<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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
WEST COAST ENTERTAINMENT CORPORATION
ONE SUMMIT SQUARE, SUITE 200
ROUTE 413 & DOUBLE WOODS ROAD
LANGHORNE, PENNSYLVANIA 19047
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 1, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of West
Coast Entertainment Corporation (the "Company") will be held on Wednesday, July
1, 1998 at 11:00 a.m., local time, at the offices of Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109 (the "Meeting") 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 by the Board of Directors 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 and 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 and any adjournment thereof. A
list of persons entitled to vote at the Meeting will be available for
examination by any stockholder of the Company for any purpose germane to the
Meeting during normal business hours for ten days prior to the Meeting at the
offices of the Company, One Summit Square, Suite 200, Route 413 & Double Woods
Road, Langhorne, Pennsylvania 19047.
A copy of the Company's Annual Report to Stockholders for the year ended
January 31, 1998 accompanies this Notice of Meeting and the enclosed Proxy
Statement.
By Order of the Board of Directors,
M. TRENT STANDLEY
Secretary
June 1, 1998
Langhorne, Pennsylvania
WHETHER OR NOT YOU PLAN 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
FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 1, 1998
PROXY STATEMENT
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 1998 Annual Meeting of Stockholders to be held on
Wednesday, July 1, 1998, at 11:00 a.m., local time, at Hale and Dorr LLP, 60
State Street, Boston, Massachusetts 02109, and at any adjournment thereof (the
"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 a
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Meeting. Attendance at the Meeting will not itself
be deemed to revoke a proxy unless the stockholder affirmatively revokes the
proxy.
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 Meeting,
there were outstanding and entitled to vote an aggregate of 13,933,662 shares of
Common Stock of the Company, $.01 par value per share ("Common Stock"),
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 Meeting shall constitute a quorum for
the transaction of business at the 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 Meeting.
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 the holders of a majority of the shares of Common Stock
present and voting on the matter is required for the ratification of the
selection by the Board of Directors 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 matters, and also
will not be counted as shares voting on such matters. Accordingly, abstentions
and "broker non-votes" will have no effect on the election of directors or the
ratification of the selection by the Board of Directors of independent auditors.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of February 28, 1998 by (i) each person who is known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each current director of the Company, (iii) the Chief Executive
Officer and the other executive officers listed in the Summary Compensation
Table on page 5 and (iv) all current directors and executive officers as a
group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
NAME AND ADDRESS OF -------------------
BENEFICIAL OWNER NUMBER PERCENT
------------------- --------- -------
<S> <C> <C>
5% STOCKHOLDERS:
Ralph W. Standley III(2)(3)(4)......................... 1,345,765 9.7%
Ralph W. Standley III Irrevocable Trust(2)(4).......... 342,819 2.5
T. Kyle Standley(2)(4)(5).............................. 1,431,388 10.3
Marsh & McLennan Companies, Inc.(6).................... 985,900 7.1
OTHER EXECUTIVE OFFICERS:
Richard G. Kelly(2).................................... -- --
Jerry L. Misterman(2).................................. -- --
Donald Weiss(2)........................................ 33,737 *
OTHER DIRECTORS:
M. Trent Standley(2)(4)(5)............................. 683,369 4.9
C. Stewart Forbes(7)................................... 3,000 *
c/o Colliers International
84 State Street, 5th Floor
Boston, MA 02109
Wesley F. Hoag(8)...................................... 2,000 *
c/o R. Meeder & Associates
6000 Memorial Drive
Columbus, OH 43215
All directors and executive officers as a group
(8 persons)(9)...................................... 3,842,078 27.6
</TABLE>
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* 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
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) The business address of each of these persons is c/o West Coast
Entertainment Corporation, One Summit Square, Suite 200, Route 413 and
Double Woods Road, Langhorne, Pennsylvania 19047.
(3) 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.
(4) 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 number of shares in the column
next to the names of each of Ralph W. Standley III, T. Kyle Standley and M.
