[ ESKIMO PIE CORPORATION LOGO ]
March 27, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders to be held on Wednesday, May 6, 1998, at 10:00 a.m. in the
Auditorium of the Crestar Center, 919 East Main Street, Richmond, Virginia. A
formal notice of the meeting, together with a proxy statement and proxy form, is
enclosed with this letter. As you will see from the notice, you will be asked to
elect seven directors to serve until the next Annual Meeting and to ratify the
designation of auditors for 1998. In addition to the formal agenda, we expect to
report on the Company's business activities and to answer any questions you
might have.
We would appreciate your voting, signing, dating and promptly
returning the enclosed proxy in the enclosed postage-paid envelope. By doing so,
you will be sure that your shares will be represented and voted at the meeting.
If you attend the meeting, you may revoke your proxy and vote in person.
We look forward to seeing you if you are able to attend. Whether or
not you attend, we hope you will enjoy our products and recommend them to your
friends.
Sincerely,
/s/ Arnold H. Dreyfuss
Arnold H. Dreyfuss
Chairman of the Board
<PAGE>
ESKIMO PIE CORPORATION
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------------
TO BE HELD WEDNESDAY, May 6, 1998
The Annual Meeting of Shareholders of Eskimo Pie Corporation (the
"Company") will be held on May 6, 1998, at 10:00 a.m. in the Auditorium of the
Crestar Center, 919 East Main Street, Richmond, Virginia for the following
purposes:
1. To elect seven directors to serve until the 1999 Annual Meeting
of Shareholders,
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for the current fiscal year, and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 13,
1998 as the record date for determination of shareholders entitled to notice of
and to vote at the meeting and any adjournments thereof.
By Order of the Board of Directors,
/s/ Thomas M. Mishoe, Jr.
Thomas M. Mishoe, Jr.
Chief Financial Officer, Vice President,
Treasurer and Corporate Secretary
March 27, 1998
Please complete and return the enclosed proxy. If you attend the meeting in
person, you may withdraw your proxy and vote your own shares.
901 Moorefield Park Drive, Richmond, Virginia 23236
<PAGE>
ESKIMO PIE CORPORATION
901 Moorefield Park Drive
Richmond, Virginia 23236
----------------------------
PROXY STATEMENT
----------------------------
ANNUAL MEETING OF SHAREHOLDERS
May 6, 1998
General
The enclosed proxy is solicited by the Board of Directors of Eskimo
Pie Corporation (the "Company") for the Annual Meeting of Shareholders ("Annual
Meeting") of the Company to be held Wednesday, May 6, 1998, at the time and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders or any adjournment or adjournments thereof. Shareholders
may revoke proxies at any time prior to their exercise by written notice to the
Company, by submitting a proxy bearing a later date, or by attending the Annual
Meeting and requesting to vote in person.
The Company will pay all costs for this proxy solicitation. Proxies
are being solicited by mail and may also be solicited personally by telephone or
telegraph, by directors, officers and employees of the Company. The Company may
reimburse banks, brokerage firms, and other custodians, nominees, and
fiduciaries for their reasonable expenses in sending proxy materials to the
beneficial owners of the Company's Common Stock.
The approximate mailing date of this Proxy Statement ("Proxy
Statement") and the accompanying proxy form is March 27, 1998.
Voting Rights
Only those shareholders of record at the close of business on March
13, 1998 are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. The number of shares of the Company's Common Stock
outstanding and entitled to vote as of the record date was 3,458,002. A majority
of the shares outstanding and entitled to vote, represented in person or by
proxy, will constitute a quorum for the transaction of business.
With regard to the election of directors, votes may be cast in favor
or withheld. If a quorum is present, the nominees receiving a plurality of the
votes cast will be elected directors; therefore, votes withheld will have no
effect. Generally, in other matters including the ratification of auditors, an
affirmative vote of a majority of the shares present and entitled to vote is
required for passage. Abstentions and broker non-votes (shares held by brokers
for customers which may not be voted on certain matters because the broker has
not received specific instructions from the customer) are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. With respect to such other matters, abstentions are counted in the
tabulation of the votes cast on such other proposals presented to shareholders,
and therefore, abstentions in such other matters have the effect of a vote
against such matters; whereas, broker non-votes are not counted for purposes of
determining whether a proposal has been approved and therefore have no effect.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of February 13, 1998 (except for
Messrs. Kewer and Ludeman for which the information is as of March 20, 1998) the
number and percentage of shares of the Company's Common Stock held by persons
known to the Company to be the owners of more than five percent of the Company's
issued and outstanding Common Stock, each of the Company's directors and
nominees for director, the executive officers named in the Summary Compensation
Table, and all of the Company's directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Beneficial Ownership Common Stock
Name and Address of Beneficial Owner of Common Stock(1) Outstanding
- ------------------------------------ ------------------ -----------
<S> <C>
Gabelli Funds, Inc. (2) 435,500 12.6%
Rye, New York
Heartland Advisors, Inc. 370,500 10.7%
Milwaukee, Wisconsin
Matrix Asset Advisors, Inc. 322,850 9.3%
New York, New York
Ryback Management Corporation 245,000 7.1%
St. Louis, Missouri
Brinson Partners, Inc. 231,500 6.7%
Chicago, Illinois
The TCW Group, Inc. 225,553 6.5%
Los Angeles, California
Terrence D. Daniels 2,300 (3) *
Charlottesville, Virginia
Arnold H. Dreyfuss 18,102 (3)(4)(5) *
Richmond, Virginia
Wilson H. Flohr, Jr. 7,500 (3)(6) *
Richmond, Virginia
F. Claiborne Johnston, Jr. 2,300 (3)(7) *
Richmond, Virginia
V. Stephen Kangisser 1,163 (5) *
Richmond, Virginia
David B. Kewer 32,836 (4)(5) *
Richmond, Virginia
2
<PAGE>
<CAPTION>
Amount and Nature of Percent of
Beneficial Ownership Common Stock
Name and Address of Beneficial Owner of Common Stock(1) Outstanding
- ------------------------------------ ------------------ -----------
Daniel J. Ludeman 5,000 *
Richmond, Virginia
Judith B. McBee 1,500 (3) *
Richmond, Virginia
Thomas M. Mishoe, Jr. 6,075 (4)(5) *
Richmond, Virginia
Robert C. Sledd --- *
Richmond, Virginia
All Directors and Executive Officers 82,596 (3)(4)(5) 2.4%
as a Group (11 persons)
- ----------------------------------------
</TABLE>
* Beneficial ownership does not exceed one percent of the outstanding shares of
Common Stock.
