<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PERFORMANCE FOOD GROUP COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LOGO]
6800 PARAGON PLACE, SUITE 500
RICHMOND, VIRGINIA 23230
(804) 285-7340
Dear Shareholder:
It is my pleasure to extend to you a cordial invitation to attend the
Annual Meeting of Shareholders of Performance Food Group Company (the "Company")
to be held at 10:00 a.m., eastern daylight time, on Wednesday, April 29, 1998,
at the Pocahontas Foods, USA, Inc. offices, located at 7420 Ranco Road,
Richmond, Virginia.
Shareholders will be asked to elect three directors and to consider and
act on a proposal to amend the Company's Employee Stock Purchase Plan. In
addition, we will present a report on the condition and performance of the
Company, and you will have an opportunity to question management on matters that
affect the interests of all shareholders.
We hope you will be able to attend the meeting in person. Whether you
expect to attend or not, we request that you complete and return the enclosed
proxy card in the enclosed post-paid envelope. Your vote is important.
I look forward to seeing you on April 29, 1998.
Sincerely,
Robert C. Sledd
Chairman and Chief Executive Officer
<PAGE> 3
[LOGO]
6800 PARAGON PLACE, SUITE 500
RICHMOND, VIRGINIA 23230
(804) 285-7340
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Performance Food Group Company (the "Company") will be held
at 10:00 a.m., eastern daylight time, on Wednesday, April 29, 1998 at the
Pocahontas Foods, USA, Inc. offices, located at 7420 Ranco Road, Richmond,
Virginia for the following purposes:
1. To elect two (2) Class II directors to hold office for a
term of three (3) years and until their successors are elected and
qualified and to elect one (1) Class III director to hold office for a
term of one (1) year and until his successor is elected and qualified;
2. To consider and act upon a proposal to amend the Company's
Employee Stock Purchase Plan to increase the number of shares reserved
for issuance thereunder; and
3. To transact such other business as may properly come before
the Annual Meeting.
The Board of Directors has fixed the close of business on March 16,
1998 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting.
Your attention is directed to the Proxy Statement accompanying this
notice for a more complete statement regarding matters to be acted upon at the
Annual Meeting.
By the Order of the Board of Directors
DAVID W. SOBER, Secretary
Richmond, Virginia
March 26, 1998
YOUR REPRESENTATION AT THE ANNUAL MEETING IS IMPORTANT. TO ENSURE YOUR
REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. SHOULD YOU DESIRE TO REVOKE
YOUR PROXY, YOU MAY DO SO AS PROVIDED IN THE ACCOMPANYING PROXY STATEMENT AT ANY
TIME BEFORE IT IS VOTED.
<PAGE> 4
[LOGO]
6800 PARAGON PLACE, SUITE 500
RICHMOND, VIRGINIA 23230
(804) 285-7340
--------------------
PROXY STATEMENT
--------------------
The accompanying proxy is solicited by the Board of Directors of
Performance Food Group Company (the "Company") for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on April 29, 1998,
and any adjournments thereof, notice of which is attached hereto.
The purposes of the Annual Meeting are to elect two Class II directors
and one Class III director; to consider and act upon a proposal to amend the
Company's Employee Stock Purchase Plan to increase the number of shares issuable
thereunder; and to transact such other business as may properly be brought
before the Annual Meeting or any adjournment thereof.
A shareholder who signs and returns a proxy may revoke the same at any
time before the authority granted thereby is exercised by attending the Annual
Meeting and electing to vote in person, by filing with the Secretary of the
Company a written revocation or by duly executing a proxy bearing a later date.
Unless so revoked, the shares represented by the proxy will be voted at the
Annual Meeting. Where a choice is specified on the proxy, the shares represented
thereby will be voted in accordance with such specifications. If no
specification is made, such shares will be voted FOR the election of the three
director nominees and FOR the amendment to the Employee Stock Purchase Plan.
The Board of Directors knows of no other matters which are to be
brought to a vote at the Annual Meeting. If any other matter does come before
the Annual Meeting, however, the persons appointed in the proxy or their
substitutes will vote in accordance with their best judgment on such matters.
The Board of Directors has fixed the close of business on March 16,
1998 as the record date for the Annual Meeting. Only record holders of the
Company's common stock, $.01 par value per share (the "Common Stock"), at the
close of business on that date will be entitled to vote at the Annual Meeting.
On the record date, the Company had outstanding 12,511,580 shares of Common
Stock. Holders of the Common Stock will be entitled to one vote for each share
of Common Stock so held, which may be given in person or by proxy duly
authorized in writing.
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
meeting. Abstentions and "non-votes" are counted as present in determining
whether the quorum requirement is satisfied. Because directors are elected by a
plurality of the votes cast by the holders of the Common Stock represented and
entitled to vote at the Annual Meeting, abstentions are not considered in the
election. Because the amendment to the Employee Stock Purchase Plan will be
approved if votes for exceed votes cast against the proposal, abstentions are
not considered in that vote. Any other matters as may properly come before the
meeting or any adjournment thereof shall be approved by the affirmative vote of
a majority of the votes cast by the holders of Common Stock represented and
entitled to vote at the Annual Meeting. A "non-vote" occurs when a nominee
holding shares for a beneficial owner votes on one proposal, but does not vote
on another proposal because the nominee does not have discretionary voting power
and has not received instructions from the beneficial owner.
