UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ACME UNITED CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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March 29, 2004
Dear Fellow Shareholder:
On behalf of your Board of Directors and Management, I cordially invite you to
attend the Annual Meeting of Shareholders of Acme United Corporation scheduled
to be held on Monday, April 26, 2004 at 11:00 A.M., at the American Stock
Exchange, 86 Trinity Street, New York, New York. I look forward to greeting
personally those shareholders able to attend.
At the Meeting, shareholders will be asked to elect eight directors to serve for
a one-year term. Information regarding these matters are set forth in the
accompanying Notice of Annual Meeting and Proxy Statement to which you are urged
to give your prompt attention.
It is important that your shares be represented and voted upon at the Meeting.
Whether or not you plan to attend, please take a moment to sign, date and
promptly mail your proxy in the enclosed prepaid envelope. This will not limit
your right to vote in person should you attend the meeting.
On behalf of your Board of Directors, thank you for your continued support and
interest in Acme United Corporation.
Sincerely,
Walter C. Johnsen
President and Chief Executive Officer
(1)
Acme United Corporation
1931 Black Rock Turnpike
Fairfield, Connecticut 06825
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 2004
Notice is hereby given that the Annual Meeting of Shareholders of Acme United
Corporation will be held at the American Stock Exchange, 86 Trinity Street, New
York, New York, on Monday, April 26, 2004, at 11:00 A.M. for the following
purposes:
1. To elect eight Directors of the Company to serve until the next Annual
Meeting and until their successors are elected.
2. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 9, 2004 will be
entitled to vote at the meeting and at any adjournment thereof.
March 29, 2004
Fairfield, Connecticut --------------------------------
Paul G. Driscoll, Vice President and
Chief Financial Officer, Secretary
and Treasurer
YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly return your proxy so that your shares
may be voted in accordance with your wishes and in order that the presence of a
quorum may be assured. The prompt return of your signed proxy, regardless of the
number of shares you hold, will aid the Company in reducing the expense of
additional proxy solicitation. The giving of such proxy does not affect the
right to vote in person in the event you attend the meeting.
Enclosure: The Annual Report of the Company for the year 2003.
(2)
Acme United Corporation
1931 Black Rock Turnpike
Fairfield, Connecticut 06825
ANNUAL MEETING OF SHAREHOLDERS
April 26, 2004
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies
by the directors of Acme United Corporation (hereinafter called the "Company")
to be used at the Annual Meeting of Shareholders of the Company, to be held
April 26, 2004, or at any adjournment thereof. The purposes are set forth in the
accompanying Notice of Annual Meeting of Shareholders and in this Proxy
Statement. Any proxy given may be revoked by a shareholder orally or in writing
at any time prior to the voting of the proxy.
The approximate date on which this Proxy Statement and the enclosed Proxy is
first sent or given to shareholders is March 29, 2004.
Only holders of Common Stock of record at the close of business on March 9, 2004
will be entitled to vote at the meeting. Each holder of the 3,340,551 issued and
outstanding shares of $2.50 par value Common Stock is entitled to one vote per
share.
Each share of Common Stock is entitled to one vote on each question to be
presented at the Annual Meeting. A plurality of the votes cast by the shares of
stock entitled to vote, in person or by proxy, at the Annual Meeting will elect
directors as long as a quorum is present. A quorum consists of a majority of the
votes entitled to be cast on a question. Once a share is represented for any
purpose at the meeting, it is deemed present for quorum purposes for the
remainder of the meeting. If a quorum exists, action on each other question to
be voted upon will be approved if votes, in person or by proxy, cast by
shareholders favoring the action exceed the vote cast by shareholders opposing
the action. In certain circumstances, a shareholder will be considered to be
present at the Annual Meeting for quorum purposes, but will not be deemed to
have voted in the election of directors or in connection with other matters
presented for approval at the Annual Meeting. Such circumstances will exist
where a shareholder is present but specifically abstains from voting, or where
shares are represented at a meeting by a proxy conferring authority to vote on
certain matters but not for the election of directors or on other matters. Under
Connecticut law, such abstentions and non-votes have a neutral effect on the
election of management's nominees for directors and on the approval or
disapproval of the other matters presented for shareholder action.
(3)
PRINCIPAL SHAREHOLDERS
The following information is given with respect to any person who, to the
knowledge of the Company's Board of Directors, owns beneficially more than 5% of
the Common Stock of the Company (exclusive of treasury shares) as of February 1,
2004:
- ---------------------------- ------------- -------------------- --------------
Type of Shares Owned on Percent of
Shareholder Ownership February 1, 2004 Class
- ---------------------------- ------------- -------------------- --------------
Walter C. Johnsen Direct 277,272 (1) 7.05
1931 Black Rock Turnpike
Fairfield, CT 06825
- ---------------------------- ------------- -------------------- --------------
R. Scott Asen Direct 607,690 15.46
Asen and Co.
224 East 49th Street
New York, NY 10017
- ---------------------------- ------------- -------------------- --------------
(1) In addition, Mr. Johnsen has the right to acquire 282,500 shares issuable
upon exercise of outstanding options within 60 days of February 1, 2004.
