<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
Martin Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was 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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 3
April 7, 1997
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of Martin
Industries, Inc. (the "Company"), to be held on Friday, May 16, 1997, at the
Florence Conference Center, 10 Hightower Place, Florence, Alabama, at 11:00
A.M., Central Daylight Time. Notice of the Annual Meeting of Stockholders,
together with the Proxy Statement and Form of Proxy, accompany this letter.
Matters to be considered at the Annual Meeting of Stockholders are (i)
the election of two (2) members to the Board of Directors of the Company to
serve until the Annual Meeting of the Company to be held in the year 2000, (ii)
a proposal to approve the Martin Industries, Inc. 1996 Non-Employee Directors'
Stock Option and Deferred Compensation Plan, (iii) a proposal to ratify the
selection of Arthur Andersen LLP as independent auditors of the Company for the
fiscal year ending December 31, 1997, and (iv) any other matters which may
properly come before the Annual Meeting. Details of the matters to be considered
at the Annual Meeting of Stockholders appear in the Proxy Statement. Other than
the election of directors, the proposal to approve the Martin Industries, Inc.
1996 Non-Employee Directors' Stock Option and Deferred Compensation Plan and the
proposal to ratify the selection of the Company's independent auditors, the
Board of Directors of the Company does not know at this time of any other
matters to come before the Annual Meeting.
We hope that you will be able to attend the Annual Meeting of
Stockholders so that we may have the opportunity of meeting with you and
discussing the affairs of the Company. HOWEVER, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING OF STOCKHOLDERS, PLEASE EXECUTE AND RETURN THE
ENCLOSED PROXY TO ENSURE THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING AND TO
ENSURE THAT YOUR SHARES OF COMMON STOCK ARE VOTED.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
James D. Wilson
President and Chief Executive Officer
<PAGE> 4
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARTIN INDUSTRIES, INC.
To the Stockholders of Martin Industries, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders (the
"Annual Meeting") of Martin Industries, Inc., a Delaware corporation (the
"Company"), will be held at Florence Conference Center, 10 Hightower Place,
Florence, Alabama, on Friday, May 16, 1997, at 11:00 A.M., Central Daylight
Time, for the following purposes:
(1) To elect two (2) members to the Board of Directors of the
Company to serve until the Annual Meeting of the Stockholders
of the Company to be held in the year 2000 and until their
successors are duly elected and shall have qualified;
(2) To consider and vote upon a proposal to approve the Martin
Industries, Inc. 1996 Non-Employee Directors' Stock Option and
Deferred Compensation Plan;
(3) To consider and vote upon a proposal to ratify the selection
of Arthur Andersen LLP as independent auditors of the Company
for the fiscal year ending December 31, 1997; and
(4) To transact such other business as may properly come before
the Annual Meeting.
Holders of record of the Common Stock of the Company at the close of
business on March 24, 1997 are entitled to notice of and to vote on all matters
to be considered at the Annual Meeting. A complete list of the Stockholders
entitled to vote at the Annual Meeting shall be open to the examination of any
Stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the Annual Meeting at the
Company's corporate headquarters located at 301 East Tennessee Street, Florence,
Alabama. The Annual Meeting may be adjourned from time to time without notice
other than announcement at the Annual Meeting, and any business for which notice
of the Annual Meeting is hereby given may be transacted at any such adjournment.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE EXECUTE
AND RETURN THE ENCLOSED PROXY TO ENSURE THE PRESENCE OF A QUORUM AT THE ANNUAL
MEETING AND TO ENSURE THAT YOUR COMMON STOCK IS VOTED. A stamped, addressed
envelope is enclosed for your convenience in returning your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
James W. Truitt
Secretary
Martin Industries, Inc.
301 East Tennessee Street
Florence, Alabama 35630
April 7, 1997
<PAGE> 5
PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD MAY 16, 1997
This Proxy Statement is being furnished on behalf of the Board of
Directors (the "Board") of Martin Industries, Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies for use at the Annual
Meeting of Stockholders of the Company to be held at Florence Conference Center,
10 Hightower Place, Florence, Alabama, on Friday, May 16, 1997, at 11:00 A.M.,
Central Daylight Time, and at any adjournment thereof (the "Annual Meeting"),
for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders of the Company. It is contemplated that this Proxy Statement and
accompanying form of Proxy will be mailed to Stockholders of the Company on or
about April 7, 1997.
The shares represented by each proxy received by the Board of Directors
of the Company will be voted in accordance with the instructions appearing
thereon. In the absence of contrary instructions, the proxies received by the
Board of Directors will be voted FOR the election of all nominees for director
of the Company named in this Proxy Statement, FOR the approval of the Martin
Industries, Inc. 1996 Non-Employee Directors' Stock Option and Deferred
Compensation Plan and FOR the ratification of the Board's appointment of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year ending
December 31, 1997, all as described in more detail elsewhere in this Proxy
Statement. A Stockholder who has given a proxy may revoke it at any time prior
to its exercise by giving written notice of such revocation to the Secretary of
the Company, by executing and delivering to the Company a later dated proxy
reflecting contrary instructions, or by appearing at the Annual Meeting and
taking appropriate steps to vote in person. Attendance at the Annual Meeting by
itself will not revoke a proxy.
I. VOTING SECURITIES
As of March 24, 1997, the record date for determining Stockholders
entitled to notice of and to vote at the Annual Meeting, the Company had issued
and outstanding 8,743,895 shares of Common Stock. The holders of each
outstanding share of Common Stock of the Company as of such date are entitled to
one vote per share with respect to each matter to be considered at the Annual
Meeting. There are no cumulative voting rights. The presence, in person or by
proxy, of a majority of the outstanding shares of Common Stock of the Company is
necessary to constitute a quorum at the Annual Meeting. Shares of Common Stock
represented by a properly executed and returned proxy will be treated as present
at the Annual Meeting for purposes of determining a quorum without regard to
whether the proxy is marked as casting a vote for or against or abstaining with
respect to a particular matter. In addition, shares of Common Stock represented
by "broker non-votes" (i.e., shares of Common Stock held in record name by
brokers or nominees as to which a proxy is received and (i) instructions have
not been received from the beneficial owners or persons entitled to vote, (ii)
the broker or nominee does not have discretionary voting power and (iii) the
record holder has indicated that it does not have authority to vote such shares
on that matter) generally will be treated as present for purposes of determining
a quorum, but will have the effect as described below concerning the matters to
be voted upon by the Stockholders at the Annual Meeting.
<PAGE> 6
The affirmative vote of the holders of a plurality of the outstanding
shares of Common Stock of the Company present in person or represented by proxy
at the Annual Meeting is necessary to elect the nominees for directors named in
the Proxy Statement. Accordingly, abstentions and broker non-votes with respect
to the election of directors will have no effect upon the election of directors
at the Annual Meeting. The affirmative vote of the majority of the outstanding
shares of Common Stock of the Company present in person or represented by proxy
at the Annual Meeting is necessary to approve the Martin Industries, Inc. 1996
Non-Employee Directors' Stock Option and Deferred Compensation Plan (the "1996
Plan") and to ratify the Board's appointment of Arthur Andersen LLP as the
Company's independent auditor for the fiscal year ending December 31, 1997.
Therefore, abstentions, broker non-votes and votes that are withheld with
respect to the proposed approval of the 1996 Plan and ratification of the
Company's independent auditors will have the same effect as negative votes.
II. ELECTION OF DIRECTORS
The By-laws of the Company provide that the number of members of the
Board of Directors shall be fixed by resolution of the Board of Directors or
Stockholders of the Company. The Restated Certificate of Incorporation and the
By-laws of the Company provide that the members of the Board of Directors shall
be divided into three classes, one class to be elected at each annual meeting of
Stockholders and to serve for a term of three years. As of the date of this
Proxy Statement, the Board of Directors consists of nine persons.
CURRENT NOMINEES
The Board of Directors proposes to nominate the two persons named below
for election as directors to serve until the Annual Meeting of Stockholders to
be held in the year 2000 and until their successors have been elected and shall
have qualified.
The names, ages and principal occupations of the nominees, the year
each first became a director of the Company, and the number and percentage of
shares of the Company's Common Stock owned beneficially by each of them as of
March 24, 1997, are as follows:
<TABLE>
<CAPTION>
Number and Percent
of Shares of Common
Name, Age and Stock of the Company
Principal Occupation Director Beneficially Owned as
Of Nominees Since of March 24, 1997(1)
- ------------------------------- -------- ----------------------
<S> <C> <C>
Bill G. Hughey, 61 1995 111,345(2)(3) - 1.3%
Retired
Charles R. Martin, 56 1974 191,425(2)(4) - 2.2%
President and Chief Executive Officer
Amerimark Capital Corporation
</TABLE>
- --------------------
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares as of March 24, 1997 that such person has the
right to acquire within sixty days after such date, or with respect to
which such person otherwise has or shares voting or investment power.
For purposes of computing beneficial ownership and the percentages of
outstanding shares held by each person on a given date, shares which
such person has the right to acquire within sixty days after such date
are shares for which such person has beneficial ownership and are
deemed to be outstanding for purposes of computing the percentage for
such person, but are not deemed to be outstanding for the purpose of
computing the percentage of any other person.
2
<PAGE> 7
(2) Does not include 3,396,325 shares which are owned of record by the
Employee Stock Ownership Plan and Related Trust (the "ESOP") and with
respect to which the individual, as a member of the ESOP Committee,
shares in the voting and investment power. The members of the ESOP
Committee currently do not participate in the ESOP.
(3) Includes 800 shares which are not currently outstanding, but which Mr.
Hughey is entitled to acquire upon exercise of outstanding stock
options, and 10,360 shares held by Mr. Hughey's wife. Mr. Hughey
disclaims beneficial ownership of the shares held by his wife.
(4) Includes 800 shares which are not currently outstanding, but which Mr.
Martin is entitled to acquire upon exercise of outstanding stock
options, and 126,525 shares held by Compass Bank as Trustee for the
Charles H. Martin Estate, with respect to which Mr. Martin also serves
as executor. Mr. Martin disclaims beneficial ownership of said 126,525
shares.
Bill G. Hughey has served as a director of the Company since February
1995. Mr. Hughey previously served on the Board of Directors from 1975 until his
retirement as President and Chief Executive Officer of the Company in May 1994,
a position he had held since 1987.
Charles R. Martin has served as a director of the Company since 1974.
Mr. Martin serves as President and Chief Executive Officer of Amerimark Capital
Group, a financial services firm, a capacity in which he has served since 1992.
Mr. Martin served as Vice President of Amerimark Capital Group from 1990 to
1992.
Each of the nominees was elected as a director at the Annual Meeting of
Stockholders held on April 7, 1995.
Unless directed to the contrary, the persons acting under the proxy
solicited hereby will vote FOR the nominees named above. Should any such nominee
become unable to accept election, which is not anticipated, it is intended that
the persons acting under the proxy will vote for the election in his stead of
such other person as the Board of Directors may recommend. Proxies may not be
voted for more than two persons.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE
NOMINEES FOR DIRECTORS NAMED ABOVE.
3
<PAGE> 8
CONTINUING DIRECTORS
The following table sets forth with respect to those persons who were
elected as directors of the Company at previous Annual Meetings of Stockholders
(and who will continue to serve as directors following the Annual Meeting) the
names, ages and principal occupations during the past five years, the year each
person first became a director of the Company, and the number and percentage of
shares of the Company's Common Stock owned beneficially by each person as of
March 24, 1997:
<TABLE>
<CAPTION>
Number and Percent of
Shares of Common Stock of
the Company Beneficially
Name, Age and Current Term Director Owned as of March
Principal Occupation Expires Since 24, 1997(1)
- ----------------------------------- ------------ -------- --------------------------
<S> <C> <C> <C>
William H. Martin, III, 66 1999 1974 173,615(2)(3) - 2.0%
Investments
James D. Wilson, 51 1999 1994 133,635(2)(4) - 1.5%
President and Chief Executive Officer,
Martin Industries, Inc.
James W. Truitt, 59 1999 1975 113,950(2)(5) - 1.3%
Senior Vice President and Secretary,
Martin Industries, Inc.
Louis J. Martin, II, 42 1999 1988 194,813(2)(6) - 2.2%
Vice President of Manufacturing,
Martin Industries, Inc.
