<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (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 14a-11(c) or Rule 14a-12
ENVIRODYNE INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
Suite 190
701 Harger Road
ENVIRODYNE LOGO Oak Brook, Illinois 60521
April 18, 1997
Dear Fellow Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Envirodyne Industries, Inc., which will be held on Friday, May 16, 1997, at
9:00 a.m. local time, at the offices of Sidley & Austin, One First National
Plaza, 55th Floor Conference Center, Chicago, Illinois. In addition to the
matters to be acted upon at the meeting, which are described in the attached
Notice of Annual Meeting of Stockholders and Proxy Statement, a report will be
given with respect to the operations of Envirodyne.
Whether or not you plan to attend the meeting, please complete, date, sign
and return the enclosed WHITE proxy card in the accompanying envelope as
promptly as possible to ensure that your shares are represented and voted in
accordance with your wishes.
Your vote is of special importance this year because of recent events
involving Malcolm Glazer. Mr. Glazer, through Zapata Corporation, Envirodyne's
largest shareholder, has informed the Company that he will attempt to obtain
control of the Company without paying for it.
Mr. Glazer has stated that he intends to replace the Company's entire board
of directors with his own hand-picked slate. The Glazer slate includes Malcolm
Glazer, three of Glazer's sons: Avram, Bryan and Edward, and Robert Leffler,
Jr., who handles public relations activities for Glazer related entities. These
nominees lack the experience and independence necessary to protect the interests
of all of our shareholders. Envirodyne has nominated its present slate of
directors for reelection, excluding Malcolm and Avram Glazer.
We were surprised by the Glazers' actions because, up to this point, the
Glazers have been very supportive of management and have never expressed to the
Board any dissatisfaction with the Company's current strategic direction. We
therefore believe Mr. Glazer is seeking to obtain control of Envirodyne without
paying for it in order to further his interests at the expense of other
shareholders. The Board of Directors is unwilling to surrender control to Mr.
Glazer and his nominees, except as part of an arm's length acquisition
transaction providing a fair price to all shareholders.
Your board believes Mr. Glazer's actions are self-serving and not in the
best interests of other shareholders. We are doing everything we can to prevent
Mr. Glazer from gaining control at your expense.
You may receive proxy material from Zapata. We urge you not to return a
proxy to Zapata, even as a protest.
If you have any questions about this matter or care to discuss the
Company's strategy, please contact us at (630) 575-2400. In the meantime, we
request that you sign, date and return the enclosed WHITE proxy card.
Thank you for your continued support.
Very truly yours,
F. EDWARD GUSTAFSON
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3
ENVIRODYNE INDUSTRIES, INC.
701 HARGER ROAD, SUITE 190
OAK BROOK, ILLINOIS 60521
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 1997
To the Stockholders of Envirodyne Industries, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of Envirodyne Industries, Inc., a Delaware corporation
("Envirodyne" or the "Company"), will be held on Friday, May 16, 1997, at 9:00
a.m. local time, at Sidley & Austin, One First National Plaza, 55th Floor
Conference Center, Chicago, Illinois, for the following purposes:
(1) To elect five (5) directors to serve until the 1998 Annual Meeting of
Stockholders or until their respective successors are duly elected and
qualified;
(2) To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the fiscal year ending December 25, 1997;
and
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors of the Company has set the close of business on
March 21, 1997 as the record date (the "Record Date") for the Annual Meeting.
Only holders of Envirodyne's common stock, $.01 par value, at the close of
business on the Record Date are entitled to notice of, and to vote at, the
Annual Meeting. The stock transfer books of the Company will not be closed
following the Record Date. For a period of ten (10) days prior to the Annual
Meeting, a complete list of stockholders entitled to vote at the Annual Meeting
will be available for examination at the Company's offices, during normal
business hours, by any Envirodyne stockholder for any purpose germane to the
Annual Meeting.
It is important that your shares be voted at the Annual Meeting. Whether or
not you plan to attend the Annual Meeting in person, you are urged to complete,
date and sign the accompanying WHITE proxy card and return it promptly in the
enclosed postage-paid envelope to ensure that your shares are represented and
voted in accordance with your wishes. You may revoke your proxy by following the
procedures set forth in the accompanying Proxy Statement. If you so choose, you
may still vote in person at the Annual Meeting even though you previously
submitted your proxy.
By order of the Board of Directors,
Stephen M. Schuster[SIG]
STEPHEN M. SCHUSTER
Vice President, General Counsel
and Secretary
Oak Brook, Illinois
April 18, 1997
<PAGE> 4
ENVIRODYNE INDUSTRIES, INC.
701 HARGER ROAD, SUITE 190
OAK BROOK, ILLINOIS 60521
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement and the accompanying proxy card are being furnished in
connection with the solicitation of proxies by and on behalf of the Board of
Directors (the "Board of Directors") of Envirodyne Industries, Inc., a Delaware
corporation ("Envirodyne" or the "Company"), for use at the 1997 Annual Meeting
of Stockholders of the Company (the "Annual Meeting"). The Annual Meeting will
be held on Friday, May 16, 1997, at 9:00 a.m. local time, at Sidley & Austin,
One First National Plaza, 55th Floor Conference Center, Chicago, Illinois. This
Proxy Statement and the accompanying WHITE proxy card will be mailed to the
holders of Envirodyne's common stock, $.01 par value (the "Common Stock"), on or
about April 18, 1997.
Stockholders of the Company represented at the Annual Meeting will consider
and vote upon (i) the election of five (5) directors to serve until the 1998
Annual Meeting of Stockholders of the Company or until their respective
successors are duly elected and qualified, (ii) the ratification of the
appointment of Coopers & Lybrand L.L.P. as the Company's independent accountants
for the fiscal year ending December 25, 1997, and (iii) such other business as
may properly come before the Annual Meeting.
VOTING RIGHTS AND QUORUM
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting was the
close of business on March 21, 1997 (the "Record Date"). Only holders of record
of Common Stock at the close of business on the Record Date are entitled to
notice of, and to vote at, the Annual Meeting. As of the Record Date, there were
14,552,233 shares of Common Stock issued and outstanding. The presence, in
person or by proxy, of the holders of a majority of the shares of Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum for
the conduct of business at the Annual Meeting.
In the election of directors, each share of Common Stock is entitled to
cast one vote for each director to be elected; cumulative voting is not
permitted. Nominees for director receiving the affirmative vote of a plurality
of shares of Common Stock present in person or by proxy and entitled to vote at
the Annual Meeting will be elected as directors. For all matters except the
election of directors, each share of Common Stock is entitled to one vote. The
affirmative vote of a majority of Common Stock present in person or by proxy and
entitled to vote at the Annual Meeting is required for each of the other matters
submitted to the stockholders for approval or ratification. A "broker non-vote"
is a vote withheld by a broker on a particular matter in accordance with stock
exchange rules because the broker has not received instructions from the
customer for whose account the shares are held. Abstentions, directions to
withhold authority and broker non-votes will be treated as present for
determining a quorum. Abstentions, directions to withhold authority and broker
non-votes will have no effect on the election of directors. On all other
matters, abstentions will have the effect of a negative vote, and broker
non-votes will have no effect.
PROXY SOLICITATION
This proxy solicitation is being made by and on behalf of the Board of
Directors. The cost of soliciting proxies and preparing the proxy materials will
be borne by the Company. The Company has retained the services of Morrow & Co.,
Inc. ("Morrow") to assist it in soliciting proxies for a fee of approximately
$75,000 plus reimbursement of out-of-pocket expenses. The Company has agreed to
indemnify Morrow against certain liabilities and expenses. It is estimated that
Morrow will employ approximately forty (40) persons to solicit proxies on behalf
of the Board of Directors for the Annual Meeting. The Company believes that it
will incur
<PAGE> 5
additional expenses of approximately $100,000 for public relations advisors'
fees, attorneys' fees and printing and other miscellaneous expenses. As of April
18, 1997, the Company had incurred expenses of approximately $125,000 in
connection with the solicitation of proxies. The Company will also request
securities brokers, custodians, nominees and fiduciaries to forward solicitation
material to the beneficial owners of Common Stock held of record by them and
will reimburse them for their reasonable out-of-pocket expenses in forwarding
such solicitation material. In addition to solicitation of proxies by Morrow,
proxies may be solicited personally or by telephone, facsimile, overnight,
certified or first-class mail, advertisement or telegram by directors, officers
and employees of the Company or its subsidiaries without additional compensation
to them.