This Proxy Statement and the Company's Annual Report to Shareholders
have been mailed on or about March 26, 1998 to all shareholders of record at the
close of business on March 16, 1998. The cost of solicitation of proxies will be
borne by the Company, including expenses in connection with preparing,
assembling and mailing this Proxy Statement. Such solicitation will be made by
mail, and may also be made by the Company's regular officers or employees
personally or by telephone or telecopy. The Company may reimburse brokers,
custodians and nominees for their expenses in sending proxies and proxy
materials to beneficial owners.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information furnished to the
Company as of March 16, 1998 concerning persons known to the Company to be the
beneficial owners of more than 5% of the outstanding shares of the Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS(1)
------------------- --------- -----------
<S> <C> <C>
Performance Food Group Employee Savings and Stock Ownership Trust................. 1,443,533(2) 11.5%
6800 Paragon Place, Suite 500
Richmond, Virginia 23230
Palisade Capital Management, L.L.C................................................ 1,521,300(3) 12.2%
One Bridge Plaza, Suite 695
Fort Lee, New Jersey 07024
</TABLE>
- -----------------
(1) Computed in accordance with Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934.
(2) 902,249 shares held by the Performance Food Group Employee Savings and
Stock Ownership Plan (the "ESOP") have been allocated to an aggregate
of approximately 2,300 participants of the Company who exercise voting
power over such shares. The remaining 541,284 unallocated shares are
voted by the Trustee at the direction of the Plan Committee which is
appointed by the Board of Directors of the Company.
(3) Based solely on information contained in a Schedule 13G/A filed by
Palisade Capital Management, L.L.C. with the Securities and Exchange
Commission (the "SEC") on February 2, 1998.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Restated Charter classifies the Board of Directors into
three classes, each class to be as nearly equal in number as possible,
designated Class I, Class II and Class III. At each annual meeting, directors of
the class whose term of office expires in that year are elected for a three-year
term. The terms of the two Class II directors, Robert C. Sledd and Fred C. Goad,
Jr., will expire upon the election and qualification of new directors at this
Annual Meeting. The terms of each of the two Class III directors and each of the
two Class I directors will expire at the annual meeting in 1999 and 2000,
respectively. The Board of Directors has designated Robert C. Sledd and Fred C.
Goad, Jr. as the two nominees for reelection as Class II directors for a
three-year term expiring at the annual meeting in 2001 and until their
successors are elected and qualified. Both of the nominees are currently
directors of the Company and were elected by the shareholders.
In addition, Jerry J. Caro, a Class III director, has indicated that he
intends to resign from the Board of Directors as of the date of the annual
meeting. The Board of Directors has designated John E. Stokely as the nominee
for election as a Class III director for a one-year term expiring at the annual
meeting in 1999 and until his successor is elected and qualified.
Unless contrary instructions are received, it is intended that the
shares represented by proxies solicited by the Board of Directors will be voted
in favor of the election of the two Class II nominees and the Class III nominee
as directors. Each nominee has consented to be a candidate and to serve, if
elected. While the Board has no reason to believe that any nominee will be
unable to accept nomination or election as a director, if such an event should
occur, the persons named in the form of proxy have advised the Company that they
will vote for such substitute or substitutes as shall be designated by the
current Board of Directors.
2
<PAGE> 6
The following table contains, as of March 16, 1998, certain information
concerning the executive officers and directors of the Company, including the
nominees, which information has been furnished to the Company by the individuals
named.
<TABLE>
<CAPTION>
SHARES
COMMON
STOCK
DIRECTOR TERM BENEFICIALLY PERCENT
NAME AGE SINCE EXPIRES POSITION OWNED(1) OF CLASS
---- --- ----- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Sledd........ 45 1987 1998 Chairman, Chief Executive 347,432(2) 2.8%
Officer and Director
C. Michael Gray........ 48 1992 1999 President, Chief Operating 145,911 1.2%
Officer and Director
Roger L. Boeve......... 59 Executive Vice President and 111,557(3) *
Chief Financial Officer
Thomas Hoffman......... 58 Senior Vice President 54,751 *
David W. Sober......... 65 Vice President of Human 25,007(3) *
Resources and Secretary
Charles E. Adair....... 50 1993 2000 Director 22,750 *
Jerry J. Caro.......... 55 1987 1999 Director 27,000 *
Fred C. Goad, Jr....... 57 1993 1998 Director 24,250 *
Timothy M. Graven...... 46 1993 2000 Director 19,750 *
John E. Stokely........ 45 --- --- Director Nominee 1,000 *
All directors and
executive officers as a
group (10 persons)..... 779,408 6.0%
</TABLE>
- --------------------
* Less than one percent
(1) Includes the following shares which are not currently outstanding but
which the named individuals are entitled to acquire as of March 16,
1998 and within 60 days of such date upon the exercise of options: Mr.
Sledd - 118,688; Mr. Gray - 88,313; Mr. Boeve - 90,563; Mr. Hoffman -
26,999; Mr. Sober - 17,888; Mr. Adair - 12,250; Mr. Caro - 27,000; Mr.
