<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
WALL STREET DELI, INC.
(Name of registrant as Specified in Its Charter)
REGISTRANT
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE> 2
Wall Street Deli, Inc.
One Independence Plaza
Suite 100
Birmingham, Alabama 35209
(205)870-0020
Fax: (205)868-0860
October 5, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders, which will be held at 10:00 a.m. on Thursday, November 5, 1998, in
the Board of Directors Meeting Room on the mezzanine floor of AmSouth Bank of
Alabama, at the AmSouth-Sonat Building located at Fifth Avenue North and
Twentieth Street, Birmingham, Alabama.
Information about the meeting and the various matters on which the
shareholders will act is included in the Notice of Meeting and Proxy Statement
which follow. Also included is a Proxy Card and postage paid return envelope.
It is important that your shares be represented at the meeting. Whether
you plan to attend or not, we hope that you will complete and return your Proxy
in the enclosed envelope as promptly as possible.
We look forward to seeing you at the shareholders meeting.
Yours very truly,
/s/ Jeffrey V. Kaufman
Jeffrey V. Kaufman
President and Chief Executive Officer
<PAGE> 3
WALL STREET DELI, INC.
ONE INDEPENDENCE PLAZA, SUITE 100
BIRMINGHAM, ALABAMA 35209
(205) 870-0020
---------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 5, 1998
The Annual Meeting of Shareholders of WALL STREET DELI, INC., a
Delaware corporation (the "Company"), will be held in the Board of Directors
Meeting Room of AmSouth Bank of Alabama, at the AmSouth-Sonat Building located
at Fifth Avenue North and Twentieth Street, Birmingham, Alabama, on Thursday,
November 5, 1998, at 10:00 a.m. Central Standard Time.
At the Annual Meeting shareholders will consider and act upon the
following matters:
1. The election of seven directors, each director to hold office
until his successor is elected and qualified.
2. The ratification of authorization for the Audit Committee to
select the Company's independent auditors.
3. A proposal from a shareholder regarding engagement of
investment bankers to study ways of enhancing shareholder
value; and
4. The transaction of such other business as may properly come
before the meeting.
The Board of Directors has fixed the close of business on September 23,
1998, as the record date for the determination of shareholders entitled to vote
at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ Alan V. Kaufman
ALAN V. KAUFMAN
Chairman of the Board
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, WE URGE YOU TO MARK, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED IN ORDER
THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE MEETING AND TO ASSURE
A QUORUM. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
SHOULD YOU LATER DETERMINE TO ATTEND THE MEETING.
<PAGE> 4
WALL STREET DELI, INC.
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
--------
PROXY STATEMENT
The following information is furnished in connection with the
SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS of Wall Street Deli, Inc. (the
"Company"), to be voted at the Annual Meeting of shareholders to be held on
November 5, 1998. A copy of the Annual Report of the Company for the fiscal year
ended June 27, 1998, and a form of proxy for use at the meeting are enclosed
with this Proxy Statement. It is anticipated that this Proxy Statement and the
enclosed proxy will be first mailed to shareholders on or about October 5, 1998.
GENERAL INFORMATION
PROXY
Shareholders are requested to execute and return the enclosed proxy in
the accompanying envelope. The proxy may be revoked at any time before it is
voted by written notice to the Secretary of the Company. Proxies which are
returned properly executed, and not revoked, will be voted in accordance with
the shareholders' directions specified thereon. Where no direction is specified,
proxies will be voted FOR each of the nominees for directors and the
ratification of auditors, and AGAINST the shareholder proposal. On any other
matters that may properly come before the meeting, proxies will be voted by the
persons named in the proxy in accordance with their best judgment.
RECORD DATE AND VOTING SECURITIES
Shareholders of record at the close of business on September 23, 1998,
are entitled to notice of, and to vote at, the Annual Meeting. As of September
23, 1998, there were 2,966,077 shares of the Company's common stock issued and
outstanding, and entitled to vote. The holders of common stock, the only class
of voting stock of the Company outstanding, are entitled to one vote per share,
exercisable in person or by proxy, for the election of directors and all other
matters.
A majority of the outstanding shares entitled to vote is necessary to
provide a quorum at this meeting. All matters to be considered at the meeting
except the election of directors require the affirm ative vote of a majority of
the votes cast at the meeting. Proxies marked as abstentions or as broker non-
votes will be treated as shares present for purposes of determining whether a
quorum is present. Broker non-votes (that is, shares held in street name for
which proxies have been designated as not voted) will not be counted as votes
cast. An abstention or a proxy instructing that a vote be withheld is considered
a negative vote.
EXPENSES OF SOLICITATION
The cost of soliciting proxies is paid by the Company. Solicitation is
being made principally by mail; in addition certain officers and directors of
the Company and persons acting under their instructions
<PAGE> 5
may also solicit proxies on behalf of management by telephone or in person.
Banks, brokerage firms and other custodians, nominees and fiduciaries will be
reimbursed by the Company for reasonable expenses incurred in sending proxy
material to beneficial owners of the Company's stock. The cost of such
additional solicitation, if any, and such expenses is not expected to be
material.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of September 15, 1998, certain
information with respect to the Company's common stock owned beneficially by
each director, each nominee for election as a director, each executive officer,
by all executive officers and directors as a group, and by each person known by
the Company to be a beneficial owner of more than five percent of the issued and
outstanding common stock of the Company.
