E-Z SERVE CORPORATION
2550 North Loop West, Suite 600
Houston, Texas 77092
April 27, 1998
By EDGAR
--------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: 1934 Act Filing Desk
Re: E-Z Serve Corporation (the "Registrant")
Ladies and Gentlemen:
The Registrant hereby files pursuant to Rule 14a-6(a) of
the Securities Exchange Act of 1934, as amended, a
definitive copy of the Registrant's proxy statement and
proxy card in connection with the Registrant's Annual
Meeting of Stockholders to be held on June 19, 1998.
By copy of this letter, three copies of the proxy
statement and proxy card have been forwarded to the
American Stock Exchange, Inc., the stock exchange on which
shares of the Registrant's common stock are traded.
Please feel free to call the undersigned at (713) 684-4308
if you have any questions.
Very truly yours,
E-Z Serve Corporation
/s/ HAROLD E. LAMBERT
---------------------
Harold E. Lambert
Assistant Secretary
cc: Ms. Lisa Hackman
American Stock Exchange
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
(X ) Definitive Proxy Statement
( ) Soliciting Material Pursuant to 240.14a-11(c)
or 240.14a-12
E-Z Serve Corporation
- -----------------------------------------------------
(Name of Registrant as Specified in its Charter)
E-Z Serve Corporation
- -----------------------------------------------------
(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)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
- -----------------------------------------------------
2) Aggregate number of securities to which
transaction applies:
- -----------------------------------------------------
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11.*
- -----------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------
* Set forth the amount on which the filing fee is
calculated and state how it was determined.
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as
provided by Exchange Act Rule 011(a) 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:
--------------------------------------------
E-Z SERVE CORPORATION
(A Delaware Corporation)
2550 North Loop West, Suite 600
Houston, Texas 77092
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 19, 1998
To the Stockholders of
E-Z Serve Corporation:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting
of Stockholders (the "Annual Meeting") of E-Z Serve
Corporation, a Delaware corporation (the Company"), will
be held at the offices of the Company at 2550 North Loop
West, Suite 600, Houston, Texas 77092, at 10:00 a.m.,
local time, on June 19, 1998, to consider and act upon the
following matters which are described in more detail in
the accompanying Proxy Statement:
1. To elect five directors to hold office until the
next annual election of directors by stockholders and
until their respective successors shall have been duly
elected and shall have qualified;
2. A proposal to ratify the appointment of KPMG
Peat Marwick LLP as independent auditors for the Company;
and
3. To transact any and all other business that
may properly come before the Annual Meeting or any
adjournment or adjournments thereof.
The Company has fixed the close of business on April
20, 1998, as the record date for determining stockholders
entitled to notice of, and to vote at, the Annual Meeting
and any adjournment thereof. A complete list of the
stockholders entitled to vote at the meeting or any
adjournment thereof will be maintained at the Company's
principal executive offices, will be open to examination
by any stockholder for any purpose germane to the meeting
during ordinary business hours for a period of ten days
prior to the meeting, and will be produced at the time and
place of the meeting during the whole time thereof.
Any stockholder of the Company giving a proxy has the
unconditional right to revoke his proxy at any time prior
to the voting thereof (i) by attendance at the Annual
Meeting and voting in person, (ii) by delivering a duly
executed proxy bearing a later date, or (iii) by giving
written notice of revocation to the Company addressed to
Mr. Harold E. Lambert, Assistant Secretary, E-Z Serve
Corporation, 2550 North Loop West, Suite 600, Houston,
Texas 77092; no such revocation shall be effective,
however, until such notice of revocation has been received
by the Company at or prior to the meeting. If a
stockholder does not specify a choice on his proxy, the
proxy will be voted in favor of the above proposals.
Further information regarding the Annual Meeting is set
forth in the attached Proxy Statement. The Company's
Annual Report for the fiscal year ended December 28, 1997,
accompanies this Notice.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL
MEETING. HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND THE
ANNUAL MEETING IN PERSON, PLEASE COMPLETE, SIGN, VOTE AND
RETURN THE ACCOMPANYING PROXY WITHOUT DELAY IN THE
ENCLOSED POSTPAID ENVELOPE. THE PROXY IS REVOCABLE AND
WILL NOT BE USED IF YOU ARE PRESENT AND PREFER TO VOTE IN
PERSON.
