MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE
DAYTON, OHIO 45426
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF COMMON STOCK:
The Annual Meeting of Shareholders of Moto Photo, Inc. (the "Company") will be
held at the offices of the Company, 4444 Lake Center Drive, Dayton, Ohio 45426,
on Wednesday, June 25, 1997 at 9:00 a.m., for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To transact such other business as may properly be brought before the
Annual Meeting or any adjournment of the Annual Meeting.
The accompanying Proxy Statement contains information regarding the items of
business to be considered at the Annual Meeting.
The holders of Common Stock of record at the close of business on April 28,
1997, are entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof. A list of such shareholders will be available at the
Annual Meeting and during the ten days before the Annual Meeting at the offices
of the Company, 4444 Lake Center Drive, Dayton, Ohio 45426.
Dayton, Ohio
May 12, 1997
Even if you plan to attend the meeting, please sign the enclosed proxy card and
return it promptly in the envelope enclosed for that purpose. If you have
previously submitted a proxy card and are present at the Annual Meeting, you
will be able to revoke the proxy and vote your shares in person.
MOTO PHOTO, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TABLE OF CONTENTS
PAGE
GENERAL.................................................. 1
Record Date and Outstanding Voting Stock............ 1
Quorum and Voting................................... 1
Action To Be Taken Under the Proxy.................. 1
Votes Required...................................... 2
Solicitation of Proxies............................. 2
Revocation of Proxies............................... 2
Annual Report....................................... 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT......................................... 2
Potential Future Change in Control.................. 4
Compliance with Section 16(a) of the Securities
Exchange Act of 1934.............................. 5
ELECTION OF DIRECTORS.................................... 5
Information Concerning Nominees..................... 5
Meetings of Board of Directors and Committees....... 6
Compensation of Outside Directors................... 7
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION............ 7
Executive Officers.................................. 7
Executive Compensation.............................. 8
Option Grants During 1996........................... 9
Option Exercises and Year-End Option Values .........10
Ten-Year Option Repricing............................10
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements.....................11
Compensation Committee Interlocks and Insider
Participation......................................12
Report of the Compensation Committee and Mr. Adler...12
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS..........14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............15
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS..................15
PROPOSALS OF SHAREHOLDERS.................................17
OTHER MATTERS.............................................17
MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE
DAYTON, OHIO 45426
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JUNE 25, 1997
The following information is furnished in connection with the Annual Meeting of
Shareholders of Moto Photo, Inc. (the "Company") to be held on Wednesday, June
25, 1997 at 9:00 a.m., at the offices of the Company, 4444 Lake Center Drive,
Dayton, Ohio. This Proxy Statement will be mailed on or about May 12, 1997, to
holders of Voting Common Stock ("Common Stock") of record as of the record date.
GENERAL
RECORD DATE AND OUTSTANDING VOTING STOCK
The record date ("Record Date") for determining shareholders entitled to vote at
the Annual Meeting has been fixed at the time of the closing of business on
April 28, 1997. On that date, the Company had 7,789,973 shares of Common Stock
outstanding and entitled to be voted.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Annual Meeting. If a quorum is not present at the Annual Meeting, the Annual
Meeting may be adjourned to another place, date or time. At any such reconvened
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the original meeting.
Cumulative voting is not permitted in the election of directors of the Company.
On all matters (including the election of directors) submitted to a vote of the
shareholders at the Annual Meeting or any adjournment of the Annual Meeting,
holders of Common Stock will be entitled to one vote for each share of Common
Stock owned of record by such shareholder on the Record Date.
ACTION TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form which are properly executed and returned will
be voted in accordance with the instructions on the proxies. Any proxy upon
which no instructions have been indicated with respect to a specified matter
will be voted as follows:
(a)"FOR" the election to the Board of Directors of the seven persons named in
this Proxy Statement as the nominees of the Board of Directors; and
(b)As to any other matters which may properly come before the meeting, in
accordance with the recommendation of the Board of Directors. The Board of
Directors knows of no other matters to be presented for consideration at
the meeting.
VOTES REQUIRED
Directors will be elected by a plurality of the votes of the shares present in
person or represented by proxy at the Annual Meeting. Any other matters
properly brought before the Annual Meeting will be decided by a majority of the
votes cast on the matter, unless otherwise required by law.
Because directors are elected by a plurality rather than a majority of the
shares present in person or represented by proxy at the Annual Meeting, proxies
marked "withhold authority" with respect to any one or more nominees will not
affect the outcome of the nominee's election unless the nominee receives no
affirmative votes or unless other candidates are nominated for election as
directors.
SOLICITATION OF PROXIES
The enclosed proxy for the Annual Meeting is being solicited by the Board of
Directors of the Company. The cost of soliciting the proxies in the enclosed
form will be borne by the Company. In addition to the use of the mails, proxies
may be solicited by personal interview, telephone, and facsimile by directors,
officers or other regular employees of the Company. No additional compensation
will be paid to directors, officers or other regular employees for such
services. Copies of proxy solicitation materials will be furnished to banks,
brokerage houses fiduciaries and custodians holding in their names shares of
Common Stock beneficially owned by others to forward to such beneficial owners.
The Company may, upon request, reimburse banks, brokerage houses and other
institutions, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to beneficial owners.
REVOCATION OF PROXIES
Any shareholder returning the accompanying proxy may revoke such proxy at any
time prior to its exercise by (a) giving written notice to the Company of such
revocation, (b) voting in person at the Annual Meeting, or (c) executing and
delivering to the Company a later-dated proxy. Any such written notice of
revocation or later-dated proxy should be addressed to Jacob A. Myers,
Secretary, at the Company's offices.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended December
31, 1996, including audited financial statements, accompanies this Proxy
Statement. Neither the Report nor the financial statements are deemed to be a
part of the material for the solicitation of proxies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
At April 14, 1997, the Company had 7,789,973 shares of Common Stock outstanding.
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 14, 1997 by (i) each of the
Company's directors or nominees for director, its chief executive officer and
its other executive officers whose total salary and bonus for the year ended
December 31, 1996 exceeded $100,000, (ii) all directors, nominees and executive
officers of the Company as a group, and (iii) each person who is known by the
Company to beneficially own more than 5% of the Company's Common Stock. Unless
otherwise indicated, the Company believes that the persons named in the table
have sole voting and investment power with respect to the shares indicated as
beneficially owned by them.