Goad - 12,250; Mr. Graven - 12,250; all directors and executive
officers as a group (10 persons) - 406,201 shares. The shares described
in this note are deemed to be outstanding for the purpose of computing
the percentage of outstanding common stock owned by such persons
individually and by the group, but are not deemed to be outstanding for
the purposes of computing the percentage of ownership of any other
person.
(2) Includes 40,500 shares held by Mr. Sledd as trustee for the benefit of
his children. Also includes 2,250 shares held by Mr. Sledd's wife for
which Mr. Sledd disclaims beneficial ownership.
(3) Excludes unallocated shares held by the ESOP. Mr. Boeve and Mr. Sober
are trustees of the ESOP and are members of the Plan Committee which
directs the voting of such shares.
- ------------------
3
<PAGE> 7
The following is a brief summary of the business experience of each of
the executive officers and directors of the Company, including the nominees.
Robert C. Sledd has served as Chairman of the Board of Directors since
February 1995 and has served as Chief Executive Officer and a director of the
Company since 1987. Mr. Sledd served as President of the Company from 1987 to
February 1995. Mr. Sledd has served as a director of Taylor & Sledd Industries,
Inc., a predecessor of the Company, since 1974, and served as President and
Chief Executive Officer of that company from 1984 to 1987. Mr. Sledd also serves
as a director of SCP Pool Corporation, a supplier of swimming pool supplies and
related products.
C. Michael Gray has served as President and Chief Operating Officer of
the Company since February 1995 and has served as a director of the Company
since 1992. Mr. Gray served as President of Pocahontas Foods, USA, Inc.
("Pocahontas"), a wholly-owned subsidiary of the Company, from 1981 to 1995. Mr.
Gray had been employed by Pocahontas since 1975, serving as Marketing Manager
and Vice President of Marketing. Prior to joining Pocahontas, Mr. Gray was
employed by the Kroger Company as a produce buyer.
Roger L. Boeve has served as Executive Vice President and Chief
Financial Officer of the Company since 1988. Prior to that date, Mr. Boeve
served as Executive Vice President and Chief Financial Officer for The Murray
Ohio Manufacturing Company and as Corporate Vice President and Treasurer for
Bausch and Lomb. Mr. Boeve is a certified public accountant.
Thomas Hoffman has served as Senior Vice President of the Company since
February 1995. Mr. Hoffman has also served as President of Kenneth O. Lester
Company, a wholly-owned subsidiary of the Company, since 1989. Prior to joining
the Company in 1989, Mr. Hoffman had served in executive capacities at Booth
Fisheries Corporation, a subsidiary of Sara Lee Corporation, as well as C.F.S.
Continental, Miami and International Foodservice, Miami, two foodservice
distributors.
David W. Sober has served as Vice President of Human Resources since
1987 and as Secretary of the Company since March 1991. Mr. Sober served as Vice
President for Purchasing of the Company from March 1991 to July 1994. Mr. Sober
served as Corporate Vice President and Secretary for Taylor & Sledd Industries,
Inc., a predecessor of the Company, during 1986 and 1987. Mr. Sober held various
positions in other companies in the wholesale and retail food industries,
including approximately 30 years with the A&P grocery store chain.
Charles E. Adair has served as a director of the Company since August
1993. Mr. Adair is the Chairman and founder of Adair & Associates, Inc., a
consulting and private investment firm founded in 1993 and is President of
Kowaliga Capital, Inc., a venture capital management company founded in 1994.
Mr. Adair was employed by Durr-Fillauer Medical, Inc., a distributor of
pharmaceuticals and other medical products, from 1973 to 1992, serving as
Executive Vice President from 1978 to 1981, as President and Chief Operating
Officer from 1981 to 1992, and as a director from 1976 to 1992. Mr. Adair also
serves as a director of Tech Data Corporation, a distributor of microcomputers
and related hardware and software products. Mr. Adair is a certified public
accountant.
Jerry J. Caro has served as a director of the Company since 1987. Mr.
Caro served as Founding Chairman of the Company from February 1995 to December
1997, as Senior Vice President from 1989 to December 1997 and as Vice Chairman
of the Company from 1988 to February 1995. Prior to joining the Company, Mr.
Caro was the President of Caro Foods, Inc., a wholly-owned subsidiary of the
Company.
Fred C. Goad, Jr. has served as a director of the Company since July
1993. Since June 1996, Mr. Goad has served as Chairman and Co-Chief Executive
Officer and a director of ENVOY Corporation ("ENVOY"), a provider of electronic
transaction processing services for the health care industry. From 1985 to June
1996, Mr. Goad served as President and Chief Executive Officer and as a director
of ENVOY. Prior to 1985, Mr. Goad served in executive positions with UCCEL
Corporation and FISI-Madison Financial Corp. Mr. Goad also serves as a director
of Oacis Healthcare Systems, Inc., a clinical health care software and services
company.
