in part. The exercise price of a stock option award may be paid either in cash or cash equivalents or, if permitted by the Compensation Committee, with previously acquired shares of our common stock, by means of a brokered cashless exercise or by a combination of the foregoing provided that the consideration tendered, valued as of the date tendered, is at least equal to the exercise price for the stock options being exercised. Additionally, to the extent permitted by the Compensation Committee, options may be “net exercised,” that is, the excess, if any, of the full market value of the shares being exercised at the date of exercise over the exercise price for such shares will be delivered in shares without any requirement that the participant pay the exercise price.

     Stock appreciation rights, or SARs, are similar to stock options, except that no exercise price is required to be paid. Upon exercise of a SAR, the participant will receive payment equal to the increase in the fair market value of a share of common stock on the date of exercise over the exercise price (fair market value on date of grant) times the number of shares as to which the SAR is being exercised. The payment will be made in cash or shares of common stock of equivalent value.

     Unless otherwise determined by the Compensation Committee or provided for in an employment or individual severance agreement, if a participant’s service is terminated by reason of death or disability, all stock options and SARs held by the participant at the date of termination will vest and become exercisable and will remain exercisable until the earlier of (i) the first anniversary of such termination (or, for incentive stock options, the first anniversary of such termination) or (ii) the expiration date of the option or SAR. If a participant’s service is terminated for any other reason, any stock options held by the participant that have not become vested and exercisable will be immediately canceled and any stock options that have become vested and exercisable will remain exercisable for 90 days following such termination. In any event, all stock options and SARs (whether or not then vested and exercisable) will be immediately canceled upon termination of service for cause.

Other Stock-Based Awards

The New Plan permits the Compensation Committee to grant other forms of stock-based awards with such terms and conditions as the Compensation Committee determines, including provisions relating to the impact of termination of service and a change in control. Such awards may include outright grants of shares without restriction or awards structured to meet the requirements of non-U.S. law or practice. Such awards may be settled by the issuance of shares or by a cash payment equal to the value of the shares earned under the award.

Change in Control

Except as otherwise provided in an employment or individual severance agreement or award agreement, upon a change in control (as defined in the New Plan) of the Company, (i) all outstanding stock options and SARs will become immediately vested and exercisable; (ii) the restricted period of all outstanding restricted stock and restricted stock units will immediately lapse; and (iii) each outstanding performance share and performance unit will be canceled in exchange for the greater of (i) target or (ii) actual performance to date. In addition, the Compensation Committee may provide that in connection with a change in control:

•		each stock option and SAR will be canceled in exchange for an amount equal to the excess, if any, of the fair market value of our common stock over the exercise price for such option or SAR; and
•		each share of restricted stock and each restricted stock unit will be canceled in exchange for an amount equal to the fair market value multiplied by the number of shares of our common stock covered by such award. All

amounts payable as a result of a change in control will be paid in cash or, at the discretion of the Compensation Committee, in shares of stock of any new employer.

     If a change in control occurs as a result of a merger, reorganization, consolidation or sale of all or substantially all of our assets, any participant whose service is involuntarily terminated (other than for cause) on or after the date on which our stockholders approve the transaction giving rise to the change in control will be treated for purposes of the New Plan as continuing service with us until the consummation of the change in control and to have been terminated immediately thereafter.

Amendment and Termination

The Board may terminate or suspend the New Plan at any time, and from time to time may amend or modify the New Plan, provided that without the approval by a majority of the votes cast at a duly constituted meeting of stockholders, no amendment or modification to the New Plan may (i) materially increase the benefits accruing to participants under the New Plan, (ii) except as a result of an adjustment in capitalization or similar adjustments, materially increase the number of shares of stock subject to awards under the New Plan or the number of awards or amount of cash that may be granted to a participant under the New Plan, (iii) materially modify the requirements for participation in the New Plan, or (iv) materially modify the New Plan in any way that would require stockholder approval under any regulatory requirement that the Compensation Committee determines to be applicable. Consequently, the New Plan cannot be amended to permit the grant of options or SARs at below fair market value exercise prices without shareholder approval. No amendment, modification or termination of the New Plan shall in any material way adversely affect any award previously granted under the New Plan without the consent of the participant. The New Plan shall continue in effect, unless sooner terminated by the Board, until March 1, 2017, the tenth anniversary of the date on which the New Plan was adopted by the Board of Directors, at which time no additional awards may be granted after that date.

Summary of Federal Tax Consequences

The following is a brief description of the federal income tax treatment that generally applies to New Plan awards. The description is based on current federal tax laws, rules and regulations, which are subject to change, and does not purport to be a complete description of the federal income tax aspects of the New Plan. A participant may also be subject to state, local and foreign taxes.

Non-Qualified Stock Options. The grant of a non-qualified stock option will not result in taxable income to the participant. The participant will realize ordinary income at the time of exercise in an amount equal to the excess, if any, of the then fair market value of the stock acquired over the exercise price for those shares, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains or losses, with the basis in such stock equal to the fair market value of the shares at the time of exercise.

Incentive Stock Options. The grant of an incentive stock option will not result in taxable income to the participant. The exercise of an incentive stock option will not result in taxable income to the participant if the participant was, without a break in service, employed by us or an affiliate from the date of the grant of the option until the date three months prior to the date of exercise (one year prior to the date of exercise if the participant is disabled). The excess, if any, of the fair market value of the stock at the time of the exercise over the exercise price is an adjustment that is

included in the calculation of the participant’s alternative minimum taxable income for the tax year in which the incentive stock option is exercised.

     If the participant does not sell or otherwise dispose of the stock within two years from the date of the grant of the incentive stock option or within one year after the transfer of such stock to the participant, then, upon disposition of such stock, any amount realized in excess of the exercise price will be taxed to the participant as capital gain, and we will not be entitled to a corresponding deduction. A capital loss will be recognized to the extent that the amount realized is less than the exercise price. If the foregoing holding period requirements are not met, the participant will generally realize ordinary income at the time of the disposition of the shares, in an amount equal to the lesser of (i) the excess, if any, of the fair market value of the stock on the date of exercise over the exercise price, or (ii) the excess, if any, of the amount realized upon disposition of the shares over the exercise price, and we will be entitled to a corresponding deduction. If the amount realized exceeds the value of the shares on the date of exercise, the additional amount will be capital gain. If the amount realized is less than the exercise price, the participant will recognize no income, and a capital loss will be recognized equal to the excess of the exercise price over the amount realized upon the disposition of the shares.

Stock Appreciation Rights. The grant of a stock appreciation right will not result in taxable income to the participant. The participant will realize ordinary income at the time of exercise in an amount equal to the amount of cash or the fair market value of the shares paid upon exercise, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of any shares received will be treated as capital gains or losses, with the basis in such stock equal to the fair market value of the shares at the time of exercise.

Restricted Stock and Performance Shares. A grant of restricted stock or performance shares will not result in taxable income to the participant at the time of grant, and we will not be entitled to a corresponding deduction, assuming that the shares are subject to transferability restrictions and that certain restrictions on the shares constitute a “substantial risk of forfeiture” for federal income tax purposes. Upon vesting, the holder will realize ordinary income in an amount equal to the then fair market value of the vested shares, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon subsequent disposition of such shares will be treated as capital gains or losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting. Dividends paid to the holder of restricted stock during the restricted period also will be compensation income to the participant, and we will be entitled to a corresponding deduction when the dividends no longer are subject to a substantial risk of forfeiture or become transferable. A participant may elect, pursuant to Section 83(b) of the Code, to have income recognized at the date a restricted stock award or performance share award, as the case may be, is granted and to have the applicable capital gain holding period commence as of that date. In such a case, we will be entitled to a corresponding deduction on the date of grant.

Restricted Stock Units and Performance Units. A grant of restricted stock units or performance units will not result in taxable income to the participant at the time of grant, and we will not be entitled to a corresponding deduction. Upon vesting and issuance of the underlying shares, the holder will realize ordinary income in an amount equal to the then fair market value of the issued shares, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains or losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting and issuance. Dividend equivalents paid to the holder of restricted stock units during the restricted period also will be compensation income to the participant, and we will be entitled to a corresponding deduction when the dividend equivalents are paid. No election pursuant to Section 83(b) of the Code may be made with respect to restricted stock units and performance units.

Performance Awards and Other Stock-Based Awards. A grant of a performance award or other stock-based award will not result in taxable income to the participant at the time of grant, and we will not be entitled to a corresponding deduction. Upon payment of cash or the vesting or issuance of the underlying shares, the participant will realize ordinary income in an amount equal to the cash received or the then fair market value of the issued shares, and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon subsequent disposition of such shares will be treated as capital gains or losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting and issuance.

Section 162(m). With respect to certain executive officers, including the Chief Executive Officer, the amount of compensation payments that may be deducted by us in any given taxable year may be limited to $1 million, regardless of whether we would otherwise be entitled to a deduction for such payments. This limit does not apply to performance-based compensation that satisfies certain conditions. The New Plan has been designed so that options, SARs, performance awards, performance shares and performance units can be awarded in a manner that should satisfy the applicable conditions and be deductible on the same basis as applies to all employees generally. In the ordinary course, restricted stock and restricted stock unit awards would not qualify for this performance-based exception to the deduction limit.

Section 409A. Recently enacted Section 409A of the Code may cause certain deferred compensation amounts to be deemed currently taxable and at a rate of income taxation at least 20% higher than would otherwise apply to such amounts, if the conditions specified in that Section are not satisfied. It is intended that any amounts awarded pursuant to the New Plan that are treated as deferred compensation for purposes of such Section shall be administered in a manner intended to comply with such requirements, to the extent applicable to such compensation.

Tax Withholding. As a condition to the delivery of any shares to the recipient of an award, we may require the recipient to make arrangements for meeting certain tax withholding requirements in connection with the award.

     The preceding is based on current federal tax laws and regulations, which are subject to change, and does not purport to be a complete description of the federal income tax aspects of the New Plan. A participant may also be subject to state and local taxes.

Plan Benefits. As of March 23, 2007, approximately 16,000 persons were eligible to receive awards under the New Plan, including our executive officers and non-employee directors. The granting of awards under the New Plan is discretionary, and we cannot now determine the number or type of awards to be granted in the future to any particular person or group. As the types of awards available for issuance under the New Plan differ from those available under the Old Plans, awards made under such Old Plans in 2006 are not illustrative of the awards that could be made under the New Plan in 2007 and in future years.

     On April 3, 2007, the last reported sale price of our common stock on the New York Stock Exchange was $33.70.

 

Proposal Three: Ratification of Selection of Independent Auditor

The Audit Committee of our Board of Directors has selected Deloitte & Touche LLP to serve as our independent auditor for the 2007 fiscal year and is soliciting your ratification of that selection.

     Your ratification of the Audit Committee’s selection of Deloitte & Touche LLP is not necessary because the Audit Committee has responsibility for selection of our independent auditor. However, the Audit Committee will take your vote on this proposal into consideration when selecting our independent auditor in the future.

 

 

Stockholder Proposal

We received a proposal (the “Stockholder Proposal”) from the International Brotherhood of Teamsters, as the custodian and trustee of the Teamsters General Fund (the “Funds”), whose address is International Brotherhood of Teamsters, 25 Louisiana Avenue, NW, Washington, DC 20001. The Funds beneficially own approximately 100 shares of our common stock. The International Brotherhood of Teamsters intends to introduce the following resolution at our annual meeting of stockholders and has furnished the following statement in support of the proposal:

Resolved:

That the shareholders of Dean Foods (“Company”) urge the Board of Directors to take the necessary steps to amend the by-laws to require that, subject to any presently existing contractual obligations of the Company, the Chairman of the Board of Directors shall not concurrently serve as the Chief Executive Officer.

Supporting Statement:

The Board of Directors is elected by shareholders to oversee management and its Chairman provides leadership for the Board. The Business Roundtable has noted that “the paramount duty of the Board of Directors is to select a Chief Executive Officer (“CEO”) and to oversee the CEO and other senior management ... “ The Business Roundtable, Principles of Corporate Governance, May 2002.

     To be effective, a Board of Directors must be led by a Chair who is independent of management because, we believe, having the same individual serve as both Chairman and CEO necessarily impairs the Chair’s ability to hold the CEO accountable.

     Our Company’s Chairman, Mr. Gregg Engles, is also currently its CEO.

