<PAGE>
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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Matthews Studio Equipment Group
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PRELIMINARY PROXIES
MATTHEWS STUDIO EQUIPMENT GROUP
2405 Empire Avenue
Burbank, California 91504-3399
(818) 843-6715
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 27, 1997 AT 10:00 A.M.
The Annual Meeting of Shareholders of Matthews Studio Equipment Group (the
"Company") will be held at 10:00 a.m. local time, Thursday, March 27, 1997, at
the Burbank Airport Hilton Hotel, 2500 North Hollywood Way, Burbank, California,
to consider and act upon the following matters:
1. To elect nine directors to hold office during the ensuing year until
their respective successors are elected and qualified.
2. To amend the Articles of Incorporation to eliminate inapplicable
language regarding the Company's business.
3. To ratify Ernst & Young LLP as the Company's independent accountants
for the fiscal year ending September 30, 1997.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Shares represented by properly executed proxies hereby solicited by the Board of
Directors of the Company will be voted in accordance with instructions specified
therein. It is the intention of the Board of Directors that shares represented
by proxies which are not limited to the contrary will be voted in favor of the
election as directors of the persons named in the accompanying Proxy Statement,
for proposals 2 and 3 and in favor of other matters as recommended by the Board
of Directors, as may properly come before the meeting.
The Board of Directors has fixed the close of business on February 25, 1997, as
the record date for the purpose of determining shareholders entitled to notice
of, and to vote at, the meeting and all adjournments thereof.
By Order of the Board of Directors,
Gregory Moiseeff
Secretary
Burbank, California
March 3, 1997
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, WE WILL APPRECIATE A PROMPT RETURN OF YOUR
SIGNED PROXY CARD TO ENSURE YOUR REPRESENTATION AT THE MEETING. ANY SHAREHOLDER
ATTENDING THE MEETING MAY REVOKE HIS OR HER PROXY AT THAT TIME AND MAY THEN VOTE
HIS OR HER SHARES IN PERSON EVEN IF HE OR SHE HAS PREVIOUSLY RETURNED A PROXY.
PLEASE ADVISE THE COMPANY'S TRANSFER AGENT, U.S. STOCK TRANSFER CORPORATION,
1745 GARDENA AVENUE, GLENDALE, CA 91204, OR OUR INVESTOR RELATIONS DEPARTMENT,
IF THE ADDRESS ON THE ACCOMPANYING MATERIAL IS INCORRECT.
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
2405 EMPIRE AVENUE
BURBANK, CALIFORNIA 91504
__________
PROXY STATEMENT
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 27, 1997
__________
GENERAL INFORMATION
This proxy statement (this "Proxy Statement") is furnished in connection with
the solicitation of proxies by the Board of Directors (the "Board") of Matthews
Studio Equipment Group (the "Company"), for use at its Annual Meeting of
Shareholders (the "Meeting") to be held at 10:00 a.m. local time, Thursday,
March 27, 1997, at the Burbank Airport Hilton Hotel, 2500 North Hollywood Way,
Burbank, California, and at any adjournment or postponement of the Meeting. The
Company intends to mail this Proxy Statement, the form of proxy to be utilized
at the Meeting and the accompanying material on or about March 3, 1997. The
Company's 1996 Annual Report to Shareholders is transmitted herewith, but is not
incorporated in and is not part of this material.
RECORD DATE AND VOTING
The Board has fixed the close of business on February 25, 1997, as the record
date (the "Record Date") for the determination of the holders of Common Stock,
no par value per share (the "Common Stock"), and the preferred stock (the
"Preferred Stock"), entitled to notice of and to vote at the Meeting, and at any
adjournment or postponement of such Meeting. As of the Record Date, there were
outstanding 10,331,591 shares of Common Stock and 1 share of Preferred Stock.
QUORUM, CUMULATIVE VOTING AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common Stock
will constitute a quorum for the transaction of business at the Meeting.
Abstentions and broker non-votes (shares held by a broker or nominee which are
represented at the Meeting, but with respect to which such broker or nominee is
not empowered to vote on a particular proposal) are counted for the purpose of
determining whether there is a quorum at the Meeting. In the election of
directors, the holders of the Common Stock are entitled to elect nine directors
with the nine candidates who receive the highest number of affirmative votes
being elected. Votes against a candidate and votes withheld have no legal
effect. In electing directors, shareholders have the unconditional right to
cumulate their votes and give one candidate the number of votes equal to the
number of directors to be elected multiplied by the number of votes per share of
stock held in their name or to distribute such votes among as many candidates as
they see fit. Shareholders may cumulate their votes by designating the name or
names of the nominee or nominees with respect to whom they are withholding their
votes in the space provided on the proxy card and shareholders' votes
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<PAGE>
cumulated in the manner described above can be distributed among the remaining
candidate or candidates, in the proportions determined by the shareholders, by
writing the number of votes allocated to the remaining candidate or candidates
in the space provided on the proxy card. Votes can also be distributed equally
among all candidates or certain candidates, by writing the appropriate
information in the space provided on the proxy card. In matters other than the
election of directors, abstentions have the effect of votes against a proposal
in tabulations of the votes cast on proposals presented to shareholders, whereas
broker non-votes do not have any effect for purposes of determining whether a
proposal has been approved. The Preferred Stock has no right to receive notice
of or to vote at the Meeting at the present time.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial ownership of
the Company's Common Stock as of February 25, 1997 by (i) each director and
nominee for director, (ii) the Chairman and Chief Executive Officer and each of
the four most highly compensated executive officers of the Company and (iii) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percentage of
Beneficial Owner /1/ Beneficially Owned /2/ Common Stock /2/
- --------------------------------------------------------------------------------------
<S> <C> <C>
Carlos D. De Mattos 2,057,117 /3/ 19.91%
Edward Phillips 2,057,117 /4/ 19.91%
Ernst F. Nettmann 105,000 /5/ 1%
Jack Brehm /6/ 27,000 /7/ Less than 1%
Jerome E. Farley /8/ 10,000 /9/ Less than 1%
John H. Donlon /10/ 10,000/11/ Less than 1%
Benjamin P. Giess /12/ 4,132,464/13/ 40.00%
ING Equity Partners, L.P. I /14/ 44,132,464/15/ 40.00%
John F. Jastrem /16/ 10,000/17/ Less than 1%
John A. Alonzo 5,000/18/ Less than 1%
All officers and directors
as a group (10 persons) 8,413,698 81.44%
- --------------------------------------------------------------------------------------
</TABLE>
1 Unless otherwise noted, all shares are beneficially owned and the sole
voting power is held by the person indicated, and the address of each of
these individuals is: c/o Matthews Studio Equipment Group, 2405 Empire
Avenue, Burbank, California 91504.
