SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
THE SOUTHLAND CORPORATION
- --------------------------------------------------------------------------------
(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.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
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[LOGO]
2711 NORTH HASKELL AVENUE - BOX 711 - DALLAS, TEXAS 75221-0711
March 25, 1999
Dear Southland Shareholder:
We invite you to attend the Annual Meeting of Shareholders of The Southland
Corporation on Wednesday, April 28, 1999, at 9:30 a.m., Central Daylight Time,
in the Joe C. Thompson Auditorium, on the ground floor at Cityplace Center, 2711
North Haskell Avenue, Dallas, Texas. If you are planning to attend the meeting
in person, please mark the appropriate space on the enclosed proxy card. A map
of Cityplace is included on the outside back cover of the attached Proxy
Statement showing entrances to the parking garage. This booklet contains the
formal Notice of Annual Meeting and the Proxy Statement. The Proxy Statement
tells you about the proposals being presented to the shareholders for
consideration at this meeting and also provides additional important information
about the procedures for the meeting.
At this meeting you will be voting on the election of thirteen directors,
ratification of the selection of auditors, the Stock Compensation Plan for
Non-Employee Directors and Articles of Amendment to the Company's Articles of
Incorporation that will authorize the change of the Company's name to "7-Eleven,
Inc."
As described in the accompanying Proxy Statement, the Board of Directors
unanimously recommends that you vote FOR each of the persons nominated for
election as a director, and FOR each of the other items presented.
A copy of Southland's 1998 Annual Report is being sent to you along with
this Proxy Statement and Notice of Annual Meeting. As always, we appreciate your
continued interest in Southland.
Please complete, sign and mail the enclosed proxy card as soon as possible
so that your vote will be counted at the meeting.
Sincerely,
Clark J. Matthews, II
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
SECRETARY AND DIRECTOR
THE SOUTHLAND CORPORATION
2711 NORTH HASKELL AVENUE
BOX 711
DALLAS, TEXAS 75221-0711
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1999
------------------------
To the Shareholders of The Southland Corporation:
The Annual Meeting of Shareholders of The Southland Corporation (the
"Company") will be held on Wednesday, April 28, 1999, at 9:30 a.m., Central
Daylight Time, in the Joe C. Thompson Conference Center, on the ground floor at
Cityplace Center, 2711 North Haskell Avenue, Dallas, Texas, for the following
purposes:
1. To elect thirteen directors to serve for the ensuing year;
2. To consider and vote upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP, certified public accountants, to be the
independent auditors of the Company for the year 1999;
3. To consider and vote upon the approval of the Company's Stock
Compensation Plan for Non-Employee Directors;
4. To consider and vote upon the approval of Articles of Amendment to the
Company's Second Restated Articles of Incorporation to change the
Company's name to "7-Eleven, Inc."; and
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only shareholders of record at the close of business Friday, March 12, 1999,
will be entitled to receive notice of, and to vote at, the meeting.
Your attention is directed to the Proxy Statement for further information
about each of the matters to be considered.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND, PLEASE DATE AND SIGN THE ACCOMPANYING PROXY CARD EXACTLY AS YOUR NAME
APPEARS ON IT, INDICATING YOUR VOTES BY MARKING THE APPROPRIATE SPACES, AND
RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors,
Clark J. Matthews, II
SECRETARY
Dallas, Texas
March 25, 1999
IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK
THE APPROPRIATE SPACE ON THE PROXY CARD
THE SOUTHLAND CORPORATION
2711 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1999
DATE FIRST SENT OR GIVEN TO SECURITY HOLDERS: MARCH 29, 1999
---------------------
GENERAL INFORMATION
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the Board of Directors of The
Southland Corporation (the "Company" or "Southland") for use at the Annual
Meeting of Shareholders to be held April 28, 1999, and at any adjournments
thereof. Neither the Company's officers nor directors who held office during the
last fiscal year, nor any nominee or associate of any of the aforementioned
persons, has any interest, direct or indirect, in the matters to be voted upon,
other than election to office and as otherwise disclosed herein.
The Board of Directors requests that you execute and return the proxy
promptly, whether or not you plan to attend the meeting. In addition, if you
plan to attend the meeting in person, please so indicate in the appropriate
space on the proxy card. Each properly executed proxy not revoked will be deemed
to grant authority to vote and, unless a contrary instruction is indicated on
the proxy, will be voted for the election of thirteen directors, for
ratification of the appointment of the accounting firm of PricewaterhouseCoopers
LLP (successor to Coopers & Lybrand L.L.P.) to be the independent auditors of
the Company for 1999 and for approval of proposals 3 and 4. Any shareholder may
revoke such shareholder's proxy by giving written notice of revocation to the
Company at any time prior to the meeting or by advising the Inspector of
Election of the revocation at the meeting; however, presence at the meeting will
not automatically revoke the proxy and revocation during the meeting will not
affect any votes previously taken. The signing of the proxy grants discretionary
authority to vote upon matters which may properly come before the meeting from
the floor or at such a late date as to prohibit additional notice. Other than
approval of the minutes of the 1998 Annual Meeting of Shareholders, no such
matter is known to management.
The cost of soliciting proxies will be borne by Southland. Southland has
retained The Altman Group, Inc., New York, New York, to assist in the
solicitation, at an estimated cost of $2,500, plus reimbursement of reasonable
out-of-pocket expenses. In addition, the Company will reimburse brokers or other
persons holding stock in their names or in the names of their nominees for
charges and expenses incurred in forwarding proxies and proxy material to the
beneficial owners. Solicitation may also be made by officers and regular
employees of Southland, without additional compensation, by use of the mails,
telephone, telegraph or in person.
SHARES OUTSTANDING AND VOTING RIGHTS
Shareholders of record as of the close of business March 12, 1999, are
entitled to notice of, and to vote at, the meeting. At the record date there
were 409,941,168 shares of common stock, $.0001 par value (the "Common Stock"),
outstanding and entitled to vote, the only class of voting securities of the
Company
1
outstanding, and there were 2,670 record holders on such date. Each outstanding
share is entitled to one vote.
Shareholders are not entitled to vote cumulatively for the election of
directors or on any other matter. In addition, an abstention from voting or a
broker non-vote will be counted toward determining the presence of a quorum, but
will not be included in determining the number of votes "for" the election of
directors and will not be counted "for" or "against" any other item being voted
upon.
OTHER INFORMATION
THE COMPANY'S RESTRUCTURING. On October 24, 1990, the Company filed a
voluntary petition for reorganization relief under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court (the "Bankruptcy Court") for the Northern District of Texas, Dallas
Division (Case No. 390-37119-HCA-11). In accordance with the Company's Plan of
Reorganization (the "Plan of Reorganization") IYG Holding Company ("IYG"), which
is jointly owned by Ito-Yokado Co., Ltd. ("Ito-Yokado") and Seven-Eleven Japan
Co., Ltd. ("Seven-Eleven Japan"), acquired, for an aggregate purchase price of
$430 million in cash, approximately 70% of the Company's outstanding Common
Stock following the consummation of the Plan of Reorganization. As of the record
date for this meeting, IYG owned shares of the Common Stock representing 65.12%
of the shares entitled to vote at this meeting.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
BOARD OF DIRECTORS
The Board of Directors has set the number of directors to be elected at this
meeting at thirteen, which shall constitute the entire board of directors. Each
director shall be elected to hold office until the next Annual Meeting of
Shareholders or until his earlier death, removal or resignation or until his
successor is duly elected and qualified.
Although there is currently no agreement that controls the composition of
the Board of Directors, the fact that IYG owns over 65% of the Company's
outstanding common stock (see "Security Ownership of Certain Persons" below)
means that IYG can control the composition of the Company's Board of Directors.
The nominees for election as directors for 1999 have been nominated by
resolution adopted by the current Board of Directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1998, there were four meetings of the Board of Directors.
The Board of Directors has an Audit Committee, which was composed of three
directors in 1998: Mr. Chai, who served as Chairman, Mr. Fernandes, and Dr.
Pacholder. The Audit Committee met seven times during 1998. The functions of the
Audit Committee include: recommending the engagement of independent auditors for
the Company and reviewing with them the plan and scope of the audit, its status
during the year, the results when completed and the fees for services performed,
as well as reviewing the engagement of the independent auditors to perform
nonaudit services and the effect, if any, this may have on their independence;
reviewing with the Company's internal auditors the plan, scope and results of
their operations; discussing with management, the independent auditors and the
internal auditors the adequacy of internal accounting controls and, if deemed
necessary or appropriate, discussing with each of them, independently of the
other, any recommendations on matters which any of them considers to be of
importance; reviewing the Company's accounting and financial reporting
principles, policies and practices; and reviewing, prior to publication, the
annual audited financial statements as well as such other Company financial
information or releases as the Committee deems desirable. The Audit Committee
also undertakes such other duties as may be assigned to it by the Board of
Directors.
2
The Board of Directors has a Compensation and Benefits Committee, composed
of three directors: Mr. Suzuki, who served as Chairman, Mr. Fernandes and Mr.
Otsuka. During 1998 the Compensation and Benefits Committee did not meet but
took action by Unanimous Consent. (See "Compensation of Directors and Executive
Officers," below, for a description of the functions of the Compensation and
Benefits Committee.)
The Board of Directors does not have a Nominating Committee.
During 1998, each of the current directors attended more than 75% of the
combined meetings of the Board of Directors and committees of which such
director is a member.
COMPENSATION OF DIRECTORS
The compensation for members of the Board of Directors is established by
resolution adopted by the Board. The annual fee for a director who is a
non-employee of the Company, Ito-Yokado or Seven-Eleven Japan is set at $30,000
a year, plus $1,000 for attendance at each Regular or Special Meeting of the
Board or of any Board Committee of which the director is a member, including
meetings held by means of conference telephone or similar communications
equipment. Participation in any Committee meeting while in attendance at a Board
or other Committee meeting or the signing of any consent in lieu of holding a
meeting, is not deemed attendance at a meeting for purposes of compensation. The
annual fee for a director who is an employee of Ito-Yokado, or of Seven-Eleven
Japan is set at $18,000 a year. The Chairman of the Audit Committee receives an
additional fee of $5,000 a year. During 1998, the Board approved and adopted the
Stock Compensation Plan for Non-Employee Directors (see Proposal 3, below).
Under this plan, a non-employee director can elect to receive all, none or a
portion of his director's fees in shares of Common Stock, instead of in cash.
Shares are valued as of the closing price on the last trading day of the
calendar quarter during which the fees were earned and are issued shortly
thereafter. Directors who are employees of the Company receive only their
compensation as an employee and no director's fees for their service on the
Board or any committee thereof.
In addition, as described elsewhere herein, Mr. Ashida is paid $138,000 per
year, inclusive of the director's fees to which he would otherwise be entitled,
under an Independent Consultant's Agreement entered into on July 1, 1991, and
amended in 1995, pursuant to which he serves as liaison with the Board of
Directors. Mr. Asakura is a Senior Vice President of Southland and receives
compensation from Southland for his service as a director and officer of the
Company pursuant to the terms of an agreement entered into in 1997 concerning
his service (see "Proposal 1. Election of Directors--Information About
Nominees," below, for additional details concerning Mr. Ashida's and Mr.
Asakura's compensation).
3
PROPOSAL 1. ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES
The following biographical information includes the names, ages and year
first elected a director, the principal occupation or employment, as of March 1,
1999, of each person nominated, including all positions and offices with
Southland, and the principal directorships held by such persons in non-Southland
companies. Also included is information regarding compensation paid to certain
directors of the Company.
POSITION WITH SOUTHLAND, PRINCIPAL OCCUPATION YEAR FIRST ELECTED
NAME AGE AND BUSINESS EXPERIENCE PAST FIVE YEARS DIRECTOR
- ------------------------------ --- --------------------------------------------------- ----------------------
Masatoshi Ito................. 74 Chairman of the Board and Director (1) 1991
Toshifumi Suzuki.............. 66 Vice Chairman of the Board and Director (2) 1991
Clark J. Matthews, II......... 62 President, Chief Executive Officer, Secretary and 1981-1987 and 1991
Director (3)
Yoshitami Arai................ 67 Director (4) 1991
Masaaki Asakura............... 56 Senior Vice President and Director (5) 1997
Timothy N. Ashida............. 59 Director (6) 1991
Jay W. Chai................... 65 Director (7) 1991
Gary J. Fernandes............. 55 Director (8) 1991
Masaaki Kamata................ 59 Director (9) 1991
James W. Keyes................ 43 Executive Vice President and Chief Operating 1997
Officer and Director (10)
Kazuo Otsuka.................. 52 Director (11) 1991
Asher O. Pacholder............ 61 Director (12) 1991
Nobutake Sato................. 60 Director (13) 1991
- ------------------------
(1) Chairman of the Board and Director of the Company since March 5, 1991.
Director and Honorary Chairman of Ito-Yokado Group, which includes
Ito-Yokado Co., Ltd., Seven-Eleven Japan Co., Ltd. and Denny's Japan Co.,
Ltd., as well as other companies. Ito-Yokado Co., Ltd. is one of Japan's
leading diversified retailing companies which, together with its
subsidiaries and affiliates, operates superstores, convenience stores,
department stores, supermarkets, specialty shops and discount stores.
