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SCHEDULE 14A
(RULE 14A - 101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PERFORMANCE FOOD GROUP COMPANY
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
6800 PARAGON PLACE, SUITE 500
RICHMOND, VIRGINIA 23230
(804) 285-7340
Dear Shareholder:
It is our pleasure to extend to you a cordial invitation to attend the
Annual Meeting of Shareholders of Performance Food Group Company (the "Company")
to be held at 10:00 a.m., eastern daylight time, on Wednesday, May 2, 2001, at
the Pocahontas Foods, USA, Inc. offices located at 7420 Ranco Road, Richmond,
Virginia.
Shareholders will be asked to elect two directors, to consider and act
upon a proposal to amend the Company's 1993 Employee Stock Incentive Plan, to
consider and act upon a proposal to amend the Company's Employee Stock Purchase
Plan and to consider and act upon a proposal to amend the Company's Restated
Charter. In addition, we will present an oral report on the condition and
performance of the Company, and you will have an opportunity to question
management on matters that affect the interests of all shareholders.
We hope you will be able to attend the meeting in person. Whether you
expect to attend or not, we request that you complete and return the enclosed
proxy card in the enclosed post-paid envelope. Your vote is important.
We look forward to seeing you on May 2, 2001.
Sincerely,
Robert C. Sledd
Chairman and Chief Executive Officer
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[LOGO]
6800 PARAGON PLACE, SUITE 500
RICHMOND, VIRGINIA 23230
(804) 285-7340
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Performance Food Group Company (the "Company") will be held
at 10:00 a.m., eastern daylight time, on Wednesday, May 2, 2001, at the
Pocahontas Foods, USA, Inc. offices located at 7420 Ranco Road, Richmond,
Virginia for the following purposes:
1. To elect two (2) Class II directors to hold office for a term
of three (3) years and until their successors are elected and
qualified;
2. To consider and act upon a proposal to amend the Company's
1993 Employee Stock Incentive Plan (the "1993 Plan");
3. To consider and act upon a proposal to amend the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan");
4. To consider and act upon a proposal to amend the Company's
Restated Charter to increase the number of authorized shares
of Common Stock from 50,000,000 to 100,000,000; and
5. To transact such other business as may properly come before
the Annual Meeting.
The Board of Directors has fixed the close of business on March 14,
2001 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting.
Your attention is directed to the Proxy Statement accompanying this
notice for a more complete statement regarding matters to be acted upon at the
Annual Meeting.
By the Order of the Board of Directors
John D. Austin, Secretary
Richmond, Virginia
April 6, 2001
YOUR REPRESENTATION AT THE ANNUAL MEETING IS IMPORTANT. TO ENSURE YOUR
REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. SHOULD YOU DESIRE TO REVOKE
YOUR PROXY, YOU MAY DO SO AS PROVIDED IN THE ACCOMPANYING PROXY STATEMENT AT ANY
TIME BEFORE IT IS VOTED.
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[LOGO]
6800 PARAGON PLACE, SUITE 500
RICHMOND, VIRGINIA 23230
(804) 285-7340
--------------------
PROXY STATEMENT
--------------------
The accompanying proxy is solicited by the Board of Directors of
Performance Food Group Company for use at the Annual Meeting of Shareholders of
the Company to be held on May 2, 2001, and any adjournments thereof, notice of
which is attached hereto.
The purposes of the Annual Meeting are to elect two Class II directors,
to consider and act upon a proposal to amend the Company's 1993 Plan, to
consider and act upon a proposal to amend the Company's Stock Purchase Plan, to
consider and act upon an amendment to the Company's Restated Charter and to
transact such other business as may properly be brought before the Annual
Meeting or any adjournment thereof.
A shareholder who signs and returns a proxy may revoke the same at any
time before the authority granted thereby is exercised by attending the Annual
Meeting and electing to vote in person, by filing with the Secretary of the
Company a written revocation or by duly executing a proxy bearing a later date.
Unless so revoked, the shares represented by the proxy will be voted at the
Annual Meeting. Where a choice is specified on the proxy, the shares represented
thereby will be voted in accordance with such specifications. If no
specification is made, such shares will be voted FOR the election of the two
director nominees; FOR the amendment to the 1993 Plan; FOR the amendment to the
Stock Purchase Plan; and FOR the amendment to the Restated Charter.
The Board of Directors knows of no other matters which are to be
brought to a vote at the Annual Meeting. If any other matter does come before
the Annual Meeting, however, the persons appointed in the proxy or their
substitutes will vote in accordance with their best judgment on such matters.
The Board of Directors has fixed the close of business on March 14,
2001 as the record date for the Annual Meeting. Only record holders of the
Company's common stock, $.01 par value per share (the "Common Stock"), at the
close of business on that date will be entitled to vote at the Annual Meeting.
On the record date, the Company had outstanding 17,836,626 shares of Common
Stock. Holders of the Common Stock will be entitled to one vote for each share
of Common Stock so held, which may be given in person or by proxy duly
authorized in writing.
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
meeting. Abstentions and "non-votes" are counted as present in determining
whether the quorum requirement is satisfied. Because directors are elected by a
plurality of the votes cast by the holders of the Common Stock represented and
entitled to vote at the Annual Meeting, abstentions are not considered in the
election. Any other matters that may properly come before the meeting or any
adjournment thereof shall be approved by the affirmative vote of a majority of
the votes cast by the holders of Common Stock represented and entitled to vote
at the Annual Meeting, and abstentions and "non-votes" will have no effect on
the outcome of the vote. A "non-vote" occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
This Proxy Statement and Form of Proxy and the Company's Annual Report
to Shareholders have been mailed on or about April 6, 2001 to all shareholders
of record at the close of business on March 14, 2001. The cost of solicitation
of proxies will be borne by the Company, including expenses in connection with
preparing, assembling and mailing this Proxy Statement. Such solicitation will
be made by mail, and may also be made by the Company's regular officers or
employees personally or by telephone or telecopy. The Company may reimburse
brokers, custodians and nominees for their expenses in sending proxies and proxy
materials to beneficial owners.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information furnished to the
Company as of March 14, 2001 concerning persons known to the Company to be the
beneficial owners of more than 5% of the outstanding shares of the Common Stock.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS (1)
------------------- --------- ---------
Performance Food Group Employee Savings and
Stock Ownership Trust............................... 1,145,983(2) 6.4%
6800 Paragon Place, Suite 500
Richmond, Virginia 23230
- -----------------
(1) Computed in accordance with Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934.
(2) 876,150 shares held by the Performance Food Group Employee Savings and
Stock Ownership Plan (the "ESOP") have been allocated to an aggregate
of approximately 2,900 participants of the Company who exercise voting
power over such shares. The remaining 269,833 unallocated shares are
voted by the Trustee at the direction of the Plan Committee which is
appointed by the Board of Directors of the Company.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Restated Charter classifies the Board of Directors into
three classes, each class to be as nearly equal in number as possible,
designated Class I, Class II and Class III. At each annual meeting, directors of
the class whose term of office expires in that year are elected for a three-year
term. The terms of two Class II directors, Robert C. Sledd and Fred C. Goad,
Jr., will expire upon the election and qualification of new directors at this
Annual Meeting. The terms of each of the two Class III directors and each of the
three Class I directors will expire at the annual meetings in 2002 and 2003,
respectively. The Board of Directors has designated Robert C. Sledd and Fred C.
Goad, Jr. as the two nominees for reelection as Class II directors for a
three-year term expiring at the annual meeting in 2004 and until their
successors are elected and qualified. These two nominees are currently directors
of the Company and were elected by the shareholders.
Unless contrary instructions are received, it is intended that the
shares represented by proxies solicited by the Board of Directors will be voted
in favor of the election of the two Class II nominees as directors. Each nominee
has consented to be a candidate and to serve, if elected. While the Board has no
reason to believe that any nominee will be unable to accept nomination or
election as a director, if such an event should occur, the persons named in the
Form of Proxy have advised the Company that they will vote for such substitute
or substitutes as shall be designated by the current Board of Directors.
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The following table contains, as of March 14, 2001, certain information
concerning the executive officers, directors and certain key employees of the
Company, including the nominees, which information has been furnished to the
Company by the individuals named.
SHARES OF
COMMON STOCK
DIRECTOR TERM BENEFICIALLY PERCENT
NAME AGE SINCE EXPIRES POSITION OWNED (1) OF CLASS
---- --- ----- ------- -------- --------- --------
Robert C. Sledd............ 48 1987 2001 Chairman, Chief 325,907(2) 1.8%
Executive Officer
and Director
C. Michael Gray............ 51 1992 2002 President, Chief 123,389 *
Operating Officer
and Director
Roger L. Boeve............. 62 -- -- Executive Vice President 117,099(3) *
and Chief Financial
Officer
Thomas Hoffman............. 61 -- -- Senior Vice President 58,589 *
G. Thomas Lovelace, Jr. ... 48 -- -- Vice President 6,172 *
John D. Austin............. 39 -- -- Vice President-Finance 8,391(3) *
and Secretary
John R. Crown.............. 54 -- -- Broadline Regional 6,661(4) *
President
Joseph J. Paterak, Jr...... 49 -- -- Broadline Regional 1,314 *
President
Steven Spinner............. 40 -- -- Broadline Regional 47,629(5) *
President
Charles E. Adair........... 53 1993 2003 Director 31,750 *
Fred C. Goad, Jr........... 60 1993 2001 Director 31,750(6) *
Timothy M. Graven.......... 49 1993 2003 Director 27,250 *
H. Allen Ryan.............. 58 2000 2003 Director 299,165 1.7%
John E. Stokely............ 48 1998 2002 Director 12,250 *
All directors and executive
officers as a group (14
persons) ................. 1,097,316 6.1%
- ------------------------------
* Less than one percent
(1) Includes the following shares which are not currently outstanding but
which the named individuals are entitled to acquire as of March 14,
2001 and within 60 days of such date upon the exercise of options: Mr.
