SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
DEVCON INTERNATIONAL CORP.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
DEVCON INTERNATIONAL CORP.
1350 EAST NEWPORT CENTER DRIVE, SUITE 201
DEERFIELD BEACH, FLORIDA 33442
----------------
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 1998
----------------
To the shareholders of
Devcon International Corp.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
Devcon International Corp., a Florida corporation (the "Company"), will be held
at the Deerfield Beach Hilton, Hillsboro Executive Center North, 100 Fairway
Drive, Deerfield Beach, Florida on Friday, June 12, 1998 at 3:00 p.m., local
time, for the following purposes:
1. To elect five persons to the Company's Board of Directors to hold
office until their terms shall expire or until their successors are duly
elected and qualified;
2. To amend the Company's Restated Articles of Incorporation (the
"Articles") to provide for a Board of Directors consisting of not less than
five (5) nor more than seven (7) directors, as specified from time to time
by the Board of Directors;
3. To ratify the reappointment of KPMG Peat Marwick LLP, independent
certified public accountants, as the Company's auditor for 1998; and
4. To transact such other business as may properly come before the
meeting and any and all adjournments or postponements thereof.
The Board of Directors has fixed the close of business on May 1, 1998 as
the record date for determining those shareholders entitled to notice of and to
vote at the 1998 Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present at the meeting, please sign, date
and return the enclosed proxy card as promptly as possible in the enclosed
pre-addressed stamped envelope.
By Order of the Board of Directors,
/S/ DONALD L. SMITH, JR.
----------------------------------------
Donald L. Smith, Jr., President
Deerfield Beach, Florida
May 8, 1998
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE
RESPECTFULLY URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY
AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND
THE MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE>
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
DEVCON INTERNATIONAL CORP.
----------------
PROXY STATEMENT
----------------
DATE, TIME AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Devcon International Corp., a Florida corporation
(the "Company"), of proxies from the holders of the Company's Common Stock, par
value $0.10 per share (the "Common Stock"), for use at the 1998 Annual Meeting
of Shareholders of the Company to be held on June 12, 1998, and any
adjournments or postponements thereof (the "Annual Meeting"), pursuant to the
enclosed Notice of Annual Meeting. It is expected that this Proxy Statement and
the enclosed form of proxy will be first mailed to shareholders of the Company
on or about May 8, 1998. The complete mailing address, including zip code, of
the Company's principal executive offices is 1350 East Newport Center Drive,
Suite 201, Deerfield Beach, Florida 33442.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving a proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date. No revocation will be effective, however, until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone and facsimile. They will receive no
compensation therefor in addition to their regular salaries. The Company may
request banks, brokers and other custodians, nominees and fiduciaries to
forward copies of the proxy material to their principals and to request
authority for the execution of proxies. The Company may reimburse such persons
for their expenses in so doing.
<PAGE>
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
1. The election of five directors to serve until the next annual meeting
of shareholders or until their successors are duly elected and
qualified;
2. To amend the Company's Restated Articles of Incorporation (the
"Articles") to provide for a Board of Directors consisting of not less
than five (5) nor more than seven (7) directors, as specified from
time to time by the Board of Directors;
3. The ratification of the reappointment of KPMG Peat Marwick, LLP,
independent certified public accountants, as the Company's auditor for
1998; and
4. Such other business as may properly come before the Annual Meeting,
including any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (a) for the election of the five nominees for director named
below, and (b) in favor of all other proposals described on the Notice of
Annual Meeting. In the event a shareholder specifies a different choice by
means of the enclosed proxy, his shares will be voted in accordance with the
specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on May 1, 1998, as
the record date (the "Record Date") for determining shareholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date
there were 4,498,935 shares of Common Stock issued and outstanding, all of
which are entitled to be voted at the Annual Meeting. Holders of Common Stock
are entitled to one vote per share on each matter that is submitted to
shareholders for approval.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. In order to be elected, nominees for director
must receive a plurality of the votes cast by holders of shares of Common Stock
voting in person or by proxy at the Annual Meeting. The approval of proposals 2
and 3 will require an affirmative vote of the holders of a plurality of the
shares of the Common Stock of the Company voting in person or by proxy at the
Annual Meeting. Abstentions are considered as shares present and entitled to
vote for purposes of determining the outcome of any matter submitted to the
shareholders for a vote, but are not counted as votes cast "for" or "against"
any matter. The inspector of elections will treat shares referred to as "broker
or nominee non-votes" (shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power on a particular matter) as shares that are present and entitled to vote
for purposes of determining the presence of a quorum. For
2
<PAGE>
purposes of determining the outcome of any matter as to which the proxies
reflect broker or nominee non-votes, shares represented by such proxies will be
treated as not present and not entitled to vote on that subject matter.
Accordingly, such shares would not be considered by the inspectors as shares
entitled to vote on that subject matter and therefor would not be considered by
the inspectors when counting votes cast on the matter. If less than a majority
of the outstanding shares of Common Stock are represented at the meeting, a
majority of the shares so represented may adjourn the meeting from time to time
without further notice.
