UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
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| o Preliminary Proxy Statement |
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| þ Definitive Proxy Statement |
| o Definitive Additional Materials |
o Soliciting Material Pursuant to Section 240.14a-12 |
PARK-OHIO HOLDINGS CORP.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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PARK-OHIO HOLDINGS CORP.
6065 Parkland Boulevard
Cleveland, Ohio 44124
Notice of 20082011 Annual Meeting of Shareholders
The 20082011 annual meeting of shareholders of Park-Ohio Holdings Corp., an Ohio corporation, will be held at The Cleveland Marriott East, 26300 Harvard Road, Warrensville Heights, Ohio 44122, on Tuesday,Thursday, May 20, 2008,26, 2011, at 10 A.M., Cleveland Time. The purposes of the meetingAnnual Meeting are:
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| 1. | To elect three directors to serve until the 2011 annual meeting of shareholders; and |
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| 2. | To act on other matters that are properly brought before the Annual Meeting or any adjournments, postponements or continuations thereof. |
1. To elect three directors to serve until the 2014 annual meeting of shareholders;
2. To ratify the appointment of Ernst & Young LLP as our independent auditors for fiscal year 2011;
3. To re-approve the Park-Ohio Holdings Corp. Annual Cash Bonus Plan;
4. To hold an advisory vote on named executive officer compensation;
5. To hold an advisory vote on the frequency of future advisory votes on named executive officer compensation; and
6. To act on other matters that are properly brought before the Annual Meeting or any adjournments, postponements or continuations thereof.
The Board of Directors set March 31, 20082011 as the record date for the Annual Meeting. This means that owners of Common Stock at the close of business on that date are entitled to (1) receive notice of the Annual Meeting and (2) vote at the Annual Meeting and any adjournments, postponements or continuations of the Annual Meeting.
You are invited to attend the Annual Meeting and urged to mark, sign and return the proxy card in the enclosed envelope, regardless of whether you expect to attend the Annual Meeting. No postage is required if mailed in the United States. Your proxy will not be used if you attend the Annual Meeting and vote in person. If you attend the Annual Meeting, you may be asked to present a valid picture identification.
By Order of the Board of Directors
Robert D. Vilsack
Secretary & General Counsel
April 14, 200819, 2011
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 26, 2011:A complete set of proxy materials relating to the Annual Meeting is available on the Internet. These materials, consisting of the Notice of Annual Meeting, Proxy Statement, Proxy Card and Annual Report, may be viewed athttp://eproxy.pkoh.com.
TABLE OF CONTENTS
PARK-OHIO HOLDINGS CORP.
6065 Parkland Boulevard
Cleveland, Ohio 44124
Proxy Statement for
Annual Meeting of Shareholders
To Be Held On May 20, 200826, 2011
GENERAL INFORMATION
The Board of Directors of Park-Ohio Holdings Corp., or Board, is furnishing this proxy statement in order to solicit proxies on its behalf to be voted at our 20082011 annual meeting of shareholders. The Annual Meeting will be held at The Cleveland Marriott East, 26300 Harvard Road, Warrensville Heights, Ohio 44122 on Tuesday,Thursday, May 20, 2008,26, 2011, at 10 A.M., Cleveland Time, and any and all adjournments, postponements or continuations thereof.
Proxy materials are first being mailed to shareholders on or about April 14, 2008.19, 2011. A shareholder giving a proxy may revoke it, without affecting any vote previously taken, by a later appointment received by us prior to the Annual Meeting or by giving notice to us in writing or in open meeting. Attendance at the Annual Meeting will not in itself revoke a proxy. Shares represented by properly executed proxies will be voted at the Annual Meeting. If a shareholder has specified how the proxy is to be voted with respect to a matter listed on the proxy, it will be voted in accordance with such specifications. If no specification is made, the executed proxy will be voted (1) “FOR” the election of the nominees for directors.directors, (2) “FOR” ratification of the appointment of Ernst & Young LLP as our independent auditors for fiscal year 2011, (3) “FOR” the re-approval of the Annual Cash Bonus Plan, (4) “FOR” the resolution approving the compensation of our named executive officers, and (5) “EVERY THREE YEARS” with respect to the shareholder advisory vote on the frequency of future advisory votes on named executive officer compensation.
The record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting is March 31, 2008.2011. As of March 31, 2008,2011, there were issued and outstanding 11,363,73611,826,020 shares of our Common Stock, par value $1.00 per share. Each share is entitled to one vote on each matter presented at the Annual Meeting. Our Articles of Incorporation do not provide for cumulative voting in the election of directors. The affirmative vote of a plurality of the shares of Common Stock represented at the Annual Meeting is required to elect Edward F. Crawford, Kevin R. Greene and Dan T. Moore III as directors to serve until the 2011 annual meeting of shareholders.
We are not aware of any matters other than those described in this proxy statement whichthat will be presented to the Annual Meeting for action on the part of the shareholders. If any other matters are properly brought before the meeting, of which we did not have notice of on or prior to March 5, 2008, orAnnual Meeting that applicable law otherwise permits proxies to vote on a discretionary basis, it is the intention of the persons named in the accompanying proxy to vote the shares to which the proxy relates thereon in accordance with their best judgment. Abstentions and broker non-votes will be counted as present at the meetingAnnual Meeting for purposes of determining a quorum, but will not be counted as voting, except as otherwise required by law and indicated herein.quorum.
The cost of soliciting proxies, including the charges and expenses incurred by brokerage firms and other persons for the forwarding of proxy materials to the beneficial owners of such shares, will be borne by us. Proxies may be solicited by our officers and employees by letter, by telephone or in person. Such individuals will not be additionally compensated but may be reimbursed by us for their reasonableout-of-pocket expenses incurred in connection therewith. expenses. In addition, we have retained Morrow & Co., Inc.LLC, 470 West Ave., Stamford, CT 06902, a professional proxy soliciting firm, to assist in the solicitation of proxies and will pay such firm a fee, estimated to be approximately $4,000,$5,000, plus reimbursement ofout-of-pocket expenses.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
The authorized number of directors is presently fixed at nine, divided into three classes of three members. The directors of each class are elected for three-year terms so that the term of office of one class of directors expires at each annual meeting. Proxies may only be voted for the nominees identified in the section entitled “Nominees for Election.”
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The class of directors to be elected in 2008,2011, who will hold their positions for a term of three years and until the election of their successors, has been fixed at three. Unless otherwise directed, the persons named in the accompanying proxy will vote the proxies received by them (unless authority to vote is withheld) in favor of electing to that class: Edward F. Crawford, Kevin R. Greene, A. Malachi Mixon III and Dan T. Moore III, all of whom have beenwere previously elected as directors by shareholders. If any nominee is not available at the time of election, the proxy holders may vote in their discretion for a substitute or such vacancy may be filled later by the Board. We have no reason to believe any nominee will be unavailable.
TheDuring 2010, the Board of Directors continues to conduct searchescontinued its search for a suitable candidatescandidate for directorsa director to fill the vacanciesremaining vacancy created by the retirement of Lewis E. Hatch, and Lawrence O. Selhorst, who were members ineffective with the class of directors whose term expires at the Annual Meeting. In the interim, Kevin R. Greene, who had been a member of the class of directors whose term expires at the Company’s 20092006 annual meeting of shareholders and Dan T. Moorewhose term expired at the 2008 annual meeting of shareholders. In the interim, A. Malachi Mixon III, who had been a member of the class of directors whose term expires at the company’s 2010our 2012 annual meeting of shareholders, werewas elected by the Board of Directors as membersa member of the class of the Board of Directors whose term expires at the Annual Meeting. The Board continues to search for a suitable candidate for the remaining vacancy in the class of directors whose term expires at our 2012 annual meeting of shareholders.
Vote Required and Recommendation of Thethe Board of Directors
The affirmative vote of a plurality of the shares of Common Stock represented at the Annual Meeting is required to elect Edward F. Crawford, Kevin R. Greene, A. Malachi Mixon III and Dan T. Moore III, as directors to serve until the 20112014 annual meeting of shareholders. Abstentions and broker non-votes will have no effect with respect to the election of directors.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EDWARD F. CRAWFORD, KEVIN R. GREENE, A. MALACHI MIXON III AND DAN T. MOORE III.
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Biographical Information
Information is set forth below regarding the nominees for election and the directors who will continue in office as directors after the Annual Meeting, includingMeeting. The information includes their ages, principal occupations during at least the past five years and other directorships presently held.held currently or within the last five years. Also set forth is the date each was first elected as a director.
Also contained in the biographical information below are the qualifications that led the Board to conclude that each director and nominee should serve as a director. Each director and nominee possesses the integrity, judgment and analytical ability to guide the Company. The aforementioned qualities, when viewed in tandem with the attributes and accomplishments of each director and nominee, as reflected below, qualify each director and nominee to serve on the Board.
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| Nominees for Election |
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Principal Occupation
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Name | | Age | | | and Other Directorships |
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Edward F. Crawford (a) | | | 68 | | | Director, Chairman and Chief Executive Officer since 1992 and President from 1997 to 2003; Chairman, Crawford Group, Inc. (a management company for a group of manufacturing companies) since 1964; Director of Continental Global Group, Inc. Mr. M. Crawford is the son of Mr. E. Crawford. |
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| Kevin R. Greene (b,d) | | | 4952 | | | Director since 1998; Chairman and Chief Executive Officer of KR Group LLC (international investment banking, money management and consulting firm) since 1992; Managing Partner of Cru Capital Management LLC (money management company) since 2005; Managing Partner of James Alpha Management LLC (money management company) since 2005; Chairman and Chief Executive Officer of Capital Resource Holdings L.L.C. (pension consultant) from 1999 through 2004; formerly a management consultant with McKinsey & Company (consulting firm). With his background in finance and money management, Mr. Greene provides the Board with financial and investment expertise, as well as valuable perspective on risk analysis and development and management of effective internal controls. |
| A. Malachi Mixon III (d) | | | 70 | | | Director since 2008; Chairman since 1983, director since 1979, and Chief Executive Officer 1979-2010 of Invacare Corporation (manufacturer and distributor of home and long-term care medical products); director since 1993 of The Sherwin-Williams Company (manufacturer and distributor of coatings and related products); since 2011, Chairman Emeritus of the Board of Directors and Trustees of The Cleveland Clinic Foundation; Chairman of Cleveland Institute of Music; board of Advisors of Primus Venture Partners (venture capital investment company) 1995-2010. Mr. Mixon, as the senior executive of a publicly-traded corporation, brings 30 years of upper management experience to the Board. Mr. Mixon is experienced in managing domestic and international manufacturing and distribution operations. Through this experience as well as his service on the boards of publicly-traded corporations and a private equity firm, he provides important insight and assistance to the Board in the areas of finance, marketing, and corporate governance. |
| Dan T. Moore III (c,d) | | | 6871 | | | Director since 2003; Chief Executive Officer of Dan T. Moore Co. and related(a management company overseeing a group of companies (Soundwich, Flow Polymers, Impact Ceramics LLC and Team Wendy) (researchperforming research and development of advanced materials) since 1969. Also, Chief Executive Officer of Delaware Dynamics LLC (a manufacturer of large, complex high-pressure dies for the automotive industry). Director since 1979 of Invacare Corporation (manufacturer and distributor of home and long-term care medical products) and for the period 1989-2010, Director of Hawk Corporation.Corporation (supplier of friction materials and motorsports components). Mr. Moore brings to the Board his business acumen and operations experience demonstrated over years of managing numerous manufacturing companies. He is a recognized and successful entrepreneur. From this experience, as well as his service on the boards of other publicly-traded corporations, Mr. Moore offers the Board a comprehensive perspective for developing corporate strategies and managing risks of a major publicly-traded corporation. |
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Directors Continuing in Office with Term Expiring in 20092012 |
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Principal Occupation
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Name | | Age | | | and Other Directorships |
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| Patrick V. Auletta (a,b,d) | | | 60 | | | Director since 2004; President Emeritus of KeyBank National Association (financial services company) since 2005; President of KeyBank National Association from 2001 to 2004; over 35 years of banking experience at KeyBank. Director of The Cleveland Clinic Foundation. Mr. Auletta’s extensive experience in finance, the banking industry and general management, including his service as president of an operating company of a publicly-traded corporation, enables him to make significant contributions to the Board, particularly in his capacity as the Chair of the Audit Committee and as our Audit Committee financial expert. He has a broad and deep understanding of financial analysis, the financial reporting system, the challenges involved in developing and maintaining effective internal controls and evaluating risks to the Company. |
| Edward F. Crawford (a) | | | 71 | | | Director, Chairman and Chief Executive Officer of the Company since 1992 and President from 1997 to 2003. Chairman and Chief Executive Officer of The Crawford Group (a venture capital, management consulting company) since 1964. Mr. Edward Crawford has completed over 18 years of service to the Company as a director and senior officer and has amassed extensive knowledge of the Company’s strategies and operations. In addition, he also brings to the Board his experience in leading a variety of private enterprises for over 40 years. Mr. Matthew Crawford is the son of Mr. Edward Crawford. |
| James W. Wert (a,b,c,d) | | | 64 | | | Director since 1992 and Vice Chairman since 2002; Chief Executive Officer, President and Director since 2003 and Vice President from 2000 to 2002, C M Wealth Advisors, Inc., formerly known as Clanco Management Corporation (a registered investment advisor); formerly Senior Executive Vice President and Chief Investment Officer of KeyCorp (financial services company) from 1995 to 1996 and Chief Financial Officer of KeyCorp and predecessor companies from 1990 to 1995. Director of Marlin Business Services Corp. For the period 1997-2008, director of Continental Global Group. Mr. Wert has acquired extensive experience handling transactional and investment issues through his experience managing a registered investment adviser and as chief investment officer of a publicly-traded corporation. Through this experience as well as his service on other boards of publicly-traded corporations, he provides important insight and assistance to the Board in the areas of finance, investments and corporate governance. In addition, as one of our longest standing directors, Mr. Wert provides continuity to the Board and has a broad understanding of the strategic and operational issues we face. |
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| Directors Continuing in Office with Term Expiring in 2013 |
| | | | | Principal Occupation
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Name | | Age | | | and Other Directorships |
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| Matthew V. Crawford | | | 3841 | | | Director since 1997; President and Chief Operating Officer of the Company since 2003; Senior Vice President from 2001 to 2003; Assistant Secretary and Corporate Counsel from February 1995 to 2001; President of The Crawford Group Inc. (a venture capital, management company for a group of manufacturing companies)consulting company) since 1995. With over 15 years of experience at the Company, Mr. E.Matthew Crawford is intimately familiar with the Company’s capabilities, customers, strategy, position in the industry and with developments within the industry. In addition, he is experienced in operating a number of diversified private companies. Mr. Matthew Crawford’s experience, influence and deep knowledge of the Company and its industries provides the Board with the management perspective necessary to successfully oversee the Company and its strategy and business operations. Mr. Edward Crawford is the father of Mr. M.Matthew Crawford. |
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| Ronna Romney (c,d) | | | 6467 | | | Director since 2001; former political and news commentator for radio and television; author; U.S. Senate Candidate for Michigan 1996; former ChairwomanChair of the President’s Commission for White House Fellowships; former Chairwoman of the President’s Commission for White House Scholars; former Commissioner on the President’s National Advisory Council on Adult Education; Lead Director and ChairwomanChair of the Corporate Governance and Nominating Committee of Molina Healthcare, Inc. |
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Directors Continuing Ms. Romney’s diverse experiences as a lead director for a health care company, her political experience, and her focus on education issues ensure the Board is aware of alternative perspectives in Office with Term Expiring in 2010 |
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Principal Occupation
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Name
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Patrick V. Auletta (a,b,d) | | | 57 | | | Director since 2004; President Emeritusthe oversight of KeyBank National Association (financial services company) since 2005; President of KeyBank National Association from 2001 to 2004; over 35 years of banking experience at KeyBank. Trustee of Cleveland Clinic Foundation. |
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James W. Wert (a,b,c,d) | | | 61 | | | Director since 1992 and Vice Chairman since 2002; Chief Executive Officer and President since 2003 and Vice President from 2000 to 2002, Clanco Management Corporation (registered investment advisor); formerly Senior Executive Vice President and Chief Investment Officer of KeyCorp (financial services company) from 1995 to 1996 and Chief Financial Officer, of KeyCorp and predecessor companies from 1990 to 1995. Director of Continental Global Group, Inc., Marlin Business Services Corp. and Clanco Management Corp.the Company. |
a(a) Member, Executive Committee
b(b) Member, Audit Committee
c(c) Member, Compensation Committee
d(d) Member, Nominating and Corporate Governance Committee
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to beneficial ownership of our Common Stock by: (i) each person (or group of affiliated persons) known to us to be the beneficial owner of more than five percent of our outstanding Common Stock; (ii) each director or director nominee; (iii) each executive officer named in the Summary Compensation Table on Page 13page 25 of this proxy statement individually; and (iv) all directors and executive officers as a group. Unless otherwise indicated, the information is as of February 29, 2008,March 31, 2011, and the nature of beneficial ownership consists of sole voting and investment power.
