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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
BOB EVANS FARMS, INC.
_______________________________________________
(Name of Registrant as Specified In Its Charter)
__________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
____________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:____________________
(5) Total fee paid:_____________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:_____________________________________________
(2) Form, Schedule or Registration Statement No.:_______________________
(3) Filing Party:_______________________________________________________
(4) Date Filed:_________________________________________________________
BOB EVANS
FARMS(R)
3776 S. HIGH ST.
COLUMBUS, OHIO 43207
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Monday, Sept. 12, 2005, at 9 a.m.
Southern Theatre
21 E. Main St.
Columbus, Ohio 43215
Dear Fellow Stockholders: Aug. 1, 2005
We are pleased to invite you to the annual meeting of stockholders of Bob Evans
Farms, Inc. on Monday, Sept. 12, 2005, 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 refreshments 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, 2005, 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 2005 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
Aug. 1, 2005, to the company's stockholders of record at the close of business
on July 15, 2005. We also are sending the Bob Evans Farms, Inc. 2005 annual
report, which includes financial statements for the fiscal year ended April 29,
2005.
DELIVERY OF PROXY MATERIALS TO MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS
Periodically, the company provides each registered stockholder at a shared
address, not previously notified, with a separate notice of the company's
intention to "household" proxy materials. Only one copy of the company's proxy
statement for the 2005 annual meeting of stockholders and annual report to
stockholders for the 2005 fiscal year will be delivered to previously notified
registered stockholders who share an address unless the company has received
contrary instructions from one or more of those registered stockholders. A
separate proxy card will be included for each account at a shared address.
Registered stockholders who share an address and would like to receive a
separate annual report to stockholders for the 2005 fiscal year and/or a
separate proxy statement for the 2005 annual meeting of stockholders, or who
have questions regarding the householding process, may contact the company's
Stock Transfer Department at Bob Evans Farms, Inc., 3776 S. High St., Columbus,
Ohio 43207 or (614) 492-4952. Promptly upon request, additional copies of the
annual report to stockholders for the 2005 fiscal year and/or a separate proxy
statement for the 2005 annual meeting of stockholders will be sent. By
contacting the company's Stock Transfer Department, registered stockholders
sharing an address may also (1) notify the company that the registered
stockholders wish to receive separate annual reports to stockholders and/or
proxy statements in the future or (2) request delivery of a single copy of the
annual report to stockholders and/or proxy statement in the future if registered
stockholders at the shared address are receiving multiple copies.
VOTING INFORMATION
WHO MAY VOTE?
Only stockholders of record at the close of business on July 15, 2005, are
entitled to vote at the annual meeting or any adjournment(s) of the meeting. At
the close of business on July 15, 2005, there were 35,433,872 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:
- log onto www.proxyvote.com,
- call (800) 690-6903 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. 11,
2005. 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.
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, 2005.
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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 the company's
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.
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 3776 S. High St.,
Columbus, Ohio 43207, which must be received prior to the annual meeting;
- 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 before
11:59 p.m. Eastern Daylight Time on Sept. 11, 2005; or
- attending the annual meeting and revoking your proxy 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, 2005, 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 IF MY SHARES ARE HELD THROUGH THE COMPANY'S 401(k) PLAN?
If you participate in the Bob Evans Farms and Affiliates 401(k) Plan (the
"401(k) plan") and shares of the company's common stock have been allocated to
your account in the 401(k) plan, you will be entitled to instruct the trustee of
the 401(k) plan how to vote those shares. If you do not give the trustee voting
instructions, the trustee will not vote the shares allocated to your 401(k) plan
account.
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 I
directors receiving the greatest number of votes "for" election will be elected
as class I 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
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of record who do not have discretionary authority to vote on a particular matter
and who have not received voting 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 "nonroutine" matters
without instructions from their clients.
STOCK OWNERSHIP
The following table shows the 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(1) PERCENT OF CLASS(2)
- -------------------------------- -------------------------- -------------------
Ariel Capital Management, LLC 6,806,757(3) 19.2%
200 E. Randolph Dr., Ste. 2900
Chicago, Ill. 60601
Mac-Per-Wolf Company 2,275,079(4) 6.4%
310 S. Michigan Ave., Ste. 2600
Chicago, Ill. 60604
NFJ Investment Group L.P. 1,766,000(5) 5.0%
2121 San Jancinto St., Ste. 1840
Dallas, Texas 75201
(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.
(2) The percent of class is based upon 35,433,872 common shares outstanding on
July 15, 2005.
(3) Includes 6,806,757 shares as to which Ariel Capital Management, LLC
("Ariel") has sole investment power and 5,298,875 shares as to which Ariel
has sole voting power. Ariel is a registered investment advisor, and all of
these common shares are owned by its investment advisory clients. Ariel
Fund, a series of Ariel Investment Trusts and a registered investment
company, owns more than 5 percent of the common shares. All of the fore-
going information regarding Ariel's ownership interest in the company is
based on information contained in a Schedule 13G/A filed with the Securities
and Exchange Commission ("SEC") by Ariel on Feb. 14, 2005.
(4) Mac-Per-Wolf Company ("Mac") is the parent company of PWMCO, LLC and
Perkins, Wolf, McDonnell and Company, LLC, which furnishes investment advice
to various investment companies and to individuals and institutional
clients, no one of which, to the knowledge of Mac, owns more than 5 percent
of the company's outstanding stock. All of the foregoing information
regarding Mac's ownership interests in the company is based on information
contained in a Schedule 13G filed with the SEC by Mac on Jan. 31, 2005.
(5) Includes 1,766,000 shares as to which NFJ Investment Group L.P. ("NFJ") has
sole investment power, 1,107,300 shares as to which NFJ has sole voting
power and 658,700 shares as to which NFJ has shared voting power. All of the
common shares reported are held by NFJ, a registered investment advisor
under Section 203 of the Investment Advisors Act of 1940. All of the
foregoing information regarding NFJ's ownership interests in the company is
based on information contained in a Schedule 13G filed with the SEC by NFJ
on Feb. 14, 2005.
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The following table summarizes the company's common shares beneficially owned by
each current director, each of the nominees for election or re-election as a
director, each executive officer named in the summary compensation table (page
12) and by all current directors and executive officers of the company as a
group, as of July 15, 2005:
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)
- ----------------------- -------------- ------------------- --------- ----------
Russell W. Bendel(3) 9,748 0 9,748 (*)
Larry C. Corbin 52,688(4) 227,181 279,869 (*)
Daniel E. Evans 102,999(5) 211,991 314,990 (*)
Daniel A. Fronk 24,641(6) 13,172 37,813 (*)
Michael J. Gasser 9,734 13,172 22,906 (*)
Randall L. Hicks(3) 2,226(7) 17,287 19,513 (*)
E.W. (Bill) Ingram III 15,467 13,172 28,639 (*)
Cheryl L. Krueger 3,085 4,155 7,240 (*)
G. Robert Lucas 11,984 13,172 25,156 (*)
Stewart K. Owens(3) 222,727(8) 574,616 797,343 2.3%
Robert E.H. Rabold 8,347(9) 9,212 17,559 (*)
Donald J. Radkoski(3) 13,864(10) 184,618 198,482 (*)
Roger D. Williams(3) 23,540(11) 130,995 154,535 (*)
All current executive
officers and directors
as a group (17 persons) 515,719(12) 1,525,650 2,041,369 5.8%
* Represents ownership of less than 1 percent 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 35,433,872 common shares outstanding on
July 15, 2005, 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, 2005.
