<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
MOOVIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
MOOVIES, INC.
201 BROOKFIELD PARKWAY
(LOGO MOOVIES, INC.(TM)) GREENVILLE, SOUTH CAROLINA 29607
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
TO THE STOCKHOLDERS OF MOOVIES, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of MOOVIES,
INC. (the "Company") will be held at the Greenville Hyatt Regency, 220 North
Main Street, Greenville, South Carolina, 29601, on May 15, 1997 at 10:30 a.m.,
Greenville time, for the following purposes:
1. To elect two directors to serve until the annual meeting of
stockholders in 2000 and until their successors are elected and have
qualified.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The proxy statement dated April 14, 1997, is attached.
Only record holders of the Company's $.001 par value Common Stock at the
close of business on March 17, 1997, will be eligible to vote at the meeting.
Your attendance at the annual meeting is very much desired. However, if
there is any chance you may not be able to attend the meeting, please execute,
complete, date and return the proxy in the enclosed envelope. If you attend the
meeting, you may revoke the proxy and vote in person.
By Order of the Board of Directors:
/s/ JOHN L. TAYLOR
------------------
JOHN L. TAYLOR
Chairman of the Board
President and Chief Executive Officer
Date: April 14, 1997
A copy of the Annual Report of Moovies, Inc. for the fiscal year ended
December 31, 1996 containing consolidated financial statements is enclosed.
<PAGE> 3
MOOVIES, INC.
201 BROOKFIELD PARKWAY
GREENVILLE, SOUTH CAROLINA 29607
---------------------
PROXY STATEMENT
---------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
This statement is furnished for the solicitation by the Board of Directors
of proxies for the annual meeting of stockholders of Moovies, Inc. ("Moovies" or
the "Company") to be held on May 15, 1997, at 10:30 a.m., Greenville time, at
the Greenville Hyatt Regency, 220 North Main Street, Greenville, South Carolina,
29601. The sending in of a signed proxy will not affect the stockholder's right
to attend the meeting and vote in person. A signed proxy may be revoked by the
sending in of a timely but later dated, signed proxy. Any stockholder giving a
proxy may also revoke it at any time before it is exercised by giving written
notice to Ross Miller, Secretary of the Company, or F. Andrew Mitchell,
Assistant Secretary, at the offices of the Company.
Holders of record of the Company's $.001 par value Common Stock at the
close of business on March 17, 1997, will be eligible to vote at the meeting.
The Company's stock transfer books will not be closed. At the close of business
on March 17, 1997, the Company had outstanding a total of 12,354,292 shares of
$.001 par value common stock. Each such share will be entitled to one vote
(non-cumulative) at the meeting.
Other than the matters set forth herein, Management is not aware of any
other matters that may come before the meeting. If any other business should
properly come before the meeting, the persons named in the enclosed proxy, John
L. Taylor and F. Andrew Mitchell, will have discretionary authority to vote the
shares represented by the effective proxies and intend to vote them in
accordance with their best judgment.
This proxy statement and the attached proxy were first mailed to security
holders on behalf of the Company on or about April 14, 1997. Properly executed
proxies, timely returned, will be voted and, where the person solicited
specifies by means of a ballot a choice with respect to any matter to be acted
upon at the meeting, the shares will be voted as indicated by the stockholder.
If the person solicited does not specify a choice with respect to election of
directors, the shares will be voted "FOR" Management's nominees for election as
directors. In addition to the solicitation of proxies by the use of the mails,
directors and officers of the Company may solicit proxies on behalf of
Management by telephone, telegram and personal interview. Such persons will
receive no additional compensation for their solicitation activities, and will
be reimbursed only for their actual expenses in connection therewith. The costs
of soliciting proxies will be borne by the Company.
VOTING PROCEDURES AND VOTE REQUIRED
The Secretary of Moovies, in consultation with the judges of election, who
will be employees of the Company's transfer agent, shall determine the
eligibility of persons present at the Annual Meeting to vote and shall determine
whether the name signed on each proxy card corresponds to the name of a
stockholder of the Company. The Secretary, based on such consultation, shall
also determine whether or not a quorum of the shares of the Company (consisting
of a majority of the votes entitled to be cast at the Annual Meeting) exists at
the Annual Meeting. Both abstentions from voting and broker non-votes will be
counted for the purpose of determining the presence or absence of a quorum for
the transaction of business. If a quorum exists and a vote is taken at the
Annual Meeting, the Secretary of the Company, with the assistance of the judges
of election, shall tabulate (i) the votes cast for or against each proposal and
(ii) the abstentions in respect of each proposal.
Nominees for election as directors will be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election. Since
there are two directorships to be filled, this means that the two individuals
receiving the most votes will be elected. Abstentions and broker non-votes will
therefore not be relevant to the outcome.
<PAGE> 4
ELECTION OF DIRECTORS
The proxy holders intend to vote "FOR" election of the nominees named below
as directors of the Company, unless otherwise specified in the proxy. Directors
of the Company elected at the Annual Meeting to be held on May 15, 1997 will
hold office until the Annual Meeting in 2000 and until their successors are
elected and qualified.
