<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy X
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 Section 240.14a-11(c) or Section 240.14a-12
AMERICAN COIN MERCHANDISING, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement)
<PAGE> 2
AMERICAN COIN MERCHANDISING, INC.
5660 CENTRAL AVENUE
BOULDER, CO 80301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1998
TO THE STOCKHOLDERS OF AMERICAN COIN MERCHANDISING, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of American
Coin Merchandising, Inc., a Delaware corporation (the "Company"), will be held
on Wednesday, May 6, 1998 at 2:00 p.m. local time at the principal offices of
the Company located at 5660 Central Avenue, Boulder, Colorado 80301, for the
following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors of the Company for its fiscal year ending December 31,
1998.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 23, 1998,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Randall J. Fagundo
Randall J. Fagundo
Secretary
Boulder, Colorado
March 31, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
AMERICAN COIN MERCHANDISING, INC.
5660 CENTRAL AVENUE
BOULDER, CO 80301
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
American Coin Merchandising, Inc., a Delaware corporation (the "Company"), for
use at the Annual Meeting of Stockholders to be held on May 6, 1998, at 2:00
p.m. local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the principal offices of the
Company located at 5660 Central Avenue, Boulder, Colorado 80301. The Company
intends to mail this proxy statement and accompanying proxy card on or about
March 31, 1998 to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March
23, 1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 23, 1998 the Company had outstanding and entitled to
vote 6,458,570 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 5660
Central Avenue, Boulder, CO 80301, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than November 30, 1998 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
There are seven nominees for the seven Board positions presently
authorized in the Company's By-laws. Each director to be elected will hold
office until the next annual meeting of stockholders and until his or her
successor is elected and has qualified, or until such director's earlier death,
resignation or removal. Each nominee listed below is currently a director of the
Company, all having been elected by the stockholders.
Shares represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of the seven nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected and management has no reason to believe that any
nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION/
NAME AGE POSITION HELD WITH THE COMPANY
---- --- ------------------------------
<S> <C> <C>
Jerome M. Lapin.......................... 68 President, Chief Executive Officer and Chairman of the
Board of Directors
Randall J. Fagundo....................... 38 Vice President of Operations, Secretary and Director
Abbe M. Stutsman (1)..................... 45 Vice President of Purchasing and Product Development and
Director
Richard D. Jones(2)...................... 56 President, T.R. Baron & Associates, Inc.
J. Gregory Theisen....................... 52 Vice President of Lorac, Inc.
Jim D. Baldwin (1)....................... 65 Investor
John A. Sullivan (1) (2)................. 43 Investment Advisor, Relational Investors, LLC
</TABLE>
- ----------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Jerome M. Lapin has served as President, Chief Executive Officer and a
director since January 1994 and as chairman of the Board since July 1995. Prior
to joining the Company, he was the Managing Director for World Hosts Pty. Ltd.,
a restaurant leasing consulting business, from July 1991 to January 1994. From
June 1989 to June 1990, Mr. Lapin was the President of Sanwa Foods, Inc., a soup
manufacturer and marketer ("Sanwa"), and from June 1990 to June 1991 he was a
consultant for Sanwa. Mr. Lapin was a co-founder of the International House of
Pancakes, Inc. in 1958.
Randall J. Fagundo, a co-founder of the Company, has served as Vice
President of Operations and Secretary since May 1991 and as a director since
August 1988. Prior to joining the Company, he was one of the founders of
Southwest Coin Company.
Abbe M. Stutsman, a co-founder of the Company, has served as a Vice
President since January 1994 and as a director since December 1989. Ms. Stutsman
served as the Company's Secretary from August 1988 until May 1991, Treasurer
from January 1994 until July 1995 and President from May 1991 until January
1994. Prior to joining the Company, she was the Business Manager of Colorado
Coin from April 1988 to August 1988.
2
<PAGE> 5
Richard D. Jones, a co-founder of the Company, has served as a director
since August 1988 and served as Chairman of the Board from August 1988 to July
1995 and as President of the Company from August 1988 to April 1991. Mr. Jones
has served as President of T.R. Baron & Associates, Inc., a marketing and
consulting business, since May 1975. Mr. Jones was a co-founder of Colorado Coin
in 1987.