NUMBER PERCENT
NAME OF SHARES OF CLASS (1)
DIRECTORS AND CERTAIN
EXECUTIVE OFFICERS
Michael F. Adler (2) 1,496,399 18.7%
4444 Lake Center Drive
Dayton, OH 45426
Harry D. Loyle (3) 504,375 6.5%
410 S. Main Plaza
Pleasantville, NJ 08232
David A. Mason (4) 113,802 1.4%
Frank W. Benson (5) 26,000 *
Dexter B. Dawes (5) 22,000 *
Leslie Charm (5) 15,000 *
Douglas M. Thomsen 6,000 *
Frank M. Montano (6) 41,522 *
Leonard S. Swartz (7) 51,101 *
Paul Pieschel (8) 25,384 *
ALL DIRECTORS, NOMINEES AND
EXECUTIVE 2,366,363 28.7%
OFFICERS AS A GROUP
(13 PERSONS) (9)
BENEFICIAL OWNERS OF MORE THAN 1,000,000 11.4%
5% OF THE COMMON STOCK
Fuji Photo Film U.S.A.,
Inc. (10)
555 Taxter Road
Elmsford, NY 10523
* Less than 1%
(1)Percent of class is calculated without regard to shares of Common Stock
issuable upon exercise of outstanding warrants or stock options, except that
any shares a person is deemed to own by having the right to acquire upon
exercise of a warrant or option are considered to be outstanding solely for
purpose of calculating such person's percentage ownership.
(2)The shares of Common Stock indicated as beneficially owned by Mr. Adler: (i)
include 2,332 shares owned by Michael F. Adler as custodian for Elizabeth
Adler; (ii) include 6,000 shares owned by the Elizabeth Adler Trust for which
Mr. Adler is trustee; (iii) include 1,000 shares which he has the right to
acquire upon exercise of warrants owned by him; (iv) include 209,996 shares
which he has the right to acquire by exercise of stock options which are
currently exercisable; (v) include 2,000 shares issuable upon the exercise of
warrants owned by the Robert Adler Trust for which Mr. Adler is co-trustee
and shares voting and investment power with Jacob A. Myers, an officer of the
Company; and (vi) exclude a total of 11,000 shares owned by Mr. Adler's
spouse, as to which Mr. Adler disclaims beneficial ownership. Such shares
also include 1,192,039 shares of Common Stock owned by Progressive Industries
Corporation ("Progressive"), which is 99% owned by Mr. Adler and his family,
which shares of Common Stock Mr. Adler may be deemed to own beneficially due
to his ownership of a controlling interest in Progressive and his position as
President of Progressive. The shares of Common Stock owned by Progressive
include 46,000 shares issuable upon exercise of warrants owned by
Progressive.
(3)Includes 3,000 shares which Mr. Loyle has the right to acquire upon exercise
of warrants owned by him and 321,375 shares held by Corral Photographic
Corp., a corporation 100% owned by Mr. Loyle.
(4)Includes 74,552 shares which Mr. Mason has the right to acquire upon exercise
of stock options which are currently exercisable and excludes 2,000 shares
owned by Mr. Mason's wife, as to which Mr. Mason disclaims beneficial
ownership.
(5)Includes 15,000 shares which this individual has the right to acquire upon
exercise of stock options which are currently exercisable.
(6)Includes 25,552 shares which Mr. Montano has the right to acquire upon
exercise of stock options which are currently exercisable.
(7)Includes 16,500 shares which Mr. Swartz has the right to acquire upon
exercise of stock options which are currently exercisable.
(8)Includes 12,384 shares which Mr. Pieschel has the right to acquire upon
exercise of stock options which are currently exercisable.
(9)Includes 416,132 shares which such group has the right to acquire upon
exercise of stock options which are currently exercisable and 52,000 shares
which such group has the right to acquire upon exercise of warrants.
(10)Consists of 1,000,000 shares issuable upon exercise of warrants owned by
Fuji Photo Film U.S.A., Inc. ("Fuji").
POTENTIAL FUTURE CHANGE IN CONTROL
Fuji is the holder of 1,000,000 shares of Series G Non-Voting Cumulative
Preferred Stock (the "Fuji Preferred Stock") and warrants to purchase 1,000,000
shares of the Company's Common Stock for $2.375 per share which expire in 2002.
The Fuji Preferred Stock is redeemable by the Company at any time in aggregate
amounts of at least $1 million. The shares are subject to mandatory redemption
on January 1, 1999 ("Mandatory Redemption Date"). Any redemption of the Fuji
Preferred Stock must be either in cash from the proceeds of an equity offering
or in Common Stock valued at 90% of the market price at the time of redemption;
provided, however, that Fuji may refuse any proposed redemption by the Company
in shares of Common Stock and elect to continue to hold the Fuji Preferred Stock
without impairment of any right to require redemption at a later time. The
redemption price for the Fuji Preferred Stock is $10.00 per share, or an
aggregate of $10 million. If the market price of the Company's Common Stock on
the Mandatory Redemption Date is less than $3.00 per share, the redemption of
the Fuji Preferred Stock will be extended until the earlier of (i) the first
date on which the market price of the Common Stock exceeds $3.00 per share or
(ii) the date one year following the initial Mandatory Redemption Date. If the
Fuji Preferred Stock is redeemed in shares of Common Stock, depending upon the
market price of the Common Stock and the number of shares of Common Stock
outstanding, such redemption could result in Fuji acquiring control of the
Company.
The Fuji Preferred Stock is also redeemable at Fuji's option under certain other
circumstances ("Redemption Event") which include, after appropriate cure
periods, the failure of the Company to meet certain requirements under a supply
agreement with Fuji, default by the Company under certain other agreements
between the Company and Fuji, the termination of involvement in the day-to-day
management of the Company of either of Michael F. Adler or David A. Mason, a
change in control of the Company, the Company's bankruptcy or insolvency, or
failure by the Company to meet its obligations under other indebtedness in
excess of $100,000. If the Company fails to redeem all of the Fuji Preferred
Stock upon the occurrence of a Redemption Event, Fuji has the right, until all
of the shares of Fuji Preferred Stock are redeemed or the Redemption Event is
cured, to elect the majority of the Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely on a review of filed reports or other information provided to the
Company, no person who at any time during 1996 was director, executive officer,
or beneficial owner of more than ten percent of any class of the equity
securities of the Company failed to file reports as required by Section 16(a) of
the Securities Exchange Act of 1934.
