<PAGE> 1
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE
REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
WEST COAST ENTERTAINMENT CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1. Amount previously paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
WEST COAST ENTERTAINMENT CORPORATION
One Summit Square, Suite 200
Route 413 & Double Woods Road
Langhorne, Pennsylvania 19047
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON WEDNESDAY, JULY 1, 1998
The Annual Meeting of Stockholders of West Coast Entertainment
Corporation (the "Company") will be held at the offices of Hale and Dorr LLP,
60 State Street, Boston, Massachusetts 02109, on Wednesday, July 1, 1998 at
11:00 a.m., local time, to consider and act upon the following matters:
1. To elect five directors to serve until the 1999 Annual
Meeting of Stockholders.
2. To approve an amendment to the Company's Certificate of
Incorporation to effect a reverse split of the Company's Common Stock, $.01 par
value per share (the "Common Stock"), pursuant to which each four shares of
Common Stock then outstanding will be converted into one share.
3. To ratify the selection of Price Waterhouse LLP as the
Company's independent auditors for the current fiscal year.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on May 11, 1998 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
M. Trent Standley, Secretary
Langhorne, Pennsylvania
May __, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS
MAILED IN THE UNITED STATES.
<PAGE> 3
WEST COAST ENTERTAINMENT CORPORATION
One Summit Square, Suite 200
Route 413 & Double Woods Road
Langhorne, Pennsylvania 19047
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 1, 1998
INTRODUCTION
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of West Coast Entertainment Corporation
(the "Company") for use at the Annual Meeting of Stockholders to be held on
Wednesday, July 1, 1998, and at any adjournment of that meeting. All proxies
will be voted in accordance with the stockholders' instructions, and if no
choice is specified, the proxies will be voted in favor of the matters set forth
in the accompanying Notice of Meeting. Any proxy may be revoked by a stockholder
at any time before its exercise by delivery of written revocation or a
subsequently dated proxy to the Secretary of the Company or by voting in person
at the Annual Meeting.
Portions of the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1998 were mailed to stockholders, along with these proxy
materials, on or about May __, 1998.
QUORUM REQUIREMENT
At the close of business on May 11, 1998, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of 13,933,662
shares of Common Stock of the Company, constituting all of the outstanding
voting stock of the Company. Holders of Common Stock are entitled to one vote
per share.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Annual Meeting shall constitute a quorum
for the transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or represented by proxy (including shares which abstain or
otherwise do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum is present at the Annual Meeting.
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<PAGE> 4
VOTES REQUIRED
The affirmative vote of the holders of a plurality of the shares of
Common Stock present and voting on the matter is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock issued and outstanding and entitled to vote is required for the
approval of the amendment to the Company's Certificate of Incorporation. The
affirmative vote of holders of a majority of the shares of Common Stock present
and voting on the matter is required for the ratification of the selection of
Price Waterhouse LLP as the Company's independent auditors for the fiscal year
ending January 31, 1999.
Shares which abstain from voting on the amendment to the Company's
Certificate of Incorporation, and shares held in "street name" by brokers or
nominees who indicate on their proxies that they do not have discretionary
authority to vote such shares as to such matter are nonetheless considered
outstanding shares and will have the same effect as a vote against the amendment
to the Company's Certificate of Incorporation. Shares which abstain from voting
as to all other matters, and shares held in "street name" by a broker or nominee
who indicates on a proxy that it does not have discretionary authority to vote
as to all other matters, will not be voted in favor of such matter, and also
will not be counted as shares voting on such matter. Accordingly, abstentions
and "broker non-votes" will have no effect on the election of directors or the
ratification of the selection of independent auditors.