2 Based on 10,331,591 shares of Common Stock outstanding.
3 Includes 1,816,450 shares owned by a family trust with trust management
vested in the named director as the trustee, and 100,000 shares owned by a
limited liability company owned by such family trust. Also includes an
option to purchase 140,667 shares of Common Stock.
-2-
<PAGE>
- -----------------------------------
4 Includes 1,847,450 shares owned by a family trust with trust management
vested in the named director as the trustee, and 69,000 shares owned by the
named director directly. Also includes an option to purchase 140,667
shares of Common Stock.
5 Includes options to purchase 100,000 shares of Common Stock.
6 This individual's address is: 19501 Greenbriar Drive, Tarzana, California
91356.
7 Includes an option to purchase 15,000 shares of Common Stock, and the
exercisable portion (to purchase 10,000 shares) of an option to purchase a
total of 15,000 shares of Common Stock.
8 This individual's address is: 4100 West Alameda Avenue, Burbank,
California 91505.
9 Represents the exercisable portion (to purchase 10,000 shares) of an option
to purchase a total of 15,000 shares of Common Stock.
10 This individual's address is: 2813 West Alameda Avenue, Burbank,
California 91505.
11 Represents the exercisable portion (to purchase 10,000 shares) of an option
to purchase a total of 15,000 shares of Common Stock.
12 This individual's address is: 135 East 57th Street, 16th Floor, New York,
New York 10022.
13 Mr. Giess disclaims beneficial ownership of these shares. Mr. Giess is an
executive officer of Lexington Partners, Inc., which is the sole general
partner of Lexington Partners, L.P., the sole general partner of ING Equity
Partners, L.P. I ("ING"); however, the Company has been advised by Mr.
Giess that he does not exercise sole or shared voting or dispositive power
with respect to the shares of Common Stock and Preferred Stock held by ING
described in footnote 15.
14 This company's address is: 135 East 57th Street, 16th Floor, New York, New
York 10022.
15 Includes a warrant to purchase 2,322,464 shares of Common Stock (the
"Warrant"). ING is entitled to certain contingent voting rights for the
2,322,464 shares underlying the Warrant pursuant to a share of the
Company's Preferred Stock issued to ING. These voting rights primarily
arise upon the occurrence of an event of default under the Purchase
Agreement between the Company and ING. Also includes the exercisable
portion (to purchase 10,000 shares) out of an option issued to ING as
consideration for services of its appointee, Benjamin P. Giess, to purchase
a total of 15,000 shares of Common Stock.
16 This individual's address is: 1913 Ripley Avenue, Redondo Beach,
California 90278.
17 Represents the exercisable portion (to purchase 10,000 shares) of an option
to purchase a total of 15,000 shares of Common Stock.
18 Represents the exercisable portion (to purchase 5,000 shares) of an option
to purchase a total of 15,000 shares of Common Stock.
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<PAGE>
CERTAIN TRANSACTIONS
In July, 1995, the Company entered into a Purchase Agreement (the "Purchase
Agreement') with ING Equity Partners, L.P. I ("ING") pursuant to which the
Company sold to ING for a total purchase price of $5 million (i) its senior
subordinated promissory notes in the principal amount of $5 million, bearing
interest at an initial rate of 10% per annum, (ii the Warrant entitling ING to
purchase 2,322,464 of the Company's authorized shares of Common Stock at an
initial purchase price per share of $2.50 and having certain anti-dilutive
rights and (ii a share of Preferred Stock of the Company entitling ING to
certain voting rights with respect to the number of shares underlying the
Warrant. As part of the transaction, the Company, Carlos D. De Mattos, Chairman
of the Board of Directors, Chief Executive Officer and Chief Financial Officer
of the Company, Edward Phillips, President of Matthews Studio Equipment, Inc.,
together with certain affiliates of Mr. De Mattos and of Mr. Phillips, entered
into a Stockholders Agreement with ING pursuant to which the Company agrees to
nominate and Messrs. De Mattos and Phillips and their affiliates agree to vote
for, two representatives of ING to the Board of Directors of the Company. Also,
the parties agree to set the number of members of the Board of Directors at
nine. ING's current nominees are Benjamin P. Giess and John F. Jastrem. No other
arrangement or understanding exists between any nominee and any other person or
persons pursuant to which any nominee was or is to be selected as a director or
nominee. None of the nominees has any family relationship to any other nominee
or to any executive officer of the Company.
