<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
GC Companies, Inc.
(Name of Registrant as Specified In Its Charter)
Philip J. Szabla, Esq.
GC Companies, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
(Set forth the amount on which the filing fee is calculated and state how
it was determined):
5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
GC Companies, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
(617) 278-5600
[GC COMPANIES LOGO]
January 26, 1998
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 3, 1997
The Annual Meeting of Stockholders of GC Companies, Inc. will be held at
10:00 a.m., Eastern Standard Time, on Tuesday, March 3, 1998, AT THE COMPANY'S
CORPORATE HEADQUARTERS, 27 BOYLSTON STREET (ROUTE 9), ADJACENT TO THE CHESTNUT
HILL GENERAL CINEMA THEATRE, CHESTNUT HILL, MASSACHUSETTS, for the following
purposes:
1. To elect two Class I directors in accordance with the By-Laws of the
Company.
2. To consider and act on a proposal to ratify the appointment by the
Board of Directors of Deloitte & Touche LLP as the Company's
independent auditors for the current fiscal year.
3. To transact such other business as may properly come before the meeting
and any adjournments of the meeting.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
Philip J. Szabla
Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
GC Companies, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
(617) 278-5600
[GC COMPANIES LOGO]
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
MARCH 3, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of GC Companies, Inc. (the "Company") for use
at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Tuesday, March
3, 1998, AT THE COMPANY'S CORPORATE HEADQUARTERS, 27 BOYLSTON STREET (ROUTE 9),
ADJACENT TO THE CHESTNUT HILL GENERAL CINEMA THEATRE, CHESTNUT HILL,
MASSACHUSETTS, and at any adjournments thereof. All shares will be voted in
accordance with the instructions contained in the proxy, but if the proxies
which are signed and returned do not specify a vote on any proposal, the proxies
will be voted FOR the election of the nominees for director named herein, and
FOR the ratification of the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent auditors for the current fiscal year.
Any proxy may be revoked by a stockholder at any time before it is exercised by
providing written notice of revocation to the Secretary of the Company (at the
address set forth above), by executing a proxy bearing a later date, or by
voting in person at the Annual Meeting. The mailing of this proxy statement and
accompanying form of proxy is expected to commence on or about January 26, 1998.
In addition to solicitations of proxies by mail, the Company's officers,
directors or employees may solicit proxies by telephone or personal
communication. All costs of soliciting proxies, including reimbursement of GC
Companies, Inc. fees of certain brokers, fiduciaries and nominees in obtaining
voting instructions from beneficial owners, will be borne by the Company.
Although stock transfer books will remain open, the Board of Directors has
fixed the close of business on January 14, 1998 as the record date for
determining the stockholders having the right to vote at the Annual Meeting. At
the meeting, each share of Common Stock of the Company ("Common Stock") is
entitled to one vote. At the close of business on January 14, 1998, there were
7,710,698 shares of Common Stock outstanding and entitled to vote at the
meeting.
Shares of Common Stock represented in person or by proxy at the Annual
Meeting (including abstentions and broker non-votes) will be tabulated by the
inspectors of election appointed for the meeting and will be counted in
determining that a quorum is present. Votes are counted using written ballots.
<PAGE> 4
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of January 20, 1998 (except
as noted in footnotes 4 and 5 below) with respect to the beneficial ownership of
the Company's Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of the Company's Common
Stock, (ii) each executive officer named in the Summary Compensation Table,
(iii) each director of the Company, and (iv) all current executive officers and
directors as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
NAME AND ADDRESS -----------------------
OF BENEFICIAL OWNER NUMBER PERCENT
- --------------------------------------------------------------------- --------- -------
<S> <C> <C>
Smith Family Group(2)(3)............................................. 2,222,208 28.82%
c/o Richard A. Smith
GC Companies, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
Richard A. Smith(2)(3)............................................... 1,458,877 18.92%
c/o GC Companies, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
Nancy L. Marks(2)(3)................................................. 1,030,299 13.36%
c/o GC Companies, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
Gabelli Funds, Inc.(4)............................................... 1,188,812 15.42%
One Corporate Center
Rye, NY 10580
Harris Associates L.P. and Harris Associates, Inc.(5)................ 554,170 7.19%
Two North LaSalle Street
Suite 500 Chicago, IL 60602
William L. Brown..................................................... 1,757 *
Peter C. Read........................................................ 500 *
Leonard A. Schlesinger............................................... -0- --
Francis E. Sutherby.................................................. -0- --
Robert A. Smith(2)(3)(6)............................................. 93,345 1.21%
Paul R. DelRossi(1)(7)............................................... 35,959 *
William B. Doeren(1)(8).............................................. 4,130 *
John G. Berylson(1)(2)(3)(9)......................................... 131,321 1.70%
All current directors and officers as a group (10 persons)
(2)(3)(10)......................................................... 1,725,889 22.38%
</TABLE>
- ---------------
* Less than 1%
(1) The number of shares of Common Stock reported in the table for the
executive officers of the Company individually and as a group includes
shares allocated to each executive officer's account under the Company's
Employee Stock Ownership Plan ("ESOP"), as to which the officers share
voting power with the trustee of the ESOP. The number of shares is as
follows: Paul R. Del Rossi -- 582; William B. Doeren --12; John G. Berylson
-- 42; G. Gail Edwards -- 0; and all current executive officers as a group
-- 636. Except as set forth in the preceding sentence or in the following
footnotes, each stockholder referred to above has sole voting and
investment power with respect to the shares listed.
(2) Certain of the shares included in the table have been counted more than
once because of certain rules and regulations of the Securities and
Exchange Commission ("SEC"). The total number of shares
2
<PAGE> 5
owned by, or for the benefit of, Richard A. Smith, Nancy L. Marks and
members of their families is as shown for the "Smith Family Group". See
Note 3. Mr. Smith and Mrs. Marks are "control" persons of the Company
within the meaning of the rules and regulations of the SEC.
(3) The Smith Family Group includes Richard A. Smith, Chairman and Chief
Executive Officer of the Company; Nancy L. Marks, Richard A. Smith's
sister; Robert A. Smith, President and Chief Operating Officer of the
Company, who is Richard A. Smith's son; John G. Berylson, Senior Vice
President and Chief Investment Officer of the Company, who is Richard A.
Smith's son-in-law; other members of their families; and various Smith
family corporations, trusts and charitable foundations. Members of the
Smith Family Group possess sole or shared voting power over all of the
shares shown in the table as being beneficially owned by the Smith Family
Group.
Certain members of the Smith Family Group have filed a Schedule 13D dated
December 15, 1993 (the "Smith Family Group 13D") with the SEC. The Smith
Family Group 13D discloses that certain members of the Smith Family Group
have executed the "Smith-Lurie/Marks Family Stockholders' Agreement Re GC
Companies, Inc." dated December 15, 1993, as amended and supplemented (the
"Stockholders' Agreement"). With certain exceptions, the Stockholders'
Agreement imposes restrictions on the ability of members of the Smith
Family Group to dispose of their shares of Common Stock of the Company for
five years from the date of the Stockholders' Agreement. According to the
Smith Family Group 13D, not all of the shares of Common Stock owned
beneficially by the members of the Smith Family Group are subject to the
Stockholders' Agreement. Currently, 1,801,432 shares of Common Stock are
subject to the terms of the Stockholders' Agreement.
(4) The information reported is based on an amendment to Schedule 13D dated
December 12, 1996 filed with the SEC by the Gabelli Funds, Inc. and its
affiliates (collectively, the "Gabelli Affiliates"). The Gabelli Affiliates
have sole investment power over 1,188,812 shares of Common Stock reported
in the table, and sole voting power over 1,169,312 of such shares.
(5) The information reported is based on an amendment to Schedule 13G dated
February 19, 1997 filed with the SEC by Harris Associates L.P. and its
affiliate Harris Associates, Inc. (collectively, "Harris"). Harris has sole
investment power over 143,170 shares of Common Stock, shared investment
power over 554,170 additional shares of Common Stock and shared voting
power over all of the shares of Common Stock reported in the table.