Through inadvertence, certain individuals filed late reports; in each case, the
report was filed as soon as the failure to file was discovered. Michael F.
Adler, David A. Mason, Alfred E. Lefeld, Paul Pieschel, and Robert Galastro each
filed one late report with respect to one transaction each; Kathryn Drury filed
two late reports with respect to one transaction each.
ELECTION OF DIRECTORS
The Board of Directors has established the size of the Board as seven members
and has nominated all of the current members of the Board for re-election. Each
director to be elected will hold office until the next annual meeting of
shareholders and until his successor is duly elected and qualified, or until
such director's earlier death, resignation or removal. The affirmative vote of
a plurality of the votes cast in person or by proxy at the meeting is required
to elect each nominee listed. If any nominee becomes unavailable for any
reason, or if a vacancy shall occur before the election (which events are not
anticipated), the shares of Common Stock represented by the enclosed proxy will
be voted for such other person as may be recommended by the Board of Directors
of the Company.
There is no formal arrangement among the directors or shareholders to nominate
any person for election to the Board of Directors. No family relationships
exist between or among directors or officers of the Company.
INFORMATION CONCERNING NOMINEES
Michael F. Adler. Age 60. Mr. Adler was elected Chief Executive Officer of the
Company in June, 1985, and its Chairman in October, 1990. From February, 1984
through December, 1996 he served as the Company's President. He was elected a
director of the Company on June 29, 1983. Mr. Adler has also been President,
Chief Executive Officer and a director of Progressive Industries Corporation
("Progressive") since 1968, positions he still holds. He is a member of the
Board of Directors and Chairman of the Venture Capital Committee of the City-
Wide Development Corporation, Dayton, Ohio, and a member of the Board of
Directors of The 2003 Committee in Dayton, Ohio. Mr. Adler has previously been
a member of the Board of Trustees of the Photo Marketing Association, the Ohio
Building Authority, and the State Governance Board-Jobs for Ohio Graduates, a
member of the executive committee and past Chairman of the Board of Trustees-
Jobs for Dayton Graduates, as well as chairman of the nominating council of the
Public Utilities Commission of Ohio and of the City-Wide Development
Corporation, Dayton, Ohio.
Frank W. Benson. Age 69. Mr. Benson became a director of the Company in
February, 1989. Since June, 1988, Mr. Benson has been Director of Finance and
Administration, and, since October, 1989, Treasurer of the Center for Policy
Negotiation, Inc. in Boston, Massachusetts. He served as an independent
consultant to small businesses from May, 1987 through May, 1988. From February,
1983 through April, 1987, Mr. Benson was President, Treasurer, and a director
(through January, 1987) of Bailey's of Boston, Inc., a manufacturer and retailer
of ice cream and candies in Massachusetts.
Leslie Charm. Age 53. Mr. Charm became a director in October, 1990. Mr.
Charm's principal occupation since August, 1990 has been as partner of
Restoration Associates, a management consulting firm in Massachusetts. From
1977 to August, 1990, Mr. Charm was President of Docktor Pet Centers, Inc.,
Wilmington, Mass.; approximately fifteen months after it was sold and Mr. Charm
ceased his affiliation with Docktor Pet Centers, Inc., such company filed a
petition in bankruptcy. Mr. Charm is a former director of the International
Franchise Association. In addition, since 1989 Mr. Charm has been an adjunct
professor of entrepreneurial finance at Babson College in Wellesley,
Massachusetts. Mr. Charm is a director of several privately-held companies.
Dexter B. Dawes. Age 60. Mr. Dawes became a director of the Company in
December, 1989. Since 1972, Mr. Dawes has been Chairman of the New York and San
Francisco-based investment banking firm of Bangert, Dawes, Reade, Davis & Thom
Incorporated. From September, 1989, through December, 1996, Mr. Dawes was
President of John Hancock Capital Growth Management, Inc.
Harry D. Loyle. Age 43. Mr. Loyle became a director of the Company in July,
1993. Since July, 1985, Mr. Loyle's principal occupation has been as President
and Director of Franchise Development for ProMoto Management Corporation, an
area developer for the Company. He also serves as Secretary/Treasurer and is a
director and shareholder of the following One Hour MotoPhoto franchisees:
Corral Photographic Corporation in Northfield, New Jersey, and the Positive
Negative, Inc. in Bala Cynwyd, Pennsylvania. Mr. Loyle serves as director
and/or officer or partner of a number privately held businesses in New Jersey
and Pennsylvania. From 1976 to 1985, he was President and General Manager of
Charlex, Inc., a company that owned and operated retail photographic stores. In
January, 1995, Mr. Loyle was elected to the Franchise Advisory Council of the
International Franchise Association and, in June, 1996, to the Council's
Executive Committee.
David A. Mason. Age 56. Mr. Mason was elected Treasurer and a director of the
Company in June, 1983 and Executive Vice President - Finance and Chief Financial
Officer in December, 1983. Mr. Mason has also been Senior Vice President and
Treasurer of Progressive since 1975 and a director of Progressive since 1976,
positions he still holds.
Douglas M. Thomsen. Age 78. Mr. Thomsen became a director of the Company in
June, 1988. Until his retirement in January, 1988, Mr. Thomsen had been
associated with Federated Department Stores ("Federated") for over forty years.
Most recently, from March, 1987 to December, 1987, Mr. Thomsen served as a
consultant on a special project for Federated. From 1972 to March, 1987, Mr.
Thomsen served as Chairman and Chief Executive Officer of Rike's,
Shillito/Rike's, and Lazarus, divisions of Federated.
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors had six meetings during 1996. The Board of Directors has
established standing Audit and Compensation Committees; it does not have a
nominating committee. Each director attended, in person or through telephone
conference call, at least three-fourths of the aggregate meetings of the Board
of Directors and the meetings of the committees, if any, on which he served.
The Audit Committee meets with management to consider the adequacy of the
internal controls of the Company and the objectivity of financial reporting.
The Audit Committee also meets with the independent auditors and with financial
personnel of the Company about such matters. The independent auditors
periodically meet alone with the Audit Committee and always have unrestricted
access to the Audit Committee. The Audit Committee has two members: Mr. Dawes,
Chairman, and Mr. Loyle. The Audit Committee met three times during 1996.