(3) Executive officer of the company named in the summary compensation table.
(4) Includes 227 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.
(5) 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 2,044 common shares held by Mr.
Evans' spouse, as to which she has sole voting and investment power; 414
common shares held by Mr. Evans' stepson, as to which he has sole voting and
investment power; and 414 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.
(6) 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.
4
(7) Includes six shares held by Mr. Hicks as custodian for the benefit of his
son and 2,220 shares held jointly by Mr. Hicks and his spouse with whom he
shares voting and investment power. Additionally, Mr. Hicks holds one
nonvoting preferred share of BEF REIT, as to which he has sole investment
power. Mr. Hicks' spouse holds one nonvoting preferred share of BEF REIT,
as to which she has sole investment power.
(8) 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.
(9) 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.
(10) 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.
(11) Includes 14,465 shares held in a trust for which Mr. Williams' spouse
serves as trustee and has sole voting and investment power. Additionally,
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.
(12) See notes (4) through (11) above. As a group, the current directors and
executive officers of the company and their immediate family members who
reside with them hold 20 nonvoting preferred shares of BEF REIT.
NEW STOCK OWNERSHIP GUIDELINES
To further implement the company's fundamental philosophy of maximizing
stockholder value by aligning the financial interests of the company's
stockholders with the individuals primarily responsible for developing and
implementing corporate strategy, the compensation committee of the board of
directors recently adopted the following stock ownership guidelines for the
company's named executive officers (i.e., the company's chief executive officer
and the four other most highly compensated executive officers) and directors:
Chief Executive Officer 100,000 Shares
Other Named Executive Officers 10,000 Shares
Board of Directors 5,000 Shares
The named executive officers and directors must satisfy the stock ownership
guidelines within five years; however, they must satisfy 50 percent of the
applicable requirement within three years.
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 2005 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 2005 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 2007. At the
annual meeting on Sept. 12, 2005, three class I directors will be elected for
three-year terms.
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Based on the recommendation of the nominating and corporate governance
committee, the board of directors has designated Daniel A. Fronk, Cheryl L.
Krueger and G. Robert Lucas as nominees for election as class I directors of the
company for terms expiring in 2008. The company's Corporate Governance
Principles provide that directors must retire from the board when they reach age
70. Mr. Fronk will turn 70 this year. The board of directors has determined that
it is in the best interest of the company and its stockholders to nominate Mr.
Fronk for re-election to the board and to suspend the mandatory retirement
requirement with respect to Mr. Fronk. Given the company's recent disappointing
performance, the board believes the company will benefit greatly from Mr.
Fronk's extensive knowledge of the company's business and his continued
leadership on the board during this challenging time.
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 I directors receiving the greatest number of
votes will be elected as class I 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.
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 2008 (CLASS I)
Daniel A. Fronk, age 69 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 53 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 61 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 Miracle-Gro Company, a
manufacturer of lawn and garden
products, Marysville, Ohio.
CONTINUING DIRECTORS - TERMS TO EXPIRE IN 2006 (CLASS II)
Larry C. Corbin, age 63 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 50 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; in each case
of the company.
Robert E.H. Rabold, age 66 Retired Chairman since 2001; Chairman
Director since 1994. of 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.
6
CONTINUING DIRECTORS - TERMS TO EXPIRE IN 2007 (CLASS III)
Daniel E. Evans, age 68 Retired Chairman since 2001; Chairman
Director since 1957. of 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 54 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 54 President and Chief Executive Officer
Director since 1998. since 1972 of White Castle System,
Inc., a quick-service hamburger chain,
Columbus, Ohio.
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 six meetings during the 2005
fiscal year. Each director is expected to attend each meeting of the board and
the committees on which he or she serves. In fiscal 2005, 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 company's Corporate Governance Principles, 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. 13, 2004.
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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 2005
fiscal year. Messrs. Corbin, Evans and Owens do not serve on any of the
following committees.
Audit Compensation Nominating and Corporate
Name Committee Committee Governance Committee
- ---- --------- ------------ ------------------------
Daniel A. Fronk - - -
Michael J. Gasser Chair -
E.W. (Bill) Ingram III - -
Cheryl L. Krueger - Chair
G. Robert Lucas -
Robert E.H. Rabold - Chair -
Number of committee meetings
held during fiscal 2005 4 7 2
- - committee member
AUDIT COMMITTEE
The audit committee is organized and conducts its business pursuant to a written
charter adopted by the board of directors. A current copy of the audit committee
charter is posted on the company's Web site, www.bobevans.com, in the
"Investors" section under "Corporate Governance." 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
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 registered public
accounting firm to the company or any of its subsidiaries and ensures that the
independent registered public accounting firm is not engaged to perform the
specific non-audit services prohibited by law, rule or regulation. The audit
committee's report relating to the 2005 fiscal year begins at page 25.
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, in the "Investors" section under
"Corporate Governance." 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;
- 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;
8
- 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 2005 fiscal year begins at
page 19.
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, in the "Investors"
section under "Corporate Governance." 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 committees. 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 the company. Daniel E. Evans, a current director of The
Sherwin-Williams Company, 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 company's board at age 70. As noted above, the board of
directors has suspended this requirement with respect to Mr. Fronk.
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 company's
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, in the
"Investors" section under "Corporate Governance." 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.
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.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------- ------------
NAME AND SECURITIES
PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ------------------------- ------ ----------- ----------- ------------ ------------
Stewart K. Owens: 2005 $ 656,341(1) $ 112,340 169,300(2) $ 28,000(3)
Chairman of the Board, 2004 $ 597,983 $ 306,790 147,496 $ 28,168
Chief Executive Officer, 2003 $ 544,930 $ 358,108 119,801 $ 531,839
President and Chief
Operating Officer
Roger D. Williams: 2005 $ 344,027 $ 113,529 60,175(2) $ 69,500(3)
Executive Vice 2004 $ 332,393 $ 193,453 55,449 $ 13,804
President of 2003 $ 319,608 $ 132,174 47,636 $ 224,482
Food Products
Division
Russell W. Bendel 2005 $ 260,000(4) $ 54,165 0(2) $ 0
President of 2004 (5)
SWH Corporation 2003
(d/b/a Mimi's Cafe)
Donald J. Radkoski: 2005 $ 317,338 $ 47,601 50,190(2) $ 13,790(3)
Chief Financial 2004 $ 306,606 $ 135,131 46,912 $ 13,770
Officer, Treasurer 2003 $ 294,814 $ 145,933 40,301 $ 203,535
and Secretary
Randall L. Hicks: 2005 $ 250,000 $ 29,286 9,745(2) $ 55,944(3)
Executive Vice 2004 $ 200,000 $ 46,852 8,172 $ 10,135
President of Restaurant 2003 $ 156,924 $ 29,566 4,702 $ 21,766
Operations
(1) "Salary" includes directors' fees received by Mr. Owens during the 2005
fiscal year of $14,400.
