SCHEDULE 14A INFORMATION
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
[ ]Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2)
[X]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Sections 240.14a-11(c) or Sections 240.14a-12
MOTO PHOTO, INC.
(Name of Registrant as Specified in its Charter)
NOT APPLICABLE
(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: _______________.
4) Proposed maximum aggregate value of transaction: _______________.
[ ] 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>
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 Wednesday, June 30, 1999 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 May 14, 1999,
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
June 1, 1999
Even if you plan to attend the meeting, please sign the enclosed proxy card 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
GENERAL 1
Record Date and Outstanding Voting Stock. 1
Quorum and Voting 1
Action To Be Taken Under the Proxy 1
Votes Required 2
Solicitation of Proxies 2
Revocation of Proxies 2
Annual Report 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 3
Potential Future Change in Control 5
Compliance with Section 16(a) of the Securities Exchange Act
of 1934 5
ELECTION OF DIRECTORS 5
Information Concerning Nominees 6
Meetings of Board of Directors and Committees 7
Compensation of Outside Directors 7
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION 8
Executive Officers 8
Executive Compensation 9
Option Grants During 1998 10
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 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 16
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 17
PROPOSALS OF SHAREHOLDERS 17
OTHER MATTERS 18
MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE
DAYTON, OHIO 45426
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JUNE 30, 1999
The following information is furnished in connection with the Annual Meeting of
Shareholders of Moto Photo, Inc. (the "Company") to be held on Wednesday,
June 30, 1998 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 June 1,
1999, 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
May 14, 1999. On that date, the Company had 7,840,173 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. Shares represented by proxies which are marked "withhold
authority" with respect to the election of any one or more nominees for
election as directors will be counted for the purpose of determining the number
of shares represented by proxy atthe Annual Meeting. Shares represented by
proxies returned by brokers where the brokers' discretionary authority is
limited by stock exchange rules will be treated as represented at the Annual
Meeting only as to such matter or matters, if any, voted
on in the proxies. 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 eight 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. 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 that are marked "withhold
authority' with respect to the election of any one or more nominees for election
as directors will notaffect the outcome of the nominee's election unless the
nominee receives no affirmative votes or unless other candidates are nominated
for election as directors. 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.
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, 1998, 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, 1999, the Company had 7,840,173 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, 1999 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, 1998 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) 1,511,950 18.6%
4444 Lake Center Drive
Dayton, OH 45426
Harry D. Loyle (3) 537,688 6.8%
410 S. Main Plaza
Pleasantville, NJ 08232
David A. Mason (4) 123,675 1.6%
Dexter B. Dawes (5) 56,513 *
PAGE>Frank W. Benson (5) 44,713 *
D. Lee Carpenter (5) 30,413 *
Leslie Charm (5) 25,000 *
James F. 29,013 *
Frank M. Montano (6) 174,160 2.2%
Leonard S. Swartz (7) 59,511 *
Paul Pieschels(8) Ph.D. (5) 31,604 *
ALL DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS AS A GROUP (12 PERSONS) (9) 2,636,740 31.0%
BENEFICIAL OWNERS OF MORE THAN
5% OF THE COMMON STOCK
Fuji Photo Film U.S.A. Inc. (10) 1,000,000 11.3%
555 Taxter Road
Elmsford, NY 10523
Mark E. Brady (11) 776,280 9.9%
Robert J. Suttman (11)
Ronald L. Eubel (11)
Bernie Holtgreive (11)
c/o Eubel Brady & Suttman
Asset Management, Inc.
7777 Washington Village Drive,
Suite 210
Dayton, OH 45459
________________________
<FN>
* Less than 1%
</TABLE>
(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 227,209 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 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 1,192,039
shares of Common Stock owned by Progressive Industries Corporation
("Progressive"), which is 99% owned by Mr. Adler and his family, which shares of
Common Stock Mr. Adler may be deemed to own beneficially 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 25,000 shares which he has the right to
acquire by exercise of stock options which are currently exercisable. Mr. Loyle
shares voting and investment power with his wife.
(4)Includes 82,285 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 25,000 shares which this individual has the right to acquire upon
exercise of stock options which are currently exercisable.
