<PAGE> 1
================================================================================
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 Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Worthington 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
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
[WORTHINGTON FOODS, INC. LOGO]
900 PROPRIETORS ROAD
WORTHINGTON, OHIO 43085
(614) 885-9511
Worthington, Ohio
March 16, 1998
To the Shareholders of
Worthington Foods, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of the Shareholders
(the "Annual Meeting") of Worthington Foods, Inc. (the "Company") will be held
at The Worthington Hills Country Club, 920 Clubview Blvd. South, Worthington,
Ohio 43235 on Tuesday, April 21, 1998, at 11:00 a.m., local time, for the
following purposes:
1. To elect three directors to serve for terms of three years each.
2. To transact such other business as may properly come before the Annual
Meeting and any adjournment(s) thereof.
Shareholders of record at the close of business on March 2, 1998 will be
entitled to receive notice of and to vote at the Annual Meeting and any
adjournment(s) thereof.
You are cordially invited to attend the Annual Meeting. The vote of each
shareholder is important, whatever the number of Common Shares held. Whether or
not you plan to attend the Annual Meeting, please sign, date and return your
proxy promptly in the enclosed envelope. Should you attend the Annual Meeting,
you may revoke your proxy and vote in person. ATTENDANCE AT THE ANNUAL MEETING
WILL NOT, IN AND OF ITSELF, CONSTITUTE REVOCATION OF A PROXY.
By Order of the Board of Directors,
/s/ Ronald L. McDermott
Ronald L. McDermott, Secretary
<PAGE> 3
[WORTHINGTON FOODS, INC. LOGO]
900 PROPRIETORS ROAD
WORTHINGTON, OHIO 43085
(614) 885-9511
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are being mailed to
shareholders of Worthington Foods, Inc., an Ohio corporation (the "Company"), on
or about March 16, 1998 in connection with the solicitation of proxies by the
Board of Directors of the Company for use at the 1998 Annual Meeting of
Shareholders of the Company (the "Annual Meeting") called to be held on Tuesday,
April 21, 1998, or at any adjournment(s) thereof. The Annual Meeting will be
held at 11:00 a.m., local time, at The Worthington Hills Country Club, 920
Clubview Blvd. South, Worthington, Ohio 43235.
A proxy for use at the Annual Meeting accompanies this Proxy Statement and
is solicited by the Board of Directors of the Company. A shareholder of the
Company may use his proxy if he is unable to attend the Annual Meeting in person
or wishes to have his Common Shares voted by proxy even if he does attend the
Annual Meeting. Without affecting any vote previously taken, any shareholder
executing a proxy may revoke it at any time before it is voted by filing with
the Secretary of the Company, at the address of the Company set forth on the
cover page of this Proxy Statement, written notice of such revocation; by
executing a later-dated proxy which is received by the Company prior to the
Annual Meeting; or by attending the Annual Meeting and giving notice of such
revocation in person. ATTENDANCE AT THE ANNUAL MEETING WILL NOT, IN AND OF
ITSELF, CONSTITUTE REVOCATION OF A PROXY.
Only shareholders of the Company of record at the close of business on
March 2, 1998 are entitled to receive notice of and to vote at the Annual
Meeting and any adjournment(s) thereof. At the close of business on March 2,
1998, 11,663,440 Common Shares were outstanding and entitled to vote. Each
Common Share of the Company entitles the holder thereof to one vote on each
matter to be submitted to shareholders at the Annual Meeting.
The Company will bear the costs of preparing and mailing this Proxy
Statement, the accompanying proxy and any other related materials and all other
costs incurred in connection with the solicitation of proxies on behalf of the
Board of Directors. Proxies will be solicited by mail and may be further
solicited, for no additional compensation, by officers, directors, or employees
of the Company by further mailing, by telephone, or by personal contact. The
Company will also pay the standard charges and expenses of brokerage houses,
voting trustees, banks, associations and other custodians, nominees, and
fiduciaries, who are record holders of Common Shares not beneficially owned by
them, for forwarding such materials to and obtaining proxies from the beneficial
owners of such Common Shares.
The Annual Report to the Shareholders of the Company for the fiscal year
ended December 31, 1997 is enclosed herewith.
