<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:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
FRESH FOODS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
FRESH FOODS, INC.
P. O. Box 399
Claremont, North Carolina 28610
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------------------
To the Shareholders of
Fresh Foods, Inc.
The Annual Meeting of Shareholders of Fresh Foods, Inc. will be held at
the Company's Pierre Foods Division plant at 9990 Princeton Road, Cincinnati,
Ohio 45246 on Thursday, June 25, 1998, at 10:00 a.m., Eastern Daylight Savings
Time, to:
1. Elect three directors to terms of three years, one director to
a term of two years, and one director to a term of one year.
2. To approve an amendment to the Company's Bylaws to change the
number of authorized directors of the Company from eleven to a
number not less than seven nor more than seventeen.
3. To ratify an Amendment to the Company's 1997 Incentive Stock
Option Plan to increase the shares authorized thereunder from
500,000 to 1,000,000.
4. Transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on June 5, 1998,
as the record date for determining shareholders entitled to notice of and to
vote at the meeting. Only shareholders of record at the close of business on
that date are entitled to vote at the meeting.
Fresh Foods, Inc. hopes that as many shareholders as possible will
personally attend the meeting. Whether or not you plan to attend, please
complete the enclosed proxy card and sign, date and return it promptly so that
your shares will be represented. Sending in your proxy will not prevent your
voting in person at the meeting.
By Order of the Board of Directors,
JAMES E. HARRIS
Secretary
Claremont, North Carolina
June 10, 1998
<PAGE> 3
FRESH FOODS, INC.
3437 East Main Street
P.O. Box 399
Claremont, North Carolina 28610
June 10, 1998
FRESH FOODS ANNUAL MEETING
PROXY STATEMENT
General
This Proxy Statement first being mailed to Fresh Foods Shareholders on
or about June 10, 1998 and is accompanied by the Notice of Annual Meeting of
Shareholders and a form of proxy that is solicited by the Fresh Foods Board for
use at the Annual Meeting to be held on June 25, 1998, at 10:00 a.m., local
time, at the Company's Pierre Foods Division plant at 9990 Princeton Road in
Cincinnati, Ohio, and at any adjournments or postponements thereof.
Solicitation of Proxies
A holder of Common Stock may use the accompanying proxy if such
shareholder is unable to attend the Annual Meeting in person or wishes to have
his or her shares voted by proxy even if such shareholder does attend the
meeting. A shareholder may revoke any proxy given pursuant to this solicitation
by delivering to the Secretary of Fresh Foods, prior to or at the Annual
Meeting, a written notice revoking the proxy or a duly executed proxy relating
to the same shares bearing a later date; however, attendance at the Annual
Meeting will not in and of itself constitute a revocation of a proxy. All
written notices of revocation and other communications with respect to the
revocation of proxies should be addressed to: Secretary, Fresh Foods, Inc., P.O.
Box 399, Claremont, North Carolina 28610. For such notice of revocation or later
proxy to be valid, however, it must actually be received by Fresh Foods prior to
the vote of the Shareholders at the Annual Meeting. All shares represented by
valid proxies received pursuant to this solicitation, and not revoked before
they are exercised, will be voted in the manner specified therein. If no
specification is made, the proxies will be voted in favor of management's
nominees for directors and in favor of approval of all other matters. The Fresh
Foods Board is unaware of any other matters that may be presented for action at
the Annual Meeting. If other matters do properly come before the Annual Meeting,
however, it is intended that shares represented by proxies in the accompanying
form will be voted or not voted by the persons named in the proxies in their
discretion, provided that no proxy that is voted against approval and adoption
of any matters will be voted in favor of any adjournment or postponement of the
Annual Meeting for the purpose of soliciting additional proxies.
The entire cost of soliciting proxies will be borne by Fresh Foods. In
addition to the solicitation of the proxies by mail, Fresh Foods will request
banks, brokers and other record holders to send proxies and proxy material to
the beneficial owners of the stock and secure their voting instructions, if
necessary. Fresh Foods will reimburse such record holders for their reasonable
expenses in doing so. If necessary, Fresh Foods may also use several of its
regular employees, who will not be specially compensated, to solicit proxies
from shareholders, either personally or by telephone, telegram, facsimile or
special delivery letter.
Record Date and Voting Rights
Pursuant to North Carolina law, June 5, 1998 has been fixed as the
record date for determination of Shareholders entitled to notice of and to vote
at the Annual Meeting. Accordingly, only holders of Common Stock of record at
the close of business on that date will be entitled to notice of and to vote at
the Annual Meeting. The number of outstanding shares of Common Stock entitled to
vote at the Annual Meeting is ______. On the Record Date, there were
approximately ___ holders of record of Common Stock. In accordance with North
Carolina law, abstentions from voting will be counted for purposes of
determining whether a quorum exists at the Annual Meeting. Furthermore, shares
represented in proxies returned by a broker holding such shares in nominee or
"street" name will be counted for purposes of determining whether a quorum
exists, even if such shares are not voted in matters where discretionary voting
by the broker is not allowed ("broker non-votes"). In
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<PAGE> 4
addition, abstentions from voting and broker non-votes will not be deemed to
have been cast either "for" or "against" the proposals considered at the meeting
and, therefore, will have no effect on the adoption of such proposals.
Each share of Common Stock entitles its holder to one vote. Directors
will be elected by a plurality of the votes cast. The affirmative vote of a
majority of the votes cast at the Annual Meeting is required to approve any
other matters, provided that a majority of the shares entitled to vote are
represented at the Annual Meeting in person or by proxy.
