SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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ACTION INDUSTRIES, INC.
_________________________________________________________________
(Name of Registrant as Specified In Its Charter)
ACTION INDUSTRIES, INC.
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
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2) Aggregate number of securities to which transaction
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ACTION INDUSTRIES, INC.
Allegheny Industrial Park
Cheswick, Pennsylvania 15024
Telephone Number (412) 782-4800
_______________
PROXY STATEMENT
_______________
This proxy statement has been prepared by the management of Action
Industries, Inc. (the "Company"). It is being furnished in connection
with the solicitation of proxies by the Board of Directors of the Com-
pany to be voted at the annual meeting of shareholders on December 2,
1994 (or any adjournment of that meeting) for the purposes set forth
in the covering Notice. All expenses incurred in connection with the
solicitation of proxies will be borne by the Company.
Shareholders of record on October 12, 1994 are entitled to notice of
and to vote at the meeting. Any person giving a proxy may revoke it
by giving written notice to the Secretary of the Company, by signing a
later dated valid proxy, or by voting in person at the meeting. If
not revoked, the shares represented by the proxies will be voted. All
shares will be voted as directed by the shareholder. If no direction
is given, shares will be voted as indicated in this proxy statement
and on the enclosed proxy form.
Except as described below, shareholders are entitled to one vote per
share of the Company's common stock, par value $0.10 per share, on all
matters to be considered and acted upon at the meeting. The presence,
in person or by proxy, of the holders of at least a majority of the
outstanding shares of the Company's common stock will be necessary to
constitute a quorum at the meeting. In general, the affirmative vote
of a majority of the votes cast by the shareholders is required to
approve any proposals voted on at the meeting. Matters involving
certain fundamental corporate changes, however, require the
affirmative vote of at least 80% of the votes which all shareholders
are entitled to cast.
Further, with respect to the election of directors, shareholders have
cumulative voting rights. That is, each shareholder is entitled to
cast a number of votes equal to the number of shares he or she holds
multiplied by the number of directors to be elected -- in this case
three -- and cast the whole number of resulting votes for one
candidate or distribute them among the three candidates as he or she
wishes. The nominees receiving the highest number of votes, up to the
designated number of directors to be elected, will be deemed elected.
Shareholder abstentions and broker "non-votes" (i.e. a broker-dealer's
withholding of votes for shares held in street name for a shareholder
who has not given voting instructions) will be counted neither for nor
against a proposal in the case of the election of directors and in the
case of proposals other than certain fundamental corporate changes.
Where a proposal involves certain kinds of fundamental corporate
changes, however, shareholder abstentions and broker non-votes will be
counted as "no" votes.
As of September 8, 1994 there were 5,539,458 shares of common stock
outstanding.
The Company anticipates mailing proxy materials and annual reports to
shareholders on or about October 27, 1994.
ELECTION OF DIRECTORS
In November 1993, the Board increased the number of positions on the
Board from seven to eight and appointed James H. Knowles, Jr. to fill
the vacancy created. In August 1994, Ronald A. Gagnon retired from
service on the Board and was replaced by William B. Snow. The eight
members of the Board of Directors are divided among three classes, two
of which have three members and one of which has two members. Each
class of directors serves a three-year term.
The three candidates nominated by the Board for election as directors
this year are identified below, along with the directors continuing in
office.
NOMINEES FOR A 3-YEAR TERM EXPIRING IN 1997:
Charles C. Cohen, 53. Mr. Cohen has served as a Director of the Com-
pany since June 1991. He has been, since 1981, a Director of the law
firm of Cohen & Grigsby and, since 1976, Adjunct Professor of
securities regulation at the University of Pittsburgh School of Law.
He serves on the Boards of Directors of Robroy Industries, Inc.,
Medrad, Inc., Phar-Mor, Inc. and several civic organizations.