J. Gregory Theisen, a co-founder of the Company, has served as a director
since August 1988. Mr. Theisen has served as a Vice President of Lorac, Inc., an
investment consulting company, since December 1989. Mr. Theisen served as Vice
President of the Company from August 1988 to December 1993. Prior to joining the
Company, Mr. Theisen was a co-founder of Colorado Coin and served as its
Operations Manager from January 1987 to October 1988.
Jim D. Baldwin has served as a director since October 1995. Mr. Baldwin
served as President and Chief Executive Officer of King Soopers, a
supermarket/combination store retailer, from 1979 until his retirement in
February 1990. Mr. Baldwin served as a consultant with Knight, Roth and
Associates, a consulting firm, from February 1990 to July 1994. Mr. Baldwin also
serves as a director of Grease Monkey Holding Corp.
John A. Sullivan has served as a director since October 1995. Mr.
Sullivan has been employed by Relational Investors, LLC, an investment
management firm, since March 1998. Mr. Sullivan was employed by Batchelder &
Partners, Inc., an investment advisory and consulting firm, from May 1996 to
February 1998. Mr. Sullivan also served as a Senior Vice President of The
Seidler Companies Incorporated ("Seidler"), the underwriter of the Company's
initial public offering, from August 1993 to April 1996. Prior to being elected
Senior Vice President at Seidler, Mr. Sullivan served as a Vice President from
October 1990 to August 1993. Mr. Sullivan also serves as a director of the Farr
Company.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997, the Board of Directors
held three meetings. Each director attended at least 75% of the total number of
Board meetings and meetings of Board Committees on which the director served
during the time they served on the Board or such committees, except Messrs.
Theisen and Baldwin. The Board of Directors has an Audit Committee and a
Compensation Committee.
The Audit Committee is comprised of Messrs. Baldwin and Sullivan and Ms.
Stutsman. The Audit Committee held one meeting during 1997. The functions
performed by the Audit Committee include recommending to the Board of Directors
independent auditors to serve the Company for the ensuing year, reviewing with
the independent auditors and management, the scope and results of the audit,
assuring that the independent auditors act independently, reviewing and
approving any substantial change in the Company's accounting policies and
practices, reviewing with management and the independent auditors the adequacy
of the Company's system of internal controls and reviewing the Company's annual
report.
The Compensation Committee is comprised of Messrs. Jones and Sullivan. The
Compensation Committee held three meetings during 1997. The functions performed
by the Compensation Committee include reviewing and approving management's
recommendations as to executive compensation and reviewing, approving and
administering the Company's executive compensation and stock option plans.
3
<PAGE> 6
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. KPMG Peat Marwick
LLP has audited the Company's financial statements since December 31, 1993.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG Peat Marwick LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of KPMG Peat Marwick
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the selection
is ratified, the Audit Committee and the Board in their discretion may direct
the appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of KPMG Peat Marwick LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
4
<PAGE> 7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 23, 1998 by: (i)
each person (or group of affiliated persons) who is known by the Company to own
beneficially more than 5% of the Common Stock, (ii) each of the Company's
directors, (iii) each of the officers named in the executive compensation table,
and (iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED (1) OWNED (1)
------------------------ ---------------- ---------------
<S> <C> <C>
SAFECO Asset Management Company (2)....................................................... 577,300 8.94%
601 Union Street
Seattle, WA 98101
Jerome M. Lapin (3)....................................................................... 523,132 8.10
5660 Central Avenue
Boulder, CO 80301
Richard D. and Melinda K. Jones (4)....................................................... 503,623 7.80
5660 Central Avenue
Boulder, CO 80301
Merrill Lynch Asset Management, L.P. (5).................................................. 482,000 7.46
800 Scudders Mill Road
Plainsboro, NJ 08536
J. Gregory Theisen (6).................................................................... 473,623 7.33
5660 Central Avenue
Boulder, CO 80301
Abbe M. Stutsman (7)...................................................................... 314,354 4.87
Randall J. Fagundo........................................................................ 294,091 4.55
W. John Cash (8).......................................................................... 30,000 *
John A. Sullivan (9)...................................................................... 24,500 *
Jim D. Baldwin (10)....................................................................... 9,300 *
All directors and executive officers as a group (8 persons) (3)-(5) and (7)-(10).......... 2,172,623 33.64%
</TABLE>
- ----------------------
* Less than one percent.