Each of the nominees has consented to serve on the Board of Directors, if
elected. Should any nominee for the office of director become unable to accept
nomination or election, which is not anticipated, it is the intention of the
persons named in the proxy, unless otherwise specifically instructed in the
proxy, to vote for the election in his stead of such other person as Management
may recommend.
The Board of Directors of the Company is in the process of reducing the
number of Class B Directors from three to two, and the number of total Directors
from nine to eight. Management anticipates that this reduction will be completed
prior to the Annual Meeting. The nominees named below will fill the two Class B
Director positions.
The name and age of each current director whose term will continue after
the Annual Meeting and each director nominee, his principal occupation and the
period during which such person has served as a director, together with the
number of shares of the Company's Common Stock beneficially owned, directly or
indirectly, by such person and the percentage of outstanding shares of the
Company's Common Stock such ownership represented at the close of business on
March 31, 1997 (according to information received by the Company) is set forth
below. There are no other holders of more than 5% of the outstanding shares of
common stock of the Company.
1997 Director Nominees
<TABLE>
<CAPTION>
SHARES OF
MOOVIES STOCK PERCENT OF
BENEFICIALLY OUTSTANDING
SERVICE OWNED AT SHARES OF
NAME OF NOMINEE(1) AS DIRECTOR AGE MARCH 17, 1997 MOOVIES STOCK
------------------ ----------- --- -------------- -------------
<S> <C> <C> <C> <C>
Arthur F. Greeder, III............................. Since 1995 50 346,400(2) 2.8%
Charles D. Way..................................... Since 1995 44 19,000(3) *
</TABLE>
Other Directors and Executive Officers
<TABLE>
<CAPTION>
PERCENT OF
SHARES OUTSTANDING
BENEFICIALLY SHARES OF
NAME AGE POSITION OWNED MOOVIES STOCK
---- --- -------- ------------ -------------
<S> <C> <C> <C> <C>
John L. Taylor................. 45 Chairman of the Board, President and 456,740(4) 3.7%
Chief Executive Officer
F. Andrew Mitchell............. 43 Chief Financial Officer, Director 221,711(5) 1.8
Robert J. Klein................ 49 Chief Operating Officer, Director 73,749(6) *
Theodore J. Coburn............. 43 Director 150,000(7) 1.2
Douglas M. Raines.............. 48 Director 629,149 5.1
Michael A. Yeargin............. 49 Director 637,649 5.2
Ross Miller.................... 43 Senior Vice President, General Counsel, 13,000(8) *
Secretary
All executive officers and directors as a group (10 persons).................. 2,925,798(9) 23.2
</TABLE>
- ---------------
* Ownership represents less than 1% of outstanding shares of Moovies Common
Stock.
(1) The address of the persons listed below is c/o Moovies, Inc., 201 Brookfield
Parkway, Suite 200, Greenville, SC 29607.
(2) Includes 165,150 shares held jointly with Mr. Greeder's spouse.
(3) Includes 5,000 shares which are issuable upon the exercise of currently
exercisable options.
2
<PAGE> 5
(4) Includes 7,400 shares held of record by Mr. Taylor as custodian for minor
children.
(5) Includes 2,000 shares held of record by Mr. Mitchell's spouse as custodian
for minor children.
(6) Includes 27,083 shares held of record by XIMPEC, Inc., a corporation of
which Mr. Klein is a director and stockholder. Includes 46,666 shares of
Common Stock which are issuable upon the exercise of currently exercisable
options.
(7) Consists of 150,000 shares which may be purchased upon exercise of a warrant
that is currently exercisable.
(8) Includes 12,500 shares which are issuable upon the exercise of currently
exercisable options.
(9) Includes 264,166 shares which may be purchased upon exercise of warrants and
options that are currently exercisable.
Arthur F. Greeder, III became a director of the Company in August 1995.
From October 1995 to August 1995 Mr. Greeder was Vice President -- Store
Development -- MidAtlantic Region for the Company and from June 1995 to October
1995 was Vice President, Chief Operating Officer -- MidAtlantic Region of the
Company. From 1981 to June 1995, Mr. Greeder was President of Video Express,
which merged its ten stores into the Company in August 1995.
Charles D. Way became a director of the Company in August 1995. Since June
1988, Mr. Way has been President of Ryan's Family Steakhouses Inc. ("Ryan's"), a
chain of restaurants. In October 1989 he was elected Chief Executive Officer,
and in October 1992 he was elected Chairman of the Board, of Ryan's. He
graduated in 1975 from Clemson University with a B.S. in Accounting. Mr. Way
also serves as a director of World Acceptance Corp.