(2) The options reflected in the Summary Compensation Table were granted during
the 2005 fiscal year. For more information regarding these options, see the
table under "Grants of Options." Additionally, in June 2005, the
compensation committee awarded incentive stock options ("ISOs") and
non-qualified stock options ("NQSOs") to the named executive officers with
respect to fiscal 2005 performance. Messrs. Owens and Williams each received
an ISO covering 4,307 shares. Messrs. Bendel, Radkoski and Hicks received
ISOs covering 9,846; 4,037; and 3,445 shares, respectively. Messrs. Owens,
Williams, Radkoski and Hicks received NQSOs covering 38,489; 10,005; 8,072;
and 5,168 shares, respectively. Mr. Bendel received 9,748 shares of
restricted stock. These awards are not reflected in the Summary Compensation
Table because they were granted during the 2006 fiscal year.
(3) Includes company matching contributions to the 401(k) plan for each of the
named executive officers listed, except Mr. Bendel, during the 2005 fiscal
year in the amount of $4,100; includes amounts related to the Bob Evans
Farms, Inc. 2002 Second Amended and Restated Executive Deferral Program for
Messrs. Owens, Williams, Radkoski and Hicks during the 2005 fiscal year of
$23,900; $11,904; $9,690; and $4,286, respectively, and includes
contributions to the Bob Evans Farms, Inc. and Affiliates 2002 Second
Amended and Restated Supplemental Executive Retirement Plan for Messrs.
Williams and Hicks during the 2005 fiscal year of $53,496 and $47,558,
respectively.
12
(4) Mr. Bendel's salary in fiscal 2005 was based on an annual rate of $325,000;
the actual salary paid ($260,000) was the prorated amount for the period
subsequent to the July 7, 2004, acquisition of SWH Corporation (d/b/a Mimi's
Cafe).
(5) Mr. Bendel was not a named executive officer of the company until fiscal
2005 upon the acquisition of SWH Corporation (d/b/a Mimi's Cafe).
GRANTS OF OPTIONS
The following table sets forth information concerning individual grants of ISOs
and NQSOs made during the 2005 fiscal year to each of the named executive
officers identified below. Mr. Bendel was not granted any options during the
2005 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------- REALIZABLE VALUE AT
NUMBER OF % OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION --------------------------
NAME GRANTED(1) FISCAL YEAR PRICE ($/SH) DATE 5% 10%
- ------------------ ---------- ------------- ------------ ---------- ----------- -----------
Stewart K. Owens 169,300 18.8% 26.68 6/16/14 $ 2,840,669 $ 7,198,814
Roger D. Williams 60,175 6.7% 26.68 6/16/14 $ 1,009,671 $ 2,558,704
Donald J. Radkoski 50,910 5.7% 26.68 6/16/14 $ 854,214 $ 2,164,747
Randall L. Hicks 9,745 1.1% 26.68 6/16/14 $ 163,510 $ 414,368
(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 16, 2004, 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 1998 Stock Option 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.
13
OPTION EXERCISES AND HOLDINGS
The following table outlines options exercised during the 2005 fiscal year by
each of the named executive officers identified below and unexercised options
held as of the end of the 2005 fiscal year by such named executive officers. Mr.
Bendel did not hold nor exercise any options during the 2005 fiscal year.
AGGREGATE OPTION EXERCISES IN FISCAL 2005
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)
OPTIONS VALUE --------------------------- --------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ---------- ---------- ----------- ------------- ----------- ------------
Stewart K. Owens 26,803 $ 272,714 429,084 318,696 $ 805,636 $ 116,902
Roger D. Williams 0 $ 0 76,575 126,940 $ 77,422 $ 147,709
Donald J. Radkoski 0 $ 0 138,578 105,314 $ 285,989 $ 105,039
Randall L. Hicks 2,164 $ 28,181 9,747 18,513 $ 11,431 $ 19,113
(1) All values are shown pretax and are rounded to the nearest whole dollar.
Amounts are based on the 2005 fiscal year-end closing price of $20.40 per common
share.
CHANGE IN CONTROL AND SEVERANCE ARRANGEMENTS
The company has entered into change in control agreements with each of the named
executive officers listed in the Summary Compensation Table except for Mr.
Bendel. 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, 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.
15
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.
EMPLOYMENT AGREEMENT
In connection with the company's acquisition of SWH Corporation (d/b/a Mimi's
Cafe) on July 7, 2004, Mimi's Cafe entered into an employment agreement with
Russell W. Bendel. The employment agreement provides that Mr. Bendel will serve
as the president and chief executive officer of Mimi's Cafe until the earlier of
July 7, 2006, or the termination of Mr. Bendel's employment with Mimi's Cafe. As
compensation for his services, the employment agreement provides Mr. Bendel with
an annual base salary of $325,000, subject to annual review and adjustment by
the company's compensation committee. (In June 2005, the compensation committee
raised Mr. Bendel's base salary to $344,500 for fiscal 2006). The employment
agreement also entitles Mr. Bendel to participate in all employee benefit plans
provided to the company's employees generally as well as bonus plans established
by the compensation committee for the company's executive officers.
If Mr. Bendel's employment terminates due to his death or disability, Mr. Bendel
(or his estate) will receive Mr. Bendel's then current base salary through the
date his employment is terminated. If Mr. Bendel is terminated for cause (as
defined in the employment agreement) or resigns without good reason, he will
receive his then current base salary accrued through the date his employment is
terminated. If Mr. Bendel is terminated without cause or he resigns for good
reason (as defined in the employment agreement), he will continue to receive his
base salary for up to 18 months following the date his employment is terminated;
provided, however, that (a) beginning 12 months after the date his employment is
terminated, the company's payment obligations will be offset by any compensation
Mr. Bendel receives from a new employer and (b) Mimi's Cafe will have no payment
obligations to Mr. Bendel if he becomes employed by a competing business, as
described below. If Mr. Bendel is terminated or resigns because Mimi's Cafe does
not permit him to take an unpaid leave of absence for a personal emergency or
under circumstances that would normally be the basis for unpaid leave under the
company's general policies, Mr. Bendel will continue to receive his base salary
for up to 12 months after the date his employment is terminated; provided,
however, that the company's payment obligations will be offset by any
compensation Mr. Bendel receives from a new employer and Mimi's Cafe will have
no payment obligations to Mr. Bendel if he becomes employed by a competing
business, as described below.