Sledd - 33,751; Mr. Gray - 53,626; Mr. Boeve - 27,939; Mr. Hoffman -
41,437; Mr. Austin - 6,750; Mr. Crown - 5,000; Mr. Adair - 19,750; Mr.
Goad - 19,750; Mr. Graven - 19,750; Mr. Ryan - 5,250; Mr. Stokely
-10,250; all directors and executive officers as a group (14 persons) -
243,253 shares. The shares described in this note are deemed to be
outstanding for the purpose of computing the percentage of outstanding
Common Stock owned by such persons individually and by the group, but
are not deemed to be outstanding for the purposes of computing the
percentage of ownership of any other person.
(2) Includes 40,500 shares held by Mr. Sledd as trustee for the benefit of
his children. Also includes 1,750 shares held by Mr. Sledd's wife for
which Mr. Sledd disclaims beneficial ownership.
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(3) Excludes unallocated shares held by the ESOP. Mr. Boeve and Mr. Austin
are each trustees of the ESOP, and each is a member of the Plan
Committee which directs the voting of such shares.
(4) Includes 60 shares held by Mr. Crown's wife for which Mr. Crown
disclaims beneficial ownership.
(5) Includes 87 shares held by Mr. Spinner's daughter.
(6) Includes 1,500 shares held by Mr. Goad's wife for which Mr. Goad
disclaims beneficial ownership.
The following is a brief summary of the business experience of each of
the executive officers and directors of the Company, including the nominees.
Robert C. Sledd has served as Chairman of the Board of Directors since
February 1995 and has served as Chief Executive Officer and a director of the
Company since 1987. Mr. Sledd served as President of the Company from 1987 to
February 1995. Mr. Sledd has served as a director of Taylor & Sledd Industries,
Inc., a predecessor of the Company, since 1974, and served as President and
Chief Executive Officer of that company from 1984 to 1987. Mr. Sledd also serves
as a director of SCP Pool Corporation, a supplier of swimming pool supplies and
related products.
C. Michael Gray has served as President and Chief Operating Officer of
the Company since February 1995 and has served as a director of the Company
since 1992. Mr. Gray served as President of Pocahontas Foods, USA, Inc.
("Pocahontas"), a wholly-owned subsidiary of the Company, from 1981 to 1995. Mr.
Gray had been employed by Pocahontas since 1975, serving as Marketing Manager
and Vice President of Marketing. Prior to joining Pocahontas, Mr. Gray was
employed by Kroger Company as a produce buyer.
Roger L. Boeve has served as Executive Vice President and Chief
Financial Officer of the Company since 1988. Prior to that date, Mr. Boeve
served as Executive Vice President and Chief Financial Officer for The Murray
Ohio Manufacturing Company and as Corporate Vice President and Treasurer for
Bausch and Lomb. Mr. Boeve is a certified public accountant.
Thomas Hoffman has served as Senior Vice President of the Company since
February 1995. Since 1989, Mr. Hoffman has served as President of Kenneth O.
Lester Company, Inc., a wholly-owned subsidiary of the Company. Prior to joining
the Company in 1989, Mr. Hoffman served in executive capacities at Booth
Fisheries Corporation, a subsidiary of Sara Lee Corporation, as well as C.F.S.
Continental, Miami and International Foodservice, Miami, two foodservice
distributors.
G. Thomas Lovelace, Jr. has served as Vice President of the Company
since February 2001 and has served as President of Fresh Advantage, Inc., a
wholly-owned subsidiary of the Company, since 1996.
John D. Austin has served as Vice President-Finance since January 2001
and as Secretary of the Company since March 2000. Mr. Austin served as Corporate
Treasurer from 1998 to January 2001. Mr. Austin served as Corporate Controller
of the Company from 1995 to 1998. From 1991 to 1995, Mr. Austin was Assistant
Controller for General Medical Corporation, a medical supplies distributor.
Prior to that, Mr. Austin was an accountant with Deloitte & Touche LLP. Mr.
Austin is a certified public accountant.
John R. Crown has served as Broadline Regional President of the Company
since January 1999. Mr. Crown served as Vice President, Business Development of
the Company from January 1997 to January 1999. From 1987 to 1996, Mr. Crown
served as President of Burris Retail Food Systems, a subsidiary of Burris Foods,
Inc., and as Executive Vice President and General Manager of Institution Food
House. Mr. Crown is immediate past Chairman of the National Frozen Food
Association and a member of the board of directors of Food Distributors
International, two food industry trade associations.
Joseph J. Paterak, Jr. has served as Broadline Regional President of
the Company since January 1999. Mr. Paterak served as Vice President of the
Company from October 1998 to January 1999. From 1993 to September 1998, Mr.
Paterak served as Market President of Alliant Foodservice, Inc.
Steven Spinner has served as Broadline Regional President of the
Company since January 2001 and has served as President of AFI Foodservice
Distributors, Inc. ("AFI"), a wholly-owned subsidiary of the Company, since
October 1997. From 1985 to October 1997, Mr. Spinner held various positions with
AFI, including Vice President.
Charles E. Adair has served as a director of the Company since August
1993. Since 1993, Mr. Adair has been a partner in Cordova Ventures, a venture
capital management company. Mr. Adair was employed by Durr-Fillauer Medical,
Inc., a distributor of pharmaceuticals and other medical products, from 1973 to
1992, serving as
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Executive Vice President from 1978 to 1981, as President and Chief Operating
Officer from 1981 to 1992, and as a director from 1976 to 1992. In addition, Mr.
Adair serves as a director of Tech Data Corporation, a distributor of
microcomputers and related hardware and software products. Mr. Adair is a
certified public accountant.
Fred C. Goad, Jr. has served as a director of the Company since July
1993. Since March 1999, Mr. Goad has served as Co-Chief Executive Officer of the
transaction services division of WebMD. From June 1996 to March 1999, Mr. Goad
served as Co-Chief Executive Officer and Chairman of ENVOY Corporation
("ENVOY"), a provider of electronic transaction processing services for the
health care industry, which was acquired by WebMD in 1999. From 1985 to June
1996, Mr. Goad served as President and Chief Executive Officer and as a director
of ENVOY. Mr. Goad also serves as a director of Luminex Corporation, a maker of
proprietary technology that simplifies biological testing for the life sciences
industry, and Private Business, Inc., a provider of electronic commerce
solutions that help community banks provide accounts receivable financing to
their small business customers.
Timothy M. Graven has served as a director of the Company since August
1993. Mr. Graven is the Managing Partner and co-founder of Triad Investment
Company, LLC, a private investment firm founded in 1995. Mr. Graven previously
served as President and Chief Operating Officer of Steel Technologies, Inc. of
Louisville, Kentucky, a steel processing company, from March 1990 to November
1994, as Executive Vice President and Chief Financial Officer from May 1985 to
March 1990 and as a director from 1982 to 1994. Mr. Graven is also a certified
public accountant.
H. Allen Ryan has served as a director of the Company since May 2000
and serves as a consultant to the Company from time to time. Mr. Ryan served as
President of NorthCenter Foodservice Corporation ("NorthCenter"), a wholly-owned
subsidiary of the Company, from 1982 to April 2000. Mr. Ryan is past Chairman of
Nugget Distributors, Inc., a foodservice buying group, and the International
Foodservice Distributors Association. Mr. Ryan also serves on the Board of
Directors of the Maine Restaurant Association and the Board of Trustees of
Thomas College in Waterville, Maine. NorthCenter was the 1999 recipient of the
ID Magazine Great Distributor Organization Award.
John E. Stokely has served as a director of the Company since April
1998. Since August 1999, Mr. Stokely has been self-employed as a business
consultant. Mr. Stokely was the President, Chief Executive Officer and Chairman
of the Board of Directors of Richfood Holdings, Inc. ("Richfood"), a retail food
chain and wholesale grocery distributor, from January 1997 until August 1999,
when Richfood was acquired by Supervalu Inc. Mr. Stokely served on the Board of
Directors and as President and Chief Operating Officer of Richfood from April
1995 to January 1997 and served as Executive Vice President and Chief Financial
Officer from 1990 to April 1995. Mr. Stokely also serves as a director of
Nash-Finch Company, a food wholesaler, and SCP Pool Corporation.
The Board of Directors has established an Audit Committee for the
purpose of recommending the Company's auditors, reviewing the scope of their
engagement, consulting with such auditors, reviewing the results of the audit,
acting as a liaison between the Board and the auditors and reviewing various
Company policies, including those related to accounting and internal control
matters. It is the function of the Audit Committee to ensure that the Company's
financial statements accurately reflect the Company's financial position and
results of operations. Messrs. Goad, Graven, Adair and Stokely comprise the
Audit Committee, each of whom is independent as defined by the National
Association of Securities Dealers' listing standards. The Audit Committee met
five times during the fiscal year ended December 30, 2000.
