4
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ACME ELECTRIC CORPORATION
JOHN B. DRENNING, SECRETARY
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:
...................................................................
2) Aggregate number of securities to which transaction applies:
...................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(set forth the amount on which the
filing fee is calculated and state how it was determined):
...................................................................
4) Proposed maximum aggregate value of transaction:
...................................................................
5) Total fee paid:
...................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing. 1) Amount Previously
Paid:
.............................................
2) Form, Schedule or Registration Statement No.:
.............................................
3) Filing Party:
.............................................
4) Date Filed: .............................................
<PAGE>
LETTER TO SHAREHOLDERS
September 16, 1998
Dear Shareholder:
The Annual Meeting of Shareholders of Acme Electric Corporation will be
held at the Buffalo Conference Center, 6 Fountain Plaza, Buffalo, New York,
at 9:00 a.m. on Friday, October 30, 1998. Beverages and pastries will be
served at 8:30 a.m. prior to the Meeting.
We hope that you can attend the Meeting. However, whether or not you
plan to attend, please complete, sign, date and return the accompanying proxy
card as soon as possible. It is important that your shares be represented.
The enclosed envelope requires no postage when mailed within the United
States. If you attend the Meeting, you may revoke your proxy if you wish and
vote personally.
The formal Notice and the Proxy Statement which accompany this letter
contain details of the business to be conducted at the Meeting, including the
election of directors, the approval of the 1998 Stock Option Plan, and ratifica-
tion of the reappointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for 1999. We urge you to read carefully the description
of these proposals in the Proxy Statement and to vote for their adoption.
Sincerely,
/S/
Robert J. McKenna
Chairman, President and CEO
<PAGE>
PROXY CARD
PROXY
ACME ELECTRIC CORPORATION
This Proxy Solicited By The Board of Directors
The undersigned hereby appoints ROBERT J. McKENNA AND MICHAEL A. SIMON,
and each of them, the proxies of the undersigned with full power of
substitution, to vote all shares of stock which the undersigned may be
entitled to vote at the Annual Meeting of the Shareholders of ACME ELECTRIC
CORPORATION to be held Friday, October 30, 1998, at 9:00 a.m. EST at the
Buffalo Conference Center, 6 Fountain Plaza, Buffalo, New York, and at any
adjournment thereof, for the following purposes:
(PLEASE DATE AND SIGN ON THE REVERSE SIDE)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
ACME ELECTRIC CORPORATION
October 30, 1998
Please Detach and Mail In The Envelope Provided
-------------------------------------------------------------------------
_X_ Please mark your votes as in this example.
(1) To elect a board of five directors:
___ FOR all nominees listed at right Nominees:
(except as marked to the contrary below) Robert D. Batting
Robert T. Brady
___ WITHHOLD authority to vote for all Randall L. Clark
nominees listed at right Terry M. Manon
(Instruction: To withhold authority to vote for Robert J. McKenna
any individual nominee, strike a line through
the nominee's name at right.)
(2) To approve the 1998 Stock Option Plan FOR AGAINST ABSTAIN
___ ___ ___
(3) To ratify the reappointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP ___ ___ ___
as independent auditors of the Company;
and
(4) To transact such other business as may properly come before the meeting, or
any adjournment thereof, hereby giving to each of my said proxies, power,
authority and discretion to act as fully as I might do if personally
present. The named proxies, or any of them, shall have and may exercise all
powers hereunder.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS, FOR APPROVAL OF 1998 STOCK OPTION PLAN,
FOR RATIFICATION OF THE REAPPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
Signature __________________ Signature __________________ Dated _____________
NOTE: Please sign exactly as your name appears hereon. When signing as
attorney, executor, administrator, trustee, guardian, or a corporation
official, please give full title. Each joint owner must sign the proxy.
<PAGE>
PROXY STATEMENT
(LOGO)
400 Quaker Road
East Aurora, New York 14052
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 30, 1998
To the Shareholders of
ACME ELECTRIC CORPORATION
The Annual Meeting of Shareholders of Acme Electric Corporation will be
held at 9:00 a.m., Friday, October 30, 1998, at the Buffalo Conference Center,
6 Fountain Plaza, Buffalo, New York, for the following purposes:
1. To elect a board of five directors;
2. To approve the 1998 Stock Option Plan;
3. To ratify the reappointment of PricewaterhouseCoopers LLP as
independent auditors of the Company for 1999; and
4. To transact such other business as may properly come
before the Meeting or any adjournment thereof.
Shareholders of record at the close of business on September 11, 1998,
will be entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
The Board of Directors has authorized the solicitation of proxies. Unless
otherwise directed, the proxies will be voted for the election of the five
persons listed in the attached proxy statement to form the Board of Directors
of the Company, subject to any changes in the nominees as set forth in the
proxy statement; for the approval of the 1998 Stock Option Plan; for the
ratification of the reappointment of PricewaterhouseCoopers LLP as independent
auditors; and on any other business that may properly come before the Annual
Meeting as the named proxies in their best judgment shall decide.
By Order of the Board of Directors
John B. Drenning, Secretary
September 16, 1998
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD, AND PROMPTLY
RETURN IT IN THE ENCLOSED STAMPED ENVELOPE. IF YOU ATTEND THE
MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES
DIRECTLY IF YOU SO DESIRE.
<PAGE>
(LOGO)
400 Quaker Road
East Aurora, New York 14052
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of Acme
Electric Corporation for use at the Annual Meeting of its shareholders to be
held at the Buffalo Conference Center, 6 Fountain Plaza, Buffalo, New York, at
9:00 a.m. on Friday, October 30, 1998, and at any adjournment thereof. This
proxy statement and form of proxy are being mailed to shareholders beginning on
September 16, 1998.
A shareholder returning the enclosed proxy shall have the power to revoke
it in writing at any time before it is voted by notifying Robert J. McKenna or
Michael A. Simon at the offices of the Company at 400 Quaker Road, East Aurora,
New York 14052, and any shareholder attending the Meeting may vote in person
whether or not he or she has filed a proxy. If not revoked, the proxy will be
voted in accordance with its terms.
Where a shareholder specifies a choice with respect to the propositions
set forth in the proxy, his or her shares will be voted in accordance with the
instructions given. If no specific instructions are given, his or her shares
will be voted FOR the election of the nominees for Director of the Company, FOR
approval of the 1998 Stock Option Plan, and FOR the ratification of the
reappointment of PricewaterhouseCoopers LLP as independent auditors. The named
proxies may vote in their discretion upon such other matters as may properly
come before the Meeting. Shares represented at the Meeting by proxy or in
person will be counted for the purpose of establishing a quorum. If shares are
not represented at the Meeting by proxy or in person, they will not be counted
for the purpose of a quorum nor toward the vote required for approval of the
proposals. Votes withheld, abstentions and broker non-votes will be counted
towards the quorum, but will not be counted as votes for or against a proposal.
Proxies will be solicited by mail and may also be solicited by officers
and employees of the Company by telephone or telegraph, without additional
compensation. The Company will request persons, such as banks, brokers,
nominees and fiduciaries, holding stock in their names for others, to forward
proxy material to their principals and request authority for the execution of
the proxies. The Company will reimburse such persons and entities for their
expenses in so doing. The total cost of soliciting proxies on behalf of the
Board of Directors will be borne by the Company.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record at the close of business on September 11, 1998,
will be entitled to vote at the Meeting. As of that date, there were
outstanding 5,056,541 shares of the Common Stock. The holders of Common Stock
are entitled to one vote per share.
The following is the only shareholder owning of record or, to the
knowledge of Management, beneficially, more than five percent (5%) of the
outstanding voting securities of the Company as of August 14, 1998, based upon
information believed to be reliable.
Title of Name and Address Shares Beneficially Percent of
Class of Owner Owned Class
- -----------------------------------------------------------------------
Common Pioneering Management Corporation 500,500(1) 9.81
Stock 60 State Street
Boston, MA
(1) Persons who are officers of Pioneering Management Corporation have sole
voting power and sole dispositive power with respect to these shares.
Proposal Number One
ELECTION OF DIRECTORS
The business and affairs of the Company are managed under the direction of
the Board of Directors elected by the shareholders. The Board has
responsibility for establishing broad corporate policies and for the overall
performance of the Company rather than day-to-day operating details. Members of
the Board of Directors are kept informed of the Company's business by various
reports and documents sent to them monthly, as well as by reports presented at
meetings of the Board and its committees by officers and employees of the
Company and its subsidiaries.
A Board of five Directors is to be elected to serve until the next annual
meeting of shareholders and until their successors have been elected and
qualified. Each nominee was selected on the recommendation of the Nominating
Committee of the Board. All nominees have expressed a willingness to serve as
a Director during the coming year.
