o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
ţ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to Section 240.14a-12
Dayton Superior Corporation
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement)
Payment of Filing Fee (Check the appropriate box):
ţ
No fee required.
o
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Fee paid previously with preliminary materials.
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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.
The Annual Meeting of Stockholders of Dayton Superior
Corporation, a Delaware corporation, will be held at the Dayton
Superior Conference Center, 721 Richard Street, Miamisburg, Ohio45342, on Thursday, May 24, 2007, at 11:30 a.m.,
Eastern Daylight Savings Time, for the following purposes:
•
to elect two directors;
•
to vote on the Fifth Amendment to the Dayton Superior
Corporation 2000 Stock Option Plan, as amended; and
•
to transact such other business as may properly come before the
Annual Meeting or any adjournment of the Annual Meeting. We
currently are not aware of any other business to be presented at
the Annual Meeting.
Our Board of Directors has fixed the close of business on
April 23, 2007 as the record date for determining the
stockholders entitled to vote at the Annual Meeting. You are
only entitled to vote if you are a stockholder of record at the
close of business on that date. This Proxy Statement and
accompanying proxy card are being mailed to stockholders
beginning on or about April 30, 2007.
Your vote is important. Even if you only own a few shares of
Dayton Superior Corporation common stock, we want your shares to
be represented at the meeting. We encourage you to vote your
shares promptly. You may vote by Internet or telephone as
described in the voting instructions on the proxy or you may
date, sign and return the proxy in the enclosed envelope. You
may vote in person at the Annual Meeting even if you previously
submitted your proxy by Internet, telephone or mail.
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Dayton Superior
Corporation, a Delaware corporation, of proxies to be used at
the Annual Meeting of Stockholders to be held at
11:30 a.m., Eastern Daylight Savings Time on May 24,2007 or any adjournments thereof. Unless otherwise noted, when
used in this Proxy Statement the terms “Dayton
Superior,”“we,”“us” and
“our” refer to Dayton Superior Corporation. We are
mailing this Proxy Statement and the accompanying proxy card to
our stockholders beginning on or about April 30, 2007. Our
Board is soliciting your proxy in order to give all stockholders
of record the opportunity to vote on matters that will be
presented at the Annual Meeting. This Proxy Statement provides
you with information on these matters to assist you in voting
your common stock. Our 2006 Annual Report to Stockholders also
is enclosed.
How do
proxies work?
Our Board of Directors is asking for your proxy. Giving the
Board your proxy means that you authorize the individuals
designated as proxies on the enclosed proxy card to vote your
shares at the Annual Meeting in the manner you direct. You may
vote for both, one, or none of the director nominees. You may
vote for or against approval of the Fifth Amendment to the
Dayton Superior 2000 Stock Option Plan or you may abstain from
voting.
Your proxy card covers all shares registered in your name.
If you give the Board your signed proxy but do not specify how
to vote, the individuals named as proxies will vote your shares:
•
FOR both of the director nominees;
•
FOR approval of the Fifth Amendment to the Dayton
Superior Corporation 2000 Stock Option Plan; and
•
In accordance with their judgment upon such other matters as may
properly come before the meeting.
If you hold our shares through someone else, such as a
stockbroker, you may receive material from that person or firm
asking how you want to vote those shares. Review the voting form
used by that person or firm to see if it offers Internet or
telephone voting, and follow the voting instructions on that
form.
Who is
qualified to vote?
You are qualified to receive notice of the Annual Meeting and to
vote if you own shares of our common stock at the close of
business on April 23, 2007, which is the record date for
the Annual Meeting.
How many
shares of common stock may vote at the Annual Meeting?
As of April 23, 2007, we had 19,047,439 shares of our
common stock outstanding and entitled to vote. Each share of
common stock is entitled to one vote on each matter presented
for a vote at the Annual Meeting.
What is
the difference between a “stockholder of record” and a
“street name” holder?
These terms describe how your shares are held. If your shares
are registered directly in your name with American Stock
Transfer & Trust Company, our transfer agent, you are a
“stockholder of record.” If your shares are held in
the name of a brokerage, bank, trust or other nominee as a
custodian, you are a “street name” holder.
How do I
vote my common stock?
If you are a “stockholder of record,”you have
three choices. You can vote your proxy:
(i) by mailing in the enclosed proxy card;
(ii) over the telephone; or
(iii) via the Internet.
Please refer to the specific instructions set forth on the
enclosed proxy card.
If you hold your shares in “street name,”your
broker, bank, trustee or nominee will provide you with materials
and instructions for voting your shares.
Can I
vote my common stock in person at the Annual Meeting?
If you are a “stockholder of record,”you may
vote your shares in person at the Annual Meeting. If you hold
your shares in “street name,”you must obtain a
proxy from your broker, banker, trustee or nominee, giving you
the right to vote the shares at the Annual Meeting.
The chairman of the meeting has broad authority to conduct the
Annual Meeting in an orderly manner. This authority includes
establishing rules for stockholders who wish to address the
meeting. Copies of any rules will be available at the meeting.
The chairman also may exercise broad discretion in recognizing
stockholders who wish to speak and in determining the extent of
discussion on each item of business. In light of the need to
conclude the meeting within a reasonable period of time, we
cannot assure that every stockholder who wishes to speak on an
item of business will be able to do so.
What are
the Board’s recommendations as to how I should vote my
common stock?
The Board recommends that you vote your common stock as follows:
FOR the election of the two director nominees to our
Board.
FOR the approval of the Fifth Amendment to the Dayton
Superior Corporation 2000 Stock Option Plan, as amended.
What are
my choices when voting?
Election of Directors. — You may (a) vote
in favor of all nominees, (b) withhold your vote as to all
nominees, or (c) withhold your vote as to specific nominees.
Fifth Amendment to 2000 Stock Option Plan. —
You may cast your vote in favor of or against approval of the
Fifth Amendment, or you may elect to abstain from voting your
common stock. An abstention will have the effect of a negative
vote. Broker non-votes (meaning the broker returns a proxy but
does not have authority to vote some or all of the shares
represented by that proxy on a particular proposal), however,
will not be counted for purposes of determining the number of
votes cast and thus will not affect the outcome of voting on the
Fifth Amendment.
How will
my common stock be voted if I do not specify how it should be
voted?
IF YOU SUBMIT YOUR PROXY WITHOUT INDICATING HOW YOU WANT YOUR
COMMON STOCK TO BE VOTED, THE PERSONS NAMED ON THE PROXY CARD
WILL VOTE YOUR COMMON STOCK ACCORDING TO THE BOARD’S
RECOMMENDATIONS THAT ARE LISTED ABOVE.
As to any other business that may properly come before the
Annual Meeting, the persons named on the proxy card will vote in
accordance with their best judgment. We do not presently know of
any other business.
How many
shares of common stock constitute a quorum for the Annual
Meeting?
The holders of shares of common stock entitling them to a
majority of the voting power of the outstanding shares of common
stock entitled to vote at the Annual Meeting must be present in
person or by proxy to constitute a quorum for conducting
business. Shares represented by proxies we receive will be
counted as present at the Annual Meeting for purposes of
determining the existence of a quorum, regardless of how or
whether the shares are voted on a specific proposal. Abstentions
and broker non-votes are counted as shares present at the
meeting for purposes of determining the presence of a quorum.
What vote
is required to approve each proposal?
The two director nominees receiving the greatest number of votes
at the Annual Meeting will be elected. Abstentions and broker
non-votes will not affect the outcome of the election.
The affirmative vote of the holders of a majority of the shares
of common stock present or represented by proxies and entitled
to vote at the Annual Meeting is required to approve the Fifth
Amendment. Abstentions have the effect of a vote against
approval of the Fifth Amendment. Broker non-votes have no effect
on determining the outcome of the vote on the Fifth Amendment.
Do
stockholders have cumulative voting rights?
The holders of our common stock do not have cumulative voting
rights.
Can I
change my vote after I have submitted my proxy?
You may revoke your proxy by doing one of the following:
•
sending a written notice of revocation (stating that you revoke
your proxy) to our Secretary so that he receives it before the
Annual Meeting;
•
delivering to our Secretary a later-dated proxy by telephone, on
the Internet or in writing so that he receives it before the
Annual Meeting in accordance with the instructions included in
the proxy card; or
•
attending the Annual Meeting and voting your common stock in
person.
Who will
count the votes?
We will appoint an inspector of elections who will be present at
the Annual Meeting and will count the number of shares of common
stock represented in person or by proxy at the Annual Meeting to
determine whether a quorum is present and will count the number
of votes cast to determine the outcome of the matters to be
considered at the Annual Meeting.
Who pays
the cost of this proxy solicitation?
We will pay the cost of soliciting proxies sought by the Board.
In addition to solicitation of proxies by use of the mail,
certain of our directors, officers and regularly engaged
employees, without extra compensation, may solicit proxies by
telephone, telegraph, or personal contact. Upon request, we will
reimburse brokers, dealers, banks and trustees, or their
nominees, for reasonable expenses incurred by them in forwarding
proxy materials to beneficial owners of our common stock.
Where is
the Annual Meeting?
The meeting will be held at the conference center at our offices
at 721 Richard Street, Miamisburg, Ohio.
Our Board of Directors consists of six directors. The
Board is divided into three classes with the directors in each
class elected for three-year terms; however, at the time of our
initial public offering in December, 2006, we staggered the
initial terms of the three classes so that the term of one of
the classes would expire at each of the following three Annual
Meetings. Each year, the directors of one of the classes will
stand for election by the stockholders at our Annual Meeting.
At our 2007 Annual Meeting, the terms of Stephen Berger and
William F. Hopkins will expire. Our Board has nominated each of
them for re-election to a three-year term at our 2007 Annual
Meeting, and both have agreed to serve if elected. If elected,
each of them will serve on the Board until our Annual Meeting in
2010 or until his successor is elected and qualified. In the
event that either nominee becomes unable to accept election, the
persons designated as proxies on the proxy card may vote for
other person(s) selected by the Board. We have no reason to
believe that either of the nominees will be unable to serve.
Because only one-third of our directors are elected at each
annual meeting, two annual meetings of stockholders could be
required for the stockholders to change a majority of our Board.
Director
Qualifications
Our Corporate Governance and Nominating Committee is responsible
for reviewing with the Board, on an annual basis, the
appropriate characteristics, skills, and experience required for
the Board as a whole and its individual members and recommending
nominees to the Board. In evaluating the suitability of
individual candidates (both new candidates and current Board
members), the Corporate Governance and Nominating Committee and
the Board take into account many factors, including:
•
the ability to make independent analytical inquiries,
•
general understanding of marketing, finance and other elements
relevant to the success of a publicly-traded company in
today’s business environment,
•
understanding of the Company’s business on a technical
level,
•
other board service, and
•
educational and professional background.
Each candidate nominee must also possess fundamental qualities
of:
•
personal and professional integrity, ethics and values,
The Board evaluates each individual in the context of the Board
as a whole, with the objective of assembling a group that can
best perpetuate the success of the business and represent
stockholder interests through the exercise of sound judgment
using its diversity of experience in these various areas. In
determining whether to recommend a director for re-election, the
Corporate Governance and Nominating Committee also considers the
director’s past attendance at meetings and participation in
and contributions to the activities of the Board.
Director
Nomination Process
The Corporate Governance and Nominating Committee utilizes a
variety of methods for identifying and evaluating nominees for
director. Candidates may come to the attention of the Corporate
Governance and Nominating Committee through current Board
members, professional search firms, stockholders or other
persons. These candidates are evaluated at regular or special
meetings of the Corporate Governance and Nominating Committee
and may be considered at any point during the year. Prior to the
issuance of the proxy statement for the annual meeting of
stockholders, the Corporate Governance and Nominating Committee
considers all recommendations and suggestions for nominees.