The Board of Directors has established a Compensation Committee for the
purpose of evaluating the performance of the Company's officers, reviewing and
approving officers' compensation, formulating bonuses for the Company's
management and administering the Company's stock incentive plans. Messrs. Goad,
Graven, Adair and Stokely comprise the Compensation Committee, which met two
times during the fiscal year ended December 30, 2000.
The Board of Directors held 13 meetings, nine of which were via
teleconference, during fiscal 2000. All incumbent directors attended at least
75% of the meetings of the Board and each committee of the Board on which such
directors served at the time of such meeting, held during the fiscal year ended
December 30, 2000. The Board of Directors does not have a nominating committee.
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EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended December 30, 2000 (fiscal 2000),
January 1, 2000 (fiscal 1999) and January 2, 1999 (fiscal 1998) for (i) the
Chief Executive Officer of the Company and (ii) the four highest paid executive
officers of the Company whose salary and bonus payments exceeded $100,000
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND FISCAL SALARY BONUS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#)(1) ($)
------------------ ------ -------- -------- ------------ ------------
Robert C. Sledd 2000 $387,412 $334,101 76,000 $12,951(2)
Chairman and Chief 1999 357,950 256,962 20,000 7,929(2)
Executive Officer 1998 275,396 150,334 50,600 9,664(2)
C. Michael Gray 2000 338,656 188,898 33,000 12,951(2)
President and Chief 1999 266,078 104,535 15,000 7,929(2)
Operating Officer 1998 225,576 73,381 37,100 9,664(2)
Roger L. Boeve 2000 245,159 116,239 14,000 12,951(2)
Executive Vice 1999 211,262 56,374 8,000 7,929(2)
President and Chief 1998 193,262 50,581 21,900 9,664(2)
Financial Officer
Thomas Hoffman 2000 236,250 57,653 9,000 12,951(2)
Senior Vice President 1999 216,980 66,690 10,000 7,929(2)
1998 190,535 157,667 16,870 9,664(2)
G. Thomas Lovelace, Jr 2000 259,240 133,472 33,000 12,951(2)
Vice President 1999 224,279 114,356 6,000 8,602(2)
1998 201,657 98,331 10,000 9,664(2)
- -------------------------
(1) Number of stock options granted under the 1993 Plan.
(2) Includes allocations by the Company to each Named Executive Officer's
ESOP account of $8,701, $4,729 and $7,264 for fiscal 2000, 1999 and
1998, respectively. Allocations to the ESOP accounts are based on the
closing price of the Common Stock on The Nasdaq Stock Market of $51.27
per share at December 29, 2000 for fiscal 2000, $24.38 per share at
December 31, 1999 for fiscal 1999, and $28.13 per share at December 31,
1998 for fiscal 1998. Also includes contributions by the Company to
each Named Executive Officer's 401(k) account in fiscal 2000 of $4,250;
in fiscal 1999 as follows: Mr. Sledd - $3,200; Mr. Gray - $3,200; Mr.
Boeve - $3,200; Mr. Hoffman - $3,200; and Mr. Lovelace - $3,873; and in
fiscal 1998 of $2,400.
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The following table summarizes certain information regarding stock
options issued to the Named Executive Officers during fiscal 2000. No stock
appreciation rights ("SARs") have been granted by the Company.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE FOR OPTION TERM
GRANTED FISCAL PRICE EXPIRATION ---------------------------
NAME (#)(1) 2000(%) ($/SHARE) DATE 5%($) 10%($)
---- ------ ------- --------- ---- ----- ------
Robert C. Sledd 40,000 6.6% $ 19.56 3/14/10 $ 492,047 $1,246,944
36,000 5.9 29.44 5/15/10 666,528 1,689,112
C. Michael Gray 33,000 5.4 19.56 3/14/10 405,939 1,028,729
Roger L. Boeve 14,000 2.3 19.56 3/14/10 172,217 436,430
Thomas Hoffman 9,000 1.5 19.56 3/14/10 110,711 280,562
G. Thomas Lovelace, Jr 8,000 1.3 19.56 3/14/10 98,409 249,389
25,000 4.1 34.88 10/19/10 548,396 1,389,743
- ---------------------------
(1) The options granted to the Named Executive Officers were granted on
March 14, 2000, May 15, 2000 and October 19, 2000 pursuant to the 1993
Plan. The options become 100% exercisable on March 14, 2004, May 15,
2004 and October 19, 2004, respectively. If any of certain events which
generally constitute a change in control of the Company occur, the
options would become immediately exercisable. The options were granted
at exercise prices determined by the closing price of the Common Stock
on The Nasdaq Stock Market on the dates of grant.
The Company has no long-term incentive plans, as that term is defined
in regulations promulgated by the Securities and Exchange Commission (the
"SEC"). Also, the Company presently has no defined benefit or actuarial plans
covering any employees of the Company. During fiscal 2000, the Company did not
adjust or amend the exercise price of stock options awarded to the Named
Executive Officers, whether through amendment, cancellation or replacement
grants, or other means.
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The following table sets forth certain information with respect to
stock options issued to the Named Executive Officers pursuant to the 1993 Plan
and the 1989 Nonqualified Stock Option Plan (the "1989 Plan").
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL 2000 YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 30, 2000 AT DECEMBER 30, 2000 ($)(1)
ACQUIRED ON VALUE ---------------------------- -------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Robert C. Sledd -- -- 33,751 146,600 $1,367,699 $4,222,446
C. Michael Gray -- -- 53,626 85,100 2,262,247 2,644,727
Roger L. Boeve -- -- 27,939 43,900 1,113,356 1,365,619
Thomas Hoffman -- -- 41,437 35,870 1,729,188 1,092,319
G. Thomas Lovelace, Jr 4,500 $153,000 -- 49,000 -- 1,143,869
- ----------------
(1) Based on the closing price of the Company's Common Stock on The Nasdaq
Stock Market at December 29, 2000 of $51.27 per share.
DIRECTOR COMPENSATION
Non-employee directors receive an annual retainer of $10,000 and a fee
of $1,000 for each Board meeting attended, $500 for each committee meeting
attended, $500 for each meeting attended by telephone, and are reimbursed for
expenses reasonably incurred in connection with their services as directors. In
addition, the Chairman of the Audit Committee receives an annual retainer of
$2,500, and the Chairman of the Compensation Committee receives an annual
retainer of $1,500. Directors who are officers or employees of the Company
receive no compensation for serving as members of the Board. The aggregate
amount of fees paid to all of the non-employee directors for fiscal 2000 was
approximately $114,500.
Each non-employee director participates in the Outside Directors' Plan,
which was approved by the shareholders of the Company on July 21, 1993.
Non-employee directors elected to the Board subsequent to the adoption of the
Outside Directors' Plan will receive an option grant for 5,250 shares upon their
election to the Board of Directors and all non-employee directors will receive
an annual option grant of 2,500 shares as of the date of each annual meeting of
shareholders. The options become exercisable, subject to a director's continued
service on the Board of Directors, one year from the date of grant, and expire
on the tenth anniversary of such date. All options issued under the Outside
Directors' Plan have an exercise price per share at the date of grant equal to
the closing sale price on The Nasdaq Stock Market on that date. At December 30,
2000, there were five participants under the Outside Directors' Plan who held
options covering an aggregate of 15,750 shares at an exercise price of $9.33 per
share, 4,500 shares at an exercise price of $14.17 per share, 4,500 shares at an
exercise price of $12.67 per share, 4,500 shares at an exercise price of $18.33
per share, 7,500 shares at an exercise price of $20.00 per share, 12,750 shares
at an exercise price of $20.13 per share, 10,000 shares at an exercise price of
$25.93 per share and 15,250 shares at an exercise price of $26.50 per share.
There have been no exercises to date of options granted under the Outside
Directors' Plan.
The Board of Directors may in the future adjust the compensation of
directors as it deems advisable and consistent with the best interests of the
Company's shareholders and the financial abilities of the Company.
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CHANGE IN CONTROL AGREEMENTS
Effective as of October 29, 1997, the Company entered into agreements
with certain of its key executives (the "Agreement"), including the Chief
Executive Officer and Named Executive Officers, which provide for certain
payments to be made to the executive if, within two years following a Change in
Control (as defined in the Agreement) of the Company, his employment with the
Company is terminated for any reason other than Cause (as defined in the
Agreement) or if the executive terminates his employment with the Company for
Good Reason (as defined in the Agreement). Upon termination, the executive is
entitled to receive (i) 299.9% of his base salary (defined as the higher of the
executive's base salary prior to the Change in Control or immediately prior to
termination), (ii) 299.9% of his bonus (based upon the executive's bonus for the
three fiscal years prior to the Change in Control or bonus after the Change in
Control, whichever is higher) and (iii) an amount necessary to reimburse the
executive for any excise tax payable under Section 4999 of the Internal Revenue
Code in connection with the Change in Control. One-third of such amount must be
paid in equal semi-monthly installments over the twelve months following
termination and the balance in a lump sum payment made within five business days
after the expiration of the twelve-month period. Amounts payable pursuant to
clause (iii) above must be paid within thirty days following termination of
employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2000, the Compensation Committee of the Board of
Directors was composed of Messrs. Goad, Graven, Adair and Stokely. None of these
persons has at any time been an officer or employee of the Company or any of its
subsidiaries. In addition, there are no relationships among the Company's
executive officers, members of the Compensation Committee or entities whose
executives serve on the Board of Directors or the Compensation Committee that
require disclosure under applicable SEC regulations.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions with respect to compensation of the Named Executive Officers
for fiscal 2000 were made by the Compensation Committee of the Board of
Directors, which was composed of Messrs. Goad, Graven, Adair and Stokely. None
of these persons has at any time been an officer or employee of the Company or
any of its subsidiaries. The Compensation Committee approves compensation
actions and long-term incentive awards to the Named Executive Officers and other
key employees of the Company, and reviews and administers the incentive
compensation, stock option and other compensation plans of the Company.
