SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
----------------------------------------------
(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] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
300 Industrial Boulevard, NE
Minneapolis, Minnesota 55413
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 26, 1999
------------------------------
TO THE SHAREHOLDERS OF THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of The
Barbers, Hairstyling for Men & Women, Inc., a Minnesota corporation, will be
held on Tuesday, January 26, 1999 at 3:30 p.m., at the Minneapolis Club, 729
Second Avenue South, Minneapolis, MN for the following purposes:
1. To elect seven directors to serve for the ensuing year or until their
resignation or removal.
2. To ratify the appointment of Ernst & Young LLP as independent auditors for
the fiscal year 1999.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only Shareholders of record at the close of business on December 4, 1998
are entitled to notice of and to vote at the Annual Meeting and any adjournments
or postponements thereof.
EACH OF YOU IS INVITED AND URGED TO ATTEND THE ANNUAL MEETING IN PERSON IF
POSSIBLE. WHETHER OR NOT YOU ARE ABLE TO ATTEND IN PERSON, YOU ARE REQUESTED TO
DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE ENCLOSED FOR
YOUR CONVENIENCE.
By Order of the Board of Directors
Patricia D. Kessler
Vice President of Franchise Compliance
& Corporate Secretary
December 30, 1998
<PAGE>
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
300 Industrial Boulevard, NE
Minneapolis, Minnesota 55413
PROXY STATEMENT
For Annual Meeting of Shareholders
to be held January 26, 1999
SOLICITATION OF PROXIES
GENERAL
The enclosed proxy is solicited by and on behalf of the Board of
Directors of The Barbers, Hairstyling for Men & Women, Inc. (the "Company") for
use at the Annual Meeting of Shareholders to be held on Tuesday, January 26,
1999 at 3:30 p.m., at the Minneapolis Club, 729 Second Avenue South,
Minneapolis, MN 55402 and at any adjournment or postponement thereof. The
approximate date on which this Proxy Statement, form of proxy, and the Company's
Annual Report will first be sent or given to Shareholders is December 30, 1998.
The only matters the Board of Directors knows will be presented at
the Annual Meeting are those stated in Items 1 and 2 of the notice. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE IN FAVOR OF ITEMS 1 AND 2.
Should any other matter properly come before the Annual Meeting, it is intended
that the persons named in the enclosed proxy will have authority to vote such
proxy in accordance with their judgment on such matter.
RECORD DATE
Only Shareholders of record at the close of business on December 4,
1998, are entitled to notice of and to vote at the Annual Meeting or any
adjournments or postponements thereof. Each share so held entitles the holder to
one vote upon each matter to be voted upon. On December 4, 1998, the Company had
outstanding 3,983,269 shares of common stock. A quorum, consisting of 51% of the
outstanding shares of the common stock entitled to vote at the Annual Meeting,
must be present in person or represented by proxy before action may be taken at
the Annual Meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving the proxy at any time before it is voted. Proxies may be revoked
by (a) giving written notice of such revocation to the secretary of the Company
at the Company's principal executive office located at 300 Industrial Boulevard
NE, Minneapolis, MN 55413, (b) giving another written proxy bearing a later
date, or (c) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of a proxy).
VOTING AND SOLICITATION
All shares represented by proxies which have been properly executed
and filed with the secretary of the Company prior to or at the meeting, and not
otherwise revoked, will be voted at the meeting. Where a specification is made
by the Shareholder as provided in the form of proxy, the shares will be voted in
accordance with such specification. If no specification is made, the shares will
be voted (i) FOR the election of all of the nominees for director named in this
Proxy Statement, (ii) FOR the ratification of the appointment of Ernst & Young
LLP as independent auditors for the fiscal year 1999, and (iii) in the Proxy's
discretion on such other business as may come before the Annual Meeting. At the
date of this Proxy Statement, the Board of Directors knows of no other matters
which may come before the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspectors of Election appointed for the Annual Meeting. If an
executed proxy card is returned and the Shareholder has abstained from voting on
any matter, the shares represented by such proxy will be considered present at
the meeting for purposes of determining a quorum, but as unvoted for purposes of
determining the approval of matters submitted to the shareholders for a vote. If
an executed proxy is returned by a broker
1
<PAGE>
holding shares in street name which indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more matters,
such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be present at the meeting
for purposes of calculating the vote with respect to such matter.
The expense of the solicitation of proxies for this Annual Meeting,
including the cost of mailing, has been or will be borne by the Company.
