MARTIN INDUSTRIES INC /DE/, DEF 14A, 1998-04-06

MARTIN INDUSTRIES INC /DE/
DEF 14A, 1998-04-06
HEATING EQUIPMENT, EXCEPT ELECTRIC & WARM AIR FURNACES

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<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 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] 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
</TABLE>

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):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

April 6, 1998

Dear Stockholder:

You are invited to attend the Annual Meeting of Stockholders of Martin
Industries, Inc. (the "Company"), to be held on Friday, May 15, 1998, 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 three (3) members to the Board of Directors of the Company to serve
until the Annual Meeting of the Company to be held in 2001 and one member of the
Board of Directors of the Company to serve until the Annual Meeting of the
Company to be held in 1999, (ii) a proposal to ratify the selection of Arthur
Andersen LLP as independent auditors of the Company for the fiscal year ending
December 31, 1998, and (iii) 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 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,

William H. Martin, III
Chairman, President and
Chief Executive Officer

<PAGE> 3

- --------------------------------------------------------------------------------

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 15, 1998, at 11:00 A.M., Central Daylight
Time, for the following purposes:

(1) To elect three (3) 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 2001 and one member of the Board of Directors of the Company to
serve until the Annual Meeting of the Company to be held in 1999 and, in
each case, until their successors are duly elected and shall have
qualified;

(2) 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, 1998; and

(3) 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 23, 1998 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

Roderick V. Schlosser
Secretary
Martin Industries, Inc.

301 East Tennessee Street
Florence, Alabama 35630
April 6, 1998

<PAGE> 4

- --------------------------------------------------------------------------------

PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD MAY 15, 1998

- --------------------------------------------------------------------------------

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 15, 1998, 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 6, 1998.

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 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, 1998, 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 23, 1998, the record date for determining Stockholders entitled
to notice of and to vote at the Annual Meeting, the Company had issued and
outstanding 8,644,980 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.

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

<PAGE> 5

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 ratify the Board's
appointment of Arthur Andersen LLP as the Company's independent auditor for the
fiscal year ending December 31, 1998. Therefore, abstentions, broker non-votes
and votes that are withheld with respect to the 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 eight persons.

CURRENT NOMINEES

The Board of Directors proposes to nominate the three persons named below
for election as directors to serve until the Annual Meeting of Stockholders to
be held in 2001 and until their successors have been elected and shall have
qualified. The Board of Directors further proposes to nominate the person named
below for election to fill a vacancy in the class of directors whose term
expires in 1999. Therefore, the nominee, if elected, will serve until the Annual
Meeting of Stockholders to be held in 1999 and until his successor has 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 16,
1998, are as follows:

NOMINEES TO SERVE UNTIL 2001
<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 16, 1998(1)
-------------------- -------- ---------------------

<S> <C> <C>
William D. Biggs, 59 1993 36,666(2)(3) *
Managing Partner,
Carillon Beach

Jim D. Caudle, Sr., 62 1990 23,581(2)(4) *
Chairman and Chief Executive Officer
United Printed Circuits, Inc.
Chairman and Chief Executive Officer
Advanced Precision Manufacturing, Inc.

James J. Tanous, 50 1998 0(2) *
Partner, Jaeckle Fleischmann & Mugel, LLP
</TABLE>

<PAGE> 6

NOMINEE TO SERVE UNTIL 1999
<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 16, 1998(1)
-------------------- -------- ---------------------

<S> <C> <C> <C>
Herbert J. Dickson, 72 1985 24,300(2)(5) *
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 16, 1998 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 3,287,248 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 12,666 shares which are not currently outstanding, but which Mr.
Biggs is entitled to acquire upon the exercise of outstanding stock
options.

(4) Includes 18,500 shares which are not currently outstanding, but which Mr.
Caudle is entitled to acquire upon the exercise of outstanding stock
options.

(5) Includes 19,300 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 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.

James J. Tanous has served as a director of the Company since March
1998. Mr. Tanous has been a partner in the law firm of Jaeckle Fleischmann &
Mugel, LLP, a general business law firm having offices in Buffalo and Rochester,
New York, since 1976. Mr. Tanous acted as special counsel for the Company from
1995 until his election as a director, at which time he withdrew from that
representation.

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.

Each of Messrs. Biggs, Caudle and Dickson was elected as a director at the
Annual Meeting of Stockholders held on April 7, 1995. Mr. Tanous was elected as
a director by the Board of Directors in March 1998 to fill a vacancy on the
board until the Annual Meeting of Stockholders to be held on May 15, 1998.

