<PAGE>
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
- -----------------------------------------------------------------------------
HUDSON FOODS, INC.
(Name of Registrant as Specified in its Charter)
- -----------------------------------------------------------------------------
HUDSON FOODS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies: N/A
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(2) Aggregate number of securities to which transaction applies: N/A
-------------------------------------------------------------------
(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:* N/A
-------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: N/A
-------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined:
[ ] 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: $0.00
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
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<PAGE>
Hudson Foods, Inc.
1225 Hudson Road
Rogers, Arkansas 72756
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 14, 1997
To the Stockholders of Hudson Foods, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
Hudson Foods, Inc., a Delaware corporation (the "Company"), will be held at the
Continuing Education Center, East and Center Streets, Fayetteville, Arkansas, on
Friday, February 14, 1997, at 10:00 A.M., local time, for the following
purposes:
1. To elect eight directors to serve for the ensuing year.
2. To ratify the adoption of the 1996 Stock Option Plan.
3. To consider and act upon such other business as may properly
come before the meeting or any adjournment thereof.
Record Date
Only stockholders of record at the close of business on December 23,
1996 will be entitled to vote at the Annual Meeting and any adjournment thereof.
The Company's Proxy Statement and Annual Report are submitted
herewith.
By Order of the Board of Directors
TOMMY D. REYNOLDS
Secretary
Rogers, Arkansas
December 13, 1996
YOUR VOTE IS IMPORTANT
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO DATE, SIGN AND
PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH
YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. THE
GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT LATER OR VOTE YOUR
SHARES IN PERSON IN THE EVENT YOU SHOULD ATTEND THE MEETING.
<PAGE>
Hudson Foods, Inc.
1225 Hudson Road
Rogers, Arkansas 72756
Proxy Statement for Annual Meeting of Stockholders
February 14, 1997 and Adjournments
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy, for use only at the Annual Meeting of Stockholders
to be held at the Continuing Education Center, East and Center Streets,
Fayetteville, Arkansas, on Friday, February 14, 1997, at 10:00 A.M., local time,
and any adjournment thereof, is solicited on behalf of the Board of Directors of
Hudson Foods, Inc. (the "Company"). Such solicitation is being made primarily by
mail, but may also be made in person or by telephone or telegraph by officers,
directors and regular employees of the Company. All expenses incurred in the
solicitation will be borne by the Company.
Any stockholder executing a proxy retains the right to revoke it at
any time prior to exercise at the Annual Meeting. A proxy may be revoked by
giving written notice to Tommy D. Reynolds, Secretary of the Company. A proxy
may also be revoked by the execution of a later proxy or by voting the shares in
person at the Annual Meeting. If not revoked, all shares represented by properly
executed proxies will be voted. Where a stockholder has specified a choice with
respect to any matter to be acted upon at the meeting, such shares will be voted
in accordance with the stockholder's wishes.
The approximate date this Proxy Statement is first being mailed to
stockholders is December 30, 1996.
OUTSTANDING STOCK AND VOTING RIGHTS
At the Annual Meeting, each stockholder will be entitled to one vote
for each share of Class A common stock, $.01 par value ("Class A common stock"),
and ten votes for each share of Class B common stock, $.01 par value ("Class B
common stock"), owned of record at the close of business on December 23, 1996.
The outstanding stock of the Company as of December 2, 1996, totaled 20,540,493
shares of Class A common stock and 9,602,522 shares of Class B common stock.
Votes may be cast in person or by proxy. The stock transfer books of the Company
will not be closed.
The enclosed form of proxy provides a method for stockholders to
withhold authority to vote for any one or more of the director nominees while
still granting authority to the proxy to vote for the remaining nominees. The
names of all nominees are listed on the proxy card. If you wish to grant the
proxy authority to vote for all nominees, check the box marked "FOR." If you
wish to withhold authority to vote for all nominees, check the box marked
"WITHHOLD AUTHORITY." If you wish your shares to be voted for some nominees and
not for one or more of the others, indicate the name(s) of the nominee(s) for
whom you are withholding the authority to vote by writing the name(s) of such
nominee(s) in the space provided on the form of proxy.
<PAGE>
Although shares represented by proxies containing abstentions or
indicating broker non-votes will be considered as present at the meeting for
purposes of determining the presence of a quorum, abstentions and broker
non-votes will not otherwise be counted on any matters submitted to a vote at
the meeting.
ELECTION OF DIRECTORS
(Item 1)
Nominees
The Company's By-Laws provide that the number of directors
constituting the Board of Directors shall be not less than three nor more than
15, as determined by the Board of Directors. The Board's size is currently set
at eight members.
The Company's directors each serve for a term of one year and until
their successors shall be elected and qualified. The following slate of eight
nominees has been chosen by the Board of Directors, and the Board recommends
that each be elected.
<TABLE>
<CAPTION>
Name Age Experience
<S> <C> <C>
James T. Hudson 72 Chairman of the Board and Chief Executive Officer of the Company since its
organization in February 1972. President of the Company from its organization until
October 1985. Prior to 1972, was with Ralston Purina for 26 years, the last seven
as Operating Director of the West Central Region. Chairman of the Board of the
National Broiler Council from 1982 to 1984. Past President of the Arkansas Poultry
Federation.
Michael T. Hudson 49 President of the Company since October 1985; Chief Operating Officer since August
1987. Prior to joining the Company in 1972, was employed for two years in the
Southeast Region of Ralston Purina's poultry operations. Since joining the Company,
has served as Vice President -- Sales, Vice President-- Sales and Marketing and Vice
President -- Production. Director since 1972.
Charles B. Jurgensmeyer 53 Chief Financial Officer and Executive Vice President of the Company. Prior to
joining Hudson in 1972, was employed in the West Central Region of Ralston Purina's
poultry operations for seven years, primarily in finance and accounting positions.
Has previously served as Secretary/Treasurer and Controller of the Company.
Director since July 1985.
James R. Hudson 38 Vice President - Director of Transportation since September 1992. Served as the
Company's Director of Fleet Operations from November 1984 until August 1992.
Director since November 1992. Director from July 1985 until December 1985.
Elmer W. Shannon 75 Began service with the Company in 1972 as Marketing Manager. Retired as Vice
President and Director of Marketing in April 1984. Subsequently retained by the
Company as a consultant. Director since December 1986.
Kenneth N. May 66 Consultant. Vice President - Research and Quality Assurance of Holly Farms Foods,
Inc. from September 1973 through September 1985; President and Chief Executive
Officer of Holly Farms Foods, Inc. from October 1985 through January 1988; and
Chairman and Chief Executive Officer of Holly Farms Foods, Inc. from January 1988
through August 1989. Subsequently retained by the Company as a consultant. Director
since December 1989. Dr. May also serves as a director of Embrex, Inc.
Jerry L. Hitt 50 Physician. Engaged in family practice at Rogers Medical Center, Rogers, Arkansas
since 1971. Director since November 1989.
Jane M. Helmich 45 Homemaker. Director since November 1992.
</TABLE>
<PAGE>
Each of the foregoing nominees is currently serving as a director of
the Company and was elected at the Company's most recent Annual Meeting. Each
nominee has been employed as described above for at least the past five years.
James T. Hudson is the father of Michael T. Hudson, James R. Hudson and Jane M.
Helmich; there are no other family relationships among the foregoing nominees.
By reason of his ownership, directly and beneficially, of shares of the
Company's Class A common stock and Class B common stock, James T. Hudson is
deemed to be a control person of the Company. None of the companies or
organizations listed opposite the name of any director above is a parent,
subsidiary or affiliate of the Company.
Unless otherwise designated, the enclosed proxy will be voted for the
election of the foregoing nominees as directors. The Board of Directors does not
contemplate that any of said nominees will be unable to stand for election, but
should any nominee unexpectedly become unavailable for election, the persons
named as proxies shall have the authority to vote for the election of any other
person.