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<PAGE> 5
BENEFICIAL OWNERSHIP OF VOTING STOCK
The following table sets forth the beneficial ownership of the
Company's Common Stock as of February 28, 1998 (i) by each person who is known
by the Company to beneficially own more than 5% of the outstanding shares of
Common Stock, (ii) by each director and nominee for election as a director,
(iii) by each of the executive officers, and (iv) by all directors and executive
officers as a group:
<TABLE>
<CAPTION>
Shares Beneficially
Owned(1)(2)
Name and Address of --------------------
Beneficial Owner Number Percent
- ---------------- --------- -------
<S> <C> <C>
5% STOCKHOLDERS:
Ralph W. Standley III(3)(4)(5) 1,345,765 9.7
Ralph W. Standley III Irrevocable Trust(3)(5) 342,819 2.5
T. Kyle Standley(3)(5)(6) 1,431,388 10.3
Marsh & McLennan Companies, Inc.(7) 985,900 7.1
OTHER EXECUTIVE OFFICERS:
Richard G. Kelly(3) __ __
Jerry L. Misterman(3) __ __
Donald Weiss(3) 33,737 *
OTHER DIRECTORS: __ __
M. Trent Standley(3)(5)(6) 683,369 4.9
C. Stewart Forbes(8) 3,000 *
c/o Colliers International
84 State Street, 5th Floor
Boston, MA 02109
Wesley F. Hoag(9) 2,000 *
c/o R. Meeder & Associates
6000 Memorial Drive
Columbus, OH 43215
All directors and executive officers as a group
(8 persons)(10).................................... 3,842,078 27.6
</TABLE>
- --------------
* Less than 1%.
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated. In accordance with the
rules of the Securities and Exchange Commission, each stockholder is deemed
to beneficially own any shares subject to stock options or warrants which
are currently exercisable or which become exercisable, or convertible
securities which are currently exercisable or which become exercisable,
within 60 days after February 28, 1998, and any reference in these
footnotes to shares subject to stock options held by the person or entity
in question refers to stock options which are currently exercisable or
which become
3
<PAGE> 6
exercisable within 60 days after February 28, 1998. The inclusion herein of
shares listed as beneficially owned does not constitute an admission of
beneficial ownership.
(2) Number of shares deemed outstanding includes shares outstanding as of
February 28, 1998, and any shares subject to stock options held by the
person or entity in question that are currently exercisable or exercisable
within 60 days following February 28, 1998.
(3) These persons have an address c/o the Company, One Summit Square, Suite
200, Route 413 and Double Woods Road, Langhorne, Pennsylvania 19047.
(4) Includes 1,281,461 shares held by a revocable trust over which this
stockholder has sole voting and dispositive power; also includes 64,304
shares owned by this stockholder's wife as to which this stockholder
disclaims beneficial ownership.
(5) Voting and dispositive power over 342,819 shares owned by this trust is
shared by T. Kyle Standley and John H. Chory, Esq., as co-trustees. The
beneficiaries of the trust are Ralph W. Standley III's children, who
include T. Kyle Standley and M. Trent Standley. The numbers of shares in
the column next to the names of Ralph W. Standley III, T. Kyle Standley and
M. Trent Standley exclude these shares.
(6) All shares owned by this individual are pledged to a bank as loan
collateral.
(7) Includes 985,900 shares beneficially owned by Putnam Investments, Inc.,
which is a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. The
shares beneficially held by Putnam Investments, Inc. include shares held by
two registered investment advisers which Putnam Investments, Inc. wholly
owns, Putnam Investment Management, Inc. and The Putnam Advisory Company,
Inc.
(8) Includes 1,000 shares of Common Stock issuable to Mr. Forbes within 60
days of February 28, 1998 upon exercise of stock options.
(9) Includes 1,000 shares of Common Stock issuable to Mr. Hoag within 60 days
of February 28, 1998 upon exercise of stock options.
(10) Includes 1,626,280 shares of Common Stock held by entities affiliated with
certain directors and executive officers as described in notes 4 and 5
above and 2,000 shares of Common Stock issuable to all directors and
executive officers as a group within 60 days of February 28, 1998 upon
exercise of stock options.
4
<PAGE> 7
PROPOSAL 1:
ELECTION OF DIRECTORS
There are currently five members of the Board of Directors of the
Company, each of whose terms expire at the Annual Meeting, subject to the
election and qualification of their successors or to their earlier death,
resignation or removal.
The persons named in the enclosed proxy will vote to elect Ralph W.
Standley III, T. Kyle Standley, M. Trent Standley, Wesley F. Hoag and C. Stewart
Forbes as directors to serve until the 1999 Annual Meeting of Stockholders,
unless authority to vote for the election of the nominee is withheld by marking
the proxy to that effect. Each of the nominees is currently serving as a
director of the Company. Each nominee has indicated his willingness to serve, if
elected, but if he should be unable or unwilling to stand for election, proxies
may be voted for a substitute nominee designated by the Board of Directors. THE
BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE IN FAVOR OF ALL NOMINEES FOR
ELECTION AS DIRECTORS OF THE COMPANY.
Set forth below are the names and certain information with respect to
each nominee for election as a director of the Company.
