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)
(Name of Registrant as Specified in Its Charter)
DEVCON INTERNATIONAL CORP.
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(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 in 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 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 10, 1999
To the shareholders of
Devcon International Corp.:
NOTICE IS HEREBY GIVEN that the 1999 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 Thursday, June 10, 1999 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 approve and ratify the Company's 1999 Stock Option Plan;
3. To ratify the reappointment of KPMG LLP, independent certified
public accountants, as the Company's auditor for 1999; and
4. To transact 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 April 29, 1999 as the
record date for determining those shareholders entitled to notice of and to vote
at the 1999 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,
Donald L. Smith, Jr., President
Deerfield Beach, Florida
May 6, 1999
- --------------------------------------------------------------------------------
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>
1999 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 1999 Annual Meeting of
Shareholders of the Company to be held on June 10, 1999, 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 6,
1999. 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.
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 approve and ratify the Company's 1999 Stock Option Plan;
3. The ratification of the reappointment of KPMG LLP, independent
certified public accountants, as the Company's auditor for 1999;
and
4. Other business as may properly come before the Annual Meeting,
including any adjournments or postponements thereof.
2
<PAGE>
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 April 29, 1999, 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 proposal two
will require an affirmative vote of the holders of a majority of the shares of
the Common Stock of the Company voting in person or by proxy at the Annual
Meeting. The Board will consider the 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 as a recommendation to the Board with respect to
proposal three. 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 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 inspector 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 five executive officers of the Company who had annual salary and bonus
for 1998 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.
3
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED (2)
------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES PERCENT
- ---------------------------------------- ------ -------
<S> <C> <C> <C>
Donald L. Smith, Jr.(3)............................................... 1,263,432 27.62%
Smithcon Family Investments, Ltd.(4).................................. 981,372 21.81%
Robert A. Steele(5)................................................... 244,000 5.39%
Robert L. Kester(6)................................................... 25,600 *
Richard L. Hornsby(7)................................................. 65,625 1.41%
Donald L. Smith, III(8)............................................... 109,814 2.42%
W. Douglas Pitts(9)................................................... 20,000 *
Henry C. Obenauf...................................................... 44,700 *
Jan A. Norelid(10).................................................... 8,500 *
Dimensional Fund Advisors, Inc.(11)................................... 301,600 6.70%
Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr.
and Franklin Advisory Services, Inc.(12)............................ 391,200 8.70%
Tweedy, Browne Company L.P. and TBK Partners, L.P.(13)................ 440,589 9.79%
All directors and executive officers as a group (9 persons)........... 1,750,170 37.12%
- --------------------
</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 981,372 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. Mr.
Smith's holdings include (i) all 981,372 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)
17,628 shares held by the Corporation and (iii) 75,000 shares issuable upon
exercise of options that are presently exercisable.
(4) All 981,372 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 description of relationship between Smithcon Family
Investments, Ltd. and Mr. Smith.
(5) Includes 24,000 shares issuable upon exercise of options that are presently
exercisable.
(6) Includes 24,000 shares issuable upon exercise of options that are presently
exercisable.
(7) Includes 34,125 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 23,250
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 beneficially owned that are held in trust by Donald L. Smith,
III for the benefit of his minor children, to which latter shares Mr. Smith
disclaims beneficial ownership and (y) 33,450 shares issuable upon exercise
of options that are
4
<PAGE>
presently exercisable. Does not include 19,500 shares issuable upon
exercise of options that are not presently exercisable.
(9) Includes 20,000 shares issuable upon exercise of options that are presently
exercisable.
(10) Includes 6,000 shares issuable upon exercise of options that are presently
exercisable. Does not include 64,000 shares issuable upon exercise of
options that are not presently exercisable.
(11) 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
301,600 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 11, 1999.
(12) 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 22, 1999.
(13) 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. with respect to which Tweedy, Browne Company, L.P. has investment
discretion. Tweedy, Browne Company, L.P. and TBK Partners, L.P. each
disclaims 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, Brown Company L.P. and TBK Partners, L.P. is based
solely on a Schedule 13G, 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 Restated Articles of Incorporation and Bylaws provide that the
number of directors to serve on the Board of Directors shall be determined by
the Board of Directors of not less than five nor more than seven directors. The
Board of Directors has previously determined the number of directors at five.
Each director elected at the Annual Meeting will serve as a director for a term
expiring at the 2000 Annual Meeting of Shareholders, expected to be held in June
2000, 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.
5
<PAGE>
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, 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.
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. .................. 77 Chairman of the Board, President and Chief Executive Officer
Richard L. Hornsby................... 63 Director and Executive Vice President
Robert L. Kester..................... 79 Director
Robert A. Steele..................... 83 Director
W. Douglas Pitts..................... 59 Director
Jan A. Norelid ...................... 45 Vice President-Finance and Chief Financial Officer
Henry C. Obenauf..................... 69 Vice President-Engineering
Donald L. Smith, III................. 46 Vice President-Construction Operations
</TABLE>
Donald L. Smith, Jr., a cofounder 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. Mr. Kester is
additionally a partner of Kester Management Trust, a real estate business in
Pompano Beach, Florida.
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.
6
<PAGE>
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
Florida.
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 more than 31 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
the Company's Assistant Vice President of Construction Operations-South Florida
and the Caribbean. 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. In December 1998 the three non-employee directors each received
an option to purchase 10,000 shares at $2.17 per share which was the closing
market price on the day preceding the grant.
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 and 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, 1998, the Board of Directors took certain
actions by unanimous written consent and held six meetings. During 1998, 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 committees. The Board of
Directors has two standing committees, the Audit Committee and the Compensation
Committee.
Messrs. Kester, Pitts and Steele are members of the Audit Committee, which met
two times during 1998. 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, Pitts and Steele are members of the Company's Compensation
Committee, which met three times during 1998. 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 four executive officers
of the Company who had an annual salary and bonus in 1998 in excess of $100,000
(collectively, the "Named Executive Officers"). The Company has not granted any
restricted stock awards or stock appreciation rights.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------------ ------------------------------
OTHER ALL
ANNUAL AWARDS PAYOUTS OTHER
COMPEN- LTIP COMPEN-
NAME AND FISCAL SATION OPTIONS PAYOUTS SATION
PRINCIPAL POSITION YEAR SALARY($) BONUS ($) ($)(1) (#) ($) ($)(2)
- ------------------ ---- -------- ----------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald L. Smith, Jr. 1998 260,000 - - - - 7,867
Chairman of the Board, 1997 260,000 - - - - 7,800
President and 1996 260,000 - - - - 7,200
Chief Executive Officer
Richard L. Hornsby 1998 165,000 - 9,000 - - 72,780
Executive Vice President 1997 165,000 - 9,000 - - 72,436
1996 165,000 - 9,000 - - 72,286
Jan A. Norelid 1998 109,039 - 5,000 40,000 - 5,000
Vice President-Finance, 1997 26,923 - - 30,000 - -
Chief Financial Officer 1996 - - - - - -
Henry C. Obenauf 1998 102,346 3,000 - - - 3,187
Vice President - 1997 101,000 5,414 - - - 3,033
Engineering 1996 91,796 5,074 - - - 2,754
Donald L. Smith, III 1998 99,796 3,000 5,000 - - 10,736
Vice President- 1997 99,465 4,331 5,000 - - 10,598
Construction Operations 1996 98,900 8,000 5,000 - - 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 $5,000 per year for
Messrs. Hornsby, Norelid and Smith, III for service on a management policy
committee.