<TABLE>
<CAPTION>
Amount and
Nature of Percentage
Name and Address of Beneficial of Common
Beneficial Owner Ownership(1) Stock
------------------- ------------ -----------
<S> <C> <C>
Alan V. Kaufman 330,712(2) 10.5%
Chairman and Nominee
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
Robert G. Barrow 240,800(3) 7.6%
Vice Chairman, Chief Financial Officer and Nominee
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
Jeffrey V. Kaufman 56,174(4) 1.8%
President, Chief Executive Officer,
Director and Nominee
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
David A. Thomas 30,890(5) *
Senior Vice President-Marketing and Corporate
Development
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
Gary L. Fields 29,000(6) *
Senior Vice President-National Operations
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
Amount and
Nature of Percentage
Name and Address of Beneficial of Common
Beneficial Owner Ownership(1) Stock
------------------- ------------ ----------
<S> <C> <C>
Julie J. Christian 8,500(7) *
Vice President, Controller and Chief Accounting Officer
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
Steven G. Barrow 29,493(8) *
Vice President-Information Systems and Secretary
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
William S. Atherton 103,650(9) 3.3%
Director and Nominee
1924 South Utica
Tulsa, Oklahoma 74104
Aaron Beam, Jr. -0- *
Director and Nominee
5182 Greystone Way
Birmingham, Alabama 35242
William M. Byrne -0- *
Director and Nominee
2701 South Minnesota
Souix Falls, South Dakota 57105
Jake L. Netterville 42,750(9) 1.4%
Director and Nominee
8550 United Plaza Boulevard
Baton Rouge, Louisiana 70809
Estate of Joe Lee Griffin, Jr. 281,828(9)(10) 8.9%
2432 Shades Crest Road
Birmingham, Alabama 35216
All directors and executive officers as a group (11 persons) 875,339(11) 27.8%
</TABLE>
- -------------------
* Less than 1%
3
<PAGE> 7
(1) Beneficial ownership reflects sole voting and investment power unless
otherwise noted.
(2) The amount reported includes 51,403 shares owned by Kaufman-Barrow
Properties, a general partnership, and 15,000 shares subject to options
held by Mr. Kaufman. Mr. Kaufman is the father of Jeffrey V. Kaufman.
(3) The amount reported includes 51,403 shares owned by Kaufman-Barrow
Properties, a general partnership, and 30,000 shares subject to options
held by Mr. Barrow. Mr. Barrow is the father of Steven G. Barrow.
(4) The amount reported includes 1,045 and 9,750 shares owned by Mr.
Kaufman's spouse and minor children, respectively, as to which he
disclaims beneficial ownership. The amount reported also includes 40,500
shares subject to options.
(5) The amount reported includes 630 shares owned by Mr. Thomas's minor
children as to which he disclaims beneficial ownership. The amount
reported also includes 20,500 shares subject to options.
(6) The amount reported includes 28,000 shares subject to options.
(7) The amount reported includes 8,500 shares subject to options.
(8) The amount reported includes 175 shares owned by Mr. Barrow's minor
children as to which he disclaims beneficial ownership. The amount
reported also includes 28,500 shares subject to options.
(9) The reported amounts for Mr. Atherton, Mr. Netterville and Mr. Griffin's
Estate include 5,000 shares each subject to options.
(10) The amount reported includes 60,000 shares owned by JLG Investments, Inc.
of which the late Mr. Griffin was the controlling shareholder, 200,478
shares owned by the Joe Lee Griffin Family Limited Partnership of which
Mr. Griffin was a general partner and a limited partner, and an aggregate
of 15,000 shares owned by three trusts of which Mr. Griffin was trustee.
Mr. Griffin is recently deceased, and as of the date of this proxy
statement the Company is without knowledge as to the holder(s) of voting
and/or investment power with respect to any of these shares.
(11) The amount reported includes an aggregate 186,000 options held by
executive officers and directors included in the group.
ELECTION OF DIRECTORS
At the Annual Meeting, seven directors will be elected to hold office
until their successors are elected and qualified. It is the intention of the
persons named as proxies, or their substitutes, to vote for the election of the
nominees listed below, unless and to the extent otherwise specified in any
particular proxy. Management of the Company does not contemplate that any of the
nominees will become unavailable for any reason, but if that should occur before
the meeting, proxies will be voted for another nominee, or other nominees, to be
selected by the Board of Directors. Any vacancies that may occur during the year
may be filled by an individual appointed by the Board of Directors to serve for
the remainder of the term of any such director position. In accordance with the
Company's bylaws and Delaware law, a stockholder entitled to vote for the
election of directors may withhold authority to vote for certain nominees for
director or may withhold authority to vote for all nominees for director. Each
director nominee receiving a plurality of the votes cast in person or by proxy
at the meeting will be elected director. Abstentions and broker non-votes will
not be treated as a vote for or against any particular director nominee, and
will not affect the outcome of the election.
