SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 Rule 14a-11(c) or Rule
14a-12
ACTION INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
ACTION INDUSTRIES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 for each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] 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: ________________________________________
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________
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_________________________________________________________________
ACTION INDUSTRIES, INC.
460 Nixon Road
Cheswick, Pennsylvania 15024
Telephone Number 412-782-4800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
ON DECEMBER 8, 1995
The annual meeting of shareholders of Action Industries, Inc. will
be held at the Company's headquarters, located at 460 Nixon Road,
Cheswick, Pennsylvania 15024, at 10:00 a.m. on Friday, December 8,
1995, for the following purposes:
1. To elect two directors for a term of three years
2. To approve an amendment to the Action Industries, Inc.
Stock Option Plan
3. To approve amendments to the Action Industries, Inc.
Nonemployee Director Stock Option Plan
4. To transact such other business as may properly come
before the meeting or any adjournment
Shareholders of record on the books of the Company at the close of
business on October 12, 1995, are entitled to vote at the meeting.
We encourage all shareholders to attend the meeting. Whether or
not you plan to attend the meeting, however, it is important that
your shares be represented. PLEASE TAKE A MOMENT NOW TO COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED. Shareholders who attend the meeting may, if
they wish, vote in person even if they have mailed their proxies.
By order of the Board of Directors,
ACTION INDUSTRIES, INC.
LINDA S. WYCKOFF
Linda S. Wyckoff
Vice President, General Counsel
and Corporate Secretary
ACTION INDUSTRIES, INC.
460 Nixon Road
Cheswick, Pennsylvania 15024
Telephone Number 412-782-4800
PROXY STATEMENT
This proxy statement has been prepared by the management of Action
Industries, Inc. (the "Company"). It is being furnished in
connection with the solicitation of proxies by the Board of
Directors of the Company to be voted at the annual meeting of
shareholders on December 8, 1995 (or any adjournment of that
meeting) for the purposes set forth below and in the covering
Notice. All expenses incurred in connection with the solicitation
of proxies will be borne by the Company. The Company anticipates
mailing proxy materials and annual reports to shareholders on or
about November 1, 1995. No solicitation other than by mail is
anticipated.
The annual meeting will be held at the Company's headquarters,
located at 460 Nixon Road, Cheswick, Pennsylvania 15024, at
10:00 a.m. on Friday, December 8, 1995. Shareholders of record
on October 12, 1995 are entitled to notice of and to vote at the meeting.
Any person giving a proxy may revoke it by giving written notice to
the Secretary of the Company, by signing a later dated valid proxy,
or by voting in person at the meeting. If not revoked, the shares
represented by the proxies will be voted. All shares will be voted
as directed by the shareholder. If no direction is given, shares
will be voted as indicated in this proxy statement and on the
enclosed proxy form.
Except as described below, shareholders are entitled to one vote
per share of the Company's common stock, par value $0.10 per share,
on all matters to be considered and acted upon at the meeting. The
presence, in person or by proxy, of the holders of at least a
majority of the outstanding shares of the Company's common stock
will be necessary to constitute a quorum at the meeting. In
general, the affirmative vote of a majority of the votes cast by
the shareholders is required to approve any proposals voted on at
the meeting. Matters involving certain fundamental corporate
changes, however, require the affirmative vote of at least 80% of
the votes which all shareholders are entitled to cast.
Further, with respect to the election of directors, shareholders
have cumulative voting rights. That is, each shareholder is
entitled to cast a number of votes equal to the number of shares he
or she holds multiplied by the number of directors to be elected --
in this case two -- and cast the whole number of resulting votes
for one candidate or distribute them among the two candidates as he
or she wishes. The nominees receiving the highest number of votes,
up to the designated number of directors to be elected, will be
deemed elected.
Shareholder abstentions and broker "non-votes" (i.e. a broker-
dealer's withholding of votes for shares held in street name for a
shareholder who has not given voting instructions) will be counted
neither for nor against a proposal in the case of the election of
directors and in the case of proposals other than certain
fundamental corporate changes. Where a proposal involves certain
kinds of fundamental corporate changes, however, shareholder
abstentions and broker non-votes will be counted as "no" votes.
As of September 15, 1995 there were 5,539,458 shares of common
stock outstanding.
There are three matters to be voted upon in connection with this
year's annual meeting of shareholders: (1) the election of
directors, (2) the amendment of the Action Industries, Inc. Stock
Option Plan for Company management and (3) the amendment of the
Action Industries, Inc. Nonemployee Director Stock Option Plan.
ITEM 1. ELECTION OF DIRECTORS
R. Craig Kirsch, who came to the Company as a Director and
executive officer in 1990 and has served as Chairman of the Board
since 1991, resigned from the Company and the Board of Directors on
September 7, 1995 to pursue other business opportunities. Director
Joel M. Berez was subsequently elected to replace him as Chairman,
and T. Ronald Casper was retained by the Board as Acting President
and Chief Executive Officer. With Mr. Kirsch's departure, the
Board of Directors is now comprised of seven members divided among
three classes, two of which have two members and one of which has
three members. Each class of directors serves a three-year term.
The two candidates nominated by the Board for election as directors
this year are identified below, along with the directors continuing
in office.
NOMINEES FOR A 3-YEAR TERM EXPIRING IN 1998:
Joel M. Berez, 41. Mr. Berez has been a Director of the Company
since 1983 and was elected Chairman on September 7, 1995. He has
served as President and Chief Executive Officer of Digital Alchemy,
Inc., a producer of home education software, since January 1995.
Prior to this, he had been an officer of the Company since his
employment in 1988 and had held several executive positions, most
recently Senior Vice President.
William B. Snow, 63. Mr. Snow was appointed to the Board on August
29, 1994. Since July 1994, he has served as Vice Chairman and
Chief Financial Officer of Movie Gallery, Inc., a video cassette
and game retail sales and rental business. He had previously been
Director, Executive Vice President and Chief Financial Officer of
Consolidated Stores Corporation, a specialty retailer in the
"close-out" consumer goods industry, since 1985.
The Board of Directors recommends a vote FOR the nominees named
above.
DIRECTORS CONTINUING IN OFFICE:
SERVING THE SECOND YEAR OF A 3-YEAR TERM EXPIRING IN 1997:
Charles C. Cohen, 54. Mr. Cohen has served as a Director of the
Company since June 1991. He has been, since 1981, a Director of
the law firm of Cohen & Grigsby and, since 1976, Adjunct Professor
of Securities Regulation at the University of Pittsburgh School of
Law. He serves on the Boards of Directors of Robroy Industries,
Inc., Medrad, Inc., Phar-Mor, Inc. and several civic organizations.
James H. Knowles, Jr., 55. Mr. Knowles has been a Director of the
Company since November 1993. Having over ten years of experience
in the founding and management of venture capital firms, he is
presently President and Chief Executive Officer of Dragonswood,
Inc., a venture capital investment management company, where he has
served since 1988.
David S. Shapira, 53. Mr. Shapira has served as a Director of the
Company since 1981. He has held various executive positions with
Giant Eagle, Inc., a retail supermarket chain, including Director,
Chairman, President and Chief Executive Officer, since 1980. He
has also held various executive positions with Phar-Mor, Inc., a
general merchandise and retail variety store chain, including
Director, Chairman and Chief Executive Officer, since 1984. Mr.
Shapira is also a member of the Boards of Directors of Mellon Bank,
N.A., Mellon Bank Corporation, Equitable Resources, Inc. and Bell
Telephone Company of Pennsylvania.
SERVING THE THIRD YEAR OF A 3-YEAR TERM EXPIRING IN 1996:
Ernest S. Berez, 70. Mr. Berez has been a Director of the Company
since 1951 and served as its Chairman from 1987 through July 1990.
He was an executive officer of the Company from 1950 to 1990,
serving in various capacities, most recently including President,
Chief Executive Officer and Chief Operating Officer. Now retired,
Mr. Berez was the principal in Lobeco World Trade Corp., an
international trading company, from 1990 to 1995.
Joel L. Gold, 54. Mr. Gold has served as a Director of the Company
since 1978. He has been Managing Director of Fector, Detwiler &
Co., Inc., an investment banking firm, since April 1995. Prior to
that, he had served as Managing Director of Furman Selz Incor-
porated, an investment banking company, from 1992 to 1995, and as
Managing Director for Bear, Stearns & Co., Inc., also an investment
banking firm, from 1990 to 1992. He also serves on the Boards of
Concord Camera Corp., Life Medical Sciences, Inc. and Biomechanics
Corporation of America.
ITEM 2. AMENDMENT OF ACTION INDUSTRIES, INC. STOCK OPTION PLAN
The Action Industries, Inc. Stock Option Plan for management of the
Company (the "Management Plan") was adopted by the Board of
Directors and approved by shareholders in 1990. Those eligible for
participation in the Management Plan are "key employees" of the
Company and its subsidiaries, that is, officers, managers and other
executives who are primarily responsible for the growth and
development and future financial success of the Company.
Approximately 34 persons are currently eligible to participate.
Proposed Amendment. The Company originally reserved 450,000 shares
for issuance pursuant to options granted under the Management Plan.
The proposed amendment (set forth on Exhibit A) would reserve an
additional 500,000 shares, for a total of 950,000 shares reserved
for issuance under the Plan.
The purpose of the additional reserve of shares to the Management
Plan is to enable the Company to attract and retain highly
qualified managers to positions of substantial responsibility and
to provide an incentive to employees to remain with the Company and
restore it to profitability. Consistent with the substantial
financial, operational and systems restructuring, which was begun
by the Company several years ago and which is still underway, no
general salary increases have been provided to management for five
to seven years. While this is in many respects appropriate for a
company that has not been consistently profitable, it also leads to
the risk of losing talented employees who are key to restoring the
Company to profitability and increasing the value of its stock for
shareholders. The Board of Directors believes that the maximum
efforts of the Company's key managers toward the completion of
restructuring are best assured if a broad base of management
employees, extending not just to senior executives but also to a
large group of midlevel managers, is given the opportunity to
acquire a personal stake in maximizing the Company's stock value.