1
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 2, 1998, certain information
with respect to the Company's Common Shares beneficially owned by the only
person known by the Company to beneficially own more than 5% of the outstanding
Common Shares of the Company:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
-------------------- ---------------------- ---------
<S> <C> <C>
The Huntington Trust Company, N.A. 881,639 7.6%
41 South High Street
Columbus, Ohio 43215 (2)
<FN>
(1) The percent of class is based upon 11,663,440 Common Shares outstanding on
March 2, 1998.
(2) Includes 804,229 Common Shares held by the Worthington Foods, Inc. Employee
Stock Ownership Plan (the "ESOP"). The Huntington Trust Company, as
trustee, has sole dispositive power and the Compensation Committee of the
Board of Directors has sole investment power with respect to the Common
Shares held by the ESOP and each participant in the ESOP has sole voting
power with respect to the Common Shares held by the ESOP which are
allocated to such participant's account in the ESOP.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN OFFICERS AND DIRECTORS
The following table sets forth, as of March 2, 1998, certain information
with respect to the Company's Common Shares owned beneficially by each director,
by each nominee for election as a director, by each of the executive officers
named in the Summary Compensation Table and by all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS (3)
- ------------------------ -------------------------------------
<S> <C> <C>
Allan R. Buller (5)(6).................................................. 299,398(7) 2.6%
Dale E. Twomley (4)(5)(6)............................................... 263,350(8) 2.2
Donald B. Burke(6)...................................................... 43,084 (14)
William T. Kirkwood (6)................................................. 98,915(9) (14)
Ronald L. McDermott (6)................................................. 54,909 (14)
Jay L. Robertson (6).................................................... 93,347(10) (14)
Roger D. Blackwell (4)(5)............................................... 53,330(11) (14)
Emil J. Brolick (5)..................................................... 3,999 (14)
George T. Harding, IV (5)............................................... 392,632(12) 3.4
Donald G. Orrick (4)(5)................................................. 211,108(13) 1.8
William D. Parker (5)................................................... 23,998 (14)
Francisco J. Perez (5).................................................. 3,599 (14)
Donald B. Shackelford (5)............................................... 51,999 (14)
All Executive Officers and Directors (including nominees) as a group
(13 individuals) ................................................... 1,593,668 13.3%
<FN>
(1) Unless otherwise noted, the beneficial owner has sole voting, investment
and dispositive power with respect to all of the Common Shares shown to be
owned by such person in the table.
(2) The common share ownership information for Messrs. Twomley, Burke,
Kirkwood, McDermott and Robertson and for all executive officers as a
group includes 24,208; 1,171; 20,427; 5,380; 10,940 and 62,126 shares,
respectively, held for the accounts of such persons in the ESOP as to
which shares
</TABLE>
2
<PAGE> 5
such persons have sole voting power but no investment power. The Common
Share ownership for Messrs. Twomley, Burke, Kirkwood, McDermott and
Robertson and all executive officers as a group includes 106,666; 13,110;
48,517; 32,591; 35,600 and 236,484 shares, respectively, that are subject
to options exercisable within 60 days following March 2, 1998. The Common
Share ownership for each of Messrs. Blackwell, Brolick, Harding, Orrick,
Parker, Perez and Shackelford includes 22,221; 3,333; 22,221; 22,221;
22,221; 3,333 and 25,554 shares, respectively, that are subject to options
exercisable within 60 days following March 2, 1998.
(3) The percent of class is based upon 11,663,440 Common Shares outstanding on
March 2, 1998 and the number of Common Shares, if any, as to which the
named person has the right to acquire beneficial ownership upon the
exercise of stock options exercisable within 60 days of March 2, 1998.
(4) Nominee for election as a director of the Company.
(5) Director of the Company.
(6) Executive officer of the Company.
(7) Includes 227,409 Common Shares held in trust established by Mr. Buller as
to which Mr. Buller and his spouse act as joint trustees and have shared
voting and investment/dispositive power. Also includes 70,998 Common Shares
held in trust established by Mr. Buller's spouse as to which she and Mr.
Buller act as joint trustees and have shared voting and
investment/dispositive power.
(8) Includes 47,829 Common Shares held by Mr. Twomley's spouse as to which she
has sole voting and investment/dispositive power and as to which Mr.
Twomley disclaims beneficial ownership. Also included are 2,444 Common
Shares held in an IRA trust for the benefit of Mr. Twomley as to which Mr.
Twomley has sole voting and investment/dispositive power. Also included are
4,442 Common Shares held by Mr. Twomley's children.
