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:
1
<PAGE>
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DEVCON INTERNATIONAL CORP.
1350 EAST NEWPORT CENTER DRIVE, SUITE 201
DEERFIELD BEACH, FLORIDA 33442
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 9, 2000
To the shareholders of
Devcon International Corp.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of Devcon
International Corp., a Florida corporation (the "Company"), will be held at the
Deerfield Beach Hilton, Hillsboro Executive Center North, 100 Fairway Drive,
Deerfield Beach, Florida on Friday, June 9, 2000 at 3:00 p.m., local time, for
the following purposes:
1. To elect six 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 ratify the reappointment of KPMG LLP, independent certified
public accountants, as the Company's auditor for 2000; and
3. 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 28, 2000 as the
record date for determining those shareholders entitled to notice of and to vote
at the 2000 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 5, 2000
- --------------------------------------------------------------------------------
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>
2000 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 2000 Annual Meeting of
Shareholders of the Company to be held on June 9, 2000, 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 5,
2000. 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 six directors to serve until the next annual
meeting of shareholders or until their successors are duly
elected and qualified;
2. The ratification of the reappointment of KPMG LLP, independent
certified public accountants, as the Company's auditor for
2000; and
3. 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 six 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 28, 2000, 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 3,911,295 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. 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 1999 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>
Donald L. Smith, Jr.(3)............................................... 1,273,431 30.89%
Smithcon Family Investments, Ltd.(4).................................. 981,372 24.31%
Robert A. Steele(5)................................................... 245,000 6.03%
Robert L. Kester(6)................................................... 26,600 *
Richard L. Hornsby(7)................................................. 76,625 1.74%
Donald L. Smith, III(8)............................................... 121,814 2.84%
W. Douglas Pitts(9)................................................... 21,000 *
Jan A. Norelid(10).................................................... 47,900 1.18%
Jose A. Bechara, Jr. Esq. (11)........................................ 58,500 1.45%
Dimensional Fund Advisors, Inc.(12)................................... 283,400 7.02%
FMR Corp. (13)........................................................ 346,700 8.59%
All directors and executive officers as a group (9 persons)........... 1,841,870 42.56%
</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
and (iv) 40,000 shares presently not 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 25,000 shares issuable upon exercise of options that are
presently exercisable.
(6) Includes 25,000 shares issuable upon exercise of options that are
presently exercisable.
(7) Includes 1,500 shares directly owned by Mr. Hornsby, 46,125 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 41,250 shares
subject to options held by Mr. Hornsby that are not presently
exercisable.
4
<PAGE>
(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) 45,450 shares
issuable upon exercise of options that are presently exercisable. Does
not include 37,500 shares issuable upon exercise of options that are
not presently exercisable.
(9) Includes 21,000 shares issuable upon exercise of options that are
presently exercisable.
(10) Includes 12,500 shares directly owned by Mr. Norelid and 35,400 shares
issuable upon exercise of options that are presently exercisable. Does
not include 91,600 shares issuable upon exercise of options that are
not presently exercisable.
(11) Includes 50,000 shares owned by Hormigonera Mayaguezana, Inc., of which
Mr. Bechara is a significant shareholder, 500 shares directly owned by
Mr. Bechara and 8,000 shares issuable upon exercise of options that are
presently exercisable.
(12) 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.
(13) The address for FMR Corp. (Fidelity Investments) is 82 Devonshire
Street, Boston, Massachusetts 02109. The 346,700 shares were held by
FMR Corp. ("FMR") on behalf of its direct subsidiary, Fidelity
Management & Research Company (Fidelity), a wholly-owned subsidiary of
FMR and an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940. Fidelity was the beneficial owner of
346,700 shares as a result of acting as an investment advisor to
various investment companies (the "Fidelity Funds" or "Funds")
registered under Section 8 of the Investment Company Act of 1940. The
information with respect to FMR is based solely on a Schedule 13G dated
February 14, 2000.
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 and shall be not less than five nor more than seven
directors. The Board of Directors has previously determined the number of
directors at six. 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, Pitts and Bechara have
been nominated for election as directors and proxies will be voted for such
persons absent contrary instructions.
The Board of Directors does not believe that any nominee will refuse to act or
be unable to accept election. In the event, however, that a nominee for director
is unable to accept election or if any other unforeseen contingencies should
arise, 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.
5
<PAGE>
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, Mr. Pitts
has served as a director since 1996 and Mr. Bechara has served as a director
since 1999.