President of Ito-Yokado Co., Ltd. from 1958 to 1992. Chairman of
Seven-Eleven Japan Co., Ltd. from 1978 to 1992, and President from 1973 to
1978. Chairman of Denny's Japan Co., Ltd. from 1981 to 1992, and President
from 1973 to 1981. Chairman of Famil Co., Ltd. since 1986. Chairman of York
Mart Co., Ltd. since 1979. Chairman of Robinson's Japan Co., Ltd. since
1995. Chairman of Maryann Co., Ltd. since 1977. President of Oshman's Japan
Co., Ltd. since 1984. Statutory Auditor of Steps Co., Ltd. since 1992.
Chairman of York-Keibi Co., Ltd. since 1989. President of Union Lease Co.,
Ltd. since 1985. Statutory Auditor of Daikuma Co., Ltd. since 1982.
Chairman of Marudai Co., Ltd. since 1989. Director of Seven-Eleven
(Hawaii), Inc. since 1989. Chairman of Umeya Co., Ltd. since 1981. Director
of Shop America Limited since 1990. Director and Chairman of the Board of
IYG Holding Company since 1990.
(2) Vice Chairman of the Board and Director of the Company since March 5, 1991.
President and Chief Executive Officer of Ito-Yokado Co., Ltd. since
October, 1992 and Director since 1971; Executive Vice President from 1985
to 1992; Senior Managing Director from 1983 to 1985; Managing Director from
1977 to 1983; employee since 1963. Chairman of the Board and Chief
Executive Officer of Seven-Eleven Japan Co., Ltd. since October, 1992 and
Director since 1973; President from 1975 to
4
1992; Senior Managing Director from 1973 to 1975. Statutory Auditor of
Robinson's Japan Co., Ltd. since 1984. Chairman of Daikuma Co., Ltd. since
1985. President of Seven-Eleven (Hawaii), Inc. since 1989. President of
Shop America Limited since 1990. President and Director of IYG Holding
Company since 1990.
(3) Director of the Company since March 5, 1991, and from 1981 until 1987;
President and Chief Executive Officer since March 5, 1991 and Secretary
since April 26, 1995; Executive Vice President (or Senior Executive Vice
President) and Chief Financial Officer from 1979 to 1991; Vice President
and General Counsel from 1973 to 1979; employee since 1965.
(4) Director of the Company since March 5, 1991. Chairman of the Board of
Systems International Incorporated, a consulting firm for international
joint-ventures, licensing and investment arrangements, since 1977 and
President from 1970 to 1977. President of Tokyu Hotels International from
1977 to 1989. Chairman of Catalina Pacific Media L.L.C. Director of Entry
Strategies Inc., Industrial Suppliers S.A., Pacific Media K.K. and Parallel
Inc. Member of Pacific Basin Economic Council and other international
non-profit organizations. Senior Advisor, Welsh Development Agency, a
British government organization, since 1996.
(5) Director of the Company since April 23, 1997, and Senior Vice President
since May 1, 1998; General Manager and Overseas Liaison, Planning
Department, Seven-Eleven Japan Co., Ltd., from 1995 to present; Director
since 1991, and Executive Vice President and General Manager, Seven-Eleven
(Hawaii), Inc., from 1991 to 1994; employee of Seven-Eleven Japan since
1976. In connection with Mr. Asakura's employment with the Company and
service on the Board of Directors, he and his family relocated to Dallas,
Texas. Relocation and moving expenses were paid by the Company. In
addition, Mr. Asakura received compensation from Southland of $180,000 in
1998, plus a housing allowance from the Company and the use of a
company-leased car. The Company also reimbursed him for his US resident tax
liability on the value of these benefits. As an employee of the Company, he
is not entitled to receive any additional director's fees for his service
on the Board of Directors. Mr. Asakura and his family are eligible to
participate in the Company's group medical and dental plans, but, pursuant
to the conditions of his employment, Mr. Asakura is not eligible to
participate in other benefit plans (such as Annual Performance Incentive,
Stock Incentive or Performance Plans).
(6) Director of the Company since March 5, 1991. President of A.K.K.
Associates, Inc., a consulting firm for Japanese/American investments, in
Glendale, California, since 1972. Director of Seven-Eleven Japan Co., Ltd.
since 1991; General Manager, Far East Division of Travel Systems
International in Los Angeles from 1969 to 1972. Interpreter/Technical
Coordinator at Kawaguchi Tour Services in Los Angeles from 1966 to 1969.
Mr. Ashida has entered into an "Independent Consultant's Agreement" with
the Company pursuant to which (as amended in 1995) he is paid $11,500 per
month to serve as liaison with the Board of Directors. This fee is
inclusive of any director's fees to which he would otherwise be entitled.
(7) Director of the Company since March 5, 1991. Chairman of the Board and
Chief Executive Officer of ITOCHU International Inc. (formerly known as C.
Itoh & Company (America) Inc.) since April 1991; Chief Operating Officer
from 1989 to 1991; Executive Vice President from 1986 to 1991; Senior Vice
President from 1982 to 1985; Director since 1983. Executive Vice President
of ITOCHU Corporation (formerly C. Itoh & Co., Ltd.), a Japanese trading
company, since July 1993; Senior Managing Director from 1991 to 1993;
Managing Director from 1989 to 1991; Director from 1986 to 1989. Managing
Director with Representation Rights, ITOCHU Corporation, since 1989.
Director of Isuzu Motors Limited since 1984. Strategic Planning Advisor
with General Motors Corporation throughout 1982.
(8) Director of the Company since April 11, 1991. Managing General Partner,
Convergent Partners, LLC, a venture capital partnership, since January,
1999; Vice Chairman of Electronic Data Systems Corporation ("EDS"), an
information technology service company, from 1996 to 1998,
5
Senior Vice President from 1984 to 1996, and Director from 1981 to 1998.
Director and Chairman of the Board of A.T. Kearney, Inc. from September
1995 to 1998. Director of John Wiley & Sons, Inc. since April 1988 and of
Paging Network, Inc., since March 1999. Member of the Advisory Board of the
East Texas State University Foundation; Governor of the Boys and Girls
Clubs of America and Director of the Boys and Girls Clubs of Greater
Dallas, Inc.
(9) Director of the Company since March 5, 1991. Director, since 1978, and Vice
Chairman of Seven-Eleven Japan Co., Ltd. since 1997; Executive Vice
President from 1992 to 1997; Senior Managing Director from 1989 to 1992;
Managing Director from 1985 to 1989; employee since 1973. Director, since
1989, and President of Seven-Eleven (Hawaii), Inc. since 1992. Director and
Treasurer of IYG Holding Company since 1990.
(10) Director of the Company since April 23, 1997; Executive Vice President and
Chief Operating Officer since May 1, 1998; Chief Financial Officer from
May 1996 to April 1998; Senior Vice President, Finance, from June 1993 to
April 1996; Vice President, Planning and Finance, from August 1992 to June
1, 1993; Vice President and/or Vice President, National Gasoline, from
August 1991 to August 1992; General Manager, National Gasoline, from 1986
to 1991; employee of the Company since 1985.
(11) Director of the Company since March 5, 1991. General Manager, Corporate
Development, Ito-Yokado Co., Ltd., since 1986; Manager, Corporate
Development from 1982 to 1986; Assistant to Mr. Masatoshi Ito, President
and Chief Executive Officer, from 1978 to 1982; employee since 1975.
Assistant Secretary of IYG Holding Company since 1990.
(12) Director of the Company since March 5, 1991. Chairman of the Board and
Chief Financial Officer, ICO, Inc., an oil field service and petrochemical
processing company, since February 1995; Chairman of the Board and
Managing Director of Pacholder Associates, Inc., an investment advisory
firm, since 1984. Director of TC/GP, Inc.
(13) Director of the Company since March 5, 1991. Director, since 1977 and
Executive Vice President, Ito-Yokado Co., Ltd., since 1993; Executive Vice
President and Chief Financial Officer, from 1996 to 1998; Senior Managing
Director from 1985 to 1993; Managing Director from 1983 to 1985; employee
since 1964. Director of Denny's Japan Co., Ltd. since 1973, Maryann Co.,
Ltd. since 1982, Oshman's Japan Co., Ltd. since 1984 and Marudai Co., Ltd.
since 1989. President of Urawa Building Co., Ltd. since 1985, Nitsu
Systems Kaihatsu Co., Ltd. since 1986 and Waiaru Kaihatsu Co., Ltd. since
1988. Director and Vice President of IYG Holding Company since 1990.
Each of the nominees presented for election has been recommended by the
Board of Directors. All nominees are currently members of the Board of
Directors. Each nominee has consented to serve as a director if elected. If any
nominee becomes unavailable for any reason or should a vacancy occur before the
election (which events are not anticipated), proxies may be voted for a
substitute nominee. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES, WHICH REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES
REPRESENTED AND ENTITLED TO VOTE AT THE MEETING. VOTES WILL BE TABULATED BY AN
INSPECTOR OF ELECTION. AN ABSTENTION FROM VOTING WILL BE TABULATED AS A VOTE
WITHHELD ON THE ELECTION, AND WILL BE INCLUDED IN COMPUTING THE NUMBER OF SHARES
PRESENT FOR PURPOSES OF DETERMINING THE PRESENCE OF A QUORUM FOR THE
SHAREHOLDERS MEETING AND WHETHER NOMINEES HAVE RECEIVED THE VOTE OF A MAJORITY
OF THE SHARES PRESENT AT THE MEETING.
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At March 12, 1999, the record date for the Annual Meeting, the Company was
aware of the following beneficial owners of 5% or more (as determined under the
applicable rules of the Securities and Exchange Commission) of the Company's
shares of Common Stock (the only class of voting security of the Company) of
which a total of 409,941,168 shares were issued and outstanding on the record
date. The following table, however, in accordance with the applicable
requirements, includes certain shares which Ito-Yokado and Seven-Eleven Japan
have the power to acquire within the next sixty days, but which are not
currently outstanding.
NAME AND ADDRESS AMOUNT AND NATURE OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ---------------------------------- --------------------------------- ------------------------- -----------------
Common Stock, $.0001 par value.... IYG Holding Company 266,937,933 Shares (a) 65.12%
4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
Common Stock, $.0001 par value.... Ito-Yokado Co., Ltd. 36,777,078 Shares (b) 8.23%(b)
4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
Common Stock, $.0001 par value.... Seven-Eleven Japan Co., Ltd. 35,334,839 Shares (b) 7.94%(b)
4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
- ------------------------
(a) IYG Holding Company is a Delaware corporation, created specifically for the
purpose of purchasing shares of Common Stock of the Company issued in
connection with consummation of the Company's Plan of Reorganization and as
contemplated therein and in the Stock Purchase Agreement (see "Other
Information," above). It is a jointly owned subsidiary of Ito-Yokado Co.,
Ltd. and Seven-Eleven Japan Co., Ltd. Ito-Yokado owns 51%, and Seven-Eleven
Japan owns 49%, of IYG's outstanding common stock. Ito-Yokado owns 51% of
Seven-Eleven Japan's outstanding common stock. Messrs. Ito, Suzuki, Sato,
Kamata and Otsuka are the officers and directors of IYG (see "Security
Ownership of Management" and "Information About Nominees"). They each,
individually, disclaim beneficial ownership of the shares held by IYG.
(b) As required by the rules and regulations under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the numbers shown in this table
include shares of common stock acquirable by Ito-Yokado (36,777,078 shares)
and Seven-Eleven Japan (35,334,839 shares) upon conversion of $300 million
4.5% Convertible Quarterly Income Debt Securities due 2010, issued by the
Company in November 1995 (the "1995 QUIDS") which are convertible into
72,111,917 shares of Southland Common Stock at a conversion price of $4.1602
per share.
The percentage ownership shown in this table and the table that follows is
calculated as required by Rule 13d-3(d)(1) under the Exchange Act. The actual
percentage owned by IYG, Ito-Yokado and Seven-Eleven Japan, if the 1995 QUIDS
were converted, would be 70.34%. IYG currently owns 65.12% of the Company's
outstanding Common Stock. Ito-Yokado and Seven-Eleven Japan do not currently own
any shares of the Common Stock.
In February, 1998, the Company issued $80 million 4.5% Convertible Quarterly
Income Debt Securities due 2013 (the "1998 QUIDS", which together with the 1995
QUIDS are hereinafter referred to as the "Convertible Debt Securities") to
Ito-Yokado ($40.8 million) and Seven-Eleven Japan ($39.2 million). The shares
acquirable upon conversion of the 1998 QUIDS, at a price of $2.4609 per share,
(a total
7
of 32,508,432 shares) are not shown in the above table because the 1998 QUIDS
are not convertible until February, 2001 and then become mandatorily convertible
under certain conditions related to the trading price of Southland Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table, and the footnotes that follow, show the beneficial
ownership of Southland Common Stock as of February 1, 1999, as required by the
rules and regulations of the Securities and Exchange Commission (the
"Commission"), by each director and each person nominated for director, by the
Chief Executive Officer and the next four most highly compensated executive
officers of the Company, and by all officers and directors of the Company as a
group.