6)Includes 135,686shares which Mr. Montano has the right to acquire upon
exercise of stock options which are currently exercisable.
(7)Includes 23,155 shares which Mr. Swartz has the right to acquire upon
exercise of stock options which are currently exercisable.
(8)Includes 17,564 shares which Mr. Pieschel has the right to acquire upon
exercise of stock options which are currently exercisable.
(9)Includes 635,899 shares which such group has the right to acquire upon
exercise of stock options which are currently exercisable and 52,000 shares
which such group has the right to acquire upon exercise of warrants.
(10) Consists of 1,000,000 shares issuable upon exercise of warrants owned by
Fuji Photo Film U.S.A., Inc. ("Fuji").
(11) Consists of shares as to which Mark E. Brady, Robert J. Suttman, Ronald
Eubel, and Bernie Holtgreive each share voting and investment power. Also,
Mr. Suttman beneficially owns 5,000 additional shares as to which he has sole
voting and investment power, and Mr. Brady beneficially owns 1,900 additional
shares as to which he has sole voting and investment power.
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 were subject to mandatory
redemption on January 1, 1999; however, because the market price of the
Company's Common Stock on January 1, 1999, was less than $3.00 per share, the
redemption of the Fuji Preferred Stock has been extended until the earlier of
(i) the first date on which the market price of the Common Stock equals or
exceeds $3.00 per share or (ii) January 1, 2000. 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 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
Section 16(a) of the Securities Exchange Act of 1934 requires directors and
executive officers of the Company and persons who beneficially own more than
10% of the Company's Common Stock to file reports of ownership and changes in
ownership of the Company's Common Stock with the Securities and Exchange
Commission. The Company is required to disclose delinquent filings of reports
by such persons. Based on a review of the copies of such reports and amendments
thereto received by the Company, or written representations that no filings
were required, the Company believes that no person who at any time during 1998
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, except as
described below.
Through inadvertence, Dexter B. Dawes filed one late report as to one
transaction; the report was filed as soon as the failure to file was discovered.
ELECTION OF DIRECTORS
The Board of Directors has established the size of the Board as eight members
and has nominated all of the current members of the Board for re-election.
Eachdirector 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 director's 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 each nominee 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 62. Mr. Adler was elected Chief Executive Officer of
the Company in June, 1985, and its Chairman in October, 1990. From February,
1984 through December, 1996 he served as the Company's President. 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 and
Strategic Planning Committee of the City-Wide Development Corporation, Dayton,
Ohio, The National Center for Industrial Competitiveness, and The Advisory
Board of Alpha Capital. Mr. Adler chairs the 20/20 Economic Development
Committee for the City of 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 71. 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.
D. Lee Carpenter. Age 50. Mr. Carpenter became a director in December, 1997.
Since 1978, Mr. Carpenter has been Chairman and Chief Executive Officer of
Design Forum in Dayton, Ohio, a firm providing strategic design services to
businesses. Mr. Carpenter is a member of the Board of Directors of the
Association of Professional Design Firms and a member of the American Institute
of Graphic Arts, the International Mass Retailers Association and the National
Retail Federation.
Leslie Charm. Age 55. Mr. Charm became a director in October, 1990. Since
August 1990 Mr. Charm has also been partner of Restoration Associates, an
entrepreneural advisory firm in Babson Park, Massachusetts. Mr. Charm is a
former director of the International Franchise Association. 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. He is also a director of several
privately-held companies and of New Generation Foods, Inc., in Scarsdale, New
York, a publicly-held company providing credit information via the Internet.
Dexter B. Dawes. Age 62. Mr. Dawes became a director of the Company in
December, 1989. Mr. Dawes is the founder, a director, and chief financial
officer of Puffin Designs, Inc., a software company based in Sausalito,
California. From 1975 to 1998, Mr. Dawes was Chairman of the New York and San
Francisco-based investment banking firm of Bangert, Dawes, Reade, Davis & Thom
Incorporated. In addition, between September, 1989, and December, 1996, Mr.
Dawes was President of John Hancock Capital Growth Management, Inc.
