<PAGE>
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
[ ] Confidential for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BLIMPIE INTERNATIONAL, INC.
(Name of Registrant as Specified in its Charter)
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):
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset 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 date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Number:
3) Filing Party:
4) Date Filed:
<PAGE>
[BLIMPIE LOGO]
November 9, 1998
TO OUR SHAREHOLDERS:
You are cordially invited to attend our Annual Meeting of Shareholders for
the fiscal year ending June 30, 1999 which will be held on Monday, December 7,
1998 at 9:00 A.M., local time, at the offices of Hall Dickler Kent Friedman &
Wood, LLP, 909 Third Avenue, New York, New York 10022, on the 27th Floor.
At this meeting, you will be asked to consider and vote upon the election
of seven (7) directors who will serve until the annual meeting to be held in
1999; and to ratify the selection of Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending June 30, 1999.
The accompanying Notice of Annual Meeting and Proxy Statement set forth in
detail the business intended to be transacted. Time will be made available for a
discussion of these items as well as for other questions about the business
affairs of the Company.
If you are unable to join us at the meeting it is very important that you
be represented by proxy. Therefore, please take a moment to sign, date, and
return your proxy in the enclosed envelope. If you do not have a proxy, please
call your broker or the Company, and ask that a proxy be mailed to you. Your
cooperation in mailing your proxy promptly will not only be greatly appreciated;
it will also result in a significant benefit to the Company.
Sincerely yours,
/s/ Anthony P. Conza
------------------------------------
ANTHONY P. CONZA
Chairman and Chief Executive Officer
<PAGE>
BLIMPIE INTERNATIONAL, INC.
740 BROADWAY
NEW YORK, NEW YORK 10003
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MONDAY, DECEMBER 7, 1998
------------------------
TO THE HOLDERS OF COMMON STOCK OF
BLIMPIE INTERNATIONAL, INC.
The Annual Meeting of the holders of the Common Stock of Blimpie
International, Inc. (the "Company") will be held at the offices of Hall Dickler
Kent Friedman & Wood, LLP, 909 Third Avenue, New York, New York 10022, on the
27th Floor, on Monday, December 7, 1998 at 9:00 A.M., local time, for the
following purposes:
1. To elect seven (7) persons to serve as directors of the Company
until the Annual Meeting to be held in 1999 for the fiscal year ending
June 30, 2000;
2. To ratify the selection of Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending June 30, 1999; and
3. To transact such other business as may properly come before the
meeting.
Only holders of record of the Company's Common Stock at the close of
business on November 2, 1998, are entitled to notice of or to vote at this
meeting and any adjournment or adjournments thereof. Shareholders are entitled
to vote upon all business as may properly be presented for consideration at the
meeting.
By Order of the Board of Directors
/s/ Charles G. Leaness
----------------------------------
CHARLES G. LEANESS,
Secretary
New York, New York
November 9, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. THIS IS IMPORTANT
FOR THE PURPOSE OF ENSURING A QUORUM AT THE MEETING.
<PAGE>
PROXY STATEMENT
BLIMPIE INTERNATIONAL, INC.
740 BROADWAY
NEW YORK, NEW YORK 10003
------------------------
ANNUAL MEETING OF SHAREHOLDERS
FOR THE FISCAL YEAR ENDING JUNE 30, 1998
------------------------
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of Blimpie
International, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held December 7, 1998, and at any adjournment or adjournments
thereof (the "Annual Meeting"). A proxy may be revoked by notice in writing to
the Secretary at any time prior to the exercise thereof. Each valid proxy
received in time will be voted at the Annual meeting, and, if a choice is
specified on the proxy, it will be voted in accordance with such specifications.
If no such specification is made, the persons named in the accompanying proxy
have advised the Company of their intention to vote the shares represented by
the proxies received by them (i) in favor of the election as directors, the
persons named in the proxy as nominees for directors; (ii) in favor of ratifying
the selection of Ernst & Young LLP, as the Company's independent accountants for
the fiscal year ending June 30, 1999; and (iii) in accordance with their best
judgment on any other matters that may come before the meeting.
The cost of solicitation of proxies, including the reimbursement to banks
and brokers for reasonable expenses in sending proxy material to their
principals, will be borne by the Company. The Company's transfer agent,
ChaseMellon Shareholder Services, is assisting the Company in the solicitation
of proxies from brokers, banks, institutions and other fiduciaries by mail, and
will charge the Company its customary fee therefor plus out-of-pocket expenses
which, in the aggregate, are estimated to be less than $5,000. In addition,
proxies may be solicited by officers of the Company by mail, in person or by
telephone, telegraph or telex. It is anticipated that on or about November 9,
1998 this proxy statement and the enclosed form of proxy will be mailed to
shareholders.
The outstanding voting securities of the Company on November 2, 1998 (the
"Record Date") consisted of 9,577,226 shares of Common Stock, $.01 par value
(the "Common Stock"). Only shareholders of record at the close of business on
the Record Date are entitled to notice of or to vote at the Annual Meeting.
Each share of Common Stock is entitled to one vote with respect to each
proposal which shall properly come before the Annual Meeting for consideration
by the shareholders. The holders of a majority of the outstanding shares
entitled to vote must be present at the Annual Meeting in person or by proxy to
constitute a quorum.
PROPOSAL NUMBER 1: ELECTION OF DIRECTORS
Seven directors are to be elected at the meeting to hold office until the
Annual Meeting to be held in 1999 for the fiscal year ending June 30, 2000, and
until their respective successors have been elected and qualified.
