SCHEDULE 14A INFORMATION
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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BOB EVANS FARMS, INC.
_______________________________________________
(Name of Registrant as Specified In Its Charter)
__________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[BOB EVANS FARMS(R) LOGO]
3776 S. HIGH ST.
COLUMBUS, OHIO 43207
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Monday, Sept. 13, 2004, at 9 a.m.
Southern Theatre
21 E. Main St.
Columbus, Ohio 43215
July 27, 2004
Dear Fellow Stockholders:
We are pleased to invite you to the annual meeting of stockholders of Bob Evans
Farms, Inc. on Monday, Sept. 13, 2004, 9 a.m., Eastern Daylight Time, at the
Southern Theatre at 21 E. Main St. in Columbus, Ohio. Business for the meeting
includes:
(1) electing three directors to serve for terms of three years each;
(2) ratifying the selection of Ernst & Young LLP as Bob Evans Farms, Inc.'s
independent registered public accounting firm for the current fiscal year;
and
(3) transacting other business that may properly come before the meeting.
Juice, coffee and pastries will be available between 8 a.m. and 9 a.m. We hope
you will take this opportunity to become acquainted with the officers and
directors of your company.
Only stockholders of record at the close of business on July 15, 2004, will be
entitled to vote by proxy or in person at the annual meeting. We look forward to
seeing you at the meeting.
Sincerely,
/s/ Stewart K. Owens
--------------------
Stewart K. Owens
Chairman of the Board and
Chief Executive Officer
BOB EVANS FARMS, INC.
3776 S. HIGH ST.
COLUMBUS, OHIO 43207
GENERAL INFORMATION
The board of directors of Bob Evans Farms, Inc. (the "company") is soliciting
your proxy in connection with our 2004 annual meeting of stockholders. This
proxy statement summarizes information that you will need in order to vote.
MAILING
We began mailing this proxy statement and the enclosed proxy card on or about
July 27, 2004, to Bob Evans Farms stockholders of record at the close of
business on July 15, 2004. We also are sending the Bob Evans Farms, Inc. 2004
annual report, which includes financial statements for the fiscal year ended
April 30, 2004.
MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS
The Securities and Exchange Commission ("SEC") permits companies and
intermediaries (e.g., brokers) to deliver one copy of the annual report and
proxy statement to any household at which two or more stockholders reside if the
company believes those stockholders are members of the same family or otherwise
share the same address. This process, which is commonly referred to as
"householding," reduces the volume of duplicative information stockholders
receive and reduces the company's printing and mailing expenses. Each
stockholder will continue to receive a separate proxy card.
In accordance with a notice sent in 2003 to eligible stockholders who share the
same address, the company and a number of brokers are sending only one proxy
statement and annual report to stockholders residing at the same address, unless
different instructions have been received from an affected stockholder. The
company will promptly deliver, upon written or oral request, a separate copy of
this proxy statement and/or the annual report to any stockholder residing at an
address to which only one copy was mailed. Requests for additional copies should
be directed to the Stock Transfer Department at Bob Evans Farms, Inc., 3776 S.
High St., Columbus, Ohio 43207, or (614) 492-4952.
Stockholders residing at the same address and currently receiving only one copy
of the proxy statement and annual report may request that multiple copies of
these documents be delivered in the future by contacting their brokers or the
company at the address or telephone number set forth above.
Stockholders residing at the same address who currently receive multiple copies
of the proxy statement and annual report may request that only a single copy of
these materials be mailed in the future by contacting their brokers or the
company at the address or telephone number set forth above.
VOTING INFORMATION
WHO MAY VOTE?
Only stockholders of record at the close of business on July 15, 2004, are
entitled to vote at the annual meeting or any adjournment(s) of the meeting. At
the close of business on July 15, 2004, there were 35,288,938 shares of common
stock, par value $.01 per share, outstanding. Each common share entitles the
holder to one vote per each item to be voted upon at the annual meeting.
HOW DO I VOTE?
Whether or not you plan to attend the annual meeting, we urge you to vote in
advance by proxy. To do so, you may:
- call (800) 690-6903,
- log onto www.proxyvote.com or
- complete, sign and date the enclosed proxy card and return it promptly
in the envelope provided.
The deadline for transmitting voting instructions electronically via the
Internet or telephonically is 11:59 p.m., Eastern Daylight Time, on Sept. 12,
2004. The Internet and telephone voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been properly
recorded. If you vote through the Internet, you may incur costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies.
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If you plan to attend the annual meeting and vote in person, a ballot will be
available when you arrive. If your shares are held in the name of your broker,
bank or other holder of record, you must bring an account statement or letter
from the broker, bank or other holder of record indicating that you were the
beneficial owner of the shares on July 15, 2004.
HOW WILL MY SHARES BE VOTED?
Those common shares represented by properly executed proxies or properly
authenticated votes recorded electronically through the Internet or by telephone
that are received prior to the annual meeting and not revoked will be voted as
you direct. If you submit a valid proxy prior to the annual meeting, but do not
complete the voting instructions on the proxy, the persons named as proxies will
vote the shares represented by your proxy as follows:
- FOR the election of the nominees as directors listed under "PROPOSAL 1:
ELECTION OF DIRECTORS."
- FOR ratification of the selection of Ernst & Young LLP as Bob Evans
Farms' independent registered public accounting firm as set forth in
"PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM."
In addition, if other matters are properly presented for voting at the annual
meeting, the persons named as proxies will vote on those matters in accordance
with their best judgment. At the time this proxy statement went to press, we had
not received notice of any other matters that may properly be presented for
voting at the annual meeting.
MAY I CHANGE MY VOTE?
Yes, you may revoke a proxy at any time before it is voted by any of the
following ways:
- sending written notice to the secretary of the company at the address
given previously,
- submitting a later-dated proxy which must be received by the company
prior to the annual meeting,
- casting a new vote via the Internet or by calling (800) 690-6903 or
- attending the annual meeting and giving notice of such revocation in
person if your shares are held in your name. If your shares are held in
the name of your broker, bank or other holder of record and you wish to
revoke your proxy in person, you must bring an account statement or
letter from the broker, bank or other holder of record indicating that
you were the beneficial owner of the shares on July 15, 2004, the
record date for voting. Simply attending the annual meeting will not
constitute revocation of a proxy.
WHO PAYS THE COST OF PROXY SOLICITATION?
The company will pay the expenses of soliciting proxies other than the Internet
access and telephone usage charges described above. Officers and employees of
the company may solicit proxies by further mailings, by telephone or by personal
contact without receiving any additional compensation for such solicitations.
The company will pay the standard charges and expenses of brokerage houses,
voting trustees, banks, associations and other custodians, nominees and
fiduciaries for forwarding proxy materials to the beneficial stockholders.
WHAT IF MY SHARES ARE HELD IN STREET NAME THROUGH A BROKER?
If you hold your common shares in "street name" with a broker, bank or other
holder of record, you should review the information provided to you by such
holder of record. This information will set forth the procedures you need to
follow in instructing the holder of record how to vote your "street name" common
shares and how to revoke previously given instructions.
WHAT CONSTITUTES A QUORUM?
Under our by-laws, a quorum is a majority of the voting power of the outstanding
shares of stock entitled to vote. Common shares that have the authority to vote
withheld and broker non-votes will be counted as present for quorum purposes.
WHAT VOTE IS NECESSARY TO APPROVE THE PROPOSALS PRESENTED AT THE ANNUAL MEETING?
Under Delaware law and our bylaws, the three nominees for election as class III
directors receiving the greatest number of votes "for" election will be elected
as class III directors. Ratification of the selection of Ernst & Young LLP as
the company's independent registered public accounting firm requires the
affirmative vote of the majority of the shares of common stock present or
represented at the annual meeting.
For the election of directors, withheld votes do not affect whether a nominee
has received sufficient votes to be elected. For purposes of determining whether
the stockholders have approved matters other than the election of directors,
abstentions are treated as shares present or represented and voting, so
abstaining will have the same effect as a negative vote. Broker non-votes, which
are proxies representing shares held by brokers, banks and other holders of
record who do not have discretionary authority to vote on a particular matter
and who have not received voting
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instructions from the beneficial owners of the shares, are not treated as
present or represented for the purpose of determining whether the stockholders
have approved that matter, but they are counted as present for the purpose of
determining a quorum at the annual meeting. Banks, brokers and other holders of
record have discretionary authority to vote their clients' shares on "routine"
proposals, such as the uncontested election of directors, even if they do not
receive voting instructions from their clients. They cannot, however, vote their
clients' shares on other "non-routine" matters without instructions from their
clients.
STOCK OWNERSHIP
The following table shows the only stockholders known to the company to be the
beneficial owners of more than 5 percent of the company's outstanding common
shares.
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
- ------------------------------ ----------------------- -------------------
Ariel Capital Management, Inc. 5,858,394(2) 16.6%
200 E. Randolph Dr., Ste. 2900
Chicago, I11. 60601
Barclays Global Investors, NA 2,399,620(3) 6.8%
Barclays Global Fund Advisors
45 Freemont St.
San Francisco, Calif. 94105
(1) The percent of class is based upon 35,288,938 common shares outstanding on
July 15, 2004.
(2) Includes 5,858,394 shares as to which Ariel Capital Management, Inc.
("Ariel") has sole investment power and 4,855,619 shares as to which Ariel
has sole voting power. Ariel is a registered investment adviser, and all
of these common shares are owned by its investment advisory clients, no
one of which, to the knowledge of Ariel, owns more that 5 percent of the
company's outstanding stock. John W. Rogers Jr., chairman and chief
executive officer of Ariel, has disclaimed beneficial ownership of the
common shares held by Ariel. All of the foregoing information regarding
Ariel's ownership interest in the company is based on information
contained in a Schedule 13G filed with the SEC by Ariel on Feb. 17, 2004.
(3) Includes 1,947,348 shares beneficially owned by Barclays Global Investors,
NA ("Barclays Global Investors"), as to which Barclays Global Investors
has sole investment and voting power over 1,755,346 shares and 452,272
shares beneficially owned by Barclays Global Fund Advisors as to which
Barclays Global Fund Advisors has sole investment and voting power. All of
the common shares reported are held by Barclays Global Investors and
Barclays Global Fund Advisors in trust accounts for the economic benefit
of the beneficiaries of those accounts. All of the foregoing information
regarding Barclays Global Investors' and Barclays Global Fund Advisors'
ownership interests in the company is based on information contained in a
Schedule 13G filed with the SEC by Barclays Global Investors and Barclays
Global Fund Advisors on Feb. 17, 2004.