(1) Percentage of beneficial ownership is based on 6,458,570 shares of Common
Stock outstanding as of March 23, 1998. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of Common Stock subject to options or warrants currently exercisable
or exercisable within 60 days of March 23, 1998, are deemed outstanding for
computing the percentage of the person or entity holding such securities,
but not outstanding for computing the percentage of any other person or
entity. Except as indicated by footnote, and subject to community property
laws where applicable, the persons named in the table above have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(2) SAFECO Asset Management Company is a subsidiary of SAFECO Corporation and
holds such shares on behalf of its clients, including SAFECO Common Stock
Trust, which holds 317,300 shares and SAFECO Resource Series Trust, which
holds 260,000 shares. SAFECO Asset Management Company disclaims beneficial
ownership of all shares held by SAFECO Common Stock Trust and SAFECO
Resource Series Trust.
(3) Includes 361,483 shares of Common Stock held jointly with Mr. Lapin's
spouse.
5
<PAGE> 8
(4) Includes (i) 42,464 shares held by T.R. Baron and Associates, Inc. Defined
Benefit Pension Plan, of which Mr. Jones is the Trustee, and (ii) 293,080
held by Ms. Jones.
(5) Merrill Lynch & Co., Inc. ("ML&Co."), Merrill Lynch Group, Inc. ("ML
Group"), Princeton Services, Inc. ("PSI") and Merrill Lynch Asset
Management, L.P. ("MLAM") have together filed a Schedule 13G pursuant to
which they report sole or shared voting and dispositive power over 482,000
shares owned. ML&Co. may be deemed to be the beneficial owner of certain of
the securities held by or deemed to be beneficially owned by its
wholly-owned subsidiary, ML Group. ML Group may be deemed to be the
beneficial owner of certain of the securities by virtue of its control of
its wholly-owned subsidiary, PSI. PSI, may be deemed to be the beneficial
owner of certain of the securities by virtue of its being the general
partner of MLAM. MLAM is a registered investment adviser and may be deemed
to be the beneficial owner of the securities by virtue of its acting as
investment adviser to one or more investment companies registered pursuant
to Section 8 of the Investment Company Act of 1940.
(6) Includes 12,464 shares held by Colorado Coin Company Defined Benefit Keogh
Plan of which Mr. Theisen is the Trustee.
(7) Includes 50,519 shares of Common Stock held jointly with Ms. Stutsman's
spouse.
(8) Consists of options to purchase Common Stock exercisable within 60 days of
March 23, 1998 by Mr. Cash.
(9) Includes options to purchase 7,000 shares of Common Stock granted under the
Directors' Plan which are exercisable within 60 days of March 23, 1998 and
a warrant held by Mr. Sullivan exercisable to purchase 17,500 shares of
Common Stock.
(10) Includes 540 shares of Common Stock held jointly with Mr. Baldwin's spouse
and options to purchase 7,000 shares of Common Stock granted under the
Directors' Plan which are exercisable within 60 days of March 23, 1998.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company as of March 23, 1998:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE POSITION HELD WITH THE COMPANY
---- --- ------------------------------
<S> <C> <C>
Jerome M. Lapin............................... 68 President, Chief Executive Officer and Chairman of
the Board of Directors
W. John Cash.................................. 50 Vice President, Chief Financial Officer and Treasurer
Randall J. Fagundo............................ 38 Vice President of Operations, Secretary and Director
Abbe M. Stutsman.............................. 45 Vice President of Purchasing and Product Development
and Director
</TABLE>
W. John Cash has served as Vice President and Chief Financial Officer
since July 1995. Prior to joining the Company he was Vice President and Chief
Financial Officer of Kasler Holding Company, a diversified construction company,
from May 1991 to March 1995. From July 1984 to April 1991, Mr. Cash served as a
partner of KPMG Peat Marwick LLP.
See "Proposal 1--Election of Directors" for biographies of the other
executive officers.