By Order of the Board of Directors
/s/ HAROLD E. LAMBERT
-----------------------------
Harold E. Lambert
Assistant Secretary
Houston, Texas: April 27, 1998
<PAGE> 1
E-Z SERVE CORPORATION
(A Delaware Corporation)
2550 North Loop West, Suite 600
Houston, Texas 77092
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be Held on June 19, 1998
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying Proxy is solicited on behalf of E-Z
Serve Corporation, a Delaware corporation (the "Company"),
to be voted at the 1998 Annual Meeting of Stockholders of
the Company ("Annual Meeting") to be held on June 19,
1998, at the time and place and for the purposes set forth
in the accompanying Notice of Annual Meeting and at any
adjournment or adjournments thereof.
The principal executive offices of the Company are
located at 2550 North Loop West, Suite 600, Houston, Texas
77092. This Proxy Statement and accompanying form of
Proxy are being mailed on or about April 27, 1998. The
Company's Annual Report to Stockholders covering the
Company's fiscal year ended December 28, 1997, is enclosed
herewith, but does not form any part of the materials for
solicitation of proxies.
Any stockholder of the Company giving a Proxy has the
unconditional right to revoke his Proxy at any time prior
to the voting thereof (i) by attendance at the Annual
Meeting and voting in person, (ii) by delivering a duly
executed proxy bearing a later date, or (iii) by giving
written notice of revocation to the Company addressed to
Mr. H. E. Lambert, Assistant Secretary, E-Z Serve
Corporation, 2550 North Loop West, Suite 600, Houston,
Texas 77092; no such revocation shall be effective,
however, until such notice of revocation has been received
by the Company at or prior to the meeting.
In addition to the solicitation of proxies by use of
the mail, officers and regular employees of the Company
may solicit the return of proxies, either by mail,
telephone, telegraph, or through personal contact. Such
officers and employees will not be additionally
compensated but will be reimbursed for out-of-pocket
expenses. Brokerage houses and other custodians, nominees
and fiduciaries will be required to forward solicitation
material to the beneficial owners of the shares of the
Company's common stock, $.01 par value per share ("Common
Stock"). The cost of preparing, printing, assembling and
mailing the Annual Report, the Notice of Annual Meeting,
this Proxy Statement, and the enclosed Proxy, as well as
the cost of forwarding solicitation materials to the
beneficial owners of shares and other costs of
solicitation, are to be borne by the Company.
<PAGE> 2
PURPOSES OF THE MEETING
At the Annual Meeting, the stockholders will consider
and act upon the following matters:
1. The election of five directors to hold office
until the next annual election of directors by
stockholders and until their respective successors shall
have been duly elected and shall have qualified;
2. A proposal to ratify the appointment of KPMG
Peat Marwick LLP as independent auditors for the Company;
and
3. Such other business as may properly come
before the meeting or any adjournment or adjournments
thereof.
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
The record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting
was the close of business on April 20, 1998 (the "Record
Date"). On the Record Date, there were 69,351,530 shares
of Common Stock of the Company issued and outstanding.
Each share of Common Stock is entitled to one vote on all
matters to be acted upon at the Annual Meeting. Neither
the Company's Amended and Restated Certificate of
Incorporation nor its Bylaws provide for cumulative voting
rights.
The presence, in person or by proxy, of the holders
of a majority of the aggregate of the issued and
outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum to
transact business. The nominees for the Board of
Directors receiving a plurality of the votes cast will be
elected as directors. Assuming the presence of a quorum,
the affirmative vote of the holders of a majority of the
outstanding shares of the Company's voting stock present
in person or by proxy and entitled to vote at the Annual
Meeting is required for the approval of all matters to
come before the Annual Meeting other than the election of
directors.
Properly signed and returned proxies will be voted in
accordance with the stockholder's specifications thereon.
In the absence of such specification on any matter, the
Proxy will be voted "FOR" such matter. Abstentions will
have no effect in the election of directors and will have
the same effect as votes against any other matter. Broker
non-votes, however, will be deemed shares not entitled to
vote on such matters, and therefore, will not count as
votes for or against the proposals, and will not be
included in calculating the number of votes necessary for
approval of such matters. Votes at the Annual Meeting
will be tabulated by an Inspector of Elections appointed
by the Company.
Under the laws of the State of Delaware, dissenters'
<PAGE> 3
rights are not available to stockholders of the Company
with respect to the matters to be voted upon at the Annual
Meeting.
