MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE
DAYTON, OHIO 45426
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF COMMON STOCK:
The Annual Meeting of Shareholders of Moto Photo, Inc. (the" Company")
will be held at the offices of the Company, 4444 Lake Center Drive,
Dayton, Ohio 45426, on Thursday, June 27, 1996 at 9:00 a.m., for the
following purposes:
1. To elect a Board of Directors for the ensuing year;
2. To transact such other business as may properly be brought before the
Annual Meeting or any adjournment of the Annual Meeting.
The accompanying Proxy Statement contains information regarding the items
of business to be considered at the Annual Meeting.
The holders of Common Stock of record at the close of business on April 29,
1996, are entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof. A list of such shareholders will be available at the
Annual Meeting and during the ten days before the Annual Meeting at the
offices of the Company, 4444 Lake Center Drive, Dayton, Ohio 45426.
Dayton, Ohio
May 3, 1996
Even if you plan to attend the meeting, please sign the enclosed form of
proxy and return it promptly in the envelope enclosed for that purpose. If
you have previously submitted a proxy card and are present at the Annual
Meeting, you will be able to revoke the proxy and vote your shares in
person
MOTO PHOTO, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TABLE OF CONTENTS
PAGE
NOTICE ..................................................... 1
TABLE OF CONTENTS........................................... 2
GENERAL..................................................... 3
Record Date and Outstanding Stock...................... 3
Quorum and Voting...................................... 3
Action To Be Taken Under the Proxy..................... 3
Votes Required......................................... 4
No Appraisal Rights.................................... 4
Solicitation of Proxies................................ 4
Revocation of Proxies.................................. 4
Annual Report.......................................... 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................................ 5
Potential Future Change in Control..................... 6
Compliance with Section 16(a) of the Securities Exchange
Act of 1934............................................ 7
ELECTION OF DIRECTORS....................................... 7
Information Concerning Nominees........................ 7
Meetings of Board of Directors and Committees.......... 8
Compensation of Outside Directors...................... 9
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION............... 9
Executive Officers..................................... 9
Executive Compensation................................. 10
Option Grants in 1995.................................. 11
Option Exercises and Year-End Option Values ........... 11
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements......................... 11
Compensation Committee Interlocks and Insider
Participation.......................................... 12
Report of the Compensation Committee and Mr. Adler..... 12
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS............ 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 15
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.................... 16
PROPOSALS OF SHAREHOLDERS................................... 16
OTHER MATTERS............................................... 16
MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE
DAYTON, OHIO 45426
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JUNE 27, 1996
The following information is furnished in connection with the Annual
Meeting of Shareholders of Moto Photo, Inc. (the "Company") to be held on
Thursday, June 27, 1996 at 9:00 a.m., at the offices of the Company, 4444
Lake Center Drive, Dayton, Ohio. This Proxy Statement will be mailed on or
about May 3, 1996, to holders of Voting Common Stock ("Common Stock") of
record as of the record date.
GENERAL
RECORD DATE AND OUTSTANDING VOTING STOCK
The record date ("Record Date") for determining shareholders entitled to
vote at the Annual Meeting has been fixed at the time of the closing of
business on April 29, 1996. On that date, the Company had 7,785,973 shares
of Common Stock outstanding and entitled to be voted.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at
the Annual Meeting. If a quorum is not present at the Annual Meeting, the
Annual Meeting may be adjourned to another place, date or time. At any
such reconvened meeting at which a quorum is present, any business may be
transacted which might have been transacted at the original meeting.
Cumulative voting is not permitted in the election of directors of the
Company. On all matters (including the election of directors) submitted to
a vote of the shareholders at the Annual Meeting or any adjournment of the
Annual Meeting, holders of Common Stock will be entitled to one vote for
each share of Common Stock owned of record by such shareholder on the
Record Date.
ACTION TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form which are properly executed and returned
will be voted in accordance with the instructions on the proxies. Any
proxy upon which no instructions have been indicated with respect to a
specified matter will be voted as follows:
(a) "FOR" the election to the Board of Directors of the seven persons
named in this Proxy Statement as the nominees of the Board of Directors;
and
(b) As to any other matters which may properly come before the
meeting in accordance with the recommendation of the Board of Directors.
The Board of Directors knows of no other matters to be presented for
consideration at the meeting.
VOTES REQUIRED
Directors will be elected by a plurality of the votes of the shares present
in person or represented by proxy at the Annual Meeting. Any other matters
properly brought before the Annual Meeting will be decided by a majority of
the votes cast on the matter, unless otherwise required by law.
Because directors are elected by a plurality rather than a majority of
the shares present in person or represented by proxy at the Annual
Meeting, proxies marked "withhold authority" with respect to any one or
more nominees will not affect the outcome of the nominee's election
unless the nominee receives no affirmative votes or unless other
candidates are nominated for election as directors.
NO APPRAISAL RIGHTS
There are no dissenters' appraisal rights under Delaware law with respect
to any actions proposed to be taken at the Annual Meeting.
SOLICITATION OF PROXIES
The enclosed proxy for the Annual Meeting is being solicited by the Board
of Directors of the Company. The cost of soliciting the proxies in the
enclosed form will be borne by the Company. In addition to the use of the
mails, proxies may be solicited by personal interview, telephone and
facsimile by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other
regular employees for such services. Copies of proxy solicitation
materials will be furnished to banks, brokerage houses fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may, upon
request, reimburse banks, brokerage houses and other institutions, nominees
and fiduciaries for their reasonable expenses in forwarding proxy materials
to beneficial owners.