Principal Shareholders
The following table sets forth, as of June 5, 1998, information
relative to Company common stock ownership by (I) each person known by the
Company's management to own beneficially 5.0% or more of the total outstanding
shares of Company stock, (ii) each director and nominee for director of the
Company, (iii) each named executive officer of the Company and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Beneficial Owner Beneficial Ownership Outstanding Shares (1)
- ---------------- -------------------- ----------------------
<S> <C> <C>
HERTH Management, Inc. (2) 1,219,235 20.7
P. O. Box 399
Claremont, NC 28610
Columbia Hill, LLC (3) 1,262,034 21.4
P. O. Box 399
Claremont, NC 28610
James C. Richardson, Jr. (4) 1,609,534 26.3
P. O. Box 399
Claremont, NC 28610
David R. Clark (5) 1,548,284 25.0
P. O. Box 399
Claremont, NC 28610
Gregory A. Edgell (6) 1,386,110 23.3
3200 Devine Street
Columbia, SC 29205
James M. Templeton (7) 1,288,472 21.6
P. O. Box 399
Claremont, NC 28610
Larry D. Hefner (8) 1,277,034 21.6
P. O. Box 519
Claremont, NC 28610
L. Dent Miller (9) 570,801 9.6
P. O. Box 399
Claremont, NC 28610
</TABLE>
Page 2
<PAGE> 5
<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Beneficial Owner Beneficial Ownership Outstanding Shares (1)
- ---------------- -------------------- ----------------------
<S> <C> <C>
Charles F. Connor, Jr. (10) 704,731 11.9
P. O. Box 519
Claremont, NC 28610
Richard F. Howard (11) 115,390 1.9
Norbert E. Woodhams (12) 100,000 1.7
Lewis C. Lanier (12) 15,000 *
William R. McDonald III (13) 15,860 *
E. Edwin Bradford (14) 16,250 *
Bobby G. Holman (15) 16,128 *
William P. Foley II (12) 150,000 2.5
Andrew F. Puzder (12) 50,000 *
All directors, nominees 3,014,450 43.1
and executive officers as a group (13 persons)
</TABLE>
- ----------------
* Less than one percent
(1) The actual number of shares outstanding at June 5, 1998 was 5,902,619.
Each percentage has been calculated on the basis of such number plus
shares subject to outstanding call options exercisable not later than
August 4, 1998. Shares subject to such options have been considered
outstanding for the purpose of computing the percentage of outstanding
shares owned by the person who holds such options but have not been
considered outstanding for the purpose of computing the percentage of
outstanding shares owned by any other person.
(2) All of the shares owned of record by HERTH are also deemed to be owned
beneficially by each of its shareholders. The shareholders of HERTH,
and their ownership percentages, are Columbia (45.0%) and Messrs.
Richardson (22.0%), Edgell (22.0%) and Templeton (11%). Beneficial
ownership of other than a pro rata interest in the shares owned of
record by HERTH is disclaimed by each shareholder of HERTH.
(3) Consists of (I) 42,799 shares owned of record and (ii) 1,219,235 shares
owned beneficially through HERTH. All of the shares owned of record by
Columbia are also deemed to be owned beneficially by each of its
owners. The owners of Columbia, and their ownership percentages are
Messrs. Clark (45.0%), Richardson (40.0%) and Hefner (15.0%).
Beneficial ownership of other than a pro rata interest in the shares
owned by record by Columbia is disclaimed by each owner of Columbia.
(4) Consists of (I) 7,500 shares owned of record, (ii) 1,219,235 shares
owned beneficially through HERTH, (iii) 42,799 shares owned
beneficially through Columbia, (iv) 125,000 shares owned beneficially
through Capital Factors and (v) 215,000 shares subject to currently
exercisable call options. All 125,000 shares owned of record by Capital
Factors are also deemed to be owned beneficially by each of its
shareholders, although beneficial ownership of other than a pro rata
interest in such shares is disclaimed by each such shareholder. The
shareholders of Capital Factors, and their ownership percentages, are
Messrs. Richardson (50.0%) and Edgell (50.0%).
(5) Consists of (I) 1,250 shares owned of record, (ii) 1,219,235 shares
owned beneficially through HERTH, (iii) 42,799 shares owned
beneficially through Columbia and (iv) 285,000 shares subject to
currently exercisable call options.
(6) Consists of (I) 1,250 shares owned of record, (ii) 625 shares held by
spouse as custodian for minor children, of which beneficial ownership
is disclaimed, (iii) 1,219,235 shares owned beneficially through HERTH,
(iv) 125,000 shares owned beneficially through Capital Factors and (v)
40,000 shares subject to currently exercisable call options. See note
(4).
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<PAGE> 6
(7) Consists of (I) 4,237 shares owned of record, (ii) 1,219,235 shares
owned beneficially through HERTH and (iii) 65,000 shares subject to
currently exercisable call options.
(8) Consists of (I) 10,000 shares owned of record, (ii) 1,219,235 shares
owned beneficially through HERTH, (iii) 42,799 shares owned
beneficially through Columbia and (iv) 5,000 shares subject to
currently exercisable call options.
(9) Consists of (I) 520,801 shares owned of record and (ii) 50,000 shares
subject to currently exercisable call options.
(10) Consists of (I) 638,910 shares owned of record, (ii) 38,220 shares
owned beneficially through Countywide Insurance Agency, Inc.
("Countywide"), and (iii) 21,868 shares held by spouse, of which
beneficial ownership is disclaimed. All 38,220 shares owned of record
by Countywide are deemed beneficially owned by Connor, although
beneficial ownership of other than a pro rata interest in such shares
is disclaimed.
(11) Consists of (I) 390 shares owned of record and (ii) 115,000 shares
subject to currently exercisable call options.
(12) All such shares are subject to currently exercisable call options.
(13) Consists of (I) 860 shares owned by spouse, of which beneficial
ownership is disclaimed, and (ii) 15,000 shares subject to currently
exercisable call options.
(14) Consists of (I) 1,250 shares owned of record and (ii) 15,000 shares
subject to currently exercisable call options.
(15) Consists of (I) 1,128 shares owned of record and (ii) 15,000 shares
subject to currently exercisable call options.
Except as set forth above, management of the Company is not aware of
any other person or group which owns in excess of five percent of the
outstanding Common Stock of the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers, and persons who own more than ten percent of
the Company's stock ("Reporting Persons"), to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of the Company's stock. Reporting Persons are required by Securities
and Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based upon review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, all Section 16(a) filing requirements
applicable to Reporting Persons were complied with during fiscal 1998, except
that through inadvertent error, Messrs. _________ failed to file timely Form 5s.
All applicable reports have since been filed.
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
The Company's By-Laws provide for eleven directors, classified into
three classes and elected for three year terms, or until their successors are
duly elected and qualified. The Class I directors, whose terms expire at the
1998 Annual Meeting, are Messrs. Richard F. Howard, James M. Templeton, E. Edwin
Bradford, and L. Dent Miller. Additionally, one Class II director is being
elected to fill the unexpired term of Richard F. Hendrickson, and one Class III
director is being elected to fill a new directorship created by the Shareholders
at their last meeting. The directors who have been appointed to these positions
pending election are Andrew F. Puzder and William P. Foley II, respectively. The
remaining five directors were elected at prior annual meetings to serve until
the annual meetings to be held in the years set forth below.
Four Class I directors will be elected to serve three year terms
expiring in June, 2001, upon the election and qualification of their successors.