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| | Shares Acquirable
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| | Shares Acquirable
| | Percent
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Name of Beneficial Owner | | Currently Owned | | Within 60 Days(1) | | of Class | | | Currently Owned | | Within 60 Days(1) | | of Class (%) | |
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| Patrick V. Auletta | | | 11,500 | | | | — | | | | * | | | | 14,500 | | | | 2,500 | (i) | | | * | |
| Edward F. Crawford | | | 2,021,301 | (a)(b) | | | 316,670 | | | | 19.9 | | | | 2,190,058 | (a)(c) | | | 25,000 | | | | 18.7 | |
| Matthew V. Crawford | | | 1,117,161 | (b)(c) | | | 291,670 | | | | 12.0 | | | | 1,113,307 | (b)(c) | | | 200,000 | | | | 10.9 | |
| Richard P. Elliott | | | 12,500 | | | | 11,667 | | | | * | | |
| Patrick W. Fogarty | | | 11,979 | (d) | | | 6,667 | | | | * | | | | 21,390 | (d) | | | 25,000 | | | | * | |
| Kevin R. Greene | | | 6,500 | | | | 2,000 | | | | * | | | | 10,500 | | | | 2,000 | | | | * | |
| A. Malachi Mixon III | | | | 25,500 | (e) | | | — | | | | * | |
| Dan T. Moore III | | | 10,500 | | | | 9,500 | | | | * | | | | 25,000 | | | | 9,500 | | | | * | |
| Ronna Romney | | | 13,700 | | | | — | | | | * | | | | 17,700 | | | | — | | | | * | |
| Jeffrey L. Rutherford | | | | 37,288 | (f) | | | 7,500 | | | | * | |
| Robert D. Vilsack | | | — | | | | 26,667 | | | | * | | | | 33,363 | | | | 35,000 | | | | * | |
| James W. Wert | | | 85,500 | | | | 44,500 | | | | 1.1 | | | | 88,000 | | | | 16,300 | | | | * | |
| Dimensional Fund Advisors LP | | | 783,857 | (e) | | | — | | | | 6.9 | | | | 660,796 | (g) | | | — | | | | 5.6 | |
| FMR LLC | | | 650,688 | (f) | | | — | | | | 5.7 | | |
| GAMCO Investors, Inc. | | | 1,096,888 | (g) | | | — | | | | 9.6 | | | | 1,350,517 | (h) | | | — | | | | 11.4 | |
| Paulette R. Baum Revocable Living Trust u/a/d 7/21/98 | | | 713,000 | (h) | | | — | | | | 6.3 | | |
| Private Management Group, Inc. | | | 610,033 | (i) | | | — | | | | 5.3 | | |
| Directors and executive officers as a group (10 persons) | | | 3,193,540 | | | | 709,341 | | | | 32.2 | | |
| Directors and executive officers as a group (11 persons) | | | | 3,484,505 | | | | 322,800 | | | | 31.3 | |
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| * | | Less than one percent. |
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| (1) | | Reflects the number of shares that could be purchased by exercise of options vested at February 29, 2008March 31, 2011 or within 60 days thereafter. |
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| (a) | | The total includes 1,861,7382,044,989 shares over which Mr. E.Edward Crawford has sole voting and investment power, 22,500 shares owned by L’Accent de Provence of which Mr. E.Edward Crawford is President and owner of 25% of its capital stock and over which Mr. E.Edward Crawford shares voting and investment power, 17,000 shares owned by EFC Properties, Inc. of which Mr. E. Crawford is the President and has sole voting and investment power, and 9,500 shares owned by Mr. E.Edward Crawford’s wife as to which Mr. E.Edward Crawford disclaims beneficial ownership. The total includes 13,46220,968 shares held under the Individual Account Retirement Plan of Park-Ohio Industries, Inc. and Its Subsidiaries as of December 31, 2007. The address of Mr. E. Crawford is the business address of the company.2010. |
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| (b) | | IncludesTotal includes 1,021,206 shares over which Mr. Matthew Crawford has sole voting and investment power. |
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| (c) | | Total includes an aggregate of 1,117,16192,101 shares over which Messrs. E.Edward Crawford and M.Matthew Crawford have shared voting power and investment power, consisting of: 44,00039,000 shares held by a charitable foundation; 11,700 shares owned by Crawford Container Company; and 41,401 shares owned by First Francis Company, Inc. These 97,10192,101 shares are included in the beneficial ownership amounts reported for both Mr. E.Edward Crawford and Mr. M.Matthew Crawford. |
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(c) | | Total includes 1,020,060 shares over which Mr. M. Crawford has sole voting and investment power. The address of Mr. M. Crawford is the business address of the company. |
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| (d) | | Total includes 939850 shares held under the Individual Account Retirement Plan of Park-Ohio Industries, Inc. and Its Subsidiaries as of December 31, 2007.2010. |
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| (e) | | 23,000 shares have been pledged as security. |
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| (f) | | The total number of shares includes 21,538 shares owned by Mr. Rutherford’s wife as to which Mr. Rutherford disclaims beneficial ownership. |
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| (g) | | Based on information set forth on Amendment No. 2 to Schedule 13G as filed with the Securities and Exchange Commission (“SEC”)SEC on February 6, 2008,11, 2011, Dimensional Fund Advisors LP, (“Dimensional”), a registered investment adviser, furnishes investment advice to four investment companies and serves as investment manager to certain other investment vehicles, including |
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| | commingled group trusts, (“Funds”).or the Funds. Dimensional reported beneficial ownership of 783,857660,796 shares as of December 31, 2007,2010, all of which shares were held by the Funds. Dimensional reported sole voting and investment power with respect to all651,796 of suchthe shares but disclaimed |
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| | beneficial ownership of all such shares. Dimensional is located at 1299 Ocean Avenue, Santa Monica, California 90401.Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas 78746. |
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(f)(h) | | Based on information set forth on Amendment No. 2 to Schedule 13G as filed with the SEC on February 14, 2008, FMR LLC, a parent holding company, as of December 31, 2007, through its subsidiaries, is the beneficial owner of 650,688 shares, with the sole power to dispose of or direct the disposition of the 650,688 shares owned by the Fidelity funds. Neither FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity funds. These powers reside with the Boards of Trustees for the funds. FMR LLC and its subsidiaries are located at 82 Devonshire Street, Boston, Massachusetts 02109. |
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(g) | | Based on information set forth on Amendment No. 1821 to Schedule 13D as filed with the SEC on June 7, 2007. Includes 773,888March 18, 2009. Total includes 1,009,017 shares held by GAMCO Asset Management Inc., 321,000340,000 shares held by Gabelli Funds, LLC, and 2,0001,500 shares held by MJG Associates, Inc., as of June 5, 2007.March 18, 2009. GGCP, Inc. is the ultimate parent holding company for the above listedabove-listed companies, and Mr. Mario J. Gabelli is the majority shareholderstockholder, chief executive officer and a director of GGCP, Inc. Each of the foregoing has the sole power to vote or direct the vote and sole power to dispose or direct the disposition of thetheir respective reported shares, except that GAMCO Asset Management Inc. does not have the authority to vote 10,000 of the reported shares. The foregoing companies provide securities and investment related services and have their principal business office at One Corporate Center, Rye, New York 10580. |
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(h) | | Based on information set forth on Amendment No. 2 to Schedule 13G as filed with the SEC on January 7, 2008, Paulette R. Baum Revocable Living Trust u/a/d 7/21/98 is classified as an individual filer that, as of December 31, 2007, through John B. Baum, Trustee, has the sole power to vote or direct the vote and sole power to dispose or direct the disposition of 713,000 shares. Paulette R. Baum Revocable Living Trust u/a/d 7/21/98 is located at 30201 Orchard Lake Road, Suite 107, Farmington Hills, Michigan 48334. |
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| (i) | | Based on information set forth on Amendment No. 3Includes 2,500 restricted share units that represent the right to Schedule 13G as filed withreceive shares of our Common Stock upon Separation of Service (as defined in the SEC on January 24, 2008, Private Management Group, Inc. is an investment adviser that, as of December 31, 2007, has the sole power to vote or direct the vote and sole power to dispose or direct the disposition of 610,333 shares. Private Management Group, Inc. is located at 20 Corporate Park, Suite 400, Irvine, California 92606.Director DC Plan). |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, or the Exchange Act, requires our officers and directors, and persons who beneficially own more than ten percent of our Common Stock, to file reports of ownership and changes in ownership of such securities with the SEC. Officers, directors and greater than ten percent beneficial owners are required by applicable regulations to furnish us with copies of all Section 16(a) forms they file.
Based upon our review of the copies of Section 16(a) forms received by us, and upon written representations from reporting persons concerning the necessity of filing a Form 5, we believe that, during 2007,2010, all filing requirements applicable for reporting persons were met, with the exception of Patrick W. FogartyMr. Edward Crawford who filed: Forms 4 on February 3, 2011 reporting the sale of 31,040 shares on November 15, 2010, the sale of 13,948 shares on November 19, 2010, the sale of 14,947 shares on November 23, 2010, and Robert D. Vilsack,the sale of 2,241 shares on November 24, 2010, respectively; Mr. Matthew Crawford who each filedfiled: a Form 4 on April 25, 2007June 10, 2010 reporting the sale of 36422,260 shares on May 10, 2010 and 317a Form 4 on November 29, 2010 reporting the sale of 3,529 shares respectively, for the payment on April 6, 2007 of a tax liability associated with the vesting of restricted shares pursuant to the 1998 Plan; RonnaNovember 19, 2010; Ms. Romney who filed a Form 4 on February 20, 2008 and December 17, 2007January 24, 2011 reporting the sale of 2,0002,500 shares on November 29, 2010; Mr. Rutherford who filed a Form 5 on August 23, 2010 reporting the gifting of 1,875 shares on October 9, 2009 and filed a Form 4/A on January 24, 2011 reporting the payment of a tax liability by the delivery of 590 shares on August 13, 200719, 2010; and 2,000 shares on December 10, 2007, respectively; and James W.Mr. Wert who filed a Form 4 on May 18, 2007February 15, 2011 reporting the salepurchase of 4182,500 shares on May 15, 2007.March 17, 2009 and the purchase of 2,500 shares on March 18, 2009.
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CERTAIN MATTERS PERTAINING TO THE BOARD OF DIRECTORS AND
CORPORATE GOVERNANCE
Corporate Governance
Director Independence.The Board believes that there should be a substantial majority of independent directors on the Board. The Board also believes that it is useful and appropriate to have members of management, including the Chief Executive Officer, or CEO, and President, as directors. The current Board members include fivesix independent directors (including two of theall three nominees).
Director Independence.Each of Messrs. Auletta, Greene, Mixon, Moore, and Wert and Ms. Romney is “independent” in accordance with the rules of the Nasdaq Stock Market. The Nasdaq Stock MarketMarket’s independence definition includes a series of objective tests, such asincluding that the director is not our employee and has not engaged in various types of business dealings with us. In addition, as further required by the Nasdaq Stock MarketMarket’s rules, the Board has made a subjective determination as to each independent director that no relationships exist that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the directorsBoard reviewed and discussed information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to the Company and management.
In addition, as required by the Nasdaq Stock MarketMarket’s rules, the members of the Audit Committee are each “independent” under special standards established by the SEC for members of audit committees. The Audit Committee also includes at least one independent member whom the Board has determined meets the qualifications of an “audit committee financial expert” in accordance with SEC rules. Patrick V.Mr. Auletta is the independent director who has been determined to be an audit committee financial expert. Shareholders should understand that this designation is a disclosure requirement of the SEC related to Mr. Auletta’s experience and understanding with respect to certain accounting and auditing matters. The designation does not impose upon Mr. Auletta any duties, obligations or liability that are greater than are generally imposed on him as a member of the Audit Committee and the Board, and his designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or the Board.
Risk Oversight. The Board is responsible for overseeing the Company’s risk, with reviews of certain areas being conducted by the relevant committees of the Board and directly through senior management reports.
The Audit Committee oversees our risk policies and processes relating to the financial statements and financial reporting processes, as well as internal controls and compliance, and the guidelines, policies and processes for monitoring and mitigating those risks. The Compensation Committee assesses and monitors risks relating to our executive compensation policies and practices. The Nominating and Corporate Governance Committee is responsible for overseeing the management of risks related to our governance structure and processes, the independence of the Board and potential conflicts of interest and ensuring compliance with the Code of Business Conduct and Ethics. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks.
In addition, the Board’s role in our risk oversight process includes receiving regular reports either directly from presentations to the Board by senior or regional management or through executive officers at Board meetings on areas of material risk to us, including market-specific, operational, legal, regulatory, competitive and strategic risks.
The procedures described above permit the Board to maintain an awareness of material risks that may affect us and ensure the ability of the Board to take any and all appropriate actions to oversee risks we face. We also believe that our board leadership structure complements our risk management structure, as it allows our independent directors, through the independent committees, to exercise effective oversight of the actions of management in identifying risks and implementing effective risk management policies and controls.
Leadership Structure. Our CEO, Mr. Edward Crawford, also serves as our Chairman. The Company has no fixed policy on whether the roles of Chairman and CEO should be separate or combined; this decision is based on the best interests of the Company considering the circumstances at the time. The Board believes that the combined role of Chairman and CEO promotes strategic development and execution of our business strategies, which is
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essential to effective governance. The Board recognizes utilizing the expertise of Mr. Edward Crawford contributes to the success of the Company. The diversity of our operating units requires a leader who possesses the detailed and in-depth knowledge of the issues, opportunities and challenges facing those diverse businesses. At this time, the Board believes that Mr. Edward Crawford, based upon his experience in the various industries in which we are positioned, is best qualified to efficiently develop agendas that ensure that the Board’s time and attention are focused on the most critical matters and to execute strategic plans effectively.
The Board has chosen not to appoint a “lead director,” but instead uses executive sessions of the independent directors, as necessary, and other than the Executive Committee, the composition of the remaining committees of the Board is comprised solely of independent directors. We believe that shared leadership responsibility among the independent directors, as opposed to a single lead director, results in increased engagement of the Board as a whole, and that having a strong, independent group of directors fully engaged is important for good governance.
Code of Business Conduct and Ethics. All directors, officers and employees must act ethically at all times and in accordance with the policies comprising our Code of Business Conduct and Ethics.Ethics, or Code. A copy of the codeCode is available, without charge, upon written request to: Secretary, Park-Ohio Holdings Corp., 6065 Parkland Boulevard, Cleveland, Ohio 44124. A copy of our Code44124 and is also available on our website at www.pkoh.com. We intend to disclose any amendment to, or waiver from, the Code of Business Conduct and Ethics by posting such amendment or waiver, as applicable, on our website.
Board of Directors and Committees
Board Committees and Charters.Committees. The Board currently has, and appoints the members of, Audit, Compensation, Nominating and Corporate Governance and Executive Committees. Each member of the Audit, Compensation and Nominating and Corporate Governance Committees is an independent director in accordance with the rules of the Nasdaq Stock Market. The Audit Committee has a written charter approved by the Board.
Audit Committee. The Audit Committee consists of Messrs. Auletta, Greene and Wert, with Mr. Auletta as its chairman.chair. The Audit Committee assists the Board in its general oversight of our financial reporting, internal controls and audit functions, and is directly responsible for the appointment, retention, compensation and oversight of the work of our independent auditors. In 2007,2010, the Audit Committee held sevensix meetings. The Audit Committee has a written charter approved by the Board. The responsibilities and activities of the Audit Committee are described in greater detail in “Audit Committee Report” and the Audit Committee Charter. The Audit Committee Charter, which is available on our website at www.pkoh.com.
Compensation Committee. The Compensation Committee consists of Messrs. Wert and Moore and Ms. Romney, with Ms. Romney as its chairwoman.chair. The Compensation Committee reviews and approves salaries, performance-based incentives and other matters relating to executive compensation, including reviewing and granting equity awards to executive officers. As described in greater detail below under “Compensation Discussion and
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Analysis,” the Compensation Committee determines the compensation of our executive officers, including our CEO, and directors. With respect to executive officers other than the CEO, the Compensation Committee takes into account the recommendations of the CEO when determining the various elements of their compensation, including the amount and form of such compensation. The Compensation Committee has the sole authority to retain and terminate compensation consultants to assist in the evaluation of executive compensation and the sole authority to approve the fees and other retention terms of any such consultants. During 2007, the Compensation Committee again retained Watson Wyatt to assist in the evaluation of our executive compensation program, which evaluation included providing information to the Compensation Committee on trends in executive compensation and other market and peer group data.
