<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE SOUTHLAND CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THE SOUTHLAND CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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>
[LOGO]
2711 NORTH HASKELL AVENUE
BOX 719
DALLAS, TEXAS 75221-0719
March 22, 1995
Dear Southland Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
The Southland Corporation on Wednesday, April 26, 1995, at 9:30 a.m., Central
Daylight Time, in the Joe C. Thompson Auditorium, on the ground floor at
Cityplace Center, 2711 North Haskell Avenue, Dallas, Texas. If you are planning
to attend the meeting in person, please check the appropriate space on the
enclosed proxy card. A map of Cityplace is included on the outside back cover of
the attached Proxy Statement showing entrances to the parking garage. The formal
Notice of Annual Meeting and Proxy Statement, which are contained in the
following pages, describe the proposals being presented to the shareholders for
consideration at this meeting and also provide additional important information.
At this meeting you will be voting on the election of fourteen directors and
ratification of the selection of auditors.
As described in the accompanying Proxy Statement, the Board of Directors
unanimously recommends that you vote FOR each of the persons nominated and FOR
the ratification of the selection of auditors.
A copy of Southland's 1994 Annual Report is being sent to you along with
this Proxy Statement and Notice of Annual Meeting. As always, we appreciate your
continued interest in Southland.
We urge you to complete, sign and mail the enclosed proxy card as soon as
possible so that your vote will be counted at the meeting.
Sincerely,
CLARK J. MATTHEWS, II
PRESIDENT AND CHIEF
EXECUTIVE OFFICER AND DIRECTOR
<PAGE>
THE SOUTHLAND CORPORATION
2711 NORTH HASKELL AVENUE
BOX 719
DALLAS, TEXAS 75221-0719
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1995
TO THE SHAREHOLDERS OF THE SOUTHLAND CORPORATION:
The Annual Meeting of Shareholders of The Southland Corporation (the
"Company") will be held on Wednesday, April 26, 1995, at 9:30 a.m., Central
Daylight Time, in the Joe C. Thompson Auditorium, on the ground floor, at
Cityplace Center, 2711 North Haskell Avenue, Dallas, Texas, for the following
purposes:
1. To elect fourteen directors to serve for the ensuing year;
2. To ratify the appointment of Coopers & Lybrand L.L.P., certified
public accountants, to be the independent auditors of the Company for the
year 1995; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business Friday, March 3,
1995, as the record date for the determination of shareholders entitled to
receive notice of, and to vote at, the meeting.
Your attention is directed to the Proxy Statement for further information
about each of the matters to be considered.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
BE PRESENT, PLEASE DATE AND SIGN THE ACCOMPANYING PROXY CARD EXACTLY AS YOUR
NAME APPEARS THEREON, INDICATING YOUR VOTES BY MARKING THE APPROPRIATE BALLOT
BOXES, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors,
BRYAN F. SMITH, JR.
ASSISTANT SECRETARY
Dallas, Texas
March 22, 1995
IF YOU PLAN TO ATTEND THE MEETING, PLEASE CHECK
THE APPROPRIATE BOX ON THE PROXY CARD
<PAGE>
PROXY STATEMENT
THE SOUTHLAND CORPORATION
2711 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1995
DATE FIRST SENT OR GIVEN TO SECURITY HOLDERS: MARCH 24, 1995
GENERAL INFORMATION
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors of
The Southland Corporation (the "Company" or "Southland") for use at the Annual
Meeting of Shareholders to be held April 26, 1995, and at any adjournments
thereof. Neither the Company's officers or directors who held office during the
last fiscal year, nor any nominee or associate of any of the aforementioned
persons, has any interest, direct or indirect, in the matters to be voted upon,
other than election to office and as otherwise disclosed herein.
The Board of Directors requests that you execute and return the proxy
promptly, whether or not you plan to attend the meeting. In addition, if you
plan to attend the meeting in person, please so indicate in the appropriate
space on the proxy card. Each properly executed proxy not revoked will be deemed
to grant authority to vote and, unless a contrary instruction is indicated on
the proxy, will be voted for the election of fourteen directors and for
ratification of the appointment of the accounting firm of Coopers & Lybrand
L.L.P. to be the independent auditors of the Company for 1995. Any shareholder
may revoke such shareholder's proxy by giving written notice of revocation to
the Company at any time prior to the meeting or by advising the Secretary of the
revocation at the meeting; however, presence at the meeting will not
automatically revoke the proxy and revocation during the meeting will not affect
any votes previously taken. The signing of the proxy grants discretionary
authority to vote upon matters which may properly come before the meeting from
the floor or at such a late date as to prohibit additional notice. Other than
approval of the minutes of the 1994 Annual Meeting of Shareholders, no such
matter is known to management.
The cost of soliciting proxies will be borne by Southland. Southland has
retained Hill & Knowlton, Inc., New York, New York, to assist in the
solicitation, at an estimated cost of $5,000, plus reimbursement of reasonable
out-of-pocket expenses. In addition, the Company will reimburse brokers or other
persons holding stock in their names or in the names of their nominees for
charges and expenses incurred in forwarding proxies and proxy material to the
beneficial owners. Solicitation may also be made by officers and regular
employees of Southland, without additional compensation, by use of the mails,
telephone, telegraph or in person.
SHARES OUTSTANDING AND VOTING RIGHTS
Shareholders of record as of the close of business March 3, 1995 are
entitled to notice of, and to vote at, the meeting. At the record date there
were 409,922,935 shares of common stock, $.0001 par value (the "Common Stock"),
outstanding and entitled to vote, the only class of voting securities of the
Company outstanding, and there were 3,060 record holders on such date. Each
outstanding share is entitled to one vote.
Shareholders are not entitled to vote cumulatively for the election of
directors or on any other matter. In addition, an abstention from voting or a
broker non-vote will be counted toward determining the presence of a quorum, but
will not be included in determining the number of votes "for" the election of
directors and will not be counted "for" or "against" ratification of the
approval of auditors.
<PAGE>
OTHER INFORMATION
THE COMPANY'S RESTRUCTURING. On October 24, 1990, the Company filed a
voluntary petition for reorganization relief under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court (the "Bankruptcy Court") for the Northern District of Texas, Dallas
Division (Case No. 390-37119-HCA-11).
The Company filed a Plan of Reorganization (the "Plan") which provided for,
among other things, Ito-Yokado Co., Ltd. ("Ito-Yokado") and Seven-Eleven Japan
Co., Ltd. ("Seven-Eleven Japan") to acquire, for an aggregate purchase price of
$430 million in cash, pursuant to a Stock Purchase Agreement among IYG Holding
Company ("IYG" or the "Purchaser"), Ito-Yokado, Seven-Eleven Japan and the
Company, newly issued shares of Common Stock representing approximately 70% of
the Company's outstanding shares following the consummation of the Plan. The
Plan also provided for holders of the Company's then outstanding securities to
receive new debt securities, Common Stock and, in certain cases, cash, in
exchange for their old securities. In addition, the Plan provided for the
Company to effect a one-for-ten reverse stock split of its Common Stock (the
"Stock Split") and, as subsequently modified, provided for the issuance by the
Company of new warrants (the "Thompson Warrants"), exercisable (until February
23, 1996) to acquire certain shares of Common Stock owned by the "Warrant
Shareholders" (as defined below), at $1.75 per share from the Warrant
Shareholders pursuant to a Warrant Agreement with Wilmington Trust Company as
Warrant Agent (the "Warrant Agreement").
On February 21, 1991, the Bankruptcy Court issued an order confirming the
Plan and the closing under the Stock Purchase Agreement (the "Closing") occurred
on March 5, 1991. The Company issued 286,634,619 shares of Common Stock to IYG,
a Delaware corporation, jointly owned by Ito-Yokado and Seven-Eleven Japan, and
received $430 million in cash. In connection with the Closing, the Company
entered into the Shareholders Agreement, the Warrant Agreement and the
Employment Agreements, among others, all as described below.
SHAREHOLDERS AGREEMENT. Upon the Closing, the Company, IYG, Ito-Yokado and
various holders of the Company's Common Stock who held the old common stock
prior to the Closing (the "Existing Shareholders") entered into a shareholders
agreement (the "Shareholders Agreement") pursuant to which the parties may not
offer, sell, assign, transfer, grant a participation in, pledge or otherwise
dispose of any shares of Common Stock except in compliance with the Shareholders
Agreement. Although transfers are permitted to certain transferees or pursuant
to Rule 144 under the Securities Act of 1933, other transfers are subject to the
Purchaser's right of first refusal (see "Security Ownership of Certain Persons"
and "Security Ownership of Management," below).
The Shareholders Agreement provides each of the Existing Shareholders (and
any persons who hold employee options or employee convertible debentures to
purchase shares of Common Stock as a result of employment with the Company) with
the right and option to require IYG to purchase up to all of the shares of
Common Stock held by such person on the fifth anniversary of the date of the
Shareholders Agreement at the fair market value (to be determined in accordance
with the terms of the Shareholders Agreement) of such shares on such date.
In addition, the Shareholders Agreement (as amended effective December 30,
1992) provides that the parties to the agreement shall cause the Board to
consist of and shall vote their shares as to the election of directors (see
"Election of Directors," below) so that the Board shall consist of (i) two
individuals (the "Existing Shareholder Nominees") designated by Existing
Shareholders holding a majority of shares held by the Existing Shareholders,
(ii) ten individuals (the "Purchaser Nominees") selected by IYG, (iii) two
individuals (the "Other Shareholder Nominees") initially designated by the
Official Committee of Bondholders appointed by the Bankruptcy Court and, from
and after the 1992 annual meeting of the Company's shareholders, for those
persons receiving the most votes from shares of Common Stock held by
shareholders (the "Other Shareholders") other than IYG and the
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<PAGE>
Existing Shareholders, and (iv) although no such obligation currently exists,
two independent directors if, and to the extent, required to meet the listing or
quotation requirements of any exchange or quotation system upon which the Common
Stock is or shall be listed or traded (and only if, and to the extent that, the
Other Shareholder Nominees fail to qualify as such independent directors).
In addition, the Shareholders Agreement provides the Existing Shareholders
with certain registration rights (if no exemption from registration is
applicable for their sales), parallel exit rights and preemptive rights in
certain circumstances.