SECURITY OWNERSHIP
The following table sets forth as of the Record Date the number of shares
beneficially owned and the percentage of ownership of the Company's Common
Stock by (i) each person known to the Company to own beneficially more than 5
percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each of the three executive officers of the Company who had annual salary
and bonus for 1997 in excess of $100,000 (the "Named Executive Officers"),
including the President and Chief Executive Officer, and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(2)
-------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES PERCENT
- -------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Donald L. Smith, Jr.(3) .................................................. 1,263,431 27.62%
Smithcon Family Investments, Ltd(4) ...................................... 980,372 21.79%
Robert A. Steele(5) ...................................................... 233,000 5.16%
Robert L. Kester(6) ...................................................... 14,600 *
Richard L. Hornsby(7) .................................................... 58,125 1.28%
Donald L. Smith, III(8) .................................................. 103,814 2.29%
W. Douglas Pitts(9) ...................................................... 9,000 *
Henry C. Obenauf ......................................................... 44,700 *
Dimensional Fund Advisors, Inc.(10) ...................................... 300,100 6.67%
Franklin Resources, Inc., Charles B. Johnson,
Rupert H. Johnson, Jr. and Franklin Advisory Services, Inc.(11) ........ 446,200 9.92%
Tweedy, Browne Company L.P. and TBK Partners, L.P.(12) ................... 440,589 9.79%
All directors and executive officer
as a group (8 persons) ................................................. 1,696,670 36.37%
</TABLE>
- ----------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the beneficial owners
is 1350 East Newport Center Drive, Suite 201, Deerfield Beach, Florida
33442.
(2) Unless otherwise indicated each person or group has sole voting and
investment power with respect to all such shares.
(3) All 980,372 shares held by Smithcon Family Investments, Ltd. are deemed
beneficially owned by Donald L. Smith, Jr. and are included in the above
table for each of Mr. Smith and Smithcon
3
<PAGE>
Family Investments, Ltd. Mr. Smith's holdings include (i) all 980,372
shares held by Smithcon Family Investments, Ltd., an entity controlled by
Smithcon Investments, Inc. (the "Corporation"), a corporation that is
wholly owned by Mr. Smith, (ii) 18,628 shares held by the Corporation and
(iii) 75,000 shares issuable upon exercise of options that are presently
exercisable.
(4) All 980,372 shares held by Smithcon Family Investments, Ltd. are deemed
beneficially owned by Donald L. Smith, Jr. and are included in the above
table for each of Mr. Smith and Smithcon Family Investments, Ltd. See
footnote (3) for a description of the relationship between Smithcon Family
Investments, Ltd. and Mr. Smith.
(5) Includes 13,000 shares issuable upon exercise of options that are
presently exercisable.
(6) Includes 13,000 shares issuable upon exercise of options that are
presently exercisable.
(7) Includes 28,125 shares issuable upon exercise of options granted by the
Company that are presently exercisable and 30,000 shares issuable upon
exercise of an option that is presently exercisable, granted by Mr. Donald
L. Smith, Jr., to Mr. Hornsby to purchase shares of Mr. Smith's Common
Stock at an exercise price of $2.33 per share. Does not include 29,250
shares subject to options held by Mr. Hornsby that are not presently
exercisable.
(8) Includes (w) 33,964 shares directly owned by Mr. Smith and his wife (x)
42,400 shares held in trust by Donald L. Smith, III for the benefit of his
minor children, to which shares Mr. Smith disclaims beneficial ownership
and (y) 27,450 shares issuable upon exercise of options that are presently
exercisable. Does not include 25,500 shares issuable upon exercise of
options that are not presently exercisable.
(9) Includes 9,000 shares issuable upon exercise of options that are presently
exercisable.
(10) The address for Dimensional Fund Advisors, Inc. ("Dimensional") is 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401. Dimensional, a
registered investment advisor, is deemed to have beneficial ownership of
300,100 shares (Dimensional has sole dispositive power over all such
shares and sole voting power with respect to 221,800 of such shares), all
of which shares are held by advisory clients of Dimensional. Dimensional
disclaims beneficial ownership of all such shares. The information with
respect to Dimensional is based solely on a Schedule 13G dated February 9,
1998.
(11) The address for Franklin Resources, Inc. ("Franklin") is 777 Mariners
Island Boulevard, P.O. Box 7777 San Mateo, California 94403-7777. Franklin
is deemed to have beneficial ownership of such shares which are
beneficially owned by one or more open or closed-end investment companies
or other managed accounts which are advised by direct and indirect
investment advisory subsidiaries of Franklin. Such securities may also be
deemed to be beneficially owned by Charles B. Johnson, and Rupert H.
Johnson, Jr., each of whom owns greater than 10% of the outstanding Common
Stock of Franklin, and by Franklin Advisory Services, Inc., an investment
adviser subsidiary of Franklin ("FAI"). Franklin, its principal
shareholders and FAI disclaim beneficial ownership of all such shares. The
information with respect to Franklin is based solely on a Schedule 13G
dated January 16, 1998.