<PAGE> 7

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 four persons.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE NOMINEES
FOR DIRECTORS NAMED ABOVE.

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 16, 1998:

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 16 1998(1)
- ----------------------------------- ------------- --------------- -------------------------
<S> <C> <C> <C> <C>
William H. Martin, III, 67 1999 1974 179,791(2)(3) - 2.1%
Chairman, President and Chief
Executive Officer,
Martin Industries, Inc.

Louis J. Martin, II, 43 1999 1988 217,085(2)(4) - 2.5%
Vice President of Manufacturing,
Martin Industries, Inc.

Bill G. Hughey, 62 2000 1995 112,345(2)(5) - 1.3%
Retired

Charles R. Martin, 57 2000 1974 194,195(2)(6) - 2.2%
President and Chief Executive Officer
Amerimark Capital Corporation
</TABLE>

- ----------

(2) Does not include 3,287,248 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.

(3) Includes 6,976 shares which are not currently outstanding, but which
William H. Martin, III is entitled to acquire upon exercise of outstanding
stock options, and 27,965 shares held by his wife, for which he disclaims
beneficial ownership.

<PAGE> 8

(4) Includes 120,525 shares which are not currently outstanding, but which
Louis J. Martin, II is entitled to acquire upon the exercise of outstanding
stock options and 30,435 shares held as custodian for his minor children.

(5) Includes 1,800 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 his wife, for which he disclaims beneficial
ownership.

(6) Includes 3,570 shares which are not currently outstanding, but which
Charles R. 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 Charles R. Martin also serves as
executor and for which he disclaims beneficial ownership.

William H. Martin, III is serving as President and Chief Executive Officer
during the Company's search for a successor to James D. Wilson, who resigned as
President and Chief Executive Officer in March 1998. Mr. Martin 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. From 1993 to March 1998, Mr. Martin was a private investor.

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, he has
served the Company in various capacities, including as Vice President of
Engineering from 1988 to 1996.

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. He
serves as President and Chief Executive Officer of Amerimark Capital Group, a
financial services firm, a capacity in which he has served since 1992.

William H. Martin, III and Louis J. Martin, II are first cousins.

During the Company's fiscal year ended December 31, 1997, the Board of
Directors of the Company held four regular and five special meetings.

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. Mr. Dickson serves as the
chairman of the Compensation Committee. The Compensation Committee met four
times during the fiscal year ended December 31, 1997.

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. Mr. Dickson serves as the chairman of the Audit Review Committee.
The Audit Review Committee met three times during the fiscal year ended December
31, 1997.

The Company does not have a Nominating Committee.

<PAGE> 9

III. RATIFICATION OF SELECTION OF AUDITORS

Arthur Andersen LLP, independent accountants, served as the Company's
auditors for fiscal year 1997 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, 1998. 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, 1998.

IV. 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.

V. PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of March 16, 1998
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
Securities Exchange Act of 1934, as amended (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 3,287,248 38.0%
P.O. Box 128
Florence, Alabama 35630

Heartland Advisors, Inc. 654,000 (2) 7.6
790 North Milwaukee Street
Milwaukee, Wisconsin 53202

William H. Martin, III 179,791 (3)(4) 2.1
James D. Wilson 183,814 (3)(5) 2.1
James W. Truitt 123,882 (3)(6) 1.4
Louis J. Martin, II 217,085 (3)(7) 2.5
Roderick V. Schlosser 10,032 (3)(8) *
J. Reid Roney 20,000 (3)(9) *
William D. Biggs 36,666 (3)(10) *
Jim D. Caudle, Sr. 23,581 (3)(11) *
Herbert J. Dickson 24,300 (3)(12) *
Bill G. Hughey 112,345 (3)(13) 1.3
Charles R. Martin 194,195 (3)(14) 2.2
All directors and executive
officers as a group (14 persons) 1,189,976 (3) 13.6
</TABLE>

<PAGE> 10

- -----------
* 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 16, 1998 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) Based on information contained in the Schedule 13G, dated January 29, 1998,
filed by the named Stockholder with the Securities and Exchange Commission.

(3) Does not include 3,287,248 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. William Martin, Louis Martin and Schlosser as
trustee of the ESOP, shares in the voting and investment power. The members
of the ESOP Committee and the trustees of the ESOP, other than Mr.
Schlosser, currently do not participate in the ESOP.