The Board of Directors has selected F. Edward Gustafson and Stephen M.
Schuster to act as proxies, with full power of substitution. Unless otherwise
directed in the accompanying proxy, the persons named therein will vote FOR the
election of the five (5) director nominees listed below and FOR the ratification
of the appointment of Coopers & Lybrand L.L.P. as the Company's independent
accountants for the fiscal year ending December 25, 1997. The Company has
received written notice from Zapata Corporation of its intent to nominate five
(5) candidates for election as directors and to bring a stockholder proposal for
consideration at the Annual Meeting. See "Other Matters." As to any other
business which may properly come before the Annual Meeting, the persons
designated as proxies on the enclosed proxy card will vote in accordance with
their judgment on such matters. Any stockholder executing a proxy may revoke the
proxy at any time before it is voted by filing with the Secretary of the Company
a revoking instrument or a duly executed proxy bearing a later date. Any
stockholder may attend the Annual Meeting and vote in person whether or not the
stockholder has previously given a proxy.
ELECTION OF DIRECTORS
At a meeting held on March 19, 1997, the Board of Directors voted to reduce
the number of directors from seven (7) members to five (5) members upon the
expiration of the current term of directors. In addition, the Board of Directors
nominated Messrs. Robert N. Dangremond, F. Edward Gustafson, Michael E. Heisley,
Gregory R. Page and Mark D. Senkpiel as nominees for election as directors to
serve until the 1998 Annual Meeting of Stockholders of the Company or until
their respective successors are duly elected and qualified. All of the nominees
are currently directors of the Company whose terms will expire at the Annual
Meeting. The Board of Directors believes that all of its present nominees will
be available for election at the Annual Meeting and will serve if elected.
Messrs. Avram A. Glazer and Malcolm I. Glazer, who are also currently directors
of the Company, were not renominated by the Board of Directors and their terms
will expire at the Annual Meeting.
All of the Board of Directors' nominees have demonstrated leadership
abilities and achievement in the companies in which they have served as an
executive or director. The Board of Directors' nominees have experience in a
broad range of industries and bring to the Board of Directors substantial
business experience and knowledge. Each of the Board of Directors' nominees has
served on the Board of Directors for over three (3) years and has extensive
knowledge about the Company and its industries.
2
<PAGE> 6
Nominees for Directors. The following sets forth information with respect
to the nominees for election as directors at the Annual Meeting:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
Robert N. Dangremond................. 54 Mr. Dangremond has been a principal with Jay Alix &
Associates, a consulting and accounting firm
specializing in corporate restructurings and
turnaround activities, since August 1989. Since
August 1995, Mr. Dangremond has held the positions of
interim Chief Executive Officer and President of
Forstmann & Company, Inc. ("Forstmann"), a producer
of clothing fabrics. Previously, Mr. Dangremond was
Chairman of the Board, President and Chief Executive
Officer of AM International, Inc. ("AMI"), a provider
of graphics arts equipment, supplies and services,
from February 1993 to September 1994. Mr. Dangremond
is also a director of AMI and Forstmann. Mr.
Dangremond has served as a director of the Company
since 1993.
Mr. Dangremond's appointments as interim Chief
Executive Officer and President of Forstmann and,
prior thereto, as Chairman of the Board, President
and Chief Executive Officer of AMI, were made in
connection with turnaround consulting services
provided by Jay Alix & Associates. On May 17, 1993,
AMI filed a petition under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code"), and
on September 29, 1993, a plan of reorganization was
confirmed with respect to AMI. On September 22, 1995,
Forstmann filed a petition under Chapter 11 of the
Bankruptcy Code. A plan of reorganization has been
negotiated with Forstmann's creditors, which plan of
reorganization is expected to be filed with the
Bankruptcy Court in the near future and confirmed by
the creditors sometime in the summer of 1997.
F. Edward Gustafson.................. 55 Mr. Gustafson has been Chairman of the Board,
President and Chief Executive Officer of the Company
since March 1996 and a director of the Company since
1993. Mr. Gustafson was Executive Vice President and
Chief Operating Officer of the Company from May 1989
to March 1996 and President of Viskase Corporation, a
wholly-owned subsidiary of the Company, from February
1990 to August 1994. Mr. Gustafson has also served as
Executive Vice President and Chief Operating Officer
of D.P. Kelly & Associates, L.P., a management
services and private investment firm, since November
1988.
On January 7, 1993, Envirodyne and its major domestic
subsidiaries filed petitions under Chapter 11 of the
Bankruptcy Code. On December 31, 1993, Envirodyne and
the debtor subsidiaries consummated a plan of
reorganization and emerged from bankruptcy. Mr.
Gustafson is Executive Vice President of Emerald
Acquisition Corporation ("Emerald"), the former
parent company of Envirodyne. On August 20, 1993,
Emerald filed a petition under Chapter 11 of the
Bankruptcy Code. The case is still pending.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
Michael E. Heisley................... 60 Mr. Heisley has for more than five years been the
Chief Executive Officer of Heico Acquisitions, an
investment holding company, through which Mr. Heisley
has interests in various manufacturing companies. Mr.
Heisley is also a director of Robertson CECO, Inc., a
major construction company engaged in the manufacture
of metal buildings, concrete forms and curtain walls.
Mr. Heisley has served as a director of the Company
since 1993.
Gregory R. Page...................... 45 Mr. Page has been President of the Red Meat Group of
Cargill, Inc. ("Cargill"), a multinational trader and
processor of foodstuffs and other commodities, since
August 1995. From 1994 to August 1995, Mr. Page was
President of Cargill's Worldwide Beef Operations.
From 1992 to 1994, Mr. Page was President of
Cargill's North American Beef Operations. From 1989
to 1992, Mr. Page was Managing Director of Sun Valley
Thailand, a joint venture between Cargill and Nippon
Meat Packers, as an integrated processor of
poultry-based foods for the Japanese marketplace. Mr.
Page has served as a director of the Company since
1993.
Mark D. Senkpiel..................... 44 Mr. Senkpiel has been Senior Vice President of Trust
Company of the West, an investment management firm,
since January 1996. Previously, Mr. Senkpiel was for
more than five (5) years Investment Director of the
Investment Management Division of Allstate
Corporation, a property, liability and life insurance
company. Mr. Senkpiel has served as a director of the
Company since 1993.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES LISTED ABOVE, AND EACH PROXY WILL BE VOTED FOR SUCH NOMINEES (UNLESS
THE STOCKHOLDER EXECUTING SUCH PROXY HAS WITHHELD AUTHORITY). If any nominee is
not available for election at the Annual Meeting, the proxies will be voted for
an alternate selected by the Board of Directors (unless authority is withheld),
or the Board of Directors may elect not to fill the vacancy and reduce the
number of directors.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
In fiscal year 1996, the Board of Directors met seven (7) times and took
action by written consent in lieu of a meeting on one (1) occasion. Also during
fiscal year 1996, the Audit Committee met twice and the Compensation and
Nominating Committee met three (3) times. Each director participated in at least
75% of the total number of such meetings of the Board of Directors and meetings
of committees of the Board of Directors on which he served.
The Board of Directors has established the following standing committees:
Audit Committee. The principal responsibilities of the Audit Committee are
to review and recommend to the Board of Directors the selection of the Company's
independent accountants; to review with the independent accountants the scope
and results of the annual audit engagement and the system of internal accounting
controls; and to direct and supervise special audit inquiries. The current
members of the Audit Committee are Mark D. Senkpiel, Chairman, Michael E.
Heisley and Avram A. Glazer, who was appointed to the Audit Committee in January
1997.
Compensation and Nominating Committee. The principal responsibilities and
authority of the Compensation and Nominating Committee are to review and approve
certain matters involving executive compensation; to review and approve grants
of stock options and stock appreciation rights under the Company's stock option
plan; to review and recommend adoption of or revisions to compensation plans and
policies; and to
4
<PAGE> 8
review and make recommendations to the Board of Directors regarding such matters
as the size and composition of the Board of Directors, criteria for director
nominations, director candidates, including stockholder nominations, and such
other related matters as the Board of Directors may request from time to time.
