SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant /X/
Filed by a party other than the Registrant
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
THE OHIO ART COMPANY
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
THE OHIO ART COMPANY
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 6, 2000
-----------------------
Bryan, Ohio
May 9, 2000
To the Shareholders of
The Ohio Art Company
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders
of THE OHIO ART COMPANY will be held at the Summit Club, 110 W. Berry
Street, Fort Wayne, Indiana, on June 6, 2000 at 10:00 AM local time for the
following purposes:
1. To elect three directors to serve for a term of two years.
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 28, 2000 are
entitled to notice of and to vote at the meeting.
William C. Killgallon
Chairman of the Board
IMPORTANT
WHETHER YOU OWN FEW OR MANY SHARES, IT IS IMPORTANT THAT YOUR STOCK BE
REPRESENTED AT THIS MEETING; THEREFORE, PLEASE FILL IN, DATE, AND SIGN THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO STAMP IS
NECESSARY IF MAILED IN THE U.S.
1
<PAGE>
THE OHIO ART COMPANY
One Toy Street
Bryan, OH 43506
---------------
PROXY STATEMENT
---------------
Annual Meeting of Shareholders, June 6, 2000
The accompanying proxy is solicited on behalf of the Board of Directors for
use at the annual meeting of shareholders to be held on June 6, 2000. The proxy
and this proxy statement are being mailed to shareholders on or about May 9,
2000. The expense of this solicitation is to be borne by the Company, and the
Company may also reimburse persons holding shares in their names or in the names
of their nominees for their reasonable expenses in sending proxies and proxy
material to their principals.
Unless authority is withheld, proxies in the accompanying form which are
properly executed and duly returned to the Company will be voted at the meeting.
Each proxy granted is revocable and may be revoked either by executing a later
dated proxy or by giving notice to the Company in writing or in open meeting
before any vote is taken.
Abstentions will be treated as votes cast on a particular matter as well as
shares present for purposes of establishing a quorum. Where nominee record
holders do not vote on specific issues because they did not receive specific
instructions on those issues from the beneficial owners of the shares (broker
"non-votes"), those broker non-votes will not be treated as either votes cast or
shares present or represented for purposes of establishing a quorum.
As of April 28, 2000, the record date, the Company had outstanding and
entitled to vote at the meeting or at any adjournments thereof 886,784 shares of
Common Stock. Each shareholder of record on the record date is entitled to one
vote for each share held.
INFORMATION WITH RESPECT TO DIRECTORS AND NOMINEES
The Board of Directors of the Company is divided into two classes, with one
class being elected each year for a two-year term. The Company's Code of
Regulations provides that the Board of Directors shall consist of seven
directors or such other number as may be fixed at a meeting of shareholders.
Shareholders are being asked to elect three directors to serve for a term of two
years or until their respective successors are elected and qualified. Proxies
given to the Board of Directors will be voted in accordance with the direction
of the
shareholders. It is expected that shares held by the Killgallon Family (as
defined below) will be voted to elect the three nominees set forth in the
following tabulation. Directors will be elected by a plurality of the votes cast
by the shareholders present in person or by proxy and entitled to vote at the
meeting.
If any nominee named herein shall be unable to serve, the proxies will be
voted for a substitute nominee and for the other nominees. The Company has no
reason to believe that any listed nominee will be unable to serve.
2
<PAGE>
Position with the Company
or Other Principal Occupation Director
Name and Age and Other Directorships Since
------------ ----------------------------- --------
NOMINEES TO SERVE UNTIL 2002
Neil H. Borden, Jr. (68)......Professor of Business 1988
Administration (Emeritus), Darden
Graduate School of Business
Administration, University of
Virginia, 1963 to present.
William C. Killgallon (61)....Chairman of the Board and Chief 1965
Executive Officer since June 1989.
Also Director of Columbia Ventures.
Wayne E. Shaffer (77).........Senior Partner of Newcomer, 1996
Shaffer & Spangler (a law firm).