(6) Includes 16,000 shares held by Robert A. Smith as trustee, as to which he
disclaims beneficial ownership. Robert A. Smith is the son of Richard A.
Smith, Chairman and Chief Executive Officer of the Company, and is the
brother-in-law of John G. Berylson, Senior Vice President and Chief
Investment Officer of the Company.
(7) Includes 405 shares of Common Stock held by members of Mr. Del Rossi's
immediate family and 22,387 shares of Common Stock subject to outstanding
options exercisable within 60 days of January 20, 1998. Also includes 3,522
shares of restricted Common Stock over which Mr. Del Rossi has voting but
not investment power.
(8) Consists of 4,130 shares of Common Stock subject to options exercisable
within 60 days of January 20, 1998.
(9) Includes 80,937 shares held by Mr. Berylson's wife, 16,000 shares held in
an insurance trust for the benefit of Mr. Berylson's wife, 20,006 shares
held by Mr. Berylson as a trustee, as to which Mr. Berylson disclaims
beneficial ownership, and 5,145 shares of Common Stock subject to
outstanding options exercisable within 60 days of January 20, 1998. Also
includes 1,135 shares of restricted stock over which Mr. Berylson has
voting, but not investment power. Mr. Berylson, a member of the Smith
Family Group, is the son-in-law of Richard A. Smith, Chairman and Chief
Executive Officer of the Company, and is the brother-in-law of Robert A.
Smith, President and Chief Operating Officer of the Company.
(10) Includes 39,529 shares of Common Stock subject to outstanding options
exercisable within 60 days of January 20, 1998. Also includes 4,657 shares
of restricted Common Stock described in Notes 7 and 9 above.
3
<PAGE> 6
1. ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of three
classes. At each Annual Meeting, a class of directors is elected for a full term
of three years to succeed those whose terms are expiring.
Two Class I directors are to be elected for a three year term at the Annual
Meeting. The persons named in the accompanying proxy will vote each proxy for
the election of the nominees listed below, unless directed otherwise. Each
nominee is currently a member of the Board of Directors. Mr. Schlesinger was
elected to the Board of Directors in May, 1997. The Company has no reason to
believe that either nominee will become unavailable for election, but if for any
reason that should be the case, the proxies may be voted for substitute
nominees. A plurality of the votes cast at the Annual Meeting is required to
elect a director. Proxies withholding authority to vote for a nominee will be
treated as votes cast against the election of such nominee. Broker non-votes
will not be treated as votes cast and therefore will not be counted in
calculating a plurality.
All of the nominees for director, and the directors who will continue to
serve after the 1998 Annual Meeting, are listed below with their principal
occupations for the last five years.
NOMINEES FOR TERM EXPIRING IN 2001 (CLASS I DIRECTORS)
FRANCIS E. SUTHERBY, age 65, Director since 1993
Partner of Deloitte & Touche LLP, the independent auditors of the Company,
from 1968 until his retirement in May 1992.
LEONARD A. SCHLESINGER, age 45, Director since May, 1997
Mr. Schlesinger is the George Fisher Baker, Jr. Professor of Business
Administration at the Harvard Business School. He has served as a faculty member
at the Harvard Business School for more than five years. Mr. Schlesinger serves
as a director of The Limited, Inc., a clothing retailer, Pegasystems, Inc., a
customer service software company, and Borders Group, Inc., a book store chain.
DIRECTOR WHOSE TERM EXPIRES IN 1999 (CLASS II DIRECTOR)
PETER C. READ, age 61, Director since 1994
Currently active in consulting, venture capital and civic and charitable
matters; Executive Vice President of The First National Bank of Boston until his
retirement in September 1992; Director of Granite State Bank.
DIRECTORS WHOSE TERMS EXPIRE IN 2000 (CLASS III DIRECTORS)
WILLIAM L. BROWN, age 76, Director since 1993
Retired Chairman of Bank of Boston Corporation and its principal
subsidiary, The First National Bank of Boston; Director of Standex International
Corporation and Ionics, Incorporated and a trustee of Bradley Real Estate Trust.
RICHARD A. SMITH, age 73, Director since 1993
Chairman and Chief Executive Officer of the Company since 1993; President
of the Company from 1993 until November 1995; Chairman of Harcourt General, Inc.
("Harcourt General") and of The Neiman Marcus Group, Inc., a majority owned
subsidiary of Harcourt General ("Neiman Marcus"); Chief Executive Officer of
Harcourt General and of Neiman Marcus since January 15, 1997 and prior to
December 1991;
4
<PAGE> 7
Director of Neiman Marcus. Mr. Smith is the father of Robert A. Smith, President
and Chief Operating Officer of the Company, and the father-in-law of John G.
Berylson, Senior Vice President and Chief Investment Officer of the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended October 31, 1997, the Board of Directors held
four meetings and acted by unanimous written consent on two other occasions.
During fiscal 1997, each director of the Company participated in at least 75% of
the aggregate number of Board meetings and meetings held by the committees of
which he is a member. The By-laws of the Company designate three principal
standing committees. Set forth below are descriptions of the functions of such
committees and the names of their current members.
Audit Committee. The members of the Audit Committee, which met three times
during fiscal 1997, are Messrs. Sutherby (Chairman), Brown, Read and
Schlesinger. The functions of the Audit Committee include the review of the
scope of the services of the Company's independent auditors and the
responsibilities of the Company's internal audit department and a continuing
review of the Company's internal procedures and controls. The Audit Committee
also annually reviews the Company's audited financial statements, considers the
qualifications and fees of the independent auditors of the Company and makes
recommendations to the Board of Directors as to the selection of the auditors
and the scope of their audit services.
Compensation Committee. The members of the Compensation Committee, which
met two times during fiscal 1997, are Messrs. Brown (Chairman), Sutherby, Read
and Schlesinger. The functions of the Compensation Committee include the review
or determination of salaries, benefits and other compensation for officers and
key employees of the Company and the administration of the Company's incentive
plans.
Special Review Committee. The members of the Special Review Committee,
which met once during fiscal 1997, are Messrs. Sutherby (Chairman), Brown, Read
and Schlesinger. The primary function of the Special Review Committee is to make
all determinations for the Company pursuant to the terms of the Intercompany
Services Agreement between the Company and Harcourt General, including the
consideration of the fees charged to the Company by Harcourt General pursuant to
the Intercompany Services Agreement. For additional information regarding the
Intercompany Services Agreement, see "Executive Compensation -- Summary
Compensation Table" (Note 1).
The Company does not currently have a Nominating Committee. The Company's
By-laws provide that the Board of Directors or any nominating committee
appointed by the Board of Directors must carefully consider all suggestions for
nominees to the Board of Directors which are timely received in proper written
form. To be timely, notice shall be delivered to, or mailed and received by, the
Secretary of the Company at the principal executive offices of the Company (see
"Deadline for Submission of 1999 Stockholder Proposals and Nominations"). To be
in proper written form, a stockholder's notice shall set forth in writing (i) as
to each person whom the stockholder proposes to nominate for election as a
director, all information relating to such person that is required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC,
including such person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected and (ii) as to the stockholder
giving the notice (x) the name and address, as they appear on the Company's
books, of such stockholder and (y) the class and number of shares of the
corporation which are beneficially owned by such stockholder.
DIRECTORS' COMPENSATION
Directors who are not affiliated with the Company each receive an annual
retainer of $15,000 and a fee of $1,500 per Board of Directors meeting attended,
plus travel and incidental expenses (none in fiscal 1997) incurred in attending
meetings and carrying out their duties as directors. Such directors also receive
a fee of
5
<PAGE> 8
$750 (the Chairmen receive $1,000) for each committee meeting attended. If a
director is unable to attend a meeting in person but participates by telephone,
he receives one-half of the fee that otherwise would be payable.