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates, as to each named executive officer and director
and as to all directors and executive officers as a group, the number of shares
and percentage of the Company's Common Stock beneficially owned as of February
1, 2004. The persons shown have sole voting power in these shares except as
shown in the footnotes below.
Common Stock Beneficially Owned
as of February 1,2004
- --------------------------------------------------- ------- -------------------
Number of Shares (1) Percent
- --------------------------------------------------- ------- -------------------
James A. Benkovic....................62,000 (2) 1.58
- --------------------------------------------------- ------- -------------------
Larry H. Buchtmann...................51,500 (3) 1.31
- --------------------------------------------------- ------- -------------------
Paul G. Driscoll.....................16,525 (4) *
- --------------------------------------------------- ------- -------------------
George R. Dunbar ....................52,809 (5) 1.34
- --------------------------------------------------- ------- -------------------
Richmond Y. Holden, Jr. .............32,972 (6) *
- --------------------------------------------------- ------- -------------------
Walter C. Johnsen...................559,772 (7) 14.24
- --------------------------------------------------- ------- -------------------
Wayne R. Moore ......................50,143 (5) 1.28
- --------------------------------------------------- ------- -------------------
Brian S. Olschan....................144,750 (8) 3.68
- --------------------------------------------------- ------- -------------------
Gary D. Penisten ...................131,287 (5) 3.34
- --------------------------------------------------- ------- -------------------
Stevenson E. Ward III ...............13,500 (9) *
- --------------------------------------------------- ------- -------------------
Susan M. Murphy ......................2,500 (10) *
- --------------------------------------------------- ------- -------------------
Executive Officers and Directors
as a Group (10 persons)........1,117,758
- --------------------------------------------------- ------- -------------------
*Less than 1.0%
(4)
(1) Based on a total of 3,265,551 outstanding shares as of February 1, 2004 and
666,375 shares issuable upon exercise of outstanding options exercisable
within 60 days of February 1, 2004.
(2) Includes 47,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(3) Includes 50,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(4) Includes 17,625 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(5) Includes 30,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(6) Includes 27,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(7) Includes 282,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(8) Includes 138,750 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(9) Includes 12,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(10) Includes 2,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2004.
(5)
ELECTION OF DIRECTORS
Each of the following persons has been nominated as a director until the next
Annual Meeting of Shareholders and until his/her successor is chosen and
qualified. The Board has determined that a majority of the following persons are
"independent directors", as such term is defined in Section 121A of the American
Stock Exchange's listing standards. The proxies in the enclosed form which are
executed and returned will be voted (unless otherwise directed) for the election
as directors of the following nominees, all of whom are now members of the Board
of Directors:
- ------------------------- -------------------------------------------- ---------
Director
Nominees Principal Occupation Since
- ------------------------- -------------------------------------------- ---------
Walter C. Johnsen President and Chief Executive Officer of the 1995
(age 53) Company since November 30,1995; Executive
Vice President from January 24, 1995 to
November 29, 1995. Formerly served as Vice
Chairman and a principal of Marshall
Products, Inc., a medical supply distributor.
- ------------------------- -------------------------------------------- ---------
Gary D. Penisten Chairman of the Board of the Company since 1994
(age 72) February 27, 1996. From 1977 to 1988, he was
Senior Vice President of Finance, Chief
Financial Officer and a Director of
Sterling Drug Inc. From 1974 to 1977 he
served as Assistant Secretary (Financial
Management) of the United States Navy.
Prior to that, he was employed by General
Electric Company.
- ------------------------- -------------------------------------------- ---------
Wayne R. Moore President and Chief Executive Officer of the 1976
(age 72) Moore Special Tool Company(1974-1993)and its
Chairman of the Board(1986-1993). He was
Chairman of the Board of the Producto
Machine Company (1994-1997). Mr. Moore was
Chairman of the Association for Manufacturing
Technology/U.S. Machine Tool Builders
(1985-1986) and Committee Member of the U.S.
Eximbank (1984). He is a Trustee of the
American Precision Museum and on the Board
of Advisors of the Fairfield University
School of Engineering.
- ------------------------- -------------------------------------------- ---------
(6)
- ------------------------- -------------------------------------------- ---------
George R. Dunbar President of The U.S. Baird Corporation 1977
(age 80) since January 2001 and President of Dunbar
Associates, a municipal management consulting
firm. Former Chief Administrative Officer
for the City of Bridgeport. President
(1972-1987), Bryant Electric Division of
Westinghouse Electric Corporation,
manufacturer of electrical distribution and
utilization products, Bridgeport, CT.
- ------------------------- -------------------------------------------- ---------
Richmond Y. Holden, Jr. President and Chief Executive Officer of 1998
(age 50) J.L. Hammett Co. since 1992. J.L. Hammett
Co. is a retailer of educational products,
with 60 stores, focusing on the needs of
teachers and concerned parents. He is also
currently Chairman of the Board of PC-Build,
a computer upgrade, network services and
computer services company.
- ------------------------- -------------------------------------------- ---------
Brian S. Olschan Executive Vice President and Chief Operating 2000
(age 47) Officer of the Company as of January 25,
1999; Senior Vice President - Sales and
Marketing from September 12, 1996 to January
24, 1999; formerly served as Vice President
and General Manager of the Cordset and
Assembly Business of General Cable
Corporation, an electrical wire and cable
manufacturer.
