<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)
- --------------------------------------------------------------------------------
(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 21, 1996
Dear Southland Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
The Southland Corporation on Wednesday, April 24, 1996, at 9:30 a.m., Central
Daylight Time, in the Lakewood Room (I and II), 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 twelve directors,
approval of the 1995 Stock Incentive Plan, approval of the 1995 Performance Plan
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, FOR
approval of both the 1995 Stock Incentive Plan and the 1995 Performance Plan,
and FOR the ratification of the selection of auditors.
A copy of Southland's 1995 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,
SECRETARY AND DIRECTOR
<PAGE>
THE SOUTHLAND CORPORATION
2711 NORTH HASKELL AVENUE
BOX 719
DALLAS, TEXAS 75221-0719
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 24, 1996
TO THE SHAREHOLDERS OF THE SOUTHLAND CORPORATION:
The Annual Meeting of Shareholders of The Southland Corporation (the
"Company") will be held on Wednesday, April 24, 1996, at 9:30 a.m., Central
Daylight Time, in the Lakewood Room (I and II), on the ground floor at Cityplace
Center, 2711 North Haskell Avenue, Dallas, Texas, for the following purposes:
1. To elect twelve directors to serve for the ensuing year;
2. To consider and vote upon a proposal that the shareholders approve
the adoption of the Company's 1995 Stock Incentive Plan;
3. To consider and vote upon a proposal that the shareholders approve
the Company's 1995 Performance Plan;
4. To consider and vote upon a proposal that the shareholders ratify
the appointment of Coopers & Lybrand L.L.P., certified public accountants,
to be the independent auditors of the Company for the year 1996; and
5. 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 8,
1996, 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,
Clark J. Matthews, II
SECRETARY
Dallas, Texas
March 21, 1996
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 24, 1996
DATE FIRST SENT OR GIVEN TO SECURITY HOLDERS: MARCH 25, 1996
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 24, 1996, 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 twelve directors, for ratification
of the appointment of the accounting firm of Coopers & Lybrand L.L.P. ("Coopers
& Lybrand") to be the independent auditors of the Company for 1996 and for
approval of both the 1995 Stock Incentive Plan and the 1995 Performance Plan.
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
Inspector of Election 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 1995 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 8, 1996 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 3,097 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" any other item being voted
upon.
<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 of Reorganization")
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 of Reorganization. The Plan of Reorganization 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 of Reorganization 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 "Warrants"), exercisable (until February 23, 1996) to acquire
certain shares of Common Stock owned by the "Thompsons" and certain other
shareholders of the Company, including companies related to the "Thompsons" (as
defined below), at $1.75 per share, from such 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 of Reorganization 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 certain other agreements, including a
Shareholders Agreement, the Employment Agreements with John P. Thompson, Jere W.
Thompson and Joe C. Thompson, Jr., and the Warrant Agreement among others, each
of which had, for most purposes, a five-year term. These agreements have
terminated as of March 5, 1996, and pursuant to the terms of the Shareholders
Agreement, IYG is obligated to purchase, if requested to do so, certain shares
owned by the signatories to the Shareholders Agreement. Such acquisitions, if
any, will occur on or about April 22, 1996. Included in the shares IYG is
obligated to purchase are 1,301,375 shares that have been pledged to IYG as
collateral for certain non-recourse loans made by IYG to certain signatories to
the Shareholders Agreement, and such shares will possibly be transferred to IYG.
(See "Security Ownership of Certain Persons" and "Security Ownership of
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. Thompson, Jr. was terminated. The
Employment Agreements, which provided for John P. Thompson and Jere W. Thompson
to serve as directors of the Company, expired on March 5, 1996, and John and
Jere Thompson are not standing for re-election to the Board of Directors.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
BOARD OF DIRECTORS
The Board of Directors has set the number of directors to be elected at this
meeting at twelve, which shall constitute the entire board of directors. 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.
During 1995, Southland's directors were selected pursuant to the terms of
the Stock Purchase Agreement and Shareholders Agreement entered into pursuant
thereto. On March 5, 1996, the
2
<PAGE>
Shareholders Agreement terminated and the composition of the Board of Directors
is no longer controlled by any agreement or understanding. The nominees for
election as directors for 1996 have been nominated by resolution adopted by the
current Board of Directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1995, there were four meetings of the Board of Directors.
The Board of Directors has an Audit Committee, which was composed of four
directors in 1995: Mr. Chai, who served as Chairman, Mr. Fernandes, Dr.
Pacholder and Mr. Sekine. The Audit Committee, which met six times during 1995,
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 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. Fernandes
and Mr. Otsuka. The Compensation and Benefits Committee met once in 1995. (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.
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 three of the four meetings of the Board of Directors, but
did not attend any meetings of the Audit Committee.
COMPENSATION OF DIRECTORS
Effective as of May 1, 1995, the compensation for services as a director of
the Company was set, as follows: (a) the annual fee for a director who is a
non-employee of the Company, Ito-Yokado or Seven-Eleven Japan was set at $30,000
a year; (b) the annual fee for a director who is an employee of Ito-Yokado or of
Seven-Eleven Japan was set at $18,000 a year; (c) all directors who are
non-employees of the Company, Ito-Yokado or Seven-Eleven Japan are also paid
$1,000 for attendance at each Regular or Special Meeting of the Board or of any
Board Committee of which the director is a member, including meetings held by
means of conference telephone or similar communications equipment; however,
participation in any Committee meeting while in attendance at a Board or other
Committee meeting, or the signing of any consent in lieu of holding a meeting,
is not deemed attendance at a meeting for this purpose. In addition, the
Chairman of the Audit Committee receives a fee of $5,000 a year. Directors who
are employees of the Company receive only their compensation as an employee and
no director's fees for their service on the Board or any Committee thereof.
In addition, as described elsewhere herein, Mr. Ashida is paid $138,000 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, and
amended in 1995, pursuant to which he serves as liaison with the Board of
Directors.
PROPOSAL 1. ELECTION OF DIRECTORS
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,
1996, of each person nominated, including all
3
<PAGE>
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. Mr. Matthews was an officer 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............ 71 Chairman of the Board and Director (1) 1991
Toshifumi Suzuki......... 63 Vice Chairman of the Board and Director 1991
(2)
Clark J. Matthews, II.... 59 President, Chief Executive Officer, 1981-1987 and
Secretary and Director (3) 1991
Yoshitami Arai........... 64 Director (4) 1991
Timothy N. Ashida........ 56 Director (5) 1991
Jay W. Chai.............. 62 Director (6) 1991
Gary J. Fernandes........ 52 Director (7) 1991
Masaaki Kamata........... 56 Director (8) 1991
Kazuo Otsuka............. 49 Director (9) 1991
Asher O. Pacholder....... 58 Director (10) 1991
Nobutake Sato............ 57 Director (11) 1991
Tatsuhiro Sekine......... 61 Director (12) 1993
</TABLE>
- ------------------------
(1) Chairman of the Board and Director of the Company since March 5, 1991.
Director and Honorary Chairman 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 Famile Co., Ltd. since 1986. Chairman of York
Mart Co., Ltd. since 1979. Chairman of Robinson's Japan Co., Ltd. since
1995. Chairman of Maryann Co., Ltd. since 1977. President of Oshman's Japan
Co., Ltd. since 1984. Statutory Auditor of Steps Co., Ltd. since 1992.
Chairman of York-Keibi Co., Ltd. since 1989. President of Union Lease Co.,
Ltd. since 1985. 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 1981. 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 1985. 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 and Secretary
since April 26, 1995; 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
<PAGE>
(4) Director of the Company since March 5, 1991. Chairman of the Board of
Systems International Incorporated, 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., Europe
Consultants S.A., and Industrial Suppliers S.A. Member of Pacific Basin
Economic Council and other international non-profit organizations.
(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 International 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
(as amended in 1995) he is paid $11,500 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. from June 1992
to September 1995. 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 and Chairman
of the Board of A.T. Kearney, Inc. since September 1995. Director of John
Wiley & Sons, Inc. since April 1988, of Westcott Communications since May,
1989 and of Amtech Corporation since February 1995. 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.
(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., AM International, Inc. and USF&G Pacholder Fund, Inc. Dr.
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
5
<PAGE>
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.
Each of the nominees presented for election has been recommended by the
Board of Directors. All nominees are currently members of the Board of Directors
and 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. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office.
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At March 8, 1996, the record date for the Annual Meeting, the Company was
aware of the following beneficial owners of 5% or more (as determined under the
applicable rules of the Securities and Exchange Commission) 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. The following
table, however, in accordance with the applicable requirements, includes certain
shares which Ito-Yokado and Seven-Eleven Japan have the power to acquire within
the next sixty days.
<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 265,546,459 Shares(a) 64.78%
$.0001 par value 4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
Common Stock, Ito-Yokado Co., Ltd. 36,777,078(b) 8.23%(b)
$.0001 par value 4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
Common Stock, Seven-Eleven Japan Co., Ltd. 35,334,839(b) 7.94%(b)
$.0001 par value 4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
</TABLE>
- ------------------------
(a) IYG Holding Company is a Delaware corporation, created specifically for the
purpose of purchasing shares of Common Stock of the Company issued in
connection with consummation of the Company's Plan of Reorganization 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. In
addition, IYG has the obligation to purchase, if requested to do so, up to
an additional 1.6 million shares, on or about
6
<PAGE>
April 22, 1996, from the holders of those shares under the terms of the
Shareholders Agreement. It is unknown whether those holders will offer their
shares to IYG. Included in the shares IYG is obligated to purchase are
1,301,375 shares that have been pledged to IYG as collateral for certain
loans made by IYG to those holders under the Shareholders Agreement. The
loans, which are non-recourse to the borrowers, will become due on or about
April 22, 1996.
(b) As required by the rules and regulations under the Securities Exchange Act
of 1934, as amended, the numbers shown in this table include shares of
common stock acquirable by Ito-Yokado (36,777,078 shares) and Seven-Eleven
Japan (35,334,839 shares) upon conversion of $300 million 4.5% Convertible
Quarterly Income Debt Securities due 2010, issued by the Company in
November, 1995 (the "Convertible Debt Securities"), which are convertible
into 72,111,917 shares of Southland Common Stock at a conversion price of
$4.1602 per share.
The percentage ownership shown in this table and the table that follows is
calculated as required by Rule 13d-3(d)(1) under the Securities Exchange Act of
1934, as amended. The actual percentage owned by IYG, Ito-Yokado and
Seven-Eleven Japan, if all the Convertible Debt Securities were converted, would
be 70.04%. IYG currently owns 64.78% of the Company's outstanding Common Stock.
Ito-Yokado and Seven-Eleven Japan do not currently own any shares of the Common
Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table, and the footnotes that follow, show the beneficial
ownership of Southland Common Stock as of March 1, 1996, as required by the
rules and regulations of the Securities and 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............................................ 307,709(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................................................ 61,000(i) *
Masaaki Kamata................................................... 100,000(j) * (j)
James W. Keyes................................................... 17,500(k) *
Stephen B. Krumholz.............................................. 40,834(l) *
Kazuo Otsuka..................................................... 30,000(m) * (m)
Asher O. Pacholder............................................... -0- -0-
Nobutake Sato.................................................... 100,000(n) * (n)
Tatsuhiro Sekine................................................. -0- -0-
Bryan F. Smith, Jr............................................... 15,251(o) *
All officers and directors as a group (27 persons) (p)........... 341,689,273(p) 70.8%(p)
</TABLE>
- ------------------------
*Rounds to less than one-tenth of one percent
(a) At March 1, 1996, 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
Warrants to purchase Common Stock as a result of their ownership of
Southland's old debt securities and preferred stock. Shares acquirable upon
7
<PAGE>
the exercise of such Warrants are included in the shares shown in the above
table because all such Warrants were exercised prior to their expiration on
February 23, 1996, although the actual share certificates may not have been
received.
(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 7,708 shares directly; 143,334 shares acquired under the
Company's Grant Stock Plan; 156,667 shares are 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 options to acquire 640,000 shares of Common Stock granted under the
1995 Stock Incentive Plan, not shown in the above table because no portion
of such options can be exercised until after October 23, 1996.
(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;
31,667 shares are 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 options to
acquire 136,800 shares of Common Stock granted under the 1995 Stock
Incentive Plan, not shown in the above table because no portion of such
options can be exercised until after October 23, 1996.
(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 Common Stock. Mr. Chai disclaims beneficial ownership
of such shares.
(i) Mr. Fernandes owns 60,000 shares directly and 1,000 shares are held in trust
for his son.
(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. Keyes has options on 17,500 shares acquirable upon the exercise of such
options under the Company's Equity Participation Plan (see "Compensation of
Directors and Officers -- Executive Officers' Compensation," below) and
holds options to acquire 250,000 shares of Common Stock granted under the
1995 Stock Incentive Plan, not shown in the above table because no portion
of such options can be exercised until after October 23, 1996.
(l) Mr. Krumholz owns 9,167 shares acquired under the Company's Grant Stock
Plan; 31,667 shares are 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 options to
acquire 350,000 shares of Common Stock granted under the 1995 Stock
Incentive Plan, not shown in the above table because no portion of such
options can be exercised until after October 23, 1996.
(m) 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.
(n) 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.
(o) Mr. Smith owns 251 shares directly; 15,000 shares are acquirable upon the
exercise of options under the Company's Equity Participation Plan (see
"Compensation of Directors and Officers --
8
<PAGE>
Executive Officers' Compensation," below) and holds options to acquire
136,800 shares of Common Stock granted under the 1995 Stock Incentive Plan,
not shown in the above table because no portion of such options can be
exercised until after October 23, 1996.
(p) The total shares shown are as follows: 3,542,896 shares owned by officers
and directors directly or with family members; 488,001 shares acquirable by
16 officers upon exercise of options or conversion of convertible debentures
under the Equity Participation Plan; 265,546,459 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, and 72,111,917 shares acquirable by Ito-Yokado and
Seven-Eleven Japan (of either or both of which Messrs. Ito, Suzuki, Kamata,
Sato, Sekine and Otsuka are directors or officers) upon conversion of the
Convertible Debt Securities (as to which Messrs. Ito, Suzuki, Kamata, Sato,
Sekine and Otsuka disclaim beneficial ownership).
SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. The Company believes
that during the fiscal year ended December 31, 1995, its officers, directors and
holders of more than 10% of the Company's Common Stock complied with all Section
16(a) filing requirements except that Terry Blocher, a newly elected Vice
President of the Company, failed to file his initial ownership report on Form 3
within ten days after the effective date of his election. In making these
statements, the Company has relied upon the written representations of its
directors and officers.
PROPOSAL 2. APPROVAL OF 1995 STOCK INCENTIVE PLAN
On October 23, 1995, the Board of Directors adopted The Southland
Corporation 1995 Stock Incentive Plan (the "Stock Incentive Plan"), subject to
shareholder approval at this Annual Meeting. The Board of Directors' adoption
of, and any Awards granted under, the Stock Incentive Plan, have been made
subject to obtaining approval of the Stock Incentive Plan from the shareholders.
The Board believes that the adoption of the Stock Incentive Plan will provide an
effective means to attract and retain key employees of outstanding ability,
motivate key employees, by means of performance-related incentives, to achieve
longer-range performance goals and enable such key employees to participate in
the long-term growth and financial success of the Company. The Compensation and
Benefits Committee unanimously recommended that the Stock Incentive Plan be
adopted by the Board of Directors, which unanimously approved the adoption of
the plan.
The following summary description of the Stock Incentive Plan is qualified
in its entirety by reference to the Stock Incentive Plan, a copy of which is
attached hereto as Appendix A and incorporated herein by reference. Terms with
their initial letter capitalized that are used in this description and not
specifically defined herein shall have the same meaning given such terms in the
Stock Incentive Plan.
GENERAL INFORMATION
The types of awards that may be granted under the Stock Incentive Plan
include (i) incentive stock options ("Incentive Stock Options"), as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
stock options other than Incentive Stock Options ("nonqualified stock options"
and, together with Incentive Stock Options, "Stock Options"), (iii) stock
appreciation rights ("SARs"), (iv) shares of restricted stock ("Restricted
Stock"), (v) restricted stock units ("Restricted Stock Units"), (vi) performance
shares ("Performance Shares"), (vii) bonus stock ("Bonus Stock") and (viii)
other stock-based awards (collectively, "Incentive Awards").