James H. Knowles, Jr., 54. Mr. Knowles has been a Director of the
Company since November 1993. Having over ten years of experience in
the founding and management of venture capital firms, he is presently
President and Chief Executive Officer of Dragonswood, Inc., a venture
capital investment management company, where he has served since 1988.
David S. Shapira, 52. Mr. Shapira has served as a Director of the
Company since 1981. He has held various executive positions with
Giant Eagle, Inc., a retail supermarket chain, including Director,
Chairman, President and Chief Executive Officer, since 1980. He has
also held various executive positions with Phar-Mor, Inc., a general
merchandise and retail variety store chain, including Director,
Chairman and Chief Executive Officer, since 1984. Mr. Shapira is also
a member of the Boards of Directors of Mellon Bank, N.A., Mellon Bank
Corporation, Equitable Resources, Inc. and Bell Telephone Company of
Pennsylvania.
The Board of Directors recommends a vote FOR the nominees named above.
DIRECTORS CONTINUING IN OFFICE:
SERVING THE SECOND YEAR OF A 3-YEAR TERM EXPIRING IN 1996:
Ernest S. Berez, 69. Mr. Berez has been a Director of the Company
since 1951 and served as its Chairman from 1987 through July 1990. He
was an executive officer of the Company from 1950 to 1990, serving in
various capacities, most recently including President, Chief Executive
Officer and Chief Operating Officer. Mr. Berez is presently Chairman
of Lobeco World Trade Corp., an international trading company.
Joel L. Gold, 53. Mr. Gold has served as a Director of the Company
since 1978. He has been Managing Director of Furman Selz Incor-
porated, an investment banking company, since January 1992. Prior to
that, he had served as Managing Director for Bear, Stearns & Co.,
Inc., an investment banking firm, from April 1990 and as Managing
Director for Drexel Burnham Lambert Incorporated, also an investment
banking firm, from 1981. He also serves on the Boards of MSA Realty
Corporation, Concord Camera Corp., Life Medical Sciences, Inc. and
Biomechanics Corporation of America.
R. Craig Kirsch, 47. Mr. Kirsch has served as a Director since 1990
and was elected Chairman in 1991. He joined the Company in February
1990 as President and Chief Operating Officer and was appointed Chief
Executive Officer the same year. He was previously employed by
General Nutrition Corp., a health food retailer, where he had served
since 1986 as Director, Senior Vice President and Chief Financial
Officer.
SERVING THE THIRD YEAR OF A 3-YEAR TERM EXPIRING IN 1995:
Joel M. Berez, 40. Mr. Berez has been a Director of the Company since
1983. An officer of the Company since his employment in 1988, he is
presently Senior Vice President. He has held several other executive
postions, most recently Senior Vice President - ADS Project.
William B. Snow, 62. Mr. Snow was appointed to the Board on August
29, 1994. On July 1, 1994, he became Vice Chairman and Chief
Financial Officer of Movie Gallery, Inc., a video cassette and game
retail sales and rental business. Having previously held various
executive positions with several other companies, he recently retired
from Consolidated Stores Corporation, where he had served from 1985 to
1994 as Director, Executive Vice President and Chief Financial
Officer. Consolidated Stores is a specialty retailer in the "close-
out" consumer goods industry.
PRINCIPAL HOLDERS OF THE COMPANY'S COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT: The following table shows, as of
September 8, 1994, the beneficial ownership of each director, the
Chief Executive Officer, the four other most highly compensated execu-
tive officers of the Company as of the end of fiscal year 1994, one
other individual who would have been among the four other most highly
compensated executive officers but for the fact that he was not
serving in an executive officer capacity at the end of the fiscal
year, and all the directors and officers of the Company as a group.