(1) Except to the extent that shares may be held in joint tenancy with a
spouse or as otherwise indicated, each director or executive officer has
sole voting and investment power with respect to the shares shown. The
beneficial ownership shown for the six institutional shareholders is
based upon the most recent filings received by the Company for such
shareholders pursuant to Section 13(d) or (g) of the Securities Exchange
Act of 1934. Each of these filings certifies that the acquisition of the
shares reported thereon was in the ordinary course of business and not in
connection with or as a participant in any transaction having the purpose
or effect of changing or influencing the control of the Company.
(2) The Schedule 13D for Gabelli Funds, Inc. which is filed by Gabelli Funds,
Inc., GAMCO Investors, Inc., Gemini Capital Management, Ltd. and Mario J.
Gabelli indicates that Mr. Gabelli directly or indirectly controls, or
acts as Chief Investment Officer for, the various entities, other than
Gemini Capital Management, Ltd., which are reported to beneficially own
the Company's Common Stock disclosed in the preceding table.
(3) Includes shares subject to presently exercisable stock options and shares
of restricted stock automatically granted to non-employee directors under
the 1996 Incentive Stock Plan, as more fully described under
"Compensation of Directors."
(4) Includes shares subject to presently exercisable stock options as more
fully described in the table "Fiscal Year-End Option Values" on page 9,
and/or shares of restricted stock as reflected in the "Summary
Compensation Table" on page 7.
(5) Includes shares held by executive officers in the Company's 401(k)
Savings Plan and/or Employee Stock Purchase Plan. Employees, exclusive of
the executive officers, held 13,388 shares of Common Stock in these plans
on February 13, 1998. Each participant in the respective plans has the
right to instruct the plans' trustee with respect to the voting of shares
allocated to his or her account.
3
<PAGE>
(6) Includes 1,500 shares held by Mr. Flohr's wife; 2,000 shares held by Mr.
Flohr's wife as trustee; and 200 shares held as custodian.
(7) Includes 400 shares held by, or for the benefit of, a family member
living in Mr. Johnston's household, as to which shares Mr. Johnston
disclaims beneficial ownership.
Election of Directors
The seven persons named below will be nominated to serve as directors
until the 1999 Annual Meeting, or until their successors have been duly elected
and have qualified. Terrence D. Daniels, who has served as a director since 1992
has advised the Company, that because of commitments to other organizations, he
is unable to stand for re-election. Each of the nominees, other than Mr. Sledd,
currently serves as a director of the Company. Mr. Sledd will be nominated for
election as a director to fill the vacancy which will result upon the expiration
of Mr. Daniel's current term as a director at the 1998 Annual Meeting. The
persons named in the proxy will vote for the election of the nominees named
below unless authority is withheld. If, for any reason, any of the persons named
below should become unavailable to serve, an event which management does not
anticipate, proxies will be voted for the remaining nominees and such other
person or persons as the Board of Directors of the Company may designate.
<TABLE>
<CAPTION>
Director Principal Occupation During Past Five Years;
Name (Age) Since Directorship in other Public Companies
---------- ----- --------------------------------------
<S> <C>
Arnold H. Dreyfuss (69) 1992 From September 19, 1996 through March 1, 1998, Chief
Executive Officer of the Company. Also, President of Jupiter
Ocean and Racquet Club of Jupiter, Florida; formerly (1982 until
1991) Chairman of the Board and Chief Executive Officer of
Hamilton Beach/Proctor-Silex, Inc., a small appliance
manufacturer headquartered in Richmond, Virginia; director of
Mentor Growth Trust, Inc.
Wilson H. Flohr, Jr. (51) 1992 Executive Vice President and General Manager of Paramount's
Kings Dominion, a regional family theme park in Doswell,
Virginia.
F. Claiborne Johnston, Jr. (55) 1992 Attorney-at-Law, Partner in the law firm of Mays & Valentine,
L.L.P., Richmond, Virginia.
David B. Kewer (43) 1997 Effective March 1, 1998, President and Chief Executive Officer
of the Company. Previously, beginning March 1, 1997, President
and Chief Operating Officer of the Company. Formerly (1993 until
1997) President of Willy Wonka Candy Factory, a subsidiary of
Nestle USA, Inc. From 1988 through 1993, held various senior
level positions at Drumstick Co. which was acquired by Nestle in
1991.
