UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
DECORATOR INDUSTRIES, INC.
--------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
DECORATOR INDUSTRIES, INC.
10011 PINES BOULEVARD, SUITE 201
PEMBROKE PINES, FL 33024
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD MAY 15, 2007
TO THE STOCKHOLDERS OF DECORATOR INDUSTRIES, INC.
Notice is hereby given that the annual meeting of the stockholders of
Decorator Industries, Inc. will be held at Suite 201, 10011 Pines Blvd.,
Pembroke Pines, Florida, on May 15, 2007 at 9:30 A.M., local time, for the
purpose of:
(a) Electing two directors.
(b) Transacting such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors fixed the close of business on April 2, 2007 as
the record date for the determination of stockholders entitled to notice of and
to vote at the annual meeting.
Copies of the Company's proxy statement for the meeting and annual
report to stockholders for the fiscal year ended December 30, 2006 are furnished
herewith.
PLEASE SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES. YOUR PROMPT
COMPLIANCE WITH THIS REQUEST WILL BE APPRECIATED AND WILL ASSIST IN OBTAINING A
QUORUM. YOUR PROXY MAY BE WITHDRAWN AT ANY TIME PRIOR TO ITS EXERCISE BY GIVING
NOTICE TO THE UNDERSIGNED.
By Order of the Board of Directors
MICHAEL K. SOLOMON
Secretary
April 10, 2007
PROXY STATEMENT
DECORATOR INDUSTRIES, INC.
10011 Pines Boulevard
Pembroke Pines, FL 33024
April 10, 2007
This statement is furnished in connection with the solicitation of
proxies to be used at the annual meeting of stockholders of Decorator
Industries, Inc. (the "Company"), to be held May 15, 2007 at the place and time
and for the purposes set forth in the foregoing Notice of Annual Meeting, and at
any adjournment thereof. This proxy statement and the enclosed form of proxy and
annual report for 2006 were mailed to stockholders on or about April 10, 2007.
Proxies in the form enclosed are solicited on behalf of the Board of
Directors of the Company. The cost of preparing, assembling and mailing the
notice of annual meeting, proxy statement and form of proxy is to be borne by
the Company. In addition to the solicitation of proxies by use of the mails,
directors, officers or other employees of the Company may solicit proxies
personally or by telephone or other means and the Company may request certain
persons holding stock in their names or in the names of their nominees to obtain
proxies from and send proxy material to the principals and will reimburse such
persons for their expenses in so doing.
The accompanying proxy may be revoked by the stockholder at any time
prior to its use by giving notice of such revocation either personally or in
writing to Michael K. Solomon, Secretary of the Company, 10011 Pines Blvd. Suite
201, Pembroke Pines, FL 33024. Unless the proxy shall have been properly
revoked, the shares represented by proxies in the enclosed form will be voted.
Each such proxy will be voted as directed, but if no direction is indicated, it
will be voted FOR the election of the Board of Directors' nominees named below.
Only holders of record of the Company's Common Stock, par value $.20
per share ("Common Stock"), at the close of business on April 2, 2007 will be
entitled to vote at the meeting. As of March 31, 2007, there were 3,003,679
shares of Common Stock outstanding, the holders of which are entitled to one
vote per share, except for cumulative voting in the election of directors, as
explained below.
A quorum for the transaction of business at the annual meeting will
require the presence, in person or by proxy, of stockholders entitled to cast at
least a majority of the total number of votes entitled to be cast at the
meeting. Directors will be elected at the meeting by a plurality of the votes
cast. Abstentions and broker non-votes are counted as shares present for
determination of a quorum but are not counted as affirmative or negative votes
and are not counted in determining the number of votes cast on any matter.
Stockholders are entitled to cumulative voting in the election of
directors, which means that a stockholder is entitled to a number of votes equal
to the number of shares held by such stockholder multiplied by the number of
directors to be elected, and the stockholder may cast all of such votes for one
nominee or divide them between the two nominees.
1
ELECTION OF DIRECTORS
The Board of Directors consists of three classes of directors with
staggered terms. A purpose of the meeting is the election of two directors to
serve for a term of three years. The last two columns of the tables below give
information regarding the Common Stock beneficially owned by the nominee or
director as of the close of business on March 31, 2007. The percentages in the
last column were computed by dividing the number of shares beneficially owned by
the total of the number of shares of Common Stock outstanding and the number of
shares of Common Stock, if any, which the named nominee or director was entitled
to acquire within 60 days of March 31, 2007 through the exercise of stock
options. Mr. Bassett is trustee of the Trust under the Stock Plan for
Non-Employee Directors (the "Trust").