Description of the Plan. Options are granted under the Management
Plan for the purchase of the Company's common stock. The purchase
price at which an option may be exercised is subject to
determination by the Compensation Committee of the Board of
Directors upon the recommendation of the Company's Chief Executive
Officer. In any event, however, the purchase price is no less than
the fair market value of the stock, defined as the closing price of
the stock as reported by the American Stock Exchange on the date of
the grant of the option. (In the case of an incentive stock option
granted to a participant who is a 10% shareholder, the purchase
price is no less than 110% of fair market value.)
In the event of a participant's termination of employment, the
participant has three months to exercise any vested options
outstanding. In the case of termination because of disability,
however, the participant has twelve months, and in the case of
termination because of death, the participant's estate or
beneficiary has twelve months. All options expire ten years from
the date of grant (five years in the case of incentive stock
options granted to participants who are 10% shareholders), and no
options may be granted more than ten years after the September 4,
1990 effective date of the Management Plan.
Federal Income Tax Consequences. The Management Plan provides for
grants of both incentive and nonqualified stock options, which
differ in the their tax treatment under the Internal Revenue Code
of 1986 (the "Code"). Incentive stock options, as defined under
Section 422A of the Code, permit a participant to exercise a stock
option without incurring tax liability until the stock is sold.
Upon sale of the stock, the participant will incur a taxable gain
or loss based on the difference between the sale price and the
exercise price. The Company is not entitled to a compensation
deduction as a result of the grant of an incentive stock option to,
or the exercise of the option by, the participant.
Nonqualified stock options do not qualify for favorable tax
treatment by the participant. A participant's exercise of these
options results in taxable income in the year of exercise in the
amount of the difference between the option price and the fair
market value at exercise. Correspondingly, the Company is entitled
to a compensation deduction in an amount equal to the taxable
income deemed paid to the participant upon exercise, provided that
the Company withholds income taxes on that amount. Upon sale of
the stock, the participant will incur a taxable gain or loss based
on the difference between the sale price and the market value at
exercise.
Current Grants, Market Value. The Company granted options to one
individual in December 1994 and to 30 individuals in June 1995 to
purchase an aggregate of 370,000 shares (excluding options
cancelled since their grant), subject to shareholder approval of
the amendment reserving an additional 500,000 shares to the
Management Plan. The purchase prices of the newly granted options
are $1.8125 per share for the December 1994 option and $1.00 per
share for the June 1995 options, in each case the fair market value
of the Company's common stock on the date of grant. Presently
there are 34 individuals who hold stock options for the purchase of
an aggregate of 537,400 shares under the Management Plan
(excluding options expected to cancel or expire by the end of
September 1995). On September 15, 1995, the closing market price
of the Company's common stock was $0.875 per share, and the
aggregate market value of the 537,400 option shares was $470,225.
The table included below under Item 3 sets forth, for both the
Management Plan and the Nonemployee Director Stock Option Plan, the
options granted to various individuals or groups and the value of
the underlying shares as of September 15, 1995.
The Board of Directors recommends a vote FOR the above amendment.
ITEM 3. AMENDMENT OF NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
The Action Industries, Inc. Nonemployee Director Stock Option Plan
(the "Director Plan") was adopted by the Board of Directors and
approved by shareholders in 1991. Those eligible for participation
in the Director Plan are Directors who are neither employees nor
former employees of the Company and who are "disinterested persons"
for the purpose of Rule 16b-3 of the Securities Exchange Act of
1934. Five Directors are currently eligible to participate.
Proposed Amendment. The Company originally reserved 55,300 shares
for issuance pursuant to options granted under the Director Plan.
Options are granted automatically under the Director Plan,
providing a single grant for the purchase of 7,500 shares to each
nonemployee Director upon appointment to the Board. The first
proposed amendment would reserve an additional 50,000 shares, for
a total of 105,300 shares reserved for issuance under the Director
Plan. The second proposed amendment would change the operation of
the automatic grant of options, so that each new nonemployee
Director would be granted an option to purchase 4,000 shares and
each existing nonemployee Director would be granted an additional
option each year to purchase 1,000 shares. The proposed amendments
are set forth on Exhibit B.
The purpose of the proposed amendments to the Director Plan is to
enable the Company to attract highly qualified individuals to serve
as members of the Company's Board of Directors and to provide an
incentive to them to continue to serve on the Board to oversee the
restoration of the Company to profitability. The Company believes
that the maximum efforts of its Directors toward the completion of
restructuring are best assured if they are given the opportunity to
acquire a personal stake in maximizing the Company's stock value.
Description of the Plan. Options are granted under the Director
Plan for the purchase of the Company's common stock. The purchase
price at which an option may be exercised is the fair market value
of the common stock, defined as the closing price of the common
stock as reported by the American Stock Exchange on the date of the
grant of the option, which is the date of the Director's initial
election to the Board.
In the event of a participant's termination of membership on the
Board, the participant has three months to exercise any vested
options outstanding. In the case of termination of membership
because of disability, however, the participant has twelve months,
and in the case of termination because of death, the participant's
estate or beneficiary has twelve months. All options expire ten
years from the date of grant, and no options may be granted more
than ten years after the July 17, 1990 effective date of the
Director Plan.
Federal Income Tax Consequences. Options available under the Plan
are nonqualified stock options. Under current provisions of the
Internal Revenue Code of 1986 (the "Code"), a participant will not
recognize taxable income at the time an option is granted or when
it vests. Exercise of these options will result in taxable income
in the year of exercise in the amount of the difference between the
option price and the fair market value at exercise.
Correspondingly, the Company will be entitled to a federal income
tax deduction equal to that amount. Upon sale of the stock, the
participant will incur a taxable gain or loss based on the
difference between the sale price and the market value at exercise.
Current Grants, Market Value. The Company granted options as of
June 26, 1995 to its five nonemployee Directors to purchase an
aggregate of 5,000 shares of common stock, subject to shareholder
approval of the above amendments. The purchase price of the newly
granted options is $1.125, which was the fair market value as of
June 26, 1995, the first Monday of the fiscal year. With the new
grants, nonemployee Directors now hold stock options for the
purchase of an aggregate of 42,500 shares under the Plan. The
market value of these shares as of September 15, 1995 was $37,188.
The following table sets forth, for both the Management Plan and
the Director Plan, the options granted to various individuals or
groups and the value of the underlying shares as of September 15,
1995 (excluding option shares expected to expire by the end of
September 1995).
The Board of Directors recommends a vote FOR the above amendment.
OPTIONS OUTSTANDING UNDER STOCK OPTION PLANS
<TABLE>
<CAPTION>
Management Plan Director Plan
------------------ -----------------
Name and Dollar Dollar
Position Value Units Value Units
- -------- ------ ----- ----- -----
<S> <C> <C> <S> <C> <C>
R. Craig Kirsch 0 0 *1 0 0
(Former) Chairman
President and Chief
Executive Officer
Robert I. Christian 153,125 175,000 0 0
Senior Vice President, Sales
Walter M. Tymoczko 11,375 13,000 *2 0 0
(Former) Senior Vice
President and General Manager,
Kensington Lamp Company
Marc J. Joseph 0 0 *3 0 0
(Former) Senior Vice
President, Marketing
and Merchandising
Kenneth L. Campbell 26,250 30,000 0 0
Senior Vice President,
Finance
Robert P. Garrity 39,375 45,000 0 0
Senior Vice President,
Operations
Current Executive Officer 236,250 270,000 0 0
Group
Non-Executive Direct 0 0 37,188 42,500
Group
Non-Executive Officer 233,975 267,400 0 0
Employee Group
Director Nominees:
Joel M. Berez 0 0 0 0
William B. Snow 0 0 7,438 8,500
Associates of Directors, 0 0 0 0
Executive Officers or
Nominees
Persons with 5% of
Option Shares:
Robert I. Christian 153,125 175,000 0 0
</TABLE>
*1 As noted above, Mr. Kirsch resigned on September 7, 1995.
Options previously granted to Mr. Kirsch to purchase a total of
288,462 shares were cancelled upon his resignation and are no
longer outstanding.
*2 Mr. Tymoczko resigned from the Company in September 1995,
incident to his participation in a management purchase of the
assets of the Company's lamp assembly subsidiary, Kensington Lamp
Company (see discussion under "Business Relationships, Transactions
with Management and Involvement in Legal Proceedings"). In
accordance with the Management Plan, 2,000 of his option shares
were cancelled upon his resignation, and the remaining 13,000
option shares will expire in December 1995 unless Mr. Tymoczko
exercises his option to purchase the shares prior to that date.
*3 Mr. Joseph resigned from the Company in May 1995. In
accordance with the Management Plan, his 50,000 option shares were
then cancelled and are no longer outstanding.
PRINCIPAL HOLDERS OF THE COMPANY'S COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT: The following table shows, as of
September 15, 1995, the beneficial ownership of each director, the
Chief Executive Officer for the 1995 fiscal year, the four other
most highly compensated executive officers of the Company as of the
end of fiscal year 1995, one other individual who would have been
among the four other most highly compensated executive officers but
for the fact that he left the Company's employ prior to the end of
the fiscal year, and all the directors and officers of the Company
as a group.
COMMON STOCK BENEFICIALLY OWNED
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
-----------------------------------------
Sole Voting Shared Voting
and and Percent of
Investment Investment Stock
Name Power Power Total Outstanding
---- ----------- ------------- ----- -----------
<S> <C> <C> <C> <S> <C>
Ernest S. Berez 5,031 14,669 19,700 *1 0.4
Joel M. Berez 18,014 677,937 695,951 *2 12.6
Kenneth L. Campbell 14,352 0 14,352 *3 0.3
Robert I. Christian 0 0 0 -
Charles C. Cohen 12,500 0 12,500 *4 0.2
Robert P. Garrity 6,200 0 6,200 *5 0.1
Joel L. Gold 11,000 500 11,500 *6 0.2
Marc J. Joseph 0 0 0 -
R. Craig Kirsch 0 80,600 80,600 *7 1.5
James H. Knowles, Jr. 16,450 0 16,450 *8 0.3
David S. Shapira 7,500 28,302 35,802 *9 0.6
William B. Snow 1,875 0 1,875 *10 < 0.1
Walter M. Tymoczko 13,095 200 13,295 *11 0.2
All 20 directors and 152,567 811,823 1,068,515 *12 18.9
officers, including
those named above
</TABLE>
*1 Amount includes 14,669 shares held by Mr. Berez's wife, as
to which shares he disclaims beneficial interest.
