<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) 9/29/95
AMERICAN CONSUMER PRODUCTS, INC.
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(Exact name of registrant as specified in charter)
Delaware O-15051 34-1376833
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(State or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification
incorporation or Number)
organization)
31100 Solon Road, Solon, Ohio 44139
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(Address of Registrant's principal
executive offices)
Registrant's telephone number, including area code 216-248-7000
________________________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
______________________
The Exhibit Index is located at Page 4.
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
(a) As set forth in the press release dated September
29, 1995 and attached hereto as Exhibit 99.1, Vista 2000, Inc. acquired
beneficial ownership of approximately 96% of the outstanding common stock, $.10
par value per share (the "Common Stock"), of the Registrant, including 22,000
shares of Common Stock held by Vista prior to commencement of the Offer (as
hereinafter defined) pursuant to a tender offer commenced by Vista on August
30, 1995 pursuant to an Offer to Purchase dated August 30, 1995 and related
Letter of Transmittal. The Offer to Purchase, together with the related Letter
of Transmittal, shall be referred to hereinafter as the "Offer". The
aggregate amount of consideration paid by Vista for the acquisition of control
was approximately $13,218,539, all of which was provided from Purchaser's
internally available funds.
Additional information regarding the Offer, including
a description thereof and of any arrangements or understandings among members
of both the former and new control groups and their associates with respect to
the election of directors and other matters, is included in the Registrant's
Solicitation/Recommendation Statement on Schedule 14D-9 which was filed with the
Securities and Exchange Commission on September 14, 1995 and provided to the
Registrant's stockholders. A copy of the Schedule 14D-9 is attached hereto as
Exhibit 99.2 and incorporated herein by referrence.
(b) The Registrant is not aware of any arrangements,
including any pledge by any person of securities of the Registrant or of Vista,
the operation of which may at a subsequent date result in a change in control
of the Registrant.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits.
See the Exhibit Index located at sequential page 4 of this
Report.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Date: October 12, 1995 AMERICAN CONSUMER PRODUCTS, INC.
BY: /s/ Stephan W. Cole
-----------------------------------
Name: Stephan W. Cole
Title: Chief Executive Officer
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
99.1 Press Release dated September 29, 1995
99.2 Solicitation/Recommendation Statement
on Schedule 14D-9 filed with the Securities
and Exchange Commission on September 14, 1995.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
NEWS FROM VISTA 2000, INC. (NASDAQ; VIST)
VISTA 2000, INC. For additional information
11660 Alpharetta Highway A. Richard Marshall
Roswell, GA 30076 Investor Relations VISTA 2000, INC.
SEPTEMBER 29, 1995 770-751-3776
VISTA 2000, INC. COMPLETES TENDER OFFER FOR
AMERICAN CONSUMER PRODUCTS, INC.
ROSWELL, GA, SEPTEMBER 29, 1995. . . . VISTA 2000,INC. (NASDQ: VIST, VISTW)
announced today the succesful completion of its tender offer to acquire the
common stock of American Consumer Products, Inc. (NASDQ:ACPI) at $5.30 per
share in cash. Approximately 2,494,064 shares of ACPI's common stock were
tendered pursuant to VISTA's tender offer, according to a preliminary count by
Harris Trust Company of New York, the depository for the tender offer. The
tender offer expired by its terms at 12:00 midnight, New York City time, on
Thursday, September 28.
Vista has accepted all validly tendered shares for payment at $5.30 per share.
The tendered shares, when aggregated with the 22,000 shares held by Vista prior
to commencement of the tender offer, represent approximately 96% of the
outstanding shares of common stock of ACPI on a fully diluted basis. Vista
expects to commence payment for all validly tendered shares on Monday, October
2.
The preliminary count includes shares tendered by notice of guaranteed delivery,
and is subject to final verification.
AMERICAN CONSUMER PRODUCTS, INC. manfactures and distributes consumer hardware
products, including key blanks, key related accessories, knives, letters,
numbers and signs, driveway markers, snow shovels and pet products, as well as
gloves and other items through its Boss Manufacturing subsidary, which are sold
by ACPI's national field sales force to hardware, mass merchandise and DIY
retailers across the United States. In addition, ACPI's national field sales
organazation represents Pawtucket Fasteners for the sale of Sharon Fastener
Products (nuts, bolts and screws).
VISTA 2000, INC. consists of a holding company with four divisions. Its
appliance division provides high value appliances for personal safety and home
security including gas detectors and wireless home security systems; its
housewares divison is a leading supplier of kitchen and convience housewares;
its hardware divison has over 6,000 products including keys, fastners, and
other various lines, its distribution group provides both sales and service to
over 25,000 retailers nationwide, and has a direct to consumer sales group
which promotes its products through a direct to consumer catalog and on
television.
<PAGE> 1
EXHIBIT 99.2
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
SCHEDULE 14D-9
-------------------------
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
AMERICAN CONSUMER PRODUCTS, INC.
(NAME OF SUBJECT COMPANY)
AMERICAN CONSUMER PRODUCTS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.10 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
025236-10-0
((CUSIP) NUMBER OF CLASS OF SECURITIES)
STEPHAN W. COLE
PRESIDENT
AMERICAN CONSUMER PRODUCTS, INC.
31100 SOLON ROAD
SOLON, OHIO 44139
(216) 248-7000
(NAME, ADDRESS AND TELEPHONE NUMBER
OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
GREGORY A. SMITH, ESQ.
THOMPSON, HINE AND FLORY
1100 NATIONAL CITY BANK BUILDING
629 EUCLID AVENUE
CLEVELAND, OHIO 44114
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- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is American Consumer Products, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 31100 Solon Road, Solon, Ohio 44139. The title of the class of
equity securities to which this Statement relates is the Common Stock, par value
$.10 per share of the Company not owned by the Purchaser (as hereinafter
defined).
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer (the "Offer") made by Vista
2000, Inc., a Delaware corporation (the "Purchaser"), to purchase all
outstanding shares of common stock, par value $.10 per share, of the Company not
owned by the Purchaser (the "Shares") at a price of $5.30 per share (the "Offer
Price"), net to the seller in cash. According to the Tender Offer Statement on
Schedule 14D-1, dated August 30, 1995, filed by Purchaser with the Securities
and Exchange Commission on August 30, 1995 (the "Schedule 14D-1"), the address
of the principal executive offices of Purchaser is 11660 Alpharetta Highway,
Suite 330, Roswell, Georgia 30076.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings and
actual and potential conflicts of interest between the Company and its
affiliates and certain of its executive officers, directors and affiliates are
described in Annex A hereto, which description is incorporated herein by
reference in its entirety.
Certain other contracts, agreements, arrangements and understandings and
actual and potential conflicts of interest between the Company and its
affiliates and the Purchaser, and its executive officers, directors and
affiliates are set forth below.