The Compensation and Nominating Committee will consider nominees recommended by
the Company's stockholders. Any such recommendation should be addressed to:
Corporate Secretary, Envirodyne Industries, Inc., 701 Harger Road, Suite 190,
Oak Brook, Illinois 60521. See "Stockholder Proposals for 1998 Annual Meeting"
for procedures with respect to nominations by stockholders. The current members
of the Compensation and Nominating Committee are Robert N. Dangremond, Chairman,
and Gregory R. Page.
The Board of Directors may from time to time establish other committees to
assist it in the discharge of its responsibilities.
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock as
of April 1, 1997 of (a) each person or group of persons known to the Company to
beneficially own more than 5% of the outstanding shares of Common Stock, (b)
each director and nominee for director of the Company, (c) each executive
officer of the Company listed in the Summary Compensation Table, and (d) all
executive officers and directors of the Company as a group. All information is
taken from or based upon ownership filings made by such persons with the
Securities and Exchange Commission or upon information provided by such persons
to the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(1)
------------------- --------------------- -----------
<S> <C> <C>
Malcolm I. Glazer....................................... 5,886,283(2)(3) 40.44%
1482 South Ocean Boulevard
Palm Beach, Florida 33480
Zapata Corporation...................................... 5,877,304 40.39%
1717 St. James Place
Houston, Texas 77056
Donald P. Kelly......................................... 1,883,691(4)(5) 12.83%
701 Harger Road, Suite 190
Oak Brook, Illinois 60521
F. Edward Gustafson..................................... 1,264,419(5)(7) 8.67%
701 Harger Road, Suite 190
Oak Brook, Illinois 60521
James D. Bennett........................................ 1,180,882(6) 8.11%
2 Stamford Plaza
281 Tresser Blvd., Suite 1501
Stamford, Connecticut 06901
Elliott Associates, L.P................................. 1,136,600(8) 7.81%
Martley International, Inc.
Westgate International, L.P.
712 Fifth Avenue, 36th Floor
New York, New York 10019
Volk Enterprises, Inc................................... 989,190 6.80%
1230-1232 South Avenue
Turlock, California 95380
Bennett Restructuring Fund, L.P......................... 862,011 5.92%
Restructuring Capital Associates, L.P.
2 Stamford Plaza
281 Tresser Blvd., Suite 1501
Stamford, Connecticut 06901
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(1)
------------------- --------------------- -----------
<S> <C> <C>
Robert N. Dangremond.................................... 11,663(3) *
Gordon S. Donovan....................................... 42,739(9) *
Avram A. Glazer......................................... 8,979(3) *
Michael E. Heisley...................................... 167,101(3) 1.15%
Gregory R. Page......................................... 11,052(3) *
Stephen M. Schuster..................................... 89,286(10) *
Mark D. Senkpiel........................................ 25,591(3)(11) *
All directors and executive officers of the Company as a
group (9 persons)..................................... 7,507,113(12) 51.23%
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934 and the rules promulgated thereunder.
Accordingly, the "Number of Shares Beneficially Owned" and the "Percent of
Class" shown for each person listed in the table are based on the
assumption that both stock options which are exercisable currently or
within 60 days of April 1, 1997 and warrants to purchase Common Stock
("Warrants") which are all currently exercisable, held by such person, have
been exercised. Unless otherwise indicated, the persons listed in the table
have sole voting and investment power over those securities listed for such
person.
(2) The ownership indicated includes 5,877,304 shares owned by Zapata
Corporation ("Zapata"), which shares may be deemed to be beneficially owned
by Mr. Glazer because Mr. Glazer is the Chairman of the Board of Zapata and
owns approximately 35.2% of the outstanding common stock of Zapata. Mr.
Glazer disclaims beneficial ownership of such shares.
(3) The ownership indicated includes 3,000 shares subject to stock options
owned by each non-employee director.
(4) The ownership indicated includes Warrants to purchase 119,809 shares owned
by Mr. Kelly.
(5) The ownership indicated includes 70,287 shares and Warrants to purchase
4,405 shares owned by D.P. Kelly & Associates, L.P. ("DPK"), of which Mr.
Kelly and Mr. Gustafson are principals and officers. The general partner of
DPK is C&G Management Company, Inc. ("C&G Management"), which is owned by
Mr. Kelly and Mr. Gustafson. The ownership indicated also includes 989,190
shares owned by Volk Enterprises, Inc. ("Volk"). Volk is controlled by Volk
Holdings L.P., whose general partner is Wexford Partners I L.P. ("Wexford
Partners"). The general partner of Wexford Partners is Wexford Corporation,
which is owned by Mr. Kelly and Mr. Gustafson. Mr. Kelly and Mr. Gustafson
share voting and investment power over the shares and Warrants owned by DPK
and Volk. However, Mr. Kelly and Mr. Gustafson each disclaim beneficial
ownership of shares and Warrants owned by DPK and Volk except to the extent
of their respective pecuniary interest in such entities.
(6) The ownership indicated includes 11,666 shares and 7,928 shares subject to
stock options and Warrants, respectively, owned by Mr. Gustafson. The
ownership indicated also includes 70,619 shares and Warrants to purchase
4,405 shares owned by Mr. Gustafson's spouse. Mr. Gustafson does not have
or share voting or investment power over the shares and Warrants owned by
his spouse and disclaims beneficial ownership of such shares and Warrants.
(7) The ownership indicated includes 862,011 shares owned by Bennett
Restructuring Fund, L.P. ("Bennett Restructuring") and 318,871 shares owned
by Bennett Offshore Restructuring Fund, Inc. ("Bennett Offshore").
Restructuring Capital Associates, L.P. ("RCA") is the general partner of
Bennett Restructuring. The general partner of RCA is Bennett Capital
Corporation, of which Mr. Bennett is the sole shareholder. Mr. Bennett is
also the President and controlling shareholder of Bennett Offshore
Investment Corporation, the investment manager of Bennett Offshore.
6
<PAGE> 10
(8) Elliott Associates, L.P. ("Elliott"), Westgate International, L.P.
("Westgate") and Martley International, Inc. ("Martley") filed a group
Schedule 13D indicating that 685,500 shares are beneficially owned by
Elliot and 451,100 shares are beneficially owned by Westgate and Martley.
Paul E. Singer and Braxton Associates, L.P., which is controlled by Mr.
Singer, are the general partners of Elliott. Mr. Singer is also the
President of Martley and an executive officer of Hambledon, Inc., which is
the sole general partner of Westgate. Martley is the investment manager of
Westgate and disclaims beneficial ownership of, and pecuniary interest in,
any shares. Westgate's business address is c/o Midland Bank Trust
Corporation (Cayman) Limited, P.O. Box 1109, Mary Street, Grand Cayman,
Cayman Island, British West Indies.
(9) The ownership indicated includes 26,000 shares subject to stock options
owned by Mr. Donovan, 3,000 shares owned jointly by Mr. Donovan and his
spouse, with whom Mr. Donovan shares voting and investment power over such
shares, and 1,000 shares owned by Mr. Donovan's spouse. Mr. Donovan does
not have or share voting power over the 1,000 shares owned by his spouse
but shares investment power over those shares with his spouse. Mr. Donovan
disclaims beneficial ownership of such shares.
(10) The ownership indicated includes 30,483 shares subject to stock options
owned by Mr. Schuster and 20,104 shares owned by Mr. Schuster's spouse. Mr.
Schuster does not have or share voting or investment power over the shares
owned by his spouse and disclaims beneficial ownership of such shares.
(11) The ownership indicated includes 3,000 shares held by Mr. Senkpiel as
custodian for accounts of his minor children under the Uniform Gifts to
Minors Act. Mr. Senkpiel disclaims beneficial ownership of such shares.
