<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 Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
GOODMARK 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
[GOODMARK FOODS, INC. LOGO]
6131 FALLS OF NEUSE ROAD
RALEIGH, NORTH CAROLINA 27609
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 25, 1997
You are cordially invited to attend the Annual Meeting of Shareholders
of GoodMark Foods, Inc. (the "Company") which will be held on Thursday,
September 25, 1997, at 2:00 p.m., local time, at the North Carolina Museum of
Art, 2110 Blue Ridge Road, Raleigh, North Carolina, for the following purposes:
(1) To elect a Board of Directors of the Company for the ensuing
year;
(2) To ratify the appointment of Deloitte & Touche LLP as
independent auditors for the Company and its subsidiaries for
the fiscal year ending May 31, 1998; and
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on August 4, 1997, are
entitled to notice of and to vote at the Annual Meeting and any and all
adjournments thereof.
IT IS DESIRABLE THAT YOUR SHARES OF STOCK BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU MAY HOLD. EVEN THOUGH YOU MAY
PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING YOU
MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
By Order of the Board of Directors
Alvin C. Blalock
Secretary
Raleigh, North Carolina
August 18, 1997
<PAGE> 3
GOODMARK FOODS, INC.
6131 Falls of Neuse Road
Raleigh, North Carolina 27609
PROXY STATEMENT
Annual Meeting of Shareholders to be held September 25, 1997
SOLICITATION AND VOTING RIGHTS
This Proxy Statement, the accompanying proxy card and the Annual Report
are being furnished to shareholders on or about August 18, 1997, by the Board of
Directors of GoodMark Foods, Inc. (the "Company") in connection with the
solicitation of proxies for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held at the North Carolina Museum of Art, 2110 Blue
Ridge Road, Raleigh, North Carolina, on September 25, 1997, at 2:00 p.m., local
time, and at all adjournments thereof. All expenses incurred in connection with
this solicitation, including postage, printing, handling, and the actual
expenses incurred by custodians, nominees, and fiduciaries in forwarding proxy
material to beneficial owners, will be paid by the Company. In addition to
solicitation by mail, certain officers, directors, and regular employees of the
Company, who will receive no additional compensation for their services, may
solicit proxies by telephone, personal communication or other means. In
addition, the Company has retained Corporate Communications, Inc. to provide
certain services in connection with proxy solicitations. The cost of such
services is not expected to exceed $2,500 and will be paid by the Company.
The principal purposes of the meeting are to: (1) elect seven nominees
to the Board of Directors; (2) ratify the action of the Board of Directors
pursuant to the recommendation of the Audit Committee in appointing Deloitte &
Touche LLP as independent auditors for the Company and its subsidiaries for the
fiscal year ending May 31, 1998; and (3) transact such other business as may
properly come before the meeting or any adjournment thereof. The Board of
Directors knows of no other matters other than those stated above to be brought
before the meeting or any adjournment thereof. The proxyholders named on the
enclosed proxy card may vote in accordance with the instructions of the Board of
Directors or in the absence thereof, in accordance with their discretion, on any
other matter properly presented for action of which the Board of Directors is
not now aware.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted by filing with the Secretary of
the Company written notice of revocation, provided such notice is actually
received prior to the vote of shareholders, duly executing a subsequent proxy
and filing it with the Secretary of the Company before the vote of shareholders
or attending the Annual Meeting and voting in person. If the proxy card is
signed and returned, but voting directions are not made, the proxy will be voted
in favor of the proposals set forth in the accompanying "Notice of Annual
Meeting of Shareholders."
The Board of Directors has fixed the close of business on August 4,
1997, as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and all adjournments
thereof. As of the close of business on August 4, 1997, the Company had
outstanding 7,225,635 shares of Common Stock. On all matters to come before the
Annual Meeting, each holder of Common Stock will be entitled to one vote for
each share owned.
<PAGE> 4
SHARE OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth certain information, as of May 25, 1997,
regarding shares of Common Stock of the Company owned of record or known to the
Company to be owned beneficially by each Director and nominee for Director, each
executive officer named in the Summary Compensation Table herein and all
Directors and executive officers as a group. Except as set forth in the
footnotes, each of the shareholders identified below has sole voting and
investment power over the shares beneficially owned by such person. The address
of the following individuals is the same as the Company's address.