Harry D. Loyle. Age 45. Mr. Loyle became a director of the Company in July,
1993. Since July, 1985, Mr. Loyle's principal occupation has been as President
of ProMoto Management Corporation, an area developer for the Company. He also
serves as Secretary/Treasurer and is a shareholder and director of the
following MotoPhotosm franchisees: Corral Photographic Corporation in
Northfield, New Jersey, Post Imaging Corporation in Huntingdon Valley,
Pennsylvania, 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 Franchisee Advisory Council of the International Franchise Association and
was elected the Council's Second Vice Chairman in June 1999.
David A. Mason. Age 58. 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. He is a former member of the Board of Directors of the Dayton
chapter of the Financial Executives' Institute and of the Executive Board of
Advisors of the International Minilab Association, Inc. Mr. Mason is also
President of National Photo Labs II, Inc., a franchise owner with one
MotoPhotosm store in Dayton, Ohio.
James F. Robeson, Ph.D. Age 62. Dr. Robeson became a director in June,
1998. Between December, 1997 and July 10, 1998, he was acting Chief Executive
Officer and President of ROBERDS, Inc., a chain of electronics, appliance, and
furniture stores based in West Carrollton, Ohio. Dr. Robeson has also been a
director of ROBERDS since November, 1993. From July, 1996 through December,
1997,Dr. Robeson was Interim Director, Miami University Art Museum, Oxford,
Ohio. He was Herbert E. Markley Visiting Scholar in Business, Miami
University, Oxford, Ohio, from August, 1995 through May, 1997. From July,
1993 to the present, Dr. Robeson has served as an independent consultant to
distribution companies and as an independent consultant on marketing,
logistics, and general business matters, including services rendered through
the firm of PricewaterhouseCoopers.
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held four meetings during 1998. 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. During the first half of 1998, the Audit
Committee had two members: Mr. Dawes, Chairman, and Mr. Loyle. Mr. Charm
joined the committee in June 1998. The Audit Committee met twice during 1998.
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. Carpenter, and Dr. Robeson. During a portion of 1998, Leslie Charm and
Douglas M. Thomsen, a former director, also served on the Compensation
Committee. The Compensation Committee met twice during 1998.
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.
During 1998, outside directors were entitled to receive monthly fees of $400, as
well as a fee of $750 per Board of Directors meeting attended in person, $225
per committee meeting attended in person, and $150 per meeting attended via
telephone conference call. The Board of Directors has also approved a plan to
compensate outside directors who choose to participate in the plan with shares
of Common Stock instead of cash payments. During 1998, each director who
participated in the plan received 200 shares of Common Stock per month, 300
shares per Board meeting attended in person, and 100 shares per meeting
attended via telephone conference call. For 1999, cash compensation for outside
directors will not change, but directors choosing to receive shares of Common
Stock in lieu of cash payments will receive shares having a value, based on
the average closing sale prices of the Common Stock during December 1998
($1.27), equal to 150% of the cash compensation that the director would
otherwise have been entitled to receive. Messrs. Benson, Carpenter, Dawes,
and Loyle elected to receive Common Stock as compensation during 1998. Messrs.
Benson, Carpenter, Dawes, Loyle, and Robeson have elected to receive Common
Stock as compensation during 1999.
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 1998.
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
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 47. Mr. Montano was appointed President and Chief
Operating Officer in January, 1997. From September, 1992 to January, 1997, Mr.
Montano served as Executive Vice President and Chief Operating Officer. From
June, 1990 to September, 1992, he served with Sbarro, Inc., first as Vice
President of Licensing (June, 1990 to May, 1991) and then as Senior Vice
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 66. Mr. Swartz has been Senior Vice President for
Franchise Operations since January 1990. From July, 1989 to January, 1990,
Mr. Swartz was Senior Vice President for Operations. Between February, 1984
and July, 1989, Mr. Swartz was Executive Vice President for Operations of the
Company.
Paul Pieschel. Age 59. Mr. Pieschel was appointed Senior Vice President of
Franchise Sales in February, 1997. From March, 1985 to February, 1997, Mr.