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(A) PERCENT OF CLASS(A)
- -------------------------------------------------------------------- ------------------------ -------------------
Masatoshi Ito....................................................... 2,002,361(b) .49%(b)
Toshifumi Suzuki.................................................... 1,001,181(c) .24%(c)
Clark J. Matthews, II............................................... 875,042(d) .21%(d)
Yoshitami Arai...................................................... 31,312(e) *
Masaaki Asakura..................................................... 10,000(f) *
Timothy N. Ashida................................................... 30,000(g) *
Rodney A. Brehm..................................................... 155,134(h) *
Jay W. Chai......................................................... 0(i)
Gary J. Fernandes................................................... 23,395(j) *
Masaaki Kamata...................................................... 102,361(k) * (k)
James W. Keyes...................................................... 380,000(l) *
Kazuo Otsuka........................................................ 31,574(m) * (m)
Asher O. Pacholder.................................................. 1,317,535(n) .32%(n)
Nobutake Sato....................................................... 101,574(o) * (o)
Bryan F. Smith, Jr.................................................. 164,451(p) *
David Urbel......................................................... 92,599(q) *
All officers and directors as a group (34 persons) (r).............. 346,172,423(r) 71.47%(r)
- ------------------------
* Rounds to less than one-tenth of one percent
(a) At March 12, 1999, there were 409,941,168 shares of Common Stock
outstanding. The nature of beneficial ownership of the shares reported, if
not direct, is described in this footnote (a) and the footnotes that follow.
Included in the numbers of shares shown, as required by the rules and
regulations of the Commission, are those shares as to which such persons
have or share voting and/or investment power, or with respect to which they
have a right to receive such power within 60 days.
(b) Mr. Ito owns 2,002,361 shares directly, of which 2,361 shares were acquired
in January, 1999 under The Southland Corporation Stock Compensation Plan for
Non-Employee Directors. Additionally, Mr. Ito is Chairman of the Board and a
Director of IYG Holding Company. See "Security Ownership of Certain
Beneficial Owners," above.
(c) Mr. Suzuki owns 1,001,181 shares directly, of which 1,181 shares were
acquired in January, 1999 under The Southland Corporation Stock Compensation
Plan for Non-Employee Directors. Additionally, Mr. Suzuki is President and a
Director of IYG Holding Company. See "Security Ownership of Certain
Beneficial Owners," above.
(d) Mr. Matthews owns 151,042 shares directly, of which 143,334 shares were
acquired under the Company's Grant Stock Plan; and holds options to acquire
2,240,000 shares pursuant to options granted under the 1995 Stock Incentive
Plan, 724,000 of which are currently exercisable (see "Compensation of
Directors and Officers--Executive Officers' Compensation," below).
8
(e) Mr. Arai owns 31,312 shares directly, of which 1,312 shares were acquired in
January, 1999 under The Southland Corporation Stock Compensation Plan for
Non-Employee Directors.
(f) Mr. Asakura disclaims beneficial ownership of 10,000 shares held in a
brokerage account for his daughter.
(g) Mr. Ashida owns 30,000 shares directly.
(h) Mr. Brehm owns 8,334 shares directly which were acquired under the Company's
Grant Stock Plan; and holds options to acquire 393,600 shares pursuant to
options granted under the 1995 Stock Incentive Plan, 146,800 of which are
currently exercisable (see "Compensation of Directors and
Officers--Executive Officers' Compensation," below).
(i) Mr. Chai owns no shares directly. ITC Asset Management, a wholly owned
subsidiary of ITOCHU International, Inc., of which Mr. Chai is Chairman of
the Board and Chief Executive Officer, owns 12,198,917 shares of Southland
common stock and ITOCHU Corporation, of which Mr. Chai is Executive Vice
President, owns 8,198,917 shares of Southland common stock. Mr. Chai
disclaims beneficial ownership of all shares owned by ITC Asset Management
and ITOCHU Corporation.
(j) Mr. Fernandes owns 23,395 shares directly, of which 3,395 shares were
acquired in January, 1999 under The Southland Corporation Stock Compensation
Plan for Non-Employee Directors.
(k) Mr. Kamata owns 102,361 shares directly, of which 2,361 shares were acquired
in January 1999 under The Southland Corporation Stock Compensation Plan for
Non-Employee Directors. Additionally, Mr. Kamata is Treasurer and a Director
of IYG Holding Company and a Director and Executive Vice President of
Seven-Eleven Japan. See "Security Ownership of Certain Beneficial Owners,"
above.
(l) Mr. Keyes owns 10,000 shares which are held in his IRA custodial account and
an additional 10,000 shares acquired after February 1, 1999 are now held in
that same account; and holds options to acquire 1,300,000 shares pursuant to
options granted under the 1995 Stock Incentive Plan, of which 360,000 are
currently exercisable (see "Compensation of Directors and
Officers--Executive Officers' Compensation," below).
(m) Mr. Otsuka owns 31,574 shares directly, of which 1,574 shares were acquired
in January 1999 under The Southland Corporation Stock Compensation Plan for
Non-Employee Directors. Additionally, Mr. Otsuka is Assistant Secretary of
IYG Holding Company and General Manager, Corporate Development of
Ito-Yokado. See "Security Ownership of Certain Beneficial Owners," above.
(n) Dr. Pacholder is a member of the general partner of two limited partnerships
that together own 1,313,600 shares. Of the total shares shown, Dr.
Pacholder's beneficial interest is a total of 47,651 shares. In addition,
Dr. Pacholder's wife shares with him a beneficial interest in the shares
held by one of the partnerships. Dr. Pacholder also owns 3,935 shares
directly which were acquired in January 1999 under The Southland Corporation
Stock Compensation Plan for Non-Employee Directors.
(o) Mr. Sato owns 101,574 shares directly, of which 1,574 shares were acquired
in January 1999 under The Southland Corporation Stock Compensation Plan for
Non-Employee Directors. Additionally, Mr. Sato is Vice President and a
Director of IYG Holding Company and Executive Vice President of Ito-Yokado.
See "Security Ownership of Certain Beneficial Owners," above.
(p) Mr. Smith owns 251 shares directly and holds options to acquire 547,600
shares pursuant to options granted under the 1995 Stock Incentive Plan,
164,200 of which are currently exercisable (see "Compensation of Directors
and Officers--Executive Officers' Compensation," below).
(q) Mr. Urbel owns 619 shares which are held in his IRA custodial account and
holds options to acquire 293,300 shares pursuant to options granted under
the 1995 Stock Incentive Plan, 91,980 of which are currently exercisable
(see "Compensation of Directors and Officers--Executive Officers'
Compensation," below).
(r) The total shares shown are as follows: 4,853,493 shares owned by officers
and directors directly or with family members (including the entire
1,313,600 shares described in footnote (n), above); 2,286,440
9
shares pursuant to options currently exercisable by 23 officers under the
1995 Stock Incentive Plan; 266,937,933 shares held by IYG Holding Company of
which Messrs. Ito, Suzuki, Sato, Kamata and Otsuka are the directors and
officers, although they each disclaim individual beneficial ownership of
such shares, and 72,111,917 shares acquirable by Ito-Yokado and Seven-Eleven
Japan (of either or both of which Messrs. Ito, Suzuki, Kamata, Sato, Otsuka
and Asakura are directors or officers) upon conversion of the 1995 QUIDS (as
to which Messrs. Ito, Suzuki, Kamata, Sato, Otsuka and Asakura disclaim
beneficial ownership). In addition, eight non-employee directors who are
participants in the Stock Compensation Plan for Non-Employee Directors will
receive additional shares after April 1, 1999, but the exact number cannot
be determined until after the close of business on March 31, 1999.
Therefore, these acquirable shares are not included in this table.
SECTION 16(a) REPORTING
Section 16(a) of the Exchange Act, requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock to
file with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. The
Company believes that during the fiscal year ended December 31, 1998, its
officers, directors and holders of more than 10% of the Company's Common Stock
complied with all Section 16(a) filing requirements, except that Dr. Pacholder
did not report a July 31, 1998, purchase of 6,000 shares of Common Stock by a
limited partnership in which he has an interest. An amended Form 4 for July
1998, reporting this purchase, has recently been filed. In making this
statement, the Company has relied upon the written representations of its
directors and officers.
PROPOSAL 2. RATIFICATION OF THE SELECTION OF AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") to be the
independent auditors of the Company for 1999. Although not legally required to
do so, upon the recommendation of the Audit Committee, the Board is submitting
to the shareholders for ratification at this meeting the appointment of
PricewaterhouseCoopers as the Company's independent auditors for 1999.
The services provided to the Company by PricewaterhouseCoopers in 1999 will
include, in addition to performing the Company's audit, audits of certain
domestic and foreign subsidiaries and related companies and those of various
employee benefit plans; review of quarterly reports; issuance of letters to
underwriters in connection with registration statements, if any, filed by the
Company with the Securities and Exchange Commission; and consultation on
accounting, financial reporting, tax and related matters.
PricewaterhouseCoopers, a nationally known firm, has no direct or indirect
interest in the Company. The firm of Coopers & Lybrand L.L.P., predecessor to
PricewaterhouseCoopers, was originally appointed as the Company's auditor in
1992.
Representatives of PricewaterhouseCoopers will be at the meeting, will have
an opportunity to make a statement, if desired, and will be available to respond
to questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP TO BE THE INDEPENDENT AUDITORS OF THE
COMPANY FOR 1999, WHICH REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
SHARES REPRESENTED AND ENTITLED TO VOTE AT THE MEETING. VOTES WILL BE TABULATED
BY AN INSPECTOR OF ELECTION. AN ABSTENTION FROM VOTING AND BROKER NON-VOTES WILL
BE INCLUDED IN COMPUTING THE NUMBER OF SHARES PRESENT FOR PURPOSES OF
DETERMINING THE PRESENCE OF A QUORUM FOR THE SHAREHOLDERS MEETING AND WHETHER
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES PRESENT AT THE MEETING HAS BEEN
RECEIVED, BUT WILL NOT BE COUNTED AS A VOTE EITHER "FOR" OR "AGAINST"
RATIFICATION.
10
PROPOSAL 3. APPROVAL OF STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
ABOUT THIS PLAN
On October 8, 1998, Southland's Board of Directors (the "Board") adopted The
Southland Corporation Stock Compensation Plan for Non-Employee Directors. The
purpose of the plan is to encourage Non-Employee Directors of the Company to
acquire shares of the Company's Common Stock, and thereby to align their
interests more closely with the interests of the other shareholders of the
Company.
Under this plan, directors who are not employees of the Company can elect to
receive all, none or a portion of their directors' fees in shares of Southland
Common Stock, instead of in cash. To date, the fees for the fourth quarter of
1998 are the only fees that have been eligible for payment under this plan. All
eligible directors have elected to participate in the plan, except Mr. Chai and
Mr. Ashida, whose fees are assigned to their corporate employers. A total of
1,200,000 shares of Common Stock have been reserved for issuance under the terms
of this plan, which are intended to satisfy issuances under the plan for ten
years.
The following summary description of the Stock Compensation Plan for
Non-Employee Directors is qualified in its entirety by reference to the complete
Stock Compensation Plan for Non-Employee Directors, a copy of which is attached
hereto as Appendix A and incorporated herein by reference. Terms with their
initial letter capitalized that are used in this description and not
specifically defined herein shall have the same meaning given such terms in the
Stock Compensation Plan for Non-Employee Directors.
GENERAL INFORMATION
Under the Stock Compensation Plan for Non-Employee Directors, eligible
directors may elect to receive all, none or a portion of their directors' fees
in shares of Southland Common Stock, instead of in cash. Under the terms of the
plan, a director can change his election each calendar quarter, and shares are
issued after the end of the calendar quarter during which the fees are earned.
The stock is valued at the closing price on the last day of the calendar quarter
for which the fees are earned. The shares issued cannot be sold or transferred
for six months following the date of issuance. The plan was established to
encourage directors to acquire shares of the Common Stock without having to
purchase such shares in the public securities market. The Company believes it is
in the best interests of the shareholders for the directors to increase their
ownership of the Common Stock.
ELIGIBILITY AND PARTICIPATION
Each Non-Employee Director shall be eligible to participate in the plan.
Participation shall be voluntary and a Non-Employee Director who elects to
participate in the plan shall complete an Election Agreement which shall be
filed with the Secretary of the Company, specifying the amount (either "all",
"none", a specific percentage or specific dollar amount) of such Director's Fees
that the Non-Employee Director wants to receive in shares of Common Stock.
ELECTION TO RECEIVE STOCK
The Election Agreement must be filed with the Secretary of the Company prior
to the beginning of the calendar quarter to which the election relates and will
only be applicable to Director's Fees earned after the effective date of the
election, except that for the calendar quarter during which the plan is first
adopted, the Election Agreement will be deemed effective as of the first day of
that calendar quarter. Once an Election Agreement is filed, it will remain in
effect for subsequent calendar quarters until the Non-Employee Director amends
it (by filing a new Election Agreement) or revokes it, by either (a) filing a
new Election Agreement or (b) filing a statement of revocation with the
Secretary of the Company advising that the Non-Employee Director no longer wants
to receive Common Stock in payment of his Director's Fees.