NOMINEES FOR ELECTION AS DIRECTORS
Information regarding the nominees for election as directors is set
forth below:
Common Shares Percent
Director Beneficially of
Name Age Principal Occupation Since Owned Class
- --------------------- --- ----------------------------- -------- -------------- -------
William A. Bassett 70 Chairman of the Board, 1980 339,112 (1) 11.17%
President and Chief Executive
Officer of the Company
William A. Bassett, as 71,091 (2) 2.37%
Trustee for the Trust
Thomas L. Dusthimer 72 Consultant to and Retired 1997 1,250 (3) --
Director of Key Bank Elkhart
- ----------
(1) Includes 31,250 optioned shares which may be acquired within 60 days.
(2) Mr. Bassett disclaims beneficial ownership of these shares.
(3) Excludes 19,791 shares held in the Trust for Mr. Dusthimer.
William A. Bassett has been President of the Company since 1980, Chief
Executive Officer since 1993 and Chairman of the Board since 1994.
Thomas L. Dusthimer has served as a consultant to and director of Key
Bank (Elkhart, Indiana District) since 1992. From 1973 until his retirement in
1992, Mr. Dusthimer served in various executive positions, including President,
Chief Executive Officer and Chairman, with Ameritrust Indiana Corporation and
Ameritrust National Bank.
The above persons were nominated for the office of director by the
present Board of Directors, upon the recommendation of the Nominating Committee.
Such persons have advised the Company that they are willing to serve as
directors for the term for which they are standing for election. If at the time
of the meeting either of the nominees should be unable or unwilling to serve as
a director for any reason, it is intended that the enclosed proxy will be voted
for the election of such person, if any, as is designated by the Board of
Directors to replace such nominee, unless the proxy withholds authority to vote
for nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING NOMINEES.
2
DIRECTORS WHOSE TERMS CONTINUE AFTER THE MEETING
Information regarding the directors whose terms of office continue
after the annual meeting is set forth below:
Common Shares Percent
Director Term Beneficially of
Name Age Principal Occupation Since Expires Owned Class
- --------------------- --- ----------------------------- -------- ------- -------------- -------
William C. Dixon 49 President and CEO of 2002 2008 1,000 (1) --
BFD of Metro Washington, Inc.
Terrence H. Murphy 56 Attorney 2005 2008 -- (1) --
Joseph N. Ellis 78 Management Consultant 1993 2009 2,500 (1) --
Ellen Downey 54 Retired Treasurer 1997 2009 1,562 (1) --
Ryder Systems, Inc
- ----------
(1) Excludes shares held in the Trust of 6,718 for Mr. Dixon, 1,726 for Mr.
Murphy, 21,785 for Mr. Ellis, and 21,071 for Ms. Downey.
William C. Dixon is President and CEO of BFD of Metro Washington, Inc.
He is also President and CEO of KHF of Metro Washington, Inc. BFD was
established in 2002; KHF was established in 2005, and both companies operate
furniture stores in the Washington, DC market. Mr. Dixon was President and CEO
of Barnes Furniture Co., Inc. from 1998 to 2005. Barnes is a privately held
retail furniture company. Mr. Dixon is the nephew of William A. Bassett.
Terrence H. Murphy is a shareholder in Buchanan Ingersoll & Rooney, a
Professional Corporation, a law firm with offices in Pittsburgh, Philadelphia
and Harrisburg, Pennsylvania, and other cities. Buchanan Ingersoll & Rooney
serves as legal counsel to the Company.
Joseph N. Ellis founded La Salle-Deitch Co., Inc., a distributor of
products for the manufactured housing and recreational vehicle industry in 1963,
and served as its President, Chief Executive Officer and Chairman from 1971
until his retirement in 1992.
Ellen Downey was employed by Ryder Systems, Inc. in various financial
positions from 1978 to 1991 and from 1991 to 1993 served as Vice President and
Treasurer of that company.