The persons named as proxies intend (unless authority is withheld) to vote
for the election of the persons hereinafter named as directors for terms
expiring in 1999 upon their nomination for such office at the Annual Meeting.
The affirmative vote of the holders of a plurality of the outstanding shares of
Common Stock represented in person or by proxy at the Annual Meeting is required
for election of each director.
If any nominee should become unavailable to serve, the proxy may be voted
for the election of another person designated by the Board. The Board has no
reason to believe any of the nominees will be unable to serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
ELECTION AS DIRECTORS.
<PAGE>
Pertinent information concerning the nominees for directors follows:
NOMINEES FOR ELECTION AS DIRECTORS
Anthony P. Conza, Age 58
Mr. Anthony P. Conza, together with two individuals who are not affiliated
with the Company, originally created the Blimpie concept in 1964. He is one of
the original founders of the Blimpie outlet chain, and is a co-founder of the
Company. He has been Chairman of the Board of Directors, President and Chief
Executive Officer of the Company since the Company commenced business operations
in 1977. In 1992, "the Entrepreneur of the Year" for New York, an award
sponsored by Ernst & Young, Merrill Lynch and Inc. Magazine, was presented to
Mr. Conza. In the same year, he was also named Chain Operator of the Year by the
New York State Restaurant Association. He is a member of the Board of the Jose
Limon Dance Company, a member of the Board of Governors of The Boys & Girls
Clubs of America and he serves on the Dean's Council at Harvard University's JFK
School of Government. Mr. Conza is the brother of Joseph A. Conza, the
brother-in-law of Patrick Pompeo and the father-in-law of Joseph Morgan. See
"Certain Relationships and Related Transactions."
David L. Siegel, Age 54
Mr. Siegel, one of the co-founders of the Company, served as the Company's
Executive Vice President and General Counsel and as a member of its Board of
Directors since its formation in 1977. In September 1995, he was appointed as
the Company's Vice Chairman of the Board, Chief Operating Officer and General
Counsel. He also served as the Company's Treasurer from 1977 until January,
1991. He is also a practicing attorney in the City of New York. Mr. Siegel
received a Bachelor of Arts degree in 1965 from Marietta College, a Juris Doctor
Degree in 1968 from New York University School of Law and a Master of Laws
Degree in 1970 from New York University School of Law. During the past five
years, Mr. Siegel has also served as an officer of each of the Company's leasing
subsidiaries.
Charles G. Leaness, Age 48
Mr. Leaness has been a member of the Company's Board of Directors since the
Company commenced business operations, and served as the Company's Senior Vice
President-Corporate Counsel for more than the past five years. In
September,1995, he became an Executive Vice President. Mr. Leaness is also a
principal shareholder, officer and director of Llewellyn Distributors, Inc., the
Company's Subfranchisor for a part of New Jersey. Mr. Leaness received a
Bachelor of Arts degree from Tulane University in 1972 and a Juris Doctor degree
from New York Law School in 1982. Mr. Leaness is a practicing attorney in New
York State. He currently serves as Director of the New York State Restaurant
Association and is President of the New York City Chapter. Mr. Leaness received
the 1997 Restaurateur of the Year award from the New York State Restaurant
Association. Mr. Leaness also serves on the Board of Directors of the
International Franchise Association (IFA) and the National Restaurant
Association (NRA). See "Certain Relationships and Related Transactions."
Patrick J. Pompeo, Age 59
Mr. Pompeo has served as a director and Senior Vice President in charge of
operations since the time of commencement of the Company's business operations
in 1977. In September 1995, he became Executive Vice President of Research
Development and Procurement. Mr. Pompeo was employed for 16 years as a floor
supervisor by E.F. Hutton & Co., the former New York Stock Exchange member firm.
Mr. Pompeo is also a principal shareholder, officer and director of Georgia
Enterprises, Inc., the Company's Subfranchisor for the State of Georgia.
Mr. Pompeo is the brother-in-law of Anthony Conza. See "Certain Relationships
and Related Transactions."
Alvin Katz, Age 68
Mr. Katz was appointed to the Board of Directors of the Company on
November 23, 1993. Mr. Katz has been a member since September 1993 of the Board
of Directors of Nastech Pharmaceutical Company, Inc., a company engaged in the
development of pharmaceuticals. Since 1981, he has served as an adjunct
professor of
2
<PAGE>
business management at Florida Atlantic University. In 1991, Mr. Katz was
appointed Chief Executive Officer of Odessa Engineering Corp., a company engaged
in the manufacturing of pollution monitoring equipment. He held this position
until that company was sold in September 1992. Mr. Katz also serves on the Board
of Directors of Amtech Systems Inc. which is engaged in the manufacture of
capital equipment in the chip manufacturing business; BCT International, Inc., a
franchisor of thermo graphic printing plants; Mikron Instruments, Inc. a
manufacturer of infrared temperature measuring instruments; and serves as
Chairman of the Board of Ozo Diversified Automation, Inc., a manufacturer of
driller and depaneling machines for circuit board manufacturers. Mr. Katz holds
a B.S. in Business Administration degree from New York University and has done
graduate work at C.U.N.Y.-Baruch School.