INTERESTS OF CERTAIN PERSONS IN THE OFFER
Stephan W. Cole, President and a Director of the Company, Richard F. Bern,
Executive Vice President and a Director of the Company and Jeffrey A. Cole, a
Director of the Company and Stephan W. Cole's brother, beneficially own in the
aggregate 1,325,796 Shares (50.60% on a fully diluted basis). In addition, as
discussed below under the headings "Employment Agreements" and "Real Estate
Purchase Agreements", and "Indemnification Letter Agreement", the foregoing
persons or certain of their affiliates are parties to certain contracts and
agreements with the Purchaser or the Company which have been entered into in
connection with the Offer.
The Company and the Purchaser have also entered into an indemnification
letter agreement whereby the current directors and officers of the Company will
be entitled to indemnification by the Company in respect of their positions as
directors or officers of the Company for matters occurring prior to the
consummation of the Offer. See the discussion below under the heading
"Indemnification Letter Agreement".
As of September 1, 1995, directors and officers of the Company, as a group,
beneficially owned 1,356,576 Shares (51.77% on a fully diluted basis).
CONFIDENTIALITY AGREEMENT
On August 2, 1995, the Purchaser and the Company entered into a
confidentiality agreement (the "Confidentiality Agreement"). The following
description of the Confidentiality Agreement does not purport to be complete and
is qualified in its entirety by reference to the Confidentiality Agreement
attached hereto as an exhibit.
Pursuant to the Confidentiality Agreement, the Purchaser agreed to maintain
the confidentiality of evaluation material regarding the business, assets and
operations of the Company provided by the Company to the Purchaser. Among other
things, the Confidentiality Agreement prevented the Purchaser from participating
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<PAGE> 3
in any transaction involving an investment in or an acquisition of the stock or
assets of the Company. The Company waived compliance with this provision as it
relates to the Offer on August 29, 1995. In the event the Offer is not
consummated, the Purchaser will be restricted for three years from (i) employing
or soliciting for employment any person currently employed by the Company and
(ii) soliciting business from any customer or supplier of the Company not
previously contacted by the Purchaser.
ESCROW AGREEMENT
The Purchaser and the Company have entered into an Escrow Agreement (the
"Escrow Agreement") dated as of August 29, 1995. The following description of
the Escrow Agreement does not purport to be complete and is qualified in its
entirety by reference to the Escrow Agreement attached hereto as an exhibit.
Pursuant to the Escrow Agreement, the Purchaser has deposited $500,000 (the
"Escrowed Funds") into escrow. The Escrowed Funds, together with interest
thereon, will be distributed to the Company in the event that the Purchaser is
unable to purchase shares tendered by stockholders pursuant to the Offer solely
due to the Purchaser's having insufficient cash funds on hand for such purchase.
In addition, up to $200,000 of such funds may be disbursed to the Company in the
event the Offer is not consummated for any reason, other than less than 51% of
the Shares (on a fully diluted basis) being tendered or the Purchaser
determining not to proceed with the Offer due to a written statement or
disclosure by the Company of a material fact which may have an adverse effect on
the Company, as reimbursement of outside legal, accounting and other consulting
expenses actually incurred by the Company in connection with the Offer.
The Escrow Agreement also provides that during the 45-day period following
the date of the Escrow Agreement, the Company and its officers, directors,
employees, agents and representatives shall not initiate or solicit any
inquiries or proposals or offers with respect to a merger, acquisition,
consolidation, business combination, or similar transaction involving the
Company, or any purchase of all or any significant portion of the assets or
equity of the Company. The Escrow Agreement does not prevent the Company or its
officers, directors, employees, agents or representatives from furnishing
information to or entering into discussions or negotiations with any person that
makes an unsolicited proposal (or expresses an unsolicited indication of
interest in making a proposal) to acquire the Company pursuant to a merger,
consolidation, share exchange, purchase of a substantial portion of the assets,
business combination or other similar transaction.
EMPLOYMENT AGREEMENTS
The Company and each of Stephan W. Cole and Richard F. Bern (collectively,
the "Executives") have entered into employment agreements (the "Employment
Agreements") each dated as of August 29, 1995 and becoming effective upon the
purchase and sale of the Shares which are the subject of the Offer pursuant to
the Offer by the Purchaser. In the event the Offer is not completed, the
Employment Agreements will terminate and be of no force and effect. The
following description of the Employment Agreements does not purport to be
complete and is qualified in its entirety by reference to the Employment
Agreements attached hereto as exhibits.
Under the Employment Agreements, the Executives shall be employed for a
period of three years as Chief Executive Officer (Mr. Cole) and President (Mr.
Bern). Each Executive will be paid minimum annual compensation equal to
$275,000, comprised of a base salary of $150,000 and additional compensation and
bonus compensation not less than $125,000 in the aggregate. The Executive's
minimum annual compensation will be paid to the Executive in bi-monthly
installments equal to $11,458. To the extent that additional compensation (which
is based on the Executive's percentage participation, as determined by the Board
of Directors, in an annual bonus pool for executives of the Company equal to 10%
of annual pre-tax profits) and bonus compensation (which is based on a
discretionary bonus to the Executive determined annually at the discretion of
the Board of Directors or the Compensation Committee of the Company) is less
than the additional compensation and bonus compensation advanced during the year
to the Executive, the Executive shall retain the excess. To the extent that such
amounts are more than amounts previously advanced to the Executive for the year
for additional compensation and bonus compensation, the Company shall pay the
difference to the Executive.
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<PAGE> 4
The Executives are also eligible to participate in an incentive stock
option plan maintained for the benefit of the Purchaser's employees generally.
Pursuant to their respective Employment Agreements, each of Messrs. Cole and
Bern will receive options under the Purchaser's incentive stock option plan
entitling him to purchase 100,000 shares of common stock of the Purchaser at an
exercise price equal to $5.58 per share. The options may be exercised with
respect to 20,000 shares upon grant, with respect to 40,000 shares in eight
equal installments of 5,000 shares each on the last day of each of the eight
calendar quarters after the date of grant, commencing with the quarter beginning
on October 1, 1995, and with respect to another 40,000 shares upon achievement
of specified performance goals.
The Executives are also entitled to other benefits, including life and
disability insurance, health and medical and vacation, which are generally
comparable to those provided to executive officers of the Company currently.
The Executives' employment under their respective agreements may be
terminated for death, total disability or for "Cause". The Company shall have
"Cause" to terminate the Executives' employment (i) due to fraud,
misappropriation or embezzlement by the Executive, (ii) gross misconduct or
willful gross neglect of the Executive's duties, (iii) conviction for a felony
or a crime involving moral turpitude, or (iv) willful and unauthorized
disclosure of trade secrets. The Executive may terminate the Employment
Agreement for Good Reason (as defined below). Additionally, either the Company
or the Executive may terminate the agreement for any other reason at any time on
ninety days written notice ("Notice Termination").