Stockholders may submit a recommendation for a director
candidate by certified mail, return receipt requested, to:
All recommendations submitted by stockholders will be screened
by the Corporate Governance and Nominating Committee and must
satisfy the general director qualifications set forth above,
agree to accept nomination for Board candidacy, meet the
standards of independence established by the Nasdaq Global
Market and the SEC, and meet all other applicable laws, rules
and regulations related to service as a director. Candidates may
be interviewed by the Corporate Governance and Nominating
Committee and other Board members, as appropriate.
Director
Attendance
The Board of Directors held five meetings in
2006. All of the directors attended at least 75% of
the meetings of the Board of Directors and each committee on
which they served.
Attendance
by the Directors at the Annual Meeting
While we do not have a policy with respect to attendance by the
directors at our Annual Meetings, we do strongly encourage all
of our directors to attend.
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines and Code of Business Conduct and
Ethics
Our Board has adopted Corporate Governance Guidelines to assist
the Board in the exercise of its responsibilities and to serve
the interests of the Company and its stockholders. Our Corporate
Governance Guidelines are available on our website at
www.daytonsuperior.com and to any stockholder who requests a
copy from our Secretary.
Our Board also has adopted a Code of Business Conduct and Ethics
applicable to our directors, officers and employees. Our Code of
Business Conduct and Ethics is available on our website at
www.daytonsuperior.com and to any stockholder who requests a
copy from our Secretary.
Independent
Directors
We currently are a “controlled company” as defined
under the listing standards of the Nasdaq Global Market because
Odyssey Investment Partners Fund, LP (“Odyssey”)
controls more than 50% of our voting power. As a
result, we are not required to have a majority of independent
directors on our Board or to have compensation and corporate
governance and nominating committees comprised of independent
directors. Currently, a majority of the directors on our Audit
Committee must be independent, as determined under applicable
Nasdaq listing standards and SEC regulations and, commencing on
December 19, 2007, all of the members of our Audit
Committee must be independent. Our Board of Directors has
determined that two of the three members of our Audit Committee
(Steven M. Berzin and Sidney J. Nurkin) are independent under
the applicable Nasdaq listing standards and SEC regulations.
Because Odyssey controls a majority of our voting power, it has
the power to control our affairs and policies. Odyssey also
controls the election of our directors and the appointment of
our management. Half of our directors are representatives of
Odyssey.
Committees
of the Board
The Board appoints committees of directors to help carry out its
duties. Our Board has a standing Audit Committee, Compensation
Committee, and Corporate Governance and Nominating Committee.
Each of the standing committees operates under a charter adopted
by our Board and is required to report the results of its
meetings to the full Board. The charter for each of our Board
committees can be accessed on our website at
www.daytonsuperior.com.
Audit
Committee
Function:
The Audit Committee is responsible for overseeing the accounting
and financial reporting processes of the Company and the audits
of our financial statements. This includes, among other things,
selecting our independent auditors, reviewing our internal
accounting and audit processes to ensure their integrity,
overseeing the relationship with our independent auditors,
reviewing compliance with legal and regulatory requirements,
reviewing significant accounting policies and controls, and
reviewing and approving all related party transactions.
The Board has determined that, as required by our Corporate
Governance Guidelines and Nasdaq listing standards, all members
of the Audit Committee are financially literate (meaning they
can read and understand fundamental financial statements) and
that Mr. Berzin has accounting or related financial
management expertise. The Board has also determined that
Mr. Berzin qualifies as an audit committee financial expert
under applicable SEC regulations.
Meetings:
The Audit Committee held four meetings in 2006.
Members:
The members of the Audit Committee are Messrs. Berzin
(chair), Nurkin and Rotatori. Messrs. Berzin and Nurkin
satisfy the independence requirements of SEC regulations and
Nasdaq listing standards.
You can find the Report of the Audit Committee on page 25
of this Proxy Statement.
Compensation
Committee
Function:
The Compensation Committee is responsible for, among other
things, reviewing and approving our goals and objectives
relevant to compensation; designing, recommending to the Board
for approval, and evaluating our compensation plans, policies,
and programs; staying informed as to market levels of
compensation; and recommending to the Board compensation levels
and systems for the Board and our Chief Executive Officer. The
compensation of our Chief Executive Officer is determined solely
by the Compensation Committee and the compensation of our other
officers is approved by our Board of Directors based on
recommendations by Mr. Zimmerman and the Compensation
Committee.
Meetings:
The Compensation Committee held five meetings in 2006.
The members of the Compensation Committee are
Messrs. Berger (chair), Hopkins and Rotatori. Because we
are a “controlled company” as defined in the Nasdaq
listing standards, we are not required to have a majority of
independent directors on our Compensation Committee.
Corporate
Governance and Nominating Committee
Function:
The Corporate Governance and Nominating Committee is responsible
for, among other things,
• all aspects of the Company’s corporate
governance functions,
• recommending director candidates to the Board,
• assisting the Board in determining the composition
and size of the Board and its committees,
• overseeing the evaluation of our Board and
management,
• making recommendations to our Board for the creation
of additional committees or the elimination of certain
committees,
• in appropriate circumstances, recommending the
removal of a director for cause, and
• reviewing governance-related shareholder proposals
and recommending Board responses.
Meetings:
The Corporate Governance and Nominating Committee was
established by our Board at the time of our initial public
offering in December 2006 and held no meetings in 2006.
Members:
The members of the Corporate Governance and Nominating Committee
are Messrs. Hopkins (chair), Rotatori, and Zimmerman.
Because we are a “controlled company” as defined in
the Nasdaq listing standards, we are not required to have a
majority of independent directors on our Corporate Governance
and Nominating Committee.
Communications
with Board of Directors
Stockholders and others may communicate with the Board by
written correspondence addressed to:
Since January 1, 2006 there has not been, nor is there
currently proposed, any transactions or series of similar
transactions to which we were, or are to be, a party in which
the amount involved exceeds $120,000 and in which any director,
executive officer or holder of more than 5% of our common stock,
or an immediate family member of any of the foregoing, had or
will have a direct or indirect interest other than the
transactions described below. All such related party
transactions must be reviewed and approved in advance by our
Audit Committee.
Certain Loans. In connection with our 2000
recapitalization, we entered into “rollover”
agreements with Raymond E. Bartholomae, Mark K. Kaler and Thomas
W. Roehrig, each of whom is or was an executive officer.
Generally, the “rollover” agreements required each
executive officer to retain stock and, in most cases, stock
options, with a specified aggregate value following the
recapitalization. In some cases, the executive officer agreed to
exercise stock options in order to obtain some of the common
stock which he agreed to retain following the recapitalization.
These agreements provided that if the executive officer
exercised stock options in order to obtain some of the common
stock he was required to retain and if he so requested, we would
make a non-interest bearing, recourse loan to him in an amount
equal to the exercise price of the options plus the estimated
federal and state income tax liability he incurred in connection
with the exercise. If the executive officer purchased some of
the common stock he was required to retain and if he so
requested, we made a 6.39% interest deferred recourse loan to
him. These loans are secured by a pledge of the shares issued.
As of March 30, 2007, the amounts outstanding under these
loans were $499,064 for Mr. Bartholomae, $283,703 for
Mr. Kaler and $54,639 for Mr. Roehrig.
On September 29, 2006, we forgave a portion of the loans to
Messrs. Bartholomae and Kaler consisting of the interest
accrued through such date. The amount of the loan forgiveness
was $141,227 for Mr. Bartholomae and $12,575 for
Mr. Kaler. All terms of the loans remain unchanged, and
each of Messrs. Bartholomae and Kaler must repay the
principal amount of his loan and any interest that accrues after
September 29, 2006 in accordance with the original terms.
Voting Agreement. Pursuant to the terms of a
voting agreement, Messrs. Zimmerman, Puisis and Bartholomae
appointed Odyssey to act as their
attorney-in-fact
to vote or act by written consent with respect to the common
stock they hold in connection with any and all matters. The
voting agreement will terminate upon the first date on which we
satisfy the listing requirements of the Nasdaq Global Market for
a company not entitled to the benefits of the “controlled
company” exemption under Nasdaq rules. The initial term of
the voting agreement will expire on December 31, 2007. The
voting agreement is subject to automatic renewal for a single
additional one-year term at the end of the initial term,
although any party may terminate the agreement (as to that party
only), effective at the end of the initial term by giving at
least 10 business days notice to each of the other parties
during December of 2007. Parties to the voting agreement will
also be released from the terms of the voting agreement upon the
disposition of all of their equity interests in us (or any
successor to us by merger), and shares of stock that have been
sold by parties to the voting agreement will no longer be
subject to any provision of the voting agreement.
Odyssey Reimbursement. In 2006, we reimbursed
Odyssey for travel, lodging, and meals of approximately $45,000.
Indemnification. We have entered into
indemnification agreements with each of our directors and
executive officers. These indemnification agreements require us,
among other things, to indemnify our directors and executive
officers for some expenses, including attorneys’ fees,
judgments, fines and settlement amounts incurred by a director
or executive officer in any action or proceeding arising out of
his service as one of our directors or executive officers, or
any of our subsidiaries or any other company or enterprise to
which the person provides services at our request, and require
us to obtain directors’ and officers’ insurance if
available on reasonable terms. We believe these provisions and
agreements are necessary to attract and retain qualified
individuals to serve as directors and executive officers.
ELECTION
OF DIRECTORS
The terms of directors Stephen Berger and William F. Hopkins
(who are serving in the class of directors referred to in our
certificate of incorporation as the Class I directors)
expire at our Annual Meeting. The Board, upon recommendation of
the Corporate Governance and Nominating Committee, has nominated
Messrs. Berger and Hopkins for re-election to the Board to
serve until the 2010 Annual Meeting of Stockholders. Our other
directors have terms that do not expire at this meeting.
Personal information for each of our directors, including the
nominees, is provided below.
If a nominee becomes unavailable before the election, your proxy
authorizes the individuals designated as proxies to vote for a
replacement nominee if the Board names one.
The Board recommends that you vote FOR each of the
nominees set forth below:
NOMINEES
(CLASS I)
(Term will expire in 2010)
Stephen
Berger
Mr. Berger, age 67, has served as Chairman of our
Board of Directors since August 2005 and has been a director
since 2000. Mr. Berger has been chairman of Odyssey
Investment Partners, LLC since 1997. Mr. Berger is a
director and a member of the Executive Committee of the Board of
Directors of Dresser, Inc. Mr. Berger is chair of our
Compensation Committee.
Mr. Hopkins, age 43, has been a director since 2000.
Mr. Hopkins has been a member and Managing Principal of
Odyssey Investment Partners, LLC since 1997. Mr. Hopkins is
a member of our Compensation Committee and chair of our
Corporate Governance and Nominating Committee.
CONTINUING
DIRECTORS (CLASS II)
(Term expires in 2008)
Douglas
W. Rotatori
Mr. Rotatori, age 46, has been a director since 2000.
Mr. Rotatori has been a Managing Principal of Odyssey
Investment Partners, LLC since October 2004 and a Principal
since 1998. Mr. Rotatori is a member of our Audit
Committee, Compensation Committee and Corporate Governance and
Nominating Committee.
Eric
R. Zimmerman
Mr. Zimmerman, age 56, has been President, Chief
Executive Officer and a director since August 2005.
Mr. Zimmerman served as President of the Gilbarco
International and Service Station Equipment units of Gilbarco
Inc. from 1998 to 2003. Mr. Zimmerman is a member of our
Corporate Governance and Nominating Committee.