Moreover, Ito-Yokado agreed to provide certain of the parties to the
Shareholders Agreement (including certain entities related to John P. Thompson
and Jere W. Thompson, two of the Company's directors, and their family
interests, but not including participants in the Company's Grant Stock Plan with
respect to shares acquired pursuant to participation in such Grant Stock Plan)
with certain loans (the "Loans") based on the pledge of shares of Common Stock
as collateral for the Loans (the "Collateral Shares"). Each Loan is a
nonrecourse obligation of the borrower except to the extent of the Collateral
Shares. Such Collateral Shares may not be sold unless the Loan secured by such
Shares is repaid simultaneously with such sales. (See "Security Ownership of
Management," below, for a description of the shares currently pledged as
collateral under these arrangements.)
THE WARRANT AGREEMENT. As part of the Plan and the Closing, on March 5,
1991, Thompson Brothers, L.P., The Hayden Company, The Philp Co., The
Williamsburg Corporation and Thompson Capital Partners, L.P. (collectively, the
"Warrant Shareholders") entered into a Warrant Agreement with Wilmington Trust
Company as Warrant Agent, the Company and Ito-Yokado. Pursuant to the Plan, the
Company, on behalf of the Warrant Shareholders, agreed to issue the Thompson
Warrants exercisable by the holders thereof to purchase up to an aggregate of
10,214,842 shares of Common Stock owned by the Warrant Shareholders.
Under the Warrant Agreement, each Thompson Warrant entitles the holder to
purchase, at the exercise price of $1.75 per Thompson Warrant, one of the
underlying common shares, subject to adjustment as provided in the Warrant
Agreement, during the period beginning three months after the date of the
Warrant Agreement and ending on February 23, 1996. As of March 3, 1995, a total
of 5,843,785 Thompson Warrants had been exercised.
Until the termination of the Warrant Agreement, the underlying common shares
will be issued to and held by the Warrant Agent (i) as trustee for the benefit
of the appropriate Warrant Shareholder and the holders of the Thompson Warrants
or (ii) if a secured loan is made pursuant to the terms of the Shareholders
Agreement, as collateral agent solely on behalf of Ito-Yokado. (See "Security
Ownership of Management," below, for a description of the shares subject to
warrants.)
Until the termination or expiration of the Warrant Agreement, neither a
Warrant Shareholder nor the Warrant Agent may, among other things, dispose of or
pledge the underlying common shares except in connection with (i) the exercise
of the Thompson Warrants, (ii) a secured loan to a Warrant Shareholder or (iii)
a sale of any pledged underlying common shares pursuant to, and in accordance
with, a Pledge Agreement (the "Pledge Agreement").
At all times during the term of the Warrant Agreement, all underlying common
shares held by the Warrant Agent as trustee, unless an event of default shall
occur under a Pledge Agreement, shall be voted, on any matters submitted to the
holders of record of Common Stock, in the same manner as a majority of the votes
cast by the holders of record of the Common Stock other than Ito-Yokado and the
Warrant Shareholders. If an event of default occurs under a Pledge Agreement,
all underlying common shares held as security shall be voted, pursuant to the
terms of such Pledge Agreement, in accordance with the instructions of
Ito-Yokado. (See "Security Ownership of Certain Beneficial Owners and
Management," below.)
THE EMPLOYMENT AGREEMENTS. As a condition to the Closing, the Company
entered into five-year Employment Agreements with Messrs. John P. Thompson, Jere
W. Thompson and Joe C. (Jodie) Thompson, Jr. (the "Thompsons"). As of December
30, 1992, the Employment Agreement with Joe C.
3
<PAGE>
Thompson, Jr. was terminated and Mr. Thompson was paid the present discounted
value of the remaining balance payable to him under the Employment Agreement.
Also effective December 30, 1992, Mr. Joe C. Thompson, Jr. resigned as a
director of the Company, and the Shareholders Agreement was amended to change
from three to two the number of directors to be designated by the Existing
Shareholders (see "Election of Directors," below). The Employment Agreements,
which were effective upon the Closing, provide for annual base salary of
$600,000 and annual bonus of $360,000 under each agreement and for the Thompsons
to have such duties and responsibilities as are agreed upon from time to time by
each of them and the Board. The Employment Agreements also provide that John P.
Thompson and Jere W. Thompson will participate in employee benefit plans and
arrangements offered to key management employees of the Company. The Employment
Agreements also provide vacation, holidays and expense reimbursement in
accordance with current Company policy. In early 1995, the Thompsons' Employment
Agreements were modified to provide for them to relinquish their office space in
Cityplace but retain certain personal property used in their offices.
PROPOSAL 1. ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors has set the number of directors constituting the
entire board at fourteen, and fourteen directors are to be elected at this
meeting. Each director shall be elected to hold office until the next Annual
Meeting of Shareholders or until his earlier death, removal or resignation or
until his successor is duly elected and qualified.
Under the Shareholders Agreement (as amended), described above, the parties
to the agreement have agreed to vote their shares of Common Stock to elect (a)
two Existing Shareholder Nominees, selected by the "Existing Shareholders"
(defined in the Shareholders Agreement as The Philp Co., The Hayden Company, The
Williamsburg Corporation, Four J Investment, L.P., Thompson Brothers, L.P.,
Thompson Capital Partners, L.P., participants in the Company's Grant Stock Plan
who are signatories to the Shareholders Agreement and any permitted transferee
of any of such shareholders, including certain limited partners of Thompson
Capital Partners, L.P.), (b) ten Purchaser Nominees selected by IYG and (c) two
Other Shareholder Nominees as selected by the holders of shares of Common Stock
other than the Existing Shareholders and the Purchaser (see "Shareholders
Agreement," above).
Each of the nominees has been nominated pursuant to the terms of the
Shareholders Agreement (described above). Messrs. John and Jere Thompson are the
Existing Shareholder Nominees and Messrs. Pacholder and Fernandes are the Other
Shareholder Nominees. The remaining ten members of the Board are the Purchaser
Nominees. All nominees are currently members of the Board of Directors.
Each nominee has consented to serve as a director if elected. If any nominee
becomes unavailable for any reason or should a vacancy occur before the election
(which events are not anticipated), proxies may be voted for a substitute
nominee. The Shareholders Agreement provides that any vacancy occurring in the
Board of Directors may be filled pursuant to the terms of that agreement. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1994, there were five meetings of the Board of Directors. Each of the
directors attended more than 75% of the combined meetings of the Board of
Directors and committees of which such director is a member, except Mr. Sekine
who attended all five meetings of the Board of Directors, but only one committee
meeting.
The Board of Directors has an Audit Committee, which was composed of four
directors in 1994: Mr. Chai, who served as Chairman, Mr. Fernandes, Mr.
Pacholder and Mr. Sekine. The Audit Committee, which met seven times during
1994, has been assigned the functions of recommending the engagement of
independent auditors for the Company and reviewing with them the plan and scope
of the audit, its status during the year, the results when completed and the
fees for services performed, as
4
<PAGE>
well as reviewing the engagement of the independent auditors to perform nonaudit
services and the effect, if any, this may have on their independence. The Audit
Committee also reviews with the Company's internal auditors the plan, scope and
results of their operations. In addition, the Audit Committee discusses with
management, the independent auditors and the internal auditors the adequacy of
internal accounting controls and may also discuss with each of them,
independently of the other, any recommendations on matters which any of them
considers to be of importance. The Audit Committee may also review the Company's
accounting and financial reporting principles, policies and practices. It also
undertakes such other duties as may be assigned to it by the Board of Directors.
The Board of Directors has a Compensation and Benefits Committee, composed
of four directors: Mr. Suzuki, who served as Chairman, Mr. Ashida, Mr. Otsuka
and Mr. Fernandes. The Compensation and Benefits Committee met once in 1994.
(See "Compensation of Directors and Executive Officers," below, for a
description of the functions of the Compensation and Benefits Committee.)
The Board of Directors does not have a Nominating Committee, as matters
related to composition of the Board are controlled by the provisions of the
Shareholders Agreement until March 5, 1996.
INFORMATION ABOUT NOMINEES
The following biographical information includes the names, ages and year
first elected a director, the principal occupation or employment, as of March 1,
1995, of each person nominated, including all positions and offices with
Southland, and the principal directorships held by such persons in non-Southland
companies. All executive officers of Southland and the directors named herein
(other than Mr. Sekine) were in their positions within two years after October
24, 1990, the date Southland filed its voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code, as described above, although only the
Thompsons and Mr. Matthews were officers and/or directors of the Company prior
to, and at the time of, the bankruptcy filing.
<TABLE>
<CAPTION>
POSITION WITH SOUTHLAND,
PRINCIPAL OCCUPATION AND YEAR FIRST
NAME AGE BUSINESS EXPERIENCE PAST FIVE YEARS ELECTED DIRECTOR
- ------------------------- --- ------------------------------------------ ----------------
<S> <C> <C> <C>
Masatoshi Ito............ 70 Chairman of the Board and Director(1) 1991
Toshifumi Suzuki......... 62 Vice Chairman of the Board and Director(2) 1991
Clark J. Matthews, II.... 58 President, Chief Executive Officer and 1981-1987 and
Director(3) 1991
Yoshitami Arai........... 63 Director(4) 1991
Timothy N. Ashida........ 55 Director(5) 1991
Jay W. Chai.............. 61 Director(6) 1991
Gary J. Fernandes........ 51 Director(7) 1991
Masaaki Kamata........... 55 Director(8) 1991
Kazuo Otsuka............. 48 Director(9) 1991
Asher O. Pacholder....... 57 Director(10) 1991
Nobutake Sato............ 56 Director(11) 1991
Tatsuhiro Sekine......... 60 Director(12) 1993
Jere W. Thompson......... 63 Co-Vice Chairman of the Board and 1961
Director(13)
John P. Thompson......... 69 Co-Vice Chairman of the Board and 1948
Director(14)
<FN>
- ------------------------
(1) Chairman of the Board and Director of the Company since March 5, 1991.
Founder, Director and Advisor of Ito-Yokado Group, which includes
Ito-Yokado Co., Ltd., Seven-Eleven Japan Co., Ltd. and Denny's Japan Co.,
Ltd., as well as other companies. Ito-Yokado Co., Ltd. is one of Japan's
leading diversified retailing companies which, together with its
subsidiaries and affiliates, operates superstores, convenience stores,
department stores, supermarkets, specialty shops and discount stores.
