<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:
[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 under Rule 14a-12.
FRESH FOODS, INC.
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(Name of Registrant as Specified in Its Charter)
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(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.
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[ ] 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
[Preliminary Copy]
FRESH FOODS, INC.
9990 PRINCETON ROAD
CINCINNATI, OHIO 45246
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------------------
To the Shareholders of
Fresh Foods, Inc.
The Annual Meeting of Shareholders of Fresh Foods, Inc. (the "Company")
will be held at the Wetherington Golf and Country Club, 7337 Country Club Lane,
West Chester, Ohio 45069, on July 27, 2000, at 10:00 a.m., local time, to take
action on the following matters:
1. To elect four directors to three-year terms.
2. To ratify the selection of Deloitte & Touche LLP to serve as
the Company's independent public accountants for the fiscal
year ending March 3, 2001.
3. To approve an amendment to the Articles of Incorporation of
Fresh Foods, Inc. changing the name of the Company to "Pierre
Foods, Inc."
4. To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed June 15, 2000 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.
The Company 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,
PAMELA M. WITTERS
Secretary
Cincinnati, Ohio
July 14, 2000
<PAGE> 3
[Preliminary Copy]
FRESH FOODS, INC.
9990 PRINCETON ROAD
CINCINNATI, OHIO 45246
JULY 14, 2000
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
GENERAL
This Proxy Statement is first being mailed to shareholders on or before
July 14, 2000 and is accompanied by a Notice of Annual Meeting of Shareholders
and a form of proxy solicited by the Board of Directors for use at the Annual
Meeting of Shareholders to be held at the Wetherington Golf and Country Club,
7337 Country Club Lane, West Chester, Ohio 45069, on July 27, 2000, at 10:00
a.m., local time, and at any adjournments or postponements thereof.
SOLICITATION OF PROXIES
A holder of Fresh Foods, Inc. (the "Company" or "Fresh Foods") common
stock may use the accompanying proxy if such shareholder is unable to attend the
Annual Meeting of Shareholders 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 the Company, prior to or at the Annual Meeting of Shareholders, a
written notice revoking the proxy or a duly executed proxy relating to the same
shares bearing a later date; but attendance at the Annual Meeting of
Shareholders will not, in itself, constitute the 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., 9990
Princeton Road, Cincinnati, Ohio 45246. For a notice of revocation or later
proxy to be valid, it must actually be received by the Company prior to the vote
of the shareholders at the Annual Meeting of Shareholders. 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 in a proxy, then the proxy will be voted in
favor of management's nominees for directors and in favor of approval of all
other matters. The Company's Board of Directors is unaware of any matters, other
than those identified herein, that may be presented for action at the Annual
Meeting of Shareholders. If other matters do properly come before the Annual
Meeting of Shareholders, 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 matter will be voted in favor of any adjournment or
postponement of the Annual Meeting of Shareholders for the purpose of soliciting
additional proxies.
<PAGE> 4
The entire cost of this proxy solicitation will be borne by the
Company. In addition to the solicitation of proxies by mail, the Company will
request banks, brokers and other record holders to send proxies and proxy
materials to the beneficial owners of shares and to secure their voting
instructions, if necessary. The Company will reimburse such record holders for
their reasonable expenses in doing so. If necessary, the Company also may 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
June 15, 2000 has been fixed as the record date for determination of
shareholders entitled to notice of and to vote at the Annual Meeting of
Shareholders. Accordingly, only shareholders of record at the close of business
on that date will be entitled to notice of and to vote at the Annual Meeting of
Shareholders. On the record date, there were approximately 1,400 shareholders of
record. The number of outstanding shares of common stock entitled to vote at the
Annual Meeting of Shareholders is 5,871,340.
A majority of the outstanding shares of common stock, represented in
person or by proxy, shall constitute a quorum. In accordance with applicable
law, abstentions will be counted for purposes of determining whether a quorum
exists. Shares represented by proxies returned by a broker that holds the shares
in nominee or "street" name also will be counted for purposes of determining
whether a quorum exists, even if such shares are not voted on matters as to
which discretionary voting by the broker is not allowed ("broker non-votes").
Abstentions and broker non-votes will not be deemed to have been cast either
"for" or "against" any proposals considered at the meeting.
Each share of common stock entitles its holder to one vote. Provided
that a quorum exists, (i) directors will be elected by a plurality of the votes
cast, and (ii) a majority of the votes cast will be required to approve any and
all other matters.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of June 15, 2000, 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 Company's
outstanding common stock, (ii) each director of the Company, (iii) each Named
Executive Officer (as defined below) and (iv) all directors and executive
officers as a group.
<PAGE> 5
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES PERCENT OF
ADDRESS OF OF COMMON STOCK OUTSTANDING
BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK (1)
---------------- ------------------ ----------------
<S> <C> <C>
Columbia Hill, LLC (2) 1,274,034 22.0
P.O. Box 3967
Hickory, NC 28603
HERTH Management, Inc. (3) 1,227,235 21.2
P.O. Box 3967
Hickory, NC 28603
Dimensional Fund Advisors Inc. (4) 358,475 6.2
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
James C. Richardson, Jr. (5) 2,619,958 45.3
P.O. Box 3967
Hickory, NC 28603
James M. Templeton (6) 1,320,778 22.6
P.O. Box 1295
Claremont, NC 28610
Gregory A. Edgell (7) 1,381,149 23.9
3200 Devine Street, Suite 103
Columbia, NC 29205
Larry D. Hefner (8) 1,299,034 22.4
1004 Power Street
China Grove, NC 28023
David R. Clark (9) 1,277,784 22.1
P.O. Box 3967
Hickory, NC 28603
Charles F. Connor, Jr. (10) 422,011 7.3
P.O. Box 519
Claremont, NC 28610
Richard F. Howard (11) 87,569 1.5
5982 Hwy. 150 East
Denver, NC 28037
Norbert E. Woodhams (12) 7,596 *
9990 Princeton Road
Cincinnati, OH 45248
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES PERCENT OF
ADDRESS OF OF COMMON STOCK OUTSTANDING
BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK(1)
---------------- ------------------ ---------------
<S> <C> <C>
Pamela M. Witters (13) 3,601 *
9990 Princeton Road
Cincinnati, OH 45246
E. Edwin Bradford (14) 2,958 *
P.O. Box 3081
Hickory, NC 28603
Bobby G. Holman 2,728 *
4090 Golf Drive
Conover, NC 28613
Andrew F. Puzder 1,000 *
4050 Calle Real, Suite 200
Santa Barbara, CA 93110
William R. McDonald III (15) 860 *
1257 25th Street Pl., SE
Hickory, NC 28602
William P. Foley II (16) -- --
4050 Calle Real, Suite 200
Santa Barbara, CA 93110
James E. Harris -- --
2910 Selwyn Avenue No. 139
Charlotte, NC 28209
Lewis C. Lanier -- --
P.O. Box 518
160 Centre Street, NE
Orangeburg, SC 29115
Bruce E. Meisner -- --
1316 2nd Street NE, Suite No. 8
Hickory, NC 28601
L. Dent Miller -- --
620 Sharon School Road
Statesville, NC 28625
All directors and executive officers 2,749,270 46.5%
as a group (12 persons)
</TABLE>
<PAGE> 7
-----------------
* Less than one percent
(1) The actual number of shares outstanding at June 15, 2000 was 5,781,340.