     The Conference Board recently issued a report that addressed this topic by a Commission, including John Snow, former U.S. Treasury Secretary and former Chairman of CSX Corporation; John Bogle, Founder and former Chairman of Vanguard Group; Arthur Levitt Jr., former SEC Chairman; and, former Federal Reserve System Chairman Paul Volcker. The report stated:

The Commission is profoundly troubled by the corporate scandals of the recent past. The primary concern in many of these situations is that strong CEOs appear to have exerted a dominate influence over their boards, often stifling the efforts of directors to play the central oversight role needed to ensure a healthy system of corporate governance. . .

     The ultimate responsibility for good corporate governance rests with the board of directors. Only a strong, diligent and independent board of directors that understands the key issues, provides wise counsel and asks management the tough questions is capable of ensuring that the interests of shareowners as well as other

constituencies are being properly served. [The Conference Board Commission on Public Trust and Private Enterprise, Findings and Recommendations, Jan. 9, 2003.]

     The Report discussed three principal approaches to provide the appropriate balance between board and CEO functions, including:

     The roles of Chairman and CEO would be performed by two separate individuals, and the Chairman would be one of the independent directors. The Commission recommends that each corporation give careful consideration, based on its particular circumstances, to separating the offices of the Chairman and Chief Executive Officer. The Commission believes that separating the positions of Chairman and CEO is fully consistent with the objectives of the Sarbanes-Oxley Act, the proposed New York Stock Exchange listing requirements, and the proposed NASDAQ requirements, and that separating the roles of Chairman and CEO enhances implementation of the Act and stock exchange reforms.

     We urge your support FOR this proposal, which would restore balance between the Chair and CEO functions by requiring that the Chair of the Board of Directors not also serve as the CEO.

What is the Company’s position regarding the Stockholder Proposal?

Our Board of Directors has carefully considered the Stockholder Proposal and recommends that our stockholders vote AGAINST it for the following reasons.

     Our Company adheres to high standards of corporate governance. Our Board of Directors is composed primarily of independent directors, as that term is defined in the New York Stock Exchange Rules and our Corporate Governance Principles. We have a strong and active Board of Directors that understands our business and works closely with our Chief Executive Officer and other senior management to provide advice and counsel regarding key aspects of our business, including strategic planning, management development and succession, operating performance, compliance and shareholder returns. The non-employee members of our Board of Directors meet in executive session, outside the presence of management, including the Chief Executive Officer, on a regular basis.

     The independent members of our Board of Directors have appointed a Lead Director who is responsible for calling all meetings of our Board of Directors, approving the schedule and agenda for all meetings of our Board of Directors, and presiding at executive sessions of the Board of Directors. The Lead Director, who according to our Corporate Governance Principles must be independent, as described above, also serves as a liaison between the non-employee directors and our Chief Executive Officer.

     Each year, our Board of Directors conducts a thorough self-evaluation to ensure that it is functioning effectively. Moreover, the Compensation Committee of our Board of Directors conducts rigorous annual evaluations of our Chief Executive Officer. At the beginning of each year, the Compensation Committee establishes specific objectives for the Chief Executive Officer for the upcoming year. At the end of each year, the Compensation Committee evaluates his performance against those objectives and takes the results of this evaluation into consideration when setting his compensation for the next year. Criteria considered by the Compensation Committee in its evaluation of our Chief Executive Officer have included: shareholder return and earnings per share growth; the Company’s credibility with the investment community; relationship with our Board of Directors; leadership in the development and execution of our strategic plan; certain tactical and operational goals; the professional development of senior management; and leadership in establishing and maintaining a culture of compliance, ethical behavior and social responsibility throughout our Company.

     All members of the Audit, Governance and Compensation Committees of our Board Directors are independent. Therefore, oversight of critical matters such as the integrity of our financial statements, executive compensation

(including the compensation of the Chief Executive Officer), the nomination of directors and evaluation of the Board of Directors and its Committees and the Chief Executive Officer is entrusted solely to independent directors.

     Our Board of Directors takes seriously its responsibility to oversee our Chief Executive Officer and other members of management, and believes that it is effective in its efforts. Having considered the particular circumstances of our Company, including our stringent Corporate Governance Principles, the individual attributes of our current Board members, including our Chief Executive Officer, and the highly effective manner in which our Board members perform their duties, both individually and as a whole, it is our Board of Directors’ belief that, at this time, there is no need to separate the offices of Chairman of the Board and Chief Executive Officer. Moreover, it is the opinion of the Board of Directors that, given these considerations and the unique and valuable contributions that our current Chief Executive Officer provides in his position as Chairman of the Board, it is in the best interest of our Company and our stockholders not to separate these positions.

 

Who is on our Board of Directors?

Our Board of Directors is authorized to have between ten and fifteen members. The Board of Directors has the ability to determine the appropriate number of members within that range in order to maximize the Board of Directors’ effectiveness and efficiency. We currently have thirteen directors. Following the annual meeting, we expect to have twelve directors. The Board anticipates filling the vacancy. The Board of Directors is divided into three classes, each of whose members serve for staggered three-year terms.

     In addition to the three directors nominated for re-election, the following persons currently serve on our Board of Directors:

Lewis M. Collens

Director since December 2001

Mr. Collens, age 69, has served as the President of Illinois Institute of Technology (“IIT”) and Chairman of IIT Research Institute since 1990. From 1974 to 1990, he served as Dean of IIT Chicago-Kent College of Law. Mr. Collens was originally elected to our Board of Directors in connection with our acquisition of Legacy Dean on December 21, 2001. Mr. Collens had served on the Board of Directors of Legacy Dean since 1991 and was Chairman of its Audit Committee and a member of its Corporate Governance Committee. His term will expire in 2009.

Tom C. Davis

Director since March 2001

Mr. Davis, age 58, has served as Managing Partner of Gryphon Special Situations Fund L.P. since July 2004. He also serves as Chief Executive Officer of The Concorde Group, a private investment firm, since March 2001. He was the managing partner and head of banking and corporate finance for the Southwest division of Credit Suisse First Boston from March 1984 to February 2001. In this position, Mr. Davis worked with several large private equity firms, in addition to a variety of public and private companies, including companies in the broadcast and telecommunications, energy, foodservice, food processing and retailing industries. In addition to ours, Mr. Davis also serves on the Boards of Directors of Affirmative Insurance Holdings, Inc., an insurance holding company, and Westwood Holdings Group, an investment management and trust services company, both of which have issued publicly-traded securities. His term will expire in 2008.

Stephen L. Green

Director since October 1994

Mr. Green, age 56, has served as a general partner of Canaan Capital Partners, L.P., the general partner of Canaan Capital Limited Partnership and Canaan Capital Offshore Limited Partnership, C.V., since November 1991. From October 1985 until November 1991, Mr. Green served as Managing Director of GE Capital’s Corporate Finance Group. His term will expire in 2008.

Joseph S. Hardin, Jr.

Director since May 1998

Mr. Hardin, age 61, served as Chief Executive Officer of Kinko’s, Inc. from May 1997 until January 2001. Currently retired, Mr. Hardin held a variety of positions from 1986 to April 1997 with increasing responsibility at Wal-Mart Stores, Inc., ultimately as an Executive Vice President and as the President and Chief Executive Officer of SAM’s Club, the wholesale division of Wal-Mart Stores, Inc. In addition to our Board, Mr. Hardin serves on the Boards of Directors of American Greetings Corporation (where he also serves on the Governance/Nominating & Compensation Committees) and Petsmart, Inc. (where he serves on the Governance Committee). His term will expire in 2008.

Janet Hill

Director since December 2001

Mrs. Hill, age 59, has served as Vice President of Alexander & Associates, a corporate consulting firm, since 1981. She was originally elected to our Board of Directors in connection with our acquisition of Legacy Dean in December 2001. Mrs. Hill had served on the Board of Directors of Legacy Dean since 1997 and was a member of its Audit and Corporate Governance Committees. In addition to our Board, Mrs. Hill serves on the Boards of two other public companies: Wendy’s International (where she also serves on the Compensation Committee) and Sprint Nextel Corporation (where she also serves on the Compensation and Corporate Governance and Nominating Committees). She also serves as a trustee of Duke University. Her term will expire in 2009.

John S. Llewellyn, Jr.

Director since December 2001

Mr. Llewellyn, age 72, served as President and Chief Executive Officer of Ocean Spray Cranberries, Inc. from 1988 until his retirement in 1997. He was originally elected to our Board of Directors in connection with our acquisition of Legacy Dean in December 2001. Mr. Llewellyn had served on the Board of Directors of Legacy Dean since 1994 and was a member of its Compensation and Corporate Governance Committees. He will retire from the Board when his term expires at the Annual Meeting held on May 18, 2007.

John R. Muse

Director since November 1997

Mr. Muse, age 56, is Chairman of HM Capital Partners LLC (formerly known as Hicks, Muse, Tate & Furst Incorporated), a private equity firm, which he co-founded in 1989. Mr. Muse was a member of the Board of Directors of The Morningstar Group Inc. prior to our acquisition of that company in November 1997. In addition to our Board, he also serves on the Board of Directors of Swift & Company (where he also serves on the Executive Committee), a meat packing company, which has issued publicly-traded securities. His term will expire in 2008.

Hector M. Nevares

Director since October 1994

Mr. Nevares, age 56, was President of Suiza Dairy, a Puerto Rico dairy processor, from June 1983 until September 1996, having served in additional executive capacities at Suiza Dairy since June 1974. Mr. Nevares served as a consultant for us from March 1998 until April 2000. His term will expire in 2009.

Pete Schenkel

Director since January 2000

Mr. Schenkel, age 71, joined our Company in January 2000 as President of our Dairy Group and a member of our Board of Directors. Effective December 31, 2005, Mr. Schenkel retired as President of our Dairy Group. He now serves as Vice Chairman of our Board of Directors. From 1959 to December 31, 1999, he served in various capacities at Southern Foods Group (now a part of our Dairy Group), including Chairman of the Board and Chief Executive Officer from 1994 through 1999, and President from 1987 to 1994. He was originally elected to our Board of Directors in connection with our acquisition of Southern Foods Group in January 2000. His term will expire in 2009.

Jim L. Turner

Director since November 1997

Mr. Turner, age 61, retired in June 2005 from Dr Pepper/Seven Up Bottling Group, Inc., where he had served as President and Chief Executive Officer since its formation in 1999. Prior to that, since 1985, he was the Owner/Chairman of the Board and Chief Executive Officer of the Turner Beverage Group, the largest privately owned independent bottler in the United States. Mr. Turner was a member of the Board of Directors of The Morningstar Group Inc. prior to our acquisition of that company in November 1997. Mr. Turner also serves on the Board of Directors and on the Compensation Committee of Crown Holdings, Inc., a manufacturer of consumer packaging products and is Chairman of Baylor University’s Board of Regents. His term will expire in 2009.

Who are our independent directors?

Under applicable New York Stock Exchange rules, a director qualifies as “independent” only if the Board of Directors affirmatively determine that he or she has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a material relationship with the company). Our Board of Directors conducts an annual assessment of the independence of each member of our Board of Directors, taking into consideration all relationships between our Company and/or our officers, on the one hand, and each director on the other, including the director’s commercial, economic, charitable and family relationships, and such other criteria as our Board of Directors may determine from time to time. The guidelines established by our Board of Directors to determine director independence are available on our website at www.deanfoods.com.

     In making its independence determinations the Board considered the following relationships and transactions in addition to those described under “Transactions with Related Persons” on page 40 of this proxy statement. In 2007, our Board determined that the following members of our Board of Directors are “independent,” as that term is used in the New York Stock Exchange rules and our Corporate Governance Principles: Lewis Collens, Tom Davis, Steve Green, Joseph Hardin, Janet Hill, Ron Kirk, John Muse, Hector Nevares and Jim Turner. Mr. Engles, Mr. Schenkel and Mr. Bernon are all current employees of our Company and, therefore, they are not independent. Our Board of Directors has determined that Mr. Llewellyn is not independent because his son is a partner with Deloitte & Touche LLP, our independent audit firm. Mr. Llewellyn will retire from the Board effective May 18, 2007.

     Mr. Kirk serves on the Board of Directors of Brinker International Inc. and Mrs. Hill serves on the Boards of Directors of Wendy’s International, Inc. and Sprint Nextel Corporation. We sell products to Brinker International

Inc. and Wendy’s International, Inc., and we purchase products and services from Sprint Nextel Corporation, all in the ordinary course of our business. In 2006, Wendy’s International, Inc. paid approximately $16.7 million, and Brinker International Inc. paid approximately $8.3 million for purchases of our products. We paid approximately $7.0 million for products and services purchased from Sprint Nextel Corporation in 2006. These amounts are not material either to us or to the other party. Our Board of Directors has determined, considering all relevant facts and circumstances, that these relationships are not material and do not impact Mr. Kirk’s or Mrs. Hill’s status as independent directors, as defined by the rules of the New York Stock Exchange and our Corporate Governance Principles.