COMMON STOCK BENEFICIALLY OWNED
Amount and Nature of Beneficial Ownership
Sole Voting Shared Voting
and and Percent of
Investment Investment Stock
Name Power Power Total Outstanding
Ernest S. Berez 134,172 14,669 148,841 *1 2.7
Joel M. Berez 38,014 560,796 598,810 *2 10.8
Kenneth L. Campbell 11,352 0 11,352 *3 0.2
Charles C. Cohen 7,625 0 7,625 *4 0.1
Lyle E. Davis 8,075 0 8,075 *5 0.1
Ronald A. Gagnon 18,095 2,500 20,595 *6 0.4
Joel L. Gold 9,125 500 9,625 *7 0.2
R. Craig Kirsch 200,000 80,600 280,600 *8 4.9
James H. Knowles, Jr. 1,875 0 1,875 *9 <0.1
David S. Shapira 5,625 8,302 13,927 *10 0.3
William B. Snow 0 0 0 0
Walter M. Tymoczko 10,095 200 10,295 *11 0.2
All 22 present di- 487,868 675,097 1,162,965 *12 19.9
rectors and offi-
cers, including
those named above
*1 Amount includes 14,669 shares held by Mr. Berez's wife.
*2 Amount includes the following: 8,000 shares which Joel Berez does
not now own but has the right to acquire within 60 days under a stock
option agreement; 550,365 shares held in twelve trusts for which Mr.
Berez is co-trustee but as to which he disclaims beneficial ownership
in 338,303 shares; and 10,431 shares held by Mr. Berez jointly with
his wife.
*3 Amount includes 10,000 shares which Mr. Campbell does not now own
but has the right to acquire within 60 days under a stock option
agreement.
*4 Amount includes 5,625 shares which Mr. Cohen does not now own but
has the right to acquire within 60 days under a stock option
agreement.
*5 Amount includes 8,000 shares which Mr. Davis does not now own but
has the right to acquire within 60 days under a stock option
agreement.
*6 Amount includes 18,000 shares which Mr. Gagnon does not now own
but has the right to acquire within 60 days under stock option
agreements and 2,500 shares held by Mr. Gagnon jointly with his wife.
*7 Amount includes 5,625 shares which Mr. Gold does not now own but
has the right to acquire within 60 days under a stock option agreement and
500 shares held by Mr. Gold's wife.
*8 Amount includes 200,000 shares which Mr. Kirsch does not now own
but has the right to acquire within 60 days under a stock option
agreement and 80,600 shares which he holds jointly with his wife.
*9 Amount includes 1,875 shares which Mr. Knowles does not now own
but has the right to acquire within 60 days under a stock option
agreement.
*10 Amount includes 5,625 shares which Mr. Shapira does not now own
but has the right to acquire within 60 days under a stock option
agreement and 8,302 shares held in various trusts for which Mr.
Shapira is co-trustee.
*11 Amount includes 10,000 shares which Mr. Tymoczko does not now own
but has the right to acquire within 60 days under a stock option
agreement and 200 shares which he holds jointly with his wife.
*12 Amount includes 315,850 shares which the directors and officers
do not now own but have the right to acquire within 60 days under
stock option agreements.
SECURITY OWNERSHIP OF CERTAIN OTHERS: The following table shows the
beneficial ownership of those persons, other than the ones named in
the table above, who are known by the Company to be beneficial owners
of more than 5% of the Company's common stock outstanding.
COMMON STOCK BENEFICIALLY OWNED
Amount and Percent of
Nature of Stock
Name and Address Beneficial Ownership Outstanding
Steven H. Berez 556,259 *1 10.0
35 Sutton Road
Needham, MA 02192
Dimensional Fund Advisors Inc. 385,700 *2 7.0
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Heartland Advisors Inc. 785,975 *3 14.2
790 North Milwaukee Street
Milwaukee, WI 53202
*1 Steven H. Berez's shareholdings include 5,698 shares for which he
has sole voting and dispositive power, 196 shares for which he shares
voting and dispositive power with his wife, and 550,365 shares held in
twelve trusts for which he shares voting and dispositive power as co-
trustee but as to which he disclaims beneficial ownership in 338,303
shares. The shares held by Mr. Berez as co-trustee are the same
550,365 shares as those described with respect to Joel M. Berez in
footnote 2 on page 3.