4
<PAGE>
(12) The address for Tweedy, Browne Company L.P. and TBK Partners, L.P. is 52
Vanderbilt Avenue, New York, New York 10017. Includes 400,777 shares with
respect to which Tweedy, Browne Company, L.P. has sole voting power, 3,000
shares to which TBK Partners, L.P. has sole voting and dispositive power,
and 440,589 shares to which Tweedy, Browne Company, L.P. has shared
dispositive power. Certain of the general partners of Tweedy, Browne
Company, L.P. and TBK Partners, L.P. may be deemed to have sole power to
vote certain shares owned by Tweedy, Browne Company L.P. or TBK Partners,
L.P. All of the shares are held in accounts of various customers of
Tweedy, Browne Company, L.P. with respect to which Tweedy, Browne Company,
L.P. has investment discretion. Tweedy, Browne Company, L.P. and TBK
Partners, L.P. each disclaim beneficial ownership of the shares held in
such accounts. TBK Partners, L.P. and Tweedy, Browne Company L.P. have
each disclaimed beneficial ownership of shares held by each other. The
information with respect to Tweedy, Browne Company L.P. and TBK Partners,
L.P. is based solely on a Schedule 13D, dated January 24, 1994, Amendment
No. 1 to Schedule 13D, dated February 2, 1994 and Amendment No. 2 to
Schedule 13D, dated September 14, 1997.
ELECTION OF DIRECTORS
NOMINEES
The Company's Articles and Amended and Restated Bylaws presently provide
that the number of directors to serve on the Board of Directors shall be fixed
by the shareholders, and if not so fixed, shall be three. The Company is
currently seeking to amend this provision of its Articles. See "Amendment to
Articles To Provide for a Board of Not Less than Five Nor More than Seven
Directors as Determined by the Board." The Company's shareholders have
previously fixed the number of directors at five. Each director elected at the
Annual Meeting will serve as director for a term expiring at the 1999 Annual
Meeting of Shareholders, expected to be held in June 1999, or until his
successor has been duly elected and qualified. Messrs. Smith, Hornsby, Kester,
Steele and Pitts have been nominated for election as directors and proxies will
be voted for such persons absent contrary instructions.
The Board of Directors does not believe that any nominee will refuse to
act or be unable to accept election. In the event, however, that a nominee for
director is unable to accept election or if any other unforeseen contingencies
should arise, it is intended that proxies will be voted for the remaining
nominees and for such other person as may be designated by the Board of
Directors, unless it is directed by a proxy to do otherwise.
Each of the nominees for election as a director of the Company is a
current member of the Board of Directors. Mr. Smith has served as a director
since 1951, Mr. Kester has served as a director since 1972, Mr. Hornsby has
served as a director since 1975, Mr. Steele has served as a director since 1989
and Mr. Pitts has served as a director since 1996.
5
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD WITH THE COMPANY
- ------------------------------- ----- -------------------------------------------
<S> <C> <C>
Donald L. Smith, Jr. .......... 76 Chairman of the Board, President and Chief
Executive Officer
Richard L. Hornsby ............ 62 Director and Executive Vice President
Robert L. Kester .............. 78 Director
Robert A. Steele .............. 82 Director
W. Douglas Pitts .............. 58 Director
Jan A. Norelid ................ 44 Vice President--Finance and
Chief Financial Officer
Henry C. Obenauf .............. 68 Vice President--Engineering
Donald L. Smith, III .......... 45 Vice President--Construction Operations
</TABLE>
Donald L. Smith, Jr., a co-founder of the Company, has served as its
Chairman of the Board, President and Chief Executive Officer since its
formation in 1951.
Richard L. Hornsby was appointed the Company's Executive Vice President in
March 1989. Mr. Hornsby served as Vice President of the Company from August
1986 to February 1989. From September 1981 until July 1986 he was Financial
Manager of R.O.L., Inc. and L.O.R., Inc., companies primarily engaged in
various private investment activities. He has been a director of the Company
since 1975 and served as Vice President-Finance from 1972 to 1977.
Robert L. Kester, a director of the Company since 1972, is a private
investor and is Chairman of the Board of Big Sky Western Bank in Big Sky,
Montana. Mr. Kester retired from active employment with Florida Coast Bank of
Pompano Beach, Florida after its acquisition by Barnett Bank of Florida in
1984.
Robert A. Steele, a director of the Company since May 1989, has been
Chairman of the Board, Chief Executive Officer and a principal shareholder of
SFM Leasing Company, Inc. and RAMS Leasing Company, Inc. since 1972. Both
companies were engaged in the heavy truck and equipment leasing business.
Currently, these companies are primarily engaged in various investment
activities. Mr. Steele has also been managing partner of Steele Associates,
Ltd. since 1981 and SFM Realty Associates since 1985, both of which are
primarily engaged in various investment activities.