Meetings and Committees
The Board of Directors held four meetings in fiscal 1996. Each
director was present for at least 75 percent of such meetings and the meetings
held by all committees of the board on which he or she served. The Company pays
outside directors an annual fee of $10,000 and $500 plus expenses for each
meeting attended.
The Board maintains a standing Audit Committee; Dr. Hitt is currently
its sole member. The Audit Committee is charged with annually reviewing
transactions between the Company and its corporate officers and performing such
additional duties as may be required by the rules of the New York Stock Exchange
or as may be specifically assigned from time to time by the Board. The Audit
Committee held two meetings during fiscal 1996.
The Company has a Compensation Committee whose primary function is to
establish the Company's compensation policies. See "Report of Compensation
Committee" contained herein. This committee, comprised of James T. Hudson
(Chairman), Michael T. Hudson and Charles B. Jurgensmeyer, held one meeting
during fiscal 1996.
The Company does not have a standing nominating committee. The Board
nominates persons to stand for election as directors. The Board will consider
suggestions for names of possible future nominees made in writing by
stockholders and sent to the Secretary of the Company so that they are received
on or before November 1 in any year.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 2, 1996, the beneficial
ownership of the Company's outstanding Class A common stock and Class B common
stock by each of the Company's directors, each executive officer listed in the
Summary Compensation Table, all directors and officers of the Company as a
group, and each person other than a director known by the Company to be the
beneficial owner of more than 5 percent of its outstanding Class A common stock
or Class B common stock. The address for all persons listed below is 1225 Hudson
Road, Rogers, Arkansas 72756.
<TABLE>
<CAPTION>
CLASS A STOCK(1) CLASS B STOCK(1)
-----------------------------------------------------------------------------------
Number of Percent Owned Number of Shares Percent Owned
Name Shares Owned Beneficially Beneficially Owned Beneficially Beneficially
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James T. Hudson 9,046,528(2)(3) 32.1% 9,600,000(4) 99.9%
Michael T. Hudson 815,378(3)(5) 3.8 750,000 7.8
Charles B. Jurgensmeyer 742,428(3) 3.6 - -
James R. Hudson 617,700(3)(6) 2.9 600,000 6.3
Elmer W. Shannon 48,943(3) * - -
Jerry L. Hitt 27,675(3) * - -
Kenneth N. May 30,973(3) * - -
Jane M. Helmich 661,825(3)(6)(7) 3.1 600,000 6.3
Norbert E. Woodhams 5,550(3) * - -
All directors and officers as a group
(11 persons) 10,693,857 36.1 9,600,000 99.9
- --------------------------------------------------------------------------------------------------------------------------
* Less than 1 percent of the outstanding shares of the Company's
Class A common stock.
</TABLE>
Footnotes to Principal Stockholders' Table
(1) Calculated based on 20,540,493 shares of Class A common stock
outstanding and 9,602,522 shares of Class B common stock outstanding as of
December 2, 1996. However, for purposes of computing the beneficial ownership of
any individual, it was assumed that such individual had exercised all options
and/or made all conversions by which that individual had the right, within the
60 days following December 2, 1996, to acquire shares of Class A common stock.
The group total similarly assumes that all directors and officers had exercised
their options and/or made conversions for shares of Class A common stock.
(2) James T. Hudson holds 56,028 shares of Class A common stock in
his own name. He has rights under revocable proxies to vote 1,330,000 shares of
Class A common stock, which are held in blocks of 650,000 by Charles B.
Jurgensmeyer and 680,000 by a third party no longer affiliated with the Company.
Mr. Hudson's wife holds 1,500 shares of Class A common stock in her own name.
Because of the revocable proxies and Mrs. Hudson's stock ownership, Mr. Hudson
is considered beneficially to own 1,331,500 shares of Class A common stock. Mr.
Hudson has disclaimed beneficial ownership of those shares. Mr. Hudson also
holds a total of 7,650,000 shares of Class B common stock, which may be
converted at any time into a like number of shares of Class A common stock, and
is thus considered to own the shares of Class A common stock into which his
shares of Class B common stock may be converted.
<PAGE>
(3) Includes shares of Class A common stock that the named individual
may acquire within the next 60 days by exercise of stock options, in the
following amounts: James T. Hudson, 9,000; Michael T. Hudson, 43,928; Charles B.
Jurgensmeyer, 43,928; Elmer W. Shannon, 1,500; Jerry L. Hitt, 15,000; Kenneth N.
May, 7,500; James R. Hudson, 9,000; Jane M. Helmich, 43,928 (through the
exercise of options held by her husband, Larry E. Helmich); and Norbert E.
Woodhams, 2,000.
(4) James T. Hudson holds 7,650,000 shares of Class B common stock in
his own name. In addition, Mr. Hudson has rights under revocable proxies to vote
another 1,950,000 shares, which are held in blocks of 600,000 each by James R.
Hudson and Jane M. Helmich, and 750,000 shares by Michael T. Hudson, and thus is
considered a beneficial owner of those shares. James T. Hudson cannot convert
those shares of Class B common stock to Class A common stock and, therefore,
such shares are not attributed to him as Class A common stock. Mr. Hudson has
disclaimed beneficial ownership of the shares for which he holds revocable
proxies.
(5) Michael T. Hudson holds 21,000 shares of Class A common stock in
his own name and 450 shares of Class A common stock jointly with his children.
In addition, Mr. Hudson holds 750,000 shares of Class B common stock, which may
be converted at any time into a like number of shares of Class A common stock.
Mr. Hudson is thus considered beneficially to own the shares of Class A common
stock into which his shares of Class B common stock may be converted.
(6) James R. Hudson and Jane M. Helmich each hold 600,000 shares of
Class B common stock, which may be converted at any time into a like number of
shares of Class A common stock. Mr. Hudson and Ms. Helmich are thus considered
beneficially to own the shares of Class A common stock into which their shares
of Class B common stock may be converted.
(7) Jane M. Helmich holds 450 shares of Class A common stock as
custodian for a minor child, and Ms. Helmich's husband holds 17,447 shares of
Class A common stock in his own name. Because of the custodianship and Mr.
Helmich's stock ownership, Ms. Helmich is considered beneficially to own 17,897
shares of Class A common stock.
EXECUTIVE OFFICERS
James T. Hudson, Michael T. Hudson, Charles B. Jurgensmeyer, James R.
Hudson, Tommy D. Reynolds, Norbert E. Woodhams, and Bernard F. Leonard currently
serve as executive officers of the Company. The first four named individuals
also serve as directors, and are described above under the caption "Election of
Directors."
Tommy D. Reynolds, age 43, has served as Secretary and Treasurer
since October 1992, and previously served as Assistant Secretary and Assistant
Treasurer beginning in 1986. He has been employed by the Company since May 1979
in various accounting, auditing and finance positions. Mr. Reynolds is a
certified public accountant in the state of Arkansas.
Norbert E. Woodhams, age 50, has served as President of the Specialty
Foods Division since the Division's inception in August 1995, and served as
President of the Pierre Frozen Foods Division from March 1994 until August 1995.
Prior to joining the Company, he was Group Vice President of Tyson Foods Inc.,
Red Meat Division, from 1991 to March 1994 and President and Chief Executive
Officer of Henry House, Inc. from 1987 to 1991.
<PAGE>
Donard W. Perkins, age 65, served as Vice President-Director of the
Broiler Division from July 1988 until retiring at the end of fiscal 1996. Prior
to joining the Company, he was Senior Vice President--Processing, Sales &
Marketing for Pilgrim's Pride Corporation from 1976 to May 1983; Vice
President--General Manager of Spring Valley (a division of Lane Poultry) from
May 1983 to December 1986; and Senior Vice President--Processing, Sales &
Marketing for Cagle's Inc. from December 1986 until his employment with the
Company.
