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:
[ ]Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14-a-6(e)(2))
[X]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:
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 27, 1996, at 10:00 a.m., Eastern Daylight Savings
Time,to:
1. Elect three directors to terms of three years.
2. Transact such other business as may properly come
before the meeting.
The Board of Directors has fixed the close of business on May 10, 1996, 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 31, 1996
WSMP, INC.
1 WSMP Drive, P.O. Box 399
Claremont, North Carolina 28610
May 31, 1996
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 27, 1996, 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 24, 1996. Any proxy not revoked will be voted as specified by
the shareholder. If no choice is indicated, a proxy will be voted in accor-
dance with the Board of Directors' recommendation.
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 10, 1996, the record
date, there were 2,760,338 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 1400 shareholders.
This Proxy Statement is first being mailed on or about May 31, 1996.
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>
<S> <C> <C> <C> <C>
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)
- - ---------------------- ------- ----------- -------- ----------
RSH Management, Inc.(2) 918,312 33.3 918,312 27.9
P. O. Box 399 (4) (4)
Claremont, NC 28610
HERTH Management,Inc.(3) 175,923 6.4 175,923 5.3
P. O. Box 399 (4) (4)
Claremont, NC 28610
Richard F. Howard 390 * 1,219,625 37.1
P. O. Box 399 (1)(2)(3)
Claremont, NC 28610
James C. Richardson, Jr. 500 * 1,219,735 37.1
P. O. Box 399 (1)(2)(3)
Claremont, NC 28610
Gregory A. Edgell 28,125 1.0 1,122,360 34.1
3200 Devine Street (5) (2)(3)(5)
Columbia, SC 29205
James M. Templeton 5,299 * 1,162,034 35.3
P. O. Box 399 (1)(2)(3)
Claremont, NC 28610
Lewis C. Lanier -0- * -0- *
Route 5, Box 863
Orangeburg, SC 29115
William R. McDonald, III -0- * -0- *
1004 North Center Street
Hickory, NC 28601
Miles M. Aldridge -0- * -0- *
315 Sharebrook Lane
Columbia, SC 29212
Richard F. Hendrickson 14,000 * 14,000 *
P. O. Box 10007
Raleigh, NC 27605
E. Edwin Bradford 2,249 * 2,249 *
361 Tenth Avenue Drive, NE
Hickory, NC 28603
Bobby G. Holman 916 * 13,416 *
P. O. Box 399 (1)
Claremont, N.C. 28610
Charles F. Connor, Jr. 281,761 10.2 344,261 10.5
P. O. Box 5l9 (6)
Claremont, NC 28610
Cecil R. Hash 132,721 4.8 257,721 7.8
3536 Vest Mill Road (7) (7)(8)
Winston-Salem, NC 27103
All Directors and 52,139 1.8 1,611,374 49.0
Officers as a
Group (17 persons)
*less than 1% of shares
<FN>
(1) Messrs. Howard, Richardson and Templeton have been granted the presently
exercisable options to purchase 125,000, 125,000 and 62,500 shares,
respectively, pursuant to the WSMP, Inc. Special Stock Option Plan, which
shares are attributed to the respective optionee. Five other officers,
including Mr. Holman and Mr. Hefner, have been granted incentive stock
options under the Incentive Stock Option Plan to purchase a total of
137,500 shares, options for 27,500 being presently exercisable and
attributed to the optionees. See EXECUTIVE COMPENSATION -- 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 (4.0%),
Richardson (0.5%), Templeton (0.3%), Lyerly (4.0%), Hunsucker (1.7%), and
HERTH Management, Inc. (91.9%). Beneficial ownership of other than a
pro-rata interest in the shares is disclaimed by each shareholder of RSH.
(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%). Beneficial
ownership of other than a pro-rata interest in the shares is disclaimed by
each shareholder of HERTH.
(4) RSH listing includes 156,176 shares held by HERTH for the benefit of RSH.
HERTH listing excludes these shares.
(5) Includes 28,125 shares held by spouse as custodian for minor children.
Beneficial ownership of such shares is disclaimed.
(6) Includes a presently exercisable option to purchase 62,500 shares granted
when Mr. Connor was an officer of the Company.
(7) Includes 125,000 shares held nominally by Mr. Hash for the benefit of
HERTH. Beneficial ownership of such shares is disclaimed.