The Compensation Committee also reviews and approves various other compensation policies and matters. The Compensation Committee held three meetingsone meeting in 20072010 and also acted by written consent. The Compensation Committee has not yet adopted a written charter.
Executive Committee. The Executive Committee consists of Messrs. Auletta, E.Edward Crawford and Wert, with Mr. Wert as its chairman.chair. The Executive Committee may exercise the authority of the Board between Board meetings, except to the extent that the Board has delegated authority to another committee or to other persons and except as limited by Ohio law and our Regulations. The Executive Committee held no meetings in 2007.2010.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee consists of Messrs. Auletta, Greene, Mixon, Moore and Wert and Ms. Romney, with Mr. Wert as its chairman,chair, and consists of all of our independent directors, in accordance with the rules of the Nasdaq Stock Market. The Nominating and Corporate Governance Committee makes recommendations to the Board regarding the size and
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composition of the Board. The Nominating and Corporate Governance Committee is responsible for reviewing with the Board from time to time the appropriate skills and characteristics required of Board members in the context of the current size andmake-up of the Board. This assessment includes issues of diversity in numerous factors such as: age; understanding of and achievements in manufacturing, technology, finance and marketing; and international experience and culture. These factors, and any other qualifications considered useful by the Nominating and Corporate Governance Committee, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time. As a result, the priorities and emphasis of the Nominating and Corporate Governance Committee and of the Board may change from time to time to take into account changes in business and other trends and the portfolio of skills and experience of current and prospective Board members. Therefore, while focused on the achievement and the ability of potential candidates to make a positive contribution with respect to such factors, the Nominating and Corporate Governance Committee has not established any specific minimum criteria or qualifications that a nominee must possess. The Nominating and Corporate Governance Committee establishes procedures for the nomination process, recommends candidates for election to the Board and also nominates officers for election by the Board. The Nominating and Corporate Governance Committee has not yet adopted a written charter but hasoperates under a resolution regarding the nomination process.
Consideration of new Board nominee candidates typically involves a series of internal discussions, review of information concerning candidates and interviews with selected candidates. In general, candidates for nomination to the Board are suggested by Board members or by employees. The Nominating and Corporate Governance Committee will consider candidates proposed by shareholders. The Nominatingshareholders and Corporate Governance Committee evaluates these candidates proposed by shareholders using the same criteria as for other candidates. Any shareholder nominations proposed for consideration by the Nominating and Corporate Governance Committee should include (1) complete information as to the identity and qualifications of the proposed nominee, including name, address, present and prior businessand/or professional affiliations, education and experience and particular fields of expertise, (2) an indication of the nominee’s consent to serve as a director if elected, and (3) the reasons why, in the opinion of the recommending shareholder, the proposed nominee is qualified and suited to be a director, and should be addressed to our Secretary at 6065 Parkland Boulevard, Cleveland, Ohio 44124.
The Nominating and Corporate Governance Committee reviews and reports to the Board on a periodic basis with regard to matters of corporate governance. The Nominating and Corporate Governance Committee also reviews and assesses the effectiveness of the Board’s Code of Business Conduct and Ethics and recommends to the Board proposed revisions to the Code. In addition, the Nominating and Corporate Governance Committee reviews
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shareholder proposals and makes recommendations to the Board for action on such proposals. Pursuant to the rules of the Nasdaq Stock Market, all of theThe members of the Nominating and Corporate Governance Committee met once without the presence of management directorstwice and acted by written consent in 2007.2010.
Attendance at Board, Committee and Annual Shareholders’ Meetings. The Board held fourfive meetings in 2007.2010. All directors are expected to attend each meeting of the Board and the committees on which he or she serves. In 2007,2010, no director attended less than 75% of the meetings of the Board and the committees on which he or she served. Directors are expected to attend the Annual Meeting, and sixall directors except for Mr. Mixon who could not attend due to health reasons, attended the 20072010 annual meeting of shareholders.
Shareholder Communications
The Board believes that it is important for shareholders to have a process to send communications to the Board. Accordingly, shareholders who wish to communicate with the Board of Directors or a particular director may do so by sending a letter to our Secretary at 6065 Parkland Boulevard, Cleveland, Ohio 44124. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Shareholder-Board Communication” or“Shareholder-Director Communication.” All such letters must identify the author as a shareholder and clearly state whether the intended recipients are all members of the Board or certain specified individual directors. The Secretary will make copies of all such letters and circulate them to the appropriate director or directors.
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Company Affiliations with the Board of Directors and Nominees
The following affiliation exists between usMr. Mixon currently serves as the executive Chairman of the Board of Invacare Corporation. In the ordinary course of business, we sell parts to Invacare Corporation and nominees or directors:its subsidiaries. Total sales to Invacare Corporation during 2010 were approximately $7.6 million.
In concluding the independence of Mr. Auletta served as President of KeyBank National Association from 2001 to 2004 and is currently President Emeritus of KeyBank. We have a secured $270.0 million revolving credit facility with J.P. Morgan Chase Bank, N.A. (successor by merger to Bank One, N.A.), as lead arranger and lender. KeyBank is a participant in this credit facility inMixon, the amount of approximately $40.0 million as syndication agent and lender. KeyBank received interest income and fee income from us during 2007. The credit facility was entered intoBoard determined that since the sales were made in the ordinary course of business was made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with unrelated parties and does not involve more than the normal risk of collectibility or present other unfavorable features.
In making the determination that Mr. Auletta is independent, the Board of Directors determined that the fact that Mr. Auletta serves assales did not constitute a material portion of our total net sales, the President Emeritus of KeyBank doessales transactions did not create a material relationship or impair the independence of Mr. Auletta for the reasons set forth in the preceding paragraph and given Mr. Auletta’s current role at KeyBank.Mixon.
Compensation Committee Interlocks and Insider Participation
Members of the Compensation Committee during 20072010 were Messrs. Moore and Wert and Ms. Romney. No current or former officer or employee of ours served on the Compensation Committee during 2007.2010.
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COMPENSATION OF DIRECTORS
We compensate non-employee directors for serving on our Board and reimburse them for expenses incurred in connection with Board and committee meetings. During 2010, each non-employee director earned, as an annual retainer, $20,000 and was granted 2,500 restricted shares. The restricted shares were granted in accordance with our Amended and Restated 1998 Long-Term Incentive Plan, which we refer to as the 1998 Plan. The non-employee directors also received $4,000 for each Board meeting attended in-person or $1,000 for each Board meeting attended telephonically, and $1,000 for each committee meeting attended. The Compensation, Audit, and Nominating and Corporate Governance Committee Chairpersons each received a $5,000 committee retainer fee.
| | | | | | | | | | | | | |
| | | Fees Earned or
| | Stock
| | |
| | | Paid in Cash
| | Awards
| | Total
|
Name | | ($) | | ($)(1) | | ($) |
| |
| Patrick V. Auletta | | | 49,000 | | | | 36,825 | | | | 85,825 | |
| Kevin R. Greene | | | 44,000 | | | | 36,825 | | | | 80,825 | |
| A Malachi Mixon III | | | 33,000 | | | | 36,825 | | | | 69,825 | |
| Dan T. Moore III | | | 37,000 | | | | 36,825 | | | | 73,825 | |
| Ronna Romney | | | 43,000 | | | | 36,825 | | | | 79,825 | |
| James W. Wert | | | 49,000 | | | | 36,825 | | | | 85,825 | |
| | |
| (1) | | The amounts in this column represent the grant date fair value for awards of restricted shares in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC 718. The restricted shares vest one year from the date of grant. As of December 31, 2010, each director in the table held 2,500 shares subject to restriction and the following directors held options to purchase the following shares: Mr. Greene, 2,000 shares; Mr. Moore, 9,500 shares; and Mr. Wert, 16,300 shares. |
In 2009, we established a 2009 Director Supplemental Defined Contribution Plan, or Director DC Plan, which is a non-qualified deferred compensation plan for our directors. Under the Director DC Plan, eligible directors can defer up to 100% of their cash retainer, attendance fees,and/or restricted share units for pre-tax savings opportunities. The investment options available to the eligible directors are the same investment options offered under our 401(k) Plan. Eligible directors’ contributions and earnings are always 100% vested. Distributions under the Director DC Plan may be made only upon a Separation of Service (as defined in the Director DC Plan). Distributions are paid in a lump sum or in annual installments over a maximum of 10 years. We do not pay above-market interest rates or provide preferential earnings.
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AUDIT COMMITTEE
Audit Committee Report
The Audit Committee oversees our accounting and financial reporting processes and the audits of financial statements. The Audit Committee selects our independent auditors. The Audit Committee is composed of three directors, each of whom is independent as defined under the rules of the Nasdaq Stock Market and SEC rules. Currently, the Audit Committee is composed of Messrs. Auletta, Greene and Wert. The Audit Committee operates under a written charter adopted by the Board.
Management is responsible for our internal controls and financial reporting process. The independent auditors are responsible for performing an independent audit of our consolidated financial statements in accordance with auditing standards generally accepted in the United States and to issue a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee met with management and Ernst & Young LLP to review and discuss the audited consolidated financial statements for the year ended December 31, 2010. The Audit Committee discussed with Ernst & Young LLP its judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required by Statement on Auditing Standards No. 114 (Auditor’s Communication With Those Charged With Governance), as amended, as adopted by the Public Company Accounting Oversight Board. In addition, the Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants communications with the Audit Committee concerning independence, and has discussed with Ernst & Young LLP its independence from management and has considered the compatibility of non-audit services with the auditors’ independence.
The Audit Committee meets with the internal and independent auditors, with and without management present, to discuss the overall scope and plans for their respective audits, the results of audit examinations, their evaluations of our internal controls, and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Annual Report onForm 10-K for the fiscal year ended December 31, 2010.
Patrick V. Auletta, Chair
Kevin R. Greene
James W. Wert
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PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has appointed Ernst & Young LLP our independent auditors to examine our financial statements and those of our subsidiaries for the fiscal year ending December 31, 2011. During fiscal year 2010, Ernst & Young LLP examined our financial statements and those of our subsidiaries, including those set forth in our Annual Report onForm 10-K for the fiscal year ended December 31, 2010. The Board recommends ratification of the appointment of Ernst & Young LLP.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and have an opportunity to make a statement at the Annual Meeting, if they so desire, and will be available to respond to appropriate shareholders’ questions.
Vote Required and Recommendation of the Board
Although shareholder approval of this appointment is not required by law or binding on the Audit Committee, the Audit Committee believes that shareholders should be given the opportunity to express their views. If the shareholders do not ratify the appointment of Ernst & Young LLP as our independent auditors, the Audit Committee will consider this vote in determining whether or not to continue the engagement of Ernst & Young LLP. Abstentions and broker non-votes will have no effect on the ratification of the appointment of Ernst & Young LLP.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THIS APPOINTMENT.
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INDEPENDENT AUDITOR FEE INFORMATION
The following table presents fees for services rendered by Ernst & Young LLP in each of the last two fiscal years:
| | | | | | | | | |
| | | 2009 | | | 2010 | |
| |
| Audit fees | | $ | 965,000 | | | $ | 965,000 | |
| Audit-related fees | | $ | 75,000 | | | $ | 425,000 | |
| Tax fees | | $ | 52,210 | | | $ | 64,000 | |
| All other fees | | $ | 0 | | | | 0 | |
| | | | | | | | | |
| | | $ | 1,092,210 | | | $ | 1,454,000 | |
Audit fees included fees associated with the annual audit, the reviews of quarterly reports onForm 10-Q, statutory audits required internationally and the audit of management’s assessment of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002. Audit-related fees principally included fees in connection with pension plan audits and accounting consultations. Tax fees included fees in connection with tax compliance and tax planning services.
Pre-approval policy
The Audit Committee has adopted a formal policy on auditor independence requiring the approval by the Audit Committee of all professional services rendered by our independent auditor prior to the commencement of the specified services.
All of the services described in “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” were pre-approved by the Audit Committee in accordance with the Audit Committee’s formal policy on auditor independence.
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PROPOSAL NO. 3
RE-APPROVAL OF THE PARK-OHIO HOLDINGS CORP. ANNUAL CASH BONUS PLAN
You are being asked to re-approve the Park-Ohio Holdings Corp. Annual Cash Bonus Plan, which we refer to as the Bonus Plan. The Bonus Plan was initially approved by our shareholders in May 2006. Section 162(m) of the Internal Revenue Code of 1986 requires that certain executive compensation plans be re-approved by the shareholders every five years in order to continue qualification of compensation awarded under such plans as performance-based compensation pursuant to Section 162(m). Accordingly, we are seeking shareholders’ re-approval of the Bonus Plan in order for all bonus payments made under the Bonus Plan to continue to satisfy the requirements for qualified performance-based compensation under the Internal Revenue Service’s regulations under Section 162(m) and, accordingly, to be eligible for deductibility by the Company.
Summary of the Bonus Plan
The purpose of the Bonus Plan is to attract and retain key executives for the Company and its subsidiaries and to provide such persons with incentives for superior performance. A summary of the terms of the Bonus Plan is set forth below. The full text of the Bonus Plan is attached to this Proxy Statement as Appendix A, and the summary is qualified in its entirety by reference to Appendix A.
Administration. The Bonus Plan shall be administered by the Compensation Committee or any other committee appointed by the Board to administer the Bonus Plan (consisting of at least two directors, each of whom must be an “outside director” within the meaning of Section 162(m)). In administering the Bonus Plan, the Compensation Committee shall have full power and authority to interpret and administer the Bonus Plan and shall have the exclusive right to establish Management Objectives (as defined below) and the amount of incentive bonuses payable upon achievement of such objectives.
Eligible Executive. Participation in the Bonus Plan will be limited to an “Eligible Executive,” which is defined as the Company’s Chief Executive Officer and any other executive officer of the Company designated by the Compensation Committee.
Management Objectives. An Eligible Executive’s right to receive a bonus under the Bonus Plan depends on achievement of certain specified performance goals, referred to as Management Objectives. Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Eligible Executive or of the subsidiary, division, department or function within the Company or subsidiary in which the Eligible Executive is employed. Management Objectives may be measured on a relative or absolute basis. The Management Objectives shall be limited to specified levels of, growth in or relative peer company performance in one or more or a combination of the following: earnings per share; earnings before interest, taxes, depreciation, and amortization; earnings before interest and taxes; earnings before taxes; return on invested capital; return on total capital; return on assets; return on equity; total shareholder return; net income; revenue; cash flow or operating profit; and productivity improvement.
Awards. Not later than the 90th day of each fiscal year of the Company, the Compensation Committee shall establish the Management Objectives for each Eligible Executive and the amount of incentive bonus payable (or formula for determining such amount) upon full achievement of the specified Management Objectives. The Compensation Committee may further specify in respect of the specified Management Objectives a minimum acceptable level of achievement below which no incentive bonus payment will be made and shall set forth a formula for determining the amount of any payment to be made if performance is at or above the minimum acceptable level but falls short of full achievement of the specified Management Objectives. The Compensation Committee may not modify any terms of awards established, except to the extent that after such modification the incentive bonus would continue to constitute qualified “performance-based compensation” for purposes of Section 162(m) of the Code.
The Compensation Committee retains the discretion to reduce the amount of any incentive bonus that would be otherwise payable to an Eligible Executive (including a reduction in such amount to zero).
Notwithstanding any other provision of the Bonus Plan to the contrary, in no event shall the incentive bonus paid to an Eligible Executive under the Bonus Plan for a year exceed $3.0 million.
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Committee Certification. As soon as practicable after the end of each fiscal year of the Company, the Compensation Committee shall determine whether the Management Objective has been achieved and the amount of the incentive bonus to be paid to each Eligible Executive for such fiscal year and shall certify such determinations in writing.
Effective Date. Subject to its re-approval by the shareholders, the Bonus Plan shall become effective May 26, 2011, and shall remain effective until the first shareholders’ meeting in 2016, subject to any further shareholder approvals (or re-approvals) mandated for performance-based compensation under Section 162(m) of the Code. The Board, however, may terminate the Bonus Plan, on a prospective basis only, at any time.
Bonus Plan Benefits. Since the Bonus Plan affords the Compensation Committee discretion in establishing target bonuses (subject to the $3.0 million annual limit per person noted above), it is not possible to determine the amount of the benefits that may become payable under the Bonus Plan. If the Bonus Plan is not approved by shareholders, no bonuses will be paid under such plan.