Bernard F. Leonard, age 43, was promoted to Vice President-Director
of the Broiler Division beginning in fiscal 1997 and previously served as
General Manager of the Company's Alabama broiler complex since joining the
Company in September 1993. Mr. Leonard was President and Chief Operating Officer
of Southland Foods from October 1990 until his employment with the Company.
EXECUTIVE COMPENSATION
General
The Company's philosophy is that total compensation programs for its
Chief Executive Officer and other executives should be established by the
process used for its other salaried employees, except that a larger portion of
executive compensation should be tied directly to the performance of the
business.
The Company also believes that executive compensation should be
subject to objective review. It is for this reason that the Compensation
Committee of the Board of Directors (the "Committee") was established. The
Committee is comprised of James T. Hudson (Chairman), Michael T. Hudson and
Charles B. Jurgensmeyer, all executive officers and directors of the Company.
Operating within the guidance provided by the Board of Directors, the
Committee's role is to assure that the compensation strategy of the Company is
aligned with the interest of the stockholders, and the Company's compensation
structure will allow for fair and reasonable base salary levels and the
opportunity for senior executives to earn short-term and long-term compensation
that reflects both Company and individual performance as well as industry
practice.
The following is a report submitted by the above listed committee
members in their capacity as the Board's Compensation Committee, addressing the
Company's compensation policy as it related to the Company's Chief Executive
Officer and its other executive officers for fiscal 1996.
<PAGE>
REPORT OF COMPENSATION COMMITTEE
Compensation Policy
The goal of the Company's executive compensation policy is to ensure
that an appropriate relationship exists between executive pay and the creation
of stockholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policies
integrate annual base compensation with bonuses based upon corporate performance
and individual initiatives and performance. Base compensation is designed to
ensure that the Company can attract and retain high caliber executive officers,
and reflects the Company's assessment of compensation levels generally
prevailing elsewhere in the market for services of persons performing similar
duties. Measurement of corporate performance is primarily based on Company
goals, industry performance levels and comparisons with the Company's results in
prior years. Accordingly, in years in which performance goals and industry
levels are achieved or exceeded, or in which the Company's results improve in
comparison to the results of prior years, executive compensation should be
higher than in years in which performance is below expectations. Annual cash
compensation, together with the payment of incentive and deferred compensation,
is designed to attract and retain qualified executives and to ensure that such
executives have a continuing stake in the long-term success of the Company. All
executive officers, and management in general, are eligible for and do
participate in incentive compensation plans.
In evaluating annual executive compensation, the Committee examines
the Company's overall performance, focusing particularly on sales growth, net
margin, return on average stockholders' equity, percentage capitalization
through long-term debt, and the Company's current ratio. These factors are
compared with designated Company performance goals, prior years' performance and
performance of several other publicly-traded companies in the industry. In
addition, other factors are taken into consideration, such as cost of living
increases, competitors' performance, as well as the individual executive
officer's past performance and potential with the Company. Bonus compensation is
also tied to performance goals, some of which are specific to the performance of
various operating divisions within the Company.
Fiscal 1996 Compensation
For fiscal 1996, the Company's executive compensation program
consisted of (i) base salary, adjusted from the prior year, (ii) a bonus pool
based upon the performance measurements described above, and (iii) contributions
under the Company's broad-based Employee Stock Purchase Plan. Stock options are
granted from time to time to members of management, based primarily on such
person's potential contribution to the Company's growth and profitability. The
Committee feels that options and other stock-based performance compensation
arrangements are an effective incentive for managers to create value for
stockholders since the value of an option bears a direct relationship to the
Company's stock price. Contributions by the Company to the Employee Stock
Purchase Plan are fixed as a percentage of employee participant contributions.
The Company's objective is to obtain a financial performance that
achieves several goals over time. Specifically, the Company seeks to achieve,
over a five-year period, an average compound annual sales growth of 15 percent,
an average 3 percent return on sales (net margin), and an average return on
average stockholders' equity of 15 percent. Other financial goals are
maintaining a current ratio of greater than 1.35 to 1 and keeping long-term
obligations less than 50 percent of total capitalization, defined as long-term
obligations plus stockholders' equity. The philosophy underlying these goals is
that unless targets are set aggressively, they will be too easily met and thus
not serve to stimulate the performance the Company expects of its executives.
Consequently, failure to achieve any one or more targets in a given year may, in
the Committee's opinion, be more reflective of the high standards of achievement
set by the Company than other factors.
<PAGE>
During fiscal 1996, the Company achieved sales growth of 14.8 percent
over the prior year, a net margin of 1.7 percent, and a return of 7.3 percent on
average stockholders' equity. At year-end, the Company's current ratio was 2.42
to 1 and long-term obligations accounted for 40.8 percent of total
capitalization. For the five-year period ended with fiscal 1996, the Company
achieved an average compound annual sales growth of 12.5 percent, an average net
margin of 1.9 percent, and an average return on average stockholders' equity of
9.4 percent. Fiscal 1996 performance achieved two of the five stated goals for
the year, while drawing the Company closer to its five-year average goals.
The performance oriented nature of the Company's compensation program
is best exemplified by examining the salary paid to James T. Hudson, the
Company's Chairman and Chief Executive Officer. See "CEO Compensation" below.
CEO Compensation
Mr. James T. Hudson has been Chairman and CEO of the Company since
its inception in 1972. Consistent with the other executive officers, the
structure of Mr. Hudson's compensation package reflects the philosophy of "total
compensation and pay for performance" and includes components of both short and
long term Company performance. The components of Mr. Hudson's compensation
package are reviewed annually and adjusted to reflect both the Company's overall
performance and the compensation level perceived by the Committee to prevail
among officers performing similar duties with other publicly traded companies.
Specific performance targets are not fixed and evaluated, but the
Committee pays special attention to Mr. Hudson's position as Chairman and CEO of
the Company, the Company's overall performance and the strategic decisions of
the Company in setting Mr. Hudson's compensation package. The Committee has the
discretion to pay an incentive bonus or option grant, whether or not any
specific performance indicators are met.
Conclusion
The Committee believes that linking executive compensation to
corporate performance results in a better alignment of compensation with
corporate goals and stockholder interest. As performance goals are met or
exceeded, resulting in increased value to stockholders, executives are rewarded
commensurately. The Committee believes that compensation levels during fiscal
1996 adequately reflect the Company's compensation goals and policies.
James T. Hudson - Chairman
Michael T. Hudson
Charles B. Jurgensmeyer
<PAGE>
Compensation Committee Interlocks and Insider Participation
Each director on the Compensation Committee is also an executive
officer of the Company.
The Company has entered into grower contracts involving poultry farms
owned by certain of its officers and directors. The contracts provide for the
placement of Company-owned flocks on the farms during the grow-out phase of
production. The contracts are identical to those entered into by the Company
with non-related parties and are terminable at any time by the Company. The
ownership of the farms and the aggregate amounts paid by the Company to members
of the Compensation Committee under the grower contracts during fiscal 1996 are
as follows: James T. Hudson (2 farms), $188,000; H&G Farms (50 percent owned by
James T. Hudson), $179,000; Michael T.
Hudson (1 farm), $141,000; and Charles B. Jurgensmeyer (1 farm), $73,000.
During fiscal 1996, James T. Hudson owned and leased aircraft to the
Company at monthly rates ranging from $87,500 to $160,000. Each lease provides
that the Company shall be responsible for operating costs, insurance,
maintenance and taxes. The Company's Board of Directors has determined that the
aircraft lease arrangements are as favorable to the Company as those it could
otherwise obtain. Mr. Hudson's total payment from the Company for the aircraft
leases was $3,112,000 in fiscal 1996.
The Company has periodically made cash advances to James T. Hudson.
Such advances accrue interest at the cost of the Company's short term borrowings
plus 0.5 percent. The largest aggregate amount of these advances during fiscal
1996 was $218,000. At September 28, 1996, the balance of these advances totaled
$217,000. Additionally, the Company advances premium payments on life insurance
policies covering James T. Hudson, Michael T. Hudson, and Charles B.
