SCHEDULE 14A
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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Uni-Marts, Inc.
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(Name of Registrant as Specified In Its Charter)
RR Donnelley Financial
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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[LOGO OF UNI-MART]
477 East Beaver Avenue
State College, Pennsylvania 16801-5690
January 28, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Uni-Marts, Inc. The meeting will be held at the Comfort Suites, 132 Village
Drive, State College, Pennsylvania on Thursday, February 28, 2002, commencing at
10:00 A.M.
At the meeting, you will be asked to vote on (i) the election of three
directors who will serve until the Annual Meeting of Stockholders in 2005, (ii)
amendment of the Company's 1996 Equity Compensation Plan (the "1996 Plan") to
increase the number of shares which may be issued under the 1996 Plan from
1,000,000 to 1,750,000, (iii) several amendments to the Company's Certificate of
Incorporation, (iv) the redomestication of the Company from a Delaware
corporation to a Pennsylvania corporation during the next twelve months at the
discretion of the Board of Directors, provided that, after approval by the
stockholders and prior to the effectiveness of the redomestication, if the Board
of Directors, in its discretion, determines that it is not in the best interests
of the Company to effect the redomestication, it shall not be completed, and (v)
the ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending September 30, 2002. Each of
these proposals is discussed more fully in the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement. You should review these materials
carefully before voting.
In order to facilitate check-in, we will require admission tickets for
stockholders who wish to attend the meeting in person. The admission ticket is
attached to the enclosed proxy card. If you are a stockholder whose shares are
not registered in your own name and you plan to attend the meeting, please bring
a copy of the voting form sent to you by your broker or other evidence of stock
ownership.
Your vote is important. Whether or not you plan to attend the meeting,
please sign, date and mail your proxy in the enclosed postpaid envelope
promptly.
Sincerely,
/s/ Henry D. Sahakian
HENRY D. SAHAKIAN
Chairman of the Board
and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
UNI-MARTS, INC.
477 East Beaver Avenue
State College, Pennsylvania 16801-5690
TO THE STOCKHOLDERS:
You are hereby notified that the Annual Meeting of Stockholders of Uni-
Marts, Inc., a Delaware corporation, will be held at the Comfort Suites, 132
Village Drive, State College, Pennsylvania at 10:00 A.M. on Thursday, February
28, 2002, for the following purposes:
1. To elect three Class III directors who will serve until the Annual
Meeting of Stockholders in 2005;
2. To approve an amendment to the Company's 1996 Equity Compensation Plan
(the "1996 Plan") to increase the number of shares of common stock,
par value $0.10, that the Company is authorized to issue from
1,000,000 shares to 1,750,000 shares;
3. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of shares of common stock, par value $0.10,
that the Company is authorized to issue from 15 million shares to 16
million shares;
4. To approve an amendment to the Company's Certificate of Incorporation
to authorize 100,000 shares of preferred stock, par value $1.00 per
share, with such designations, preferences, privileges and
restrictions as may be determined from time to time by the Company's
Board of Directors;
5. To approve an amendment to the Company's Certificate of Incorporation
to permit stockholder action only by vote at a duly convened meeting
of stockholders and not by written consent;
6. To approve amendments to the Company's Certificate of Incorporation
and By-laws to (A) permit removal of directors only for cause and upon
either (i) the affirmative vote of the holders of at least 80% of the
outstanding shares of the Company's voting stock or (ii) the vote of
the majority of the entire Board of Directors then in office and (B)
require the vote of the holders of at least 80% of the outstanding
shares of the Company's voting stock to amend the foregoing clause
(A);
7. To approve an amendment to the Company's Certificate of Incorporation
to permit vacancies on the Board of Directors to be filled by action
of the Board of Directors and eliminate the ability of stockholders to
fill any such vacancy, except as authorized by the Board of Directors;
8. To approve, at any time during the twelve months following the Annual
Meeting, the redomestication of the Company from a Delaware
corporation to a Pennsylvania corporation at the discretion of the
Board of Directors, provided that, prior to the effectiveness of the
filing of the Articles of Domestication with the Department of State
of
1
the Commonwealth of Pennsylvania, if the Board of Directors, in its
discretion, determines that it is not in the best interests of the
Company to effect the redomestication, the Articles of Domestication
shall not be filed;
9. Subject to the redomestication of the Company referred to in Proposal
No. 8, above, an amendment to the Company's Articles of Incorporation
to increase the number of shares of common stock, par value $0.10,
that the Company is authorized to issue to 20,000,000 shares;
10. Subject to the redomestication of the Company referred to in Proposal
No. 8, above, an amendment to the Company's Articles of Incorporation
to authorize the issuance of, or, if Proposal No. 4, above, is
approved, to increase the number of shares of preferred stock, par
value $1.00 per share, that the Company is authorized to issue to,
1,000,000 shares;
11. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending September 30, 2002;
and
12. To transact such other business as may properly come before the
meeting. The Board of Directors is not aware of any other business to
be presented to a vote of the stockholders at the Annual Meeting.
Information relating to the above matters is set forth in the attached
Proxy Statement. Only stockholders of record at the close of business on
December 27, 2001 are entitled to receive notice of and to vote at the Annual
Meeting and any adjournment thereof.
/s/ Harry A. Martin
HARRY A. MARTIN
Secretary
State College, Pennsylvania
January 28, 2002
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. YOU
CAN SPARE YOUR COMPANY THE EXPENSE OF FURTHER PROXY SOLICITATION BY RETURNING
YOUR PROXY CARD PROMPTLY.
If you plan to attend the meeting, please bring the admission ticket attached to
the enclosed proxy card. If you are a stockholder whose shares are not
registered in your own name and you plan to attend the meeting, please bring a
copy of the voting form sent to you by your broker or other evidence of stock
ownership.
2
UNI-MARTS, INC.
477 East Beaver Avenue
State College, PA 16801-5690
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of Uni-Marts, Inc.
(the "Company") in connection with the solicitation by the Board of Directors of
the Company of proxies to be voted at the Annual Meeting of Stockholders on
February 28, 2002 (the "Annual Meeting") and any adjournment thereof. This Proxy
Statement and the accompanying proxy card are first being mailed to stockholders
on or about January 28, 2002. The expense of preparing, printing and mailing the
Proxy Statement and soliciting proxies will be paid by the Company. In addition
to the use of the mail, proxies may be solicited personally or by telephone by
regular employees of the Company without additional compensation. The Company
will reimburse banks, brokers and other custodians, nominees and fiduciaries for
their costs in sending the proxy materials to the beneficial owners of the
Company's stock.
Shares represented by valid proxies will be voted in accordance with
instructions contained therein or, in the absence of such instructions, in
accordance with the recommendations of the Board of Directors. A proxy may be
revoked by a stockholder by written notice of such revocation or by a later
dated proxy delivered to the Secretary of the Company at any time prior to the
shares represented by such proxy being voted.
Holders of record of the Company's Common Stock, par value $.10 per share,
at the close of business on December 27, 2001 are entitled to notice of, and to
vote at, the Annual Meeting. As of such date, there were outstanding 7,073,546
shares of the Company's Common Stock. Each stockholder has one vote per share on
all items of business properly presented at the Annual Meeting. Under the
Amended and Restated By-laws of the Company, the presence of a quorum is
required for the transaction of business at the Annual Meeting. The presence at
the Annual Meeting, in person or by proxy, of the holders of record of stock
representing a majority of the total number of shares issued and outstanding and
entitled to vote thereat shall constitute a quorum for the transaction of
business. Directors will be elected by a plurality of the votes present in
person or represented by proxy at the time of the meeting and entitled to vote
thereon. Action on the proposals to amend the Company's Certificate of
Incorporation and By-laws and to redomesticate the Company will be authorized by
the affirmative vote of a majority of the outstanding stock of the Company
entitled to vote on such proposal. Action on all other matters scheduled to come
before the Annual Meeting will be authorized by the affirmative vote of the
majority of shares present in person or represented by proxy and entitled to
vote on such matters. On all matters requiring the affirmative vote of a
majority of shares, abstentions and broker nonvotes will have the same effect as
a "no" vote. Votes cast by stockholders will be counted by Mellon Investor
Services LLC, the Company's transfer agent. The Company does not have any policy
with respect to maintaining the confidentiality of proxies, ballots or vote
tabulations.
A copy of the Company's 2001 Annual Report, which includes financial
statements for the fiscal year ended September 30, 2001, is enclosed but does
not constitute a part of this Proxy Statement.
1
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors is composed of three classes. Class I and Class II
Directors are presently serving until the Annual Meetings of Stockholders in
2003 and 2004, respectively, and thereafter for terms of three years until their
successors have been elected and qualified. The Directors comprising Class III
will be elected at the Annual Meeting and will serve until the Annual Meeting of
Stockholders in 2005 and thereafter for terms of three years until their
successors have been elected and qualified. Each class of Directors is composed
of three Directors.
The persons named in the enclosed proxy card as proxies (the "Proxies")
intend to vote, unless instructed otherwise, for election of the nominees named
below. All nominees have consented to be named and to serve if elected. If for
any reason any of the nominees becomes unable or is unwilling to serve, at the
time of the Annual Meeting the Proxies will have discretionary authority to vote
for a substitute nominee or nominees. It is not anticipated that any nominee
will be unavailable for election. Directors will be elected by a plurality of
the votes cast.
The following sets forth information as to each nominee for election as a
Director at the Annual Meeting and each Director continuing in office, including
their ages, present principal occupations, other business experience for at
least the last five years and memberships on committees of the Board of
Directors.
Nominees for election as Class III Directors at the Annual Meeting with
terms expiring in 2005:
Name Age Position
---- --- --------
M. Michael Arjmand (2)(3) 54 Director
Frank R. Orloski, Sr. 69 Director
Daniel D. Sahakian (2) 69 Director
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ABOVE
NOMINEES.
Class I Directors whose present terms continue until 2003:
Name Age Position
---- --- --------
Henry D. Sahakian (4) 65 Chairman of the Board and
Chief Executive Officer
Herbert C. Graves (1)(4) 75 Director
Gerold C. Shea (4) 62 Director
Class II Directors whose present terms continue until 2004:
Name Age Position
---- --- --------
Stephen B. Krumholz (2)(3)(4) 52 Director
Jack G. Najarian (1) 46 Director
Anthony S. Regensburg (1) 74 Director
2
Other Executive Officers:
Name Age Position
---- --- --------
Ara M. Kervandjian 35 Executive Vice President of Strategy
and Corporate Development
N. Gregory Petrick 46 Executive Vice President and Chief
Financial Officer
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Stock Option Committee.
(4) Member of the Strategic Planning Committee.
Biographical Information: Directors and Executive Officers
Henry D. Sahakian is the founder of the Company and has served as Chairman
of the Board and Chief Executive Officer since the Company's inception. He also
served as the Company's President until October 1994. He assumed the duties of
President again in 1997. He is Daniel D. Sahakian's brother.
M. Michael Arjmand is the founder and, until his retirement in 2001, the
former Chief Executive Officer of Centre Analytical Laboratories, Inc., a
contract research company located in State College, Pennsylvania, and has served
as Chairman of the Board of that firm from 1986 until 2001. Mr. Arjmand became a
Director of the Company in April 1998.
Herbert C. Graves has served since 1998 as Chairman Emeritus of Standard
Steel Division of Freedom Forge Corp., a steel manufacturer located in
Lewistown, Pennsylvania. From 1989 to 1998, he served as Chairman of the Board
and Chief Executive Officer of that firm. Mr. Graves also served as that
company's President from 1989 to 1994. Mr. Graves became a Director of the
Company in June 1998.
Ara M. Kervandjian joined the Company in October 2001 as Executive Vice
President of Strategy and Corporate Development. From 2000 to 2001, he served as
Senior Vice President of Conestoga Enterprises, Inc., a regional
telecommunications firm based in Birdsboro, Pennsylvania. From 1995 to 2000, he
was President and Chief Executive Officer of TeleBeam Incorporated, a
telecommunications firm located in State College, Pennsylvania. He is Henry D.
Sahakian's son-in-law.
Stephen B. Krumholz has been employed since 1998 as Executive Vice
President of Freebie, Inc., an electronic database marketing company based in
Dallas, Texas. Mr. Krumholz was employed from 1972 to 1998 by 7-Eleven, Inc.,
headquartered in Dallas, Texas, and served as that company's Executive Vice
President and Chief Operating Officer from 1993 to 1998. 7-Eleven operates or
franchises 5,700 7-Eleven and other convenience stores in the United States and
Canada and is affiliated with another 15,000 7-Eleven convenience stores in the
United States, Japan and other countries. Prior to 1993, Mr. Krumholz served in
other executive and management positions with 7-Eleven. Mr. Krumholz became a
Director of the Company in June 1998.
Jack G. Najarian has been employed since October 1999 as Managing Director
of Investment Banking and Corporate Finance of Weatherly Securities, Inc., an
investment banking firm based in New York, New York. Mr. Najarian was the
Chairman and Co-Founder of Griffin Securities, Inc., a New York investment
banking firm, from 1996 to 1999. From 1994 to 1996, he was acting Treasurer and
Director of Treasury and Capital Markets of the New York branch of National
Australia Bank. Mr. Najarian became a Director of the Company in October 1999.
3
Frank R. Orloski, Sr. is the founder and, until April 2000, served as
President of Orloski Service Station, Inc., a chain of 43 convenience stores
located in northeastern Pennsylvania. The Company acquired the assets of this
business in April 2000. Mr. Orloski served as President of that firm since 1970.
Mr. Orloski became a Director of the Company in October 2000.
N. Gregory Petrick joined the Company in July 1978. He was named as
Executive Vice President in October 2000 and served as the Company's Senior Vice
President and Chief Financial Officer since September 1999. From 1988 to 1999,
Mr. Petrick served as the Company's Vice President, Finance.
Anthony S. Regensburg has been employed since 1989 as a consultant with AR
Consulting Group, a consulting firm based in Camden, Maine, and specializing in
convenience store distribution focusing on cigarette wholesaling and retailing.
Mr. Regensburg was employed from 1978 to 1989 in various executive positions
with Coremark, a tobacco wholesaler, and as an executive with other tobacco
firms from 1954 to 1978. Mr. Regensburg became a Director of the Company in
October 1999.
Daniel D. Sahakian has served for the past 21 years as President and Chief
Executive Officer of HFL Corporation and for the past 14 years as President of
Unico Corporation, both of which are controlled by him and Henry D. Sahakian.
HFL Corporation and Unico Corporation are commercial real estate companies. Mr.
Sahakian became a Director of the Company in October 1981. He is Henry D.
Sahakian's brother.
Gerold C. Shea has served as President of Interconnect Enterprises, a
petroleum industry consulting firm located in Downingtown, Pennsylvania, since
1995. From 1963 to 1995, he was employed by Sun Co., Inc. ("Sun"), a major
petroleum refiner and retailer, and served as that company's Vice President,
Sunoco and Atlantic Brand, from 1991 to 1995. In that position, he directed
retail marketing at 5,000 service stations and convenience stores. Prior to
that, Mr. Shea served in other executive and management positions with Sun. Mr.
Shea became a Director of the Company in June 1998.
For information with respect to the share ownership of the Company's
Directors and Executive Officers, see "Principal Stockholders."
The Board of Directors met five times during the last fiscal year. In
fiscal year 2001, the Board of Directors had an Audit Committee, a Compensation
Committee, a Stock Option Committee and a Strategic Planning Committee. The
Audit Committee communicates with and receives information directly from the
Company's independent auditors. The Audit Committee met two times during the
last fiscal year. The Compensation Committee periodically reviews, implements
and administers the compensation policies and programs for and performance of
the Company's executive officers and establishes guidelines for the compensation
of other personnel. The Compensation Committee met two times during the last
fiscal year. The Stock Option Committee administers the Company's 1996 Equity
Compensation Plan. The Stock Option Committee met one time during the last
fiscal year. The Strategic Planning Committee meets periodically to review and
make recommendations regarding the Company's strategic plan. The Strategic
Planning Committee met two times during the last fiscal year. Each incumbent
director attended more than 75% of the meetings of the Board of Directors and
the meetings of Board Committees on which such Director served except Jack G.