9
<PAGE>
ADMINISTRATION
The Stock Incentive Plan is currently administered by the Company's
Compensation and Benefits Committee, which is appointed by the Board, unless any
member of such committee fails to qualify as both a "Disinterested Person" under
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an
"Outside Director" under Section 162(m) of the Code. If the members of the
Compensation and Benefit Committee do not qualify to administer the Stock
Incentive Plan under these regulations, the Board or the Committee shall appoint
a sub-committee comprised of directors who do qualify. The committee that at any
time administers the Stock Incentive Plan is referred to as the "Committee." The
members of the Committee (through the date of this Annual Meeting of
Shareholders, as permitted by the regulations under Section 162(m)) are
Toshifumi Suzuki, Timothy N. Ashida, Gary J. Fernandes and Kazuo Otsuka.
Committee members will serve in such capacity until their resignation or removal
at any time.
Under the Stock Incentive Plan, the Committee will have wide discretion and
flexibility, thus enabling the Committee to administer the Stock Incentive Plan
in the manner that it determines, from time to time, is in the best interests of
the Company. The Committee also will have authority to interpret the Stock
Incentive Plan, to determine the terms and provisions of Incentive Awards, and
to make all other determinations necessary or advisable for administration of
the Stock Incentive Plan.
SHARES SUBJECT TO THE STOCK INCENTIVE PLAN
Subject to certain exceptions set forth in the Stock Incentive Plan, the
aggregate number of shares of the Company's Common Stock that may be the subject
of Incentive Awards under the Stock Incentive Plan is 41,000,000. The maximum
number of shares that may be awarded to any one individual pursuant to Incentive
Awards under the Stock Incentive Plan, subject to certain adjustments as
described below, is 10,000,000 shares.
ELIGIBILITY
Employees eligible to participate in the Stock Incentive Plan will be
designated by the Committee and will be chosen from among those employees
determined to be Key Employees. "Key Employees" are those employees of the
Company and its Subsidiaries determined by the Committee to have a direct and
significant impact on the performance of the Company. The Company's executive
officers are among the employees who are eligible to receive Incentive Awards
under the Stock Incentive Plan.
TERMS AND CONDITIONS OF INCENTIVE AWARDS
STOCK OPTIONS. The purchase price of Common Stock under each Stock Option
granted pursuant to the Stock Incentive Plan will be determined by the
Committee; provided, however, that the exercise price for Common Stock subject
to a Stock Option will not be less than 100% of the fair market value of the
Common Stock on the date of grant of such Stock Option. The aggregate fair
market value (determined at the time an Incentive Stock Option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by an employee during any calendar year (under all stock
option plans of the Company) will not exceed $100,000, or such other amount as
may be prescribed under the Code or applicable regulations and rulings from time
to time.
Stock Options may be exercised as determined by the Committee, but in no
event later than ten years from the date of grant.
Options awarded under the 1995 Plan will be exercisable at such times and
subject to such restrictions and conditions (including without limitation,
restrictions based on the passage of time or the achievement of certain
performance goals) as the Committee shall determine in its discretion. However,
an option generally may not be exercisable until at least one year following the
date of grant. Upon the exercise of a Stock Option, the participant must pay the
purchase price in full either in cash, a cash equivalent acceptable to the
Committee, or a combination of cash and its equivalent acceptable to the
Committee. The purchase price may be paid, with the approval of the Committee,
by assigning and delivering to the Company shares of Common Stock or a
combination of cash and such shares equal in value to the exercise price. In
addition, at the request of a participant and to the extent
10
<PAGE>
permitted by applicable law, the Committee may approve arrangements with a
brokerage firm under which such brokerage firm, on behalf of the participant,
will pay the exercise price of the Stock Options being exercised to the Company,
and the Company will promptly deliver to such firm the shares acquired upon such
exercise. Participants will not be entitled to receive any fractional shares of
Common Stock upon the exercise of Stock Options granted under the Stock
Incentive Plan.
All shares of Common Stock issuable upon the exercise of Stock Options may,
in the discretion of the Committee, be subject to restrictions on transfer and
other features similar to those applicable to awards of Restricted Stock and
Restricted Stock Units.
STOCK APPRECIATION RIGHTS. A Stock Appreciation Right ("SAR") may be
granted either in tandem with or independent of a Stock Option. An SAR is the
right to receive an amount equal to the excess of the fair market value of a
share of the Company's Common Stock on the date of exercise over the fair market
value of a share of Common Stock on the date of grant (in the case of SARs
granted independent of a Stock Option) or the exercise price of the related
Stock Option (in the case of an SAR granted in tandem with a Stock Option).
An SAR granted in tandem with a Stock Option may require the holder, upon
exercise, to surrender the related Stock Option or any portion thereof to the
extent unexercised, with respect to the number of shares as to which such SAR is
exercised, and to receive payment as described above. The surrendered Stock
Option will then cease to be exercisable. A tandem SAR will be exercisable or
transferable only to the extent that the related Stock Option is exercisable or
transferable.
An SAR granted independent of a Stock Option will be exercisable as
determined by the Committee. An independent SAR will entitle the holder, upon
exercise, to receive payment as described above. The Committee may limit the
amount payable upon exercise of any tandem or independent SAR. Any such
limitation will be specified at the time the SAR is granted.
Payment upon the exercise of SARs will be made, at the discretion of the
Committee, in cash, in shares of Common Stock, or a combination of cash and
shares of Common Stock.
PERFORMANCE SHARES. A Performance Share Award is an award, payable in cash
or stock, based on performance goals which may be established by the Committee
and the value of which shall be paid to the Participant, if the performance
goals, as set forth in the applicable Award Agreement, are satisfied.
RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS. A Restricted Stock Award
is the grant of shares of Common Stock or the right to purchase Common Stock at
a price determined by the Committee, which is nontransferable and subject to
substantial risk of forfeiture until specific conditions are met. A Restricted
Stock Unit is a fixed or variable dollar denominated right to acquire Common
Stock, which may or may not be subject to restrictions. Certificates evidencing
Restricted Stock Awards will bear a legend making reference to the restrictions
imposed. The restrictions will lapse in accordance with a schedule or other
conditions determined by the Committee. During the restriction period, the
holder of a Restricted Stock Award may, in the discretion of the Committee, be
given certain rights as a shareholder, including the right to vote the stock
subject to the Restricted Stock Award and/or receive dividends with respect
thereto.
BONUS STOCK AWARDS. Bonus Stock Awards are awards of shares of Common Stock
granted to participants without cash consideration which may be subject to
restrictions on transfer or other features similar to those applicable to awards
of Restricted Stock and Restricted Stock Units.
OTHER STOCK-BASED AWARDS. The Committee shall also have the authority to
grant participants other Stock Awards which can be in the form of shares of
Common Stock or units with the terms and conditions of such Awards to be as
specified in the Award Agreement.
11
<PAGE>
ACCELERATION OF VESTING AND EXERCISABILITY
Each Award Agreement shall provide for the effect of a termination of
employment due to death, Disability, Early Retirement, Normal Retirement or
Divestiture on the vesting, exercisability and termination of such Award, and
the effect, if any, of a change of control on such Award.
AWARD AGREEMENT
The terms of any Incentive Awards under the 1995 Stock Incentive Plan are
determined by the Committee. Each Award is evidenced by a written agreement
between the Company and the person to whom the Incentive Award is made. The
Award Agreement specifies the details of the award, the expiration date, if
applicable, the number of shares or other units to which the Incentive Award
pertains, any conditions to the exercise of the Incentive Award and such other
terms and conditions as the Committee, in its discretion, shall determine.
ADJUSTMENT PROVISIONS
The terms of an Incentive Award and the maximum number of shares of Common
Stock authorized for issuance under the Stock Incentive Plan will be adjusted if
the Company subdivides as a whole the number of shares of Common Stock then
outstanding into a greater number of shares of Common Stock (such as in a stock
split) or consolidates as a whole the number of shares of Common Stock then
outstanding into a lesser number of shares of Common Stock (such as in a reverse
stock split). In addition, if the Common Stock is subdivided or consolidated
into one or more different kinds of securities, the holders of Incentive Awards
will be entitled to purchase or receive (in lieu of the shares of Common Stock
originally subject to the Incentive Award) the kinds of securities into which
the Common Stock is subdivided or consolidated.
Upon a "change in control" of the Company and in the discretion of the
Committee, (1) all outstanding Stock Appreciation Rights and Stock Options may
become immediately and fully vested and exercisable in full, and (2) the
restriction period on any Restricted Stock Award may be accelerated and the
restrictions will expire.
In general under the Stock Incentive Plan, a "change in control" of the
Company occurs in any of four situations: (1) a person other than the Company,
certain affiliated companies or benefit plans, or a company with the same
ownership as the Company, acquires 50% or more of the voting power of the
Company's outstanding voting securities; (2) a person described in clause (1)
announces a tender offer for 50% or more of the Company's outstanding voting
securities and the Board does not oppose the tender offer; (3) the Company
merges or consolidates with another corporation or partnership, or the Company's
shareholders approve such a merger or consolidation, other than mergers or
consolidations in which the Company's voting securities are converted into
securities having the majority of voting power in the surviving company; or (4)
the Company liquidates or sells all or substantially all its assets, or the
Company's shareholders approve such a liquidation or sale, except sales to
corporations having substantially the same ownership as the Company.
AMENDMENT AND TERMINATION OF THE STOCK INCENTIVE PLAN
No Incentive Award may be granted under the Stock Incentive Plan after
December 31, 2005. The Board may, insofar as permitted by law, with respect to
any shares which, at the time, are not subject to Incentive Awards, suspend or
discontinue the Stock Incentive Plan.
The Board or the Committee may amend, suspend, or terminate the Stock
Incentive Plan or any portion thereof at any time, provided that no amendment
shall be made without shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement.
The Stock Incentive Plan is intended to comply with the requirements of
Section 162(m) of the Code to the extent required to cause Stock Options and
Stock Appreciation Rights to be classified as "performance-based compensation"
under Section 162(m)(4)(C) of the Code. However, regulations under Section
162(m) of the Code, when finalized, and interpretations of Section 162(m) and
such
12
<PAGE>
regulations, could require certain amendments to the Stock Incentive Plan to
accomplish this classification. To the extent amendments to the Stock Incentive
Plan are required, the Board or the Committee may adopt such amendments that it
determines are necessary but will not solicit shareholder approval of such
amendments unless shareholder approval is required under Section 162(m) of the
Code or other applicable law.
FEDERAL INCOME TAX CONSEQUENCES
A participant receiving nonqualified stock options or SARs will not
recognize taxable income at the time the nonqualified stock option or SAR is
granted. At the time the nonqualified stock option or SAR is exercised, the
participant will recognize ordinary taxable income in an amount equal to the
excess of the fair market value of the Company's Common Stock on the date of
exercise over the exercise price (or fair market value of the Common Stock at
the time of grant of SARs granted independent of Stock Options). The Company
will be entitled to a concurrent deduction equal to the ordinary income
recognized by the participant, to the extent such amount constitutes an ordinary
and necessary business expense and provided that the Company satisfies any
federal income tax withholding requirements.
An employee granted an Incentive Stock Option will not recognize taxable
income at the time of grant or, subject to certain conditions, at the time of
exercise. The excess of the fair market value of the Common Stock received over
the option price is an item of tax preference income potentially subject to the
alternative minimum tax. If Common Stock acquired upon exercise of an Incentive
Stock Option is held for a minimum of two years from the date of grant and one
year from the date of exercise, the gain or loss (in an amount equal to the
difference between the sales price and the exercise price) upon disposition of
the Common Stock will be treated as long-term capital gain or loss, and the
Company will not be entitled to any corresponding deduction.
If the holding period requirements are not met, the disposition of shares
will be treated as disqualifying the shares from Incentive Stock Option
treatment, and the employee will recognize ordinary income in an amount equal to
the lesser of (i) the excess of the fair market value of Common Stock on the
date of exercise over the exercise price or (ii) the amount realized on the sale
of such Common Stock over the exercise price. Any gain realized by the employee
in excess of such ordinary income will be long-term or short-term capital gain,
depending on the holding period of the shares. If the shares are sold for an
amount less than the exercise price, such loss will be treated as a long-term or
short-term capital loss depending on the holding period for such shares. In the
event of a disqualifying disposition, the Company will be entitled to a
deduction equal to the ordinary income recognized by the Participant, to the
extent such amount constitutes an ordinary and necessary business expense.
An employee receiving a Restricted Stock Award will not recognize taxable
income at the time of grant, provided that the Restricted Stock is not
transferable and is subject to a substantial risk of forfeiture within the
meaning of Section 83(a) of the Code ("Restrictions"). At the time the
Restrictions lapse, the employee will recognize ordinary taxable income equal to
the difference between the fair market value of the Common Stock at the time the
Restrictions lapse and the price, if any, paid by the employee for such Common
Stock. Any dividends received by the employee before the termination of
Restrictions will be taxed as ordinary income. The Company will be entitled to a
deduction equal to the ordinary income reported by the employee, provided the
Company satisfies any federal income tax withholding requirements. Upon the
disposition of the Common Stock, the employee will recognize capital gain or
loss equal to the difference between the fair market value of the Common Stock
at the time the Restrictions lapse and the amount realized upon the disposition
of the Common Stock. Such capital gain or loss will be long-term or short-term
depending on whether the participant held the Common Stock for more than one
year.
An employee may elect to report and recognize income at the time of grant or
purchase of Restricted Stock by filing an election under Section 83(b) of the
Code (a "Section 83(b) Election"). If the employee makes a Section 83(b)
Election, the Company will be entitled to a deduction equal to the ordinary
income reported by the employee in the year of the election, provided the
Company satisfies
13
<PAGE>
any federal income tax withholding requirements. Dividends paid by the Company
before and after the Restrictions lapse will not be deductible by the Company.
Upon the disposition of the Common Stock, the employee will recognize capital
gain or loss equal to the difference between the amount realized and the sum of
the income recognized by the employee as a result of the Section 83(b) Election
and any amounts paid by the employee for the Restricted Stock. Such capital gain
or loss will be long-term or short-term depending on the Participant's holding
period.
Special rules may apply with respect to employees subject to Section 16(b)
of the Securities Exchange Act of 1934, as amended. Other than in the case of an
Incentive Stock Option held in accordance with the specified holding period
requirements, the amount and timing of the recognition of income by an employee
subject to Section 16(b) (and the concurrent deduction by the Company) on the
exercise of a Stock Option or SAR generally will be based on the fair market
value of the shares received when the restrictions of Section 16(b) lapse,
unless the employee elects otherwise by making a Section 83(b) Election.
1995 OPTIONS GRANTED
On October 23, 1995, the Committee, subject to shareholder approval of the
Stock Incentive Plan, granted options exercisable for 3,863,600 shares of Common
Stock under the Stock Incentive Plan to a total of 82 employees, including all
officers. An Award Agreement was provided to each grantee which contained the
provisions relating to the vesting and exercisability of the options. The Award
Agreement also contains conditions relating to treatment of the option upon an
employee's death, Disability, Early Retirement, Normal Retirement or Divestiture
from the Company.
The options granted will become exercisable over a five-year period, at 20%
per year beginning one year after the date of grant and expire ten years from
the date of grant. In addition, if the Closing Price of Southland Common Stock
exceeds certain target levels during the term of the option, and before the
option grant otherwise becomes fully exercisable, the vesting and exercisability
of the option will be accelerated. Options may be exercised by giving written
notice of exercise to the Company specifying the number of full shares of Common
Stock being purchased and tendering payment of the option exercise price to the
Company. The option price due upon exercise of any option granted in 1995 shall
be paid to the Company either in full in cash or by tendering previously
acquired shares of Common Stock, or in part in cash and part in stock.
Options granted in 1995, when properly exercised, shall result in the
delivery to the optionee of 70% of the shares acquired via a stock certificate
for unrestricted shares. The remaining 30% of the shares acquired shall be
represented by a stock certificate bearing a legend restricting the transfer or
sale of such shares for a period of 24 months following the exercise date.
14
<PAGE>
The following table shows the number and value of options granted in 1995,
all of which grants are subject to shareholder approval of the 1995 Stock
Incentive Plan. Only employees of the Company are eligible to receive grants
under the Stock Incentive Plan.
