STEARNS & LEHMAN INC
DEF 14A, 1998-08-28
BOTTLED & CANNED SOFT DRINKS & CARBONATED WATERS
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<PAGE>   1
                            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 Commission Only (as permitted by
    Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)or Section 240.14a-12

                             STEARNS & LEHMAN, INC.
  -----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)
  -----------------------------------------------------------------------------
       (Name of Person(s) Filing Proxy Statement if other than 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)(4) and 0-11,
        1) Title of each class of securities to which transaction applies:

        ------------------------------------------------------------------------
        2) Aggregate number of securities to which transaction applies:

        ------------------------------------------------------------------------
        3) Per unit price or other underlying value of transaction computed
           pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
           filing fee is calculated and state how it was determined):

        ------------------------------------------------------------------------
        4) Proposed maximum aggregate value of transaction:

        ------------------------------------------------------------------------
        5) Total fee paid:

        ------------------------------------------------------------------------
[ ]     Fee paid previously with preliminary materials
[ ]     Check box if any part of the fee is offset as provided by Exchange act
        Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
        paid previously. Identify the previous filing by registration statement
        number, or the Form or Schedule and the date of its filing.
        1) Amount Previously Paid:

        ------------------------------------------------------------------------
        2) Form, Schedule or Registration Statement No.:

        ------------------------------------------------------------------------
        3) Filing Party:

        ------------------------------------------------------------------------
        4) Date Filed:

        ------------------------------------------------------------------------

<PAGE>   2


                             STEARNS & LEHMAN, INC.
                                  P.O. Box 1748
                               30 Paragon Parkway
                            Mansfield, Oh 44901-1748

- -------------------------------------------------------------------------------
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                           TO BE HELD OCTOBER 14, 1998
- -------------------------------------------------------------------------------


The 1998 Annual Meeting of Shareholders (the "Annual Meeting") of Stearns &
Lehman, Inc. (the "Company") will be held at the Masonic Temple, 1250 Middle
Bellville Road, Mansfield, Ohio 44904 on October 14, 1998 at 10:00 A.M., Eastern
Standard Time, for the following purposes:

1.      To elect four (4) directors to serve until the next Annual Meeting or
        until their successors are duly elected and qualified; and

2.      To ratify the appointment of PricewaterhouseCoopers LLP as the
        independent public accountants of the Company for the fiscal year
        ending April 30, 1999; and

3.      To transact any other business which properly comes before the meeting
        or any adjournment thereof.

All Company shareholders of record as of the close of business on August 28,
1998 are entitled to vote at the Annual Meeting. A complete list of shareholders
entitled to vote at the Annual Meeting will be available for examination by any
Company shareholder at 30 Paragon Parkway, Mansfield, Ohio, for purposes germane
to the Annual Meeting, during normal business hours from August 28, 1998 until
the Annual Meeting.

A copy of the Company's annual report for the year ended April 30, 1998 is
enclosed.

The accompanying form of proxy is being solicited by the Board of Directors of
the Company. Whether or not you plan to attend the Annual Meeting and any
adjournment thereof, shareholders are requested to DATE, SIGN AND RETURN THE
ENCLOSED PROXY in the return envelope furnished for your convenience. If you
attend the Annual Meeting and prefer to vote in person, you can revoke your
proxy. We warmly invite you to be present at the meeting.

                                          By order of the Board of Directors
                                          STEARNS & LEHMAN,INC.
                                                                              
                                          ------------------------------------
                                          William C. Stearns, President

Mansfield, Ohio
August 28, 1998




<PAGE>   3




                             STEARNS & LEHMAN, INC.
                                  P.O. Box 1748
                               30 Paragon Parkway
                            Mansfield, Oh 44901-1748

- -------------------------------------------------------------------------------
                                 PROXY STATEMENT
                     FOR THE ANNUAL MEETING OF SHAREHOLDERS
                           TO BE HELD OCTOBER 14, 1998
- -------------------------------------------------------------------------------


THIS PROXY STATEMENT AND ACCOMPANYING PROXY CARD SUPPORT A PROXY SOLICITATION ON
BEHALF OF THE BOARD OF DIRECTORS OF STEARNS & LEHMAN, INC. (THE "COMPANY") FOR
USE AT THE OCTOBER 14, 1998 ANNUAL MEETING OF SHAREHOLDERS AND AT ANY
ADJOURNMENT OF THAT MEETING. This proxy statement and form of proxy, together
with the Company's Annual Report for the year ended April 30, 1998 will be sent
by the Company by mail to shareholders beginning September 1, 1998.