At March 31, 2007, the officers and directors of the Company as a group
had sole or shared voting or investment power as to 455,965 shares of the
Company's Common Stock, which together with 73,170 optioned shares that could be
acquired within 60 days after March 31, 2007, would constitute 17.20% of the
total shares then outstanding.
DIRECTOR INDEPENDENCE
All directors and nominees for director, except Mr. Bassett, are
independent as defined in the Company Guide of the American Stock Exchange LLC.
ATTENDANCE AT STOCKHOLDER MEETINGS
Directors are expected to attend all stockholder meetings if reasonably
possible. All members of the Board attended the originally scheduled 2006 annual
meeting of stockholders.
CODE OF ETHICS
The Company has adopted a Code of Conduct and Ethics which covers all
directors, officers, and managers of the Company. It was filed as Exhibit 14 to
the Company's Annual Report on Form 10-K for the fiscal year ended January 3,
2004.
3
BOARD AND COMMITTEE MEETINGS
The Board of Directors has the following committees: Audit Committee,
Compensation Committee, and Nominating Committee.
During the fiscal year 2006, the Board of Directors held four meetings.
The Audit Committee consists of Joseph N. Ellis (Chairman), Ellen
Downey, Thomas L. Dusthimer and William C. Dixon. The Audit Committee met four
times during 2006. See "Audit Committee Report" herein.
The Compensation Committee consists of Thomas L. Dusthimer (Chairman),
Joseph N. Ellis, and Ellen Downey. The function of the Compensation Committee is
to determine the salary, bonus and benefits for the Chief Executive Officer of
the Company and to recommend to the Board the salary, bonus and benefits for all
other officers. The Compensation Committee met once in 2006. See "Compensation
Discussion and Analysis" herein.
The Nominating Committee consists of Ellen Downey (Chairwoman), Joseph
N. Ellis, and Thomas L. Dusthimer. The function of the Nominating Committee is
to recommend to the Board persons to be nominated by the Board for election as
directors and persons to be elected by the Board to fill any vacancies on the
Board. The Nominating Committee met once in 2006. See "Nominating Committee
Report" herein.
During the year 2006, all directors attended at least 75% of the total
number of meetings of the Board of Directors and the committees of which he or
she was a member.
PRINCIPAL STOCKHOLDERS
See "Nominees For Election As Directors" above for the stockholding of
William A. Bassett, Chairman of the Board, President and Chief Executive Officer
of the Company.
Robert E. Robotti of New York, New York reported on his Schedule 13D/A
dated March 23, 2007 shared voting and dispositive power with respect to 686,547
shares (22.86%) of the Company's Common Stock, including 450,080 shares reported
by Robotti & Company Advisors, LLC and 225,918 shares reported by The Ravenswood
Investment Company, L.P., and Kenneth R. Wasiak of New York, New York reported
on the same Schedule 13D shared voting and dispositive power with respect to
230,683 of those shares (7.68%).
FMR Corp. of Boston, Massachusetts has reported on its Schedule 13G/A
dated February 14, 2006 that Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR Corp. and a registered investment adviser, had
sole investment power with respect to 243,515 shares (8.11%) of the Company's
Common Stock. No further reports have been received from FMR Corp.
Prides Capital Partners, L.L.C. of Boston, Massachusetts has reported
on its Form 4 dated March 22, 2007 that it has shared voting and dispositive
power with respect to 306,225 shares (10.19%) of the Company's Common Stock.
4
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Philosophy
The Company's executive compensation program is designed to accomplish
various objectives. Compensation should align the interests of the executive
officers with shareholders, reward the achievement of performance goals, be
reasonable and reflect the value of the individual's qualifications and
performance, and should be comprehendible and transparent.
In order to help fulfill these principles, the Company has identified
the following objectives of its executive compensation program:
o Compensation levels must be adequately competitive in order to
attract and retain qualified individuals and to motivate these
individuals to achieve outstanding results;
o A substantial portion of total compensation should be
dependent upon achievement of the Company's operating
performance goals; and that such individuals with greater
responsibilities should receive a proportionally greater
benefit when performance exceeds expectations;
o The number of different types of compensation should be kept
to a minimum, and that those provided should be easily
understood and communicated to management, directors, and
shareholders;
o Executive compensation should be set at reasonable levels to
provide a sense of fairness and responsibility to employees
and shareholders alike.
