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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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 sec.240.14a-11(c) or sec.240.14a-12
BOB EVANS FARMS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(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: ...........................................................
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BOB EVANS FARMS, INC.
P.O. Box 07863
Columbus, Ohio 43207
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Columbus, Ohio
Aug. 10, 1998
To the Stockholders of
Bob Evans Farms, Inc.
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Bob Evans
Farms, Inc. (the "company") will be held at The Shelter House, Bob Evans Farm,
Rio Grande, Ohio (approximately 12 miles north of Gallipolis, Ohio, on State
Route No. 588) on Monday, Sept. 14, 1998, at 4 p.m., Eastern Daylight Time, for
the following purposes:
(1) To elect three directors to serve for terms of three years each.
(2) To consider the reports to be laid before the annual meeting or any
adjournment(s) thereof.
(3) To consider and vote upon a proposal to approve the Bob Evans Farms, Inc.
1998 Stock Option and Incentive Plan.
(4) To consider and
vote upon a stockholder proposal regarding the sale or merger of the company.
(5) To consider and vote upon a stockholder proposal to declassify the company's
board of directors.
(6) To transact such other business as may properly come before the annual
meeting or any adjournment(s) thereof.
There will be a social hour beginning at 3 p.m., Eastern Daylight Time, when
soft drinks and sandwiches will be served. We are hoping you will take this
opportunity to become acquainted with the officers and directors of your
company.
Stockholders of record at the close of business on July 17, 1998, will
be entitled to receive notice of and to vote at the annual meeting and any
adjournment(s) thereof.
By Order of the Board
of Directors,
/s/ Daniel E. Evans
Daniel E. Evans
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
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BOB EVANS FARMS, INC.
P.O. Box 07863, Columbus, Ohio 43207 (614) 491-2225
Aug. 10, 1998
PROXY STATEMENT
This proxy statement and the accompanying proxy are being mailed on or about
Aug. 10, 1998, to all stockholders of Bob Evans Farms, Inc. (the "company") of
record at the close of business on July 17, 1998, in connection with the
solicitation of proxies by the board of directors of the company for use at the
annual meeting of stockholders scheduled to be held on Monday, Sept. 14, 1998,
or at any adjournment(s) thereof. The annual meeting will be held at 4 p.m.,
Eastern Daylight Time, at The Shelter House, Bob Evans Farm, Rio Grande, Ohio
(approximately 12 miles north of Gallipolis, Ohio, on State Route 588).
A proxy for use at the annual meeting accompanies this proxy statement and is
solicited by the board of directors of the company. Stockholders of the company
may use their proxies if they are unable to attend the annual meeting in person
or wish to have their shares of common stock, par value $.01 per share, voted by
proxy even if they do attend the annual meeting. Without affecting any vote
previously taken, any stockholder executing a proxy may revoke it at any time
before it is voted by filing with the secretary of the company, at the address
of the company set forth on the cover page of this proxy statement, written
notice of such revocation; by executing a later-dated proxy which is received by
the company prior to the annual meeting; or by attending the annual meeting and
giving notice of such revocation in person. ATTENDANCE AT THE ANNUAL MEETING
WILL NOT, IN AND OF ITSELF, CONSTITUTE REVOCATION OF A PROXY.
The company will bear the costs of preparing and mailing this proxy statement,
the accompanying proxy and any other related materials and all other costs
incurred in connection with the solicitation of proxies on behalf of the board
of directors. Officers and employees of the company may solicit proxies by
further mailing, by telephone or by personal contact without receiving any
additional compensation therefor. The company will also pay the standard charges
and expenses of brokerage houses, voting trustees, banks, associations and other
custodians, nominees and fiduciaries, who are record holders of common shares of
the company not beneficially owned by them, for forwarding such materials to,
and obtaining proxies from, the beneficial owners of such common shares.
The annual report of the company for the fiscal year ended April 24, 1998 (the
"1998 fiscal year"), including financial statements, is enclosed with this proxy
statement.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on July 17, 1998, are
entitled to receive notice of, and to vote at, the annual meeting or any
adjournment(s) thereof. At July 17, 1998, the company had outstanding 41,664,056
common shares entitled to vote at the annual meeting. The holders of common
shares entitling them to exercise a majority of the voting power of the company
will constitute a quorum for the annual meeting. Each common share entitles the
holder thereof to one vote upon each matter to be voted upon by stockholders at
the annual meeting.
Under the rules of the Securities and Exchange Commission (the "SEC"), boxes and
a designated blank space are provided on the form of proxy for stockholders to
mark if they wish either to abstain on a proposal presented for stockholder
approval or to withhold authority to vote for one or more nominees for election
as a director of the company. In accordance with Delaware law and the company's
bylaws, common shares of the company as to which the authority to vote is
withheld will be counted for quorum purposes but will not be counted toward the
election of directors or toward the election of the individual nominees
specified on the form of proxy. Abstentions are counted as present for quorum
purposes; however, the effect of an abstention on any matter to be voted upon by
the stockholders of the company at the annual meeting will be the same as a "no"
vote.
The election of directors is considered a "discretionary" item upon which
brokerage firms may vote in their discretion on behalf of their clients if such
clients have not furnished voting instructions by the 10th day before the annual
meeting. However, the remaining proposals to be voted upon by the stockholders
of the company at the annual meeting are "non-discretionary," and brokers who
have received no instructions from their clients do not have discretion to vote
on these items. Such "broker non-votes" will not be considered as votes entitled
to be cast in determining the outcome of such proposals.
The following table sets forth certain information with respect to the only
holder known to the company to be the beneficial owner of more than five percent
(5%) of the outstanding common shares of the company.
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS (1)
Ariel Capital Management, Inc. 2,284,355 (2) 5.483
307 North Michigan Ave.
Chicago, Ill. 60601
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(1) The percent of class is based upon 41,664,056 common shares outstanding on
July 17, 1998.
(2) Based on information contained in a schedule 13G filing with the Securities
and Exchange Commission, dated Jan. 13, 1998, Ariel Capital Management, Inc.
("Ariel"), a registered investment adviser, beneficially owns 2,284,355 common
shares (all of which are owned by its investment advisory clients). That filing
shows Ariel has sole voting power over 2,126,389 common shares, shared voting
power over 30,300 common shares and sole investment power over 2,284,355 common
shares. John W. Rogers Jr., president and principal shareholder of Ariel, has
disclaimed beneficial ownership of the common shares of the company held by
Ariel.
The following table sets forth certain information with respect to the company's
common shares beneficially owned by each of the nominees for election as a
director of the company, by each of the continuing directors of the company, by
each of the executive officers of the company named in the summary compensation
table (page 8) and by all directors and executive officers of the company as a
group, as of July 17, 1998:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
---------------------------------------------
COMMON SHARES WHICH
CAN BE ACQUIRED
NAME OF BENEFICIAL UPON EXERCISE OF
OWNER OR NUMBER OF COMMON SHARES OPTIONS EXERCISABLE PERCENT OF
PERSONS IN GROUP PRESENTLY HELD WITHIN 60 DAYS TOTAL CLASS (2)
- -------------------------------------------------------------------------------------------------------
Larry C. Corbin(3) 33,625 39,310 72,935 (4)
Daniel E. Evans(3) 547,887(5) 140,320 688,207 1.7%
Daniel A. Fronk 22,504(6) 3,081 25,585 (4)
Michael J. Gasser 1,295 2,054 3,349 (4)
E.W. Bill Ingram III 795 -0- 795 (4)
Cheryl L. Krueger 1,112 3,081 4,193 (4)
G. Robert Lucas 5,008(7) 3,081 8,089 (4)
Stewart K. Owens(3) 211,382 19,717 231,099 (4)
Robert E.H. Rabold 1,808 8,214 10,022 (4)
Roger D. Williams(3) 30,030 12,484 42,514 (4)
Donald J. Radkoski(3) 8,445(8) 11,850 20,295 (4)
All directors and
executive officers
as a group
(14 persons) 901,332(9) 277,488 1,178,820 2.8%
- ---------------------------------------------------
(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 upon the sum of 41,664,056 common shares
outstanding on July 17, 1998, and includes the number of common shares as to
which the named person has the right to acquire beneficial ownership upon the
exercise of stock options exercisable within 60 days of July 17, 1998.
(3) Executive officer of the company named in the summary compensation table.
(4) Represents ownership of less than 1% of the outstanding common shares of the
company.
(5) Includes 53,969 common shares held by the wife of Mr. Evans; 232,486 common
shares held in the Daniel E. Evans Trust, whereby he serves as trustee and
exercises sole voting and investment power; and 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.
(6) Includes 5,133 common shares held in the Josephine A. Fronk Trust with
respect to which Mr. Fronk serves as trustee and exercises sole voting and
investment power.
(7) Includes 3,387 common shares held by Mr. Lucas in a KEOGH plan for the
benefit of Mr. Lucas and 400 common shares held in the William B. Lucas Trust
with respect to which Mr. Lucas serves as trustee and exercises sole voting and
investment power.
(8) Includes 21 common shares held by Mr. Radkoski as custodian for the benefit
of his son and 14 common shares held by Mr. Radkoski as custodian for the
benefit of his daughter.
(9) Includes common shares held by the spouses of certain executive officers and
directors, common shares held by the custodians for the children of certain
executive officers and directors and common shares held by certain executive
officers and directors in their capacities as trustees of certain trusts. See
notes (5) through (8).
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ELECTION OF DIRECTORS
Directors of the company are elected at the annual meeting. There are currently
nine members of the board of directors. Pursuant to 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 1999, class II
directors currently serve until the annual meeting in 2000, and class III
directors currently serve until the annual meeting in 1998. At the annual
meeting, three class III directors will be elected for three-year terms.
Pursuant to the recommendation of the nominating committee, the board of
directors has designated the three nominees listed below for election as class
III directors of the company for terms expiring in 2001. The common shares
represented by the enclosed proxy, if returned duly executed and not properly
revoked, will be voted as specified thereon, or if no instructions are given,
for the board's nominees; however, the persons designated as proxies reserve
full discretion to vote the common shares represented by the proxies for the
election of the remaining nominees and any substitute nominee(s) designated by
the board in the event the nominee who would otherwise receive the votes is
unavailable or unable to serve as a candidate for election as a director. The
board of directors has no reason to believe that any of the nominees will be
unavailable or unable to serve if elected to the board.
Under Delaware law and the company's bylaws, the three nominees for election as
class III directors receiving the greatest number of votes will be elected as
class III directors.
The following table sets forth 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 certain information with respect to each nominee
and each 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 AND YEAR BECAME DIRECTOR; PRINCIPAL OCCUPATION FOR PAST
POSITION AND OFFICES WITH THE COMPANY FIVE YEARS AND OTHER INFORMATION
NOMINEES - TERMS TO EXPIRE IN 2001 (CLASS III)
Daniel E. Evans, age 61; Chairman of the Board, Chairman of the Board, Chief Executive Officer and
Chief Executive Officer and Secretary of the Secretary of the company, since 1971.
company; Director since 1957.
Chairman of the Board and Chief Executive Officer
Michael J. Gasser, age 47; Director since 1997. of Greif Bros. Corporation, a manufacturer of
shipping containers and containerboard, Delaware,
Ohio, since 1994; Vice Chairman and Chief
Operating Officer in 1994; and Vice President from
1988 to 1994; in each case of Greif Bros.
Corporation. (1)
E.W. (Bill) Ingram III, age 47; Director since 1998. President and Chief Executive Officer of White
Castle System, Inc., a quick-service hamburger
chain, Columbus, Ohio, since 1979. (2)
CONTINUING DIRECTORS - TERMS TO EXPIRE IN 1999 (CLASS I)
Daniel A. Fronk, age 62; Director since 1981. Retired businessman since January 1998; Senior
Executive Vice President and Board Member of The
Ohio Company, an investment banking firm,
Columbus, Ohio, from 1988 to December 1997. (3)
Cheryl L. Krueger, age 46; Director since 1993. President and Chief Executive Officer of Cheryl &
Co., a manufacturer and retailer of gourmet foods
and gifts, Columbus, Ohio. (4)
G. Robert Lucas, age 54; Director since 1986. Senior Vice President, General Counsel and
Secretary, The Scotts Company, a manufacturer of
lawn and garden products since May 1997; Partner
in Vorys, Sater, Seymour and Pease LLP, Attorneys
at Law, Columbus, Ohio, from 1990 to April 1997.
(5) 5 Daniel A. Fronk, age 62; Director since
1981.
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CONTINUING DIRECTORS - TERMS TO EXPIRE IN 2000 (CLASS II)
Larry C. Corbin, age 56; Executive Vice President Executive Vice President - Restaurant Division
- - Restaurant Division of the company; Director since 1995; Senior Group Vice President -
since 1981. Restaurant Operations Group from 1994 to 1995;
Group Vice President - Business Development from
1990 to 1993; in each case of the company.
Stewart K. Owens, age 43; President and Chief President and Chief Operating Officer of the
Operating Officer of the company; Director since company since 1995. Executive Vice President and
1987. Chief Operating Officer from 1994 to 1995; and
Group Vice President Food Products Group from 1990
to 1993, in each case of the company. President
and Chief Operating Officer of Owens Country
Sausage, Inc., a subsidiary of the company, from
1984 to 1996.
Robert E.H. Rabold, age 59; Director since 1994. Chairman, President and Chief Executive Officer of
Motorists Mutual-American Hardware Insurance
Group, Columbus, Ohio, since 1993.
(1) Greif Bros. Corporation manufactures containerboard purchased by the company
and is expected to continue to do so.