The form of proxy, when properly signed, dated and returned to the Company, will
be voted by the proxies at the Annual Meeting as directed. A proxy returned
without direction about business to be transacted at the Annual Meeting will be
voted in favor of (i) the election of William C Stearns, Sally A. Stearns, Frank
E. Duval, and Carter F. Randolph, Ph.D. to the Board of Directors of the
Company, and (ii) the ratification of the appointment of PricewaterhouseCoopers
LLP as the independent public accountants of the Company for the Company's
fiscal year ending April 30, 1999. The proxies will use their best judgment
regarding other matters that properly come before the Annual Meeting. The
Company is not aware of any matters, other than those discussed in this proxy
statement, that will be presented at the Annual Meeting.

The Company can conduct business at the Annual Meeting only if holders of a
majority of the outstanding common shares of the Company (the "Common Stock")
entitled to vote are present, either in person or by proxy. Abstentions will be
counted in determining whether a quorum has been reached. Assuming a quorum
exists, the affirmative vote of a majority of the Common Stock outstanding as of
the close of business on August 28, 1998 is necessary to approve each of the
proposed matters to be voted on.

In the event that a quorum is not present at the time the Annual Meeting is
convened, a majority in interest of the holders of the Common Stock represented
in person or by proxy may adjourn the meeting from time to time, without notice
other than announcement at the Annual Meeting, until holders of the amount of
Common Stock requisite to constitute a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the Annual Meeting as originally
called.




                                        1

<PAGE>   4



                              REVOCABILITY OF PROXY

Execution of the enclosed form of proxy will not affect a shareholder's right to
attend the Annual Meeting and vote in person. Any shareholder giving a proxy may
revoke it at any time before it is exercised by delivering a later-dated proxy
or a written notice of revocation to the Secretary of the Company at the address
set forth above or by giving notice of revocation at the Annual Meeting.
Shareholders may vote all their eligible shares of Common Stock if they are
personally present at the Annual Meeting. When a shareholder votes at the Annual
Meeting, his or her vote will revoke any proxy previously granted by the
shareholder.

                     VOTING SECURITIES AND PRINCIPAL HOLDERS

As of August 28, 1998, the record date, 3,285,865 shares of Common Stock were
outstanding and entitled to vote at the Annual Meeting. Each share may cast one
vote on each separate matter of business properly brought before the Annual
Meeting. There are no cumulative voting rights. Only holders of record at the
close of business on August 28, 1998 may vote.

Under the rules of Securities and Exchange Commission, boxes and a designated
blank space are provided on the form of proxy for shareholders to mark if they
wish either to abstain on a proposal presented for shareholder approval or to
withhold authority to vote for one or more nominees for election as a director
of the Company. Common Stock as to which the authority to vote is withheld will
be counted for quorum purposes but will not be counted toward the election of
directors or toward the election of individual nominees specified on the form of
proxy. Abstentions are counted as present for quorum purposes; however, the
effect of abstentions on the proposal to ratify the appointment of
PricewaterhouseCoopers LLP is the same as a "no" vote.

Brokers/dealers who hold their customers' Common Stock in street name may, under
the applicable rules of the self-regulatory organizations of which the
broker/dealers are members, sign and submit proxies for such Common Stock and
may vote such Common Stock on routine matters, which, under such rules,
typically include the election of directors; but broker/dealers may not vote
such Common Stock on other matters without specific instructions from the
customer who owns such Common Stock. Proxies signed and submitted by
broker/dealers which have not been voted on certain matters as described in the
previous sentence are referred to as broker non-votes. Such proxies count
towards the establishment of a quorum. Broker non-votes on the proposals to
ratify the appointment of PricewaterhouseCoopers LLP will not be considered as
votes entitled to be cast in determining the outcome of this proposal.