Mr. Templeton has declined to be nominated for a new term. Messrs. Howard,
Bradford, Miller and Norbert E. Woodhams have been nominated for these terms by
the Board of Directors. One Class II director will
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<PAGE> 7
be elected to a term expiring in 2000, and one Class III director will be
elected to a term expiring in 1999, upon the election and qualification of their
respective successors. Mr. Puzder and Mr. Foley, respectively, have been
nominated for these terms.
It is the intention of the persons named in the enclosed Proxy to vote
the shares covered thereby for the election of the three nominees set forth
below, for terms expiring as indicated.
----------------------------------------
CLASS I - NOMINEES FOR ELECTION AS DIRECTORS for a term expiring June, 2001.
RICHARD F. HOWARD, 48, became a director in 1987 and has served as
Chairman of the Board of Directors since 1993. He also serves as Secretary to
the corporation. Mr. Howard has served as Executive Vice President of the
Company from 1989-1993, and Chief Financial Officer and Treasurer from
1989-1994. Mr. Howard has been Secretary and Treasurer of the Company's
management firm, HERTH Management, Inc. and RSH Management, Inc. since 1993.
L. DENT MILLER, was appointed by the Board in May, 1998, to fill one of
the two new directorships created by the Shareholders at their last meeting. He
presently serves the Company as President of Claremont Restaurant Group, LLC,
the Company's restaurant subsidiary, having served as President and Chief
Executive Officer of Sagebrush, Inc. from 1990 to January 1998. Mr. Miller, 64,
was a Fresh Foods executive officer from 1984 to 1988 and a Fresh Foods director
from 1987 to 1988.
E. EDWIN BRADFORD was first elected to the Fresh Food Board in 1993.
Mr. Bradford is owner of Bradford Communications, Inc., a Hickory, North
Carolina marketing and advertising firm which he founded in 1977. Mr. Bradford
is 55 years old.
NORBERT E. WOODHAMS, 52, is a new nominee for director. Mr. Woodhams
serves as President of Pierre Foods, LLC, the Company's food processing
subsidiary, since the acquisition of the Pierre Foods division of Tyson Foods,
Inc. by the Company in June, 1998. Prior to the acquisition, he served from 1994
to 1998 as President of Hudson Specialty Foods, a food processing division of
Hudson. Upon the acquisition of Hudson by Tyson Foods, Inc. in January 1998, Mr.
Woodhams became President of the Pierre Foods division of Hudson. Prior to
joining Hudson, Mr. Woodhams held the position of Executive Group Vice President
for the Pork and Beef Division of Tyson from 1990 through 1994.
-------------------------------------------
CLASS II - NOMINEE FOR ELECTION AS DIRECTOR - for a term expiring June, 2000.
ANDREW F. PUZDER was appointed in May, 1998, to fill the unexpired term
of Richard F. Hendrickson, who resigned for business reasons. He is Executive
Vice President of Fidelity National Financial, Inc. ("Fidelity National"), an
Anaheim, California-based title insurance underwriter, Executive Vice President
and General Counsel of CKE Restaurants,
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<PAGE> 8
Inc., ("CKE Restaurants") an Irvine, California-based restaurant holding company
for the Carl's Jr. and Hardee's restaurant chains, among others. He also serves
as Chief Executive Officer and director of GB Foods Corporation, which owns and
operates the Green Burrito restaurant chain. Prior to joining Fidelity National
in 1995, Mr. Puzder had been an attorney in private practice in California since
1991. Mr. Puzder, 47, is also a director of Rally's Hamburgers, Inc. ("Rally's")
and of Javelin, Inc.
------------------------------------------
CLASS III - NOMINEE FOR ELECTION AS DIRECTOR - for a term expiring June, 1999.
WILLIAM P. FOLEY II, 53, was appointed by the Board in May, 1998, to
fill one of the two new directorships created by the Shareholders at their last
meeting. He is Chairman of the Board and Chief Executive Officer of Fidelity
National, positions he has held since 1986. He has also served since 1995 as
Chairman of the Board and Chief Executive Officer of CKE Restaurants. Mr. Foley
also serves on the Boards of Directors of Rally's Hamburgers, Inc. ("Rally's"),
Checkers Drive-In Restaurants, Inc., Star Buffet, Inc., Micro General
Corporation and Data Works Corporation.
-------------------------------------
CLASS II - DIRECTORS CONTINUING IN OFFICE for a term expiring June, 1999.
JAMES C. RICHARDSON, JR. became a director in 1987. Mr. Richardson is
Fresh Food's Chief Executive Officer and Vice Chairman of the Board of
Directors, positions he assumed in 1993 and 1996, respectively. He has served
Fresh Foods as an executive officer since 1987, including Executive Vice
President from 1989-1993, and President from 1993-1996. Since 1993 Mr.
Richardson has been President of HERTH Management, Inc., the Company's
management firm, and RSH Management, Inc. He is 49 years old.
BOBBY G. HOLMAN, 62, served asFresh Food's Chief Financial Officer and
Treasurer from 1994 until his retirement in February, 1997. Prior to joining
Fresh Foods, he had been an Assistant Vice President with Aetna Life & Casualty
Insurance Company in Hartford, Connecticut, and managing director of the Food
Industry segment of Aetna's Bond Investment Department, since 1985. Mr. Holman
is 62 years old, and has served as a director since 1994. He is a member of the
Executive Compensation, Sensitive Transactions, and Audit Committees.
----------------------------------
CLASS III - DIRECTORS CONTINUING IN OFFICE for a term expiring June, 2000.
DAVID R. CLARK is Fresh Food's President and Chief Operating Officer, a
position he was appointed to in 1996. From 1994-1996, he served as Executive
Vice President and Chief Operating Officer of Bank of Granite, located in
Granite Falls, North Carolina. Prior to joining Bank of Granite, Mr. Clark
served 13 years with BB&T, a bank and trust
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company with headquarters in Wilson, North Carolina, serving in various
capacities, including President of BB&T of South Carolina, and President of the
Northwest Region of North Carolina. Mr. Clark, 41, has been a member of the
Board since 1996.
WILLIAM R. MCDONALD III, 63, has been a director since 1991, and serves
on the Executive Compensation, Sensitive Transactions and Audit Committees. He
is Branch Manager of American Pharmaceutical Services, a subsidiary of Living
Centers of America, that provides pharmaceutical needs and prescription services
to nursing homes. He has held this position with American or its predecessors
since 1989. Mr. McDonald also serves as Mayor of the City of Hickory, an
elective office he has held since 1981.