Each percentage has been calculated on the basis of such number plus
shares subject to outstanding call options exercisable not later than
August 14, 2000. 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 other than the group of
all directors and executive officers.
(2) Consists of (i) 46,799 shares owned of record and (ii) 1,227,235 shares
deemed to be owned beneficially through HERTH Management, Inc.
("HERTH"). All of the shares owned of record by Columbia Hill, LLC
("Columbia") also are 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 of record by Columbia is disclaimed by each owner of Columbia.
(3) All of the shares owned of record by HERTH also are 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 (11.0%). Beneficial
ownership of other than a pro rata interest in the shares owned of
record by HERTH is disclaimed by each shareholder of HERTH.
(4) The information provided for Dimensional Fund Advisors Inc.
("Dimensional") was obtained from a Schedule 13G dated February 4,
2000, filed with the SEC by Dimensional relative to the Company's
common stock. According to the filing, Dimensional is a registered
investment advisor with voting and/or investment power over the shares
disclosed as beneficially owned by it. The filing states that the
shares are actually owned by investment companies, trusts and accounts
advised by Dimensional and that Dimensional disclaims beneficial
ownership of the shares.
(5) Consists of (i) 1,345,924 shares owned of record (including 1,127
shares owned through the Employee Stock Purchase Plan as of March 31,
2000), (ii) 1,227,235 shares deemed to be owned beneficially through
HERTH and (iii) 46,799 shares deemed to be owned beneficially through
Columbia.
(6) Consists of (i) 43,543 shares owned of record, (ii) 1,227,235 shares
deemed to be owned beneficially through HERTH and (iii) 50,000 shares
underlying currently exercisable call options.
<PAGE> 8
(7) Consists of (i) 137,500 shares owned of record, (ii) 2,500 shares
deemed to be owned beneficially through an individual retirement
account (which owns 2,500 shares of record), (iii) 1,227,235 shares
deemed to be owned beneficially through HERTH and (iv) 13,914 shares
deemed to be owned beneficially through Capital Factors, Inc. (which
owns 13,914 shares of record).
(8) Consists of (i) 25,000 shares owned of record, (ii) 1,227,235 shares
deemed to be owned beneficially through HERTH and (iii) 46,799 shares
deemed to be owned beneficially through Columbia.
(9) Consists of (i) 3,750 shares owned of record (including 2,500 shares
owned through the Employee Stock Purchase Plan as of March 31, 2000),
(ii) 1,227,235 shares deemed to be owned beneficially through HERTH and
(iii) 46,799 shares deemed to be owned beneficially through Columbia.
(10) The information provided for this shareholder was obtained from an
amendment to a Schedule 13D dated March 1, 2000, filed with the
Securities and Exchange Commission (the "SEC") by the shareholder
relative to the Company's common stock. According to the filing, this
shareholder shares dispositive power with respect to the shares shown
as owned beneficially by him by virtue of a security interest in the
shares granted to him by Mr. Richardson. The shares shown as owned
beneficially by this shareholder also are included in the shares shown
as owned by Mr. Richardson.
(11) Consists of (i) 75,000 shares underlying currently exercisable call
options and (ii) 12,569 shares owned of record.
(12) Consists of 7,596 shares owned of record (including 744 shares owned
through the Employee Stock Purchase Plan as of March 31, 2000.)
(13) Consists of (i) 1,101 shares owned through the Company's Employee Stock
Purchase Plan at March 31, 2000 and (ii) 2,500 shares underlying
currently exercisable call options.
(14) Consists of (i) 1,200 shares deemed to be owned beneficially through an
individual retirement account (which owns 1,200 shares of record) and
(ii) 1,758 shares owned through the Company's Employee Stock Purchase
Plan at March 31, 2000.
(15) Consists of 860 shares owned of record by this shareholder's spouse.
(16) Mr. Foley disclaims beneficial ownership of 116,600 shares owned by
Fidelity National Financial, Inc., of which Mr. Foley is a director and
executive officer.
<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own ten percent or
more of the Company's common stock to file with the SEC initial reports of
ownership and reports of changes in ownership of the Company's common stock.
Such persons are required by SEC 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, the following persons
failed to make timely filings during the Company's fiscal year ended March 4,
2000 ("fiscal 2000"):
Each of Ms. Witters and Mr. Meisner did not file timely an initial
statement on Form 3.
Each of Messrs. Templeton and Edgell did not file timely a statement on
Form 4.
PROPOSALS TO BE VOTED UPON
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
The Company's Bylaws classify the Board of Directors into three
classes, as nearly equal in number as possible, the members of which serve for
three years. The terms of office of the members of the three classes expire each
year in rotation so that the members of one class are elected at each Annual
Meeting of Shareholders for full three-year terms. Accordingly, the terms of
office of four of the incumbent directors will expire at the Annual Meeting of
Shareholders scheduled for July 27, 2000.
Four Class II directors will be elected to serve three-year terms
expiring in the year 2003 upon the election and qualification of their
successors. Messrs. Clark, McDonald, Lanier and Puzder have been nominated for
these terms by the Board of Directors.
It is the intention of the persons named in the enclosed Proxy to vote
the shares covered thereby for the election of the four nominees set forth
below, for terms expiring as indicated.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS, EACH FOR A TERM EXPIRING IN THE
YEAR 2003:
DAVID R. CLARK, age 43, has been a director since 1996 and Vice
Chairman since 1999. He joined the Company as its President and Chief Operating
Officer in 1996 and held those positions until he became Vice Chairman. From
1994 to 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 worked for 13 years with BB&T, a commercial bank and
trust company. Mr. Clark
<PAGE> 10
served BB&T in various executive capacities, including President of BB&T of
South Carolina during 1993 and 1994.