The following table sets forth certain information, so far as is known to
management of the Company, regarding beneficial ownership of Common Stock held
of record, as of August 28, 1998, by (i) each shareholder who owns beneficially
more than five percent (5%) of the outstanding Common Stock; (ii) each officer
and Director of the Company; and (iii) all officers and Directors as a group.


                                        2

<PAGE>   5


<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
         TITLE OF CLASS                NAME AND ADDRESS OF               AMOUNT AND         PERCENT OF
                                       BENEFICIAL OWNER (1)               NATURE OF           CLASS
                                                                         BENEFICIAL
                                                                        OWNERSHIP (2)
- ----------------------------------------------------------------------------------------------------------
<S>                                <C>                                   <C>                  <C>  
Common Stock, no par               William C. Stearns                     614,391 (3)          18.6%
value                              Director, President and
                                   Treasurer
- ----------------------------------------------------------------------------------------------------------
Common Stock, no par               Sally A. Stearns                       631,916 (3)          19.1%
value                              Director, Vice President
                                   and Secretary
- ----------------------------------------------------------------------------------------------------------
Common Stock, no par               Frank E. Duval                         125,000 (4)           3.8%
value                              Director
- ----------------------------------------------------------------------------------------------------------
Common Stock, no par               Carter F. Randolph, Ph.D.               63,906 (5)           1.9%
value                              Director
- ----------------------------------------------------------------------------------------------------------
Common Stock, no par               John A. Chuprinko                          640               .02%
value                              Chief Financial Officer
- ----------------------------------------------------------------------------------------------------------
Common Stock, no par               All Directors and Officers           1,435,853 (6)          43.4%
value                              as a group (5 persons)
- ----------------------------------------------------------------------------------------------------------
</TABLE>

(1) The address for all persons listed is 30 Paragon Parkway, Mansfield, Ohio
44903.

(2) Unless otherwise indicated, the named shareholder has sole voting and
investment power.

(3) Does not include shares owned by the person's spouse, for which shares the
person disclaims beneficial ownership.

(4) Includes 15,000 shares purchasable on exercise of currently exercisable
warrants.

(5) Of such shares, 51,198 are beneficially owned by the Randolph Company, Inc.,
an Ohio corporation, of which Dr. Randolph owns 100% of the common shares. The
Randolph Company, Inc. and, therefore, Dr. Randolph have full discretionary
investment authority over such shares, including the right to vote and sell such
shares. Includes 12,708 shares for which Dr. Randolph and his wife, Kathy, have
shared voting and investment power. Includes 8,798 shares purchasable on
exercise of currently exercisable warrants.

(6) Includes 23,798 shares purchasable on exercise of currently exercisable
warrants.

                        DIRECTORS AND EXECUTIVE OFFICERS

The following table contains the name, position, age and telephone number with
the Company of each director and executive officer of the Company as of August
28, 1998. Directors are elected to a one year term, to serve until the next
annual meeting of shareholders and until their successors are

                                        3

<PAGE>   6



duly elected and qualified or until their earlier resignation, removal from
office, or death. The respective background of each director and executive
officer is described following the table. Each of the executive officers devotes
his or her full-time efforts to the affairs of the Company.

<TABLE>
<CAPTION>
NAME                       POSITION                                               AGE
- ----                       --------                                               ---
<S>                        <C>                                                  <C>
William C. Stearns         President, Treasurer and Director                      46
Sally A. Stearns           Executive Vice President, Secretary and Director       38
John A. Chuprinko          Chief Financial Officer                                43
Frank E. Duval             Director                                               54
Carter F. Randolph         Director                                               42
</TABLE>

WILLIAM C. STEARNS - PRESIDENT, TREASURER AND DIRECTOR

William C. Stearns is President, Treasurer and a Director of the Company. Mr.
Stearns founded the Company in March of 1988 and has been its President and a
Director since that time. Mr. Stearns attended both Cleveland State University
and Baldwin-Wallace University and is a member of the Manufacturers' Board of
Directors of the National Food Distributors Association and the National
Association of Specialty Food Trade. Mr. Stearns is the husband of Sally A.
Stearns.