NEW PLAN BENEFITS
1995 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE ($)
GRANTED AT FAIR NUMBER OF OPTIONS
NAME AND POSITION MARKET VALUE(A) GRANTED
- ------------------------------------------------------------------ ------------------- -------------------
<S> <C> <C>
Clark J. Matthews, II ............................................ -0- 640,000
President and Chief Executive Officer; Secretary
Stephen B. Krumholz .............................................. -0- 350,000
Executive Vice President and Chief Operating Officer
Rodney A. Brehm .................................................. -0- 136,800
Senior Vice President, Distribution and Foodservice
James W. Keyes ................................................... -0- 250,000
Senior Vice President, Finance
Bryan F. Smith, Jr. .............................................. -0- 136,800
Senior Vice President and General Counsel
Executive Officer Group (includes 16 persons) .................... -0- Total: 2,205,000
Non-Executive Officer Employee Group ............................. -0- 1,658,600
</TABLE>
- ------------------------
(a) All options granted are exercisable at $3.1875 per share, the fair market
value on the date of grant. The closing price per share of Southland Common
Stock on March 12, 1996 was $3.3125 per share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE STOCK
INCENTIVE PLAN, 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" THE
APPROVAL OF THE 1995 STOCK INCENTIVE PLAN.
PROPOSAL 3. APPROVAL OF 1995 PERFORMANCE PLAN
In 1993, Southland adopted a multi-year Performance Plan under which
officers and certain key employees of Southland are eligible to receive cash
awards based upon the Company's achievement of certain operating earnings
targets, both on an annual and a cumulative two-year basis. At the end of the
first two-year plan (1993 and 1994), the Performance Plan was renewed to cover a
new two-year period (1995 and 1996); however, no awards were earned under the
1995 Performance Plan for 1995. This two-year plan is the only long-term
incentive plan ("LTIP") maintained by the Company.
Recently, the federal tax rules have been amended by adding Section 162(m)
to the Code which limits the deductibility, by publicly held companies, of
compensation amounts paid to certain senior officers which exceed $1 million,
unless certain requirements are satisfied. These requirements include
stockholder approval of an arrangement which meets the requirements of the rules
as they apply to "performance-based compensation." As noted in the "Compensation
Committee Report on Executive Compensation" included in this Proxy Statement,
the Committee believes the 1995 Performance Plan qualifies as "performance-based
compensation" and unanimously recommended that the Board of Directors submit the
1995 Performance Plan to the shareholders for approval so that the Plan would
conform with the shareholder approval requirements of Section 162(m).
15
<PAGE>
The following summary description of the 1995 Performance Plan is qualified
in its entirety by reference to the 1995 Performance Plan, a copy of which is
attached hereto as Appendix B and incorporated herein by reference. Terms with
their initial letter capitalized that are used in this description and not
specifically defined herein shall have the same meaning given such terms in the
1995 Performance Plan.
GENERAL INFORMATION
Under the 1995 Performance Plan, eligible employees, including all officers,
are granted Performance Units, which are based upon the participant's salary
administration Grade Level. Cash Awards will be paid under the plan if the
Company's Actual Operating Earnings in either year in the Plan Period exceed the
threshold for Awards for that year or if the Company's Cumulative Actual
Operating Earnings exceed the Cumulative Threshold Operating Earnings for the
two-year period. A certain amount of each excess dollar of Actual Operating
Earnings funds the Award Pool under the plan. The amount paid per Performance
Unit is calculated as a pro rata portion of the Award Pool. The maximum amount
of the Award Pool is equal to the Annual Performance Incentive amount payable
under the Company's Annual Performance Incentive ("API" or "Annual Bonus") Plan
(at 100%) to all eligible employees for the Plan Period. The amount payable to
an individual participant is determined by dividing the cumulative number of
Performance Units outstanding at the end of the Plan Year for an Annual Award,
and at the end of the Plan Period for a Cumulative Award, into the Award Pool
and then multiplying the per unit amount by the number of Performance Units (not
cancelled or forfeited) held by that Participant.
ADMINISTRATION
The 1995 Performance Plan is currently administered by the Company's
Compensation and Benefits Committee, which is appointed by the Board. It is
anticipated that, at any time that the members of the Compensation and Benefit
Committee do not qualify to administer the 1995 Performance Plan under Section
162(m) of the Code, then the Board or the Committee shall appoint a sub-
committee comprised of directors that do qualify. The committee that at any time
administers the 1995 Performance Plan is referred to as the "Committee." The
members of the Committee (through the date of this Annual Meeting of
Shareholders as permitted by the regulations under Section 162(m)) are Toshifumi
Suzuki, Timothy N. Ashida, Gary J. Fernandes and Kazuo Otsuka. Committee members
will serve in such capacity until their resignation or removal at any time.
ELIGIBILITY
Employees in salary administration Grade Levels 41-44 and 50-58, or such
equivalent Grade Levels as may be established, are eligible to be selected for
participation in the 1995 Performance Plan, as selected by Southland's President
and approved by the Committee. The Company's executive officers are among the
employees eligible to participate in the Plan.
DETERMINATION OF AWARD
The number of Performance Units granted to a participant, for each Plan
Year, is equal to the Annual Performance Incentive payable (at 100%) at the
mid-point of the Participant's salary administration Grade Level on the
Determination Date for that Plan Year. The Award Pool, which is to be shared by
all eligible Participants, is equal to an amount, from $.35 to $.15, of each
dollar by which Southland's Actual Annual, or Actual Cumulative, Operating
Earnings exceed the Annual or Cumulative Threshold Operating Earnings set forth
in the Plan for the Plan Period, up to the maximum Award payable. The cumulative
number of Performance Units outstanding (and not otherwise forfeited due to
termination or ineligibility) will be divided into the Award Pool, and
Participants will receive a pro rata share of the Award Pool based upon the
number of Performance Units granted to the Participant as a proportion of the
total Performance Units outstanding under the Plan.
If a Participant's employment with the Company terminates due to death,
Disability, Divestiture, Retirement or termination by the Company for any reason
other than Cause, or the Participant is demoted to a non-eligible grade, the
Participant shall be entitled to a partial award under the Plan
16
<PAGE>
based upon the number of days in the Plan prior to termination or cessation of
participation. The Participant's Performance Units for that Plan Year will be
multiplied by a fraction the numerator of which is the number of days the
Participant worked prior to termination or demotion and the denominator of which
is 365.
Payment for any Awards earned will be made to Participants within 120 days
after the end of the Plan Year, if the Award is an Annual Award, and within 120
days after the end of the Plan Period, if the Award is a Cumulative Award.
MAXIMUM AWARDS TO ANY PARTICIPANT
The maximum that can be earned under the Plan depends upon a Participant's
salary administration Grade Level (which determines the number of Performance
Units the participant is granted) as well as on the Company's Actual Operating
Earnings for the Plan Year or the Plan Period compared with the Threshold
Operating Earnings set forth in the Plan for the same period. The amount earned
also depends upon how many other Performance Units are outstanding (and neither
cancelled, in situations such as Demotions, Divestitures or terminations, or
forfeited, for voluntary termination or termination for Cause) and eligible to
participate in the Award Pool.
CALCULATION OF OPERATING EARNINGS
Actual Operating Earnings, as shown on the Company's internal financial
statements, are the earnings of the Company before non-operating income and
expense items, interest expense, taxes and extraordinary items. For 1995 and
1996, the Committee has determined that the Threshold Operating Earnings are
equal to the Company's Budgeted Operating Earnings for each year. For any Awards
to be earned under the Plan, the Company's Actual Operating Earnings must exceed
the Budgeted Operating Earnings, as shown on the annual budgets prepared by the
Company for internal use.
LIMITATIONS ON AWARDS
In the aggregate, for the Plan Period, the amount payable under the Plan
cannot exceed the cumulative amount payable under the Company's Annual Bonus
Plan, at 100%, to all employees eligible to participate in the Performance Plan.
In addition, the Company must have the liquidity to make the payments at the
time the Awards are payable.
AMENDMENT AND TERMINATION
The Board or the Committee may amend, suspend, or terminate the 1995
Performance Plan or any portion thereof at any time.
1995 UNITS GRANTED
In 1995, Performance Units were granted to all eligible key employees
(approximately 375 persons); however, the Company's 1995 Actual Operating
Earnings did not exceed the 1995 Threshold Operating Earnings for the Plan, and
no Awards were paid.
The following table shows the number of units granted and the value of the
units granted in 1995 under the 1995 Performance Plan.
17
<PAGE>
NEW PLAN BENEFITS
1995 PERFORMANCE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS (A)
- ------------------------------------------------------------------ ------------------- -------------------
<S> <C> <C>
Clark J. Matthews, II ............................................ -0- 369,900
President and Chief Executive Officer; Secretary
Stephen B. Krumholz .............................................. -0- 191,000
Executive Vice President and Chief Operating Officer
Rodney A. Brehm .................................................. -0- 108,855
Senior Vice President, Distribution and Foodservice
James W. Keyes ................................................... -0- 108,855
Senior Vice President, Finance
Bryan F. Smith, Jr. .............................................. -0- 108,855
Senior Vice President and General Counsel
Executive Officer Group (includes 16 persons)..................... -0- Total: 1,578,360
Non-Executive Officer Employee Group.............................. -0- 6,986,607
</TABLE>
- ------------------------
(a) These units were granted based on each Participant's 1995 salary
administration Grade Level.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1995
PERFORMANCE PLAN, 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" THE
APPROVAL OF THE 1995 PERFORMANCE PLAN.
PROPOSAL 4. RATIFICATION OF THE SELECTION OF AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Coopers & Lybrand to be the independent auditors of the Company for
1996. 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 1996 to the shareholders for ratification
at this meeting.
The services provided to the Company by Coopers & Lybrand in 1996 will
include, in addition to performing the Company's 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 1996, 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.
18
<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, 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. Ito-Yokado has, since 1992, unconditionally guaranteed a
$400 million commercial paper facility established by the Company for which
Ito-Yokado has received no fee. 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. On
November 22, 1995, Ito-Yokado and Seven-Eleven Japan acquired an aggregate of
$300 million of Southland 4.5% Convertible Quarterly Income Debt Securities due
2010, convertible into a total of 72,111,917 shares of Southland Common Stock.
Southland pays interest quarterly to Ito-Yokado and Seven-Eleven Japan on these
Convertible Debt Securities. 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 under which EDS has agreed to (1) install
automatic teller machines in 7-Eleven stores over a ten-year period and (2)
provide the Company with certain consulting and business systems planning
services and data processing support for which EDS received fees in 1995.
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"
or "Annual Bonus") Plan. The amount paid as Annual Bonus under this plan is
based upon the employee's or officer's base salary, salary administration grade
level and the achievement of certain pre-established performance criteria for
the Company each year, as 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 1995, 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.
19
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------- ---------------------------- --------------------------
OTHER ANNUAL RESTRICTED LTIP ALL OTHER
NAME AND SALARY BONUS COMPEN- STOCK OPTIONS/ PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR ($)(I) ($)(II) SATION($)(III) AWARD(S)($) SARS(#) ($)(IV) SATION($)(V)
- -------------------------- --------- --------- --------- ------------- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clark J. Matthews, II 1995 410,000 196,800 N/A -0- 640,000 -0- 10,680
President and Chief 1994 390,000 177,840 -0- 55,843 9,981
Executive Officer; 1993 390,000 131,040 -0- -0- 14,130
Secretary
Stephen B. Krumholz 1995 300,000 120,000 N/A -0- 350,000 -0- 7,638
Executive Vice President 1994 271,000 112,980 -0- 29,788 7,239
and Chief Operating 1993 271,000 75,880 -0- -0- 10,472
Officer
Rodney A. Brehm 1995 210,000 75,600 N/A -0- 136,800 -0- 7,519
Senior Vice President, 1994 195,000 64,280 -0- 12,757 6,947
Foodservice and 1993 195,000 43,680 -0- -0- 10,190
Distribution
James W. Keyes 1995 200,000 72,000 N/A -0- 250,000 -0- 7,423
Senior Vice President, 1994 183,000 64,280 N/A -0- 15,746 6,929
Finance 1993 183,000 43,996 35,424 -0- -0- 10,272
Bryan F. Smith, Jr. 1995 200,000 72,000 N/A -0- 136,800 -0- 7,479
Senior Vice President 1994 183,000 55,632 N/A -0- 12,757 6,907
and General Counsel 1993 183,000 40,992 N/A -0- -0- 10,150
</TABLE>
- ------------------------
(i) In general, officers received no salary increases in 1994, unless they were
promoted to positions with additional responsibilities during that year. Mr.
Matthews received neither a salary increase nor any special bonus
compensation from 1990 through 1994.
(ii)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.
(iii)
No "Other Annual Compensation" is shown because the total amounts paid for
perquisites in 1993, 1994 and 1995 to the five named executive officers did
not exceed the lesser of $50,000 or 10% of the named executive officer's
salary and bonus for 1995, except for Mr. Keyes, who received $23,424 in
interest reimbursement relating to the refinancing of his home and interest
differential payments under a Company-initiated program to terminate the
interest reimbursement plan in which officers and certain key employees
participated, plus a $12,000 car allowance in 1993.
(iv)No amounts were paid for 1995 pursuant to the 1995 Performance Plan because
the Company's 1995 threshold operating earnings under the plan were not
achieved.
(v) Includes only (a) the amount of Company contribution 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 24,000 participants, which for
1995 was as follows: $6,645 each for Messrs. Krumholz, Brehm, Keyes and
Smith, and $8,865 for Mr. Matthews; 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, which for 1995 were as follows: Mr.
Matthews -- $1,815; Mr. Krumholz -- $993; Mr. Brehm -- $874; Mr. Keyes --
$778; and Mr. Smith -- $835.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
As described in detail elsewhere herein (see "Proposal 2-1995 Stock
Incentive Plan," above), the Company's Board of Directors unanimously approved
the adoption of the 1995 Stock Incentive Plan, which is being presented to the
shareholders for approval at this Annual Meeting of Shareholders. Pursuant to
the Stock Incentive Plan, the Compensation and Benefits Committee granted,
subject to
20
<PAGE>
such shareholder approval of the Stock Incentive Plan, nonqualified stock
options to approximately 82 of the Company's key employees, including each of
the named executive officers, as well as all other officers. Options to purchase
an aggregate of 3,863,600 shares, over the five-year vesting period, were
granted. Under the terms of the plan, vesting will be accelerated if certain
target prices for the Company's Common Stock are achieved and maintained.
The following table provides information on the number of options granted,
the exercise price and expiration date of such options, as well as the potential
realizable value of the options assuming that the underlying Common Stock
appreciates in value from the date of grant at the annualized rates of 5% and
10%, as required by the Securities and Exchange Commission, and is not intended
to forecast future appreciation of the Company's stock price.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE APPRECIATION FOR
-------------------------------------------------------- OPTION TERM(II)
NUMBER OF PERCENT OF ----------------------------
SECURITIES TOTAL OPTIONS/ 5% ASSUMING 10% ASSUMING
UNDERLYING SARS GRANTED TO EXERCISE OR 10/22/05 10/22/05
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION STOCK PRICE STOCK PRICE
NAME GRANTED(#)(I) FISCAL YEAR ($/SH) DATE OF $5.1921 OF $8.2676
- --------------------------- ------------- --------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clark J. Matthews, II...... 640,000 16.57 $ 3.1875 10-22-05 $ 1,282,944 $ 3,251,264
Stephen B. Krumholz........ 350,000 9.06 $ 3.1875 10-22-05 $ 701,610 $ 1,778,035
Rodney A. Brehm............ 136,800 3.54 $ 3.1875 10-22-05 $ 274,229 $ 694,958
James W. Keyes............. 250,000 6.47 $ 3.1875 10-22-05 $ 501,150 $ 1,270,025
Bryan F. Smith, Jr......... 136,800 3.54 $ 3.1875 10-22-05 $ 274,229 $ 694,958
</TABLE>
- ------------------------
(i) Options become exercisable as to 20% of the shares subject thereto on the
first through fifth anniversaries of the grant date. 30% of the shares
received upon exercise will bear a legend restricting the transfer or sale
of such shares for 24 months after the date acquired, unless the optionee
dies, retires, becomes disabled or his employment is terminated due to
divestiture.