(12) See Footnotes (1), (2), (3), (5), (7), (9), (10) and (11).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than 10% of the Company's
outstanding Common Stock to file reports of ownership and changes in ownership
of Common Stock with the Securities and Exchange Commission, NASDAQ and the
Company. Based upon a review of relevant filings and written representations
from the Company's officers, directors, and persons who own more than 10% of the
Company's Common Stock, the Company believes that all required filings by such
persons with respect to the year ended December 26, 1996 have been made on a
timely basis except that each of the following reporting persons failed to file
one report each with respect to one transaction on a timely basis: Zapata
Corporation, Mr. F. Edward Gustafson, Mr. Malcolm I. Glazer, Mr. Avram A. Glazer
and Ms. Elizabeth Garcia-Economou.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors. Each director who is not an officer of the
Company received an annual retainer of $20,000 in 1996 and a fee of $1,000 for
each attended meeting of the Board of Directors. Chairmen of committees of the
Board of Directors received an annual retainer of $1,500 in 1996. Directors also
received a fee for each attended meeting of a committee of the Board of
Directors of $1,000 ($500 in the case of committee meetings occurring
immediately before or after meetings of the full Board of Directors). Directors
who are officers of the Company do not receive compensation in their capacity as
directors. On May 10, 1995 (the date of the Company's 1995 Annual Meeting of
Stockholders), each non-employee director of the Company received a
non-qualified stock option to purchase 2,000 shares of Common Stock at an option
exercise price equal to the fair market value of the Common Stock on the date of
grant in accordance with the terms of the Envirodyne Industries, Inc. 1993 Stock
Option Plan, as amended and restated. Pursuant to this plan, on the date of the
1996 Annual Meeting of Stockholders, non-employee directors were granted an
additional stock option to purchase 1,000 shares of Common Stock at an option
exercise price equal to the fair market value of the Common Stock on the date of
grant. Pursuant to the Non-Employee Directors' Compensation Plan, non-employee
directors may elect to receive their director fees in the form of shares of
Common Stock. The number of shares received is based on the average of the
closing bid and asked price of
7
<PAGE> 11
the Common Stock on the business day preceding the date the Common Stock is
issued. All of the non-employee directors have elected to receive their director
fees in the form of shares of Common Stock.
Compensation Committee Interlocks and Insider Participation. The
Compensation and Nominating Committee of the Board of Directors consists of
Messrs. Dangremond and Page, each of whom is a non-employee director of the
Company. Mr. Page is the President of the Red Meat Group of Cargill, Inc. In
fiscal year 1996, Viskase Corporation, a wholly-owned subsidiary of the Company,
had sales of $19,795,000 made in the ordinary course to Cargill, Inc. and its
affiliates.
Summary of Cash and Certain Other Compensation of Executive Officers. The
Summary Compensation Table below provides certain summary information concerning
compensation by the Company for 1996, 1995 and 1994 for services rendered by the
Company's Chief Executive Officer and each of the other executive officers of
the Company whose total annual salary and bonus exceeded $100,000 in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------- ----------------------
OTHER ANNUAL RESTRICTED ALL OTHER
SALARY BONUS COMPENSATION STOCK AWARD OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR ($)(2) ($)(3) ($)(4) ($)(5) (#) ($)
- ------------------------------ ---- ------ ------ ------------ ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald P. Kelly............... 1996 112,500 -- 25,100 -- -- 65(6)
1995 450,000 -- -- -- -- 472
1994 450,000 -- 48,125 -- -- 472
F. Edward Gustafson........... 1996 435,692 -- 69,662 126,875 145,000 16,108(7)
Chairman of the Board, 1995 390,000 -- 67,772 -- -- 12,472
President and Chief 1994 390,000 -- 61,496 -- -- 16,203
Executive Officer
Stephen M. Schuster........... 1996 163,325 43,894 6,259 -- 22,900 7,096(8)
Vice President, General 1995 157,050 42,404 23,159 -- -- 7,154
Counsel and Secretary 1994 151,375 63,261 -- -- 22,850 6,197
Gordon S. Donovan............. 1996 134,042 31,776 3,035 -- 19,500 5,664(9)
Vice President, Chief 1995 121,156 33,520 -- -- 19,500 5,257
Financial Officer, 1994 110,190 45,629 -- -- -- 4,362
Treasurer and Assistant
Secretary
</TABLE>
- ---------------
(1) Mr. Kelly served as Chairman of the Board, President and Chief Executive
Officer of the Company until late March 1996. At that time, Mr. Gustafson
became Chairman of the Board, President and Chief Executive Officer.
(2) The salaries set forth above for Messrs. Kelly and Gustafson for 1996 do not
include $193,000 paid to D.P. Kelly & Associates, L.P. under the Amended and
Restated Management Services Agreement dated December 31, 1993. See "Certain
Relationships and Related Transactions."
(3) Mr. Donovan's bonus for 1995 and 1994 includes $6,250 and $10,406,
respectively, earned under the Company's Long-Term Growth Plan ("LTGP") with
respect to that fiscal year. Bonuses under the LTGP are determined based on
the Company's overall financial performance for the fiscal year in which an
award is made. Bonuses under the LTGP are paid at the conclusion of the
second year following the year for which the bonus is earned and are subject
to forfeiture if the participant's employment with the Company is terminated
for any reason other than death, retirement or other specified circumstances
prior to payment.
(4) In 1996, the Company paid country club dues on behalf of Mr. Kelly in an
amount equal to $25,100. In 1994, Mr. Kelly was reimbursed for personal
travel expenses in the amount of $40,500. In 1996, Mr. Gustafson had
personal use of a Company automobile for a portion of the year and, pursuant
to his
8
<PAGE> 12
Employment Agreement, dated March 27, 1996, was paid cash in lieu of a
Company automobile for the remainder of the year, which use and cash payment
was valued at $24,604. In 1995 and 1994, Mr. Gustafson had personal use of a
Company automobile at an aggregate incremental cost to the Company of
$28,984 and $12,654, respectively. In addition, in 1996, 1995 and 1994, the
Company paid country club dues on behalf of Mr. Gustafson in an amount equal
to $38,054, $12,062 and $12,190, respectively.
(5) Pursuant to an Employment Agreement, dated March 27, 1996, Mr. Gustafson was
granted 35,000 restricted shares of the Company's Common Stock with a value
of $126,875. Such shares are nontransferable and are subject to forfeiture
until March 27, 1999. See "Employment Agreements and Change-in-Control
Arrangements." The Company does not currently, and does not expect in the
near future to, pay dividends on shares of its Common Stock. Neither Mr.
Gustafson nor any of the other persons named in the Summary Compensation
Table holds any other restricted shares of Common Stock.
(6) Amount paid for life insurance.
(7) Includes $2,527 paid for life insurance, $4,581 contributed to the
Envirodyne Retirement Income Plan and $9,000 contributed to the Envirodyne
Parallel Non-Qualified Thrift Plan.
(8) Includes $398 paid for life insurance, $4,581 contributed to the Envirodyne
Retirement Income Plan and $2,117 contributed to the Envirodyne Parallel
Non-Qualified Thrift Plan.
(9) Includes $300 paid for life insurance, $4,073 contributed to the Envirodyne
Retirement Income Plan and $1,291 contributed to the Envirodyne Parallel
Non-Qualified Thrift Plan.
Stock Option Grants. The following table provides information concerning
stock options granted to the persons named in the Summary Compensation Table
during the fiscal year ended December 26, 1996. No stock appreciation rights
("SARs") have been granted.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ------------- ------------- ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Donald P. Kelly........... -- -- -- -- -- --
F. Edward Gustafson(3).... 35,000 6.5% 3.50 03/27/06 77,040 195,234
35,000 6.5% 3.50 03/27/06 77,040 195,234
75,000 14.0% 3.50 03/27/06 -- --
Stephen M. Schuster....... 22,900 4.3% 4.375 05/15/06 63,007 159,673
Gordon S. Donovan......... 19,500 3.6% 4.375 05/15/06 53,653 135,966
</TABLE>
- ---------------
(1) Stock options are granted under the Envirodyne Industries, Inc. 1993 Stock
Option Plan, as amended and restated (the "Stock Option Plan"). Stock
options generally become exercisable on a cumulative basis in annual
increments of one-third of the optioned shares, commencing on the first
anniversary of the grant date. Upon a "Change of Control" of the Company, as
defined in the Stock Option Plan, all outstanding stock options become
immediately exercisable.
(2) The potential realizable value is based on the term of the option at the
date of grant (ten (10) years). It is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term, and that the stock option is
exercised and sold on the last day of the stock option term for the
appreciated stock price. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises and on
the sale of shares of Common Stock acquired upon exercise are dependent on
the future performance of the Common Stock and overall stock market
conditions. There can be no assurance that the amounts reflected in this
table will be achieved.
