Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X]Preliminary Proxy Statement
[ ]Confidential, for Use of the
Commission Only (as permitted by
Rule 14-a-6(e)(2))
[ ]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
WSMP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
[ ]$500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6)i)(3).
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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:
PRELIMINARY PROXY FILING
WSMP, INC.
1 WSMP DRIVE, P.O. BOX 399
CLAREMONT, NORTH CAROLINA 28610
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
WSMP, Inc.
The Annual Meeting of Shareholders of WSMP, Inc. will be held at the
Holiday Inn, Piedmont Center on Lenoir-Rhyne Boulevard, Hickory, North Carolina
28601, on Thursday, June 22, 1995, at 10:00 a.m., Eastern Daylight Savings Time,
to:
1. Elect three directors to terms of three years.
2. Act upon a proposal to approve a Management Services
Agreement with HERTH Management, Inc.
3. Transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on May 11, 1995, as
the record date for determining shareholders entitled to notice of and to vote
at the meeting. Only shareholders of record at the close of business on that
date are entitled to vote at the meeting.
WSMP, Inc. hopes that as many shareholders as possible will personally
attend the meeting. Whether or not you plan to attend, please complete the
enclosed proxy card and sign, date and return it promptly so that your shares
will be represented. Sending in your proxy will not prevent your voting in
person at the meeting.
By Order of the Board of Directors,
Richard F. Howard
Secretary
Claremont, North Carolina
May 25, 1995
WSMP, INC.
1 WSMP Drive, P.O. Box 399
Claremont, North Carolina 28610
May 25, 1995
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of WSMP, Inc. (the Company) of proxies to be voted at its
Annual Meeting of Shareholders to be held on Thursday, June 22, 1995, and at any
adjournment thereof.
The Board requests that all shareholders complete the enclosed proxy card
and sign, date and return it as promptly as possible. Since many shareholders
cannot personally attend, it is necessary that a large number be represented by
proxy. The holders of record of a majority of the outstanding shares must be
present in person or represented by proxy at the Annual Meeting in order to hold
the meeting.
Any shareholder returning a proxy may revoke it when attending the Annual
Meeting, by announcing on the floor his intention to personally vote his shares,
or by mailing to the Secretary of the Company a later dated proxy or a written
statement of revocation which must be received by the Secretary no later than
June 21, 1995. Any proxy not revoked will be voted as specified by the
shareholder.
The Company's By-Laws require an affirmative vote of the holders of a
majority of the Common Stock present in person or by proxy and entitled to vote
for approval of each of the proxy items listed on the proxy card and described
below. Under North Carolina law and under the Company's By-laws, abstentions
and broker non-votes are counted for purposes of determining a quorum, but are
not counted in the number of shares voting to determine if a majority of shares
voting have voted for approval of a proxy item. At May 11, 1995, the record
date, there were shares of the Company's Common Stock outstanding and
entitled to one vote each at the Annual Meeting. These shares were registered
in the names of approximately shareholders.
-----
This Proxy Statement is first being mailed on or about May 25, 1995.
Cumulative Voting. The laws of North Carolina under which the Company is
-----------------
incorporated provide that, in connection with the election of directors,
shareholders of a "public corporation" do not have the right to vote
cumulatively in the election of directors. The Company presently qualifies as a
"public corporation", which the North Carolina statute describes as a
corporation that has a class of shares registered under Section 12 of the
Securities Exchange Act of 1934. So long as the Company remains a "public
corporation", shareholders do not and will not have cumulative voting rights in
the election of directors. The persons receiving a plurality of the votes cast
will be elected as directors.
On all other matters to come before the Annual Meeting, each holder of
Common Stock will be entitled to one vote for each share owned.
Principal Shareholders and Management Ownership. The following table sets
-----------------------------------------------
forth, as of the record date, information with respect to the WSMP, Inc. common
stock ownership by (i) each person known to management to own beneficially 5% or
more of the total outstanding shares of Common Stock; (ii) each person who is a
director of the Company or a nominee for director; (iii) each named executive
officer individually; and (iv) all directors and officers of the Company as a
group.
<TABLE>
<CAPTION>
No. of
No. of Percen- Shares Percentage
Shares tage of Benefi- of Out-
Name and Address Directly Outstanding cially standing
Beneficial Owner Owned Shares Owned(1) Shares(1)
<S> <C> <C> <C> <C>
RSH Management, Inc.(2)
P. O. Box 399
Claremont, N.C. 28610
HERTH Management, Inc.(3)
P. O. Box 399
Claremont, N.C. 28610
Richard F. Howard *
P. O. Box 399 (1)(2)(3)
Claremont, N.C. 28610
James C. Richardson, Jr. *
P. O. Box 399 (1)(2)(3)
Claremont, N.C. 28610
Gregory A. Edgell
3200 Devine Street (2)(3)(4)
Columbia, S.C. 29205
James M. Templeton
P. O. Box 399 (1)(2)(3)
Claremont, N.C. 28610
Lewis C. Lanier 0 * 0 *
Route 5, Box 863
Orangeburg, S.C. 29115
William R. McDonald, III 0 * 0 *
l004 North Center Street
Hickory, N.C. 28601
Miles M. Aldridge 0 * 0 *
315 Sharebrook Lane
Columbia, S.C. 29212
Richard F. Hendrickson
P. O. Box l0007
Raleigh, N.C. 27605
E. Edwin Bradford
361 Tenth Avenue Drive, NE
Hickory, N.C. 28603
Bobby G. Holman
P. O. Box 399 (1)
Claremont, N.C. 28610
Richard G. Craft
5624-6 Hudson Chapel Road
Catawba, N.C. 28609
Charles F. Connor, Jr.
P. O. Box 5l9 (5)
Claremont, N.C. 28610
Cecil R. Hash
3536 Vest Mill Road (6)
Winston-Salem, N.C. 27103
All Directors and Officers
as a Group ( persons)
<FN>
*less than 1% of shares
(1) Messrs. Howard, Richardson and Templeton have been granted the presently
exercisable options to purchase 125,000, 125,000 and 62,500 shares,
respectively, (as adjusted for a recent five-for-four stock split) pursuant
to the WSMP, Inc. Special Stock Option Plan, which shares are attributed to
the respective optionee. Four other officers, including Mr. Holman, have
been granted incentive stock options under the Incentive Stock Option Plan
to purchase a total of 175,000 shares (as adjusted for a recent five-for-
four stock split), options for 50,000 being presently exercisable and
attributed to the optionees. See EXECUTIVE OFFICERS' COMPENSATION FOR THE
LAST FISCAL YEAR - Compensation Plans.
(2) The shares held by RSH Management, Inc. are attributed to each of its
shareholders. RSH Management, Inc. has informed the Company that voting or
disposition of its shares may only be done by the consent of the holders of
a majority of its outstanding shares. The shareholders of RSH, and their
ownership percentages of RSH, are Messrs. Howard (7%), Richardson
(4%), Templeton (2%),Lyerly (6%), Edgell (4%), Hunsucker (3%), and HERTH
Management, Inc. (74%).