The employment agreement prohibits Mr. Bendel from using or divulging any
confidential information regarding the company and its subsidiaries (other than
for the benefit of the company). During the term of the employment agreement,
Mr. Bendel is also prohibited from engaging in or owning any business in the
United States that competes with Mimi's Cafe, except for the ownership of 5
percent or less of a publicly traded competitor and Mr. Bendel's pre-existing
investment in CWH, LLC (d/b/a The Lazy Dog Restaurants). During the three-year
period following the termination of Mr. Bendel's employment, he may not engage
in or own any restaurant business which (a) is in the "upscale family casual"
category; (b) has a guest check average within 20 percent of Mimi's Cafe's guest
check average; and (c) has a menu, theme or decor that is similar to that of
Mimi's Cafe, except for the ownership of 5 percent or less of a publicly traded
competitor. Mr. Bendel may not, on his own behalf or on behalf of others (i)
solicit or divert any Mimi's Cafe employee to leave their employment or (ii)
hire any of Mimi's Cafe's general managers, marketing partners, operating
partners or senior management at any time during the term of the employment
agreement and during the 18-month period following the termination of his
employment.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The company maintains the Bob Evans Farms, Inc. and Affiliates 2002 Second
Amended and Restated Supplemental Executive Retirement Plan (the "SERP"), which
is a defined contribution plan designed to supplement, through annual company
contributions, the retirement benefits of a select group of management or highly
compensated employees (as governed by ERISA) chosen at the discretion of the
compensation committee. There are currently 31 participants in the SERP,
including all of the company's executive officers. The compensation committee
added Mr. Bendel as a participant in the SERP in June 2005.
The company's annual contributions to participants' SERP accounts are based upon
an actuarially determined "target" benefit for each participant. Generally, this
target benefit is equal to the lower of (a) 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 the participant's compensation was
the highest or (b) 2.75 percent of a participant's average compensation
multiplied by the number of years the participant participated in the SERP, less
the participant's benefit under the company's qualified retirement plan derived
from company contributions and 50 percent of the participant's projected Social
Security benefit.
16
Each year, SERP participants may elect to have their portion of the company's
aggregate annual SERP contribution allocated to the participant's SERP account
in cash or, when authorized by the compensation committee, the participant may
elect to receive an NQSO to acquire a number of the company's common shares
equal in value to the amount of the participant's portion of the company's
aggregate annual SERP contribution. The compensation committee did not authorize
the grant of NQSOs to satisfy the company's SERP obligations during fiscal 2005.
The company's fiscal 2005 contributions to the named executive officers' SERP
accounts are included under the caption "All Other Compensation" in the Summary
Compensation Table included in this proxy statement.
Generally, a SERP participant 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). If a SERP participant dies while employed by the company, the
participant's beneficiary will be entitled to a distribution of the
participant's SERP account. Participants may elect to receive their SERP
distributions monthly over a period of 10 years or in a lump sum (subject to
compliance with applicable deferred compensation rules). Currently, the SERP is
expected to provide a monthly retirement benefit of $36,592 for Mr. Owens,
$14,562 for Mr. Williams, $13,609 for Mr. Bendel, $16,002 for Mr. Radkoski and
$16,632 for Mr. Hicks if they retire at the normal retirement age. These monthly
benefits would be paid for 10 years and are based on actuarial assumptions and
other factors that are specified in the SERP or that are recommended by the
SERP's actuary. The actual monthly benefit may be higher or lower than these
amounts depending on the extent to which these actuarial assumptions reflect
actual experience.
401(k) PLAN AND EXECUTIVE DEFERRAL PROGRAM
The company maintains a 401(k) plan and "matches" certain employee contributions
to the 401(k) plan. All of the company's named executive officers participate in
the company's 401(k) plan on the same basis as other employees. The company's
fiscal 2005 matching contributions to the named executive officers' 401(k)
accounts are included under the caption "All Other Compensation" in the Summary
Compensation Table included in this proxy statement.
The Bob Evans Farms, Inc. and Affiliates 2002 Second Amended and Restated
Executive Deferral Program (the "BEEDP") is a defined contribution plan designed
to allow its participants to defer a portion of their current compensation in
excess of the maximum amount they are allowed to defer to the 401(k) plan under
Internal Revenue Service rules. BEEDP participants must be members of a select
group of management or highly compensated employees (as governed by ERISA)
chosen at the discretion of the compensation committee. BEEDP participants may
elect to defer up to 25 percent of their current compensation otherwise payable
during the year and up to 100 percent of their bonus to an account established
on their behalf under the BEEDP. The company makes a matching contribution to
each BEEDP participant's account at the same rate as the company's matching
contribution to the 401(k) plan. Generally, a BEEDP 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. If a BEEDP participant dies
while employed by the company, the participant's beneficiary will be entitled to
a distribution of the participant's BEEDP account. The company's fiscal 2005
matching contributions to the named executive officers' BEEDP accounts are
included under the caption "All Other Compensation" in the Summary Compensation
Table included in this proxy statement.
OTHER BENEFITS AND COMPENSATION
All of the company's executive officers are eligible to participate in the
employee benefit programs maintained by the company, including health and dental
insurance plans, on the same terms as all other employees of the company and its
subsidiaries. In addition, the company makes the lease payments on an automobile
leased by Mr. Owens. The company also provides Messrs. Williams and Hicks with
automobiles owned by the company. The company also pays Messrs. Bendel and
Radkoski a monthly automobile allowance. The value of these automobile benefits
are not reported in the Summary Compensation Table as the total value of
personal benefits received by the named executive officers did not exceed the
lesser of 10 percent of the named executive officer's salary and bonus or
$50,000.
17
COMPENSATION OF DIRECTORS
FEES AND RETAINERS
The current Compensation Program for Directors became effective May 6, 2003, and
was most recently revised effective May 9, 2005. Under the Compensation Program
for Directors, all directors who are employees of the company receive an annual
cash retainer of $14,400. All nonemployee directors receive an annual cash
retainer of $24,000, and the lead independent director receives an additional
monthly cash retainer of $750.
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 $ 2,500
Compensation Committee $ 1,250 $ 2,000
Nominating and Corporate
Governance Committee $ 750 $ 1,000
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. 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 $12,750 (reduced from $17,000 for fiscal 2005) 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
insurance 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.
DIRECTOR RETIREMENT BENEFIT
Messrs. Fronk and Lucas and Ms. Krueger have elected to participate in the
company's group health insurance plan on the same terms as the company's
employees (i.e., the company pays the employer portion of their health insurance
premiums and these directors pay the employee portion of the health insurance
premiums). Upon retirement, participants in the company's group health insurance
plan must pay all health insurance premiums (including the employer portion
which was paid by the company prior to the participant's retirement). The
company has agreed to pay each of Messrs. Fronk and Lucas and Ms. Krueger a lump
sum amount upon their retirement from the board equal to a portion of the
anticipated cost of the employer portion of their health insurance premiums as
determined by an actuary.