The Company's compensation practices have reflected its commitment to
these principles and objectives. The Company's only employment agreement with
any of its executive officers is an employment and related consulting agreement
with Mr. Bassett, outlined later in this section. This agreement was signed in
order to ensure experienced leadership for the years to come. The only equity
incentives offered are for the issuance of stock options, and the Company does
not permit discounted stock options, reload stock options, stock grants, stock
appreciation rights, or other types of equity awards. The only type of
retirement plan is the Company's 401(k) plan available to all employees with
over one year of service.
Executive officers with over three months of service qualify for
participation in Company medical, disability, and life insurance programs.
Executive officers also receive the use of a company auto in order to fulfill
the travel that is frequently required of them.
Executive officers who make a disqualifying disposition of incentive
stock options may qualify for a bonus. The bonus is calculated so that the
Company and the executive officer share approximately equal after-tax benefits
resulting from the disqualifying disposition.
For the year 2006 and subsequent years, the Compensation Committee,
composed of independent directors, determined the salary, bonus and benefits of
the Chief Executive Officer and recommended to the Board the salary, bonus and
benefits of the other officers of the Company. In determining the compensation
of the Chief Executive Officer, the Compensation Committee considered (i) the
compensation package as a whole, including his or her salary, bonus, stock
options and other perquisites, (ii) his or her performance both quantitatively
and qualitatively, (iii) whether the financial goals of the Company, including
both sales growth and return on equity have been met, (iv) the sales/revenue
increases of the Company, (v) the compensation packages of other companies of
similar size and in the Company's line of business, to the extent such
information is available, and (vi) such other factors as the Committee may deem
relevant at the time.
Elements of Executive Compensation
The Company's executive compensation program has three primary
elements: base salary, annual performance based cash bonuses, and stock options.
The Company believes that these components combine to provide a reasonable total
compensation package for executive officers.
Base Salary
The Company pays a base salary to provide for a fixed amount of
compensation for the fiscal year. This is consistent with competitive practices
to help attract and retain qualified leadership in those positions. The Board of
Directors has approved the salaries of the executive officers of the Company on
an annual basis. In approving the salaries, the Board considered the size of the
Company, its performance during the previous fiscal year, the responsibilities
and performance of the executive officer, and such other factors as the
directors wished to consider. No pre-determined formula or guidelines were used,
and no specific weight was given to any one factor.
5
Cash Bonus
Cash bonuses can help encourage achievement of its financial and
operating goals and to reward executive officers for outstanding performance.
Individuals are eligible for cash bonuses based on the Company's and individuals
performance in the previous fiscal year. Bonuses for executive officers are
discussed by the Compensation Committee shortly after the finish of a fiscal
year and are paid shortly thereafter. The Company sets no pre-determined formula
for the calculation of this bonus; rather, it looks at total overall
performance, of both the individual and the Company for the past fiscal year, in
the determination of this bonus.
Incentive Stock Options
The Company also makes use of incentive stock options. These options
compensate individuals for their performance, as well as provide an incentive to
improve the Company's performance by motivating the executives to exert their
best efforts on behalf of the Company.
In 2006, the Company's stockholders approved the 2006 Incentive Stock
Option Plan. This plan provides for the issuance of up to 250,000 shares of the
Company's stock. The Company also has outstanding stock options from a previous
stock option plan with similar terms that have been used to motivate and reward
employees.
Stock options are typically granted by the Compensation Committee after
the end of a fiscal year, except in unusual circumstances. Stock options are
usually granted to a group of executive officers and key employees at the same
time, based on an evaluation by the Compensation Committee, with the exact
number of options granted to each officer or individual dependent on their
performance and level of responsibility.
No options have been granted on a group basis since March 2004, when
options for 74,700 shares were granted to a group of 15 individuals. However, in
2005, William Johnson, Executive Vice President, was granted options for 17,500
shares. This was an unusual circumstance which related both to the availability
of more options to grant due to forfeitures from the 1995 Incentive Stock Option
Plan, as well as recognition of a significant increase in performance and
responsibility by Mr. Johnson.
Other Compensation
The amounts shown in the Summary Compensation Table below, under the
heading "All Other Compensation", represent Company contributions to the 401(k)
Retirement Savings Plan, medical/dental reimbursement plan payments, premiums
paid by the Company on life and long-term disability and insurance policies,
country club memberships, and personal use of Company vehicles. The Company may
also make payments to executive officers after a disqualifying sale of an
incentive stock option that results in a tax benefit to the Company; however, no
such disqualifying dispositions occurred in 2006.