4
<PAGE>
Daniel J. Ludeman (40) 1997 Chairman and Chief Executive Officer of Mentor Investment Group,
LLC, a Richmond, Virginia based asset management company;
director of Mentor Series Trust, Mentor Institutional Trust,
Mentor Income Fund, Mentor Cash Resource Trust and American's
Utility Fund.
Judith B. McBee (50) 1996 Senior Vice President, Marketing of Hamilton Beach/
Proctor-Silex, Inc., a small appliance manufacturer
headquartered in Richmond, Virginia, since January 1, 1997;
previously Executive Vice President, Marketing (June 1994 to
December 1996) and Executive Vice President, Sales/Marketing
(January 1990 to June 1994), Hamilton Beach/Proctor-Silex, Inc.
Robert C. Sledd (45) Chairman of the Board (since February 1995) and Chief Executive
Officer (since 1987) of Performance Food Group Company, a
foodservice distributor headquartered in Richmond, Virginia;
director of SCP Pool Corporation.
</TABLE>
Board and Committee Meetings and Attendance
The Board of Directors held seven meetings during the fiscal year
ended December 31, 1997. All directors attended at least 75% of all meetings of
the Board and committees on which they served.
The Board has standing Executive, Compensation and Audit Committees.
The Executive Committee has a wide range of powers, but its primary duty is to
act if necessary between scheduled Board meetings. For such purpose, the
Executive Committee possesses all the powers of the Board in management of the
business and affairs of the Company except as otherwise limited by Virginia law.
During the fiscal year ended December 31, 1997, the Executive Committee took
action once by unanimous written consent. Members of the Executive Committee are
Messrs. Dreyfuss (Chairman), Flohr and Kewer and Ms. McBee.
The Compensation Committee is responsible for setting and
administering the policies and programs that govern both annual compensation for
the Company's executive officers and employee stock ownership. During the fiscal
year ended December 31, 1997, the Compensation Committee met two times. Members
of the Compensation Committee are Messrs. Flohr (Chairman) and Daniels and Ms.
McBee.
The Audit Committee recommends the appointment of a firm of
independent public accountants to audit the Company's financial statements, as
well as reviews and approves the scope, purpose and type of audit services to be
performed by the external auditors. The Audit Committee met two times during the
fiscal year ended December 31, 1997. Members of the Audit Committee are Messrs.
Johnston, (who was appointed Chairman upon the retirement of William M. Fariss,
Jr. on October 17, 1997) and Daniels.
5
<PAGE>
Compensation Committee Interlocks and Insider Participation
Members of the Compensation Committee are Messrs. Flohr (Chairman)
and Daniels and Ms. McBee. No current member of the Compensation Committee is or
has been an employee of the Company or has any relationship to the Company that
is required to be disclosed pursuant to regulations of the Securities and
Exchange Commission. Furthermore, none of the Company's executive officers
serves on the board of directors of any company of which a Compensation
Committee member is an employee.
Compensation of Directors
Each director of the Company who is not also an executive officer of
the Company receives (a) an annual retainer of $7,000; (b) a $500 fee for
attendance at each Board Meeting; and (c) a $250 fee for attendance at each
Committee Meeting. Beginning in 1998, directors may elect to receive payment of
the annual retainer and meeting fees in Common Stock of the Company under the
1996 Incentive Stock Plan, as amended. Under the 1996 Incentive Stock Plan,
outside directors also receive a stock option for 200 shares and a restricted
stock grant for 200 shares of the Company's Common Stock each year as part of
their compensation for Board service. Each outside director is also reimbursed
for usual and ordinary expenses of meeting attendance. A director who is also an
executive officer of the Company receives no additional compensation for serving
as a director.
Certain Relationships
Mays & Valentine, L.L.P., a law firm of which F. Claiborne Johnston,
Jr., a current director and nominee for director of the Company, is a partner,
was retained to perform legal services for the Company and its subsidiaries
during the last fiscal year. It is anticipated that the firm will continue to
provide such services to the Company and its subsidiaries during the current
fiscal year. The amounts paid by the Company were based upon an agreed-upon fee
arrangement for services rendered, which the Company believes to be consistent
with fees charged for similar services by other comparable firms.
Daniel J. Ludeman, a current director and nominee for director of the
Company, is the Chairman and Chief Executive officer of Mentor Investment Group
of which Wheat FirstButcher Singer, Inc. (Wheat), is the majority shareholder.
First Union Corporation, the parent of Wheat, also wholly owns First Union
National Bank (First Union). Wheat and First Union have provided the Company
with investment banking services and First Union provides the Company with long
term financing. It is anticipated that Wheat and First Union will continue to
provide such services to the Company based upon agreed-upon fee arrangements and
interest rates which are consistent with amounts charged for similar services by
other comparable firms.
Executive Compensation
The following table lists all compensation paid or accrued by the
Company for the Chief Executive Officer and the Company's three most highly
compensated executive officers, other than the Chief Executive Officer, whose
total annual salary and bonus for the year ended December 31, 1997 exceeded
$100,000. Messrs. Dreyfuss, Mishoe and Kangisser first became executive officers
of the Company in 1996. Mr. Kewer was employed by the Company effective March 1,
1997 and became Chief Executive Officer on March 1, 1998.