DIRECTORS CONTINUING TO SERVE UNTIL 2001
W. C. Killgallon (87).........Chairman, Executive Committee 1955
of the Board and Consultant to
the Company.
Martin L. Killgallon II (52)..President since June 1989. 1981
Frank L. Gallucci (75)........Attorney; Chairman and Managing 1995
Director Devonshire Limited (an
investment company). Previously
served as Senior Partner of
Gallucci, Hopkins & Theisen
(a law firm) from 1976 to 1993.
Joseph A. Bockerstette (42)...President, Seyfert Foods, Inc. 1997
Previously President of Mullinix
Packaging in 1993 and 1994.
W. C. Killgallon is the father of William C. Killgallon and Martin
L. Killgallon II. The Messrs. Killgallon are "control" persons at the
Company, as such term is defined by regulations of the Securities and
Exchange Commission.
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
Under regulations of the Securities and Exchange Commission, persons who
have power to vote or dispose of shares of the Company, either alone or jointly
with others, are deemed to be beneficial owners of such shares.
Set forth in the following table are the beneficial holdings on the
basis described above as of April 28, 2000 of: (a) each person known by the
Company to own beneficially more than 5% of its outstanding stock, (b) directors
or nominees not listed in (a), and (c) officers and directors as a group and
certain members of the Killgallon family, the owners in each case having the
sole voting and investment power, except as otherwise noted.
3
<PAGE>
% OF
NAME SHARES CLASS
----------------------- ------ -----
(a) W. C. Killgallon* .................... 49,412 (1)(2) 5.6%
P.O. Box 111
Bryan, Ohio 43506
William C. Killgallon* ............... 216,373 (1)(2)(3)(4) 24.4%
P.O. Box 111
Bryan, Ohio 43506
Martin L. Killgallon II* ............. 269,919 (1)(2)(4)(5) 30.4%
P.O. Box 111
Bryan, Ohio 43506
Ruth K. Gilbert ...................... 31,942 (1)(6) 3.6%
P.O. Box 111
Bryan, Ohio 43506
Katherine K. Michelsen ............... 20,050 (1)(8) 2.3%
P.O. Box 111
Bryan, Ohio 43506
William C. Killgallon and Martin
L. Killgallon II as Trustees of
the Company's Employee Stock
Ownership Plan ....................... 83,863 (4) 9.5%
P.O. Box 111
Bryan, Ohio 43506
(b) Joseph A Bockerstette ................ 0
Neil H. Borden, Jr ................... 604 **
Frank L. Gallucci .................... 1,000 **
Wayne E. Shaffer ..................... 1,000 **
(c) Officers and Directors as a Group .... 449,494 (7) 50.7%
(9 Persons)
* A director
** Less than 1%
(1) W. C. Killgallon is the father of William C. Killgallon, Martin L.
Killgallon II, Ruth K. Gilbert, and Katherine K. Michelsen. The
total number of shares beneficially owned by members of the
Killgallon Family listed above and their spouses and children (the
"Killgallon Family"), excluding duplications, is 526,211 or
approximately 59% of the number outstanding. Beneficial ownership
of shares held by spouses and children is disclaimed.
(2) Includes 1,200 shares held by the Killgallon Foundation, of which
W. C. Killgallon, William C. Killgallon, and Martin L. Killgallon II
are officers and directors, and as to which beneficial ownership is
disclaimed.
(3) Does not include 4,190 shares owned by his wife or 74,680 shares held by his
wife as trustee for the benefit of children but does include 8,654 shares
held in a revocable trust for the benefit of Ruth K. Gilbert. William C.
Killgallon is a trustee of this trust and disclaims any beneficial ownership
to the shares held by the trust.