     In 2006, we made a contribution of approximately $25,000 to Students in Free Enterprise (“SIFE”), a non-profit charitable organization. Mr. Hardin and Mr. Engles both serve on the Board of Directors of SIFE. There are more than 200 people currently serving on the Board of Directors of SIFE. The contribution that we made to SIFE is not material to us or to SIFE. Our Board of Directors has determined, considering all relevant facts and circumstances, that neither our relationship nor Mr. Engles’ relationship with SIFE is material and that Mr. Hardin’s relationship with SIFE does not have a material impact on his relationship with us or with Mr. Engles. Therefore, our Board of Directors has determined that Mr. Hardin is an independent director, as defined by the rules of the New York Stock Exchange and our Corporate Governance Principles.

What are the responsibilities of our Board of Directors?

Our Board of Directors is responsible for overseeing and interacting with senior management with respect to key aspects of our business, including strategic planning, management development and succession, operating performance, compliance and shareholder returns. It is the responsibility of the Board of Directors to select and evaluate a well-qualified Chief Executive Officer of high integrity, and to approve the appointment of other members of the senior management team. The Board of Directors provides general advice and counsel to our Chief Executive Officer and other senior executives.

     All directors are expected to avoid conflicts of interest and to represent the best interests of our stockholders in maintaining and enhancing the success of our business. The Board conducts a self-evaluation annually to ensure that it is functioning effectively.

     Members of our Board of Directors are required to regularly attend Board meetings and to attend our Annual Meeting of Stockholders, unless an emergency prevents them from doing so. All directors attended our 2006 Annual Meeting of Stockholders.

     Our Board of Directors meets according to a set schedule and also holds special meetings and acts by unanimous written consent from time to time as appropriate. The Board met nine times during 2006, including four regular meetings and five special meetings, and acted by unanimous written consent one time. In 2006, all directors attended at least 75% of the meetings of the Board of Directors and the Committees on which they serve.

     The Board of Directors has adopted a set of Corporate Governance Principles for our Company, a copy of which is accessible through our corporate website at www.deanfoods.com.

     Our Board of Directors has elected Mr. Hardin to serve as our Lead Director. According to the requirements of our Corporate Governance Principles, the Lead Director, who must be an independent director, (1) calls all Board meetings, (2) approves the schedule and agenda for all Board meetings, (3) presides at executive sessions of the Board and (4) acts as a liaison between the non-employee directors and our Chief Executive Officer. The independent directors on our Board meet in executive session at the end of each regularly scheduled Board meeting.

How much are Board members paid?

Our objectives for outside director compensation are to remain competitive with the compensation paid to outside directors of comparable companies so that we may attract and retain qualified candidates for Board service and to reinforce our practice of encouraging stock ownership by our directors. For the fiscal year ended December 31, 2006, non-employee directors were entitled to receive the following cash compensation:

•  $35,000 annual retainer, payable quarterly in arrears, plus

•  $3,000 for each meeting (Board of Directors or Committee) attended in person and $1,000 for each meeting attended by telephone, plus

•  $5,000 per year for serving on the Audit Committee or Compensation Committee and $2,000 per year for serving on any other Board Committee, plus

•  $10,000 per year for chairing the Audit Committee or Compensation Committee and $4,000 for chairing any other Committee, plus

•  $25,000 per year for serving as Lead Director.

     Directors may elect to receive their fees in restricted stock rather than in cash. If a director makes this election, he or she will receive shares with a value equal to 150% of the cash amount owed to him or her, determined as of the last day of the quarter based on the average closing price of our common stock over the last 30 trading days of the quarter. One-third of the restricted shares vest on the grant date; one-third vest on the first anniversary of the grant date; and the final one-third vest on the second anniversary of the grant date. In 2006, Mrs. Hill elected to receive all of her fees in cash, and Mr. Kirk elected to receive one-half of his fees in cash. All other directors elected to receive their fees in shares of restricted stock.

     In addition to cash compensation, on June 30th of each year, each non-employee director receives a grant of 7,500 immediately exercisable stock options and 2,550 stock units that vest over a three-year period (except in the event of a change in control, in which case the stock units would automatically vest).

     The table on the next page summarizes the compensation paid to our non-employee directors for the fiscal year ended December 31, 2006:

Director Compensation Table for Fiscal Year 2006

		Fees
		Earned or
		Paid in				Stock				Option
Name		Cash (1)				Awards (2)				Awards (3)				Total (4)(5)
Lewis M. Collens		$	65,000			$	125,260			$	85,275			$	275,535
Tom C. Davis			72,000				129,053				85,275				286,328
Stephen L. Green			116,000				152,297				85,275				353,572
Joseph S. Hardin, Jr.			150,000				170,500				85,275				405,775
Janet Hill			71,000				90,861				85,275				247,136
Ronald Kirk			75,000				108,499				85,275				268,774
John S. Llewellyn, Jr.			64,000				124,934				85,275				274,209
John R. Muse			52,000				118,453				85,275				255,728
Hector M. Nevares			93,000				140,197				85,275				318,472
Jim L. Turner			89,000				138,011				85,275				312,286

What are the Committees of our Board of Directors and who serves on those Committees?

Our Board of Directors has established certain committees to assist in the performance of its various functions. The chart below lists the standing Committees of our Board of Directors and indicates who currently serves on those committees and how many times each committee met during 2006.

Board Member

Audit (2)(3)

Compensation (2)

Executive

Governance(2)

Strategic Planning

Alan J. Bernon

*

*

Lewis M. Collens

*

Tom C. Davis

*

Gregg L. Engles

*

(1)

*

Stephen L. Green

*

(1)

*

*

Joseph S. Hardin, Jr.

*

(1)

*

*

*

(1)

Janet Hill

*

(1)

Ronald Kirk

*

*

John S. Llewellyn, Jr.

*

John R. Muse

Hector M. Nevares

*

Pete Schenkel

Jim L. Turner

*

*

Meetings in 2006

9

9

4

6

3

What are the responsibilities of our Board Committees?

Audit Committee: The Audit Committee’s responsibilities include:

•		appointing, approving the compensation of, and assessing the independence of our independent auditor;
•		overseeing the work of our independent auditor for the purpose of preparing or issuing an audit report or related work;
•		reviewing and discussing with management and the independent auditor, our annual and quarterly financial statements;
•		meeting regularly with members of our management and with our independent auditor outside the presence of management;
•		overseeing our internal audit function;

•		discussing risk assessment and risk management policies;
•		recommending policies regarding the hiring of employees from our independent auditor;
•		establishing procedures for the receipt and retention of accounting related complaints and concerns;
•		monitoring our compliance with applicable legal and regulatory requirements;
•		pre-approving all permitted non-audit services to be performed by our independent auditor; and
•		preparing the Audit Committee report required by SEC rules, which is included on page 23 of this proxy statement.

     The Audit Committee has authority to retain independent legal, accounting or other advisors, at our expense.

     The Audit Committee makes regular reports to the Board of Directors and reviews its own performance annually. The Audit Committee is required to meet at least quarterly and operates under a charter, a copy of which is accessible on our corporate website at www.deanfoods.com. Stockholders also may contact our Investor Relations department at 800.431.9214 to obtain a free copy.

Compensation Committee:

The following members of the Board serve or have served on the Compensation Committee during 2006: Joseph Hardin (Chairman), Stephen Green, Jim Turner and Hector Nevares. Mr. Nevares resigned from the Compensation Committee effective November 16, 2006.

     The Compensation Committee’s responsibilities include:

•		reviewing and evaluating the performance of our Chief Executive Officer;
•		determining the Chief Executive Officer’s compensation;
•		reviewing and approving the compensation of our other executive officers and certain other key employees and acting in an advisory role on non-executive employee compensation;
•		setting our executive compensation policies and objectives and administering our executive compensation programs;
•		overseeing our stock option and stock award plans and making final determinations regarding grants of stock options and other stock-based awards;
•		reviewing and discussing annually with management our “Executive Compensation — Compensation Discussion and Analysis,” which is included beginning on page 25 of this proxy statement; and
•		preparing the Compensation Committee report required by SEC rules, which is included on page 25 of this proxy statement.

     Additional information regarding the processes and procedures followed by our Compensation Committee in considering and determining executive and director compensation is provided below under the heading “Executive Compensation — Compensation Discussion and Analysis.”

     The Compensation Committee operates under a charter, a copy of which is accessible on our corporate website at www.deanfoods.com. Stockholders also may contact our Investor Relations department at 800.431.9214 to obtain a free copy. The Compensation Committee also performs annual self-evaluations.

     The Compensation Committee reviews and approves the compensation for our executive officers, including the Chief Executive Officer. Our Chief Executive Officer makes recommendations to the Compensation Committee each year on the appropriate compensation to be paid to our executive officers, excluding himself. The Compensation Committee makes the final determination of the amount of compensation to be awarded to each executive officer, including the Chief Executive Officer, based on the Compensation Committee’s determination of how that compensation achieves the objectives of our compensation policies. The Compensation Committee has delegated

limited authority to the Chief Executive Officer and the General Counsel to grant stock options and restricted stock units in connection with the hiring of new employees or the promotion or special recognition of selected employees. See additional information regarding this delegation under the heading “Executive Compensation — Compensation Discussion and Analysis.”

     The Compensation Committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. The Compensation Committee used a compensation consultant, Mercer Human Resource Consulting, Inc., to assist it in connection with setting compensation. The Compensation Committee relies on the compensation consultant to collect market compensation data. In addition, the compensation consultant assists the Compensation Committee in analyzing and validating the Company’s performance relative to the awards made under the long-term incentive plans. The Compensation Committee works with the compensation consultant to ensure that position descriptions are appropriately comparable and to properly adjust the data so that it is appropriate for a company of our size. Using this data, the compensation consultant makes preliminary compensation recommendations based on our Compensation Committee’s stated compensation philosophy. Our Compensation Committee meets several times to discuss setting individual compensation levels, and it adjusts the initial recommendations based on its assessments of the personal attributes and achievements of the individual officers. The Compensation Committee goes through a similar process in considering and establishing our short-term and long-term incentive plans and other executive benefits.

Compensation Committee Interlocks and Insider Participation

Our Compensation Committee is comprised entirely of independent directors. None of our executive officers has served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served as a director or member of our Compensation Committee.

Executive Committee: The Executive Committee may act on behalf of the Board of Directors when the Board of Directors is not in session on a limited basis, as to matters specifically delegated to the Executive Committee from time to time. This Committee meets only as needed.

Governance Committee: The Governance Committee performs the functions of a nominating committee. The Governance Committee’s responsibilities include:

•		developing and recommending to the Board of Directors corporate governance principles;
•		reviewing and making recommendations to the Board of Directors with respect to management succession planning and management development;
•		considering, recommending and recruiting candidates to fill new or open positions on the Board of Directors;
•		reviewing candidates recommended by stockholders;
•		conducting the appropriate inquiry into the backgrounds and qualifications of potential candidates;
•		recommending director nominees for approval by the Board of Directors and our stockholders;
•		considering possible conflicts of interest of Board members and senior executives; and
•		recommending Board Committee members and director development.

     The processes and procedures followed by the Governance Committee in identifying and evaluating director candidates are described below under the heading “What is the process for nominating a director?”

     The Governance Committee operates under a charter, a copy of which is accessible on our corporate website at www.deanfoods.com. Stockholders also may contact our Investor Relations department at 800.431.9214 to obtain a free copy. The Governance Committee also performs annual self-evaluations.

Strategic Planning Committee: The Strategic Planning Committee has been assigned the task of working with our executives to chart the strategic course of our Company, with the goal of maximizing stockholder returns over the medium to long term. Specific areas considered by the Strategic Planning Committee include business mix, strategic initiatives, capital and other resource allocation and earnings growth.

Committee Charters/Form 10-K: In compliance with applicable NYSE corporate governance rules, the Board has adopted charters for the Audit, Compensation and Governance Committees. These charters and a copy of our annual report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the SEC, are available on our Company website at www.deanfoods.com. Stockholders may also contact Investor Relations at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201 or at 800.431.9214 to obtain copies of the charters or Form 10-K without charge.

How can you communicate with our

Board of Directors?