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The following table summarizes the company's common shares beneficially owned by
each director and each executive officer named in the summary compensation table
(page 12) and by all directors and executive officers of the company as a group,
as of July 15, 2004:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
--------------------------------------------
COMMON SHARES WHICH
CAN BE ACQUIRED
UPON EXERCISE OF
NAME OF BENEFICIAL COMMON SHARES OPTIONS EXERCISABLE PERCENT OF
OWNER OR GROUP PRESENTLY HELD WITHIN 60 DAYS TOTAL CLASS(2)
- ----------------------- -------------- -------------- ----- --------
Scott D. Colwell(3) 2,051(4) 19,540 21,591 (*)
Larry C. Corbin(3) 45,793(5) 222,360 268,153 (*)
Daniel E. Evans 104,441(6) 270,224 374,665 1.1%
Daniel A. Fronk 23,478(7) 11,405 34,883 (*)
Michael J. Gasser 8,571 11,405 19,976 (*)
E.W. (Bill) Ingram III 14,304 11,405 25,709 (*)
Cheryl L. Krueger 1,919 2,388 4,307 (*)
G. Robert Lucas 10,639(8) 11,405 22,044 (*)
Stewart K. Owens(3) 212,124(9) 455,887 668,011 1.9%
Robert E.H. Rabold 7,184(10) 8,705 15,889 (*)
Donald J. Radkoski(3) 13,864(11) 138,578 152,442 (*)
Roger D. Williams(3) 23,540(12) 76,575 100,115 (*)
All current executive 486,410(13) 1,324,295 1,810,705 5.1%
officers and directors
as a group (18 persons)
* Represents ownership of less than 1% of the outstanding common shares of
the company
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power with respect to all of the common shares reflected in the
table. All fractional common shares have been rounded to the nearest whole
common share.
(2) The percent of class is based on 35,288,938 common shares outstanding on
July 15, 2004, and includes the number of common shares that the named
person has the right to acquire beneficial ownership of upon the exercise
of stock options exercisable within 60 days of July 15, 2004.
(3) Executive officer of the company named in the summary compensation table.
Mr. Corbin retired as the company's executive vice president of restaurant
operations effective July 1, 2004.
(4) Represents common shares of the company held jointly by Mr. Colwell and
his spouse, as to which he shares voting and investment power.
(5) Includes 222 common shares held by Mr. Corbin's spouse, as to which she
has sole voting and investment power. Mr. Corbin also holds one nonvoting
preferred share of BEF REIT, Inc., a subsidiary of the company ("BEF
REIT"), as to which he has sole investment power. Mr. Corbin's spouse
holds one nonvoting preferred share of BEF REIT, as to which she has sole
investment power.
(6) Includes 37,226 common shares held by Evans Enterprises, Inc. In his
capacity as chairman, chief executive officer and sole shareholder of
Evans Enterprises, Inc., Mr. Evans may be deemed to have sole voting and
investment power with respect to the common shares held by that
corporation. The number shown also includes 1,014 common shares held by
Mr. Evans' spouse, as to which she has sole voting and investment power;
307 common shares held by Mr. Evans' stepson, as to which he has sole
voting and investment power and 307 common shares held by Mr. Evans'
stepdaughter, as to which she has sole voting and investment power. Mr.
Evans disclaims beneficial ownership of the common shares held by his
stepchildren. Additionally, Mr. Evans holds one nonvoting preferred share
of BEF REIT, as to which he has sole investment power.
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(7) Includes 5,133 common shares held in the Josephine A. Fronk Trust for
which Mr. Fronk serves as trustee and has sole voting and investment
power.
(8) Includes 3,716 common shares held by Mr. Lucas in a retirement plan
account for the benefit of Mr. Lucas.
(9) Mr. Owens holds one nonvoting preferred share of BEF REIT, as to which he
has sole investment power. Mr. Owens' spouse holds one nonvoting preferred
share of BEF REIT, as to which she has sole investment power. Mr. Owens
also holds two nonvoting preferred shares of BEF REIT as custodian for the
benefit of his children.
(10) Includes 650 shares held in a trust for the benefit of Mr. Rabold's
grandchildren for which Mr. Rabold's spouse serves as trustee and has sole
voting and investment power.
(11) Includes 35 common shares held by Mr. Radkoski as custodian for the
benefit of his children. Additionally, Mr. Radkoski holds one nonvoting
preferred share of BEF REIT, as to which he has sole investment power. Mr.
Radkoski also holds two nonvoting preferred shares of BEF REIT as
custodian for the benefit of his children.
(12) Mr. Williams holds one nonvoting preferred share of BEF REIT, as to which
he has sole investment power. Mr. Williams' spouse holds one nonvoting
preferred share of BEF REIT, as to which she has sole investment power.
(13) See notes (4) through (12) above. As a group, the current directors and
executive officers of the company and their immediate family members who
reside with them hold 24 nonvoting preferred shares of BEF REIT.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The company's directors, executive officers and any persons holding more than 10
percent of the company's outstanding common shares are required to report their
initial ownership of common shares and any subsequent changes in their ownership
to the SEC. Specific due dates have been established by the SEC, and the company
is required to disclose in this proxy statement any late reports. Based on its
review of (1) Section 16(a) reports filed on behalf of these individuals for
their transactions during the company's 2004 fiscal year and (2) documentation
received from one or more of these individuals that no annual Form 5 reports
were required to be filed for them for the company's 2004 fiscal year, the
company believes that all SEC filing requirements were met.
PROPOSAL 1: ELECTION OF DIRECTORS
There are currently nine members of the board of directors. Based on the bylaws
of the company, the directors have been divided into three classes of three
directors each. Class I directors currently serve until the annual meeting in
2005, class II directors currently serve until the annual meeting in 2006, and
class III directors currently serve until the annual meeting in 2004. At the
annual meeting, three class III directors will be elected for three-year terms.
Based on the recommendation of the nominating and corporate governance
committee, the board of directors has designated Daniel E. Evans, Michael J.
Gasser and E.W. (Bill) Ingram III as nominees for election as class III
directors of the company for terms expiring in 2007. The common shares
represented by all valid proxies will be voted as specified, or if no
instructions are given, for the board's nominees. The board of directors
believes that all of the nominees will be available and able to serve if elected
to the board. However, if a nominee is unavailable for election, the persons
designated as management proxies will have complete discretion to vote for the
remaining nominees, as well as any substitute nominee(s) proposed by the board
of directors. Under Delaware law and the company's bylaws, the three nominees
for election as class III directors receiving the greatest number of votes will
be elected as class III directors.
The following table shows the nominees for election to the board of directors,
the directors of the company whose terms in office will continue after the
annual meeting and information about each nominee and continuing director.
Unless otherwise indicated, each person has held his or her principal occupation
for more than five years.
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THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE ELECTION OF ALL NOMINEES LISTED BELOW.
NAME, AGE PRINCIPAL OCCUPATION FOR PAST
AND YEAR BECAME DIRECTOR FIVE YEARS AND OTHER INFORMATION
------------------------ --------------------------------
NOMINEES - TERMS TO EXPIRE IN 2007 (CLASS III)
Daniel E. Evans, age 67 Retired Chairman since 2001; Chairman of
Director since 1957. the Board from 2000 to 2001; Chairman of
the Board, Chief Executive Officer and
Secretary from 1971 to 2000; in each
case of the company.
Michael J. Gasser, age 53 Chairman of the Board and Chief
Director since 1997. Executive Officer since 1994 of Greif,
Inc., a manufacturer of shipping
containers and containerboard, Delaware,
Ohio.
E.W. (Bill) Ingram III, age 53 President and Chief Executive Officer
Director since 1998. since 1972 of White Castle System, Inc.,
a quick-service hamburger chain,
Columbus, Ohio.
CONTINUING DIRECTORS - TERMS TO EXPIRE IN 2005 (CLASS I)
Daniel A. Fronk, age 68 Retired Senior Executive Vice President
Director since 1981. and Board Member since 1997 of The Ohio
Company, an investment banking firm,
Columbus, Ohio.
Cheryl L. Krueger, age 52 President and Chief Executive Officer
Director since 1993. since 1986 of Cheryl & Co., Inc., a
manufacturer and retailer of gourmet
foods and gifts, Columbus, Ohio.
G. Robert Lucas, age 60 Trustee since 2002 of The Jeffrey
Director since 1986. Trusts, trusts for the descendants of
Joseph A. Jeffrey; Of Counsel Attorney
from 2001 to 2002 of Vorys, Sater,
Seymour and Pease LLP, Attorneys at Law,
Columbus, Ohio; Executive Vice
President, General Counsel and Secretary
from 1997 to 2001 of The Scotts Company,
a manufacturer of lawn and garden
products, Marysville, Ohio.
CONTINUING DIRECTORS - TERMS TO EXPIRE IN 2006 (CLASS II)
Larry C. Corbin, age 62 Retired Executive Vice President of
Director since 1981. Restaurant Operations since 2004;
Executive Vice President of Restaurant
Operations from 1995 to 2004; in each
case of the company.
Stewart K. Owens, age 49 Chairman of the Board, Chief Executive
Director since 1987. Officer, President and Chief Operating
Officer since 2001; Chief Executive
Officer, President and Chief Operating
Officer from 2000 to 2001; President and
Chief Operating Officer from 1995 to
2000; in each case of the company.
Robert E.H. Rabold, age 65 Retired Chairman since 2001; Chairman of
Director since 1994. the Board and Chief Executive Officer
from 1988 to 2001; President from 1986
to 2000; in each case of The Motorists
Mutual Insurance Co., Columbus, Ohio.
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THE BOARD AND COMMITTEES OF THE BOARD
INDEPENDENCE OF DIRECTORS
The rules of The Nasdaq Stock Market, Inc. ("Nasdaq") require that a majority of
the company's board of directors be independent directors. The Nasdaq
independence definition includes a series of objective tests, such as that the
director is not an employee of the company and has not engaged in various types
of business dealings with the company. In addition, as further required by the
Nasdaq rules, the board has made a subjective determination as to each
independent director that no relationships exist which, in the opinion of the
board, would interfere with the exercise of independent judgment in carrying out
the responsibilities of a director. In making these determinations, the
directors reviewed and discussed information provided by the directors and the
company with regard to each director's business and personal activities as they
may relate to the company and its management. Based on those reviews and
discussions, the board of directors has determined that at least a majority of
its members are independent. The independent directors of the company are:
Daniel A. Fronk, Michael J. Gasser, E.W. (Bill) Ingram III, Cheryl L. Krueger,
G. Robert Lucas and Robert E.H. Rabold.
In addition, as required by Nasdaq rules, the members of the audit committee
each qualify as "independent" under special standards established by the SEC for
members of audit committees. Each member of the audit committee is able to read
and understand fundamental financial statements, including the company's balance
sheets, income statements and cash flow statements. The audit committee also
includes at least one independent member who is determined by the board to meet
the qualifications of an "audit committee financial expert" in accordance with
SEC rules. The board of directors has determined that Michael J. Gasser
qualifies as an audit committee financial expert. Also, as required by Nasdaq
rules, the members of the nominating and corporate governance committee each
qualify as "independent."
LEAD INDEPENDENT DIRECTOR AND EXECUTIVE SESSIONS
The independent directors of the board appoint a lead independent director who
is responsible for coordinating the activities of the other independent
directors, assisting with board meeting and agenda preparation, serving as a
liaison between management and the independent directors and leading meetings of
independent directors in executive session (without management). Robert E.H.
Rabold currently serves as the lead independent director. In accordance with the
company's Corporate Governance Principles and Nasdaq rules, the independent
directors meet in executive session at the conclusion of each board meeting and
at such other times as the independent directors deem necessary or appropriate.