Jurgensmeyer. These premiums will be repaid from the policy proceeds. At
September 28, 1996, the balance of such premium payment advances for each
individual totaled $8,234,000, $334,000, and $503,000, respectively.
<PAGE>
Summary Compensation Table
The following table sets forth certain summary information concerning
the compensation paid by the Company to its Chief Executive Officer and each of
the four most highly compensated executive officers other than the Chief
Executive Officer (collectively, the "named executive officers") during the
fiscal years indicated.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Name and Fiscal Long-Term All Other
Principal Position Year Annual Compensation Compensation Compensation(1)
------------------ ------ -------------------------------------------- ------------ ---------------
Other Annual
Salary Bonus Compensation Options (#)
-------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
James T. Hudson 1996 $486,500 $ 500,000 $14,868 -- $279,184
Chief Executive Officer and 1995 500,000 700,000 24,432 -- 96,255
Chairman of the Board 1994 475,000 1,200,000 36,704 -- 75,204
Michael T. Hudson 1996 500,000 400,000 16,122 -- 2,490
President and Chief 1995 400,000 525,000 24,240 -- 2,100
Operating Officer 1994 350,000 500,000 42,738 -- 1,900
Charles B. Jurgensmeyer 1996 400,000 350,000 5,040 -- 50,420
Chief Financial Officer and 1995 350,000 425,000 7,884 -- 40,799
Executive Vice President 1994 300,000 400,000 2,610 -- 28,010
James R. Hudson 1996 182,500 250,000 12,721 -- --
Vice President - Director 1995 175,000 250,000 5,688 -- --
of Transportation 1994 168,000 250,000 -- -- --
Norbert E. Woodhams 1996 231,000 147,500 -- 10,000 15,488
President - Specialty 1995 189,000 189,000 -- -- 8,021
Foods Division 1994 56,000 30,900 -- -- 76,279
</TABLE>
(1) Includes the following items of compensation:
(a) Company's contribution to the named individual's deferred compensation
account in the following amounts: Charles B. Jurgensmeyer, $16,500 (1996),
$13,319 (1995), $6,000 (1994); and Norbert E. Woodhams, $8,400 (1996),
$4,398 (1995).
(b) Dollar value benefit premium payments under split-dollar life insurance
policies covering the named individual for which the Company will be
reimbursed for premiums paid, in the following amounts: James T. Hudson,
$279,184 (1996), $96,255 (1995), $75,204 (1994); Michael T. Hudson, $2,490
(1996), $2,100 (1995), $1,900 (1994); and Charles B. Jurgensmeyer, $6,170
(1996), $5,910 (1995), $5,510 (1994).
(c) Company's matching contribution to the named individual under the
Company's Employee Stock Purchase Plan in the following amounts: Charles B.
Jurgensmeyer, $27,750 (1996), $21,570 (1995), $16,500 (1994); and Norbert
E. Woodhams, $7,088 (1996), $3,623 (1995), $788 (1994).
(d) Moving expenses paid by the Company on behalf of Norbert E. Woodhams,
$75,491 (1994).
<PAGE>
Compensation Pursuant to Plans
Retirement Plan. The Company provides a 401(k) Retirement Plan (the
"Retirement Plan") for the benefit of its employees. Participation in the
Retirement Plan is by voluntary employee contributions. Participants may
contribute up to 15 percent of their base and overtime pay, excluding bonuses,
to the Retirement Plan. The Company will match 50 percent of the first 4 percent
of a participant's contributions from base and overtime pay. The assets are
invested under the terms of a trust administered by Barclay's Global Investors
of San Francisco, California. The Company made no contributions for executive
officers in fiscal 1996. Matching contributions for all employees (excluding
executive officers) were $1,289,000 in fiscal 1996; $1,219,000 in fiscal 1995;
and $1,070,000 in fiscal 1994.
Executive Salary Deferral Plan. In July of 1992, the Company
established its Executive Salary Deferral Plan, which is a nonqualified deferred
compensation arrangement, exempt from certain restrictions imposed by the
Internal Revenue Code on 401(k) plans. Participation in the Executive Salary
Deferral Plan is limited to select management and highly compensated employees
of the Company. Participants may contribute up to 50 percent of their base
salary and/or 100 percent of their bonuses to the Executive Salary Deferral
Plan. The Company will match 50 percent of the first 4 percent of a
participant's contributions from base salary. Assets are held in individual
accounts for each participant and these accounts are held in a special trust.
The trust assets will become subject to the claims of the Company's general
creditors in the event of bankruptcy. The Company's contributions for all
executive officers as a group (7 persons) were $35,000 in fiscal 1996; $33,000
in fiscal 1995; and $19,000 in fiscal 1994. Matching contributions for all
employees (excluding executive officers) were $159,000 in fiscal 1996; $141,000
in fiscal 1995; and $79,000 in fiscal 1994.
Salary Continuation Plan. The Company has entered into agreements with
31 past or present key employees providing for the payment of specified benefits
in the event of the employee's retirement or death. Generally, a covered
employee (or the employee's beneficiary) is entitled to receive a fixed sum
annually for the 15 years following the employee's retirement or death. Benefits
are not paid for an employee's retirement before reaching age 65, unless the
Company's Executive Committee has approved the early retirement. In the event
that voting control of the Company ceases to be held by the Hudson family,
termination of a covered employee entitles the employee to receive the stated
retirement benefits over periods ranging from 15 to 25 years beginning on the
later of the employee's termination or attainment of age 55. Payments under this
plan are funded by life insurance proceeds and general operating capital.
The Salary Continuation Plan provides annual retirement or death
benefits of $100,000 each for James T. Hudson, Michael T. Hudson, Charles B.
Jurgensmeyer, James R. Hudson, and Donard W. Perkins and $70,000 for Norbert E.
Woodhams.
Life Insurance. The Company maintains life insurance policies on its
executives, including split-dollar policies on James T. Hudson, Michael T.
Hudson and Charles B. Jurgensmeyer, in which the beneficiaries have been
selected by the executives. Upon the death of each of these executive officers,
the Company will be reimbursed by the policy for the amount of premiums paid by
the Company.
<PAGE>
Employee Stock Purchase Plan. The Company's Amended and Restated 1990
Employee Stock Purchase Plan (the "Purchase Plan") allows participating
full-time employees to purchase Class A common stock on the New York Stock
Exchange at market prices. Purchases are made through regular payroll
deductions, which may be a minimum of 1 percent and a maximum of 10 percent of
the participant's gross earnings, including overtime pay but excluding bonuses.
The Company will, subject to certain restrictions in the Purchase Plan, annually
contribute an amount in cash and/or shares of Class A common stock equal in
value to 15 percent of each participant's aggregate contributions to the
Purchase Plan during the preceding ten years, except with respect to any
contributions that have been withdrawn by the participant. The Company pays all
administrative costs and brokerage commissions for purchases. The Purchase Plan
was adopted in July 1990, became effective on the first day of fiscal 1991 and
was amended in December 1992 to qualify for an exemption from the automatic
application of Section 16 of the Securities Exchange Act.
Of the approximately 11,250 employees eligible to participate in the
Purchase Plan, 1,355 were active participants as of the last day of fiscal 1996.
The Company's contributions for all executive officers as a group (7 persons)
were $58,000 in fiscal 1996; $56,000 in fiscal 1995; and $49,000 in fiscal 1994.
The Company's aggregate matching contributions for all employees (excluding
executive officers) were $616,000 in fiscal 1996; $538,000 in fiscal 1995; and
$366,000 in fiscal 1994.
Stock Option Plan. The proposed 1996 Stock Option Plan reserves
1,200,000 and 300,000 shares of the Company's Class A common stock for issuance
as incentive stock options and nonqualified stock options, respectively. At the
end of fiscal 1996, the Company continued to reserve 477,534 shares of Class A
common stock for issuance against outstanding options granted under the Second
Amended and Restated 1985 Stock Option Plan (the "1985 Stock Option Plan") which
expired during fiscal 1996.