President of Ito-Yokado Co., Ltd. from 1958 to 1992. Chairman of
Seven-Eleven Japan Co., Ltd. from 1978 to 1992, and President from 1973 to
1978. Chairman of Denny's Japan Co., Ltd. from 1981 to 1992, and President
from 1973 to 1981. Chairman of Famil Co., Ltd. since
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
1979. Chairman of York Mart Co., Ltd. since 1979. President of York
Matsuzakaya Co., Ltd. since 1979. President of Robinson's Japan Co., Ltd.
since 1984. Chairman of Maryann Co., Ltd. since 1977. President of Oshman's
Japan Co., Ltd. since 1984. Chairman of Steps Co., Ltd. since 1981.
Chairman of York-Keibi Co., Ltd. since 1977. President of Union Lease Co.,
Ltd. since 1975. Statutory Auditor of Daikuma Co., Ltd. since 1982.
Chairman of Marudai Co., Ltd. since 1989. Director of Seven-Eleven
(Hawaii), Inc. since 1989. Chairman of Umeya Co., Ltd. since 1977. Director
of Shop America Limited since 1990. Director and Chairman of the Board of
IYG Holding Company since 1990.
(2) Vice Chairman of the Board and Director of the Company since March 5, 1991.
President and Chief Executive Officer of Ito-Yokado Co., Ltd. since
October, 1992 and Director since 1971; Executive Vice President from 1985
to 1992; Senior Managing Director from 1983 to 1985; Managing Director from
1977 to 1983; employee since 1963. Chairman of the Board and Chief
Executive Officer of Seven-Eleven Japan Co., Ltd. since October, 1992 and
Director since 1973; President from 1975 to 1992; Senior Managing Director
from 1973 to 1975. Statutory Auditor of Robinson's Japan Co., Ltd. since
1984. Chairman of Daikuma Co., Ltd. since 1978. President of Seven-Eleven
(Hawaii), Inc. since 1989. President of Shop America Limited since 1990.
President and Director of IYG Holding Company since 1990.
(3) Director of the Company since March 5, 1991, and from 1981 until 1987;
President and Chief Executive Officer since March 5, 1991; Executive Vice
President (or Senior Executive Vice President) and Chief Financial Officer
from 1979 to 1991; Vice President and General Counsel from 1973 to 1979;
employee since 1965.
(4) Director of the Company since March 5, 1991. Chairman of the Board of
Systems International Inc., a consulting firm for international
joint-ventures, licensing and investment arrangements, since 1977 and
President from 1970 to 1977. President of Tokyu Hotels International from
1977 to 1989. Director of Entry Strategies Inc., Parallel Inc., Nissho
Berol Inc., Europe Consultants S.A., and Industrial Suppliers S.A. Member
of Pacific Basin Economic Council and others.
(5) Director of the Company since March 5, 1991. President of A.K.K.
Associates, Inc., a consulting firm for Japanese/American investments, in
Glendale, California, since 1972. Director of Seven-Eleven Japan Co., Ltd.
since 1991; General Manager, Far East Division of Travel Systems Inter-
national in Los Angeles from 1969 to 1972. Interpreter/Technical
Coordinator at Kawaguchi Tour Services in Los Angeles from 1966 to 1969.
Mr. Ashida has entered into an "Independent Consultant's Agreement" with
the Company pursuant to which he is paid $10,000 per month to serve as
liaison with the Board of Directors. This fee is inclusive of any
director's fees to which he would otherwise be entitled.
(6) Director of the Company since March 5, 1991. Chairman of the Board and
Chief Executive Officer of ITOCHU International Inc. (formerly known as C.
Itoh & Company (America) Inc.) since April 1991; Chief Operating Officer
from 1989 to 1991; Executive Vice President from 1986 to 1991; Senior Vice
President from 1982 to 1985; Director since 1983. Executive Vice President
of ITOCHU Corporation (formerly C. Itoh & Co., Ltd.), a Japanese trading
company, since July 1993; Senior Managing Director from 1991 to 1993;
Managing Director from 1989 to 1991; Director from 1986 to 1989. Managing
Director with Representation Rights, ITOCHU Corporation, since 1989.
Director of Isuzu Motors Limited since 1984. Voting Class B Representative
on the Board of Representatives of Time Warner Entertainment Company, L.P.
since June 1992. Strategic Planning Advisor with General Motors Corporation
throughout 1982.
(7) Director of the Company since April 11, 1991. Senior Vice President of
Electronic Data Systems Corporation ("EDS"), an information technology
service company, since 1984, and Director since 1981. Director of John
Wiley & Sons, Inc. since April 1988, and of Westcott Communications since
May, 1989. Director of the Dallas Council on World Affairs; member of the
Advisory Board of the East Texas State University Foundation; Governor of
the Boys and Girls Clubs of America and Director of the Boys and Girls
Clubs of Greater Dallas, Inc.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
(8) Director of the Company since March 5, 1991. Director, since 1978, and
Executive Vice President of Seven-Eleven Japan Co., Ltd.; Senior Managing
Director since 1989; Managing Director from 1985 to 1989; employee since
1973. Director of Shop America Limited since 1990. Vice President of
Seven-Eleven (Hawaii), Inc. since 1989. Director and Treasurer of IYG
Holding Company since 1990.
(9) Director of the Company since March 5, 1991. General Manager, Corporate
Development, Ito-Yokado Co., Ltd., since 1986; Manager, Corporate
Development from 1982 to 1986; Assistant to Mr. Masatoshi Ito, President
and Chief Executive Officer, from 1978 to 1982; employee of Ito-Yokado Co.,
Ltd. since 1975. Assistant Secretary of IYG Holding Company since 1990.
(10) Director of the Company since March 5, 1991. Chairman of the Board and
Chief Financial Officer, ICO, Inc., an oil field service company, since
February 1995; Chairman of the Board and Managing Director of Pacholder
Associates, Inc., an investment advisory firm, since 1984. Director of TC/
GP, Inc., Forum Group, Inc., AM International, Inc. and USF&G Pacholder
Fund, Inc. Mr. Pacholder was a director of MacLeod-Stedman, Inc., which
went into receivership in 1991 in Manitoba, Canada.
(11) Director of the Company since March 5, 1991. Executive Vice President,
Corporate Planning, Ito-Yokado Co., Ltd., since 1993; Senior Managing
Director from 1985 to 1993; Managing Director from 1983 to 1985; Director
from 1977 to 1983; employee since 1964. Director of Denny's Japan Co., Ltd.
since 1973, Maryann Co., Ltd. since 1982, Oshman's Japan Co., Ltd. since
1984 and Marudai Co., Ltd. since 1989. President of Urawa Building Co.,
Ltd. since 1985, Nitsu Systems Kaihatsu Co., Ltd. since 1986 and Waiaru
Kaihatsu Co., Ltd. since 1988. Director and Vice President of IYG Holding
Company since 1990.
(12) Director of the Company since April 28, 1993. Senior Managing Director,
Finance, Ito-Yokado Co., Ltd., since 1993; Managing Director from 1991 to
1993; employee since April 1991. General Manager of the Overseas
Construction Department from 1989 to 1991; and General Manager of Finance
Department, ITOCHU Corporation (formerly known as C. Itoh and Co.), from
1986 to 1989.
(13) Director of the Company since 1961; Co-Vice Chairman of the Board since
March 5, 1991; President from 1973 to 1991; Chief Executive Officer from
1986 to 1991; employee since 1956. Director of MCorp. John and Jere
Thompson are brothers.
(14) Director of the Company since 1948; Co-Vice Chairman of the Board since
March 5, 1991; Chairman of the Board from 1969 to 1991; Chief Executive
Officer from 1961 to 1986; employee since 1948. Mr. Thompson is a director
of IRT Corporation, which filed for protection under Chapter 11 of the
Bankruptcy Code in 1994.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES, WHICH REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES
REPRESENTED AND ENTITLED TO VOTE AT THE MEETING. VOTES WILL BE TABULATED BY AN
INSPECTOR OF ELECTION. AN ABSTENTION FROM VOTING OR A BROKER NON-VOTE WILL BE
TABULATED AS A VOTE WITHHELD ON THE ELECTION, AND WILL BE INCLUDED IN COMPUTING
THE NUMBER OF SHARES PRESENT FOR PURPOSES OF DETERMINING THE PRESENCE OF A
QUORUM FOR THE SHAREHOLDERS MEETING AND WHETHER NOMINEES HAVE RECEIVED THE VOTE
OF A MAJORITY OF THE SHARES PRESENT AT THE MEETING.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At March 3, 1995, the record date for the annual meeting, the Company was
aware of the following beneficial owner of 5% or more of the Company's shares of
Common Stock (the only class of voting security of the Company) of which a total
of 409,922,935 shares are issued and outstanding:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------------------------------ ------------------------------------ ----------------------- ------------
<S> <C> <C> <C>
Common Stock, IYG Holding Company(a) 263,642,493 Shares 64.3%
$.0001 par value 4-1-4, Shibakoen,
Minato-ku, Tokyo Japan 105
<FN>
- ------------------------
(a) IYG Holding Company is a Delaware corporation, created specifically for the
purpose of purchasing approximately 70% of the shares of Common Stock of
the Company, issued in connection with consummation of the Plan and as
contemplated therein and in the Stock Purchase Agreement (see "Other
Information," above). It is a jointly owned subsidiary of Ito-Yokado Co.,
Ltd. and Seven-Eleven Japan Co., Ltd. Ito-Yokado owns 51%, and Seven-Eleven
Japan owns 49%, of IYG's outstanding common stock. Ito-Yokado owns 51% of
Seven-Eleven Japan's outstanding common stock. Messrs. Ito, Suzuki, Sato,
Kamata and Otsuka are the officers and directors of IYG (see "Security
Ownership of Management" and "Information About Nominees"). They each,
individually, disclaim beneficial ownership of the shares held by IYG. As a
result of private transactions, IYG's ownership is now approximately 64.3%
of the Company's outstanding Common Stock.
</TABLE>
In addition, in 1994, the Company received a copy of a Schedule 13G, filed
by Highbridge Capital Corporation, Dubin & Swieca Asset Management, Inc. and
Dubin & Swieca Capital Management, Inc., reporting ownership of over 5% of the
outstanding Thompson Warrants, exercisable for 955,000 shares of the Common
Stock. The Thompson Warrants have no voting rights until exercised, and if
exercised, the shares received would be less than two-tenths of one percent of
Southland's outstanding Common Stock. No amendment to this filing has been
received, indicating that ownership has dropped below the reporting threshold.