Najarian.
Compensation of Directors. During the 2001 fiscal year, each Director who was
not an employee of the Company received a retainer of $7,500, of which $5,000
was paid in shares of Common Stock. Mr. Orloski also received a partial-year
retainer of $3,750, of which $2,500 was paid in shares of Common Stock. Pursuant
to the Company's 1996 Equity Compensation Plan, all non-employee directors
receive annual nonqualified stock option grants for 2,000 shares of common stock
plus 500 shares for each full year the director has served as a member of the
board, up to a maximum of 4,000 shares per grant, on the date of each annual
meeting. In
4
addition, newly appointed or elected non-employee directors receive an initial
grant for 5,000 shares. Accordingly, during the 2001 fiscal year, each non-
employee Director received grants of stock options to purchase 3,500 shares of
the Company's Common Stock (4,000 shares for Mr. Daniel D. Sahakian and 3,000
shares for Mr. Orloski) at an exercise price of $2.15 for serving as a Director
during fiscal year 2001. Mr. Orloski also received a grant of stock options to
purchase 6,000 shares of the Company's Common Stock at an exercise price of
$2.00 during fiscal year 2001. Each non-employee Director also received $1,000
for each board or committee meeting attended. Committee chairmen received $2,000
for each meeting they chaired.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the total annual
compensation paid or accrued by the Company to or for its Chief Executive
Officer and the other executive officer who was employed by the Company during
fiscal 2001 (the "named executive officers") for the periods listed below:
Summary Compensation Table
Long-Term Compensation
------------------------------------
Awards
-----------
Securities
Annual Compensation Underlying All
--------------------------- Options/SARs Other
Name and Principal Position Year Salary($) Bonus($) (# of Shares) Payouts ($) Comp.($)
--------------------------- ---- --------- -------- --------------- --------------- -----------------
Henry D. Sahakian, 2001 333,400 8,895 45,000 0 66,661(a)(b)(c)
Chairman of the Board 2000 333,400 0 40,000 0 58,914(a)(b)(c)
and Chief Executive 1999 367,000 0 25,000 0 60,309(a)(b)(c)
Officer
N. Gregory Petrick, 2001 125,000 3,335 22,500 0 12,999(a)(b)(c)
Executive Vice President 2000 110,000 2,200 20,000 0 5,163(b)(c)
and Chief Financial Officer (d) 1999 90,192 0 15,000 0 1,355(c)
(a) Includes premiums paid by the Company on split-dollar insurance policies on
the lives of Henry D. Sahakian and N. Gregory Petrick in the amounts of
$53,590 and $6,200, respectively, for the fiscal year ended September 30,
2001, premiums on the life of Henry D. Sahakian in the amount of $53,790
for the fiscal year ended September 30, 2000, and premiums on the life of
Henry D. Sahakian in the amount of $53,262 for the fiscal year ended
September 30, 1999.
(b) Includes Company contributions to the Company's Deferred Compensation Plan
for Messrs. Sahakian and Petrick in the amounts of $5,000 and $5,000,
respectively, for the fiscal year ended September 30, 2001, contributions
for Messrs. Sahakian and Petrick in the amounts of $5,000 and $3,750,
respectively, for the fiscal year ended September 30, 2000, and a
contribution for Mr. Sahakian of $5,000 for the fiscal year ended September
30, 1999.
(c) Includes Company contributions to the Company's Retirement Savings and
Incentive Plan (the "Savings Plan") for Messrs. Sahakian and Petrick in the
amounts of $1,661 and $1,799, respectively, for the fiscal year ended
September 30, 2001, contributions in the amounts of $124 and $1,413,
respectively, for the fiscal year ended September 30, 2000 and
contributions in the amounts of $1,519 and $1,355, respectively, for the
fiscal year ended September 30, 1999.
(d) Mr. Petrick was named Executive Vice President on October 26, 2000 and
Senior Vice President and Chief Financial Officer on September 1, 1999.
5
Grants of Stock Options. The following table sets forth incentive stock
options granted to the Company's named executive officers during the fiscal year
ended September 30, 2001:
Options/SAR Grants Table
Option/SAR Grants in Last Fiscal Year
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants For Option Terms
--------------------------------------------------------- ---------------------
% of Total
Options/SARs
Options/ Granted to Exercise
SARs Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
---- ---------- -------------- --------- -------------- --------- -------
Henry D. Sahakian 45,000 20.3% 2.42 9-25-06 23,928 61,389
N. Gregory Petrick 22,500 10.1% 2.20 9-25-11 35,733 90,589
Stock Option Exercises and Fiscal Year-End Stock Option Values. The
following table sets forth information concerning stock options exercised during
the 2001 fiscal year and the value of stock options held at the end of the
fiscal year ended September 30, 2001 by each of the Company's named executive
officers:
Aggregated Options/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Shares Options/SARs at Options/SARs
Acquired Value FY-End (#) at FY-End ($)
----------------- ---------------
on Realized Exercisable/ Exercisable/
Name Exercise ($) Unexercisable Unexercisable
---- -------- -------- ----------------- ---------------
Henry D. Sahakian 0 0 137,350/102,410 16,750/10,375
N. Gregory Petrick 0 0 29,167/ 40,833 11,250/10,875
All options held by the named individuals were fully exercisable at
September 30, 2001 except options granted during fiscal year 2001, two-thirds of
the options granted during fiscal year 2000, one-third of the options granted
during fiscal year 1999, and options for 11,205 shares granted to Mr. Sahakian
in each of fiscal years 1997 and 1998. The Company does not currently grant any
long-term incentives, other than stock options, to its executives or other
employees. Similarly, the Company does not sponsor any defined benefit or
actuarial plans at this time.
Employment Agreements. The Company has entered into a change-in-control
agreement with each of Messrs. Sahakian, Kervandjian and Petrick, which provides
for, among other things, the payment of an amount equal to 2.99 times the
officer's base compensation if such officer's employment is terminated in
connection with a change in control of the Company.
6
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors during fiscal year 2001 were Messrs. Arjmand, Krumholz and Daniel D.
Sahakian.
The Company leases one store location from Daniel D. Sahakian, which Mr.
Sahakian purchased from HFL Corporation in fiscal year 1995. The lease has a
remaining term of six years with two five-year and one four-year renewal
options, with the rent increasing by 2% each year. Rent paid to Daniel D.
Sahakian under this lease during fiscal year 2001 was $29,900.
During fiscal year 2001, the Company leased three store locations and one
other location from Unico Corporation. Henry D. Sahakian and Daniel D. Sahakian
are also directors, executive officers and stockholders of Unico Corporation.
The leases for these locations have a remaining term of six years with two five-
year and one four-year renewal options. Annual rental increases are limited to a
maximum of 2% each year. Aggregate rent paid under these leases during fiscal
year 2001 was $79,400.
The Company leases its corporate headquarters, certain storage facilities,
five of its store locations and store equipment at one location from HFL
Corporation, all of the stock of which is beneficially owned or controlled by
Henry D. Sahakian and Daniel D. Sahakian. The leases for the corporate
headquarters expired in December 2000 and a new lease for the corporate
headquarters was entered into in January 2001 for a term of 10 years. This lease
provides for an annual rent of $304,000 with 2% annual increases in years two
through five. The lease for the storage facilities was entered into in 1999 for
a term of five years, subject to a 4% annual increase, and provides for an
aggregate rent of $90,800. The aggregate rent paid to HFL Corporation for the
corporate headquarters, parking and storage facilities was $421,300 for fiscal
year 2001. The five leases of store locations and equipment at one location from
HFL Corporation were entered into from January 2001 to October 2001, are for
terms of one year to two years with renewal options and provide for annual rents
aggregating $234,100. The aggregate rent paid under these leases to HFL
Corporation during fiscal year 2001 was $136,000.
During fiscal year 2001, the Company received from HFL Corporation $11,200
as reimbursement for certain general and administrative expenses. The Company
intends to continue to provide some administrative services for HFL Corporation
and expects to be reimbursed therefor.
7
REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK OPTION
COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for implementing and administering the Company's
compensation policies and programs for its executive officers. A separate
committee administers the Company's Stock Equity Compensation Plan (the "Stock
Option Committee"). The Compensation Committee and the Stock Option Committee
both are comprised entirely of non-employee directors. The Company's
compensation policy, effectuated by these Committees, is to provide a
comprehensive structure that will (i) motivate the executive officers to
implement and achieve the Company's strategic and financial goals, (ii) retain
and attract key executive personnel and (iii) align a significant portion of the
compensation of management with the interest of the stockholders through stock
options that are designed to provide additional compensation only when all
stockholders benefit through share price appreciation. The Company and the
Committees are strongly committed to maximizing shareholder value through
consistent growth and profitability.
The Company's overall compensation program for its executive officers is
currently comprised of the following three elements:
A. Base Salary;
B. Corporate Salaried Employees Bonus Plan; and
C. Stock Option Plan.
Base Salary and Benefits
------------------------
The Compensation Committee reviews the base salary and welfare and
retirement benefits provided to each executive officer on an annual basis and
evaluates this compensation against available data for other businesses, both in
related areas and in general industry. During 2001, the Compensation Committee
reviewed proxy information and other similar data to attempt to ensure that the
Company continues to provide competitive levels of compensation. The
Compensation Committee believes that the compensation provided to the executive
officers is competitive with that generally offered by comparable convenience
store operators and other similarly sized businesses taking into account the
Company's financial circumstances.
Bonuses
-------
For the fiscal year ended September 30, 2001, bonuses of $12,230 were
awarded to the executive officers based upon the terms of the Corporate Salaried
Employees Bonus Plan, as administered by the Compensation Committee. During this
year, the Plan was designed to reward the executive officers on a quarterly
basis only if actual Company earnings exceeded a specified level after the
bonuses were taken into account, i.e., a bonus could be paid only to the extent
that the bonus would "be paid for" prior to the net income figure that had to be
achieved. Since earnings exceeded the target set during only one fiscal quarter,
bonuses were earned for only one fiscal quarter under the Plan by any executive
officer. However, the Company and the Compensation Committee believe that a
quarterly bonus plan is a beneficial compensation device for the Company. The
Compensation Committee has always followed a philosophy that such a plan must
relate executive compensation directly to Company performance so that any
bonuses paid will provide a financial reward only for the achievement of
substantial business results. The Corporate Salaried Employees Bonus Plan was
renewed for fiscal 2002 and new quarterly bonus targets were established by the
Compensation Committee.
8
Stock Options
-------------
The Compensation Committee and the Stock Option Committee believe that
stock ownership by executive officers is important in order that a portion of
each executive's compensation is directly aligned with the economic interest of
the stockholders of the Company. The Stock Option Committee believes that stock
option grants provide opportunities for capital accumulation, promote long-term
retention and foster an executive officer's proprietary interest in the Company.
Under the Stock Option Plan, options are issued at a price equal to the fair
market value of a share on the date of grant and the options generally expire
after ten years. Although the grant of stock options and the number of shares
subject to options are discretionary with the Stock Option Committee, executives
have annually received stock options in order to increase their potential for
additional stock ownership. In addition, the Compensation Committee takes into
account the number of shares subject to options and the potential long-term
benefit to the executives in setting each executive's overall compensation
targets. Because the Company and the Stock Option Committee believe that stock
options are a valuable incentive, in recent years, stock options have been
extended to many other individuals employed by the Company. In addition, in
light of the Company's financial results in recent years, the Compensation
Committee has granted more options and held base salaries down to further align
the economic interests and impact of the executives with those of the Company's
stockholders.
Chief Executive Officer Compensation
------------------------------------
The salary, bonus and stock option awards of the Chief Executive Officer
are determined by the Compensation Committee and the Stock Option Committee, in
conformance with the policies described above. Mr. Sahakian was paid a base
salary for the fiscal year ending September 30, 2001 of $333,400. Mr. Sahakian
requested, and the Compensation Committee agreed to, no increase for fiscal
2002. Mr. Sahakian will continue to participate, and receive potential rewards
under, the incentive based plans established for that purpose. In this way, the
Compensation Committee is acting consistently with its philosophy of making a
portion of an executive's total compensation dependent upon the Company's
performance.
The Company continues to monitor the applicability of Section 162(m) of the
Internal Revenue Code of 1986, as amended, which restricts the Federal income
tax deduction that may be claimed by a "public company" for compensation paid to
the Chief Executive Officer and the four most highly compensated other officers
to $1 million each except to the extent that any amount in excess of such limit
is paid pursuant to a plan containing a performance standard or a stock option
plan that meets certain requirements. The Company's current stock option plan
meets the requirements of Section 162(m). In light of this, the Compensation
Committee does not believe that Section 162(m) will have any adverse affect on
the Company but continues to evaluate the Company's compensation program in
light of that restriction.
Compensation Committee Stock Option Committee
Stephen B. Krumholz, Chairman Stephen B. Krumholz, Chairman
M. Michael Arjmand M. Michael Arjmand
Daniel D. Sahakian
9
PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock for the last five years with the cumulative total
return on the Standard and Poor's 500 Index and a peer group index based on the
common stock of the following three companies: 7-Eleven, Inc., Casey's General
Stores, Inc., and Uni-Marts, Inc. In prior years, our peer group index also
included Dairy Mart Convenience Stores, Inc. ("Dairy Mart"). However, Dairy Mart
was not publicly traded at September 30, 2001 and, accordingly, the performance
information provided for our peer group index reflects only the performance of
the companies currently included in the group. The cumulative total stockholder
return set forth in the graph assumes the investment of $100 in the Company's
Common Stock and each index on September 30, 1996, and reinvestment of all
dividends.
9/30/96 9/30/97 9/30/98 9/30/99 9/30/00 9/30/01
------- ------- ------- ------- ------- -------
Uni-Marts, Inc. 100 66 38 15 25 28
S & P 500 100 138 148 187 209 151
Peer Group 100 99 115 103 115 88
10
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee consists of the following members of the Company's
Board of Directors: Herbert C. Graves, Chairman, Jack G. Najarian and Anthony S.
Regensburg. Each of the members of the Audit Committee is independent as defined
under the National Association of Securities Dealers' listing standards. The
Audit Committee operates pursuant to a written charter adopted by the Board of
Directors.
The Audit Committee has reviewed and discussed the Company's audited
financial statements with management.
The Audit Committee has discussed the matters required to be discussed
by SAS 61 (Communication with Audit Committees) with Deloitte & Touche LLP, the
Company's independent auditors.
The Audit Committee has received written disclosures and the letter
from Deloitte & Touche LLP required by Independence Standards Board Standard No.
1 (which relates to the accountant's independence from the Company and its
related entities) and has discussed with Deloitte & Touche LLP their
independence from the Company and its related entities.
Based on the review and discussions referenced above, the Audit
Committee recommended to the Company's Board of Directors that the Company's
audited financial statements be included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 2001.
Audit Committee
Herbert C. Graves, Chairman
Jack G. Najarian
Anthony S. Regensburg
11
CERTAIN TRANSACTIONS
The Company made consulting fee and expense reimbursement payments of
$79,200 in fiscal year 2001 to Interconnect Enterprises, a petroleum industry
consulting firm owned by Gerold C. Shea.
Additional transactions with management and others are described under
"Compensation Committee Interlocks and Insider Participation." In management's
opinion, the Interconnect Enterprises transactions and those described under
"Compensation Committee Interlocks and Insider Participation" were or are, as
the case may be, on terms which are at least as favorable as could have been
obtained with or from a third party. All such transactions were approved by a
majority of the independent directors of the Board.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 27, 2001, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person known to the Company to own 5% or more of the outstanding shares of
Common Stock, (ii) each of the Company's Directors and named executive officers
and (iii) all of the Directors and executive officers as a group. As of such
date, there were 7,073,546 shares of Common Stock outstanding.