LEWIS C. LANIER is a member of the law firm of Horger, Horger, Lanier,
Culclasure & Knight, LLP, of Orangeburg, South Carolina, joining this firm's
predecessor in 1985. Mr. Lanier, who was first elected to the Board in 1988,
serves on the Executive Compensation, Sensitive Transactions and Audit
Committees, and is 49 years old.
---------------------------
Should any of the foregoing nominees become unavailable for any reason,
the persons named in the enclosed proxy intend to vote for such other persons as
the present Board may nominate.
Board Meetings and Committees of the Board. Fresh Food's Board held
____ regular meetings and two telephonic meetings during the past fiscal year.
The Board has appointed Audit, Executive Compensation, and Sensitive
Transactions Committees, the members of which are indicated in the foregoing
information on nominees. The full Board nominates candidates for Board
membership.
The Audit Committee, established in 1978 and consisting of three
outside directors, met ____ times during the past fiscal year. The Committee
reviews external audit plans and activities, reviews the Company's financial
controls, approves all significant fees for audit and non-audit services
provided by the independent auditor and recommends to the Board the selection or
retention of independent auditors.
The Executive Compensation Committee, established in 1978, which
consists of three outside directors, sets and approves changes in executive
compensation, an recommends to the Board changes in the Company's executive
compensation arrangements. All proposals concerning executive compensation are
first brough before this Committee; upon an affirmative recommendation of the
Committee, proposals proceed to the full Board for consideration. The full Board
is free to accept or reject the recommendation of the Committee. This Committee
met ____ times during fiscal 1998.
The Sensitive Transactions Committee, established in 1983, monitors and
reviews for fairness certain transactions between the Company and its officers
and directors. This Committee reviews all such transactions and recommends their
approval or rejection to the full Board. The full Board is free to accept or
reject the recommendation of this Committee. This Committee, which met ____
times during the past fiscal year, consists of three outside directors.
During the past year, al incumbent directors attended at least 75% of
the aggregate of the meetings of the Board and committees on which they served.
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Directors Compensation.
During fiscal 1998, independent directors were paid $2,000 per meeting
attended. Directors who are employees of the Company or are members of the HERTH
group, or who have material contracts with the Company, continue to receive no
payment for their service as directors. All directors at February 20, 1998 were
granted immediately-exercisable ten-year options to purchase 15,000 shares of
the Company's common stock at a price of $16.00 per share.
EXECUTIVE COMPENSATION
Cash Compensation of Executive Officers.
The following information relates to compensation paid by the Company
to its Chief Executive Officer and to three other individuals who served the
Company as executive officers (collectively, the "Named Executive Officers of
the Company"). No other executive officers of the Company received annual salary
and bonus in fiscal 1998 of at least $100,000.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------------ ------------
Name and Fiscal Other Annual Option
Principal Position Year Salary Bonus Compensation Awards
- ------------------ ---- ------ ----- ------------ ------
<S> <C> <C> <C> <C> <C>
Richard F. Howard 1998 (1) -0- $ 750(2) 40,000
Chairman of the Board 1997 (1) -0- -0- -0-
1996 (1) -0- -0- -0-
James C. Richardson, Jr 1998 (1) -0- $ 6,925(3) 215,000
Vice Chairman of the 1997 (1) -0- 9,664(4) -0-
Board and Chief 1996 (1) -0- -0- -0-
Executive Officer
David R. Clark 1998 (5) 152,064 (6) 215,000
President and Chief 1997 (5) 73,500 $ 51,720(7) 100,000
Operating Officer 1996 -- -- -- --
James M. Templeton 1998 (1) -0- $ 4,012(8) 40,000
Senior Vice President, 1997 (1) -0- 2,204(9) -0-
Real Estate 1996 (1) -0- 1,500(10) -0-
</TABLE>
- ------------
(1) No salary was paid by the Company to this individual, who was instead
compensated by HERTH. The Company currently pays HERTH $1.5 million per
fiscal year. See "Certain Relationships and Related Party
Transactions."
(2) Consists of country club dues.
(3) Includes $3,845 in life insurance premiums and $2,580 in country club
dues.
(4) Consists of $7,084 in life insurance premiums and $2,580 in country
club does.
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<PAGE> 11
(5) Excludes $200,000 and $126,800 paid by the Company for fiscal 1998 and
fiscal 1997, respectively, which amounts were reimbursed in full by
HERTH. See "Management -- Employment Contracts and Change in Control
Agreements" and "Certain Relationships and Related Party Transactions."
(6) Did not exceed 10% of the individual's annual salary and bonus. (7)
Includes a one-time bonus of $50,000 paid upon joining the Company.
(8) Includes $2,112 in country club dues and $1,500 as the Company' s
matching payment under an employee stock purchase plan.
(9) Consists of $704 in country club dues and $1,500 as the Company's
matching payment under an employee stock purchase plan.
(10) Consists of the Company's matching payment under an employee stock
purchase plan.
Option Grants in Last Fiscal Year
The following table presents information relating to option grants made
during fiscal 1998 to the Named Executive Officers of the Company and the
potential realizable value of each grant assuming annualized appreciation of the
Company common stock at an annual rate of either 5% or 10% over the term of the
option.
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
-------------------------------------------------------- Annual Rates of
Number of % of Total Stock Price
Shares Options Exercise Appreciation
Underlying Granted to or Base for Option Term
Options Employees in Price Expiration -------------------------------
Name Granted Fiscal Year Per Share Date 5% 10%
- ---- ------- ----------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard F. 40,000(1) 3.0 $ 16.00 2/20/08 402,400 1,019,968
Howard
James C. 215,000(1) 15.9 16.00 2/20/08 2,162,900 5,482,328
Richardson, Jr.
David R. 215,000(1) 15.9 16.00 2/20/08 2,162,900 5,482,328
Clark
James M. 15,000(1) 1.1 16.00 2/20/08 150,900 382,488
Templeton
25,000(2) 1.9 16.00 2/20/08 251,500 637,480
</TABLE>
- -------------
(1) Such options are presently exercisable.
(2) Such options vest at a rate of 20% per year over five years. The first
20% are exercisable beginning February 20, 1999.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
The following table presents certain information about stock options
exercised by the Named Executive Officers of the Company during fiscal 1998 and
the value of unexercised options held by them at February 27, 1998.
