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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Matthews Studio Equipment Group
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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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Notes:
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MATTHEWS STUDIO EQUIPMENT GROUP
3111 N. Kenwood Street
Burbank, California 91505
(818) 525-5200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held March 18, 1998 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, Wednesday, March 18, 1998, 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 transact such other business as may properly come before the meeting
and any adjournments thereof.
The Board of Directors has fixed the close of business on February 18, 1998, as
the record date for the purpose of determining shareholders entitled to notice
of, and to vote at, the meeting and all adjournments thereof.
The Company's 1997 Annual Report to Shareholders and Form 10-Q for the quarter
ended December 31, 1997 are transmitted herewith.
By Order of the Board of Directors,
/s/ Gregory Moiseeff
Gregory Moiseeff
Secretary
Burbank, California
February 24, 1998
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
3111 N. Kenwood Street
Burbank, California 91505
__________
PROXY STATEMENT
1998 ANNUAL MEETING OF SHAREHOLDERS
To be held March 18, 1998
__________
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, Wednesday,
March 18, 1998, 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 February 24, 1998.
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 herein. In addition, a proxy will be
voted in the discretion of the proxyholders with respect to such other business
as may properly come before the meeting.
RECORD DATE AND VOTING
The Board has fixed the close of business on February 18, 1998, as the record
date (the "Record Date") for the determination of the holders of common stock,
no par value per share (the "Common 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 11,000,806 shares of Common Stock. Each
share of Common Stock is entitled to one vote on each matter brought before the
meeting.
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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 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 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 (the "Proxy Card") and
shareholders' votes 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. The
Preferred Stock has no right to receive notice of or to vote at the Meeting at
the present time.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership of
the Company's Common Stock as of February 18, 1998 by (i) each director and
nominee for director, (ii) the Chairman and Chief Executive Officer and each of
the other three executive officers of the Company whose combined salary and
bonus exceeded $100,000 in fiscal 1997 and (iii) all directors and executive
officers of the Company as a group:
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<TABLE>
<CAPTION>
Name and Address of Number of Shares Percentage of
Beneficial Owner /1/ Beneficially Owned Common Stock/21/
- -------------------- ------------------ ----------------
<S> <C> <C>
Carlos D. De Mattos 2,123,784 /9/ 19.3%
Edward Phillips 2,123,784 /10/ 19.3%
Ernst F. Nettmann 105,000 /11/ Less than 1%
Jack Brehm /2/ 17,000 /12/ Less than 1%
Jerome E. Farley /3/ 15,000 /13/ Less than 1%
John H. Donlon /4/ 15,000 /14/ Less than 1%
Benjamin P. Giess /5/ 4,137,464 /15/ 37.6%
ING Equity Partners, L.P.I /6/ 4,137,464 /16/ 37.6%
John F. Jastrem /7/ 15,000 /17/ Less than 1%
John A. Alonzo /8/ 10,000 /18/ Less than 1%
Gary S. Borman 6,000 /19/ Less than 1%
Carly Barber 27,000 /20/ Less than 1%
All executive officers 8,731,745 79.4%
and directors as a group
(14 persons)
</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, 3111 N. Kenwood Street,
Burbank, California 91505.
/2/ This individual's address is: 19501 Greenbriar Drive, Tarzana, California
91356.
/3/ This individual's address is: 4100 West Alameda Avenue, Burbank,
California 91505.
/4/ This individual's address is: 2813 West Alameda Avenue, Burbank,
California 91505.
/5/ This individual's address is: 135 East 57th Street, 16th Floor, New York,
New York 10022.
/6/ This company's address is: 135 East 57th Street, 16th Floor, New York, New
York 10022.
/7/ This individual's address is: 1913 Ripley Avenue, Redondo Beach,
California 90278.
/8/ This individual's address is: 10866 Wilshire Boulevard, 10th Floor, Los
Angeles, CA 90024.