BOARD MEETINGS AND ATTENDANCE AT ANNUAL MEETINGS OF STOCKHOLDERS
The board of directors and its committees meet throughout the year on a set
schedule and also hold special meetings and act by written consent from time to
time as appropriate. The board of directors held four meetings during the 2004
fiscal year. Each director is expected to attend each meeting of the board and
the committees on which he or she serves. In fiscal 2004, no director attended
less than 75 percent of all the meetings of the board and the committees on
which he or she served.
According to the Corporate Governance Principles adopted by the board of
directors, each director is expected to attend each annual meeting of the
company's stockholders. All of the incumbent directors attended the company's
last annual meeting of stockholders held on Sept. 8, 2003.
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COMMITTEE MEMBERSHIP
The board of directors has delegated various responsibilities and authority to
its standing audit, compensation and nominating and corporate governance
committees. The following table indicates the directors who currently serve on
these committees and the number of committee meetings held during the 2004
fiscal year.
Audit Compensation Nominating and Corporate
Name Committee Committee Governance Committee
---------------------------- --------- --------- --------------------
Larry C. Corbin
Daniel E. Evans
Daniel A. Fronk - - -
Michael J. Gasser Chair -
E.W. (Bill) Ingram III - -
Cheryl L. Krueger - Chair
G. Robert Lucas -
Stewart K. Owens
Robert E.H. Rabold - Chair -
Number of committee meetings
held during fiscal 2004 4 2 1
- committee member
AUDIT COMMITTEE
The audit committee is organized and conducts its business pursuant to a written
charter adopted by the board of directors, which is attached to this proxy
statement as Appendix A. A current copy of the audit committee charter is also
posted on the company's Web site, www.bobevans.com, under "Corporate Governance"
in the "Investors" section. At least annually, the audit committee reviews and
reassesses the adequacy of its charter and recommends any proposed changes to
the board of directors for approval. The audit committee is responsible for:
- overseeing the company's accounting and financial reporting processes,
audits of the company's consolidated financial statements and the
company's internal audit function;
- directly appointing, compensating and overseeing the company's
independent auditors (i.e., independent registered public accounting
firm);
- instituting procedures for the receipt, retention and treatment of
complaints received by the company regarding accounting, internal
accounting controls or auditing matters and the confidential, anonymous
submission by employees of concerns regarding questionable accounting
or auditing matters;
- reviewing procedures designed to identify and, when appropriate,
approving certain "related party" transactions; and
- assisting the board of directors in the oversight of internal control
over financial reporting.
In addition, the audit committee reviews and preapproves all audit services and
permitted non-audit services provided by the independent auditors to Bob Evans
Farms or any of its subsidiaries and ensures that the independent auditors are
not engaged to perform the specific non-audit services prohibited by law, rule
or regulation. The audit committee's report relating to the 2004 fiscal year
begins at page 21.
COMPENSATION COMMITTEE
The compensation committee is organized and conducts its business pursuant to a
written charter adopted by the board of directors, which is posted on the
company's Web site, www.bobevans.com, under "Corporate Governance" in the
"Investors" section. The purpose of the compensation committee is to discharge
the responsibilities of the board relating to compensation of the company's
directors and executive officers and to provide recommendations regarding
management succession. The compensation committee's primary responsibilities
include:
- reviewing with management and approving the general compensation policy
for the company's executive officers and directors and those other
employees of the company and its subsidiaries which the full board
directs;
- reviewing and approving the compensation of the company's executive
officers, including base salary, equity-based awards, bonuses,
long-term compensation and other incentives, in light of goals and
objectives approved by the compensation committee;
8
- administering the company's equity-based compensation plans and
approving awards as required to comply with applicable securities and
tax laws, rules and regulations;
- evaluating the need for, and provisions of, change in control and
employment/severance contracts with the company's executive officers;
- reviewing and making recommendations to the board of directors with
respect to incentive compensation plans and equity-based compensation
plans in accordance with applicable laws, rules and regulations; and
- reviewing and making recommendations to the board of directors and
management regarding the company's organizational structure and
succession plans for the company's executive officers.
The compensation committee's report relating to the 2004 fiscal year begins at
page 17.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The nominating and corporate governance committee is organized and conducts its
business pursuant to a written charter adopted by the board of directors, which
is posted on the company's Web site, www.bobevans.com, under "Corporate
Governance" in the "Investors" section. The purpose of the nominating and
corporate governance committee is to identify and recommend to the board of
directors for nomination, election or appointment qualified individuals for
membership on the board and recommending director candidates for the board's
selection for each meeting of stockholders at which directors are to be elected.
The nominating and corporate governance committee is also responsible for
overseeing and advising the board on corporate governance matters and practices,
including:
- developing, reviewing and assessing corporate governance guidelines and
principles;
- reviewing and assessing the company's compliance with SEC and Nasdaq
rules and other applicable legal requirements pertaining to corporate
governance; and
- recommending to the board of directors changes to committee structure
and functions as the committee deems advisable.
In carrying out its responsibilities to identify and evaluate director nominees,
the nominating and corporate governance committee considers any factors which it
deems appropriate. These factors include, without limitation, judgment; skill;
diversity; independence; strength of character; experience with businesses and
organizations of comparable size; experience with a publicly traded company;
experience and skill relative to other board members; desirability of the
candidate's membership on the board and any committees of the board; and the
ability of the candidate to represent the company's stockholders. Depending on
the current needs of the board, certain factors may be weighed more or less
heavily.
Although the nominating and corporate governance committee has not established
any specific minimum qualifications for director nominees, it believes that all
directors should have the highest character and integrity; a reputation for
working constructively with others; sufficient time to devote to board matters;
and no conflict of interest that would interfere with performance as a director.
The nominating and corporate governance committee has the authority, to the
extent it deems it necessary or appropriate, to retain consultants or search
firms to assist in the identification of director nominees. It also will
consider candidates recommended by stockholders and has from time to time
received unsolicited candidate recommendations from stockholders. The nominating
and corporate governance committee evaluates candidates proposed by stockholders
using the same criteria as for other candidates. A stockholder seeking to
recommend a prospective nominee for consideration by the nominating and
corporate governance committee should submit in writing the candidate's name,
address, qualifications and such other information as the stockholder thinks
would be helpful to the nominating and corporate governance committee, to the
company's secretary in care of the company at 3776 S. High St., Columbus, Ohio
43207. Stockholders should note that this procedure only relates to the
recommendation of director nominees for consideration by the nominating and
corporate governance committee. Any stockholder who desires to formally nominate
an individual for election to the company's board of directors must follow the
procedures set forth in the company's bylaws, as outlined under "Director
Nominations by Stockholders."
9
DIRECTOR NOMINATIONS BY STOCKHOLDERS
Stockholders who desire to formally nominate an individual for election to the
board of directors must follow the procedures outlined in section 3.04 of
article III of the company's bylaws. According to these procedures, nominations
for election to the board of directors may be made at a meeting of stockholders
by the board of directors of the company or by any stockholder of the company
who:
- is a stockholder of record as of the record date for the meeting of
stockholders,
- is entitled to vote for the election of directors at such meeting and
- complies with the notice procedures below.
Stockholder nominations must be received at the company's corporate office not
less than 60 nor more than 90 days prior to the applicable stockholders'
meeting. However, if less than 70 days' notice or prior public disclosure of the
date of the stockholders' meeting is given to stockholders, a nomination by the
stockholder must be received by the company no later than the close of business
on the 10th day following when the notice or prior public disclosure of the
stockholders' meeting was given.
A stockholder's written nomination must include:
- information about each person whom the stockholder wants to nominate as
required by Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which includes the person's written
consent to be named in the proxy statement as a nominee and to serve as
a director if elected;
- the name and address, as they appear on the company's books, of the
stockholder giving the notice; and
- the class and number of common shares of the company which are
beneficially owned by the stockholder giving the notice.
DIRECTORS SERVING ON BOARDS OF OTHER PUBLIC COMPANIES
In order to ensure that directors have sufficient time to devote to board
matters, the company's Corporate Governance Principles provide that directors
and nominees may not serve on more than three boards of public companies in
addition to the board of Bob Evans Farms. Daniel E. Evans, a current director of
The Sherwin-Williams Company and a director of National City Corporation until
April 2004, and Michael J. Gasser, a director of Greif, Inc., are the only
directors of the company who are also directors of another company with a class
of securities registered pursuant to the Exchange Act or which is otherwise
subject to the reporting requirements of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940.
RESIGNATION/RETIREMENT OF DIRECTORS
Directors must submit a letter of resignation to the chairman of the board upon
a job change. At that time, the board can choose either to accept the
resignation or invite the individual to continue to fill his/her term. Directors
must retire from the Bob Evans Farms board at age 70.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The board of directors believes it is important for stockholders to have a
process to communicate with the board, committees of the board and individual
directors. Accordingly, any individual may contact any member of the Bob Evans
Farms board, including any committee of the board, by writing to them at:
Bob Evans Farms, Inc.
c/o Corporate Secretary
3776 S. High St.
Columbus, Ohio 43207
E-mails may also be sent to the audit committee at audit.comm@bobevans.com.
10
Stockholders should note that:
- All questions and concerns regarding accounting, internal accounting
controls or auditing matters are promptly forwarded to the audit
committee for review and investigation.
- All other communications are initially reviewed by the corporate
secretary. The lead independent director is promptly notified of any
such communication that alleges misconduct on the part of top
management or raises legal, ethical or compliance concerns about
company policies or practices.
- The lead independent director receives copies of all other
board-related communications on a periodic basis.
Typically, communications unrelated to the duties and responsibilities of the
board are not forwarded to the lead independent director, such as product
complaints and inquiries, new product and location suggestions, resumes and
other forms of job inquiries, opinion surveys and polls, business solicitations
or advertisements, junk mail and mass mailings.
CODE OF CONDUCT
The board of directors has adopted a Code of Conduct that sets forth standards
regarding honest and ethical conduct, full and timely disclosure and compliance
with law. The Code of Conduct applies to all employees, officers and directors
of the company, including the company's principal executive officer, principal
financial officer and principal accounting officer or controller. A copy of the
Code of Conduct is available on the company's Web site, www.bobevans.com, under
"Corporate Governance" in the "Investors" section. Any amendments to certain
provisions of the Code of Conduct or waivers of such provisions granted to
executive officers and directors will also be disclosed on this Web site within
five days following the date of the amendment or waiver.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2004, the company purchased a variety of fresh produce in the
ordinary course of business for its restaurant operations from Gino's Produce at
an aggregate purchase price of approximately $828,000. At the time of these
purchases, Gino's Produce was owned and operated by Giovanni A. Nocero, the
brother of Rinzy J. Nocero, an executive officer of the company. In the opinion
of the company, the terms of the purchases were no less favorable than the
company and its subsidiaries could have obtained in comparable transactions from
unrelated third parties.
Additionally, during fiscal 2004, the company retained the services of Fineline
Recruitment Service ("Fineline") to assist the company in identifying and
placing potential restaurant managers. The aggregate costs of these services was
approximately $72,000. Fineline is owned and operated by Rodolfo A. Nocero, the
son of Rinzy J. Nocero, an executive officer of the company. The company
retained these services in the ordinary course of its business and believes that
the terms of its business relationship with Fineline were no less favorable than
the company and its subsidiaries could have obtained in a comparable transaction
from an unrelated third party.