EMPLOYMENT AGREEMENT
The Company amended its employment agreement with Mr. Bassett in July
2003 and in May 2004. The amendments extended his employment until December 31,
2007 (the "First Term"). For the five years commencing January 1, 2008, the
Company will employ Mr. Bassett as an employee/consultant (the "Second Term").
His salary during the First Term shall be no less than $336,000 per annum, to be
payable no less frequently than equal monthly installments. He will be eligible
for annual increases and bonuses commensurate with his and the Company's
performance during the preceding year, the payment and amount of which is to be
at the discretion of the Compensation Committee of the Board of Directors.
During the Second Term, Mr. Bassett will receive compensation of at
least 70% of either his salary for 2007, or the average of his salary for 2005,
2006, and 2007, whichever is greater, payable in not less than equal monthly
installments. In addition, the Company will maintain a long term care policy for
Mr. Bassett and his wife for the Second Term. The Company shall also continue,
maintain and pay the premiums on a $1,000,000 insurance policy and a $1,000,000
key man insurance policy on the life of Mr. Bassett, the proceeds of which key
man insurance less the death benefits payable under the terms of his employment
agreement, shall be payable to Mr. Bassett or his personal representative or
named beneficiary.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed the Compensation Discussion and
Analysis and discussed it with management. Based on its review and discussions
with management, the Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee: Thomas L. Dusthimer (Chairman), Joseph N.
Ellis, and Ellen Downey.
6
SUMMARY OF COMPENSATION
The following table shows the compensation of the executive officers of
the Company for fiscal 2006. There were no stock or option awards, and the
Company does not maintain any nonqualified deferred compensation plans..
SUMMARY COMPENSATION TABLE
All
Other
Name and Fiscal Compensation Total
Principal Position Year Salary ($) Bonus ($) ($) (1) ($)
- --------------------------- ------ ---------- --------- ------------ -------
William A. Bassett
Chairman of the Baord, 2006 350,000 20,000 44,572 414,572
President and Chief
Executive Officer
Michael K. Solomon 2006 152,000 10,000 10,700 172,700
Vice President, Treasurer,
Chief Financial Officer and
Secretary
William A. Johnson 2006 144,750 10,000 13,188 167,938
Executive Vice President
and Controller
- ----------
(1) Medical/dental reimbursement plan payments, country club memberships,
personal use of Company vehicles, premiums paid by the Company on life
and long-term disability insurance policies, and Company contributions
to the 401(k) Retirement Savings Plan. Included in this total for Mr.
Bassett are premiums on his life insurance benefits which totaled
$25,368 in 2006.
Mr. Solomon, age 57, has been Vice President of the Company since 1994,
Treasurer and Chief Financial Officer since 1985, and Secretary since March
2005. He beneficially owns 89,420 shares of Common Stock, including 19,420
optioned shares that may be acquired within 60 days of March 31, 2007.
Mr. Johnson, age 47, has been Controller of the Company since January
1997, an officer of the Company since June 1998, and Executive Vice President of
the Company since February 2007. He beneficially owns 23,200 shares of Common
Stock, including 22,500 optioned shares that may be acquired within 60 days of
March 31, 2007.
The Company's medical and dental reimbursement plan provides
reimbursement to the corporate and certain divisional officers of the Company
and their dependents (as defined in Section 152 of the Internal Revenue Code)
for their medical and dental expenses. Benefits under the plan are limited to
10% of the participant's compensation during the plan year. The plan also
prohibits any participant from receiving "double reimbursement"; i.e., if a
participant receives reimbursement from another source, he or she must remit to
the Company benefits received under the plan.
On September 1, 1998 the Company began a 401(k) Retirement Savings Plan
which is available to all eligible employees. To be eligible for the plan, the
employee must be at least 21 years of age and have completed one year of
employment. Eligible employees may contribute up to 75% of their earnings with a
maximum of $15,000 for 2006 ($20,000 for employees over 50 years of age) based
on the Internal Revenue Service annual contribution limit. Up until December 31,
2005, the Company matched 25% of the first 4% of the employee's contributions up
to 1% of the employee's earnings. As of January 1, 2006, the Company began
matching 25% of the first 6% of the employee's contributions up to 1.5% of the
employee's earnings. Contributions are invested at the direction of the employee
in one or more funds. Company contributions begin to vest after two years.