(9) Includes 1,000 Common Shares held by Mr. Kirkwood's spouse as to which she
has sole voting and investment/dispositve power and as to which Mr.
Kirkwood disclaims beneficial ownership. Includes 7,584 Common Shares held
in the Worthington Foods, Inc. Tax Savings and Profit Sharing Plan for the
benefit of Mr. Kirkwood as to which Mr. Kirkwood has sole voting and
investment/dispositive power. Includes 1,047 Common Shares held by Mr.
Kirkwood's children and step-children as to which shares Mr. Kirkwood
disclaims beneficial ownership.
(10) Includes 29,191 Common Shares held jointly by Mr. Robertson and his spouse
as to which Mr. Robertson shares voting and investment/dispositive power.
(11) Includes 20,888 Common Shares held in an IRA trust for the benefit of Mr.
Blackwell as to which Mr. Blackwell has sole voting and
investment/dispositive power.
(12) Includes 64,800 Common Shares held by Dr. Harding's spouse as to which she
has sole voting and investment/dispositive power and as to which Dr.
Harding disclaims beneficial ownership. Also included are 103,198 Common
Shares held in an IRA trust for the benefit of Dr. Harding as to which Dr.
Harding has sole voting and investment/dispositive power.
(13) Includes 2,621 Common Shares held by Dr. Orrick's spouse as to which she
has sole voting and investment/dispositive power and as to which Dr. Orrick
disclaims beneficial ownership. Includes 186,266 Common Shares held in an
IRA trust for the benefit of Dr. Orrick as to which Dr. Orrick has sole
voting and investment/dispositive power.
(14) Reflects ownership of less than 1% of the outstanding Common Shares of the
Company.
3
<PAGE> 6
ELECTION OF DIRECTORS
(Item 1 on Proxy)
In accordance with Section 2.02 of the Amended Regulations of the Company,
three directors are to be elected at the Annual Meeting for terms of three years
each and until their respective successors are elected and qualified. It is the
intention of the persons named in the accompanying proxy to vote the Common
Shares represented by the proxies received pursuant to this solicitation for the
nominees named below who have been designated by the Board of Directors, unless
otherwise instructed on the proxy.
The following table gives certain information concerning each nominee for
election as a director of the Company. Unless otherwise indicated, each person
has held his principal occupation for more than five years.
<TABLE>
<CAPTION>
DIRECTOR OF NOMINEE
POSITION(S) HELD WITH THE COMPANY FOR TERM
THE COMPANY AND CONTINUOUSLY EXPIRING
NOMINEE AGE PRINCIPAL OCCUPATION(S) SINCE IN
- ------- ---- ----------------------- ------------- --------
<S> <C> <C> <C> <C>
Roger D. Blackwell.................... 57 Professor of Marketing at 1992 2001
The Ohio State University,
Columbus, Ohio; self-employed
as a business consultant (1)
Donald G. Orrick...................... 69 Retired since 1992; prior thereto, 1983 2001
Dr. Orrick was in the private practice
of dentistry in the Columbus, Ohio
metropolitan area
Dale E. Twomley....................... 58 President and Chief Executive Officer 1985 2001
of the Company
<FN>
- ---------------
(1) Mr. Blackwell is also a director of Max & Erma's Restaurants, Inc.,
Checkpoint Systems, Inc., Intimate Brands, Inc., Abercrombie & Fitch Co.,
AirNet Systems, Inc., Flex-Funds, Applied Industrial Technologies and
Cheryl & Co.
</TABLE>
While it is contemplated that all nominees will stand for election, if one
or more of the nominees at the time of the Annual Meeting should be unavailable
or unable to serve as a candidate for election as a director of the Company, the
proxies reserve full discretion to vote the Common Shares represented by the
proxies for the election of the remaining nominees and for the election of any
substitute nominee or nominees designated by the Board of Directors. The Board
of Directors knows of no reason why any of the above-mentioned persons will be
unavailable or unable to serve if elected to the Board.
Under Ohio law and the Company's Amended Regulations, the three nominees
receiving the greatest number of votes will be elected as directors. Common
Shares as to which the authority to vote is withheld are not counted toward the
election of directors, or toward the election of the individual nominees
specified on the form of proxy, but are counted for the purpose of determining
whether there is a quorum.