PROPOSAL 1
ELECTION OF DIRECTORS
Nine directors are to be elected at the Meeting to hold office until the next
annual meeting of shareholders and until their successors have been duly elected
and qualified. In the absence of instructions to the contrary, proxies will be
voted in favor of the election of the persons listed below. In the event that
any nominee for election as director should become unavailable to serve, it is
intended that votes will be cast, pursuant to the enclosed proxy, for such
substitute as may be nominated by the Company. Management has no present
knowledge that any persons named will be unavailable to serve.
INFORMATION CONCERNING INCUMBENT DIRECTORS AND NOMINEES TO THE BOARD OF
DIRECTORS
The following table sets forth the names and certain information concerning the
incumbent directors, all of whom are also nominees for election as directors,
and each of whom has consented to being named herein and to serve if elected.
<TABLE>
<CAPTION>
(NAME) (AGE) (POSITION)
- ----- ----- ----------
<S> <C> <C>
Carlos D. De Mattos 44 Chairman of the Board, Chief Executive
Officer, Chief Financial Officer
Edward Phillips 50 Director, President of Matthews Studio
Equipment, Inc.
Ernst F. Nettmann 57 Director, President of Matthews Studio
Electronics, Inc.
Jack Brehm 68 Director
John H. Donlon 51 Director
Jerome E. Farley 56 Director
Benjamin P. Giess 34 Director
John F. Jastrem 41 Director
John A. Alonzo 62 Director
</TABLE>
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<PAGE>
Directors are elected at the annual meeting of shareholders and hold office for
one year or until their successors are elected and qualified. The Company's
officers are elected annually by the Board of Directors and serve at the
pleasure of the Board.
CARLOS D. DE MATTOS has served as a director and the Company's chairman and
chief executive officer since January 1995, and prior thereto as the Company's
co-chairman and chief executive officer from February 1989 to January 1995. Mr.
De Mattos became chief financial officer of the Company in April, 1996. Mr. De
Mattos has continuously been co-chairman of the board and chief financial
officer of Matthews Studio Equipment, Inc. since 1976. He is a co-recipient of
two Technical Achievement Awards from the Academy of Motion Picture Arts and
Sciences for the Tulip Crane and for the development of the Cam-Remote(R) System
in March 1983 and March 1985, respectively. He is also a co-recipient of a
Technical Achievement Award from the Academy of Television Arts and Sciences for
the development of the Cam-Remote(R) System in September 1989. Mr. De Mattos is
an active member of the principal trade associations pertaining to the industry
serviced by the Company. In June 1991, the government of Portugal inducted him
into the select membership of the prestigious Order of Henry the Navigator as a
Knight Commander. He is a member of the Academy of Motion Picture Arts and
Sciences, the American Society of Cinematographers and the Portuguese-American
Leadership Council of the United States based in Washington, D.C.
EDWARD PHILLIPS has served as a director of the Company since February 1989.
Until December 31, 1994 he was the co-chairman of the Company's board of
directors. He also served as the Company's chief operating officer from
February 1989 to January 1995. Continuously since 1976, Mr. Phillips has been
co-chairman of the board and president of Matthews Studio Equipment, Inc. Mr.
Phillips has been responsible for the design and engineering of most of the
equipment manufactured by Matthews Studio Equipment, Inc., since 1972. In the
latter 1970s Mr. Phillips authored the first ANSI standard covering mounting
equipment interface for the motion picture industry. Mr. Phillips continues to
maintain an active role in the ongoing engineering effort of the Company. Mr.
Phillips is a co-recipient of two Technical Achievement Awards from the Academy
of Motion Picture Arts and Sciences for the Tulip Crane and for the development
of the Cam-Remote(R) System in March 1983 and March 1985, respectively. He is
also a co-recipient of a Technical Achievement Award from the Academy of
Television Arts and Sciences for the Cam-Remote(R) System in September 1989.
Mr. Phillips is a past president of the Professional Motion Picture Equipment
Association and has served on many subcommittees of the Society of Motion
Picture and Television Engineers. He is a member of the American Society of
Cinematographers.
ERNST F. NETTMANN has served as a director of the Company since February 1989.
Mr. Nettmann was president of Matthews Studio Electronics, a general partnership
since 1982, and of Matthews Studio Electronics, Inc. ("Electronics"), one of its
general partners, since July 1989. Mr. Nettmann is president of E.F. Nettmann &
Associates, Inc., a privately held corporation, which has been managing the
business of Electronics since October 1, 1994 pursuant to a management and
license agreement. Prior to 1981, Mr. Nettmann was principal owner of
Continental Camera Rental, which made and rented his Technical Achievement
Award-winning camera mounts and aerial photography optical systems. He is a co-
recipient of a like award from the Academy of Motion Picture Arts and Sciences
in March 1985 and the Academy of Television Arts and Sciences in September 1989
for the development of the Cam-Remote(R) System.
JACK BREHM has served as a director since February 1989, and served as chief
financial officer of the Company from that date through December 1991. Mr.
Brehm was with Ernst & Young LLP from 1951 until his retirement as a partner in
1988. Since his retirement in September 1988, Mr. Brehm has acted as a
financial consultant. Mr. Brehm is a director of Cosmetics Group USA, Inc., a
public corporation
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<PAGE>
listed on the Nasdaq Small Cap System, which manufactures and packages cosmetic
and other beauty care products.