8
<PAGE>
(2) Represents (i) the cost of term and non term life insurance coverage paid
to the insurance company as premiums for policies on the lives of Messrs.
Hornsby and Smith, III in 1998, 1997 and 1996 pursuant to split dollar life
insurance policies on the lives of such executive officers and (ii) the
Company's match of a 401(k) contribution made by each named executive
officer. The Company will be reimbursed for its non-term premium payments
at such time as benefits are paid under the policies or the policies are
terminated and the cash proceeds distributed.
OPTION GRANTS AND LONG-TERM INCENTIVE AWARDS
The following table sets forth certain information concerning stock option
grants to the Named Executive Officers during the 1998 year. No stock
appreciation rights or long-term incentive awards were granted to the Named
Executive Officers during 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS GRANT
SECURITIES GRANTED TO DATE
UNDERLYING EMPLOYEES IN EXERCISE OF PRESENT
OPTIONS FISCAL YEAR BASE PRICE EXPIRATION VALUE
(#)(1) (%) ($/SH) DATE $ (2)
------------- ----------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Donald L. Smith, Jr. - - - - -
Richard L. Hornsby - - - - -
Jan A. Norelid 20,000 25.0% 3.63 3/03/08 43,752
20,000 25.0% 2.94 6/24/08 35,316
Henry C. Obenauf - - - - -
Donald L. Smith, III - - - - -
</TABLE>
(1) Options become exercisable at the rate of 20% on each anniversary of the
date of the grants, which was March 3, 1998 and June 24, 1998,
respectively.
(2) The Black-Scholes option-pricing model was used to determine the grant date
present value of the stock options granted in 1998 by the Company to the
Named Executive Officers listed above.
The following facts and assumptions were used in making such calculation:
(i) exercise prices as indicated in the table above; (ii) fair market value
equal to the respective exercise price of each option on the date of the
grants; (iii) a dividend yield of 0%; (iv) an expected stock option term of
10 years; (v) a stock price volatility of 38.48% based on an analysis of
monthly stock closing prices of Common Stock during 1998; and (vi) a
risk-free interest rate of 5.6% for the options granted on March 3, 1998
and a risk-free interest rate of 5.5% for the options granted on June 24,
1998 each of which is equivalent to the yield of a ten-year Treasury note
on the date of the grants. No other discounts or restrictions related to
vesting or the likelihood of vesting of stock options were applied. The
grant date present value for each stock option was multiplied by the total
number of stock options granted, to determine the total grant date present
value of such stock options granted to each of the Named Executive
Officers, respectively.
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 December 31, 1998. No stock
appreciation rights have been granted or are outstanding.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE MONEY OPTIONS
ON VALUE FISCAL YEAR-END (#) AT FISCAL-YEAR END($)(1)
EXERCISE REALIZED ----------------------------- ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE(3)
- ---------------------- --------- ----------- ------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Smith, Jr. - - 75,000 - 22,500 -
Richard L. Hornsby - - 34,125 23,250 13,838 3,375
Jan A. Norelid - - 6,000 64,000 - -
Henry C. Obenauf - - - - - -
Donald L. Smith, III - - 33,450 19,500 4,635 2,250
- -----------------
</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, 1998 was $2.63. Value is calculated by
multiplying (a) the difference between $2.63 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, 1998. Values shown include only in the money exercisable
shares.
(3) For certain exercisable shares, exercise price exceeded closing price at
December 31, 1998. Values shown include only in the money unexercisable
shares.
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 1998.
The Company has borrowed approximately $5.6 million from Donald L. Smith, Jr. at
December 31, 1998. The note is unsecured, bears interest at 2 percent over the
prime interest rate. One hundred sixty-three-thousand dollars is due on demand
and $5.4 million is due on January 1, 2000. The officer has the option of making
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% or more of the Company's Common Stock.
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.
10
<PAGE>
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, 1998,
$600,000 remained outstanding on the secured promissory note and $128,000 in
principal remained outstanding on the unsecured promissory note.
At December 31, 1998, the Company had borrowed approximately $987,000 from
Robert A. Steele, a Board member of the Company. The notes are secured by
various pieces of equipment and bear interest at a rate of 10 percent per annum
with monthly payments being made through July 2002.
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 $673,379 at December 31, 1998, including $458,116 from Richard L.
Hornsby and $53,895 from Donald L. Smith, III.
Commencing in July 1996 and through December 31, 1998, Donald L. Smith, Jr. had
invested $2.5 million and committed to invest $1.3 million additionally, to a
partnership seeking to develop a resort in the Bahamas. In exchange for his
investment and commitment to make additional investments, Mr. Smith had a 14.8%
interest in the partnership at December 31, 1998. Commencing in August 1996 and
through January 1998, Robert A. Steele had invested $144,000 for a 1.7% interest
in the partnership. Commencing in October 1996 and through January 1998, the
Company invested $154,000 and provided certain services for a 2.1% interest in
the partnership.
In September 1997, Donald L. Smith, Jr. guaranteed a supersedeas bond written
for the Company in the amount of $3.8 million in connection with a judgment
entered against the Company in certain litigation. In March of 1999, the Company
partially settled the lawsuit and the supersedeas bond will be reduced to the
amount of $629,148.
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, 1998 all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10
percent beneficial owners were complied with.
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee members are Robert L. Kester, W. Douglas Pitts and
Robert A. Steele.
Commencing in July 1996 and through December 31, 1998, Donald L. Smith, Jr. had
invested $2.5 million and committed to invest $1.3 million additionally, to a
partnership seeking to develop a resort in the Bahamas. In exchange for his
investment and commitment to make additional investments, Mr. Smith had a 14.9%
interest in the partnership at December 31, 1998. Commencing in August 1996 and
through January 1998, Robert A. Steele had invested $144,000 for a 1.7% interest
in the partnership. Consequently, in October 1998 and through January 1998, the
Company invested $154,000 and provided certain services for a 2.1% interest in
the partnership.
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.
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 similar market capitalization. Given the level of the Company's
executive officers compensation, the Committee does not believe that it is
necessary to incur the expense of formal studies or market analysis.
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 1998 as compared to 1997. 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
12
<PAGE>
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.
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 Company performance. Given that the
Company has had significant losses in years prior to 1998, no additional options
were granted to executive officers in 1998, except to one new executive officer
in connection with his hiring. However, during 1998, the Committee decided to
consider methods to act as an incentive to management in subsequent years.
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 1998. In addition, he received no bonus or new grants of options in
1998. 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 bonuses, the Company's performance in 1998, with respect to salary,
the Company's results in 1997, the President's experience and expertise in
handling the issues facing the Company and the perceived progress toward
enabling the Company to meet future goals. 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, W. DOUGLAS PITTS, 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,
1993 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.; and Lafarge 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.