Arrangements will be made with brokerage houses and other custodian nominees and
fiduciaries to send proxies and proxy materials to their principals and the
Company will reimburse them for their expense in so doing. In addition to
solicitation by mail, proxies may be solicited by telephone, telegraph or
personally by certain of the Company's directors, officers and regular
employees, without additional compensation.
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
The property, affairs and business of the Company are managed under
the direction of the Board of Directors. A board of seven (7) directors is to be
elected at the Annual Meeting. Unless otherwise instructed, the proxy holders
will vote the proxies received by them for the seven (7) nominees named below,
all of whom are presently directors of the Company. The term of office for each
person elected as a director will continue until the next annual meeting of the
Shareholders and until such person's successor shall have been duly elected and
qualified (unless, prior to such time, such person is removed or such person
resigns). All of the nominees named below are presently directors of the Company
and have served continuously since the date indicated. All nominees have
indicated a willingness to serve if elected, and the Company knows of no reason
why any of the listed nominees would be unavailable to serve.
All shares represented by proxies which have been properly executed
and returned will be voted for the election of the nominees named below, unless
other instructions are indicated thereon. In the event any one or more of such
nominees should for any reason be unable to serve as a director, it is intended
that the enclosed proxy will be voted for such person or persons as may be
selected by the Board of Directors.
NOMINEES
The names of the nominees and certain information about them are set
forth below:
NAME POSITION WITH COMPANY AGE DIRECTOR SINCE
---- --------------------- --- --------------
Florence F. Francis Chairman of the Board 62 1989
Frederick A. Huggins, Jr. President, Chief Executive 63 1988
Officer and Director
Marcia J. Bystrom Director 54 1995
David E. Emerson Director 63 1988
Richard H. King Director 73 1986
James L. Reissner Director 58 1991
Susan F. Goldstein Director 40 1995
VOTE REQUIRED
Directors are elected by a majority of the votes cast for the
election of directors at the Annual
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<PAGE>
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES NAMED ABOVE.
INFORMATION CONCERNING
DIRECTORS AND NOMINEES
DIRECTORS AND NOMINEES
Set forth below is certain information concerning the directors and nominees of
the Company, including information provided by them as to their principal
occupations for the past five years and certain other directorships held by
them:
Ms. Francis has been Chairman of the Board of Directors of the Company since
April 1994, and previously served as Vice-Chairman of the Board of Directors
from August 1993. She has been a director of the Company since January 1989. She
is a major shareholder of the Company and has directed public relations and
franchisee relations for the Company since February 1988. In addition, Ms.
Francis has also been involved in public relations and franchisee relations
since the inception of the Company.
Mr. Huggins joined the Company as a member of its Board of Directors in January
1988 and became President and Chief Executive Officer in April 1990. Mr. Huggins
has over twenty-five years of franchising experience. He was the Vice President
of the Fast Food and Restaurant Division of International Multifoods Corporation
from June 1982 to March 1990, and was the President of Mister Donut of America,
Inc., a subsidiary of International Multifoods Corporation, from January 1985 to
March 1990. Prior to that, Mr. Huggins worked in various franchise-related
capacities for Dunkin' Donuts, Inc., Dutch Pantry Restaurants and Pizza Hut,
Inc.
Ms. Bystrom has been a director of the Company since January 1995. Ms. Bystrom
has been an Associate Vice President of Morgan Stanley Dean Witter. since 1997.
From 1985 to 1997 she was an Assistant Vice President of Piper Jaffray, Inc. Ms.
Bystrom is also currently on the board of directors of numerous nonprofit
community organizations.
Mr. Emerson became a director of the Company in January 1988. He has been a
Professor of Accounting and Finance at the College of St. Catherine, St. Paul,
Minnesota, since 1980. In addition, he is a business management and financial
consultant. Mr. Emerson is a certified public accountant.
Ms. Goldstein has been a director of the Company since December 1995. Ms.
Goldstein is President of the Joe Francis Haircare Scholarship Foundation. Ms.
Goldstein was employed by CC Pittsburgh, Inc., which operated Cost Cutters
franchises, as Operations Manager from March 1995 to March 1996. From 1985 to
1995, Ms. Goldstein was a homemaker. From 1983 to 1985, she was a Sales
Representative for Control Data Business Corporation in Chicago, Illinois. From
1980 to 1983, she was a Systems Analyst for the Commodity Marketing Division of
Cargill, Inc.