Common Stock
Beneficial Ownership (1)
-------------------------------
Name and Address of Beneficial Owner (2) Shares Percentage
---------------------------------------- ------------- -----------
Henry D. Sahakian 1,076,177(3) 15.1%
M. Michael Arjmand 24,825(4) 0.4
Herbert C. Graves 39,825(5) 0.6
Ara M. Kervandjian 59,309(6) 0.8
Stephen B. Krumholz 24,825(7) 0.4
Jack G. Najarian 19,380(8) 0.3
Frank R. Orloski, Sr. 22,175(9) 0.3
N. Gregory Petrick 33,076(10) 0.5
Anthony S. Regensburg 19,380(11) 0.3
Daniel D. Sahakian 1,178,798(12) 16.6
Gerold C. Shea 27,325(13) 0.4
All Directors and Executive Officers as a Group (11 persons) 2,246,195 30.9
HP Limited Partnership, 80 Fairhaven Road, Cumberland, RI 02864 651,400 9.2
Dimensional Fund Advisors, Inc., 1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401 476,600 6.7
(1) Includes options to purchase Common Stock granted pursuant to the
Company's Equity Compensation Plan and 1996 Equity Compensation Plan
exercisable within 60 days.
(2) Except as noted, addresses of all beneficial owners listed are in care of
the Company at 477 East Beaver Avenue, State College, PA 16801.
(3) Includes 35,500 shares owned by Henry D. Sahakian's wife, 63,028 shares
held in the Savings Plan, 216,700 shares held by HFL Corporation, 62,200
shares held by Unico Corporation, 5,000 shares held in his Individual
Retirement Account, 5,000 shares held as custodian for his grandson and
options to purchase 43,000 shares of Common Stock. Henry D. Sahakian is
one of two trustees for two trusts for the benefit of Daniel D. Sahakian's
children. Henry D. Sahakian disclaims beneficial ownership of, and the
beneficial ownership in the table above does not include, the stock held
by these two trusts. The beneficial ownership in the table above also does
not include 34,340 shares held by his daughter and son-in-law for which he
disclaims beneficial ownership.
(4) Includes options to purchase 16,000 shares of Common Stock.
12
(5) Includes 15,000 shares held by the Graves Family Partnership and options
to purchase 16,000 shares of Common Stock.
(6) Includes 52,509 shares held by Mr. Kervandjian jointly with his wife and
6,800 held in his SEP account.
(7) Includes options to purchase 16,000 shares of Common Stock.
(8) Includes options to purchase 11,500 shares of Common Stock.
(9) Includes options to purchase 8,500 shares of Common Stock.
(10) Includes 3,779 shares held in the Savings Plan and options to purchase
29,167 shares of Common Stock.
(11) Includes options to purchase 11,500 shares of Common Stock.
(12) Includes 322,325 shares held by Daniel D. Sahakian's wife, 216,700 shares
held by HFL Corporation, 137,815 shares held as a trustee for two trusts,
62,200 shares held by Unico Corporation and options to purchase 27,000
shares of Common Stock.
(13) Includes options to purchase 16,000 shares of Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of its Common Stock to file with the Securities and Exchange Commission
and the American Stock Exchange initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to it and written representations that no other reports were
required during or with respect to the fiscal year ended September 30, 2001, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent stockholders were complied with, except that Mr. Frank
R. Orloski, Sr. inadvertently failed to timely file his initial statement of
beneficial ownership in October 2000.
13
PROPOSAL 2
APPROVAL OF THE ADDITIONAL 750,000 SHARES AUTHORIZED FOR ISSUANCE UNDER
COMPANY'S 1996 EQUITY COMPENSATION PLAN
THE PROPOSAL
The 1996 Equity Compensation Plan (the "1996 Plan") was created to
assist the Company in retaining and attracting employees, officers and members
of the Board who are not employees ("Non-employee Directors") by offering those
individuals a propriety interest in the Company. On December 7, 2001, the Board
of Directors amended the 1996 Plan, subject to stockholder approval at the
Annual Meeting, to authorize an additional 750,000 shares to be issued. At the
Annual Meeting, a proposal will be presented to the stockholders to amend the
1996 Plan in order to authorize the additional 750,000 shares of the Company's
common stock to be issued under the 1996 Plan. Options for the additional shares
and share grants to non-employee directors will not be made unless or until
stockholder approval is obtained.
The Board has determined that this increase is necessary in order to
enable the Company to grant stock options and make share grants to key employees
and to permit additional distributions of options and shares to be made to
members of the Board as required by the 1996 Plan. Over the last five years, the
Company has granted increased numbers of options to employees as an incentive
and in lieu of any significant cash compensation increases and this results in a
need for additional shares to be authorized at this time. The Company and the
Board both believe that the use of options better aligns the interests of these
individuals with the interests of the Company's stockholders and that this is a
better method of providing compensation and incentives for these individuals and
wishes to be in a position to continue this practice.
VOTE REQUIRED FOR APPROVAL
The proposal to amend the 1996 Plan requires the affirmative vote of a
majority of shares present in person or represented by proxy at the Annual
Meeting. Abstentions may be specified with respect to the proposal and will be
considered present at the Annual Meeting, but will not be counted as affirmative
votes. Abstentions, therefore, will have the practical effect of voting against
the proposal because the affirmative vote of a majority of the shares present at
the Annual Meeting is required to approve the proposal. Broker nonvotes are
considered not present at the Annual Meeting for the purpose of voting on this
proposal and, therefore, will not be voted or have any effect on the proposal.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
DESCRIPTION OF THE 1996 PLAN
Amendment 2001-1 to the 1996 Plan is set forth as Appendix A to this
Proxy Statement, and the description of the 1996 Plan contained herein is
qualified in its entirety by reference to the Plan document.
GENERAL. The purpose of the 1996 Plan, as approved by the stockholders
at the 1997 Annual Meeting, is to encourage stock ownership by employees and
Non-employee Directors of the Company so that such individuals may acquire or
increase their proprietary interest in the Company and its subsidiaries,
14
participate as a stockholder in its success and may be encouraged to remain
employees or directors of the Company and its subsidiaries. The 1996 Plan, as
amended, generally provides that the Company is authorized to grant options to
purchase or grant shares for up to 1,750,000 shares of Common Stock, of which
options to purchase 860,250 shares of stock have previously been granted and
69,863 shares have been issued. If and to the extent options granted under the
1996 Plan terminate or expire without being exercised, the shares subject to
such options again will be available for purposes of the 1996 Plan.
ADMINISTRATION OF THE PLAN. The 1996 Plan is administered and
interpreted by a Committee of the Board (the "Plan Committee") consisting of not
less than two persons appointed by the Board, each of whom qualify as "outside"
director as defined under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Plan Committee, in its discretion, has the
authority to designate the employees (including officers, whether or not they
are directors) of the Company to whom options are to be granted under the 1996
Plan and the number of options to be granted to each such employee.
GRANTS. Incentives under the 1996 Plan consist of incentive stock
options ("ISOs") within the meaning of Section 422 of the Code, nonqualified
stock options ("NQSOs"), (hereinafter collectively referred to as "Stock
Options") and shares of Common Stock (collectively referred to as "Grants"). All
Grants are subject to the terms and conditions set forth in the 1996 Plan and to
those other terms and conditions consistent with the 1996 Plan as the Plan
Committee deems appropriate and as are specified in writing by the Plan
Committee to the designated individual (the "Grant Letter"). The Plan Committee
must approve the form and provisions of each Grant Letter to an individual.
ELIGIBILITY FOR PARTICIPATION. Employees and Non-employee Directors of
the Company are eligible to participate in the 1996 Plan. As of December 31,
2001, the Company and its subsidiaries employed approximately 2,650 individuals
and eight Non-employee Directors who would be eligible to participate in the
1996 Plan. No optionee may receive Stock Options for more than 50% of the number
of shares of Common Stock available for issuance under the 1996 Plan.
TERM, PURCHASE PRICE, VESTING AND METHOD OF EXERCISE. The exercise
price of Stock Options granted under the 1996 Plan to employees may not be less
than the fair market value of a share of Common Stock on the date of grant (110%
of the fair market value for an ISO in the case of any person who holds more
than 10% of the combined voting power of all classes of outstanding stock). On
December 31, 2001, the fair market value of the Company's Common Stock was $2.51
per share.
The exercise price of NQSOs granted to Non-employee Directors is equal
to the fair market value of a share of Common Stock on the date of an Annual
Meeting as determined under the terms of the 1996 Plan. These options become
exercisable one year after the date they are granted and expire upon the earlier
of the date the Director ceases to be a Director (except on account of becoming
an employee of the Company or nine months thereafter in the case of death or
disability) or ten years from the date of grant.
The Stock Options expire upon the earlier of the employee's termination
of employment (subject to extension in the case of death or disability) or ten
years from the date of grant (five years for an ISO in the case of any person
who holds more than 10% of the combined voting power of all classes of
outstanding stock).
AMENDMENT AND TERMINATION OF THE PLAN. The Board may make any amendment
to the 1996 Plan, except, without approval of the Company's stockholders, no
such amendment may change the number of shares subject to the 1996 Plan (or the
individual limit for any optionee) or change the designation of the class of
employees eligible to receive Stock Options. The 1996 Plan will terminate on
October 31, 2006, unless terminated earlier by the Board or extended by the
Board with approval of the stockholders.
15
CHANGE IN CONTROL PROVISIONS. In the event of a Change in Control of
the Company, all outstanding Stock Options will become immediately exercisable,
unless the Plan Committee determines otherwise. Optionees will be permitted to
elect to exercise any outstanding Stock Options or to receive a cash payment
equal to the excess of the fair market value of the shares of Common Stock
subject to the outstanding Stock Options over the purchase price to be paid in
the Change in Control. The cash payment alternative is available only if it does
not render a Change in Control ineligible for pooling of interest accounting
treatment or desired tax treatment. If the cash payment is unavailable, the
optionee may elect to receive shares of Common Stock equal to the cash payment.
If an optionee does not make an election in connection with a Change in Control
where the Company is not the surviving corporation, his or her Stock Options
will terminate, unless they are assumed by the surviving or acquiring company.
FEDERAL INCOME TAX CONSEQUENCES. Set forth below is a general
description of the federal income tax consequences relating to Grants made under
the 1996 Plan. Grantees are urged to consult with their personal tax advisors
concerning the application of the principles discussed below to their own
situations and the application of state and local tax laws.
NONQUALIFIED STOCK OPTIONS. There are no federal income tax
consequences to optionees or to the Company upon the grant of an NQSO under the
1996 Plan. Upon the exercise of NQSOs, optionees will recognize ordinary
compensation income in an amount equal to the excess of the fair market value of
the shares at the time of exercise over the exercise price of the NQSO, and the
Company generally will be entitled to a corresponding federal income tax
deduction. Upon the sale of shares acquired by exercise of an NQSO, an optionee
will have a capital gain or loss (long-term or short-term depending upon the
length of time the shares were held) in an amount equal to the difference
between the amount realized upon the sale and the optionee's adjusted tax basis
in the shares (the exercise price plus the amount of ordinary income recognized
by the optionee at the time of exercise of the NQSO).
INCENTIVE STOCK OPTIONS. Optionees will not be subject to federal
income taxation upon the grant or exercise of ISOs granted under the 1996 Plan,
and the Company will not be entitled to a federal income tax deduction by reason
of such Grant or exercise. However, the amount by which the fair market value of
the shares at the time of exercise exceeds the Stock Option price (or the
optionee's other tax basis in the shares) is an item of tax preference subject
to the alternative minimum tax applicable to the person exercising the ISO. A
sale of shares acquired by exercise of an ISO that does not occur within one
year after the exercise or within two years after the grant of the ISO generally
will result in the recognition of long-term capital gain or loss in the amount
of the difference between the amount realized on the sale and the Stock Option
price (or the optionee's other tax basis in the shares), and the Company will
not be entitled to any tax deduction in connection therewith. If such sale
occurs within one year from the date of exercise of the ISO or within two years
from the date of grant (a "disqualifying disposition") and is a transaction in
which a loss, if sustained, would be recognized, the optionee generally will
recognize ordinary compensation income equal to the lesser of (i) the excess of
the fair market value of the shares on the date of exercise over the exercise
price (or the optionee's other tax basis in the shares), or (ii) the excess of
the amount realized on the sale of the shares over the exercise price (or the
optionee's other tax basis in the shares). In the case of a disqualifying
disposition where a loss, if sustained, would not be recognized, the optionee
will recognize ordinary income equal to the excess of the fair market value of
the shares on the date of exercise over the Stock Option price (or the
optionee's other tax basis in the shares). Any amount realized on a
disqualifying disposition in excess of the amount treated as ordinary
compensation income (or any loss realized) will be a long-term or a short-term
capital gain (or loss), depending upon the length of time the shares were held.
The Company generally will be entitled to a tax deduction on a disqualifying
disposition corresponding to the ordinary compensation income recognized by the
optionee.
16
Generally, where previously acquired Common Stock is used to exercise
an outstanding ISO or NQSO, appreciation on such stock will not be recognized as
income. However, if such Common Stock was acquired pursuant to the exercise of
an ISO, a disqualifying disposition will be deemed to have occurred if such
stock is used to exercise another ISO prior to the expiration of the applicable
holding periods.
STOCK GRANTS. A grantee normally will recognize taxable income upon
receipt of a stock grant in an amount equal to the fair market value of the
Common Stock at that time, and the Company will be entitled to a deduction in
the same amount.
TAX WITHHOLDING. The Company may require optionees who exercise NQSOs
to remit an amount sufficient to cover the optionee's minimum federal, state and
local withholding tax obligations associated with the exercise of such NQSOs.
SECTION 162(m). Under Section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration would
include amounts received upon the exercise of stock options. An exception does
exist, however, for "performance-based compensation," including amounts received
upon the exercise of stock options pursuant to a plan approved by stockholders
that meets certain requirements. The 1996 Plan is intended to make grants of
Stock Options thereunder meet the requirements of "performance-based
compensation."
No Grants will be made from the additional shares to be authorized by
the proposed amendment to the 1996 Plan until after stockholder approval of the
amended 1996 Plan at the Annual Meeting. Participation in the 1996 Plan is at
the discretion of the Plan Committee. Future participation by employees will be
based upon determinations which the Plan Committee may make in the future.
Consequently, it is not possible to state the benefits which may be awarded to
any of our executive or other officers. For information with respect to the
grant of options to certain executive officers during the year ended September
30, 2001, similar to those which may be granted under the 1996 Plan, see the
table captioned "Option Grants in Last Fiscal Year".
17
PROPOSAL 3
THE COMMON STOCK AMENDMENT
At the meeting of the Board of Directors on December 7, 2001 (the
"December Meeting"), the Board of Directors approved, subject to stockholder
approval, an amendment to the Company's Certificate of Incorporation (the
"Common Stock Amendment") that would increase the number of shares of Common
Stock the Company is authorized to issue from 15,000,000 to 16,000,000. As of
September 30, 2001, 7,064,808 shares of Common Stock were outstanding and
997,567 shares were reserved for issuance under the Company's benefit plans. An
additional 750,000 shares will be reserved for issuance under the Company's
benefit plans if the stockholders approve Proposal 2, above, relating to the
authorization of additional shares for issuance under the Company's 1996 Equity
Compensation Plan.
The Board of Directors believes that the proposed increase in the
number of authorized shares of Common Stock will benefit the Company by
improving its flexibility in responding to future business needs and
opportunities. The additional authorized shares could be used for possible stock
splits, future acquisitions, financings, stock dividends and other corporate
purposes.
If the Common Stock Amendment is approved, the Board of Directors would
be authorized to issue shares of Common Stock without additional stockholder
approval, subject to the rules of the American Stock Exchange, described below,
the terms of any agreements or securities the Company may enter into or issue in
the future, if any, or applicable law. Subject to such limits, shares of Common
Stock could be issued in one or more transactions.
Depending upon the nature and terms thereof, such a transaction or
transactions could make a takeover of the Company more difficult and therefore
less likely. An issuance of additional shares of Common Stock could have the
effect of diluting the earnings per share and book value per share of existing
shares of Common Stock and diluting the stock ownership of persons seeking to
obtain control of the Company. The Board of Directors has no present plans,
understandings or agreements to issue any additional shares except pursuant to
the Company's benefit plans, including the 1996 Equity Compensation Plan that is
described under Proposal 2, above, following the heading "Description of the
Plan."