In the event that the Executive's employment is terminated upon the death
of the Executive, the Company shall continue to pay to the Executive's estate
all compensation payable under the Agreement through the remainder of the year
in which he died. In the event an Executive's employment is terminated for
disability or upon Notice Termination by the Company, or if the Executive
terminates employment for Good Reason, the Executive shall be entitled to
receive all compensation and benefits provided for under the Employment
Agreement as if his employment had not terminated prior to the expiration of the
three year term. "Good Reason" means (i) assignment to the Executive of duties
inconsistent in any material respect (other than in the nature of a promotion)
with the Executive's position immediately prior to such change, (ii) any failure
by the Company to pay the compensation or provide the benefits provided for
under the Employment Agreement, (iii) any failure by the Company to comply with
any material provision of the Employment Agreement, or (iv) the relocation of
the Executive's office outside of a 75 mile radius of Cleveland, Ohio (for Mr.
Cole) or Phoenix, Arizona (for Mr. Bern).
In the event an Executive's employment is terminated for Cause or by the
Executive other than for Good Reason, the Executive shall be paid (i) salary
accrued, but unpaid as of the date of termination, (ii) vacation or sick leave
benefits accrued, but unpaid or unused as of the date of termination, (iii)
additional compensation earned (based on pre-tax profits for the quarter(s)
during which the Executive is employed in the year of termination), but unpaid
as of the date of termination, and (iv) bonus compensation with respect to
announced, but unpaid bonuses as of the date of termination.
All compensation and benefits provided to the Executives under the
Employment Agreements are guaranteed by the Purchaser should the Company ever
default on its obligations under the Employment Agreements.
Pursuant to the Employment Agreements each of the Executives have agreed
that (i) during the term of the Employment Agreements and thereafter he will not
use, disclose, disseminate or distribute certain trade secrets of the Company
and (ii) during the one-year period following the termination of the Executive's
employment, he will not engage or participate in any business involving the sale
or distribution of home, business or personal security or safety products
marketed by the Company on the effective date of the Employment Agreement,
including the sale or distribution of locks and keys.
REAL ESTATE PURCHASE AGREEMENTS
The Purchaser and each of 31100 Solon Road, Inc. ("31100") and CRS Limited
Partnership ("CRS") have entered into real estate purchase agreements (the "Real
Estate Purchase Agreements") pursuant to
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which the Purchaser shall, subject to the completion of the Offer, (i) purchase
from 31100 the parcel of real property located at 31100 Solon Road, Solon, Ohio,
together with all buildings, fixtures, and other improvements thereon (the
"Solon Road Property"), and (ii) purchase from CRS the parcel of real property
located in Springfield, Illinois, together with all buildings, fixtures, and
other improvements thereon (the "CRS Property").
31100 is wholly-owned by Stephan W. Cole, Richard F. Bern and Stephan W.
Cole as custodian for Joseph E. Cole II, the son of Jeffrey A. Cole, under the
Ohio Transfers to Minors Act. 31100 is a limited partner in CRS, having a 65%
interest in the partnership's profits and losses. See the discussion below in
Annex A under the heading "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION; CERTAIN OTHER RELATIONSHIPS" regarding the terms of the leases
between the Company, as lessee, and 31100 (for the Company's corporate
headquarters and certain of its manufacturing and distribution facilities) and
between Boss Manufacturing Company, a wholly-owned subsidiary of the Company, as
lessee, and CRS (for Boss' warehouse and distribution facility).
The following description of the Real Estate Purchase Agreements does not
purport to be complete and is qualified in its entirety by reference to the Real
Estate Purchase Agreements attached hereto as exhibits.
Under the Real Estate Purchase Agreements, the Purchaser has agreed to
purchase for cash the Solon Road Property and the CRS Property within 45 days
after the completion of the Offer. The purchase price for the Solon Road
Property will be the lesser of $5,000,000 or the fair market value of the
property as determined by the average of two real estate appraisals of the
property performed by qualified independent appraisers; provided that if such
appraised amount is less than $4,750,000, 31100 may elect to terminate the
agreement and not sell the property. The purchase price for the CRS Property
will be the fair market value of the property as determined by the average of
two appraisals of the property performed by qualified independent appraisers;
provided that if such amount is less than $1,700,000, CRS may elect to terminate
the agreement and not sell the property.
INDEMNIFICATION LETTER AGREEMENT
The Purchaser and the Company entered into an indemnification letter
agreement (the "Indemnification Agreement") dated August 29, 1995 which provides
that for a period of six years after the Purchaser purchases and accepts the
Shares tendered in the Offer, the Purchaser shall use its best efforts to cause
the Company to indemnify, defend and hold harmless the present and former
directors and officers of the Company and any of its subsidiaries and their
respective heirs, executors, administrators and legal representatives,
including, without limitation, each member of the Special Committee of the Board
of Directors of the Company appointed in respect of the transactions
contemplated by the Offer, against all losses, expenses, claims, damages or
liabilities arising out of acts or omissions occurring on or prior to the
purchase and acceptance of the Shares by the Purchaser to the fullest extent
permitted or required under applicable law. The Purchaser has also agreed to use
its best efforts to cause the Company to maintain for the six-year period
following the purchase and acceptance of the Shares by the Purchaser (i) the
Company's current directors' and officers' liability insurance and fiduciary
liability insurance policies or (ii) other policies with scope of coverage,
policy limits, retention amounts, and other material terms that are no less
favorable than that currently provided.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation and Background.
In late June 1995, Richard Smyth, Chairman of the Board of Directors and
CEO of the Purchaser, met with Stephan W. Cole, President of the Company, and
Richard F. Bern, Executive Vice President of the Company, to disclose the
Purchaser's interest in a transaction for a business combination or other
joining of the businesses of the Purchaser and the Company. Several days later,
a brief follow-up meeting among Messrs. Smyth, Cole and Bern occurred to discuss
various possible structures and approaches to joining the businesses of the
Purchaser and the Company. On July 10, 1995, a follow-up meeting of Mr. Smyth
and Arnold Johns, President of the Purchaser, with Messrs. Cole and Bern,
occurred to further discuss potential
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methods for joining the businesses of the Purchaser and the Company. During this
meeting, these managers explored merger and tender offer approaches and
discussed joint distribution opportunities.