William D. Biggs, 58 1998 1993 21,800(2)(7) - *
Managing Partner,
Carillon Beach
Jim D. Caudle, Sr., 61 1998 1990 18,050(2)(8) - *
Chairman and Chief Executive Officer
United Printed Circuits, Inc.
Chairman and Chief Executive Officer
Advanced Precision Manufacturing
Herbert J. Dickson, 71 1998 1985 23,300(2)(9) - *
Retired
</TABLE>
- --------------------
* Represents less than 1%.
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares as of March 24, 1997 that such person has the
right to acquire within sixty days after such date, or with respect to
which such person otherwise has or shares voting or investment power.
For purposes of computing beneficial ownership and the percentages of
outstanding shares held by each person on a given date, shares which
such person has the right to acquire within sixty days after such date
are shares for which such person has beneficial ownership and are
deemed to be outstanding for purposes of computing the percentage for
such person, but are not deemed to be outstanding for the purpose of
computing the percentage of any other person.
(2) Does not include 3,396,325 shares which are owned of record by the ESOP
and with respect to which the individual, as a member of the ESOP
Committee, shares in the voting and investment power. The members of
the ESOP Committee currently do not participate in the ESOP.
4
<PAGE> 9
(3) Includes 800 shares which are not currently outstanding, but which Mr.
Martin is entitled to acquire upon exercise of outstanding stock
options, and 27,965 shares held by Mr. Martin's wife. Mr. Martin
disclaims beneficial ownership of the shares held by his wife.
(4) Includes 122,500 shares which are not currently outstanding, but which
Mr. Wilson is entitled to acquire upon the exercise of outstanding
stock options, and 135 shares held by Mr. Wilson's wife. Mr. Wilson
disclaims beneficial ownership of the shares held by his wife.
(5) Includes 112,500 shares which are not currently outstanding, but which
Mr. Truitt is entitled to acquire upon the exercise of outstanding
stock options, and 100 shares held by Mr. Truitt's child. Mr. Truitt
disclaims beneficial ownership of said 100 shares.
(6) Includes 110,525 shares which are not currently outstanding, but which
Mr. Martin is entitled to acquire upon the exercise of outstanding
stock options and 24,621 shares held as custodian for his minor
children.
(7) Includes 7,800 shares which are not currently outstanding, but which
Mr. Biggs is entitled to acquire upon the exercise of outstanding stock
options.
(8) Includes 13,050 shares which are not currently outstanding, but which
Mr. Caudle is entitled to acquire upon the exercise of outstanding
stock options.
(9) Includes 18,300 shares which are not currently outstanding, but which
Mr. Dickson is entitled to acquire upon the exercise of outstanding
stock options, and 2,000 shares held by Mr. Dickson's wife. Mr. Dickson
disclaims beneficial ownership of the shares held by his wife.
William H. Martin, III has served as Chairman of the Board of Directors
of the Company since April 1994 and as a director of the Company since 1974.
From 1977 to 1987, Mr. Martin served as President and Chief Executive Officer of
the Company. From 1987 to 1993, Mr. Martin served as Executive Assistant to the
Rector of Trinity Church in New York City. Since 1993, Mr. Martin has been a
private investor.
James D. Wilson has served as President and Chief Executive Officer and
as a director of the Company since May 1994. Mr. Wilson has served the Company
in various capacities since 1978, when he joined the Company as a cost
accountant. In 1982, Mr. Wilson became the Company's Corporate Controller, a
position he held until becoming Vice President and Treasurer in 1992. Mr. Wilson
served in this capacity until becoming President and Chief Executive Officer in
May 1994.
James W. Truitt has served as Senior Vice President and Secretary of
the Company since November 1996 and as a director of the Company since 1975. Mr.
Truitt has served the Company in various capacities since 1967, including as
Vice President and Secretary from 1992 to May 1994 and Vice President and Chief
Financial Officer, Secretary and Treasurer from May 1994 to November 1996.
Louis J. Martin, II has served as Vice President of Manufacturing since
November 1996 and as a director of the Company since 1988. Since 1977, Mr.
Martin has served the Company in various capacities, including as Vice President
of Engineering from 1988 to 1996.
William D. Biggs has served as a director of the Company since 1993.
Mr. Biggs has served as Managing Partner of Carillon Beach,a real estate
development firm, since 1990.
Jim D. Caudle, Sr. has served as a director of the Company since 1990.
Mr. Caudle is Chairman and Chief Executive Officer of United Printed Circuits,
Inc., a manufacturer of printed circuit boards, and Advanced Precision
Manufacturing, Inc., a sheet metal manufacturing business, positions he has held
since 1989 and 1991, respectively. From 1973 to 1994, Mr. Caudle was Chairman
and Chief Executive Officer of United Plating, Inc., a metal finishing business.
Herbert J. Dickson has served as a director of the Company since 1985.
Mr. Dickson has been retired since 1995. From 1993 to 1995, Mr. Dickson was a
private business consultant. Mr. Dickson served as Chairman and Chief Executive
Officer of Fortune Financial Services, Inc. and Fortune Factors, Inc.,
businesses engaged in asset based lending and factoring, from 1987 to 1993. Mr.
Dickson also serves on the board of Blount International, Inc.
5
<PAGE> 10
William H. Martin, III and Louis J. Martin, II are first cousins.
During the Company's fiscal year ended December 31, 1996, the Board of
Directors of the Company held four regular meetings and one special meeting.
COMMITTEES OF THE BOARD
The Company has two standing committees of the Board of Directors, the
Compensation Committee and the Audit Review Committee. The Compensation
Committee's function is to develop and monitor the compensation arrangements
with the Company's President and Chief Executive Officer and its other executive
officers, including the administration of the Company's stock incentive plans.
The members of the Compensation Committee are William D. Biggs, Jim D. Caudle,
Sr., Herbert J. Dickson and William H. Martin, III. The Compensation Committee
met four times during the fiscal year ended December 31, 1996.
The Audit Review Committee's functions are to (i) recommend, subject to
approval by the Board of Directors and the Stockholders, the Company's
independent accountants, (ii) meet with the Company's independent accountants
and accounting personnel and review the scope and results of audits, (iii)
assess the quality of the Company's financial reporting process, (iv) monitor
the Company's compliance with laws and regulations relating to financial
reporting requirements, and (v) assess the adequacy and effectiveness of
internal controls. The members of the Audit Review Committee are Jim D. Caudle,
Sr., Herbert J. Dickson, Bill G. Hughey, Charles R. Martin and William H.
Martin, III. The Audit Review Committee met twice during the fiscal year ended
December 31, 1996.
The Company does not have a Nominating Committee.
III. ADOPTION OF THE MARTIN INDUSTRIES, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION
AND DEFERRED COMPENSATION PLAN
On May 3, 1996, the Board of Directors adopted the Martin Industries,
Inc. 1996 Non-Employee Directors' Stock Option and Deferred Compensation Plan
(the "1996 Plan"), subject to the approval of the Stockholders of the Company.
The purpose of the 1996 Plan is to advance the interests of the Company and the
Stockholders by giving non-employee directors an opportunity to acquire or
increase their interest in the Company, thereby aligning the interests of such
directors with the interests of the Stockholders. The purpose of the 1996 Plan
is also to enhance the Company's long-term growth and financial performance by
increasing the Company's ability to continue to attract and retain the services
of experienced and knowledgeable directors. Under the 1996 Plan, non-employee
directors are granted options to purchase Company stock and are allowed to
receive options in lieu of fees that otherwise would have been paid in cash to
such directors for their services as directors. The 1996 Plan also provides that
non-employee directors may defer receipt of their director's fees until a later
date.
The non-employee directors of the Company, presently consisting of six
persons, are eligible to participate in the 1996 Plan. The 1996 Plan will be
administered by a committee appointed by the Board of Directors and consisting
of at least three (3) members who will not be eligible to receive options under
the 1996 Plan (the "Plan Committee"). The 1996 Plan consists of two elements:
(i) stock options and (ii) deferred compensation.
STOCK OPTIONS
Under the 1996 Plan, a copy of which is attached hereto as Appendix I,
a maximum of 100,000 shares of the Company's Common Stock are to be reserved for
issuance upon the exercise of options granted to non-employee directors of the
Company. The number of reserved shares is subject to adjustment for stock
splits, stock dividends and other changes in the capital structure of the
Company. In the event of an expiration, termination or cancellation of any
option awarded under the 1996 Plan, the number of shares subject to such option
shall again become available for grant under the 1996 Plan.
6
<PAGE> 11
On the date of the annual meeting of the Board of Directors each year,
beginning with 1996, each non-employee director will be granted an option to
purchase shares of Common Stock as follows: (i) each non-employee director
elected to the Board of Directors at such annual meeting will receive an option
to purchase the number of shares of Common Stock determined by dividing the
amount of such director's cash retainer payable for serving on the Board of
Directors for the upcoming year by the fair market value of the Common Stock on
such date; and (ii) each non-employee director not standing for election at such
annual meeting and who is to continue to serve as a director of the Company will
receive an option to purchase the number of shares of Common Stock determined by
dividing the amount of such director's cash retainer payable for serving on the
Board of Directors for the upcoming year by the fair market value of the Common
Stock on such date, and multiplying the resulting amount by .6666.
The 1996 Plan also provides that each non-employee director may elect
to receive the cash retainer and meeting fees payable to the director for
service on the Board of Directors and any committees thereof in the form of
options to purchase stock in lieu of cash. On the first business day following
each of the three-month periods ending August 31, November 30, February 28 (or
29, as the case may be), and May 31, the Company will grant to each non-employee
director who has made such an election an option to purchase the number of
shares of Common Stock determined by dividing (i) the amount of such director's
cash retainer and meeting fees accrued during such three-month period increased
by 30% by (ii) the Black-Scholes value of each option to purchase a share of
Common Stock on the date of grant.
The grant of options under the 1996 Plan will be subject to the
following limitations: (i) the option price will be not less than 100% of the
fair market value of the stock on the date of the grant; (ii) no option may be
exercised more than ten years after the date of grant; (iii) options granted
prior to Stockholder approval of the 1996 Plan may not be exercisable within the
first twelve months following the grant thereof and, further, generally at least
six months must elapse from the date of Stockholder approval of the 1996 Plan to
the date of disposition of any underlying shares of Common Stock to which such
option relates; (iv) options granted following Stockholder approval of the 1996
Plan will generally not be exercisable within the first twelve months after the
date of grant; (v) with certain exceptions, no option will be exercisable unless
at all times during the period beginning on the date of grant and ending three
years before exercise the optionee was a director of the Company; and (vi) such
other limitations and conditions as the Plan Committee may determine. Following
Stockholder approval of the 1996 Plan, the Plan Committee in its discretion may
accelerate the times when options are exercisable after the initial grant
thereof; provided that the Plan Committee may not exercise such power if to do
so would permit or result in a violation of Section 16(b) of the Securities
Exchange Act of 1934 (the "Exchange Act").
As of the date of this Proxy Statement, 21,262 options have been
granted under the 1996 Plan at exercise prices of $6.75, $7.00 and $8.00. The
market value of the securities underlying the options in the 1996 Plan as of
March 24, 1997 was $5.75 per share.
DEFERRED COMPENSATION
Pursuant to the 1996 Plan, a non-employee director may elect to defer
all or any portion of the cash retainer and meeting fees payable to such
director for service on the Board of Directors and any committees thereof
(directors electing such deferral are hereinafter sometimes referred to as
"Participating Directors"). The Company will deposit such deferred fees into an
account (a "Deferral Account") established for each Participating Director and
will pay interest on funds in such accounts at the rate paid on five-year U.S.
Treasury notes, or at such other rate as is prescribed by the Plan Committee.
Amounts credited to the Deferral Account of a Participating Director will be
paid to him, at his election, in monthly installments over a period not to
exceed three (3) years, or in such other manner as the Plan Committee may
permit. Upon the death of a Participating Director, any amounts in his Deferral
Account will be paid to his designated beneficiary. Further, if a Participating
Director, or his designated beneficiary, if applicable, suffers certain
financial hardships, the Plan Committee may accelerate payment of the amounts in
such Participating Director's Deferral Account to the extent necessary to
eliminate such hardship.
7
<PAGE> 12
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE 1996 PLAN
Stock options issued under the 1996 Plan are referred to as
"nonqualified stock options" ("NQSOs"). The grant of NQSOs does not result in
any federal income tax consequences for either the Company or the optionee.