The overall objectives of the Company's executive compensation program
for fiscal 2000 were to:
- Attract and retain the highest quality talent to lead the
Company
- Reward key executives based on business performance
- Design incentives to maximize shareholder value
- Assure that objectives for corporate and individual
performance are measured
The philosophy upon which these objectives are based is to provide
incentive to the Company's officers to enhance the profitability of the Company
and closely align the financial interests of the Company's officers with those
of its shareholders. In order to uphold this philosophy for fiscal 2000, the
Compensation Committee reviewed the various elements of executive compensation,
including salaries, incentive compensation awards and stock option awards under
the 1993 Plan. In 2000, the Compensation Committee retained William M. Mercer,
Inc. ("Mercer"), an independent consulting firm, to analyze the Company's
compensation programs in relation to a group of similarly sized companies in
comparable industries. These comparable companies are primarily in the
distribution industry, including certain of the Company's competitors for which
compensation data is available. The Mercer analysis compared the compensation
levels of the CEO and Named Executive Officers to similar positions at these
peer companies. The Compensation Committee then used this information when
establishing compensation levels for the Company's senior management.
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The Compensation Committee set annual base salaries for the Named
Executive Officers near or just below the midpoint of the relative salaries of
similar executives at these peer companies. To closely align an executive's
compensation to the Company's goals, the Compensation Committee believes that a
substantial portion of an executive's compensation should be incentive based.
Therefore, the Company relies to a significant degree on annual cash bonuses and
long-term stock based incentive compensation. Beginning in fiscal 1995, the
Compensation Committee and the Board implemented an annual cash bonus program
for senior management, including the Named Executive Officers, based in part on
Economic Value Added ("EVA") and in part on individual performance objectives.
EVA measures the Company's ability to generate after-tax operating profits in
excess of the cost of capital, including both debt and equity, employed to
generate that profit. The Company's bonus program includes a component based on
the improvement in EVA over the prior year and a component based on current year
EVA. Under this program, an executive's bonus varies directly with improvement
in and with the amount of after-tax operating profits in excess of the cost of
capital. Therefore, an executive is rewarded for creating shareholder wealth by
most effectively utilizing the Company's capital. In addition, an executive's
bonus is "at risk," in that no bonuses are paid if the Company fails to improve
the utilization of capital or generate after-tax operating profits in excess of
the cost of capital.
The long-term incentive program for senior management consists of stock
option and other stock-based awards granted under the 1993 Plan. Until 1999, the
Compensation Committee granted stock option awards on a bi-annual basis. In
1999, the Compensation Committee began to grant options to senior management
annually. During 2000, the Compensation Committee approved the grant of an
aggregate of 165,000 stock options under the 1993 Plan to the Named Executive
Officers. These options were granted at the fair market value of the Common
Stock on the date of grant and vest 100% four years from the date of grant.
Compensation of Chief Executive Officer
Robert C. Sledd, the Company's Chairman and Chief Executive Officer,
is compensated in accordance with the same general criteria established from
time to time by the Compensation Committee of the Board of Directors with
respect to the Named Executive Officers. In May 2000, the Compensation Committee
and Mr. Sledd discussed their mutual desire to align Mr. Sledd's interests more
closely with the Company's shareholders generally. The Compensation Committee
determined, and Mr. Sledd agreed, that Mr. Sledd's fiscal 2000 cash compensation
would be reduced by $120,000 comprised of $60,000 in salary for the balance of
fiscal 2000 and $60,000 in bonus eligibility of Mr. Sledd for the balance of
fiscal 2000. Given the reduction in Mr. Sledd's cash compensation and the desire
of the Compensation Committee to continue to align the interests of the Chief
Executive Officer and shareholders generally, in May 2000, the Compensation
Committee granted Mr. Sledd options to purchase 36,000 shares of the Company's
common stock at an exercise price of $29.44, the fair market value of such stock
on the date of grant. Such options vest four years from the date of the grant.
Mr. Sledd's base salary for fiscal 2000 was $387,412, and he earned cash bonuses
of $334,101.
Federal Income Tax Deductibility Limitations
The Compensation Committee believes it is appropriate to take into
account the $1,000,000 limit on the deductibility of executive compensation for
federal income tax purposes enacted as part of the 1993 Omnibus Budget
Reconciliation Act ("OBRA") and to seek to qualify the Company's long-term
compensation awards as performance-based compensation excluded from the
$1,000,000 limit. None of the Company's executive officers has received
compensation that could potentially exceed the applicable limits under OBRA.
The tables set forth under "Executive Compensation," and the
accompanying narrative and footnotes, reflect the decisions covered by the above
discussion.
Charles E. Adair Fred C. Goad, Jr. Timothy M. Graven John E. Stokely
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such acts.
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AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of
Directors, a copy of which is attached as Exhibit A, the Audit Committee of the
Board of Directors assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. During fiscal 2000,
the Audit Committee met five times.
In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might be thought to bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," discussed with the auditors any relationships that may impact
their objectivity and independence and satisfied itself as to the auditors'
independence. The Audit Committee also discussed with management and the
independent auditors the quality and adequacy of the Company's internal
controls. The Audit Committee reviewed with the independent auditors their fees,
audit plans, audit scope and identification of audit risks.
The Audit Committee discussed and reviewed with the independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communications with Audit Committees" and discussed and reviewed the results of
the independent auditors' audit of the consolidated financial statements.
The Audit Committee reviewed the audited consolidated financial
statements of the Company as of and for the fiscal year ended December 30, 2000
with management and the independent auditors. Management has the responsibility
for the preparation of the Company's consolidated financial statements and the
independent auditors have the responsibility for the audit of those statements.
Based on the above-mentioned review and discussions with management and
the independent auditors, the Audit Committee recommended to the Board that the
Company's audited consolidated financial statements be included in its Annual
Report on Form 10-K for the fiscal year ended December 30, 2000, for filing with
the SEC. The Audit Committee also approved the reappointment of KPMG LLP as the
Company's independent auditors.
Charles E. Adair Fred C. Goad, Jr. Timothy M. Graven John E. Stokely
The foregoing report of the Audit Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such acts.
AUDIT FEES
The Company paid KPMG LLP $157,500 in connection with its audit of the
Company's consolidated financial statements for fiscal 2000 and review by KPMG
LLP of the Company's consolidated financial statements included in its Quarterly
Reports on Form 10-Q during fiscal 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KMPG LLP did not perform any financial information technology services
for the Company during fiscal 2000.
ALL OTHER FEES
During fiscal 2000, KPMG LLP billed the Company $267,389 for all other
services, including $98,150 in connection with the Company's Registration
Statement on Form S-3 dated October 23, 2000 and the related Prospectus
Supplement dated December 7, 2000, $109,950 in connection with its audits of
Redi-Cut Foods, Inc. and related entities and Carroll County Foods, Inc. and
$59,289 for tax related and other services.
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SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the percentage change in the unaudited
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return of the S&P 600 Index and the S&P Distributors Food and
Health Index between December 31, 1995 and December 31, 2000. The graph assumes
the value of the investment in the Company's Common Stock and each index was
$100 at December 31, 1995 and that all dividends, if any, were reinvested.
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Performance Food Group Company 100 98 150 178 154 324
S&P 600 Stock Index 100 121 152 150 169 189
S&P Distr. Food & Health Index 100 114 154 165 130 256
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PROPOSAL 2: AMENDMENT OF THE
1993 EMPLOYEE STOCK INCENTIVE PLAN
The Company's 1993 Plan was originally adopted by the Company's
shareholders on July 21, 1993. The 1993 Plan initially authorized 250,000 shares
of Common Stock for issuance and authorized an additional 500,000 on May 7,
1996, which number of shares was subsequently increased to 1,125,000 as a result
of a stock split in the form of a stock dividend paid on July 15, 1996. An
additional 500,000 shares were authorized on May 5, 1999. At March 14, 2001,
there were no shares of Common Stock available for issuance under the 1993 Plan.
In addition, options to purchase 28,512 shares of Common Stock have been granted
subject to shareholder approval of this amendment to the 1993 Plan.
INCREASE IN AUTHORIZED SHARES
The Compensation Committee (the "Committee"), which consists entirely
of directors who are not officers of the Company, reviewed the Company's
stock-based incentive compensation plans and concluded that the number of shares
available under the 1993 Plan did not authorize a sufficient number of shares to
provide the flexibility with respect to stock-based compensation, or to
establish appropriate long-term incentives to achieve Company objectives. The
Committee and the Board believe that a key element of officer and key employee
compensation is stock-based incentive compensation. Stock-based compensation
advances the interests of the Company by encouraging, and providing for, the
acquisition of equity interest in the Company by officers and key employees,
thereby providing substantial motivation for superior performance and aligning
their interest with shareholders of the Company. In order to provide the Company
with greater flexibility to adapt to changing economic and competitive
conditions, and to implement long-range goals and expansion plans through
stock-based compensation strategies which will attract and retain those
employees who are important to the long-term success of the Company, the Board
proposed the adoption, subject to shareholder approval, of an amendment of the
1993 Plan to increase the number of shares of Common Stock authorized for
issuance thereunder by 1,200,000 shares. The Committee and Board of Directors
believe that the approval of this amendment is essential to further the
long-term stability and financial success of the Company by attracting,
motivating and retaining qualified employees through the use of stock
incentives.