*2 Amount includes the following: 667,506 shares held in
twelve trusts for which Mr. Berez is co-trustee but as to which he
disclaims beneficial ownership in 336,970 shares; and 10,431 shares
held by Mr. Berez jointly with his wife.
*3 Amount includes 13,000 shares which Mr. Campbell does not
now own but has the right to acquire within 60 days under stock
option agreements.
*4 Amount includes 7,500 shares which Mr. Cohen does not now
own but has the right to acquire within 60 days under a stock
option agreement.
*5 Amount includes 4,000 shares which Mr. Garrity does not now
own but has the right to acquire within 60 days under a stock
option agreement.
*6 Amount includes 7,500 shares which Mr. Gold does not now
own but has the right to acquire under a stock option agreement and
500 shares held by Mr. Gold's wife.
*7 All shares are held jointly by Mr. Kirsch and his wife.
*8 Amount includes 3,750 shares which Mr. Knowles does not now
own but has the right to acquire within 60 days under a stock
option agreement.
*9 Amount includes 7,500 shares which Mr. Shapira does not now
own but has the right to acquire within 60 days under a stock
option agreement and 28,302 shares held in various trusts for which
Mr. Shapira is co-trustee.
*10 Amount includes 1,875 shares which Mr. Snow does not now
own but has the right to acquire within 60 days under a stock
option agreement.
*11 Amount includes 13,000 shares which Mr. Tymoczko does not
now own but has the right to acquire within 60 days under a stock
option agreement and 200 shares which he holds jointly with his
wife.
*12 Amount includes 104,125 shares which the directors and
officers do not now own but have the right to acquire within 60
days under stock option agreements.
SECURITY OWNERSHIP OF CERTAIN OTHERS: The following table shows
the beneficial ownership of those persons, other than the ones
named in the table above, who are known by the Company to be
beneficial owners of more than 5% of the Company's common stock
outstanding.
COMMON STOCK BENEFICIALLY OWNED
<TABLE>
<CAPTION>
Amount and Percent of
Nature of Stock
Name and Address Beneficial Ownership Outstanding
- ---------------- -------------------- -----------
<S> <C> <S> <C>
Steven H. Berez 673,400 *1 12.2
35 Sutton Road
Needham, MA 02192
Heartland Advisors Inc. 987,100 *2 17.8
790 North Milwaukee Street
Milwaukee, WI 53202
</TABLE>
*1 Steven H. Berez's shareholdings include 5,698 shares for
which he has sole voting and dispositive power, 196 shares for
which he shares voting and dispositive power with his wife, and
667,506 shares held in twelve trusts for which he shares voting and
dispositive power as co-trustee but as to which he disclaims
beneficial ownership in 336970 shares. The shares held by Mr.
Berez as co-trustee are the same 643,506 shares as those described
with respect to Joel M. Berez in footnote 2 under "Security
Ownership of Management."
*2 Heartland Advisors Inc. has sole dispositive power with
respect to these shares but no voting power.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
FAMILY RELATIONSHIPS: Directors Ernest S. Berez and Joel M. Berez
are father and son.
BUSINESS RELATIONSHIPS, TRANSACTIONS WITH MANAGEMENT AND
INVOLVEMENT IN LEGAL PROCEEDINGS:
David S. Shapira and Charles C. Cohen. In August 1992 Phar-Mor,
Inc. reported that it had been the victim of a fraud and
embezzlement scheme perpetrated by Phar-Mor executives whose
employment was immediately terminated. David S. Shapira, a
Director of the Company, was Director and Chief Executive Officer
of Phar-Mor at the time of discovery of the scheme. Mr. Shapira
and his wife own directly or beneficially 4% of the outstanding
shares of Phar-Mor. Mr. Shapira is also a Director and executive
officer of Giant Eagle, Inc. Giant Eagle owns a significant
portion (though not a majority) of the outstanding shares of Phar-Mor.
Company Director Charles C. Cohen is also a Director of Phar-Mor.
Mr. Cohen owns no Phar-Mor shares. The Company holds 0.7% of the
outstanding shares of Phar-Mor.
On August 17, 1992 Phar-Mor, Inc., a Pennsylvania corporation,
filed for protection under Chapter 11 of the United States
Bankruptcy Act. Mr. Shapira was an executive officer of Phar-Mor
at the time of filing. The proceedings are still pending.
In light of the bankruptcy proceedings, in August 1992 the Board of
Directors of the Company approved the write-off of the $1,611,710
book value of the Company's Phar-Mor shares. Mr. Cohen abstained
from the decision with respect to the Company's write-off of the
value of the Phar-Mor stock (Mr. Shapira was not present at the
meeting). Further, the Board of Directors determined that Messrs.
Shapira and Cohen would abstain from any future vote by the Board
of Directors concerning any transaction between the Company and
Phar-Mor.
In August 1994, the Official Committee of Unsecured Creditors of
Phar-Mor, Inc., et al. filed an adversary proceeding in the Phar-Mor
bankruptcy matter against the Company and about 50 other
shareholders and former shareholders of Phar-Mor. In this
proceeding the Official Committee sought the recovery of monies
paid to the defendants for their tender of shares in a Phar-Mor
tender offer in August 1991. The claim was based upon allegations
that at the time of the tender offer Phar-Mor was insolvent or had
unreasonably small capital, and, therefore, the transfers pursuant
to the tender offer constituted fraudulent conveyances. In the
case of the Company, the amount the Official Committee sought was
$2,639,960. On August 22, 1995, summary judgment was entered in
favor of the Company and the other defendants. In September 1995,
the Official Committee filed an appeal of this decision.
During fiscal year 1995 the Company engaged in several arms-length
business transactions with Giant Eagle and Phar-Mor. The Company
sold merchandise to Giant Eagle in the amount of $92,500 and to
Phar-Mor in the amount of $283,400. The Company also purchased
from Giant Eagle Christmas gift certificates for Company employees
in the amount of $29,200 and paid to Giant Eagle $1,000 in trade
show booth fees.
Mr. Cohen is a Director of Cohen & Grigsby, P.C., a law firm
retained by the Company to perform legal services during fiscal
year 1995 and which the Company expects to retain during the
current fiscal year.
Walter M. Tymoczko. On September 18, 1995, the Company's wholly
owned subsidiary, Kensington Lamp Company, sold certain of the
assets and the business of the subsidiary to Kensington Collection,
Inc., a newly formed company of which Walter M. Tymoczko is
principal owner. Until that date Mr. Tymoczko had been Senior Vice
President and General Manager of the subsidiary, which assembled
and marketed household lamps. The purchase price for the assets
equaled their approximate net book value, or $1,605,759.
COMPLIANCE WITH CERTAIN FILING REQUIREMENTS: Directors and
executive officers are required under Section 16(a) of the
Securities Exchange Act of 1934 to file reports concerning their
holdings and transactions in Company stock. Director Joel Berez
and the Company recently discovered that a transaction in November
1994 by a Berez family trust had not been reported. Mr. Berez is
cotrustee of the trust, which routinely reports its transactions,
but for this oversight. As of the date of this proxy statement,
the error was being corrected in connection with an overall review
of the Berez family shareholdings.
THE BOARD OF DIRECTORS AND ITS COMMITTEES: The full Board of
Directors held four meetings during fiscal year 1995. No member
failed to attend at least 75% of the aggregate number of meetings
of the full Board and meetings of the Board committees on which he
serves.
Executive Committee. The Board recently reinstituted the executive
committee, whose functions are to conduct all the business of the
Board of Directors in managing the Company between meetings of the
Board, subject to any limitations imposed by the Board, and
provided that matters of importance that do not require immediate
action will be referred to the full Board. The members are Messrs.
Cohen, Knowles, Shapira and Joel Berez. Mr. Kirsch was a member
until his resignation and served as the committee's Chairman. They
met four times during the fiscal year.
Audit Committee. The Board has an audit committee, the function of
which is to assist the Board of Directors in fulfilling its
obligation concerning the financial accounting and reporting
practices of the Company and the sufficiency of its auditing. In
furtherance of its function, the committee reviews the scope and
results of the annual audit by the Company's independent public
accountants, ensures the independence of the public accountants and
makes appropriate inquiries as to the adequacy of the Company's
financial and operating controls. The members are Messrs. Cohen,
Knowles, Snow and Joel Berez, with Mr. Snow serving as Chairman.
They met three times during the fiscal year.
Nominating Committee. The Board has a nominating committee, the
functions of which are to consider and recommend candidates to fill
vacancies or new openings for membership on the Board and to
consider and recommend successor management for the Company. The
members are Messrs. Cohen and Joel Berez, with Mr. Cohen serving as
Chairman. Mr. Kirsch was a member until his resignation. They met
informally several times during the year. The nominating committee
will consider director candidates recommended by shareholders who
submit the candidate's resume by sending it to Mr. Cohen at the
Company's address.
Compensation Committee. The Board has a compensation committee,
the function of which is to review and determine the compensation
of senior management. The members for fiscal year 1995 were
Messrs. Gold, Knowles and Shapira, with Mr. Shapira serving as
Chairman. Mr. Kirsch also participated as a nonvoting member until
his resignation. For fiscal year 1996, Joel Berez was added as a
member of the committee. The compensation committee met twice
during the past year. The committee and the Company have retained
professional benefit and compensation consultants to advise them
concerning the compensation of directors, officers and other
management.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION FOR DIRECTORS: Directors who are employees of the
Company, as well as former employee Ernest Berez, receive no
additional compensation for their services on the Board. For
fiscal year 1995 Mr. Kirsch was the only Director who was also an
employee.