<TABLE>
<CAPTION>
Name Shares Beneficially Owned Percent of Class
---- ------------------------- ----------------
<S> <C> <C>
Ron E. Doggett(1) 2,345,548 31.1%
Richard C. Miller(2) 271,719 3.6%
Donald H. Grubb(3) 9,277 *
Thomas W. D'Alonzo(4) 10,784 *
Rollie Tillman, Jr. 1,083 *
Robert B. Seidensticker(5) 3,171 *
Eric J. Lomas 2,000 *
Alvin C. Blalock(6) 140,263 1.9%
Paul L. Brunswick(7) 65,960 *
Richard E. Kennedy(8) 32,147 *
All Directors and executive
officers as a group (10
persons)(9) 2,881,952 36.3%
*Less than one percent
</TABLE>
(1) Includes 286,100 shares owned by Mr. Doggett's wife. Mr. Doggett
disclaims beneficial ownership of all shares owned by his wife.
Includes 314,300 shares which Mr. Doggett has the right to acquire
through the exercise of non-qualified stock options within the next 60
days. Includes 18,725 shares invested in the GoodMark Foods, Inc.
Investment and Savings Plan.
(2) Includes 232,450 shares which Mr. Miller has the right to acquire
through the exercise of non-qualified stock options within the next 60
days, 13,255 shares owned jointly with Mr. Miller's wife, and 12,376
shares owned by Mr. Miller's wife. Mr. Miller disclaims beneficial
ownership of all shares owned by his wife. Includes 9,487 shares
invested in the GoodMark Foods, Inc. Investment and Savings Plan.
(3) Includes 2,063 shares owned by Mr. Grubb's wife. Mr. Grubb disclaims
beneficial ownership of all shares owned by his wife.
(4) Includes 1,600 shares owned jointly with Mr. D'Alonzo's wife and 2,900
shares owned by Mr. D'Alonzo's children. Mr. D'Alonzo disclaims
beneficial ownership of all shares owned by his children.
(5) Includes 1,000 shares owned by Mr. Seidensticker's wife. Mr.
Seidensticker disclaims beneficial ownership of all shares owned by his
wife.
(6) Includes 19,674 shares owned by Mr. Blalock's wife. Mr. Blalock
disclaims beneficial ownership of all shares owned by his wife.
Includes 112,900 shares which Mr. Blalock has the right to acquire
through the exercise of non-qualified stock options within the next 60
-2-
<PAGE> 5
days. Includes 5,689 shares invested in the GoodMark Foods, Inc.
Investment and Savings Plan.
(7) Includes 38,570 shares which Mr. Brunswick has the right to acquire
through the exercise of non-qualified stock options within the next 60
days. Includes 3,093 shares invested in the GoodMark Foods, Inc.
Investment and Savings Plan.
(8) Includes 22,600 shares which Mr. Kennedy has the right to acquire
through the exercise of non-qualified stock options within the next 60
days. Includes 3,862 shares invested in the GoodMark Foods, Inc.
Investment and Savings Plan.
(9) Includes 720,820 shares subject to presently exercisable stock options
owned by the individual executive officers.
In addition, the following table sets forth certain information as of
May 25, 1997, regarding shares of Common Stock of the Company known to be
beneficially owned by persons with more than five percent of the Company's
Common Stock (except as set forth in the table above relating to the Company's
Directors and executive officers).
<TABLE>
<CAPTION>
Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned Class
---------------- ----- -----
<S> <C> <C>
Schwerin Boyle Capital 704,500 9.8%
1391 Main Street
Springfield, MA 01103
State of Wisconsin Investment Board 687,600 9.5%
121 East Wilson Street
Madison, WI 53707
Reich & Tang 658,100 9.1%
600 5th Ave. 8th Floor
New York, NY 10020
Harris Associates 497,000 6.9%
2 N. LaSalle
Chicago, IL 60602
Estate of H. Hawkins Bradley 406,200 5.6%
3201 Kenly Court
Raleigh, North Carolina 27607
</TABLE>
-3-
<PAGE> 6
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors has established the number constituting the
Board of Directors for the ensuing year to be seven. The nominees for election
to the office of Director are named and certain other information is provided in
the following table:
<TABLE>
<CAPTION>
First Year
Name Position With Company Age Elected Director
---- --------------------- --- ----------------
<S> <C> <C> <C>
Ron E. Doggett (1) Chairman of the Board, Chief Executive 62 1982
Officer, and Director
Richard C. Miller President, Chief Operating Officer, and 58 1989
Director
Donald H. Grubb (1)(2)(3) Director 72 1985
Thomas W. D'Alonzo (1)(2)(3) Director 53 1991
Rollie Tillman, Jr. (1)(2)(3) Director 64 1991
Robert B. Seidensticker (1)(2)(3) Director 67 1995
Eric J. Lomas (1) Director 50 1995
</TABLE>
(1) Member of the Executive Committee of the Board.