All of the nominees named on the following pages were elected to the Board
of Directors at the annual meeting of shareholders held on October 31, 1997.
Unless the proxy is otherwise marked, the proxy shall be voted for election of
these nominees. Directors shall be elected by a plurality of the votes cast at
the Annual Meeting. Votes withheld and broker non-votes will be counted as
being represented at the Meeting, but will not otherwise have an effect on the
outcome of the vote for the election of directors. Withholding an affirmative
vote from a particular nominee will not prevent that person from being elected
to the Board of Directors.
The Management has no reason to believe that any of the nominees will not
be available for election as a Director. However, should any nominees become
unavailable, the proxy may be voted for such other person or persons as shall
be nominated by the Board of Directors following recommendations by the
Nominating Committee.
G. Wayne Hawk has been a member of the Board of Directors since 1980.
Upon attaining 70 years of age, in deference to the Board's policies, Mr. Hawk
has determined not to stand for re-election.
The following information is presented with respect to the nominees for
the office of Director and for all Executive Officers and Directors as a group,
as of August 14, 1998.
NOMINEES FOR ELECTION AS DIRECTORS
Principal Occupation and Business Shares of
Experience During the Past Five Common Stock
Nominee Years and Other Directorships Beneficially Owned
- -----------------------------------------------------------------------------
Robert D. Batting Director, President and Chief Sole Beneficial Ownership:
Age 57 Executive Officer, Kenney 0
Director Since Manufacturing Company, a Shared Beneficial Ownership:
1995 manufacturer of consumer 0
durable/hardware products, Right To Acquire:
since July 1997. Prior 3,355.56
thereto, Vice President and Percent of Class:
General Manager, Brown & .07
Sharpe Manufacturing Co.,
a manufacturer of industrial
measurement devices, since
1995. Prior thereto,
President, Clearing/Niagara,
Inc., a manufacturer of
industrial press equipment,
since 1991.
Robert T. Brady Director, Chairman, President Sole Beneficial Ownership:
Age 57 and Chief Executive Officer, 0
Director Since Moog Inc., manufacturer of Shared Beneficial Ownership
1988 fluid controls for aerospace 300
and industrial applications, Right to Acquire:
since 1996. Director, 12,355.56
Astronics Corporation, M&T Percent of Class:
Bank Corp., Seneca .25
Foods Corp., National Fuel
Gas Corp.
Randall L. Clark Chairman, Dunn Tire Sole Beneficial Ownership:
Age 55 Corporation, tire 1,000
Director Since distribution company, Shared Beneficial Ownership:
1995 since 1996. Principal, 0
Buffalo Ventures, Inc., Right to Acquire:
investment banking company 3,355.56
since 1996. Prior thereto, Percent of Class:
Executive Vice President .09
and Chief Operating Officer,
Pratt & Lambert United, Inc.,
a manufacturer of paints
and chemical products, from
1992 until 1995.
Terry M. Manon Senior Vice President, Air Sole Beneficial Ownership:
Age 47 Handling Products, 0
Director Since Company, manufacturer of Shared Beneficial Ownership
1994 air handling systems, since 0
1996. Prior thereto, Vice Right to Acquire:
President, Air Handling 3,355.56
Systems Division, Trane Percent of Class:
Company, since 1987. .07
Robert J. McKenna Chairman, President and Sole Beneficial Ownership:
Age 50 Chief Executive Officer of 15,045
Director Since Acme Electric Corporation, Shared Beneficial Ownership:
1993 since 1994. Director, *0
Astronics Corp. Right to Acquire:
5,000
Percent of Class:
.39
All Executive Officers Sole Beneficial Ownership: 24,926.00
and Directors as a Shared Beneficial Ownership: 7,072.00
Group (10 Persons) Right to Acquire: **43,922.24
Percent of Class: 1.49
*Does not include 80,000 shares held in the Company's Retirement Plan for
Employees of the Company (see Pension Plan) as to which shares Mr. McKenna has
shared voting and investment powers in his capacity as Chairman of the Pension
Committee.
**Includes shares which are exercisable under the 1981 Incentive Stock Option
Plan, the 1989 Stock Option Plan, and the 1996 Directors' Stock Option Plan.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has appointed from its members Executive, Audit, Compensation
and Nominating Committees which have the responsibilities and authority
described below.
The Executive Committee has, during the interval between meetings of the
Board of Directors, the authority to exercise all the powers of the Board
delegated to it by the Board in the management and direction of the business
and affairs of the Company. Members of this Committee are Messrs. Brady, Clark
and McKenna.
The Audit Committee has the responsibility, among other things, to (i)
recommend the selection of the Company's independent auditors, (ii) review the
adequacy of the audit by the independent auditors, (iii) review the financial
statements which are the subject of the independent auditors' certification,
and (iv) review the effectiveness of the Company's internal auditing
procedures. Members of this Committee are Messrs. Batting, Hawk and Manon.
Two meetings of the Audit Committee were held during fiscal year 1998.
The Compensation Committee has the responsibility, among other things, to
(i) review and make recommendations on the compensation rate for executive
officers of the Company, and (ii) review incentive compensation plans and make
recommendations as to the adoption of these plans. Members of this Committee
are Messrs. Batting, Brady and Clark. Two meetings of the Compensation
Committee were held during fiscal year 1998.
The Nominating Committee has the responsibility, among other things, to
(i) study and make recommendations as to the size and composition of the Board,
(ii) make nominations to the Board prior to the Annual Meeting, and (iii)
search for potential candidates and make recommendations as to candidates for
membership on the Board. Two meetings of the Nominating Committee were held
during fiscal year 1998. Members of this Committee are Messrs. Brady, Clark
and McKenna. The Nominating Committee will consider nominees for the Board
recommended by shareholders. A shareholder wishing to recommend such nominees
for election at the 1999 annual meeting of shareholders should submit such
recommendation in writing to the Committee at the Company's address on or
before May 19, 1999.
Each non-employee member of the Board of Directors receives payments in
the form of stock options under the 1996 Directors' Stock Option Plan. Each
quarter non-employee directors are entitled to receive an option to purchase
shares of the Common Stock of the Company at 30% of the fair market value of
such shares when the option is granted. The number of shares subject to each
option is determined by dividing the nominal amount of quarterly fees of $2,500
by 70% of the fair market value of each share. Fair market value is the
average of the high and low sales prices of a share on the New York Stock
Exchange on the most recent prior trading day. Subject to shareholder approval
of the 1998 Stock Option Plan, options were granted to non-employee directors
on September 1, 1998, as shown in the table of New Plan Benefits on page 19.
During fiscal year 1998, the Board of Directors held four meetings. Each
Director attended 75% or more of the Board meetings and meetings of the
Committees of the Board on which such Director served.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors is made up of only
outside directors and oversees the Company's executive compensation programs.
After consideration of the Committee's recommendations, the full Board of
Directors reviews and approves the salaries of all elected officers. Any
directors who are full-time employees are excused from voting on their own
compensation. The Committee also oversees the other elements of executive
compensation, including annual incentive awards and stock options.
General Philosophy
The philosophy of the Company is that annual compensation should adjust to
Company performance, and long-term incentives should align with creating
shareholder value. The Committee believes that operating criteria should
determine annual cash incentive compensation, and market-based criteria, as
measured by the market price of the Company's Common Stock, are better tied to
performance periods longer than a year. Individual compensation should reflect
operating unit performance for division executives and Company performance for
selected elected officers, with the purpose being to attract and retain
qualified executives.
Salaries
Salaries are based upon a commercially available study of the durable
goods manufacturing sector for companies of a similar size. Salary payments
are primarily intended to reward current and past performance based upon job
experiences and comparison to peers both inside and outside the Company.
Annual Incentive Awards
Annual incentive awards are designed to motivate and reward the individual
for personal contributions to the success of the Company. The Executive
Incentive Plan (EIP) rewards selected elected officers based upon return on
equity. A minimum threshold based on recognized financial return rates, which
incorporate investment risk, must be met before any payments are made. A
percentage of pre-tax earnings above the threshold is distributed as a
percentage of base salary.
The Board of Directors can also make individual awards based on their
assessment of contributions to the tactical and strategic goals set by the
Chief Executive Officer and approved by them at the beginning of the year.
The Management Incentive Plan (MIP) rewards key managers and officers
based upon their respective division's operating profit, net asset utilization
and sales growth. The MIP pays only for improvement and is distributed as a
percentage of base salary. The MIP has a maximum allowable payout of 40% of
salary.