7
GRANT OF PLAN BASED AWARDS
The Company does not maintain an incentive plan that grants or
authorizes specific awards at predetermined thresholds or targets.
OUTSTANDING EQUITY-BASED AWARDS
In February 2006 the Board of Directors adopted, and in May 2006 the
stockholders approved, the Company's 2006 Incentive Stock Option Plan (the "2006
Plan") which has a term of ten years. The 2006 Plan authorizes the issuance of
up to 250,000 shares of Common Stock pursuant to stock options granted to key
employees of the Company. The purchase price of optioned shares must be the fair
market value of the Common Stock on the date of grant, and the maximum term of
the options is ten years; in the case of options granted to employees who own
more than 10% of the outstanding Common Stock, however, the purchase price must
be 110% of the fair market value of the Common Stock on the date of grant and
the term of the option cannot exceed five years. The number of shares that may
be issued under the 2006 Plan, the number of optioned shares and the purchase
price per share are subject to adjustment for stock splits, stock dividends,
reclassifications and the like.
Outstanding equity awards at year end were all from the Company's 1995
Incentive Stock Option Plan. No options have as yet been granted under the 2006
Plan, and no stock awards have been made.
OUTSTANDING OPTION AWARDS AT DECEMBER 30, 2006
Number of Number of
Shares Shares
Underlying Underlying
Unexercised Unexercised
Options Options Exercise
(#) (#) Price Option
----------- ------------- Per Share Expiration
Name Exercisable Unexercisable ($) Date
- ------------------ ----------- ------------- --------- ---------
William A. Bassett 31,250 - 5.86 10/9/2012
Michael K. Solomon 12,500 - 8.10 3/3/2008
Michael K. Solomon 5,000 - 7.00 6/11/2009
Michael K. Solomon 1,280 1,920 8.06 3/5/2014
William A. Johnson 12,500 - 5.86 10/9/2012
William A. Johnson 2,000 3,000 8.06 3/5/2014
William A. Johnson 1,000 4,000 8.25 3/4/2015
William A. Johnson 2,500 10,000 9.30 4/1/2015
OPTION EXERCISES
The following table sets forth option exercises by the Company's
executive officers during fiscal 2006. No stock awards have been made to
executive officers.
OPTION EXERCISES DURING FISCAL 2006
Option Awards
----------------------------------
Number of Shares
Acquired on Value Realized
Name Exercise on Exercise
------------------ ---------------- ---------------
Willam A. Bassett 26,041 $91,144
Michael K. Solomon -- --
William A. Johnson -- --
Mr. Bassett exercised his options via constructive exercise on February
10, 2006. He paid the exercise price for the exercise of 26,041 options by
offering constructive delivery of 15,060 shares owned for more than one year,
resulting in a net acquisition of 10,981 shares.
8
PENSION BENEFITS
The Company does not have a pension plan for any of its officers or
employees and does not anticipate creating such a plan in the future.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
With the exception of Mr. Bassett's employment contract as previously
mentioned, or the Company's stock option plans, the Company does not maintain
any such agreement, plan or arrangement with any officer regarding payments or
benefits to its executive officers upon termination of employment or change in
control. Mr. Bassett's employment contract guarantees his employment and
consulting benefits through the end of December 2012. The Company's stock option
plans provide that unvested options will, under certain circumstances, become
immediately exercisable in the event of a dissolution, liquidation, or certain
mergers involving the Company.
COMPENSATION OF DIRECTORS
The following table sets forth information with respect to the
compensation for fiscal 2006 of each of the Company's non-employee directors.
Mr. Bassett's compensation is reported in the Summary Compensation Table above.
He receives no additional compensation for his duties as Chairman of the Board.
DIRECTOR COMPENSATION FOR FISCAL 2006
Stock
Awards
Name ($) (1)
------------------- -------
Joseph N. Ellis 19,000
Ellen Downey 17,000
Thomas L. Dusthimer 17,000
William C. Dixon 17,000
Terrence H. Murphy 11,000
- ----------
(1) The dollar amount recognized for financial statement reporting purposes
with respect to fiscal 2006.