JEROME E. FARLEY has served as a director of the Company since April 1994. He
is president and chief executive officer of Western Security Bancorp, a bank
holding company. Continuously since December 1992, he has also been president,
chief executive officer and a director of Western Security Bank. From 1981
through most of 1992, Mr. Farley was a director and an executive officer of
First Regional Bank. Continuously since 1979 Mr. Farley has been a director of
Regional Properties, Inc., a real estate development company, principally active
in Riverside County, California. Mr. Farley has been a member of the State Bar
of California since 1973. From 1973 through 1985 he was general counsel to a
number of subsidiaries of City Investing Company, a public corporation listed on
the New York Stock Exchange. Mr. Farley has been a professor at the Pepperdine
University School of Business and Management since 1984.
JOHN H. DONLON has served as a director of the Company since February 1995. He
is president and director of Four Media Company ("4MC"), a privately held
corporation with revenues in excess of $75 million. 4MC employs over 600 people
worldwide, principally at its facilities in Burbank and Santa Monica,
California, and Singapore. 4MC provides post-production services to the
Hollywood television and motion picture industry along with playback and
satellite transmission services for eighteen channels of cable programming to
the USA. The Singapore subsidiary provides similar services to American
companies in Asia. From 1984 to 1993, Mr. Donlon was president and chief
executive officer of Compact Video Group, Inc. ("CVG"). During his tenure, CVG
expanded its editing and sound services, consolidated its duplication and
satellite transmission services, developed syndication capability and
established a successful network origination business. From 1981 to 1984 he was
president of Technicolor Videocassette where he launched a videocassette
duplication facility from the ground up. From 1977 to 1981 he was vice
president of operations for Technicolor, the largest motion picture and
television film laboratory in the world.
BENJAMIN P. GIESS was elected a director of the Company in September 1995. Mr.
Giess is a partner and executive officer of ING. Mr. Giess has been employed by
ING or its predecessors and affiliates since 1992. From 1991 to 1992, Mr. Giess
worked in the Corporate Finance Group of ING Capital. From 1990 to 1991, Mr.
Giess was employed by the Corporate Finance Group of General Electric Capital
Corporation where he worked in the media and entertainment group. From 1986 to
1988, Mr. Giess was the credit department manager of the Boston Branch of ABN
Amro North America, Inc. From 1984 to 1986 Mr. Giess was employed by Shawmut
Bank of Boston, N.A. Mr. Giess also serves on the board of directors of
American Communication Services, Inc., a public corporation listed on the Nasdaq
Small Cap System, which is a competitive local access telecommunications
provider. He is also a director of CMI Holding Corp., a privately held book
retailer and specialty importer.
JOHN F. JASTREM was elected a director of the Company in September 1995. He is
chairman and chief executive officer of Hooven Direct Marketing, a privately
held corporation founded in 1922 with more than 250 employees. From 1995 to
1996, Mr. Jastrem served as president and chief executive officer of Colt's
Manufacturing Company, Inc., and a management consultant to major business
enterprises. From 1993 to 1995 Mr. Jastrem was president and chief operating
officer of Acme Holdings, Inc. and Acme Acquisition Corp., the fifth largest
equipment rental business in the United States. From 1990 to 1993 Mr. Jastrem
was senior vice president and chief financial officer of Knapp Communications
Corp., the publisher of Architectural Digest and Bon Appetit magazines which
were acquired by Conde Nast. From 1989 through 1990 Mr. Jastrem was chief
financial officer of Reliance Steel & Aluminum Company, a metals distributing
company. From 1985 to 1989 Mr. Jastrem was part of the management
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<PAGE>
team of Wickes Companies, Inc., a $6 billion manufacturer and retailer, during
its successful reorganization. From 1977 to 1985 Mr. Jastrem was a senior
manager for Arthur Andersen & Co.
JOHN A. ALONZO was elected a director of the Company in July 1996. Mr. Alonzo
is the first cinematographer to be recognized by the U.S. Library of Congress,
for his cinematography work on the feature film "Chinatown," and is a member of
the American Society of Cinematographers. Other feature films on which Mr.
Alonzo was the principal cinematographer include "Harold and Maude," "Scarface,"
"Steel Magnolias," and "Star Trek, Generations." Mr. Alonzo holds an honorary
Doctorate Degree in Humane Letters from Columbia College, Hollywood, and an
honorary Bachelors Degree from The Brooks Institute. Mr. Alonzo has given
seminars and lectures at the University of Southern California and is currently
on the faculty of The American Film Institute.
EXECUTIVE OFFICERS
The Company's executive officers also include Mr. Gary S. Borman.
GARY S. BORMAN joined the Company as corporate controller and chief accounting
officer in March 1996. From 1991 to 1996 Mr. Borman was the controller of HR
Textron, Inc., an aerospace component manufacturer and a division of Textron,
Inc. From 1982 to 1991 Mr. Borman was a senior manager for Ernst & Young LLP.
BOARD OF DIRECTORS
MEETINGS AND REMUNERATION
During the fiscal year ended September 30, 1996, the Board held five regular
meetings, and no director attended less than 75% of the aggregate of all Board
meetings and all of the meetings held by any committee on which he served. Non-
employee members of the Board receive a retainer of $1,000 per month for
services rendered to the Board of Directors and Committee(s) of the Board of
Directors and for his or her attendance at the meetings. In addition, each
independent director receives an option to purchase 15,000 shares of Common
Stock. Such shares are exercisable ratably 6, 24 and 36 months after the grant
date, and the exercise price per share is the market value of the shares at the
grant date, or $3.00 per share, in the case of the options granted to Mr. Giess
and Mr. Jastrem (the market value was less than $3.00 on the date on which the
options were granted to Messrs. Giess and Jastrem). Mr. Giess has assigned to
ING the compensation to which Mr. Giess would be entitled as an independent
director.
COMMITTEES
The Company has an Audit Committee chaired by Mr. Brehm and include Messrs.