4
<PAGE> 7
The following table gives certain information concerning the current
directors whose terms will continue after the Annual Meeting. Unless otherwise
indicated, each person has held his principal occupation for more than five
years.
<TABLE>
<CAPTION>
DIRECTOR OF
POSITION(S) HELD WITH THE COMPANY TERM
THE COMPANY AND CONTINUOUSLY EXPIRES
NAME AGE PRINCIPAL OCCUPATION(S) SINCE IN
- ---- --- ----------------------- ------------ -------
<S> <C> <C> <C> <C>
Allan R. Buller....................... 80 Chairman of the Board 1982 1999
and Treasurer of the Company
George T. Harding, IV ................ 69 Physician and since 1995, 1982 1999
Chairman of the Board of Harding,
a psychiatric hospital in Worthington, Ohio;
prior thereto he was President of Harding
William D. Parker..................... 60 Retired since January, 1997; 1996 1999
prior thereto, he was President of
the Kroger Columbus, Ohio
Marketing Area, a division of The
Kroger Company, a multi-state
super-market chain
Emil J. Brolick....................... 50 Senior Vice President, Strategic Planning, 1997 2000
Research & New Product Marketing,
Wendy's International, Inc.
Francisco J. Perez.................... 54 President and Chief Executive Officer 1997 2000
of Kettering Medical Center,
Kettering, Ohio since 1994; prior thereto,
he was President and Chief Executive Officer
of New England Memorial Hospital,
Stoneham, Massachusetts
Donald B. Shackelford................. 65 Chairman of State Savings Bank, 1991 2000
a state chartered savings bank based in
Columbus, Ohio (1)
<FN>
- --------------
(1) Mr. Shackelford is also a director of The Limited, Inc., Intimate Brands,
Inc., Abercrombie & Fitch Co., and Progressive Corporation. There are no
family relationships among any of the directors, nominees for election as
directors and executive officers of the Company.
</TABLE>
Each Non-Employee Director, upon election or re-election to the Board of
Directors, is granted a non-qualified stock option to purchase 10,000 Common
Shares of the Company at the fair market value of the Common Shares on the date
the option is granted. Each option will be for a term of five years and will
become exercisable with respect to one-third of the grant on each anniversary of
the grant date. Non-Employee Directors who were elected prior to April 22, 1997
had been granted a non-qualified stock option to purchase 22,221 Common Shares
at the fair market value of the Common Shares at the date of the grant. These
options have a term of five years.
The Board of Directors of the Company held a total of five meetings during
the Company's 1997 fiscal year. Each director attended 75% or more of the
aggregate of the total number of meetings held by the Board of Directors during
the period he served as a director and the total number of meetings held by all
committees of the Board of Directors on which he served during the period he
served.
The Company's Board of Directors has standing Audit, Compensation and
Nominating Committees.
The Audit Committee consists of Donald B. Shackelford (Chair), George T.
Harding, IV, William D. Parker and Francisco J. Perez. The function of the Audit
Committee is to review the adequacy of the
5
<PAGE> 8
Company's system of internal controls, to investigate the scope and adequacy of
the work of the Company's independent public accountants and to recommend to the
Board of Directors an accounting firm to serve as the Company's independent
public accountants. The Audit Committee met twice during the 1997 fiscal year.
The Compensation Committee consists of Roger D. Blackwell (Chair), Emil J.
Brolick and Donald G. Orrick, all of whom are outside directors. The function of
the Compensation Committee is to review and supervise the operation of the
Company's compensation plans, to select those employees who may participate in
each plan (where selection is required), to prescribe the terms of any stock
options granted under the Company's stock option plan for employees and to
approve the compensation of the Company's executive officers. The Compensation
Committee met once during the 1997 fiscal year.
The Nominating Committee consists of George T. Harding, IV (Chair), Donald
B. Shackelford and Dale E. Twomley and met once during 1997. The functions of
the Nominating Committee include the consideration of the size and composition
of the Board, review and recommendation of individuals for election as directors
or officers of the Company, and review of the criteria for selecting directors.