The American Stock Exchange, on which the Common Stock is listed,
currently requires stockholder approval as a prerequisite to listing shares in
several instances, including acquisition transactions where (i) the number of
shares of Common Stock to be issued could result in an increase in outstanding
shares of Common Stock of 20% or more or (ii) any director, officer or
substantial stockholder of the Company has a 5% or greater interest in the
Company or assets to be acquired or in the consideration to be paid in the
transaction and the stock to be issued could result in an increase in
outstanding shares of Common Stock of 5% or more.
The additional shares of Common Stock which would be authorized by the
Common Stock Amendment would have the same rights and privileges as, and
otherwise be identical to, the shares of Common Stock currently authorized and
outstanding. Holders of the Company's shares have no preemptive rights and, as a
result, existing stockholders would not have any preferential right to purchase
any of the additional shares of Common Stock when issued.
Voting Requirement
------------------
Under Delaware law, the Common Stock Amendment requires the affirmative
vote of the holders of a majority of the Company's issued and outstanding shares
of Common Stock entitled to vote at the
18
Meeting.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
COMMON STOCK AMENDMENT.
19
PROPOSALS 4-7
STRATEGIC AMENDMENTS
TO THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BY-LAWS
The Board of Directors unanimously approved and recommends approval by
the stockholders of four proposals to amend the Company's Certificate of
Incorporation and By-laws.
Specifically, these amendments would do the following:
1. Authorize the future issuance of up to 100,000 shares of
preferred stock, par value $1.00 per share, on such terms and
at such times as the Board of Directors may determine (the
"Preferred Stock Amendment");
2. Require that any stockholder action be taken only at a duly
convened meeting of stockholders and not by written consent in
lieu of a meeting (the "Stockholder Meeting Amendment");
3. Permit removal of directors by stockholders only for cause and
upon either (i) the affirmative vote of the holders of at
least 80% of the outstanding shares of the Company's voting
stock or (ii) the vote of a majority of the entire Board of
Directors then in office and require the vote of the holders
of at least 80% of the outstanding shares of the Company's
voting stock to amend this provision (the "Director Removal
Amendments"); and
4. Permit vacancies on the Board of Directors to be filled only
by action of the Board of Directors and eliminate the ability
of stockholders to fill any such vacancy, except as authorized
by the Board of Directors (the "Vacancy Amendment").
As more fully discussed below, the Board of Directors believes that
each of these amendments (collectively, the "Strategic Amendments") is advisable
and in the best interests of the Company and its stockholders. Each of the
Strategic Amendments will be discussed separately in this Proxy Statement
following a general discussion that is applicable to all of the Strategic
Amendments.
General Discussion
------------------
The Board of Directors believes that the Company's Common Stock is
significantly undervalued at this time. As a result, the Company may be
vulnerable to the threat of an uninvited, non-negotiated takeover attempt. The
Board believes that such hostile takeover attempts are generally costly to all
participants and do not generally maximize stockholder value. Accordingly, while
the Board does not intend to foreclose or discourage reasonable merger
proposals, stockholder values can be enhanced by encouraging would-be acquirers
to forego hostile public tender offers and negotiate with the Board transactions
that are fair to all stockholders.
Although a tender offer or other takeover attempt may be made at a
price substantially above the then current market price of the Company's Common
Stock, such offers frequently are made for less than all of the outstanding
stock of a target company and, accordingly, may present stockholders with the
alternative of partially liquidating their investment while retaining an
investment in an enterprise under substantially different management objectives
that may not be consistent with those of the remaining stockholders. The
concentration
20
of control that could result from a tender offer for less than all of the
outstanding stock of a company, could also deprive the remaining stockholders of
the benefits of listing on a national exchange and even of public reporting
under the Securities Exchange Act of 1934, as amended.
At the December Meeting, the Board considered several possible
approaches to protecting the Company and its stockholders from the foregoing
threats. The Board concluded that the best combination of defenses against
abusive and coercive takeover tactics for the Company would consist of: (1)
amendment of the Company's By-laws to specify that a special meeting may only be
called by the Chairman of the Board or by the Secretary of the Company upon the
request of a majority of the Board of Directors then in office and to provide
for greater advance notification by a stockholder of nominations for the
election of directors (the "By-law Amendments") and (2) the Strategic
Amendments.
At the December Meeting, the Board unanimously approved the adoption of
the By-law Amendments and, subject to stockholder approval, the Strategic
Amendments. The adoption of the By-law Amendments require no further action by
the stockholders and, accordingly, the By-law Amendments are being, or have
been, implemented. The Strategic Amendments, however, require the approval of
the stockholders. The Board of Directors unanimously approved the recommendation
of each of the Strategic Amendments to the stockholders and the submission of
the Strategic Amendments to the stockholders for approval at the Annual Meeting.
None of the actions taken by the Board at the December Meeting are in
response to any specific proposal, effort or inquiry to acquire control of the
Company, and the Board of Directors is not aware of any such contemplated
takeover activity.
While the Strategic Amendments, individually and collectively,
particularly when taken together with the By-law Amendments, existing provisions
of the Company's Certificate of Incorporation and By-laws and protections
afforded under Delaware corporate law, give added protection to the Company's
stockholders, the Strategic Amendments may also have the effect of making more
difficult or discouraging a tender offer or proxy fight, even if such occurrence
may be favorable to the interests of some or all of the Company's stockholders.
By having the effect of discouraging takeover attempts, the Strategic Amendments
could have the effect of inhibiting (1) certain changes in management (some or
all of the members of which might be replaced in the course of a change in
control) and (2) temporary fluctuations in the market price of the Company's
Common Stock that might accompany actual or rumored takeover attempts.
The Board of Directors recognizes that a takeover might in some
circumstances be beneficial to some or all of the Company's stockholders, but,
nevertheless, believes that the stockholders as a whole will benefit from the
adoption of the Strategic Amendments. The Board further believes that it is
preferable to act on the Strategic Amendments when they can be considered
carefully rather than during an unsolicited bid for control.
The Board of Directors does not currently intend to propose any
amendments to the Company's Amended and Restated Certificate of Incorporation
which might be deemed to have the effect of discouraging takeover attempts other
than those set forth in this Proxy Statement, although such amendments or other
programs may be considered by the Board in the future if it believes the
interests of the stockholders would be protected thereby.
Existing Protective Measures and Statutory Provisions
-----------------------------------------------------
Certain provisions of the Company's Certificate of Incorporation and
By-laws as well as certain provisions of Delaware law may also have the effect
of making more difficult and discouraging, to varying degrees and in various
circumstances, an attempt to acquire control of the Company without approval
of the
21
Board of Directors, even if such acquisition of control may be favorable to the
interests of some or all of the Company's stockholders.
The Company's Certificate of Incorporation expressly authorizes the
Board of Directors, in considering a takeover offer, to consider, among other
things, the social, economic or any other material impact which an acquisition
of the Company, or substantially all of its assets, would have upon the
employees and customers of the Company and its subsidiaries and the communities
which they serve. In addition, the Certificate of Incorporation specifically
authorizes the Board to take defensive actions if it determines that an offer
should be rejected.
The Company's current By-laws provide that the Board of Directors will
consist of three classes, each serving for a term of three years with the term
of one class expiring each year. In addition, at the December Meeting, the Board
of Directors amended the By-laws (i) to permit that a special meeting to be
called only by the Chairman or a majority of the Board of Directors and not by
stockholders and (ii) to establish a procedure for increased advance notice of
shareholder nominations for director.
Certain provisions of Delaware law may also have the effect of making
more difficult or discouraging attempts to acquire control of the Company
without the approval of the Board of Directors. In particular, Section 203 of
the Delaware General Company Law prohibits certain "business combinations"
between a publicly-held Delaware corporation, such as the Company, and an
"interested stockholder." The provision is in effect for a period of three years
after the date the interested stockholder becomes such, unless (a) prior to the
time the interested stockholder became an interested stockholder of a target
company, either the proposed business combination or the proposed acquisition of
stock which would make such interested stockholder an interested stockholder was
approved by that company's board of directors, (b) in the same transaction in
which the interested stockholder becomes an interested stockholder, the
interested stockholder acquires at least 85% of the voting stock of that company
(excluding shares owned by directors who are also officers and certain shares
held in employee stock plans); or (c) the interested stockholder obtains
approval of the business combination by the target company's board of directors
and the holders of 66-2/3% of the target company's outstanding voting stock
other than shares of voting stock held by the interested stockholder. For
purposes of Section 203, an "interested stockholder" is any person that (a)
beneficially owns 15% or more of the outstanding voting stock of the target
company or (b) is an affiliate or associate of the target company and at any
time within the preceding three-year period was the beneficial owner of 15% or
more of the outstanding voting stock of the target company, together, in each
case, with the affiliates and associates of such person.
The "business combinations" to which Section 203 applies include: (a)
any merger or consolidation of a company or any of its majority-owned
subsidiaries with an interested stockholder or any other company if the merger
or consolidation is caused by the interested stockholder; (b) certain sales,
leases, exchanges, mortgages, pledges, transfers or other dispositions of assets
of the target company or any of its majority-owned subsidiaries having an
aggregate market value equal to 10% or more of either the aggregate market value
of all the assets of the company and its subsidiaries or of all the outstanding
stock of the company; (c) any issuance or transfer of stock of the target
company or any of its majority-owned subsidiaries to the interested stockholder
with certain exceptions; (d) any transaction involving the target company or any
of its majority-owned subsidiaries that has the effect of increasing the
interested stockholder's percentage ownership interest in that company's capital
stock, except certain immaterial changes; and (e) most loans or other financial
benefits provided by or through the target company or any of its majority-owned
subsidiaries to the interested stockholder.
22
Section 203 encourages persons interested in acquiring a company to
negotiate in advance with the board of directors because the special stockholder
voting requirement imposed by Section 203 can be avoided if such person, prior
to acquiring 15% of a company's voting stock, obtains the approval of the target
company's board of directors for such acquisition or for the proposed business
combination. In addition, Section 203 provides limited protection against the
potential inequities inherent in "two-tier" business combination transactions.
Under Section 203, any merger, consolidation or similar transaction following a
partial tender offer that has not been approved by a majority of the board of
directors requires approval by the holders of at least 66-2/3% of the remaining
shares of stock (unless the acquirer obtains 85% or more of the target company's
voting stock (other than excepted shares as discussed above) in such partial
tender offer). Furthermore, Section 203 tends to discourage the accumulation of
large blocks of stock by third parties which may be disruptive to the stability
of a company's relationships with its employees, customers and major lenders.
Potential Disadvantages of the Strategic Amendments
---------------------------------------------------
The Strategic Amendments, together with the existing provisions of the
Company's Certificate of Incorporation and By-laws and the statutory protections
of Delaware law, may have the following consequences: (1) a person acquiring a
substantial stock interest in the Company may have more difficulty in
accomplishing a merger or similar transaction with the Company without the
Board's consent, (2) the removal of the Company's directors and management may
be delayed, regardless of whether any such transaction or removal was desired by
the holders of a majority of the outstanding shares of the Company's Common
Stock or that might be advantageous to the Company and its stockholders. In
addition, a tender offer at a premium over market price, which might extend to
all public shares or might otherwise be favorable to public stockholders, could
be discouraged by the Strategic Amendments. The Strategic Amendments may also
have the effect of making the Board of Directors and management more secure in
the retention of their positions and, thus, enable the Board to resist changes
that the stockholders might otherwise have the power to impose.
Voting Requirements
-------------------
Under Delaware law, each of the Strategic Amendments requires the
affirmative vote of the holders of a majority of the Company's issued and
outstanding shares of Common Stock entitled to vote at the Meeting. If the
stockholders approve one or more of the Strategic Amendments, the Company will
file an amendment to the Certificate of Incorporation that reflects the
Strategic Amendments that are approved with the Secretary of State of the State
of Delaware. Each of the Strategic Amendments approved by the stockholders would
become effective regardless of whether the other Strategic Amendments are
approved.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE STRATEGIC
AMENDMENTS.
23
PROPOSAL 4
THE PREFERRED STOCK AMENDMENT
At the December Meeting, the Board of Directors approved, subject to
stockholder approval, an amendment to the Company's Certificate of Incorporation
(the "Preferred Stock Amendment") that would authorize 100,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). The Company
presently is not authorized to issue preferred stock. If the Preferred Stock
Amendment is approved, the Board of Directors would be authorized to fix the
designations, preferences and rights of the Preferred Stock and issue shares of
Preferred Stock without additional stockholder approval, subject to any
applicable requirements of the American Stock Exchange, described below, the
terms of any agreements or securities the Company may enter into or issue in the
future, if any, or applicable law.
The discussion of the Strategic Amendments set forth on pages 20
through 23 of this Proxy Statement pertains to this Proposal. You should review
that material together with the following discussion before voting on this
Proposal.
Effect of the Preferred Stock Amendment
---------------------------------------
The new shares of Preferred Stock could be issued by the Board of
Directors as a class or in one or more series. The Board of Directors would be
empowered to fix by resolution or resolutions the designations, preferences and
relative rights, qualifications and limitations of the new shares of Preferred
Stock, including, among other things: (a) the number of shares in, and
designation of, each series, if any; (b) the dividend rate, conditions and
preferences over the Common Stock, if any, and the dates upon which dividends
would be declared and paid; (c) whether, and to what extent, the holders thereof
would have voting rights in addition to those prescribed by statute; (d)
whether, and upon what terms, the shares of Preferred Stock would be convertible
into, or exchangeable for, other securities; (e) whether, and upon what terms,
the shares would be redeemable; (f) whether a sinking fund would be provided for
the redemption of the shares and, if so, the terms and conditions thereof; and
(g) the preference, if any, to which the shares would be entitled in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
Company.
The American Stock Exchange, on which the Company's Common Stock is
listed, may decline to list an issue of preferred stock unless the preferred
shareholders have the right, voting as a class, to vote on (i) any changes in
the rights, privileges or preferences and (ii) the creation of any additional
class of preferred stock that would rank senior or equal to the issue listed.
The American Stock Exchange rules also specify certain minimum votes on these
matters.
Advantages and Purpose of the Preferred Stock Amendment
-------------------------------------------------------
The Board of Directors believes that the Preferred Stock Amendment
would (a) provide the Company with an important anti-takeover defensive tool, as
discussed in this Proxy Statement, and (b) provide the Company with flexibility
of action for possible future acquisitions, financing transactions and other
corporate purposes. Elimination of the delay occasioned by the necessity of
obtaining stockholder approval at such time as the Company desires to issue
preferred stock would better enable the Corporation to engage in financing
transactions and acquisitions which take full advantage of changing market
conditions. The Board of Directors has no present plans, understandings or
agreements to issue shares of Preferred Stock.
24
Disadvantages and Potential Anti-Takeover Impact
------------------------------------------------
Should the Preferred Stock Amendment be approved, the Board of
Directors would be authorized to issue shares of Preferred Stock that could,
depending on the terms of such series, make more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or other means. When, in the judgment of the Board of Directors,
the action would be in the best interests of the stockholders and the Company,
such shares could be used to create voting or other impediments to a takeover
attempt or to discourage persons seeking to gain control of the Company.
Preferred shares could be privately placed with purchasers friendly to the Board
of Directors (a so-called "white knight" or "white squire"), the favorable vote
of which could be necessary to approve any merger, sale of assets or other
extraordinary corporate transaction. In addition, the Board of Directors could
authorize holders of a series of Preferred Stock to vote either separately as a
class or with the holders of the Company's Common Stock, on any merger, sale or
exchange of assets by the Company or any other extraordinary corporate
transaction. The authorization of shares of Preferred Stock, without the actual
issuance thereof, could have the effect of discouraging unsolicited takeover
attempts. The issuance of new shares of Preferred Stock also could be used to
dilute the stock ownership of a person or entity seeking to obtain control of
the Company should the Board of Directors consider the action of such entity or
person not to be in the best interests of the stockholders and the Company.
The Preferred Stock Amendment could also enable the Company to adopt a
traditional form of shareholder rights plan. Such a plan could provide
additional protection to the Company's shareholders by encouraging prospective
acquirers to bring their proposals to the Board of Directors so that those
proposals may be evaluated and, if appropriate, negotiated by the Board of
Directors. However, the adoption of a shareholder rights plan may make more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or other means.