On August 2, 1995, the Company and the Purchaser entered into the
Confidentiality Agreement pursuant to which the Purchaser agreed to keep certain
information furnished to it by the Company confidential and to abide by certain
"standstill" provisions including provisions preventing commencement of the
Offer. On August 7, 1995, a meeting among Messrs. Smyth, Cole and Bern discussed
the possibility of an equity infusion by the Purchaser into the Company as well
as further exploration of joint distribution opportunities. During the next few
days, the Purchaser's representatives began conducting initial due diligence
regarding the Company and on August 9, 1995, Mr. Smyth was introduced to the
Company's Board of Directors, at which time he noted the possible synergies of
the two businesses and discussed the possible range of approaches to joining the
two businesses. On August 17, 1995, Mr. Smyth met with Mr. Cole and various
staff members of the Company. At these meetings, representatives of the Company
reviewed proposed employment agreements for Messrs. Cole and Bern, proposed real
estate purchase agreements for certain facilities used by the Company, and a
proposed escrow agreement. All of the foregoing agreements were drafted by the
Purchaser and presented to the Company's representatives for their
consideration. See the discussions above in Item 3 regarding these agreements
under the headings "Escrow Agreement", "Employment Agreements", and "Real Estate
Purchase Agreements". At these meetings there was also a discussion of the
impact of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and a review of certain accounting issues and the respective management
information systems of the Purchaser and the Company. Moreover, on this same
date, Messrs. Smyth and Cole met with a representative of McDonald & Company
Securities, Inc. ("McDonald & Company") to provide information for their use
should it be engaged to provide a fairness opinion to the Company regarding a
transaction with the Purchaser.
Subsequently, following discussions during the weeks of August 21 and
August 28 regarding the Offer, the Escrow Agreement, the Real Estate Purchase
Agreements, the Employment Agreements and the Indemnification Agreement were
executed by the respective parties thereto on August 29, 1995. The Company also
waived on August 29 the provisions of the Confidentiality Agreement restricting
the Purchaser from commencing the Offer and, on August 30, 1995, the Purchaser
commenced the Offer. On August 30, the Board of Directors appointed a Special
Committee of the Board of Directors (the "Special Committee"), comprised of
Malvin E. Bank and Frank W. Hulse, to consider the Offer. On September 1, 1995,
McDonald & Company was retained by the Company. See Item 5 below regarding the
engagement of McDonald & Company.
THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED
THE OFFER AND HAS DETERMINED THAT THE TERMS OF THE OFFER ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
(b) Reasons for the Recommendation.
In reaching its conclusions and the recommendation described above, the
Special Committee considered a number of factors including, without limitation,
the following:
(i) The terms and conditions of the Offer including the price of the
Offer, Purchaser's intention to pay at least $5.30 per share (subject to
dissenters' rights) to each stockholder who does not tender pursuant to the
Offer in a cash out merger (the "Merger") following Purchaser's purchase
and acceptance of the shares, and the fact that the Offer is not subject to
a financing condition.
(ii) The Company's business, assets, financial condition and future
prospects, the strategic direction of the Company's business, current
conditions in its industry and in the financial markets.
(iii) The oral opinion (later confirmed in writing) of McDonald &
Company, the Company's financial advisor, that the proposed consideration
to be received by the Company's stockholders pursuant to the Offer is fair
to such stockholders from a financial point of view. A copy of the written
opinion of McDonald & Company dated September 13, 1995, which sets forth
the procedures followed, the matters considered, the assumptions made and
the limitations of the review undertaken, is attached as an exhibit hereto.
McDonald & Company's opinion is directed only to the consideration to be
received by the
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Company's stockholders pursuant to the Offer and does not constitute a
recommendation to any stockholder to tender Shares in the Offer.
STOCKHOLDERS ARE URGED TO READ CAREFULLY SUCH OPINION IN ITS ENTIRETY.
(iv) The purchase prices to be paid for the Solon Road Property and
the CRS Property under the Real Estate Purchase Agreements will not be
greater than the respective fair market values of such properties, as
determined by independent real estate appraisers.
(v) The compensation and benefits to be provided to Stephan W. Cole
and Richard F. Bern is reasonable in comparison to, and not in excess of,
those generally available to them currently as executive officers of the
Company.
(vi) The $5.30 per share offering price represented a 41% premium over
the closing price ($3.75) reported on the NASDAQ National Market System on
August 23, 1995, which was the last trading day on which a reported sale of
any of the Shares occurred prior to the commencement of the Offer.
(vii) A review of strategic alternatives available to the Company to
enhance stockholder value, including the interest of possible third party
acquirors in acquiring all or portions of the Company.
(viii) The Company and the Special Committee may consider unsolicited
third party offers to acquire the Company and to provide information
regarding the Company to, and to negotiate with, such third parties
regarding possible Other Proposals (as defined below in Item 5).
In reaching its recommendation, no specific weightings were given by the
Special Committee to any of the foregoing factors, although the offer price was
a significant factor in reaching its conclusions. Such a determination of
specific weightings would, in the Board of Directors' view, be impracticable.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
On September 1, 1995, the Company engaged McDonald & Company to analyze,
make a recommendation and render a written fairness opinion to the Special
Committee with respect to the Offer. With respect to this engagement, McDonald &
Company is to receive a fee of $50,000 for its services rendered in connection
with its opinion. This fee is payable upon delivery of the opinion. In addition,
McDonald & Company was engaged to assist the Company in analyzing and evaluating
any other expressions of interest which may be made for substantially all of the
stock or assets of the Company ("Other Proposals") and to assist the Company in
negotiating the terms and conditions of any such Other Proposals. With respect
to any such Other Proposals which may be consummated, McDonald & Company will be
paid a transaction fee equal to $50,000 plus 6% of the portion of the value
thereof which is over $13,771,675 ($5.30 times 2,598,429 shares). The Company
has also agreed to reimburse McDonald & Company for its reasonable out-of-pocket
expenses and to indemnify McDonald & Company and its affiliates.
Neither the Company nor, to the best of the Company's knowledge, any person
acting on its behalf, intends to employ, retain, or compensate any other person
to make solicitations or recommendations to the stockholders of the Company in
connection with the transactions contemplated by the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in the Shares
have been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company, except acquisitions
of Shares issuable upon the exercise of options previously awarded.
(b) To the best of the Company's knowledge, Stephan W. Cole, Richard F.
Bern and Jeffrey A. Cole, who beneficially own in the aggregate 1,325,796 shares
(50.60% on a fully diluted basis), and the Company's other executive officers,
directors and affiliates currently intend to tender all Shares held of record or
beneficially owned by them.
6
<PAGE> 8
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Other than as described above in Item 3 (b) and Item 4, and in the
following paragraph, there are no negotiations being undertaken or underway by
the Company in response to the Offer which relate to or would result in (i) an
extraordinary transaction such as a merger or reorganization, involving the
Company or any subsidiary of the Company, (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company or
(iv) any material change in the present capitalization or dividend policy of the
Company.