In carrying out its responsibilities for recommending candidates to fill
vacancies on the Board and in recommending a slate of directors for election by
the shareholders at the Annual Meeting, the Committee will consider candidates
suggested by other directors, employees and shareholders. Suggestions for
candidates, accompanied by biographical material for evaluation, may be sent to
the Secretary of the Company at its Corporate Headquarters. Individuals
suggested as candidates should have high level management experience in a
relatively complex organization or have experience dealing with complex
problems. A candidate also must include a willingness to attend scheduled Board
and Committee meetings.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The compensation paid to the Company's executive officers is evaluated and
approved by the Compensation Committee of the Company's Board of Directors. The
Compensation Committee consists of three directors, all of whom are Outside
Directors.
All decisions of the Compensation Committee are reviewed by the full Board
of Directors. During 1997, none of the compensation decisions of the
Compensation Committee were modified or rejected in any material way by the full
Board.
COMPENSATION PROGRAM FOR EXECUTIVE OFFICERS
The Company's compensation program for its executive officers is based on
the following objectives:
- Total compensation of the executive officers should be linked to the
financial performance of the Company.
- The compensation paid to the executive officers of the Company should
compare favorably with executive compensation levels of other
similarly-sized companies so that the Company can continue to attract
and retain outstanding executives.
- The compensation program should reward outstanding individual
performance and contributions as well as experience.
The Company's executive compensation program consists of annual cash
compensation and longer-term incentive compensation. Historically, annual cash
compensation has been comprised of base salary and an annual incentive award.
In determining executive compensation, the Compensation Committee wishes
to maintain competitive salaries for the officers by targeting compensation
within the competitive ranges of data
6
<PAGE> 9
compiled by the Company's executive compensation consulting firm. The
Compensation Committee believes that the emphasis should be on performance
linked rewards, so that compensation for key executives improves in line with
improvements in return to the shareholders. Base salaries are targeted at
adequate minimum total cash compensation in a year when no bonus is earned.
Base salaries awarded in 1997 by the Compensation Committee to each
executive officer, other than the Chief Executive Officer, were based upon a
recommendation to the Compensation Committee made by Mr. Twomley, the Company's
Chief Executive Officer. Mr. Twomley makes his recommendations after considering
the individual performance, duties, responsibilities, experience and tenure of
each executive officer, general current economic conditions, the recent
financial performance of the Company and other factors, none of which is given a
specific weighting. The Compensation Committee approves the base salary of each
of these executive officers after meeting with Mr. Twomley and discussing with
him his salary recommendations and the basis for his recommendations. The
Compensation Committee determines Mr. Twomley's base salary on the basis of the
same factors.
The Company also has an annual incentive program for its executive
officers, including the Chief Executive Officer. Annual incentive awards are
based on the extent to which the Company achieves or exceeds annual financial
performance goals established by the Board on an annual basis. The actual amount
of the bonus that an executive officer will receive at various performance
levels is approved by the Compensation Committee at the beginning of each year
and is based upon the position, duties and responsibilities of each such
executive officer. No bonuses were paid under the annual incentive program for
1997.
The Company's longer-term compensation program for its executive officers
consists primarily of stock options, both incentive stock options and
non-qualified stock options. Award opportunities for the stock option program
are determined by the Compensation Committee. Incentive stock options are
granted at 100% of fair market value on the date of grant so that the holders of
the options do not receive a benefit from the stock option unless and until
there is an increase in the market price of the Company's shares.
The Company also maintains for its executive officers a supplemental
executive retirement plan, which is a non-qualified plan designed to provide
supplemental retirement benefits to the Company's executive officers. This plan
is designed to provide a retiring executive officer with 30 years of service a
target benefit (after adjustment for other retirement benefits and Social
Security benefits) equal to 50 percent of final salary. The Compensation
Committee views this plan as a valuable tool in hiring and retaining superior
executives.
1997 COMPENSATION OF MR. TWOMLEY
Mr. Twomley's base salary for 1997 was targeted to be within competitive
ranges based upon data compiled by the Company's executive compensation
consulting firm. The Compensation Committee believes that the base salary for
Mr. Twomley should be adequate minimum total cash compensation in a year when no
bonus is earned. Earnings beyond that level should be linked to the Company's
financial performance. Mr. Twomley's base salary for 1997 represented a 13.2%
increase over his prior year's base salary. In setting Mr. Twomley's 1997 base
salary, the Compensation Committee gave consideration to Mr. Twomley's many
contributions toward the Company's operations in 1996 in establishing an
adequate minimum compensation for 1997.
No cash bonus was paid to Mr. Twomley for 1997 under the incentive program
described above due to the Company not achieving certain specified net income
goals. The maximum formula-determined bonus that Mr. Twomley could have achieved
in 1997 under the incentive program would have represented 120% of his base
salary.