Compensation for nonemployee Directors includes an annual retainer
of $12,000 plus $1,000 for each full Board meeting attended and
$500 for each committee meeting attended on a day other than the
day of a full Board meeting. Upon his appointment to the Board,
each of the present nonemployee Directors was granted the option to
purchase 7,500 shares of stock, pursuant to a Nonemployee Director
Stock Option Plan approved by the shareholders in 1991. Subject to
shareholder approval of an amendment to the Plan (see discussion
above), nonemployee Directors will receive annual stock option
grants of 1,000 shares each, and each new nonemployee Director will
receive an initial stock option grant of 4,000 shares. Beginning
in fiscal year 1996, Chairman Joel Berez, who is a former employee,
will be paid the cash compensation paid to nonemployee Directors.
Director Ernest Berez, former Chairman and President of the
Company, is compensated under an agreement with the Company dated
July 31, 1990 and amended July 31, 1991. Pursuant to that
agreement, Mr. Berez now receives lifetime retirement benefits in
the amount of $139,200 annually. If Mr. Berez's wife survives him,
she will receive lifetime survivor benefits of one-half his benefit
amount.
COMPENSATION FOR EXECUTIVE OFFICERS: The following tables show,
for the last three fiscal years, all compensation received by the
Chief Executive Officer for fiscal year 1995, the four other most
highly compensated executive officers of the Company as of the end
of fiscal year 1995, and one other individual who would have been
among the four other most highly compensated executive officers but
for the fact that he left the Company's employ prior to the end of
the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities All
Underlying Other
Name and Fiscal Salary Bonus Options/ Compensa-
Principal Position Year ($) ($) SARs (#) tion ($)
- ------------------ ------ ----- ----- ---------- ---------
<S> <C> <C> <C> <C> <C>
R. Craig Kirsch *1 1995 243,437 0 88,642 2,448
(Former) Chairman, 1994 243,437 0 0 2,875
President and Chief 1993 243,437 0 0 2,916
Executive Officer
Robert I. Christian *2 1995 125,000 30,000 175,000 340
Senior Vice President, 1994 49,275 0 0 0
Sales 1993 0 0 0 0
Walter M. Tymoczko *3 1995 123,106 0 0 578
(Former) Senior Vice 1994 123,046 15,000 0 551
President and General 1993 123,046 0 0 589
Manager, Kensington
Lamp Company
Marc J. Joseph *4 1995 120,000 30,000 50,000 19,409
(Former) Senior Vice 1994 0 0 0 0
President, Marketing 1993 0 0 0 0
and Merchandising
Kenneth L. Campbell *5 1995 118,690 0 20,000 522
Senior Vice President, 1994 118,698 6,000 0 554
Finance 1993 123,714 0 0 569
Robert P. Garrity *6 1995 106,082 0 25,000 441
Senior Vice President, 1994 20,000 0 20,000 0
Operations 1993 0 0 0 0
</TABLE>
*1 During fiscal year 1995, Mr. Kirsch, who has since resigned
from the Company, was granted an 88,462-share option in
substitution for a 150,000-share option granted to him in 1992.
The substituted option had a value equivalent to that of the prior
option, under the Black-Scholes method for determining equivalent
value. The substituted option was subsequently cancelled upon Mr.
Kirsch's resignation. The amount shown for fiscal year 1995 in the
column "All Other Compensation" is comprised of $628 in forfeiture
allocations to his account in the Employees' Retirement Plan and
$1,820 for payment of the annual premium for a term life insurance
policy.
*2 Mr. Christian joined the Company in May 1994. Stock option
grants to him in fiscal year 1995 include a 100,000-share option
that is subject to shareholder approval of an amendment to the
Management Plan at the December 1995 shareholder meeting. The
amount shown for fiscal year 1995 in the column "All Other
Compensation" is a forfeiture allocation to his account in the
Employees' Retirement Plan.
*3 For Mr. Tymoczko, the amount shown for fiscal year 1995 in
the column "All Other Compensation" is a forfeiture allocation to
his account in the Employees' Retirement Plan. Mr. Tymoczko
resigned in September 1995.
*4 Mr. Joseph, who joined the Company in April 1994, resigned
in May 1995 and, therefore, was not serving as an executive officer
at the end of the fiscal year. His stock option terminated with
his separation from the Company. The amount shown for fiscal year
1995 in the column "All Other Compensation" includes a $427
forfeiture allocation to his account in the Employees' Retirement
Plan and an $18,982 reimbursement for moving expenses.
*5 Mr. Campbell's fiscal year 1995 stock option grants include
a 15,000-share grant that is subject to shareholder approval of an
amendment to the Management Plan at the December 1995 shareholder
meeting and a 5,000-share option that was granted upon the
cancellation of a 5,000-share option granted to him in 1992. The
amount shown for fiscal year 1995 in the column "All Other
Compensation" is a forfeiture allocation to his account in the
Employees' Retirement Plan.
*6 Mr. Garrity joined the Company in January 1994. His fiscal
year 1995 stock option grant is subject to shareholder approval of
an amendment to the Management Plan at the December 1995
shareholder meeting. The amount shown for fiscal year 1995 in the
column "All Other Compensation" is a forfeiture allocation to his
account in the Employees' Retirement Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
----------------- ------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ------------ ------------ ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
R. Craig Kirsch *1 88,462 11.1 1.8125 09-07-95 NA NA
Robert I. Christian *2 100,000 12.5 1.00 06-21-05 62,889 159,374
75,000 9.4 1.8125 12-09-04 85,490 216,649
Walter M. Tymoczko 0 NA NA NA NA NA
Marc J. Joseph *3 50,000 6.3 1.8125 05-17-95 NA NA
Kenneth L. Campbell *4 15,000 1.9 1.00 06-21-05 9,433 23,906
5,000 0.6 1.00 06-21-05 3,144 7,969
Robert P. Garrity *5 25,000 3.1 1.00 06-21-05 15,722 39,844
</TABLE>
*1 Mr. Kirsch's 88,462-share option was granted in
substitution for a 150,000-share option that had been granted to
him in 1992. The substituted option had a value equivalent to that
of the cancelled option, under the Black-Scholes method for
determining equivalent value. The substituted option was
subsequently cancelled upon Mr. Kirsch's resignation.
*2 Mr. Christian's 100,000-share option is subject to
shareholder approval of an amendment to the Management Plan at the
December 1995 shareholder meeting.
*3 Mr. Joseph's option was cancelled upon his resignation in
May 1995.
*4 Mr. Campbell's 15,000-share option is subject to
shareholder approval of an amendment to the Management Plan at the
December 1995 shareholder meeting. His 5,000-share option was
granted in substitution for a 5,000-share option that had been
granted to him in 1992.
*5 Mr. Garrity's option is subject to shareholder approval of
an amendment to the Management Plan at the December 1995
shareholder meeting.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End at FY-End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized Unexercisable Unexercisable
---- --------------- -------- ------------- -------------
<S> <C> <S> <C> <C>
R. Craig Kirsch 0 NA 0 NA
0 NA
Robert Christian 0 NA 0 NA
175,000 12,500
Walter M. Tymoczko 0 NA 13,000 0
0 NA
Marc J. Joseph 0 NA 0 NA
0 NA
Kenneth L. Campbell 0 NA 13,000 375
17,000 2,125
Robert P. Garrity 0 NA 4,000 0
41,000 3,125
</TABLE>
TEN-YEAR OPTIONS/SAR REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock Price at Remaining
Options/SARs at Time of Time of New at Date of
Name and Repriced or Repricing or Repricing or Exercise Repricing or
Position Date Amended Amendment ($) Amendment ($) Price ($) Amendment
-------- ---- ------- ------------- ------------- --------- ---------
<S> <C> <C> <S> <C> <C> <C> <C>
R. Craig Kirsch 12-09-94 88,462 *1 1.8125 5.625 1.8125 7.25 years
(Former) Chairman,
President and Chief
Executive Officer
Kenneth L. Campbell 06-21-95 5,000 *2 1.00 4.625 1.00 7.08 years
Senior Vice President,
Finance
</TABLE>
*1 This option replaced an option earlier granted to Mr.
Kirsch for the purchase of 150,000 shares. The new option had a
value equivalent to that of the prior option, under the
Black-Scholes method for determining equivalent value. The new option
was subsequently cancelled upon Mr. Kirsch's resignation.
*2 This option replaces an option earlier granted to Mr.
Campbell for the purchase of 5,000 shares.
EMPLOYMENT CONTRACTS:
R. Craig Kirsch. Until his resignation on September 7, 1995, Mr.
Kirsch served under an employment agreement dated as of March 12,
1992. The agreement provided for five years' employment with base
compensation subject to the review of the compensation committee of
the Board of Directors, participation in any incentive compensation
program implemented by the Company and customary insurance benefits
for executives of the Company. Mr. Kirsch had stock options to
purchase a total of 288,462 shares of the Company's common stock;
these options were cancelled upon his resignation. The agreement
provides for Mr. Kirsch's covenant not to compete with the Company
for two years following his separation. Mr. Kirsch will receive
separation benefits in the form of salary continuation until the
earliest to occur of March 12, 1997, his employment with another
firm, or his death.
Robert I. Christian. Mr. Christian serves under an agreement of
employment "at will." The agreement provides for base compensation
at $125,000 annually, subject to adjustment by the Company's Chief
Executive officer, a bonus of $30,000 for fiscal year 1995,
participation in the Company's stock option plan and participation
in the Company's group insurance benefits and pension plan. The
agreement also provides for severance benefits in the event of the
termination of Mr. Christian's employment, other than for cause, in
the amount of one year's base salary, payable in installments on
the Company's normal salary payment cycle.
Robert P. Garrity. Mr. Garrity serves under an employment
agreement dated December 15, 1993. The agreement provides for two
years' employment with base compensation, presently $106,082
annually, subject to adjustment by the Company's Chief Executive
Officer, participation in any bonus, incentive compensation and
stock option plan for executives of the Company and participation
in the Company's group insurance benefits and pension plan. The
agreement also provides for Mr. Garrity's covenant not to compete
for a period of two years after his employment ends. Further, in
the event of the termination of Mr. Garrity's employment, other
than for cause, the agreement provides for continued payment of Mr.