(3) The shares held by HERTH Management, Inc. are attributed to each of its
shareholders. HERTH Management, Inc. has informed the Company that voting
or disposition of its shares may only be done by the consent of the holders
of a majority of its outstanding shares. The shareholders of HERTH, and
their ownership percentages of HERTH, are Messrs. Howard (45%),
Richardson (22%), Templeton (11%), and Edgell (22%).
(4) Includes 28,125 shares (as adjusted) held by spouse as custodian for minor
children. Beneficial ownership of such shares is disclaimed.
(5) Includes a presently exercisable option to purchase 62,500 shares (as
adjusted) granted when Mr. Connor was an officer of the Company.
(6) Includes 125,000 shares (as adjusted) held nominally by Mr. Hash for the
benefit of HERTH. Beneficial ownership of such shares is disclaimed.
</TABLE>
As of May 11, 1995, Cede & Co., the nominee of the Depository Trust
Company, New York, New York, which provides custodial services for various
institutions, such as banks and stock brokerage firms, was the record holder of
shares of Common Stock representing % of the outstanding shares of
- - - - - --------- ----
Common Stock of the Company. The Company believes that none of these shares
were beneficially owned by Cede & Co.
Except as set forth above, management of the Company is not aware of any
other person or group which owns in excess of five percent of the outstanding
Common Stock of the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers, and persons who own more than ten percent of
the Company's stock ("Reporting Persons"), to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of the Company's stock. Reporting Persons are required by Securities
and Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based upon review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, all Section 16(a) filing requirements
applicable to Reporting Persons were complied with during fiscal 1994, except
that Messrs. Richardson and Hefner were one week late in filing one Form 5
report.
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
The Company's By-Laws provide for nine directors, classified into three
classes and elected for three year terms, or until their successors are duly
elected and qualified. The Class I directors, whose terms expire at the 1995
annual meeting, are Messrs. Richard F. Howard, James M. Templeton, and E. Edwin
Bradford. The remaining six directors were elected at prior annual meetings to
serve until the annual meetings to be held in the years set forth below. Three
Class I directors will be elected to serve three year terms expiring in 1998,
upon the election and qualification of their successors. Mr. Howard, Mr.
Templeton and Mr. Bradford have been nominated for these terms by the Board of
Directors.
It is the intention of the persons named in the enclosed Proxy to vote the
shares covered thereby for the election of the three nominees set forth below,
for terms expiring as indicated.
- - - - - - - - - - - -
CLASS I - NOMINEES FOR ELECTION AS DIRECTORS FOR A TERM EXPIRING JUNE, 1998.
RICHARD F. HOWARD, 45, became a director in 1987 and has served as Chairman
of the Board of Directors since 1993. Mr. Howard is presently Secretary and
Treasurer of the Company's management firm, HERTH Management, Inc., and also the
affiliated RSH Management, Inc. Mr. Howard has served as Executive Vice
President from 1989 to 1993, and was Chief Financial Officer and Treasurer of
the Company from 1989 to 1994, and also presently serves as Secretary to the
Company.
JAMES M. TEMPLETON, a member of the Board since 1988, is 58 years old and
serves WSMP as Senior Vice President of Franchising and Real Estate. He served
the Company as Vice President of Real Estate from 1988 to 1994, when he assumed
his present position. He is presently Vice-President of Administration of HERTH
Management, Inc., a position he has held since 1991, and is Vice-President of
RSH Management, Inc., since 1987.
E. EDWIN BRADFORD was first elected to the WSMP Board in l993. Mr.
Bradford is owner of Bradford Communications, Inc., a Hickory, North Carolina
marketing and advertising firm which he founded in 1977. Mr. Bradford is 52
years old.
- - - - - - - - - - - - - -
CLASS II - DIRECTORS CONTINUING IN OFFICE FOR A TERM EXPIRING JUNE, 1996.
JAMES C. RICHARDSON, JR. became a director in 1987. Mr. Richardson has
served WSMP as an executive officer since 1987, including Executive Vice
President from 1989 to 1993 and Secretary from 1991 until 1993. Mr. Richardson
is presently President of HERTH Management, Inc., the Company's management firm,
and RSH Management, Inc. He became President and Chief Executive Officer of the
Company in 1993. He is 46 years old.
RICHARD F. HENDRICKSON was elected to the Board of Directors in l993, after
having previously served on the Board from 1988 to 1991. Mr. Hendrickson is
Vice-President of York Properties, Inc. of Raleigh, North Carolina, a real
estate firm which he has served since 1985. Mr. Hendrickson, 54 years old, is a
member of the Executive Compensation, Sensitive Transactions and Audit
Committees.
BOBBY G. HOLMAN is WSMP, Inc.'s Chief Financial Officer and Treasurer.
Prior to assuming this position in 1994, he had been an Assistant Vice President
with Aetna Life & Casualty Insurance Company in Hartford, Connecticut, and
managing director of the Food Industry segment of Aetna's Bond Investment
Department, since l985. He had been employed by Aetna in other positions since
l977. Mr. Holman is 59 years old.
- - - - - - - - - - - - - -
CLASS III - DIRECTORS CONTINUING IN OFFICE FOR A TERM EXPIRING JUNE, 1997.
WILLIAM R. MCDONALD III, 60, has been a director since 1991, and serves on
the Executive Compensation, Sensitive Transactions and Audit Committees. He is
Vice President of Medipack Management Company, Inc., a subsidiary of The Brian
Center Corporation, that provides pharmaceutical needs and prescription services
to nursing homes in North Carolina, South Carolina and Virginia, a position he
has held since 1989. Mr. McDonald also serves as Mayor of the City of Hickory,
an elective office he has held since 1981.
MILES M. ALDRIDGE was elected as a member of the Board of Directors in
1991. Mr. Aldridge is an assistant football coach at Clemson University.
Prior to assuming this position in 1993, he held positions as assistant football
coach at the University of South Carolina (l991-l993), North Carolina State
University (l990-l99l) and Clemson University (l986-l990). Mr. Aldridge, 46, is
a member of the Executive Compensation, Sensitive Transactions and Audit
Committees.
LEWIS C. LANIER is a member of the law firm of Horger, Horger & Lanier of
Orangeburg, South Carolina, joining this firm in 1985. Mr. Lanier, who was
first elected to the Board in 1988, serves on the Executive Compensation,
Sensitive Transactions and Audit Committees, and is 46 years old.
-----------------------------
Should any of the foregoing nominees become unavailable for any reason, the
persons named in the enclosed proxy intend to vote for such other persons as the
present Board may nominate.
Board Meetings and Committees of the Board. The Board of Directors held
------------------------------------------
five meetings during the past fiscal year. The Board has appointed Audit,
Executive Compensation, and Sensitive Transactions Committees, the members of
which are indicated in the foregoing information on nominees. The Board
functions as a committee of the whole to nominate candidates for Board
membership.