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. .................. 78 Chairman of the Board, President and Chief Executive
Officer
Richard L. Hornsby..................... 64 Director and Executive Vice President
Robert L. Kester....................... 80 Director
Robert A. Steele....................... 84 Director
W. Douglas Pitts....................... 60 Director
Jose A. Bechara, Jr. Esq............... 55 Director
Jan A. Norelid ........................ 46 Vice President-Finance and Chief Financial Officer
Henry C. Obenauf....................... 70 Vice President-Engineering
Donald L. Smith, III................... 47 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>
Jose A. Bechara, Jr., Esq., a director of the Company since 1999, is Chairman of
the Board and Chief Executive Officer of Hormigonera Mayaguezana, Inc., a
leading manufacturer of concrete in Puerto Rico. He serves as a director to the
board of Banco Popular, Puerto Rico and Puerto Rico Electric Power Authority. He
was admitted to the bar in the Commonwealth of Puerto Rico in 1969.
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 32 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.
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, 1999, the Board of Directors took certain
actions by unanimous written consent and held 9 meetings. During 1999, 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.
7
<PAGE>
Messrs. Kester, Pitts and Steele are members of the Audit Committee, which met
three times during 1999. 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.
Messrs. Kester, Pitts and Steele are members of the Company's Compensation
Committee, which met once during 1999. This committee administers the 1992 and
1999 Stock Option Plans 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 and 1999 Stock Option Plans. 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 1999 in excess of $100,000
(collectively, the "Named Executive Officers"). The Company has not granted any
restricted stock awards or stock appreciation rights.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- -----------------
OTHER AWARDS PAYOUTS ALL
ANNUAL ------ ------- OTHER
COMPEN- LTIP COMPEN-
NAME AND FISCAL SALARY SATION OPTIONS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) (1) BONUS ($) ($) (2) (#) ($) ($) (3)
- ------------------ ------ ------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald L. Smith, Jr 1999 270,000 -- -- 50,000 -- 8,159
Chairman of the Board, 1998 260,000 -- -- -- -- 7,867
President and 1997 260,000 -- -- -- -- 7,200
Chief Executive Officer
Richard L. Hornsby 1999 171,346 -- 9,000 30,000 -- 72,913
Executive Vice President 1998 165,000 -- 9,000 -- -- 72,780
1997 165,000 -- 9,000 -- -- 72,436
Jan A. Norelid 1999 118,462 2,500 5,000 57,000 -- 3,817
Vice President-Finance, 1998 109,039 -- 5,000 40,000 -- 5,000
Chief Financial Officer 1997 26,923 -- -- 30,000 -- --
Henry C. Obenauf 1999 110,077 10,087 -- -- -- 3,361
Vice President - 1998 102,346 3,000 -- -- -- 3,187
Engineering 1997 101,000 5,414 -- -- -- 3,033
Donald L. Smith III 1999 106,808 3,000 5,000 30,000 -- 10,969
Vice President- 1998 99,796 3,000 5,000 -- -- 10,736
Construction Operations 1997 99,465 4,331 5,000 -- -- 10,598
</TABLE>
8
<PAGE>
- ----------------
(1) Salary consisted in 1999 of 27 bi-weekly payments compared to 26
bi-weekly payments in all other years.
(2) 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
$5,000 per year for Messrs. Hornsby, Norelid and Smith III for service
on a management policy committee.
(3) Represents (i) the cost of term and non term life insurance coverage
paid to the insurance company as premiums for policies on the lives of
Messrs. Hornsby and Smith III in 1999, 1998 and 1997 pursuant to split
dollar life insurance policies on the lives of such executive officers
and (ii) the Company's match of a 401(k) contribution made by each
named executive officer. The Company will be reimbursed for its non-
term premium payments at such time as benefits are paid under the
policies or the policies are terminated and the cash proceeds
distributed.