/9/ Includes 1,916,450 shares owned by a family trust with trust management
vested in the named director as the trustee. Also includes an option to
purchase 207,334 shares of Common Stock.
/10/ 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 207,334 shares of
Common Stock.
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/11/ Includes an option to purchase 100,000 shares of Common Stock.
/12/ Includes the exercisable portion (to purchase 15,000 shares) of options to
purchase a total of 20,000 shares of Common Stock.
/13/ Represents the exercisable portion of options to purchase a total of 20,000
shares of Common Stock.
/14/ Represents the exercisable portion of options to purchase a total of 20,000
shares of Common Stock.
/15/ 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 16.
/16/ 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 referred to under "Certain Transactions". Also includes the
exercisable portion (to purchase 15,000 shares) of options issued to ING as
consideration for services of its appointee, Benjamin P. Giess, to purchase a
total of 20,000 shares of Common Stock.
/17/ Represents the exercisable portion of options to purchase a total of 20,000
shares of Common Stock.
/18/ Represents the exercisable portion of options to purchase a total of 20,000
shares of Common Stock.
/19/ Represents the exercisable portion of options to purchase a total of 30,000
shares of Common Stock.
/20/ Represents the exercisable portion of options to purchase a total of 36,000
shares of Common Stock.
/21/ Based on 11,000,806 shares of Common Stock outstanding at February 18,
1998.
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 iii) 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 agreed to
nominate, and Messrs. De Mattos and Phillips and their affiliates agreed to vote
for, two representatives of ING to the Board of Directors of the Company. Also,
the parties
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agreed 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.
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.
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 45 Chairman of the Board, Chief Executive Officer,
Chief Financial Officer
Edward Phillips 51 Director, President of Matthews Studio Equipment,
Inc.
Ernst F. Nettmann 58 Director, President of Matthews Studio
Electronics, Inc.
John A. Alonzo 63 Director
Jack Brehm 69 Director
John H. Donlon 52 Director
Jerome E. Farley 59 Director
Benjamin P. Giess 35 Director
John F. Jastrem 42 Director
</TABLE>
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<PAGE>
CARLOS D. DE MATTOS was co-founder of the Company and has served as a Director
and as Chairman of the Company's Board of Directors, President 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 also serves as the Company's Chief Financial Officer. 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 was co-founder of the Company and 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 late 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 is President of Matthews Studio Electronics, Inc., a wholly owned
subsidiary of the Company ("Electronics"). 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 (see "Related Transactions" below). 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.
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<PAGE>
JOHN A. ALONZO, A.S.C., was elected a Director of the Company in July 1996. Mr.
Alonzo is a cinematographer. He is the first cinematographer to be recognized
by the U.S. Library of Congress, for his exemplary cinematographic work on a
total of two distinguished feature films: "Chinatown" and "Harold and Maude".
He is a member of the American Society of Cinematographers. Other feature films
on which Mr. Alonzo was the principal cinematographer include "Scarface," "Steel
Magnolias," and "Star Trek, Generations." Mr. Alonzo has given seminars and
lectures at the University of Southern California and currently is on the
faculty of The American Film Institute.
JACK BREHM has served as a Director of the Company 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 from Ernst & Young LLP in September 1988,
Mr. Brehm has acted as a financial consultant. Mr. Brehm is a Director of
Zegarelli Group International, Inc., a Nasdaq listed company which manufactures
and distributes professional hair care products.
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 Nasdaq listed company
with revenues in excess of $100 million. 4MC employs over 700 people worldwide,
principally at its facilities in Universal City, 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.
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. From 1979 through 1997 Mr. Farley was 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 New York Stock Exchange
listed holding company. Mr. Farley has been a professor at the Pepperdine
University School of Business and Management since 1984.
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<PAGE>
BENJAMIN P. GIESS was elected a Director of the Company in September 1995. Mr.
Giess is a partner and executive officer of ING Equity Partners, L.P.I ("ING")
(see "Certain Transactions" above). 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 Nasdaq listed company, 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, and, of Transcare
Corporation, a privately held ambulance operator.