(4) Includes 6,976 shares which are not currently outstanding, but which
William H. Martin, III is entitled to acquire upon exercise of outstanding
stock options, and 27,965 shares held by his wife, for which he disclaims
beneficial ownership.

(5) Includes 172,500 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 his wife, for which he disclaims beneficial
ownership.

(6) Includes 122,500 shares which are not currently outstanding, but which Mr.
Truitt is entitled to acquire upon the exercise of outstanding stock
options.

(7) Includes 120,525 shares which are not currently outstanding, but which
Louis J. Martin, II is entitled to acquire upon the exercise of outstanding
stock options and 30,435 shares held as custodian for his minor children.

(8) Includes 6,000 shares which are not currently outstanding, but which Mr.
Schlosser is entitled to acquire upon the exercise of outstanding stock
options.

(9) Includes 20,000 shares which are not currently outstanding, but which Mr.
Roney is entitled to acquire upon the exercise of outstanding stock
options.

(10) Includes 12,666 shares which are not currently outstanding, but which Mr.
Biggs is entitled to acquire upon the exercise of outstanding stock
options.

(11) Includes 18,500 shares which are not currently outstanding, but which Mr.
Caudle is entitled to acquire upon the exercise of outstanding stock
options.

(12) Includes 19,300 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 his wife, for which he disclaims
beneficial ownership.

(13) Includes 1,800 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 his wife, for which he disclaims beneficial
ownership.

(14) Includes 3,570 shares which are not currently outstanding, but which
Charles R. 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 Charles R. Martin also serves as
executor and for which he disclaims beneficial ownership.

<PAGE> 11

VI. 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 1997 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, 1997, 1996 and 1995.

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> <C>
James D. Wilson (2)...................... 1997 $237,516 $0 40,000(3)/ 3,862 $ 6,345(4)
Former President and Chief Executive Officer 1996 $187,530 $0 95,000(3)/ 3,092 $ 5,828(5)
1995 $140,010 $68,100 0 / 3,024 $ 5,653(6)

James W. Truitt (7)...................... 1997 $152,105 $0 0 / 3,704 $ 6,574(4)
Former Senior Vice President and Secretary 1996 $115,515 $0 17,500(3)/ 2,953 $ 5,956(5)
1995 $105,750 $26,700 0 / 3,059 $ 5,858(6)

J. Reid Roney (8)........................ 1997 $127,524 $0 32,000(3)/ 0 $17,699(4)
Vice President of Sales and Marketing

Louis J. Martin, II...................... 1997 $103,593 $0 7,000(3)/ 2,604 $ 3,947(4)
Vice President of Manufacturing 1996 $ 92,675 $0 17,500(3)/ 2,470 $ 3,834(5)
1995 $ 83,976 $25,700 0 / 3,006 $ 3,747(6)

Roderick V. Schlosser.................... 1997 $100,503 $0 7,000(3)/ 0 $16,948(4)
Vice President and Chief Financial Officer 1996 $ 75,560 $0 3,000(3)/ 0 $16,462(5)
and Secretary 1995 $ 62,770 $9,800 3,000(3)/ 0 $17,432(6)
</TABLE>

- --------------
(1) "SARs" consist of phantom shares credited to the named executives' accounts
under the Company's Supplemental Executive Retirement Plan (the "SERP").

(2) Mr. Wilson resigned as President and Chief Executive Officer on March 5,
1998.

(3) Consists of a stock option(s) to purchase shares of Common Stock under the
Company's 1994 Nonqualified Stock Option Plan.

(4) All other compensation for Messrs. Wilson, Truitt, Roney, Martin and
Schlosser in 1997 includes taxable insurance premiums of $2,554, $3,354,
$1,294, $1,208 and $1,717, respectively; Company 401(k) matching
contributions of $2,092, $1,521, $0, $1,040 and $1,005, respectively;
Company ESOP contributions of $0, $0, $14,706, $0 and $12,527,
respectively; and supplemental medical insurance premiums of $1,699 each.

(5) All other compensation for Messrs. Wilson, Truitt, Martin and Schlosser in
1996 includes taxable insurance premiums of $2,554, $3,102, $1,208 and
$928, respectively; Company 401(k) matching contributions of $1,575,
$1,155, $927 and $756, respectively; Company ESOP contributions of $0, $0,
$0 and $13,079, respectively; and supplemental medical insurance premiums
of $1,699 each.