Ralph W. Standley III, age 59, has served as the Chairman of the Board
of Directors of the Company and its principal predecessors since 1992. He also
served as President of two such predecessors, Nostalgia Ventures, Inc. ("NVI")
and Videosmith (DE) Incorporated ("VDI"), and as Secretary of two other
predecessors, Giant Video Corporation ("GVC") and G.V. Management Corp.
("GVMC"), from the date of their inception or acquisition by the Company through
July 1995. Ralph W. Standley III is the father of T. Kyle Standley and M. Trent
Standley.
T. Kyle Standley, age 34, has served as the President and Chief
Executive Officer and a Director of the Company and its predecessors since its
inception in February 1995. Previously, he served as an executive officer of two
of the Company's predecessors, GVC and GVMC, commencing in 1991. Mr. Standley
was director of research at Colliers International Property Consultants from
1989 to 1991, and prior thereto was a financial analyst at Paine Webber
Incorporated.
M. Trent Standley, age 33, has served as a Vice President, Secretary
and a Director of the Company since May 1995. He also served as President of one
of the Company's predecessors, GVI, from 1989 to 1995, as Vice President of two
other predecessors, VDI, from 1994 to 1995, and GVMC, from 1992 to 1995, and as
Secretary of a fourth predecessor, NVI, from 1993 to 1995.
C. Stewart Forbes, age 57, a Director of the Company since May 1996,
has served as President of Colliers International Property Consultants since
1979.
Wesley F. Hoag, age 41, a Director of the Company since May 1996, has
served as General Counsel and Chief Operating Officer of R. Meeder &
Associates, Inc., a registered investment adviser ("Meeder"), since July 1993,
and since April 1994 has served as Vice President of The Flex-funds and The
Flex-Partners, investment companies managed and sponsored by Meeder. From 1984
to 1993, Mr. Hoag was an attorney at the law firm of Porter, Wright, Morris &
Arthur.
5
<PAGE> 8
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors,
which is responsible for reviewing the Company's financial statements,
accounting procedures and the scope and results of the annual audit of the
Company's financial statements. The Audit Committee met once and held several
teleconference discussions during 1997. The current members of the Audit
Committee are Messrs. Forbes, Hoag, and Ralph Standley.
The Company has a standing Compensation Committee of the Board of
Directors, which is responsible for reviewing compensation issues and making
decisions concerning the compensation (including stock option grants) of the
Company's executive officers. The Compensation Committee met two times and held
several teleconference discussions during 1997. The current members of the
Compensation Committee are Messrs. Forbes and Hoag.
The Company has a standing Acquisitions Committee of the Board of
Directors, which is responsible for reviewing potential acquisition targets and
authorizing the execution and performance by the Company of acquisition
agreements that (i) are consistent with the Company's current financing
arrangements, (ii) do not exceed an aggregate purchase price of $20 million and
(iii) that relate to target companies located in the United States and engaged
in the retail video or electronic game business. The Acquisitions Committee met
once during 1997. The current members of the Acquisitions Committee are Messrs.
Hoag, Ralph Standley and Kyle Standley.
The Board of Directors met four times during 1997 and took several
actions by written consent. Each director attended at least 75% of the aggregate
of the number of Board meetings and the number of meetings held by all
committees on which he then served.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual stipend of $10,000 and all
directors are reimbursed for expenses incurred in connection with attendance at
Board of Directors and committee meetings.