(2) Member of the Human Resources Committee of the Board.
(3) Member of the Audit Committee of the Board.
Ron E. Doggett has been a Director of the Company since the Company's
organization in 1982, Chief Financial Officer from 1982 until 1985, President
from 1983 until 1989, Chief Executive Officer since June 1, 1985, and Chairman
of the Board since June 1, 1987. He served as Chief Operating Officer from 1983
until June 1, 1985, and as Executive Vice President from 1982 until 1983. From
1967 until 1982, he held various management positions with the GoodMark Foods
Division of General Mills. Mr. Doggett currently serves on the Board of
Directors of Exide Electronics Group, Inc., a publicly-owned company.
Richard C. Miller has been President and Chief Operating Officer of the
Company since April 1989 and a Director of the Company since September 1989. He
was President of Sun-Diamond Growers of California from 1988 until March 1989
and served as Senior Vice President-Business Management/Marketing with
Sun-Diamond from 1986 until 1988. Prior to that time, he was President and CEO
of S.B. Thomas, a division of CPC International, Inc. from 1984 to 1986. He
served in various other management positions with CPC International, Inc. or its
affiliates from 1967 to 1984 and with Procter & Gamble from 1962 to 1967.
Donald H. Grubb is President of GEDON Enterprises, a management
consulting firm. He held various management positions with Westvaco Corporation
and was President and Chief Executive Officer of Huyck Corporation, a supplier
to the paper industry. He became President and CEO of Huyck Corporation in 1973
and served in that position until his retirement in 1980. Mr. Grubb served on
the Board of Directors of several American subsidiaries of Morgan Crucible Co.
PLC, a public company whose shares are traded on the London Stock Exchange until
his retirement from those positions in 1995. He has been a Director of the
Company since September 1985.
Thomas W. D'Alonzo has served as President, Chief Operating Officer and
Director of Pharmaceutical Product Development, Inc., a publicly-owned contract
research organization, since November 1996. He was President and Chief Executive
Officer of GenVec, Inc., a privately-owned gene therapy research company, from
October 1993 until November 1996. He was Group Vice President and served on the
Board of Directors of Glaxo Inc. from 1983 until June 30, 1993. Prior to
-4-
<PAGE> 7
that time, Mr. D'Alonzo held positions with Adria Laboratories, Inc. in
Columbus, Ohio and with Hercules, Inc. in Wilmington, Delaware. Mr. D'Alonzo
currently serves on the Board of Directors of Amarillo Biosciences Inc., a
publicly-owned biotechnology company. He has been a Director of the Company
since September 1991.
Rollie Tillman, Jr. has served as Professor of Business since 1968 and
as Chairman of the Board of Trustees of the Frank Hawkins Kenan Institute of
Private Enterprise at the University of North Carolina at Chapel Hill since
1990. Prior to these positions, Mr. Tillman served as Director of the Masters of
Business Administration Program, of the Corporate Executive Program and as Vice
Chancellor of the University of North Carolina at Chapel Hill. Mr. Tillman
received his doctorate degree from the Harvard School of Business
Administration. He currently serves on the Board of Directors of Renfro, Inc., a
privately owned company. He has been a Director of the Company since September
1991.
Robert B. Seidensticker is President of RBS Associates, a management
consulting firm. He was Vice Chairman of Pinkerton Group, Inc. from 1992 until
his retirement in 1994. For 10 years prior to 1992 he was President and Chief
Executive Officer of Pinkerton Group, Inc. and Chairman of American Candy
Company. Prior to that time he was President of Liggett & Myers International
Corporation and served in executive capacities with Philip Morris International
and The Rothmans Group. He has been a Director of the Company since January
1995.
Eric J. Lomas is President of The Hill Thompson Group, Ltd., an
investment banking firm and has served in that capacity since 1989. For the five
years prior to becoming President of The Hill Thompson Group, Ltd., Mr. Lomas
was managing director and co-head of investment banking at Gruntal & Co.,
Incorporated. Before his affiliation with Gruntal & Co., Incorporated, Mr. Lomas
worked 10 years with Deloitte & Touche LLP in the international merger and
acquisition department. He currently serves on the Board of Directors of
Centron, Inc., DIC, Inc. and The Blanchard Family of Mutual Funds and is
Chairman of Wilcox & Gibbs, Inc. He also currently serves as Chairman of the
Board of Directors of Rexel, Inc., a publicly-owned company.