SUMMARY OF THE AMENDMENT
The amendment increases the number of shares of Common Stock which may
be issued upon the exercise of options and for the issuance of SARs, restricted
stock awards, or other stock-based awards by 1,200,000 shares, or 6.7% of the
17,836,626 shares of Common Stock outstanding on March 14, 2001. As amended, the
1993 Plan will continue to provide for appropriate adjustments in the number of
shares in the event of a stock dividend, recapitalization, merger or similar
transactions.
A copy of the proposed amendment is attached as Exhibit B to this Proxy
Statement. If approved by shareholders, this amendment will become effective on
May 2, 2001.
SUMMARY OF MATERIAL PROVISIONS OF THE 1993 PLAN
The following is a summary of the material provisions of the 1993 Plan,
as proposed to be amended.
Shares. The 1993 Plan will be amended to authorize an additional
1,200,000 shares of Common Stock, approximately 6.7% of the Common Stock
outstanding as of March 14, 2001. These shares, less the 28,512 shares subject
to options granted subject to shareholder approval of this amendment, provide an
aggregate of 1,171,488 shares or 6.6% of the Common Stock outstanding on March
14, 2001. Shares awarded under the 1993 Plan may consist, in whole or in part,
of authorized and unissued shares. If shares subject to an option under the 1993
Plan cease to be subject to such option, or if shares awarded under the 1993
Plan are forfeited, or otherwise terminate without payment being made to the
participant in the form of Common Stock and without the payment of any dividends
thereon, such shares will again be available for future distribution under the
1993 Plan.
Participation. 1993 Plan awards may be made to employees, including
officers, of the Company, its subsidiaries and affiliates, and to consultants
thereof, but may not be granted to any director who is a member of the Committee
administering the plan or to any other director unless the director is also a
regular employee of the Company, its subsidiaries or affiliates. Participation
is discretionary on the part of the Committee. The approximate number of
officers and employees currently eligible for awards pursuant to the 1993 Plan
is 5,300.
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Administration. The 1993 Plan is administered by a committee of not
less than two disinterested individuals appointed by the Board, which committee
is currently the Compensation Committee of the Board.
Awards Under the Plan. The Committee has the authority to grant the
following type of awards under the 1993 Plan: (1) stock options; (2) SARs; (3)
restricted stock; (4) deferred stock; (5) stock purchase rights; and (6) other
stock-based awards.
1. Stock Options. Incentive stock options ("ISOs") and non-qualified
stock options may be granted for such number of shares as the Committee may
determine and may be granted alone, in conjunction with, or in tandem with,
other awards under the 1993 Plan, and/or cash awards outside the 1993 Plan. ISOs
may be granted only to individuals who are employees of the Company or its
subsidiaries.
A stock option will be exercisable at such times and subject to such
terms and conditions as the Committee will determine and over a term to be
determined by the Committee, which term will not be more than 10 years after the
date of grant (or, in the case of an employee who owns stock possessing more
than 10% of the combined voting power of all classes of stock of the Company or
any of its subsidiaries (a "10% Employee"), five years after the date of grant).
The option price for any ISO will not be less than 100% of the fair market value
of the Company's Common Stock as of the date of grant (or, in the case of a 10%
Employee, not less than 110%). Although the 1993 Plan, as previously approved by
shareholders, permits the Committee to grant non-qualified stock options
exercisable at less than their fair market value on the date of the grant, but
not below 50% of such fair market value, the Committee has not done so to date
and has no present intention of doing so. Payment of the option price (in the
case of an ISO) may be in cash, or, as determined by the Committee, by
unrestricted Common Stock having a fair market value equal to the option price.
For non-qualified stock options, payment, as determined by the Committee, may
also be made in the form of restricted stock or deferred stock.
Upon termination of an option holder's employment for cause, such
employee's stock options will terminate. If employment is involuntarily
terminated without cause, stock options will be exercisable for three months
following termination or until the end of the option period, whichever is
shorter. On the disability or retirement of the employee, stock options will be
exercisable within the lesser of the remainder of the option period or three
years from the date of disability or retirement. Upon death of an employee,
stock options will be exercisable by the deceased employee's representative
within the lesser of the remainder of the option period or one year from the
date of the employee's death. Unless otherwise determined by the Committee, only
options which are exercisable on the date of termination, death, disability, or
retirement may be subsequently exercised.
2. Stock Appreciation Rights. SARs may be granted in conjunction with
all or part of a stock option and will be exercisable only when the underlying
stock option is exercisable. Once an SAR has been exercised, the related portion
of the stock underlying the SAR will terminate.
Upon the exercise of an SAR, the Company will pay to the employee, in
cash, Common Stock or a combination thereof (the method of payment to be at the
discretion of the Committee), an amount of money equal to the excess between the
fair market value of the stock on the exercise date and option price, multiplied
by the number of SARs being exercised.
In addition to the foregoing SARs, the Committee may grant limited SARs
which will be exercisable only in the event of a "change in control" or
"potential change in control" (as defined below) of the Company. In awarding
SARs or limited SARs, the Committee may provide that in the event of a change in
control or potential change in control, SARs or limited SARs may be cashed out
on the basis of a "change in control price," as defined in the 1993 Plan.
3. Restricted Stock. Restricted stock may be granted alone, in
conjunction with, or in tandem with, other awards under the 1993 Plan and/or
cash awards outside of the 1993 Plan and may be conditioned upon the attainment
of specific performance goals or such other factors as the Committee may
determine. The provisions attendant to a grant of restricted stock may vary from
participant to participant.
In making an award of restricted stock, the Committee will determine
the periods during which the stock is subject to forfeiture, and may grant such
stock at a purchase price established by it, which may be zero. During the
restriction period, employees may not sell, transfer, pledge or assign their
restricted stock. The certificate evidencing the restricted stock will remain in
the possession of the Company until the restrictions have lapsed.
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Upon the termination of an employee's employment for any reason during
the restriction period, all shares of restricted stock either will vest or be
subject to forfeiture, in accordance with the terms and conditions established
by the Committee at or after grant. During the restriction period, the employee
will have the right to vote the restricted stock and to receive any cash
dividends. At the time of award, the Committee may require the deferral and
reinvestment of any cash dividends in the form of additional shares of
restricted stock. Stock dividends will be treated as additional shares of
restricted stock and will be subject to the same terms and conditions as the
initial grant.
The Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or stock to the recipient of a restricted stock award, subject to such
performance, future service, deferral or other terms and conditions as may be
specified by the Committee.
4. Deferred Stock. Deferred stock may be granted alone, in conjunction
with, or in tandem with other awards under the 1993 Plan and/or cash awards
outside of the 1993 Plan and may be conditioned upon the attainment of specific
performance goals or such other factors as the Committee may determine. The
provisions attendant to a grant of deferred stock may vary from participant to
participant.
During the deferral period as set by the Committee, the employee may
not sell, transfer, pledge or assign the deferred stock award. At the end of the
deferral period, shares of Common Stock equal to the number covered by the award
of deferred stock will be delivered to the employee. Unless otherwise determined
by the Committee at grant, any dividends declared during the deferral period may
be paid to the participant concurrently or deferred and reinvested in additional
deferred stock, as determined by the Committee in its sole discretion. Upon the
termination of a participant's employment for any reason during the deferral
period, the deferred stock will vest or be forfeited in accordance with the
terms and conditions established by the Committee at or after grant. The
Committee may, in its sole discretion, accelerate the vesting of all or a part
of the deferred stock award and/or waive the deferral limitations for all or any
part of an award. A participant may elect to defer receipt of an award for a
specified period, upon approval by the Committee. Subject to exceptions made by
the Committee, such election must be made at least 12 months prior to completion
of the deferral period for such award.
The Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or stock to the recipient of a deferred stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
5. Stock Purchase Rights. The Committee may grant eligible individuals
rights to purchase the Company's Common Stock at (1) the fair market value, (2)
85% of fair market value, (3) book value, or (4) a price between 85% and 100% of
fair market value, all values being as of the date of grant. The Committee may
condition such rights, or their exercise, on such terms and conditions as it
sees fit. The terms of the stock purchase rights awards need not be the same
with respect to each participant.
6. Other Stock Based Awards. The Committee may also grant other types
of awards that are valued in whole or in part, by reference to or otherwise
based on the Company's Common Stock. These awards may be granted alone, in
addition to, or in tandem with, stock options, SARs, restricted stock, deferred
stock, stock purchase rights and/or cash awards outside the 1993 Plan. Such
awards may be made upon terms and conditions as the Committee may, in its
discretion, provide.