John L. Taylor has served as President, Chief Executive Officer and
director of the Company since November 1994 and as Chairman of the Board since
November 1995. Mr. Taylor became President and Chief Executive Officer of the
Company's predecessor, Tonight's Feature Limited Partnership II (the
"Predecessor"), in September 1994. From March 1986 through July 1989 Mr. Taylor
was President and Chief Operating Officer, and thereafter through July 1994 was
President and Chief Executive Officer, of Ingram Entertainment, Inc., the
largest video wholesaler in the United States. Mr. Taylor graduated in 1976 from
the University of North Carolina, Charlotte, with a B.S. in accounting.
F. Andrew Mitchell joined the Company in March 1995 and became Chief
Financial Officer and a director of the Company at that time. From 1987 to March
1995, Mr. Mitchell was a partner with KPMG Peat Marwick LLP and was managing
partner of the 70-person Greenville, South Carolina office from 1992 to March
1995. During his 20-year career with KPMG Mr. Mitchell had extensive experience
servicing public and privately-held clients in the financial institution,
entertainment and franchise restaurant industries. Mr. Mitchell graduated in
1975 from the University of Cincinnati with a B.B.A. in accounting.
Robert J. Klein became Chief Operating Officer of the Company in February
1996 and became a director of the Company in May 1996. From June 1995 to
February 1996 he served as Vice President, Chief Operating Officer -- Eastern
Pennsylvania and New Jersey Region of the Company. From January 1994 to June
1995 Mr. Klein was President of Planet Video, which sold its two video specialty
stores to the Company in August 1995. From March 1990 to May 1993, Mr. Klein was
a Senior Vice President of Choices Entertainment Corporation, a video retail
company. Mr. Klein received his B.S. from Temple University in 1970 and an M.A.
in administration in 1975 from Villanova University.
Theodore J. Coburn became a director of the Company in June 1995. Since
1991, Mr. Coburn has been a partner and a director of Brown, Coburn & Co., an
investment banking firm. From 1986 until 1991, he was a Managing Director of
Global Equity Transactions and a member of the Board of Directors of Prudential
Securities. From 1983 to 1986 Mr. Coburn served as Managing Director of Merrill
Lynch Capital Markets. Mr. Coburn received his B.S. from the University of
Virginia in 1975 and an M.B.A. from Columbia University Graduate School of
Business in 1978. Mr. Coburn serves as a director of Sage Analytics
International ("Sage"), Nicholas-Applegate Growth Equity Fund, the Emerging
Germany Fund, and Premiere Radio Networks, Inc. ("Premiere"), serves as a
trustee of Nicholas-Applegate Mutual Funds, and serves on the compensation
committees of Sage and Premiere.
3
<PAGE> 6
Douglas M. Raines co-founded the Predecessor in 1985 and managed the
business until September 1994. Mr. Raines became a director of the Company in
June 1995. From June 1995 to March 1996, Mr. Raines was Chairman of the Board
and Executive Vice President -- Real Estate and Development of the Company
responsible for site selection and construction for new stores. Mr. Raines
resigned as Chairman of the Board in November 1995 and as Executive Vice
President -- Real Estate and Development in March 1996.
Michael A. Yeargin co-founded the Predecessor in 1985 and became a Director
of the Company in June 1995. From June 1995 to March 1996, Mr. Yeargin was
Executive Vice President -- Purchasing and Secretary of the Company. In March
1996, Mr. Yeargin resigned as Executive Vice President -- Purchasing.
Ross Miller became Senior Vice President and General Counsel of the Company
in January 1996 and became Secretary of the Company in March 1996. From 1994 to
December 1995, Mr. Miller was corporate counsel with the Atlanta, Georgia law
firm of Rogers & Hardin. From 1991 to 1994, Mr. Miller was a partner in the
Chicago law firm of Schwartz, Cooper, Greenberger & Krauss. From 1986 to 1991,
Mr. Miller was a partner in the Chicago law firm of Katten Muchin & Zavis. Mr.
Miller received an A.B. degree from the University of North Carolina at Chapel
Hill, a J.D. from the University of Michigan Law School and a L.L.M., in
International and Comparative Law, from the University of Brussels. Mr. Miller
is a member of the Georgia, Illinois, Texas, and New York bars.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
Meetings of the Board of Directors. During 1996, there were five meetings
of the Board of Directors.
Director Compensation. The non-employee members of the Board of Directors
of the Company are paid $5,000 per year plus $1,000 for each Board or committee
meeting attended in person. In addition, directors are reimbursed for expenses
incurred in connection with their services as a director.
Audit Committee. The Company's Audit Committee consists of two
non-employee directors: Mr. Coburn and Mr. Way. The Audit Committee held two
meetings during 1996. The Audit Committee reviews the general scope of the
Company's annual audit and the nature of services to be performed for the
Company in connection therewith, acting as liaison between the Board of
Directors and the independent auditors. The Audit Committee also formulates and
reviews various company policies, including those relating to accounting
practices and internal control systems of the Company. In addition, the Audit
Committee is responsible for reviewing and monitoring the performance of the
Company's independent auditors and for recommending the engagement or discharge
of the Company's independent auditors.