OPTION GRANTS AND LONG-TERM INCENTIVE AWARDS
The following table sets forth certain information concerning stock option
grants to the Named Executive Officers during the 1999 year. No stock
appreciation rights or long-term incentive awards were granted to the Named
Executive Officers during 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS GRANT
SECURITIES GRANTED TO DATE
UNDERLYING EMPLOYEES IN EXERCISE PRESENT
OPTIONS FISCAL YEAR PRICE EXPIRATION VALUE
(#)(1) (%) ($/SH) DATE $ (2)
------------- ----------------- ------------ -------------- --------
<S> <C> <C> <C> <C> <C>
Donald L. Smith, Jr. 50,000 15.7% 1.65 4/6/04 50,900
Richard L. Hornsby 30,000 9.4% 1.50 4/6/09 30,540
Donald L. Smith III 30,000 9.4% 1.50 4/6/09 30,540
Jan A. Norelid 57,000 17.9% 1.50 4/6/09 58,026
Henry C. Obenauf -- -- -- -- --
</TABLE>
(1) Options vest at the rate of 20% on each anniversary of the date of the
grants, April 6, 1998. Initially, the exercisability of the options was
subject to certain conditions which were satisfied on December 20, 1999
(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.
9
<PAGE>
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, 1999. No stock
appreciation rights have been granted or are outstanding.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
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 50,000 252,000 202,000
Richard L. Hornsby -- -- 40,125 47,250 54,180 163,500
Jan A. Norelid -- -- 20,000 107,000 27,548 328,322
Henry C. Obenauf -- -- -- -- -- --
Donald L. Smith, III -- -- 39,450 43,500 51,912 150,900
</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, 1999 was $5.69. Value is calculated by
multiplying (a) the difference between $5.69 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, 1999. Values shown include only in-the-money
exercisable shares.
(3) For certain unexercisable shares, exercise price exceeded closing price
at December 31, 1999. 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 1999.
The Company had borrowed approximately $3.3 million from Donald L. Smith, Jr. at
December 31, 1999. The note is unsecured and bears interest at 2 percent over
the prime interest rate. One million dollars is due on demand and $2.3 million
is due on April 1, 2001. 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
10
<PAGE>
amendment of the partnership agreement, the Antiguan subsidiary and the Company,
as applicable, contributed a note receivable of $505,000 from the partnership
into equity and contributed approximately $235,000 of equipment to the
partnership. The Antiguan subsidiary's ownership interest in the partnership was
increased to 64.47 percent. The ownership interest of Messrs. Smith, Jr. and
Hornsby was reduced to 6.47 percent.
In November 1995 the Company decided to sell this operation because of its poor
operating results and uncertain prospects for improvement. The Company's
investment in the partnership was written down to its estimated net realizable
value of approximately $749,000, which consisted 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, 1999,
$600,000 remained outstanding on the secured promissory note due in installments
from August 2001 through July 2005 and $59,000 in principal remained outstanding
on the unsecured promissory note.
At December 31, 1999, the Company had borrowed approximately $1.6 million from
Robert A. Steele, a Board member of the Company and his wife. 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 March 2004.
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 $763,337 at December 31, 1999, including $525,451 from Richard L.
Hornsby and $61,359 from Donald L. Smith III.
Commencing in July 1996 and through December 1999, Donald L. Smith, Jr. had
invested $5.0 million for a 16.8% investment in a partnership seeking to develop
a resort in the Bahamas. Commencing in August 1996 and through December 1999,
Robert A. Steele had invested $163,000 for a 1.7% interest in the partnership.
Commencing in October 1996 and through December 1999, the Company invested
$177,000 and provided certain services for a 2.1% interest in the partnership.
The Company has a $23.8 million contract with the venture to perform land
preparation services. In connection with this contract, the Company has recorded
revenue of $5.4 million during 1999. The backlog on the contract as of December
31, 1999 was $15.1 million. The Company's activity with this project has slowed
down substantially. There is a substantial uncertainty whether or not the
venture will receive its total financing and necessary permits to proceed, thus
the timing and amount could vary. On November 1, 1999, the Company extended a
$1.0 million note to the venture, secured by equipment. As of December 31, 1999
the Company had trade receivables, net of billings in excess of costs and
estimated earnings, from the venture of approximately $920,000. If the venture
does not receive its ultimate financing, it is unlikely the $920,000 will be
paid. However, the Company's President has personally guaranteed up to $1.2
million of the outstanding trade receivables from the venture, subject to
exhaustion by the Company of all other remedies. The Company expects to receive
interim payments from the venture's cash resources to cover its incremental
costs while the venture is seeking its total financing.
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 1999, the Company
partially settled the lawsuit and the supersedeas bond was reduced to the amount
of $629,148. In April 2000 the Company settled the remaining portion and the
supersedeas bond was released.
11
<PAGE>
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 notes were paid off
on April 12, 2000.
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, 1999 all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10
percent beneficial owners were complied with, except that Jose Bechara's Form 3
was inadvertently filed later then ten days after he became a director.