Change in Control Provisions. If there is a "change in control" or a
"potential change in control" (as defined below), any SARs and limited SARs
outstanding for at least six months and any stock options which are not then
exercisable will become fully exercisable and vested. Similarly, the
restrictions and deferral limitations applicable to restricted stock, deferred
stock, stock purchase rights and other stock-based awards will lapse and such
shares and awards will be deemed fully vested. Stock options, SARs, limited
SARs, restricted stock, deferred stock, stock purchase rights and other
stock-based awards, will, unless otherwise determined by the Committee in its
sole discretion, be cashed out on the basis of the change in control price
described below.
The change in control price will be the highest price per share paid in
any transaction reported on The Nasdaq Stock Market, or such other exchange or
market that is the principal trading market for the Common Stock, or paid or
offered to be paid in any bona fide transaction relating to a potential or
actual change in control of the Company, at any time during the immediately
preceding 60 day period as defined by the Committee. However, in the case of
ISOs and SARs relating to ISOs, such price shall be based only on transactions
reported for the date on which an optionee exercises such SARs or, where
applicable, the date on which a cash out occurs. A change in control occurs if
(1) any person becomes a beneficial owner directly or indirectly of 35% or more
of the total voting
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stock of the Company (subject to certain exceptions), (2) as a result of, or in
connection with, any cash tender or exchange offer, merger or other business
combination or similar transaction less than a majority of the combined voting
power of the then outstanding securities of the Company are held in the
aggregate by the holders of Company securities entitled to vote generally in the
election of directors immediately prior to such transaction, or (3) during any
period of two consecutive years, individuals which at the beginning of such
period constitute the Board of Directors cease for any reason to constitute at
least a majority thereof unless each director of the Company first elected
during such period was approved by a vote of at least two-thirds of the
directors of the Company then still in office who were directors of the Company
at the beginning of any such period. A potential change in control means (1)
approval by the shareholders of an agreement which, if completed, would
constitute a change in control, or (2) the acquisition by a person of 5% or more
of the total voting stock of the Company and the adoption by the Board of a
resolution that a potential change in control has occurred.
Amendment. The 1993 Plan may be amended by the Board of Directors,
except that the Board may not, without the approval of the Company's
shareholders, (1) increase the number of shares available for distribution, (2)
change the pricing terms applicable for stock options or purchase rights, (3)
change the employees or class of employees eligible to receive awards under the
1993 Plan, or (4) extend the term of the 1993 Plan.
Adjustment. In the case of a stock split, stock dividend,
reclassification, recapitalization, merger, reorganization, or other changes in
the Company's structure affecting the Common Stock, appropriate adjustments will
be made by the Committee, in its sole discretion, in the number of shares
reserved under the 1993 Plan and in the number of shares covered by options and
other awards then outstanding under the 1993 Plan and, where applicable, the
exercise price for awards under the 1993 Plan.
Federal Income Tax Aspects. The following is a brief summary of the
Federal income tax aspects of awards made under the 1993 Plan based upon the
Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
1. Incentive Stock Options. No taxable income is realized by the
participant upon the grant or exercise of an ISO. If Common Stock is issued to a
participant pursuant to the exercise of an ISO, and if no disqualifying
disposition of the shares is made by the participant within two years of the
date of grant or within one year after the transfer of the shares to the
participant, then: (1) upon the sale of the shares, any amount realized in
excess of the option price will be taxed to the participant as a long-term
capital gain, and any loss sustained will be a capital loss, and (2) no
deduction will be allowed to the Company for Federal income tax purposes. The
exercise of an ISO will give rise to an item of tax preference that may result
in an alternative minimum tax liability for the participant unless the
participant makes a disqualifying disposition of the shares received upon
exercise.
If Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of the holding periods described above, then generally:
(1) the participant will realize ordinary income in the year of disposition in
an amount equal to the excess, if any, of the fair market value of the shares at
exercise (or, if less, the amount realized on the disposition of the shares)
over the option price paid for such shares, and (2) the Company will be entitled
to deduct any such recognized amount. Any further gain or loss realized by the
participant will be taxed as short-term or long-term capital gain or loss, as
the case may be, and will not result in any deduction by the Company.
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the participant's
employment, the option will generally be taxed as a non-qualified stock option.
2. Non-Qualified Stock Options. Except as noted below, with respect to
non-qualified stock options: (1) no income is realized by the participant at the
time the option is granted; (2) generally upon exercise of the option, the
participant realizes ordinary income in an amount equal to the difference
between the option price paid for the shares and the fair market value of the
shares on the date of exercise, and the Company will be entitled to a tax
deduction in the same amount; and (3) at disposition, any appreciation (or
depreciation) after the date of exercise is treated either as short-term or
long-term capital gain or loss, depending upon the length of time that the
participant has held the shares. See "Restricted Stock" for tax rules applicable
where the spread value of an option is settled in an award of restricted stock.
3. Stock Appreciation Rights. No income will be realized by a
participant in connection with the grant of an SAR. When the SAR is exercised,
the participant will generally be required to include as taxable ordinary income
in the year of exercise, an amount equal to the amount of cash and the fair
market value of any
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shares received. The Company will be entitled to a deduction at the time and in
the amount included in the participant's income by reason of the exercise. If
the participant receives Common Stock upon exercise of an SAR, the post-exercise
appreciation or depreciation will be treated in the same manner discussed above
under "Non-Qualified Stock Options."
4. Restricted Stock. A participant receiving restricted stock generally
will recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
the consideration paid for the stock. However, a participant may elect, under
Section 83(b) of the Internal Revenue Code within 30 days of the grant of the
stock, to recognize taxable ordinary income on the date of grant equal to the
excess of the fair market value of the shares of restricted stock (determined
without regard to the restrictions) over the purchase price of the restricted
stock. Thereafter, if the shares are forfeited, the participant will be entitled
to a deduction, refund, or loss, for tax purposes only, in an amount equal to
the purchase price of the forfeited shares regardless of whether he made a
Section 83(b) election. With respect to the sale of shares after the forfeiture
period has expired, the holding period to determine whether the participant has
long-term or short-term capital gain or loss generally begins when the
restriction period expires and the tax basis for such shares will generally be
based on the fair market value of such shares on such date. However, if the
participant makes an election under Section 83(b), the holding period will
commence on the date of grant, the tax basis will be equal to the fair market
value of shares on such date (determined without regard to restrictions), and
the Company generally will be entitled to a deduction equal to the amount that
is taxable as ordinary income to the participant in the year that such income is
taxable.
5. Dividends and Dividend Equivalents. Dividends paid on restricted
stock generally will be treated as compensation that is taxable as ordinary
income to the participant, and will be deductible by the Company. If, however,
the participant makes a Section 83(b) election, the dividends will be taxable as
ordinary income to the participant but will not be deductible by the Company.
6. Other Stock-Based Awards. The Federal income tax treatment of other
stock-based awards will depend on the nature of any such award and the
restrictions applicable to such award. Such an award may, depending on the
conditions applicable to the award, be taxable as an option, an award of
restricted stock, or in a manner not described herein.
AWARD GRANTS UNDER THE PLAN
Because awards under the 1993 Plan are at the discretion of the
Committee, the benefits that will be awarded under the 1993 Plan are not
currently determinable. As of March 14, 2001, the market value of a share of
Common Stock based on the closing price for such stock on The Nasdaq Stock
Market on that date was $46.38.
CONCLUSION AND RECOMMENDATION
The Board of Directors believes it is in the best interests of the
Company and its shareholders to adopt the amendment to the 1993 Plan to help
attract and retain key persons of outstanding competence and to further identify
their interests with those of the Company's shareholders generally.
The amendment to the 1993 Plan will be approved if the votes cast in
favor of the amendment exceed the votes cast against it. The Board of Directors
recommends a vote FOR approval of the amendment to the 1993 Employee Stock
Incentive Plan.
PROPOSAL 3: AMENDMENT OF THE
PERFORMANCE FOOD GROUP COMPANY
EMPLOYEE STOCK PURCHASE PLAN
The Stock Purchase Plan was adopted by the Company's shareholders on
April 19, 1994. The Stock Purchase Plan initially authorized 100,000 shares of
Common Stock for issuance and authorized an additional 75,000 shares in May
1996, which number of shares was subsequently increased to 262,500 as a result
of a stock split in the form of a stock dividend paid on July 15, 1996. In April
1998, an additional 100,000 shares were authorized for issuance. The Stock
Purchase Plan Administrator, which is a committee consisting of one or more
persons chosen by the Board of Directors, has reviewed the Stock Purchase Plan
and has concluded that there are insufficient shares of Common Stock available
for issuance under the Stock Purchase Plan to meet the demands of the Company's
employees choosing to participate in the Stock Purchase Plan by directing a
portion of their income
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into equity interests of the Company. The Board of Directors believes the
amendment to the Stock Purchase Plan is necessary as it believes that
broad-based ownership of equity interests in the Company by its employees
provides a substantial motivation for superior performance by more closely
aligning the economic interests of those employees with the overall performance
of the Company.
In order for the Company to provide its employees with the ability to
continue to invest in the Company through the Stock Purchase Plan, the Board of
Directors proposed the adoption, subject to shareholder approval, of an
amendment to the Stock Purchase Plan to increase the number of shares available
for purchase to 612,500. The Board of Directors believes that the approval of
the amendment is essential to further the long-term stability and financial
success of the Company by attracting, motivating and retaining qualified
employees whose interests are aligned with those of other shareholders of the
Company.