Until such time as the Board of Directors authorizes the issuance and
determines the rights of any series of Preferred Stock, it is not possible to
state the precise disadvantages that issuance of such series might have on the
holders of the Company's Common Stock. Such disadvantages, however, might
include: (i) a reduction in the amount available for the payment of dividends on
the Common Stock if dividends on the Preferred Stock are in arrears; (ii)
dilution of the voting power of the Common Stock to the extent the Preferred
Stock has voting rights; and (iii) limitations on the rights of the holders of
Common Stock to share in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to the Preferred Stock.
Further, the authorization of Preferred Stock may operate to the disadvantage of
certain stockholders by reducing the likelihood of a hostile takeover of the
Company which could result in a change in the composition of the Board of
Directors. The Board of Directors may issue Preferred Stock with greater rights
over the Common Stock, including the power to elect a majority of the Board of
Directors. If the holders of Preferred Stock possessed the right to elect a
majority of the Board, then such holders would be able to control the management
of the Company.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
PREFERRED STOCK AMENDMENT.
25
PROPOSAL 5
THE STOCKHOLDER MEETING AMENDMENT
At the December Meeting, the Board of Directors approved, subject to
stockholder approval, an amendment to the Company's Certificate of Incorporation
(the "Stockholder Meeting Amendment") that would permit stockholder action only
by vote at a duly convened meeting of stockholders and not by written consent. A
conforming amendment to the Company's By-laws was also approved by the Board
that will be implemented upon approval by the stockholders of the Stockholder
Meeting Amendment.
Under current Delaware law, unless a corporation's certificate of
incorporation provides otherwise, any action required or permitted to be taken
by the corporation's stockholders may be taken without a meeting or notice to
all stockholders and without a stockholder vote, if a written consent setting
forth the action to be taken is signed by the holders of shares of outstanding
stock having the requisite number of votes that would be necessary to authorize
such action if it were taken at a meeting of stockholders. The Company's current
By-laws expressly authorize stockholder action by written consent. The
Stockholder Meeting Amendment provide that actions by written consent of the
stockholders will be prohibited.
Stockholders should be aware that the Company's By-laws were recently
amended to allow special meetings of stockholders to be called only by a
majority vote of the Board of Directors. As a result, approval of the proposed
Stockholder Meeting Amendment would require that stockholder action be taken
only at an annual or special meeting of stockholders which may be called only by
the Chairman or the Board of Directors.
The discussion of the Strategic Amendments set forth on pages 20
through 23 of this Proxy Statement pertains to this Proposal. You should review
that material together with the following discussion before voting on this
Proposal.
Purpose of the Stockholder Meeting Amendment
--------------------------------------------
Proposals for stockholder action typically involve important issues to
all stockholders relating to the Company and its future. Consequently, the Board
of Directors believes that such proposals should be considered at a special or
annual meeting of stockholders, following notice to all stockholders, where the
issues can be discussed by all interested persons. The Stockholder Meeting
Amendment is designed to achieve this result by requiring all actions that
require the approval of stockholders to be considered at a meeting of
stockholders. The notice provisions currently provided in the Company's By-laws
and the proposed Stockholder Meeting Amendment provide the Board with the
opportunity to inform stockholders of a proposed action, together with the
Board's recommendation or position with respect to a proposed stockholder
action, thereby enabling stockholders to better determine whether they desire to
attend the stockholder meeting or grant a proxy to the Board of Directors in
connection with the disposition of any such business.
Advantages and Disadvantages
----------------------------
The Board of Directors approved the Stockholder Meeting Amendment
because the Board believes it is in the best interests of all stockholders to be
informed of any action to be taken by the stockholders, including approval of a
merger or sale of assets. Transactions such as mergers or sales of assets that
have not been negotiated or approved by the Board could seriously disrupt the
business and management of the Company and result in terms which may be less
favorable to the stockholders as a whole than would be available in transactions
approved by the Board. Board-approved transactions may be carefully planned and
undertaken at an opportune time in order to obtain maximum value for all of the
Company's stockholders.
26
Conversely, the Stockholder Meeting Amendment may be disadvantageous to
stockholders because it may limit their ability to amend the By-laws or remove
directors pursuant to a written consent. Any stockholder or group of
stockholders would have to wait until the annual meeting of stockholders to seek
approval for such action. The Stockholder Meeting Amendment may also be
perceived to be disadvantageous because it could discourage future attempts to
acquire control of the Company even though a majority of stockholders may
believe such is in their best interests or that they might receive a substantial
premium.
Potential Anti-Takeover Impact
------------------------------
The proposed Stockholder Meeting Amendment may have the effect of
tending to discourage persons from initiating hostile takeover attempts of the
Company. The Stockholder Meeting Amendment protects the Company from the use of
a written consent by a person, group or entity who has accumulated a majority of
the Company's shares and who seeks to affect the makeup of the Board of
Directors or who seeks to pass resolutions that might be counter to the
interests of the remaining stockholders of the Company. Elimination of the
ability to act by written consent may lengthen the amount of time required to
take stockholder actions. Without the ability to act by written consent, a
stockholder or group of stockholders controlling a majority-in-interest of the
Company's Common Stock will not be able to amend the By-laws or remove directors
until an annual or special meeting of stockholders is held. While the
Stockholder Meeting Amendment ultimately would not prevent an insurgent
stockholder from effecting certain takeover measures, it does ensure that they
will not occur without a regular or special meeting of stockholders and
consequently without advance notice.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
STOCKHOLDER MEETING AMENDMENT.
27
PROPOSAL 6
THE REMOVAL AMENDMENTS
At the December Meeting, the Board of Directors approved, subject to
stockholder approval, amendments to the Company's Certificate of Incorporation
and By-laws (the "Removal Amendments") that would:
1. Permit removal of directors by stockholders only for cause and
upon either (i) the affirmative vote of the holders of at
least 80% of the outstanding shares of the Company's voting
stock or (ii) the vote of a majority of the entire Board of
Directors then in office; and
2. Require the affirmative vote of the holders of at least 80% of
the shares of voting stock to amend the foregoing provision.
The discussion of the Strategic Amendments set forth on pages 20
through 23 of this Proxy Statement pertains to this Proposal. You should review
that material together with the following discussion before voting on this
Proposal.
Effect of the Removal Amendments
--------------------------------
The Company's Board of Directors is classified, as permitted by law,
into three classes, with directors in each class elected for terms of three
years, the term of each class expiring in a different year. Under applicable
Delaware law, in the case of a corporation whose board is classified, unless the
certificate of incorporation otherwise provides, directors may be removed from
office only for cause upon the vote of the holders of a majority of the shares
then entitled to vote in the election of directors. If the certificate of
incorporation provides otherwise, directors may be removed without cause upon
the vote of the holders of a majority of the shares entitled to vote in the
election of directors. The Company's current Certificate of Incorporation
expressly provides that directors may be removed by the stockholders without
cause. The Company's current By-laws contain an identical provision. The effect
of adopting the Removal Amendments would be to increase the voting requirement
from a majority of such shares to 80% and restrict removals so that a director
may only be removed for cause. In addition, in order to prevent modification or
repeal of such provisions by holders of a simple majority of the Company's
voting stock present and voting at a meeting, the Company's Certificate of
Incorporation is proposed to be amended to provide that the affirmative vote of
the holders of 80% of the outstanding shares of all classes of stock of the
Company entitled to vote generally in the election of directors shall be
required to alter, amend, supplement or repeal the revised Article Fourth of the
Certificate of Incorporation.
Purpose of the Removal Amendments
---------------------------------
The proposed Removal Amendments are intended to prevent circumvention
of the benefits derived from classification of directors and to prevent a
person, corporation or other entity making a takeover bid for the Company from
seizing control of the Board of Directors through the removal process. The
Removal Amendments are consistent with, and supportive of, the concept of a
classified board in that they tend to moderate the pace of change in the Board
of Directors. The Board of Directors believes that the Removal Amendments will
properly condition a director's continued service upon his ability to serve
rather than his position relative to a dominant stockholder.
28
Advantages of the Removal Amendments
------------------------------------
The primary purpose of the Removal Amendments is to preclude the
removal of any director or directors by a takeover bidder or otherwise, unless
removal is warranted for reasons other than control of the Board. For a takeover
bidder to obtain effective control of the Company, it presently would need to
control at least a majority of the Board votes. One popular method for a
takeover bidder to obtain control is to acquire a majority of the outstanding
shares of a corporation through a tender offer or open market purchases and to
use that voting power to remove the existing directors and replace them with
persons chosen by the takeover bidder. Requiring cause in order to remove a
director would defeat this strategy, thereby encouraging potential takeover
bidders to obtain the cooperation of the existing Board before attempting a
takeover.
Disadvantages and Potential Anti-Takeover Impact
------------------------------------------------
The Removal Amendments will make the removal of any director more
difficult, even if such removal is believed by the stockholders to be in their
best interests, and will eliminate the stockholders' ability to remove a
director at will. Since the amendments will make the removal of directors more
difficult, it will increase the directors' security in their positions.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
REMOVAL AMENDMENTS.
29
PROPOSAL 7
THE VACANCY AMENDMENT
At the December Meeting, the Board of Directors approved, subject to
stockholder approval, an amendment to the Company's Certificate of Incorporation
(the "Vacancy Amendment") that would permit vacancies on the Board of Directors
to be filled by action of the Board of Directors and eliminate the ability of
stockholders to fill any such vacancy, except as authorized by the Board of
Directors. A conforming amendment to the Company's By-laws was also approved by
the Board that will be implemented upon approval by the stockholders of the
Vacancy Amendment.
The discussion of the Strategic Amendments set forth on pages 20
through 23 of this Proxy Statement pertains to this Proposal. You should review
that material together with the following discussion before voting on this
Proposal.
Effect of the Vacancy Amendment
-------------------------------
The Company's current Certificate of Incorporation provide that a
vacancy in the office of a director may be filled either by (i) the vote of the
holders of Common Stock or (ii) the remaining directors then in office, even
though less than a quorum, or by the sole remaining director. If the Vacancy
Amendment is approved by the stockholders, the stockholders will no longer be
able to act to fill a vacancy on the Board of Directors.
Advantages and Disadvantages of the Vacancy Amendment
-----------------------------------------------------
The Board of Directors believes that controlling the ability to fill
vacancies on the Board will promote continuity of management and thereby enhance
the ability of the Company to carry out long-range plans and goals for its
benefit and the benefit of its stockholders. In addition, this proposal, coupled
with the foregoing proposal relating to the removal of directors, if adopted,
will preclude stockholders from removing incumbent directors without cause and
simultaneously gaining control of the Board by filling the vacancies created by
such removal with their own nominees. Although the Company has not experienced
difficulties in the past in maintaining continuity of the Board and management,
the Board of Directors believes that this proposal will assist the Company in
maintaining this continuity of management into the future.
This proposal would protect the continuity of the Board resulting from
both a classified board and the inability to remove directors other than for
cause, and thus may have the effect of discouraging potential unfriendly bids
for shares of the Company even if a majority of the stockholders desire such a
change. This effect could occur even if such actions would be favorable to the
interests of the stockholders.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
VACANCY AMENDMENT.
30
PROPOSAL 8
THE REDOMESTICATION PROPOSAL
General
-------
At the December Meeting, the Board of Directors approved, subject to
stockholder approval, a proposal to permit the Company to change its state of
incorporation from Delaware to Pennsylvania (the "Redomestication"). The
Redomestication would be accomplished at any time during the twelve months
following the Meeting by filing Articles of Domestication with the Secretary of
State of the Commonwealth of Pennsylvania. However, if the Board, in its
discretion, determines that it is not in the best interests of the Company to
effect the Redomestication, the Articles of Domestication will not be filed.
The capital structure of the Company after the Articles of
Domestication become effective (the "Pennsylvania Company") will be identical to
the capital structure of the Company, except that, if the stockholders approve
Proposals 9 and 10, the Pennsylvania Company will be authorized to issue up to
20 million shares of Common Stock and up to 1 million shares of Preferred Stock.
The rights of the Company's stockholders, however, will be governed by
Pennsylvania law after the Redomestication. (See "Conversion of Shares" and
"Comparison of Stockholder Rights," below.)
The internal affairs of the Pennsylvania Company will be governed by
the Articles of Domestication (the "New Articles"), the By-laws of the Company
and by Pennsylvania law. The New Articles will not differ substantially from the
Company's current Certificate of Incorporation, except with respect to the
increased number of shares of Common and Preferred Stock that the Pennsylvania
Company will be authorized to issue if the stockholders approve Proposals 9 and
10. The Board of Directors does not currently plan to amend the By-laws of the
Company in connection with the Redomestication, although such amendments may be
considered by the Board in the future. (See "Charter and By-laws," below.)
The Redomestication will have no effect on the conduct of the daily
business operations of the Company, the location of its principal executive
offices, or its management. (See "No Change in Business Plan, Management,
Assets, Liabilities or Net Worth," below.)
Principal Reasons for the Redomestication
-----------------------------------------
By changing the Company's state of incorporation to Pennsylvania, the
Company will be conforming its legal residence to its actual residence. The
primary reason for incorporating in Delaware rather than Pennsylvania in 1977
was to take advantage of the more modern and less restrictive provisions of the
Delaware General Company Law ("DGCL") that existed at that time. Subsequently,
Pennsylvania significantly modernized its corporation law. Pennsylvania's
Business Corporation Law of 1988, as amended in 1990 ("PBCL"), is designed to
afford Pennsylvania-domiciled companies substantial operating flexibility and
other advantages over the DGCL. Since the PBCL was adopted, Pennsylvania
corporations have tested, and Pennsylvania courts have interpreted, the PBCL,
providing additional assurance as to the PBCL's effect. As a result, the primary
motivations for a company headquartered in Pennsylvania to be incorporated in
Delaware have largely been eliminated.
The Board also considered certain differences in stockholder rights and
the powers of management under Delaware and Pennsylvania law and concluded that
these changes would provide desirable flexibility in the management of the
Company and would enhance the Board's ability to pursue the long-term interests
of the stockholders of the Company and the other constituencies served by the
Company. (See "Certain Changes in the Rights of Stockholders Resulting from the
Merger," below.)
31
Another benefit of the Redomestication is to reduce the Company's state
tax liability. This liability will be reduced by approximately $60,000 per year
as a result of the change to a Pennsylvania corporate domicile. Because there
will be no negative tax consequence to the Pennsylvania Company if the number of
shares the Pennsylvania Company is authorized to issue is increased, the New
Articles will specify that the authorized number of shares of Common Stock will
be 20 million and the authorized number of shares of Preferred Stock will be 1
million, if the stockholders approve Proposals 9 and 10. Hence, the
Redomestication will enable the Company to increase the number of authorized
shares without additional tax liability and enhance the benefits that may be
obtained from approval of the Common Stock Amendment and the Preferred Stock
Amendment. (See "The Common Stock Amendment" and "The Preferred Stock
Amendment," above.)
The Board of Directors of the Company believes that, in view of the
modernization of the PBCL and the annual tax savings to the Company, the best
interests of the Company and its stockholders will be served by changing the
Company's state of incorporation from Delaware to Pennsylvania.
Even though the Board concluded at the December Meeting that the
Redomestication Proposal is in the best interests of the Company and its
stockholders, if, subsequent to the approval of the proposal by the stockholders
but prior to the effectiveness of filing the Articles of Domestication, the
Board determines that it is not in the best interests of the Company to effect
the Redomestication, the Articles of Domestication will not be filed.
Conversion of Shares
--------------------
At the time the Redomestication becomes effective, each outstanding
share of Common Stock of the Company, par value $0.10 per share, will
automatically be converted on a one-for-one basis into shares of Common Stock,
par value $0.10 per share ("Common Shares"), of the Pennsylvania Company. Such
conversion of shares will not result in any change in the present ownership of
shares of stock of the Company.
After the Redomestication, certificates that previously represented
shares of Company Common Stock will be deemed to represent an equal number of
Common Shares of the Pennsylvania Company. Certificates that previously
represented Company Common Stock will be replaced by certificates representing
Common Shares of the Pennsylvania Company only when submitted to the transfer
agent with a request that they be so replaced or when they are presented for
transfer.