4
<PAGE> 8
Timothy M. Graven has served as a director of the Company since August
1993. Mr. Graven is the Managing Partner and co-founder of Triad Investment
Company, LLC, a private investment firm founded in 1995. Mr. Graven previously
served as President and Chief Operating Officer of Steel Technologies, Inc. of
Louisville, Kentucky, a steel processing company, from March 1990 to November
1994, as Executive Vice President and Chief Financial Officer from May 1985 to
March 1990 and as a director from 1982 to 1994. Mr. Graven also serves as a
director of In-House Rehab Corporation, a provider of physical, speech and
occupational therapy services to nursing home and other long-term care
providers.
John E. Stokely has been nominated to serve as a director of the
Company subject to the approval of the shareholders at the annual meeting. Mr.
Stokely is the President, Chief Executive Officer and a director of Richfood
Holdings, Inc., a wholesale grocery distributor ("Richfood"). Mr. Stokely has
held his current position with Richfood since January 1997, served as President
and Chief Operating Officer from April 1995 to January 1997 and served as
Executive Vice President from 1990 to April 1995.
The Board of Directors has established an Audit Committee for the
purpose of recommending the Company's auditors, reviewing the scope of their
engagement, consulting with such auditors, reviewing the results of the audit
examination, acting as a liaison between the Board and the auditors and
reviewing various Company policies, including those related to accounting and
internal control matters. Messrs. Goad, Graven and Adair comprise the Audit
Committee, which met two times during the fiscal year ended December 27, 1997.
The Board of Directors has established a Compensation Committee for the
purpose of evaluating the performance of the Company's officers, reviewing and
approving officers' compensation, formulating bonuses for the Company's
management and administering the Company's stock incentive plans. Messrs. Goad,
Graven and Adair comprise the Compensation Committee, which met two times during
the fiscal year ended December 27, 1997.
The Board of Directors held eight meetings, four of which were via
teleconference, during the fiscal year ended December 27, 1997. All incumbent
directors attended at least 75% of the meetings of the Board and each committee
of the Board on which such directors served, held during fiscal 1997. The Board
of Directors does not have a nominating committee.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended December 27, 1997 (fiscal 1997),
December 28, 1996 (fiscal 1996), and December 30, 1995 (fiscal 1995) for (i) the
Chief Executive Officer of the Company and (ii) the four highest paid executive
officers of the Company whose salary and bonus payments exceeded $100,000
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------- -------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#)(1) ($)
------------------ ---------- -------------- --------------- ---------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Sledd 1997 $269,807 $164,864 -- -- $6,359(5)
Chairman and Chief Executive 1996 242,466 111,139 -- 13,501 7,174(5)
Officer 1995 189,780 121,523 $50,697(2) 11,250 7,265(5)
C. Michael Gray 1997 217,858 126,237 -- -- 6,359(5)
President and Chief Operating 1996 201,509 100,709 35,724(3) 18,751 7,174(5)
Officer 1995 169,598 80,704 46,404(3) 11,250 7,265(5)
Roger L. Boeve 1997 189,333 71,374 -- -- 6,359(5)
Executive Vice President and 1996 173,741 49,705 39,968(4) 14,251 7,174(5)
Chief Financial Officer 1995 146,118 54,234 26,670(4) 7,500 7,265(5)
Thomas Hoffman 1997 185,244 19,530 -- -- 6,359(5)
Senior Vice President 1996 172,877 59,431 -- 16,501 7,174(5)
1995 141,759 160,126 -- 3,000 7,265(5)
David W. Sober 1997 125,159 38,319 -- -- 6,359(5)
Vice President of Human 1996 113,568 28,785 -- 4,200 6,931(5)
Resources and Secretary 1995 100,133 25,471 -- 3,000 5,665(5)
</TABLE>
- -------------------------
(1) Number of stock options granted under the Company's 1993 Employee Stock
Incentive Plan (the "1993 Plan").
(2) Includes $42,851 for moving expenses in connection with the Company's
relocation of its headquarters to Richmond, Virginia.
(3) Includes $28,049 in 1996 and $38,487 in 1995 for moving expenses in
connection with Mr. Gray's temporary relocation to the Company's
facility in Atlanta, Georgia.
(4) Includes $32,122 in 1996 and $18,824 in 1995 for moving expenses in
connection with the Company's relocation of its headquarters to
Richmond, Virginia.
(5) Includes the dollar value of allocations to the Named Executive Officer
under the ESOP based on the closing price of the Company's Common Stock
on The Nasdaq Stock Market of $15.83 per share on December 29, 1995 for
fiscal 1995, $15.25 per share at December 27, 1996 for fiscal 1996 and
$21.00 per share at December 26, 1997 for fiscal 1997.
- ------------------
There were no stock option grants to any of the Named Executive
Officers during the fiscal year ended December 27, 1997.
6
<PAGE> 10
\
The Company has not awarded stock appreciation rights to any employee
and has no long-term incentive plans, as that term is defined in regulations
promulgated by the SEC. During the fiscal year ended December 27, 1997, the
Company did not adjust or amend the exercise price of stock options awarded to
the Named Executive Officers, whether through amendment, cancellation or
replacement grants, or other means. Also, the Company presently has no defined
benefit or actuarial plans covering any employees of the Company.