SUMMARY OF THE AMENDMENT
The amendment increases the number of shares of Common Stock which may
be issued upon the exercise of options by 250,000 shares or 1.4% of the
17,836,626 shares of Common Stock outstanding on March 14, 2001. These shares,
less 74,634 shares subject to options granted subject to shareholder approval of
this amendment, will provide an aggregate of 175,366 shares available for
issuance.
A copy of the proposed amendment is included as Exhibit C hereto. If
approved by the shareholders, the amendment will become effective as of May 2,
2001.
SUMMARY OF MATERIAL PROVISIONS OF THE STOCK PURCHASE PLAN
The following is a summary of the material provisions of the Stock
Purchase Plan, as proposed to be amended.
Participation; Awards Under the Stock Purchase Plan. Pursuant to the
Stock Purchase Plan, all employees of the Company and its subsidiaries and
affiliates (including executive officers of the Company) who have been employed
by the Company for at least six months as of any January 1 or July 1 may elect
to deduct from their compensation not less than $130.00 and up to 25% of their
Base Pay (as defined in the Stock Purchase Plan) for each six-month option
period. The dollar amount deducted is credited to the participant's Contribution
Account (as defined in the Stock Purchase Plan). In addition, a participant is
permitted to make two lump sum contributions during each option period, as long
as the aggregate amount of salary deductions do not exceed 25% of the
participant's compensation. On the Exercise Date (the last trading day of each
option period), the amount deducted from each participant's salary and any
additional amounts contributed on a lump-sum basis over the course of the period
will be used to purchase shares of Common Stock at a purchase price (the
"Exercise Price") equal to the lesser of (a) 85% of the closing market price of
the shares of Common Stock on the Exercise Date or (b) 85% of the average of the
closing market price of the shares of Common Stock on the Grant Date (the first
trading date of each six-month period) and the closing market price of the
Common Stock on the Exercise Date for such period. On an Exercise Date, all
options shall be automatically exercised, except for persons whose employment
has terminated or who have withdrawn all contributions.
Options granted under the Stock Purchase Plan are subject to the
following limitations: (i) subject to certain adjustments, the maximum number of
shares of Common Stock which may be purchased by a participant on an Exercise
Date is 1,125 shares; (ii) no participant is allowed to purchase, during a
calendar year, stock under the Stock Purchase Plan having a market value in
excess of $25,000, as determined on the Grant Date; (iii) no option may be
granted to a participant who would own 5% or more of the Common Stock of the
Company; and (iv) no participant may assign, transfer or otherwise alienate any
options granted to him, except by will or the laws of descent and distribution,
and such options must be exercised during the participant's lifetime only by
him.
The Company and its subsidiaries have approximately 5,300 employees who
are currently eligible to participate in the Stock Purchase Plan. Directors of
the Company who are not also employees of the Company and holders of 5% or more
of the outstanding shares of Common Stock are not eligible to participate in the
Stock Purchase Plan.
Administration. The Stock Purchase Plan is administered by a Stock
Purchase Plan Administrator, which Stock Purchase Plan Administrator is
currently the Compensation Committee of the Board of Directors. The Stock
Purchase Plan Administrator does not, however, have the discretion to deny the
right to participate in the Stock Purchase Plan to any employee who meets the
eligibility criteria.
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Upon termination of a participant's employment, the employee shall
cease being a participant under the Stock Purchase Plan, and the balance of the
employee's Contribution Account shall be paid to the participant as soon as
practical after termination. An option granted to such a participant shall be
null and void from the date of termination. Upon the death, retirement or
disability of a participant, the participant, or his legal representative, may
withdraw the balance in his Contribution Account or may have the accumulated
balance used to purchase stock under the Stock Purchase Plan. Any remaining
money which is insufficient to purchase a whole share is returned to the
participant or his legal representative.
Adjustments. In the case of a stock split, stock dividend,
reclassification, recapitalization, merger, reorganization, or other change in
the Company's structure affecting the Common Stock, appropriate adjustments will
be made by the Stock Purchase Plan Administrator in the number of shares
reserved for issuance under the Stock Purchase Plan and the calculation of the
Exercise Price.
Amendment. Without the approval of the shareholders of the Company, the
Stock Purchase Plan may not be amended to: (i) increase the number of shares
reserved under the Stock Purchase Plan (except pursuant to certain changes in
the capital structure of the Company), (ii) materially increase the benefits
accruing to an insider subject to Section 16(a) of the Securities Exchange Act
of 1934, as amended ("Statutory Insiders"), (iii) change the method of
determining the purchase price of the shares such that the exercise price is
reduced for Statutory Insiders or (iv) make participation in the Stock Purchase
Plan available to any person who is not an employee as defined in the Stock
Purchase Plan.
If the amendment to the Stock Purchase Plan is approved, the Stock
Purchase Plan will have 612,500 shares of Common Stock authorized for issuance
under the Stock Purchase Plan.
Federal Income Tax Aspects. The following is a brief summary of the
Federal income tax aspects of awards made under the Stock Purchase Plan based
upon the Federal income tax laws in effect on the date hereof. This summary is
not intended to be exhaustive and does not describe state or local tax
consequences.
A holder will not recognize income for Federal tax purposes on account
of the initial discount when shares are purchased. Instead, income may be
recognized when a holder disposes of his stock.
If shares of stock are disposed of before a statutory holding period is
met, income is recognized in an amount equal to the difference between the price
paid for the shares and the market value of the shares on the date such shares
were purchased. If shares are disposed of after meeting the holding period
requirement, the holder receives ordinary taxable income in the calendar year of
disposition equal to the lesser of (i) the original 15% discount on the shares
assuming the stock had been purchased on the Grant Date or (ii) the excess of
the fair market value of such shares of Common Stock on the day of disposition
over the price paid for such shares. In either case, (i) if a holder's
disposition is by gift, such holder will have no further income tax consequences
and (ii) in the case of a sale of such shares, the difference between the net
proceeds on the date of disposition and the holder's tax basis in such shares
(including ordinary income recognized in the disposition) will be taxable as
capital gain or loss.
If an employee leaves contributions in the Stock Purchase Plan to
purchase Common Stock after he or she retires, the tax consequences depend on
whether the termination date is within three months of the Exercise Date. If the
termination date is not more than three months prior to the Exercise Date, the
tax consequences are as described above. However, if the termination date is
more than three months prior to the Exercise Date, the holder is treated as
exercising a non-qualified option and is taxed on the Exercise Date on the
excess of market value of the stock on that date over the price paid.
CONCLUSION AND RECOMMENDATION
The Board of Directors believes it is in the best interests of the
Company and its shareholders to adopt the amendment to the Stock Purchase Plan
to help attract and retain key persons of outstanding competence and to further
identify their interests with those of the Company's shareholders generally.
The amendment to the Stock Purchase Plan will be approved if the votes
cast in favor of the amendment exceed the votes cast against it. The Board of
Directors recommends that you vote FOR the approval of the amendment to the
Employee Stock Purchase Plan.
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PROPOSAL 4: AMENDMENT TO
RESTATED CHARTER TO INCREASE
AUTHORIZED SHARES OF COMMON STOCK
On February 14, 2001, the Board of Directors unanimously approved and
directed that the shareholders consider an amendment to Section 5 of the
Company's Restated Charter (the "Charter"). The amendment to Section 5 would
increase the number of authorized shares of Common Stock from 50,000,000 to
100,000,000. If this proposal is approved by the shareholders at the Annual
Meeting, the amendment to Section 5 will become effective upon the filing of
Articles of Amendment with the Secretary of State of Tennessee, which filing is
expected to take place shortly after the Annual Meeting. The Board of Directors
believes that it is in the best interests of the Company and all of its
shareholders to amend the Charter.
Except as set forth below, the relative rights of the holders of Common
Stock under the Charter would remain unchanged. The first paragraph of Section 5
of the Charter, as amended by the proposed amendment, is set forth below. The
remainder of Section 5 will remain unchanged.
"5. The Corporation is authorized to issue two classes of
stock in the following number of shares: (i) 100,000,000 shares of
common stock, $.01 par value per share (the "Common Stock"), and (ii)
5,000,000 shares of preferred stock, $.01 par value per share (the
"Preferred Stock")."
As of March 14, 2001, there were 17,836,626 shares of Common Stock
issued and outstanding, 1,436,491 shares subject to options awarded under the
1993 Plan, 74,750 shares subject to options awarded under the Outside Directors'
Plan and 92,621 shares subject to options awarded under the 1989 Plan. Since
July 1997, the Company has issued 2,452,275 shares of Common Stock in connection
with acquisitions. Furthermore, in July 1996, the Board of Directors declared a
three-for-two stock split effected in the form of a 50% stock dividend.
The Board of Directors considers the proposed increase in the number of
authorized shares of Common Stock desirable because it would give the Company
the necessary flexibility to issue Common Stock in connection with additional
stock dividends and splits, acquisitions, equity financings, employee
compensation and benefit plans, and for other general corporate purposes.
Future issuances of Common Stock would be at the discretion of the
Board of Directors without the expense and delay incidental to obtaining
shareholder approval, except as may be required by applicable law or by the
rules of any stock exchange or market on which the Company's securities may then
be listed or authorized for quotation. For example, The Nasdaq Stock Market, on
which the Common Stock is authorized for quotation, currently requires
shareholder approval as a prerequisite to listing shares in several instances,
including in connection with acquisitions where the present or potential
issuance of shares could result in an increase in the number of shares of Common
Stock outstanding by 20% or more.