6
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------ -------------------------
Restricted Securities
Name, Age and Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus Compensation Awards Options(#) Compensation
- ------------------ ---- ------ ----- ------------ ------ ---------- ------------
<S> <C>
Arnold H. Dreyfuss (69) 1997 $131,250 ---- ---- ---- 7,500 ----
Chief Executive 1996 42,115 ---- ---- $41,125 (1) 200 (2) $11,647 (3)
Officer and Chairman 1995 ---- ---- ---- ---- ---- ----
of the Board ----
V. Stephen Kangisser (46) 1997 112,002 ---- $52,558 (4) ---- 7,639 (5) 2,023 (6)
Vice President, 1996 67,286 ---- 18,161 (7) ---- 2,000 ----
Marketing 1995 ---- ---- ---- ---- ---- ----
David B. Kewer (43) 1997 166,667 $40,000 (8) 102,182 (4) 125,000 (9) 50,000 525 (6)
President and Chief 1996 ---- ---- ---- ---- ---- ----
Operating Officer 1995 ---- ---- ---- ---- ---- ----
Thomas M. Mishoe, Jr. (45) 1997 127,500 ---- ---- ---- 7,709 (5) 2,495 (6)
Chief Financial 1996 104,154 ---- 24,444 (7) ---- 12,000 ----
Officer, Vice 1995 ---- ---- ---- ---- ---- ----
President, Secretary
and Treasurer
</TABLE>
(1) Reflects an automatic award of 200 shares made to Mr. Dreyfuss on May 2,
1996 as an outside director under the 1996 Incentive Stock Plan and an
award of 2,500 shares made as of September 19, 1996, upon Mr. Dreyfuss'
appointment as Chief Executive Officer. The May 2, 1996 award vests three
years from the grant date and the September 19, 1996 award vests in four
installments, the first 1,000 shares vested six months from the grant
date, the next two installments of 500 shares each vested when the market
price (average of 20 consecutive trading days) of the Company's Common
Stock reached $10.50 and $12.00 per share, with the remaining installment
of 500 shares to vest when the market price reaches $13.00 per share.
During the period of restriction, Mr. Dreyfuss has the right to vote and
receive dividends on the shares of restricted stock as and when paid on
the Company's Common Stock. At December 31, 1997, Mr. Dreyfuss' aggregate
restricted stock holdings were 500 shares with a value of $5,750.
(2) Reflects options granted to Mr. Dreyfuss on May 2, 1996 as an outside
director under the 1996 Incentive Stock Plan.
(3) Reflects amounts paid to Mr. Dreyfuss for his service as an outside
director prior to his appointment as Chief Executive Officer.
(4) Of the total amounts reported as "Other Annual Compensation" for Messrs.
Kewer and Kangisser in 1997, $92,182 and $43,877, respectively, is
attributable to relocation expenses incurred in connection with their
employment by the Company.
(5) Includes options granted as a result of the repricing actions discussed
under the caption "Repricing of Stock Options" in the Compensation
Committee Report.
(6) Reflects the Company's matching contributions to the Company's 401(k)
Savings Plan and Employee Stock Purchase Plan.
7
<PAGE>
(7) Of the total amount reported as "Other Annual Compensation" for Messrs.
Kangisser and Mishoe in 1996, $16,563 and $19,912, respectively, is
attributable to relocation expenses incurred in connection with their
employment by the Company.
(8) Reflects amounts paid to Mr. Kewer as incentive to join the Company as
President and Chief Operating Officer.
(9) Reflects an award of 10,000 shares made to Mr. Kewer upon his employment
by the Company on March 1, 1997. The award vests in three installments,
the first 2,500 shares vested on March 1, 1998; 2,500 additional shares
vest on March 1, 1999 and the remaining 5,000 shares vest on March 1,
2000. During the period of restriction, Mr. Kewer has the right to vote
the shares and to receive dividends on the shares of restricted stock as
and when paid on the Company's Common Stock. At December 31, 1997, Mr.
Kewer's restricted stock holdings had a value of $115,000.
The following table sets forth information regarding option grants
made during the year ended December 31, 1997 for each of the named executive
officers.
<TABLE>
OPTIONS GRANTED IN LAST FISCAL YEAR
<CAPTION>
Number of Percentage of Potential Realizable Value at Assumed
Securities Total Options Exercise Grant Date Annual Rates of Stock Appreciation
Underlying Granted to Price Market During Option Term (5)
Options Employees in Per Price Expiration -----------------------
Granted 1997 Share Per Share Date 5% 0% 10%
------- ---- ----- --------- ---- -- -- ---
<S> <C>
Arnold H. Dreyfuss 7,500 (1) 4% $12.50 $12.50 3/4/07 --- $ 58,969 $149,438
V. Stephen Kangisser 6,000 (2) 3% 12.50 12.50 3/4/07 --- 47,175 119,550
1,639 (3) 1% 12.50 12.50 3/4/07 --- 12,887 32,657
David B. Kewer 50,000 (4) 28% 10.00 12.50 3/4/07 $125,000 528,125 1,121,250
Thomas M. Mishoe, Jr. 6,000 (2) 3% 12.50 12.50 3/4/07 --- 47,175 119,550
1,709 (3) 1% 12.50 12.50 3/4/07 --- 13,437 34,052
</TABLE>
(1) Grant was made under the 1996 Incentive Stock Plan and was immediately
exercisable on the grant date.