All Directors and executive officers hold office until the next annual
meeting of shareholders or until their successors are elected and qualified. The
Board of Directors has no reason to believe that the persons named above as
nominees for Directors will be unable or will decline to serve if elected.
However, in the event of death or disqualification of any nominee or refusal or
inability of any nominee to serve, it is the intention of the proxyholders to
vote for the election of such other person or persons as the proxyholders
determine in their discretion, but in no circumstance will the proxy be voted
for more than seven nominees. Properly executed and returned proxies, unless
revoked, will be voted as directed by the shareholder or, in the absence of such
direction, will be voted in favor of the election of the recommended nominees.
The Company's bylaws provide that the nominees who receive the highest number of
votes will be elected as Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION OF
THE NOMINEES.
-5-
<PAGE> 8
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the last fiscal year, the Board of Directors met four times.
Each Director attended 75% or more of the aggregate of the Board meetings (held
during the period for which the Director was in office) and committee meetings
of the Board of which the Director was a member.
The Board has a standing Executive, Human Resources, and Audit
Committee. The Executive Committee has the authority to exercise all powers of
the Board of Directors in the management of the business and affairs of the
Company. The Executive Committee also serves as the nominations committee of the
Board. It presently does not have a policy for considering shareholder
recommendations for Board nominees and pursuant to the bylaws, no nominations to
the Board of Directors may be made from the floor of the annual meeting of
shareholders. During fiscal 1997 the Executive Committee met once. The Human
Resources Committee reviews and approves compensation of the executive officers
and administers the Company's Executive Management Incentive Plan and
Non-Qualified Stock Option Plan. The Human Resources Committee met once during
fiscal 1997. The Audit Committee is responsible for reviewing the scope and
effectiveness of accounting controls and audits by the independent public
accountants. The Audit Committee also recommends to the Board the employment of
independent auditors. The Audit Committee met one time during the last fiscal
year.
-6-
<PAGE> 9
EXECUTIVE COMPENSATION
The following tables set forth a summary of compensation of the
executive officers of the Company for the fiscal years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1) Long Term Compensation
---------------------- ----------------------
Securities
Name and Restricted Underlying All Other
Principal Position Year Salary Bonus Stock Award Options(#) Compensation(2)
------------------ ---- ------ ----- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Ron E. Doggett 1997 $353,424 $0 0 $3,211
Chairman of the Board 1996 353,424 0 15,000 2,750
and Chief Executive 1995 336,600 329,900 0 3,394
Officer 1994 323,664 339,800 0 4,459
1993 311,220 263,000 106,700 2,343
Richard C. Miller(3) 1997 234,408 0 0 3,277
President and Chief 1996 225,384 0 10,000 3,008
Operating Officer 1995 214,656 189,300 0 3,083
1994 206,400 195,000 0 3,064
1993 198,432 139,300 68,050 2,295
Alvin C. Blalock 1997 128,016 0 0 2,688
Vice President and 1996 116,304 0 5,000 2,211
Director of 1995 110,760 86,800 0 1,801
Manufacturing 1994 106,500 89,500 0 1,927
1993 102,400 63,900 35,100 1,680
Paul L Brunswick(4) 1997 131,016 0 0 2,709
Vice President and 1996 119,088 0 5,000 2,259
Chief Financial Officer 1995 110,256 86,400 0 1,943
1994 104,000 87,400 0 1,988
1993 50,000 26,000 $13,125(5) 38,570 569
Richard E. Kennedy(6) 1997 119,208 0 0 2,583
Vice President and 1996 108,360 0 5,000 2,074
Director of Snack Sales 1995 101,280 79,400 0 1,786
1994 91,536 58,600 1,000 1,709
</TABLE>
(1) Disclosure of perquisites and other personal benefits is not required
because such benefits did not equal or exceed the lesser of $50,000 or
10% of any individual's annual salary and bonus shown above.
(2) The 1997 amounts shown represent contributions made by the Company to
the officers under the Company's 401(k) Investment and Savings Plan as
follows: R. Doggett $3,000; R. Miller $3,066; A. Blalock $2,477; P.
Brunswick $2,498; and R. Kennedy $2,372; and the remaining amounts are
premiums paid by the Company on term life insurance.
(3) Includes $70,000 in 1995 and 1994 which Mr. Miller has elected to defer
pursuant to a non-qualified deferred compensation arrangement.