Under the proposed 1996 Stock Option Plan, a committee of the Board of
Directors may grant to "key" employees options to purchase shares of Class A
common stock at a price which is at least 100 percent of the fair market value
of such shares on the date of grant (110 percent in the case of individuals
holding 10 percent or more of the Company's Class A common stock). "Key"
employees are determined by the committee, and may include directors, executive
officers, and other officers and employees of the Company and its subsidiaries.
Options expire no later than the tenth anniversary of the date of grant. Subject
to those conditions, the exercise price and the duration of options granted are
set by the committee. The 1985 Stock Option Plan operated in the same manner
during its existence.
<PAGE>
During fiscal 1996, the Company granted stock options to the named executive
officer as shown below:
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants(1) for Option Term(2)
- ------------------------------------------------------------------------------- ---------------------------
Number of % of Total
Securities Options Granted Exercise
Underlying to Employees Price Per Expiration
Name Options Granted in Fiscal Year Share Date 5% 10%
- ------------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Nobert E. Woodhams 10,000 33.3% $14.125 4/3/01 $39,020 $86,230
</TABLE>
(1) During fiscal 1996, a total of 30,000 options were granted to
three employees under the 1996 Stock Option Plan.
(2) Potential realizable values are based on the assumption that the
Company's common stock will appreciate in value from the date of grant to the
end of the option term (5 years from the date of grant) at compound annual rates
of 5% and 10%. These values are not intended to forecast future appreciation, if
any, in the price of the Company's common stock.
During fiscal 1996, the Company did not make any awards, other than
those described above, pursuant to any long-term incentive plans. The Company
did not reprice any of its options during fiscal 1996.
<PAGE>
The following table sets forth the options exercised, the value
realized and the fiscal year-end value of unexercised options for each of the
named executive officers.
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Options at Value of Unexercised In-the-Money
Fiscal Year-End (#) Options at Fiscal Year-End(5)
-------------------------- ---------------------------------
Shares Acquired Value
Name on Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- --------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James T. Hudson(3) -- $ -- 4,500 4,500 $ 38,633 $38,633
Michael T. Hudson(1) -- -- 39,428 4,500 346,482 38,633
Charles B. Jurgensmeyer(1) -- -- 39,428 4,500 346,482 38,633
James R. Hudson(3) -- -- 4,500 4,500 38,633 38,633
Norbert E. Woodhams(4) -- -- 2,000 8,000 -- --
Donard R. Perkins(2) 1,500 22,595 -- 1,500 -- 12,878
</TABLE>
(1) Michael T. Hudson and Charles B. Jurgensmeyer's options consist of the
following:
- 21,428 shares granted on April 28, 1988, at $4.667 per share,
expiring April 28, 1998, of which 21,428 shares are exercisable.
- 22,500 shares granted on October 5, 1992, at $5.04 per share,
expiring October 5, 1997, of which 18,000 shares are exercisable.
(2) Donard W. Perkins' options consist of the following:
- 1,500 shares granted on October 5, 1992, at $5.04 per share,
expiring December 28, 1996, of which no shares are exercisable.
(3) James T. Hudson and James R. Hudson's options consist of the following:
- 9,000 shares granted on October 5, 1992, at $5.04 per share,
expiring October 5, 1997, of which 4,500 shares are exercisable.
(4) Norbert E. Woodhams' options consist of the following:
- 10,000 shares granted on April 3, 1996, at $14.125 per share,
expiring April 3, 2001, of which 2,000 shares are exercisable.
(5) Amounts represent the excess of the market value over the exercise price as
of September 28, 1996.
<PAGE>
PROPOSAL TO RATIFY THE ADOPTION OF THE 1996 STOCK OPTION PLAN
(Item 2)
Introduction
In April 1996, the Board of Directors of the Company adopted, subject
to stockholder approval, the Hudson Foods, Inc. 1996 Stock Option Plan (the
"1996 Plan").
A summary of the principal features of the 1996 Plan is provided
below but is qualified in its entirety by reference to the full text of the 1996
Plan which was filed electronically with this proxy statement with the
Securities and Exchange Commission. Such text is not included in the printed
version of this proxy statement.
Stockholders are requested in this Item 2 to ratify the adoption of
the 1996 Plan. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the Annual
Meeting will be required to approve the 1996 Plan. The Board of Directors
believes that ratification of the adoption of the 1996 Plan is in the best
interests of the Company and its stockholders and recommends that the
stockholders vote for this proposal.
General
The 1996 Plan provides for the grant to employees and directors of
the Company or any present or future parent or subsidiary thereof of stock
options ("Options"), which may be incentive stock options ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonqualified stock options ("Nonqualified
Options"), at the discretion of the Compensation Committee and as reflected in
the terms of the written Option agreement.
The aggregate number of shares of the Company's Class A common stock,
$.01 par value (the "Stock" or "Common Stock"), deliverable upon the exercise of
Options granted pursuant to the 1996 Plan will not exceed 1,200,000 shares for
Incentive Stock Options and 300,000 shares for Nonqualified Options. Such shares
may either be authorized but unissued or treasury shares.
Purposes
The 1996 Plan was adopted to provide a means by which selected
officers, directors and employees of the Company could be given the opportunity
to purchase Stock in the Company, to assist in retaining the services of
employees holding key positions, to secure and retain the services of persons
capable of filling such positions and to provide incentives for such persons to
exert maximum efforts for the success of the Company.
Administration
The 1996 Plan will be administered by the Compensation Committee.
Unless contrary to the express provisions of the 1996 Plan or to resolutions
adopted by the Board, the administration, interpretation or application of the
1996 Plan by the Compensation Committee shall be final, conclusive and binding
upon all participants. Currently, the Compensation Committee consists of James
T. Hudson, Michael T. Hudson and Charles B. Jurgensmeyer. Members of the
Compensation Committee will receive no additional compensation for their
services in connection with the administration of the 1996 Plan.
<PAGE>
Eligibility
Incentive Stock Options may be granted under the 1996 Plan only to
selected employees (including directors who are salaried employees) who are
employed on a full-time basis by the Company. Selected employees (including
directors) are also eligible to receive Nonqualified Options. As of September
28, 1996, the Company had approximately 11,470 full-time employees, including
four directors who are also full-time employees.
For Incentive Stock Options granted under the 1996 Plan, the
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which such options are exercisable for the first
time by an optionee during any calendar year (under all such plans of the
Company) may not exceed $100,000.
Terms of Options
Each Option granted pursuant to the 1996 Plan is evidenced by a
written stock Option agreement between the Company and the optionee and is
subject to the following terms and conditions. Individual Option grants may be
more restrictive as to any or all of the terms described below:
Exercise of the Option. The Compensation Committee
determines on the date of grant when Options may be exercisable under
the 1996 Plan. Options granted under the Plan may become exercisable
in cumulative increments ("vest") as determined by the Compensation
Committee. The form of Option agreement proposed for general use
under the 1996 Plan provides that Options typically vest at the rate
of 20 percent per year during the optionee's employment or service as
a Board member. Shares covered by Options granted in the future under
the 1996 Plan may be subject to different vesting terms.
An Option is exercised by delivering to the Company a
written notice of exercise that specifies the number of full shares
of Common Stock to be purchased and by tendering payment of the
purchase price in cash to the Company. An Option may not be exercised
for a fraction of a share.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased shares
shall be available for the grant of other Options under the 1996
Plan.