11
STOCK ISSUANCE
The shares of Common Stock to be issued shall be equal to the number of
shares of Common Stock that could be purchased at the Closing Price of the
Common Stock on the last day of the calendar quarter during which the Director's
Fees were earned with the dollar amount of the Director's Fees that are being
paid in Common Stock.
CERTIFICATE FOR SHARES OF COMMON STOCK; RESTRICTION ON TRANSFER
A certificate representing the appropriate number of shares of Common Stock
shall be issued in the name of the Non-Employee Director, individually, or upon
his request, in the name of another person or entity to which he has assigned
his Director's Fees, and shall be delivered within ten days after the end of the
calendar quarter for which the Director's Fees are being paid. The certificate
so issued shall contain a restrictive legend stating that the shares represented
by the certificate cannot be transferred for six months following the date of
issuance of the certificate, unless the restriction is waived by the Company.
The restriction shall automatically lapse at the end of the six-month period.
Under current law, if any shares are issued under this plan to a person or
entity other than the individual Non-Employee Director, such shares are not
eligible to be registered on Form S-8; therefore, any shares so issued shall be
unregistered and may not be sold or transferred except pursuant to a valid
exemption from registration (for example, in compliance with all the applicable
provisions of Rule 144 under the Securities Act).
RESALE RESTRICTIONS
The Common Stock is traded on The Nasdaq Stock Market. In general, all
directors of a public company are "Affiliates" and shares may only be sold or
transferred by an Affiliate if a valid exemption from applicable registration
requirements is available for the transaction. All such sales must be reported
on Form 144 promulgated under the Securities Act.
In addition, Section 16(b) of the Exchange Act generally provides that any
profit realized by an officer or director of the Company or a beneficial owner
of more than 10% of the Common Stock who purchases and sells, or sells and
purchases, any equity security of the Company within any period of less than six
months shall inure to, and be recoverable by, the Company. Effort has been made
to exempt the acquisition of shares under this plan from Section 16(b) by
complying with the requirements of Rule 16b-3.
ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board, which may delegate authority to
a committee; however, such committee shall have no authority to (a) determine
how many shares shall be given to any Non-Employee Director or (b) determine
eligibility to participate in the plan. Such committee may be authorized to
interpret the plan and to prescribe, amend and rescind such rules and
regulations relating to the plan, as may be deemed advisable to protect the
interests of the Company in connection with the operation of the plan, and to
make all other determinations necessary or advisable for the administration of
the plan, but only to the extent not contrary to the express provisions of the
plan.
STOCK SUBJECT TO THE PLAN
Up to an aggregate of 1,200,000 shares of Common Stock are authorized for
issuance under the plan in accordance with the provisions of the plan. Shares of
Common Stock that are issued shall be fully paid and non-assessable. No
fractional shares shall be issued, and to the extent that the calculation of the
number of shares to be issued to a Non-Employee Director under the plan shall
result in a fractional share, the number of shares to be issued to the
Non-Employee Director shall be rounded up to the next whole share. The Company
shall at all times during the term of the plan retain as authorized and unissued
Common Stock at least the number of shares from time to time as may be issued
under the provisions of the plan or otherwise assure itself of its ability to
perform its obligations under the plan. Shares of
12
Common Stock issued pursuant to the plan may be shares of original issuance or
treasury shares or a combination of the foregoing, as the Board, in its
discretion, shall from time to time determine.
ADJUSTMENTS UPON CHANGES IN COMMON STOCK
(a) Upon the issuance of a certificate representing shares of Common Stock
to a Non-Employee Director, the Non-Employee Director shall become the owner
thereof for all purposes and shall have all rights as a shareholder, including
voting rights and the right to receive dividends and distributions and shall be
subject to any stock splits and other similar actions, with respect to such
shares, subject to the restrictions of the plan and any restrictions imposed by
law. If the Company shall pay or declare a dividend or make a distribution of
any kind, whether due to a reorganization, recapitalization, or otherwise, or
declare a stock split or take other similar action with respect to the shares of
Common Stock, then the Company shall pay or make such dividend or other
distribution or take such other action with respect to the shares owned by the
Non-Employee Director. In the event the Company shall effect a split of the
Common Stock or declare a dividend payable in Common Stock, or in the event the
outstanding Common Stock shall be combined into a smaller number of shares or
are in any way subject to a modification or changed during the time after
Director's Fees subject to the plan are earned but before the shares are issued,
then the number of shares of Common Stock that shall be issued to the
Non-Employee Director shall be increased or decreased proportionately or shall
be exchanged or modified as if they had been issued just prior to the record
date for the event requiring the change or modification; and
(b) in the event of a reclassification of the Common Stock not covered by
the foregoing, or in the event of a liquidation or reorganization (including a
merger, consolidation, or sale of assets) of the Company, the Board shall make
an appropriate adjustment in the number of shares of Common Stock then subject
to issuance under the plan. The Board shall make such adjustments, if any, as it
may deem appropriate in the number and kind of shares that are authorized for
issuance or are issuable pursuant to the Plan.
DESIGNATION OF BENEFICIARY
Each Non-Employee Director who elects to participate in the plan shall name
a beneficiary to receive any shares due him at the time of his death, with the
right to change such beneficiary at any time. In case of a failure to designate
a beneficiary or the death of the designated beneficiary without a designated
successor, such shares shall be issued to the estate of the Non-Employee
Director.
AMENDMENT OR TERMINATION OF PLAN
This plan is effective beginning with the calendar quarter commencing
October 1, 1998, subject to approval by the Company's shareholders at the next
annual meeting of shareholders, which approval is anticipated to be received due
to the fact that IYG Holding Company is expected to vote for approval of the
Plan and IYG Holding Company has sufficient voting power to approve the plan.
The plan shall continue until the earliest of the following to occur: (a)
December 31, 2008; (b) the date on which all shares reserved for issuance under
the plan have been issued; or (c) the date the plan is terminated by a
resolution of the Board. The Board may at any time suspend, terminate, amend, or
modify the plan.
TAX EFFECTS OF PARTICIPATION IN THE PLAN
Based on existing law, which is subject to change, the plan is not a
"qualified" plan as defined in Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"). Any stock received by a Non-Employee Director
under this plan will be reported by the Company as compensation to the
Non-Employee Director when received by him.
13
NEW PLAN BENEFITS
The following table estimates the number of shares that would be issued each
quarter to each Non-Employee Director, assuming a share price of $2.00 under the
formula contained in the Stock Compensation Plan for Non-Employee Directors and
assuming each Non-Employee Director elected to receive all his fees in shares of
Common Stock.
NEW PLAN BENEFITS
STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
- -------------------------------------------------------------------------------------------
ESTIMATED # OF SHARES
MAXIMUM ISSUED
# OF SHARES JANUARY
PER QUARTER 1999
NAME OF NON-EMPLOYEE DIRECTOR (@ $2.00) (A) (@$1.90625)(B)
- ------------------------------------------------------------- --------------- -----------
Yoshitami Arai............................................... 4,250 1,312
Timothy Ashida............................................... 2,250 -0-
Jay Chai..................................................... 5,125 -0-
Gary Fernandes............................................... 4,625 3,935
Masatoshi Ito................................................ 2,250 2,361
Masaaki Kamata............................................... 2,250 2,361
Kazuo Otsuka................................................. 2,250 1,574
Dr. Asher Pacholder.......................................... 4,500 3,935
Nobutake Sato................................................ 2,250 1,574
Toshifumi Suzuki............................................. 2,250 1,181
TOTAL SHARES................................................. 32,000(a) 18,233(b)
- ------------------------
(a) Shown are the estimated number of shares that would be issued each calendar
quarter, using a price for the Common Stock of $2.00 per share, if each
eligible director elected to receive all his fees for 1999 in shares of
Common Stock, based on the total fees such director received in 1998. The
actual number of shares received by each non-employee director and by all
eligible participants as a group may differ materially from the numbers
shown in this table which are only an estimate and are based on the
following assumptions which are only assumptions for purposes of preparing
this table: (a) that all non-employee directors have elected to participate
in the plan (neither Mr. Ashida nor Mr. Chai are currently participants due
to the fact that each of them has assigned his director's fees to his
corporate employer); (b) that each director will take all his fees in shares
of stock; and (c) that the share price is $2.00.
(b) As shown above, shares were issued to eight directors under the Plan,
representing varying amounts of their director's fees for the fourth quarter
of 1998. The numbers in this column represent the actual number of shares
issued for the calendar quarter ending December 31, 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE STOCK
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS, WHICH REQUIRES THE AFFIRMATIVE
VOTE OF A MAJORITY OF THE SHARES REPRESENTED AND ENTITLED TO VOTE AT THE
MEETING. VOTES WILL BE TABULATED BY AN INSPECTOR OF ELECTION. AN ABSTENTION FROM
VOTING AND BROKER NON-VOTES WILL BE INCLUDED IN COMPUTING THE NUMBER OF SHARES
PRESENT FOR PURPOSES OF DETERMINING THE PRESENCE OF A QUORUM FOR THE
SHAREHOLDERS MEETING AND WHETHER THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
SHARES PRESENT AT THE MEETING HAS BEEN RECEIVED, BUT WILL NOT BE COUNTED AS A
VOTE EITHER "FOR" OR "AGAINST" THE APPROVAL OF THE STOCK COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS. THIS IS FUNCTIONALLY EQUIVALENT TO A VOTE AGAINST THE
PROPOSAL.
14
PROPOSAL 4. APPROVAL OF ARTICLES OF AMENDMENT TO THE COMPANY'S SECOND RESTATED
ARTICLES OF INCORPORATION
The Board of Directors of the Company has approved an amendment to the
Company's Articles of Incorporation to change the name of the Company to
"7-Eleven, Inc." As approved by the Board of Directors, the name change will not
become effective until (a) shareholder approval is received for the Articles of
Amendment and (b) the Company's President and Chief Executive Officer decides it
is the appropriate time to file the Articles of Amendment to effect the name
change. It is currently anticipated that the Articles of Amendment will be filed
as soon as practical after shareholder approval is received. The Company's
Articles of Incorporation provide that a majority of the shares eligible to vote
can approve Articles of Amendment to the Articles of Incorporation. As described
above, IYG Holding Company is the owner of 65.12% of the Company's outstanding
common stock. BECAUSE THE APPROVAL OF THE MAJORITY SHAREHOLDER IS SUFFICIENT TO
PROVIDE THE REQUISITE SHAREHOLDER APPROVAL FOR THE NAME CHANGE AMENDMENT, THE
COMPANY EXPECTS THAT THE AMENDMENT WILL BE APPROVED WITHOUT THE AFFIRMATIVE VOTE
OF ANY OTHER SHAREHOLDER.
The Board of Directors of the Company is recommending the approval of the
name change and has adopted a proposal to change the name of the Company to
"7-Eleven, Inc." The Company's current name, The Southland Corporation, dates
back to 1927 and has no current identification with the Company's business
focus, which is now solely the operating, licensing and franchising of 7-Eleven
convenience stores. The 7-Eleven name, which is a trademark owned by the Company
in the United States and in many foreign countries, is well recognized as the
leading name in the convenience store business and has become an icon
symbolizing the industry that this company founded nearly 75 years ago and is an
important part of the legacy of the popular culture of the 20th century. The
Company believes that it will improve the Company's name identification if its
corporate name is the same as the name of its very valuable trademark. It is
anticipated that this change will improve national awareness of the Company in
the minds of consumers, vendors, shareholders, potential franchisees and the
investment community, by focusing on the Company's business name, which is so
well known around the world. By Unanimous Written Consent dated February 11,
1999, the Board of Directors adopted resolutions to authorize the Company's
President and Chief Executive Officer to proceed with effecting the name change
at such time as he decides to do so, after first submitting the name change to
the shareholders for their approval. The draft of the Articles of Amendment to
the Company's Second Restated Articles of Incorporation which would give effect
to the name change when such Articles of Amendment are filed with the Secretary
of State of Texas are attached hereto as Appendix B.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE ARTICLES OF
AMENDMENT TO THE COMPANY'S SECOND RESTATED ARTICLES OF INCORPORATION, WHICH
REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES ENTITLED TO VOTE AT
THE MEETING. VOTES WILL BE TABULATED BY AN INSPECTOR OF ELECTION. AN ABSTENTION
FROM VOTING AND BROKER NON-VOTES WILL BE INCLUDED IN COMPUTING THE NUMBER OF
SHARES PRESENT FOR PURPOSES OF DETERMINING THE PRESENCE OF A QUORUM FOR THE
SHAREHOLDERS MEETING, BUT WILL NOT BE COUNTED AS A VOTE EITHER "FOR" OR
"AGAINST" THE APPROVAL OF THE ARTICLES OF AMENDMENT TO THE COMPANY'S SECOND
RESTATED ARTICLES OF INCORPORATION. THIS IS FUNCTIONALLY EQUIVALENT TO A VOTE
AGAINST THE PROPOSAL.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS' COMPENSATION
The Company's executive compensation program is subject to the approval of
the Compensation and Benefits Committee of the Board of Directors. The committee
is composed of three directors, as follows: Mr. Suzuki (Chairman of the
Committee), Mr. Fernandes and Mr. Otsuka. Mr. Suzuki is Vice Chairman of the
Board of Directors of the Company. He is also President of Ito-Yokado and IYG
Holding Company and Chairman of Seven-Eleven Japan. As described elsewhere
herein, IYG Holding Company, which owns approximately 65% of the Common Stock of
the Company, is a jointly owned subsidiary of Ito-Yokado and
15
Seven-Eleven Japan. Ito-Yokado has, since 1992, unconditionally guaranteed the
Company's commercial paper facility for which Ito-Yokado has received no fee.