Every other employee of the Company participates in an annual incentive
plan.
Stock Options
Stock options accomplish the objective of further motivating executives to
create shareholder value. Options are reviewed on an annual basis. Options
are granted with an exercise price equal to the closing price of Acme stock on
the day preceding the date of grant, creating recipient value only as the stock
increases in market price. Stock options granted under the 1989 Stock Option
Plan to certain executive officers in fiscal year 1998 are shown in the table
of Option Grants in Last Fiscal Year on page 9. Subject to shareholder
approval of the 1998 Stock Option Plan, options were granted as September 1,
1998, as shown in the table of New Plan Benefits on page19.
Compensation of the Chief Executive Officer
The Chief Executive Officer's salary was determined by the Committee, in
accordance with the above stated philosophy.
An incentive payment was made to the CEO based on fiscal 1998 earnings
exceeding the required return threshold on beginning shareholder equity, as
established by the Board of Directors.
The Committee believes that both annual and long-term compensation
for the last three years reflect this statement on philosophy.
Submitted by the Compensation Committee:
Robert D. Batting Robert T. Brady Randall L. Clark
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compensation
---------------------
- -------
Annual Compensation Awards
Payouts
--------------------------- ---------------------
- -------
Other Restricted Securities
Fiscal Annual Stock Underlying
LTIP All Other
Name and Year Salary Bonus Compensation Award(s) Options
Payouts Compensation
Principal Position End ($) ($)(1) ($)(2) ($) (#)(3)
($)(4) ($)(5)
________________________________________________________________________________
________________________
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
R.J. McKenna 6/30/98 278,000 138,374 --- --- 15,000
- --- 1,566
Chairman/ 6/30/97 262,625 --- --- --- ---
- --- 1,566
President/CEO 6/30/96 250,000 --- --- --- 10,000
- --- 907
D.K. Corwin 6/30/98 155,189 46,347 --- --- 5,000
- --- 1,612
V.President/GM 6/30/97 149,334 --- --- --- ---
- --- 927
Electronics Div. 6/30/96 142,000 --- --- --- 5,000
- --- 669
J.E. Gleason 6/30/98 134,645 53,858 --- --- 5,000
- --- 599
V.President/GM 6/30/97 128,861 --- --- --- ---
- --- 891
Aerospace Div 6/30/96 121,700 6,377 --- --- 5,000
- --- 535
N.T. Arena 6/30/98 130,000 --- --- --- 5,000
- --- 607
V.President/GM 6/30/97 118,861 14,834 --- --- ---
- --- 400
Power Distribution 6/30/96 44,452 --- --- --- ---
- --- ---
Products Division
<FN>
1. Bonuses accrued at June 30 and paid within the subsequent ninety-day period.
2. No individual listed had annual perquisites with aggregate value exceeding
10 percent of salary, plus bonus.
3. All grants were incentive stock options granted under the Company's 1989
Stock Option Plan based on fiscal 1995 and fiscal 1997 Company performance.
4. The Company has no long-term incentive plans.
5. The amounts reflected in this column are the value of group term-life
insurance. The Company has not contributed to any defined contribution
plans.
</FN>
</TABLE>
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed
Annual
Rates of Stock
Price
Appreciation for
Individual Grants
Option Term
--------------------------------------------- -----
- -----------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Price Expiration
Name (#)(1)(2) Year ($/Sh) Date 5% ($)
10% ($)
________________________________________________________________________________
________________________
<S> <C> <C> <C> <C> <C>
<C>
R.J. McKenna 15,000 33.3% $6.34375 08/31/2007 59,843 151,654
D.K. Corwin 5,000 11.1% $6.34375 08/31/2007 19,948 50,551
J.E. Gleason 5,000 11.1% $6.34375 08/31/2007 19,948 50,551
N.T. Arena 5,000 11.1% $6.34375 08/31/2007 19,948 50,551
<FN>
1. The Company does not have a stock appreciation rights plan.
2. Options become exercisable over a period of four years following the date of
grant, in an amount equal to 25% of the total grant following each such
year.
</FN>
</TABLE>
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND F/Y-END OPTION VALUES
<CAPTION>
Shares Acquired Value Number of Unexercised Value of
Unexercised In-the-Money
on Exercise Realized Options at F/Y-End (#) Options at
F/Y-End ($)
Name (#) ($) Exercisable/Unexercisable
Exercisable/Unexercisable
________________________________________________________________________________
___________________
<S> <C> <C> <C> <C>
R.J. McKenna None --- 5,000/20,000
$0/$0
D.K. Corwin None --- 10,500/7,500
$0/$0
J.E. Gleason None --- 5,500/7,500
$0/$0
N.T. Arena None --- 0/5,000
$0/$0
</TABLE>
1. Supplemental Requirement Information:
Shares of Common Stock Beneficially Owned
-----------------------------------------
D.K. Corwin Sole Beneficial Ownership: 0
Shared Beneficial Ownership: 4,962
Right to Acquire: 10,500
Percent of Class: .30
J.E. Gleason Sole Beneficial Ownership: 5,988
Shared Beneficial Ownership: 0
Right to Acquire: 5,500
Percent of Class: .23
N.T. Arena Sole Beneficial Ownership: 0
Shared Beneficial Ownership: 1,810
Right to Acquire: 0
Percent of Class: .04
<PAGE>
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
(GRAPH)
June 93 June 94 June 95 June 96 June 97 June 98
Acme Electric Corp.$100.00 $100.00 $358.82 $ 89.71 $ 77.94 $ 56.61
S & P 500 Index $100.00 $101.41 $127.84 $161.08 $216.98 $282.39
Peer Group (1998) $100.00 $101.79 $175.81 $203.50 $306.66 $321.24
Peer Group (1997) $100.00 $100.91 $167.20 $187.37 $270.12 $274.67
_______________________________________________________________________________
Peer group companies include the S & P Electrical Equipment group, with General
Electric excluded because of its weighted effect, the S & P Electronics
(Instrumentation) group, the S & P Electronics (Semiconductor) group, and the S
& P Electronics (Defense) group. The list of companies comprising the peer
group was updated (identified as Peer Group (1998)) in the current year to
better reflect the businesses and markets in which the Company currently
participates. No significant difference resulted in the five-year trend
comparison between 1997 and 1998 peer groups.
Peer Companies:
Advanced Micro Devices Honeywell Inc. Perkin-Elmer Corp.
AMP Inc. Hubbell Inc. -CL B Raychem Corp.
E-Systems Inc. Intel Corp. SL Industries Inc.
EG&G Inc. Loral Corp. Tektronix Inc.
Emerson Electric Co. Motorola Inc. Texas Instruments Inc.
Hewlett-Packard Co. Nat'l Semiconductor Corp. Thomas & Betts Corp.
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. McKenna has an employment agreement with the Company which provides
for a severance period of six months at full salary should his employment be
terminated, except for good cause. In addition, Messrs. McKenna and Corwin
have agreements providing for continuation of employment in the event of a
change of control for periods of up to three years. Under the agreements,
Messrs. McKenna and Corwin must preserve confidential Company information and
refrain from any activities that may compete with the Company's business. The
terms of these agreements are automatically extended unless either party gives
timely notice to the other of intent to not extend each such agreement. Under
the agreements, Messrs. McKenna and Corwin receive a base salary as determined
by the Board of Directors plus bonus, which amounts may not be reduced during
the term of the agreements.
1989 STOCK OPTION PLAN
Under the 1989 Stock Option Plan (the "1989 Plan"), certain individuals
are granted for a period of up to ten years, beginning with the date of grant,
options to purchase specified amounts of the Company's Common Stock for 100% of
the fair market value of the stock, subject to option, on the day preceding the
grant. Individuals covered by the Plan include executive officers, directors
and other key employees subject to review by the Board of Directors. The
number of shares granted to each individual is also subject to review by the
Board of Directors. An amendment to the 1989 Plan was approved at the annual
meeting of shareholders held on October 28, 1994, to apply a formula for the
award of further options following each year of profitable operation and to
increase the number of shares subject to the Plan from 225,000 to 450,000.
Options in accordance with the formula were last granted as of September 1,
1997.
The Board of Directors is recommending that the shareholders approve a new
plan at the Annual Meeting. See Proposal Number Two -- Approval of the 1998
Stock Option Plan. Upon approval of the 1998 Stock Option Plan, the Board of
Directors intends to cease granting options under the 1989 Plan.
1996 DIRECTORS' STOCK OPTION PLAN
The 1996 Directors' Stock Option Plan (the "1996 Plan") was approved by
the Company's shareholders on October 31, 1996. The purpose of the 1996 Plan
is to facilitate ownership in the Company by non-employee directors of the
Company by providing them with a convenient means to purchase Common Stock of
the Company and, thereby, to share in its progress and success. Currently,
five directors participate in the 1996 Plan.