The Audit Committee, established in 1978 and consisting of four outside
directors, met three times during the past fiscal year with the Company's
financial management and independent auditors. The Committee reviews external
audit plans and activities, reviews the Company's financial controls, approves
all significant fees for audit and non-audit services provided by the
independent auditors and recommends to the Board the selection or retention of
independent auditors.
The Executive Compensation Committee, established in 1978, which consists
of four outside directors, sets and approves changes in executive compensation,
and recommends to the Board changes in the Company's executive compensation
arrangements. All proposals concerning executive compensation are first brought
before this Committee; upon an affirmative recommendation of the Committee,
proposals proceed to the full Board for consideration. The full Board is free
to accept or reject the recommendation of the Committee. This Committee met
four times during fiscal l994.
The Sensitive Transactions Committee, established in 1983, monitors and
reviews for fairness certain transactions between the Company and its officers
and directors. This Committee reviews all such transactions and recommends
their approval or rejection to the full Board. The full Board is free to accept
or reject the recommendation of this Committee. This Committee, which met four
times during the past fiscal year, consists of four outside directors.
During the past year the incumbent directors attended at least 75% of the
aggregate of the meetings of the Board and committees on which they served,
except for Mr. Aldridge, who was unable to attend at least 75% of such meetings
because of business conflicts.
Remuneration of Directors.
- - - - - -------------------------
During fiscal 1994, outside directors were paid $2,000 per meeting
attended. Directors who are employees of the Company or members of the HERTH
Management, Inc. group, or who have material contracts with the Company receive
no payment for serving as directors.
EXECUTIVE COMPENSATION
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
It is the responsibility of the Executive Compensation Committee to advise
management and the Board of Directors on matters pertaining to compensation
arrangements for executive employees, a well as for the administration of the
Company's stock option plans. The members of this committee are all
independent, non-employee directors. Following review and approval by the
Executive Compensation Committee, all issues pertaining to executive
compensation are submitted to the full Board of Directors for approval.
Compensation Principles.
- - - - - -----------------------
In determining compensation for executive officers, the Company believes
that compensation should be 1) based in part upon the Company's performance, by
the use of bonuses or stock options which do this, 2) based in part upon the
individual contributions and attainment of goals of each officer and the
performance of management as a group, and 3) based in part upon compensation
paid by other companies to similarly situated management.
The Company's executive compensation program consists of salary, bonus,
long-term compensation and other benefits. Specific targets are not utilized by
the Committee in determining the level of any of these individual components of
overall compensation. Rather, the Committee seeks to formulate an overall
compensation package which approximates in value the median range of overall
compensation paid to executives of the comparison group. Overall compensation
paid to the Company's executives in fiscal 1995 met this objective.
Three of the Company's top officers (Messrs. Howard, Richardson and
Templeton) are compensated pursuant to a Management Services Agreement with
HERTH Management, Inc. (see CERTAIN TRANSACTIONS) entered into March 31, 1993,
and the renewal of which is the subject of a shareholder ratification vote (see
MANAGEMENT SERVICES AGREEMENT WITH HERTH MANAGEMENT, INC. (PROXY ITEM NO. 2)).
The Committee uses a comparison group of similarly situated companies to
compare its overall compensation. This is the same group that the Company uses
in comparing shareholder returns over the past five years (see PERFORMANCE
GRAPH). Also, the Committee intermittently retains a private economist to
review compensation paid under the Management Services Agreement for its
reasonableness. The Committee believes that these are two appropriate methods
of comparing compensation.
Section 162(m) of the Internal Revenue Code imposes a limit, with certain
exceptions, on the amount a publicly held corporation may deduct for
compensation paid or accrued with respect to its five most highly compensated
officers. The Company does not feel that the fiscal 1995 compensation exceeded
this limit, and the Committee has not established a policy should the limit be
exceeded by future compensation.
Executive Compensation.
- - - - - ----------------------
The Committee measures management's performance using longer-term (1 1/2 to
2 years) objectives to the Company, and developing criteria based upon these
longer-term goals. The Committee reviews the Company's business plan, as
approved by the Board of Directors, and determines whether the Company has met
its goals thereunder, as well as whether individual officers have accomplished
the goals assigned to them. Several elements of the performance of an officer
are based upon non-numerical performance criteria, such as level of
responsibility in the Company, comparable compensation of other executives,
individual merit performance or improvements in administration; other elements
are tied to management's performance as a group in achieving corporate goals,
such as financial performance, profit margins, the elimination of waste in
manufacturing, or restoration of working capital. The Committee also compares
the Company's return to shareholders with that for other similarly situated
companies in a peer group approach. No mathematical weights are assigned to
these individual criteria.
The performance of executive officers compensated under the HERTH
Agreement, like those of other executive officers of the company, are evaluated
by the Committee using the criteria previously set forth. Although the
compensation payable to HERTH is only adjustable every three years, the
Committee feels that the Company has the authority under principles of contract
law, to re-negotiate or even terminate the Management Services Agreement, should
the officers employed under this agreement fail to substantially comply with the
terms of the agreement.
Performance based-criteria are generally considered as a whole, so that
specific performance targets may be waived or adjusted as long as, on the whole,
performance targets have been met. Management has also accomplished many of the
goals set forth by the Board. During the last year these accomplishments have
included the following: record sales, improved profitability, an increase in the
Company's stock price in the face of declining values in restaurant stocks
nationwide, and outstanding performance by the Company's Bakery Division and Ham
Curing Division.
Chief Executive Officer Compensation.
- - - - - ------------------------------------
Mr. Richardson's compensation as Chief Executive Officer (subsumed under
the HERTH agreement), and the evaluation of his performance as Chief Executive
Officer, is consistent with the compensation principles described above and
reflected the performance of the Company and Mr. Richardson. Determination of
adequate compensation was qualitative in nature and based upon a variety of
factors, including comparison group compensation data, attainment of various
corporate goals, financial and operating performance, individual performance and
other factors. Specifically, important corporate goal of sales and
profitability were achieved, and his leadership in achieving these goals were
considered by the Committee.
The Executive Compensation Committee
Lewis C. Lanier, Chairman
William R. McDonald III
Richard F. Hendrickson
Miles M. Aldridge
Compensation Committee Interlockings and Insider Participation. The Executive
- - - - - --------------------------------------------------------------
Compensation Committee does not include any employee or former or current
officers of the Company. There are no "interlocking" memberships between WSMP's
Executive Compensation Committee and any other company's compensation committee.
Cash Compensation of Executive Officers.