Compensation Committee. The Company's Compensation Committee currently
consists of two directors: Mr. Coburn and Mr. Way. Prior to November 1996, the
Compensation Committee consisted of Mr. Coburn and Mr. Taylor. The Compensation
Committee met two times in 1996. The Compensation Committee is responsible for
reviewing and making recommendations to the Board regarding the annual
compensation for all officers, including the salary and the compensation package
of executive officers. A portion of the compensation package includes a bonus
award. The Compensation Committee also administers the Company's benefit plans,
including the 1995 Stock Plan.
Executive Committee. The Company's Executive Committee currently consists
of three directors: Mr. Mitchell, Mr. Taylor and Mr. Way. The Executive
Committee met two times in 1996. The Executive Committee is authorized to
exercise all of the powers and authority of the Board of Directors in the
management of the business and affairs of the Company subject to any limitations
imposed by resolution of the Board of Directors, the Bylaws of the Company or as
set forth in Section 141 of the Delaware General Corporation Law.
Nominating Committee. The Company's Nominating Committee was created in
November 1996 and currently consists of Mr. Coburn and Mr. Mitchell. The
Nominating Committee held no meetings in 1996. The function of the Nominating
Committee is to propose directors and officers for election or reelection to the
Board of Directors. The Nominating Committee will consider nominees recommended
in writing by stockholders.
4
<PAGE> 7
During 1996, no director attended fewer than 75% of the aggregate of the
total number of meetings of the Board of Directors and the total number of
meetings held by all committees of the Board on which he served.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the following Report and
Performance Graph shall not be incorporated by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee of the Board of Directors of Moovies, Inc. is
composed of two non-employee directors. The Compensation Committee reviews and
approves the compensation of the Company's executive officers at least annually.
The Compensation Committee believes the actions of top executives of the Company
have a profound impact on the short-term and long-term profitability of the
Company. Therefore, the Compensation Committee gives significant attention to
the design of the Company's compensation package.
The Company's compensation package consists of three parts and is
relatively simple in design. The three primary parts are a base salary, a cash
bonus and stock-based incentive compensation. No significant perquisites are
provided to executive officers.
BASE SALARY
The Compensation Committee believes it is important for executive officers
and other employees of the Company to receive acceptable salaries so that the
Company can recruit and retain the talent it needs. In setting salaries, the
Compensation Committee takes into consideration the individual employee's
performance, length of service to the Company, and a subjective judgment
regarding the impact the individual has on the Company. The base salary for each
executive officer is set on a subjective basis, bearing in mind an overall
impression of that executive's relative skills, experience and contribution to
the Company. The Compensation Committee does not attempt to address the relative
weight assigned to the various factors, which are evaluated on a subjective
overall basis by each individual member of the Compensation Committee. Salaries
of all executive officers are reviewed annually by the Compensation Committee.
The base salaries for new executive officers are established utilizing a
procedure agreed upon by the Compensation Committee. In accordance with this
procedure, the Compensation Committee consults with certain executive officers
and the Human Resource Manager of the Company, and an appropriate range of base
salary, bonus, and stock options is subjectively considered, based upon the
range of compensation received by the other executive officers and the
requirements of the particular positions to be filled. The Chief Executive
Officer negotiates with the candidate for employment, subject to acceptance and
ratification by the Compensation Committee, and this negotiated base salary is
reflected in the candidate's employment arrangement.
CASH BONUSES
Cash bonuses are the next component of executive officer compensation. In
determining the amount to be paid as bonuses to executive officers, the
Compensation Committee considers the performance of the Company in reaching
goals for increased revenues and pre-tax profit as well as the performance of
each executive officer.
5
<PAGE> 8
STOCK-BASED INCENTIVES
Stock-based incentives have been a supplemental component of compensation
for the Company's executive officers, and certain other employees, since the
formation of the Company. The Company adopted a formal incentive stock option
plan in 1995. The Compensation Committee approves grants of stock options under
the Company's option plan.
Historically, grants made by the Company have generally vested at a rate of
33% per year and have had a term of ten years. These options also usually expire
upon termination of employment or a limited period thereafter, except in the
event of disability or death, in which case the term of the option may continue
for some time thereafter.
The Compensation Committee believes that the Company's stock option program
has been effective in focusing attention on stockholder value since the gain to
be realized by executive officers upon exercise of options will change as the
stock price changes. The Compensation Committee also believes that the long-term
nature of the options encourages the Company's executive officers to remain with
the Company. Finally, the Compensation Committee has found it appropriate to
grant options to newly employed executive officers in order to encourage such
officers to identify promptly with the Company's goal of increased stockholder
value. The number of shares to be granted was established utilizing the
procedure described above at "Base Salary." The Compensation Committee
subjectively determined the number of shares to be granted based on its analysis
of the number which would provide an adequate incentive to each new executive
officer to accept a position with the Company.