Seven-Eleven Japan, a 51%-owned subsidiary of Ito-Yokado, is the Company's area
licensee in Japan and, through its subsidiary, Seven-Eleven (Hawaii), Inc., is
the Company's area licensee in Hawaii. In addition, Ito-Yokado and Seven-Eleven
Japan acquired an aggregate of $300 million of the 1995 QUIDS and $80 million of
the 1998 QUIDS (see "Security Ownership of Certain Beneficial Owners and
Management--Security Ownership of Certain Beneficial Owners," above). Interest
is payable quarterly to Ito-Yokado and Seven-Eleven Japan on the Convertible
Debt Securities. Gary Fernandes, was Vice Chairman and a Director of Electronic
Data Systems Corporation ("EDS") in 1998. As described elsewhere herein, the
Company has contractual arrangements with EDS under which EDS has agreed to (a)
install and operate automatic teller machines in 7-Eleven stores over a ten-year
period and (b) provide the Company with certain consulting and business systems
planning services and data processing support for which EDS received fees in
1998. Kazuo Otsuka is an officer of Ito-Yokado and of IYG Holding Company.
The Company's Executive Officers, as well as all other management personnel,
receive annual compensation consisting of base salary and annual performance
incentive, or "bonus," under the Company's Annual Performance Incentive ("API"
or "Annual Bonus") Plan. The amount paid as Annual Bonus under this plan is
based upon the employee's or officer's base salary, salary administration grade
level and the achievement of certain pre-established performance criteria for
the Company each year, as more fully described in the Report of the Compensation
and Benefits Committee, included elsewhere herein.
The following table shows the compensation paid, or earned, during 1998, by
the Company's Chief Executive Officer and the next four most highly compensated
Executive Officers, as specifically required by the rules and regulations
relating to Proxy Statement disclosure.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION
------------------------------------------------ AWARDS PAYOUTS
OTHER ------------------------ -------------
ANNUAL RESTRICTED
NAME AND PRINCIPAL POSITION SALARY BONUS COMPEN- STOCK OPTIONS/ LTIP
IN 1998 YEAR ($) ($) SATION($)(I) AWARD(S)($) SARS(#) PAYOUTS($)(II)
- --------------------------------- --------- --------- --------- --------------- ----------- ----------- -------------
Clark J. Matthews, II............ 1998 480,000 339,840 N/A 500,000 -0-
Director; President and Chief 1997 480,000 141,120 N/A -0- 500,000 -0-
Executive Officer; Secretary 1996 410,000 216,480 N/A 600,000 -0-
James W. Keyes................... 1998 350,000 206,500 N/A 350,000 -0-
Director; Executive Vice
President 1997 250,000 61,250 N/A -0- 350,000 -0-
and Chief Operating Officer 1996 200,000 85,091 N/A 350,000 -0-
Bryan F. Smith, Jr............... 1998 240,000 127,490 N/A 137,000 -0-
Senior Vice President and 1997 215,000 47,408 N/A -0- 137,000 -0-
General Counsel 1996 200,000 79,200 N/A 136,800 -0-
Rodney A. Brehm.................. 1998 210,000 111,510 N/A 70,000 -0-
Senior Vice President, 1997 210,000 46,305 N/A -0- 50,000 -0-
Store Operations (v) 1996 210,000 83,160 N/A 136,800 -0-
David A. Urbel................... 1998 210,000 101,686 N/A 70,000 -0-
Vice President Finance (vi) 1997 205,000 40,180 N/A -0- 75,000 -0-
1996 195,000 68,640 N/A 60,000 -0-
ALL OTHER
NAME AND PRINCIPAL POSITION COMPEN-
IN 1998 SATION($)(III)
- --------------------------------- -------------
Clark J. Matthews, II............ 8,286
Director; President and Chief 7,767
Executive Officer; Secretary 280,114(iv)
James W. Keyes................... 7,984
Director; Executive Vice
President 6,945
and Chief Operating Officer 9,652
Bryan F. Smith, Jr............... 7,592
Senior Vice President and 6,824
General Counsel 9,636
Rodney A. Brehm.................. 7,270
Senior Vice President, 6,810
Store Operations (v) 9,674
David A. Urbel................... 7,428
Vice President Finance (vi) 6,780
10,296
- ------------------------------
(i) No "Other Annual Compensation" is shown because the total amounts paid for
perquisites in 1996, 1997 and 1998 to the five named executive officers did
not exceed the lesser of $50,000 or 10% of the named executive officer's
salary and bonus for such years.
(ii) No amounts were paid for 1998 pursuant to the 1997 Performance Plan
because the Company's 1998 threshold operating earnings under the plan
were not achieved.
16
(iii) The amounts shown for 1998 include only (a) the amount of Company
contribution to each of the named executive officer's accounts in The
Southland Corporation Employees' Savings and Profit Sharing Plan (the
"Savings and Profit Sharing Plan"), a Section 401(k) defined contribution
plan with over 20,000 participants, which for 1998 was as follows: $6,520
for each of the named executive officers; and (b) for each of the named
executive officers, the full premiums paid for basic term life insurance
under the Company's group plan for all employees, which for 1998 were as
follows: Mr. Matthews--$1,766; Mr. Keyes--$1,084; Mr. Smith--$813; Mr.
Brehm--$751; and Mr. Urbel--$742.
(iv) This amount includes $269,583 paid in 1996 in connection with the
Company's request that Mr. Matthews enter into a settlement of a previous
insurance arrangement.
(v) Mr. Brehm's title will change to Senior Vice President, Store Operations,
in early 1999.
(vi) Mr. Urbel decided to retire as an officer of the Company, effective April
30, 1999. (See "Arrangements Related to Termination of Employment",
below.)
OPTION/SAR GRANTS IN LAST FISCAL YEAR
In 1995, the Company's Board of Directors unanimously approved the adoption
of the 1995 Stock Incentive Plan, which was approved by the Company's
shareholders in 1996. Pursuant to the Stock Incentive Plan, the Board of
Directors granted, upon the recommendation of the Compensation and Benefits
Committee, nonqualified stock options to approximately 64 of the Company's key
employees in 1998, including each of the named executive officers, as well as
all other officers. Options to purchase an aggregate of 3,319,500 shares, over
the five-year vesting period, were granted. Under the terms of the plan, vesting
will be accelerated if certain target prices for the Company's Common Stock are
achieved and maintained.
The following table provides information on the number of options granted,
the exercise price and expiration date of such options, as well as the potential
realizable value of the options assuming that the underlying Common Stock
appreciates in value from the date of grant at the annualized rates of 5% and
10%, as required by the Securities and Exchange Commission, and is not intended
to forecast future appreciation of the Company's stock price.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM (II)
---------------------------------------------------- ------------------------
PERCENT OF
NUMBER OF TOTAL 5% 10%
SECURITIES OPTIONS/ ASSUMING ASSUMING
UNDERLYING SARS GRANTED 10/13/08 10/13/08
OPTIONS/SARS TO EMPLOYEES EXERCISE OR STOCK STOCK
GRANTED IN FISCAL BASE PRICE EXPIRATION PRICE OF PRICE OF
NAME (#)(I) YEAR ($/SH) DATE $3.11 $4.94
- ----------------------------- ----------- ------------- ----------- ----------- ----------- -----------
Clark J. Matthews, II........ 500,000 14.88% $ 1.90625 10-13-08 $ 595,000 $1,515,000
James W. Keyes............... 350,000 10.42% $ 1.90625 10-13-08 416,500 1,060,500
Bryan F. Smith, Jr........... 137,000 4.11% $ 1.90625 10-13-08 163,030 415,110
Rodney A. Brehm.............. 70,000 2.08% $ 1.90625 10-13-08 83,300 212,100
David A. Urbel............... 70,000 2.08% $ 1.90625 10-13-08 83,300 212,100
- ------------------------
(i) Options become exercisable as to 20% of the shares subject thereto on the
first through fifth anniversaries of the grant date. Thirty percent (30%)
of the shares received upon exercise will bear a legend restricting the
transfer or sale of such shares for 24 months after the date acquired,
unless the optionee dies, retires, becomes disabled or his employment is
terminated due to divestiture.
(ii) The amounts shown under these columns are the result of calculations at
the 5% and 10% rates required by the Securities and Exchange Commission
and are not intended to forecast future appreciation of the Company's
stock price.
17
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information on the number of options
outstanding under the 1995 Stock Incentive Plan, as well as the value of
unexercised options, both exercisable and unexercisable, under the plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/ IN-THE-MONEY OPTIONS/SARS
SARS AT FISCAL YEAR END(#) AT FISCAL YEAR-END($)(III)
ACQUIRED ON VALUE ------------------------------ ----------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE(I) UNEXERCISABLE(II) EXERCISABLE(IV) UNEXERCISABLE
- --------------------------------- ----------- ----------- ------------- --------------- ----------------- ---------------
Clark J. Matthews, II............ -- -- 724,000 1,516,000 N/A N/A
James W. Keyes................... -- -- 360,000 940,000 N/A N/A
Bryan F. Smith, Jr............... -- -- 164,200 383,400 N/A N/A
Rodney A. Brehm.................. -- -- 146,800 246,800 N/A N/A
David A. Urbel................... -- -- 91,980 201,320 N/A N/A
- ------------------------
(i) The exercisable options shown are held pursuant to the 1995 Stock Incentive
Plan (pursuant to which 60% of the options granted in 1995; 40% of the
options granted in 1996; and 20% of the options granted in 1997 became
exercisable on October 23, September 30, and November 12, 1998,
respectively).
(ii) The unexercisable options shown are Nonqualified Stock Options granted in
1995, 1996, 1997 and 1998 under the 1995 Stock Incentive Plan, at an
exercise price of $3.1875 per share, $3.00 per share, $2.469 per share,
and $1.90625 per share respectively. The options granted will become
exercisable 20% per year for five years, which can be accelerated if
certain share price targets are achieved.
(iii) No SARs are held by any of the named executive officers nor are any SARs
currently outstanding.
(iv) Based on the closing price of $1.90625 on The Nasdaq Stock Market on the
last business day of the Company's fiscal year.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The 1997 Performance Plan, was a two-year incentive plan designed to reward
management for exceptional achievement in operating earnings, both on a one-year
and on a multi-year basis. The 1997 Performance Plan expired by its terms on
December 31, 1998 and has not been renewed.
18
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR(A)
ESTIMATED FUTURE
PAYOUTS
PERFORMANCE UNDER NON-STOCK
NUMBER OF OR OTHER
SHARES, PERIOD PRICE-BASED PLANS(B)(C)
UNITS UNTIL --------------------------
OR OTHER MATURATION THRESHOLD MAXIMUM
NAME RIGHTS(#) OR PAYOUT ($ OR #) ($ OR #)
- -------------------------------------------------------------- ------------ ----------- ------------- -----------
Clark J. Matthews, II......................................... 420,000 12/31/98 -0- 840,000
James W. Keyes................................................ 155,000 12/31/98 -0- 310,000
Bryan F. Smith, Jr............................................ 112,500 12/31/98 -0- 225,000
Rodney A. Brehm............................................... 112,500 12/31/98 -0- 225,000
David Urbel................................................... 80,600 12/31/98 -0- 161,200
- ------------------------
(a) The numbers of units shown above are the numbers of units awarded in 1997.
No formal awards were made in 1998, but it is estimated the numbers of units
would have been similar to, if not equal to, the numbers shown.
(b) There is no "target" payout amount under the plan.
(c) No awards were earned under this plan for 1997 or 1998 or the cumulative
two-year period.
This plan had both annual and two-year cumulative operating earnings
targets. Under the 1997 Performance Plan, units were granted to eligible
executives, including all officers, based upon the salary administration grade
level assigned to the executive's job. All executives in the same grade level
were awarded the same number of units. At the end of the plan period (December
31, 1998) the award pool was to be funded by a predetermined amount of each
dollar of actual operating earnings achieved by the Company above the threshold
operating earnings set for each year and for the cumulative two-year period. The
Company's 1998 operating earnings were not above the threshold for 1998 and,
pursuant to the terms of the plan, no amounts were paid.
The maximum aggregate awards payable under this plan were not to exceed the
total amount of Annual Bonus payable to the participants in this plan for the
plan period.