JOHN F. JASTREM was elected a Director of the Company in September 1995. Mr.
Jastrem is a management consultant to major business enterprises. From 1996 to
1997, he served as 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. 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 was 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 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 LLP.
EXECUTIVE OFFICERS
The Company's executive officers in addition to Mr. De Mattos and Mr. Phillips
include Mr. Gary S. Borman, Mr. Kenneth W. Kramer, Ms. Carly Barber, Mr. Robert
M. Johnston and Mr. Harold J. Lefkovitz.
GARY S. BORMAN, age 40, joined the Company as Corporate Controller and Chief
Accounting Officer in March 1996 and has been the Company's Vice President since
March 1997. 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.
KENNETH W. KRAMER, age 40, joined the Company in December 1996 as Vice
President, Development and Operations. Prior to joining the Company, Mr. Kramer
was employed by
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<PAGE>
Technicolor Video Services, Inc. from February 1995 to December 1996, where he
served as Senior Vice President and Chief Financial Officer. From June 1981 to
February 1985, Mr. Kramer was a senior manager for Ernst & Young LLP, serving in
their Chicago, National/Cleveland and Los Angeles offices.
CARLY BARBER, age 42, President, Hollywood Rental Co., Inc., joined the Company
in March 1986. From 1984 to 1986 Ms. Barber was the manager of Cinepro, a
Panavision expendables, camera, lighting and grip company. From 1981 to 1984,
Ms. Barber worked for the Samuelsons Film Services, an international supplier of
rental cameras and lighting equipment as a representative of the company on
production.
ROBERT M. JOHNSTON, age 37, President, Expendable Supply Store, joined the
Company in October 1996. Prior to joining the Company he was a consultant with
responsibility for the marketing and sales of production supplies and products
to William F. White, Ltd., Canada's largest supplier of television, motion
picture and theatrical equipment.
HAROLD J. LEFKOVITZ, age 45, President, Duke City Video, Inc., joined the
Company in May 1997. Mr. Lefkovitz co-founded Duke City Video, Inc., in 1979
and has continuously been its President and Chief Executive Officer with
responsibility for all of its day-to-day operations.
BOARD OF DIRECTORS
MEETINGS AND REMUNERATION
During the fiscal year ended September 30, 1997, the Board held three 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, the
Company's 1994 Stock Option Plan for Directors provides that each independent
Director is to receive options to purchase 15,000 shares of Common Stock. Under
the terms of such plan, such options are exercisable ratably 6, 24 and 36 months
after the grant date, and the exercise price per share is the market value at
the grant date. Each of the current independent directors has received such
options for 15,000 shares, exercisable at the market value on the date of grant,
except that the options granted to Mr. Giess and Mr. Jastrem are exercisable at
$3.00 per share even though the market value was less than $3.00 on the date on
which these options were granted. Mr. Giess has assigned to ING the
compensation to which he would be entitled as an independent Director. On
December 10, 1997, options to purchase an additional 5,000 shares of Common
Stock were granted to each of the Company's independent directors. Such options
were also granted under the Company's 1994 Stock Option Plan for Directors, and
are exercisable ratably 12 and 24 months after the grant date, at an exercise
price per share equal to the market value at the grant date. Mr. Giess
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has also assigned to ING these additional options. The committee administering
the 1994 Stock Option Plan for Directors granted these additional options in
recognition of the extraordinary efforts required of the Board during the year.
COMMITTEES
The Company has an Audit Committee chaired by Mr. Brehm, which includes Messrs.
Alonzo, Donlon, Farley, Giess and Jastrem as members. The Committee held three
meetings during fiscal 1997. 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,
which includes Messrs. Alonzo, Donlon, Farley, Giess and Jastrem as members.
The Committee held two meetings during fiscal 1997. Its primary function is to
review compensation levels of members of management; evaluate the 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.