(4) Mr. Brunswick joined the Company in December 1992, and the amounts for
1993 reflect his compensation for the remainder of the fiscal year
ended May 30, 1993.
(5) The amount shown in this column is the value of the restricted shares
as of the date of grant. The total number and value of Mr. Brunswick's
restricted stock holdings as of the fiscal year
-7-
<PAGE> 10
ended May 25, 1997, were 400 shares, and $5,250 respectively. The
restricted shares vest at a rate of 400 shares per year. Quarterly
dividends are paid on the shares of restricted stock.
(6) Mr. Kennedy was appointed an executive officer of the Company on
January 10, 1994. The 1994 amounts reflect his compensation in all
capacities for the full fiscal year ended May 29, 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Shares Acquired Value Options at FY-End Options at FY-End
Name on Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- --------------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Ron E. Doggett 0 $0 314,300/0 $1,652,763/0
Richard C. Miller 20,000 217,500 232,450/0 1,191,144/0
Alvin C. Blalock 2,000 25,625 112,900/0 622,413/0
Paul L. Brunswick 0 0 38,570/0 200,661/0
Richard E. Kennedy 0 0 22,600/0 60,088/0
</TABLE>
- --------------------------------
(1) Based on the fair market value of the Common Stock on May 25, 1997, of
$13.125 per share.
The following table sets forth estimated annual benefits computed on a
straight-life basis which would become payable under the Company's Non-Union
Employees Pension Plan (including amounts attributable to the Company's
Executive Pension Plan for corporate officers) upon retirement to persons in
certain specified salary and years of service classifications. These benefits
may be reduced by the election of a joint-and-survivor annuity payment for
married participants.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
----------------
Remuneration 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $22,802 $30,403 $38,004 $45,604 $45,604
150,000 27,802 37,070 46,337 55,604 55,604
175,000 32,802 43,736 54,670 65,604 65,604
200,000 37,802 50,403 63,004 75,604 75,604
225,000 42,802 57,070 71,337 85,604 85,604
250,000 47,802 63,736 79,670 95,604 95,604
300,000 57,802 77,070 96,337 115,604 115,604
400,000 77,802 103,736 129,670 155,604 155,604
450,000 87,802 117,070 146,337 175,604 175,604
500,000 97,802 130,403 163,004 195,604 195,604
</TABLE>
-8-
<PAGE> 11
Officers who are employees of the Company and whose compensation is
included in the Summary Compensation Table are eligible to participate in the
Company's Non-Union Employees Pension Plan. The credited years of service under
the plan for each of the individuals named in the Summary Compensation Table are
as follows: Mr. Doggett, 35 years; Mr. Miller, 7 years; Mr. Blalock, 25 years;
Mr. Brunswick, 4 years; and Mr. Kennedy, 17 years. Upon retirement at age 65 (or
otherwise as provided by the plan), a participant in the plan receives (subject
to the limitations referred to below) an annual benefit which equals a
percentage of the average of the highest 5 consecutive calendar years of basic
compensation (base salary plus bonus, excluding overtime pay, or other special
compensation of any kind as shown in the Annual Compensation column of the
Summary Compensation Table) paid during the 10 calendar years preceding the
earlier of actual or normal retirement age. The percentage amount is 25% of the
final 5-year average monthly compensation up to the covered compensation level
(varies according to year-of-birth and year-of-benefit determination), plus 40%
of the final 5-year average monthly compensation above the covered compensation
level, with the benefit determined being reduced pro rata for each year of
service which is less than 30 years.
Effective January 1, 1995, the annual retirement benefit payable under
the Company's Non-Union Employees Pension Plan is limited by the Internal
Revenue Code (the "Code") to $125,000 for the 1997 calendar year and the maximum
covered compensation is limited to $160,000 for the 1997 calendar year. For
corporate officers covered under the Company's Executive Pension Plan, any
excess annual retirement benefit which could not be paid under the Non-Union
Employees Pension Plan because of such limitations would be payable under the
Executive Pension Plan. The benefit paid, if any, under the Executive Pension
Plan is the difference between the Non-Union Employees Pension Plan benefit
calculated as described above and the amount that would have been paid under
such plan in the absence of dollar limits in the Code.
DIRECTORS' FEES
All Directors who are not executive officers are paid an annual
retainer of $12,000. In addition, each such Director is compensated $800 for
attending each meeting of the Board and $400 for attending each committee
meeting of the Board. The Directors' fees may be payable in part or in full, at
the option of the individual Director, in the Company's Common Stock at the then
current market price or in cash. All expenses associated with attending those
meetings are reimbursed by the Company. Certain other business relationships
with directors are described in "Certain Transactions."