- - - - - ---------------------------------------
The following information relates to compensation paid by the Company to
its Chief Executive Officer, and its other four most highly compensated
executive officers of the Company for services in all capacities during the
three fiscal years ended February 24, 1995.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term All Other
Annual Compensation Compensation Compensation
Name and Other Annual
Principal Fiscal Compensation Awards of
Position Year Salary(l) Bonus (3) Options
<S> <C> <C> <C> <C> <C> <C>
James C. Richardson, Jr. 1995 $487,500(2) -- -- -- --
President, Chief 1994 $625,000(2) -- -- -- --
Executive Officer 1993 $175,000(2) -- -- -- --
Richard F. Howard 1995 $495,000(2) -- -- -- --
Chairman of the Board 1994 $640,000(2) -- -- -- --
and Secretary 1993 $218,000(2) -- -- -- --
James M. Templeton 1995 $200,000(2) -- -- -- --
Senior Vice President 1994 $165,000(2) -- -- -- --
of Franchising and 1993 $ 87,000(2) -- -- -- --
Real Estate
Ronnie L. Digh 1995 $ 71,932 $ 59,939 -- -- --
Vice President, 1994 $ 67,249 $ 75,178 -- -- --
Bakery Operations 1993 $ 67,151 $105,379 -- -- --
Bobby G. Holman 1995 $104,400 -- -- 62,500(4) --
Chief Financial Officer 1994 -- -- -- -- --
and Treasurer 1993 -- -- -- -- --
Richard G. Craft 1995 $ 95,976 $10,140 -- -- $82,772(5)
Senior Vice President 1994 $105,648 -- -- -- --
Accounting & Finance (5) l993 $ 99,298 -- -- -- --
<FN>
(1) Includes the Company's contribution under the Employee Profit-Sharing and
Salary Deferral Plan. The Company provides this benefit only upon salary
amounts, and not upon amounts paid to HERTH Management, Inc. for management
services. Also includes the Company's matching portion under its Employee
Stock Purchase Plan.
(2) Represents compensation paid to HERTH Management, Inc. for management
services rendered. See CERTAIN TRANSACTIONS. Amounts assigned to each
officer represent the allocation provided the Company by HERTH Management,
Inc. at the Company's request, and may not represent any sum actually paid
to these persons by HERTH.
(3) All other compensation, consisting of basic perquisites are not discussed
since the amounts paid do not exceed the lesser of l0% of salary and bonus
or other annual compensation, or $50,000, in any one year.
(4) Mr. Holman was granted an option to purchase 50,000 shares during Fiscal
l995, under the Company's Incentive Stock Option Plan which is exercisable
as to 20% after each year of service after issuance. All options are
issued at the closing price of the Company's stock at the date of issuance,
which was $5.00 for Mr. Holman's option. Pursuant to an anti-dilution
provision in WSMP, Inc.'s Incentive Stock Option Plan, the exercise price
was reduced from $5.00 to $4.20 and the number of shares increased from
50,000 to 62,500, to reflect a five-for-four stock split after fiscal year
end. See REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS - Compensation
Plans.
(5) Mr. Craft left the Company's employment prior to the end of fiscal 1995.
Compensation reported herein represents severance package paid or payable
as of year end.
</TABLE>
The following table presents options granted during the last fiscal year,
and their potential realizable value.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
Number of % Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Exp.
Name Granted in Fiscal Year ($/share) Date 5% ($)10% ($)0%
<S> <C> <C> <C> <C> <C> <C> <C>
James C. Richardson, Jr. -- -- -- -- -- -- --
Richard F. Howard -- -- -- -- -- -- --
James M. Templeton -- -- -- -- -- -- --
Ronnie L. Digh -- -- -- -- -- -- --
Bobby G. Holman 62,500(1) 32% $4.20(1) 5-14-04 $ $ $0
Richard G. Craft -- -- -- -- -- -- --
<FN>
(1) Pursuant to an anti-dilution provision in WSMP, Inc.'s Incentive Stock
Option Plan, the exercise price was reduced from $5.00 to $4.20 and the number
of shares increased from 50,000 to 62,500, to reflect a 5 for 4 stock split
after fiscal year end.
</TABLE>
The following table presents options exercised during the last fiscal year
and the value of unexercised options at February 24, 1995.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options
Options at at Fiscal
Fiscal Year End Year End
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
<S> <C> <C> <C>
James C. Richardson, Jr. -0- -0- 125,000(1)/ $318,750/
-0- -0-
Richard F. Howard -0- -0- 125,000(1)/ $318,750/
-0- -0-
James M. Templeton -0- -0- 62,500(1)/ $150,000/
-0- -0-
Ronnie L. Digh -0- -0- -0-/ -0-/
-0- -0-
Bobby G. Holman -0- -0- -0-/ -0-/
62,500(1) $100,000
Richard G. Craft -0- -0- 40,000/ $135,000/
-0- -0-
<FN>
(1) Pursuant to an anti-dilution provision in WSMP, Inc.'s Incentive Stock
Option Plan and Special Stock Option Plan, the shares under option have been
adjusted since fiscal year end to reflect a 5 for 4 stock split. At year end,
the actual shares under unexercised options were Richardson: 100,000; Howard:
100,000; Templeton: 50,000; and Holman: 50,000.
</TABLE>
WSMP, Inc. has not during fiscal 1995 adjusted or amended the exercise
price on stock options previously awarded to these executive officers.
Compensation Plans.
- - - - - ------------------
1987 Incentive Stock Option Plan. The Company's 1987 Incentive Stock
--------------------------------
Option Plan (the "Option Plan") provides for the issuance of up to 500,000
shares of Common Stock to key employees, including officers, of the
Company. The Option Plan is administered by a committee of the Board of
Directors, none of which are eligible to participate in the plan, which may
grant Incentive Stock Options ("ISOs") or non-qualified stock options to
eligible employees. The Committee determines who will receive ISOs and
non-qualified options, subject to the limitations contained in the Option
Plan, and the terms of such options, including price, duration, number of
shares covered and timing of exercise.
No options issued under the Option Plan may be granted at an exercise
price of less than 100% of the fair market value of the Common Stock at the
date of the grant. ISOs granted under the Option Plan are intended to
qualify as "incentive stock options" pursuant to Section 422A of the
Internal Revenue Code of 1986 ("the Code"), and are subject to the
additional restrictions of issuance and exercise prescribed by the Code and
the Option Plan. No options are transferable and, with certain exceptions,
are exercisable only while the optionee is employed by the Company or
within 3 months thereafter. Payment shall be made in cash or, at the
discretion of the Committee, by the surrender of shares of Common Stock.
1987 Special Stock Option Plan. The Company's 1987 Special Stock
------------------------------
Option Plan (the "Special Plan") provides for the issuance of up to 500,000
shares of Common Stock to key management employees, including officers of
the Company. The Special Plan is administered by a committee of the Board
of Directors, none of whom are eligible to participate in the plan, who
make recommendations to the Board of Directors; the Board then authorizes
the granting of options. All options granted under the Special Plan are
non-qualified stock options. The Board, upon recommendation of the
Committee, determines the price, duration, number of shares covered, and
timing of exercise, subject to the limitations contained in the Special
Plan. All options must be granted at not less than 100% of the fair market
value of the Common Stock at the date of the grant, and the option price is
payable in cash at the time of exercise.