Management and Principal Stockholders
The following table sets forth, as of the Record
Date, certain information known by the Company with
respect to the ownership of shares of Common Stock as to
(i) all persons who are the beneficial owners of 5% or
more of the outstanding shares of Common Stock, (ii) each
director, (iii) each nominee for director, (iv) each named
executive officer (as defined in Item 402(a)(3) of
Regulation S-K promulgated under the Securities Exchange
Act of 1934), as amended, and (v) all officers and
directors of the Company as a group. Unless otherwise
indicated, each of the following persons may be deemed to
have sole voting and dispositive power with respect to
such shares. Information set forth in the table with
respect to beneficial ownership of the Company's equity
securities has been obtained from filings made by the
named beneficial owners with the Securities and Exchange
Commission or, in the case of officers and directors of
the Company, has been provided to the Company by such
individuals.
Common Stock
<TABLE>
<CAPTION>
Name and Address Amount and Nature
of Beneficial of Beneficial Percent
Owner Ownership Of Class
- ----------------- --------------- --------
<S> <C> <C>
Tenacqco Bridge
Partnership
277 Park Avenue
New York, NY 10172 29,715,364 (1) 42.8%
Phemus Corporation
c/o Harvard Management
Company, Inc.
600 Atlantic Avenue
Boston, MA 02210-2203 17,164,006 (2) 24.7%
NAR Group Limited
Post Office Box 438
Tropic Isle Building
Wickhams Cay
Road Town, Tortola
British Virgin Islands 14,961,480 (3) 21.6%
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Amount and
Nature of
Directors and Beneficial Percent
Executive Officers Ownership of Class
- ------------------ ----------- --------
<S> <C> <C>
Donald D. Beane 81,250 (4) *
Neil H. McLaurin 3,451,000 (5) 5.0%
John M. Sallay 17,164,006 (6) 24.7%
John R. Schoemer 14,966,480 (7) 21.6%
Larry J. Taylor 934,700 1.3%
Paul Thompson III 29,715,364 (8) 42.8%
Kathleen
Callahan-Guion 1,550,000 (9) 2.2%
Harold E. Lambert 200,000 (10) *
All executive
officers and
directors as a
group (8 persons
including those
listed above) 36,387,314 52.5%
- ----------------------
* Less than 1%
</TABLE>
(1) This figure includes the shares of Common Stock
owned by Tenacqco's affiliate DLJ Capital Corp.
(2) This figure (i) includes 729,600 shares of Common
Stock issuable upon exercise of the Company?s Common Stock
Purchase Warrants, and (ii) excludes the shares of Common
Stock owned by Phemus affiliates, the President and
Fellows of Harvard College and the Harvard-Yenching
Institute for which Phemus disclaims beneficial ownership.
(3) This figure includes 230,400 shares of Common
Stock issuable upon exercise of the Company?s Common Stock
Purchase Warrants.
(4) This figure includes 80,000 shares of Common Stock
issuable upon the exercise of options issued pursuant to
the Company's 1991 Stock Option Plan.
(5) This figure includes (i) 750,000 shares of Common
Stock issuable upon the exercise of options issued
pursuant to the Company's 1991 Stock Option Plan, and (ii)
2,700,000 shares of Common Stock issuable upon the
exercise of options issued pursuant to the Company's 1994
Stock Option Plan.
<PAGE> 5
(6) Mr. Sallay is a partner in the Harvard Private
Capital Group, Inc., an affiliate of Phemus. This figure
includes shares held by Phemus. Mr. Sallay disclaims
beneficial ownership of such shares.
(7) Mr. Schoemer is the Chief Financial Officer of
Quadrant Management, Inc., a subsidiary of NAR. This
figure includes shares held by NAR. Mr. Schoemer
disclaims beneficial ownership of such shares.
(8) Mr. Thompson is a Managing Director of Donaldson,
Lufkin & Jenrette Securities Corporation, a Tenacqco
affiliate. This figure includes shares held by Tenacqco
and its affiliates. Mr. Thompson disclaims beneficial
ownership of such shares.
(9) This figure (i) includes (a) 50,000 shares of
Common Stock issuable upon the exercise of options issued
pursuant to the Company's 1991 Stock Option Plan, and (b)
1,500,000 shares of Common Stock issuable upon the
exercise of options issued pursuant to the Company's 1994
Stock Option Plan and (ii) excludes 450,000 shares of
Common Stock issuable upon exercise of options pursuant to
the Company?s 1991 Stock Option Plan that are not
currently vested.