In general, following initial employment, the granting of stock-based
incentives is considered by the Committee to be justified when the Company's
revenues and earnings, coupled with the individual executive's performance,
warrant supplemental compensation in addition to the salary and bonus paid with
respect to a given year. Each of these factors is weighed subjectively by
Committee members in determining whether or not a stock-based incentive should
be granted, and such incentives are not granted routinely. As a result, stock
options for shares of Common Stock were granted to certain officers for their
continued outstanding performance and for making substantial contributions to
the Company's increased revenues. See "Executive Compensation." The Committee
thinks it unlikely that any participants in the Company's stock plans will, in
the foreseeable future, receive in excess of $1 million in aggregate
compensation (the maximum amount for which an employer may claim a compensation
deduction pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended, unless certain performance-related compensation exemptions are met)
during any fiscal year, and has therefore determined that the Company will not
take any affirmative action at this time to meet the requirements of such
exemptions.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee fixed the 1996 salary of Mr. John L. Taylor,
Chief Executive officer of the Company, at $200,000. This exhibits the
philosophy of the Compensation Committee as set forth at "Base Salary" and "Cash
Bonuses" above. This salary was reflected in Mr. Taylor's employment agreement
entered into in September 1994. Mr. Taylor's compensation is subject to annual
review by the Board of Directors. The Board believes the compensation of Mr.
Taylor, a founder of the Company, reflects the Committee's subjective opinion
that Mr. Taylor has provided superlative leadership and fulfilled the functions
of an executive officer of the Company at the highest level.
6
<PAGE> 9
CONCLUSION
The Compensation Committee believes that its mix of a cash salary and
bonuses and a long-term stock incentive compensation program represents a
balance that has motivated and will continue to motivate the Company's
management team to produce the best results possible given overall economic
conditions and the difficulty of predicting the Company's performance in the
short term.
<TABLE>
<S> <C>
Compensation Committee: Board of Directors:
THEODORE COBURN, Chairman JOHN L. TAYLOR
CHARLES D. WAY F. ANDREW MITCHELL
ROBERT J. KLEIN
ARTHUR F. GREEDER, III
MICHAEL A. YEARGIN
THEODORE J. COBURN
DOUGLAS M. RAINES
CHARLES D. WAY
</TABLE>
7
<PAGE> 10
PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing the cumulative
stockholder return on the Company's Common Stock, on an indexed basis, against
cumulative total returns of the Nasdaq Stock Market (U.S. Companies) and a "peer
group" selected by Management of the Company. The peer group selected for
inclusion in this proxy statement includes Hollywood Entertainment Corporation
("Hollywood"), Movie Gallery, Inc. ("MGI"), Video Update, Inc. ("VUI") and West
Coast Entertainment Corp. ("West Coast") (collectively, the "Peer Group
Companies"). Hollywood, MGI, VUI and West Coast have securities traded on the
Nasdaq Stock Market. The Peer Group Companies were selected because they had
been utilized as a basis for comparison with the Company in reports by analysts
for each of the two co-managers of the Company's initial public offering. The
Company previously used Viacom, Inc. ("Viacom") in its peer group. However,
Viacom is a large entertainment conglomerate with only a small portion of its
business in the retail videotape industry, and its stock is traded on the
American Stock Exchange. Therefore, the Company has restructured its peer group
to delete Viacom and replace it with West Coast. West Coast owns a chain of
video specialty stores. West Cost completed its initial public offering and its
common stock began trading on the Nasdaq Stock Market in May 1996 and is
included in the new peer group beginning on that date. The returns for the peer
group were weighted according to each issuer's market capitalization. The
Performance Graph shows total return on investment for the period beginning
August 4, 1995 (the date of the Company's initial public offering) and ending
December 31, 1996.
VALUE OF $100 INVESTED ON AUGUST 4, 1995 AT:
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NEW PEER OLD PEER NASDAQ
(FISCAL YEAR COVERED) MOOVIES GROUP GROUP MARKET
<S> <C> <C> <C> <C>
8/4/95 100.00 100.00 100.00 100.00
9/30/95 163.58 94.75 99.97 103.57
12/31/95 112.50 51.17 90.51 102.74
3/31/96 116.67 57.34 81.02 107.49
6/30/96 65.67 60.06 75.78 115.45
9/30/96 45.83 62.07 70.50 118.63
12/31/96 43.25 56.55 68.75 124.21
</TABLE>
Total return assumes reinvestment of dividends.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Company's Chief Executive Officer and the two other most highly
paid executive officers of the Company in 1996 (the "Named Executives"). The
information presented is for the years ended December 31, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#)(2) ($)
------------------ ---- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John Taylor................. 1996 $200,000 $25,000 $ 0 $ 0 $ 1,380(3)
Chairman of the Board 1995 200,000 0 0 0 1,110
of Directors, President 1994 66,694(4) 0 0 0 0
and Chief Executive
Officer
F. Andrew Mitchell(5)....... 1996 207,000 25,000 0 0 1,910(3)
Chief Financial Officer 1995 190,181 10,000(6) 0 0 1,910
1994 0 0 0 0 0
Robert J. Klein(7).......... 1996 169,230 25,000 0 100,000 66,865(8)
Chief Operating Officer 1995 97,014 0 0 40,000 0
1994 53,000 0 11,500(9) 0 0
</TABLE>
- ---------------
(1) Amounts for perquisites and other personal benefits extended to the Named
Executives are less than 10% of the total annual salary and bonus of such
named executive.