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<TABLE>
<CAPTION>
Shares Acquired No. Of Shares Value of Unexercised
on Exercise Underlying Unexercised In-the-Money Options
----------------------- Options at February 27, 1998 at February 27, 1998(1)
Value -------------------------------- -------------------------------
Name No. Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Howard 50,000 $905,000 115,000 -0- $1,193,750 -0-
James C. Richardson, Jr. 125,000(2) -- 215,000 -0- 430,000 -0-
David R. Clark -0- -0- 275,000 40,000 1,157,200 $484,800
James M. Templeton 12,500 250,625 65,000 25,000 770,000 50,000
</TABLE>
- --------------
(1) The closing price of the Company's common stock on February 27, 1998
was $18.00 per share.
(2) Mr. Richardson transferred all of these options to Capital Factors,
Inc. ("Capital Factors") on November 13, 1997. The unrealized gain on
shares received by Capital Factors was $2,415,625 on the date of
receipt. The gain realized by Capital Factors on exercise of the
options was $2,571,875. Mr. Richardson owns 50% of the outstanding
stock of Capital Factors.
Employment Contracts and Change in Control Agreements
On June 30, 1996, Mr. Clark and the Company executed an Employment
Agreement (the "Clark Employment Agreement") providing that Mr. Clark would
serve as President and Chief Executive Officer of the Company for a term of
three years at an annual base salary of $200,000 and an annual bonus based on
the Company's financial performance. During fiscal 1997 and fiscal 1998, Mr.
Clark's salary was paid by the Company and reimbursed in full by HERTH. See
"Certain Relationships and Related Party Transactions." In the event Mr. Clark's
employment is terminated by the Company without cause or Mr. Clark resigns from
employment for good reason during the initial three-year term, then the Company
is obligated to pay him a lump sum severance payment equal to the total sum of
his base salary as would be due in the aggregate for the remainder of the
three-year term. In the event of a termination without cause or a resignation
for good reason during any renewal term of the Clark Employment Agreement, such
lump sum severance payment shall equal three months of Mr. Clark's then-existing
base salary. Under the Clark Employment Agreement, the Company granted to Mr.
Clark options to purchase 100,000 shares of the Company's common stock and
agreed to consider Mr. Clark for participation in any subsequent options made
available to senior management of the Company in the discretion of the Company's
Board. The Company also agreed to appoint Mr. Clark to full the first available
vacancy on the Company's Board. Mr. Clark subsequently filled this vacancy and
currently serves as a member of the Company's Board. In addition, the Company
agreed to obtain coverage for Mr. Clark under a directors' and officers'
liability insurance policy and to indemnify Mr. Clark to the fullest extent
permitted by applicable law in the event Mr. Clark is made a party to certain
threatened or pending actions, suits or proceedings by reason of his performing
services as an officer or director of the Company. The Clark Employment
Agreement was subsequently amended (the "Amended Clark Employment Agreement") to
increase Mr. Clark's annual base salary to $350,000, of which $200,000 is to be
reimbursed to the Company by HERTH, and to provide Mr. Clark an annual bonus
based upon the Company's profitability. The Amended Clark Employment Agreement
also grants Mr. Clark options to purchase 215,000 shares of the Company's common
stock and provides Mr. Clark with a special one-time bonus of $375,000 upon the
closing
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of the acquisition of Pierre Foods from Tyson Foods, Inc.. The Amended Clark
Employment Agreement has a term of five years, expiring February 28, 2003.
Each of Messrs. Clark, Hefner, Richardson, Howard, Templeton, Miller
and Woodhams (each, an "Executive") has entered into a Change in Control
Agreement with the Company (collectively, the "Change in Control Agreements").
The Change in Control Agreements provide that, if a change in control of the
Company occurs, then the following benefits will be provided by the Company:
three times the amount of the annual base salary of the Executive; three times
the amount of the largest annual cash bonus paid or payable to such person; the
aggregate spread between the exercise prices of all outstanding unexercised
options of the Company and the higher of the closing price of the Company's
common stock as of the effective date of the Change in Control of the Company or
the highest price paid in connection with a change in control of the Company;
and a "gross-up" payment for all tax liabilities resulting from payments under
the Change in Control Agreements. A change in control of the Company is
considered to have occurred if: (1) the individuals who constituted the
Company's Board as of the date of the Change in Control Agreements cease to
constitute a majority of the Company's Board; (2) any "person" (as defined in
the Change in Control Agreements) acquires 15% of the Company's common stock;
(3) any of certain business combinations are consummated, unless the beneficial
owners of the Company's common stock before such combination own more than 50%
of such stock after the business combination; or (4) the Company is liquidated
or dissolved. Payments under the Change in Control Agreements are payable upon a
change in control of the Company, whether or not an Executive's employment is
terminated. The term of each Change in Control Agreement is ten years unless it
expires earlier upon the termination of an Executive's employment.
Report Of The Executive Compensation Committee
It is the responsibility of the Executive Compensation Committee to
advise management and the Board of Directors on matters pertaining to
compensation arrangements for executive employees, as well as for the
administration of the Company's stock option plans. The members of this
committee are all independent, non-employee directors. Following review and
approval by the Executive Compensation Committee, all issues pertaining to
executive compensation are submitted to the full Board of Directors for
approval.
Compensation Principles.
In determining compensation for executive officers, the Company
believes that compensation should be 1) based in part upon the Company's
performance, by the use of bonuses or stock options which do this, 2) based in
part upon the individual contributions and attainment of goals of each officer
and the performance of management as a group, and 3) based in part upon
compensation paid by other companies to similarly situated management.
The Company's executive compensation program consists of salary, bonus,
long-term compensation and other benefits. Specific targets are not utilized by
the Committee in determining the level of any of these individual components of
overall compensation. Rather, the Committee seeks to formulate an overall
compensation package which approximates in value the median range of overall
compensation paid to executives of the comparison group. Overall compensation
paid
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<PAGE> 14
to the Company's executives in fiscal 1997 was comparable to the median of
overall compensation paid to the comparison group.
Three of the Company's top officers (Messrs. Howard, Richardson, and
Templeton) are compensated pursuant to a Management Services Agreement with
HERTH Management, Inc. (see CERTAIN TRANSACTIONS) entered in 1993, and which was
renewed in 1995, upon ratification by the shareholders, for an additional
three-year term beginning in 1996. Mr. Clark's compensation is partially from
HERTH and partially from the Company (see Employment Contracts and Change in
Control Agreements).