Directors who are not employees of the Company are paid an annual
retainer fee of $11,000 for their scheduled services as directors, which
includes four meetings per year. Directors are paid $2,000 for each additional
meeting. Members of the Audit Committee are paid ($2,000 per meeting for
chairman and $1,500 per meeting for other members) for attending Audit Committee
meetings. All fees are paid quarterly in shares of the Company's Common Stock
valued at their closing price on the American Stock Exchange on the third
business day following the release of sales and earnings for the preceding
fiscal year. Under the Company's Stock Plan for Non-Employee Directors, such
directors may elect to defer receipt of their shares, until after they leave the
Board, by having them delivered to the Trust established under the Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on our records and other information, we believe that during the
fiscal year 2006 all of our directors and executive officers complied with the
reporting requirements of section 16(a) of the Securities Exchange Act of 1934
in a timely manner.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors serves as a focal point
for communications among the Board, the outside auditors and management as their
duties relate to financial accounting, reporting and internal controls. It
reviews the overall plan of the annual independent audit, the financial
statements, the scope of audit procedures, the performance of the Company's
independent auditors, and the independent auditors' evaluation of internal
controls. The Audit Committee assists the Board in fulfilling its fiduciary
responsibilities as to accounting policies, financial reporting practices and
the sufficiency of auditing with respect thereto; however, management has the
primary responsibility for the financial statements and the financial reporting
process. The Audit Committee is to select the Company's outside auditors and
review and oversee any "related party transactions" with the Company.
9
The Board has determined that the current members of the Committee,
listed below, are "independent" as defined in Section 121A of the Company Guide
of the American Stock Exchange, and in Rule 10A-3 under the Securities Exchange
Act of 1934 and that the Committee qualifies under Section 121B(2) of the
Company Guide. The Board of Directors has determined that Ellen Downey qualifies
as an "audit committee financial expert" as defined by the rules of the
Securities and Exchange Commission.
The Audit Committee has reviewed and discussed with management the
audited financial statements of the Company for the fiscal year ended December
30, 2006 and has also discussed with Louis Plung & Company, the Company's
independent auditors for that fiscal year, their judgment as to the
acceptability and quality of the Company's accounting principles and the other
matters required by Statement on Auditing Standards 61 to be discussed with the
independent auditors. In addition, the Audit Committee received from Louis Plung
& Company the written disclosures and letter required by Independence Standards
Board Standard No. 1 and has discussed with them their independence from the
Company and its management. The Committee has also considered whether the
provision of nonaudit services to the Company by Louis Plung & Company is
compatible with maintaining their independence. Based on such review and
discussions, the Audit Committee recommended to the Board that the audited
financial statements for the fiscal year ended December 30, 2006 be included in
the Company's Annual Report on Form 10-K for that fiscal year and for filing
with the Securities and Exchange Commission.
Audit Committee: Joseph N. Ellis, Chairman, Ellen Downey, Thomas L. Dusthimer
and William C. Dixon.
NOMINATING COMMITTEE REPORT
The Board of Directors has adopted a Resolution which establishes the
Nominating Committee and sets forth its functions. The Resolution provides as
follows:
The Nominating Committee of the Board of Directors shall consist of two
or more directors, each of whom shall be an "Independent Director" as
defined in the Company Guide of the American Stock Exchange LLC
("Amex"), and no director shall qualify as independent unless the Board
affirmatively determines that he or she does not have a material
relationship with the Company that would interfere with the exercise of
independent judgment. The Committee shall elect its Chairperson from
among its membership. The function of the Nominating Committee shall be
to recommend to the Board persons to be nominated by the Board for
election as directors and persons to be elected by the Board to fill
any vacancies on the Board.
No employee or Floor Member of the Amex may be nominated as a director
of the Company. The Committee will consider for recommendation to the
Board nominees proposed by the shareholders entitled to vote who
deliver notice to the Secretary of the Company not less than 45 days
nor more than 75 days prior to the first anniversary of the record date
for the preceding year's annual meeting, commencing with the annual
meeting in the year 2005.
The members of the Nominating Committee shall hereafter be Ellen Downey
(Chairperson), Joseph N. Ellis, and Thomas L. Dusthimer, each of whom
is an Independent Director who has been determined by the Board not to
have a material relationship with the Company that would interfere with
the exercise of independent judgment.