WILLIAM R. McDONALD III, age 66, has been a director since 1991. From
1989 until his retirement in 1999, he was Branch Manager of American
Pharmaceutical Services, a subsidiary of Mariner Post-Acute Network, or its
predecessors. American Pharmaceutical Services provides pharmaceutical needs and
prescription services to nursing homes. Mr. McDonald serves as Mayor of the City
of Hickory, North Carolina, an elective office he has held since 1981. During
fiscal 2000 he served on the Audit and Sensitive Transactions Committees of the
Company's Board of Directors. He continues to serve on both Committees and
chairs the Sensitive Transactions Committee.
LEWIS C. LANIER, age 51, a director since 1988, is a partner in the
Orangeburg, South Carolina, law firm of Lanier & Knight, LLC. Until he
co-founded that firm in August 1999, he had been a member of the Orangeburg law
firm of Horger, Horger, Lanier & Knight, L.L.P., since joining the firm's
predecessor in 1985. During fiscal 2000 Mr. Lanier served on the Board's
Executive Compensation, Sensitive Transactions and Audit Committees. He
currently serves on the Executive Compensation Committee, which he chairs.
ANDREW F. PUZDER, age 50, has been a director since 1998. He is
President and Chief Executive Officer of Hardee's Food Systems, Inc., Executive
Vice President of Fidelity National Title Insurance Company ("Fidelity Title")
and Executive Vice President of CKE Restaurants, Inc., a California-based
restaurant holding company for the Carl's Jr. and Hardee's restaurant chains,
among others. He also serves as a director of Santa Barbara Restaurant Group,
Inc. and Aspeon, Inc. Mr. Puzder was a partner in the Costa Mesa, California,
law firm of Lewis, D'Amato, Brisbois & Bisgaard from September 1991 to March
1994 and a shareholder in the Newport Beach, California, law firm of Stradling,
Yocca, Carlson & Rauth from March 1994 until joining Fidelity Title in 1995. Mr.
Puzder currently serves on the Executive Compensation Committee of the Company's
Board of Directors.
Should any of the nominees become unavailable for any reason, the
persons named in the enclosed Proxy intend to vote for such other person as the
present Board of Directors may nominate.
CLASS III DIRECTORS CONTINUING IN OFFICE FOR TERMS EXPIRING IN THE YEAR 2002:
WILLIAM P. FOLEY II, age 55, has been a director since 1998. Mr. Foley
has served as Chief Executive Officer and Director of Fidelity National
Financial, Inc. since 1986, as Chairman of the Board and Chief Executive Officer
of CKE Restaurants, Inc. from 1995 through March 2000 and solely as Chairman of
the Board of CKE Restaurants, Inc. since March 2000. He is also Chairman of the
Board of Santa Barbara Restaurant Group, Inc. and Checkers Drive-In Restaurants,
Inc. ("Checkers") and is a director of American National Financial, Inc.,
Miravant Medical Technologies,
<PAGE> 11
Inc. and Micro General Corporation. He currently serves on the Sensitive
Transactions Committee.
JAMES C. RICHARDSON, JR., age 51, a director since 1987, became
Chairman of the Board of Directors on December 16, 1999. From 1993 until then he
had served as Chief Executive Officer of the Company. From 1996 until becoming
Chairman, he had served as Vice Chairman. Mr. Richardson has served the Company
as an executive officer since 1987, including Executive Vice President from 1989
to 1993 and President from 1993 to 1996.
BOBBY G. HOLMAN, age 64, has been a director since 1994. He served as
the Company's Chief Financial Officer and Treasurer from 1994 until his
retirement in 1997. Before joining the Company he served as 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. During fiscal 2000 Mr. Holman was a member of the Executive
Compensation, Sensitive Transactions and Audit Committees of the Board of
Directors. He currently serves on the Audit Committee, which he chairs.
CLASS I DIRECTORS CONTINUING IN OFFICE FOR TERMS EXPIRING IN THE YEAR 2001:
RICHARD F. HOWARD, age 50, has been a director since 1987. He served as
Chairman of the Board of Directors from 1993 until Mr. Richardson became
Chairman in 1999. Mr. Howard served as Executive Vice President of the Company
from 1989 to 1993 and as Chief Financial Officer and Treasurer from 1989 to
1994. He currently serves on the Executive Compensation Committee.
E. EDWIN BRADFORD, age 57, has been a director since 1993. He is the
founder of Bradford Communications, Inc., a Hickory, North Carolina marketing
and advertising firm founded in 1977. Mr. Bradford was a member of the Audit
Committee of the Board of Directors during fiscal 2000. He currently serves on
the Sensitive Transactions Committee.
NORBERT E. WOODHAMS, age 54, a director since 1998, became the
Company's President and Chief Executive Officer on December 16, 1999.
Immediately prior to his election to those offices, Mr. Woodhams was President
of Pierre Foods, LLC, the Company's operating subsidiary, having served in that
position since the Company's acquisition of the Pierre Foods division ("Pierre")
of Tyson Foods, Inc. ("Tyson") in June 1998. From 1994 to 1998, he served as
President of Hudson Specialty Foods, a food processing division of Hudson Foods,
Inc. ("Hudson") . Upon the acquisition of Hudson by Tyson in January 1998, Mr.
Woodhams became President of Pierre. 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. He also served as President and Chief Executive
Officer for Henry House/Holly Farms, a value-added processor of pork products,
from 1987 to 1990.
<PAGE> 12
BRUCE MEISNER, age 50, was elected to the Board of Directors by the
Board itself on February 3, 2000 to fill the unexpired term of L. Dent Miller,
who had resigned from the Board incident to his retirement from the Company. The
proprietor of Bruce E. Meisner Appraisal Company in Hickory, North Carolina, a
company providing real estate appraisal services, Mr. Meisner currently serves
on the Audit Committee.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROXY ITEM NO. 2)
The Board of Directors desires, in accordance with its established
policy, to obtain from the shareholders an indication of their approval or
disapproval of the action of the Board of Directors in appointing Deloitte &
Touche LLP to serve as the independent public accountants of the Company and its
subsidiaries for the Company's fiscal year ending March 3, 2001 ("fiscal 2001").
Deloitte & Touche LLP has been serving the Company and its subsidiaries
as independent public accountants since 1982. Deloitte & Touche LLP has no
direct financial interest or any material indirect financial interest in the
Company or any of its subsidiaries and, while serving as independent public
accountants, has had no connection therewith in the capacity of promoter,
underwriter, voting trustee, director, officer or employee.
Upon the recommendation of the Audit Committee and subject to
shareholder approval, the Board of Directors has appointed Deloitte & Touche LLP
as the Company's independent public accountants for fiscal 2001. In their
deliberations, the Audit Committee and the entire Board considered the
performance of Deloitte & Touche LLP in prior years, as well as the firm's
reputation for integrity and competence. The directors expressed satisfaction
with Deloitte & Touche LLP in these respects.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting of Shareholders and will have the opportunity to speak should they so
desire. They also will be available to respond to appropriate questions from
shareholders attending the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING
RESOLUTION, WHICH WILL BE PRESENTED AT THE MEETING:
"BE IT RESOLVED that the appointment of Deloitte & Touche LLP as
independent public accountants of the Company and its subsidiaries, for fiscal
2001 be and hereby is ratified and approved."