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
The Company does not maintain a defined benefit pension plan for its
employees. It does maintain an Executive Protection Plan, covering approximately
58 executives, including each of the named executive officers. This plan
provides three benefits: salary continuation upon retirement at age 65 (or
later) equal to 150% of the executive's "final compensation," as determined for
plan purposes, payable in ten equal annual installments (if the executive
retires between the ages of 55 and 65, a reduced benefit is payable);
post-retirement life insurance benefit equal to 200% of the executive's "final
compensation," as determined for plan purposes, plus $15,000 (or, in lieu
thereof, if the executive dies prior to retirement, a salary continuation death
benefit shall be paid to the executive's named beneficiary, equal to 200% of
such compensation, payable in ten equal annual installments); and disability
income in excess of the amount provided under the Company's group long-term and
short-term disability plans. If the executive becomes disabled while a
participant in this plan, the total amount paid to the executive as disability
benefits will equal 80% of the executive's "final compensation" prior to the
disability. The Company maintains various insurance policies to fund the amounts
payable under this plan.
Under the current plan provisions, the "final compensation" on which
benefits would be calculated for each of the named executive officers would be
based on that executive's 1996 earnings (which may be adjusted to 1998 earnings
in mid-1999). Based on such compensation, the annual installment of salary
continuation, assuming retirement at age 65, and no adjustments to compensation
between 1996 and retirement, would be as follows: Mr. Matthews--$93,972, Mr.
Keyes--$42,764, Mr. Smith $41,880,
19
Mr. Brehm--$43,974, and Mr. Urbel--$39,546, (see below for the actual amount to
be paid Mr. Urbel in lieu of benefits under this plan). Under the plan, normal
retirement age is 65; however, if an executive retires between the ages of 55
and 65, a reduced benefit is payable under the plan. At age 55, the benefit is
50% of what would have been paid at age 65; the benefit increases to 55% at age
56, and increases 5% per year thereafter for each year up to age 65.
ARRANGEMENTS RELATED TO TERMINATION OF EMPLOYMENT
During 1998, David A. Urbel, one of the named executive officers, decided to
retire from the Company, effective April 30, 1999, and entered into an agreement
with the Company providing for certain enhanced retirement benefits to be paid
to him. The agreement provides that Mr. Urbel will receive a "Separation Grant"
commencing in 1999, equal to approximately two years' salary (a total of
$420,000) plus the greater of 100% of his 1999 Annual Performance Incentive, or
such percentage as is actually earned in 1999 under that plan, or any
replacement plan, for 1999 (at least $84,000). In addition, under the terms of
the agreement, Mr. Urbel will receive certain benefits payable starting in 2002
(or earlier, if he should die prior to that date) comparable to 80% of the
benefits he would have received from the Company under the Executive Protection
Plan had he retired at age 65. Mr. Urbel will also receive payment of a lump sum
of $8,000 representing his 1999 car allowance from May through December 1999. He
will also receive reimbursement to cover the cost of retiree medical coverage in
excess of employee coverage from May 1, 1999 through April 30, 2001. Under the
1995 Stock Incentive Plan, Mr. Urbel's separation will be treated as an early
retirement and his options will continue to vest pursuant to their terms.
The Company currently maintains insurance that covers the full cost of
providing these retirement benefits to Mr. Urbel.
DIRECTORS' COMPENSATION
For information about compensation of the Board of Directors see
"Information About The Board of Directors and Committees of the
Board--Compensation of Directors," above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described above, the Compensation and Benefits Committee of the Board of
Directors is composed of three directors, as follows: Mr. Suzuki (Chairman of
the Committee), Mr. Fernandes and Mr. Otsuka. Mr. Suzuki is Vice Chairman of the
Board of Directors of the Company. He is also President of Ito-Yokado and IYG
Holding Company and Chairman of Seven-Eleven Japan. As described elsewhere
herein, IYG Holding Company, which owns approximately 65% of the Common Stock of
the Company, is a jointly owned subsidiary of Ito-Yokado and Seven-Eleven Japan.
Ito-Yokado has, since 1992, unconditionally guaranteed the Company's commercial
paper facility for which Ito-Yokado has received no fee. Seven-Eleven Japan, a
51%-owned subsidiary of Ito-Yokado, is the Company's area licensee in Japan and,
through its subsidiary, Seven-Eleven (Hawaii), Inc., is the Company's area
licensee in Hawaii. In addition, Ito-Yokado and Seven-Eleven Japan acquired an
aggregate of $300 million of the 1995 QUIDS and $80 million of the 1998 QUIDS
(see "Security Ownership of Certain Beneficial Owners and Management--Security
Ownership of Certain Beneficial Owners," above). Interest is payable quarterly
to Ito-Yokado and Seven-Eleven Japan on the Convertible Debt Securities. Gary
Fernandes, was Vice Chairman and a director of Electronic Data Systems
Corporation ("EDS") in 1998. As described elsewhere herein, the Company has
contractual arrangements with EDS under which EDS has agreed to (a) install and
operate automatic teller machines in 7-Eleven stores over a ten-year period and
(b) provide the Company with certain consulting and business systems planning
services and data processing support for which EDS received fees in 1998. Kazuo
Otsuka is an officer of Ito-Yokado and of IYG Holding Company.
20
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The functions of the Compensation and Benefits Committee are to review the
level, coverage and competitiveness of the Company's compensation, incentives,
benefits and perquisites and its plans, goals and objectives for officer-level
and other executive positions, so as to retain and reward high-quality personnel
in key positions; to administer the Company's various incentive plans, including
the 1995 Stock Incentive Plan; to make recommendations to the Board regarding
amendments to the various plans and institution of new plans and other related
matters. It also undertakes such other duties as may be assigned to it by the
Board of Directors.
In carrying out its duties, the Committee relies on recommendations
presented to it by the Company's Compensation and Benefits Department, as well
as by outside consultants who have been utilized from time to time to assist the
Company in determining the competitiveness of its compensation policies, as well
as on recommendations of the Company's executive officers with regard to the
specific performance of individuals in carrying out their job responsibilities,
and on data collected and utilized by the Company's Compensation and Benefits
Department about compensation structure, practices and payment levels in certain
"Comparable Companies" (as described below). In addition, in making compensation
decisions, the Company will consider the strong increases in 1998 in same store
merchandise sales, as well as the impact of management's focus on implementation
of the Company's strategic initiatives during the year.
The Company's compensation structure is based on grade level classifications
for all exempt positions, with a salary range and target annual bonus
compensation set at a percentage of base salary for each grade level.
During 1998, annual compensation for exempt employees consisted of salary
(or "base" compensation) and an Annual Performance Incentive (called "API" or
"Annual Bonus"). The API that is potentially payable to any employee is a set
percentage of the employee's salary, based on grade level. The combined total of
full annual salary and full API is designed to achieve a compensation level that
is slightly above the median compensation level for the same job
responsibilities in "Comparable Companies," as defined below.
REVIEW OF COMPENSATION PRACTICES. In response to concerns with different
aspects of the Company's pay program for exempt employees, the Executive
Committee had the Compensation Department review Southland's compensation and
benefits strategy and assess the degree to which it supports the Company's
business strategies.
The result of this review was a completely revised set of grade levels,
consolidating what had previously been ten grades into six new grades. In
addition, instead of using "mid-point' as a guide within the grade level, as had
been done under the prior system, each new grade level is now divided into three
sub-parts (entry, target and value) to recognize the specific accomplishments of
individual employees and the market value of the services provided, emphasizing
the value to the Company of each individual's accomplishments. The new plan,
which also continues the API, was announced to employees in November, 1997, with
the new pay scales implemented effective as of January, 1998.
DESCRIPTION OF 1998 COMPENSATION
BASE SALARY. For 1998, officer compensation was increased approximately
11%.
ANNUAL PERFORMANCE INCENTIVE. All the Company's officers and all other
exempt personnel have the potential to earn API. The API potential for the Chief
Executive Officer, if the Company's earnings target is reached, is 60% of his
base salary. The Company's senior officers have API potential of from 45% to 50%
of their base salary. Other officers have a potential to earn between 37% and
45% of their base salary. In 1998, the amount of API that was earned was based
on the achievement of certain net earnings targets. The Company exceeded the
targets and the API payout was 118% of the individual officer's or exempt
employee's target payment.
21
1997 PERFORMANCE PLAN. In 1993, the Company initiated a multi-year
incentive plan, the Performance Plan, which was designed to retain and reward
employees whose responsibilities were directly related to the Company's
performance. In 1997, the Committee approved, and the shareholders ratified,
extension of the Performance Plan for 1997 and 1998. The goals set under this
plan were not achieved in 1997 or 1998 and the plan, which terminated on
December 31, 1998, according to its terms, is not being renewed. The Company may
decide to replace this plan with a plan that awards employees more closely for
their individual accomplishments on the Company's strategic initiatives.
1995 STOCK INCENTIVE PLAN. This plan provides for the Company to award a
variety of stock-based incentives, including options, stock units, restricted
stock, phantom stock and stock appreciation rights. Based on the study of
practices at Comparable Companies, the Board has set aside from the Company's
authorized, but unissued, shares, approximately 10% of the Company's currently
issued and outstanding shares, for awards under this plan over the ten-year term
of the plan, with the intention that options will be granted each year for
approximately one-tenth of the total shares reserved for issuance under this
plan. Shareholder approval of this plan was obtained in April 1996.
Options were granted under this plan in October 1995, October 1996, November
1997, and October 1998. The options granted become exercisable over a five-year
period starting one year after the date of grant. Approximately 14.6 million
shares of the Company's authorized but unissued Common Stock are now subject to
outstanding options under this plan. The option exercise price is $3.1875 for
the options granted in 1995, $3.00 for the options granted in 1996, $2.469 for
the options granted in 1997, and $1.90625 for the options granted in 1998, in
each case being equal to the closing price of the stock on the date of grant.
Although as of December 31, 1998, all exercisable options were at prices above
the market price, the Committee believes this plan, over the life of the plan,
which provides for an accelerated vesting schedule if the Company's stock price
reaches and stays above certain levels for a significant period of time, has the
potential to reward the executives who are responsible for the success of the
Company's long-term growth and encourage them to focus on initiatives that will
have a positive effect on the price of the Company's stock.
CHIEF EXECUTIVE COMPENSATION. Mr. Matthews' base pay in 1998 was $480,000,
representing no increase from the prior year. Mr. Matthews' annual bonus was
$339,840, which was significantly higher than in 1997 because the Company
exceeded its net earnings target for the year. Mr. Matthews' compensation
remains well below the median for chief executive officers in Comparable
Companies.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN FOR ELIGIBLE EMPLOYEES
("SERP"). Effective in January 1998, the Company adopted the SERP, an unfunded,
non-qualified deferred compensation arrangement for a select group of highly
compensated management employees. The Committee heartily endorsed the
implementation of this plan as a means to encourage employees to augment their
savings for retirement. Eligible employees are permitted to defer up to 12% of
their income into the SERP. The amounts deferred earn interest, set each
December, at 120% of the federal long-term rate for compounding annually, as set
by the Internal Revenue Service. For 1998, the interest rate was 7.59% and for
1999 it is 6.32%. The Company may make a matching contribution to the SERP,
roughly equivalent to the amount a SERP participant was prevented from receiving
under the Savings and Profit Sharing Plan due to federally mandated
discrimination testing. The matching contribution, if any, will only apply on
deferrals of up to a total of six percent of a participant's income, after
deducting any matching contribution the participant received in the Savings and
Profit Sharing Plan. The Company elected not to make a matching contribution to
the SERP for 1998.
STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS. In October 1998, the
Board approved the Stock Compensation Plan for Non-Employee Directors. The
purpose of this plan is to encourage non-employee directors to increase their
ownership of Southland common stock by electing, under the terms of this plan,
to receive a portion, or all, of their directors' fees in shares of Common Stock
instead of in cash. All non-employee directors (the only directors who receive
directors' fees) are eligible to
22
participate, however, two directors who have assigned their fees to their
corporate employers have elected not to participate because the registration
statement that covers the shares issued under this plan would not cover shares
issued to their employers. Eight directors are currently participating in this
plan, which is being presented to shareholders for approval at this meeting.
(See "Proposal 3," above.)
FUTURE COMPENSATION:
1999 COMPENSATION. The human resources team has been asked to study and
develop a new Annual Performance Incentive plan for all exempt employees, with
the initial focus on field personnel, that will be designed to reward employees
as directly as possible based upon their individual unit's performance. In
addition, the Compensation and Benefits Department is also reviewing other
aspects of management's compensation, including all other benefit plans, to
determine if the plan structures and benefits are comparable to those being
offered currently by Comparable Companies. This is called the "Benchmarking
Study." In December, 1998, the Company announced that for 1999 and future years,
annual salary administration for exempt employees would take place in April,
instead of in January, as had been done previously. This will give the Company
additional time to assess prior year results when making decisions about
compensation for the following year. Thus, any salary increases for 1999 will
not be effective until April, 1999.
SECTION 162(M). Changes in the tax laws for 1994 and thereafter do not
permit public companies to recognize a tax deduction for compensation paid in
excess of $1,000,000 to any of the five most highly compensated officers, unless
the plan under which such compensation is paid is not only approved by the
Board's Compensation Committee but is also performance-based and approved by the
Company's shareholders, in which case the compensation paid under such plan is
exempt from the $1,000,000 limitation. The Committee does not believe that any
executive will earn in excess of $1,000,000 of non-exempt compensation in 1999;
however, the 1995 Stock Incentive Plan was approved by the shareholders, in
order to comply with Section 162(m). In addition, the Committee intends to take
other actions, if required, to comply with the regulations under Section 162(m).