Mr. King has been a director of the Company since April 1986 and a self-employed
business and financial consultant since January 1988. He was the Vice President
of Corporate Development for the Company from April 1986 until December 1987.
Prior to joining the Company, he was associated with International Multifoods
Corporation, Minneapolis, Minnesota, initially as its Controller for
approximately two years, and then as its Vice President-Finance for
approximately 15 years. Mr. King also acts as an advisor to the Company's 401(k)
Plan.
Mr. Reissner has been a director of the Company since December 1991. He is
currently President of Activar, Inc. Mr. Reissner was the Chief Financial
Officer of Activar, Inc. from January 1993 through June 1996. He has also been a
director of Toro Credit Company since March 1991; a director of Vermillion State
Bank since January 1993; a director of Intek, Inc. since January 1995; and a
director of Rimage, Inc. since March 1998. From January 1991 to December 1992 he
was a self-employed banking and financial consultant. He was employed by First
Bank System, Inc. from 1964 to December 1990, most recently as the Managing
Director of the Minnesota Region.
3
<PAGE>
FAMILY RELATIONSHIPS.
Florence F. Francis, Chairman of the Board of Directors and major
shareholder, is the widow of Joseph Francis, Sr., who was the founder, former
Chairman of the Board of Directors and a major Shareholder in the Company.
Susan F. Goldstein is the daughter of Florence F. Francis, the
Chairman of the Board and major shareholder.
John W. Francis, Vice President of Strategy and Credit of the
Company, is the son of Florence F. Francis, the Chairman of the Board and major
shareholder.
DIRECTOR COMPENSATION
For the fiscal year ended September 24, 1998, each non-employee
director was paid $750 per month and 112.5 shares of common stock for each Board
of Directors meeting attended. In addition, for the fiscal year ended September
24, 1998, each non-employee director received an automatic, nondiscretionary
award of options to purchase 4,500 shares of common stock pursuant to the 1990
Stock Option Plan for Directors. No additional compensation is paid to directors
for attendance at committee meetings which are held on the same day as a meeting
of the Board of Directors; however, each director is paid $200 per committee
meeting attended that is held on a day other than the day of a meeting of the
Board of Directors. The Company also paid Richard H. King the sum of $800 for
services rendered as an advisor to the Company's 401-k plan.
As of January 1, 1999, each non-employee director will be paid $750
per month and 112.5 Shares of common stock for each board of directors meeting
attended; provided that if the board of directors holds more than nine meetings
a year, each director will be paid $500 per additional meeting attended. No
additional compensation is paid to directors for attendance at committee
meetings which are held on the same day as a meeting of the board of directors;
however, each director will be paid $200 per committee meeting attended that is
held on a day other than the day of a meeting of the board of directors. In
addition, each non-employee director will receive an annual, nondiscretionary
award of options to purchase 4,500 shares of common stock pursuant to the 1990
stock option plan for directors.
BOARD ACTIONS AND COMMITTEES
During the fiscal year ended September 24, 1998, the Company's Board
of Directors met or took action by written consent eight times. All of the
directors attended at least 85% of the aggregate number of meetings of the Board
of Directors and the committees on which he or she served.
The Board of Directors has an Audit Committee, which consisted of
the following individuals for the fiscal year ended September 24, 1998: David E.
Emerson and Richard H. King. The Audit Committee, which met two times during the
fiscal year ended September 24, 1998, reviews and reports to the Board with
respect to various auditing and accounting matters, including the engagement of
independent auditors, the scope of audit procedures, the scope, frequency and
results of internal audits, and the adequacy of internal accounting controls.
The Board of Directors has a Compensation Committee, which consisted
of the following individuals for the fiscal year ended September 24, 1998:
Marcia J. Bystrom, David E. Emerson, Richard H. King, and James L. Reissner. The
Compensation Committee, which met two times in fiscal year 1998, awards stock
options, reviews salary levels, bonuses and other matters and makes
recommendations to the Board of Directors in connection therewith.
The entire Board of Directors acts as a nominating committee.
4
<PAGE>
PROPOSAL TWO
RATIFICATION AND APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP
as independent public auditors to audit the books, records and accounts of the
Company for the fiscal year ending September 30, 1999.
Representatives of Ernst & Young LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions by Shareholders.