Respectfully submitted,
THE COMPENSATION COMMITTEE
Roger D. Blackwell, Chr. Emil J. Brolick Donald G. Orrick
7
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the Company's fiscal years ended December
31, 1997, 1996 and 1995, the cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to the Company's
Chief Executive Officer and to the other executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ -------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ COMPEN-
SALARY BONUS SATION(1) AWARD SARS SATION(2)
NAME/PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
-------------------------- -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
DALE E. TWOMLEY,.................. 1997 $237,670 $ -- $ -- -- -- $13,150
President and Chief Executive Officer 1996 210,870 203,558 9,158 -- 53,333 29,730
1995 198,000 237,600 8,639 -- 66,666 31,449
WILLIAM T. KIRKWOOD,.............. 1997 $153,790 $ -- $ -- -- -- $ 7,975
Executive Vice President and 1996 138,760 100,829 3,387 -- 35,554 13,521
Chief Financial Officer 1995 124,680 100,000 3,195 -- 22,221 13,595
DONALD B. BURKE,.................. 1997 $143,830 $ -- $ -- -- -- $ 6,449
Executive Vice President 1996 129,665 93,658 3,357 -- 26,666 12,498
of Marketing and Sales 1995 125,100 75,000 3,167 $25,575(3) 22,221 11,865
JAY L. ROBERTSON,................. 1997 $129,180 $ -- $ -- -- -- $ 6,621
Vice President of Sales 1996 118,890 57,254 3,205 -- 17,777 12,725
1995 114,600 69,000 3,024 -- 11,110 12,382
RONALD L. MCDERMOTT,.............. 1997 $117,060 $ -- $ -- -- -- $ 7,466
Vice President of Research 1996 105,500 50,803 2,724 -- 17,777 12,343
and Technology, Secretary 1995 101,760 61,000 2,570 -- 8,888 10,639
<FN>
- ---------------
(1) Other Annual Compensation consists of gross-up payments for tax
liabilities related to contributions to the Worthington Foods, Inc.
Supplemental Executive Retirement Plan.
(2) "All Other Compensation" for 1997 includes the following: (a)
contributions of $7,200; $7,975; $6,449; $6,621 and $7,466 to the
Worthington Foods Tax Savings and Profit Sharing Plan (the "401(k) Plan")
on behalf of Messrs. Twomley, Kirkwood, Burke, Robertson and McDermott
respectively, to match 1997 pre-tax elective deferral contributions made
by each to the 401(k) Plan and a discretionary contribution made by the
Company; and (b) $5,950 representing the dollar value of split dollar life
insurance premiums paid for the benefit of Mr. Twomley.
(3) The restrictions on Mr. Burke's Common Shares lapsed on November 14, 1996.
There are no restricted Common Shares held by the executive officers named
in the Summary Compensation Table at December 31, 1997.
</TABLE>
GRANTS OF STOCK OPTIONS
There were no grants of stock options to the named executives during 1997.
8
<PAGE> 11
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to options
exercised during the 1997 fiscal year by the named executive officers and
unexercised options held as of the end of the 1997 fiscal year by such executive
officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE REALIZED NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES (FAIR MARKET UNDERLYING UNEXERCISED IN-THE-MONEY
UNDERLYING VALUE AT EXERCISE OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
OPTIONS LESS EXERCISE -------------------------- -------------------------
NAME EXERCISED PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dale E. Twomley................... 16,665 $173,820 106,665 72,223 $898,339 $375,269
William T. Kirkwood............... 15,998 $166,542 59,627 23,703 $484,725 $ 15,217
Donald B. Burke................... 12,220 $122,046 24,220 43,557 $210,536 $218,635
Jay L. Robertson.................. 9,442 $ 95,652 41,156 12,177 $359,999 $ 7,817
Ronald L. McDermott............... 7,444 $ 78,339 37,035 11,852 $315,848 $ 7,608
</TABLE>
SEVERANCE ARRANGEMENTS
On August 28, 1995, the Company entered into agreements with Dale E.
Twomley, William T. Kirkwood, Donald B. Burke, Jay L. Robertson and Ronald L.