Exercise Price. The exercise price of Options granted under
the 1996 Plan is determined by the Compensation Committee but may not
be less than 100 percent of the fair market value of the Common Stock
on the date the Option is granted. No Incentive Stock Option may be
granted under the 1996 Plan to any person who, at the time of the
grant, owns (or is deemed to own) Stock possessing more than 10
percent of the total combined voting power of the Company, unless the
Incentive Stock Option exercise price is at least 110 percent of the
fair market value of the Stock subject to the Incentive Stock Option
on the date of grant, and the term of the Option does not exceed five
years from the date of grant. Because the Company's Common Stock is
currently traded on the New York Stock Exchange ("NYSE"), the fair
market value per share shall be the average of the highest and lowest
selling price on the NYSE on the date of grant of the Option.
<PAGE>
Termination of Employment. Unless otherwise provided in the
terms of an Option, if an optionee's employment with the Company is
terminated for any reason (other than by death or disability), a
vested Option may be exercised within three months (or such other
period of time as is determined by the Compensation Committee) after
such termination (but in no event later than the date of expiration
of the term of such Option) as to all or a part of the shares as to
which the optionee was entitled to exercise at the date of such
termination.
Death or Disability. Unless otherwise provided in the terms
of an Option, if an optionee is unable to continue his or her
employment with the Company as a result of death, or disability,
within the meaning of Section 22(e)(3) of the Code, his or her
Options may be exercised at any time within 12 months from the date
of death or disability (but in no event later than the date of
expiration of the term of such Option) to the extent such Options
would have been exercisable immediately prior to the date of the
optionee's death or disability. In the event of an optionee's death,
Options may be exercised by the person who acquires the right to
exercise the Option by bequest or inheritance.
Term and Termination of Options. The maximum term of
Options under the 1996 Plan is 10 years, except that in certain
cases (i.e., Incentive Stock Options granted to certain stockholders
of the Company) the maximum term is five years. No Option may be
exercised by any person after the expiration of its term.
Nontransferability of Options. Options granted under the
1996 Plan may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or the
laws of descent and distribution. An Option may be exercised, during
the lifetime of the optionee, only by the optionee.
Other Provisions. The Option agreement may contain such
other terms, provisions and conditions not inconsistent with the 1996
Plan as may be determined by the Compensation Committee.
Adjustment Provisions
In the event that each of the outstanding shares of Stock shall be
changed into or exchanged for a different number or kind of shares of stock of
the Company, or of another corporation, through merger, consolidation,
recapitalization, reclassification, stock dividend, split-up, combination of
shares, or otherwise, there shall be substituted for each share of Stock then
under Option or available for Option the number and kind of shares of stock into
which each outstanding share of Stock shall be so changed or for which each such
share shall be so exchanged, together with an appropriate adjustment of the
Option price.
In the event that there shall be any other change in the number of,
or kind of, issued shares of Stock, or of any stock or other securities into
which such Stock shall have been changed, or for which it shall have been
exchanged, then if the Compensation Committee shall, in its sole discretion,
determine that such change equitably requires an adjustment in the number of, or
kind, or Option price of shares then subject to an Option or available for
Option, such adjustment shall be made by the Board and shall be effective and
binding for all purposes of the 1996 Plan.
<PAGE>
Duration, Amendment and Termination
The Board may suspend or terminate the 1996 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Plan will terminate on April 1, 2006. The Board may also amend
the 1996 Plan at any time or from time to time. However, no amendment will be
effective unless approved by the stockholders of the Company within 12 months
before or after its adoption by the Board if the amendment would (i) modify the
requirements as to eligibility for participation (to the extent such
modification requires stockholder approval in order for the 1996 Plan to satisfy
Section 422 of the Code), (ii) increase the number of shares reserved for
issuance upon exercise of Options, or (iii) change any other provision of the
1996 Plan in any way if such modification requires stockholder approval in order
to satisfy the requirements of Section 422 of the Code.
Federal Income Tax Information
Options granted under the 1996 Plan may be either Incentive Stock
Options, as defined in Section 422 of the Code, or Nonqualified Options.
An optionee who is granted an Incentive Stock Option will not
recognize taxable income either at the time the Option is granted or upon its
exercise, although the exercise may subject the optionee to the alternative
minimum tax. Upon the sale or exchange of the shares more than two years after
grant of the Option and one year after exercising the Option, any gain or loss
will be treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee will recognize ordinary income at the time of sale
or exchange equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the Option exercise, or
(ii) the sale price of the shares. A different rule for measuring ordinary
income upon such a premature disposition may apply if the optionee is also an
officer, director or 10 percent stockholder of the Company. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period.
All other Options which do not qualify as Incentive Stock Options are
referred to as Nonqualified Options. An optionee will not recognize any taxable
income at the time he is granted a Nonqualified Option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the exercise
price. Any taxable income recognized in connection with an Option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's exercise price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
Subject to Section 162(m) of the Code, the Company will be entitled
to a tax deduction in the same amount as the ordinary income recognized by the
optionee with respect to shares acquired upon exercise of a Nonqualified Option.
<PAGE>
New Plan Benefits
Because the granting of Options is discretionary, the Company cannot
now determine the number of Options to be granted in the future to any
particular person or group. The following table presents certain information
with respect to Options held under the 1996 Plan as of September 28, 1996:
<TABLE>
<CAPTION>
Name and Position(1) Aggregate Exercise Price(2) Number of Units
-------------------- --------------------------- ---------------
<S> <C> <C>
Norbert E. Woodhams
President - Specialty Foods Division $141,250 10,000
Executive Officer Group 141,250 10,000
Non-Executive Officer Director Group -- --
Non-Executive Officer Employee Group 282,500 20,000
</TABLE>
(1) Grants reflected in this table are subject to stockholder
approval of Item 2.
(2) Exercise price multiplied by the number of shares underlying the
options.
COMPANY PERFORMANCE
The following graph presents a five year comparison of cumulative
total returns for the Company, the Standard & Poor's 500 Stock Index ("S&P 500")
and an index of peer companies selected by the Company (the "Peer Group").
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
Hudson
Measurement Period Foods S & P 500 Peer Group
(Fiscal Year Covered) Inc. Index Index
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Base Period 9/91 $100.00 $100.00 $100.00
9/92 103.22 111.05 110.14
9/93 144.67 125.49 139.59
9/94 308.57 130.11 165.72
9/95 283.77 168.82 150.68
9/96 295.58 203.14 153.11
</TABLE>
Source: Standard & Poor's Compustat
The cumulative total return on investment (change in the year-end
stock price plus reinvested dividends) for each period is based on an assumed
initial investment of $100 in stock or the composite index at the end of fiscal
1991.
The above graph compares the performance of the Company with that of
the S&P 500, and the Peer Group with the investment weighted on market
capitalization. The Peer Group consists of WLR Foods, Inc., Pilgrim's Pride
Corporation, Sanderson Farms, Inc., Golden Poultry Company, Inc. and Cagle's,
Inc. These companies were approved by the Compensation Committee.
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into grower contracts involving poultry farms
owned by certain of its officers and directors. The contracts provide for the
placement of Company owned flocks on the farms during the grow-out phase of
production. The contracts are identical to those entered into by the Company
with non-related parties and are terminable at any time by the Company. In
addition to the information previously disclosed for members of the Compensation
Committee, the ownership of the farms and the aggregate amounts paid by the
Company under grower contracts during fiscal 1996 are as follows: James R.
Hudson and Larry E. Helmich (1 farm, joint ownership), $121,000; and Elmer W.
Shannon (1 farm), $85,000.
Larry E. Helmich has been an employee of the Company since 1979. For
fiscal 1996, Mr. Helmich received salary and bonus totaling $390,500. Mr.
Helmich served as a member of the Board of Directors from July 1985 until
December 1985, and continues to serve as the General Manager of the Company's
integrated broiler complex in Noel, Missouri. Mr. Helmich is the husband of Jane
M. Helmich, the son-in-law of James T. Hudson and the brother-in-law of Michael
T. Hudson and James R. Hudson.
James T. Hudson was a party to other certain transactions with the
Company during fiscal 1996. See "Executive Compensation Committee Interlocks and
Insider Participation."