Harry G. Chernoff, Age 52
Dr. Chernoff was appointed to the Board of Directors of the Company on
November 23, 1993. For more than the past five years, Dr. Chernoff has been a
principal of HMS Properties, Inc., a real estate investment, development and
management firm. Dr. Chernoff has an active financial and operational consulting
practice with major financial institutions, and food and hospitality firms as
his clients. Dr. Chernoff received a Ph.D. in Operations Management from the New
York University Leonard N. Stern School of Business in 1985, and has been a
member of the faculty of New York University for 20 years. He also received a
B.S. degree from New York University in 1968 and an M.S. degree from that
institution in 1975.
Francis A. Tarkenton, Age 58
Mr. Tarkenton is a business consultant and a public speaker. He is also
Chairman and founder of The Fran Tarkenton Small Business NETwork and Global
Compass, an E-Commerce internet company. He served as Chairman of the Board of
Directors and Chief Executive Officer of KnowledgeWare, Inc. (a computer
software company) from 1986 to 1994. Through 1997, Mr. Tarkenton served as a
director of Sterling Software, Inc. (a computer software company) and Pre-Paid
Legal Services, Inc. Mr. Tarkenton was a founding member of the Board of
Directors of Coca-Cola Enterprises, Inc. and served on that board from 1986 to
1998.
THE BOARD OF DIRECTORS; COMMITTEES AND ATTENDANCE
The Board of Directors held four meetings during the fiscal year ended
June 30, 1998. All of the directors attended each of such meetings. The Board of
Directors has established an Audit Committee and a Compensation Committee. The
Audit Committee, among other things, makes recommendations to the Board, for
approval by the shareholders, regarding the appointment of independent
accountants to audit the financial accounts, books and records of the Company,
meets jointly and/or separately with the chief financial officer of the Company
and such accountants before commencement and after conclusion of the audit to
discuss the evaluation by the accountants of the adequacy and effectiveness of
the accounting procedures and internal controls of the Company and its
subsidiaries, to approve the overall scope of the audit to be made and the fees
to be charged, to review the audited financial statements of the Company, to
discuss the results of the audit, and to discuss any significant recommendations
by the accountants for improvement of accounting systems and controls of the
Company. The Compensation Committee develops executive compensation policies and
practices designed to enhance the Company's business plans and strategies, and
is responsible for the administration of the Company's Omnibus Stock Incentive
Plan. The Compensation Committee has full authority in its discretion to
determine the individuals to whom awards shall be made under such plan, the time
or times when they shall receive them and the terms and conditions thereof, all
as more fully set forth and described in such plans. Messrs. Katz and Chernoff
serve on both of such Committees. Mr. Conza is also a member of the Compensation
Committee. The Audit Committee met on two occasions during fiscal year 1998, and
the Compensation Committee acted once by unanimous written consent in lieu of a
meeting during such year.
EXECUTIVE COMPENSATION
The following table sets forth compensation awarded to, earned by or paid
to the Chief Executive Officer and the four highest-paid executive officers of
the Company who served as such at June 30, 1998 and whose annual compensation
and bonus was $100,000 or more (collectively, the "Named Executive Officers").
3
<PAGE>
Information with respect to salary, bonus, other annual compensation, restricted
stock and options is included for the fiscal years ended June 30, 1998, 1997 and
1996. The Company has not paid any compensation that would qualify as "All Other
Compensation," nor has the Company made payments to any named Executive Officer
which may be categorized as "LTIP" payments in any of the three years in the
period ended June 30, 1998.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
FISCAL SECURITIES
YEAR OTHER UNDERLYING
NAME AND ENDED ANNUAL OPTIONS/
PRINCIPAL POSITION JUNE 30 SALARY($) BONUS($) COMPENSATION($) SARS(#)
- --------------------------------------------- -------- --------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Anthony P. Conza, CEO........................ 1998 $ 217,375 $ 41,006 $ 1,172(1) --
1997 214,326 117,450 3,093(1) 40,000(2)
1996 206,718 46,500 3,267(1) --
David L. Siegel, COO......................... 1998 156,748 21,558 1,172(1) --
1997 149,418 58,725 3,093(1) 40,000(2)
1996 148,839 23,250 3,267(1) --
Charles G. Leaness, Exec. V.P................ 1998 124,028 14,521 4,397(1) --
1997 114,654 39,233 10,982(1) 20,000(3)
1996 105,324 15,500 12,250(1) --
Patrick J. Pompeo, Exec. V.P................. 1998 115,615 14,521 1,172(1) --
1997 102,181 39,233 3,093(1) 20,000(3)
1996 87,245 15,500 3,267(1) --
Dennis G. Fuller, Senior. V.P. (4)........... 1998 44,654 14,401 93,070(1,5) --
1997 42,793 19,616 155,716(1,5) 20,000(3)
1996 42,134 7,800 170,486(1,5) --
Joseph W. Morgan, Sr. V.P.................... 1998 114,654 10,451 3,938(1,6) --
1997 92,413 14,166 10,827(1,6) 25,000(7)
1996 65,708 5,400 11,751(1,6) --
</TABLE>
- ------------------
(1) Represents commissions paid with respect to franchise, subfranchise and/or
master license sales consummated.
(2) In April 1997, each of Messrs. A. Conza and Siegel received a five year
option under the Plan to purchase 40,000 shares of Common Stock vesting at
the rate of 8,000 shares per year.
(3) In April 1997, each of Messrs. Leaness, Pompeo and Fuller received a five
year option under the Plan to purchase 20,000 shares of Common Stock vesting
at the rate of 4,000 shares per year.
(4) Mr. Fuller's employment by the Company ended on May 8, 1998.