11
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table summarizes, for the past three fiscal years, annual and
long-term compensation for the company's chief executive officer and the four
other most highly compensated executive officers ("named executive officers") of
the company.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------- ------------------------------
NAME AND SECURITIES
PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS OPTIONS COMPENSATION
- -------- ---- --------- ----- ------- ------------
Stewart K. Owens: 2004 $ 597,983 $ 306,790 147,496(2) $ 28,168(3)
Chairman of the Board, 2003 $ 544,930 $ 358,108 119,801 $ 531,839
Chief Executive Officer, 2002 $ 496,700 $ 601,910 174,000 $ 243,700
President and Chief
Operating Officer
Larry C. Corbin: 2004 $ 368,840 $ 143,336 67,981(2) $ 10,685(3)
Executive Vice 2003 $ 348,777 $ 167,189 58,401 $ 661,901
President of 2002 $ 335,917 $ 321,357 94,000 $ 108,870
Restaurant Operations(4)
Roger D. Williams: 2004 $ 332,393 $ 193,453 55,449(2) $ 13,804(3)
Executive Vice 2003 $ 319,608 $ 132,174 47,636 $ 224,482
President of 2002 $ 307,316 $ 206,055 79,000 $ 52,595
Food Products
Division
Donald J. Radkoski: 2004 $ 306,606 $ 135,131 46,912(2) $ 13,770(3)
Chief Financial 2003 $ 294,814 $ 145,933 40,301 $ 203,535
Officer, Treasurer 2002 $ 283,475 $ 255,128 60,678 $ 58,918
and Secretary
Scott D. Colwell: 2004 $ 244,282 $ 63,894 10,864(2) $ 26,431(3)
Senior Vice 2003 $ 226,958 $ 46,508 8,678 $ 34,805
President of Marketing 2002 (5)
(1) "Salary" includes directors' fees received by both Messrs. Owens and
Corbin during the 2004, 2003 and 2002 fiscal years in the amounts of
$14,400 each year.
(2) See the table under "Grants of Options."
(3) Includes company contributions to the Bob Evans Farms, Inc. and Affiliates
401(k) Retirement Plan (the "401(k) plan") for each of the named
executive officers listed during the 2004 fiscal year in the amount of
$4,000. Also, includes amounts related to deferred compensation programs
for Messrs. Owens, Corbin, Williams, Radkoski and Colwell during the 2004
fiscal year of $24,168; $6,685; $9,804; $9,770 and $22,431, respectively.
(4) Mr. Corbin retired as the company's executive vice president of restaurant
operations on July 1, 2004. Randall L. Hicks assumed that position.
(5) Mr. Colwell was not named an executive officer of the company until fiscal
2003.
12
GRANTS OF OPTIONS
The following table sets forth information concerning individual grants of
incentive stock options ("ISOs") and non-qualified stock options ("NQSOs") made
during the 2004 fiscal year to each of the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------------------- REALIZABLE VALUE AT
NUMBER OF % OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------------
NAME GRANTED(1) FISCAL YEAR PRICE ($/SH) DATE 5% 10%
- ---- ---------- ----------- ------------ -------------- ---------- ----------
Stewart K. Owens 147,496 19.2% 27.84 6/10/13 $2,582,423 $6,544,367
Larry C. Corbin(3) 67,981 8.9% 27.84 6/10/13 $1,190,240 $3,016,303
Roger D. Williams 55,449 7.2% 27.84 6/10/13 $ 970,825 $2,460,260
Donald J. Radkoski 46,912 6.1% 27.84 6/10/13 $ 821,355 $2,081,476
Scott D. Colwell 10,864 1.4% 27.84 6/10/13 $ 190,212 $ 482,033
(1) The options consist of both ISOs and NQSOs, which were granted under the
Bob Evans Farms, Inc. First Amended and Restated 1998 Stock Option and
Incentive Plan (the "1998 Stock Option Plan") on June 10, 2003, and become
exercisable in three equal annual installments beginning one year from the
date of grant. Upon a change in control (as defined in the plan) of the
company, these ISOs and NQSOs will become fully exercisable as of the date
of the change in control.
- If a participant's employment or service as a director is terminated
for any reason other than disability, death, retirement or for cause,
the participant must exercise his or her stock options by the end of
the original term of the stock options or 90 days after the date of
termination of employment, whichever comes first.
- If a participant's employment or service as a director is terminated
due to disability, the participant must exercise his or her stock
options by the end of the original term of the stock options or one
year after the termination of employment, whichever comes first.
- If a participant should die while employed or serving as a director,
his or her successor in interest must exercise any stock options held
by the participant by the end of the original term of the stock options
or one year after the participant's death, whichever comes first.
- If a participant is terminated for cause, the participant's right to
exercise his or her stock options immediately terminates.
- If a participant retires, the participant must exercise his or her ISOs
by the earlier to occur of the end of the original term of the ISOs or
90 days after the date of retirement; provided, however, that if the
ISOs are not exercised within 90 days of the date of retirement, they
will convert automatically into NQSOs and the participant's right to
exercise the ISOs converted into NQSOs will terminate at the end of the
original term of the option; and the participant must exercise his or
her NQSOs by the end of the term of the NQSOs.
(2) The amounts reflected in this table represent certain assumed rates of
appreciation only. Actual realized values, if any, on option exercises
will be dependent on the actual appreciation in the price of the common
shares of the company over the term of the options. There can be no
assurances that the potential realizable values reflected in this table
will be achieved.
(3) Mr. Corbin retired as the company's executive vice president of restaurant
operations effective July 1, 2004.
13
OPTION EXERCISES AND HOLDINGS
The following table outlines options exercised during the 2004 fiscal year by
each of the named executive officers and unexercised options held as of the end
of the 2004 fiscal year by such named executive officers.
AGGREGATE OPTION EXERCISES IN FISCAL 2004
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
SECURITIES UNEXERCISED OPTIONS AT OPTIONS AT FISCAL
UNDERLYING FISCAL YEAR-END YEAR-END(1)(2)
OPTIONS VALUE ----------------------------- -----------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
Stewart K. Owens 100,000 $1,933,478 308,787 296,496 $ 3,528,693 $ 1,427,829
Larry C. Corbin(3) 140,781 $2,065,695 19,467 138,249 $ 0 $ 612,267
Roger D. Williams 94,452 $1,290,237 15,879 127,461 $ 0 $ 801,213
Donald J. Radkoski -- -- 89,838 103,144 $ 1,009,584 $ 601,779
Scott D. Colwell 3,530 $ 53,276 9,780 21,451 $ 97,209 $ 107,513
(1) All values are shown pretax and are rounded to the nearest whole dollar.
(2) Amount is based on the 2004 fiscal year-end closing price of $30.73 per
common share.
(3) Mr. Corbin retired as the company's executive vice president of restaurant
operations effective July 1, 2004.
CHANGE IN CONTROL AND SEVERANCE ARRANGEMENTS
The company has entered into agreements with each of the named executive
officers listed in the Summary Compensation Table. These agreements provide the
named executive officers with severance benefits if their employment is
terminated under certain circumstances related to a "change in control" (as
defined in the agreements) of the company.
TERMINATION BY THE COMPANY WITHOUT CAUSE
Each agreement provides that the company may terminate the executive officer
without cause effective as of a date specified by the company. If the
termination date specified by the company falls within the period beginning six
months before and ending 36 months after a change in control, the company must
continue to pay the executive officer's compensation and benefits through the
date of termination. In addition, the company must pay the executive officer an
amount referred to as the "severance payment," which is equal to the sum of:
- the value of the executive officer's unused vacation and compensation
days,
- 2.99 times the executive officer's average annual taxable compensation
for the five fiscal years ending before the change in control,
- a prorated portion of the executive officer's average cash bonus for
the three fiscal years ending before the date his or her employment is
terminated and
- any other change in control benefit the executive officer is entitled
to receive under any other plan, program or agreement with the company
or any of its subsidiaries.
The company will also continue health and life insurance and other employee
welfare benefit plans for the executive officer and his or her family for a
period of 36 months following the employment termination date.
TERMINATION BY THE EXECUTIVE OFFICER FOR GOOD REASON
Each agreement provides that the executive officer may terminate his or her
employment for "good reason" effective as of a date specified by the executive
officer. The executive officer will have "good reason" to terminate his or her
14
employment if, among other things, the company does any of the following without
his or her consent at any time after a change in control:
- breaches the agreement,
- reduces the executive officer's title, duties, responsibilities or
status,
- assigns duties to the executive officer that are inconsistent with the
executive officer's position,
- reduces the executive officer's total cash compensation by 10 percent
or more,
- requires the executive officer to relocate to an office more than 50
miles away from his or her current office or
- fails to continue or adversely modifies any material fringe benefit,
compensation, retirement or insurance plan in which the executive
officer participated before the change in control.
If the employment termination date specified by the executive officer falls
within the period beginning six months before and ending 36 months after the
change in control and the executive officer has "good reason" for terminating
his or her employment, the company must:
- pay the executive officer's compensation and benefits through the date
of termination,
- pay the executive officer the severance payment and
- continue health and life insurance and other employee welfare benefit
plans for the executive officer and his or her family for a period of
36 months following the employment termination date.
DISABILITY
If the executive officer becomes disabled (as defined in the agreement), the
company may terminate the executive officer's employment effective as of a date
specified by the company. If the executive officer does not return to work
full-time before the specified date, and the specified date falls within the
36-month period following a change in control, the executive officer's
employment and the agreement will terminate effective as of that date and the
executive officer will receive a lump sum payment equal to the severance payment
less:
- one-half of the Social Security disability benefit payable,
- the amount by which the executive officer's company-funded benefit
under any retirement or deferred compensation plan is enhanced because
of the disability and
- the value of any company-funded disability income or other benefits the
executive officer is entitled to receive under any disability plan or
program.
The company will continue to pay the executive officer's compensation and
benefits through the employment termination date and will continue health and
life insurance and other employee welfare benefit plans for the executive
officer and his or her family for a period of 36 months following the employment
termination date.
If the company fails to notify the executive officer within 30 days after the
date his or her disability began that his or her employment is going to be
terminated, the executive officer may terminate his or her employment. In this
event, the executive officer will be entitled to the same benefits and payments
described above.
DEATH, TERMINATION FOR CAUSE AND RETIREMENT
Each agreement provides that it will terminate and no amounts will be paid to
the executive officer if:
- the executive dies,
- the company terminates the executive officer's employment "for cause"
(which is defined to include the executive officer's breach of the
agreement, willful refusal to perform assigned duties and gross
misconduct) or
- the executive officer retires after attaining the normal or mandatory
retirement age specified in the company's retirement policy or any
individual retirement agreement between the executive officer and the
company.
EFFECT OF SECTION 280G OF THE INTERNAL REVENUE CODE
If any portion of the payments and benefits provided for in an agreement would
be considered "excess parachute payments" under section 280G(b)(1) of the
Internal Revenue Code and subject to excise tax, the company will either make
tax reimbursement payments to the executive officer or reduce the executive
officer's payments to an amount which is $1 less than the amount that would be
an "excess parachute payment." The company will select the alternative that
provides the executive officer with a greater after-tax amount. Notwithstanding
the foregoing,
15
if any portion of the payments and benefits provided for in Mr. Owens' agreement
(or any other agreement between the company and Mr. Owens) would be considered
an "excess parachute payment," the company will pay Mr. Owens an additional
amount which, after deduction of any income, withholding and excise tax thereon,
equals the excise tax.