CERTAIN AGREEMENTS
The Company extended its employment agreement with Mr. Doggett in 1997
which is to remain in effect until August 1, 2002, with the parties having the
right to extend the agreement for additional successive periods as the parties
may mutually agree. Under the agreement, Mr. Doggett's compensation is subject
to such increases as the Board of Directors may determine. In addition, Mr.
Doggett is entitled to the use of a Company car and other retirement and
disability benefits similar to those available for other executive officers. The
agreement provides that the Company may terminate Mr. Doggett's employment at
any time. If Mr. Doggett is terminated without cause, the Company is obligated
to continue the benefits under the agreement for the remaining period of the
agreement. Similarly, in the event Mr. Doggett terminates the agreement for
cause, Mr. Doggett is entitled to the above benefits for the remaining period of
the agreement.
The Company has entered into severance compensation agreements
("Severance Compensation Agreements") with the executive officers of the Company
named in the Summary Compensation Table, other than Mr. Doggett. The Severance
Compensation Agreements each
-9-
<PAGE> 12
provide that if the executive's employment is terminated within two years after
a "change in control" of the Company, the executive will receive an amount equal
to the greater of two (2) times the executive's most recent annual compensation,
including the amount of his most recent annual bonus at the time of termination,
or an amount equal to the executive's most recent monthly salary times the
number of years of employment with the Company, unless the termination is by the
executive other than for "good reason," by the Company for "cause," or because
of the executive's disability, death or retirement. The severance compensation
shall be paid in twenty-four (24) equal monthly installments, without interest,
commencing one (1) month after termination, unless and until the executive
obtains other full-time employment, at which time the balance of the severance
compensation due shall be paid in a lump sum amount. In addition, in the event
of the executive's termination after a "change in control" and during the
two-year period following the change in control, unless and until the executive
obtains full-time employment, the executive is entitled to receive all insurance
benefits to which such employee is entitled immediately prior to the date of
termination.
For purposes of the Severance Compensation Agreements, a "change in
control" of the Company would be deemed to have occurred if (a) a third person
(including a "group," as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934) becomes the beneficial owner of shares of the Company which
constitutes either more than 50% of the shares which voted in the election of
Directors of the Company at the shareholders' meeting immediately preceding such
determination or more than 33% of the Company's then outstanding shares entitled
to vote, (b) as a result of a merger or consolidation to which the Company is a
party and either the Company is not the surviving corporation or Directors of
the Company immediately prior to the merger or consolidation constitute less
than a majority of the Board of Directors of the surviving corporation, or (c)
all or substantially all of the Company's assets are sold, leased or disposed of
in one transaction or a series of related transactions. An agreement to bring
about a change in control also constitutes a change in control, provided,
however, that a change in control shall not be deemed to have occurred under (b)
so long as Mr. Doggett remains a Director, executive officer and a 15% voting
stock shareholder in the surviving company. Further, a change in control shall
not be deemed to have occurred under (a) as a result of the beneficial ownership
of voting stock of the Company by Mr. Doggett or any group with which Mr.
Doggett is acting in concert.
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<PAGE> 13
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total shareholder return on
the Company's Common Stock with the cumulative total return on the NASDAQ Market
Index and a peer group selected on a line-of-business basis consisting of
selected snack food companies with small to medium market capitalizations (the
"Peer Group Index"), assuming in each case the reinvestment of dividends. The
corporations making up the Peer Group Index are Ben & Jerry's Homemade, Inc.,
Bridgford Foods Corporation, Golden Enterprises, Inc., Grist Mill Co., J&J Snack
Foods Corporation, Lance Inc., Tootsie Roll Industries, Inc., and Topps Co.,
Inc.
FIVE YEAR PERFORMANCE CHART
<TABLE>
<CAPTION>
Measurement Period GoodMark Custom Peer
(Fiscal Year Covered) Foods, Inc. NASDAQ Group
<S> <C> <C> <C>
1992 100 100 100
1993 106 120 92
1994 167 126 74
1995 256 152 78
1996 238 220 81
1997 216 245 96
</TABLE>
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<PAGE> 14
HUMAN RESOURCES COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Company's executive officers' compensation policies are based on
the premise that the strategic objectives of the Company are best achieved by
(i) attracting and retaining the most qualified individuals available and (ii)
rewarding such individuals on the basis of business and individual performance.