(5) Includes the fair market value on the date of issuance of awards of common
stock to Mr. Fuller. On July 1, 1993, Mr. Fuller was granted a stock bonus
of 7,500 shares of Common Stock (as adjusted to account for a three for two
stock split implemented in March 1994) to be vested and issued at a rate of
1,500 shares per year beginning July 1, 1993 and ending July 1, 1997. The
amount included in Other Annual Compensation was $8,250 in 1998, $22,125 in
1997 and $11,160 in 1996.
(6) Includes the fair market value on the date of issuance of awards of common
stock to Mr. Morgan. On December 24, 1993, Mr. Morgan was granted a stock
bonus of 3,750 shares of Common Stock (as adjusted to account for a three
for two stock split implemented in March 1994) to be vested and issued at a
rate of 1,500 shares per year beginning December 24, 1993 and ending
December 24, 1997. The amount included in Other Annual Compensation was
$2,766 in 1998, $7,734 in 1997 and $8,484 in 1996.
(7) In April 1997, Mr. Morgan received a five year option under the Plan to
purchase 25,000 shares of Common Stock vesting at the rate of 5,000 shares
per year.
4
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
There were no options awarded to the Named Executive Officers during the
fiscal year ended June 30, 1998.
FISCAL YEAR END OPTION VALUES
The following table sets forth the number of unexercised options held by
the Named Executive Officers during the fiscal year ended June 30, 1998. No
options were exercised during such period.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(#) AT FY-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------- --------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Anthony P. Conza................................... -- -- 16,000/24,000 $ --
David L. Siegel.................................... -- -- 16,000/24,000 --
Charles G. Leaness................................. -- -- 8,000/12,000 --
Patrick J. Pompeo.................................. -- -- 8,000/12,000 --
Dennis G. Fuller................................... -- -- -- --
Joseph W. Morgan................................... -- -- 20,750/43,000 --
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF BLIMPIE INTERNATIONAL, INC.
The primary purpose of this Committee is to develop executive compensation
policies and practices which coincide with and enhance the business plans and
strategies which the Company undertakes in connection with the pursuit of its
business objectives.
It is not unusual to find that the compensation committees of the Boards of
publicly held companies possessing share capitalizations far in excess of the
Company's share capital adopt executive compensation philosophies which are
largely based upon the view that the majority of pay for senior executive
officers should be composed of long-term, at-risk pay, and that less emphasis
should be placed on salary and annual incentives. However, prior to fiscal 1997,
it had been this Committee's belief, based upon the facts that (1) the Company's
Common Stock was trading at ever increasing levels, (2) less than 4,000,000
shares of the Company's Common Stock was in public hands, and (3) the Company's
senior management team already owned, collectively, more than 55% of all of the
Company's outstanding shares, that the shareholders of the Company, especially
the public shareholders, would not have been well-served by implementation of an
executive compensation policy which would place even more equity ownership in
the hands of that senior management.
Thus, until recently, this Committee's policy regarding the compensation of
its senior executives had been grounded upon the view that the senior
executives' equity positions provided them with sufficient incentives to serve
the interests of the shareholders. Accordingly, this Committee has almost
exclusively followed a policy of rewarding its senior executives with
compensation packages consisting of salaries which are determined upon the basis
of the following four factors (1) appreciation or depreciation in the Company's
Common Stock during the prior year, (2) increase or decrease in earnings during
the prior year, (3) changes in the size and industry position of the Company
through expansions or contractions in the overall size of the franchise chain,
and (4) the growth of the Company's international franchise operations. In
determining the salary to be paid to the Company's Chief Executive Officer and
its other senior executives, this Committee also considers, in addition to the
foregoing factors, the comparative salaries paid to other Chief Executives and
senior executives in the quick service restaurant industry, based upon the
Executive Compensation Rankings published annually by Restaurant Business
Magazine.
5
<PAGE>
The payment of bonuses to the Company's senior executives is not a matter
which falls within the jurisdiction of this Committee. Instead, during the
fiscal year ended June 30, 1991, the Board of Directors adopted a Company-wide
standard policy regarding such payments. Such policy is based upon the Company's
annual net income, as determined for financial reporting purposes. A bonus pool
is funded with 10% of the Company's annual net income. A percentage of the bonus
pool is assigned to each level of employment in the Company. The funds assigned
to each of the levels encompassing the Chief Executive Officer, Chief Operating
Officer, Executive Vice Presidents and Senior Vice Presidents are then divided
by the number of employees on each level, and payments are made on a quarterly
basis with each payment being made two months after the end of the quarter.
The percentages assigned to each of the above-mentioned levels are, as
follows:
<TABLE>
<S> <C>
Chief Executive Officer.............................................. 18%
Chief Operating Officer.............................................. 9%
Executive Vice Presidents............................................ 12%
Senior Vice Presidents............................................... 12%
</TABLE>
In applying the above-described factors to the determination of the
compensation to be paid to Anthony P. Conza, the Company's Chief Executive
Officer, during fiscal 1998, your Committee included in its deliberation of the
above-described factors, such matters as the Company's efforts to achieve
increases in quarterly and annual revenues, income and earnings, and the strides
taken by the Company to expand the scope of its operations both internationally
and in terms of the development of new product and franchise offerings. As a
result of our consideration of all of such factors, this Committee awarded
Mr. Conza a minimal 1.4% salary increase to $217,000 for the year ended
June 30, 1998, and no incentive-based forms of compensation (other than his
share of the Company-wide bonus pool). By comparison, during the prior fiscal
year, Mr. Conza received a 3.6% salary increase to $214,000, plus a modest
number of stock options granted under the Company's Omnibus Stock Incentive
Plan. Our decision to provide only a very limited increase in the cash
compensation to be paid to Mr. Conza during fiscal 1998, and to refrain from
awarding any incentive-based forms of compensation to him (other than his share
of the Company-wide bonus pool) was based upon our views that the efforts
previously commenced by Mr. Conza and the other members of the Company's senior
management to establish and sustain momentum in the Company's efforts to expand
internationally, and to develop new product and franchise offerings, had not yet
halted the substantial depreciation of the Company's market capitalization as a
result of the continuing decreases in comparative quarterly and annual earnings.