However, upon exercise of an NQSO, the optionee will realize ordinary income
equal to the difference between the fair market value of the shares purchased
determined as of the date of exercise, and the price which the optionee pays for
the shares. The Company will be entitled to a deduction for federal income tax
purposes equal to the amount which the optionee is required to include in
income, provided that the amount taken into income by the optionee constitutes
"reasonable compensation" for federal income tax purposes. Any sale or exchange
of shares acquired pursuant to the exercise of an NQSO will result in long-term
or short-term capital gain or loss to the optionee, depending upon whether the
shares were held for one year or longer, or less than one year, respectively.
Currently capital gains of individual taxpayers are taxed at a maximum rate of
28%, although such capital gains are taken into account in computing the
phase-out of the benefits of itemized deductions and personal exemptions, and
thus may have the effect of increasing the marginal income tax rate applicable
to the taxpayer's ordinary income.
REGISTRATION
The Company intends to file with the Securities and Exchange Commission
a Registration Statement under the Securities Act of 1933, as amended, with
respect to the shares of Common Stock issuable under the 1996 Plan promptly upon
approval of the 1996 Plan by the Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE MARTIN
INDUSTRIES, INC. 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION AND DEFERRED
COMPENSATION PLAN.
IV. RATIFICATION OF SELECTION OF AUDITORS
Arthur Andersen LLP, independent accountants, served as the Company's
auditors for fiscal year 1996 after having previously served in the same
capacity since 1972. Upon recommendation of the Audit Review Committee and
subject to ratification by the Stockholders, the Board of Directors has
appointed Arthur Andersen LLP as the Company's independent auditors for the
fiscal year ending December 31, 1997. Representatives of Arthur Andersen LLP
will be in attendance at the Annual Meeting of Stockholders and will be given
the opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP AS AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER
31, 1997.
V. OTHER MATTERS
The Board of Directors of the Company does not know at this time of any
other matters that are to be presented at the Annual Meeting.
8
<PAGE> 13
VI. PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of March 24, 1997
regarding the beneficial ownership of the Company's Common Stock by (i) each
person (including each "group" as that term is used in Section 13(d)(3) of the
Exchange Act) who is known by the Company to be the beneficial owner of more
than five percent (5%) of the Company's outstanding Common Stock, (ii) each
director of the Company who is a Stockholder, (iii) each of the executive
officers named in the Summary Compensation table under "Remuneration of
Executive Officers," and (iv) all directors and executive officers of the
Company as a group. Unless otherwise indicated, each of the Stockholders listed
below has sole voting and investment power with respect to the shares shown as
beneficially owned by them.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Beneficially Beneficial Ownership
Name Owned (1) of Shares(1)
- ----------------------------- ------------------ ----------------------
<S> <C> <C>
Martin Industries, Inc.
Employee Stock Ownership Plan
and Related Trust 3,396,325 38.8%
P.O. Box 128
Florence, Alabama 35630
William H. Martin, III 173,615 (2)(3) 2.0
James D. Wilson 133,635 (2)(4) 1.5
James W. Truitt 113,950 (2)(5) 1.3
Louis J. Martin, II 194,813 (2)(6) 2.2
Russell L. Todd 46,410 *
William D. Biggs 21,800 (2)(7) *
Jim D. Caudle, Sr. 18,050 (2)(8) *
Herbert J. Dickson 23,300 (2)(9) *
Bill G. Hughey 111,345 (2)(10) 1.3
Charles R. Martin 191,425 (2)(11) 2.2
All directors and executive
officers as a group (10 persons) 1,028,343 (2) 11.3
</TABLE>
* Represents less than 1%.
(1) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares as of March 24, 1997 that
such person or group has the right to acquire within sixty days after
such date, or with respect to which such person otherwise has or shares
voting or investment power. For purposes of computing beneficial
ownership and the percentages of outstanding shares held by each person
or group of persons on a given date, shares which such person or group
has the right to acquire within sixty days after such date are shares
for which such person has beneficial ownership and are deemed to be
outstanding for purposes of computing the percentage for such person,
but are not deemed to be outstanding for the purpose of computing the
percentage of any other person.
(2) Does not include 3,396,325 shares which are owned of record by the ESOP
and with respect to which the individual, as a member of the ESOP
Committee and, in the case of Messrs. Wilson, Truitt and Louis Martin,
as trustees of the ESOP, shares in the voting and investment power. The
members of the ESOP Committee and the trustees of the ESOP currently do
not participate in the ESOP.
(3) Includes 800 shares which are not currently outstanding, but which Mr.
Martin is entitled to acquire upon exercise of outstanding stock
options, and 27,965 shares held by Mr. Martin's wife. Mr. Martin
disclaims beneficial ownership of the shares held by his wife.
(4) Includes 122,500 shares which are not currently outstanding, but which
Mr. Wilson is entitled to acquire upon the exercise of outstanding
stock options, and 135 shares held by Mr. Wilson's wife. Mr. Wilson
disclaims beneficial ownership of the shares held by his wife.
9
<PAGE> 14
(5) Includes 112,500 shares which are not currently outstanding, but which
Mr. Truitt is entitled to acquire upon the exercise of outstanding
stock options, and 100 shares held by his child. Mr. Truitt disclaims
beneficial ownership of the shares held by his child.
(6) Includes 110,525 shares which are not currently outstanding, but which
Mr. Martin is entitled to acquire upon the exercise of outstanding
stock options and 24,621 shares held as custodian for his minor
children.
(7) Includes 7,800 shares which are not currently outstanding, but which
Mr. Biggs is entitled to acquire upon the exercise of outstanding stock
options.
(8) Includes 13,050 shares which are not currently outstanding, but which
Mr. Caudle is entitled to acquire upon the exercise of outstanding
stock options.
(9) Includes 18,300 shares which are not currently outstanding, but which
Mr. Dickson is entitled to acquire upon the exercise of outstanding
stock options, and 2,000 shares held by Mr. Dickson's wife. Mr. Dickson
disclaims beneficial ownership of the shares held by his wife.
(10) Includes 800 shares which are not currently outstanding, but which Mr.
Hughey is entitled to acquire upon exercise of outstanding stock
options, and 10,360 shares held by Mr. Hughey's wife. Mr. Hughey
disclaims beneficial ownership of the shares held by his wife.
(11) Includes 800 shares which are not currently outstanding, but which Mr.
Martin is entitled to acquire upon exercise of outstanding stock
options, and 126,525 shares held by Compass Bank as Trustee for the
Charles H. Martin Estate, with respect to which Mr. Martin also serves
as executor. Mr. Martin disclaims beneficial ownership of said 126,525
shares.
VII. REMUNERATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes compensation earned by or paid to each
person who served at any time during 1996 as the Company's Chief Executive
Officer, and the compensation earned by or paid to the Company's other most
highly compensated executive officers (collectively, the "named executive
officers"), for the years ended December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS(1) COMPENSATION
- --------------------------------------- ---- -------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
James D. Wilson......................... 1996 $187,530 $ 0 95,000(2)/3,092 $ 5,828(3)
President and Chief Executive Officer 1995 $140,010 $ 68,100 0/3,024 $ 5,653(4)
1994 $ 99,026 $110,000 17,500(2)/3,045 $ 8,129(5)
James W. Truitt......................... 1996 $115,515 $ 0 17,500(2)/2,953 $ 5,956(3)
Senior Vice President and Secretary 1995 $105,750 $ 26,700 0/3,059 $ 5,858(4)
1994 $ 98,400 $ 99,000 0/3,045 $10,785(5)
Russell L. Todd......................... 1996 $103,405 $ 0 0/2,705 $ 5,600(6)
Vice President - Manufacturing 1995 $ 95,349 $ 26,400 0/3,042 $ 3,614(4)
1994 $ 89,547 $ 90,400 0/3,045 $ 4,317(7)
</TABLE>
- --------------------
(1) "SARs" consist of phantom shares credited to the named executives'
accounts under the Company's Supplemental Executive Retirement Plan
(the "SERP").
(2) Consists of a stock option(s) to purchase shares of Common Stock under
the Company's 1994 Nonqualified Stock Option Plan.
(3) All other compensation for Messrs. Wilson and Truitt in 1996 includes
taxable insurance premiums of $2,554 and $3,102, respectively, Company
401(k) matching contributions of $1,575 and $1,155, respectively, and
supplemental medical insurance premiums of $1,699 each.
(4) All other compensation for Messrs. Wilson, Truitt and Todd in 1995
includes taxable insurance premiums of $2,554, $3,102 and $962,
respectively, Company 401(k) matching contributions of $1,400, $1,057
and $953, respectively, and supplemental medical insurance premiums of
$1,699 each.
10
<PAGE> 15
(5) All other compensation for Messrs. Wilson and Truitt in 1994 includes
$3,000 and $5,000, respectively, in board meeting fees, $2,440 and
$3,102, respectively, in taxable insurance premiums, $990 and $984,
respectively, in Company 401(k) matching contributions and $1,699 each
in supplemental medical insurance premiums.
(6) All other compensation for Mr. Todd in 1996 includes $2,867 in taxable
insurance premiums, $1,034 in Company 401(k) matching contributions and
$1,699 in supplemental medical insurance premiums.
(7) All other compensation for Mr. Todd in 1994 includes $1,723 in taxable
insurance premiums, $895 in Company 401(k) matching contributions and
$1,699 in supplemental medical insurance premiums.
1996 STOCK OPTION/SAR GRANTS
The following table sets forth the specified information with respect
to stock option and SAR grants to each of the named executive officers during
1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER TOTAL OPTIONS/ AT ASSUMED ANNUAL RATES OF
OF SECURITIES SARS GRANTED EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING TO EMPLOYEE BASE PRICE FOR OPTION TERM(1)
OPTIONS/SARS IN FISCAL OF OPTIONS/ EXPIRATION -------------------------------------
NAME GRANTED(#) YEAR SARS ($/SH) DATE 5% ($) 10% ($)
- --------------- --------------- -------------- ----------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James D. Wilson 45,000/3,092(2) 55.4%/23.5% $9.50/$7.25 3/7/06/(3) $268,650/$44,384 $681,300/$85,129
50,000 $6.75 11/4/06 $212,500 $538,000
James W. Truitt 7,500/2,953(2) 10.2%/22.5% $9.50/$7.25 3/7/06/(3) $44,775/$28,690 $113,550/$37,927
10,000 $6.75 11/4/06 $42,500 $107,600
Russell L. Todd 0/2,705(2) 0/20.6% $0/$7.25 0/(3) 0/$35,219 0/$61,548
</TABLE>
- --------------------
(1) The number of years remaining until each named executive reaches
retirement age under the provisions of the SERP has been used as the
term in determining the potential realizable value of phantom shares
credited to the named executive's account under the SERP.
(2) Consists of phantom shares credited to the named executive officer's
account under the SERP.
(3) Under the terms of the SERP, the participant's SARs vest upon the
participant attaining retirement age under the plan, upon death or upon
the occurrence of a permanent disability. Generally, upon retirement,
death or disability, the participant's benefit from his SARs will be
distributed as a lump sum cash payment not later than one year
following the closing of the plan year in which the event occurred;
provided that, under certain circumstances, a participant's benefit may
be deferred to commence following the participant reaching the age 70
1/2.
11
<PAGE> 16
1996 STOCK OPTION EXERCISES
The following table sets forth the number of stock options exercised
and the dollar value realized thereon by each of the named executive officers
during 1996, along with the number and dollar value of any options remaining
unexercised and the number and dollar value of any phantom shares outstanding at
December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT FISCAL
FISCAL YEAR-END (#) YEAR-END ($)
SHARES ACQUIRED VALUE EXERCISABLE(1)/ EXERCISABLE(1)/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE(2) UNEXERCISABLE(2)
- ---- --------------- ------------ --------------------- ----------------------
<S> <C> <C> <C> <C>
James D. Wilson........................ 10,000 $ 58,080 122,500/62,084 $424,210/$87,609
James W. Truitt........................ None None 112,500/22,621 $680,847/$91,502
Russell L. Todd........................ 88,760 $753,485 0/12,054 0/$87,392
</TABLE>
- --------------------
(1) The number of securities underlying unexercised options includes
presently exercisable stock options under the Company's 1988
Nonqualified Stock Option Plan and 1994 Nonqualified Stock Option Plan.