TERM AND TERMINATION
Each agreement has a one-year term that is automatically extended for one-year
periods unless the agreement is otherwise terminated. An agreement may be
terminated if, among other things, the company notifies the executive officer
(no later than the Feb. 28 preceding the end of the term) that it does not want
to continue the agreement, provided that the company cannot give such notice
during the 36-month period following a change in control or at any time after
the company learns that activities have begun which would result in a change in
control if completed.
COMPENSATION OF DIRECTORS
The current Compensation Program for Directors became effective May 6, 2003, and
was most recently revised effective May 11, 2004. Under the Compensation Program
for Directors, all directors who are employees of the company receive a monthly
director fee of $1,200 in cash. All nonemployee directors receive a monthly
director fee of $2,000 in cash, and the lead independent director receives an
additional monthly retainer of $750 in cash.
In addition, nonemployee directors are compensated for each board and committee
meeting they attend. Each nonemployee director is paid $1,500 for each board
meeting attended. The following table outlines the compensation per committee
meeting attended paid to directors who are members of that committee or the
chair of that committee:
Committee member Committee chair
fee per meeting fee per meeting
--------------- ---------------
Audit Committee $1,500(1) $2,500(2)
Compensation Committee $1,250 $2,000
Nominating and Corporate
Governance Committee $ 750 $1,000
(1) Increased from $1,250 paid in fiscal 2004
(2) Increased from $2,000 paid in fiscal 2004
The Compensation Program for Directors also provides that each nonemployee
director annually receives common shares of the company with a value equal to
$27,000 (increased from $22,000 for the 2004 fiscal year). The number of common
shares issued to the nonemployee directors each year is based on the closing
price of the company's common shares on the date of the June meeting of the
compensation committee at which the grants are approved. These common shares are
awarded out of the company's 1998 Stock Option Plan.
The Compensation Program for Directors also provides for the award of NQSOs to
nonemployee directors based on the closing price of the company's common shares
on the date of the June meeting of the compensation committee at which the
options are approved. These stock options are awarded out of the 1998 Stock
Option Plan. The number of stock options granted to each nonemployee director is
based upon a value of $17,000 and the application of the Black-Scholes option
pricing model. The Black-Scholes option pricing model is a mathematical formula
designed to price options "fairly" based upon certain variables including: (i)
the price of the underlying shares, (ii) the exercise price of the option, (iii)
the current risk-free interest rate, (iv) the time to expiration of the option
and (v) the volatility of the underlying shares. The first four variables are
readily obtainable, with volatility being the only variable that has to be
estimated. The company estimates the volatility of the underlying shares based
upon the historical volatility of the company's common shares.
Pursuant to the terms of the Compensation Program for Directors, the company
will continue to maintain a life insurance policy with a death benefit of
$50,000 on behalf of each director of the company. In addition, group health
care is available to nonemployee directors.
The compensation committee, with the approval of the board of directors of the
company, may amend or terminate the Compensation Program for Directors at any
time without the approval of the stockholders of the company.
16
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The compensation committee of the board of directors (for purposes of this
report, the "committee") has the responsibility of recommending to the board
appropriate salaries, annual bonuses and other compensation for the executive
officers of the company. The committee, composed entirely of independent
directors, also administers the company's equity compensation and other
long-term incentive plans.
COMPENSATION PHILOSOPHY
The company's philosophy is to maximize stockholder value over time by aligning
executive compensation with the company's financial and operational performance,
individual contribution and stockholder returns. The company has identified
several key principles upon which compensation practices are based. These
principles are as follows:
- Compensation practices should enhance the company's financial
performance by aligning the financial interests of the company's
executive officers with those of the stockholders.
- Financial rewards should be based on both corporate and individual
performance.
- A majority of the executive officers' compensation should be "at risk."
By tying a majority of the executives' compensation to the company's
financial results, Bob Evans Farms achieves a greater degree of "pay
for performance."
- Stock-based compensation should form a significant portion of the
at-risk compensation, ensuring that significant awards are received by
executive officers only when stockholder value is created.
- Compensation levels are set at competitive levels in the marketplace in
order to attract and retain key executives. During fiscal 2004, an
independent third party consultant was authorized by the committee to
review compensation levels of the top five highest paid executives. The
independent consultant compared peer data and discussed executive
compensation trends with the committee. Generally, the company
considers pay levels in relation to those in a peer group of companies
in the restaurant and food products businesses.
BASE SALARY
To enable the company to attract and retain talent, executive officers' salaries
are targeted to be competitive with those paid to individuals in similar
positions at other companies in the company's peer group. The committee met in
June 2003 to review the base salaries of the company's executive officers. The
committee recommended to the board of directors, as a result of this meeting,
that the company increase the base salaries of the executive officers named in
the summary compensation table. This recommendation was based upon the
committee's assessment of the individual performance of the respective executive
officer, the performance of the company, comparative data of peer group
companies relating to executive compensation and the independent consultant's
evaluation.
BONUSES
The company's overall philosophy with respect to the granting of bonus awards to
executive officers is that a significant portion of each executive officer's
total compensation should be based on:
- individual performance, including the performance of the individual's
business unit, where appropriate, and
- the company's overall performance.
At the beginning of the 2004 fiscal year, individual performance goals were
established for each executive officer, including in some cases, but not limited
to, business unit financial results, department budget goals, special project
goals and personnel management goals. In addition, goals relating to overall
company performance, including net income and earnings per share, were also
established. At the end of fiscal 2004, each executive officer was evaluated
based upon his or her individual performance goals for the year, as well as the
goals relating to overall company and business unit performance. Based on these
evaluations, initial bonus levels were established for each executive officer
and reviewed by management. Management's recommendations were then reviewed by
the committee, which made recommendations to the board of directors.
For fiscal 2004, the company's reported diluted earnings per share decreased 3.3
percent, while net income decreased 4.1 percent compared to the previous fiscal
year, primarily due to sluggish same-store sales, as well as upward pressure on
food costs across a wide variety of commodities in the company's restaurant
division and increased hog costs in the food products division. This overall
performance was slightly below the targets set by
17
the committee for the 2004 fiscal year. In consideration of the individual
performance of each executive officer combined with these overall financial
results, bonuses were awarded that ranged from 67.4 percent to 116.4 percent of
the target awards for the five executive officers named in the summary
compensation table.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER COMPENSATION
For fiscal 2004, the committee reviewed the performance of Mr. Owens relative to
the goals established at the start of the fiscal year. Under Mr. Owens'
leadership, the company achieved net income of $72.0 million, or $2.03 per
diluted share, for fiscal 2004 which was down from the record level in fiscal
2003 of $75.1 million, or $2.10 per diluted share. Total net sales for fiscal
2004 were approximately $1.2 billion, up 9.8 percent from the previous year.
Fiscal 2004 was a 53-week year and fiscal 2003 was a 52-week year. As a result,
the committee voted to award Mr. Owens a bonus of $306,790 for the 2004 fiscal
year. The committee also granted Mr. Owens options in fiscal 2004 to purchase
147,496 common shares as an incentive for continuing to build long-term
stockholder value. The committee believes that the total value of Mr. Owens'
compensation is appropriate in respect to the company's performance and the
comparative data of chief executive officers of competitors as illustrated by
the data provided by the independent consultant. The total value of these
actions results in a substantial portion of at-risk compensation for Mr. Owens,
consistent with the committee's philosophy.
LONG-TERM INCENTIVES
In addition to the salary and bonus compensation outlined above, the company
maintains plans that provide executive officers with additional compensation,
including stock options. These plans are briefly described below. Awards under
these plans are made under the supervision of the committee and in accordance
with the criteria described below.
Stock options are the company's primary long-term incentive vehicle. The company
has from time to time implemented various stock option plans for the purpose of
providing employees and directors long-term incentive based compensation. Under
the 1998 Stock Option Plan, the committee may grant ISOs to executive officers
and other employees. Also, under the 1998 Stock Option Plan, the committee may
grant NQSOs to executive officers, other employees and directors. All options
are granted with an exercise price equal to the fair market value of the
company's common shares on the date of grant. If there is no appreciation in the
market value of the company's common shares, the ISOs and NQSOs are valueless.
In June 2003, the committee approved the grant of ISOs to certain key employees,
including the five executive officers named in the summary compensation table.
During the 2004 fiscal year, the company also issued NQSOs to directors and to
the five executive officers named in the summary compensation table. The option
grant table included in this proxy statement provides information with respect
to the options granted to the five executive officers named in the summary
compensation table.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The company maintains a supplemental executive retirement plan which is referred
to as the "SERP." The SERP is a "top hat" plan under Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and is not
intended to qualify under section 401(a) of the Internal Revenue Code of 1986,
as amended (the "code"). The SERP is a defined contribution plan designed to
supplement, through annual company contributions, the retirement benefits of its
participants. Employees of the company and its subsidiaries are eligible to
participate in the SERP only to the extent, and for the period, that they are
members of a select group of management or highly compensated employees, as this
group is described under sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
Participation in the SERP is at the discretion of the committee.
Under the SERP, an annual company contribution is determined, based upon an
actuarially determined "target" benefit for each participant. Generally, this
target benefit is equal to 55 percent of a participant's average compensation
over the five-consecutive-year period (in the last 10 years of employment prior
to age 62) during which such compensation is the highest:
- less the participant's benefit under the company's qualified retirement
plan derived from company contributions and
- less 50 percent of the participant's projected Social Security benefit.
18
Each year, a SERP participant may elect to have the participant's portion of the
company's contribution allocated to an account, in his or her name, under the
SERP or, when authorized by the compensation committee, the participant may
elect to receive NQSOs equal in value to the amount of the participant's portion
of the company's contribution. If the participant elects to receive NQSOs in
lieu of an allocation to his or her SERP account, no portion of the company's
contribution shall be credited to the participant's SERP account.
Generally, a participant in the SERP is entitled to receive a distribution of
his or her account upon early retirement (age 55 and 10 or more years of
service), normal retirement (age 62) or total and permanent disability (as
determined by the company). In addition, in the event of a participant's death
while employed by the company, the participant's beneficiary will be entitled to
a distribution of such account.
BOB EVANS FARMS, INC. AND AFFILIATES 401(k) RETIREMENT PLAN
Each of the company's executive officers participates in the 401(k) plan, the
company's qualified retirement plan. Following the conclusion of calendar year
2003, the board of directors voted to contribute $3,687,539 to the 401(k) plan.
Each participant in the 401(k) plan received a pro rata share of this
contribution and a pro rata share of forfeitures reallocated to participants
(such pro rata share, in each case, based upon such participant's eligible
compensation). In cases where participants made deferrals to the 401(k) plan,
the company contributed $.50 for each $1 of deferrals (subject to a limitation
of 6 percent of total compensation of each participant making voluntary
contributions). Each executive officer had the option of contributing up to 4
percent of his or her compensation (up to a maximum contribution of $8,000) to
the 401(k) plan.