VOTE REQUIRED
The affirmative vote of not less than a majority of the common stock
represented either in person or by proxy and entitled to vote at the meeting
will be required to ratify the appointment of the independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation for the fiscal year ended September 24, 1998 and the two prior
fiscal years earned by or paid to the Company's Chief Executive Officer and the
four most highly compensated executive officers, other than the Chief Executive
Officer, whose total annual salary and bonus exceeded $100,000 in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
----------------------------------------------- -------------------
Other Annual Options/ All Other
Name and Principal Fiscal Compensation SARs Compensation
Position Year Salary ($) Bonus ($) (1) ($) (2) (#) (5) ($) (6)
-------- ---- ---------- ------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Florence F. Francis 1998 $ 205,189 $ 130,076 $ 28,754 - $ 3,691
Chairman of the 1997 $ 201,375 $ 102,903 $ 32,678 - $ 4,044
Board of Directors (3) 1996 $ 194,754 $ 85,930 $ 37,460 - $ 3,511
Frederick A. Huggins, Jr. 1998 $ 205,189 $ 130,076 $ 26,769 - $ 3,774
President and Chief 1997 $ 201,375 $ 102,903 $ 45,419 - $ 3,885
Executive Officer (3) 1996 $ 194,754 $ 85,930 $ 56,930 - $ 3,553
John A. Fox 1998 $ 204,849 $ 50,846 $ 14,021 - $ 1,503
Vice President of 1997 $ 207,917 $ 39,940 $ 32,367 - $ 1,184
Development (4) (7) 1996 $ 213,421 $ 33,291 $ 54,118 22,500 $ 1,448
James W. George 1998 $ 88,949 $ 56,401 $ 6,553 - $ 3,242
Vice President of 1997 $ 85,580 $ 44,011 $ 5,041 - $ 2,325
Franchise Services (4) 1996 $ 83,207 $ 36,721 $ 2,820 - $ 2,175
J. Brent Hanson 1998 $ 85,374 $ 54,142 $ 6,568 - $ 3,510
Vice President and Chief 1997 $ 82,890 $ 42,121 $ 4,987 - $ 2,344
Financial Officer (4) 1996 $ 79,096 $ 34,894 $ 3,325 - $ 2,128
</TABLE>
(1) All amounts paid pursuant to the Company's Incentive Compensation Plan,
See "Employment Agreements - INCENTIVE COMPENSATION PLAN".
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<PAGE>
(2) This principally represents amounts paid for life insurance premiums,
company cars, tax preparation and medical cost reimbursements.
(3) Other Annual Compensation includes deferred compensation represented by
the Company's contribution to a deferred compensation plan pursuant to the
employment agreement with the employee. Under the terms of the agreements,
the employee or his beneficiary is only entitled to receive the Company's
contributions when his or her employment is terminated or upon his or her
death.
(4) Other Annual Compensation includes deferred compensation representing
voluntary elective reductions in base pay, commissions, and/or bonus
deferred under The Barbers, Hairstyling for Men & Women, Inc. Deferred
Compensation Plan.
(5) Options or warrants to purchase shares of common stock of the Company
becoming exercisable during the fiscal year. See also "Employment
Agreements". All options and warrants have been adjusted to reflect the
3-for-2 stock splits that were issued April 17, 1998 and October 31, 1996.
(6) This amount represents the Company's contribution to its 401(k) Plan for
this individual.
(7) Salary amounts include commissions earned on the sale and opening of new
franchise locations.
AGGREGATED OPTION/SAR EXERCISES DURING FISCAL YEAR ENDED SEPTEMBER 24, 1998 AND
OPTION/SAR VALUES AT SEPTEMBER 24, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE SEPTEMBER 24, 1998 SEPTEMBER 24, 1998
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
FLORENCE F. FRANCIS - $ - 99,000 / 22,500 $ 440,645 / $ 99,180
FREDERICK A. HUGGINS - $ - 202,500 / 22,500 $ 974,745 / $ 99,180
JOHN A. FOX - $ - 33,750 / 11,250 $ 139,995 / $ 30,240
JAMES W. GEORGE 15,000 $ 66,078 24,375 / 5,625 $ 109,208 / $ 28,901
J. BRENT HANSON 7,500 $ 46,500 31,875 / 5,625 $ 147,743 / $ 28,901
</TABLE>
Number of Shares have been adjusted to reflect the 3-for-2 stock split that was
effective April 17, 1998. The value of unexercised in-the-money options was
determined by multiplying the number of shares subject to such options by the
favorable difference between the exercise price and $6.188, the closing bid
price per share on September 24, 1998.