(2) Mr. Ingram was appointed by the board of directors of the company on May 15,
1998, to fill the vacancy created by the retirement of Robert S. Wood.
(3) The Ohio Company has, from time to time, rendered various investment banking
and brokerage services to the company and is expected to continue to do so.
(4) Cheryl & Co. rendered various food products for the company and is expected
to continue to do so.
(5) Vorys, Sater, Seymour and Pease LLP provides counsel to the company. It
rendered legal services to the company during the company's 1998 fiscal year,
and continues to do so.
Daniel E. Evans, a director of The Sherwin-Williams Company and National City
Corporation, and Michael J. Gasser, a director of Greif Bros. Corporation, are
the only directors who are also directors of any other company with a class of
securities registered pursuant to the Securities Exchange Act of 1934, as
amended (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.
The company's board of directors has standing audit, compensation and nominating
committees.
The audit committee consists of Daniel A. Fronk, Michael J. Gasser, G. Robert
Lucas and Robert E.H. Rabold. The audit committee reviews the services performed
and to be performed by the company's principal accountant, the cost of such
services and the financial statements of the company. The audit committee met
three times during the 1998 fiscal year.
The compensation committee (formerly known as the compensation/stock option
committee), consisting of Daniel A. Fronk, Cheryl L. Krueger, G. Robert Lucas
and Robert E.H. Rabold, reviews and recommends to the board of directors of the
company the salaries, bonuses and other compensation to be paid to executive
officers of the company. This committee also administers the company's stock
option plans pursuant to which employee stock options are granted, selects and
nominates for selection those eligible employees who may participate in each
stock option plan (where selection is required) and prescribes the terms of any
stock options granted under the stock option plans. The compensation committee
met five times during the 1998 fiscal year.
On Oct. 31, 1997, the board of directors of the company established the
company's nominating committee. The purpose of the nominating committee is to
identify and recommend to the board of directors nominees for election or
re-election to the board of directors of the company. The nominating committee
currently consists of the following members of the company's board of directors:
Stewart K. Owens, Daniel A. Fronk, Michael J. Gasser and Cheryl L. Krueger. The
nominating committee met one time during the 1998 fiscal year.
In connection with the establishment of the nominating committee, on Oct. 31,
1997, pursuant to the authority vested in the board of directors of the company
under article seventh of the Amended Certificate of Incorporation of the
company, the board of directors amended the bylaws of the company to establish a
procedure for the nomination of directors by the stockholders of the company.
Pursuant to new section 4 of article III of the amended bylaws of the company,
nominations of persons for election to the board of
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directors may be made at a meeting of stockholders (a) by or at the direction of
the board of directors of the company or (b) by any stockholder of the company
who (i) is a stockholder of record as of the record date for the meeting of
stockholders, (ii) is entitled to vote for the election of directors at such
meeting and (iii) complies with the notice procedures set forth below.
Stockholder nominations must be made pursuant to timely notice in writing to the
secretary of the company. To be timely, a stockholder's notice must be delivered
to or mailed and received at the principal executive offices of the company 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 or made to stockholders, notice by
the stockholder must be received by the company not later than the close of
business on the 10th day following the day on which such notice of the date of
the stockholders' meeting or such public disclosure was made. A stockholder's
notice must set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including such person's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected); and (b) as to the stockholder giving the notice, (i) the name and
address, as they appear on the company's books, of such stockholder and (ii) the
class and number of common shares of the company which are beneficially owned by
such stockholder. Any director nomination by a stockholder of the company which
does not meet the requirements of new section 4 of article III of the amended
bylaws of the company will be invalid.
The board of directors of the company held a total of four meetings during the
1998 fiscal year. None of the directors attended fewer than 75% of the aggregate
of the total number of board meetings and the total number of meetings held by
the committees of the board on which he or she served during the period he or
she served.
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE
ACT THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN
WHOLE OR IN PART, THIS REPORT AND THE GRAPH SET FORTH ON PAGE 11 SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
This report on the compensation paid to executive officers of the company was
prepared by the compensation committee of the board of directors. The
compensation committee is composed entirely of independent outside directors.
During the 1998 fiscal year, the company's compensation policies for its
executive officers were administered by the compensation committee. The
compensation committee recommends to the board of directors the salaries and
bonuses of the executive officers and administers the plans pursuant to which
longer term incentives are granted.
OVERALL PHILOSOPHY
The compensation policies administered by the compensation committee are
intended to enhance the financial performance of the company by aligning the
financial interests of the company's executive officers with those of its
stockholders. In addition, the compensation committee believes that its policies
must allow the company to attract and retain outstanding executives to lead the
company in the competitive environment in which it operates.
In furtherance of these key objectives, the company has adopted a total
compensation system which is intended to provide executive officers with a
competitive salary, while at the same time emphasizing a performance based bonus
and long-term incentive component of total compensation. All management
employees of the company (including the five executive officers named in the
summary compensation table) have been placed in one of 18 pay grades, each pay
grade being commensurate with the duties undertaken by each such employee. Each
pay grade is assigned a minimum, midpoint and maximum salary range as well as a
minimum, midpoint and maximum total compensation range. The dollar amounts
comprising the minimum, midpoint and maximum ranges were derived by company
personnel, working with executive compensation consultants, from comparisons to
companies in similar lines of business with the company as published in
compensation surveys. In addition, the salary and bonus components of executive
compensation are reviewed for competitiveness in relation to a group of
companies in the restaurant and food products businesses by members of the human
resources group of the company and by independent consultants specializing in
executive compensation.
BASE SALARY
The compensation committee makes its base salary recommendations based upon its
assessment of the performance of executive officers, the performance of the
company and comparative data of peer companies within the company's lines of
business. The compensation committee does not give specific weighting or apply
specific formulae to any of these factors but rather analyzes the executive's
performance and value to the company as a whole.
In May of 1997, the compensation committee met to review the factors described
above with respect to each executive officer and to
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review the salaries being paid to the executive officers of the company. At that
meeting, the compensation committee decided to increase in the salaries of the
executive officers, including Daniel E. Evans, chairman of the board and chief
executive officer, to competitive levels retroactive to the beginning of the
1998 fiscal year. This increase in base salary was adopted by the board of
directors.
BONUSES
Bonus awards made to executive officers and other management personnel reflect
the compensation committee's philosophy that a significant portion of total
compensation should consist of performance based components.
At the beginning of the 1998 fiscal year, written goals were established for
each executive officer to be accomplished by him or her during the fiscal year.
Different strategic goals were set for each executive officer - some involving
overall company performance (such as performance of the common shares, increase
in net income, increase in sales and cost savings) and some specific to the
performance of the particular executive officer (such as personnel management,
financial presentations and community service). At the end of the fiscal year,
each executive officer was evaluated based upon his individual performance goals
for that year.
Based on these analyses, an initial bonus level was determined for each
executive officer. After the initial bonus levels for the executive officers
were determined, they were reviewed a final time by the chairman of the board
and chief executive officer, who has discretion to recommend increased or
decreased bonus amounts for the fiscal year. The chairman's recommendations were
then reviewed by the compensation committee, which made its recommendations to
the board of directors.
The performance of Daniel E. Evans was evaluated on the same basis as the
performance of the other executive officers of the company. That is, goals were
set at the beginning of the fiscal year and Mr. Evans was evaluated (by the
compensation committee) with respect to each such goal. At the beginning of the
1998 fiscal year, Mr. Evans' bonus for 1998 was targeted at 84.3% of his salary.
As a result, if, he attained 100% of his goals and no other subjective factors
were considered, his bonus would be 84.3% of his salary for the 1998 fiscal
year. His ability to earn more or less than his targeted bonus was predicated on
exceeding performance goals previously referred to and subjective factors (to be
applied by the compensation committee in its discretion).
At its meeting on May 26, 1998, the compensation committee reviewed the
performance goals for Mr. Evans, applied the mathematical formulae to those
goals for which such formulae were applicable and subjectively evaluated Mr.
Evans' performance in categories not subject to a mathematical formula. This
combination of objective and subjective analyses led to the bonus disclosed in
the summary compensation table, which was recommended by the compensation
committee and adopted by the board of directors.
STOCK OPTION PLANS AND THE ADOPTION OF THE 1998 SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
In contrast to salary and bonuses, stock option grants are tied directly to
stock price performance. The compensation committee grants incentive stock
options ("ISOs") under stockholder-approved stock option plans with an exercise
price equal to the market value of the company's common shares on the date of
grant. If there is no appreciation in the market value of the company's common
shares, the ISOs are valueless.
At the 1992 annual meeting, the stockholders of the company approved the
company's Nonqualified Stock Option Plan (the "Nonqualified Plan"). The purpose
of the Nonqualified Plan has been to use grants of nonqualified stock options
("NQSOs") to provide benefits earned under the Supplemental Executive Retirement
Plan (the "1992 SERP"). The 1992 SERP has been an unfunded plan, the purpose of
which has been to retain key employees by providing retirement benefits in
excess of benefits available under qualified retirement plans. During the 1998
fiscal year, the compensation committee made grants of NQSOs to executive
officers of the company and its subsidiaries in amounts determined to be
necessary to satisfy the obligations for benefits accrued under the 1992 SERP
during the 1998 fiscal year, given the years of service and level of
compensation of each participant. While the exercise price of the NQSOs was less
than the market value of the company's common shares on the date of grant, under
the principles of the 1992 SERP, benefits under the 1992 SERP would not have
reached their actuarially assumed values if the company's common shares had not
appreciated at a predetermined rate. Under the 1992 SERP, no future adjustments
were to be made and no additional grants of NQSOs were to be made to match
actual values of the NQSOs with the assumed value of such NQSOs at the date of
grant.
On April 21, 1998, and May 1, 1998, the compensation committee and the board of
directors of the company, respectively, adopted and approved the Bob Evans
Farms, Inc. 1998 Supplemental Executive Retirement Plan (the "1998 SERP").
Effective as of May 1, 1998, the 1998 SERP superseded and replaced in its
entirety the 1992 SERP.
The 1998 SERP is a "top hat" plan under Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and is not intended to
qualify under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). The 1998 SERP is a defined contribution plan designed to
supplement, through annual company contributions, the retirement benefits of its
participants. Employees of the company and its subsidiaries will be eligible to
participate in the 1998 SERP only to the extent, and for the period, that they
are members of a select group of management or highly compensated employees, as
this group is described under sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
Participation in the 1998 SERP is at the discretion of the compensation
committee.
Under the 1998 SERP, an annual company contribution is determined, based upon an
actuarially determined "target" benefit for each
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participant. Generally, this target benefit is equal to (a) 55 percent of a
participant's average compensation over the five (5) consecutive-year period (in
the last 10 years of employment prior to age 62) during which such compensation
is the highest, less (b) the participant's benefit under the company's qualified
retirement plan derived from company contributions, less (c) 50 percent of the
participant's projected Social Security benefit. Each year, upon determination
of the company's contribution, a participant in the 1998 SERP may elect to
either have the amount of such contribution allocated to an account, in his or
her name, under the 1998 SERP, or the participant may elect to receive NQSOs
equal in value to the amount of such contribution. If the participant elects to
have such contribution credited to an account under the 1998 SERP, such account
will be credited with mutual-fund based earnings, each year, until distribution.
If the participant elects to receive NQSOs in lieu of an allocation to his or
her account under the 1998 SERP, no portion of such contribution shall be
credited to any account, on behalf of such participant, under the 1998 SERP.
Generally, a participant in the 1998 SERP is entitled to receive a distribution
of his or her account upon early retirement (age 55 and 10 or more years of
service), normal retirement (age 62), or total and permanent disability (as
determined by the company). In addition, in the event of a participant's death
while employed by the company, the participant's beneficiary will be entitled to
a distribution of such account. Upon a "change in control" (as defined in the
1998 SERP) of the company, a participant's account under the 1998 SERP will
immediately become fully vested and non-forfeitable.
Also on April 21, 1998, and May 1, 1998, the compensation committee and the
board of directors of the company, respectively, adopted and approved the Bob
Evans Farms, Inc. 1998 Stock Option and Incentive Plan (the "1998 Stock Option
Plan"). A proposal to the stockholders of the company to adopt the 1998 Stock
Option Plan is included in this proxy statement. See "Proposal to Approve the
Bob Evans Farms, Inc. 1998 Stock Option and Incentive Plan" at page 12. It is
anticipated that the compensation committee will make additional grants of NQSOs
from the Nonqualified Plan to provide NQSOs to those participants in the 1998
SERP who elect to receive such options in lieu of contributions to their
accounts under the 1998 SERP. In addition, if the 1998 Stock Option Plan is
approved by the stockholders of the company, it is anticipated that the
compensation committee will make future grants of NQSOs out of the 1998 Stock
Option Plan to provide NQSOs to those participants in the 1998 SERP who elect to
receive such options in lieu of contributions to their accounts under the 1998
SERP.
In June 1997, the compensation committee approved the grant of ISOs to certain
key employees, including the five executive officers named in the summary
compensation table. Each ISO was granted at the market value of the company's
common shares on the date of grant and is exercisable in 331/3 percent
increments beginning one year from date of grant. The number of ISOs granted to
each executive officer named in the summary compensation table increased
substantially from the number granted in 1993, which was the last time that ISOs
were granted to executive officers of the company. The compensation committee
felt this increase was justified when it compared the number of ISOs
historically granted to executive officers of the company to those granted by
other companies of similar size and in similar lines of business.