Federal Income Tax Consequences
Under present federal income tax law, a Bonus Plan participant will be taxed at ordinary income rates on the amount of any payment received pursuant to the Bonus Plan. Generally, and subject to the provisions of Section 162(m), the Company will receive a federal income tax deduction corresponding to the amount of income recognized by a Bonus Plan participant.
Vote Required and Recommendation of the Board
Your Board believes it is in the best interests of the Company to qualify performance-based compensation for deductibility under Section 162(m) in order to maximize the Company’s income tax deductions. The re-approval of the Bonus Plan is necessary to qualify performance-based compensation for such deductibility.
The affirmative vote of a majority of our shares of Common Stock represented at the Annual Meeting and entitled to vote on the proposal is required to approve the Bonus Plan. Abstentions will have the effect of a vote against and broker non-votes will have no effect, with respect to the approval of this proposal.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RE-APPROVAL OF THE BONUS PLAN.
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PROPOSAL NO. 4
ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Pursuant to Section 14A of the Exchange Act, shareholders have an opportunity to cast a non-binding advisory vote on the compensation of our named executive officers as disclosed in this proxy statement pursuant to SEC rules.
Our compensation philosophy is designed to align each executive’s compensation with our short-and long-term performance and to provide the compensation and incentives needed to attract, motivate, reward, and retain key executives who are crucial to achieving our business goals and who will build long-term economic value for us. We seek to provide an executive compensation package that is tied to our overall financial performance and that aligns executive and shareholder interests. Our executive compensation decisions demonstrate our commitment to those goals. This link between incentive compensation and achievement of business goals and shareholder value helped drive our strong performance in 2010.
Our executive compensation is discussed in further detail in theCompensation Discussion and Analysissection of this proxy statement, which discusses how our compensation policies and procedures implement our compensation philosophy.
The Compensation Committee and our Board believe these policies and procedures are effective in implementing our compensation philosophy and in achieving its goals.
We are asking our shareholders to indicate their support for the compensation of our named executive officers, as described in this proxy statement. This proposal, commonly known as a“say-on-pay” proposal, is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we ask our shareholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed pursuant to SEC rules, and the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosures in this proxy statement.”
Thesay-on-pay vote is advisory and, therefore, not binding; however, the Compensation Committee will consider the outcome of the vote when considering future named executive officer compensation.
Vote Required and Recommendation of the Board
The affirmative vote of a majority of our shares of Common Stock represented at the Annual Meeting and entitled to vote on this proposal is required for the approval of the named executive officer compensation. Abstentions will have the effect of a vote against and broker non-votes will have no effect, with respect to the approval of this proposal.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RESOLUTION APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
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PROPOSAL NO. 5
ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Pursuant to Section 14A of the Exchange Act, shareholders have an opportunity to cast a non-binding advisory vote on how frequently we should seek an advisory vote on the compensation of our named executive officers. Shareholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every year, two years, or three years. Alternatively, shareholders may abstain from casting a vote.
The Board believes it is most appropriate to conduct an advisory vote on named executive officer compensation once every three years and, therefore, the Board recommends that you vote for a three-year interval for the advisory vote on named executive officer compensation.
Our executive compensation program is designed to achieve a balance of short-term and long-term goals. To this end, the Compensation Committee combines potential annual cash incentive awards with long-term equity awards, which generally vest over a three-year period, and with value based on the price of our Common Stock. The Board believes that holding the advisory vote on named executive officer compensation once every three years will encourage a reasonably long-term focus on our executive compensation policies and practices.
When you vote, you may cast your vote on your preferred voting frequency by choosing among the following four options: once every one year, two years or three years, or you may abstain from voting.
Although this advisory vote is not binding, the Board will consider our shareholders’ preferences and may take them into account in making future determinations concerning the frequency of advisory votes on our named executive officer compensation.
Vote Required and Recommendation of the Board
As an advisory vote, the option of once every year, two years or three years that receives the highest number of votes cast by shareholders is expected to be the frequency for the advisory vote on named executive officer compensation that has been selected by shareholders. Abstentions and broker non-votes will have no effect with respect to this proposal.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EVERY “THREE YEARS” REGARDING THE FREQUENCY OF THE SHAREHOLDER ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION.
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
2010 Performance
Fiscal 2010 was a year of significant achievement for us and our financial performance was substantially improved over 2009. In summary:
| | |
| • | Net sales were up 16%; |
|
| • | Net income was $15.2 million compared to a loss of $5.2 million for 2009; |
|
| • | Earnings per share was $1.29 compared to a loss of $.47 for 2009; |
|
| • | We generated operating cash flow of $67.1 million; |
|
| • | We strengthened our balance sheet by reducing total debt by $17.8 million and increasing cash by $12.1 million; |
|
| • | We increased revolving credit availability by $10.4 million; |
|
| • | The price of our Common Stock price increased 270% in 2010; and |
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| • | We completed two strategic acquisitions. |
Philosophy and Objectives
Our compensation program is designed to recognize the level of responsibility of an executive within our company,Company, taking into account the executive’snamed executive officer’s role and expected leadership within our organization, and to encourage decisions and actions that have a positive impact on our overall performance.
Our compensation philosophy is based upon the following objectives:
| | |
| | • | to reinforce the achievement of key business strategies and objectives; |
| |
| | • | to reward our executives for their outstanding performance and business results; |
| |
| | • | to emphasize the enhancement of shareholder value; |
| |
| | • | to value the executive’s unique skills and competencies; |
| |
| | • | to attract retain and motivateretain qualified executives; and |
| |
| | • | to provide a competitive compensation structure. |
Overview
The Compensation Committee of the Board of Directors administers our compensation program. The Compensation Committee is responsible for reviewing and approving base salaries, bonuses and equity incentive awards for all named executive officers. Typically, our Chief Executive Officer, or CEO makes compensation recommendations to the Compensation Committee with respect to decisions concerning named executive officers other than himself. TheWith respect to our CEO, the Compensation Committee makes its decisions with respectin executive session. Our compensation program recognizes the importance of ensuring that discretion is provided to ourthe Compensation Committee and CEO in executive session.determining compensation levels and awards.
BenchmarkingCompensation Consultants
In 2006, theThe Compensation Committee has engaged the services of Watson Wyatt Worldwide, an executive compensation and benefits consulting firm, as consultants on a periodic basis to help evaluate our executive compensation program and to help select appropriate market data for compensation and benchmarking. SomeThe Compensation Committee also may consider a variety of the resources used data sources and information related to market practices
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for comparison were the WWDS Top Management Survey, Mercer Executive Compensation Survey,companies similar to ours. A comprehensive review was conducted by Towers Watson Wyatt Proprietary Executive Survey and comparative executive compensation information from a peer group consisting of the following companies: AAR Corp., Applied Industrial Technologies Inc., Aviall Inc., Century Aluminum Co., Encore Wire Corp., Fairchild Corp., General Cable Corp., Kunan Corp., Lawson Products Inc., Lamson & Sessions Co., Mueller Industries Inc., Shiloh Industries Inc., Superior Essex Inc. and Wolverine Tube Inc. The peer group was established utilizing several factors including their respective industry, markets, revenue, market capitalization and profitability.in 2006. We have in the past used, and continue to use, Towers Watson Wyatt for actuarial relatedactuarial-related services in connection with our retirement plans.
In 2007, Watson Wyatt provided us market survey and peer group data on supplemental retirement plans for chief executive officers. The 2007 peer group used by Watson Wyatt was the same as the 2006 peer group described above, except that Aviall Inc. was not included because it was acquired subsequent to the 2006 review, and Fairchild Corp. was not included as it no longer fit the peer group profile. In 2008,past, the Compensation Committee considered Watson Wyatt’s 2007 market survey and peer group data in establishing a non-qualified defined contribution plan and a non-qualified defined benefit plan for our CEO.
The Compensation Committee considered Watson Wyatt’s 2006 market survey and peer group data in determining the base salary, bonus and equity components of our executive officers for 2007. With respect to our CEO and our President and Chief Operating Officer, or COO, the Compensation Committeehas considered medians for total compensation from the market survey and peer group data from the 2006 Towers Watson review for comparable positions.positions in determining the base salary, bonus, equity components, and benefit package for our CEO and our President and Chief Operating Officer, or COO. However, actual compensation can and does vary widely, either above or below these medians, based on companyCompany and individual performance, scope of responsibilities, competencies and experience. With respect to our other executive officers,For 2010, the Compensation Committee used its judgment and discretion to address individual circumstances rather than to simply aim for a level of compensation that falls with a specific range fordid not consider the Towers Watson market survey or peer group data in making its compensation decisions for our CEO and COO.
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asIn January 2011, the Compensation Committee engaged the services of Pearl Meyer & Partners (PM&P), a result,leading independent provider of executive compensation consulting services, to evaluate our executive compensation program and help select appropriate market data for compensation and benchmarking. For 2010, the other executive officers’ total compensation is at or belowCompensation Committee did not consider the median level for thePM&P market survey andor peer group data in making its compensation decisions for comparable positions.our named executive officers. The Compensation Committee considers many factors in exercising its judgment and discretion in making compensation decisions. Other factors the Compensation Committee considers when making individual compensation decisions are described under “Compensation Components” below.
The Compensation Committee believes that the foregoing actions are consistent with our philosophy and objectives.
Compensation Components
For 2007, ourOur compensation program hadhas three primary components consisting of a base salary, an annual cash bonus, whether discretionary or pursuant to our Annual Cash Bonus Plan, which we refer to as the Bonus Plan, and equity awards granted pursuant to our Amended and Restated 1998 Long-Term Incentive Plan, which we refer to as the 1998 Plan. In addition, we also offer our named executive officers basic retirement savings opportunities, participation in a deferred compensation plan, health and welfare benefits and perquisites that supplement the three primary components of compensation. ForBeginning in 2008, our compensation program will also includeincluded a non-qualified defined benefit plan, or DB Plan, and a non-qualified defined contribution plan, and non-qualified defined benefit planor DC Plan, for our CEO.
We view these various components of compensation as related but distinct. Although our Compensation Committee does review total compensation, we do not believe that significant compensation derived from one component of compensation should negate or reduce compensation from other components. The appropriate level for each compensation component is based in part, but not entirely, on our view of internal equity and consistency, and other considerations we deem relevant, such as rewarding extraordinary performance. Our Compensation Committee has not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid-out compensation, between cash and non-cash compensation or among different forms of non-cash compensation.
Base Salary
We pay base salaries to recognize each named executive officer’s unique value and skills, competencies and experience in light of the executive’s position. Base salaries, including any annual or other adjustments, for our named executive officers, other than our CEO, are determined after taking into account recommendations by our CEO. Base salaries for all named executive officers are determined by the Compensation Committee after considering a variety of factors such factors as competitive industry salaries, a subjective assessment of the nature and scope of the named executive officer’s position, the named executive officer’s unique value and historical contributions, historical increases, internal equitable considerations, and the experience and length of the service of the named executive officer. Adjustments to
For 2009, the Compensation Committee, after considering recommendations from our CEO, and after taking into account economic and business conditions and our financial performance, reduced our named executive officers’ 2008 base salaries are generally considered duringby 10% commencing March 1, 2009.
Effective April 1, 2010, the first quarter of each yearCompensation Committee, after considering recommendations from our CEO, and if made, are effective retroactively to the beginning of the year. For 2007, base salaries forafter taking into account improved economic and business conditions, and our financial performance, reinstated our
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named executive officers remained the same from 2006, other than for our Secretaryofficers’ 2008 salary levels (Messrs. Edward Crawford, $750,000; Rutherford, $340,000; Matthew Crawford, $400,000; Vilsack, $260,000; and General Counsel, who received an increase of approximately 4% for 2007.Fogarty $240,000).
Annual Bonus
Annual bonuses are used to reward our named executive officers for achieving key financial and operational objectives, to motivate certain desired individual behaviors and to reward superior individual achievements. Bonus awards for our named executive officers, other than for our CEO, are determined by the Compensation Committee after taking into account recommendations by our CEO. The annual bonus awards, other than for our CEO, are fully discretionary and are based on subjective criteria, in light of all relevant factors.which may include:
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| • | our overall financial performance; |
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| • | individual expertise, contribution, and performance; |
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| • | overall leadership; and |
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| • | other factors that are critical to driving long-term value for shareholders. |
We have established the Bonus Plan, which was approved by our shareholders in 2006, and for which we are seeking re-approval at the Annual Meeting, for our CEO and any other named executive officer selected by the Compensation Committee to participate in the Bonus Plan. The Bonus Plan includes a set of performance measures that can be used to establish the bonus award. Under the Bonus Plan, our CEO or any other selected named executive officer is eligible to receive an annual cash bonus depending on the performance of our companyCompany against specific performance measures established by the Compensation Committee before the end of the first quarter of each year. For 2007,2010, only our CEO participated in the Bonus Plan, and the Compensation Committee selected consolidated income before income taxes as the performance measure for our CEO. For 2007,determined that our CEO was entitled to a bonus award equal to 4% of our consolidated adjusted income before income taxes.taxes (adjusted for extraordinary gains and losses). The Compensation Committee believes income before income taxes, as adjusted, is an appropriate measure of our core operating performance, and directly links our CEO’s annual bonus award to our profitability. Under the Bonus Plan, the Compensation Committee is authorized to exercise negative discretion and reduce our CEO’s award, but did not do so for 2007.2010.
The Compensation Committee has established that the performance measure for our CEO under the Bonus Plan for each of 2008, 2009 and 2010 will be 4% of our consolidated income before income taxes. The
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Compensation Committee believes income before income taxes is an appropriate measure of our core operating performance and directly links our CEO’s annual bonus award to our profitability. For our other named executive officers, the 20072010 bonus awards were determined by the Compensation Committee, after considering recommendations from our CEO, and after taking into account individual performance and our profitability. Information about bonuses paid to our named executive officers is contained in the “Summary Compensation Table.”Table”.
The Compensation Committee has established that the performance measure for our CEO under the Bonus Plan for 2011 will continue to be 4% of our consolidated adjusted income before income taxes (adjusted for special charges).
Equity Compensation
We use the grant of equity awards under our 1998 Plan to provide long-term incentive compensation opportunities, whichintended to align the executives’named executive officers’ interests with those of our shareholders, and to attract and retain executive officers.
Our Compensation Committee administers our 1998 Plan. Historically, the Compensation Committee has granted options and restricted shares under our 1998 Plan.Plan, but awards also can be made in the form of performance shares, restricted share units, or performance units, stock appreciation rights and stock awards. There is no set formula for the granting of equity awards to named executive officers. Other than for grants of equity awards to our CEO, the Compensation Committee typically considers recommendations from our CEO when considering decisions regarding the grant of equity awards to named executive officers. The Compensation Committee grants equity awards based on its subjective judgment and discretion, and may consider a number of criteria, including the relative rank of the named executive officer, total compensation levels, and the executive’snamed executive officer’s historical and ongoing contributions to our success based on subjective criteria. There is no set formula forBecause the granting ofCompensation Committee and the CEO in their discretion may consider such factors as they deem relevant in determining the named executive officer’s overall equity awardsaward, other factors may cause the award in any given year to executive officers.differ from historical amounts.
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We do not have any program, plan or obligation that requires us to grant equity awards on specific dates. We have not made equity grants in connection with the release or withholding of material, non-public information. Options granted under our 1998 Plan have exercise prices equal to the closing market price of our Common Stock on the day of the grant.
For 2010, no equity award was made to our CEO. The Compensation Committee approved restricted share awards for Messrs. Matthew Crawford, Rutherford, Vilsack, and Fogarty in the amounts of 24,000, 12,000, 12,000, and 12,000 shares, respectively. These restricted shares vest one-third each year over three years. The Compensation Committee did not perform a qualitative or quantitative analysis, but instead used its subjective judgment and discretion in determining the value of the equity awards. Restricted shares were utilized over stock options because restricted shares serve to reward and retain executives and foster stock ownership, while also minimizing the number of shares granted in aggregate. In 2006,exercising its judgment and discretion, the Compensation Committee madewas influenced by recommendations from our CEO and motivated by its desire to award each named executive officer with the equity value that is considered necessary to achieve the shareholder alignment and attraction, retention and motivation objectives of our compensation program. The Compensation Committee’s review and consideration of each of the named executive officer’s equity grants were of a general nature, rather than identifying and focusing on each individual’s performance relative to specific tasks, projects or accomplishments or distinguishable qualitative performance goals. The Compensation Committee did not otherwise take into account any specific performance, criteria or achievements relative to qualitative performance goals when making its equity compensation decisions for 2010. In granting the 2010 restricted share awards, ofthe Compensation Committee also considered:
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| • | total compensation levels for each named executive officer in 2008, 2009, and 2010; |
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| • | the value provided by restricted shares versus stock options; |
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| • | the value and size of historical grants; |
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| • | how much value was created by the historical grants; and |
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| • | shares available for grant under the 1998 Plan. |
Information about equity awards granted in 2010 to our CEO and our COO. For 2007, no equity awards were made to our CEO or our COO. Equity awards were granted in 2007 to our other executive officers and information about such awards is contained in the “2007 Grants of Plan-Based Awards” table. Information about outstanding equity awards granted to ournamed executive officers is contained in the “Outstanding Equity Awards at December 31, 2007”“2010 Grants of Plan-Based Awards” table.