REPORT OF THE COMPENSATION/STOCK OPTION COMMITTEE
GENERAL
The Compensation/Stock Option 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, or their, 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:
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. The Company must offer competitive salaries to be able to attract and
retain highly qualified and experienced executives and other
management personnel;
. Executive cash compensation in excess of base salaries should be tied
to Company and individual performance; and
The financial interest of the Company's senior executives should be
. aligned with the financial interest of the shareholders, primarily
through stock option grants 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
officers at comparable companies. Salaries of officers or employees 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.
Stock option grants are offered to new employees in order to attract highly
qualified and experienced executives and other management personnel. In
addition, stock option grants are offered to existing employees to reward
individual performance. Performance evaluations are made by the Company's
officers and reported to the Chief Executive Officer, who in turn makes
recommendations regarding stock option grants for existing employees to the
Compensation Committee.
COMPENSATION/STOCK OPTION COMMITTEE
John A. Alonzo
Jack Brehm
Jerome E. Farley
John H. Donlon
Benjamin P. Giess
John F. Jastrem
-11-
<PAGE>
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"). The performance graph has been changed to include
a comparison between new and old peer groups. The new peer group has been added
to include shareholder returns information of Panavision, Inc., an equipment
rental company whose shares began trading publicly in November, 1996.
TOTAL SHAREHOLDER RETURNS
-------------------------
(DIVIDENDS REINVESTED)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
ANNUAL RETURN PERCENTAGE
YEARS ENDING
- --------------------------------------------------------------------------------------------------------------
COMPANY NAME / INDEX SEP 93 SEP 94 SEP 95 SEP 96 SEP 97
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MATTHEWS STUDIO EQUIPMENT GROUP [graph line -11.11 2.07 -30.60 -5.88 118.75
symbol ---*--]
S&P COMP-LTD [graph line symbol ---[_]---] 13.00 3.69 29.74 20.33 40.45
NEW PEER GROUP [graph line 16.46 53.74 55.30 -36.35 18.62
symbol ---#--- ]
OLD PEER GROUP [graph line symbol ---X---] -31.52 52.16 55.30 -36.35 18.62
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
BASE INDEXED RETURNS
PERIOD YEARS ENDING
- --------------------------------------------------------------------------------------------------------------
COMPANY NAME / INDEX SEP 92 SEP 93 SEP 94 SEP 95 SEP 96 SEP 97
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MATTHEWS STUDIO EQUIPMENT GROUP ---*--- 100 88.89 90.73 62.96 59.26 129.63
S&P COMP-LTD ---[_]--- 100 113.00 117.17 152.02 182.93 256.92
NEW PEER GROUP ---#--- 100 83.54 128.44 199.47 126.95 150.59
OLD PEER GROUP ---X--- 100 68.48 104.20 161.82 102.99 122.17
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
NEW PEER GROUP OLD PEER GROUP
- --------------------------------------------------------------------------------------------------------------
<S> <C>
ARC International Corp. ARC International Corp.
Avid Technology Inc. (Trade began 3/12/93) Avid Technology Inc. (Trade began 3/12/93)
Camera Platforms Intl. Inc. Camera Platforms Intl. Inc.
Chyron Corp. Chyron Corp.
Panavision, Inc. Shop Television Network, Inc.
Shop Television Network, Inc. (Stopped filing with SEC 4/15/96) Trans Global Services, inc.