The Company offers non-employee directors the alternative of receiving
directors' fees on a deferred basis. Those directors may elect to defer receipt
of all or a specified portion of their fees (i) in the form of cash with
interest at a rate equal to the average of the top rates paid by major New York
banks on three month negotiable certificates of deposit; or (ii) in the form of
stock based units, the value of each unit initially being equal to the fair
market value of one share of Common Stock of the Company on the date the fees
would otherwise be payable. To date, each director has elected to receive fees
on a deferred basis using the stock based method.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. The Company believes that all filing requirements
applicable to its insiders were complied with during fiscal 1997.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information on the compensation provided for
services rendered to the Company and its predecessor during fiscal 1997, 1996
and 1995 to the Company's Chief Executive Officer and the other executive
officers of the Company at the end of fiscal 1997 who were not employed by
Harcourt General, Inc. ("Harcourt General").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
AWARDS
LONG TERM COMPENSATION ------------------------
---------------------------------- RESTRICTED SECURITIES PAYOUTS
OTHER ANNUAL STOCK UNDERLYING ---------- ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS LTIP COMPENSATION
POSITION YEAR ($) ($)(2) ($)(3) ($)(4) (#) PAYOUTS(5) ($)(6)
- ------------------------ ------ -------- -------- ------------ ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard A. Smith........ 1997 -- -- -- -- -- -- --
Chairman (President 1996 -- -- -- -- -- -- --
until November 1995 -- -- -- -- -- -- --
1995) and Chief
Executive Officer (1)
Robert A. Smith......... 1997 -- -- -- -- -- -- --
President and Chief 1996 -- -- -- -- -- -- --
Operating Officer (1) 1995 -- -- -- -- -- -- --
Paul R. Del Rossi....... 1997 $330,076 $ 59,807 -- -- 3,200 -- $ 13,128
President and Chief 1996 $321,115 $ 49,600 $123,347 -- 3,000 -- $ 15,133
Executive Officer of 1995 $280,000 $140,000 $ 71,657 -- -- -- $ 10,001
General Cinema
Theatres, Inc. (7)
William B. Doeren....... 1997 $318,774 $ 34,708 -- -- 3,000 -- $ 11,717
Executive Vice 1996 $311,538 $ 38,400 -- -- 8,825 -- $ 1,188
President and Chief 1995 -- -- -- -- -- -- --
Operating Officer of
General Cinema
Theatres, Inc. (8)
John G. Berylson........ 1997 $300,138 $150,000 -- $ 48,792 2,800 $179,269 $ 33,452
Senior Vice President 1996 $273,507 -- -- -- 3,000 $705,000 $ 11,910
and Chief Investment 1995 $239,654 $ 84,000 -- -- 2,500 -- $ 10,503
Officer (9)
G. Gail Edwards......... 1997 $253,346 $125,665 -- -- 7,120 -- $ 12,137
Vice President, Chief 1996 $ 85,865 $ 44,000 -- -- -- -- $ 1,937
Financial Officer and 1995 -- -- -- -- -- -- --
Treasurer (10)
</TABLE>
- ---------------
(1) Under the Intercompany Services Agreement between the Company and Harcourt
General entered into in December 1993, and amended in November, 1995,
Harcourt General provides the services of Richard A. Smith as Chairman and
Chief Executive Officer of the Company, and Robert A. Smith as President
and Chief Operating Officer of the Company, as well as such additional
corporate services as are agreed to from time to time between the Company
and Harcourt General. The payment of fees under the Intercompany Services
Agreement has been and will continue to be subject to the approval of the
Special Review Committee, a committee of the Company's Board of Directors
consisting solely of directors who are not affiliated with Harcourt
General. Richard A. Smith and Robert A. Smith receive all of their cash and
non-cash compensation from Harcourt General. Of the amounts paid by the
Company to Harcourt General under the Intercompany Services Agreement for
fiscal 1997, 1996 and 1995, approximately $242,838, $429,000 and $381,900,
respectively, were attributable to Richard A. Smith's services, and
approximately $202,230, $193,900 and $100,700, respectively, were
attributable to
7
<PAGE> 10
Robert A. Smith's services. These amounts include costs related to their
base compensation, bonus and benefits, all of which are direct obligations
of Harcourt General.
(2) Bonus payments are reported with respect to the year in which the related
services were performed.
(3) No disclosure regarding items included in this category is required unless
the amount in any year exceeds the lesser of $50,000 or 10% of the annual
salary and bonus for the named executive officer.
(4) Twenty percent of an award of restricted Common Stock are freed from the
restrictions on transfer each year, commencing one year after the date of
grant, provided that the recipient continues to be employed by the Company
on the anniversary date of the grant. Holders of restricted stock are
entitled to vote their restricted shares. In the event of termination of
employment for any reason, other than death or permanent disability,
restricted shares are forfeited by the holder and revert to the Company.
(5) The long term incentive plan ("LTIP") payout reported in this category with
respect to Mr. Berylson for fiscal 1997 includes cash portions of Mr.
Berylson's share of an incentive pool relating to the Company's investment
activity in accordance with the terms of the GCC Investments, Inc.
Incentive Plan (the "Pool Plan") See, "Long Term Incentive Plans Awards in
Last Fiscal Year.".
(6) The items accounted for in this category include the value of allocated
ESOP shares, the cost to the Company of matching contributions under the
Key Employee Deferred Compensation Plan and life insurance premiums. For
fiscal 1997, such amounts for each of the named executive officers other
than Richard A. Smith and Robert A. Smith were, respectively, as follows:
Mr. Del Rossi -- $500, $11,321 and $1,307; Mr. Doeren -- $500, $9,955 and
$1,262; Mr. Berylson -- $500, $31,764 and $1,188; and Ms. Edwards -- $0,
$11,134 and $1,003.
(7) The stock option and restricted stock awards shown in the table for Mr. Del
Rossi for fiscal 1994 were awarded pursuant to Mr. Del Rossi's employment
agreement with the Company dated December 14, 1993. At the end of fiscal
1997, Mr. Del Rossi held 3,522 shares of restricted stock, having a market
value (based on the New York Stock Exchange closing price of $41.9375 at
October 31, 1997) of $147,704. All of the restricted shares held by Mr. Del
Rossi were granted in fiscal 1994. See "Transactions Involving Management."
(8) Mr. Doeren's employment commenced on October 2, 1995.
(9) The restricted stock awards shown in the table for Mr. Berylson are based
upon 30% of the amounts available for distribution, in accordance with the
Pool Plan. See, "Long Term Incentive Plan Awards in Last Fiscal Year."
(10) Ms. Edwards' employment commenced on June 24, 1996.
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding options granted under
the Company's 1993 Equity Incentive Plan during the fiscal year ended October
31, 1997 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
----------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTIONS GRANTED EMPLOYEES IN BASE PRICE ---------------------
NAME (#)(1) FISCAL YEAR ($/SH)(2) EXPIRATION DATE 5%($) 10%($)
- ------------------- ---------------- -------------- ----------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard A.
Smith(4)......... -- -- -- -- -- --
Robert A.
Smith(4)......... -- -- -- -- -- --
Paul R. Del
Rossi............ 3,200 8.21% $34.625 11/14/06 $ 69,682 $176,582
William B.
Doeren........... 3,000 7.69% $34.625 11/14/06 $ 65,327 $165,546
John G. Berylson... 2,800 7.18% $34.625 11/14/06 $ 60,972 $154,509
G. Gail Edwards.... 7,120 18.26% $34.625 11/14/06 $155,043 $392,895
</TABLE>
- ---------------
(1) No stock appreciation rights were granted to any named executive officer
during fiscal 1997. The option grants listed are non-qualified stock options
having a term of 10 years and one day; they become exercisable at the rate
of 20% on each of the first five anniversary dates of the grant.
(2) The options reflected in this table were granted at fair market value
measured by the closing price of the Common Stock on the New York Stock
Exchange on the date of grant.