SECURITY OWNERSHIP OF MANAGEMENT
COMMON STOCK
The following table, and the footnotes that follow, show the beneficial
ownership of Southland Common Stock as of February 1, 1995, as required by the
rules and regulations of the Securities and
8
<PAGE>
Exchange Commission (the "Commission"), by each director and each person
nominated for director, by each of the five most highly compensated executive
officers of the Company, and by all officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(A) CLASS(A)
- ----------------------------------------------------------------- --------------------------- -------------
<S> <C> <C>
Masatoshi Ito.................................................... 2,000,000(b) .49%(b)
Toshifumi Suzuki................................................. 1,000,000(c) .24(c)
Clark J. Matthews, II............................................ 307,769(d) *
Yoshitami Arai................................................... 30,000(e) *
Timothy N. Ashida................................................ 30,000(f) *
Rodney A. Brehm.................................................. 40,001(g) *
Jay W. Chai...................................................... -0-(h) -0-(h)
Gary J. Fernandes................................................ 50,000(i) *
Masaaki Kamata................................................... 100,000(j) * (j)
Stephen B. Krumholz.............................................. 40,834(k) *
Kazuo Otsuka..................................................... 30,000(l) * (l)
Asher O. Pacholder............................................... -0- -0-
John H. Rodgers.................................................. 63,052(m) *
Michael K. Roemer................................................ 50,001(n) *
Nobutake Sato.................................................... 100,000(o) * (o)
Tatsuhiro Sekine................................................. -0- -0-
John P. Thompson................................................. 10,965,930(p) 2.68%
Jere W. Thompson................................................. 9,273,318(q) 2.26%
All officers and directors as a group (26 persons)............... 279,214,486(r) 68.11%
- ------------------------
* Rounds to less than one-tenth of one percent
(a) At February 1, 1995, there were 409,922,935 shares of Common Stock
outstanding. The nature of beneficial ownership of the shares reported, if
not direct, is described in this footnote (a) and the footnotes that
follow. Included in the numbers of shares shown, as required by the rules
and regulations of the Commission, are those shares as to which such
persons have or share voting and/or investment power, or with respect to
which they have a right to receive such power within 60 days. Certain
officers and directors received Thompson Warrants as a result of their
ownership of Southland's old debt securities and preferred stock. Shares
acquirable upon the exercise of such warrants are included in the shares
shown in the above table because such warrants became exercisable on June
5, 1991 and will not expire until February 23, 1996. Because of the
applicable Commission requirements, 8,698,480 shares are duplicated under
John and Jere Thompson. These duplications are excluded from the total
number of shares for all officers and directors as a group. Also excluded
from the shares shown are any shares held by limited partners of Thompson
Capital Partners, L.P. and the 1,179,496 shares held by Thompson Capital
Partners, L.P., which are subject to the Warrant Agreement and during the
term of the Warrant Agreement, the voting and distribution of such shares
are restricted by such Warrant Agreement.
(b) Mr. Ito owns 2,000,000 shares directly. Additionally, Mr. Ito is Chairman
of the Board and a Director of IYG Holding Company. See "Security Ownership
of Certain Beneficial Owners," above.
(c) Mr. Suzuki owns 1,000,000 shares directly. Additionally, Mr. Suzuki is
President and a Director of IYG Holding Company. See "Security Ownership of
Certain Beneficial Owners" above.
(d) Mr. Matthews owns 7,240 shares either directly or as custodian; 143,334
shares acquired under the Company's Grant Stock Plan which are subject to
the Shareholders Agreement; 156,667
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
shares acquirable upon the exercise of options under the Company's Equity
Participation Plan
(see "Compensation of Directors and Officers -- Executive Officers'
Compensation," below); and holds 528 Thompson Warrants which are
exercisable for Common Stock.
(e) Mr. Arai owns 30,000 shares directly.
(f) Mr. Ashida owns 30,000 shares directly.
(g) Mr. Brehm owns 8,334 shares acquired under the Company's Grant Stock Plan
which are subject to the Shareholders Agreement; 31,667 shares acquirable
upon the exercise of options under the Company's Equity Participation Plan
(see "Compensation of Directors and Officers -- Executive Officers'
Compensation," below).
(h) Mr. Chai owns no shares directly. ITOCHU Corporation, of which he is
Executive Vice President, and ITOCHU International Inc., of which he is
Chairman of the Board and Chief Executive Officer, together own a total of
20,397,834 shares of Southland Common Stock. Mr. Chai disclaims beneficial
ownership of such shares.
(i) Mr. Fernandes owns 50,000 shares directly. In addition, Mr. Fernandes
acquired 10,000 additional shares in the open market on February 28, 1995.
(j) Mr. Kamata owns 100,000 shares directly. Additionally, Mr. Kamata is
Treasurer and a Director of IYG Holding Company. See "Security Ownership of
Certain Beneficial Owners," above.
(k) Mr. Krumholz owns 9,167 shares acquired under the Company's Grant Stock
Plan which are subject to the Shareholders Agreement; 31,667 shares
acquirable upon the exercise of options under the Company's Equity
Participation Plan (see "Compensation of Directors and Officers --
Executive Officers' Compensation," below).
(l) Mr. Otsuka owns 30,000 shares directly. Additionally, Mr. Otsuka is
Assistant Secretary of IYG Holding Company. See "Security Ownership of
Certain Beneficial Owners," above.
(m) Mr. Rodgers owns 2,846 shares directly; 23,334 shares acquired under the
Company's Grant Stock Plan which are subject to the Shareholders Agreement;
36,667 shares acquirable upon the exercise of options under the Company's
Equity Participation Plan (see "Compensation of Directors and Officers --
Executive Officers' Compensation," below) which shall expire on May 30,
1995, and holds 205 Thompson Warrants which are exercisable for Common
Stock.
(n) Mr. Roemer owns 18,334 shares acquired under the Company's Grant Stock Plan
which are subject to the Shareholders Agreement; 31,667 shares acquirable
upon the exercise of options under the Company's Equity Participation Plan
(see "Compensation of Directors and Officers -- Executive Officers'
Compensation," below) which shall expire on September 30, 1995.
(o) Mr. Sato owns 100,000 shares directly. Additionally, Mr. Sato is Vice
President and a Director of IYG Holding Company. See "Security Ownership of
Certain Beneficial Owners," above.
(p) Mr. John Thompson owns 2,227,759 shares and 39,691 Thompson Warrants held
by The Hayden Company (the voting stock of which is owned by John P.
Thompson), of which 522,154 shares are subject to Thompson Warrants and
2,224,844 shares are pledged to Ito-Yokado as collateral for the loans made
pursuant to the Shareholders Agreement; also included are 1,447,400 shares
and 32,221 Thompson Warrants held by The Philp Co. (the voting stock of
which is owned by two trusts, of which John and Jere Thompson serve as two
of the trustees), of which 311,557 shares are subject to Thompson Warrants
and 1,445,541 shares are pledged to Ito-Yokado as collateral for the Loans
made pursuant to the Shareholders Agreement; 7,218,859 shares by Thompson
Brothers, L.P., a Texas limited partnership in which three Thompson family
partnerships, each controlled by one of the Thompsons, are the general
partners and The Philp Co. is the limited partner, of which 2,240,660
shares are subject to Thompson Warrants and 7,218,859 are pledged to
Ito-Yokado as collateral for the Loans made pursuant to the Shareholders
Agreement.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
(q) Mr. Jere Thompson owns 568,819 shares and 6,019 Thompson Warrants held by
The Williamsburg Corporation (the voting stock of which is owned by Jere W.
Thompson), of which 150,848 shares are subject to Thompson Warrants and
568,051 shares are pledged to Ito-Yokado as collateral for the Loans made
pursuant to the Shareholders Agreement; also included are 1,447,400 shares
and 32,221 Thompson Warrants held by The Philp Co. (see (p) above) and
7,218,859 shares by Thompson Brothers (see (p) above).
(r) The total shares shown are as follows: 3,355,812 shares owned by officers
and directors directly or with family members (including 1,071 shares which
can be acquired on exercise of Thompson Warrants); 7,218,859 shares owned
by Thompson Brothers; 2,227,759 shares owned by The Hayden Company;
1,447,400 shares owned by The Philp Co.; 568,819 shares owned by The
Williamsburg Corporation; 219,171 shares issued pursuant to the Grant Stock
Plan held by seven officers, and an additional 43,337 shares held under
such plan by non-officers, all of which grant stock shares are subject to
the Shareholders Agreement, and are to be voted in accordance with that
agreement; 490,836 shares acquirable by 13 officers upon exercise of
options or conversion of convertible debentures under the Equity
Participation Plan; and 263,642,493 shares held by IYG Holding Company of
which Messrs. Ito, Suzuki, Sato, Kamata and Otsuka are the directors and
officers, although they each disclaim individual beneficial ownership of
such shares.
</TABLE>
Based upon information provided to the Company, a Form 4 reporting the
purchase, on March 28, 1994, of 10,000 shares of Southland common stock by Gary
Fernandes was filed approximately ten days late.
PROPOSAL 2. RATIFICATION OF THE SELECTION OF AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Coopers & Lybrand L.L.P. ("Coopers & Lybrand") to be the independent
auditors of the Company for 1995. Although not legally required to do so, upon
the recommendation of the Audit Committee, the Board is submitting the
appointment of Coopers & Lybrand as the Company's independent auditors for 1995
to the shareholders for ratification at this meeting.
The services provided to the Company by Coopers & Lybrand in 1995 will
include, in addition to performing the audit, audits of certain domestic and
foreign subsidiaries and related companies and those of various employee benefit
plans; review of quarterly reports; issuance of letters to underwriters in
connection with registration statements, if any, filed by the Company with the
Securities and Exchange Commission; and consultation on accounting, financial
reporting, tax and related matters.
Coopers & Lybrand, a nationally known firm, has no direct or indirect
interest in the Company. The firm of Coopers & Lybrand has been the Company's
auditor since 1992.
Representatives of Coopers & Lybrand will be at the meeting, will have an
opportunity to make a statement, if desired, and will be available to respond to
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND TO BE THE INDEPENDENT AUDITORS OF THE COMPANY
FOR 1995, WHICH REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES
REPRESENTED AND ENTITLED TO VOTE AT THE MEETING. VOTES WILL BE TABULATED BY AN
INSPECTOR OF ELECTION. AN ABSTENTION FROM VOTING AND BROKER NON-VOTES WILL BE
INCLUDED IN COMPUTING THE NUMBER OF SHARES PRESENT FOR PURPOSES OF DETERMINING
THE PRESENCE OF A QUORUM FOR THE SHAREHOLDERS MEETING AND WHETHER THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES PRESENT AT THE MEETING HAS BEEN
RECEIVED, BUT WILL NOT BE COUNTED AS A VOTE EITHER "FOR" OR "AGAINST"
RATIFICATION.