*2 Dimensional Fund Advisors Inc. has sole voting power over 224,200
of the shares, and certain of its officers vote an additional 136,500
of the shares by virtue of their capacities as officers of other
investment companies. Dimensional Fund has sole dispositive power
with respect to all 385,700 shares.
*3 Heartland Advisors Inc. has sole voting power over 450,000 of the
shares. It has sole dispositive power with respect to all 785,975
shares.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
FAMILY RELATIONSHIPS: Director Ernest S. Berez is the father of Joel
M. Berez, a Director and officer of the Company.
BUSINESS RELATIONSHIPS, TRANSACTIONS WITH MANAGEMENT AND INVOLVEMENT
IN LEGAL PROCEEDINGS:
David S. Shapira and Charles C. Cohen. In August 1992 Phar-Mor, Inc.
reported that it had been the victim of a fraud and embezzlement
scheme perpetrated by Phar-Mor executives whose employment was
immediately terminated. David S. Shapira, a Director of the Company,
was Director and Chief Executive Officer of Phar-Mor at the time of
discovery of the scheme. Mr. Shapira and his wife own directly or
beneficially 4% of the outstanding shares of Phar-Mor. Mr. Shapira is
also a Director and executive officer of Giant Eagle, Inc. Giant
Eagle owns a significant portion (though not a majority) of the
outstanding shares of Phar-Mor.
Company Director Charles C. Cohen is also a Director of Phar-Mor. Mr.
Cohen owns no Phar-Mor shares. The Company holds 0.7% of the out-
standing shares of Phar-Mor.
On August 17, 1992 Phar-Mor, Inc., a Pennsylvania corporation, filed
for protection under Chapter 11 of the United States Bankruptcy Act.
Mr. Shapira was an executive officer of Phar-Mor at the time of
filing. The proceedings are still pending.
In light of the bankruptcy proceedings, in August 1992 the Board of
Directors of the Company approved the write-off of the $1,611,710 book
value of the Company's Phar-Mor shares. Mr. Cohen abstained from the
decision with respect to the Company's write-off of the value of the
Phar-Mor stock (Mr. Shapira was not present at the meeting). Further,
the Board of Directors determined that Messrs. Shapira and Cohen would
abstain from any future vote by the Board of Directors concerning any
transaction between the Company and Phar-Mor.
During fiscal year 1994 the Company engaged in several arms-length
business transactions with Giant Eagle and Phar-Mor. The Company sold
merchandise to Giant Eagle in the amount of $212,178 and to Phar-Mor
in the amount of $1,353,417. The Company also purchased from Giant
Eagle Christmas gift certificates for Company employees in the amount
of $29,601 and paid to Giant Eagle $601 in trade show booth fees.
Mr. Cohen is a Director of Cohen & Grigsby, P.C., a law firm retained
by the Company to perform legal services during fiscal year 1994 and
which the Company expects to retain during the current fiscal year.
William B. Snow. Until June 30, 1994, Mr. Snow was a Director and
executive officer of Consolidated Stores Corporation, which engaged in
a series of arms-length business transactions with the Company during
fiscal year 1994. The Company acts as a foreign buying agent for
Consolidated Stores, for which services the Company was paid $166,118
in commissions for the fiscal year. The Company also sold to
Consolidated Stores certain plastic housewares pursuant to a supply
agreement between the companies, as well as a number of other
products, aggregating $4,836,502 for the fiscal year.
COMPLIANCE WITH CERTAIN FILING REQUIREMENTS: Directors and executive
officers are required under Section 16(a) of the Securities Exchange
Act of 1934 to file reports concerning their holdings and transactions
in Company stock. Through inadvertent error, Marc J. Joseph, who
joined the Company in April 1994 as Senior Vice President,
Merchandising and Marketing, filed his initial report of the status of
his stock ownership about one week late. Director Ernest Berez failed
to file a report in 1992 disclosing a small donation of stock by his
wife. He has routinely filed timely reports of other transactions
during 1992 and other years and was not aware of the unreported
transaction until recently. The transaction has now been reported.