The Company has provided and may continue to provide, information to
persons who have indicated an interest in making an Other Proposal ("Other
Persons") (subject to execution of confidentiality agreements) for the purpose
of evaluating the Company with respect to possible Other Proposals. By
resolution adopted by the Special Committee, the Company is authorized to enter
into or continue discussions or negotiations with such Other Persons regarding
possible Other Proposals. Although certain discussions with Other Persons have
occurred, there are presently no proposals to acquire the Company other than the
Offer and neither the Company nor the Special Committee are aware of any Other
Person who presently intends to make a definitive proposal to acquire all or any
portion of the Company.
(b) Except as set forth in the preceding paragraph and in Items 3(b), 4 and
8, there are no transactions, Board resolutions, agreements in principle or
signed contracts in response to the Offer which relate to or would result in one
or more of the events referred to in the first paragraph of Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Company is incorporated under the laws of the State of Delaware and is
subject to the provisions of Section 203 ("Section 203) of the Delaware General
Corporation Law (the "DGCL"). Generally, Section 203 prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other transactions) with a
Delaware corporation for a period of three years following the date such person
became an interested stockholder unless, among other things, the business
combination or the transaction by which the interested stockholder became an
interested stockholder is approved by the Board of Directors of the corporation
prior to the date on which such person became an interested stockholder. The
limitations of Section 203 will not apply to the Offer or the Merger because,
for purposes of that Section, the Special Committee acting for and on behalf of
the Board of Directors has approved the Offer. See discussion above in Item 4
"The Solicitation or Recommendation".
Under the Company's Amended and Restated Credit Agreement dated as of
February 12, 1993, as amended by the Amendment to Credit Agreement dated as of
March 23, 1995 (the "Credit Agreement"), an event of default thereunder will
occur in the event that any person or group acquires beneficial ownership (as
used in the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder) of more than 50% of the outstanding voting stock of the
Company, unless such acquisition was approved by the Company's Board of
Directors. The acquisition of shares of the Company pursuant to the Offer has
been approved by the Special Committee acting for and on behalf of the Board of
Directors.
7
<PAGE> 9
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1) Letter to stockholders of the Company dated September 14, 1995*.
(a)(2) Opinion of McDonald & Company Securities, Inc. dated September 13, 1995*.
(a)(3) Press release issued by the Company on August 29, 1995.
(a)(4) Press release issued by the Purchaser on August 29, 1995.
(b) None.
(c)(1) Employment Agreement dated August 29, 1995 between the Company and Stephan W. Cole.
(c)(2) Employment Agreement dated August 29, 1995 between the Company and Richard F. Bern.
(c)(3) Real Estate Purchase Agreement dated August 29, 1995 between the Purchaser and
31100.
(c)(4) Real Estate Purchase Agreement dated August 29, 1995 between the Purchaser and CRS.
(c)(5) Confidentiality Agreement dated August 2, 1995 between the Purchaser and the
Company.
(c)(6) Escrow Agreement dated August 29, 1995 among the Company, the Purchaser and Grier
Newlin, as escrow agent.
(c)(7) Indemnification Agreement between the Purchaser and the Company dated August 29,
1995.
(c)(8) Sublease between 31100 and the Company dated February 28, 1988.
(c)(9) Agreement of Lease between CRS and Boss Manufacturing Company dated June 27, 1989.
(c)(10) Key Blank and Machine Supply Agreement between the Company and Things Remembered,
Inc., dated March 30, 1995.
</TABLE>
* Included in copies mailed to Stockholders.
8
<PAGE> 10
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 14, 1995
AMERICAN CONSUMER PRODUCTS, INC.
By: /s/ STEPHAN W. COLE
Stephan W. Cole, President
9
<PAGE> 11
ANNEX A
AMERICAN CONSUMER PRODUCTS, INC.
31100 SOLON ROAD
SOLON, OHIO 44139
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This information Statement is being mailed on September 14, 1995, as part
of American Consumer Products, Inc.'s (the "Company")
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
to the holders of record of the Company's common stock, par value $0.10 per
share ("Common Stock"). Capitalized terms used and not otherwise defined herein
shall have the meaning set forth in the Schedule 14D-9. You are receiving this
Information Statement in connection with the possible selection of persons
designated by Purchaser to seats on the Company's Board of Directors. You are
urged to read this Information Statement carefully. You are not, however,
required to take any action.
This Information Statement is required by Section 14(f) of the Exchange Act
and Rule 14f-1 of the General Rules and Regulations thereunder. Upon acquiring
51% or more of the Common Stock pursuant to the Offer, the Purchaser intends to
have its representatives or its nominees ("Purchaser's Designees") elected or
designated to fill a majority of the seats on the Board of Directors of the
Company.
Information contained herein regarding the Purchaser and Purchaser's
Designees has been provided to the Company by such persons or included in the
Purchaser's Offer to Purchase dated August 30, 1995 and the Company assumes no
responsibility for, nor has it attempted to independently verify, the accuracy
or completeness of such information.
COMPANY COMMON STOCK
The outstanding voting securities of the Company as of September 1, 1995
consisted of 2,620,429 shares of Common Stock (on a fully diluted basis). Each
Share that is outstanding as of the close of business on any applicable record
date for any matter to be acted upon by stockholders is entitled to one vote on
such matter.
The following information is based on the Company's Proxy Statement dated
April 4, 1995 and mailed to the Company's stockholders in connection with the
Company's 1995 Annual Meeting of Stockholders held on May 4, 1995 and except as
otherwise indicated, such information is given as of such date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth information at March 24, 1995 with respect
to the beneficial ownership of the Company's Common Stock by all persons known
by the Company to own, individually or as a group, more than 5% of the Company's
outstanding Common Stock, by the executive officers named in the Summary
Compensation Table and by all executive officers and directors as a group.
A-1
<PAGE> 12
<TABLE>
<CAPTION>
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
- --------------------------------- ------------ --------
<S> <C> <C>
Stephan W. Cole 613,046(1)(3) 24.81%
31100 Solon Road
Solon, Ohio 44139
Jeffrey A. Cole 420,250(2)(3) 17.01%
5915 Landerbrook Drive
Lyndhurst, Ohio 44124
Richard F. Bern 282,500(3)(4) 11.33%
31100 Solon Road
Solon, Ohio 44139
Willen Management Corp. 230,900(5) 9.34%
2360 West Joppa Road, Suite 226
Lutherville, Maryland 21093
FMR Corp. 206,000(6) 8.34%
82 Devonshire Street
Boston, Massachusetts 02109
Irving B. Harris 191,850(7) 7.76%
c/o William Harris Investors,
Inc.
Two North LaSalle Street
Suite 505
Chicago, Illinois 60602
Dimensional Fund Advisors 134,700(8) 5.45%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
All Officers and Directors 1,329,246(1) 53.18%
as a Group (six) (2)(3)(4)(9)
</TABLE>
- ---------------
(1) Includes 83,343 shares of Common Stock held in trust for the benefit of
Stephan W. Cole's children. Mr. Cole disclaims beneficial ownership of such
shares.