Should you wish to contact our Lead Director or any of the other members of our Board of Directors on a board-related issue, you may write to him or her in care of our Corporate Secretary at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201. Relevant communications will be distributed to the Board, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communication. Communications that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as:

•		business solicitations or advertisements,
•		junk mail and mass mailings,
•		new product suggestions,
•		product complaints,
•		product inquiries,
•		resumes and other forms of job inquiries,
•		spam, and
•		surveys.

     In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded. Any communication that is filtered out will be made available to any director upon his or her request.

What is the process for nominating directors?

When searching for or considering a candidate for Board membership (including any candidate who may be recommended by a shareholder), the Governance Committee will require that the candidate have the highest ethical standards, integrity, sound business judgment and a willingness to devote adequate time to Board duties. Our Board of Directors seeks to ensure that the Board includes members with appropriately diverse backgrounds, skills and experience, including financial and other expertise relevant to the business of our Company. The Governance Committee has, as appropriate, retained search firms to assist in identifying qualified director candidates.

     Stockholders may recommend individuals to the Governance Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and the number of shares of our common stock beneficially owned by the nominee to the Governance Committee, c/o Corporate Secretary, 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201. Assuming the appropriate information has been provided on a timely basis, the Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by

others. If the Board of Directors determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in the proxy statement for the next annual meeting of stockholders.

     Stockholders also have the right under our bylaws to directly nominate candidates, without any action or recommendation on the part of the Governance Committee or the Board of Directors. Our bylaws require that the Company be given advance written notice of stockholder nominations for election to the Board of Directors. The Secretary must receive such notice at the address noted above no later than March 1st of any calendar year; provided, however, that in the event that less than 35 days’ notice of a meeting called for the election of directors is given to stockholders, the Secretary must receive such notice not later than the close of business on the seventh day following the day on which the notice was mailed, and in the case of a special meeting of stockholders, not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first.

Do we have a Code of Ethics?

We have adopted a Code of Ethics that applies to all of our directors, executive officers and employees, including the Chief Executive Officer, a copy of which is posted on our corporate website at www.deanfoods.com and filed as Exhibit 14 to our Form 10-K. Any amendments to or waivers of our Code of Ethics also will be posted on our website. If you would like a hard copy of our Code of Ethics, please request one by writing or calling our Investor Relations department at:

Dean Foods Company
Attention: Investor Relations
2515 McKinney Avenue, Suite 1200
Dallas, Texas 75201
214.303.3400

Lead Director

Mr. Hardin serves as Lead Director. The Lead Director is responsible for calling all meetings of our Board of Directors, approving the schedule and agenda for all meetings of our Board of Directors, and presiding at executive sessions of the Board of Directors. The Lead Director also serves as a liaison between the non-employee directors and our Chief Executive Officer.

Chief Compliance Officer

We have appointed a Chief Compliance Officer who manages our compliance program. He provides reports to the Audit Committee on the program’s effectiveness and works closely with various compliance functions to provide coordination and sharing of best practices across our Company.

Disclosure Committee

We have established a Disclosure Committee composed of members of management to assist in fulfilling our obligations to maintain effective disclosure controls and procedures, and to coordinate and oversee the process of preparing our securities filings with the SEC.

Audit Committee

Report of the Audit Committee

We have met with representatives of Deloitte & Touche LLP and Company management to review and discuss the Company’s audited consolidated financial statements for the year ended December 31, 2006, and the assessment of the Company’s internal control over financial reporting. We have discussed significant accounting policies applied by the Company in its financial statements, as well as alternative treatments. We discussed with the Company’s Chief Audit Executive and with Deloitte & Touche the overall scope and plans for their respective audits. We met with the Chief Audit Executive and with Deloitte & Touche, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting. We also regularly review and discuss the Company’s activities with respect to risk assessment and risk management, and receive regular reports regarding the Company’s compliance program.

     We regularly discuss with Deloitte & Touche, and they have provided written disclosures to us, regarding (1) the matters required to be communicated under generally accepted auditing standards (Standard No. 61, Communication with Audit Committees), and

(2) Deloitte & Touche’s independence, as required by the Independence Standards Board (Standard No. 1, Independence Discussions with Audit Committees).

     We have considered whether the services performed by Deloitte & Touche other than audit services or services related to the audit are compatible with maintaining the independence of Deloitte & Touche, and we have concluded that they are. Based on our reviews and discussions with management and Deloitte & Touche, as described above, we recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s annual report on Form 10-K for the year ended December 31, 2006, for filing with the SEC.

This report is presented by:
The Members of the Audit Committee
Stephen L. Green (Chairman)
Lewis M. Collens
Tom C. Davis
Hector M. Nevares

Information Concerning Auditor Services

Deloitte & Touche has served as independent auditor for the Company since its formation. Deloitte & Touche periodically changes the personnel who work on the audit. In addition to performing the audit of the Company’s consolidated financial statements, Deloitte & Touche also provides various other services to the Company. All of the services provided for the Company by Deloitte & Touche in 2006 were approved by the Audit Committee. The aggregate fees and reimbursable expenses billed to the Company and its subsidiaries by Deloitte & Touche for 2006 and 2005 were:

		2006				2005
Audit Fees (1)		$	6,281,000			$	5,791,000
Audit-Related Fees (2)			3,082,000				3,304,000
Tax Fees (3)			463,000				1,112,000
All Other Fees (4)			101,000				180,000
Total		$	9,927,000			$	10,387,000

(1)		“Audit Fees” includes fees and expenses billed for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s quarterly reports on Form 10-Q, and services provided in connection with statutory and regulatory filings. Audit fees also include the audit of the Company’s internal controls.
(2)		“Audit-Related Fees” includes fees billed for services that are related to the performance of the audit or review of the Company’s financial statements (which are not reported above under the caption “Audit Fees”), such as fees for accounting due diligence on acquisitions and divestitures and audits of Company employee benefit plans. In 2005, “Audit-Related Fees” also included fees for the stand-alone audit of TreeHouse Foods and other work related to the TreeHouse spin-off.
(3)		“Tax Fees” includes fees billed for services that are related to our benefit plans and tax compliance. For 2005, “Tax Fees” includes $738,000 for tax work related to the TreeHouse spin-off.

(4)

“All Other Fees” includes a license fee for certain tax preparation software.

     The Audit Committee has also recommended that Deloitte & Touche be selected as the Company’s independent auditor for 2007.

     The Audit Committee has sole authority to engage and determine the compensation of the Company’s independent auditor. The Audit Committee’s pre-approval is required for any engagement of Deloitte & Touche, and the Audit Committee has established the following pre-approval policies and procedures. Annually, the Audit Committee pre-approves services to be provided by Deloitte & Touche. The Audit Committee also considers the engagement of Deloitte & Touche for the provision of other services during the year. In addition to conducting the Company’s 2007 audit, the Audit Committee has pre-authorized Deloitte & Touche to provide services to the Company in connection with the following types of non-audit matters:

Audit-Related Engagements

•		Audit of financial statements for Dean Dairy Group or any other subsidiary
•		Ordinary course accounting consultations
•		Due diligence services related to potential acquisitions and divestitures of businesses

Tax Engagements

•		U.S. federal, state and local tax compliance advice
•		International tax compliance advice
•		Review of federal, state, local and international income, franchise and other tax returns
•		Advice on tax audits
•		Tax structuring and related advice in connection with potential acquisitions, divestitures and restructurings.

Other

•

Licensing of tax return preparation software.

The pre-approval described above will expire in the first quarter of 2008. In the event a matter of a type listed above arises before the first quarter of 2008, the Audit Committee has authorized management, if necessary, to negotiate, for the Chairman’s approval and execution, an engagement agreement related to that matter. For each such matter, management is required to provide the Audit Committee, at its next regularly scheduled meeting, with detailed documentation about the services to be provided. Any service that management wishes Deloitte & Touche to provide that is of a type that has not been pre-approved must be considered at a meeting of the Audit Committee before the service is provided. In determining whether to approve the engagement of Deloitte & Touche, the Audit Committee considers whether such service is consistent with their independence. The Audit Committee also considers the amount of audit and audit-related fees in comparison to all other fees paid to Deloitte & Touche and the Audit Committee reviews such comparisons regularly.

     Representatives of Deloitte & Touche will be present at the annual meeting to make a statement, if they choose, and to answer any questions you have.

Executive Compensation

Report of the Compensation Committee

The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with our management. Based on this review and discussion, the

Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

This report is presented by:
The Members of the Compensation Committee
Joseph S. Hardin, Jr. (Chairman)
Stephen L. Green
Jim L. Turner

How is the compensation of our Named Executive Officers determined?

Compensation Discussion and Analysis

This Compensation Discussion and Analysis is intended to provide investors with an understanding of our compensation policies and decisions for our Chief Executive Officer, Chief Financial Officer, former Chief Financial Officer and the three other most highly compensated executive officers (collectively called “Named Executive Officers”). We will discuss and analyze the following topics in this Compensation Discussion and Analysis:

•		Executive Compensation Objectives and Policies
•		Elements of Compensation
•		Comparison Group For Executive Compensation Purposes
•		Compensation Methodology
•		Annual Cash Compensation

	•		Base Salary
	•		Annual Incentives

•		Long-Term Equity Incentive Compensation
•		Timing of Long-Term Equity Grants
•		Deferred Compensation Plan
•		Other Compensation
•		Severance and Change in Control Benefits
•		Tax Deductibility Policy

Executive Compensation Objectives and Policies

Our Compensation Committee is responsible for establishing and administering our policies governing the compensation of our senior executives, including our Named Executive Officers. For a description of the Compensation Committee’s charter and additional information regarding the processes and procedures it follows in determining executive compensation, including the use of compensation consultants, see “Other Information – What are the responsibilities of our Board Committees?” The Compensation Committee is composed entirely of independent directors.

     In accordance with its charter, the Compensation Committee has adopted executive compensation policies that are designed to achieve the following four objectives:

•		Attract and retain top talent,
•		Motivate the performance of officers in support of achievement of the Company’s strategic, financial and operating performance objectives,
•		Reward performance, and
•		Align our officers’ interests with the long-term interests of our stockholders through awards of stock options and other equity vehicles.

Elements of Compensation

The Company’s executive compensation program is composed of the following elements:

•		Base salary;
•		Annual incentives; and
•   Long-term incentives, which for the Named Executive Officers and other senior executives consists of stock options and restricted stock units, with the amounts of the awards of each tied to Company performance.

Comparison Groups for Executive Compensation Purposes

In order to ensure that we are able to attract and retain the highest caliber management, we endeavor to ensure that total compensation is comparable to that offered by competitors for the Company’s management talent. Specifically for 2006, we considered the following companies (referred to in this report as the “Comparison Group”):

•		Archer-Daniels-Midland Company
•		Campbell Soup Company
•		The Clorox Company
•		Coca-Cola Enterprises, Inc.
•		Colgate-Palmolive Company
•		ConAgra Foods, Inc.
•		Cott Corporation
•		Del Monte Foods Company
•		General Mills, Inc.
•		H.J. Heinz Company
•		The Hershey Foods Company
•		Hormel Foods Corporation
•		The J.M. Smucker Company
•		Kellogg Company
•		Kimberly-Clark Corporation
•		McCormick & Co., Inc.
•		The Pepsi Bottling Group, Inc.
•		The Procter & Gamble Company
•		Sara Lee Company
•		Smithfield Foods, Inc.
•		Tyson Foods, Inc.
•		The William Wrigley Jr. Company

     The Compensation Committee believes this is the appropriate Comparison Group because it consists of consumer packaged goods organizations against whom we compete for executive talent. The Compensation Comparison Group is reviewed at least annually by the Compensation Committee with input from Mercer Human Resource Consulting, Inc., the Compensation Committee’s outside consultant. We determine base salary, annual incentive compensation and long-term incentive awards for the Named Executive Officers and other senior executives after review of executive compensation survey data for positions with similar responsibilities in our Comparison Group, the responsibilities of each officer, and the subjective evaluation of such officer’s overall performance and contribution to the Company’s results. In addition to the Comparison Group, the Compensation Committee may also consider general industry data where such additional information may be helpful.

Compensation Methodology

In order to ensure that management’s interests are aligned with those of stockholders and to motivate and reward individual initiative and effort, we have put an emphasis on performance-based compensation so that attainment of Company, business unit and, in some cases, individual performance goals, are rewarded. Through the use of performance-based plans that emphasize attainment of Company and/or business-unit goals, we seek to foster an attitude of teamwork, and the use of tools such as equity ownership is important to ensure that the efforts of management are consistent with the objectives of stockholders.