[Line Graph Plotted From Data In Table Below]
12/93 12/94 12/95 12/96 12/97 12/98
------ ----- ----- ----- ----- -----
DEVCON INTERNATIONAL CORP. DEVC 100 143 139 107 85 46
PEER GROUP PPEER1 100 81 93 100 143 215
NASDAQ STOCK MARKET-US INAS 100 98 138 170 208 294
14
<PAGE>
PROPOSAL TO APPROVE AND RATIFY THE
DEVCON INTERNATIONAL CORP.
1999 STOCK OPTION PLAN
BACKGROUND AND PURPOSE
On April 1, 1999, the Board of Directors (the "Board") adopted the Devcon
International Corp. 1999 Stock Option Plan (the "Plan") and recommended that it
be submitted to the Company's shareholders for their approval at the Annual
Meeting. The purpose of the Plan is to provide an additional incentive to
attract and retain qualified competent persons who provide services and upon
whose efforts and judgment the success of the Company is largely dependent,
through the encouragement of stock ownership in the Company by such persons. In
furtherance of this purpose, the Plan authorizes, among other things, (a) the
granting of incentive or non-qualified stock options to purchase Common Stock
(collectively, "Options") to persons selected by the administrators of the Plan
from the class of all regular employees of the Company, including officers who
are regular employees and directors, (b) the provision of loans for the purposes
of financing the exercise of Options and the amount of taxes payable in
connection therewith, and (c) the use of already owned Common Stock as payment
of the exercise price for Options granted under the Plan.
Shareholder approval of the Plan is required (i) for purposes of compliance with
certain exclusions from the limitations of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) in order for the Plan to be
eligible under the "plan lender" exemption from the margin requirements of
Regulation U promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and (iii) by the rules of the National Association of
Securities Dealers National Market System.
The effective date of the Plan is April 1, 1999 (the "Effective Date"). On April
6, 1999, the Board awarded, subject to and conditioned on approval of the Plan
by the Company's shareholders at the Annual Meeting, incentive stock options
under the Plan to certain employees as per the table below. No other stock
options under the Plan have been granted or are otherwise contemplated at this
time.
<TABLE>
<CAPTION>
NUMBER OF GRANT
SECURITIES DATE
UNDERLYING EXERCISE OF PRESENT
OPTIONS BASE PRICE EXPIRATION VALUE
(#)(1) ($/SH) DATE $(2)
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Donald L. Smith, Jr 50,000 1.65 4/6/04 50,900
Richard L. Hornsby 30,000 1.50 4/6/09 30,540
Jan A. Norelid 57,000 1.50 4/6/09 58,026
Donald L. Smith, III 30,000 1.50 4/6/09 30,540
-------- ---- ------ --------
All executive officers as a group 167,000 1.50 4/6/09 170,006
Other employees receiving more than
5% of options granted:
Willem Van Kempen 17,500 1.50 4/6/09 17,815
Janett McMillan 20,000 1.50 4/6/09 20,360
Michael Zastawniak 20,000 1.50 4/6/09 20,360
Kevin M. Smith 50,000 1.50 4/6/09 50,900
All other employees as a group 158,500 1.50 4/6/09 161,353
All directors as a group - - - -
Total options issued 325,500 - - 331,359
</TABLE>
15
<PAGE>
(1) Options vest at the rate of 20% on each anniversary of the date of the
grants, April 6, 1998, exercisable only if one of the following events has
occurred:
(i) The Company will have accumulated earnings of $6 million from January
1, 1999, excluding the net effect of the Antigua note payments; or
(ii) The price of the Company's shares is trading on NASDAQ or a stock
exchange in excess of $4 per share for a consecutive period of two
months; or
(iii) At the end of five years.
(2) The Black-Scholes option-pricing model was used to determine the grant date
present value of the stock options granted. The following facts and
assumptions were used in making such calculation: (i) exercise prices as
indicated in the table above; (ii) fair market value equal to the
respective exercise price of each option on the date of the grants; (iii) a
dividend yield of 0%; (iv) an expected stock option term of 10 years; (v) a
stock price volatility of 49.99% based on an analysis of monthly stock
closing prices of Common Stock during the preceding 12 months; and (vi) a
risk-free interest rate of 5.35% for the options granted on April 6, 1999,
which is equivalent to the yield of a ten-year Treasury note on the date of
the grants. No other discounts or restrictions related to vesting or the
likelihood of vesting of stock options were applied. The resulting grant
date present value for each stock option was multiplied by the number of
stock options granted.
The following is a summary of certain principal features of the Plan. This
summary is qualified in its entirety by reference to the complete text of the
Plan, which is attached to this Proxy Statement as Appendix A. Shareholders are
urged to read the actual text of the Plan in its entirety.
ADMINISTRATION OF THE PLAN
The Plan provides that it shall be administered by the Board or by the
Compensation Committee (the "Committee") which shall be composed of two or more
directors all of whom shall be "outside directors" (as defined in the Plan) in
compliance with Rule 16b-3 of the Exchange Act and Section 162(m) of the Code
(although Rule 16b-3 also may be complied with if the option grants are approved
by the Board).
The Committee or the Board in its sole discretion determines the persons to be
awarded the Options, the number of shares subject thereto and the exercise price
and other terms thereof. In addition, the Committee or the Board has full power
and authority to construe and interpret the Plan, and the acts of the Committee
or the Board are final, conclusive and binding on all interested parties,
including the Company, its shareholders, its officers and employees, recipients
of grants under the Plan, and all persons or entities claiming by or through
such persons.
An aggregate of 350,000 shares of Common Stock (subject to adjustment described
below) are reserved for issuance upon the exercise of Options granted under the
Plan. The shares acquired upon exercise of Options granted under the Plan will
be authorized and issued shares of Common Stock. The Company's shareholders will
not have any preemptive rights to purchase or subscribe for any Common Stock by
reason of the reservation and issuance of Common Stock under the Plan. If any
Option granted under the Plan should expire or terminate for any reason other
than having been exercised in full, the shares not purchased subject to that
Option, will again be available for purposes of the Plan.
16
<PAGE>
CERTAIN TERMS AND CONDITIONS
All Options granted under the Plan must be evidenced by a written agreement
between the Company and the grantee. The agreement will contain such terms and
conditions as the Committee or the Board shall prescribe, consistent with the
Plan, including, without limitation, the exercise price, term and any
restrictions on the exercisability of the Options granted.
For any Option granted under the Plan, the exercise price per share of Common
Stock may be any price determined by the Committee or the Board, however, the
exercise price per share of any Incentive Stock Option may not be less than the
Fair Market Value of the Common Stock on the date such Incentive Stock Option is
granted. For purposes of the Plan, the "Fair Market Value" on any date of
reference is deemed to be the closing price of Common Stock on the business day
immediately preceding such date, unless the Committee or the Board in its sole
discretion determines otherwise in a fair and uniform manner. For this purpose,
the closing price of Common Stock on any business day is (i) if Common Stock is
listed or admitted for trading on any United States national securities
exchange, or if actual transactions are otherwise reported on a consolidated
transaction reporting system, the last reported sale price of Common Stock on
such exchange or reporting system, as reported in any newspaper of general
circulation; (ii) if Common Stock is quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or any similar system
of automated dissemination of quotations of securities prices in common use, the
mean between the closing high bid and low asked quotations for such day of
Common Stock on such system; or (iii) if neither clause (i) nor (ii) is
applicable, the mean between the high bid and low asked quotations for Common
Stock as reported by the National Quotation Bureau, Incorporated if at least two
securities dealers have inserted both bid and asked quotations for Common Stock
on at least 5 of the 10 preceding days. The closing price per share of Common
Stock on April 23, 1999 as reported on NASDAQ was $1.88.