COMPARATIVE DATA. In carrying out its functions, the Committee may be asked
to review data collected from various sources by the Company's Compensation and
Benefits Department and benefits consultants utilized by the Company on
particular issues. The Company believes that, to effectively recruit talented
executives, it must compete with other national companies having a similar
employee base, approximately the same range of revenue and similar geographic
locations, although such companies are not in the same line of business as
Southland (the "Comparable Companies"). Therefore, the companies used for
compensation comparisons are not the same companies as those included in the
peer group index shown on the Performance Graph appearing elsewhere herein. The
companies included in that peer group are specifically selected because they (a)
are publicly owned with actively traded common stock, (b) have a market
capitalization that can be analyzed for comparison with Southland's rate of
return on equity, and (c) engage in either the convenience retailing or food
retailing business. The Company believes it competes with a much broader range
of companies in its quest for executive talent.
The Committee will continue to review the compensation issues presented to
it by the Company, making adjustments that are deemed appropriate, both in
compensation policies and practices, compensation structure and the actual
amounts paid and will look to the Company's executive officers for
recommendations resulting from the currently ongoing review of the Company's
compensation program and strategies.
Toshifumi Suzuki, Chairman
Gary J. Fernandes
Kazuo Otsuka
23
PERFORMANCE GRAPH
The Performance Graph, below, shows the value, at year-end 1994, 1995, 1996,
1997 and 1998, of an investment in Southland Common Stock of $100 on January 1,
1994. Also shown are the values, assuming $100 invested in the NASDAQ Market
Index and a peer group index selected by the Company consisting of three
publicly traded convenience store companies (Casey's General Stores, Inc., Dairy
Mart Convenience Stores, Inc. and Uni-Marts, Inc.) and two food retailers (The
Kroger Co. and Safeway, Inc.), also beginning on January 1, 1994, and at
year-end 1995, 1996, 1997 and 1998. In prior years, The Vons Companies, Inc. was
also included in the peer group; however, The Vons Companies, Inc. was acquired
by Safeway, Inc., in April 1997, ceased public trading, and has therefore been
deleted from the peer group for 1997 and 1998. In addition, two of the Company's
major convenience store competitors: the Circle K Corporation ("Circle K") and
National Convenience Stores (operator of "Stop N Go") are not included in the
peer group. Both companies have been acquired and do not issue securities to the
public at this time. The Company may decide, in future years, to change the
composition of the peer group if the Company believes that better comparative
data is available.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
THE SOUTHLAND CORPORATION PEER GROUP INDEX
1993 $100.00 $100.00
1994 $66.67 $133.72
1995 $49.07 $211.07
1996 $43.98 $304.49
1997 $31.48 $459.44
1998 $28.24 $825.46
DOLLARS
ASSUMES $100 INVESTED ON JAN. 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1998
Source of Information:
NASDAQ MARKET INDEX
1993 $100.00
1994 $104.99
1995 $136.18
1996 $169.23
1997 $207.00
1998 $291.96
DOLLARS
ASSUMES $100 INVESTED ON JAN. 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1998
Source of Information:
FISCAL YEAR ENDING DECEMBER 31
-----------------------------------------------------
COMPANY 1994 1995 1996 1997 1998
- ---------------------------------------------------- --------- --------- --------- --------- ---------
The Southland Corporation........................... 66.67 49.07 43.98 31.48 28.24
Peer Group.......................................... 133.72 211.07 304.49 459.44 825.46
Broad Market........................................ 104.99 136.18 169.23 207.00 291.96
Source of information: [MEDIA GENERAL FINANCIAL SERVICES]
24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company currently has a commercial paper program under which it can
issue up to $650 million based upon the Company's needs. The commercial paper
facility is unconditionally guaranteed by Ito-Yokado.
In November 1995, the Company issued $300 million 4.5% Convertible Quarterly
Income Debt Securities due 2010 (the "1995 QUIDS") to Ito-Yokado ($153 million)
and Seven-Eleven Japan ($147 million). An additional $80 million 4.5%
Convertible Quarterly Income Debt Securities due 2013 (the "1998 QUIDS") were
issued in February 1998, to Ito-Yokado ($40.8 million) and Seven-Eleven Japan
($39.2 million). Interest on both series of QUIDS is payable quarterly, and in
1998, the Company paid aggregate interest to Ito-Yokado of $8,348,700 and to
Seven-Eleven Japan of $8,021,300 on both series of QUIDS. The Company may defer
the interest payments for up to 20 consecutive quarters but currently intends to
make interest payments as they come due. In addition, the 1995 QUIDS are
convertible in whole or in part into a total of 72,111,917 shares of Southland
Common Stock at a conversion price of $4.1602 per share and, beginning in 2001,
the 1998 QUIDS are convertible in whole or in part into a total of 32,508,432
shares of Southland Common Stock, at a conversion price of $2.4609 per share, at
which time, if certain conditions with regard to the closing price of
Southland's Common Stock are met, the 1998 QUIDS have a mandatory conversion
feature.
Seven-Eleven Japan is the largest area licensee of the Company, operating,
as of December 1998, over 7,605 7-Eleven stores in Japan under an area license
agreement entered into in 1973. In 1988, the Company entered into a
yen-denominated financing arrangement pursuant to which it pledged the royalty
stream from Seven-Eleven Japan as collateral for the financing until the earlier
of twenty years or the date the indebtedness is paid in full. In 1998, it was
anticipated that the indebtedness would be satisfied earlier than the
twenty-year term and the Company entered into an additional yen-denominated
financing related to subsequent royalties which, pursuant to the terms of the
amended license agreement with Seven-Eleven Japan, will be at a reduced
percentage. In 1998, the royalties from Seven-Eleven Japan that were paid under
this arrangement totaled approximately $53 million.
In addition, Seven-Eleven (Hawaii), Inc., the Company's area licensee in
Hawaii, is a subsidiary of Seven-Eleven Japan, and operates 48 stores in Hawaii.
During 1998, Seven-Eleven (Hawaii), Inc. paid the Company $68,219 in connection
with the area license arrangement.
As of December 31, 1998, the Savings and Profit Sharing Plan leased a total
of 606 operating convenience stores to the Company plus 18 other locations.
Rentals, including percentage rents, paid by the Company to the Savings and
Profit Sharing Plan for 1998 aggregated $20,826,545. During 1998, the Savings
and Profit Sharing Plan sold 111 locations to third parties, 75 of which were
leased to the Company at the time of the sale which leases were assigned to the
buyer. The leases with the Company were terminated on 2 locations upon payment
by the Company of $50,297 in termination fees. In addition, five properties were
sold to the Company by the Savings and Profit Sharing Plan in 1998.
Gary J. Fernandes, a director of Southland, was, through December 31, 1998,
an officer and director of Electronic Data Systems Corporation ("EDS"). During
1998, EDS provided the Company with certain consulting and business systems
planning and development services to assist the Company in its planning and
production of data processing support for the Company's retail information
system and combined distribution centers. During 1998, EDS also provided support
and maintenance in connection with the Company's General Ledger, Accounts
Payable, Purchasing, Project Accounting and Environmental Compliance Tracking
and Control systems. In addition, EDS provided the Company with hardware and
installation services to upgrade the operating system of its internal network
infrastructure. During 1998, the Company paid EDS a total of approximately $55
million in connection with these business systems planning and retail
information projects. Such payments are expected to continue in the future,
pursuant to the terms of the relevant agreements.
25
In addition, the Company has an ongoing agreement with EDS, originally
entered into in 1993 with a ten-year term, for the installation and operation of
ATMs in 7-Eleven stores. Payments from EDS to the Company, under this agreement,
include both a flat fee per month per store and transaction-based fees
determined by the number of transactions completed on the ATM each month.
Payments to the Company under these agreements relating to operation of ATMs in
the Company's stores totaled approximately $30.7 million in 1998. Such payments
are expected to continue in the future. Mr. Fernandes has no personal material
interest in any transactions between the Company and EDS.
Mr. Chai is Chairman and Chief Executive Officer of ITOCHU International
Inc. and Executive Vice President of ITOCHU Corporation. Both ITOCHU
International and ITOCHU Corporation are general trading companies and each has
a 10% direct equity interest in Prime Deli, Inc., a company that operates a
fresh food commissary for Southland, serving approximately 283 7-Eleven stores
in Texas. During 1998, Southland purchased fresh food products from this
commissary for approximately $6.1 million and, in addition, paid Prime Deli
approximately $557,000 as fees related to research and development, advertising,
promotions and product write-off.
In addition, SIG Logistics, which is partially owned by ITOCHU Corporation
and ITOCHU International, operated three combined distribution centers in
Florida that served a total of 464 7-Eleven stores. During 1998 the fees paid to
SIG Logistics as distribution fees totaled approximately $8 million.
C. Itoh & Co. (now ITOCHU Corporation) entered into a Consulting Agreement
with The Southland Corporation and Seven-Eleven Japan Co., Ltd. in 1973, related
to the 7-Eleven convenience store chain operating in Japan, and has performed
under this agreement since then.
In addition, ITOCHU International and ITOCHU Corporation may, from time to
time, negotiate with the Company to provide additional goods or services.
Mr. Chai has no personal material interest in any transactions between the
Company and ITOCHU Corporation and ITOCHU International Inc. other than as a
director and/or officer of such companies.
SHAREHOLDER PROPOSALS
Any shareholder intending to present a proposal and wishing to have it
included in the Proxy Statement for the Company's 2000 Annual Meeting of
Shareholders, which is expected to be held during April or May 2000, must send
such proposal to the Company at its principal office, 2711 North Haskell Avenue,
Dallas, Texas 75204, Attn: Office of the Secretary. Such proposal must be
received by the Company not later than December 1, 1999, and must comply with
the then current rules of the Securities and Exchange Commission relating to
shareholder proposals.
FINANCIAL AND OTHER INFORMATION
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1998 is
being mailed to shareholders with this Proxy Statement but such report is not
incorporated in this Proxy Statement and is not deemed to be part of the proxy
soliciting material. A COPY OF SOUTHLAND'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1998 (WITHOUT EXHIBITS) WILL BE FURNISHED TO
SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO: MANAGER, INVESTOR
RELATIONS, THE SOUTHLAND CORPORATION, 2711 NORTH HASKELL AVENUE, DALLAS, TEXAS
75204.
OTHER BUSINESS
Management knows of no other matters to be brought before this meeting.
However, if other business should come before this meeting, it is the intention
of each person named in the proxy to vote such proxy in accordance with his
respective judgment on such matters. Minutes of the last Annual Meeting of
26
Shareholders will be approved. Management's reports will be heard and received.
Neither the hearing of the reports nor the approval of the minutes will
constitute approval or disapproval of the matters set forth therein.
INDEMNIFICATION
Pursuant to the Company's Articles of Incorporation and Bylaws and the Texas
Business Corporation Act, the Company has indemnified certain current and former
officers and directors in connection with pending litigation as well as with
other actions they may have taken while serving as directors or officers of the
Company.
27
APPENDIX A
THE SOUTHLAND CORPORATION
STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
EFFECTIVE AS OF OCTOBER 8, 1998
1. ESTABLISHMENT AND PURPOSE
The Southland Corporation (the "Company"), hereby establishes The Southland
Corporation Stock Compensation Plan for Non-Employee Directors (the "Plan"). The
purposes of the Plan are to encourage non-employee directors of the Company to
acquire shares of the Company's common stock, and thereby to align their
interests more closely with the interests of the other shareholders of the
Company.
2. CERTAIN DEFINITIONS.
For purposes of the Plan, the following terms shall have the indicated
meanings:
(a) "Annual Retainer" means the amount paid to a Non-Employee Director as
his annual fee, which is paid in quarterly increments.
(b) "Board" means the Board of Directors of The Southland Corporation.
(c) "Closing Price" means the last reported sales price of the Common Stock
on the last Trading Day of the calendar quarter, or if no such sale is
made on such day, the last reported sales price of the Common Stock on
the next following day for which such sales price is reported on the
NASDAQ National Market (or, if the Common Stock is not then listed or
admitted to trading on the NASDAQ National Market, the principal national
stock exchange or stock market on which the Common Stock is then listed
or admitted to trading).
(d) "Common Stock" means the Common Stock, par value $.0001 per share, of
the Company, or any stock or other securities of the Company hereafter
issued or issuable in substitution or exchange for the Common Stock.
(e) "Director's Fees" means all fees paid to a Non-Employee Director for his
services to the Company as a member of the Board. It shall include the
Annual Retainer, committee fees and meeting fees. It shall not include
any consulting fees paid to a Non-Employee Director.
(f) "Election Agreement" means the form, signed by the Non-Employee Director
and filed with the Company that specifies the amount (all, none, dollars
or percentage) of the Director's Fees that a Non-Employee Director elects
to receive in Common Stock in lieu of cash.
(g) "Non-Employee Director" means an individual duly elected or chosen as a
director of the Company who is not also an employee of the Company or its
subsidiaries.
(h) "Trading Day" means any day on which the stock exchange or stock market
referred to in Section 2(c) hereof is open for trading on a regular
basis.