     At the beginning of each year, the Compensation Committee establishes specific objectives for the Chief Executive Officer for the upcoming year. At the end of each year, the Compensation Committee evaluates his performance against the pre-set objectives and takes the results of this evaluation into consideration when setting his compensation for the next year. The objectives that were established for the Chief Executive Officer for 2006 included performance in the following categories: shareholder return and earnings per share growth; his credibility with the investment community; his relationship with the Board of Directors; development and execution of the Company’s strategic plan; certain tactical and operational initiatives; his development of and relationship with the Company’s management; and his leadership in establishing and maintaining a culture of compliance, ethical behavior and social responsibility throughout the Company. The results of this evaluation were shared with the full Board of Directors.

     A similar process of setting objectives and reviewing performance against these objectives is used by the Chief Executive Officer for each member of his leadership team which includes the other Named Executive Officers. The Compensation Committee considers the performance of the other executive officers in approving compensation levels.

Annual Cash Compensation

Base Salary

     The base salary component of our compensation program is intended to compensate our senior executives for their job responsibilities and allows us to attract and retain top talent, consistent with our objectives. It is our practice to set the base salary levels slightly in excess of the median of the Comparison Group and the overall general industry, adjusted to reflect each executive’s individual performance and contributions. In some cases, when an executive is recruited from another company, the base salary may exceed the levels indicated, which can be necessary in order to attract the executive.

     Base salaries are reviewed annually by the Compensation Committee. Adjustments are made based on movements in salaries in the Comparison Group and on the performance of the executive, considering recommendations from the Chief Executive Officer for all executives except himself. The Compensation Committee separately reviews the performance of the Chief Executive Officer, as described above, and makes adjustments as warranted.

Annual Incentives

Annual cash incentive compensation is designed to motivate our senior executives to achieve annual financial and other goals based on the strategic, financial and operating performance objectives of the Company. In conjunction with our review of the strategic and operating plans of the Company, we establish target performance levels for each executive tied to the Company’s performance, the performance of particular operating units over which an executive has control and on individual goals, or some combination thereof. It is our practice to set target bonus levels between the median and the 75th percentile of the Comparison Group and the overall general industry.

     Target incentive compensation payout amounts for Named Executive Officers in 2006 were:

		Target Cash Incentive
		Compensation (expressed as a
Name		percentage of base salary)
Gregg L. Engles Chairman of the Board and Chief Executive Officer			120	%
Pete Schenkel Vice Chairman of the Board (former President of Dean Dairy Group through December 31, 2005)			50	%
Alan J. Bernon President of Dairy Group			80	%
Michelle P. Goolsby Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary			70	%
Jack F. Callahan Executive Vice President and Chief Financial Officer			70	%
Barry A. Fromberg Former Executive Vice President and Chief Financial Officer			65	%

     Pursuant to our Executive Incentive Compensation Plan, executives are eligible to receive 0% to 212% of their target cash incentive compensation amount, depending on the level of achievement of the performance criteria approved for that person by the Compensation Committee. Our program places significant weight on the achievement of financial objectives. We use achievement and growth in earnings per share (for positions in the corporate office) or achievement and growth in operating income (for positions in business units) as the key financial metrics, as we believe sustained performance in these areas is consistent with the expectations of our investors.

     Mr. Engles’ 2006 performance criteria were based 40% on the Company’s earnings per share performance compared to targeted earnings per share, 40% on the growth of the Company’s earnings per share over 2006 earnings per share and 20% on individual performance objectives.

     Ms. Goolsby’s, Mr. Fromberg’s and Mr. Callahan’s 2006 performance criteria were based 35% on the Company’s earnings per share performance compared to targeted earnings per share, 35% on the growth of the Company’s earnings per share and 30% on individual performance objectives.

     Mr. Bernon’s 2006 performance criteria were based 35% on the Dairy Group achieving its annual operating income target, 35% on the growth of the Dairy Group’s operating income and 30% on the achievement of individual performance goals.

     Mr. Schenkel’s 2006 performance criteria were based 35% on the Dairy Group achieving its annual operating income target, 35% on the growth of the Dairy Group’s operating income and 30% on the achievement of individual performance goals.

     For the 2006 performance period, the Company’s earnings per share exceeded the targeted earnings per share and the targeted growth in earnings per share that we established for Mr. Engles, Ms. Goolsby, Mr. Fromberg and Mr. Callahan. In addition, Mr. Engles, Ms. Goolsby and Mr. Callahan exceeded their individual target objectives. Therefore, in accordance with the terms of the Executive Incentive Compensation Plan, Mr. Engles, Ms. Goolsby

and Mr. Callahan each received 154% of their target incentive compensation payable under the plan. Mr. Fromberg received 150% of his target incentive compensation payable under the plan and, because he retired effective April 1, 2006, the payment was pro-rated for the three-month period he worked. Mr. Callahan received a full year of incentive compensation.

     The Dairy Group significantly exceeded its operating income targets for 2006 and Mr. Bernon achieved his individual objectives, which resulted in Mr. Bernon receiving 183% of his target incentive compensation payable under the plan.

Long-Term Equity Incentive Compensation

We believe that a significant portion of each senior executive’s compensation should be dependent on long-term value created for our stockholders. Our current program is designed to align the results achieved for stockholders with the rewards provided to our senior executives. Each year we compare our total shareholder return (“TSR”) for the past three years to that of our Comparison Group. The value of the long-term incentive awards provided is based on the results of this comparison. For performance at the 75th percentile or above, the awards are made at the 75th percentile of those provided to similar positions in the Comparison Group. If our performance is at the 25th percentile or below, the awards are made at levels equivalent to the 25th percentile within our Comparison Group. For results between the 25th and 75th percentiles, the value of the awards made are consistent with the level of performance within the Comparison Group.

     Our awards are currently provided in the form of stock options (weighted 50%) and restricted stock units – RSUs (weighted 50%). The awards have been granted pursuant to the 1989 Stock Awards Plan, as amended, and the 1997 Stock Option and Restricted Stock Plan, as amended. Stock options are used to motivate and reward our senior executives relative to value created for shareholders. RSUs are used to provide an ongoing retention element and a continuing link to shareholder value. Options vest over three years and RSUs vest over five years in equal portions following the grant. The vesting of RSUs is accelerated to 30 months following the date of grant if certain share price targets are reached, which for the outstanding grants is 150% times our stock price on the date of grant. The Compensation Committee annually reviews both market practices and trends, and the availability of shares and units in our incentive program, in determining the mix of awards.

     For the 2004-2006 performance period, our three-year TSR was at the 95th percentile relative to the Comparison Group. As such, our long-term incentive awards, which were granted in January 2006, were set at the 75th percentile.

Timing of Long-Term Equity Grants

Historically, our practice has been to award annual option and restricted share units in January of each year and stock options had an exercise price equal to the closing price of our Company’s stock on the day preceding the date of grant. Beginning in 2007, our policies and stock option plans now require that stock options have an exercise price equal to the closing price of the Company’s stock on the date of grant. Our new policies also require that annual stock option and restricted stock unit grants to senior executives and other employees be made by the Compensation Committee at a meeting held in February of each year on the third business day following the public release of the Company’s financial results for the prior year. The Compensation Committee has the ability to postpone the annual grant date if circumstances warrant such postponement.

     Our Chief Executive Officer and General Counsel have limited authority to grant stock options and restricted stock units in connection with the hiring of new employees or the promotion or special recognition of selected employees. These recruiting and recognition grants may not exceed 400,000 annually and may not be made to any

executive officer of the Company. In addition, no individual grant may exceed 50,000 shares without the Compensation Committee’s approval. These recruiting and recognition grants are made on the first business day of each month for all employees selected for awards in the preceding month or whose employment began during the preceding month without regard to the release of information by the Company.

Deferred Compensation Plan

We allow senior officers of the Company, including the executive officers, to defer a portion of their salary and bonus each year into a tax deferred plan. This program is intended to promote retention by providing a long-term savings opportunity on a tax-efficient basis. A deferred salary and bonus plan is viewed as a strong retention tool for our eligible executives. We believe this program is similar to that offered at most of the companies in our Comparison Group. Several Named Executive Officers have elected to defer both salary and bonus over their careers with us and have therefore accumulated the deferred compensation amounts shown in the Nonqualified Deferred Compensation Table on page 34. The amounts deferred are unfunded and unsecured obligations of the Company, receive no preferential standing, and are subject to the same risks as any of the Company’s other unsecured obligations. For a description of the terms of the Deferred Compensation Plan, see the Nonqualified Deferred Compensation Table.

Other Compensation

We provide our executive officers with a limited number of perquisites. These are designed to minimize the amount of time they devote to administrative matters other than Company business, promote a healthy work/life balance and provide opportunities for developing business relationships. For example, we make available to our executive officers a health screening program which helps to maintain their overall health. We encourage our officers to take advantage of this service. In addition, the Compensation Committee has approved club memberships for certain of our executive officers.

     The Compensation Committee has also approved certain personal use of the corporate aircraft as described in the “Summary Compensation Table.” The Compensation Committee believes the enhanced security and efficiency this benefit provides is appropriate and is in the best interests of the Company and our shareholders. The incremental cost to us of providing personal travel on corporate aircraft is included in the “Summary Compensation Table” on page 31.

     The Compensation Committee has also approved the payment of relocation costs when hiring or moving executive officers. The Compensation Committee believes it is appropriate to pay these costs in attracting and retaining top talent in the locations where we operate. The incremental cost to us of providing relocation benefits is included in the “Summary Compensation Table” on page 31.

     We purchase tickets to various cultural, charitable, civic, entertainment and sporting events for business development and relationship-building purposes, as well as to maintain our involvement in communities in which the Company operates and our employees live. Occasionally, our employees, including our executives, make personal use of tickets that would not otherwise be used for business purposes.

     Our senior executives participate in the Company’s broad-based programs generally available to all employees, including our 401(k) retirement plan, health and dental and various other insurance plans, including disability and life insurance. For additional information regarding perquisites and other compensation, see the “Summary Compensation Table.”

Severance and Change in Control Benefits

We have entered into agreements with our executive officers pursuant to which we would provide certain payments in the event of a qualified termination (as described under “Potential Benefits Upon a Change in Control”) following a change in control. A copy of the form of these change in control agreements is filed with the SEC as Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. Generally, the executive would be paid a lump sum of cash equal to three times his or her base annual salary and his or her target bonus for the year, gross-up payment for excise taxes, insurance benefits, outplacement services and certain other benefits. The Compensation Committee believes that change in control benefits are important for attracting and retaining executive talent and help to ensure that executive officers can remain focused during periods of uncertainty. These are particularly important in an environment where merger and acquisition activity is high. We believe that our change in control benefits are consistent with those maintained by comparable companies. The change in control agreements also include provisions to deal with the impact of the federal excise tax on “excess parachute payments.” The so-called “golden parachute” tax rules subject “excess parachute payments” to a dual penalty: the imposition of a 20% excise tax upon the recipient and non-deductibility of such payments by the paying corporation. “Excess parachute payments” are those payments that exceed three times the individual’s “base amount” (generally an average of the individual’s W-2 compensation for the five years preceding the year in which the change in control occurs). Depending upon circumstances, the excise tax can discriminate against new hires who have not received previous compensation from the Company, discriminate against newly promoted employees depending on their historical compensation and can discriminate against individuals who have not exercised stock options in favor of those who have and against those who elect to defer compensation in favor of those who do not. For these reasons, we believe that the provision of the excise tax gross-up is appropriate. Estimated payments to the Named Executive Officers pursuant to the change in control agreements are summarized on page 36.

     We also maintain a severance plan for our executive officers, other than the Chief Executive Officer, which provides certain severance benefits in the event of a qualified termination (as described under “Estimated Payments Upon a Qualified Termination”). A copy of the Company’s Executive Severance Pay Plan, which was approved by the Compensation Committee, is on file with the Securities and Exchange Commission as Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. Generally, upon a qualified termination, an executive officer would receive a cash payment equal to two times his or her base annual salary plus his or her target bonus and a cash payment for the in-the-money value of stock options and restricted share units that would vest during the two years following the date of severance and certain health benefits and outplacement services. We believe this plan helps create stability during periods of significant change and enables us to avoid negotiating individual severance arrangements with new hires or departing executives. We also believe this plan reduces the likelihood and extent of litigation from executive severance. We believe that our severance benefits are consistent with those maintained by comparable companies. Estimated payments to the Named Executive Officers pursuant to the Executive Severance Pay Plan are summarized on page 36.