(2) Grants were made under the Company's 1996 Incentive Stock Plan and become
exercisable in increments of one-third of the shares subject to option on
each the second, third and fourth anniversaries of the March 4, 1997
grant date.
(3) Grants were made under the 1992 Incentive Stock Plan as the result of a
repricing action as discussed in greater detail under the caption
"Repricing of Stock Options" in the Compensation Committee Report. The
repriced grants become exercisable in increments of one third of the
shares subject to option on each the second, third, and fourth
anniversaries of the March 4, 1997 grant date.
8
<PAGE>
(4) Grant was made under the 1992 Incentive Stock Plan, 10,000 options were
immediately exercisable on the March 4, 1997 grant date, 10,000 options
become exercisable on each the first and second anniversary of the grant,
and 20,000 options become exercisable on March 4, 2000.
(5) The dollar amounts under the 5% and 10% columns are the result of
calculations at assumed rates of stock price appreciation set by the
Securities and Exchange Commission. The dollar amounts shown are not
intended to forecast possible future price appreciation, if any, for the
Company's Common Stock.
The following table sets forth information regarding year-end option
values at December 31, 1997 for each of the named executive officers.
<TABLE>
FISCAL YEAR-END OPTION VALUES (1)
<CAPTION>
<S> <C>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Year-End Options at Year-End (2)
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Arnold H. Dreyfuss 7,700 0 $0 $0
V. Stephen Kangisser 0 7,639 0 0
David B. Kewer 10,000 40,000 15,000 60,000
Thomas M. Mishoe, Jr. 5,000 12,709 0 0
</TABLE>
(1) The columns "Number of Shares Acquired on Exercise" and "Value Realized"
have been omitted because no options were exercised by the named
executive officers during the year ended December 31, 1997.
(2) The value included in this column is the difference between the market
value of the Company's Common Stock of $11.50 on December 31, 1997 and
the exercise price of the respective in-the-money options.
Retirement Benefits
The following table sets forth information related to the annual
benefits payable upon retirement under the Company's defined benefit pension
plans to persons with the specified final average earnings and years of service
as a salaried employee of the Company, assuming a continuation of service and
1997 compensation to age 65, retirement at age 65, and an annual accrual rate of
1.5% of average annual earnings, and without regard to the compensation
limitations under Internal Revenue Code (IRC) 401(a)(17) or the benefit
limitation of IRC 415. The benefits set forth in the following table are not
subject to any deduction for social security or other offset amount.
9
<PAGE>
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Years of Service
--------------------------------------------------------------------------------
Amount of Annual Retirement Benefit
Average --------------------------------------------------------------------------------
Annual Earnings 15 20 25 30 35
--------------- -- -- -- -- --
<S> <C>
$125,000 $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
$150,000 33,750 45,000 56,250 67,500 78,750
$175,000 39,375 52,500 65,625 78,750 91,875
$200,000 45,000 60,000 75,000 90,000 105,000
$225,000 50,625 67,500 84,375 101,250 118,125
$250,000 56,250 75,000 93,750 112,500 131,250
$300,000 67,500 90,000 112,500 135,000 157,500
$400,000 90,000 120,000 150,000 180,000 210,000
$450,000 101,250 135,000 168,750 202,500 236,250
$500,000 112,500 150,000 187,500 225,000 262,500
</TABLE>
"Average Annual Earnings" is an employee's highest five consecutive year average
total cash compensation within the last 10 years (which is salary, incentive
awards and Savings Plan as such amounts are shown under the respective salary,
bonus and other compensation columns in the Summary Compensation Table.)
The Company established two substantially identical pension plans in
1992, covering salaried employees age 21 or over with one year of service.
Salaried employees who are not officers are covered by the tax-qualified plan
and officers are covered by the non-qualified plan.
Credited years of service for the named executive officers as of
December 31, 1997 are Arnold H. Dreyfuss - 1.2; V. Stephen Kangisser - 1.6;
David B. Kewer - .8 and Thomas M. Mishoe, Jr. - 1.8.
Certain Agreements
The Company entered into severance agreements with Messrs. Kangisser,
Kewer and Mishoe upon their being named executive officers of the Company. The
agreements provide that termination compensation will be paid if the executive's
employment is terminated by the Company within three years after a change in
control other than for cause (as defined in the agreements) or upon the death,
permanent disability, or retirement of the executive if the executive
voluntarily terminates his employment for "good reason" (as defined in the
agreements). "Change in control" is defined generally to include (i) an
acquisition of 20% of the Company's voting stock, (ii) certain changes in the
composition of the Company's Board of Directors, (iii) shareholder approval of
certain business combinations or asset sales in which the Company's historic
shareholders hold less than 60% of the resulting or purchasing company or (iv)
shareholder approval of the liquidation or dissolution of the Company.
Termination compensation consists of a cash payment equal to approximately three
times the average annual compensation paid to the executive for the three most
recent taxable years of the Company ending prior to the change in control. In
addition, the agreements provide for the continuation of certain medical, life
and disability benefits. These agreements renew annually unless terminated by
the Company by notice given 60 days prior to expiration of the current term.
10
<PAGE>
Compensation Committee Report on 1997 Executive Compensation
The Company's executive compensation and benefits program is
administered by the Compensation Committee (the "Committee"), which is composed
entirely of non-employee directors. The goal of the program is to attract,
motivate, reward and retain the management talent required to achieve the
Company's business objectives, at compensation levels which are equitable and
competitive with those of comparable companies. This goal is furthered by the
Committee's policy of linking compensation to individual and corporate
performance and by encouraging significant stock ownership by senior management
in order to align the financial interests of management with those of the
shareholders.