The Compensation Committee meets to review and to make recommendations to the
Board about certain compensation matters. In addition, the Compensation
Committee administers the Company's 1992 Performance and Equity Incentive Plan.
The Compensation Committee has three members: Mr. Benson, Chairman, Mr. Charm,
and Mr. Thomsen. The Compensation Committee met three times during 1996.
COMPENSATION OF OUTSIDE DIRECTORS
The Company pays certain compensation to its outside directors for their
services to the Company. Directors who are also employees of the Company
receive no additional remuneration for serving as directors.
During 1996, outside directors were paid monthly fees of $350, as well as a fee
of $500 per Board of Directors meeting attended in person, $225 per committee
meeting attended in person, and $150 per meeting attended via telephone
conference call. In December, 1996, the Board of Directors approved a plan to
compensate with Common Stock instead of cash compensation outside directors who
choose to participate in the plan. Each outside director who chooses to
participate will receive 200 shares of Common Stock per month, 300 shares per
Board meeting attended in person, 100 shares per meeting attended via telephone
conference call, and 100 shares per committee meeting attended. Messrs. Benson,
Dawes, Loyle, and Thomsen have chosen to receive Common Stock as compensation
during 1997.
In addition, Mr. Charm, who acts as a consultant to the Company, was paid fees
of $6,000 for his services in that capacity during 1996.
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
In addition to Messrs. Adler and Mason, who are listed elsewhere herein under
the heading "Information Concerning Nominees," the following individuals also
serve as executive officers of the Company.
Frank M. Montano. Age 45. Mr. Montano was appointed President and Chief
Operating Officer in January, 1997. From September, 1992 to January, 1997, Mr.
Montano served as Executive Vice President and Chief Operating Officer. From
June, 1990 to September, 1992, he served with Sbarro, Inc., first as Vice
President of Licensing (June, 1990 to May, 1991) and then as Senior Vice
President (May, 1991 to September, 1992). From April, 1989 to June, 1990, Mr.
Montano was associated with Diet Center, Inc., as Vice President of Operations
(April, 1989 to October, 1989) and as Senior Vice President (October, 1989 to
June, 1990). From August, 1986 to April, 1989, Mr. Montano was Vice President
of Franchising for Marriott Corporation.
Leonard S. Swartz. Age 64. Mr. Swartz was appointed Senior Vice President for
Operations in July, 1989 and in January, 1990, was given primary responsibility
for franchise operations. Between February, 1984 and July, 1989, Mr. Swartz was
Executive Vice President for Operations of the Company.
Paul Pieschel. Age 57. Mr. Pieschel was appointed Senior Vice President of
Franchise Sales in February, 1997. From March, 1985 to February, 1997, Mr.
Pieschel was Vice President of Franchise Sales. Since 1984, Mr. Pieschel has
also served as the Company's Vice President of Human Resources.
Kathryn A. Drury. Age 33. Ms. Drury was appointed Vice President of Marketing
in August, 1995. From October, 1993 to August 22, 1995 she served as Regional
Marketing Director for the Company. Ms. Drury served as Senior Marketing
Manager for the Company from September, 1991 to October, 1993 and as Operations
Manager for the Company from November, 1988 to September, 1991.
Alfred E. Lefeld. Age 38. Mr. Lefeld was appointed Vice President and
Controller in October, 1994. From June, 1993 to October, 1994, Mr. Lefeld
served as director of MIS for the Company. From January, 1992 to May, 1993, Mr.
Lefeld served as Controller - Midwest Division for MAB Paints and Coatings.
From March, 1984 to December, 1992, Mr. Lefeld was Controller for Paint America
Company.
Robert A. Galastro. Age 54. Mr. Galastro was appointed Vice President of
Company Store Operations in September, 1994. From January, 1993 to September,
1994, Mr. Galastro was Senior Vice President and Chief Operating Officer of BCB,
Inc., a franchisor of upscale bakery and gourmet coffee cafes. From March, 1992
to December, 1992, Mr. Galastro was self-employed as a consultant to the
hospitality and retail industries. From December, 1991 to February, 1992, Mr.
Galastro served as Zone Vice President for Sbarro, Inc. Mr. Galastro also
served from April, 1991 to November, 1991 as President and Chief Operating
Officer of Skolniks, Inc., a franchisor of upscale bagel bakeries and cafes, and
from January, 1990 to April, 1991 as President and Chief Operating Officer of
Winchells, Inc., a franchisor of donut and bakery cafes.
EXECUTIVE COMPENSATION
The following table provides information with respect to compensation received
for the preceding three fiscal years by the Company's chief executive officer,
the other executive officers of the Company whose total salary and bonus for the
year ended December 31, 1996 exceeded $100,000, and one individual (Donald J.
Isaacs) whose total salary and bonus for the year ended December 31, 1996
exceeded $100,000 but who was not an executive officer at December 31, 1996.
These individuals are referred to herein as the "named executive officers."
ANNUAL COMPENSATION LONG TERM COMPENSATION
OTHER ALL
ANNUAL SECURITIES OTHER
FISCAL COMPEN- UNDERLYING COMPEN-
NAME AND PRINCIPAL YEAR SALARY BONUS SATION OPTIONS SATION
POSITION (1) (#) (2)
Michael F. Adler (3) 1996 $156,000 $85,000 $21,924 190,000 $14,048
Chairman and Chief 1995 154,615 - 18,882 66,687 2,600
Executive Officer 1994 150,940 - 19,679 - 5,119
Frank M. Montano (4) 1996 $150,800 $51,000 $ 3,246 200,000 $15,212
President and Chief 1995 149,462 - 3,246 63,880 12,884
Operating Officer 1994 145,000 - 3,246 - 14,353
David A. Mason 1996 $114,400 $50,000 $ 3,246 55,000 $ 7,493
Executive Vice 1995 113,385 - 3,246 48,889 1,400
President, Chief 1994 108,615 - 3,246 - 3,117
Financial Officer
and Treasurer
Donald J. Isaacs (5) 1996 $102,721 $ 7,659 $ 3,246 - $ 9,720
Vice President of 1995 90,000 - 3,246 34,780 900
Wholesale and 1994 82,861 - 3,246 - 1,676
Communication
Services
Leonard S. Swartz 1996 $100,384 $15,839 $ 2,776 - $12,959
Senior Vice President 1995 96,390 - 2,776 41,253 2,300
Franchise Operations 1994 91,800 - 2,776 - 5,154
Paul Pieschel 1996 $ 80,500 $24,993(6) $ 3,246 - $ 7,423
Senior Vice President 1995 71,824 $33,685 3,246 30,969 1,896
Franchise Operations 1994 70,407 $34,550 3,246 - 3,106
(1)The primary component of "Other Annual Compensation" for Mr. Adler is a car
allowance. In 1996, 1995, and 1994, the car allowances were $12,032,
$11,117, and $11,993, respectively.