11
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS' COMPENSATION
The Company's executive compensation program is subject to the approval of
the Compensation and Benefits Committee of the Board of Directors. The committee
is composed of four directors, as follows: Mr. Suzuki, the chairman of the
committee, is Vice Chairman of the Board of Directors, but receives no
compensation from the Company for his service as Vice Chairman or as a director.
Mr. Suzuki is President of Ito-Yokado and IYG Holding Company and Chairman of
Seven-Eleven Japan. As described elsewhere herein, IYG Holding Company, which
owns approximately 64% of the Common Stock of the Company, is a jointly owned
subsidiary of Ito-Yokado and Seven-Eleven Japan. During 1992, Ito-Yokado
unconditionally guaranteed a $400 million commercial paper facility established
by the Company. Seven-Eleven Japan, a 51%-owned subsidiary of Ito-Yokado, is the
Company's area licensee in Japan and, through its subsidiary, Seven-Eleven
(Hawaii), Inc., is the Company's area licensee in Hawaii. The other committee
members are Timothy Ashida, who is a director of Seven-Eleven Japan, and, as
described elsewhere herein, has an Independent Consultant's Agreement with the
Company to serve as liaison with the Board of Directors, Kazuo Otsuka, who is an
officer of Ito-Yokado, and Gary Fernandes, who is Senior Vice President and a
director of Electronic Data Systems Corporation. As described elsewhere herein,
the Company has entered into contractual arrangements with EDS relating to (1)
installation of automatic teller machines in 7-Eleven stores over a ten-year
period and (2) providing the Company with retail automation systems, including
host computer services, over a five-year period and has paid EDS for certain
consulting and business planning services in 1994.
The Company's Executive Officers, as well as all other management personnel,
receive annual compensation consisting of base salary and annual performance
incentive, or "bonus," under the Company's Annual Performance Incentive ("API")
Plan. The amount paid under this API plan is based upon the employee's or
officer's base salary, compensation grade level and the achievement of certain
pre-established performance criteria for the Company each year, and in 1995, for
certain eligible employees, on the performance of the employee's specific
operating unit, more fully described in the Report of the Compensation and
Benefits Committee, included elsewhere herein.
The following table shows the compensation paid, or earned, during 1994, by
the Company's Chief Executive Officer and the next four most highly compensated
executive officers, as specifically required by the rules and regulations
relating to Proxy Statement disclosure.
12
<PAGE>
TABLE 1
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ---------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER
ANNUAL RESTRICTED ALL OTHER
NAME AND SALARY BONUS COMPENSA- STOCK OPTIONS/ LTIP COMPENSA-
PRINCIPAL POSITION YEAR ($)(I) ($)(II) TION($)(III) AWARD(S)($) SARS(#) PAYOUTS($)(IV) TION($)(V)
- --------------------------- --------- --------- --------- --------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clark J. Matthews, II 1994 390,000 177,840 N/A -0- -0- 55,843 9,981
President and Chief 1993 390,000 131,040
Executive Officer 1992 390,000 161,850
John H. Rodgers (vi) 1994 285,000 110,800 N/A -0- -0- 29,788 9,560
Executive Vice President, 1993 285,000 79,800
Chief Administrative 1992 257,500 155,405
Officer and Secretary
Stephen B. Krumholz 1994 271,000 112,980 N/A -0- -0- 29,788 7,239
Executive Vice President 1993 271,000 75,880
and Chief Operating 1992 235,500 97,450
Officer
Michael K. Roemer (vi) 1994 200,000 63,800 N/A -0- -0- 12,757 6,967
Senior Vice President, 1993 200,000 44,800
Merchandising 1992 184,000 55,776
Rodney A. Brehm 1994 195,000 64,280 N/A -0- -0- 12,757 6,947
Senior Vice President, 1993 195,000 43,680
Foodservice and 1992 183,750 58,100
Distribution
<FN>
- --------------------------
(i) In general, officers received no salary increases in 1989, 1990, 1991 and
1994, unless they were promoted to positions with additional
responsibilities during a particular year. Mr. Matthews received neither a
salary increase nor any special bonus compensation from 1990 through 1994.
(ii) During 1992, certain executive officers were granted special bonuses to
compensate them for the loss of income in prior years. In addition, certain
officers and other employees received special bonus amounts in 1994. The
amounts paid as a special bonus to any of the five named executive officers
are included in the bonus amount shown in column (d).
(iii) No "Other Annual Compensation" is shown because the total amounts paid for
perquisites in 1994 did not exceed the lesser of $50,000 or 10% of the
named executive officer's salary and bonus for 1994.
(iv) All amounts were paid in 1995 pursuant to the 1993 Performance Plan, based
on the Company's 1994 achievement of above threshold operating earnings
under the plan.
(v) Includes only (a) the amount of Company contribution for 1994 to each of
the named executive officer's accounts in The Southland Corporation
Employees' Savings and Profit Sharing Plan (the "Savings and Profit Sharing
Plan"), a Section 401(k) defined contribution plan with over 22,000
participants, as follows: $6,269 each for Messrs. Krumholz, Roemer and
Brehm, and $8,359 each for Messrs. Matthews and Rodgers; and (b) for each
of the named executive officers, the full premiums paid for basic term life
insurance under the Company's group plan for all employees, as follows: Mr.
Matthews -- $1,442; Mr. Rodgers -- $1,022; Mr. Krumholz -- $970; Mr. Roemer
-- $698 and Mr. Brehm -- $678.
(vi) During 1995, both Mr. Rodgers and Mr. Roemer terminated their employment
with the Company. See "Arrangements Related to Termination of Employment,"
below.
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company granted no options or SARs during 1994.
13
<PAGE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF
UNEXERCISED VALUE OF
FY-END UNEXERCISED
(#) IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END AT
ACQUIRED ON VALUE (#) FY-END($)
NAME EXERCISE(#) REALIZED($) EXERCISABLE(I) EXERCISABLE(II)
- ------------------------- ------------ ------------- --------------- -------------
<S> <C> <C> <C> <C>
Clark J. Matthews, II.... -- -- 156,667 N/A
John H. Rodgers.......... -- -- 36,667 N/A
Stephen B. Krumholz...... -- -- 31,667 N/A
Michael K. Roemer........ -- -- 31,667 N/A
Rodney A. Brehm.......... -- -- 31,667 N/A
<FN>
- ------------------------
(i) All options shown are held pursuant to the Equity Participation Plan and
became exercisable on December 31, 1994. Pursuant to the terms of the plan,
both Mr. Rodgers' and Mr. Roemer's options will expire 90 days after
termination of employment.
(ii) All outstanding options are exercisable at $7.50 or $7.70 per share. The
Common Stock is currently trading at prices significantly below this level.
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE
PAYOUTS UNDER
NON-STOCK PRICE-BASED
PLANS
----------------------
(A) (B) (C) (D) (F)
PERFORMANCE
OR OTHER
NUMBER OF PERIOD
SHARES, UNTIL
UNITS MATURATION
OR OTHER OR THRESHOLD MAXIMUM
NAME RIGHTS(#) PAYOUT ($ OR #) ($ OR #)
- ------------------------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Clark J. Matthews, II......... 334,740 12/31/94 -0- $ 668,700
John H. Rodgers............... 178,150 12/31/94 -0- 356,700
Stephen B. Krumholz........... 178,550 12/31/94 -0- 356,760
Michael K. Roemer............. 76,760 12/31/94 -0- 152,760
Rodney A. Brehm............... 76,760 12/31/94 -0- 152,760
</TABLE>
- ------------------------
Column (e) has been deleted because there is no "target" payout amount under the
plan.
See "Summary Compensation Table" for the cash awards paid pursuant to this plan
for 1994.
The long-term incentive plan awards described in the above table were all
granted under the 1993 Performance Plan, adopted by the Company in 1993, with
two-year cumulative operating earnings targets. Under the 1993 Performance Plan
performance units are granted to eligible executives, including all officers,
based upon the salary administration grade level assigned to the executive's
job. All executives in the same grade level are awarded the same number of
units. Units are awarded for each year that the executive is a participant in
the plan. At the end of the plan period (December 31, 1994) the award pool for
this plan equalled a predetermined amount of each dollar of operating earnings
achieved by the Company above the threshold operating earnings set for each
year. The Plan contains both annual and cumulative thresholds. Failure to meet
the threshold operating earnings in one year could possibly have no impact if
the other year's results were sufficient to offset any shortfall.
The Company's 1993 operating earnings were not above the threshold for 1993
and, pursuant to the terms of the plan, 1993 operating earnings were therefore
not used to calculate either the
14
<PAGE>
cumulative threshold, or cumulative actual operating earnings under the plan.
For 1994, the amount that accrued for the award pool was $.20 of every dollar
over the threshold operating earnings amount (which was the Company's budgeted
operating earnings) and, if the Company's 1994 actual operating earnings had
been sufficient to pay 100% of the targeted bonus amount under the Company's API
plan, then $.45 of every dollar of actual operating earnings above that amount
was to have been contributed to fund the award pool. The Company's 1994
operating earnings did exceed the threshold amount, and approximately $1.48
million, or 12% of the potential awards payable, was distributed under this
plan.
The maximum aggregate awards that can be paid under this plan are equal to
the total amount of API payable to the participants in this plan for the plan
period. This plan has been revised and extended to cover a new plan period of
1995-1996. See "Board Compensation Committee Report on Executive Compensation,"
below.
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
The Company does not maintain a defined benefit pension plan for its
employees. It does maintain an Executive Protection Plan, covering approximately
45 executives in 1994, including each of the named executive officers. This plan
provides three benefits: salary continuation upon retirement at age 65 (or
later) equal to 150% of the executive's "final compensation," as determined for
plan purposes, payable in ten equal annual installments (if the executive
retires before age 65, but after age 55, an adjusted benefit will be paid);
post-retirement life insurance equal to 200% of the executive's "final
compensation," as determined for plan purposes, plus $15,000 (or, in lieu
thereof, if the executive dies prior to retirement, a salary continuation death
benefit shall be paid to the executive's named beneficiary, equal to 200% of
such compensation, payable in ten equal annual installments); and disability
income in excess of the amount provided under the Company's group long-term and
short-term disability plans, if the executive becomes disabled while a
participant in this plan, that will bring the total amount paid to the executive
to the level of 80% of "final compensation" prior to the disability. The Company
maintains various insurance policies to fund the amounts payable under this
plan.