The three main components of the Company's executive compensation
program are base salary, incentive awards under the Senior Management Incentive
Plan as established annually by the Committee and equity participation in the
form of stock options, restricted stock grants and eligibility to participate in
the Company Stock Fund of the Company's 401(k) Savings Plan and Employee Stock
Purchase Plan. Each year the Committee reviews the total compensation package of
each executive officer to ensure it meets the goals of the program. As a part of
this review, the Committee considers corporate performance, compensation survey
data, the advice of consultants and the recommendations of management.
Base Salaries
Base salaries for executive officers are reviewed annually to
determine whether adjustments may be necessary. Factors considered by the
Committee in determining base salaries for executive officers include personal
performance considering the respective executive's level of responsibility, the
overall performance and profitability of the Company during the preceding year
and the competitiveness of the executive's salary with the salaries of
executives in comparable positions at companies of comparable size and
operational characteristics. Each factor is weighed by the Committee in a
subjective analysis of the appropriate level of compensation for that executive.
For purposes of assessing the competitiveness of salaries, the Committee reviews
compensation data from national surveys and selected groups as provided by
William M. Mercer, Incorporated, the Company's compensation consultant. Such
compensation data indicates that salary levels for the Company's executive
officers approximate the market averages of executive positions of similar scope
and responsibility.
Mr. Dreyfuss became the Chairman of the Board and Chief Executive
Officer in September 1996 upon the resignation of the Company's former Chairman
and Chief Executive Officer. Mr. Dreyfuss' salary was established by the
Committee (with Mr. Dreyfuss not participating) based on discussion with Mr.
Dreyfuss and consideration of the responsibilities to be assumed by Mr. Dreyfuss
pending the Company's selection of a new President.
In March 1997, the Company named David B. Kewer President and Chief
Operating Officer and Mr. Dreyfuss' base salary was reduced by $37,500 to
$112,500 effective July 1, 1997. This reduction was made in consideration of the
operational responsibilities to be assumed by Mr. Kewer and the transition
period required to transfer management of the Company to Mr. Kewer. Further
reductions in Mr. Dreyfuss' base salary are planned for 1998 as additional
responsibilities are assumed by Mr. Kewer.
Senior Management Incentive Plan
The Company utilizes a Senior Management Incentive Plan under which
executives may receive cash and stock incentive awards based upon corporate,
business unit and individual performance. Target thresholds and anticipated pay
awards are established annually by the Committee and ratified by the full Board.
The plan provides for cash payment of awards under the plan except where awards
11
<PAGE>
equal or exceed $5,000, in which case, participants in the plan receive an
additional award equal to 25% of the cash award in restricted stock subject to a
three year vesting requirement.
Except for Mr. Kewer who received a bonus payment as incentive to
join the Company, no incentive awards were provided to executives as the
Company's financial results did not meet the target thresholds required under
the 1997 Senior Management Incentive Plan.
Equity Participation
At the time the Company became a public company in April, 1992,
management held abnormally low ownership interests in the Company because of the
prior controlling ownership by Reynolds Metals Company. From time to time since
the Company's initial public offering, this issue has been raised as a concern
by various shareholders. As a result, the Committee and the Board have continued
to believe it is important to increase management's equity participation in the
Company as a part of the Company's overall compensation policies to provide
long-term financial rewards linked directly to the market performance of the
Company's stock. The Committee believes that significant ownership of stock by
senior management is the best way to align the interests of management and the
shareholders, and the Company's stock incentive program is designed to further
this objective. Awards with respect to the Chief Executive Officer are made by
the Committee and awards for all the other executive officers are made by the
Committee in consultation with the Chief Executive Officer.
In March 1997, the Committee granted non-qualified stock options on
80,000 shares of Common Stock to executive officers and members of senior
management. These awards were made at an exercise price of $12.50 per share
(which equaled the closing price on the date of the grant) and are exercisable
in increments of one third each of the shares subject to option on the second,
third and fourth anniversaries of the March 4, 1997 award date.
The Committee also granted non-qualified stock options on 7,500
shares to Mr. Dreyfuss. This award, made on March 4, 1997, also has an exercise
price of $12.50 per share and became exercisable immediately upon grant. The
accelerated rate of exercisability for this grant was made in consideration of
the significant contributions made to the Company by Mr. Dreyfuss during the
recent changes in executive management.
Furthermore, the Committee granted non-qualified stock options on
50,000 shares to Mr. Kewer upon his employment with the Company. These options,
granted on March 4, 1997, have an exercise price of $10.00 per share and are
exercisable on a graded scale as follows:
o 10,000 options were immediately exercisable on the grant date,
o 10,000 options become exercisable on each the first and second
anniversaries of the grant, and
o 20,000 options become exercisable on March 4, 2000.
The strike price discount-to-market was granted as incentive for Mr. Kewer to
join the Company and in consideration of non-vested stock awards forfeited to
Mr. Kewer's former employer.
Mr. Kewer also received a restricted stock grant for 10,000 shares
upon his employment with the Company. The restricted stock awards vest in three
installments, the first 2,500 shares vested on March 1, 1998; 2,500 shares vest
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on March 1, 1999 and the remaining 5,000 shares vest on March 1, 2000. During
the period of restriction, Mr. Kewer has the right to vote and to receive
dividends on the shares of restricted stock as and when paid on the Company's
Common Stock.