The following table sets forth certain information with respect to
stock options issued to the Named Executive Officers pursuant to the 1993 Plan
and the 1989 Nonqualified Stock Option Plan. No stock options were exercised by
the Named Executive Officers in fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS HELD AT OPTIONS AT
EXERCISE (#) REALIZED ($) DECEMBER 27, 1997 DECEMBER 27, 1997(1)
------------ ------------ ---------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Sledd....... NONE NONE 115,875 19,126 $1,872,113 $149,632
C. Michael Gray....... NONE NONE 85,500 24,376 1,386,169 183,757
Roger L. Boeve........ NONE NONE 88,688 18,001 1,437,073 133,882
Thomas Hoffman........ NONE NONE 26,249 18,001 397,689 123,757
David W. Sober........ NONE NONE 17,138 5,700 271,114 43,800
</TABLE>
- --------------------
(1) Based on the closing price of the Company's Common Stock on The Nasdaq
Stock Market at December 26, 1997 of $21.00 per share.
DIRECTOR COMPENSATION
Non-employee directors receive an annual retainer of $3,000 and a fee
of $1,000 for each Board meeting attended, $500 for each committee meeting
attended on a day on which there is no regularly scheduled Board meeting, $500
for each meeting attended by telephone and are reimbursed for expenses
reasonably incurred in connection with their services as a director. Directors
who are officers or employees of the Company receive no compensation for serving
as members of the Board. The aggregate amount of fees paid to all of the
non-employee directors for fiscal 1997 was $17,000.
Each non-employee director participates in the Outside Directors' Plan,
which was approved by the shareholders of the Company on July 21, 1993.
Non-employee directors elected to the Board subsequent to the adoption of the
Outside Directors' Plan will receive an option for 5,250 shares upon their
election to the Board of Directors and all non-employee directors will receive
an annual option grant of 2,500 shares as of the date of each annual meeting of
shareholders. The options become exercisable, subject to a director's continued
service on the Board of Directors, one year from the date of grant, and expire
on the tenth anniversary of such date. All options issued under the Outside
Directors' Plan have an exercise price per share at the date of grant equal to
the closing sale price on The Nasdaq Stock Market on that date. At December 27,
1997, there were three participants under the Outside Directors' Plan who held
options covering an aggregate of 15,750 shares at an exercise price of $9.33 per
share, 4,500 shares at an exercise price of $14.17 per share, 4,500 shares at an
exercise price of $12.67 per share, 4,500 shares at an exercise price of $18.33
7
<PAGE> 11
per share and 7,500 shares at an exercise price of $20.00 per share. There have
been no exercises to date of options granted under the Outside Directors' Plan.
The Board of Directors may in the future adjust the compensation of
directors as it deems advisable and consistent with the best interests of the
Company's shareholders and the financial abilities of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the Compensation Committee of the Board of
Directors was composed of Messrs. Goad, Graven and Adair. None of these persons
has at any time been an officer or employee of the Company or any of its
subsidiaries. In addition, there are no relationships among the Company's
executive officers, members of the Compensation Committee or entities whose
executives serve on the Board of Directors or the Compensation Committee that
require disclosure under applicable SEC regulations.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions with respect to compensation of the Named Executive Officers
for fiscal 1997 were made by the Compensation Committee of the Board of
Directors, which was composed of Messrs. Goad, Graven and Adair. None of these
persons has at any time been an officer or employee of the Company or any of its
subsidiaries. The Compensation Committee approves compensation actions and
long-term incentive awards to the Named Executive Officers and other key
employees of the Company, and reviews and administers the incentive
compensation, stock option and other compensation plans of the Company.
The overall objectives of the Company's executive compensation program for
fiscal 1997 were to:
- Attract and retain the highest quality talent to lead the
Company
- Reward key executives based on business performance
- Design incentives to maximize shareholder value
- Assure that objectives for corporate and individual
performance are measured
The philosophy upon which these objectives were based is to provide
incentive to the Company's officers to enhance the profitability of the Company
and align closely the financial interests of the Company's officers with those
of its shareholders. In order to implement this philosophy for fiscal 1997, the
Compensation Committee reviewed the various elements of executive compensation,
including salaries, incentive compensation awards and stock option awards under
the 1993 Plan. In 1995, the Compensation Committee retained William M. Mercer,
Incorporated ("Mercer"), a nationally known consulting firm, to determine for
the Compensation Committee the Company's practices relative to a comparable
group of companies of similar size. The Mercer analysis and the recommendation
of the Company's Chairman, Robert C. Sledd, were used by the Compensation
Committee to establish compensation levels for fiscal 1997 for members of senior
management.
The Compensation Committee set annual salaries for the Named Executive
Officers somewhat below competitive levels so that the Company relies to a
significant degree on annual cash bonuses and long-term stock based incentive
compensation to attract and retain senior management of outstanding abilities
and to motivate them to perform to the full extent of their abilities. Beginning
in fiscal 1995, the Compensation Committee and the Board implemented an annual
cash bonus program for senior management, including the Named Executive
Officers, based on Economic Value Added ("EVA"). EVA measures the Company's
ability to generate after-tax operating profits in excess of the cost of
capital, including both debt and equity, employed to generate that profit. The
Company's bonus program includes a component based on the improvement in EVA
over the prior year and a component based on current year EVA. Under this
program, an executive's bonus varies directly with improvement in and with the
amount of after-tax operating profits in excess of the cost of capital.