CONTINUING
DIRECTORS (CLASS III)
(Term expires in 2009)
Steven
M. Berzin
Mr. Berzin, age 56, has been a director of our Company
since December 2006. From 2005 to 2006, Mr. Berzin served
as Executive Vice President of the New York City Economic
Development Corporation. From 2001 to 2005 Mr. Berzin
served on the Resource Committee on Graduate Fellowships at
Harvard University, and from
2002-2005
Mr. Berzin served as a director of CDC IXIS Financial
Guaranty North America, Inc. Mr. Berzin has also held a
variety of senior offices with W.P. Carey & Co., Inc.,
General Electric Capital Corporation and Financial Guaranty
Insurance Company. Mr. Berzin is chair of our Audit
Committee.
Sidney
J. Nurkin
Mr. Nurkin, age 65, has been a director since March
2007. Mr. Nurkin serves as Senior Counsel of the law firm
of Alston & Bird, LLP. Prior to his retirement on
December 31, 2006, Mr. Nurkin was a partner in the law
firm of Alston & Bird, LLP for more than five years.
Mr. Nurkin is a member of our Audit Committee.
Director
Compensation
We reimburse the members of our Board of Directors for their
out-of-pocket
expenses. Our outside directors, who are those directors who are
neither employed by us or by any subsidiary or affiliate of
Odyssey, also are compensated by us for their service on the
Board. Each of our outside directors receives an annual retainer
fee of $25,000 paid in cash in four $6,250 quarterly
installments. The outside directors also receive a fee of $1,500
for each board meeting and, if a member of the Audit Committee,
each meeting of the Audit Committee attended ($750 if the
meeting is telephonic). The chair of the Audit Committee
receives an additional $15,000 per year.
Subject to approval of the Fifth Amendment to our 2000 Stock
Option Plan at the Annual Meeting, following the initial
election or appointment of an outside director, we also will
grant the director a stock option with an exercise price equal
to the greater of the closing market price of our common stock
on the date of grant or, if the outside director is first
elected or appointed prior to June 22, 2007,
$12.00 per share (which is the price at which we sold our
common stock in our initial public offering) and covering a
number of shares calculated so that the value of the option on
the date of grant is $45,000 (rounded to the nearest whole
share). These options have a
10-year term
and are exercisable immediately. On April 20, 2007, we
granted such an option to each of Messrs. Berzin and
Nurkin, our two outside directors, covering 8,936 shares of
our common stock with an exercise price of $12.00 per
share. These options may not be exercised unless and until the
Fifth Amendment is approved by our stockholders, and the options
will terminate and become null and void if the Fifth Amendment
is not approved by the stockholders within one year after the
date the options were granted.
Prior to our initial public offering on December 22, 2006,
we did not have any outside directors. The following table shows
the compensation we paid Mr. Berzin, the only outside
director who served on the Board at any time during 2006, for
his service during the period from December 22, 2006
through December 31, 2006.
Director
Compensation
Name
Fees Earned or Paid in Cash ($)
Total ($)
Steven M. Berzin
$
1,205
$
1,205
OWNERSHIP
OF COMMON STOCK
General
As of March 30, 2007, 19,037,902 shares of our common
stock were outstanding. Pursuant to our certificate of
incorporation, we are authorized to issue up to
10,000,000 shares of preferred stock, but no preferred
stock was outstanding as of our record date. All holders of our
common stock are entitled to the same rights and privileges,
including one vote for each share held on all matters submitted
to a vote of stockholders at the Annual Meeting. Accordingly,
holders of a majority of the outstanding shares of common stock
are assured of being able to elect all of the directors standing
for election.
Principal
Holders of Common Stock
The following table sets forth as of March 30, 2007, to our
knowledge, information with respect to the beneficial owners of
more than five percent of our outstanding common stock. The SEC
has defined “beneficial owner” for this purpose to
include any person who has or shares voting power or investment
(dispositive) power with respect to the stock or has the right
to acquire beneficial ownership of the stock within
60 days. Unless otherwise noted, the individuals or
entities named in the following table have sole voting and
dispositive power.
1290 Avenue of the Americas, New
York New York 10104
AXA Assurances I.A.R.D. Mutuelle
AXA Assurances Vie Mutuelle
AXA Courtage Assurance Mutuelle
AXA
*
Percentage is based on 19,037,902 shares of common stock
outstanding on March 30, 2007.
(1)
Consists of 9,120,685 shares of common stock owned by
Odyssey Investment Partners Fund, LP, certain of its affiliates
and certain co-investors (collectively, the “Odyssey
Group”) and 502,985 shares owned by
Mr. Zimmerman, 256,173 shares owned by Mr. Puisis
and 297,172 shares owned by Mr. Bartholomae.
Messrs. Zimmerman, Puisis, and Bartholomae are parties to a
voting agreement with Odyssey described above under the heading
“Voting Agreement.” Pursuant to the terms of the
voting agreement, Messrs. Zimmerman, Puisis and Bartholomae
have agreed that Odyssey will be designated as
attorney-in-fact
to vote or act by written consent with respect to the common
stock owned by Messrs. Zimmerman, Puisis and Bartholomae.
Therefore, Messrs. Zimmerman, Puisis and Bartholomae have
sole dispositive power, but no voting power with respect to
their shares.
(2)
Includes 9,120,685 shares of common stock owned in the
aggregate by the Odyssey Group. Odyssey Capital Partners, LLC is
the general partner of Odyssey. Odyssey Investment Partners, LLC
is the manager of Odyssey. Each of Odyssey Investment Partners,
LLC and Odyssey Capital Partners, LLC is managed by a
three-person managing board, and all board action related to the
voting or disposition of this common stock requires approval of
a majority of the board. The members of the managing board are
Stephen Berger, William Hopkins and Brian Kwait. Therefore, each
may be deemed to share voting and dispositive power with respect
to the common stock deemed to be beneficially owned by the
Odyssey Group. Each of the managers disclaims beneficial
ownership.
(3)
Includes 9,120,685 shares of common stock owned in the
aggregate by the Odyssey Group. Messrs. Berger and Hopkins
are managing members of Odyssey Capital Partners, LLC and
Odyssey Investment Partners, LLC, and Mr. Rotatori is a
member of Odyssey Investment Partners, LLC. Therefore, each may
be deemed to share voting and dispositive power with respect to
the common stock deemed to be beneficially owned by the Odyssey
Group. Each of Messrs. Berger, Hopkins and Rotatori
disclaim beneficial ownership of this common stock.
(4)
As reported in a Schedule 13G dated December 31, 2006
filed with the SEC, Morgan Stanley has shared voting power with
respect to 1,604 of these shares and sole dispositive power with
respect to all of these shares.
(5)
As reported in a Schedule 13G dated December 31, 2006
filed with the SEC, AllianceBernstein L.P., a subsidiary of AXA
Financial, Inc., has sole voting power with respect to 935,950
of these shares and sole dispositive power with respect to
1,096,700 of these shares. AXA Equitable Life Insurance Company,
a subsidiary of AXA Financial, Inc., has sole voting and
dispositive power with respect to 345,660 of these shares. AXA
Financial, Inc. is controlled, directly or indirectly, by AXA,
AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle,
and AXA Courtage Assurance Mutuelle, all of which disclaim
beneficial ownership of any of these shares.
Stock
Ownership of Directors and Executive Officers
The following table shows the number of shares of our common
stock beneficially owned by each executive officer named in the
Summary Compensation Table on page 17 and each director and
nominee on March 30, 2007. This information is based on
data furnished by the person named. Except as set forth in the
table, none of our directors or executive officers beneficially
owned 1% or more of any class of equity security of the Company
outstanding as of March 30, 2007. Unless otherwise
indicated, the persons named have sole voting and dispositive
power with respect to the common stock reported.
Name of
Amount and Nature of
Percent
Beneficial Owner
Beneficial Ownership(1)
of Class*
Peter J. Astrauskas(1)
5,202
**
Raymond E. Bartholomae(1)(2)
326,543
1.7
Stephen Berger(3)
10,236,186
53.5
Steven M. Berzin
—
—
William F. Hopkins(3)
10,236,186
53.5
Mark K. Kaler(1)(4)
105,517
**
Sidney J. Nurkin
—
—
Edward J. Puisis(1)(2)
285,973
1.5
Douglas W. Rotatori(3)
10,236,186
53.5
Eric R. Zimmerman(2)
502,985
2.6
Directors and all executive
officers as a group (a total of 13 people)(5)
10,358,782
54.2
*
Percentage is based on 19,037,902 shares of common stock
outstanding on March 30, 2007.
**
Signifies less than 1%.
(1)
Includes common stock subject to outstanding options which are
exercisable by such individuals within 60 days. The
following common stock subject to such options is included in
the totals: 4,335 shares for Mr. Astrauskas;
29,371 shares for Mr. Bartholomae; 19,677 shares for
Mr. Kaler and 29,800 shares for Mr. Puisis.
(2)
Pursuant to the terms of a voting agreement, Messrs. Zimmerman,
Puisis and Bartholomae have designated Odyssey and certain of
its affiliates as
attorney-in-fact
to vote or act by written consent with respect to the shares of
our common stock owned by them. Thus, these individuals have
sole dispositive power, but no voting power, with respect to the
shares indicated.
(3)
Includes 9,120,685 shares of common stock owned by the Odyessy
group and 502,985 shares owned by Mr. Zimmerman, 256,173
shares owned by Mr. Puisis and 29,800 shares which may be
acquired by Mr. Puisis within 60 days upon the exercise of
outstanding options, and 297,172 shares owned by
Mr. Bartholomae and 29,371 shares which may be acquired by
Mr. Bartholomae within 60 days upon the exercise of
outstanding options, as to which Odyessy has the sole voting
power pursuant to a voting agreement.
(4)
Mr. Kaler’s employment with us terminated on
January 16, 2007. Mr. Kaler’s stock ownership is
based on the most recent information available to us.
(5)
Includes 86,825 shares of common stock subject to
outstanding options which are exercisable within 60 days.
Ownership of and transactions in Company securities by executive
officers, directors, and certain beneficial stockholders of the
Company are required to be reported to the Securities and
Exchange Commission. Based solely on its review of Forms 3
furnished to the Company, the Company believes that all of its
executive officers, directors and applicable stockholders
complied with these filing requirements on a timely basis during
2006.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The following Compensation Discussion and Analysis explains our
compensation program as it applies to Eric R. Zimmerman, our
President and Chief Executive Officer, Edward J. Puisis, our
Executive Vice President and
Chief Financial Officer, and our three other most highly
compensated executive officers who were serving on
December 31, 2006, each of whom is named in the Summary
Compensation Table below. We refer to these five individuals as
our named executive officers.
Objectives
Our executive compensation program has the following primary
overall objectives:
•
attract and maintain the management we need to lead our business;
•
motivate our executive officers and other executives to increase
stockholder value by aligning their interests with those of our
stockholders;
•
fairly compensate our executive officers and other executives
relative to the achievement of established objectives; and
•
recognize and reward those executive officers and other
executives whose performance exceeds the normal expectations and
requirements for their positions.
Process
for Setting Executive Compensation
Our executive compensation program consists of six elements:
base salary, annual incentive bonuses, long-term incentives,
perquisites, retirement and welfare benefits and
severance/change in control benefits.
The Compensation Committee of our Board of Directors, which is
comprised of Stephen Berger (chair), William F. Hopkins and
Douglas W. Rotatori (each of whom is associated with Odyssey,
our controlling stockholder), annually reviews and approves the
base salary, annual incentive targets and long-term incentive
awards of Mr. Zimmerman and each of our other named
executive officers. The Compensation Committee’s review of
Mr. Zimmerman is conducted at an executive session at which
neither Mr. Zimmerman nor any other members of our
management is present. The Compensation Committee’s reviews
of our other executive officers are based on recommendations
from Mr. Zimmerman, and the executive officers whose
compensation is being reviewed are not present during the
reviews.