The Committee uses a comparison group of similarly situated companies
to compare its overall compensation. This is the same group that the Company
uses in comparing shareholder returns over the past five years (see PERFORMANCE
GRAPH). Also, the Committee intermittently retains a private economist to review
compensation paid under the Management Services Agreement for its
reasonableness. The Committee believes that these are two appropriate methods of
comparing compensation.
Section 162(m) of the Internal Revenue Code imposes a limit, with
certain exceptions, on the amount a publicly held corporation may deduct for
compensation paid or accrued with respect to its five most highly compensated
officers. The Company does not feel that the fiscal 1997 compensation exceeded
this limit, and the Committee has not established a policy should the limit be
exceeded by future compensation.
Executive Compensation.
The Committee measures management's performance using longer-term (l1/2
to 2 years) objectives of the Company, and developing criteria based upon these
longer-term goals. The Committee reviews the Company's business plan, as
approved by the Board of Directors, and determines whether the Company has met
its goals thereunder, as well as whether individual officers have accomplished
the goals assigned to them. Several elements of the performance of an officer
are based upon non-numerical performance criteria, such as level of
responsibility in the Company, comparable compensation of other executives,
individual merit performance or improvements in administration; other elements
are tied to management's performance as a group in achieving corporate goals,
such as financial performance, profit margins, the elimination of waste in
manufacturing, increase of working capital, and acquisitions deemed to be
advantageous to the Company. The Committee also compares the Company's return to
shareholders with that for other similarly situated companies in a peer group
approach. No mathematical weights are assigned to these individual criteria.
The performances of executive officers compensated under the HERTH
Agreement, like those of other executive officers of the Company, are evaluated
by the Committee using the criteria previously set forth. Although the
compensation payable to HERTH is only adjustable every three years, the
Committee feels that the Company has the authority, under principles of contract
law, to re-negotiate or even terminate the Management Services Agreement, should
the officers employed under this agreement fail to substantially comply with the
terms of the agreement.
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Performance based-criteria are generally considered as a whole, so that
specific performance targets may be waived or adjusted as long as, on the whole,
performance targets have been met. Concerning this aspect of compensation, the
Committee considered that management has met and surpassed all goals for them by
the Board, including meeting and exceeding budget objectives for the Company's
pre-tax earnings completion of certain acquisitions, improved investor
communication and relationships, reduction of non-core properties, modification
of corporation debt, and meeting goals for reduction of corporate overhead. The
Committee also considered management's timely actions in positioning the Company
for future growth.
In hiring new officers for Fresh Foods, consideration is given to
compensation arrangements in previous employment, compensation averages for such
officers in the food service industry, and to structure a compensation package
to create incentives to achieve individual and corporate goals.
Chief Executive Officer Compensation.
Mr. Richardson's compensation as Chief Executive Officer (subsumed
under the HERTH agreement), and the evaluation of his performance as Chief
Executive Officer, is consistent with the compensation principles described
above and reflected the performance of the Company and Mr. Richardson.
Determination of adequate compensation was qualitative in nature and based upon
a variety of factors, including comparison group compensation data, attainment
of various corporate goals, financial and operating performance, individual
performance and other factors. Specifically, important corporate goals of sales,
profitability and certain acquisitions were achieved, and his leadership in
achieving these goals were considered by the Committee.
The Executive Compensation Committee
Lewis C. Lanier, Chairman
William R. McDonald III
Bob G. Holman
Stock Price Performance Graph.
The following graph presents a five year comparison of cumulative
shareholder returns for the Company, the Standard & Poor's Composite Index and a
Company-constructed peer group that reflects the performance of various
companies that are similar to the Company in industry or line of business, over
the five year period beginning February 26, 1993 and ending February 27, 1998.
The graph assumes that $100 is invested on February 26, 1993, in Fresh Foods,
Inc. common stock, the Standard & Poor's Composite Index and in the Company
constructed peer group.
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<PAGE> 16
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED FEBRUARY, 1997
[GRAPH HERE]
<TABLE>
<CAPTION>
Index Year Year Year Year Year
at Ending Ending Ending Ending Ending
2/26/93 2/25/94 2/24/95 2/23/96 2/28/97 2/27/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Fresh Foods, Inc.:
S&P Composite Index:
Peer Group:
</TABLE>
The Company-constructed peer group consists of Family Steakhouses of
Florida, Flagstar Companies, Inc., Flowers Industries, Inc., Interstate Bakeries
Corp., Perkins Family Restaurant LP, Piemonte Foods Corp., Stacey's Buffet,
Inc., and Thorne Apple Valley, Inc. The returns of each group member were
weighted according to the member's stock market capitalization at the beginning
of each period for which a return is indicated.
Compensation Committee Interlocks and Insider Participation
During fiscal 1998, the Executive Compensation Committee of the
Company's Board consisted of Messrs. Lanier, McDonald and Richard F.
Hendrickson, none of whom was an officer or employee of the Company or any of
its subsidiaries during fiscal 1998 or was formerly an officer of the Company or
any of its subsidiaries. See "Certain Relationships and Related Party
Transactions."
Page 14
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
HERTH Management, Inc. ("HERTH") provides management services to the
Company, reviews and supervises financing, provides cost analysis services, real
estate services, strategic planning services and reviews franchisee
relationships. HERTH provides the full-time services of Messrs. Howard,
Richardson, and Templeton for an annual fee of $1.5 million per year, and
reimburses the Company for a portion of the compensation of Mr. Clark. The
Company's contract with HERTH expires in 2002. The shareholders of HERTH are
Messrs. Richardson, Templeton, Edgell and Columbia Hill, L.L.C. ("Columbia"),
whose equity owners are Messrs. Clark, Richardson and Hefner. The Company paid
HERTH $1.5 million in fiscal 1998.
The Company maintains comprehensive insurance coverages through
County-Wide Insurance Agency, Inc. ("County-Wide"), whose principal owner is
Charles F. Connor, Jr. ("Connor"). Connor, a consultant to the Company, owned
11.9% of the Company's outstanding common stock at June 5, 1998. County-Wide
received payments of $2.2 million during fiscal 1998 in connection with such
insurance coverage, of which amounts it retained approximately 7% as
commissions.
Denver Equipment Company ("Denver") and Howard Furniture Company
("Howard Furniture") sell restaurant equipment and supplies, and restaurant
furnishings, respectively, to the Company. During fiscal 1998, Denver was paid a
total of $1.8 million, and Howard Furniture a total of $57,000, for purchases
made by the Company. These companies had as their majority owner Richard S.
Howard, the late father of director Mr. Howard; Mr. Connor has a 10.0% equity
interest in Denver.