W. Douglas Pitts, a director of the Company since 1996, is Chairman of the
Board and Chief Executive Officer of The Courtelis Company, which is engaged
primarily in various real estate development activities. Prior to his selection
as Chairman of the Board and Chief Executive Officer in December 1995, Mr.
Pitts served as Executive Vice President and Chief Operating Officer of The
Courtelis Company from 1983 to 1995.
Jan A. Norelid was appointed Vice President-Finance and Chief Financial
Officer in October 1997. From January 1996 until September 1997 he owned and
operated a printing company. Prior to that and from January 1991 he served as
Chief Financial Officer for Althin Medical, Inc., a medical device manufacturer
in Miami Lakes, Florida.
6
<PAGE>
Henry C. Obenauf was appointed Vice President-Engineering of the Company
in March 1989, after having served as Vice President of the Company since 1977.
Mr. Obenauf has been employed by the Company for over 22 years.
Donald L. Smith, III, was appointed Vice President-Construction Operations
for the Company in December 1992. Prior to that and from March 1992, he served
as Assistant Vice President of Construction Operations-South Florida and
Caribbean of the Company. Mr. Smith joined the Company in 1976 and has served
in various supervisory and managerial positions with the Company since that
time.
The Company's directors hold office until the next annual meeting of
shareholders and until their successors have been duly elected and qualified.
The Company's officers are elected annually by the Board of Directors and serve
at the discretion of the Board. There are no arrangements or understandings
with respect to the selection of officers or directors. The Company pays each
director other than Mr. Smith an annual retainer of $4,000. Non-employee
directors who serve on the Compensation Committee or Audit Committee are paid
an annual fee of $1,000 or $500, depending on the level of responsibility they
assume.
Pursuant to the 1992 Directors' Stock Option Plan (the "Directors' Plan"),
the Company's non-employee directors were granted options to purchase 8,000
shares of Common Stock upon the approval of the Directors' Plan by
shareholders. A new non-employee director would receive a similar option upon
the commencement of service as a director. In addition, each non-employee
director is granted options to purchase 1,000 shares of Common Stock after each
annual meeting of the Company, pursuant to the Directors' Plan. For purposes of
the Directors' Plan, a director is a non-employee director if he does not
receive regular compensation from the Company or its subsidiaries other than
directors fees and reimbursement for expenses, even if such director is an
officer of a subsidiary of the Company.
Donald L. Smith, III is the son of Donald L. Smith, Jr., the Company's
Chairman, President and Chief Executive Officer. Aside from the foregoing,
there are no family relationships between any directors or executive officers
of the Company. Certain other children of Donald L. Smith, Jr. are employed by
the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1997, the Board of Directors took
certain actions by unanimous written consent and held six (6) meetings. During
1997, no incumbent director attended fewer than 75 percent of the aggregate of
(i) the number of meetings of the Board of Directors held during the period he
served on the Board, and (ii) the number of meetings of committees of the Board
of Directors held during the period he served on such committee. The Board of
Directors has two standing committees, the Audit Committee and the Compensation
Committee.
Messrs. Kester, Hornsby and Steele are members of the Audit Committee,
which met one time during 1997. The duties and responsibilities of the Audit
Committee include (a) recommending to the full Board the appointment of the
Company's auditors and any termination of engagement, (b) reviewing the plan
and scope of audits, (c) reviewing the Company's significant accounting
policies and internal controls and (d) having general responsibility for all
related auditing matters.
7
<PAGE>
Messrs. Kester and Steele were members of the Company's Compensation
Committee, which met two times during 1997. This committee administers the 1992
Stock Option Plan and has the power and authority to (a) determine the persons
to be awarded options and the terms thereof and (b) construe and interpret the
1992 Stock Option Plan. This Committee also is responsible for the final review
and determination of executive compensation.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded to, earned by or paid
to the Company's Chief Executive Officer and each of the other two executive
officers of the Company who had an annual salary and bonus in 1997 in excess of
$100,000 (collectively, the "Named Executive Officers"). The Company has not
granted any restricted stock awards or stock appreciation rights.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- -------------------------
AWARDS PAYOUTS
OTHER ANNUAL ------ ------- ALL OTHER
NAME AND FISCAL COMPENSATION LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) PAYOUTS($) ($)(2)
- -------------------------- -------- ----------- ---------- -------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald L. Smith, Jr. 1997 260,000 -- -- -- -- 7,800
Chairman of the Board, 1996 260,000 -- -- -- -- 7,200
President and 1995 260,000 -- -- -- -- 4,800
Chief Executive Officer
Richard L. Hornsby 1997 165,000 -- 9,000 -- -- 72,436
Executive Vice President 1996 165,000 -- 9,000 -- -- 72,286
1995 165,000 -- 9,000 30,000 -- 70,736
Henry C. Obenauf 1997 101,000 5,414 -- -- -- 3,033
Vice President-- 1996 91,796 5,074 -- -- -- 2,754
Engineering 1995 91,796 3,790 -- -- -- 2,754
Donald L. Smith, III 1997 99,465 4,331 5,000 -- -- 10,598
Vice President-- 1996 98,900 8,000 5,000 -- -- 10,418
Construction Operations 1995 98,450 10,000 5,000 30,000 -- 10,418
</TABLE>
- ----------------
(1) Does not include the dollar value of personal benefits, such as the cost of
automobiles and health insurance, the aggregate value of which for each
named executive officer was less than 10% of such executive officer's
salary and bonus. Includes $4,000 a year for Mr. Hornsby, representing a
retainer paid to all directors other than Mr. Smith and $5,000 per year
for Messrs. Hornsby and Smith, III for service on a management policy
committee.