The Compensation Committee also periodically reviews the other
elements of our executive compensation program for our executive
officers such as retirement and welfare benefits, perquisites,
and severance and change in control benefits.
The agenda for each meeting of the Compensation Committee is
collectively agreed upon by the Chair of the Compensation
Committee and Mr. Zimmerman. The agenda typically includes
standing items covered regularly, generally at the same meeting
each year; other items a member of the Compensation Committee
has requested be included in the agenda; and items that
management recommends that the Compensation Committee consider.
Prior to our initial public offering in December, 2006, the
Compensation Committee was guided in its determinations by the
objectives and process described above and, in some cases, by
negotiations with individual executive officers, but without any
formal evaluation by the Compensation Committee of external
market considerations. In late 2006, with the approval of the
Compensation Committee, we engaged an outside compensation
consultant, Watson Wyatt Worldwide Consulting, to perform a
comprehensive review of all elements of our executive
compensation program. The primary objectives of this evaluation
are to:
•
analyze the market competitiveness of our existing compensation
programs;
•
identify any areas in which our executive compensation and
benefits vary from current market practice;
•
assist us in developing a compensation philosophy which defines
the market for executive talent, our desired competitive
positioning within the market, the relative mix and the
importance of the various components of compensation and our use
of personal benefits and perquisites, employment agreements and
severance arrangements;
•
review our current mix of salary and incentive compensation,
including the relative weighting of short-term versus long-term
incentives; and
assist us in developing an ongoing long-term incentive plan.
Watson Wyatt has collected market data and has assembled a
custom group of companies it views as comparable to us. Watson
Wyatt will report its conclusions to the Compensation Committee.
Components
of Executive Compensation
Base Salary. When we employed
Mr. Zimmerman in 2005, we entered into an employment
agreement with him which specifies that his minimum annual base
salary will be $350,000. Similarly, when we employed
Mr. Puisis in 2003, we entered into an employment agreement
with him which specifies that his minimum annual base salary
will be $250,000. These employment agreements, including the
minimum base salary amounts, were negotiated with
Messrs. Zimmerman and Puisis by members of our Compensation
Committee and reflect what the Compensation Committee believed
were competitive salaries given the duties and responsibilities
of these officers, their level of experience, the amounts we
were paying our other executive officers, our size, the industry
in which we operate and our prior performance.
We also entered into an employment agreement with
Mr. Bartholomae in 2003, which we amended in 2005. While
that agreement does not specify the amount of base salary we
must pay Mr. Bartholomae, it does provide that he will have
“good reason” to resign his employment and receive
severance payments if we reduce his annual base salary below
$260,000. We do not have employment agreements with
Messrs. Kaler (whose employment terminated in January,
2007) or Mr. Astrauskas. The base salaries of
Messrs. Bartholomae, Kaler and Astrauskas for 2005, were
set by the Compensation Committee based substantially on
recommendations of our former President and Chief Executive
Officer and reflected the Compensation Committee’s view
that these amounts were competitive given the duties and
responsibilities of these officers, their level of experience,
the amounts we were paying our other executive officers, our
size, the industry in which we operate and our prior performance.
In 2005, we had a net loss of $114.7 million, compared to a
net loss of $48.7 million in 2004. As a result of our
performance in 2005, the Compensation Committee chose not to
increase the base salary of any of our named executive officers
in 2006 from the base salary we paid them in 2005.
Annual Incentive Bonuses. We view annual
incentive bonuses as an important component of compensation for
our named executive officers. In mid-2005, we made several
management changes, including the hiring of Mr. Zimmerman
as our President and Chief Executive Officer. In order to
encourage Mr. Zimmerman and his management team to move
quickly to improve our performance in 2006, the Compensation
Committee determined to pay discretionary bonuses with respect
to the first half of 2006 if our EBITDA (which we define for
incentive bonus purposes as earnings (loss) before interest
expense, interest income, income taxes, depreciation,
amortization of intangibles, stock compensation expense, gain or
loss on disposals of property, plant and equipment and facility
closing and severance expense) improved substantially, in the
judgment of the Compensation Committee. In the past, we have not
typically paid incentive bonuses based solely on half year
performance; however, the Compensation Committee believed these
mid-year discretionary bonuses were important to encourage and
reward our senior executive team for quickly implementing the
turnaround strategy developed under the leadership of our new
chief executive officer. Based on the Compensation
Committee’s evaluation of our improved performance during
that period, we paid cash bonuses in the following amounts to
our named executive officers: Mr. Zimmerman —
$175,000; Mr. Puisis — $100,000;
Mr. Bartholomae — $104,000;
Mr. Kaler — $90,800; and
Mr. Astrauskas — $42,500. The bonuses were
approved by the Compensation Committee on July 14, 2006,
after our first-half financial results became available. On
May 11, 2006, the Compensation Committee also approved
payment of a special cash bonus in the amount of $75,000 to
Mr. Puisis. This bonus was intended to bring
Mr. Puisis’ total compensation for 2006 up to a
minimum level consistent with a prior informal commitment made
to Mr. Puisis by the Committee.
In addition to the discretionary incentive bonuses we paid for
the first half of 2006, the Compensation Committee also followed
its normal practice of adopting an annual Executive Incentive
Plan for full-year 2006 under which participating executives,
including our named executive officers, were awarded a bonus
opportunity equal to a specified percentage of their base
salary, based on the extent to which we achieved financial goals
specified under the plan. Since the Compensation Committee chose
to award discretionary bonuses for the first half of 2006, it
did not adopt the full-year 2006 Executive Incentive Plan until
June 30, 2006, when it was generally
aware of the amount of the discretionary bonuses it intended to
award. For the 2006 Executive Incentive Plan, the Compensation
Committee established two performance goals: EBITDA and cash
flow (which we define for incentive bonus purposes as EBITDA
less facility closing and severance expense, cash paid for
income taxes, gain on sale of rental equipment and cash used in
investing activities, and adjusted to reflect changes in assets
and liabilities, excluding the effects of changes in accrued
interest). The Compensation Committee views EBITDA and cash
flow, as we define them, as key measures of our operating
performance. The EBITDA goal for full-year 2006 was
$60 million, and the cash flow goal for full-year 2006 was
$44.2 million. The Compensation Committee also concluded
that an expense we incurred in 2006 in connection with a
comprehensive study of our freight arrangements should be added
back to EBITDA for purposes of 2006 performance.
Under the 2006 Executive Incentive Plan, no incentive bonus was
to be paid with respect to a performance measure unless we
achieved at least 90% of our goal for the performance measure
for the year, at which point each of the named executive
officers would receive 50% of his targeted bonus opportunity for
that performance measure. The percentage of the targeted bonus
opportunity to be paid with respect to a performance measure
would increase above 50% as our performance for the year
increased above 90% of the goal for the performance measure,
with a payout of 100% of the targeted bonus opportunity if we
achieved 100% of the goal for the performance measure. In
addition, for each $1 million by which we exceeded our
EBITDA goal for the year, we also would pay each of the
participants an additional incentive bonus equal to the
following percentage of his base salary:
Mr. Zimmerman — 10%; Messrs. Puisis and
Bartholomae — 7.5%; and Messrs. Kaler and
Astrauskas — 5%.
The incentive bonus opportunity, as a percentage of base salary,
for each of our named executive officers for each of the two
performances measures if we reached 100% of our goal for the
performance measure was as follows: Mr. Zimmerman,
EBITDA — 60%; cash flow — 40%;
Messrs. Puisis and Bartholomae, EBITDA — 45%;
cash flow — 30%; and Messrs. Kaler and
Astrauskas, EBITDA — 30%; cash flow — 20%.
In the case of our named executive officers other than
Mr. Zimmerman, those percentages were based on
recommendations made by Mr. Zimmerman and approved by the
Compensation Committee. Mr. Zimmerman’s employment
agreement with us provides that he will receive an annual
performance-based incentive bonus equal to 75% of his base
salary, and the additional bonus opportunity provided to him
under the 2006 Executive Incentive Plan was determined through
negotiation by Mr. Zimmerman with the Compensation
Committee. For 2006, our performance reached 107.5% of our
EBITDA goal and over 100% of our cash flow goal, which resulted
in the payouts under the 2006 Executive Incentive Plan set forth
in the “Non-Equity Incentive Plan Compensation” column
in the Summary Compensation Table below. While the Compensation
Committee had the authority to make adjustments to the
performance measures under the 2006 Executive Incentive Plan, it
did not exercise that authority.
Long-term Incentives. The long-term incentive
component of our compensation program typically has consisted of
stock options granted under our 2000 Stock Option Plan, as
amended. Prior to our initial public offering, we generally did
not make annual grants of stock options but rather relied on
grants we made following our 2000 recapitalization to those of
our executive officers who were employed by us at that time and
grants we thereafter made to new executive officers when they
were hired by us. We did not grant any stock options to any of
our named executive officers in 2006.
On June 30, 2006, the Compensation Committee approved, and
we granted, 502,985 restricted shares of our common stock to
Mr. Zimmerman and 251,491 restricted shares of our common
stock to each of Messrs. Bartholomae and Puisis. The number
of shares (which have been restated to reflect a
2.1673-for-1
stock split) were determined by the Compensation Committee based
on its evaluation of the performance of Mr. Zimmerman and
his senior management team in commencing a turnaround of our
performance and as an incentive to the three recipients to
encourage the continued improvement in our performance. The
amount of the grants also took into account the number of stock
options previously granted to these individuals
(Mr. Zimmerman was not granted any stock options when he
joined us). We believe that the vesting schedule associated with
restricted stock assists us in the retention of the executive
officers to whom we grant restricted stock. The terms of the
restricted stock are described under “Restricted Stock
Awards” on page 20.
We anticipate that we will adopt a new long-term incentive
program in the future with the assistance of Watson Wyatt, but
we do not yet know the form such a program will take.
Perquisites and Other Personal Benefits. We
provide certain perquisites and other personal benefits to our
named executive officers. The Compensation Committee believes
these perquisites are reasonable and appropriate. The
perquisites assist in the attraction and retention of our named
executive officers and, in the case of certain perquisites,
promote the health and efficiency of our named executive
officers.
Currently, these perquisites and other personal benefits consist
principally of life insurance, an automobile allowance and tax
planning assistance. We also reimburse Messrs. Zimmerman
and Astrauskas (each of whom maintains his primary residence
outside of the Dayton, Ohio area) for certain housing expenses
associated with maintaining a second residence near our
corporate headquarters, we reimburse Mr. Puisis for certain
commuting expenses and we reimburse Messrs. Zimmerman and
Puisis for membership fees in connection with their membership
in one country, alumni or social club. We also reimburse
Messrs. Zimmerman, Puisis and Astrauskas for the taxes they
are required to pay on certain of these benefits.
In September, 2006, we forgave specified amounts of accrued
interest on certain loans we made to certain of our executive
officers in 2000 in connection with a recapitalization merger,
including $141,227 we forgave for Mr. Bartholomae and
$12,575 we forgave for Mr. Kaler. These loans enabled the
recipients to exercise stock options and acquire and hold our
stock so that the transaction would qualify for recapitalization
accounting treatment. We did not forgive any outstanding
principal under these loans nor did we forgive any interest
accruing after the date of the forgiveness. The Compensation
Committee approved the forgiveness of these amounts in
recognition of the long-term service of Messrs. Bartholomae
and Kaler to us.