REVOCATION OF PROXIES
Any shareholder returning the accompanying proxy may revoke such proxy at
any time prior to its exercise by (a) giving written notice to the Company
of such revocation, (b) voting in person at the Annual Meeting, or (c)
executing and delivering to the Company a later-dated proxy. Any such
written notice of revocation or later-dated proxy should be addressed to
Jacob A. Myers, Secretary, at the Company's offices.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1995, including audited financial statements, accompanies thiS
Proxy Statement. Neither the Report nor the financial statements are
deemed to be a part of the material for the solicitation of proxies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
At April 15, 1996, the Company had 7,785,973 shares of Common Stock
outstanding. The following table sets forth certain information regarding
the beneficial ownership of the Company's Common Stock as of April 15, 1996
by (i) each of the Company's directors or nominees for director, its chief
executive officer and its other executive officers whose total salary and
bonus for the year ended December 31, 1995 exceeded $100,000, (ii) all
directors, nominees and executive officers of the Company as a group, and
(iii) each person who is known by the Company to beneficially own more than
5% of the Company's Common Stock. Unless otherwise indicated, the Company
believes that the persons named in the table have sole voting and
investment power with respect to the shares indicated as beneficially owned
by them.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF SHARES OF CLASS
(1)
<S> <C> <C>
DIRECTORS AND CERTAIN
EXECUTIVE OFFICERS
Michael F. Adler (2) .... 1,482,776 18.5%
4444 Lake Center Drive
Dayton, OH 45426
Harry D. Loyle (3) ...... 503,375 6.5%
410 S. Main Plaza
Pleasantville, NJ 08232
David A. Mason (4) ...... 94,250 1.2%
Jacob A. Myers (5) ...... 41,500 *
Frank W. Benson (5) ..... 25,000 *
Dexter B. Dawes (5) ..... 21,000 *
Leslie Charm (5) ........ 15,000 *
Douglas M. Thomsen ...... 5,000 *
Frank M. Montano (6) .... 165,970 2.1%
ALL DIRECTORS, NOMINEES AND
EXECUTIVE
OFFICERS AS A GROUP (15
PERSONS) (7) ................. 2,435,672 29.0%
BENEFICIAL OWNERS OF MORE THAN
5% OF THE COMMON STOCK
Fuji Photo Film U.S.A.
Inc. (8) ................. 1,000,000 11.4%
555 Taxter Road
Elmsford, NY 10523
</TABLE>
* Less than 1%
(1)Percent of class is calculated without regard to shares of Common Stock
issuable upon exercise of outstanding warrants or stock options, except that
any shares a person is deemed to own by having the right to acquire upon
exercise of a warrant or option are considered to be outstanding solely for
purpose of calculating such person's percentage ownership.
(2)The shares of Common Stock indicated as beneficially owned by Mr. Adler: (i)
include 2,332 shares owned by Michael F. Adler as custodian for Elizabeth
Adler; (ii) include 6,000 shares owned by the Elizabeth Adler Trust for
which Mr. Adler is trustee; (iii) include 1,000 shares which he has the
right to acquire upon exercise of warrants owned by him; (iv) include
190,000 shares which he has the right to acquire by exercise of stock
options which are currently exercisable; (v) include 2,000 shares issuable
upon the exercise of warrants owned by the Robert Adler Trust for which Mr.
Adler is co-trustee and shares voting and investment power with Jacob A.
Myers, an officer and director of the Company; and (vi) exclude a total of
11,000 shares owned by Mr. Adler's spouse, as to which Mr. Adler disclaims
beneficial ownership. Such shares also include 1,204,080 shares of Common
Stock owned by Progressive Industries Corporation ("Progressive"), which is
98% owned by Mr. Adler and his family, which shares of Common Stock Mr.
Adler may be deemed to own due to his ownership of a controlling interest in
Progressive and his position as President of Progressive. The shares of
Common Stock owned by Progressive include 46,000 shares issuable upon
exercise of warrants owned by Progressive.
(3)Includes 3,000 shares which Mr. Loyle has the right to acquire upon exercise
of warrants owned by him and 321,375 shares held by Corral Photographic
Corp., a corporation 100% owned by Mr. Loyle.
(4)Includes 55,000 shares which Mr. Mason has the right to acquire upon
exercise of stock options which are currently exercisable and excludes 2,000
shares owned by Mr. Mason's wife, as to which Mr. Mason disclaims beneficial
ownership.
(5)Includes 15,000 shares which this individual has the right to acquire upon
exercise of a stock option which is currently exercisable.
(6)Includes 150,000 shares which Mr. Montano has the right to acquire upon
exercise of stock options which are currently exercisable.
(7)Includes 520,000 shares which such group has the right to acquire upon
exercise of stock options which are currently exercisable and 53,000 shares
which such group has the right to acquire upon exercise of warrants.
(8)Consists of 1,000,000 shares issuable upon exercise of warrants owned by
Fuji Photo Film U.S.A., Inc. ("Fuji").
POTENTIAL FUTURE CHANGE IN CONTROL
Fuji is the holder of 1,000,000 shares of Series G Non-Voting Cumulative
Preferred Stock (the "Fuji Preferred Stock") and warrants to purchase
1,000,000 shares of the Company's Common Stock for $2.375 per share which
expire in 2002.