(3) These potential realizable values are based on assumed rates of appreciation
required by applicable regulations of the Securities and Exchange
Commission.
(4) Richard A. Smith and Robert A. Smith do not participate in the Company's
1993 Equity Incentive Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table provides information regarding stock options exercised
during fiscal 1997 as of October 31, 1997 and the number and value of stock
options held at October 31, 1997 by the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
OCTOBER 31, OPTIONS AT
1997(#)(5) OCTOBER 31, 1997(4)
------------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- --------------------------- ---------------- --------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Richard A. Smith(3)........ -- -- -- --
Robert A. Smith(3)......... -- -- -- --
Paul R. Del Rossi(4)....... 5,100 $ 141,300 46,789/10,473 $1,263,340/$61,233
William B. Doeren.......... -- -- 1,765/10,060 $ 16,326/$90,430
John G. Berylson........... -- -- 3,313/5,844 $ 36,004/$62,052
G. Gail Edwards............ -- -- 0/7,120 0/$59,630
</TABLE>
- ---------------
(1) Represents the difference between the closing price of the Common Stock on
the New York Stock Exchange on the date of exercise and the option exercise
price.
9
<PAGE> 12
(2) The value of unexercised in-the-money options is calculated by multiplying
the number of underlying shares by the difference between the closing price
of the Company's Common Stock on the New York Stock Exchange at October 31,
1997, and the option exercise price for those shares. These values have not
been realized. The closing price of the Company's Common Stock on the New
York Stock Exchange on October 31, 1997 was $41.9375.
(3) Richard A. Smith and Robert A. Smith do not participate in the Company's
1993 Equity Incentive Plan.
(4) The number of shares listed in the first column for Mr. Del Rossi includes
the surrender of vested options to purchase 5,100 shares of Common Stock at
various exercise prices. The Company paid Mr. Del Rossi an aggregate of
$141,300 in connection with those surrenders. That amount, which was
calculated based on the difference between the closing price of the Common
Stock on the New York Stock Exchange on the respective dates Mr. Del Rossi
surrendered these options and the various option exercise prices, is
included in the second column in this table.
(5) There are no outstanding SAR's.
LONG-TERM INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR
The following table provides information regarding Long-Term Incentive Plan
awards during the fiscal year ended October 31, 1997 to the executive officers
named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SHARES, PERFORMANCE OR OTHER PERIOD
NAME UNITS OR OTHER RIGHTS UNTIL MATURATION OR PAYOUT
------------------------------- --------------------- ---------------------------
<S> <C> <C>
Richard A. Smith (1)........... -- --
Robert A. Smith (1)............ -- --
Paul R. Del Rossi (2).......... $ 44,807 --
William B. Doeren (2).......... $ 34,708 --
John G. Berylson (3)........... $557,763 2
G. Gail Edwards (1)............ -- --
</TABLE>
(1) Richard A. Smith, Robert A. Smith and Ms. Edwards do not participate in any
of the Company's Long-Term Incentive Plans.
(2) Messrs. Del Rossi and Doeren participate in General Cinema Theatres, Inc.
EVA Incentive Plan. See the description of this plan under the Compensation
Committee Report on Executive Compensation.
(3) Mr. Berylson participates in the GCC Investments, Inc. Incentive Plan (the
"Pool Plan"). The amount in such incentive pool allocated to Mr. Berylson
included $162,641, which is Mr. Berylson's share of 20% of (i) the realized
cash profit from the Vision Express transaction plus (ii) certain dividends
and directors' fees received, minus (iii) an 8% annually compounded rate of
return to the Company, minus (iv) the remaining loss on the Company's food
service investment; and (v) certain Group expenses. Of this amount, $113,849
or 70% is payable in cash in equal installments of $37,950 over three years,
and $48,792 or 30% is payable in restricted stock, which vests 20% per year
over five years. The number of shares of restricted stock awarded were based
upon the closing price per share of the Company's Common shares on the New
York Stock Exchange on October 31, 1997. In addition, Mr. Berylson was
allocated $380,705, representing a 35% share of an investment banking fee
relating to the acquisition of international theatre assets, which fee is
payable in cash in three equal installments of $126,902 over two years. Mr.
Berylson also received $14,417, representing a final payment in connection
with a release of escrow proceeds from the sale of the Company's radio group
investment in 1996.
10
<PAGE> 13
PENSION PLANS
The Company maintains a funded, qualified pension plan known as the GC
Companies, Inc. Retirement Plan (the "Retirement Plan"). Non-union employees of
the Company who have reached the age of 21 and completed one year of service
with 1,000 or more hours participate in the Retirement Plan, which pays benefits
upon retirement or termination of employment by reason of disability. Benefits
under the Retirement Plan become fully vested after five years of service with
the Company.
The Company also maintains a Supplemental Executive Retirement Plan (the
"SERP"). The SERP is an unfunded, nonqualified plan under which benefits are
paid from the Company's general assets to supplement Retirement Plan benefits
and Social Security. Executive, administrative and professional employees with
an annual base salary at least equal to a selfadjusting minimum ($100,000 as of
December 31, 1997) are eligible to participate in the SERP. Benefits under the
SERP become fully vested after five years of service with the Company. Former
Harcourt General employees who became employees of the Company in connection
with the Spinoff have been given full credit under the SERP for their service
with and compensation from Harcourt General. At normal retirement age (generally
age 65), a participant with 25 or more years of service is entitled to payments
under the SERP sufficient to bring his or her combined annual benefit from the
Retirement Plan and the SERP, computed as a straight life annuity, up to 50% of
the participant's highest consecutive 60 month average of annual pensionable
earnings, less 60% of his or her estimated annual primary Social Security
benefit. If the participant has fewer than 25 years of service or retired before
age 62, the combined benefit is reduced. In computing the combined benefit,
"pensionable earnings" means base salary, including any salary which may have
been deferred.
The following table shows the estimated annual pension benefits payable to
employees in various compensation and years of service categories. The estimated
benefits apply to an employee retiring at age 65 in 1998 who elects to receive
his or her benefit in the form of a straight life annuity. These benefits
include amounts attributable to both the Retirement Plan and the SERP and are in
addition to any retirement benefits that might be received from Social Security.
ESTIMATED ANNUAL RETIREMENT BENEFITS
UNDER THE RETIREMENT PLAN AND THE SERP(1)
<TABLE>
<CAPTION>
TOTAL YEARS OF SERVICE
AVERAGE -----------------------------------------------------------
PENSIONABLE 25
EARNINGS 5 10 15 20 OR MORE
---------------------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000.................... $10,000 $ 20,000 $ 30,000 $ 40,000 $ 50,000
200,000.................... 20,000 40,000 60,000 80,000 100,000
300,000.................... 30,000 60,000 90,000 120,000 150,000
400,000.................... 40,000 80,000 120,000 160,000 200,000
500,000.................... 50,000 100,000 150,000 200,000 250,000
</TABLE>
- ---------------
(1) The amounts actually payable will be lower than the amounts shown above,
since the above amounts will be reduced by 60% of the participant's
estimated primary Social Security benefit.
11
<PAGE> 14
The following table shows the pensionable earnings and credited years of
service for the executive officers named in the Summary Compensation Table as of
October 31, 1997 and years of service creditable at age 65. Credited service may
not exceed 25 years for purpose of calculating retirement benefits under any of
the Company's retirement plans. Richard A. Smith and Robert A. Smith do not
participate in the Retirement Plan or the SERP.
<TABLE>
<CAPTION>
CREDITED YEARS OF SERVICE
PENSIONABLE EARNINGS -------------------------------
FOR YEAR ENDED AT AT
NAME OCTOBER 31, 1997 OCTOBER 31, 1997 AGE 65
---------------------------------- -------------------- ---------------- ------
<S> <C> <C> <C>
Mr. Del Rossi..................... $330,076 21(1) 25(1)
Mr. Doeren........................ $318,774 2 25
Mr. Berylson...................... $300,138 4 16
Ms. Edwards....................... $253,346 1 24
</TABLE>
- ---------------
(1) Pursuant to his previous employment agreement with the Company, Mr. Del
Rossi received two years of service credit for each of his first five years
of employment with the Company after the Spinoff for purposes of calculating
his benefits under the SERP. See "Transactions Involving Management."