The value of unexercised in-the-money options represents the difference
between the fair market value of the shares subject to unexercised
options as of December 31, 1996 and the cash portion of the option
price of the shares. See "- Compensation Pursuant to Plans - 1988
Nonqualified Stock Option Plan" below. A fair market value of $7.25 per
share is used based upon the closing sale price of the Company's Common
Stock on The Nasdaq Stock Market's National Market on December 31,
1996, the final trading day of 1996. The actual value, if any, a person
may realize as a result of an option will depend on the excess of the
stock price over the exercise price on the date the option is
exercised. The ultimate value of an option is dependent on the market
value of the Common Stock at a future date, which will depend to a
large degree on the efforts of the executive officers named above to
bring future success to the Company for the benefit of all
Stockholders.
(2) Includes presently unexercisable options under the Company's 1994
Nonqualified Stock Option Plan and phantom shares credited to the named
executive officers' accounts under the SERP. For purposes of
calculating the value of unexercisable in-the-money options and phantom
shares held under the SERP at December 31, 1996, a fair market value of
$7.25 per share is used and is based upon the closing sale price of the
Company's Common Stock on The Nasdaq Stock Market's National Market on
December 31, 1996, the final trading day of 1996. The actual value, if
any, a person may realize as a result of such options and phantom
shares will depend on the market value of the Common Stock of the
Company at a future date, which will depend to a large degree on the
efforts of the executive officers named above to bring future success
to the Company for the benefit of all Stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William D. Biggs, Jim D. Caudle, Sr., Herbert J. Dickson and William H.
Martin, III served as members of the Compensation Committee of the Board of
Directors of the Company during 1996. From 1977 to 1987, William H. Martin, III
served as the President and Chief Executive Officer of the Company. During 1996,
no executive officer of the Company served as a member of the Compensation
Committee or as a director of any other entity, one of whose executive officers
served on the Compensation Committee or was a director of the Company, nor does
any such relationship exist currently.
12
<PAGE> 17
DIRECTOR COMPENSATION
Directors are reimbursed for their out-of-pocket expenses for each
meeting of the Board of Directors attended. All directors of the Company, other
than directors who are employees of the Company, receive from the Company a
monthly retainer of $1,000. The Chairman of the Board also receives an
additional annual retainer of $25,000. In addition, directors who are not
employees of the Company currently receive a $700 fee per meeting of the Board
of Directors, and any committee thereof, with the Chairman of the Board
receiving a fee of $1,000 per meeting of the Board of Directors and the chairman
of each committee receiving $900 per meeting of any committee of the Board of
Directors. Directors are also entitled to receive grants of stock options under
the 1994 Nonqualified Stock Option Plan of the Company and, if approved by the
Stockholders of the Company, non-employee directors will be entitled to receive
grants of stock options and to defer fees or receive options in lieu of fees in
accordance with the terms of the 1996 Plan. See "ADOPTION OF THE MARTIN
INDUSTRIES, INC. 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION AND DEFERRED
COMPENSATION PLAN," above. In addition, each director is provided with $200,000
of coverage under the Company's group accidental death and dismemberment policy
and directors who are or have been Stockholders, officers and employees of the
Company may become entitled to benefits under the Company's post-retirement
benefit plan. See "- Compensation Pursuant to Plans - Life and Disability
Insurance" and "- Post-retirement and Post-employment Benefits," below.
Directors who are also employees of the Company receive no fees or retainers for
attending meetings of the Board of Directors.
COMPENSATION PURSUANT TO PLANS
Profit Sharing Plan. The Company sponsors the Martin Industries, Inc.
Profit Sharing Plan (the "Profit Sharing Plan"), which covers substantially all
employees of the Company. Contributions by the Company to the Profit Sharing
Plan are at the discretion of the Board of Directors. Prior to 1993,
contributions under the Profit Sharing Plan were generally equal to 20% of the
amount by which income before income taxes and the contribution exceeded 15% of
the net worth of the Company at the beginning of the year to which the
contribution applied. As a result of the implementation of the ESOP in 1993, the
Company did not make any contributions to the Profit Sharing Plan in 1993 or in
any year since. As part of the Profit Sharing Plan, the Company also offers a
savings and retirement provision (the "401(k) Plan"), which is designed to be a
qualified retirement plan under Section 401(k) of the Internal Revenue Code of
1986, as amended (the "Code").
The 401(k) Plan was first approved by the Company in 1984. All
employees of the Company are generally eligible to participate in the 401(k)
Plan after completion of one year of employment. Each month, a participant may
defer, on a pre-tax basis, up to 8% of his or her base compensation, excluding
bonuses and extraordinary compensation, through contributions to the 401(k)
Plan. The Company may choose to match a participant's salary deferrals in an
amount equal to a percentage of such deferrals, but not to exceed 1% of the
participant's base compensation excluding bonuses and extraordinary
compensation. Each participant is fully vested in the 401(k) Plan to the extent
of his or her salary deferrals, but participants generally must have been
employed by the Company for at least seven years before they have fully vested
rights in any matching contributions made by the Company, although participants
become partially vested in any matching contributions after three years of
service. Lump sum or periodic distributions may be made from the 401(k) Plan
upon termination of employment or attainment of age 65. A participant may also
obtain a hardship withdrawal from the 401(k) Plan. Including employee
contributions and the Company matching contributions, the named executive
officers accrued the following benefits under the 401(k) Plan during 1996: Mr.
Wilson - $7,875, Mr. Truitt - $8,823 and Mr. Todd - $6,204. Amounts deferred by
these individuals under the elective deferral feature of the 401(k) Plan and the
matching Company contributions applicable to these individuals are reported in
the Summary Compensation Table above.
Life and Disability Insurance. The Company provides each officer of the
Company, including the named executive officers, with group term life insurance
with a death benefit of up to a maximum of $100,000. The Company further
provides each named executive officer with individual term life coverage with a
death benefit of $100,000. The Company also provides each named executive
officer and director with group accidental death and dismemberment insurance
with a benefit of up to a maximum of $200,000. The life insurance benefits and
the accidental death and dismemberment benefits are payable to such officer's or
director's beneficiary and not to the
13
<PAGE> 18
Company. The Company also pays all of the premiums on certain variable life
insurance policies for certain officers of the Company, the death benefit and
cash value of which are for the benefit of and payable to such officer or his
designated beneficiary and not to the Company. The death benefit and cash value
of the variable life insurance policies of the named executive officers at
December 31, 1996 are as follows: Mr. Wilson - $100,000/$31,891, Mr. Truitt -
$100,000/$20,236 and Mr. Todd - $100,000/$33,974. Amounts paid in premiums by
the Company for the benefit of these individuals are reported in the Summary
Compensation Table above. The Company also provides substantially all of its
other employees with certain group life insurance benefits under term life
insurance policies for which premiums are paid by the Company, and with certain
long-term disability insurance which replaces a percentage of the employees'
base salaries in the event of a qualifying disability.
1988 Nonqualified Stock Option Plan. Pursuant to authority granted in
the Company's Articles of Incorporation, the Board of Directors adopted the
Company's 1988 Nonqualified Stock Option Plan (as amended, the "1988 Plan") in
July 1988. The 1988 Plan, which has been approved by the Company's Stockholders,
is currently administered by the Compensation Committee. The purpose of the 1988
Plan is to benefit the Company by offering certain employees and officers of the
Company an opportunity to acquire Common Stock and thereby increase their
personal investment in the Company. Options to purchase Common Stock may be
granted under the 1988 Plan to eligible employees and officers of the Company
who are selected by the Compensation Committee; provided, however, that no
member of the committee, and no director of the Company who is not also an
employee or officer of the Company, is eligible to receive options under the
1988 Plan. The Compensation Committee has the discretion, subject to the terms
and conditions of the plan, to identify from among eligible participants those
who will receive options, the option price and the other terms and conditions of
the options. The purchase price for options granted under the 1988 Plan may not
be less than the greater of the par value of the shares or 38.5% of their book
value at the end of the Company's fiscal year immediately prior to the complete
fiscal year that precedes the grant. Options granted under the 1988 Plan must be
granted within 10 years from the date of the adoption of the 1988 Plan by the
Board of Directors, and are generally exercisable at any time between one year
and 10 years from the date of grant, except that options become immediately
exercisable upon certain changes in control and except that in the event of a
termination of employment for any reason other than death, the purchase price
for the stock must be paid within 90 days from the date of such termination (or
prior to the expiration of the option if earlier). In the event of termination
of optionee's employment on account of death, instead of a 90 day period as
described in the foregoing sentence, the exercise period is one year. The Board
of Directors is authorized to amend the 1988 Plan, except that the Stockholders
of the Company must approve any amendment to increase the maximum number of
shares subject to the 1988 Plan or to materially modify the requirements as to
eligibility for participation in the plan. Under the 1988 Plan, nonqualified
options to purchase an aggregate of not more than 1,564,500 shares of Common
Stock may be granted (subject to appropriate adjustment for stock splits, stock
dividends, reorganizations, reclassifications, mergers, consolidations or
recapitalizations). Options to purchase an aggregate of 1,564,500 shares of
Common Stock have been granted under the 1988 Plan at an average total purchase
price of $1.42 per share, to be satisfied 50% in cash upon exercise and 50% in
previously earned but unpaid compensation accrued. As of December 31, 1996, of
the 1,564,500 options granted, 1,138,800 options had been exercised and 425,700
shares remained subject to presently exercisable options. No options remain
available to be granted under the 1988 Plan.
1994 Nonqualified Stock Option Plan. The Board of Directors adopted the
Company's 1994 Nonqualified Stock Option Plan (the "1994 Plan") in October 1994.
The Company's Stockholders approved the 1994 Plan in April 1996. The purpose of
the 1994 Plan is to attract, compensate, motivate and retain those highly
competent officers, directors and key management employees upon whose judgment,
initiative, leadership and continued efforts the success of the Company in large
measure depends. Under the 1994 Plan, eligible persons who are selected by the
Compensation Committee may be granted nonqualified options to purchase an
aggregate of not more than 525,000 shares of Common Stock (subject to
appropriate adjustment for stock splits, stock dividends, reorganizations,
reclassifications, mergers, recapitalizations or otherwise). As of December 31,
1996, options to purchase an aggregate of 234,050 shares of Common Stock had
been granted under the 1994 Plan.
The 1994 Plan is currently administered by the Compensation Committee.
Within the limitations set forth in the 1994 Plan, the Compensation Committee
has sole discretion and authority to determine from among the eligible officers,
directors and employees those to whom options may be granted, the timing of the
grant of the options, and the exercise period and price of such options.
Directors, officers and other key management employees of the
14
<PAGE> 19
Company and its subsidiaries are eligible to participate under the 1994 Plan.
The option price per share under the 1994 Plan may not be less than the greater
of the par value of the shares or 85% of their fair market value (as defined in
the 1994 Plan) on the date of grant. Options must be granted within ten years
from the adoption of the 1994 Plan and exercised within ten years from the date
of grant, except that options must be exercised prior to termination of
employment if termination is "for cause" (as defined in the 1994 Plan) or within
90 days after termination if termination is other than for cause, or within one
year after termination (subject to extension by the Compensation Committee) if
termination is due to death or disability. Options also generally become
exercisable in full upon certain changes in control of the Company. Otherwise,
the period for the exercise of options is generally at the discretion of the
Compensation Committee. The Board of Directors is authorized from time to time
to amend the 1994 Plan, except that the Stockholders of the Company must approve
any amendment to increase the maximum number of shares subject to the plan and
to modify materially the requirements as to those persons who are eligible to
participate in the plan.
Executive Supplemental Income Plan. In 1983, the Company implemented
its executive supplemental income plan (the "ESIP") in order to encourage
certain key members of management to continue their employment with the Company.