Therefore, an executive is rewarded for creating shareholder wealth by most
effectively utilizing the Company's capital. In addition, an executive's bonus
is "at risk" in that no bonuses are paid if the Company
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<PAGE> 12
fails to improve the utilization of capital or generate after-tax operating
profits in excess of the cost of capital. Based on the foregoing, the Company's
Chairman and Chief Executive Officer, Robert C. Sledd, was paid a base salary in
fiscal 1997 of approximately $270,000 and earned bonuses under the cash bonus
program totaling approximately $165,000.
The long-term incentive program for senior management consists of stock
option and other stock-based awards granted under the 1993 Plan. The
Compensation Committee has established a pattern of granting stock option awards
on a bi-annual basis. Accordingly, no grants of stock options were made to the
Named Executive Officers during 1997. The Compensation Committee expects to make
awards under the 1993 Plan in fiscal 1998.
FEDERAL INCOME TAX DEDUCTIBILITY LIMITATIONS
The Compensation Committee believes it is appropriate to take into
account the $1,000,000 limit on the deductibility of executive compensation for
federal income tax purposes enacted as part of the 1993 Omnibus Budget
Reconciliation Act ("OBRA") and to seek to qualify the Company's long-term
compensation awards as performance-based compensation excluded from the
$1,000,000 limit. Compensation under the Company's stock incentive plans is
currently excluded from the $1,000,000 limit under the transition rules
contained in the proposed Treasury regulations under OBRA and none of the
Company's executive officers has received other compensation that could
potentially exceed the applicable limits under OBRA.
The tables set forth under "Executive Compensation," and the
accompanying narrative and footnotes, reflect the decisions covered by the above
discussion.
Fred C. Goad, Jr. Timothy M. Graven Charles E. Adair
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the percentage change in the unaudited
total return on the Company's Common Stock against the cumulative total return
of the S&P 500 Index and the S&P Distributors (Consumer Products) Index between
August 24, 1993 (the date the Company's Common Stock began trading on the Nasdaq
National Market) and December 27, 1997. The graph assumes the value of the
investment in the Company's Common Stock and each index was $100 at August 24,
1993, and that all dividends, if any, were reinvested.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
AUGUST
1993 1993 1994 1995 1996 1997
----- ---- ---- ---- ---- ----
Performance Food Group Company $100 $158 $81 $153 $150 $230
S&P 500 Index $100 $102 $104 $143 $175 $234
S&P Distributors (Food and Health) $100 $97 $102 $128 $127 $178
</TABLE>
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<PAGE> 13
PROPOSAL 2: AMENDMENT OF THE
PERFORMANCE FOOD GROUP COMPANY
EMPLOYEE STOCK PURCHASE PLAN
The Performance Food Group Company Employee Stock Purchase Plan (the
"Plan") was adopted by the Company's shareholders on April 19, 1994. The Plan
initially authorized 100,000 shares of Common Stock for issuance and authorized
an additional 75,000 shares in May 1996, which number of shares was subsequently
increased to 262,500 as a result of a stock split in the form of a stock
dividend paid on July 15, 1996. The Plan Administrator, which is a committee
consisting of one or more persons chosen by the Board of Directors, has reviewed
the Plan and has concluded that there are insufficient shares of Common Stock
available for issuance under the Plan to meet the demands of the Company's
employees choosing to participate in the Plan by directing a portion of their
income into equity interests of the Company. The Board of Directors believes the
amendment to the Plan is necessary as it believes that broad-based ownership of
equity interests in the Company by its employees provides a substantial
motivation for superior performance by more closely aligning the economic
interests of those employees with the overall performance of the Company.
In order for the Company to provide its employees with the ability to
continue to invest in the Company through the Plan, the Board of Directors
proposed the adoption, subject to shareholder approval, of an amendment to the
Plan to increase the number of shares available for purchase to 362,500. The
Board of Directors believes that the approval of the amendment is essential to
further the long-term stability and financial success of the Company by
attracting, motivating and retaining qualified employees whose interests are
aligned with those of other shareholders of the Company.
SUMMARY OF THE AMENDMENT
The amendment increases the number of shares of Common Stock which may
be issued upon the exercise of options by 100,000 shares or less than one
percent of the 12,511,580 shares of Common Stock outstanding on March 16, 1998.
These shares, in addition to the 61,348 shares currently authorized and
available for issuance under the Plan, will provide an aggregate of 161,348
shares available for issuance.
SUMMARY OF MATERIAL PROVISIONS OF THE PLAN
The following is a summary of the material provisions of the Plan, as
proposed to be amended.