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENT WITH FLORENCE F. FRANCIS. On October 13, 1994,
Ms. Francis entered into an employment agreement with the Company. Under the
employment agreement, Ms. Francis will receive a base salary of $190,000 per
year, which will be increased annually on October 1 to reflect the increase in
the consumer price index, and participation in the Incentive Compensation Plan,
described below.
Ms. Francis is eligible for the following fringe benefits:
participation in the Company's group health plan; additional health care cost
coverage of up to $10,000 per occurrence and $100,000 per year; the use of a
company car; a yearly tax preparation fee of $2,500; participation in a stock
option plan; life insurance coverage in the amount of $1,500,000; and
participation in a deferred compensation plan, which is equal to 10% of Ms.
Francis' base salary each year. See also "Certain Relationships and Related
Transactions".
6
<PAGE>
In connection with Ms. Francis' employment agreement, she received
warrants to purchase 112,500 shares of common stock, exercisable at a price of
$1.78 per share, which vested over four years and are now fully vested. Such
warrants expire one year after termination of Ms. Francis' employment with the
Company.
EMPLOYMENT AGREEMENT WITH FREDERICK A. HUGGINS, JR. Mr. Huggins is
currently the President, Chief Executive Officer and a director of the Company.
For the fiscal year ended on September 24, 1998, Mr. Huggins employment
relationship with the Company was governed by an employment agreement, the term
of which began on October 1, 1994 and continues through September 30, 2000.
Under the terms of this employment agreement, Mr. Huggins will receive a base
salary of $190,000 per year, which will be increased annually on October 1 to
reflect the increase in the consumer price index, and participation in the
Incentive Compensation Plan, described below.
Mr. Huggins is eligible for the following fringe benefits:
participation in the Company's group health plan; additional health care cost
coverage of up to $10,000 per occurrence and $100,000 per year; the use of a
company car; a yearly tax preparation fee of up to $2,500; participation in a
stock option plan; life insurance coverage in the amount of $1,100,000; and
participation in a deferred compensation plan, which is equal to 10% of Mr.
Huggins' base salary each year.
The Agreement provides that if the Company terminates Mr. Huggins'
employment, Mr. Huggins will receive his base salary, health insurance, company
car, and tax preparation fees for a period of 18 months after the date of
termination. If Mr. Huggins voluntarily terminates his employment with the
Company, he will receive only his base salary up to the date of termination;
however, if there is a change of control in the Company, and the Company
initiates Mr. Huggins' termination within one year from the date of the change
of control, then the Company will pay Mr. Huggins' base salary, health
insurance, company car, and tax preparation fees for a period of 30 months from
the date of termination. The Agreement also provides that if after a change in
control, Mr. Huggins resigns within one year from the date of the change in
control, then the Company will pay Mr. Huggins' base salary, health insurance,
company car, and tax preparation fees for a period of 18 months after the
termination. All benefits not mentioned above will cease on the date of
termination. In addition, the employment agreement contains a two year
non-compete agreement.
In connection with Mr. Huggins' employment agreement, he received
warrants to purchase 112,500 shares of common stock, exercisable at a price of
$1.78 per share, which are now fully vested. Mr. Huggins also has warrants to
purchase 112,500 shares of common stock exercisable at $1.05 per share. These
warrants were awarded in April 1990 and are fully vested. All warrants expire
one year after termination of Mr. Huggins' employment with the Company.
EMPLOYMENT AGREEMENT WITH JOHN A. FOX. Mr. Fox is currently the Vice
President of Development of the Company. Mr. Fox's employment relationship with
the Company is governed by an employment agreement, the term of which began on
October 1, 1997 and continues through September 30, 2002. Under the terms of
this employment agreement, Mr. Fox will receive a base salary which will be
increased annually on January 1, based upon review of performance. Mr. Fox will
also receive commissions based on the sale and opening of new franchise
locations.
Mr. Fox is eligible for the following fringe benefits: participation
in the Company's group health plan; the use of a company car; life insurance
coverage; and participation in a deferred compensation plan, which will be
credited with an amount designated by the employee from earned sales commissions
and base salary.