(2) Includes 8,000 shares owned by Jeffrey A. Cole's son Joseph E. Cole II. Mr.
Cole disclaims beneficial ownership of such shares.
(3) Under the Securities and Exchange Commission rules regarding the reporting
of beneficial ownership of shares, the amounts and percentages reported for
each of Stephan W. Cole, Richard F. Bern and Jeffrey A. Cole include 47,500
shares owned by 31100 Solon Road, Inc. a corporation owned equally by
Stephan W. Cole, Richard F. Bern and Stephan W. Cole as custodian for Joseph
E. Cole II, the son of Jeffrey A. Cole, under the Ohio Transfers to Minors
Act. After eliminating the effects of triple counting those shares, the
number and percentage of the Company's Common Stock owned by Stephan W.
Cole, Richard F. Bern, Jeffrey A. Cole and all officers and directors as a
group would be 581,380 (23.53%), 250,833 (10.06%), 388,583 (15.72%) and
1,234,246 (49.38%), respectively. If the 47,500 shares owned by 31100 Solon
Road, Inc. were allocated in proportion to the ownership of that
corporation, each of Stephan W. Cole, Richard F. Bern and Stephan W. Cole as
custodian for Joseph E. Cole II would beneficially own one-third of the
47,500 shares or 15,833 1/3 each. Jeffrey A. Cole disclaims beneficial
ownership of the 47,500 shares owned by 31100 Solon Road, Inc.
(4) Includes 21,250 shares of Common Stock represented by options exercisable at
March 24, 1995, or within 60 days thereafter, held by Mr. Bern.
(5) As of January 19, 1995, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission.
A-2
<PAGE> 13
(6) As of February 14, 1995, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission. In its capacity as
investment advisor to Fidelity Low-Priced Stock Fund (the "Fund"), Fidelity
Management & Research Company ("Fidelity"), 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly owned subsidiary of FMR Corp. FMR Corp.,
through its control of Fidelity, the Fund, and Edward C. Johnson 3d,
Chairman of FMR Corp., each have sole power to dispose of these shares.
(7) As of December 19, 1994, based upon information contained in a Schedule 13D
filing with the Securities and Exchange Commission. Mr. Harris, the Harris
Foundation, the Irving Harris Foundation and the William Harris & Co.
Employees Profit Sharing Trust, whose plan sponsor is William Harris & Co.,
report shared power to dispose of these shares.
(8) As of January 30, 1995, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission. Dimensional Fund Advisors
Inc. ("Dimensional"), a registered investment advisor, is deemed to have
beneficial ownership of 134,700 shares of American Consumer Products, Inc.
Stock as of December 31, 1994, all of which shares are held in portfolios of
DFA Investment Dimensions Group Inc., a registered open-end investment
company, or in series of the DFA Investment Group Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(9) Includes 28,250 shares of Common Stock subject to options which are
exercisable at March 24, 1995, or within 60 days thereafter, including
27,250 shares of Common Stock subject to options held by Mr. Bank (3,000
shares), Mr. Hulse (3,000 shares) and Mr. Bern (21,250) shares.
DIRECTORS (OTHER THAN THOSE WHO ARE
PRINCIPAL STOCKHOLDERS)
The number of shares of Common Stock beneficially owned by each of the
directors (other than Stephan W. Cole, Richard F. Bern and Jeffrey A. Cole who
are each included in the foregoing table under the heading "Principal
Stockholders") on March 24, 1995 and the percentage of ownership represented by
such shares of Common Stock are set forth in the following table.
<TABLE>
<CAPTION>
BENEFICIALLY OWNED ON
MARCH 24, 1995
NUMBER PERCENT
NAME OF SHARES OF CLASS
- --------------- --------- --------
<S> <C> <C>
Malvin E. Bank 5,950(1) (2)
Frank W. Hulse 5,500(1) (2)
</TABLE>
(1) Includes 3,000 and 3,000 shares of Common Stock subject to options
exercisable at March 24, 1995, or within 60 days thereafter, held by Messrs.
Bank and Hulse, respectively.
(2) Less than 1% of the shares of Common Stock outstanding.
A-3
<PAGE> 14
DIRECTORS AND EXECUTIVE OFFICERS
PURCHASER DESIGNEES
Purchaser may designate as directors of the Company following consummation
of the Offer persons from among the following list (each of whom is a citizen of
the United States of America).
<TABLE>
<CAPTION>
NAME, POSITION AND PRINCIPAL OCCUPATIONS AND OTHER
BUSINESS ADDRESS DIRECTORSHIPS DURING THE PAST 5 YEARS
- --------------------- --------------------------------------------------------------------
<S> <C>
Richard Smyth (38) Chairman and CEO of the Purchaser, February 1995 to present;
President of the Purchaser, 1992-1995; President, The Technology and
Services Group, Inc., 1989-1992
Arnold Johns (52) President of the Purchaser, February 1995 to present; Senior
Managing Director, Buckhead Financial Corporation, June 1993 to
February 1995; Executive Vice President, Argent Securities, Inc.,
1992-1993; President, RTS, Inc., 1991-1992
Michael Becker (40) Vice President-Finance of the Purchaser, 1995 to present; Vice
President and Controller, Interstate Distributors, Inc., 1991-1995;
Regional Controller, Burger King, 1988-1991
</TABLE>
During the last five years, none of the persons identified above has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction or as a result of such proceeding
has been or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or any violation of such laws.
COMPANY DIRECTORS AND EXECUTIVE OFFICERS
The information below sets forth as of March 24, 1995 for each current
Director of the Company such Director's name, business experience during the
past five years, other directorships held, age and the year such Director first
became a director of the Company.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST FIVE YEARS FIRST BECAME
NAME AND AGE AND CURRENT PUBLIC DIRECTORSHIPS A DIRECTOR IN
- ----------------- --------------------------------------------------------- -------------
<S> <C> <C>
Stephan W. Cole President and Treasurer of the Company since 1982; 1982
Age 47 Stephan W. Cole is Jeffrey A. Cole's brother
Richard F. Bern Executive Vice President of the Company since 1982; 1982
Age 47 Secretary of the Company since July 1988
Jeffrey A. Cole Chairman and Chief Executive Officer of Cole National 1984
Age 53 Corporation, a leading national specialty service
retailer (since 1992); President and Chief Executive
Officer of Cole National Corporation (from 1984 to 1992);
Director of Cole National Corporation, Victoria Financial
Corporation and Hartmarx Corporation; Jeffrey A. Cole is
Stephan W. Cole's brother
Malvin E. Bank Partner in the law firm of Thompson, Hine and Flory, 1986
Age 64 Cleveland, Ohio (for more than five years); Director of
Oglebay Norton Company
Frank W. Hulse Founder and a Director (since 1983) of River Capital, an 1986
Age 47 Atlanta- based venture capital partnership; Chairman of
the Board and President of American Beechcraft, Inc., an
aircraft sales and service company (since December 1991)
</TABLE>
A-4
<PAGE> 15
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1994, the Board of Directors met
six times and took various actions by unanimous written consent. Each Director
attended or participated by telephone in at least 75% of the meetings of the
Board of Directors and of any committee of the Board of Directors on which he
served during the last fiscal year.