The Fuji Preferred Stock is redeemable by the Company at any time in
aggregate amounts of at least $1 million. The shares are subject to
mandatory redemption on January 1, 1999 ("Mandatory Redemption Date"). Any
redemption of the Fuji Preferred Stock must be either in cash from the
proceeds of an equity offering or in Common Stock valued at 90% of the
market price at the time of redemption; provided, however, that Fuji may
refuse any proposed redemption by the Company in shares of Common Stock and
elect to continue to hold the Fuji Preferred Stock without impairment of
any right to require redemption at a later time. The redemption price for
the Fuji Preferred Stock is $10.00 per share, or an aggregate of $10
million. If the market price of the Company's Common Stock on the
Mandatory Redemption Date is less than $3.00 per share, the redemption of
the Fuji Preferred Stock will be extended until the earlier of (i) the
first date on which the market price of the Common Stock exceeds $3.00 per
share or (ii) the date one year following the initial Mandatory Redemption
Date. If the Fuji Preferred Stock is redeemed in shares of Common Stock,
depending upon the market price of the Common Stock and the number of
shares of Common Stock outstanding, such redemption could result in Fuji
acquiring control of the Company.
The Fuji Preferred Stock is also redeemable at Fuji's option under certain
other circumstances ("Redemption Event") which include, after appropriate
cure periods, the failure of the Company to meet certain requirements under
a supply agreement with Fuji, default by the Company under certain other
agreements between the Company and Fuji, the termination of involvement in
the day-to-day management of the Company of either of Michael F. Adler or
David A. Mason, a change in control of the Company, the Company's
bankruptcy or insolvency, or failure by the Company to meet its obligations
under other indebtedness in excess of $100,000. If the Company fails to
redeem all of the Fuji Preferred Stock upon the occurrence of a Redemption
Event, Fuji has the right, until all of the shares of Fuji Preferred Stock
are redeemed or the Redemption Event is cured, to elect the majority of the
Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
After he left the Company's employ, Frans VanOudenallen, formerly Vice
President of Marketing for the Company, failed to report the expiration of
options granted to him while he was in the Company's employment. Based
solely on a review of filed reports or other information provided to the
Company, no other person who at any time during 1995 was director,
executive officer, or beneficial owner of more than ten percent of any
class of the equity securities of the Company failed to file reports as
required by Section 16(a) of the Securities Exchange Act of 1934.
Through inadvertence, certain individuals filed late reports; in each case,
the report was filed as soon as the failure to file was discovered. Alfred
Lefeld, Paul Pieschel, and Kathryn Drury each filed one late report with
respect to one transaction each; Robert Galastro filed one late report with
respect to two transactions.
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The Board of Directors has established the size of the Board as seven
members and has nominated seven of the current members of the Board for re-
election. For personal reasons, Jacob A. Myers has declined to stand for
re-election. Each director to be elected will hold office until the next
annual meeting of shareholders and until his successor is duly elected and
qualified, or until such directors earlier death, resignation or removal.
The affirmative vote of a plurality of the votes cast in person or by proxy
at the meeting is required to elect the nominees listed. If any nominee
becomes unavailable for any reason, or if a vacancy shall occur before the
election (which events are not anticipated), the shares of Common Stock
represented by the enclosed proxy will be voted for such other person as
may be recommended by the Board of Directors of the Company.
There is no formal arrangement among the directors or shareholders to
nominate any person for election to the Board of Directors. No family
relationships exist between or among directors or officers of the Company.
INFORMATION CONCERNING NOMINEES
Michael F. Adler. Age 59. Mr. Adler was elected President of the Company
in February, 1984, its Chief Executive Officer in June, 1985, and its
Chairman in October 1990. He was elected a director of the Company on June
29, 1983. Mr. Adler has also been President, Chief Executive Officer and a
director of Progressive Industries Corporation ("Progressive") since 1968,
positions he still holds. He is a member of the Board of Directors and
Chairman of the Venture Capital Committee of the City-Wide Development
Corporation, Dayton, Ohio, and a member of the Board of Directors of The
2003 Committee in Dayton, Ohio. Mr. Adler has previously been a member of
the Board of Trustees of the Photo Marketing Association, the Ohio Building
Authority, and the State Governance Board-Jobs for Ohio Graduates, a member
of the executive committee and past Chairman of the Board of Trustees-Jobs
for Dayton Graduates, as well as chairman of the nominating council of the
Public Utilities Commission of Ohio and of the City-Wide Development
Corporation, Dayton, Ohio.
Frank W. Benson. Age 68. Mr. Benson became a director of the Company in
February, 1989. Since June, 1988, Mr. Benson has been Director of Finance
and Administration, and, since October, 1989, Treasurer of the Center for
Policy Negotiation, Inc. in Boston, Massachusetts. He served as an
independent consultant to small businesses from May, 1987 through May,
1988. From February, 1983 through April, 1987, Mr. Benson was President,
Treasurer, and a director (through January, 1987) of Bailey's of Boston,
Inc., a manufacturer and retailer of ice cream and candies in
Massachusetts.
Leslie Charm. Age 52. Mr. Charm was elected a director in October, 1990.
Mr. Charm's principal occupation since August, 1990 has been as partner of
three management consulting firms in Massachusetts: Restoration
Associates, Youngman and Charm and Conway & Youngman. From 1977 to August,
1990, Mr. Charm was President of Docktor Pet Centers, Inc., Wilmington,
Mass.; approximately fifteen months after it was sold and Mr. Charm ceased
his affiliation with Docktor Pet Centers, Inc., such company filed a
petition in bankruptcy. Mr. Charm is a former director of the
International Franchise Association. In addition, since 1989 Mr. Charm has
been an adjunct professor of entrepreneurial finance at Babson College in
Wellesley, Massachusetts. Mr. Charm is a director of several privately-
held companies.
Dexter B. Dawes. Age 59. Mr. Dawes became a director of the Company in
December, 1989. Since September, 1989, Mr. Dawes has been President of
John Hancock Capital Growth Management, Inc. From 1972 to September 1989,
he was Chairman of the New York and San Francisco-based investment banking
firm of Bangert, Dawes, Reade, Davis & Thom Incorporated. Mr. Dawes is a
trustee of the Philharmonic Baroque Orchestra of San Francisco, California.