The grant of options under the 1996 Plan occurs automatically on the first
day of each quarter of a calendar year to each eligible director in lieu of
director fees attributable to service as a director during such quarter. A
total of 50,000 shares of Common Stock are available for grant under the 1996
Plan.
The Purchase Price of each share of Common Stock subject to an option is
equal to 30% of the fair market value (determined as provided in the 1996 Plan)
of a share of Common Stock on the date the option is granted. The number of
shares of Common Stock subject to the option will be equal to the director fees
for the preceding quarter, divided by 70% of the fair market value of a share
of Common Stock on the date the option is granted. The discount amount for the
number of shares granted replaces the value of the cash director fees that
would otherwise be due. Each eligible director will accrue director fees of
$2,500 each quarter for credit toward the grant of options under the 1996 Plan.
An option becomes exercisable in full six months after the date of grant,
and, to the extent not previously exercised, will expire ten years after the
date of grant or, in some cases, earlier pursuant to provisions in the 1996
Plan relating to a director's termination of service.
Each option shall be evidenced by a written option agreement executed by
the Company and the director. Stock must be paid for in full in cash when
purchased upon the exercise of options. Upon exercise, the optionee will
recognize ordinary income in an amount equal to the excess of the fair market
value of the Common Stock over the purchase price, and the Company will be
entitled to a deduction in the same amount.
Options are not transferable other than by will or by the laws of descent
and distribution, or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as amended.
PENSION PLAN
Executive officers of the Company, including those named in the Summary
Compensation Table, are covered by the Retirement Plan for Employees of the
Company ("Pension Plan"). Messrs. McKenna and Corwin are also covered by the
Supplemental Executive Retirement Plan ("Supplemental Plan"). These Plans
provide for regular monthly payments to retirees. Normal retirement age under
the Plans is 65. The Plans also provide for early and disability retirement.
The normal monthly retirement benefit is reduced by up to one-half of one
percent for each month between the date benefits begin and a participant's
normal retirement date in the event of early retirement. The disability
retirement benefit is the benefit accrued by a participant to the disability
retirement date. Benefits are not subject to any deduction for Social Security
or other payments. The cost of the Plans is borne by the Company.
The normal retirement benefit under the Pension Plan is one percent of the
average monthly base salary for each year of credited service at December 31,
1991, plus 1.5 percent of monthly W-2 wages earned in each year of credited
service after December 31, 1991. The Internal Revenue Code of 1986, as
amended, limits the amount of benefits payable under the Pension Plan, as well
as the amount of compensation used to determine those benefits. For benefits
accruing in plan years beginning after 1997, no more than $160,000 (indexed for
inflation) in annual compensation may be taken into account.
The annual monthly retirement benefit under the Supplemental Plan is one-
twelfth of the product of two percent of annual base salary at retirement
multiplied by years of credited service to a maximum of 30 years, less the
benefit payable under the Pension Plan. The benefits of certain individuals
covered by the Supplemental Plan may be subject to limitations. The table
below illustrates the maximum total amount of annual pension payments, computed
on a straight life annuity basis, under both the Pension Plan and the
Supplemental Plan for an employee whose annual base salary at retirement and
years of service are as specified:
Base Salary 10 Years 20 Years 30 Years
at Retirement of Service of Service of Service
$ 55,000 $11,000 $ 22,000 $ 33,000
90,000 18,000 36,000 54,000
140,000 28,000 56,000 84,000
190,000 38,000 76,000 114,000
250,000 50,000 100,000 150,000
300,000 60,000 120,000 180,000
350,000 70,000 140,000 210,000
The term "base salary" used in the above table refers to the column of the
Summary Compensation Table on page 8 labeled "Salary."
For the purpose of determining the pension benefits payable under the
Pension Plan and the Supplemental Plan, estimated years of credited service as
of the end of the calendar year 1997 covered by the Plans for executive
officers named in the Summary Compensation Table are as follows: Mr. McKenna,
5 years; Mr. Corwin, 26 years; Mr. Gleason, 30 years; and Mr. Arena, 2 years.
The estimated annual benefits payable under the Pension Plan upon
retirement at normal retirement age for Messrs. Gleason and Arena are $60,000
and $42,000, respectively. The combined estimated annual benefits payable
under the Pension Plan and the Supplemental Plan upon retirement at normal
retirement age for Messrs. McKenna and Corwin are $115,000 and $93,000,
respectively. The above annual benefits were computed on a straight life
annuity basis and assume continued employment to age 65 with no increase in
compensation covered by the Plans.
Benefits are presently being paid to some individuals covered under the
Supplemental Plan. The Company has purchased, and is the beneficiary of,
insurance on the lives of participants under the Supplemental Plan. The
proceeds of the policies will reimburse the Company for some or all costs,
including Supplemental Plan benefits, insurance premiums and a factor for the
use of the Company's money. It is expected that the Supplemental Plan will aid
the Company in continuing to retain and motivate key employees. Messrs.
McKenna and Corwin will be eligible to receive benefits under the Supplemental
Plan.
EMPLOYEE SAVINGS AND PROTECTION PLAN
Employees of the Company are eligible to participate in the Company's
Employee Savings and Protection Plan on the first of the month following
employment. Under the Plan, participants may contribute up to twelve (12)
percent of their gross earnings for investment in cash, stock and mutual
investment funds. The Company bears the cost of operating the Plan, but does
not make matching contributions.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and change in ownership with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. Directors, officers and greater-than-
10% shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on review of copies
of such reports furnished to the Company and written representations that no
other reports were required, the Company believes that all Section 16(a) filing
requirements applicable to its officer, directors and greater-than-10%
shareholders were complied with during the fiscal year ended June 30, 1998.
Proposal Number Two
APPROVAL OF THE 1998 STOCK OPTION PLAN
On May 11, 1998, the Board of Directors adopted the Acme Electric
Corporation 1998 Stock Option Plan ("Plan"), subject to approval by the
shareholders at this Annual Meeting. The affirmative vote of a majority of the
votes cast with respect to this proposal by the holders of shares of Common
Stock entitled to vote is required for the adoption of the Plan.
The Board of Directors believes that it is in the Company's best interests
to adopt the Plan for several reasons. First, although shares are available
for grant under the 1989 Incentive Stock Option Plan (the "1989 Plan"), the
current option plan, no options may be granted thereunder after August 16,
1999. Second, the 1989 Plan is inflexible in a number of respects. The
Company believes that a competitive stock option plan is essential to attract
and retain outstanding individuals in today's market. Upon approval of the
Plan, the Board of Directors intends to cease granting stock options under the
1989 Plan, which has approximately 231,000 shares available for grant. For the
full text of the Plan, see Exhibit A to this Proxy Statement.
Administration
The Plan will generally be administered by the Compensation Committee
("Committee") of the Board of Directors ("Board") or another committee
designated by the Board. The Committee shall consist of not less than two
members of the Board, each of whom is a "Disinterested Board Member" (as
defined in the Plan). Among the powers granted to the Committee are the
authority to interpret the Plan, establish rules and regulations for its
administration, select key employees of the Company and its subsidiaries to
receive stock options ("Options") under the Plan, determine the form and amount
and other terms and conditions of Options, grant waivers of Plan terms and
conditions, accelerate the vesting, exercise or payment of Options and take all
action it deems advisable for the proper administration of the Plan. The Board
must approve any grant of non-qualified stock options to a non-employee
director and such non-employee director must abstain from voting on such grant.
The Plan authorizes the Committee to delegate its authority and duties under
the Plan, in certain circumstances, to the Chief Executive Officer and other
senior officers of the Company.
Eligibility and Participation
All key employees and non-employee directors of the Company or any of its
80-percent-or-more owned subsidiaries ("Subsidiaries") are eligible to be
selected to participate in the Plan. The selection of Participants from among
key employees is within the discretion of the Committee. The selection of
Participants from among non-employee directors is within the discretion of the
Board.
Amendment of Plan
The Board may suspend or terminate the Plan at any time, and may also
amend the Plan at any time, but any such amendment may be subject to
shareholder approval as may be required by law.
Shares Available for Grant
The Plan authorizes the Committee to grant awards during the period from
August 28, 1998, through August 27, 2008. Subject to equitable adjustment,
500,000 shares of Common Stock of the Company are available for grant under the
Plan. Shares of Common Stock related to Options which terminate by expiration,
forfeiture, cancellation or otherwise without the issuance of shares will again
be available for grant under the Plan. Similarly, shares of Common Stock used
by a Participant with the Committee's consent to pay in full or in part the
purchase price of shares of Common Stock upon exercise of a stock option will
again be available for grant under the Plan.