(ii)The amounts shown under these columns are the result of calculations at the
5% and 10% rates required by the Securities and Exchange Commission and are
not intended to forecast future appreciation of the Company's stock price.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information on the number of options
outstanding under both the Company's Equity Participation Plan and under the
1995 Stock Incentive Plan, as well as the value of unexercised options, both
exercisable and unexercisable, under both plans.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS/SARS
UNDERLYING UNEXERCISED OPTIONS/ AT FISCAL
SARS AT FISCAL YEAR END (#) YEAR-END($)(III)
SHARES ACQUIRED VALUE -------------------------------- -----------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE (I) UNEXERCISABLE (II) EXERCISABLE (IV)
- ---------------------------- --------------- --------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Clark J. Matthews, II....... -- -- 156,667 640,000 N/A
Stephen B. Krumholz......... -- -- 31,667 350,000 N/A
Rodney A. Brehm............. -- -- 31,667 136,800 N/A
James W. Keyes.............. -- -- 17,500 250,000 N/A
Bryan F. Smith, Jr.......... -- -- 15,000 136,800 N/A
<CAPTION>
NAME UNEXERCISABLE (V)
- ---------------------------- -----------------
<S> <C>
Clark J. Matthews, II....... $ 80,000
Stephen B. Krumholz......... $ 43,750
Rodney A. Brehm............. $ 17,100
James W. Keyes.............. $ 31,250
Bryan F. Smith, Jr.......... $ 17,100
</TABLE>
- ------------------------------
(i) All exercisable options shown are held pursuant to the Equity Participation
Plan (including both Incentive Stock Options and Nonqualified Stock
Options) and became exercisable on December 31, 1994.
21
<PAGE>
(ii) All unexercisable options shown are Nonqualified Stock Options, granted
subject to shareholder approval, under the 1995 Stock Incentive Plan, at an
exercise price of $3.1875 per share. None of the options granted in 1995
will become exercisable until October 1996 and then will become exercisable
20% per year for five years, which schedule can be accelerated if certain
share price targets are achieved.
(iii)No SARs are held by any of the named executive officers nor are any SARs
currently outstanding.
(iv) All options shown are exercisable at $7.50 or $7.70 per share. The Common
Stock is currently trading at prices significantly below this level.
(v) Based on the closing price of $3.3125 on The Nasdaq Stock Market on the
last business day of the Company's fiscal year.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table provides information on performance units awarded under
the 1995 Performance Plan to the named executive officers during the year ended
December 31, 1995.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE
NUMBER OF OR OTHER UNDER NON-STOCK
SHARES, PERIOD PRICE-BASED PLANS (A)(B)
UNITS UNTIL --------------------------
OR OTHER MATURATION THRESHOLD MAXIMUM
NAME RIGHTS (#) OR PAYOUT ($ OR #) ($ OR #)
- --------------------------------------------------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Clark J. Matthews, II.............................. 369,900 12/31/96 -0- $ 739,800
Stephen B. Krumholz................................ 191,000 12/31/96 -0- 382,000
Rodney A. Brehm.................................... 108,855 12/31/96 -0- 217,710
James W. Keyes..................................... 108,855 12/31/96 -0- 217,710
Bryan F. Smith, Jr................................. 108,855 12/31/96 -0- 217,710
</TABLE>
- ------------------------
(a) There is no "target" payout amount under the plan.
(b) No awards were earned under this plan for 1995.
All units granted, as described in the above table, were awarded pursuant to
the 1995 Performance Plan (described in detail elsewhere herein, see "Proposal
3. -- Approval of 1995 Performance Plan") adopted by the Company in 1995 as an
extension of the 1993 Performance Plan. The plan has both annual and two-year
cumulative operating earnings targets. Under the 1995 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, 1996) the award pool for
this plan will be funded by a predetermined amount of each dollar of actual
operating earnings achieved by the Company above the threshold operating
earnings set for each year and for the cumulative two-year period. 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 are sufficient to offset any shortfall.
The Company's 1995 operating earnings were not above the threshold for 1995
and, pursuant to the terms of the plan, no amounts were paid.
The maximum aggregate awards that can be paid under this plan are equal to
the total amount of Annual Bonus payable to the participants in this plan for
the plan period.
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
86 executives, 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
22
<PAGE>
in ten equal annual installments (if the executive retires between the ages of
55 and 65, a reduced benefit is payable); 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, the total amount
paid to the executive as disability benefits will equal 80% of the executive's
"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, would be
based on that executive's 1994 earnings, as follows:
Mr. Matthews -- $567,840, Mr. Krumholz -- $373,980, Mr. Brehm -- $254,280,
Mr. Keyes -- $245,586, and Mr. Smith -- $238,632. Under the plan, normal
retirement age is 65; however, if an executive retires between the ages of 55
and 65, 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.
DIRECTORS' COMPENSATION
For information about compensation of the Board of Directors see
"Information About The Board of Directors and Committees of the Board --
Compensation of Directors," above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described above, the Compensation and Benefits Committee of the Board of
Directors is composed of four directors, as follows: Mr. Suzuki, the chairman of
the committee, is Vice Chairman of the Board of Directors, 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. Ito-Yokado has, since 1992, unconditionally guaranteed a
$400 million commercial paper facility established by the Company for which
Ito-Yokado has received no fee. 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. On
November 22, 1995, Ito-Yokado and Seven-Eleven Japan acquired an aggregate of
$300 million of Southland 4.5% Convertible Quarterly Income Debt Securities due
2010, convertible into a total of 72,111,917 shares of Southland common stock.
Southland pays interest quarterly to Ito-Yokado and Seven-Eleven Japan on these
Convertible Debt Securities. 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 under which EDS has agreed to (1) install
automatic teller machines in 7-Eleven stores over a ten-year period and (2)
provide the Company with certain consulting and business systems planning
services and data processing support, for which EDS received fees in 1995.
Both Mr. Suzuki and Mr. Otsuka served as officers and/or directors of IYG
Holding Company, Ito-Yokado and/or Seven-Eleven Japan during 1995.
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 Plan, Grant Stock Plan,
23
<PAGE>
1995 Performance Plan and the newly adopted 1995 Stock Incentive Plan; 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).
In 1993, as the result of a Company-wide analysis of position
responsibilities and classifications, all exempt jobs were evaluated, and the
Company's compensation practices were compared against the compensation
practices of companies of similar size for jobs of similar responsibilities and
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 ("Annual Bonus") at the mid-point
of each grade level will achieve a compensation level that is slightly above the
median compensation level for the same job responsibilities in the comparative
data used. Most of the Company's officers are currently at salary levels below
the mid-point of the applicable grade level.
ANNUAL PERFORMANCE INCENTIVE. The Company's executive officers and all
exempt personnel receive annual compensation consisting of a combination of base
salary and the potential to earn Annual Bonus. The amount of Annual Bonus 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. The Chief Executive Officer and all executive
officers are compensated under this plan. The Annual Bonus potential for the
Chief Executive Officer, if the Company's earnings target is reached, is 60% of
his base salary. The Company's senior officers (Messrs. Krumholz, Brehm, Keyes,
LeRoy and Smith) have Annual Bonus potential of from 50% to 45% of their base
salary. Other executive officers have a potential to earn between 45% and 34% of
their base salary.
The amount of Annual Bonus received by any particular executive for service
in 1995 was based upon the Company's achievement of certain operating earnings
threshold and budgeted target and above-budget goal levels, as set forth in the
Company's internal budget documents. Under the plan, as designed for 1995, if
the budgeted operating earnings amount was achieved, then 100% of the Annual
Bonus would have been earned and, if operating earnings exceeded the budgeted
amount, then a set amount of each excess dollar of operating earnings would have
funded the payment of additional Annual Bonus. The maximum that can be earned
under this plan is 200% of the targeted amount of Annual Bonus. Based upon the
calculations under the formula for this plan and the Company's actual operating
earnings, 80% of the targeted Annual Bonus was paid for 1995.
In 1995, certain officers with responsibility for divisional operating units
(as well as other operations management personnel) received Annual Bonus that
was based partly on the performance of their particular operating units and only
partly on the performance of the Company as a whole. This will not be continued
in 1996 as the Company is continuing the phase-in of new products and marketing
strategies in selected geographic areas, which may impact each area's ability to
achieve pre-set performance goals differently.
BASE SALARY. In recognition of the progress that had been made by the
Company to implement various new merchandising, training and customer-oriented
initiatives during 1994, it was determined that Mr. Matthews' base salary should
be increased to $410,000 for 1995. This represented a five-percent increase, the
first increase in base salary given to Mr. Matthews since 1989. Although Mr.
Matthews' base salary is still well below the median for chief executive
officers in companies of comparable size, revenue and earnings, it is
anticipated that this shortfall will be eliminated over a
24
<PAGE>
multi-year period, if the Company continues to make progress toward achieving
its strategic goals. This increase in salary also increased the amount of Annual
Bonus 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 in 1995, ranging from five to ten percent, in recognition of the
Company's improvement in earnings and merchandise sales in 1994. Although salary
administration is generally performed on an annual basis, with increases taking
effect on January 1, the Company decided that increases for all officers, as
well as the top two grade levels of below-officer-level managers, would be
delayed, at least temporarily for 1996, until management had an opportunity to
review the Company's performance for the first few months, or longer, in 1996,
as operating results in the fourth quarter of 1995 were below the levels that
had been budgeted. Thus, through the first three months of the year, no officers
received any base salary increases for 1996.
1995 PERFORMANCE PLAN. In 1993, the Company initiated a multi-year
incentive plan, the Performance Plan, which was designed to retain and reward
employees whose responsibilities were directly related to the Company's
performance. In 1995, the Committee approved extension of the Performance Plan
for 1995 and 1996. This plan (which is described in greater detail elsewhere in
this Proxy Statement) has two-year cumulative operating earnings targets.
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
this plan. Threshold operating earnings targets are set, based on internally
budgeted earnings criteria for (a) each year in the plan period, and (b) the
cumulative two-year term. Awards are 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 annual target, then any excess amount can be applied to the
cumulative target.
The award pool for this plan is funded by 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 equalled budgeted operating earnings, as set forth in the Company's
internal budget documents, and a sliding scale was used, which provided for from
$.15 to $.35 of each excess dollar of operating earnings to fund the awards. The
threshold for this plan was not reached, and no awards were paid for 1995.
For 1996, the threshold will again be based upon the achievement of budgeted
operating earnings. For each excess dollar of operating earnings that is
achieved, from $.15 to $.35 will be contributed to the award pool, until the
maximum awards payable under this plan have been funded. The maximum aggregate
awards that can be paid under this plan are equal to the total amount of Annual
Bonus payable to the participants in this plan for the plan period (i.e., the
total of 1995 and 1996 Annual Bonus payable at 100% to all executives eligible
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. (See additional
discussion under "Item 3. -- Approval of 1995 Performance Plan.")
1995 STOCK INCENTIVE PLAN. During 1995, after reviewing the Company's
executive benefit package with outside consultants, the Committee decided that
it was appropriate to adopt a plan that would provide equity-based awards to key
members of the Company's management team. After extensive consideration, the
Committee recommended, and the Board of Directors adopted, the 1995 Stock
Incentive Plan, (which is described in greater detail elsewhere in this Proxy
Statement). The plan provides for the Company to award a variety of stock-based
incentives, including options, stock units, restricted stock, phantom stock and
stock appreciation rights. Based on the study of practices at comparable
companies, the Board, subject to shareholder approval, has set aside from the
Company's authorized, but unissued, shares, approximately 10% of the Company's
currently issued and outstanding shares, for awards under this plan over the
ten-year term of the plan, with approximately one-tenth of the amount reserved
to be issued each year.
Options were granted under this plan in October 1995, subject to shareholder
approval of the 1995 Stock Incentive Plan, which will become exercisable over a
five-year period for approximately
25
<PAGE>
3.9 million shares of the Company's Common Stock. The Committee believes this
plan, which provides for an accelerated vesting schedule if the Company's stock
price reaches and stays above certain levels for a significant period of time,
will assist in rewarding and retaining the executives who are responsible for
the success of the Company's long-term growth. (See additional discussion under
"Item 2. -- Approval of 1995 Stock Incentive Plan.")
FUTURE COMPENSATION. The Committee does not currently intend to change the
components of compensation, other than as discussed above, for the Company's
executive officers, although implementation of a non-qualified tax deferred plan
to supplement the Company's 401(k) savings and profit sharing plan is being
actively considered. This plan would cover all employees who are classified as
"highly compensated" for purposes of the Internal Revenue Code of 1986, as
amended. In addition, the Equity Participation Plan, adopted in 1988 following
the Company's leveraged buyout, remains in place. Options granted under that
plan became exercisable on December 31, 1994 and will expire on December 31,
1997. 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. The Company does not intend to grant any new awards under this plan.
APPROVAL OF PLANS. Changes in the tax laws for 1994 and thereafter do not
permit public companies to recognize a tax deduction for compensation paid 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. Although the Committee does not believe that any
executive will earn in excess of $1,000,000 in 1996, the Committee recommended,
and the Board of Directors has authorized, the presentation to the shareholders,
at this meeting, of the approval of the 1995 Performance Plan so that any
compensation paid under that plan, all of which is performance based, will be
exempt from the $1,000,000 limit. The Committee believes it is appropriate to
request shareholder approval for that plan at this time because the 1995 Stock
Incentive Plan is also being presented to the shareholders for approval at this
time. The Equity Participation Plan was adopted in 1988 and all grants made
under that plan, all of which were in 1988 and 1989, are not subject to the 1994
tax law limitations on deductibility. In addition, the Committee will take such
other actions as may be required under the 1995 Stock Incentive Plan and the
1995 Performance Plan as the Committee determines are appropriate to comply with
the regulations under Section 162(m).
COMPARATIVE DATA. 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 revenue 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.
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
26
<PAGE>
PERFORMANCE GRAPH
The Performance Graph, below, shows the value, at year-end 1991, 1992, 1993,
1994 and 1995 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, 1994
and 1995. 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. In addition,
both NCS and Circle K are now in the process of merging with other companies;
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, has not been
available and, following the impending mergers, neither company will have
comparative data. The Company may decide, in future years, to change the
composition of the peer group if the Company believes that better comparative
data is available.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG THE SOUTHLAND CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
The Southland Corporation 200 323.34 720 480 353.3
Peer Group 90.44 74.91 93.45 121.6 191.5
Broad Market 109.7 110.78 132.88 139.51 180.96
</TABLE>
ASSUMES $100 INVESTED ON MARCH 5, 1991
ASSUMES DIVIDEND REINVESTED
FISCAL YEARS ENDING DEC. 31, 1991-1995
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31
-----------------------------------------------------
COMPANY 1991 1992 1993 1994 1995
- -------------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
The Southland Corporation..................................... 200.00 323.34 720.00 480.00 353.33
Peer Group.................................................... 90.44 74.91 93.45 121.60 191.50
Broad Market.................................................. 109.70 110.78 132.88 139.51 180.96
</TABLE>
Source of information: Media General Financial Services
27
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In November 1995, the Company issued a total of $300 million 4.5%
Convertible Quarterly Income Debt Securities due 2010 to Ito-Yokado ($153
million) and Seven-Eleven Japan ($147 million). Interest is payable quarterly,
and in 1995, the Company paid Ito-Yokado $309,825 in interest and paid
Seven-Eleven Japan $297,675 in interest on the Convertible Debt Securities.
Interest payments will total $13.5 million per year, starting in 1996. The
Company may defer the interest payments for up to 20 consecutive quarters but
currently intends to make interest payments as they come due. In addition, the
Convertible Debt Securities are convertible into a total of 72,111,917 shares of
Southland Common Stock at a conversion price of $4.16 per share.
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 1995, over 6,200 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, will again be paid to the Company. In 1995, the royalties from
Seven-Eleven Japan that were paid under this arrangement totaled $43,696,888.
In addition, Seven-Eleven (Hawaii), Inc., the Company's area licensee in
Hawaii, is a subsidiary of Seven-Eleven Japan, and operates 46 stores in Hawaii.
During 1995, Seven-Eleven (Hawaii), Inc. paid the Company approximately $63,149
in connection with the area license arrangement.
As of December 31, 1995, the Savings and Profit Sharing Plan leased a total
of 769 operating convenience stores to the Company plus 62 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 1995 aggregated $28,089,633. During 1995, the Savings and
Profit Sharing Plan sold 67 locations to third parties some of which were leased
to the Company at the time of the sale. The leases with the Company were
terminated on 27 locations upon payment by the Company of $1,543,859 as
termination fees and the leases on 23 locations were assigned to the buyer.
Gary J. Fernandes, a director of Southland, is an officer and director of
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 $5,874,965 in
1995. Such payments are expected to continue in the future.
During 1995, EDS provided the Company with certain consulting and business
systems planning services to assist the Company in its planning of and data
processing support for the Company's automated retail systems, combined
distribution centers, and an environmental compliance tracking and control
system. EDS also provides support and maintenance in connection with the
Company's current projects to convert its General Ledgers, Accounts Payable,
Human Resources and Payroll systems to new software packages. During 1995, the
Company paid EDS a total of approximately $10 million 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.