4
<PAGE> 8
None of the nominees for election as a director is proposed to be
elected pursuant to any arrangement or understanding between the nominee and any
other person or persons. All nominations for membership on the Board of
Directors originated with the Board of Directors.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND NOMINEES
The Company's bylaws provide for a minimum of three, and a maximum of
seven directors. The Board of Directors has presently fixed the number of
directors at seven and since 1995 the Company has had seven directors.
The Company reports with deep sorrow the death on August 31, 1998 of
Joe Lee Griffin, who served as a member of the Board of Directors since 1978. On
August 20, 1998, Louis C. Henderson, Jr., retired from the Board after serving
as a director since 1977. In accordance with the Company's bylaws, which provide
that vacancies may be filled by the remaining directors, on September 17, 1998,
William M. Byrne was appointed by the Board to fill Mr. Henderson's unexpired
term, and Aaron Beam, Jr. was appointed to fill Mr. Griffin's unexpired term.
The following is a brief summary of each nominee's business experience
during at least the past five years, unless otherwise indicated, and other
directorships held.
ALAN V. KAUFMAN
Mr. Kaufman, age 61, is one of the founders of Company. He served as
President of the Company from its founding in 1966 until August
1995, and has been Chairman of the Board since the inception of the
Company. Mr. Kaufman is the father of Jeffrey V. Kaufman.
Director since 1966
ROBERT G. BARROW
Mr. Barrow, age 62, co-founded the Company and has been its Chief
Financial Officer since 1966, and Vice Chairman of the Board since
February 1997. He was President and Chief Executive Officer of the
Company from August 1995 to February 1997, and Executive Vice
President from 1966 to 1996.
Director since 1966
JAKE L. NETTERVILLE
Mr. Netterville, age 60, is Chairman of Postlethwaite and
Netterville, Certified Public Accountants, of Baton Rouge,
Louisiana. In 1993 Mr. Netterville served as Chairman of the Board
of Directors of the American Institute of Certified Public
Accountants. He is also a director of Source Capital Corporation*
and Catalyst Vidalia Corporation.*
Director since 1982
WILLIAM S. ATHERTON
Mr. Atherton, age 65, has been since 1965 a Partner in Atherton &
Murphy Investment Company, which manages personal investments. He
was Chairman and Chief Executive
5
<PAGE> 9
Officer of A&M Food Services, Inc.,* from 1981 to 1986, and a
Director of Advantage Media, Inc., from 1991 to 1993.
Director since 1991
JEFFREY V. KAUFMAN
Mr. Kaufman, age 37, has been President and Chief Executive Officer
of the Company since June 1, 1998. He has been employed by the
Company since 1985, previously serving as Executive Vice President
and Chief Operating Officer from 1995 until his appointment as
President and Chief Executive Officer, as Senior Vice President and
National Operations Manager from 1993 to 1995, and as Regional Vice
President, Central Region 1987 to 1993. Mr. Kaufman is the son of
Alan V. Kaufman.
Director since 1995
WILLIAM M. BYRNE
Mr. Byrne, age 54, has been President and Chief Executive Officer
since 1977 of The Byrne Companies, a consulting firm specializing in
human assessment and performance. He is the author of the book
Habits of Wealth and Chief Executive Officer of Vista Publications,
a newsletter publisher. He is the founder and Chief Executive
Officer of Taco John's of Iowa, the largest franchisee of that
system, and in 1995 was the recipient of the National Leadership
Award from Taco John's International. He is a member of the
Franchisee Advisory Council of the International Franchise
Association. Mr. Byrne was appointed to the Company's Board of
Directors in September, 1998, to fill the unexpired term occasioned
by Mr. Henderson's retirement.
Director since 1998
AARON BEAM, JR.
Mr. Beam, age 54, was one of the founders of HealthSouth Corp.,* a
provider of outpatient surgery and rehabilitative healthcare
services, and served as its Executive Vice President and Chief
Financial Officer and a Director from 1984 until his retirement in
1997. He is also a Director of Ramsay Health Care Inc.* and Urocor,
Inc.* Mr. Beam was appointed to the Company's Board of Directors in
September, 1998, to fill the vacancy occasioned by the death of Mr.
Griffin.
Director since 1998
(*) A company with a class of securities registered under the Securities
Exchange Act of 1934.
BOARD AND COMMITTEE MEETINGS AND ATTENDANCE
The Board of Directors held five meetings during the fiscal year ended
June 27, 1998. All of the directors, except Mr. Griffin, attended at least 75%
of the meetings.
The Audit Committee of the Board of Directors consists of Mr. Barrow,
Mr. Netterville and Mr. Atherton. In addition, Mr. Beam was appointed to the
Audit Committee effective September 17, 1998. The Audit Committee is charged
with recommending to the Board of Directors the independent accountants to be
selected as the Company's auditors; reviewing the audit plan, financial
statements and
6
<PAGE> 10
audit results; reviewing with internal accounting officers and independent
auditors the accounting practices and policies, and overall accounting and
financial controls; and conducting an appropriate review of all related party
transactions and potential conflict of interest situations. The committee met
two times during the 1998 fiscal year, and all members were present at both
meetings.
The Compensation Committee of the Board of Directors consists of Mr.
