Exhibit 10.2
BOB EVANS FARMS, INC.
SUMMARY OF PERFORMANCE INCENTIVE PLAN
On May 9, 2005, the Compensation Committee of the Board of Directors of
Bob Evans Farms, Inc. (the "Company") approved a new Performance Incentive Plan
(the "Performance Incentive Plan") for the executive officers and senior
management of the Company and its subsidiaries.
The purpose of the Performance Incentive Plan 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 Compensation Committee continues to believe that a
large portion of executive compensation should be at-risk and stock-based to
ensure that significant awards are received by executive officers only when
stockholder value is created. The Performance Incentive Plan was developed by
the Compensation Committee with the assistance of a nationally recognized
consulting firm who, among other things, benchmarked compensation practices of
companies in the Company's peer group and advised the Compensation Committee on
appropriate compensation guidelines.
Awards under the Performance Incentive Plan consist of stock options,
restricted stock awards and cash bonuses. The Compensation Committee has
established two categories of participants in the Performance Incentive Plan.
"Tier 1" participants include the Company's Chief Executive Officer and its four
other most highly compensated executive officers (the "Named Executive
Officers"). "Tier 2" participants include the Company's other executive officers
and senior management (i.e., all employees categorized in grades M07 through
M11).
TIER 1 PARTICIPANTS
The amount of incentive compensation that a Named Executive Officer can
receive under the Performance Incentive Plan is equal to a multiple of the Named
Executive Officer's annual base salary established by the Compensation Committee
(the "Base Salary Multiple"). The amount obtained by multiplying the Named
Executive Officer's annual base salary by the Base Salary Multiple is the Named
Executive Officer's "Target Incentive Compensation." For example, if a Named
Executive Officer's annual base salary is $150,000 and the Compensation
Committee establishes his Base Salary Multiple at 150%, the Named Executive
Officer's Target Incentive Compensation would be $225,000 (to be paid in
addition to the Named Executive Officer's base salary, cash bonus and other
compensation). Incentive compensation under the Performance Incentive Plan is
payable to the Named Executive Officers in the form of stock options and
restricted stock as described below.
Once the Named Executive Officer's Target Incentive Compensation is
determined, the Named Executive Officer will automatically receive a grant of
stock options with a value equal to 25% of that amount as incentive
compensation, calculated using the closing price of the Company's common stock
on the Nasdaq National Market on the grant date, the Black-Scholes valuation
model and a discount based on vesting requirements. Based on the example in the
preceding paragraph, the Named Executive Officer would receive a grant of stock
options worth $56,250 (25% of $225,000). The Compensation Committee has
determined that this automatic grant of stock options is an appropriate form of
incentive compensation because the value of the stock options is inherently tied
to Company performance - the stock options are only valuable if the price of the
Company's common stock increases after the grant date and before the options
expire. The stock options (which will be granted to the Named Executive Officers
after the end of the fiscal year) will be incentive stock options up to
applicable statutory limits and the balance will be non-qualified stock options.
The remaining 75% of each Named Executive Officer's Target Incentive
Compensation is at-risk and will be awarded in the form of restricted stock only
if specific performance goals the Compensation Committee are achieved (e.g.,
specific earnings per share and operating income amounts for designated business
units). Based on the example in the preceding paragraph, the Named Executive
Officer would receive restricted stock worth $168,750 (75% of $225,000) if the
performance goals established by the
Compensation Committee were achieved. If the performance goals are partially
achieved, the Named Executive Officer may receive part of the at-risk portion of
his Target Incentive Compensation. The Compensation Committee has established a
minimum threshold performance level that must be met in order for the Named
Executive Officer to receive any part of the at-risk portion of his Target
Incentive Compensation (80% of the performance goal(s) for Messrs. Owens,
Radkoksi, Williams and Hicks; 70% of the performance goal for Mr. Bendel). If
the performance goals are exceeded, the Named Executive Officer will receive up
to 150% of the at-risk portion of his Target Incentive Compensation, depending
on the amount by which the performance goals were exceeded. At the end of the
performance period, the Compensation Committee determines the portion of the
at-risk Target Incentive Compensation earned and the value of the restricted
stock earned. At that time, the Compensation Committee also calculates the
number of shares of restricted stock awarded using the closing price of the
Company's common stock on the Nasdaq National Market on the grant date as well
as a discount based on vesting requirements.