Provided that a quorum exists, a majority of the votes cast will be
required to approve this resolution.
<PAGE> 13
In the event that the resolution is defeated, the adverse vote will be
considered a direction to the Board of Directors to select another firm of
independent public accountants for the following fiscal year. Because of the
difficulty and expense associated with substituting auditors so long after the
beginning of the current fiscal year, however, it is contemplated that the
appointment of Deloitte & Touche LLP for fiscal 2001 will be permitted to stand
unless the Board of Directors finds other good reasons for making an early
change.
APPROVAL OF AMENDMENT TO THE
ARTICLES OF INCORPORATION (PROXY ITEM NO. 3)
The Board of Directors has proposed that the Articles of Incorporation
of the Company be amended to change the name of the Company to Pierre Foods,
Inc. The Board believes that this change is desirable in view of the Company's
sale of its restaurant and ham curing operations and because the Company is
known as Pierre Foods in the food processing industry.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING
RESOLUTION, WHICH WILL BE PRESENTED AT THE MEETING:
"BE IT RESOLVED that the Articles of Incorporation of Fresh Foods, Inc.
be amended to change the name of the Company to Pierre Foods, Inc."
Provided that a quorum exists, a majority of the votes cast will be
required to approve this resolution.
BOARD MEETINGS AND BOARD COMMITTEES
The Company's Board of Directors held four regular meetings and three
special meetings during fiscal 2000. The Board has appointed Audit, Executive
Compensation and Sensitive Transactions Committees. The entire Board nominates
candidates for Board membership and selects the members of its several
Committees. All three Committees are constituted entirely by non-employee
directors.
The AUDIT COMMITTEE, established in 1978, met three times during fiscal
2000. This Committee previews external audit plans and activities, reviews the
Company's financial controls, and recommends to the entire Board the selection
or retention of such independent public accountants. The Audit Committee is
composed entirely of non-employee directors. The Committee's members during
fiscal 2000 were Messrs. Holman (Chairman), Bradford and Lanier. The current
members are Messrs. Holman (Chairman), McDonald and Meisner.
The EXECUTIVE COMPENSATION COMMITTEE, established in 1978, met six
times in fiscal 2000. This Committee sets and approves changes in executive
compensation and recommends to the entire Board changes in the Company's
executive compensation arrangements. All proposals concerning executive
<PAGE> 14
compensation are first brought before this Committee; upon an affirmative
recommendation of the Committee, proposals proceed to the entire Board for
consideration. The Board is free to accept or reject the recommendation of the
Committee. The Executive Compensation Committee is composed entirely of
non-employee directors. The Committee's members during fiscal 2000 were Messrs.
Lanier (Chairman), Holman and McDonald. The current members are Messrs. Lanier
(Chairman), Howard and Puzder.
The SENSITIVE TRANSACTIONS COMMITTEE, established in 1983, met eight
times during fiscal 2000. This Committee monitors and reviews, for fairness,
transactions between the Company, on the one hand, and its executive officers
and directors, on the other. The Committee reviews all such transactions and
recommends their approval or rejection to the entire Board. The Board is free to
accept or reject the recommendation of the Committee. During fiscal 2000 the
Committee's members were Messrs. McDonald (Chairman), Holman and Lanier. The
members are presently Messrs. McDonald (Chairman), Bradford and Foley.
During fiscal 2000, nine of the eleven incumbent directors attended at
least 75% of the meetings of the Board and the Committees on which they served.
Mr. Foley attended 43% of the Board meetings; he served on no Committees. Mr.
Woodhams attended 71% of the Board meetings; he served on no Committees.
SUMMARY COMPENSATION TABLE
The following information relates to compensation paid by the Company
to the two individuals who served as its Chief Executive Officer during fiscal
2000, to the two other individuals who were serving the Company as executive
officers at the end of fiscal 2000 and to two additional individuals who would
have been among the five most highly compensated officers of the Company at the
end of fiscal 2000 but for the fact that they were no longer with the Company at
that time (collectively, the "Named Executive Officers").
<PAGE> 15
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------- Long Term
Name and Fiscal Compensation All Other
Principal Position Year Salary Bonus Other Option Awards Compensation
------------------ ------ --------- ---------- --------- ------------- ------------
($) ($) ($) (# of Shares ($)(1)
Underlying
Options)
<S> <C> <C> <C> <C> <C> <C>
James C. Richardson, Jr 2000 (2) $1,145,748(3) $ 795,522(4) (5) -0-
Former Vice Chairman 1999 (2) -0- (4) 215,000(6) -0-
and Chief Executive 1998 (2) -0- (4) 215,000 -0-
Officer; current
Chairman
David R. Clark 2000 $ 150,000(7) $1,261,969(3) $ 795,522(4) (5) $ 3,200
Former President and 1999 150,000(7) 375,000(8) (4) 215,000(6) 3,200
Chief Operating Officer, 1998 (7) 152,064 (4) 215,000 -0-
current Vice Chairman
Norbert E. Woodhams 2000 $ 275,622 $ 355,007 $ 179,100(4) (5) $ 3,200
Former President, 1999 189,493(9) 62,500 (4) 200,000(6) 2,200
Pierre Foods, LLC; 1998 -- -- -- 200,000 -0-
current President and
Chief Executive Officer
L. Dent Miller 2000 $ 121,154(10) $1,176,648(3) $ 399,294(4) (5) $104,907(11)
Former President, 1999 225,000 -- (4) 100,000(6) -0-
Claremont Restaurant 1998 -- -- (4) 100,000 -0-
Group, LLC
James E. Harris 2000 $ 161,538(12) $ 726,640(3) $ 497,201(4) 75,000(13) $ 1,096
Former Executive Vice 1999 166,372(12) -- (4) 75,000(14) -0-
President, Chief 1998 -- -- -- 25,000 -0-
Financial Officer,
Treasurer and
Secretary
Pamela M. Witters 2000 $ 104,438 $ 73,546 (4) -- $ 652
Chief Financial Officer, 1999 18,750(15) -- (4) 12,500 -0-
Treasurer and 1998 -- -- -- -- -0-
Secretary
</TABLE>
--------------------
(1) Other than with respect to Mr. Miller, includes amounts contributed by
the Company to the Company's 401(k) plan.