As a consequence of these views, the compensation packages of each of the senior
executives other than Mr. Conza also excluded any incentive-based forms of
compensation (other than their shares of the Company-wide bonus pool). However,
in order to maintain the salary levels of those executives within the same
ranges as the salaries paid to senior executives performing the same or similar
duties at other companies in the quick service restaurant industry, their
salaries were increased at the high end by 4.9% to approximately $157,000, and
at the low end by 24% to approximately 115,000.
In summary, it is this Committee's belief that the compensation policies
that we have described in this report have served the best interests of the
shareholders and the Company. Such policies have been designed to provide
appropriate levels of compensation to the Company's senior executives based upon
the particular combination of factors which apply to this Company. As and when
those factors change, this Committee will make every effort to make adjustments
to its policies in a manner which will provide fair and reasonable levels of
compensation and appropriate incentives to its executives, while continuing to
be in the best interests of the shareholders and the Company.
Respectfully submitted,
The Compensation Committee
/S/ ALVIN KATZ /S/ HARRY G. CHERNOFF
- ---------------------------- -----------------------------------------
6
<PAGE>
COMPARISON OF TOTAL SHAREHOLDER RETURNS
The performance graph which follows compares the cumulative total
shareholder returns on the Company's Common Stock for the five-year period ended
June 30, 1998 with the S&P 500 Index and the S&P 500 Restaurants Index during
the same period. The graph assumes that the value of the Company's Common Stock
and the value of each Index was $100 on June 30, 1993, and that all dividends
have been reinvested. The shareholder returns shown below may not be indicative
of future performance.
[Shareholder Returns Graph]
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
---------------------------------------------------------------------
Base
Year
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Blimpie International, Inc. $100.00 $204.15 $266.19 $526.31 $199.68 $112.98
S&P 500 Index $100.00 $101.41 $127.85 $161.09 $216.99 $276.12
S&P 500 Restaurants Index $100.00 $115.71 $152.18 $179.97 $187.27 $252.07
</TABLE>
7
<PAGE>
OMNIBUS STOCK INCENTIVE PLAN
The Company has adopted the Omnibus Stock Incentive Plan (the "Plan") to
permit the grant of awards to employees of the Company (including officers and
directors who are employees of the Company or a subsidiary of the Company) of
restricted shares of the Company's Common Stock, performance shares of the
Company's Common Stock, stock appreciation rights relative to the Company's
Common Stock and both incentive stock options and non-qualified options to
purchase shares of the Company's Common Stock. A maximum of 950,000 shares maybe
issued under the Plan. Through June 30, 1998, the Company granted to certain
employees, pursuant to its incentive plan: (a) options to acquire a total of
380,400 shares of Common Stock, net of amounts canceled or exercised; and
(b) stock grants of 95,800 shares of Common Stock. The options are exercisable
at the fair market value on the date of grant, with prices ranging from $3.25 to
$14.75 per share. The options and stock grants provide for vesting at the rate
of 20% per annum and expire five years after the date of the grant. As of
June 30, 1998, 7,850 options had been exercised, 212,600 options had been vested
and not exercised, and 83,100 shares of stock had been issued under the stock
grant program. The aggregate value of the shares issuable pursuant to vested
options under the Plan was $438,594 based on the closing price of the Common
Stock on October 15, 1998 of $2.063 per share. The Plan was adopted in order
that the participants in the Plan will have financial incentives to contribute
to the Company's growth and profitability, and to enhance the ability of the
Company to attract and retain in its employ individuals of outstanding ability.
WARRANTS ISSUED TO NON-EMPLOYEE DIRECTORS
On November 24, 1993, the Company issued to each of Harry Chernoff and
Alvin Katz, two non-employee directors of the Company, warrants to purchase up
to 7,500 shares of the Company's Common Stock at the purchase price of $6.00 per
share at any time prior to November 24, 1998. On September 1, 1995, the Company
issued to each of Messrs. Chernoff and Katz warrants to purchase up to 4,000
shares of the Company's Common Stock at the purchase price of $8.875 per share
at any time prior to September 1, 2000. On September 11, 1998, the Company
issued to Messrs. Chernoff and Katz Plan options entitling each of them to
purchase up to 17,000 shares of the Company's Common Stock at the purchase price
of $2.56 per share at any time prior to September 11, 2003. Such options entitle
each of Messrs. Chernoff and Katz to purchase 9,000 shares of Common Stock at
any time during the term thereof. The 8,000 share remainder purchasable under
such options shall vest at the rate of 2,000 shares per annum during the four
year period commencing on September 11, 1999.