(10) This figure (i) includes 50,000 shares of Common
Stock issuable upon the exercise of options issued
pursuant to the Company's 1991 Stock Option Plan, and (ii)
150,000 shares of Common Stock issuable upon the exercise
of options issued pursuant to the Company's 1994 Stock
Option Plan.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act and the rules
issued thereunder require the Company's executive officers
and directors, and persons who own more than 10% of the
registered class of equity securities of the Company, to
file with the Securities and Exchange Commission and the
American Stock Exchange reports of ownership and changes
in ownership of such securities. Based solely on its
review of the copies of such reports furnished to the
Company, or written representations that no reports were
required, the Company believes that during 1997, its
executive officers, directors and greater than 10%
stockholders complied with all applicable filing
requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following describes certain of the Company's
<PAGE> 6
transactions since the beginning of the Company's fiscal
year 1997 and certain ongoing transactions during fiscal
year 1997.
Transactions with Larry J. Taylor. On March 25,
1992, the Company acquired the capital stock of two
companies from Larry J. Taylor and two trusts whose
beneficiaries are children of Mr. Taylor. In connection
with the acquisition, the Company leased certain retail
convenience store properties from landlords owned or
controlled by Mr. Taylor. The leases have a primary term
of ten years beginning March 1, 1992, and are renewable at
the Company's option for three consecutive additional
five-year terms. During 1997, the Company sold most of
the stores that had lease commitments with Mr. Taylor. As
of March 31, 1998, the remaining monthly rentals payable
under the leases were approximately $6,000 in the
aggregate.
Transactions with Phemus. On January 27, 1997, the
Company entered into a Securities Purchase Agreement
("Purchase Agreement") with Phemus. Pursuant to the
Purchase Agreement, the Company issued and sold to Phemus
(i) 140,000 shares of its Series H Preferred Stock, $0.01
par value ("Series H Preferred Stock"), (ii) warrants
("Warrants") for the purchase of an aggregate of 960,000
shares of Common Stock at a per share exercise price of
$0.01 and exercisable at any time prior to January 27,
2009, and (iii) additional warrants issuable on each
anniversary date of the Purchase Agreement for each share
of Series H Preferred Stock then outstanding. On January
31, 1997, Phemus sold 33,600 shares of the Series H
Preferred Stock and Warrants to purchase 230,400 shares of
Common Stock for an aggregate of $2,144,724 to
Intercontinental Mining & Resources Incorporated, an
affiliate of NAR.
Net proceeds of $8,359,000 from the sale of the
Series H Preferred Stock and the Warrants were used by the
Company to redeem all of the outstanding 75,656 shares
plus all accrued but unpaid dividends of the Company's
$6.00 Convertible Preferred Stock, Series C and net
proceeds of $5,081,000 were used for general corporate
purposes, including paying down a portion of amounts
outstanding under the Amended and Restated Credit and
Guaranty Agreement dated as of October 7, 1995, as
amended, among the Company, its subsidiary, E-Z Serve
Convenience Stores, Inc., and the Company's senior bank
lenders.
On December 24, 1997, the Company refinanced its long
term debt, and a portion of the proceeds were used to
redeem all of the outstanding shares of Series H Preferred
<PAGE> 7
Stock.
Transactions with Affiliates of Tenacqco. On
February 8, 1996, the Company engaged Donaldson, Lufkin &
Jenrette Securities Corporation, an affiliate of Tenacqco
("DLJ"), to act as the Company's exclusive financial
advisor in connection with the Company's efforts to
evaluate, preliminarily, various alternatives to maximize
stockholder value. During the engagement, the Company
paid DLJ for out-of-pocket expenses, the amount of which
did not exceed five percent of DLJ's consolidated gross
revenues for DLJ's last full fiscal year. The engagement
was terminated in the first quarter of 1997.
As a matter of policy, all transactions described
herein with related parties were, and all future
transactions (including loans) between the Company and its
directors, officers and principal stockholders and their
affiliates known to the Company will be, on terms that are
no less favorable to the Company than those obtainable
from unaffiliated third parties.
EXECUTIVE COMPENSATION
The table below summarizes the total value of
compensation received by the five most highly compensated
executive officers who received salary and bonus which
exceeded $100,000 in fiscal 1997. The table includes the
yars ended December 31, 1995, December 29, 1996 and
December 28, 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------------------ -------------
Other All
Annual Securities Other
Name and Salary Bonus Comp. Underlying Comp.