- ------------------------- -------------------------------------------- ---------
Stevenson E. Ward III Vice President and Chief Financial Officer 2001
(age 59) of Triton Thalassic Technologies, Inc. since
September 2000. From 1999 thru 2000, Mr.
Ward served as Senior Vice President-
Administration of Sanofi-Synthelabo, Inc.
He also served as Executive Vice President
(1996-1999) and Chief Financial Officer
(1994-1995) of Sanofi, Inc. and Vice
President, Pharmaceutical Group, Sterling
Winthrop, Inc. (1992-1994). Prior to joining
Sterling he was employed by General Electric
Company.
- ------------------------- -------------------------------------------- ---------
(7)
- ------------------------- -------------------------------------------- ---------
Susan H. Murphy Vice President for Student and Academic 2003
(age 52) Services, Cornell University since 1994;
Dean of Admissions and Financial Aid from
1985 to 1994. Employed at Cornell since 1978.
Chair of Policy Committee, Council of Ivy
Presidents since 1997.
- ------------------------- -------------------------------------------- ---------
Management does not expect that any of the nominees will become unavailable
for election as a director, but, if for any reason that should occur prior
to the Annual Meeting, the persons named in the proxy will vote for such
substitute nominee, if any, as may be recommended by Management.
There were no material transactions between the Company and any officer of
the Company, any director or nominee for election as director, any security
holder holding more than 5% of the Common Stock of the Company or any
relative or spouse of any of the foregoing persons.
The Board of Directors had seven meetings. All directors attended at least
75% of the aggregate of the total number of the Board meetings and meetings
of Committees of which they were a member. Board members are expected to
attend annual meetings. All seven then-incumbent Board members attended the
Annual Meeting held in 2003.
DIRECTORS' FEES
All directors who are not salaried employees received a fee of $3,000 per
quarter plus $700 for each Board of Directors meeting attended. The Chairman of
the Board earned an additional $700 per meeting to compensate for the broader
responsibility and related effort. The fees earned for service on the Committees
of the Board were $600 per Committee meeting and $600 for each one-half day, or
major portion thereof, devoted to Committee work. The Chairman of each Committee
earned an additional $600 per meeting to compensate for the broader
responsibility and related effort.
(8)
DIRECTORS STOCK OPTIONS
Under the Non-Salaried Directors Stock Option Plan, options were granted on
April 28, 1997 for 10,000 shares each to Messrs. Dunbar, Moore and Penisten, of
which 2,500 shares vested on April 28, 1997, 2,500 shares vested on April 28,
1998, 2,500 shares vested on April 28, 1999, and 2,500 shares vested on April
28, 2000. On April 27, 1998, options were granted for 2,500 shares each to
Messrs. Dunbar, Moore and Penisten, of which all shares vested immediately. On
April 27, 1998, options were granted for 10,000 shares to Richmond Y. Holden,
Jr., of which 2,500 vested April 27, 1998, 2,500 vested on April 27, 1999, 2,500
vested on April 27, 2000 and 2,500 vested on April 27, 2001. On April 26, 1999,
options were granted for 2,500 shares to Messrs. Dunbar, Holden, Moore and
Penisten, of which all shares vested immediately. On April 24, 2000, options
were granted for 2,500 shares to Messrs. Dunbar, Holden, Moore and Penisten, of
which all shares vested immediately. On April 24, 2001, options were granted for
7,500 shares to Messrs. Dunbar, Holden, Moore and Penisten, of which all shares
vested immediately. On April 24, 2001, options were granted for 10,000 shares to
Stevenson E. Ward III of which 2,500 shares vested on April 25, 2001, 2,500
shares vested on April 25, 2002, 2,500 shares will vest on April 25, 2003 and
2,500 shares will vest on April 25, 2004. On April 22, 2002, options were
granted for 2,500 shares to Messrs. Dunbar, Holden, Moore, Penisten and Ward of
which all shares vested immediately. On April 28, 2003, options were granted for
2,500 shares to Messrs. Dunbar, Holden, Moore, Penisten and Ward of which all
shares vested immediately Additionally on April 28, 2003, options were granted
for 10,000 shares to Susan H. Murphy of which 2,500 shares vested on April 28,
2003, 2,500 shares will vest on April 28, 2004, 2,500 shares will vest on April
28, 2005 and 2,500 shares will vest on April 28, 2006.
Newman M. Marsilius, a former Director, had previously been granted options for
10,000 shares, which fully vested on April 27, 1998 upon his retirement from the
Board; the Board extended the exercise date for his options to expiration of the
Plan.
On February 24, 2004, the Board of Directors adopted a resolution to suspend the
granting of stock options to directors. No options have been granted to
directors since April 28, 2003 and none will be granted until further notice.
STOCK PURCHASE CASH AWARD PLAN
Effective February 24, 2004, the Board of Directors adopted a resolution to
implement a Stock Purchase Cash Award Plan which is intended to more closely
align the Board with long-term shareholder value.