Under the Company's 1995 Director Stock Option Plan, as amended to date
(as amended, the "Director Option Plan"), each non-employee director is eligible
to receive options for such number of shares of Common Stock and at such times
as the Board of Directors may determine, which options have an exercise price
equal to the fair market value of the Common Stock on the date of grant. All
options granted under the Director Option Plan vest over a three-year period,
provided the optionholder continues to serve as a director of the Company, and
expire ten years from the date of grant. The Director Option Plan was adopted by
the Board of Directors and approved by the stockholders of the Company in July
1995, and was amended by the Board of Directors in October 1996. The total
number of shares of Common Stock that may be issued under the Director Option
Plan is 50,000. Messrs. Forbes and Hoag have each been granted an option under
the Director Option Plan to purchase 3,000 shares of Common Stock at an exercise
price of $13.00 per share.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION. The following Summary Compensation Table sets forth
certain information concerning the compensation of the Company's Chief Executive
Officer and each of the other four most highly compensated executive officers
whose salaries and bonuses exceeded $100,000 for services rendered during the
fiscal year ended January 31, 1998 (the "Named Executive Officers"), together
with similar information with respect to the Named Executive Officers for each
of the fiscal years ended January 31, 1996 and 1997.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards(2)
------------------------------------- ----------------
Number of shares All
Name and Fiscal Other Annual Underlying Stock Other
Principal Position Year Salary Bonus Compensation(1) Options Compensation
------------------ ------ -------- ------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
T. Kyle Standley 1998 $230,000 __ $26,952(4) __ __
President and Chief 1997 $126,507 __ __ __ __
Executive Officer 1996 $43,795 $30,000 __ __ __
Richard G. Kelly(3) 1998 $200,000 __ __ __ __
Chief Financial 1997 $126,923 __ __ __ __
Officer 1996 __
Ralph W. Standley III 1998 $150,000 __ __ __ __
Chairman of the 1997 $107,308 __ __ __ __
Board of Directors 1996 $117,923 $34,000 __ __ __
Jerry L. Misterman 1998 $150,000 __ __ __ __
Chief Accounting 1997 $151,154 __ __ __ __
Officer 1996 $118,750 __ __ __ __
Donald Weiss 1998 $150,000 __ __ __ __
Executive Vice 1997 $129,944 __ __ __ __
President 1996 $120,000 __ __ __ __
</TABLE>
- ------------------
(1) Other compensation in the form of perquisites and other personal benefits
has been omitted for certain of the Named Executive Officers, in accordance
with the rules of the Securities and Exchange Commission, as the aggregate
amount of such perquisites and other personal benefits for such officers
constituted less than the lesser of $50,000 or 10% of the total annual
salary and bonus for each executive officer in each fiscal year covered.
(2) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive plan payouts to these
individuals during any fiscal year covered.
(3) This executive officer joined the Company in July 1997.
(4) Constitutes lease payments and insurance payments on two motor vehicles
totalling $26,952.
OPTION GRANTS. No options to purchase Common Stock of the Company were granted
to any of the Named Executive Officers during the fiscal year ended January 31,
1998.
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<PAGE> 10
OPTION EXERCISES AND HOLDINGS. None of the Executive Officers holds any options
to purchase Common Stock of the Company.
CERTAIN TRANSACTIONS
The Company has granted certain stock options to Messrs. Forbes and
Hoag under the Director Option Plan. See "Management--Director Compensation."
Ralph W. Standley III, the Chairman of the Board of Directors of the
Company, is indebted to the Company under a promissory note between the
Company and Mr. Standley, pursuant to which the Company loaned Mr. Standley
$126,103, at an interest rate of 10% per annum. The promissory note is payable
on demand. As of May 1, 1998, the aggregate amount (including interest) of the
loan outstanding was $139,997.
T. Kyle Standley, the President and Chief Executive Officer of the
Company, is indebted to the Company under a promissory note between the Company
and Mr. Standley, pursuant to which the Company loaned Mr. Standley $169,499,
at an interest rate of 10% per annum. The promissory note is payable on demand.
As of May 1, 1998, the aggregate amount (including interest) of the loan
outstanding was $185,243.
The Company has adopted a policy requiring all future transactions
between the Company and its officers, directors and affiliates to be on terms no
less favorable to the Company than could be obtained from unrelated third
parties and to be approved by a majority of the disinterested members of the
Company's Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during the fiscal year ended
January 31, 1998, were Wesley F. Hoag and C. Stewart Forbes.
None of the Company's executive officers serves as a member of the
compensation committee (or other board committee performing equivalent functions
or, in the absence of such a committee, the entire board of directors) of
another entity, one of whose executive officers serves on the Compensation
Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews the compensation levels of the
Company's executive officers, makes recommendations to the Board of Directors
regarding compensation, and has authority to grant options under the Company's
1995 Equity Incentive Plan.
The Company's compensation program seeks to achieve the following
objectives:
- To attract and retain key executives who are important to the
long-term growth and success of the Company.
- To give appropriate incentives based on both individual
performance and the performance of the Company as a whole.
- To promote identity of interest between the Company's stockholders
and its senior management.
- To reward officers for their contributions to growing the number
of video stores (through acquisitions and new store construction)
and increasing the average annual revenue per store.