The options are exercisable immediately, and terminate 10 years from
the date of issuance. At the death of a grantee, the option can be
exercised by his executor or personal representative; otherwise, options
are not transferable and may not be assigned, pledged or hypothecated.
Shares subject to the option are to be adjusted in case of any stock split,
stock dividend, or recapitalization of the Company.
Employee Profit-Sharing and Salary Deferral Plan. In 1987, the Company
- - - - - ------------------------------------------------
established its Employee Profit-Sharing and Salary Deferral Plan (the
"Profit-Sharing Plan") for employees of the Company. In general, employees
who have attained age 21, and been employed for one year are eligible to
participate. Participants may allocate up to the lesser of 20% of their
salary, or $9,240 to the Profit-Sharing Plan on a pre-tax basis pursuant to
Section 401(k) of the Code. The Company contributes an amount equal to 25%
of the first 8% or up to an additional 2% of salary. Participant and
Company contributions are invested in annuity contracts.
Participant contributions to the Profit-Sharing Plan are vested
immediately; Company contributions vest completely after 6 years of
service. No withdrawals under the Profit-Sharing Plan during Fiscal 1995
attributable to the Company's contributions were made by any executive
officer.
The executive officers of the Company who are paid pursuant to a
management agreement with HERTH Management, Inc. do not participate in the
Profit-Sharing Plan as to any amount received by HERTH Management, Inc.
1994 Employee Stock Purchase Plan. The Company's l994 Employee Stock Purchase
- - - - - ---------------------------------
Plan allows all eligible Company employees, including all officers and
directors, to participate in purchasing Company stock under advantageous
conditions. Employees who have attained age 21 and been employed by the Company
or its subsidiaries for at least 90 days may elect to participate. Employee
contributions are generally by payroll deductions, and may range from $10.00 per
week up to 10% of base salary. Company officers not compensated by the Company
and Directors may contribute up to $500 per month. The Company matches 25% of
the contribution of a participant on a monthly basis. All contributions vest
when credited to a participant's account. The executive officers of the Company
who are paid pursuant to a management agreement with HERTH Management, Inc. do
not participate in the Stock Purchase Plan as to any amount received by HERTH
Management, Inc.
All contributions are paid over to the Trustee Bank, which purchases shares
of the Company's common stock and allocates to participants their pro rata
shares of such purchases. Participants vote all whole shares of stock credited
to their accounts. The Trustee Bank votes fractional shares.
The Trustee Bank, which serves at the pleasure of the Board of Directors,
is Lincoln Bank of North Carolina, in Lincolnton, North Carolina.
STOCK PRICE PERFORMANCE GRAPH
The following graph presents a five year comparison of cumulative shareholder
returns for the Company, the Standard & Poor's Composite Index, and a company
constructed peer group that reflects the performance of various companies that
are similar to the Company in industry or line of business, over the five year
period beginning February 23, 1990 and ending February 24, 1995. The graph
assumes that $100 is invested on February 23, 1990, in WSMP, Inc. common stock,
the Standard & Poor's Composite Index, and in the Company constructed peer
group.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED FEBRUARY, 1995
[GRAPH HERE]
Index Year Year Year Year Year
at Ending Ending Ending Ending Ending
2/23/90 2/22/91 2/28/92 2/26/93 2/25/94 2/24/95
WSMP, Inc.: $100 $ 61 $105 $136 $100 $118
S&P Composite
Index: $100 $117 $136 $151 $163 $176
Peer Group: $100 $102 $137 $147 $144 $130
The Company constructed peer group consists of Family Steakhouses of Florida,
Inc., Flagstar Companies, Inc., Flower Industries, Inc., Interstate Bakeries
Corp., Perkins Family Restaurant LP, Piemonte Foods Corp., Po' Folks,Inc.,
Stacey's Buffet Inc., and Thorn Apple Valley, Inc. The returns of each group
member were weighted according to the member's stock market capitalization at
the beginning of each period for which a return is indicated.
CERTAIN TRANSACTIONS
HERTH Management, Inc. ("HERTH") provides management services to the
Company, reviews and supervises financing, provides cost analysis services, real
estate services, strategic planning services, and reviews franchisee
relationships. HERTH provides the full time services of Messrs. Howard,
Richardson and Templeton and the part-time services of Messrs. Edgell and
Sherrill. The Company currently operates under a written contract with HERTH,
which was approved by the Shareholders of the Company at their l993 annual
meeting, which provides for an annual compensation rate of $1,500,000 per year
and expires in 1996. Messrs. Howard, Richardson and Templeton are also paid
salaries by the Company of $1.00 each per year. HERTH is a corporation whose
shareholders are Howard, Richardson, Templeton and Edgell, and whose officers
are Howard, Richardson and Templeton. This Contract was assigned from RSH
Management, Inc. to HERTH Management, Inc. with the consent of the Company in
1993. RSH previously provided management services to WSMP, Inc. from 1988
through 1993. RSH's Shareholders are Howard, Edgell, Richardson, Hunsucker,
Lyerly and Templeton, and its officers are Howard, Richardson and Templeton.
The Company believes that the terms of this Agreement are at least as favorable
as could have been obtained in an arms-length transaction.
There is a proposal presently before the shareholders to ratify a new
agreement with HERTH. See MANAGEMENT SERVICES AGREEMENT WITH HERTH MANAGEMENT,
INC. (PROXY ITEM NO. 2).
The Company maintains fire and general property, automobile liability,
premises liability, product liability, worker's compensation, director and
officer liability, and certain key employee life insurance coverages, which
insurance has been provided since prior to 1979, through County-Wide Insurance
Agency, Inc. ("County-Wide"). County-Wide received payments of $1,066,000
during fiscal l995 in connection with such insurance, of which sums County-Wide
retained approximately ten percent as commissions. Charles F. Connor, Jr., who
is a greater than 5% shareholder, is a principal of County-Wide. The Company
periodically (approximately every 3 years) places its insurance requirements out
to bid in order to insure that its prices paid are as fair and equitable as
could be obtained through unaffiliated parties.
Messrs. Hash, Howard and Connor own interests in an aggregate of 27 of the
Company's franchised restaurants. Royalty income of the Company from these
restaurants aggregated $840,000 during fiscal 1995. No receivables from any of
these restaurants were written off during the last fiscal year.
Denver Equipment Company (`Denver'') and Howard Furniture Company
(``oward'') are companies which sell restaurant equipment and restaurant
furnishings, respectively, to the Company, as well as to affiliated and
unaffiliated franchises and to the public in general. During fiscal 1995,
Denver was paid a total of $322,506, and Howard a total of $4,821, for purchases
made by the Company. These companies have as their major owner Richard S.
Howard, the father of director Richard F. Howard. The Company believes that the
furnishings and equipment purchased from Denver and Howard were purchased on
terms as fair and equitable as could have been obtained from unaffiliated third
parties.