Principal Position Year ($) ($) ($)(a) Options (#)(b) ($)(c)
- ------------------ ---- ------- ------ ----- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Neil H. McLaurin 1995 250,000 250,000 5,100 -- 612
Chairman of the 1996 300,000 -- 5,100 -- 726
Board, CEO 1997 300,000 -- 5,100 -- 1,900
Kathleen Callahan- 1995 -- -- -- -- --
Guion, President 1996 -- -- -- -- --
and COO 1997 178,125 50,000 4,038 -- 111,253
John T. Miller (d) 1995 144,000 80,000 5,100 -- 612
Senior V. P., 1996 170,000 -- 5,100 -- 726
CFO and Secretary 1997 170,000 50,000 5,100 -- 2,500
Harold E. Lambert 1995 95,000 25,000 5,400 -- 587
Vice President and 1996 105,000 -- 5,400 -- 660
Asst. Secretary 1997 105,000 5,000 5,400 -- 2,757
Elizabeth Marshall 1995 -- -- -- -- --
Controller 1996 47,000 -- 2,550 -- --
1997 100,000 3,000 5,100 -- 125
</TABLE>
<PAGE> 8
(a) Consists of car allowance.
(b) Options granted pursuant to the Company's 1991
Stock Option Plan as amended ("1991 Plan") and the Amended
and Restated 1994 Stock Option Plan ("1994 Plan") are as
follows:
(i) The right to exercise the underlying options of
the 1991 Plan vests at the rate of 20% per year from the
date of grant. As of December 28, 1997, Mr. McLaurin, Ms.
Callahan-Guion, Mr. Miller, Mr. Lambert and Ms. Marshall
had the right to exercise 750,000, 50,000, 375,000, 50,000
and 10,000 options, respectively. Upon Mr. Miller?s
resignation of employment and in accordance with the terms
of the 1991 Plan, he retained the right to exercise
375,000 options.
(ii) All options underlying the 1994 Plan vested as
of September 17, 1996. As of December 28, 1997, Mr.
McLaurin, Ms. Callahan-Guion, Mr. Miller and Mr. Lambert
had the right to exercise 2,700,000, 1,500,000, 1,200,000
and 150,000 options, respectively. Upon Mr. Miller?s
resignation of employment and in accordance with the terms
of the 1994 Plan, he forfeited the right to all options.
(c) Consists of Company contributions to a defined
contribution savings plan and tax assistance
reimbursements. Ms. Callahan-Guion?s compensation amount
also includes reimbursement of relocation expenses.
(d) Mr. Miller resigned from the Company effective March
20, 1998.
The table below summarizes the grant of Company
options during fiscal 1997.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential
Realizable Value
At Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
- ---------------------------------------------------------- ----------------
Percent of
Securities Total Options
Underlying Granted to Exercise of Expira-
Options Employees in Base Price tion
Name Granted (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---- ----------- ------------ ----------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Neil H.
McLaurin --- --- --- --- --- ---
Kathleen
Callahan- 500,000 (a) 71% 1.0625 6/26/07 15,188 318,856
Guion 1,500,000 (b) 88% 0.70 6/26/07 589,315 1,500,319
John T.
Miller --- --- --- --- --- ---
<PAGE> 9
H. E.
Lambert --- --- --- --- --- ---
Elizabeth
Marshall --- --- --- --- --- ---
- ----------
</TABLE>
(a) Options granted pursuant to the Company?s 1991 Stock
Option Plan as amended.
(b) Options granted pursuant to the Company?s Amended
and Restated 1994 Stock Option Plan.
The table below summarizes the exercise of Company options
during fiscal 1997.
<TABLE>
<CAPTION>
Aggregated Option Exercises
in Last Fiscal Year
and Fiscal Year-End Option Values
Value of
Unexercised
Number of In-the-Money
Unexercised Options at
Options at FY-End FY-End ($)
Shares Exercisable/ Exercisable/
Acquired on Value Unexercisable(#) Unexercisable
Name Exercise (#) Realized($) (in thousands)(a) (in thousands)(b)
- ---- ---------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Neil H.
McLaurin 0 0 3,450/0 108/0
Kathleen
Callahan-
Guion 0 0 1,550/450 48/0
John T.
Miller(c) 0 0 1,575/0 60/0
Harold E.
Lambert 0 0 200/0 6/0
Elizabeth
Marshall 0 0 10/40 --
- ------
</TABLE>
(a) Includes options granted under both the 1991 Plan
and the 1994 Plan.
(b) At December 28, 1997, the last closing bid for the
Company's Common Stock was $0.44 per share. These
amounts were calculated by multiplying the number of
applicable shares by such last closing bid price less the
exercise price of the options.