6
<PAGE> 9
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company, other than Messrs. Jones and
Theisen, receives $2,500 for each regular or special meeting of the Board of
Directors or committee meeting that is held on a date other than the date of a
board meeting. All Directors also receive reimbursement for their reasonable
out-of-pocket expenses related to such attendance. In the fiscal year ended
December 31, 1997, the total compensation paid to non-employee directors was
$10,000.
Each non-employee director of the Company, other than Messrs. Jones and
Theisen, are eligible to receive stock option grants under the 1995 Non-Employee
Director Stock Option Plan (the "Directors' Plan"). Only non-employee directors
of the Company or an affiliate of such directors (as defined in the Code) are
eligible to receive options under the Directors' Plan. Options granted under the
Directors' Plan are intended by the Company not to qualify as incentive stock
options under the Code.
During 1997, the Company did not grant options to non-employee directors
of the Company. As of March 23, 1998, no options had been exercised under the
Directors' Plan.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows for the fiscal years ended December 31, 1997,
1996 and 1995, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and its three other most highly compensated executive
officers for the year ended December 31, 1997 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION -----------------
------------------------------ SECURITIES
SALARY BONUS UNDERLYING ALL OTHER
NAME OF PRINCIPAL POSITION YEAR ($) (1) ($) OPTIONS COMPENSATION(2)
-------------------------- ---- ------- --- ------- ---------------
<S> <C> <C> <C> <C> <C>
Jerome M. Lapin............................ 1997 $ 178,750 -- -- $ 10,351
President and Chief Executive 1996 155,833 -- -- 6,757
Officer 1995 156,250 -- -- 7,074
W. John Cash............................... 1997 125,547 -- 100,000 10,025
Vice President, Chief Financial 1996 112,320 -- -- 9,128
Officer and Treasurer 1995(3) 50,416 -- 20,000 1,860
Randall J. Fagundo......................... 1997 125,547 -- -- 10,779
Vice President of Operations 1996 111,837 -- -- 9,550
and Secretary 1995 80,411 $ 98,469(4) -- 6,445
Abbe M. Stutsman........................... 1997 125,547 -- -- 10,385
Vice President of Purchasing 1996 111,837 -- -- 9,824
and Product Development 1995 79,167 203,870(4) -- 2,918
</TABLE>
- ----------------------
(1) Includes amounts deferred pursuant to Section 401(k) of the Internal Revenue
Code of 1986, as amended.
(2) Includes value of Company provided automobile, health insurance premiums
paid by the Company and funds contributed by the Company as matching
contributions to the Named Executive Officers' 401(k) Plan account.
(3) Mr. Cash joined the Company in July 1995.
(4) Consists of S Corporation Distributions.
7
<PAGE> 10
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The Company grants options to its executive officers under its Amended and
Restated Stock Option Plan (the "Option Plan"). As of March 23, 1998, options to
purchase a total of 305,834 shares were outstanding under the Plans and options
to purchase 633,035 shares remained available for grant thereunder.
The following table shows for the fiscal year ended December 31, 1997
certain information regarding options granted to each of the Named Executive
Officers:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#) IN FISCAL 1997(1) ($/SHARE) DATE ($/SHARE)(2)
---- ----------- ------------------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Jerome M. Lapin............................ -- -- -- -- --
W. John Cash............................... 100,000 44.64% $ 7.625 4/30/07 $ 4.60
Randall J. Fagundo......................... -- -- -- -- --
Abbe M. Stutsman........................... -- -- -- -- --
</TABLE>
- ------------
(1) Based upon 224,000 options to purchase shares of Common Stock granted in
fiscal 1997.
(2) The per share value is based on a Black-Scholes option pricing model. The
calculation included the following assumptions: estimated volatility of 60%
(based on historical stock prices); risk-free interest rate of 6% (based on
returns available through U. S. Treasury bonds); no dividend yield; and an
expected life of 6 years. Option values are dependent on general market
conditions and the performance of the Common Stock. There can be no
assurance that the values in this table will be realized.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table shows for the fiscal year ended December 31, 1997
certain information regarding options exercised and held at year-end by the
Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT
SHARES AT 12/31/97 12/31/97
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE(#) UNEXERCISABLE($)(2)
---- -------------- -------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Jerome M. Lapin........................... 323,297 $ 2,053,258 -- /-- -- /--
W. John Cash.............................. -- -- 30,000/90,000 $ 331,250/931,250
Randall J. Fagundo........................ -- -- -- /-- -- /--
Abbe M. Stutsman.......................... -- -- -- /-- -- /--
</TABLE>
- ------------
(1) Based on the fair market value of the Common Stock as of the date of
exercise, minus the exercise price, multiplied by the number of shares
acquired.