(2)`All Other Compensation" in 1996 for Messrs. Adler, Mason, Swartz, and
Pieschel consists of the Company's contributions for them to the Company's
defined contribution retirement plan. "All Other Compensation" in 1996 for
Mr. Montano consists of $2,732 equivalent to interest at 9% that would have
accrued during such period on transition loans made by the Company to Mr.
Montano during 1992 and 1993 in connection with his employment by the Company
with respect to which no interest is charged, $8,673 representing
indebtedness under such loans forgiven by the Company during 1996, and $3,808
representing the Company's contribution for Mr. Montano to the Company's
defined contribution retirement plan. `All Other Compensation'' in 1996 for
Mr. Isaacs consists of $5,220 representing the Company's contribution for him
to the Company's defined contribution retirement plan and $4,500 in
consulting fees paid by the Company to Mr. Isaacs following termination of
his employment (see note (5) below).
(3)During 1996, Mr. Adler served as Chairman, Chief Executive Officer, and
President of the Company. Effective in January, 1997, Mr. Montano was
promoted to the position of President of the Company. Mr. Adler continues to
serve as the Company's Chairman and Chief Executive Officer.
(4)Prior to his promotion to President and Chief Operating Officer of the
Company effective in January, 1997, Mr. Montano served as Executive Vice
President and Chief Operating Officer of the Company.
(5)Mr. Isaacs served as the Company's Vice President for Wholesale and
Communication Services until September 30, 1996.
(6)Bonus to Mr. Pieschel for 1996, 1995, and 1994 includes commissions, paid to
Mr. Pieschel in connection with the sale of franchises, of $20,993, $33,685,
and $34,500, respectively.
OPTION GRANTS DURING 1996
The following table provides information concerning the grant of stock options
during the year ended December 31, 1996 to each of the named executive officers
who received such option grants.
POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED IN 1996 PER SHARE DATE 5%(1) 10%(1)
Michael F. Adler 190,000 (2) 42.7% $1.3063 4/30/2001 $ 68,571 $151,525
Frank M. Montano 200,000 (3) 45.0% $1.875 12/04/2001 $103,600 $228,940
David A. Mason 55,000 (4) 12.3% $1.1875 4/30/2001 $ 18,045 $ 39,874
(1)The Potential Realizable Values upon exercise of stock options are equal to
the product of the number of shares underlying the options and the difference
between (i) the respective hypothetical stock prices on the date of option
exercise and (ii) the exercise price per share of the options. The
hypothetical stock prices are equal to the price per share of the Common
Stock as of the date of the option grant compounded annually at the rates of
5% and 10%, respectively, over the term of the option. The rates of
appreciation used are required by the Securities and Exchange Commission and
do not represent a projection or estimate by the Company on the potential
growth of the value of its Common Stock. Therefore, there can be no
assurance that the rate of stock price appreciation presented in this table
can be achieved.
(2)This option was exercisable as to 45,000 shares immediately and as to the
remaining 145,000 shares on
January 1, 1997.
(3)This option is exercisable as to 50,000 shares on December 4 of each year,
commencing December 4, 1997.
(4)This option was exercisable immediately.
OPTION EXERCISES AND YEAR-END OPTION VALUES
None of the named executive officers exercised any stock option during the year
ended December 31, 1996. The following table provides information concerning
unexercised stock options held by the named executive officers as of December
31, 1996.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END($)(1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Michael F. 190,000 60,001 $108,053 -
Adler
Frank M. 6,388 257,492 - -
Montano
David A. Mason 59,888 44,001 $ 37,812 -
Donald J. 28,478 31,302 $ 14,062
Isaacs
Leonard S. 29,125 37,128 $ 14,062 -
Swartz
Paul Pieschel 13,096 27,873 $ 5,625 -
(1) Based on the closing sale price of the Company's Common Stock on December
31, 1996 of $1.875 per share as reported on the NASDAQ.
TEN-YEAR OPTION REPRICING
Compensation Committee Report on 1996 Cancellation and Regrant of Options
On December 4, 1996, the Compensation Committee approved the cancellation and
regrant to Frank M. Montano, President and Chief Operating Officer of the
Company, of outstanding options to purchase 200,000 shares of Common Stock.
This cancellation and regrant was approved in connection with the promotion of
Mr. Montano to President of the Company, effective January 1, 1997. Mr. Montano
was not given a salary increase along with the promotion and increased
responsibilities. However, in order to provide enhanced long-term equity
incentive compensation opportunities for Mr. Montano in his new position and
more effectively to align his interests with the long-term interests of the
shareholders, the Compensation Committee deemed it desirable to cancel the
existing options and to regrant an identical number of options with an exercise
price equal to the market price of the Common Stock on the date of regrant. At
the time of their cancellation and during much of their term, the exercise price
of the cancelled options was in excess of the market price of the Common Stock.
In any event, the cancelled options would have expired approximately nine
months following the date of cancellation. Certain provisions of the regranted
options are described in the table above under `Executive Compensation - Option
Grants During 1996.'' With the exception of the exercise price and extended
term of the regranted options, the provisions of the regranted options are
substantially similar to those of the cancelled options.
Compensation Committee:
Frank W. Benson, Chairman
Leslie Charm
Douglas M. Thomsen
The following table sets forth certain information concerning the repricing,
replacement or cancellation and regrant of options, with the last ten fiscal
years, of options held by executive officers of the Company.