David A. Mason. Age 55. Mr. Mason was elected Treasurer and a director of
the Company in June, 1983 and Executive Vice President - Finance and Chief
Financial Officer in December, 1983. Mr. Mason has also been Senior Vice
President and Treasurer of Progressive since 1975 and a director of
Progressive since 1976, positions he still holds.
Douglas M. Thomsen. Age 77. Mr. Thomsen was first elected a director of
the Company in June, 1988. Until his retirement in January, 1988, Mr.
Thomsen had been associated with Federated Department Stores ("Federated")
for over forty years. Most recently, from March, 1987 to December, 1987,
Mr. Thomsen served as a consultant on a special project for Federated.
From 1972 to March, 1987, Mr. Thomsen served as Chairman and Chief
Executive Officer of Rike's, Shillito/Rike's, and Lazarus, divisions of
Federated.
Harry D. Loyle. Age 42. Mr. Loyle became a director of the Company in
July, 1993. Since July, 1985, Mr. Loyle's principal occupation has been as
President and Director of Franchise Development for ProMoto Management
Corporation, an area developer for the Company. He also serves as
Secretary/Treasurer and is a director and shareholder of the following One
Hour MotoPhoto franchisees: Corral Photographic Corporation in Northfield,
New Jersey, B & H Management Services, Inc. in Ventnor, New Jersey, and the
Positive Negative, Inc. in Bala Cynwyd, Pennsylvania. Mr. Loyle serves as
director and/or officer or partner of a number privately held businesses in
New Jersey and Pennsylvania. From 1976 to 1985, he was President and
General Manager of Charlex, Inc., a company that owned and operated retail
photographic stores. In January, 1995, Mr. Loyle was elected to the
Franchise Advisory Council of the International Franchise Association.
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors had five meetings during 1995 The Board of
Directors has established standing Audit and Compensation Committees; it
does not have a nominating committee. Each director attended, in person or
through telephone conference call, at least three-fourths of the aggregate
meetings of the Board of Directors and the meetings of the committees, if
any, on which he served.
The Audit Committee meets with management to consider the adequacy of the
internal controls of the Company and the objectivity of financial
reporting. The Audit Committee also meets with the independent auditors
and with financial personnel of the Company about such matters. The
independent auditors periodically meet alone with the Audit Committee and
always have unrestricted access to the Audit Committee. The Audit
Committee has three members: Mr. Dawes, Mr. Myers, and Mr. Loyle. The
Audit Committee met three times during 1995.
The Compensation Committee meets to review and to make recommendations to
the Board about certain compensation matters. In addition, the
Compensation Committee administers the Company's 1992 Performance and
Equity Incentive Plan. The Compensation Committee has three members: Mr.
Benson, Chairman, Mr. Charm, and Mr. Thomsen. The Compensation Committee
met twice during 1995.
COMPENSATION OF OUTSIDE DIRECTORS
The Company pays certain compensation to its outside directors for their
services to the Company. Directors who are also employees of the Company
receive no additional remuneration for serving as directors.
Jacob A. Myers receives from the Company his regular hourly rate for time
he spends at meetings of the Board of Directors and committees. During
1995, Mr. Myers' hourly rate was $180.
During 1995, outside directors (other than Mr. Myers, who is compensated as
noted above) were paid monthly fees of $350, as well as a fee of $500 per
Board of Directors meeting attended in person, $225 per committee meeting
attended in person, and $150 per meeting attended via telephone conference
call.
In addition, Mr. Charm, who acts as a consultant to the Company, was paid
fees of $6,000 for his services in that capacity during 1995.
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
In addition to Messrs. Adler and Mason, who are listed elsewhere herein
under the heading "Information Concerning Nominees," the following
individuals also serve as executive officers of the Company.
Frank M. Montano. Age 43. Mr. Montano was appointed as Executive Vice
President and Chief Operating Officer in September, 1992. From June, 1990
to September, 1992, he served with Sbarro, Inc., first as President (May,
1991 to September, 1992). From April, 1989 to June, 1990,
Mr.Montano was associated with Diet Center, Inc., as Vice President of
Operations (April, 1989 to October, 1989) and as Senior Vice President
(October, 1989 to June, 1990). From August, 1986 to April, 1989, Mr.
Montano was Vice President of Franchising for Marriott Corporation.
Leonard S. Swartz. Age 63. Mr. Swartz was appointed as Senior Vice
President for Operations in July, 1989 and in January, 1990 was given
primary responsibility for franchise operations. Between February, 1984
and July, 1989, Mr. Swartz was Executive Vice President for Operations of
the Company.
Donald J. Isaacs. Age 51. Mr. Isaacs was appointed as Vice President of
Wholesale and Communication Services in September, 1994. Prior to his
appointment to his current position, Mr. Isaacs served as Vice President
and Controller of the Company from February, 1988 and as Controller from
November, 1985.
Kathryn A. Drury. Age 32. Ms. Drury was appointed as Vice President of
Marketing in August 1995. From October 1993 to August 22, 1995 she served
as Regional Marketing Director for the Company. Ms. Drury served as Senior
Marketing Manager for the Company from September 1991 to October 1993 and
as Operations Manager for the Company from November 1988 to September 1991.
Alfred E. Lefeld. Age 37. Mr. Lefeld was appointed as Vice President and
Controller in October, 1994. From June, 1993 to October, 1994, Mr. Lefeld
served as director of MIS for the Company. From January, 1992 to May,
1993, Mr. Lefeld served as Controller - Midwest Division for MAB Paints and
Coatings. From March, 1984 to December, 1992, Mr. Lefeld was Controller
for Paint America Company.