9
<PAGE> 13
(3) Mr. Gustafson's stock options were granted pursuant to an Employment
Agreement, dated March 27, 1996, between Mr. Gustafson and the Company. See
"Employment Agreements and Change-in-Control Arrangements." Mr. Gustafson's
stock options are subject to and governed by the Stock Option Plan. However,
one stock option to purchase 35,000 shares of Common Stock does not commence
vesting until the second anniversary of the grant date, and the
exercisability of the stock option to purchase up to 75,000 shares of Common
Stock was contingent upon the financial performance of the Company during
1996. No portion of this stock option has or will become exercisable.
Therefore, no information has been given with respect to the potential
realizable value of the shares underlying this stock option.
Stock Option Exercises and Holdings. The following table provides
information concerning the exercise of stock options during the fiscal year
ended December 26, 1996 and the fiscal year-end value of stock options with
respect to each of the persons named in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND DECEMBER 26, 1996 OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
ACQUIRED VALUE UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
ON EXERCISE REALIZED OPTIONS AT 12/26/96(#) 12/26/96($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Donald P. Kelly................. -- -- -- --
F. Edward Gustafson............. -- -- 0/70,000 0/166,250
Stephen M. Schuster............. -- -- 22,850/22,900 18,566/34,350
Gordon S. Donovan............... -- -- 19,500/19,500 15,844/29,250
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
On March 27, 1996, the Company entered into an Employment Agreement (the
"Agreement") with Mr. F. Edward Gustafson. Pursuant to the Agreement, Mr.
Gustafson agreed to serve as Chairman of the Board, President and Chief
Executive Officer of the Company, and the Company agreed to use its best efforts
to cause Mr. Gustafson to be elected as a director of the Company, during the
term of the Agreement. The initial term of the Agreement is three (3) years,
provided, however, that on March 26, 1997 and each subsequent anniversary
thereof, the term of the Agreement will be automatically extended for a period
of one (1) year unless the Company or Mr. Gustafson gives written notice to the
other at least thirty (30) days prior to the anniversary date that the term
shall not be so extended.
Under the Agreement, Mr. Gustafson will receive an initial annual base
salary of at least $450,000 and $30,000 per year in lieu of a Company-provided
automobile. Mr. Gustafson's base salary will be increased by the Compensation
and Nominating Committee of the Board of Directors each year in a manner
consistent with increases in base salary for other senior officers of the
Company. In addition, the Agreement provides that with respect to the fiscal
year ended December 26, 1996, Mr. Gustafson would be eligible to receive a bonus
based on a percentage of his base salary depending on the Company's performance
based on earnings before interest, taxes and depreciation and amortization
("EBITDA"). Because the Company did not achieve the minimum goal for EBITDA, Mr.
Gustafson did not receive a bonus for fiscal year 1996. Mr. Gustafson will be
eligible to receive an annual bonus for future fiscal years of the Company based
on such financial performance or other performance-related criteria as
established by the Compensation and Nominating Committee, after consultation
with Mr. Gustafson. Mr. Gustafson is also entitled to participate in any
employee benefit plans in effect for, and to receive other fringe benefits
provided to, other executive officers.
Pursuant to and upon execution of the Agreement, Mr. Gustafson was granted
two (2) stock options, each to purchase 35,000 shares of Common Stock. One (1)
stock option becomes exercisable in cumulative annual increments of one-third
commencing on the first anniversary of the date of grant. The other stock option
becomes exercisable in cumulative annual increments of one-third commencing on
the second anniversary of the date of grant. In addition, Mr. Gustafson was
granted a stock option to purchase up to 75,000 shares of Common Stock depending
on the financial performance of the Company based on EBITDA for fiscal year
1996. The Company did not achieve the minimum goal for EBITDA. Therefore, no
portion of
10
<PAGE> 14
this stock option became exercisable or will become exercisable in the future.
Lastly, Mr. Gustafson was granted 35,000 restricted shares of Common Stock which
may not be transferred, and are subject to forfeiture, until March 27, 1999.
If Mr. Gustafson's employment is terminated by the Company for Cause, as
defined in the Agreement, or by Mr. Gustafson other than for Good Reason or
Disability, as defined in the Agreement, Mr. Gustafson will be paid all Accrued
Compensation, as defined in the Agreement, through the date of termination of
employment. If Mr. Gustafson's employment with the Company is terminated by the
Company for any reason other than for Cause, death or Disability, or by Mr.
Gustafson for Good Reason, (i) Mr. Gustafson will be paid all Accrued
Compensation plus 200% of his base salary and the prorated amount of annual
bonus that would have been payable to Mr. Gustafson with respect to the fiscal
year in which Mr. Gustafson's employment is terminated, provided that the
performance targets have been actually achieved as of the date of termination
(unless such termination of employment follows a Change in Control, as defined
in the Agreement, in which case Mr. Gustafson will receive a bonus equal to 50%
of his base salary regardless of the Company's performance), (ii) Mr. Gustafson
will continue to receive life insurance, medical, dental and hospitalization
benefits for a period of twenty-four (24) months following termination of
employment, and (iii) all outstanding stock options and restricted shares of
Common Stock will become immediately exercisable, vested and nonforfeitable.
Pursuant to the Agreement, Mr. Gustafson is generally prohibited during the
term of the Agreement, and for a period of two (2) years thereafter, from
competing with the Company, soliciting any customer of the Company or inducing
or attempting to persuade any employee of the Company to terminate his or her
employment with the Company in order to enter into competitive employment. For
purposes of the Agreement, the Company includes Envirodyne Industries, Inc. and
any of its subsidiaries over which Mr. Gustafson exercised, directly or
indirectly, any supervisory, management, fiscal or operating control during the
term of the Agreement.
In May 1996, the Compensation and Nominating Committee of the Board of
Directors approved the Envirodyne Industries, Inc. Severance Pay Policy (the
"Policy") which covers all permanent, full-time, salaried executives and
administrative personnel employed by the Company at its corporate office,
including Mr. Gordon S. Donovan and Mr. Stephen M. Schuster. Mr. Donovan and Mr.
Schuster are eligible for severance benefits as set forth in the Policy upon the
occurrence of one of the following events (an "Event"): (i) involuntary
separation of employment from the Company for any reason other than death,
disability or willful misconduct, (ii) voluntary separation of employment from
the Company (a) following a reduction in base compensation or incentive bonus
opportunity from that in effect on the day immediately before the effective date
of a Change in Control, as defined in the Policy, or office consolidation or
elimination, or (b) following a reduction in the person's principal
responsibilities from those in effect on the day immediately before the
effective date of a Change in Control, as defined in the Policy, or office
consolidation or elimination. Upon the occurrence of an Event and subject to the
Company obtaining a general release, Mr. Donovan and Mr. Schuster would receive
severance pay equal to the equivalent to eighteen (18) months' salary (at the
highest annual rate in effect during the three-year period prior to separation
of employment) plus a target bonus under the Management Incentive Plan in effect
at the time of separation. In addition, Mr. Donovan and Mr. Schuster would
continue to receive medical, life and dental insurance benefits in effect at the
time of separation of employment for a period of time following such separation
depending on form of payment of the severance pay elected (e.g., lump sum or
installment) and whether he is covered by another employer's plan. The Policy
may be amended or terminated at any time by the Company except that in the event
that a Change in Control or elimination or consolidation of all of part of the
corporate office occurs during the term of the Policy, the Policy will be
automatically extended for a period of twenty-four (24) months following the
effective date of the Change in Control or office consolidation or elimination.
11
<PAGE> 15
REPORT OF THE COMPENSATION AND NOMINATING
COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation and Nominating Committee (the "Committee") of the Board of
Directors of the Company is composed of two (2) directors, neither of whom is an
officer or employee of the Company, its subsidiaries or affiliates.
GENERAL POLICY
The Company's compensation program is intended to promote the interests of
the Company by attracting and retaining highly qualified key employees and
providing such key employees with incentives and rewards to encourage superior
performance and continued employment with the Company. Accordingly, the
Company's compensation program consists of three (3) components: base salary,
annual bonus and stock options.
BASE SALARY
The base salaries of the Company's executive officers are reviewed and, if
appropriate, adjusted on an annual basis. The base salaries of executive
officers, other than the Chief Executive Officer, are determined by the Chief
Executive Officer after consultation with the Vice President, Human Resources.
During 1996 the Company retained the services of Towers Perrin, an executive
compensation consultant, to assist the Chief Executive Officer in determining
the compensation, including base salary, of the other executive officers.