Pieschel was Vice President of Franchise Sales. Since 1984, Mr. Pieschel has
also served as the Company's Vice President of Human Resources.
Lloyd F. ("Rick") Noland. Age 53. Mr. Noland was appointed Senior Vice
President of Marketing in August, 1998. From December, 1995 through October,
1997, Mr. Noland served as President of Whitmire Micro-Gen, a manufacturer of
chemicals and equipment for professional pest control, horticultural, and
animal health industries in St. Louis, Missouri, and a wholly-owned subsidiary
of S.C. Johnson & Son. From 1993 through November, 1995, Mr. Noland was
Director, Global Business Development, for S.C. Johnson & Son, a company
marketing consumer and institutional cleaning, fragrance, insecticide, and
storage products, in Racine, Wisconsin.
EXECUTIVE COMPENSATION
The following table provides information with respect to compensation received
for the preceding three fiscal years by the Company's chief executive officer
and the four other most highly compensated executive officers of the Company.
These individuals are referred to herein as the "named executive officers."
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPEN-
SATION
ALL
OTHER SECUR- OTHER
ANNUAL ITIES COMPEN-
NAME AND PRINCIPAL FISCAL COMPEN- UNDERLY SATION
POSITION YEAR SALARY BONUS SATION(1) OPTIONS(#) SECURITY
<S> <C> <C> <C> <C> <C> <C>
Michael F. Adler 1998 $189,634 - $23,544 38,760 $ 5,900
160,125 $68,627 26,975 - 10,001
Executive Officer 1996 156,000 85,000 21,924 190,000 14,048
Frank M. Montano 1998 $162,604 - $ 3,895 37,464 $13,044
ChairmantanddChief 1997 154,725 $52,591 23,246 - 14,452
Operating Officer 1996 150,800 51,000 3,246 200,000 15,212
David A. Mason 1998 $123,223 - $ 3,895 28,416 $ 3,200
Executive Vice 1997 117,400 42,073 3,246 - 5,949
President, Chief 1996 114,400 50,000 3,246 55,000 7,493
Financial Officer
and Treasurer
Leonard S. Swartz 1998 $108,332 - $ 2,776 25,299 $ 2,523
Senior Vice President - 1997 103,854 $ 8,088 2,776 - 7 058
Franchise Operations 1996 100,384 15,839 2,776 - 12,959
Paul Pieschel 1998 $ 89,234 $23,492(3)$ 3,895 20,808 $ 2,496
Senior Vice President - 1997 86,725 31,395 3,246 - 4,944
Franchise Sales 1996 80,500 33,685 3,246 - 7,423
</TABLE>
(1)The primary component of "Other Annual Compensation" for Mr. Adler is a car
allowance. In 1998, 1997, and 1996, the car allowances were $14,225, $14,123,
and $12,032, respectively.
(2)"All Other Compensation" in 1998 for Mr. Adler consists of (i) $2,700 of
insurance premiums paid by the Company with respect to a $500,000 term life
insurance policy covering Mr. Adler that is maintained by the Company for Mr.
Adler's benefit pursuant to his employment agreement and (ii) $3,200
consisting of the Company's contributions for Mr. Adler to the Company's
defined contribution retirement plan. "All Other Compensation" in 1998 for Mr.
Montano consists of $1,171 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, $8,673 representing indebtedness under such
loans forgiven by the Company during 1998, and $3,200 representing the
Company's contribution for Mr. Montano to the Company's defined contribution
retirement plan. "All Other Compensation" in 1998 for Messrs. Mason, Swartz,
and Pieschel consists of the Company's contributions for them to the Company's
defined contribution retirement plan.
(3)Bonus to Mr. Pieschel for 1998, 1997, and 1996 includes commissions, paid
to Mr. Pieschel in connection with the sale of franchises, of $23,492, $29,395,
and $20,993, respectively.