The Company's executive compensation program consists primarily of base
salaries, supplemented by equity incentives and bonuses under appropriate
circumstances. Base salaries are determined in a manner intended to be
comparable to the salaries that are paid to persons performing similar functions
for companies of comparable size in comparable
8
<PAGE> 11
industries, although a number of subjective factors also influence salary
decisions, including the Company's judgment with respect to a given individual's
particular skills, experience and knowledge of the Company's industry. In
addition, the compensation of executives who joined the Company upon the
Company's acquisition of their former employers reflects the level at which they
were compensated by such former employers. The Company typically reviews
executive base salaries on an annual basis. Equity incentives represent the
principal performance-based component of the Company's compensation program. The
Company granted no options to executive officers in the fiscal year ended
January 31, 1998; options grants were not believed to be necessary or
appropriate in part due to their already significant stock holdings in the
Company. The Company did not pay any bonuses relating to the fiscal year ended
January 31, 1998.
Compensation of the Chief Executive Officer. T. Kyle Standley's annual
base salary remained unchanged at $230,000 during the fiscal year ended January
31, 1998. In March 1998, the Compensation Committee voted to increase Mr.
Standley's annual base salary to $330,000. The Compensation Committee believed
that this level of compensation is appropriate given the rapid growth of the
Company and Mr. Standley's contributions to that growth, as well as the current
size of the Company. The Compensation Committee believes that Mr. Standley's
level of compensation is near the middle of the range of compensation to chief
executives for companies of similar size within the industry.
Compensation Committee
Wesley F. Hoag
C. Stewart Forbes
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and regulations of the Securities and Exchange Commission
("SEC") thereunder require the Company's executive officers and directors, and
persons who own more than ten percent of the Company's outstanding Common Stock,
to file reports of initial ownership and changes in ownership with the SEC and
the National Association of Securities Dealers, Inc. Such officers, directors
and ten-percent stockholders are also required by SEC rules to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons that no other reports were required for such
persons, the Company believes that, during or with respect to the fiscal year
ended January 31, 1998, all of its executive officers, directors and ten-percent
stockholders complied with their Section 16(a) filing obligations.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Common Stock of the Company between May 14, 1996 (the date the Company's
Common Stock commenced public trading) and January 31, 1998 with the cumulative
total return of (i) the Nasdaq Stock Market (U.S.) and (ii) an index compiled
for the Company (the "Video Retailers Group") over the same period. The Video
Retailers Group is comprised of Hollywood Entertainment Corp., Movie Gallery
Inc., Moovies, Inc. and Video Update, Inc., other comparable publicly-traded
companies whose primary line of business is the retail rental and sale of
movies on videocassette. This graph assumes the investment of $100.00 on May
14, 1996 in the Company's Common Stock, the Nasdaq Stock Market and the Video
Retailers Group, and assumes that dividends, if any, are invested.
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<PAGE> 12
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
05/14/96 01/31/97 01/30/98
-------- -------- --------
<S> <C> <C> <C>
West Coast Entertainment Corporation $100 $ 64 $ 14
Nasdaq Stock Market (U.S.) $100 $112 $132
Video Retailers Group $100 $ 87 $ 40
</TABLE>
10
<PAGE> 13
PROPOSAL 2:
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO EFFECT
A ONE-FOR-FOUR REVERSE STOCK SPLIT
The Board of Directors has adopted a resolution declaring the
advisability of, and submitting to the stockholders for approval, a proposal to
amend the Company's Certificate of Incorporation (the "Proposed Amendment") to
effect a reverse split of the Company's Common Stock, pursuant to which each
four shares of Common Stock will be automatically converted into one share
without any action on the part of the stockholder (the "Reverse Split"). The
text of the Proposed Amendment is set forth in Exhibit A to this Proxy
Statement.
Consummation of the Reverse Split will not change the number of shares
of Common Stock authorized by the Company's Certificate of Incorporation, which
will remain at 25,000,000 shares. The Reverse Split will become effective as of
5:00 p.m., Boston time (the "Effective Date"), on the date that the Certificate
of Amendment to the Company's Certificate of Incorporation is filed with the
Secretary of State of the State of Delaware. If for any reason the Board of
Directors deems it advisable, the Proposed Amendment may be abandoned at any
time before the Effective Date, whether before or after the Meeting (even if
such proposal has been approved by the stockholders).