The Committee or the Board may permit the exercise price of an Option to be paid
for in cash, by certified or official bank check or personal check, by money
order, with already owned shares of Common Stock that have been held by the
Optionee for at least six (6) months (or other shares as the Company determines
will not cause the Company to recognize for financial accounting purposes a
charge for compensation expense), the withholding of shares of Common Stock
issuable upon exercise of the Option, by delivery of a properly executed
exercise notice together with such documentation as shall be required by the
Committee or the Board (or, if applicable, the broker) to effect a cashless
exercise, or a combination of the above. If paid in whole or in part with shares
of already owned Common Stock, the value of the shares surrendered is deemed to
be their Fair Market Value on the date the Option is exercised. The Plan also
authorizes the Company to lend money to an Optionee, guarantee a loan to an
Optionee, or otherwise assist an Optionee to obtain the cash necessary to
exercise all or a portion of the Option granted thereunder or to pay any tax
liability of the Optionee attributable to such exercise. If the exercise price
is paid in whole or part with the Optionee's promissory note, such note shall
(i) provide for full recourse to the maker, (ii) be collateralized by the pledge
of the shares that the Optionee purchases upon exercise of such Option, (iii)
bear interest at the prime rate of the Company's principal lender or such rate
as the Committee or the Board, as the case may be, shall determine, and (iv)
contain such terms as the Committee or the Board in its sole discretion shall
reasonably require.
The use of already owned shares of Common Stock applies to payment for the
exercise of an Option in a single transaction and to the "pyramiding" of already
owned shares in successive, simultaneous Option exercises. In general,
pyramiding permits an Option holder to start with as little as one share of
Common Stock and exercise an entire Option to the extent then exercisable (no
matter what the number of shares subject thereto). By utilizing already owned
shares of Common Stock, no cash (except for fractional share adjustments) is
needed to exercise an Option. Consequently, the Optionee would receive Common
Stock equal in value to the spread between the fair market value of the shares
subject to the Option and the exercise price of such option.
No Incentive Stock Option, and unless the prior written consent of the Committee
or the Board is obtained (which consent may be withheld for any reason) and the
transaction does not violate the requirements of Rule 16b-3 of the
17
<PAGE>
Exchange Act, no non-qualified stock option granted under the Plan is assignable
or transferable, other than by will or by the laws of descent and distribution.
During the lifetime of an Optionee, an Option is exercisable only by him or her,
or in the case of a non-qualified stock option, by his or her permitted
assignee. The expiration date of an Option under the Plan will be determined by
the Committee or the Board at the time of grant, but in no event may such an
Option be exercisable after 10 years from the date of the grant. An Option may
be exercised at any time or from time to time or only after a period of time in
installments, as the Committee or the Board determines. The Committee or the
Board may in its sole discretion accelerate the date on which any Option may be
exercised. Each outstanding Option granted under the Plan may become immediately
fully exercisable in the event of certain transactions, including certain
changes in control of the Company, certain mergers and reorganizations, and
certain dispositions of substantially all the Company's assets.
Unless otherwise provided in the Option agreement, the unexercised portion of
any Option granted under the Plan shall automatically be terminated (a) three
months after the date on which the Optionee's employment is terminated for any
reason other than (i) Cause (as defined in the Plan), (ii) mental or physical
disability, or (iii) death; (b) immediately upon the termination of the
Optionee's employment for Cause; (c) one year after the date on which the
Optionee's employment is terminated by reason of mental or physical disability;
or (d) one year after the date on which the Optionee's employment is terminated
by reason of Optionee's death, or if later, three months after the date of
Optionee's death if death occurs during the one year period following the
termination of the Optionee's employment by reason of mental or physical
disability.
To prevent dilution of the rights of a holder of an Option, the Plan provides
for appropriate adjustment of the number of shares for which Options may be
granted, the number of shares subject to outstanding Options and the exercise
price of outstanding Options, in the event of any increase or decrease in the
number of issued and outstanding shares of the Company's capital stock resulting
from a stock dividend, a recapitalization or other capital adjustment of the
Company. The Committee or the Board has discretion to make appropriate
anti-dilution adjustments to outstanding Options in the event of a merger,
consolidation or other reorganization of the Company or a sale or other
disposition of substantially all of the Company's assets.
The Plan will expire on March 31, 2009, and any Option outstanding on such date
will remain outstanding until it expires or is exercised. The Committee or the
Board may amend, suspend or terminate the Plan or any Option at any time,
provided that such amendment shall be subject to the approval of the Company's
Shareholders if such shareholder approval is required by any federal or state
law or regulation (including, without limitation, Rule 16b-3 or to comply with
Section 162(m) of the Code) or the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or granted. In
addition, no amendment, suspension or termination shall substantially impair the
rights or benefits of any Optionee, pursuant to any Option previously granted,
without the consent of the Optionee.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS OF OPTIONS
The Plan is not qualified under the provisions of section 401(a) of the Code and
is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
NON-QUALIFIED STOCK OPTIONS. On exercise of a non-qualified stock
option granted under the Plan, an Optionee will recognize ordinary income equal
to the excess, if any, of the fair market value on the date of exercise of the
shares of Common Stock acquired on exercise of the Option over the exercise
price. If the Optionee is an employee of the Company that income will be subject
to the withholding of Federal income tax. The Optionee's tax basis in those
shares will be equal to their fair market value on the date of exercise of the
Option, and his holding period for those shares will begin on that date.
18
<PAGE>
If an Optionee pays for shares of Common Stock on exercise of an Option by
delivering shares of the Company's Common Stock, the Optionee will not recognize
gain or loss on the shares delivered, even if their fair market value at the
time of exercise differs from the Optionee's tax basis in them. The Optionee,
however, otherwise will be taxed on the exercise of the Option in the manner
described above as if he had paid the exercise price in cash. If a separate
identifiable stock certificate is issued for that number of shares equal to the
number of shares delivered on exercise of the Option, the Optionee's tax basis
in the shares represented by that certificate will be equal to his tax basis in
the shares delivered, and his holding period for those shares will include his
holding period for the shares delivered. The Optionee's tax basis and holding
period for the additional shares received on exercise of the Option will be the
same as if the Optionee had exercised the Option solely in exchange in cash.
The Company will be entitled to a deduction for Federal income tax purposes
equal to the amount of ordinary income taxable to the Optionee, provided that
the amount constitutes an ordinary and necessary business expense for the
Company and is reasonable in amount, and either the employee includes that
amount in income or the Company timely satisfies its reporting requirements with
respect to that amount.