SALLY A. STEARNS - EXECUTIVE VICE PRESIDENT, SECRETARY AND DIRECTOR

Sally A. Stearns graduated from Bowling Green State University in June of 1982
with a Bachelor of Science Degree in Business Administration, with a major
concentration in Human Resource Management. From October 1987 to February 8,
1989, she was a senior accountant for Autocall, Inc., a division of Federal
Signal located in Shelby, Ohio. From February 18, 1989 to the present Ms.
Stearns has served as Executive Vice President, Secretary and a Director of the
Company. Ms. Stearns is the wife of William C. Stearns.

JOHN A. CHUPRINKO - CHIEF FINANCIAL OFFICER

John A. Chuprinko is a graduate of The Ohio State University, where he obtained
a Bachelor of Science Degree in accounting, and the United States Navy Supply
School in Athens, Georgia. Mr. Chuprinko was hired as the Chief Financial
Officer of the Company on January 10, 1996 and is a Certified Public Accountant.
Mr. Chuprinko is a member and past President of the Knox County, Ohio Airport
Advisory Board and is a member and past Chairman of the Marion Technical College
Accounting Advisory Committee. From October 1994 to January 1996, Mr. Chuprinko
served as the Chief Financial Officer and Treasurer of Na-Churs Plant Food
Company, a national manufacturing company with $18,000,000 in sales, located in
Marion, Ohio. Prior to that position, Mr. Chuprinko was the Controller at The
J.E. Grote Company, Incorporated in Blacklick, Ohio.

FRANK E. DUVAL - DIRECTOR

Mr. Duval has served as a Director of the Company since January 3, 1995. Mr.
Duval has been the

                                        4

<PAGE>   7



President of J&S Capital, Inc. since 1990 where he oversees a portfolio of real
estate, limited partnership and stock and bond investments. Mr. Duval has a
Bachelor of Science Degree in Education from the University of Buffalo. From
1979 to 1990, Mr. Duval served as President and Chief Executive Officer of
International Automated Machines, Inc., a manufacturer of single service and
portion control condiments. From 1973 to 1979, he served as President and Chief
Executive Officer of United Wild Rice, Inc. Prior to 1973, Mr. Duval held
various sales and marketing management positions with Ralston Purina, Wm.
Underwood Company and Scott Paper Company. Mr. Duval is a member of the Board of
Directors' Audit Committee.

CARTER F. RANDOLPH, PH.D. - DIRECTOR

Dr. Randolph was appointed as a Director of the Company on March 29, 1996. Since
1987, Dr. Randolph has been the President of The Randolph Company, Inc. where he
is responsible for the management of pension plans, foundations and trusts. From
1989 to the present, Dr. Randolph has also been Executive Vice President and
Trustee of the Green Acres Foundation where he is responsible for management,
including all aspects of organization and operation of the private nonprofit
foundation. Dr. Randolph has experience in the areas of estate planning, tax
planning, IRS audit management, investment management, real estate management,
farm management and property management. Dr. Randolph currently serves on the
Board of Directors of Cintech Tele-Management Systems, Inc. Dr. Randolph is a
member of the Board of Directors' Audit Committee.

SIGNIFICANT EMPLOYEES

PHYLLIS J. THOMAS

Ms. Thomas, age 44, has been employed by the Company since November 1993 and
currently is the Director of Operations. Ms. Thomas is a graduate of Ashland
University with a Bachelor of Science Degree in Business Administration. Prior
to working for the Company, Ms. Thomas was a promotion specialist for R.J.R.
Nabisco from 1990 to 1993.

JON D. WHITESIDE

Mr. Whiteside, age 38, was hired by the Company in March 1997 and currently is
the national sales manager responsible for managing the Company's sales
department, including the coordination of the regional sales personnel. Mr.
Whiteside attended Arizona State University. From 1993 to March, 1997, Mr.
Whiteside was the national sales manager for Saquella U.S.A. Inc., a $4,000,000
distributor of coffee and espresso industry products.

FAMILY RELATIONSHIPS

Except for Mr. and Mrs. Stearns, there are no family relationships among the
Directors and executive officers of the Company.