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, 1999, Donald
L. Smith, Jr. had invested $5.0 million for a 16.8% investment in a partnership
seeking to develop a resort in the Bahamas. In exchange for his investment, Mr.
Smith had a 16.8% interest in the partnership at December 31, 1999. Commencing
in August 1996 and through December 1999, Robert A. Steele had invested $163,000
for a 1.7% interest in the partnership. Commencing in October 1996 and through
December 1999, the Company invested $177,000 and provided certain services for a
2.1% interest in the partnership. The Company has a $23.8 million contract with
the venture to perform land preparation services. In connection with this
contract, the Company has recorded revenue of $5.4 million during 1999. The
backlog on the contract as of December 31, 1999 was $15.1 million. The Company's
activity with this project has slowed down substantially. There is a substantial
uncertainty whether or not the venture will receive its total financing and
necessary permits to proceed, thus the timing and amount could vary.
On November 1, 1999, the Company extended a $1.0 million note to the venture,
secured by equipment. As of December 31, 1999 the Company had trade receivables,
net of billings in excess of costs and estimated earnings, from the venture of
approximately $920,000. If the venture does not receive its ultimate financing,
it is unlikely the $920,000 will be paid. However, the Company's President has
personally guaranteed up to $1.2 million of the outstanding trade receivables
from the venture, subject to exhaustion by the Company of all other remedies.
The Company expects to receive interim payments from the venture's cash
resources to cover its incremental costs while the venture is seeking its total
financing.
At December 31, 1999, the Company had borrowed approximately $1.6 million from
Robert A. Steele, a Board member of the Company and his wife. 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 March 2004.
12
<PAGE>
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. The Company
did not meet certain internal economic goals. As a result, salaries for
executive officers remained basically the same in 1999 as compared to 1998,
except for one executive officer, who received an increase based on merit and
other factors. 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 for executive officers did not decrease. This analysis was
also subjective and not subject to specific criteria.
While bonuses are also related to individual performance, Company performance is
emphasized more in determining bonus payments than in determining salary. This
is particularly true at the highest level of management. In considering
performance, generally earnings are most emphasized, although revenues and
financial condition are also considered. The amount of any bonus is not tied to
specific performance criteria, but is also subjectively determined based upon an
analysis of the aforementioned factors. An executive officer could receive a
bonus in a year where the Company is not profitable, based upon his individual
performance or areas of responsibility. Three executive officers received
bonuses totaling $16,000 after review of the foregoing factors.
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 the
Company's share
13
<PAGE>
price at the time, the Board believed that the outstanding options in March 1999
were not providing sufficient incentive to executive officers and employees.
Therefore, the Board established the 1999 Stock Option Plan, which was approved
and ratified by the shareholders' annual meeting in June 1999. No options were
granted to the executives since 1995, except to an executive that was hired in
1997.
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 1999. In addition, he received no bonus in 1999. 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 1999, with respect to salary, the Company's results in
1998, 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.
As an incentive to the President he was granted 50,000 stock options. No options
have been granted to him since 1986.
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
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<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,
1994 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 It is the intention of the Company to discontinue the use of
a Peer Group and instead use the Dow Jones Building Material Index.
<TABLE>
<CAPTION>
12/94 12/95 12/96 12/97 12/98 12/99
<S> <C> <C> <C> <C> <C> <C>
DEVCON INTERNATIONAL CORP. 100 97 74 59 32 69
PEER GROUP 100 115 123 176 267 193
DOW JONES BUILDING MTRL 100 137 163 199 230 188
NASDAQ STOCK MARKET-US 100 141 174 213 300 542
</TABLE>
15
<PAGE>
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, 2000. 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.
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 2001 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, 2001.
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 2001, the Company
must receive this notice on or after November 5, 2000, and on or before January
4, 2001. 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,
Deerfield Beach, Florida Donald L. Smith, Jr., President
May 5, 2000
16
<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 2000 Annual Meeting
of Shareholders of the Company, to be held on Friday, June 9, 2000, 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, W. DOUGLAS PITTS AND JOSE A. BECHARA, JR., 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 ratify the reappointment of KPMG, LLP, independent
certified public accountants, as the Company's auditor for 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) 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 _________________________ , 2000
______________________________________
(Signature)
______________________________________
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name appears and mail it promptly even
though you now plan to attend the meeting. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENVELOPE
PROVIDED.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
