<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>
[ ] Preliminary proxy statement [ ] Confidential, for use of the Commission
only (as permitted) by Rule
14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material under 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.
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,
/s/ Pamela M. Witters
PAMELA M. WITTERS
Secretary
Cincinnati, Ohio
July 14, 2000
<PAGE> 3
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.
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
<PAGE> 4
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.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF COMMON STOCK OUTSTANDING
NAME AND ADDRESS OF 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
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF COMMON STOCK OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK(1)
------------------------------------ ------------------ ---------------
<S> <C> <C>
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
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 as a group (12
persons).................................................. 2,749,270 46.5%
</TABLE>
---------------
* 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.
3
<PAGE> 6
(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.
(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.
4
<PAGE> 7
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 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
5
<PAGE> 8
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, 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.
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
6
<PAGE> 9
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.
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.
7
<PAGE> 10
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 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.
8
<PAGE> 11
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").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION OPTION AWARDS
------------------------------------ (# OF SHARES ALL OTHER
FISCAL SALARY BONUS OTHER UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS) ($)(1)
--------------------------- ------ -------- ---------- -------- ------------- ------------
<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 Officer; 1998 (2) -0- (4) 215,000 -0-
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.
(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.
9
<PAGE> 12
(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.
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>
PERCENTAGE
NUMBER OF OF OPTIONS
SHARES GRANTED TO EXERCISE POTENTIAL REALIZABLE VALUE
UNDERLYING EMPLOYEES OR BASE AT ASSUMED ANNUAL RATE
OPTIONS IN FISCAL PRICE PER EXPIRATION OF STOCK PRICE APPRECIATION
NAME GRANTED YEAR SHARE DATE FOR OPTION 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.
10
<PAGE> 13
<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>
---------------
(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
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
11
<PAGE> 14
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) 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.
12
<PAGE> 15
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 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
13
<PAGE> 16
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-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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE FISCAL YEAR ENDED MARCH 4, 2000
<TABLE>
<CAPTION>
FRESH FOODS, INC. NEW PEER GROUP OLD PEER GROUP S&P 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>
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.
14
<PAGE> 17
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 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
15
<PAGE> 18
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 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 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
16
<PAGE> 19
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.
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.
17
<PAGE> 20
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.
<TABLE>
<S> <C> <C>
[ ] VOTE FOR all four nominees [ ] VOTE WITHHELD from all nominees [ ] VOTE FOR ALL EXCEPT
(Clark, McDonald, Lanier and To vote for all directors, mark the
Puzder) to three-year terms, as VOTE FOR box. To withhold voting for
provided in the Proxy Statement 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.
</TABLE>
(CONTINUED AND TO BE SIGNED ON REVERSE)
<PAGE> 21
(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.