(2) No salary was paid by the Company to this individual, who was instead
compensated by HERTH. The Company paid HERTH $3,241,270 in fiscal 2000,
consisting of $1,300,000 pursuant to the HERTH Agreement and an
additional $1,941,270 in the aggregate as bonuses to Mr. Richardson for
his leadership on strategic initiatives. See "Certain Relationships and
Related Party Transactions."
(3) Includes management performance bonuses and transaction success
bonuses.
<PAGE> 16
(4) For fiscal 2000, consists of tax "gross up" payments made in connection
with the payment of transaction success bonuses. For all periods shown,
the value of insurance premiums, company cars and certain other
benefits are excluded, as such items did not exceed 10% of the
individual's annual salary and bonus.
(5) On February 18, 2000, each of the Named Executive Officers cancelled
all outstanding options to purchase common stock that had been issued
and were then outstanding, including options not yet exercisable as
well as options exercisable as of the date of cancellation. No value
was received by any of the Named Executive Officers in connection with
the cancellation of their options.
(6) Certain options granted under the 1997 Special Stock Option Plan and
under the 1997 Incentive Stock Option Plan were repriced on August 27,
1998, reducing the per share option exercise price from $16.00 to
$10.50. The repricing was accomplished by canceling old options and
granting new options at the reduced exercise price.
(7) For each year, excludes $200,000 paid by the Company and offset from
amounts owing to HERTH. See "Employment Contracts and Change in Control
Agreements" and "Certain Relationships and Related Party Transactions."
(8) Includes a one-time bonus of $375,000 paid upon the Company's
acquisition of Pierre in June 1998.
(9) Mr. Woodhams' employment with the Company began in June 1998.
(10) Mr. Miller's employment with the Company terminated in October 1999.
(11) Consists of a lump sum severance payment to Mr. Miller made in
connection with his termination of employment.
(12) Mr. Harris' employment with the Company began in March 1998 and
terminated in December 1999.
(13) All of such options expired subsequent to Mr. Harris' termination of
employment.
(14) Certain options granted under the 1997 Incentive Stock Option Plan were
repriced on August 27, 1998, reducing the per share option exercise
price from $16.00 to $10.50 on shares granted on February 23, 1998 and
from $15.25 to $10.50 on shares granted on June 25, 1998. The repricing
was accomplished by canceling old options and granting new options at
the reduced exercise price.
(15) Ms. Witters' employment with the Company began in November 1998. She
was appointed Chief Financial Officer on December 1, 1999. Ms. Witters'
annual salary is $153,000.
<PAGE> 17
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents information relating to option grants made
during fiscal 2000 to the Named Executive Officers of the Company and the
potential realizable value of each grant assuming appreciation of the Company's
common stock at an annual rate of either 5% or 10% over the stated term of the
option.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT
NUMBER OF OF OPTIONS ASSUMED ANNUAL RATE
SHARES GRANTED TO OF STOCK
UNDERLYING EMPLOYEES IN EXERCISE OR PRICE APPRECIATION
OPTIONS FISCAL BASE PRICE EXPIRATION FOR OPTION
NAME GRANTED YEAR PER SHARE DATE TERM
---- ---------- ------------ ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
James C. Richardson, Jr -- -- -- -- -- --
David R. Clark -- -- -- -- -- --
Norbert E. Woodhams -- -- -- -- -- --
L. Dent Miller -- -- -- -- -- --
James E. Harris 75,000(1) 45% $5.75 N/A -- --
Pamela M. Witters -- -- -- -- -- --
</TABLE>
------------------------
(1) Such options expired subsequent to Mr. Harris' termination of
employment in December 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 2000
AND FISCAL YEAR-END OPTION VALUES
The following table presents certain information about stock options
exercised by the Named Executive Officers during fiscal 2000 and the value of
unexercised options held by them at the end of fiscal 2000.
<TABLE>
<CAPTION>
SHARES NO. SHARES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON EXERCISE OPTIONS AT MARCH 4, 2000 (1) AT MARCH 4, 2000 (2)
------------------- -------------------------------- --------------------------------
VALUE
NAME NO. REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James C. Richardson, Jr. -- -- -- -- -- --
David R. Clark -- -- -- -- -- --
Norbert E. Woodhams -- -- -- -- -- --
L. Dent Miller -- -- -- -- -- --
James E. Harris -- -- -- -- -- --
Pamela M. Witters -- -- 2,500 10,000 $ 0 $ 0
</TABLE>
<PAGE> 18
------------------------
(1) On February 18, 2000, Messrs. Richardson, Clark, Woodhams and Miller
tendered 215,000, 315,000, 200,000 and 50,000 options, respectively,
for cancellation.
(2) The closing price of the Company's common stock on Friday, March 3,
2000, was $4.0625 per share.
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 Operating Officer of the Company for three years at
an annual base salary of $200,000 and an annual bonus based on the Company's
financial performance. The Clark Employment Agreement was amended on February
23, 1998 (the "Amended Clark Employment Agreement") to increase Mr. Clark's
annual base salary to $350,000 and to provide Mr. Clark an annual bonus based
upon the Company's performance. The Company can award bonuses to Mr. Clark based
upon other considerations, too. See "Report of the Executive Compensation
Committee." $200,000 of Mr. Clark's base salary is paid by HERTH and $150,000 of
his base salary is paid by the Company. See "Certain Relationships and Related
Party Transactions." The Amended Clark Employment Agreement has a term of five
years, expiring February 28, 2003, and is automatically extended for additional,
successive, one-year terms, unless the Company notifies Mr. Clark that it does
not intend to extend the term. Should Mr. Clark's employment be terminated by
the Company without cause, or by reason of death or disability, or should Mr.
Clark resign from employment for good reason during the five-year term, then the
Company would be obligated to make a severance payment to him equal to the sum
of his base salary as would be due in the aggregate for the remainder of the
five-year term. In the event of a termination without cause, or by reason of
death or disability, or a resignation for good reason during any renewal term of
the Clark Employment Agreement, the severance payment would equal three months
of Mr. Clark's then-existing base salary. Under the Clark Employment Agreement,
the Company agreed to appoint Mr. Clark to fill the first available vacancy on
the Board. Mr. Clark subsequently filled a vacancy and currently serves as a
member of the Board.
On August 18, 1999, Mr. Woodhams and the Company executed an Incentive
Agreement, which was amended on January 1, 2000 (the "Woodhams Incentive
Agreement"). The Company agreed to pay Mr. Woodhams an annual salary of $300,000
and a periodic bonus under the Company's executive bonus plan. The Company also
agreed to pay to Mr. Woodhams a "pay to stay bonus" in the amount of $800,000
(inclusive of a tax "gross up" amount) in the event that the Company enters into
an agreement for the sale of the Company's food processing operation or if Mr.