THE BOARD OF DIRECTORS AND ITS COMMITTEES: The full Board of
Directors held five meetings during fiscal year 1994. No member
failed to attend at least 75% of the aggregate number of meetings of
the full Board and meetings of the Board committees on which he
serves.
Executive Committee. The Board recently reinstituted the executive
committee, whose functions are to conduct all the business of the
Board of Directors in managing the Company between meetings of the
Board, subject to any limitations imposed by the Board, and provided
that matters of importance that do not require immediate action will
be referred to the full Board. The members are Messrs. Cohen, Kirsch,
Knowles, Shapira and Joel Berez, with Mr. Kirsch serving as Chairman.
Audit Committee. The Board has an audit committee, the function of
which is to assist the Board of Directors in fulfilling its obligation
concerning the financial accounting and reporting practices of the
Company and the sufficiency of its auditing. In furtherance of its
function, the committee reviews the scope and results of the annual
audit by the Company's independent public accountants, ensures the
independence of the public accountants and makes appropriate inquiries
as to the adequacy of the Company's financial and operating controls.
The members during fiscal year 1994 were Messrs. Knowles, Cohen and
Joel Berez. They met two times during the year. The members for
fiscal year 1995 are Messrs. Cohen, Snow and Joel Berez, with Mr. Snow
serving as Chairman.
Nominating Committee. The Board has a nominating committee, the func-
tions of which are to consider and recommend candidates to fill
vacancies or new openings for membership on the Board and to consider
and recommend successor management for the Company. The members are
Messrs. Cohen, Kirsch and Joel Berez, with Mr. Cohen serving as Chair-
man. They met informally several times during the year. The nominat-
ing committee will consider director candidates recommended by
shareholders who submit the candidate's resume by sending it to Mr.
Cohen at the Company's address.
Compensation Committee. The Board has a compensation committee, the
function of which is to review and determine the compensation of
senior management. The members are Messrs. Gold, Kirsch, Knowles and
Shapira, with Mr. Shapira serving as Chairman and Mr. Kirsch
participating as a nonvoting member. The compensation committee met
twice during the past year. The committee and the Company have
retained professional benefit and compensation consultants to advise
them concerning the compensation of directors, officers and other
management.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION FOR DIRECTORS: Directors who are employees of the Com-
pany, namely Messrs. Kirsch and Joel Berez, Mr. Gagnon until his
retirement from the Board, as well Mr. Ernest Berez, who is a former
employee, receive no additional compensation for their services on the
Board.
Compensation for nonemployee directors includes an annual retainer of
$12,000 plus $1,000 for each full Board meeting attended and $500 for
each committee meeting attended on a day other than the day of a full
Board meeting. Upon their appointment to the Board, they are also
granted options to purchase 7,500 shares of stock each, pursuant to a
stock option plan approved by the shareholders in 1991.
Director Ernest S. Berez, former Chairman and President of the
Company, is compensated under an agreement with the Company dated July
31, 1990 and amended July 31, 1991. Pursuant to that agreement, Mr.
Berez now receives lifetime retirement benefits in the amount of
$139,200 annually. If Mr. Berez's wife survives him, she will receive
lifetime survivor benefits of one-half his benefit amount.