(8) Includes a presently exercisable option to purchase 125,000 shares granted
when Mr. Hash was an officer of the Company.
</TABLE>
As of May 10, 1996, 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
711,052 shares of Common Stock representing 25.8% 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 representa-
tions that no other reports were required, all Section 16(a) filing require-
ments applicable to Reporting Persons were complied with during fiscal 1996.
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 II directors, whose terms expire at the 1996
annual meeting, are Messrs. James C. Richardson, Jr., Richard F. Hendrickson,
and Bobby G. Holman. 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 II directors will be elected to serve three year terms
expiring in 1999, upon the election and qualification of their successors.
Mr. Richardson, Mr. Hendrickson and Mr. Holman 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 II - NOMINEES FOR ELECTION AS DIRECTORS FOR A TERM EXPIRING JUNE, 1999.
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 47 years old.
RICHARD F. HENDRICKSON was elected to the Board of Directors in 1993,
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, 55 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 1985. Mr. Holman is 60 years old.
- - - - - - - - - - - -
CLASS III - DIRECTORS CONTINUING IN OFFICE FOR A TERM EXPIRING JUNE, 1997.
WILLIAM R. MCDONALD III, 61, has been a director since 1991, and serves on
the Executive Compensation, Sensitive Transactions and Audit Committees. He is
Branch Manager of American Pharmaceutical Services, a subsidiary of Living
Centers of America, that provides pharmaceutical needs and prescription
services to nursing homes. He has held this position with American or its
predecessors 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 the University of
Arkansas. Prior to assuming this position in 1996, he held positions as
assistant football coach at Clemson University (1993-96), the University of
South Carolina (1991-1993) and North Carolina State University (1990-1991).
Mr. Aldridge, 47, 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 47 years old.
- - - - - - - - - - - -
CLASS I - DIRECTORS CONTINUING IN OFFICE FOR A TERM EXPIRING JUNE, 1998.
RICHARD F. HOWARD, 46, became a director in 1987 and has served as Chair-
man 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 59 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-Presi-
dent of RSH Management, Inc., since 1987.
E. EDWIN BRADFORD was first elected to the WSMP Board in 1993. Mr.
Bradford is owner of Bradford Communications, Inc., a Hickory, North Carolina
marketing and advertising firm which he founded in 1977. Mr. Bradford is 53
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
------------------------------------------
four 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 two 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 one time during fiscal 1996.
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 twice 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 1996, 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
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 23, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
-------------------------------------------- ------------------------
Other Annual
Name and Fiscal Compensation Awards of All other
Principal Position Year Salary(l) Bonus (3) Options Compensation
- - ------------------------ ------ --------- ----- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
James C. Richardson, Jr. 1996 $487,550(2) -- -- -- --
President, Chief 1995 $487,550(2) -- -- -- --
Executive Officer 1994 $625,000(2) -- -- -- --
Richard F. Howard 1996 $495,000(2) -- -- -- --
Chairman of the Board 1995 $495,000(2) -- -- -- --
and Secretary 1994 $640,000(2) -- -- -- --
James M. Templeton 1996 $200,000(2) -- -- -- --
Senior Vice President 1995 $200,000(2) -- -- -- --
of Franchising and 1994 $165,000(2) -- -- -- --
Real Estate
Bobby G. Holman 1996 $130,000 -- 17,656(4) -- --
Chief Financial Officer 1995 $104,400(5) -- -- 62,500(6) --
and Treasurer 1994 -- -- -- -- --
Larry D. Hefner 1996 $70,000 $48,135 -- -- --
Vice President, 1995 $57,850 $52,237 -- 25,000(6) --
Procurement 1994 $50,000 $39,500 -- -- --
<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 manage-
ment 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 10% of salary and bonus
or other annual compensation, or $50,000, in any one year.
(4) Reimbursement for moving expenses.
(5) Represents a partial year. Mr. Holman was hired in May, 1994.
(6) Mr. Holman and Mr. Hefner were granted options to purchase 62,500 shares
and 25,000 shares, respectively (as adjusted for a subsequent stock
split), during Fiscal 1995, 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 $4.00 and $5.20, respectively (as
adjusted for a subsequent stock split). See EXECUTIVE COMPENSATION -
Compensation Plans.
</TABLE>
The following table presents options exercised during the last fiscal year
and the value of unexercised options at February 23, 1996.
