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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
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[LOGO]
6800 PARAGON PLACE, SUITE 500
RICHMOND, VIRGINIA 23230
(804) 285-7340
Dear Shareholder:
It is my 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 5, 1999, at
the Pocahontas Foods, USA, Inc. offices, located at 7420 Ranco Road, Richmond,
Virginia.
Shareholders will be asked to elect two directors and to consider and
act on a proposal to amend the Company's 1993 Employee Stock Incentive Plan. In
addition, we will present a 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.
I look forward to seeing you on May 5, 1999.
Sincerely,
/s/ Robert C. Sledd
------------------------------------
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 5, 1999, at the
Pocahontas Foods, USA, Inc. offices, located at 7420 Ranco Road, Richmond,
Virginia for the following purposes:
1. To elect two (2) Class III 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 to increase the number of shares
reserved for issuance thereunder; and
3. 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 15,
1999 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
/s/ DAVID W. SOBER
---------------------------------------
DAVID W. SOBER, Secretary
Richmond, Virginia
April 2, 1999
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
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PROXY STATEMENT
--------------------
The accompanying proxy is solicited by the Board of Directors of
Performance Food Group Company (the "Company") for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on May 5, 1999,
and any adjournments thereof, notice of which is attached hereto.
The purposes of the Annual Meeting are to elect two Class III
directors; to consider and act upon a proposal to amend the Company's 1993
Employee Stock Incentive Plan (the "1993 Plan") to increase the number of shares
issuable thereunder; 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 and FOR approval of the amendment to the 1993 Plan.
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 15,
1999 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 13,504,869 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. Because the amendment to the 1993 Plan will be approved if the number
of votes cast for it exceed the votes cast against it, abstentions are not
considered in that vote. 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 2, 1999 to all shareholders
of record at the close of business on March 15, 1999. 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 15, 1999 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 BENEFICIAL OWNER OWNERSHIP OF CLASS(1)
------------------- ---------- -----------
Performance Food Group Employee Savings and Stock Ownership Trust.............. 1,384,955(2) 10.3%
6800 Paragon Place, Suite 500
Richmond, Virginia 23230
J. & W. Seligman & Co. Incorporated............................................ 876,037(3) 6.5%
William C. Morris
100 Park Avenue
New York, New York 10017
H. Allen Ryan.................................................................. 850,191(4) 6.3%
Dalton Road
Augusta, Maine 04338
- -----------------
(1) Computed in accordance with Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934.
(2) 937,085 shares held by the Performance Food Group Employee Savings and
Stock Ownership Plan (the "ESOP") have been allocated to an aggregate
of approximately 2,300 participants of the Company who exercise voting
power over such shares. The remaining 447,870 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.
(3) Based solely on information contained in a Schedule 13G filed by J. &
W. Seligman & Co. Incorporated ("JWS") and William C. Morris with the
Securities and Exchange Commission (the "SEC") on February 9, 1999.
William C. Morris is the owner of a majority of the outstanding voting
securities of JWS and may be deemed to beneficially own the shares
reported to be owned by JWS.
(4) Based solely on information contained in a Schedule 13D filed by Mr.
Ryan with the SEC on March 3, 1999.
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 the two Class III directors, C. Michael Gray and John E.
Stokely, will expire upon the election and qualification of new directors at
this Annual Meeting. The terms of each of the two Class I directors and each of
the two Class II directors will expire at the annual meeting in 2000 and 2001,
respectively. The Board of Directors has designated C. Michael Gray and John E.
Stokely as the two nominees for reelection as Class III directors for a
three-year term expiring at the annual meeting in 2002 and until their
successors are elected and qualified. Both of the 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 III 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 15, 1999, certain information
concerning the executive officers and directors of the Company, including the
nominees, which information has been furnished to the Company by the individuals
named.