4
<PAGE>
(4) Includes 83,863 shares which reflect allocated and unallocated shares held
in the ESOP (as defined below) as to which William C. Killgallon and Martin
L. Killgallon II, as trustees and members of the ESOP's Plan Committee have
shared investment power. Of these 83,863 shares, 21,738 shares reflect
shares that have not been allocated to participants' accounts and to which
William C. Killgallon and Martin L. Killgallon II, as trustees and members
of the Plan Committee have shared voting power. Of the 62,125 allocated
shares, 5,359 and 5,187 shares have been allocated to the accounts of
William C. Killgallon and Martin L. Killgallon II, respectively, as to which
they have sole voting power. Messrs. Killgallon have no voting power with
respect to the remaining 51,579 shares in the ESOP. Messrs. Killgallon
disclaim beneficial ownership of all the shares held in the ESOP other than
those allocated to their respective accounts.
(5) Includes 31,860 shares held for children of Martin L. Killgallon II as to
which beneficial ownership is disclaimed, but does not include 1,129 shares
owned by his wife or 26,750 shares held by adult children.
(6) Includes 8,654 shares held in trust as described in Note 3 above. Includes
44 shares in an IRA. Includes 23,244 shares held for a child as to which
beneficial ownership is disclaimed.
(7) Includes shares held by directors in (a) and (b) above, but excludes
duplications.
(8) Includes 18,856 shares held for children as to which beneficial ownership is
disclaimed.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual compensation for the Company's
Chief Executive Officer and the Chief Operating Officer as well as the total
compensation paid to each individual for the Company's three previous fiscal
years:
ANNUAL COMPENSATION
---------------------------------
NAME AND (a) OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY COMPENSATION
---- -------- -------------
William C. Killgallon 2000 $230,054 $23,678
Chairman of the Board 1999 233,620 --
1997 232,259 52,781
Martin L. Killgallon II 2000 230,054 --
President 1999 233,620 --
1997 232,259 $24,551
(a) The Company's fiscal year-end was changed from December 31st to
January 31st effective in 1999.
For the year ended January 31, 2000, ESOP shares have yet to be reallocated
to all participants. As of April 28, 2000, the closing price per share on the
American Stock Exchange was $13 1/4. The value of shares to be allocated for
fiscal 2000, if any, is not included in compensation above.
5
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of the Company has
furnished the following report on executive compensation:
The fundamental philosophy of the Company's compensation program is to
offer competitive compensation opportunities for all employees, based primarily
on the individual employee's personal performance relative to their area of
responsibility and the contribution to the short-term and long-term strategic
objectives of the Company. The philosophy is further driven by the concept of
paying minimal annual inflationary increases and, instead, rewarding the
employee through a generous incentive program when the Company is profitable.
The compensation of the executive officers of the Company and its
subsidiaries, and those employees drawing over $75,000 per year is reviewed
annually and recommended by the Compensation Committee to the Board of Directors
for their approval. Unanimous approval of the recommendation was made by the
Directors. The "committee" is comprised entirely of non-employee directors.
The foundation of the Company's executive compensation program is based
upon the promotion of the Company's short-term and long-term business
objectives, the creation of a performance-oriented environment, and the
enhancement of shareholder value through the greatest achievable profitability.
The elements of the Company's executive compensation program are:
- Base salary compensation
- Annual incentive compensation
Base salary compensation is intended to compensate the executive officers
at a level commensurate with their responsibilities and contribution to the
short- and long-term objectives of the Company. The Committee further takes into
account the local and general economic conditions, future business prospects,
and length of employment with the Company.
Annual incentive compensation is purely short-term performance based, and
is comprised of the Company's Cash Bonus Incentive Plan and the ESOP Profit
Sharing Plan. These plans provide annual incentive awards, payable in cash and
the Company's common stock, respectively, based upon the profitability of the
Company and other considerations.
In its annual review of executive officer compensation for fiscal 2000, and
based on interim financial statements available for fiscal 2000, the Committee
considered the bonus of the Company's Chief Executive Officer, William C.