The Committee believes the equity participation granted to Mr. Kewer,
upon his employment with the Company, will effectively align his interests with
those of the Company's shareholders.
In addition to stock option and restricted stock grants, eligible
executive officers and many of the Company's employees participate in the
Company Stock Fund under the Company's 401(k) Savings Plan and Employee Stock
Purchase Plan, thereby increasing, on a voluntary basis, their equity
participation in the Company.
Repricing of Stock Options
In 1996, the Company experienced a reversal in business conditions,
including a decline in the Company's core Eskimo Pie brand. The new management
team instituted a new business plan, with strategies to refocus on the core
Eskimo Pie brand, as well as to expand distribution of all brands represented by
the Company. Significant management changes, coupled with the need for
concentrated efforts to successfully implement the new plan, made enhancement of
the retention and motivational impact of the compensation program for key
employees, including executive officers, especially critical.
At the beginning of 1997, all of the Company's outstanding stock
options had exercise prices that were substantially above the then current
market price of the Company's Common Stock. The Committee concluded that these
stock options, which are a key element in the Company's incentive compensation
program, no longer provided sufficient incentives to the Company's employees,
nor adequately encouraged key personnel to remain in the employment of the
Company.
Therefore, the Committee, with ratification by the full Board,
instituted a program in March 1997 to exchange outstanding "underwater" stock
options, which had been granted since August 1992 under the Company's 1992
Incentive Stock Plan, for repriced options having a per share exercise price
equal to the market price of the Company's Common Stock on the March 4, 1997
date of grant, as well as new 10-year terms and new vesting requirements.
The Committee determined to offer all key employees holding options
under the 1992 Plan the opportunity to participate in the repricing program. As
a result, options on a total of 48,100 shares with a weighted average exercise
price of $18.51 were exchanged for 37,486 shares of repriced options with an
exercise price of $12.50 per share. Each previously granted option was replaced
with options having an equivalent value based on an exchange ratio calculated
using the Black-Scholes Option Pricing Model. Consequently, the repriced options
provide for the purchase of a fewer number of shares of Common Stock than the
options which they replaced, depending on the price and remaining term of the
option being replaced.
The Committee instituted the repricing program to remove the negative
morale associated with "underwater" options, and because it believes that
meaningful equity interests by management create a strong incentive to rebuild
the value of the Company and thereby increase the market price of the Company's
Common Stock. The repricing formula reduced the number of options and potential
shareholder dilution by approximately 22%, but re-established incentives at the
then current market price for the Company's Common Stock in keeping with the
Company's motivational and retention needs during the restructuring period.
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<PAGE>
The following table sets forth information regarding the Repricing of
Stock Options, since its initial public offering, for all executive officers of
the Company.
<TABLE>
OPTION REPRICINGS
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE LENGTH OF
UNDERLYING OF STOCK AT ORIGINAL OPTION
OPTIONS TIME OF EXERCISE PRICE NEW TERM REMAINING
REPRICING REPRICED OR REPRICING OR AT TIME OF EXERCISE AT DATE OF
NAME AND POSITION DATE AMENDED AMENDMENT REPRICING OR PRICE REPRICING OR
AMENDMENT AMENDMENT
- -------------------------- ----------- ------------- -------------- ------------------ ----------- ------------------
<S> <C>
Kimberly P. Ferryman
Vice President, 3/4/97 5,000 $12.50 $20.50 $12.50 8.0 years
Quality 4,223 12.50 18.75 12.50 9.0 years
Assurance and
Product Development
V. Stephen Kangisser
Vice President, 3/4/97 2,000 12.50 21.25 12.50 9.2 years
Marketing
Thomas M. Mishoe, Jr.
Chief Financial 3/4/97 2,000 12.50 18.75 12.50 9.0 years
Officer, Vice President,
Treasurer and
Corporate Secretary
</TABLE>
Replacement options have new ten-year terms as well as additional
vesting requirements that make the new stock option grants exercisable in
increments of one third of the shares subject to option on each the second,
third and fourth anniversaries of the March 4, 1997 grant date. Grantees
received a lower number of replacement share options than those listed above in
order to account for the differences between the fair market values of the
original grants and the repriced options. Ms. Ferryman and Messrs. Kangisser and
Mishoe received 7,485, 1,639 and 1,709 shares of repriced options, respectively,
in place of the original grants shown above.
Section 162(m) Considerations
The Committee has not given significant consideration to the
deductibility of executive compensation under Section 162(m) of the Internal
Revenue Code which was enacted in 1993. Under this provision, beginning in 1994,
a publicly held corporation is not permitted to deduct compensation in excess of
$1 million per year paid to the chief executive officer or any one of the other
named executive officers except to the extent the compensation was paid under
compensation plans meeting certain tax code requirements. The Committee has
noted that the Company does not currently face the loss of this deduction for
compensation. The Committee nevertheless has determined that in reviewing the
design of and administering the executive compensation program, the Committee
will continue in the future to seek to preserve the Company's tax deductions for
executive compensation unless this goal conflicts with the primary objectives of
the Company's compensation program.
1997 Compensation Committee
Wilson H. Flohr, Jr., Chairman
Terrence D. Daniels
Judith B. McBee
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<PAGE>
Performance Graph
Securities and Exchange Commission regulations require the Company to
include in its proxy statement the following Performance Graph. As required by
the regulations, the Graph shows the percentage change in the total return on
the Company's Common Stock during the five-year period ended December 31, 1997.