SHARES
COMMON
STOCK
DIRECTOR TERM BENEFICIALLY PERCENT
NAME AGE SINCE EXPIRES POSITION OWNED(1) OF CLASS
---- --- -------- ------- -------- ------------ --------
Robert C. Sledd....... 46 1987 2001 Chairman, Chief Executive 350,547 (2) 2.6%
Officer and Director
C. Michael Gray....... 49 1992 1999 President, Chief Operating 149,068 1.1%
Officer and Director
Roger L. Boeve........ 60 -- -- Executive Vice President and 114,837 (3) *
Chief Financial Officer
Thomas Hoffman........ 59 -- -- Senior Vice President 56,163 *
David W. Sober........ 66 -- -- Vice President of Human 24,572 (3) *
Resources and Secretary
Charles E. Adair...... 51 1993 2000 Director 25,250 *
Fred C. Goad, Jr...... 58 1993 2001 Director 26,750 *
Timothy M. Graven..... 47 1993 2000 Director 22,250 *
John E. Stokely....... 46 1998 1999 Director 7,250 *
All directors and
executive officers as
a group (9 persons)... 776,687 5.6%
- --------------------
* 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 15, 1999 and within 60 days of such date upon the exercise
of options: Mr. Sledd - 121,500; Mr. Gray - 91,125; Mr. Boeve -
92,438; Mr. Hoffman - 24,186; Mr. Sober - 18,638; Mr. Adair -
14,750; Mr. Goad - 14,750; Mr. Graven - 14,750; Mr. Stokely -
5,250; all directors and executive officers as a group (9 persons)
- 397,387 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 2,250 shares held by Mr.
Sledd's wife for which Mr. Sledd disclaims beneficial ownership.
(3) Excludes unallocated shares held by the ESOP. Mr. Boeve and Mr.
Sober are trustees of the ESOP and are members of the Plan
Committee which directs the voting of such shares.
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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. In addition, Mr. Sledd serves as a director of Eskimo Pie
Corporation.
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 the 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. Mr. Hoffman has also served as President of Kenneth O. Lester
Company, a wholly-owned subsidiary of the Company, since 1989. Prior to joining
the Company in 1989, Mr. Hoffman had 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.
David W. Sober has served as Vice President of Human Resources since
1987 and as Secretary of the Company since March 1991. Mr. Sober served as Vice
President for Purchasing of the Company from March 1991 to July 1994. Mr. Sober
held various positions in other companies in the wholesale and retail food
industries, including approximately 30 years with the A&P grocery store chain.
Charles E. Adair has served as a director of the Company since August
1993. Mr. Adair is a partner in Cordova Ventures, a venture capital management
company. Mr. Adair is also the Chairman and founder of Adair & Associates, Inc.,
a consulting and private investment firm founded in 1993. Mr. Adair was employed
by Durr-Fillauer Medical, Inc., a distributor of pharmaceuticals and other
medical products, from 1973 to 1992, serving as 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 June 1996, Mr. Goad has served as Co-Chief Executive Officer and a
director of ENVOY Corporation ("ENVOY"), a provider of electronic transaction
processing services for the health care industry. From June 1996 through March
1999, Mr. Goad served as Chairman of ENVOY. 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 Oacis Healthcare Systems, Inc., a clinical
health care software and services company.
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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 also serves as a
director of In-House Rehab Corporation, a provider of physical, speech and
occupational therapy services to nursing homes and other long-term care
providers.
John E. Stokely has served as a director of the Company since April
1998. Mr. Stokely is the President, Chief Executive Officer and Chairman of the
Board of Directors of Richfood Holdings, Inc., a wholesale grocery distributor
("Richfood"). Mr. Stokely has held his current position with Richfood since
January 1997, served as President and Chief Operating Officer from April 1995 to
January 1997 and served as Executive Vice President from 1990 to April 1995.
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
examination, acting as a liaison between the Board and the auditors and
reviewing various Company policies, including those related to accounting and
internal control matters. Messrs. Goad, Graven, Adair and Stokely comprise the
Audit Committee, which met two times during the fiscal year ended January 2,
1999.
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 January 2, 1999.