BOB EVANS FARMS, INC. AND AFFILIATES 401(K) RETIREMENT PLAN
Each of the executive officers participates in the Bob Evans Farms, Inc. and
Affiliates 401(k) Retirement Plan (the "401(k) plan"). Following the conclusion
of calendar 1997, the board of directors voted to contribute $2,888,580 to the
401(k) plan. Each participant in the 401(k) plan received a pro rata share of
this contribution and a pro rata share of forfeitures reallocated to
participants (such pro rata share, in each case, based upon such participant's
eligible compensation). In addition, each executive officer had the option of
contributing up to 6% of his or her compensation (up to a maximum contribution
of $9,500) to the 401(k) plan. In cases where participants made voluntary
contributions to the 401(k) plan, the company contributed $0.25 for each $1.00
of voluntary contributions (subject to a limitation of 6% of total compensation
of each participant making voluntary contributions).
ADOPTION OF THE BOB EVANS FARMS, INC. NONQUALIFIED SALARY DEFERRAL PLAN
On April 21, 1998, and May 1, 1998, the compensation committee and the board of
directors of the company, respectively, adopted and approved the Bob Evans
Farms, Inc. Nonqualified Salary Deferral Plan (the "Nonqualified Salary Deferral
Plan"), to be effective as of Jan. 1, 1999. Like the 1998 SERP, the Nonqualified
Salary Deferral Plan is a "top hat" plan under Title I of ERISA and is not
intended to qualify under section 401(a) of the Code. The Nonqualified Salary
Deferral Plan is a defined contribution plan designed to allow its participants
to defer a portion of their current compensation in excess of the maximum
amounts permitted under the applicable provisions of the Code with respect to
the company's qualified retirement plan. Employees of the company and its
subsidiaries will be eligible to participate in the Nonqualified Salary Deferral
Plan only to the extent, and for the period, that they are members of a select
group of management or highly compensated employees, as this group is described
under Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. Participation in the
Nonqualified Salary Deferral Plan is at the discretion of the compensation
committee.
Under the terms of the Nonqualified Salary Deferral Plan, a participant may
elect to defer up to 25 percent of his or her current compensation otherwise
payable during the year by the company. To the extent that a participant elects
to make such a deferral, an amount will be credited to an account established
on the participant's behalf under the Nonqualified Salary Deferral Plan. Each
year, such account will be credited with an earnings component to be determined
by the compensation committee. Generally, a participant will be eligible to
receive a distribution of his or her account under the Nonqualified Salary
Deferral Plan at his or her retirement, total and permanent disability or
other termination of employment with the company and its subsidiaries. In
addition, in the event of a participant's death while employed by the company,
the participant's beneficiary will be entitled to a distribution of such
account.
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DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code places certain restrictions on the amount of
compensation in excess of $1,000,000 which may be deducted for each executive
officer of the company. It is the compensation committee's policy to continually
review its compensation plans and to take steps to ensure that compensation paid
to its executive officers is deductible by the company.
CONCLUSION
The compensation committee believes that the compensation program outlined in
this report and the compensation paid to the executive officers is consistent
with the goals and objectives of the company.
SUBMITTED BY: COMPENSATION COMMITTEE MEMBERS
G. Robert Lucas, chairman, Daniel A. Fronk, Cheryl L. Krueger and Robert E.H.
Rabold
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
G. Robert Lucas, who, until April 30, 1997, was a partner in the law firm of
Vorys, Sater, Seymour and Pease LLP, which rendered legal services to the
company during the company's 1998 fiscal year and continues to do so, serves as
a member of the compensation committee of the company's board of directors.
Daniel A. Fronk, who until Dec. 31, 1997, was the senior executive vice
president and a board member of The Ohio Company, which rendered various
investment banking and brokerage services to the company and continues to do so,
also serves as a member of the compensation committee. Cheryl L. Krueger,
president and chief executive officer of Cheryl & Co., which sold various food
products to the company during the company's 1998 fiscal year and continues to
do so, also serves as a member of the compensation committee.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table summarizes, for the fiscal years ended April 24, 1998, April
25, 1997, and April 26, 1996, cash compensation paid by the company to, as well
as certain other compensation paid or earned for those years by, the company's
chief executive officer and the four other most highly compensated executive
officers of the company in all capacities in which they served.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ------------------------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL FISCAL SALARY BONUS OPTIONS/ COMPENSATION
POSITION YEAR ($)(1) ($) SARS (#) ($)(3)
- ------------------------------------------------------------------------------------------------------------------------
Daniel E. Evans: 1998 $392,800 $408,672 28,200(2) $ 2,400
Chairman of the 1997 $341,319 $245,952 0 $ 2,250
Board, Chief Executive 1996 $331,727 $298,000 4,770 $ 2,250
Officer and Secretary
Stewart K. Owens: 1998 $262,451 $262,449 14,150(2) $ 2,400
President and Chief 1997 $223,706 $151,158 0 $ 2,250
Operating Officer 1996 $213,742 $173,000 2,330 $ 2,250
Larry C. Corbin: 1998 $202,800 $213,618 11,050(2) $ 2,400
Executive Vice President 1997 $187,384 $132,370 0 $ 2,250
Restaurant Division 1996 $180,963 $149,500 1,948 $ 2,250
Roger D. Williams: 1998 $190,000 $198,168 11,050(2) $ 2,400
Executive Vice President 1997 $175,384 $121,268 0 $ 2,250
Food Products Division 1996 $168,963 $150,000 2,041 $ 2,250
Donald J. Radkoski: 1998 $175,000 $153,661 9,150(2) $ 2,400
Group Vice President - Finance 1997 $144,200 $117,852 0 $ 2,250
Group, Treasurer and 1996 $140,000 $136,500 2,824 $ 2,250
Chief Financial Officer
(1) "Salary" includes directors' fees received by each of Messrs. Evans, Owens
and Corbin during the 1998, 1997 and 1996 fiscal years in the amounts of
$12,800, $12,000 and $12,000, respectively.
(2) See the table under "Grants of Options."
(3) Includes company contributions to the 401(k) plan during the 1998, 1997 and
1996 fiscal years.
GRANTS OF OPTIONS
The following table sets forth information concerning individual grants of ISOs
made during the 1998 fiscal year to each of the named executive officers.
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\
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------------ REALIZABLE VALUE AT
NUMBER OF % OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM (1)
OPTIONS EMPLOYEES IN EXERCISE MARKET EXPIRATION -------------------------
NAME GRANTED (2)(3) FISCAL YEAR PRICE ($/SH) PRICE ($/SH) DATE 5% 10%
- ----------------------------------------------------------------------------------------------------------------------------------
Daniel E. Evans 28,200 7.5% 15.3125 15.3125 6/5/07 $271,565 $688,206
Stewart K. Owens 14,150 3.7% 15.3125 15.3125 6/5/07 $136,264 $345,323
Larry C. Corbin 11,050 2.9% 15.3125 15.3125 6/5/07 $106,411 $269,670
Roger D. Williams 11,050 2.9% 15.3125 15.3125 6/5/07 $106,411 $269,670
Donald J. Radkoski 9,150 2.4% 15.3125 15.3125 6/5/07 $ 88,114 $223,301
- ----------------------------
(1) The amounts reflected in this table represent certain assumed rates of
appreciation only. Actual realized values, if any, on ISOs exercises will be
dependent on the actual appreciation in the price of the common shares of the
company over the term of the ISOs. There can be no assurances that the potential
realizable values reflected in this table will be achieved.
(2) These ISOs were granted on June 5, 1997, and become exercisable in 33-1/3
percent increments beginning one year from the date of grant.
(3) If the company liquidates or dissolves, or is a party to a merger or
consolidation in which the company is not the surviving corporation, other than
a merger or consolidation involving only a change in the state of incorporation
or an internal reorganization not involving a change in underlying ownership,
the ISOs become fully exercisable for a period of 30 days prior to the effective
date of the transaction and terminate on such effective date. If the executive
officer leaves the employment of the company for any reason, including death,
the portion of the ISOs then exercisable may be exercised for a period of three
months following the termination of employment, subject to the term of the ISOs.
Upon the retirement of the holder of the ISOs, these ISOs immediately vest and
become exercisable.
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to options
exercised during the 1998 fiscal year by each of the named executive officers
and unexercised options held as of the end of the 1998 fiscal year by such
executive officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SECURITIES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
UNDERLYING FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)(2)
OPTIONS VALUE --------------------------- -----------------------------
NAME EXERCISED (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------------
Daniel E. Evans - - 130,920 28,200 $1,239,853 $ 139,237
Stewart K. Owens - - 15,000 25,283 $ 11,390 $ 185,093
Larry C. Corbin - - 33,237 11,050 $ 266,260 $ 54,559
Roger D. Williams - - 8,800 24,971 $ 11,000 $ 200,174
Donald J. Radkoski - - 8,800 15,650 $ 11,000 $ 110,266
- ----------------------------------------------
(1) All values are shown pretax and are rounded down to the nearest whole
dollar.
(2) Based on the 1998 fiscal year-end closing price of $20.25 per common share.
SEVERANCE ARRANGEMENTS
From February 1989 through September 1990, the company entered into agreements
with the five executive officers named in the summary compensation table. These
agreements, which are substantially identical, have one-year terms, which are
automatically extended for one-year periods unless either party gives notice not
to renew, and provide that in the event of the executive officer's termination
of employment under certain circumstances during the 36-month period following a
"change of control" of the company (the "effective period"), the executive
officer will be entitled to certain severance benefits. Prior to such change of
control, the executive officer will remain an employee at the will of the
company. Each agreement will terminate automatically on the death or retirement
of the executive officer to whom it relates, and may be terminated at the option
of the company upon disability of the executive officer or for "cause" (as that
term is defined in the agreement) or, at the option of the executive officer,
for other than "good reason," in all of which cases no additional severance
payments, other than accrued compensation and benefits customarily paid to
employees in such circumstances, will be due the executive officer.
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If the executive officer terminates the agreement during the effective period
for "good reason," or, if the company terminates the agreement during such
period for any reason other than for "cause" (as that latter term is defined in
the agreement) or as a result of the executive officer's death, retirement or
disability, the company will be obligated to pay the executive officer his base
salary and prorated bonus through the date of the termination and (A) to make a
lump-sum payment to the executive officer equal to 2.99 times the average annual
compensation (including salary and bonus) which was payable to the executive
officer for the five taxable years ending prior to the date on which the change
of control occurred; (B) to continue health and life insurance and other
employee welfare benefit plans for the executive officer and his family for a
period of 36 months following the date of termination; (C) to allow the
executive officer to exercise in full any stock options held by the executive
officer which were not fully exercisable on the termination date; and (D) to pay
to the executive officer in one lump sum in cash, at the executive officer's
normal retirement age, an amount equal to the actuarial equivalent of the
retirement pension to which the executive officer would have been entitled under
such retirement plan had he accumulated 36 additional months of continuous
service after the termination date. As of April 24, 1998, the amount of the
lump-sum payment to Messrs. Evans, Owens, Corbin, Williams and Radkoski would
have been approximately $2,015,585; $1,240,348; $1,042,691; $1,007,484; and
$837,750, respectively. If any portion of the payments and benefits provided for
in an agreement would be considered "parachute payments" within the meaning of
section 280G(b)(2) of the Code, so as to be nondeductible by the company, then
the aggregate present value of all of the amounts and benefits payable to the
executive officer to whom such agreement relates will be reduced at the election
of the executive officer to the maximum amount which would cause all of the
payments and benefits to be deductible by the company.
For purposes of each agreement, the executive officer to whom it relates may
terminate his employment for "good reason" during the effective period if his
title, duties, responsibilities, compensation or benefits are reduced, if he is
required to relocate or if the agreement is breached by the company. A "change
of control" is defined to include, among other events, the acquisition by any
individual, entity or group of stock entitling such individual, entity or group
to exercise 20% or more of the voting power of the company or a change in a
majority of the current directors of the company, unless the election or
nomination for election of the successor directors was approved by a vote of at
least three-quarters of the incumbent directors.
COMPENSATION OF DIRECTORS
Between April 25, 1997, and Aug. 31, 1997, each director who was not a salaried
officer of the company received a monthly fee of $2,200 and each director who
was a salaried officer of the company received a monthly fee of $1,000.
Effective Sept. 1, 1997, the monthly director fees were increased to $2,400 and
$1,100 for non-salaried and salaried directors, respectively. If a director did
not attend a scheduled meeting of the board of directors during the fiscal year,
he or she had $500 deducted from the amount of the monthly fee he or she would
have received for the month of such meeting. Each director also was reimbursed
for out-of-pocket expenses incurred in attending meetings.
From April 25, 1997, through Jan. 29, 1998, non-salaried directors received an
additional fee of $500 for each committee meeting attended. In addition, the
chairmen of the audit committee and the compensation committee received an extra
fee of $200 per committee meeting attended. Effective Jan. 30, 1998, the board
of directors of the company approved an increase in the amount of fees to be
received by each nonemployee director for each committee meeting attended to
$750, unless the nonemployee director is the chairman of the committee, in which
case the nonemployee director receives a fee of $1,000 for each committee
meeting attended.
As a result of his appointment to the board of directors of the company on July
17, 1997, Michael J. Gasser was granted 5,133 NQSOs under the provisions of the
Bob Evans Farms, Inc. 1989 Stock Option Plan for Nonemployee Directors (the
"Nonemployee Directors Plan").