Farley, Donlon, Giess, Jastrem and Alonzo as members. The Committee held four
meetings during fiscal 1996. The primary function of this Committee is to
review periodic financial statements and certain financial information before
publication; discuss the scope of independent accountants' engagement and review
the scope of the independent accountants' performance, reports and fees; review
the scope and adequacy of the Company's financial controls, internal audit plans
and the findings of internal audit examinations; and recommend the selection of
independent accountants.
The Company has a Compensation/Stock Option Committee chaired by Mr. Brehm and
include Messrs. Farley, Donlon, Giess, Jastrem and Alonzo as members. The
Committee held two meetings during fiscal 1996. Its primary function is to
review compensation levels of members of management; evaluate the
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performance of management and consider management succession and related
matters; and develop and administer the Company's various incentive plans,
including the Company's stock option plan and incentive compensation plans.
REPORT OF THE COMPENSATION/OPTIONS COMMITTEE
The following Report of the Compensation/Options Committee and the Performance
Graph shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission (the "Commission") or subject to Regulations
14A or 14C of the Commission or the liabilities of Section 18 of the Securities
Exchange Act of 1934 (the "Exchange Act"). Such Report and Performance Graph
shall not be deemed incorporated by reference into any filing under the
Securities Act of 1933 or the Exchange Act, notwithstanding any general
incorporation by reference of this Proxy Statement into any other document.
GENERAL
The Compensation/Options Committee (the "Compensation Committee"), a committee
composed entirely of directors who are not employed by the Company and who do
not serve as officers of the Company, develops and administers the Company's
various incentive and stock plans, reviews compensation levels of members of
management, evaluates the performance of management and considers management
succession and related matters. In evaluating the performance of members of
management, the Compensation Committee consults with the Chief Executive
Officer, Chief Financial Officer and Chairman of the Board except when reviewing
his performance, in which case the Compensation Committee meets independently.
The Compensation Committee reviews with the Board in detail all aspects of
compensation for the senior executives, including the individuals named in the
Summary Compensation Table (the "Compensation Table").
STATEMENT ON PHILOSOPHY OF EXECUTIVE COMPENSATION
In April 1995, the Compensation Committee adopted general principles with
respect to executive compensation, i.e., establishing and evaluating the
effectiveness of compensation programs for executive officers, as well as other
employees of the Company. Those general principles continue to be utilized by
the Compensation Committee and are as follows:
o The Company must offer competitive salaries to be able to attract and
retain highly qualified and experienced executives and other
management personnel;
o Executive cash compensation in excess of base salaries should be tied to
Company and individual performance; and
o The financial interest of the Company's senior executives should be
aligned with the financial interest of the shareholders, primarily
through stock option grants, restricted stock and other long-term
incentive arrangements.
BASE SALARY
Base salaries for the Chief Executive Officer, Chief Financial Officer and
Chairman of the Board, and other executive officers, are established at levels
considered appropriate in light of the duties and scope of responsibilities of
each executive officer's position and compensation paid to equivalent executive
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officers at comparable companies. Salaries of officers or employees who are not
covered by an employment agreement are reviewed periodically (at least annually)
and adjusted as warranted to reflect sustained individual performance. The
Compensation Committee measures individual performance and contribution against
total annual compensation, including incentive awards, rather than base salary
alone. Total compensation for executive officers consists of a combination of
salaries, bonuses, stock option grants and contributions to the Company's 401(k)
plan.
The compensation for the five highest paid executive officers of the Company in
fiscal 1996 is set forth in the Compensation Table.
COMPENSATION AND OPTIONS COMMITTEE
Jack Brehm
Jerome E. Farley
John H. Donlon
Benjamin P. Giess
John F. Jastrem
John A. Alonzo
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PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total returns for
the Company, the S&P 500 Composite Index and a self-selected peer group of
companies (the "Peer Group").
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN* 1992 1993 1994 1995 1996
------------------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
MATTHEWS STUDIO EQUIPMENT GROUP 76.06 67.61 69.01 47.89 45.08
S&P 500 INDEX 111.05 125.49 130.11 168.82 203.14
PEER GROUP WEIGHTED AVERAGE 147.34 100.90 153.53 238.42 151.75
</TABLE>
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* Annual return assumes reinvestment of dividends. Cumulative Total Return
assumes an initial investment of $100 on September 30, 1991. The Peer
Group members include: ARC International Corp., Chyron Corp., Camera
Platforms International, Inc., Avid Technology, Inc. (since March 1993),
Trans Global Services Inc. (since August 1994), and Shop Television
Network, Inc. (since March 1994). Trans Global Services Inc. formerly
known as Concept Technologies Group.
-10-
<PAGE>
The following table sets forth information concerning total compensation earned
by or paid to, during the Company's fiscal years ended September 30, 1994,
September 30, 1995 and September 30, 1996, those persons who at September 30,
1996, were the Company's chief executive officer and the five most highly
compensated executive officers of the Company, earning at least $100,000 in
combined salary and bonus for services rendered to the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------------------
Awards Payouts
----------------------------------------------------
Name and Principal Year Salary Bonus Other Annual Restricted Securities LTIP All Other
Position /1/ ($) ($) Compensation Stock Underlying Payouts Compensation
Awards ($) Options/ ($)
SARs
(#)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carlos D. De Mattos, 1996 263,425 50,000 -- -- -- -- 1,462
Chairman, Director, Chief 1995 225,866 -- -- -- 200,000 -- 1,828
Executive Officer and Chief 1994 227,631 -- -- -- -- -- 1,828
Financial Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Edward Phillips, Director, 1996 263,425 100,000 -- -- -- -- 1,799
President, Matthews Studio 1995 225,866 -- -- -- 200,000 -- 2,249
Equipment, Inc. 1994 227,631 -- -- -- -- -- 1,994
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER ANNUAL COMPENSATION - None paid.