(2) Represents (i) the cost of term and non term life insurance coverage paid
to the insurance company as premiums for policies on the lives of Messrs.
Hornsby and Smith, III in 1996, 1995 and 1994
8
<PAGE>
pursuant to split dollar life insurance policies on the lives of such
executive officers and (ii) the Company's match of a 401(k) contribution
made by each named executive officer. The Company will be reimbursed for
its non term premium payments at such time as benefits are paid under the
policies or the policies are terminated and the cash proceeds distributed.
OPTION GRANTS AND LONG-TERM INCENTIVE AWARDS
No options were granted in 1997 other than options to purchase 30,000
shares at $5.00 per share which were granted to Jan A. Norelid in connection
with the commencement of his employment with the Company.
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning unexercised
stock options held by the Named Executive Officers as of the end of the 1997
year. No stock appreciation rights have been granted or are outstanding.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ON EXERCISE REALIZED ----------------------------- ----------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE(3)
- ------------------------------ ------------- --------- ------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Smith, Jr. ......... -- -- 75,000 -- 190,875 --
Richard L. Hornsby ........... -- -- 28,125 29,250 41,038 28,631
Henry C. Obenauf ............. -- -- -- -- -- --
Donald L. Smith, III ......... -- -- 27,450 25,500 39,320 19,088
</TABLE>
- ----------------
(1) The closing price for the Company's Common Stock as reported on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") on December 31, 1997 was $4.88. Value is calculated by
multiplying (a) the difference between $4.88 and the option exercise price
by (b) the number of shares of Common Stock underlying the option.
(2) For certain exercisable shares, exercise price exceeded closing price at
December 31, 1997. Values shown include only in the money exercisable
shares.
(3) For certain unexercisable shares, exercise price exceeded closing price at
December 31, 1997. Values shown include only in the money unexercisable
shares.
9
<PAGE>
CERTAIN TRANSACTIONS
The Company leases a 4.4 acre parcel of real property from Mr. Donald L.
Smith, Jr., pursuant to which Mr. Smith received $49,303 in annual rent in
1997.
The Company had borrowed approximately $6.3 million from Donald L. Smith,
Jr. at December 31, 1997. The note is unsecured and bears interest at the prime
interest rate. Eight hundred thousand dollars is due on demand and $5.5 million
is due on January 1, 1999. The officer has the option to make the entire note
due on demand should a change of control occur. A change of control has
occurred if a person or group acquires 15% or more of the Company's Common
Stock or announces a tender offer, the consummation of which would result in
ownership by a person or group of 15% of more of the Company's Common Stock.
The Company repaid $700,000 in principal to the officer in the first quarter of
1998.
In 1989, an Antiguan subsidiary of the Company obtained a minority
interest in a partnership that acquired a manufacturer of acoustical ceiling
tiles in Matamoros, Mexico and that is engaged in the sale, distribution and
marketing of such tiles. The subsidiary invested approximately $1.2 million in
the partnership for a 29 percent interest and two of the Company's officers and
directors, Messrs. Smith, Jr. and Hornsby, obtained an 11 percent interest for
which they paid $450,000. In January 1994, another Antiguan subsidiary of the
Company became the new general partner of the partnership and was assigned all
the rights and assumed all the liabilities of the former Antiguan subsidiary
with respect to the partnership. In connection with an amendment of the
partnership agreement, the Antiguan subsidiary and the Company, as applicable,
contributed a note receivable of $505,000 from the partnership into equity and
contributed approximately $235,000 of equipment to the partnership. The
Antiguan subsidiary's ownership interest in the partnership was increased to
64.47 percent. The ownership interest of Messrs. Smith, Jr. and Hornsby was
reduced to 6.47 percent.
In November 1995 the Company decided to sell this operation because of its
poor operating results and uncertain prospects for improvement. The Company's
investment in the partnership was written down to its estimated net realizable
value of approximately $749,000, which consists principally of property,
equipment and inventory with a net book value of approximately $1.4 million,
along with debt of approximately $621,000. The Company sold its interest in the
ceiling tile business in September 1996 in exchange for one secured promissory
note in the amount of $600,000 and one unsecured promissory note in the amount
of $385,000, assumed certain liabilities of the partnership and took an
additional loss on disposal of approximately $488,000. At December 31, 1997,
$600,000 remained outstanding on the secured promissory note and $216,000 in
principal remained outstanding on the unsecured promissory note.