In lieu of issuing less than one whole share resulting from the Reverse
Split to holders of an odd number of shares, the Company will determine the fair
value of each outstanding share of Common Stock held on the Effective Date of
the Reverse Split (the "Fractional Share Purchase Price"). The Company currently
anticipates that the Fractional Share Purchase Price will be based on the
average daily closing bid price per share of the Common Stock as reported by the
primary trading market for the Company's Common Stock for the ten (10) trading
days immediately preceding the Effective Date. In the event the Company
determines that unusual trading activity would cause such amount to be an
inappropriate measure of the fair value of the Common Stock, the Company may
base the Fractional Share Purchase Price on the fair market value of the Common
Stock as reasonably determined in good faith by the Board of Directors of the
Company. Stockholders who hold an odd number of shares on the Effective Date
will be entitled to receive, in lieu of the less than one whole share arising as
a result of the Reverse Split, cash in the amount of the relevant portion of the
Fractional Share Purchase Price.
As soon as practical after the Effective Date, the Company will mail a
letter of transmittal to each holder of record of a stock certificate or
certificates which represent issued Common Stock outstanding on the Effective
Date. The letter of transmittal will contain instructions for the surrender of
such certificate or certificates to the Company's designated exchange agent in
exchange for certificates representing the number of whole shares of Common
Stock (plus the relevant portion of the Fractional Share Purchase Price, if any)
into which the shares of Common Stock have been converted as a result of the
Reverse Split. No cash payment will be made or new certificate issued to a
stockholder until he has surrendered his outstanding certificates together with
the letter of transmittal to the Company's exchange agent. See "--Exchange of
Stock Certificates."
THE BOARD OF DIRECTORS BELIEVES THE ADOPTION OF THE PROPOSED AMENDMENT
IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT.
11
<PAGE> 14
PURPOSE OF THE REVERSE SPLIT
The Company's shares of Common Stock have been listed, and have traded,
on the Nasdaq National Market ("Nasdaq NM") since May 14, 1996 when the Company
completed its initial public offering. The rules of the Nasdaq NM require that
as a condition of the continued listing of a company's securities on the Nasdaq
NM, a company must satisfy one of two alternative maintenance standards, which
generally require that a company meet certain minimum requirements relating to
its financial condition, results of operations and trading market for its listed
securities. The Company no longer meets one of the requirements for continued
listing on the Nasdaq NM under Maintenance Standard 1 because its net tangible
assets are less than $4,000,000. The Company also no longer meets one of the
requirements for continued listing under Maintenance Standard 2 because the
minimum bid price of the Company's shares of Common Stock does not equal or
exceed $5.00. The closing price of the Company's Common Stock on May __, 1998
was __________ per share.
The Company believes that if the Reverse Split is approved by the
stockholders at the Meeting, and the Reverse Split is effectuated, the Company's
shares of Common Stock will have a minimum bid price in excess of $5.00 per
share, and therefore will satisfy Maintenance Standard 2. The Company believes
that it satisfies all other requirements under Maintenance Standard 2. These
other requirements consist of maintaining (i) a market capitalization of at
least $50 million (or total assets and total revenue of at least $50 million),
(ii) a public float of at least 1.1 million shares, (iii) a market value of the
public float of at least $15 million, (iv) at least 400 shareholders (round lot
holders), (v) at least four market makers and (vi) compliance with certain
corporate governance requirements.
If the Reverse Split is not approved by the stockholders at the
Meeting, then it is likely the Company will not meet Nasdaq NM continued listing
criteria. In such event, the Company intends to make application for listing on
the Nasdaq Smallcap Market. If not approved for listing on the Nasdaq Smallcap
Market, quotes for the shares of Common Stock will likely be maintained by the
National Quotation Bureau, Inc. or the NASD Electronic Bulletin Board. The
delisting of the Company's Common Stock from the Nasdaq NM could adversely
affect the liquidity of the Company's Common Stock and the ability of the
Company to raise capital. In addition, the Board of Directors further believes
that low trading prices of the Company's Common Stock may have an adverse impact
upon the efficient operation of the trading market in the securities.
Stockholders should note that the effect of the Reverse Split upon the
market price for the Company's Common Stock cannot be accurately predicted. In
particular, there is no assurance that the price for shares of the Common Stock
after the Reverse Split will be four
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times the price for shares of the Common Stock immediately prior to the Reverse
Split. Furthermore, there can be no assurance that the proposed Reverse Split
will achieve the desired results which have been outlined above, nor can there
be any assurance that the Reverse Split will not adversely impact the market
price of the Common Stock, or, alternatively, that any increased price per share
of the Common Stock immediately after the proposed Reverse Split will be
sustained for any prolonged period of time. In addition, the Reverse Split may
have the effect of creating odd lots of stock for some stockholders and such odd
lots may be more difficult to sell or have higher brokerage commissions
associated with the sale of such odd lots.