The agreement provides that if the Company terminates Mr. Fox's
employment, Mr. Fox will receive his base salary, health insurance, and company
car for a period of 15 months after the date of termination. If Mr. Fox
voluntarily terminates his employment with the Company, he will receive only his
base salary up to the date of termination; however, if there is a change of
control in the Company, and the Company initiates Mr. Fox's termination within
one year from the date of the change of control, then the Company will pay Mr.
Fox a lump sum payment equal to 20 months base salary. If this Agreement is
terminated by the employee for any reason within one year following a change in
control, then the Company will pay Mr. Fox a lump sum payment equal to 18 months
base salary. All benefits not
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mentioned above will cease on the date of termination. In addition, the
employment agreement contains a two year non-compete agreement.
SALARY CONTINUATION AGREEMENT WITH PATRICIA D. KESSLER. On February
9, 1988, the Company entered into a salary continuation agreement with Patricia
D. Kessler, who is currently the Vice President of Franchise Compliance and
Corporate Secretary. In addition to her yearly salary, the agreement provides
that if Ms. Kessler remains in the continuous employ of the Company until she
reaches age 65, the Company will pay Ms. Kessler, or her named beneficiary,
retirement benefits of $250,000 in 120 equal monthly installments over a ten
year period. If Ms. Kessler dies prior to attaining age 65, the agreement
provides a death benefit to her named beneficiary of $250,000 in 120 equal
monthly payments.
SPECIAL TERMINATION ALLOWANCE. The Company has established a special
termination allowance for key employees which becomes effective in the event of
a "change of control" of the Company, as defined under the terms of the special
termination allowance. The agreement calls for a continuation of base salary and
benefits equal to one month's salary per year of service to a maximum of twelve
months. The agreement also prorates the annual incentive bonus to the date of
termination and guarantees franchise sales commissions for all sales made prior
to the termination date.
INCENTIVE COMPENSATION PLAN. The Incentive Compensation Plan
provides that once the Company reaches a certain pre-tax profit target, a
portion of any additional pre-tax profits will be allocated to the Incentive
Compensation Plan. Amounts accrued for this Plan will be allocated to executive
participants in proportion with their base salary levels and a portion will be
allocated to the general employees' profit sharing plan, which will be allocated
by a point system reflecting base salary and years of service.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of the common stock of the Company as of November 30,
1998 by each person who is known by the Company to beneficially own more than 5%
of the outstanding common stock, each of the Company's named executive officers
(as named on page 6 of this Proxy Statement), each director and each nominee,
and all executive officers, directors and nominees of the Company as a group.
Unless otherwise noted, each person or group identified has sole voting and
investment power with respect to the shares of common stock shown.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner* Beneficial Owner Percent of Class (1)
------------------------------------- ---------------- --------------------
<S> <C> <C> <C>
Florence F. Francis (2) 2,469,843 shares (3) (4) 60.2%
Frederick A. Huggins, Jr. 229,672 shares (4) 5.5%
John A. Fox 44,121 shares (3) (4) 1.1%
James W. George 53,595 shares (3) (4) 1.3%
J. Brent Hanson 57,076 shares (3) (4) 1.4%
Marcia J. Bystrom 20,587 shares (4) **
David E. Emerson 37,273 shares (4) **
Susan F. Goldstein 72,575 shares (4) 1.8%
Richard H. King 46,255 shares (4) 1.2%
James L. Reissner 26,925 shares (4) **
All Executive Officers, Directors, and
nominees as a group (15 persons) 3,184,129 shares (3) (4) 69.1%
</TABLE>
8
<PAGE>
* Unless otherwise indicated, the business address of each beneficial owner
is: c/o The Barbers, 300 Industrial Blvd. NE, Minneapolis, MN 55413
** Indicates common stock ownership of less than 1%.
(1) Includes 3,978,243 shares outstanding as of November 30, 1998. In
calculating percentage ownership, all shares of common stock which a named
stockholder has the right to acquire within 60 days from the date of this
Proxy Statement upon exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage of common stock
owned by that stockholder, but are not deemed to be outstanding for the
purpose of computing the percentage of common stock owned by any other
stockholders.
(2) Includes shares held in various trusts which Ms. Francis is deemed to
beneficially own.
(3) Includes shares of common stock held by the 401(k) Plan in which the
individuals are participants. The trustee of the plan, Norwest Bank
Minnesota, N.A., holds the voting rights to these shares.
(4) Includes stock options and warrants exercisable within sixty days of
November 30, 1998 as follows: Florence F. Francis, 121,500 shares;
Frederick A. Huggins, Jr., 225,000 shares; John A. Fox, 39,375 shares;
James W. George, 30,000 shares; J. Brent Hanson, 37,500 shares; Marcia J.