No shareholders proposed nominees for election as directors at this
annual meeting. The two nominees approved by the Board were recommended by the
Nominating Committee because of their experience and knowledge of the Company's
business and industry. The Committee considered the following factors in
evaluating proposed nominees:
o the needs of the Company with respect to the particular talents and
experience of its incumbent directors;
o the knowledge, skills and experience of the candidate, including
experience in the markets the Company services, business, finance, in
light of prevailing business conditions, and the knowledge, skills and
experience already possessed by other members of the Board;
o experience with accounting rules and practices;
o references obtained with respect to the candidate;
o the amount of time the candidate can devote to serving on the Board,
and the number of other boards and board committees on which the
candidate serves; and
o the desire to balance the considerable benefit of continuity with the
periodic injection of fresh perspectives provided by new members.
There are no stated minimum criteria for director nominees. None of the
foregoing factors is an absolute requirement. The Nominating Committee will
evaluate all of these factors, and others, as necessary to satisfy the Company's
needs and objectives at the time a candidate is being considered. The Nominating
Committee's goal is to assemble a Board of Directors that brings to the Company
a variety of perspectives and skills derived from high quality business and
professional experience.
10
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
The Board has established a process for shareholders to communicate
with members of the Board. The Chairperson of the Nominating Committee, with the
assistance of the Company's Secretary, is primarily responsible for monitoring
communications from shareholders and providing copies or summaries of such
communications to the other directors, as he or she considers appropriate.
Shareholders who wish to send communications to the Board may do so by writing:
Ellen Downey, Chairperson of the Nominating Committee, c/o the Company's
Secretary, 10011 Pines Blvd. Suite 201, Pembroke Pines, FL 33024.
DISCRETIONARY AUTHORITY
At the time of mailing copies of this proxy statement to stockholders,
the election of directors was the only matter known by management that will be
presented for action at the annual meeting of stockholders. Should any other
matters come before the meeting, action may be taken thereon pursuant to proxies
in the form enclosed, which confer discretionary authority upon the persons
named therein or their substitutes with respect to any such business which may
properly come before the meeting.
CONCERNING THE AUDITORS
Louis Plung & Company are the independent public accountants of the
Company and have been selected as the Company's independent public accountants
for the current fiscal year by the Audit Committee. Representatives of such firm
are not expected to be in attendance at the annual meeting.
AUDIT FEES
The following table presents fees for professional audit services
rendered by Louis Plung & Company for the audit of the Company's annual
financial statements for the fiscal years ended December 30, 2006 and December
31, 2005, and fees billed for other services rendered by Louis Plung & Company
during those periods.
Audit Fees(1) Audit Related Fees(2) Tax Fees(3) All Other Fees Total
------------- --------------------- ----------- -------------- -----
2006 $45,500 -- $25,000 -- $70,500
2005 $46,500 $17,000 $21,500 -- $85,000
- ----------
(1) Professional services rendered for the audit of the Company's financial
statements for the fiscal years ended December 30, 2006 and December
31, 2005, the audit of the Company's 401(k) plan, and the reviews of
the financial statements included in the Company's Forms 10-Q for that
fiscal year.
(2) Professional services rendered in 2005 for the restatement of the
Company's fiscal 2004 interim financial statements.
(3) Professional services rendered for the preparation of the Company's
federal, state, and local tax returns.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITOR
The Audit Committee is responsible for the pre-approval of all audit
and permitted non-audit services performed by outside auditors, and will not
engage outside auditors to perform any non-audit services proscribed by law or
regulation. The Audit Committee may delegate authority for the pre-approval of
all audit and non-audit services to a member of the Committee. All such
approvals will be reported to the Audit Committee at its next scheduled meeting.
The approval of a non-audit service to be performed by the outside auditors
shall be disclosed to the investors in a timely manner in accordance with
applicable regulations.
OTHER INFORMATION
The Nominating Committee will consider nominees recommended by
stockholders for election as directors at the annual meeting in the year 2008 if
information concerning the recommended nominees is received by the Company not
later than February 17, 2008 and not before January 18, 2008.
Stockholder proposals intended to be presented at the annual meeting in
the year 2008 must be received by the Company prior to January 7, 2008 to be
considered for inclusion in the Company's proxy statement and form of proxy for
that meeting.
By Order of the Board of Directors
MICHAEL K. SOLOMON
Secretary
11