The Company utilizes Bradford Communications, Inc. ("BCI") for public
and investor relations and graphic design services. During fiscal 1998, the
Company paid BCI a total of $449,000 for such services. The owner of BCI, Mr. E.
Edwin Bradford, has been a director of the Company since 1992.
HS Traveltime, Inc. ("HS") provides travel agency services to the
Company. During fiscal 1998, HS was paid a total of $76,000 for such services.
Mr. Howard has a 50.0% equity interest in HS.
In January 1996, the Company received 111,983 shares of Sagebrush, Inc.
common stock as part of a transaction leading to the initial public offering of
Sagebrush, Inc. Columbia purchased these shares at $7.00 per share for $783,881,
payable 10.0% in cash with the balance represented by a two-year promissory note
bearing interest at the prime rate and secured by the unconditional guaranties
of Messrs. Richardson, Clark and Hefner. The largest principal amount owed
during fiscal 1998 was $705,493. At the time of the offer, Sagebrush, Inc.
common stock was trading at $7.00 per share. At closing, it was trading at
$7.25.
During fiscal 1998, the Company sold two former restaurant properties
in Panama City, Florida, one former restaurant property in Black Mountain, North
Carolina and one former restaurant property in Eden, North Carolina, all to
Catawba Valley Real Estate, Inc. ("CVRE"), whose principal shareholder is Mr.
Templeton. The two Panama City properties were sold for $650,000 and $350,000,
respectively, with cash down payments to the Company of $130,000 and $10,000,
respectively, and with five-year promissory notes payable to the Company for the
balances bearing interest at 8.5%. The largest principal amounts outstanding
during fiscal 1998 were $517, 115 and $338,114, respectively. The Black Mountain
property was sold for $500,000 in cash, and the Eden property was sold for
$400,000 in cash. The Company determined the purchase price for these four
properties based on comparable sales of similar tracts. Also during fiscal 1998,
the Company sold its 80.0% equity interest in a franchised restaurant in St.
Augustine, Florida to CVRE. The price for the Company's interest in its St.
Augustine franchise was $160,000 in cash, which was the price at which the
remaining 20.0% shareholder had the right to purchase the Company's 80.0%
interest and so was considered by the Company to be the highest price attainable
for the property.
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<PAGE> 18
Mr. Connor had an equity interest in five of the Company's franchised
restaurants at various times during fiscal 1998. Royalties, accounting and
management fees to the Company from these restaurants aggregated $74,000 during
fiscal 1998.
Mr. Howard had an equity interest in three of the Company's franchised
restaurants at various times during fiscal 1998. Royalties, accounting and
management fees to the Company from these restaurants aggregated $111,000 during
fiscal 1998.
Messrs. Connor and Miller had direct or indirect equity interests in 17
restaurant properties leased to the Company during fiscal 1998. Total rents paid
under these leases were $1.3 million during fiscal 1998. Mr. Connor also had a
direct or indirect interest in an additional three restaurants and two corporate
office buildings leased to the Company during fiscal 1998. Rents paid under
these leases were $217,000 in fiscal 1998.
During fiscal year 1998, the Company purchased two parcels of land
located in Lenoir, North Carolina and Denver, North Carolina, to be used for
restaurant locations, from corporations in which Messrs. Miller, Connor and
Richard S. Howard, the late father of Mr. Howard, had equity interests. The
parcels were purchased for $375,000 and $225,000, respectively, in cash. The
Company determined the purchase price for these properties based on comparable
sales of similar tracts.
On January 30, 1998, the Company merged with Sagebrush, Inc., whose
principal shareholders were Messrs. Connor and Miller. Mr. Connor, who was
Chairman of the Board and a director of Sagebrush, entered into a two-year
consulting agreement with the Company. Mr. Miller, who was President, Chief
Executive Officer and a director of Sagebrush, entered into a two-year
employment agreement with the Company. The merger obligated the Company, as the
surviving corporation, to indemnify the directors and officers of Sagebrush,
Inc. and its predecessors from and after the merger against certain liabilities
arising prior to the merger. Additionally, the Company agreed to register under
the Securities Act the shares of Company common stock issued in the merger to
Messrs. Connor and Miller.
William P. Foley II, a director of the Company, has direct and indirect
interests in Hardee's, Checkers, Rally's and Green Burrito. The Company has
recently entered into licensing agreements with such companies to begin
producing and marketing microwaveable Hardee's, Checkers and Rally's sandwiches
and to market Green Burrito products beginning in the summer of 1998.
All material transactions with affiliates of the Company are first
reviewed by the Sensitive Transactions Committee of the Board, which is composed
of three independent directors. Upon recommendation of this Committee, such
transactions are then presented to the Company's Board, where they must be
approved by a majority of the independent directors. Also, the Company
periodically obtains bids, quotations or appraisals from unaffiliated third
parties to assure that the products and services received from affiliates are on
terms at least as fair and equitable to the Company as could have been obtained
from unaffiliated third parties.
AMENDMENT TO THE COMPANY'S BYLAWS (PROXY ITEM NO. 2)
General
The Board of Directors has approved and recommends that the
Shareholders approve, an amendment to the Bylaws of the Company (the "Bylaws
Amendment") which would allow the Board of Directors by majority vote, to
increase or decrease the size of the Board to as few as seven directors or to as
many as 17 directors. As presently in effect, the Company's Bylaws specify that
the Company's Board of Directors consist of eleven directors, and that such
number of directors cannot be changed except with the approval of the
Shareholders.
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The Bylaws Amendment was unanimously approved by the Company's Board of
Directors on May 7, 1998, as the Board deemed it to be advisable and in the best
interest of the Company and all the Shareholders. In the opinion of management,
the Bylaws Amendment will benefit the Shareholders because, if approved, the
Company will have the flexibility to expand its current Board membership as
needed and, if desired, retain the services of additional, well-qualified
persons to serve on the Company's Board of Directors.
[Quote Amendment]
Purpose and Effect
The Board of Directors believes that the Bylaws Amendment will allow
the Company the flexibility to attract and retain additional outside directors
in the future who may provide the Company with business expertise in industries
that are similar or complementary to the Company's food business. For example,
when the Company recruited Messrs. Foley and Puzder as Board members, it found
it necessary to call a Special Meeting of Shareholders in order to expand the
size of the Board to expeditiously add these two members to the Board.