DIRECTORS' COMPENSATION
The Board has adopted a compensation policy to help the Company to attract
and maintain the services of qualified outside directors. Such compensation
consists of (a) payment of a directors fee of $9,000 per annum and $500 per
meeting; (b) issuance of five year warrants or options to purchase 5,000 shares
of the Company's Common Stock at an exercise price equal to the average of the
highest and lowest sales prices of such stock on the date of his or her
appointment or election to the Board; (c) issuance of additional warrants or
options, at the discretion of the Board, periodically during the tenure of an
outside director; and (d) reimbursement of the reasonable travel and lodging
expenses incurred by each outside director in attending Board meetings which are
not held within a 75 mile radius of his or her residence or principal place of
business.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the holdings of the Common Stock of the
Company as of October 12, 1998 by (1) each person or entity known to the Company
to be the beneficial owner of more than five percent (5%) of the outstanding
shares of Common Stock of the Company; (2) each director and executive officer;
and (3) all directors and executive officers as a group. All of the holders of
the Company's Common Stock are entitled to one vote per share. Except as
otherwise noted, the address of each of the persons listed below is 740
Broadway, New York, New York 10003.
<TABLE>
<CAPTION>
NUMBER ATTRIBUTABLE TO
OPTIONS OR WARRANTS
NAME OF ADDRESS OF NUMBER OF SHARES EXERCISABLE WITHIN 60 PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) DAYS OF JUNE 30, 1998 OWNED(3)
- ------------------------- ------------------------ ----------------------- --------
<S> <C> <C> <C>
Anthony P. Conza.................... 2,953,985(4) 21,000 30.6%
David L. Siegel..................... 1,518,830 21,000 15.8%
Charles G. Leaness.................. 444,908 13,000 4.6%
Patrick J. Pompeo................... 411,637(5) 13,000 4.3%
Alvin L. Katz....................... 11,500(6) 11,500 *
Dr. Harry G. Chernoff............... 13,768(7) 11,500 *
Dennis G. Fuller.................... 800 0 *
Joseph W. Morgan.................... 155,050(8) 20,750 1.6%
All Directors and Executive Officers
as a Group (15 Persons)........... 5,632,191 163,750 58.4%
</TABLE>
- ------------------
* Represents less than 1%.
(1) Includes shares actually and beneficially owned.
(2) Includes all shares which may be acquired within 60 days after June 30, 1998
by the exercise of stock options under the Company's stock option plan or
under warrants issued to outside directors.
(3) Based on 9,640,976 shares of the Company's Common Stock, consisting of
9,577,226 shares outstanding on October 12, 1998, increased by 163,750
shares under options which the holders thereof have the right to acquire
within 60 days from June 30, 1998, and decreased by 100,000 shares held in
treasury stock.
(4) Does not include (a) 37,050 shares owned by Mr. Conza's daughter, (b) 8,550
shares owned by Mr. Morgan (Mr. Conza's son-in-law), (c) 125,000 shares
owned jointly by Mr. Conza's daughter and Mr. Morgan over which Mr. Morgan
has sole voting power, (d) 4,150 shares owned by Mr. Conza's parents, (e)
40,913 shares owned by Joseph Conza, the brother of Mr. Conza, (f) 44,000
shares held by Mr. Conza's daughter as Trustee for the Anthony P. Conza
Charitable Remainder Trust, and (g) 1,400 shares owned by Mr. Conza's wife,
as to all of which Mr. Conza disclaims beneficial ownership.
(5) Does not include 6,300 shares held by Mr. Pompeo's sister and
brother-in-law, as to which Mr. Pompeo disclaims beneficial ownership.
(6) The address of Mr. Katz is 301 N. Birch Road, Ft. Lauderdale, Florida 33304.
(7) The address of Mr. Chernoff is 286 Spring Street, Suite 401, New York, New
York 10013.
(8) Does not include (a) 37,050 shares held by Mr. Morgan's wife (Mr. A. Conza's
daughter), (b) 4,800 shares held by Mr. Morgan's children, (c) 700 shares
held by Mr. Morgan's wife as custodian for his son under the Transfers to
Minors Act, and (d) 44,000 shares held by Mr. Morgan's wife as Trustee for
the Anthony P. Conza Charitable Remainder Trust, as to all of which Mr.
Morgan disclaims beneficial ownership.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal years ended June 30, 1998, 1997 and 1996, the Company
paid $990,000, $984,000 and $894,000, respectively, to Georgia Enterprises,
Inc., a corporation partially owned by Patrick Pompeo, an Executive Vice
President and Director of the Company, and Joseph Conza, a Senior Vice President
of the Company and President of B I Concept Systems, Inc., in payment of said
corporation's share of the fees that it earned as the Subfranchisor for the
Georgia market. During the same three fiscal years, the Company paid $254,000,
$289,000 and $339,000, respectively, to Llewellyn Distributors, Inc.
("Llewellyn"), a corporation partially owned by Charles G. Leaness, a Director
and Executive Vice President of the Company, in payment of said corporation's
share of the fees that it earned as the Subfranchisor for the northern New
Jersey market. The Company also paid $143,000, $150,000 and $165,000,
respectively, to International Southwest Blimpie, Inc. ("Southwest"), a
corporation principally owned and controlled by Joseph Conza, in payment of said
corporation's share of the fees that it earned as the Subfranchisor for the
Houston, Texas market.
Each of the aforementioned transactions was effected pursuant to written
agreements between the Company and the parties thereto. Such agreements are
substantially identical to the standard form of Subfranchise agreement that the
Company enters into with unaffiliated Subfranchisors. In the opinion of the
Company's management, each such agreement is on terms as favorable to the
Company as would be available from an unrelated third party.