Under the current plan provisions, the "final compensation" on which
benefits would be calculated for each of the named executive officers, based on
that executive's 1994 earnings, would be as follows:
Mr. Matthews -- $567,840, Mr. Rodgers -- $393,300, Mr. Krumholz -- $373,980,
Mr. Roemer -- $260,800, and Mr. Brehm -- $254,280. Under the plan, normal
retirement age is 65; however, if an executive retires at age 55 or later, a
reduced benefit is payable under the plan. At age 55, the benefit is 50% of what
would have been paid at age 65; the benefit increases to 55% at age 56, and
increases 5% per year thereafter for each year up to age 65.
ARRANGEMENTS RELATED TO TERMINATION OF EMPLOYMENT
In February 1995, both Mr. Rodgers and Mr. Roemer, two of the named
executive officers, resigned as officers of the Company, and received certain
separation benefits.
Mr. Rodgers resigned from the Company effective February 28, 1995. As part
of the Company's ongoing efforts to streamline its organization, the position of
Executive Vice President and Chief Administrative Officer will not be refilled.
In recognition of his 22 years of service to the Company, he received a
"Separation Grant" equal to the discounted present value of approximately three
years' salary plus the discounted present value of 100% of his normal Annual
Performance Incentive for 1995 ($790,403 and $140,227, respectively) plus
certain benefits payable starting in 1998 (or earlier, if he should die prior to
that date) equal to those he would have received from the Company under the
Executive Protection Plan had he retired at age 55, the 1995 Performance Plan
for 1995, Car Allowance Program through February 1998, Life Insurance Benefits,
including the amount necessary to purchase enhanced life insurance coverage,
disability coverage equal to 65% of his final base salary, reimbursement to
cover the cost of Retiree Medical Coverage in excess of employee coverage
through
15
<PAGE>
February 1998, as well as a nonqualified deferred compensation benefit that
replaced his qualified 401(k) plan benefits through 1998. To compensate Mr.
Rodgers for the 36,667 stock options he holds under the Equity Participation
Plan that, pursuant to the terms of that plan, expire 90 days after termination
of employment, and which, as stated elsewhere herein, are currently without
value, Mr. Rodgers was also granted a phantom stock option, exercisable through
December 31, 1997, with a value of up to $2.50 per option, should the price of
Southland's common stock exceed the option exercise price by that amount.
Mr. Roemer, who has been an employee of the Company since 1966, chose, for
personal reasons, to take early retirement and resigned from his position as
Senior Vice President, Merchandising, effective February 28, 1995. Mr. Roemer
will remain an employee through June 30, 1995, at which time he will receive
certain enhanced retirement benefits from the Company, including a "Separation
Grant", payable in semi-monthly installments through February 28, 1998, equal to
his base salary and the greater of 100% of his 1995 Annual Performance
Incentive, or such percentage as is actually earned in 1995 under that plan (a
total of $533,333 over the 32-month period and $80,000, respectively). In
addition, Mr. Roemer will receive benefits equal to those he would have received
from the Company under the Executive Protection Plan, payable starting in 1998
(or earlier, if he should die prior to that date) had he retired at age 55 under
that plan, as well as the amount he would have earned under the 1995 Performance
Plan for 1995, Car Allowance Program for 1995 and reimbursement to cover the
cost of Retiree Medical Coverage in excess of the cost of employee coverage
through February 1998. To compensate Mr. Roemer for the 31,667 stock options he
holds under the Equity Participation Plan that, pursuant to the terms of that
plan, expire 90 days after termination of employment, and which, as stated
elsewhere herein, are currently without value, Mr. Roemer was also granted a
phantom stock option, exercisable through December 31, 1997, with a value of up
to $2.50 per option, should the price of Southland's common stock exceed the
option exercise price by that amount.
The Company currently maintains sufficient insurance to be completely
reimbursed the full cost of providing these separation benefits.
DIRECTORS' COMPENSATION
In 1994, the Company paid non-employee Directors an annual fee of $25,000
plus $1,000 for attendance at each meeting of the Board, or Committee thereof,
on which they serve. For this purpose, Clark J. Matthews, II, as well as
employees of Ito-Yokado and Seven-Eleven Japan, and the Thompsons (see "Other
Information -- The Employment Agreements," above) were not considered
non-employee directors. The Chairman of the Audit Committee receives an
additional annual fee of $5,000 for serving as Chairman of that Committee.
In addition, as described above under "Election of Directors" and elsewhere
herein, Mr. Ashida is paid $120,000 per year, inclusive of the director's fees
to which he would otherwise be entitled, under an Independent Consultant's
Agreement entered into on July 1, 1991, pursuant to which he serves as liaison
with the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described above, the Compensation and Benefits Committee of the Board of
Directors is composed of four directors. Mr. Suzuki, the chairman of the
committee, is Vice Chairman of the Board of Directors, but receives no
compensation from the Company for his service as Vice Chairman or as a director.
Mr. Suzuki is President of Ito-Yokado and IYG Holding Company and Chairman of
Seven-Eleven Japan. As described elsewhere herein, IYG Holding Company, which
owns approximately 64% of the Common Stock of the Company, is a jointly owned
subsidiary of Ito-Yokado and Seven-Eleven Japan. During 1992, Ito-Yokado
guaranteed a $400 million commercial paper facility established by the Company.
Seven-Eleven Japan, a 51% owned subsidiary of Ito-Yokado, is the Company's area
licensee in Japan and, through its subsidiary, Seven-Eleven (Hawaii), Inc., is
the Company's area licensee in Hawaii. The other committee members are Timothy
Ashida, who is a director of Seven-Eleven Japan and, as described elsewhere
herein, has an Independent Consultant's Agreement with the Company to serve as
liaison with the Board of Directors, Kazuo Otsuka, who is an officer of Ito-
16
<PAGE>
Yokado, Gary Fernandes, Senior Vice President and a director of EDS, with which
the Company currently has several contracts for EDS to assist the Company with
data processing, consulting and business planning, as well as for installation
and operation of automatic teller machines ("ATMs") in the Company's stores over
several years.
Both Mr. Ito and Mr. Suzuki served as officers and/or directors of IYG
Holding Company, Ito-Yokado and Seven-Eleven Japan, as well as serving as
Chairman and Vice Chairman of the Company during 1994.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The functions of the Compensation and Benefits Committee are to review the
level, coverage and competitiveness of the Company's compensation, incentives,
benefits and perquisites and its plans, goals and objectives for officer level
and other executive positions, so as to retain and reward high quality personnel
in key positions, to administer the Equity Participation, Stock Unit Incentive
and Grant Stock Plans; to make amendments to the various plans; and to institute
new plans. It also undertakes such other duties as may be assigned to it by the
Board of Directors.
In carrying out its duties, the Committee has relied on recommendations
presented to it by outside consultants who have been utilized from time to time
to assist the Company in determining the competitiveness of its compensation
policies, as well as on recommendations of the Company's executive officers with
regard to the specific performance of individuals in carrying out their job
responsibilities, and on data collected and utilized by the Company's
Compensation and Benefits Department about compensation structure, practices and
payment levels in certain "Comparable Companies" (as described below).
During 1993, after performing a multi-year analysis of all exempt job
classifications, the Company revised its salary administration plan. All exempt
jobs were evaluated based upon the job responsibilities of each position which
were compared against the compensation paid by companies of similar size for
jobs of similar responsibilities, in the various geographic areas where the
Company's employees are located. The resulting job reclassification affected all
exempt job levels, including officers. Based upon the comparative data
collected, the Company's compensation structure is now designed so that the
combined total of full annual salary and full annual performance incentive
compensation will achieve a compensation level that is slightly above the median
compensation level for the same job responsibilities in the comparative data
used.
The Company's executive officers and all exempt personnel receive annual
compensation consisting of a combination of base salary and the potential to
earn an annual performance incentive. The amount of annual performance incentive
received by any particular executive for service in 1994 was based on the
achievement, by the Company, of a threshold amount of operating earnings,
determined against a budgeted goal, as set forth in the Company's internal
budget documents. The amount of annual performance incentive that can be earned
by an individual is a predetermined percentage of that individual's base salary,
and is pegged to the salary administration grade level assigned to the
individual's job. In 1994, achievement of the full budgeted operating earnings
resulted in payment of 50% of the targeted annual performance incentive. In
addition, there was the potential to earn in excess of 50% of the targeted
annual performance incentive if the Company achieved a higher than budgeted
level of operating earnings. Based upon the calculations under the formula for
this plan, 76% of annual performance incentive was paid for 1994.
The Chief Executive Officer and all executive officers are compensated under
this plan. The annual performance incentive potential for the Chief Executive
Officer, if the 100% target is reached, is 60% of base salary. The Company's
senior officers (Mr. Rodgers and Mr. Krumholz in 1994) have annual performance
incentive potential of 50% of base salary. Other executive officers have a
potential to earn between 34% and 45% of their base salary.
For 1995, the annual performance incentive will again be based upon the
Company's achievement of certain operating earnings threshold, budgeted target
and above-budget goal levels. If the budgeted
17
<PAGE>
operating earnings amount is achieved, 100% of the annual performance incentive
will be earned. If operating earnings exceed the budgeted amount, then $.35 of
each excess dollar of operating earnings will fund the payment of additional
annual performance incentive until 150% of the annual performance incentive has
been earned. Any operating earnings in excess of this amount will continue to
fund the annual performance incentive, at $.15 per excess dollar earned until
the maximum payment for 1995 is achieved under the 1995 Performance Plan (see
below), and then $.35 of each excess dollar of operating earnings shall fund
this plan until the maximum 200% of annual performance incentive has been paid.
In addition, in 1995 certain executives' annual performance incentive may be
based partly on the performance of their particular operating units and only
partly on the performance of the Company as a whole.
As he had done in the past three years, Mr. Matthews, who became Chief
Executive Officer in 1991, again requested in 1994 that he not be granted any
increase in base salary. Moreover, none of the Company's executive officers
received salary increases in 1994, as the Company's focus was on the use of its
capital to strengthen the stores' image and to emphasize programs that assisted
the stores' operations.