The Company has receivables due from certain officers and employees as a
result of payments made by the Company pursuant to a split dollar life
insurance plan. The Company's advances to pay premiums are secured by a pledge
of the cash value of the issued policies. Amounts due the Company under the
split dollar plans aggregated $583,264 at December 31, 1997, including $435,684
from Richard L. Hornsby and $48,294 from Donald L. Smith, III.
Commencing in July 1996 and through December 31, 1997, Donald L. Smith,
Jr., had invested $266,500 and advanced $117,650 to a joint venture seeking to
develop a resort in the Bahamas. In
10
<PAGE>
exchange for his investment and agreement to make the advance and certain
future advances, Mr. Smith had a 21% interest in the joint venture at December
31, 1997. Commencing in August 1996 and through December 31, 1997, Robert A.
Steele had invested $118,900 for a 6% interest in the joint venture. In October
1997, the Company invested $123,000 and provided certain services for a 7%
interest in this venture.
In September 1997, Donald L. Smith, Jr. guaranteed a supersedeas bond
written for the Company in the amount of $3.76 million in connection with a
judgment entered against the Company in certain litigation.
Henry C. Obenauf is indebted to the Company in the principal amount of
$221,488 pursuant to several promissory notes. The indebtedness was incurred by
Mr. Obenauf to fund the exercise price of his options to purchase Common Stock
of the Company and income taxes related to such exercise.
The Company believes that, to the extent applicable, the foregoing
transactions were on terms no less favorable to the Company than those that
could have been obtained from independent third parties.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock. Officers, directors and greater than 10 percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, during the fiscal year ended December 31, 1997 all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee members are Robert L. Kester and Robert A.
Steele.
Commencing in July 1996 and through December 31, 1997, Donald L. Smith,
Jr., had invested $266,500 and advanced $117,650 to a joint venture seeking to
develop a resort in the Bahamas. In exchange for his investment and agreement
to make the advance, Mr. Smith had a 21% interest in the joint venture at
December 31, 1997. Commencing in August 1996 and through December 31, 1997,
Robert A. Steele had invested $118,900 for a 6% interest in the joint venture.
In October 1997, the Company invested $123,000 and provided certain services
for a 7% interest in this venture.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is primarily responsible for determining the
compensation of the Company's executive officers, although the Company's Chief
Executive Officer and President makes recommendations to the Compensation
Committee as to the compensation of the Company's executive officers.
11
<PAGE>
The Compensation Committee's general philosophy with respect to the
compensation of the Company's executive officers is to offer competitive
compensation programs designed to attract and retain qualified executives, to
motivate performance to achieve specific goals and to align the interests of
senior management with the long-term interests of the Company's shareholders.
In determining compensation, job level, individual performance and Company
performance are considered. More specifically, factors considered include the
Chief Executive Officer and President's recommendations, specific
accomplishments of the executive officers, the Company's historical and
projected performance, sales, earnings, financial condition and return on
equity and economic conditions. These factors and the ultimate determination of
compensation are subjective. The Company attempts to provide incentives to
retain qualified executive officers, but also believes that the compensation
paid to its executives is well within the range of compensation paid to
similarly situated executives at other companies in similar industries or at
companies having a similar market capitalization. Given the level of the
Company's executive officer compensation, the Committee does not believe that
it is necessary to incur the expense of formal studies or market analyses.
Of all the components of compensation, salary is most closely related to
individual performance. Strong emphasis is given to the Chief Executive
Officer's recommendations, given his experience with the Company since its
origin and his day-to-day contact with the other executive officers.
Consideration is also given to the amount deemed necessary to retain an
executive officer's services. These considerations are subjective and not
subject to specific criteria. Company performance is also a factor and given
that the Company did not meet internal economic goals, salaries for executive
officers remained basically the same in 1997 as compared to 1996. Based on its
experience with companies generally and in the Company's industry, and without
utilizing any formal market studies, the Committee believes that the salaries
paid by the Company to its executive officers are moderate by comparison to
external standards. For this reason and since individual performances did not
merit a decrease in the view of the Committee, salaries did not decrease. The
Committee took special notice of several factors, including the additional time
and effort expended by management and difficult economic conditions in certain
of the Company's Caribbean operations. This analysis was also subjective and
not subject to specific criteria.
While bonuses are also related to individual performance, Company
performance is emphasized more in determining bonus payments than in
determining salary. This is particularly true at the highest level of
management. In considering performance, generally earnings are most emphasized,
although revenues and financial condition are also considered. The amount of
any bonus is not tied to specific performance criteria, but is also
subjectively determined based upon an analysis of the aforementioned factors.
An executive officer could receive a bonus in a year where the Company is not
profitable, based upon his individual performance or areas of responsibility.
As the Company had a significant loss in 1997, executive officers either did
not receive bonuses or received nominal bonuses.
The Company also attempts to provide incentives to its executive officers
to remain with the Company and to improve performance through the grant of
stock options. Options allow executive officers to share, to some extent, in
shareholders' return on equity. Typically, Company options vest in staggered
amounts over a long-term, such as a given percentage every one or three years.