The Plan calls for a cash award to be paid to Directors which will be determined
at the first Board meeting following the annual meeting. The amount of the award
will be recommended to the full Board by the Chairman of the Board, the
President and Chief Executive Officer and the Chairman of the Compensation
Committee based on their evaluation of improvement in shareholder value as
indicated by share price movement, return on assets, budget accomplishment and
corporate long-range planning. All directors will receive the same amount and
awards will not exceed $10,000 per year.
As the Plan title implies, Directors are expected to buy company stock on the
open market or exercise previously granted stock options with their after-tax
proceeds of the cash award.
(9)
COMMITTEE STRUCTURE
There is an Executive Committee of the Board of Directors, which is composed of
Mr. Penisten as Chairman, and Mr. Dunbar. The function of the Executive
Committee is to act for the Board of Directors during the intervals between
meetings of the Board. There were no meetings of the Executive Committee during
2003.
There is an Audit Committee of the Board of Directors, which is composed of Mr.
Holden as Chairman, and Messrs. Ward and Moore.
The members of the Audit Committee are "independent" as such term is defined in
Section 121A of the American Stock Exchange's listing standards and Rule 10A-3
under the Securities Exchange Act of 1934. The Board of Directors has determined
that Mr. Ward is the "audit committee financial expert" as such term is defined
in applicable SEC regulations. The Board of Directors has adopted a written
charter for the Audit Committee, a copy of which was included as Appendix A to
the proxy statement for the annual meeting which was held on April 28, 2003. The
Audit Committee will be reviewing the charter to determine if any adjustments
need to be made as a result of new American Stock Exchange Rules.
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Audit Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with accounting principles generally accepted in the United States,
their judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under auditing standards generally accepted in the
United States. In addition, the Audit Committee has discussed with the
independent auditors the auditors' independence from management and the Company,
including the matters in the written disclosures received by the Audit Committee
as required by the Independence Standards Board, and has considered the
compatibility of nonaudit service with the auditors' independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plan for their respective audits. The Audit Committee meets
with the independent auditors, with and without management present, to discuss
the results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Audit Committee held two meetings during 2003.
(10)
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2003 for filing with the Securities and
Exchange Commission. The Audit Committee has also selected Ernst & Young LLP as
the Company's independent auditors for the 2004 audit.
Richmond Y. Holden, Jr., Audit Committee Chair
Stevenson E. Ward III, Audit Committee Member and Audit Committee Financial
Expert
Wayne R. Moore, Audit Committee Member
NOMINATING COMMITTEE
The functions of the Nominating Committee are performed by the whole Board.
Board of Director nominations are recommended for the entire Board's selection
by a majority of the Board's "independent directors", as such term is defined in
Section 121A of the American Stock Exchange's listing standards. Because the
Board's procedure is permissible under the American Stock Exchange's new rules
adopted on December 1, 2003, the Board has not established a separate Nominating
Committee, and because there is no separate Nominating Committee, there is no
charter for the same. However, at or before the Board meeting to be held the
same day as the Annual Meeting (April 26, 2004), the Board expects to adopt one
or more resolutions formalizing its procedures for nominating directors.
The Board will consider nominees for directors recommended by shareholders, and
such recommendations may be made by submitting in writing to the Board at least
sixty (60) days prior to the annual meeting at which the election of directors
is to be held (subject to certain requirements set forth in the by-laws), care
of the Secretary at the Company's principal executive office, the name, address,
telephone number and resume of his or her business and educational background
along with a written statement by the shareholder as to why such person should
be considered for election to the Board of Directors.
The Board follows the same evaluation procedures whether a candidate is
recommended by directors or shareholders. In identifying and evaluating nominees
for director, the Board considers whether the candidate has the highest ethical
standards and integrity and sufficient education, experience and skills
necessary to understand and wisely act upon the complex issues that arise in
managing a publicly-held company. To the extent the Board does not have enough
information to evaluate a candidate, the Board may send a questionnaire to the
candidate for completion in enough time for Board consideration.
(11)
BOARD OVERSIGHT COMMITTEE
On November 3, 2003, a temporary Board Oversight Committee was established to
evaluate and recommend actions related to the size of the Board and the
disciplines needed by its members. The Committee will also address (1) the
possible need for a mandatory retirement age for Directors and (2) any other
issue which it determines will improve Board performance and effectiveness. The
Committee is composed of Mr. Holden as Chairman, Mr. Dunbar and Ms. Murphy.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE AND INSIDER PARTICIPATION
The Company's executive compensation program is administered by the Compensation
Committee of the Board of Directors. During 2003, the Committee was composed of
certain non-employee members of the Board of Directors, which include Mr. Dunbar
as Chairman, Messrs. Holden, and Penisten and Ms. Murphy. The Committee had two
meetings during 2003.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is committed to a strong, positive link between
business, performance and strategic goals, and compensation and benefit
programs.
OVERALL EXECUTIVE COMPENSATION POLICY
Our compensation policy is designed to support the overall objective of
enhancing value for our shareholders by:
- Attracting, developing, rewarding and retaining highly qualified and
productive individuals.
- Directly relating compensation to both Company and individual
performance.
- Ensuring compensation levels that are externally competitive and
internally equitable.