The Board of Directors held nine meetings, five of which were via
teleconference, during the fiscal year ended January 2, 1999. 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 fiscal 1998. 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 January 2, 1999 (fiscal 1998),
December 27, 1997 (fiscal 1997), and December 28, 1996 (fiscal 1996) 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 $100,000
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- -------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#)(1) ($)
------------------ ------ ------- ------- ------------- ------------- ------------
Robert C. Sledd 1998 $275,396 $150,334 -- 50,600 $ 9,817(4)
Chairman and Chief Executive 1997 269,807 164,864 -- -- 8,603(4)
Officer 1996 242,466 111,139 -- 13,501 7,174(4)
C. Michael Gray 1998 225,576 73,381 -- 37,100 9,764(4)
President and Chief Operating 1997 217,858 126,237 -- -- 8,636(4)
Officer 1996 201,509 100,709 $35,724(2) 18,751 7,174(4)
Roger L. Boeve 1998 193,262 50,581 -- 21,900 9,753(4)
Executive Vice President and Chief 1997 189,333 71,374 -- -- 8,652(4)
Financial Officer 1996 173,741 49,705 39,968(3) 14,251 7,174(4)
Thomas Hoffman 1998 190,535 149,467 -- 16,870 9,664(4)
Senior Vice President 1997 185,244 19,530 -- -- 7,784(4)
1996 172,877 59,431 -- 16,501 7,174(4)
David W. Sober 1998 127,825 34,476 -- 8,000 9,155(4)
Vice President of Human Resources 1997 125,159 38,319 -- -- 8,481(4)
and Secretary 1996 113,568 28,785 -- 4,200 6,931(4)
- -------------------------
(1) Number of stock options granted under the 1993 Plan.
(2) Includes $28,049 for moving expenses in connection with Mr. Gray's temporary
relocation to the Company's facility in Atlanta, Georgia.
(3) Includes $32,122 for moving expenses in connection with the Company's
relocation of its headquarters to Richmond, Virginia.
(4) Includes allocations by the Company to each Named Executive Officer's ESOP
account for fiscal 1998 of $7,264, for fiscal 1997 of $6,359 and for fiscal
1996 of $7,174 except for Mr. Sober whose allocation was $6,931. Allocations
to the ESOP accounts are based on the closing price of the Common Stock on
The Nasdaq Stock Market of $28.13 per share at December 31, 1998 for fiscal
1998, $21.00 per share at December 26, 1997 for fiscal 1997 and $15.25 per
share at December 27, 1996 for fiscal 1996. Also includes contributions by
the Company to each Named Executive Officer's 401(k) account in fiscal 1998
as follows: Mr. Sledd - $2,553; Mr. Gray - $2,500; Mr. Boeve - $2,489; Mr.
Hoffman - $2,400; and Mr. Sober - $1,891; and in fiscal 1997 as follows: Mr.
Sledd - $2,244; Mr. Gray - $2,277; Mr. Boeve - $2,293; Mr. Hoffman - $1,425;
and Mr. Sober - $2,122.
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The following table summarizes certain information regarding stock options
issued to the Named Executive Officers during fiscal 1998. No stock appreciation
rights ("SARs") have been granted by the Company.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL PRESENT REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION ---------------------------
NAME (#)(1) 1998 ($/SHARE) DATE 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ------------ ----------
Robert C. Sledd 50,600 12.5% $18.50 2/11/09 $588,708 $1,491,902
C. Michael Gray 37,100 9.2% 18.50 2/11/09 431,642 1,093,865
Roger L. Boeve 21,900 5.4% 18.50 2/11/09 254,797 645,705
Thomas Hoffman 16,870 4.2% 18.50 2/11/09 196,275 497,399
David W. Sober 8,000 2.0% 18.50 2/11/09 93,076 235,874
- ------------
(1) All options granted to the Named Executive Officers were granted on
February 11, 1998 pursuant to the 1993 Plan. The options become 100%
exercisable on February 11, 2002. If any of certain events which generally
constitute a change in control of the Company occur, the options would
become immediately exercisable. The options were granted at an exercise
price determined by the closing price of the Common Stock on The Nasdaq
Stock Market on the date of grant.