18
CONSULTING ARRANGEMENT
Larry C. Corbin, a director of the company, retired from his position as the
company's executive vice president of restaurant operations effective July 1,
2004. Since his retirement, Mr. Corbin has periodically provided consulting
services to the company with respect to its acquisition of Mimi's Cafe. The
company compensates Mr. Corbin on a daily basis for his consulting services. The
company paid Mr. Corbin $15,020 in the aggregate for consulting services
rendered during fiscal 2005.
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
ROLE OF THE COMPENSATION COMMITTEE
The compensation committee is responsible for approving appropriate base
salaries, annual bonuses, equity compensation and other compensation for the
executive officers of the company. The compensation committee, composed entirely
of independent directors, also administers the company's equity compensation and
other long-term incentive plans.
COMPENSATION PHILOSOPHY
Our fundamental philosophy is to maximize stockholder value over time by
aligning the financial interests of the company's executive officers and
stockholders. Our compensation practices are based on the following key
principles:
- Incentive compensation is awarded based upon company, business unit
and individual performance goals designed to motivate our executive
officers to achieve strategic business objectives and to perform at
the highest levels.
- A significant portion of the executive officers' total compensation
should be "at risk" to achieve a greater degree of "pay for
performance."
- Stock-based compensation should form a significant portion of total
compensation, ensuring that significant rewards are received by
executive officers only when stockholder value is created.
- Compensation levels should be set at competitive levels in the
marketplace in order to attract and retain key executives.
Historically, the compensation of the company's executive officers has been
comprised of three components: base salary, cash bonus and long-term equity
compensation. We determine base salaries annually based upon peer market
research and our assessment of company and individual performance. "At-risk"
cash bonuses formed a significant portion of the executive officers'
compensation and were based on the achievement of objective and subjective
performance goals established by the compensation committee. We based individual
cash bonus targets on a multiple of the executive officer's base salary
(historically 40 percent to 70 percent of base salary) determined with the
assistance of studies conducted by an independent consultant. Long-term equity
compensation has not been at-risk during the last few years. Instead, we awarded
equity compensation (i.e., stock options) based solely on a multiple of the
executive officers' base pay. We made these automatic grants of equity
compensation in accordance with a plan we developed with an independent
consultant a few years ago which was designed to move the compensation of the
company's executive officers to a level competitive with the company's peers
over the course of a few years.
During fiscal 2005, we determined that the compensation of the company's
executive officers had reached a level competitive with the company's peers and
decided to re-examine our compensation practices described above. We retained a
new independent consultant to evaluate the company's incentive compensation
practices in light of changes to accounting standards, market practice trends
and the company's acquisition of Mimi's Cafe. The consultant compared peer data
and discussed long-term incentive compensation trends with the compensation
committee, including plan eligibility, performance measures and award structure.
As this process continued throughout fiscal 2005, we took a subjective and
flexible approach to fiscal 2005 executive officer compensation. In August 2004,
in light of the consultant's ongoing evaluation of our incentive compensation
practices and the company's sluggish performance, we established performance
goals for cash bonuses to be awarded with respect to fiscal 2005 performance,
but we did not establish specific numeric targets for those performance goals
for any of the executive officers (except Russell W. Bendel) as we had in the
past. Instead, we discussed the performance of the company and its executive
officers throughout fiscal 2005 and deferred any decisions regarding the award
of cash bonuses and equity compensation with respect to fiscal 2005 performance
until the conclusion of fiscal 2005. Fiscal 2005 compensation is discussed in
more detail in this report under "Executive Officer Compensation."
19
Section 162(m) of the Internal Revenue Code prohibits the company from claiming
a deduction on its federal income tax return for compensation in excess of $1.0
million paid for a given year to the company's named executive officers. The
$1.0 million deduction limit does not apply to "performance-based compensation."
None of the company's named executive officers received more than $1.0 million
of compensation from the company for fiscal 2005.
The company does not have a policy that requires all compensation payable for a
given fiscal year to be deductible under Section 162(m). However, all of the
company's current equity-based compensation programs have been approved by the
company's stockholders to enable stock options and other forms of equity-based
compensation granted under those plans to qualify as performance-based
compensation under Section 162(m), so that any compensation realized from
equity-based awards would be excluded from the $1.0 million cap. Additionally,
the stockholders voted at the company's 2002 annual meeting of stockholders to
approve the company's 2002 Incentive Growth Plan for the purpose of qualifying
the plan under Section 162(m). We continue to consider other steps which might
be in the company's best interest to comply with Section 162(m), while reserving
the right to award future compensation which would not comply with the Section
162(m) requirements for deductibility if we conclude that this is in the best
interest of the company and its stockholders.
EXECUTIVE OFFICER COMPENSATION
BASE SALARY
We target executive officers' base salaries to be competitive with those paid to
individuals in similar positions at peer companies to enable the company to
attract and retain talent. We also consider overall company and/or business unit
performance and our subjective assessment of each executive officer's
responsibilities and contributions to the company when determining base
salaries. While these factors have a general influence on the determination of
base salaries, no specific weighting is given to any of these factors and the
relevance of each factor varies from individual to individual.
We approved the base salaries for fiscal 2005 reported in the "Summary
Compensation Table" of this proxy statement in June 2004. We believe these
salaries were at a median level in comparison to the company's peers. Base
salary increases for fiscal 2005 were based, in part, on the plan we developed
with an independent consultant a few years ago to move the compensation of the
company's executive officers to a level competitive with the company's peers
over the course of a few years.
On June 14, 2005, we approved the base salaries for the company's named
executive officers for fiscal 2006. Given the company's continued sluggish
performance, we opted to take a conservative approach to this year's base salary
increases. Each named executive officer received a base salary increase of 3.5
percent, except for Mr. Bendel who received a 6.0 percent raise due to the
performance of the Mimi's Cafe business unit. The 3.5 percent salary increase
was consistent with the target level salary increase used for corporate office
employees in good standing. Accordingly, base salaries for fiscal 2006 will be
$664,409 for Mr. Owens, $356,068 for Mr. Williams, $344,500 for Mr. Bendel,
$328,445 for Mr. Radkoski and $258,750 for Mr. Hicks.
INCENTIVE COMPENSATION
Historically, a significant portion of the executive officers' compensation has
been awarded in the form of a cash bonus which is "at risk" based on the
achievement of objective and subjective performance goals established by the
compensation committee at the beginning of the fiscal year. Individual cash
bonus targets were based on a multiple of base salary set at the beginning of
the fiscal year.
In August 2004, we established objective performance goals (without establishing
specific numeric targets) and base salary multiples for target cash bonuses to
be awarded to the executive officers with respect to fiscal 2005 performance. In
light of the company's lower-than-expected net income, earnings per share
("EPS") and Bob Evans Restaurant same-store sales, we substantially reduced the
range of target cash bonuses for the named executive officers (other than Mr.
Bendel) from 40 percent to 70 percent of base salary to 30 percent to 35 percent
of base salary.