IT WILL NOT BE NECESSARY FOR THE STOCKHOLDERS OF THE COMPANY TO
EXCHANGE THEIR EXISTING CERTIFICATES FOR NEW CERTIFICATES REPRESENTING COMMON
SHARES OF THE PENNSYLVANIA COMPANY.
Company Employee Benefit Plans
------------------------------
The Company's employee benefit plans will not be changed in any
material respect by the Redomestication. For example, the options to acquire
Company Common Stock under the Company's Equity Compensation Plan and 1996
Equity Compensation Plan which are outstanding immediately prior to the
Redomestication will be converted into options to purchase the same number of
Common Shares of the Pennsylvania Company on the same terms and conditions as
those in effect immediately prior to the Redomestication, and future options
granted under such plans will be for Common Shares of the Pennsylvania
Corporation.
32
Trading of Pennsylvania Company Common Shares
---------------------------------------------
After the Redomestication, the Pennsylvania Company will be a publicly
held company, its Common Shares will continue to be listed on the American Stock
Exchange under the "UNI" ticker symbol, and it will file with the SEC and
provide to its stockholders the same type of information that the Company has
previously filed and provided. Stockholders whose Company stock is fully
tradable before the Redomestication will receive freely tradable Pennsylvania
Company shares. For stockholders holding restricted stock of the Company, their
shares in the Pennsylvania Company will be subject to the same restrictions on
transfer as those to which their present shares of stock in the Company are
subject. For purposes of computing compliance with the holding period of Rule
144, stockholders will be deemed to have acquired their shares in the
Pennsylvania Company on the date they acquired their shares in the Company. In
summary, the Pennsylvania Company and its stockholders will be in the same
respective position under the federal securities laws after the Redomestication
as were the Company and its stockholders prior to the Redomestication.
No Change in Business Plan, Management, Assets, Liabilities or Net Worth
------------------------------------------------------------------------
The proposed reincorporation will not result in any change in the
business, assets, liabilities or net worth of the Company. Upon completion of
the Redomestication, the name of the Company will continue to be Uni-Marts, Inc.
After the Redomestication, the Board of Directors of the Pennsylvania Company
will be comprised of those persons elected to the Board of Directors of the
Company at the 2002 Annual Meeting of Stockholders and the other members of the
Company's Board whose terms of office do not expire until 2003 and 2004. The
persons holding office as directors of the Company at the time the
Redomestication become effective will continue to hold such office as directors
of the Pennsylvania Company for the same terms for which they would otherwise
serve as directors of the Company and the persons who currently serve as
executive officers of the Company will serve as executive officers of the
Pennsylvania Company after the Redomestication.
Charter and By-laws
-------------------
Upon effecting the Redomestication, the New Articles of the
Pennsylvania Company will be substantially identical to the existing Certificate
of Incorporation of the Company, except for (i) changes reflecting the increased
number of shares of Common and Preferred Stock that the Pennsylvania Company
will be authorized to issue, if the stockholders approve Proposals 9 and 10,
(ii) changes triggered by differences in the corporation law of the two states,
as discussed below, and (iii) certain technical changes, such as substituting
references to the "DGCL" with references to the "PBCL."
Certain Differences Between the Company Statutes of Delaware and Pennsylvania
-----------------------------------------------------------------------------
Although the DGCL and the PBCL are similar in many respects, there are
a number of differences between the two statutes which should be carefully
considered by the stockholders in evaluating the Redomestication Proposal. The
following summary, which sets forth certain material differences between the two
statutes, does not purport to be a complete statement of all differences between
the DGCL and the PBCL, nor does it purport to be a complete statement of the
provisions of the two statutes which it compares.
All statements contained in the following summary are qualified in
their entirety by the laws of Delaware and Pennsylvania and reference is made to
those laws for a complete statement of their provisions. Among the more
significant differences affecting the rights, obligations and relationships
between a Company and its stockholders are the following:
Fiduciary Duties of Directors: Both Delaware and Pennsylvania law
provide that the board of directors
33
has the ultimate responsibility for managing the business and affairs of a
company. In discharging this function, directors owe fiduciary duties of care
and loyalty to the company and to its stockholders.
Delaware courts have held that the duty of care requires the directors
to exercise an informed business judgment. An informed business judgment means
that the directors have informed themselves of all material information
reasonably available to them. Delaware courts have also imposed a heightened
standard of conduct upon directors in matters involving a contest for control of
the company.
Similar to Delaware law, Pennsylvania law requires that directors
perform their duties in good faith, in a manner they reasonably believe to be in
the best interests of the company, and with such care, including reasonable
inquiry, skill and diligence, as a person of ordinary prudence would use under
similar circumstances. The PBCL, however, contains a provision specifically
permitting directors, in discharging their duties, to consider the effects of
any action taken by them upon any or all affected groups (including, e.g.,
stockholders, employees, customers, suppliers, creditors of the company and
certain communities) as well as all other pertinent factors. Furthermore, unlike
Delaware law, the PBCL expressly makes clear that a director has no greater
obligation to justify, or higher burden of proof with respect to, any act
relating to an actual or potential take-over of the Company than he or she has
with respect to any other act as a director.
The Company's Certificate of Incorporation expressly authorizes the
Board of Directors, in considering a takeover offer, to consider, among other
things, the social, economic or any other material impact which an acquisition
of the Company, or substantially all of its assets, would have upon the
employees and customers of the Company and its subsidiaries and the communities
which they serve. Thus, the Company's Certificate of Incorporation is already
closely aligned with the provisions of the PBCL.
Limitation of Director Liability: Both Delaware and Pennsylvania law
permit a Company's certificate or articles of incorporation to limit a
director's exposure to monetary liability for breach of fiduciary duty.
The Company's Certificate of Incorporation currently eliminates a
director's personal liability for monetary damages to the fullest extent
permitted by Delaware law. Pursuant to Delaware law, this means that a director
presently has no monetary liability except for liability for (i) breach of the
duty of loyalty, (ii) acts or omissions not in good faith or constituting
intentional misconduct or knowing violation of the law, (iii) declaration of an
improper dividend or an improper redemption of stock, or (iv) any transaction
from which the director derived an improper personal benefit.
Similarly, the New Articles will eliminate a director's liability to
the fullest extent permitted by Pennsylvania law. Pursuant to Pennsylvania law,
this means that a director will have no monetary liability for any action taken
or omitted unless (i) the director breached or failed to perform his or her
duties and (ii) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness. Under Pennsylvania law, a director will also
remain personally liable where the responsibility or liability is pursuant to
any criminal statute or is for the payment of taxes under local, State or
Federal law.
Anti-takeover Laws: Both Delaware and Pennsylvania have adopted a
"business combination" type of takeover statute. Business combination statutes
generally prohibit a target corporation from engaging in any "business
combination" with an "interested stockholder" of the target corporation for a
set period of time following the date on which the interested stockholder became
such. An interested stockholder is typically defined as the direct or indirect
beneficial owner of a specified percentage of the target corporation's
outstanding shares.
The DGCL (in Section 203) provides that a person who acquires 15% or
more of the outstanding voting
34
stock of a Delaware corporation becomes an "interested stockholder," and the
corporation may not effect mergers or certain other "business combinations" with
the interested stockholder for a period of three years, unless certain
conditions are met. The provisions of Section 203 are more fully discussed in
this Proxy Statement under the heading "Proposal Nos. 4-7 - Existing Protective
Measures and Statutory Provisions," above.
The PBCL (in Chapter 25) contains certain anti-takeover provisions
which apply to a registered company, such as the Company, unless the registered
company elects not to be governed by some or all of these provisions. The
Company has elected not to be governed by certain of these provisions and,
following the Redomestication, will be governed by the anti-takeover provisions
currently set forth in its Certificate of Incorporation, which provisions have
been replicated in the New Articles, as supplemented by Subchapter 25F of the
PBCL (relating to "business combinations"). This Subchapter delays for five
years and imposes conditions upon "business combinations" between an "interested
shareholder" and the corporation. The term "business combination" is defined
broadly to include various transactions utilizing a corporation's assets for
purchase price amortization or refinancing purposes. An "interested shareholder"
is defined generally as the beneficial owner of at least 20% of a corporation's
voting shares.
Subchapter 25F contains several exemptions, including an exemption for
business combinations with an interested shareholder where the board of
directors of the company had approved the purchase of shares that resulted in
the interested shareholder becoming an interested shareholder within the meaning
of Subchapter 25F. In considering whether the Pennsylvania Company should be
subject to Subchapter 25F, the Board of Directors determined that it should not
apply to any person who is a director or executive officer of the Company or who
beneficially owns more than 5% of the Company's outstanding Common Stock at the
time of the Redomestication (each an "Exempt Shareholder") and approved a
resolution to that effect. Even though Subchapter 25F will not apply to a
business combination between the Pennsylvania Company and an Exempt Shareholder,
such a business combination would require approval of the Board of Directors and
the shareholders as otherwise required. See "Certain Differences Between the
Company Statutes of Delaware and Pennsylvania--Mergers and Other Fundamental
Transactions," below.
The New Articles contain a section which expressly opts out of the
following Pennsylvania anti-takeover provisions: (i) the "control transactions"
provision, which provides for mandatory stockholder notice of the acquisition of
20% of the voting power of a Pennsylvania Company and provides stockholders with
the opportunity to demand "fair value" for their shares upon acquisition of
voting power, (ii) the "control share" provision, which limits the voting power
of stockholders owning 20% or more of a Company's voting stock, and (iii) the
"disgorgement provision," which permits a Company to recover profits resulting
from the sale of shares in certain situations, including those where an
individual or group attempts to acquire at least 20% of the Company's voting
shares. By opting-out of the control-share acquisition provisions, the
"severance payment" provision, which provides for mandatory severance
compensation for employees whose employment is terminated for certain reasons
after approval of a control-share acquisition, and the "labor contract"
provision, which provides for the preservation of labor contracts following
certain business combinations, will not apply.
Amendments to Charter: Under Delaware law, amending the Certificate of
Incorporation of the Company (other than the provision relating to the removal
of directors if the Removal Amendment is approved) requires the approval of the
holders of a majority of the shares entitled to vote. Pennsylvania law only
requires the affirmative vote of a majority of the votes actually cast on a
proposed amendment, unless the articles require a greater percentage (as the New
Articles do with respect to the director removal provision). Because only the
votes cast are counted, an abstention or failure to vote will not affect the
outcome of most votes. Pennsylvania law also eliminates the need for stockholder
approval of certain non-material amendments to the articles of incorporation.
35
Mergers and Other Fundamental Transactions: Under Delaware law,
fundamental corporate transactions (such as mergers, sales of all or
substantially all of a company's assets, dissolutions, etc.) require the
approval of the holders of a majority of the shares of the company. Pennsylvania
law reduces the approval threshold to a majority of the votes actually cast by
the stockholders at the meeting.
Pennsylvania law expressly provides a safe harbor for determining when
the sale of assets is not deemed to be a sale of "substantially all" of a
company's assets. Specifically, a company is not deemed to have sold
substantially all of its assets if it retains a business activity that
represented at least 25% of total assets and 25% of either (a) income from
continuing operations before taxes or (b) revenues from continuing operations.
In addition, Pennsylvania law requires that certain mergers, sale of
assets and other transactions between a company and one or more of its
shareholders must be approved by a majority of the votes that all shareholders
(other than the interested shareholder) are entitled to cast with respect to the
transaction (without counting the vote of the interested shareholder). This
requirement does not apply in certain cases, such as when the transaction was
approved by a majority vote of the board of directors without counting directors
who are directors or officers of or have a material equity interest in the
interested shareholder, or were nominated by such interested shareholder and
first elected as a director within 24 months of the date of the vote on the
proposed transaction.
Appraisal or Dissenters' Rights: The rights of stockholders to demand
payment in cash by a corporation of the fair value of their shares under certain
circumstances are called appraisal rights under the DGCL and dissenters' rights
under the PBCL. Delaware law does not afford appraisal rights to holders of
shares which are either listed on a national securities exchange, quoted on the
NASDAQ National Market System or held of record by more than 2,000 stockholders,
unless the plan of merger or consolidation converts such shares into anything
other than stock of the surviving corporation or stock of another corporation
which is either listed on a national securities exchange, quoted on NASDAQ or
held of record by more than 2,000 stockholders.
Pennsylvania law is substantially the same as Delaware law regarding
appraisal rights, except that where shares whose rights are to be determined are
listed on a national exchange or held of record by more than 2,000 shareholders,
dissenters' rights will nevertheless be available under Pennsylvania law unless
the plan converts such shares into stock of the surviving or new corporation.
Dividends: Delaware law permits dividends to be paid out of (i) surplus
(the excess of net assets of the company over capital) or (ii) net profits for
the current or immediately preceding fiscal year, unless the net assets are less
than the capital of any outstanding preferred stock. Pennsylvania law permits
the payment of dividends unless they would render the company insolvent, meaning
either (i) the company would be unable to pay its debts as they become due in
the ordinary course of business, or (ii) the total assets of the company would
be less than the sum of its total liabilities plus the amount that would be
needed upon dissolution of the company to pay the holders of shares having a
liquidation preference.
Stock Repurchases: Under Delaware law, a company may not purchase or
redeem its own shares when the capital of the company is impaired or when such
purchase or redemption would cause an impairment of the capital of the company.
A Delaware company may, however, purchase or redeem out of capital any of its
preferred shares if such shares will be retired upon acquisition, thereby
reducing the capital of the company. In contrast, Pennsylvania law permits a
company to redeem any and all classes of its shares and treats such redemption
or repurchase like a dividend, subject to the same limitations described above
under "Dividends."
Voting Rights: Under Delaware law, cumulative voting in the election of
directors is only permitted if
36
expressly authorized in a company's charter. The Certificate of Incorporation of
the Company does not authorize cumulative voting. Under Pennsylvania law,
however, stockholders automatically have cumulative voting rights unless the
Pennsylvania charter provides otherwise. Therefore, in order to maintain the
status quo, the New Articles state expressly that stockholders do not have
cumulative voting rights.
Amendments to By-laws: Under Delaware law, if the certificate of
incorporation confers on the board of directors the power to amend the by-laws,
as does the Company's Certificate of Incorporation, the DGCL does not limit the
power of the board to make changes in the by-laws. Under Pennsylvania law,
however, certain matters are reserved to the stockholders and the board's power
to adopt or amend by-law provisions on such matters is limited.
Under Delaware law, a company's by-laws may be amended by the
stockholders at any annual meeting, without the need to obtain the consent of
the Board of Directors or to give prior notice that such action would be taken
at the meeting. Pennsylvania law is more restrictive to stockholders, as it
requires that a copy of any proposed amendment to the by-laws, or a summary
thereof, be included with the notice of the meeting at which the stockholders
will consider amendments to a Pennsylvania company's by-laws.
Action by Written Consent: Delaware law permits a majority of
stockholders to consent in writing to any action without a meeting, unless the
certificate of incorporation prohibits such written consent, as proposed by the
Meeting Amendment. With respect to registered corporations, such as the Company,
Pennsylvania law also permits stockholder action by majority written consent,
but only where the articles specifically authorize less than unanimous consent.
To remain consistent, if the stockholders approve the Meeting Amendment, the New
Articles will contain a prohibition against stockholder action by written
consent identical to that contained in the Company's Certificate of
Incorporation.
Case Law and Court Systems: There is a substantial body of case law in
Delaware interpreting the corporation laws of that state. A comparable body of
judicial interpretations does not exist in Pennsylvania. Delaware also has a
long-established system of Chancery Courts to adjudicate matters arising under
its corporation law. As a result of these factors, there may be less certainty
as to the outcome of matters governed by Pennsylvania corporation law or by the
New Articles and therefore it may be more difficult to obtain legal guidance as
to such matters than would be the case under Delaware law.
Special Meetings of Stockholders: Both Delaware and Pennsylvania laws
permit a special meeting of the stockholders to be called by the board of
directors or such other person as may be authorized by the company's charter or
by-laws. Pennsylvania law, however, explicitly states that stockholders of a
registered corporation, such as the Company, shall not have a statutory right to
call special meetings. As recently amended, the By-laws of the Company provide
that special meetings of the stockholders may only be called by the Chairman or
the Board of Directors. The New By-laws will remain consistent with the current
By-laws in this regard.