Following is a description of the elements of the Company's executive
compensation program and how each relates to the objectives and policy outlined
above.
(12)
BASE SALARY
The Committee reviews each executive officer's salary annually. In determining
appropriate salary levels, we consider level and scope of responsibility,
experience, company and individual performance, internal equity, as well as pay
practices of other companies relating to executives of similar responsibility.
By design, we strive to set executives' salaries at competitive market levels.
ANNUAL INCENTIVES
Annual incentive award opportunities are made available to executives to
recognize and reward corporate and individual performance. The plan in effect
for 2003 provided for an incentive bonus based on the achievement of corporate
profitability goals set for each individual, based upon his area of
responsibility. The amount individual executives may earn under the bonus plan
is directly dependent upon the individual's position, responsibility and ability
to impact our financial success and corporate goals. The bonuses awarded in 2003
to top management are listed in the Summary Compensation Table below.
In 2004, the incentive plan criteria will be similar to the plan in 2003.
STOCK OPTION INCENTIVES
The Company's stock option compensation program is administered by the Board of
Directors, which acts upon recommendations of the Compensation Committee. The
purpose of the Company's Employee Stock Option Plan is to promote the interests
of the Company by enabling its key employees to acquire an increased proprietary
interest in the Company and thus to share in the future success of the Company's
business. Accordingly, the plan is intended as a means not only of attracting
and retaining outstanding management personnel but also of promoting a closer
identity of interests between employees and shareholders. Since the employees
eligible to receive options under the plan will be those who are in a position
to make important and direct contributions to the success of the Company, the
Board believes that the grant of options under the plan has been and will
continue to be in the best interests of the Company.
The Company's Amended and Restated Stock Option Plan terminated on February 24,
2002, at which time options previously granted under the Plan continue to vest
and to be exercisable in accordance with their terms; however, no new options
may be granted under the Plan after February 24, 2002. The Company adopted a new
stock option plan, effective February 26, 2002.
The following options were granted in 2003:
Options for 20,000 shares were granted to Walter C. Johnsen on June 23,
2003 of which 5,000 shares vested on June 23, 2003, 5,000 will vest on
June 23, 2004, 5,000 shares will vest on June 23, 2005, and 5,000
shares will vest on June 23, 2006.
(13)
Options for 15,000 shares were granted to Brian S. Olschan on June 23,
2003 of which 3,750 shares vested on June 23, 2003, 3,750 will vest on
June 23, 2004, 3,750 shares will vest on June 23, 2005, and 3,750
shares will vest on June 23, 2006.
Options for 5,000 shares were granted to James A. Benkovic on June 23,
2003 of which 1,250 shares vested on June 23, 2003, 1,250 will vest on
June 23, 2004, 1,250 shares will vest on June 23, 2005, and 1,250
shares will vest on June 23, 2006.
Options for 7,500 shares were granted to Paul G. Driscoll on June 23,
2003 of which 1,875 shares vested on June 23, 2003, 1,875 will vest on
June 23, 2004, 1,875 shares will vest on June 23, 2005, and 1,875
shares will vest on June 23, 2006.
The Board also granted options for 32,500 shares in the aggregate to
five other employees with staggered vesting dates through September 2,
2006.
RATIONALE FOR CEO COMPENSATION
Walter C. Johnsen was designated President and Chief Executive Officer of the
Company effective on November 30, 1995. His compensation package was designed to
encourage performance in line with the interests of our shareholders. We believe
Mr. Johnsen's total compensation was competitive in the external marketplace and
reflective of Company and individual performance.
COMPENSATION COMMITTEE
George R. Dunbar, Chairman
Richmond Y. Holden, Jr.
Susan M. Murphy
Gary D. Penisten
The Compensation Committee Report on Executive Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference in
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
SUMMARY COMPENSATION TABLE
The following sets forth information concerning the compensation of the
Company's Chief Executive Officer and each of the four other most highly
compensated officers of the Company at the end of the last completed fiscal
year. No information is given as to any person for any fiscal year during which
such person was not an officer of the Company.
(14)
ANNUAL COMPENSATION
- ---------------------------- ---- --------- ------- --------------- ------------
Other Annual All Other
Name and Principal Position Year Salary(1) Bonus Compensation(2) Compensation
- ---------------------------- ---- --------- ------- --------------- ------------
Walter C. Johnsen 2003 $307,365 $65,000 $ 0 $ 0
President & Chief 2002 $287,231 $60,000 $ 0 $ 0
Executive Officer 2001 $257,346 $43,125 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
Brian S. Olschan 2003 $264,632 $45,000 $ 0 $ 0
Executive Vice President 2002 $247,008 $40,000 $ 0 $ 0
& Chief Operating 2001 $220,067 $36,563 $ 0 $ 0
Officer (3)
- ---------------------------- ---- --------- ------- --------------- ------------
Paul G. Driscoll 2003 $147,442 $25,000 $ 0 $ 0
Vice President-Chief 2002 $128,686 $10,000 $ 0 $ 0
Financial Officer (4) 2001 $ 96,615 $ 0 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
James A. Benkovic 2003 $153,683 $30,000 $ 0 $ 0
Vice President- 2002 $143,616 $17,000 $ 0 $ 0
Consumer Sales (5) 2001 $128,673 $11,250 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
Larry H. Buchtmann 2003 $152,600 $ 0 $ 0 $ 0
Vice President- 2002 $151,346 $17,000 $ 0 $ 0
Manufacturing (6) 2001 $138,894 $11,250 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
(1) Effective 1997, the Company changed its payroll payment cycle from monthly
to bi-weekly. The salary reported is gross wages paid, which varies
slightly from annual compensation.