Compensation survey information with respect to consumer nondurable product
companies (some of which are included in the peer group used by the Company in
constructing its Performance Graph included in this Proxy Statement) was
reviewed by the Chief Executive Officer in adjusting each executive officer's
base salary. Other factors such as the executive officer's level of
responsibility, individual performance and contributions to the Company were
also taken into account in determining the base salaries of executive officers.
The Company believes that its executive officers' total compensation is at
approximately the median of total compensation when compared to other nondurable
product companies.
ANNUAL BONUS
In 1996 executive officers of the Company (other than Mr. Gustafson)
participated in the Management Incentive Plan ("MIP") pursuant to which they
were granted an annual bonus based primarily on the financial performance of the
Company and secondarily on personal performance. At the beginning of the 1996
fiscal year, the Committee, based on the recommendation of the Chief Executive
Officer and the Vice President, Human Resources, of the Company, established
target and maximum financial performance goals with respect to the Company's
Operating Income, Operating Cash Flow and Return on Net Managed Assets and the
bonus opportunity, stated as a percentage of base salary, that each executive
could earn under the MIP. In addition, personal performance goals were jointly
established by the executive officer and the Chief Executive Officer.
The Company exceeded its target goal for Operating Cash Flow. Based on the
recommendation of the Chief Executive Officer, the Committee determined that
each of the executive officers achieved his primary personal performance goals.
Actual awards under the MIP varied depending on the bonus opportunity for each
executive officer.
STOCK OPTIONS
Executive officers also participate in the 1993 Stock Option Plan, as
amended (the "Stock Option Plan"). Under the Plan, executive officers were
granted approximately the same number of stock options in 1996 as their most
recent past grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Donald P. Kelly resigned as President, Chief Executive Officer and
Chairman of the Board of the Company in March 1996. Prior to his resignation,
Mr. Kelly's compensation was governed by the terms of the
12
<PAGE> 16
Amended and Restated Management Services Agreement (the "Management Agreement"),
dated as of December 31, 1993, between the Company and D.P. Kelly and
Associates, L.P. ("DPK"). See "Certain Relationships and Related Transactions"
for a description of, and more information relating to, the Management
Agreement. The salary disclosed in the Summary Compensation Table for Mr. Kelly
represents that portion of the management fees payable to DPK under the
Management Agreement elected to be taken by Mr. Kelly in the form of salary. Mr.
Kelly did not participate in the Stock Option Plan or MIP. The terms and
conditions of the Management Agreement, including the compensation payable to
DPK, were approved by the Company's creditors in connection with the Company's
plan of reorganization, consummated December 31, 1993, under Chapter 11 of the
Bankruptcy Code. In March 1996, the Company terminated the Management Services
Agreement.
Mr. F. Edward Gustafson was elected President, Chief Executive Officer and
Chairman of the Board in March 1996. Prior to March 1996, Mr. Gustafson served
as Executive Vice President and Chief Operating Officer of the Company, and his
compensation was governed by the terms and conditions of the Management
Agreement. A portion of the salary disclosed in the Summary Compensation Table
for Mr. Gustafson represents that portion of the management fees payable to DPK
elected to be taken by Mr. Gustafson in the form of salary. Mr. Gustafson serves
as President, Chief Executive Officer and Chairman of the Board of the Company
pursuant to an Employment Agreement with the Company dated March 27, 1996 (the
"Agreement"). For a description of the terms and conditions of the Employment
Agreement, see "Employment Agreements and Change-in-Control Arrangements." Mr.
Gustafson's base salary, annual bonus and stock option grant for 1996 were
established in accordance with the terms and conditions set forth in the
Agreement. The Company did not achieve the minimum goal for EBITDA set forth in
the Agreement, and Mr. Gustafson therefore did not receive an annual bonus for
1996, and no portion of the stock option to purchase up to 75,000 shares of
Common Stock became exercisable or will become exercisable in the future. The
Committee believes that Mr. Gustafson's base salary and stock option grants
under the Agreement are reasonable in light of his increased duties and
responsibilities and his continued contribution toward the success of the
Company.
POLICY REGARDING SECTION 162(m)
The Company has not adopted a policy regarding the $1 million limitation on
the deductibility of certain executive compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended. The current compensation of the
Company's executive officers falls significantly below the $1 million deduction
limit.
Compensation and Nominating Committee
ROBERT N. DANGREMOND (Chairman)
GREGORY R. PAGE
13
<PAGE> 17
PERFORMANCE GRAPH
Set forth below is a graph comparing the annual change in the cumulative
total stockholder return of the Common Stock against the cumulative total return
of the NASDAQ Non-Financial Services Index and a peer group of plastic film
manufacturing or food packaging companies consisting of AEP Industries, Inc.,
Atlantis Group, Inc., Ball Corporation, Bemis Company, Inc., Carlisle Plastics
Inc. (through September 9, 1996), Liqui-Box Corp., Sealed Air Corp. and
Sealright Co., Inc. for the period commencing January 4, 1994, the first trading
date of the Common Stock which was distributed to stockholders pursuant to
Envirodyne's Plan of Reorganization on December 31, 1993, and ending December
26, 1996. The graph assumes an investment of $100 on January 4, 1997 and the
reinvestment of dividends and other distributions to stockholders.
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING JANUARY 4, 1994
[GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
4-JAN-94 DEC.-94 DEC.-95 DEC.-96
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Envirodyne Industries, Inc. $100 $ 39 $ 33 $ 53
- ---------------------------------------------------------------------------------------------------
NASDAQ Non-Financial Companies Index $100 $ 98 $138 $170
- ---------------------------------------------------------------------------------------------------
Custom Composite Index (8 Stocks) $100 $109 $120 $166
- ---------------------------------------------------------------------------------------------------
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 31, 1993, the Company and D.P. Kelly & Associates, L.P. ("DPK")
entered into an Amended and Restated Management Services Agreement (the
"Management Agreement") pursuant to which DPK provided corporate management
services to the Company. In consideration of the services provided by DPK under
the Management Agreement, the Company agreed to pay $2,000,000 in management
fees and salaries and the reimbursement of expenses. On March 27, 1996, the
Board of Directors voted to terminate the Management Agreement. For fiscal 1996,
the Company paid $193,000 to DPK for services provided under the Management
Agreement. In addition, pursuant to the Agreement, the Company paid to DPK a
$2,000,000 termination fee. Messrs. Kelly and Gustafson are executive officers
and limited partners of DPK. Mr. Kelly's salary and Mr. Gustafson's salary prior
to March 27, 1996, disclosed in the Summary Compensation Table, were paid
pursuant to the Management Agreement.
14
<PAGE> 18
During fiscal 1996, the Company purchased products in the ordinary course
and on arm's-length terms from affiliates of DPK in the amount of $904,000.
During fiscal 1996, the Company sublet office space from DPK for which it paid
$139,000 in rent. The rent is comparable to that which would be charged to a
nonaffiliated company for use of this office space.
Mr. Kelly and DPK have asserted common law and contractual rights of
indemnity against Envirodyne for attorneys' fees, costs and any ultimate
liability relating to the claims set forth in complaints filed in two lawsuits.
In ARTRA Group Incorporated v. Salomon Brothers Holding Company Inc, Salomon
Brothers Inc, D.P. Kelly & Associates, L.P., Donald P. Kelly, Charles K.
Bobrinskoy, James L. Massey, William Rifkind and Michael Zimmerman, Case No. 93
A 1616, United States Bankruptcy Court for the Northern District of Illinois,
Eastern Division ("ARTRA I"), ARTRA Group Incorporated ("ARTRA") alleges breach
of fiduciary duty and tortious interference in connection with the negotiation
and consummation of the Plan of Reorganization. In ARTRA Group Incorporated v.
Salomon Brothers Holding Company Inc., Salomon Brothers Inc., D.P. Kelly &
Associates, L.P., Donald P. Kelly, Charles K. Bobrinskoy and Michael Zimmerman,
Case No. 93 L 2198, Circuit Court of the Eighteenth Judicial Circuit, DuPage
County, Illinois, ARTRA alleges breach of fiduciary duty, fraudulent and
negligent misrepresentation and breach of contract in connection with the 1989
acquisition of Envirodyne by Emerald Acquisition Corporation. The plaintiff
seeks damages in the total amount of $136.2 million plus interest and punitive
damages of $408.6 million. In ARTRA I, upon a motion of the defendants, the
Bankruptcy Court dismissed ARTRA's claims. ARTRA appealed to the U.S. District
Court, and on October 31, 1996, the U.S. District Court affirmed the Bankruptcy
Court's decision. ARTRA has appealed to the U.S. Court of Appeals for the
Seventh Circuit. All briefs have been filed, and the parties are awaiting oral
argument.