Woodhams' employment is terminated. Mr. Woodhams is also entitled to receive a
<PAGE> 19
transaction success bonus in the amount of $750,000 (inclusive of a tax "gross
up" amount) and a severance payment of $532,099 (inclusive of a tax "gross up"
amount) in the event that such sale is consummated or Mr. Woodhams' employment
is terminated. The term of the Woodhams Incentive Agreement expires on June 8,
2003 and is automatically continued from year to year unless the Company gives
Mr. Woodhams notice of termination.
On July 12, 1999, the Company, Claremont Restaurant Group, LLC
("Claremont") and Mr. Miller entered into a Severance, Consulting and Noncompete
Agreement (the "Miller Severance Agreement") pursuant to which Mr. Miller agreed
to provide consulting services to Claremont for a term of five years, beginning
on the date of disposition of the Company's membership interest in Claremont. On
such date, the Company paid Mr. Miller a lump sum payment of $825,000 plus a
"gross up" amount equal to all income and excise tax liabilities related to such
payment. This payment to Mr. Miller represented (a) $567,690 for his agreement
not to compete with Claremont during a five-year period, (b) $94,615 for the
consulting services to be provided, (c) a transaction success bonus of $57,788
and (d) a severance amount of $104,906. Subsequently, on January 6, 2000, the
Company and Mr. Miller entered into a Consulting and Noncompete Agreement (the
"Miller Consulting Agreement") in connection with Mr. Miller's resignation from
the Company's Board of Directors. Under the Miller Consulting Agreement, Mr.
Miller agreed to provide consulting services to the Company related to the
Company's food processing operations for a period of five years. The Company
agreed to pay Mr. Miller $200,000 per year for these consulting services. If a
change in control of the Company (as defined in the Change in Control Agreements
described below) occurs during the five-year term, then Mr. Miller would receive
the unpaid portion of the $1,000,000 otherwise due to be paid in installments
under the Miller Consulting Agreement. Mr. Miller also agreed not to compete
with the Company for five years.
On June 30, 1999, the Company and Mr. Harris entered into a Bonus
Agreement (the "Harris Bonus Agreement"). Under the Harris Bonus Agreement, the
Company paid to Mr. Harris a lump sum transaction bonus of $562,500 in
connection with the sale of the Company's restaurant operations, plus a "gross
up" amount equal to all income and excise tax liabilities related to such
payment.
Each of Messrs. Richardson and Clark (each, an "Officer") 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
Officer; three times the amount of the largest annual cash bonus paid or payable
to such person; and a "gross-up" payment for all excise and income 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 Board of Directors as of the date of the
applicable Change in Control Agreement cease to constitute a majority of the
Board; (2) any "person" (as defined in the applicable Change in Control
Agreement)
<PAGE> 20
acquires 15% of the Company's common stock; (3) any of certain business
combinations is consummated; 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 Officer's employment is terminated.
Upon a change in control, Mr. Clark's Employment Agreement would be terminated
immediately prior to the change in control. The term of each Change in Control
Agreement is ten years and is automatically extended for additional, successive
one-year terms unless the Company notifies the Officer that it does not intend
to extend the term.
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 senior executives. The members of the 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 entire Board of Directors for its
consideration.
Compensation Principles. In determining the compensation of senior
executives, the Company believes that compensation should be (1) based in part
upon the Company's performance, by the use of bonuses or stock options, (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 has sought to formulate overall
compensation packages which approximate in value the overall compensation paid
to executives of similar companies.
The Company's Chairman, Mr. Richardson, who was also Chief Executive
Officer during fiscal 2000, is compensated pursuant to a Management Services
Agreement with HERTH (the "HERTH Agreement"), which was amended and restated in
December 1999 and expires in March 2002. Mr. Clark's compensation is partially
from HERTH and partially from the Company. See "Employment Contracts and Change
in Control Agreements" and "Certain Relationships and Related Party
Transactions."
Executive Compensation. The Committee measures management's performance
using longer-term (1 1/2 to 2 years) objectives of the Company, 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 executives
have accomplished the goals assigned to them. Several elements of the
performance of an executive are based upon non-numerical performance criteria,
such as level of
<PAGE> 21
responsibility in the Company, comparable compensation of other executives,
individual meritorious performance and improvements in administration. Other
elements are tied to management's performance as a group in achieving corporate
goals, such as financial performance, profit margins, increase of working
capital and acquisitions deemed to be advantageous to the Company. No
mathematical weights are assigned to these individual criteria. The performances
of executives compensated under the HERTH Agreement, like those of other
executives of the Company, are evaluated by the Committee using these criteria.
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 met and surpassed many goals set for them
by the Board, including completion of acquisitions and divestitures, elimination
of non-core properties, modification of corporate debt and reduction of
corporate overhead. The Committee also considered management's timely actions in
positioning the Company for future growth.
In hiring new officers for the Company, consideration is given to
compensation arrangements in previous employment, compensation averages for such
executives in the food service industry and means of structuring compensation
packages 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 reflects the performance of the
Company and Mr. Richardson. Determination of adequate compensation is
qualitative in nature and is 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, the important corporate goal of divesting particular operating
subsidiaries and non-core assets has been achieved, and his leadership in
achieving this goal has been considered by the Committee.
The Executive Compensation Committee
Lewis C. Lanier, Chairman
Richard F. Howard
Andrew F. Puzder
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 (the
"S&P Composite Index"), an obsolete Company-constructed peer group (the "Old
Peer Group") and a revised Company-constructed peer group (the "New Peer
Group"). The Company-
<PAGE> 22
constructed peer groups seek to reflect the performance of various companies
that are similar to the Company in industry or line of business over the
five-year period beginning February 24, 1995 and ending March 4, 2000. The graph
assumes that $100 is invested on February 24, 1995 in each of the Company's
common stock, the New Peer Group and the Old Peer Group, and on February 24,
1995 in the Standard & Poor's Composite Index, and, in each case, that all
dividends are reinvested.
<TABLE>
<CAPTION>
Fresh New Old
Measurement Period Foods, Peer Peer S&P
(Fiscal Year-End) Inc. Group Group 500
------------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
2/24/95 100.00 100.00 100.00 100.00
2/23/96 78.13 126.93 105.67 134.71
2/28/97 160.71 152.70 102.77 169.95
2/27/98 321.43 206.34 144.58 229.44
3/6/99 93.75 209.60 120.48 274.72
3/4/00 72.55 119.57 83.07 306.95
</TABLE>
<PAGE> 23
Prior to the Company's disposition of its Claremont Restaurant Group in
October 1999, restaurant operations accounted for approximately 60% of the
Company's revenues. The Company's Old Peer Group consists of restaurant peers
CKE Restaurants, Inc. and Lone Star Steakhouse and Saloon, Inc.; food processing
peers Bridgford Foods Corporation, Hormel Foods Corporation and WLR Foods, Inc.;
and restaurant/food processing hybrid peer Bob Evans Farms Inc. Upon disposing
of its Claremont Restaurant Group the Company became a pure-play food processor.