Atherton and Mr. Netterville, and as of September 17, 1998, Mr. Beam, none of
whom is or has ever been employed by the Company. Mr. Beam was appointed
following the death of Mr. Griffin. This committee held one formal meeting in
fiscal 1998, at which all members were in attendance. The Compensation Committee
acts as the Stock Option Plan Committee as set forth in the Company's Incentive
Stock Option Plans, and in addition administers the Company's employee
compensation and benefit plans, makes annual recommendations to the Board of
Directors concerning compensation to executive officers, considers and makes
recommendations with respect to executive compensation policies, and considers
and acts upon such other related matters as the Board may direct or request.
EXECUTIVE COMPENSATION
The following tables and charts set forth information with respect to
benefits made available, and compensation paid or accrued, by the Company during
the fiscal year ended June 27, 1998 for services by each of the persons serving
as chief executive officer at any time during the 1998 fiscal year, and the
other four highest paid executive officers of the Company who were serving as
such at the end of fiscal 1998 whose total salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------- Awards(3)
Other Annual ---------- All Other
Name and Principal Position Year(1) Salary Bonus Compensation(2) Options(4) Compensation(5)
- --------------------------- ------- -------- ----- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey V. Kaufman 1998 $155,000 $-0- $13,411 10,000 $9,091
President and Chief Executive 1997 $151,250 $-0- $12,764 17,500 $9,091
Officer since June 1998 (6) 1996 $138,000 $-0- $11,183 10,000 $9,091
Louis C. Henderson, Jr. 1998 $180,000 $-0- $ 3,504 -0- $4,995
President and Chief Executive 1997 $ 75,000 $-0- $ 2,915 40,000 $ -0-
Officer February 1997 1996 n/a
through May 1998
Robert G. Barrow 1998 $166,500 $-0- $19,482 -0- $52,987
President and Chief Executive 1997 $208,000 $-0- $27,504 7,500 $56,987
Officer until February 1997; 1996 $204,000 $-0- $18,727 7,500 $56,987
currently Vice Chairman and
Chief Financial Officer
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
Other Annual All Other
Name and Principal Position Year(1) Salary Bonus Compensation(2) Options(4) Compensation(5)
- --------------------------- ------- ------ ----- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Alan V. Kaufman 1998 $125,000 $-0- $12,757 -0- $53,979
Chairman of the Board 1997 $125,000 $-0- $12,811 -0- $53,979
1996 $208,000 $-0- $15,767 -0- $57,979
David A. Thomas 1998 $140,000 $-0- $21,820 7,500 $ 3,356
Senior Vice President- 1997 $138,750 $-0- $61,998 5,000 $ 3,356
Marketing and Corporate 1996 n/a
Development
Gary L. Fields 1998 $138,750 $-0- $20,320 15,000 $ 8,174
Senior Vice President- 1997 n/a
National Operations 1996 n/a
</TABLE>
(1) Information is provided for the full fiscal year during which a person
served in the named capacity for any portion of that year.
(2) The amounts shown in this column for the last fiscal year include the
following perquisites or personal benefits which exceeded 25% of the total
of such benefits reported for each such officer: medical expense
reimbursements of $4,748 to Jeffrey Kaufman; automobile allowances of $7,200
to Alan Kaufman, $19,482 to Robert Barrow, $6,000 to Jeffrey Kaufman, $6,000
to David Thomas and $6,000 to Gary Fields; and reimbursement or payment of
moving expenses and moving expense allowances of $14,000 to David Thomas and
$12,500 to Gary Fields.
(3) The Company has no restricted stock award plans and no long term incentive
plans as those terms are defined by applicable SEC rules.
(4) The Company's Incentive Stock Option Plan provides for grants of stock
appreciation rights (SAR's) in tandem with options, but no SAR's have been
granted during the past three fiscal years.
(5) The amounts shown in this column for the last fiscal year include Company
contributions to a defined contribution variable life insurance plan for
management and administrative employees, in the amounts of $18,979 for Alan
Kaufman, $17,987 for Robert Barrow, $9,091 for Jeffrey Kaufman, $3,356 for
David Thomas and $8,174 for Gary Fields. With respect to Alan Kaufman and
Robert Barrow, these amounts also include $35,000 each in dollar value of
premiums paid by the Company for their benefit for split-dollar life
insurance with respect to term life insurance and to premium amounts
unrelated to term life insurance coverage. On termination of the insurance
policy the beneficiaries are obligated by contract to refund to the Company
all premiums paid.
(6) Mr. Kaufman served as Executive Vice President and Chief Operating Officer
prior to June 1, 1998.
8
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal
1998 to the named executive officers.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants For Option Term(4)
- -------------------------------------------------------------------------------------- ------------------
Percent of Total
Options Granted Exercise
Options to Employees or Base Expiration
Name Granted(1) in Fiscal Year(2) Price(3) Date 5% 10%
- ---------------------------- ---------- ----------------- ------------ ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey V. Kaufman 10,000 14.0% $ 4.00 08-01-02 $51,051 $64,420
Louis C. Henderson, Jr. -0-
Robert G. Barrow -0-
Alan V. Kaufman -0-
David A. Thomas 7,500 10.5% $ 4.00 08-01-02 $38,288 $48,315
Gary L. Fields 5,000 7.0% $ 4.00 08-01-02 $25,526 $32,210
10,000 14.0% $3.375 01-22-03 $43,075 $54,355
</TABLE>
(1) SAR's in tandem with options may be granted under the Company's Incentive
Stock Option Plan, but no SAR's were granted during fiscal 1997. Options are
immediately exercisable, and expire five years after the date of grant.