1998 DIRECTORS COMPENSATION PLAN
On April 21, 1998, and May 1, 1998, the compensation committee and the board of
directors of the company, respectively, adopted and approved the 1998 Directors
Compensation Plan, which became effective on May 1, 1998. Pursuant to the 1998
Directors Compensation Plan, all directors who are employees of the company will
receive a monthly director fee of $1,200 in cash. All nonemployee directors will
receive a monthly director fee of $1,250 in cash. In addition, as stated above,
each nonemployee director will receive a fee of $750 for each committee meeting
attended, unless the nonemployee director is the chairman of the committee, in
which case the director will receive a fee of $1,000 for each committee meeting
attended.
Annually, each nonemployee director will receive common shares of the company
with a value equal to $17,000. The number of common shares to be issued to the
nonemployee directors each year will be based on the price of the company's
common shares on the third business day following the release of annual fiscal
year-end earnings.
Under the 1998 Directors Compensation Plan, nonemployee directors will be
granted NQSOs annually on the third business day following the release of annual
fiscal year-end earnings. The number of NQSOs to be granted to each nonemployee
director will be based upon the amount of the nonemployee director's annual
retainer (excluding any fees received for attending committee meetings) 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
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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 will estimate the volatility of
the underlying shares based upon the historical volatility of the company's
common shares.
For fiscal year 1999, all NQSOs granted to nonemployee directors will be granted
out of the Nonemployee Directors Plan. Thereafter, if the 1998 Stock Option Plan
is approved by the stockholders of the company, NQSOs granted to the nonemployee
directors also will be granted out of the 1998 Stock Option Plan.
The compensation committee, with the approval of the board of directors of the
company, may amend the 1998 Directors Compensation Plan from time to time or
terminate the 1998 Directors Compensation Plan at any time without the approval
of the stockholders of the company.
Pursuant to the terms of the 1998 Directors Compensation Plan, the company will
continue to maintain a life insurance policy with a death benefit of $50,000 on
behalf of each director of the company. In addition, group health care is
available to nonemployee directors at no cost.
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 the NASDAQ Restaurants and Food Manufacturers Indices
(Restaurants are weighted 70% and Food Manufacturers 30% to reflect the
company's business mix) ("NASDAQ Restaurant/Food Mfg. Index") for the five-year
period ended April 24, 1998.
COMPARISON OF FIVE -YEAR TOTAL RETURN AMONG BOB EVANS FARMS, INC.,
S&P 500 AND NASDAQ RESTAURANT/FOOD MFG. INDEX
APRIL 30, 1993 - APRIL 24, 1998
CUMULATIVE VALUE OF $100 INVESTMENT
4/30/93 4/29/94 4/28/95 4/30/96 4/30/97 4/24/98
- --------------------------------------------------------------------------------------------------------------------
Nasdaq Restaurant/Food Mfg. Peer Group $100.00 $100.02 $ 94.26 $114.12 $100.81 $116.12
S&P 500 $100.00 $105.10 $123.60 $161.30 $202.10 $284.60
Bob Evans Farms, Inc. $100.00 $121.40 $118.70 $ 92.80 $ 79.90 $124.40
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PROPOSAL TO APPROVE THE BOB EVANS FARMS, INC. 1998 STOCK OPTION AND INCENTIVE
PLAN
On April 21, 1998, and May 1, 1998, the compensation committee and the board of
directors of the company adopted, respectively, the 1998 Stock Option Plan. The
purpose of the 1998 Stock Option Plan is to attract and retain outstanding
individuals as directors (both employee directors and nonemployee directors) and
officers and other key employees of the company and its subsidiaries and to
furnish incentives to such persons by providing them opportunities to acquire
common shares of the company. The 1998 Stock Option Plan is designed to permit
the company to provide several different forms of benefits to meet competitive
conditions and the particular circumstances of the individuals who may be
eligible to receive such benefits. To accomplish this purpose, the 1998 Stock
Option Plan authorizes the grant of ISOs, as defined in section 422 of the Code,
and NQSOs (ISOs and NQSOs are herein referred to collectively as "Stock
Options"), stock appreciation rights ("SARs"), restricted stock awards
("Restricted Stock Awards") and performance share awards ("Performance Share
Awards") (Stock Options, SARs, Restricted Stock Awards and Performance Share
Awards are herein referred to collectively as "Awards").
The company maintains various stock option and compensation plans (the "Plans")
under which options and other awards may be granted to directors (both employee
and nonemployee directors) and officers and other key employees of the company
and its subsidiaries. As of July 17, 1998, a total of 762,698 common shares of
the company remained available for the grant of options and other awards under
the Plans. The compensation committee and the board of directors of the company
believe that the number of common shares remaining available for the grant of
options and other awards under the Plans is not sufficient to satisfy grants of
options and other awards which the company expects to make over the next several
years. The board of directors also believes that the company should have the
flexibility to grant other types of awards to meet competitive conditions and
the particular circumstances of the individuals who may be eligible to receive
awards. For these reasons, the compensation committee and the board of directors
of the company are recommending the adoption of the 1998 Stock Option Plan,
which will make an additional 5,000,000 common shares of the company available
for the grant of Awards. The 5,000,000 common shares to be reserved for issuance
under the 1998 Stock Option Plan are equal to approximately 12 percent of the
company's outstanding common shares as of July 17, 1998. On July 17, 1998, the
closing sale price of the company's common shares on The Nasdaq National Market
was $20.125.
Directors (both employee directors and nonemployee directors) and officers and
other key employees of the company and its subsidiaries selected by the
compensation committee (collectively, the "Participants") will be eligible to
receive Awards under the 1998 Stock Option Plan. As of the date of this Proxy
Statement, no determination has been made regarding the identity of the
Participants to whom Awards may be made under the 1998 Stock Option Plan or the
number and type of Awards that will be made to any such Participant, except for
nonemployee directors who will be granted NQSOs out of the 1998 Stock Option
Plan pursuant to the terms of the 1998 Directors Compensation Plan if the 1998
Stock Option Plan is approved by the stockholders of the company. The company
estimates that approximately 1,200 Participants will be eligible to receive
Awards under the 1998 Stock Option Plan.
The common shares covered by the 1998 Stock Option Plan may be either newly
issued or treasury shares. If there is a lapse, expiration, termination or
cancellation of any Award granted under the 1998 Stock Option Plan without the
issuance of common shares or payment of cash thereunder, or if common shares are
issued under any Award and thereafter are re-acquired by the company pursuant to
rights reserved upon the issuance thereof, in each case so long as the holder
thereof has not received any benefits of ownership of such common shares, the
common shares subject to or reserved for such Award may again be used for new
Awards under the 1998 Stock Option Plan. During any calendar year, no
Participant shall be granted Awards under the 1998 Stock Option Plan covering,
in the aggregate, more than 300,000 common shares of the company and no
Participant shall be granted stock options covering, in the aggregate, more than
250,000 common shares of the company.
The following summary of certain provisions of the 1998 Stock Option Plan is
qualified in its entirety by reference to the copy of the 1998 Stock Option Plan
attached to this proxy statement as Exhibit A.
ADMINISTRATION
The 1998 Stock Option Plan will be administered by the compensation committee of
the board of directors of the company. None of the members of the compensation
committee is an officer or employee of the company or of any of its
subsidiaries. The compensation committee will grant Awards under the 1998 Stock
Option Plan, interpret the 1998 Stock Option Plan and make all determinations
necessary for the administration of the 1998 Stock Option Plan.
It is the intention of the compensation committee to make no decisions with
respect to the granting of Awards under the 1998 Stock Option Plan until after
the 1998 Stock Option Plan has been approved by the stockholders. Because the
granting of Awards is at the sole discretion of the compensation committee, the
identity of the persons to whom Awards may be granted and the number of common
shares which may be allocated to any specific individual are not presently
determinable, except that nonemployee directors will be granted NQSOs out of the
1998 Stock Option Plan pursuant to the terms of the 1998 Directors Compensation
Plan if the 1998 Stock Option Plan is approved by the stockholders of the
company.
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DURATION
Any grant of an Award under the 1998 Stock Option Plan must be made on or before
April 30, 2008.
ADJUSTMENTS
The 1998 Stock Option Plan provides for adjustment in the number of common
shares reserved for issuance under the 1998 Stock Option Plan and in the number
and exercise price of common shares covered by each outstanding Award in the
event of a stock dividend or stock split and for continuation of Awards or other
equitable adjustments in the event of changes in the common shares resulting
from a reorganization, sale, merger, consolidation or similar occurrence.
TERMS OF AWARDS
STOCK OPTIONS
- -------------
The option exercise price of each ISO granted under the 1998 Stock Option Plan
will be determined by the compensation committee and may not be less than 100
percent of the fair market value of the company's common shares on the date of
grant. Fair market value is defined under the 1998 Stock Option Plan as the last
reported sales price of the company's common shares on the relevant date, as
reported in The Nasdaq National Market. The period during which any ISO may be
exercised will be determined by the compensation committee, but no ISO may be
exercised after the expiration of 10 years from the date it is granted. The
option exercise price and the duration during which any NQSO granted under the
1998 Stock Option Plan may be exercised will be determined by the compensation
committee in its discretion. Upon the retirement of a participant, all Stock
Options held by such participant will immediately vest and become exercisable.
Only employees of the company selected by the compensation committee of the
board of directors will be eligible to receive ISOs (the "Key Employees"). Under
the 1998 Stock Option Plan, no Key Employee will be granted an ISO if, at the
time of grant, such Key Employee owns of record and beneficially common shares
representing more than 10 percent of the total combined voting power of all
classes of stock of the company unless the option exercise price is at least 110
percent of the fair market value of the common shares covered by the ISO on the
date of grant and the option term does not exceed five years. No Key Employee
may be granted ISOs under the 1998 Stock Option Plan if it would cause the
aggregate fair market value (determined as of the date an ISO is granted) of the
common shares with respect to which ISOs are exercisable for the first time by
such Key Employee during any calendar year under the 1998 Stock Option Plan and
all other stock option plans maintained by the company and its subsidiaries to
exceed $100,000.
EXERCISE OF STOCK OPTIONS
- -------------------------
The compensation committee may provide for the payment of the option exercise
price of common shares subject to a Stock Option in cash, by delivery of
already-owned common shares of the company having a fair market value equal to
the option exercise price of such common shares, or by delivery of an exercise
notice accompanied by a copy of irrevocable instructions to a broker to deliver
promptly to the company sale or loan proceeds to pay the option exercise price.
Unless specified otherwise in any stock option agreement, the number of common
shares under each Stock Option which may be purchased in any one year ending on
an anniversary date of the grant of the Stock Option shall be the total number
of common shares subject to the Stock Option divided by the number of years
constituting the term of the Stock Option; provided however, that if a
Participant does not purchase in any one option year the full number of common
shares to which he or she is then entitled, the Participant may purchase those
common shares in any subsequent year during the term of the Stock Option. The
1998 Stock Option Plan contains special rules governing the time of exercise and
termination of Stock Options and SARs in cases of retirement, death, disability
or other termination of employment or service. The 1998 Stock Option Plan
provides that, upon the occurrence of a "change in control" (as defined in the
1998 Stock Option Plan) or the "retirement" (as defined in the 1998 Stock Option
Plan) of the applicable Participant, all Stock Options (whether or not then
exercisable) will become fully exercisable as of the date of the change in
control or retirement. The 1998 Stock Option Plan also provides that an ISO
which is not exercised by a Participant prior to 90 days after the date of such
Participant's retirement, automatically converts into a NQSO and will be
exercisable for the original term of the Stock Option.
SARS
- ----
Under the 1998 Stock Option Plan, the compensation committee has the discretion
to grant SARs to Participants at the same time that such Participants are
awarded Stock Options. Each SAR must relate to a specific Stock Option and must
be awarded to a Participant concurrently with the grant of such Stock Option.
The number of SARs granted to a Participant shall be equal to a percentage of
the number of common shares of the company that the Participant is entitled to
receive pursuant to the corresponding Stock Option. Because each SAR is granted
in tandem with a Stock Option, the exercise by a Participant of all or a portion
of any Stock Options will cause an equal exercise of the same proportion of SARs
relating to such Stock Option.
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Each SAR will entitle the applicable Participant to the excess of the fair
market value of a single common share of the company on the exercise date over
the fair market value of a single common share on the date the SAR is granted.
The total appreciation available to a Participant from any exercise of SARs will
be equal to the number of SARs being exercised times the amount of appreciation
per SAR and will be paid in a single lump sum payment in cash.
The company does not currently anticipate that the compensation committee will
grant any SARs to Participants during the 1999 fiscal year.
RESTRICTED STOCK
- ----------------
Restricted Stock Awards may be granted to Participants with terms and conditions
as determined at the discretion of the compensation committee including, without
limitation, the price of the Restricted Stock Awards, restrictions on the sale
or other disposition of the underlying common shares and rights of the company
to re-acquire any such common shares upon termination of the applicable
Participant's employment or service with the company or a subsidiary.
PERFORMANCE SHARE AWARDS
- ------------------------
The compensation committee may grant Performance Share Awards under which
payment may be made in common shares, cash or a combination of common shares and
cash if the performance of the company or any subsidiary of the company selected
by the compensation committee meets certain goals established by the
compensation committee. The compensation committee will determine the
performance goals (which may include earnings per share, return on stockholders'
equity, return on assets, net income or any other financial or other measure
established by the compensation committee), the length of a performance period,
the maximum payment value of a Performance Share Award and the minimum
performance required before a payment will be made. The compensation committee
may revise the goals and the computation of payment to account for unforeseen
events which occur during a performance period and which have a substantial
effect on the performance of the company or subsidiary.