28
<PAGE>
C. Itoh & Co. (now ITOCHU Corporation) 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. Chai 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, Inc., a
company that operates a fresh food commissary for Southland, serving
approximately 228 7-Eleven stores in the Dallas, Texas area. During 1995,
Southland purchased fresh food products from the commissary for approximately
$8.4 million and, in addition, paid Prime Deli approximately $20,000 as fees
related to advertising and promotions. ITOCHU Corporation also has an ownership
interest in a company that has agreed to operate combined distribution
facilities to service 7-Eleven stores in certain areas of Florida, beginning in
1996.
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, 1995, Messrs. John P. Thompson, Jere W. Thompson and
their brother, Joe C. Thompson, Jr., in their status as directors of the
Company, 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 or 1995 and no additional premiums were
paid during those years. 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,
1995, 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 specific terms
agreed upon in connection with termination of his Employment Agreement, no
further amounts have been advanced to Joe C. Thompson, Jr. since 1992.
SHAREHOLDER PROPOSALS
Any shareholder intending to present a proposal and wishing to have it
included in the Proxy Statement for the Company's 1997 Annual Meeting of
Shareholders, which is expected to be held during April or May 1997, must send
such proposal to the Company at its principal office, 2711 North Haskell Avenue,
Dallas, Texas 75204, Attn: Office of the Secretary. Such proposal must be
received by the Company not later than December 1, 1996, 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, 1995 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, 1995 (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.
29
<PAGE>
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 indemnified 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.
30
<PAGE>
APPENDIX A
THE SOUTHLAND CORPORATION
1995 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE
The purposes of The Southland Corporation 1995 Stock Incentive Plan (the
"Plan") are to promote the interests of the Company and its shareholders by (i)
attracting and retaining executive personnel and other key employees of
outstanding ability; (ii) motivating executive personnel and other key
employees, by means of performance-related incentives, to achieve longer-range
performance goals; and (iii) enabling such employees to participate in the
long-term growth and financial success of the Company. This Plan covers the sale
of Restricted Stock, the grant of Restricted Stock Units, the award of Bonus
Stock and the grant of Options (including options intended to qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended), the award of Performance Shares, Stock Appreciation Rights, and any
other Stock Unit Awards or stock-based forms of awards as the Committee may
determine in its sole and complete discretion at the time of grant.
SECTION 2. DEFINITIONS
"Affiliate" shall mean (a) any corporation or other entity which is not a
Subsidiary but as to which the Company possesses a direct or indirect ownership
interest of 10% or more; (b) any Person who is directly or indirectly the
beneficial owner of 10% or more of the voting power of the Company; or (c) any
Person controlling, controlled by or under common control with the Company.
"Award" shall mean a grant or award under Sections 7 through 12, inclusive,
of the Plan, whether granted individually, in combination, or in tandem, to a
Participant pursuant to the terms, conditions and limitations that the Committee
may establish in order to fulfill the objectives of the Plan.
"Award Agreement" shall mean the written agreement between the Company and a
Participant evidencing the terms, conditions and limitations of the Award
granted to that Participant.
"Board of Directors" shall mean the Board of Directors of the Company.
"Bonus Stock" shall mean an award granted pursuant to Section 11 of the Plan
expressed as a share of Common Stock which may or may not be subject to
restrictions.
"Change in Control" shall mean (a) the direct or indirect acquisition by any
Person (an "Acquiring Person") other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or a subsidiary of the
Company, of securities of the Company representing 50% or more of the combined
voting power of the Company, such that such Person becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of the Company; or (b) a
public announcement of a tender offer or exchange offer by any Acquiring Person
for securities representing 50% or more of the combined voting power of the
Company, which offer is not opposed by the Company's Board of Directors; (c) the
approval by the shareholders of the Company of a merger or a consolidation of
the Company with any other Person (or, if no such approval is required, the
consummation of such a merger or consolidation of the Company), other than a
merger or consolidation that would result in the stock of the Company
outstanding immediately before the consummation thereof continuing to represent
a majority of the combined voting power of the surviving entity outstanding
immediately after such merger or consolidation; or (d) the approval by the
shareholders of the Company of a plan of complete liquidation of the Company or
an agreement for the sale or distribution by the Company of all or substantially
all of the Company's assets (or, if no such approval is required, the
consummation of such a liquidation, sale or disposition in one transaction or a
series of related transactions), other than a liquidation, sale or disposition
of all or substantially all of the Company's assets in one
A-1
<PAGE>
transaction or a series of related transactions to a corporation owned directly
or indirectly by the shareholders of the Company in substantially the same
proportions as their ownership of the stock of the Company.
"Closing Price" shall mean the last traded price per share of Stock as
reported on The Nasdaq Stock Market or such other securities trading system or
exchange which is the primary market on which the Stock may then be listed or
traded.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean the Committee that administers this Plan and shall be
the Compensation and Benefits Committee of the Board of Directors unless any
member of such committee shall fail to qualify as a Person described in the
following three sentences, in which case, the Compensation and Benefits
Committee shall appoint an Incentive Compensation Committee, consisting solely
of persons who do so qualify, to serve as the Committee to administer this Plan.
The Committee shall consist of not less than two persons (all of whom shall be
members of the Board of Directors and shall qualify as Outside Directors under
Section 162(m)). A member of the Committee shall not be eligible to receive
Awards or equity securities under any plan of the Company or its Affiliates
while serving as a member of the Committee; shall not have received Awards or
equity securities under any plan of the Company or its Affiliates within one
year before appointment to the Committee; and shall not be eligible to receive
Awards or such equity securities under any plan of the Company or its Affiliates
for such period following service on the Committee as may be required by Rule
16b-3 for that person to remain a Disinterested Person (as provided in Rule
16b-3), in each case except for Awards or equity securities granted as provided
in paragraphs (c)(2)(i)(A), (B), (C) or (D) of Rule 16b-3. A "Disinterested
Person" cannot be a former officer of the Company or a former employee receiving
deferred compensation.
"Common Stock" or "Stock" shall mean the Common Stock of the Company, par
value $.0001 per share, or such other security or right or instrument into which
such Common Stock may later be changed or converted.
"Company" shall mean The Southland Corporation and any Subsidiary of the
Company that has Key Employees that satisfy the eligibility requirements for
participation in this Plan.
"Date of Grant" shall mean the date specified by the Committee as the
effective date or date of grant of an Award or, if the Committee does not so
specify, shall be the date the Committee adopts the resolution approving the
offer of an Award to an individual, including the specification of the number
(or method of determining the number) of shares of Stock and the amount (or
method of determining the amount) of cash to be subject to the Award, even
though certain terms of the Award Agreement may not be determined at that time
and even though the Award Agreement may not be executed until a later time.
"Department" shall mean the Company's Compensation and Benefits Department.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, pursuant to procedures established by the Department, to receive
amounts due the Participant in the event of the Participant's death. In the
absence of an effective designation by the Participant, Designated Beneficiary
shall mean the Participant's estate.
"Disability" shall mean the mental or physical disability, either
occupational or non-occupational in cause, defined as "Total Disability" in the
Company's Disability Plan as currently in effect and as amended from time to
time, or which, in the opinion of the Committee, on the basis of medical
evidence satisfactory to it, prevents the employee from engaging in any
occupation or employment for wage or profit, which has continued for at least 12
months and is likely to be permanent.
"Divestiture" shall mean the sale of, or closing by, the Company of the
business operations in which the Participant was employed, or the elimination of
a particular position at the Company's discretion.
A-2
<PAGE>
"Early Retirement" shall mean, in the case of any Participant, retirement
from employment with the Company after the age of 55, but before the age of 65,
provided that such Participant is eligible for retiree benefits under the
Company's group medical/dental plans.
"Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
"Executive Officer" shall mean the Company's president, principal financial
officer, principal operating officer, principal accounting officer or any vice
president of the Company in charge of a principal business unit, division or
function (such as sales, administration or finance), any other officer who
performs a policy-making function, or any other person who performs similar
policy-making functions for the Company or any other person who is subject to
the provisions of Rule 16b-3.
"Fair Market Value" shall mean the Closing Price of the Stock on the date in
question or, if the Stock has not been traded on such date, the Closing Price on
the first day prior thereto on which the Stock was so traded.
"Fiscal Year" shall mean the fiscal year of the Company.
"Incentive Stock Option" shall mean a stock option granted under Section 7
of the Plan which is intended to meet the requirements of Section 422 of the
Code.
"Key Employee" shall mean any employee whom the Committee identifies as
having a direct and significant effect on the performance of the Company or any
of its Subsidiaries.
"Non-Stock Based Incentive Compensation" refers to incentive compensation
the value of which is not based in whole or in part on the value of the Stock.
"Nonqualified Stock Option" shall mean a stock option granted under Section
7 of the Plan which is not intended to be an Incentive Stock Option.
"Normal Retirement" shall mean, in the case of any Participant, retirement
from employment with the Company at or after the time when such Participant
reaches age 65 or some earlier age if approved by the Committee.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
"Option Shares" shall mean the shares of Stock purchased upon exercise of an
Option granted pursuant to this Plan.
"Outside Director" shall mean a person who satisfies the requirements of
Section 162(m) of the Code and is a "Disinterested Person" under Rule 16b-3.
"Participant" shall mean an employee who is selected by the Committee to
receive an Award under the Plan.
"Payment Value" shall mean the dollar amount assigned to a Performance Share
which shall be equal to the Fair Market Value of the Common Stock on the day of
the Committee's determination under Section 9 with respect to the applicable
Performance Cycle.
"Performance Based Awards" shall mean any Awards of Performance Shares,
Restricted Stock, Restricted Stock Units, Bonus Stock or other stock-based
compensation that is intended by the Committee to constitute performance-based
compensation under Section 162(m).
"Performance Cycle" or "Cycle" shall mean the period of years selected by
the Committee during which the performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been earned.
"Performance Goals" shall mean the objectives established by the Committee
for a Performance Cycle, for the purpose of determining the extent to which
Performance Shares which have been contingently awarded for such Cycle are
earned.
A-3
<PAGE>
"Performance Share" shall mean an award granted pursuant to Section 9 of the
Plan expressed as a share of Common Stock.
"Person" shall mean any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust or other entity.
"Plan" shall mean "The Southland Corporation 1995 Stock Incentive Plan."
"QDRO" shall mean a "Qualified Domestic Relations Order" as defined in the
Code or Title I of the Employee Retirement Income Security Act.
"Restricted Period" shall mean the period of years selected by the Committee
during which a grant of Restricted Stock or Restricted Stock Units may be
forfeited to the Company.
"Restricted Stock" shall mean shares of Common Stock, subject to
restrictions, contingently granted to a Participant under Section 10 of the
Plan.
"Restricted Stock Unit" shall mean a fixed or variable dollar denominated
right to acquire Stock, which may or may not be subject to restrictions,
contingently awarded under Section 10 of the Plan.
"Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the Exchange Act
as adopted in Exchange Act Release No. 34-29131 (April 26, 1991), or any
successor rule, as it may be amended from time to time.
"Section 162(m)" shall mean Section 162(m) of the Code, or any successor
section under the Code, as it may be amended from time to time and as
interpreted by final or proposed regulations promulgated thereunder from time to
time.
"Securities Act" shall mean the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as it may be amended
from time to time.
"Stock Appreciation Right" shall mean an award granted under Section 8 of
the Plan.
"Stock Unit Award" shall mean an award of Common Stock or units granted
under Section 12 of the Plan.
"Stockholder Approved Standard" means any pre-established objective
performance goal qualifying under Section 162(m) and approved by the
shareholders of the Company in accordance with Section 162(m), including (a)
total stockholder return (Stock price appreciation plus dividends), (b) net
income, (c) earnings per share, (d) return on sales, (e) return on equity, (f)
return on assets, (g) increase in the market price of Stock or other securities
of the Company, (h) the performance of the Company in any of the items mentioned
in clause (a) through (g) in comparison to the average performance of the
companies used in a self-constructed peer group established before the beginning
of the performance period.
"Subsidiary" shall mean any business entity in which the Company possesses
directly or indirectly fifty percent (50%) or more of the total combined voting
power.
"Unvested Stock" shall mean all the shares of Restricted Stock, Unit Stock,
Bonus Stock and Option Stock other than Vested Stock.
"Vested Stock" shall mean: (i) all shares of Restricted Stock, Unit Stock,
Bonus Stock and Option Stock which at the time in question have been freed of
the restrictions imposed pursuant to the Plan; and (ii) all shares of Unit
Stock, Bonus Stock and Option Stock which shall have been issued free of
restrictions pursuant to the Plan.
SECTION 3. ADMINISTRATION
The Plan shall be administered and interpreted by the Committee. The
Committee shall have full authority, in its discretion, to adopt, alter and
repeal such administrative rules, guidelines, and practices governing the
operation of the Plan as it shall from time to time deem advisable, and to
A-4
<PAGE>
interpret the terms and provisions of the Plan. Subject to Section 4, the
Committee shall have full authority, in its discretion, to determine those
Executive Officers and Key Employees who shall participate in the Plan and the
number of shares of Stock to be sold or awarded to each Participant and the
number of shares of Stock to be covered by either rights to acquire shares of
Stock or Options granted to each Participant (it being understood that more than
one sale, award or grant or any combination thereof may relate to the same
Participant). Recommendations for individual awards shall be made to the
Committee by the President of the Company. The Committee may delegate to the
President of the Company the power to make Awards to Participants who are not
Executive Officers of the Company provided the Committee shall fix the maximum
amount of such Awards for the group and a maximum for any one Participant. The
Committee shall determine the Awards to be made to the Executive Officers. The
Committee's decisions shall be binding upon all persons, including the Company,
its stockholders, employees, Participants, and Designated Beneficiaries.
The Committee may act by a meeting in person or take action by unanimous
written consent or by means of a meeting held by conference telephone call or
similar communications equipment pursuant to which all persons participating in
the meeting can hear each other. The Committee may request advice or assistance
or employ such persons as it deems necessary for proper administration of the
Plan. Any determination made by the Committee shall be conclusive except to the
extent that the sufficiency of the consideration therefor or the terms of any
such sale or award of shares of Stock or any grant of rights or Options under
the Plan are required by law or by the Articles of Incorporation or Bylaws of
the Company to be subject to ratification by the Board of Directors or its
Compensation and Benefits Committee prior to such sale, award or grant.
SECTION 4. ELIGIBILITY
Key Employees, including officers, of the Company shall be eligible to
participate under the Plan. However: (i) no non-Employee director of the Company
shall be eligible to participate under the Plan; (ii) no member of the Committee
shall be eligible to participate under the Plan; and (iii) no person shall be
eligible to participate under the Plan if he owns, directly or indirectly, more
than 5% of the total combined voting power of all classes of stock of the
Company.
SECTION 5. SHARES SUBJECT TO PLAN/MAXIMUM AMOUNT AVAILABLE FOR AWARDS
(a) The maximum number of shares of Stock in respect of which Awards may be
made under the Plan shall be a total of 41,000,000 shares of Common Stock, which
may be in any combination of Options, Restricted Stock, Restricted Stock Units,
Performance Shares, Bonus Shares or any other right or option.
(b) Shares of Common Stock may be available from the authorized but unissued
shares of Common Stock of the Company or from shares of Common Stock reacquired
by the Company, including shares of Common Stock purchased in the open market.
In the event that (i) an Option or Stock Appreciation Right is settled for cash
or expires or is terminated unexercised as to any shares of Common Stock covered
thereby, or (ii) any Award in respect of shares of Common Stock is cancelled or
forfeited for any reason under the Plan without the delivery by the Company of
shares of Common Stock, such shares shall thereafter be again available for
award pursuant to the Plan. In the event that any Option or other Award granted
hereunder is exercised through the delivery of shares of Common Stock, the
number of shares of Common Stock available for Awards under the Plan shall be
increased by the number of shares so surrendered, to the extent permissible
under Rule 16b-3 as interpreted from time to time by the Securities and Exchange
Commission or its staff.