Additionally, the Company currently does not have the ability to
provide a seat on the Board of Directors to a new executive officer or to an
officer of another corporation should the Company decide to undertake a merger
or acquisition, and expanding the Board would allow the Company to provide a
director position to such an officer. By way of example, when the Company hired
Mr. Clark as its President and Chief Operating Officer, it was unable to grant
him a seat on the Board, but was only able to promise him a seat when one became
available. Likewise after the Sagebrush merger and the Pierre acquisition,
Messrs. Miller and Woodhams, respectively, could not immediately receive seats
on the Board, but were forced to wait until vacancies occurred or the Board
membership was expanded by Shareholder action.
Also, the Bylaw Amendment gives the Board the ability to reduce the
size of the Board if it becomes unwieldily or if attrition occurs and the Board
does not desire to fill all vacancies.
Required Vote
The affirmative vote of a majority of the outstanding shares of Common
Stock present and entitled to vote at the Annual Meeting is required to approve
the Bylaw Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
AMENDMENT TO THE COMPANY'S 1997 INCENTIVE STOCK OPTION PLAN (PROXY ITEM NO. 3)
General
The Board of Directors has approved and recommends that the
Shareholders ratify an amendment to the Fresh Foods, Inc. 1997 Incentive Stock
Option Plan (the "Plan") which would increase the number of shares subject to
the Plan from 500,000 to 1,000,000.
The Shareholders at their Annual Meeting on June 26, 1997, approved and
ratified the Plan. The Plan, as presented at the 1997 Annual Meeting, was
applicable to not more than 500,000 shares of the Company's common stock.
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<PAGE> 20
This Amendment (the "ISOP Amendment") was unanimously approved by the
Company's Board of Directors on February 23, 1998, as the Board deemed it
advisable and in the best interests of the Company and all the Shareholders. In
the opinion of Management, the ISOP Amendment will be able in the future to
attract and retain strong management level personnel by promising them a share
in the Company's future.
Purpose and Effect
Since the Shareholders ratified the Plan at the 1997 Annual Meeting,
Management has made effective use of the Plan, particularly in attracting
certain key employees of both Sagebrush, Inc. And the Pierre Foods division of
Tyson Foods, Inc. Upon the Company's acquisition of these businesses,
availability of the Plan has allowed Management to bring such key employees as
L. Dent Miller, President of Sagebrush, Inc. And Norbert E. Woodhams, President
of Pierre Foods, and key members of their staffs into active participation in
their respective divisions, insuring the Company and its Shareholders a smooth
transition and continuing operations success.
In order to maintain and continue its growth, Management feels that it
must have a continuing source of options with which to entice new key employees.
Incentive stock options are especially attractive to employees, since
the employee only recognizes income upon sale of the stock subject to option,
rather than upon exercise of the option itself. Since options are issued at the
common stock's current market price, the employee receives no immediate benefit,
but shares in any future increase in the Company's value. This increase in value
will be brought about by the employee's hard work and contribution to the
Company's success.
To protect the tax-advantaged value of these stock options, material
changes to the Plan must be submitted to the Shareholders for their
consideration and ratification.
Required Vote
The affirmative vote of a majority of the outstanding shares of Common
Stock present and entitled to vote at the Annual Meeting is required to approve
the ISOP Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of Deloitte & Touche, LLP has served as independent auditors
for the Company since 1982. A representative of Deloitte & Touche, LLP will
attend the annual meeting to respond to appropriate questions raised by
shareholders.
OTHER MATTERS
As of the date of this Proxy Statement, the Fresh Foods Board knows of
no matters that will be presented for consideration at the Annual Meeting other
than as described in this Proxy Statement. If any other matters shall properly
come before the Annual Meeting, or any adjournment or postponement of the Annual
Meeting and be voted upon, then the enclosed proxies will be deemed to confer
discretionary authority on the individuals named as proxies therein to vote the
shares
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represented by such proxies as to any such matters. The persons named as proxies
intend to vote or not to vote in accordance with the recommendation of the
management of Fresh Foods.
1999 SHAREHOLDER PROPOSALS
The Company welcomes comments or suggestions from its shareholders,
including any recommendations shareholders may have as to future directors of
the Company. In the event that a shareholder desires to have a proposal formally
considered at the 1999 Annual Shareholders' Meeting, and included in the Proxy
Statement for that meeting, the proposal must be received in writing by the
Company on or before February 20, 1999.
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APPENDIX A
FRESH FOODS, INC.
3437 EAST MAIN STREET
CLAREMONT, NORTH CAROLINA 28610
THIS PROXY IS SOLICITED ON BEHALF OF WSMP'S BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON JUNE 25, 1998, AT 10:00 A.M.
The undersigned hereby appoints Richard F. Howard, James C. Richardson,
Jr., David R. Clark and James E. Harris, and each or any of them, proxies for
the undersigned, with full power of substitution, to represent the undersigned
and to vote all shares of Common Stock that the undersigned may be entitled to
vote at the Annual Meeting of Shareholders to be held in Cincinnati, Ohio, on
June 25, 1998, at 10:00 a.m., or at any adjournment or postponement thereof. The
undersigned further authorizes such proxies to vote in their discretion upon
such matters as may properly come before such Annual Meeting or any adjournment
or postponement thereof. Receipt of Notice of the Annual Meeting of Shareholders
and of the Proxy Statement is hereby acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3. THE WSMP BOARD OF DIRECTORS RECOMMENDS VOTING
"FOR" SUCH PROPOSALS.
1. ELECTION OF DIRECTORS (Item No. 1).
[ ] VOTE FOR all six nominees
(Howard, Miller, Bradford, Woodhams, Foley, Puzder)
to terms of 1 to 3 years, as set forth in this Proxy
Statement
[ ] VOTE WITHHELD from all nominees
To vote for all directors, mark the VOTE FOR box. To withhold voting
for all nominees, mark the VOTE WITHHELD box. To withhold voting for a
particular nominee, mark the VOTE FOR ALL EXCEPT box and enter name(s)
Of the exception(s) in the space provided; Your shares will be voted
for the remaining Nominees.
[ ] VOTE FOR ALL EXCEPT
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(CONTINUED AND TO BE SIGNED ON REVERSE)
2. Approval of Bylaw amendment to change number of Directors to not less
than seven nor more than 17.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of Amendment to 1997 Incentive Stock Option Plan to increase
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: , 1998.
----------------------------
----------------------------------------
-----------------------------------------
Signature of Shareholder(s)
Important: Please sign exactly as your
name(s) appears hereon. Where shares are
held jointly, both holders should sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give your full title as such. If the holder
is a corporation, execute in full corporate
name by authorized officer.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