(2) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation, if any, does not exceed
the lesser of $50,000 or ten (10%) percent of the total amount of annual
salary and bonus for any named individual.
(3) Brian S. Olschan joined Acme as Senior Vice President-Sales and Marketing
on September 12, 1996. He was promoted to Executive Vice President and
Chief Operating Officer on January 25, 1999.
(4) Paul G. Driscoll joined Acme as Director, International Finance and
Planning on March 19, 2001. He was named Vice President and Chief Financial
Officer, Secretary and Treasurer on September 23, 2002.
(5) James A. Benkovic joined Acme as Western Regional Sales Manager on June 18,
1990. He was promoted to Vice President of Sales - Consumer Products on
October 1, 1991.
(6) Larry H. Buchtmann joined Acme as Vice President-Manufacturing on March 17,
1998.
(15)
OPTION GRANTS IN LAST FISCAL YEAR
AND POTENTIAL REALIZABLE VALUES
The following table provides information concerning each option granted during
the last fiscal year to each of the named executive officers and the potential
realizable value of such options at certain assumed rates of stock appreciation.
Individual Grants
-------------------- ----------- ------------ ----------- ----------------- ----------------
Potential
Realizable
Value at
Assumed Annual
% of Total Rates of Stock
Number of Options Price
Shares Granted to Appreciation
Underlying Employees in for Option
Options Fiscal Exercise or Term
Name Granted (1) Year Base Price Expiration Date 5% 10%
-------------------- ----------- ------------ ----------- ----------------- ----------------
Walter C. Johnsen 20,000 25.0% $4.00 per June 23, 2013 $50,000 $127,000
share
-------------------- ----------- ------------ ----------- ----------------- ----------------
Brian S. Olschan 15,000 18.8% $4.00 per June 23, 2013 $38,000 $ 96,000
share
-------------------- ----------- ------------ ----------- ----------------- ----------------
James A. Benkovic 5,000 6.3% $4.00 per June 23, 2013 $13,000 $ 32,000
share
-------------------- ----------- ------------ ----------- ----------------- ----------------
Paul G. Driscoll 7,500 9.4% $4.00 per June 23, 2013 $19,000 $ 48,000
share
-------------------- ----------- ------------ ----------- ----------------- ----------------
(1) The dates on which the shares vest are summarized under the heading Stock
Option Incentives in the preceding pages.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table provides information concerning each option exercised during
the last fiscal year by each of the named executive officers and the value of
unexercised options held by such executive officers at the end of the fiscal
year.
(16)
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Value of
Number of Securities Unexercised In-the-Money
Underlying Unexercised Options/SARs at Fiscal Year
Options/SARs at Fiscal Year End
Shares Acquired End (#) (1) Exercisable/ ($)(1)(2) Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Walter C. Johnsen -0- $0 282,500/27,500 $636,000/$52,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Brian S. Olschan -0- $0 138,750/21,250 $345,000/$41,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Paul G. Driscoll -0- $0 15,125/13,375 $ 27,000/$21,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Larry H. Buchtmann -0- $0 50,500/ 4,500 $126,000/$11,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
James A. Benkovic -0- $0 47,000/ 8,000 $112,000/$16,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
(1) The Company has no unexercised SARs.
(2) Values stated are based on the closing price per share of the Company's
Common Stock on the American Stock Exchange on December 31, 2003, the last
trading day of the fiscal year.
ACME UNITED CORPORATION RETIREMENT PLANS
In December 1995, the Board of Directors adopted a resolution to freeze the
defined benefit pension plan resulting in no further benefit accruals after
February 1, 1996. The life annuity annual benefit at age 65 was zero for Walter
C. Johnsen, Brian S. Olschan, Paul G. Driscoll and Larry H. Buchtmann and $3,985
for James A. Benkovic. Amounts earned by others under this plan are not subject
to a deduction for estimated Social Security benefits, and do not include
benefits which would result from the transfer by a retiring employee of his
accrued profit-sharing account balance to the pension plan.
(17)
CHANGE-IN-CONTROL ARRANGEMENTS AND SEVERANCE PAY PLAN
The Company has a Salary Continuation Plan in effect covering officers of the
Company employed in the United States at the level of Vice President or above,
under the age of 65 and having at least one (1) year of Company service. This
plan covers Walter C. Johnsen, Brian S. Olschan, Paul G. Driscoll, James A.