(c) Mr. Miller resigned from the Company effective
March 20, 1998.
Standard Arrangements with Directors
Each member of the Board of Directors, who is not an
employee of the Company, is compensated at the rate of
$1,000 per meeting attended, excluding telephonic
meetings, and each director who is also a member of a
committee of the Board of Directors is compensated $1,000
<PAGE> 10
per committee meeting attended, excluding telephonic
meetings. In addition, each director receives an annual
fee of $20,000, paid on a quarterly basis.
All of Mr. Sallay's fees were paid to Harvard
Management Company, Inc. as he did not personally accept
such fees.
Board Compensation Committee Report on Executive
Compensation
The Board of Directors has a standing compensation
committee ("Compensation Committee") which is composed of
three non-management directors and is responsible for
reviewing the policies regarding executive compensation,
including the compensation of the Chief Executive Officer.
The Compensation Committee recommends specific
compensation levels, including bonuses and stock options,
for the Board of Directors as a whole to act upon.
Compensation Policies for Executive Officers
The Company's executive officers have, since the
Company's inception as a separately held public entity in
March 1991, been charged by the board to formulate and
implement strategic and tactical plans which will increase
the profit of the Company. The current executive
management team receives compensation under criteria which
are largely composed of measures of improved performance
and profitability. The executive management team has been
granted a significant number of options on the Company's
Common Stock and the Compensation Committee intends these
options to be a significant motivating factor in the
performance of the group.
Bonuses for 1995 were awarded based on earnings of
the Company before interest, depreciation and taxes.
Based upon the success in bringing the Company to a point
of profitability, the Compensation Committee awarded
compensation in line with industry averages. Bonuses for
1997 were discretionary, based on individual performance.
Compensation Policies for Chief Executive Officer
The Compensation Committee's procedures for
determining the compensation arrangements with the Chief
Executive Officer are not materially different than those
discussed above. As with other executive officers, Mr.
McLaurin's compensation for 1997 included his base salary.
<PAGE> 11
Compensation Committee
----------------------
Paul Thompson III (Chairman)
John M. Sallay
John R. Schoemer
Compensation Committee Interlocks and Insider
Participation
Each of the members of the Compensation Committee are
officers or stockholders of the Company which beneficially
own, in the aggregate, approximately 88% of the Company's
outstanding common stock. Paul Thompson III is Managing
Director of Donaldson, Lufkin & Jenrette Securities Corp.,
an affiliate of Tenacqco; John M. Sallay is a partner in
Harvard Private Capital Group, Inc. which is an affiliate
of Phemus, and John R. Schoemer is the Chief Financial
Officer of Quadrant Management, Inc., a subsidiary of NAR.
Performance Graph
The following graph [Graphic Omitted] compares the
cumulative return on $100.00 invested in the Company's
Common Stock, the Standard & Poor's 500 Index and a peer
group index (consisting of Casey's General Stores, Inc.,
Dairy Mart Convenience Stores, Inc., and Uni-Marts, Inc.),
assuming reinvestment of all dividends, since December 31,
1992.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
E-Z Serve $100 $167 $ 75 $ 88 $ 79 $ 33
S & P 500
Index $100 $111 $112 $154 $189 $215
Peer Group $100 $139 $146 $217 $170 $176
</TABLE>
ELECTION OF DIRECTORS (ITEM 1)
The Bylaws of the Company provide that the Board of
Directors shall consist of not fewer than two nor more
than nine members and that the number of directors, within
such limits, shall be determined by resolution of the
Board of Directors at any meeting or by the stockholders
at the Annual Meeting. During 1997 the Company had six
directors. Mr. Donald Beane has declined to stand for re-
<PAGE> 12
election in order to pursue other business opportunities.
At the Annual Meeting, the stockholders will vote on the
election of five nominees for director as indicated below.
Unless otherwise directed in the enclosed Proxy, it
is the intention of the persons named in such Proxy to
nominate and to vote the shares represented by such Proxy
for the election of the following named nominees for the
offices of directors of the Company to hold office until
the next annual meeting of stockholders or until their
respective successors shall have been duly elected and
qualified. The following named persons are the nominees
for election as directors of the Company and comprise the
current Board of Directors of the Company:
<TABLE>
<CAPTION>
Year Present
Principal First Office(s)
Occupation and Elected Held In
Name Age Business Address Director Company
- ---- ---- ---------------- ------- ---------
<S> <C> <C> <C> <C>
Neil H. McLaurin 53 Principal Executive 1990 Director
E-Z Serve Corporation Chairman
2550 North Loop West Of the
Suite 600 Board,
Houston, Texas 77092 Chief
Executive
Officer
John M. Sallay 42 Partner 1992 Director
Harvard Private Capital Group
Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
John R. Schoemer 58 Chief Financial Officer 1994 Director
Quadrant Management Inc.