No one Participant in the Plan may receive Options covering more than
100,000 shares of Common Stock of the Company in any calendar year, subject to
equitable adjustment.
The shares available for issuance under the Plan may be authorized and
unissued shares or treasury shares.
Stock Options
Types of Options
The Plan provides for the grant of Options in the form of incentive stock
options and non-qualified stock options to purchase shares of the Company's
Common Stock. Only non-qualified stock options may be granted to non-employee
directors.
Terms and Purchase Price
Unless the option agreement evidencing the Option ("Option Agreement")
provides otherwise, each Option shall be exercisable in whole or in part. The
Committee (or the Board in the case of an Option granted to a non-employee
director) will, with regard to each Option, determine the number of shares
subject to the Option, the manner and time of the Option's exercise, and the
exercise price per share of Common Stock subject to the Option. In no event,
however, may the exercise price of an Option be less than the fair market value
of the Company's Common Stock on the date of the Option's grant (or 110 percent
of such fair market value in the case of an incentive stock option granted to
any 10 percent shareholder). Unless the Option Agreement provides for a
shorter period, each incentive stock option shall expire on the tenth
anniversary of its date of grant (or on the fifth anniversary of such date in
the case of an incentive stock option granted to any 10 percent shareholder).
Any Option granted in the form of an incentive stock option will satisfy the
applicable requirements in Section 422 of the Internal Revenue Code of 1986, as
amended, (the "Code"). See Federal Income Tax Treatment beginning at page 18
for a discussion of the differing federal tax treatment afforded to incentive
and non-qualified stock options.
Termination of Employment
Unless otherwise determined by the Committee and as otherwise provided in
the Option Agreement, any Option granted to a Participant who is a key employee
and which has not theretofore expired shall expire upon termination of the
Participant's employment with the Company or a Subsidiary, except that upon
termination of employment (other than by death) after the expiration of at
least one full year following grant of the Option or by reason of the
Participant's disability, a Participant may, within three months after the date
of termination of employment, purchase all or part of any shares of Common
Stock which the Participant was entitled to purchase under such Option on the
date of termination of employment. Also, upon the death of any Participant
while employed with the Company or a Subsidiary or within the three-month
period after the date of termination of a Participant's employment, the
Participant's estate or the person to whom the Participant's rights under the
Option are transferred by will or the laws of descent and distribution may,
within one year after the date of the Participant's death (or within one year
after termination of the Participant's employment if death occurs after such
termination), purchase all or part of any shares of Common Stock which the
Participant was entitled to purchase under the Option on the date of death (or
on the date of termination of the Participant's employment if death occurs
after such date).
Cessation of Directorship of Non-Employee Director
Unless otherwise determined by the Board and as otherwise provided in the
Option Agreement, any Option granted to a Participant who is a non-employee
director and which has not theretofore expired shall expire upon the non-
employee director ceasing to serve as a director of the Company or a
Subsidiary, except that upon ceasing to serve as a director (other than by
death) after the expiration of at least one full year following grant of the
Option or by reason of the non-employee director's disability, the non-employee
director may, within three months after the date of such cessation, purchase
all or part of any shares of Common Stock which the non-employee director was
entitled to purchase under such Option on such date. Also, upon the death of a
non-employee director while serving as a director of the Company or a
Subsidiary or within the three-month period after ceasing to be a director of
the Company or a Subsidiary, the non-employee director's estate or the person
to whom the non-employee director's rights are transferred by will or the laws
of descent and distribution may, within one year after the date of the non-
employee director's death (or within one year after the date the non-employee
director ceased serving as a director if death occurs after cessation of
service as a director), purchase all or part of any shares of Common Stock
which the non-employee director was entitled to purchase under the Option on
the date of death (or on the date of cessation of service as a director if
death occurs after such date).
Exercise of an Option
Upon exercise, the exercise price of an Option may be paid by a
Participant in cash, shares of Common Stock, or a combination of both. The
Plan also allows for the so-called "cashless exercise" of Options by payment of
the exercise price using a portion of the shares otherwise receivable upon
exercise of the Option.
Nonassignability
All awards under the Plan may not be transferred (except by will or the
laws of descent and distribution), and during a Participant's lifetime may be
exercised only by the Participant except that the Committee (or the Board in
the case of an Option granted to a non-employee director) may, in its sole
discretion, authorize all or a portion of the nonqualified stock options
granted to a Participant to be on terms which permit the transfer by such
Participant to (i) the Participant's spouse, children, grandchildren, brothers
or sisters ("Immediate Family Members"); (ii) a trust or trusts for the benefit
of one or more of such Immediate Family Members; or (iii) a partnership or
limited liability company in which any of such Immediate Family Members are the
only partners or members, provided that (a) the transfer is approved by the
Committee (or the Board in the case of an Option granted to a non-employee
director) and (b) subsequent transfers of transferred Options are prohibited
(except by will or the laws of descent and distribution). Following transfer,
any such Options continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer and the effects of the
termination of employment of the Participant or termination of the directorship
of a non-employee director shall continue to apply to such Options with respect
to the Participant to whom the Options were granted and following any such
termination shall be exercisable by the transferee only to the extent and for
the periods specified above under "Termination of Employment" or "Cessation of
Directorship of Non-Employee Director," whichever is applicable.
Change in Control
In the event of a Change in Control (as defined in the Plan) all
outstanding, unexpired Options shall become exercisable as of the date of the
Change in Control.
Adjustment of Shares Available
In the event of changes in the Common Stock by reason of a Common Stock
dividend or stock split-up or combination, appropriate adjustment will be made
by the Committee in the aggregate number of shares of Common Stock available
under the Plan, the number of shares of Common Stock with respect to which
Options may be granted to any Participant in any year, and the number of shares
of Common Stock subject to outstanding Options, without change in the aggregate
purchase price to be paid for such shares of Common Stock.
The Plan also provides that in the event of a merger, consolidation,
reorganization of the Company with another corporation, a reclassification of
the Common Stock, a spin-off of a significant asset, or other changes in the
capitalization of the Company, appropriate provision will be made for the
protection and continuation of outstanding Options by either (i) the
substitution of appropriate stock or other securities, or (ii) by appropriate
adjustments, each as set forth under the Plan and as deemed appropriate by the
Committee (or the Board in the case of an Option granted to a non-employee
director).
Federal Income Tax Treatment
The following is a brief summary of the federal income tax aspects of the
Plan, based on existing law and regulations which are subject to change. The
application of state and local income taxes and other federal taxes is not
discussed.
Incentive Stock Options
Generally, a person who is granted an incentive stock option is not
required to recognize taxable income at the time of the grant or at the time of
exercise and the Company is not entitled to a deduction at the time of grant or
at the time of exercise of an incentive stock option. Under certain
circumstances, however, an option holder may be subject to the alternative
minimum tax with respect to the exercise of his incentive stock options.
Generally, the gain realized but not recognized upon the exercise of an
incentive stock option (equal to the difference between the fair market value
of the shares received upon exercise of the incentive stock option and the
purchase price paid for such shares) is included in the option holder's
alternative minimum taxable income and, depending upon the option holder's
overall tax situation, he may be required to pay alternative minimum tax on
such gain.
If an option holder does not dispose of the shares acquired pursuant to
the exercise of an incentive stock option before the later of two years from
the date of grant of the option and one year from the transfer of the shares to
him, any gain or loss realized on a subsequent disposition of the shares will
be treated as long-term capital gain or loss. Under such circumstances, the
Company will not be entitled to any deduction for federal income tax purposes.
An option holder must also own the shares of stock acquired upon exercise of an
incentive stock option for more than eighteen months for the gain or loss
realized on the sale to qualify for the lowest federal income tax rates
currently imposed on certain long-term capital gains.
If an option holder disposes of the shares received upon the exercise of
an incentive stock option either (1) within one year of the transfer of the
shares to him or (2) within two years after the incentive stock option was
granted, the option holder will generally recognize ordinary compensation
income equal to the lesser of (a) the excess of the fair market value of the
shares on the date the incentive stock option was exercised over the purchase
price paid for the shares upon exercise and (b) the amount of gain realized on
the sale. Any gain realized in excess of the compensation income recognized,
and any loss realized, will be long-term or short-term capital gain or loss,
depending upon the length of the period the option holder held the shares. If
an option holder is required to recognize ordinary compensation income as a
result of the disposition of shares acquired on the exercise of an incentive
stock option, the Company, subject to general rules relating to the
reasonableness of the option holder's compensation and the limitation under
Section 162(m) of the Code, will be entitled to a deduction for an equivalent
amount.