INCENTIVE STOCK OPTIONS. The Plan provides for the grant of stock
options that qualify as "incentive stock options" as defined in section 422 of
the Code. Under the Code an Optionee generally is not subject to tax upon the
grant or exercise of an incentive stock option. In addition, if the Optionee
holds a share received on exercise of an incentive stock option for at least two
years from the date the Option was granted and at least one year from the date
the Option was exercised (the "Required Holding Period"), the difference, if
any, between the amount realized on a sale or other taxable disposition of that
share and the holder's tax basis in that share will be long-term capital gain or
loss.
If, however, an Optionee disposes of a share acquired on exercise of an
incentive stock option before the end of the Required Holding Period (a
"Disqualifying Disposition"), the Optionee generally will recognize ordinary
income in the year of the Disqualifying Disposition equal to the excess, if any,
of the fair market value of the share on the date the incentive stock option was
exercised over the exercise price. If, however, the Disqualifying Disposition is
a sale or exchange on which a loss, if realized, would be recognized for Federal
income tax purposes, and if the sales proceeds are less than the fair market
value of the share on the date of exercise of the Option, the amount of ordinary
income recognized by the Optionee will not exceed the gain, if any, realized on
the sale. If the amount realized on a Disqualifying Disposition exceeds the fair
market value of the share on the date of exercise of the Option, that excess
will be short-term or long-term capital gain, depending on whether the holding
period for the share exceeds one year.
An Optionee who exercises an incentive stock option by delivering shares of
Common Stock acquired previously pursuant to the exercise of an incentive stock
option before the expiration of the Required Holding Period for those shares is
treated as making a Disqualifying Disposition of those shares. This rule
prevents "pyramiding" the exercise of an incentive stock option (that is,
exercising an incentive stock option for one share and using that share, and
others so acquired, to exercise successive incentive stock options) without the
imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which the fair market
value of a share of Common Stock acquired on exercise of an incentive stock
option exceeds the exercise price of that Option generally will be an adjustment
included in the Optionee's alternative minimum taxable income for the year in
which the Option is exercised. If, however, there is a Disqualifying Disposition
of the share in the year in which the Option is exercised, there will be no
adjustment with respect to that share. If there is a Disqualifying Disposition
in a late year, no income with respect to the Disqualifying Disposition is
included in the Optionee's alternative minimum taxable income for that year. In
computing alternative minimum taxable income, the tax basis of a share acquired
on exercise of an incentive stock option is increased by the amount of the
adjustment taken into account with respect to that share for alternative minimum
tax purposes in the year the Option is exercised.
19
<PAGE>
The Company is not allowed an income tax deduction with respect to the grant or
exercise of an incentive stock option or the disposition of a share acquired on
exercise of an incentive stock option after the Required Holding Period. However
if there is a Disqualifying Disposition of a share, the Company is allowed a
deduction in an amount equal to the ordinary income included in income by the
Optionee, provided that the amount constitutes an ordinary and necessary
business expense for the Company and is reasonable in amount, and either the
employee includes that amount in income or the Company timely satisfies its
reporting requirements with respect to that amount.
SECTION 162 LIMITATIONS. The Omnibus Budget Reconciliation Act of 1993
added Section 162(m) to the Code, which generally disallows a public company's
tax deduction for compensation to covered employees in excess of $1 million in
any tax year beginning on or after January 1, 1994. Compensation that qualifies
as "performance-based compensation" is excluded from the $1 million
deductibility cap, and therefore remains fully deductible by the company that
pays it. The Company intends that Options granted to employees whom the
Committee expects to be covered employees at the time a deduction arises in
connection with such Options, will qualify as such "performance-based
compensation," so that such Options will not be subject to the Section 162(m)
deductibility cap of $1 million. Future changes in Section 162(m) or the
regulations thereunder may adversely affect the ability of the Company to ensure
that Options under the Plan will qualify as "performance-based compensation"
that is fully deducible by the Company under Section 162(m).
IMPORTANCE OF CONSULTING TAX ADVISOR. The information set forth above
is a summary only and does not purport to be complete. In addition, the
information is based upon current Federal income tax rules and therefore is
subject to change when those rules change. Moreover, because the tax
consequences to any Optionee may depend on his particular situation, each
Optionee should consult his tax adviser as to the Federal, state, local and
other tax consequences of the grant or exercise of an Option or the disposition
of Common Stock acquired on exercise of an Option.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
APPROVE AND RATIFY THE 1999 STOCK OPTION PLAN.
RATIFICATION OF THE REAPPOINTMENT OF THE COMPANY'S AUDITOR
The firm of KPMG 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 four 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 LLP as the Company's auditor for the year ended
December 31, 1999. 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 LLP
are expected to be present at the Annual Meeting, and 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.
20
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR
RATIFICATION OF THE REAPPOINTMENT OF KPMG 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
Any shareholder who intends to present a proposal at the Company's 2000 Annual
Meeting of Shareholders and who wishes to have their proposal included in the
Company's Proxy Statement for that meeting, must deliver the proposal, not
exceeding 500 words in length, to the Secretary of the Company in writing not
later than January 7, 2000.
Under the Company's Amended and Restated Bylaws, nominations for director may be
made only by the Board or a Board committee, or by a shareholder entitled to
vote who delivers notice to the Company not less than 120 days nor more than 180
days prior to the first anniversary of the date of the notice of the preceding
year's annual meeting. For the Company's meeting in the year 2000, the Company
must receive this notice on or after November 8, 1999, and on or before January
7, 2000. Nominations, which are timely received, will be considered by the
Board.
A copy of the full text of the Amended and Restated Bylaws provisions discussed
above may be obtained by writing to the Corporate Secretary at 1350 East Newport
Center Drive, Suite 201, Deerfield Beach, Florida 33442.
By Order of the Board of Directors,
Donald L. Smith, Jr., President
Deerfield Beach, Florida
May 6, 1999
21
<PAGE>
APPENDIX A
DEVCON INTERNATIONAL CORP.
1999 STOCK OPTION PLAN
-----------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of DEVCON
INTERNATIONAL CORP., a Florida corporation (the "Company"), and its
Subsidiaries by providing an additional incentive to attract and retain
qualified and competent persons who provide services to the Company and its
Subsidiaries, and upon whose efforts and judgment the success of the
Company and its Subsidiaries is largely dependent, through the
encouragement of stock ownership in the Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the meaning
indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the committee appointed by the Board pursuant
to Section 13(a) hereof.
(c) "Common Stock" shall mean the Company's Common Stock, par value $0.10
per share.
(d) "Director" shall mean a member of the Board.
(e) "Fair Market Value" of a Share on any date of reference shall mean the
"Closing Price" (as defined below) of the Common Stock on the business
day immediately preceding such date, unless the Committee or the Board
in its sole discretion shall determine otherwise in a fair and uniform
manner. For the purpose of determining Fair Market Value, the "Closing
Price" of the Common Stock on any business day shall be (i) if the
Common Stock is listed or admitted for trading on any United States
national securities exchange, or if actual transactions are otherwise
reported on a consolidated transaction reporting system, the last
reported sale price of Common Stock on such exchange or reporting
system, as reported in any newspaper of general circulation, (ii) if
the Common Stock is quoted on the National Association of Securities
Dealers Automated Quotations System ("NASDAQ"), or any similar system
of automated dissemination of quotations of securities prices in
common use, the last reported sale price of Common Stock on such
system or, if sales prices are not reported, the mean between the
closing high bid and low asked quotations for such day of Common Stock
on such system, as reported in any newspaper of general circulation or
(iii) if neither clause (i) nor (ii) is applicable, the mean between
the high bid and low asked quotations for the Common Stock as reported
by the National Quotation Bureau, Incorporated if at least two
securities dealers have inserted both bid and asked quotations for
Common Stock on at least five of the ten preceding days. If neither
(i), (ii), nor (iii) above is applicable, then Fair Market Value shall
be determined in good faith by the Committee or the Board in a fair
and uniform manner.