Participation; Awards Under the Plan. Pursuant to the Plan, all
employees of the Company and its subsidiaries and affiliates (including
executive officers of the Company) who have been employed by the Company for at
least six months as of any January 1 or July 1 may elect to deduct from their
compensation not less than $130.00 and up to 25% of their Base Pay (as defined
in the Plan) for each six-month option period. The dollar amount deducted is
credited to the participant's Contribution Account (as defined in the Plan). In
addition, a participant is permitted to make two lump sum contributions during
each option period, as long as the aggregate amount of salary deductions do not
exceed 25% of the participant's compensation. On the Exercise Date (the last
trading day of each option period), the amount deducted from each participant's
salary and any additional amounts contributed on a lump-sum basis over the
course of the period will be used to purchase shares of Common Stock at a
purchase price (the "Exercise Price") equal to the lesser of (a) 85% of the
closing market price of the shares of Common Stock on the Exercise Date or (b)
85% of the average of the closing market price of the shares of Common Stock on
the Grant Date (the first trading date of each six-month period) and the closing
market price of the Common Stock on the Exercise Date for such period. On an
Exercise Date, all options shall be automatically exercised, except for persons
whose employment has terminated or who have withdrawn all contributions.
Options granted under the Plan are subject to the following
limitations: (i) subject to certain adjustments, the maximum number of shares of
Common Stock which may be purchased by a participant on an Exercise Date is
1,125 shares; (ii) no participant is allowed to purchase, during a calendar
year, stock under the Plan having a market value in excess of $25,000, as
determined on the Grant Date; (iii) no option may be granted to a participant
who would own 5% or more of the Common Stock of the Company; and (iv) no
participant may assign, transfer or otherwise
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<PAGE> 14
alienate any options granted to him, except by will or the laws of descent and
distribution, and such options must be exercised during the participant's
lifetime only by him.
The Company and its subsidiaries have approximately 2,600 employees who
are currently eligible to participate in the Plan. Directors of the Company who
are not also employees of the Company and holders of 5% or more of the
outstanding shares of Common Stock are not eligible to participate in the Plan.
Administration. The Plan is administered by a Plan Administrator, which
Plan Administrator is currently the Compensation Committee of the Board of
Directors. The Plan Administrator does not, however, have the discretion to deny
the right to participate in the Plan to any employee who meets the eligibility
criteria.
Upon termination of a participant's employment, the employee shall
cease being a participant under the Plan, and the balance of the employee's
Contribution Account shall be paid to the participant as soon as practical after
termination. An option granted to such a participant shall be null and void from
the date of termination. Upon the death, retirement or disability of a
participant, the participant, or his legal representative, may withdraw the
balance in his Contribution Account or may have the accumulated balance used to
purchase stock under the Plan. Any remaining money which is insufficient to
purchase a whole share is returned to the participant or his legal
representative.
Adjustments. In the case of a stock split, stock dividend,
reclassification, recapitalization, merger, reorganization, or other change in
the Company's structure affecting the Common Stock, appropriate adjustments will
be made by the Plan Administrator in the number of shares reserved for issuance
under the Plan and the calculation of the Exercise Price.
Amendment. Without the approval of the shareholders of the Company, the
Plan may not be amended to: (i) increase the number of shares reserved under the
Plan (except pursuant to certain changes in the capital structure of the
Company), (ii) materially increase the benefits accruing to an insider subject
to Section 16(a) of the Securities Exchange Act of 1934, as amended ("Statutory
Insiders"), (iii) change the method of determining the purchase price of the
shares such that the exercise price is reduced for Statutory Insiders or (iv)
make participation in the Plan available to any person who is not an employee as
defined in the Plan.
If the amendment to the Plan is approved, the Plan will have 362,500
shares of Common Stock authorized for issuance under the Plan.
Federal Income Tax Aspects. The following is a brief summary of the
Federal income tax aspects of awards made under the Plan based upon the Federal
income tax laws in effect on the date hereof. This summary is not intended to be
exhaustive and does not describe state or local tax consequences.
A holder will not recognize income for Federal tax purposes on account
of the initial discount when shares are purchased. Instead, income may be
recognized when a holder disposes of his or her stock.
If shares of stock are disposed of before a statutory holding period is
met, income is recognized in an amount equal to the difference between the price
paid for the shares and the market value of the shares on the date such shares
were purchased. If shares are disposed of after meeting the holding period
requirement, the holder receives ordinary taxable income in the calendar year of
disposition equal to the lesser of (i) the original 15% discount on the shares
assuming the stock had been purchased on the Grant Date or (ii) the excess of
the fair market value of such shares of Common Stock on the day of disposition
over the price paid for such shares. In either case, (i) if a holder's
disposition is by gift, such holder will have no further income tax consequences
and (ii) in the case of a sale of such shares, the difference between the net
proceeds on the date of disposition and the holder's tax basis in such shares
(including ordinary income recognized in the disposition) will be taxable as
capital gain or loss.
If an employee leaves contributions in the Plan to purchase Common
Stock after he or she retires, the tax consequences depend on whether the
termination date is within three months of the Exercise Date. If the termination
date is not more than three months prior to the Exercise Date, the tax
consequences are as described above. However, if the termination date is more
than three months prior to the Exercise Date, the holder is treated as
exercising a non-
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<PAGE> 15
qualified option and is taxed on the Exercise Date on the excess of market value
of the stock on that date over the price paid.
A copy of the proposed amendment is included as Exhibit A hereto. If
approved by the shareholders, the amendment will become effective as of the date
of the annual meeting.