McDermott. These agreements, which are substantially identical, have initial
terms ending on August 28, 1998 (which will be automatically extended for
one-year periods unless either party gives notice of his or its decision not to
renew), and provide that in the event of the executive officer's termination of
employment under certain circumstances during the 36-month period (the
"Effective Period") following a "change in control" of the Company, the
executive officer will be entitled to certain severance benefits. Prior to a
change in control, the executive officer will remain an employee at will of the
Company.
Each agreement will terminate automatically on the death or retirement of
the executive officer to whom it relates, and may be terminated, at the option
of the Company upon disability of the executive officer or for "cause" (as that
term is defined in the agreement) or, at the option of the executive officer,
for other than "good reason," in all of which cases no additional severance
payments, other than accrued compensation and benefits customarily paid to
employees in such circumstances, will be due the executive officer.
If the executive officer terminates the agreement during the Effective
Period for "good reason,"or if the Company terminates the agreement during such
period for any reason other than for "cause" or as a result of the executive
officer's death, retirement or disability, the Company will be obligated to pay
the executive officer his base salary and prorated bonus through the date of the
termination and to make a lump-sum payment to the executive officer equal to
2.99 times (for Messrs. Twomley, Kirkwood and Burke) and 2 times (for Messrs.
Robertson and McDermott) the average annual compensation (including salary and
bonus) which was payable to such executive officer for the five taxable years
ending prior to the date on which the change of control occurred. As of March 2,
1998, the amount of the lump-sum payment to Messrs. Twomley, Kirkwood, Burke,
Robertson and McDermott would have been approximately $1,093,000, $611,000,
$600,000, $325,000 and $267,000, respectively.
If any portion of the payments and benefits provided for in such
agreements would be considered "parachute payments" within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended, so as to be
nondeductible by the Company, then the aggregate present value of all of the
amounts payable to the executive officer to whom such agreement relates will be
reduced at the election of the executive officer to the maximum amount which
would cause all of the payments to be deductible by the Company.
9
<PAGE> 12
For purposes of each such agreement, the executive officer to whom it
relates may terminate his employment for "good reason" during the Effective
Period if his title, duties, responsibilities, compensation or benefits are
reduced, if he is required to relocate or if the agreement is breached by the
Company. A "change in control" is defined to include, among other events, the
acquisition by any individual, entity or group of stock entitling such
individual, entity or group to exercise 20% or more of the voting power of the
Company or, as a result of a merger or other business combination, the persons
who were directors of the Company prior to such transaction shall cease to
constitute a majority of the directors of the surviving company in such
transaction.
DIRECTORS' COMPENSATION
Non-Employee Directors of the Company are paid an annual fee of $8,000, a
fee of $1,000 for each Board of Directors meeting attended and a fee of $500 for
each committee meeting attended. Directors who are also employees of the Company
receive no additional compensation from the Company for serving in such
capacity. Directors are reimbursed their expenses in attending meetings of the
Board and Committee meetings. In addition, each non-employee director is granted
a non-qualified stock option as described on page 5.
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
WORTHINGTON FOODS, INC., RUSSELL 2000 INDEX AND FOOD PROCESSING
(PERFORMANCE RESULTS THROUGH 12/31/97)
<TABLE>
<CAPTION>
WORTHINGTON RUSSELL FOOD
FOODS 2000 INDEX PROCESSING
<S> <C> <C> <C>
1992 $100.00 $100.00 $100.00
1993 81.07 118.91 100.28
1994 90.32 116.55 108.62
1995 193.25 149.70 137.09
1996 351.87 174.30 171.07
1997 347.37 213.00 254.37
</TABLE>
Assumes $100 invested at the close of trading on 12/31/92 in Worthington
Foods, Inc. Common Shares, Russell 2000 Index, and Food Processing.
*Cumulative total returns assumes reinvestment of dividends.
Source: Value Line
10
<PAGE> 13
INDEPENDENT PUBLIC ACCOUNTANTS
The Company engaged Ernst & Young LLP as its independent public
accountants to audit its financial statements for the year ended December 31,
1997. Ernst & Young LLP has served as independent public accountants for the
Company since 1989. The Company's Audit Committee makes its selection of the
Company's independent public accountants for the 1998 fiscal year in July, 1998.