(f) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Internal Revenue Code.
(g) "Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
(h) "Non-Qualified Stock Option" shall mean an Option, which is not an
Incentive Stock Option.
(i) "Officer" shall mean the Company's Chairman of the Board, President,
Chief Executive Officer, principal financial officer, principal
accounting officer, any vice-president of the Company in charge of a
principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a
policymaking function, or any other person who performs similar
policymaking functions for the Company. Officers of Subsidiaries shall
be deemed Officers of the Company if they perform such
<PAGE>
policymaking functions for the Company. As used in this paragraph, the
phrase "policymaking function" does not include policymaking functions
that are not significant. If pursuant to Item 401(b) of Regulation S-K
(17 C.F.R. 229.401 (b)) the Company identifies a person as an
"executive officer," the person so identified shall be deemed an
"Officer" even though such person may not otherwise be an "Officer"
pursuant to the foregoing provisions of this paragraph.
(j) "Option" (when capitalized) shall mean any option granted under this
Plan.
(k) "Optionee" shall mean a person to whom a stock option is granted under
this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(l) "Outside Director" shall mean a member of the Board who qualifies as
an "outside director" under Section 162(m) of the Internal Revenue
Code and the regulations thereunder and as a "Non-Employee Director"
under Rule 16b-3 promulgated under the Securities Exchange Act. (l)
(m) "Plan" shall mean this 1999 Stock Option Plan for the Company.
(n) "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(o) "Share" shall mean a share of Common Stock.
(p) "Subsidiary" shall mean any corporation (other than the Company) in
any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other
than the last corporation in the unbroken chain owns stock possessing
50 percent or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
3. SHARES AVAILABLE FOR OPTION GRANTS. The Committee or the Board may grant to
Optionees from time to time Options to purchase an aggregate of up to Three
Hundred Fifty Thousand (350,000) Shares from the Company's authorized and
unissued Shares. If any Option granted under the Plan shall terminate,
expire, or be canceled or surrendered as to any Shares, new Options may
thereafter be granted covering such Shares.
4. INCENTIVE AND NON-QUALIFIED OPTIONS.
(a) An Option granted hereunder shall be either an Incentive Stock Option
or a Non-Qualified Stock Option as determined by the Committee or the
Board at the time of grant of such Option and shall clearly state
whether it is an Incentive Stock Option or a Non-Qualified Stock
Option. All Incentive Stock Options shall be granted within 10 years
from the effective date of this Plan. Incentive Stock Options may not
be granted to any person who is not an employee of the Company or any
Subsidiary.
(b) Options otherwise qualifying as Incentive Stock Options hereunder will
not be treated as Incentive Stock Options to the extent that the
aggregate fair market value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the
requirements of Section 422(b) of the Internal Revenue Code are
exercisable for the first time by any individual during any calendar
year (under all plans of the Company and its parent and subsidiary
corporations as defined in Section 424 of the Internal Revenue Code),
exceeds $100,000.
<PAGE>
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that may contain
any term deemed necessary or desirable by the Committee or the Board,
provided such terms are consistent with this Plan or applicable law.
Optionees shall be (i) those persons selected by the Committee or the
Board from the class of all regular employees of, or persons who
provide consulting or other services as independent contractors to,
the Company or its Subsidiaries, including Directors and Officers who
are regular employees, and (ii) Directors who are not employees of the
Company or of any Subsidiaries. Any person who files with the
Committee or the Board, in a form satisfactory to the Committee or the
Board, a written waiver of eligibility to receive any Option under
this Plan shall not be eligible to receive any Option under this Plan
for the duration of such waiver.
(b) In granting Options, the Committee or the Board shall take into
consideration the contribution the person has made to the success of
the Company or its Subsidiaries and other factors as the Committee or
the Board shall determine. The Committee or the Board shall also have
the authority to consult with and receive recommendations from
officers and other personnel of the Company and its Subsidiaries with
regard to these matters. The Committee or the Board may from time to
time in granting Options under the Plan prescribe other terms and
conditions concerning such Options as it deems appropriate, including,
without limitation, (i) prescribing the date or dates on which the
Option becomes exercisable, (ii) providing that the Option rights
accrue or become exercisable in installments over a period of years,
or upon the attainment of stated goals or both, or (iii) relating an
Option to the continued employment of the Optionee for a specified
period of time, provided that such terms and conditions are not more
favorable to an Optionee than those expressly permitted herein.
(c) The Options granted to employees under this Plan shall be in addition
to regular salaries, pension, life insurance or other benefits related
to their employment with the Company or its Subsidiaries. Neither the
Plan nor any Option granted under the Plan shall confer upon any
person any right to employment or continuance of employment by the
Company or its Subsidiaries.
(d) Notwithstanding any other provision of this Plan, an Incentive Stock
Option shall not be granted to any person owning directly or
indirectly (through attribution under Section 424(d) of the Internal
Revenue Code) at the date of the grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the
Company (or of its parent or subsidiary corporation (as defined in
Section 424 of the Internal Revenue Code) at the date of the grant)
unless the option price of such Option is at least 110% of the Fair
Market Value of the Shares subject to such Option on the date the
Option is granted, and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is
granted.
(e) Notwithstanding any other provision of this Plan, and in addition to
any other requirements of this Plan, the aggregate number of Options
granted to any one Optionee may not exceed One Hundred Thousand
(100,000), subject to adjustment as provided in Section 10 hereof.