Trans Global Services, inc. (Began trade 8/1/94)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE>
EXECUTIVE COMPENSATION
Set forth below is certain summary information with respect to the Company's
Chief Executive Officer and the other executives of the Company whose combined
salary and bonus exceeded $100,000 in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
- ----------------------------------------------------------------------------------------- -------------------------------
Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------------------
Name and Principal Year Salary ($) Bonus ($) Securities All Other
Position Underlying Compensation/1/
Options
(#)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Carlos D. De Mattos, 1997 351,421 140,568 - - 1,230
Chairman, Chief Executive 1996 263,425 50,000 - - 1,462
Officer and Chief Financial 1995 225,866 - - 200,000 1,828
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Edward Phillips, Director, 1997 295,747 118,299 - - 1,512
President, Matthews Studio 1996 263,425 100,000 - - 1,799
Equipment, Inc. 1995 225,866 - - 200,000 2,249
- ------------------------------------------------------------------------------------------------------------------------------------
Carly Barber, President, 1997 111,291 23,000 - - 1,094
Hollywood Rental Co., Inc. 1996 88,002 7,000 15,000 1,219
1995 83,189 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Gary S. Borman, Vice 1997 100,769 30,203 30,000 900
President, Corporate 1996 48,462 6,000 30,000 21
Controller 1995 - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ These amounts represent Company contributions to the 401(k) plan.
The following table shows the options granted during the year ended September
30, 1997 to the named executive officers:
OPTIONS GRANTED IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Value at
Assumed Rates
of Stock Price
Number of Percentage of Appreciation For
Securities Total Options Option Term
Underlying Granted to Exercise Price Expiration --------------------------
Name Options Granted Employees ($/Share) Date 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gary S. Borman 30,000 8% $2.50 March 2004 $33,000 $83,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
The following table shows the value of options with respect to each of the named
executive officers based on the difference between the exercise price and the
closing price on September 30, 1997 as reported by the Nasdaq Stock Market.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Name # of Shares Underlying Value of Unexercised In-the-
Unexercised Options Money Options at FY-End ($)
------------------------------------------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Carlos D. De Mattos 207,000/67,000 $309,000/$92,000
- ------------------------------------------------------------------------------------------------
Edward Phillips 207,000/67,000 $309,000/$92,000
- ------------------------------------------------------------------------------------------------
Carly Barber 27,000/9,000 $51,000/$21,000
- ------------------------------------------------------------------------------------------------
Gary S. Borman 6,000/54,000 $14,000/$113,000
- ------------------------------------------------------------------------------------------------
</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 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 three-year terms commencing July 1, 1995 at annual base
salaries of $257,000. These base salaries increase annually for cost-of-living
and by amounts not less than 10% as determined in 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 was increased to $282,700 for the period from July 1, 1996
to June 30, 1997, and subsequently to $310,970 for the period from July 1, 1997
to June 30, 1998. The Employment Agreements provide for annual incentive
bonuses equal to 20% to 40% of 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
-14-
<PAGE>
anniversary dates of the Employment Agreements and these options are exercisable
until July 2005. Pursuant to both Employment Agreements, Messrs. De Mattos and
Phillips, respectively, agreed to provide consulting services to the Company for
a period of five years following the termination date, at 50% of the base salary
under their respective Employment Agreements.
Effective as of October 1, 1997, the Employment Agreement with Mr. De Mattos was
amended (as amended, the "De Mattos Agreement") by the Compensation Committee.
The term of the employment under the De Mattos Agreement will expire September
30, 2000 but, similar to the July 1, 1995 Employment Agreement, Mr. De Mattos
has agreed to provide consulting services to the Company for a period of five
years following the termination date, at 50% of the base salary. The base
salary under the De Mattos Agreement was increased to $400,000 and will increase
10% at each anniversary date. Mr. De Mattos will receive an incentive bonus for
fiscal 1998 ranging from 20% to 100% of his base salary, based upon attainment
by the Company of specific earnings per share levels (described in more detail
in the De Mattos Agreement). The annual incentive bonus for fiscal years 1999
and 2000 will be based on performance levels to be established by the Company's
Compensation Committee. As part of the amendment, options to purchase an
additional 100,000 shares of the Company's Common Stock at an exercise price of
$4.74 per share were granted to Mr. De Mattos. These options are in addition to
the options to purchase 200,000 shares of the Company's Common Stock granted
under the July 1, 1995 Employment Agreement. These additional options will vest
at one-third increments on October 1, 1998 and on the next two successive
anniversaries of that date, and were granted under and are subject to the terms
of the Company's 1994 Stock Option Plan. The De Mattos Agreement has been
approved by unanimous vote of the independent Directors on the Compensation
Committee of the Company's Board of Directors. Further, the De Mattos Agreement
was approved by the full Board, except for Mr. De Mattos who abstained from
voting on the matter.