During the fiscal years ended June 30, 1998, 1997 and 1996, the Company
received $4,000, $168,000 and $245,000 respectively, in management fees from
Georgia Enterprises, Inc. Such fees were received pursuant to a written
agreement which provides that, in consideration of the Company's provision of
operational and administrative support functions to Georgia Enterprises, Inc.,
the Company shall be reimbursed with respect to the expenses incurred by the
Company in connection therewith pursuant to a payment scale set forth in the
agreement. The agreement also provides that in the event the costs of such
support services shall rise, then the fees paid pursuant to the agreement shall
rise accordingly. In the opinion of the Company's management, the agreement is
on terms as favorable to the Company as would be available from an unrelated
third party.
During the years ended June 30, 1998, 1997 and 1996, the Company paid
$11,030, $8,243 and $7,182, respectively, to Joseph Conza as compensation for
the use of his apartment in New York City by employees of the Company's Atlanta
and Houston offices during business trips. In the Company's estimation, this
practice reduced the Company's lodging expense inasmuch as the per diem amounts
paid to Mr. Conza were below the market rates for hotel accommodations which the
Company would have been required to pay in order to house such employees during
such trips to New York.
During the fiscal years ended June 30, 1998, 1997 and 1996, the Company
received $119,000, $101,000 and $85,000, respectively, in management fees from
Llewellyn. Such fees were paid pursuant to a written agreement which provides
that the Company shall be reimbursed by Llewellyn for costs incurred by the
Company in providing operational support services to Llewellyn. The agreement
also provides that in the event the costs of such support services shall rise,
then the fees paid pursuant to the agreement shall rise accordingly. In the
opinion of the Company's management, the agreement is on terms as favorable to
the Company as would be available from an unrelated third party.
During the fiscal years ended June 30, 1998, 1997 and 1996, the Company
received $8,000, $49,000 and $61,000, respectively, in management fees from
Southwest. The management fees were paid pursuant to a written agreement which
provides that the Company shall be reimbursed by Southwest for costs incurred by
the Company in providing operational support services to Southwest. The
agreement also provides that in the event the costs of such support services
shall rise, then the fees paid pursuant to the agreement shall rise accordingly.
In the opinion of the Company's management, the agreement is on terms as
favorable to the Company as would be available from an unrelated third party.
In April 1994, Mr. Leaness borrowed the sum of $20,000 from the Company,
and collateralized the payment thereof with the same 120,000 shares of Common
Stock which he pledged in connection with a $60,000 option exercise and loan
transaction consummated in December 1991. Said $20,000 loan is payable upon
demand and bears interest at the rate of 5% per annum.
In March 1995, Joseph Conza borrowed the principal amount of $55,500 from
the Company. Said indebtedness is payable in constant bi-monthly payments of
principal and interest computed at the rate of 8% per annum on the basis of a 20
year amortization schedule, and the unpaid balance of principal and accrued but
unpaid interest shall become due and payable on April 16, 2000, provided,
however, that, Mr. Conza may extend the term of the loan through April 15, 2015
as long as no default exists with regard to said loan when it originally
matures. Mr. Conza pledged 10,000 unregistered shares of the Company's Common
Stock as collateral security
10
<PAGE>
for the payment of all sums due under said loan. As of the end of the fiscal
year, Mr. Conza was current with respect to his payment obligations and the
outstanding principal balance had been reduced to $51,325.
In 1995, the Company acquired the rights possessed by Anthony P. Conza and
David L. Siegel regarding the licensing of the Blimpie Trademarks and the
Blimpie Marketing System for all non-U.S. territories, pursuant to a 99 year
license Agreement. Said agreement provided for payment of certain income-based
fees to Messrs. Conza and Siegel, and further provided for cancellation by
Messrs. Conza and Siegel if the Company fails to pay them a minimum annual fee
aggregating $350,000 during the first five years of the term, and a minimum
aggregate fee of $150,000 per year (subject to an annual cost of living
adjustment) during the balance of such term. The payments made to Messrs. Conza
and Siegel under this agreement were $137,029 and $230,713 during the fiscal
years ended June 30, 1997 and 1996, respectively. In February 1997, the Company
acquired, pursuant to a written agreement which it executed with Messrs. Anthony
P. Conza and David L. Siegel, ownership of the undivided 60% interest in the
international rights to the Blimpie trademarks and Blimpie marketing system
owned by such individuals. In accordance with such agreement, the Company paid
these individuals $4.5 million ($3 million to Mr. Conza and $1.5 million to
Mr. Siegel), and it must pay certain income-based fees to them which take effect
after international revenues exceed $5 million.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's Directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Company's Common Stock. Officers,
Directors and greater than ten-percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 1998, all of the
Company's officers, directors and greater than ten-percent beneficial owners
complied with all applicable Section 16(a) filing requirements, except Anthony
P. Conza, who should have made a Form 4 filing for the month of June 1998 on
July 10, 1998, but did not make such filing until July 27, 1998.
PROPOSAL NUMBER 2: SELECTION OF AUDITORS
At a meeting held on October 30, 1998, the Audit Committee of the Board of
Directors of the Company approved the engagement of Ernst & Young LLP as its
independent auditors for the fiscal year ending June 30, 1999 to replace the
firm of PricewaterhouseCoopers, LLP, who were dismissed as auditors of the
Company effective November 3, 1998.