The Board of Directors expects that representatives of Ernst & Young LLP
will be present at the Annual Meeting, will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any qualified shareholder who desires to present a proposal for
consideration at the 1999 Annual Meeting of Shareholders must submit the
proposal in writing to the Company. If the proposal is received by the Company
on or before November 17, 1998 and otherwise meets the requirements of
applicable state and federal law, it will be included in the proxy statement and
form of proxy of the Company relating to its 1999 Annual Meeting of
Shareholders.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other business to be presented for action by the shareholders at the 1998 Annual
Meeting of Shareholders other than as set forth in this Proxy Statement.
However, if any other matter is properly presented at the Annual Meeting, or at
any adjournment(s) thereof, it is intended that the persons named as proxies in
the enclosed proxy may vote the Common Shares represented by such proxy on such
matters in accordance with their best judgment in light of the conditions then
prevailing.
It is important that proxies be voted and returned promptly; therefore,
shareholders who do not expect to attend the Annual Meeting in person are urged
to fill in, sign and return the enclosed proxy in the self-addressed envelope
furnished herewith.
By Order of the Board of Directors,
/s/ Ronald L. McDermott
Ronald L. McDermott
Secretary
March 16, 1998
11
<PAGE> 14
Worthington Foods, Inc.
Annual Meeting of Shareholders
April 21, 1998
[STREET MAP TO WORTHINGTON HILLS COUNTRY CLUB]
The Worthington Hills Country Club
920 Clubview Boulevard South
Worthington, Ohio 43235
315 North: Turn left at Clubview Boulevard
270 North from east or west: exit at 315 North
71 from north or south: 270 West to 315 North
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of Worthington Foods, Inc. (the
"Company") hereby constitutes and appoints Allan R. Buller, George T.
Harding, IV and William D. Parker, or any one of them, the Proxy or Proxies
of the undersigned, with full power of substitution in each of them, to
attend the Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on Tuesday, April 21, 1998, at The Worthington Hills
Country Club, 920 Clubview Blvd. S., Worthington, Ohio 43235, at 11:00
a.m., local time, and any adjournment(s) thereof, and to vote all of the
common shares of the Company which the undersigned is entitled to vote at
such Annual Meeting or at any adjournment(s) thereof as follows:
P
R 1. To elect three directors to serve for terms of three years each.
O [ ] FOR election as director of [ ] WITHHOLD AUTHORITY to vote for
X the Company of all the nominees all nominees listed below.
Y listed below (except as marked
to the contrary below).*
ROGER D. BLACKWELL DONALD G. ORRICK DALE E. TWOMLEY
*(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting or any adjournment(s)
thereof.
(Continued, and to be executed and dated on the other side.)
<PAGE> 15
[WORTHINGTON FOODS, INC. LOGO]
-----------------------------------------------
We invite you to attend the 1998 Annual Meeting
of Shareholders of Worthington Foods, Inc.
Date: Tuesday, April 21, 1998
Time: 11:00 a.m., eastern standard time
Location: The Worthington Hills Country Club
920 Clubview Boulevard South
Worthington, Ohio 43235
(see map on reverse side)
DETACH CARD
(Continued from the other side.)
WHERE A CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED OR NOT VOTED AS SPECIFIED. IF NO CHOICE IS
INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED IN ITEM NO. 1 AS DIRECTORS OF THE COMPANY. IF
ANY OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT(S) THEREOF OR IF A NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN THE
PROXY STATEMENT IS UNABLE TO SERVE, THE COMMON SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN THE DISCRETION OF THE PROXY OR PROXIES ON SUCH MATTERS OR FOR
SUCH SUBSTITUTE NOMINEES AS THE DIRECTORS MAY RECOMMEND.
All proxies previously given or executed by the undersigned are hereby
revoked. The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement for the April 21, 1998
meeting.
Dated:___________________, 1998
-----------------------------------------
Signature of Shareholder(s)
-----------------------------------------
Signature of Shareholder(s)
Please sign exactly as your name appears
hereon. When common shares are registered
in two names, both shareholders should
sign. When signing as executor,
administrator, trustee, guardian,
attorney or agent, please give full title
as such. If shareholder is a corporation,
please sign in full corporate name by
President or other authorized officer. If
shareholder is a partnership or other
entity, please sign in entity name by
authorized person. (Please note any
change of address on this proxy.)
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF WORTHINGTON FOODS,
INC. PLEASE FILL IN, DATE AND SIGN AND
RETURN IT PROMPTLY USING THE ENCLOSED
ENVELOPE.