RELATED PARTY TRANSACTIONS
Certain facilities of the Company are leased from PDM, a partnership owned by
Carlos D. De Mattos and Edward Phillips pursuant to a lease which expires
December 31, 1999. In negotiating for this lease, the Company acted through and
by its Directors and executive officers other than Messrs. De Mattos and
Phillips. Rental payments under the lease with PDM were $479,000 in fiscal
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. Payments to Mr. Nettman under the Management Agreement
were $78,372 in fiscal 1997.
-15-
<PAGE>
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP 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, 1998.
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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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,
1997, all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent shareholders were complied with
except, due to administrative errors: (i) The Form 4 filed by Mr. Gary S.
Borman with respect to 60,000 options to purchase the Company's common stock
granted in March 1997, was filed after its due date, (ii) the Form 4 filed by
Mr. Kenneth W. Kramer with respect to 5,000 shares of the Company's common stock
acquired in September 1997, was filed after its due date, and (iii) no Form 3
has been filed by Ms. Carly Barber.
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.
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 1999 must be
received by the Company at its
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<PAGE>
principal executive offices on or before October 27, 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, 1997 and
of the Company's Form 10-Q for the quarter ended December 31, 1997 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, 3111 N. Kenwood Street, Burbank, CA 91505.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gregory Moiseeff
Gregory Moiseeff, Secretary
February 24, 1998
-17-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MATTHEWS STUDIO EQUIPMENT GROUP, 3111 N. KENWOOD STREET, BURBANK, CALIFORNIA 91505 - (818) 525-5200
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S>
[LOGO OF MATTHEWS STUDIO] PROXY
solicited by the Board of Directors
Annual Meeting -- March 18, 1998 -- Burbank, California
The undersigned hereby appoints Carlos D. De Mattos and Jack Brehm and each of them, with full power of substitution and to act
alone, as proxyholders for the undersigned to vote all the shares of common stock that the undersigned would be entitled to vote at
the 1998 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
their discretion, upon any other matters which properly come before the Meeting.
- ----------------------------------------------------------------------- ELECTION OF DIRECTORS
NOMINEES: CARLOS D. DE MATTOS, EDWARD PHILLIPS, ERNST F.
NETTMANN, JOHN A. ALONZO, JACK BREHM, JOHN H. DONLON,
JEROME E. FARLEY, BENJAMIN P. GIESS, JOHN F. JASTREM
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTION OF DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] For All Nominees [ ] Withhold From All Nominees [ ] Per Cumulative Vote Below
You may withhold authority to vote for any nominee by lining through or striking out the name of any nominee.
- ------------------------------------------------------------------------------------------------------------------------------------
Carlos D. De Mattos John A. Alonzo Jerome E. Farley
- ------------------------------------------------------------------------------------------------------------------------------------
Edward Phillips III Jack Brehm Benjamin P. Giess
- ------------------------------------------------------------------------------------------------------------------------------------
Ernst F. Nettmann John H. Donlon John F. Jastrem
- ------------------------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS TO MARK YOUR VOTE:
[1] Please mark your vote with a [x] in your choice of one of the 3 boxes provided. [2] Joint owners must each sign. If acting as
attorney, trustee, executor or in another capacity, sign and print your name and title. [3] To vote cumulatively for a director or
directors, 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] Please return this Proxy promptly in the enclosed
envelope.
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------- ----------------------------------------- --------------------------------------------------
Signature Title Date
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------- ----------------------------------------- --------------------------------------------------
Signature Title Date
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------- ----------------------------------------- --------------------------------------------------
Signature Title Date
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