<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> <C>
James C. Richardson, Jr. -0- -0- 125,000/ $165,625/
-0- -0-
Richard F. Howard -0- -0- 125,000/ $165,625/
-0- -0-
James M. Templeton -0- -0- 62,500/ $ 73,438/
-0- -0-
Bobby G. Holman -0- -0- 12,500/ $ 4,688/
50,000 18,750
Larry D. Hefner -0- -0- 5,000/ $ -0-/
20,000 -0-
</TABLE>
WSMP, Inc. has not during fiscal 1996 adjusted or amended the exercise
price on stock options previously awarded to these executive officers, except
to reflect a 5-4 stock split which was declared in fiscal 1995, but which
occurred in fiscal 1996.
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 625,000
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 exer-
cise 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 restric-
tions 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.
No options were issued under the Option Plan during fiscal 1996, and no
options were exercised by the Chief Executive Officer or the four other named
officers during fiscal 1996.
1987 Special Stock Option Plan. The Company's 1987 Special Stock Option
------------------------------
Plan (the "Special Plan") provides for the issuance of up to 625,000 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 transfer-
able 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 recapi-
talization of the Company.
No options were issued under the Special Plan during fiscal 1996, and no
options were exercised by a grantee during fiscal 1996.
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 $9,500,
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 immedi-
ately; Company contributions vest completely after six years of service. No
withdrawals under the Profit-Sharing Plan during Fiscal 1996 attributable to
the Company's contributions were made by any executive officer.
The executive officers of the Company who are paid pursuant to a manage-
ment 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 condi-
tions. 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 con-
tributions 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.
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, as 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 1996 was less than the median of
overall compensation paid to the comparison group.
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 in 1993, and which
was renewed in 1995, upon ratification by the shareholders, for an additional
three-year term beginning in 1996.
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 1996 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 of 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 performances 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 con-
tract 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. Concerning this aspect of compensa-
tion, the Committee considered that the Company did not achieve profitability
during the past fiscal year, primarily because of 1) the loss by a co-packer
of the Company's bakery division of a substantial account, 2) the recall of a
ham curing division product because of insufficient curing time, and 3) harsh
winter weather that effected the restaurant division's restaurant performance;
they further considered the extent to which some of these factors were beyond
the control of management. The Committee also considered management's timely
actions in addressing and working to correct these problems, and the fact that
other performance-based criteria were met, and concluded that it should monitor
the impact of such corrective action over the course of the coming year.
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 goals, 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.
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 22, 1991 and ending February 23, 1996.
The graph assumes that $100 is invested on February 22, 1991, 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, 1996
[GRAPH HERE]
Index Year Year Year Year Year
at Ending Ending Ending Ending Ending
2/22/91 2/28/92 2/26/93 2/25/94 2/24/95 2/23/96
------- ------- ------- ------- ------- -------
WSMP, Inc.: $100 $170 $222 $163 $193 $162
S&P Composite
Index: $100 $116 $129 $139 $150 $208
Peer Group: $100 $118 $128 $127 $118 $133
The Company-constructed peer group consists of Family Steakhouses of
Florida, Flagstar Companies, Inc., Flowers Industries, Inc., Interstate
Bakeries Corp., Perkins Family Restaurant LP, Piemonte Foods Corp., Po' Folks,
Inc., Stacey's Buffet, Inc., and Thorne Apple Valley, Inc. The returns of each
group member were weighted according to the member's stock market capitaliza-
tion 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 1995 annual
meeting, which provides for an annual compensation rate of $1,500,000 per year
and expires in 1999. 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. See
EXECUTIVE COMPENSATION.
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 $1,334,000
during fiscal 1996 in connection with such insurance, of which sums County-Wide
retained approximately ten percent as commissions. Charles F. Connor, Jr., who
is an approximately 10% 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.
Denver Equipment Company ("Denver") and Howard Furniture Company
("Howard") are companies which sell restaurant equipment and supplies, and
restaurant furnishings, respectively, to the Company, as well as to affiliated
and unaffiliated franchises and to the public in general. During fiscal 1996,
Denver was paid a total of $446,000, and Howard a total of $36,000, for
purchases made by the Company. These companies have as their major owner
Richard S. Howard, the father of director Richard F. Howard; and Charles F.