LENGTH OF
MARKET ORIGINAL
PRICE OF EXERCISE OPTION
NUMBER OF STOCK AT PRICE TERM
OPTIONS TIME OF AT TIME OF REMAINING
REPRICED REPRICING REPRICING AT DATE OF
OR OR OR NEW REPRICING
AMENDED AMENDMENT AMENDMENT EXERCISE OR
NAME DATE (#) ($) ($) PRICE ($) AMENDMENT
Frank M. 12/04/96 200,000 $1.875 $2.5626 $1.875 Nine
Montano, months
President
and Chief
Operating
Officer
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On April 1, 1997, Michael F. Adler, the Company's Chairman and Chief Executive
Officer, entered into an employment contract effective January 1, 1997 through
December 31, 1999. The employment contract is automatically renewed at
the end of each fiscal year for an additional three year term unless the Board
takes other action. The employment contract provides for a base salary of
$161,500 per year, subject to annual review of the Board of Directors. The
employment contract calls for Mr. Adler's bonuses to be determined by the Board
of Directors or a committee of the Board. The employment contract also provides
that, in the event Mr. Adler's employment is terminated without cause, he will
be entitled to salary continuation equal to thirty-six months of the salary he
was receiving immediately prior to termination, as well as continuation of
benefits which he was receiving at the time of termination, including health
insurance and use of suitable office and secretarial support, but excluding a
car allowance.
On June 1, 1996, David A. Mason, the Company's Executive Vice President, Chief
Financial Officer. and Treasurer, entered into an employment contract effective
January 1, 1996 through December 31, 1998. Commencing January 1, 1998, the
employment contract will be automatically extended at the beginning of each
fiscal year for an additional one-year term unless Mr. Mason's employment is
terminated earlier. The employment contract provides for a base salary of
$114,400 per year, subject to annual review by Mr. Adler after consultation with
the Compensation Committee of the Board of Directors. Under the employment
contract, Mr. Mason's eligibility for bonus payments for 1996 was based on an
incentive formula set forth in the contract. The employment contract calls for
Mr. Mason's bonuses for subsequent years to be determined by Mr. Adler after
consultation with the Compensation Committee. The employment contract provides
that, if there is a change in control of the Company, the employment contract
will be extended for three years from the date of the change of control.
On June 1, 1996, Frank M. Montano, the Company's President and Chief Operating
Officer, entered into an employment contract effective January 1, 1996 through
December 31, 1998. Commencing January 1, 1998, the employment contract will be
automatically extended at the beginning of each fiscal year for an additional
one-year term unless Mr. Montano's employment is terminated earlier. The
employment contract provides for a base salary of $150,000 per year, subject to
annual review by Mr. Adler after consultation with the Compensation Committee.
Under the employment contract, Mr. Montano's eligibility for bonus payments for
1996 was based on an incentive formula set forth in the contract. The
employment contract calls for Mr. Montano's bonuses for subsequent years to be
determined by Mr. Adler after consultation with the Compensation Committee. The
employment contract provides that, if there is a change in control of the
Company, the employment contract will be extended for three years from the date
of the change of control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are Frank W.
Benson, Chairman, Leslie Charm, and Douglas M. Thomsen, all of whom are
independent non-employee directors. The Committee establishes the compensation
of the Chief Executive Officer. Michael F. Adler, President, Chief Executive
Officer and Chairman of the Board, sets compensation for all other executive
officers but reviews such decisions with the Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE AND MR. ADLER
COMPENSATION ELEMENTS
Compensation of the Company's executive officers consists of three
principal elements:
. Base salaries designed to be competitive in the Company's geographic
market and with comparably situated companies;
. Annual bonuses which are generally dependent on the Company's
profitability for the year but from time to time discretionary bonuses
are granted based on a subjective review of the performance of
executive officers and taking into consideration accomplishments which
will benefit the Company over the longer term; and
. Stock options which are designed to align the executive officers'
interests with long-term interests of the shareholders.
EXECUTIVE OFFICER COMPENSATION
Several of the Company's executive officers, including Messrs. Adler,
Montano, and Mason, are employed pursuant to employment contracts which
specify base salary and bonus levels. It is the Company's policy to pay
base salaries to executive officers in the 25th to 75th percentile for
comparable positions for comparably situated companies. Bonuses for
executive officers are determined either by the terms of the executive
officer's employment contract approved by the Compensation Committee, or
in the absence of specific contractual provisions, by the Compensation
Committee as to Mr. Adler's bonus, and by Mr. Adler, after consultation
with the Compensation Committee, as to the bonuses for the remaining
executive officers.
For 1996, all executive officers received bonuses, which were based on
achievement by the Company of certain profit levels and/or achievement by
the executive officers' respective departments of certain profit levels.
Such bonuses for 1996 totaled $245,597.
The Compensation Committee administers the Company's 1992 Performance and
Equity Incentive Plan (`the Plan''), which permits the Committee to grant
to officers and key employees stock option and other equity-based incentive
awards. In authorizing awards under the Plan to executive officers, the
Committee considers various factors, including the relative
responsibilities of the recipient, the Committee's subjective evaluation of
the recipient's performance, and the recipient's relative equity interest
in the Company in the form of stock, stock options, or other equity-based
incentive awards in view of the Committee's desire to align the interests
of management and the shareholders in the long-term performance and
financial success of the Company.
During 1996, the Compensation Committee granted options pursuant to the
Plan to purchase 190,000, 200,000, and 55,000 shares of Common Stock to,
respectively, Messrs. Adler, Montano, and Mason. In the case of Messrs.
Adler and Mason, these options, priced at 110% and 100%, respectively, of
the market value on the date of grant, replaced options for the same number
of shares which expired during 1996. For Mr. Montano, who was elected
President and Chief Operating Officer of the Company effective January 1,
1997, these options, priced at 100% of the market value on the date of
grant, replaced options for the same number of shares which the Committee
cancelled in order to grant the new options. See `Executive Officers and
Executive Compensation - Ten-Year Option Repricing.''
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Compensation for the Company's Chief Executive Officer, Michael F. Adler,
is determined under the terms of his employment contract with the Company.
During 1996, Mr. Adler received the base salary under the contract of
$156,000. Mr. Adler's bonus compensation is also determined pursuant to
the employment contract. Mr. Adler's bonus for 1996 was dependent upon the
Company's achieving certain target pre-tax net income levels. The target
levels were reached during 1996, and Mr. Adler received a bonus of $85,000
for the period, based on the target levels achieved and a percentage of
the Company's income in excess of the target levels.
Compensation Committee:
Frank W. Benson, Chairman
Leslie Charm
Douglas M. Thomsen
Michael F. Adler, Chief Executive Officer
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
The following line graph compares the yearly percent change in the cumulative
total shareholder return of the Company's Common Stock against the cumulative
total return of the Center for Research in Security Prices ("CRSP") Index for
the NASDAQ Stock Market (U.S. Companies) and the CRSP Index for NASDAQ Retail
Trade Stocks for the period of five fiscal years (1992 to 1996). It assumes
that $100 was invested on December 31, 1991 in the Company's Common Stock and in
each of the other indices, with all dividends reinvested.