                                        5

<PAGE>   8



                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

William C. Stearns, the President, Treasurer and a Director of the Company, owns
a twin engine airplane which he regularly uses for Company business. The Company
pays Corporate Flight Services, a sole proprietorship of Mr. Stearns, $500.00
per month and $210.00 per hour for the use of the airplane. During the fiscal
years ended April 30, 1998 and 1997, Corporate Flight Service was paid
$33,675.00 and $49,892.60, respectively, pursuant to this arrangement.

The Company carries and pays the premium for a "key man" life insurance policy
on Mr. Stearns in the amount of $1,000,000, and as one of the named
beneficiaries, the Company is entitled to ninety (90%) of the benefits of such
policy. Sally A. Stearns is the other named beneficiary of Mr. Stearns'
insurance policy and is entitled to ten percent (10%) of the benefits of such
insurance policy. The Company also carries and pays the premium for a "key man"
life insurance policy on Ms. Stearns, the Vice President, Secretary and a
Director of the Company, in the amount of $500,000 and is entitled to eighty
percent (80%) of the benefits of such policy. William C. Stearns is the other
named beneficiary of Ms. Stearns' policy and is entitled to receive the
remaining twenty percent (20%) of the benefits of such insurance policy.

                       MEETINGS OF THE BOARD OF DIRECTORS

The Company's Board of Directors met five times during the fiscal year ended
April 30, 1998. All Directors were present at these meetings.

                                   COMMITTEES

The Company's Board of Directors has an Audit Committee. The duties of the Audit
Committee are to recommend independent accountants for selection by the Board of
Directors, to review the arrangements for and scope of the independent
accountants' audit, to review the findings and recommendations of the
independent accountants concerning internal accounting procedures and controls,
to review professional services rendered by the independent accountants in
regard to the Company and its management, and to review potential conflicts of
interest between the Company and its employees. The Audit Committee met once
during the fiscal year ended April 30, 1998. The members of the Audit Committee
presently are Frank E. Duval and Carter F. Randolph, Ph.D. The Board of
Directors does not have a Compensation Committee. William C. Stearns and Sally
A. Stearns, both executive officers of the Company, are Directors and
participated in deliberations of the Company's Board of Directors concerning
executive compensation. The Board of Directors does not have a Nominating
Committee. Frank E. Duval and Carter F. Randolph, Ph.D. are members of the Stock
Option Committee.

                             EXECUTIVE COMPENSATION

The following table and notes set forth information regarding remuneration of
the only officer of the Company whose total annual salary and bonus during the
fiscal year ended April 30, 1998 exceeded $100,000:

                                        6

<PAGE>   9




<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
NAME OF INDIVIDUAL        FISCAL                                          ALL OTHER
POSITION                   YEAR        SALARY ($)      BONUS ($)        COMPENSATION ($)
- ----------------------------------------------------------------------------------------
<S>                        <C>       <C>               <C>                <C>
William C. Stearns,        1998      $ 104,000.00      $  0.00            $ 123.00 (1)
President                  1997      $ 104,000.00      $  0.00            $ 123.00 (1)
                           1996      $ 127,500.00      $  0.00            $ 115.00 (1)
- ----------------------------------------------------------------------------------------
</TABLE>

(1) The Company carries and pays the premium on a "key man" life insurance
policy on Sally A. Stearns in the amount of $500,000 and is entitled to eighty
percent (80%) of the benefits of such a policy. Mr. Stearns is the other named
beneficiary of this policy and is entitled to receive the remaining twenty
percent (20%) of the benefits of such insurance policy. For the fiscal years
ended April 30, 1998, 1997 and 1996, the premium value of this benefit to Mr.
Stearns was $123.00, $123.00 and $115.00, respectively.

                             DIRECTORS COMPENSATION

Beginning with the third meeting of the previous fiscal year, the outside
Directors of the Company received cash compensation of $1,000.00 per meeting for
serving on the Board of Directors, and were reimbursed reasonable expenses
incurred while attending these meetings. Frank E. Duval and Carter F Randolph,
Ph.D. each received $3,000.00 for attending Board of Directors meetings for the
fiscal year ended April 30, 1998. The Company agreed to grant warrants to each
of the outside Directors for services rendered during a calendar year, on a pro
rata basis for the actual time served as a Director during such calendar year,
to purchase up to 5,000 shares of Common Stock. The exercise price for such
warrants is equal to the fair market value of such shares at the date the
warrants are granted. Frank E. Duval and Carter F. Randolph, Ph.D. each received
warrants to purchase 5,000 shares of Common Stock, respectively, at an exercise
price of $5.625 per share, on January 21, 1998 for services rendered in calendar
year 1997.