(2) Based on 71,400 options granted to all employees in the fiscal year ended
June 27, 1998. This amount does not include options for 3,000 shares granted
to non-employee directors.
(3) Options are exercisable at fair market value (the average of the high and
low prices for the Company's common stock) on the date of grant. In the case
of persons owning more than 10% of the Company's outstanding stock, the
exercise price is 110% of fair market value on the date of grant.
(4) The dollar amounts set forth under these columns are the result of
calculations at the 5% and 10% rates specified by SEC rules; they are not
intended to forecast future appreciation of the Company's stock price.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
The following table provides information on option exercises in fiscal
1998 by the named executive officers and the value of each such officer's
unexercised options at June 27, 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal Year End at Fiscal Year End(1)
---------------------------- ---------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey V. Kaufman -0- -0- 40,500 -0- $13,750 -0-
Louis C. Henderson, Jr. -0- -0- 44,000 -0- $27,500 -0-
Robert G. Barrow -0- -0- 30,000 -0- -0- -0-
Alan V. Kaufman -0- -0- 15,000 -0- -0- -0-
David A. Thomas -0- -0- 20,500 -0- $ 5,156 -0-
Gary L. Fields -0- -0- 28,000 -0- $16,563 -0-
</TABLE>
(1) Based on $4.6875 per share, the average of bid and ask prices reported by
NASDAQ on June 29, 1998.
COMPENSATION OF DIRECTORS
Four of the seven present directors are not salaried employees of the
Company. For their services in fiscal 1998 each non-employee director was paid a
fee of $650 for each meeting of the Board of Directors and each committee
meeting (if not held in conjunction with a Board meeting) attended.
The non-employee directors also received grants of options for 1,000
shares each in fiscal 1998, pursuant to the Company's Stock Option Plan for
Non-Employee Directors (the "Directors Plan"). The Directors Plan provides for
the granting of stock options under a non-discretionary formula by which each
non-employee director serving as such on August 1 of each year receives an
option to purchase 1,000 shares of the Company's common stock. The options are
immediately exercisable, at an exercise price equal to the fair market value of
the common stock on the date of grant, and expire five years from the date of
grant. The Directors Plan reserves 75,000 shares of the Company's common stock
for issuance upon exercise of the non-qualified stock options to purchase. The
Plan will terminate in 2001. Directors are eligible to participate if they are
not employed by the Company or its subsidiaries. Options for an aggregate of
19,000 shares (as adjusted) had been granted and remained outstanding as of the
1998 fiscal year end, and 56,000 shares remained available for grant under this
Plan.
10
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Alan Kaufman, Robert Barrow, Jeffrey Kaufman, and Steven Barrow are
general partners in Rex Associates, which leased to the Company its former
administrative offices in Memphis, Tennessee. Pursuant to the relocation of the
Company's administrative offices from Memphis to Birmingham and the subsequent
consolidation with the Company's executive headquarters, the lease agreement
terminated effective September 30, 1997. During the Company's 1998 fiscal year,
rents paid to Rex Associates were $18,500. Management believes this transaction
to have been on terms no less favorable than could have been obtained from
unaffiliated third parties.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors
during fiscal 1998 were Messrs. William S. Atherton, Joe Lee Griffin, and Jake
L. Netterville, then constituting all of the non-employee members of the Board.
Following Mr. Griffin's death after the end of fiscal 1998, Mr. Byrne was
appointed to the Committee. Both Mr. Alan Kaufman and Mr. Robert Barrow have
formerly served as chief executive officer of the Company, and Mr. Kaufman and
Mr. Barrow, as well as Mr. Henderson, who was chief executive officer during
most of fiscal 1998 and Mr. Jeffrey Kaufman, the current chief executive
officer, have participated in deliberations concerning executive officer
compensation and continue to make recommendations to and are consulted by the
Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of
directors who have never been employed by the Company, and is charged with
consideration of and action on matters concerning compensation to executive
officers. In addition, this Committee administers the Company's Incentive Stock
Option Plan.
COMPENSATION POLICIES
The Company's approach to executive compensation is intended to
motivate, retain and attract management and to enhance the profitability of the
Company and, thus, to enhance value for its shareholders. To that end, the
Company's compensation structure is reflective of the principle that the
compensation of executive officers should be competitive with compensation of
senior executives at comparable companies, and that a meaningful portion of the
compensation received should be closely tied to the performance of the Company
and, in certain instances, to the achievement of individual goals. By
specifically linking pay and performance, it is the intent of the Company to
provide direct incentives for the Company's financial success and the creation
of incremental stockholder value.
In keeping with these general objectives, the key components of
compensation for the named executive officers have for a number of years
consisted of annual compensation provided by base salary and annual performance
bonuses, and long-term compensation provided by stock options.
Members of the Committee believe they have a general awareness of pay
practices among companies of roughly comparable size, complexity, and/or
industry focus, but the Committee has not
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<PAGE> 15
commissioned any studies or formally reviewed specific information concerning
compensation practices of other companies. As this is necessarily an imprecise
basis for comparison, the Committee is unable to measure with any specificity
the compensation paid by the Company against that paid by other companies.