If an option holder exercises an incentive stock option by transferring
shares of Company Common Stock to the Company to pay all or part of the
purchase price, the option holder will not recognize gain or loss with respect
to the already owned shares exchanged. The number of shares of stock received
upon exercise of the incentive stock option equal to the number of shares
exchanged will have a basis and holding period equal to the basis and holding
period the option holder had in the shares exchanged. The remaining shares
received will have a basis equal to the cash paid, if any, on the exercise.
Non-Qualified Stock Options
A person who is granted a non-qualified stock option does not have taxable
income at the time of grant, but does have taxable income at the time of
exercise equal to the difference between the purchase price of the shares and
the fair market value of the shares on the date of exercise. Subject to
general rules relating to the reasonableness of the option holder's
compensation and the limitation under Section 162(m) of the Code, the Company
is entitled to a corresponding deduction for the same amount.
If an option holder exercises a non-qualified stock option by transferring
shares of Company Common Stock to the Company to pay all or part of the
purchase price, the option holder will not recognize gain or loss with respect
to the already owned shares exchanged. The number of shares of stock received
upon exercise of the non-qualified stock option equal to the number of shares
exchanged will have a basis and holding period equal to the basis and holding
period the option holder had in the shares exchanged. The fair market value of
the additional shares received will be includible in the option holder's income
upon exercise and the option holder's basis in such shares will equal such
value.
Section 162(m)
Section 162(m) of the Code generally limits to $1 million the amount
of compensation paid to certain "covered employees" of a publicly held
corporation (generally, the corporation's chief executive officer and four most
highly compensated executive officers other than the chief executive officer)
that can be deducted by the corporation for the year. Certain performance-
based compensation, the material terms of which are disclosed to the
corporation's shareholders and approved by a majority vote of the shareholders,
is exempt from the $1 million limitation. Based on regulations promulgated
under Section 162(m), grants of Options to covered employees under the Plan
would appear to qualify for the exemption from the $1 million limitation as
performance-based compensation.
New Plan Benefits
On September 1, 1998, options were granted under the Plan, subject to
shareholder approval of the Plan, to each of the named executive officers and
the groups shown in the following table:
NEW PLAN BENEFITS
Number of Securities (1) (2)
Name and Position Underlying Options Granted Exercise or Base Price
R. J. McKenna 45,000 $4.00
Chairman/President/CEO
D. K. Corwin 10,000 $4.00
Treasurer
Vice President/GM
Electronics Division
J. E. Gleason 10,000 $4.00
Vice President/GM
Aerospace Division
N. T. Arena 10,000 $4.00
Vice President/GM
Power Distribution
Products Division
All current executive 75,000 $4.00
officers as a group
(4 persons)
All non-employee 8,000 $4.00
directors as a group
(4 persons)
All employees, including 22,000 $4.00
all current officers who
are not executive officers,
as a group
1 Options become exercisable in increments of 50% on December 1, 1998, and
September 1, 1999.
2 Fair market value per share of the Company's Common Stock on the date the
option was granted.
It is not determinable at this time what further benefits, if any, each of
the persons or groups eligible to receive grants under the Plan will receive
under the Plan, because grants to key employees under the Plan are at the
discretion of the Committee and grants to non-employee directors are at the
discretion of the Board.
The exercise price of each Option will be determined by the Committee (or
the Board in the case of an Option granted to a non-employee director), but
will not be less than the fair market value of each share of stock issued under
the Plan. The closing price of a share of Common Stock as reported on the New
York Stock Composite Tape on September 1, 1998, was $4.00 per share; and the
aggregate market value of the shares available for issuance under the Plan was
$2,000,000.
VOTE REQUIRED FOR APPROVAL OF THE 1998 STOCK OPTION PLAN
The approval of the Plan will require the affirmative vote of the holders
of a majority of the shares present in person or by proxy and voting at the
meeting. If approved by the shareholders, the plan will become effective as of
August 28, 1998.
The Board of Directors recommends a vote FOR approval of the 1998 Stock
Option Plan. Proxies solicited by the Board of Directors will be so voted
unless shareholders specify otherwise in their proxies.
Proposal Number Three
REAPPOINTMENT OF INDEPENDENT AUDITORS
Subject to shareholder approval, the Board of Directors, upon
recommendation of the Audit Committee, has reappointed the firm of
PricewaterhouseCoopers LLP as independent auditors to examine the Company's
financial statements for its fiscal year ending June 30, 1999.
PricewaterhouseCoopers LLP and its predecessors have served as the Company's
independent auditors for many years.
As in prior years, a representative of PricewaterhouseCoopers LLP will be
present at the Meeting with the opportunity to make a statement and respond to
questions.
VOTE REQUIRED TO RATIFY APPOINTMENT
Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the shares present in person or by proxy and
voting at the Meeting. If the shareholders should not ratify the appointment
of PricewaterhouseCoopers LLP, the Board of Directors will reconsider the
appointment.
The Board of Directors recommends a vote FOR ratification of the
appointment of PricewaterhouseCoopers LLP as independent auditors of the
Company for the 1999 fiscal year. Proxies solicited by the Board of Directors
will be so voted unless shareholders specify otherwise in their Proxies.
PROPOSALS BY SECURITY HOLDERS
Any proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company by May 19, 1999, in
order to be considered for inclusion in the proxy statement and form of proxy
for that meeting.
If a shareholder who intends to present a proposal at the 1999 Annual
Meeting of Shareholders does not notify the Company of such proposal by
February 6, 1999, then management proxies would be allowed to use their
discretionary voting authority to vote on the proposal when the proposal is
raised at the meeting, even though there is no discussion of the proposal in
the 1999 proxy statement.
COST OF SOLICITATION
The Company will pay the expenses of soliciting proxies for the Meeting.
Solicitations of proxies may be made by personal calls upon, or telephone or
telegraphic communications with, shareholders or their representatives by
directors, officers and employees of the Company, none of whom will be
compensated specially for these services.
OTHER MATTERS
The Board of Directors does not know of any other matters that may come
before the Meeting. If any other business is properly presented at the Meeting
for action, the persons named in the proxy will vote thereon according to their
best judgment of such matters.
Shareholders are urged to forward their proxies without delay. A prompt
response will be greatly appreciated.
East Aurora, New York By Order of the Board of Directors
September 16, 1998 John B. Drenning, Secretary
<PAGE>
EXHIBIT A
ACME ELECTRIC CORPORATION
1998 STOCK OPTION PLAN
1. Purpose
The purpose of the Plan is to advance the interests of the Company
and its shareholders by providing a long-term incentive compensation program
that will be an incentive to the Key Employees and Non-Employee Directors of
the Company and its Subsidiaries whose contributions are important to the
continued success of the Company and its Subsidiaries and enhance their ability
to attract and retain in their employ and as directors highly qualified persons
for the successful conduct of their businesses.
2. Definitions
2.1 "Board" means the Board of Directors of the Company.
2.2 "Change in Control" shall be deemed to have occurred at such
time as (i) any "person" within the meaning of Section 14(d) of the Exchange
Act, other than the Company, a Subsidiary, or any employee benefit plan or
plans sponsored by the Company or any Subsidiary, is or becomes the "beneficial
owner", as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 40% or more of the combined voting power of the outstanding
securities of the Company ordinarily having the right to vote at the election
of directors, or (ii) approval by the stockholders of the Company of (a) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of stock of the
Company would be converted into cash, securities or other property, other than
a consolidation or merger of the Company in which the common stockholders of
the Company immediately prior to the consolidation or merger have substantially
the same proportionate ownership of common stock of the surviving corporation
immediately after the consolidation or merger as immediately before, or (b) any
consolidation or merger in which the Company is the continuing or surviving
corporation but in which the common stockholders of the Company immediately
prior to the consolidation or merger do not hold at least a majority of the
outstanding common stock of the continuing or surviving corporation (except
where such holders of common stock hold at least a majority of the common stock
of the corporation which owns all of the common stock of the Company), or (c)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company, or
(iii) individuals who constitute the Board on August 28, 1998 (the "Incumbent
Board") have ceased for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to August 28, 1998
whose election, or nomination for election by the Company's stockholders, was
approved by a vote of at least three-quarters (3/4) of the directors comprising
the Incumbent Board (either by specific vote or by approval of the proxy
statement of the Company in which such person is named as nominee for director
without objection to such nomination) shall be, for purposes of this Plan,
considered as though such person were a member of the Incumbent Board.