6. OPTION PRICE. The option price per Share of any Option shall be any price
determined by the Committee or the Board but shall not be less than the par
value per Share; provided, however, that in no event shall the option price
per Share of any Incentive Stock Option be less than the Fair Market Value
of the Shares underlying such Option on the date such Option is granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i) the
Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii)
arrangements that are satisfactory to the Committee or the Board in its
sole discretion have been made for the Optionee's payment to the Company of
the
<PAGE>
amount that is necessary for the Company or Subsidiary employing the
Optionee to withhold in accordance with applicable Federal or state tax
withholding requirements. The consideration to be paid for the Shares to be
issued upon exercise of an Option as well as the method of payment of the
exercise price and of any withholding and employment taxes applicable
thereto, shall be determined by the Committee or the Board and may in the
discretion of the Committee or the Board consist of: (1) cash, (2)
certified or official bank check, (3) money order, (4) Shares that have
been held by the Optionee for at least six (6) months (or other Shares as
the Company determines will not cause the Company to recognize for
financial accounting purposes a charge for compensation expense), (5) the
withholding of Shares issuable upon exercise of the Option, (6) pursuant to
a "cashless exercise" procedure, by delivery of a properly executed
exercise notice together with other documentation, and subject to such
guidelines, as the Board or the Committee shall require to effect an
exercise of the Option and delivery to the Company by a licensed broker
acceptable to the Company of proceeds from the sale of Shares or a margin
loan sufficient to pay the exercise price and any applicable income or
employment taxes, or (7) in other consideration as the Committee or the
Board deems appropriate, or by a combination of the above. In the case of
an Incentive Stock Option, the permissible methods of payment shall be
specified at the time the Option is granted. The Committee or the Board in
its sole discretion may accept a personal check in full or partial payment
of any Shares. If the exercise price is paid in whole or in part with
Shares, or through the withholding of Shares issuable upon exercise of the
Option, the value of the Shares surrendered or withheld shall be their Fair
Market Value on the date the Option is exercised. The Company in its sole
discretion may, on an individual basis or pursuant to a general program
established in connection with this Plan, lend money to an Optionee,
guarantee a loan to an Optionee, or otherwise assist an Optionee to obtain
the cash necessary to exercise all or a portion of an Option granted
hereunder or to pay any tax liability of the Optionee attributable to such
exercise. If the exercise price is paid in whole or part with Optionee's
promissory note, such note shall (i) provide for full recourse to the
maker, (ii) be collateralized by the pledge of the Shares that the Optionee
purchases upon exercise of such Option, (iii) bear interest at the prime
rate of the Company's principal lender, and (iv) contain other terms as the
Committee or the Board in its sole discretion shall reasonably require. No
Optionee shall be deemed to be a holder of any Shares subject to an Option
unless and until a stock certificate or certificates for such Shares are
issued to such person(s) under the terms of this Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 10 hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in such
amounts, at such intervals and upon such terms as the Committee or the
Board shall provide in such Option, except as otherwise provided in this
Section 8.
(a) The expiration date of an Option shall be determined by the Committee
or the Board at the time of grant, but in no event shall an Option be
exercisable after the expiration of 10 years from the date on which
the Option is granted.
(b) Unless otherwise provided in any Option, each outstanding Option shall
become immediately fully exercisable in the event of a "Change in
Control" or in the event that the Committee or the Board exercises its
discretion to provide a cancellation notice with respect to the Option
pursuant to Section 9(b) hereof. For this purpose, the term "Change in
Control" shall mean:
(i) Approval by the shareholders of the Company of a reorganization,
merger, consolidation or other form of corporate transaction or
series of transactions, in each case, with respect to which
persons who were the shareholders of the Company immediately
prior to such reorganization, merger or consolidation or other
transaction do not, immediately thereafter, own more than 50% of
the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated
company's then outstanding voting securities, in substantially
the same proportions as their ownership immediately prior to such
reorganization, merger, consolidation or other transaction, or a
liquidation or dissolution of the Company or the sale of all or
<PAGE>
substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate
transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(ii) Individuals who, as of the date on which the Option is granted,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date on which the
Option was granted whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A of Regulation 14A promulgated under the
Securities Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the
Incumbent Board; or
(iii) The acquisition (other than from the Company) by any person,
entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of more than 25% of
either the then outstanding shares of the Company's Common Stock
or the combined voting power of the Company's then outstanding
voting securities entitled to vote generally in the election of
directors (hereinafter referred to as the ownership of a
("Controlling Interest") excluding, for this purpose, any
acquisitions by (1) the Company or its Subsidiaries, (2) any
person, entity or "group" that as of the date on which the Option
is granted owns beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act) of a
Controlling Interest or (3) any employee benefit plan of the
Company or its Subsidiaries.
(c) The Committee or the Board may in its sole discretion, accelerate the
date on which any Option may be exercised and may accelerate the
vesting of any Shares subject to any Option or previously acquired by
the exercise of any Option.
9. TERMINATION OF OPTION PERIOD.
(a) Unless otherwise provided in any option agreement, the unexercised
portion of any Option shall automatically and without notice terminate
and become null and void at the time of the earliest to occur of the
following:
(i) Three months after the date on which the Optionee's employment is
terminated other than by reason of (A) Cause, which, solely for
purposes of this Plan, shall mean the termination of the
Optionee's employment by reason of the Optionee's willful
misconduct or gross negligence, (B) a mental or physical
disability (within the meaning of Internal Revenue Code Section
22(e)) of the Optionee as determined by a medical doctor
satisfactory to the Committee, or (C) death of the Optionee;
(ii) Immediately upon the termination of the Optionee's employment for
Cause;
(iii) Twelve months after the date on which the Optionee's employment
is terminated by reason of a mental or physical disability
(within the meaning of Internal Revenue Code Section 22(e)) as
determined by a medical doctor satisfactory to the Committee or
the Board;
(iv) (A) Twelve months after the date of termination of the Optionee's
employment by reason of death of the Optionee, or, if later, (B)
three months after the date on which the Optionee shall die if
such death shall occur during the one year period specified in
Subsection 9(a)(iii) hereof.
<PAGE>
All references herein to the termination of the Optionee's
employment shall, in the case of an Optionee who is not an
employee of the Company or a Subsidiary, refer to the termination
of the Optionee's service with the Company.
(b) To the extent not previously exercised, (i) each Option shall
terminate immediately in the event of (1) the liquidation or
dissolution of the Company, or (2) any reorganization, merger,
consolidation or other form of corporate transaction in which the
Company does not survive, unless the successor corporation, or a
parent or subsidiary of such successor corporation, assumes the Option
or substitutes an equivalent option or right pursuant to Section 10(c)
hereof, and (ii) the Committee or the Board in its sole discretion may
by written notice ("cancellation notice") cancel, effective upon the
consummation of any corporate transaction described in Subsection
8(b)(i) hereof in which the Company does survive, any Option that
remains unexercised on such date. The Committee or the Board shall
give written notice of any proposed transaction referred to in this
Section 9(b) a reasonable period of time prior to the closing date for
such transaction (which notice may be given either before or after
approval of such transaction), in order that Optionees may have a
reasonable period of time prior to the closing date of such
transaction within which to exercise any Options that then are
exercisable (including any Options that may become exercisable upon
the closing date of such transaction). An Optionee may condition his
exercise of any Option upon the consummation of a transaction referred
to in this Section 9(b).
10. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised Options are
outstanding, there shall be any increase or decrease in the number of
issued and outstanding Shares through the declaration of a stock
dividend or through any recapitalization resulting in a stock
split-up, combination or exchange of Shares, then and in such event:
(i) Appropriate adjustment shall be made in the maximum number of
Shares available for grants under the Plan, or available for
grants to any person under the Plan, so that the same percentage
of the Company's issued and outstanding Shares shall continue to
be subject to being so optioned; and
(ii) The Board or the Committee may, in its discretion, make any
adjustments it deems appropriate in the number of Shares and the
exercise price per Share thereof then subject to any outstanding
Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same
aggregate exercise price.
(b) Unless otherwise provided in any Option, the Committee or the Board
may change the terms of Options outstanding under this Plan, with
respect to the option price or the number of Shares subject to the
Options, or both, when, in the Committee's or Board's sole discretion,
such adjustments become appropriate so as to preserve but not increase
benefits under the Plan.