The Company has sold certain restaurant property in Arden, North Carolina,
to a corporation whose major shareholder is Charles F. Connor, Jr. for a
Sagebrush Steakhouse & Saloon restaurant at a price of $625,000. This sale, in
the Company's estimation, was completed upon terms as fair and equitable as
could have been obtained from unaffiliated third parties, and the Company
recognized a gain of $128,000 on the transaction.
The Company from time to time may enter into restaurant joint ventures, or
sales or leases of vacant restaurant properties, with entities which may include
Messrs. Connor, Richardson, Hash or Howard upon such terms and conditions as the
Company finds acceptable, and upon terms as fair and equitable as could be
obtained with an unaffiliated third party.
Since 1981, the Company has utilized Bradford Communications, Inc. ("BCI")
to provide the Company with certain marketing and advertising services. As a
part of its services to the Company, BCI develops advertising programs for all
segments of the Company, including contracting for media space and time and
placing all advertising for Company-owned and operated restaurants, as well as
developing marketing tools for the food manufacturing divisions. During fiscal
1995, the Company paid BCI a total of $180,000 for media plan development and
research, development of advertising concepts and associated services and
$444,000 for media costs and other associated expenses. Of the total received
by BCI, it paid out on behalf of the Company $362,267 for media and printing
expenses, and $173,000 for photography, direct mail and consultant costs. BCI
renders such services to the public in general. The owner of BCI, E. Edwin
Bradford, has been a director of the Company since l993.
All material transactions with affiliated parties of the Company are first
reviewed by the Sensitive Transactions Committee of the Board, which is made up
of four outside directors. Upon recommendation of this Committee, such
transactions are then presented to the Board, where they must be approved by a
majority of the disinterested directors. Also, the Company periodically obtains
bids, quotations or appraisals from unaffiliated third parties to ensure that
the products and services received from affiliates are on terms at least as fair
and equitable to the Company as could have been obtained from unaffiliated third
parties.
MANAGEMENT SERVICES AGREEMENT WITH HERTH MANAGEMENT, INC.
(PROXY ITEM NO. 2)
The Board of Directors, upon unanimous recommendation of its Executive
Compensation Committee, has unanimously approved and voted to recommend to the
Shareholders the ratification of a renewal and extension of its Management
Services Agreement (the "Agreement") with HERTH Management, Inc. ("HERTH").
This agreement provides the Company with certain of its executive management
officers for a period of three years. A copy of the Agreement is included with
the Proxy Statement as Exhibit A.
HERTH is a corporation formed to provide management services to WSMP, Inc.
(See CERTAIN TRANSACTIONS). Its present shareholders are Messrs. Howard,
Richardson, Templeton and Edgell. HERTH is also a large holder of the Company's
stock, holding 168,423 shares outright and owning a 74% interest in RSH
Management, Inc. the Company's largest shareholder with 744,537 shares ( %).
-----
See Principal Shareholders and Management Ownership. HERTH does not have any
additional management or other business activities.
History of the Agreement. The Company's executive management have been hired
- - - - - ------------------------
and compensated pursuant to management services agreements since 1988, first
with RSH and then with HERTH. The Company originally entered into such an
agreement because of the flexibility it allowed the Company to retain the
services of certain personnel with the discretion to use them on a full-time
basis, as their services were required. It also allowed the Company to exclude
these individuals from its employee benefits and employment taxes, and
director's fees. From RSH's and HERTH's perspective, it provided a tax-
advantaged way of receiving income for the services of its principals with its
discretion as to the use of such income.
The original management services agreement was entered into with RSH in
1988, and it was renewed for a three-year term in 1990. It was again renewed
in 1993, and this renewal was placed before the disinterested shareholders for
their ratification at the 1993 Annual Meeting of Shareholders, where it was
approved. RSH later assigned this Agreement to HERTH, a sister corporation,
with the consent of WSMP, Inc. See CERTAIN TRANSACTIONS.
The Present Agreement. The current Management Services Agreement provides for
- - - - - ---------------------
a term of three years, from April 1, 1993 until March 31, 1996. It provides for
WSMP to receive services to be provided in the nature of those provided by a
chief executive officer and chief financial officer, as well as supervision of
franchises, cost analysis services, real estate services including acquisition
and disposition, certain administrative functions and review of franchise
relationships, and strategic planning services.
Under the current Agreement, HERTH provides the full-time services of
President and Chief Executive Officer James C. Richardson, Jr., of Chairman of
the Board of Directors and Corporate Secretary Richard F. Howard, and of Senior
Vice President of Franchising and Real Estate James M. Templeton. HERTH also
provides the strategic planning services of Gregory A. Edgell, Vice President of
Strategic Planning, and the real estate related services of Dwight A. Sherrill,
Vice President of Real Estate. HERTH also reimburses the Company for one-half
of the salary of its Chief Financial Officer and Treasurer, Bobby G. Holman.
Under the agreement, WSMP and HERTH must agree upon the exact nature and
extent of services to be provided, and the personnel to perform the services.
If WSMP wishes to remove or replace an offer for cause, it may negotiate for
such change with HERTH under the agreement. If such negotiations are fruitless,
WSMP may terminate the agreement, upon 30 days written notice and the reasonable
opportunity of HERTH to cure. Only the Board of Directors of WSMP has the
authority to name or replace an officer.
As compensation for these management services, the Agreement provides for
an annual payment of $1.5 million per year to HERTH, payable quarterly in
advance, for the contract term of three years, beginning April 1, 1993.
Changes under the Renewal Agreement. The renewal Agreement would contain the
- - - - - -----------------------------------
identical terms and conditions of the current Agreement, but would extend the
Agreement for an additional three years, from April 1, 1996 until March 31,
1999. As written, the current Agreement would expire on March 31, 1996, after
the 1995 Annual Meeting, but prior to the 1996 Annual Meeting. By negotiating
and presenting the Renewal Agreement at this year's meeting instead of next
year's meeting, it allows shareholders to vote on ratification prospectively and
not retroactively.
WSMP's management believes that the reasons originally advanced for its
securing management services by a management services agreement are still valid,
giving the Company flexibility in the management it requires without the long-
term commitments required in many executive management employment agreements.
Management believes that the Agreement is fair to the Company, as it
provides chief executive officer and chief financial officer services and the
executive leadership that the Company requires in all three of its lines of
business: food production, restaurant operation, and franchising. This
arrangement also allows the Company the flexibility to modify its executive
needs as the Company's emphases may change. The negotiation and executing of a
Renewal Agreement guarantees the Company that WSMP's costs will not increase
through 1999.
The Company is pleased with the performance of HERTH and RSH under past
agreements. When RSH assumed the executive management of WSMP, the Company's
financial fortunes were on a downward trend. HERTH and RSH have taken the
Company from precipitous losses to profitability. The Company feels that the
success of its management companies in the past bodes well for the future of the
Company, and justifies a renewal of this relationship upon the same terms and
compensation level.