Tax Deductibility Policy

The United States income tax laws generally limit the deductibility of compensation paid to each Named Executive Officer to $1,000,000 per year. An exception to this general rule exists for performance-based compensation that meets certain Internal Revenue Service requirements. Stock option awards under the Company’s stockholder approved long-term incentive plans qualify for the exemption offered by Section 162(m) of the U.S. tax code. Currently, all other compensation that we pay does not qualify for the Section 162(m) exemption.

     Although deductibility of compensation is preferred, tax deductibility is not a primary objective of our compensation programs. We believe it is more important to retain the flexibility to compensate officers competitively. We will continue to monitor our compensation practices, however, and consider future opportunities

to take advantage of the Section 162(m) exemption when we believe it is in the best interest of the Company and its stockholders.

Who are our executive officers?

The term “executive officer” is defined by applicable securities law as the company’s president, any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the public company. According to that definition, our Board of Directors has determined that at the end of 2006 our “executive officers” were:

Gregg L. Engles – Chairman of the Board and Chief Executive Officer

See Mr. Engles’ biography on page 6.

Jack F. Callahan – Executive Vice President and Chief Financial Officer

Mr. Callahan, age 48, joined us in May 2006 as Executive Vice President and Chief Financial Officer. Prior to joining us, from 1996 to 2006, he held a number of positions at PepsiCo, Inc. including Senior Vice President of Corporate Strategy and Development for PepsiCo and Chief Financial Officer for Frito Lay International. Before joining PepsiCo, he held various positions at General Electric Company and McKinsey & Company.

Michelle P. Goolsby – Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary

Ms. Goolsby, age 49, joined us in July 1998 as Executive Vice President, General Counsel and Corporate Secretary. In August 1999, she assumed the additional role of Chief Administrative Officer. From September 1988 until July 1998, Ms. Goolsby held various positions with the law firm of Winstead Sechrest & Minick. Prior to joining Winstead Sechrest & Minick, she held various positions with Trammell Crow Company.

Ronald H. Klein – Senior Vice President – Corporate Development

Mr. Klein, age 41, joined us in 1997 as Assistant Treasurer. In mid-1998, he became Vice President – Corporate Development, focused primarily on acquisition and divestiture transactions and financial planning. In February 2002, he became Senior Vice President – Corporate Development. Prior to joining us, he worked in the Corporate Finance division of Bear Stearns.

Joseph E. Scalzo – President – WhiteWave Foods Company

Mr. Scalzo, age 48, joined us in October 2005 as President of our WhiteWave Foods Company subsidiary. Prior to joining us, he was employed by The Gillette Company from 2001 to October 2005, serving most recently as Group President, Personal Care and Global Value Chain. Prior to joining The Gillette Company, Mr. Scalzo served in various capacities at the Coca-Cola Company from 1997 to 2001, including Senior Vice President and Chief Marketing Officer of The Minute Maid Company. He began his career at Procter & Gamble in 1985 where he held various leadership positions. Mr. Scalzo also serves on the Board of Directors of HNI Corporation, a leading office furniture and wood burning fireplace manufacturer.

Alan J. Bernon – President of Dairy Group

See Mr. Bernon’s biography on page 6.

Pete Schenkel – Vice Chairman of the Board, Former President of Dairy Group

See Mr. Schenkel’s biography on page 16.

How much are our Named Executive Officers paid?

The following chart shows the compensation paid during 2006 to our Chief Executive Officer, Chief Financial Officer, our former Chief Financial Officer and our other three most highly compensated executive officers who were serving as executive officers as of December 31, 2006. Those six people are referred to in this proxy statement as the “Named Executive Officers.”

Summary Compensation Table for Fiscal Year 2006

																		Non-Equity
						Stock				Option				Incentive Plan				All Other
Name and Principal Position		Salary ($)(1)				Awards ($)(2)				Awards ($)(3)				Compensation ($)(4)				Compensation ($)(5)(6)(7)				Total ($)(8)
Gregg L. Engles			1,200,000				3,795,739				3,386,074				2,220,480				423,200	(9)			11,025,493
Chairman of the Board and Chief Executive Officer
Jack F. Callahan			297,620				271,701				312,400				495,880				262,786	(10)			1,640,387
Executive Vice President and Chief Financial Officer
Barry A. Fromberg			108,750				—				—				106,032				3,169,992	(11)			3,384,774
Former Executive Vice President and Chief Financial Officer
Michelle P. Goolsby			515,000				753,354				654,837				555,170				98,726	(12)			2,577,087
Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary
Alan J. Bernon			620,000				1,273,722				1,206,891				907,680				860,157	(13)			4,868,450
President of Dairy Group
Pete Schenkel			500,000				963,336				1,104,811				1,066,012				407,863	(14)			4,042,022
Vice Chairman of the Board

Grants of Plan-Based Awards in Fiscal Year 2006

																														All Other				All Other
																														Stock				Option												Grant Date
																														Awards:				Awards:				Exercise or				Closing				Fair Value
						Estimated Possible Payouts												Estimated Future Payouts												Number of				Number of				Base Price				Market				of Stock
						Under Non-Equity												Under Equity												Shares of				Securities				of Option				Price on				and
		Grant				Incentive Plan Awards(1)												Incentive Plan Awards												Stock or				Underlying				Awards				Day of				Options
Name		Date				Threshold ($)				Target ($)				Maximum ($)				Threshold (#)				Target (#)				Maximum (#)				Units (#)(2)				Options (#)(3)				($/Sh)				Grant(4)				Awards
Gregg L.			01/13/06				0				1,440,000				2,995,200				—				—				—				130,786				640,702				25.68				25.74				3,358,860
Engles			01/13/06																																												4,765,480
Jack F.			05/09/06				0				322,000				682,640				—				—				—				58,045				161,645				25.44				25.10				1,476,905
Callahan(5)			05/09/06																																												1,249,600
Barry A.							0				282,750				599,430				—				—				—
Fromberg
Michelle P.			01/13/06				0				360,500				764,260				—				—				—				26,451				126,671				25.68				25.74				679,320
Goolsby			01/13/06																																												942,166
Alan J.			01/13/06				0				496,000				1,051,520				—				—				—				110,213				405,582				25.68				25.74				2,830,500
Bernon			01/13/06																																												3,016,680
Pete Schenkel			01/13/06				0				250,000				500,000				—				—				—								385,744				25.68				25.74				2,869,125

(1)

The amounts paid pursuant to these awards are included in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column. See “Compensation Discussion and Analysis — Annual Cash Compensation – Annual Incentives” for a description of this plan.

(2)

Restricted Stock Unit awards are granted pursuant to our 1989 Stock Awards Plan and reflect adjustments as a result of the $15 special dividend paid to stockholders of record on March 27, 2007. Each employee’s restricted stock units vest ratably on April 12, 2007, over five years, subject to certain accelerated vesting provisions based primarily on our stock price except for 33,064 Restricted Stock Units granted to Mr. Callahan in 2006 which vest ratably over three years.

(3)

Stock option awards are granted pursuant to our 1997 Stock Option and Restricted Stock Plan and reflect adjustments as a result of the $15 special dividend paid on April 2, 2007 to stockholders of record on March 27, 2007. Stock option awards vests as follows: one-third on first anniversary of grant; one-third on second anniversary of grant, and one-third on third anniversary of grant, except for Mr. Schenkel’s grant which vests ratably over five years.

(4)

Before 2007, our option plans defined fair market value on the date of grant as the closing market price of our common stock on the date prior to the date of grant. The SEC’s rules adopted in 2006 define fair market value on the date of grant as the closing market price of the Company’s common stock on the date the option is granted, and require supplemental disclosure if the option price differs from the price that would have been established if that definition had been used. We revised our plans in 2007 to change the definition of fair market value on the date of grant to match the SEC’s new definition. The closing market price is based on the closing price of our common stock as reported by the New York Stock Exchange and adjusted consistent with the adjustments made to the exercise price of our outstanding stock option awards as a result of the special dividend.

(5)

Stock option awards and Restricted Stock Unit awards to Jack Callahan made in 2006 were “inducement grants” pursuant to New York Stock Exchange rules.

Outstanding Equity Awards at 2006 Fiscal Year-End(1)(2)

		Option Awards(3)																Stock Awards(4)
																						Market
		Number of				Number of												Number of				Value of
		Securities				Securities												Shares or				Shares or
		Underlying				Underlying												Units of				Units of
		Unexercised				Unexercised				Option				Option				Stock That				Stock That
		Options (#)				Options (#)				Exercise				Expiration				Have Not				Have Not
Name		Exercisable				Unexercisable				Price ($)				Date				Vested (#)				Vested ($)
Gregg L. Engles			—				640,702				25.68				01/13/2016				275,578				7,928,853
			167,066				334,133				18.30				01/07/2015
			348,286				187,948				17.91				01/13/2014
			950,101				—				14.25				01/06/2013
			1,551,522				—				11.69				01/14/2012
Jack F. Callahan			—				161,645				25.44				05/09/2016				58,045				1,670,060
Barry A. Fromberg			—				—				—				—				—				—
Michelle P. Goolsby			—				126,671				25.68				01/13/2016				54,992				1,582,202
			32,485				64,971				18.30				01/07/2015
			69,612				34,804				17.91				01/13/2014
			164,458				—				14.25				01/06/2013
			330,804				—				11.69				01/14/2012
			133,137				—				8.26				01/22/2011
			130,521				—				9.38				07/31/2008
Alan J. Bernon			—				405,582				25.68				01/13/2016				129,805				3,734,719
			16,591				33,181				18.30				01/07/2015
			44,548				23,200				17.91				01/13/2014
			136,556				—				14.25				01/06/2013
			217,681				—				11.69				01/14/2012
Pete Schenkel			—				385,744				25.68				01/13/2016				36,198				1,041,483
			41,187				82,373				18.30				01/07/2015
			125,758				63,809				17.91				01/13/2014
			290,627				—				14.25				01/06/2013
			852,888				—				11.69				01/14/2012
			509,949				—				8.26				01/22/2011
			173,159				—				7.17				01/04/2010

(1)		The amounts shown reflect outstanding equity awards granted under our 1989 Stock Awards Plan and our 1997 Stock Option and Restricted Stock Plan (the “Equity Plans”).
(2)		Numbers shown in the table include adjustments made in connection with the TreeHouse Foods spin-off and previous stock splits, and reflect adjustments as a result of the $15 special dividend paid on April 2, 2007 to stockholders of record on March 27, 2007.
(3)		Generally, stock option awards vest as follows: one-third on the first anniversary of grant, one-third on the second anniversary of grant, and one-third on the third anniversary of grant. Mr. Schenkel’s option awards in 2006 vest ratably over five years.
(4)		Each restricted stock unit represents the right to receive one share of common stock in the future. Stock units have no exercise price. Generally, each grant vests ratably over five years subject to certain accelerated vesting provisions based primarily on the stock price. 33,064 restricted stock units granted to Mr. Callahan in 2006 vest ratably over three years.

Option Exercises and Stock Vested in Fiscal Year 2006

		Option Awards								Stock Awards
		Number of								Number of
		Shares Acquired				Value Realized				Shares Acquired				Value Realized
Name		on Exercise (#)				on Exercise ($)(1)				on Vesting (#)				on Vesting ($)(2)
Gregg L. Engles			2,197,241				57,720,111				120,321				4,513,349
Jack F. Callahan			—				—				—				—
Barry A. Fromberg			213,900				3,975,865				8,646				327,866
Michelle P. Goolsby			—				—				23,804				892,899
Alan J. Bernon			43,910				998,136				6,667				283,147
Pete Schenkel			—				—				39,318				1,473,691

Deferred Compensation Plan

We allow senior officers of the Company, including the Named Executive Officers, to defer their salary and/or bonus each year into the Dean Foods Deferred Compensation Plan, a tax deferred plan. The balance in the deferred compensation accounts are unsecured general obligations of the Company. This program is intended to promote retention by providing a long-term savings opportunity on a tax-efficient basis. The Company makes no contributions to the plan. Several Named Executive Officers have elected to defer salary and/or bonus over their careers with us and have therefore accumulated the deferred compensation amounts shown below:

Nonqualified Deferred Compensation for Fiscal Year 2006

		Executive				Registrant				Aggregate				Aggregate				Aggregate
		Contributions				Contributions				Earnings				Withdrawals/				Balance
Name		in Last FY ($)				in Last FY ($)				in Last FY ($)(2)				Distributions ($)(3)				at Last FYE ($)
Gregg L. Engles			—				—				1,929,244				—				13,155,102
Jack F. Callahan			—				—				—				—				—
Barry A. Fromberg			—				—				50,346				600,522				364,501
Michelle P. Goolsby			90,000	(1)			—				173,682				—				1,323,470
Alan J. Bernon			—				—				53,152				2,532,047				267,363
Pete Schenkel			—				—				3,902				—				23,571

Pension Benefits(1)

Executive

Registrant

Aggregate

Aggregate

Aggregate

Contributions

Contributions

Earnings

Withdrawals/

Balance

Name

in Last FY ($)

in Last FY ($)

in Last FY ($)(2)

Distributions ($)(3)

at Last FYE ($)

Gregg L. Engles

—

—

—

—

—

Jack F. Callahan

—

—

—

—

—

Barry A. Fromberg

—

—

—

—

—

Michelle P. Goolsby

—

—

—

—

—

Alan J. Bernon

—

—

—

—

—

Pete Schenkel

—

—

—

—

—

Executive Officer Severance

We maintain two severance plans for our executive officers, depending on the circumstances that result in their termination. The Executive Severance Pay Plan (the “Severance Plan”), a copy of which is filed as Exhibit 10.14 to our Annual Report on Form 10-K for the year ended December 31, 2006, is applicable in the event of certain involuntary terminations. In addition, we have entered into change in control agreements with each of our executive officers, the form of which is filed as Exhibit 10.28 to our Annual Report on Form 10-K for the year ended December 31, 2006, and which is applicable in the event of a qualifying termination following a change in control. Following is a description of the benefits that may be paid to the executive officers pursuant to the Severance Plan and the change in control agreements. An executive officer may not receive benefits under both plans.