Robert A. Galastro. Age 53. Mr. Galastro was appointed as Vice President
of Company Store Operations in September, 1994. From January, 1993 to
September, 1994, Mr. Galastro was Senior Vice President and Chief Operating
Officer of BCB, Inc., a franchisor of upscale bakery and gourmet coffee
cafes. From March, 1992 to December, 1992, Mr. Galastro was self-employed
as a consultant to the hospitality and retail industries. From December,
1991 to February, 1992, Mr. Galastro served as Zone Vice President for
Sbarro, Inc. Mr. Galastro has also served from April, 1991 to November,
1991, as President and Chief Operating Officer of Skolniks, Inc., a
franchisor of upscale bagel bakeries and cafes, and from January, 1990 to
April, 1991 as President and Chief Operating Officer of Winchells, Inc., a
franchisor of donut and bakery cafes.
EXECUTIVE COMPENSATION
The following table discloses compensation received for the preceding three
fiscal years by the Company's chief executive officer and the other
executive officers of the Company whose total salary and bonus for the year
ended December 31, 1995 exceeded $100,000. These individuals are
referred to herein as the "named executive officers."
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
FISCAL COMPENSATION STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL YEAR SALARY BONUS (1) AWARDS($) OPTIONS(#)(2) (3)
POSITION
<S> <C> <C> <C> <C> <C> <C> <C>
Michael F. Adler 1995 $156,921 - $16,576 - 66,687 $ 2,600
President and Chief 1994 153,246 - 17,373 - - 5,119
Executive Officer 1993 145,423 $10,000 15,847 - 11,486
Frank M. Montano 1995 152,708 - - - 63,880 $ 12,884
Executive Vice 1994 148,246 - - - - 14,353
President 1993 145,558 $15,000 - - - 54,028
and Chief Operating
Officer
David A. Mason
Executive Vice
President - 1995 116,631 - - - 48,889 $ 1,400
Finance, Chief 1994 111,861 - - - - 3,117
Financial Officer 1993 102,185 7,500 - - - 5,994
and Treasurer
</TABLE>
(1) The primary component of "Other Annual Compensation" for Mr. Adler is a car
allowance. In 1995, 1994 and 1993, the car allowances were $11,117, $11,993,
and $11,907, respectively. "Other Annual Compensation" for the other named
executive officers was less than ten percent of their respective annual salaries
and bonuses and therefore need not be disclosed.
(2) During 1995, Messrs. Adler, Montano, and Mason were granted options to
purchase shares of the Company's Common Stock as shown in the table. On June
15, 1995 (the date of grant of the options) the shares underlying the options
granted to Messrs. Adler, Montano, and Mason had an aggregate market value of
$150,046, $143,730, and $110,00, respectively, based on the closing sale price
of the Common Stock on such date, $2.25 per share, as reported on the NASDAQ.
(3)"All Other Compensation" in 1995 for Messrs. Adler and Mason consists of the
Company's contributions for Messrs. Adler and Mason to the Company's defined
contribution retirement plan. "All Other Compensation" in 1995 for Mr. Montano
consists of $3,512 equivalent to interest at 9% that would have accrued during
such period on transition loans made by the Company to Mr. Montano during 1992
and 1993 in connection with his employment by the Company with respect to which
no interest is charged, $8,672 representing indebtedness under such loans
forgiven by the Company during 1995 and $700 representing Company's contribution
for Mr. Montano to the Company's defined contribution retirement plan.
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
Potential
Realized Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
Name Number of % of
Securities Total
Underlying Options Options Exercise
Granted Granted Price Expiration
to Per Share Date 5%(1) 10%(1)
Employees
in 1995
<S> <C> <C> <C> <C> <C> <C>
Michael F. 33,343 (2) 6.6% $2.475 7/15/2000 $22,800 $ 50,382
Adler 33,344 (3) 6.6% $2.475 6/15/2005 $51,800 $131,526
Frank M. 31,940 (2) 6.3% $2.25 7/15/2000 $19,855 $ 43,874
Montano 31,940 (3) 6.3% $2.25 6/15/2005 $45,291 $114,534
David A. 24,444 (2) 4.9% $2.25 7/15/2000 $15,195 $ 33,577
Mason 24,445 (3) 4.9% $2.25 6/15/2005 $34,663 $ 87,658
</TABLE>
(1) The Potential Realizable Values upon exercise of stock options are equal
to the product of the number of shares underlying the options and the
difference between (i) the respective hypothetical stock prices on the date
of option exercise and (ii) the exercise price per share of the options. The
hypothetical stock prices are equal to the price per share of the Common
Stock as of the date of the option grant compounded annually at the rates of
5% and 10%, respectively, over the term of the option. The rates of
appreciation used are required by the Securities and Exchange Commission and do
not represent a projection or estimate by the Company on the potential growth of
its Common Stock. Therefore, there can be no assurance that the rate of stock
price appreciation presented in this table can be achieved.
(2) Each of the options is exercisable as to 20% of the shares on June 15 of
each year,commencing June 15, 1996.
(3) Each of the options is exercisable as
to 20% of the shares on June 15 of each year, commencing June 15, 1996,
provided the Company's earnings per share have achieved certain specified
growth. To the extent the options have not previously become exercisable,
the options become fully exercisable as to all shares previously unexercised on
March 15,2005.