OPTION GRANTS DURING 1998
The following table provides information concerning the grant of stock options
during the year ended December 31, 1998 to each of the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE
AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES
OF STOCK APPREC-
IATION FOR
OPTION TERM(2)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAM GRANTED(1) IN 1998 PER SHARE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Michael F. Adler 19,380 5.1% $2.75 3/1/2003 $15,000 $33,179
19,380 5.1% 2.75 1/29/2008 33,508 84,923
Frank M. Montano 18,732 4.9% 2.50 3/1/2003 13,169 29,166
18,732 4.9% 2.50 1/29/2008 29,447 74,628
David A. Mason 14,208 3.7% 2.50 3/1/2003 9,988 22,122
14,208 3.7% 2.50 1/29/2008 22,335 56,605
Leonard S. Swartz 12,614 3.3% 2.50 3/1/2003 8,892 19,694
12,615 3.3% 2.50 1/29/2008 19,886 50,397
Paul Pieschel 10,404 2.7% 2.50 3/1/2003 7,314 16,199
10,404 2.7% 2.50 1/29/2008 16,355 41,450
___________________________
</TABLE>
(1)All of the options shown were granted under the Company's Stock Ownership
Plan under the 1992 Performance and Equity Incentive Plan. For each named
executive officer, the first option listed is exercisable in 20% increments per
year on each successive anniversary date of the grant; the second option is
exercisable in 20% increments per year on each successive anniversary date of
the grant, provided that, in such year, the Company achieves certain growth in
earnings per share over the Company's earnings per share in 1997. To the
extent the second option has not previously become exercisable based on growth
in earnings per share, the option becomes fully exercisable on October 30,
2007. Each officer is required to own and retain shares of the Company's
Common Stock to participate in the Stock Ownership Plan, and the number of
shares underlying option grants under the program is calculated using a
formula based, in part, on the number of shares owned, generally resulting
in grants of options to purchase four shares for each one share owned.
(2) 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 the value of
its Common Stock. Therefore, there can be no assurance that the rate of stock
price appreciation presented in this table can be achieved.
OPTION EXERCISES AND YEAR-END OPTION VALUES
one of the named executive officers exercised any stock option during the year
ended December 31, 1998. The following table provides information concerning
unexercised stock options held by the named executive officers as of December
31, 1998.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END($)(1)
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Michael F. Adler 220,542 74,485 - -
Frank M. Montano 129,298 172,046 - -
David A. Mason 77,396 54,909 - -
Leonard S. Swartz 19,203 47,459 - -
Paul Pieschel 14,463 37,313 - -
____________________
</TABLE>
(1) Based on the closing sale price of the Company's Common Stock on December
31, 1998 of $1.1875 per share as reported on the NASDAQ.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In April, 1997, Michael F. Adler, the Company's Chairman and Chief Executive
Officer, entered into an employment contract with a term through December 31,
1999. The employment contract is automatically renewed at the end of each
fiscal year for an additional three years unless the Board takes other action.
The employment contract provides for a base salary of $161,500 per year,
subject to annual review by the Board of Directors. Beginning April, 1998, Mr.
Adler's base salary was set at $200,000 per year. The employment contract calls
for Mr. Adler's bonuses to be determined by the Board of Directors or a
committee of the Board. The employment contract requires the Company to
maintain for Mr. Adler's benefit a $500,000 term life insurance policy covering
Mr. Adler. The Company paid premiums of $2,700 for this policy during 1998.
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, as well as continuation of benefits which he was receiving at the
time of termination, including health insurance and use of suitable office and
secretarial support, but excluding a car allowance.
In June, 1996, David A. Mason, the Company's Executive Vice President, Chief
Financial Officer and Treasurer, entered into an employment contract with a
term through December 31, 1998. In December 1997, the employment contract was
amended to provide, among other things, for a term through December 31, 2000.
Commencing January 1, 2000, the term of the employment agreement will be
extended so that the term of the agreement will always be for a period of one
year unless Mr. Mason or the Company elects not to continue the contract or
unless Mr. Mason's employment is terminated earlier. The employment contract,
as amended, provides for a base salary of $125,000 per year, subject to annual
review by Mr. Adler after consultation with the Compensation Committee of the
Board of Directors. Under the employment contract, Mr. Mason's eligibility
for bonus payments for 1998 was based on an incentive formula set forth in
the contract. The employment contract calls for Mr. Mason's bonuses for
subsequent years to be determined by Mr. Adler after consultation with the
Compensation Committee. The employment contract provides that, if there is a
change in control of the Company, the employment contract will be extended
for three years from the date of the change of control.