(6) All other compensation for Messrs. Wilson, Truitt, Martin and Schlosser in
1995 includes taxable insurance premiums of $2,554, $3,102, $1,208, and
$708, respectively; Company 401(k) matching contributions of $1,400,
$1,057, $840 and $628, respectively; Company ESOP contributions of $0, $0,
$0 and $15,076, respectively; and supplemental medical insurance premiums
of $1,699, $1,699, $1,699 and $1,020, respectively.

(7) Mr. Truitt retired as Senior Vice President and Secretary on January 1,
1998.

(8) Mr. Roney's employment with the Company began in January 1997.

<PAGE> 12

1997 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 1997.

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 OR STOCK PRICE APPRECIATION
UNDERLYING TO EMPLOYEE BASE PRICE FOR OPTION/SAR 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 40,000/3,862(2) 32.3%/30.0% $5.375/$5.25 11/4/07/(2) $135,212/$38,232 $342,655/$69,997

James W. Truitt 0/3,704(2) 0%/28.8% N/A/$5.25 N/A/(2) N/A/$19,446 N/A/$19,446

J. Reid Roney 20,000/N/A 25.8%/N/A $ 7.25/N/A 1/1/07 $70,670/N/A $236,624/N/A
12,000 $5.375 11/4/07

Louis J. Martin, II 7,000/2,604 5.6%/20.2% $5.375/$5.25 11/4/07/(2) $23,662/$39,991 $ 59,965/$111,286

Roderick V. Schlosser 7,000/N/A 5.6%/N/A $5.375/N/A 11/4/07 $23,662/N/A $ 59,965/N/A
</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. 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. See
"- Compensation Pursuant to Plans-Supplemental Executive Retirement Plan"
below for a more detailed description of the SERP.

1997 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
1997, 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, 1997. No options were exercised by the named executive officers
during 1997.

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 ($)
EXERCISABLE(1)/ EXERCISABLE(1)/
NAME UNEXERCISABLE(2) UNEXERCISABLE(2)
- ---- ---------------- ----------------

<S> <C> <C>
James D. Wilson...................................................... 172,500/55,946 $269,210/$83,717
James W. Truitt...................................................... 122,500/16,325 $470,847/$85,706
J. Reid Roney........................................................ 20,000/12,000 $0/$0
Louis J. Martin, II.................................................. 120,525/20,775 $464,280/$72,319
Roderick V. Schlosser................................................ 6,000/7,000 $0/$0
</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, 1997 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 $5.25 per share is used based

<PAGE> 13

upon the closing sale price of the Company's Common Stock on The Nasdaq
Stock Market's National Market on December 31, 1997, the final trading day
of 1997. 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.

(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. The value of unexercisable
in-the-money options represents the difference between the fair market
value of the share subject to the nonexcercisable options at December 31,
1997 and the option price of the shares. The value of the phantom shares
held under the SERP is equal to the fair market value of the equivalent
number of shares of Common Stock at December 31, 1997. A fair market value
of $5.25 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, 1997, the final trading day of 1997. The actual value, if any,
a person may realize as a result of such options will depend on the excess
of the stock price over the exercise price on the date the option is
exercised.

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 1997. From 1977 to 1987, William H. Martin, III
served as the President and Chief Executive Officer of the Company. During 1997,
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.

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 non-employee directors are entitled to receive
grants of stock options and to defer fees or receive options in lieu of fees
under the 1996 Non-Employee Directors' Stock Option and Deferred Compensation
Plan. 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 and officers 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 25% 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

<PAGE> 14

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 1997: Mr. Wilson - $10,459, Mr. Truitt -$9,715, Mr.
Roney, - $0, Mr. Louis Martin - $6,337 and Mr. Schlosser - $5,025. 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 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, 1997 are as follows: Mr. Wilson -
$100,000/$33,580, Mr. Truitt - $100,000/$21,841, Mr. Roney - $100,000/$0, Mr.
Louis Martin - $100,000/$14,362 and Mr. Schlosser - $100,000/$2,875. 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, 1997, of
the 1,564,500 options granted, 1,196,620 options had been exercised and 367,880
shares remained subject to presently exercisable options. No options remain
available to be granted under the 1988 Plan.

<PAGE> 15

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,
1997, options to purchase an aggregate of 363,050 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 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.