Based upon a review of the implementation of various new merchandising,
training and customer-oriented initiatives during the past year, it was
determined that Mr. Matthews' base salary should be increased to $410,000 for
1995. This amount represents a five percent increase, the first increase Mr.
Matthews has had since 1989. Although Mr. Matthews' base salary is still well
below the median for Chief Executive Officers in companies of comparable size,
revenues and earnings, it is anticipated that this shortfall will be eliminated
over a multi-year period. This increase in salary will also impact the amount of
annual performance incentive that Mr. Matthews is eligible to earn, as well as
his benefit eligibility under other Southland benefit plans.
In addition, the Company's other officers were also granted increases in
base salary, ranging from five to ten percent, in recognition of the Company's
improvement in earnings and merchandise sales in 1994.
To retain and reward employees, the committee approved extension of the
mid-term incentive plan, originally instituted in 1993. This Plan, with two-year
cumulative operating earnings targets, grants performance units to eligible
executives, including all officers, based upon the salary administration grade
level assigned to the executive's job. All executives in the same grade level
are awarded the same number of units. Units are awarded for each year that the
executive is a participant in this plan. Although the 1993 threshold for this
plan was not achieved, the 1994 threshold, which the Committee determined would
not be cumulated with 1993 results, was achieved and approximately 12% of the
potential awards under this plan were paid.
The term of the extended plan will be 1995 and 1996. Threshold Operating
Earnings targets will be set for each year in the Plan Period, and for the
cumulative two-year term. Awards will be paid if the threshold is exceeded
during either year in the Plan Period, and if the results in either the first or
second year exceed the cumulative target, then any excess amount can be applied
to the cumulative target.
The Award Pool for this plan will equal a predetermined amount of each
dollar of operating earnings achieved by the Company above the threshold set for
each year in the plan term and for the cumulative two-year term. In 1995, this
threshold shall be budgeted operating earnings and the amount to be accrued for
the award pool is $.15 of each dollar over this threshold amount, until 150% of
the annual performance incentive for 1995 is earned. At this level, $.35 of
every excess dollar of operating earnings shall fund awards under this plan,
until the maximum awards payable have been funded. The maximum aggregate awards
that can be paid under this plan are equal to the total amount of annual
performance incentive payable to the participants in this plan for the plan
period (i.e., the total of 1995 and 1996 annual performance incentive payable at
100% to all executives eligible
18
<PAGE>
to participate in the plan) and this amount shall be paid if the cumulative
maximum target is achieved at the end of the plan term. Any amounts paid at the
end of the first year shall be included in determining the amount of the total
awards paid under this plan.
The Committee does not currently intend to change the components of
compensation, other than as discussed above, for the Company's executive
officers. The Equity Participation Plan, adopted in 1987 following the Company's
leveraged buyout, remains in place. Options granted under that plan became
exercisable on December 31, 1994. Under current market conditions, the options
are without value, as the exercise price to acquire a share of Common Stock is
$7.50 or $7.70 under the plan.
In carrying out its functions, the Committee refers to data collected from
various sources by the Company's Compensation and Benefits Department. The
Company believes that, to effectively recruit talented executives, it must
compete with other national companies having a similar employee base,
approximately the same range of revenues and similar geographic locations,
although such companies are not in the same line of business as Southland (the
"Comparable Companies"). Therefore, the companies used for compensation
comparisons are not the same companies as those included in the peer group index
shown on the Performance Graph appearing elsewhere herein. The companies
included in that peer group are specifically selected because they (1) are
publicly owned with actively traded Common Stock (2) have a market
capitalization that can be analyzed for comparison with Southland's rate of
return on equity and (3) engage in either the convenience retailing or food
retailing business. The Company believes it competes with a much broader range
of companies in its quest for executive talent.
Changes in the tax laws for 1994 and thereafter will not permit companies to
recognize a tax deduction for compensation in excess of $1,000,000 to any of the
five most highly compensated officers, unless the plan under which such
compensation is paid is not only approved by the Board's Compensation Committee,
but is also performance-based and approved by the Company's shareholders. The
Committee considered whether or not shareholder approval should be sought for
any of the Company's current-year compensation plans to conform with this new
law. After reviewing the applicability of the limitation to the Company's
specific plans (awards under plans adopted prior to 1993 are excluded from the
limitation), the Committee determined that no action is necessary to solicit
shareholder approval for any compensation plans at this time.
The Committee will continue to review the compensation package provided for
the Chief Executive Officer and other executive officers, and to monitor its
competitiveness within the industry and the community, as well as its
relationship to shareholders' return on investment in the Company, making
adjustments that are deemed appropriate, both in compensation policies and
practices, compensation structure and the actual amounts paid.
Toshifumi Suzuki, Chairman
Timothy Ashida
Gary J. Fernandes
Kazuo Otsuka
19
<PAGE>
PERFORMANCE GRAPH
The Performance Graph, below, shows the value, at year-end 1991, 1992, 1993
and 1994 of an investment in Southland Common Stock of $100 on March 5, 1991
(the date the stock was first traded in the public market following the
consummation of Southland's Restructuring). Also shown are the values, assuming
$100 invested in the NASDAQ Market Index and a peer group index selected by the
Company consisting of three publicly traded convenience store companies (Casey's
General Stores, Inc., Dairy Mart Convenience Stores, Inc. and Uni-Marts, Inc.)
and three food retailers (The Kroger Co., Safeway, Inc. and The Vons Companies
Inc.), also beginning on March 5, 1991, and at year-end 1991, 1992, 1993 and
1994. Missing from the peer group are two of the Company's major convenience
store competitors: the Circle K Corporation ("Circle K") and National
Convenience Stores ("NCS"), as both companies were involved in Chapter 11
bankruptcy proceedings during the period covered by this graph. NCS has only
been publicly traded since March 1993; Circle K has only recently filed a
registration statement for a public offering of securities; therefore, the
Company could not include Circle K or NCS in the peer group used for this graph
as comparative data, for the time period presented, is not available. The
Company may decide, in future years, to change the composition of the peer group
when comparative data is available.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1991 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
The Southland Corporation 100 200 323.34 720 480
Peer Group 100 90.38 74.89 93.45 121.82
Broad Market 100 109.7 110.78 132.88 139.51
</TABLE>
ASSUMES $100 INVESTED ON MARCH 5, 1991
ASSUMES DIVIDEND REINVESTED (IF ANY)
FISCAL YEAR ENDING DECEMBER 31
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31
MARCH 5, ------------------------------------------
COMPANY 1991 1991 1992 1993 1994
- ----------------------------------------------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
The Southland Corporation...................... 100.00 200.00 323.34 720.00 480.00
Peer Group..................................... 100.00 90.38 74.89 93.45 121.82
Broad Market................................... 100.00 109.70 110.78 132.88 139.51
</TABLE>
Source of information: Media General Financial Services
20
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On September 9, 1992, the Company began issuing commercial paper in a
program under which it can issue up to $400 million based upon the Company's
needs. The commercial paper facility is unconditionally guaranteed by
Ito-Yokado.
Seven-Eleven Japan is the largest area licensee of the Company, operating,
as of December 1994, over 5,800 7-Eleven stores in Japan under an area license
agreement entered into in 1973. In 1988, the Company entered into a financing
arrangement pursuant to which it pledged the royalty stream from Seven-Eleven
Japan as collateral for the approximately twenty-year term of the financing.
Thereafter, the royalties under the area license agreement, at a reduced
percentage, would again be paid to the Company. In 1994, the royalties from
Seven-Eleven Japan that were paid under this arrangement totalled $41,930,321.
In addition, Seven-Eleven (Hawaii), Inc., the Company's area licensee in
Hawaii, is a subsidiary of Seven-Eleven Japan, and operates 47 stores in Hawaii.
During 1994, Seven-Eleven (Hawaii), Inc. paid the Company approximately $60,052
in connection with the area license arrangement.
As of December 31, 1994, the Savings and Profit Sharing Plan leased a total
of 818 operating convenience stores to the Company plus 82 other locations at
rates slightly more favorable for the Savings and Profit Sharing Plan than
contemporaneously available similar transactions with third parties. Rentals,
including percentage rents, paid by the Company to the Savings and Profit
Sharing Plan for 1994 aggregated $31,251,384. During 1994, the Savings and
Profit Sharing Plan sold 43 locations to third parties that were leased to the
Company at the time of the sale. The leases with the Company were terminated on
39 locations upon payment by the Company of $2,376,836 as termination fees and
the leases on four locations were assigned to the buyer.
During 1994, the Company leased a 7-Eleven store location from an entity
owned by Thompson family interests. The total rents paid in 1994 were $69,768.
This lease was entered into in the ordinary course of business in 1986 and is
expected to continue for its term of 14 years, 11 months, with three renewal
options of five years each.
Southguard Corporation, a company that is approximately 22% owned by Jodie
Thompson, brother of John and Jere Thompson, operates 7-Eleven stores in the
Corpus Christi, Victoria and Wichita Falls, Texas and the Lawton, Duncan and
Altus, Oklahoma areas pursuant to two Area License Agreements with the Company.
Southguard Corporation pays the Company a royalty for the continued use of the
7-Eleven name on these stores. Royalty payments under these area licenses
totalled $541,736 in 1994. During the first quarter of 1995, Southguard and the
Company entered into a conditional agreement to terminate the area licenses, in
exchange for a fee from Southguard to the Company, in connection with
Southguard's decision to stop using the 7-Eleven name and system.
John and Jere Thompson, through family interests, have an interest in
7-Eleven Stores of Oklahoma, a partnership that operates 7-Eleven stores in
Oklahoma pursuant to a license agreement from the Company.
Gary J. Fernandes, a director of Southland is an officer and director of
Electronic Data Systems Corporation ("EDS") from which Southland leases property
at 3308 S. Collins, Arlington, Texas 76019, for annual rental of $10,062.
In addition, during 1993, the Company entered into a ten-year agreement with
EDS for the installation and operation of ATMs in 7-Eleven stores. Payments from
EDS to the Company, under this agreement, include both a flat fee per month per
store and transaction-based fees determined by the number of transactions
completed on the ATM each month. Payments to the Company under these agreements
relating to operation of ATMs in the Company's stores totalled $3,863,727 in
1994. Such payments are expected to continue in the future.
21
<PAGE>
During 1994, EDS also provided the Company with certain consulting and
business systems planning services to assist the Company in its planning of
automated retail systems and, in December 1993, the Company and EDS entered into
an agreement which provides that EDS will operate the host computer and provide
a data network for the Company's retail automation project which is being
installed in a phased approach. During 1994, the Company paid EDS a total of
approximately $2,049,232 in connection with these business systems planning and
retail automation projects. Such payments are expected to continue in the
future, pursuant to the terms of the relevant agreements.