(2) Based on the fair market value of the Common Stock as of December 31, 1997
of $17.625 per share, minus the exercise price of "in-the-money"
unexercised options, multiplied by the number of shares represented by such
options.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Jerome M. Lapin, W.
John Cash and Abbe Stutsman (each an "Executive") as of June 1, 1996 (the
"Employment Agreements"). The Employment Agreement with Mr. Lapin, as updated by
the Compensation Committee, provides that he will receive an annual salary of
$185,000 as of April 1, 1997, increasing to $200,000 on April 1, 1998 and to
$215,000 on April 1, 1999. The Employment Agreements with Mr. Cash and Ms.
Stutsman,
8
<PAGE> 11
as updated by the Compensation Committee, provide that they will each receive an
annual salary of $129,470. Additionally, each Executive is eligible to receive a
bonus or salary increase as determined by the Compensation Committee. Mr. Lapin
also is entitled to a minimum bonus of $60,000 and $45,000 during the years
beginning April 1, 1998 and April 1, 1999, respectively. The Employment
Agreements also provide that each Executive will be entitled to (i) participate
in any employee benefits plans the Company makes available to its other
employees, (ii) four weeks vacation, and (iii) use of an automobile provided by
the Company. The Employment Agreement with Mr. Lapin expires on December 31,
1999 and the Employment Agreements with Mr. Cash and Ms. Stutsman expire on
December 31, 1998. Each Employment Agreement also provides that the Company may
terminate the Executive's employment at any time for cause and with 60 days'
written notice without cause. If the Executive is terminated without cause, the
Company is obligated to pay the Executive's salary for 12 months after the
termination date. The Employment Agreements provide that after a change of
control of the Company, if the Executive is terminated without cause, required
to move outside the Boulder, Colorado area or experiences a material reduction
in his or her responsibilities then the Executive will be entitled to receive
the salary set forth in the respective Employment Agreement for the remaining
term of the Agreement. The Employment Agreements also contain confidentiality
and noncompete provisions which prohibit the Executives from soliciting
employees of the Company, engaging in business similar to the Company's or
disclosing confidential information for a period of three years after the
termination of the Executive's employment with the Company.
REPORT OF THE COMPENSATION COMMITTEE (1)
THE COMPENSATION COMMITTEE
The Compensation Committee's stated purpose is to review and recommend to
the Board the compensation, stock options and employment benefits of all
officers of the Company, administer the Company's Amended and Restated Stock
Option Plan, fix the terms of other employee benefit arrangements and make
awards under such arrangements. The Compensation Committee is composed of two
directors, one of whom has never served as an officer of the Company. The
following is a summary of polices of the Compensation Committee that affect the
compensation paid to executive officers, as reflected in the tables and text set
forth elsewhere in this Proxy Statement.
General Compensation Policy. The Compensation Committee's overall policies
with respect to executive officers is to offer competitive compensation
opportunities for such persons based upon their position and personal
performance, the financial performance of the Company and their contribution to
that performance. Each executive officer's compensation package is comprised of
two elements: (i) base salary that reflects individual performance and is
designed primarily to be competitive with salary levels in similar profitable
size businesses and (ii) stock-based awards designed to strengthen the mutuality
of interests between the executive officers and the Company's stockholders.
Factors. Several important factors considered in establishing the
components of each executive officer's compensation package for the 1997 fiscal
year are summarized below. Additional factors were taken into account to a
lesser degree. The Compensation Committee may, in its sole discretion, apply
entirely different factors, such as different measures of financial performance,
for future fiscal years. However, it is presently contemplated that all
compensation decisions will be designed to further the overall compensation
policy described above.
- --------------
(1) Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, as amended (the
"Securities Act") or the Exchange Act that might incorporate future
filings by reference, including this Proxy Statement, in whole or in
part, the following Report of the Compensation Committee and the
Performance Graph shall not be incorporated by reference into any such
filings, and shall not be deemed soliciting material under the Securities
Act or the Exchange Act.