Holders of Common Stock have no preemptive rights to subscribe to any
additional securities of any class that the Company may issue. The amendment to
the Charter is not being proposed in response to any effort known by management
to acquire control of the Company.
The amendment to the Charter will be approved if the votes cast in
favor of the proposal exceed the votes cast against it. The Board of Directors
recommends a vote FOR approval of the amendment to the Restated Charter.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Company's Common Stock, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than 10% shareholders
are required by SEC regulations 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,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with during the year ended December 30, 2000, with the exception
of Mr. Gray's June Form 4 (reporting nine transactions) and Mr. Ryan's June Form
4 (reporting three transactions), each of which was filed three days late.
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CERTAIN TRANSACTIONS
On July 27, 1998, the Company purchased all of the assets used in the
operation of Virginia Food Service Group, the foodservice division of Taylor &
Sledd, Inc. ("Taylor & Sledd"). Robert C. Sledd, Chairman and Chief Executive
Officer of the Company, and certain members of his family are shareholders of
Taylor & Sledd. The purchase price for the assets was $3,652,158, plus
$4,453,303 paid in March 1999 pursuant to the terms of an earnout agreement. The
purchase price was determined by arm's-length negotiations between the parties.
Mr. Sledd's interest in the transaction, including the earnout payment, was
valued at $1,385,223. Mr. Sledd's parents' and siblings' interest in the
transaction, including the earnout payment, was valued at an additional
$5,719,213. In addition, in connection with the acquisition, Taylor & Sledd
entered into a lease with Virginia Foodservice Group, Inc., a subsidiary of the
Company, which provided for payments to Taylor & Sledd annually through June
2013. Virginia Foodservice Group, Inc. made lease payments to Taylor & Sledd in
the aggregate amount of approximately $571,000 during fiscal 2000. In January
2001, the unaffiliated owner trust under the Company's synthetic lease facility
acquired the property from Taylor & Sledd, and the Company now leases that
property from the owner trust.
In 1988, Pocahontas leased certain land and buildings from Taylor &
Sledd. The lease provides for monthly payments of approximately $54,000 and
expires on July 31, 2004, subject to certain renewal options on the same terms
for successive one year periods. Pocahontas made lease payments in the aggregate
amount of approximately $663,000 during fiscal 2000.
On February 26, 1999, pursuant to an Agreement and Plan of Merger dated
February 2, 1999 (the "Merger Agreement"), the Company effected a business
combination with NorthCenter Foodservice Corporation ("NorthCenter") through the
merger of NorthCenter with a wholly-owned subsidiary of the Company (the
"Merger"). As consideration for the Merger, H. Allen Ryan received 850,176
shares, or approximately 6.8%, of the Company's then outstanding Common Stock.
If and when Mr. Ryan sells any shares of the Company's Common Stock, he has
agreed to do so in accordance with Rule 145 of the Securities Act of 1933, as
amended, and in accordance with the rules and regulations governing
poolings-of-interest transactions.
The Board of Directors of the Company has adopted a policy which
provides that any transaction between the Company and any of its directors,
officers, or principal shareholders or affiliates thereof must be on terms no
less favorable to the Company than could be obtained from unaffiliated parties
and must be approved by vote of a majority of the disinterested directors of the
Company. Management believes that past transactions have complied with this
policy.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected KPMG LLP to serve as
independent auditors for the current fiscal year. Such firm has served as the
Company's independent auditors since 1987. Representatives of KPMG LLP are
expected to be present at the Annual Meeting and will be given the opportunity
to make a statement if they desire to do so and to respond to appropriate
questions.
PROPOSALS OF SHAREHOLDERS
Shareholders intending to submit proposals should send such proposals
in writing, by certified mail, return receipt requested, to John D. Austin,
Secretary, Performance Food Group Company, 6800 Paragon Place, Suite 500,
Richmond, Virginia 23230. To be included in the proxy statement and form of
proxy relating to the Company's 2002 Annual Meeting of Shareholders or to be
presented at the Company's 2002 Annual Meeting of Shareholders, proposals must
be received by the Company prior to December 10, 2001.
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EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:
- - Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
- - Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- - Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent nonexecutive directors, free
from any relationship that would interfere with the exercise of his or her
independent judgment. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the Committee shall
have accounting or related financial management expertise.
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or approve an
agenda in advance of each meeting. The Committee shall meet privately in
executive session at least annually with management; the director of the
internal auditing department, the independent auditors and as a committee to
discuss any matters that the Committee or each of these groups believes should
be discussed. In addition, the Committee shall communicate with management and
the independent auditors' quarterly to review the Company's financial statements
and significant findings based upon the auditors limited review procedures.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Document/Reports Review Procedures
1. The Audit Committee shall assess the adequacy of this Charter at least
annually. Submit the charter to the Board of Directors for approval and
have the document published at least every three years in accordance
with SEC regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices and judgments.
3. In consultation with the management, the independent auditors and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control and
report such exposures. Review significant findings prepared by the
independent auditors and the internal auditing department together with
management's responses.
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4. Review with financial management and the independent auditors the
company's quarterly financial results prior to the release of earnings
and/or the company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9). The Chair
of the Committee may represent the entire Audit Committee for purposes
of this review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence, and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors audit plan including scope, staffing,
locations, reliance upon management and internal audit and general
audit approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to audit committees in accordance with AICPA SAS 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
Internal Audit Department and Legal Compliance
11. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal audit department, as
needed.
12. Review the appointment, performance and replacement of the senior
internal audit executive.
13. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, inquiries received from regulators or
governmental agencies.
Other Audit Committee Responsibilities
15. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's
annual proxy statement.
16. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
17. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
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EXHIBIT B
THIRD AMENDMENT TO PERFORMANCE FOOD GROUP COMPANY
1993 EMPLOYEE STOCK INCENTIVE PLAN
Section 3 of the Performance Food Group Company 1993 Employee Stock
Incentive Plan is hereby amended, effective May 2, 2001, subject to the approval
of the Performance Food Group Company shareholders at the 2001 Annual Meeting of
Shareholders, as follows:
1. By deleting the first sentence in its entirely and
substituting therefor the following:
"The aggregate number of shares of Stock reserved and
available for distribution under the Plan shall be increased by
1,200,000 shares to 2,825,000 shares."
Upon the occurrence of any action which would require an
adjustment in the number of shares under the third paragraph of Section
3 of the 1993 Employee Stock Incentive Plan between the date of
approval of this amendment by the Board of Directors of the Company and
the date of approval of this amendment by the Company's shareholders,
then the 1,200,000 share increase in the shares authorized shall be
adjusted in the same manner as provided in the third paragraph of
Section 3.
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EXHIBIT C
AMENDMENT TO PERFORMANCE FOOD GROUP COMPANY EMPLOYEE STOCK PURCHASE PLAN
Section 6.1 of the Performance Food Group Company Employee Stock
Purchase Plan is hereby amended, effective May 2, 2001, subject to the approval
of the Performance Food Group Company shareholders at the 2001 Annual Meeting of
Shareholders, as follows:
1. By deleting the first sentence in its entirety and
substituting therefor the following:
"PFG shall have reserved an additional two hundred fifty
thousand (250,000) shares of Stock, for a total of six hundred twelve
thousand five hundred (612,500) shares of Stock for issuance upon
exercise of the options granted under this Plan."
Upon the occurrence of any action which would require an
adjustment in the number of shares under Section 10.3 of the Employee
Stock Purchase Plan between the date of approval of this amendment by
the Board of Directors of the Company and the date of approval of this
amendment by the Company's shareholders, then the 250,000 share
increase in the authorized shares shall be adjusted in the same manner
as provided in Section 10.3.
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PERFORMANCE FOOD GROUP COMPANY
ANNUAL MEETING OF SHAREHOLDERS
MAY 2, 2001
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AT 10:00 A.M. (EDT) ON MAY 2, 2001 AND
ANY ADJOURNMENT(S) THEREOF. The undersigned hereby appoints John D. Austin and
Roger L. Boeve, or either of them, with full power of substitution, as
attorneys, and hereby authorizes them to represent and to vote in the name of
and as proxy for the undersigned, as designated, all of the shares of common
stock of Performance Food Group Company held of record by the undersigned on
March 14, 2001.
1. ELECTION OF TWO CLASS II DIRECTORS TO SERVE UNTIL THE 2004 ANNUAL MEETING OF
SHAREHOLDERS AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
[ ] FOR all nominees listed below (except as marked to the contrary below).
Robert C. Sledd Fred C. Goad, Jr.
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below:
------------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. AMENDMENT OF THE 1993 EMPLOYEE STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. AMENDMENT OF THE EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. AMENDMENT OF THE RESTATED CHARTER.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before this meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES REFERRED TO IN PROPOSAL
1, FOR THE AMENDMENT TO THE 1993 EMPLOYEE STOCK INCENTIVE PLAN, FOR THE
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN AND FOR THE AMENDMENT TO THE
RESTATED CHARTER.
The undersigned revokes any prior proxies to vote the shares covered by this
proxy.
Dated: , 2001
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--------------------------------
Signature
--------------------------------
Signature if Held Jointly
Please sign exactly as name
appears on your share
certificates. Each joint owner
must sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name as authorized. If a
partnership or limited liability
company, please sign in such
organization's name by an
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED REPLY
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.