The Board of Directors has assigned certain responsibilities to committees
of its members. The Compensation Committee, established by the Board of
Directors in 1986, is composed of Malvin E. Bank, Jeffrey A. Cole and Stephan W.
Cole. The Compensation Committee took various actions without a meeting but did
not meet during 1994. The Compensation Committee is responsible for setting
executive compensation and granting stock options and restricted stock awards
under the Company's option and restricted stock plans.
The Audit Committee, established by the Board of Directors in 1987, is
composed of Malvin E. Bank, Frank W. Hulse and Jeffrey A. Cole. The Audit
Committee is responsible for recommending the appointment of auditors and
reviewing the scope of external and internal auditing procedures. The Audit
Committee met two times during 1994.
DIRECTOR COMPENSATION
The Company pays Directors who do not otherwise receive compensation from
the Company at a rate of $5,000 per annum. At the 1990 Annual Meeting, the
stockholders approved a grant of options to acquire 3,000 shares of Common Stock
of the Company to each of Messrs. Bank and Hulse at an exercise price of $7.50
per share. The original exercise price per share of Common Stock for the options
granted to Messrs. Bank and Hulse was determined by calculating the mean between
the high and low sales price of a share of Common Stock of the Company as of the
date of the grant. On May 4, 1995, the stockholders of the Company approved a
grant of options to acquire the following number of Shares to each of Richard F.
Bern, 50,000 shares; Stephan W. Cole, 30,000 shares; Jeffrey A. Cole, 25,000
shares; Malvin E. Bank, 7,500 shares; and Frank W. Hulse, 7,500 shares. These
options are exercisable at any time within 5 years of the date of grant at an
exercise price of $2.4375 per share.
EXECUTIVE OFFICERS OF THE COMPANY
The Executive Officers of the Company and their respective positions and
ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------ ----- ---------------------------------
<S> <C> <C>
Stephan W. Cole 47 President and Treasurer;
Director
Richard F. Bern 47 Executive Vice President and
Secretary; Director
Joel M. Falck 37 Vice President - Finance
</TABLE>
Stephan W. Cole has been President, Treasurer and a Director of the Company
since its incorporation in 1982. Stephan W. Cole is the brother of Jeffrey A.
Cole, a Director of the Company. Richard F. Bern has been Executive Vice
President and a Director of the Company since its incorporation in 1982, and
Secretary since July 1988. Joel M. Falck has been Vice President - Finance since
February 1990. Prior to that time, he was a Manager with Arthur Andersen LLP.
A-5
<PAGE> 16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION;
CERTAIN OTHER RELATIONSHIPS
The Compensation Committee is composed of Stephan W. Cole, President and
Treasurer of the Company, Jeffrey A. Cole and Malvin E. Bank. The following is a
discussion of certain relationships among the members of the Compensation
Committee and the Company, as well as certain relationships between Richard F.
Bern and the Company.
The Company sells key blanks to Things Remembered, Inc. ("Things
Remembered"), a subsidiary of Cole National Corporation, a national specialty
service retailer under a contract expiring on January 31, 1998. Jeffrey A. Cole
is the Chairman and Chief Executive Officer of Cole National Corporation. In
fiscal 1994, total purchases by Things Remembered from ACPI were approximately
$1,267,000; this amount is not considered material to any of the entities,
representing less than 2% of the gross revenues of each entity.
The Company, since 1988, has leased the building located at 31100 Solon
Road, Solon, Ohio which houses the corporate headquarters and certain of the
Company's manufacturing and distribution facilities. The lessor of the property
is 31100 Solon Road, Inc., a corporation owned equally by Stephan W. Cole,
Richard F. Bern and Stephan W. Cole as custodian for Joseph E. Cole II, the son
of Jeffrey A. Cole, under the Ohio Transfers to Minors Act ("31100 Solon Road").
The lease, as currently in effect, provides for an initial term of eight years
and three renewal option periods of five years each. The fixed rental under the
lease was at a rate of $525,000 per annum, through February 1994, and thereafter
at a rate of $575,000 per annum, including the option periods. Real estate taxes
and various other charges are the responsibility of the Company. At the time of
its inception in 1988 and upon its amendment in 1989, the Board of Directors
unanimously determined that the terms of the lease, and in 1989, the terms of
the amendment, were fair and in the best interests of the Company and were at
least as favorable to the Company as those which could be negotiated with an
unaffiliated lessor.
Boss Manufacturing Company ("Boss"), a wholly owned subsidiary of the
Company, sold in 1989 a warehouse and distribution facility located in
Springfield, Illinois to CRS Limited Partnership ("CRS") for $1,100,000 and
entered into a lease with CRS for the use of that facility. 31100 Solon Road is
a limited partner in CRS, having a 65% interest in the partnership's profits and
losses. The lease has an initial term of 10 years, with three five-year renewal
options in favor of Boss. The fixed rental for the first five years of the
initial term was $152,000 per annum, and for the last five years of the initial
term is $159,500 per annum. The fixed rental during the first renewal period
will be $167,000 per annum in the event Boss elects to exercise its first
renewal option, with the fixed rent adjusting in subsequent renewal periods to
reflect increases in the debt service of the lessor. Real estate taxes and
various other charges are the responsibility of Boss. The Company has guaranteed
Boss' obligations under the lease with CRS. The Board of Directors unanimously
determined that the sale-leaseback arrangement is fair and in the best interest
of the Company and is at least as favorable to the Company as that which could
be negotiated with an unaffiliated party.
Malvin E. Bank is a partner of the law firm of Thompson, Hine and Flory,
Cleveland, Ohio, which provided legal services to the Company in 1994 and
continues to provide such services in 1995.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the regulations thereunder require the Company's executive
officers and directors and beneficial owners of more than ten percent (10%) of
the Company's Common Stock to file initial reports of ownership and reports of
changes of ownership of the Company's Common Stock with the Securities and
Exchange Commission ("SEC"). Executive officers and directors and beneficial
owners of more than ten percent (10%) of the Company's Common Stock are required
to furnish the Company with copies of all Section 16(a) forms that they file.