Retirement Benefits
Our Individual Account Retirement Plan, or 401(k) Plan, is a tax-qualified retirement savings plan that permits our employees, including our named executive officers, to defer a portion of their annual salary to the 401(k) Plan on a before-tax basis. Our named executive officers participate in the 401(k) Plan on the same basis as all other salaried employees whereby we annually contribute 2% of their salary into the 401(k) Plan on their behalf, subject to Internal Revenue Code limitations. Effective March 1, 2009, the Compensation Committee, after considering recommendations from our CEO, and after taking into account economic and business conditions and our financial performance for 2008 and 2009, suspended the 2% contribution for our named executive officers. Our named executive officers vest in the companyCompany contributions ratably over six years of employment service, at which time they are 100% vested.
ForIn 2008, the Compensation Committee established a non-qualified defined contribution planthe DC Plan and a non-qualified defined benefit planthe DB Plan for our CEO.CEO, which is described under “Pension Benefits” and “Non-Qualified Deferred Compensation” below. These retirement benefits are intended to reward himour CEO for his past service to the company,us and, to recognize, over the long term, future service to the company, and to provide a total compensation and benefit package that is at, or above, the median for total compensation for our peer group.us.
The defined contribution plan, or DC Plan, provides our CEO with an annual credit of $375,000, or DC Benefit, during the seven-year period beginning on January 1, 2008 and ending on December 31, 2014. The DC Benefit is credited to an account on our books for our CEO, provided he has not had a termination of employment with the company, as defined in the DC Plan. Our CEO is at all times 100% vested in the DC Benefit. The amount credited under the DC Plan for our CEO will be paid upon his termination of employment.
The defined benefit plan, or DB Plan, provides our CEO with an annual retirement benefit, or DB Benefit, of up to $375,000 upon his termination of employment with the company, as defined in the DB Plan. The annual DB Benefit that our CEO actually receives depends on his years of credited service with the company as of his termination of employment. If he has 20 or more years of credited service, he will receive the full $375,000 annual DB Benefit. If our CEO has attained less than 20 years of credited service as of his termination of employment, he will receive an annual DB Benefit that is reduced proportionately. As of December 31, 2007, our CEO has 13 years of credited service with the company. If our CEO dies while employed by the company, his spouse is entitled to receive an amount equal to 50% of the amount our CEO would have been entitled to receive on the date of his death payable annually for the life of his spouse.
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Deferred Compensation
The companyCompany maintains a non-qualified deferred compensation plan, which we refer to as the 2005 Supplemental Defined Contribution Plan, or 2005 Plan, that allows certain employees, including our named executive officers, to defer a percentage of their salary and bonus, to be paid at a time specified by the participant and consistent with the terms of the plan. For 2007, none of our executive officers participatedWe do not provide any matching contributions to the 2005 Plan. We do not pay above-market interest rates or provide preferential earnings.
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Our CEO is the only participant in the non-qualified deferred compensation plan.DC Plan to which we make an annual contribution of $375,000 as noted in the Non-Qualified Deferred Compensation table below. We do not pay above-market interest rates or provide preferential earnings.
Termination-Related Payments
All of our named executive officers areemployees-at-will and, as such, do not have employment agreements with us. Therefore, we are not obligated to provide any post-employment compensation or benefits. However, upon a change of control, as defined in the 1998 Plan, all unvested stock option grants become fully exercisable, and all outstanding restricted share grants fully vest.vest, and our CEO becomes 100% vested in his benefit under the DB Plan, regardless of years of service.
Other Benefits
We also provide other benefits to our named executive officers that we consider necessary in order to offer fully-competitive opportunities to attract and retain our named executive officers. These benefits include life insurance, companyCompany cars or car allowances, executive physicals, and club dues. ExecutiveNamed executive officers are eligible to participate in all of our employee benefit plans, such as the 401(k) Plan and medical, dental, group life, disability and accidental death and dismemberment insurance, in each case on the same basis as other employees.
Accounting and Tax TreatmentLimitations on Deductibility of Compensation
We account for equity compensation paid to our employees under the rules of Financial Accounting Standards Board Statement No. 123 (revised 2004), “Share-Based Payment,” or FAS 123R, which require us to estimate and record an expense over the service period of the award. Accounting rules also require us to record cash compensation as an expense at the time the obligation is accrued.
As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any fiscal year to a company’s CEO and certain other named executive officers as of the end of any fiscal year. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met.
The Compensation Committee believes that it is generally in our best interest to attempt to structure performance-based compensation, including annual bonuses, to named executive officers who may be subject to Section 162(m) in a manner that satisfies the statute’s requirements. However, the Compensation Committee also recognizes the need to retain flexibility to make compensation decisions that may not meet Section 162(m) standards when necessary to enable us to meet our overall objectives, even if we may not deduct all of the compensation. Accordingly, the Compensation Committee has expressly reserved the authority to award non-deductible compensation in appropriate circumstances.
We are not obligated to offset any income taxes due on any compensation or benefits, including as discussed below, income or excise taxes due on any income from accelerated vesting of outstanding equity grants. To the extent any such amounts are considered “excess parachute payments” under Section 280G of the Internal Revenue Code and thus, not deductible by us, the Compensation Committee is aware of that possibility and has decided to accept the cost of that lost deduction. However, the Compensation Committee has not thought it necessary for us to take on the additional cost of reimbursing executives for any taxes generated by the vesting accelerations.
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our Annual Report onForm 10-K for the year ended December 31, 2007.2010.
Ronna Romney, Chair
Dan T. Moore III
James W. Wert
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INFORMATION REGARDING CURRENT YEAR’S COMPENSATION/GRANTS
The following table sets forth for fiscal 20072010, 2009, and 2006,2008, all compensation earned by the individuals who served as our CEO and Chief Financial Officer during fiscal 2007,2010, and by our three highest paid employees serving as other executive officers as of the end of 2007,2010, whom we refer to collectively as our named executive officers.
Summary Compensation Table for 2010
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| | | | | | | | | | | | | | | Change in
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| | | | | | | | | | | | | | | Nonqualified
| | | | | | | | | | | | | | | | | | | Nonqualified
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| | | | | | | | | | | | | Non-Equity
| | Deferred
| | All Other
| | | | | | | | | | | | | | | Non-Equity
| | Deferred
| | All Other
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| | | | | | | | | Stock
| | Option
| | Incentive Plan
| | Compensation
| | Compen-
| | | | | | | | | | | Stock
| | Option
| | Incentive Plan
| | Compensation
| | Compen-
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| | | | | Salary
| | Bonus
| | Awards
| | Awards
| | Compensation
| | Earnings
| | sation
| | Total
| | | | | Salary
| | Bonus
| | Awards
| | Awards
| | Compensation
| | Earnings
| | sation
| | Total
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Name and Principal Position | | Year | | ($) | | ($)(1) | | ($)(2) | | ($)(3) | | ($)(4) | | ($) | | ($)(5) | | ($) | | | Year | | ($)(1) | | ($) | | ($)(2) | | ($) | | ($)(3) | | ($)(4) | | ($)(5) | | ($) |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) |
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| Edward F. Crawford | | | 2007 | | | | 750,000 | | | | 0 | | | | 812,583 | | | | 69,583 | | | | 1,246,920 | | | | 0 | | | | 81,446 | | | | 2,960,532 | | | | 2010 | | | | 731,250 | | | | 0 | | | | 0 | | | | 0 | | | | 742,000 | | | | 72,532 | | | | 451,371 | | | | 1,997,153 | |
| Chairman of the Board and Chief Executive Officer | | | 2006 | | | | 750,000 | | | | 0 | | | | 245,807 | | | | 69,584 | | | | 968,000 | | | | 0 | | | | 80,720 | | | | 2,114,111 | | |
| Richard P. Elliott | | | 2007 | | | | 300,000 | | | | 165,000 | | | | 0 | | | | 41,725 | | | | 0 | | | | 0 | | | | 13,986 | | | | 520,711 | | |
| Vice President and Chief Financial Officer | | | 2006 | | | | 300,000 | | | | 125,000 | | | | 0 | | | | 13,916 | | | | 0 | | | | 0 | | | | 7,766 | | | | 446,682 | | |
| Chairman of the Board and | | | | 2009 | | | | 687,500 | | | | 0 | | | | 959,750 | | | | 0 | | | | 0 | | | | 85,534 | | | | 466,258 | | | | 2,199,042 | |
| Chief Executive Officer | | | | 2008 | | | | 750,000 | | | | 0 | | | | 0 | | | | 0 | | | | 876,000 | | | | 2,398,804 | | | | 458,536 | | | | 4,483,340 | |
| Jeffrey L. Rutherford(6) | | | | 2010 | | | | 331,500 | | | | 261,000 | | | | 139,800 | | | | 0 | | | | 0 | | | | 0 | | | | 9,486 | | | | 731,786 | |
| Vice President and Chief | | | | 2009 | | | | 311,666 | | | | 0 | | | | 87,250 | | | | 0 | | | | 0 | | | | 0 | | | | 9,342 | | | | 408,258 | |
| Financial Officer | | | | 2008 | | | | 166,700 | | | | 0 | | | | 100,500 | | | | 108,450 | | | | 0 | | | | 0 | | | | 4,121 | | | | 379,771 | |
| Matthew V. Crawford | | | 2007 | | | | 350,000 | | | | 250,000 | | | | 417,900 | | | | 69,583 | | | | 0 | | | | 0 | | | | 30,123 | | | | 1,117,606 | | | | 2010 | | | | 390,000 | | | | 260,000 | | | | 279,600 | | | | 0 | | | | 0 | | | | 0 | | | | 20,198 | | | | 950,248 | |
| President and Chief Operating Officer | | | 2006 | | | | 350,000 | | | | 195,000 | | | | 126,415 | | | | 69,584 | | | | 0 | | | | 0 | | | | 35,429 | | | | 776,428 | | |
| President and | | | | 2009 | | | | 366,666 | | | | 0 | | | | 139,600 | | | | 0 | | | | 0 | | | | 0 | | | | 37,167 | | | | 543,433 | |
| Chief Operating Officer | | | | 2008 | | | | 400,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 34,269 | | | | 434,269 | |
| Robert D. Vilsack | | | 2007 | | | | 240,000 | | | | 160,000 | | | | 2,504 | | | | 41,725 | | | | 0 | | | | 0 | | | | 17,268 | | | | 461,497 | | | | 2010 | | | | 253,500 | | | | 214,000 | | | | 139,800 | | | | 0 | | | | 0 | | | | 0 | | | | 21,185 | | | | 628,485 | |
| Secretary and General Counsel | | | 2006 | | | | 230,000 | | | | 138,000 | | | | 9,468 | | | | 19,342 | | | | 0 | | | | 0 | | | | 16,437 | | | | 413,247 | | |
| Secretary and | | | | 2009 | | | | 238,333 | | | | 0 | | | | 87,250 | | | | 0 | | | | 0 | | | | 0 | | | | 28,951 | | | | 354,534 | |
| General Counsel | | | | 2008 | | | | 260,000 | | | | 0 | | | | 0 | | | | 82,400 | | | | 0 | | | | 0 | | | | 31,605 | | | | 374,005 | |
| Patrick W. Fogarty | | | 2007 | | | | 230,000 | | | | 115,000 | | | | 2,504 | | | | 41,725 | | | | 0 | | | | 0 | | | | 21,793 | | | | 411,022 | | | | 2010 | | | | 234,000 | | | | 186,000 | | | | 139,800 | | | | 0 | | | | 0 | | | | 0 | | | | 18,536 | | | | 578,336 | |
| Director of Corporate Development | | | 2006 | | | | 230,000 | | | | 82,000 | | | | 9,468 | | | | 13,916 | | | | 0 | | | | 0 | | | | 20,026 | | | | 355,410 | | |
| Director of Corporate | | | | 2009 | | | | 220,000 | | | | 0 | | | | 87,250 | | | | 0 | | | | 0 | | | | 0 | | | | 19,111 | | | | 326,361 | |
| Development | | | | 2008 | | | | 240,000 | | | | 0 | | | | 0 | | | | 82,400 | | | | 0 | | | | 0 | | | | 21,813 | | | | 344,213 | |
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| (1) | | Other than Mr. E. Crawford, bonus awards to theThe amounts in this column represent salary actually paid for 2010. Effective April 1, 2010 salaries for our named executive officers were discretionary cash bonuses which were not paid pursuantreinstated to the Bonus Plan. Bonus awards were granted to2008 levels: Messrs. M.Edward Crawford, Elliott,$750,000; Rutherford, $340,000; Matthew Crawford, $400,000; Vilsack, $260,000; and Fogarty, and Vilsack based on the discretion of the Compensation Committee. The bonus awards were determined by the Compensation Committee based on recommendations from our CEO and after taking into account the individual performance of the executive officer and our profitability. These amounts are disclosed as bonuses in column (d) above.$240,000. |
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| (2) | | The amounts in this column (e) above represent the dollar amount recognized for financial statement reporting purposes with respect to the year indicatedgrant date fair value for awards of restricted shares granted in prior years,or restricted share units, in accordance with FAS 123R. Assumptions usedASC 718. The 2008 grant to Mr. Rutherford will vest one-fourth each year over four years. The 2009 grants to Messrs. Rutherford, Matthew Crawford, Vilsack, and Fogarty will vest in one year. The 2009 grant to Mr. Edward Crawford and the calculation of the amounts are included in Note I2010 grants to our consolidated financial statements included in our Annual Report onForm 10-K for 2007. The restricted sharesMessrs. Rutherford, Matthew Crawford, Vilsack, and Fogarty will vest one-third each year over the three years following the grant date, except that the 2006 grant to Mr. M. Crawford will vest one-fifth each year over five years. |
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| (3) | | The amounts in column (f) above represent the dollar amount recognized for financial statement reporting purposes with respect to the year indicated for awards of stock options granted in that year and in prior years, in accordance with FAS 123R. The stock options vest one-third each year over the three years following the grant date and expire after ten years, if not exercised before that time. Assumptions used in the calculation of the amounts are included in Note I to our consolidated financial statements included in our Annual Report onForm 10-K for 2007. |
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(4) | | For 2010, Mr. E.Edward Crawford received a performance-based award under the Bonus Plan equal to 4% of our consolidated adjusted income before income taxes. For 2009, Mr. Edward Crawford was entitled to a cash bonus equal to 4% of our consolidated adjusted income before income taxes under the Bonus Plan. For 2009, our consolidated adjusted income before income taxes was a loss and, therefore, Mr. Edward Crawford was not entitled to a cash bonus under the Bonus Plan. For 2008, Mr. Edward Crawford received a performance-based award under the Bonus Plan equal to 4% of our consolidated adjusted income before income taxes, but waived his right to receive $600,000 of this amount due to the economic crisis beginning in 2008. |
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| (4) | | The amount listed in this column for 2007.2010 consists of the aggregate change in the actuarial present value of the non-qualified defined benefit under the DB Plan, as described in more detail in the “Pension Benefits for 2010” section. |
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| (5) | | The amounts disclosed in this column (i) above for 20072010 include life insurance premiums for allMessrs. Edward Crawford ($52,737), Rutherford ($1,086), Matthew Crawford ($852), Vilsack ($942), and Fogarty ($942); use of the named executive officers. For Mr. E. Crawford, this amount was $52,737. Also included in these amounts are our contributions to the 401(k) Plan for all the named executive officers;a Company car expenses for Messrs. E.Edward Crawford ($2,500) and M.Matthew Crawford ($3,000); car allowances for Messrs. Elliott,Rutherford ($8,400), Vilsack ($8,400), and Fogarty and Vilsack; and($8,400); club duesmemberships for Messrs. E.Edward Crawford ($19,498)18,098), M.Matthew Crawford ($30,123)16,796), Vilsack ($11,843), and Fogarty ($9,194); and Vilsack.contributions to the DC Plan for Mr. Edward Crawford ($375,000). |
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| (6) | | Mr. Rutherford joined us on July 7, 2008. |
For 2010, base salary was 37% of total compensation in the Summary Compensation Table for Mr. Edward Crawford; 41% for Mr. Matthew Crawford; 45% for Mr. Rutherford; 40% for Mr. Vilsack; and 40% for Mr. Fogarty.