RESTRICTED STOCK AWARDS - The Company does not have a plan for restricted stock awards.
LTIP PAYOUTS - None paid. No plan in place.
ALL OTHER COMPENSATION - This represents Company contributions to the 401(k) plan.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
1 There are only two reportable individuals.
-11-
<PAGE>
The following table shows exercises and values of options and SARs held by the
named executive officers:
OPTIONS/SAR EXERCISES AND FY-END VALUE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Name Shares Value (# of Shares) Underlying ($) Year-End Value
Acquired on Realized Unexercised of Unexercised In-
Exercise (#) ($) Options/SARs The-Money Options
Exercisable (E)/ and SARs
Unexercisable (U) Exercisable (E)/
Unexercisable (U)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Carlos D. De Mattos -- -- 140,000(E)/134,000(U) $21,400(E)/0.00(U)
- ----------------------------------------------------------------------------------------------------
Edward Phillips -- -- 140,000(E)/134,000(U) $21,400(E)/0.00(U)
- ----------------------------------------------------------------------------------------------------
</TABLE>
RETIREMENT PLANS
The Company has an employee benefit plan intended to qualify under Section
401(k) of the Internal Revenue Code. Under the plan, employees may contribute
as deferred compensation up to 6% of compensation (not to exceed $9,500
annually). The Company matches from 20% to 50% of employee contributions, based
on individual salary levels. The Company's contributions accrued under the plan
in the year ended September 30, 1996 was a maximum of approximately $1,800 for
each of the officers listed above. The Company does not have any defined
benefit or actuarial plan.
EMPLOYMENT AGREEMENTS
The Company entered into written employment agreements with Carlos D. De Mattos
and Edward Phillips on July 1, 1995 (the "Employment Agreements") to serve as
the Company's President and Chairman of the Board, and, as President of the
Company's wholly owned subsidiary, Matthews Studio Equipment, Inc.,
respectively, for a three-year term commencing July 1, 1995 at annual base
salaries of $257,000. Said base salaries increase annually for cost-of-living
and by amounts not less than 10% based on the sole discretion of the
Compensation Committee of the Board of Directors, during the term of the
Employment Agreements. Mr. De Mattos' base salary was increased by the
Compensation Committee to $332,700 per year, starting October 1, 1996. Mr.
Phillips' base salary increased to $282,700 for the period from July 1, 1996 to
June 30, 1997. The Employment Agreements provide for annual incentive bonuses
for 20% to 40% of the base salary depending upon attainment by the Company of
specified Earnings (as defined in the Employment Agreements). The Employment
Agreements each contain the grant of an option to purchase 200,000 shares of
Common Stock at an exercise price of $3.00 per share. The right to purchase up
to 66,667 shares under such options vests in like installments commencing on the
first and the next two successive anniversary dates of the Employment Agreements
and these options are exercisable until July 2005.
RELATED PARTY TRANSACTIONS
The principal facilities of the Company are leased from PDM, a partnership owned
by Carlos D. De Mattos and Edward Phillips. As of October 1, 1995, the Company
and PDM agreed to cancel the master lease (which would have expired December 31,
1996), and entered into a new lease which will expire
-12-
<PAGE>
December 31, 1999. In negotiating for the new lease, the Company acted through
and by its directors and executive officers other than Messrs. De Mattos and
Phillips (who are financially interested in PDM as its general partners). To
achieve this new lease, the remaining lease payments through December 31, 1996
(fifteen months at $1.23 per square foot) were added to a three-year extension
(thirty-six months at $0.62 per square foot, which was at the time of the lease
negotiation the current prevailing rental rate for like property in the Burbank
area.) The average resulting rent for the entire 51-month period of the new
lease is $0.80 per square foot.
The executive office, showroom and warehouse of Hollywood Rental Co., Inc. in
Sun Valley, California, are leased from a former director and former officers of
the Company under leases which expire in April, 1997. In addition, a company
owned by Ernst F. Nettmann, a director of the Company, has a Management
Agreement with Electronics, a wholly owned subsidiary of the Company, pursuant
to which Mr. Nettmann's company manages the Cam-Remote(R) Systems business of
Electronics. Mr. Nettmann's company is entitled to receive compensation
predicated on achieving certain revenues under the Management Agreement, as well
as rental reimbursement of approximately $3,000 per month.
At July 1, 1989 the Company had issued two promissory notes, each in the
principal sum of $107,000, to Messrs. De Mattos and Phillips to pay certain
obligations. These notes were paid in full by the Company during the fiscal
year ended September 30, 1996.
PROPOSAL 2
AMENDMENT OF ARTICLES OF INCORPORATION
TO ELIMINATE INAPPLICABLE
LANGUAGE REGARDING THE COMPANY'S BUSINESS
The Articles of Incorporation of the Company provide at Articles II and III that
the Company may conduct any lawful business, but also state that the Company's
initial business is the manufacturing and selling of ties. The Board of
Directors has unanimously declared the advisability of an amendment to the
Articles of Incorporation to state that the Company may engage in any lawful
activity for which a corporation may be organized under the General Corporation
Law of California and, by such amendment, eliminate from the Articles of
Incorporation all unnecessary and inapplicable discussion regarding the initial
business of the Company, which business the Company no longer conducts.
A form of the amendment to the Articles of Incorporation proposed to be adopted
by the shareholders at the Meeting is included with this Proxy Statement.