However, it should be noted that WSMP's management will directly benefit
from this Agreement. Under the allocation provided in the Company's annual
summary compensation table (see Cash Compensation of Executive Officers) the
portions of the present $1,500,000 management fee allocated to management
officers during fiscal 1995, which is not necessarily what they are paid by
HERTH, is the following:
James C. Richardson, Jr. ..$487,500
Richard F. Howard ..........495,000
James M. Templeton .........200,000
Gregory A. Edgell ..........125,000
Dwight A. Sherrill .........125,000
Bobby G. Holman .............67,500
The proposed Agreement has been presented to the Board of Directors'
Executive Compensation Committee for its review and recommendation. This
Committee, made up of the four independent directors, has reviewed the proposed
transaction and has recommended to the Board that the Agreement be approved, and
presented for ratification by the Shareholders of the Company. Although the
Committee agreed with the conclusions reached by Management concerning the
necessity for renewal of the Agreement under its present terms and for utilizing
a management services agreement in compensating executive management, it was the
feeling of this Committee, as expressed in its Report (see REPORT OF THE
EXECUTIVE COMPENSATION COMMITTEE), that because the HERTH principals are
directors and large shareholders of the Company, the Agreement should be
presented to the Shareholders for ratification, just as the current Agreement
was in 1993.
This transaction has been unanimously approved the Board of Directors with
all interested directors abstaining from voting.
REASONS FOR RATIFICATION BY SHAREHOLDERS AND EFFECT OF RATIFICATION
Since HERTH and its affiliates control directly or indirectly approximately
% of the Company's stock and make up three of the nine current directors,
and since Messrs. Howard, Richardson and Templeton constitute the executive
management of the Company, the proposed Agreement between the Company and HERTH
is a "conflict of interest transaction" as that term is defined in the North
Carolina Business Corporation Act (the "Act").
N.C.G.S. Section 55-8-31(a) provides that a "conflict of interest
transaction is a transaction with the corporation in which a director of the
corporation has a direct of indirect interest." Such a transaction is not
voidable solely because of the director's interest in the transaction if any one
of the following is true:
1. If the transaction and the director's interest therein is disclosed to
the board of directors, and the transaction is thereafter approved by
a majority vote of the disinterested directors; or
2. If the transaction and the director's interest therein is disclosed to
the shareholders, and the transaction is thereafter approved by a
majority vote of the disinterested shareholders; or
3. If the transaction is fair to the Corporation.
Management feels that the Agreement, having been approved by the
independent directors of the Company, has met the first test of the statute;
likewise, Management believes that the transaction is objectively fair to the
Company for the reasons set forth above, and therefore meets the third test of
the statute. Management is now requesting a ratification of the Agreement by
the disinterested shares of the Company to meet the second test of the statue.
The effect of ratification of the Agreement will be to preserve the
Agreement from being avoided by the Company. So long as the transaction is fair
to the Company, ratification by the Shareholders would mean that in any
challenge to the Agreement, the burden of proving fairness would shift from the
party seeking to sustain the transaction to the party seeking to void the
transaction.
Management feels that ratification of the Agreement by the disinterested
shares would be in the interests of the disinterested shareholders because it
would make more difficult and hence discourage any suits against the Company
seeking to challenge the Agreement, and would give Management the ability to
deal aggressively with corporate matters in the future, secure from any attempt
to second-guess Management's decisions or directions by the artifice of a
lawsuit to void the Agreement. Additionally, Management considers this
ratification to be an informal barometer of the disinterested shareholders'
feelings on Management's job performance, and considers this resolution useful
in this regard.
No shareholder rights will be lost by the ratification of the Agreement,
and no dissenters' rights exist for those shares voted against the resolution.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock, other than these owned by HERTH Management
and its affiliates, is required for ratification of this Agreement. Failure to
ratify the renewal of this Agreement by the disinterested shareholders will not
cause the Company to terminate this agreement, as the Agreement has been
ratified by the disinterested directors, and management feels that it is fair to
the Company.
The Company's Board of Directors recommends a vote FOR the approval of this
proposal. Proxies, unless indicated to the contrary, will be voted FOR the
proposal.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of Deloitte & Touche has served as independent auditors for the
Company since 1982. A representative of Deloitte & Touche will attend the
annual meeting to respond to appropriate questions raised by shareholders.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
meeting. If matters other than the foregoing should arise at the meeting, it
is intended that the shares represented by proxies will be voted in accordance
with the judgment of the persons named in the proxy.
1996 SHAREHOLDER PROPOSALS
The Company welcomes comments or suggestions from its shareholders,
including any recommendations shareholders may have as to future directors of
the Company. In the event that a shareholder desires to have a proposal
formally considered at the 1996 Annual Shareholders' Meeting, and included in
the Proxy Statement for that meeting, the proposal must be received in writing
by the Company on or before February 5, 1996.
GENERAL
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited by directors, officers and
employees of the Company in person or by telephone (acting without extra
compensation). The Company's regularly retained investor relations firm,
Corporate Communications, Inc., may also be called upon to solicit proxies by
telephone and mail. Brokers, dealers, banks, nominees, fiduciaries and other
custodians will be requested to forward solicitation materials to the beneficial
owners of the Common Stock held of record by such persons and will be reimbursed
for reasonable out-of-pocket expenses incurred by them in so doing.
The Annual Report to Shareholders for the year ending February 24, 1995,
which includes financial statements, has been mailed with this Proxy Statement
and does not form a part of the material for the solicitation of proxies. If,
upon receipt of your proxy material, you have not received the Annual Report,
please write or call the Company's Chief Financial Officer, (704) 459-7626, and
a copy will be forwarded to you.
Please complete, sign, and date the enclosed proxy card, which is revocable
as described herein, and mail it promptly in the enclosed postage-paid envelope.
By Order of the Board of Directors,
RICHARD F. HOWARD
Secretary
NORTH CAROLINA EXHIBIT A
CATAWBA COUNTY
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT, made and entered into this the day of , 1995, by
---- ---------
and between HERTH MANAGEMENT, INC., a North Carolina corporation, hereinafter
referred to as "HERTH", and WSMP, INC., a North Carolina corporation,
hereinafter referred to as "WSMP";
W I T N E S S E T H :
WHEREAS, HERTH provides management services to WSMP pursuant to a Management
Service Agreement dated March 31, 1993, which expires by its own terms on March
31, 1996; and
WHEREAS, the parties are desirous of continuing the services provided by HERTH
for an additional three years, upon the terms and conditions of the agreement of
March 31, 1993, and restating the Agreement of the parties; and
WHEREAS, the terms of this Agreement have been considered and approved by the
Boards of Directors of the parties;
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
contained herein, the parties hereto are agreed as follows:
1. MANAGEMENT SERVICES. WSMP does hereby retain HERTH to provide executive
management services to WSMP through the employees and agents of HERTH. The
nature and extent of services to be provided may vary from time to time as
agreed upon by the parties, but shall address the following areas of corporate
management:
(a) Those services normally provided by the executive officers of corporations
of similar size and diversity, including those services normally provided
by a chief executive officer.