None of the named executive officers has an employment agreement with us.
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2010 Grants of Plan-Based Awards
The following table sets forth the optionrestricted share grants and Bonus Plan awardsaward granted in 2007:2010.
2007 Grants of Plan-Based Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | All Other
| | | | | | | | | | | All Other
| | |
| | | | | | | | | | | Option
| | | | | | | | | Estimated
| | Stock
| | |
| | | | | | | | | | | Awards:
| | | | Grant Date
| | | | | Possible Payouts
| | Awards:
| | Grant Date
|
| | | | | Estimated Possible Payouts
| | Number
| | Exercise or
| | Fair Value
| | | | | Under Non-Equity
| | Number of
| | Fair Value
|
| | | | | Under Non-Equity
| | of Securities
| | Base Price
| | of Stock
| | | | | Incentive
| | Shares of
| | of Stock
|
| | | | | Incentive Plan Awards(1) | | Underlying
| | of Option
| | and Option
| | | | | Plan Awards | | Stock or
| | and Option
|
| | | Grant
| | Threshold
| | Target
| | Maximum
| | Options
| | Awards
| | Awards
| | | Grant
| | Target
| | Units
| | Awards
|
Name | | Date | | (#) | | ($) | | ($) | | (#)(2) | | ($/Sh) | | ($)(3) | | | Date | | ($)(1) | | (#)(2) | | ($)(3) |
(a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | |
| | |
| Edward F. Crawford | | | | | | | | | | | | | | | | | | | | | | | | 742,000 | | | | 0 | | | | 0 | |
| Richard P. Elliott | | 4/12/2007 | | | | | | | | | | 10,000 | | 20.00 | | | 116,000 | | |
| Jeffrey L. Rutherford | | | | 08/19/2010 | | | | | | | 12,000 | | | | 139,800 | |
| Matthew V. Crawford | | | | | | | | | | | | | | | | | | | | | 08/19/2010 | | | | | | | 24,000 | | | | 279,600 | |
| Robert D. Vilsack | | 4/12/2007 | | | | | | | | | | 10,000 | | 20.00 | | | 116,000 | | | | 08/19/2010 | | | | | | | 12,000 | | | | 139,800 | |
| Patrick W. Fogarty | | 4/12/2007 | | | | | | | | | | 10,000 | | 20.00 | | | 116,000 | | | | 08/19/2010 | | | | | | | 12,000 | | | | 139,800 | |
| | |
| (1) | | For 2007,2010, Mr. E.Edward Crawford was entitled to a cash bonus equal to 4% of our consolidated adjusted income before income taxes under the Bonus Plan. Accordingly, there is no threshold, target or maximum award amount, except that such award is limited to a maximum of $3.0 million under the terms of the Bonus Plan. For 2007,2010, Mr. E.Edward Crawford earned a cash bonus in the amount of $1,246,920.$742,000 under the Bonus Plan. |
| |
| (2) | | The amounts in this column (f) above are the number of stock optionsrestricted shares granted in 2007. All stock options were granted with an exercise price equal to the closing market price of our Common Stock on the day of the grant, have a ten-year term and will become exercisable2010. The restricted shares vest one-third each year over a three-year period beginning on the first anniversary of the grant date. In the case of death, disability, retirement or change in control, the stock options become 100% vested and exercisable.three years. |
| |
| (3) | | The amounts in this column (h) above represent the grant date fair value of the restricted shares calculated in accordance with FAS 123R. Assumptions used in the calculation of the amounts are included in Note I to our consolidated financial statements included in our Annual Report onForm 10-K for 2007.ASC 718. |
For 2007, base salary and bonuses (other than pursuant to non-equity incentive plans) were 25.3% of total compensation in the Summary Compensation table for Mr. E. Crawford; 53.7% for Mr. M. Crawford; 89.3% for Mr. Elliott; 84.0% for Mr. Fogarty and 86.7% for Mr. Vilsack.
None of the named executive officers has an employment agreement with us.
None of the named executive officers participated in the company’s non-qualified deferred compensation plan in 2007.
14
Outstanding Equity Awards at 20072010 Fiscal Year-End
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
| | | | | | | | | | | | | | | | | | | | | | | | �� | | | Equity
| |
| | | | | | | | | | | | | | | | | | | | | | | | Equity
| | | Incentive
| |
| | | | | | | | | | | | | | | | | | | | | | | | Incentive
| | | Plan
| |
| | | | | | | | | | | | | | | | | | | | | | | | Plan
| | | Awards:
| |
| | | | | | | | | | | | | | | | | | | | | | | | Awards:
| | | Market or
| |
| | | | | | | | | Equity
| | | | | | | | | | | | | | | Number of
| | | Payout
| |
| | | | | | | | | Incentive
| | | | | | | | | | | | | | | Unearned
| | | Value of
| |
| | | | | | | | | Plan
| | | | | | | | | | | | | | | Shares,
| | | Unearned
| |
| | | | | | | | | Awards:
| | | | | | | | | | | | Market
| | | Units or
| | | Shares,
| |
| | | Number of
| | | Number of
| | | Number of
| | | | | | | | | Number of
| | | Value of
| | | Other
| | | Units
| |
| | | Securities
| | | Securities
| | | Securities
| | | | | | | | | Shares or
| | | Shares or
| | | Rights
| | | or Other
| |
| | | Underlying
| | | Underlying
| | | Underlying
| | | | | | | | | Units of
| | | Units of
| | | That
| | | Rights
| |
| | | Unexercised
| | | Unexercised
| | | Unexercised
| | | Option
| | | | | | Stock That
| | | Stock That
| | | Have
| | | That Have
| |
| | | Options
| | | Options
| | | Unearned
| | | Exercise
| | | Option
| | | Have Not
| | | Have Not
| | | Not
| | | Not
| |
| | | Exercisable
| | | Unexercisable
| | | Options
| | | Price
| | | Expiration
| | | Vested
| | | Vested
| | | Vested
| | | Vested
| |
Name | | (#) | | | (#)(1) | | | (#) | | | ($) | | | Date | | | (#) | | | ($)(4) | | | (#) | | | ($) | |
| (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | |
| |
| Edward F. Crawford | | | 300,000 | | | | | | | | | | | | 1.91 | | | | 11/30/2011 | | | | | | | | | | | | | | | | | |
| | | | 16,670 | | | | 8,330 | | | | | | | | 14.90 | | | | 05/02/2015 | | | | 116,667 | (2) | | | 2,928,341 | | | | | | | | | |
| Richard P. Elliott | | | 5,000 | | | | | | | | | | | | 1.91 | | | | 11/30/2011 | | | | | | | | | | | | | | | | | |
| | | | 3,334 | | | | 1,666 | | | | | | | | 14.90 | | | | 05/02/2015 | | | | | | | | | | | | | | | | | |
| | | | | | | | 10,000 | | | | | | | | 20.00 | | | | 04/12/2017 | | | | | | | | | | | | | | | | | |
| Matthew V. Crawford | | | 275,000 | | | | | | | | | | | | 1.91 | | | | 11/30/2011 | | | | | | | | | | | | | | | | | |
| | | | 16,670 | | | | 8,330 | | | | | | | | 14.90 | | | | 05/02/2015 | | | | 120,000 | (3) | | | 3,012,000 | | | | | | | | | |
| Robert D. Vilsack | | | 10,000 | | | | | | | | | | | | 3.34 | | | | 03/10/2013 | | | | | | | | | | | | | | | | | |
| | | | 10,000 | | | | | | | | | | | | 4.40 | | | | 05/21/2013 | | | | | | | | | | | | | | | | | |
| | | | 3,334 | | | | 1,666 | | | | | | | | 14.90 | | | | 05/02/2015 | | | | | | | | | | | | | | | | | |
| | | | | | | | 10,000 | | | | | | | | 20.00 | | | | 04/12/2017 | | | | | | | | | | | | | | | | | |
| Patrick W. Fogarty | | | 3,334 | | | | 1,666 | | | | | | | | 14.90 | | | | 05/02/2015 | | | | | | | | | | | | | | | | | |
| | | | | | | | 10,000 | | | | | | | | 20.00 | | | | 04/12/2017 | | | | | | | | | | | | | | | | | |
| | |
(1) | | These stock options become exercisable equally over a three-year period beginning on the first anniversary of the grant date. |
|
(2) | | These restricted shares vest equally over a three-year period beginning on the first anniversary of the grant date. |
|
(3) | | These restricted shares vest equally over a five-year period beginning on the first anniversary of the grant date. |
|
(4) | | These amounts are based on the closing market price of our Common Stock of $25.10 per share as of December 31, 2007. |
2007 Option Exercises and Stock Vested
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Option Awards | | Stock Awards |
| | | | | | | | | | | | | | | | Market
|
| | | | | | Number of
| | Number of
| | | | | | Number of
| | Value of
|
| | | | | | Securities
| | Securities
| | | | | | Shares or
| | Shares or
|
| | | | | | | | | | | | | | | | | Underlying
| | Underlying
| | | | | | Units of
| | Units of
|
| | | Option Awards | | Stock Awards | | | | | Unexercised
| | Unexercised
| | Option
| | | | Stock That
| | Stock That
|
| | | Number of Shares
| | Value Realized
| | Number of Shares
| | Value Realized
| | | | | Options
| | Options
| | Exercise
| | Option
| | Have Not
| | Have Not
|
| | | Acquired on Exercise
| | on Exercise
| | Acquired on Vesting
| | on Vesting
| | | | | Exercisable
| | Unexercisable
| | Price
| | Expiration
| | Vested
| | Vested
|
Name | | (#) | | ($) | | (#) | | ($)(1) | | | Grant Date | | (#) | | (#) | | ($) | | Date | | (#) | | ($)(1) |
| (a) | | (b) | | (c) | | (d) | | (e) | | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) |
| |
| Edward F. Crawford | | | | | | | 58,333 | | | | 1,557,491 | | | | 05/02/2005 | | | | 25,000 | | | | 0 | | | | 14.90 | | | | 05/02/2015 | | | | | | | |
| Richard P. Elliott | | | | | | | 0 | | | | 0 | | |
| | | | | 03/13/2009 | | | | | | | | | | | | | | | | 183,334 | (2) | | | 3,833,513 | |
| Jeffrey L. Rutherford | | | | 07/09/2008 | | | | 7,500 | | | | 7,500 | (3) | | | 13.40 | | | | 07/09/2018 | | | | | | | |
| | | | | 07/09/2008 | | | | | | | | | | | | | | | | 3,750 | (4) | | | 78,412 | |
| | | | | 08/19/2010 | | | | | | | | | | | | | | | | 12,000 | (2) | | | 250,920 | |
| Matthew V. Crawford | | | | | | | 30,000 | | | | 801,000 | | | | 11/30/2001 | | | | 175,000 | | | | 0 | | | | 1.91 | | | | 11/30/2011 | | | | | | | |
| | | | | 05/02/2005 | | | | 25,000 | | | | 0 | | | | 14.90 | | | | 05/02/2015 | | | | | | | |
| | | | | 09/12/2006 | | | | | | | | | | | | | | | | 30,000 | (5) | | | 627,300 | |
| | | | | 08/19/2010 | | | | | | | | | | | | | | | | 24,000 | (2) | | | 501,840 | |
| Robert D. Vilsack | | | | | | | 1,000 | | | | 19,010 | | | | 05/21/2003 | | | | 10,000 | | | | 0 | | | | 4.40 | | | | 05/21/2013 | | | | | | | |
| | | | | 05/02/2005 | | | | 5,000 | | | | 0 | | | | 14.90 | | | | 05/02/2015 | | | | | | | |
| | | | | 04/12/2007 | | | | 10,000 | | | | 0 | | | | 20.00 | | | | 04/12/2017 | | | | | | | |
| | | | | 05/20/2008 | | | | 6,666 | | | | 3,334 | (6) | | | 15.61 | | | | 05/20/2018 | | | | | | | |
| | | | | 08/19/2010 | | | | | | | | | | | | | | | | 12,000 | (2) | | | 250,920 | |
| Patrick W. Fogarty | | | | | | | 1,000 | | | | 19,010 | | | | 05/02/2005 | | | | 5,000 | | | | 0 | | | | 14.90 | | | | 05/02/2015 | | | | | | | |
| | | | | 04/12/2007 | | | | 10,000 | | | | 0 | | | | 20.00 | | | | 04/12/2017 | | | | | | | |
| | | | | 05/20/2008 | | | | 6,666 | | | | 3,334 | (6) | | | 15.61 | | | | 05/20/2018 | | | | | | | |
| | | | | 08/19/2010 | | | | | | | | | | | | | | | | 12,000 | (2) | | | 250,920 | |
| | |
| (1) | | These amounts are based on the closing market price of our Common Stock of $20.91 per share on December 31, 2010. |
|
| (2) | | These restricted shares vest one-third each year over a three-year period beginning on the first anniversary of the grant date. |
|
| (3) | | These stock options become exercisable one-fourth each year over a four-year period beginning on the first anniversary of the grant date. |
|
| (4) | | These restricted shares vest one-fourth each year over a four-year period beginning on the first anniversary of the grant date. |
26
| | |
| (5) | | These restricted shares vest one-fifth each year over a five-year period beginning on the first anniversary of the grant date. |
|
| (6) | | These stock options become exercisable one-third each year over a three-year period beginning on the first anniversary of the grant date. |
2010 Option Exercises and Stock Vested
| | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| | | Number of Shares
| | Value Realized
| | Number of Shares
| | Value Realized
|
| | | Acquired on Exercise
| | on Exercise
| | Acquired on Vesting
| | on Vesting
|
Name | | (#) | | ($)(1) | | (#) | | ($)(2) |
| (a) | | (b) | | (c) | | (d) | | (e) |
| |
| Edward F. Crawford | | | 0 | | | | 0 | | | | 91,666 | | | | 887,326 | |
| Jeffrey L. Rutherford | | | 0 | | | | 0 | | | | 26,875 | | | | 268,381 | |
| Matthew V. Crawford | | | 0 | | | | 0 | | | | 70,000 | | | | 734,900 | |
| Robert D. Vilsack | | | 10,000 | | | | 193,100 | | | | 25,000 | | | | 242,000 | |
| Patrick W. Fogarty | | | 0 | | | | 0 | | | | 25,000 | | | | 242,000 | |
| | |
| (1) | | These amounts represent the difference between the exercise price and the closing market price of our Common Stock on the date of exercise. |
|
| (2) | | These amounts are based on the closing market price of our Common Stock on the day on which the restricted shares vested. |
PENSION BENEFITS FOR 2010
The following table sets forth information with respect to our DB Plan, as of December 31, 2010.
| | | | | | | | | | | | | | | | | |
| | | | | Number of Years
| | Present Value of
| | |
| | | | | Credited
| | Accumulated
| | Payments During
|
Name | | Plan Name | | Service(1)(#) | | Benefit ($)(2) | | Last Fiscal Year ($) |
| |
| Edward F. Crawford | | | DB Plan | | | | 16 | | | | 2,556,870 | | | | 0 | |
| | |
| (1) | | The DB Plan was adopted by us in January 2008; therefore, the years of credited service represent prior years of service, but not all of the actual years of service. Upon establishment of the DB Plan, 13 years of Mr. Edward Crawford’s prior service were recognized and credited under the DB Plan. |
|
| (2) | | Represents the actuarial present value of the vested accrued benefits as of December 31, 2010 payable at age 72 in single-life annuity form, with a 6.00% discount rate and using the RP2000 White Collar Male mortality table. |
The DB Plan provides Mr. Edward Crawford with an annual retirement benefit of up to $375,000 upon his termination of employment with us, for his life, as defined in the DB Plan. The annual benefit that he actually receives depends on his years of credited service as of his termination of employment. If he has 20 or more years of credited service, he will receive the full $375,000 annual benefit. Prior to 20 years of credited service, the accrued benefit equals $375,000 multiplied by the ratio of years of credited service to 20 years. If he dies while employed or before the first day of the month following his termination of employment, his spouse is entitled to receive an amount equal to 50% of the amount he would have been entitled to receive on the date of his death, payable semi-annually for the life of his spouse. In the event of a change in control of the Company, the full $375,000 annual benefit is payable, regardless of service.
No other named executive officer participated in a pension plan during 2010.