Solely on the basis of the Committee's general knowledge and experience, it is
believed that the Company's compensation levels are generally commensurate with
those of similar companies.
The determination of base salaries for the named executive officers is
a subjective process, which attempts to take into account individual
responsibilities and performance, as well as the experience of the individual
and the competitive marketplace for management talent, though no discrete
relative weights or values are assigned to those elements. While base salary
decisions have not been determined by reference to any specific criteria or
factors related to corporate performance, the Committee has noted that since the
Company is in a highly competitive business and continues to operate a difficult
competitive environment, reviews and decisions with respect to executive
compensation must be made in light of other Company policies that are designed
to control costs and improve operating performance. In light of other management
changes and corporate cost control efforts, Mr. Robert Barrow voluntarily
reduced his annual salary rate from $208,000 to $125,000 effective as of the
beginning of the third fiscal quarter of 1998, and consistent with Mr. Alan
Kaufman's reduction taken in the previous year. Base salaries of the other named
executive officers in fiscal 1998 remained very close to previous year levels,
with individual increases reflecting only promotions to more senior positions.
Annual Performance Bonuses. In fiscal 1998, the Company's formula for
annual performance bonuses was based upon the achievement of net pre-tax
earnings for the entire year. The bonus program provided that the chief
executive officer and other named executive officers (except Mr. Alan Kaufman
and Mr. Robert Barrow, who at their request did not participate), as well as all
corporate officers and management personnel, would participate in a bonus pool
consisting of a specified percentage of net annual pre-tax earnings. The bonus
pool was comprised of five per cent of profits up to a fixed dollar amount,
after which the percentage could increase as profits attained further specified
dollar levels. Based upon financial results for fiscal 1988, no bonuses were
paid.
Stock Options. Stock options are granted by the Committee to executive
officers, as well as other employees, based upon the Committee's subjective
evaluation of employees' general overall performance and contribution, and upon
their relative rank within the Company. No specific performance criteria are
considered, and there is no fixed formula for differentiating among different
levels of responsibility within the Company or for otherwise determining the
number of options granted to an individual or to all employees in the aggregate.
The Committee's approach to long-term incentives provided by stock options has
been a flexible one, in which the effort is to attract and retain able key
employees by giving them an opportunity for stock ownership. The Committee
awarded a total of 71,400 options in fiscal 1998, of which an aggregate of
22,500 were granted to two of the named executive officers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
From February 1997 through May 1998, Mr. Henderson was President and
Chief Executive Officer, at a base salary for the fiscal year ended June 27,
1998 of $180,000. Following Mr. Henderson's resignation, Mr. Jeffrey Kaufman was
promoted from Executive Vice President and Chief Operating Officer to President
and Chief Executive Officer. His base salary for the year was $155,000,
reflecting
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<PAGE> 16
his assumption of the Chief Executive Officer's position late in the fiscal
year. In determining the chief executive officer's base salary, the Committee
has relied on the general principles and considerations outlined in the
"Compensation Policies" discussion above, noting particularly the cost
containment and operational improvement issues presently facing the Company.
Under the Company's bonus compensation program as outlined in "Annual
Performance Bonuses" above, no bonuses were awarded in fiscal 1998.
The Committee awarded options for 10,000 shares to Mr. Jeffrey Kaufman
during the year. The Committee believes this grant is consistent with the
Company's ongoing effort to achieve a responsible balance between short-term and
long-term performance for the Company and its shareholders, and between
compensation incentives that encourage those results.
All members of the Compensation Committee concur in this report to the
shareholders.
William S. Atherton
Jake L. Netterville
PERFORMANCE GRAPH
The graph below sets forth Company's cumulative total stockholder
return over the last five years compared to the NASDAQ Stock Market - U.S. and
the Standard & Poor's Restaurants indexes. Stock price performance over the past
five years is not necessarily indicative of future results.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6/93 6/94 6/95 6/96 6/97 6/98
WALL STREET DELI, INC. 100.00 108.89 77.78 53.33 35.56 38.33
NASDAQ STOCK MARKET (U.S.) 100.00 100.96 134.77 173.03 210.38 277.69
S & P RESTAURANTS 100.00 115.71 152.17 179.06 187.26 253.68
</TABLE>
Assumes $100 invested in Wall Street Deli, Inc., NASDAQ Stock Market - U.S., and
S&P Restaurants indexes on June 30, 1993.
Total return calculations assume annual dividend reinvestment. The Company has
never paid a cash dividend.
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<PAGE> 17
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The information set forth in the following paragraph is based solely
upon a review of Forms 3 and 4 and amendments thereto furnished to the Company
pursuant to Rule 16a-3(e) during the fiscal year ended June 27, 1998, and Form 5
and amendments thereto furnished to the Company with respect to that fiscal
year, if any, and written representations received by the Company.
Of those persons who, at any time during the fiscal year ended June 27,
1998, were directors, executive officers, or beneficial owners of more than 10
percent of the Company's outstanding stock, none of such persons failed to file,
on a timely basis, as disclosed in the above forms, reports required by Section
16(a) of the Securities Exchange Act of 1934 during the most recent fiscal year
or prior fiscal years.