EXECUTIVE DEFERRAL PROGRAM
The company maintains an executive deferral program (the "Executive Deferral
Program"), which is a "top hat" plan under Title I of ERISA and is not intended
to qualify under section 401(a) of the code. The Executive Deferral Program is
a defined contribution plan designed primarily to allow its participants to
defer a portion of their current compensation in excess of the maximum amount
permitted under the applicable provisions of the code with respect to the
company's 401(k) plan. Employees of the company and its subsidiaries are
eligible to participate in the Executive Deferral Program only to the extent,
and for the period, that they are members of a select group of management or
highly compensated employees, as this group is described under sections 201(2),
301(a)(3) and 401(a)(1) of ERISA. Participation in the Executive Deferral
Program is at the discretion of the committee.
Under the terms of the Executive Deferral Program, a participant may elect to
defer up to 25 percent of his or her current compensation otherwise payable
during the year by the company and up to 100 percent of his or her bonus. The
amount deferred will be credited to an account established on the participant's
behalf under the Executive Deferral Program. Also, the company will credit an
additional amount to the participants' accounts. This amount is based on
participants' deferrals and is the same as the rate of the company's
contribution to the 401(k) plan. Generally, a participant will be eligible to
receive a distribution of his or her account at termination of employment or at
an earlier date specified by the participant. In addition, in the event of a
participant's death while employed by the company, the participant's beneficiary
will be entitled to a distribution of such account.
CONCLUSION
The committee believes that the compensation program outlined in this report and
the compensation paid to the executive officers is consistent with the goals and
objectives of the company.
Submitted by: Compensation Committee Members
Robert E.H. Rabold (chair), Daniel A. Fronk, Cheryl L. Krueger and E.W. (Bill)
Ingram III
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP has been Bob Evans Farms' independent auditors since 1980, and
the audit committee has selected Ernst & Young as Bob Evans Farms' independent
auditors (i.e., independent registered public accounting firm) for the fiscal
year ending April 29, 2005. Before selecting Ernst & Young LLP, the audit
committee carefully considered, among other things, that firm's qualifications
as independent auditors for the company and the audit scope. As a matter of good
corporate governance, the audit committee has determined to submit its selection
to stockholders for ratification. In the event that this selection of auditors
is not ratified by a majority of the shares of common stock present or
represented at the annual meeting, the audit committee will review its future
selection of auditors.
19
The company expects a representative of Ernst & Young LLP will attend the annual
meeting, and the representative will have an opportunity to make a statement if
he or she so desires. The representative will also be available to respond to
appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR FISCAL 2005.
PREAPPROVAL OF SERVICES PERFORMED BY INDEPENDENT AUDITORS
Under applicable SEC rules, the audit committee is required to preapprove the
audit and non-audit services performed by the independent auditors (i.e.,
independent registered public accounting firm) in order to ensure that they do
not impair the auditors' independence from the company. The SEC rules specify
the types of non-audit services that an independent auditor may not provide to
its audit client and establish the audit committee's responsibility for
administration of the engagement of the independent auditor.
Consistent with the SEC's rules, the audit committee has adopted a policy which
requires that the audit committee preapprove all audit services and permitted
non-audit services provided by the independent auditors to Bob Evans Farms or
any of its subsidiaries. The policy contains a list of specific audit services,
audit-related services and tax services that have been approved by the audit
committee up to certain cost-levels. This list is reviewed and approved by the
audit committee at least annually. The preapproval of the services set forth in
the list is merely an authorization for management to potentially use the
independent auditors for such services. The audit committee, in concert with
management, has the responsibility to set the terms of the engagement and
negotiate the fees. The audit committee must specifically preapprove any
proposed services that are not included in the list or that will exceed the
cost-levels set forth on the list. The audit committee may delegate preapproval
authority to its chairman or another member of the audit committee and, if it
does, the decisions of that member must be presented to the full audit committee
at its next scheduled meeting. In no event does the audit committee delegate to
management its responsibility to preapprove services to be performed by the
independent auditor.
All requests or applications for services to be provided by the independent
auditor that do not require specific preapproval by the audit committee must be
submitted to the company's controller and must include a detailed description of
the services to be rendered. The controller will determine whether such services
fall within the list of services which have been preapproved by the audit
committee. If there is any question as to whether the proposed services have
been preapproved, the controller will contact the audit committee's designee to
obtain clarification or, if necessary, specific preapproval of the proposed
services. The audit committee will be informed on a timely basis of any such
services rendered by the independent auditor.
All requests or applications for services to be provided by the independent
auditor that require specific preapproval by the audit committee must be
submitted to the audit committee by both the independent auditor and the
company's controller and must include a joint statement as to whether, in their
view, the request or application is consistent with the SEC's rules on auditor
independence.
FEES OF INDEPENDENT AUDITORS
The following table shows the fees that the company paid or accrued for the
audit and other services provided by Ernst & Young LLP for fiscal years 2004 and
2003. All of the services provided in fiscal 2004 described below were
preapproved by the audit committee.
2004 2003
---- ----
Audit Fees $169,000 $162,000
Audit-Related Fees 39,000 22,000
Tax Fees 116,000 189,000
All Other Fees 0 0
-------- --------
Total $324,000 $373,000
20
AUDIT FEES: This category includes the audit of the company's annual financial
statements, review of financial statements included in the company's Quarterly
Reports on Form 10-Q and services that are normally provided by the independent
auditors (i.e., independent registered public accounting firm) in connection
with statutory and regulatory filings or engagements for those fiscal years.
This category also includes advice on audit and accounting matters that arose
during, or as a result of, the audit or the review of interim financial
statements and the preparation of an annual "management letter" on internal
control matters.
AUDIT-RELATED FEES: This category consists of assurance and related services by
Ernst & Young LLP that are reasonably related to the performance of the audit or
review of the company's financial statements and are not reported above under
"Audit Fees." The services for the fees disclosed under this category include
benefit plan audits, due diligence related to potential mergers and acquisitions
and accounting consultations.
TAX FEES: This category consists of professional services rendered by Ernst &
Young LLP for tax compliance, tax advice and tax planning. The services for the
fees disclosed under this category include tax return preparation and technical
tax advice. In fiscal years 2004 and 2003, $0 and $86,000, respectively, were
paid to Ernst & Young LLP for tax planning services. All other fees paid for tax
services related to tax return preparation, tax return review and technical tax
advice.
ALL OTHER FEES: None
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The audit committee is comprised of five independent directors, as defined by
applicable Nasdaq and SEC rules, and it operates under a written charter adopted
by the board and reviewed annually by the audit committee. As described more
fully in its charter, the purpose of the audit committee is to oversee the
company's accounting and financial reporting processes, audits of the company's
consolidated financial statements and the company's internal audit function. The
audit committee is also directly responsible for appointing, compensating and
overseeing the company's independent auditors (i.e., independent registered
public accounting firm).
Management is responsible for the preparation, presentation and integrity of the
company's financial statements and for the company's accounting and financial
reporting processes, including the establishment and maintenance of an adequate
system of internal control over financial reporting. The company's internal
audit function is responsible for objectively reviewing and evaluating the
adequacy, effectiveness and quality of the company's system of internal control
over financial reporting. Ernst & Young LLP, the company's independent
registered public accounting firm, is responsible for performing an independent
audit of the consolidated financial statements in accordance with generally
accepted auditing standards.
The audit committee members are not professional accountants nor auditors, and
their functions are not intended to duplicate or to certify the activities of
management and the independent auditors. The audit committee serves a
board-level oversight role, in which it provides advice, counsel and direction
to management and the auditors on the basis of the information it receives,
discussions with management and the auditors, and the experience of the audit
committee's members in business, financial and accounting matters.
The audit committee met with Ernst & Young LLP and the internal auditors, with
and without management present throughout the year, to discuss the results of
their respective audits, their evaluations of the company's system of internal
control over financial reporting and the overall quality of the company's
financial reporting. In addition, the audit committee reviewed and discussed
with Ernst & Young LLP all matters required by auditing standards generally
accepted in the United States, including those described in Statement on
Auditing Standards No. 61, "Communication with Audit Committees," as modified.
The audit committee has received from Ernst & Young LLP the written disclosures
and a letter describing all relationships between Ernst & Young LLP and the
company and its subsidiaries that might bear on Ernst & Young LLP's independence
consistent with Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees," as modified. The audit committee has
discussed with Ernst & Young LLP any relationships with or services to the
company or its subsidiaries that may impact the objectivity and independence of
Ernst & Young LLP, and the audit committee has satisfied itself as to Ernst &
Young LLP's independence.
Management and Ernst & Young LLP presented and discussed the company's audited
consolidated financial statements as of and for the fiscal year ended April 30,
2004, with the audit committee and represented to the audit committee that the
consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the United States.
21
Based on the audit committee's discussions with management and Ernst & Young LLP
and its review of the report of Ernst & Young LLP to the audit committee, the
audit committee recommended to the board (and the board approved) that the
company's audited consolidated financial statements be included in the company's
Annual Report on Form 10-K for the fiscal year ended April 30, 2004, to be filed
with the SEC.
Submitted by: Audit Committee Members
Michael J. Gasser (chair), Daniel A. Fronk, E.W. (Bill) Ingram III, G. Robert
Lucas and Robert E.H. Rabold
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following line graph compares the yearly percentage change in the company's
cumulative total stockholder return (as measured by dividing (i) the sum of the
cumulative amount of dividends for the measurement period, assuming dividend
reinvestment, and the difference between the price of the company's common
shares at the end and the beginning of the measurement period; by (ii) the price
of the common shares at the beginning of the measurement period) against the
cumulative total return of the Standard & Poor's 500 Stock Index ("S&P 500") and
the weighted average of its peer group for the five-year period ended April 30,
2004. The company's peer group is comprised of Nasdaq-listed restaurant
companies (weighted 80 percent) and both Nasdaq- and New York Stock Exchange
("NYSE")-listed meat producers (weighted 20 percent). The company modified its
peer group in 2004 to include NYSE-listed meat producers for the first time in
order to reflect a more representative peer group of its competitors. The graph
depicts both peer groups for comparison purposes.
TOTAL CUMULATIVE STOCKHOLDER RETURN FOR
FIVE-YEAR PERIOD ENDING APRIL 30, 2004
[PERFORMANCE GRAPH]
22
CUMULATIVE VALUE OF $100 INVESTMENT
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
Peer Group (including NYSE-listed
meat producers) $ 100.00 $ 85.85 $ 107.89 $ 147.73 $ 137.79 $ 201.13
Peer Group (excluding NYSE-listed
meat producers) $ 100.00 $ 85.77 $ 110.78 $ 163.13 $ 145.65 $ 240.20
S&P500 $ 100.00 $ 110.13 $ 95.85 $ 83.75 $ 72.61 $ 89.22
Bob Evans Farms, Inc. $ 100.00 $ 72.93 $ 107.66 $ 175.31 $ 148.77 $ 183.18
PROXY STATEMENT STOCKHOLDER PROPOSALS
Each year the board of directors submits its nominations for election of
directors at the annual meeting of stockholders. Other proposals may be
submitted by the board of directors or stockholders for inclusion in the proxy
statement for action at each year's annual meeting. Any proposal submitted by a
stockholder for inclusion in the proxy statement for the fiscal 2005 annual
meeting, presently scheduled for Sept. 12, 2005, must be received by the company
on or before April 4, 2005. A stockholder proposal received after April 4, 2005,
but on or before June 17, 2005, will not be included in the proxy materials, but
may be presented at the 2005 annual meeting. The individuals named as proxies
for the 2005 annual meeting will be entitled to use their discretionary voting
authority for proposals received after June 17, 2005, without any discussion of
the matter in the company's proxy materials.