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Such persons are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it
with respect to fiscal 1996, or written representations from certain reporting
persons, the Company believes that all directors, officers and persons who own
more than 10 percent of a registered class of the Company's equity securities
have complied in a timely fashion with their reporting obligations under Section
16(a).
AUDITORS TO BE PRESENT
The Company employs Coopers & Lybrand L.L.P. of Tulsa, Oklahoma as
its principal independent public accountants. A representative of Coopers &
Lybrand is expected to attend the Annual Meeting and will have the opportunity
to make a statement. The
representative will also be available to respond to appropriate questions.
<PAGE>
VOTING PROCEDURES
Nominees for the Board of Directors of the Company will be elected by
a plurality of the votes of shares of all classes of common stock present in
person or represented by proxy at the Annual Meeting. Stockholder votes cast by
proxy or in person at the Annual Meeting will be tabulated by the Company's
transfer agent, ChaseMellon Shareholder Services of Los Angeles, California. The
results will be announced by the transfer agent at the Annual Meeting.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual
Meeting of Stockholders to be held on February 13, 1998 must be received by the
Company on or before August 22, 1997, in order to be eligible for inclusion in
the Company's proxy statement and form of proxy. To be so included, a proposal
must also comply with all applicable provisions of Regulation 14A under the
Securities Exchange Act of 1934.
The Company's By-Laws require that for business to be properly brought
before the Annual Meeting by a stockholder, the Company's Secretary must receive
a written proposal for the consideration of such business at least 120 days
prior to the scheduled meeting date. Any stockholder who wishes to bring
business before an Annual Meeting should contact the Company for additional
information as to the procedures to be followed.
OTHER MATTERS
So far as now known, there is no business other than that described
above to be presented to the stockholders for action at the Annual Meeting.
Should other business come before the meeting, votes may be cast pursuant to
proxies in respect to any such business in the best judgment of the persons
acting under the proxies.
<PAGE>
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED SEPTEMBER 28, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO:
DAVID K. SIEMENS
DIRECTOR OF INVESTOR RELATIONS
HUDSON FOODS, INC.
P.O. BOX 777
ROGERS, AR 72757-0777
OR MAY BE OBTAINED AT WWW.HUDSONFOODS.COM ON THE INTERNET.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE URGED TO
SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED,
WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
TOMMY D. REYNOLDS
Secretary
December 13, 1996
<PAGE>
HUDSON FOODS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS, FEBRUARY 14, 1997
The undersigned hereby constitute(s) and appoint(s) James T. Hudson and Charles
B. Jurgensmeyer as Proxies, each with the power to appoint his substitute, and
hereby authorizes the Proxies, or either of them, to represent and vote as
designated on the reverse side all of the shares of common stock of Hudson
Foods, Inc. held of record by the undersigned on December 23, 1996, at the
Annual Meeting of Stockholders to be held on February 14, 1997, and any
adjournment thereof.
PLEASE SEE REVERSE SIDE
[Reverse of Proxy Card]
This proxy, when properly executed, will be voted Please mark
in the manner directed herein by the undersigned. your votes as
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED indicated in
FOR PROPOSALS 1, 2 AND 3. this example [X]
1. ELECTION OF DIRECTORS Nominees: James T. Hudson; Michael T.
Hudson; Charles B. Jurgemsmeyer; Elmer W.
FOR WITHHOLD Shannon; Jerry L. Hitt; Kenneth N. May;
all AUTHORITY James R. Hudson; and Jane M Helmich.
Nominees for all Nominees
[_] [_] To withhold authority to vote for any
individual Nominee, write that Nominee's
name on the line below.
-----------------------------------------
2. RATIFY THE 1996 STOCK OPTION
PLAN
FOR AGAINST ABSTAIN
[_] [_] [_]
Please mark, sign, date and promptly return
this proxy card in the enclosed envelope.
3. IN THEIR DISCRETION on any Please sign exactly as your name(s)
other matter which may properly appear(s) on your stock certificate(s).
come before the meeting, When shares are held by joint tenants, both
including any adjournment thereof. should sign. When signing as attorney,
executor, administrator, trustee, or
FOR AGAINST ABSTAIN guardian, please give full title as such.
[_] [_] [_] If a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Dated:_______________________________, 1997
-------------------------------------------
Signature
-------------------------------------------
Signature if held jointly
<PAGE>
HUDSON FOODS, INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan. The Plan shall be known as the Hudson Foods,
Inc. 1996 Stock Option Plan (the "Plan"). The purpose of the Plan is to attract
and retain the best available personnel for positions of substantial
responsibility and to provide additional incentive to employees of Hudson Foods,
Inc. (the "Company") or any present or future Parent or Subsidiary of the
Company to promote the success of the business. It is intended that options
issued pursuant to this Plan shall primarily constitute incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended. Stock options not constituting incentive stock options may also be
issued.
2. Definitions. As used herein, the following definitions shall apply.
(a) "Company" shall mean Hudson Foods, Inc.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Common Stock" or "Stock" shall mean the Company's Class
A Common Stock.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with paragraph 4(a) of the Plan.
(f) "Continuous Employment" or "Continuous Status as an
Employee" shall mean the absence of any interruption or termination of
employment by the Company or any present or future Parent or Subsidiary
of the Company. Employment shall not be considered interrupted in the
case of sick leave, military leave or any other leave of absence
approved by the Company or in the case of transfers between payroll
locations of the Company or between the Company, its Parent, its
Subsidiaries or a successor.
(g) "Effective Date" shall mean the date specified in
paragraph 12 hereof.
(h) "Employee shall mean any person employed on a full-time
basis by the Company or any present or future Parent or Subsidiary of
the Company. For the purposes of granting Non-qualified Options
pursuant to the Plan, "Employee" shall also mean any member of the
Board of Directors of the Company or any present or future Parent or
Subsidiary of the Company.
(i) "Incentive Stock Option" shall mean an option granted
pursuant to Section 422 of the Code.
(j) "Non-qualified Option" shall mean an option not
constituting an Incentive Stock Option.
(k) "Option" shall mean an option to purchase Common Stock
granted pursuant to this Plan.
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(l) "Optioned Stock" shall mean stock subject to an Option
granted pursuant to this Plan.
(m) "Optionee" shall mean an Employee who receives an Option.
(n) "Parent" shall mean any present or future corporation
which would be a "parent corporation" as defined in Subsection 424(e)
of the Code.
(o) "Plan" shall mean the Hudson Foods, Inc. 1996 Stock
Option Plan.
(p) "Share" shall mean one share of the Common Stock.
(q) "Subsidiary" shall mean any present or future corporation
which would be a "subsidiary corporation" as defined in Subsection
424(f) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of paragraph 11 hereof, the aggregate number of shares of Common
Stock deliverable upon the exercise of Options pursuant to the Plan shall not
exceed one million two hundred thousand (1,200,000) Shares for Incentive Stock
Options or three hundred thousand (300,000) Shares for Non-qualified Options.
Such Shares may either be authorized but unissued or treasury Shares.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, be available for the
grant of other Options under the Plan.
4. Administration of the Plan.
(a) Composition of Option Committee. The Plan shall be
administered by an Option Committee (the "Committee") consisting of
three directors of the Company appointed by the Board. Employees who
are designated by the Committee as key management personnel shall be
eligible to receive Options under the Plan.
(b) Powers of the Option Committee. The Committee is
authorized (but only to the extent not contrary to the express
provisions of the Plan or to resolutions adopted by the Board) to
interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the form and content of
Options to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall
have and may exercise such other power and authority as may be
delegated to it by the Board from time to time. A majority of the
entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present
shall be deemed the action of the Committee.
The President of the Company and such other officers as shall
be designated by the Committee are hereby authorized to execute
instruments evidencing Options on behalf of the Company and to cause
them to be delivered to the Optionees or other participants.
(c) Effect of Option Committee's Decision. All
decisions, determinations and interpretations of the Committee shall
be final and conclusive on all persons affected thereby.