Garrity's base salary and continued health care benefits for the
remainder of the contract term but no less than twelve months.
Marc J. Joseph. Until his resignation in May 1995, Mr. Joseph
served under an agreement of employment "at will." The agreement
provided for base compensation at $120,000 annually, subject to
adjustment by the Company's Chief Executive Officer, a bonus of
$30,000 for fiscal year 1995, participation in the Company's stock
option plan and participation in the Company's group insurance
benefits and pension plan. The agreement also provided for
severance benefits in the event of the termination of Mr. Joseph's
employment, other than for cause, in the amount of one year's base
salary, payable in installments on the Company's normal salary
payment cycle.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION: The
members of the compensation committee during fiscal year 1995 were
Messrs. Gold, Kirsch, Knowles and Shapira. Mr. Kirsch, who was a
nonvoting member, was President and Chief Executive Officer of the
Company until his resignation in September 1995. Mr. Shapira is a
Director and executive officer of Giant Eagle, Inc., and Phar-Mor,
Inc., both of which engaged in several arms-length business
transactions with the Company during the fiscal year. The Company
sold merchandise to Giant Eagle in the amount of $92,500 and to
Phar-Mor in the amount of $283,400. It also purchased from Giant
Eagle Christmas gift certificates for Company employees in the
amount of $29,200 and paid Giant Eagle $1,000 in trade show booth
fees.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the policy of the compensation committee to compensate
executive officers of the Company under a pay plan with three
components: base salary, performance-based pay and equity owner-ship.
The compensation plan was developed in 1990 with the
assistance and recommendation of compensation consultants. Under
this pay system, base salaries for executives are set at or just
below the market median for each position, as determined from
market survey information for companies with comparable sales
volume.
Performance-based compensation is paid pursuant to a plan
implemented in September 1990. The plan provides that a portion of
the compensation payable to each executive officer will be based
upon the individual's achievement of predetermined performance
objectives and the Company's attainment of overall performance
objectives. The plan is a flexible program in which performance
objectives, which are individually determined for each executive
appropriate to his/her position, are established each year by
senior management. The aggregate amount potentially payable to
executives is determined by the Board of Directors each year, based
upon a percentage of the Company's profits. The plan has been
suspended for the last two fiscal years, as management did not
expect the Company to have the financial resources to fund it. Two
executive officers nevertheless received bonuses in honor of
employment contracts made with them to bring them to the Company in
1994.
The equity ownership portion of executive officer compensation is
paid in the form of stock options under a Stock Option Plan
approved by shareholders in 1990. Under this plan, the Company
earlier granted options to executive officers and other managers
for approximately 450,000 shares. Options for an additional
458,462 shares were recently granted under the plan, subject to
shareholder approval of an amendment reserving additional shares
to the Stock Option Plan (see discussion regarding the Management
Plan above). The number of option shares granted to each
individual is based upon the executive's position in the Company
and the relative potential for that position to affect the
Company's performance. The option price for each grant is the fair
market value at the date of grant. Executives have ten years from
the date of grant to exercise their options by paying the option
price for the stock. Stock options earlier granted to two
executives were replaced during fiscal year 1995 because their
option prices were significantly higher than those of other
executives and significantly above the Company's current stock
value. Consequently, these options no longer provided an
incentive, and they were replaced at the market value of the
Company's common stock on the dates of grant of the replacement
options (see further discussion below, with regard to Mr. Kirsch).
The compensation committee believes that this three-component pay
system for executive officers effectively balances the employee's
need for income security and the Company's need to maximize
performance. The base salary component provides the executive a
reliable but moderate income stream. The opportunity for any
additional income exists only through the performance-based
compensation plan and the stock option plan and is available only
by virtue of individual achievement and overall Company
performance.
It has also been the policy of the compensation committee to
compensate R. Craig Kirsch, who was the Company's Chief Executive
Officer until his resignation in September 1995, under a compen-
sation plan consisting of base salary, performance-based pay and
equity ownership. This compensation plan was developed with the
assistance and recommendation of compensation consultants. Base
salary was set at or just below the market median for chief
executive officers of companies with comparable sales volume. Mr.
Kirsch had received no salary increases for four years.
Performance-based compensation was paid to Mr. Kirsch for his
achievement of predetermined performance objectives and the
Company's attainment of overall performance objectives, as
determined by the committee each fiscal year. The amount
potentially payable to him was also determined each year by the
committee, based upon a percentage of the Company's profits. As
noted above, this plan has been suspended for all executives for
the last two fiscal years. Mr. Kirsch received no performance-based pay
for the last four fiscal years.
The equity ownership component of Mr. Kirsch's compensation
consisted of two stock options. The first stock option -- for
200,000 shares -- was negotiated with Mr. Kirsch in 1990 to attract
him to the Company to plan and carry out a financial and
organizational restructuring of the Company. The option vested
over a three-year period, as it was originally anticipated that
restructuring was a three-year project. After two years it became
apparent that more than three years would be needed to stabilize
the Company and regain its profitability. Accordingly, Mr.
Kirsch's employment agreement was renegotiated in 1992 with an
extended term and an additional option for 150,000 shares, vesting
in two installments over five years. In December 1994, this option
was cancelled and replaced by an equivalent value option for 88,432
shares at a lower purchase price with the same vesting provisions.
The option was replaced because the price of the 1994 option was
significantly higher than the prices of options granted to other
executives and significantly higher than the Company's current
stock value. Consequently, the Compensation Committee believed
that the original option no longer provided an incentive. Both of
Mr. Kirsch's stock options were granted at fair market value on the
date of grant. Both options were cancelled upon Mr. Kirsch's
resignation.
By the Voting Members of the Compensation Committee:
Joel L. Gold, James H. Knowles, Jr., and David S. Shapira
COMPANY PERFORMANCE
The following chart is a comparison of five-year cumulative
shareholder return among Action Industries, Inc. common stock, the
Standard & Poor's Housewares Index and the Amex Market Value Index.
The comparison assumes $100 invested on June 30, 1990 in Company
stock or in either Index, including reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG ACTION INDUSTRIES, THE AMEX MARKET VALUE INDEX
AND THE S&P HOUSEWARES INDEX
<TABLE>
<CAPTION>
Fiscal Year Action Amex Market S&P Housewares
Ending Industries ($) Value Index ($) Index ($)
- ----------- -------------- --------------- --------------
<S> <C> <C> <C>
June 1991 158 99 116
June 1992 127 105 137
June 1993 69 120 145
June 1994 77 117 168
June 1995 37 138 193
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
Pursuant to Article V of the Company's Bylaws, the Directors have
the authority to have financial reports prepared or verified by
independent public accountants who need not be elected by the
shareholders. Ernst & Young served as the Company's independent
accountants throughout the fiscal year ended June 24, 1995 and are
continuing in that capacity for fiscal year 1996.
Representatives of Ernst & Young are expected to be present at the
meeting of the shareholders and will have the opportunity to make
a statement if they so desire and to respond to appropriate
questions.
OTHER BUSINESS
So far as is known, no business other than the election of
directors will come before the meeting. It is the intention of the
Board, however, that the proxy solicited in this statement will be
exercised in the discretion of the person or persons voting the
proxy on any matters that may properly come before the meeting.
SHAREHOLDER PROPOSALS FOR THE 1996 ANNUAL MEETING
Shareholders who wish to present proposals at the 1996 annual
meeting must send their proposals to the Company so that they are
received no later than July 5, 1996, in order that they may be
included in the proxy statement for that meeting.
September 19, 1995
EXHIBIT A
AMENDMENT OF ACTION INDUSTRIES, INC. STOCK OPTION PLAN
EXISTING PROVISION:
Section 5. Shares Subject to the Plan. The total number of
Option Shares which may be issued under the Plan will be 450,000
shares of the common stock of the Company, par value $ .10 per
share (the "Common Stock"), subject to adjustment as provided in
Section 10 below, which may be either authorized and unissued
shares or shares held in treasury by the Company. To the extent
that options granted under the Plan expire without being exercised,
the Option Shares granted under the expired options will again
become available for purposes of grant under the Plan.
PROPOSED AMENDMENT:
Section 5. Shares Subject to the Plan. The total number of
Option Shares which may be issued under the Plan will be 950,000
shares of the common stock of the Company, par value $ .10 per
share (the "Common Stock"), subject to adjustment as provided in
Section 10 below, which may be either authorized and unissued
shares or shares held in treasury by the Company. To the extent
that options granted under the Plan expire without being exercised,
the Option Shares granted under the expired options will again
become available for purposes of grant under the Plan.
EXHIBIT B
AMENDMENT OF ACTION INDUSTRIES, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
EXISTING PROVISIONS:
5. Shares Subject to the Plan. Subject to certain adjustments in
Section 8, the total number of Option Shares which may be issued
under the Plan is 55,300 shares of the Company's Common Stock, par
value $.10 per share, which may be either authorized and unissued shares
or shares held in treasury by the Company. To the extent that
options granted under the Plan expire without being exercised, the
Option Shares granted under the expired options will again become
available for grant under the Plan.
6.2 Grant of Option. An option to purchase 7,500 shares (the
"Option") will be granted automatically to each eligible Director
as of the following date (the "Date of Grant"):
(i) With respect to each eligible Director who was first
elected to the Board on or before July 17, 1991, the Date of Grant
is July 17, 1991.
(ii) With respect to each eligible Director who is first
elected to the Board after July 17, 1991, the Date of Grant is the
date of the Director's first election to the Board.
PROPOSED AMENDMENTS:
5. Shares Subject to the Plan. Subject to certain adjustments in
Section 8, the total number of Option Shares which may be issued
under the Plan is 105,300 shares of the Company's Common Stock, par
value $.10 per share, which may be either authorized and unissued shares
or shares held in treasury by the Company. To the extent that
options granted under the Plan expire without being exercised, the
Option Shares granted under the expired options will again become
available for grant under the Plan.