If the proposed amendment is adopted by the shareholders, the Company plans to
file a Certificate of Amendment to the Company's Articles of Incorporation with
the Secretary of State of the State of California promptly following the
Meeting. The amendment will be effective upon filing.
The affirmative vote of the holders of a majority of the outstanding shares of
the Company entitled to vote thereon is required for the adoption of the
proposed amendment to the Company's Articles of Incorporation. Abstentions and
broker non-votes have the effect of a vote against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
---
THE ARTICLES OF INCORPORATION TO ELIMINATE INAPPLICABLE LANGUAGE REGARDING THE
COMPANY'S BUSINESS.
-13-
<PAGE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Ernst & Young LLP has audited and reported upon the financial statements of the
Company for the fiscal year ended September 30, 1996 and has acted as the
Company's independent accountants since their appointment for fiscal 1991. The
Board of Directors, on the unanimous recommendation of the Audit Committee, has
selected Ernst & Young LLP as the Company's independent accountants for the
fiscal year ending September 30, 1997. Representatives of Ernst & Young LLP are
expected to be at the Meeting to respond to questions and will have the
opportunity to make a statement if they desire to do so.
All services provided to the Company by Ernst & Young LLP were approved by the
Audit Committee which also considered the possible effect on the independence of
Ernst & Young LLP by rendering such services.
Audit services of Ernst & Young LLP included the examination of the consolidated
financial statements, services related to filings with the Commission, and the
performance of certain consulting services in respect of the Company's quarterly
unaudited financial information.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY
---
ERNST & YOUNG LLP'S APPOINTMENT AS INDEPENDENT ACCOUNTANTS.
PRINCIPAL SHAREHOLDERS
As of February 25, 1997, the only persons known by the Company to own
beneficially or that may be deemed to own beneficially more than five percent of
any class of its voting stock were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Name and Address of Number of Shares Percentage of
Beneficial Owner /1/ Beneficially Owned Common Stock /2/
- ---------------------------------------------------------------------------
<S> <C> <C>
Carlos D. De Mattos 2,057,117 /3/ 19.91%
- ---------------------------------------------------------------------------
Edward Phillips 2,057,117 /4/ 19.91%
- ---------------------------------------------------------------------------
ING Equity Partners, L.P. I /5/ 4,132,464 /6/ 40.00%
- ---------------------------------------------------------------------------
</TABLE>
- -----------
1 Unless otherwise noted, all shares are beneficially owned and the sole
voting power is held by the person indicated, and the address of each of
these individuals is: c/o Matthews Studio Equipment Group, 2405 Empire
Avenue, Burbank, California 91504.
2 Based on 10,331,591 shares outstanding at February 25, 1997.
3 Includes 1,816,450 shares owned by a family trust with trust management
vested in the named person as the trustee and 100,000 shares owned by a
limited liability company owned by such family trust. Also includes an
option to purchase 140,667 shares of Common Stock.
-14-
<PAGE>
4 Includes 1,847,450 shares owned by a family trust with trust management
vested in the named director as the trustee, and 69,000 shares owned by the
named person directly. Also includes an option to purchase 140,667 shares
of Common Stock.
5 This company's address is 135 East 57th Street, 16th Floor, New York, New
York 10022.
6 Includes the Warrant to purchase 2,322,464 shares of Common Stock. ING is
entitled to contingent voting rights for the 2,322,464 shares underlying
the Warrant pursuant to a share of Preferred Stock, as discussed above in
this Proxy Statement. Also includes the exercisable portion (to purchase
10,000 shares) of an option issued to ING as consideration for the services
of its appointee, Benjamin P. Giess, to purchase a total of 15,000 shares
of Common Stock.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers, and persons who own more than ten percent of a registered class of
shares of the Company's equity securities, to file by specific dates with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of equity securities of the Company. Officers, directors
and greater than ten percent shareholders are required by security regulations
to furnish the Company with copies of all Section 16(a) forms that they may
file. The Company is required to report in this proxy statement any failure of
its directors and executive officers and greater than ten percent shareholders
to file by the relevant due date any of these reports during the two preceding
fiscal years.
To the best of the Company's knowledge, based solely on review of copies of such
reports furnished to the Company during the two fiscal years ended September 30,
1996, all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent shareholders were complied
with, except: No Form 3s were filed by Directors Ernst F. Nettmann, John H.
Donlon, or John A. Alonzo. As far as the Company is aware, all transactions for
ING, and for Directors Carlos D. De Mattos, Edward Phillips, Jack Brehm,
Benjamin P. Giess, John F. Jastrem and Jerome E. Farley were previously reported
on Form 4 and there were no transactions by the officers, directors and holders
of ten percent or more of the Company's securities which would have required
reporting by such persons during such period, except as discussed below with
regard to certain late filings.
A Statement of Change of Beneficial Ownership on Form 4 (with respect to the
sale by Edward Phillips, a director and greater than ten percent shareholder of
the Company, of 5,000 shares of Common Stock in the open market in September
1994) was filed subsequent to its due date, due to an administrative error.
Also Statements of Change of Beneficial Ownership on Form 4 (with respect to the
issuance by the Company to ING in November 1995 of an option to purchase 15,000
shares of the Common Stock) were filed by Benjamin P. Giess, a director of the
Company, and ING subsequent to their due date, due to an administrative error.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of the date of this Proxy Statement, the Board of Directors knows of no other
business that will be presented by management at the Meeting. If any other
business properly comes before the Meeting, the proxy holders intend to vote the
proxies as recommended by the Board.
-15-
<PAGE>
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals for shareholder action that eligible shareholders wish to have
included in the Company's Annual Meeting to be held in March 1998 must be
received by the Company at its principal executive offices on or before January
15, 1998 in order for the proposition to be considered for inclusion in the
Company's proxy statement and form of proxy relating to such annual meeting.
