Hollywood Board, Others Cashed in During 200424 Mar, 2005 By: Erik Gruenwedel
It paid to be on Hollywood Entertainment Corp.'s board of directors and to be the No. 2 video rentailer's auditor in 2004, according to a proxy statement sent to shareholders and filed with the Securities and Exchange Commission.
Wilsonville, Ore.-based Hollywood will hold its annual shareholders meeting March 30 at the Sweetbriar Inn in Tualatin, Ore.
The meeting is scheduled to cover only the election of Hollywood's board, whose members James Cutler, owner of a financial holding company; investment banker Douglas Glendenning; commercial real estate developer William Zebe; and Hollywood president and CEO Bruce Giesbrecht are up for re-election.
As members of the board in 2004, Cutler, Glendenning and Zebe each received a $61,000 fee, plus $1,500 for every board meeting attended; $2,000 for each audit meeting; $1,000 for every separate additional meeting; and $1,000 for each meeting via conference call.
By comparison, Blockbuster board members are paid $50,000 annual fees (50 percent in common stock) in addition to $2,000 for each board meeting attended and $1,000 per committee meeting.
The three Hollywood board members, who combined own more than 385,000 shares of Hollywood common stock with options for an additional 252,000 shares, comprised the special committee that ruled in favor of Movie Gallery's bid to acquire Hollywood. As members of that committee, Glendenning received an additional $150,000, and Cutler and Zebe, each $100,000.
Hollywood CEO Giesbrecht, who was paid $495,000 (not including stock sales and outstanding options) as COO in 2004, would appear to be the biggest benefactor in increased salary should he retain his CEO position this year.
Mark Wattles, Hollywood's founder, chairman and CEO until his resignation in February, was paid more than $1.4 million in base salary in 2004 — almost 46 percent more than his $975,000 salary in 2003 and 2002.
The company said board compensation rates were in the range of industry norms and that Wattles' compensation actually lagged that of previous years due to the elimination of bonuses, stock options and free use of Hollywood's corporate jet.
Entertainment analyst Marla Backer with Research Associates - Soleil Securities in New York said the fees paid to Hollywood's board were “pretty standard.”
Finally, Hollywood auditor PricewaterhouseCoopers earned more than $2.6 million in fees in 2004 — up 235 percent from $803,324 in 2003.
A separate shareholder meeting to vote on Movie Gallery's $13.25-per-share acquisition bid is slated for April 22 — about a month after Blockbuster's March 24 scheduled closing on a $14.50-per-share hostile offer to Hollywood shareholders.
Blockbuster's bid, however, remains under fire from the Federal Trade Commission that could result in a protracted legal showdown that Big Blue has vowed to fight.
According to Oregon law, 50 percent plus one vote of a public company's common shareholders are required to consummate a merger offer; 85 percent to validate a hostile bid.
Wattles, who remains the largest Hollywood shareholder, with more than 6.1 million shares, ended fiscal 2004 with 3.5 million in unexercised stock options (worth about $36 million), not including 500,000 shares that were forfeited when he failed to act on them 30 days after resigning.
This week, Wattles announced intentions to purchase up to 50 percent of Hollywood store locations.
The former CEO continues to own 20 Hollywood franchise stores — purchased in 2001 — for which he pays a 2-percent-of-revenue royalty to Hollywood in addition to the initial $25,000 license fee per store.
Should Hollywood be acquired, Wattles has the right to require the new owner to acquire his stores for fair market value.