In order to receive payment under a Performance Share Award, the holder thereof
must remain in the employment or service of the company or a subsidiary until
the completion of the performance period, except that the compensation committee
may provide complete or partial exemptions to that requirement as it deems
equitable.
TRANSFERABILITY OF AWARDS
- -------------------------
Each Award granted under the 1998 Stock Option Plan will not be transferable
other than by will or the laws of descent and distribution, and Stock Options
will be exercisable, during a Participant's lifetime, only by the Participant or
the Participant's guardian or legal representative.
AMENDMENTS AND DISCONTINUANCE
- -----------------------------
The compensation committee, with the approval of the board of directors of the
company, may amend the 1998 Stock Option Plan from time to time or terminate the
1998 Stock Option Plan at any time without the approval of the stockholders of
the Company, except as such stockholder approval may be required (a) to satisfy
the requirements of rule 16b-3 under the Exchange Act, (b) to satisfy applicable
requirements of the Code or (c) to satisfy applicable requirements of any
national securities exchange on which any of the company's equity securities may
then be listed or of The Nasdaq National Market. No such action may, without the
consent of the applicable Participant, reduce the amount of any existing Award
of such Participant or adversely change the terms and conditions thereof.
The terms and conditions applicable to any outstanding Award may at any time be
amended, modified or canceled, without stockholder approval, by mutual agreement
between the compensation committee and the applicable Participant so long as
stockholder approval of such amendment, modification or cancellation is not
required to satisfy the requirements of rule 16b-3 under the Exchange Act, to
satisfy applicable provisions of the Code or to satisfy any applicable
requirements of any stock exchange on which any of the company's equity
securities are then listed or of The Nasdaq National Market. The compensation
committee may, at any time and in its sole discretion, declare any or all Stock
Options then outstanding under the 1998 Stock Option Plan to be exercisable,
whether or not such Stock Options are then otherwise exercisable.
FEDERAL INCOME TAX CONSEQUENCES
- -------------------------------
Based on current provisions of the Code and the existing regulations thereunder,
the anticipated federal income tax consequences in respect of the Awards granted
under the 1998 Stock Option Plan are as described below. The following
discussion is not intended to be a complete statement of applicable law and is
based upon the federal income tax laws as in effect on the date hereof.
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ISOs
- ----
In general, a participant who is granted an ISO does not recognize taxable
income either on the date of grant or on the date of exercise, except that upon
the exercise of an ISO, the difference between the fair market value of the
common shares of the company received and the option price is a tax preference
item potentially subject to the alternative minimum tax. However, on the later
sale or other disposition of the common shares, generally only the difference
between the fair market value of the common shares on the exercise date and the
amount realized on the sale or disposition is includable in alternative minimum
taxable income.
Upon disposition of common shares acquired from exercise of an ISO, capital gain
or loss is generally recognized in an amount equal to the difference between the
amount realized on the sale or disposition and the exercise price. However, if
the Participant disposes of the common shares within two years of the date of
grant or within one year from the date of the issuance of the common shares to
the participant (a "Disqualifying Disposition"), then the Participant will
recognize ordinary income, as opposed to capital gain, at the time of
disposition. In general, the amount of ordinary income recognized will be equal
to the lesser of (i) the amount of gain realized on the disposition, or (ii) the
difference between the fair market value of the common shares received on the
date of exercise and the exercise price. Any remaining gain or loss is treated
as a short-term, mid-term or long-term capital gain or loss, depending upon the
period of time the common shares have been held.
The company is not entitled to a tax deduction upon either the exercise of an
ISO or the disposition of common shares acquired pursuant to such exercise,
except to the extent that the Participant recognizes ordinary income in a
Disqualifying Disposition.
If the holder of an ISO pays the exercise price, in whole or in part, with
previously acquired common shares, the exchange should not effect the ISO tax
treatment of the exercise. Upon such exchange, and except for Disqualifying
Dispositions, no gain or loss is recognized by the participant upon the delivery
of the previously acquired common shares to the company for the payment of the
exercise price. The common shares received by the Participant, equal in number
to the previously acquired common shares exchanged therefor, will have the same
basis and holding period for capital gain purposes as the previously acquired
common shares. The Participant, however, will not be able to utilize the prior
holding period for the purpose of satisfying the ISO statutory holding period
requirements. Common shares received by the Participant in excess of the number
of previously acquired common shares will have a basis of zero and a holding
period which commences as of the date the common shares are issued to the
Participant upon exercise of the ISO. If the exercise of an ISO is effected
using common shares previously acquired through the exercise of an ISO, the
exchange of the previously acquired common shares will be considered a
disposition of such common shares for the purposes of determining whether a
Disqualifying Disposition has occurred.
NQSOs
- -----
A Participant receiving an NQSO does not recognize taxable income on the date of
grant of the NQSO, provided that the NQSO does not have a readily ascertainable
fair market value at the time it is granted. In general, the Participant must
recognize ordinary income at the time of exercise of the NQSO in the amount of
the difference between the fair market value of the common shares of the company
on the date of exercise and the option price. The ordinary income recognized
will constitute compensation for which income tax withholding generally will be
required. The amount of ordinary income recognized by a Participant will be
deductible by the company in the year that the Participant recognizes the income
if the company complies with the applicable withholding requirement.
Common shares acquired upon exercise of an NQSO will have a tax basis equal to
their fair market value on the exercise date or other relevant date on which
ordinary income is recognized, and the holding period for the common shares
generally will begin on the date of exercise or such other relevant date. Upon
subsequent disposition of the common shares, the participant will recognize
long-term capital gain or loss if the Participant has held the common shares for
more than 18 months prior to disposition, mid-term capital gain or loss if the
Participant has held the common shares for more than one year, but less than 18
months, prior to disposition, or short-term capital gain or loss if the
Participant has held the common shares for one year or less.
If the holder of an NQSO pays the exercise price, in whole or in part, with
previously acquired common shares, the holder will recognize ordinary income in
the amount by which the fair market value of the common shares received exceeds
the exercise price. The Participant will not recognize gain or loss upon
delivery of the previously acquired common shares to the Company. The common
shares received by the holder equal in number to the previously acquired common
shares exchanged therefor will have the same basis and holding period for
capital gain purposes as the previously acquired common shares. Common shares
received by the holder of the NQSO in excess of the number of previously
acquired common shares will have a basis equal to the fair market value of such
additional common shares as of the date ordinary income is recognized. The
holding period for such additional common shares will commence as of the date of
exercise or such other relevant date.
SARs
- ----
A Participant will not be taxed upon the grant of SARs. Participants will
generally be taxed upon the exercise date, at ordinary income tax rates, on the
amount of cash received and the fair market value of any common shares received.
However, if the sale of common
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shares of the company could subject a Participant to liability under section
16(b) of the Exchange Act, such Participant generally will not recognize
ordinary income with respect to such common shares until the participant is no
longer subject to such liability, at which time the Participant will recognize
ordinary income in an amount equal to the fair market value of the common shares
on such date.
RESTRICTED STOCK AWARDS
- -----------------------
In general, the excess of the fair market value of the underlying common shares
of the Restricted Stock Award over the amount paid for the Restricted Stock
Award will be treated as ordinary income to the Participant and will be subject
to tax in the first taxable year in which the underlying common shares are not
subject to vesting or similar types of forfeiture provisions. The income
realized by the Participant is generally treated as wages and will be subject to
withholding taxes even though no cash is paid to the Participant by the company.
PERFORMANCE SHARE AWARDS
- ------------------------
The grant of a Performance Share Award will not result in income for the
Participant or in a deduction for the company. Upon the receipt of common shares
or cash under a Performance Share Award, the Participant will recognize ordinary
income and the company will be entitled to a deduction measured by the fair
market value of the common shares plus any cash received. Income and employment
tax withholding will be required.
OTHER MATTERS
- -------------
The 1998 Stock Option Plan is intended to comply with section 162(m) of the Code
which was enacted as part of the Omnibus Budget Reconciliation Act of 1993.
Section 162(m) of the Code prohibits a publicly held corporation, such as the
company, from claiming a deduction on its federal income tax return for
compensation in excess of $1 million paid for a given fiscal year to the chief
executive officer (or person acting in that capacity) and the four most highly
compensated officers of the corporation, other than the chief executive officer,
at the end of the corporation's fiscal year (collectively, the "section 162(m)
officers"). The $1 million compensation deduction limitation does not apply to
"performance-based compensation." Regulations issued by the Internal Revenue
Service under section 162(m) set forth a number of provisions which compensatory
plans must contain if the compensation paid thereunder is to qualify as
"performance-based" for purposes of section 162(m). The 1998 Stock Option Plan
is intended to satisfy the requirements of these IRS regulations. The company is
seeking stockholder approval of the 1998 Stock Option Plan in order to qualify
compensation received thereunder as "performance-based" for purposes of section
162(m). If such stockholder approval is not obtained, the 1998 Stock Option Plan
will be null and void.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO APPROVE THE 1998 STOCK OPTION PLAN. APPROVAL OF THIS PROPOSAL
REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE COMMON SHARES OF THE COMPANY
PRESENT IN PERSON OR BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL MEETING. UNLESS
OTHERWISE DIRECTED, THE PERSONS NAMED IN THE ENCLOSED PROXY WILL VOTE THE COMMON
SHARES REPRESENTED BY ALL PROXIES RECEIVED PRIOR TO THE ANNUAL MEETING, AND NOT
PROPERLY REVOKED, EXCLUDING BROKER NON-VOTES, IN FAVOR OF THE PROPOSAL TO
APPROVE THE 1998 STOCK OPTION PLAN.
PROXY STATEMENT STOCKHOLDER PROPOSALS
Each year the board of directors submits its nominations for election as
directors at the annual meeting of stockholders. Other proposals may be
submitted by the board of directors or stockholders for inclusion in the proxy
statement for action at each year's annual meeting. Any proposal submitted by a
stockholder for inclusion in the proxy statement for the 1999 annual meeting,
presently scheduled for Sept. 13, 1999, must be received by the company on or
before April 13, 1999. In addition, if a stockholder fails to provide the
company notice of any stockholder proposal prior to June 29, 1999, then the
company's management's proxies will be entitled to use their discretionary
voting authority if such stockholder proposal is raised at the annual meeting
without any discussion of the matter in the proxy statement.
The following stockholder proposals have been submitted for inclusion in the
1998 proxy statement. The Board of Directors of the company recommends that
shareholders vote "against" the following stockholder proposals.
STOCKHOLDER PROPOSAL REGARDING SALE OR MERGER OF THE COMPANY
E.K. Mitchell, 2855 Lander Road, Pepper Pike, Ohio 44124, claiming ownership for
more than one year of common shares of the company with a market value in excess
of $1,000 and that she shall continue to hold the same through the date of the
annual meeting, has submitted the following resolution and supporting statement
for inclusion in this proxy statement and stated her intention to present same
at the annual meeting. YOUR BOARD OF DIRECTORS OPPOSES THIS RESOLUTION FOR THE
REASONS STATED BELOW.
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"MAXIMIZE VALUE RESOLUTION
Resolved that the shareholders of Bob Evans Farms, Inc. urge the Bob Evans
Farms, Inc. board of directors to arrange for the prompt sale of Bob Evans
Farms, Inc. to the highest bidder.
The purpose of the maximize value resolution is to give all Bob Evans Farms,
Inc. shareholders the opportunity to send a message to the Bob Evans Farms, Inc.
board that they support the prompt sale of Bob Evans Farms, Inc. to the highest
bidder. A strong and or majority vote by the shareholders would indicate to the
board the displeasure felt by the shareholders of the shareholder returns over
many years and the drastic action that should be taken. Even if it is approved
by the majority of the Bob Evans Farms, Inc. shares represented and entitled to
vote at the annual meeting, the maximize value resolution will not be binding on
the Bob Evans Farms, Inc. board. The proponent however believes that if this
resolution receives substantial support from the shareholders, the board may
choose to carry out the request set forth in the resolution:
The prompt auction of Bob Evans Farms, Inc. should be accomplished by any
appropriate process the board chooses to adopt including a sale to the highest
bidder whether in cash, stock or a combination of both. It is expected that the
board will uphold its fiduciary duties to the utmost during the process.
The proponent further believes that if the resolution is adopted, the management
and the board will interpret such adoption as a message from the company's
stockholders that it is no longer acceptable for the board to continue with its
current management plan and strategies.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
----------------------------------------------
- --------------------------------------------------------------------------------
RESPONSE OF THE BOB EVANS FARMS, INC. BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE
RESOLUTION SET FORTH ABOVE FOR THE FOLLOWING REASONS:
The subject of stockholder value is considered often by the board of directors
and management. For several reasons, the board strongly believes that
implementation of the resolution described above would not be in the best
interest of stockholders of the company and, contrary to the title of the
resolution, would not maximize value to the stockholders.
First, the board of directors is elected by the stockholders to direct the
management of the business and affairs of the company. Consistent with its
fiduciary duties and responsibilities to the stockholders, the board continually
reviews and monitors the company's business and progress, as well as
developments in the company's industries. Accordingly, the board is in the best
and most informed position to evaluate and consider all of the options that may
be available to the company from time to time including if, when and under what
conditions the sale of the company should be considered. Acting hastily to force
a sale of Bob Evans Farms, Inc. at auction or otherwise to the highest bidder
would restrict the board's ability to examine all strategic alternatives and
weaken the board's ability to maximize stockholder value. Further, such an
action could seriously prejudice and jeopardize the stockholders' financial
interests.