In June, 1996, Frank M. Montano, the Company's President and Chief Operating
Officer, entered into an employment contract with a term through December 31,
1998. In December 1997, the employment contract was amended to provide, among
other things, for a term through December 31, 2000. Commencing January 1,
2000, the term of the employment agreement will be extended so that the term
of the agreement will always be for a period of one year unless Mr. Montano
or the Company elects not to continue the contract or unless Mr. Montano's
employment is terminated earlier. The employment contract provides for a base
salary of $150,000 per year, subject to annual review by Mr. Adler after
consultation with the Compensation Committee. Under the employment contract,
Mr. Montano's eligibility for bonus payments for 1998 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 Mr. Adler
afterconsultation with the Compensation Committee. The employment contract
provides that, if there is a change in control of the Company, the employment
contract will be extended for three years from the date of the change of
control.
In January, 1999, Lloyd F. Noland, the Company's Senior Vice President of
Marketing, entered into an employment contract with a term through December
1, 2001. Commencing January 1, 2001, the term of the employment agreement
will be extended so that the term of the agreement will always be for a period
of one year unless Mr.Noland or the Company elects not to continue the
contract or unless Mr. Noland's employment is terminated earlier. The
employment contract provides for a base salary of $135,000 per year, subject to
annual review by Mr. Adler after consultation with the Compensation Committee.
Mr. Noland's bonus for 1999 will be based on an incentive formula set forth in
the contract but will be no less than $20,000. The employment contract calls
for Mr. Noland's bonuses for subsequent years to be determined by Mr. Adler
after consultation with the Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are Frank W.
Benson, Chairman of the Committee, D. Lee Carpenter and James F. Robeson, Ph.D.
During a portion of 1998, Leslie Charm and Douglas M. Thomsen, a former
director, also served on the Compensation Committee. All of such current and
former members of the Compensation Committee are, or were during their period
of service, independent non-employee directors of the Company. The Committee
establishes the compensation of the Chief Executive Officer, subject to the
terms of his employment contract. Michael F. Adler, Chairman and Chief
Executive Officer of the Company, 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:
_ Base salaries designed to be competitive in the Company's
geographic market and with comparably situated companies;
_ 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
_ Stock options which are designed to align the executive
officers' interests with long-term interests of the shareholders.
EXECUTIVE OFFICER COMPENSATION
Several of the Company's executive officers, including Messrs. Adler, Montano,
Mason and Noland, 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 by the terms of the executive officer's employment contract, if any,
approved by the Compensation Committee. In the absence of specific contractual
provisions, the Compensation Committee determines Mr. Adler's bonus, and
Mr. Adler, after consultation with the Compensation Committee, determines the
bonuses for the remaining executive officers.
For 1998, the executive officers generally were eligible to receive bonuses
based on achievement by the Company of certain target pre-tax profit levels.
These levels were not achieved and no such bonuses were paid to executive
officers for 1998. Mr. Pieschel, Senior Vice President - Franchise Sales,
continued to receive commissions in connection with the Company's sales of
franchises for 1998 at commission levels determined by Mr. Adler after
consultation with the Compensation Committee.
The Compensation Committee administers the Company's 1992 Performance and
EquityIncentive Plan (the "Plan"), which permits the Committee to grant to
officers and key employees stock option and other equity-based incentive
awards. In authorizing awards under the Plan to executive officers, the
Committee considers various factors, including the relative responsibilities of
the recipient, the Committee's subjective evaluation of the recipient's
performance, and the recipient's relative equity interest in the Company in the
form of stock, stock options, or other equity-based incentive awards in view of
the Committee's desire to align the interests of management and the shareholders
in the long-term performance and financial success of the Company.