Benkovic and Larry H. Buchtmann and is designed to retain key employees and
provide for continuity of management in the event of an actual or threatened
change in control of the Company. First, the plan provides that in the event of
such a change in control each such key employee would have specific rights and
receive certain benefits if, within one year after such change in control (two
years for officers who like Mr. Johnsen and Mr. Olschan are also directors),
either the employee's employment is terminated by the Company involuntarily,
his/her responsibility, status or compensation is reduced, or if he/she is
transferred to a location unreasonably distant from his/her current location. In
such circumstances the compensation which the employee would be entitled to
receive would be a lump sum payment equal to a specific number of months'
compensation based upon the level of his/her non-deferred compensation in effect
immediately preceding such disposition. Secondly, any such key employee
resigning within six (6) months after the disposition of the Company (one year
for certain officers who like Mr. Johnsen and Mr. Olschan are also directors)
would be entitled to a similar payment. Under the first scenario Messrs. Johnsen
and Olschan would be entitled to thirty (30) months' compensation, respectively
and Messrs. Driscoll, Benkovic and Buchtmann eighteen (18) months compensation.
Under the second scenario, Messrs. Johnsen and Olschan would be entitled to
twenty-four (24) months', and Messrs. Driscoll, Buchtmann and Benkovic would be
entitled to six (6) months' compensation.
The Company has a Severance Pay Plan in effect covering officers of the Company
employed in the United States at the level of Vice President or above, under the
age of 65 and having at least one (1) year of Company service. This Plan covers
Messrs. Johnsen, Olschan, Driscoll, Benkovic and Buchtmann and is designed to
enable the Company to attract and retain key employees. The Plan provides that
in the event the key employee's employment is terminated by the Company
involuntarily, his/her responsibility, status or compensation is reduced, or if
he/she is transferred to a location unreasonably distant from his/her current
location, he/she shall be entitled to benefits under the Plan. In such
circumstances the compensation which the employee would be entitled to receive
would be a lump sum payment equal to a specific number of months compensation
based upon the level of his/her non-deferred compensation in effect immediately
preceding such termination. Under the Plan Messrs. Johnsen and Olschan would be
entitled to nine (9) months' compensation, and Messrs. Driscoll, Benkovic and
Buchtmann six (6) months' compensation, upon such severance. This plan applies
only if the Salary Continuation Plan does not apply.
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such Acts.
(18)
The graph compares the yearly cumulative total shareholder return on the
Company's Common Stock with the yearly cumulative total return of (a) the AMEX
Market Index and (b) a peer group of companies that, like the Company, (i) are
currently listed on the American Stock Exchange, and (ii) have a market
capitalization of $10 million to $20 million. The peer group includes the
following companies: Ablest Incorporated, Advanced Photonix CL A, Amcon
Distributing Co, American Insured MTG 84, American Shared Hosp SVC,Amreit Inc.,
ATC Healthcare Inc. CL A, Avitar Inc., AXS-One Inc., Bell Industries Inc., Bexil
Corp., Blackrock CA Inv QMT, Blackrock FL IQMT, Blackrock NJ INVST QLTY,
Blackrock NY INVST QLTY, Blonder Tongue Labs, Bolt Technology Corp., Cap Rock
Energy Corp., Cardiotech International Inc., Carmel Container System, Cheniere
Energy Inc., Cognitronics Corp., Competitive Technologies, Core Molding Tech
Inc., Cornerstone Bancorp, Cortex Pharmaceuticals, CPI Aerostructures Inc.,
Cybex International, Danielson Holding Corp., Decorator Industries, Decorize
Inc., Eagle Broadband Inc., Earl Sheib Inc., Elite Pharmaceuticals, Empire
Resources Inc., Equidyne Corporation, Excel Maritime Carriers, First American MN
Muni Inc., First City Bank CT, Five Star Quality Care Inc., Flanigan's
Enterprise Inc., Franklin Electronic Publication, Friedman Industries Inc.,
Genetronics Biomedical, Goldfield Corp, Golf Trust of America, Graham Corp,
Gristedes Foods Inc., Grupo Simec S A ADR, Halifax Corporation, Heartland
Partners L.P., Hersha Hospitality Trust, Hi-Shear Technology Corp., Imageware
Systems Inc.,Investors Capital Holdings, Jinpan International Ltd., Kentucky
First Bancorp, Kinark Corp., Lifepoint Inc., Lynch Corp., McRae Industries CLA,
Medical Technology Systems, Merrimac Industries Inc., Michael Anthony Jewelers,
Movie Star Inc., Natural Gas Services Group, New Dragon Asia Corp., North
American Galvanizing, Northern Technology, The Ohio Art Company, ON2
Technoligies Inc., Overhill Farms Inc., Phoenix Footwear Group, Piccadilly
Cafeterias, Pittsburgh and WV Railroad, PLC Systems Inc., Proterion Corp.,
REFAC, Rica Foods Inc., Riviera Holdings Corp., Rotonics Manufacturing, Sherwood
Brands Inc., Sifco Industries Inc., Southern Banc Co., Southfirst Bancshares,
Stephen Company, Sterling Cap CP, Streettracks DJ Global, Streettracks DJ US LC
VL, Streettracks DJ US SM CP, Sunair Electronics Inc., Sunlink Health Systems,
Sussex Bancorp, Tech Flavors and Fragrance, Tech-Ops Sevcon Inc., Tengasco
Incorporated, Tofutti Brands Inc., United Guardian Inc., Urecoats Industries
Inc., Valpey Fisher Corp., Versar Inc., Vicon Industries, Viragen Inc., Vita
Food Products Inc., Wellco Enterprises Inc.