(c) If at any time, or from time to time, the Company shall subdivide as a
whole (by reclassification, by a Stock split, by the issuance of a distribution
on Stock payable in Stock, or otherwise) the number of shares of Stock then
outstanding into a greater number of shares of Stock, or increase the number of
outstanding shares of Common Stock by virtue of any public or private stock
offering or the issuance by the Company of debt, equity or other instruments
that are convertible to Common Stock, such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under this Plan, then (i) the maximum number of shares of Stock
available for the
A-5
<PAGE>
Plan shall be increased proportionately, and the kind of shares or other
securities available for the Plan shall be appropriately adjusted, (ii) the
number of shares of Stock (or other kind of shares or securities) that may be
acquired under any award under the Plan shall be increased proportionately, and
(iii) the price (including Exercise Price) for each share of Stock (or other
kind of shares or securities) subject to then outstanding awards shall be
reduced proportionately, without changing the aggregate purchase price or value
as to which outstanding awards remain exercisable or subject to restrictions.
(d) If at any time, or from time to time, the Company shall consolidate as a
whole (by reclassification, reverse Stock split, or otherwise) the number of
shares of Stock then outstanding into a lesser number of shares of Stock, (i)
the maximum number of shares of Stock available for the Plan shall be decreased
proportionately, and the kind of shares or other securities available for the
Plan shall be appropriately adjusted, (ii) the number of shares of Stock (or
other kind of shares or securities) that may be acquired under any award shall
be decreased proportionately, and (iii) the price (including Exercise Price) for
each share of Stock (or other kind of shares or securities) subject to then
outstanding awards shall be increased proportionately, without changing the
aggregate purchase price or value as to which outstanding awards remain
exercisable or subject to restrictions.
(e) In the event that any stock dividend, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock, or other similar corporate event, not contemplated in Section 5(c) or (d)
above, affects the Common Stock such that an adjustment is deemed appropriate in
order to preserve the benefits or potential benefits intended to be made
available under this Plan, then the Committee may in its discretion adjust any
or all of (i) the number and kind of shares which thereafter may be awarded or
optioned and sold or made the subject of Stock Appreciation Rights under the
Plan, (ii) the number and kind of shares subject of Options and other Awards,
and (iii) the grant, exercise or conversion price with respect to any of the
foregoing and/or, if deemed appropriate, make provision for cash payment to a
Participant or a person who has an outstanding Option or other Award provided,
however, that the number of shares subject to any Option or other Award shall
always be a whole number.
(f) Whenever the number of shares of Stock subject to outstanding awards
under the Plan and the price for each share of Stock subject to outstanding
awards are required to be adjusted as provided in this Section, the Committee
shall authorize the Department to prepare a notice setting forth the event
requiring adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the change in price and the number of shares of
Stock, or securities, cash or property purchasable subject to each Award after
giving effect to the adjustments. The Committee shall authorize the Department
to give each Participant such a notice.
(g) The maximum number of shares of Stock in respect of which Awards may be
made under the Plan to any individual Key Employee shall be 10,000,000 shares of
Stock, which may be in any combination of Options, Restricted Stock, Restricted
Stock Units, Performance Units, Bonus Shares or any other right or option. Such
maximum number of shares shall be adjusted as provided in Sections 5(c), (d),
and (e) above; however, the events described in Section 5(b) above shall count
against and reduce the maximum number of shares of Stock in respect of which
Awards may be made under the Plan to any individual Key Employee. This Section
5(g) is intended to comply with the requirement of the performance-based
compensation exception to Section 162(m) and shall be interpreted accordingly.
(h) Adjustments under this Section shall be made, as required, and the
calculations by the Department shall be final, binding and conclusive. No
fractional interest shall be issued under the Plan as a result of any such
adjustments.
A-6
<PAGE>
SECTION 6. PRICE
Subject to the provisions of this Plan and to the requirements of applicable
law, the Committee shall determine the price at which shares of Restricted
Stock, Restricted Stock Units or any other form of incentive Stock shall be sold
to Participants hereunder and the price at which any Options granted to purchase
shares of Option Stock hereunder shall become exercisable. All shares purchased
upon exercise of any Option shall be paid for in full at the time of exercise
and such payment may be made in whole or in part by delivery of shares of Stock
already owned by the participant with such shares being valued for these
purposes at 100% of the Fair Market Value thereof on the date of the exercise.
SECTION 7. STOCK OPTIONS
(a) Grant.
Subject to the provisions of the Plan and applicable law, all Options
granted pursuant to the Plan shall have such terms and conditions as the
Committee in its sole discretion shall determine, all of which terms and
conditions shall be specified in the particular Award Agreement, including the
period during which such Option may be exercised in whole or in part, and the
conditions under which such Option may be terminated and such other provisions
as may be advisable to comply with law or the rules of any securities trading
system or stock exchange. The Committee shall have the authority to grant
Incentive Stock Options, or to grant Nonstatutory Stock Options, or to grant
both types of options. In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with such rules as may
be prescribed by Section 422 of the Code, as from time to time amended, and any
implementing regulations.
(b) Option Price.
The Committee shall establish the option price at the time each Option is
granted, which price shall not be less than 100% of the Fair Market Value of the
Common Stock on the Date of Grant.
(c) Exercise.
(1) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion, specify
in the applicable Award Agreement or thereafter, provided, however, that in
no event may any Option granted hereunder be exercisable prior to the
expiration of six months from the Date of Grant nor after the expiration of
ten years from the Date of Grant. The Committee may impose such conditions
with respect to the exercise of Options, including without limitation, any
relating to the application of federal or state securities laws, as it may
deem necessary or advisable, restrictions on transfer of shares of Stock
received upon exercise, or a portion thereof, after exercise, as the
Committee may deem advisable, including, without limitation, restrictions
on, or acceleration of, the term or vesting based on market appreciation of
the Stock, increases in the revenues, sales, net worth or net earnings of
the Company or any Subsidiary, division or other component thereof, or the
attainment of any other business or financial goal of the Company.
(2) No shares of Stock shall be delivered pursuant to any exercise of an
Option until payment in full of the option price therefore is received by
the Company. Such payment may be made in cash, or its equivalent, or by
exchanging shares of Common Stock owned by the optionee (which are not the
subject of any pledge or other security interest), or by a combination of
the foregoing, provided that the combined value of all cash and cash
equivalents and the Fair Market Value of any such Common Stock so tendered
to the Company, valued as of the date of such tender, is at least equal to
such option price. In addition, at the request of the Participant and to the
extent permitted by applicable law, the Committee may (but shall not be
required to) approve arrangements with a brokerage firm under which that
brokerage firm, on behalf of the Participant, shall pay to the Company the
Exercise Price of the Option being exercised (either as a loan to the
Participant or from the proceeds of the sale of Stock issued pursuant to
that exercise of the
A-7
<PAGE>
Option), and the Company shall promptly cause the exercised shares to be
delivered to the brokerage firm. Such transactions shall be effected in
accordance with the procedures that the Committee may establish from time to
time.
(d) Each Option shall have the following additional conditions:
(1) The Options shall not be transferable other than by will or the laws
of descent and distribution and shall be exercisable during the
Participant's lifetime only by him, except as otherwise determined by the
Committee.
(2) Participants shall have no right to receive any fractional shares of
Stock upon the exercise of Options granted under the Plan.
(3) No optionee shall be deemed to be a holder of any shares of Stock
until the issuance of certificates after the exercise of an Option. No
adjustment shall be made for any dividends or distributions or other rights
for which the record date is prior to the date such stock certificates are
so issued.
(4) The number of shares of Stock subject to an Option and the price per
share shall be appropriately adjusted pursuant to Section 5.
(5) All Option Shares (and all shares of Stock received thereon as the
result of any adjustment pursuant to Section 5) shall either be free of any
restrictions (other than those imposed by applicable law) or in the
discretion of the Committee may be subject to restrictions or features
similar to those referred to in Section 10 and set forth in the related
Award Agreement.
SECTION 8. STOCK APPRECIATION RIGHTS
(a) The Committee may, with full authority and in its sole and complete
discretion, grant Stock Appreciation Rights in tandem with an Option, in
addition to an Option, or freestanding and unrelated to an Option. Stock
Appreciation Rights granted in tandem with or in addition to an Option may be
granted either at the same time as the Option or at a later time. Stock
Appreciation Rights shall not be exercisable earlier than six months after grant
and shall not be exercisable after the expiration of ten years from the Date of
Grant.
(b) The Committee shall establish the grant price of each Stock Appreciation
Right at the time each Stock Appreciation Right is granted, and, unless such
Stock Appreciation Right is not intended to comply with the performance-based
compensation exception to Section 162(m), such grant price shall not be less
than the Fair Market Value of the Common Stock on the date of grant.
(c) A Stock Appreciation Right shall entitle the Participant to receive from
the Company an amount equal to the excess of the Fair Market Value of a share of
Common Stock on the exercise of the Stock Appreciation Right over the grant
price thereof, provided that the Committee may for administrative convenience
determine that, a Stock Appreciation Right which is not related to an Incentive
Stock Option can only be exercised during limited periods of time in order to
satisfy the conditions of certain rules of the Securities and Exchange
Commission, and the exercise of any such Stock Appreciation Right for cash
during such limited period shall be deemed to occur for all purposes hereunder
on the day during such limited period on which the Fair Market Value of the
Stock is the highest. Any such determination by the Committee may be changed by
the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted prior to such determination as well as Stock
Appreciation Rights thereafter granted. The Committee shall determine upon the
exercise of a Stock Appreciation Right whether such Stock Appreciation Right
shall be settled in cash, shares of Common Stock, Stock Options, or a
combination thereof, provided, however, that if any payment in shares of Stock
results in a fractional share, payment for the fractional share shall be made in
cash.
SECTION 9. PERFORMANCE SHARES
(a) The Committee may, with full authority and in its sole and complete
discretion, grant Performance Shares and determine the number of such shares for
each Performance Cycle, the
A-8
<PAGE>
duration of each Performance Cycle and the value of each Performance Share. All
the terms and conditions of each Performance Share Grant shall be included in
the applicable Award Agreement. There may be more than one Performance Cycle in
existence at any one time, and the duration of Performance Cycles may differ
from each other.
(b) The Committee shall establish Performance Goals for each Cycle on the
basis of such criteria and to accomplish such objectives as the Committee may
from time to time select. During any Cycle, the Committee may adjust the
Performance Goals for such Cycle as it deems equitable in recognition of unusual
or non-recurring events affecting the Company, changes in applicable tax laws or
accounting principles, or such other factors as the Committee may determine.
(c) (1) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established Performance
Goals.
(2) Payment Value of earned Performance Shares shall be distributed to
the Participant or, if the Participant has died, to the Participant's
Designated Beneficiary, as soon as practicable after the expiration of the
Performance Cycle and the Committee's determination under paragraph (c)(1),
above. The Committee shall determine whether Payment Values are to be
distributed in the form of cash or shares of Common Stock, provided,
however, that if any payment in shares of Stock results in a fractional
share, payment for the fractional share shall be made in cash.
SECTION 10. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
(a) The Committee may, with full authority and in its sole and complete
discretion, grant Restricted Stock and Restricted Stock Units and determine the
number of shares of Restricted Stock and the number of Restricted Stock Units to
be granted to each Participant, the duration of the Restricted Period during
which, the consideration to be paid, if any, therefor, and the conditions under
which, the Restricted Stock and Restricted Stock Units may be forfeited to the
Company, and the other terms and conditions of such Awards. The Restricted
Period may be shortened, lengthened or waived by the Committee at any time in
its discretion with respect to one or more Participants or Awards outstanding.
(b) Shares of Restricted Stock and Restricted Stock Units may not be sold,
assigned, transferred, pledged, or otherwise encumbered, except as herein
provided, during the Restricted Period. Certificates issued in respect of shares
of Restricted Stock shall be registered in the name of the Participant and
deposited by such Participant, together with a stock power endorsed in blank,
with the Company or with the Company's stock transfer agent. At the expiration
of the Restricted Period, the Company or its stock transfer agent shall deliver
such certificates to the Participant or the Participant's legal representative.
If any payment is to be made to the Company for Restricted Stock Units, it shall
be made in cash/or shares of Common Stock, as permitted in the Award Agreement,
provided, however, that if any payment in shares of Stock results in a
fractional share, payment for the fractional share shall be made in cash.
(c) Except as otherwise provided in the related Award Agreement, in the
event a Participant who has purchased shares hereunder ceases to be employed by
the Company as the result of death, Disability, Divestiture, Early Retirement or
Normal Retirement, then: (i) the Company may repurchase that portion of the
shares of Unvested Stock sold to such Participant, at such price and on such
terms and conditions, as the Committee shall determine at such time in its sole
discretion; or (ii) the other restrictions imposed and still existing upon any
or all of the shares of Unvested Stock sold to such Participant shall lapse or
shall be removed in accordance with a specified formula, all as shall be
determined at such time in the sole discretion of the Committee.
(d) The Committee may provide in the related Award Agreement that, in the
event of the failure of any condition to the vesting of shares of Restricted
Stock, all such shares of Unvested Stock that
A-9
<PAGE>
have been purchased by the Participant may be repurchased by the Company on a
date selected by the Committee within 60 days after the occurrence of the
failure of such condition of vesting upon such terms and conditions as the
Committee may elect.
(e) The Committee may provide in the related Award Agreement for: (i) any
other restrictions or features relating to any shares of Restricted Stock sold
pursuant to this Plan as it may deem advisable, including, without limitation,
restrictions or acceleration of terms or vesting based on market appreciation of
the Stock, increases in the revenues, sales, net worth or net earnings of the
Company or any Subsidiary, division or other component thereof, or the
attainment of any other business or financial goal of the Company; and (ii) such
further restrictions as may be advisable to comply with law, including the
requirements of the Securities Act, any stock exchange or securities trading
system upon which such share or shares of the same class are then listed and
under any state securities or other laws applicable to such shares.
(f) The Committee shall determine the exercise period within which a right
to acquire shares of Restricted Stock pursuant to this Plan must be exercised
and, subject to the other provisions of this Plan, the Participant may not sell,
assign, transfer or otherwise alienate or hypothecate such right other than by
will or the laws of descent and distribution, and such right shall be
exercisable during the Participant's lifetime only by him or his guardian or
legal representative.
SECTION 11. BONUS STOCK.
The Committee may, with full authority and in its sole and complete
discretion, award shares of Bonus Stock to participants hereunder without cash
consideration and may determine in the related Award Agreement whether shares of
Bonus Stock awarded pursuant to the Plan (including any shares received by the
holders thereof as a result of any adjustment pursuant to Section 5) shall be
free of any restrictions (other than those advisable to comply with law) or
shall be subject to restrictions and limitations similar to those referred to in
Section 10. In the event that any restrictions are imposed on shares of Bonus
Stock awarded pursuant to the Plan, then such shares shall be subject to at
least the following restrictions:
A. Shares of Unvested Stock may not be sold, assigned, transferred or otherwise
alienated or hypothecated.
B. In the event of the failure of any condition to the vesting of shares of
Bonus Stock, all such shares of Unvested Stock shall be delivered to the
Company (as designated by the Committee) within 60 days after the occurrence
of the failure of such condition as is established by the Committee without
any payment from the Company.
SECTION 12. OTHER STOCK BASED AWARDS
(a) In addition to granting Options, Stock Appreciation Rights, Performance
Shares, Bonus Stock, Restricted Stock, and Restricted Stock Units, the Committee
shall have authority to grant to Participants Stock Unit Awards which can be in
the form of Common Stock or units with the precise terms and conditions of each
Award to be as specified in the Award Agreement, with the value of each such
Award based, in whole or in part, on the value of Common Stock. Subject to the
provisions of the Plan, Stock Unit Awards shall be subject to such terms,
restrictions, conditions, vesting requirements, and payment rules (all of which
are sometimes hereinafter collectively referred to as "rules") as the Committee
may determine in its sole and complete discretion at the time of grant. The
rules need not be identical for each Stock Unit Award.
(b) In the sole and complete discretion of the Committee, a Stock Unit Award
may be granted subject to the following rules:
(1) Any shares of Common Stock which are part of a Stock Unit Award may
not be assigned, sold, transferred, pledged or otherwise encumbered prior to
the date on which the shares are issued or, if later, the date provided by
the Committee at the time of grant of the Stock Unit Award.
A-10
<PAGE>
(2) Stock Unit Awards may provide for the payment of cash consideration
by the person to whom such Award is granted or provide that the Award, and
any Common Stock to be issued in connection therewith, if applicable, shall
be delivered without the payment of cash consideration.