During 1998, options to purchase a total of 225,747 shares of Common Stock were
granted to executive officers at exercise prices equal to 100%, or in the case
of Mr.Adler 110%, of the market price of the Common Stock on the date of
grant. With the exception of options to purchase 25,000 shares of Common Stock
granted to an executive officer in connection with the commencement of his
employment with the Company, all of such options were granted in connection with
a program requiring the optionee to own and retain at least one share of Common
Stock for each four options granted, thus furthering the Compensation
Committee's goal of strengthening the mutuality of interests of management and
the shareholders through increased shareownership by management.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Compensation for the Company's Chief Executive Officer, Michael F. Adler,
isdetermined under the terms of his employment contract with the Company.
During 1998,Mr. Adler received base salary of $189,634. Mr. Adler's bonus
compensation isdetermined by the Compensation Committee pursuant to the
employment contract and for1998 was dependent upon the Company's achieving
certain target pre-tax profit levels.These levels were not achieved, and
Mr. Adler did not receive a bonus for 1998.
SECTION 162(M)
The Committee has not adopted a policy with respect to qualification of
executive compensation in excess of $1 million per individual for deduction
underSection 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder. The Committee currently does not anticipate that the
compensation of any executive officer during 1999 will exceed the limits on
deductibility for 1999. In determining a policy for future periods, the
Committee would expect to consider a number of factors, including the tax
position of the Company, the materiality of amounts likely to be involved and
any potential ramifications of the loss of flexibility to respond to
unforeseeable changes in circumstances.
Compensation Committee:
Frank W. Benson, Chairman of Compensation Committee
D. Lee Carpenter
James F. Robeson, Ph.D.
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 (1994 to 1998).
It assumes that $100 was invested on December 31, 1993 in the Company's Common
Stock and in each of the other indices, with all dividends reinvested.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Adler, Mason, Swartz, and Pieschel own 23% of the outstanding
common stock of National Photo Labs II, Inc. ("NPL II"). NPL II owns one
one-hour photo processing store. The store owned by NPL II is managed by the
Company pursuant to a management agreement and is operated as a MotoPhotosm
store under a franchise agreement. The management agreement provides for an
annual incentive fee based on cash generated. The franchise agreement provides
for monthly royalties equal to the greater of 5% of net sales or $1,000 per
store. During the year ended December 31, 1998, the Company received from
NPL II total revenues of approximately $308,000, including all royalty and
incentive fees paid and revenues derived from the sale by the Company to
NPL II of operating supplies and merchandise. This amount constituted
approximately 0.8% of the Company's total revenues.
Progressive purchased a MotoPhotosm store from the Company and signed a
franchise agreement for the store, effective as of January 1, 1996. The
purchase price of the store was $64,000, its book value as of December 31,
1995. During 1998 this store paid the Company royalty and advertising fees of
$23,205. Total revenues derived by the Company from this store, including all
royalty and advertising fees paid and revenues derived from the sale of
operating supplies and merchandise, were approximately $97,000. This amount
constituted approximately 0.3% of the Company's total revenues.
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 providing for rent of $18,083 per month through June 1999.
The Company has agreed in principle to sign a new lease for these offices on
the following terms: the lease will have an initial term of ten years
commencing July 1, 1999, with two five-year renewal options. The rent will be
$20,327 per month through June 2004 and $22,374 from July 2004 through June
2009. During 1998, 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.
Pursuant to the employment contract for Lloyd F. Noland when he joined the
Company in 1998, the Company advanced him moving expenses and a monthly living
allowance for a limited period of time. In connection with this arrangement,
Mr. Noland executed a promissory note for $40,352, the amount of the moving
expenses and temporary living allowance; so long as Mr. Noland is still employed
by the Company, one-fifth of the principal will be forgiven on each anniversary
date of his joining the Company.
In February, 1997, the Company agreed to manage a MotoPhotosm franchised store
owned by W. P. Enterprises, Inc. ("WP"), a corporation owned by Richard
Zsambok, thebrother-in-law of Michael F. Adler. The management agreement
provides for an annual incentive fee based on cash generated and a monthly fee,
which supersedes the royalty fee required by the franchise agreement, equal to
the greater of 5% of net sales or $1,000. During 1998, this store paid the
Company monthly and advertising fees of $18,313. Total revenues derived by
the Company from this store, including all royalty and advertising fees paid
and revenues derived from the sale of operating supplies and merchandise, were
approximately $101,000. This amount constituted approximately 0.3% of the
Company's total revenues.