OPTION EXERCISES AND YEAR-END OPTION VALUES
None of the named executive officers
exercised any stock option during the year ended December 31, 1995,
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY
FISCAL YEAR END OPTIONS AT
FISCAL YEAR
END($)(1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Michael F. 190,000 66,687 $23,058 -
Adler
Frank M. 150,000 113,880 - -
Montano
David A. 55,000 48,889 $11,250 -
Mason
(1) Based on the closing sale price of the Company's Common Stock on December
29, 1995 (the last trading date prior to the year-end) of $1.5625 per
share as reported on the NASDAQ.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On January 1, 1994, Michael F. Adler, the Company's President and Chief
Executive Officer, entered into an employment contract effective through
December 31, 1996. The Contract is automatically renewed at the end of
each fiscal year for an additional three year term unless the Board takes
other action. The employment contract provides for a base salary of
$150,000 per year, subject to annual review of the Board of Directors.
Under the employment contract, Mr. Adler's eligibility for bonus payments
for 1994 was based on an incentive formula set forth in the contract.
The employment contract calls for Mr. Adler's bonuses for subsequent
years to be determined by the Board of Directors. The employment
contract also provides that, in the event Mr. Adler's employment is
terminated without cause, he will be entitled to salary continuation
equal to thirty-six months of the salary he was receiving immediately prior
to termination.
On June 23, 1993, David A. Mason, the Company's Executive Vice President -
Finance, Chief Financial Officer and Treasurer, entered into an employment
contract effective April 1, 1993 through March 31, 1996. The employment
contract provides for a base salary of $104,000 per year, subject to annual
review by the Board of Directors. The employment contract calls for Mr.
Mason's bonuses to be determined by the Board of Directors. The
Compensation Committee has authorized renegotiation of the employment
contract for a new three-year term and has extended the existing contract
for one year.
On January 1, 1994, Frank M. Montano, the Company's Executive Vice
President and Chief Operating Officer, entered into an employment contract
effective through December 31, 1996. The employment contract provides for
a base salary of $145,000 per year, subject to annual review by the Board
of Directors. Under the employment contract, Mr. Montano's eligibility for
bonus payments for 1994 was based on an incentive formula set forth in the
contract. The employment contract calls for Mr. Montano's bonuses for
subsequent years to be determined by the Board of Directors. The
Compensation Committee has authorized renegotiation of the employment
contract for a new three-year term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are
Frank W. Benson, Chairman, Leslie Charm and Douglas M. Thomsen, all of whom
are independent non-employee directors. The Committee establishes the
compensation of the Chief Executive Officer. Michael F. Adler, President,
Chief Executive Officer and Chairman of the Board, sets compensation for
all other executive officers but reviews such decisions with the
Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE AND MR. ADLER
COMPENSATION ELEMENTS
Compensation of the Company's executive officers consists of three
principal elements:
o Base salaries designed to be competitive in the Company's
geographic market and with comparably situated companies;
o Annual bonuses which are generally dependent on the Company's
profitability for the year, but from time to time discretionary
bonuses are granted based on a subjective review of the performance
of executive officers and taking into consideration accomplishments
which will benefit the Company over the longer term; and
o Stock options which are designed to align the executives' interests
with long-term interests of the shareholders.
EXECUTIVE OFFICER COMPENSATION
Several of the Company's executive officers, including Messrs. Adler,
Montano, and Mason, are employed pursuant to employment contracts which
specify base salary and bonus levels. It is the Company's policy to pay
base salaries to executive officers in the 25th to 75th percentile for
comparable positions for comparably situated companies. Bonuses for
executive officers are determined either by the terms of the executive
officer's employment contract or by the Board of Directors. No bonuses
were paid to executive officers during 1995.
During 1995, the Compensation Committee established the Officer and Key
Employee Stock Ownership Program (``the Program'') to encourage increased
share ownership by participating employees and to enhance Company
performance by strengthening the interests of participating employees in
the financial success of the Company. The number of options granted to an
employee under the Program is calculated by a formula based on the number
of shares of Common Stock owned by the employee, the employee's salary, the
market price of the Common Stock on the date of grant, and a
``participation percentage''determined by the Compensation Committee. Each
employee to whom options are granted must own at least 500 shares of Common
Stock. The terms of the grant require each employee to maintain ownership
of a specified minimum number of shares of Common Stock. The options
become exercisable as to 50% of the shares covered by each option grant at
the rate of 20% (of such 50% portion) per year on the anniversary of the
grant date. This portion of the options expires 5 years after the grant
date. Options granted as to the remaining 50% of the shares become
exercisable at the rate of 20% of the shares per year on the anniversary of
the grant date, provided that the Company's earnings per share have
achieved certain levels. To the extent the options have not previously
become exercisable, the options become fully exercisable nine years and
nine months following the grant date and expire ten years from the grant
date. Pursuant to the Program, the Compensation Committee granted
incentive stock options to purchase a total of 330,638 shares of Common
Stock to the executive officers of the Company and incentive stock options
to purchase 141,448 shares of Common Stock to key employees of the Company.
In addition, the Compensation Committee granted options to purchase 10,000
shares of Common Stock each to Mr. Lefeld and Ms. Drury.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Compensation for the Company's Chief Executive Officer, Michael F. Adler,
is determined under the terms of his employment contract with the Company.
During 1995, Mr. Adler received the base salary under the contract of
$156,000. Mr. Adler's bonus compensation is also determined pursuant to
the employment contract. Mr. Adler's bonus for 1995 was dependent upon the
Company achieving certain target pre-tax net income levels. The target
levels were not reached during 1995, and Mr. Adler did not receive a bonus
for such period.
