<PAGE> 1
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 240.14a-11(c) or 240.14a-12
EARL SCHEIB, INC.
- --------------------------------------------------------------------------------
(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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[ ] 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
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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<PAGE> 2
EARL SCHEIB, INC. [EARL CHEIB, INC. LOGO]
8737 Wilshire Boulevard
Beverly Hills, California 90211
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
EARL SCHEIB, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of EARL SCHEIB,
INC. (the "Company") will be held in the Hana Room at the Hotel Nikko located at
465 S. La Cienega Boulevard, Los Angeles, California on Friday, September 4,
1998 at 10:00 a.m., for the following purposes:
(1) To elect six directors, each for a term of one year and until their
successors shall have been duly elected and qualified.
(2) To approve an amendment to the 1994 Performance Employee Stock Option Plan.
(3) To transact such other business as may properly come before the meeting and
any adjournments thereof.
Only shareholders of record at the close of business on July 15, 1998 are
entitled to notice of and to vote at the Annual Meeting of Shareholders or any
adjournments thereof.
Your attention is called to the Proxy Statement and accompanying Proxy Card. You
are requested, whether or not you plan to be present at the meeting, to sign,
date and return the Proxy Card in the enclosed envelope, to which no postage
need be affixed if mailed in the United States. If you attend the Annual
Meeting, you may withdraw your proxy and vote your own shares at the meeting.
A copy of the 1998 Annual Report of the Company accompanies this Notice but is
not a part of the proxy solicitation material.
By order of the Board of Directors
/S/ DAVID I. SUNKIN
David I. Sunkin
Vice President & General
Counsel, Secretary
Beverly Hills, California
July 27, 1998
IT IS IMPORTANT THAT ALL SHAREHOLDERS BE REPRESENTED AT THE ANNUAL MEETING.
SHAREHOLDERS WHO ARE UNABLE TO ATTEND THE MEETING IN PERSON SHOULD MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD WHICH WILL BE USED AT THE ANNUAL
MEETING. A SELF-ADDRESSED, STAMPED ENVELOPE IS ENCLOSED HEREWITH FOR THAT
PURPOSE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION IS APPRECIATED.
Requests for additional copies of proxy material should be addressed to David I.
Sunkin, Vice President and General Counsel, at the office of the Company, 8737
Wilshire Boulevard, Beverly Hills, California 90211, (310) 652-4880 ext. 160.
Earl Scheib, Inc. is listed and traded on the American Stock Exchange (Symbol
"ESH").
<PAGE> 3
EARL SCHEIB, INC. EARL SCHEIB, INC. [LOGO]
8737 WILSHIRE BOULEVARD
BEVERLY HILLS, CALIFORNIA 90211
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 4, 1998
The accompanying proxy is solicited by the Board of Directors of Earl Scheib,
Inc. (the "Company"), to be used at the Annual Meeting of Shareholders to be
held on Friday, September 4, 1998 and any adjournment thereof (the "Meeting").
Shares represented by valid proxies in the enclosed form will be voted as
specified if executed and received in time for the Meeting. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO BEING VOTED BY DELIVERING WRITTEN NOTICE TO THE
SECRETARY OF THE COMPANY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
This notice of Annual Meeting and Proxy Statement is being mailed to
shareholders on or about July 27, 1998.
VOTING SECURITIES
Only shareholders of record at the close of business on July 15, 1998, are
entitled to notice of and to vote at the Meeting, each share having one vote. In
electing directors, shareholders may vote in favor of all nominees or withhold
their votes as to all nominees or withhold their votes as to specific nominees.
If no specific instructions are given with respect to the matters to be acted
upon, the shares represented by a signed proxy, will be voted FOR the election
of all nominees and FOR the proposal to amend the 1994 Performance Employee
Stock Option Plan. Directors will be elected by a plurality of votes cast by
holders of shares of Common Stock voting in person or by proxy at the Meeting.
Approval of all other proposals will require the affirmative vote of the holders
of a majority of shares of Common Stock voting in person or by proxy at the
Meeting. Broker non-votes will not be included in vote totals and will have no
effect on the outcome of the vote. On the record date, the Company had issued
and outstanding 4,660,182 shares of Common Stock, par value $1.00.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates the number of shares of the Company's Common Stock
beneficially owned as of June 30, 1998, by (i) all persons know to the Company
to own more that 5% thereof, (ii) all directors and nominees for director of the
Company, and (iii) all directors and officers of the Company as a group:
<TABLE>
<CAPTION>
PERCENT OF
NAME OF AMOUNT AND NATURE OUTSTANDING
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(A) SHARES
---------------- -------------------------- -----------
<S> <C> <C>
Dimensional Fund Advisors, Inc............................ 291,500(b) 6.2%
1229 Ocean Avenue, Suite 650
Santa Monica, CA 90401
Gabelli Funds, Inc. and affiliates........................ 1,361,360(c) 29.2%
One Corporate Center
Rye, NY 10580
Christian K. Bement....................................... 241,500(d) 5.1%
Stuart D. Buchalter....................................... 980,000(e)(i) 21%
Philip Wm. Colburn........................................ 24,500(f) *
Alexander L. Kyman........................................ 23,500(g) *
Daniel A. Seigel.......................................... 386,871(h) 8.3%
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PERCENT OF
NAME OF AMOUNT AND NATURE OUTSTANDING
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(A) SHARES
---------------- -------------------------- -----------
<S> <C> <C>
Donald R. Scheib.......................................... 970,000(i) 20.8%
Robert L. Spencer......................................... 23,500(j) *
All directors, nominees for director and officers as a 1,833,487(k) 39.3%
group (9 persons).......................................
</TABLE>
- ---------------
* Indicates ownership of less than 1% of the Company's Common Stock
(a) Except as noted below, each of such beneficial owners exercises sole voting
and investment power over all shares shown. Amounts include shares owned
outright plus shares which could be acquired on or before August 30, 1998.
(b) According to a Securities and Exchange Commission Schedule 13G, dated
February 5, 1997. Dimensional Fund Advisors, Inc. ("Dimensional") a
registered investment advisor, is deemed to have beneficial ownership of all
291,500 shares, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
(c) According to a Securities and Exchange Commission Schedule 13D, dated
December 2, 1997, Gabelli Funds, Inc. and its affiliates hold all such
shares for the benefit of their clients. Gabelli Funds, Inc. claims
beneficial ownership of all 1,361,360 shares except for 9,460 shares owned
by Mario J. Gabelli as an individual.
(d) Includes 41,500 shares owned outright and 200,000 shares which may be
acquired upon the exercise of stock options which are presently exercisable.
(e) Includes 30,000 shares owned outright.
(f) Includes 4,500 shares owned outright and 20,000 shares which may be
acquired upon the exercise of directors stock options which are presently
exercisable.
(g) Includes 3,500 shares owned by a trust of which Mr. Kyman is one of two
trustees and 20,000 shares which may be acquired upon the exercise of
directors stock options which are presently exercisable or which will become
exercisable on or before August 30, 1998.
(h) Includes 136,871 shares owned outright and 250,000 shares which may be
acquired upon the exercise of stock options which are presently exercisable.
(i) Mr. Scheib and Mr. Buchalter are successor co-executors of the estate of
Earl A. Scheib which owns 950,000 shares over which Mr. Scheib and Mr.
Buchalter share investment and voting power. For Mr. Scheib, the amount
also includes 20,000 shares which may be acquired upon the exercise of
stock options which are presently exercisable.
(j) Includes 3,500 shares owned outright and 20,000 shares which may be
acquired upon the exercise of directors stock options which are presently
exercisable.
(k) Includes shares which may be acquired upon the exercise of stock options
which are presently exercisable or which will be come exercisable on or
before August 30, 1998.
ELECTION OF DIRECTORS
Six persons are to be elected to the Board of Directors, each for a term of one
year, commencing on the date of the Meeting and continuing until the Annual
Meeting of Shareholders to be held in 1999 and until their successors have been
duly elected and qualified. The nominees named below will be nominated to serve
until the 1999 Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified. Of the six nominees, Donald R. Scheib
and Stuart D.
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<PAGE> 5
Buchalter, as the successor co-executors for the estate of Earl A. Scheib, and
Daniel A. Seigel may be deemed "controlling persons" of the Company.
The number of directors set to sit on the Board is seven. Inasmuch as six
directors are being elected to the Board, due to the retirement of Mr. Spencer,
a vacancy will result. The Company anticipates that it will fill the vacancy
according to the bylaws during the current fiscal year.
All of the nominees are currently serving as directors of the Company. In the
event that any nominee for director would become unavailable, it is intended
that votes will be cast, pursuant to the enclosed proxy, for such substitute
nominee as may be nominated by the Board of Directors. The Board of Directors
has no present knowledge that any of the persons named will be unavailable to
serve.
INFORMATION CONCERNING DIRECTORS AND NOMINEES TO BOARD OF DIRECTORS
The following table sets forth the principal occupation or employment and
principal business of the employer, if any, of each director and nominee for
director of the Company, as well as his age, business experience, other
directorships held by him and the period during which he has previously served
as director of the Company:
<TABLE>
<CAPTION>
NAME, AGE PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS;
AND PRESENT POSITION OTHER DIRECTORSHIPS; BUSINESS EXPERIENCE
-------------------- ---------------------------------------------
<S> <C>
</TABLE>
Daniel A. Seigel, 56
President and Chief
Executive Officer,
Director
and Nominee A director since November 1994 when Mr. Seigel was
employed as the Company's President and Chief
Executive Officer. From March 1993 through 1994,
Mr. Seigel was President and Chief Executive
Officer of Thrifty Corporation (retail drug stores
and sporting goods). Prior to that and since March
1990, Mr. Seigel served as the President of Thrifty
Corporation. Prior to joining Thrifty Corporation
and since 1986, Mr. Seigel served as President,
Chief Executive Officer and a director of Pacific
Energy, an alternative energy subsidiary of Pacific
Enterprises.
Philip Wm. Colburn, 69
Director and Nominee A director since June 1992, Mr. Colburn has more
than 40 years experience in the automotive
industry. Since March 1988, Mr. Colburn has served
as the Chairman of the Board of Allen Telecom, Inc.
(NYSE), which is a manufacturer of
telecommunications products. From March 1988 to
January 1992, Mr. Colburn also served as the Chief
Executive Officer of Allen Telecom, Inc. Mr.
Colburn is also a Director of Superior Industries
International (OEM wheels and custom auto
accessories), Transpro, Inc. (manufacturer and
supplier of automotive components and systems) and
Spinnaker Industries, Inc. (specialty
adhesive-backed materials). Mr. Colburn is a member
of the Company's Audit Committee and Nominating
Committee and is Chairman of the Compensation
Committee.
Alexander L. Kyman, 68
Director and Nominee A director since August 1994, Mr. Kyman from 1984
to 1992 was President of City National Bank
(commercial bank). From 1992 through 1993, Mr.
Kyman was Vice Chairman of City National Bank. Mr.
Kyman is a Director of DEP Corporation (personal
care products). Currently, Mr. Kyman is a business
and financial consultant. Mr. Kyman is a member of
the Company's Audit Committee and Compensation
Committee.
Donald R. Scheib, 62
Chairman of the Board
and Nominee A director since 1966, Mr. Scheib was the President
and Chief Executive Officer of the Company from
1992 through 1994. For more than five years prior
thereto, Mr. Scheib served the Company as its Vice
President, in charge of the Western Region. Mr.
Scheib is a member of the Company's Nominating
Committee.
3
<PAGE> 6
Robert L. Spencer, 80
Director A director since 1990, Mr. Spencer has been for
more than the last five years self-employed with
Spencer Associates which is engaged in merger and
acquisition and financial services consultation.
Mr. Spencer is a member of the Company's Audit
Committee. Pursuant to the Company's Bylaws, Mr.
Spencer will be retiring effective the date of the
Meeting.
Stuart D. Buchalter, 60
Director and Nominee Of counsel, Buchalter, Nemer, Fields & Younger, a
Professional Corporation, California law firm;
Chief Executive Officer (until January 1995),
Chairman of the Board (until June 1995), The Art
Stores, art materials retailer; Chairman of the
Board and Chief Executive Officer, Standard Brands
Paint Company, manufacturer and retailer of paint,
until June 1993; Director, City National Corp.,
(commercial bank holding company); Director,
Authentic Fitness Corp., (athletic apparel
manufacturer and retailer); Director, Faroudja,
Inc., (manufacturer of video enhancement products).
Mr. Buchalter is Chairman of the Company's Audit
Committee and a member of the Compensation
Committee. Mr. Buchalter is the uncle of David I.
Sunkin, the Company's Vice President & General
Counsel.
Christian K. Bement, 56
Executive Vice President,
Director and Nominee Mr. Bement has served the Company as its Executive
Vice President and Chief Operating Officer since
February 1995 and became a director in 1997. Prior
to that and for over 25 years, Mr. Bement served in
various senior executive positions at Thrifty
Corporation, most recently, from 1990-1994, as
Executive Vice President.
THE BOARD OF DIRECTORS
MEETINGS, ORGANIZATIONS AND REMUNERATION
During the fiscal year ended April 30, 1998, the Board of Directors met four (4)
times. For their services on the Board during the 1998 fiscal year, all
non-employee directors, with the exception of Mr. Scheib, were paid $18,000 as a
retainer which includes compensation for all regular meetings. Non-employee
directors receive an additional $1,000 for each special meeting, if any,
attended in person. Members of the Audit Committee, the Compensation Committee
and the Nominating Committee receive $500 for each meeting attended in person.
Mr. Scheib, the Chairman of the Board of Directors, was paid $36,000 as a
retainer for his services. Each director attended at least 75% of all Board and
applicable committee meetings.
AUDIT COMMITTEE
The Audit Committee recommends to the Board of Directors a firm of independent
certified public accountants to conduct the annual audit of the Company's books
and records; reviews with such accounting firm the scope and results of the
annual audit; reviews the adequacy of the Company's system of internal
accounting controls with such independent accountants; and reviews fees charged
by the independent accountants for professional services.
The Company's independent public accountants are invited to attend meetings of
the Audit Committee and certain members of management may also be invited to
attend. The Audit Committee consists of four non-employee directors, Messrs.
Robert Spencer, Stuart D. Buchalter, who acts as Chairman, Philip Wm. Colburn
and Alexander L. Kyman. The Committee met two (2) times during the fiscal year
ended April 30, 1998.
COMPENSATION COMMITTEE
The Compensation Committee reviews and approves all salary arrangements and
other compensation for officers of the Company. The Compensation Committee
consists of three non-employee directors, Messrs. Philip Wm. Colburn, who acts
as Chairman, Stuart D. Buchalter and
4
<PAGE> 7
Alexander L. Kyman. The Compensation Committee met three (3) times during the
fiscal year ended April 30,1998.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
No member of the Compensation Committee was an officer or employee of the
Company or any of its subsidiaries during the year. None of the executive
officers of the Company has served on the board of directors or on the
compensation committee of any other entity, any of whose officers served either
on the Board of Directors or on the Compensation Committee of the Company.
NOMINATING COMMITTEE
The Nominating Committee, composed of Mr. Scheib and Mr. Seigel, is responsible
for soliciting recommendations for candidates for the Board of Directors;
developing and reviewing background information for candidates; and making
recommendations to the Board regarding such candidates. The Nominating Committee
did not meet during the fiscal year ended April 30, 1998.
EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation paid in the
fiscal year ended April 30 1998 ("Fiscal 1998"), and the two prior fiscal years
to the Company's Chief Executive Officer and the Company's other executive
officers whose disclosure of compensation is required pursuant to the rules of
the Securities and Exchange Commission (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION SECURITIES
NAME AND FISCAL SALARY BONUS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) OPTIONS (#) COMPENSATION
------------------ ------ ------------ ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Daniel A. Seigel............. 1998 250,000 52,250(4) 150,000(3)
President & Chief 1997 250,000 0
Executive Officer(1) 1996 250,000 120,000
Christian K. Bement.......... 1998 170,000 24,948(4)
Executive Vice President & 1997 170,000 0
Chief Operating Officer 1996 170,000 60,000
John D. Branch............... 1998 140,000 21,376(4)
Senior Vice President & 1997 140,000 0 100,000(3)
Chief Financial Officer
David I. Sunkin.............. 1998 98,125 12,098(4)
Vice President & General 1997 90,000 5,000 10,000(3)
Counsel, Secretary(2) 1996 37,500 12,000 20,000(3)
</TABLE>
- ---------------
(1) Mr. Seigel serves the Company pursuant to an employment agreement dated as
of November 18, 1994 which provides for his employment as President and
Chief Executive Officer. Mr. Seigel's annual salary is $250,000 and serves
at the discretion of the Company. Mr. Seigel is entitled to termination
benefits under certain circumstances.
(2) Compensation for the 1996 fiscal year represents five (5) months of service.
Mr. Sunkin is entitled to termination benefits under certain circumstances.
Mr. Sunkin is the nephew of Stuart D. Buchalter, Director of the Company.
5
<PAGE> 8
(3) These shares are issuable upon exercise of stock options granted under the
1994 Performance Employee Stock Option Plan.
(4) Bonus payments disbursed during fiscal 1998 relate to performance during the
last half of fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to option grants to the
Company's Named Executives during Fiscal 1998 and the potential realizable value
of such option grants.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Seigel(1)......... 150,000 98 8.75 3/18/08 825,423 2,091,787
</TABLE>
- ---------------
(1) These options reflect the reload of a portion of Mr. Seigel's previously
granted and exercised options. Please see the "Report of the Compensation
Committee of the Board of Directors on Executive Compensation of the Chief
Executive Officer".
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth below information with respect to previously
granted options which were exercised (if any) or which remain outstanding for
the Named Executives.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE
VALUE OPTIONS AT FY-END(#) MONEY OPTIONS(1)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Seigel........ 150,000 356,250 250,000 150,000 $718,750 $ 75,000
Christian K. Bement..... 0 0 200,000 0 375,000 25,000
John D. Branch.......... 0 0 66,666 33,334 154,166 8,333
David I. Sunkin......... 0 0 13,333 16,667 47,499 43,751(2)
</TABLE>
- ---------------
(1) Value based upon $9.25 closing price per share of Common Stock on April 30,
1998.
(2) Five thousand options currently do not have any value since the exercise
price of those options exceeds the fair market value of the underlying
shares as of April 30, 1998.
TEN-YEAR OPTION REPRICINGS
The following table discloses the repricing of stock options previously granted
to Mr. Seigel.
<TABLE>
<CAPTION>
MARKET
PRICE OF LENGTH OF
STOCK AT EXERCISE PRICE ORIGINAL OPTION
NUMBER OF TIME OF AT TIME OF TERM REMAINING
OPTIONS REPRICING OR REPRICING OR NEW AT DATE OR
REPRICED OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED(#) ($) ($) PRICE AMENDMENT
---- -------- ----------- ------------ -------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Seigel..... 03-18-98 150,000 8.75 6.375 8.75(1) 19 months
President & Chief
Executive Officer 03-12-96 400,000 6.625 5.50(2) 6.375(3) 44 months
</TABLE>
- ---------------
(1) These options reflect the reload of a portion of Mr. Seigel's previously
granted and exercised options. Please see the "Report of the Compensation
Committee of the Board of Directors on Executive Compensation of the Chief
Executive Officer".
6
<PAGE> 9
(2) Exercise Prices for the options varied depending upon when Mr. Seigel
exercised his options as follows:
$5.00/share for the period 11/15/94 - 11/30/95
$5.50/share for the period 12/01/95 - 11/30/96
$6.00/share for the period 12/01/96 - 11/15/97
$6.50/share for the period 11/16/97 - 11/15/98
$7.00/share for the period 11/16/98 - 11/15/99
(3) Repricing occurred as a result of a review and the recommendation of the
Company's Compensation Committee's Compensation Consultant to "fix" the
exercise price of the options to eliminate the potential of an accounting
charge.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Report of the Compensation Committee shall not be deemed incorporated by
reference to any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
The Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") is responsible for administering the executive
compensation plans and programs of the Company including the 1994 Performance
Employee Stock Option Plan and for making recommendations to the Board of
Directors regarding the compensation and benefits provided to the Chief
Executive Officer and the other executive officers. Each member of the
Compensation Committee, whose names are set forth below this report, is an
independent director of the Company.
COMPENSATION POLICIES
The Company's executive compensation programs are designed to:
1. Motivate executive officers to enhance the Company's performance for
the benefit of its shareholders,
2. Reward executives for superior individual contributions to the
achievement of the Company's business objectives, and
3. Align the interests of the Company's executive officers and key
employees with the interests of its shareholders through equity and
performance based compensation programs.
For the Fiscal Year ended April 30, 1998, the key elements of the compensation
program for executive management were base salary, cash bonuses and stock option
grants. The Compensation Committee reevaluates executive compensation
periodically to institute compensation packages which relate in part to overall
Company performance and are similar to compensation packages awarded to similar
positions in the industry. The Compensation Committee has periodically retained
an independent executive compensation consulting firm, Towers-Perrin,
("Compensation Consultant") to evaluate the competitive position and structure
of the Company's executive compensation plans and programs.
BASE SALARY
Base salary levels generally are determined on the Compensation Committee's
assessment of prevailing levels among similarly sized and situated publicly-held
companies. The Compensation Committee also considers other factors, including
the Company's financial performance, the depth of the duties and functions of
each of the Named Executives, the individual executives performance
7
<PAGE> 10
for the year, other benefits available to the Named Executives and the
recommendations of the Company's Chief Executive Officer. The base salary is
deemed to have been appropriate by the Compensation Committee in view of the
value of stock options previously granted and the prior and expected
contributions of the Named Executives to the Company's development.
DISCRETIONARY ANNUAL BONUSES
Discretionary annual bonuses were the only bonus procedure available during
fiscal 1996 for the Named Executives. For fiscal 1997, the Company adopted a
semi-annual performance bonus program described below, which became an annual
program for fiscal 1998. Discretionary annual bonuses were determined based on
the Company's performance during the previous year, focusing particularly on
enhancement of shareholder value, growth in earnings and individual performance.
Discretionary bonuses may still be granted for exceptional individual
performance.
ANNUAL PERFORMANCE BONUS PLAN
The Company utilizes an annual performance bonus plan entitled Management By
Objectives ("MBO"). Under the MBO, annual incentives are established for the
Named Executives, all other executives and certain key employees of the Company.
The actual award is based on Company performance and individual performance, and
may be greater or less than the target annual incentive. If the Company does not
meet a threshold level of performance, no awards may be granted with the
exception of discretionary annual bonuses discussed above. Generally, an
individual's target award is calculated by assigning various weights to
objective performance criteria such as sales increases, profit growth and
individual objectives. During fiscal 1997, the MBO was a semi-annual bonus plan.
Payments made under this Plan are disbursed in the fiscal year following the
fiscal year in which the performance occurred.
EQUITY BASED PLAN
Stock options provide executives with the opportunity to buy and maintain an
equity interest in the Company and to share in the appreciation of the value of
the Company's stock. Stock options only have value if the stock price
appreciates in value from the date the options are granted.
In 1994, the shareholders adopted, and amended in 1996, the Earl Scheib, Inc.,
1994 Performance Employee Stock Option Plan (the "1994 Performance Plan"). The
1994 Performance Plan was adopted to better align the interests of the Company's
management and employees with those of the shareholders. Options will be granted
to key employees who have made and are expected to continue to make valuable
contributions to the Company. Options are typically granted at fair market value
or higher on the date of grant and vest over a three to four year period.
In addition, the shareholders, in 1994, adopted the Earl Scheib, Inc., 1994
Board of Directors Stock Option Plan (the "1994 Directors Option Plan") to
provide an equity based incentive to the Company's non-employee directors. The
1994 Directors Option Plan provides that each independent director shall be
eligible for an initial grant of options to purchase 10,000 shares of Common
Stock at the fair market value on the date of grant and vest over a four year
period. In 1996, the shareholders approved an amendment to the 1994 Directors
Option Plan to further link the interests of the directors with those of the
shareholders by providing the directors an opportunity to receive a grant of an
additional option to purchase four times the number of shares of Company Common
Stock the director purchases on the open market (up to a maximum of an option to
purchase 10,000 shares).
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Pursuant to his employment agreement, Mr. Seigel, the Company's President and
Chief Executive Officer, is paid an annual salary of $250,000 and any bonus
awarded was within the discretion of the Board of Directors.
8
<PAGE> 11
Mr. Seigel was granted stock options to purchase up to 400,000 shares of Common
Stock in November 1994. All of the options granted were originally granted at
exercise prices both below and above the then-current fair market value of the
Common Stock and vest over a two-year period. It was recommended to the
Compensation Committee by the Compensation Consultant and the Company's
independent auditors that the Company and Mr. Seigel amend his Stock Option
Agreement to "fix" the exercise price of the options granted in order to
eliminate the potential of an accounting charge. Mr. Seigel's exercise price, as
described in footnote 2 of the "Ten-Year Option Repricings" table, for all his
options were repriced to $6.375 per share. No other provision of Mr. Seigel's
Stock Option Agreement was amended.
During fiscal 1998, the Committee, in consultation with the Company's
Compensation Consultant, approved the "reload" of Mr. Seigel's original grant of
options in light of the fact that the original options were scheduled to expire
in November 1999. The principal features of a reload are to replace exercised
stock options with a grant of a corresponding amount of new options. At April
30, 1998, the Company had reloaded 150,000 options to Mr. Seigel as disclosed on
the "Option Grants in the last Fiscal Year" table.
In fiscal 1998, Mr. Seigel was awarded a bonus of $52,250 under the MBO for
performance during the last six months of fiscal 1997.
During fiscal 1996, Mr. Seigel was awarded a bonus of $120,000 in consideration
of the Company's improving financial performance and the repositioning of the
organizational structure to intensify focus on shop management and customer
service.
Philip Wm. Colburn, Chairman
Alexander L. Kyman
Stuart D. Buchalter
9
<PAGE> 12
PERFORMANCE GRAPH
The Performance Graph below compares total cumulative return on the Company's
Common Stock, the AMEX Index and the Media General Automotive Parts and
Accessories Industry Index.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
MEASUREMENT PERIOD EARL SCHEIB, INDUSTRY BROAD
(FISCAL YEAR COVERED) INC. INDEX MARKET
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 67.65 117.28 105.79
1995 97.72 113.70 114.50
1996 109.94 133.17 140.07
1997 86.45 151.98 129.98
1998 139.07 207.65 176.54
</TABLE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENT NO. 2 TO 1994
PERFORMANCE EMPLOYEE STOCK OPTION PLAN
At the Annual Meeting, the stockholders are being asked to approve an amendment
to the 1994 Performance Employee Stock Option Plan, as amended, (the "1994
Performance Plan") to increase the number of shares reserved for issuance
thereunder.
PROPOSED AMENDMENT TO THE 1994 PERFORMANCE PLAN
In July 1998, upon the recommendation of the Compensation Committee, the Board
of Directors adopted Amendment No. 2 to the 1994 Performance Plan to increase
the number of shares reserved for issuance from 500,000 to 900,000 shares.
REASONS FOR THE AMENDMENT
The 1994 Performance Plan currently authorizes the issuance of options to
acquire an aggregate of 500,000 shares. As of April 30, 1998, only 3,250 shares
were available for the issuance of additional options under the 1994 Performance
Plan. The Board of Directors considered, among other things, the Company's
reliance primarily on stock options in place of long-term cash based bonuses to
provide long-term incentive compensation to its employees. Furthermore, as
discussed in the "Report of the Compensation Committee of the Board of Directors
on Executive Compensation" the reload of Mr. Seigel's original option grant of
400,000 shares will be accomplished through the 1994
10
<PAGE> 13
Performance Plan necessitating an increase in the number of shares available in
the 1994 Performance Plan.
DESCRIPTION OF THE 1994 PERFORMANCE EMPLOYEE STOCK OPTION PLAN
The principal features of the 1994 Performance Plan, as proposed to be amended,
are outlined below. Copies of the 1994 Performance Plan are available upon
request to the Vice President & General Counsel of the Company, addressed to
8737 Wilshire Boulevard, Beverly Hills, California 90211.
GENERAL
The 1994 Performance Plan was adopted by the Board of Directors in June 1994,
and approved by the shareholders in August 1994. The 1994 Performance Plan is
not qualified under Section 401(a) of the Code (as hereinafter defined) and is
not subject to any provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
PURPOSE
The purpose of the 1994 Performance Plan is to strengthen the Company by
providing to participating employees added incentives for high levels of
performance and to encourage stock ownership in the Corporation. The 1994
Performance Plan seeks to accomplish these goals by providing a means whereby
employees of the Corporation and its subsidiaries may be given an opportunity to
purchase, by way of option, Common Stock of the Corporation. The 1994
Performance Plan is also intended to enable the Corporation and its subsidiaries
to compete effectively for and retain the services of such persons and to
provide incentives for such persons to exert maximum efforts for the success of
the Corporation and its subsidiaries.
The Company intends that the options issued under the 1994 Performance Plan
shall, in the discretion of the Board, or any committee to which responsibility
for administration of all or any part of the 1994 Performance Plan has been
delegated, be either incentive stock options ("Incentive Stock Options") as that
term is used in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor thereto, or options which do not qualify as
incentive stock options ("Non-Qualified Stock Options").
ADMINISTRATION
The Board has delegated administration of the 1994 Performance Plan to its
Compensation Committee ("Committee"). The Committee shall have full power and
authority in its discretion to take any and all action required or permitted to
be taken under the 1994 Performance Plan, including the selection of
participants to whom stock options may be granted, the determination of the
number of shares which may be covered by stock options, the purchase price, and
other terms and conditions thereof.
SHARES RESERVED
There are currently 500,000 shares of Common Stock, par value $1.00 (900,000
shares, if the proposed amendment is adopted), reserved for issuance upon
exercise of options granted under the 1994 Performance Plan. Shares of Common
Stock will be made available from the authorized but unissued shares of the
Company or from shares reacquired by the Company, including shares purchased in
the open market. If any option granted under the 1994 Performance Plan shall for
any reason expire, terminate, be canceled or otherwise be annulled without
having been exercised in full, the shares not purchased under such option shall
again become available for the 1994 Performance Plan.
11
<PAGE> 14
ELIGIBILITY
Key employees, as determined by the Committee, including executive officers, are
eligible to participate in the 1994 Performance Plan. As of the date hereof, the
Company estimates that approximately 100 employees are eligible to participate.
The Company may issue Incentive Stock Options provided that the aggregate fair
market value (determined at the time the Incentive Stock Option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by the optionee during any calendar year (under all Incentive
Stock Option plans of the Company) shall not exceed $100,000. Should it be
determined that any Incentive Stock Option granted pursuant to the 1994
Performance Plan exceeds such maximum, such Incentive Stock Option shall be
considered to be a Non-Qualified Stock Option and not to qualify for treatment
as an Incentive Stock Option under Section 422 of the Code to the extent, but
only to the extent, of such excess.
OPTION PRICE
The exercise price of each Non-Qualified Stock option shall be determined by the
Committee and shall not be less than 100% of the fair market value of the Common
Stock subject to the option on the date the option is granted. The exercise
price of Incentive Stock Options may not be less than 100% of the fair market
value of the Common Stock subject to the option on the date the option is
granted; provided, however, that the purchase price of the Common Stock subject
to the Incentive Stock Option may not be less than 110% of such fair market
value (without regard to any restriction other than a restriction which, by its
terms, will never lapse) where the optionee owns (or is deemed to own pursuant
to Section 424(d) of the Code) Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
subsidiaries. An option shall be exercised by written notice to the Company upon
terms and conditions as the optionee's stock option agreement provides and in
accordance with such other procedures for the exercise of options as the Board
of Directors or Committee may establish from time to time. The purchase price of
Common Stock acquired pursuant to an option shall be paid by such method or
methods as the Committee may determine and may consist of cash or check payable
to the order of the Company, or in whole shares of Common Stock of the Company
owned by the optionee having a fair market value on the exercise date
(determined by the Committee in accordance with any reasonable valuation method)
equal to the option price for the shares being purchased. Payments by Common
Stock shall be made by delivery of Common Stock certificates properly endorsed
for transfer in negotiable form. If other than the optionee, the person or
persons exercising the option shall be required to furnish the Company
appropriate documentation that such person or persons have the full legal right
and power to exercise the option on behalf of and for the optionee.
ADJUSTMENTS UPON CHANGES IN COMMON STOCK; REORGANIZATION, MERGER, CONSOLIDATION
If the outstanding shares of the Common Stock of the Company are increased,
decreased, or changed into, or exchanged for a different number or kind of
shares or securities of the Company, through reorganization, merger,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, an appropriate and proportionate adjustment shall
be made in the number and kind of shares as to which options may be granted. A
corresponding adjustment changing the number or kind of shares and the exercise
price per share allocated to unexercised options, or portions thereof, which
shall have been granted prior to any such change shall likewise be made.
Adjustments shall be made by the Committee whose determination as to what
adjustments shall be made, and the extent thereof, shall be final and
conclusive. No fractional shares of stock shall be issued under the 1994
Performance Plan on account of any such adjustment. Upon the dissolution or
liquidation of the Company, or upon any reorganization, merger or consolidation
of the Company where the Company is the surviving corporation and the
stockholders immediately prior to such transaction do not own at least 80% of
the Company's
12
<PAGE> 15
Common Stock immediately after such transaction, or upon any reorganization,
merger or consolidation of the Company where the Company is not the surviving
corporation, or upon a sale of substantially all of the assets or 50% or more of
the then outstanding Common Stock to another person, corporation or entity,
including any group within the meaning of Regulation 13D promulgated under
Section 13(d) of the Securities Exchange Act of 1934 (any such reorganization,
merger, consolidation, sale of assets, or sale of shares of Common Stock being
hereinafter referred to as the "Transaction"), the 1994 Performance Plan will
terminate provided however that (i) any options granted and outstanding prior
thereto shall become immediately exercisable in full and (ii) the termination of
the 1994 Performance Plan, and exercise of the any option (to the extent that
the holder's right to exercise such option has been accelerated) shall be
concurrent with, subject to and conditioned upon the consummation of the
Transaction to which such termination and acceleration relates, and if, for any
reason, such Transaction is abandoned, exercise of the option shall be void and
such option shall thereafter be exercisable only as permitted by the 1994
Performance Plan and the related option agreement which shall remain in full
force and effect.
VESTING
The Committee shall determine vesting periods, if any, for options granted under
the 1994 Performance Plan.
EXPIRATION, TERMINATION AND TRANSFER OF OPTIONS
Subject to earlier termination as provided in the 1994 Performance Plan, each
Incentive Stock Option granted and all rights or obligations thereunder by its
terms shall expire on such date as the Committee may determine as set forth in
such stock option agreement, but not later than (i) 5 years from the date of
grant in the case of any Incentive Stock Option granted to an optionee who owns
(or is deemed to own pursuant to Section 424(d) of the Code) Common Stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its subsidiaries, and (ii) 10 years from the date
of grant in the case of all other Incentive Stock Options. In the case of
Non-Qualified Options, the term may not exceed 10 years. For purposes of the
1994 Performance Plan, the date of grant of an option shall be the date on which
the Committee takes final action approving the award of the option,
notwithstanding the date the optionee accepts the option, the date of execution
of the option agreement, or any other date with respect to such option. Except
in the event of termination of employment due to death, disability or
termination for "substantial cause" (as defined below), options will terminate
three months after an optionee ceases to be employed by the Company or its
subsidiaries unless the options by their terms were scheduled to terminate
earlier but only as to such number of shares as to which the option was
exercisable on the date of termination. If termination occurs by reason of
disability (as defined in the 1994 Performance Plan) such three month period
shall be extended to one year. If employment is terminated for "substantial
cause," the optionee's right to exercise will terminate at the time notice of
termination is given. Termination for "substantial cause" shall include (i) the
commission of a criminal act against, or in derogation of the interests of the
Company or any of its subsidiaries, (ii) knowingly divulging confidential
information about the Company, (iii) interference with any major customer of the
Company, or (iv) any similar action that the Committee may deem sufficiently
injurious to the interests of the Company. If an employee dies while in the
employ of the Company or within three months after cessation of such employment
(except for "substantial cause"), his or her estate or personal representation
shall have the right to exercise such option before the date such option would
otherwise terminate, but only as to the number of shares as to which such option
was exercisable on the date of death. An option by its terms may only be
transferred by will or by laws of descent or pursuant to a qualified domestic
relations order, and, except as otherwise required pursuant to a qualified
domestic relations order, options shall be exercisable during the lifetime of
the person to whom the option is granted only by such person (or in the case of
disability by his or her court appointed legal representative).
13
<PAGE> 16
In addition, subsequent to the grant of any option, the Committee, at any time
before complete termination of such option, may accelerate the time or times at
which such option may be exercised in whole or in part (without reducing the
term of such option), notwithstanding the provision in the option stating the
time during which the option may be exercised.
TERMINATION AND AMENDMENT OF THE 1994 PERFORMANCE PLAN
The 1994 Performance Plan will terminate in 2004. The 1994 Performance Plan will
also terminate upon liquidation, reorganization, merger or consolidation of the
Company as discussed above. No options may be granted under the 1994 Performance
Plan after it is terminated. No termination, suspension, modification or
amendment of the 1994 Performance Plan may, without the consent of the person to
whom an option shall theretofore have been granted, adversely affect the rights
of such person with respect to such option. No modification, extension, renewal
or other change in any option granted under the 1994 Performance Plan shall be
made after the grant of such option, unless the same is consistent with the
provisions of the 1994 Performance Plan. With the consent of the holder of an
option and subject to the terms and conditions of the 1994 Performance Plan, the
Committee may amend outstanding stock option agreements with any optionee,
including, without limitation, any amendment which would (i) accelerate the time
or times at which the option may be exercised and/or (ii) extend the scheduled
expiration date of the option.
The 1994 Performance Plan may be amended by the Board of Directors at any time,
and from time to time. However, except as otherwise provided in the 1994
Performance Plan, no amendment shall be effective unless approved by the
stockholders if the amendment: (a) increases the number of shares reserved for
options under the 1994 Performance Plan; (b) materially modifies the
requirements as to eligibility for participation in the 1994 Performance Plan;
or (c) materially increases the benefits accruing to participants under the 1994
Performance Plan; (d) changes the purchase price for Incentive Stock Options, or
(e) otherwise materially increases the benefits to guarantees under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is only a summary of the principal federal income tax
consequences of the options and rights to be granted under the 1994 Performance
Plan, and is based on existing federal law (including administration,
regulations and rulings) which is subject to change, in some cases
retroactively. This discussion is also qualified by the particular circumstances
of individual optionees, which may substantially alter or modify the federal
income tax consequences herein discussed. Each employee should consult his or
her tax advisor with respect to the specific tax consequences of his or her
participation in the 1994 Performance Plan.
Generally, under present law, when an option qualifies as an Incentive Stock
Option under Section 422 of the Code: (i) an optionee will not realize taxable
income either upon the grant or by the exercise of the option, (ii) any gain or
loss upon a qualifying disposition of the shares acquired by the exercise of the
option will be treated as capital gain or loss, and (iii) no deduction will be
allowed to the Company for federal income tax purposes in connection with the
grant or exercise of an Incentive Stock Option or a qualifying disposition of
the shares. A disposition by an optionee of Common Stock acquired upon exercise
of an Incentive Stock Option will constitute a qualifying disposition if it
occurs more than two years after the grant of the option, and one year after the
transfer of the shares of the optionee. If such Common Stock is disposed of by
the optionee before the expiration of those time limits, the transfer would be a
"disqualifying disposition" and the optionee, in general, will recognize
ordinary income equal to the lesser of (i) the aggregate fair market value of
the shares, as of the date of exercise less the option price, or (ii) the amount
realized on the disqualifying disposition less the option price. Ordinary income
from a disqualifying disposition will constitute ordinary compensation income.
Any gain in addition to the amount reportable as ordinary income on a
"disqualifying disposition" generally will be capital gain.
14
<PAGE> 17
Capital gain recognized by an optionee on shares held more than one year but
less than 18 months prior to disposition will be taxable at a maximum rate of
28%; capital gains recognized on shares held for more than 18 months will be
taxable at a maximum rate of 20%.
Upon the exercise of an Incentive Stock Option, the difference between the fair
market value of Common Stock on the date of exercise and the option price
generally is treated as an adjustment to taxable income in that taxable year for
alternative minimum tax purposes, as are a number of other items specified by
the Code. Such adjustments (along with tax preference items) form the basis for
the alternative minimum tax (presently at the rate of 26% on the first $175,000
of alternative minimum taxable income and 28% on amounts in excess of $175,000
for individuals), which may apply depending on the amount of the computed
"regular tax" of the employee for that year. Under certain circumstances the
amount of alternative minimum tax is allowed as a carry forward credit against
regular tax liability in subsequent years.
In the case of stock options which do not qualify as an Incentive Stock Option
(Non-Qualified Stock Options), no income generally is recognized by the optionee
at the time of the grant of the option. Under present law the optionee generally
will recognize ordinary income at the time the Non-Qualified Stock Option is
exercised equal to the aggregate fair market value of the shares acquired less
the option price. Ordinary income from a Non-Qualified Stock Option will
constitute compensation for which withholding may be required under federal and
state law.
Subject to special rules applicable when an optionee uses Common Stock of the
Company to exercise an option, shares acquired upon exercise of a Non-Qualified
Stock Option will have a tax basis equal to their fair market value on the
exercise date or other relevant date on which ordinary income is recognized and
the holding period for the shares generally will begin on the date of exercise
or such other relevant date. Upon subsequent disposition of the shares, the
optionee generally will recognize capital gain or loss. Provided the shares are
held by the optionee for more than one year prior to disposition, such gain or
loss will be long-term capital gain or loss.
The Company will generally be entitled to a deduction equal to the ordinary
income (i.e., compensation) portion of the gain recognized by the optionee in
the case of a "disqualifying disposition" of an Incentive Stock Option or in
connection with the exercise of a Non-Qualified Stock Option provided the
Company complies with any withholding requirements of federal and state law.
Federal income tax laws limit to $1,000,000 the annual amount publicly held
corporations may deduct for reasonable compensation paid to certain executive
officers (including compensation attributable to stock options) if such
reasonable compensation does not qualify as "performance based compensation" or
compensation paid on a "commission basis." The $1,000,000 limitation is
determined for each executive officer to which the deduction applies.
If, as a result of certain changes in control of the Company, certain employee
options become immediately excercisable, the additional economic value
attributable to the acceleration may be deemed an "excess parachute payment" to
the extent the additional value (when combined with the value of other change of
control payments) equals or exceeds 300% of the employee's average annual
taxable compensation over the five calendar years preceding the change of
control. Any such excess over the employee's average annual taxable compensation
will be subject to a 20% excise tax. To the extent that an excess parachute
payment is not deductible and is paid to an executive officer whose compensation
is subject to the $1,000,000 deduction limitation rules, the $1,000,000
deduction limitation is reduced by such amount, but not below zero.
This is only a summary of the effect of the United States federal income
taxation. It does not purport to be complete and does not discuss the income tax
laws of any municipality, state or other country. Optionees should consult with
their own tax advisors regarding the tax consequences arising from the receipt
and exercise of Options and the disposition of Common Stock issued upon exercise
of Options.
15
<PAGE> 18
RESTRICTION ON RESALE
Certain directors and officers may be deemed to be "affiliates" as that term is
defined under the Securities Act of 1933, as amended (the "Act"). Common Stock
acquired under the Performance Plan by an affiliate may only be reoffered or
resold under an effective registration statement, under Rule 144 or under
another exemption from the registration requirements of the Act.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast at the Meeting will be
required to approve the amendment to the 1994 Performance Plan.
RECOMMENDATION
The Board of Directors has unanimously approved the proposed amendment to the
1994 Directors Option Plan and recommends that the shareholders vote for such
amendment.
SECTION 16(A) REPORTING DELINQUENCIES
Under federal securities laws and rules of the Securities and Exchange
Commission, directors and executive officers of the Company, as well as persons
holding more than 10% of the Company's outstanding shares of Common Stock, are
required to file reports showing their initial ownership of the Company's Common
Stock and any subsequent changes in that ownership with the Securities and
Exchange Commission and the American Stock Exchange by certain specified due
dates. Based solely on the Company's review of copies of such reports furnished
to the Company and written representations that no other reports were required
to be filed, during fiscal 1998, all such reports that were required were filed
on a timely basis, with the exception of Christian Bement, who filed a
delinquent Form 5 in June, 1998, which was due in June, 1996.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholders of record who wish to have their proposals considered for inclusion
in the Company's Proxy Statement for the 1999 Annual Meeting of Shareholders
should deliver such proposals in writing to the Company, addressed as follows:
Earl Scheib, Inc., 8737 Wilshire Boulevard, Beverly Hills, California 90211,
Attention: David I. Sunkin, Vice President and General Counsel. Such proposals
must be received by the Company at the foregoing address no later than March 27,
1999 to be considered for inclusion in the Company's Proxy Statement and form of
Proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors is not aware of any matter which may properly be
presented for action at the Meeting other than the matters set forth herein,
but, should any other matter requiring a vote of the shareholders arise, it is
intended that the proxies in the accompanying form will be voted in respect
thereof in accordance with the best judgment of the person or persons voting the
proxies, discretionary authority to do so being included in the proxy, in the
interests of the Company.
PROXIES AND SOLICITATIONS
Proxies for the Meeting are being solicited by mail directly and through
brokerage and bank institutions. The Company will pay all expenses in connection
with the solicitation of proxies. In addition to the use of the mails, proxies
may be solicited by directors, officers and regular employees of the Company
personally, by telephone, or by telegraph. The Company does not expect to pay an
fees or compensation for the solicitation of proxies but may reimburse brokers
and other persons who hold stock in their names, or in the names of nominees,
for their expenses in sending proxy material to principals and obtaining their
proxies.
16
<PAGE> 19
AVAILABILITY OF FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended April 30,
1998, including the financial statements and schedules thereto, as filed with
the Securities and Exchange Commission, will be furnished to shareholders upon
written request without charge. A copy may be requested by writing to David I.
Sunkin, Vice President and General Counsel, Earl Scheib, Inc., 8737 Wilshire
Boulevard, Beverly Hills, California 90211.
By order of the Board of Directors
/S/ DAVID I. SUNKIN
David I. Sunkin
Vice President & General Counsel,
Secretary
Beverly Hills, California
July 27, 1998
17
<PAGE> 20
PROXY EARL SCHEIB, INC.
Solicited on behalf of the Board of Directors of EARL SCHEIB, INC. (the
"Company") for use at the Annual Meeting of Shareholders (the "Meeting") to be
held on September 4, 1998 at 10:00 A.M., at The Hotel Nikko, 465 S. La Cienega
Boulevard, Los Angeles, California.
The undersigned hereby appoints John D. Branch and David I. Sunkin, or
either one of them, as proxies, with full power of substitution, to vote all
shares of Common Stock of the Company held of record by the undersigned on July
15, 1998 at the Meeting or at any adjournments thereof, on the proposal set
forth below and in their discretion upon such other business as may properly
come before the Meeting.
The Board of Directors recommends a vote FOR all nominees listed in Proposal
1 and TO APPROVE Proposal 2.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ]WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below.
</TABLE>
Christian K. Bement Stuart D. Buchalter Philip Wm. Colburn Alexander L. Kyman
Donald R. Scheib Daniel A. Seigel
(INSTRUCTION: To withhold authority for any individual write that nominee's name
on the line provided below)
- --------------------------------------------------------------------------------
2. Approve amendment to the 1994 Performance Employee Stock Option Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign and date on reverse side)
<PAGE> 21
(Continued from the front side of card)
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting. This Proxy, when properly
executed, will be voted in the manner directed by the undersigned
shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2. All proxies heretofore
given by the undersigned are hereby revoked. Receipt of the Proxy Statement
dated July 27, 1998 is acknowledged.
Please mark, sign, date and return this Proxy in the accompanying prepaid
envelope.
Date:
- -------------------------------------------------------------------------------,
1998
-------------------------------
(Signature)
-------------------------------
(Signature)
Please sign exactly as your
name appears hereon. When
signing as attorney, executor,
administrator, trustee,
guardian or corporate officer,
please include full title.