1527
PENSION BENEFITS AND NON-QUALIFIED DEFERRED COMPENSATION FOR 2010
2007 Pension BenefitsThe following table sets forth information with respect to the DC Plan and Non-qualified Deferred Compensation Tablesour 2005 Plan, as of December 31, 2010.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Executive
| | Registrant
| | Aggregate
| | Aggregate
| | |
| | | | | Contributions
| | Contributions
| | Earnings
| | Withdrawals/
| | Aggregate Balance at
|
| | | Plan
| | in 2010
| | in 2010
| | in 2010
| | Distributions
| | December 31, 2010
|
Name | | Name | | $ | | $ | | $(1) | | $ | | $ |
| |
| Edward F. Crawford | | | DC Plan | | | | 0 | | | | 375,000 | (2) | | | 99 | | | | 0 | | | | 1,034,209 | |
| Robert D. Vilsack | | | 2005 Plan | | | | 0 | | | | 0 | | | | 637 | | | | 0 | | | | 6,973 | |
None
| | |
| (1) | | The Aggregate Earnings are not “above-market or preferential earnings” and, therefore, are not reported in the Summary Compensation Table. |
|
| (2) | | Consists of contributions made in 2010 by us and credited to Mr. Edward Crawford’s account. This amount was also included in the “All Other Compensation” column in the Summary Compensation Table. |
The DC Plan provides our CEO with an aggregate annual credit of $375,000, or DC Benefit, during the seven-year period beginning on January 1, 2008 and ending on December 31, 2014. The DC Benefit is credited to an account on our books for our CEO, provided he has not had a termination of employment with the Company, as defined in the DC Plan. Our CEO’s account is adjusted for any positive or negative investment results from phantom investment alternatives selected by him. These phantom investment alternatives track actual market investments and are similar to the investment alternatives offered under our 401(k) Plan. We do not provide above-market or preferential earnings on the amounts credited under the DC Plan. We contribute to a grantor trust in order to provide a source of funds for the benefits under the DC Plan. Our CEO is at all times 100% vested in the DC Benefit and any earnings thereon. The amount credited under the DC Plan for our CEO will be paid upon his termination of employment.
Our 2005 Plan is a non-qualified deferred compensation plan for certain key employees, including our named executive officers. Under the 2005 Plan, eligible participants can defer up to 100% of their base salary and 100% of their cash bonus for pre-tax savings opportunities. The investment options available to the participant are the same investment options offered under our 401(k) Plan. Participants’ contributions and earnings are always 100% vested. Distributions under the 2005 Plan may be made only upon a Separation of Service (as defined in the 2005 Plan), disability, or hardship. Distributions are paid in a lump sum or in annual installments over a maximum of 10 years.
No other named executive officers participated in any pension plan or anya non-qualified deferred compensation plan sponsored by us during 2007.2010.
POTENTIAL POST-EMPLOYMENT PAYMENTS
Upon termination of employment for any reason, no special severance benefits are payable to any of the named executive officers.
Upon a change of control, or the death, disability, or retirement of a named executive officer, all restricted share grants fully vest and all unvested stock options become immediately exercisable under the 1998 Plan, and under the DB Plan, certain benefits are immediately recognized. The value of these vesting accelerations and benefits for the named executive officers, as if a death, disability or retirement had occurred on December 31, 2010, would be as follows:
| | | | | | | | | | | | | |
| | | Death
| | Disability
| | Retirement
|
Name | | $(1) | | $(2) | | $(3) |
| |
| Edward F. Crawford | | | 5,285,408 | | | | 3,833,513 | | | | 6,390,383 | |
| Jeffrey L. Rutherford | | | 385,657 | | | | 385,657 | | | | 385,657 | |
| Matthew V. Crawford | | | 1,129,140 | | | | 1,129,140 | | | | 1,129,140 | |
| Robert D. Vilsack | | | 268,590 | | | | 268,590 | | | | 268,590 | |
| Patrick W. Fogarty | | | 268,590 | | | | 268,590 | | | | 268,590 | |
| | |
| (1) | | This amount includes the vesting of previously unvested restricted shares valued at the closing market price of $20.91 of our Common Stock on December 31, 2010. This amount also includes the vesting of previously unvested stock options valued at the difference between the exercise price and the closing market price of $20.91 of our Common Stock on December 31, |
28
| | |
| | 2010. For Mr. Edward Crawford, this amount includes the actuarial present value of 50% of the vested accrued non-qualified pension benefit as a lifetime annuity to his surviving spouse under the DB Plan of $1,451,895. |
|
| (2) | | This amount represents the vesting of previously unvested restricted shares valued at the closing market price of $20.91 of our Common Stock on December 31, 2010. This amount also includes the vesting of previously unvested stock options valued at the difference between the exercise price and the closing market price of $20.91 of our Common Stock on December 31, 2010. |
|
| (3) | | This amount includes the vesting of previously unvested restricted shares valued at the closing market price of $20.91 of our Common Stock on December 31, 2010. This amount also includes the vesting of previously unvested stock options valued at the difference between the exercise price and the closing market price of $20.91 of our Common Stock on December 31, 2010. For Mr. Edward Crawford, this amount includes the actuarial present value of the previously vested accrued non-qualified pension benefit as a lifetime annuity under the DB Plan of $2,556,870. |
Under the 1998 Plan, upon a change of control, all restricted share grants fully vest and all unvested stock options become immediately exercisable. Under the DB Plan, upon a change of control, all pension benefits fully vest. The value of these vesting accelerations for the named executive officers, as if a change of control had occurred on December 31, 2007,2010, would be as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Stock
| | Restricted
| | | | | | | Stock
| | Restricted
| | |
| | | Options
| | Shares
| | Total
| | | DB Plan Early
| | Options
| | Shares
| | Total
|
Name | | ($)(1) | | ($)(2) | | ($) | | | Vesting($) | | ($) | | ($)(1) | | ($) |
| |
| Edward F. Crawford | | | 84,966 | | | | 2,928,341 | | | | 3,013,307 | | | | 3,196,088 | (2) | | | 0 | | | | 3,833,513 | | | | 7,029,601 | |
| Richard P. Elliott | | | 67,993 | | | | 0 | | | | 67,993 | | |
| Jeffrey L. Rutherford | | | | 0 | | | | 56,325 | | | | 329,332 | | | | 385,657 | |
| Matthew V. Crawford | | | 84,996 | | | | 3,012,000 | | | | 3,096,966 | | | | 0 | | | | 0 | | | | 1,129,140 | | | | 1,129,140 | |
| Robert D. Vilsack | | | 67,993 | | | | 0 | | | | 67,993 | | | | 0 | | | | 17,670 | | | | 250,920 | | | | 268,590 | |
| Patrick W. Fogarty | | | 67,993 | | | | 0 | | | | 67,993 | | | | 0 | | | | 17,670 | | | | 250,920 | | | | 268,590 | |
| | |
| (1) | | VestingThis amount represents the vesting of previously unexercisable options isunvested restricted shares valued as the spread between the exercise price andat the closing market price of $25.10$20.91 of our Common Stock on December 31, 2007.2010. |
| |
| (2) | | VestingThis amount includes the actuarial present value of the previously unvested restricted shares is valued atvested accrued non-qualified pension benefit as a lifetime annuity under the closing market priceDB Plan of $25.10 of our Common Stock on December 31, 2007.$2,556,870. |
No cash payments or other benefits are due the named executive officers upon a change of control, as defined in the 1998 Plan. A change of control is generally defined in the 1998 Plan and DB Plan as: (i) our corporate reorganization or a sale of substantially all of our assets with the result that the shareholders prior to the reorganization or sale afterwards hold less than a majority of our voting stock; (ii) any person (other than Mr. E. Crawford) becoming the beneficial owner of 20% or more of the combined voting power of our outstanding securities; (iii) we enter into an agreement changing the control of our voting stock; and (iv)(iii) a change in the majority of our Board of Directors.
16
COMPENSATION OF DIRECTORSEquity Compensation Plan Information
We compensate non-employee directors for serving on our Board of Directors and reimburse them for expenses incurred in connection with Board and committee meetings. During 2007, each non-employee director received as an annual retainer a grant of 2,500 restricted shares. The restricted shares were granted in accordance with the 1998 Plan. The non-employee directors also received $2,000 for each Board meeting attended, or $500 for each Board meeting attended telephonically. Committee members received $500 for each meeting attended whether in person or telephonically. Committee Chairpersons received $1,000 per committee meeting chaired.
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| | | | | | | | | | | | | Change in Pension
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| | | | | | | | Non-Equity
| | Nonqualified
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| | | Paid in
| | | Stock
| | | Option
| | Incentive Plan
| | Deferred
| | All Other
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| | | Cash
| | | Awards
| | | Awards
| | Compensation
| | Compensation
| | Compensation
| | | Total
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Name | | ($) | | | ($)(1) | | | ($) | | ($) | | Earnings | | ($) | | | ($) | |
| (a) | | (b) | | | (c) | | | (d) | | (e) | | (f) | | (g) | | | (h) | |
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| Patrick V. Auletta | | | 12,500 | | | | 50,413 | | | — | | — | | — | | | 0 | | | | 62,913 | |
| Kevin R. Greene | | | 9,000 | | | | 50,413 | | | — | | — | | — | | | 0 | | | | 59,413 | |
| Dan T. Moore III | | | 6,500 | | | | 50,413 | | | — | | — | | — | | | 0 | | | | 56,913 | |
| Ronna Romney | | | 8,000 | | | | 50,413 | | | — | | — | | — | | | 0 | | | | 58,413 | |
| James W. Wert | | | 11,000 | | | | 50,413 | | | — | | — | | — | | | 0 | | | | 61,413 | |
| | | | | | | | | | | | | |
| | | | | | | | | Number of Securities
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| | | Number of Securities
| | | Weighted-Average
| | | Remaining Available for
| |
| | | to be Issued Upon
| | | Exercise Price of
| | | Future Issuance Under
| |
| | | Exercise Price of
| | | Outstanding
| | | Equity Compensation Plans
| |
| | | Outstanding Options
| | | Options, Warrants
| | | (Excluding Securities
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Plan Category | | Warrants and Rights | | | and Rights | | | Reflected in Column (a)) | |
| | | (a) | | | (b) | | | (c) | |
| |
| Equity compensation plans approved by security holders(1) | | | 458,634 | | | $ | 6.17 | | | | 331,284 | |
| Equity compensation plans not approved by security holders | | | -0- | | | | -0- | | | | -0- | |
| | | | | | | | | | | | | |
| Total | | | 458,634 | | | $ | 6.17 | | | | 331,284 | |
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| (1) | | These amounts representIncludes the dollar amount recognized for financial statement reporting purposes with respect to 2007 for awards of restricted shares granted in 2007 and in prior years, in accordance with FAS 123R. The restricted shares vest one year from the date of grant. Assumptions used in the calculation of the amounts are included in Note I to our consolidated financial statements included in our Annual Report on Form 10-K for 2007. As of December 31, 2007, each director held 2,500 outstanding shares subject to restriction.1998 Plan. |
1729
AUDIT COMMITTEE
Audit Committee Report
The Audit Committee oversees our accounting and financial reporting processes and the audits of financial statements. The Audit Committee selects our independent auditors. The Audit Committee is composed of three directors, each of whom is independent as defined under the rules of the Nasdaq Stock Market and SEC rules. Currently, the Audit Committee is composed of Messrs. Auletta, Greene and Wert. The Audit Committee operates under a written charter adopted by the Board of Directors.
Management is responsible for our internal controls and financial reporting process. The independent auditors are responsible for performing an independent audit of our consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and to issue a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee met with management and Ernst & Young LLP to review and discuss the audited consolidated financial statements for the year ended December 31, 2007. The Audit Committee discussed with Ernst & Young LLP its judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as adopted by the Public Company Accounting Standards Oversight Board in Rule 3600T, has discussed with Ernst & Young LLP its independence from management and has considered the compatibility of non-audit services with the auditors’ independence.
The Audit Committee meets with the internal and independent auditors, with and without management present, to discuss the overall scope and plans for their respective audits, the results of audit examinations, their evaluations of our internal controls, and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board of Directors has approved, that the audited financial statements be included in the Annual Report onForm 10-K for the fiscal year ended December 31, 2007.
Patrick V. Auletta, Chair
Kevin R. Greene
James W. Wert
18
Independent Auditor Fee Information
Audit and Non-Audit Fees
The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of our annual financial statements in each of the last two fiscal years:
| | | | | | | | | |
| | | 2006 | | | 2007 | |
| |
| Audit fees | | $ | 1,084,000 | | | $ | 1,043,000 | |
| | | | | | | | | |
| Audit-related fees | | $ | 83,000 | | | $ | 75,000 | |
| | | | | | | | | |
| Tax fees | | $ | 112,000 | | | $ | 77,800 | |
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| All other fees | | $ | 0 | | | $ | 0 | |
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| | | $ | 1,279,000 | | | $ | 1,195,800 | |
Fees for audit services included fees associated with the annual audit, the reviews of quarterly reports onForm 10-Q, statutory audits required internationally and the audit of management’s assessment of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002. Audit-related fees principally included fees in connection with pension plan audits and accounting consultations. Tax fees included fees in connection with tax compliance and tax planning services.
Pre-approval policy
The Audit Committee has adopted a formal policy on auditor independence requiring the approval by the Audit Committee of all professional services rendered by our independent auditor prior to the commencement of the specified services.
One hundred percent of the services described in “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” were pre-approved by the Audit Committee in accordance with the Audit Committee’s formal policy on auditor independence.
Independent Auditors
The Audit Committee has retained Ernst & Young LLP as our independent auditor for the year ending December 31, 2007. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and have an opportunity to make a statement at the Annual Meeting, if they so desire, and will be available to respond to appropriate shareholders’ questions.
TRANSACTIONS WITH RELATED PERSONS
In accordance with our Audit Committee Charter, our Audit Committee is responsible for reviewing and approving the terms and conditions of all related-party transactions. In some cases, however, the Audit Committee will defer the approval of a related-party transaction to the disinterested members of the full Board of Directors.Board.
Neither the Audit Committee nor the Board of Directors has written policies or procedures with respect to the review, approval or ratification of related-party transactions. Instead, the Audit Committee, or the Board, of Directors, as applicable, reviews each proposed transaction on acase-by-case basis taking into account all relevant factors, including whether the terms and conditions are at least as favorable to us as if negotiated on an arm’s-length basis with unrelated third parties. The following related-party transactions have been approved either by our Board of Directors or our Audit Committee.
During 2007,2010, we chartered, on an hourly basis, an airplane from a third-party private aircraft charter company. One of the aircraft available for use by us is an aircraft owned jointly by this charter company and a company owned by Mr. E.Edward Crawford. For 2007,2010, we paid $74,241$270,585 for the use of that aircraft.
We lease space in three buildings in Conneaut, Ohio: (a) a 91,300 square foot facility owned by a company Through companies owned by Mr. M.Edward Crawford, at a monthly rent of $30,400; (b) an additional 70,000 square foot attached facility
19
owned by the same company, at a monthly rent of $10,000; and (c) a separate 50,000 square foot facility owned by the spouse of Mr. E. Crawford, at a monthly rent of $4,000. Wewe lease a 125,000 square foot facility in Huntington, Indiana, from a company owned by Mr. E. Crawford, at a monthly rent of $13,500. We lease a 150,000 square foot facility in Cleveland, Ohio from a company owned by Mr. M. Crawford, at a monthly rent of $28,835. We lease$13,500 and a 60,450 square feetfoot building we use as our corporate headquarters in Mayfield Heights, Ohio, from a company owned by Mr. E. Crawford, at a monthly rent of $68,488.$65,437.
Through companies owned by Mr. Matthew Crawford, we lease two buildings in Conneaut, Ohio: a 91,300 square foot facility, at a monthly rent of $35,740 and an additional 70,000 square foot attached facility, at a monthly rent of $10,500; a 150,000 square foot facility in Cleveland, Ohio, at a monthly rent of $29,686; and a 125,000 square foot facility in Canton, at a monthly rent of $51,500.
During 2010, we received an aggregate amount of $128,000 for providing office space, secretarial, and information technology support to companies owned by Mr. Edward Crawford.
SHAREHOLDER PROPOSALS FOR THE 20082012 ANNUAL MEETING
20092012 Proposals. Any shareholder who intends to present a proposal to include in the proxy materials for the 20092012 annual meeting of shareholders must comply withRule 14a-8 of the Securities Exchange Act. To have the proposal included in our proxy statement and form of proxy for that meeting, the shareholder must deliver the proposal in writing by December 15, 200821, 2011 to the Secretary of the Company, at 6065 Parkland Blvd.,Boulevard, Cleveland, Ohio 44124. In connection with proposals of shareholders submitted outside the processes ofRule 14a-8 of the Exchange Act in connection with the 2009 annual meeting of shareholders, our proxy statement relating to the 2009 annual meeting of shareholders will give discretionary authority to those individuals named in the accompanying proxy to vote with respect to allnon-Rule 14a-8 proposals received by us after February 28, 2009.