6.2 Grant of Option. An option to purchase shares (the "Option")
will be granted automatically to each eligible Director in the
amount and as of the date (the "Date of Grant") specified below:
(i) An option to purchase 4,000 shares will be granted to
each eligible Director as of the date the Director is first elected
to the Board.
(ii) An additional option to purchase 1,000 shares will be
granted to each eligible Director, subject to the following
exception, as of the first Monday of each fiscal year. This option
will not be granted, however, in the case of a Director who was
first elected to the Board since the January 1 prior to the then
current year grant.
APPENDIX 1
REVOCABLE PROXY
ACTION INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, DECEMBER 8, 1995
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joel M. Berez, Chairman, and Linda
S. Wyckoff, Secretary, or either of them, proxies of the
undersigned to vote the shares of ACTION INDUSTRIES, INC. which the
under-signed would be entitled to vote if personally present at the
meeting or any adjournment of it:
(1) To elect each of the following nominees for director for the
ensuing three years:
For Withheld
JOEL M. BEREZ [ ] [ ]
WILLIAM B. SNOW [ ] [ ]
YOUR SHARES WILL BE VOTED "FOR" UNLESS YOU INSTRUCT OTHERWISE.
(2) To amend the Action Industries, Inc. Stock Option Plan:
[ ] For [ ] Against [ ] Abstain
YOUR SHARES WILL BE VOTED "FOR" UNLESS YOU INSTRUCT OTHERWISE.
(3) To amend the Nonemployee Director Stock Option Plan:
[ ] For [ ] Against [ ] Abstain
YOUR SHARES WILL BE VOTED "FOR" UNLESS YOU INSTRUCT OTHERWISE.
(4) In their discretion to vote upon such other matters as may
properly come before the meeting.
Please be sure to sign and date
this Proxy in the box below. Date: __________________________
Please sign exactly as name appears hereon.
When signing as executor, trustee, etc., or as corporation officer,
give full title as such. For Stockholder sign above. Co-holder
(if any) sign above. Joint accounts, provide both signatures.
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope
provided.
ACTION INDUSTRIES, INC.
PLEASE ACT PROMPTLY.
SIGN, DATE AND MAIL YOUR PROXY CARD TODAY.
APPENDIX 2
ACTION INDUSTRIES, INC.
STOCK OPTION PLAN
(As Amended June 15, 1995)
Section 1. Establishment. There is hereby established the
Action Industries, Inc. Stock Option Plan (hereinafter call the
"Plan") pursuant to which certain key officers, managers, and other
executives employed by Action Industries, Inc. (hereinafter called
the "Company") and its subsidiaries (as hereafter defined) may be
granted options to purchase shares of Common Stock of the Company
(as defined in Section 5 below). The purpose of the Plan is to
advance the interests of the Company and its shareholders and to
promote the success of the Company's business by attracting highly
qualified personnel for positions of substantial responsibility and
by providing an incentive to key employees and encouraging them to
remain in the Company's employ.
Section 2. Administration. The Plan will be administered
by a committee (hereinafter called the "Committee") of not less
than three members, none of whom will be eligible to participate in
the Plan, who will be appointed and will serve at the pleasure of
the Board of Directors (hereinafter called the "Board"). A
majority of the Committee will constitute a quorum, and the acts of
a majority of the members present at an meeting at which a quorum
is present, or acts approved in writing by a majority of the
Committee, will be deemed the acts of the Committee. Subject to
the provisions of the Plan and to policies determined by the Board,
the Committee is authorized to adopt rules and regulations and to
take such action in the administration of the Plan as it deems
proper. The Committee will have full power to construe and
interpret the Plan and the options granted under the Plan, to
establish and amend rules for its administration, to grant options
under the Plan in accordance with the provisions of the Plan, and
to correct any defect or omission or reconcile any inconsistency in
the Plan or in any option to the extent the Committee deems it
necessary to do so. All actions taken and decisions made by the
Board or the Committee pursuant to the Plan will be binding and
conclusive on all persons interested in the Plan.
Section 3. Duration of Plan. The Plan will remain in
effect, subject to the Board's right to earlier terminate the Plan
pursuant to Section 13 below, until all shares subject to the Plan
(the "Option Shares") have been purchased or acquired.
Notwithstanding the foregoing, no option may be granted under the
Plan on or after the tenth anniversary of the Plan's effective
date.
Section 4. Eligibility. Key officers, managers, and other
executives employed by the Company and its subsidiaries (any of
whom may also be directors) who, in the opinion of the Committee,
are or will be primarily responsible for the growth and development
and future financial success of the Company are eligible to
participate in the Plan, except that Sholom Comay, Ernest Berez,
and outside directors of the Company are not eligible to
participate in the Plan. The Committee will, in its sole
discretion, from time to time select from the persons eligible to
participate in the Plan those to whom options will be granted
("optionees") and will determine the number of Option Shares to be
included in the option, the option price, the date(s) of exercise,
and any other terms of the option consistent with the provisions of
the Plan. No employee will have any right to receive an option
except as the Committee in its sole discretion determines. The
term "subsidiary," as used in the Plan or in any stock option
agreement entered into under the Plan, means a "subsidiary
corporation" as defined in Section 425 of the Internal Revenue Code
of 1986, as amended from time to time (the "Code").
Section 5. Shares Subject to Plan. The total number of
Option Shares which may be issued under the Plan will be 950,000
shares of common stock of the Company, par value $.10 per share
(the "Common Stock"), subject to adjustment as provided in Section
10 below, which may be either authorized and unissued shares or
shares held in treasury by the Company. To the extent that options
granted under the Plan expire without being exercised, the Option
Shares granted under the expired options will again become
available for purposes of grant under the Plan.
Section 6. Types of Options. Options granted under the Plan
may be either options which are incentive stock options under
Section 422A of the Code (hereinafter called "Incentive Stock
Options") or other options (hereinafter called "Nonstatutory Stock
Options"). The Committee, in its discretion, will determine
whether options granted under the Plan will be Incentive Stock
Options or Nonstatutory Stock Options. To the extent that both
Incentive Stock Options and Nonstatutory Stock Options are granted
to an optionee, separate stock option agreements will be entered
into for each. The provisions of the Plan and the stock option
agreements pursuant to which Incentive Stock Options are issued
will be construed in a manner consistent with Section 422A of the
Code and rule and regulations thereunder.
Section 7. Terms of Options. Each option granted under the
Plan will be evidenced by a stock option agreement between the
Company and the person to whom the option is granted and will be
subject to the following terms and conditions:
(a) Subject to adjustment as provided in Section 10
below, the price at which the Option Shares may be purchased will
be determined in each case by the Committee but will not be less
than their fair market value at the time the option is granted. If
an optionee owns (or is deemed to own under applicable provisions
of the Code and rules and regulations thereunder) more than ten
percent (10%) of the combined voting power of all classes of the
capital stock of the Company (or any parent or subsidiary of the
Company) and an option granted to that optionee is intended to
qualify as an Incentive Stock Option, the option price will be no
less than one hundred ten per cent (110%) of the fair market value
of the Option Shares at the time the option is granted.
(b) In accordance with Section 422(b) of the Code, the
aggregate fair market value of Option Shares with respect to which
Incentive Stock Options at first exercisable by optionees in any
calendar year (under all plans the Company and its subsidiaries)
will not exceed $100,000 determined at the time of grant. If any
option designated as an Incentive Stock Option, either alone or in
conjunction with any other options, exceeds the foregoing limit,
the portion of the option in excess of the limit will automatically
be reclassified as a Nonstatutory Stock Option by a whole number of
Option Shares, with later-granted options being reclassified first.
(c) During the lifetime of an optionee, the option may
be exercised only by the optionee. The option is not transferable
by the optionee other than by will or by the laws of descent and
distribution. At the discretion of the Committee, after the death
of the optionee the option may be transferred to the Company upon
such terms and conditions, if any, as the Committee and the
personal representative or other person(s) entitled to the option
under the optionee's will or the laws of descent and distribution
may agree within the period specified in subsection d(ii) of this
Section 7.
(d) The Committee will determine and the stock option
agreement will state the period, not exceeding ten (10) years from
the grant of the option, within which the option may be exercised
(such period being hereinafter referred to as the "Option Period"),
provided that:
(i) if the optionee ceases to be employed by the
Company or any of its subsidiaries for any reason other than death
or disability, the option may be exercised by the optionee at any
time prior to the expiration of the option or within three (3)
months after the date of termination of employment, whichever
period is the shorter, unless termination of employment is for
cause, in which case the option will immediately terminate;
(ii) if the optionee dies, the option may be
exercised at any time prior to the expiration of the option or
within twelve (12) months after the date of death, whichever period
is the shorter, and only by the optionee's personal representative
or other person(s) entitled to the option under the optionee's will
or the laws of descent and distribution; provided, however, that
the decedent must have been employed by the Company at the time of
his/her death or within three (3) months prior to his/her death;
(iii) if the employment of the optionee terminates
by reason of disability as defined in Section 22(e) (3) of the
Code, the option may be exercised by the optionee at any time prior
to the expiration of the option or within twelve (12) months after
the date of disability, whichever period is the shorter;
(iv) the option may not be exercised for more
Option Shares (subject to adjustment as provided in Section 10
below) after the termination of the optionee's employment or the
optionee's death or disability than the optionee was entitled to
purchase at the time of the termination of the optionee's
employment or the optionee's death or disability; and
(v) if an optionee owns (or is deemed to own under
applicable provisions of the Code and rules and regulations
thereunder) more than ten per cent (10%) of the combined voting
power of all classes of capital stock of the Company (or any parent
or subsidiary of the Company) and an option granted to such
optionee is intended to qualify as an Incentive Stock Option , the
option by its terms will not be exercisable after the expiration of
five (5) years from the date the option is granted.