Compensation Committee:
Frank W. Benson, Chairman
Leslie Charm
Douglas M. Thomsen
Michael F. Adler, Chief Executive Officer
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
The following line graph compares the yearly percent change in the
cumulative total shareholder return of the Company's Common Stock against
the cumulative total return of the Center for Research in Security Prices
("CRSP") Index for the NASDAQ Stock Market (U.S. Companies) and the CRSP
Index for NASDAQ Retail Trade Stocks for the period of five fiscal years
(1991 to 1995). It assumes that $100 was invested on December 31, 1990 in
the Company's Common Stock and in each of the other indices, with all
dividends reinvested.
DATE COMPANY INDEX MARKET INDEX PEER INDEX
12/31/90 100.000 100.000 100.000
01/31/91 125.000 111.085 111.324
02/28/91 130.000 121.770 122.339
03/28/91 240.000 129.918 138.902
04/30/91 190.000 130.742 141.123
05/31/91 205.000 136.742 149.434
06/28/91 200.000 128.414 143.517
07/31/91 205.000 136.016 154.350
08/30/91 190.000 142.779 157.865
09/30/91 160.000 143.304 162.328
10/31/91 230.000 148.040 162.773
11/29/91 190.000 143.073 163.042
12/31/91 170.000 160.548 189.957
01/31/92 260.000 169.937 194.378
02/28/92 220.000 173.788 197.894
03/31/92 220.000 165.585 188.520
04/30/92 210.000 158.485 170.938
05/29/92 250.000 160.544 168.106
06/30/92 370.000 154.268 157.241
07/31/92 340.000 159.731 162.349
08/31/92 410.000 154.850 152.593
09/30/92 380.000 160.607 164.041
10/30/92 340.000 166.932 168.494
11/30/92 340.000 180.217 176.418
12/31/92 320.000 186.851 178.772
01/29/93 480.000 192.171 175.357
02/26/93 540.000 185.001 166.082
03/31/93 520.000 190.356 169.276
04/30/93 420.000 182.232 159.241
05/28/93 520.000 193.118 167.542
06/30/93 460.000 194.011 167.318
07/30/93 460.000 194.241 170.417
08/31/93 400.000 204.281 180.088
09/30/93 340.000 210.367 185.539
10/29/93 500.000 215.095 192.956
11/30/93 400.000 208.680 185.584
12/31/93 440.000 214.496 188.936
01/31/94 460.000 221.006 188.563
02/28/94 420.000 218.941 184.738
03/31/94 420.000 205.475 173.819
04/29/94 480.000 202.809 174.180
05/31/94 440.000 203.305 170.148
06/30/94 380.000 195.870 166.739
07/29/94 360.000 199.888 166.983
08/31/94 330.000 212.630 179.515
09/30/94 330.000 212.087 182.260
10/31/94 320.000 216.254 184.458
11/30/94 400.000 209.082 177.457
12/30/94 380.000 209.670 172.277
01/31/95 320.000 210.775 166.243
02/28/95 290.000 221.915 169.672
03/31/95 370.000 228.494 170.404
04/28/95 350.000 235.691 169.488
05/31/95 360.000 241.773 173.502
06/30/95 350.000 261.365 187.696
07/31/95 300.000 280.573 197.880
08/31/95 320.000 286.254 197.343
09/29/95 320.000 292.865 200.918
10/31/95 320.000 291.187 197.394
11/30/95 290.000 298.033 196.354
12/29/95 250.000 296.505 189.925
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1983, Foto Fair International, Inc. ("FFI"), a wholly-owned
subsidiary of Progressive, merged into the Company. Progressive is 98% owned by
Michael F. Adler and his family. Mr. Adler is President, Chief Executive
Officer and Chairman of the Board of Directors of the Company, and a director
and executive officer of Progressive. In connection with such merger, the
Company acquired the business and assets of FFI, which primarily was the
management by FFI of the businesses of National Photo Labs, Inc. ("NPL") and
National Photo Labs II, Inc. ("NPL II"), both of which were engaged in the one-
hour photo processing business. NPL owned three stores during part of 1995; it
closed two of the stores and sold one to the Company for $147,409. NPL was
dissolved in November 1995. Directors and executive officers of the Company own
23% of the outstanding common stock of NPL II and owned 16% of the outstanding
common stock of NPL. NPL II owns one one-hour photo processing store. The store
owned by NPL II and the stores owned by NPL are or were managed by the Company
pursuant to management agreements and are or were operated as One Hour MotoPhoto
stores under franchise agreements. The management agreements provide for an
annual incentive fee based on cash generated. The franchise agreements provide
for monthly royalties equal to the greater of 5% of net sales or $1,000 per
store. During the year ended December 31, 1995, the Company received from NPL
and NPL II total revenues of approximately $410,994, including all royalty and
incentive fees paid and revenues derived from the sale by the Company to NPL and
NPL II of operating supplies and merchandise. This amount constituted
approximately 1.0% of the Company's total revenues.
The terms of the merger of FFI and the Company described above were all
determined by arms' length negotiation between the Company and Progressive,
prior to Progressive's becoming a shareholder of the Company. The merger with
FFI was approved by the shareholders of the Company.
The Company's corporate offices are located at 4444 Lake Center Drive,
Dayton, Ohio 45426. The building in which the Company's offices are located is
76% owned by Michael F. Adler, members of Mr. Adler's family, David A. Mason,
and Leonard S. Swartz. Such offices, consisting of approximately 33,000 square
feet on approximately 2.4 acres of land, have been leased by the Company
pursuant to a lease agreement which commenced on July 1, 1989 and which has been
extended through 1999. In July 1990, the lease terms were amended to provide
for rent payable as follows: $12,792 per month through June 1992; $16,097 per
month from July 1992 through June 1994; and $18,083 per month from July 1994
through June 1999. During 1995, the Company made lease payments totaling
$216,996.