As of December 31, 1996, 11 current or retired employees had entered into
supplemental income agreements ("Supplemental Income Agreements") with the
Company under the ESIP. Under the Supplemental Income Agreement, a participant
will receive credits based upon the participant's age at the time the agreement
is entered into and for each prior year of service with the Company, with the
participant becoming vested under the agreement, and entitled to receive
benefits thereunder, upon receiving an established number of credits. Upon
entering into a Supplemental Income Agreement, the participant will receive the
greater of one credit for each year of the participant's age or 40 credits, plus
one credit for each year of full-time service to the Company rendered up to the
date of the agreement. Thereafter, the participant will receive one credit for
each twelve months of full-time service to the Company. The participant becomes
50% vested upon receiving 55 credits and continues to vest at a rate of 5% per
credit received thereafter until becoming fully vested upon receiving 65
credits. Beginning at the later of either the attainment of 65 years of age or
termination of full-time employment or beginning at such time as may be
determined in the discretion of the Compensation Committee, a participant or the
designated beneficiary thereof becomes entitled to receive 120 monthly payments
equal to 40% (or 40% times the percentage vested, if only partially vested) of
the highest average monthly compensation (exclusive of bonuses and fringe
benefits) paid to the participant by the Company during a period of three
consecutive years within the five-year period ending immediately prior to the
termination of the participant's full-time employment. The Supplemental Income
Agreements also provide as a condition to payment that the participant shall not
enter into competition with the Company during the term of his employment or for
a period of five years thereafter. As a part of this program, the Company has
purchased, and is the named beneficiary of, life insurance on the participants
which, based on the actuarial assumptions used, is expected to exceed the total
obligation, after taxes, of the Company under the ESIP. As of December 31, 1996,
the named executive officers had received the following number of credits under
their respective Supplemental Income Agreements: Mr. Wilson - 59 credits (70%
vested), Mr. Truitt - 75 credits (100% vested) and Mr. Todd - 65 credits (100%
vested).
The following table shows estimated annual benefits payable upon
retirement under the ESIP.
<TABLE>
<CAPTION>
Highest 3-Year Number of Credits
Average Annual --------------------------------------
Base Salary 55 60 65
-------------- ------- ------- ---------
<S> <C> <C> <C>
$ 100,000 $20,000 $30,000 $ 40,000
125,000 25,000 37,500 50,000
150,000 30,000 45,000 60,000
175,000 35,000 52,500 70,000
200,000 40,000 60,000 80,000
225,000 45,000 67,500 90,000
250,000 50,000 75,000 100,000
300,000 60,000 90,000 120,000
</TABLE>
15
<PAGE> 20
Employee Stock Ownership Plan. In 1992, the Company established the
ESOP in an effort to promote employee involvement in the success of the Company
by giving eligible employees an ownership interest in the Company. All
participants in the Profit Sharing Plan as of December 31, 1991, became
participants in the ESOP as of January 1, 1992. The Company's Board of Directors
serves as the Administrative Committee of the ESOP and thereby directs the
actions of the trustees of the ESOP, all of whom are executive officers of the
Company. Under Section 1042 of the Code, persons who sell shares to an ESOP can
defer tax recognition on the sale if certain requirements are met, including the
requirement that such selling Stockholders and other specified persons not
participate in the ESOP. Because Section 1042 was utilized in connection with
the ESOP and all the named executive officers sold shares to the ESOP, none of
the named executive officers participate in the ESOP.
Supplemental Executive Retirement Plan. Because Section 1042 of the
Code prohibits certain employees, including the named executive officers, from
participating in the ESOP, the Company implemented a supplemental executive
retirement plan (the "SERP") in 1993 to provide benefits that would have been
available to those employees under the ESOP. Under the terms of the SERP, each
participant in the SERP is allocated a number of "phantom shares" equal to the
number of shares of Common Stock that would have been allocated to such
participant's account under the ESOP but for the Section 1042 limitations.
Participants vest in the SERP account in accordance with the vesting provisions
of the ESOP. During 1996, 12,571 phantom shares of the Company's Common Stock
with an estimated fair value of $91,140 were allocated to participants' accounts
under the SERP. The calculation of the price per share is based upon the price
of the shares of Common Stock at the close of trading on December 31, 1996.
Post-retirement and Post-employment Benefits. The Company currently
maintains a plan whereby the Company pays supplemental Medicare insurance
premiums for certain retired officers, directors and their spouses. Certain
current officers and directors who meet specified service requirements will be
provided these retirement benefits under this plan upon their retirement. The
total expense under this plan to the Company in 1996 was $82,000. The Company
also maintains a plan whereby the Company provides medical insurance coverage
through its self-insured medical/dental plan to certain former employees of the
Company who were directors and/or officers and Stockholders and who have
terminated their employment but have not reached retirement age and the members
of the immediate families of such persons. To be eligible to participate in this
plan, the former employee must have been a Stockholder, an officer and director
of the Company and have been employed by the Company for 15 years or, if the
employee did not serve as a director, 20 years. The total expense of this plan
to the Company in 1996 was $105,000, including $44,000 accrued for named
officers.
VIII. CERTAIN TRANSACTIONS
The Company is a party to an agreement with Amerimark Capital Group
("ACG"), the President and Chief Executive Officer of which is Mr. Charles R.
Martin, a director of the Company. Under this agreement, ACG provides the
Company with a variety of consulting services related to the Company's
refinancing and acquisition programs. The Company has agreed to pay ACG on an
hourly basis for all such consulting services performed by ACG. The agreement
also provides that ACG will search for viable acquisition candidates on behalf
of the Company. In the event that any proceeds are paid to any person involved
in an acquisition transaction with the Company arising out of an introduction by
ACG, or upon the closing of such a transaction, the Company has agreed to pay
ACG a success fee equal to 1.5% of such proceeds paid. Finally, the Company has
agreed to reimburse ACG for all out-of-pocket expenses incurred by ACG in
connection with its services pursuant to the agreement, provided that the
Company has pre-approved such expenses.
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<PAGE> 21
IX. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
RESPONSIBILITIES OF THE COMMITTEE
The Compensation Committee is responsible for establishing a
compensation program designed to create a direct relationship between the levels
of compensation paid to executives and the Company's annual and long-term level
of performance. The Committee, which is composed of non-employee directors,
believes that this relationship is best established by providing a compensation
package consisting of separate components, all of which are designed to enhance
the Company's overall performance resulting in increased Stockholder value.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Compensation Committee believes that the total compensation program
should be based on the Company's overall performance compared to corporate
objectives, while also recognizing individual contributions that have helped
create value for the Company's Stockholders. The Company's compensation program
is designed to be competitive with those of other well-managed, durable products
companies. The Committee has focused the program on variable compensation so
that a significant proportion of the officers' total compensation is at risk,
with its value based on the Company's annual and long-term financial results and
improvement in Stockholder value. The program specifically attempts to align the
financial interests of the executives with those of the Stockholders so that the
executives' personal net worth depends heavily on a long-term appreciation in
the value of the Company's stock. The Committee uses the services of an
independent consultant to advise it in the continuing development of the
Company's philosophy and objectives.
COMPENSATION COMPONENTS
The Company's compensation program for executive officers has three
components: base salary, annual incentive awards and long-term incentive awards.
The Compensation Committee determines executive compensation levels for each
component based upon the Committee's judgment, taking into account an
objectives-based evaluation by the President and Chief Executive Officer of the
executive officers who report to him. The Compensation Committee reviews the
President and Chief Executive Officer's recommendations for these executive
officers, but ultimately makes compensation awards based upon the judgment of
the Committee's members.
The Chairman of the Board of Directors prepares an appraisal of the
President and Chief Executive Officer based on his performance and the Company's
results during the previous fiscal year, and the Compensation Committee
considers this evaluation in determining any change in the base salary and the
amount of the annual incentive award for the President and Chief Executive
Officer.
In setting compensation levels for the executive officers, the
Committee considers survey-derived data that reflect compensation paid by
bonus-paying companies of similar size in the durable goods industry.
BASE SALARIES
The Compensation Committee annually reviews and approves the base pay
levels for the executive officers. The Committee established the salaries for
the officers at levels considered appropriate in light of the scope of the
duties and responsibilities attendant to the executive's position and taking
into account competitive practices. The Committee's goal is to set base salaries
for the Company's executives slightly below the 50th percentile of the market
though specific compensation for an individual executive may vary from those
levels due to various subjective and objective factors, such as experience,
length of service and performance.
Base salary increases were granted to each of the named executive
officers in 1996; all were paid base salaries at the beginning of the year that
were significantly below the survey-derived pay levels.
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<PAGE> 22
ANNUAL INCENTIVE PROGRAM
Under the Company's Management Incentive Plan (the "Incentive Plan"),
the Company's executive officers and other key management employees have the
opportunity to earn annual performance bonuses. Bonuses are paid based on
achievement of the Company's pre-tax return on equity percentage compared to a
target approved by the Compensation Committee at the start of the year. The
resultant awards may then be increased or decreased on the basis of an
executive's achievement of individual goals. The executives set Company and
individual goals with the President and Chief Executive Officer at the start of
the year. A target incentive award is established so that each executive knows
at the beginning of the year the amount he can earn if both Company and
individual results are achieved.
While the Company's results for 1996 were positive, they did not
achieve the objectives set at the beginning of the year, and no payments were
earned or paid from the Incentive Plan. Since the achievement of individual
goals acts as a modifier for any amount earned on the basis of the Company's
results, no payments could be made from the individual component of the
Incentive Plan.
LONG-TERM COMPENSATION
The Company's long-term incentive compensation plan promotes ownership
of the Company's Common Stock, providing a common interest between the
Stockholders and the executive officers. The Committee establishes target
incentive compensation opportunities that directly link an executive's potential
award to individual contributions and the Company's performance.
The 1994 Nonqualified Stock Option Plan authorizes the Compensation
Committee to make grants of stock options at an exercise price which cannot be
less than the greater of (i) the par value of the Common Stock on the date the
option is granted or any time the option is exercisable, or (ii) 85% of the per
share fair market value of the Common Stock on the date of grant. Within the
limitations set forth in the 1994 Nonqualified Stock Option Plan, the
Compensation Committee has sole discretion and authority to determine from among
the eligible officers, directors, and employees those to whom options may be
granted, the time of the options, the exercise period and the price of the
options. Stock options granted to the named executive officers during the fiscal
year ended December 31, 1996, are reflected in the table set forth above under
"REMUNERATION OF EXECUTIVE OFFICERS - 1996 Stock Option Grants."
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The President and Chief Executive Officer's salary, bonus and annual
grants of stock options follow the policies and procedures set forth above. Mr.
Wilson's salary increase in fiscal 1996 was based on the Compensation
Committee's evaluation of his performance, that of the Company, and the review
of competitive salary data. The Company's performance for the previous year was
measured against pre-tax return on equity goals established by the Compensation
Committee. The Company's 1995 results were used since the President and Chief
Executive Officer's salary was reviewed early in 1996. The Compensation
Committee is aware that Mr. Wilson's base salary continues to be low when
compared to that of Chief Executive Officers of comparable companies. Since Mr.
Wilson's base salary was almost 50 percent below the survey-derived median level
for his position, the Committee approved an increase for him of approximately 33
percent, increasing his base salary to $200,000.
In addition to his base salary, the President and Chief Executive
Officer is eligible to receive compensation paid through incentive programs.
While Mr. Wilson's base salary accounts for 50 percent of his total pay, annual
and long-term incentive plans account for the remainder. It is the Compensation
Committee's intention to revise this compensation mix in the future so that a
greater portion of his total compensation will be based on the value of the
Company's stock, improving the linkage with the increase in value created for
the Company's Stockholders.
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<PAGE> 23
Mr. Wilson's 1996 compensation consisted of a base salary of $200,000,
but no annual incentive award. The Company's failure to achieve the Incentive
Plan's financial objectives in 1996 resulted in no annual incentive award. The
Compensation Committee's evaluation of Mr. Wilson's achievement of his
individual goals did not result in any award since a threshold of the Company's
financial results must be achieved before any award for individual results may
be made.
In 1996, the Compensation Committee approved the grant of options to
purchase 95,000 shares of the Company's Common Stock to Mr. Wilson at fair
market value at the date of grant. The number of shares granted Mr. Wilson is
determined by the Compensation Committee as part of the overall compensation
program. The Compensation Committee believes that stock options encourage the
senior executives to become owners of the Company, which further aligns their
interests with the Stockholders.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits to $1 million the
tax deduction for compensation paid to the named executive officers, unless
certain requirements are met, one of which is that compensation over $1 million
must be based on the Company's attainment of performance goals approved by the
Stockholders. The Compensation Committee's policy is to comply with Section
162(m), and the Nonqualified Stock Option Plan approved by the Stockholders in
1994 was designed to comply with Section 162(m). Based on currently available
information, all compensation paid to executives in 1996 is deductible. The
Compensation Committee will continue to monitor this subject.