In June 2005, we evaluated each executive officer based upon his or her
objective performance goals for fiscal 2005 and our subjective assessment of the
executive officer's individual performance and contributions to the company. For
fiscal 2005, the company's reported diluted EPS decreased 48.8 percent and net
income decreased 48.7 percent compared to the previous fiscal year, primarily
due to increased competition in key market areas, substantially lower Bob Evans
Restaurant same-store sales, increased 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 substantially below
anticipated levels. Accordingly, cash bonuses awarded for fiscal 2005
performance were $112,340 for Mr. Owens, $113,529 for Mr. Williams, $54,165 for
Mr. Bendel, $47,601 for Mr. Radkoski and $29,286 for Mr. Hicks. Messrs. Owens,
Radkoski and Hicks received cash bonuses ranging from 40 percent to 50 percent
of their cash bonus targets, while Messrs. Williams and Bendel received cash
bonuses ranging from 104
20
percent to 110 percent of their cash bonus targets due to the performance of
their respective business units. Although food products operating income was
significantly lower than fiscal 2004, given the cost environment, operating
profit was better than planned.
LONG-TERM EQUITY-BASED INCENTIVE COMPENSATION
We believe equity-based compensation should form a significant portion of total
compensation because this ensures that significant rewards are received by
executive officers only when stockholder value is created. Historically, stock
options have been the company's primary long-term incentive compensation
vehicle. Over the last few years, we have awarded stock options based solely on
a multiple of the executive officer's base salary, without reference to the
achievement of performance goals, in accordance with the plan we developed with
an independent consultant which was designed to move the compensation of the
company's executive officers to a level competitive with the company's peers
over the course of a few years. As a result of our review of our compensation
practices and discussions with our new independent consultant during fiscal
2005, we have adopted a new approach for equity compensation to be awarded with
respect to fiscal 2006 performance, as described below under "Fiscal 2006
Incentive Compensation."
During fiscal 2005, we awarded ISOs and NQSOs covering an aggregate of 290,130
shares of common stock to the named executive officers. These grants are set
forth in the "Grants of Options" table included in this proxy statement. The
amount of these awards was based on the plan we developed with an independent
consultant a few years ago to move the compensation of the company's executive
officers to a level competitive with the company's peers.
In June 2005, we awarded ISOs and NQSOs to the named executive officers with
respect to fiscal 2005 performance. Messrs. Owens, Williams, Bendel, Radkoski
and Hicks received ISOs covering 4,307; 4,307; 9,846; 4,037; and 3,445 shares,
respectively. Messrs. Owens, Williams, Radkoski and Hicks received NQSOs
covering 38,489, 10,005, 8,072 and 5,168 shares, respectively. Mr. Bendel
received 9,748 shares of restricted stock. These awards (other than Mr. Bendel's
awards) reflect a reduction of approximately 80 percent from the level of awards
granted the past few years due to the company's disappointing performance in
fiscal 2005; our desire to preserve the number of shares available for future
awards under the 1998 Stock Option Plan; and the accomplishment of the goals of
the plan we developed with an independent consultant a few years ago to move the
compensation of the company's executive officers to a level competitive with the
company's peers.
OTHER COMPENSATION
We review the participation of the company's executive officers in the company's
retirement and savings plans and other employee benefit plans. The named
executive officers participate in the company's 401(k) plan on the same basis as
other employees. The company "matches" certain employee contributions to the
401(k) plan. Company matching amounts for the named executive officers are
included under the caption "All Other Compensation" in the Summary Compensation
Table included in this proxy statement.
We also considered the participation of the company's executive officers in the
BEEDP described on page 17. Company contributions to the named executive
officers' BEEDP accounts are included under the caption "All Other Compensation"
in the Summary Compensation Table included in this proxy statement.
All of the company's executive officers participate in the SERP described on
pages 16 and 17. Currently, the SERP is expected to provide a monthly retirement
benefit of $36,592 for Mr. Owens, $14,562 for Mr. Williams, $13,609 for Mr.
Bendel, $16,002 for Mr. Radkoski and $16,632 for Mr. Hicks if they retire at the
normal retirement age. These monthly benefits will be paid for 10 years and are
based on actuarial assumptions and other factors that are specified in the SERP
or that are recommended by the SERP's actuary. The actual monthly benefit may be
higher or lower than these amounts depending on the extent to which these
factors reflect actual experience. We have considered these amounts in assessing
the overall compensation of the company's executive officers.
All of the company's executive officers are eligible to participate in the
employee benefit programs maintained by the company, including health and dental
insurance plans, on the same terms as all other employees. Additionally, the
company's named executive officers are provided with a monthly car allowance or
a company car.
21
CHAIRMAN AND CHIEF EXECUTIVE OFFICER COMPENSATION
When reviewing Mr. Owens' base salary, we consider the compensation of his
peers, his experience, responsibilities and tenure as well as the company's
overall performance and his individual achievements during a particular fiscal
year. In June 2004, we approved a 10 percent base salary increase for Mr. Owens
for fiscal 2005. Mr. Owens has received a 10 percent raise for the last three
fiscal years as part of our goal of moving his base salary to a median level of
the base salary paid to the chief executive officers of the company's peers.
In June 2005, we approved a 3.5 percent base salary increase for Mr. Owens for
fiscal 2006. We took a conservative approach to Mr. Owens' base salary for
fiscal 2006 due to the company's recent disappointing performance, especially
with respect to Bob Evans Restaurant same-store sales. Mr. Owens' 3.5 percent
raise for fiscal 2006 was consistent with the target level salary increase used
for corporate office employees in good standing.
At the beginning of fiscal 2005, we determined that Mr. Owens' fiscal 2005
target cash bonus would be based 50 percent on the company's EPS and 50 percent
on our subjective assessment of the performance of Mr. Owens and the company. We
also reduced Mr. Owens' target cash bonus for fiscal 2005 from 70 percent to 35
percent of base salary. The company's fiscal 2005 EPS was $1.04, down from
fiscal 2004 EPS of $2.03. Accordingly, we determined that Mr. Owens should not
receive the 50 percent portion of his target cash bonus based on EPS. However,
we awarded Mr. Owens all of the remaining 50 percent of his target cash bonus.
The company's total net sales for fiscal 2005 were approximately $1.5 billion,
up 21.9 percent from the previous year. We also noted Mr. Owens' efforts in the
company's successful acquisition and integration of Mimi's Cafe during fiscal
2005. Mr. Owens' bonus was $112,340 (which equals 17.5 percent of his fiscal
2005 base salary).
We also granted Mr. Owens stock options in fiscal 2005 to purchase 169,300
common shares. We based the amount of options awarded on a multiple of his base
salary to help move the overall amount of his compensation to a level
competitive with his peers.
In June 2005, we awarded Mr. Owens an ISO covering 4,307 shares and an NQSO
covering 38,489 shares. The level of Mr. Owens' equity compensation with respect
to fiscal 2005 performance was approximately 80 percent less than his previous
awards over the last few years because we determined that his compensation level
had reached a level competitive with his peers, and also due to the company's
poor fiscal 2005 performance and our desire to preserve the number of shares
available for future awards under the 1998 Stock Option Plan.
We believe that the total value of Mr. Owens' compensation is appropriate with
respect to the company's performance and the comparative data of compensation
paid to chief executive officers of the company's peers.
FISCAL 2006 INCENTIVE COMPENSATION
Pursuant to the recommendations of the new independent consultant, in May 2005
we approved a new Performance Incentive Plan for the company's executive
officers and senior management. Beginning with fiscal 2006, the amount of target
equity-based incentive compensation that a named executive officer can receive
will be equal to a multiple of the named executive officer's annual base salary.
Once the named executive officer's target equity-based incentive compensation is
determined, the named executive officer will automatically receive a grant of
stock options with a value equal to 25 percent of that amount as incentive
compensation. We believe 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 remaining 75 percent 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 established
by the compensation committee are achieved (e.g., specific EPS and operating
income amounts for designated business units). Awards to the named executive
officers under the Performance Incentive Plan will be made in accordance with
the company's 2002 Incentive Growth Plan and 1998 Stock Option Plan, so we
expect these awards will be excluded from the $1.0 million cap for purposes of
Section 162(m).
22
NEW STOCK OWNERSHIP GUIDELINES
To further implement our fundamental philosophy of maximizing stockholder value
by aligning the financial interests of the company's stockholders with the
individuals primarily responsible for developing and implementing corporate
strategy, we recently adopted the stock ownership guidelines described on page 5
for the company's named executive officers and directors.
CONCLUSION
We have reviewed all components of the chief executive officer's and the other
named executive officers' compensation, including salary, bonus and long-term
equity compensation, accumulated realized and unrealized stock option gains, the
dollar value to the executive and cost to the company of all perquisites and
other personal benefits, the earnings and accumulated payout obligations under
the company's non-qualified deferred compensation program and the projected
payout obligations under the SERP and under change-in-control scenarios.
Based on this review, we find the chief executive officer's and the other named
executive officers' total compensation (and, in the case of the
change-in-control scenarios, the potential payouts) in the aggregate to be
reasonable and not excessive. Furthermore, we believe that the compensation paid
to the executive officers is consistent with the goals and objectives of the
company.
Attracting and retaining talented and motivated management and employees is
essential to create long-term shareholder value. Offering a competitive,
performance-based compensation program with a large equity component helps to
achieve this objective by aligning the interest of management with those of
stockholders.
Submitted by: Compensation Committee Members
Robert E.H. Rabold (chair), Daniel A. Fronk, E.W. (Bill) Ingram III and Cheryl
L. Krueger
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP has been the company's independent auditors since 1980, and
the audit committee has selected Ernst & Young LLP as the company's independent
registered public accounting firm for the fiscal year ending April 28, 2006.
Before selecting Ernst & Young LLP, the audit committee carefully considered,
among other things, that firm's qualifications as the independent registered
public accounting firm for the company and the audit scope. As a matter of good
corporate governance, the audit committee has determined to submit its selection
to the company's stockholders for ratification. In the event that this selection
of the independent registered public accounting firm 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 the independent
registered public accounting firm.
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 2006.
PREAPPROVAL OF SERVICES PERFORMED BY THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Under applicable SEC rules, the audit committee is required to preapprove the
audit services and permitted non-audit services performed by the 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 registered public accounting firm may not
provide to its audit client and establish the audit committee's responsibility
for administration of the engagement of the independent registered public
accounting firm.
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 registered public accounting firm
to the company 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
23
forth in the list is merely an authorization for management to potentially use
the independent registered public accounting firm 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 chairperson 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 registered public accounting firm.
All requests or applications for services to be provided by the independent
registered public accounting firm 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 registered public
accounting firm.
All requests or applications for services to be provided by the independent
registered public accounting firm that require specific preapproval by the audit
committee must be submitted to the audit committee by both the independent
registered public accounting firm 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 THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 2005 and
2004. All of the services described below were preapproved by the audit
committee.
2005 2004
---------- ----------
Audit Fees $ 446,000 $ 169,000
Audit-Related Fees 88,000 39,000
Tax Fees 25,000 116,000
All Other Fees 0 0
---------- ----------
Total $ 559,000 $ 324,000
AUDIT FEES: This category includes the audit of the company's annual financial
statements, the audit of management's annual assessment of the company's
internal control over financial reporting, review of financial statements
included in the company's quarterly reports on Form 10-Q and services that are
normally provided by the 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 2005 and 2004, no fees were paid to Ernst & Young
LLP for tax planning services; all fees paid were for tax services related to
tax return preparation, tax return review and technical tax advice.
ALL OTHER FEES: None
24
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The purpose of the audit committee is to oversee the company's accounting and
financial reporting process, audits of the company's consolidated financial
statements and the company's internal audit function. The committee is also
responsible for appointing, compensating and overseeing the company's
independent registered public accounting firm.
The audit committee is comprised of five independent directors, as defined by
applicable Nasdaq and SEC rules, and operates under a written charter adopted by
the board. The charter is reviewed annually by the audit committee and was last
revised in May 2004. The audit committee appoints the company's independent
registered public accounting firm. Ernst & Young LLP served as the company's
independent registered public accounting firm for the 2005 fiscal year.
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. Management is also
responsible for preparing its report on the establishment; maintenance; and
assessment of the effectiveness; of the company's 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. Deloitte and
Touche LLP was approved by the audit committee to assist the company with its
internal audit function. Ernst & Young LLP is responsible for performing an
independent audit of the company's consolidated financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States) and issuing a report on management's assessment of the
effectiveness of the company's internal control over financial reporting.
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 registered public accounting firm. 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 management, the company's internal auditors and
Ernst & Young LLP throughout the year. The audit committee met with Ernst &
Young LLP and the internal auditors, with and without management present, 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 the
standards of the Public Company Accounting Oversight Board (United States),
including those described in Statements on Auditing Standards Nos. 61, 54 and
99, Communication with Audit Committees.
The audit committee has reviewed and discussed with management its assessment
and reported on the effectiveness of the company's internal controls over
financial reporting as of April 29, 2005. The audit committee also reviewed and
discussed with Ernst & Young LLP its attestation report on management's
assessment of internal control over financial reporting, and its review and
report on the company's internal control over financial reporting.
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. 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 have represented to the audit committee that
the company's audited consolidated financial statements as of and for the fiscal
year ended April 29, 2005, were prepared in accordance with accounting
principles generally accepted in the United States and the audit committee has
reviewed and discussed those audited consolidated financial statements with
management and Ernst & Young LLP.
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 and management's report on
the establishment;
25
maintenance; and assessment of the effectiveness; of the company's internal
control over financial reporting be included in the company's annual report to
stockholders and incorporated by reference in the company's annual report on
Form 10-K for the fiscal year ended April 29, 2005, 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 29,
2005. 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).