(2) During the periods presented, the only form of long-term compensation
utilized by the Company has been the grant of stock options. The Company
has not awarded restricted stock or stock appreciation rights, nor has it
made any long-term incentive payouts. Accordingly, the columns for
"Restricted Stock Award(s)" and "Long Term Incentive Payouts" have been
omitted.
(3) In 1995, the Company adopted its supplemental life insurance program for
Mr. Taylor and Mr. Mitchell. The Company's contributions to supplemental
life insurance program for 1995 and 1996 were $1,110 and $1,380,
respectively, for Mr. Taylor and $1,910 in both years for Mr. Mitchell.
(4) Includes $46,774 of deferred salary earned by Mr. Taylor in 1994 but paid
in 1995.
(5) Mr. Mitchell joined the Company in March 1995. Mr. Mitchell's salary
includes an additional $2,000 per month for his first 12 months with the
Company.
(6) Mr. Mitchell's bonus represents a signing bonus paid in 1995.
(7) For Mr. Klein, includes amounts paid by Planet Video, Inc., a video chain
acquired by the Company in August 1995. The salary amounts paid by Planet
Video, Inc. were $53,000 for 1994 and $41,000 for 1995. The salary amount
paid by the Company in 1995 was $56,014.
(8) Includes amounts paid for relocation expenses and the Company's
reimbursement for the federal income tax liability resulting from such
income to the executive officer.
(9) Includes professional fees reimbursed of $5,000, auto allowance of $3,500,
and travel and entertainment allowance of $3,000, all paid to Mr. Klein by
Planet Video, Inc.
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<PAGE> 12
Grant of Options. During 1996, options were granted to Mr. Klein in
recognition of his performance. No options were granted to any of the other
Named Executives during 1996. No stock appreciation rights (SARs) have been
granted by the Company. The following table sets forth information regarding the
grant of options in 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1996)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS/SARS EMPLOYEES EXERCISE EXPIRATION --------------------------
NAME GRANTED (#) IN FISCAL YEAR PRICE ($/SH) DATE(1) 5% ($) 10% ($)
- ---- ------------ -------------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Klein......... 100,000 29.4% $11.875 3/4/2006 $746,812 $1,892,969
</TABLE>
- ---------------
(1) Options are subject to earlier termination in the event of death,
disability, retirement, or termination of employment.
Options Exercised. No options were exercised by Named Executives in 1996.
The following table sets forth information regarding the number of options held
by the Named Executives as listed in the Summary Compensation Table, including
the value of unexercised in-the-money options as of December 31, 1996. The
closing price of the Company's Common Stock on December 31, 1996 used to
calculate such values was $5 3/16 per share.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (1996)
AND FISCAL YEAR-END OPTION/SAR VALUES (AS OF DECEMBER 31, 1996)
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT YEAR END (#) AT YEAR END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Klein............. 0 $0 46,666 93,334 $0 $0
</TABLE>
Option Repricing. The Company did not reprice any stock options in 1995 or
1996 and, to date, has not issued any stock appreciation rights.
Long Term Incentive Plans. Presently, the Company has no long-term
incentive plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions for Moovies, Inc. are made by the Compensation
Committee, comprised of Messrs. Way and Coburn. Prior to November 1996,
compensation decisions for Moovies, Inc. were made by the Compensation Committee
which was comprised of Mr. Coburn and Mr. Taylor.
Theodore J. Coburn received approximately $140,000 during 1995 for
consulting services primarily in connection with the Company's initial public
offering and received $80,129 in 1996 on retainer as a consultant to the
Company. Mr. Coburn's consulting retainer terminated in December 1996.
Related Party Loans
In March 1995, PARR-Four, Inc. d/b/a Video Express ("Video Express")
borrowed $319,314 from Mr. Greeder pursuant to a demand promissory note with
annual interest accruing at a rate equal to the applicable federal rate
published periodically by the United State Treasury Department. In August 1995,
the Company acquired Video Express and assumed the note. In October 1996, the
note and the related accrued interest were repaid in full. The greatest amount
outstanding under this note during 1996 was $319,314.
In January 1995, First Row Video, Inc. ("First Row") loaned $260,804 to an
affiliate which is 70% owned by Mr. Rogan pursuant to a demand promissory note
with an annual rate of 6%. In August 1995, the Company
10
<PAGE> 13
acquired First Row and assumed the note. In March 1997, the note and the related
accrued interest were repaid in full. The greatest amount outstanding under this
note during 1996 was $260,804.