The Compensation Committee's philosophy and objectives and its
compensation program are designed to enhance Stockholder value, and such
philosophy, objectives and programs are subject to review and change whenever
the Compensation Committee perceives that this purpose is not being met.
This report is submitted by the following Directors of the Company,
compromising all the members of the Compensation Committee:
William D. Biggs
Jim D. Caudle, Sr.
Herbert J. Dickson
William H. Martin, III
X. EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of the executive officers of the Company who are not
also directors of the Company, and the offices with the Company held by each
such executive officer and the period during which he has served in such office
are as follows:
<TABLE>
<CAPTION>
Year First Elected
Name and Age Office to Such Office
- -------------------------- ------------------------------------------ ------------------
<S> <C> <C>
Roderick V. Schlosser - 41 Vice President of Finance and Treasurer 1996
Robert W. Wintersteen - 39 Vice President of Sales and Marketing 1997
J. Reid Roney - 37 Vice President of Research and Development 1997
Kenneth W. Horton - 51 Vice President of Sales 1997
</TABLE>
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<PAGE> 24
XI. STOCK PERFORMANCE GRAPH
The following indexed graph compares the Company's annual percentage
change in cumulative total Stockholder return for the period since the date the
Company's stock was initially publicly traded with The Nasdaq Stock Market -
U.S. Index and the S&P Industrials Index.
<TABLE>
- ------------------------------------------------------------------
<S> <C> <C> <C>
7/13/95 12/95 12/96
Martin Industries, Inc. $100 $ 85 $ 72
NASDAQ $100 $106 $131
S&P Industrials $100 $112 $138
- ------------------------------------------------------------------
</TABLE>
XII. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers, directors and 10% Stockholders are
required under the Exchange Act to file reports of ownership and changes in
ownership with the Commission. Copies of these reports must also be furnished to
the Company. Based on a review of copies of such reports furnished to the
Company through the date hereof, or written representations of such officers,
directors or Stockholders that no reports were required, the Company believes
that during fiscal 1996 all filing requirements applicable to its officers,
directors and Stockholders were complied with in a timely manner with the
exception of Form 5 filings that were not made in a timely manner by Messrs.
Bill G. Hughey and Charles R. Martin, directors of the Company.
XIII. PROPOSALS BY STOCKHOLDERS
Stockholders of the Company may submit proposals for consideration for
inclusion in the proxy statement of the Company relating to the Annual Meeting
of Stockholders to be held in 1998. However, in order for such proposals to be
considered for inclusion in the proxy statement of the Company relating to the
Annual Meeting, such proposals must be received by the Company not later than
December 9, 1997.
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<PAGE> 25
XIV. GENERAL INFORMATION
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter for action at the Annual Meeting other than those matters
stated in the Notice of the Annual Meeting. If other matters should properly
come before the Annual Meeting, it is intended that the holders of the proxies
will act in respect thereto in accordance with their best judgment.
In addition to the use of the mails, proxies may be solicited by
personal interview or by telephone or telegraph. The cost of solicitation of
proxies will be borne by the Company. The Company may request brokerage houses,
nominees, custodians, and fiduciaries to forward soliciting material to the
beneficial owners of the stock held of record and will reimburse such persons
for any reasonable expense incurred in forwarding the material.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, IN FORM AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
MAY BE OBTAINED, WITHOUT CHARGE, FROM JAMES W. TRUITT, SECRETARY OF THE COMPANY,
301 EAST TENNESSEE STREET, FLORENCE, ALABAMA 35630 ON THE WRITTEN REQUEST OF
PERSONS WHO WERE STOCKHOLDERS BENEFICIALLY OR OF RECORD AS OF MARCH 24, 1997.
MARTIN INDUSTRIES, INC.
James W. Truitt
Secretary
301 East Tennessee Street
Florence, Alabama 35630
April 7, 1997
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<PAGE> 26
APPENDIX I
MARTIN INDUSTRIES, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION AND DEFERRED COMPENSATION PLAN
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS
As used herein, the following terms shall have the meanings hereinafter
set forth unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of Martin
Industries, Inc., a Delaware corporation.
(b) "Committee" shall mean the committee of the Board
appointed pursuant to Article III to administer the Plan.
(c) "Company" shall mean Martin Industries, Inc., a Delaware
corporation, and any successor in interest thereto.
(d) "Eligible Director" shall mean any person who is serving
as a director of the Company who is not an officer of the Company or a
subsidiary of the Company or otherwise employed by the Company or a subsidiary
of the Company.
(e) "Fair Market Value" shall mean, if applicable, the closing
price per share of the Stock on the principal United States securities exchange
registered under the 1934 Act on which such Stock is sold in the regular way; or
the last sales price of the day during regular trading per share of the Stock
quoted on an automated quotation system of a registered securities association
on which such Stock is sold in the regular way; or if the Stock is not
registered or traded in such a manner that such quotations are available, the
Fair Market Value shall be deemed to be the fair value per share of Stock
determined in good faith by the Board or the Committee as of a date which is
within 30 days of the date as of which the determination is to be made.
(f) "Fees" shall mean the cash retainer and meeting fees
payable to an Eligible Director for service on the Board of Directors of the
Company and any committees thereof.
(g) "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended.
(h) "Option" shall mean an option to purchase Stock granted
pursuant to the provisions of Article VI hereof.
(i) "Optionee" shall mean a person to whom an Option has been
granted hereunder.
(j) "Plan" shall mean the Martin Industries, Inc. 1996
Non-Employee Directors' Stock Option and Deferred Compensation Plan, the terms
of which are set forth herein.
(k) "Retainer" shall mean the cash retainer payable to an
Eligible Director for service on the Board of Directors of the Company and any
committees thereof.
(l) "Stock," with respect to each share to which that term
refers, shall mean one (1) share of Common Stock, par value $0.01 per share, of
the Company now authorized; any other shares of the Stock of
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<PAGE> 27
the Company hereafter authorized; and securities of the Company which, under any
conditions, will be converted into or exchanged for any such Stock.
(m) "Stock Option Agreement" shall mean the agreement between
the Company and the Optionee under which the Optionee may purchase Stock
hereunder.
(n) "1934 Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
ARTICLE II
THE PLAN
SECTION 2.1 NAME
This Plan shall be known as the "Martin Industries, Inc. 1996
Non-Employee Directors' Stock Option and Deferred Compensation Plan."
SECTION 2.2 PURPOSE
The purpose of the Plan is to advance the interests of the Company and
its Stockholders by affording to Eligible Directors an opportunity to acquire or
increase their proprietary interest in the Company by the grant to such
directors of Options and by allowing such directors to receive Options in lieu
of Fees that otherwise would have been paid in cash under the terms set forth
herein and, thereby, to align the interests of the Eligible Directors with the
interests of the Stockholders of the Company. The purpose of the Plan is also to
enhance the Company's long-term growth and financial performance by increasing
the Company's ability to continue to attract and retain the services of
experienced and knowledgeable directors.
SECTION 2.3 EFFECTIVE DATE
The Plan was adopted by the Board of Directors on May 3, 1996, and
became effective as of that date, subject to ratification and approval prior to
June 1, 1997 by the affirmative vote of a majority of the shares of Stock of the
Company present, or represented, and entitled to vote at a meeting of
Stockholders of the Company duly held in accordance with the Restated
Certificate of Incorporation of the Company and the General Corporation Law of
the State of Delaware. The Plan and all Options granted hereunder are further
subject to the receipt by the Company of any consents or approvals required to
adopt the Plan and/or grant Options under applicable law and under any permit,
agreement or instrument to which the Company is a party or by which any of its
properties or assets are bound. Any Option granted prior to such Stockholder and
other consent and approval of the Plan as herein provided shall be subject to
such approval and shall have no legal effect and shall convey no rights to the
holder thereof in the event said Stockholder and other consent and approval of
the Plan is not obtained. The Plan shall expire ten (10) years from the
effective date of the Plan; provided, however, that upon termination of the
Plan, the applicable provisions of the Plan shall continue to apply to all
Options which are outstanding on the date the Plan is terminated. If Stockholder
approval is not obtained within the period contemplated herein, the Plan shall
be nullified and all Options granted pursuant to Article VI below shall be
rescinded and all elections to receive options pursuant to Article VI below
shall be rescinded and all Eligible Directors shall receive cash equal to all
Fees that had been the subject of an election under said article or Article V
hereof.
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<PAGE> 28
ARTICLE III
ADMINISTRATION AND OPERATION
SECTION 3.1 APPOINTMENT OF AND DUTIES AND POWERS OF COMMITTEE
The Plan shall be administered by a Committee appointed by the Board of
Directors of the Company and consisting of at least three (3) members who shall
not be Eligible Directors. Subject to the express provisions of the Plan, the
Committee shall have complete authority to interpret the Plan, to prescribe,
amend, and rescind rules and regulations relating to it, and to make all other
determinations necessary or advisable in the administration of the Plan. The
final determination of the Committee as to any disputed questions shall be
conclusive.
Any action of the Committee may be taken without a meeting if a
majority of the members of the Committee sign written consents setting forth the
action taken or to be taken at any time before or after the intended effective
date of such action. Any member of the Committee may participate in a meeting of
the Committee by means of a conference telephone or similar communications
equipment enabling all persons participating in the meeting to hear each other.
The Committee may authorize any member thereof to execute all instruments
required in the administration of the Plan, and such instruments may be executed
by facsimile signature.
The Committee may delegate to any member or members of the Committee or
to any employee or employees of the Company the authority to perform any
ministerial act in connection with the administration of the Plan.
SECTION 3.2 MAJORITY RULE
A majority of the members of the Committee shall constitute a quorum,
and any action taken by a majority present at a meeting at which a quorum is
present or any action taken without a meeting evidenced by a writing executed by
a majority of the whole Committee shall constitute the action of the Committee.
SECTION 3.3 COMPANY ASSISTANCE
The Company shall supply full and timely information to the Committee
on all matters relating to Eligible Directors and such pertinent facts related
thereto as the Committee may require. The Company shall furnish the Committee
with such clerical and other assistance as is necessary in the performance of
its duties.
SECTION 3.4 PLAN OPERATION IN COMPLIANCE WITH RULE 16B-3 OF THE 1934 ACT.
The Plan shall be interpreted and administered to comply with Rule
16b-3 promulgated under the 1934 Act, as then applicable to the Company's
employee benefit plans. At such time as the terms of the Plan are required to
comply with (or, if earlier, are elected by the Company to comply with) the
provisions of Rule 16b-3 adopted in Release No. 34-37260 dated May 31, 1996, all
Options granted under this Plan shall provide that at least six months must
elapse from the date of the grant of the Option to the date of disposition of
any underlying shares of Stock to which such Option relates, unless any earlier
disposition may be effected without causing a violation of Section 16(b) of the
1934 Act or any rules and regulations promulgated thereunder.
ARTICLE IV
SHARES OF STOCK SUBJECT TO PLAN
SECTION 4.1 LIMITATIONS
The number of shares of Stock which may be issued and sold hereunder
shall not exceed 100,000 shares of Stock, subject to adjustment pursuant to the
provisions of Section 4.3 hereof. Such shares may be either authorized and
unissued shares or shares issued and thereafter acquired by the Company, and
such amount of shares
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<PAGE> 29
shall be and is hereby reserved for issuance pursuant to this Plan. Any of such
shares which may remain unsold and which are not subject to outstanding Options
at the termination of the Plan shall cease to be reserved for the purpose of the
Plan, but until the termination of the Plan, the Company shall at all times
reserve a sufficient number of shares to meet the requirements of the Plan.
SECTION 4.2 OPTIONS GRANTED UNDER PLAN
Shares of Stock with respect to which an Option granted hereunder shall
have been exercised shall not again be available for grant hereunder. If Options
granted hereunder shall expire, terminate, or be canceled for any reason without
being wholly exercised, new Options may be granted hereunder covering the number
of shares to which such Option expiration, termination or cancellation relates.