2.3 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.4 "Committee" means the Compensation Committee of the Board, or
such other committee designated by the Board, authorized to administer the
Plan. The Committee shall consist of not less than two members of the Board,
each of whom shall be a Disinterested Board Member.
2.5 "Common Stock" means the common stock of the Company.
2.6 "Company" means Acme Electric Corporation.
2.7 "Disinterested Board Member" means a member of the Board who (a)
is not a current employee of the Company or a Subsidiary, (b) is not a former
employee of the Company or a Subsidiary who receives compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
taxable year, (c) has not been an officer of the Company, (d) does not receive
remuneration from the Company or a Subsidiary, either directly or indirectly,
in any capacity other than as a director, and (e) does not possess an interest
in any other transaction, and is not engaged in a business relationship, for
which disclosure would be required pursuant to Item 404(a) or
(b) of Regulation S-K under the Securities Act of 1933, as amended. The term
"Disinterested Board Member" shall be interpreted in such manner as shall be
necessary to conform to the requirements of Section 162(m) of the Code and Rule
16b-3 promulgated under the Exchange Act.
2.8 "Exchange Act" means the Securities and Exchange Act of 1934, as
amended from time to time.
2.9 "Fair Market Value" of a share of Common Stock on any date means
the closing price of a share of Common Stock as reflected in the report of
consolidated trading of New York Stock Exchange-listed securities for that date
(or, if no such shares were publicly traded on that date, the next preceding
date that such shares were so traded) published in The Wall Street Journal or
in any other publication selected by the Committee; provided, however, that if
shares of Common Stock shall not have been publicly traded for more than ten
(10) days immediately preceding such date, then the Fair Market Value of a
share of Common Stock shall be determined by the Committee (or the Board in the
case of an Option granted to a Non-Employee Director) in such manner as it may
deem appropriate.
2.10 "Key Employee" means an officer or other key employee of the
Company or a Subsidiary as determined by the Committee.
2.11 "Non-Employee Director" means a director of the Company or a
Subsidiary who is not also an employee of the Company or a Subsidiary.
2.12 "Option" means a stock option granted under the Plan to a
Participant by the Committee pursuant to such terms and conditions as the
Committee may establish.
2.13 "Option Agreement" means a written agreement between the Company
and a Participant that establishes the terms and conditions of an Option in
addition to those established by this Plan and by the Committee's exercise of
its administrative powers.
2.14 "Participant" means any individual to whom an Option has been
granted by the Committee (or the Board in the case of an Option granted to a
Non-Employee Director) under this Plan.
2.15 "Plan" means the 1998 Stock Option Plan.
2.16 "Subsidiary" means a corporation or other business entity in
which the Company directly or indirectly has an ownership interest of 80
percent or more.
3. Administration
The Plan shall be administered by the Committee. The Committee shall
have the authority to: (a) interpret the Plan; (b) establish such rules and
regulations as it deems necessary for the proper administration of the Plan;
(c) select Key Employees to receive Options under the Plan; (d) determine the
form of an Option, whether an incentive stock option or non-qualified stock
option, the number of shares subject to the Option, all the terms and
conditions of an Option, including the time and conditions of exercise or
vesting; (e) grant waivers of Plan terms and conditions, provided that such
waivers are not inconsistent with Section 16 of the Exchange Act and the rules
promulgated thereunder; (f) accelerate the vesting of any Option when any such
action would be in the best interest of the Company; (g) take any and all other
action it deems advisable for the proper administration of the Plan. All
determinations of the Committee shall be made by a majority of its members, and
its determinations shall be final, binding and conclusive. The Committee, in
its discretion, may delegate its authority and duties under the Plan to the
Chief Executive Officer or to other senior officers of the Company under such
conditions as the Committee may establish; provided, however, that only the
Committee may select and grant Options and render other decisions as to the
timing, pricing and amount of Options to Key Employees who are subject to
Section 16 of the Exchange Act. Notwithstanding any other provision of the
Plan, Non-Employee Directors may only be granted non-qualified stock options
under the Plan, the Board must approve any grant of non-qualified stock options
to a Non-Employee Director and such Non-Employee Director must abstain from
voting on such grant.
4. Eligibility
Any Key Employee and any Non-Employee Director is eligible to become
a Participant in the Plan.
5. Shares Available
The maximum number of shares of Common Stock, $1.00 par value, of the
Company which shall be available for grant of Options under the Plan (including
incentive stock options) during its term shall not exceed 500,000; subject to
adjustment as provided in paragraph 12. Options covering no more than 100,000
shares of Common Stock may be granted to any Participant in any calendar year,
subject to adjustment as provided in paragraph 12. Any shares of Common Stock
related to Options which terminate by expiration, forfeiture, cancellation or
otherwise without the issuance of such shares shall be available again for
grant under the Plan. The shares of Common Stock available for issuance
under the Plan may be authorized and unissued shares or treasury shares.
6. Term
The Plan shall become effective as of August 28, 1998 subject to its
approval by the Company's shareholders at the 1998 annual meeting. No Options
shall be exercisable before approval of the Plan has been obtained from the
Company's shareholders. Options shall not be granted pursuant to the Plan
after August 27, 2008.
7. Participation
The Committee (or the Board in the case of an Option granted to a Non-
Employee Director) shall select Participants, determine the type of Options to
be granted, and establish in the related Option Agreements the applicable terms
and conditions of the Options in addition to those set forth in this Plan.
8. Options
(a) Grants. Options may be granted to Key Employees and Non-
Employee Directors pursuant to the Plan. Options may be incentive stock
options within the meaning of Section 422 of the Code or non-qualified stock
options (i.e., stock options which are not incentive stock options); provided,
however, that only non-qualified stock options may be granted to Non-Employee
Directors.
(b) Terms and Conditions of Options. An Option shall be exercisable
in whole or in such installments and at such times as may be determined by the
Committee. The price at which Common Stock may be purchased upon exercise of
an Option shall be established by the Committee, but such price shall not be
less than the Fair Market Value of the Common Stock, on the date of the
Option's grant.
(c) Restrictions Relating to Incentive Stock Options. Options
issued in the form of incentive stock options shall, in addition to being
subject to all applicable terms and conditions established by the Committee,
comply with Section 422 of the Code. Accordingly, the aggregate Fair Market
Value (determined at the time the Option is granted) of the Common Stock with
respect to which incentive stock options are exercisable for the first time by
a Participant during any calendar year (under this Plan or any other plan of
the Company or any of its Subsidiaries) shall not exceed $100,000 (or such
other limit as may be required by the Code). Each incentive stock option shall
expire not later than ten years from its date of grant. If an incentive stock
option is granted to a Key Employee who at the time the Option is granted owns
stock possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company (as determined under Section 424(d) of the
Code), the price at which Common Stock may be purchased upon exercise of such
Option shall not be less than 110 percent of the Fair Market Value of the
Common Stock on the date of the Option's grant and such Option shall expire not
later than five years from its date of grant. The number of shares of Common
Stock that shall be available for incentive stock options granted under the
Plan is 500,000.
(d) Exercise of Options. Upon exercise, the option price of an
Option may be paid in cash, shares of Common Stock, or a combination of the
foregoing. The Committee (or the Board in the case of an Option granted to a
Non-Employee Director) shall establish appropriate methods for accepting Common
Stock and may impose such conditions as it deems appropriate on the use of such
Common Stock to exercise an Option. The Committee, in its sole discretion, may
establish procedures whereby a Participant to the extent permitted by and
subject to the requirements of Rule 16b-3 under the Exchange Act, Regulation T
issued by the Board of Governors of the Federal Reserve System pursuant to the
Exchange Act, federal income tax laws, and other federal, state and local tax
and securities laws, can exercise an Option or a portion thereof without making
a direct payment of the option price to the Company. If the Committee so
elects to establish a cashless exercise program, the
Committee shall determine, in its sole discretion and from time to time, such
administrative procedures and policies as it deems appropriate. Such procedures
and policies shall be binding on any Participant wishing to utilize the
cashless exercise program.
9. Termination of Employment
Except as otherwise determined by the Committee, in its sole
discretion, and as otherwise provided in the Option Agreement evidencing an
Option, the following rules regarding the effect of termination of employment
shall apply to any Option granted to a Participant who is a Key Employee:
(a) General. Except as otherwise provided in paragraph 9(b)-(e), a
Participant's Option shall expire upon the termination of the Participant's
employment by the Company or a Subsidiary.
(b) Termination after One Year. If a Participant's employment by
the Company or a Subsidiary is terminated for any reason, other than death or
disability, after the expiration of at least one full year following the grant
of the Option, the Participant's Option may be exercised only during the three
month period beginning on the date of such termination of employment and only
to the extent the Option was exercisable on such date, but in no event after
the expiration date of the Option.