Leases
Prior to August 1995, Video Express leased one of its store facilities from
Mr. Greeder. The Company assumed this lease in connection with the consummation
of the Acquisitions. For the year ended December 31, 1996, the Company made
rental payments under this lease aggregating $92,498.
Prior to August 1995, First Row leased certain store facilities and a
warehouse from an affiliated company. Mr. Rogan owns 70% of this affiliated
company. The Company assumed these leases in connection with the consummation of
the Acquisitions. For the year ended December 31, 1996, the Company made rental
payments under these leases aggregating $399,759.
Management believes that the transactions described above may not have been
on terms as favorable to the Company, the Predecessor or the relevant video
store chains, as applicable, as those that could have been obtained from
unaffiliated parties; however, it is the Company's policy that all future
transactions, if any, with affiliated parties will comply with the requirements
of the Delaware General Corporation Law. As a result, any such transactions will
be approved by the disinterested members of the Company's Board of Directors (or
a committee thereof) or by the stockholders of the Company.
EMPLOYMENT AGREEMENTS; COVENANTS NOT TO COMPETE
Effective September 1994, the Company entered into a three-year employment
agreement with Mr. Taylor pursuant to which Mr. Taylor serves as President and
Chief Executive Officer at an annual base salary of $200,000 and is eligible for
an annual bonus at the discretion of the Board of Directors. The Company also
maintains for the benefit of Mr. Taylor a $1.0 million life insurance policy.
Effective March 1995, the Company entered into a two-year employment
agreement with Mr. Mitchell pursuant to which he serves as Chief Financial
Officer at an annual base salary of $200,000 and a guaranteed additional payment
of $2,000 per month through March 1996. The agreement automatically renews on a
year-to-year basis, but it may be terminated at any time by Mr. Mitchell or the
Company upon 90-days prior written notice. Upon the expiration or termination of
the Agreement, except for voluntary termination of employment by Mr. Mitchell or
termination for just cause by the Company, Mr. Mitchell shall be paid severance
compensation equal to twelve months base salary plus an amount equal to the
average of any aggregate annual cash bonuses received by him during the prior
two calendar years of employment (collectively the "Expiration Payment"). The
Company may terminate the agreement without cause if it pays Mr. Mitchell the
Expiration Payment plus, if such termination occurs during the original term of
the agreement, an amount equal to the base salary which would have been paid to
Mr. Mitchell had he remained an employee through the end of such two-year term.
The Company also maintains a $1.5 million life insurance policy for the benefit
of Mr. Mitchell.
In August 1995, the Company entered into two-year employment agreements
with Messrs. Raines and Yeargin, as Executive Vice President -- Real Estate and
Development and as Executive Vice President -- Purchasing, respectively,
pursuant to which each was paid a base salary at the annual rate of $150,000 and
was eligible for an annual bonus granted at the discretion of the Board of
Directors. Mr. Raines and Mr. Yeargin each resigned their positions as Executive
Vice Presidents and terminated their respective employment agreements in March
1996.
In August 1995, the Company entered into a three-year employment agreement
with Mr. Klein and a one-year employment agreement with Mr. Greeder under which
their annual base salaries were $100,000 and they were eligible for payment of
bonuses granted at the discretion of the Board of Directors. In October 1995,
Mr. Klein's salary under this employment agreement was increased to $150,000 per
year. In March 1996, Mr. Klein's employment agreement was amended to increase
his annual base salary to $175,000 and to grant Mr. Klein and an additional
100,000 stock options.
Each of the above employment agreements contain covenants not to compete
within a five-mile radius of the Company's store locations in existence at
August 1995 for a period of two years following termination of
11
<PAGE> 14
employment, except that in the case of Messrs. Mitchell, Greeder and Klein such
covenants are for a period of one year following termination of employment. Each
of the above employment agreements contain nondisclosure provisions that
generally provide that the employee will not disclose confidential information
or trade secrets of the Company during the term of the agreement and for one
year thereafter.
In May 1996, the Board of Directors of the Company authorized the Company
to enter into severance agreements with each of seven officers that provide for
a severance payment of two times the applicable officer's average annual
compensation (including salary and bonus) for the prior two years in the event
that a "Change in Control" occurs and the officer either resigns or is
terminated without cause by the Company within six months after such Change in
Control. In addition, the Board approved a similar severance agreement for Mr.
Klein that provides for a severance payment equal to (i) $1,000,000 minus (ii)
the aggregate difference between the value of Mr. Klein's outstanding stock
options (as measured by the spread between the market value of the Company's
common stock and the exercise price) and $2,000,000. All such severance
agreements define "Change of Control" as the occurrence of any of the following
events:
(a) any person or entity, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, other than the
Company, a wholly owned subsidiary of the Company, or any employee benefit
plan of the Company or its subsidiaries, becomes the beneficial owner of
the Company's securities have 51 percent or more of the combined voting
power of the then outstanding securities of the Company that may be cast
for the election for directors of the Company; or
(b) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, less
than a majority of the combined voting power of the then outstanding
securities of the Company or any successor corporation or entity entitled
to vote generally in the election of directors of the Company or such other
corporation or entity after such transaction, are held in the aggregate by
holders of the Company's securities entitled to vote generally in the
election of directors of the Company immediately prior to such transaction;
or
(c) the approval of the stockholders of the Company of a plan of
liquidation.