Bystrom, 18,000 shares; David E. Emerson, 22,000 shares; Susan Goldstein,
13,500 shares; Richard H. King, 36,000 shares; James L. Reissner, 22,500
shares; all other executive officers together, 61,875 shares.
INFORMATION REGARDING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is certain information concerning executive officers
of the Company who are not directors or nominees for director is set forth
below.
<TABLE>
<CAPTION>
NAME POSITIONS WITH THE COMPANY AGE SINCE
---- -------------------------- --- -----
<S> <C> <C> <C>
Connie L. Boltinghouse Vice President of National Distribution 56 1996
John A. Fox Vice President of Development 60 1993
John W. Francis Vice President of Strategy and Credit 32 1998
James W. George Vice President of Franchise Services 40 1992
J. Brent Hanson Vice President and Chief Financial Officer 44 1989
Donna R. Hazelton Vice President of Human Resources 42 1997
Patricia D. Kessler Vice President of Franchise Compliance 47 1997
& Corporate Secretary
Kathryn L. Waycaster Vice President of Corporate Salon Operations 47 1997
</TABLE>
Ms. Boltinghouse rejoined the Company to become Vice President of National
Distribution in October 1996. Ms. Boltinghouse was previously employed by the
Company from 1990 to 1993 in the position of Director of Franchise Operations
and Education. From 1993 to 1996, Ms. Boltinghouse was employed by Brookfield
Assemblies of God in the position of Executive Pastor of Ministries. Ms.
Boltinghouse was employed by Mister Donut of America, a division of
International Multifoods Corporation, from 1984 to 1990 in the position of
Director of Training School and Product Development.
Mr. Fox has been Vice President of Development of the Company since January
1993, and was Vice President of Franchise Sales of the Company from December
1991 to January 1993. He was National Sales Manager for the Cost Cutters
division of the Company from April 1990 to December 1991. Mr. Fox previously
worked as Director of Development for Mister Donut of America from August 1984
to March 1990.
Mr. Francis has been Vice President of Strategy and Credit since March 1998. Mr.
Francis coordinated the Company's acquisition of the We Care Hair salons from
December 1996 to March 1998. Mr. Francis was International Director for The
Barbers from May 1990 to October 1995. He was also a Field Marketing
Representative for the Cost Cutters division of The Barbers from October 1995 to
December 1996. From April 1992 to October 1993, he was a franchise development
representative for The Barbers. Mr. Francis is the son of the Chairman of the
Board of Directors.
Mr. George has been Vice President of Franchise Services for the Company since
June 1992. He was
9
<PAGE>
Vice President of Franchise Services - Cost Cutters from January 1989 to June
1992. He was Vice President of Marketing - Cost Cutters from October 1985 to
January 1989. He was Regional Marketing Manager for USA Cafes from June 1984 to
September 1985. Mr. George was employed by International Dairy Queen, Inc. as
Regional Marketing Manager from July 1982 to May 1984 and as a Store Opening
Specialist from March 1981 to June 1982.
Mr. Hanson has been Vice President and Chief Financial Officer of the Company
since January 1989. He was Vice President and Chief Financial Officer of
Determan Marketing Corporation from August 1987 until November 1988. Mr. Hanson
was employed by the Haagen-Dazs Company, Inc. from January 1985 until August
1987, first as General Accounting Manager, then as Sales and Distribution
Accounting Manager. He was employed by The Pillsbury Company from January 1976
until December 1984 in various accounting management positions, the most recent
being Warehousing Accounting Manager - US Foods Division.
Ms. Hazelton has been the Vice President of Human Resources since April 1997.
She has held various human resource positions for The Barbers since February
1990, most recently that of the Director of Human Resources.
Ms. Kessler has been associated with the Company since November 1971. She has
been the Vice President of Franchise Compliance since April 1997. She was the
Corporate Secretary of the Company from August 1988 to August 1991. Ms. Kessler
was Assistant to the President from July 1983 to September 1989, was Franchise
Compliance Officer from February 1988 to April 1997, and was reappointed
Corporate Secretary in December 1992.