(c) Death While Employed. If a Participant dies while employed by
the Company or Subsidiary, the Participant's Option may be exercised by the
legal representative of the Participant's estate or the person to whom the
Participant's rights under the Option pass by will or the laws of descent and
distribution, only during the one year period beginning on the date of death
and only to the extent the Option was exercisable on such date, but in no event
after the expiration date of the Option.
(d) Death After Termination. If a Participant dies within three
months after termination of employment with the Company or a Subsidiary, the
Participant's Option may be exercised by the legal representative of the
Participant's estate or the person to whom the Participant's rights under the
Option are transferred by will or the laws of descent and distribution, only
during the one year period beginning on the date the Participant's employment
was terminated and only to the extent the Option was exercisable on such date,
but in no event after the expiration date of the Option.
(e) Disability. If a Participant's employment by the Company or a
Subsidiary is terminated by reason of the Participant's disability (within the
meaning of Section 22(e)(3) of the Code), the Participant's Option may be
exercised by the Participant or the Participant's legal representative, only
during the three month period beginning on the date of such termination and
only to the extent the Option was exercisable on such date, but in no event
after the expiration date of the Option.
10. Cessation of Directorship of Non-Employee Director
Except as otherwise determined by the Board, in its sole discretion,
and as otherwise provided in the Option Agreement evidencing an Option, the
following rules shall apply to any Option granted to a Non-Employee Director:
(a) General. Except as otherwise provided in paragraph 10(b)-(e), a
Non-Employee Director's Option shall expire upon the Non-Employee Director
ceasing to serve as a director of the Company or a Subsidiary.
(b) Termination after One Year. If a Non-Employee Director ceases
to serve as a director of the Company or a Subsidiary for any reason, other
than death or disability, after the expiration of at least one full year
following the grant of the Option, the Non-Employee Director's Option may be
exercised only during the three month period beginning on the date of such
cessation and only to the extent the Option was exercisable on such date, but
in no event after the expiration date of the Option.
(c) Death While a Director. If a Non-Employee Director dies while a
director of the Company or a Subsidiary, the Non-Employee Director's Option may
be exercised by the legal representative of the Non-Employee Director's estate
or the person to whom the Non-Employee Director's rights under the Option are
transferred by will or the laws of descent and distribution, only during the
one year period beginning on the date of death and only to the extent the
Option was exercisable on such date, but in no event after the expiration date
of the Option.
(d) Death After Termination. If a Non-Employee Director dies within
three months after ceasing to be a director of the Company or a Subsidiary, the
Non-Employee Director's Option may be exercised by the legal representative of
the Non-Employee Director's estate or the person to whom the Non-Employee
Director's rights under the Option are transferred by will or the laws of
descent and distribution, only during the one year period beginning on the date
of such cessation and only to the extent the Option was exercisable on such
date, but in no event after the expiration date of the Option.
(e) Disability. If a Non-Employee Director ceases to be a director
of the Company or a Subsidiary by reason of the Non-Employee Director's
disability (within the meaning of Section 22(e)(3) of the Code), the Non-
Employee Director's Option may be exercised by the Non-Employee Director or the
Non-Employee Director's legal representative, only during the three month
period beginning the date of such cessation and only to the extent the Option
was exercisable on such date, but in no event after the expiration date of the
Option.
11. Limitations on Transferability of Options
(a) General. Except as otherwise provided herein and in the Option
Agreement, no Option granted under the Plan shall be transferable otherwise
than by will or the laws of descent and distribution, and an Option may be
exercised, during his lifetime, only by the Participant.
(b) Discretion to Permit Certain Transfers. Notwithstanding
paragraph 11(a) of the Plan, the Committee (or the Board in the case of an
Option granted to a Non-Employee Director) may, in its sole discretion,
authorize all or a portion of the non-qualified stock options granted to a
Participant to be on terms which permit the transfer by such Participant to (a)
the spouse, children, grandchildren, brothers or sisters of the optionee
("Immediate Family Members"), (b) a trust or trusts for the benefit of one or
more of such Immediate Family Members, or (c) a partnership or limited
liability company in which any of such Immediate Family Members are the only
partners or members; provided, however, that (i) the transfer is approved by
the Committee (or the Board in the case of an Option granted to a Non-Employee
Director) and (ii) subsequent transfers of transferred Options shall be
prohibited except transfers by will or the laws of descent and distribution.
Following transfer, any transferred Options shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer and
the effects of termination of employment or termination of the directorship of
a Non-Employee Director described in paragraph 9 or 10, whichever is
applicable, shall continue to apply to such Options with respect to the
Participant to whom the Option was granted and following any such termination
transferred Options shall be exercisable by the transferee only to the extent
and for the periods specified in paragraph 9 or 10, whichever is applicable.
Participants transferring Options in accordance with this paragraph 11(b)
remain subject to the withholding tax requirements of paragraph 13 with respect
to the transferred Options.
12. Adjustment of Shares Available
(a) Changes in Stock. In the event of changes in the Common Stock
by reason of a Common Stock dividend or stock split-up or combination,
appropriate adjustment shall be made by the Committee in the aggregate number
of shares available under the Plan, the number of shares with respect to which
Options may be granted to any Participant in any calendar year, and the number
of shares subject to outstanding Options, without change in the aggregate
purchase price to be paid therefor. Such proper adjustment as may be deemed
equitable may be made by the Committee (or the Board in the case of an Option
granted to a Non-Employee Director) in its discretion to give effect to any
other change affecting the Common Stock.
(b) Changes in Capitalization. In case of a merger or consolidation
of the Company with another corporation, a reorganization of the Company, a
reclassification of the Common Stock of the Company, a spin-off of a
significant asset, or other changes in the capitalization of the Company,
appropriate provision shall be made for the protection and continuation of any
outstanding Options by either (i) the substitution, on an equitable basis, of
appropriate stock or other securities or other consideration to which holders
of Common Stock of the Company will be entitled pursuant to such transaction or
succession of transactions, or (ii) by appropriate adjustment in the number of
shares issuable pursuant to the Plan, the number of shares with respect to
which Options may be granted to any Participant during any calendar year, the
number of shares covered by outstanding Options, and the option price of
outstanding Options, as deemed appropriate by the Committee (or the Board in
the case of an Option granted to a Non-Employee Director) .
13. Withholding Taxes
The Company shall be entitled to deduct from any payment under the
Plan, regardless of the form of such payment, the amount of all applicable
income and employment taxes required by law to be withheld with respect to such
payment or may require the Participant to pay to it such tax prior to and as a
condition of the making of such payment. Subject to any administrative
guidelines established by the Committee, a Participant may pay the amount of
taxes required by law to be withheld upon the
exercise of an Option by requesting that the Company withhold from any payment
of Common Stock due as a result of such exercise, or delivering to the Company,
shares of Common Stock having a fair market value, as determined by the
Committee, equal to the amount of such required withholding taxes.
14. Amendments to Options
The Committee (or the Board in the case of an Option granted to a Non-
Employee Director) may at any time unilaterally amend any unexercised Options;
provided, however, that any such amendment which is adverse to a Participant
shall require the Participant's consent.
15. Regulatory Approvals and Listings
Notwithstanding anything contained in this Plan to the contrary, the
Company shall have no obligation to issue or deliver certificates of Common
Stock upon the exercise of an Option prior to (a) the obtaining of any approval
from any governmental agency which the Company shall, in its sole discretion,
determine to be necessary or advisable, (b) the admission of such shares to
listing on the stock exchange on which the Common Stock may be listed, and (c)
the completion of any registration or other qualification of said shares under
any state or federal law or ruling of any governmental body which the Company
shall, in its sole discretion, determine to be necessary or advisable.
16. No Right to Continued Employment or Directorship or Grants
Participation in the Plan shall not give any Key Employee any right
to remain in the employ of the Company or any Subsidiary or any Non-Employee
Director the right to continue as a director of the Company or any Subsidiary.
The Company or, in the case of employment with a Subsidiary, the Subsidiary,
reserves the right to terminate the employment of any Key Employee or the
directorship of any Non-Employee Director at any time. Further, the adoption
of this Plan shall not be deemed to give any person any right to be selected as
a Participant or to be granted an Option.
17. Change in Control
In the event of a Change in Control, all outstanding, unexpired Options
shall become exercisable as of the date of the Change in Control.
18. Amendment
The Board may suspend or terminate the Plan at any time. In
addition, the Board may, from time to time, amend the Plan in any manner,
subject to shareholder approval as may be required by law.