Retirement and Welfare Benefits. Our named
executive officers participate on the same basis as our salaried
employees in our Employee Savings Plan (401(k) plan) to which we
currently make matching contributions equal to 50% of the first
2% of the participant’s contribution and 25% of the next 4%
of the participant’s contribution. We also make an
additional annual contribution, which we refer to as a
retirement contribution account contribution, equal to a
percentage of the participant’s compensation determined
based on the participant’s age as of the end of the plan
year. Our named executive officers do not participate in any
deferred benefit or actuarial pension plans.
We provide our named executive officers with the same health and
welfare benefits we provide generally to all of our other
employees at the same general premium rates as we charge our
other employees.
Severance/Change in Control Payments and
Benefits. We provide certain severance and change
in control payments and benefits to certain of our named
executive officers. These payments and benefits and applicable
triggers are described in more detail on pages 22-24. The
benefits are provided pursuant to employment agreements,
restricted stock agreements and stock option agreements. We
believe that these benefits assist us in retaining our executive
officers.
Tax
Treatment of Compensation Elements
Section 162(m) of the Internal Revenue Code of 1986, as
amended, generally denies a publicly held corporation a federal
income tax deduction for compensation in excess of
$1 million per year paid to or accrued for each of its five
most highly-compensated executive officers. The regulation
includes our chief executive officer as of the last day of our
taxable year. It also includes any employee whose total
compensation must be reported to our stockholders under the
Securities Exchange Act by reason of the employee being among
the four highest compensated executive officers for the taxable
year.
Compensation made non-deductible by the regulation is included
in the executive’s gross income, and the tax on us
resulting from the denial of the deduction is, therefore, a
second tax on the compensation. Under Section 162(m),
certain “performance based” compensation is not
subject to this limitation on deductibility provided that
certain requirements are met. The Compensation Committee
evaluates the tax impact of the compensation arrangements for
our named executive officers in light of our overall
compensation philosophy. Although the Compensation Committee
generally attempts to structure compensation elements for the
named executive officers in a way that excepts them from
Section 162(m), from time to time, the Committee may award
compensation that is not fully deductible if it determines that
the compensation is in the best interests of us and our
stockholders.
The Compensation Committee has reviewed and discussed with
management the foregoing Compensation Discussion and Analysis
required by Item 402(b) of
Regulation S-K,
and, based on that review and discussion, the Compensation
Committee recommended to the Board that the Compensation
Discussion and Analysis be included in this Proxy Statement.
Compensation Committee
Stephen Berger, Chair
William F. Hopkins
Douglas W. Rotatori
Summary
Compensation Table
The following table sets forth information concerning the
compensation earned for 2006 by each of our named executive
officers.
Summary
Compensation Table
Non-Equity
Incentive
Stock
Option
Plan
All Other
Name and
Salary
Awards
Awards
Compensation
Compensation
Total
Principal Position
Year
($)
Bonus ($)(1)
($)(2)
($)(3)
($)(4)
($)(5)
($)
Eric R. Zimmerman
President and Chief Executive Officer
2006
$
350,000
$
175,000
$
774,817
$
0
$
510,930
$
102,471
$
1,913,218
Raymond E. Bartholomae
Executive Vice President and President, Symons
2006
$
260,000
$
104,000
$
387,408
$
43,648
$
284,661
$
178,732
$
1,258,449
Edward J. Puisis
Executive Vice President and Chief Financial Officer
2006
$
250,000
$
175,000
$
387,408
$
20,591
$
273,713
$
44,622
$
1,151,334
Mark K. Kaler(6)
Vice President, Product Management
2006
$
227,000
$
90,800
$
0
$
37,520
$
165,687
$
42,404
$
563,411
Peter J. Astrauskas
Vice President, Engineering Services
2006
$
170,000
$
42,500
$
0
$
8,643
$
124,083
$
51,745
$
396,971
(1)
Consists of discretionary cash
bonuses approved by the Compensation Committee on July 14,2006 based on the Compensation Committee’s evaluation of
our performance for the first six months of 2006. Also includes
for Mr. Puisis, a $75,000 special cash bonus paid on
May 11, 2006.
(2)
Consists of the aggregate dollar
amount recognized for financial statement reporting purposes for
2006 with respect to the restricted stock awards made to each of
Messrs. Zimmerman, Puisis and Bartholomae, determined in
accordance with Statement of Financial Accounting Standards
No. 123(R) (“FAS 123R”),
but without regard to any estimate of forfeitures
related to service-based vesting. See Note 5 to the
Consolidated Financial Statements included in our 2006 Annual
Report for an explanation of the assumptions we made in valuing
these awards. For information about the restricted stock awards
granted in 2006, please see “Restricted Stock Awards”
below. For information on all outstanding equity awards as of
December 31, 2006, please refer to the “Outstanding
Equity Awards at Fiscal Year-End” table below.
(3)
Consists of the aggregate dollar
amount recognized for financial statement reporting purpose for
2006 with respect to stock options granted to each of
Messrs. Bartholomae, Puisis, Kaler and Astrauskas in years
prior to 2006, determined in accordance with FAS 123R, but
without regard to any estimate of forfeitures related to
service-based vesting. See Note 5 to the Consolidated
Financial Statements in our 2006 Annual Report for an
explanation of the assumptions we made in valuing these awards.
(4)
Consists of annual incentive
bonuses awarded and earned in 2006 under our 2006 Executive
Incentive Plan and paid in 2007. For more information, please
see the “Grants of Plan-Based Awards” table below.
(5)
The amounts in the “All Other
Compensation” column consist of the following components:
The following table provides information concerning the
plan-based cash and equity awards we granted to our named
executive officers with respect to their service in 2006. The
non-equity incentive awards shown in the table were granted
under our 2006 Executive Incentive Plan, effective June 30,2006, for performance in 2006. The awards were paid in January
and March, 2007 based on our attainment of pre-established
performance goals. More information about the performance goals
and these awards can be found on pages 14 and 15. The restricted
stock awards granted in 2006 were made under individual
restricted stock agreements we entered into with each of
Messrs. Zimmerman, Bartholomae and Puisis, as approved by
the Compensation Committee on June 30, 2006. More
information about these restricted stock awards can be found on
page 20.
Grants of
Plan-Based Awards
All Other
Stock Awards:
Grant Date Fair
Estimated Possible Payments Under
Number of Shares
Value of
Non-Equity Incentive Plan Awards(2)
of Stock
Stock and Option
Name
Grant Date(1)
Threshold ($)
Target ($)
Maximum ($)
or Units (#)(3)
Awards ($)(4)
Eric R. Zimmerman
6/30/06
0
0
0
502,985
$
774,817
6/30/06
$
175,000
$
350,000
N/A
0
0
Raymond E. Bartholomae
6/30/06
0
0
0
251,491
$
387,408
6/30/06
$
97,500
$
195,000
N/A
0
0
Edward J. Puisis
6/30/06
0
0
0
251,491
$
387,408
6/30/06
$
93,750
$
187,500
N/A
0
0
Mark K. Kaler
6/30/06
0
0
0
0
0
6/30/06
$
56,750
$
113,500
N/A
0
0
Peter J. Astrauskas
6/30/06
0
0
0
0
0
6/30/06
$
42,500
$
85,000
N/A
0
0
(1)
The date our Compensation Committee
approved the grant.
(2)
Consists of annual incentive bonus
opportunities awarded for 2006 under our 2006 Executive
Incentive Plan. The information included in the
“Threshold” and “Target” columns reflects
the range of potential payouts under the plan when the
performance goals were established by the Compensation Committee
on June 30, 2006. The 2006 Executive Incentive Plan did not
provide for a maximum payout. The actual 2006 incentive bonuses
were determined when our financial results for 2006 became
available in 2007 and are set forth in the “Non-Equity
Incentive Plan Compensation” column of the Summary
Compensation Table. See our Compensation Discussion and Analysis
above for a description of the performance goals associated with
these awards.
(3)
Represents the number of shares of
our common stock covered by restricted stock awards made to
Messrs. Zimmerman, Bartholomae and Puisis pursuant to
individual restricted stock agreements on June 30, 2006.
See “Restricted Stock Awards” below for a description
of the restrictions applicable to the restricted stock and the
applicable vesting provisions.
(4)
Represents the grant date fair
value of the restricted stock awards, determined in accordance
with FAS 123R, but without regard to any estimate of
forfeitures related to service-based vesting. See Note 5 to
our Consolidated Financial Statements included in our 2006
Annual Report for an explanation of the assumptions we made in
valuing these awards.
Employment
Agreements
We have entered into employment agreements with certain of our
named executive officers, as described below.
Mr. Zimmerman. Effective August 1,2005, we entered into an employment agreement with
Mr. Zimmerman to serve as our President and Chief Executive
Officer. The term of his employment agreement is through
December 31, 2008. The employment agreement provides that
the term will be extended automatically for additional one-year
periods thereafter unless either party notifies the other at
least 90 days prior to the end of the term that the term
will not be extended.
Under his employment agreement, Mr. Zimmerman’s annual
base salary is $350,000, subject to increase by the Compensation
Committee. Mr. Zimmerman is entitled to participate in our
annual executive incentive plan, with a target-level bonus equal
to 75% of his annual base salary, and he is entitled to
participate in our various other employee benefit plans and
arrangements which are applicable to senior officers.
Mr. Zimmerman also receives an annual car allowance,
reimbursement for tax and financial planning assistance and
payment of the annual membership fee in a country, alumni or
social club of his choice (as well as the initiation fee in that
club), in each case up to a specified maximum amount.
Mr. Zimmerman’s employment agreement also provides for
reimbursement for certain expenses incurred in connection with
his move to the Dayton, Ohio area.
Certain severance provisions of Mr. Zimmerman’s
employment agreement are described under “Potential
Payments upon Termination or Change in Control” below.
Mr. Zimmerman is prohibited from competing with us during,
and for one year following, the term of his employment agreement.
Mr. Puisis. Effective August 11,2003, we entered into an employment agreement with
Mr. Puisis to serve as our Chief Financial Officer. The
current term of his employment under his employment agreement is
through August 11, 2007. The employment agreement provides
that the term will be extended automatically for additional
one-year periods thereafter unless either party notifies the
other not later than 120 days prior to the end of the term.
Under his employment agreement, Mr. Puisis’ annual
base salary is $250,000, subject to increase by the Compensation
Committee. Mr. Puisis is entitled to participate in our
annual executive incentive plan and in our various other
employee benefit plans and arrangements which are applicable to
senior officers.
Mr. Puisis also receives an annual car allowance, and
payment of the annual membership fee in a country, alumni or
social club of his choice (as well as the initiation fee in that
club), in each case up to a specified maximum amount.
Certain severance provisions of Mr. Puisis’ employment
agreement are described under “Potential Payments upon
Termination or Change in Control” below.
Mr. Puisis is prohibited from competing with us during and
for one year following, the term of his employment agreement
(or, in the event that Mr. Puisis remains employed by us
following the end of the term of his employment agreement, for
one year following the date on which we terminate his employment
other than for Cause), but only if we provide him with the
benefits to which he is entitled upon a termination of his
employment by us without Cause during such one-year period.
Mr. Bartholomae. We are a party to a
letter agreement with Mr. Bartholomae, dated as of
August 13, 2003, as amended December 15, 2005, which
provides for his at-will employment with us for no specified
term. The letter agreement provides that we may terminate
Mr. Bartholomae’s employment at any time for any legal
reason, at our discretion, and that he may resign from his
employment at any time for any reason, upon 30 days advance
written notice.
Certain severance provisions of Mr. Bartholomae’s
employment agreement are described under “Potential
Payments upon Termination or Change in Control” below.