The Company's New Peer Group, selected to reflect that change, consists of food
processing companies only: ConAgra, Inc., Sara Lee Corporation and Tyson Foods,
Inc., in addition to Bridgford Foods Corporation, Hormel Foods Corporation and
WLR Foods, 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 OF DIRECTORS
During fiscal 2000, directors were paid $2,000 per Board meeting
attended and $500 per Committee meeting attended, except that directors who were
employees of the Company or were compensated by HERTH, or who had material
contracts with the Company, received no payment for their service as directors.
In December 1999, the Company changed its compensation policy relative to its
directors. Under the new policy, directors are paid $10,000 per Board meeting
attended and $5,000 per Committee meeting attended, except that directors who
are employees of the Company or are compensated by HERTH, or who have business
relationships with the Company significant enough to require disclosure under
SEC regulations, receive no payment for their services as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2000, the Executive Compensation Committee of the
Company's Board of Directors consisted of Messrs. Lanier, McDonald and Holman,
none of whom was an officer or employee of the Company or any of its
subsidiaries during fiscal 2000. Messrs. Lanier and McDonald have never been
officers of the Company or any of its subsidiaries. Mr. Holman was the Chief
Financial Officer and Treasurer of the Company from 1994 until his retirement in
1997.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
HERTH provides management services to the Company, including strategic
planning and the direction of strategic initiatives, including the
identification and pursuit of mergers, acquisitions, other investment
opportunities (both within and without the Company's industry) and divestitures;
management of the Company's relationships with investment bankers, securities
broker-dealers, significant shareholders, noteholders, banks, lawyers and
accountants; facilitating meetings of the Board of Directors; and general
oversight of the Company's performance. HERTH provides the full-time
<PAGE> 24
services of Messrs. Richardson and Clark. In exchange for these services, the
Company is obligated to pay HERTH $1,500,000 per year pursuant to the HERTH
Agreement, which expires in 2002. The shareholders of HERTH are Messrs.
Richardson, Templeton, Edgell and Columbia, whose equity owners are Messrs.
Clark, Richardson and Hefner. The Company paid HERTH $3,241,270 in fiscal 2000,
consisting of $1,300,000 pursuant to the HERTH Agreement and an additional
$1,941,270 in the aggregate as bonuses to Mr. Richardson for his leadership on
strategic initiatives. The HERTH Agreement provides for $200,000 of Mr. Clark's
salary to be paid for by HERTH. In fiscal 2000, the Company paid such amount
directly to Mr. Clark and reduced the $1,500,000 owed to HERTH under the HERTH
Agreement by $200,000.
The Company maintains comprehensive insurance coverages through
County-Wide Insurance Agency, Inc. ("County-Wide"), whose principal owner is
Charles F. Connor, Jr. ("Connor"). Connor is a consultant to the Company who
beneficially owns in excess of 5.0% of the Company's outstanding common stock at
June 15, 2000. County-Wide received payments of approximately $447,000 during
fiscal 2000 in connection with such insurance coverage.
On January 14, 2000, the Company and Mr. Connor entered into a
Consulting and Noncompete Agreement (the "2000 Connor Consulting Agreement")
under which Mr. Connor agreed to provide consulting services to the Company
related to the Company's food processing operations for a period of five years.
The Company agreed to pay Mr. Connor $200,000 per year, plus the cost of medical
insurance premiums for Mr. Connor and his spouse, for these consulting services.
If a change in control of the Company (as defined in the Change in Control
Agreements) occurs during the five-year term, then Mr. Connor would receive the
unpaid portion of the $1,000,000 otherwise due to be paid in installments under
the 2000 Connor Consulting Agreement. Mr. Connor also agreed not to compete with
the Company for five years.
On January 28, 1998, the Company and Mr. Connor entered into a
Consulting and Noncompetition Agreement in connection with the merger of the
Company and Sagebrush, Inc. (the "1998 Connor Consulting Agreement".) Under this
agreement, Mr. Connor agreed to provide consulting services to the Company
related to its restaurant operations for a period of two years and also agreed
not to compete with the Company during the two-year term. The Company paid Mr.
Connor $175,000 per year for these consulting services. The 1998 Connor
Consulting Agreement expired on January 29, 2000.
On July 12, 1999, the Company, Claremont, HERTH and Mr. Howard entered
into a Severance, Consulting and Noncompete Agreement (the "Howard Severance
Agreement") pursuant to which Mr. Howard agreed to provide consulting services
to Claremont for a term of five years, beginning on the date of disposition of
the Company's membership interest in Claremont. Mr. Howard also agreed not to
compete with Claremont during the five-year term. On such date, the Company paid
Mr. Howard a lump sum payment of $750,000 plus a "gross up" amount equal to all
income and
<PAGE> 25
excise tax liabilities related to such payment. This payment to Mr. Howard
represented (a) $567,690 for his agreement not to compete with Claremont, (b)
$94,615 for the consulting services to be provided, (c) a transaction success
bonus of $66,351 and (d) a severance amount of $21,343.
On September 13, 1999, the Company, Claremont, HERTH and Mr. Templeton
entered into a Severance, Consulting and Noncompete Agreement (the "Templeton
Severance Agreement") pursuant to which Mr. Templeton agreed to provide
consulting services to Claremont for a term of five years, beginning on the date
of disposition of the Company's membership interest in Claremont. Mr. Templeton
also agreed not to compete with Claremont during the five-year term. On such
date, the Company paid Mr. Templeton a lump sum payment of $315,000 plus a
"gross up" amount equal to all income and excise tax liabilities related to such
payment, and an additional amount of $34,437 representing future premium
payments on a life insurance policy insuring Mr. Templeton. The payment of
$315,000 to Mr. Templeton represented (a) $236,538 for his agreement not to
compete with Claremont, (b) $70,961 for the consulting services to be provided,
and (c) a severance amount of $7,501.
During fiscal 2000, the Company utilized Bradford Communications, Inc.
("BCI") for public and investor relations and graphic design services. The
Company paid BCI approximately $221,000 for such services. The founder of BCI,
Mr. Bradford, has been a director of the Company since 1992. In April 2000, Mr.
Bradford sold BCI.
During fiscal 2000, Columbia owed the Company as much as $705,493
pursuant to a promissory note payable on demand and bearing interest at the
prime rate. Columbia is owned by Messrs. Clark, Richardson and Hefner, who have
unconditionally guaranteed repayment of the note.