1996 Non-Employee Directors' Stock Option and Deferred Compensation Plan.
On May 3, 1996, the Board of Directors adopted the Company's 1996 Non-Employee
Directors' Stock Option and Deferred Compensation Plan (the "1996 Plan"). The
Company's Stockholders approved the 1996 Plan in May 1997. 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 is
administered by a committee appointed by the Board of Directors and consisting
of at least three (3) members who are not 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. Under the 1996 Plan, 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 (subject to adjustment
for stock splits, stock dividends and other changes in the capital structure of
the Company). On the date of the annual meeting of the Board of Directors each
year, each non-employee director is 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 receives an option to purchase the number of
shares of Common Stock determined by dividing the amount of such directors' 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 receives 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.

<PAGE> 16

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 grants 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 are subject to the following
limitations: (i) the option price may not be 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 are generally not
exercisable within the first twelve months after the date of grant; (iv) with
certain exceptions, no option is 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 (v) such other limitations and
conditions as the Plan Committee may determine. The Plan Committee in its
discretion may accelerate the time 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
Exchange Act. As of December 31, 1997, 55,383 options had been granted under the
1996 Plan at exercise prices ranging from $5.875 to $8.00. The closing price of
the Common Stock on December 31, 1997 was $5.25 per share.

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.

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, 1997, 10 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, 1997,
the named executive officers had received

<PAGE> 17

the following number of credits under their respective Supplemental Income
Agreements: Mr. Wilson - 60 credits (75% vested), Mr. Truitt - 76 credits (100%
vested) and Mr. Louis Martin - 60 credits (75% vested).

The following table shows estimated annual benefits payable upon retirement
under the ESIP.

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>

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 Messrs. Wilson, Truitt and Martin sold shares to the ESOP they do
not participate in the ESOP. Mr. Roney and Mr. Schlosser participate in the
ESOP. During 1997, 2,801 shares of Common Stock with an estimated fair value of
$5.25 were allocated to Mr. Roney's account in the ESOP and 2,386 of Common
Stock with an estimated fair value of $5.25 were allocated to Mr. Schlosser's
account in the ESOP.

Supplemental Executive Retirement Plan. Because Section 1042 of the Code
prohibits certain employees, including certain of 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 1997, 12,878 phantom shares of the Company's Common Stock
with an estimated aggregate fair value of $67,608 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, 1997.

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 1997 was $10,000. 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 1997 was $77,000, including $48,000 accrued for named
officers.

<PAGE> 18

RETENTION AND TERMINATION AGREEMENTS

In January 1998, the Company entered into Retention and Termination
Agreements with certain of its senior executive officers. The Agreements, which
have a term of one year, provide that the executive officer will receive a
specified payment in the event that he continues his employment with the Company
through the completion of a "change in control of the Company." The amount of
the payment varies by executive officer, but is based on a percentage of the
officer's annual base salary at the highest rate in effect during the twelve
month period immediately preceding the change in control of the Company. The
percentages range from 40%to 55%.

The Retention and Termination Agreement also provides that in the event the
executive officer is terminated without cause or terminates his employment for
"Good Reason" within 185 days of the completion of a change in control of the
Company, he will be entitled to a lump sum payment equal to the amount of his
salary at the highest rate in effect during the twelve months immediately
preceding the date of the termination of his employment. The agreement also
provides that the terminated officer will continue to receive health insurance
and other employment benefits for a period of one year following the termination
of his employment. These severance payments and benefits are paid only if
termination follows a change in control of the Company and is not due to normal
retirement, death, disability or termination for cause.

A change in control of the Company is defined in the agreement as (i) any
person or entity becoming the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act of 1934, as amended) of more than 50% of the outstanding voting
capital stock of the Company, or more than 20% (but not more than 50%) of the
outstanding voting capital stock of the Company without the approval of the
Continuing Directors (as defined below), (ii) if at any time Continuing
Directors no longer constitute a majority of the directors of the Company, or
(iii) the consummation of (A) a merger or consolidation of the Company, or
similar transaction, in which the Company is not the surviving or continuing
corporation or shares of Common Stock of the Company are to be converted into or
exchanged for cash, securities other than Common Stock of the Company or other
property, (B) a sale or disposition of all or substantially all of the assets of
the Company or (C) the dissolution of the Company. Generally, "Continuing
Directors" are directors who have served on the board for a continuous 24-month
period or whose nomination or election is approved by at least the majority of
such directors.

VII. 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 Compensation 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.