COMPENSATION FOR EXECUTIVE OFFICERS: The following tables show, for
the last three fiscal years, all compensation received by the Chief
Executive Officer, the four other most highly compensated executive
officers of the Company as of the end of fiscal year 1994, and one
other individual who would have been among the four other most highly
compensated executive officers but for the fact that he was not
serving in an executive officer capacity at the end of the fiscal
year.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation
Compensation Awards
Securities
Underlying All Other
Name and Fiscal Salary Bonus Options/ Compensa-
Principal Position Year ($) ($) SARs (#) tion ($) *1
R. Craig Kirsch 1994 243,437 0 0 2,875
Chairman, President, 1993 243,437 0 0 2,916
and Chief Executive 1992 243,271 0 150,000 15,770
Officer
Ronald A. Gagnon *2 1994 164,406 0 0 2,737
Executive Vice 1993 168,033 0 0 813
President 1992 167,950 0 5,000 11,940
Walter M. Tymoczko 1994 123,046 15,000 0 551
Senior Vice Presi- 1993 123,046 0 0 589
dent and General 1992 123,020 0 0 9,887
Manager, Kensington
Lamp Company
Kenneth L. Campbell 1994 118,698 6,000 0 554
Senior Vice Presi- 1993 123,714 0 5,000 569
dent, Finance 1992 118,606 0 0 8,704
Lyle E. Davis *3 1994 121,710 0 0 545
former Senior Vice 1993 121,710 0 0 583
President and Gen- 1992 121,500 12,381 5,000 8,400
eral Merchandise
Manager
Joel M. Berez *4 1994 137,463 0 0 816
Senior Vice Presi- 1993 137,400 0 0 659
dent 1992 137,400 0 0 9,411
*1 The amounts shown for fiscal year 1994 in the column "All Other
Compensation" are comprised of the following: For Mr. Kirsch, the
amount includes $1,055 in forfeiture allocations to his account in the
Employees' Retirement Plan and $1,820 for payment of the annual premium
for a term life insurance policy. For Mr. Gagnon, the amount includes
$761 in forfeiture allocations and $1,976 value of tax consultation
services. For Mr. Berez, the amount includes $616 in forfeiture
allocations and $200 value of tax consultation services. For Messrs.
Tymoczko, Campbell and Davis, the entire amount shown is the amount of
forfeitures allocated to the executive's account in the Employees'
Retirement Plan.
*2 Following the end of the fiscal year, Mr. Gagnon began serving in a
semi-retired position with the Company and is no longer an executive
officer.
*3 Mr. Davis left the Company's employ following the end of the
fiscal year.
*4 Mr. Berez remains an officer of the Company but was not serving as
an executive officer as of the end of the fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End at FY-End($)
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable *1
R. Craig Kirsch 0 NA 200,000 0
150,000 0
Ronald A. Gagnon 0 NA 14,000 0
11,000 0
Joel M. Berez 0 NA 6,000 0
4,000 0
Walter M. Tymoczko 0 NA 7,000 0
8,000 0
Kenneth L. Campbell 0 NA 7,000 0
8,000 0
Lyle E. Davis 0 NA 8,000 0
7,000 0
*1 All these options were out of the money at 1994 fiscal year end.
EMPLOYMENT CONTRACTS AND RETIREMENT PLANS:
R. Craig Kirsch Employment Agreement. Mr. Kirsch serves under an
employment agreement dated as of March 12, 1992. The agreement provides
for five years' employment with base compensation, presently $243,437
annually, subject to the review of the compensation committee of the
Board of Directors, participation in any incentive compensation program
implemented by the Company and customary insurance benefits for execu-
tives of the Company. He also has options to purchase a total of
350,000 shares of the Company's common stock. The agreement provides
for Mr. Kirsch's covenant not to compete with the Company for two years
after his employment ends.
Ronald A. Gagnon Employment Agreement. Mr. Gagnon serves under an
employment agreement dated July 1, 1994 and expiring June 30, 1997. The
agreement provides for base salary of $150,000, $100,000 and $50,000 per
annum, respectively, for the three years, as well as customary group
benefits for executives. The agreement also provides for Mr. Gagnon's
covenant not to compete with the Company for two years after his
employment ends.
Lyle E. Davis Employment Agreement. Until his resignation on August 31,
1994, Mr. Davis served under an employment agreement dated March 24,
1992 and expiring March 23, 1995. The agreement provided for base
compensation, most recently $121,710, participation in any bonus,
incentive compensation and stock option programs for executives, as well
as customary benefits. It further provides for Mr. Davis' covenant not
to compete with the Company for two years after his separation from
employment.