TRANSACTIONS INVOLVING MANAGEMENT
Paul R. Del Rossi
On December 14, 1993, the Company entered into an employment agreement with
Mr. Del Rossi, then President and Chief Executive Officer of General Cinema
Theatres, Inc. for an initial term of four years.
On November 1, 1997, the Company entered into an amended employment
agreement (the "Employment Agreement") with Mr. Del Rossi, Chairman of General
Cinema Theatres, for a term of four years, pursuant to which Mr. Del Rossi will
serve as Chairman of General Cinema Theatres, Inc. and receive a salary of
$330,000 for fiscal year 1998, and a salary of at least $237,500 plus an hourly
rate of $300 per hour for each hour worked over 792 hours per year for fiscal
years 1999 through October 31, 2002, unless the Agreement is terminated earlier.
Mr. Del Rossi will no longer participate in the EVA Plan, but will receive all
previously earned EVA bonuses, and may earn a bonus for extraordinary
performance as determined by the President of the Company.
In addition, Mr. Del Rossi's stock options will vest as of October 31, 1998
and he will be eligible for stock options as determined by the Compensation
Committee for fiscal years 1997 and 1998. His retirement benefits will continue
under the Company's Retirement Plan. In lieu of benefits provided under the
Company's SERP, the Company will fund $181,500 per year to a trust for his named
beneficiaries. Through October 31, 2002, Mr. Del Rossi will receive family
coverage under the Company's Executive Medical Plan, group term life insurance
coverage, eligibility to participate in the Key Executive Deferred Compensation
Plan and other fringe benefits afforded vice presidents of the Company. The
Agreement may be terminated by the Company only for cause, death or disability.
The Agreement may be terminated by Mr. Del Rossi upon a change of control,
defined to be a change in Board composition after a change of ownership
resulting in the Smith Family Group controlling less than twenty percent (20%)
of the Company or a third party obtaining over twenty percent (20%) of the
voting stock of the Company.
If the Agreement is terminated due to total disability or change of
control, salary to the end of term will be paid in a lump sum and all benefits
will continue to the end of the term. If the Agreement is terminated by Mr. Del
Rossi or the Company for cause, salary and bonuses will cease and benefits will
cease, except for pension benefits and payments into trust in lieu of SERP
payments. In the event of Mr. Del Rossi's death, salary will cease but
beneficiaries will be entitled to group life insurance coverage, pension and
trust payments will continue and Mr. Del Rossi's spouse will be entitled to
family health coverage until the end of the original term.
12
<PAGE> 15
In addition, Mr. Del Rossi has agreed not to compete with the Company
throughout the term of the Agreement and for a period of eighteen (18) months
thereafter in the motion picture exhibition business.
For purposes of the Employment Agreement, the term "cause" means a breach
of duty in the course of employment involving fraud, acts of dishonesty, acts of
moral turpitude, repeated insubordination, failure to devote his full time,
loyalty and best efforts to the performance of his duties or conviction of a
felony.
Mr. Del Rossi is a participant in the Company's Key Executive Stock
Purchase Loan Plan (the "Loan Plan"). From November 1, 1995 through January 20,
1998, and currently, the largest aggregate amount of indebtedness outstanding by
Mr. Del Rossi under the Loan Plan was $420,000 (the "Loans"), and the annual
rate of interest on the Loans at all times during such period was five percent
(5.0%). The principal purpose of the Loan Plan, which provides loans to key
employees to finance their purchase of shares of Common Stock, is to encourage
the acquisition and retention of Common Stock by such employees so that the
continuing proprietary interest of such employees in the Company may serve as an
additional incentive to them. Each loan under the Loan Plan is evidenced by a
promissory note bearing interest at a rate determined by the Compensation
Committee of the Board of Directors of the Company, and is secured by a pledge
of the securities purchased with the loan proceeds. The unpaid principal amount
of each such loan (and any unpaid interest) becomes due and payable seven months
after the loan participant's employment with the Company has terminated. The
unpaid principal amount of a loan of a participant who ceases to be an employee
of the Company (a) more than four years after the date of the loan or (b) by
reason of involuntary discharge (except for cause), death, or retirement or
disability, shall be repayable at the option of the participant (or his legal
representative, as the case may be) either in cash or in the number of shares
obtained with the proceeds of the loan. The aggregate unpaid principal amount of
all stock purchase loans outstanding under the Loan Plan may not exceed $3.0
million at any time.
William B. Doeren
Pursuant to an agreement between Mr. Doeren and the Company, effective
August 1995, Mr. Doeren is entitled to receive severance payments in the event
his employment is terminated in certain situations. If the Company terminates
Mr. Doeren's employment other than for cause or other than due to his total
disability or death or if Mr. Doeren voluntarily terminates his own employment
due to a change of control of the Company, Mr. Doeren will receive an amount
equal to his then-current annual salary which amount will be paid in 12 monthly
installments following such termination but will be reduced by any amounts
received by him from other employment during the period beginning six months and
ending 12 months following such termination.
G. Gail Edwards
The Company has provided loans totaling $120,000 to Ms. Edwards, the
Company's Vice President, Chief Financial Officer and Treasurer. The loans bear
interest at 5% per annum (with no interest on $100,000 thereof for fiscal year
1997) and are payable in annual principal installments equal to the lesser of
$20,000 per year or 20% of Ms. Edwards annual bonus commencing January 1, 1998.
The loans have a current principal balance of $100,000 and are unsecured and
payable in full on or before December 31, 2002 or sooner if Ms. Edwards'
employment is terminated for cause.
---------------------
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934, each as amended, that might incorporate future filings, including this
proxy statement, in whole or in part, the following Compensation Committee
Report on Executive Compensation and Stock Performance Graph shall not be deemed
to be incorporated by reference into any such filings, nor shall such sections
of this proxy statement be deemed to be incorporated into any future filings
made by the Company under the Securities Act of 1933 or the Securities Exchange
Act of 1934.
13
<PAGE> 16
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of William L. Brown (Chairman),
Peter C. Read, Francis E. Sutherby and Leonard A. Schlesinger. The members of
the Compensation Committee are all independent directors.
The principal responsibility of the Committee is to review the performance
of, and determine the compensation for, certain of the officers of the Company
who are not also executive officers of Harcourt General. The individuals in this
group include the named executive officers in the Summary Compensation Table.
The compensation of Harcourt General's executive officers who are also executive
officers of the Company is determined by Harcourt General's Compensation
Committee.
Compensation Policies
The principal objectives of the Company's executive compensation program
are to reward competitively its executive officers in order to attract and
retain excellent management and to provide incentives that will most sharply
focus the attention of those individuals on the goal of increasing the
profitability of the Company over both the short and long terms.
Early in each fiscal year, the Committee considers the recommendations of
the Chief Executive Officer, which are supported by data generated by the
Company's Human Resources Department, for each component of compensation of the
Company's executive officers. The Committee reviews those recommendations and
then approves them or makes such modifications as it deems appropriate.
The principal components of the Company's compensation program are:
Base Salary:
Base salary is determined with reference both to salary survey
information from recognized compensation consulting firms and to each
executive officer's level of responsibility, experience and performance.
The salary survey data is used to establish benchmark amounts for both base
salary and total cash compensation for each executive position. Comparisons
are made to a range of companies included in such salary surveys, with the
principal selection criteria for comparisons being similar revenues to the
Company or to the appropriate division within the Company. While there are
no hard and fast rules which bind the Committee, the Company generally sets
its salary and total cash compensation benchmarks (assuming that maximum
bonuses are achieved) for executive officers at the 75th percentile of the
comparison group of companies in order to compete for and retain the best
management talent available. Because the Company competes for executive
talent with a broad range of companies, the Committee does not limit its
comparison information for compensation purposes to the companies included
in the peer group in the Stock Performance Graph.