On September 14, 1999, the Company sold five former restaurant
properties and one tract of vacant land, with a combined book value of
$2,433,482, to an entity in which Mr. Templeton was then a minority investor,
for a total cash purchase price of $938,585. This transaction was completed
under an agreement entered into earlier during fiscal 2000 and was contingent
upon the sale of Claremont. Under the terms of the initial agreement, all
non-operating restaurant properties, consisting of seven former restaurant
locations and three tracts of undeveloped land with a total book value of
$3,620,842, were offered for sale at an aggregate price of $2,635,000. The
agreement further specified that the cash proceeds from the sale of any of these
properties to third parties prior to the sale of Claremont would reduce the
purchase price of the remaining pool of properties on a dollar-for-dollar basis,
subject to the sale of Claremont. Prior to the sale, four of the properties,
with a book value totaling $1,187,359, were sold to unrelated third parties for
cash totaling $1,557,065.
On December 16, 1999, the Board of Directors approved a loan to Mr.
Richardson in an amount up to $8.5 million for the purpose of enabling Mr.
Richardson to purchase shares of the Company's common stock owned by certain
shareholders. The terms of the loan provide that outstanding amounts will bear a
simple interest rate
<PAGE> 26
of 8 1/2%, with principal and interest due three years from the date of the
loan. At the end of fiscal 2000, disbursements under the loan totaled $5
million.
On July 1, 1999, the Company's subsidiary, Pierre Foods, LLC ("Pierre
Foods") sold a 1% membership interest in Mom 'n' Pop's Country Ham, LLC ("Mom
'n' Pop's"), the Company's country ham operation, to Mr. Richardson for $9,950.
In August 1999, effective as of July 2, 1999, Pierre Foods conveyed its 99%
membership interest in Mom 'n' Pop's to Hoggs, LLC ("Hoggs") in exchange for a
promissory note in the principal amount of $985,050 due December 31, 1999 (the
"Hoggs Promissory Note"). As security, each of the members of Hoggs pledged his
membership interest in Hoggs to Pierre Foods. Mr. Richardson holds a 55%
membership interest in Hoggs. In addition, the Company provided a revolving line
of credit of $500,000 to Hoggs for working capital. As of the end of fiscal
2000, Hoggs paid the Hoggs Promissory Note and the line of credit in full.
On July 1, 1999, the Company, Mom 'n' Pop's and Mr. Hefner entered into
a Severance, Consulting and Noncompete Agreement (the "Hefner Consulting
Agreement") under which Mr. Hefner agreed to provide consulting services to Mom
'n' Pop's for a term of five years, beginning on the date of disposition of
Pierre Foods' membership interest in Mom 'n' Pop's. Mr. Hefner also agreed not
to compete with Mom 'n' Pop's during the five-year term. On such date, the
Company paid to Mr. Hefner a lump sum payment of $450,000 plus a "gross up"
amount equal to all income and excise tax liabilities related to such payment.
This payment to Mr. Hefner represented (a) $189,230 for his agreement not to
compete with Mom 'n' Pop's, (b) $70,961 for the consulting services to be
provided, (c) a transaction success bonus of $39,811 and (d) a severance amount
of $149,998.
In October 1999, Fresh Foods Sales, LLC, a wholly-owned subsidiary of
the Company, sold all assets related to its Bennett's Bar-B-Que restaurant
located in Conover, North Carolina, to Fairgrove Restaurants, LLC ("Fairgrove").
Fairgrove purchased the assets for approximately $1.1 million in cash and
assumed certain related liabilities. Mr. Howard, Mr. Richardson, Mr. Clark and
Mr. Miller each hold a 17.5% membership interest in Fairgrove.
Messrs. Connor and Miller, together, had a direct or indirect interest
in 15 restaurant properties leased to the Company during fiscal 2000. Total
rents paid under these leases were $767,200 during fiscal 2000.
Messrs. Connor, Miller and Howard all had a direct or indirect interest
in one restaurant property leased to the Company for approximately $72,000 in
fiscal 2000.
Mr. Connor also had a direct or indirect interest in an additional
three restaurants leased to the Company during fiscal 2000. Rents paid under
these leases totaled $132,500 in fiscal 2000.
<PAGE> 27
Columbia Hill Land Company, LLC, owned 50% by each of Messrs.
Richardson and Clark, leases office space to the Company in Hickory, North
Carolina, pursuant to a ten-year lease that commenced in September 1998. Rents
paid under the lease were approximately $103,000 in fiscal 2000.
Messrs. Foley and Puzder, directors of the Company, have direct and
indirect interests in Checkers, Hardee's and Rally's Hamburgers, Inc. The
Company entered into licensing agreements with such companies to produce and
market certain products under the companies' brand names in exchange for royalty
payments. Royalties paid during fiscal 2000 totaled approximately $120,000.
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 entire Board, where they must be approved
by a majority of the independent directors.
YEAR 2001 SHAREHOLDER PROPOSALS
The Company welcomes comments or suggestions from its shareholders. In
the event that a shareholder desires to have a proposal formally considered at
the next Annual Meeting of Shareholders and included in the Proxy Statement for
that meeting, the proposal must be received in writing by the Company not later
than February 28, 2001.
<PAGE> 28
[Preliminary Form of Proxy]
FRESH FOODS, INC.
9990 PRINCETON ROAD
CINCINNATI, OHIO 45246
THIS PROXY IS SOLICITED ON BEHALF OF FRESH FOODS' BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JULY 27, 2000, AT 10:00 A.M.
The undersigned hereby appoints James C. Richardson, Jr.,
David R. Clark, Norbert E. Woodhams and Pamela M. Witters, 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 West Chester, Ohio on July 27,
2000, 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 the Annual Meeting of
Shareholders 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 FRESH
FOODS BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" SUCH PROPOSALS.
1. Election of Directors.
[ ] VOTE FOR all four nominees (Clark, McDonald, Lanier and
Puzder) to three-year terms, as provided in the 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)
<PAGE> 29
(Continued from other side)
2. Ratification of the selection of Deloitte & Touche LLP to serve as
Fresh Foods' independent public accountants for the fiscal year ending
March 3, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of amendment to the Articles of Incorporation of Fresh Foods
to change the name of the Company to "Pierre Foods, Inc."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated:
, 2000
-------------------------------
-------------------------------------
Signature(s) of Shareholder(s)
IMPORTANT: PLEASE SIGN EXACTLY AS YOUR
NAME(S) APPEAR(S) 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, THEN EXECUTE IN
FULL CORPORATE NAME BY AUTHORIZED OFFICER.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