Second, the success of the company is highly dependent on its ability to
maintain strong relationships with, and the confidence of, its employees,
customers and vendors. Although the resolution only requests and does not
obligate the board to take certain action, the board believes that approval of
this resolution would cause uncertainty regarding the company's future, which
would undermine confidence in the company and adversely affect the company's
relationships with employees, customers and vendors. Such results could have an
adverse impact on the company's ability to effectively compete in the short and
long run, which could lead to a potential decline in revenues, profits and, in
turn, stockholder value.
In summary, the board of directors remains committed to maximizing the value of
the company for all stockholders, and will pursue the course of action that will
best achieve that objective and the best interests of all stockholders. The
board believes that sustained focus on the company's sales and acquisition
strategies, improved operating efficiencies and ongoing internal and external
organizational modifications will continue to enhance stockholder value. In view
of the positive future prospects of the company, the board does not believe that
implementation of the stockholder proposal described above would achieve that
result at this time. BECAUSE THE BOARD DOES NOT BELIEVE THAT THE STOCKHOLDER
PROPOSAL DESCRIBED ABOVE IS IN THE BEST INTERESTS OF ALL OF THE STOCKHOLDERS OF
THE COMPANY, THE BOARD VIGOROUSLY OPPOSES THE STOCKHOLDER PROPOSAL DESCRIBED
ABOVE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"AGAINST" THE ADOPTION OF THIS STOCKHOLDER PROPOSAL. APPROVAL OF THIS
STOCKHOLDER PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE COMMON
SHARES OF THE COMPANY PRESENT IN PERSON OR BY PROXY AND ENTITLED TO VOTE AT THE
ANNUAL MEETING. UNLESS OTHERWISE DIRECTED, THE PERSONS NAMED IN THE ENCLOSED
PROXY WILL VOTE THE COMMON SHARES REPRESENTED BY ALL PROXIES RECEIVED PRIOR TO
THE ANNUAL MEETING, AND NOT PROPERLY REVOKED, EXCLUDING BROKER NON-VOTES,
AGAINST THIS STOCKHOLDER PROPOSAL.
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STOCKHOLDER PROPOSAL REGARDING ELIMINATION OF
CLASSIFIED BOARD OF DIRECTORS
Deborrah A. Donskov, 4569 Ravine Drive, Westerville, Ohio 43081, claiming
ownership for more than one year of common shares of the company with a market
value in excess of $1,000 and that she shall continue to hold the same through
the date of the annual meeting, has submitted the following resolution and
supporting statement for inclusion in this proxy statement and stated her
intention to present same at the annual meeting. YOUR BOARD OF DIRECTORS OPPOSES
THIS RESOLUTION FOR THE REASONS STATED BELOW.
"ELIMINATE CLASSIFIED BOARD OF DIRECTORS RESOLUTION
Resolved, that the stockholders of Bob Evans Farms, Inc. request that the board
of directors take the necessary steps, in accordance with state law, to
declassify the board of directors so that all directors are elected annually,
such declassification to be effected in a manner that does not affect the
unexpired terms of directors previously elected.
SUPPORTING STATEMENT
The election of directors is the primary avenue for stockholders to influence
corporate governance policies and to hold management accountable for its
implementation of those policies. I believe that the classification of the board
of directors, which results in only a portion of the board being elected
annually, is not in the best interest of the company and its stockholders.
I believe that the company's classified board of directors maintains the
incumbency of the current board and therefore of current management, which in
turn limits management's accountability to stockholders.
The elimination of the company's classified board would require each new
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to ensure that the company will be managed in a manner that is in
the best interest of the stockholders.
I believe that concerns expressed by companies with classified boards, that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
----------------------------------------------
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RESPONSE OF THE BOB EVANS FARMS, INC. BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST"
THE RESOLUTION SET FORTH ABOVE FOR THE FOLLOWING REASONS:
Since approved by the stockholders in 1985, the company's board of directors has
been divided into three classes. Under this system, each director serves a
three-year term, each class is as nearly equal as possible in size (subject to
resignations and retirement), and one of the three classes is elected each year.
This staggered election of directors is a common practice that has been adopted
by the stockholders of many major corporations. The board is confident that the
election of directors by classes is in the best interest of the company and its
stockholders and should not be changed for several reasons.
First, the board believes that the election of directors by classes assures
continuity and stability in the management of company affairs, since, at any
given time, a majority of the board generally will have had prior experience as
directors of the company. This serves to provide solid knowledge of the business
and industry, informed oversight of corporate policies, orderly development of
strategies and operations, and long-term strategic planning to enhance
stockholder value. This also permits a more orderly process for a change in the
composition of the board and company policies and strategies.
Second, when directors are elected by classes, a change in the composition of a
majority of the board normally requires at least two stockholder meetings,
instead of one. Therefore, the board believes that the election of directors by
classes reduces the vulnerability of the company to certain potentially abusive
takeover tactics and encourages potential acquirors to initiate such actions
through arm's length negotiations with both management and experienced
directors. Thus, a classified board does not preclude unsolicited acquisition
proposals but, by eliminating the threat of imminent removal, positions the
incumbent board to act to maximize the value of an acquisition for all
stockholders.
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Finally, the board believes that directors elected for staggered terms are not
any less accountable or responsive to stockholders than they would be if elected
annually. The same standards of performance apply to all of the directors
regardless of the term of service. Further, the stockholders retain their
ability to replace incumbent directors or propose and elect alternate nominees
for the class of directors to be elected each year. Thus, the stockholders
continue to enjoy a significant opportunity to express their views regarding the
board's performance and to influence the board's composition.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" THE ADOPTION OF
THE STOCKHOLDER PROPOSAL TO DECLASSIFY THE COMPANY'S BOARD OF DIRECTORS.
APPROVAL OF THIS STOCKHOLDER PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE COMMON SHARES OF THE COMPANY PRESENT IN PERSON OR BY PROXY AND
ENTITLED TO VOTE AT THE ANNUAL MEETING. UNLESS OTHERWISE DIRECTED, THE PERSONS
NAMED IN THE ENCLOSED PROXY WILL VOTE THE COMMON SHARES REPRESENTED BY ALL
PROXIES RECEIVED PRIOR TO THE ANNUAL MEETING, AND NOT PROPERLY REVOKED,
EXCLUDING BROKER NON-VOTES, AGAINST THIS STOCKHOLDER PROPOSAL.
INFORMATION CONCERNING INDEPENDENT AUDITORS
Ernst & Young L.L.P., which has served as independent auditors for the company
since 1980, has been selected by management to serve in that capacity for the
1999 fiscal year. Representatives of Ernst & Young L.L.P. are expected to be
present at the annual meeting, will be given the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
REPORTS TO BE PRESENTED AT THE ANNUAL MEETING
There will be presented at the annual meeting the company's annual report for
the fiscal year ended April 24, 1998, containing financial statements for such
fiscal year and the signed report of Ernst & Young L.L.P., independent auditors,
with respect to such financial statements. The annual report is not to be
regarded as proxy soliciting material, and management of the company does not
intend to ask, suggest or solicit any action from the stockholders with respect
to such report.
OTHER MATTERS
As of the date of this proxy statement, the only business which management
intends to present at the annual meeting consists of the matters set forth in
this proxy statement. Management knows of no other matters to be brought before
the annual meeting by any other person or group. If any other matters should
properly come before the annual meeting, or any adjournment(s) thereof, the
proxy holders will vote thereon in their discretion, in accordance with their
best judgment in light of the conditions then prevailing. All proxies received
duly executed and not properly revoked will be voted.
You are requested to sign and date the enclosed proxy and mail it promptly in
the enclosed envelope. If you later desire to vote in person, you may revoke
your proxy, either by written notice delivered to the company before the proxy
is voted or in person at the annual meeting before the proxy is voted (without
affecting any vote previously taken).
By Order of the Board of Directors,
/s/ Daniel E. Evans
Daniel E. Evans
Chairman of the Board and
Chief Executive Officer
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EXHIBIT A
---------
BOB EVANS FARMS, INC. 1998 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE. The purpose of the Bob Evans Farms, Inc. 1998 Stock Option and
Incentive Plan (the "Plan") is to foster and promote the long-term success of
Bob Evans Farms, Inc. (the "Company") and materially increase stockholder value
by (a) motivating superior performance by means of performance-related
incentives, (b) encouraging and providing for the acquisition of an ownership
interest in the Company by the directors and officers and other key employees of
the Company and its Subsidiaries and (c) enabling the Company to attract and
retain the services of an outstanding management team upon whose judgment,
interest and special effort the successful conduct of the operations of the
Company is largely dependent.
2. ADMINISTRATION. The Plan will be administered by a committee (the
"Committee") of at least three persons who shall be either the Compensation
Committee of the Board of Directors of the Company or such other committee
comprised entirely of "outside directors" within the meaning of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations and rulings thereunder, as the Committee may from time to time
select. The Committee shall interpret the Plan; prescribe, amend and rescind
rules and regulations relating thereto; and make all other determinations
necessary or advisable for the administration of the Plan. Any determination,
decision or action of the Committee in connection with the construction,
interpretation, administration or application of the Plan shall be final,
conclusive and binding upon all persons participating in the Plan and any person
validly claiming under or through persons participating in the Plan. A majority
of the members of the Committee shall constitute a quorum at any meeting of the
Committee, and all determinations of the Committee at a meeting shall be made by
a majority of its members. Any determination of the Committee under the Plan may
be made without a meeting of the Committee by a writing signed by all of its
members. No member of the Board of Directors of the Company or of the Committee
shall be liable for any action or determination made in good faith, with respect
to the Plan or any Award granted under the Plan. The Company shall effect the
granting of Awards under the Plan in accordance with the determination of the
Committee, by execution of instruments in writing in such form as approved by
the Committee.
With respect to persons subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), transactions under the Plan are intended
to comply with all applicable conditions of Rule l6b-3 under the Exchange Act,
or any successor rule or regulation. To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee.
3. PARTICIPANTS. Participants in the Plan will consist of the directors and
officers and other key employees of the Company or any of its Subsidiaries, as
the Committee in its sole discretion may designate from time to time to receive
Awards hereunder (the "Participants"). The Committee's designation of a
Participant in any year shall not require the Committee to designate such person
to receive an Award in any other year. The Committee shall consider such factors
as it deems pertinent in selecting Participants and in determining the type and
amount of their respective Awards, including, without limitation: (a) the
financial condition of the Company and its Subsidiaries; (b) anticipated profits
for the current or future years; (c) contributions of Participants to the
profitability and development of the Company and its Subsidiaries; and (d) other
compensation provided to Participants. During any calendar year, no Participant
shall be granted Awards under this Plan covering, in the aggregate, more than
Three Hundred Thousand (300,000) Common Shares and no Participant shall be
granted stock options covering, in the aggregate, more than Two Hundred and
Fifty Thousand (250,000) Common Shares.
4. TYPES OF AWARDS. Awards under the Plan may be granted in any one or a
combination of: (a) Incentive Stock Options; (b) Non-Qualified Stock Options;
(c) Stock Appreciation Rights; (d) Performance Share Awards; and (e) Restricted
Stock, all as described below in Sections 6, 7, 8, 9 and 10 hereof.
5. COMMON SHARES RESERVED UNDER THE PLAN. There is hereby reserved for issuance
under the Plan an aggregate of Five Million (5,000,000) Common Shares, which may
be newly issued or treasury shares. If there is a lapse, expiration, termination
or cancellation of any Award granted hereunder without the issuance of Common
Shares or payment of cash thereunder, or if Common Shares are issued under any
Award and thereafter are reacquired by the Company pursuant to rights reserved
upon the issuance thereof, the Common Shares subject to or reserved for such
Award may again be used for new Stock Options or other Awards under the Plan so
long as the holder thereof has not received any benefits of ownership of such
Common Shares; provided, however, that in no event may the number of Common
Shares issued under the Plan exceed the total number of Common Shares reserved
for issuance hereunder.
6. INCENTIVE STOCK OPTIONS. Incentive Stock Options will consist of Stock
Options, qualifying as "incentive stock options" under the requirements of
Section 422 of the Code, to purchase Common Shares at purchase prices of not
less than One Hundred Percent
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(100%) of the Fair Market Value of such Common Shares on the date of grant.
Incentive Stock Options will only be eligible for grant to employees of the
Company. Incentive Stock Options will be exercisable over not more than ten (10)
years after the date of grant. In the event of the termination of a
Participant's employment for any reason other than Disability, death, Retirement
or for Cause, the right of the Participant to exercise an Incentive Stock Option
shall terminate upon the earlier to occur of the end of the original term of the
Incentive Stock Option or ninety (90) days after the date of such termination of
employment. In the event that a Participant is Terminated for Cause, the right
of the Participant to exercise an Incentive Stock Option shall terminate
immediately upon the termination of employment. In the event of the termination
of a Participant's employment due to Disability, the right of the Participant
(or, in the case of the death of the Participant after his or her termination of
employment due to Disability, his or her successor in interest) to exercise an
Incentive Stock Option shall terminate upon the earlier to occur of (i) the end
of the original term of the Incentive Stock Option or (ii) one (l) year after
the date of termination of employment. If a Participant should die while
employed, the right of the Participant's successor in interest to exercise an
Incentive Stock Option granted to the Participant shall terminate upon the
earlier to occur of (i) the end of the original term of the Incentive Stock
Option or (ii) one year after the Participant's last date of employment. Upon
Retirement of a Participant, the right of the Participant (or, in the case of
the death of the Participant after his or her termination of employment due to
Retirement, his or her successor in interest) to exercise an Incentive Stock
Option shall terminate upon the earlier of (i) ninety (90) days after the date
of such Retirement or (ii) the end of the original term of the Incentive Stock
Option; provided, however, that if the Participant or his or her successor in
interest does not exercise the Incentive Stock Option within ninety (90) days
after the date of such Retirement, the Incentive Stock Option shall
automatically convert into a Non-Qualified Stock Option upon the end of such
ninety (90) day period and the Participant's or his or her successor in
interest's right to exercise such converted Non-Qualified Stock Option shall
terminate at the end of the original term of the option. For purposes of this
Section 6, if a Participant terminates his or her employment voluntarily, the
date of termination of employment shall be deemed to be the date on which he or
she notifies the Company of his or her intention to terminate his or her
employment; in all other cases, the date of termination of employment shall be
the last day of employment.