Retirement Plan. Each of the named executive officers is a participant
in an Employees' Retirement Plan to which the Company contributes. The
Plan is a profit sharing plan providing for contributions in an amount
subject to the Board of Directors' determination each year. It covers
all employees other than those who are participants in a collectively
bargained plan. The Plan was amended in 1989 to permit contributions of
Company stock under an employee stock ownership provision and to permit
participants to make their own contributions. These provisions have not
been made effective. A participant's account under the Plan vests after
five years of service, and the total amount of the individual's account
balance is distributed upon termination of employment.
Contributions accrued pursuant to the Plan for the named executive
officers are shown in the final column of the Summary Compensation
Table. For plan years 1993 and 1994, contributions consisted only of
forfeitures of the accounts of unvested participants whose employment
terminated during those years; there was no contribution of additional
Company funds. For 1992, the amounts shown include both forfeitures and
additional Company contributions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION: The mem-
bers of the compensation committee during fiscal year 1994 were Messrs.
Gold, Kirsch, Knowles and Shapira. Mr. Kirsch, who is a nonvoting
member, is President and Chief Executive Officer of the Company. Mr.
Shapira is a Director and executive officer of Giant Eagle, Inc., and
Phar-Mor, Inc., both of which engaged in several arms-length business
transactions with the Company during the fiscal year. The Company sold
merchandise to Giant Eagle in the amount of $212,178 and to Phar-Mor in
the amount of $1,353,417. It also purchased from Giant Eagle Christmas
gift certificates for Company employees in the amount of $29,601 and
paid Giant Eagle $601 in trade show booth fees.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the policy of the compensation committee to compensate executive
officers of the Company under a pay plan with three components: base
salary, performance-based pay and equity ownership. The compensation
plan was developed in 1990 with the assistance and recommendation of
compensation consultants. Under this pay system, base salaries for
executives are set at or just below the market median for each position,
as determined from market survey information for companies with
comparable sales volume.
Performance-based compensation is paid pursuant to a plan implemented in
September 1990. The plan provides that a portion of the compensation
payable to each executive officer will be based upon the individual's
achievement of predetermined performance objectives and the Company's
attainment of overall performance objectives. The plan is a flexible
program in which performance objectives, which are individually
determined for each executive appropriate to his/her position, are
established each year by senior management. The aggregate amount
potentially payable to executives is determined by the Board of
Directors each year, based upon a percentage of the Company's profits.
The plan was suspended for fiscal year 1994, as management did not
expect the Company to have the financial resources to fund it. Two
executive officers nevertheless received bonuses based upon their
achievement of specific performance objectives.
The equity ownership portion of executive officer compensation is paid
in the form of stock options under a plan approved by shareholders in
1990. Under this plan, the Company has granted options to executive
officers and other managers for approximately 450,000 shares (options
for an additional 275,000 shares have been granted outside the plan to
three executives). The number of option shares granted to each
individual is based upon the executive's position in the Company and the
relative potential for that position to affect the Company's
performance. The option price for each grant is the fair market value
at the date of grant. Executives have ten years from the date of grant
to exercise their options by paying the option price for the stock.
The compensation committee believes that this three-component pay system
for executive officers effectively balances the employee's need for
income security and the Company's need to maximize performance. The
base salary component provides the executive a reliable but moderate
income stream. The opportunity for any additional income exists only
through the performance-based compensation plan and the stock option
plan and is available only by virtue of individual achievement and
overall Company performance.
It is also the policy of the compensation committee to compensate R.
Craig Kirsch, Chief Executive Officer of the Company, under a compen-
sation plan consisting of base salary, performance-based pay and equity
ownership. This compensation plan was developed with the assistance and
recommendation of compensation consultants. Base salary is set just below
the market median for chief executive officers of companies
with comparable sales volume.