EFFECT OF THE REVERSE SPLIT
As a result of the Reverse Split, the number of whole shares of Common
Stock held by stockholders of record as of the close of business on the
Effective Date will automatically, without any action required by the
stockholders, be equal to the number of shares of Common Stock held immediately
prior to the close of business on the Effective Date divided by four, plus cash
in lieu of any fractional shares. The Reverse Split will not affect a
stockholder's percentage ownership interest in the Company or proportional
voting power, except for minor differences resulting from the payment of cash in
lieu of fractional shares. The rights and privileges of the holders of shares of
Common Stock will be unaffected by the Reverse Split. The par value of the
Common Stock will remain at $.01 per share following the Effective Date of the
Reverse Split, and the number of shares of Common Stock will be reduced.
Consequently, the aggregate par value of the issued Common Stock also will be
reduced. In addition, the number of authorized but unissued shares of Common
Stock will be increased by the Reverse Split, the issuance of which may have the
effect of diluting the earnings per share and book value per share, as well as
the stock ownership and voting rights, of outstanding Common Stock. As the
Reverse Split will increase the number of authorized but unissued shares of
Common Stock, it may be construed as having an anti-takeover effect by
permitting the issuance of shares to purchasers who might oppose a hostile
takeover bid or oppose any efforts to amend or repeal certain provisions of the
Company's Certificate of Incorporation or By-laws.
Stockholders have no right under Delaware law or under the Company's
Certificate of Incorporation or By-laws to dissent from the Reverse Split.
The Common Stock is currently registered under Section 12(g) of the
Exchange Act and as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The Reverse Split will not affect
the registration of the Common Stock under the Exchange Act, and the Company has
no current intention of terminating its registration under the Exchange Act.
Upon consummation of the Reverse Split, the total number of shares
currently reserved for grants of stock options and all stock options previously
granted would be decreased proportionally. The cash consideration payable per
share upon exercise of the stock options would be increased proportionally.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, the Company intends to
require stockholders to exchange their stock certificates ("Old Certificates")
for new certificates ("New Certificates") representing the number of whole
shares of Common Stock into which their shares of Common Stock have been
converted as a result of the Reverse Split (as well as cash
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in lieu of fractional shares resulting from the reverse split). Stockholders
will be furnished with the necessary materials and instructions for the
surrender and exchange of stock certificates at the appropriate time by the
Company's transfer agent. Stockholders will not be required to pay a transfer or
other fee in connection with the exchange of certificates. STOCKHOLDERS SHOULD
NOT SUBMIT ANY CERTIFICATES TO THE TRANSFER AGENT UNTIL REQUESTED TO DO SO.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The following description of the material federal income tax
consequences of the Reverse Split is based upon the Internal Revenue Code of
1986, as amended, the applicable Treasury Regulations promulgated thereunder,
judicial authority and current administrative rulings and practices all as in
effect on the date of this Proxy Statement. The Company has not sought and will
not seek an opinion of counsel or a ruling from the Internal Revenue Service
regarding the federal income tax consequences of the Reverse Split. This
discussion is for general information only and does not discuss consequences
which may apply to special classes of taxpayers (e.g., non-resident aliens,
broker-dealers or insurance companies) and does not discuss the tax consequences
under the laws of any foreign, state or local jurisdictions. Stockholders are
urged to consult their own tax advisors to determine the particular consequences
to them.
In general, the federal income tax consequences of the proposed Reverse
Split will vary among stockholders depending upon whether they receive the
Fractional Share Purchase Price or solely New Certificates in exchange for Old
Certificates. The Company believes that because the Reverse Split is not part of
a plan to increase periodically a stockholder's proportionate interest in the
Company's assets or earnings and profits, the Reverse Split probably will have
the following federal income tax effects:
1. A stockholder who receives solely New Certificates will not
recognize gain or loss on the exchange. In the aggregate, the stockholder's
basis in the Common Stock represented by New Certificates will equal the
holder's basis in the Common Stock represented by Old Certificates.
2. A stockholder who receives a portion of the Fractional Share
Purchase Price as a result of the Reverse Split will generally be treated as
having received the payment as a distribution in redemption of the Fractional
Share, as provided in Section 302(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). Each affected stockholder will be required to consult such
stockholder's own tax advisor for the tax effect of such redemption (i.e.,
exchange or dividend treatment) in light of such stockholder's particular facts
and circumstances.
3. The Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Code, and the Company will not recognize
any gain or loss as a result of the Reverse Split.