Based solely upon a review of these filings and amendments thereto during and
with respect to the Company's most recent fiscal year and written
representations from certain of the Company's directors and executive officers
that no other reports were required, the Company believes that all filing
requirements applicable to the foregoing persons were met during and with
respect to 1994.
A-6
<PAGE> 17
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's compensation policy is designed to attract and
retain those executive officers who are able to make significant contributions
to both the long-term and short-term success of the Company. An executive
officer's annual compensation package, including that of the chief executive
officer, is composed of an annual salary and, at the discretion of the
Compensation Committee, an annual bonus. If an executive officer, including the
chief executive officer, demonstrates an ability to enhance the profitability of
the Company and stockholder value, for instance by recognizing and capitalizing
on cost saving and market opportunities resulting in improved operating
efficiencies and increased revenues, contributing to the Company's technological
advancement, or developing improved customer, supplier and employee relations,
the Compensation Committee believes that officer should be rewarded for his or
her efforts.
In setting the executive officers' compensation levels, including that of
the chief executive officer, the Compensation Committee considers a variety of
factors, including the salaries of personnel performing similar functions for
comparable companies, the Company's financial performance during the past year
and its prospects for the coming years, the effect of economic conditions on the
Company's performance and the officer's individual contribution to the Company's
performance during the past year and its prospects for the coming years. In
considering the Company's financial performance during the past year, the
Compensation Committee compares the Company's actual financial results (monthly,
quarterly and annually) with expected results given general economic conditions
and events outside the ordinary course of business, i.e. a bankruptcy filing by
a customer, if any, that may have affected the historical results. In
considering prospects for the coming years, the Compensation Committee attempts
to assess the extent to which an officer's contributions may be expected to
improve future financial performance of the Company. The comparable companies
considered by the Compensation Committee in setting annual salaries are not
necessarily the same group of companies included in the CRSP Total Return Index
for The NASDAQ Stock Market (U.S. Companies) or the peer group index used in the
graph, appearing below under the heading "Comparison of Five-Year Cumulative
Return," showing the five-year cumulative total stockholder return. These
indices do not necessarily include companies competing in the same businesses as
does the Company, nor do they necessarily include companies that the
Compensation Committee believes would compete for the talent and executive
skills that the Company desires to retain. Consequently, for purposes of annual
salary determinations, the Compensation Committee focuses on companies that are
generally competing in the same businesses and for the same executive talent as
does the Company.
In addition to the salary increases reflected in the Summary Compensation
Table, the executives of the Company, including the chief executive officer,
were awarded bonuses for their efforts in the fiscal year ended December 31,
1994. In determining these bonuses, the Compensation Committee considered the
development of a new key machine and the efforts expended to continue the
Company's systems development. These projects are vital to the continued success
of the Company and the enhancement of stockholder value. Additionally, the
Compensation Committee considered the improved operating results over 1993. The
bonuses awarded to the chief executive officer and the other most highly paid
executive officer whose total annual salary and bonus for the fiscal year ended
December 31, 1994 exceeded $100,000 are included in the Summary Compensation
Table.
The Revenue Reconciliation Act of 1993 precludes a publicly held
corporation from taking a deduction for certain compensation in excess of $1
million paid or accrued with respect to the executive officers of the Company.
While these regulations would not have an impact on the deductibility of
compensation paid by the Company, based on the Company's historical compensation
levels, the Compensation Committee intends to adopt, as necessary, a policy with
respect to compensation paid to its executive officers for deductibility under
these Federal income tax regulations.
A-7
<PAGE> 18
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Malvin E. Bank
Jeffrey A. Cole
Stephan W. Cole
The following table sets forth individual compensation information for the
fiscal year ended December 31, 1994, for Stephan W. Cole, President of the
Company, and the other most highly paid executive officer whose annual salary
and bonus for the fiscal year ended December 31, 1994, exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
NAME AND PRINCIPAL ------------------------------- UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION
- ------------------------- ----- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephan W. Cole 1994 $267,692 $20,000 -0- $ 13,974(1)
President 1993 $256,000 -0- -0- $ 9,055
1992 $247,115 $25,000 -0- $ 8,749
Richard F. Bern 1994 $250,962 $18,000 -0- $ 49,378(2)
Executive Vice 1993 $240,000 -0- -0- $ 39,633
President 1992 $231,538 $22,000 21,250 $ 42,825
</TABLE>
- ---------------
(1) Includes the Company's contributions for the named executive under the
Company's 401(k) Profit Sharing Retirement plan ($6,692) and health and
medical expense benefits in excess of those provided to employees generally
($7,282).
(2) Includes the Company's contributions for the named executive under the
Company's 401(k) Profit Sharing Retirement plan ($6,274), health and medical
benefits in excess of those provided to employees generally ($9,728),
premiums paid by the Company in respect of a noncancelable guaranteed
long-term disability program provided to Mr. Bern, which is in addition to
the long-term disability benefits generally provided to employees ($5,840)
and reimbursement of interest expenses payable by the named executive to a
third party ($27,536).
There were no individual grants of stock options awarded under the
Company's Amended and Restated Stock Option Plan or awards of restricted stock
made under the Company's Amended and Restated Restricted Stock Plan during the
fiscal year ended December 31, 1993. On October 27, 1994, the Board of Directors
granted, subject to stockholder approval, options to purchase Company Common
Stock to each of the Directors of the Company, including Messrs. S. Cole and
Bern. See discussion above under the heading "Directors and Executive Officers
- -- Director Compensation."
The following table sets forth information regarding options held by each
of the executive officers named in the Summary Compensation Table as of December
31, 1994. There were no stock options exercised by any of these executive
officers during the fiscal year ended December 31, 1994.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END ($)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Richard F. Bern.......... 21,250 -0- None(1) $ -0-
</TABLE>
- ---------------
(1) As of December 31, 1994, the exercise price of Mr. Bern's exercisable
options ($3.40) was higher than the market value of the Company's Common
Stock ($2.50) on that date.
A-8
<PAGE> 19
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
The following graph shows a five-year comparison of cumulative total
stockholder return, assuming dividend reinvestment, for the Company, the CRSP
Total Return Index for The NASDAQ Stock Market (U.S. Companies) and a peer group
index consisting of Waxman Industries, Inc., Selfix, Inc., Elco Industries,
Inc., Moore Handley, Inc. and Triangle Corp. The graph also assumes that the
value of a share of the Company's Common Stock and each index was $100 as of the
end of 1989 and that the returns of each member of the peer group have been
weighted according to their stock market capitalization as of the beginning of
each period for which a return is indicated.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) NASDAQ PEER GROUP ACPI
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 84.92 54.29 42.86
1991 136.28 72.62 46.43
1992 158.58 61.55 71.43
1993 180.93 84.41 51.79
1994 176.92 69.68 35.72
</TABLE>
A-9