Performance-based compensation is paid to Mr. Kirsch for his achievement
of predetermined performance objectives and the Company's attainment of
overall performance objectives, as determined by the committee each
fiscal year. The amount potentially payable to him is also determined
each year by the committee, based upon a percentage of the Company's
profits. As noted above, this plan was suspended for fiscal year 1994.
Mr. Kirsch has received no performance-based pay for the last three
fiscal years.
The equity ownership component of Mr. Kirsch's compensation consists of
two stock options -- one for 200,000 shares and the other for 150,000
shares. The first stock option was negotiated with Mr. Kirsch in 1990
to attract him to the Company to plan and carry out a financial and
organizational restructuring of the Company. The option vested over a
three-year period, as it was originally anticipated that restructuring
was a three-year project. After two years it became apparent that more
than three years would be needed to stabilize the Company and regain its
profitability. Accordingly, Mr. Kirsch's employment agreement was
renegotiated in 1992 with an extended term and an additional option for
150,000 shares. To encourage Mr. Kirsch to remain with the Company and
lead it to profitability, this option vests in two installments over a
five-year period. Both the 1990 and the 1992 stock options were granted
at fair market value on the date of grant.
By the Voting Members of the Compensation Committee:
Joel L. Gold, James H. Knowles, Jr., and David S. Shapira
COMPANY PERFORMANCE
The following graph is a comparison of five-year cumulative shareholder
return among Action Industries, Inc. common stock, the Amex Market Value
Index and the Standard and Poor's Housewares Index. The comparison
assumes $100 invested on June 30, 1989 in Company stock or the Indexes,
including reinvestment of dividends.
[FILED UNDER COVER OF FORM SE.]
INDEPENDENT PUBLIC ACCOUNTANTS
Pursuant to Article V of the Company's Bylaws, the Directors have the
authority to have financial reports prepared or verified by independent
public accountants who need not be elected by the shareholders. Ernst &
Young served as the Company's independent accountants throughout the
fiscal year ended June 25, 1994 and are continuing in that capacity for
fiscal 1995.
Representatives of Ernst & Young are expected to be present at the
meeting of the shareholders and will have the opportunity to make a
statement if they so desire and to respond to appropriate questions.
OTHER BUSINESS
So far as is known, no business other than the election of directors
will come before the meeting. It is the intention of the Board,
however, that the proxy solicited in this statement will be exercised in
the discretion of the person or persons voting the proxy on any matters
that may properly come before the meeting.
SHAREHOLDER PROPOSALS FOR THE 1995 ANNUAL MEETING
Shareholders who wish to present proposals at the 1995 annual meeting
must send their proposals to the Company so that they are received no
later than June 29, 1995, in order that they may be included in the
proxy statement for that meeting.
September 9, 1994
ACTION INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, DECEMBER 2, 1994
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R. Craig Kirsch, Chairman, and Linda S.
Wyckoff, Secretary, or either of them, proxies of the undersigned to
vote the shares of ACTION INDUSTRIES, INC. which the undersigned would
be entitled to vote if personally present at the meeting or any
adjournment of it:
(1) To elect each of the following nominees for director for the ensuing
three years:
CHARLES C. COHEN JAMES H. KNOWLES, JR. DAVID S. SHAPIRA
You may withhold authority to vote your shares for any nominee by
striking through the individual's name. YOUR SHARES WILL BE VOTED FOR
THE ELECTION OF ANY NOMINEE WHOSE NAME IS NOT STRICKEN.
(2) In their discretion to vote upon such other matters as may properly
come before the meeting.
(over)
______________________________________________________________________
(continued from other side)
Dated: _________________________, 1994
_______________________________________
_______________________________________
Please sign exactly as name appears
hereon. When signing as executor,
trustee, etc., or as corporation of-
ficer, give full title as such. For
joint accounts, provide both signatures.
PLEASE SIGN AND RETURN THIS PROXY IMME-
DIATELY IN THE ENCLOSED ENVELOPE.