PROPOSAL 3:
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Price Waterhouse LLP as
the Company's independent auditors for the fiscal year ending January 31, 1999.
Although
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stockholder approval of the Board of Directors' selection of Price Waterhouse
LLP is not required by law, the Board of Directors believes that it is advisable
to give stockholders an opportunity to ratify this selection. If this proposal
is not approved at the Annual Meeting, the Board of Directors may reconsider its
selection. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION
OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
OTHER MATTERS
MATTERS TO BE CONSIDERED AT THE MEETING
The Board of Directors does not know of any other matters which may
come before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional remuneration, may solicit proxies by telephone,
facsimile and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and, as required by law, the Company will
reimburse them for their out-of-pocket expenses in this regard.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal office
no later than January __, 1999 for inclusion in the proxy statement for that
meeting.
By Order of the Board of Directors,
M. Trent Standley, Secretary
May __, 1998
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 1998 INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES THERETO (EXCEPT EXHIBITS) TO EACH OF THE
COMPANY'S STOCKHOLDERS UPON RECEIPT OF A WRITTEN REQUEST THEREFOR MAILED TO THE
COMPANY'S OFFICES, ATTENTION: INVESTOR RELATIONS. REQUESTS FROM BENEFICIAL
STOCKHOLDERS MUST SET FORTH A REPRESENTATION AS TO SUCH OWNERSHIP ON MAY 11,
1998.
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Exhibit A
RESOLVED: That the first paragraph of Article FOURTH of the Certificate of
Incorporation, as amended, be and hereby is deleted in its
entirety and the following paragraphs are inserted in lieu
thereof:
"FOURTH. That, upon the filing date of this Certificate of
Amendment of this Certificate of Incorporation (the "Effective
Date"), a one-for-four reverse stock split of the Corporation's
Common Stock shall become effective, pursuant to which each four
shares of Common Stock outstanding and held of record by each
stockholder of the Corporation (including treasury shares)
immediately prior to the Effective Date shall be reclassified and
combined into one share of Common Stock automatically and without
any action by the holder thereof upon the Effective Date and shall
represent one share of Common Stock from and after the Effective
Date. No fractional shares of Common Stock shall be issued as a
result of such reclassification and combination. In lieu of any
fractional shares to which the stockholder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction
multiplied by the then fair market value of the Common Stock as
determined by the Board of Directors of the Corporation.
The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 27,000,000
shares, consisting of 25,000,000 shares of Common Stock, $.01 par
value per share ("Common Stock"), and 2,000,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock")."
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APPENDIX 1
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
WEST COAST ENTERTAINMENT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS--JULY 1, 1998
The undersigned hereby appoint(s) Ralph W. Standley III, Richard G.
Kelly and John H. Chory as proxies to act without the other and with full power
of substitution, and hereby authorizes them to represent and vote, as designated
on the other side, all the shares of Common Stock of West Coast Entertainment
Corporation (the "Company") standing in the name of the undersigned with all
powers which the undersigned would possess if present at the Annual Meeting of
Stockholders of the Company to be held on July 1, 1998, or any adjournment
thereof.
Attendance of the undersigned at the meeting or at any adjourned
session thereof will not be deemed to revoke this Proxy unless the undersigned
shall affirmatively indicate thereat the intention of the undersigned to vote
said shares in person. If the undersigned hold(s) any of the shares of the
Company in a fiduciary, custodial or joint capacity or capacities, this Proxy is
signed by the undersigned in every such capacity as well as individually.
IN THEIR DISCRETION, THE NAMED PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING, OR ANY ADJOURNMENT THEREOF.
Item 1 - Election of Directors
Nominees: C. Stewart Forbes, Wesley F. Hoag, Ralph W. Standley III, T. Kyle
Standley, M. Trent Standley
FOR [ ] WITHHOLD AUTHORITY [ ]
to vote for all nominees
WITHHELD FOR (Write that nominee's name
in the space provided below)
_______________________________________
_______________________________________
Item 2 - Approval of an amendment to the Company's Certificate of Incorporation
to effect a four-into-one reverse split of the Company's Common Stock, $.01 par
value per share, as described in the accompanying Proxy Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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Item 3 - -Ratification of Price Waterhouse LLP as independent auditors for the
fiscal year ended January 31, 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
_____________________________________
Signature
_____________________________________
Signature
_____________________________________
Date:
NOTE: Please sign name as appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, please
give full title as such.
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