Killgallon, and Chief Operating Officer, Martin L. Killgallon II, for fiscal
2000 and the level of base salary for 2000 in light of the Company's estimated
overall performance for fiscal 2000, and the performance of the CEO and COO
relative to the long-term objectives of the Company. Based on that review, no
bonuses were paid for fiscal 2000; however, the Committee recommended salary
increases for fiscal 2001. Historically, the Committee takes into account the
success of the Company in meeting its financial performance objectives for the
prior year and the CEO's and COO's length of service to the Company in
determining base salary.
6
<PAGE>
The foregoing report is submitted by the members of the Company's
Compensation Committee.
Wayne E. Shaffer
Neil H. Borden, Jr.
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return,
assuming reinvestment of dividends, to the shareholders of the Company (OAR)
during the five-year period ended January 31, 2000, as well as an overall stock
market index (The Russell 2000 Index) and the Company's peer group index.
Comparison of Five-Year Cumulative Total Return
Ohio Art Company, Russell 2000 Index and Peer Group
(Performance Results Through 1/31/2000)
[Graph Omitted]
- --------------------------------------------------------------------------------
1/31/95 1/31/96 1/31/97 1/31/98 1/31/99 1/31/00
- --------------------------------------------------------------------------------
Ohio Art Company 100.00 174.06 109.58 91.84 110.53 127.39
Russell 2000 Index 100.00 129.94 154.49 182.17 182.32 211.99
Peer Group 100.00 150.73 159.61 225.63 161.72 85.60
- --------------------------------------------------------------------------------
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in Ohio Art Company common
stock, Russell 2000 Index, and Peer Group.
7
<PAGE>
The Company maintains defined benefit qualified retirement plans applicable
to employees of the Company and its subsidiaries, providing a pension based on
compensation and years of service.
Set forth below are estimated annual benefits payable for the lifetime of a
participant who is in both of the Company's defined benefit plans on retirement
at age 65 in the remuneration and service class specified. Plan beneficiaries
may elect actuarially equivalent benefits including lump sum benefits under one
plan.
ESTIMATED ANNUAL RETIREMENT BENEFITS (1)
Years of Service at Retirement (2)
Average ------------------------------------------
Compensation (3) 10 20 25 30
--------------- ------- ------- ------- -------
$100,000 ............... $14,000 $27,500 $34,300 $41,000
200,000 ............... 26,300 52,100 65,000 77,900
250,000 ............... 32,400 64,400 80,400 96,300
300,000 ............... 38,600 76,700 95,800 114,800
350,000 ............... 44,700 89,000 111,100 133,200
400,000 ............... 50,900 101,300 126,500 151,700
(1) One plan was amended on March 13, 1992 to comply with Tax Reform Act of
1986. Individuals' benefits are never less than the benefits based on the
provisions of the plan prior to amendment, determined as of March 31, 1992,
or, for certain highly compensated employees, as of December 30, 1989.
(2) Benefits will vary slightly between individuals because benefit rate
increases under one plan apply only to service after the effective date of
the increase. Benefits shown include the maximum benefit payable for
retirements during 2000 under this plan.
(3) Under one plan, based on the average of the highest five consecutive years
of the ten years prior to retirement. The Internal Revenue Code limits the
amount of annual compensation that may be taken into account in determining
an individual's benefit accrued under a qualified retirement plan. The
current maximum amount of annual compensation is $160,000, and this limit is
expected to be adjusted annually to reflect cost-of-living increases.
The years of credited service for participants listed in the remuneration
table are William C. Killgallon 31 years and Martin L. Killgallon II, 21 years.
Although current IRS regulations limit compensation that may be taken into
account in determining an individual's pension to $160,000 per year
retroactively, the Company has a non-qualified supplemental pension plan which
will make up the difference between actual compensation and the IRS limitation.
The plan covers both individuals listed under Compensation of Executive
Officers. Based on the supplemental plan, the current covered compensation for
both of the above individuals is William C. Killgallon $323,861 and Martin L.