The determination of how many options to grant to an executive officer depends,
to varying degrees, on the number of outstanding options held by the executive
officer, his job level and performance and
12
<PAGE>
Company performance. Given that the Company has had significant losses, no
additional options were granted in 1997, except to one new executive officer in
connection with his hiring.
As a result of the foregoing factors, primarily the need for more
consistent profitability, the President and Chief Executive Officer's salary
was not increased in 1997. In addition, he received no bonus or new grants of
options. In determining to maintain the President's compensation at its
existing level the Committee took into consideration, in addition to the other
factors mentioned above, the time and effort being expended by the President,
with respect to bonus, the Company's performance in 1997, with respect to
salary, the Company's results in 1996, the President's experience and expertise
in handling the issues facing the Company and the perceived progress towards
enabling the Company to meet future goals. The Committee, with the concurrence
of the President and Chief Executive Officer, decided not to increase his
compensation in view of the Company's significant losses. The final
determination, after reviewing these factors, was subjective.
The Company had various obligations under its 401(k) plan and with respect
to split dollar insurance premiums, all of which were met.
In December 1993, the Internal Revenue Service issued proposed regulations
concerning compliance with Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Section 162(m) generally disallows a public company's
deduction for compensation to any one of certain employees (primarily executive
officers) in excess of $1.0 million per year unless the compensation is
pursuant to a plan or performance goals approved by the public company's
shareholders. None of the Named Executive Officers presently receives, and the
Compensation Committee does not anticipate that such persons will receive,
annual cash compensation in excess of the $1.0 million cap provided in Section
162(m). The Compensation Committee intends to take any necessary steps to
ensure compliance with Section 162(m) of the Code.
ROBERT L. KESTER, ROBERT A. STEELE
13
<PAGE>
PERFORMANCE GRAPH
The following graph shows the cumulative total shareholder return on the
Company's Common Stock over the last five fiscal years as compared to the total
returns of the NASDAQ Stock Market Index and a group of peer companies (the
"Peer Group"). Returns are based on the change in year-end to year-end price
and assume reinvested dividends. The graph assumes $100 was invested on
December 31, 1992 in the Company's Common Stock, the NASDAQ Stock Market Index
and the Peer Group.
The Peer Group includes the Company; Florida Rock Industries; Granite
Construction, Inc.; Lafarge Corp.; and Medusa Corp. The Peer Group consists of
companies that are engaged in the concrete and related products business and/or
the land development contracting business. Companies included in the Peer Group
were weighted by market capitalization from the beginning of each period for
which a return is indicated.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ AND SELECTED PEERS
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
12/92 12/93 12/94 12/95 12/96 12/97
------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
DEVCON INTL CORP DEVC 100 59 85 82 63 50
PEER GROUP PPEER1 100 160 129 147 164 268
NASDAQ STOCK MARKET--US INAS 100 115 112 159 195 240
</TABLE>
14
<PAGE>
AMENDMENT TO ARTICLES TO PROVIDE FOR A
BOARD OF NOT LESS THAN FIVE (5) NOR MORE THAN SEVEN (7)
DIRECTORS AS DETERMINED BY THE BOARD
The Board of Directors has adopted, subject to shareholder approval, an
amendment to Article V of the Company's Articles, which would provide for a
Board of Directors consisting of not less than five (5) nor more than seven (7)
directors. Currently, Article V of the Articles states as follows:
"The business of the corporation shall be managed by its Board of
Directors which shall consist of at least three members, with the exact
number to be specified by the shareholders from time to time."
The proposed amendment to Article V of the Articles would still provide
that the business of the corporation shall be managed by its Board, but would
read in its entirety as follows:
"The business of the corporation shall be managed by its Board of
Directors, which shall consist of no less than five (5) members and no
more than seven (7) members, with the exact number to be as specified
from time to time by the Board of Directors."
The proposed amendment increases the minimum size of the Board of
Directors from three (3) directors to five (5) directors, which is its current
size; limits the maximum size of the Board, which was previously not limited;
and gives the Board the power, previously given to shareholders, to determine
the number of directors between five (5) and seven (7).
The Company's Bylaws provide in Article Three, Section One, that the
shareholders shall fix the number of directors to serve on the Board of
Directors, and in Article Seven, that the Bylaws may be amended by the Board of
Directors, except that to the extent Article Three, Section One states that
shareholders shall fix the number of directors, this provision may not be
amended without first amending the same provision in the Articles. If the
Company's shareholders approve the proposed amendment to Article V of the
Articles, the Board of Directors intends to amend Article Three, Section One
and Article Seven of the Bylaws to be consistent with the proposed amended
Article V of the Articles.
If the proposed amendment is adopted, since the Board of Directors has
nominated, and shareholders at the Meeting will be requested to elect, five (5)
persons as directors of the Company, the Board, pursuant to the Bylaws, will
have the right pursuant to the Bylaws to fill the remaining vacancies on the
Board by the affirmative vote of a majority of the current directors even if
less than a quorum, without further shareholder approval. If the proposal is
approved, the Board would have the power to increase its size, up to seven (7),
and to appoint additional directors to fill the vacancies.