DATE COMPANY MARKET PEER INDEX
INDEX INDEX
12/31/91 100.000 100.000 100.000
01/31/92 152.941 105.847 102.361
02/28/92 129.412 108.246 104.230
03/31/92 129.412 103.137 99.282
04/30/92 123.529 98.714 90.017
05/29/92 147.059 99.996 88.543
06/30/92 217.647 96.086 82.837
07/31/92 200.000 99.490 85.540
08/31/92 241.177 96.449 80.401
09/30/92 223.529 100.034 86.446
10/30/92 200.000 103.974 88.770
11/30/92 200.000 112.247 92.949
12/31/92 188.235 116.378 94.194
01/29/93 282.353 119.691 92.389
02/26/93 317.647 115.226 87.499
03/31/93 305.882 118.561 89.152
04/30/93 247.059 113.501 83.806
05/28/93 305.882 120.281 88.152
06/30/93 270.588 120.837 88.021
07/30/93 270.588 120.980 89.664
08/31/93 235.294 127.233 94.750
09/30/93 200.000 131.022 97.628
10/29/93 294.118 133.967 101.537
11/30/93 235.294 129.972 97.647
12/31/93 258.824 133.595 99.394
01/31/94 270.588 137.650 99.115
02/28/94 247.059 136.363 97.095
03/31/94 247.059 127.976 91.351
04/29/94 282.353 126.315 91.543
05/31/94 258.824 126.624 89.419
06/30/94 223.529 121.993 87.625
07/29/94 211.765 124.495 87.768
08/31/94 194.118 132.432 94.359
09/30/94 194.118 132.094 95.790
10/31/94 188.235 134.689 96.959
11/30/94 235.294 130.221 93.277
12/30/94 223.529 130.587 90.553
01/31/95 188.235 131.318 87.382
02/28/95 170.588 138.263 89.186
03/31/95 217.647 142.360 89.574
04/28/95 205.882 146.842 89.084
05/31/95 211.765 150.628 91.202
06/30/95 205.882 162.835 98.667
07/31/95 176.471 174.804 104.027
08/31/95 188.235 178.347 103.735
09/29/95 188.235 182.448 105.621
10/31/95 188.235 181.403 103.758
11/30/95 170.588 185.662 103.205
12/29/95 147.059 184.674 99.757
01/31/96 117.647 185.587 98.761
02/29/96 123.529 192.660 105.286
03/29/96 117.647 193.300 112.199
04/30/96 111.765 209.334 122.342
05/31/96 176.471 218.945 125.226
06/28/96 158.824 209.078 119.911
07/31/96 188.235 190.458 112.618
08/30/96 188.235 201.130 120.512
09/30/96 176.471 216.524 126.554
10/31/96 188.235 214.151 121.321
11/29/96 176.471 227.423 124.388
12/31/96 176.471 227.164 118.973
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1983, Foto Fair International, Inc. ("FFI"), a wholly-owned
subsidiary of Progressive, merged into the Company. Progressive is 99% owned by
Michael F. Adler and his family. Mr. Adler is Chief Executive Officer and
Chairman of the Board of Directors of the Company, and a director and executive
officer of Progressive. In connection with such merger, the Company acquired
the business and assets of FFI, which primarily was the management by FFI of the
businesses of National Photo Labs, Inc. ("NPL") and National Photo Labs II, Inc.
("NPL II"), both of which were engaged in the one-hour photo processing
business. NPL sold or closed all of its stores and was dissolved in November
1995. Directors and executive officers of the Company own 23% of the
outstanding common stock of NPL II and owned 16% of the outstanding common stock
of NPL. NPL II owns one one-hour photo processing store. The store owned by
NPL II is managed by the Company pursuant to a management agreement and is
operated as a One Hour MotoPhoto store under a franchise agreement. The
management agreement provides for an annual incentive fee based on cash
generated. The franchise agreement provides for monthly royalties equal to the
greater of 5% of net sales or $1,000 per store. During the year ended December
31, 1996, the Company received from NPL II total revenues of approximately
$244,000, including all royalty and incentive fees paid and revenues derived
from the sale by the Company to NPL II of operating supplies and merchandise.
This amount constituted approximately 0.6% of the Company's total revenues.
The terms of the merger of FFI and the Company described above were all
determined by arms' length negotiation between the Company and Progressive,
prior to Progressive's becoming a shareholder of the Company. The merger with
FFI was approved by the shareholders of the Company.
Progressive purchased a One Hour MotoPhoto store from the Company and signed a
franchise agreement for the store, effective as of January 1, 1996. The
purchase price of the store was $64,000, its book value as of December 31, 1995.
During 1996, this store paid the Company royalty and advertising fees of
$21,874. Total revenues derived by the Company from this store, including all
royalty and advertising fees paid and revenues derived from the sale by the
Company to Pr0ogressive of operating supplies and merchandise, were
approximately $191,000. This amount constituted approximately 0.4% of the
Company's total revenues.
The Company's corporate offices are located at 4444 Lake Center Drive, Dayton,
Ohio 45426. The building in which the Company's offices are located is 76%
owned by Michael F. Adler, members of Mr. Adler's family, David A. Mason, and
Leonard S. Swartz. Such offices, consisting of approximately 33,000 square feet
on approximately 2.4 acres of land, have been leased by the Company pursuant to
a lease agreement which commenced on July 1, 1989 and which has been extended
through 1999. In July 1990, the lease terms were amended to provide for rent
payable as follows: $12,792 per month through June 1992; $16,097 per month from
July 1992 through June 1994; and $18,083 per month from July 1994 through June
1999. During 1996, the Company made lease payments totaling $216,996.
Pursuant to the employment contract for Frank M. Montano when he joined the
Company in 1992, the Company advanced him moving expenses, the cost of temporary
housing in Dayton for a limited period of time, and a monthly living allowance
until Mr. Montano's home was sold. In connection with this arrangement, upon
the sale of his home in 1993, Mr. Montano executed a promissory note for
$52,036, the amount of the moving expenses and temporary housing and living
allowances; so long as Mr. Montano is still employed by the Company, one-sixth
of the principal will be forgiven on each anniversary date of the sale of his
home.