The aggregate Fair Market Value (determined as of the time the Stock Option is
granted) of the Common Shares with respect to which incentive stock options are
exercisable for the first time by any Participant during any calendar year
(under all option plans of the Company and all Subsidiaries and Parents of the
Company) shall not exceed $100,000. Anything contained herein to the contrary
notwithstanding, no Incentive Stock Option shall be granted to an employee who,
at the time the Incentive Stock Option is granted, owns (actually or
constructively under the provisions of Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of any Parent or Subsidiary of the Company, unless the
option exercise price is not less than 110% of the Fair Market Value of the
Common Shares subject to the Incentive Stock Option on the date of grant and the
Incentive Stock Option by its terms is not exercisable more than five (5) years
from the date it is granted.
7. NON-QUALIFIED STOCK OPTIONS. Non-Qualified Stock Options will consist of
options to purchase Common Shares at purchase prices and with terms as
determined by the Committee in its discretion. In the event of the termination
of a Participant's employment or service as a director for any reason other than
Retirement, Disability, death or for Cause, the right of the Participant to
exercise a Non-Qualified Stock Option shall terminate upon the earlier to occur
of the end of the original term of the Non-Qualified Stock Option or ninety (90)
days after the date of such termination of employment or service. If a
Participant is Terminated for Cause, the right of the Participant to exercise a
Non-Qualified Stock Option shall terminate immediately upon the termination of
employment or service. In the event of the termination of a Participant's
employment or service due to Disability or death, the right of the Participant
or his or her successor in interest to exercise a Non-Qualified Stock Option
shall terminate upon the earlier to occur of (i) the end of the original term of
the Non-Qualified Stock Option or (ii) one (l) year after the date of
termination of employment or service as a result of such Disability or death. In
the event of the termination of a Participant's employment or service due to
Retirement, the right of the Participant (or, in the case of the death of the
Participant after his or her termination of employment or service due to
Retirement, his or her successor in interest) to exercise a Non-Qualified Stock
Option shall terminate upon the end of the original term of the Non-Qualified
Stock Option. For purposes of this Section 7, if a Participant terminates his or
her employment or service voluntarily, the date of termination of employment or
service shall be deemed to be the date on which he or she notifies the Company
of his or her intention to terminate his or her employment or service; in all
other cases, the date of termination of employment or service shall be the last
day of employment or service.
8. STOCK APPRECIATION RIGHTS. The Committee may grant Stock Appreciation Rights
to Participants at the same time as such Participants are awarded Stock Options
under the Plan. Such Stock Appreciation Rights shall be evidenced by an
agreement in such form as the Committee shall from time to time approve. Such
agreements shall comply with, and be subject to, the following terms and
conditions:
(a) GRANT. Each Stock Appreciation Right shall relate to a specific Stock Option
under the Plan and shall be awarded to a Participant concurrently with the grant
of such Stock Option. The number of Stock Appreciation Rights granted to a
Participant shall be equal to
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a proportion of the number of shares of Common Shares that the Participant is
entitled to receive pursuant to the Plan.
(b) GRANT OF PARALLEL AWARD. Since each Stock Appreciation Right is parallel to
a Stock Option, the exercise of all or a portion of the Stock Options shall
cause an equal exercise of the same proportion of Stock Appreciation Rights
granted under the Plan. A Stock Appreciation Right can only be exercisable in
conjunction with the exercise of the parallel Stock Option.
(c) CALCULATION OF APPRECIATION. Each Stock Appreciation Right shall entitle a
Participant to the excess of the Fair Market Value of a Common Share on the
exercise date over the Fair Market Value of a Common Share on the date the Stock
Appreciation Right was granted.
(d) PAYMENT OF APPRECIATION. The total appreciation available to a Participant
from an exercise of Stock Appreciation Rights shall be paid in a manner
determined by the Committee.
(e) EXERCISE LIMITATIONS. A Participant may exercise a Stock Appreciation Right
only in conjunction with the exercise of the Stock Option to which the Stock
Appreciation Right is attached. Stock Appreciation Rights may be exercised only
at such times and by such persons as may exercise Stock Options under the Plan.
9. PERFORMANCE SHARE AWARDS. The Committee may grant awards under which payment
may be made in Common Shares, cash or any combination of Common Shares and cash
if the performance of the Company or any Subsidiary selected by the Committee
during the Performance Period meets certain goals established by the Committee
("Performance Share Awards"). Such Performance Share Awards shall be subject to
the following terms and conditions and such other terms and conditions as the
Committee may prescribe:
(a) PERFORMANCE PERIOD AND PERFORMANCE GOALS. The Committee shall determine and
include in a Performance Share Award grant the period of time for which a
Performance Share Award is made ("Performance Period"). The Committee shall also
establish performance objectives ("Performance Goals") to be met by the Company
or Subsidiary during the Performance Period as a condition to payment of the
Performance Share Award. The Performance Goals may include earnings per share,
return on stockholders' equity, return on assets, net income or any other
financial or other measure established by the Committee. The Performance Goals
may include minimum and optimum objectives or a single set of objectives.
(b) PAYMENT OF PERFORMANCE SHARE AWARDS. The Committee shall establish the
method of calculating the amount of payment to be made under a Performance Share
Award if the Performance Goals are met, including the fixing of a maximum
payment. The Performance Share Award shall be expressed in terms of Common
Shares and referred to as "Performance Shares." After the completion of a
Performance Period, the performance of the Company or Subsidiary shall be
measured against the Performance Goals, and the Committee shall determine
whether all, none or any portion of a Performance Share Award shall be paid. The
Committee, in its discretion, may elect to make payment in Common Shares, cash
or a combination of Common Shares and cash. Any cash payment shall be based on
the Fair Market Value of the underlying Common Shares on, or as soon as
practicable prior to, the date of payment.
(c) REVISION OF PERFORMANCE GOALS. At any time prior to the end of a Performance
Period, the Committee may revise the Performance Goals and the computation of
payment if unforeseen events occur which have a substantial effect on the
performance of the Company or Subsidiary and which in the judgment of the
Committee make the application of the Performance Goals unfair unless a revision
is made.
(d) REQUIREMENT OF EMPLOYMENT. A Participant who receives a Performance Share
Award must remain in the employment of the Company or Subsidiary or remain in
the service of the Company or Subsidiary as a director until the completion of
the Performance Period in order to be entitled to payment under the Performance
Share Award; provided that the Committee may, in its sole discretion, provide
for a partial payment where such an exception is deemed equitable.
(e) COMPLIANCE WITH CODE SECTION 162(m). Any Performance Share Awards granted
under this Plan shall satisfy the requirements of the applicable provisions of
Section 162(m) of the Code as "qualified performance-based compensation."
10. RESTRICTED STOCK AWARDS. To the extent not inconsistent with the terms of
this Plan, the Committee may grant Restricted Stock Awards to Participants.
Restricted Stock Awards will consist of Common Shares transferred to a
Participant who is eligible to participate in the Plan without other payment
therefor (other than the payment of the par value of such Common Shares if
required by applicable law) as additional compensation for his or her services
to the Company or one of its Subsidiaries. Restricted Stock Awards shall be
subject to such terms and conditions as the Committee determines appropriate
including, without limitation, restrictions on
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the sale or other disposition of such Common Shares and rights of the Company to
reacquire such Common Shares upon termination of the Participant's employment or
service as a director with the Company within specified periods. Subject to such
other restrictions as are imposed by the Committee and federal and state
securities laws, the Common Shares covered by a Restricted Stock Award granted
to a Participant under the Plan may be sold or otherwise disposed of only after
six (6) months from the grant date of the Award.
11. NONTRANSFERABILITY. Each Stock Option, Performance Share Award and
Restricted Stock Award granted under this Plan shall not be transferable other
than by will or the laws of descent and distribution, and Stock Options shall be
exercisable, during the Participant's lifetime, only by the Participant or the
Participant's guardian or legal representative.
12. OTHER PROVISIONS. The grant of any Award under the Plan may also be subject
to such other provisions (whether or not applicable to any Award granted to any
other Participant) as the Committee determines appropriate including, without
limitation, provisions for the purchase of Common Shares under Stock Options in
installments, provisions for the payment of the option exercise price of Common
Shares under a Stock Option by delivery of other Common Shares of the Company
having a then Fair Market Value equal to the option exercise price of such
Common Shares, restrictions on resale or other disposition, such provisions as
may be appropriate to comply with federal or state securities laws and stock
exchange requirements and understandings or conditions as to the Participant's
employment or service as a director in addition to those specifically provided
for under the Plan. If the Committee does not specify another exercise schedule
at the time of grant, the number of Common Shares under each Stock Option which
may be purchased in any one year ending on an anniversary date of the grant of
the Stock Option shall be the total number of Common Shares subject to the Stock
Option divided by the number of years constituting the term of the Stock Option;
provided, however, that if a Participant does not purchase in any one option
year the full number of Common Shares to which he or she is then entitled, the
Participant may purchase those Common Shares in any subsequent year during the
term of the Stock Option.
The Committee may, in its discretion, permit payment of the option exercise
price of Common Shares under Stock Options by delivery of a properly executed
exercise notice together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to pay the
option exercise price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
The Committee may, in its discretion and subject to such rules as it may adopt,
permit a Participant to pay all or a portion of the federal, state and local
taxes, including FICA withholding tax, arising in connection with the following
transactions: (a) the exercise of a Non-Qualified Stock Option; or (b) the
receipt or exercise of any other Award by electing (i) to have the Company
withhold Common Shares, (ii) to tender back Common Shares received in connection
with such Award or (iii) to deliver other previously acquired Common Shares of
the Company having a Fair Market Value approximately equal to the amount to be
withheld.
13. TERM OF THE PLAN AND AMENDMENT, MODIFICATION, CANCELLATION OR ACCELERATION
OF AWARDS. No Award shall be granted under the Plan more than ten (10) years
after the date of the adoption of the Plan by the Company's Board of Directors.
The terms and conditions applicable to any Award granted prior to such date may
at any time be amended, modified or canceled, without stockholder approval, by
mutual agreement between the Committee and the Participant or such other persons
as may then have an interest therein, so long as stockholder approval of such
amendment, modification or cancellation is not required under Rule l6b-3 under
the Exchange Act or any applicable requirements of any securities exchange on
which are listed any of the Company's equity securities or any applicable
requirements for issuers whose securities are traded in the NASDAQ National
Market System or any applicable requirements of the Code. The Committee may, at
any time and in its sole discretion, declare any or all Stock Options then
outstanding under this Plan to be exercisable, whether or not such Stock Options
are then otherwise exercisable.
l4. TAXES. The Company shall be entitled to withhold the amount of any tax
attributable to any amount payable or Common Shares deliverable under the Plan
after giving the person entitled to receive such amount or Common Shares notice
as far in advance as practicable, and the Company may defer making payment or
delivery if any such tax may be pending unless and until indemnified to its
satisfaction.
15. DEFINITIONS.
(a) AWARD. The term "Award" means an award or grant of a Stock Option, Stock
Appreciation Right, Performance Share or Restricted Stock made to a Participant
under Section 6, 7, 8, 9 or 10 of the Plan.
(b) CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred on
the earliest of the following dates:
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(i) The date any entity or person (including a "group" as defined in
Section 13(d) (3) of the Exchange Act) shall have become the beneficial
owner of, or shall have obtained voting control over, twenty percent
(20%) or more of the outstanding Common Shares;
(ii) The date the stockholders of the Company approve a definitive
agreement (A) to merge or consolidate the Company with or into another
corporation, in which the Company is not the continuing or surviving
corporation or pursuant to which any Common Shares would be converted
into cash, securities or other property of another corporation, other
than a merger of the Company in which holders of Common Shares
immediately prior to the merger have the same proportionate ownership
of shares of the surviving corporation immediately after the merger as
immediately before, or (B) to sell or otherwise dispose of
substantially all the assets of the Company; or
(iii) The date there shall have been a change in a majority of the
Board of Directors of the Company within a twelve (12) month period;
provided, however, that any new director whose nomination for election
by the Company's stockholders was approved, or who was appointed or
elected to the Board by, the vote of two-thirds of the directors then
still in office who were in office at the beginning of the twelve (12)
month period shall not be counted in determining whether there has been
such a change in a majority of the Board.
(c) CODE. "Code" means the Internal Revenue Code of 1986, as amended, and the
regulations and rulings thereunder. References to a particular section of the
Code shall include references to successor provisions.
(d) COMMITTEE. The "Committee" means the Committee of the Board of Directors of
the Company constituted as provided in Section 2 hereof.
(e) COMMON SHARES. "Common Shares" means the shares of Common Stock, par value
$0.01 per share, of the Company or any security of the Company issued in
substitution, exchange or lieu thereof.
(f) COMPANY. The "Company" means Bob Evans Farms, Inc., a Delaware corporation,
or any successor corporation.
(g) DISABILITY. The term "Disability" means, as it relates to the exercise of an
Incentive Stock Option after termination of employment, a disability within the
meaning of Section 22(e)(3) of the Code, and for all other purposes, a mental or
physical condition which, in the opinion of the Committee, renders a Participant
unable or incompetent to carry out the job responsibilities which such
Participant held or the tasks to which such Participant was assigned at the time
the disability was incurred, and which is expected to be permanent or for an
indefinite duration exceeding one year.
(h) EXCHANGE ACT. The term "Exchange Act" means the Securities Exchange Act of
1934, as amended, or a successor statute.
(i) FAIR MARKET VALUE. The "Fair Market Value" of the Company's Common Shares
shall mean, on any given date, the last reported sales price of the Common
Shares, as reported on the NASDAQ National Market System or on any securities
exchange on which the Company's Common Shares may be listed on such date or, if
there are no reported sales of Common Shares on such date, then the last
reported sales price on the next preceding day on which such a sale was
transacted.
(j) INCENTIVE STOCK OPTION. "Incentive Stock Option" means any Stock Option
granted pursuant to the provisions of Section 6 of the Plan that is intended to
be and is specifically designated as an "incentive stock option" within the
meaning of Section 422 of the Code.
(k) NON-QUALIFIED STOCK OPTION. A "Non-Qualified Stock Option" means any Stock
Option granted pursuant to the provisions of Section 7 of the Plan that is not
an Incentive Stock Option.
(l) PARENT. The term "Parent of the Company" shall have the meaning set forth in
424(e) of the Code.
(m) PARTICIPANT. The term "Participant" shall have the meaning set forth in
Section 3 of the Plan.
(n) PERFORMANCE GOALS. The term "Performance Goals" shall have the meaning set
forth in Section 9 of the Plan.
(o) PERFORMANCE PERIOD. The term "Performance Period" shall have the meaning set
forth in Section 9 of the Plan.
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(p) PERFORMANCE SHARE AWARD. The term "Performance Share Award" shall have the
meaning set forth in Section 9 of the Plan.
(q) PLAN. The "Plan" means the Bob Evans Farms, Inc. 1998 Stock Option and
Incentive Plan, as set forth herein, and as it may be hereafter amended and from
time to time in effect.
(r) RESTRICTED STOCK. The term Restricted Stock shall have meaning described in
Section 10 of this Plan.
(s) RETIREMENT. The term "Retirement" for all purposes of the Plan shall mean
voluntary separation from employment or termination of service as a director
with the Company and each of its Subsidiaries on or after the date the person
both has attained age fifty-five (55) and is credited with at least ten (10)
years of service.
(t) STOCK APPRECIATION RIGHT. The term Stock Appreciation Right or "SAR" shall
mean a right to receive cash in an amount equal to the excess of the Fair Market
Value of a Common Share on the exercise date of the SAR over the Fair Market
Value of a Common Share on the date the SAR is granted pursuant to the
provisions of the Plan.
(u) STOCK OPTION. The term "Stock Option" means any Incentive Stock Option or
Non-Qualified Stock Option granted under the Plan.
(v) STOCK OPTION AWARDS. The term "Stock Option Awards" means any grant of a
Stock Option to a Participant under the Plan.
(w) SUBSIDIARY. The term "Subsidiary" for all purposes other than the Incentive
Stock Option plan described in Section 6, shall mean any corporation,
partnership, joint venture or business trust, fifty percent (50%) or more of the
control of which is owned, directly or indirectly, by the Company. For purposes
of the Incentive Stock Option plan described in Section 6, the term "Subsidiary"
shall be defined as provided in Section 424(f) of the Code.
(x) TERMINATED FOR CAUSE. The term "Terminated for Cause" for purposes of the
Plan shall mean termination on account of any act of fraud or intentional
misrepresentation or embezzlement, misappropriation or conversion of assets or
opportunities of the Company or a Subsidiary, the conviction of a felony or
intentional and repeated violations of the written policies or procedures of the
Company or any Subsidiary.
16. ADJUSTMENT PROVISIONS.
(a) The existence of the Plan and the Awards granted hereunder shall not affect
or restrict in any way the right or power of the Board of Directors or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Company's capital stock or the rights thereof, the dissolution or
liquidation of the Company or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
(b) In the event of any change in capitalization affecting the Common Shares,
such as a stock dividend, stock split, recapitalization, merger, consolidation,
split-up, combination or exchange of shares or other form of reorganization, or
any other change affecting the Common Shares, the Committee shall make
proportionate adjustments to reflect such change with respect to the aggregate
number of Common Shares for which Awards in respect thereof may be granted under
the Plan, the maximum number of Common Shares which may be sold or awarded to
any Participant, the number of Common Shares covered by each outstanding Award
and the price per share in respect of outstanding Awards.
(c) The Committee also shall make such adjustments in the number of shares
covered by, and the price or other value of, any outstanding Awards in the event
of a spin-off or other distribution (other than normal cash dividends) of assets
of the Company to stockholders.
(d) Upon the occurrence of a Change in Control, all Stock Options then
outstanding under this Plan shall become fully exercisable as of the date of the
Change in Control, whether or not then otherwise exercisable. In addition, upon
Retirement of any Participant, all Stock Options held by such retiring
Participant shall immediately vest and become exercisable.
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17. AMENDMENT AND TERMINATION OF PLAN. The Committee, with the approval of the
Board of Directors of the Company, may amend the Plan from time to time or
terminate the Plan at any time without the approval of the stockholders of the
Company except as such stockholder approval may be required (a) to satisfy the
requirements of Rule 16b-3 under the Exchange Act, or any successor rule or
regulation, (b) to satisfy applicable requirements of the Code or (c) to satisfy
applicable requirements of any securities exchange on which are listed any of
the Company's equity securities or any requirements applicable to issuers whose
securities are traded in the NASDAQ National Market System. No such action to
amend or terminate the Plan shall reduce the then existing amount of any
Participant's Award or adversely change the terms and conditions thereof without
the Participant's consent. No amendment of the Plan shall result in any
Committee member's losing his or her status as a "disinterested person" as
defined in Rule 16b-3 under the Exchange Act, or any successor rule or
regulation, with respect to any employee benefit plan of the Company or result
in the Plan losing its status as a plan satisfying the requirements of said Rule
16b-3.
18. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the granting of
any Awards hereunder shall confer upon any employee or director of the Company
or any Subsidiary any right to continued employment or service with the Company
or any Subsidiary, as the case may be, nor shall it interfere in any way with
the right of the Company or a Subsidiary to terminate the employment or service
of any of its employees or directors at any time, with or without cause.
19. UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not be
required to segregate any assets that may at any time be represented by Awards
under the Plan. Any liability of the Company to any person with respect to any
Awards under the Plan shall be based solely upon any contractual obligations
that may be effected pursuant to the Plan. No such obligation of the Company
shall be deemed to be secured by any pledge of, or other encumbrance on, any
property of the Company or any Subsidiary.
20. OTHER COMPANY AWARD AND COMPENSATION PLANS. Payments and other Awards
received by a Participant under the Plan shall not be deemed a part of a
Participant's regular, recurring compensation for purposes of any termination
indemnity or severance pay law and shall not be included in, nor have any effect
on, the determination of Awards under any other employee benefit plan or similar
arrangement provided by the Company or a Subsidiary unless expressly so provided
by such other plan or arrangement, or except where the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of competitive annual cash compensation. Awards
under the Plan may be made in combination or in tandem with, or as alternatives
to, grants, awards or payments under any other Company or Subsidiary plans. The
Plan notwithstanding, the Company or any Subsidiary may adopt such other
compensation programs and additional compensation arrangements as it deems
necessary to attract, retain and reward employees and directors for their
service with the Company and its Subsidiaries.
21. SECURITIES LAW RESTRICTIONS. No Common Shares shall be issued under the Plan
unless counsel for the Company shall be satisfied that such issuance will be in
compliance with applicable federal and state securities laws. Certificates for
Common Shares delivered under the Plan may be subject to such stock transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Shares are then listed or
traded, the NASDAQ National Market System or any applicable federal or state
securities law. The Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
22. AWARD AGREEMENT. Each Participant receiving an Award under the Plan shall
enter into an agreement with the Company in a form specified by the Committee
agreeing to the terms and conditions of the Award and such related matters as
the Committee shall, in its sole discretion, determine.
23. COST OF THE PLAN. The costs and expenses of administering the Plan shall be
borne by the Company.
24. GOVERNING LAW. The Plan and all actions taken thereunder shall be governed
by and construed in accordance with the laws of the State of Delaware.
25. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of Directors of the
Company on May 1, 1998. The Plan and any Award granted thereunder shall be null
and void if stockholder approval is not obtained within twelve (12) months of
the adoption of the Plan by the Board of Directors.
26
29
[BOB EVANS FARMS LOGO]
Annual Meeting of Stockholders
To be held Sept. 14, 1998
Aug. 10, 1998
Dear Stockholders:
The 1998 Bob Evans Farms Inc. ANNUAL MEETING OF STOCKHOLDERS will be
held MONDAY, SEPT. 14, 1998, AT THE BOB EVANS FARM IN RIO GRANDE, OHIO. I look
forward to sharing with you details of a successful fiscal 1998 and plans to
build on that success in fiscal 1999.
The meeting begins at 4 P.M. You are also invited to a social hour,
beginning at 3 p.m., to enjoy some delicious Bob Evans products and get better
acquainted with the officers and directors of your company.
At the meeting, we will elect three directors, vote on the 1998 Stock
Option and Incentive Plan and consider two stockholder proposals, which your
board of directors opposes. Your vote on these matters is very important even if
you are unable to attend the meeting. PLEASE COMPLETE, SIGN AND RETURN YOUR
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE PRIOR TO THE MEETING.
You may want to note on your calendar that we plan to announce our
first quarter earnings on Aug. 18, 1998. These results will be reported to the
news media and will also be available on the Internet at: http://www.nasdaq.com
and http://www.prnewswire.com. I hope to see you at our annual meeting on Sept.
14.
[MAP OF SOUTHEAST OHIO Sincerely,
WITH EMPHASIS ON RIO
GRANDE, OHIO AREA]
/s/ Daniel E. Evans
Daniel E. Evans
The Bob Evans Farm is Chairman of the Board
conveniently located on Chief Executive Officer
State Route 588 just of U.S
Route 35. Directions From
U.S. 35, take the State Route
325 exit. Go south on State
Route 325 to State Route 588
and turn left. The Farm is less
than one mile ahead on State
Route 588.
* FOLD AND DETACH HERE *
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BOB EVANS FARMS, INC.
(Please indicate your vote on the reverse side.)
Votes will be counted as follows: Where a choice is
indicated, the shares represented by this proxy will be
voted as specified. IF A VOTE IS NOT INDICATED ON THE
REVERSE SIDE OF THIS CARD, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED (I) FOR THE ELECTION OF THE NOMINEES
LISTED IN ITEM NO. 1 AS DIRECTORS OF THE COMPANY, (II) FOR
THE APPROVAL OF THE BOB EVANS FARMS, INC. 1998 STOCK OPTION
AND INCENTIVE PLAN, (III) AGAINST THE STOCKHOLDER PROPOSAL
REGARDING THE SALE OR MERGER OF THE COMPANY AND (IV) AGAINST
THE PROPOSAL TO DECLASSIFY THE COMPANY'S BOARD OF DIRECTORS.
If prior proxies have been submitted for the same shares
represented by this card, this proxy will replace earlier
proxies.
The undersigned hereby acknowledges receipt of the notice of
the annual meeting of stockholders, dated Aug. 10, 1998, the
enclosed proxy statement and the annual report of the
company for the fiscal year ended April 24, 1998.
------------------------------------------------------------
Date
------------------------------------------------------------
------------------------------------------------------------
(Sign name exactly as it appears on the card.)
Please fill in reverse side, sign above and return this proxy card in the enclosed envelope. When signing as attorney,
executor, administrator, trustee or custodian, please give full title as such. If signer is a corporation, please sign
the full corporate name by authorized officer. Joint owners should both sign. Also, please note any change of address on
this proxy.
30
BELOW IS YOUR PROXY CARD. PLEASE READ BOTH SIDES, VOTE, SIGN AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
----------------------------------------------------------------------------------------------------------------
BOB EVANS FARMS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPT. 14, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder(s) of Bob Evans Farms, Inc. (the "company") identified on this card appoints Daniel E. Evans and Donald
J. Radkoski, and each of them, to attend the annual meeting of stockholders of the company to be held at the Shelter
House on the Bob Evans Farm in Rio Grande, Ohio, on Monday, Sept. 14, 1998, at 4 p.m., Eastern Daylight Time and to vote
all of the shares of common stock which the stockholder(s) is entitled to vote at the annual meeting or any
adjournment(s) thereof:
Your Board
Recommends For Against Abstain
You Vote:
1. For all 1. Election of three class III directors to serve for terms of three years each:
nominees Daniel E. Evans, Michael J. Gasser and E.W. (Bill) Ingram III
[ ] Vote for all nominees [ ] Vote withheld for all nominees
[ ] Vote for all nominees except ___________________
2. For [ ] [ ] [ ] 2. Approval of the Bob Evans Farms, Inc. 1998 Stock Option & Incentive Plan.
3. Against [ ] [ ] [ ] 3. Adoption of the stockholder proposal regarding the sale or merger of the
company.
4. Against [ ] [ ] [ ] 4. Adoption of the stockholder proposal to declassify the company's board of
directors.
In their discretion, the proxies are authorized 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.
(This proxy must be signed and dated on the reverse side.)