Restricted
Stock Awards
On June 30, 2006, with the approval of the Compensation
Committee, we granted 502,985 restricted shares of our common
stock to Mr. Zimmerman and 251,491 restricted shares of our
common stock to each of
Messrs. Bartholomae and Puisis. The terms of the restricted
stock are set forth in restricted stock agreements we entered
into with each of Messrs. Zimmerman, Bartholomae and Puisis.
The restricted stock agreements provide the executives with all
of the rights and privileges of a stockholder with respect to
the restricted stock, except that we will retain custody of the
certificates for the restricted stock and all dividends, if any,
until the restrictions lapse, and except that until the
restrictions lapse the restricted stock may not be transferred
by the executive and will be subject to forfeiture upon the
termination of the executive’s employment other than for
certain reasons described in the restricted stock agreements.
Under the terms of the restricted stock agreements, following
our initial public offering, the restricted stock began to vest,
and the restrictions on the stock began to lapse, in four equal
annual installments, commencing on December 31, 2006 (the
year in which the offering occurred) and on December 31 of
each of the following three years, assuming the executive’s
employment is not terminated prior to the vesting under certain
conditions. The restricted stock also will earlier vest upon a
change in control if certain conditions are satisfied. Certain
of the provisions of the restricted stock agreements are
described under “Potential Payments upon Termination or
Change in Control” below.
Stock
Option Plan
Our 2000 Stock Option Plan, as amended, is described below under
“Approval of Fifth Amendment to Dayton Superior Corporation
2000 Stock Option Plan — Summary of Stock Option
Plan.”
Severance
Agreement
In connection with the termination of Mr. Kaler’s
employment with us, effective January 16, 2007, we entered
into a severance agreement and release of claims with him. We
agreed to pay Mr. Kaler $87,308 of severance pay for the
period from January 17, 2007 until June 6, 2007 and a
total of $139,692 in non-compete pay for the period from
June 7, 2007 until January 16, 2008. We also agreed to
pay his 2006 incentive bonus even though he was no longer
employed by us on the payment date, provide him with
outplacement services, reimburse him for executive tax
preparation for 2006 and provide him with medical and dental
insurance through January 31, 2007 and, if he elects COBRA
continuation coverage, contribute the same monthly premium
amount toward the premium cost associated with the COBRA
continuation coverage through January 16, 2008. In return,
Mr. Kaler agreed not to compete with us through
January 16, 2008.
The following table sets forth information for each of our named
executive officers with respect to each option to purchase our
common stock and each award of restricted common stock that was
outstanding as of December 31, 2006.
Outstanding
Equity Awards at Fiscal Year-End
Option Awards
Stock Awards
Market
Number of
Number of
Number of
Value of
Securities
Securities
Shares or
Shares or
Underlying
Underlying
Units of
Units of
Unexercised
Unexercised
Option
Option
Stock That
Stock That
Options (#)
Options (#)
Exercise
Expiration
Have Not
Have Not
Name
Exercisable
Unexercisable
Price ($)
Date
Vested(1) (#)
Vested(2) ($)
Eric R. Zimmerman
0
0
—
—
377,239
$
4,428,786
Raymond E. Bartholomae
0
0
—
—
188,618
$
2,214,375
4,547
0
$
7.76
2/26/2008
0
0
2,399
0
$
8.97
2/1/2009
0
0
17,657
83,530
(3)
$
12.46
6/16/2010
0
0
2,601
23,407
(4)
$
12.69
1/1/2013
0
0
2,167
19,506
(5)
$
11.07
8/11/2013
0
0
Edward J. Puisis
0
0
—
—
188,618
$
2,214,375
29,800
89,402
(5)
$
11.07
8/11/2013
0
0
Mark K. Kaler
17,076
79,360
(3)
$
12.46
6/16/2010
0
0
2,601
23,407
(4)
$
12.69
1/1/2013
0
0
Peter J. Astrauskas
4,335
39,011
(6)
$
11.07
9/24/2013
0
0
(1)
The outstanding restricted stock
will vest in three equal installments on December 31 of
each year, commencing December 31, 2007, or earlier upon a
change in control, if certain conditions are satisfied.
(2)
Based on the closing market price
of a share of our common stock on December 29, 2006.
(3)
These stock options vest on the
earlier of June 15, 2009 or, if certain conditions are
satisfied, upon a change in control.
(4)
These stock options vest on the
earlier of January 1, 2012 or, if certain conditions are
satisfied, upon a change in control. All or a portion of the
options also may vest on December 31, 2007 if certain
financial performance measures are satisfied.
(5)
These stock options vest on the
earlier of August 11, 2012 or, if certain conditions are
satisfied, upon a change in control. A portion of the options
also may vest on December 31, 2007, and all or a portion of
the options also may vest on December 31, 2008, if certain
financial performance measures are satisfied.
(6)
These stock options vest on the
earlier of September 12, 2012 or, if certain conditions are
satisfied, upon a change in control. A portion of the options
also may vest on December 31, 2007, and all or a portion of
the options also may vest on December 31, 2008, if certain
financial performance measures are satisfied.
Options
Exercised and Stock Vested
The following table sets forth information for each of our named
executive officers with respect to the value of restricted
shares that vested on December 31, 2006. None of the named
executive officers exercised any stock options in 2006.
Options
Exercised and Stock Vested
Stock Awards
Name
Number of Shares Acquired on Vesting (#)
Value Realized on Vesting ($)(1)
Eric R. Zimmerman
125,746
$
1,476,258
Raymond E. Bartholomae
62,873
$
738,129
Edward J. Puisis
62,873
$
738,129
Mark K. Kaler
0
0
Peter J. Astrauskas
0
0
(1)
Based on the closing market price
of a share of our common stock on December 29, 2006, the
last business day prior to the vesting date, December 31,2006.
Potential
Payments Upon Termination or Change in Control
Certain of the agreements we have entered into with certain of
our named executive officers require that we, or our successors,
pay or provide certain compensation and benefits to the named
executive officers upon the occurrence of a termination of their
employment or a change in control of our company. The estimated
value of the compensation and benefits that would be paid or
provided to each named executive officer for each type of
agreement is summarized below, based on an assumption that the
triggering event occurred on December 31, 2006. We have
noted below other material assumptions used in calculating the
estimated compensation and benefits under each triggering event.
Due to the various factors that impact the nature and value of
benefits due upon certain terminations of employment or upon a
change in control, the actual value of compensation and benefits
to which a named executive officer would be entitled can be
determined only at the time a triggering event actually occurs.
The estimated value of compensation and benefits described below
does not take into account compensation and benefits that a
named executive officer has earned prior to the applicable
triggering event or that are generally available to all salaried
employees, such as distributions from the 401(k) plan or earned
but unpaid salary or accrued vacation pay.
Provisions
in Employment Agreements
The employment agreements we entered into with
Messrs. Zimmerman, Bartholomae and Puisis provide for
payments and benefits upon termination of employment as follows:
Mr. Zimmerman. Mr. Zimmerman’s
employment agreement provides that, if his employment is
terminated by us without “Cause” or because we do not
extend the term of his employment agreement, we will do the
following:
•
continue to pay his base salary for 18 months following
termination of his employment;
•
pay him a pro-rated portion of his annual bonus under our
executive bonus plan for the year in which the termination
occurs, based on our
year-to-date
performance through the date of termination in relation to the
performance targets under the executive bonus plan; and
•
continue, for 18 months following the termination, coverage
under our medical and dental plans and programs, including his
group life insurance coverage, in which he was entitled to
participate immediately prior to the termination, on the same
terms as if he were an active employee.
If Mr. Zimmerman’s employment terminates by reason of
his death or disability, then we are required to pay him a
pro-rated portion of his annual bonus under our executive bonus
plan for the year in which the termination occurs based on our
year-to-date
performance through the date of termination in relation to the
performance targets under the executive bonus plan.
Mr. Zimmerman’s employment agreement defines
“Cause” as his willful failure to substantially
perform his executive duties and responsibilities (other than as
a result of his disability), his willful failure to comply with
any lawful and reasonable directives of the Board of Directors,
his commission of any act or omission that could result in a
conviction or plea of guilty or no contest for any felony or
crime involving moral turpitude, unlawful use or possession of
drugs, or his commission of any act of fraud, personal
dishonesty involving our assets or breach of any fiduciary duty
to us.
Mr. Zimmerman’s right to receive these payments is
contingent upon him signing a general waiver and release of
claims in our customary form. Mr. Zimmerman also is
prohibited by his employment agreement from competing with us or
soliciting our employees during the 12 months following
termination of his employment.
If Mr. Zimmerman’s employment had terminated on
December 31, 2006 on account of his death, we would have
been required to pay him a total of $510,930. If we had
terminated his employment on that date without cause or if his
employment had terminated because we did not extend the term of
his employment agreement, we would have been required to pay him
a total of $1,044,930 under his employment agreement ($869,930
if a change in control (which is not defined in the employment
agreement) had occurred prior to that date).
Mr. Bartholomae. Mr. Bartholomae’s
employment agreement provides that, if we terminate his
employment without “Cause” or if his employment
terminates by reason of his death, we will do the following:
•
pay him a pro-rated portion of his annual bonus under our annual
executive bonus plan for the year in which the termination
occurs;
•
during the
36-month
period following the date of termination, pay him:
•
an amount equal to his average annual base salary for the three
years prior to the termination or his then current annual base
salary, whichever is greater;
•
the average of his annual bonus for the three years prior to his
termination (pro-rated based on the calendar years in the
36-month
period);
•
the amount of his car allowance in effect at the time of his
termination; and
•
continue until age 65 his and his spouse’s coverage
under our medical and dental plans and programs, including group
life insurance coverage, in which he was entitled to participate
immediately prior to the termination, on the same terms as if he
were an active employee.
For purposes of Mr. Bartholomae’s employment
agreement, “Cause” is defined as
Mr. Bartholomae’s willful or gross misconduct, a
material failure in the performance of his duties and
responsibilities (other than as a result of his disability),
conviction of or plea of guilty or nolo contendre to a felony or
a crime involving moral turpitude or fraud or personal
dishonesty involving our assets.
If, prior to the termination of Mr. Bartholomae’s
employment without Cause or by reason of his death, a change in
control occurs, then the period over which the payments and
benefits described above are provided will be reduced from
36 months to 24 months. Mr. Bartholomae’s
employment agreement defines “change in control” to
mean that a person or group acquires securities entitling them
to exercise more than 50% of our total combined voting power, we
sell or dispose of all or substantially all of our assets or we
merge or consolidate and our stockholders prior to the merger or
consolidation thereafter hold less than 50% of our voting power.
Mr. Bartholomae’s right to receive these payments is
contingent upon him signing a general waiver and release of
claims in our customary form. Mr. Bartholomae also is
prohibited by his employment agreement from competing with us
during the 36 months (24 months, if a change in
control occurs prior to termination of his employment) following
termination of his employment.
If Mr. Bartholomae’s employment had terminated on
December 31, 2006 on account of his death or if we
terminated his employment without Cause, we would have been
required to pay him a total of $1,661,195 under his employment
agreement or a total of $1,211,017 if a change in control had
occurred prior to that date.
Mr. Puisis. Mr. Puisis’
employment agreement provides that, if his employment terminates
without Cause (which is defined generally in the same manner as
it is defined in Mr. Bartholomae’s employment
agreement) or by reason of his death or disability, we will do
the following:
•
continue to pay his annual base salary for 12 months
following termination of his employment;
•
pay him a pro-rated portion of his annual bonus under our
executive bonus plan for the year in which the termination
occurs; and
•
continue, for one year following the termination, his coverage
under our medical and dental plans and programs, including his
group life insurance coverage, in which he was entitled to
participate immediately prior to the termination on the same
terms as if he were an active employee, subject to his election
of COBRA continuation coverage during such period.