Effective November 1, 1993, Southland and EDS entered into a two-year
agreement under which EDS is providing Southland with hardware, software
maintenance and data processing services in connection with Southland's combined
distribution center (CDC) and commissary programs and, in December 1993, under a
separate agreement, EDS delivered certain software to the Company for use in
connection with the CDC program. Southland paid EDS approximately $1,089,777
during 1994 for these services. Payments to EDS for these services have
continued in 1995.
ITOCHU Corporation (formerly C. Itoh & Co.) entered into a Consulting
Agreement with The Southland Corporation and Seven-Eleven Japan Co., Ltd. in
1973, related to the 7-Eleven convenience store chain operating in Japan, and
has performed under this agreement since then. Mr. Jay Chai, a director of the
Company, is Chairman and Chief Executive Officer of ITOCHU International Inc.
and Executive Vice President of ITOCHU Corporation.
Also, both ITOCHU International and ITOCHU Corporation are general trading
companies and each has a 10% direct equity interest in Prime Deli Corporation, a
company that operates a fresh food commissary for Southland, serving
approximately 240 7-Eleven stores in the Dallas, Texas area. During 1994,
Southland purchased fresh food products from the commissary for approximately
$3,365,500 and, in addition, paid Prime Deli approximately $19,000 as fees
related to returned, out-of-code or damaged merchandise and in connection with
advertising and promotions.
In addition, ITOCHU International Inc. and ITOCHU Corporation may, from time
to time, negotiate with the Company to provide additional goods or services.
As of December 31, 1994, Messrs. John P. Thompson, Jere W. Thompson and
their brother, Joe C. Thompson, Jr., as well as Clark J. Matthews, II, and one
former officer of the Company, were indebted to the Company under a split dollar
insurance arrangement. The Company has made advances to each insured to cover
the premiums due on an insurance policy obtained for them by the Company,
although no additional amounts were advanced in 1994 and no additional premiums
were paid during the year. The Company requires a promissory note and a
collateral assignment of the insurance policy to secure repayment of the amount
loaned, and the indebtedness is fully secured by the policy assignments. As of
December 31, 1994, the total amount of indebtedness outstanding was as follows:
John P. Thompson -- $496,020; Jere W. Thompson -- $349,974; Joe C. Thompson, Jr.
- -- $128,583 and Clark J. Matthews, II -- $158,919. Pursuant to the termination
of his Employment Agreement, no further amounts will be advanced to Joe C.
Thompson, Jr.
In addition, in February 1994, under the Company's relocation policy, a loan
of $204,300 was made to Stephen LeRoy, Vice President, International and Real
Estate, of the Company, to assist with his relocation at the Company's request.
As security for the loan, the Company was granted a security interest in his old
home and in the property purchased at the new location. Pursuant to the terms of
the loan, the Company was paid in full when Mr. LeRoy's old home was sold.
SHAREHOLDER PROPOSALS
Any shareholder intending to present a proposal and wishing to have it
included in the Proxy Statement for the Company's 1996 Annual Meeting of
Shareholders, which is expected to be held during April or May 1996, must send
such proposal to the Company at its principal office, 2711 North
22
<PAGE>
Haskell Avenue, Dallas, Texas 75204, Attn: Secretary. Such proposal must be
received by the Company not later than December 1, 1995, and must comply with
the then current rules of the Securities and Exchange Commission relating to
shareholder proposals.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1994 is
being mailed to shareholders with this Proxy Statement but such report is not
incorporated in this Proxy Statement and is not deemed to be a part of the proxy
soliciting material. A COPY OF SOUTHLAND'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1994 (WITHOUT EXHIBITS ) WILL BE FURNISHED TO
SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO: MANAGER, INVESTOR
RELATIONS, THE SOUTHLAND CORPORATION, 2711 NORTH HASKELL AVENUE, DALLAS, TEXAS
75204.
OTHER BUSINESS
Management knows of no other matters to be brought before this meeting.
However, if other business should come before this meeting, it is the intention
of each person named in the proxy to vote such proxy in accordance with his
respective judgment on such matters. Minutes of the last Annual Meeting of
Shareholders will be approved. Management's reports will be heard and received.
Neither the hearing of the reports nor the approval of the minutes will
constitute approval or disapproval of the matters set forth therein.
INDEMNIFICATION
Pursuant to the Company's Articles of Incorporation and Bylaws and the Texas
Business Corporation Act, the Company has agreed to indemnify certain current
and former officers and directors in connection with pending litigation as well
as with other actions they may have taken while serving as directors or officers
of the Company.
23
<PAGE>
APPENDIX
On the outside back cover of the Proxy Statement of The Southland Corporation
there is a map of the intersection of North Central Expressway and Lemmon
Avenue and North Central Expressway and Haskell Avenue, in Dallas, Texas,
showing the entrances to Cityplace Center.
<PAGE>
Cityplace Center East is located on the southeast corner of the intersection of
Haskell and Central Expressway.
- - To enter underground parking garages use Ramp #2, #3, or #5.
#2 is entered from left lane while eastbound on Haskell.
#3 is entered from left lane while westbound on Haskell.
#5 is entered from southbound Weldon.
- - At entrance ramp gate - take parking ticket to raise gate and enter, parking
is complimentary.
- - Proceed along roadway to entrance of either garage "B" or garage "C", note
Compact car spaces.
- - Locate garage elevators, take elevator to Concourse Level "C".
- - Exit Level "C" elevator lobby thru glass doors and follow signs to East Tower
entrance.
- - Enter East Tower at revolving door and proceed thru retail corridor to
information Kiosk.
- - An escalator located behind the Kiosk provides access to the ground floor
lobby and conference center.
<PAGE>
PROXY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 26, 1995
THE SOUTHLAND CORPORATION
The undersigned hereby constitutes and appoints Clark J. Matthews, II, Bryan
F. Smith, Jr. and Carol S. Hilburn, and each of them (acting by majority or
if only one be present, then by that one alone) my true and lawful agents and
proxies, with power of substitution in each, to vote as directed hereon, for
and in my name, place, and stead, all shares I would be entitled to vote if
personally present at the Annual Meeting of Shareholders of The Southland
Corporation to be held on April 26, 1995 and at any adjournments thereof, as
follows:
1. ELECTION OF DIRECTORS-Nominees: Masatoshi Ito; Toshifumi Suzuki; Clark
J. Matthews, II; Yoshitami Arai; Timothy N. Ashida; Jay W. Chai; Gary J.
Fernandes; Masaaki Kamata; Kazuo Otsuka; Asher O. Pacholder; Nobutake Sato;
Tatsuhiro Sekine; Jere W. Thompson; John P. Thompson.
2. RATIFICATION OF AUDITORS-Ratification of the appointment of Coopers &
Lybrand L.L.P., certified public accountants, to be the independent auditors
of the Company for 1995.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
SOUTHLAND CORPORATION AND WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS
MARKED ON THE REVERSE SIDE. IF A CHOICE IS NOT INDICATED WITH RESPECT TO
ITEMS 1. AND 2., THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES
AND "FOR" ITEM 2. THE PROXY HOLDERS WILL USE THEIR DISCRETION WITH RESPECT TO
ANY MATTER REFERRED TO IN ITEM 3.
(Please sign on the reverse side)
SEE REVERSE SIDE
<PAGE>
/X/ Please mark your SHARES IN YOUR NAME
votes as in this
example.
FOR WITHHELD
1. Election of / / / /
Directors
(SEE REVERSE)
For, except vote withheld from the following nominee(s):
_________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of the appoint- / / / / / /
ment of the accounting firm of
Coopers & Lybrand L.L.P., as
independent auditors of the
Company for 1995.
3. Other Business-In their discretion, the proxies are authorized
to vote upon such other matters as may properly come before
the meeting or any adjournments thereof.
If you plan to attend the meeting in
person, please check this box. / /
SIGNATURE(S) ________________________________ DATE _____________
SIGNATURE(S) ________________________________ DATE _____________
Date and sign exactly as your name appears hereon. Joint owners should each
sign. When signing as an administrator, executor, trustee, attorney,
guardian, corporate officer, or in any other capacity, please give full title
as such. Receipt of 1994 Annual Report and March 22, 1995 Notice and Proxy
Statement is hereby acknowledged.
<PAGE>
EXHIBIT 99
THE
SOUTHLAND
CORPORATION
March 24, 1995
To: All Signatories to the Shareholders Agreement dated as of March 5, 1991
(the "Shareholders Agreement")
Re: The Southland Corporation ("Southland")
Annual Meeting of Shareholders to be held April 26, 1995
Within the next few days, all holders of common stock of Southland will be
receiving proxy materials relating to the Annual Meeting of Shareholders of
The Southland Corporation to be held on April 26, 1995. A copy of those proxy
materials and Southland's 1994 Annual Report to Shareholders are enclosed.
Certain shares held by you are subject to the Shareholders Agreement and
are to be voted for the election of directors in accordance with the terms of
Section 3.3 of the Shareholders Agreement.
Included in the proxy materials that are being sent to the holders of
common stock is a proxy card. When you receive these proxy materials, please
return the proxy card to Society National Bank, Southland's common stock
transfer agent (in the business reply envelope enclosed), specifying your
vote (either "For," "Against" or "Abstain") with respect to ratification of
the appointment of auditors and, instead of indicating a vote in connection
with the election of directors, please write on the proxy card the following
words:
"PLEASE VOTE MY # SHARES THAT ARE SUBJECT TO THE
SHAREHOLDERS AGREEMENT DATED AS OF MARCH 5, 1991, IN
CONNECTION WITH THE ELECTION OF DIRECTORS, IN
ACCORDANCE WITH SECTION 3.3 OF THE SHAREHOLDERS
AGREEMENT."
If you own Southland common stock that is not subject to the Shareholders
Agreement, please either vote those shares separately by identifying them by
number on the same proxy card or contact me to request an additional proxy
card to vote those shares.
If you have any questions about these instructions or if you plan to
attend the meeting in person (or need an additional proxy card), please
contact me at 214/828-7933 (facsimile 214/841-6574).
Sincerely,
Carol Hilburn
Associate General Counsel
and Manager, SEC Section
CH:js
Encls.