The Company believes that this approach best serves the interests of the
Company's shareholders.
The Human Resources Committee of the Board of Directors (the
"Committee") is responsible for setting and administering the policies which
govern both annual compensation and stock ownership programs. The Committee
annually evaluates the Company's corporate performance, actual compensation and
share ownership in comparison with both its own industry and a broader group of
companies representing a national industrial perspective.
The annual compensation program for the Company's executive officers is
highly leveraged on the basis of performance. The Company's annual compensation
mix generally has lower base salaries than comparable companies, coupled with a
leveraged incentive system which makes higher payments with good performance,
lower payments with performance below par and no incentive payments if corporate
earnings fall below 75% of the Board-approved earnings per share target or below
100% of the previous year's earnings per share, whichever occurs first, unless
the current year's earnings per share target as approved by the Board is less
than the previous year's earnings per share.
The Company has an Executive Incentive Plan ("EIP") under which cash
incentive awards may be made annually to the executive officers, including the
Chief Executive Officer. The EIP is based on two equally weighted factors:
corporate performance and group performance. The corporate performance rating is
based on the Company's achievement of annual earnings versus a Board-approved
annual target amount. The Committee believes that annual earnings is a primary
determinant of share price over time. The group rating is based on the annual
achievement by the executive officers of a Board-approved list of corporate
performance objectives, such as the achievement of net sales, gross margin,
return on equity and assets, managed expenses, headcount and capital spending
goals. Both the corporate and group ratings are heavily dependent on the
achievement of financial objectives.
The Company's corporate rating can range from 0 to 1.5. If the
corporate rating is 1.4 or higher, the Company targets executive officer
compensation in the top quartile of the companies surveyed by Hay Management
Consultants. The Company retains Hay Management Consultants to provide a summary
of compensation data of approximately 400 United States industrial companies.
The group rating can range from 0.1 to 1.5 and may vary among participants.
These ratings are then combined with the participant's target incentive
participation rate (a percentage of base salary which increases for higher
positions within the Company). The resulting factor is then multiplied by the
participant's fiscal year base salary to determine the annual incentive award.
The Committee's evaluation of corporate performance in the fiscal year
ended May 25, 1997, was 0. This rating was based on fiscal 1997 earnings per
share which were 55% of the target amount and approximately 14% less than fiscal
1996 earnings per share.
Under the terms of the Company's Non-Qualified Stock Option Plan, stock
options may be granted to certain key officers and employees. The value to the
participant depends upon the extent to which the market value of the stock
exceeds the option exercise price. Stock options awarded to executive officers
are approved by the Committee based upon criteria similar to that used for the
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<PAGE> 15
EIP. The Committee has the discretion to determine the term of the options
granted, but such term may not be less than one year from the date of grant nor
longer than 10 years and 30 days from the date of grant.
The fiscal 1997 compensation of the Chief Executive Officer consisted
of cash, which included his base salary pursuant to his employment contract. Mr.
Doggett's cash compensation contains both fixed and variable components. The
fixed portion of his compensation is comprised of his base salary. The balance
of his compensation is variable and includes any payments earned under the EIP
and any gains from the exercise of stock options. The Chief Executive Officer
and other executive officers did not receive any payments under the EIP in
fiscal 1997.
The Committee reviews Mr. Doggett's base salary annually in June and
makes recommendations for action by the independent directors of the Board of
Directors after considering a number of factors, including the Company's just
completed year's performance compared to Board-approved targets, the Company's
progress in accomplishing its five-year performance goals, as well as Hay
Management Consultant's market values for comparable positions.
During fiscal year 1996, the Company retained Hay Management
Consultants to evaluate the Company's executive compensation programs and
structure relative to its competitors. Hay Management Consultants specifically
analyzed the Company's executive compensation philosophy and its individual
components, including base salary, bonuses, and long-term incentives such as
stock options. Based on Hay's recommendations, the Company's Board of Directors
adopted a new long-term incentive plan effective June 1, 1996, which is
objectively performance-based. Under the plan, executive officers and other key
managers may receive stock options and phantom stock options based on the
Company achieving predesignated performance measures for net income growth and
return on assets over specified time periods.
The Company has not awarded any compensation that is non-deductible
under Section 162(m) of the Internal Revenue Code. That section imposes a $1
million limit on the U.S. corporate income tax deduction a publicly-held company
may claim for compensation paid to the named executive officers unless certain
requirements are satisfied. In the event that the Human Resources Committee
considers approving compensation in the future which would exceed the $1 million
deductibility threshold, the Human Resources Committee will consider what
actions, if any, should be taken to make such compensation deductible.