Mr. Puisis’ right to receive these payments is
contingent upon him signing a general waiver and release of
claims in our customary form. Mr. Puisis also is prohibited
by his employment agreement from competing with us during the
year following termination of his employment.
If Mr. Puisis’ employment had terminated on
December 31, 2006 on account of his death or disability, or
if we had terminated his employment without Cause, we would have
been required to pay him a total of $529,713 under his
employment agreement.
Provisions
in Restricted Stock Agreements
We are parties to agreements with Messrs. Zimmerman,
Bartholomae and Puisis under which we have granted them
restricted stock. These restricted stock agreements provide that
the restrictions set forth in the agreements will lapse with
respect to 25% of the stock originally granted under these
agreements on December 31 of each year, commencing
December 31, 2006. The agreements also provide that all of
the restrictions will earlier lapse upon the occurrence of any
of the following events:
•
immediately prior to a change in control, but only if Odyssey
receives proceeds as a result of the change in control that,
when aggregated with all other proceeds previously received by
Odyssey in any public offering of our stock, is at least equal
to their total investment in our company, and only if the
executive is continuously employed by us from the date of the
grant to the date of the change in control;
•
the executive’s employment with us is terminated by reason
of his death; or
•
the executive’s employment with us is terminated for any
reason other than Cause (as defined in the executive’s
respective employment agreement), insubordination, failure to
carry out any lawful directive of our chief executive officer or
Board of Directors or failure to satisfactorily perform his
duties or responsibilities (each as determined by our Board of
Directors).
If the executive’s employment is terminated either by the
executive or by us for any reason other than the reasons
described above, the restrictions on any remaining unvested
restricted stock will not lapse and the restricted stock will
not vest and will be forfeited.
If any of the events described above had occurred on
December 31, 2006, the value of the additional restricted
stock that would have vested, based on the closing price of our
common stock on December 29, 2006 (the last business day of
the year), would have been $2,165,618 for Mr. Zimmerman and
$1,082,809 for each of Messrs. Bartholomae and Puisis.
Provisions
in Stock Option Agreements
All of our named executive officers other than
Mr. Zimmerman hold stock options granted at various times
under our 2000 Stock Option Plan, as amended. The option
agreements provide that, in the event of a change in control,
any previously unvested options will vest effective immediately
prior to the change in control, but only if the change in
control results in Odyssey having received at least a specified
minimum return on its aggregate investment in our company. The
required minimum return to Odyssey for vesting varies (depending
upon the particular option and, in some cases, the time at which
the investment was made) from 2.25 times the amount of
Odyssey’s investment to four times the amount of the
investment and, for certain of the options, an annual compounded
pre-tax internal rate of return of at least 30% to Odyssey on
its investment. The option agreements also provide that any
unvested options held by an executive will expire upon
termination of the executive’s employment, if the executive
is terminated for Cause, or 90 days after the
executive’s employment terminates, if the executive’s
employment terminates for any other reason.
The stock option agreements generally define “change in
control” to mean that a person or group acquires securities
entitling them to exercise more than 50% of our total combined
voting power, we sell or dispose of all or substantially all of
our assets or we are a party to a merger or consolidation in
which our stockholders prior to the merger or consolidation
thereafter hold less than 50% of our voting power.
If a change in control had occurred on December 31, 2006,
based on our stock price on that date, none of the unvested
stock options held by the named executive officers would have
vested because Odyssey would not have received the required
minimum return on its aggregate investment in our company.
The purpose of the Audit Committee is to oversee our accounting
and financial reporting processes and the audits of our
financial statements. The Audit Committee’s charter
describes in greater detail the full responsibilities of the
Committee and is available on our website at
www.daytonsuperior.com.
The Audit Committee has reviewed and discussed Dayton
Superior’s consolidated financial statements with
management and Deloitte & Touche LLP, Dayton
Superior’s independent auditors. Management is responsible
for the preparation, presentation and integrity of Dayton
Superior’s financial statements, accounting and financial
reporting principles, establishing and maintaining disclosure
controls and procedures (as defined in the SEC’s
Rule 13a-15(e)),
evaluating the effectiveness of disclosure controls and
procedures, evaluating the effectiveness of internal control
over financial reporting and evaluating any change in internal
control over financial reporting that has materially affected,
or is reasonably likely to materially affect, internal control
over financial reporting. Deloitte & Touche LLP is
responsible for performing an independent audit of the
consolidated financial statements and expressing an opinion on
the conformity of those financial statements with accounting
principles generally accepted in the United States of America.
The Committee reviewed Dayton Superior’s audited financial
statements with management and Deloitte & Touche LLP
and met separately with both management and Deloitte &
Touche LLP to discuss and review those financial statements and
reports prior to issuance. These discussions also addressed the
quality, not just the acceptability, of Dayton Superior’s
accounting principles, the reasonableness of significant
judgments, and the other matters required to be discussed under
generally accepted auditing standards (including those described
in Statement on Auditing Standards No. 61, as amended,
“Communications with Audit Committees”). Management
has represented, and Deloitte & Touche LLP has
confirmed, to us that the financial statements were prepared in
accordance with generally accepted accounting principles. In
addition, Deloitte & Touche LLP provided the Audit
Committee with the written disclosures and the letter required
by the Independence Standards Board Standard No. 1, as
amended, “Independence Discussions with Audit
Committees,” that relates to Deloitte & Touche
LLP’s independence from Dayton Superior and its subsidiary
and the Audit Committee has discussed with Deloitte &
Touche LLP their firm’s independence.
Based on their review of the consolidated financial statements
and discussions with and representations from management and
Deloitte & Touche LLP referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in Dayton Superior’s
Form 10-K
for filing with the SEC.
Deloitte & Touche LLP served as our independent
registered public accounting firm for 2006, and our Audit
Committee has selected Deloitte & Touch LLP to serve as
our independent registered public accounting firm for 2007. A
representative of Deloitte & Touche LLP is expected to
be present at the Annual Meeting with the opportunity to make a
statement if he or she desires to do so and to respond to
appropriate questions from stockholders.
Audit
Fees
The fees we paid to Deloitte & Touche LLP in 2005 and
2006 were as follows:
2005
2006
Audit Fees
$
524,400
$
600,350
Audit-Related Fees
$
14,400
$
634,650
Tax Fees
$
408,900
$
31,242
Total
$
947,700
$
1,266,242
Audit Fees are the fees billed for professional services
rendered for the audit of our annual financial statements and
the review of our quarterly financial statements.
Audit-Related Fees are the fees billed for assurance and related
services that are reasonably related to the performance of the
audit or review of our financial statements. This includes
services associated with SEC registration statements, periodic
reports and other documents we file with the SEC, accounting
consultations and other attest services.
Tax fees are fees billed for tax compliance, tax advice and tax
planning.
The Audit Committee has determined that the provision of the
Audit-Related Services and Tax Services by our independent
accountant is compatible with maintaining the principal
accountant’s independence.
APPROVAL
OF FIFTH AMENDMENT
TO
DAYTON SUPERIOR CORPORATION
2000 STOCK OPTION PLAN, AS AMENDED
(Item 2 on the proxy card)
Background
On April 18, 2007, our Board of Directors adopted, subject
to stockholder approval, the Fifth Amendment to the Dayton
Superior Corporation 2000 Stock Option Plan, as amended, which
we refer to in this section as the Stock Option Plan. The Fifth
Amendment permits stock options to be granted under the Stock
Option Plan to our directors. Currently, stock options may be
granted under the Stock Option Plan only to our employees and
consultants. If approved by our stockholders, the Fifth
Amendment will permit us to implement our new compensation plan
for those of our directors who are neither employed by us or any
of our subsidiaries or by any affiliate of Odyssey, which
includes a one-time grant of a stock option to purchase our
common stock, as described under “Director
Compensation” on page 9. As of December 31, 2006,
options for 705,402 shares were available for grant under the
Stock Option Plan. The Fifth Amendment will not increase the
number of shares of common stock that may be issued under the
Stock Option Plan.
The Stock Option Plan was adopted at a time when our stock was
not publicly traded and our directors received no additional
consideration for serving on our Board of Directors and were not
eligible to receive stock options. Following our initial public
offering in December, 2006, our Compensation Committee
recommended to the Board of Directors, and the Board of
Directors approved, a compensation program for our outside
directors, which we define as those directors neither employed
by us or any subsidiary or by any affiliate of Odyssey.
Currently, Steven M. Berzin and Sidney J. Nurkin are our only
two outside directors. We have granted to each of them a stock
option to purchase 8,936 shares of our common stock at an
exercise price of $12.00 per share. These options may not
be exercised unless and until the Fifth Amendment is approved by
our stockholders and, if the Fifth Amendment is not approved by
the stockholders within one year after the date of grant, these
options will terminate and become null and void.
We are asking our stockholders to approve the Fifth Amendment to
enable us to implement the stock option portion of our
compensation program for our outside directors. If the
stockholders do not approve the Fifth Amendment, then we will
not grant any additional stock options to our directors under
the Stock Option Plan.
Summary
of Stock Option Plan
Purposes. The purposes of the Stock Option
Plan are: (1) to provide an additional incentive for
employees and consultants to further our growth, development and
financial success by personally benefiting through the ownership
of common stock and (2) to enable us to obtain and retain
the services of employees and consultants considered essential
to our long range success by offering them an opportunity to own
common stock.
Eligibility. The Stock Option Plan currently
authorizes the grant of non-qualified options to employees,
including officers, and any independent contractor or advisor
who performs services for us. The Stock Option Plan also
authorizes the grant to our employees of incentive stock options
intended to qualify under Section 422 of the Internal
Revenue Code. If the Fifth Amendment is approved by the
stockholders, the Stock Option Plan also will authorize the
grant of non-qualified options to our directors.
Securities Subject to the Plan. The aggregate
number of shares of common stock that may be issued upon the
exercise of options granted under the Stock Option Plan is
1,667,204. The shares of common stock covered by the Stock
Option Plan may be either previously authorized but unissued
shares or treasury shares. To the extent that an option expires
or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by the Stock
Option Plan, the number of shares subject to the option that are
not exercised may be used again for new grants under the Stock
Option Plan. Additionally, in the event of certain specified
corporate transactions or events, any shares subject to options
which become exercisable with respect to shares of stock of
another corporation will be considered canceled and may again be
granted. Finally, shares tendered or withheld to satisfy the
exercise price or tax withholding obligation may be used for
grants under the Stock Option Plan. No
shares of common stock may again be subject to an option if such
action would cause an incentive stock option to fail to qualify
under Section 422 of the Code.
The maximum number of shares of common stock that may be subject
to one or more options granted to a participant pursuant to the
Stock Option Plan during any calendar year is 150,000.
Administration. The Stock Option Plan is
administered by our Board of Directors unless and until each of
the members of the Compensation Committee qualifies as both a
“non-employee director” pursuant to
Rule 16b-3
of the Securities Exchange Act of 1934, and an “outside
director” pursuant to Section 162(m) of the Internal
Revenue Code. The Compensation Committee may delegate some or
all of its authority to grant options to a
sub-committee
consisting of one or more members of the committee or of one or
more of our officers, subject to certain exceptions.
The Board of Directors and the Compensation Committee have the
authority to administer the Stock Option Plan, including the
power to interpret the Stock Option Plan and any stock option
agreements, to adopt rules for the administration,
interpretation, and application of the Stock Option Plan, and to
amend or revoke any such rules and to amend any stock option
agreement so long as the rights or obligations of such optionee
are not affected adversely.