In addition, stock option agreements granted to the employees of the
Company, including Messrs. Klein, Greeder and Rogan, provide for immediate
vesting of the options upon a Change of Control as described above.
CERTAIN TRANSACTIONS
See "Management -- Compensation Committee Interlocks and Insider
Participation" for a description of certain transactions among the Company and
certain of its affiliates.
SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who beneficially own more than 10%
of the Company's stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. Executive officers, directors
and greater than 10% beneficial owners are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of forms received by it pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended, or written
representations from certain reporting persons, the Company believes that with
respect to 1996, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners were
complied with.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG Peat Marwick LLP has been the independent
certified public accountants of the Company since the inception of the Company.
Approval or selection of the independent certified public accountants of the
Company is not submitted to the annual meeting of stockholders. The Board of
Directors of
12
<PAGE> 15
the Company has historically selected the independent certified public
accountants of the Company, with the advice of the Audit Committee.
It is anticipated that a representative from the accounting firm of KPMG
Peat Marwick LLP will be present at the annual meeting of stockholders to answer
questions and make a statement if the representative desires to do so.
STOCKHOLDER PROPOSALS
Appropriate proposals of stockholders intended to be presented at the
Company's 1998 annual meeting of stockholders must be received by the Company by
December 18, 1997 for inclusion in its proxy statement and form of proxy
relating to that meeting. If the date of the next annual meeting is advanced or
delayed by more than 30 calendar days from the date of the annual meeting to
which this proxy statement relates, the Company shall, in a timely manner,
inform its stockholders of the change, and the date by which proposals of
stockholders must be received.
UPON THE WRITTEN REQUEST OF ANY RECORD OR BENEFICIAL OWNER OF COMMON STOCK
OF THE COMPANY WHOSE PROXY WAS SOLICITED IN CONNECTION WITH THE 1997 ANNUAL
MEETING OF STOCKHOLDERS, THE COMPANY WILL FURNISH SUCH OWNER, WITHOUT CHARGE, A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31,
1996. REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE ADDRESSED
TO F. ANDREW MITCHELL, CHIEF FINANCIAL OFFICER, MOOVIES, INC., 201 BROOKFIELD
PARKWAY, GREENVILLE, SOUTH CAROLINA 29607.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO SIGN, COMPLETE, DATE AND
RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE
AFFIXED.
By Order of the Board of Directors
/s/ JOHN L. TAYLOR
------------------
JOHN L. TAYLOR
Chairman of the Board
President and Chief Executive Officer
Dated: April 14, 1997
13
<PAGE> 16
APPENDIX A
MOOVIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE AT THE ANNUAL MEETING ON MAY 15, 1997
The undersigned stockholder hereby appoints JOHN L. TAYLOR and F. ANDREW
MITCHELL, or any of them, with full power of substitution, to act as proxy for,
and to vote the stock of, the undersigned at the annual meeting of stockholders
of MOOVIES, INC. (the "Company") to be held on May 15, 1997, and any
adjournments thereof.
The undersigned acknowledges receipt of Notice of the Annual Meeting and
proxy statement, each dated April 14, 1997, and grants authority to said
proxies, or their substitutes, and ratifies and confirms all that said proxies
may lawfully do in the undersigned's name, place and stead. The undersigned
instructs said proxies to vote as indicated on the reverse hereof.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
1. ELECTION OF DIRECTORS: NOMINEES: Arthur F. Greeder, III, Charles D. Way
<TABLE>
<S> <C>
[ ] FOR election of the individuals set [ ] REFRAIN FROM VOTING FOR election of
forth opposite as directors (except as the individuals set forth as directors
marked to the contrary)
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
write that person's name on the space provided below.)
- --------------------------------------------------------------------------------
(continued on the reverse side)
2. Upon such other matters as may properly come before the meeting or any
adjournments thereof. THE PROXIES SHALL VOTE AS SPECIFIED ABOVE, OR IF A
CHOICE IS NOT SPECIFIED, THEY SHALL VOTE "FOR" THE ELECTION OF THE
ABOVE-NAMED PERSONS AS DIRECTORS
Dated: , 1997
--------------------
--------------------------------
--------------------------------
(Signature)
(Stockholders should sign
exactly as name appears on
stock. Where there is more than
one owner each should sign.
Executors, Administrators,
Trustees and others signing in a
representative capacity should
so indicate.)
Please enter your Social
Security Number or Federal
Employer Identification Number
here:
--------------------------------
"PLEASE MARK INSIDE BLUE BOX SO THAT DATA PROCESSING EQUIPMENT WILL RECORD YOUR
VOTES"