     For a description of the post-employment arrangements with our former chief financial officer, Mr. Fromberg, see “Agreements with Named Executive Officers” below.

Potential Benefits Upon a Change in Control

We have entered into agreements with all of our Named Executive Officers pursuant to which we must, in the event of a change in control and a qualifying termination (as defined below) provide the following:

•  pay each of the Named Executive Officers a lump sum of cash equal to three times his or her base annual salary plus his or her target bonus for the year in which the termination occurs, plus a pro-rated bonus for the portion of the year served prior to termination, in addition to a gross-up payment to pay for any applicable excise taxes,

•  pay each of the Named Executive Officers the unvested balance of his or her 401(k) account, plus three times his or her most recent Company match,

•  continue the Named Executive Officer’s insurance benefits for two years, and

•  provide certain outplacement services.

     A qualifying termination means a termination of employment either involuntarily without cause, or by the executive officer with good reason within two years following a change in control. Pursuant to the agreements “cause” means the following: (i) the willful and intentional material breach by the executive officer of the change in control agreement, (ii) the willful and intentional misconduct or gross negligence in the performance of, or willful neglect of, the executive officer’s duties, or (iii) the conviction of, or plea of guilty or nolo contendere to a felony. “Good reason” means any of the following: (i) any reduction in the amount of the executive officer’s compensation or significant reduction in benefits not generally applicable to similarly situated employees of the Company, (ii) removal of the executive officer from the position held by him or her immediately prior to the change in control, or (iii) transfer of the executive officer’s principal place of employment.

     Also, each officer has the right, at any time during the thirteenth month after a change in control, to voluntarily terminate his or her employment for any reason and receive the same benefits as if he or she had been terminated by us or by a successor company during the two years after a change in control as described above.

     The agreements also contain:

•		a covenant pursuant to which the executives have agreed not to compete with us for two years after termination,
•		a confidentiality provision pursuant to which the executives have agreed not to divulge any of our confidential information, and
•		agreements not to solicit any of our employees for two years after termination.

     All of the Named Executive Officers’ unvested stock options and stock units would automatically vest immediately upon a change in control.

     If a change in control occurred as of December 29, 2006, and our Named Executive Officers’ rights under the agreements were triggered, they would receive approximately the following:

Estimated Benefits Upon Termination Following a Change in Control

		Severance				Early Vesting of				Early Vesting								Estimated Tax
Name		Amount (1)				Restricted Stock (2)				of Stock Options (3)				Other (4)				Gross Up (5)				Total
Gregg L. Engles		$	7,946,400			$	7,928,853			$	7,519,151			$	70,000			$	—			$	23,464,404
Jack F. Callahan			2,372,400				1,670,060				537,900				70,000				1,878,466				6,528,826
Michelle P. Goolsby			2,652,900				1,582,202				1,449,604				70,000				—				5,754,706
Alan J. Bernon			3,374,400				3,734,719				1,852,432				70,000				3,515,766				12,547,318
Pete Schenkel (6)			3,501,400				1,041,483				2,747,452				—				—				7,290,335

Executive Severance Pay Plan

The Executive Severance Pay Plan provides severance benefits to certain designated officers, including the Named Executive Officers (other than the Chief Executive Officer), who are involuntarily terminated, other than for cause (as defined below), or who voluntarily terminate his or her employment for good reason (as defined below). Generally, the officer will be entitled to receive a payment in an amount up to two times the sum of his or her base salary and target bonus, plus a pro rata portion of his or her target bonus for the fiscal year in which the termination occurs. The Severance Plan administrator may impose certain conditions on a participant’s right to receive benefits under the plan including the execution of a release, non-compete agreement, non-solicitation agreement and/or non-disclosure agreement. In addition, participants would receive a cash payment for the in-the-money value of option awards and restricted stock units that would vest up to 24 months following the date of severance based on the average closing price of Dean Foods Company stock for 45 days preceding the date of severance. The participant would also be entitled to payments to be used to pay COBRA health benefits and to obtain outplacement services.

     Under the Severance Plan “cause” means the following: (i) the breach by the executive officer of any written covenant or agreement with the Company, (ii) the willful and intentional misconduct or gross negligence in the performance of, or willful neglect of, the executive officer’s duties, (iii) the conviction of or plea of guilty or of nolo contendere to a felony or any other crime which makes the executive officer’s continued employment untenable, or (iv) the executive officer’s failure to comply with or breach of the Company’s code of ethics. “Good reason” means any of the following: (i) any reduction in the amount of the executive officer’s compensation or significant reduction in benefits not generally applicable to similarly situated employees of the Company, (ii) removal of the executive officer from the position held by him or her immediately prior to the change in control, or (iii) the transfer of the executive officer’s principal place of employment.

     In the event the Named Executive Officers’ rights under the Severance Plan were triggered as of December 29, 2006, they would receive approximately the following:

Estimated Payments Upon a Qualified Termination

						Early Vesting				Early Vesting
		Severance				of Restricted				of Stock
Name		Amount(1)				Stock(2)				Options(3)				Other(4)				Total
Gregg L. Engles			—				—				—				—				—
Jack F. Callahan			1,564,000				931,078				390,137				50,000				2,935,215
Michelle P. Goolsby			1,751,000				1,137,026				1,373,062				50,000				4,311,088
Alan J. Bernon			2,232,000				2,704,952				1,530,370				50,000				6,517,323
Pete Schenkel (6)			3,475,000				—				—				—				3,475,000

Agreements with Named Executive Officers

Retirement Agreement with Barry Fromberg

On April 1, 2006, Barry Fromberg, our former Chief Financial Officer, retired. On November 7, 2005, we entered into an Employment and Release Agreement with Mr. Fromberg regarding his retirement.

     Pursuant to the agreement, Mr. Fromberg agreed to continue in his position until April 1, 2006 (the “Retirement Date”) and we agreed to continue to pay him his regular salary, at the rate of $435,000 per year, until the Retirement Date, and he continued to be eligible to participate in our benefit plans. In addition, we agreed to pay him a prorated bonus for the three months that he was employed in 2006, but only to the extent that other senior corporate executives became eligible to receive a bonus, which was determined after the end of 2006 in accordance with our Executive Incentive Compensation Plan. Because the other senior corporate executives were eligible, Mr. Fromberg was paid $106,000. Stock awards granted to Mr. Fromberg prior to the date of the agreement that were scheduled to vest prior to the Retirement Date vested in accordance with their terms. Mr. Fromberg had 60 days after the Retirement Date to exercise his vested stock options.

     Mr. Fromberg agreed to make himself available after the Retirement Date to assist us with any transitional issues that may have arisen and/or to assist his successor with any issues that may have arisen. In consideration for his agreement to remain in his position until the Retirement Date, and to assist with transitional issues that may have arisen after the Retirement Date, and in exchange for the release contained in the agreement and Mr. Fromberg’s agreement to abide by the non-solicitation, non-compete and non-disclosure provisions contained in the agreement, we agreed to make certain payments to Mr. Fromberg, and to provide him with certain other benefits. Specifically, we agreed to provide him with the following cash amounts, all of which were paid on October 15, 2006: (1) a payment in an amount equal to approximately $1.4 million (less applicable withholding), or two times the sum of his base annual salary plus his target bonus, (2) a health benefit advance in the amount of $24,000, and (3) a payment in an amount of $25,200, which is three times the amount of his 2005 401(k) match. In addition, on April 15, 2006, we made a payment to Mr. Fromberg in the amount of $1,663,000, which was intended to compensate him for the value of his previously granted stock awards that would have vested in 2007 and 2008 if he were still employed. For unvested options, the amount of the payment was the difference between the market price (as defined below) of our stock and the strike price of the associated option, times the number of shares underlying such options. For unvested stock units, the amount of the payment was equal to the market price of our stock times the number of unvested stock units. “Market price” is defined in the agreement as the highest closing price of our stock during the 30 trading days ending on March 31, 2006. Finally, we will continue to provide Mr. Fromberg the annual physical benefit provided to other executives of the Company.

     Pursuant to the agreement, Mr. Fromberg agreed not to solicit any of our employees or customers for a period of two years after the Retirement Date, and he agreed to maintain the confidentiality of our trade secrets and other confidential information. Finally, the agreement contains a mutual release pursuant to which Mr. Fromberg and the Company have agreed to release one another from all claims that may arise out of or relate to his employment with the Company.

     The agreement can be terminated for “cause,” as defined in the agreement.

Employment Agreements with Pete Schenkel

Pete Schenkel, formerly the President of the Dairy Group, resigned from that position effective December 31, 2005. On December 2, 2005, we entered into an employment agreement (the “Employment Agreement”) with Mr. Schenkel pursuant to which he became Vice Chairman of our Board of Directors effective January 1, 2006. As Vice Chairman, he has and will continue to assist in the transition of leadership of the Dairy Group through the end of 2007. On December 2, 2005, we also entered into an Independent Contractor and Noncompetition Agreement (the “Consulting and Noncompetition Agreement”) with Mr. Schenkel under which we will generally retain access to his services through December 31, 2009, and he has agreed to certain restrictive covenants that will preclude him from competing with us or otherwise interfering with our relationships with our customers and employees.

Employment Agreement

Mr. Schenkel’s term as Vice Chairman is expected to continue through December 31, 2007, at which time he will resign as Vice Chairman and as an employee. The Employment Agreement, however, permits Mr. Schenkel to retire prior to December 31, 2007, by providing us at least ten days’ notice (the date he retires as Vice Chairman, whether on or before December 31, 2007, is referred to herein as the “Resignation Date”).

     During the period Mr. Schenkel serves as Vice Chairman, Mr. Schenkel is assisting with various strategic, budgeting and organizational matters pertaining to the Dairy Group and

     working to facilitate a smooth transition of his responsibilities and customer relationships to his successor. Mr. Schenkel’s current Board term will expire May 2009.

     For his services during his continued employment, we paid Mr. Schenkel an annual base salary of $500,000 for 2006 and will pay him $350,000 for 2007, provided he does not resign earlier. His target bonus is 50% of his annual base salary for each year (prorated to reflect his actual period of employment if he resigns prior to the end of the year). Payment of his bonus will be subject to the achievement of certain operating and other individual targets to be established by our Board of Directors. In 2007, we paid him a $457,500 bonus that was earned in 2006. Pursuant to the agreement, in January 2006 we granted him 385,744 (as adjusted for the special cash dividend) stock options with an exercise price of $25.68, as adjusted for the special cash dividend paid on April 2, 2007. The options will vest in equal installments over a five-year period, beginning on the date of grant, subject to any earlier vesting that may occur in the event of a change in control of our Company. Continued vesting of the options granted in January 2006 is expressly contingent on Mr. Schenkel’s continuing compliance with the restrictive covenants contained in the Consulting and Noncompetition Agreement. Any portion of the options that vest prior to the termination of Mr. Schenkel’s employment shall remain exercisable for a period of no less than twelve months following termination of his employment, unless he is terminated for cause (as defined in the Employment Agreement), in which case they will be exercisable only for as long as provided in the award agreement. If his employment is terminated for cause, any unvested options will be forfeited.