The Company's Common Stock price ranged from a low of $7.50 to a high of $22.63
between January 1, 1993 and December 31, 1997. The closing price for the stock
on December 31, 1997 was $11.50.
The Performance Graph assumes $100 was invested on January 1, 1993 in
the Company, the NASDAQ Stock Market Index, and an industry index for the ice
cream and frozen dessert business ("Industry Index") and shows the total return
on such an investment, assuming reinvestment of dividends, as of December 31,
1997. The Industry Index includes companies in SIC Code 2024 (ice cream and
frozen desserts). In addition to the Company, the Industry Index currently
includes: Action Products International, Ben & Jerry's Homemade, Inc., Dreyer's
Grand Ice Cream, Integrated Brands, Inc., International Yogurt Company, Suiza
Foods Corporation, TCBY Enterprises, Inc. and Tofutti Brands, Inc.
COMPANY 1992 1993 1994 1995 1996 1997
- ------- ---- ---- ---- ---- ---- ----
ESKIMO PIE CORP 100 107.89 114.37 112.54 69.53 73.08
INDUSTRY INDEX 100 103.51 109.82 127.41 109.38 219.04
NASDAQ 100 119.95 125.94 163.35 202.99 248.30
Section 16(a) Beneficial Ownership Reporting Compliance
Based on a review of reports of changes in beneficial ownership of
the Company's Common Stock and written representations furnished to the Company,
the Company believes that its officers and directors complied with all filing
requirements under Section 16(a) of the Securities Exchange Act of 1934 during
1997, except for a Form 3 filing for Mr. William Weiskopf, Vice
President-Flavors Division, which was inadvertently filed late.
15
<PAGE>
Ratification of the Selection of Independent Auditors
Ernst & Young LLP has been selected as independent auditors for the
Company for the fiscal year ending December 31, 1998, subject to ratification by
the shareholders.
If not otherwise specified, proxies will be voted in favor of
ratification of the appointment. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting, will have an opportunity to make a
statement if they so desire and are expected to be available to respond to
appropriate questions.
Shareholder Proposals for 1999 Annual Meeting
The 1999 Annual Meeting of Shareholders will be held on May 5, 1999.
Under applicable law, the Board of Directors need not include an otherwise
appropriate shareholder proposal (including any shareholder nominations for
director candidates) in its proxy statement or form of proxy for that meeting
unless the proposal is received by the Secretary of the Company at the Company's
principal place of business on or before November 27, 1998. In addition, the
Company's Bylaws prescribe certain procedures which must be followed, including
certain advance notice requirements, in order for a proposal to be properly
before a shareholder meeting. Any shareholder desiring a copy of the Bylaws will
be furnished one without charge upon written request to the Secretary.
Other Matters
As of the date of this Proxy Statement, management of the Company has
no knowledge of any matters to be presented for consideration at the Annual
Meeting other than those referred to above. If any other matter properly comes
before the Annual Meeting, the persons named in the accompanying proxy intend to
vote such proxy, to the extent entitled, in accordance with their best judgment.
Annual Report on Form 10-K
A copy of the Company's annual report on Form 10-K as filed with the
Securities and Exchange Commission for the year ended December 31, 1997 can be
obtained without charge by writing to the Corporate Secretary at 901 Moorefield
Park Drive, Richmond, Virginia 23236. The Form 10-K may also be accessed by
viewing the Company's home page on the worldwide web at www.eskimopie.com.
By Order of the Board of Directors,
/s/ Thomas M. Mishoe, Jr.
Thomas M. Mishoe, Jr.
Chief Financial Officer, Vice President,
Treasurer and Corporate Secretary
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PROXY
ESKIMO PIE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Arnold H. Dreyfuss, Thomas M. Mishoe, Jr.
and F. Claiborne Johnston, Jr. jointly and severally, proxies, with full power
to act alone, and with full power of substitution, to represent the undersigned
and to vote, as designated below and upon any and all other matters which may
properly be brought before such meeting, all shares of Common Stock which the
undersigned would be entitled to vote at the Annual Meeting of Stockholders of
Eskimo Pie Corporation to be held on May 6, 1998, or any adjournment thereof.
1. Election of Directors to serve until 1999 Annual Meeting of Shareholders
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
(except as written on to vote for all
the line below) nominees listed below
Nominees: Arnold H. Dreyfuss, Wilson H. Flohr, Jr., F. Claiborne Johnston, Jr.
David B. Kewer, Daniel J. Ludeman, Judith B. McBee and Robert C. Sledd
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE LISTED
ABOVE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
______________________________________________________________________________
(CONTINUED ON REVERSE)
<PAGE>
2. Ratification of the designation of Ernst & Young LLP as independent auditors
for the Corporation and its subsidiaries for the current fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon any other
business that may come before the meeting or any adjournment thereof.
Unless otherwise specified in the squares provided, the undersigned's vote
will be cast for items 1 and 2. If, at or before the time of the meeting, any of
the nominees listed above has become unavailable for any reason, the proxies
have the discretion to vote for a substitute nominee or nominees. This proxy may
be revoked at any time prior to its exercise.
------------------------------
Signature
------------------------------
Signature
Dated:_____________________, 1998
(In signing as Attorney, Administrator, Executor, Guardian or
Trustee, please add your title as such.)