9
<PAGE> 12
Stock-Based Incentive Compensation. The Company adopted the Amended and
Restated Stock Option Plan (the "Option Plan") in order to provide equity based
performance incentives to its employees. The Option Plan authorizes the Company
to award incentive stock options and nonqualified stock options to purchase
Common Stock to officers and other employees of the Company. The purpose of the
Option Plan is to attract, retain and motivate officers and employees. On
November 12, 1997, the stockholders approved an increase in the number of shares
authorized to award incentive options and nonqualified stock options by 543,868
shares to 1,400,000 shares. Stock options may be exercised at a purchase price
as recommended by the Compensation Committee and determined by the Board of
Directors, provided that the exercise price per share under the Option Plan
shall be an amount not less than 100% of the fair market value on the date of
grant for incentive stock options and not less than 85% of the fair market value
on the date of grant for nonqualified stock options. Options granted to
beneficial owners of 10% or more of the Company's outstanding shares shall not
be granted at less than 110% of fair market value. The grants are designed to
align the interests of the optionees with those of the stockholders and provide
each individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business, even though
certain executive officers of the Company are already significant stockholders
of the Company (see "Security Ownership of Certain Beneficial Owners and
Management"). Moreover, the long-term vesting schedules encourage a long-term
commitment to the Company by its executive officers and other optionees. The
size of the option grant to each optionee is set at a level that the
Compensation Committee deems appropriate in order to create a meaningful
opportunity for stock ownership based upon the individual's current position
with the Company, but also takes into account the individual's potential for
future responsibility and promotion over the option vesting period, and the
individual's performance in recent periods. The Compensation Committee
periodically reviews the number of shares owned by, or subject to options held
by, each executive officer, and additional awards are considered based upon past
performance of the executive officer.
CHIEF EXECUTIVE OFFICER
In fiscal 1997, Jerome M. Lapin, Chairman, President and Chief Executive
Officer of the Company received total cash payments of $178,750 in salary. The
Compensation Committee notes that the Company under the strong leadership of Mr.
Lapin produced significant growth in sales and earnings during the period. The
Compensation Committee considers this level of compensation appropriate in light
of Mr. Lapins' leadership of a growth oriented company which has experienced
significant increases in fiscal 1997 revenue and net earnings of 54.4% and
71.3%, respectively, as compared to fiscal 1996. Mr. Lapin has an employment
agreement with the Company. See "Executive Compensation--Employment Agreements."
LIMITATION ON DEDUCTIBILITY
The Compensation Committee has reviewed the Company's informal
compensation policies in light of amendments to the Internal Revenue Code
enacted during 1993 that generally limit deductions for compensation paid to
certain executive officers to $1,000,000 per annum (certain performance based
compensation is not subject to that limit). At present levels of compensation,
these amendments do not limit the deductions to which the Company is entitled
and the Compensation Committee has therefore concluded that no changes in the
Company's compensation policies as a result of these amendments are appropriate.
SUMMARY
The Compensation Committee believes that the compensation programs of the
Company and the administration of those programs well serve the interest of the
Company's stockholders. These programs allow the Company to attract, retain and
motivate exceptional management talent and to compensate executives in a manner
that reflects their contributions to both the short and long-term performance of
the Company. The Company intends to continue to emphasize programs that it
believes positively affect stockholder value.
COMPENSATION COMMITTEE MEMBERS
Richard D. Jones and John A. Sullivan
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Company's Common Stock from October 16, 1995 (the date the Company became a
public company) until December 31, 1997, with the cumulative total return of the
NASDAQ Stock Market index and the Russell 2000 index. The graph assumes the
investment of $100 in the Company's Common Stock and in each of the indexes on
October 16, 1995 and reinvestment of all dividends. The initial public offering
price of the Company's Common Stock was $7 per share.