In fiscal 1996, Viskase Corporation, a wholly-owned subsidiary of the
Company, had sales of $19,795,000 to Cargill, Inc. and its affiliates, which
sales were made in the ordinary course of business. During 1996, Cargill
Financial Services Corporation was the beneficial owner of 9.4% of the Company's
outstanding Common Stock, and Gregory R. Page, President of the Red Meat Group
of Cargill, Inc., is a director of the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. has been appointed by the Board of
Directors as the Company's independent accountants for the fiscal year ending
December 25, 1997. Representatives of Coopers & Lybrand L.L.P. are expected to
attend the Annual Meeting. They will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 25, 1997.
OTHER MATTERS
Zapata Corporation ("Zapata") has given the Company written notice of its
intent to nominate five candidates for election as directors. The nominees are:
Malcolm I. Glazer ("Glazer"), three of Glazer's sons, Avram A. Glazer, Bryan G.
Glazer and Edward Glazer, and Robert V. Leffler, Jr. Mr. Glazer is the Chairman
of the Board of Directors of Zapata. Avram A. Glazer is President, Chief
Executive Officer and a director of Zapata. Robert V. Leffler, Jr. is also a
director of Zapata.
Zapata has also indicated that it intends to bring a proposal to be
considered at the Annual Meeting (the "Zapata Proposal") recommending that the
Board of Directors take appropriate action to redeem as soon as possible the
rights issued under the Rights Agreement between the Company and Harris Trust &
Savings Bank, dated as of June 26, 1996, or otherwise terminate the plan and not
implement any other stockholder rights plan without a binding vote of the
Company's stockholders.
15
<PAGE> 19
The persons designated as proxies on the enclosed proxy card intend to vote
against the Zapata Proposal. If any other matters properly come before the
Annual Meeting, the persons designated as proxies on the enclosed proxy card
will vote in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual stockholder meetings, consistent with rules
adopted by the Securities and Exchange Commission. Such proposals must be
received by the Company not later than December 18, 1997 to be considered for
inclusion in the proxy statement and form of proxy relating to the 1998 Annual
Meeting of Stockholders. Any such proposals should be addressed to: Corporate
Secretary, Envirodyne Industries, Inc., 701 Harger Road, Suite 190, Oak Brook,
Illinois 60521. In addition, the Amended and Restated By-Laws of the Company
(the "By-Laws") provide that any stockholder of record wishing to nominate a
person for election as director or to bring any other business before an annual
meeting of stockholders must provide to the Corporate Secretary of Envirodyne
notice of such nomination or other business to be brought, in the proper written
form specified in the By-Laws, not less than ninety (90) days nor more than one
hundred twenty (120) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders, provided, however, that in the event
that the annual meeting of stockholders is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the annual meeting was mailed or public disclosure of the date of the
annual meeting was made, whichever first occurs. For the 1998 Annual Meeting of
Stockholders, a stockholder must provide written notice to the Company of any
nomination or other business to be brought under the By-Laws no earlier than
January 6, 1998 and no later than February 15, 1998. Any stockholder desiring a
copy of the By-Laws will be furnished one without charge upon request to the
Corporate Secretary.
1996 ANNUAL REPORT ON FORM 10-K
A copy of the Company's 1996 Annual Report on Form 10-K (the "Form 10-K"),
as filed with the Securities and Exchange Commission, is included as part of the
Company's 1996 Annual Report which accompanies this Proxy Statement. Additional
copies of the Form 10-K are available to stockholders without charge on request
in writing to the following address: Envirodyne Industries, Inc., 701 Harger
Road, Suite 190, Oak Brook, Illinois 60521, Attention: Corporate Secretary.
ENVIRODYNE INDUSTRIES, INC.
Oak Brook, Illinois
April 18, 1997
16
<PAGE> 20
APPENDIX A
INFORMATION CONCERNING DIRECTORS, NOMINEES FOR
DIRECTOR, EXECUTIVE OFFICERS AND OTHER "PARTICIPANTS"
The following table sets forth the name and the principal occupation or
employment (except with respect to directors, whose principal occupation is set
forth in the Proxy Statement), and the name, principal business and address of
any corporation or organization (if other than the Company) in which such
employment is carried on, of (i) directors, nominees for director and executive
officers of the Company, and (ii) certain employees, if any, of the Company and
its subsidiaries who may assist in soliciting proxies from stockholders of the
Company.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL OCCUPATION
BUSINESS ADDRESS OR EMPLOYMENT
------------------ --------------------
<S> <C>
Robert N. Dangremond........................................ (1)
Jay Alix & Associates
575 Fifth Avenue
New York, New York 10017
Gordon S. Donovan(2)........................................ Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
Avram A. Glazer............................................. (3)
Zapata Corporation
1717 St. James Place
Houston, Texas 77056
Malcolm I. Glazer........................................... (4)
1482 South Ocean Blvd.
Palm Beach, Florida 33480
F. Edward Gustafson(2)...................................... President, Chief Executive Officer
and Chairman of the Board of
Directors
Michael E. Heisley.......................................... (1)
Heico Acquisitions
Three First National Plaza,
Ste. 5600
Chicago, Illinois 60602
Gregory R. Page............................................. (1)
Red Meat Group
Cargill, Inc.
15615 McGinty Road, West
Wayzata, Minnesota 55440-2398
Mark D. Senkpiel............................................ (1)
Trust Company of the West
11100 Santa Monica Blvd.,
Ste. 2050
Los Angeles, California 90025
Stephen M. Schuster(2)...................................... Vice President, General Counsel
and Secretary
</TABLE>
- ---------------
(1) Messrs. Dangremond, Gustafson, Heisley, Page and Senkpiel are currently
directors of the Company. A complete description of each director's
principal occupation or employment and the principal business of
A-1
<PAGE> 21
any corporation or other organization in which such employment is carried on
is contained in the Proxy Statement.
(2) Messrs. Donovan, Gustafson and Schuster are executive officers of the
Company, whose business address is 701 Harger Road, Suite 190, Oak Brook,
Illinois 60521. The principal business of the Company is the manufacture and
sale of food packaging and food service supplies.
(3) Mr. Avram A. Glazer is currently a director of the Company but was not
nominated by the Board of Directors for reelection. Mr. Glazer is the
President and Chief Executive Officer of Zapata Corporation, a marine
protein business. Mr. Glazer is also the Vice President of First Allied
Corporation, an investment company. Mr. Glazer is included in this Appendix
A and in Appendix B because he is a director of the Company; however, he has
stated his intent to wage an election contest and is not expected to solicit
proxies on behalf of the Board of Directors of the Company.
(4) Mr. Malcolm I. Glazer is currently a director of the Company but was not
nominated by the Board of Directors for reelection. Mr. Glazer is a
self-employed private investor. He is the owner of the Tampa Bay Buccaneers,
a National Football League franchise. In addition, Mr. Glazer is the
President and Chief Executive Officer of First Allied Corporation. He is
also Chairman of the Board of Directors of Zapata Corporation. Mr. Glazer is
included in this Appendix A and in Appendix B because he is a director of
the Company; however, he has stated his intent to wage an election contest
and is not expected to solicit proxies on behalf of the Board of Directors
of the Company.
A-2
<PAGE> 22
APPENDIX B
SHARES HELD BY DIRECTORS, NOMINEES FOR DIRECTOR,
EXECUTIVE OFFICERS AND OTHER "PARTICIPANTS"
Current Ownership. The amount of each class of securities owned by each
director, nominee for director and executive officer and information regarding
beneficial and record ownership are set forth in the Security Ownership table
and the related footnotes in the Proxy Statement. It is not known at this time
which other employees of the Company, if any, will solicit proxies on behalf of
the Board of Directors.
Purchases and Sales. The following table sets forth information concerning
purchases and sales during the past two years by each of the directors, nominees
for director and executive officers.