For the Company's fiscal year beginning on April 30, 2005 ("Fiscal
2006"), the Compensation Committee has established the following Base Salary
Multiples and performance goals for each of the Named Executive Officers:
At-Risk Portion of
Target Incentive
Base Salary Compensation as
Name and Title Multiple Percentage Base Salary Performance Goals
-------------- -------- ---------------------- -----------------
Stewart K. Owens 250% 187.5% Earnings per share of the
Chairman, Chief Executive Officer, Company
President and Chief Operating Officer
Donald J. Radkoski 105% 78.75% Earnings per share of the
Chief Financial Officer, Treasurer and Company
Secretary
Roger D. Williams 105% 78.75% Earnings per share of the
Executive Vice President - Food Products Company (25%)
Operating income of the
Company's Food Products
segment (75%)
Randall L. Hicks 75% 56.25% Earnings per share of the
Executive Vice President - Restaurant Company (25%)
Operations
Operating income of Bob
Evans restaurants (75%)
Russell W. Bendel 75% 56.25% Operating income of SWH
Chief Executive Officer - SWH Corporation Corporation (Mimi's Cafe
d/b/a Mimi's Cafe restaurants)
TIER 2 PARTICIPANTS
The total amount of incentive compensation that a Tier 2 participant
can receive under the Performance Incentive Plan is equal to a multiple of the
Tier 2 participant's annual base salary. Each Tier 2 participant's base salary
multiple will be established by the appropriate Named Executive Officers, except
that the Compensation Committee will establish the base salary multiple for Tier
2 participants who are executive officers.
All incentive compensation for Tier 2 participants is at-risk based on
the achievement of performance goals established by the Compensation Committee.
For Fiscal 2006, the Compensation Committee has established earnings per share
as the performance goal for all Tier 2 corporate support employees and business
unit operating income as the performance goal for Tier 2 participants whose job
responsibilities are primarily related to a particular business unit (e.g., Bob
Evans and Owens Country Sausage combined food products, Bob Evans food products,
Bob Evans restaurants, Owens food products, Mimi's Cafe restaurants, etc.). If a
Tier 2 participant's performance goal is achieved, the Tier 2 participant will
receive 100% of his or her target incentive compensation. If the performance
goal is partially achieved, the Tier 2 participant may receive a portion of his
or her target incentive compensation. The Compensation Committee has established
a minimum threshold performance level (70% of the target performance goals) that
must be met in order for any incentive compensation to be awarded. If the
performance goal is exceeded, the Tier 2 participant will receive up to 150% of
his or her target incentive compensation, depending on the amount by which the
performance goal was exceeded.
Tier 2 participants will receive one-half of their incentive
compensation under the Performance Incentive Plan in the form of cash and the
remaining one-half in the form of restricted stock. At the end of the
performance period, the Compensation Committee determines the portion of
incentive compensation earned and the value of the restricted stock earned. At
that time, the Compensation Committee also calculates the number of shares of
restricted stock awarded using the closing price of the Company's common stock
on the Nasdaq National Market on the grant date as well as a discount based on
vesting requirements.
GENERAL
All incentive compensation awards under the Performance Incentive Plan
will vest over a period of three (3) years beginning on the first anniversary of
the date the award was made. The exercise price of stock options and the grant
price of restricted stock awards made under the Performance Incentive Plan will
be equal to the closing price of the Company's common stock on the Nasdaq
National Market on the date the stock options and restricted stock awards are
made. All awards of stock options and restricted stock will be granted under the
Company's First Amended and Restated 1998 Stock Option and Incentive Plan (or,
for fiscal years after Fiscal 2006, any subsequent employee compensation plan
approved by the Company's stockholders) and, with respect to awards granted to
the Named Executive Officers, in accordance with the Bob Evans Farms, Inc. 2002
Incentive Growth Plan.
The Performance Incentive Plan is effective beginning with Fiscal 2006.
The Compensation Committee may amend or terminate the Performance Incentive Plan
at any time.