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5. Eligibility. Options may be granted to Employees who are key
management personnel, as determined by the Option Committee, of the Company or
any present or future Parent or Subsidiary. An Employee who has been granted an
Option may, if otherwise eligible, be granted an additional Option or Options.
In any calendar year, the aggregate fair market value of the Shares (as
determined at the time the Option is granted) for which Incentive Stock Options
are exercisable for the first time by any Employee cannot exceed the sum of
$100,000. Notwithstanding the prior provisions of this paragraph, the Committee
may grant Options in excess of the foregoing limitations, provided said Options
shall be clearly and specifically designated as not being Incentive Stock
Options, as defined in Section 422 of the Code.
Any Incentive Stock Option or Non-qualified Option which is cancelled
by consent of the parties shall not be considered outstanding and shall revert
to the status of authorized but unissued Options.
6. Term of Plan; Term of Options.
(a) The Plan shall continue in effect for a term of ten (10)
years from the date it is adopted, unless sooner terminated pursuant to
paragraph 15. No Option shall be granted under the Plan after ten (10)
years from the date it is adopted by the Board.
(b) The term of each Option granted under the Plan shall be
established by the Committee, but shall not exceed 10 years, provided
however that in the case of an Employee who owns stock representing
more than ten (10) percent of the total combined voting power of all
classes of the Company stock including the stock of the Company's
Parent and Subsidiary, the term of such Option shall not exceed five
years.
(c) Notwithstanding the provision of any Option which provides
for its exercise in installments as designated by the Option Committee,
all such Options shall become immediately exercisable in the event of
change in control or threatened change in control of the Company. The
term "control" shall refer to the acquisition of ten (10) percent or
more of the voting securities of the Company by any person or by
persons acting as a group within the meaning of Section 13(d) of the
Securities Exchange Act of 1934; provided, however, that for the
purposes of the Option Plan no change in control or threatened change
in control shall be deemed to have occurred if prior to the acquisition
of, or offer to acquire, 10 percent or more of the voting securities of
the Company, the full Board of Directors shall have adopted by not less
than a two-thirds vote a resolution specifically approving such
acquisition or offer. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any
other form of entity not specifically listed herein.
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7. Incentive Stock Option Price. The price per Share at which each
Incentive Stock Option granted under the Plan may be exercised shall not, as to
any particular Incentive Stock Option, be less than the fair market value of the
Stock at the time such Incentive Stock Option is granted. In the case of an
Employee who owns Stock representing more than ten (10) percent of the Company's
outstanding Common Stock at the time the Incentive Stock Option is granted, the
Incentive Stock Option price shall not be less than 110% of the fair market
value of the Stock at the time the Incentive Stock Option is granted. If the
Common Stock is traded otherwise than on a national securities exchange at the
time of the granting of an Incentive Stock Option, then the price per Share
shall be not less than the mean between the bid and asked price on the date the
Option is granted or, if there is no bid and asked price on said date, then on
the next prior business day on which there was a bid and asked price. If no such
bid and asked price is available, then the price per Share shall be determined
by the Committee. If the Common Stock is listed on a national securities
exchange at the time of granting an Incentive Stock Option, then the price per
Share shall be not less than the average of the highest and lowest selling price
on such exchange on the date such Incentive Stock Option is granted or if there
were no sales on said date, then the price shall be not less than the mean
between the bid and asked price on such date.
8. Exercise of Option.
(a) Procedure for Exercise. Any Option granted hereunder shall
be exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Option granted to an
Optionee. An Option may not be exercised for a fractional Share.
An Option granted pursuant to the Plan may be exercised,
subject to provisions relative to its termination and limitations on
its exercise, from time to time only by (a) written notice of intent to
exercise the Option with respect to a specified number of Shares, and
(b) payment to the Company (contemporaneously with delivery of each
such notice), in cash, of the amount of the Option price of the number
of Shares with respect to which the Option is then being exercised.
Each such notice and payment shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the Company
at the Company's executive offices, until the total number of Shares
then subject to the Option have been purchased.
(b) Exercise During Employment or Following Death. Unless
otherwise provided in the terms of an Option, an Option may be
exercised by an Optionee only while he is an Employee and has
maintained Continuous Status as an Employee since the date of the grant
of the Option, or within 3 months after termination of his status as an
Employee (but not later than the date on which the Option would
otherwise expire), except if his Continuous Employment is terminated by
reason of disability, within the meaning of Code Section 22(e)(3), or
death, then to the extent that the Optionee would have been entitled to
exercise the Option immediately prior to his disability or death, such
Option may be exercised within twelve (12) months from the date of his
disability or death by the Optionee, the personal representatives of
his estate, or persons to whom his rights under such Option shall have
passed by will or by laws of descent and distribution.
The Committee's determination whether an Optionee's employment
has ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
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9. Non-Transferability of Options. Options granted under the Plan may
not be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution. An Option
may be exercised, during the lifetime of the Optionee, only by the Optionee.
10. Effect of Change in Stock Subject to the Plan. In the event that
each of the outstanding shares of Common Stock (other than shares held by
dissenting shareholders) shall be changed into or exchanged for a different
number or kind of shares of stock of the Company or of another corporation
whether by reason of merger, consolidation, recapitalization, reclassification,
stock dividend, split-up, combination of shares, or otherwise), then there shall
be substituted for each share of Common Stock then under Option or available for
Option the number and kind of shares of stock into which each outstanding share
of Common Stock (other than shares held by dissenting shareholders) shall be so
changed or for which each such share shall be so exchanged, together with an
appropriate adjustment of the Option price.
In the event there shall be any other change, in the number of, or kind
of, issued shares of Common Stock, or of any stock or other securities into
which such Common Stock shall have been changed, or for which it shall have been
exchanged, then if the Committee shall, in its sole discretion, determine that
such change equitably requires an adjustment in the number, or kind, or Option
price of shares then subject to an Option or available for Option, such
adjustment shall be made by the Board and shall be effective and binding for all
purposes of the Plan.
11. Time of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the determination shall be
given to each Employee to whom an Option is so granted within a reasonable time
after the date of such grant.
12. Effective Date. The Plan shall become effective April 1, 1996.
Options may be granted prior to ratification of the Plan by the stockholders if
the exercise of such Options is subject to such stockholder ratification. The
Plan shall continue in effect for a term of ten (10) years from the date it is
adopted by the Board, unless sooner terminated under paragraph 15 of the Plan.
13. Approval by Shareholders. The Plan shall be approved by
stockholders of the Company within twelve (12) months before or after the date
it becomes effective.
14. Modification of Options. At any time and from time to time the
Board may authorize the Committee to direct execution of an instrument providing
for the modification of any outstanding Option, provided no such modification,
extension or renewal shall confer on the holder of said Option any right or
benefit which could not be conferred on him by the grant of a new Option at such
time, or impair the Option without the consent of the holder of the Option.
15. Amendment and Termination of the Plan. The Board may alter, suspend
or discontinue the Plan except that no action of the Board may increase (other
than as provided in paragraph 10) the maximum number of shares permitted to be
optioned or become available for the granting of Options under the Plan, or
reduce the minimum Option price, or extend the period within which Options may
be exercised, unless such action of the Board shall be subject to approval or
ratification by the shareholders of the Company.
No action of the Board may, without the consent of the holder of the
Option, impair any then outstanding Option.
<PAGE>
16. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
Inability of the Company to obtain from any regulatory body or
authority deemed by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of any liability in
respect of the non-issuance or sale of such Shares.
As a condition to the exercise of an Option, the Company may require
the person exercising to make such representations and warranties as may be
necessary to assure the availability of an exemption from the registration
requirement of federal or state securities law.
17. Reservation of Shares. The Company, during the term of this Plan,
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
Date Adopted: April 1, 1996.
HUDSON FOODS, INC.
By:_______________________
President
ATTEST:
_______________________________
Secretary