The Company has no long-term incentive plans, as that term is defined in
regulations promulgated by the SEC. Also, the Company presently has no defined
benefit or actuarial plans covering any employees of the Company. During the
fiscal year ended January 2, 1999, the Company did not adjust or amend the
exercise price of stock options awarded to the Named Executive Officers, whether
through amendment, cancellation or replacement grants, or other means.
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The following table sets forth certain information with respect to stock
options issued to the Named Executive Officers pursuant to the 1993 Plan and the
1989 Nonqualified Stock Option Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL 1998 YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON REALIZED OPTIONS HELD AT OPTIONS AT
EXERCISE (#) ($) JANUARY 2, 1999 (#) JANUARY 2, 1999($) (1)
------------ -------- ----------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--- ----------- ------------- ----------- -------------
Robert C. Sledd None None 118,688 66,913 $2,749,301 $722,278
C. Michael Gray None None 88,313 58,663 2,046,783 663,831
Roger L. Boeve None None 90,563 38,026 2,103,412 439,132
Thomas Hoffman 2,813 $41,632 23,436 34,871 518,232 414,562
David W. Sober None None 17,138 13,700 393,308 161,481
- --------------------
(1) Based on the closing price of the Company's Common Stock on The Nasdaq
Stock Market at December 31, 1998 of $28.13 per share.
DIRECTOR COMPENSATION
Non-employee directors receive an annual retainer of $3,000 and a fee
of $1,000 for each Board meeting attended, $500 for each committee meeting
attended on a day on which there is no regularly scheduled Board meeting, $500
for each meeting attended by telephone and are reimbursed for expenses
reasonably incurred in connection with their services as a director. 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 1998 was $35,500.
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 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 January 2,
1999, there were four 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 and 12,750
shares at an exercise price of $20.13 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 1998, 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 1998 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 1998 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 were based is to provide
incentive to the Company's officers to enhance the profitability of the Company
and align closely the financial interests of the Company's officers with those
of its shareholders. In order to implement this philosophy for fiscal 1998, the
Compensation Committee reviewed the various elements of executive compensation,
including salaries, incentive compensation awards and stock option awards under
the 1993 Plan. In 1995, the Compensation Committee retained William M. Mercer,
Incorporated ("Mercer"), a nationally known consulting firm, to determine for
the Compensation Committee the Company's practices relative to a comparable
group of companies of similar size. The Mercer analysis and the recommendation
of the Company's Chairman, Robert C. Sledd, have been used by the Compensation
Committee to establish compensation levels for members of senior management.
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The Compensation Committee set annual salaries for the Named Executive
Officers somewhat below competitive levels so that the Company relies to a
significant degree on annual cash bonuses and long-term stock based incentive
compensation to attract and retain senior management of outstanding abilities
and to motivate them to perform to the full extent of their abilities. 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 on Economic Value Added ("EVA"). 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. Based on the foregoing, the Company's Chairman and Chief
Executive Officer, Robert C. Sledd, was paid a base salary in fiscal 1998 of
approximately $275,000 and earned bonuses under the cash bonus program totaling
approximately $150,000.
The long-term incentive program for senior management consists of stock
option and other stock-based awards granted under the 1993 Plan. The
Compensation Committee has established a pattern of granting stock option awards
on a bi-annual basis but currently intends to grant options to senior management
annually beginning in fiscal year 1999. During the first quarter of 1998, the
Compensation Committee approved the grant of an aggregate of 134,470 stock
options under the 1993 Plan to the Named Executive Officers, including 50,600 to
Mr. Sledd. 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.
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.
Fred C. Goad, Jr. Timothy M. Graven Charles E. Adair John E. Stokely
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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 500 Index and the S&P Distributors (Consumer
Products) Index between December 31, 1993 and December 31, 1998. The graph
assumes the value of the investment in the Company's Common Stock and each index
was $100 at December 31, 1993 and that all dividends, if any, were reinvested.