     Through the Resignation Date, Mr. Schenkel will continue to be eligible to participate in all employee benefit plans that are available to our senior-level executives and to receive all other benefits currently provided to him. Stock options and other equity-based awards granted to Mr. Schenkel prior to January 1, 2006 will fully vest on the Resignation Date, subject to any earlier vesting provided for in any award agreements or in the change in control agreement between us and Mr. Schenkel described elsewhere in this proxy statement, and thereafter they will expire according to the terms of our long-term incentive plans and Mr. Schenkel’s award agreements.

     We may terminate Mr. Schenkel’s employment at any time with or without cause. If, prior to the Resignation Date, we terminate his employment for any reason other than for cause, or if Mr. Schenkel terminates his employment for good reason (as defined in the Employment Agreement): (1) he will receive a lump sum payment of $4.1 million, which is equal to the base salary and target bonus to which he would otherwise have been entitled

through December 31, 2007, and the payments that would have been payable to him through December 31, 2009, under the Consulting and Noncompetition Agreement, less lawful deductions, (2) any unvested portion of his stock options granted in 2006 will continue to vest in equal installments after his termination, and shall remain exercisable for a period of no less than twelve months from their vest date and (3) he will be paid his accrued and any unpaid base salary and target bonus through the date of termination. In addition, he will have no obligation following his termination to provide us the advisory services contemplated in the Consulting and Noncompetition Agreement and his obligations with regard to the noncompetition and nonsolicitation covenants in the Consulting and Noncompetition Agreement will cease as of the date of such termination.

     If his employment is terminated for cause, (1) he will be paid any accrued and any unpaid base salary through the date of termination (but no other severance or other payment will be made), and any unvested portion of his stock options granted in 2006 will be automatically forfeited; (2) any portion of his stock options granted in 2006 which are vested prior to his termination for cause shall remain exercisable for the period specified above; and (3) he shall have no obligation following his termination to provide us the advisory services contemplated in the Consulting and Noncompetition Agreement, and we shall have no obligation to pay him the fees for his consulting services under such Agreement, including any of the benefits that would have otherwise been made available to him following the Resignation Date pursuant to such Agreement.

Consulting and Noncompetition Agreement

Pursuant to the Consulting and Noncompetition Agreement, Mr. Schenkel has agreed to provide general advice and consultation to our Chief Executive Officer and to the Dairy Group President on matters of strategy and execution, and to provide assistance with respect to such specific operating initiatives as may be required from time to time, from the Resignation Date until December 31, 2009. For his services under the Consulting and Noncompetition Agreement, we pay Mr. Schenkel at the rate of $200,000 per year. We also provide him with a continued car allowance, club membership, life insurance, and medical coverage. In the event that his employment under the Employment Agreement is terminated by us without cause or by Mr. Schenkel for good reason or the advisory period contemplated by the Consulting and Noncompetition Agreement is ended by us prior to December 31, 2009 and, in any such case, he has not breached any of his obligations in the Consulting and Noncompetition Agreement, we will pay him a single lump sum payment, six months and one day after his termination, of $400,000, which is equal to the aggregate amount of the fees that would have been payable during the remainder of the advisory period contemplated by the Consulting and Noncompetition Agreement.

     The Consulting and Noncompetition Agreement also contains Mr. Schenkel’s agreement (1) to maintain the confidentiality of our trade secrets and other confidential information, (2) not to compete with our dairy operations for a period of two years after the termination of his services (including his services under the Consulting and Noncompetition Agreement), and (3) not to solicit or interfere with our relationships with our employees or our customers. In consideration for the confidentiality, non-compete and non-solicit agreements, we paid Mr. Schenkel $280,000 on January 2, 2006, and $425,000 on January 2, 2007, and we have agreed to pay him an additional $425,000 on each of January 2, 2008, January 2, 2009, January 2, 2010, January 2, 2011 and January 2, 2012. As noted above in the description of his Employment Agreement, any unpaid installments will be paid in a lump sum in the event of Mr. Schenkel’s termination of his employment under the Employment Agreement by us without cause or by him for good reason. Such unpaid amounts also will be paid in a lump sum in the event of his death.

How much stock do our executive officers and directors own?

The following table presents information as of March 23, 2007 concerning:

•		Each director and each Named Executive Officer, and
•		All directors and executive officers as a group.

		Number of Shares				Exercisable
Beneficial Owner		Common Stock				Options (1)				Total				Percent (2)				Notes
Alan J. Bernon			912,899				584,883				1,497,782				1.01	%
Jack F. Callahan			—				53,882				53,882				0.03	%
Lewis M. Collens			23,634				87,303				110,937				0.06	%
Tom C. Davis			16,779				126,459				143,238				0.08	%
Gregg L. Engles			2,642,459				3,585,556				6,228,015	(3)			3.93	%
Barry A. Fromberg			12,530				—				12,530				0.01	%
Michelle P. Goolsby			32,819				970,528				1,003,347				0.54	%
Stephen L. Green			49,486				283,084				332,570				0.19	%
Joseph S. Hardin, Jr.			58,095				221,305				279,400				0.16	%			(4	)
Janet Hill			13,140				100,914				114,054				0.06	%
Ronald Kirk			10,952				48,147				59,099				0.03	%
Ronald H. Klein			23,005				261,627				284,632				0.16	%
John S. Llewellyn, Jr.			28,197				122,637				150,834				0.09	%			(5	)
Ronald L. McCrummen			9,812				51,283				61,095				0.03	%
John R. Muse			248,671				243,928				492,599				0.32	%			(6	)
Hector M. Nevares			26,670				503,274				529,944				0.29	%
Joseph E. Scalzo			—				120,010				120,010				0.06	%
Pete Schenkel			76,239				2,175,712				2,251,951				1.20	%
Jim L. Turner			204,877				306,079				510,956				0.32	%			(7	)
Executive Officers and Directors as a Group (19 persons)			4,390,264				9,846,611				14,236,875				8.56	%

Do we have any holders who beneficially own more than 5% of our common stock?

The following table sets forth the information as of March 23, 2007, regarding persons or groups known to us to be beneficial owners of more than 5% of our common stock.

		Number of				Percentage of Common
Name and Address		Common Shares				Stock Outstanding
of Beneficial Owner		Beneficially Owned				on March 23, 2007
Barclays Global Investors, NA(1) 45 Fremont Street San Francisco, CA 94105			11,132,861				6.35	%
Iridian Asset Management LLC(2) 276 Post Road West Westport, CT 06880-4704			7,250,947				5.60	%

(1)

The address and number of shares of our common stock beneficially owned by Barclays Global Investors, NA and certain of its affiliates are based on the Schedule 13G filed by Barclays Global Investors, NA and its affiliates with the Securities and Exchange Commission on January 23, 2007. In addition to Barclays Global Investors, NA, affiliates included in the filing are Barclays Global Fund Advisors, Barclays Global Investors, Ltd, Barclays Global Investors Japan Trust and Banking Company Limited, and Barclays Global Investors Japan Limited. According to the filing, the reporting entities, taken as a whole, had sole voting power with respect to 9,792,873 shares and sole dispositive power with respect to 11,132,861 shares, and did not have shared voting or dispositive power as to any shares.

(2)

The address and number of shares of our common stock beneficially owned by Iridian Asset Management LLC (“Iridian”) are based on the Schedule 13G filed by reporting persons with the Securities and Exchange Commission on February 5, 2007. In addition to Iridian Asset Management LLC other reporting entities included in the filing are The Governor and Company of the Bank of Ireland, BIAM Holdings, Banc Ireland US Holdings, Inc. and BIAM US Inc. The filing states that Iridian has power to vote or to direct the vote of 7,250,947 shares.

What are our policies regarding transactions with related persons and what relationships do we have with our executive officers and directors?

Transactions with Related Persons

Under our Code of Ethics, directors, officers and employees are expected to make business decisions and take actions based upon the best interests of the Company and not based upon personal relationships or benefits.

     The Board of Directors has recognized that some transactions, arrangements and relationships present a heightened risk of an actual or perceived conflict of interest and has adopted a written policy governing these transactions. This policy governs any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which our Company was, is or will be a participant and the amount involved exceeds $120,000, and in which any of the following persons had, has or will have a direct or indirect material interest:

•		our directors, nominees for director or executive officers;
•		any person who is known to be the beneficial owner of more than 5% of any class of our voting securities;
•		any immediate family member of any of the foregoing persons; and
•		any entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.

     The Governance Committee of the Board of Directors is responsible for reviewing and approving these transactions.

     Any transaction proposed to be entered into by the Company with an interested person must be reported to our General Counsel and reviewed and approved by the Governance Committee in accordance with the terms of this Policy, prior to effectiveness or consummation of the transaction, whenever practicable. If advance approval is not practicable under the circumstances, the Governance Committee will review and, in its discretion, may ratify the interested transaction at the next meeting of the Governance Committee. In the event management becomes aware of any further transactions subsequent to that meeting, such transactions may be presented to the Governance Committee for approval at the next Governance Committee meeting, or where it is not practicable or desirable to wait until the next Governance Committee meeting, to the Chair of the Governance Committee (who has delegated authority to act between Committee meetings) subject to ratification by the Governance Committee at its next meeting.

     Any transaction with an interested person previously approved by the Governance Committee or otherwise already existing that is ongoing in nature shall be reviewed by the Governance Committee annually.

     The Governance Committee (or the Chair) will approve only those transactions that are in, or are not inconsistent with, the best interests of the Company and our shareholders, as the Governance Committee (or the Chair) determines in good faith in accordance with its business judgment. In addition, the transaction must be on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party.

     All transactions below have been considered and approved by the Governance Committee pursuant to this policy.

     Other transactions considered by our Board in assessing director independence, but which do not involve a direct or indirect material interest for the related person, are described in this proxy statement under the heading “Who are our independent directors?”

Real Property Lease

We lease the land for our Franklin, Massachusetts, plant from a partnership owned by Alan Bernon and his family. Our lease payments during 2006 totaled $700,000.

Minority Interest in Consolidated Container Holding Company

We own an approximately 25% minority interest in Consolidated Container Company through our subsidiary Franklin Plastics, Inc., in which we own an approximately 99% interest. Alan Bernon and his brother, Peter Bernon, collectively own the remaining approximately 1% ownership interest of Franklin Plastics, Inc. Consolidated Container Company is one of the nation’s largest manufacturers of rigid plastic containers and our largest supplier of plastic bottles and bottle components. We have owned our minority interest since July 1999, when we sold our plastic packaging operations to Consolidated Container Company. During 2006, we spent approximately $284.4 million on products purchased from Consolidated Container Company.

Professional Fees

During 2006, we paid legal fees and expenses of approximately $565,000 to Locke Liddell & Sapp LLP, where Michelle Goolsby’s husband is a partner, for legal services rendered on various matters.

Employment of Family Members

Pete Schenkel’s son and son-in-law are both employed by our Dairy Group. Stephen Schenkel, Pete Schenkel’s son, is the Sales Manager for Schepps Dairy and received total cash compensation of $154,500 in 2006 (including salary and bonus earned for 2006), in addition to benefits available to all similarly situated employees. In January 2006, he was granted options to purchase 1,763 (as adjusted for the special cash dividend) shares of our common stock. Craig Roberts, Pete Schenkel’s son-in-law, is General Manager of Oak Farms Dairy, and received total cash compensation of $180,111 in 2006 (including salary and bonus earned for 2006), in addition to benefits available to all similarly situated employees. In January 2006, he was granted options to purchase 1,763 (as adjusted for the special cash dividend) shares of our common stock. Options granted to Stephen Schenkel and Craig Roberts have an exercise price of $25.68 and will expire on January 13, 2016.

Have our equity compensation plans been approved by our stockholders?

Our equity compensation plans have been approved by our stockholders. In addition, from time to time we grant inducement grants outside our approved plans as permitted by New York Stock Exchange rules. The following table contains certain information about our plans as of December 31, 2006.

Number

Number of

of Securities

Securities

Weighted-

Remaining

to be Issued

Average

Available for

Upon Exercise

Exercise Price

Future Issuance

of Outstanding

of Outstanding

Under Equity

Options, Warrants

Options, Warrants

Compensation

Plan Category

and Rights

and Rights

Plans

Equity compensation plans approved by security holders

22,875,097

14.64

5,318,977

Equity compensation plans not approved by security holders

881,333

(1)

21.52

(1)

318,667

(2)

Total

23,756,430

14.89