PROPOSAL NUMBER 2:
RATIFICATION OF AUTHORIZATION FOR THE
AUDIT COMMITTEE TO SELECT 1999 INDEPENDENT AUDITORS
The Board of Directors has authorized the Audit Committee to select the
Company's independent auditors for the fiscal year ending July 3, 1999, subject
to approval by the shareholders at the Annual Meeting. BDO Seidman, LLP,
Certified Public Accountants, served as the Company's independent auditors for
the fiscal year ending June 27, 1998, and has performed this function for the
Company since 1971. Representatives of BDO Seidman, LLP will be present at the
Annual Meeting with the opportunity to make a statement if they so desire and
will be available to respond to questions of shareholders.
The Board of Directors of the Company recommends ratification of
authorization for the Audit Committee to select the Company's independent
auditors for the 1999 fiscal year. The affirmative vote of a majority of the
votes cast at the meeting is necessary to approve this proposal.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL NUMBER 3:
SHAREHOLDER PROPOSAL REGARDING ENGAGEMENT OF INVESTMENT
BANKERS TO STUDY WAYS OF ENHANCING SHAREHOLDER VALUE
Mr. Raj Sehgal, as Managing Member of SkyRise Investors, LLC, of 20
Wellesley Avenue, Yonkers, New York, 10705, and Mr. Vinod Chand, as President of
Chand 41 Realty Corporation ("Chand"), of 40-18 77th Street, Elmhurst, NY,
11373, have jointly advised the Company that Chand will present a shareholder
proposal at the annual meeting. The proposed resolution and supporting
statement, for which the Board of Directors and the Company accept no
responsibility, are presented below in the
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<PAGE> 18
form received from Mr. Sehgal and Mr. Chand. The affirmative vote of a majority
of the votes cast at the meeting is required to approve the proposal.
"Resolved: That the shareholders of the Wall Street Deli (the
'Company') recommend and deem it in their best interest that the Board
of Directors establish a committee of independent directors to
immediately engage the services of a nationally recognized investment
banker to explore all alternatives to enhance the value of the Company.
These alternatives should include, but not be limited to, the sale,
merger, liquidation, restructuring or other extraordinary transaction
involving the Company. The Company should thereafter issue a report to
shareholders within 3 months based on the recommendations of the
investment banker.
"Supporting Statement
"We believe that the stock price performance of the Company and its
future prospects have been adversely affected by poor management and
questionable strategic decisions. For example, cash flow that would
otherwise be better suited for dividends or stock buybacks has been
used for expansion even though the Company is unable to profitably
operate many of its current restaurants. While the Board may have taken
some token steps to appear to be concerned with shareholder value,
positive results have not been achieved.. We believe that this poor
performance is tolerated in part because a substantial portion of the
Company's directors are current or former officers of the Company or
friends of the officers. Furthermore, we believe that Wall Street Deli
is not an appropriate 'stand alone' public market vehicle to create
shareholder value. We believe that it has been and will continue to be
very difficult for the Company to attract the necessary investor
interest and research analyst coverage because of the low liquidity in
the stock and the small market capitalization of approximately $10
million. The Company trades at a depressed price to cash flow multiples
of less than 4 while it's main publicly traded rival, Schlotzky's Deli,
is trading at a multiple of 19 times price to cash flow. The stock
price, which reached a high of $14.50 per share in 1994, now languishes
in the $3 to $4 per share range while all major stock market indices
continually have hit new highs.
"If present management cannot or refuses to maximize shareholder value,
the best interests of Wall Street Deli shareholders will be served by
the sale, merger or restructuring of our Company; and we recommend you
vote 'For' this proposal and help yourself and your fellow shareholders
prevent further losses in the value of your investment. If management
opposes this proposal and you want to vote in favor of it, you must
mark the 'For' box on the proxy card next to the proposal that you, as
a shareholder and investor, can send a message that you are not
satisfied with the results achieved by the Board of Directors and
management to produce value for shareholders."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
The Board of Directors recommends a vote AGAINST this proposal based on
their belief that it would not be in the best interest of the Company's
shareholders.
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<PAGE> 19
It is the Board's opinion that shareholder value will be maximized by
management's diligent work toward operating the Company effectively and
efficiently to generate increased operating earnings rather than hiring an
investment banker at this time. The Board believes that it would not be a
responsible expenditure of the Company's funds to commission a study of the type
proposed by Mr. Sehgal and Mr. Chand. In addition, the Board believes that such
a study would deter and distract management from improving performance at this
time.
The Board of Directors is deeply concerned with the performance of the
Company and the enhancement of shareholder value. As significant shareholders
themselves, Board members hold an aggregate 25% of the outstanding shares, and
thus have a strong financial incentive to build shareholder value. The Board of
Directors is fully aware of its fiduciary responsibilities and will continue its
challenge to management to achieve the Company's long-term business objectives
and maximize shareholder value.
The Board of Directors consists of individuals who are familiar with
the Company and its business, and are experienced and knowledgeable of the
industry in which it operates. The Board has always been active in exploring
alternatives to enhance the value of the Company, including efforts with
investment bankers, and it regularly assesses the long-term outlook for the
Company from a strategic perspective, reviewing the prospects for the Company's
current business as well as future plans, and continually evaluating the range
of credible and realistic strategic opportunities. The Board believes it is
capable of reaching the strategic decisions that are in the best interest of all
shareholders, without the expense of engaging investment bankers.