Connor, Jr. is a 10% owner of Denver. The Company believes that the furnish-
ings and equipment purchased from Denver and Howard were purchased on terms as
fair and equitable as could have been obtained from unaffiliated third parties.
During fiscal 1996, WSMP agreed with its senior lenders to liquidate
certain secured promissory notes it was holding. Most of this indebtedness,
which totalled $1,440,000, consisted of purchase money promissory notes
received by WSMP upon various sales of real estate to third parties, which
notes were secured by purchase money mortgages on the properties sold.
Mr. Templeton offered to purchase these notes for cash, and the Company
accepted his offer at a price representative of 75% of the present amounts that
were due and owing under the notes, or $1,080,000. Management felt these
purchase money notes to be high risk indebtedness and determined that Mr.
Templeton's offer was as fair and equitable as could be obtained from
unaffiliated parties who deal in high risk mortgage-backed indebtedness.
Management further feels that the terms of its agreement with Mr. Templeton,
and the discount given from present amounts due, were just as favorable, if not
more favorable, to WSMP than the Company could have obtained from any
commercial purchaser of such notes on an arms-length basis.
WSMP had in previous years acquired ownership interests in three "Sage-
brush Steakhouse and Saloon" restaurants, located in Knoxville, Tennessee,
Asheville, North Carolina, and Rock Hill, South Carolina. These restaurants
were developed by a group led by Charles F. Connor, Jr., a former officer and
director of WSMP who presently owns approximately 10% of the Company's out-
standing stock. James C. Richardson also held interests in nine of these
restaurants.
During fiscal 1996, Sagebrush, Inc., the parent company of the
"Sagebrush Steakhouse and Saloon" chain, made an initial public offering of its
stock. As part of this offering Sagebrush, Inc. completed a corporate reor-
ganization by which it issued Sagebrush common stock to the owners of its
Sagebrush restaurants in exchange for their interests in the restaurants.
Under this arrangement WSMP or its wholly-owned subsidiaries received 111,983
shares of Sagebrush, Inc. common stock valued at $783,881 at the offering price
of $7.00 per share and $87,000 in cash. This stock represents less than 2% of
the Sagebrush shares outstanding after the offering. Mr. Connor received
1,474,241 shares, or approximately 23% of the outstanding shares, and
$1,146,632 in cash. Mr. Richardson received 176,085 shares and $137,000 in
cash.
This reorganization took place pursuant to the report of an independent
certified public accounting firm which valued the 22 corporations which
operated "Sagebrush Steakhouse and Saloon" restaurants, including the three
corporations in which WSMP owned interests, and determined their pro-rata
ownership of Sagebrush stock in the reorganization. WSMP feels that under such
circumstances the valuation and the reorganization were fair and equitable to
the Company, irrespective of any affiliation among Connor, Sagebrush, and WSMP.
Messrs. Hash, Howard, and Connor own interests in an aggregate of 26 of
the Company's franchised restaurants. Royalty fees, accounting fees, and
advertising fees to the Company from these restaurants aggregated $1,079,000
during fiscal 1996. No receivables from any of these restaurants were written
off during the last fiscal year.
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. No transac-
tions of this nature were entered into during fiscal 1996.
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
1996, the Company paid BCI a total of $175,000 for media plan development and
research, development of advertising concepts and associated services and
$497,000 for media costs and other associated expenses for a total of $672,000.
Of the total received by BCI, it paid out on behalf of the Company $356,000 for
media and media-related printing expenses, and $191,000 for non-media related
printing expenses, mechanical and consultant costs, for a total of $547,000.
BCI renders such services to the public in general. The owner of BCI, E. Edwin
Bradford, has been a director of the Company since 1993.
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 independent 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.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of Deloitte & Touche LLP has served as independent auditors for
the Company since 1982.
A representative of Deloitte & Touche LLP 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.
1997 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 1997 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, 1997.
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 benefi-
cial 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 23, 1996,
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
WSMP, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - June 27, 1996
THIS PROXY IS SOLICITED ON BEHALF OF WSMP INC.'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 27, 1996, 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
---- (Richardson, Hendrickson, Holman)
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)
WHERE NO VOTING INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED FOR ITEM NO. 1.
Receipt is hereby acknowledged of the WSMP, Inc., Notice of Meeting and Proxy
Statement.
Dated: , 1996
--------------------------
--------------------------------------
--------------------------------------
(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.