(3) Stock Unit Awards may relate in whole or in part to certain
performance criteria established by the Committee at the time of grant.
(4) Stock Unit Awards may provide for deferred payment schedules and/or
vesting over a specified period of employment.
(5) In such circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in part, any
restriction or limitation to which a Stock Unit Award was made subject at
the time of grant.
(c) In the sole and complete discretion of the Committee, an Award, whether
made as a Stock Unit Award under this Section 12 or as an Award granted pursuant
to Sections 7 through 11, may provide the Participant with (i) dividends or
dividend equivalents (payable on a current or deferred basis) and (ii) cash
payments in lieu of or in addition to an Award.
SECTION 13. CERTAIN PERFORMANCE SHARES, RESTRICTED STOCK, RESTRICTED STOCK
UNITS, BONUS STOCK AND OTHER STOCK BASED AWARDS
(a) Performance-Based Awards shall be subject to the requirements of this
Section 13 in addition to the requirements of Sections 9, 10, 11 and 12 above.
To the extent that the requirements of this Section 13 conflict with the
requirements of Sections 9, 10, 11 and 12, the requirements of this Section 13
shall govern.
(b) The Award Agreement with respect to each Performance-Based Award shall
condition the Participant's right to receive the underlying compensation
(whether payable in Stock or otherwise) on the achievement of specific numeric
targets under one or more Stockholder Approved Standards; provided further that
a Performance-Based Award may be conditioned upon the achievement either
cumulatively or in the alternative of numeric targets under multiple Stockholder
Approved Standards.
(c) The Committee in its discretion will select a specific Stockholder
Approved Standard(s) and a specific numeric target(s) under such Stockholder
Approved Standard(s) on which a Participant's right to receive a
Performance-Based Award is conditioned.
(d) The Committee will select a specific period of time over which numeric
target(s) of Stockholder Approved Standard(s) must be achieved; provided,
however, that such period of time shall be equal to one year, two years, three
years, or such other period of time as the Committee may in its discretion
select, but in no event shall such period of time be less than six months.
(e) Before the earlier of the lapse of (i) 90 days after the commencement of
the period of service to which a Performance-Based Award relates or (ii) 25% of
the period of service to which such Award relates, the Committee will specify in
writing the specific Stockholder Approved Standard(s), numeric target(s) for
such Stockholder Approved Standard(s), and the period of time over which the
numeric target(s) of such Stockholder Approved Standard(s) must be achieved with
respect to such Performance-Based Award.
(f) A Performance-Based Award shall be in an amount calculated as, and
specified in the Award Agreement as, the product of the number of shares of
Common Stock with respect to which such Performance-Based Award is made
multiplied by the Fair Market Value of the Common Stock, or some multiple of the
Fair Market Value of the Common Stock, on the date the numeric target(s) are
achieved under the applicable Stockholder Approved Standard(s) and any other
conditions to receipt of such Performance-Based Award are satisfied.
(g) The Committee will certify in writing, prior to the lapse of the
restrictions and/or conditions on a Participant's receipt of compensation under
a Performance-Based Award, that the numeric
A-11
<PAGE>
target(s) under the applicable Stockholder Approved Standard(s) have been
achieved; provided, however, that such certification will be required only if
the Committee concludes that there is a material possibility that such
Participant will be a "covered employee" within the meaning of Section 162(m).
The written certification requirement will be satisfied if approved written
minutes are kept of the meeting of the Committee at which such certification
occurs.
(h) The preceding Sections 13(a)-(g) shall not apply to any
Performance-Based Awards the value of which, upon satisfaction of all
restrictions and/or conditions to receipt by the Participant, is dependent
solely and exclusively upon an increase in the Fair Market Value of the Common
Stock between the date of grant and the date that such restrictions and
conditions are satisfied.
SECTION 14. GENERAL PROVISIONS
(a) Withholding.
The Company shall have the right to deduct from all amounts paid to a
Participant in cash (whether under this Plan or otherwise) any taxes required by
law to be withheld in respect of Awards under this Plan. In the case of payments
of incentive Awards in the form of Common Stock, at the Committee's discretion
the Participant may be required to pay to the Company the amount of any taxes
required to be withheld with respect to such Common Stock, or, in lieu thereof,
the Company shall have the right to retain (or the Participant may be offered
the opportunity to elect to tender) the number of shares of Common Stock the
Fair Market Value of which equals the amount required to be withheld.
(b) Awards.
Each Award hereunder shall be evidenced in writing, delivered to the
Participant, and shall specify the terms and conditions thereof and any rules
applicable thereto, including but not limited to the effect on such Award of the
death, Disability, Divestiture, Early Retirement, Normal Retirement or other
termination of employment of the Participant and the effect thereon, if any, of
a Change in Control.
(c) Nontransferability.
No Award shall be assignable or transferable except by will or the laws of
descent and distribution, and no right or interest of any Participant shall be
subject to any lien, obligation, or liability of the Participant.
Notwithstanding the above, in the discretion of the Committee, Awards may be
transferable pursuant to a QDRO, as determined by the Committee.
(d) No Right to Employment.
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company.
(e) Rights as Shareholder.
Subject to the provisions of the applicable Award, no Participant or
Designated Beneficiary shall have any rights as a shareholder with respect to
any shares of Common Stock to be distributed under the Plan until he or she has
become the holder thereof. Notwithstanding the foregoing, in connection with
each grant of Restricted Stock hereunder, the applicable Award shall specify
that upon the issuance of certificates with respect to such shares, the
Participant or Designated Beneficiary shall be the owner of such shares as
provided herein and in the related Restricted Stock Agreement, Restricted Stock
Unit Agreement, Bonus Stock Agreement or Option Stock Agreement and, except as
otherwise provided herein or in any such related Agreement, shall be entitled to
full voting, dividend and distribution rights like any other holder of the Stock
as long as such Participant remains the owner thereof.
(f) Construction of the Plan.
The validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the state of Texas. If any
provision of the Plan should be found by any court of competent
A-12
<PAGE>
jurisdiction to be invalid, illegal or unenforceable, in whole or in part, such
declaration shall not affect the validity, legality or enforceability of any
remaining provision or portion thereof, which remaining provision or portion
shall remain in full force and effect as if the Plan had been adopted with the
invalid, illegal or unenforceable provision or portion thereof eliminated.
(g) Effective Date and Term of Plan.
Subject to the approval of the shareholders of the Company, the Plan shall
be effective on October 23, 1995; provided, however, that no Stock, rights or
Options may be sold, awarded or granted under the Plan until a Registration
Statement under the Securities Act covering the shares of Stock to be issued
under the Plan has become effective. Any rights, Options or Stock granted
hereunder shall be granted subject to approval of this Plan by the shareholders
of the Company.
No Awards may be granted under the Plan after December 31, 2005; however,
all previous Awards made that have not expired under their original terms at the
time the Plan expires will remain outstanding.
(h) Amendment of Plan.
The Board of Directors or the Committee may amend, suspend, or terminate the
Plan or any portion thereof at any time, provided that no amendment shall be
made without shareholder approval if such approval is necessary to comply with
any tax or regulatory requirement, including for these purposes any approval
requirement which is a prerequisite for exemptive relief under Section 16(b) of
the Exchange Act or under the performance-based compensation exception to
Section 162(m). Notwithstanding anything to the contrary contained herein, the
Committee may amend the Plan in such manner as may be necessary so as to have
the Plan conform with local rules and regulations.
(i) Amendment of Award.
Any Award may be amended by the Committee at any time (i) if the Committee
determines, in its sole discretion, that amendment is necessary or advisable in
light of any additions to or changes in the Code or in the regulation issued
thereunder, or any federal or state securities law or other law or regulations,
which change occurs after the Date of Grant and by its terms applies to the
Award; or (ii) other than in the circumstances described in clause (i), with the
consent of the Participant.
(j) Exemption from Computation of Compensation for Other Purposes.
By acceptance of shares of Stock sold or awarded or rights or Options
granted under this Plan, each Participant shall be deemed to agree that it is
special incentive compensation and that it will not be taken into account as
"wages" or "salary" in pension, retirement, life insurance or other employee
benefit plans or arrangements of the Company, except as otherwise determined by
the Company. In addition, each Designated Beneficiary of a deceased Participant
shall be deemed to agree that such Award or grant will not affect the amount of
any life insurance coverage available under any life insurance plan covering
employees of the Company.
(k) Termination.
Unless earlier terminated by the Board of Directors or the Committee, the
Plan shall terminate at 11:59 p.m. on December 31, 2005. No shares of Stock
shall be sold or issued (except to the extent issued in connection with rights
or Options previously granted hereunder) or rights or Options granted hereunder
after such date. The termination of the Plan, however, shall not affect any
restrictions previously imposed on shares of Stock issued pursuant to the Plan
or alter the rights of Participants with respect to rights or Options granted or
shares of Stock issued (including Unvested Stock) pursuant to the Plan.
(l) Legend.
In order to enforce the restrictions imposed upon shares of Stock sold or
awarded hereunder, the Committee may cause a legend or legends to be placed on
any certificates representing such shares, which legend or legends shall make
appropriate reference to the restrictions imposed hereunder.
A-13
<PAGE>
(m) Certain Participants.
All Award Agreements for Participants who are subject to Section 16(b) of
the Exchange Act shall be deemed to include such additional limitations, terms,
and provisions as Rule 16b-3 then requires unless the Committee determines that
any such Award should not comply with the requirements of Rule 16b-3. All
Performance-Based Awards shall be deemed to include such additional limitations,
terms and provisions as are necessary to comply with the performance-based
compensation exemption to Section 162(m). Unless the Committee determines that
an Award to an Executive Officer is not intended to qualify for the exemption
for performance-based compensation under Section 162(m) or unless (and then only
to the extent) the requirements of Section 162(m) change, (a) an Award of a
Stock Option shall have an exercise price (and Award of a Stock Appreciation
Right shall have a specified price fixed by the Committee) equal to the Fair
Market Value of a share of Stock on the Date of Grant of the Award, (b) the
period over which the performance objectives of the Award must be satisfied
shall not be shorter than six months, (c) the performance objectives applicable
to an Award for an Executive Officer shall be based on one or more of the
Stockholder Approved Standards; and (d) the Award shall be subject to any
additional requirement of Section 162(m).
(n) Restriction on Awards.
If a Participant has received a hardship distribution from a plan maintained
by the Company and qualified under Section 401(a) of the Code with a Section
401(k) cash or deferred arrangement that permits hardship withdrawals, then such
Participant must suspend all elective and employee contributions under the Plan,
to the extent required by regulations promulgated by the United States
Department of the Treasury pursuant to and in respect of provisions of the Code
or by the Internal Revenue Service's interpretation thereof, for 12 months
following the hardship distribution.
(o) Change in Control.
The Committee shall, in its sole discretion, have the right to accelerate
the payment or vesting of any Award and to release any restrictions on any
Awards in the event of a Change in Control.
A-14
<PAGE>
APPENDIX B
THE SOUTHLAND CORPORATION
1995 PERFORMANCE PLAN
SECTION 1: PURPOSE
The purpose of this Plan is to (a) provide incentives and rewards to
eligible Employees of the Corporation by allowing Participants to earn Awards
based upon the Corporation's performance; (b) assist the Corporation in
attracting, retaining, and motivating employees of high ability and experience;
(c) direct the focus of management on maximizing the value of the Corporation as
a going concern over a multi-year period; and (d) promote the long-term
interests of the Corporation and its shareholders.
SECTION 2: DEFINITIONS
2.1 ACTUAL OPERATING EARNINGS, shall mean Operating Earnings in a particular
Plan Year, as set forth on the Corporation's internal financial statements for
such Plan Year, calculated in accordance with GAAP; both the calculation of
Operating Earnings and the internal financial statements being certified by the
Corporation's Chief Accounting Officer (1) as accurate and (2) that such
Operating Earnings were calculated, and such financial statements were prepared,
in a manner consistent with the accounting principles utilized in preparation of
the Corporation's annual budget.
2.2 ANNUAL AWARD shall mean the amount payable to a Participant pursuant to
Section 5.5 if the Annual Threshold Operating Earnings set forth on Exhibit 1
are achieved.
2.3 ANNUAL AWARD POOL shall mean the amount available for payment of Annual
Awards as a result of the achievement of Actual Operating Earnings in excess of
Threshold Operating Earnings in any Plan Year as described in Section 5.4.
2.4 AWARD shall mean the amount payable, either as an Annual Award or
Cumulative Award, to Participants in this Plan.
2.5 BENEFICIARY shall mean a Participant's beneficiary designated in
accordance with Section 7.
2.6 BOARD shall mean the Board of Directors of the Corporation.
2.7 BONUS AMOUNT shall mean the annual amount payable, as of the
Determination Date (at 100% of normal bonus) under the Corporation's Annual
Performance Incentive Plan, in each Plan Year for Employees in Grade Levels
50-58 and 41-44 or such equivalent Grade Levels as may be established.
2.8 BUDGETED OPERATING EARNINGS shall mean the amount of Operating Earnings
included in the Corporation's annual budget for a particular year, as determined
during the budgeting process, generally in the fourth quarter of the preceding
year.
2.9 CAUSE shall mean acts constituting insubordination, theft, dishonesty,
fraud, embezzlement or other acts detrimental to the interests of the
Corporation, or any breach of any employment, nondisclosure, noncompetition or
other contract with the Corporation, all as determined in good faith by the
Committee.
2.10 COMMITTEE shall mean the Compensation and Benefits Committee of the
Board or, if such committee has not been designated, shall mean the Board.
2.11 CORPORATION shall mean The Southland Corporation, a Texas corporation,
and any of its wholly owned subsidiaries, and any successor or assignee of The
Southland Corporation, by merger, consolidation, acquisition or otherwise, of
all or substantially all of the assets thereof.
2.12 CUMULATIVE AWARD shall mean an amount payable to participants based on
the achievement of Excess Actual Operating Earnings in either, or both, Plan
Years.
B-1
<PAGE>
2.13 CUMULATIVE AWARD POOL shall mean the amount available to pay
Cumulative Awards as a result of the achievement of Excess Actual Operating
Earnings.
2.14 DEPARTMENT shall mean the Corporation's Compensation and Benefits
Department.
2.15 DETERMINATION DATE shall mean the date designated by the Committee
each Plan Year, or, if no date is so designated, May 1 of each Plan Year, for
certain specified purposes under the Plan.
2.16 DISABILITY shall mean the mental or physical disability, either
occupational or non-occupational in cause, which, in the opinion of the
Committee, on the basis of medical evidence satisfactory to it, prevents the
employee from engaging in any occupation or employment for wage or profit, which
has continued for at least 12 months and is likely to be permanent.
2.17 DIVESTITURE shall mean the sale of, or closing by, the Corporation of
the business operations in which the Participant was employed.
2.18 EMPLOYEE shall mean any person employed by the Corporation.
2.19 EXCESS ACTUAL OPERATING EARNINGS shall mean Actual Operating Earnings
in a Plan Year that are in excess of the Actual Operating Earnings required to
pay 100% of the Annual Awards under this Plan for the particular Plan Year.
Excess Actual Operating Earnings shall be used to fund the Cumulative Award
Pool.
2.20 GAAP shall mean generally accepted accounting principles in the United
States as in effect from time to time.
2.21 GRADE LEVEL shall mean a Participant's grade level classification (as
such grade levels are specified in the Corporation's exempt salary
administration and/or job evaluation programs) as of the Determination Date in
the Plan Year for which his or her Grade Level is to be determined.
2.22 OPERATING EARNINGS shall mean the earnings of the Corporation before
non-operating income and expense items, interest expense, taxes and
extraordinary items, as set forth on the Corporation's internal financial
statements for such Plan Year, calculated in accordance with GAAP and in a
manner consistent with the accounting principles utilized in preparation of the
Corporation's annual budget for such Plan Year; both the calculation of
Operating Earnings and the internal financial statements being certified by the
Corporation's Chief Accounting Officer (1) as accurate and (2) that such
Operating Earnings were calculated, and such financial statements were prepared,
in a manner consistent with the accounting principles utilized in preparation of
the Corporation's annual budget.
2.23 PARTICIPANT shall mean any Employee who is selected to participate in
the Plan as of the Determination Date.
2.24 PERFORMANCE UNIT shall mean a unit of measurement for purposes of
determining a Participant's Award under the Plan, as more fully described in
Section 5.2.
2.25 PLAN shall mean The Southland Corporation 1995 Performance Plan, as it
may be amended from time to time.