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, or as appropriate, of the
Compensation Committee, who were not officers of the Company and/or were not
interested in the transaction.
Harry D. Loyle, a director of the Company, is a shareholder, officer, and
director in three One Hour MotoPhotosm franchisees -- Corral Photographic
Corporation, Post Imaging Corporation, and The Positive Negative, Inc. Each
such franchisee owns and operates one store under a franchise agreement which
provides for a royalty fee of six percent of net retail sales and an
advertising fee of one-half percent of net retail sales. Mr. Loyle also was a
shareholder, officer, and director in Nash Photographic Corporation, which,
for a portion of 1998, owned and operated a MotoPhotosm store in Abington,
Pennsylvania under a similar MotoPhoto franchise agreement. During 1998,
these four franchises paid royalty and advertising fees of $104,887. Total
revenues derived by the Company from such stores were approximately $439,000,
which constituted approximately 1.2% of the Company's total revenues.
In addition, Mr. Loyle is owner and President of ProMoto Management Corporation
("ProMoto"), which acts as an area developer for the Company pursuant to an
areadevelopment agreement. As Area Developer, ProMoto 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 four
franchisees named above) as compensation for performing training, marketing,
quality control and other services which would otherwise be performed by the
Company. During 1998, the Company paid ProMoto fees of $442,353. The terms of
the Company's area development agreement with ProMoto are the same as those in
the agreements of most of the Company's other area developers.
D. Lee Carpenter, a director of the Company, is Chairman and Chief Executive
Officer of Design Forum, which provides store design services to the Company.
The Company paid Design Forum fees of $118,046 for such services during 1998.
During 1998, Caroline Zsambok, wife of Michael F. Adler, provided consultation
to the Company on training and organizational learning services through her
company, Z Research and Consulting ("Z Research"). During 1998, the Company paid
Z Research fees of approximately $54,769. The Company has agreed to provide
Z Research with an office at the Company's headquarters and limited secretarial
support for non-Company work it performs. Z Research will compensate the
Company for all out-of-pocket expenses the Company incurs in providing Z
Research with an office and secretarial support.
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 1998. 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 2000 Annual Meeting of Shareholders. For a
shareholder proposal to be included in the Company's Proxy Statement relating
to the 2000 Annual Meeting, a written proposal complying with certain
requirements established by the Securities and Exchange Commission, including
Rule 14a-8 under the Securities Exchange Act of 1934, must be received at the
Company's principal executive offices, located at 4444 Lake Center Drive,
Dayton, Ohio 45426, no later than February 2, 2000.
In addition, shareholders are notified that the deadline for providing the
Company timely notice of any shareholder proposal to be submitted outside of
the Rule 14a-8 process for consideration at the 2000 Annual Meeting is
April 16, 2000. As to all such matters of which the Company does not have
notice as of April 16, 2000, discretionary authority to vote on such proposal
will be granted to the persons designated in the Company's proxy related to
the 2000 Annual Meeting.
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. Nonetheless, the enclosed proxy confers
discretionary authority to vote with respect to those matters described in
Rule 14a-4(c) under the Securities Exchange Act of 1934, including those
matters that the Board of Directors does not know, a reasonable time before
proxy solicitation, are to be represented at the Annual Meeting. 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
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 shares of Voting Common
Stock of Moto Photo, Inc., (the "Company")
held of record by the undersigned on May 14,
1999, at the Annual Meeting of Shareholders
to be held on June 30, 1999, or any adjournment
thereof.
Please be sure to sign and date this Proxy in the box below.
Date
Shareholder sign above Co-holder (if any) sign above
FOR FOR ALL WITH
EXCEPT HOLD
1. ELECTION OF DIRECTORS
ADLER, BENSON, CARPENTER, CHARM,
DAWES, LOYLE, MASON AND ROBESON
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
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 by 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.
+ +
Detach above card, sign, date and mail in postage paid envelope provided.
MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE, DAYTON, OHIO 45426
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