The Committee reviews in detail the base salary levels for each of the
executive officers of the Company. While the Committee uses the benchmarks
as a reference point, a particular individual's base salary may vary from
the benchmark depending upon his salary history, experience, individual
performance, contractual obligations of the Company, guidelines determined
by the Chief Executive Officer with respect to salary increases for the
entire Company, and the subjective judgment of the Committee.
Annual Incentive Plan:
The bonus program is intended to put substantial amounts of total cash
compensation at risk with the intent of focusing the attention of the
executive officers on achieving both the Company's and their
14
<PAGE> 17
division's performance goals and their individual goals, thereby
contributing to profitability and building shareholder value.
The determination of annual bonuses for executive officers is based
principally on the achievement of performance objectives by the operating
division for which the executive officer is responsible and the executive's
attainment of individual performance objectives which typically include
achievement of specific tasks.
Absent extraordinary circumstances, if the financial performance
targets are exceeded, bonus awards are not increased over the maximum bonus
values established by the Committee. If the performance targets are not
met, bonus awards are generally reduced at the discretion of the Committee.
If the Company and/or the relevant division falls sufficiently short of its
performance target, there is a presumption that bonuses would not be paid
absent special circumstances. If corporate and/or division performance
targets are met, but an individual falls short of his or her performance
goals, the individual's bonus could be reduced or eliminated in the
discretion of the Committee.
Prior to fiscal 1997, the economic performance objectives for Mr. Del
Rossi, Mr. Doeren and the senior executives of General Cinema Theatres,
Inc. included operating cash flow, film gross profit, patronage and
concession sales. The inclusion and relative weighting of these several
objectives varied depending on the scope of each individual's
responsibilities. For fiscal 1997 and beyond, the Board and the
Compensation Committee have adopted an Economic Value Added (EVA)(R)
Incentive Plan, described under Long Term Incentive Programs below, which
replaces the current bonus plan for executives of General Cinema Theatres,
Inc.
Stock Incentives:
The Committee's purpose in awarding equity based incentives,
principally in the form of stock options which vest over a five year period
and terminate ten years from the date of grant, is to achieve as much as
possible an identity of interest between the executives and the long term
interest of the stockholders.
The principal factors considered in determining which certain
executives of the Company (including certain of the named executive
officers) were awarded equity based compensation in fiscal 1997, and in
determining the types and amounts of such awards, were salary levels,
equity awards granted to executives at other companies, as well as the
performance, experience and level of responsibility and length of service
of each executive officer. Mr. Del Rossi, Mr. Doeren and the Senior
executives of General Cinema Theatres, Inc., who participate in the Theatre
EVA Plan, have stock incentives awarded in accordance with that Plan.
Long Term Incentive Programs:
General Cinema Theatres, Inc. The Board and the Compensation
Committee adopted an Economic Value Added (EVA)(R) Incentive Plan for
executives of General Cinema Theatres, Inc. effective for fiscal year 1997
and beyond. The purpose of the EVA Incentive Plan is to provide incentive
compensation to certain key employees, including executive officers of
General Cinema Theatres, Inc., in a form which attempts to correlate the
incentive compensation payment to increases in the Company's value to its
stockholders. In general, the EVA is the excess of net operating profit
after taxes, with certain adjustments, less a capital charge. The capital
charge is a historical approximation of the return that can
- ---------------
EVA(R) is registered trademark of Stern Stewart & Co.
15
<PAGE> 18
be expected by the providers of the Company's capital. The Committee
believes that EVA is the financial performance measure which most closely
corresponds with increases in shareholder value.
EVA performance is determined by reference to the amount of
improvement or deterioration in EVA within a determined interval amount. If
the actual annual EVA is in excess of the target EVA for such year, the
performance calculation will produce an incentive compensation amount in
excess of the target incentive award; if the annual EVA is less than the
target EVA but within the interval, the performance calculation will
produce an incentive compensation amount which is less than the target EVA
award. Individual target incentive awards ("Target Bonuses") under the EVA
Incentive Plan range between 35% and 50% of base compensation. For fiscal
1997 and subsequent Plan years, the target EVA will be the sum of the
actual EVA for the prior year, plus an expected EVA improvement amount to
be determined by the Committee. The expected EVA improvement amount has
been determined for five years as follows: $2.3 million in 1997, $2.4
million in 1998, $2.5 million in 1999, $2.6 million in 2000, and $2.8
million in 2001. In 1997, the Company's EVA fell within the determined
interval amount, but did not reach the target EVA. As a result, Target
Bonuses were not achieved, but approximately 28% of the Target Bonus amount
was awarded in accordance with the terms of the Plan.
Pursuant to the EVA Incentive Plan, there are no limitations on the
amounts an executive may earn for any one year. The "Reserve Account"
feature of the EVA Incentive Plan, however, ensures that extraordinary EVA
improvements are sustained before extraordinary bonus awards are paid. Each
year the bonus declared is added to the outstanding Reserve Account balance
(which has an initial balance of zero), resulting in a balance available
for payment. Up to Target Bonus is immediately drawn out, and then
one-third of any remaining balance is also drawn out, with the remaining
two-thirds carried forward to the next year. If the Reserve Account is
greater than Target Bonus, then Target Bonus plus one-third of the
remainder will be drawn. Of this draw, a fixed amount is to be paid
automatically and the remainder is contingent upon the achievement of
professional objectives. A Reserve Account is"at risk" in the sense that
performance above target must be sustained in order for the bank to remain
positive. If performance is below target, the Reserve Account will be drawn
down, and can even go negative. This "at risk" amount maintains the fixed
sharing relationship between long term cumulative pay and cumulative
performance.
Upon termination of employment due to death, disability or retirement,
the available balance in the Reserve Account will be paid to the
terminating executive of his designated beneficiary or estate. Executives
who voluntarily leave to accept employment elsewhere or who are terminated
for cause forfeit any positive Reserve Account balances.
GCC Investments, Inc. The Board and the Compensation Committee
recently adopted the GCC Investments, Inc. Incentive Pool Plan, which was
approved by the stockholders at the 1997 Annual Meeting, for executives of
the Company's investment group. This incentive pool provides payments based
upon criteria that measure realized returns to the Company from its
investments over time, and is described in detail below under the caption
"The GCC Investments, Inc. Incentive Pool Plan."
Summary of the GCC Investments, Inc. Incentive Plan
The Plan is administered by the Committee which is composed of
non-employee directors who are not eligible to participate in the Plan.
16
<PAGE> 19
ELIGIBILITY
The employees eligible (the "Eligible Employees") to participate in and
receive compensation under the Plan are the officers of GCCI with the titles of
Chief Investment Officer, Senior Vice President and Senior Investment Officer.
Two employees of GCCI currently are eligible to participate in the Plan.
DETERMINATION OF AWARDS
An award pool is determined based on the net gains resulting from (i) a
cash profit being realized as a result of a disposition of an investment made by
GCCI, (ii) securities becoming transferable pursuant to an initial public
offering, (iii) a reevaluation of an investment six years from the date of the
investment or (iv) such other similar event that the Committee may designate
(collectively, a "Sale Event"). The net gains attributable to each Sale Event
are determined based on the amount of cash realized or realizable by GCCI as a
result of the Sale Event less an assumed rate of return and certain deductions
which reflect the cost of doing business. The Committee shall establish at or
prior to the beginning of each fiscal year (or by such later date as may be
permitted under Section 162(m) for the establishment of goals pursuant to which
performance-based compensation is to be payable for a particular period), the
specific methodology to be applied during the fiscal year to determine net gains
(e.g., what after-tax losses and expenses are to be deducted in determining net
gains). Once the net gain from any Sale Event has been determined, 20% of such
amount is set aside for awards to be made under the Plan.