The amendment to the Plan will be approved if the votes cast in favor
of the amendment exceed the votes cast against it. Abstentions and broker
non-votes will not be considered in the vote. The Board of Directors recommends
that you vote FOR the approval of the amendment to the Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Company's common stock, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Form 5s were
required for those persons, the Company believes that all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with during the year ended December 31, 1997.
CERTAIN TRANSACTIONS
In 1988, Pocahontas leased certain land and buildings from Taylor &
Sledd, Inc., a Virginia corporation owned by Robert C. Sledd and certain members
of his family. The lease provides for monthly payments of approximately $48,000
and expires on July 31, 2004, subject to certain renewal options on the same
terms for successive one year periods. Pocahontas made lease payments in the
aggregate amount of $604,000 during fiscal 1997.
H.C. Sledd, Jr., is a shareholder of Virginia Foodservice Group, Inc.
("VFG"), an independent distributor located in Richmond, Virginia, which
participates in various buying programs sponsored and administered by the
Company. VFG receives its proportionate share of rebates received from
unaffiliated manufacturers or vendors participating in the programs. Mr. Sledd
has pledged 6,000 shares of the Company's Common Stock to secure any obligations
of VFG to the Company. Robert C. Sledd serves as a director of VFG.
During 1997, Jerry J. Caro was a minority owner in KMB Transport, Ltd.
("KMB Transport") in Houma, Louisiana, which provides trucking services to the
Company from time to time through one or more of the Company's wholly owned
subsidiaries. One of Mr. Caro's children now owns a minority interest in KMB
Transport. The Company made payments to KMB Transport during fiscal 1997 of
approximately $294,000.
The Board of Directors of the Company has adopted a policy which
provides that any transaction between the Company and any of its directors,
officers, or principal shareholders or affiliates thereof must be on terms no
less favorable to the Company than could be obtained from unaffiliated parties
and must be approved by vote of a majority of the disinterested directors of the
Company. Management believes that past transactions have complied with this
policy.
12
<PAGE> 16
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected KPMG Peat Marwick
LLP to serve as independent auditors for the current fiscal year. Such firm has
served as the Company's independent auditors since 1987. Representatives of KPMG
Peat Marwick LLP are expected to be present at the Annual Meeting and will be
given the opportunity to make a statement if they desire to do so and to respond
to appropriate questions.
PROPOSALS OF SHAREHOLDERS
Shareholders intending to submit proposals for presentation at the next
annual meeting of the shareholders of the Company and inclusion in the proxy
statement and form of proxy for such meeting should forward such proposals to
David W. Sober, Secretary, Performance Food Group Company, 6800 Paragon Place,
Suite 500, Richmond, Virginia 23230. Proposals must be in writing and must be
received by the Company prior to November 27, 1998. Proposals should be sent to
the Company by certified mail, return receipt requested.
13
<PAGE> 17
EXHIBIT A
AMENDMENT TO PERFORMANCE FOOD GROUP COMPANY EMPLOYEE STOCK PURCHASE PLAN
Section 6.1 of the Performance Food Group Company Employee Stock
Purchase Plan is hereby amended, effective April 29, 1998, subject to the
approval of the Performance Food Group Company shareholders at the 1998 Annual
Meeting of Shareholders, as follows:
1. By deleting the first sentence in its entirety and
substituting therefor the following:
"PFG shall have reserved three hundred sixty-two thousand five
hundred (362,500) shares of Stock for issuance upon exercise of the
options granted under this Plan."
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<PAGE> 18
Appendix A
PERFORMANCE FOOD GROUP COMPANY
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1998
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AT 10:00 A.M. (EDT) ON APRIL 29,
1998 AND ANY ADJOURNMENT(S) THEREOF. The undersigned hereby appoints David W.
Sober and Roger L. Boeve, or either of them, with full power of substitution, as
attorneys, and hereby authorizes them to represent and to vote in the name of
and as proxy for the undersigned, as designated, all of the shares of common
stock of Performance Food Group Company held of record by the undersigned on
March 16, 1998.
1. ELECTION OF TWO CLASS II DIRECTORS TO SERVE UNTIL THE 2001 ANNUAL
MEETING OF SHAREHOLDERS AND UNTIL THEIR SUCCESSORS ARE ELECTED AND
QUALIFIED AND ELECTION OF ONE CLASS III DIRECTOR TO SERVE UNTIL THE
1999 ANNUAL MEETING OF SHAREHOLDERS AND UNTIL HIS SUCCESSOR IS ELECTED
AND QUALIFIED.
[ ] FOR all nominees listed below (except as marked to the contrary
below).
ROBERT C. SLEDD FRED C. GOAD, JR. JOHN E. STOKELY
To withhold authority to vote for any individual nominee, write that
nominee's name in the space below:
----------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. AMENDMENT OF THE EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before this meeting or any adjournment thereof.
<PAGE> 19
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION AS DIRECTORS OF THE NOMINEES REFERRED TO IN PROPOSAL 1 AND FOR
THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
The undersigned revokes any prior proxies to vote the shares covered by
this proxy.
Dated: _______________________________, 1998
____________________________________________
Signature
____________________________________________
Signature if Held Jointly
Please sign exactly as name appears on your
share certificates. Each joint owner must
sign. When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name as
authorized. If a partnership or limited
liability company, please sign in such
organization's name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
REPLY ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