Killgallon II $319,539.
8
<PAGE>
BOARD OF DIRECTORS
The Company's Board of Directors had four regular meetings in the calendar
year 1999. Members of the Board who are not otherwise compensated by the
Company, received a fee of $12,000 for their services in the calendar year 1999,
and in addition, were compensated at a rate of $1,000 for each committee meeting
held on a date other than a Board meeting date and each Board meeting in excess
of five per year attended. Each incumbent director attended and or participated
telephonically in at least 50% of the meetings of the Board and committees of
which he was a member.
COMMITTEES
The Company has standing Executive, Audit, and Compensation Committees, but
no Nominating Committee, changes in the Board of Directors being considered by
the whole Board.
Executive Committee. The members of the Executive Committee are
W. C. Killgallon, William C. Killgallon, and Martin L. Killgallon II.
The Executive Committee met two times in calendar year 1999. The Executive
Committee has all of the authority of the Board of Directors (except for action
relating to dividends, stock issuances, and certain fundamental corporate
changes) between Board meetings.
Audit Committee. The members of the Audit Committee are Neil H. Borden, Jr.
and Joseph A. Bockerstette. In calendar year 1999, this Committee met twice. The
Committee advised on the appointment of independent auditors and consulted with
management and with the Company's independent auditors with respect to the scope
of the audit performed by such auditors, reviewed the audit report and
management letter received from the independent auditors and management's
response to the letter, reviewed the system of internal controls, reviewed
performance of the Company personnel responsible for accounting matters, and
discussed fees paid to the independent auditors.
Compensation Committee. The members of the Compensation Committee are Wayne
E. Shaffer and Neil H. Borden, Jr. In calendar year 1999, this Committee met
once. This Committee reviews and recommends compensation of those employees
drawing over $75,000 per year.
INDEPENDENT AUDITORS
The Board of Directors selected PriceWaterhouseCoopers LLP, to be the
independent auditors for the current year.
SHAREHOLDER PROPOSALS
For inclusion in the Company's 2001 proxy statement, all shareholder
proposals for consideration at the annual meeting of the shareholders of the
Company to be held in 2001 must be received at the
Company's executive offices by December 4, 2000. Proposals must also comply with
regulations of the Securities and Exchange Commission.
9
<PAGE>
OTHER BUSINESS
The management knows of no other business to be transacted, but if any
other business does come before the meeting, the persons named as proxies will
vote or act with respect to such business in accordance with their best
judgment.
William C. Killgallon
Dated: May 9, 2000 Chairman of the Board
10
<PAGE>
PROXY SOLICITED BY BOARD OF DIRECTORS
THE OHIO ART COMPANY - MEETING OF SHAREHOLDERS - JUNE 6, 2000
The undersigned hereby appoints Joseph A. Bockerstette and Jerry D. Kneipp,
and each of them and each with power of substitution to vote the stock of the
undersigned at the annual meeting of shareholders of THE OHIO ART COMPANY to be
held June 6, 2000 or at any adjournment thereof, with all the powers the
undersigned would possess if present. The proxies are instructed to vote as
follows:
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 1. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
(Continued and to be signed and dated on the other side)
Please mark boxes or X in blue or black ink.
1. ___ FOR ___ WITHHOLD AUTHORITY to elect, except as indicated, the
three nominees listed below:
Neil H. Borden, Jr., William C. Killgallon, Wayne E. Shaffer
Instructions: To withhold authority to vote for any nominee, write
the nominee's name on this line:
- ---------------------------------------------------------------------
2. In their discretion on all other matters which may properly come
before the meeting.
Please sign name(s) exactly as imprinted.
Executors, administrators, trustees, and others
signing in a representative capacity should
indicate the capacity in which they sign.
Dated: _________________________,2000
-------------------------------------
(Signature)
-------------------------------------
(Signature)
PLEASE DATE, SIGN, AND RETURN THIS PROXY