Under the Board's direction, management has executed plans and
invested in new programs to enhance shareholder value. Over the past two years,
the Company consolidated its Memphis operation center into the Birmingham
administrative offices, eliminated its commissary system and changed to a new
single source vendor, developed and launched its franchise program, accounted
for charges to reflect under-performing units, implemented new management
information systems, and other matters discussed in the accompanying annual
report.
Contrary to the proponents' supporting statement above for their
shareholder proposal--and without addressing the numerous matters in their
statement the Company believes to be erroneous--the Board believes that based
upon their prior communications, this shareholder proposal by Mr. Sehgal and Mr.
Chand is part of an effort to further only their personal objectives.
Shareholders should be aware that this proposal from Mr. Sehgal and Mr. Chand
follows a series of inquiries and nonspecific overtures from them within the
past year. Management understood the thrust of their initial expressions to be
that management should undertake some kind of "going private" transaction, in
which SkyRise and Chand would take part in an unspecified "role," with the
intention of taking the Company public again in the future. That was followed
some time later by their request for a shareholder list, the stated purpose for
which was that they wished to contact shareholders in an attempt to purchase up
to 4.9% of the Company's stock. Management responded that the stock is traded on
the NASDAQ National Market System and that in fairness to all the Company's
shareholders they should avail themselves of the organized market. When the
Company declined their request for the shareholder list, they threatened to sue.
To the best of the Company's knowledge, they did not purchase any additional
shares. Later still, they informed the Board that they were considering
formulating a bid to take the Company private, and stated their interest in
discussing management's participation in such a transaction.
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<PAGE> 20
The Board has a duty to act in the best interest of all its
shareholders. Maximizing shareholder value is certainly a very important
component of that duty, and the subject of shareholder values is a continuing
concern of the Board of Directors and management.
For all these reasons, the Board of Directors believes the proposal
should not be approved, and recommends a vote AGAINST this proposal.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED AGAINST THE RESOLUTION
UNLESS SHAREHOLDER SPECIFY A CONTRARY VOTE.
OTHER MATTERS
The Board of Directors knows of no other business to be transacted, but
if any other matters do come before the meeting, the persons named as proxies in
the accompanying proxy, or their substitutes, will vote or act with respect to
them in accordance with their best judgment.
SHAREHOLDERS' PROPOSALS
Any proposal which a shareholder expects to present at the next annual
meeting to be held in 1999 must be received at the Company's principal executive
office shown on the first page of this Proxy Statement not later than June 8,
1999, in order to be included in the proxy material for the 1999 meeting. All
proposals must comply with the Rule 14a-8 of Regulation 14A of the proxy rules
of the Securities and Exchange Commission.
THE ANNUAL REPORT OF THE COMPANY WHICH ACCOMPANIES THIS PROXY STATEMENT
CONTAINS CERTAIN OF THE INFORMATION CONTAINED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. A COPY OF THE
10-K WILL BE FURNISHED TO SHAREHOLDERS UPON REQUEST WITHOUT CHARGE. REQUESTS FOR
FORM 10-K REPORTS SHOULD BE SENT TO JEFFREY V. KAUFMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, WALL STREET DELI, INC., ONE INDEPENDENCE PLAZA, SUITE 100,
BIRMINGHAM, ALABAMA 35209.
By Order of the Board of Directors
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<PAGE> 21
APPENDIX A
PROXY
WALL STREET DELI, INC.
Proxy for Annual Meeting of Shareholders, November 5, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Alan V. Kaufman and Robert G. Barrow, and
either of them, proxies for the undersigned, with full power of substitution,
to represent the undersigned and to vote, as designated below, all of the
shares of the common stock of Wall Street Deli, Inc. (the Company) which the
undersigned is entitled to vote at the annual meeting of shareholders of the
Company to be held on November 5, 1998, and at any adjournment thereof.
1. The election as directors of all nominees listed below (except as marked
to the contrary below):
Alan V. Kaufman, Robert G. Barrow, Jeffrey V. Kaufman, William S.
Atherton, Aaron Beam, Jr., William M. Byrne, and Jake L. Netterville
[ ] FOR all nominees listed above [ ] VOTE WITHHELD
(except as marked to the to vote for all
contrary) nominees listed above
(INSTRUCTION: TO WITHHOLD YOUR AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE LINE BELOW:)
- --------------------------------------------------------------------------------
2. Ratification of authorization for the Audit Committee to select the
Company's independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. A proposal from a shareholder regarding engagement of investment bankers
to study ways of enhancing shareholder value.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and will be voted
as directed herein. If no direction is given, this proxy will be voted FOR
items 1 and 2 and AGAINST item 3.
<PAGE> 22
Dated , 19
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Phone No.
-------------------------- --------------------------------
Signature of Stockholder
--------------------------------
Signature of Stockholder
Where stock is registered jointly in the names of two or more persons, ALL
should sign. Signature(s) should correspond exactly with the name(s) as shown
above. Please mark, sign, date, and return the proxy card promptly in the
enclosed envelope. No postage need be affixed if mailed in the United States.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