For any pool which relates to an investment made prior to November 1, 1996,
46% of such pool shall be allocated to the Chief Investment Officer and 34% will
be allocated to the Senior Vice President employed by GCCI on that date.
For any pool which relates to an investment made on or after November 1,
1996, 35% of such pool shall be allocated to the Chief Investment Officer, 25%
to the Senior Vice President and 20% will be reserved for allocations to newly
hired Senior Vice Presidents, if any, or Senior Investment Officers. When an
Eligible Employee is hired, the Committee may allocate a pool percentage to such
individual, which may vest over such period of time as the Committee may deem
reasonable.
Once a total of 80% of pool percentages have been allocated to Eligible
Employees, the Committee may then also allocate another 10% to newly hired
Eligible Employees. In no event may more than 90% of pool percentages be
allocated to Eligible Employees under the Plan. Once a total of 90% of pool
percentages have been allocated to Eligible Employees, future allocations to
newly hired Eligible Employees will be deducted from Eligible Employees who
already have allocations on a pro rata basis so that total allocations to
Eligible Employees never exceed 90%. In addition, no Eligible Employee (other
than the Chief Investment Officer) will ever be entitled to a portion of a pool
in excess of 25% of the total pool. The portion of any pool which is not
allocated or used for payments to Eligible Employees may be used to cover
expenses or losses or make other payments to GCCI employees.
FORM AND PAYMENT OF AWARDS
If an Eligible Employee is entitled to a pool allocation, 70% of such pool
allocation will be paid in such number of installments as the Committee may
specify. The remaining 30% of an Eligible Employee's pool allocation shall be
paid in cash or awards of restricted Common Stock awarded under the 1993 Equity
Incentive Plan, or a combination thereof, as determined by the Compensation
Committee. This portion of an Eligible Employee's pool allocation shall be
payable, or in the case of restricted Common Stock shall vest, in a number of
substantially equal installments specified by the Committee.
Except as described under "Termination of Employment" below and except with
respect to the first in the series of any installment payments, an Eligible
Employee must be employed on the payment or vesting
17
<PAGE> 20
date to be entitled to receive or vest in such installment. For any part of an
Eligible Employee's pool allocation awarded in cash, installments after the
first installment shall be credited with interest until paid at an annual rate
specified by the Committee from time to time.
Any Eligible Employee entitled to a cash payment under the Plan may elect
to defer payment of up to 100% of any such amount in accordance with the terms
of the Plan. Any such deferred amounts will be credited with interest until paid
based on an annual rate specified by the Committee from time to time. However,
alternatively, the Committee may, from time to time, select one or more
investment vehicles to be made available as a measuring standard for crediting
earnings or losses on such deferred amounts and allow an annual eligible
employee to select from such vehicle.
TERMINATION OF EMPLOYMENT
Any Eligible Employee who voluntarily terminates employment from the
Company or who is terminated for cause prior to receiving a cash installment or
vesting in a restricted stock award shall forfeit all rights to such benefits.
An Eligible Employee who dies or becomes permanently disabled or who retires
with the approval of GCCI shall be entitled to payment of any unpaid amount in
accordance with the remainder of the installment schedule. An Eligible Employee
who is terminated by the Company for reasons other than for cause or who
voluntarily terminates employment will be entitled to receive all amounts vested
but will forfeit any unvested amounts. In addition, such an Eligible Employee
shall be entitled to share in the proceeds of any Sale Event which occurs within
twelve months following termination to the extent vested, at the time of
termination.
CHANGE OF CONTROL
The Plan provides that in the event of a "Change in Control" (as defined in
the Plan) of the Company, all shares of restricted stock awarded shall
immediately become fully vested and any non-vested installment payments shall be
paid.
AMENDMENT OR TERMINATION OF THE PLAN
The Company may at any time amend, suspend or discontinue the Plan in whole
or in part. Generally, no such action may, without the approval of the Eligible
Employees, affect any Eligible Employee's rights to benefits attributable to
Sale Events which have already occurred.
CALCULATION OF PLAN BENEFITS FOR FISCAL YEAR 1997
For Fiscal Year 1997, total benefits under the GCC Investments, Inc.
Incentive Plan totaled $1,472,638. The Vision Express transaction resulted in a
$353,567 incentive payment representing 20% of the determined realized cash
profit from the Vision Express transaction, plus certain dividends and
directors' fees, minus an 8% annually compounded rate of return to the Company,
less the remaining loss on the Company's investment in its food service
investment, and less certain Group expenses. This amount is payable 70% in cash
in three equal installments over two years, and 30% in restricted stock which
vests 20% per year over five years. Investment banking fees earned in connection
with the acquisition of certain theatre assets in Mexico and Argentina amounted
to $1,087,730, which is payable in three equal installments over two years.
Lastly, $31,341 related to the release of escrow proceeds from the sale of the
Company's radio group investment in 1996.
Compensation of the Chief Executive Officer
Richard A. Smith is also the Chairman and Chief Executive Officer of
Harcourt General and a principal member of the Smith Family Group, which owns
approximately 28.4% of the outstanding Common Stock of the Company. All of Mr.
Smith's cash and non-cash compensation is paid directly by Harcourt General and
is
18
<PAGE> 21
approved by the Harcourt General Compensation Committee. Mr. Smith receives no
compensation directly from the Company. However, pursuant to the Intercompany
Services Agreement between the Company and Harcourt General, Harcourt General
provides certain management and other corporate services to the Company,
including Mr. Smith's services as Chief Executive Officer of the Company. During
fiscal 1997, the Company paid or accrued $495,537 to Harcourt General for all of
its services under the Intercompany Services Agreement, of which $242,838 was
attributable to Mr. Smith's services. While the Special Review Committee of the
Company reviews each year the appropriateness of the charges by Harcourt General
to the Company under the Intercompany Services Agreement, neither this Committee
nor the Special Review Committee plays any role in determining the compensation
that Mr. Smith receives from Harcourt General.
Compliance with the Internal Revenue Code
The Internal Revenue Code (the "Code") generally disallows a tax deduction
to public companies for compensation in excess of $1 million per year paid to
each of the executive officers named in the Summary Compensation Table who are
employed by the Company on the last day of the fiscal year. The Committee and
the Board of Directors recently adopted the GCC Investments, Inc. Incentive Pool
Plan, which was approved by the stockholders of the Company at the 1997 Annual
Meeting (see "The GCC Investments, Inc. Incentive Pool Plan"). This Plan allows
the Committee to continue to award stock incentives and cash bonuses to
executives of GCC Investments, Inc. based on objective criteria. The stock
incentives and cash bonuses awarded under the Plan will be characterized as
"performance based" compensation and therefore will be fully deductible by the
Company. Compensation resulting from awards under the Company's 1993 Equity
Incentive Plan is not subject to the deductibility limit. The Committee will
continue to monitor the requirements of the Code to determine what actions
should be taken by the Company in order to preserve the tax deduction for
executive compensation to the maximum extent, consistent with the Company's
continuing goals of providing the executives of the Company with appropriate
incentives and rewards for their performance.
COMPENSATION COMMITTEE:
William L. Brown, Chairman
Peter C. Read
Francis E. Sutherby
Leonard A. Schlesinger
19
<PAGE> 22
STOCK PERFORMANCE GRAPH
The graph set forth below compares the total cumulative return on the
Company's Common Stock to the total cumulative return during the three fiscal
years ended October 31, 1997 of the Standard & Poor's 500 Index and a peer group
index consisting of AMC Entertainment Inc., Carmine Cinemas, Inc., Cineplex
Odeon Corp. and Regal Cinemas, Inc. The graph assumes a $100 investment in the
Company's Common Stock and in each index at October 31, 1994 and that all
dividends were reinvested. The common stocks of the companies in the peer group
indices have been weighted annually to reflect relative stock market
capitalization.