SECTION 4.3 ANTIDILUTION
In the event that the outstanding shares of Stock hereafter are
increased, decreased or changed into or exchanged for a different number or kind
of shares or other securities of the Company by reason of merger, consolidation,
reorganization, recapitalization, reclassification, combination of shares, stock
split, or stock dividend after the effective date of the Plan,
(a) the aggregate number and kind of shares subject to Options
which may be granted hereunder shall be adjusted appropriately; and
(b) rights under outstanding Options granted hereunder, both
as to the number of subject shares and the Option price, shall be adjusted
appropriately.
In the event of a dissolution or liquidation of the Company, the
Options granted hereunder shall terminate; provided, however, that the Optionees
shall have the right for a period of thirty (30) days prior to such dissolution
or liquidation to exercise outstanding Options in full without regard to any
installment exercise provisions and whether the Option by its terms is at such
time immediately exercisable in full, to the extent it shall not have been
exercised. In the event of (i) any merger, consolidation or combination
involving the Company, other than (A) any merger, consolidation or combination
that is solely for the purpose of changing the domicile of the Company, and (B)
any merger, consolidation or combination that would result in the holders of the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by the securities remaining outstanding or by
being converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities of the
Company (or such surviving entity) outstanding immediately after such merger,
consolidation or combination, or (ii) any sale of substantially all the assets
of the Company or a sufficient amount of Stock in the Company (whether by tender
offer, original issuance, or a single or series of related stock purchase and
sale agreements and/or transactions) sufficient to confer on the purchaser or
purchasers thereof (whether individually or in a group) the ability to elect a
majority of the Board of Directors of the Company (without regard to any
provisions concerning the classification of Board members or the staggering of
their terms), the Optionee shall have the right, immediately prior to such
merger, consolidation, combination, or asset or stock sale to exercise
outstanding Options in full, without regard to any installment exercise
provisions and whether the Option by its terms is at such time immediately
exercisable in full, to the extent that it shall not have been exercised. In the
event of a transaction of the nature described in (i) above (including, without
limitation, in (i)(A) and (i)(B) above), nothing contained herein shall prevent
the Board and the Board of Directors of the surviving corporation and/or the
acquiring corporation from converting an Option into an option to purchase stock
in the surviving or acquiring corporation on a fair and equitable basis. In the
event of a transaction described in (i) (including, without limitation, in
(i)(A) and (i)(B)) and (ii) above, the Board shall be entitled in its discretion
to require Optionees either to exercise their Options prior to such transactions
becoming effective or to forfeit them in the absence of such an exercise.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined solely by the Committee, and any such
adjustment shall provide for the elimination of fractional share interests.
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<PAGE> 30
ARTICLE V
DEFERRAL OF FEES
Each Eligible Director may elect to defer all or any portion of any of
his Fees in accordance with the terms of this Article V.
(a) An election to defer Fees may be made at any time, but not
more frequently than once each calendar year, and shall be effective only with
respect to Fees payable for services to be performed after the date of the
election. Such election shall be made by executing and delivering a deferred
compensation agreement to the Committee. A deferral election may not be
modified. An Eligible Director may terminate a deferral election at any time by
delivering a written notice of termination to the Committee. Such notice shall
specify the effective date, and deferrals shall cease as soon as practicable
thereafter. A termination notice shall not be effective with regard to amounts
previously deferred.
(b) The Company shall establish an account for each Eligible
Director who defers Fees hereunder (the "Deferral Account") and shall adjust the
account as follows:
(i) At the end of each calendar month in which Fees
deferred would otherwise be payable, credit the account with the amount
deferred for such month; and
(ii) As of the first day of each month (A) debit the
account by the amount, if any, paid to the Eligible Director or his
beneficiary during the preceding calendar month in accordance with the
terms hereof or the terms of any deferred compensation agreement; and
(B) credit the account with interest on the balance as of said first
day of the month following the aforementioned debit to the account, at
the rate paid on five-year U.S. Treasury notes on the first day of the
month for which the interest is to be credited, or at such other rate
as is prescribed by the Committee in the deferred compensation
agreement.
The Committee shall provide each Eligible Director who has elected to defer Fees
hereunder with an account statement at least annually.
(c) The amount credited to the Deferral Account of an Eligible
Director shall be paid to him in substantially equal consecutively monthly
installments over a period not to exceed three (3) years, or in such other
manner as the Committee may permit. Each such Eligible Director shall elect the
manner and time of payment (including the time payments shall commence) in the
first deferred compensation agreement he executes and such election shall apply
to any subsequent deferred compensation agreement the Eligible Director executes
unless specifically modified in a subsequent agreement.
(d) Except as provided in paragraph (e) below, the amount
credited to the Deferral Account of an Eligible Director, at the time of his
death, shall be paid to his designated beneficiary in substantially equal
consecutive monthly installments over a period not to exceed three (3) years, or
in such other manner as the Committee may permit. If payment commenced in
accordance with paragraph (c) above prior to the Eligible Director's death,
payment shall continue in accordance with the form of payment then in effect. If
payment had not commenced in accordance with paragraph (c) above, payment shall
be made or commenced as soon as practicable following the date of death. Each
such Eligible Director shall elect the manner in which payment shall be made to
his designated beneficiary in the first deferred compensation agreement he
executes. Such election shall apply to all subsequent deferred compensation
agreements executed by the Eligible Director unless specifically modified in a
subsequent agreement.
(e) In the event an Eligible Director suffers a financial
hardship caused by accident, illness or other event beyond his control, the
Committee may, in its discretion, accelerate payment of the amounts credited to
the Eligible Director's Deferral Account, if any, to the extent reasonably
necessary to eliminate such hardship. In addition, if following the death of an
Eligible Director, his beneficiary or beneficiaries suffers a financial hardship
caused by an accident, illness or other event beyond the control of such
beneficiary or beneficiaries, the Committee may, in its discretion, accelerate
payment of the amounts credited to the Eligible Director's Deferral Account, if
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any, to which such beneficiary or beneficiaries are entitled to the extent
reasonably necessary to eliminate such hardship.
ARTICLE VI
OPTIONS
SECTION 6.1 ANNUAL OPTION GRANTS
(a) On the date of the meeting of the Board each year which
follows the Annual Meeting of Stockholders in said year (the "Annual Meeting of
Stockholders"), beginning with the date of the Annual Meeting of Stockholders
held in 1996, each director elected to the Board of Directors by the
Stockholders of the Company at the annual meeting of Stockholders in said year
and who is an Eligible Director, and, in addition to the newly elected Eligible
Directors, each Eligible Director then in office on such date shall
automatically be granted an Option as of the date of such Board meeting to
purchase shares of Stock as follows:
(i) Each director elected to the Board at the Annual
Meeting of Stockholders and who is an Eligible Director shall receive
an Option to purchase the number of shares of Stock (rounded up to the
next whole number) determined by dividing the whole dollar amount of
the director's Retainer for the upcoming year of service by the Fair
Market Value of the Stock on the date of grant.
(ii) Each Eligible Director not standing for election
at the Annual Meeting of Stockholders and who is to continue to serve
as a director of the Company shall receive an Option to purchase the
number of shares of Stock (rounded up to the next whole number)
determined by dividing the whole dollar amount of the director's
Retainer for the upcoming year of service by the Fair Market Value of
the Stock on the date of grant and then multiplying the resulting
amount by .6666.
Example:
At the Annual Meeting of Stockholders for 1999, Eligible
Director A stands for election and is elected to the Board of
Directors and Eligible Director B is continuing into the third
year of a three-year term as a director of the Company. Each
Eligible Director will be paid a $12,000 Retainer for the
upcoming year. The Fair Market Value of the Stock on the date
of the next meeting of the Board following the Annual Meeting
of Stockholders is $11.00. Under these facts, Eligible
Director A will receive an Option to purchase 1,091 shares of
Stock ($12,000 / $11.00 = 1,090.9, rounded up to 1,091).
Eligible Director B will receive an Option to purchase 728
shares of Stock (1,090.9 x .6666 = 727.1, rounded up to 728).
(b) Each Option granted under this Section 6.1 shall be
evidenced by a Stock Option Agreement dated as of the date of grant and
executed by the Company and the Optionee, which Agreement shall set forth such
terms and conditions as may be determined by the Committee consistent with the
Plan.
(c) The per share price of the Stock subject to each Option
granted under this Section 6.1 shall be one hundred percent (100%) of the Fair
Market Value of the Stock on the date the Option is granted.
SECTION 6.2 OPTION GRANTS IN LIEU OF PAYMENT OF FEES
(a) Each Eligible Director may elect to receive his Fees in
the form of Options in lieu of cash. An election shall apply to the full amount
of the Eligible Director's Fees and shall be made in writing, on such form
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and in such manner as the Committee may prescribe, before the Annual Meeting of
Stockholders of the Company each year, such election to cover Fees accrued
during the twelve-month period to begin on June 1 following said annual meeting
and end May 31 of the following year (the "Election Option Period"); provided,
however, that for the initial year of the Plan, an Eligible Director may make
his election hereunder at any time prior to August 31, 1996, which election
shall apply to the period beginning September 1, 1996 and ending on May 31,
1997.
(b) On the first business day following each of the
three-month periods ending August 31, November 30, February 28 (or 29, as the
case may be) and May 31 in each Election Option Period (the "Election Quarter
Period"), the Company shall grant to each Eligible Director who has made an
election in accordance with paragraph (a) above an Option to purchase the number
of shares of Stock (rounded up to the next whole number) determined by dividing
x by y, where --
x is the amount of the Eligible Director's Fees accrued during
the Election Quarter Period increased by a factor of thirty
percent (30%); and
y is the Black-Scholes value of each Option to purchase a
share of Stock on the date of grant.
(c) The per share price of the Stock subject to each Option
granted under this Section 6.2 shall be one hundred percent (100%) of the Fair
Market Value of the Stock on the date the Option is granted.
(d) An election by an Eligible Director whose service on the
Board terminates prior to the end of an Election Quarter Period to which the
election relates shall be void. Such Eligible Director shall receive the portion
of his Fees earned as of the date of termination in cash.
SECTION 6.3 OPTION PERIOD
Each Option granted hereunder must be granted within ten years from the
effective date of the Plan. The period for the exercise of each Option shall be
ten years. Options granted hereunder prior to Stockholder approval of the Plan
shall provide that such Options are not exercisable within the first
twelve-months following the grant thereof and, further, that at least six months
must elapse from the date of Stockholder approval of the Plan to the date of
disposition of any underlying shares of Stock to which such Option relates,
unless any earlier exercise of disposition may be effected without causing a
violation of Section 16(b) of the 1934 Act or any rules and regulations
promulgated thereunder. Following Stockholder approval of the Plan, Options
granted hereunder shall not be exercisable within the first twelve months after
the date of grant; provided, however, that said Options may become exercisable
earlier in accordance with the provisions of this Plan concerning the
termination of an Optionee's directorship on account of total and permanent
disability or death (Section 6.5) and change of control of the Company (Section
4.3), provided that, in each case, the earlier exercise thereof would not cause
a violation of Section 16(b) of the 1934 Act or any rules and regulations
promulgated thereunder. Following Stockholder approval of the Plan, the
Committee in its discretion may accelerate the times when Options are
exercisable after the initial grant thereof; provided, however, that the
Committee may not exercise such power in a manner that would shorten the initial
twelve-month period for Eligible Directors referred to in the foregoing sentence
or the other periods referenced in this Section 6.3 if to do so would permit or
result in a violation of Section 16(b) of the 1934 Act.
SECTION 6.4 OPTION EXERCISE
(a) Options may be exercised with respect to whole shares
only, for such shares of Stock and within the period permitted by the exercise
thereof as determined by the Committee, and shall be exercised by written notice
of intent to exercise the Option with respect to a specified number of shares
delivered to the Company at its principal office, and payment in full to the
Company at said office of the amount of the Option price for the number of
shares of Stock with respect to which the Option is then being exercised.
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<PAGE> 33
(b) The Option price upon exercise of any Option shall be
payable to the Company in full either (i) in cash or its equivalent, (ii) by
tendering shares of previously acquired Stock which has been held by the
Optionee for a minimum of six months prior to such exercise, and having a Fair
Market Value as of the business day immediately preceding the date of exercise
equal to the total Option price, or (iii) by a combination of (i) and (ii). Any
shares of Stock received by the Company pursuant to this Section 6.4(b) shall
be held by the Company as treasury shares.