Grant and Terms of Options. The Board of
Directors or Compensation Committee determines at the time an
option is granted whether the option is to be an incentive stock
option or a non-qualified stock option and whether an option
will qualify as performance-based compensation as described in
Section 162(m) of the Internal Revenue Code. Incentive
stock options may be granted only to employees.
At the time an option is granted, the Board of Directors or
Compensation Committee also sets the exercise price, except that
the exercise price per share of options intended to qualify as
incentive stock options or performance-based compensation
generally may not be less than 100% of the fair market value of
a share of common stock on the date the option is granted. For
purposes of the Stock Option Plan, the fair market value of a
share of our common stock as of a given date generally will be
the closing price of a share as reported on the Nasdaq stock
market or on such other principal exchange on which our common
stock is then trading.
The Board of Directors or Compensation Committee also sets the
term and vesting period, if any, of each option, although the
term of an incentive option generally may not be longer than
10 years. The Board of Director or Compensation Committee
may accelerate the vesting period of any option at any time.
Exercise of Stock Options. The exercise price
of options granted under the Stock Option Plan must be paid in
cash at the time the option is exercised, although the Board of
Directors or the Compensation Committee also may allow payment
in whole or in part by other means, including:
•
by delivery of shares of common stock held for at least six
months and having a fair market value on the date of delivery
equal to the aggregate exercise price of the option or exercised
portion thereof,
•
through the surrender of shares of common stock issuable upon
exercise of the option with a fair market value on the date of
exercise equal to the aggregate exercise price of the option or
the exercised portion thereof,
•
by other property acceptable to the Board of Directors or the
Compensation Committee, or
•
any combination of the above.
Transferability of Options. Except as
otherwise provided by the Board of Directors or the Compensation
Committee, no option granted under the Stock Option Plan may be
assigned, transferred or otherwise disposed of by the award
holder, except by will or the laws of descent and distribution.
Adjustment of Securities. If there is any
stock dividend, recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation,
split-up,
spin-off, combination, repurchase, liquidation, dissolution, or
sale, transfer exchange or other disposition of all or
substantially all of our assets, or other similar corporate
transaction or event that in the sole discretion of the Board of
Directors or Compensation Committee affects our common stock
such that an adjustment is determined to be appropriate in order
to prevent dilution or enlargement of benefits under the Stock
Option Plan or with respect to an option, then the Board of
Directors or Compensation Committee as it may deem equitable
will adjust the number and kind of shares of common stock that
may be issued under the Stock Option Plan (including, but not
limited to, adjustments of the number of shares available under
the Stock Option Plan and the maximum number of shares which may
be subject to one or more awards to a participant pursuant to
the Stock Option Plan during any calendar year), the number and
kind of common stock subject to outstanding options, the
exercise price with respect to any option and the financial or
other targets specified in each stock option agreement for
determining exercisability of the options. Any adjustment
affecting an award intended as “qualified performance-based
compensation” must be made consistent with the requirements
of Section 162(m) of the Internal Revenue Code.
Additionally, in the event of any transaction described above or
any other unusual or nonrecurring transaction or event affecting
us, any of our affiliates, our financial statements, or of
changes in applicable laws, regulations or accounting
principles, the Board of Directors or the Compensation Committee
may in its sole discretion take action to prevent dilution or
enlargement of the benefits under the Stock Option Plan or to
facilitate such event or to give effect to such change in laws,
regulations or principles by providing that an option:
•
will be exercisable only for aggregate consideration into which
shares of common stock issuable upon exercise of the option
would have been converted if the option had been exercised
immediately prior to the event or for the amount of cash equal
to such consideration;
•
cannot vest or be exercised after such event;
•
will be exercisable as to all shares covered by such option;
•
will be assumed by the successor or survivor corporation or a
parent or subsidiary or substituted by similar options or awards
of the successor or survivor corporation; or
•
adjustment in the number and type of shares subject to
outstanding options and the terms and conditions (including
exercise price) for options that may be granted in the future.
Amendment, Modification and Termination. The
Compensation Committee, subject to approval of the Board of
Directors, may terminate, amend, or modify the Stock Option Plan
at any time; however, stockholder approval will be required for
any amendment to the Stock Option Plan to increase the number of
shares available under the plan or as otherwise may be required
by applicable rules of the Nasdaq Stock Market. No incentive
stock options may be granted under the Stock Option Plan on or
after the tenth anniversary of the plan.
Federal
Income Tax Consequences
In general, no federal income tax is imposed on the holder at
the time an incentive stock option is granted or exercised,
except to the extent that alternative minimum tax results from
the exercise of the option. We are not entitled to a tax
deduction in connection with the grant or exercise of an
incentive stock option. If the common stock acquired upon
exercise of an incentive stock option is held for more than two
years after the grant of the option and one year after exercise
of the option, then any amount realized upon the disposition of
the common stock in excess of the holder’s tax basis will
be taxed as long-term capital gain in the year of disposition
and we will not be entitled to a tax deduction.
If the common stock acquired upon exercise of an incentive stock
option is disposed of before the above-described holding periods
are satisfied, the disposition will be a disqualifying
disposition resulting in recognition of ordinary income to the
holder at the time of disposition in an amount equal to the
lesser of the excess of the fair market value of the shares, or
the excess of the amount received, if any, on the disposition of
the shares over the exercise price. If the amount realized on a
disqualifying disposition exceeds the fair market value of the
shares at the time the option was exercised, then, in addition
to recognizing ordinary income, the holder also will recognize
long or short-term capital gain to the extent of the excess of
the amount received over the fair market value of the common
stock at the time the option was exercised. In the event of a
disqualifying disposition, we will be entitled to a tax
deduction equal to the amount of ordinary income recognized by
the holder provided that we satisfy the applicable tax reporting
requirements.
No federal income tax is imposed at the time a nonqualified
option is granted. With certain exceptions for payment of the
exercise price with already owned shares, upon exercise of a
nonqualified option, the holder realizes ordinary income for
federal income tax purposes to the extent that the fair market
value of the common stock
acquired exceeds the exercise price of the related option on the
date of exercise. In addition, we will be entitled to a
deduction for federal income tax purposes at the same time and
to the same extent that ordinary income is realized by the
holder provided that we satisfy the applicable tax reporting
requirements.
Equity
Compensation Plan Information
The following table sets forth information concerning our equity
compensation plans as of December 31, 2006, which currently
includes only the Stock Option Plan (which was approved by our
stockholders).
Number of securities available
Number of securities to be
for future issuance under
issued upon exercise of
Weighted average exercise
equity compensation plans
outstanding options,
price of outstanding options,
(excluding securities
Plan Category
warrants and rights
warrants and rights
reflected in column (a))
Equity compensation plans approved
by security holders
859,445
$
11.93
705,402
Equity compensation plans not
approved by security holders
0
0
0
Total
859,445
$
11.93
705,402
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
FIFTH AMENDMENT TO THE STOCK OPTION PLAN.
A majority of the shares of common stock represented at the
Annual Meeting, in person or by proxy, and entitled to vote on
this proposal is required for approval of the Fifth Amendment.
Abstentions will count as votes against the proposal. Broker
non-votes do not count for voting purposes.
Any stockholder who intends to bring a matter before our 2008
Annual Meeting of Stockholders must give us notice in accordance
with the requirements of our by-laws at 7777 Washington Village
Drive, Suite 130, Dayton, Ohio45459, Attention: Secretary
generally by not later than the close of business on
January 30, 2008 and not earlier than the close of business
on December 31, 2007. In order for stockholder proposals
for the 2008 Annual Meeting of Stockholders to be eligible for
inclusion in our proxy statement, they must be received by us at
on or before December 31, 2007. If any stockholder who
intends to propose any matter to be acted upon at the 2008
Annual Meeting of Stockholders does not inform us of such matter
by March 16, 2008, the persons named as proxies for the
2008 Annual Meeting of Stockholders will be permitted to
exercise discretionary authority to vote on such matter even if
the matter is not discussed in the proxy statement for that
meeting. The 2008 Annual Meeting of Stockholders is presently
scheduled to be held on May 2, 2008.
Other
Matters
The Board does not intend to present any other business at the
meeting and knows of no other matters which will be presented.
No stockholder has informed us of any intention to propose any
other matter to be acted upon at the meeting; however, if any
other matters properly come before the meeting, it is the
intention of the persons named as proxies to vote in accordance
with their judgment on such matters.
A copy of our Annual Report on
Form 10-K
for the year ended December 31, 2006, as filed with the
Securities and Exchange Commission, not including exhibits, will
be mailed without charge to stockholders, upon written request.
Requests should be addressed to Thomas W. Roehrig, Secretary,
Dayton Superior Corporation, 7777 Washington Village Drive,
Suite 130, Dayton, Ohio45459.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 24, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen Berger, Steven M. Berzin, and Eric R. Zimmerman as
proxies, each with full power of substitution, to represent and vote as designated on the reverse
side, all the shares of Common Stock of Dayton Superior Corporation held of record by the
undersigned on April 23, 2007, at the Annual Meeting of Stockholders to be held at the Company’s
Conference Center, located at, 721 Richard Street, Miamisburg, Ohio45342, on May 24, 2007, or any
adjournment or postponement thereof.
ę Please detach along perforated line and mail in the envelope provided. ę
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
1. Election of Directors:
NOMINEES:
o
FOR ALL NOMINEES
ˇ Stephen Berger
ˇ William F. Hopkins
o
WITHHOLD AUTHORITY
FOR ALL NOMINEES
o
FOR ALL EXCEPT
(See instructions below)
INSTRUCTION:
To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT”
and fill in the circle next to each nominee you wish to withhold, as shown here:
l
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
o
FOR
AGAINST
ABSTAIN
2.
Approval of the Fifth Amendment to the Company’s
2000 Stock Option Plan.
o
o
o
3.
In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
This proxy is solicited on behalf of the Board of Directors of the
Company. This proxy, when properly executed, will be voted in
accordance with the instructions given above. If no instructions are
given, this proxy will be voted “FOR” election of the Directors and
“FOR” proposal 2.
Signature of Stockholder
Date:
Signature of Stockholder
Date:
Note:
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
MAIL - Date, sign and mail your proxy card in the
envelope provided as soon as possible.
- OR -
TELEPHONE - Call toll-free 1-800-PROXIES
(1-800-776-9437) from any touch-tone telephone and follow the
instructions. Have your proxy card available when you call.
- OR -
INTERNET - Access “www.voteproxy.com” and
follow the on-screen instructions. Have your proxy card
available when you access the web page.
- OR -
IN PERSON - You may vote your shares in person
by attending the Annual Meeting.
COMPANY NUMBER
ACCOUNT NUMBER
You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM
Eastern Time the day before the cut-off or meeting date.
ę Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. ę
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE ORBLACK INK AS SHOWN HERE x
1. Election of Directors:
NOMINEES:
o
FOR ALL NOMINEES
ˇ Stephen Berger
ˇ William F. Hopkins
o
WITHHOLD AUTHORITY
FOR ALL NOMINEES
o
FOR ALL EXCEPT
(See instructions below)
INSTRUCTION:
To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT”
and fill in the circle next to each nominee you wish to withhold, as shown here:
l
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
o
FOR
AGAINST
ABSTAIN
2.
Approval of the Fifth Amendment to the Company’s
2000 Stock Option Plan.
o
o
o
3.
In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
This proxy is solicited on behalf of the Board of Directors of the
Company. This proxy, when properly executed, will be voted in
accordance with the instructions given above. If no instructions are
given, this proxy will be voted “FOR” election of the Directors and
“FOR” proposal 2.
Signature of Stockholder
Date:
Signature of Stockholder
Date:
Note:
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
Dates Referenced Herein and Documents Incorporated by Reference