Ms. Waycaster has been Vice President of Corporate Salon Operations since April
1997. She was Director of Corporate Salons from October 1994 to April 1997. From
February 1991 to May 1994 Ms. Waycaster was employed by The Hair Cuttery, Falls
Church, Virginia, most recently as the Director of Education.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASE OF THE COMPANY HEADQUARTERS. The Company leases from the
Francis Family Limited Partnership, of which Florence F. Francis, Susan
Goldstein and John W. Francis are limited partners, approximately 65,400 square
feet for its corporate headquarters. The lease expires on October 31, 2002. The
rental payments for the corporate headquarters were $412,000 in fiscal 1996,
$423,000 in fiscal 1997, and $394,000 in fiscal 1998.
LEASE OF THE COMPANY PARKING LOT. The Company also leases its
parking lot from the Francis Family Limited Partnership. The lease expires
September 30, 2002. Rental payments were $13,800 in each of the fiscal years
1996 and 1997 and $18,000 in fiscal 1998.
FRANCHISES OWNED BY AN OFFICER AND DIRECTOR. Florence F. Francis
owns a minority equity interest in CC Harrisburg, Inc., a Minnesota corporation.
CC Harrisburg, Inc. owns and operates 20 franchised salons.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Based solely upon a review of Forms 3, 4 and 5, any amendments
thereto, and written representations from certain reporting persons, the Company
believes that, during the fiscal year 1998, the Company complied with all filing
requirements applicable to directors, officers, and beneficial owners of more
than 10% of any class of equity securities.
10
<PAGE>
PROPOSALS OF SHAREHOLDERS
Any proposal of a Shareholder of the Company intended to be
presented at the Annual Meeting of Shareholders in January 2000, must be
received at the Company's office on or before September 1, 1999 in order to be
considered for inclusion in the Company's Proxy Statement and form of proxy
relating to that meeting.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors knows of
no other matters which may come before the Annual Meeting. However, if any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed proxy form to vote such proxies received by the Company in
accordance with their judgment on such matters.
December 30, 1998 By Order of the Board of Directors
Patricia D. Kessler
Vice President of Franchise Compliance
& Corporate Secretary
11
<PAGE>
PROXY
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies given by the undersigned for the
Annual Meeting of the Shareholders of The Barbers, Hairstyling for Men & Women,
Inc. to be held on Tuesday, January 26, 1999 at 3:30 p.m., at the Minneapolis
Club, 729 Second Avenue South, Minneapolis, MN, hereby appoints Florence F.
Francis and Frederick A. Huggins, Jr., and each of them, as proxy or proxies,
each with the power to act alone and with full power of substitution and
revocation, to vote for the undersigned and in the name of the undersigned all
shares of common stock of The Barbers, Hairstyling for Men & Women, Inc. held of
record by the undersigned on December 4, 1998, as if the undersigned were
personally present and voting at said Annual Meeting, and all adjournments or
postponements thereof, upon the following matters:
1. Election of directors to serve for the ensuing year or until their
resignation or removal.
Nominees: Florence F. Francis, Frederick A. Huggins, Jr., Marcia J. Bystrom,
David E. Emerson, Susan F. Goldstein, Richard H. King and James L. Reissner.
[ ] VOTE FOR all nominees listed above [ ] VOTE WITHHELD as to all
(except as marked to the contrary below). nominees listed above.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE OR
NOMINEES, WRITE EACH NOMINEE'S NAME IN THE SPACE PROVIDE BELOW.)
----------------------------------------------------------------------------
2. Ratification and appointment of Ernst & Young LLP as independent auditors
for the fiscal year 1999.
[ ] For [ ] Against [ ] Abstain
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)
(CONTINUED FROM OTHER SIDE)
3. In their discretion, the proxies are authorized to transact such other
business as may come before the Annual Meeting or any adjournments or
postponements thereof.
This Proxy, when properly executed, will be voted in the manner specified herein
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL DIRECTORS, FOR PROPOSAL 2, AND IN THE PROXIES'
DISCRETION ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF.
The undersigned hereby acknowledges receipt of the Company's Annual Report and
Notice of the Annual Meeting of Shareholders of The Barbers, Hairstyling For Men
& Women, Inc. and the Proxy Statement furnished therewith dated December 30,
1998.
Please sign your name exactly as it
appears below. In the case of shares
owned in joint tenancy or as tenants in
common, all should sign. Fiduciaries
should indicate their title and
authority. If signer is a corporation,
please sign full corporation name by
authorized officer.
Dated: ________________________, 199___.
________________________________________
________________________________________
(Signature)
PLEASE MARK, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