COMPARISON OF CUMULATIVE TOTAL RETURN*
FOR THE PERIOD ENDED DECEMBER 31, 1997
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
AMCN
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------
10/16/95 12/95 12/96 12/97
-------- ----- ----- -----
<S> <C> <C> <C> <C>
American Coin Merchandising, Inc................................. 100 88 71 252
NASDAQ Stock Market (U.S.)....................................... 100 101 124 153
Russell 2000..................................................... 100 102 119 146
Cumulative Total Return*
- ------------------------
American Coin Merchandising, Inc.............................. 252
NASDAQ Stock Market (U.S.).................................... 153
Russell 2000.................................................. 146
</TABLE>
* Annual return assumes reinvestment of dividends. There were no dividends
paid by the Company during the period presented. Cumulative total return
assumes an initial investment of $100 on October 16, 1995.
CERTAIN TRANSACTIONS
INTEREST EXPENSE AND PRINCIPAL PAYMENTS RELATED TO NOTES PAYABLE TO CONTROL
GROUP
On August 31, 1995, the Company acquired substantially all of the
inventory, property and equipment and assumed certain facilities leases and
contracts of Performance Merchandising, Inc., Inland Merchandising, Inc.,
Chicago Toy Company, Georgia Toy Company, Lehigh Valley Toy Company, and
Southwest Coin Company (the "Entities") for an aggregate purchase price of
$3,351,417. The Entities were owned in varying percentages by Greg Theisen, Abbe
Stutsman, Richard Jones and Randall Fagundo and their respective spouses (the
"Founders").
The purchase price for the Entities was paid with cash in the amount of
$2,002,795 and three year promissory notes with an aggregate principal amount of
$1,348,622 with an interest rate on the principal amount of 8% per annum (the
"Notes"). During the fiscal year ended December 31, 1997, the Company made the
following interest and principal payments on the Notes held by the Founders:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
<S> <C> <C>
Richard D. Jones................................................................... $ 119,314 $ 16,704
J. Gregory Theisen................................................................. 101,058 14,148
Randall J. Fagundo................................................................. 141,931 19,870
Abbe M. Stutsman................................................................... 312,007 43,681
</TABLE>
OTHER
On October 1, 1997, the Company acquired the operating assets of Three
Rivers Toy Company, a franchisee, for approximately $182,000. Paul Harmeier,
brother-in-law of Randall J. Fagundo, owned 30% of Three Rivers Toy Company.
11
<PAGE> 14
Management believes the terms of the foregoing transactions were fair to
the Company. All future transactions with affiliates will be subject to the
approval of the Company's disinterested directors and will be on terms believed
by such directors to be no less favorable to the Company than those available
from unaffiliated third parties.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ Randall J. Fagundo
Randall J. Fagundo
Secretary
Boulder, Colorado
March 31, 1998
12
<PAGE> 15
AMERICAN COIN MERCHANDISING, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS -- MAY 6, 1998
The undersigned hereby appoints Jerome M. Lapin and W. John Cash (the
"Proxies"), each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Common
Stock of American Coin Merchandising, Inc., held of record by the undersigned on
March 23, 1998, at the ANNUAL MEETING OF STOCKHOLDERS to be held on May 6, 1998,
or any adjournment thereof.
(1) To elect Directors to hold office until the next Annual Meeting of
Stockholders and until their successors are elected.
<TABLE>
<S> <C> <C> <C>
JEROME M. LAPIN RANDALL J. FAGUNDO ABBE M. STUTSMAN RICHARD D. JONES
J. GREGORY THEISEN JIM D. BALDWIN JOHN A. SULLIVAN
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
<TABLE>
<S> <C>
FOR all nominees WITHHOLD AUTHORITY
(except as marked below) to vote for nominees listed
</TABLE>
- --------------------------------------------------------------------------------
(2) To ratify and approve the appointment of KPMG Peat Marwick LLP, independent
auditors of the Company for its fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be completed and signed on the reverse side)
(Continued from the other side)
(3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH PROPOSAL.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED IN
FAVOR OF THE PROPOSALS.
Dated:_____________________,1998
Signed:
-------------------------
Signature of Stockholder
Signed:
-------------------------
Signature of Stockholder
Please vote, date and sign this
proxy as your name is printed
hereon. When signing as
attorney, executory
administrator, trustee,
guardian, etc. give full title
as such. If the stock is held
jointly, each owner should sign.
If a corporation, please sign in
full corporate name by President
or other authorized officer. If
a partnership, please sign in
partnership name by authorized
person.