[GRAPH]
<TABLE>
<CAPTION>
Measurement Period GC Companies,
(Fiscal Year Covered) Inc. S&P 500 Index Peer Index
<S> <C> <C> <C>
31-Oct-93 100.00 100.00 100.00
31-Oct-94 85.61 104.87 121.27
31-Oct-95 97.73 132.59 124.47
31-Oct-96 102.65 164.55 151.86
31-Oct-97 130.30 217.39 156.31
</TABLE>
Since the Company's securities have been publicly traded only during fiscal
1994, 1995, 1996 and 1997 the graph reflects information only with respect to
those years. The comparisons provided in this graph are not intended to be
indicative of possible future performance of the Company's stock.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Although Delaware law does not require that the selection by the Board of
Directors of the Company's auditors be approved each year by the stockholders,
the Board of Directors believes it is appropriate to submit its selection to the
stockholders for their approval and to abide by the result of the stockholders'
vote. The Board of Directors recommends that the stockholders ratify the
appointment of Deloitte & Touche LLP as independent auditors to audit the
financial statements of the Company for the fiscal year ending October 31, 1998.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they wish, and will be
available to respond to appropriate questions from stockholders. The Company
paid or accrued approximately $500,000 for audit and tax services rendered by
Deloitte & Touche LLP for the fiscal year ended October 31, 1997.
20
<PAGE> 23
Approval of the proposal to ratify the selection of Deloitte & Touche LLP
as the Company's independent auditors for the current fiscal year requires a
favorable vote of a majority of the issued and outstanding Common Stock
represented and entitled to vote at the Annual Meeting. Abstentions will be
treated as votes cast. Broker non-votes will be treated as present but not
voting. On this proposal, abstentions and broker non-votes will have the same
effect as votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING OCTOBER 31, 1998.
3. OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
brought before the meeting. If any other matters should be properly brought
before the meeting, it is the intention of the persons named in the enclosed
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
DEADLINE FOR SUBMISSION OF
1999 STOCKHOLDER PROPOSALS AND NOMINATIONS
In order for stockholder proposals to be considered by the Company for
inclusion in the proxy material for the Annual Meeting of Stockholders to be
held in 1999, they must be received by the Company at its principal executive
offices by November 15, 1998. Any nominations for the Board of Directors must
also be received no later than November 15, 1998. See "Meetings and Committees
of the Board of Directors."
By Order of the Board of
Directors
PHILIP J. SZABLA
Secretary
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, ALL STOCKHOLDERS ARE URGED TO
PROMPTLY COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
21
<PAGE> 24
GCX-PS-98
<PAGE> 25
Wachovia Corporate Services, Inc.
Trust Services Division
301 North Main Street
Winston-Salem, North Carolina 27150-3099
January 26, 1998
TO: Participants in the GC Companies, Inc.
Employee Stock Ownership Plan
FROM: Wachovia Bank of North Carolina, N.A.
Trustee of the Employee Stock Ownership Plan
As a participant in the non-contributory Employee Stock Ownership Plan
("ESOP") of GC Companies, Inc., which owns shares of GC Companies, Inc. Common
Stock ("Common Stock"), you are entitled to instruct the Trustee on how to vote
the shares of Common Stock in your account on matters scheduled to come before
the Annual Meeting of Stockholders of GC Companies, Inc., to be held on Tuesday,
March 3, 1998.
A proxy statement, voting instruction card and return envelope are
enclosed. Please complete, date and sign the voting instruction card and mail it
promptly in the return envelope to exercise your right to direct the Trustee
with respect to shares of Common Stock allocated to your account.
If you own shares of Common Stock outside of the ESOP, you will receive
similar materials for those shares in a separate mailing. Please return both
cards in their separate return envelopes if you wish to fully participate in the
matters being submitted to the stockholders of GC Companies, Inc.
<PAGE> 26
GC COMPANIES, INC.
COMMON STOCK PROXY COMMON STOCK PROXY
ANNUAL MEETING OF STOCKHOLDERS - MARCH 3, 1998
Robert A. Smith, G. Gail Edwards, and Philip J. Szabla and each of them (a
majority of those present and acting to have all the powers hereunder), with
several powers of substitution, are hereby authorized to represent and vote all
shares of Common Stock of the undersigned at the Annual Meeting of Stockholders
of GC Companies, Inc. to be held at the corporate headquarters of GC Companies,
Inc., 27 Boylston Street, Chestnut Hill, Massachusetts on Tuesday, March 3, 1998
at 10:00 A.M. and at any adjournments thereof. The undersigned hereby revokes
any Proxy previously given and acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement dated January 26, 1998 and a copy of the Annual
Report for the year ended October 31, 1997.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. THE BOARD OF DIRECTORS OF GC COMPANIES, INC. RECOMMENDS A VOTE FOR
THE NOMINEES NAMED BELOW, FOR PROPOSAL 2. IF THIS PROXY IS SIGNED AND RETURNED
AND DOES NOT SPECIFY A VOTE ON ANY PROPOSAL, THE PROXY WILL BE SO VOTED.
ELECTION OF CLASS I DIRECTORS
NOMINEES: FRANCIS E. SUTHERBY, LEONARD A. SCHLESINGER
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)
<TABLE>
<S> <C>
/X/ Please mark votes
as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. ELECTION OF /__/ /__/ 2. APPROVAL OF DELOITTE & /__/ /__/ /__/
TOUCHE LLP AS INDEPENDENT
AUDITORS OF THE COMPANY
FOR THE CURRENT FISCAL YEAR.
___________________________________
/__/ FOR BOTH NOMINEES EXCEPT
AS NOTED ABOVE.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT. THE MEETING.
For joint accounts, each owner should sign.
Executors, Administrators, Trustees, etc.
should give full title.
Signature ______________________________Date_____ Signature___________________________Date_____
DETACH HERE
</TABLE>
<PAGE> 27
CONFIDENTIAL VOTING INSTRUCTIONS
TO: WACHOVIA BANK OF NORTH CAROLINA, N.A.
AS TRUSTEE UNDER THE
GC COMPANIES, INC.,
EMPLOYEE STOCK OWNERSHIP PLAN
WITH RESPECT TO THE ANNUAL MEETING OF STOCKHOLDERS OF
GC COMPANIES, INC. - MARCH 3, 1998.
I hereby instruct the Trustee to vote (in person or by proxy) all
shares of Common Stock of GC Companies, Inc. which are credited to my account
under the above-referenced Plan at the Annual Meeting of Stockholders of GC
Companies, Inc. to be held at the corporate headquarters of GC Companies, Inc.,
27 Boylston Street, Chestnut Hill, Massachusetts on Tuesday, March 3, 1998 at
10:00 a.m. and at any adjournments thereof. The undersigned hereby revokes any
Proxy previously given and acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement dated January 26, 1998 and a copy of the Annual Report for
the year ended October 31, 1997.
THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. THE BOARD OF DIRECTORS OF GC COMPANIES, INC. RECOMMENDS A VOTE FOR
THE NOMINEES NAMED BELOW, FOR PROPOSAL 1 AND PROPOSAL 2. IF THIS PROXY IS SIGNED
AND RETURNED AND DOES NOT SPECIFY A VOTE ON ANY PROPOSAL, THE PROXY WILL BE SO
VOTED.
ELECTION OF CLASS I DIRECTORS
NOMINEES: FRANCIS E. SUTHERBY, LEONARD A. SCHLESINGER
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)
<TABLE>
<S> <C>
/X/ Please mark votes
as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. ELECTION OF /__/ /__/ 2. APPROVAL OF DELOITTE & /__/ /__/ /__/
TOUCHE LLP AS INDEPENDENT
AUDITORS OF THE COMPANY
FOR THE CURRENT FISCAL YEAR.
___________________________________
/__/ FOR BOTH NOMINEES EXCEPT
AS NOTED ABOVE.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT. THE MEETING.
For joint accounts, each owner should sign.
Executors, Administrators, Trustees, etc.
should give full title.
Signature ____________________Date_____ Signature___________________Date_____
</TABLE>