                                STOCK OPTION PLAN

At the Company's Annual Meeting of Shareholders held on March 31, 1994, the
Company adopted the 1994 Stock Option Plan (the "Plan"). The shares of Common
Stock that may be issued upon the exercise of options granted under the Plan
shall not exceed 275,000 shares in the aggregate. The options granted under the
Plan may be designed as "incentive stock options" or "nonqualified stock
options", at the discretion of the committee designated by the Board of
Directors of the Company to administer the Plan. The exercise price of options
shall not be less than 100% of the fair market value of a share of Common Stock
on the effective date of the grant; provided, that the option price for
incentive stock options granted to a person holding more than 10% of the voting
power of the Company shall not be less than 110% of the fair market value of a
share of Common Stock on the effective date of the grant. As of April 30, 1998,
the Company has not issued options to any of its officers, directors or
employees under the Plan.

                                        7

<PAGE>   10



                 COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires executive officers
and Directors, and persons who beneficially own more than ten percent (10%) of
the Common Stock, to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission. Executive officers,
Directors and persons who beneficially own more than ten percent (10%) of the
Common Stock are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. Frank E.
Duval and Carter F. Randolph, Ph.D. each failed to file one Form 4 relating to
the grant of warrants on a timely basis during the fiscal year ended April 30,
1998.

                       EXPENSE AND MANNER OF SOLICITATION

The expenses of the solicitation of the proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the notice, form of
proxy, proxy statement and return envelopes, the handling and tabulation of
proxies received, and charges of brokerage houses and other institutions,
nominees or fiduciaries for forwarding such documents to beneficial owners, will
be paid by the Company. In addition to the mailing of the proxy material,
solicitation may be made in person or by telephone by officers, directors or
regular employees of the Company.

                                  ANNUAL REPORT

The Annual Report for the Company for the year ended April 30, 1998 is enclosed
herewith but is not a part of the proxy solicitation material.

                                   PROPOSAL 1
                       ELECTION OF THE BOARD OF DIRECTORS

The Board of Directors of the Company has nominated William C. Stearns, Sally A.
Stearns, Frank E. Duval, and Carter F. Randolph, Ph.D., all members of the
existing Board of Directors, for election to the Board of Directors of the
Company. Each of these nominees was elected to the Board of Directors at the
Company's 1997 Annual Meeting of Shareholders.

A proposal to elect William C. Stearns, Sally A. Stearns, Frank E. Duval, and
Carter F. Randolph, Ph.D. to the Company's Board of Directors will be presented
to the shareholders at the Annual Meeting. Each director to be elected will hold
office until the next annual meeting of shareholders of the Company and until
his or her successor is elected and has qualified, or until such director's
earlier resignation, death or removal. The nominees receiving the highest number
of votes, up to the number of directors to elected, will be elected.

THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE ELECTION OF WILLIAM C. STEARNS, SALLY A.
STEARNS, FRANK E. DUVAL, AND CARTER F. RANDOLPH, PH.D. TO THE COMPANY'S
BOARD OF DIRECTORS.

                                        8

<PAGE>   11



                                   PROPOSAL 2
                 RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

PricewaterhouseCoopers LLP was the Company's independent public accounting firm
for the fiscal years ended April 30, 1995 through 1998 and has been appointed by
the Board of Directors of the Company to continue in that capacity for the
fiscal year ending April 30, 1999.

A proposal to ratify the appointment of PricewaterhouseCoopers LLP will be
presented to the shareholders at the Annual Meeting. Representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting and will have
an opportunity to make a statement if they desire to do so and respond to
appropriate questions. An affirmative vote of the holders of shares of a
majority of the Common Stock outstanding as of the close of business on August
28, 1998 is necessary to approve this proposal.

THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP

                              SHAREHOLDER PROPOSALS

Shareholders are entitled to submit proposals on matters appropriate for
shareholder action consistent with regulations of the Securities and Exchange
Commission and the Company's Code of Regulations. Should a shareholder wish to
have a proposal appear in the Company's proxy statement for next year's annual
meeting, under the regulations of the Securities and Exchange Commission, it
must be received by the Secretary of the Company at P.O. Box 1748, 30 Paragon
Parkway, Mansfield, Ohio 44901-1748 on or before April 28, 1999. If a
shareholder intends to present a proposal at next year's annual meeting but does
not intend to seek the inclusion of such proposal in the Company's proxy
statement, such proposal must be received by the Company prior to July 14, 1999,
or the Company's management proxies will be entitled to use their discretionary
voting authority should such proposal be raised without any discussion of the
matter in the proxy statement.

                                 OTHER BUSINESS

All items of business to be brought before the Annual Meeting are set forth in
this proxy statement. Management knows of no other business to be presented. If
other matters of business not presently known to management are properly raised
at the Annual Meeting, the proxies will vote on the matters in accordance with
their best judgment.

NOTE: SHAREHOLDERS ARE REQUESTED TO SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY, USING THE ENCLOSED ENVELOPE.






                                        9




<PAGE>   12
                             STEARNS & LEHMAN, INC.
                                  P.O. Box 1748
                               30 Paragon Parkway
                            Mansfield, Oh 44901-1748

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby appoints each of Sally A. Stearns and Frank E. Duval as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all the common
shares of Stearns & Lehman, Inc. (the "Company") held of record by the
undersigned on August 28, 1998, at the Annual Meeting of shareholders to be held
on October 14, 1998, or any adjournment thereof.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN ITEM 1 AND "FOR"
ITEM 2.

ITEM 1 - ELECTION OF DIRECTORS

        [  ]   FOR all nominees    [  ]   WITHHOLD AUTHORITY for all nominees

INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.

                 WILLIAM C. STEARNS            SALLY A. STEARNS
                 FRANK E. DUVAL                CARTER F. RANDOLPH, PH.D.

ITEM 2 - PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY

          [  ]   For               [  ]   Against               [  ]   Abstain

The common shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR all nominees" in Item 1 and "FOR" Item 2.

In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting or any adjournment thereof. This
proxy when properly executed will be voted in the manner directed herein by the
undersigned shareholder.

Please complete, sign, date and return the proxy promptly, using the enclosed
envelope.

                                       Signature
Signature:                             if held jointly:
           ------------------------                     -----------------------

Date:                                  Name (Printed)
           ------------------------                     -----------------------

Please sign exactly as name appears on certificate evidencing your common
shares. When shares are held by joint tenants, both should sign. When signing as
attorney, as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.




<PAGE>   13



                             STEARNS & LEHMAN, INC.
                                  P.O. Box 1748
                               30 Paragon Parkway
                            Mansfield, Oh 44901-1748

           BALLOT FOR ANNUAL MEETING OF SHAREHOLDERS, OCTOBER 14, 1998

The undersigned holder of common shares of Stearns & Lehman, Inc. (the "Company)
hereby votes all of the common shares of the Company which the undersigned is
entitled to vote, as a result of being the shareholder of record on August 28,
1998, at the Annual Meeting of shareholders of the Company held on October 14,
1998 as follows:

ITEM 1 - ELECTION OF DIRECTORS

        [  ]    William C. Stearns          [  ]
                                                 ------------------------------

        [  ]    Sally A. Stearns            [  ]
                                                 ------------------------------

        [  ]    Frank E. Duval              [  ]
                                                 ------------------------------

        [  ]    Carter F. Randolph, Ph.D.   [  ]
                                                 ------------------------------

ITEM 2 - PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY

        [  ]    For        [  ]   Against         [  ]   Abstain





                                     Signature
Signature:                           if held jointly:
           --------------------                       ------------------------

Printed name:                        Printed name:
           --------------------                       ------------------------


Please sign exactly as name appears on certificate evidencing your common
shares. When shares are held by joint tenants, both should sign. When signing as
attorney, as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.






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