The reports issued by PricewaterhouseCoopers, LLP with respect to its
audits of the Company's financial statements for the fiscal years ended
June 30, 1997 and 1998 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the Company's fiscal years ended June 30, 1997 and 1998, and the
interim period which commenced on July 1, 1998 and ended on the date of
dismissal of PricewaterhouseCoopers, LLP, there were no disagreements with
PricewaterhouseCoopers, LLP on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope and procedures
which, if not resolved to the satisfaction of PricewaterhouseCoopers, LLP would
have caused PricewaterhouseCoopers, LLP to make reference thereto in any report
issued or to be issued by it in connection with its audit of the Company's
financial statements.
At the Annual Meeting, the Company's shareholders will be asked to ratify
the Board of Directors' selection of the firm of Ernst & Young LLP, as the
Company's independent accountants for the fiscal year ending June 30, 1999. Said
firm has been selected to serve as the Company's independent accountants for the
first time in 1999. It is not expected that a representative of Ernst &
Young LLP will be present at the meeting.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock represented in person or by proxy at the
Annual Meeting is required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH PROPOSAL.
11
<PAGE>
OTHER MATTERS
DISCRETIONARY AUTHORITY TO VOTE PROXY
Management does not know of any other matters to be considered at the
Annual Meeting. If any other matters do properly come before the Annual Meeting,
the proxy will be voted in respect thereof in accordance with the best judgment
of the persons authorized therein, and the discretionary authority to do so is
included in the proxy.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended June 30, 1998,
including financial statements, accompanies this proxy statement. However no
action is proposed to be taken at the Annual Meeting with respect to the Annual
Report, and it is not to be considered as constituting any part of the proxy
soliciting materials.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the Annual Meeting of
shareholders to be held in 1999 for inclusion in the Proxy Statement and form of
proxy relating to that meeting is advised that the proposal must be received by
the Company at its principal executive offices no later than July 12, 1999. The
Company will not be required to include in its proxy statement or form of proxy
a shareholder's proposal which is received after that date or which otherwise
fails to meet requirements for shareholder proposals established by regulations
of the Securities and Exchange Commission.
SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED JUNE 30, 1998 BY SENDING A REQUEST TO: INVESTOR
RELATIONS DEPARTMENT, BLIMPIE INTERNATIONAL, INC., 1775 THE EXCHANGE, SUITE 600,
ATLANTA, GA 30339
New York, New York
Dated: November 9, 1998
12
<PAGE>
BLIMPIE INTERNATIONAL, INC.
This Proxy is Solicited on Behalf of the Board of Directors
of Blimpie International, Inc.
The undersigned holder of the $.01 par value Common Stock (the "Common Shares")
of Blimpie International, Inc. (the "Company"), hereby acknowledges receipt of
the Notice of Annual Meeting of the Company and Proxy Statement attached
thereto, all relating to the Company's Annual Meeting of Shareholders (the
"Annual Meeting"), and does appoint Anthony P. Conza, David L. Siegel, Charles
G. Leaness and Patrick J. Pompeo, and each of them, the true and lawful
attorney or attorneys of the undersigned, with power of substitution, for and
in the name of the undersigned, to vote as proxies for the undersigned
according to the number of Common Shares the undersigned would be entitled to
vote if then personally present at the Annual Meeting to be held at the offices
of Hall Dickler Kent Friedman & Wood, LLP, 909 Third Avenue, 27th Floor, on
Monday, December 7, 1998, at 9:00 A.M., or at any adjournment or adjournments
thereof, and thereat to vote all Common Shares of the Company held by the
undersigned and entitled to be voted thereat upon the following matters:
1. To elect as Directors to serve until the Annual Meeting to be held in 1999
for the fiscal year ending June 30, 2000, the Nominees listed below:
Anthony P. Conza (Chairman), David L. Siegel (Vice-Chairman), Charles G.
Leaness, Patrick J. Pompeo, Harry G. Chernoff, Alvin Katz and Francis A.
Tarkenton.
FOR all the foregoing Nominees
------------------
WITHHOLD AUTHORITY to vote for the foregoing Nominees
---------------------
NOTE: To withhold authority to vote for any individual nominee, strike a line
through that nominee's name. Unless authority to vote for all of the foregoing
nominees is withheld, this Proxy will be deemed to confer authority to vote for
every nominee whose name is not struck.
2. To ratify the selection of Ernst & Young LLP as the Company's independent
accountants for the fiscal year ending June 30, 1999.
FOR AGAINST ABSTAIN
----------- ------------- --------------
3. To transact such other business as may properly come before the meeting.
FOR AGAINST ABSTAIN
----------- ------------- --------------
This Proxy confers authority to vote "FOR" each of propositions 1 and 2 listed
above unless otherwise indicated. If any other business is transacted at said
meeting, this proxy shall be voted in accordance with the best judgment of the
proxies. The Board of Directors recommends a vote of "FOR" for each of the
listed propositions. This proxy is solicited on behalf of the Board of
Directors of Blimpie International, Inc. and may be revoked prior to its
exercise.
NOTE: Signature(s) should follow exactly the name(s) on the stock certificate.
Executor, administrator, trustee or guardian should sign as such. If more than
one trustee, all should sign. ALL JOINT OWNERS MUST SIGN.
Dated:
------------------------------------------------
Signature of Shareholder
------------------------------
Signature of Shareholder
------------------------------