Advance Notice Procedures. Under our Regulations, no business may be brought before an annual meeting unless it is specified in the notice of the meeting or otherwise brought before the meeting by or at the direction of the Board of Directors or by a shareholder who has delivered written notice to our Secretary not less than sixty days nor more than ninety days before the meeting. If there was less than seventy-five days notice or prior public disclosure of the date of the meeting given or made to the shareholders, then in order for the written notice by the shareholder to be timely, it must be received no later than the close of business on the fifteenth day after the earlier of the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Accordingly, if a shareholder intends to present a proposal at the 2012 annual meeting of shareholders outside the processes ofRule 14a-8 of the Securities Exchange Act, the shareholder must provide written notice pursuant to the procedures contained in our Regulations that are outlined above. Our proxy statement relating to the 2012 annual meeting of shareholders will give discretionary authority to those individuals named in the accompanying proxy to vote with respect to allnon-Rule 14a-8 proposals not included in the proxy statement relating to the 2012 annual meeting if the proposals are properly presented at the 2012 annual meeting.
ANNUAL REPORT
Our Annual Report for the year ended December 31, 20072010 is being mailed to each shareholder of record with this Proxy Statement. Additional copies may be obtained from the undersigned.
30
OTHER MATTERS
Set forth below are directions to The Cleveland Marriott East:
Directions to the Marriott Cleveland East, 26300 Harvard Road, Warrensville Heights, Ohio 44122:
From South:
| | |
| • | Take I-71N to Exit 220: I-271N |
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| • | Continue on I-271N to Exit 28B: Harvard Road |
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| • | Turn Left |
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| • | Go to second stop light (Richmond Road) and make a left |
|
| • | Marriott is on left |
From East:
| | |
| • | Take I-80W to Exit 187: I-480 |
|
| • | Continue on I-480(NW) to I-271N |
|
| • | Continue on I-271N to Exit 28B: Harvard Road |
|
| • | Turn Left |
|
| • | Go to second stop light (Richmond Road) and make a left |
|
| • | Marriott is on left |
From North (Downtown Cleveland):
| | |
| • | Take I-77S to Exit 156: I-480E |
|
| • | Follow I-480E toward Erie, PA/Warren to US-422 |
|
| • | Take Exit to I-271N/US-422W |
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| • | Continue on I-271N to Exit 28B: Harvard Road |
|
| • | Turn Left |
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| • | Go to second stop light (Richmond Road) and make a left |
|
| • | Marriott is on left |
From West:
| | |
| • | Take I-80E to Exit 151: I-480E |
|
| • | Follow I-480E to I-271N/US-422W |
|
| • | Continue on I-271N to Exit 28B: Harvard Road |
|
| • | Turn Left |
|
| • | Go to second stop light (Richmond Road) and make a left |
|
| • | Marriott is on left |
PARK-OHIO HOLDINGS CORP.
ROBERT D. VILSACK
Secretary & General Counsel
April 14, 200819, 2011
2031
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| | c/o National City Bank
Shareholder Services Operations
Locator 5352
P. O. Box 94509
Cleveland, OH 44101-4509 |
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If votingAPPENDIX A
PARK-OHIO INDUSTRIES, INC.
ANNUAL CASH BONUS PLAN
1. Purpose. The purpose of the Annual Cash Bonus Plan (the “Plan”) is to attract and retain key executives for Park-Ohio Industries, Inc., an Ohio corporation (the “Company”), and its Subsidiaries and to provide such persons with incentives for superior performance. Incentive Bonus payments made under the Plan are intended to constitute qualified “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, andSection 1.162-27 of the Treasury Regulations promulgated thereunder, and the Plan shall be construed consistently with such intention.
2. Definitions. As used in this Plan,
“Board”means the Board of Directors of the Company.
“Code”means the Internal Revenue Code of 1986, as amended from time to time.
“Committee”means the Compensation Committee of the Board or any other committee appointed by mail, Proxy mustthe Board to administer the Plan; provided, however, that in any event the Committee shall be signedcomprised of not less than two directors of the Company, each of whom shall qualify as an “outside director” for purposes of Section 162(m) of the Code and dated below.
êSection 1.162-27(e)(3) Please fold and detach card at perforation before mailing.ê
of the Regulations.
“Eligible Executive”means the Company’s Chairman and Chief Executive Officer and any other executive officer of the Company designated by the Committee.
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PARK-OHIO HOLDINGS CORP. | | PROXY |
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS“Incentive Bonus”shall mean, for each Eligible Executive, a bonus opportunity amount determined by the Committee pursuant to Section 5 below.
Patrick V. Auletta
“Management Objectives”means the achievement of a performance objective or objectives established pursuant to this Plan for Eligible Executives. Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Eligible Executive or of the Subsidiary, division, department or function within the Company or Subsidiary in which the Eligible Executive is employed. Management Objectives may be measured on a relative or absolute basis. The Management Objectives shall be limited to specified levels of, growth in or relative peer company performance in one or more or a combination of the following: (i) earnings per share; (ii) earnings before interest, taxes, depreciation, and James W. Wertamortization; (iii) earnings before interest and taxes; (iv) earnings before taxes; (v) return on invested capital; (vi) return on total capital; (vii) return on assets; (viii) return on equity; (ix) total shareholder return; (x) growth in net income, revenue, cash flow, or eitheroperating profit;and/or (xi) productivity improvement.
“Regulations”mean the Treasury Regulations promulgated under the Code, as amended from time to time.
“Subsidiary”means a corporation, partnership, joint venture, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest.
3. Administration of them, are hereby authorized, withthe Plan. The Plan shall be administered by the Committee, which shall have full power and authority to construe, interpret and administer the Plan and shall have the exclusive right to establish Management Objectives and the amount of substitution,Incentive Bonus payable to represent and voteeach Eligible Executive upon the Common Stockachievement of the undersigned atspecified Management Objectives.
4. Eligibility. Eligibility under this Plan is limited to Eligible Executives designated by the annual meetingCommittee in its sole and absolute discretion.
5. Awards.
(a) Not later than the 90th day of shareholderseach fiscal year of Park-Ohio Holdings Corp. tothe Company, the Committee shall establish the Management Objectives for each Eligible Executive and the amount of Incentive Bonus payable (or formula for determining such amount) upon full achievement of the specified Management Objectives. The Committee may further specify in respect of the specified Management Objectives a minimum acceptable level of achievement below which no Incentive Bonus payment will be held at The Cleveland Marriott East, 26300 Harvard Road, Warrensville Heights, Ohio 44122, on May 20, 2008,made and any and all adjournments, postponements or continuations thereof.
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| | DATE: | | | , | 2008 |
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| | (Sign here)
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| | NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. |
shall set forth a formula for determining the amount of
A-1
êPlease fold and detach cardany payment to be made if performance is at perforation before mailing.ê
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES BELOW, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED BELOW IN PROPOSAL 1.or above the minimum acceptable level but falls short of full achievement of the specified Management Objectives. The Committee may not modify any terms of awards established pursuant to this section, except to the extent that after such modification the Incentive Bonus would continue to constitute qualified “performance-based compensation” for purposes of Section 162(m) of the Code.
(b) The Committee retains the discretion to reduce the amount of any Incentive Bonus that would be otherwise payable to an Eligible Executive (including a reduction in such amount to zero). (c) Notwithstanding any other provision of the Plan to the contrary, in no event shall the Incentive Bonus paid to an Eligible Executive under the Plan for a year exceed $3.0 million.
If this Proxy is properly executed
6. Committee Certification. As soon as reasonably practicable after the end of each fiscal year of the Company, the Committee shall determine whether the Management Objective has been achieved and returned, shares represented hereby willthe amount of the Incentive Bonus to be votedpaid to each Eligible Executive for such fiscal year and shall certify such determinations in writing.
7. Payment of Incentive Bonuses. Subject to a valid election made by an Eligible Executive with respect to the manner specifieddeferral of all or a portion of his or her Incentive Bonus, Incentive Bonuses shall be paid within 30 days after written certification pursuant to section 6, but in no event later than two and a half months from the end of the Company’s fiscal year.
8. No Right to Bonus or Continued Employment. Neither the establishment of the Plan, the provision for or payment of any amounts hereunder nor any action of the Company, the Board or the Committee with respect to the Plan shall be held or construed to confer upon any person (a) any legal right to receive, or any interest in, an Incentive Bonus or any other benefit under the Plan or (b) any legal right to continue to serve as an officer or employee of the Company or any Subsidiary of the Company.
9. Withholding. The Company shall have the right to withhold, or require an Eligible Executive to remit to the Company, an amount sufficient to satisfy any applicable federal, state, local or foreign withholding tax requirements imposed with respect to the payment of any Incentive Bonus.
10. Nontransferability. Except as expressly provided by the shareholder. If no specification is made, sharesCommittee, the rights and benefits under the Plan shall not be transferable or assignable other than by will be voted FORor the electionlaws of descent and distribution.
11. Effective Date. Subject to its approval by the stockholders, this Plan shall become effective May 26, 2011, and shall remain effective until the first shareholders’ meeting in 2016, subject to any further stockholder approvals (or reapprovals) mandated for performance-based compensation under Section 162(m) of the persons nominated as directors pursuantCode, and subject to the Proxy Statement.right of the Board to terminate the Plan, on a prospective basis only, at any time.
A-2
| 1. | | Park-Ohio Holdings Corp. IMPORTANT ANNUAL MEETING INFORMATION Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X Annual Meeting Proxy Card PLEASE FOLD ALONG THE ELECTION OF DIRECTORS |
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| | q | | PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Proposals — The Board of Directors recommends a vote FORall nominees listed below | | | | q | | WITHHOLDAuthority |
| | | | (except as otherwise marked below) | | | | | | in Proposal 1, FOR Proposals 2, 3 and 4, and for a frequency of 3 YRS in regards to vote for all nominees listed below |
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Edward F. Crawford | | Proposal 5. 1. ELECTION OF DIRECTORS: For Withhold 01 — Kevin R. Greene | | 02 — A. Malachi Mixon III For Withhold For Withhold 03 — Dan T. Moore III |
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(Instructions:to withhold authority to vote for any individual nominee, strike a line through that nominee’s name)
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| + 2. | | RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2011. 4. ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION. For Against Abstain 3. APPROVAL OF THE PARK-OHIO HOLDINGS CORP. ANNUAL CASH BONUS PLAN. For Against Abstain 5. ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION. For Against Abstain 1 Yr 2 Yrs 3 Yrs Abstain 6. THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT, POSTPONEMENT OR CONTINUATION THEREOF. |
(Continued B Non-Voting Items Change of Address — Please print new address below. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and to be signed on reverse)
c/o National City BankShareholder Services OperationsLocator 5352P. O. Box 94509Cleveland, OH 44101-4509If voting by mail, Proxy must be signed and dated below.
ê Please fold and detach card at perforation before mailing. ê
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PARK-OHIO HOLDINGS CORP. | | CONFIDENTIAL VOTING INSTRUCTIONS |
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CONFIDENTIAL VOTING INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
To The Charles Schwab Trust Company, Trustee of the Individual Account Retirement Plan of Park-Ohio Industries, Inc. and Its Subsidiaries (the “Plan”): The undersigned, a participant in the Plan, hereby directs the Trustee to vote in person or by proxy (a) all common shares of Park-Ohio Holdings Corp. credited to the undersigned’s account under the Plan on the record date (“allocated shares”); and (b) the proportionate number of common shares of Park-Ohio Holdings Corp. allocated to the accounts of other participants in the Plan, but for which the Trustee does not receive valid voting instructions (“non-directed shares”) and as to which the undersigned is entitled to direct the voting in accordance with the Plan provisions at the annual meeting of shareholders of Park-Ohio Holdings Corp. to be held at The Cleveland Marriott East, 26300 Harvard Road, Warrensville, Ohio 44122, on May 20, 2008, and any and all adjournments, postponements, or continuations thereof. Under the Plan, shares allocated to the accounts of participants for which the Trustee does not receive timely directions in the form of a signed voting instruction card are voted by the Trustee as directed by the participants who timely tender a signed voting instruction card. By completing this Confidential Voting Instruction Form and returning it to the Trustee, you are authorizing the Trustee to vote allocated shares and a proportionate amount of the non-directed shares held in the Plan. The number of non-directed shares for which you may instruct the Trustee to vote will depend on how many other participants exercise their right to direct the voting of their allocated shares. Any participant wishing to vote the non-directed shares differently from the allocated shares may do so by requesting a separate voting instruction form from the Trustee at 800-724-7526.
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DATE: | | | | , 2008 |
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(Sign here)
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NOTE:Below Please sign exactly as namename(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + . |
ê Please fold and detach card at perforation before mailing.ê
Confidential Voting Instruction Form
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES BELOW, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS FORM. THE BOARD OF DIRECTORS RECOMMENDS A VOTEPLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy — Park-Ohio Holdings Corp. PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS Patrick V. Auletta and James W. Wert, or either of them, are hereby authorized, with full power of substitution, to represent and vote the common stock of the signed shareholder(s) at the annual meeting of shareholders of Park-Ohio Holdings Corp. to be held at The Cleveland Marriott East, 26300 Harvard Road, Warrensville Heights, Ohio 44122, on May 26, 2011, and any and all adjournments, postponements, or continuations thereof. You are encouraged to specify your choices by marking the appropriate boxes on the reverse, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. The proxies cannot vote your shares unless you sign and return this card. The Board of Directors recommends a vote FOR ALL NOMINEES LISTED BELOW IN PROPOSAL 1.
If This Confidential Voting Instruction Form Is Properly Executed And Returned, Shares Represented Hereby Will Be Voted In The Manner Specified By The Participant. | 1. | | THE ELECTION OF DIRECTORS |
| | | | | | | | | | | | | o | | FORall nominees listed below
(excepton the reverse in proposal 1, FOR proposals 2, 3 and 4, and for a frequency of 3 YRS in regards to proposal 5. If this Proxy is properly executed and returned, shares represented hereby will be voted in the manner specified by the shareholder. If no specification is made, shares will be voted FOR the election of persons nominated as otherwise marked below) | | | | o | | WITHHOLDAuthority
directors pursuant to the Proxy Statement, FOR proposals 2, 3 and 4, and for a frequency of 3 YRS in regards to proposal 5. IMPORTANT NOTICE TO PARTICIPANTS IN THE INDIVIDUAL ACCOUNT RETIREMENT PLAN OF PARK-OHIO INDUSTRIES, INC. AND ITS SUBSIDIARIES To The Charles Schwab Trust Company, Trustee of the Individual Account Retirement Plan of Park-Ohio Industries, Inc. and its Subsidiaries (the “Plan”): The signed shareholder, a participant in the Plan, hereby directs the Trustee to vote in person or by proxy (a) all shares of Park-Ohio Holdings Corp. common stock credited to the signed shareholder’s account under the Plan on the record date (“allocated shares”); and (b) the proportional number of shares of common stock of Park-Ohio Holdings Corp. allocated to the accounts of other participants in the Plan, but for which the Trustee does not receive valid voting instructions (“non-directed shares”) and as to which the signed shareholder is entitled to direct the voting in accordance with the Plan provisions at the annual meeting of shareholders of Park-Ohio Holdings Corp. to be held at The Cleveland Marriott East, 26300 Harvard Road, Warrensville Heights, Ohio 44122, on May 26, 2011, and any and all nominees listed belowadjournments, postponements, or continuations thereof. Under the Plan, shares allocated to the accounts of participants for which the Trustee does not receive timely directions in the form of a signed proxy card are voted by the Trustee as directed by the participants who timely tender a signed proxy card. By completing this proxy card and returning it to the Trustee, you are authorizing the Trustee to vote allocated shares and a proportionate amount of the non-directed shares held in the Plan. The number of non-directed shares for which you may instruct the Trustee to vote will depend on how many other participants exercise their right to direct the voting of their allocated shares. Any participant wishing to vote the non-directed shares differently from the allocated shares may do so by requesting a separate proxy card form from the Trustee at 800-724-7526. (Continued and to be signed on reverse) |
| | | | | Edward F. Crawford | | Kevin R. Greene | | Dan T. Moore III |
(Instructions: to withhold authority to vote for any individual nominee, strike a line through that nominee’s name)
| 2. | | THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT, POSTPONEMENT OR CONTINUATION THEREOF. |
(Continued and to be signed on reverse)
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