REPORTS TO BE PRESENTED AT THE ANNUAL MEETING
The company's annual report for the fiscal year ended April 30, 2004, which
contains financial statements for such fiscal year and the signed report of
Ernst & Young LLP, independent registered public accounting firm, with respect
to such financial statements, will be presented at the annual meeting. The
annual report is not to be regarded as proxy soliciting material, and management
of the company does not intend to ask, suggest or solicit any action from the
stockholders with respect to such report.
OTHER MATTERS
As of the date of this proxy statement, the only business which management
intends to present at the annual meeting consists of the matters set forth in
this proxy statement. Management knows of no other matters to be brought before
the annual meeting by any other person or group. If any other matters should
properly come before the annual meeting, or any adjournment(s) thereof, the
proxy holders will vote thereon in their discretion, in accordance with their
best judgment in light of the conditions then prevailing. All proxies received
duly executed and not properly revoked will be voted.
You are requested to vote by either calling (800) 690-6903; visiting the
www.proxyvote.com Web site as indicated on the proxy card; or signing, voting
and dating the enclosed proxy card and mailing it promptly in the enclosed
envelope. If you later desire to vote in person, you may revoke your proxy,
either by written notice delivered to the company or in person at the annual
meeting if your shares are held in your name.
By Order of the
Board of Directors,
/s/ Stewart K. Owens
-------------------
Stewart K. Owens
Chairman of the Board and
Chief Executive Officer
23
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF BOB EVANS FARMS, INC.
(APPROVED BY BOARD OF DIRECTORS MAY 11, 2004)
This Charter (this "Charter") identifies the purpose, authority,
composition, meetings and responsibilities of the Audit Committee (the "Audit
Committee") of the Board of Directors (the "Board") of Bob Evans Farms, Inc.
("Bob Evans").
PURPOSE
The purpose of the Audit Committee is to:
- Oversee the accounting and financial reporting processes of Bob Evans
and its subsidiaries (collectively, the "Company") and audits of the
Company's financial statements;
- Oversee the Company's internal audit function;
- Be directly responsible for the appointment, compensation and oversight
of the Company's independent auditors;
- Prepare the audit committee report required by the rules of the
Securities and Exchange Commission (the "SEC") to be included in Bob
Evans' annual proxy statement; and
- Perform such other duties for the Company as may be requested by the
Board from time to time.
AUTHORITY
The Audit Committee has authority to:
- Directly appoint, retain, agree to compensate, evaluate and, where
appropriate, terminate the Company's independent auditors. The
independent auditors will report directly to the Audit Committee.
- Oversee the work of the independent auditors, including the resolution
of disagreements between management and the independent auditors.
- Pre-approve the audit engagement, including fees and terms, and all
other audit or permitted non-audit services performed by the Company's
independent auditors to the extent required and in a manner consistent
with applicable law.
- Retain independent legal, accounting and other advisors to the extent
the Audit Committee deems it necessary or appropriate to assist the
Audit Committee in carrying out its duties. Bob Evans shall provide for
appropriate funding, as determined solely by the Audit Committee, for
payment of compensation to the independent auditors engaged for the
purposes of preparing or issuing an audit report or performing other
audit, review or attest services for the Company, compensation to any
other advisors employed by the Audit Committee and ordinary
administrative expenses of the Audit Committee that the Audit Committee
determines are necessary or appropriate in carrying out its duties.
- Conduct or authorize investigations into any matters within the scope
of the Audit Committee's responsibilities.
- Seek any information the Audit Committee requires from employees of the
Company (all of whom are directed to cooperate with the Audit
Committee's requests) or external parties.
- Meet with the Company's officers, independent auditors or outside
counsel, as necessary.
24
The Audit Committee may delegate to its Chairperson such power and
authority as the Audit Committee deems to be appropriate, except such power and
authority required by law to be exercised by the whole Audit Committee or by a
subcommittee, which the Audit Committee has the authority to form and delegate
to, consisting of one or more Audit Committee members, when appropriate. Such
delegated power and authority may include the authority to pre-approve all audit
and permitted non-audit services, and the decisions made pursuant to such
delegated power and authority shall be reported to the Audit Committee at its
next scheduled meeting.
COMPOSITION
The Audit Committee shall serve at the pleasure of the Board. The Audit
Committee shall consist of at least three members of the Board, each of whom
shall be appointed by the Board. Each member of the Audit Committee shall be
free of any relationship that, in the opinion of the Board, may interfere with
the exercise of his or her independent judgment in carrying out the
responsibilities of a director of the Company. Additionally, all Audit Committee
members must satisfy the independence requirements prescribed by applicable
rules of the Nasdaq Stock Market ("Nasdaq") as well as Section 10A of the
Securities Exchange Act of 1934 and the rules promulgated by the SEC thereunder.
All members of the Audit Committee must be able to read and understand
fundamental financial statements, including the Company's balance sheet, income
statement and cash flow statement. At least one member of the Audit Committee
shall have past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable experience or
background which results in the individual's financial sophistication, including
being or having been a chief executive officer, chief financial officer or other
senior officer with financial oversight responsibilities. Any member of the
Audit Committee who qualifies as an "audit committee financial expert" as
defined in the applicable rules or criteria established by the SEC, and as
determined by the Board, shall be deemed to meet this financial sophistication
requirement.
No member of the Audit Committee may have participated in the preparation
of the financial statements of the Company at any time during the past three
years.
MEETINGS
The Audit Committee shall meet at least four times annually and may
convene more frequently as circumstances dictate. The Audit Committee shall be
chaired by one of its members appointed by the Board. If the Board does not
appoint a Chairperson or if the Chairperson is not present at a meeting, the
members of the Audit Committee may designate a Chairperson by majority vote of
the full Audit Committee membership, or those members present, as the case may
be. All Audit Committee members are expected to attend each meeting, in person
or via teleconference or other means of electronic communications permitted
under applicable law and the Company's By-laws.
The Audit Committee shall maintain written minutes of its meetings, which
minutes shall be filed with the minutes of the meetings of the Board. The Audit
Committee may act by a majority of its members at a meeting or without a meeting
if all members of the Audit Committee consent to the action in writing or by
other means of electronic transmission permitted under applicable law and the
Company's By-laws. The Chairperson of the Audit Committee shall provide the
Board with a report of the Audit Committee's activities and proceedings at each
regularly scheduled meeting of the Board.
The Audit Committee shall meet periodically with management, the internal
auditors and the independent auditors in separate executive sessions to discuss
any matters that the Audit Committee or one of these groups believes should be
discussed privately.
The Audit Committee may have in attendance at its meetings such members of
management, the internal auditors and the independent auditors or others as the
Audit Committee may deem necessary or desirable to provide the information the
Audit Committee needs to carry out its duties and responsibilities.
25
RESPONSIBILITIES
The Audit Committee shall have the authority to undertake the specific
responsibilities outlined in this Charter and to undertake such other
responsibilities as the Board may prescribe from time to time. The Audit
Committee may carry out additional functions and adopt additional policies and
procedures as may be appropriate in light of changing business, legislative,
regulatory, legal or other conditions.
A. FINANCIAL REPORTING / INTERNAL CONTROL OVER FINANCIAL REPORTING
The following are the principal responsibilities of the Audit Committee
with respect to the oversight of financial reporting and internal control over
financial reporting:
1. Reviewing and discussing with management, the internal auditors and the
independent auditors annually, before each audit begins, the overall
scope of their respective annual audit plans, including adequacy of
staffing, professional services to be provided, the audit procedures to
be used and fees to be charged by the independent auditors.
2. Reviewing and discussing with management and the independent auditors
major issues regarding accounting principles and financial statement
presentation, including: (a) any significant changes in the Company's
selection or application of accounting principles and major issues as
to the adequacy of the Company's internal controls and any special
audit steps adopted in light of material control deficiencies; (b)
analyses prepared by management and/or the independent auditors setting
forth significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements;
(c) the development, selection and disclosure of critical accounting
estimates and policies and practices and the use thereof; and (d)
analyses of the effect of alternative GAAP methods on the Company's
financial statements, including the ramifications of the use of
alternative disclosures and treatments and the treatment preferred by
the independent auditors.
3. Reviewing and discussing with management and the independent auditors
the effect of regulatory and accounting initiatives, as well as any
off-balance sheet structures and aggregate contractual obligations, on
the Company's financial statements, and any related disclosures.
Discussing with the independent auditors any matters required to be
communicated to the Audit Committee by the independent auditors under
generally accepted auditing standards, including those matters set
forth in Statement on Auditing Standards ("SAS") No. 61, Communication
with Audit Committees, as such statement may be modified or
supplemented.
4. Reviewing and discussing with the internal auditors and the independent
auditors their respective reports and the results of their respective
audits. Ensuring that the independent auditors share with the Audit
Committee all material written communications between the independent
auditors and management, including reviewing any "management letter,"
"internal control" letter or "schedule of unadjusted differences"
issued, or proposed to be issued, by the independent auditors.
5. Reviewing and discussing with management and the independent auditors
the Company's annual audited financial statements and the disclosures
to be made under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" prior to the filing of each Annual
Report on Form 10-K, including their judgment about the quality, not
just the acceptability, of accounting principles, the reasonableness
of significant judgments and the clarity of the disclosures in the
financial statements. The Audit Committee shall recommend to the Board
whether the Company's audited financial statements should be included
in the Annual Report on Form 10-K.
6. Discussing with the independent auditors, the internal auditors,
management and the Company's financial and accounting personnel their
assessments of the adequacy and effectiveness of the Company's systems
of disclosure controls and procedures and internal control over
financial reporting and related accounting and financial controls and
any special audit steps adopted in light of material control
deficiencies.
7. Reviewing disclosures made by Bob Evans' principal executive officer
and principal financial officer during the certification process for
each Quarterly Report on Form 10-Q and Annual Report on Form 10-K,
about (a) significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting, (b)
any fraud that involves management or other employees who have a
significant role in the Company's internal controls and (c) any
significant changes in the Company's internal control over financial
reporting which occurred during the last fiscal quarter.
26
8. Generally discussing with management and, where appropriate, the
independent auditors, the types and presentation of financial
information to be disclosed in Bob Evans' earnings releases (paying
particular attention to any use of "pro forma" or "adjusted" non-GAAP
information and reconciliations of the same) as well as reviewing any
financial information or earnings guidance provided to analysts and/or
rating agencies. The Audit Committee does not need to discuss each
earnings release in advance.
9. Discussing with the independent auditors and the internal auditors any
problems or difficulties they encountered in the course of their audit
work, including any restrictions on the scope of their activities or
access to requested information, and any significant disagreements
with management.
10. Reviewing the Company's compliance with pronouncements of the
Financial Accounting Standards Board, the American Institute of
Certified Public Accountants, the SEC, Nasdaq or other similar bodies
or agencies that could have an impact on the Company's financial
statements.
B. OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITORS
The following are the principal responsibilities of the Audit Committee
with respect to oversight of the Company's relationship with the independent
auditors:
1. Monitoring and evaluating the independence, qualifications and
performance of the independent auditors, and their appointment, by,
among other things: at least annually, obtaining and reviewing a
written report from the independent auditors regarding (a) the
independent auditors' internal quality-control procedures; (b) any
material issues raised by the most recent internal quality-control
review, or peer review, of the independent auditors, or by any inquiry
or investigation by governmental or professional authorities, within
the preceding five years, respecting one or more independent audits
carried out by the independent auditors; (c) any steps taken to deal
with any such issues; and (d) all relationships between the
independent auditors and the Company, including the written
disclosures and letter required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as
that standard may be modified or supplemented. Actively engaging in a
dialogue with the independent auditors with respect to any disclosed
relationships or services that may impact the objectivity and
independence of the independent auditors, and taking, or recommending
that the Board take, appropriate action to oversee the independence of
the independent auditors.
2. At least annually, reviewing the experience, rotation and
qualifications of the senior members of the independent auditors' team
under applicable laws, rules and regulations.
3. Setting clear policies, in compliance with applicable laws, rules and
regulations, for the Company's hiring of present or former employees
of the independent auditors.
4. Reviewing and pre-approving all audit services and permitted non-audit
services to be performed for the Company or any of its subsidiaries by
the independent auditors or any other auditing or accounting firm
engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services (other than with
respect to de minimus exceptions permitted by applicable laws, rules
and regulations). In no event shall the independent auditors perform
any non-audit services for the Company which are prohibited by
applicable law or the rules established by the SEC or the Public
Company Accounting Oversight Board (or other similar body as may be
established from time to time). Establishing pre-approval policies and
procedures, in compliance with the rules and criteria established by
the SEC. Such pre-approval policies and procedures must be detailed as
to the particular services to be provided, ensure that the Audit
Committee knows precisely what services it is being asked to
pre-approve and not include any delegation to management of the Audit
Committee's responsibilities under applicable laws, rules and
regulations to pre-approve all services provided by the independent
auditors. Approval of a non-audit service to be performed by the
independent auditors and, if applicable, the pre-approval policies and
procedures established by the Audit Committee shall be disclosed as
required under applicable SEC rules in Bob Evans' Annual Report on
Form 10-K and annual proxy statement.
27
C. OVERSIGHT OF THE INTERNAL AUDIT FUNCTION
The following are the principal responsibilities of the Audit Committee
with respect to oversight of the internal audit function:
1. Ensuring that the Company has an internal audit function.
2. Reviewing the appointment, performance and replacement of the internal
auditors and evaluating the effectiveness of the internal audit
function.
3. Reviewing and discussing with the internal auditors the results of
their internal audits, including their assessment of the Company's risk
management processes and system of internal control and each
significant point brought up in the internal auditors' letter of
recommendation to management and management's responses.
D. COMPLIANCE
The following are the principal responsibilities of the Audit Committee
with respect to oversight of compliance matters:
1. Reviewing procedures designed to identify "related party" transactions
that are material to the Company's financial statements or otherwise
require disclosure under applicable law and rules adopted by the SEC or
Nasdaq. Approving any "related party" transactions when the Audit
Committee deems it appropriate to do so.
2. Establishing procedures and requiring the Company to obtain or provide
the necessary resources and mechanisms for (a) the receipt, retention
and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, and (b)
the confidential, anonymous submission by employees of the Company of
concerns regarding questionable accounting or auditing matters.
3. Reviewing and discussing with management and the independent auditors
any correspondence with regulators or governmental agencies and any
employee complaints or published reports which raise material issues
regarding the Company's financial statements or accounting policies.
4. Obtaining regular updates from management and Company's legal counsel
regarding legal matters that may have an impact on the Company's
financial statements.
E. ADDITIONAL RESPONSIBILITIES
1. Reviewing with the Board any issues which arise with respect to the
quality or integrity of the Company's financial statements, the
performance and independence of the independent auditors or the
performance of the internal audit function.
2. Providing an open avenue of communication among the internal auditors,
the independent auditors and the Board.
3. Preparing the Audit Committee report to be included in Bob Evans'
annual proxy statement and any other information related to the
responsibilities of the Audit Committee required to be disclosed under
the rules of the SEC and Nasdaq.
4. At least annually, reviewing and reassessing the adequacy of this
Charter and recommending any proposed changes to the Board. This
Charter and any amendments hereto shall be publicly disclosed at the
times and in the manner required by the applicable rules or criteria
established by Nasdaq and the SEC.
28
[BOB EVANS FARMS(R) LOGO]
VOTE BY PHONE - (800) 690-6903
3776 SOUTH HIGH STREET Use any touch-tone telephone to transmit
COLUMBUS, OH 43207 your voting instructions up until
11:59 p.m. Eastern Daylight Time the day
before the cut-off date or meeting date.
Have your proxy card in hand when you
call and then follow the instructions.
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting
instructions and for electronic delivery
of information up until 11:59 p.m.
Eastern Daylight Time the day before the
cut-off date or meeting date. Have your
proxy card in hand when you access the
Web site and follow the instructions to
obtain your records and to create an
electronic voting instruction form.
VOTE BY MAIL
Indicate your vote, sign your name as it
appears on this card and fill in the
date and return it in the postage-paid
envelope we have provided or return it
to Bob Evans Farms, Inc., c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
Proxies must be received by 11:59 p.m.
Eastern Daylight Time the day before the
meeting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
BEFRM1 KEEP THIS PORTION FOR YOUR RECORDS
- ------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
BOB EVANS FARMS, INC.
Proxy for annual meeting of stockholders
to be held on Sept. 13, 2004.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS.
YOUR BOARD RECOMMENDS YOU VOTE "FOR" ALL NOMINEES. To withhold
authority to vote
DIRECTORS FOR WITHHOLD FOR ALL for a specific
ALL ALL EXCEPT nominee, mark "For
All Except" and
Election of three class III directors to serve for terms of three years [ ] [ ] [ ] write the nominee's
each: 01) Daniel E. Evans number on the line
02) Michael J. Gasser below.
03) E. W. (Bill) Ingram III ___________________
YOUR BOARD RECOMMENDS YOU VOTE "FOR" THE RATIFICATION OF THE SELECTION OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
PROPOSAL FOR AGAINST ABSTAIN
Ratification of the selection of Ernst & Young LLP as the company's independent registered public
accounting firm for the 2005 fiscal year. [ ] [ ] [ ]
THE UNDERSIGNED STOCKHOLDER(S) AUTHORIZES THE PROXIES TO VOTE UPON SUCH OTHER MATTERS (NONE KNOWN AT
THE TIME OF SOLICITATION OF THIS PROXY) AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT(S)
THEREOF IN THEIR DISCRETION.
The undersigned hereby acknowledges receipt of the notice of the annual meeting
of stockholders, dated July 27, 2004; the enclosed proxy statement; and the
annual report of the company for the fiscal year ended April 30, 2004.
YES NO
Please indicate if you plan to attend this meeting [ ] [ ]
HOUSEHOLDING ELECTION - Please indicate if
you consent to receive certain future investor
communications in a single package per household [ ] [ ]
_________________________________ ______ _______________________ _________
_________________________________ ______ _______________________ _________
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
July 27, 2004
Dear Fellow Stockholders:
You are invited to join us at our annual meeting of stockholders where we will
discuss our financial results and our plans, including those for our newly
acquired Mimi's Cafe restaurants. The ANNUAL MEETING OF STOCKHOLDERS WILL BE
MONDAY, SEPT. 13, 2004, AT 9 A.M. AT THE SOUTHERN THEATRE IN COLUMBUS, OHIO.
Beginning at 8 a.m., officers and directors will be available to discuss our
company's progress, as well as share in refreshments.
WHETHER OR NOT YOU PLAN TO JOIN US AT THE MEETING, PLEASE TAKE THE TIME TO VOTE
YOUR PROXY. Your vote is important. There are instructions on the reverse side
of this card for voting by Internet, phone or mail. If you choose to vote by
Internet, I encourage you to sign up for electronic delivery of the proxy
materials and annual report which will expedite delivery, reduce paper usage and
decrease mailing costs next year.
Again, I do hope you can join us on Sept. 13.
Sincerely,
/s/ Stewart K. Owens
- --------------------
Stewart K. Owens
Chairman of the Board and
Chief Executive Officer
BEFRM2
- --------------------------------------------------------------------------------
The stockholder(s) of Bob Evans Farms, Inc. (the "company"), identified on this
card, appoints Stewart K. Owens and Donald J. Radkoski as the proxies of such
stockholder(s), with full power of substitution, to attend the annual meeting of
stockholders of the company to be held at the Southern Theatre, 21 E. Main St.,
Columbus, Ohio 43215, on Monday, Sept. 13, 2004, at 9 a.m., Eastern Daylight
Time, and to vote all of the shares of common stock which such stockholder(s) is
entitled to vote at the annual meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BOB EVANS FARMS,
INC.
You may vote using any of the above-mentioned methods. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If
a signer is a corporation, please sign the full corporate name by authorized
officer. Joint owners should both sign.
VOTES WILL BE COUNTED AS FOLLOWS: WHERE A CHOICE IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED.
IF NO CHOICE IS INDICATED ON THE REVERSE SIDE OF THIS CARD, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED
AS DIRECTORS OF THE COMPANY AND FOR THE RATIFICATION OF THE SELECTION OF ERNST &
YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
FISCAL 2005. IF PRIOR PROXIES HAVE BEEN SUBMITTED FOR THE SAME SHARES
REPRESENTED BY THIS CARD, THIS PROXY WILL REPLACE EARLIER PROXIES.
IF SHARES OF COMMON STOCK OF THE COMPANY ARE ALLOCATED TO THE ACCOUNT OF THE
STOCKHOLDER IDENTIFIED ON THIS CARD UNDER THE BOB EVANS FARMS, INC. AND
AFFILIATES 401(k) RETIREMENT PLAN (THE "401(k) PLAN"), THEN SUCH STOCKHOLDER
HEREBY DIRECTS WILMINGTON TRUST COMPANY, THE TRUSTEE OF THE 401(k) PLAN (THE
"TRUSTEE"), TO VOTE (i) ALL OF THE SHARES OF COMMON STOCK OF THE COMPANY
ALLOCATED TO SUCH STOCKHOLDER'S ACCOUNT UNDER THE 401(k) PLAN AND (ii) THE
PORTION OF THE SHARES OF COMMON STOCK ALLOCATED TO ACCOUNTS OF PARTICIPANTS IN
THE 401(k) PLAN FROM WHOM VOTING INSTRUCTIONS HAVE NOT BEEN RECEIVED ("UNVOTED
SHARES"), IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN HEREIN AT THE ANNUAL MEETING
AND ANY ADJOURNMENT(S), ON THE MATTERS SET FORTH ON THE REVERSE SIDE. YOUR
INSTRUCTIONS TO THE TRUSTEE ARE CONFIDENTIAL. IF NO INSTRUCTIONS ARE GIVEN, THE
SHARES ALLOCATED TO SUCH STOCKHOLDER'S ACCOUNT IN THE 401(k) PLAN WILL BE VOTED
IN THE SOLE DISCRETION OF THE TRUSTEE.