TOTAL CUMULATIVE STOCKHOLDER RETURN FOR
FIVE-YEAR PERIOD ENDING APRIL 29, 2005
[PERFORMANCE GRAPH]
CUMULATIVE VALUE OF $100 INVESTMENT
2000 2001 2002 2003 2004 2005
--------- --------- ---------- -------- --------- --------
Peer Group $ 100.00 $ 125.88 $ 171.54 $ 159.69 $ 233.04 $ 264.80
S&P 500 $ 100.00 $ 86.03 $ 74.15 $ 63.13 $ 76.24 $ 79.65
Bob Evans Farms, Inc. $ 100.00 $ 147.61 $ 240.38 $ 203.98 $ 251.16 $ 169.93
26
PROXY STATEMENT STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the annual meeting of
stockholders must be received by the company no later than April 3, 2006, to be
eligible for inclusion in the company's proxy materials relating to the 2006
annual meeting of stockholders. Upon receipt of a proposal, the company will
determine whether or not to include the proposal in the proxy materials in
accordance with the applicable rules and regulations of the SEC.
The SEC has promulgated rules relating to the exercise of discretionary voting
under proxies solicited by the board of directors. If a stockholder intends to
present a proposal at the 2006 annual meeting of stockholders and does not
notify the company of the proposal by June 17, 2006, the proxies solicited by
the board of directors for use at the 2006 annual meeting of stockholders will
be entitled to use their discretionary voting authority should the proposal then
be raised, without any discussion of the matter in the company's proxy statement
for the 2006 annual meeting of stockholders.
In each case, written notice must be given to the company at Bob Evans Farms,
Inc., 3776 S. High St., Columbus Ohio 43207, Attention: Senior Vice President of
Investor Relations and Corporate Communications.
Stockholders desiring to nominate candidates for election as directors at the
2006 annual meeting of stockholders must follow the procedures described in "THE
BOARD AND COMMITTEES OF THE BOARD -- Director Nominations by Stockholders."
REPORTS TO BE PRESENTED AT THE ANNUAL MEETING
The company's annual report for the fiscal year ended April 29, 2005, 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. 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 visiting the www.proxyvote.com Web site as
indicated on the proxy card; calling (800) 690-6903 or signing, voting and
dating the enclosed proxy card and mailing it promptly in the enclosed envelope.
By Order of the
Board of Directors,
/s/ Stewart K. Owens
-----------------------------------
Stewart K. Owens
Chairman of the Board and
Chief Executive Officer
27
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ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER
COMMUNICATIONS
If you would like to reduce the costs incurred by Bob Evans Farms,
Inc. in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports
[BOB EVANS FARMS LOGO] electronically via e-mail or the Internet. To sign up for
3776 SOUTH HIGH STREET electronic delivery, please follow the instructions below to vote
COLUMBUS, OH 43207 using the Internet and, when prompted, indicate that you agree to
receive or access stockholder communications electronically in
future years.
IMPORTANT NOTICE REGARDING DELIVERY VOTE BY INTERNET - WWW.PROXYVOTE.COM
OF SECURITY HOLDER DOCUMENTS (HH) Use the Internet to transmit your voting instructions and for
AUTO DATA PROCESSING electronic delivery of information up until 11:59 p.m. Eastern
INVESTOR COMM SERVICES Daylight Time Sept. 11, 2005. Have your proxy card in hand when you
ATTENTION: access the Web site and follow the instructions to obtain your
TEST PRINT 1 OF 2 records and to create an electronic voting instruction form.
51 MERCEDES WAY 62
EDGEWOOD, NY 91 VOTE BY PHONE - (800) 690-6903
11717 Use any touch-tone telephone to transmit your voting instructions
up until 11:59 p.m. Eastern Daylight Time Sept. 11, 2005.
Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Indicate your vote, sign your name as it appears on this card, 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 Sept. 11, 2005.
--------------------------------------------------------------------
----------------------
--- 000000000000
----------------------
NAME A/C
BOB EVANS FARMS INC 1234567890123456789 123,456,789,012.12345
BOB EVANS FARMS INC 1234567890123456789 123,456,789,012.12345
BOB EVANS FARMS INC 1234567890123456789 123,456,789,012.12345
BOB EVANS FARMS INC 1234567890123456789 123,456,789,012.12345
BOB EVANS FARMS INC 1234567890123456789 123,456,789,012.12345
BOB EVANS FARMS INC 1234567890123456789 123,456,789,012.12345
BOB EVANS FARMS INC 1234567890123456789 123,456,789,012.12345
BOB EVANS FARMS INC 1234567890123456789 123,456,789,012.12345
PAGE 1 OF 2
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
BOBEV1 KEEP THIS PORTION FOR YOUR RECORDS
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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 02 0000000000 214958305296
Sept. 12, 2005. THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS.
To withhold authority to vote for a specific
YOUR BOARD RECOMMENDS YOU VOTE "FOR" ALL NOMINEES. nominee, mark "For All Except" and write the
DIRECTORS FOR WITHHOLD FOR ALL nominee's number on the line below.
Election of three class I directors to serve for ALL ALL EXCEPT
terms of three years each: 01) Daniel A. Fronk,
02) Cheryl L. Krueger, 03) G. Robert Lucas [ ] [ ] [ ]
-------------------------------------------------
YOUR BOARD RECOMMENDS YOU VOTE "FOR" THE RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
FOR AGAINST ABSTAIN
PROPOSAL
Ratification of the selection of Ernst & Young LLP as the company's independent registered public accounting [ ] [ ] [ ]
firm for the 2006 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
Aug. 1, 2005; the enclosed proxy statement; and the annual report of the company for the fiscal year
ended April 29, 2005.
AUTO DATA PROCESSING
YES NO INVESTOR COMM SERVICES
ATTENTION:
TEST PRINT
Please indicate if you plan to attend this [ ] [ ] 51 MERCEDES WAY
meeting. EDGEWOOD, NY
HOUSEHOLDING ELECTION - Please indicate if [ ] [ ] 11717
you consent to receive certain future
investor communications in a single package
per household.
--------------------------------------------- --------------------------------------------- 123,456,789,012
096761G99
--------------------------------------------- --------------------------------------------- 91
Signature (PLEASE SIGN WITHIN BOX) Date P19295 Signature (Joint Owners) Date
- ------------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 2005
Dear Fellow Stockholders:
You are invited to join us at our annual meeting of stockholders where we will
discuss our fiscal 2005 financial results and our plans going forward. The
ANNUAL MEETING OF STOCKHOLDERS WILL BE MONDAY, SEPT. 12, 2005, 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.
I look forward to seeing you on Sept. 12.
Sincerely,
/s/ Stewart K. Owens
Stewart K. Owens
Chairman of the Board and
Chief Executive Officer
BOBEV2
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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. 12, 2005, 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 2006. 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 MELLON BANK, N.A., 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 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
STRICTLY CONFIDENTIAL. IF NO INSTRUCTIONS ARE GIVEN, THE SHARES ALLOCATED TO
SUCH STOCKHOLDER'S ACCOUNT IN THE 401(k) PLAN WILL NOT BE VOTED.
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