The Board believes that adoption of this proposal would save the Company
the time and expense associated with requiring a shareholder vote each time
there is a change in size of the Board of Directors. The Board is considering
adding at least one additional director and increasing the size of the Board if
an appropriate candidate is found.
The text of the proposed amendment to the Articles that would be included
as new Article V is set forth in Appendix A to this Proxy Statement and should
be read in its entirety by shareholders.
15
<PAGE>
The affirmative vote of the holders of a plurality of the shares of Common
Stock represented at the meeting is required for approval of proposed Article V
of the Articles.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR
THE PROPOSED AMENDMENT TO ARTICLE V OF THE ARTICLES TO PROVIDE FOR A BOARD OF
DIRECTORS CONSISTING OF NOT LESS THAN FIVE (5) NOR MORE THAN SEVEN (7)
DIRECTORS, AS SPECIFIED FROM TIME TO TIME BY THE BOARD OF DIRECTORS.
RATIFICATION OF THE REAPPOINTMENT OF THE COMPANY'S AUDITOR
The firm of KPMG Peat Marwick LLP, independent certified public
accountants, has been the Company's auditor since 1980 and has advised the
Company that the firm does not have any direct financial interest or indirect
financial interest in the Company or any of its subsidiaries, nor has such firm
had any such interest in connection with the Company or its subsidiaries during
the past 4 years, other than in its capacity as the Company's independent
certified public accountant. The Board of Directors, on the recommendation of
the Company's Audit Committee, has selected KPMG Peat Marwick LLP as the
Company's auditor for the year ended December 31, 1998. Although the Board is
not required to do so, it is submitting its selection of the Company's auditors
for ratification at the Annual Meeting, in order to ascertain the views of its
shareholders. The Board will not be bound by the vote of the shareholders,
however, if the selection is not ratified, the Board would reconsider its
selection. One or more representatives of KPMG Peat Marwick LLP are expected to
be present at the Annual Meeting, will have the opportunity to make a statement
if they desire to do so, and are expected to be available to respond to
appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR
RATIFICATION OF THE REAPPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
PRINCIPAL INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote proxies
as in their discretion they may deem appropriate, unless they are directed by a
proxy to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal for action at the
1999 Annual Meeting of Shareholders must deliver a proposal in writing to the
Company's principal executive offices on or before January 12, 1998.
By Order of the Board of Directors,
/S/ DONALD L. SMITH, JR.
----------------------------------------
Donald L. Smith, Jr., President
Deerfield Beach, Florida
May 8, 1998
16
<PAGE>
APPENDIX A
ARTICLE V
"The business of the corporation shall be managed by its Board of
Directors, which shall consist of no less than five (5) members and no more than
seven (7) members, with the exact number to be as specified from time to time by
the Board of Directors."
<PAGE>
DEVCON INTERNATIONAL CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S
BOARD OF DIRECTORS
COMMON STOCK
The undersigned, a holder of Common Stock of Devcon International Corp., a
Florida corporation (the "Company"), hereby appoints Donald L. Smith, Jr. and
Richard L. Hornsby, and each of them, as proxies for the undersigned, each with
full power of substitution, for and in the name of the undersigned to act for
the undersigned and to vote, as designated below, all of the shares of stock of
the Company that the undersigned is entitled to vote at the 1998 Annual Meeting
of Shareholders of the Company, to be held on Friday, June 12, 1998, at 3:00
p.m., local time, at the Deerfield Beach Hilton, Hillsboro Executive Center
North, 100 Fairway Drive, Deerfield Beach, Florida and at any adjournments or
postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND THE
OTHER PROPOSALS SET FORTH.
(1) ELECTION OF DONALD L. SMITH, JR., RICHARD L. HORNSBY, ROBERT L. KESTER,
ROBERT A. STEELE AND W. DOUGLAS PITTS, as directors.
[ ] VOTE FOR all nominees listed above, except vote withheld from the
following nominees (if any):
[ ] VOTE WITHHELD from all nominees listed above.
[ ] ABSTAIN
(2) PROPOSAL to amend the Company's Articles of Incorporation to provide for a
Board of Directors of not less than five (5) nor more than seven (7)
directors, as specified from time to time by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL to ratify the reappointment of KPMG Peat Marwick LLP, independent
certified public accountants, as the Company's auditor for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Upon such other matters as may properly come before the Annual Meeting and
any adjournments or postponements thereof. In their discretion, the proxies
are authorized to vote upon such other business as may properly come before
the Annual Meeting, and any adjournments or postponements thereof.
(see reverse side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED 'FOR' ALL OF THE PROPOSALS.
Dated _________________________, 1998
---------------------------------------------
(Signature)
---------------------------------------------
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name
appears and mail it promptly even though you
now plan to attend the meeting. When shares
are held by joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in partnership name
by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENVELOPE
PROVIDED.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED
STATES.