Pursuant to the employment contract for Frank M. Montano when he joined the
Company in 1992, the Company advanced him moving expenses, the cost of temporary
housing in Dayton for a limited period of time, and a monthly living allowance
until Mr. Montano's home was sold. In connection with this arrangement, upon
the sale of his home in 1993, Mr. Montano executed a promissory note for
$52,036, the amount of the moving expenses and temporary housing and living
allowances; so long as Mr. Montano is still employed by the Company, one-sixth
of the principal will be forgiven on each anniversary date of the sale of his
home.
The foregoing transactions were and all future transactions with or loans
to officers, directors, key employees or their affiliates will be approved by a
majority of the members of the Board of Directors who were not officers of the
Company and/or were not interested in the transaction.
Harry D. Loyle is a shareholder, officer and director in three One Hour
MotoPhoto franchisees -- Corral Photographic Corporation, B&H Management
Services, Inc., and The Positive Negative, Inc. Each such franchisee owns and
operates one store under a One Hour MotoPhoto franchise agreement which provides
for a royalty fee of six percent of net retail sales. For part of 1995, Mr.
Loyle also owned and operated a One Hour MotoPhoto store in Absecon, New Jersey
under a similar One Hour MotoPhoto franchise agreement. During 1995, these four
franchises paid royalty and advertising fees of $50,172. Total revenues derived
by the Company from such stores were $280,692, which constituted approximately
0.7% of the Company's total revenues.
In addition, Mr. Loyle is owner and President of ProMoto Management
Corporation, which acts as an area developer for the Company pursuant to an area
development agreement. As Area Developer, ProMoto Management Corporation
receives a portion of the initial franchise fee as compensation for the
recruitment of a franchisee in its area and also receives a portion of the
royalty paid to the Company by any franchised store in its area (including the
stores owned by the three franchisees named above) as compensation for
performing training, marketing, quality control and other services which would
otherwise be performed by the Company. During 1995, the Company paid ProMoto
Management Corporation fees of $359,745. The terms of the Company's area
development agreement with ProMoto Management Corporation are the same as those
in the agreements of most of the Company's other area developers.
Jay Adler, son of Michael F. Adler, President, Chairman of the Board and
Chief Executive Officer of the Company, is President of Franchise Development
and Management Corporation, which acts as an area developer for the Company
pursuant to an area development agreement. During 1995, the Company paid
Franchise Development and Management Corporation fees of $260,921. The terms of
the Company's area development agreement with Franchise Development and
Management Corporation are on substantially the same terms as those offered to
the Company's other area developers during the period in which the agreement was
entered into.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ernst & Young LLP, independent certified public accountants, have been
reappointed by the Board of Directors of the Company as independent auditors for
the Company and it subsidiaries to examine and report on its financial
statements for 1995. Ernst & Young LLP have been auditors of the accounts of
the Company since November 1983. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting, with the opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.
PROPOSALS OF SHAREHOLDERS
The Board of Directors will consider proposals of shareholders intended to
be presented for action at the 1996 Annual Meeting of Shareholders. According
to the rules of the Securities and Exchange Commission, such proposals shall be
included in the Company's Proxy Statement if they are received in a timely
manner and if certain other requirements are met. For a shareholder proposal to
be included in the Company's Proxy Statement relating to the 1996 Annual
Meeting, a written proposal complying with the requirements established by the
Securities and Exchange Commission must be received at the Company's principal
executive offices, located at 4444 Lake Center Drive, Dayton, Ohio 45426, no
later than January 3 1997 If the date of next year's shareholders' meeting is
advanced by more than 30 days or delayed for more than 90 days, the Company will
advise all shareholders of the change in the date by which shareholder proposals
must be received.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
action at the meeting other than those listed in the Notice of Meeting and
referred to in this Proxy Statement. If any other matters properly come before
the meeting or any adjournment of the meeting, the persons named on the
accompanying proxy intend to vote the shares represented by them in accordance
with the recommendations of the Board of Directors.
REVOCABLE PROXY
MOTO PHOTO, INC.
PLEASE MARK VOTES
X AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The undersigned hereby appoints Michael F. Adler, David A. Mason
and Jacob A. Myers as Proxies, or any of them, each with the power to
appoint his substitute, and hereby authorizes them to represent and to
vote, as designated below, all the share of Voting Common Stock of Moto Photo
Inc., held of record by the undersigned on April
29, 1996, at the Annual Meeting of Shareholders to be held on June 27,
1996, or any adjournament thereof.
1. ELECTION OF DIRECTORS For Withhold For All Except
Adler, Benson, Charm, Dawes, Loyle, Mason, and Thomsen
INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name in
the space provided below.
2. In their discretion, the Proxies For Against Abstain
are authorized to vote upon such
other business as may properly
come before the meeting.
This proxy, when properly executed, will be voted as specified
be the shareholders. If no specification is made, the proxy will
be voted FOR the election of all of the nominees listed in Item 1.
If any other matters are brought before the meeting or if a nominee
for election as a director named in the proxy statement for election
as a director is unable to serve or for good cause will not serve, the
proxy will be voted in accordance with the recommendations of the
Board on such matters or for such substitute nominees as the Board
may recommend.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and the Proxy Statement and hereby expressly revokes any and
all proxies heretofore given or executed by the undersigned with
respect to the shares represented by this proxy.
Please be sure to sign and date this Proxy in the box below.
Date
Shareholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
Please date this proxy, sign EXACTLY as name appears hereon. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title. If more than one trustee, all should sign. If shares are
registered in more than one name, signatures of all such persons are required.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