127 East 73rd Street
New York, New York 10022
Larry J. Taylor 55 President 1992 Director
Salt Fork Company, Inc.
2201 Civic Circle, Suite 900
Amarillo, Texas 79106
Paul Thompson III 48 Managing Director 1992 Director
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
</TABLE>
The following director has declined to stand for re-
election, as detailed above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Donald D. Beane 52 Investment Adviser 1990 Director
New Value Managers, L.P.
One Hollis Street, Suite 207
Wellesley, Massachusetts 02181
</TABLE>
Nominees for Directors:
A brief description of each person nominated to
become a director of the Company and of Mr. Beane is
provided below:
<PAGE> 13
Neil H. McLaurin has been Chairman of the Board of
Directors and Chief Executive Officer of the Company since
October 1990. Mr. McLaurin also served as President of
the Company from October 1990 to March 1997.
John M. Sallay joined Harvard in 1990, and in 1991,
became a Partner of Harvard Private Capital Group, Inc.,
which manages several investment affiliates that assist in
the management of the Harvard University endowment fund.
Harvard, through its relationship to Phemus, beneficially
owns approximately 24% of the outstanding Common Stock of
the Company.
John R. Schoemer has been employed by Quadrant
Management, Inc., a subsidiary of NAR ("Quadrant"), since
1991 and is currently Quadrant's Chief Financial Officer.
Prior to joining Quadrant, Mr. Schoemer was for seven
years the Treasurer and Chief Financial Officer of either
the National Football League or its subsidiary the World
League of American Football. NAR beneficially owns
indirectly through subsidiaries approximately 21% of the
outstanding Common Stock of the Company.
Larry J. Taylor is President of two real estate
investment companies, each of which leases locations and
equipment to the Company: (i) Salt Fork Company, Inc.,
which is also a wholesale supplier of motor fuels, and
(ii) Anadarko Development Company. Mr. Taylor is the
founder of Taylor Petroleum, Inc. which was formed in
November 1972, and was sold on March 25, 1992, to the
Company.
Paul Thompson III is currently a Managing Director of
Donaldson, Lufkin & Jenrette Securities Corporation, an
affiliate of Tenacqco, which beneficially owns
approximately 43% of the outstanding Common Stock of the
Company. Mr. Thompson joined Donaldson, Lufkin & Jenrette
Securities Corporation in April 1987, to establish and run
the DLJ Bridge Fund which invests in leveraged buy-outs,
recapitalizations and similar transactions.
Current Director:
Donald D. Beane is currently an investment adviser to
New Value Managers, L. P. which is an owner of, and
adviser to, emerging asset management firms. Mr. Beane
was a partner of Harvard Management Company, Inc.
("Harvard") from June 1981 to September 1990 and also
served as Chief Operating Officer of Harvard until
September 1990.
If elected as a director of the Company, each nominee
will hold office as a director until next year's annual
<PAGE> 14
meeting of stockholders, expected to be held in June 1999,
or until their respective successors are elected and
qualified.
The Board of Directors does not contemplate that any
of the above-named nominees for director will refuse or be
unable to accept election as a director of the Company, or
be unable to serve as a director of the Company. Should
any of them become unavailable for nomination or election
or refuse to be nominated or to accept election as a
director of the Company, then the persons named in the
enclosed form of Proxy intend to vote the shares
represented in such Proxy for the election of such other
person or persons as may be nominated or designated by the
Board of Directors. No nominee is related by blood,
marriage, or adoption to another nominee nor to any
executive officer of the Company or its subsidiaries or
affiliates.
Committees
Four (4) meetings of the Compensation Committee were
held in 1997.
The Board of Directors has a standing audit committee
("Audit Committee"), which is currently comprised of Mr.
Beane, Mr. Schoemer and Mr. Taylor. As noted above, Mr.
Beane has declined to stand for re-election and therefore
will no longer serve on the Audit Committee. Effective
with the Annual Meeting, Mr. Schoemer will assume
Chairmanship of the Audit Committee. The Audit Committee
is responsible for reviewing the scope, findings and
recommendations in respect of audits conducted by the
Company's independent auditors, as well as the adequacy of
the Company's internal controls and the accounting
principles employed by it in financial reporting. Two (2)
meetings of the Audit Committee were held in 1997.