(e) The option price of each Option Share purchased must
be paid in full at the time of each exercise of the option either
(i) in cash or (ii) in the discretion of the Committee, the
optionee may deliver to the Company shares of Common Stock or a
combination of shares of Common Stock and cash having as aggregate
fair market value equal to the option price of the Option Shares
being purchased; provided, however, that the shares of Common
Stock of the Company delivered by an optionee will be accepted in
payment of all or part of the option price of any option exercised
under the Plan only if the shares have been held by the optionee
for at least six (6) months.
(f) Options granted under the Plan will be exercisable
in whole or in part at such times and subject to such restrictions
and conditions, which need not be the same for all participants, as
the Committee in each instance approves, provided that such
restrictions and conditions are not inconsistent with those
provided in subsections (a) through (e) hereunder.
Section 8. Payroll Deductions. An optionee may, subject to
the prior approval of the Committee, direct the Company to withhold
a specified amount from the optionee's compensation through payroll
deductions in advance of the exercise of an option, by filing with
the Company a written authorization for payroll deductions. The
Company will have no duty to invest the amounts withheld through
payroll deductions, and these amounts will be deposited with the
general funds of the Company to be used for any corporate purpose.
The amounts withheld will be applied by the Company to the Option
Price at the time of exercise pursuant to the provision of Section
7(e) hereunder. Any amounts withheld but not used for the purchase
of Option Shares will be refunded to the optionee with no interest
paid thereon.
Section 9. Tax Withholding. Whenever Option Shares are to be
issued upon the exercise of a Nonstatutory Stock Option, the
Company will have the right to require the optionee to remit to the
Company an amount sufficient to satisfy federal, state, and local
tax-withholding requirements prior to the delivery of any
certificate for such shares. If an optionee makes a disposition of
shares acquired upon the exercise of an Incentive Stock Option
within either two (2) years after the option was granted or one (1)
year after the receipt of Option Shares by the optionee, the
optionee will promptly notify the Company and the Company will have
the right to require the optionee to pay the Company an amount
sufficient to satisfy federal, state and local tax-withholding
requirements.
Section 10. Adjustment of Number and Price of Shares.
(a) In the event that a dividend is declared upon
the Common Stock of the Company payable in shares of Company stock,
the number of Option Shares covered by each outstanding option, and
the number of shares available for issuance pursuant to he Plan but
not yet covered by an option agreement, shall be adjusted by adding
the number of shares which would have been distributable thereon if
such shares had been outstanding on the date fixed for determining
the shareholders entitled to receive the stock dividend.
(b) In the event that the outstanding shares of
Common Stock of the Company are changed into or exchanged for a
different number or kind of shares of capital stock or other
securities of the Company or of another corporation, whether
through reorganization, recapitalization, stock split-up,
combination of shares, merger, or consolidation, there shall be
substituted for the Option Shares covered by each outstanding
option, and for the shares available for issuance pursuant to the
Plan but not yet covered by an option agreement, the number and
kind of shares or capital stock or other securities which would
have been substituted therefor if such shares had been outstanding
on the date fixed for determining the shareholders entitled to
receive the changed or substituted stock or other securities.
(c) If there is to be any change, other than that
specified in this Section 10, in the number or kind of outstanding
shares of Common Stock of the Company or of any capital stock or
other securities into which such Common Stock is changed or for
which it has been exchanged, then, if the Board of Directors
determines, in its discretion, that such change equitably required
an adjustment in the number or kind of shares covered by
outstanding but unexercised options or which are available for
issuance pursuant to the Plan but not yet covered by an option
agreement, such adjustment will be made by the Board of Directors
and will be effective and binding for all purposes of the Plan and
on each outstanding stock option agreement.
(d) No adjustment or substitution provided for in
this Section 10 will require the Company to issue or to sell a
fractional share under any stock option agreement, and the total
adjustment or substitution with respect to each stock option
agreement will be limited accordingly.
(e) In the case of any adjustment or substitution
provided for in this Section 10, the option price per share in each
stock option agreement will be equitably adjusted by the Board of
Directors to reflect to greater or lesser number of shares of stock
or other securities into which the Option Shares have been changed
or for which shares have been substituted.
Section 11. Fair Market Value. For purposes of this Plan,
fair market value is defined as the reported closing sale price of
a share of Common Stock as reported on the American Stock Exchange
on the date the option is granted, or if no sale was made on that
date, on the next preceding date on which a sale was made.
Section 12. Change in Control of the Company. In t he event
of a "change in control" of the Company (as defined below), all
options outstanding under the Plan as of the date the change of
control occurs will, unless otherwise determined by the Board,
become fully exercisable, and the value of all outstanding options
will, unless otherwise determined by the Board, be cashed out. The
cash-out price will be the difference between the exercise price
and the defined "change-in-control price."
A "change in control" in defined as the acquisition by any
person of fifty percent (50%) or more of the outstanding shares of
the Company, or the occurrence of a transaction requiring
shareholder approval and involving the sale of all or substantially
all of the assets of the Company or the merger of the Company with
or into another corporation. The "change-in-control price" is
defined as either (as determined by the Board) (i) the highest
closing price of the Common Stock as reported on the American Stock
Exchange in the sixty-calendar-day period preceding the date of the
determination of the change-in-control price, or (ii) the highest
price paid or offered, as determined by the Board, in any bona fide
transaction or offer related to the change in control of the
Company, in the sixty-calendar-day period preceding the date of
determination of the change-in-control price.
In the event of a sale of all or substantially all of the
assets of the Company or the merger of the Company with or into
another corporation in a transaction in which options outstanding
under the Plan are not accelerated and cashed out as provided
above, each outstanding option will be assumed, or an equivalent
option will be substituted, by the successor corporation in the
transaction or a parent or subsidiary of such successor
corporation, unless the Board determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution,
that the optionee will have the right to exercise the option as to
all of the shares, including shares as to which the option would
not otherwise be exercisable. If the Board makes an option fully
exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Company will notify the optionee
that the option will be fully exercisable for a period of thirty
(30) days from the date of such notice, and the option will
terminate upon the expiration of the thirty-day period.
Section 13. Amendment and Termination of the Plan. The Board
has the authority to amend or terminate the Plan at any time
without shareholder approval; provided, however, that approval by
the holders of a majority of the outstanding shares of the Company
entitled to vote is required for any amendment which increases the
maximum number of shares for which options may be granted, changes
the standard for eligibility, or materially increases the benefits
which may accrue to participants under the Plan. However, no
action by the Board or shareholders may alter or impair any option
previously granted under the Plan without the optionee's consent.
Section 14. Compliance with Governmental Regulations.
Notwithstanding the other provisions of the Plan, the exercise of
an option will b effective only at such time as Counsel to the
Company has determined that the issuance and delivery of Option
Shares pursuant to the exercise will not violate any state or
federal securities or other laws. An optionee desiring to exercise
an option may be required by the Company, as a condition to the
effectiveness of any exercise of an option, to acknowledge and
agree in writing that all Option Shares to be acquired pursuant to
the exercise are being acquired for investment and not for resale
and will be held for his or her own account without a view to any
further distribution, that the certificates for the Option Shares
will bear an appropriate legend to that effect, and that the Option
Shares will not be transferred or disposed of except in compliance
with applicable federal and state laws. The Company may, in its
sole discretion, defer the effectiveness of any exercise of an
option in order to allow the issuance of the Option Shares to be
made pursuant to registration or an exemption from registration or
other methods for compliance available under the federal or state
securities laws. The Company will inform the optionee in writing
of its decision to defer the effectiveness of the exercise of an
option. During the period that the effectiveness of the exercise
of an option has been deferred, the optionee may, by written
notice, withdraw the exercise and obtain a refund of any amount
paid with respect thereto. The Company will be under no obligation
to effect the registration pursuant to the Securities Act of 1933
of any Option Shares to be issued hereunder or to effect similar
compliance under any state laws.
Section 15. Rights to Continued Employment or Participation.
(a) Employment. Nothing contained in the Plan or in any
stock option agreement confers upon any optionee any right with
respect to the continuance by the Company or any of its
subsidiaries or interferes, in any way, with the right of the
Company or any subsidiary to terminate the optionee's employment or
to change his/her compensation at any time.
(b) Participation. No employee has a right to be
selected as a participant or optionee in the Plan, or, having been
so selected, to be selected again as a participant or optionee.
Section 16. Headings and Captions. The headings and captions
contained in this Plan are for convenience only and may not be
utilized to interpret the Plan.
Section 17. Effective Date of the Plan. The Plan will become
effective upon the adoption of the Plan by the Board.
Section 18. Shareholder Approval. In conformity with Section
422A of the Code, the Plan will be subject to approval by the
shareholders of the Company within twelve (12) months after the
date the Plan is adopted by the Board.
APPENDIX 3
ACTION INDUSTRIES, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
(As Amended June 15, 1995)
1. Purpose of the Plan. The Nonemployee Director Stock Option
Plan (the "Plan") is intended to promote the best interest of
Action Industries, Inc. (the "Company") in attracting and retaining
as independent members (the "Directors") of the Board of Directors
(the "Board") persons with training, experience and ability. It is
intended to encourage the sense of proprietorship of such persons
and to stimulate their interest in the development and financial
success of the Company.
2. Type of Options. The options granted under this Plan are in-
tended to be nonqualified stock options (options that do not
qualify as "incentive stock options" within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended (the "
Code")).
3. Term of Plan. The Plan was adopted by the Board on July 17,
1991, subject to shareholder approval within twelve months. The
Plan is effective July 17, 1991 and will remain in effect, subject
to the Board's right to earlier terminate the Plan pursuant to
Section 9, until all shares subject to the Plan (the "Option
Shares") have been acquired. In any event, however, the Plan will
terminate and no further options will be granted after July 17,
2001.
4. Eligibility. All Directors who are not employees or former
employees of the Company and who are "disinterested persons" (as
used in Rule 16b-3 promulgated under the Securities Exchange Act of
1934 ("Rule 16b-3")) are eligible to participate in the Plan.
5. Shares Subject to the Plan. Subject to certain adjustments in
Section 8, the total number of Option Shares which may be issued
under the Plan is 105,300 shares of the Company's Common Stock, par
value $0.10 per share, which may be either authorized and unissued
shares or shares held in treasury by the Company. To the extent
that options granted under the Plan expire without being exercised,
the Option Shares granted under the expired options will again
become available for grant under the Plan.