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Performance Food Group Company $100 $ 51 $ 97 $ 95 $145 $172
S&P 500 Index $100 $101 $139 $171 $229 $294
S&P Distributors (Food and Health) $100 $105 $132 $130 $183 $251
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PROPOSAL NO. 2: AMENDMENT OF
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. At March
15, 1999, there were 195,815 shares of Common Stock available for issuance under
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 500,000 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 or for issuance of SARs, restricted stock
awards, or other stock-based awards by 500,000 shares, or 3.7% of the 13,504,869
shares of Common Stock outstanding on March 15, 1999. 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 A to this Proxy
Statement. If approved by shareholders, the amendment will become effective as
of May 5, 1999.
SUMMARY OF MATERIAL PROVISIONS OF THE 1993 PLAN
This 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
500,000 shares of Common Stock, approximately 3.7% of the Common Stock
outstanding as of March 15, 1999. These shares, in addition to the 195,815
shares currently authorized for issuance under the 1993 Plan provide an
aggregate of 695,815 shares or 5.2% of the Common Stock outstanding as of March
15, 1999. 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 3,500.
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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.
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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 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.
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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 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 15, 1999, 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 $26.56.
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. Abstentions and broker
non-votes will not be considered in the vote. The Board of Directors recommends
a vote FOR approval of the amendment to the 1993 Employee Stock Incentive Plan.
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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 ten percent
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 ten percent beneficial
owners were complied with during the year ended January 2, 1999.
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 approximately $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 provides for payments to Taylor & Sledd of $108,000 annually.
Virginia Foodservice Group, Inc. made lease payments to Taylor & Sledd in the
aggregate amount of $45,000 during fiscal 1998.
In 1988, Pocahontas leased certain land and buildings from Taylor &
Sledd. The lease provides for monthly payments of approximately $52,000 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 $628,000 during fiscal 1998.
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.
In connection with the Merger, Mr. Ryan and the Company entered into an
Indemnity and Escrow Agreement, and 46,296 shares of the Company's Common Stock
were placed in escrow to satisfy potential indemnification obligations arising
from breaches of representations, warranties or covenants made by Mr. Ryan in
the Merger Agreement. Mr. Ryan has also agreed to sell his shares of the
Company's Common Stock 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.
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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 David W. Sober,
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 2000 Annual Meeting of Shareholders or to be
presented at the Company's 2000 Annual Meeting of Shareholders, proposals must
be received by the Company prior to December 7, 1999.
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EXHIBIT A
SECOND 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 5, 1999, subject to the approval
of the Performance Food Group Company shareholders at the 1999 Annual Meeting of
Shareholders, as follows:
1. By deleting the first sentence in its entirety and substituting
therefor the following:
"The aggregate number of shares of Stock reserved and
available for distribution under the Plan shall be 1,625,000 shares."
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APPENDIX A
PERFORMANCE FOOD GROUP COMPANY
ANNUAL MEETING OF SHAREHOLDERS
MAY 5, 1999
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 5, 1999 AND
ANY ADJOURNMENT(S) THEREOF. The undersigned hereby appoints David W. Sober 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 15, 1999.
1. ELECTION OF TWO CLASS III DIRECTORS TO SERVE UNTIL THE 2002 ANNUAL MEETING OF
SHAREHOLDERS AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all nominees.
(except as marked to the contrary below).
C. MICHAEL GRAY JOHN E. STOKELY
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below:
- --------------------------------------------------------------------------------
2. AMENDMENT OF THE 1993 EMPLOYEE STOCK INCENTIVE PLAN.
[ ] 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
AND FOR THE AMENDMENT TO THE 1993 EMPLOYEE STOCK INCENTIVE PLAN.
The undersigned revokes any prior proxies to vote the shares covered by this
proxy.
Dated: , 1999
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Signature
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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.