Trent Standley excludes these shares.
(5) All shares owned by this individual are pledged to a bank as loan
collateral.
2
<PAGE> 5
(6) 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.
(7) Includes 1,000 shares of Common Stock issuable to Mr. Forbes within 60 days
of February 28, 1998 upon exercise of stock options.
(8) Includes 1,000 shares of Common Stock issuable to Mr. Hoag within 60 days of
February 28, 1998 upon exercise of stock options.
(9) Includes 1,626,280 shares of Common Stock held by entities affiliated with
certain directors and executive officers as described in notes 3 and 4 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.
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 1998 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
3
<PAGE> 6
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.
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) 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 meetings of the
Board of Directors and the 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
(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.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation of the Company's Chief Executive Officer and its
four other most highly compensated executive officers whose salaries and bonuses
exceeded $100,000 for services rendered during the fiscal years ended January
31, 1996, 1997 and 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(2)
ANNUAL COMPENSATION -----------------
------------------------------------ NUMBER OF SHARES
NAME AND FISCAL OTHER ANNUAL UNDERLYING STOCK
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS
------------------ ------ -------- ------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
T. Kyle Standley......................... 1998 $230,000 -- $ 26,952(3) --
President and Chief 1997 $126,507 -- -- --
Executive Officer 1996 $ 43,795 $30,000 -- --
Richard G. Kelly(4)...................... 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) Constitutes lease payments and insurance payments on two motor vehicles
totalling $26,952.
(4) This executive officer joined the Company in July 1996.
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.
OPTION EXERCISES AND HOLDINGS
None of the Named Executive Officers held any options to purchase Common
Stock of the Company as of January 31, 1998.
CERTAIN TRANSACTIONS
The Company has granted certain stock options to Messrs. Forbes and Hoag
under the Director Option Plan. See "Management -- Director Compensation."
5
<PAGE> 8
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 director or 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 any other entity, any of whose executive officers serves as a director of the
Company or as a member of its 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 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 such executive officers' significant
stock holdings in the Company. The Company did not pay any bonuses relating to
the fiscal year ended January 31, 1998.
6
<PAGE> 9
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.
7
<PAGE> 10
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 (US) 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 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 reinvested.
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
West Coast Video
Measurement Period Entertainment Nasdaq Stock Retailers
(Fiscal Year Covered) Corporation Market (US) Group
<S> <C> <C> <C>
5/14/96 $100 $100 $100
1/31/97 64 112 87
1/31/98 14 132 40
</TABLE>
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, 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 (the "Effective Date"). If for any reason the Board of
Directors deems it advisable, the Proposed Amendment may
8
<PAGE> 11
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.
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 28, 1998
was $1.625 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
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<PAGE> 12
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 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, not
including 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 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
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<PAGE> 13
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 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 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
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 Meeting. However, if any other matters are properly presented at the
Meeting, it is the intention of the persons
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<PAGE> 14
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 February 1, 1999 for inclusion in the proxy statement for that
meeting.
By Order of the Board of Directors,
M. TRENT STANDLEY, Secretary
June 1, 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.
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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<PAGE> 15
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")."
<PAGE> 16
APPENDIX 1
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
WEST COAST ENTERTAINMENT CORPORATION
1998 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 1998 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 and 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.
(Continued, and to be marked, dated and signed, on the other side)
FOLD AND DETACH HERE
<PAGE> 17
Please
mark your
votes as
indicated
in this
example
[X]
Item 1 - Election of Directors
Nominees: C. Stewart Forbes, Wesley F. Hoag, Ralph W. Standley III, T. Kyle
Standley, M. Trent Standley
<TABLE>
<S> <C> <C>
FOR all nominees WITHHOLD AUTHORITY WITHHELD FOR (Write that nominee's name
listed to the right to vote for all nominees in the space provided below)
(except as marked listed to the right _______________________________________
to the contrary) _______________________________________
[ ] [ ]
</TABLE>
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 [ ]
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 it appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, please
give full title as such.