The Company does not believe it can reasonably identify a peer group of
companies on an industry or line-of-business basis for the purpose of developing
a comparative performance index. While the Company is aware that some other
publicly-traded companies market products in the Company's line-of-business,
none of these other companies provide most or all of the products offered by the
Company, and many offer other products or services as well. Moreover, some of
these other companies that engage in the Company's line-of-business do so
through divisions or subsidiaries that are not publicly-traded. Furthermore,
many of the other companies are substantially more highly capitalized than the
Company. For these reasons, any such comparison would not, in the opinion of the
Company, provide a meaningful index of comparative performance.
The comparisons in the graph below are based on historical data and are not
indicative of, or intended to forecast, the possible future performance of the
Company's Common Stock.
(19)
(Printer: Insert Graph)
COMPARISON OF CUMULATIVE TOTAL RETURN OF COMPANY, PEER GROUP AND
AMEX MARKET INDEX
- --------------------------------FISCAL YEAR ENDED-------------------------------
1998 1999 2000 2001 2002 2003
ACME UNITED CORP 100.00 50.00 125.02 173.33 167.11 240.00
PEER GROUP INDEX 100.00 121.27 62.45 54.31 37.62 64.94
AMEX MARKET INDEX 100.00 124.67 123.14 117.47 112.78 153.50
SELECTION OF AUDITORS
The Audit Committee has reappointed Ernst & Young LLP as independent auditors to
audit the financial statements of the Company for the current fiscal year.
Representatives of Ernst & Young LLP are expected to be present at the 2004
Annual Meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions. The
Company knows of no direct or material indirect financial interest in the
Company or of any connection with the Company by this accounting firm except the
professional relationship between auditor and client.
POLICY ON PRE-APPROVAL OF INDEPENDENT AUDITOR SERVICES
Beginning May 6, 2003 and on an ongoing basis, the Audit Committee is required
to pre-approve all services rendered by the Company's independent auditors prior
to the engagement of the auditors with respect to such services. During 2002 and
2003, the Audit Committee pre-approved all services with the exception of
certain tax advice projects which had begun prior to May 6, 2003 (the effective
date of the pre-approval requirements for audit committees).
FEES TO AUDITORS
A. Audit Fees
Audit fees for the 2002 and 2003 audits were $134,000 and $178,000,
respectively.
B. Audit Related Fees
Audit related fees for 2002 and 2003 were $9,000 and $8,000,
respectively. Audit related services generally include fees for pension
audits and accounting consultations.
C. Tax Fees
Tax fees for 2002 and 2003 were $64,000 and $38,000, respectively. Tax
services include fees for tax compliance, tax advice, and tax planning.
D. All other Fees
None.
The Audit Committee has determined that the provision of non-audit services
described above is compatible with maintaining Ernst & Young's independence.
(20)
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company Common Stock(collectively referred to herein as
"Insiders"), to file with the SEC and the American Stock Exchange reports of
ownership and changes in ownership of Common Stock and other equity securities
of the Company. Insiders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on review of copies of such reports furnished to the Company or
written representations that no other reports were required, the Company
believes that, during the 2003 fiscal year, all filing requirements applicable
to its officers, directors and greater than 10% beneficial owners were complied
with.
SHAREHOLDER PROPOSALS AND COMMUNICATIONS
The Company has established a process for shareholders to send communications to
the Board of Directors, as described in this section.
To allow sufficient time for preparation of the proxy and proxy statement,
shareholder proposals for presentation at the Annual Meeting scheduled for April
25, 2005 must be received by the Secretary of the Company no later than November
22, 2004.
In addition, the Company's by-laws provide that any shareholder wishing to make
a nomination for the office of director at the 2004 Annual Meeting must give the
Company at least sixty (60) days' advance notice, and that notice must meet
certain requirements set forth in the by-laws. Shareholders may request a copy
of the by-laws from the Secretary of the Company.
The communications described above should be addressed to Secretary, Acme United
Corporation, 1931 Black Rock Turnpike, Fairfield, Connecticut 06825, who will
forward them to all Board members within a reasonable time after receipt.
Shareholders may also direct communications not described above to the Secretary
at the same address. If the shareholder wishes the communication to be sent to
one or more specific Board members only, the addressee should be the specific
Board member(s), "c/o Secretary", who will then forward the communication to
such Board member(s). If one or more specific Board members are not designated
for such other communication, the communication will be forwarded to the entire
Board.
(21)
OTHER BUSINESS
Management does not know of any matters to be presented, other than those
described herein, at the Annual Meeting. If any other business should come
before the meeting, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies in accordance with their best
judgment.
Solicitation of proxies is being made by management through the mail, in person
and by telephone. The Company will be responsible for costs associated with this
solicitation.
By Order of the Board of Directors
Paul G. Driscoll, Vice President and
Chief Financial Officer, Secretary
and Treasurer
Acme United Corporation
1931 Black Rock Turnpike
Fairfield, Connecticut 06825
March 29, 2004
(22)