<TABLE>
<CAPTION>
DATE OF NATURE OF
NAME TRANSACTION AMOUNT TRANSACTION
---- ----------- ------ -----------
<S> <C> <C> <C>
Robert N. Dangremond....................... 4/24/95 2,000 Purchase
9/30/96 5,209 (1)
1/31/97 1,454 (1)
Gordon S. Donovan.......................... 7/24/96 2,000 Purchase
11/22/96 4,720 (2)
2/25/97 6,489 (2)
11/96-3/97 529 (3)
Avram A. Glazer............................ 9/30/96 4,961 (1)
1/31/97 1,018 (1)
Malcolm I. Glazer.......................... 8/7/95 4,189,298 Sale
9/30/96 4,961 (1)
1/31/97 1,018 (1)
F. Edward Gustafson........................ 4/17/95 272,668 (4)
4/24/95 50,000 (4)
5/17/95 20,000 Purchase
5/17/95 20,000 (6)
2/9/96 1,000 Purchase
2/12/96 4,000 Purchase
2/12/96 7,157 Purchase
3/27/96 35,000 (7)
4/15/96 3,000 Purchase
4/15/96 47,000 (6)
4/15/96 57,853 (5)
10/2/96 5,638 (2)
10/17/96 4,555 (2)
3/4/97 6,345 (3)
Michael E. Heisley......................... 4/15/96 157,853 Purchase
9/30/96 5,085 (1)
1/31/97 1,163 (1)
Gregory R. Page............................ 9/30/96 4,961 (1)
1/31/97 1,091 (1)
</TABLE>
B-1
<PAGE> 23
<TABLE>
<CAPTION>
DATE OF NATURE OF
NAME TRANSACTION AMOUNT TRANSACTION
---- ----------- ------ -----------
<S> <C> <C> <C>
Stephen M. Schuster........................ 3/1/96 10,000 (6)
5/31/96 604 (6)
6/7/96 2,500 (6)
11/11/96 5,000 (6)
11/15/96 12,156 (2)
1/22/97 3,000 (9)
2/14/97 6,557 (2)
3/24/97 1,219 (3)
11/96-3/97 673 (3)
Mark D. Senkpiel........................... 4/25/96 2,000 Purchase
4/25/96 3,000 (8)
9/30/96 5,209 (1)
1/31/97 1,382 (1)
3/6/97 6,000 Purchase
3/6/97 3,000 (8)
</TABLE>
- ---------------
(1) These shares were issued pursuant to the Non-Employee Directors'
Compensation Plan, which provides that non-employee directors may elect to
receive their directors' fees in the form of shares of Common Stock of the
Company.
(2) These shares were acquired pursuant to intra-plan transfers under the
Company's Retirement Income Plan (e.g., 401(k) plan).
(3) These shares were acquired pursuant to regular payroll deductions under the
Company's Retirement Income Plan.
(4) These shares were acquired by Volk Enterprises, Inc. See Footnote 5 to the
Security Ownership table in the Proxy Statement for an explanation of
beneficial ownership. Mr. Gustafson disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in Volk Enterprises,
Inc.
(5) These shares were acquired by D.P. Kelly & Associates, L.P. See Footnote 5
to the Security Ownership table in the Proxy Statement for an explanation of
beneficial ownership. Mr. Gustafson disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in D.P. Kelly &
Associates, L.P.
(6) These shares were acquired by such person's spouse. Each such person
disclaims beneficial ownership of any shares acquired by his spouse.
(7) These shares were issued pursuant to an Employment Agreement, dated March
27, 1997, between the Company and Mr. Gustafson.
(8) These shares were acquired by Mr. Senkpiel as custodian of accounts for the
benefit of his minor children under the Uniform Gifts to Minors Act. Mr.
Senkpiel disclaims beneficial ownership of these shares.
(9) These shares were issued by the Company as a bonus to Mr. Schuster.
OTHER INFORMATION.
(a) The Company owns, directly or indirectly, all of the issued and
outstanding securities of all of its subsidiaries.
(b) Except as disclosed in this Appendix B and the Proxy Statement, to the
best of the Company's knowledge, none of the Company or any of its directors,
nominees for director or executive officers (i) owns beneficially, directly or
indirectly, any securities of the Company or its subsidiaries, (ii) owns of
record, but not beneficially, any securities of the Company, (iii) has purchased
or sold any securities of the Company during the past two years, (iv) has
incurred indebtedness for the purpose of acquiring or holding securities of
B-2
<PAGE> 24
the Company, or (v) is, or was during the past year, a party to any contract,
arrangement or understanding with respect to the securities of the Company.
(c) Except as disclosed in this Appendix B and the Proxy Statement, to the
knowledge of the Company, no associate of the Company, or any of its directors,
nominees for director or executive officers, owns beneficially, directly or
indirectly, any securities of the Company.
(d) Except as disclosed in this Appendix B and the Proxy Statement, to the
knowledge of the Company, neither the Company nor any of the directors, nominees
for director or executive officers or any other of their associates (i) has or
had a direct or indirect material interest in any transactions or series of
transactions with the Company since the beginning of the Company's last fiscal
year or any currently proposed transaction, or series or transactions, to which
the Company or any of its subsidiaries was or is to be a party in which the
amount in question exceeded $60,000, (ii) has any arrangement or understanding
with respect to future employment by the Company or any of its affiliates, or
(iii) has any arrangement or understanding with respect to any future
transactions to which the Company or any of its affiliates will or may be a
party.
B-3
<PAGE> 25
<TABLE>
<S><C>
P [LOGO] ENVIRODYNE PROXY SOLICITED BY THE BOARD OF DIRECTORS
INDUSTRIES, INC. FOR THE ANNUAL MEETING OF STOCKHOLDERS
R MAY 16, 1997
o
x F. Edward Gustafson and Stephen M. Schuster, or either of them individually, and each of them with power of substitution,
are hereby appointed Proxies of the undersigned to vote all shares of Common Stock of Envirodyne Industries, Inc. owned
Y on the record date by the undersigned at the Annual Meeting of Stockholders to be held on May 16, 1997, or any adjournments
or postponements thereof, upon such business as may properly come before the meeting, including the items on the reverse
side of this form as set forth in the Notice of Annual Meeting of Stockholders and Proxy Statement, dated April 18, 1997
(the "Proxy Statement"). THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE. IF NO DIRECTION IS INDICATED, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS 1 AND 2. THIS PROXY WILL BE VOTED "AGAINST" THE STOCKHOLDER PROPOSAL WHICH MAY BE BROUGHT BY
ZAPATA CORPORATION AS DESCRIBED UNDER "OTHER MATTERS" IN THE PROXY STATEMENT IN THE EVENT SUCH PROPOSAL IS BROUGHT BEFORE
THE MEETING.
Proposal 1 - Election of Directors Nominees: Robert N. Dangremond, F. Edward Gustafson, Michael E. Heisley,
Gregory R. Page, Mark D. Senkpiel.
Proposal 2 - Ratification of the appointment of Coopers & Lybrand L.L.P. as the Company's independent accountants for
the 1997 fiscal year.
(Shares cannot be voted unless this Proxy Card is signed and returned, or other specific arrangements are made to have
the shares represented at the meeting.)
</TABLE>
<PAGE> 26
<TABLE>
<S><C>
/X/ Please mark your Envirodyne Industries, Inc.
votes as in this 701 Harger Road, Suite 190
example. Oak Brook, Illinois 60521
Proxy Card This proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED AND FOR PROPOSAL 2. THIS PROXY WILL BE
VOTED "AGAINST" THE STOCKHOLDER PROPOSAL WHICH MAY BE BROUGHT BY ZAPATA CORPORATION AS DESCRIBED UNDER "OTHER
MATTERS" IN THE PROXY STATEMENT IN THE EVENT SUCH PROPOSAL IS BROUGHT BEFORE THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2
For Withheld For Against Abstain
1. Election of Directors / / / / 2. Ratification of Accountants / / / / / /
(See Reverse) (See Reverse)
For, except vote WITHHELD from the following nominee(s):
- --------------------------------------------------------
PLEASE SIGN, DATE AND RETURN IN ENCLOSED ENVELOPE.
Signature________________________________
DATE_____________________________________
Signature________________________________
DATE_____________________________________
Please sign exactly as your name appears. If
acting as attorney, executor, trustee or in
representative capacity, sign name and indicate
title. Joint owners should each sign personally.
</TABLE>