2.26 PLAN PERIOD shall mean the two-year period commencing on January 1,
1995, and ending on December 31, 1996.
2.27 PLAN YEAR shall mean a calendar year occurring during the Plan Period.
2.28 RETIREMENT shall mean, in the case of any Participant, the date
established by the Corporation as his or her normal retirement date, generally
when the Participant reaches age 65 (or earlier if approved by the President of
the Corporation).
2.29 THRESHOLD OPERATING EARNINGS for a Plan Year shall equal Budgeted
Operating Earnings for such Plan Year, or, if the Committee so determines, a
different amount that is based on Budgeted Operating Earnings, with the number
as determined for each year to be as set forth in Exhibit 1.
B-2
<PAGE>
SECTION 3: ADMINISTRATION
3.1 COMMITTEE. This Plan shall be administered by the Committee.
3.2 COMMITTEE'S POWERS. Subject to the express provisions hereof and in
addition to the other powers set forth in this Plan, the Committee shall have
the authority, in its sole and absolute discretion, to (i) determine criteria
for eligibility for inclusion in this Plan; (ii) adopt, amend, and rescind
administrative and interpretive rules and regulations relating to this Plan;
(iii) construe this Plan or any agreements contemplated hereunder; and (iv) make
all other determinations and perform all other acts necessary or advisable for
administering this Plan, including the delegation of such ministerial acts and
responsibilities as the Committee deems appropriate. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in this Plan or
in any agreement contemplated hereunder in the manner and to the extent it shall
deem expedient to carry it into effect and it shall be the sole and final judge
of the necessity of such action. The determination of the Committee on the
matters referred to in this Section 3.2 shall be final and conclusive.
3.3 ADMINISTRATION. The Department shall (i) prepare and distribute
designation of beneficiary forms to Participants; (ii) maintain records of
designations of Beneficiaries; (iii) prepare communications to Participants;
(iv) prepare reports and data required by the Corporation, the Committee and
government agencies; (v) obtain data requested by the Committee; and (vi) take
such other actions requested by the Committee as are necessary for the effective
implementation of the Plan.
SECTION 4: PARTICIPATION
4.1 ELIGIBILITY. Eligibility for participation in the Plan shall be
limited to those Employees who, as of the Determination Date, are in Grade
Levels 50-58 or 41-44 or such equivalent Grade Levels as may be established, and
who, in the judgment of the Committee or the President of the Corporation, have
the ability and opportunity to influence significantly the Corporation's
performance over a multi-year period. Employees shall be selected for
participation in the Plan as of the Determination Date each year, as approved by
the President of the Corporation.
SECTION 5: AWARDS
5.1 GENERAL. A Participant shall be entitled to an Annual Award or
Cumulative Award out of the applicable Award Pool with respect to any Plan Year
or the Plan Period, if the performance level described in Section 5.3 is
achieved.
5.2 PERFORMANCE UNITS.
(a) Based on the Grade Level of each Participant as of the Determination
Date in a Plan Year, the Committee shall grant to each Participant for such
Plan Year a specified number of Performance Units as determined under
subsection (b) below. Performance Units shall be solely units of account,
shall imply no ownership interest in the Corporation, and shall carry no
value outside the context of the Plan.
(b) The number of Performance Units to be granted to each Participant
for each Plan Year shall equal the Bonus Amount payable to a person earning
the mid-point of such Participant's Grade Level (as determined as of the
Determination Date) for such Plan Year.
5.3 PERFORMANCE LEVEL. The performance level under the Plan can be
satisfied either on an annual or a cumulative basis. If at the end of any year
in the Plan Period, Actual Operating Earnings exceed Threshold Operating
Earnings, then the performance level under the Plan is satisfied for that year
and the Annual Award Pool shall be determined in accordance with the formula for
determining the Annual Award Pool for that year, as set forth in Section 5.4. In
addition, if there are Excess Actual Operating Earnings in any Plan Year, then
those Excess Actual Operating Earnings shall be used to fund the Cumulative
Award Pool, using the formula in Section 5.4 for the year in which the Excess
Actual Operating Earnings were achieved.
5.4 CALCULATION OF AWARD POOL. The amount to be credited to the Annual
Award Pool for 1995 shall be determined as follows: if 1995 Actual Operating
Earnings exceed 1995 Threshold Operating Earnings, as defined in Section 2.29,
then $.15 of every excess dollar of 1995 Actual Operating
B-3
<PAGE>
Earnings shall be contributed to the Annual Award Pool for 1995. In addition, if
Actual Operating Earnings are sufficient to pay 150% of the annual performance
incentive ("API") payable to all covered employees in the Corporation's 1995
Annual Performance Incentive Plan, then $.35 of every dollar of 1995 Actual
Operating Earnings earned in excess of the amount necessary to pay 150% of the
API payable pursuant to the Annual Performance Incentive Plan, shall be
contributed to the Annual Award Pool, up to the maximum Annual Awards payable
for 1995 under this Plan, as described in Section 5.6. If there are Excess
Actual Operating Earnings in any Plan Year, then until 200% of the API payable
to all covered employees pursuant to the Annual Performance Incentive Plan has
been paid pursuant to the Annual Performance Incentive Plan, $.15 of every
dollar of Excess Actual Operating Earnings shall fund the Cumulative Award Pool
for this Plan and, after 200% of the API has been paid to all covered employees
pursuant to the Annual Performance Incentive Plan, then $.35 of every additional
dollar of Excess Actual Operating Earnings shall be designated to fund the
Cumulative Award Pool for this Plan, up to the maximum Awards payable for the
Plan Period, as described in Section 5.6. The 1996 Annual Award Pool shall be
determined according to the same formula as 1995, unless a different formula is
approved by the Committee. An Annual Award that is based on achievement of only
the 1995 performance level shall be based on the Performance Units granted for
that year only; an Annual Award that is based on the achievement of the 1996
performance level shall be based on the Performance Units granted for that year
only; and any Cumulative Awards that are based on the achievement of Excess
Actual Operating Earnings in either Plan Year shall be based upon the total
Performance Units granted for both years in the Plan Period.
5.5 AWARDS. Subject to the limitations under Section 5.6, a Participant
shall be entitled to an Annual Award equal to (a) the Annual Award Pool
determined under Section 5.4 multiplied by (b) a fraction, the numerator of
which is the number of such Participant's Performance Units granted for that
Plan Year, and the denominator of which is the total Performance Units for that
Plan Year granted and outstanding under the Plan to persons who are to
participate in the Annual Awards for that Plan Year. If the Award is a
Cumulative Award based on Excess Actual Operating Earnings from either Plan
Year, then a Participant shall be entitled to a Cumulative Award equal to (a)
the Cumulative Award Pool determined under Section 5.4 multiplied by (b) a
fraction, the numerator of which is the number of such Participant's Performance
Units granted for the Plan Period, and the denominator of which is the total
Performance Units granted and outstanding under the Plan to persons who are to
participate in the Cumulative Awards for the Plan Period. A Cumulative Award
shall not be paid if the maximum Annual Awards have been paid for each Plan Year
in the Plan Period.
5.6 LIMITATIONS ON AWARDS. Awards under the Plan shall be subject to the
limitations described in subsections (a), (b) and (c) below.
(a) The Awards payable to all Participants under the Plan shall not exceed
the sum of the Bonus Amounts to all eligible Participants for (i) each Plan Year
for an Annual Award and (b) the Plan Period, less any amounts paid as Annual
Awards, for any Cumulative Awards.
(b) The amount of Annual and Cumulative Awards payable under the Plan shall
be subject to the condition that the Corporation has sufficient liquidity as
determined by the President of the Corporation, either from available cash or
from borrowings to make the payments under this Plan at the time provided in
Section 5.7.
(c) Except as provided in Section 6.1 and Section 6.3, to be eligible for an
Award, a Participant must be actively employed by the Corporation at the end of
the applicable Plan Year for any Annual Award and at the end of the Plan Period
to be eligible for a Cumulative Award based on Excess Actual Operating Earnings
in either Plan Year.
5.7 PAYMENT. Except as set forth in Section 9.1, Awards will be paid to
Participants within one hundred twenty (120) days after the end of the Plan Year
for which an Annual Award is earned or within one hundred twenty (120) days
after the end of the Plan Period for a Cumulative Award. As determined by the
Committee, Awards may be paid in cash or stock of the Corporation, or a
combination of cash and stock, and may be paid in different forms to different
Participants.
B-4
<PAGE>
SECTION 6: TERMINATION OF EMPLOYMENT; CHANGE IN GRADE LEVEL
6.1 TERMINATION WITHOUT FORFEITURE. If a Participant ceases to be employed
by the Corporation prior to the end of the applicable Plan Year or Plan Period
because of (i) Disability, (ii) death, (iii) Retirement, (iv) a Divestiture, or
(v) other termination by the Corporation for any reason other than Cause, then
such Participant shall be entitled to an Award as provided in Section 6.3 below.
6.2 CHANGE IN GRADE LEVEL. If a Participant ceases participation in this
Plan prior to the end of the applicable Plan Year or Plan Period because of a
change in Grade Level, then such Participant shall be entitled to a partial
Award as provided in Section 6.3.
6.3 PARTIAL AWARD. A Participant who ceases to be employed by the
Corporation in accordance with any of the applicable conditions set forth in
Section 6.1 or who ceases participation in the Plan for the reason set forth in
Section 6.2, will be entitled to receive an Annual Award under Section 5.5 only
for a Plan Year during which the Participant was employed and granted
Performance Units and the Participant's Annual Award for that Plan Year shall be
determined by multiplying the number of Performance Units granted to such
Participant for that Plan Year by a fraction, the numerator of which is the
number of days in the Plan Year prior to such cessation of employment or
participation, and the denominator of which is the number of days in the
particular Plan Year. If a Cumulative Award based on Excess Actual Operating
Earnings is earned under the Plan for any Plan Year, then a Participant who is
described in the first sentence of this section shall be entitled to a
Cumulative Award based on (i) the Participant's Performance Units for each full
Plan Year occurring prior to such Participant's cessation of employment or
participation in the Plan, plus (ii) the number of Performance Units granted to
such Participant for the Plan Year in which the Participant's employment or
participation terminated multiplied by a fraction, the numerator of which is the
number of days in the Plan Year prior to such cessation of employment or
participation, and the denominator of which is the number of days in the
particular Plan Year. Such resulting number of eligible Performance Units shall
then share pro rata in the Cumulative Award Pool by multiplying the Cumulative
Award Pool by a fraction, the numerator of which is the eligible number of such
Participant's Performance Units, and the denominator is the total number of
Performance Units granted and outstanding for the Plan Period.
Awards paid in accordance with this Section 6.3 shall be paid at the same
time and in the same manner as described in Section 5.7.
6.4 TERMINATION RESULTING IN FORFEITURE. If a Participant ceases to be
employed by the Corporation for any reason other than those specified in Section
6.1 above, including, without limitation, voluntary termination of employment,
then such Participant shall only be entitled to an Annual Award under the Plan
if the Participant was actively employed on December 31 of the Plan Year for
which the Annual Award was earned and shall not be entitled to share in any
Cumulative Award, regardless of the Plan Year in which the Excess Actual
Operating Earnings were achieved.
SECTION 7: DESIGNATION OF BENEFICIARIES
7.1 DESIGNATION AND CHANGE OF DESIGNATION. Each Participant shall file
with the Department a written designation of the Beneficiary who shall be
entitled to receive the amount, if any, payable under the Plan upon his or her
death. A Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by filing a
new designation with the Department. The last such designation received by the
Department shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Department prior to the Participant's death, and in no event shall it be
effective as of a date prior to the date of such receipt.
7.2 ABSENCE OF VALID DESIGNATION. If no such Beneficiary designation is in
effect at the time of a Participant's death, or if no designated Beneficiary
survives the Participant, or if such designation conflicts with law, the
Participant's estate shall be deemed to have been designated his or her
Beneficiary and shall receive the payment of the amount, if any, payable under
the Plan upon his or
B-5
<PAGE>
her death. If the Committee is in doubt as to the right of any party to receive
such amount, the Corporation may retain such amount, or the Corporation may pay
such amount into any court of appropriate jurisdiction and such payment shall be
a complete discharge of the liability of the Plan and the Corporation therefor.
SECTION 8: GENERAL PROVISIONS
8.1 NO ASSIGNMENT. A Participant may not assign an Award without the
Committee's prior written consent. Any attempted assignment without such consent
shall be null and void; provided, however, that an assignment to the Corporation
to collateralize indebtedness of the Participant to the Corporation does not
need the consent of the Committee. For purposes of this paragraph, any
designation of, or payment to, a Beneficiary shall not be deemed an assignment.
8.2 UNFUNDED INCENTIVE COMPENSATION ARRANGEMENT. The Plan is intended to
constitute an unfunded incentive compensation arrangement covering a select
group of management or highly compensated employees. Nothing contained in the
Plan, and no action taken pursuant to the Plan, shall create or be construed to
create a trust of any kind. A Participant's right to receive an Award shall be
no greater than the right of an unsecured general creditor of the Corporation.
All Awards shall be paid from the general funds of the Corporation, and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such Awards.
8.3 NO RIGHT TO EMPLOYMENT. Nothing contained in the Plan shall give any
Participant the right to continue in the employment of the Corporation or affect
the right of the Corporation to discharge a Participant.
8.4 GOVERNING LAW. The Plan shall be construed and governed in accordance
with the laws of the State of Texas except to the extent Texas law is preempted
by federal law.
8.5 NO RIGHT TO SPECIFIC ASSETS. There shall not vest in any Participant
or Beneficiary any right, title, or interest in and to any specific assets of
the Corporation.
8.6 NO EFFECT ON OTHER BENEFIT PLANS. Benefits under the Plan shall not
increase, decrease, modify or otherwise be taken into account for purposes of
determining benefits under any other employee benefit plan unless such other
plan expressly provides, by referring to this Plan, that benefits under the Plan
are to be so taken into account.
8.7 WITHHOLDING. The Corporation shall have the right to deduct from all
payments made to any Participant pursuant to this Plan any federal, state or
local taxes required by law to be withheld with respect to such payments, as
well as any amount then owed by the Participant to the Corporation.
8.8 EFFECTIVE DATE. This Plan is effective as of January 1, 1995. Subject
to Section 9.1, the Plan shall expire December 31, 1996.
8.9 HEADINGS. The titles and headings of Sections are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof.
8.10 WORD USAGE. Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of this Plan dictates, the plural
shall be read as the singular and the singular as the plural.
SECTION 9: AMENDMENT, SUSPENSION OR TERMINATION
9.1 The Board or the Committee may amend, terminate, extend or suspend the
Plan at any time. If the Plan is terminated within the Plan Period, (i) Awards,
if any, shall be determined as of the date of termination, (ii) Annual Awards
for 1995 will be paid to Participants within one hundred twenty (120) days after
December 31, 1995, and Annual Awards for 1996 and/or Cumulative Awards based on
Excess Actual Operating Earnings shall be paid within one hundred twenty (120)
days after December 31, 1996; (iii) for all other purposes under the Plan, the
date of such termination shall be deemed the last day of the Plan Period.
B-6
<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 FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 24, 1996
THE SOUTHLAND CORPORATION
PROXY
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 24, 1996 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.
See Reverse Side for Items 2-5, and to vote on Items 1, 2, 3 and 4.
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, 2, 3 AND 4, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
NOMINEES AND "FOR" ITEMS 2, 3 and 4. THE PROXY HOLDERS WILL USE THEIR
DISCRETION WITH RESPECT TO ANY OTHER MATTER THAT IS PROPERLY BROUGHT BEFORE
THE MEETING, AS REFERRED TO IN ITEM 5.
(Please sign on the reverse side)
SEE REVERSE SIDE
X Please mark your SHARES IN YOUR NAME
votes as in this
example.
FOR WITHHELD
1. Election of
Directors
(NOMINEES
ARE LISTED ON
REVERSE SIDE)
For, except vote withheld from the following nominee(s):
________________________________________________________
2. Approval of the 1995 Stock Incentive Plan.
FOR AGAINST ABSTAIN
3. Approval of the 1995 Performance Plan.
FOR AGAINST ABSTAIN
4. Ratification of the appointment of the accounting firm of Coopers &
Lybrand L.L.P., as independent auditors of the Company for 1996.
FOR AGAINST ABSTAIN
5. 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 1995 Annual Report and March 21, 1996 Notice and Proxy
Statement is hereby acknowledged.