(c) In the event of a proposed sale of all or substantially all of the
Company's assets or any reorganization, merger, consolidation or other
form of corporate transaction in which the Company does not survive,
where the securities of the successor corporation, or its parent
company, are issued to the Company's shareholders, then the successor
corporation or a parent of the successor corporation may, with the
consent of the Committee or the Board, assume each outstanding Option
or substitute an equivalent option or right. If the successor
corporation, or its parent, does not cause such an assumption or
substitution to occur, or the Committee or the Board does not consent
to such an assumption or substitution, then each Option shall
terminate pursuant to Section 9(b) hereof upon the consummation of
sale, merger, consolidation or other corporate transaction.
<PAGE>
(d) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in
connection with a direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof
shall be made to, the number of or exercise price for Shares then
subject to outstanding Options granted under the Plan.
(e) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not effect in any
manner the right or power of the Company to make, authorize or
consummate (i) any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or
its business; (ii) any merger or consolidation of the Company; (iii)
any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of
the assets or business of the Company; or (vi) any other corporate act
or proceeding, whether of a similar character or otherwise.
11. TRANSFERABILITY OF OPTIONS AND SHARES.
(a) No Incentive Stock Option, and unless the prior written consent of the
Committee or the Board is obtained (which consent may be withheld for
any reason) and the transaction does not violate the requirements of
Rule 16b-3 promulgated under the Securities Exchange Act no
Non-Qualified Stock Option, shall be subject to alienation,
assignment, pledge, charge or other transfer other than by the
Optionee by will or the laws of descent and distribution, and any
attempt to make any such prohibited transfer shall be void. Each
Option shall be exercisable during the Optionee's lifetime only by the
Optionee, or in the case of a Non-Qualified Stock Option that has been
assigned or transferred with the prior written consent of the
Committee or the Board, only by the permitted assignee.
(b) No Shares acquired by an Officer or Director pursuant to the exercise
of an Option may be sold, assigned, pledged or otherwise transferred
prior to the expiration of the six-month period following the date on
which the Option was granted, unless the transaction does not violate
the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act.
12. ISSUANCE OF SHARES.
(a) Notwithstanding any other provision of this Plan, the Company shall
not be obligated to issue any Shares unless it is advised by counsel
of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and
may require any stock so issued to bear a legend, may give its
transfer agent instructions, and may take other steps, as in its
judgment are reasonably required to prevent any such violation.
(b) As a condition to any sale or issuance of Shares upon exercise of any
Option, the Committee or the Board may require such agreements or
undertakings as the Committee or the Board may deem necessary or
advisable to facilitate compliance with any applicable law or
regulation including, but not limited to, the following:
(i) A representation and warranty by the Optionee to the Company, at
the time any Option is exercised, that he is acquiring the Shares
to be issued to him for investment and not with a view to, or for
sale in connection with, the distribution of any such Shares; and
<PAGE>
(ii) A representation, warranty and/or agreement to be bound by any
legends endorsed upon the certificate(s) for such Shares that
are, in the opinion of the Committee or the Board, necessary or
appropriate to facilitate compliance with the provisions of any
securities laws deemed by the Committee or the Board to be
applicable to the issuance and transfer of such Shares.
13. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board or by a committee
appointed by the Board (the "Committee") which shall be composed of
two or more Directors all of whom shall be Outside Directors. The
membership of the Committee shall be constituted so as to comply at
all times with the applicable requirements of Rule 16b-3 promulgated
under the Securities Exchange Act and Section 162(m) of the Internal
Revenue Code. The Committee shall serve at the pleasure of the Board
and shall have the powers designated herein and such other powers as
the Board may from time to time confer upon it.
(b) The Board may grant Options pursuant to this Plan to Directors who are
not employees of the Company or any Subsidiary and/or other persons to
whom Options may be granted under Section 5(a) hereof.
(c) The Committee or the Board, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The
determinations by the Committee or the Board, and the interpretation
and construction of any provision of the Plan or any Option by the
Committee or the Board, shall be final and conclusive.
(d) Any and all decisions or determinations of the Committee shall be made
either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of
the members of the Committee.
14. WITHHOLDING OR DEDUCTION FOR TAXES. If at any time specified herein for the
making of any issuance or delivery of any Option or Common Stock to any
Optionee or beneficiary, any law or regulation of any governmental
authority having jurisdiction in the premises shall require the Company to
withhold, or to make any deduction for, any taxes or take any other action
in connection with the issuance or delivery then to be made, such issuance
or delivery shall be deferred until such withholding or deduction shall
have been provided for by the Optionee or beneficiary, or other appropriate
action shall have been taken.
15. INTERPRETATION.
(a) As it is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 promulgated under the Securities Exchange Act
("Rule 16b-3") any ambiguities or inconsistencies in construction of
the Plan shall be interpreted to give effect to such intention, and if
any provision of the Plan is found not to be in compliance with Rule
16b-3, such provision shall be deemed null and void to the extent
required to permit the Plan to comply with Rule 16b-3. The Committee
or the Board may from time to time adopt rules and regulations under,
and amend, the Plan in furtherance of the intent of the foregoing.
(b) The Plan and any Option agreements entered into pursuant to the Plan
shall be administered and interpreted so that all Incentive Stock
Options granted under the Plan will qualify as Incentive Stock Options
under section 422 of the Internal Revenue Code. If any provision of
the Plan or any such Option agreement should be held invalid for the
granting of Incentive Stock Options or illegal for any reason, such
determination shall not affect the remaining provisions hereof, but
instead the Plan and the Option agreement shall be construed and
enforced as if such provision had never been included in the Plan or
the Option agreement.
(c) This Plan shall be governed by the laws of the State of Florida.
<PAGE>
(d) Headings contained in this Plan are for convenience only and shall in
no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender shall be a
reference to such gender as is appropriate.
16. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Committee or the Board may
from time to time amend, suspend or terminate the Plan or any Option;
provided, however, that, any amendment to the Plan shall be subject to the
approval of the Company's shareholders if such shareholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or to comply with Section 162(m) of the Internal
Revenue Code) or the rules of any Stock exchange or automated quotation
system on which the Common Stock may then be listed or granted. Except to
the extent provided in Sections 9 and 10 hereof, no amendment, suspension
or termination of the Plan or any Option issued hereunder shall
substantially impair the rights or benefits of any Optionee pursuant to any
Option previously granted without the consent of the Optionee.
17. EFFECTIVE DATE AND TERMINATION DATE. The effective date of the Plan is
April 1, 1999, the date on which the Board adopted this Plan, and the Plan
shall terminate on March 31, 2009. The Plan shall be submitted to the
shareholders of the Company for their approval and adoption and Options
hereunder may be granted prior to such approval and adoption but contingent
upon such approval and adoption.
<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 1999 Annual Meeting
of Shareholders of the Company, to be held on Thursday, June 10, 1999, 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 approve and ratify the Company's 1999 Stock Option Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL to ratify the reappointment of KPMG LLP, independent certified
public accountants, as the Company's auditor for 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Upon 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 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 _________________________ , 1999
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(Signature)
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(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.