6. Formula for Automatic Grant, Price and Exercisability
6.1 Disinterested Persons. No discretion concerning any deci-
sions regarding the Plan will be afforded to any person who is not
a disinterested person within the meaning of Rule 16b-3 or any
successor rule, and no option will be granted to any Director who
is not a Disinterested Person. If the Company determines at any
time during the existence of this Plan or of options granted under
the Plan that the grants of options cause the Directors not to be
Disinterested Persons, then this Plan will terminate and all
options outstanding will be void ab initio.
6.2 Grant of Option. An option to purchase shares (the
"Option") will be granted automatically to each eligible Director
in the amounts and as of the date specified below (the "Date of
Grant"):
(i) An option to purchase 4,000 shares will be granted to
each eligible Director as of the date the Director is first elected
to the Board.
(ii) An additional option to purchase 1,000 shares will be
granted to each eligible Director, subject to the following
exception, as of the first Monday of each fiscal year. This option
will not be granted, however, in the case of a Director who was
first elected to the Board since the January 1 prior to the then
current year grant.
Each person to whom an Option is granted under the Plan, or any
successor to the rights of such person because of the death of the
original grantee, is an "Optionee" under the Plan. Options granted
are in addition to the Directors' fees and any other benefits to
which Directors may be entitled.
Each Option granted under the Plan will be subject to a Stock
Option Agreement between the Company and the Optionee, in substantially
the form attached as Exhibit A.
6.3 Option Price. Each Option will have an exercise price for
the Option Shares that is equal to the fair market value of the
Common Stock on the Date of Grant. The fair market value as of a
specified date is the closing price of the Common Stock on that
date as reported by the American Stock Exchange, or, if no sale of
Common Stock occurred that day, then the next preceding day on
which a sale occurred.
6.4 Exercisability. Each Option will become vested and exer-
cisable in four equal installments on the first, second, third and
fourth anniversaries of the Date of Grant. The Option will remain
exercisable for a period expiring ten years from the Date of Grant.
7. Exercise of Options
7.1 Notice. Subject to the restrictions of this Plan, an
Option may be exercised, in whole or in part, by giving written
notice to the Company specifying the number of Option Shares to be
purchased. The notice will be accompanied by payment of the
purchase price in full by any of the methods provided in this Plan.
7.2 Method of Payment. Payment upon exercise of an Option
will be made by any of the following methods:
(i) in cash, by money order, by certified or cashier's
check or by personal check (if approved by the Board) of an amount
equal to the full purchase price of the Option Shares being pur-
chased, or
(ii) by delivery of shares of Common Stock already owned
by the Optionee for at least six months, which shares have a fair
market value (determined as of the date preceding the Company's
receipt of notice of exercise) equal to the full purchase price of
the Option Shares being purchased; provided that the Company will
pay to the Optionee, in exchange for any fractional shares
delivered by the Optionee the fair market value of which is in
excess of the exercise price, cash in an amount equal to the fair
market value of the fractional shares.
7.3 Termination of Membership on the Board. If an Optionee
ceases to be a Director for any reason other than death or dis-
ability, the Option may be exercised by the Optionee within three
months after the date of termination of directorship (but no later
than the expiration of the Option), unless the termination of
directorship is for "cause," in which case the Option will
immediately terminate. As used in this Plan, "cause" means (i)
gross negligence of or willful misconduct by the Director in the
performance of his duties as Director, (ii) material breach by the
Director of his fiduciary duty to the Company, (iii) engagement by
the Director in fraudulent activities materially injurious to the
Company, or (iv) conviction of the Director of a felony, a crime
involving moral turpitude or a crime, whether or not a felony,
involving misappropriation of property of the Company.
7.4 Death of an Optionee. In the event of the death of an Op-
tionee during his or her term as a Director or within three months
thereafter, to the extent the Optionee was entitled to exercise the
Option at the time of death, the Option may be exercised within
twelve months from the date of death (but no later than the expira-
tion of the Option) by the Optionee's estate or other person(s) en-
titled to the Option under the Optionee's will or the laws of
descent and distribution. To the extent the Optionee was not
entitled to exercise the Option at date of death, and to the extent
the Option is not exercised as provided in this Section, the Option
will terminate.
7.5 Disability of an Optionee. In the event an Optionee is,
in the reasonable determination of the Board of Directors, unable
to continue as a Director because of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may, to
the extent he or she was entitled to exercise the Option at the
date of such determination by the Board (the "Date of Disability"),
exercise the Option within twelve months from the Date of Disability (but no
later than the expiration of the Option). To the
extent the Optionee was not entitled to exercise the Option at the
Date of Disability, and to the extent the Option is not exercised
as provided in this Section, the Option will terminate.
7.6 Nontransferability. During an Optionee's lifetime, the
Option may be exercised only by the Optionee. The Option is not
transferable other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order
(as defined in the Code or Title I of the Employee Retirement
Income Security Act or the rules thereunder).
8. Adjustment of Number and Price of Shares
8.1 No Effect on Corporate Decisions. Except to the extent
Options granted under the Plan have been exercised, the existence
of the Plan and any Options granted will not affect in any way the
right or power of the Board or the shareholders of the Company to
make or authorize any adjustment, recapitalization, reorganization
or other change in the Company's capital structure or its business,
any merger or consolidation of the Company, any issue of debt or
equity securities ahead of or affecting the Common Stock or the
rights thereof, the dissolution or liquidation of the Company or
any sale, lease, exchange or other disposition of all or any part
of its assets or business or any other corporate act or proceeding.
8.2 Common Stock Dividend. In the event that a stock dividend
is declared upon the Common Stock of the Company, the number of Op-
tion Shares covered by each outstanding Option and the number of
shares available for issuance pursuant to the Plan but not yet
covered by a Stock Option Agreement shall be adjusted by adding the
number of shares which would have been distributable thereon if
such shares had been outstanding on the date fixed for determining
the shareholders entitled to receive the stock dividend.
8.3 Recapitalization, Reorganization, Etc. In the event that
the outstanding shares of the Common Stock of the Company are
changed into or exchanged for a different number or kind of shares
of capital stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization,
stock split-up, combination of shares, merger or consolidation,
there will be substituted for the Option Shares covered by each
outstanding Option and for the shares available for issuance
pursuant to the Plan but not yet covered by a Stock Option
Agreement the number and kind of shares of capital stock or other
securities which would have been substituted therefor if such
shares had been outstanding on the date fixed for determining the
shareholders entitled to receive the changed or substituted stock
or other securities.
8.4 Fractional Shares. No adjustment or substitution under
Section 8 will require the Company to issue or to sell a fractional
share, and the total adjustment or substitution with respect to
each Stock Option Agreement will be limited accordingly.
8.5 Adjustment of Option Price. In the event of any adjustment or
substitution under Section 8, the option price per share
will be adjusted, as equitably required, to reflect the greater or
lesser number of shares of Common Stock or other securities into
which the Option Shares have been changed or for which Option
Shares have been substituted.
9. Change in Control of the Company. A Change in Control of the
Company is any of the following: (i) a merger or consolidation in
which the Company is not the surviving entity or survives only as
a subsidiary of an entity other than a previously wholly-owned sub-
sidiary of the Company, (ii) the acquisition by any person of 50%
or more of the outstanding voting shares (including securities
exercisable for or convertible into voting shares) of the Company,
or (iii) a transaction requiring shareholder approval and involving
the sale, lease or exchange of all or substantially all the assets
of the Company.
In the event of a Change in Control of the Company, all Options
outstanding under the Plan as of the date of the Change in Control
will be cashed out (including Options which have not yet vested,
which will be deemed to vest immediately upon occurrence of the
event constituting the Change in Control). That is, Options
outstanding will be terminated by the Company in exchange for an
amount equal to the excess of the Change in Control Price over the
exercise price.
The Change in Control Price is either (as determined by the Board)
(i) the highest closing price of the Common Stock as reported on
the American Stock Exchange in the 60-day period preceding the date
of the event constituting or resulting in the Change in Control or
(ii) the highest price paid or offered in any bona fide transaction
or offer related to the Change in Control of the Company in the
60-day period preceding the date of the event constituting or
resulting in the Change in Control.
10. Amendment and Termination of the Plan. The Board may amend or
terminate the Plan without shareholder approval, except that
shareholder approval is required for any amendment which (i)
materially increases the aggregate number of shares which may be
issued pursuant to the Plan, (ii) materially modifies the standard
for eligibility, or (iii) materially increases the benefits which
may accrue to participants under the Plan. No action of the Board
or the shareholders may, without the consent of the Optionee, alter
or impair any Option previously granted under the Plan. The Plan
will not be amended more than once every six months, other than to
comply with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
11. Compliance with Governmental Regulations
11.1 Plan Subject to Regulation. The Plan, the granting and
exercise of Options under the Plan, and the obligation of the
Company to sell and deliver shares under the Options are subject to
all applicable laws, rules and regulations and to any approvals by
governmental agencies or national securities exchanges as may be
required.
11.2 Representation of Optionee. As a condition to the effec-
tiveness of any exercise of an Option, the Company may require an
Optionee to acknowledge and agree in writing that all Option Shares
will be acquired for investment and not for resale and will be held
for his or her own account without a view toward further distribu-
tion, that the certificates for Option Shares will bear an ap-
propriate legend to that effect, and that the Option Shares will
not be transferred or disposed of except in compliance with
applicable federal and state laws.
11.3 Share Restrictions. Certificates for shares delivered un-
der the Plan may be subject to such stock transfer orders and other
restrictions as the Company deems advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the stock is listed and
any applicable federal or state law. The Company may cause a
legend or legends to be placed upon the certificate to refer to
those restrictions.
12. Captions. The captions appearing in this Plan are for con-
venience only and may not be used in the interpretation of the
Plan.
13. Governing Law. This Plan and all actions taken pursuant to
the Plan will be governed and construed in accordance with the laws
of the Commonwealth of Pennsylvania.