(b) Management and overseeing of the accounting and financial functions of
WSMP, including those services normally provided by the chief financial
officer.
(c) Management of advertising and promotions for each business segment.
(d) Sales of WSMP's Western Steer, Prime Sirloin and Bennett's Bar-B-Que
franchises.
(e) Overseeing all divisions, review of contracts, purchasing and
troubleshooting.
(f) Supervision of administration.
(g) Liaison services for external financing, including relationships with
lenders and potential lenders to WSMP.
(h) Strategic planning.
(j) Overseeing of relationships with franchisees of WSMP, and supervision of
management of franchises, cost controls and related services.
(k) Those services normally provided by a chief operating officer as to each of
WSMP's operating divisions.
These services will include any services rendered by Richard F. Howard, James
C. Richardson, Jr. and James M. Templeton. The parties agree that HERTH will
retain a real estate officer and a strategic planning officer, as soon as is
reasonably possible, to fulfill these functions for WSMP. The parties may add
or remove, or substitute personnel from time to time as they may agree.
2. TERM. This Agreement shall begin as of April 1, 1996, and shall terminate
on March 31, 1999.
3. COMPENSATION. As compensation for the services rendered hereunder, WSMP
shall pay HERTH the sum of One Million Five Hundred Thousand Dollars
($1,500,000.00) per annum, payable in four (4) equal installments of Three
Hundred Seventy-Five Thousand Dollars ($375,000.00), payable at the beginning of
each of WSMP's accounting quarters.
4. STATUS OF HERTH OPERATIONS. HERTH services shall be rendered through HERTH
employees or independent contractors, who shall remain exclusively the employees
or agents of HERTH, and who shall not be regarded as employees of WSMP.
5. EXTENT AND PLACE OF SERVICES. HERTH shall assume and perform such further
reasonable responsibilities and duties as may be requested from time to time by
WSMP. WSMP acknowledges that certain employees and agents of HERTH are
directors of WSMP or employees and directors of other related entities and
agrees that such persons may continue to devote their services to the affairs of
such other entities, on condition, however, that those services will not
interfere with the services to be performed pursuant to this Agreement. No
HERTH employee shall receive any additional compensation for service as a member
of WSMP's Board of Directors.
6. TRADE SECRETS. During the terms of this agreement, HERTH shall have access
to all facilities and records of WSMP, and, through its employees and agents,
may acquire information which is privileged to or a trade secret of WSMP. HERTH
agrees not to disclose such information in a manner which would be harmful to or
diminish the competitive stance of WSMP, and shall bind its agents and employees
to the same effect.
7. FACILITIES. HERTH, its agents and employees, shall be furnished by WSMP
with such offices, equipment, and services as may be necessary, and such other
facilities and services adequate for the performance of the services enumerated
hereunder. Those persons appointed by HERTH to perform services under this
agreement shall be granted sufficient authority as may be reasonably necessary
to carry out the duties of HERTH hereunder.
8. TERMINATION. This agreement may be terminated by either party upon a
substantial breach of the terms hereof by the other party; provided however that
the party in breach shall be given thirty (30) days written notice of the
breach, with the opportunity to cure the breach; and provided further, that
should the breach not be reasonably curable within thirty (30) days, that he
party in breach have made substantial effort to reasonably cure the breach.
Should either party terminate this agreement except in accordance with the
foregoing, then any money damages recoverable by either party for such
termination shall be limited to any sum paid or earned hereunder, respectively,
to date during the term of this agreement.
9. NOTICES. Any notice required or permitted to be given under this agreement
shall be sufficient if in writing and if sent by registered mail, with return
receipt requested to the address of the parties as follows:
WSMP, Inc.
Post Office Box 399
Claremont, North Carolina 28610
HERTH Management, Inc.
Post Office Box 399
Claremont, North Carolina 28610
Either party may, upon written notice to the other party specify a different
address for the giving of notice during or after the term hereof.
10. WAIVER OF BREACH. The waiver by either party of a breach of any provision
of this agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach.
11. ENTIRE AGREEMENT. The instrument contains the entire agreement of the
parties. It may not be changed orally, but only by agreements in writing signed
by the party against whom enforcement of any waiver, change, modification,
extension or discharge is sought.
12. BINDING EFFECT. This agreement shall be binding upon the parties hereto,
their successors and assigns.
13. GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the law of the State of North Carolina.
14. SEVERABILITY. If any provision herein shall be declared invalid or
unenforceable, the remainder of this agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above indicated.
HERTH MANAGEMENT, INC.
By: (SEAL)
-----------------------
President
ATTEST:
Secretary
(corporate seal)
WSMP, INC.
By: (SEAL)
--------------------------
President
ATTEST:
Secretary
(corporate seal)
WSMP, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - June 22, 1995
THIS PROXY IS SOLICITED ON BEHALF OF WSMP'S BOARD OF DIRECTORS
The undersigned hereby appoints James C. Richardson, Jr., Richard F. Howard and
Bobby G. Holman, and each of them proxies for the undersigned, with full power
of substitution, to vote all shares of WSMP, Inc. in Hickory, North Carolina, on
Thursday, June 22, 1995, at 10:00 a.m., or at any adjournment thereof, upon the
matters set forth below and described in the accompanying Proxy Statement and
upon such other business as may properly come before the meeting or any
adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED BELOW TO VOTE ON ANY ITEM. IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, PLEASE SIGN THE
REVERSE SIDE; NO BOXES NEEDED TO BE CHECKED.
1. ELECTION OF DIRECTORS (Item No. 1)
VOTE FOR three nominees
(Howard, Templeton, Bradford)
to terms of 3 years, as set forth in this Proxy Statement
VOTE FOR ALL EXCEPT
VOTE WITHHELD from all nominees
To vote for all directors, mark the VOTE FOR box in Item 1. To withhold voting
for all nominees, mark the VOTE WITHHELD box. To withhold voting for a
particular nominee, mark the VOTE FOR ALL EXCEPT box and enter name(s) of the
exception(s) in the space provided; your shares will be voted for the remaining
nominees.
(Continued on Other Side)
2. Proposal to approve Management Services Agreement with HERTH Management,
Inc.
FOR AGAINST ABSTAIN
WHERE NO VOTING INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED FOR ITEM NO. 1 AND NO. 2.
Receipt is hereby acknowledged of the WSMP, Inc., Notice of Meeting and Proxy
Statement.
Dated: , 1995
(Signature of Shareholder(s)
Important: Please sign exactly as your name or names appear on this Proxy.
Where shares are held jointly, both holders should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as such. If the holder is a corporation, execute in full corporate name
by authorized officer.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