HUMAN RESOURCES COMMITTEE
THOMAS W. D'ALONZO (Chairman)
DONALD H. GRUBB
ROLLIE TILLMAN, JR.
ROBERT B. SEIDENSTICKER
CERTAIN TRANSACTIONS
During the 1997 fiscal year the Company engaged The Hill Thompson Group
Ltd. to perform certain investment banking services in relation to the Company's
disposition of its Jesse Jones packaged meat division. Mr. Lomas is President of
The Hill Thompson Group Ltd. which is anticipated to receive a fee of $125,000
during the 1998 fiscal year for facilitating the sale of the Jesse Jones
division.
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<PAGE> 16
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors has appointed Deloitte & Touche LLP as independent accountants for the
fiscal year 1998. Deloitte & Touche LLP has served as independent auditors for
the Company since the Company's inception. Although shareholder approval is not
required, the Company desires to obtain from the shareholders an indication of
their approval or disapproval of the Board's action in appointing Deloitte &
Touche LLP as the independent auditors of the Company and its subsidiaries. If
the shareholders do not ratify this appointment, such appointment will be
reconsidered by the Audit Committee and the Board of Directors. The proxy will
be voted as specified, and if no specification is made, the proxy will be cast
"For" this proposal.
A representative of Deloitte & Touche LLP will be present at the Annual
Meeting and will be afforded an opportunity to make a statement and to respond
to questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP FOR FISCAL YEAR 1998.
MISCELLANEOUS
UPON WRITTEN REQUEST MADE BY ANY SHAREHOLDER TO PAUL L. BRUNSWICK, VICE
PRESIDENT AND CHIEF FINANCIAL OFFICER, GOODMARK FOODS, INC., 6131 FALLS OF NEUSE
ROAD, RALEIGH, NORTH CAROLINA 27609, A COPY OF THE COMPANY'S 1997 ANNUAL REPORT
ON FORM 10-K INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT
SCHEDULES WILL BE PROVIDED WITHOUT CHARGE.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposals which shareholders intend to present for a vote of
shareholders at the 1998 Annual Meeting of Shareholders and which such
shareholders desire to have included in the Company's Proxy Statement and form
of proxy relating to that meeting must be sent to the Company's principal
executive offices, marked to the attention of the Secretary of the Company, and
received by the Company at such offices on or before April 20, 1998. The
determination by the Company's management of whether the Company will oppose
inclusion of any proposal in its Proxy Statement and form of proxy will be made
on a case-by-case basis in accordance with management's judgment and the rules
and regulations promulgated by the Securities and Exchange Commission. Proposals
received after April 20, 1998, will not be considered for inclusion in the
Company's proxy materials for its 1998 Annual Meeting.
By Order of the Board of Directors
Alvin C. Blalock
Secretary
August 18, 1997
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<PAGE> 17
APPENDIX A
GOODMARK FOODS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Ron E. Doggett and Alvin C. Blalock as
proxies, each with the full power of substitution, to represent the undersigned
and to vote all of the shares of stock in GoodMark Foods, Inc. (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held at the North Carolina Museum of Art, 2110 Blue Ridge Road, Raleigh,
North Carolina, on Thursday, September 25, 1997, at 2:00 p.m., local time, and
any adjournment thereof (1) as hereinafter specified upon the proposals listed
below and as more particularly described in the Company's Proxy Statement,
receipt of which is hereby acknowledged; and (2) in their discretion upon such
other matters as may properly come before the meeting and any adjournment
thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. Election of the Board of Directors [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary). to vote for all nominees listed
below.
</TABLE>
Ron E. Doggett; Richard C. Miller; Donald H. Grubb; Thomas W. D'Alonzo; Rollie
Tillman, Jr.; Robert B. Seidensticker; and Eric J. Lomas.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE THAT
NOMINEE'S NAME ON THE SPACE PROVIDED BELOW:
- --------------------------------------------------------------------------------
2. Ratify appointment of Deloitte & Touche LLP as independent auditors for the
Company and its subsidiaries for the fiscal year ending May 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSAL 1 AND PROPOSAL 2.
(Continued on other side)
(Continued from other side)
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign.
Date _________________________, 1997
(Be sure to date proxy)
Signature and title, if applicable
-----------------------------------
Signature if held jointly
-----------------------------------
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign the
full corporate name by the
President or other authorized
officer. If a partnership,
please sign in the partnership
name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