3. ELIGIBILITY AND PARTICIPATION
Each Non-Employee Director shall be eligible to participate in the Plan.
Participation shall be voluntary and a Non-Employee Director who elects to
participate in the Plan shall complete an Election Agreement which shall be
filed with the Secretary of the Company, specifying the amount (either "all",
"none", a specific percentage or specific dollar amount) of such Director's Fees
that the Non-Employee Director wants to receive in shares of Common Stock.
A-1
4. ELECTION TO RECEIVE STOCK
The Election Agreement must be filed with the Secretary of the Company prior
to the beginning of the calendar quarter to which the election relates and will
only be applicable to Director's Fees earned after the effective date of the
election, except that for the calendar quarter during which the Plan is first
adopted, the Election Agreement will be deemed effective as of the first day of
that calendar quarter. Once an Election Agreement is filed, it will remain in
effect for subsequent calendar quarters until the Non-Employee Director amends
it (by filing a new Election Agreement) or revokes it, by either (a) filing a
new Election Agreement or (b) filing a statement of revocation with the
Secretary of the Company advising that the Non-Employee Director no longer wants
to receive Common Stock in payment of his Director's Fees.
5. STOCK ISSUANCE
The shares of Common Stock to be issued pursuant to the election described
in Section 3 shall be equal to the (i) number of shares of Common Stock that
could be purchased (ii) at the Closing Price on the last day of the calendar
quarter during which the Director's Fees were earned (iii) with the dollar
amount of the Director's Fees that are being paid in Common Stock.
6. CERTIFICATE FOR SHARES OF COMMON STOCK
A certificate representing the appropriate number of shares of Common Stock
shall be issued in the name of the Non-Employee Director, individually, or upon
his request, in the name of another person or entity to which he has assigned
his Director's Fees, and shall be delivered within ten days after the end of the
calendar quarter for which the Director's Fees are being paid. The certificate
so issued shall contain a restrictive legend stating that the shares represented
by the certificate cannot be transferred for six months following the date of
issuance of the certificate, unless the restriction is waived by the Company.
The restriction shall automatically lapse at the end of the six-month period.
7. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board, which may delegate authority to
a committee; however, such committee shall have no authority to (a) determine
how many shares shall be given to any Non-Employee Director or (b) determine
eligibility to participate in the Plan. Such committee may be authorized to
interpret the Plan, prescribe, amend and rescind such rules and regulations
relating to the Plan, as may be deemed advisable to protect the interests of the
Company in connection with the operation of the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan, but
only to the extent not contrary to the express provisions of the Plan. No member
of the Board or of any such committee shall be liable for any action or
determination made in good faith with respect to the Plan or any agreement
entered into pursuant to the Plan. The determinations, interpretations, and
other actions of the Board and of any such committee pursuant to the provisions
of the Plan shall be binding and conclusive for all purposes and on all persons.
8. STOCK SUBJECT TO THE PLAN.
Up to an aggregate of 1,200,000 shares of Common Stock are authorized for
issuance under the Plan in accordance with the provisions of the Plan. Shares of
Common Stock that are issued shall be fully paid and non-assessable. No
fractional shares shall be issued, and to the extent that the calculation
provided for in Section 4 shall result in a fractional share, the number of
shares to be issued to the Non-Employee Director shall be rounded up to the next
whole share. The Company shall at all times during the term of the Plan retain
as authorized and unissued Common Stock at least the number of shares from time
to time as may be issued under the provisions of the Plan or otherwise assure
itself of its ability to perform its obligations hereunder. Shares of Common
Stock issued pursuant to the Plan may be shares of original
A-2
issuance or treasury shares or a combination of the foregoing, as the Board, in
its discretion, shall from time to time determine.
9. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
(a) Upon the issuance of a certificate representing shares of Common Stock
to a Non-Employee Director, the Non-Employee Director shall become the owner
thereof for all purposes and shall have all rights as a shareholder, including
voting rights and the right to receive dividends and distributions and shall be
subject to any stock splits and other similar actions, with respect to such
shares, subject to the restrictions of the Plan and any restrictions imposed by
law. If the Company shall pay or declare a dividend or make a distribution of
any kind, whether due to a reorganization, recapitalization, or otherwise, or
declare a stock split or take other similar action with respect to the shares of
Common Stock, then the Company shall pay or make such dividend or other
distribution or take such other action with respect to the shares owned by the
Non-Employee Director. In the event the Company shall effect a split of the
Common Stock or declare a dividend payable in Common Stock, or in the event the
outstanding Common Stock shall be combined into a smaller number of shares or
are in any way subject to a modification or changed during the time after
Director's Fees subject to the Plan are earned but before the shares are issued,
then the number of shares of Common Stock that shall be issued to the
Non-Employee Director shall be increased or decreased proportionately or shall
be exchanged or modified as if they had been issued just prior to the record
date for the event requiring the change or modification; and
(b) in the event of a reclassification of the Common Stock not covered by
the foregoing, or in the event of a liquidation or reorganization (including a
merger, consolidation, or sale of assets) of the Company, the Board shall make
an appropriate adjustment in the number of shares of Common Stock then subject
to issuance under the Plan. The Board shall make such adjustments, if any, as it
may deem appropriate in the number and kind of shares that are authorized for
issuance or are issuable pursuant to the Plan.
10. DESIGNATION OF BENEFICIARY.
Each Non-Employee Director who elects to participate in the Plan shall name
a beneficiary to receive any shares due him at the time of his death, with the
right to change such beneficiary at any time. In case of a failure to designate
a beneficiary or the death of the designated beneficiary without a designated
successor, such shares shall be issued to the estate of the Non-Employee
Director.
11. PLAN AMENDMENT, MODIFICATION, AND TERMINATION.
The Board may at any time suspend, terminate, amend, or modify the Plan.
12. PLAN EFFECTIVENESS.
The Plan shall be effective as of October 1, 1998, unless it has not been
approved by the Board prior to that date, and shall continue until the earliest
of the following to occur: (a) December 31, 2008; (b) the date on which all
shares reserved for issuance under the Plan have been issued; and (c) the date
the Plan is terminated by a resolution of the Board.
13. GENERAL PROVISIONS.
(a) No Continuing Right as Director. Neither the adoption or operation of
the Plan, nor the Plan itself or any document describing or relating to the
Plan, or any part hereof, shall confer upon any Non-Employee Director any right
to continue as a director of the Company or any subsidiary of the Company.
A-3
(b) Nonalienation of Benefits. No Non-Employee Director shall have the right
to sell, assign, transfer, or otherwise convey or encumber in whole or in part
the right to receive any Common Stock under the Plan, except in accordance with
the express provisions hereof.
(c) Binding Effect. The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation, or other reorganization of the Company, or upon any
successor corporation or organization succeeding to all or substantially all of
the assets and business of the Company. The terms and conditions of the Plan
shall be binding upon each Non-Employee Director and his heirs, legatees,
distributees, and legal representatives.
(d) Severability. If any provision of the Plan or any agreement hereunder is
held to be illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining provisions of the Plan or such agreement, as the case
may be, but such provision shall be fully severable and the Plan or such
agreement, as the case may be, shall be construed and enforced as if the illegal
or invalid provision had never been included herein or therein.
(e) Expenses. All expenses incident to the administration, protection, or
termination of the Plan, including, but not limited to, legal and accounting
fees, shall be paid by the Company.
(f) Notices. Whenever any notice is required or permitted under the Plan or
any agreement hereunder, such notice must be in writing and personally delivered
or sent by mail. Any notice required or permitted to be delivered hereunder or
under an agreement shall be deemed to be delivered on the date on which it is
personally delivered, or on the third business day after it is deposited in the
United States mail, certified or registered, postage prepaid, addressed to the
person who is to receive it at the address that such person has theretofore
specified by written notice delivered in accordance herewith. The Company or a
Non-Employee Director may change, at any time and from time to time, by written
notice to the other, the address that it or he had theretofore specified for
receiving notices. Until such address is changed in accordance herewith, notices
hereunder or under an agreement shall be delivered or sent (i) to the
Non-Employee Director at his address as set forth in the records of the Company
or (ii) to the Company at the principal executive offices of the Company clearly
marked "Attention: Secretary".
(g) No Restriction of Corporate Action. Nothing contained in the Plan shall
be construed to prevent the Company or any subsidiary thereof from taking any
corporate action that is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan. No Non-Employee Director or other person shall have
any claim against the Company or any subsidiary thereof as a result of such
action.
(h) Governing Law. The provisions of the Plan, and all agreements hereunder,
shall be governed by and construed in accordance with the laws of the State of
Texas.
(i) Miscellaneous. Headings are given to the sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction of the Plan or any
provisions hereof. The use of the masculine gender shall also include within its
meaning the feminine. Wherever the context of the Plan dictates, the use of the
singular shall also include within its meaning the plural, and vice versa.
A-4
APPENDIX B
ARTICLES OF AMENDMENT
TO THE
SECOND RESTATED ARTICLES OF INCORPORATION
OF
THE SOUTHLAND CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business Corporation
Act, THE SOUTHLAND CORPORATION, a corporation organized under the laws of the
State of Texas, adopts the following articles of amendment to its Second
Restated Articles of Incorporation (the "Articles of Incorporation"):
ARTICLE ONE
The name of the corporation is The Southland Corporation.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by the
shareholders of the corporation on [April 28, 1999]. The Articles of
Incorporation are amended to change the name of the corporation to 7-Eleven,
Inc.
The amendment alters or changes Article One of the Articles of Incorporation
and the full text of Article One is as follows:
"The name of the Corporation is "7-Eleven, Inc."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was ; and the number of shares entitled to vote thereon was
.
The designation and number of shares of each class or series entitled to
vote thereon as a class or series were as follows:
CLASS OR
SERIES NUMBER OF SHARES OUTSTANDING
N/A AND ENTITLED TO VOTE
ARTICLE FOUR
The number of shares voted for such amendment was ; and the number
of shares voted against such amendment was .
The number of shares of each class or series entitled to vote as a class or
series voted for or against such amendment as follows:
CLASS OR
SERIES NUMBER OF SHARES VOTED
N/A FOR AGAINST
Dated the day of , 1999.
THE SOUTHLAND CORPORATION
By:
--------------------------------------
Name:
- --------------------------------------------------------------------------------
Title:
--------------------------------------
B-1
On the outside back cover of the Proxy Statement of The Southland Corporation
there is a map of the intersection of North Central Expressway and Lemmon Avenue
and North Central Expressway and Haskell Avenue, in Dallas, Texas, showing the
entrances to Cityplace Center.
On the outside back cover of the Proxy Statement of The Southland Corporation
there is a map of the North Central Expressway and Lemmon Avenue and North
Central Expressway and Haskell Avenue, in Dallas, Texas, showing the entrances
to CityPlace Center.
PROXY PROXY
THE SOUTHLAND CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS -- APRIL 28, 1999
The undersigned appoints Clark J. Matthews, II, Bryan F. Smith, Jr. and Carol
S. Hilburn, and each of them (acting by majority, or if only one be present,
then by that one alone) as my true and lawful agents and proxies, with full
power of substitution and revocation, to vote, as designated on the reverse
side hereof, all the Common Stock of The Southland Corporation which the
undersigned has power to vote, with all powers which the undersigned would
possess if personally present, at the Annual Meeting of Shareholders of The
Southland Corporation to be held on April 28, 1999 and at any adjournments
thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named and FOR Proposals No. 2, 3 and 4. The proxy holders will use
their discretion with respect to any other matter that is properly brought
before the meeting, as referred to in Item 5.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
THE SOUTHLAND CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY / /
1. ELECTION OF DIRECTORS-Nominees: Masatoshi Ito;
Toshifumi Suzuki; Clark J. Matthews, II; Yoshitami Arai;
Masaaki Asakura; Timothy N. Ashida; Jay W. Chai;
Gary J. Fernandes; Masaaki Kamata; James W. Keyes;
Kazuo Otsuka; Asher O. Pacholder; Nobutake Sato.
For All For all, except
For Withheld Except Nominee(s) written
/ / / / / / in below
______________________
Nominee(s) Excepted
2. Ratification of the appointment of the accounting firm of
PricewaterhouseCoopers LLP, as independent auditors
of the Company for 1999.
For Against Abstain
/ / / / / /
3. Approval of the Company's For Against Abstain
Stock Compensation Plan for / / / / / /
Non-Employee Directors
4. Approval of Articles of For Against Abstain
Amendment to the Company's / / / / / /
Second Restated Articles
of Incorporation to change the
Company's name to "7-Eleven, Inc."
5. Other Business. In their discretion,
the proxies are authorized to vote
upon such other matters as may properly
come before the meeting or any
adjournments thereof.
If you plan to attend the meeting / /
in person, please mark this oval
SIGNATURE(S)___________________________________ DATE_______________
SIGNATURE(S)___________________________________ DATE_______________
Date and sign exactly as your name appears hereon. Joint owners should each
sign. When signing as an administrator, executor, trustee, attorney,
guardian, corporate officer, or in any other capacity, please give full title
as such. Receipt of 1998 Annual Report and March 25, 1999 Notice and Proxy
Statement is hereby acknowledged.