(c) No Option granted hereunder shall be exercisable unless at
all times during the period beginning on the date of the granting of such Option
and ending on the day which is three years before the date of exercise (or
ending on the day which is 90 days before the date of exercise in the event of
the termination of the directorship of the Optionee for cause, or ending on the
expiration date of the Option in the event of termination of the directorship on
account of the mandatory retirement, determination of total and permanent
disability or the death of the Optionee, as the case may be) the Optionee was a
director of the Company.
SECTION 6.5 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT
(a) In the event that the directorship of an Optionee to whom
an Option shall have been granted hereunder shall be terminated for any reason
(including voluntary resignation, early retirement or failure to be re-elected)
other than for cause (as defined below), mandatory retirement according to the
policy of the Board, death or disability, such Option may be exercised (to the
extent that the Optionee shall have been entitled to do so at the date of his
termination) by such Optionee at any time prior to the expiration date of the
Option or within three years after the date of such directorship termination,
whichever is earlier.
(b) If the directorship of an Optionee to whom an Option shall
have been granted hereunder is terminated for cause, as defined below, such
Option may be exercised (to the extent that the Optionee shall have been
entitled to do so at the date of his termination) by such Optionee at any time
prior to the expiration date of the Option or within ninety (90) days after the
date of such termination, whichever is earlier. For purposes of this Section
6.5, the term "for cause" shall be defined as a good faith express determination
by the Board that the Optionee has been guilty of willful misconduct or
dishonesty or a good faith express determination by the Board that the Optionee
has been grossly derelict in or has grossly neglected the Optionee's duty to the
Company.
(c) In the event that the directorship of an Optionee to whom
an Option shall have been granted hereunder shall be terminated by reason of
mandatory retirement according to the policy of the Board, such Option may be
exercised (to the extent that the Optionee shall have been entitled to do so at
the date of his termination) by such Optionee at any time prior to the
expiration date of the Option.
(d) In the event that the directorship of an Optionee to whom
an Option shall have been granted hereunder shall be terminated by the death or
total and permanent disability (as defined in Section 72(m)(7) of the Internal
Revenue Code of 1986, as amended (the "Code"), or as determined by the Committee
in its discretion) of such Optionee, such Option may be exercised (to the extent
that the Optionee shall have been entitled to do so at the date of his
termination) by such Optionee, his personal representatives, the executor or
administrator of the estate of the Optionee, or the person or persons to whom an
Option granted hereunder shall have been validly transferred pursuant to a will
or the laws of descent and distribution, or otherwise, at any time prior to the
expiration date of the Option.
SECTION 6.6 NONTRANSFERABILITY OF OPTIONS
At such time as the terms of the Plan are required to comply with (or,
if earlier, are elected by the Company to comply with) the provisions of Rule
16b-3, adopted in Release No. 34-37260 dated May 30, 1996, Options granted
hereunder may be transferred by an Optionee upon the prior consent of the
Committee; provided, however, that such Committee approval shall not be required
for transfers of an Option by will or the laws of descent and distribution.
Prior to such time, no Option shall be transferred by an Optionee otherwise than
by will or the laws of descent and distribution. No transfer of an Option by the
Optionee by will or by the laws of descent and distribution shall be effective
to bind the Company unless the Company shall have been furnished with written
notice
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<PAGE> 34
thereof and an authenticated copy of the will and/or such other evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transfers of the terms and conditions of such
Option. Subject to the foregoing, during the lifetime of an Optionee, the Option
shall be exercisable only by him.
SECTION 6.7 RIGHTS AS STOCKHOLDER
An Optionee or a transferee of an Option shall have no rights as a
Stockholder with respect to any shares subject to such Option prior to the
purchase of such shares by exercise of such Option as provided herein.
ARTICLE VII
STOCK CERTIFICATES
SECTION 7.1 STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate
for shares of Stock purchased upon the exercise of an Option granted hereunder
or any portion thereof, prior to fulfillment of all of the following conditions:
(a) the completion of any registration or other qualification
of such shares under any federal or state law or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall in its sole discretion deem necessary
or advisable;
(b) the obtaining of any approval or other clearance from any
federal or state governmental agency which the Committee shall in its sole
discretion determine to be necessary or advisable;
(c) the lapse of such reasonable period of time following the
exercise of the Option as the Committee from time to time may establish for
reasons of administrative convenience;
(d) the compliance with any and all applicable federal, state
or local laws; and
(e) such other terms and conditions as may be set forth in the
Plan.
The Company shall further be entitled to place whatever legends on such
certificate as it shall deem reasonably necessary or appropriate.
ARTICLE VIII
TERMINATION, AMENDMENT, AND MODIFICATION OF THE PLAN
The Board may at any time terminate, and may at any time and from time
to time and in any respect amend or modify, the Plan; provided, however, that no
such action of the Board without approval of the Stockholders of the Company may
(a) increase the total number of shares of Stock subject to
the Plan except as contemplated in Section 4.3 hereof;
(b) materially modify the requirements as to those persons who
are eligible to participate in the Plan; and
provided, further, that no termination, amendment, or modification of the Plan
shall in any manner affect any Stock Option Agreement theretofore entered into
pursuant to the Plan without the consent of the Optionee or valid transferee
30
<PAGE> 35
of the Option. The foregoing provisions of this Article VIII notwithstanding,
until such time as the terms of the Plan are required to comply with (or, if
earlier, are elected by the Company to comply with) the provisions of Rule
16b-3, adopted in Release No. 34-37260 dated May 30, 1996, the provisions of
Article VI of the Plan shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, ERISA, or the
rules thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option or
incentive or other compensation plans in effect for the Company or any of its
subsidiaries, nor shall the Plan preclude the Company from establishing any
other forms of incentive or other compensation for employees of the Company or
any of its subsidiaries.
SECTION 9.2 PLAN BINDING ON SUCCESSORS
The Plan shall be binding upon the successors and assigns of the
Company.
SECTION 9.3 SINGULAR, PLURAL; GENDER
Whenever used herein, nouns in the singular shall include the plural,
and the masculine pronoun shall include the feminine gender.
SECTION 9.4 HEADINGS, ETC., NO PART OF PLAN
Headings of Articles and Sections hereof are inserted for convenience
and references; they constitute no part of the Plan.
SECTION 9.5 INVESTMENT REPRESENTATION
Each Stock Option Agreement may contain an agreement that, upon demand
by the Committee for such a representation, the Optionee shall deliver to the
Committee at the time of any exercise of an Option a written representation that
the shares of Stock to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution thereof. Upon
such demand, delivery of such representation prior to the delivery of any shares
issued upon exercise of an Option and prior to the expiration of the Option
period shall be a condition precedent to the right of the Optionee or such other
persons to purchase any such shares.
SECTION 9.6 COMPLIANCE WITH OTHER LAWS AND REGULATIONS
The Plan, the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable federal and state laws, rules and regulations and
to such approvals by any governmental or regulatory agency or national
securities exchange as may be required. The Company shall not be required to
issue or deliver any certificates for shares of Stock prior to the completion of
any registration or qualification of such shares under any federal or state law,
or any ruling or regulation of any governmental body or national securities
exchange which the Company shall, in its sole discretion, determine to be
necessary or advisable.
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<PAGE> 36
SECTION 9.7 WITHHOLDING BY THE COMPANY
A Stock Option Agreement executed pursuant to this Plan may contain a
provision to the effect that the Optionee will consent to any withholding
actions that the Company deems reasonably necessary to enable the Company to
obtain the benefit of an income tax deduction under the Code, and any related
state or local income tax laws.
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APPENDIX A
MARTIN INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN AND RELATED TRUST
FLORENCE, ALABAMA
VOTING INSTRUCTION CARD FOR THE ANNUAL
MEETING OF STOCKHOLDERS
MAY 16, 1997
The undersigned hereby instructs James D. Wilson, James W.
Truitt and Louis J. Martin, II, as trustees of the Martin Industries, Inc.
Employee Stock Ownership Plan and Related Trust (the "ESOP"), and each of them,
with full power of substitution, to vote the shares of Common Stock of Martin
Industries, Inc., a Delaware corporation (the "Company"), which are allocated to
the undersigned's account in the ESOP at the Annual Meeting of Stockholders of
the Company to be held on Friday, May 16, 1997, at the Florence Conference
Center, 10 Hightower Place, Florence, Alabama, at 11:00 A.M., Central Daylight
Time, or at any adjournment thereof, as follows:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees below [ ] WITHHOLD AUTHORITY to vote
(except as indicated to for all nominees below
the contrary below)
Bill G. Hughey, Charles R. Martin
INSTRUCTION: To withhold authority to vote for an individual nominee,
write that nominee's name in the space provided below.
------------------------------------------------------------------
2. APPROVAL OF MARTIN INDUSTRIES, INC. 1996 NON-EMPLOYEE DIRECTORS' STOCK
OPTION AND DEFERRED COMPENSATION PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN respecting the proposal to approve the
Martin Industries, Inc. 1996 Non-Employee Directors' Stock Option and
Deferred Compensation Plan.
3. RATIFICATION OF SELECTION OF AUDITORS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN respecting the proposal to ratify the
selection by the Board of Directors of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending December 31,
1997.
<PAGE> 38
4. OTHER MATTERS:
[ ] In the manner the ESOP Trustees determine to be in the best
interest of the ESOP Participants.
[ ] Withhold authority to vote on other matters.
THIS VOTING INSTRUCTION CARD WILL BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS,
AND IF NO INSTRUCTIONS ARE GIVEN, THE SHARES ALLOCATED TO YOUR ACCOUNT WILL BE
VOTED IN THE MANNER THE ESOP COMMITTEE DETERMINES TO BE IN THE BEST INTEREST OF
THE ESOP PARTICIPANTS. THE ESOP COMMITTEE CURRENTLY INTENDS TO VOTE SHARES FOR
WHICH NO INSTRUCTIONS ARE RECEIVED FOR THE ELECTION OF THE PERSONS NOMINATED BY
THE BOARD OF DIRECTORS AS DIRECTORS, FOR THE APPROVAL OF THE MARTIN INDUSTRIES,
INC. 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION AND DEFERRED COMPENSATION PLAN,
AND FOR THE RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
Dated:
---------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(Signature(s) of Participant(s))
(Please date and sign as name appears to the left.)
PLEASE MARK, SIGN, DATE AND RETURN THIS VOTING INSTRUCTION CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
2
<PAGE> 39
APPENDIX B
MARTIN INDUSTRIES, INC.
FLORENCE, ALABAMA
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 1997
(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY)
The undersigned hereby appoints James D. Wilson and James W.
Truitt, and each of them, with full power of substitution, proxies to vote the
shares of Common Stock of Martin Industries, Inc., a Delaware corporation (the
"Company"), which the undersigned could vote if personally present at the Annual
Meeting of Stockholders of the Company to be held on Friday, May 16, 1997, at
the Florence Conference Center, 10 Hightower Place, Florence, Alabama, at 11:00
A.M., Central Daylight Time, or at any adjournment thereof:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees below [ ] WITHHOLD AUTHORITY to vote
(except as indicated to for all nominees below
the contrary below)
Bill G. Hughey, Charles R. Martin
INSTRUCTION: To withhold authority to vote for an individual nominee,
write that nominee's name in the space provided below.
------------------------------------------------------------------
2. APPROVAL OF MARTIN INDUSTRIES, INC. 1996 NON-EMPLOYEE DIRECTORS' STOCK
OPTION AND DEFERRED COMPENSATION PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN respecting the proposal to approve the
Martin Industries, Inc. 1996 Non-Employee Directors' Stock Option and
Deferred Compensation Plan.
3. RATIFICATION OF SELECTION OF AUDITORS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN respecting the proposal to ratify the
selection by the Board of Directors of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending December 31,
1997.
<PAGE> 40
4. OTHER MATTERS:
In their discretion, upon such other matters as may properly come
before the Annual Meeting of Stockholders.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS, AND IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE PERSONS
NOMINATED BY THE BOARD OF DIRECTORS AS DIRECTORS, FOR THE APPROVAL OF THE MARTIN
INDUSTRIES, INC. 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN, AND FOR THE
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
Dated:
-----------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
(Signature(s) of Stockholder(s))
(Please date and sign as name appears on proxy. If
shares are held jointly, each stockholder should
sign. Executors, administrators, trustees, etc.
should use full title and, if more than one, all
should sign. If the stockholder is a corporation,
please sign full corporate name by an authorized
officer.)
2