Meetings of the Board of Directors
Eleven (11) meetings of the Board of Directors were
held during 1997. No director attended less than 75% of
all the meetings of the Board of Directors and those
committees on which he served in 1997.
The nominees for director will be elected by the
favorable vote of a plurality of the votes cast by the
outstanding Common Stock at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES FOR
DIRECTORS.
<PAGE> 15
PROPOSAL TO RATIFY THE APPOINTMENT
OF INDEPENDENT AUDITORS (ITEM 2)
KPMG Peat Marwick LLP has served as the Company's
principal independent public accountants since August 7,
1991, and has been appointed by the Board of Directors as
the independent auditors for the current year.
Representatives of KPMG Peat Marwick LLP are expected to
be present at the Annual Meeting, with the opportunity to
make a statement if they desire to do so, and are expected
to be available to respond to appropriate questions.
This proposal will be approved by the favorable vote
of a majority of outstanding Common Stock present, in
person or by proxy, at the Annual Meeting and entitled to
vote.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
OTHER BUSINESS (ITEM 3)
The Board of Directors knows of no other business
that may properly be, or which is likely to be, brought
before the meeting. If, however, any other matters are
properly presented, it is the intention of the persons
named in the accompanying form of Proxy to vote the shares
covered thereby as in their discretion they may deem
advisable.
DATE FOR RECEIPT OF PROPOSALS
Pursuant to Rule 14a-8 under the Securities and
Exchange Act of 1934, as amended, stockholders may present
proper proposals for inclusion in the Company's Proxy
Statement for consideration at its Annual Meeting of
Stockholders by submitting proposals to the Company in a
timely manner. In order to be so included for the 1999
Annual Meeting, stockholder proposals must be received by
the Company by December 28, 1998, and must otherwise
comply with the requirements of Rule 14a-8.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ HAROLD E. LAMBERT
----------------------------------
HAROLD E. LAMBERT
ASSISTANT SECRETARY
<PAGE> 16
April 27, 1998
Houston, Texas
<PAGE> 17
E-Z SERVE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
FRIDAY, JUNE 19,1998
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Neil H.
McLaurin and Harold E. Lambert, and each of them,
attorneys and agents, with full power of substitution to
vote as proxy all the shares of Common Stock standing in
the name of the undersigned at the Annual Meeting of
Stockholders of E-Z Serve Corporation (the "Company") to
be held at 2550 North Loop West, Suite 600, Houston Texas
77092 at 10:00 a.m., Houston time, on Friday June 19,
1998, and at any adjournment(s) thereof in accordance with
instructions noted below. Receipt of notice of the
meeting and Proxy Statement dated April 27, 1998, is
hereby acknowledged.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL
BE VOTED IN ACCORDANCE WITH THE STOCKHOLDER'S
SPECIFICATIONS HEREON. IN THE ABSENCE OF SUCH
SPECIFICATIONS, THE PROXY WILL BE VOTED "FOR" THE
PROPOSALS SET OUT BELOW.
1. ELECTION OF DIRECTORS to serve until the 1999
Annual Meeting of Stockholders and until their successors
are duly elected and qualified.
FOR all nominees listed below (except as otherwise
indicated) ( )
( ) WITHHOLD AUTHORITY for all nominees below
* Instruction: To withhold authority to vote for
any nominee, draw a line through the name of the nominee
in the list below:
NEIL H. MCLAURIN, JOHN M. SALLAY, JOHN R. SCHOEMER,
LARRY J. TAYLOR AND PAUL THOMPSON III.
2. PROPOSAL TO RATIFY AND APPROVE the Board of
Directors' appointment of KPMG Peat Marwick, LLP as
independent auditors of the Company.
FOR ( ) AGAINST ( ) ABSTAIN ( )
IN THEIR DISCRETION, THE AFOREMENTIONED PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING AND ANY
ADJOURNMENT THEREOF.
Dated: , 1998.
-----------------------
-----------------------------
(Signature of Stockholder)
<PAGE> 18
-----------------------------
(Signature of Stockholder)
* Please sign as name appears. Joint owners each should
sign. When signing as attorney, trustee, administrator,
executor, etc., please indicate your full title as such.
PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY.
PLEASE DO NOT FOLD THIS PROXY.