COMPENSATION PHILOSOPHY AND OBJECTIVES

The Compensation Committee believes that the 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.

<PAGE> 19

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 1997; all were paid base salaries at the beginning of the year that were
below the survey-derived pay levels.

ANNUAL INCENTIVE PROGRAM

Under the Company 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.

The Company did not achieve the minimum objectives set at the beginning of
1997 and, therefore, 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.

<PAGE> 20

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, 1997, are reflected in the table set forth above under
"REMUNERATION OF EXECUTIVE OFFICERS - 1997 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 1997 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 1996 results were used since the President and Chief
Executive Officer's salary was reviewed early in 1997.

In addition to his base salary, the President and Chief Executive Officer
is eligible to receive compensation paid through incentive programs. It is the
Compensation Committee's intention to establish a compensation mix in the future
so that a greater portion of the Chief Executive Officer's 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.

Mr. Wilson's 1997 compensation consisted of a base salary of $237,516, but
no annual incentive award. The Company's failure to achieve the Incentive Plan's
financial objectives in 1997 resulted in no incentive award being paid. 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 1997, the Compensation Committee approved the grant of options to
purchase 40,000 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 1997 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.

<PAGE> 21

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

VIII. 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 - 42 Vice President of Finance and Treasurer 1996
Robert W. Wintersteen - 40 Vice President of Research and Development 1997
J. Reid Roney - 38 Vice President of Sales and Marketing 1997
Kenneth W. Horton - 52 Vice President of Sales 1997
</TABLE>

IX. 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. The graph assumes that the index value
of the investment in the Company's Common Stock and each index was 100 on July
13,1995, and that all dividends have been reinvested.

<TABLE>
<CAPTION>
Measurement Period Martin Industries,
(Fiscal Year Covered) Inc. NASDAQ S&P Industrials
<S> <C> <C> <C>
7/13/95 100 100 100
12/95 93 106 109
12/96 78 130 134
12/97 58 159 175
</TABLE>

<PAGE> 22

X. 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 1997 all filing requirements applicable to its officers,
directors and Stockholders were complied with in a timely manner.

XI. 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 1999. The stockholders may also submit
recommendations of individuals to be nominated for director in 1999 to be
considered by the Board of Directors. However, in order for such proposals to be
considered for inclusion in the proxy statement of the Company relating to the
Annual Meeting and such nominations to be considered by the Board of Directors,
such proposals and nominations must be received by the Company not later than
December 7, 1998.

XII. 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, 1997, IN FORM AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
MAY BE OBTAINED, WITHOUT CHARGE, FROM RODERICK V. SCHLOSSER, SECRETARY OF THE
COMPANY, 301 EAST TENNESSEE STREET, FLORENCE, ALABAMA 35630, ON WRITTEN REQUEST.

MARTIN INDUSTRIES, INC.

Roderick V. Schlosser
Secretary

301 East Tennessee Street
Florence, Alabama 35630
April 6, 1998

<PAGE> 23

APPENDIX A

MARTIN INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN AND RELATED TRUST
FLORENCE, ALABAMA

VOTING INSTRUCTION CARD FOR THE ANNUAL
MEETING OF STOCKHOLDERS
MAY 15, 1998

The undersigned hereby instructs William H. Martin, III, Louis J. Martin,
II and Roderick V. Schlosser, 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 15, 1998, 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)

William D. Biggs, Jim D. Caudle, Sr., James J. Tanous, Herbert J. Dickson

INSTRUCTION: To withhold authority to vote for an individual nominee, write
that nominee's name in the space provided below.

------------------------------------------------------------------

2. 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,
1998.

3. 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.

<PAGE> 24

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 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.

<PAGE> 25

APPENDIX B

MARTIN INDUSTRIES, INC.
FLORENCE, ALABAMA

PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1998

(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY)

The undersigned hereby appoints William H. Martin, III and Roderick V.
Schlosser, 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 15,
1998, 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)

William D. Biggs, Jim D. Caudle, Sr., James J. Tanous, Herbert J. Dickson

INSTRUCTION: To withhold authority to vote for an individual nominee, write
that nominee's name in the space provided below.

------------------------------------------------------------------

2. 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, 1998.

3. OTHER MATTERS:

In their discretion, upon such other matters as may properly come before
the Annual Meeting of Stockholders.

<PAGE> 26

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 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 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.)

PLEASE MARK, SIGN, DATE AND RETURN THIS VOTING INSTRUCTION CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.