In February, 1997, the Company agreed to manage a One Hour MotoPhoto franchised
store owned by W. P. Enterprises, Inc. (``WP''), a corporation owned by Richard
Zsambok, the brother-in-law of Michael F. Adler. The management agreement
provides for an annual incentive fee based on cash generated and a monthly fee,
which supersedes the royalty fee required by the franchise agreement, equal to
the greater of 5% of net sales or $1,000. During 1996, this store paid the
Company royalty and advertising fees of $17,279. Total revenues derived by the
Company from this store, including all royalty and advertising fees paid and
revenues derived from the sale by the Company to WP of operating supplies and
merchandise, were approximately $81,000. This amount constituted approximately
0.2% of the Company's total revenues.
The foregoing transactions were and all future transactions with or loans to
officers, directors, key employees or their affiliates will be approved by a
majority of the members of the Board of Directors who were not officers of the
Company and/or were not interested in the transaction.
Harry D. Loyle is a shareholder, officer and director in two One Hour MotoPhoto
franchisees -- Corral Photographic Corporation and The Positive Negative, Inc.
Each such franchisee owns and operates one store under a One Hour MotoPhoto
franchise agreement which provides for a royalty fee of six percent of net
retail sales and an advertising fee of one-half percent of net retail sales.
For part of 1996, Mr. Loyle also was a shareholder, officer, and director in B &
H Photographic Services, Inc., which owned and operated a One Hour MotoPhoto
store in Ventnor, New Jersey under a similar One Hour MotoPhoto franchise
agreement. During 1996, these three franchises paid royalty and advertising
fees of $78,378. Total revenues derived by the Company from such stores were
$371,708, which constituted approximately 0.9% of the Company's total revenues.
In addition, Mr. Loyle is owner and President of ProMoto Management Corporation
(``ProMoto''), which acts as an area developer for the Company pursuant to an
area development agreement. As Area Developer, ProMoto receives a portion of
the initial franchise fee as compensation for the recruitment of a franchisee in
its area and also receives a portion of the royalty paid to the Company by any
franchised store in its area (including the stores owned by the three
franchisees named above) as compensation for performing training, marketing,
quality control and other services which would otherwise be performed by the
Company. During 1996, the Company paid ProMoto fees of $359,674. The terms of
the Company's area development agreement with ProMoto are the same as those in
the agreements of most of the Company's other area developers.
Jay Adler, son of Michael F. Adler, is President of Franchise Development and
Management Corporation (``FDMC''), which acts as an area developer for the
Company pursuant to an area development agreement. During 1996, the Company
paid FDMC fees of $296,725. The terms of the Company's area development
agreement with FDMC are on substantially the same terms as those offered to the
Company's other area developers during the period in which the agreement was
entered into.
During 1996, Caroline Zsambok, wife of Michael F. Adler, provided organizational
learning services to the Company through her employer, Klein Associates. In
early 1997, Ms. Zsambok resigned from Klein Associates and formed her own
company, Z Research and Consulting (`` Research''), through which she will
continue to provide organizational learning services to the Company. The
Company anticipates that it will pay Z Research fees of approximately $45,000
during 1997. The Company has agreed to provide Z Research with an office at the
Company's headquarters and limited secretarial support for non-Company work it
performs. Z Research will compensate the Company for all out-of-pocket expenses
the Company incurs in providing Z Research with an office and secretarial
support.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ernst & Young LLP, independent certified public accountants, have been
reappointed by the Board of Directors of the Company as independent auditors for
the Company and it subsidiaries to examine and report on its financial
statements for 1997. Ernst & Young LLP have been auditors of the accounts of
the Company since November 1983. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting, with the opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.
PROPOSALS OF SHAREHOLDERS
The Board of Directors will consider proposals of shareholders intended to be
presented for action at the 1998 Annual Meeting of Shareholders. According to
the rules of the Securities and Exchange Commission, such proposals shall be
included in the Company's Proxy Statement if they are received in a timely
manner and if certain other requirements are met. For a shareholder proposal to
be included in the Company's Proxy Statement relating to the 1998 Annual
Meeting, a written proposal complying with the requirements established by the
Securities and Exchange Commission must be received at the Company's principal
executive offices, located at 4444 Lake Center Drive, Dayton, Ohio 45426, no
later than January 13, 1998. If the date of next year's shareholders' meeting
is advanced by more than 30 days or delayed for more than 90 days, the Company
will advise all shareholders of the change in the date by which shareholder
proposals must be received.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for action
at the meeting other than those listed in the Notice of Meeting and referred to
in this Proxy Statement. If any other matters properly come before the meeting
or any adjournment of the meeting, the persons named on the accompanying proxy
intend to vote the shares represented by them in accordance with the
recommendations of the Board of Directors.
REVOCABLE PROXY
MOTO PHOTO, INC.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael F. Adler, David A. Mason and Jacob A.
Myers as Proxies, or any of them, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Voting Common Stock of Moto Photo Inc., held of record by the
undersigned on April 28, 1997, at the Annual Meeting of the Shareholders to be
held on June 25, 1997, or any adjournment thereof.
1. ELECTION OF DIRECTORS For Withhold For All Except
Adler, Benson, Charm, Dawes, Loyle, Mason, and Thomsen
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "FOR ALL EXCEPT" and write that nominee's name in the space provided
below.
2. In their discretion, the Proxies For Against Abstain
are authorized to vote upon such
other business as may properly
come before the meeting.
This proxy, when properly executed will be voted as specified by the
shareholders. If no specification is made, the proxy will be voted FOR
the election of all of the nominees listed in item 1. If any other matters
brought before the meeting or if a nominee for election as a director
are named in the proxy statement for election as a director is unable to
serve or for good cause will not serve,the proxy will be voted in accordance
with the recommendations of the Board on such matters or for such substitute
nominees as the Board may recommend.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and the Proxy Statement and hereby expressly revokes any and all
proxies heretofore given or executed by the undersigned with respect to
the shares represented in this proxy.
Please be sure to sign and date this Proxy in the box below.
Date
Stockholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
MOTO PHOTO, INC.
4444 Lake Center Drive, Dayton, Ohio 45426
Please date this proxy, sign EXACTLY as name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
If more than one trustee, all should sign. If shares are registered in more
than one name, signatures of all such persons are required.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY