<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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(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
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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(4) Date Filed:
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<PAGE> 2
EARL SCHEIB, INC. [EARL SCHEIB 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 Thursday, September 2,
1999 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 ratify the appointment of Arthur Andersen, LLP, as the Company's
independent auditors for the fiscal year ended April 30, 1999.
(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 16, 1999 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 1999 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 29, 1999
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 LOGO]
8737 WILSHIRE BOULEVARD
BEVERLY HILLS, CALIFORNIA 90211
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 2, 1999
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 Thursday, September 2, 1999 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 29, 1999.
VOTING SECURITIES
Only shareholders of record at the close of business on July 16, 1999, 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 ratification of the appointment of Arthur Andersen,
LLP, as the Company's independent auditor. 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 4,358,682 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, 1999, by (i) all persons know to the Company
to own more that 5%
<PAGE> 4
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............................ 340,300(b) 7.8%
1229 Ocean Avenue, Suite 650
Santa Monica, CA 90401
Gabelli Funds, Inc. and affiliates........................ 1,647,160(c) 37.8%
One Corporate Center
Rye, NY 10580
Christian K. Bement....................................... 261,500(d) 6%
Stuart D. Buchalter....................................... 658,000(e)(j) 15.1%
Philip Wm. Colburn........................................ 74,500(f) 1.7%
David Eisenberg........................................... 2,500(g) *
Alexander L. Kyman........................................ 23,500(h) *
Daniel A. Seigel.......................................... 211,871(i) 4.9%
Donald R. Scheib.......................................... 630,000(j) 14.4%
All directors, nominees for director and officers as a
group (10 persons)...................................... 1,273,537 29.2%
</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, 1999.
(b) According to a Securities and Exchange Commission Schedule 13G, dated
February 11, 1999. Dimensional Fund Advisors, Inc. ("Dimensional"), an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940, furnishes investment advice to four investment companies
registered under the Investment Company Act of 1940, and serves as
investment manager to certain other investment vehicles, including
commingled group trusts, (these investment companies and investment vehicles
are the "Portfolios"). In its role as investment advisor and investment
manager, Dimensional possesses both voting and investment power over the
securities of the Company that are owned by the Portfolios. Dimensional
disclaims beneficial ownership of such securities.
(c) According to a Securities and Exchange Commission Schedule 13D, dated June
4, 1999, Gabelli Funds, Inc. and its affiliates hold all such shares for the
benefit of their clients. Gabelli Funds, Inc. claims beneficial ownership of
all 1,647,160 shares except for 9,460 shares owned by Mario J. Gabelli as an
individual.
(d) Includes 41,500 shares owned outright and 220,000 shares which may be
acquired upon the exercise of stock options which are presently exercisable.
(e) Includes 28,000 shares owned outright.
(f) Includes 4,500 shares owned outright, 20,000 shares which may be acquired
upon the exercise of directors stock options and 50,000 shares which may be
acquired upon the exercise of employee stock options which are presently
exercisable.
(g) Owned by a trust of which Mr. Eisenberg is one of two trustees.
(h) Includes 1,000 shares owned by a trust of which Mr. Kyman is one of two
trustees, 2,500 shares in an Individual Retirement Account and 20,000 shares
which may be acquired upon the exercise of directors stock options which are
presently exercisable.
(i) Includes 136,871 shares owned outright and 75,000 shares which may be
acquired upon the exercise of stock options which are presently
exercisable.
2
<PAGE> 5
(j) Mr. Scheib and Mr. Buchalter are successor co-executors of the estate of
Earl A. Scheib which owns 630,000 shares over which Mr. Scheib and Mr.
Buchalter share investment and voting power.
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 2000 and until their successors have been
duly elected and qualified. The nominees named below will be nominated to serve
until the 2000 Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified. Of the six nominees, Stuart D.
Buchalter, as the successor co-executor for the estate of Earl A. Scheib, and
Christian Bement 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. Scheib, a
vacancy will result.
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>
Philip Wm. Colburn, 70 A director since June 1992, Mr. Colburn was elected Chairman
Chairman of the Board of the Board of the Company effective January 1, 1999. Mr.
and Nominee 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), and Transpro, Inc.
(manufacturer and supplier of automotive components and
systems).
Christian K. Bement, 57 Mr. Bement became President and Chief Executive Officer on
President and Chief January 1, 1999. Mr. Bement previously served the Company as
Executive Officer, its Executive Vice President and Chief Operating Officer
Director and Nominee 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.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME, AGE PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS;
AND PRESENT POSITION OTHER DIRECTORSHIPS; BUSINESS EXPERIENCE
-------------------- ---------------------------------------------
<S> <C>
Stuart D. Buchalter, 61 Stuart Buchalter has served as a director of the Company
Director since 1997. Mr. Buchalter has been Of Counsel with the
California law firm of Buchalter, Nemer, Fields & Younger, a
Professional Corporation, since August 1980. He has been an
officer of East-West Capital Associates, Inc., a venture
capital firm, since February 1996. From August 1980 to June
1993, he served as Chairman of the Board of Directors and
Chief Executive Officer of Standard Brands Paint Company, a
paint retailer and manufacturer. Mr. Buchalter is a director
of Authentic Fitness Corp., an athletic apparel
manufacturer, City National Corp., the holding company for
City National Bank, e4L, Inc., (formerly National Media
Corporation), a direct response marketing company, and
Faroudja, Inc., video imaging enhancement. He is also
Vice-Chairman of the Board of Trustees of Otis College of
Art and Design. Mr. Buchalter is Chairman of the Company's
Audit Committee and member of the Compensation Committee.
Mr. Buchalter is the uncle of David I. Sunkin, the Company's
Vice President & General Counsel.
David Eisenberg, 63 A director since June, 1999, Mr. Eisenberg is Co-Chairman
Director and Nominee and Chief Executive Officer of Let's Talk Cellular &
Wireless, a retail chain of 260 stores selling cellular and
wireless products, services and accessories. Mr. Eisenberg,
from 1992 - 1998, was Chairman, President & Chief Executive
Officer of Chief Auto Parts, Inc., a national retail auto
parts chain. Prior to that and for 38 years, Mr. Eisenberg
worked for Peoples Drug Stores, Inc., a retail chain of 500
stores, eventually becoming President and Chief Operating
Officer. Mr. Eisenberg is a member of the Company's
Compensation Committee.
Alexander L. Kyman, 69 A director since August 1994, Mr. Kyman from 1984 to 1992
Director and Nominee was President of City National Bank (commercial bank). From
1992 through 1993, Mr. Kyman was Vice Chairman of City
National Bank. Currently, Mr. Kyman is a business and
financial consultant. Mr. Kyman is a member of the Company's
Audit Committee and Chairman of the Compensation Committee.
Donald R. Scheib, 63 A director since 1966, Mr. Scheib was the President and
Director Chief Executive Office 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 and Compensation Committees. Mr. Scheib will
retire from the Board effective on the date of the Annual
Meeting.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME, AGE PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS;
AND PRESENT POSITION OTHER DIRECTORSHIPS; BUSINESS EXPERIENCE
-------------------- ---------------------------------------------
<S> <C>
Daniel A. Seigel, 57 A director since November 1994 when Mr. Seigel was employed
Director and Nominee as the Company's President and Chief Executive Officer. Mr.
Seigel resigned as President and Chief Executive Officer on
December 31, 1998. 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
and Chief Executive Officer of Pacific Energy, an
alternative energy subsidiary of Pacific Enterprises. Mr.
Seigel is a member of the Audit Committee.
</TABLE>
THE BOARD OF DIRECTORS
MEETINGS, ORGANIZATIONS AND REMUNERATION
During the fiscal year ended April 30, 1999, the Board of Directors met seven
(7) times. For their services on the Board during the 1998 fiscal year, all
non-employee directors, with the exception of Mr. Scheib and Mr. Colburn, 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 until January 1, 1999
was paid $36,000 for his services and Mr. Colburn, the Chairman of the Board of
Directors after January 1, 1999 was paid $32,000 for his services. Mr. Colburn
is currently paid $60,000 per year for his services. Upon being elected as an
employee Chairman of the Board, Mr. Colburn was granted an option to purchase
250,000 shares of the Company's common stock. Additionally, Mr. Seigel was paid
$4,500 for his services on the Board which represents the portion of the fiscal
year he was a non-employee director. 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 three non-employee directors, Messrs.
Stuart D. Buchalter, who acts as Chairman, Alexander L. Kyman and Daniel A.
Seigel. The Committee met five (5) times during the fiscal year ended April 30,
1999.
COMPENSATION COMMITTEE
The Compensation Committee reviews and approves all salary arrangements and
other compensation for officers of the Company. The Compensation Committee
consists of four non-employee directors, Messrs. Alexander L. Kyman, who acts as
Chairman, Stuart D. Buchalter, Donald R. Scheib and David Eisenberg. The
Compensation Committee met four (4) times during the fiscal year ended April
30,1999.
5
<PAGE> 8
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 Messrs. Colburn, Kyman and 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, 1999.
EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation paid in the
fiscal year ended April 30 1999 ("Fiscal 1999"), 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.................. 1999 187,500 0
Former President & Chief 1998 250,000 52,250 150,000(5)
Executive Officer(1) 1997 250,000 0
Christian K. Bement............... 1999 190,063 0 100,000
President & 1998 170,000 24,948
Chief Executive Officer(2) 1997 170,000 0
John D. Branch.................... 1999 140,000 0
Senior Vice President & 1998 140,000 21,376
Chief Financial Officer(3) 1997 140,000 0 100,000
David I. Sunkin................... 1999 115,920 12,000 20,000
Vice President & General 1998 98,125 12,098
Counsel, Secretary(4) 1997 90,000 5,000 10,000
James Smith....................... 1999 112,052 0
Vice President 1998 92,334 6,881
1997 90,269 0
</TABLE>
- ---------------
(1) Mr. Seigel served the Company as an employee through January 31, 1999
although he resigned from his officer position on December 31, 1998.
(2) Mr. Bement served as President and Chief Executive Officer commencing
January 1, 1999 at an annual salary of $220,000. Prior to that, Mr. Bement
served as Executive Vice President and Chief Operating Officer. Mr. Bement
is entitled to termination benefits under certain circumstances.
(3) Mr. Branch resigned his officer positions effective May 3, 1999 and
currently serves the Company pursuant to a Consulting Agreement through July
31, 1999.
(4) Mr. Sunkin is entitled to termination benefits under certain circumstances.
Mr. Sunkin is the nephew of Stuart D. Buchalter, a director of the Company.
(5) The options have been cancelled.
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to option grants to the
Company's Named Executives during Fiscal 1999 and the potential realizable value
of such option grants.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Christian K. Bement......... 100,000 19.9 5.375 11/25/08 330,170 836,175
David I. Sunkin............. 20,000 4 5.125 12/30/08 64,462 163,359
</TABLE>
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 OPTIONS VALUE OF UNEXERCISED
ON VALUE AT FY-END(#) IN-THE MONEY OPTIONS(1)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Seigel(2).... 0 0 75,000 0 0 0
Christian K. Bement.... 0 0 200,000 100,000 0 0
John D. Branch(3)...... 0 0 100,000 0 0 0
David I. Sunkin........ 0 0 21,666 28,334 0 2,500
James Smith............ 0 0 16,000 7,000 3,750 0
</TABLE>
- ---------------
(1) Value based upon $5.25 closing price per share of Common Stock on April 30,
1999.
(2) Effective on his resignation date, Mr. Seigel relinquished 350,000
previously granted and vested options.
(3) All of these options terminate in October, 1999.
TEN-YEAR OPTION REPRICINGS
The following table discloses the repricing of stock options previously granted
to Mr. Seigel.
<TABLE>
<CAPTION>
MARKET PRICE LENGTH OF
OF STOCK AT EXERCISE PRICE ORIGINAL OPTION
NUMBER OF TIME OF AT TIME OF TERM REMAINING
OPTIONS REPRICING OR REPRICING OR NEW AT DATE OR
REPRICED OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED(#) ($) ($) 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
Former President & 03-12-98 400,000 6.625 5.50(2) 6.375(3) 44 months
Chief Executive Officer
</TABLE>
- ---------------
(1) These options reflected the reload of a portion of Mr. Seigel's previously
granted and exercised options. As noted in the previous table, Mr. Seigel
relinquished 350,000 options effective on his resignation date. 50,000 of
the remaining options terminate in November 1999.
7
<PAGE> 10
(2) Exercise Prices for the options varied depending upon when Mr. Seigel
exercised his options as follows:
<TABLE>
<S> <C> <C>
$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
</TABLE>
(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, 1999, 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 previously retained an
independent executive compensation consulting firm ("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 for the
year, other benefits available to the Named Executives and the recommen-
8
<PAGE> 11
dations 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 granted and the prior and expected contributions of the Named
Executives to the Company's development.
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 below. 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
which became an annual program for fiscal 1998 and thereafter. Payments made
under this Plan are earned and made in the fiscal year following the fiscal year
in which the performance occurred.
DISCRETIONARY ANNUAL BONUSES
Discretionary bonuses may be granted by the Company to executive officers for
exceptional individual performance.
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 typically 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).
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COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Bement was elected President and Chief Executive Officer on January 1, 1999.
Mr. Bement previously served the Company as its Executive Vice President and
Chief Operating Officer at an annual salary of $170,000. As a result of Mr.
Bement's promotion and increase in duties and responsibilities, the Committee
increased his salary to $220,000 and granted him stock options to purchase up to
an additional 100,000 shares of Common Stock. All of the options were granted at
the closing price of the Common Stock on the American Stock Exchange on the date
of Mr. Bement's election and vest over a 30-month period. Mr. Bement
participates in the MBO to the same extent as the prior CEO.
Mr. Bement serves the Company in an "at-will" capacity pursuant to an Employment
Agreement which provides for termination benefits under certain circumstances.
Alexander L. Kyman, Chairman
Stuart D. Buchalter
David Eisenberg
Donald R. Scheib
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<PAGE> 13
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>
EARL SCHEIB AUTO PARTS AMEX MARKET INDEX
----------- ---------- -----------------
<S> <C> <C> <C>
'1994' 100.00 100.00 100.00
'1995' 144.44 96.94 108.23
'1996' 162.50 113.54 132.40
'1997' 127.78 129.59 122.86
'1998' 205.56 177.05 166.88
'1999' 116.67 161.19 154.67
</TABLE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has appointed the firm of Arthur Andersen, LLP to serve as
independent auditors of the Company for the fiscal year ended April 30, 1999,
subject to ratification of this appointment by the shareholders of the Company.
Arthur Andersen, LLP is considered by management of the Company to be well
qualified. The Company has been advised by that firm that neither it nor any
member thereof has any financial interest, direct or indirect, in the Company or
any of its subsidiaries in any capacity.
One or more representatives of Arthur Andersen, LLP will be present at the
Meeting, will have an opportunity to make a statement if he or she desires to do
so and will be available to respond to appropriate questions.
Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the votes cast by the holders of the shares of
Common Stock of the Company voting in person or by proxy at the Meeting. If the
Shareholders should not ratify the appointment of Arthur Andersen, LLP, the
Board of Directors will reconsider the appointment.
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<PAGE> 14
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN, LLP AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE 1999 FISCAL YEAR. PROXIES RECEIVED BY THE BOARD OF DIRECTORS
WILL BE SO VOTED UNLESS SHARE OWNERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
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 1999, all such reports that were required were filed
on a timely basis.
CHANGES IN COMPANY'S CERTIFYING ACCOUNTANT
The Company, effective April 20, 1999, dismissed Deloitte & Touche, LLP,
independent auditors, as its principal independent accountant. The dismissal was
recommended by the Audit Committee of the Board of Directors.
Deloitte & Touche, LLP's report on the Company's financial statements for either
of the past two years did not contain an adverse opinion or disclaimer of
opinion, nor was the report qualified or modified as to uncertainty, audit scope
or accounting principles.
Effective April 22, 1999, following the recommendation of the Audit Committee,
the Company engaged Arthur Andersen, LLP, independent public accountants, as its
new principal independent accountant to audit the Company's financial
statements. The Company did not consult Arthur Andersen, LLP during its two most
recent fiscal years with regard to any of the matters described in Item
304(a)(2) of Regulation S-K.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholders of record who wish to have their proposals considered for inclusion
in the company's Proxy Statement for the 2000 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 29,
2000 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
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<PAGE> 15
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.
AVAILABILITY OF FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended April 30,
1999, 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 29, 1999
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<PAGE> 16
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 2, 1999 at 10:00 A.M., at The Hotel Nikko, 465 S. La Cienega
Boulevard, Los Angeles, California.
The undersigned hereby appoints John K. Minnihan 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
16, 1999 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 David
Eisenberg Alexander L. Kyman Daniel A. Seigel
(INSTRUCTION: To withhold authority for any individual write that nominee's name
on the line provided below)
- --------------------------------------------------------------------------------
(Please sign and date on reverse side)
<PAGE> 17
2. Ratification of the appointment of Arthur Andersen, LLP as the Company's
independent auditors:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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 29, 1999 is acknowledged.
Please mark, sign, date and return this Proxy in the accompanying prepaid
envelope.
Date: , 1999
--------------------
-------------------------------
(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.