Any such proposals, as well as any questions related thereto, should be directed
to the Secretary of the Company.
SOLICITATION OF PROXIES
Proxies for the Meeting will be solicited by mail and through brokerage
institutions, and all expenses involved, including printing and postage, will be
paid by the Company.
OTHER INFORMATION
A copy of the Company's Annual Report for the year ended September 30, 1996 and
of the Company's Form 10-Q for the quarter ended December 31, 1996 are being
furnished herewith to each shareholder of record as of the Record Date.
Additional copies of the Annual Report and such Form 10-Q will be provided for a
nominal charge upon written request to: Investor Relations Department, Matthews
Studio Equipment Group, 2405 Empire Avenue Burbank, CA 91504-3399.
BY ORDER OF THE BOARD OF DIRECTORS
March 3, 1997 Gregory Moiseeff, Secretary
-16-
<PAGE>
[AMENDMENT OF THE ARTICLES OF INCORPORATION TO
ELIMINATE INAPPLICABLE LANGUAGE REGARDING
THE COMPANY'S BUSINESS]
1. Article II of the Articles of Incorporation is hereby deleted in its
entirety.
2. Article III of the Articles of Incorporation is hereby amended and restated
in full as follows, and is hereby renumbered as Article II:
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the
trust company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
3. Articles IV, V, VI, VII and XIII are hereby renumbered as Articles III, IV,
V, VI, and VII, respectively.
-17-
<PAGE>
PRELIMINARY PROXIES
Matthews Studio Equipment Group
2405 Empire Avenue
Burbank, California 91504
(818) 843-6715
===============================================================================
P R O X Y
SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING - MARCH 27, 1997 - BURBANK, CALIFORNIA
The undersigned hereby appoints Carlos D. De Mattos, with full power of
substitution and to act alone, as proxyholder for the undersigned to vote all
the shares of common stock that the undersigned would be entitled to vote at the
1997 Annual Meeting of Shareholders of Matthews Studio Equipment Group and at
any adjournment thereof, upon all matters described in the Proxy Statement for
the Meeting referred to on the reverse side of this card in the manner there
indicated, and, in his discretion, upon any other matters which properly come
before the Meeting.
ELECTION OF DIRECTORS
Nominees:
Carlos D. De Mattos, Edward Phillips, Ernst F.
Nettman, Jack Brehm, Jerome E. Farley, John H.
Donlon, Benjamin P. Giess, John F. Jastrem,
John A. Alonzo
IF NO OTHER INDICATION IS MADE, THE PROXYHOLDER SHALL VOTE FOR THE ELECTION OF
ALL THE DIRECTOR NOMINEES SET FORTH ABOVE.
================================================================================
PLEASE FILL IN REVERSE SIDE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
<PAGE>
================================================================================
PROPOSAL 1 - ELECTION OF DIRECTORS
[_] [_] [_]
For All Withhold From Per Cumulative
Nominees All Nominees Vote Below
- --------------------------------------------------------------------------------
Carlos D. De Mattos Jerome E. Farley
- --------------------------------------------------------------------------------
Edward Phillips John H. Donlon
- --------------------------------------------------------------------------------
Ernst F. Nettmann Benjamin P. Giess
- --------------------------------------------------------------------------------
Jack Brehm John F. Jastrem
- --------------------------------------------------------------------------------
John A. Alonzo
================================================================================
PROPOSAL 2 - AMENDMENT OF ARTICLES OF INCORPORATION TO
ELIMINATE INAPPLICABLE LANGUAGE REGARDING THE COMPANY'S BUSINESS
[_] [_] [_]
For Proposal 2 Against Abstain From
Proposal 2 Proposal 2
- --------------------------------------------------------------------------------
Approval of the amendment of the Company's Articles of Incorporation to
eliminate inapplicable language regarding the Company's business, as described
in the Proxy Statement.
================================================================================
PROPOSAL 3 - RATIFICATION OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
[_] [_] [_]
For Proposal 3 Against Proposal 3 Abstain From Proposal 3
- --------------------------------------------------------------------------------
Approval of selection of Ernst & Young LLP as the Company's accountants for the
fiscal year ending September 30, 1997.
================================================================================
INSTRUCTIONS TO MARK YOUR VOTE FOR EACH PROPOSAL:
[1] PLEASE MARK YOUR VOTE WITH A [X] IN YOUR CHOICE OF ONE OF THE 3 BOXES
PROVIDED FOR EACH PROPOSAL. [2] JOINT OWNERS MUST EACH SIGN. IF ACTING AS
ATTORNEY, TRUSTEE, EXECUTOR OR IN ANOTHER REPRESENTATIVE CAPACITY, SIGN AND
PRINT YOUR NAME AND TITLE. [3] TO VOTE CUMULATIVELY FOR PROPOSAL 1, MARK THE
APPROPRIATE BOX AND INDICATE THE NUMBER OF VOTES YOU WISH TO CAST FOR EACH
DIRECTOR. THE TOTAL NUMBER OF VOTES YOU CAST FOR ALL NOMINEES MAY NOT EXCEED
YOUR TOTAL NUMBER OF SHARES. [4] YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEE BY LINING THROUGH OR STRIKING OUT THE NAME OF ANY NOMINEE. [5] PLEASE
RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
================================================================================
- ------------------------ ------------------------ ------------------------
Signature Title Date
- ------------------------ ------------------------ ------------------------
Signature Title Date
- ------------------------ ------------------------ ------------------------
Signature Title Date
================================================================================