Annual Meeting of Stockholders: Under Delaware law, if the annual
meeting for the election of directors is not held on the designated date the
directors are required to cause such meeting to be held as soon thereafter as
may be convenient. If they fail to do so for a period of 30 days after the
designated date, or if no date has been designated, for a period of 13 months
after the organization of the company or after its annual meeting, the Court of
Chancery may summarily order a meeting to be held upon application of any
stockholder or director.
Under Pennsylvania law, if the annual meeting of stockholders for
election of directors is not called and held within six months after the
designated time, any stockholder may call such meeting at any time thereafter
without application to any court.
37
Vote Required
-------------
Approval of the Redomestication Proposal requires the affirmative vote
of the holders of a majority of the Company's issued and outstanding Common
Stock entitled to vote at the Meeting.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REDOMESTICATION
PROPOSAL.
38
PROPOSAL 9
THE ADDITIONAL COMMON STOCK AMENDMENT
At the December Meeting, the Board of Directors approved, subject to
stockholder approval, and subject to the redomestication of the Company
described in Proposal 8, above, an amendment to the Company's Articles of
Incorporation to increase the number of shares of common stock, par value $0.10,
that the Company is authorized to issue to 20,000,000 (the "Additional Common
Stock Amendment").
The discussion set forth above for Proposal 3, the Common Stock
Amendment, is applicable also to the Additional Common Stock Amendment. Please
refer to that discussion for information regarding the purpose and effect of,
and the voting requirement for, the Additional Common Stock Amendment.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADDITIONAL COMMON
STOCK AMENDMENT.
39
PROPOSAL 10
THE ADDITIONAL PREFERRED STOCK AMENDMENT
At the December Meeting, the Board of Directors approved, subject to
stockholder approval, and subject to the redomestication of the Company referred
to in Proposal 8, above, an amendment to the Company's Articles of Incorporation
to authorize the issuance of, or, if Proposal 4, above, is approved, to increase
the number of shares of preferred stock, par value $1.00 per share, that the
Company is authorized to issue to, 1,000,000 shares, such shares to have such
designations, preferences, privileges and restrictions as may be determined from
time to time by the Company's Board of Directors.
The discussion set forth above for Proposal 4, the Preferred Stock
Amendment, is applicable also to the Additional Preferred Stock Amendment.
Please refer to that discussion for information regarding the purpose and effect
of, and the voting requirement for, the Additional Preferred Stock Amendment.
Recommendation of the Board of Directors
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADDITIONAL PREFERRED
STOCK AMENDMENT.
40
PROPOSAL 11
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP, Philadelphia, Pennsylvania, has
acted as the Company's independent auditors for the fiscal year ended September
30, 2001. The Company intends to utilize the services of Deloitte & Touche LLP
for the fiscal year ending September 30, 2002. A member of that firm will be
present at the Annual Meeting to respond to appropriate questions from
stockholders. He may also make a statement. The Proxies intend to vote, unless
instructed otherwise, for the ratification of the appointment of the firm of
Deloitte & Touche LLP.
FEES PAID TO INDEPENDENT AUDITORS
Audit Fees $151,500
Financial Information System Design and Implementation $ 0
All Other Fees $17, 200
The Audit Committee has considered whether the provision of other
services by the auditors is compatible with maintaining the principal
accountant's independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF THE ABOVE-NAMED INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
Stockholders intending to submit proposals to be included in the
Company's next Proxy Statement must send their proposal to the Secretary of the
Company at 477 East Beaver Avenue, State College, Pennsylvania, 16801-5690, not
later than September 30, 2002. Such proposals must relate to matters appropriate
for stockholder action and be consistent with regulations of the Securities and
Exchange Commission.
Stockholders intending to present proposals at the next annual meeting
of the Company and not intending to have such proposals included in the
Company's next Proxy Statement must send their proposal to the Secretary of the
Company at 477 East Beaver Avenue, State College, Pennsylvania, 16801-5690, not
later than December 14, 2002. If notification of a stockholder proposal is not
received by such date, the Proxies may vote, in their discretion, any and all of
the proxies received in this solicitation against such proposal.
41
OTHER MATTERS
The Board of Directors is not aware of any other matters to be
presented for action, but, if any other matter properly comes before the Annual
Meeting, it is intended that the persons voting the accompanying proxy will vote
the shares represented thereby in accordance with their best judgment.
By Order of the Board of Directors,
/s/ Harry A. Martin
Harry A. Martin
Secretary
State College, Pennsylvania
January 28, 2002
42
APPENDIX A
AMENDMENT 2001-1 TO THE UNI-MARTS, INC.
1996 EQUITY COMPENSATION PLAN
1. Section 4(a) of the Plan is hereby amended and restated, in its entirety,
to read as follows:
(a) The stock subject to the Grants issued hereunder shall be shares of
the Corporation's authorized common stock (the "Common Stock"). The aggregate
number of shares which may be issued under Grants shall not exceed 1,750,000
shares of Common Stock. The limitation established by the preceding sentence
shall be subject to adjustment as provided in Section 4(b). During the term of
the Plan, the maximum aggregate number of shares of Common Stock that shall be
subject to Stock Options granted under the Plan to any single optionee shall not
exceed 50% of the aggregate limitation specified above.
2. In all other respects, all provisions of the Uni-Marts, Inc. 1996 Equity
Compensation Plan are hereby ratified and confirmed.
A-1
APPENDIX B
RESOLUTIONS
-----------
The Common Stock Amendment
--------------------------
RESOLVED, that Article Fourth of the Certificate of Incorporation of the Company
be amended and restated to read in its entirety as follows:
"FOURTH: The total number of shares of stock which the Company shall
have authority to issue is 16,000,000 shares, consisting of 16,000,000
shares of Common Stock, having a par value of $0.10."
The Preferred Stock Amendment
-----------------------------
RESOLVED, that Article Fourth of the Certificate of Incorporation of the Company
be amended and restated to read in its entirety as follows:
"FOURTH: (a) Authorized Stock. The total number of shares of stock
----------------
which the Company shall have authority to issue is 16,100,000* shares,
consisting of 16,000,000* shares of Common Stock, having a par value of
$0.10, and 100,000 shares of Preferred Stock, having a par value of $1.00.
(b) Preferred Stock. The Board of Directors is authorized, subject to
---------------
limitations prescribed by law and the provisions of this Article Fourth, to
provide for the issuance of shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers,
preferences and other special and relative rights of the shares of each
such series and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(i) the number of shares constituting that series and the
distinctive designation of that series, which number may be increased and
decreased (but not below the number of shares then outstanding) from time
to time by action of the Board of Directors;
(ii) the dividend rate, if any, on the shares of that series,
whether dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of dividends
on shares of that series;
(iii) whether that series shall have voting rights in addition to the
voting rights provided by law, and if so, the terms of such voting rights;
--------------------
* If the Common Stock Amendment is not approved by the stockholders, these
numbers will be 15,100,000 and 15,000,000 respectively.
B-1
(iv) whether that series shall have conversion privileges, and
if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate upon the occurrence of
such events as the Board of Directors shall determine;
(v) whether the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amounts of such sinking fund;
(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Company, and the relative rights of priority, if any, of payment of
shares of that series; and any other relative rights, preferences and
limitations of that series."
The Meeting Amendment
---------------------
RESOLVED, that Article Eighth of the Certificate of Incorporation of the
Corporation be amended and restated to read in its entirety as follows:
"Eighth: Meetings of holders of capital stock of the Corporation and
of the Board of Directors and of any committee thereof may be held
outside the State of Delaware if the by-laws so provide. Except as
otherwise provided by law or by this Certificate of Incorporation, all
actions of stockholders shall be taken at an annual or special meeting
of stockholders of the Corporation. No stockholder action may be taken
without a meeting, without prior notice and without a vote. Any action
required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting
as provided by statute if the by-laws of the Corporation so provide.
Except as otherwise provided by law, the books of the Corporation may
be kept outside the State of Delaware at such place or places as may
be designated from time to time by the Board of Directors or in the
by-laws of the Corporation. Elections of directors and officers need
not be by ballot unless the by-laws of the Corporation so provide."
RESOLVED, that Section (d) of Article Seventh of the Certificate of
Incorporation of the Corporation be amended to delete the words "or by the
written consent."
The Removal Amendment
---------------------
RESOLVED, that Article Fourth, Part II(A) of the Certificate of
Incorporation of the Corporation be amended and restated to read in its entirety
as follows:
"(A) Any provision in the Certificate of Incorporation of the
Corporation (or any restatement thereof) or in the by-laws of the
Corporation to the contrary notwithstanding, no director shall be
removed from office by stockholders before
B-2
the end of his term except for cause and upon either (i) the
affirmative vote of the holders of at least 80% of the outstanding
shares of the Corporation's voting stock or (ii) the vote of a
majority of the entire Board of Directors then in office. This Article
Fourth, Part II(A) shall not be altered, amended, supplemented or
repealed, and no provision of this Certificate of Incorporation (or
any restatement thereof) or the by-laws of the Corporation
inconsistent herewith shall be adopted, except by the affirmative vote
of the holders of at least 80% of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors, considered for this purpose as one class."
RESOLVED, that Section 2(a) of Article III of the By-laws of the
Corporation be amended and restated to read in its entirety as follows:
"Section 2: Removal; Vacancies. (a) No director shall be removed from
-----------------------------
office by stockholders before the end of his term except for cause and
upon either (i) the affirmative vote of the holders of at least 80% of
the outstanding shares of the Corporation's voting stock or (ii) the
vote of a majority of the entire Board of Directors then in office."
The Vacancy Amendment
---------------------
RESOLVED, that Article Fourth, Part II(B) of the Certificate of
Incorporation of the Corporation be deleted in its entirety.
The Redomestication Proposal
----------------------------
RESOLVED, that, at any time during the twelve months following the Annual
Meeting, the Company shall be redomesticated from a Delaware corporation to a
Pennsylvania corporation and renounce the Company's current Certificate of
Incorporation at the discretion of the Board of Directors, provided that, prior
to the effectiveness of the filing of Articles of Domestication with the
Department of State of the Commonwealth of Pennsylvania, if the Board of
Directors, in its discretion, determines that it is not in the best interests of
the Company to effect the redomestication, the Articles of Domestication shall
not be filed.
The Additional Common Stock Amendment
-------------------------------------
RESOLVED, that Article 7 of the Articles of Incorporation of the Company be
amended and restated to read in its entirety as follows:
"The total number of shares of stock which the Company shall have
authority to issue is 20,000,000 shares, consisting of 20,000,000
shares of Common Stock, having a par value of $0.10."
The Additional Preferred Stock Amendment
----------------------------------------
RESOLVED, that Article 7 of the Articles of Incorporation of the Company be
amended and restated to read in its entirety as follows:
B-3
"(a) Authorized Stock. The total number of shares of stock which the
----------------
Company shall have authority to issue is 21,000,000* shares, consisting of
20,000,000* shares of Common Stock, having a par value of $0.10, and
1,000,000* shares of Preferred Stock, having a par value of $1.00.
(b) Preferred Stock. The Board of Directors is authorized, subject to
---------------
limitations prescribed by law and the provisions of this Article IV, to
provide for the issuance of shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers,
preferences and other special and relative rights of the shares of each
such series and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(i) the number of shares constituting that series and the
distinctive designation of that series, which number may be increased and
decreased (but not below the number of shares then outstanding) from time
to time by action of the Board of Directors;
(ii) the dividend rate, if any, on the shares of that series,
whether dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of dividends
on shares of that series;
(iii) whether that series shall have voting rights in addition to the
voting rights provided by law, and if so, the terms of such voting rights;
(iv) whether that series shall have conversion privileges, and if
so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate upon the occurrence of such events as the
Board of Directors shall determine;
(v) whether the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amounts of such sinking fund;
(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Company, and the relative rights of priority, if any, of payment of shares
of that series; and any other relative rights, preferences and limitations
of that series."
* The number of authorized shares are subject to stockholder approval. If the
Additional Common Stock Amendment and the Additional Preferred Stock Amendment
are not approved by the stockholders, these numbers will be adjusted to the
actual numbers of shares previously approved by stockholders.
_______________
B-4
APPENDIX C
Microfilm Number______________ Filed with the Department of State on
Entity Number _______________
_______________________________________
Secretary of the Commonwealth
ARTICLES OF DOMESTICATION
FOREIGN CORPORATION
DSCB:15-4161/6161 (Rev 90)
Indicate type of corporation (check one):
_______ Foreign Business Corporation (15 Pa.C.S.ss.4161)
_______ Foreign Nonprofit Corporation (15 Pa.C.S.ss.6161)
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations), the
undersigned qualified foreign corporation, desiring to become a domestic
business or domestic nonprofit corporation, hereby states that:
1. The name of the corporation is: Uni-Marts, Inc.
----------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its
commercial registered office provider and the county of venue is
(the Department is hereby authorized to
correct the following information to conform to the records of the
Department):
(a) 1013 Centre Road Wilmington Delaware 19805
-------------------------------------------------------------------------
New Castle
--------------
Number and Street City State Zip
County
(b) c/o: Corporation Service Company
----------------------------------------------------------
Name of Commercial Registered Office Provider
County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
C-1
3. Upon the domestication the corporation will be subject to the domestic
corporation provisions of the Business Corporation Law of 1988 or the
Nonprofit Corporation Law of 1988.
4. x The purposes for which the corporation is to be domesticated in the
----
Commonwealth of Pennsylvania consists of unlimited power to engage in and
to do any lawful act concerning any and all lawful business for which
business corporations may be incorporated under the Business Corporation
Law of 1988. DSCB:15-4161/6161 (Rev 90)-2
5. The filing of these Articles of Domestication and, if desired, the
renunciation of the original charter or articles of The corporation has
been authorized by a majority vote of the votes cast by all shareholders
entitled to vote thereon and, if any class of shares is entitled to vote
thereon as a class, a majority of the votes cast in each class vote, or by
any greater vote required by its charter.
C-2
6. These Articles of Domestication include the additional provisions set forth
in full in
Exhibit A attached hereto and made a part hereof.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Domestication to be executed this_________ day of __________________, ______.
Uni-Marts, Inc.
-----------------------------
(Name of Corporation)
BY:
-------------------------
(Signature)
TITLE:
-----------------------
C-3
Pennsylvania
EXHIBIT A
7. (a) Authorized Stock. The total number of shares of stock which
----------------
the Company shall have authority to issue is 21,000,000* shares, consisting of
20,000,000* shares of Common Stock, having a par value of $0.10, and 1,000,000*
shares of Preferred Stock, having a par value of $1.00.
(b) Preferred Stock. The Board of Directors is authorized,
---------------
subject to limitations prescribed by law and the provisions of this Article 7,
to provide for the issuance of shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the Commonwealth of
Pennsylvania, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and other
special and relative rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the
following:
(i) the number of shares constituting that series and the
distinctive designation of that series, which number may be
increased and decreased (but not below the number of shares then
outstanding) from time to time by action of the Board of
Directors;
(ii) the dividend rate, if any, on the shares of that
series, whether dividends shall be cumulative, and, if so, from
which date or dates, and the relative rights of priority, if any,
of payment of dividends on shares of that series;
(iii) whether that series shall have voting rights in
addition to the voting rights provided by law, and if so, the
terms of such voting rights;
(iv) whether that series shall have conversion privileges,
and if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate upon the
occurrence of such events as the Board of Directors shall
determine;
(v) whether the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the
terms and amounts of such sinking fund;
(vii) the rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or winding
up of the Company, and the relative rights of priority, if any,
of payment of shares of that series; and any other relative
rights, preferences and limitations of that series.
* The number of authorized shares are subject to stockholder approval. If the
Additional Common Stock Amendment and the Additional Preferred Stock Amendment
are not approved by the stockholders, these numbers will be adjusted to the
actual numbers of shares previously approved by stockholders.
C-4
PART I
------
(A) The authority of the Board of Directors to provide for the
issuance of any shares of the Corporation's capital stock shall include, but
shall not be limited to, authority to issue shares of capital stock of the
Corporation for any purpose and in any manner (including issuance pursuant to
rights, warrants, or other options) permitted by law, for delivery as all or
part of the consideration for or in connection with the acquisition of all or
part of the outstanding securities of another corporation or enterprise,
irrespective of the amount by which the issuance of such capital stock shall
increase the number of shares outstanding (but not in excess of the number of
shares authorized).
(B) No holder of any share or shares of any class of capital
stock of the corporation shall have any preemptive right to subscribe for any
shares of capital stock of any class of the Corporation now or hereafter
authorized or for any securities convertible into or carrying any optional
rights to purchase or subscribe for any shares of capital stock of any class of
the Corporation now or hereafter authorized, but any such shares of capital
stock of any class, or securities convertible into or carrying any optional
rights to purchase or subscribe for any shares of capital stock of any class of
the Corporation, may be issued and disposed of pursuant to resolution or
resolutions of the Board of Directors of the Corporation to such person, firms,
corporations or associations upon such terms as may be deemed advisable by the
Board of Directors of the Corporation in the exercise of its discretion. The
Corporation may from time to time issue its shares of capital stock of any class
for such consideration as may be fixed by the Board of Directors, and may
receive in payment thereof, in whole or in part, cash, labor done, services
rendered, personal property or real property or leases thereof. In the absence
of actual fraud in the transaction, the judgment of the Board of Directors as to
the value of such labor, services, personal property, real property or leases
thereof shall be conclusive. Any and all shares of capital stock so issued for
which the consideration so fixed shall have been paid or delivered shall be
deemed fully paid capital stock and shall not be liable to any further call or
assessment thereon, and the holders thereof shall not be liable for any further
payment in respect thereof.
(C) Dividends respecting any shares of capital stock of the
Corporation shall be payable only out of earnings or assets of the Corporation
legally available for the payment of such dividends and only as and when
declared by the Board of Directors of the Corporation.
PART II
-------
(A) Any provision in the Articles of Incorporation of the
Corporation (or any restatement thereof) or in the Bylaws of the Corporation to
the contrary notwithstanding, no director shall be removed from office by
shareholders before the end of his term except for cause and upon either (i) the
affirmative vote of the holders of at least 80% of the outstanding shares of the
Corporation's voting stock or (ii) the vote of a majority of the entire Board of
Directors. This Article 7, Part II(A) shall not be altered, amended,
supplemented or repealed, and no provision of these Articles of Incorporation
(or any restatement thereof) or the Bylaws of the Corporation inconsistent
herewith shall be adopted, except by the affirmative vote of the holders of at
least 80% of the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, considered for this purpose as
one class.
(B) Advance notice of nominations for the election of directors
other than nominations by the Board of Directors or a Committee thereof, shall
be given in the manner provided in the Bylaws.
(C) The Board of Directors of the Corporation may declare and
pay dividends of the Common Stock out of earnings or assets of the corporation
legally available for the payment thereof.
8. The Corporation is to have perpetual existence.
9. The private property of the shareholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
10. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
(a) By vote of a majority of all such directors, to amend
from time to time as the said Board deems necessary or convenient, the Bylaws of
this Corporation.
C-5
(b) To fix and determine whether any, and if any what
part, of the net profits of this Corporation in excess of its capital shall be
declared in dividends and paid to the shareholders and to determine whether any,
and if any what part, of the net profits of this Corporation shall be held and
retained by this Corporation, and to set apart out of any of the funds of the
Corporation available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was created.
(c) To authorize and cause to be executed mortgages and
other instruments upon encumbering the real and personal property of the
Corporation.
(d) When and as authorized by affirmative vote given at a
meeting of shareholders of record holding at least a majority of, the stock
entitled to vote on such proposal, to sell, lease or exchange all of the
property and assets of the Corporation, including its good will and its
corporate franchises or any property or assets essential to its corporate
business, upon such terms and conditions as the Board of Directors deems
expedient.
(e) By resolution passed by a majority of the whole
board, to designate one or more committees, each committee to consist of two or
more of the directors of the Corporation, which, to the extent provided in the
resolution or in the Bylaws of the Corporation, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it, which committee or committees shall have
such name or names as may be stated in the Bylaws of the Corporation or as may
be determined from time-to-time by resolution adopted by the Board of Directors;
provided, however, that all functions of the Board of Directors of the
Corporation with respect to the executive officers of the Corporation,
including, without limitation, the authority to engage and discharge such
executive officers and the responsibility of supervising such executives in the
discharge of their duties are hereby delegated to Henry D. Sahakian or the then
current Chairman of the Board or such committee or committees as shall be
designated by him.
(f) To oppose a tender offer, or other offer for the
Corporation's securities, whether the offer is in cash or in the securities of a
corporation or otherwise. When considering whether to oppose an offer, the Board
of Directors may, but is not legally obligated to, consider any pertinent issue.
By way of illustration, but not of limitation, the Board of Directors may, but
shall not be legally obligated to, consider any or all of the following:
(1) whether the offer is acceptable based on historical
and present operating results or the financial
condition of the Corporation and its subsidiaries,
and their future prospects;
(2) whether a more favorable offer could be obtained for
the Corporation, or its Subsidiaries, securities or
assets in the future;
(3) the social, economic or any other material impact
which an acquisition of the Corporation, or
substantially all of its assets, would have upon the
employees and customers of the Corporation and its
subsidiaries and the communities which they serve;
(4) the reputation and business practice of the offeror
and its management and affiliates as they would
affect the employees and customers of the Corporation
and its subsidiaries and the future value of the
Corporation's stock;
(5) the value of securities (if any) when the offeror is
offering in exchange for the Corporation's, or its
subsidiaries, securities or assets based on an
analysis of the worth of the Corporation, or of its
subsidiaries, as compared to the offeror corporation
or other entity whose securities are being offered;
and
(6) any antitrust or other legal or regulatory issues
that are raised by the offer.
(g) If the Board of Directors determines that an offer
should be rejected, it may take any lawful action to accomplish its purposes
including, but not limited to, any or all of the following: advising
shareholders not to accept the offer; litigation against the offeror; filing
complaints with all government and regulatory authorities; acquiring the
Corporation's securities; selling or otherwise issuing authorized but unissued
securities or treasury stock or granting
C-6
options with respect thereto; acquiring a company to create an antitrust or
other regulatory problem for the offeror; and/or obtaining a more favorable
offer from another individual or entity.
11. Meetings of holders of capital stock of the Corporation and
of the Board of Directors and of any committee thereof may be held outside the
Commonwealth of Pennsylvania if the Bylaws so provide. Except as otherwise
provided by law, all actions of shareholders shall be taken at an annual or
special meeting of shareholders of the Corporation. No shareholder action may be
taken without a meeting, without prior notice and without a vote. Any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting as provided by statute if
the Bylaws of the Corporation so provide. Except as otherwise provided by law,
the books of the Corporation may be kept outside the Commonwealth of
Pennsylvania at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of the Corporation. Elections of
directors and officers need not be by ballot unless the Bylaws of the
Corporation so provide.
12. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
shareholders herein are granted subject to this reservation.
13. No contract or other transaction between this Corporation
and any other corporation and no other act of the Corporation shall, in the
absence of fraud, in any way be affected or invalidated by the fact that any of
the directors of the Corporation are pecuniarily or otherwise interested in, or
are directors or officers of, such other corporation. Any director of the
Corporation individually or any firm or association of which any director may be
a member, may be a party to, or may be pecuniarily or otherwise interested in,
any contract or transaction of the Corporation, provided that the fact that he
individually or such firm or association is so interested shall be disclosed or
shall have been known to the Board of Directors or a majority of such members
thereof as shall be present at any meeting of the Board of Directors at which
action upon any such contract or transaction shall be taken. Any director of the
Corporation who is also a director or officer of such other corporation or who
is so interested may be counted in determining the existence of a quorum at any
meeting of the Board of Directors which shall authorize any such contract or
transaction, and may vote thereat to authorize any such contract or transaction,
with like force and effect as if he were not such director of officer of such
other corporation or not so interested. Any director of the corporation may vote
upon any contract or other transaction between the Corporation and any
subsidiary of affiliated corporation without regard to the fact that he is also
a director of such subsidiary or affiliated corporation.
Any contract, transaction or act of the Corporation or of the
directors, which shall be ratified by a majority of a quorum of the shareholders
of the Corporation at any annual meeting, or at any special meeting called for
such purpose, shall, insofar as permitted by law, be as valid and as binding as
though ratified by every shareholder of the Corporation; provided, however, that
any failure of the shareholders to approve or ratify any such contract,
transaction or act, when and if submitted, shall not be deemed in any way to
invalidate the same or deprive the Corporation, its directors, officers or
employees, of its or their rights to proceed with such contract, transaction or
act.
14. The Corporation shall have the power to enter into
agreement with its shareholders providing generally for restrictions on the
right of shareholders to sell or otherwise dispose of any of the stock of this
Corporation, and/or providing for obligations upon the Corporation and/or the
shareholders to purchase the stock of this Corporation under certain conditions,
all such agreements to contain such terms and conditions as may be agreed upon
by the Board of Directors of the Corporation and the other parties to said
agreements, provided that notice of any such agreement restricting a
shareholder's right to dispose of such stock is set forth upon each certificate
representing the shares of stock subject to such agreement.
15. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the Commonwealth of Pennsylvania may, on the application in
a summary way of this Corporation or of any creditor or shareholders thereof, or
on the application of any receiver or receivers appointed for this Corporation
or on the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation order a meeting of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the shareholders or class of
shareholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such
C-7
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the shareholders or class of shareholders, of this Corporation, as the case
may be, and also on this Corporation.
16. (a) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which such court shall deem proper.
(c) To the extent that a director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections (a) and
(b), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b)
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in
written opinion, or (3) by the shareholders.
(e) Expenses incurred by an officer or director in
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this section.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advance of expenses provided
by, or granted pursuant to, this Article shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any Bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holder such office.
(g) The Corporation shall have the power to purchase and
maintain insurance on behalf of any
C-8
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this section.
(h) The invalidity or unenforceability of any provision
hereof shall not in any way affect the remaining portions hereof, which shall
continue in full force and effect.
17. No director of the Corporation shall be personally liable
as such for monetary damages for any action taken, or any failure to take
action, unless the director has breached or failed to perform the duties of his
or her office under Sections 1711 through 1718 of the Pennsylvania Business
Corporation Law of 1988, or any successor provisions, and the breach or failure
to perform constitutes self-dealing, willful misconduct or recklessness. This
provision shall not apply to the responsibility or liability of a director
pursuant to any criminal statute or the liability of a director for payment of
taxes pursuant to local, state or federal law.
18. Subchapters E, G and H of Chapter 25 of the Pennsylvania
Business Corporation Law or any corresponding provision of succeeding law, shall
not be applicable to this Corporation.
19. Shareholders of the Corporation shall not have the right to
cumulate their votes for the election of the directors of the Corporation.
C-9
Please mark your vote as indicated in this example [X]
1. ELECTION OF CLASS III DIRECTORS: M. Michael Arjmand, Frank R. Orloski, Sr.,
Daniel D. Sahakian.
FOR ALL NOMINEES WITHHOLD AUTHORITY
LISTED ABOVE TO VOTE FOR (INSTRUCTION: To withhold authority to vote for any nominee,
(Except as marked to ALL NOMINEES write that nominee's name on the line below.)
the contrary) LISTED ABOVE
[_] [_] ------------------------------------------------------------
2. PROPOSAL TO AMEND THE 1996 EQUITY COMPENSATION PLAN to increase the number
of shares of common stock which may be issued under the 1996 Plan to
1,750,000 shares.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION to increase the
number of authorized shares of common stock to 16 million shares.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION to authorize
100,000 shares of preferred stock.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION to permit
stockholder action only by vote at a duly convened meeting of stockholders.
FOR AGAINST ABSTAIN
[_] [_] [_]
6. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS to
(A) permit removal of directors only for cause and (B) require the vote of
the holders of at least 80% of the outstanding shares of the Company's
voting stock to amend the foregoing clause (A).
FOR AGAINST ABSTAIN
[_] [_] [_]
7. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION to permit
vacancies on the board of directors to be filled only by action of the board
of directors.
FOR AGAINST ABSTAIN
[_] [_] [_]
8. PROPOSAL FOR THE REDOMESTICATION OF THE COMPANY from a Delaware corporation
to a Pennsylvania corporation.
FOR AGAINST ABSTAIN
[_] [_] [_]
9. SUBJECT TO APPROVAL OF PROPOSAL 8, PROPOSAL TO AMEND THE COMPANY'S ARTICLES
OF INCORPORATION to increase the number of shares of common stock that the
Company is authorized to issue to 20,000,000 shares.
FOR AGAINST ABSTAIN
[_] [_] [_]
10. SUBJECT TO APPROVAL OF PROPOSAL 8, PROPOSAL TO AMEND THE COMPANY'S ARTICLES
OF INCORPORATION to authorize the issuance of or to increase the number of
shares of preferred stock that the Company is authorized to issue to
1,000,000 shares.
FOR AGAINST ABSTAIN
[_] [_] [_]
11. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP as the Company's
independent auditors for the fiscal year ending September 30, 2002.
FOR AGAINST ABSTAIN
[_] [_] [_]
Date:_______________________,2002
_________________________________
_________________________________
Signature(s)
Important: Please sign your name or
names exactly as printed on this proxy.
When signing as attorney, executor,
administrator, trustee or guardian,
give title as such.
[LOGO OF Uni-Mart]
ADMISSION TICKET
2002 ANNUAL MEETING OF STOCKHOLDERS
Thursday, Febuary 28, 2002
10:00 AM
Comfort Suites
132 Village Drive, State Colllege, PA 16801
This ticket, or other evidence of stock ownership,
must be presented to enter the meeting.
Admits Stockholder(s) or their duly appointed Proxy(ies)
UNI-MARTS, INC.
PROXY
This Proxy is solicited on behalf of the Board of Directors for the Annual
Meeting of Stockholders on February 28, 2002 and any adjournment thereof.
This proxy when properly executed will be voted as specified on the reverse
side hereof. If no specific direction is given, it will be voted "FOR" (1) the
election of all nominees for directors; (2) the amendment of the Company's 1996
Equity Compensation Plan to increase the number of shares of common stock that
may be issued thereunder to 1,750,000 shares; (3) the amendment of the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock to 16 million shares; (4) the amendment of the Company's
Certificate of Incorporation to authorize 100,000 shares of preferred stock; (5)
the amendment of the Company's Certificate of Incorporation to permit
stockholder action only by vote at a duly convened meeting of stockholders; (6)
the amendment of the Company's Certificate of Incorporation and By-laws to (A)
permit removal of directors only for cause and (B) require the vote of the
holders of at least 80% of the outstanding shares of the Company's voting stock
to amend the foregoing clause (A); (7) the amendment of the Company's
Certificate of Incorporation to permit vacancies on the board of directors to be
filled by action of the board of directors; (8) the redomestication of the
Company from a Delaware corporation to a Pennsylvania corporation; (9) subject
to approval of proposal 8, proposal to amend the Company's Articles of
Incorporation to increase the number of shares of common stock that the Company
is authorized to issue to 20,000,000 shares; (10) subject to approval of
proposal 8, proposal to amend the Company's Articles of Incorporation to
authorize the issuance of or to increase the number of shares of preferred stock
that the Company is authorized to issue to 1,000,000 shares; and (11) the
ratification of the appointment of the independent auditors.
The undersigned, revoking any contrary proxy previously given, appoints
Henry D. Sahakian and N. Gregory Petrick, or any one or more of them acting in
the absence of others, Proxies, each with full power of substitution, to vote
all shares of Common Stock of the Company which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held on Thursday, February 28, 2002, at 10:00 AM, and any
adjournment thereof, as set forth on the reverse hereof. The undersigned
confers discretionary authority by this proxy as to matters which may properly
come before the meeting or any postponement or adjournment of the Annual Meeting
of Stockholders and which are not known to the Board of Directors of Uni-Marts,
Inc. a reasonable time before this solicitation of proxies.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
FOLD AND DETACH HERE